Reviewer in Labor Law

Reviewer in Labor Law
(Patterned in the Course Outline of Atty. Charisma I. Nolasco)

Christian V. Asas
Page 1
==============================================
LABOR STANDARDS
I. GENERAL CONCEPTS
A. Definition
a. Labor, in ordinary signification, is understood as physical toil although it does

not necessarily exclude the application of skill, thus, there is skilled and unskilled labor.
b. Labor Law consists of statutes, regulations and jurisprudence governing the

relations between capital and labor, by providing for certain employment standards and a legal
framework for negotiating, adjusting and administering those standards and other incidents of
employment.
c. Labor Standards vs. Labor Relations
As to Definition. Labor Standards law is defined as that which sets out the
least or basic terms, conditions and benefits of employment that employers must provide or
comply with and to which employees are entitled as a matter of right. On the other hand, Labor
Relations law is defined as that which defines the status, rights and duties, and the institutional
mechanisms that govern the individual and collective interactions of employers, employees, or
their representatives.
As to Subject Matter. Labor standards is the material or the substance to be

processed while labor relations is the mechanism that processes the substance.
d. Social Legislation is defined as those laws that provide particular kinds of

protection or benefits to society or segments thereof in furtherance of social justice. In that
sense, labor laws are necessarily social legislation.
B. Sources
a. 1987 Constitution
Article 2
Section 5. The maintenance of peace and order, the protection of life, liberty, and
property, and promotion of the general welfare are essential for the enjoyment by all the people
of the blessings of democracy.
Section 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through policies that
Christian V. Asas
Page 2
==============================================
provide adequate social services, promote full employment, a rising standard of living, and an
improved quality of life for all.
Section 10. The State shall promote social justice in all phases of national development.
Section 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual, and social well-being. It shall
inculcate in the youth patriotism and nationalism, and encourage their involvement in public and
civic affairs.
Section 14. The State recognizes the role of women in nation-building, and shall ensure
the fundamental equality before the law of women and men.
Section 18. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.
Section 20. The State recognizes the indispensable role of the private sector, encourages
private enterprise, and provides incentives to needed investments.
Article 3
Section 1. No person shall be deprived of life, liberty, or property without due process of
law, nor shall any person be denied the equal protection of the laws.
Section 4. No law shall be passed abridging the freedom of speech, of expression, or of

the press, or the right of the people peaceably to assemble and petition the government for
redress of grievances.
Section 8. The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary to law shall not be
abridged.
Article 13
Section 1. The Congress shall give highest priority to the enactment of measures that
protect and enhance the right of all the people to human dignity, reduce social, economic, and
political inequalities, and remove cultural inequities by equitably diffusing wealth and political
power for the common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of
property and its increments.
Section 2. The promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance.
Christian V. Asas
Page 3
==============================================
Section 3 (memorize). 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 to investments, and to expansion and growth.
Section 14. The State shall protect working women by providing safe and healthful
working conditions, taking into account their maternal functions, and such facilities and
opportunities that will enhance their welfare and enable them to realize their full potential in the
service of the nation.
b. Statutes and jurisprudence
c. Company practice
Honda Philippines, Inc. vs. Samahan ng Malalaya sa Honda, G.R. No. 145561, June 15,
2005, Ynarez-Santiago, J.
Doctrine. More importantly, it has not been refuted that Honda has not implemented any
pro-rating of the 13th month pay before the instant case. Honda did not adduce evidence to show
that the 13th month, 14th month and financial assistance benefits were previously subject to
deductions or pro-rating or that these were dependent upon the company’s financial standing. As
held by the Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that prompted them
to adopt a pro-rata computation, aside from being in a state of rehabilitation due to 227M
substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is
an implicit acceptance that prior to the strike, a full month basic pay computation was the
"present practice" intended to be maintained in the CBA.
Christian V. Asas
Page 4
==============================================
The memorandum dated November 22, 1999 which Honda issued shows that it was the
first time a pro-rating scheme was to be implemented in the company. It was a convenient
coincidence for the company that the work stoppage held by the employees lasted for thirty-one
(31) days or exactly one month. This enabled them to devise a formula using 11/12 of the total
annual salary as base amount for computation instead of the entire amount for a 12-month
period.
That a full month payment of the 13th month pay is the established practice at Honda is
further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both
attested that when they were absent from work due to motorcycle accidents, and after they have
exhausted all their leave credits and were no longer receiving their monthly salary from Honda,
they still received the full amount of their 13th month, 14th month and financial assistance pay.
The case of Davao Fruits Corporation v. Associated Labor Unions, et al. presented an
example of a voluntary act of the employer that has ripened into a company practice. In that case,
the employer, from 1975 to 1981, freely and continuously included in the computation of the
13th month pay those items that were expressly excluded by the law. We have held that this act,
which was favorable to the employees though not conforming to law, has ripened into a practice
and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated.
Furthermore, in Sevilla Trading Company v. Semana, we stated:
With regard to the length of time the company practice should have been exercised to
constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer,
we hold that jurisprudence has not laid down any rule requiring a specific minimum number of
years. In the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the
company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring
Services vs. Abarquez, the employer, for three (3) years and nine (9) months, approved the
commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of
giving a fixed monthly emergency allowance from November 1976 to February 1980, or three
(3) years and four (4) months. In all these cases, this Court held that the grant of these benefits
has ripened into company practice or policy which cannot be peremptorily withdrawn. In the
case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as
paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay
for at least two (2) years. This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor
Code.
Vergara, Jr. vs. Coca-Cola Bottlers, Phils., Inc., G.R. No. 176985, April 1, 2013, Peralta, J.
Doctrine. There is diminution of benefits when the following requisites are present: (1)
the grant or benefit is founded on a policy or has ripened into a practice over a long period of
time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the
Christian V. Asas
Page 5
==============================================
construction or application of a doubtful or difficult question of law; and (4) the diminution or
discontinuance is done unilaterally by the employer.
To be considered as a regular company practice, the employee must prove by substantial

evidence that the giving of the benefit is done over a long period of time, and that it has been
made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to
the length of time that company practice should have been exercised in order to constitute
voluntary employer practice. The common denominator in previously decided cases appears to
be the regularity and deliberateness of the grant of benefits over a significant period of time. It
requires an indubitable showing that the employer agreed to continue giving the benefit knowing
fully well that the employees are not covered by any provision of the law or agreement requiring
payment thereof. In sum, the benefit must be characterized by regularity, voluntary and
deliberate intent of the employer to grant the benefit over a considerable period of time.
Upon review of the entire case records, We find no substantial evidence to prove that the
grant of SMI to all retired DSSs regardless of whether or not they qualify to the same had
ripened into company practice. Despite more than sufficient opportunity given him while his
case was pending before the NLRC, the CA, and even to this Court, petitioner utterly failed to
adduce proof to establish his allegation that SMI has been consistently, deliberately and
voluntarily granted to all retired DSSs without any qualification or conditions whatsoever. The
only two pieces of evidence that he stubbornly presented throughout the entirety of this case are
the sworn statements of Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez),
former DSSs of respondent who retired in 2000 and 1998, respectively. They claimed that the
SMI was included in their retirement package even if they did not meet the sales and collection
qualifiers. However, juxtaposing these with the evidence presented by respondent would reveal
the frailty of their statements.
The declarations of Hidalgo and Velazquez were sufficiently countered by respondent

through the affidavits executed by Norman R. Biola (Biola), Moises D. Escasura (Escasura), and
Ma. Vanessa R. Balles (Balles). Biola pointed out the various stop-gap measures undertaken by
respondent beginning 1999 in order to arrest the deterioration of its accounts receivables balance,
two of which relate to the policies on the grant of SMI and to the change in the management
structure of respondent upon its re-acquisition by San Miguel Corporation. Escasura represented
that he has personal knowledge of the circumstances behind the retirement of Hidalgo and
Velazquez. He attested that contrary to petitioner’s claim, Hidalgo was in fact qualified for the
SMI. As for Velazquez, Escasura asserted that even if he (Velazquez) did not qualify for the SMI,
respondent’s General Manager in its Calamba plant still granted his (Velazquez) request, along
with other numerous concessions, to achieve industrial peace in the plant which was then
experiencing labor relations problems. Lastly, Balles confirmed that petitioner failed to meet the
trade receivable qualifiers of the SMI. She also cited the cases of Ed Valencia (Valencia) and
Emmanuel Gutierrez (Gutierrez), both DSSs of respondent who retired on January 31, 2002 and
December 30, 2002, respectively. She noted that, unlike Valencia, Gutierrez also did not receive
the SMI as part of his retirement pay, since he failed to qualify under the policy guidelines. The
Christian V. Asas
Page 6
==============================================
verity of all these statements and representations stands and holds true to Us, considering that
petitioner did not present any iota of proof to debunk the same.
Therefore, respondent's isolated act of including the SMI in the retirement package of
Velazquez could hardly be classified as a company practice that may be considered an
enforceable obligation. To repeat, the principle against diminution of benefits is applicable only
if the grant or benefit is founded on an express policy or has ripened into a practice over a long
period of time which is consistent and deliberate; it presupposes that a company practice, policy
and tradition favorable to the employees has been clearly established; and that the payments
made by the company pursuant to it have ripened into benefits enjoyed by them. 26 Certainly, a
practice or custom is, as a general rule, not a source of a legally demandable or enforceable
right. Company practice, just like any other fact, habits, customs, usage or patterns of conduct,
must be proven by the offering party who must allege and establish specific, repetitive conduct
that might constitute evidence of habit or company practice
d. Contracts
C. Social Justice
a. Definition
Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at least be approximated. Social
justice means the promotion of the welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the competent elements of society,
through the maintenance of a proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption of measures legally justifiable,
or extra-constitutionally, through the exercise of powers underlying the existence of all
governments on the time-honored principle of salus populi est suprema lex. (Calalang vs.
Williams, G.R. No. 47800, December 2, 1940, Laurel, J.)
b. Application
Philippine Long Distance Telephone Company vs. NLRC, G.R. No. L-80609, August 23,
1998, Cruz, J.
FACTS: Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone
Company, was accused by two complainants of having demanded and received from them the
total amount of P3,800.00 in consideration of her promise to facilitate approval of their
applications for telephone installation. She was dismissed but given separation pay on the
ground of social justice.
Christian V. Asas
Page 7
==============================================
ISSUE: Whether or not the grant of separation pay is justified.
HELD: No. We hold that henceforth separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft
or illicit sexual relations with a fellow worker, the employer may not be required to give the
dismissed employee separation pay, or financial assistance, or whatever other name it is called,
on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding
rather than punishing the erring employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay has nothing to do with the wrong he
has committed. Of course it has. Indeed, if the employee who steals from the company is granted
separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar
offense in his next employment because he thinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not going to do labor in general any good as it
will encourage the infiltration of its ranks by those who do not deserve the protection and
concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it
is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be
permitted to be refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to be poor. This great policy of
our Constitution is not meant for the protection of those who have proved they are not worthy of
it, like the workers who have tainted the cause of labor with the blemishes of their own character.
Applying the above considerations, we hold that the grant of separation pay in the case at
bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the
labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that
she has worked with the PLDT for more than a decade, if it is to be considered at all, should be
taken against her as it reflects a regrettable lack of loyalty that she should have strengthened
instead of betraying during all of her 10 years of service with the company. If regarded as a
justification for moderating the penalty of dismissal, it will actually become a prize for
disloyalty, perverting the meaning of social justice and undermining the efforts of labor to
cleanse its ranks of all undesirables.
Toyota Motors Philippines Corp. Workers Association vs. NLRC, G.R. No. 158798-99,
October 19, 2007, Velasco, Jr., J.
Christian V. Asas
Page 8
==============================================
ISSUE: Are illegally striking employees entitled to separation pay on the ground of social
justice?
HELD: No. Considering that the dismissal of the employees was due to their participation in
the illegal strikes as well as violation of the Code of Conduct of the company, the same
constitutes serious misconduct. A serious misconduct is a transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v.
NLRC, the Supreme Court nullified the grant of separation benefits to employees who
unlawfully participated in an illegal strike in light of Article 264, Title VIII, Book V of the Labor
Code, that, "any union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during a strike may be
declared to have lost his employment status."
The constitutional guarantee on social justice is not intended only for the poor but for the
rich as well. It is a policy of fairness to both labor and management.
The CA’s grant of separation pay is an erroneous departure from our ruling in Phil. Long
Distance Telephone Co. v. NLRC that serious misconduct forecloses the award of separation pay.
Secondly, the advertence to the alleged honest belief on the part of the 227 employees that
Toyota committed a breach of the duty to bargain collectively and an abuse of valid exercise of
management prerogative has not been substantiated by the evidence extant on record. There can
be no good faith in intentionally incurring absences in a collective fashion from work on
February 22 and 23, 2001 just to attend the DOLE hearings. The Union’s strategy was plainly to
cripple the operations and bring Toyota to its knees by inflicting substantial financial damage to
the latter to compel union recognition. The Union officials and members are supposed to know
through common sense that huge losses would befall the company by the abandonment of their
regular work. It was not disputed that Toyota lost more than PhP 50 million because of the
willful desertion of company operations in February 2001 by the dismissed union members. In
addition, further damage was experienced by Toyota when the Union again resorted to illegal
strikes from March 28 to April 12, 2001, when the gates of Toyota were blocked and barricaded,
and the company officials, employees, and customers were intimidated and harassed. Moreover,
they were fully aware of the company rule on prohibition against concerted action inimical to the
interests of the company and hence, their resort to mass actions on several occasions in clear
violation of the company regulation cannot be excused nor justified. Lastly, they blatantly
violated the assumption/certification Order of the DOLE Secretary, exhibiting their lack of
obeisance to the rule of law. These acts indeed constituted serious misconduct.
A painstaking review of case law renders obtuse the Union’s claim for separation pay. In
a slew of cases, this Court refrained from awarding separation pay or financial assistance to
Christian V. Asas
Page 9
==============================================
union officers and members who were separated from service due to their participation in or
commission of illegal acts during strikes. In the recent case of Pilipino Telephone Corporation v.
Pilipino Telephone Employees Association (PILTEA), this Court upheld the dismissal of union
officers who participated and openly defied the return-to-work order issued by the DOLE
Secretary. No separation pay or financial assistance was granted. In Sukhothai Cuisine and
Restaurant v. Court of Appeals, this Court declared that the union officers who participated in
and the union members who committed illegal acts during the illegal strike have lost their
employment status. In this case, the strike was held illegal because it violated agreements
providing for arbitration. Again, there was no award of separation pay nor financial assistance.
In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union, the
strike was declared illegal because the means employed was illegal. We upheld the validity of
dismissing union members who committed illegal acts during the strike, but again, without
awarding separation pay or financial assistance to the erring employees. In Samahang
Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines, this Court upheld the dismissal of union
officers who participated in an illegal strike sans any award of separation pay. Earlier, in Grand
Boulevard Hotel v. Genuine Labor Organization of Workers in Hotel, Restaurant and Allied
Industries, we affirmed the dismissal of the Union’s officers who participated in an illegal strike
without awarding separation pay, despite the NLRC’s declaration urging the company to give
financial assistance to the dismissed employees. In Interphil Laboratories Union-FFW, et al. v.
Interphil Laboratories, Inc., this Court affirmed the dismissal of the union officers who led the
concerted action in refusing to render overtime work and causing "work slowdowns." However,
no separation pay or financial assistance was allowed. In CCBPI Postmix Workers Union v.
NLRC, this Court affirmed the dismissal of union officers who participated in the strike and the
union members who committed illegal acts while on strike, without awarding them separation
pay or financial assistance. In 1996, in Allied Banking Corporation v. NLRC, this Court affirmed
the dismissal of Union officers and members, who staged a strike despite the DOLE Secretary’s
issuance of a return to work order but did not award separation pay. In the earlier but more
relevant case of Chua v. NLRC, this Court deleted the NLRC’s award of separation benefits to an
employee who participated in an unlawful and violent strike, which strike resulted in multiple
deaths and extensive property damage. In Chua, we viewed the infractions committed by the
union officers and members as a serious misconduct which resulted in the deletion of the award
of separation pay in conformance to the ruling in PLDT. Based on existing jurisprudence, the
award of separation pay to the Union officials and members in the instant petitions cannot be
sustained.
One last point to consider—it is high time that employer and employee cease to view
each other as adversaries and instead recognize that theirs is a symbiotic relationship, wherein
they must rely on each other to ensure the success of the business. When they consider only their
own self-interests, and when they act only with their own benefit in mind, both parties suffer
from short-sightedness, failing to realize that they both have a stake in the business. The
employer wants the business to succeed, considering the investment that has been made. The
employee in turn, also wants the business to succeed, as continued employment means a living,
and the chance to better one’s lot in life. It is clear then that they both have the same goal, even if
Christian V. Asas
Page 10
==============================================
the benefit that results may be greater for one party than the other. If this becomes a source of
conflict, there are various, more amicable means of settling disputes and of balancing interests
that do not add fuel to the fire, and instead open avenues for understanding and cooperation
between the employer and the employee. Even though strikes and lockouts have been recognized
as effective bargaining tools, it is an antiquated notion that they are truly beneficial, as they only
provide short-term solutions by forcing concessions from one party; but staging such strikes
would damage the working relationship between employers and employees, thus endangering the
business that they both want to succeed. The more progressive and truly effective means of
dispute resolution lies in mediation, conciliation, and arbitration, which do not increase tension
but instead provide relief from them. In the end, an atmosphere of trust and understanding has
much more to offer a business relationship than the traditional enmity that has long divided the
employer and the employee
Solidbank vs. NLRC, G.R. No. 165951, March 30, 2010, Peralta, J.
ISSUE: Is the grant of separation pay on the ground of social justice due to dismissal under
authorized cause justified?
HELD: No. Moreover, a review of jurisprudence relating to the application of "compassionate

and social justice" in granting financial assistance in labor cases shows that the same has been
generally used in instances when an employee has been dismissed for a just cause under Article
282 of the Labor Code and not when an employee has been dismissed for an authorized cause
under Article 283.
After a thorough consideration of the circumstances at bar, this Court finds that the award
of financial assistance is bereft of legal basis and serves to penalize petitioner who has complied
with the requirements of the law.
It behooves this Court as to why the CA affirmed the grant of financial assistance
notwithstanding its pronouncement that it would be inequitable to allow respondents to receive
benefits than those prescribed by law and jurisprudence, to wit:
In the instant case, both the Labor Arbiter and the NLRC upheld the validity of the
dismissal of the employees and of the quitclaim agreements between the affected employees and
employer Solidbank. However, it was a strange occurrence when the NLRC granted an
additional award of separation pay in an amount equivalent to two months salary to each
employee. This means that Solidbank now has the obligation to pay the employees not only their
wages, benefits and other privileges under the law, and separation pay in an amount equivalent to
150% of their one month’s pay, but also financial assistance equivalent to two months pay to
each employee. Such a situation cannot be upheld by this Court. As discussed above, all that the
law requires in cases of dismissal due to an authorized cause is that the employer must pay
financial assistance or separation pay in an amount equivalent to "one month’s pay or one-half
month’s for every year of service, whichever is higher." Solidbank has complied with the
Christian V. Asas
Page 11
==============================================
mandate of the law. Hence, it would be unjust and inequitable to allow the employees to receive
higher benefits than those prescribed by the Labor Code and jurisprudence.
Villaruel vs. Yeo Han Guan, G.R. No. 169191, June 1, 2011, Peralta, J.
ISSUE: Is an employee who has resigned from service entitled to separation pay on the ground
of social justice?
HELD: Yes. Since petitioner was not terminated from his employment and, instead, is deemed
to have resigned therefrom, he is not entitled to separation pay under the provisions of the Labor
Code.
The foregoing notwithstanding, this Court, in a number of cases, has granted financial
assistance to separated employees as a measure of social and compassionate justice and as an
equitable concession. Taking into consideration the factual circumstances obtaining in the
present case, the Court finds that petitioner is entitled to this kind of assistance.
While the abovecited cases authorized the grant of financial assistance in lieu of
retirement benefits, the Court finds no cogent reason not to employ the same guiding principle of
compassionate justice applied by the Court, taking into consideration the factual circumstances
obtaining in the present case. In this regard, the Court finds credence in petitioner's contention
that he is in the employ of respondent for more than 35 years. In the absence of a substantial
refutation on the part of respondent, the Court agrees with the findings of the Labor Arbiter and
the NLRC that respondent company is not distinct from its predecessors but, in fact, merely
continued the operation of the latter under the same owners and the same business venture. The
Court further notes that there is no evidence on record to show that petitioner has any derogatory
record during his long years of service with respondent and that his employment was severed not
by reason of any infraction on his part but because of his failing physical condition. Add to this
the willingness of respondent to give him financial assistance. Hence, based on the foregoing, the
Court finds that the award of P50,000.00 to petitioner as financial assistance is deemed equitable
under the circumstances.
Garcia vs. PAL, G.R. No. 164856, January 20, 2009, Carpio-Morales, J.
ISSUE: Whether or not the refund doctrine is in accordance with social justice.
HELD: No. Even outside the theoretical trappings of the discussion and into the mundane
realities of human experience, the "refund doctrine" easily demonstrates how a favorable
decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee,
to make both ends meet, would necessarily have to use up the salaries received during the
pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.
Christian V. Asas
Page 12
==============================================
Advisably, the sum is better left unspent. It becomes more logical and practical for the
employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is
available. Notably, the option of payroll reinstatement belongs to the employer, even if the
employee is able and raring to return to work. Prior to Genuino, it is unthinkable for one to
refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees
declining payroll reinstatement is on the horizon.
Further, the Genuino ruling not only disregards the social justice principles behind the
rule, but also institutes a scheme unduly favorable to management. Under such scheme, the
salaries dispensed pendente lite merely serve as a bond posted in installment by the employer.
For in the event of a reversal of the Labor Arbiter’s decision ordering reinstatement, the
employer gets back the same amount without having to spend ordinarily for bond premiums.
This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a
cash bond] by the employer shall not stay the execution for reinstatement."
In playing down the stray posture in Genuino requiring the dismissed employee on
payroll reinstatement to refund the salaries in case a final decision upholds the validity of the
dismissal, the Court realigns the proper course of the prevailing doctrine on reinstatement
pending appeal vis-à-vis the effect of a reversal on appeal.
Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more
basis to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice
Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air
Philippines and allied cases inapplicable because, unlike the present case, the writ of execution
therein was secured prior to the reversal of the Labor Arbiter’s decision.
The proposition is tenuous. First, the matter is treated as a mere race against time. The
discussion stopped there without considering the cause of the delay. Second, it requires the
issuance of a writ of execution despite the immediately executory nature of the reinstatement
aspect of the decision. In Pioneer Texturing Corp. v. NLRC, which was cited in Panuncillo v.
CAP Philippines, Inc., the Court observed:
x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for
reinstatement shall be immediately executory even pending appeal and the posting of a bond by
the employer shall not stay the execution for reinstatement. The legislative intent is quite
obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal.
To require the application for and issuance of a writ of execution as prerequisites for the
execution of a reinstatement award would certainly betray and run counter to the very object and
intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple.
An application for a writ of execution and its issuance could be delayed for numerous reasons. A
mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the
part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting
at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the
Christian V. Asas
Page 13
==============================================
requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we
so declared in Maranaw, then the executory nature of a reinstatement order or award
contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting
the law, the legislature is presumed to have ordained a valid and sensible law, one which operates
no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be
construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In
introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No.
6715, Congress should not be considered to be indulging in mere semantic exercise. x x x
The Court reaffirms the prevailing principle that even if the order of reinstatement of the
Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and
pay the wages of the dismissed employee during the period of appeal until reversal by the higher
court. It settles the view that the Labor Arbiter's order of reinstatement is immediately executory
and the employer has to either re-admit them to work under the same terms and conditions
prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise
the options in the alternative, employer must pay the employee’s salaries.
Philippine Airlines, Inc. vs. NLRC, G.R. No. 123294, October 20, 2010, Leonardo-De
Castro, J.
Doctrine. In the case at bar, the transgressions imputed to private respondent have never
been firmly established as deliberate and willful acts clearly directed at making petitioner lose
millions of pesos. At the very most, they can only be characterized as unintentional, albeit major,
lapses in professional judgment. Likewise, the same cannot be described as morally
reprehensible actions. Thus, private respondent may be granted separation pay on the ground of
equity which this Court had defined as "justice outside law, being ethical rather than jural and
belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and
not on any sanction of positive law, for equity finds no room for application where there is law."
A perusal of the assailed September 29, 1995 NLRC Decision would show that the
following equitable considerations were relied upon by the NLRC to arrive at its assailed ruling,
to wit:
a) The Goldair fraud was found to have started in 1981. Private respondent became the
Manager-ASAD only on September 1, 1984. The former Manager-ASAD from 1981 to
August 1984 was Josefina Sioson.
b) ASAD is under the direct supervision and control of the Vice President-Comptroller
and within the scope of the audit program of the Vice President-Internal Audit and
Control. The VP-Comptroller for the period 1981 to 1983 and the VP-Internal Audit for
the period 1984 to 1987 was Romeo Ines.
c) The accounting procedures and controls inherited by private respondent when she took
over ASAD were subjected to the scrutiny of prestigious accounting firms like Cressop,
Christian V. Asas
Page 14
==============================================
McCormick & Paget in 1985, the Sycip, Gorres, Velayo & Co., Inc. in 1986, including a
special team from the Commission on Audit in 1987 – all of which made no adverse
findings concerning ASAD.
d) No less than the VP-Internal Audit made a regular audit in Australia in November 1986
and in the early part of 1987, by borrowing all production reports covering April to
September 1986, but found no irregularities nor made any adverse feedback against
ASAD.
e) Private respondent was the first to discover the overpayment of commission claims to
Goldair in 1984 in rate differences in net/net settlement which, after her intervention, did
not recur. She was also the one who first discovered the fraud in double and fictitious
commission claims and promptly took action when she withheld all provisional payments
due Goldair.
f) Even after the Goldair anomaly was discovered, private respondent could have availed
of PAL’s Special Retirement and Separation Program, but she stayed put and had gone
twice to Australia, while under preventive suspension, to attend court proceedings as a
witness for petitioner enabling the said company to recover and minimize its economic
loss.
g) Private respondent has no derogatory record during the entire period of her
employment with petitioner for more than two decades. She steadily rose from the ranks
until she became the ASAD Manager.
h) In the dissenting opinion of Ricardo Paloma, Vice Chairman of the Espino Committee
and PAL Senior VP Strategic Planning and Corporate Service, to the Final Draft Majority
Report, he observed that "a mitigating factor in [private respondent’s] favor is that
UNSEEN HANDS designed or allowed this new procedures to be put in place. Ines, who
became the VP Internal Audit should have known the prescribed procedures (or at the
very least the actual practice during the period 1981 to 1983 when he was the VP
Comptroller) and yet, did not alert her. Unknowingly, [private respondent] allowed the
by-pass and the automatic payment of 80% upon presentation of production reports
because Sioson assured her that was the procedure previously followed. Trusting, she
became a participant in this mess."
Considering the foregoing uncontroverted special circumstances, we rule that the NLRC
did not commit grave abuse of discretion amounting to lack of jurisdiction in ordering petitioner
to pay private respondent separation pay for equitable considerations.
However, we do not agree with the NLRC that private respondent’s separation pay should
be awarded in accordance with PAL’s "Special Retirement & Separation Program" dated
February 15, 1988 plus ten percent (10%) of the total amount by way of attorney’s fees.
Christian V. Asas
Page 15
==============================================
At the risk of stating the obvious, private respondent was not separated from petitioner’s
employ due to mandatory or optional retirement but, rather, by termination of employment for a
just cause. Thus, any retirement pay provided by PAL’s "Special Retirement & Separation
Program" dated February 15, 1988 or, in the absence or legal inadequacy thereof, by Article 287
of the Labor Code does not operate nor can be made to operate for the benefit of private
respondent. Even private respondent’s assertion that, at the time of her lawful dismissal, she was
already qualified for retirement does not aid her case because the fact remains that private
respondent was already terminated for cause thereby rendering nugatory any entitlement to
mandatory or optional retirement pay that she might have previously possessed.
Likewise, attorney’s fees are not proper in this case because the same can only be
awarded when the employee is illegally dismissed in bad faith and is compelled to litigate or
incur expenses to protect his rights by reason of the unjustified act of his employer. The
aforementioned conditions do not obtain in this case.
As to the matter of the proper amount of separation pay to be awarded to private

respondent on the basis of equitable considerations, our pronouncement in Yrasuegui v.
Philippine Airlines, Inc. is instructive, to wit:
Here, We grant petitioner separation pay equivalent to one-half (1/2) month’s pay for
every year of service. It should include regular allowances which he might have been receiving.
We are not blind to the fact that he was not dismissed for any serious misconduct or to any act
which would reflect on his moral character. We also recognize that his employment with PAL
lasted for more or less a decade.
Private respondent’s circumstances are more or less identical to the above-cited case in
the sense that, as previously discussed, her dismissal was neither for serious misconduct nor for
an offense involving moral turpitude. Furthermore, her employment with petitioner spanned
more than two decades unblemished with any derogatory record prior to the infractions at issue
in the case at bar.
D. Employer-employee relationship
a. Four-fold test applied
> Four fold-test: (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the employer’s power to control the employee with respect to
the means and methods by which the work is to be accomplished. (Royale Homes Marketing
Corp. vs. Alcantara, G.R. No. 195190, July 28, 2014, Del Castillo, J.)
South East International Rattan vs. Coming, G.R. No. 186621, March 12, 2014, Villarama,
Jr., J.
Christian V. Asas
Page 16
==============================================
FACTS: South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the
business of manufacturing and exporting furniture to various countries. Jesus J. Coming was
hired as Sizing Machine Operator of SEIRI.
ISSUE: Whether or not Coming is an employee of SEIRI.
HELD: Yes. In Tan vs. Lagrama, the Court held that the fact that a worker was not reported as
an employee to the SSS is not conclusive proof of the absence of employer-employee
relationship. Otherwise, an employer would be rewarded for his failure or even neglect to
perform his obligation.
Nor does the fact that respondent’s name does not appear in the payrolls and pay
envelope records submitted by petitioners negate the existence of employer-employee
relationship. For a payroll to be utilized to disprove the employment of a person, it must contain
a true and complete list of the employee. In this case, the exhibits offered by petitioners before
the NLRC consisting of copies of payrolls and pay earnings records are only for the years 1999
and 2000; they do not cover the entire 18-year period during which respondent supposedly
worked for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized
that in the certifications issued by Mayol and Apondar, it was shown that respondent was
employed and working for them in those years he claimed to be working for SEIRI. However, a
reading of the certification by Mayol would show that while the latter claims to have respondent
under his employ in 1997, 1998 and 1999, respondent’s services were not regular and that he
works only if he wants to. Apondar’s certification likewise stated that respondent worked for him
since 1999 through his brother Vicente as "sideline" but only after regular working hours and
"off and on" basis. Even assuming the truth of the foregoing statements, these do not foreclose
respondent’s regular or full-time employment with SEIRI. In effect, petitioners suggest that
respondent was employed by SEIRI’s suppliers, Mayol and Apondar but no competent proof was
presented as to the latter’s status as independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to
respondent’s employment with SEIRI are its former workers whom they describe as "disgruntled
workers of SEIRI" with an axe to grind against petitioners, and that their execution of affidavit in
support of respondent’s claim is "their very way of hitting back the management of SEIRI after
disciplinary measures were meted against them." This allegation though was not substantiated by
petitioners. Instead, after the CA rendered its decision reversing the NLRC’s ruling, petitioners
subsequently changed their theory by denying the employment relationship with the five affiants
in their motion for reconsideration, thus:
x x x Since the five workers were occupying and working on a leased premises of the
private respondent, they were called workers of SEIRI (private respondent). Such admission
however, does not connote employment. For the truth of the matter, all of the five employees of
Christian V. Asas
Page 17
==============================================
the supplier assigned at the leased premises of the private respondent. Because of the
recommendation of the private respondent with regards to the disciplinary measures meted on
the five workers, they wanted to hit back against the private respondent. Their motive to
implicate private respondent was to vindicate. Definitely, they have an axe to grind against the
private respondent. Mention has to be made that despite the dismissal of these five (5) witnesses
from their service, none of them ever went to the National Labor [Relations] Commission and
invoked their rights, if any, against their employer or at the very least against the respondent. The
reason is obvious, since they knew pretty well that they were not employees of SEIRI but rather
under the employ of Allan Mayol and Faustino Apondar, working on a leased premise of
respondent. x x x
Petitioners’ admission that the five affiants were their former employees is binding upon
them. While they claim that respondent was the employee of their suppliers Mayol and Apondar,
they did not submit proof that the latter were indeed independent contractors; clearly, petitioners
failed to discharge their burden of proving their own affirmative allegation. There is thus no
showing that the five former employees of SEIRI were motivated by malice, bad faith or any ill-
motive in executing their affidavit supporting the claims of respondent.
In any controversy between a laborer and his master, doubts reasonably arising from the
evidence are resolved in favor of the laborer.
Royale Homes Marketing Corp. vs. Alcantara, G.R. No. 195190, July 28, 2014, Del Castillo,
J.
FACTS: Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara
asits Marketing Director for a fixed period of one year. His work consisted mainly of marketing
Royale Homes’ realestate inventories on an exclusive basis. Royale Homes reappointed him for
several consecutive years, the last of which covered the period January 1 to December 31, 2003
where he held the position of Division 5 Vice-President-Sales.
ISSUE: Whether or not Alcantara is an employee of Royale.
HELD: No. The primary evidence of the nature of the parties’ relationship in this case is the
written contract that they signed and executed in pursuanceof their mutual agreement. While the
existence of employer-employee relationship is a matter of law, the characterization made by the
parties in their contract as to the nature of their juridical relationship cannot be simply ignored,
particularly in this case where the parties’ written contractunequivocally states their intention at
the time they entered into it.
In this case, the contract, duly signed and not disputed by the parties, conspicuously
provides that "no employer-employee relationship exists between" Royale Homes and Alcantara,
as well as his sales agents. It is clear that they did not want to be bound by employer-employee
relationship atthe time ofthe signing of the contract.
Christian V. Asas
Page 18
==============================================
Since "the terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of itsstipulations should control." No construction is even
needed asthey already expressly state their intention. Also, this Court adopts the observation of
the NLRC that it is rather strange on the part of Alcantara, an educated man and a veteran sales
broker who claimed to be receiving P1.2 million as his annual salary, not to have contested the
portion of the contract expressly indicating that he is not an employee of Royale Homes if their
true intention were otherwise.
In determining the existence of an employer-employee relationship, this Court has

generally relied on the four-fold test, to wit: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control
the employee with respect to the means and methods by which the work is to be
accomplished. Among the four, the most determinative factor in ascertaining the existence of
employeremployee relationship is the "right of control test". "It is deemed to be such an
important factor that the other requisites may even be disregarded." This holds true where the
issues to be resolved iswhether a person who performs work for another is the latter’s employee
or is an independent contractor, as in this case. For where the person for whom the services are
performed reserves the right to control not only the end to beachieved, but also the means by
which such end is reached, employer-employee relationship is deemed to exist.
The assertion that control is present since in the performance of his tasks, Alcantara is
subject to company rules, regulations, code of ethics, and periodic evaluation is not tenable. Not
every form of control is indicative of employer-employee relationship. A person who performs
work for another and is subjected to its rules, regulations, and code of ethics does not necessarily
become an employee. As long as the level of control does not interfere with the means and
methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired
party do not amount to the labor law concept of control that is indicative of employer-employee
relationship.
In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission it was
pronounced that: Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and bind or
restrict the party hired to the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it. x x x
In this case, the Court agrees with Royale Homes that the rules, regulations, code of
ethics, and periodic evaluation alluded to byAlcantara do not involve control over the means and
methods by which he was to perform his job. Understandably, Royale Homes has to fix the price,
impose requirements on prospective buyers, and lay down the terms and conditions of the sale,
including the mode of payment, which the independent contractors must follow. It is also
Christian V. Asas
Page 19
==============================================
necessary for Royale Homes to allocate its inventories among its independent contractors,
determine who has priority in selling the same, grant commission or allowance based on
predetermined criteria, and regularly monitor the result of their marketing and sales efforts. But
to the mind of this Court, these do not pertain to the means and methods of how Alcantara was to
perform and accomplish his task of soliciting sales. They do not dictate upon him the details of
how he would solicit sales or the manner as to how he would transact business with prospective
clients. In Tongko, this Court held that guidelines or rules and regulations that do not pertain to
the means or methods to be employed in attaining the result are not indicative of control as
understood inlabor law.
Thus: From jurisprudence, an important lesson that the first Insular Lifecase 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 Lifecase 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 Lifecase was practically reiterated in Carungcong.
Thus, as will be shown more fully below, Manulife’s codes of conduct, 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.
As the party claiming the existence of employer-employee relationship, it behoved upon

Alcantara to prove the elements thereof, particularly Royale Homes’ power of control over the
means and methods of accomplishing the work. He, however, failed to cite specific rules,
regulations or codes of ethics that supposedly imposed control on his means and methods of
soliciting sales and dealing with prospective clients. On the other hand, this case is replete with
instances that negate the element of control and the existence of employer-employee relationship.
Notably, Alcantara was not required to observe definite working hours. Except for soliciting
sales, Royale Homes did not assign other tasks to him. He had full control over the means and
methods of accomplishing his tasks as he can "solicit sales at any time and by any manner which
[he may] deem appropriate and necessary." He performed his tasks on his own account free from
the control and direction of Royale Homes in all matters connected therewith, except as to the
results thereof.
Neither does the repeated hiring of Alcantara prove the existence of employer-employee
relationship. As discussed above, the absence of control over the means and methods disproves
employer-employee relationship. The continuous rehiring of Alcantara simply signifies the
Christian V. Asas
Page 20
==============================================
renewal of his contract with Royale Homes, and highlights his satisfactory services warranting
the renewal of such contract. Nor does the exclusivity clause of contract establish the existence
of the labor law concept of control. In Consulta v. Court of Appeals, it was held that exclusivity
of contract does not necessarily result in employer-employee relationship, viz: x x x However,
the fact that the appointment required Consulta to solicit business exclusively for Pamana did not
mean that Pamana exercised control over the means and methods of Consulta’s work as the term
control is understood in labor jurisprudence. Neither did it make Consulta an employee of
Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being
connected with any other company, for as long as the business [of the] company did not compete
with Pamana’s business.
The same scenario obtains in this case. Alcantara was not prohibited from engaging in
any other business as long as he does not sell projects of Royale Homes’ competitors. He can
engage in selling various other products or engage in unrelated businesses.
The element of payment of wages is also absent in thiscase. As provided in the contract,
Alcantara’s remunerations consist only of commission override of 0.5%, budget allocation, sales
incentive and other forms of company support. There is no proof that he received fixed monthly
salary. No payslip or payroll was ever presented and there is no proof that Royale Homes
deducted from his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his
Complaint merely states a ballpark figure of his alleged salary of P100,000.00, more or less. All
of these indicate an independent contractual relationship. Besides, if Alcantara indeed considered
himself an employee of Royale Homes, then he, an experienced and professional broker, would
have complained that he was being denied statutorily mandated benefits. But for nine
consecutive years, he kept mum about it, signifying that he has agreed, consented, and accepted
the fact that he is not entitled to those employee benefits because he is an independent contractor.
David vs. Macasio, G.R. No. 195466, July 2, 2014, Brion, J.
FACTS: Macasio alleged before the LA that he had been working as a butcher for David since
January 6, 1995. Macasio claimed that David exercised effective control and supervision over his
work, pointing out that David: (1) set the work day, reporting time and hogs to be chopped, as
well as the manner by which he was to perform his work; (2) daily paid his salary of P700.00,
which was increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3)
approved and disapproved his leaves. Macasio added that David owned the hogs delivered for
chopping, as well as the work tools and implements; the latter also rented the workplace.
Macasio further claimed that David employs about twenty-five (25) butchers and delivery
drivers.
ISSUE: Whether or not Macasio is an employee of David.
HELD: Yes. Engagement on "pakyaw" or task basis does not characterize the relationship that
may exist between the parties, i.e., whether one of employment or independent contractorship.
Christian V. Asas
Page 21
==============================================
Article 97(6) of the Labor Code defines wages as "xxx the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, piece, or commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered." In relation to Article 97(6),
Article 101 of the Labor Code speaks of workers paid by results or those whose pay is calculated
in terms of the quantity or quality of their work output which includes "pakyaw" work and other
non-time work.
To determine the existence of an employer-employee relationship, four elements

generally need to be considered, namely: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s
conduct. These elements or indicators comprise the so-called "four-fold" test of employment
relationship. Macasio’s relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection
and engagement of the employee." David categorically confirmed this fact when, in his
"Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya na
chopper[.]" Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang Salaysay" that
"[k]ami po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilala
namin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama namin siya sa aming
trabaho."
Second, David paid Macasio’s wages. Both David and Macasio categorically stated in
their respective pleadings before the lower tribunals and even before this Court that the former
had been paying the latter P700.00 each day after the latter had finished the day’s task. Solano
and Antonio also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang
Salaysay." This satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work.
This power to determine the work schedule obviously implies power of control. By having the
power to control Macasio’s work schedule, David could regulate Macasio’s work and could even
refuse to give him any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasio’s work as to
the means and methods of performing it. In addition to setting the day and time when Macasio
should report for work, the established facts show that David rents the place where Macasio had
been performing his tasks. Moreover, Macasio would leave the workplace only after he had
finished chopping all of the hog meats given to him for the day’s task. Also, David would still
engage Macasio’s services and have him report for work even during the days when only few
hogs were delivered for butchering.
Christian V. Asas
Page 22
==============================================
Under this overall setup, all those working for David, including Macasio, could naturally
be expected to observe certain rules and requirements and David would necessarily exercise
some degree of control as the chopping of the hog meats would be subject to his specifications.
Also, since Macasio performed his tasks at David’s workplace, David could easily exercise
control and supervision over the former. Accordingly, whether or not David actually exercised
this right or power to control is beside the point as the law simply requires the existence of this
power to control or, as in this case, the existence of the right and opportunity to control and
supervise Macasio.
At this point, we note that all three tribunals – the LA, the NLRC and the CA – found that
Macasio was engaged or paid on "pakyaw" or task basis. This factual finding binds the Court
under the rule that factual findings of labor tribunals when supported by the established facts and
in accord with the laws, especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to

straight-hour wage payment, is the non-consideration of the time spent in working. In a task-
basis work, the emphasis is on the task itself, in the sense that payment is reckoned in terms of
completion of the work, not in terms of the number of time spent in the completion of
work. Once the work or task is completed, the worker receives a fixed amount as wage, without
regard to the standard measurements of time generally used in pay computation.
In Macasio’s case, the established facts show that he would usually start his work at
10:00 p.m. Thereafter, regardless of the total hours that he spent at the workplace or of the total
number of the hogs assigned to him for chopping, Macasio would receive the fixed amount
of P700.00 once he had completed his task. Clearly, these circumstances show a "pakyaw" or
task basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by

applying the "four-fold" test; engagement on "pakyaw" or task basis does not determine the
parties’ relationship as it is simply a method of pay computation. Accordingly, Macasio is
David’s employee, albeit engaged on "pakyaw" or task basis.
b. Economic reality/dependence test
Francisco vs. NLRC, G.R. No. 170087, August 31, 2006, Ynarez-Santiago, J.
FACTS: Angelina Francisco was hired by Kasei Corporation during its incorporation stage. She
was designated as Accountant and Corporate Secretary and was assigned to handle all the
accounting needs of the company. She was also designated as Liaison Officer to the City of
Makati to secure business permits, construction permits and other licenses for the initial
operation of the company.
Although she was designated as Corporate Secretary, she was not entrusted with the
corporate documents; neither did she attend any board meeting nor required to do so. She never
Christian V. Asas
Page 23
==============================================
prepared any legal document and never represented the company as its Corporate Secretary.
However, on some occasions, she was prevailed upon to sign documentation for the company.
In 1996, Francisco was designated Acting Manager. The corporation also hired Gerry
Nino as accountant in lieu of petitioner. As Acting Manager, Francisco was assigned to handle
recruitment of all employees and perform management administration functions; represent the
company in all dealings with government agencies, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation.
For five years, petitioner performed the duties of Acting Manager. As of December 31,
2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit
of Kasei Corporation. In January 2001, Francisco was replaced by Liza R. Fuentes as Manager.
Francisco alleged that she was required to sign a prepared resolution for her replacement but she
was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the
designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced
that nothing had changed and that Francisco was still connected with Kasei Corporation as
Technical Assistant to Seiji Kamura and in charge of all BIR matters.
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning

January up to September 2001 for a total reduction of P22,500.00 as of September 2001.
Francisco was not paid her mid-year bonus allegedly because the company was not earning well.
On October 2001, Francisco did not receive her salary from the company. She made repeated
follow-ups with the company cashier but she was advised that the company was not earning well.
On October 15, 2001, Francisco asked for her salary from Acedo and the rest of the officers but
she was informed that she is no longer connected with the company.
ISSUE: Whether or not Francisco is an employee of Kasei Corporation.
HELD: Yes. We held in Sevilla v. Court of Appeals that in this jurisdiction, there has been no
uniform test to determine the existence of an employer-employee relation. Generally, courts have
relied on the so-called right of control test where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to be
used in reaching such end. In addition to the standard of right-of-control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can
help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of
the relationship between the parties, owing to the complexity of such a relationship where
several positions have been held by the worker. There are instances when, aside from the
employer’s power to control the employee with respect to the means and methods by which the
work is to be accomplished, economic realities of the employment relations help provide a
Christian V. Asas
Page 24
==============================================
comprehensive analysis of the true classification of the individual, whether as employee,

independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employer’s power to control the employee with respect to the means and methods by
which the work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship.
This two-tiered test would provide us with a framework of analysis, which would take
into consideration the totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the
period of the latter’s employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and
Piga, and lately in Leonardo v. Court of Appeals, where we held that there is an employer-
employee relationship when the person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, we observed the need to consider the existing economic
conditions prevailing between the parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of
an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends
upon the circumstances of the whole economic activity, such as: (1) the extent to which the
services performed are an integral part of the employer’s business; (2) the extent of the worker’s
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that line
of business.
The proper standard of economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business. In the United States, the
touchstone of economic reality in analyzing possible employment relationships for purposes of
the Federal Labor Standards Act is dependency. By analogy, the benchmark of economic reality
in analyzing possible employment relationships for purposes of the Labor Code ought to be the
economic dependence of the worker on his employer.
Christian V. Asas
Page 25
==============================================
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporation’s Technical Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper
operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an
employee of respondent corporation because she had served the company for six years before her
dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay,
bonuses and allowances, as well as deductions and Social Security contributions from August 1,
1999 to December 18, 2000. When petitioner was designated General Manager, respondent
corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s membership in the
SSS as manifested by a copy of the SSS specimen signature card which was signed by the
President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the
SSS evinces the existence of an employer-employee relationship between petitioner and
respondent corporation.
It is therefore apparent that petitioner is economically dependent on respondent

corporation for her continued employment in the latter’s line of business.
In Domasig v. National Labor Relations Commission, we held that in a business

establishment, an identification card is provided not only as a security measure but mainly to
identify the holder thereof as a bona fide employee of the firm that issues it. Together with the
cash vouchers covering petitioner’s salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an employee of private
respondent.
We likewise ruled in Flores v. Nuestro that a corporation who registers its workers with
the SSS is proof that the latter were the former’s employees. The coverage of Social Security
Law is predicated on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her designation as such
was only for convenience. The actual nature of petitioner’s job was as Kamura’s direct assistant
with the duty of acting as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government agencies. Petitioner
was never entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document for the
corporation, although once in a while she was required to sign prepared documentation for the
company.
Christian V. Asas
Page 26
==============================================
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5,
2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the
case. Regardless of this fact, we are convinced that the allegations in the first affidavit are
sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not
generally look with favor on any retraction or recanted testimony, for it could have been secured
by considerations other than to tell the truth and would make solemn trials a mockery and place
the investigation of the truth at the mercy of unscrupulous witnesses. A recantation does not
necessarily cancel an earlier declaration, but like any other testimony the same is subject to the
test of credibility and should be received with caution.
Based on the foregoing, there can be no other conclusion that petitioner is an employee of
respondent Kasei Corporation. She was selected and engaged by the company for compensation,
and is economically dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement. Respondent corporation
hired and engaged petitioner for compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.
Orozco vs. CA, G.R. No. 155207, August 13, 2008, Nachura, J. (Possible Bar Problem)
FACTS: Philippine Daily Inquirer (PDI) engaged the services of Wilhelmina S. Orozco to write
a weekly column for its Lifestyle section. She religiously submitted her articles every week,
except for a six-month stint in New York City when she, nonetheless, sent several articles
through mail. She received compensation of P250.00 – later increased to P300.00 – for every
column published.
ISSUE: Whether or not Orozco is an employee of PDI.
HELD: No. This Court has constantly adhered to the "four-fold test" to determine whether
there exists an employer-employee relationship between parties. The four elements of an
employment relationship are: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s
conduct.
Of these four elements, it is the power of control which is the most crucial and most
determinative factor, so important, in fact, that the other elements may even be disregarded. As
this Court has previously held: the significant factor in determining the relationship of the
parties is the presence or absence of supervisory authority to control the method and the details
Christian V. Asas
Page 27
==============================================
of performance of the service being rendered, and the degree to which the principal may
intervene to exercise such control.
In other words, the test is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to the means and methods by
which the same is accomplished.
Petitioner argues that several factors exist to prove that respondents exercised control
over her and her work, namely:
a. As to the Contents of her Column – The PETITIONER had to insure that the contents
of her column hewed closely to the objectives of its Lifestyle Section and the over-all
principles that the newspaper projects itself to stand for. As admitted, she wanted to write
about death in relation to All Souls Day but was advised not to.
b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines

of the newspaper for her articles to be published. These deadlines were usually that time
period when the Section Editor has to "close the pages" of the Lifestyle Section where the
column in located. "To close the pages" means to prepare them for printing and
publication.
As a columnist, the PETITIONER’s writings had a definite day on which it was going to
appear. So she submitted her articles two days before the designated day on which the
column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’
obligations to the readers with regard to timeliness and freshness of ideas.
c. As to Control of Space – The PETITIONER was told to submit only two or three pages
of article for the column, (sic) "Feminist Reflections" per week. To go beyond that, the
Lifestyle editor would already chop off the article and publish the rest for the next week.
This shows that PRIVATE RESPONDENTS had control over the space that the
PETITIONER was assigned to fill.
d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to
look for and read the works of their favorite regular writers and columnists. They are
conditioned, based on their daily purchase of the newspaper, to look for specific spaces in
the newspapers for their favorite write-ups/or opinions on matters relevant and significant
issues aside from not being late or amiss in the responsibility of timely submission of
their articles.
The PETITIONER was disciplined to submit her articles on highly relevant and
significant issues on time by the PRIVATE RESPONDENTS who have a say on whether
Christian V. Asas
Page 28
==============================================
the topics belong to those considered as highly relevant and significant, through the
Lifestyle Section Editor. The PETITIONER had to discuss the topics first and submit the
articles two days before publication date to keep her column in the newspaper space
regularly as expected or without miss by its readers.
Given this discussion by petitioner, we then ask the question: Is this the form of control
that our labor laws contemplate such as to establish an employer-employee relationship between
petitioner and respondent PDI? It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee
of the former. Rules which serve as general guidelines towards the achievement of the mutually
desired result are not indicative of the power of control. Thus, this Court has explained:
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. x x x.
The main determinant therefore is whether the rules set by the employer are meant to
control not just the results of the work but also the means and method to be used by the hired
party in order to achieve such results. Thus, in this case, we are to examine the factors
enumerated by petitioner to see if these are merely guidelines or if they indeed fulfill the
requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how she executes her work.
We do not agree. A careful examination reveals that the factors enumerated by the petitioner are
inherent conditions in running a newspaper. In other words, the so-called control as to time,
space, and discipline are dictated by the very nature of the newspaper business itself.
We agree with the observations of the Office of the Solicitor General that: The Inquirer is
the publisher of a newspaper of general circulation which is widely read throughout the country.
Christian V. Asas
Page 29
==============================================
As such, public interest dictates that every article appearing in the newspaper should subscribe to
the standards set by the Inquirer, with its thousands of readers in mind. It is not, therefore,
unusual for the Inquirer to control what would be published in the newspaper. What is important
is the fact that such control pertains only to the end result, i.e., the submitted articles. The
Inquirer has no control over [petitioner] as to the means or method used by her in the preparation
of her articles. The articles are done by [petitioner] herself without any intervention from the
Inquirer.
Petitioner has not shown that PDI, acting through its editors, dictated how she was to
write or produce her articles each week. Aside from the constraints presented by the space
allocation of her column, there were no restraints on her creativity; petitioner was free to write
her column in the manner and style she was accustomed to and to use whatever research method
she deemed suitable for her purpose. The apparent limitation that she had to write only on
subjects that befitted the Lifestyle section did not translate to control, but was simply a logical
consequence of the fact that her column appeared in that section and therefore had to cater to the
preference of the readers of that section.
The perceived constraint on petitioner’s column was dictated by her own choice of her
column’s perspective. The column title "Feminist Reflections" was of her own choosing, as she
herself admitted, since she had been known as a feminist writer. Thus, respondent PDI, as well as
her readers, could reasonably expect her columns to speak from such perspective.
Contrary to petitioner’s protestations, it does not appear that there was any actual restraint
or limitation on the subject matter – within the Lifestyle section – that she could write about.
Respondent PDI did not dictate how she wrote or what she wrote in her column. Neither did
PDI’s guidelines dictate the kind of research, time, and effort she put into each column. In fact,
petitioner herself said that she received "no comments on her articles…except for her to shorten
them to fit into the box allotted to her column." Therefore, the control that PDI exercised over
petitioner was only as to the finished product of her efforts, i.e., the column itself, by way of
either shortening or outright rejection of the column.
The newspaper’s power to approve or reject publication of any specific article she wrote
for her column cannot be the control contemplated in the "control test," as it is but logical that
one who commissions another to do a piece of work should have the right to accept or reject the
product. The important factor to consider in the "control test" is still the element of control over
how the work itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the
newspaper. We note the common practice in the newspaper business of assigning its regular
reporters to cover specific subjects, geographical locations, government agencies, or areas of
concern, more commonly referred to as "beats." A reporter must produce stories within his or her
particular beat and cannot switch to another beat without permission from the editor. In most
newspapers also, a reporter must inform the editor about the story that he or she is working on
Christian V. Asas
Page 30
==============================================
for the day. The story or article must also be submitted to the editor at a specified time.
Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover
another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she
was not precluded from submitting her column ahead of time or from submitting columns to be
published at a later time. More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline that the article should
conform to the standards of the newspaper and the general tone of the particular section.
Where a person who works for another performs his job more or less at his own pleasure,
in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.
Aside from the control test, this Court has also used the economic reality test. The
economic realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate when, as in this case, there is no written
agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of
economic reality in analyzing possible employment relationships for purposes of applying the
Labor Code ought to be the economic dependence of the worker on his employer.
Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights
advocate working in various women’s organizations. Likewise, she herself admits that she also
contributes articles to other publications. Thus, it cannot be said that petitioner was dependent on
respondent PDI for her continued employment in respondent’s line of business.
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an independent

contractor; thus, the characterization of the relationship must be made based on the particular
circumstances of each case. There are several factors that may be considered by the courts, but as
we already said, the right to control is the dominant factor in determining whether one is an
employee or an independent contractor.
In our jurisdiction, the Court has held that an independent contractor is one who carries
on a distinct and independent business and undertakes to perform the job, work, or service on
one’s 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.
Christian V. Asas
Page 31
==============================================
On this point, Sonza v. ABS-CBN Broadcasting Corporation is enlightening. In that case,

the Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of
ABS-CBN, but an independent contractor. Sonza was hired by ABS-CBN due to his "unique
skills, talent and celebrity status not possessed by ordinary employees," a circumstance that, the
Court said, was indicative, though not conclusive, of an independent contractual relationship.
Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The Court also found that, as to payment of wages,
Sonza’s talent fees were the result of negotiations between him and ABS-CBN. As to the power
of dismissal, the Court found that the terms of Sonza’s engagement were dictated by the contract
he entered into with ABS-CBN, and the same contract provided that either party may terminate
the contract in case of breach by the other of the terms thereof. However, the Court held that the
foregoing are not determinative of an employer-employee relationship. Instead, it is still the
power of control that is most important.
On the power of control, the Court found that in performing his work, Sonza only needed
his skills and talent – how he delivered his lines, appeared on television, and sounded on radio
were outside ABS-CBN’s control. Thus:
We find that ABS-CBN was not involved in the actual performance that produced the
finished product of SONZA’s work. ABS-CBN did not instruct SONZA how to perform
his job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule "for more effective programming." ABS-CBN’s sole concern was the quality of
the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control
over the means and methods of performance of SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s
power over the means and methods of the performance of his work. Although ABS-CBN
did have the option not to broadcast SONZA’s show, ABS-CBN was still obligated to pay
SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the
means and methods of SONZA’s performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that
ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN must still pay his
talent fees in full.
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the
obligation to continue paying in full SONZA’s talent fees, did not amount to control over
the means and methods of the performance of SONZA’s work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBN’s
approval. This proves that ABS-CBN’s control was limited only to the result of SONZA’s
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZA’s talent fees in full until the expiry of the Agreement.
Christian V. Asas
Page 32
==============================================
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved
the right to delete objectionable features in their shows. Since the management did not
have control over the manner of performance of the skills of the artists, it could only
control the result of the work by deleting objectionable features.
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime
needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and
airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What
SONZA principally needed were his talent or skills and the costumes necessary for his
appearance. Even though ABS-CBN provided SONZA with the place of work and the
necessary equipment, SONZA was still an independent contractor since ABS-CBN did
not supervise and control his work. ABS-CBN’s sole concern was for SONZA to display
his talent during the airing of the programs.
A radio broadcast specialist who works under minimal supervision is an independent

contractor. SONZA’s work as television and radio program host required special skills
and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN
exercised any supervision and control over how SONZA utilized his skills and talent in
his shows.
The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for
her talent, skill, experience, and her unique viewpoint as a feminist advocate. How she utilized
all these in writing her column was not subject to dictation by respondent. As in Sonza,
respondent PDI was not involved in the actual performance that produced the finished product. It
only reserved the right to shorten petitioner’s articles based on the newspaper’s capacity to
accommodate the same. This fact, we note, was not unique to petitioner’s column. It is a reality
in the newspaper business that space constraints often dictate the length of articles and columns,
even those that regularly appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools and
instrumentalities she needed to perform her work. Petitioner only needed her talent and skill to
come up with a column every week. As such, she had all the tools she needed to perform her
work.
c. Who determines employer-employee relationship
People’s Broadcasting vs. SOLE, G.R. No. 179652, March 6, 2012, Velasco, J. (2016 Bar)
Doctrine. No limitation in the law was placed upon the power of the DOLE to determine
the existence of an employer-employee relationship. No procedure was laid down where the
DOLE would only make a preliminary finding, that the power was primarily held by the NLRC.
Christian V. Asas
Page 33
==============================================
The law did not say that the DOLE would first seek the NLRC’s determination of the existence
of an employer-employee relationship, or that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE must have
the power to determine whether or not an employer-employee relationship exists, and from there
to decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor
Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a

ready set of guidelines to follow, the same guide the courts themselves use. The elements to
determine the existence of an employment relationship are: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; (4) the employer’s power to
control the employee’s conduct. The use of this test is not solely limited to the NLRC. The
DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of
inspection, making use of the same evidence that would have been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE

must be respected. The expanded visitorial and enforcement power of the DOLE granted by RA
7730 would be rendered nugatory if the alleged employer could, by the simple expedient of
disputing the employer-employee relationship, force the referral of the matter to the NLRC. The
Court issued the declaration that at least a prima facie showing of the absence of an employer-
employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE
that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it

takes cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no
jurisdiction only if the employer-employee relationship has already been terminated, or it
appears, upon review, that no employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation
would eliminate the prospect of competing conclusions between the DOLE and the NLRC. The
prospect of competing conclusions could just as well have been eliminated by according respect
to the DOLE findings, to the exclusion of the NLRC, and this We believe is the more prudent
course of action to take.
This is not to say that the determination by the DOLE is beyond question or
review. Suffice it to say, there are judicial remedies such as a petition for certiorari under Rule 65
that may be availed of, should a party wish to dispute the findings of the DOLE.
It must also be remembered that the power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily result in an affirmative finding. The DOLE
may well make the determination that no employer-employee relationship exists, thus divesting
Christian V. Asas
Page 34
==============================================
itself of jurisdiction over the case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee relationship in
the exercise of its visitorial and enforcement power, subject to judicial review, not review by the
NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there
is still a threshold amount set by Arts. 129 and 217 of the Labor Code when money claims are
involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the regional director of
the DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with
the labor arbiter, under Art. 217. The view states that despite the wording of Art. 128(b), this
would only apply in the course of regular inspections undertaken by the DOLE, as differentiated
from cases under Arts. 129 and 217, which originate from complaints. There are several cases,
however, where the Court has ruled that Art. 128(b) has been amended to expand the powers of
the DOLE Secretary and his duly authorized representatives by RA 7730. In these cases, the
Court resolved that the DOLE had the jurisdiction, despite the amount of the money claims
involved. Furthermore, in these cases, the inspection held by the DOLE regional director was
prompted specifically by a complaint. Therefore, the initiation of a case through a complaint
does not divest the DOLE Secretary or his duly authorized representative of jurisdiction under
Art. 128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor
standards provisions of the Labor Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship, the DOLE exercises jurisdiction
to the exclusion of the NLRC. If the DOLE finds that there is no employer-employee
relationship, the jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE,
and it is accompanied by a claim for reinstatement, the jurisdiction is properly with the Labor
Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original
and exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and
other terms and conditions of employment, if accompanied by a claim for reinstatement. If a
complaint is filed with the NLRC, and there is still an existing employer-employee relationship,
the jurisdiction is properly with the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an
employer-employee relationship has been subjected to review by this Court, with the finding
being that there was no employer-employee relationship between petitioner and private
respondent, based on the evidence presented. Private respondent presented self-serving
allegations as well as self-defeating evidence. The findings of the Regional Director were not
based on substantial evidence, and private respondent failed to prove the existence of an
employer-employee relationship. The DOLE had no jurisdiction over the case, as there was no
Christian V. Asas
Page 35
==============================================
employer-employee relationship present. Thus, the dismissal of the complaint against petitioner
is proper.
E. Management Prerogative
a. Definition/Basis
San Miguel Corporation vs. NLRC, G.R. No. 146121-22, April 16, 2008, Tinga, J.
Doctrine. Respondents time cards showed that he was on AWOP on the dates
enumerated by SMC: 2, 4 and 11 January; 26, 28 and 29 April; and 5, 7, 8, 13, 21, 22, 28 and 29
May 1997. The Labor Arbiter even found that respondent was on AWOP on all said
dates. Respondent also admitted being absent on 28 and 29 April and 7 and 8 May 1997. For
each of the periods of 1 to 15 January 1997 and 16 to 30 April 1997, respondent reported for
work only for two days. For the month of May 1997, he reported only for one day.
The Court observes that respondent admitted during the company-level investigation that
that his absences incurred on 28 and 29 April, and 7 and 8 May 1997 were without
permission. He explained that during those times, he had a family problem which needed his
attention; he was confused and was unable to inform or seek permission from his superior.
However, while respondent has admitted these absences, before the Court, he also seeks
to belittle the plain by countering that SMC has not been too rigid in its application of company
rules pertaining to leave availments. In the proceedings below he claimed that during the days
that he was absent, he had attended to some family matters. Thus, he presented copies of two (2)
medical certificates and a barangay certification that he attended hearings on some of the days
when he was absent. These certifications, however, cannot work to erase his AWOPs;
respondent had never submitted these documents to SMC and it is only when the case was
pending before the Labor Arbiter that he produced the same.
Respondent cannot feign surprise nor ignorance of the earlier AWOPs he had
incurred. He was given a warning for his 2, 4, and 11 January and 26, 28, and 29 April
1997AWOPs. In the same warning, he was informed that he already had six AWOPs for 1997.
He admitted that he was absent on 7 and 8 May 1997. He was also givennotices to explain his
AWOPs for the period 26 May to 2 June 1997, which he received but refused to acknowledge. It
does not take a genius to figure out that as early as June 1997, he had more than nine AWOPs.
Thus, even if he was not punished for his subsequent AWOPs, the same remained on
record. He was aware of the number of AWOPs he incurred and should have knownthat these
were punishable under company rules. The fact that he was spared from suspension cannot be
used as a reason to incur further AWOPs and be absolved from the penalty therefor.
The Court of Appeals, NLRC, and the labor arbiter found that respondent incurred
unauthorized absences, but concluded that the penalty of discharge or determination was
Christian V. Asas
Page 36
==============================================
disproportionate to respondents absences in view of SMCs inconsistent and lax implementation

of its policy on employees attendance. The Court disagrees. Respondents dismissal was well
within the purview of SMCs management prerogative.
What the lower tribunals perceived as laxity, we consider as leniency. SMCs tendency to
excuse justified absences actually redounded to the benefit of respondent since the imposition of
the corresponding penalty would have been deleterious to him. In a world where no work-no pay
is the rule of thumb, several days of suspension would be difficult for an ordinary working man
like respondent. He should be thankful that SMC did not exact from him almost 70 days
suspension before he was finally dismissed from work.
In any case, when SMC imposed the penalty of dismissal for the 12 th and 13th AWOPs, it
was acting well within its rights as an employer. An employer has the prerogative to prescribe
reasonable rules and regulations necessary for the proper conduct of its business, to provide
certain disciplinary measures in order to implement said rules and to assure that the same would
be complied with. An employer enjoys a wide latitude of discretion in the promulgation of
policies, rules and regulations on work-related activities of the employees.
It is axiomatic that appropriate disciplinary sanction is within the purview of management

imposition. Thus, in the implementation of its rules and policies, the employer has the choice to
do so strictly or not, since this is inherent in its right to control and manage its business
effectively. Consequently, management has the prerogative to impose sanctions lighter than those
specifically prescribed by its rules, or to condone completely the violations of its erring
employees. Of course, this prerogative must be exercised free of grave abuse of discretion,
bearing in mind the requirements of justice and fair play. Indeed, we have previously stated:
Management also has its own rights, which, as such, are entitled to
respect and enforcement in the interest of simple fair play. Out of its concern for
those with [fewer] privileges in life, the Supreme 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 rule that
justice is in every case for the deserving, to be dispensed in the light of the
established facts and applicable law and doctrine.
All told, we find that SMC acted well within its rights when it dismissed respondent for
his numerous absences. Respondent was afforded due process and was validly dismissed for
cause.
b. Not subject to judicial interference; Exceptions
Morales vs. Harbour Centre Port Terminal, G.R. No. 174208, January 25, 2012, Perez, J.
Christian V. Asas
Page 37
==============================================
Doctrine. In cases of a transfer of an employee, the rule is settled that the employer is
charged with the burden of proving that its conduct and action are for valid and legitimate
grounds such as genuine business necessity and that the transfer is not unreasonable,
inconvenient or prejudicial to the employee. If the employer cannot overcome this burden of
proof, the employee’s transfer shall be tantamount to unlawful constructive dismissal.
Admittedly, the right of employees to security of tenure does not give them vested rights
to their positions to the extent of depriving management of its prerogative to change their
assignments or to transfer them. By management prerogative is meant the right of an employer to
regulate all aspects of employment, such as the freedom to prescribe work assignments, working
methods, processes to be followed, regulation regarding transfer of employees, supervision of
their work, lay-off and discipline, and dismissal and recall of workers. Although jurisprudence
recognizes said management prerogative, it has been ruled that the exercise thereof, while
ordinarily not interfered with, is not absolute and is subject to limitations imposed by law,
collective bargaining agreement, and general principles of fair play and justice. Thus, an
employer may transfer or assign employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary, benefits, and other privileges, and
the action is not motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause. Indeed, having the right should not be
confused with the manner in which that right is exercised.
c. Exercise in good faith
Pantoja vs. SCA Hygiene Products, G.R. No. 163554, April 23, 2010, Del Castillo, J.
Doctrine. Respondent presented evidence of the low volume of sales and orders for the
production of industrial paper in 1999 which inevitably resulted to the company’s decision to
streamline its operations. This fact was corroborated by respondent’s VP-Tissue Manufacturing
Director and was not disputed by petitioner. Exercising its management prerogative and sound
business judgment, respondent decided to cut down on operational costs by shutting down one of
its paper mill. As held in International Harvester Macleod, Inc. v. Intermediate Appellate
Court, the determination of the need to phase out a particular department and consequent
reduction of personnel and reorganization as a labor and cost saving device is a recognized
management prerogative which the courts will not generally interfere with.
In this case, the abolishment of Paper Mill No. 4 was undoubtedly a business judgment
arrived at in the face of the low demand for the production of industrial paper at the time.
Despite an apparent reason to implement a retrenchment program as a cost-cutting measure,
respondent, however, did not outrightly dismiss the workers affected by the closure of Paper Mill
No. 4 but gave them an option to be transferred to posts of equal rank and pay. As can be seen,
retrenchment was utilized by respondent only as an available option in case the affected
employee would not want to be transferred. Respondent did not proceed directly to retrench.
This, to our mind, is an indication of good faith on respondent’s part as it exhausted other
Christian V. Asas
Page 38
==============================================
possible measures other than retrenchment. Besides, the employer’s prerogative to bring down
labor costs by retrenching must be exercised essentially as a measure of last resort, after less
drastic means have been tried and found wanting. Giving the workers an option to be transferred
without any diminution in rank and pay specifically belie petitioner’s allegation that the alleged
streamlining scheme was implemented as a ploy to ease out employees, thus, the absence of bad
faith. Apparently, respondent implemented its streamlining or reorganization plan with good
faith, not in an arbitrary manner and without prejudicing the tenurial rights of its employees.
Petitioner harps on the fact that there was no actual shutdown of Paper Mill No. 4 but that
it continued to be operational. No evidence, however, was presented to prove that there was
continuous operation after the shutdown in the year 1999. What the records reveal is that Paper
Mill No. 4 resumed its operation in 2000 due to a more favorable business climate. The
resumption of its industrial paper manufacturing operations does not, however, make
respondent’s streamlining/reorganization plan illegal because, again, the abolishment of Paper
Mill No. 4 in 1999 was a business judgment arrived at to prevent a possible financial drain at that
time. As long as no arbitrary or malicious action on the part of an employer is shown, the
wisdom of a business judgment to implement a cost saving device is beyond this court’s
determination. After all, the free will of management to conduct its own business affairs to
achieve its purpose cannot be denied.
Ymbong vs. ABS-CBN, G.R. No. 184885, March 7, 2012, Villarama, J.
Doctrine. We have consistently held that so long as a company’s management

prerogatives are exercised in good faith for the advancement of the employer’s interest and not
for the purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements, this Court will uphold them. In the instant case, ABS-CBN validly
justified the implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it
maintains its objectivity and credibility and freeing itself from any appearance of impartiality so
that the confidence of the viewing and listening public in it will not be in any way eroded. Even
as the law is solicitous of the welfare of the employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. The free will of management to
conduct its own business affairs to achieve its purpose cannot be denied.
It is worth noting that such exercise of management prerogative has earned a stamp of
approval from no less than our Congress itself when on February 12, 2001, it enacted Republic
Act No. 9006, otherwise known as the "Fair Election Act." Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air

correspondent or personality who is a candidate for any elective public office or is a
campaign volunteer for or employed or retained in any capacity by any candidate or
political party shall be deemed resigned, if so required by their employer, or shall take a
leave of absence from his/her work as such during the campaign period: Provided, That any
media practitioner who is an official of a political party or a member of the campaign staff of a
Christian V. Asas
Page 39
==============================================
candidate or political party shall not use his/her time or space to favor any candidate or political
party.
d. Transfer; Promotion (demotion)
Peckson vs. Robinsons Supermarket, G.R. No. 198534, July 3, 2013, Reyes, J.
Doctrine. As we all know, there are various laws imposing all kinds of burdens and
obligations upon the employer in relation to his employees, and yet as a rule this Court has
always upheld the employer’s prerogative to regulate all aspects of employment relating to the
employees’ work assignment, the working methods and the place and manner of work. Indeed,
labor laws discourage interference with an employer’s judgment in the conduct of his business.
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.
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.
In the case at bar, we agree with the appellate court that there is substantial showing that
the transfer of the petitioner from Category Buyer to Provincial Coordinator was not
unreasonable, inconvenient, or prejudicial to her. The petitioner failed to dispute that the job
classifications of Category Buyer and Provincial Coordinator are similar, or that they command a
similar salary structure and responsibilities. We agree with the NLRC that the Provincial
Coordinator’s position does not involve mere clerical functions but requires the exercise of
discretion from time to time, as well as independent judgment, since the Provincial Coordinator
gives appropriate recommendations to management and ensures the faithful implementation of
policies and programs of the company. It even has influence over a Category Buyer because of
its recommendatory function that enables the Category Buyer to make right decisions on
assortment, price and quantity of the items to be sold by the store.
We also cannot sustain the petitioner’s claim that she was not accorded due process and
that the respondents acted toward her with discrimination, insensibility, or disdain as to force her
to forego her continued employment. In addition to verbal reminders from Sarte, the petitioner
Christian V. Asas
Page 40
==============================================
was asked in writing twice to explain within 48 hours her refusal to accept her transfer. In the
first, she completely remained silent, and in the second, she took four (4) days to file a mere one-
paragraph reply, wherein she simply said that she saw the Provincial Coordinator position as a
demotion, hence she could not accept it. Worse, she may even be said to have committed
insubordination when she refused to turn over her responsibilities to the new Category Buyer,
Padilla, and to assume her new responsibilities as Provincial Coordinator and report to the
Metroeast Depot as directed. This was precisely the reason why the petitioner was kept on
floating status. To her discredit, her defiance constituted a neglect of duty, or an act of
insubordination, per the LA.
Neither can we consider tenable the petitioner’s contention that the respondents
deliberately held her up to mockery and ridicule when they cut off her email access, sent
memoranda to her clients that she was no longer a Category Buyer, and to the various Robinsons
branches that she was now a Provincial Coordinator on floating status and that Padilla was taking
over her position as the new Category Buyer. It suffices to state that these measures are the
logical steps to take for the petitioner’s unjustified resistance to her transfer, and were not
intended to subject her to public embarrassment.
Best Wear Garments vs. De Lemos, G.R. No. 191281, December 5, 2012, Villarama, J.
Doctrine. Being piece-rate workers assigned to individual sewing machines,

respondents’ earnings depended on the quality and quantity of finished products. That their work
output might have been affected by the change in their specific work assignments does not
necessarily imply that any resulting reduction in pay is tantamount to constructive dismissal.
Workers under piece-rate employment have no fixed salaries and their compensation is computed
on the basis of accomplished tasks. As admitted by respondent De Lemos, some garments or by-
products took a longer time to finish so they could not earn as much as before. Also,the type of
sewing jobs available would depend on the specifications made by the clients of petitioner
company. Under these circumstances, it cannot be said that the transfer was unreasonable,
inconvenient or prejudicial to the respondents. Such deployment of sewers to work on different
types of garments as dictated by present business necessity is within the ambit of management
prerogative which, in the absence of bad faith, ill motive or discrimination, should not be
interfered with by the courts.
The records are bereft of any showing of clear discrimination, insensibility or disdain on
the part of petitioners in transferring respondents to perform a different type of sewing job. It is
unfair to charge petitioners with constructive dismissal simply because the respondents insist that
their transfer to a new work assignment was against their will. We have long stated that "the
objection to the transfer being grounded on solely upon the personal inconvenience or hardship
that will be caused to the employee by reason of the transfer is not a valid reason to disobey an
order of transfer." That respondents eventually discontinued reporting for work after their plea to
be returned to their former work assignment was their personal decision, for which the
petitioners should not be held liable particularly as the latter did not, in fact, dismiss them.
Christian V. Asas
Page 41
==============================================
Indeed, there was no evidence that respondents were dismissed from employment. In
fact, petitioners expressed willingness to accept them back to work. There being no termination
of employment by the employer, the award of backwages cannot be sustained. It is well settled
that backwages may be granted only when there is a finding of illegal dismissal. In cases where
there is no evidence of dismissal, the remedy is reinstatement but without backwages.
The constitutional policy of providing full protection to labor is not intended to oppress
or destroy management. 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. Thus, where management prerogative
to transfer employees is validly exercised, as in this case, courts will decline to interfere.
Julie’s Bakeshop vs. Arnaiz, G.R. No. 173882, February 15, 2012, Del Castillo, J.
Doctrine. We have 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.
In this case, petitioners insist that the transfer of respondents was a measure of self-
preservation and was prompted by a desire to protect the health of the buying public, claiming
that respondents should be transferred to a position where they could not sabotage the business
pending resolution of their cases. According to petitioners, the possibility that respondents might
introduce harmful substances to the bread while in the performance of their duties as chief bakers
is not imaginary but real as borne out by what Tolores did in one of the bakeshops in Culasi,
Antique where he was assigned as baker.
This postulation is not well-taken. On the contrary, petitioners failed to satisfy the burden
of proving that the transfer was based on just or valid ground. Petitioners’ bare assertions of
imminent threat from the respondents are mere accusations which are not substantiated by any
proof. This Court is proscribed from making conclusions based on mere presumptions or
suppositions. An employee’s fate cannot be justly hinged upon conjectures and surmises. The act
attributed against Tolores does not even convince us as he was merely a suspected culprit in the
alleged sabotage for which no investigation took place to establish his guilt or culpability.
Besides, Reyes still retained Tolores as an employee and chief baker when he could have
dismissed him for cause if the allegations were indeed found true. In view of these, this Court
finds no compelling reason to justify the transfer of respondents from chief bakers to
utility/security personnel. What appears to this Court is that respondents’ transfer was an act of
retaliation on the part of petitioners due to the former’s filing of complaints against them, and
Christian V. Asas
Page 42
==============================================
thus, was clearly made in bad faith. In fact, petitioner Reyes even admitted that he caused the
reassignments due to the pending complaints filed against him. As the CA aptly held:
In the case at bench, respondent Reyes failed to justify petitioners’ transfer from the
position of chief bakers to utility/security personnel. We find that the threat being alluded to by
respondent Reyes – that the petitioners might introduce harmful foreign substances in baking
bread – is imaginary and not real. We recall that what triggered the petitioners’ reassignment was
the filing of their complaints against private respondents in the NLRC. The petitioners were not
even given an opportunity to refute the reason for the transfer. The drastic change in petitioners’
nature of work unquestionably resulted in, as rightly perceived by them, a demeaning and
humiliating work condition. The transfer was a demotion in rank, beyond doubt. There is
demotion when an employee is transferred from a position of dignity to a servile or menial job.
One does not need to stretch the imagination to distinguish the work of a chief baker to that of a
security cum utility man.
"[D]emotion involves a situation in which an employee is relegated to a subordinate or

less important position constituting a reduction to a lower grade or rank, with a corresponding
decrease in duties and responsibilities, and usually accompanied by a decrease in salary." When
there is a demotion in rank and/or a diminution in pay; when a clear discrimination, insensibility
or disdain by an employer becomes unbearable to the employee; or when continued employment
is rendered impossible, unreasonable or unlikely, the transfer of an employee may constitute
constructive dismissal.
We agree with the CA in ruling that the transfer of respondents amounted to a demotion.
Although there was no diminution in pay, there was undoubtedly a demotion in titular rank. One
cannot deny the disparity between the duties and functions of a chief baker to that of a
utility/security personnel tasked to clean and manage the orderliness of the outside premises of
the bakeshop. Respondents were even prohibited from entering the bakeshop. The change in the
nature of their work undeniably resulted to a demeaning and humiliating work condition.
F. Employment Restriction
a. Prohibition against competitive employment
Rivera vs. Solidbank Corporation, G.R. No. 163269, April 19, 2006, Callejo, Sr., J.
Doctrine. In cases where an employee assails a contract containing a provision

prohibiting him or her from accepting competitive employment as against public policy, the
employer has to adduce evidence to prove that the restriction is reasonable and not greater than
necessary to protect the employer’s legitimate business interests. The restraint may not be unduly
harsh or oppressive in curtailing the employee’s legitimate efforts to earn a livelihood and must
be reasonable in light of sound public policy.
Christian V. Asas
Page 43
==============================================
Courts should carefully scrutinize all contracts limiting a man’s natural right to follow
any trade or profession anywhere he pleases and in any lawful manner. But it is just as important
to protect the enjoyment of an establishment in trade or profession, which its employer has built
up by his own honest application to every day duty and the faithful performance of the tasks
which every day imposes upon the ordinary man. What one creates by his own labor is his.
Public policy does not intend that another than the producer shall reap the fruits of labor; rather,
it gives to him who labors the right by every legitimate means to protect the fruits of his labor
and secure the enjoyment of them to himself. Freedom to contract must not be unreasonably
abridged. Neither must the right to protect by reasonable restrictions that which a man by
industry, skill and good judgment has built up, be denied.
The Court reiterates that the determination of reasonableness is made on the particular
facts and circumstances of each case. In Esmerson Electric Co. v. Rogers, it was held that the
question of reasonableness of a restraint requires a thorough consideration of surrounding
circumstances, including the subject matter of the contract, the purpose to be served, the
determination of the parties, the extent of the restraint and the specialization of the business of
the employer. The court has to consider whether its enforcement will be injurious to the public or
cause undue hardships to the employee, and whether the restraint imposed is greater than
necessary to protect the employer. Thus, the court must have before it evidence relating to the
legitimate interests of the employer which might be protected in terms of time, space and the
types of activity proscribed.
Consideration must be given to the employee’s right to earn a living and to his ability to
determine with certainty the area within which his employment ban is restituted. A provision on
territorial limitation is necessary to guide an employee of what constitutes as violation of a
restrictive covenant and whether the geographic scope is co-extensive with that in which the
employer is doing business. In considering a territorial restriction, the facts and circumstances
surrounding the case must be considered.
Thus, in determining whether the contract is reasonable or not, the trial court should
consider the following factors: (a) whether the covenant protects a legitimate business interest of
the employer; (b) whether the covenant creates an undue burden on the employee; (c) whether
the covenant is injurious to the public welfare; (d) whether the time and territorial limitations
contained in the covenant are reasonable; and (e) whether the restraint is reasonable from the
standpoint of public policy.
Not to be ignored is the fact that the banking business is so impressed with public interest
where the trust and interest of the public in general is of paramount importance such that the
appropriate standard of diligence must be very high, if not the highest degree of diligence.
We are not impervious of the distinction between restrictive covenants barring an

employee to accept a post-employment competitive employment or restraint on trade in
employment contracts and restraints on post-retirement competitive employment in pension and
Christian V. Asas
Page 44
==============================================
retirement plans either incorporated in employment contracts or in collective bargaining

agreements between the employer and the union of employees, or separate from said contracts or
collective bargaining agreements which provide that an employee who accepts post retirement
competitive employment will forfeit retirement and other benefits or will be obliged to restitute
the same to the employer. The strong weight of authority is that forfeitures for engaging in
subsequent competitive employment included in pension and retirement plans are valid even
though unrestricted in time or geography. The raison d’etre is explained by the United States
Circuit Court of Appeals in Rochester Corporation v. W.L. Rochester, Jr.:
x x x The authorities, though, generally draw a clear and obvious distinction between
restraints on competitive employment in employment contracts and in pension plans. The strong
weight of authority holds that forfeitures for engaging in subsequent competitive employment,
included in pension retirement plans, are valid, even though unrestricted in time or geography.
The reasoning behind this conclusion is that the forfeiture, unlike the restraint included in the
employment contract, is not a prohibition on the employee’s engaging in competitive work but is
merely a denial of the right to participate in the retirement plan if he does so engage. A leading
case on this point is Van Pelt v. Berefco, Inc., where, in passing on a forfeiture provision similar
to that here, the Court said:
"A restriction in the contract which does not preclude the employee from engaging in
competitive activity, but simply provides for the loss of rights or privileges if he does so is not in
restraint of trade."
A post-retirement competitive employment restriction is designed to protect the employer

against competition by former employees who may retire and obtain retirement or pension
benefits and, at the same time, engage in competitive employment.
We have reviewed the Undertaking which respondent impelled petitioner to sign, and find
that in case of failure to comply with the promise not to accept competitive employment within
one year from February 28, 1995, respondent will have a cause of action against petitioner for
"protection in the courts of law." The words "cause of action for protection in the courts of law"
are so broad and comprehensive, that they may also include a cause of action for prohibitory and
mandatory injunction against petitioner, specific performance plus damages, or a damage suit
(for actual, moral and/or exemplary damages), all inclusive of the restitution of the P963,619.28
which petitioner received from respondent. The Undertaking and the Release, Waiver and
Quitclaim do not provide for the automatic forfeiture of the benefits petitioner received under the
SRP upon his breach of said deeds. Thus, the post-retirement competitive employment ban
incorporated in the Undertaking of respondent does not, on its face, appear to be of the same
class or genre as that contemplated in Rochester.
b. Prohibition on employment of relatives
i. Based on contract
Christian V. Asas
Page 45
==============================================
United Kimberly-Clark Employees Union vs. Kimberly-Clark Philippines, G.R. No.

162957, March 6, 2006, Callejo, Sr., J.
Doctrine. A CBA is more than a contract; it is a generalized code to govern a myriad of

cases which the draftsmen cannot wholly anticipate. It covers the whole employment relationship
and prescribes the rights and duties of the parties. It is a system of industrial self-government
with the grievance machinery at the very heart of the system. The parties solve their problems by
molding a system of private law for all the problems which may arise and to provide for their
solution in a way which will generally accord with the variant needs and desires of the parties.
If the terms of a CBA are clear and have no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties
stipulate that the hirees must be presumed of employment qualification standards but fail to state
such qualification standards in said CBA, the VA may resort to evidence extrinsic of the CBA to
determine the full agreement intended by the parties. When a CBA may be expected to speak on
a matter, but does not, its sentence imports ambiguity on that subject. The VA is not merely to
rely on the cold and cryptic words on the face of the CBA but is mandated to discover the
intention of the parties. Recognizing the inability of the parties to anticipate or address all future
problems, gaps may be left to be filled in by reference to the practices of the industry, and the
step which is equally a part of the CBA although not expressed in it. In order to ascertain the
intention of the contracting parties, their contemporaneous and subsequent acts shall be
principally considered. The VA may also consider and rely upon negotiating and contractual
history of the parties, evidence of past practices interpreting ambiguous provisions. The VA has
to examine such practices to determine the scope of their agreement, as where the provision of
the CBA has been loosely formulated. Moreover, the CBA must be construed liberally rather
than narrowly and technically and the Court must place a practical and realistic construction
upon it.
In the present case, the parties are in agreement that, on its face, Article XX, Section 1 of
their 1997 CBA does not contain any provision relative to the employment qualification
standards of recommendees of retired/resigned, deceased or disabled employees of respondent
who are members of petitioner. However, in determining the employment qualification standards
for said recommendees, the VA should have relied on the November 7, 1995 Guidelines issued
by respondent, which reads:
D. Definition of the phrase "immediate member of the family of an employee"
1. The phrase "immediate member of the family of an employee" shall refer to the
employee’s legitimate children and in default thereof to the employee’s collateral relatives within
the third civil degree.
Christian V. Asas
Page 46
==============================================
2. A resigned/retired employee may be allowed to recommend a collateral relative within

the third civil degree (e.g., brother, sister, nephew or niece) as his/her replacement only in the
following cases:
a. Where the retired/resigned employee is single or if married has no legitimate

children.
b. Where the retired/resigned employee’s children are still minors (below 18 years
old) at the time of his/her separation from the company. (Emphasis added)
E. General Provisions
1. The privilege to recommend a replacement can be exercised by the employee

concerned only once. Thus, in the following cases, a recommendee who has been hired on
probationary status can no longer be substituted with another recommendee.
a. where the recommendee fails to pass in his performance evaluation.
b. where the recommendee resigns without completing his probationary period.
c. where the recommendee is dismissed for cause.
d. where the recommendee dies during his probationary period.
Respondent issued said Guidelines in light of the ruling of this Court in Kimberly Clark
Philippines v. Lorredo. Respondent saw it imperative to do away with its practice of
accommodating recommendees who were mere high school graduates, and to require higher
employment standards for them.
By agreement of the parties, the implementation of the Guidelines was deferred until
January 1, 1997, unless revoked or amended by the 1997 CBA. Petitioner proposed that the
practice of hiring recommendees of retired/resigned, deceased or disabled employees who were
union members, who were at least high school graduates, be included in their CBA, but
respondent did not agree. Hence, Article XX, Section 1 of the 1997 CBA of the parties remained
intact. There was thus no more legal bar for respondent to implement the November 7, 1995
Guidelines. By executing the 1997 CBA, in its present form, petitioner is bound by the terms and
conditions therein set forth.
The VA, however, ignored the plain language of the 1997 CBA of the parties, as well as
the Guidelines issued by respondent. He capriciously based his resolution on the respondent’s
practice of hiring which, however, by agreement of petitioner and respondent, was discontinued.
Christian V. Asas
Page 47
==============================================
The Court has recognized in numerous instances the undoubted right of the employer to
regulate, according to his own discretion and best judgment, all aspects of employment,
including but not limited to, work assignments and supervision, working methods and
regulations, time, place and manner of work, processes to be followed, and hiring, supervision,
transfer, discipline, lay off, dismissal and recall of workers. Encompassing though it could be,
the exercise of this right is not absolute. Management prerogative must be exercised in good faith
for the advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws, valid agreements such as the
individual contract of employment and the collective bargaining agreement, and general
principles of justice and fair play. In this case, the Court finds that respondent acted in accord
with the CBA and the November 7, 1995 Guidelines, which, by agreement of the parties, may be
implemented by respondent after January 1, 1997.
ii. Bonafide occupational qualification exception
Star Paper Corporation vs. Simbol, G.R. No. 164774, April 12, 2006, Puno, J.
Doctrine. It is true that the policy of petitioners prohibiting close relatives from working
in the same company takes the nature of an anti-nepotism employment policy. Companies adopt
these policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability. These policies focus upon the potential employment problems
arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment
policies specifically prohibiting spouses from working for the same company. We note that two
types of employment policies involve spouses: policies banning only spouses from working in
the same company (no-spouse employment policies), and those banning all immediate family
members, including spouses, from working in the same company (anti-nepotism employment
policies).
Unlike in our jurisdiction where there is no express prohibition on marital

discrimination, there are twenty state statutes in the United States prohibiting marital
discrimination. Some state courts have been confronted with the issue of whether no-spouse
policies violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants

utilize two theories of employment discrimination: the disparate treatment and the disparate
impact. Under the disparate treatment analysis, the plaintiff must prove that an employment
policy is discriminatory on its face. No-spouse employment policies requiring an employee of
a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an
employment policy prohibiting the employer from hiring wives of male employees, but not
husbands of female employees, is discriminatory on its face.
Christian V. Asas
Page 48
==============================================
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example, although
most employment policies do not expressly indicate which spouse will be required to transfer or
leave the company, the policy often disproportionately affects one sex.
The state courts’ rulings on the issue depend on their interpretation of the scope of marital
status discrimination within the meaning of their respective civil rights acts. Though they agree
that the term "marital status" encompasses discrimination based on a person's status as either
married, single, divorced, or widowed, they are divided on whether the term has
a broader meaning. Thus, their decisions vary.
The courts narrowly interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader definition
it would have either chosen different language or specified its intent. They hold that the relevant
inquiry is if one is married rather than to whom one is married. They construe marital status
discrimination to include only whether a person is single, married, divorced, or widowed and not
the "identity, occupation, and place of employment of one's spouse." These courts have upheld
the questioned policies and ruled that they did not violate the marital status discrimination
provision of their respective state statutes.
The courts that have broadly construed the term "marital status" rule that it encompassed
the identity, occupation and employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of the state statute. They reason that
the no-spouse employment policy violate the marital status provision because it arbitrarily
discriminates against all spouses of present employees without regard to the actual effect on the
individual's qualifications or work performance. These courts also find the no-spouse
employment policy invalid for failure of the employer to present any evidence of business
necessity other than the general perception that spouses in the same workplace might adversely
affect the business. They hold that the absence of such a bona fide occupational
qualification invalidates a rule denying employment to one spouse due to the current
employment of the other spouse in the same office. Thus, they rule that unless the employer can
prove that the reasonable demands of the business require a distinction based on marital status
and there is no better available or acceptable policy which would better accomplish the business
purpose, an employer may not discriminate against an employee based on the identity of the
employee’s spouse. This is known as the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other than
the discriminatory practice. To justify a bona fide occupational qualification, the employer must
prove two factors: (1) that the employment qualification is reasonably related to the essential
operation of the job involved; and, (2) that there is a factual basis for believing that all or
Christian V. Asas
Page 49
==============================================
substantially all persons meeting the qualification would be unable to properly perform the duties
of the job.
The concept of a bona fide occupational qualification is not foreign in our jurisdiction.
We employ the standard of reasonableness of the company policy which is parallel to the bona
fide occupational qualification requirement. In the recent case of Duncan Association of
Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc., we passed on
the validity of the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company. We held that Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs and information
from competitors. We considered the prohibition against personal or marital relationships with
employees of competitor companies upon Glaxo’s employees reasonable under the
circumstances because relationships of that nature might compromise the interests of Glaxo. In
laying down the assailed company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain access to its secrets and
procedures.
The requirement that a company policy must be reasonable under the circumstances to
qualify as a valid exercise of management prerogative was also at issue in the 1997 case
of Philippine Telegraph and Telephone Company v. NLRC. In said case, the employee was
dismissed in violation of petitioner’s policy of disqualifying from work any woman worker who
contracts marriage. We held that the company policy violates the right against discrimination
afforded all women workers under Article 136 of the Labor Code, but established a permissible
exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a
"bona fide occupational qualification," or BFOQ, where the particular requirements of the job
would justify the same, but not on the ground of a general principle, such as the desirability of
spreading work in the workplace. A requirement of that nature would be valid provided it reflects
an inherent quality reasonably necessary for satisfactory job performance.
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the burden
to prove the existence of a reasonable business necessity. The burden was successfully
discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to have two (2) or more
of its employees related between the third degree by affinity and/or consanguinity" is lame. That
the second paragraph was meant to give teeth to the first paragraph of the questioned rule is
evidently not the valid reasonable business necessity required by the law.
Christian V. Asas
Page 50
==============================================
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee. Petitioners
failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit,
then an employee of the Repacking Section, could be detrimental to its business operations.
Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia,
then a Production Helper in the Selecting Department, who married Howard Comia, then a
helper in the cutter-machine. The policy is premised on the mere fear that employees married to
each other will be less efficient. If we uphold the questioned rule without valid justification, the
employer can create policies based on an unproven presumption of a perceived danger at the
expense of an employee’s right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned policy
may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and
under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners
to prove a legitimate business concern in imposing the questioned policy cannot prejudice the
employee’s right to be free from arbitrary discrimination based upon stereotypes of married
persons working together in one company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in our

jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast
and extensive that we cannot prudently draw inferences from the legislature’s silence that
married persons are not protected under our Constitution and declare valid a policy based on a
prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a
reasonable business necessity, we rule that the questioned policy is an invalid exercise of
management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia
resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the
singular fact that her resignation letter was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent court failed to categorically rule
whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol and
Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in
dire need of money. We examined the records of the case and find Estrella’s contention to be
more in accord with the evidence. While findings of fact by administrative tribunals like the
NLRC are generally given not only respect but, at times, finality, this rule admits of
exceptions, as in the case at bar.
PILTEL vs. NLRC, G.R. No. 118978, May 23, 1997, Regalado, J.
Christian V. Asas
Page 51
==============================================
FACTS: Grace De Guzman was hired by PILTEL several times as reliever. Subsequently,
she was once more asked to join PILTEL as a probationary employee. In the job application form
that was furnished her to be filled up for the purpose, she indicated in the portion for civil status
therein that she was single although she had contracted marriage a few months earlier, that is, on
May 26, 1991. It was shown that De Guzman had made the same representation in the two
successive reliever agreements. Hence, PILTEL’s branch supervisor Oficial sent to her a
memorandum requiring her to explain the discrepancy and was reminded about the company's
policy of not accepting married women for employment.
ISSUE: Whether or not PILTEL’s policy of not accepting married women is valid.
HELD: No. In the case at bar, petitioner's policy of not accepting or considering as disqualified
from work any woman worker who contracts marriage runs afoul of the test of, and the right
against, discrimination, afforded all women workers by our labor laws and by no less than the
Constitution. Contrary to petitioner's assertion that it dismissed private respondent from
employment on account of her dishonesty, the record discloses clearly that her ties with the
company were dissolved principally because of the company's policy that married women are not
qualified for employment in PT & T, and not merely because of her supposed acts of dishonesty.
This Court should be spared the ennui of strained reasoning and the tedium of
propositions which confuse through less than candid arguments. Indeed, petitioner glosses over
the fact that it was its unlawful policy against married women, both on the aspects of
qualification and retention, which compelled private respondent to conceal her supervening
marriage. It was, however, that very policy alone which was the cause of private respondent's
secretive conduct now complained of. It is then apropos to recall the familiar saying that he who
is the cause of the cause is the cause of the evil caused.
As an employee who had therefore gained regular status, and as she had been dismissed
without just cause, she is entitled to reinstatement without loss of seniority rights and other
privileges and to full back wages, inclusive of allowances and other benefits or their monetary
equivalent. However, as she had undeniably committed an act of dishonesty in concealing her
status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month
suspension imposed by respondent NLRC must be upheld to obviate the impression or inference
that such act should be condoned. It would be unfair to the employer if she were to return to its
fold without any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation was
withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the
amount corresponding to her three months suspension.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et
al. vs. Philippine Air Lines, a decision that emanated from the Office of the President. There, a
policy of Philippine Air Lines requiring that prospective flight attendants must be single and that
they will be automatically separated from the service once they marry was declared void, it being
Christian V. Asas
Page 52
==============================================
violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination
against married women. Thus:
“Of first impression is the incompatibility of the respondent's policy or regulation with
the codal provision of law. Respondent is resolute in its contention that Article 136 of the Labor
Code applies only to women employed in ordinary occupations and that the prohibition against
marriage of women engaged in extraordinary occupations, like flight attendants, is fair and
reasonable, considering the pecularities of their chosen profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew
that the controverted policy has already met its doom as early as March 13, 1973 when
Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was
promulgated. But for the timidity of those affected or their labor unions in challenging the
validity of the policy, the same was able to obtain a momentary reprieve. A close look at Section
8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals
that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which
was promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new Labor
Code, all policies and acts against it are deemed illegal and therefore abrogated. True, Article
132 enjoins the Secretary of Labor to establish standards that will ensure the safety and health of
women employees and in appropriate cases shall by regulation require employers to determine
appropriate minimum standards for termination in special occupations, such as those of flight
attendants, but that is precisely the factor that militates against the policy of respondent. The
standards have not yet been established as set forth in the first paragraph, nor has the Secretary of
Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which are as
yet to be established, the policy of respondent against marriage is patently illegal. This finds
support in Section 9 of the New Constitution.
Moreover, we cannot agree to the respondent's proposition that termination from

employment of flight attendants on account of marriage is a fair and reasonable standard
designed for their own health, safety, protection and welfare, as no basis has been laid therefor.
Actually, respondent claims that its concern is not so much against the continued employment of
the flight attendant merely by reason of marriage as observed by the Secretary of Labor, but
rather on the consequence of marriage-pregnancy. Respondent discussed at length in the instant
appeal the supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately explained by
the Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking the
provisions of Articles 52 and 216 of the New Civil Code on the preservation of marriage as an
Christian V. Asas
Page 53
==============================================
inviolable social institution and the family as a basic social institution, respectively, as bases for
its policy of non-marriage. In both instances, respondent predicates absence of a flight attendant
from her home for long periods of time as contributory to an unhappy married life. This is pure
conjecture not based on actual conditions, considering that, in this modern world, sophisticated
technology has narrowed the distance from one place to another. Moreover, respondent
overlooked the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations, or
it should have categorically expressed so. The sweeping intendment of the law, be it on special or
ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of
non-discrimination on the employment of women.”
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining &
Industrial Corporation considered as void a policy of the same nature. In said case, respondent,
in dismissing from the service the complainant, invoked a policy of the firm to consider female
employees in the project it was undertaking as separated the moment they get married due to lack
of facilities for married women. Respondent further claimed that complainant was employed in
the project with an oral understanding that her services would be terminated when she gets
married. Branding the policy of the employer as an example of "discriminatory chauvinism"
tantamount to denying equal employment opportunities to women simply on account of their sex,
the appellate court struck down said employer policy as unlawful in view of its repugnance to the
Civil Code, Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference or

conditions relating to the marital status of an employee are categorized as a "sex-plus"
discrimination where it is imposed on one sex and not on the other. Further, the same should be
evenly applied and must not inflict adverse effects on a racial or sexual group which is protected
by federal job discrimination laws. Employment rules that forbid or restrict the employment of
married women, but do not apply to married men, have been held to violate Title VII of the
United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination
against employees and applicants on the basis of, among other things, sex.
Further, it is not relevant that the rule is not directed against all women but just against
married women. And, where the employer discriminates against married women, but not against
married men, the variable is sex and the discrimination is unlawful. Upon the other hand, a
requirement that a woman employee must remain unmarried could be justified as a "bona fide
occupational qualification," or BFOQ, where the particular requirements of the job would justify
the same, but not on the ground of a general principle, such as the desirability of spreading work
in the workplace. A requirement of that nature would be valid provided it reflects an inherent
quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage
rule applicable to both male and female flight attendants, was regarded as unlawful since the
restriction was not related to the job performance of the flight attendants.
Christian V. Asas
Page 54
==============================================
Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor
Code on the right of a woman to be free from any kind of stipulation against marriage in
connection with her employment, but it likewise assaults good morals and public policy, tending
as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts
inheres in the individual as an intangible and inalienable right. Hence, while it is true that the
parties to a contract may establish any agreements, terms, and conditions that they may deem
convenient, the same should not be contrary to law, morals, good customs, public order, or public
policy. Carried to its logical consequences, it may even be said that petitioner's policy against
legitimate marital bonds would encourage illicit or common-law relations and subvert the
sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the relations
between the parties, that is, of capital and labor, are not merely contractual, impressed as they are
with so much public interest that the same should yield to the common good. It goes on to intone
that neither capital nor labor should visit acts of oppression against the other, nor impair the
interest or convenience of the public. In the final reckoning, the danger of just such a policy
against marriage followed by petitioner PT & T is that it strikes at the very essence, ideals and
purpose of marriage as an inviolable social institution and, ultimately, of the family as the
foundation of the nation. That it must be effectively interdicted here in all its indirect, disguised
or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in
order but imperatively required.
c. Prohibition on marrying employees of competitor
Duncan Association of Detailman-PTGWO vs. Glaxo Wellcome, G.R. No. 162994,

September 17, 2004, Tinga, J. (*This case was asked in the 2016 Jurist Mock Bar Examination)
ISSUE: Is the policy of the company prohibiting its employees to marry competitor’s
employees valid?
HELD: Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors, especially so that it
and Astra are rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor

companies upon Glaxo’s employees is reasonable under the circumstances because relationships
of that nature might compromise the interests of the company. In laying down the assailed
company policy, Glaxo only aims to protect its interests against the possibility that a competitor
company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less
than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to
Christian V. Asas
Page 55
==============================================
protect its right to reasonable returns on investments and to expansion and growth. Indeed, while
our laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The law
also recognizes that management has rights which are also entitled to respect and enforcement in
the interest of fair play.
G. Quitclaims and Compromise Agreements
a. Contents of a valid quitclaim/waiver (2016 Bar)
EDI-Staffbuilders vs. NLRC, G.R. No. 145587, October 26, 2007, Velasco, Jr., J.
Doctrine. Is the waiver and quitclaim labeled a Declaration valid? It is not.
The Court finds the waiver and quitclaim null and void for the following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is
unreasonably low. As correctly pointed out by the court a quo, the payment of SR 2,948.00 is
even lower than his monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very
much less than the USD 16,150.00 which is the amount Gran is legally entitled to get from
petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for
Gran's salary for the services he rendered to OAB as Computer Specialist. If the Declaration is a
quitclaim, then the consideration should be much much more than the monthly salary of SR
3,190.00 (USD 850.00)—although possibly less than the estimated Gran's salaries for the
remaining duration of his contract and other benefits as employee of OAB. A quitclaim will
understandably be lower than the sum total of the amounts and benefits that can possibly be
awarded to employees or to be earned for the remainder of the contract period since it is a
compromise where the employees will have to forfeit a certain portion of the amounts they are
claiming in exchange for the early payment of a compromise amount. The court may however
step in when such amount is unconscionably low or unreasonable although the employee
voluntarily agreed to it. In the case of the Declaration, the amount is unreasonably small
compared to the future wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show
that Gran did not voluntarily and freely execute the document. Consider the following
chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;

b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his
plane ticket;
c. On July 11, 1994, he signed the Declaration;
Christian V. Asas
Page 56
==============================================
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was "forced" to sign the Declaration and
constrained to receive the amount of SR 2,948.00 even if it was against his will—since he was
told on July 10, 1994 to leave Riyadh on July 12, 1994. He had no other choice but to sign the
Declaration as he needed the amount of SR 2,948.00 for the payment of his ticket. He could have
entertained some apprehensions as to the status of his stay or safety in Saudi Arabia if he would
not sign the quitclaim.
4. The court a quo is correct in its finding that the Declaration is a contract of adhesion
which should be construed against the employer, OAB. An adhesion contract is contrary to
public policy as it leaves the weaker party—the employee—in a "take-it-or-leave-it" situation.
Certainly, the employer is being unjust to the employee as there is no meaningful choice on the
part of the employee while the terms are unreasonably favorable to the employer.
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under

Philippine laws in the absence of proof of the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers
of employees under Philippine laws, said agreements should contain the following (2016 Bar):
1. A fixed amount as full and final compromise settlement;

2. The benefits of the employees if possible with the corresponding amounts, which the
employees are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English, Filipino, or in
the dialect known to the employees—that by signing the waiver or quitclaim, they are forfeiting
or relinquishing their right to receive the benefits which are due them under the law; and
4. A statement that the employees signed and executed the document voluntarily, and had fully
understood the contents of the document and that their consent was freely given without any
threat, violence, duress, intimidation, or undue influence exerted on their person.
It is advisable that the stipulations be made in English and Tagalog or in the dialect
known to the employee. There should be two (2) witnesses to the execution of the quitclaim
who must also sign the quitclaim. The document should be subscribed and sworn to under oath
preferably before any administering official of the Department of Labor and Employment or its
regional office, the Bureau of Labor Relations, the NLRC or a labor attaché in a foreign country.
Such official shall assist the parties regarding the execution of the quitclaim and waiver. This
compromise settlement becomes final and binding under Article 227 of the Labor Code which
provides that:
[A]ny compromise settlement voluntarily agreed upon with the assistance of the Bureau
of Labor Relations or the regional office of the DOLE, shall be final and binding upon the
parties and the NLRC or any court "shall not assume jurisdiction over issues involved
Christian V. Asas
Page 57
==============================================
therein except in case of non-compliance thereof or if there is prima facie evidence that
the settlement was obtained through fraud, misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor
contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon to
govern said contracts. Otherwise, the foreign laws shall apply
b. Valid and binding agreement
Radio Mindanao Network vs. Amurao III, G.R. No. 167225, October 22, 2014, Bersamin, J.
Doctrine: Not all quitclaims are per sein valid or against public policy. A quitclaim is
invalid or contrary to public policy only: (1) where there is clear proof that the waiver was
wrangled from an unsuspecting or gullible person; or (2) where the terms of settlement are
unconscionable on their face. In instances of invalid quitclaims, the law steps in to annul the
questionable waiver. Indeed, there are legitimate waivers that represent the voluntary and
reasonable settlements of laborers’ claims that should be respected by the Court as the law
between the parties. Where the party has voluntarily made the waiver, with a full understanding
of its terms as well as its consequences, and the consideration for the quitclaimis credible and
reasonable, the transaction must be recognized as a valid and binding undertaking, and may not
later be disowned simply because of a change of mind. A waiver is essentially contractual.
In our view, the requisites for the validity of Michael’s quitclaim were satisfied. We
explain.
Firstly, Michael acknowledged in his quitclaim that he had read and thoroughly
understood the terms of his quitclaim and signed it of his own volition. Being a radio broadcaster
and production manager, he occupied a highly responsible position in the company.It would be
implausible to hold, therefore, that he could be easily duped into simply signing away his rights.
Besides, the language and content ofthe quitclaim were clear and uncomplicated such that he
could not claim that he did not understand what he was signing.
Secondly, the settlement pay of P311,922.00 was credible and reasonable considering that
Michael did not even assail such amount as unconscionably low, or even state that he was
entitled to a higher amount.
Thirdly, that he was required to sign the quitclaim as a condition to the release of the
settlement pay did not prove that its execution was coerced. Having agreed to part with a
substantial amount of money, RMN took steps to protect its interest and obtain its release from
all obligations once it paid Michael his settlement pay, which it did in this case.
Christian V. Asas
Page 58
==============================================
And, lastly, that he signed the quitclaim out of fear of not being able to provide for the
needs of his family and for the schooling of his children did not immediately indicate that he had
been forced to sign the same. Dire necessity should not necessarily be an acceptable ground for
annulling the quitclaim, especially because it was not at all shown that he had been forced to
execute it. Nor was it even proven that the consideration for the quitclaim was unconscionably
low, and that he had been tricked into accepting the consideration.
With the quitclaim having been freely and voluntarily signed, RMN was released and
absolved from any liability in favor of Michael. Suffice it to say that the quitclaim is ineffective
in barring recovery of the full measure of an employee's rights only when the transaction is
shown to be questionable and the consideration is scandalously low and inequitable. Such is not
true here.
c. Quitclaims generally frowned upon
Zuellig Pharma Corp. vs. Sibal, G.R. No. 173587, July 15, 2013, Del Castillo, J.
Doctrine: It is true that quitclaims executed by employees are often frowned upon as
contrary to public policy. But that is not to say that all waivers and quitclaims are invalid as
against public policy. Quitclaims will be upheld as valid if the following requisites are present
(2016 Bar): "(1) the employee executes a deed of quitclaim voluntarily; (2) there is no fraud or
deceit on the part of any of the parties; (3) the consideration of the quitclaim is credible and
reasonable; and, (4) the contract is not contrary to law, public order, public policy, morals or
good customs or prejudicial to a third person with a right recognized by law."
In this case, there is no showing that Zuellig coerced or forced respondents to sign the
Release and Quitclaim. In fact, there is no allegation that Zuellig employed fraud or deceit in
making respondents sign the Release and Quitclaim. On the other hand, respondents declared
that they had received the separation pay in full settlement of all claims arising from their
employment with Zuellig. For which reason, they have remised, released and discharged Zuellig.
Notably, the Release and Quitclaim represents a reasonable and fair settlement of respondents’
claims. Under Article 283 of the Labor Code, the employers are required to pay employees
separated from employment by reason of redundancy at least one (1) month pay or at least one
(1) month pay for every year of service, whichever is higher. Here, respondents received 100%
of their one (1) month basic pay for every year of service, plus a premium ranging from 20% to
85% of such basic pay for every year of service (depending on the number of years in service),
as separation pay. In Goodrich Manufacturing Corporation, v. Ativo, this Court declared that –
It is only where there is clear proof that the waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are unconscionable on its face, that the law will step in
to annul the questionable transaction. But where it is shown that the person making the waiver
did so voluntarily, with full understanding of what he was doing, and the consideration for the
Christian V. Asas
Page 59
==============================================
quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding
undertaking.
Poseidon International vs. Tamala, G.R. No. 186475, June 26, 2013, Brion, J.
Doctrine: Generally, this Court looks with disfavor at quitclaims executed by employees
for being contrary to public policy. Where the person making the waiver, however, has done so
voluntarily, with a full understanding of its terms and with the payment of credible and
reasonable consideration, we have no option but to recognize the transaction to be valid and
binding.
We find the requisites for the validity of the respondents’ quitclaim present in this case.
We base this conclusion on the following observations:
First, the respondents acknowledged in their various pleadings, as well as in the very
document denominated as "waiver and quitclaim," that they voluntarily signed the document
after receiving the agreed settlement pay.
Second, the settlement pay is reasonable under the circumstances, especially when
contrasted with the amounts to which they were respectively entitled to receive as termination
pay pursuant to Section 23 of the POEA-SEC and Article 283 of the Labor Code.
Third, the contents of the waiver and quitclaim are clear, unequivocal and uncomplicated
so that the respondents could fully understand the import of what they were signing and of its
consequences. Nothing in the records shows that what they received was different from what
they signed for.
Fourth, the respondents are mature and intelligent individuals, with college degrees, and
are far from the naive and unlettered individuals they portrayed themselves to be.
Fifth, while the respondents contend that they were coerced and unduly influenced in
their decision to accept the settlement pay and to sign the waivers and quitclaims, the records of
the case do not support this claim. The respondents’ claims that they were in "dire need for cash"
and that they would not be paid anything if they would not sign do not constitute the coercion
nor qualify as the undue influence contemplated by law sufficient to invalidate a waiver and
quitclaim, particularly in the circumstances attendant in this case. The records show that the
respondents, along with their other fellow seafarers, served as each other’s witnesses when they
agreed and signed their respective waivers and quitclaims.
Sixth, the respondents’ voluntary and knowing conformity to the settlement pay was
proved not only by the waiver and quitclaim, but by the letters of acceptance and the vouchers
evidencing payment. With these documents on record, the burden shifts to the respondents to
prove coercion and undue influence other than through their bare self-serving claims. No such
evidence appeared on record at any stage of the proceedings.
Christian V. Asas
Page 60
==============================================
In these lights and in the absence of any evidence showing that fraud, deception or
misrepresentation attended the execution of the waiver and quitclaim, we are sufficiently
convinced that a valid transaction took place. Consequently, we find that the CA erroneously
imputed grave abuse of discretion in misreading the submitted evidence, and in relying on the
May 25, 2005 agreement and on Section 10 of R.A. No. 8042
II. THE LABOR CODE OF THE PHILIPPINES (PD 442, as amended)
A. Preliminary Title, Chapter I, Arts. 1-6
i. Construction in favor of labor
Manaya vs. Alabang Country Club, G.R. No. 168988, June 19, 2007, Chico-Nazario, J.
Doctrine. That the perfection of an appeal within the statutory or reglementary period is
not only mandatory, but jurisdictional, and failure to do so renders the questioned decision final
and executory and deprives the appellate court of jurisdiction to alter the final judgment, much
less to entertain the appeal. The underlying purpose of this principle is to prevent needless delay,
a circumstance which would allow the employer to wear out the efforts and meager resources of
the worker to the point that the latter is constrained to settle for less than what is due him. This
Court has declared that although the NLRC is not bound by the technical rules of procedure and
is allowed to be liberal in the interpretation of the rules in deciding labor cases, such liberality
should not be applied where it would render futile the very purpose for which the principle of
liberality is adopted. The liberal interpretation stems from the mandate that the workingman’s
welfare should be the primordial and paramount consideration. We see no reason in this case to
waive the rules on the perfection of appeal.
The Court is aware that the NLRC is not bound by the technical rules of procedure and is
allowed to be liberal in the interpretation of rules in deciding labor cases. However, such
liberality should not be applied in the instant case as it would render futile the very purpose for
which the principle of liberality is adopted. The liberal interpretation in favor of labor stems from
the mandate that the workingman’s welfare should be the primordial and paramount
consideration. x x x.
Indeed, there is no room for liberality in the instant case "as it would render futile the
very purpose for which the principle of liberality is adopted." As so rightfully enunciated, "the
liberal interpretation in favor of labor stems from the mandate that the workingman’s welfare
should be the primordial and paramount consideration." This Court has repeatedly ruled that
delay in the settlement of labor cases cannot be countenanced. Not only does it involve the
survival of an employee and his loved ones who are dependent on him for food, shelter, clothing,
medicine and education; it also wears down the meager resources of the workers to the point
that, not infrequently, they either give up or compromise for less than what is due them.
Christian V. Asas
Page 61
==============================================
Without doubt, to allow the appeal of the respondent as what the Court of Appeals had
done and remand the case to the NLRC would only result in delay to the detriment of the
petitioner. In Narag v. National Labor Relations Commission, citing Vir-Jen Shipping and
Marine Services, Inc. v. National Labor Relations Commission, we held that delay in most
instances gives the employers more opportunity not only to prepare even ingenious defenses,
what with well-paid talented lawyers they can afford, but even to wear out the efforts and meager
resources of the workers, to the point that not infrequently the latter either give up or
compromise for less than what is due them.
Nothing is more settled in our jurisprudence than the rule that when the conflicting
interest of loan 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
under-privileged worker.
Asuncion vs. NLRC, G.R. No. 129329, July 31, 2001, Kapunan, J.
Doctrine. In the case at bar, both the handwritten listing and computer print-outs being
unsigned, the authenticity thereof is highly suspect and devoid of any rational probative value
especially in the light of the existence of the official record book of the petitioner’s alleged
absences and tardiness in the possession of the employer company.
Ironically, in the memorandum charging petitioner and notice of termination, private

respondents referred to the record book as its basis for petitioner’s alleged absenteeism and
tardiness. Interestingly, however, the record book was never presented in evidence. Private
respondents had possession thereof and the opportunity to present the same. Being the basis of
the charges against the petitioner, it is without doubt the best evidence available to substantiate
the allegations. The purpose of the rule requiring the production of the best evidence is the
prevention of fraud, because if a party is in possession of such evidence and withholds it, and
seeks to substitute inferior evidence in its place, the presumption naturally arises that the better
evidence is withheld for fraudulent purposes which its production would expose and
defeat. Thus, private respondents’ unexplained and unjustified non-presentation of the record
book, which is the best evidence in its possession and control of the charges against the
petitioner, casts serious doubts on the factual basis of the charges of absenteeism and tardiness.
The law mandates that every opportunity and assistance must be accorded to the
employee by the management to enable him to prepare adequately for his defense. In Ruffy v.
NLRC, the Court held that what would qualify as sufficient or "ample opportunity," as required
by law, would be "every kind of assistance that management must accord to the employee to
enable him to prepare adequately for his defense." In the case at bar, private respondents cannot
be gainsaid to have given petitioner the ample opportunity to answer the charges leveled against
her.
Christian V. Asas
Page 62
==============================================
From the foregoing, there are serious doubts in the evidence on record as to the factual
basis of the charges against petitioner. These doubts shall be resolved in her favor in line with the
policy under the Labor Code to afford protection to labor and construe doubts in favor of
labor. The consistent rule is that if doubts exist between the evidence presented by the employer
and the employee, the scales of justice must be tilted in favor of the latter. The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable
cause. Not having satisfied its burden of proof, we conclude that the employer dismissed the
petitioner without any just cause. Hence, the termination is illegal.
ii. Scope/Application
SEAFDEC vs. NLRC, G.R. No. 86773, February 14, 1992, Nocon, J.
Doctrine. Southeast Asian Fisheries Development Center-Aquaculture Department

(SEAFDEC-AQD) is an international agency beyond the jurisdiction of public respondent
NLRC.
It was established by the Governments of Burma, Kingdom of Cambodia, Republic of

Indonesia, Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of
Singapore, Kingdom of Thailand and Republic of Vietnam. The Republic of the Philippines
became a signatory to the Agreement establishing SEAFDEC on January 16,1968. Its purpose is
as follows: “The purpose of the Center is to contribute to the promotion of the fisheries
development in Southeast Asia by mutual co-operation among the member governments of the
Center, hereinafter called the "Members", and through collaboration with international
organizations and governments external to the Center.”
Being an intergovernmental organization, SEAFDEC including its Departments (AQD),

enjoys functional independence and freedom from control of the state in whose territory its office
is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book,
Public International Law: Permanent international commissions and administrative bodies have
been created by the agreement of a considerable number of States for a variety of international
purposes, economic or social and mainly non-political. Among the notable instances are the
International Labor Organization, the International Institute of Agriculture, the International
Danube Commission. In so far as they are autonomous and beyond the control of any one State,
they have a distinct juridical personality independent of the municipal law of the State where
they are situated. As such, according to one leading authority "they must be deemed to possess a
species of international personality of their own."
Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed
to be represented by one Director in the governing SEAFDEC Council and that its national laws
and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of
money, movable and immovable property and services necessary for the establishment and
Christian V. Asas
Page 63
==============================================
operation of the Center" are concerned. It expressly waived the application of the Philippine laws
on the disbursement of funds of petitioner SEAFDEC-AQD.
International Catholic Immigration Commission vs. Calleja, G.R. No. 85750, September
28, 1990, Melencio-Herrera, J.
Doctrine. There are basically three propositions underlying the grant of international
immunities to international organizations. These principles, contained in the ILO Memorandum
are stated thus: 1) international institutions should have a status which protects them against
control or interference by any one government in the performance of functions for the effective
discharge of which they are responsible to democratically constituted international bodies in
which all the nations concerned are represented; 2) no country should derive any national
financial advantage by levying fiscal charges on common international funds; and 3) the
international organization should, as a collectivity of States members, be accorded the facilities
for the conduct of its official business customarily extended to each other by its individual
member States. The theory behind all three propositions is said to be essentially institutional in
character. "It is not concerned with the status, dignity or privileges of individuals, but with the
elements of functional independence necessary to free international institutions from national
control and to enable them to discharge their responsibilities impartially on behalf of all their
members. The raison d'etre for these immunities is the assurance of unimpeded performance of
their functions by the agencies concerned.
The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated
by their international character and respective purposes. The objective is to avoid the danger of
partiality and interference by the host country in their internal workings. The exercise of
jurisdiction by the Department of Labor in these instances would defeat the very purpose of
immunity, which is to shield the affairs of international organizations, in accordance with
international practice, from political pressure or control by the host country to the prejudice of
member States of the organization, and to ensure the unhampered performance of their functions.
ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its
basic rights, which are guaranteed by Article II, Section 18, Article III, Section 8, and Article
XIII, Section 3 (supra), of the 1987 Constitution; and implemented by Articles 243 and 246 of
the Labor Code, relied on by the BLR Director and by Kapisanan.
For, ICMC employees are not without recourse whenever there are disputes to be settled.
Section 31 of the Convention on the Privileges and Immunities of the Specialized Agencies of
the United Nations provides that "each specialized agency shall make provision for appropriate
modes of settlement of: (a) disputes arising out of contracts or other disputes of private character
to which the specialized agency is a party." Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC the the Philippine Government, whenever there is
any abuse of privilege by ICMC, the Government is free to withdraw the privileges and
immunities accorded. Thus:
Christian V. Asas
Page 64
==============================================
Art. IV. Cooperation with Government Authorities. — 1. The Commission shall

cooperate at all times with the appropriate authorities of the Government to ensure
the observance of Philippine laws, rules and regulations, facilitate the proper
administration of justice and prevent the occurrences of any abuse of the
privileges and immunities granted its officials and alien employees in Article III
of this Agreement to the Commission.
2. In the event that the Government determines that there has been an abuse of the
privileges and immunities granted under this Agreement, consultations shall be
held between the Government and the Commission to determine whether any
such abuse has occurred and, if so, the Government shall withdraw the privileges
and immunities granted the Commission and its officials.
Neither are the employees of IRRI without remedy in case of dispute with management
as, in fact, there had been organized a forum for better management-employee relationship as
evidenced by the formation of the Council of IRRI Employees and Management (CIEM)
wherein "both management and employees were and still are represented for purposes of
maintaining mutual and beneficial cooperation between IRRI and its employees." The existence
of this Union factually and tellingly belies the argument that Pres. Decree No. 1620, which
grants to IRRI the status, privileges and immunities of an international organization, deprives its
employees of the right to self-organization.
The immunity granted being "from every form of legal process except in so far as in any
particular case they have expressly waived their immunity," it is inaccurate to state that a
certification election is beyond the scope of that immunity for the reason that it is not a suit
against ICMC. A certification election cannot be viewed as an independent or isolated process. It
could tugger off a series of events in the collective bargaining process together with related
incidents and/or concerted activities, which could inevitably involve ICMC in the "legal
process," which includes "any penal, civil and administrative proceedings." The eventuality of
Court litigation is neither remote and from which international organizations are precisely
shielded to safeguard them from the disruption of their functions. Clauses on jurisdictional
immunity are said to be standard provisions in the constitutions of international Organizations.
"The immunity covers the organization concerned, its property and its assets. It is equally
applicable to proceedings in personam and proceedings in rem."
Hidalgo vs. Republic, G.R. No. 179793, July 5, 2010, Villarama, Jr., J.
Doctrine. Like Armed Forces of the Philippines Commissary and Exchange Services
(AFPCES), Duty Free Philippines is also a government agency engaged in proprietary activities
without separate corporate existence. Unlike Duty Free Philippines, however, AFPCES
committed acts which created an impression upon petitioners that they fall within the coverage of
pertinent labor laws and not the civil service law. First, since the start of their employment and
until their unceremonious indefinite suspension from work, AFPCES have enrolled petitioners to
Christian V. Asas
Page 65
==============================================
the SSS, the primary governmental agency engaged in providing social security benefits to
employees of the private sector, instead of the Government Service Insurance System (GSIS) as
mandated by Commonwealth Act No. 186. AFPCES even remitted its corresponding employer’s
share to petitioners’ SSS contributions. Such practice has been continuously observed by the
AFPCES in the span of more than three (3) decades.
Second, the hiring, appointment and discipline of AFPCES employees never went
through the proper procedure as required by pertinent civil service laws and regulations. In a
formal request made by Feliciano M. Gacis, Jr., Officer-in-Charge of the Office of the Assistant
Secretary for Personnel of the Department of National Defense, inquiring from the CSC whether
petitioners are indeed government employees covered by the Civil Service Law and CSC
regulations, the said Commission issued a Resolution containing the following findings:
It is explicit that the aforequoted LOI merely set aside a fund in the amount of five (5)
million pesos for the operation of a commissary in all military establishments in the country for
the benefit of veterans, their widows and orphans, and the members of the Armed Forces of the
Philippines. And the fund and commissary shall be managed by an entity called AFPCES. It can,
thus, be said that the AFPCES is a mere entity in the Armed Forces of the Philippines that is
tasked to manage a commissary in different military establishments for the benefit of those
mentioned in the said LOI. Hence, it does not necessarily follow that all its civilian employees
are considered government employees covered by and subject to the Civil Service Law and rules.
Section 2 (1), Article IX B of the 1987 Constitution defines the scope of the civil service, as
follows:
"Sec. 2. (1) The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled corporations with
original charters."
From the aforequoted constitutional provision, it is clear that only government-owned or

controlled corporations with original charters are embraced by the civil service. Hence, the
question now that needs to be answered is: Can LOI 31-A be considered as the charter of the
AFPCES such that it can be considered a government-owned or controlled corporation embraced
by the Civil Service Law and rules?
After a careful evaluation and scrutiny of LOI 31-A, the Commission is of the opinion
and so holds that the said LOI could hardly be considered as the charter of AFPCES. It should be
noted that the said LOI does not specify the composition of AFPCES, its specific functions, its
governing board, its powers and the limitation of the exercise thereof. In short, the said LOI does
not provide the AFPCES corporate features. This being the case, the AFPCES cannot be
considered a government-owned or controlled corporation with original charter. In fact, the
AFPCES does not exercise corporate powers. Accordingly, its civilian employees cannot be
considered as government employees covered by the Civil Service Law and rules.
xxxx
Christian V. Asas
Page 66
==============================================
Further, there is neither a showing that the positions of civilian employees of the
AFPCES are included in the plantilla of personnel duly approved by the Department of Budget
and Management (DBM) nor said employees were issued appointments attested by the
Commission.
Indeed, petitioners’ employment to the AFPCES should have been made in conformity
with pertinent civil service regulations since AFPCES is a government agency under the direct
control and supervision of the AFP. However, since this did not happen, petitioners were placed
under an anomalous situation with AFPCES insisting that they are government employees under
the jurisdiction of the CSC, but with the CSC itself disavowing any jurisdiction over them.
This notwithstanding, since it cannot be denied that petitioners are government

employees, the proper body that has jurisdiction to hear the case is the CSC. Such fact cannot be
negated by the failure of respondents to follow appropriate civil service rules in the hiring,
appointment, discipline and dismissal of petitioners. Neither can it be denied by the fact that
respondents chose to enroll petitioners in the SSS instead of the GSIS. Such considerations
cannot be used against the CSC to deprive it of its jurisdiction. It is not the absence or presence
of the required appointment from the CSC, or the membership of an employee in the SSS or in
the GSIS that determine the status of the position of an employee. We agree with the opinion of
the AFP Judge Advocate General that it is the regulation or the law creating the Service that
determines the position of the employee.
Petitioners are government personnel since they are employed by an agency attached to
the AFP. Consequently, as correctly observed by the Court of Appeals, the Labor Arbiter’s
decision on their complaint for illegal dismissal cannot be made to stand since the same was
issued without jurisdiction. Any decision issued without jurisdiction is a total nullity, and may be
struck down at any time.
However, given petitioners’ peculiar situation, the Court is constrained not to deny the
petition entirely, but instead to refer it to the CSC pro hac vice. The Court notes that this case has
been pending for nearly a decade, but deciding it on the merits at this juncture, while ideal and
more expeditious, is not possible. The records of the case fail to adequately spell out the validity
of the complaint for illegal dismissal as well as the actual amount of the claim. In fact, the
records even fail to disclose the amount of salary received by petitioners while they were
engaged to work in AFPCES’ facilities. But rather than directing petitioners to re-file and
relitigate their claim before the CSC – a step which will only duplicate much of the proceedings
already accomplished – the Court deems it best, pro hac vice, to order the NLRC to forward the
entire records of the case directly to the CSC which is directed to take cognizance of the case.
The CSC is directed to promptly resolve whether petitioners were illegally dismissed from the
service, and whether they are entitled to their monetary claims. Further, taking into consideration
AFPCES’ failure to observe the proper procedure required by pertinent civil service rules and
regulations regarding the hiring, appointment and placement of petitioners, we likewise caution
the CSC not to use the AFPCES’ inefficiency to prejudice the status of petitioners’ employment
Christian V. Asas
Page 67
==============================================
or to deny whatever right they may have under pertinent civil service laws. To hold otherwise
would only be giving premium to AFPCES’ delinquent attitude towards petitioners in particular,
and to the civil service in general. The AFPCES cannot be made to have its cake and eat it, too.
Salenga vs. CA, G.R. No. 174941, February 1, 2012, Sereno, J.
Doctrine. Clark Development Corporation (CDC) is not under the civil service laws on
retirement.
Petitioner Salenga contends that respondent CDC is covered by the GSIS Law. Thus, he
says, the computation of his retirement benefits should include all the years of actual government
service, starting from the original appointment forty (40) years ago up to his retirement.
Respondent CDC owes its existence to Executive Order No. 80 issued by then President
Fidel V. Ramos. It was meant to be the implementing and operating arm of the Bases Conversion
and Development Authority (BCDA) tasked to manage the Clark Special Economic Zone
(CSEZ). Expressly, respondent was formed in accordance with Philippine corporation laws and
existing rules and regulations promulgated by the SEC pursuant to Section 16 of Republic Act
(R.A.) 7227. CDC, a government-owned or -controlled corporation without an original charter,
was incorporated under the Corporation Code. Pursuant to Article IX-B, Sec. 2(1), the civil
service embraces only those government-owned or -controlled corporations with original charter.
As such, respondent CDC and its employees are covered by the Labor Code and not by the Civil
Service Law, consistent with our ruling in NASECO v. NLRC, in which we established this
distinction.
Juco vs. NLRC, G.R. No. 98107, August 18, 1997, Hermosisima, Jr., J.
Doctrine. Article 13-B, Section 2(1) of the Constitution provides, “ The civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the Government,
including government owned or controlled corporations with original charter.”
In National Service Corporation (NASECO) v. National Labor Relations Commission, we

had the occasion to apply the present Constitution in deciding whether or not the employees of
NASECO are covered by the Civil Service Law or the Labor Code notwithstanding that the case
arose at the time when the 1973 Constitution was still in effect. We ruled that the NLRC has
jurisdiction over the employees of NASECO on the ground that it is the 1987 Constitution that
governs because it is the Constitution in place at the time of the decision. Furthermore, we ruled
that the new phrase "with original charter" means that government-owned and controlled
corporations refer to corporations chartered by special law as distinguished from corporations
organized under the Corporation Code. Thus, NASECO which had been organized under the
general incorporation statute and a subsidiary of the National Investment Development
Corporation, which in turn was a subsidiary of the Philippine National Bank, is exluded from the
purview of the Civil Service Commission.
Christian V. Asas
Page 68
==============================================
In the case at bench, the National Housing Corporation is a government owned

corporation organized in 1959 in accordance with Executive Order No. 399, otherwise known as
the Uniform Charter of Government Corporation, dated January 1, 1959. Its shares of stock are
and have been one hundred percent (100%) owned by the Government from its incorporation
under Act 1459, the former corporation law. The government entities that own its shares of stock
are the Government Service Insurance System, the Social Security System, the Development
Bank of the Philippines, the National Investment and Development Corporation and the People's
Homesite and Housing Corporation. Considering the fact that the NHA had been incorporated
under Act 1459, the former corporation law, it is but correct to say that it is a government-owned
or controlled corporation whose employees are subject to the provisions of the Labor Code. This
observation is reiterated in the recent case of Trade Union of the Philippines and Allied Services
(TUPAS) v. National Housing Corporation, where we held that the NHA is now within the
jurisdiction of the Department of Labor and Employment, it being a government-owned and/or
controlled corporation without an original charter. Furthermore, we also held that the workers or
employees of the NHC (now NHA) undoubtedly have the right to form unions or employee's
organization and that there is no impediment to the holding of a certification election among
them as they are covered by the Labor Code.
Thus, the NLRC erred in dismissing petitioner's complaint for lack of jurisdiction
because the rule now is that the Civil Service now covers only government-owned or controlled
corporations with original charters. Having been incorporated under the Corporation Law, its
relations with its personnel are governed by the Labor Code and come under the jurisdiction of
the National Labor Relations Commission.
B. Book One, Title 1, Chapter I, Arts. 13, 14, 18, 21, 22
C. Book One, Title 1, Chapter II, Arts. 25, 26, 27, 28-35
D. Book One, Title 1, Chapter III, Arts. 36-38
i. Illegal Recruitment
a. Definition
b. Prohibited Acts
R.A. No. 8042 as amended by R.A. No. 10022
Sto. Tomas vs. Salac, G.R. No. 152642, November 13, 2012, Abad, J.
ISSUE: Is R.A. No. 8042 as amended by R.A. No. 10022 constitutional?

Christian V. Asas
Page 69
==============================================
HELD: Yes. The definition of illegal recruitment under Section 6 is not vague. But "illegal
recruitment" as defined in Section 6 is clear and unambiguous and, contrary to the RTC’s
finding, actually makes a distinction between licensed and non-licensed recruiters. By its terms,
persons who engage in "canvassing, enlisting, contracting, transporting, utilizing, hiring, or
procuring workers" without the appropriate government license or authority are guilty of illegal
recruitment whether or not they commit the wrongful acts enumerated in that section. On the
other hand, recruiters who engage in the canvassing, enlisting, etc. of OFWs, although with the
appropriate government license or authority, are guilty of illegal recruitment only if they commit
any of the wrongful acts enumerated in Section 6.
The penalties provided for under Section 7 are reasonable. But, in fixing uniform
penalties for each of the enumerated acts under Section 6, Congress was within its prerogative to
determine what individual acts are equally reprehensible, consistent with the State policy of
according full protection to labor, and deserving of the same penalties. It is not within the power
of the Court to question the wisdom of this kind of choice. Notably, this legislative policy has
been further stressed in July 2010 with the enactment of R.A. 10022 which increased even more
the duration of the penalties of imprisonment and the amounts of fine for the commission of the
acts listed under Section 7.
Obviously, in fixing such tough penalties, the law considered the unsettling fact that
OFWs must work outside the country’s borders and beyond its immediate protection. The law
must, therefore, make an effort to somehow protect them from conscienceless individuals within
its jurisdiction who, fueled by greed, are willing to ship them out without clear assurance that
their contracted principals would treat such OFWs fairly and humanely.
As the Court held in People v. Ventura, the State under its police power "may prescribe
such regulations as in its judgment will secure or tend to secure the general welfare of the people,
to protect them against the consequence of ignorance and incapacity as well as of deception and
fraud." Police power is "that inherent and plenary power of the State which enables it to prohibit
all things hurtful to the comfort, safety, and welfare of society."
The rule on venue under Section 9 is valid. Section 15(a), Rule 110 of the Rules of
Court allows exceptions provided by laws as it says, “Subject to existing laws . .”. Section 9 of
R.A. 8042, as an exception to the rule on venue of criminal actions is, consistent with that law’s
declared policy of providing a criminal justice system that protects and serves the best interests
of the victims of illegal recruitment.
Section 10, last sentence of 2nd paragraph is constitutional . The pertinent provision
provides, “. . If the recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily liable with
the corporation or partnership for the aforesaid claims and damages.” But the Court has already
held, pending adjudication of this case, that the liability of corporate directors and officers is not
automatic. To make them jointly and solidarily liable with their company, there must be a finding
Christian V. Asas
Page 70
==============================================
that they were remiss in directing the affairs of that company, such as sponsoring or tolerating the
conduct of illegal activities. In the case of Becmen and White Falcon, while there is evidence
that these companies were at fault in not investigating the cause of Jasmin’s death, there is no
mention of any evidence in the case against them that intervenors Gumabay, et al., Becmen’s
corporate officers and directors, were personally involved in their company’s particular actions
or omissions in Jasmin’s case.
As a final note, R.A. 8042 is a police power measure intended to regulate the recruitment
and deployment of OFWs. It aims to curb, if not eliminate, the injustices and abuses suffered by
numerous OFWs seeking to work abroad. The rule is settled that every statute has in its favor the
presumption of constitutionality. The Court cannot inquire into the wisdom or expediency of the
laws enacted by the Legislative Department. Hence, in the absence of a clear and unmistakable
case that the statute is unconstitutional, the Court must uphold its validity.
c. Elements
d. Illegal recruitment in large scale or by a syndicate
e. Illegal recruitment and estafa
People vs. Panis, G.R. No. L-58674, July 11, 1990, Cruz, J.
ISSUE: Is dealing with two or more persons an indispensable requirement to constitute

recruitment and placement under Art. 13(b) of the Labor Code?
HELD: No. Neither interpretation is acceptable. We fail to see why the proviso should speak
only of an offer or promise of employment if the purpose was to apply the requirement of two or
more persons to all the acts mentioned in the basic rule. For its part, the petitioner does not
explain why dealings with two or more persons are needed where the recruitment and placement
consists of an offer or promise of employment but not when it is done through "canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers.
As we see it, the proviso was intended neither to impose a condition on the basic rule nor
to provide an exception thereto but merely to create a presumption. The presumption is that the
individual or entity is engaged in recruitment and placement whenever he or it is dealing with
two or more persons to whom, in consideration of a fee, an offer or promise of employment is
made in the course of the "canvassing, enlisting, contracting, transporting, utilizing, hiring or
procuring (of) workers. "
The number of persons dealt with is not an essential ingredient of the act of recruitment
and placement of workers. Any of the acts mentioned in the basic rule in Article 13(b) win
constitute recruitment and placement even if only one prospective worker is involved. The
proviso merely lays down a rule of evidence that where a fee is collected in consideration of a
Christian V. Asas
Page 71
==============================================
promise or offer of employment to two or more prospective workers, the individual or entity
dealing with them shall be deemed to be engaged in the act of recruitment and placement. The
words "shall be deemed" create that presumption.
This is not unlike the presumption in article 217 of the Revised Penal Code, for example,
regarding the failure of a public officer to produce upon lawful demand funds or property
entrusted to his custody. Such failure shall be prima facie evidence that he has put them to
personal use; in other words, he shall be deemed to have malversed such funds or property. In the
instant case, the word "shall be deemed" should by the same token be given the force of a
disputable presumption or of prima facie evidence of engaging in recruitment and placement.
It is unfortunate that we can only speculate on the meaning of the questioned provision
for lack of records of debates and deliberations that would otherwise have been available if the
Labor Code had been enacted as a statute rather than a presidential decree. The trouble with
presidential decrees is that they could be, and sometimes were, issued without previous public
discussion or consultation, the promulgator heeding only his own counsel or those of his close
advisers in their lofty pinnacle of power. The not infrequent results are rejection, intentional or
not, of the interest of the greater number and, as in the instant case, certain esoteric provisions
that one cannot read against the background facts usually reported in the legislative journals.
At any rate, the interpretation here adopted should give more force to the campaign against
illegal recruitment and placement, which has victimized many Filipino workers seeking a better
life in a foreign land, and investing hard- earned savings or even borrowed funds in pursuit of
their dream, only to be awakened to the reality of a cynical deception at the hands of their own
countrymen.
People vs. Gallo, G.R. No. 187730, June 29, 2010, Velasco, Jr., J.
Doctrine. To commit syndicated illegal recruitment, three elements must be established:

(1) the offender undertakes either any activity within the meaning of "recruitment and
placement" defined under Article 13(b), or any of the prohibited practices enumerated under Art.
34 of the Labor Code; (2) he has no valid license or authority required by law to enable one to
lawfully engage in recruitment and placement of workers; and (3) the illegal recruitment is
committed by a group of three (3) or more persons conspiring or confederating with one
another. When illegal recruitment is committed by a syndicate or in large scale, i.e., if it is
committed against three (3) or more persons individually or as a group, it is considered an
offense involving economic sabotage.
Under Art. 13(b) of the Labor Code, "recruitment and placement" refers to "any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and
includes referrals, contract services, promising or advertising for employment, locally or abroad,
whether for profit or not".
Christian V. Asas
Page 72
==============================================
After a thorough review of the records, we believe that the prosecution was able to
establish the elements of the offense sufficiently. The evidence readily reveals that MPM Agency
was never licensed by the POEA to recruit workers for overseas employment.
Even with a license, however, illegal recruitment could still be committed under Section
6 of Republic Act No. 8042 ("R.A. 8042"), otherwise known as the Migrants and Overseas
Filipinos Act of 1995, viz:
Sec. 6. Definition. – For purposes of this Act, illegal recruitment shall mean any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers and
includes referring, contract services, promising or advertising for employment abroad, whether
for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated
under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor
Code of the Philippines: Provided, That any such non-licensee or non-holder who, in any
manner, offers or promises for a fee employment abroad to two or more persons shall be deemed
so engaged. It shall, likewise, include the following act, whether committed by any person,
whether a non-licensee, non-holder, licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount greater than that specified in the
schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a
worker pay any amount greater than that actually received by him as a loan or advance;
xxxx
(l) Failure to actually deploy without valid reason as determined by the Department of
Labor and Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment and processing for purposes of
deployment, in cases where the deployment does not actually take place without the worker’s
fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered an
offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three

(3) or more persons conspiring or confederating with one another. It is deemed committed in
large scale if committed against three (3) or more persons individually or as a group.
The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having control, management or direction of
their business shall be liable.
The prosecution likewise established that accused-appellant is guilty of the crime of

estafa as defined under Article 315 paragraph 2(a) of the Revised Penal Code, viz:
Art. 315. Swindling (estafa). – Any person who shall defraud another by any means
mentioned hereinbelow…
Christian V. Asas
Page 73
==============================================
xxxx
2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
(a) By using fictitious name, or falsely pretending to possess power, influence,

qualifications, property, credit, agency, business or imaginary transactions; or by means of other
similar deceits.
The elements of estafa in general are: (1) that the accused defrauded another (a) by abuse
of confidence, or (b) by means of deceit; and (2) that damage or prejudice capable of pecuniary
estimation is caused to the offended party or third person. Deceit is the false representation of a
matter of fact, whether by words or conduct, by false or misleading allegations, or by
concealment of that which should have been disclosed; and which deceives or is intended to
deceive another so that he shall act upon it, to his legal injury.
All these elements are present in the instant case: the accused-appellant, together with the
other accused at large, deceived the complainants into believing that the agency had the power
and capability to send them abroad for employment; that there were available jobs for them in
Korea as factory workers; that by reason or on the strength of such assurance, the complainants
parted with their money in payment of the placement fees; that after receiving the money,
accused-appellant and his co-accused went into hiding by changing their office locations without
informing complainants; and that complainants were never deployed abroad. As all these
representations of the accused-appellant proved false, paragraph 2(a), Article 315 of the Revised
Penal Code is thus applicable.
People vs. Chua, G.R. No. 187052, September 13, 2012, Villarama, Jr. J.
Doctrine. In order to hold a person liable for illegal recruitment, the following elements
must concur: (1) the offender undertakes any of the activities within the meaning of "recruitment
and placement" under Article 13(b) of the Labor Code, or any of the prohibited practices
enumerated under Article 34 of the Labor Code (now Section 6 of Republic Act No. 8042) and
(2) the offender has no valid license or authority required by law to enable him to lawfully
engage in recruitment and placement of workers. In the case of illegal recruitment in large scale,
a third element is added: that the offender commits any of the acts of recruitment and placement
against three or more persons, individually or as a group. All three elements are present in the
case at bar.
Appellant cannot escape liability by conveniently limiting her participation as a cashier of

Golden Gate. The provisions of Article 13(b) of the Labor Code and Section 6 of R.A. No. 8042
are unequivocal that illegal recruitment may or may not be for profit. It is immaterial, therefore,
whether appellant remitted the placement fees to "the agency’s treasurer" or appropriated them.
The same provision likewise provides that the persons criminally liable for illegal recruitment
are the principals, accomplices and accessories. Just the same, therefore, appellant can be held
liable as a principal by direct participation since she personally undertook the recruitment of
Christian V. Asas
Page 74
==============================================
private complainants without a license or authority to do so. Worth stressing, the Migrant
Workers and Overseas Filipinos Act of 1995 is a special law, a violation of which is malum
prohibitum, not mala in se. Intent is thus, immaterial and mere commission of the prohibited act
is punishable.
It is well-established in jurisprudence that a person may be charged and convicted for

both illegal recruitment and estafa. The reason therefor is not hard to discern: illegal recruitment
is malum prohibitum, while estafa is mala in se. In the first, the criminal intent of the accused is
not necessary for conviction. In the second, such intent is imperative. Estafa under Article 315,
paragraph 2(a) of the Revised Penal Code is committed by any person who defrauds another by
using fictitious name, or falsely pretends to possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions, or by means of similar deceits executed prior
to or simultaneously with the commission of fraud.
The elements of estafa by means of deceit are the following: (a) that there must be a false
pretense or fraudulent representation as to his power, influence, qualifications, property, credit,
agency, business or imaginary transactions; (b) that such false pretense or fraudulent
representation was made or executed prior to or simultaneously with the commission of the
fraud; (c) that the offended party relied on the false pretense, fraudulent act, or fraudulent means
and was induced to part with his money or property; and (d) that, as a result thereof, the offended
party suffered damage.
Unlike in illegal recruitment where profit is immaterial, a conviction for estafa requires a
clear showing that the offended party parted with his money or property upon the offender’s false
pretenses, and suffered damage thereby. In every criminal prosecution, the State must prove
beyond reasonable doubt all the elements of the crime charged and the complicity or
participation of the accused. It is imperative, therefore, that damage as an element of estafa under
Article 315, paragraph 2(a) be proved as conclusively as the offense itself. The failure of the
prosecution to discharge this burden concerning the estafa allegedly committed against Ursulum
warrants the acquittal of appellant on the said charge.
People vs. Ocden, G.R. No. 173198, June 1, 2011, Leonardo-De Castro, J.
Doctrine. It is not necessary for the prosecution to present a certification that Ocden is a
non-licensee or non-holder of authority to lawfully engage in the recruitment and placement of
workers. Section 6 of Republic Act No. 8042 enumerates particular acts which would constitute
illegal recruitment "whether committed by any person, whether a non-licensee, non-holder,
licensee or holder of authority." Among such acts, under Section 6(m) of Republic Act No.
8042, is the "[f]ailure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment, in cases where the deployment does
not actually take place without the worker’s fault."
Christian V. Asas
Page 75
==============================================
Since illegal recruitment under Section 6(m) can be committed by any person, even by a
licensed recruiter, a certification on whether Ocden had a license to recruit or not, is
inconsequential. Ocden committed illegal recruitment as described in said provision by receiving
placement fees from Mana-a, Ferrer, and Golidan’s two sons, Jeffries and Howard, evidenced by
receipts Ocden herself issued; and failing to reimburse/refund to Mana-a, Ferrer, and Golidan’s
two sons the amounts they had paid when they were not able to leave for Italy, through no fault
of their own.
Under the last paragraph of Section 6, Republic Act No. 8042, illegal recruitment shall be
considered an offense involving economic sabotage if committed in a large scale, that is,
committed against three or more persons individually or as a group.
In People vs. Hu, we held that a conviction for large scale illegal recruitment must be
based on a finding in each case of illegal recruitment of three or more persons, whether
individually or as a group. While it is true that the law does not require that at least three victims
testify at the trial, nevertheless, it is necessary that there is sufficient evidence proving that the
offense was committed against three or more persons. In this case, there is conclusive evidence
that Ocden recruited Mana-a, Ferrer, and Golidan’s sons, Jeffries and Howard, for purported
employment as factory workers in Italy.
It is settled that a person may be charged and convicted separately of illegal recruitment
under Republic Act No. 8042 in relation to the Labor Code, and estafa under Article 315,
paragraph 2(a) of the Revised Penal Code. We explicated in People v. Yabut that:
In this jurisdiction, it is settled that a person who commits illegal recruitment may be
charged and convicted separately of illegal recruitment under the Labor Code and estafa under
par. 2(a) of Art. 315 of the Revised Penal Code. The offense of illegal recruitment is malum
prohibitum where the criminal intent of the accused is not necessary for conviction, while estafa
is malum in se where the criminal intent of the accused is crucial for conviction. Conviction for
offenses under the Labor Code does not bar conviction for offenses punishable by other laws.
Conversely, conviction for estafa under par. 2(a) of Art. 315 of the Revised Penal Code
does not bar a conviction for illegal recruitment under the Labor Code. It follows that one’s
acquittal of the crime of estafa will not necessarily result in his acquittal of the crime of illegal
recruitment in large scale, and vice versa.
Article 315, paragraph 2(a) of the Revised Penal Code defines estafa as:
Art. 315. Swindling (estafa). - Any person who shall defraud another by any of the means
mentioned hereinbelow x x x:
xxxx
2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
Christian V. Asas
Page 76
==============================================
(a) By using fictitious name, or falsely pretending to possess power, influence,

qualifications, property, credit, agency, business or imaginary transactions; or by means of other
similar deceits.
The elements of estafa are: (a) that the accused defrauded another by abuse of confidence
or by means of deceit, and (b) that damage or prejudice capable of pecuniary estimation is
caused to the offended party or third person.
People vs. Velasco, G.R. No. 195668, June 25, 2014, Bersamin, J.
Doctrine. The essential elements of illegal recruitment committed in large scale are: (1)
that the accused engaged in acts of recruitment and placement of workers as defined under
Article 13(b) of the Labor Code, or in any prohibited activities under Article 34 of the same
Code; (2) that the accused had not complied with the guidelines issued by the Secretary of Labor
and Employment with respect to the requirement to secure a license or authority to recruit and
deploy workers; and (3) that the accused committed the unlawful acts against 3 or more persons.
In simplest terms, illegal recruitment is committed by persons who, without authority from the
government, give the impression that they have the power to send workers abroad for
employment purposes.
f. Powers of the Secretary of Labor
Salazar vs. Achacoso, G.R. No. 81510, March 14, 1990, Sarmiento, J.
ISSUE: May the Philippine Overseas Employment Administration (or the Secretary of Labor)
validly issue warrants of search and seizure (or arrest) under Article 38 of the Labor Code?
HELD: No. Under the new Constitution, which states, “. . . no search warrant or warrant of
arrest shall issue except upon probable cause to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or things to be seized” it is only a
judge who may issue warrants of search and arrest.
The decrees in question, it is well to note, stand as the dying vestiges of authoritarian rule
in its twilight moments. We reiterate that the Secretary of Labor, not being a judge, may no
longer issue search or arrest warrants. Hence, the authorities must go through the judicial
process. To that extent, we declare Article 38, paragraph (c), of the Labor Code, unconstitutional
and of no force and effect.
g. Migrant workers/OFW
Overseas Filipino worker" refers to a person who is to be engaged, is engaged or has been
engaged in a remunerated activity in a state of which he or she is not a citizen or on board a
Christian V. Asas
Page 77
==============================================
vessel navigating the foreign seas other than a government ship used for military or non-
commercial purposes or on an installation located offshore or on the high seas; to be used
interchangeably with migrant worker. (Section 2 of R.A. No. 10022)
i. Commencement of employer-employee relationship
Abosta Ship Management vs. Hilario, G.R. No. 195792, November 24, 2014, Sereno, C.J.
Doctrine. The contract was already perfected on the date of its execution, which
occurred when petitioner and respondent agreed on the object and the cause, as well as on the
rest of the terms and conditions therein. Naturally, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, a breach of which may give
rise to a cause of action against the erring party. Also, the POEA Standard Contract must be
recognized and respected. Thus, neither the manning agent nor the employer can simply prevent
a seafarer from being deployed without a valid reason.
True, the promotion and choice of personnel is an exercise of management prerogative. In

fact, this Court has upheld management prerogatives, so long as they are exercised in good faith
for the advancement of the employer’s interest, and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements. However, there are limitations on the exercise of management prerogatives, such as
existing laws and the principle of equity and substantial justice.
Under the principle of equity and substantial justice, change of mind was not a valid
reason for the non-deployment of respondent. He lost the opportunity to apply for other positions
in other agencies when he signed the contract of employment with petitioner. Simply put, that
contract was binding on the parties and may not later be disowned simply because of a change of
mind of either one of them.
The unilateral and unreasonable failure to deploy respondent constitutes breach of

contract, which gives rise to a liability to pay actual damages. The sanctions provided for non-
deployment do not end with the suspension or cancellation of license or the imposition of a fine
and the return of all documents at no cost to the worker. They do not forfend a seafarer from
instituting an action for damages against the employer or agency that has failed to deploy him.
Considering that it was petitioner who entered into the contract of employment with
respondent for and on behalf of the foreign principal, it has the primary obligation to ensure the
implementation of that contract. Furthermore, in line with the policy of the state to protect and
alleviate the plight of the working class, Section 1, paragraph f (3) of Rule II of the POEA Rules
and Regulations, clearly provides that the private employment agency shall assume joint and
solidary liability with the employer. Indeed, this Court has consistently held that private
employment agencies are held jointly and severally liable with the foreign-based employer for
any violation of the recruitment agreement or contract of employment. This joint and solidary
Christian V. Asas
Page 78
==============================================
liability imposed by law on recruitment agencies and foreign employers is meant to assure the
aggrieved worker of immediate and sufficient payment of what is due him.
In sum, the failure to deploy respondent was an exercise of a management prerogative

that went beyond its limits and resulted in a breach of contract. In tum, petitioner's breach gave
rise to respondent's cause of action to claim actual damages for the pecuniary loss suffered by the
latter in the form of the loss of nine months' worth of salary as provided in the POEA-approved
contract of employment.
Santiago vs. CF Sharp Crew Management, G.R. No. 162419, July 10, 2007, Tinga, J.
FACTS: Paul Santiago had been working as a seafarer for Smith Bell Management, Inc. for
about five (5) years. Then, he signed a new contract of employment with Smith Bell, with the
duration of nine (9) months. Later on, the contract was approved by the Philippine Overseas
Employment Administration (POEA). Santiago was to be deployed on board the "MSV
Seaspread" which was scheduled to leave the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez of Smith Bell sent a
facsimile message to the captain of "MSV Seaspread" instructing the latter not to deploy
Santiago because he will just jump from the ship just like his brother Christopher. Hence,
Santiago was not deployed.
ISSUE: Is the non-deployment of Santiago give rise to liability?
HELD: Yes. Considering that petitioner was not able to depart from the airport or seaport in
the point of hire, the employment contract did not commence, and no employer-employee
relationship was created between the parties.
However, a distinction must be made between the perfection of the employment contract
and the commencement of the employer-employee relationship. The perfection of the contract,
which in this case coincided with the date of execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee relationship, as earlier discussed, would
have taken place had petitioner been actually deployed from the point of hire. Thus, even before
the start of any employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of which may
give rise to a cause of action against the erring party. Thus, if the reverse had happened, that is
the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither
the manning agent nor the employer can simply prevent a seafarer from being deployed without
a valid reason.
Christian V. Asas
Page 79
==============================================
Respondent’s act of preventing petitioner from departing the port of Manila and boarding
"MSV Seaspread" constitutes a breach of contract, giving rise to petitioner’s cause of action.
Respondent unilaterally and unreasonably reneged on its obligation to deploy petitioner and must
therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals’ conclusion that damages are not recoverable
by a worker who was not deployed by his agency. The fact that the POEA Rules are silent as to
the payment of damages to the affected seafarer does not mean that the seafarer is precluded
from claiming the same. The sanctions provided for non-deployment do not end with the
suspension or cancellation of license or fine and the return of all documents at no cost to the
worker. They do not forfend a seafarer from instituting an action for damages against the
employer or agency which has failed to deploy him.
The POEA Rules only provide sanctions which the POEA can impose on erring agencies.
It does not provide for damages and money claims recoverable by aggrieved employees because
it is not the POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and

respondent, the Court rules that the NLRC has jurisdiction over petitioner’s complaint. The
jurisdiction of labor arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages.
Since the present petition involves the employment contract entered into by petitioner for
overseas employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to
pay petitioner actual damages in the form of the loss of nine (9) months’ worth of salary as
provided in the contract. He is not, however, entitled to overtime pay. While the contract
indicated a fixed overtime pay, it is not a guarantee that he would receive said amount regardless
of whether or not he rendered overtime work. Even though petitioner was "prevented without
valid reason from rendering regular much less overtime service," the fact remains that there is no
certainty that petitioner will perform overtime work had he been allowed to board the vessel. The
amount of US$286.00 stipulated in the contract will be paid only if and when the employee
rendered overtime work. This has been the tenor of our rulings in the case of Stolt-Nielsen
Christian V. Asas
Page 80
==============================================
Marine Services (Phils.), Inc. v. National Labor Relations Commission where we discussed the
matter in this light:
The contract provision means that the fixed overtime pay of 30% would be the basis for
computing the overtime pay if and when overtime work would be rendered. Simply stated, the
rendition of overtime work and the submission of sufficient proof that said work was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay which
should be computed on the basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the entitlement to such benefit must first be
established. Realistically speaking, a seaman, by the very nature of his job, stays on board a ship
or vessel beyond the regular eight-hour work schedule. For the employer to give him overtime
pay for the extra hours when he might be sleeping or attending to his personal chores or even just
lulling away his time would be extremely unfair and unreasonable.
The Court also holds that petitioner is entitled to attorney’s fees in the concept of
damages and expenses of litigation. Attorney's fees are recoverable when the defendant's act or
omission has compelled the plaintiff to incur expenses to protect his interest. We note that
respondent’s basis for not deploying petitioner is the belief that he will jump ship just like his
brother, a mere suspicion that is based on alleged phone calls of several persons whose identities
were not even confirmed. Time and again, this Court has upheld management prerogatives so
long as they are exercised in good faith for the advancement of the employer’s interest and not
for the purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements. Respondent’s failure to deploy petitioner is unfounded and
unreasonable, forcing petitioner to institute the suit below. The award of attorney’s fees is thus
warranted.
However, moral damages cannot be awarded in this case. While respondent’s failure to
deploy petitioner seems baseless and unreasonable, we cannot qualify such action as being
tainted with bad faith, or done deliberately to defeat petitioner’s rights, as to justify the award of
moral damages. At most, respondent was being overzealous in protecting its interest when it
became too hasty in making its conclusion that petitioner will jump ship like his brother.
We likewise do not see respondent’s failure to deploy petitioner as an act designed to

prevent the latter from attaining the status of a regular employee. Even if petitioner was able to
depart the port of Manila, he still cannot be considered a regular employee, regardless of his
previous contracts of employment with respondent. In Millares v. National Labor Relations
Commission, the Court ruled that seafarers are considered contractual employees and cannot be
considered as regular employees under the Labor Code. Their employment is governed by the
contracts they sign every time they are rehired and their employment is terminated when the
contract expires. The exigencies of their work necessitates that they be employed on a
contractual basis.
Stolt-Nielsen vs. Medequillo, G.R. No. 177498, January 18, 2012, Perez, J.
Christian V. Asas
Page 81
==============================================
Doctrine. The POEA Standard Employment Contract provides that employment shall
commence "upon the actual departure of the seafarer from the airport or seaport in the port of
hire." We adhere to the terms and conditions of the contract so as to credit the valid prior
stipulations of the parties before the controversy started. Else, the obligatory force of every
contract will be useless. Parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may be in keeping
with good faith, usage and law.
Thus, even if by the standard contract employment commences only "upon actual
departure of the seafarer", this does not mean that the seafarer has no remedy in case of non-
deployment without any valid reason. Parenthetically, the contention of the petitioners of the
alleged poor performance of respondent while on board the first ship MV "Stolt Aspiration"
cannot be sustained to justify the non-deployment, for no evidence to prove the same was
presented.
We rule that distinction must be made between the perfection of the employment contract
and the commencement of the employer-employee relationship. The perfection of the contract,
which in this case coincided with the date of execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee relationship, as earlier discussed, would
have taken place had petitioner been actually deployed from the point of hire. Thus, even before
the start of any employer-employee relationship, contemporaneous with the perfection of the
employment contract was the birth of certain rights and obligations, the breach of which may
give rise to a cause of action against the erring party. Thus, if the reverse had happened, that is
the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.
Further, we do not agree with the contention of the petitioners that the penalty is a mere
reprimand.
The POEA Rules and Regulations Governing Overseas Employment dated 31 May 1991
provides for the consequence and penalty against in case of non-deployment of the seafarer
without any valid reason. It reads:
Section 4. Worker’s Deployment. — An agency shall deploy its recruits within the
deployment period as indicated below:
xxx
b. Thirty (30) calendar days from the date of processing by the administration of the
employment contracts of seafarers.
Failure of the agency to deploy a worker within the prescribed period without valid
reasons shall be a cause for suspension or cancellation of license or fine. In addition, the
agency shall return all documents at no cost to the worker.
Christian V. Asas
Page 82
==============================================
The appellate court correctly ruled that the penalty of reprimand provided under Rule IV,
Part VI of the POEA Rules and Regulations Governing the Recruitment and Employment of
Land-based Overseas Workers is not applicable in this case. The breach of contract happened on
February 1992 and the law applicable at that time was the 1991 POEA Rules and Regulations
Governing Overseas Employment. The penalty for non-deployment as discussed is suspension or
cancellation of license or fine.
Now, the question to be dealt with is how will the seafarer be compensated by reason of
the unreasonable non-deployment of the petitioners?
The POEA Rules Governing the Recruitment and Employment of Seafarers do not
provide for the award of damages to be given in favor of the employees. The claim provided by
the same law refers to a valid contractual claim for compensation or benefits arising from
employer-employee relationship or for any personal injury, illness or death at levels provided for
within the terms and conditions of employment of seafarers. However, the absence of the POEA
Rules with regard to the payment of damages to the affected seafarer does not mean that the
seafarer is precluded from claiming the same. The sanctions provided for non-deployment do not
end with the suspension or cancellation of license or fine and the return of all documents at no
cost to the worker. As earlier discussed, they do not forfend a seafarer from instituting an action
for damages against the employer or agency which has failed to deploy him.
We thus decree the application of Section 10 of Republic Act No. 8042 (Migrant Workers
Act) which provides for money claims by reason of a contract involving Filipino workers for
overseas deployment. The law provides:
Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the
moral, exemplary and other forms of damages.
Following the law, the claim is still cognizable by the labor arbiters of the NLRC under
the second phrase of the provision.
Applying the rules on actual damages, Article 2199 of the New Civil Code provides that
one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he
has duly proved. Respondent is thus liable to pay petitioner actual damages in the form of the
loss of nine (9) months’ worth of salary as provided in the contract. This is but proper because of
the non-deployment of respondent without just cause.
ii. Section 10, R.A. No. 8042; Section 7, R.A. No. 10022
Christian V. Asas
Page 83
==============================================
Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read
as follows:
"SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the
moral, exemplary and other forms of damage. Consistent with this mandate, the NLRC shall
endeavor to update and keep abreast with the developments in the global services industry.
"The liability of the principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several. This provision shall be incorporated in
the contract for overseas employment and shall be a condition precedent for its approval. The
performance bond to de filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and solidarily liable with the corporation
or partnership for the aforesaid claims and damages.
"Such liabilities shall continue during the entire period or duration of the employment
contract and shall not be affected by any substitution, amendment or modification made locally
or in a foreign country of the said contract.
"Any compromise/amicable settlement or voluntary agreement on money claims

inclusive of damages under this section shall be paid within thirty (30) days from approval of the
settlement by the appropriate authority.
"In case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, or any unauthorized deductions from the migrant worker's salary, the
worker shall be entitled to the full reimbursement if his placement fee and the deductions made
with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term, whichever is
less.
"In case of a final and executory judgement against a foreign employer/principal, it shall
be automatically disqualified, without further proceedings, from participating in the Philippine
Overseas Employment Program and from recruiting and hiring Filipino workers until and unless
it fully satisfies the judgement award.
"Noncompliance with the mandatory periods for resolutions of case provided under this
section shall subject the responsible officials to any or all of the following penalties:
Christian V. Asas
Page 84
==============================================
"(a) The salary of any such official who fails to render his decision or resolution within
the prescribed period shall be, or caused to be, withheld until the said official complies
therewith;
"(b) Suspension for not more than ninety (90) days; or
"(c) Dismissal from the service with disqualification to hold any appointive public office
for five (5) years.
"Provided, however, That the penalties herein provided shall be without prejudice to any
liability which any such official may have incured under other existing laws or rules and
regulations as a consequence of violating the provisions of this paragraph."
Serrano vs. Gallant Maritime Services, G.R. No. 167614, March 24, 2009, Austria-
Martinez, J.
FACTS: Antonio Serrano’s employment contract was for a period of 12 months or from March
19, 1998 up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had
served only two (2) months and seven (7) days of his contract, leaving an unexpired portion of
nine (9) months and twenty-three (23) days.
ISSUE: Whether or not the portion “plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term, whichever is
less” of Section 10 of R.A. No. 8042 is constitutional.
HELD: No.
The provision does not violate the non-impairment clause as it preceded the
employment contract of the parties in this case. The prohibition is aligned with the general
principle that laws newly enacted have only a prospective operation, and cannot affect acts or
contracts already perfected; however, as to laws already in existence, their provisions are read
into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10,
Article II is limited in application to laws about to be enacted that would in any way derogate
from existing acts or contracts by enlarging, abridging or in any manner changing the intention
of the parties thereto.
Moreover, police power legislations adopted by the State to promote the health, morals,
peace, education, good order, safety, and general welfare of the people are generally applicable
not only to future contracts but even to those already in existence, for all private contracts must
yield to the superior and legitimate measures taken by the State to promote public welfare.
The provision violates Section 1, Article III of the Constitution, and Section 18, Article
II and Section 3, Article XIII on labor as a protected sector. Upon cursory reading, the subject
clause appears facially neutral, for it applies to all OFWs. However, a closer examination reveals
that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at
two levels: First, OFWs with employment contracts of less than one year vis-à-vis OFWs with
Christian V. Asas
Page 85
==============================================
employment contracts of one year or more; Second, among OFWs with employment contracts of
more than one year; and Third, OFWs vis-à-vis local workers with fixed-period employment.
The Court concludes that the subject clause contains a suspect classification in that, in
the computation of the monetary benefits of fixed-term employees who are illegally
discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one
year or more in their contracts, but none on the claims of other OFWs or local workers with
fixed-term employment. The subject clause singles out one classification of OFWs and
burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the

Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines
whether it serves a compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers
arrayed in the Constitution and calibrated by history. It is akin to the paramount interest of the
state for which some individual liberties must give way, such as the public interest in
safeguarding health or maintaining medical standards, or in maintaining access to information on
matters of public concern.
In the present case, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic],
Filipino seafarers have better chance of getting hired by foreign employers." The limitation also
protects the interest of local placement agencies, which otherwise may be made to shoulder
millions of pesos in "termination pay."
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect
the employment of OFWs by mitigating the solidary liability of placement agencies, such callous
and cavalier rationale will have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes the same burden on
another sector, especially when the favored sector is composed of private businesses such as
placement agencies, while the disadvantaged sector is composed of OFWs whose protection no
less than the Constitution commands. The idea that private business interest can be elevated to
the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that
can be employed to achieve that purpose without infringing on the constitutional rights of OFWs.
Christian V. Asas
Page 86
==============================================
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-
Based Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures
on erring foreign employers who default on their contractual obligations to migrant workers
and/or their Philippine agents. These disciplinary measures range from temporary
disqualification to preventive suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative
disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of

aiding local placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative
of the right of petitioner and other OFWs to equal protection.
Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3, Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing, there are
some which this Court has declared not judicially enforceable, Article XIII being
one, particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor
Relations Commission, has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be
deemed as self-executing in the sense that these are automatically acknowledged and observed
without need for any enabling legislation. However, to declare that the constitutional provisions
are enough to guarantee the full exercise of the rights embodied therein, and the realization of
ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view
presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full
protection to labor" and "security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor
against any form of removal regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within
the contemplation of the framers. Subsequent legislation is still needed to define the parameters
of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor
sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies
will be at a loss, formulating their own conclusion to approximate at least the aims of the
Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a

positive enforceable right to stave off the dismissal of an employee for just cause owing to the
failure to serve proper notice or hearing. As manifested by several framers of the 1987
Christian V. Asas
Page 87
==============================================
Constitution, the provisions on social justice require legislative enactments for their
enforceability.
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable
rights, for the violation of which the questioned clause may be declared unconstitutional. It may
unwittingly risk opening the floodgates of litigation to every worker or union over every
conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working
class any actual enforceable right, but merely clothes it with the status of a sector for whom the
Constitution urges protection through executive or legislative action and judicial recognition. Its
utility is best limited to being an impetus not just for the executive and legislative departments,
but for the judiciary as well, to protect the welfare of the working class. And it was in fact
consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng
Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate
Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the
challenge to a statute is premised on the perpetuation of prejudice against persons favored by the
Constitution with special protection -- such as the working class or a section thereof -- the Court
may recognize the existence of a suspect classification and subject the same to strict judicial
scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated
in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a
groundless apprehension. Central Bank applied Article XIII in conjunction with the equal
protection clause. Article XIII, by itself, without the application of the equal protection clause,
has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose.
The argument of the Solicitor General, that the actual purpose of the subject clause of
limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to
give them a better chance of getting hired by foreign employers. This is plain speculation. As
earlier discussed, there is nothing in the text of the law or the records of the deliberations leading
to its enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is
for that precise reason that the clause violates not just petitioner's right to equal protection, but
also her right to substantive due process under Section 1, Article III of the Constitution.
Sameer Overseas Placement vs. Cabiles, G.R. No. 170139, August 5, 2014, Leonen, J.
Christian V. Asas
Page 88
==============================================
ISSUE: Is the reenactment in R.A. No. 10022 of the provision which was declared
unconstitutional in Serrano vs. Gallant valid? (2014 Bar in Political Law)
HELD: No. Moreover, this court is possessed with the constitutional duty to "[p]romulgate
rules concerning the protection and enforcement of constitutional rights." When cases become
mootand academic, we do not hesitate to provide for guidance to bench and bar in situations
where the same violations are capable of repetition but will evade review. This is analogous to
cases where there are millions of Filipinos working abroad who are bound to suffer from the lack
of protection because of the restoration of an identical clause in a provision previously declared
as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the

government may exercise its powers in any manner inconsistent with the Constitution, regardless
of the existence of any law that supports such exercise. The Constitution cannot be trumped by
any other law. All laws must be read in light of the Constitution. Any law that is inconsistent with
it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the
Constitution, the nullity cannot be cured by reincorporation or reenactment of the same or a
similar law or provision. A law or provision of law that was already declared unconstitutional
remains as such unless circumstances have so changed as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so
changed so as to cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to these
cases. The new law puts our overseas workers in the same vulnerable position as they were prior
to Serrano. Failure to reiterate the very ratio decidendi of that case will result in the same untold
economic hardships that our reading of the Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation that will reduce their hard earned wages as
well as add to the indignity of having been deprived of the protection of our laws simply because
our precedents have not been followed. There is no constitutional doctrine that causes injustice in
the face of empty procedural niceties. Constitutional interpretation is complex, but it is never
unreasonable.
Thus, in a resolution dated October 22, 2013, we ordered the parties and the Office of the
Solicitor General to comment on the constitutionality of the reinstated clause in Republic Act
No. 10022.
In its comment, petitioner argued that the clause was constitutional. The legislators
intended a balance between the employers’ and the employees’ rights by not unduly burdening
the local recruitment agency. Petitioner is also of the view that the clause was already declared as
constitutional in Serrano.
Christian V. Asas
Page 89
==============================================
The Office of the Solicitor General also argued that the clause was valid and
constitutional. However, since the parties never raised the issue of the constitutionality of the
clause asreinstated in Republic Act No. 10022, its contention is that it is beyond judicial review.
On the other hand, respondentargued that the clause was unconstitutional because it
infringed on workers’ right to contract.
We observe that the reinstated clause, this time as provided in Republic Act. No. 10022,
violates the constitutional rights to equal protection and due process. Petitioner as well as the
Solicitor General have failed to show any compelling change in the circumstances that would
warrant us to revisit the precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be
recovered by an illegally dismissed overseas worker to three months is both a violation of due
process and the equal protection clauses of the Constitution.
Poseidon vs. Tamala, G.R. No. 186475, June 26, 2013, Brion, J.
ISSUE: Is Section 10 of R.A. No. 8042 as amended applies only in cases of illegal dismissal?
HELD: Yes. A plain reading of this provision readily shows that it applies only to cases of
illegal dismissal or dismissal without any just, authorized or valid cause and finds no application
in cases where the overseas Filipino worker was not illegally dismissed. We found the occasion
to apply this rule in International Management Services v. Logarta, where we held that Section
10 of R.A. No. 8042 applies only to an illegally dismissed overseas contract worker or a worker
dismissed from overseas employment without just, valid or authorized cause.
iii. Liability of principal/agent for damages; theory of imputed knowledge
Becmen Service Exporter and Promotions, Inc. vs. Sps. Cuaresma, G.R. Nos. 182978-79,
April 27, 2009, Ynarez-Santiago, J.
FACTS: Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and Promotion,
Inc. (Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia
(KSA), for a contract duration of three years. Subsequently, Jasmin was found dead by a female
cleaner lying on the floor inside her dormitory room with her mouth foaming and smelling of
poison. Saudi Arabian authorities concluded that Jasmin committed suicide. However, when her
remains was repatriated to the Philippines, it was found out that she was physically and sexually
abused.
ISSUE: Whether or not the recruitment agencies, Becmen and White Falcon, are liable.
Christian V. Asas
Page 90
==============================================
HELD: Yes. Under Republic Act No. 8042 (R.A. 8042), or the Migrant Workers and Overseas
Filipinos Act of 1995, the State shall, at all times, uphold the dignity of its citizens whether in
country or overseas, in general, and Filipino migrant workers, in particular. The State shall
provide adequate and timely social, economic and legal services to Filipino migrant
workers. The rights and interest of distressed overseas Filipinos, in general, and Filipino migrant
workers, in particular, documented or undocumented, are adequately protected and safeguarded.
Becmen and White Falcon, as licensed local recruitment agencies, miserably failed to
abide by the provisions of R.A. 8042. Recruitment agencies are expected to extend assistance to
their deployed OFWs, especially those in distress. Instead, they abandoned Jasmin’s case and
allowed it to remain unsolved to further their interests and avoid anticipated liability which
parents or relatives of Jasmin would certainly exact from them. They willfully refused to protect
and tend to the welfare of the deceased Jasmin, treating her case as just one of those unsolved
crimes that is not worth wasting their time and resources on. The evidence does not even show
that Becmen and Rajab lifted a finger to provide legal representation and seek an investigation of
Jasmin’s case. Worst of all, they unnecessarily trampled upon the person and dignity of Jasmin
by standing pat on the argument that Jasmin committed suicide, which is a grave accusation
given its un-Christian nature.
We cannot reasonably expect that Jasmin’s parents should be the ones to actively pursue a
just resolution of her case in the KSA, unless they are provided with the finances to undertake
this herculean task. Sadly, Becmen and Rajab did not lend any assistance at all in this respect.
The most Jasmin’s parents can do is to coordinate with Philippine authorities as mandated under
R.A. 8042, obtain free legal assistance and secure the aid of the Department of Foreign Affairs,
the Department of Labor and Employment, the POEA and the OWWA in trying to solve the case
or obtain relief, in accordance with Section 23 of R.A. 8042. To our mind, the Cuaresmas did all
that was within their power, short of actually flying to the KSA. Indeed, the Cuaresmas went
even further. To the best of their abilities and capacities, they ventured to investigate Jasmin’s
case on their own: they caused another autopsy on Jasmin’s remains as soon as it arrived to
inquire into the true cause of her death. Beyond that, they subjected themselves to the painful and
distressful experience of exhuming Jasmin’s remains in order to obtain another autopsy for the
sole purpose of determining whether or not their daughter was poisoned. Their quest for the truth
and justice is equally to be expected of all loving parents. All this time, Rajab and Becmen –
instead of extending their full cooperation to the Cuaresma family – merely sat on their laurels in
seeming unconcern.
In one case, the SC held that the foreign employer may not have been obligated by its
contract to provide a companion for a returning employee, but it cannot deny that it was
expressly tasked by its agreement to assure the safe return of said worker. The uncaring attitude
displayed by petitioners who, knowing fully well that its employee had been suffering from
some mental disorder, nevertheless still allowed him to travel home alone, is appalling to
say the least. Such attitude harks back to another time when the landed gentry practically
Christian V. Asas
Page 91
==============================================
owned the serfs, and disposed of them when the latter had grown old, sick or otherwise lost
their usefulness.
Thus, more than just recruiting and deploying OFWs to their foreign principals,
recruitment agencies have equally significant responsibilities. In a foreign land where OFWs are
likely to encounter uneven if not discriminatory treatment from the foreign government, and
certainly a delayed access to language interpretation, legal aid, and the Philippine consulate, the
recruitment agencies should be the first to come to the rescue of our distressed OFWs since they
know the employers and the addresses where they are deployed or stationed. Upon them lies the
primary obligation to protect the rights and ensure the welfare of our OFWs, whether distressed
or not. Who else is in a better position, if not these recruitment agencies, to render immediate aid
to their deployed OFWs abroad?
Article 19 of the Civil Code provides that every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his due, and observe honesty
and good faith. Article 21 of the Code states that any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or public policy shall compensate
the latter for the damage. And, lastly, Article 24 requires that in all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant
for his protection.
Clearly, Rajab, Becmen and White Falcon’s acts and omissions are against public policy
because they undermine and subvert the interest and general welfare of our OFWs abroad, who
are entitled to full protection under the law. They set an awful example of how foreign employers
and recruitment agencies should treat and act with respect to their distressed employees and
workers abroad. Their shabby and callous treatment of Jasmin’s case; their uncaring attitude;
their unjustified failure and refusal to assist in the determination of the true circumstances
surrounding her mysterious death, and instead finding satisfaction in the unreasonable insistence
that she committed suicide just so they can conveniently avoid pecuniary liability; placing their
own corporate interests above of the welfare of their employee’s – all these are contrary to
morals, good customs and public policy, and constitute taking advantage of the poor employee
and her family’s ignorance, helplessness, indigence and lack of power and resources to seek the
truth and obtain justice for the death of a loved one.
Giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it
just to protect Rajab and Becmen’s material interest – despite evidence to the contrary – is
against the moral law and runs contrary to the good custom of not denouncing one’s fellowmen
for alleged grave wrongdoings that undermine their good name and honor.
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle
of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding.
This pronouncement is in keeping with the basic public policy of the State to afford protection to
Christian V. Asas
Page 92
==============================================
labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed,
and regulate the relations between workers and employers. This ruling is likewise rendered
imperative by Article 17 of the Civil Code which states that laws which have for their object
public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed upon in a foreign country.31
The relations between capital and labor are so impressed with public interest, 32 and neither shall
act oppressively against the other, or impair the interest or convenience of the public. 33 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.
The grant of moral damages to the employee by reason of misconduct on the part of the
employer is sanctioned by Article 2219 (10) of the Civil Code, which allows recovery of such
damages in actions referred to in Article 21.
Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral
damages, which Becmen and White Falcon are jointly and solidarily liable to pay, together with
exemplary damages for wanton and oppressive behavior, and by way of example for the public
good.
Private employment agencies are held jointly and severally liable with the foreign-based
employer for any violation of the recruitment agreement or contract of employment. This joint
and solidary liability imposed by law against recruitment agencies and foreign employers is
meant to assure the aggrieved worker of immediate and sufficient payment of what is due him. If
the recruitment/placement agency is a juridical being, the corporate officers and directors and
White Falcon’s assumption of Becmen’s liability does not automatically result in

Becmen’s freedom or release from liability. This has been ruled in ABD Overseas Manpower
Corporation v. NLRC. Instead, both Becmen and White Falcon should be held liable solidarily,
without prejudice to each having the right to be reimbursed under the provision of the Civil Code
that whoever pays for another may demand from the debtor what he has paid.
Sunace International Manpower Services vs. NLRC, G.R. No. 161757, January 25, 2006,
Carpio-Morales, J.
FACTS: The February 21, 2000 telefax message from the Taiwanese broker to Sunace,
the only basis of a finding of continuous communication, reads verbatim:
xxxx
Regarding to Divina, she did not say anything about her saving in police station. As we
contact with her employer, she took back her saving already last years. And they did not
deduct any money from her salary. Or she will call back her employer to check it again.
If her employer said yes! we will get it back for her.
Christian V. Asas
Page 93
==============================================
Thank you and best regards.
(Sgd.)
Edmund Wang
President
ISSUE: Is the theory of imputed knowledge applicable in this case?
HELD: No. The finding of the Court of Appeals solely on the basis of the above-quoted telefax
message, that Sunace continually communicated with the foreign "principal" (sic) and therefore
was aware of and had consented to the execution of the extension of the contract is misplaced.
The message does not provide evidence that Sunace was privy to the new contract executed after
the expiration on February 1, 1998 of the original contract. That Sunace and the
Taiwanese broker communicated regarding Divina’s allegedly withheld savings does not
necessarily mean that Sunace ratified the extension of the contract. As Sunace points out in its
Reply filed before the Court of Appeals,
As can be seen from that letter communication, it was just an information given to the
petitioner that the private respondent had taken already her savings from her foreign employer
and that no deduction was made on her salary. It contains nothing about the extension or the
petitioner’s consent thereto.
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume
that it was sent to enlighten Sunace who had been directed, by Summons issued on February 15,
2000, to appear on February 28, 2000 for a mandatory conference following Divina’s filing of
the complaint on February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, Sunace cannot profess ignorance of such an extension as
obviously, the act of its principal extending Divina’s employment contract necessarily bound it,
it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer Xiong, not the other way around. The knowledge of the principal-foreign
employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound under
the 2-year employment contract extension, it cannot be said to be privy thereto. As such, it and
its "owner" cannot be held solidarily liable for any of Divina’s claims arising from the 2-year
employment extension. As the New Civil Code provides, contracts take effect only between the
Christian V. Asas
Page 94
==============================================
parties, their assigns, and heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by provision of law.
Furthermore, as Sunace correctly points out, there was an implied revocation of its
agency relationship with its foreign principal when, after the termination of the original
employment contract, the foreign principal directly negotiated with Divina and entered into a
new and separate employment contract in Taiwan. Article 1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the business entrusted to the agent,
dealing directly with third persons thus applies.
APQ Shipmanagement vs. Casenas, G.R. No. 197303, June 4, 2014, Mendoza, J.
Doctrine. In a nutshell, there are three (3) requirements necessary for the complete
termination of the employment contract: (1.)termination due to expiration or other
reasons/causes; (2.) signing off from the vessel; and (3.) arrival at the point of hire. In this case,
there was no clear showing that Caseñas signed off from the vessel upon the expiration of his
employment contract, which was in February or April 2005. He did not arrive either in Manila,
his point of hire, because he was still on board the vessel MV Haitien Pride on the supposed date
of expiration of his contract. It was only on August 14, 2006 that he signed off 21 from MV
Haitien Pride and arrived in Manila on August 30, 2006.
In Interorient Maritime Enterprises, Inc. v. NLRC, the Court held that the obligations and
liabilities of the local agency and its foreign principal do not end upon the expiration of the
contracted period as they were duty bound to repatriate the seaman to the point of hire to
effectively terminate the contract of employment.
Meanwhile, Caseñas claimed that his transfer was due to the fact that MV Perseverance
could not leave port because of incomplete documents for its operation. This was not disputed.
To the mind of the Court, having incomplete documents for the vessel’s operation renders it
unseaworthy. While seaworthiness is commonly equated with the physical aspect and condition
of the vessel for voyage as its ability to withstand the rigors of the sea, it must not be forgotten
that a vessel should be armed with the necessary documents required by the maritime rules and
regulations, both local and international. It has been written that vessel seaworthiness further
extends to cover the documents required to ensure that the vessel can enter and leave ports
without problems.
Accordingly, Caseñas’ contract should have been terminated and he should have been
repatriated to the Philippines because a seafarer cannot be forced to sail with an unseaworthy
vessel, pursuant to Section 24 of the POEA-SEC. There was, however, no showing that his
contract was terminated by reason of such transfer. It is necessary to reiterate that MV Haitien
Pride appears to be manned by, and accredited with, the same principal/ agency. His joining the
said vessel could only mean that it was for the purpose of completing his contract as the transfer
was made well within the period of his employment contract on board MV Perseverance.
Christian V. Asas
Page 95
==============================================
APQ further claims that that there was an agreement between Caseñas and the shipowner,
but there was no concrete proof adduced to show that indeed a new agreement for the extension
of the contract was ever made. Granting that a new agreement for the extension was made, the
acts of APQ and Crew Management proved that there was implied consent to the extension.
In Magsaysay Maritime Corporation vs. NLRC, citing Vergara vs. Hammonia Maritime
Services, Inc., the Court reiterated that the seafarer, upon sign-off from his vessel, must report to
the company-designated physician within three (3) days from arrival for diagnosis and treatment.
For the duration of the treatment but in no case to exceed 120 days, the seaman is on temporary
total disability as he is totally unable to work. He receives his basic wage during this period until
he is declared fit to work or his temporary disability is acknowledged by the company to be
permanent, either partially or totally, as his condition is defined under the POEA-SEC and by
applicable Philippine laws. If the 120 days initial period is exceeded and no such declaration is
made because the seafarer requires further medical attention, then the temporary total disability
period may be extended up to a maximum of 240 days, subject to the right of the employer to
declare within this period that a partial or total disability already exists. The seaman may, of
course, also be declared fit to work at any time such declaration is justi1ied by his medical
condition.
In this case, Casenas immediately reported to APQ for the required post-employment
medical examination upon his return to the Philippines. He was referred to the company-
designated physician, who diagnosed him to be suffering from lschemic Heart Disease, which
was a manifestation of organ damage. Caseñas likewise consulted two (2) other physicians who
certified him to be suffering from Essential Hypertension aside from Ischemic Heart
Disease. From the time of Caseñas' diagnosis by the company-designated physician, he was
under the state of temporary total disability, which lasted for at least 120 days as provided by
law. Such period could be extended up to 240 days, if further medical attention was required.
There was, however, no showing of any justification to extend said period. As the law
requires, within 120 days from the time he was diagnosed of his illness, the company-designated
physician must make a declaration as to the fitness or unfitness of Caseñas As correctly observed
by the CA, however, the 120 day period lapsed without such a declaration being made. Caseñas
is now deemed to be in a state of permanent total disability and, thus, clearly entitled to the total
disability benefits provided by law.
Sealanes Marine vs. dela Torre, G.R. No. 214132, February 18, 2015, Reyes, J.
Doctrine. Concerning the joint and solidary liability of the manning agency, Sealanes, its
foreign principal, Arklow Shipping Netherland, and Sealanes’ President Dumatol, Section 10 of
Republic Act (R.A.) No. 8042, otherwise known as the "Migrant Workers and Overseas Filipinos
Act of 1995", as amended by Section 7 of R.A. No. 10022, reads:
Christian V. Asas
Page 96
==============================================
SEC. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the
exclusive jurisdiction to hear and decide, within ninety (90)calendar days after the filing of the
moral, exemplary and other forms of damage. Consistent with this mandate, the NLRC shall
endeavor to update and keep abreast with the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and
all claims under this section shall be joint and several. This provision shall be incorporated in the
contract for overseas employment and shall be a condition precedent for its approval. The
performance bond to [be] filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and
Such liabilities shall continue during the entire period or duration of the employment
contract and shall not be affected by any substitution, amendment or modification made locally
or in a foreign country of the said contract.
xxxx
Thus, every applicant for license to operate a seafarers’ manning agency shall, in the case
of a corporation or partnership, submit a written application together with, among others, a
verified undertaking by officers, directors and partners that they will be jointly and severally
liable with the company over claims arising from employer-employee relationship. Laws are
deemed incorporated in employment contracts and the contracting parties need not repeat them.
They do not even have to be referred to. Every contract, thus, contains not only what has been
explicitly stipulated, but also the statutory provisions that have any bearing on the matter.
E. Book One, Title II, Arts. 39-42
F. Book Two, Title II, Chapters I-III
1. Definition
a. Apprentice, Apprenticeship Agreement, Apprenticeship

Occupation
b. Learners
c. Handicapped workers
Section 4 of R.A. No. 7796 (TESDA Law)

Christian V. Asas
Page 97
==============================================
j) "Apprenticeship" training within employment with compulsory related theoretical

instructions involving a contract between an apprentice and an employer on an approved
apprenticeable occupation;
k) "Apprentice" is a person undergoing training for an approved apprenticeable

occupation during an established period assured by an apprenticeship agreement;
l) "Apprenticeship Agreement" is a contract wherein a prospective employer binds

himself to train the apprentice who in turn accepts the terms of training for a recognized
apprenticeable occupation emphasizing the rights, duties and responsibilities of each party;
m) "Apprenticeable Occupation" is an occupation officially endorsed by a tripartite body

and approved for apprenticeship by the Authority;
n) "Learners" refer to persons hired as trainees in semi-skilled and other industrial

occupations which are non-apprenticeable. Learnership programs must be approved by the
Authority.
R.A. No. 7277 (Magna Carta for Persons with Disability)
Section 4
(a.) Disabled persons are those suffering from restriction or different abilities, as a result
of a mental, physical or sensory impairment, to perform an activity in the manner or within the
range considered normal for a human being.
(b.) Impairment is any loss, diminution or aberration of psychological, physiological, or

anatomical structure or function
(c.) Disability shall mean 1) a physical or mental impairment that substantially limits one
or more psychological, physiological or anatomical function of an individual or activities of such
individual; 2) a record of such an impairment; or 3) being regarded as having such an
impairment.
(d.) Handicap refers to a disadvantage for a given individual, resulting from an

impairment or a disability, that limits or prevents the function or activity, that is considered
normal given the age and sex of the individual.
Section 5
Equal Opportunity for Employment. — No disable person shall be denied access to

opportunities for suitable employment. A qualified disabled employee shall be subject to the
Christian V. Asas
Page 98
==============================================
same terms and conditions of employment and the same compensation, privileges, benefits,
fringe benefits, incentives or allowances as a qualified able bodied person.
Five percent (5%) of all casual emergency and contractual positions in the Departments
of Social Welfare and Development; Health; Education, Culture and Sports; and other
government agencies, offices or corporations engaged in social development shall be reserved for
disabled persons.
Section 7
Apprenticeship. — Subject to the provisions of the Labor Code as amended, disabled

persons shall be eligible as apprentices or learners: Provided, That their handicap is not as much
as to effectively impede the performance of job operations in the particular occupation for which
they are hired; Provided, further, That after the lapse of the period of apprenticeship, if found
satisfactory in the job performance, they shall be eligible for employment.
Section 32
Discrimination on Employment. — No entity, whether public or private, shall

discriminate against a qualified disabled person by reason of disability in regard to job
application procedures, the hiring, promotion, or discharge of employees, employee
compensation, job training, and other terms, conditions, and privileges of employment. The
following constitute acts of discrimination:
(a) Limiting, segregating or classifying a disabled job applicant in such a manner that
adversely affects his work opportunities;
(b) Using qualification standards, employment tests or other selection criteria that screen
out or tend to screen out a disabled person unless such standards, tests or other selection criteria
are shown to be job-related for the position in question and are consistent with business
necessity;
(c) Utilizing standards, criteria, or methods of administration that:
(1) have the effect of discrimination on the basis of disability; or

(2) perpetuate the discrimination of others who are subject to common administrative
control.
(d) Providing less compensation, such as salary, wage or other forms of remuneration and
fringe benefits, to a qualified disabled employee, by reason of his disability, than the amount to
which a non-disabled person performing the same work is entitled;
Christian V. Asas
Page 99
==============================================
(e) Favoring a non-disabled employee over a qualified disabled employee with respect to
promotion, training opportunities, study and scholarship grants, solely on account of the latter's
disability;
(f) Re-assigning or transferring a disabled employee to a job or position he cannot

perform by reason of his disability;
(g) Dismissing or terminating the services of a disabled employee by reason of his

disability unless the employer can prove that he impairs the satisfactory performance of the work
involved to the prejudice of the business entity: Provided, however, That the employer first
sought to provide reasonable accommodations for disabled persons;
(h) Failing to select or administer in the most effective manner employment tests which
accurately reflect the skills, aptitude or other factor of the disabled applicant or employee that
such tests purports to measure, rather than the impaired sensory, manual or speaking skills of
such applicant or employee, if any; and
(i) Excluding disabled persons from membership in labor unions or similar organizations.
R.A. No. 9231 amending R.A. No. 7610
Section 2. Section 12 of the same Act, as amended, is hereby further amended to read as follows:
"Sec. 2. Employment of Children - Children below fifteen (15) years of age shall not be
employed except:
"1) When a child works directly under the sole responsibility of his/her parents or
legal guardian and where only members of his/her family are
employed: Provided, however, That his/her employment neither endangers his/her
life, safety, health, and morals, nor impairs his/her normal
development: Provided, further, That the parent or legal guardian shall provide
the said child with the prescribed primary and/or secondary education; or
"2) Where a child's employment or participation in public entertainment or

information through cinema, theater, radio, television or other forms of media is
essential: Provided, That the employment contract is concluded by the child's
parents or legal guardian, with the express agreement of the child concerned, if
possible, and the approval of the Department of Labor and
Employment: Provided, further, That the following requirements in all instances
are strictly complied with:
"(a) The employer shall ensure the protection, health, safety, morals and
normal development of the child;
Christian V. Asas
Page 100
==============================================
"(b) The employer shall institute measures to prevent the child's

exploitation or discrimination taking into account the system and level of
remuneration, and the duration and arrangement of working time; and
"(c) The employer shall formulate and implement, subject to the approval
and supervision of competent authorities, a continuing program for
training and skills acquisition of the child.
"In the above-exceptional cases where any such child may be employed, the
employer shall first secure, before engaging such child, a work permit from the
Department of Labor and Employment which shall ensure observance of the
above requirements.
"For purposes of this Article, the term "child" shall apply to all persons under
eighteen (18) years of age."
Section 3. The same Act, as amended, is hereby further amended by adding new sections to be
denominated as Sections 12-A, 12-B, 12-C, and 12-D to read as follows:
"Sec. 2-A. Hours of Work of a Working Child. - Under the exceptions provided in Section
12 of this Act, as amended:
"(1) A child below fifteen (15) years of age may be allowed to work for not more than
twenty (20) hours a week: Provided, That the work shall not be more than four (4) hours
at any given day;
"(2) A child fifteen (15) years of age but below eighteen (18) shall not be allowed to work
for more than eight (8) hours a day, and in no case beyond forty (40) hours a week;
"(3) No child below fifteen (15) years of age shall be allowed to work between eight
o'clock in the evening and six o'clock in the morning of the following day and no child
fifteen (15) years of age but below eighteen (18) shall be allowed to work between ten
o'clock in the evening and six o'clock in the morning of the following day."
"Sec. 12-B. Ownership, Usage and Administration of the Working Child's Income. - The
wages, salaries, earnings and other income of the working child shall belong to him/her in
ownership and shall be set aside primarily for his/her support, education or skills
acquisition and secondarily to the collective needs of the family: Provided, That not more
than twenty percent (20%) of the child's income may be used for the collective needs of
the family.
"The income of the working child and/or the property acquired through the work of the
child shall be administered by both parents. In the absence or incapacity of either of the
parents, the other parent shall administer the same. In case both parents are absent or
Christian V. Asas
Page 101
==============================================
incapacitated, the order of preference on parental authority as provided for under the
Family Code shall apply.
"Sec. 12-C. Trust Fund to Preserve Part of the Working Child's Income. - The parent or
legal guardian of a working child below eighteen (18) years of age shall set up a trust
fund for at least thirty percent (30%) of the earnings of the child whose wages and
salaries from work and other income amount to at least two hundred thousand pesos
(P200,000.00) annually, for which he/she shall render a semi-annual accounting of the
fund to the Department of Labor and Employment, in compliance with the provisions of
this Act. The child shall have full control over the trust fund upon reaching the age of
majority.
"Sec. 12-D. Prohibition Against Worst Forms of Child Labor. - No child shall be engaged
in the worst forms of child labor. The phrase "worst forms of child labor" shall refer to
any of the following:
"(1) All forms of slavery, as defined under the "Anti-trafficking in Persons Act of
2003", or practices similar to slavery such as sale and trafficking of children, debt
bondage and serfdom and forced or compulsory labor, including recruitment of
children for use in armed conflict; or
"(2) The use, procuring, offering or exposing of a child for prostitution, for the
production of pornography or for pornographic performances; or
"(3) The use, procuring or offering of a child for illegal or illicit activities,
including the production and trafficking of dangerous drugs and volatile
substances prohibited under existing laws; or
"(4) Work which, by its nature or the circumstances in which it is carried out, is
hazardous or likely to be harmful to the health, safety or morals of children, such
that it:
"a) Debases, degrades or demeans the intrinsic worth and dignity of a

child as a human being; or
"b) Exposes the child to physical, emotional or sexual abuse, or is found to

be highly stressful psychologically or may prejudice morals; or
"c) Is performed underground, underwater or at dangerous heights; or
"d) Involves the use of dangerous machinery, equipment and tools such as
power-driven or explosive power-actuated tools; or
Christian V. Asas
Page 102
==============================================
"e) Exposes the child to physical danger such as, but not limited to the
dangerous feats of balancing, physical strength or contortion, or which
requires the manual transport of heavy loads; or
"f) Is performed in an unhealthy environment exposing the child to

hazardous working conditions, elements, substances, co-agents or
processes involving ionizing, radiation, fire, flammable substances,
noxious components and the like, or to extreme temperatures, noise levels,
or vibrations; or
"g) Is performed under particularly difficult conditions; or

"h) Exposes the child to biological agents such as bacteria, fungi, viruses,
protozoans, nematodes and other parasites; or
"i) Involves the manufacture or handling of explosives and other

pyrotechnic products."
2. Requirements/Effect of invalid agreement
Century Canning Corp. vs. CA, G.R. No. 152894, August 17, 2007, Carpio, J.
FACTS: Gloria Palad was hired as an apprentice as fish cleaner. Apprenticeship agreement was
executed and enforced on July 17, 1997. The said agreement was submitted for approval on July
25, 1997 and approved by TESDA on September 26, 1997.
ISSUE: Is the apprenticeship agreement valid?
HELD: No. Republic Act No. 7796 (RA 7796), which created the TESDA, has transferred the
authority over apprenticeship programs from the Bureau of Local Employment of the DOLE to
the TESDA. RA 7796 emphasizes TESDA’s approval of the apprenticeship program as a pre-
requisite for the hiring of apprentices.
In this case, the apprenticeship agreement was entered into between the parties before
petitioner filed its apprenticeship program with the TESDA for approval. Petitioner and Palad
executed the apprenticeship agreement on 17 July 1997 wherein it was stated that the training
would start on 17 July 1997 and would end approximately in December 1997. On 25 July 1997,
petitioner submitted for approval its apprenticeship program, which the TESDA subsequently
approved on 26 September 1997. Clearly, the apprenticeship agreement was enforced even
before the TESDA approved petitioner’s apprenticeship program. Thus, the apprenticeship
agreement is void because it lacked prior approval from the TESDA.
The TESDA’s approval of the employer’s apprenticeship program is required before the
employer is allowed to hire apprentices. Prior approval from the TESDA is necessary to ensure
that only employers in the highly technical industries may employ apprentices and only in
Christian V. Asas
Page 103
==============================================
apprenticeable occupations. Thus, under RA 7796, employers can only hire apprentices for
apprenticeable occupations which must be officially endorsed by a tripartite body and approved
for apprenticeship by the TESDA. This is to ensure the protection of apprentices and to obviate
possible abuses by prospective employers who may want to take advantage of the lower wage
rates for apprentices and circumvent the right of the employees to be secure in their employment.
The requisite TESDA approval of the apprenticeship program prior to the hiring of apprentices
was further emphasized by the DOLE with the issuance of Department Order No. 68-04 on 18
August 2004. Department Order No. 68-04, which provides the guidelines in the implementation
of the Apprenticeship and Employment Program of the government, specifically states that no
enterprise shall be allowed to hire apprentices unless its apprenticeship program is
registered and approved by TESDA.
Since Palad is not considered an apprentice because the apprenticeship agreement was
enforced before the TESDA’s approval of petitioner’s apprenticeship program, Palad is deemed a
regular employee performing the job of a "fish cleaner." Clearly, the job of a "fish cleaner" is
necessary in petitioner’s business as a tuna and sardines factory. Under Article 280 of the Labor
Code, an employment is deemed regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer.
Atlanta Industries, Inc. vs. Sebolino, G.R. No. 187320, January 26, 2011, Brion, J.
Doctrine. The fact that Costales, Almoite, Sebolino and Sagun were already rendering
service to the company when they were made to undergo apprenticeship (as established by the
evidence) renders the apprenticeship agreements irrelevant as far as the four are concerned. This
reality is highlighted by the CA finding that the respondents occupied positions such as machine
operator, scaleman and extruder operator - tasks that are usually necessary and desirable in
Atlanta’s usual business or trade as manufacturer of plastic building materials. These tasks and
their nature characterized the four as regular employees under Article 280 of the Labor Code.
Thus, when they were dismissed without just or authorized cause, without notice, and without
the opportunity to be heard, their dismissal was illegal under the law.
Even if we recognize the company’s need to train its employees through apprenticeship,
we can only consider the first apprenticeship agreement for the purpose. With the expiration of
the first agreement and the retention of the employees, Atlanta had, to all intents and purposes,
recognized the completion of their training and their acquisition of a regular employee status. To
foist upon them the second apprenticeship agreement for a second skill which was not even
mentioned in the agreement itself, is a violation of the Labor Code’s implementing rules and is
an act manifestly unfair to the employees, to say the least. This we cannot allow.
3. Disabled persons attaining regular status
Bernardo vs. NLRC, G.R. No. 122917, July 12, 1999, Panganiban, J. (*This was asked in the
2016 Jurist Mock Bar but the facts are twisted)
Christian V. Asas
Page 104
==============================================
FACTS: Complainants numbering 43 are deaf-mutes who were hired on various periods from
1988 to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters through
a uniformly worded agreement called "Employment Contract for Handicapped Workers". Their
employments were renewed every six months such that by the time this case arose, there were
fifty-six (56) deaf-mutes who were employed by respondent under the said employment
agreement.
ISSUE: Whether or not the complainants are regular employees.
HELD: Yes. At the outset, let it be known that this Court appreciates the nobility of private
respondent's effort to provide employment to physically impaired individuals and to make them
more productive members of society. However, we cannot allow it to elude the legal
consequences of that effort, simply because it now deems their employment irrelevant. The facts,
viewed in light of the Labor Code and the Magna Carta for Disabled Persons, indubitably show
that the petitioners, except sixteen of them, should be deemed regular employees. As such, they
have acquired legal rights that this Court is duty-bound to protect and uphold, not as a matter of
compassion but as a consequence of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be trained
for a period of one month, after which the employer shall determine whether or not they should
be allowed to finish the 6-month term of the contract. Furthermore, the employer may terminate
the contract at any time for a just and reasonable cause. Unless renewed in writing by the
employer, the contract shall automatically expire at the end of the term.
The stipulations in the employment contracts indubitably conform with Article 80 of the
Labor Code. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for
Disabled Persons), however, justify the application of Article 280 of the Labor Code.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988 to
1993. Verily, the renewal of the contracts of the handicapped workers and the hiring of others
lead to the conclusion that their tasks were beneficial and necessary to the bank. More important,
these facts show that they were qualified to perform the responsibilities of their positions. In
other words, their disability did not render them unqualified or unfit for the tasks assigned to
them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled
employee should be given the same terms and conditions of employment as a qualified able-
bodied person as provided for in Section 5 of the said law.
The fact that the employees were qualified disabled persons necessarily removes the
employment contracts from the ambit of Article 80. Since the Magna Carta accords them the
rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code.
Christian V. Asas
Page 105
==============================================
Without a doubt, the task of counting and sorting bills is necessary and desirable to the
business of respondent bank. With the exception of sixteen of them, petitioners performed these
tasks for more than six months.
As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the
pernicious practice of making permanent casuals of our lowly employees by the simple
expedient of extending to them probationary appointments, ad infinitum." The contract signed by
petitioners is akin to a probationary employment, during which the bank determined the
employees' fitness for the job. When the bank renewed the contract after the lapse of the six-
month probationary period, the employees thereby became regular employees. No employer is
allowed to determine indefinitely the fitness of its employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure; that
is, their services may be terminated only for a just or authorized cause. Because respondent
failed to show such cause, these twenty-seven petitioners are deemed illegally dismissed and
therefore entitled to back wages and reinstatement without loss of seniority rights and other
privileges. Considering the allegation of respondent that the job of money sorting is no longer
available because it has been assigned back to the tellers to whom it originally
belonged, petitioners are hereby awarded separation pay in lieu of reinstatement.
Brent ruling is not applicable. The term limit in the contract was premised on the fact
that the petitioners were disabled, and that the bank had to determine their fitness for the
position. Indeed, its validity is based on Article 80 of the Labor Code. But as noted earlier,
petitioners proved themselves to be qualified disabled persons who, under the Magna Carta for
Disabled Persons, are entitled to terms and conditions of employment enjoyed by qualified able-
bodied individuals; hence, Article 80 does not apply because petitioners are qualified for their
positions. The validation of the limit imposed on their contracts, imposed by reason of their
disability, was a glaring instance of the very mischief sought to be addressed by the new law.
G. Book Three (Conditions of Employment)
1. Title I, Chapter I, Arts. 82-90
a. Coverage (Art. 82)
i. Managerial employees vs. Managerial Staff/Supervisors
Title I, Book III, Rule I, Sec. 2(b) and (c), Omnibus Rules
a. Test of managerial/supervisory status
Clientologic Philippines, Inc. vs. Castro, G.R. No. 186070, April 11, 2011, Nachura, J.
Christian V. Asas
Page 106
==============================================
FACTS: Benedict Castro was employed by ClientLogic Philippines, Inc. (now known and shall
hereafter be referred to as SITEL) as a call center agent for its Bell South Account. After six (6)
months, he was promoted to the "Mentor" position, and thereafter to the "Coach" position. A
"Coach" is a team supervisor who is in charge of dealing with customer complaints which cannot
be resolved by call center agents.
ISSUE: Is Castro a supervisor?
HELD: No. Article 82 of the Labor Code states that the provisions of the Labor Code on
working conditions and rest periods shall not apply to managerial employees. Generally,
managerial employees are not entitled to overtime pay for services rendered in excess of eight
hours a day.
Article 212 (m) of the Labor Code defines a managerial employee as "one who is vested
with powers or prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to effectively
recommend such managerial actions.
Employees are considered occupying managerial positions if they meet all of the
following conditions, namely:
1) Their primary duty consists of management of the establishment in which they are
employed or of a department or subdivision thereof;
2) They customarily and regularly direct the work of two or more employees therein;
3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion or
any other change of status of other employees are given particular weight.
They are considered as officers or members of a managerial staff if they perform the
following duties and responsibilities:
1) The primary duty consists of the performance of work directly related to management
of policies of their employer;
2) Customarily and regularly exercise discretion and independent judgment;
3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of management of the establishment in which he is employed or subdivision
thereof; or (ii) execute under general supervision work along specialized or technical
lines requiring special training, experience, or knowledge; or (iii) execute, under general
supervision, special assignment and tasks xxx.
Christian V. Asas
Page 107
==============================================
(Respondent’s) duties do not fall under any of the categories enumerated above. His work
is not directly related to management policies. Even the circumstances shown by the instant case
reveal that (respondent) does not regularly exercise discretion and independent judgment.
(Petitioners) submitted a list of the responsibilities of "HR Manager/Supervisor" and "Division
Manager/Department Manager/Supervisors" but these do not pertain to (respondent) who does
not have any of the said positions. He was just a team Supervisor and not (an) HR or Department
Supervisor.
The test of "supervisory" or "managerial status" depends on whether a person

possesses authority to act in the interest of his employer and whether such authority is not merely
routinary or clerical in nature, but requires the use of independent judgment. The position held
by respondent and its concomitant duties failed to hurdle this test.
As a coach or team supervisor, respondent’s main duty was to deal with customer
complaints which could not be handled or solved by call center agents. If the members of his
team could not meet the needs of a customer, they passed the customer’s call to respondent.
This job description does not indicate that respondent can exercise the powers and
prerogatives equivalent to managerial actions which require the customary use of independent
judgment. There is no showing that he was actually conferred or was actually exercising the
following duties attributable to a "member of the managerial staff," viz.:
1) The primary duty consists of the performance of work directly related to management
of policies of their employer;
2) Customarily and regularly exercise discretion and independent judgment;
3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of management of the establishment in which he is employed or subdivision
thereof; or (ii) execute under general supervision work along specialized or technical
lines requiring special training, experience, or knowledge; or (iii) execute, under general
supervision, special assignment and tasks; and
4) Who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and (3) above.
According to petitioners, respondent also performed the following duties, as shown in the
company’s Statement of Policy on Discipline:
a. Know and understand in full the Policy on Discipline including their underlying
reasons.
b. Implement strictly and consistently the Policy on Discipline.
Christian V. Asas
Page 108
==============================================
c. Ensure that the said Policy on Discipline is communicated to and understood by all
employees.
d. Monitor compliance by employees with the said Policy.
e. Advise HR Manager on the state of discipline in their respective departments;
problems, if any, and recommend solution(s) and corrective action(s).
As correctly observed by the CA and the LA, these duties clearly pertained to "Division
Managers/Department Managers/ Supervisors," which respondent was not, as he was merely a
team supervisor. Petitioners themselves described respondent as "the superior of a call center
agent; he heads and guides a specific number of agents, who form a team."
Cruz vs. BPI, G.R. No. 173357, February 13, 2013, Peralta, J.
ISSUE: Is Cruz a manager?
HELD: Yes. The test of "supervisory" or "managerial status" depends on whether a person
possesses authority to act in the interest of his employer and whether such authority is not merely
routinary or clerical in nature, but requires the use of independent judgment.
In respondent's Position Paper before the NLRC and its Memorandum, respondent stated
that the responsibility of petitioner, among others, were as follows: (1) to maintain the integrity
of the signature card files of certificates of deposits and/or detect spurious signature cards in the
same files; (2) to ensure that releases of original CDS are done only against valid considerations
and made only to the legitimate depositors or their duly authorized representatives; (3) to
approve payments or withdrawals of deposits by clients to ensure that such withdrawals are valid
transactions of the bank; and (4) to supervise the performance of certain rank-and-file employees
of the branch.
Petitioner holds a managerial status since she is tasked to act in the interest of her
employer as she exercises independent judgment when she approves pre-termination of USD
CDs or the withdrawal of deposits. In fact, petitioner admitted the exercise of independent
judgment when she explained that as regards the pre-termination of the USD CDs of Uymatiao
and Caluag, the transactions were approved on the basis of her independent judgment that the
signatures in all the documents presented to her by the traders matched, as shown in her
reply dated April 23, 2002 to respondent's memorandum asking her to explain the unauthorized
preterminations/withdrawals of U.S. dollar deposits in the BPI Ayala Avenue Branch.
ii. Field Personnel
Title I, Book III, Rule I, Sec. 2(f), Omnibus Rules
DOLE Department Order No. 118-12 (Rules and Regulations

Governing the Employment and Working Conditions of Drivers and
Conductors in the Public Utility Bus Transport Industry)
Christian V. Asas
Page 109
==============================================
Doctrine. "Field personnel" shall refer to non-agricultural employees who regularly

perform their duties away from the principal place of business or branch office of the employer
and whose actual hours of work in the field cannot be determined with reasonable certainty.
Based on the definition of field personnel under Article 82, we agree with the CA that
Macasio does not fall under the definition of "field personnel." The CA’s finding in this regard is
supported by the established facts of this case: first, Macasio regularly performed his duties at
David’s principal place of business; second, his actual hours of work could be determined with
reasonable certainty; and, third, David supervised his time and performance of duties. Since
Macasio cannot be considered a "field personnel," then he is not exempted from the grant of
holiday, SIL pay even as he was engaged on "pakyaw" or task basis.
b. Actual hours of work cannot be determined with reasonable

certainty
Mercidar Fishing Corp. vs. NLRC, G.R. No. 112574, October 8, 1998, Mendoza, J.
FACTS: Fermin Agao, Jr. had been employed as a "bodegero" or ship's quartermaster of
Mercidar.
ISSUE: Is Agao, Jr. a field personnel?
HELD: No. Petitioner argues essentially that since the work of private respondent is performed
away from its principal place of business, it has no way of verifying his actual hours of work on
the vessel. It contends that private respondent and other fishermen in its employ should be
classified as "field personnel" who have no statutory right to service incentive leave pay.
In one case, the SC held that the clause "whose time and performance is unsupervised by
the employer" did not amplify but merely interpreted and expounded the clause "whose actual
hours of work in the field cannot be determined with reasonable certainty." The former clause is
still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding
whether or not an employee's actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such employee's time and
performance is constantly supervised by the employer.
In the case at bar, during the entire course of their fishing voyage, fishermen employed by
petitioner have no choice but to remain on board its vessel. Although they perform non-
agricultural work away from petitioner's business offices, the fact remains that throughout the
duration of their work they are under the effective control and supervision of petitioner through
the vessel's patron or master as the NLRC correctly held.
Christian V. Asas
Page 110
==============================================
iii. Family members
iv. Domestic servants/Persons in the personal service of

another
Title I, Book III, Rule I, Sec. 2(f), Omnibus Rules
R.A. No. 10361 (Domestic Workers Act or Batas Kasambahay)
Section 4
(c) Domestic work refers to work performed in or for a household or households.
(d) Domestic worker or "Kasambahay" refers to any person engaged in domestic work
within an employment relationship such as, but not limited to, the following: general househelp,
nursemaid or "yaya", cook, gardener, or laundry person, but shall exclude any person who
performs domestic work only occasionally or sporadically and not on an occupational basis.
The term shall not include children who are under foster family arrangement, and are
provided access to education and given an allowance incidental to education, i.e. "baon",
transportation, school projects and school activities.
(e) Employer refers to any person who engages and controls the services of a domestic
worker and is party to the employment contract.
(f) Household refers to the immediate members of the family or the occupants of the
house that are directly provided services by the domestic worker.
Section 22 (Possible Bar Problem)
Assignment to Nonhousehold Work. – No domestic worker shall be assigned to work in a

commercial, industrial or agricultural enterprise at a wage rate lower than that provided for
agricultural or nonagricultural workers. In such cases, the domestic worker shall be paid the
applicable minimum wage.
Section 23 (Possible Bar Problem)
Extent of Duty. – The domestic worker and the employer may mutually agree for the
former to temporarily perform a task that is outside the latter’s household for the benefit of
another household. However, any liability that will be incurred by the domestic worker on
account of such arrangement shall be borne by the original employer. In addition, such work
performed outside the household shall entitle the domestic worker to an additional payment of
not less than the existing minimum wage rate of a domestic worker. It shall be unlawful for the
Christian V. Asas
Page 111
==============================================
original employer to charge any amount from the said household where the service of the
domestic worker was temporarily performed.
Remington Industrial vs. Castañeda, G.R. No. 169295-96, November 20, 2006, Puno, J.
(Possible Bar Problem)
FACTS: Erlinda Castañeda alleged that she started working in August 1983 as company cook
for Remington, a corporation engaged in the trading business; that she worked for six (6) days a
week, starting as early as 6:00 a.m. because she had to do the marketing and would end at around
5:30 p.m., or even later, after most of the employees, if not all, had left the company premises;
that she continuously worked with Remington until she was unceremoniously prevented from
reporting for work when Remington transferred to a new site in Edsa, Caloocan City.
ISSUE: Is Erlinda a domestic helper?
HELD: No. Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms
"househelper" or "domestic servant" are defined as follows:
"The term ‘househelper’ as used herein is synonymous to the term ‘domestic servant’ and
shall refer to any person, whether male or female, who renders services in and about the
employer’s home and which services are usually necessary or desirable for the maintenance and
enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment of the
employer’s family."
The foregoing definition clearly contemplates such househelper or domestic servant who
is employed in the employer’s home to minister exclusively to the personal comfort and
enjoyment of the employer’s family. Such definition covers family drivers, domestic servants,
laundry women, yayas, gardeners, houseboys and similar househelps.
xxx xxx xxx
The criteria is the personal comfort and enjoyment of the family of the employer in the
home of said employer. While it may be true that the nature of the work of a househelper,
domestic servant or laundrywoman in a home or in a company staffhouse may be similar in
nature, the difference in their circumstances is that in the former instance they are actually
serving the family while in the latter case, whether it is a corporation or a single proprietorship
engaged in business or industry or any other agricultural or similar pursuit, service is being
rendered in the staffhouses or within the premises of the business of the employer. In such
instance, they are employees of the company or employer in the business concerned entitled to
the privileges of a regular employee.
Petitioner contends that it is only when the househelper or domestic servant is assigned to
certain aspects of the business of the employer that such househelper or domestic servant may be
considered as such an employee. The Court finds no merit in making any such distinction. The
Christian V. Asas
Page 112
==============================================
mere fact that the househelper or domestic servant is working within the premises of the business
of the employer and in relation to or in connection with its business, as in its staffhouses for its
guest or even for its officers and employees, warrants the conclusion that such househelper or
domestic servant is and should be considered as a regular employee of the employer and not as a
mere family househelper or domestic servant as contemplated in Rule XIII, Section 1(b), Book 3
of the Labor Code, as amended.
In the case at bar, the petitioner itself admits in its position paper that respondent worked
at the company premises and her duty was to cook and prepare its employees’ lunch
and merienda. Clearly, the situs, as well as the nature of respondent’s work as a cook, who caters
not only to the needs of Mr. Tan and his family but also to that of the petitioner’s employees,
makes her fall squarely within the definition of a regular employee under the doctrine enunciated
in the Apex Mining case. That she works within company premises, and that she does not cater
exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of the
petitioner’s right of control over her functions, which is the primary indicator of the existence of
an employer-employee relationship.
Moreover, it is wrong to say that if the work is not directly related to the employer's
business, then the person performing such work could not be considered an employee of the
latter. The determination of the existence of an employer-employee relationship is defined by law
according to the facts of each case, regardless of the nature of the activities involved. Indeed, it
would be the height of injustice if we were to hold that despite the fact that respondent was made
to cook lunch and merienda for the petitioner’s employees, which work ultimately redounded to
the benefit of the petitioner corporation, she was merely a domestic worker of the family of Mr.
Tan.
We note the findings of the NLRC, affirmed by the Court of Appeals, that no less than the
company’s corporate secretary has certified that respondent is a bonafide company
employee; she had a fixed schedule and routine of work and was paid a monthly salary
of P4,000.00; she served with the company for 15 years starting in 1983, buying and cooking
food served to company employees at lunch and merienda, and that this service was a regular
feature of employment with the company.
v. Workers paid by result
Sec. 8, Title I, Rule VII, Book III, Omnibus Rules
a. Categories
Lambo vs. NLRC, G.R. No. 111042, October 26, 1999, Mendoza, J.
FACTS: Avelino Lambo and Vicente Belocura were employed as tailors by J.C. Tailor Shop
and/or Johnny Co. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and
Christian V. Asas
Page 113
==============================================
holidays. As in the case of the other 100 employees of private respondents, petitioners were paid
on a piece-work basis, according to the style of suits they made. Regardless of the number of
pieces they finished in a day, they were each given a daily pay of at least P64.0.
ISSUE: Are Lambo and Belocura supervised employees?
HELD: Yes. There is no dispute that petitioners were employees of private respondents
although they were paid not on the basis of time spent on the job but according to the quantity
and the quality of work produced by them. There are two categories of employees paid by
results: (1) those whose time and performance are supervised by the employer. (Here, there is an
element of control and supervision over the manner as to how the work is to be performed. A
piece-rate worker belongs to this category especially if he performs his work in the company
premises.); and (2) those whose time and performance are unsupervised. (Here, the employer’s
control is over the result of the work. Workers on pakyao and takay basis belong to this group.)
Both classes of workers are paid per unit accomplished. Piece-rate payment is generally
practiced in garment factories where work is done in the company premises, while payment
on pakyao and takay basis is commonly observed in the agricultural industry, such as in sugar
plantations where the work is performed in bulk or in volumes difficult to quantify. Petitioners
belong to the first category, i.e., supervised employees.
In determining the existence of an employer-employee relationship, the following

elements must be considered: (1) the selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to control the 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.
In this case, private respondents exercised control over the work of petitioners. As tailors,
petitioners worked in the company’s premises from 8:00 a.m. to 7:00 p.m. daily, including
Sundays and holidays. The mere fact that they were paid on a piece-rate basis does not negate
their status as regular employees of private respondents. The term "wage" is broadly defined in
Art. 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 petitioners are not covered by the SSS affect the employer-employee relationship.
Indeed, the following factors show that petitioners, although piece-rate workers, were
regular employees of private respondents: (1) within the contemplation of Art. 280 of the Labor
Code, their work as tailors was necessary or desirable in the usual business of private
respondents, which is engaged in the tailoring business; (2) petitioners worked for private
respondents throughout the year, their employment not being dependent on a specific project or
season; and, (3) petitioners worked for private respondents for more than one year.
Christian V. Asas
Page 114
==============================================
b. Hours worked (Art. 84, Labor Code; Sec. 3, DOLE DO No. 118-12)
Sec. 3, DOLE D.O. No. 118-12
Hours of Work and Hours of Rest. The normal work hours of driver and conductor shall
not exceed eight (8) hours a day.
If the driver/conductor is required to work overtime, the maximum hours of work shall
not exceed 12 hours in any 24-hour period, subject to the overriding safety and operational
conditions of the public utility bus.
Drivers and conductors shall be entitled to rest periods of at least one (1) hour, exclusive
of meal breaks, within a 12-hour shift.
i. Principles in determining hours worked
Secs. 3-4, Title I, Rule I, Book III, Omnibus Rules
Sec. 3. Hours worked. The following shall be considered as compensable hours

worked:
a.) All time during which an employee is required to be on duty or to be at employer’s

premises or to be at the prescribed workplace; and
b.) All time during which an employee is suffered or permitted to work.
Sec. 4. Principles in determining Hours Worked (memorize). The following general

principles shall govern in determining whether the time spent by an employee is considered
hours worked for purposes of this Rule:
a.) All hours are hours worked which the employee is required to give to his employer,
regardless of whether or not such hours are spent in productive labor or involve physical or
mental exertion;
b.) An employee need not leave the premises of the workplace in order that his rest period
shall not be counted, it being enough that he stops working, may rest completely and may leave
his workplace, to go elsewhere, whether within or outside the premises of his workplace;
c.) If the work performed was necessary, ot it benefited the employer, or the employee
could not abandon his work at the end of his normal working hours because he had no
replacement, all time spent for such work shall be considered as hours worked, if the work was
with the knowledge of his employer or immediate supervisor;
Christian V. Asas
Page 115
==============================================
d.) The time during which an employee is inactive by reason of interruptions in his work
beyond his control shall be considered time either if the imminence of the resumption of work
requires the employee’s presence at the place of work or if the interval is too brief to be utilized
effectively and gainfully in the employee’s own interest.
ii. Engaged to wait rule/idle time
Sec. 5(a), Rule I, Book III, Omnibus Rules
Luzon Sevedoring Co. vs. Luzon Marine Department Union, G.R. No. L-6265, April 29,
1957, Felix, J.
FACTS: Luzon Marine Department Union filed a petition with the Court of Industrial Relations
containing several demands against Luzon Stevedoring Co., Inc., among which were the petition
for full recognition of the right of COLLECTIVE bargaining, close shop and check off. During
the pendency of the petition with the CIR, the union declared a strike which was ruled to be
illegal. Hence, the union filed a Constancia pertaining to the unresolved demands. One of the
unresolved demands is, "That the work performed in excess of eight (8) hours be paid an
overtime pay of 50 per cent the regular rate of pay, and that work performed on Sundays and
legal holidays be paid double the regular rate of pay."
ISSUE: Is the definition for "hours of work" as presently applied to dryland laborers equally
applicable to seamen? Or should a different criterion be applied by virtue of the fact that the
seamen’s employment is completely different in nature as well as in condition of work from that
of a dryland laborer?
HELD: Petitioner questions the applicability to seamen of the interpretation given to the phrase
"hours of work" for the purpose of the Eight-Hour Labor Law, insinuating that although the
seamen concerned stayed in petitioner’s tugboats, or merely within its compound, for 12 hours,
yet their work was not continuous but interrupted or broken. It has been the consistent stand of
petitioner that while it is true that the workers herein were required to report for work at 6:00
a.m. and were made to stay up to 6:00 p.m., their work was not continuous and they could have
left the premises of their working place were it not for the inherent physical impossibility
peculiar to the nature of their duty which prevented them from leaving the tugboats. It is the
Company’s defense that a literal interpretation of what constitutes non-working hours would
result in absurdity if made to apply to seamen aboard vessels in bays and rivers, and We are
called upon to make an interpretation of the law on "non-working hours" that may comprehend
within its embrace not only the non-working hours of laborers employed in land jobs, but also of
that particular group of seamen, i.e., those employed in vessels plying in rivers and bays, since
admittedly there is no need for such ruling with respect to officers and crew of interisland vessels
which have aboard 2 shifts of said men and strictly follow the 8-hour working period.
Christian V. Asas
Page 116
==============================================
Section 1 of Commonwealth Act No. 444, known as the Eight-Hour Labor Law, provides:
“The legal working day for any person employed by another shall be of not more than eight
hours daily. When the work is not continuous, the time during which the laborer is not working
AND CAN LEAVE HIS WORKING PLACE and can rest completely, shall not be counted.”
The requisites contained in this section are further implemented by contemporary

regulations issued by administrative authorities (Sections 4 and 5 of Chapter III, Article 1, Code
of Rules and Regulations to Implement the Minimum Wage Law).
For the purposes of this case, We do not need to set for seamen a criterion different from
that applied to laborers on land, for under the provisions of the above quoted section, the only
thing to be done is to determine the meaning and scope of the term "working place" used therein.
As We understand this term, a laborer need not leave the premises of the factory, shop or boat in
order that his period of rest shall not be counted, it being enough that he "cease to work", may
rest completely and leave or may leave at his will the spot where he actually stays while
working, to go somewhere else, whether within or outside the premises of said factory, shop or
boat. If these requisites are complied with, the period of such rest shall not be counted.
In the case at bar, We do not need to look into the nature of the work of claimant mariners
to ascertain the truth of petitioner’s allegation that this kind of seamen have had enough "free
time", a task of which We are relieved, for although after an ocular inspection of the working
premises of the seamen affected in this case the trial Judge declared in his decision that the
Company gave the complaining laborers 3 free meals a day with a recess of 20 minutes after
each meal, this decision was specifically amended by the Court en banc in its Resolution of June
6, 1955, wherein it held that the claimants herein rendered services to the Company from 6:00
a.m. to 6:00 p.m. including Sundays and holidays, which implies either that said laborers were
not given any recess at all, or that they were not allowed to leave the spot of their working place,
or that they could not rest completely. And such resolution being on a question essentially of fact,
this Court is now precluded to review the same.
National Development Co. vs. CIR, G.R. No. L-15422, November 30, 1962, Regala, J.
FACTS: At the National Development Co., a government-owned and controlled corporation,

there were four shifts of work. One shift was from 8 a.m. to 4 p.m., while the three other shifts
were from 6 a.m. to 2 p.m.; then from 2 p.m. to 10 p.m. and, finally, from 10 p.m. to 6 a.m. In
each shift, there was a one-hour mealtime period, to wit: From (1) 11 a.m. to 12 noon for those
working between 6 a.m. and 2 p.m. and from (2) 7 p.m. to 8 p.m. for those working between 2
p.m. and 10 p.m. Although there was a one-hour mealtime, NDC nevertheless credited the
workers with eight hours of work for each shift and paid them for the same number of hours.
However, since 1953, whenever workers in one shift were required to continue working until the
next shift, petitioner instead of crediting them with eight hours of overtime work, has been
paying them for six hours only. NDC argued that the two hours corresponding to the mealtime
periods should not be included in computing compensation. On the other hand, National Textile
Christian V. Asas
Page 117
==============================================
Workers Union whose members are employed at the NDC, maintained the opposite view and
asked the Court of Industrial Relations to order the payment of additional overtime pay
corresponding to the mealtime periods.
ISSUE: Are mealtime breaks considered working time?
HELD: Yes. The legal working day for any person employed by another shall be of not more
than eight hours daily. When the work is not continuous, the time during which the laborer is not
working and can leave his working place and can rest completely shall not be counted. (Sec. 1,
Com. Act No. 444, as amended.)
It will be noted that, under the law, the idle time that an employee may spend for resting
and during which he may leave the spot or place of work though not the premises of his
employer, is not counted as working time only where the work is broken or is not continuous.
The determination as to whether work is continuous or not is mainly one of fact which We shall
not review as long as the same is supported by evidence. (Sec. 15, Com. Act No. 103, as
amended, Philippine Newspaper Guild v. Evening News, Inc., 86 Phil. 303).
That is why We brushed aside petitioner's contention in one case that workers who
worked under a 6 a.m. to 6 p.m. schedule had enough "free time" and therefore should not be
credited with four hours of overtime and held that the finding of the CIR "that claimants herein
rendered services to the Company from 6:00 a.m. to 6:00 p.m. including Sundays and
holidays, . . . implies either that they were not allowed to leave the spot of their working place, or
that they could not rest completely" (Luzon Stevedoring Co., Inc. v. Luzon Marine Department
Union, et al., G.R. No. L-9265, April 29, 1957).
Indeed, it has been said that no general rule can be laid down is to what constitutes
compensable work, rather the question is one of fact depending upon particular circumstances, to
be determined by the controverted in cases. (31 Am. Jurisdiction Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner company was continuous and
did not permit employees and laborers to rest completely is not without basis in evidence and
following our earlier rulings, shall not disturb the same. Thus, the CIR found:
While it may be correct to say that it is well-high impossible for an employee to work
while he is eating, yet under Section 1 of Com. Act No. 444 such a time for eating can be
segregated or deducted from his work, if the same is continuous and the employee can leave his
working place rest completely. The time cards show that the work was continuous and without
interruption. There is also the evidence adduced by the petitioner that the pertinent employees
can freely leave their working place nor rest completely. There is furthermore the aspect that
during the period covered the computation the work was on a 24-hour basis and previously stated
divided into shifts.
Christian V. Asas
Page 118
==============================================
From these facts, the CIR correctly concluded that work in petitioner company was
continuous and therefore the mealtime breaks should be counted as working time for purposes of
overtime compensation.
iii. On call
Sec. 5(b), Rule I, Book III, Omnibus Rules
Sime Darby Philippines, Inc. vs. NLRC, G.R. No. 119205, April 15, 1998, Bellosillo, J.
ISSUE: Is the change in the work schedule and discontinuance of the 30-minute paid "on call"
lunch break proper?
HELD: Yes. The right to fix the work schedules of the employees rests principally on their
employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the
efficient conduct of its business operations and its improved production. It rationalizes that while
the old work schedule included a 30-minute paid lunch break, the employees could be called
upon to do jobs during that period as they were "on call." Even if denominated as lunch break,
this period could very well be considered as working time because the factory employees were
required to work if necessary and were paid accordingly for working. With the new work
schedule, the employees are now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break, the employees can freely and
effectively use this hour not only for eating but also for their rest and comfort which are
conducive to more efficiency and better performance in their work. Since the employees are no
longer required to work during this one-hour lunch break, there is no more need for them to be
compensated for this period. We agree with the Labor Arbiter that the new work schedule fully
complies with the daily work period of eight (8) hours without violating the Labor
Code. Besides, the new schedule applies to all employees in the factory similarly situated
whether they are union members or not.
Coca-Cola Bottlers, Inc. vs. Climaco, G.R. No. 146881, February 5, 2007, Azcuna, J.
FACTS: Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola
Bottlers Phils., Inc. by virtue of a Retainer Agreement.
ISSUE: Is Dr. Climaco a regular employee?
HELD: No. The Court agrees with the finding of the Labor Arbiter and the NLRC that the
circumstances of this case show that no employer-employee relationship exists between the
parties. The Labor Arbiter and the NLRC correctly found that petitioner company lacked the
power of control over the performance by respondent of his duties. The Labor Arbiter reasoned
that the Comprehensive Medical Plan, which contains the respondent’s objectives, duties and
obligations, does not tell respondent "how to conduct his physical examination, how to
Christian V. Asas
Page 119
==============================================
immunize, or how to diagnose and treat his patients, employees of [petitioner] company, in each
case."
The Labor Arbiter held that petitioner company, through the Comprehensive Medical
Plan, provided guidelines merely to ensure that the end result was achieved, but did not control
the means and methods by which respondent performed his assigned tasks. The NLRC affirmed
the findings of the Labor Arbiter and stated that it is precisely because the company lacks the
power of control that the contract provides that respondent shall be directly responsible to the
employee concerned and their dependents for any injury, harm or damage caused through
professional negligence, incompetence or other valid causes of action.
The Labor Arbiter also correctly found that the provision in the Retainer Agreement that
respondent was on call during emergency cases did not make him a regular employee. He
explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the day and
night makes him a regular employee is off-tangent. Complainant does not dispute the fact that
outside of the two (2) hours that he is required to be at respondent company’s premises, he is not
at all further required to just sit around in the premises and wait for an emergency to occur so as
to enable him from using such hours for his own benefit and advantage. In fact, complainant
maintains his own private clinic attending to his private practice in the city, where he services his
patients, bills them accordingly -- and if it is an employee of respondent company who is
attended to by him for special treatment that needs hospitalization or operation, this is subject to
a special billing. More often than not, an employee is required to stay in the employer’s
workplace or proximately close thereto that he cannot utilize his time effectively and gainfully
for his own purpose. Such is not the prevailing situation here.
In addition, the Court finds that the schedule of work and the requirement to be on call
for emergency cases do not amount to such control, but are necessary incidents to the
Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not
wield the sole power of dismissal or termination.
Opulencia Ice Plant & Storage vs. NLRC, G.R. No. L-98368, December 15, 1993, Bellosillo,
J.
FACTS: Manuel P. Esita was for twenty (20) years a compressor operator of Tiongson Ice Plant
in San Pablo City. In 1980 he was hired as compressor operator-mechanic for the ice plants of
petitioner Dr. Melchor Opulencia located in Tanauan, Batangas, and Calamba, Laguna. Initially
assigned at the ice plant in Tanauan, Esita would work from seven o'clock in the morning to five
o'clock in the afternoon receiving a daily wage of P35.00. In 1986, Esita was transferred to the
ice plant in Calamba, which was then undergoing overhauling, taking the place of compressor
Christian V. Asas
Page 120
==============================================
operator Lorenzo Eseta, who was relieved because he was already old and weak. For less than a
month, Esita helped in the construction-remodeling of Dr. Opulencia's house. For demanding the
correct amount of wages due him, Esita was dismissed from service. One of the issues that boils
down is the existence of employer-employee relationship. The petitioners point out that even
granting arguendo that Esita was indeed a mechanic, he could never be a regular employee
because his presence would be required only when there was a need for repair.
ISSUE: Is the argument of petitioners correct?
HELD: No. This circumstance cannot affect the regular status of employment of Esita. An
employee who is required to remain on call in the employer's premises or so close thereto that he
cannot use the time effectively and gainfully for his own purpose shall be considered as working
while on call. In sum, the determination of regular and casual employment is not affected by the
fact that the employee's regular presence in the place of work is not required, the more
significant consideration being that the work of the employee is usually necessary or desirable in
the business of the employer. More importantly, Esita worked for 9 years and, under the Labor
Code, "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 that activity in
which he is employed . . . ."
iv. Assembly time
Arica vs. NLRC, G.R. No. 78210, February 28, 1989, Paras, J.
FACTS: The preliminary activities in the assembly area are as follows: (a.) First there is the
roll call. This is followed by getting their individual work assignments from the foreman; (b.)
Thereafter, they are individually required to accomplish the Laborer's Daily Accomplishment
Report during which they are often made to explain about their reported accomplishment the
following day; (c.) Then they go to the stockroom to get the working materials, tools and
equipment; and (d.) Lastly, they travel to the field bringing with them their tools, equipment and
materials. All these activities take 30 minutes to accomplish.
ISSUE: Is the assembly time compensable?
HELD: No. Respondent avers that the instant complaint is not new, the very same claim having
been brought against herein respondent by the same group of rank and file employees in the case
of Associated Labor Union and Standard Fruit Corporation which was filed way back April 27,
1976 when ALU was the bargaining agent of respondent's rank and file workers. The said case
involved a claim for "waiting time", as the complainants purportedly were required to assemble
at a designated area at least 30 minutes prior to the start of their scheduled working hours "to
ascertain the work force available for the day by means of a roll call, for the purpose of
assignment or reassignment of employees to such areas in the plantation where they are most
needed."
Christian V. Asas
Page 121
==============================================
Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited
case (Associated Labor Union vs. Standard (Phil.) Fruit Corporation where significant findings
of facts and conclusions had already been made on the matter.
The Minister of Labor held: The thirty (30)-minute assembly time long practiced and
institutionalized by mutual consent of the parties under Article IV, Section 3, of the Collective
Bargaining Agreement cannot be considered as waiting time within the purview of Section 5,
Rule I, Book III of the Rules and Regulations Implementing the Labor Code. ... Furthermore, the
thirty (30)-minute assembly is a deeply- rooted, routinary practice of the employees, and the
proceedings attendant thereto are not infected with complexities as to deprive the workers the
time to attend to other personal pursuits. They are not new employees as to require the company
to deliver long briefings regarding their respective work assignments. Their houses are situated
right on the area where the farm are located, such that after the roll call, which does not
necessarily require the personal presence, they can go back to their houses to attend to some
chores. In short, they are not subject to the absolute control of the company during this period,
otherwise, their failure to report in the assembly time would justify the company to impose
disciplinary measures. The CBA does not contain any provision to this effect; the record is also
bare of any proof on this point. This, therefore, demonstrates the indubitable fact that the thirty
(30)-minute assembly time was not primarily intended for the interests of the employer, but
ultimately for the employees to indicate their availability or non-availability for work during
every working day.
v. Commuting time, travel time at lectures, seminars, etc.
Sec. 6, Rule I, Book III, Omnibus Rules
vi. Semestral break
University of Pangasinan Faculty Union vs. University of Pangasinan, G.R. No. L-63122,
February 20, 1984, Gutierrez, J.
ISSUE: Are the faculty members entitled to ECOLA during semestral breaks?
HELD: Yes. It is beyond dispute that the petitioner’s members are full-time employees
receiving their monthly salaries irrespective of the number of working days or teaching hours in
a month. However, they find themselves in a most peculiar situation whereby they are forced to
go on leave during semestral breaks. These semestral breaks are in the nature of work
interruptions beyond the employees’ control. The duration of the semestral break varies from
year to year dependent on a variety of circumstances affecting at times only the private
respondent but at other times all educational institutions in the country. As such, these breaks
cannot be considered as absences within the meaning of the law for which deductions may be
made from monthly allowances. The "No work, no pay" principle does not apply in the instant
Christian V. Asas
Page 122
==============================================
case. The petitioner’s members received their regular salaries during this period. It is clear from
the aforequoted provision of law that it contemplates a "no work" situation where the employees
voluntarily absent themselves. Petitioners, in the case at bar, certainly do not, ad voluntatem,
absent themselves during semestral breaks. Rather, they are constrained to take mandatory leave
from work. For this they cannot be faulted nor can they be begrudged that which is due them
under the law. To a certain extent, the private respondent can specify dates when no classes
would be held. Surely, it was not the intention of the framers of the law to allow employers to
withhold employee benefits by the simple expedient of unilaterally imposing "no work" days and
consequently avoiding compliance with the mandate of the law for those days.
It is evident that the intention of the law is to grant ECOLA upon the payment of basic
wages. Hence, we have the principle of "No pay, no ECOLA" the converse of which finds
application in the case at bar. Petitioners cannot be considered to be on leave without pay so as
not to be entitled to ECOLA, for, as earlier stated, the petitioners were paid their wages in full for
the months of November and December of 1981, notwithstanding the intervening semestral
break. This, in itself, is a tacit recognition of the rather unusual state of affairs in which teachers
find themselves. Although said to be on forced leave, professors and teachers are, nevertheless,
burdened with the task of working during a period of time supposedly available for rest and
private matters. There are papers to correct, students to evaluate, deadlines to meet, and periods
within which to submit grading reports. Although they may be considered by the respondent to
be on leave, the semestral break could not be used effectively for the teacher’s own purposes for
the nature of a teacher’s job imposes upon him further duties which must be done during the said
period of time. Learning is a never ending process. Teachers and professors must keep abreast of
developments all the time. Teachers cannot also wait for the opening of the next semester to
begin their work. Arduous preparation is necessary for the delicate task of educating our
children. Teaching involves not only an application of skill and an imparting of knowledge, but a
responsibility which entails self dedication and sacrifice. The task of teaching ends not with the
perceptible efforts of the petitioner’s members but goes beyond the classroom: a continuum
where only the visible labor is relieved by academic intermissions. It would be most unfair for
the private respondent to consider these teachers as employees on leave without pay to suit its
purposes and, yet, in the meantime, continue availing of their services as they prepare for the
next semester or complete all of the last semester’s requirements. Furthermore, we may also by
analogy apply the principle enunciated in the Omnibus Rules Implementing the Labor Code to
wit:
Sec. 4. Principles in Determining Hours Worked. — The following general principles

shall govern in determining whether the time spent by an employee is considered hours worked
for purposes of this Rule:
x x x
"(d) The time during which an employee is inactive by reason of interruptions in his
work beyond his control shall be considered time either if the imminence of the resumption of
work requires the employee’s presence at the place of work or if the interval is too brief to be
utilized effectively and gainfully in the employee’s own interest."
Christian V. Asas
Page 123
==============================================
The petitioner’s members in the case at bar, are exactly in such a situation. The semestral
break scheduled is an interruption beyond petitioner’s control and it cannot be used "effectively
nor gainfully in the employee’s interest’. Thus, the semestral break may also be considered as
"hours worked." For this, the teachers are paid regular salaries and, for this, they should be
entitled to ECOLA. Not only do the teachers continue to work during this short recess but much
less do they cease to live for which the cost of living allowance is intended. The legal principles
of "No work, no pay; No pay, no ECOLA" must necessarily give way to the purpose of the law
to augment the income of employees to enable them to cope with the harsh living conditions
brought about by inflation; and to protect employees and their wages against the ravages brought
by these conditions. Significantly, it is the commitment of the State to protect labor and to
provide means by which the difficulties faced by the working force may best be alleviated. To
submit to the respondents’ interpretation of the no work, no pay policy is to defeat this noble
purpose. The Constitution and the law mandate otherwise.
vii. Power interruptions/brownout
DOLE Policy Instruction No. 36 (see Durabuilt Recapping Plant &

Company vs. NLRC)
Durabuilt Recapping Plant & Company vs. NLRC, G.R. No. 76746, July 27, 1987,
Gutierrez, J.
FACTS: To alleviate the situation, the government thru the Ministry of Trade and Industry
called on the industrial sector to resort to the so-called Voluntary Loan Curtailment Plan (or
VLCP), whereby brownouts or electrical power interruption was scheduled by area. The program
while it may have been called “voluntary" was not so as electrical power consumers had no
choice then due to the prevailing energy crisis.
ISSUE: Is the period during power interruption compensable?
HELD: It depends. Moreover, as early as May 1978, the Ministry of Labor and Employment,
thru Policy Instruction No. 36, has said that — 2. Brownouts running for more than twenty
minutes may not be treated as hours worked provided that any of the following conditions are
present; (a.) The employees can leave their work place or go elsewhere whether within or
without the work premises; or (b.) The employees can use the time effectively for their own
interest.
viii. Exceptions to 8-hour rule (Art. 89)
ix. Compressed work week
DOLE Advisory No. 02, December 2, 2004

Christian V. Asas
Page 124
==============================================
x. Flexible schedule for solo parents
R.A. No. 8972 (Solo Parents Act of 2000)
Section 3. Definition of Terms. - Whenever used in this Act, the following terms shall mean as
follows:
(a) "Solo parent" - any individual who falls under any of the following categories:
(1) A woman who gives birth as a result of rape and other crimes against chastity
even without a final conviction of the offender: Provided, That the mother keeps
and raises the child;
(2) Parent left solo or alone with the responsibility of parenthood due to death of
spouse;
(3) Parent left solo or alone with the responsibility of parenthood while the spouse
is detained or is serving sentence for a criminal conviction for at least one (1)
year;
(4) Parent left solo or alone with the responsibility of parenthood due to physical
and/or mental incapacity of spouse as certified by a public medical practitioner;
(5) Parent left solo or alone with the responsibility of parenthood due to legal
separation or de facto separation from spouse for at least one (1) year, as long as
he/she is entrusted with the custody of the children;
(6) Parent left solo or alone with the responsibility of parenthood due to
declaration of nullity or annulment of marriage as decreed by a court or by a
church as long as he/she is entrusted with the custody of the children;
(7) Parent left solo or alone with the responsibility of parenthood due to
abandonment of spouse for at least one (1) year;
(8) Unmarried mother/father who has preferred to keep and rear her/his
child/children instead of having others care for them or give them up to a welfare
institution;
(9) Any other person who solely provides parental care and support to a child or
children;
Christian V. Asas
Page 125
==============================================
(10) Any family member who assumes the responsibility of head of family as a
result of the death, abandonment, disappearance or prolonged absence of the
parents or solo parent.
A change in the status or circumstance of the parent claiming benefits under this
Act, such that he/she is no longer left alone with the responsibility of parenthood,
shall terminate his/her eligibility for these benefits.
(e) "Flexible work schedule" - is the right granted to a solo parent employee to vary
his/her arrival and departure time without affecting the core work hours as defined by
the employer.
Section 6. Flexible Work Schedule. - The employer shall provide for a flexible working
schedule for solo parents: Provided, That the same shall not affect individual and company
productivity: Provided, further, That any employer may request exemption from the above
requirements from the DOLE on certain meritorious grounds.
xi. Meal break, Coffee break (Art. 85) (see PAL vs. Garcia
below)
Sec. 7, Rule I, Book III, Omnibus Rules (see PAL vs. Garcia below)
PAL vs. NLRC, G.R. No. 132805, February 2, 1999, Puno, J.
FACTS: Dr. Herminio A. Fabros was employed as flight surgeon at PAL. He was assigned at
the PAL Medical Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00
midnight. On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic
to have his dinner at his residence, which was about five-minute drive away. A few minutes later,
the clinic received an emergency call from the PAL Cargo Services. One of its employees, Mr.
Manuel Acosta, had suffered a heart attack. The nurse on duty, Mr. Merlino Eusebio, called
private respondent at home to inform him of the emergency. The patient arrived at the clinic at
7:50 in the evening and Mr. Eusebio immediately rushed him to the hospital. When private
respondent reached the clinic at around 7:51 in the evening, Mr. Eusebio had already left with the
patient. Mr. Acosta died the following day.
Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon
ordered the Chief Flight Surgeon to conduct an investigation. The Chief Flight Surgeon, in turn,
required Fabros to explain why no disciplinary sanction should be taken against him. In his
explanation, Fabros asserted that he was entitled to a thirty-minute meal break.
ISSUE: Is Fabros’ assertion correct?
HELD: Yes. Arts. 83 and 85 of the Labor Code read:

Christian V. Asas
Page 126
==============================================
Art. 83. Normal hours of work. — The normal hours of work of any employee shall not
exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100) shall
hold regular office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for
meals, except where the exigencies of the service require that such personnel work for six (6)
days or forty-eight (48) hours, in which case they shall be entitled to an additional compensation
of at least thirty per cent (30%) of their regular wage for work on the sixth day. For purposes of
this Article, "health personnel" shall include: resident physicians, nurses, nutritionists, dieticians,
pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists,
midwives, attendants and all other hospital or clinic personnel.
Art. 85. Meal periods. — Subject to such regulations as the Secretary of Labor may
prescribe, it shall be the duty of every employer to give his employees not less than sixty (60)
minutes time-off for their regular meals.
Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further
states:
Sec. 7. Meal and Rest Periods. — Every employer shall give his employees, regardless of
sex, not less than one (1) hour time-off for regular meals, except in the following cases when a
meal period of not less than twenty (20) minutes may be given by the employer provided that
such shorter meal period is credited as compensable hours worked of the employee;
(a) Where the work is non-manual work in nature or does not involve strenuous physical
exertion;
(b) Where the establishment regularly operates not less than sixteen hours a day;
(c) In cases of actual or impending emergencies or there is urgent work to be performed

on machineries, equipment or installations to avoid serious loss which the employer would
otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods.
Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be
considered as compensable working time.
Thus, the eight-hour work period does not include the meal break. Nowhere in the law
may it be inferred that employees must take their meals within the company premises.
Employees are not prohibited from going out of the premises as long as they return to their posts
Christian V. Asas
Page 127
==============================================
on time. Private respondent's act, therefore, of going home to take his dinner does not constitute
abandonment.
xii. Rest period
Sec. 7, Rule I, Book III, Omnibus Rules (see PAL vs. Garcia above)
Sec. 2(c), DOLE D.O. No. 118-12
Rest day of 24 consecutive hours for every six (6) consecutive working days. If the
driver/conductor is required to work on a rest day, he/she shall be paid an additional premium
pay of 30% of the basic wage. If the driver/conductor is required to work on special days under
R.A. No. 9849, he/she shall also be paid an additional pay of 30% of the basic wage. Whenever
work is performed on a rest day, which happens also to be a special day, he is entitled to
additional 50% of the basic wage.
Sec. 3, DOLE D.O. No. 118-12
Hours of work and hours of rest. The normal hours of a driver and conductor shall not
exceed eight (8) hours a day.
If the driver/conductor is required to work overtime, the maximum hours of work shall
not exceed twelve (12) hours in any 24-hour period, subject to the overriding safety and
operational conditions of the public utility bus.
Drivers and conductors shall be entitled to rest periods of at least one (1) hour, exclusive
of meal breaks, within a 12-hour shift.
Section 20. Daily Rest Period. – The domestic worker shall be entitled to an aggregate
daily rest period of eight (8) hours per day.
Section 21. Weekly Rest Period. – The domestic worker shall be entitled to at least
twenty-four (24) consecutive hours of rest in a week. The employer and the domestic worker
shall agree in writing on the schedule of the weekly rest day of the domestic
worker: Provided, That the employer shall respect the preference of the domestic worker as to
the weekly rest day when such preference is based on religious grounds. Nothing in this
provision shall deprive the domestic worker and the employer from agreeing to the following: (a)
Offsetting a day of absence with a particular rest day; (b) Waiving a particular rest day in return
for an equivalent daily rate of pay; (c) Accumulating rest days not exceeding five (5) days; or (d)
Other similar arrangements.
xiii. Overtime (Art. 87)

Christian V. Asas
Page 128
==============================================
a. Teachers
Letran Calamba Faculty & Employees Association vs. NLRC, G.R. No. 156225, January
29, 2008, Austria-Martinez, J.
FACTS: Letran Calamba Faculty and Employees Association against Colegio de San Juan de
Letran, Calamba, Inc. for collection of various monetary claims due its members. One of their
allegations is that, in the computation of the thirteenth month pay of its academic personnel,
respondent does not include as basis therefor their compensation for overloads. It only takes into
account the pay the faculty members receive for their teaching loads not exceeding eighteen (18)
units. The teaching overloads are rendered within eight (8) hours a day.
ISSUE: Whether or not the teachers’ overload shall be included in the computation of the 13 th
moth pay.
HELD: Yes. Overload on the other hand means "the load in excess of the normal load of
private school teachers as prescribed by the Department of Education, Culture and Sports
(DECS) or the policies, rules and standards of particular private schools." In recognition of the
peculiarities of the teaching profession, existing DECS and School Policies and Regulations for
different levels of instructions prescribe a regular teaching load, the total actual teaching or
classroom hours of which a teacher can generally perform in less than eight (8) hours per
working day. This is because teaching may also require the teacher to do additional work such as
handling an advisory class, preparation of lesson plans and teaching aids, evaluation of students
and other related activities. Where, however a teacher is engaged to undertake actual additional
teaching work after completing his/her regular teaching load, such additional work is generally
referred to as overload. In short, additional work in excess of the regular teaching load is
overload work. Regular teaching load and overload work, if any, may constitute a teacher's
working day.
Where a teacher is required to perform such overload within the eight (8) hours
normal working day, such overload compensation shall be considered part of the basic pay
for the purpose of computing the teacher's 13th-month pay. "Overload work" is sometimes
misunderstood as synonymous to "overtime work" as this term is used and understood in the
Labor Code. These two terms are not the same because overtime work is work rendered in excess
of normal working hours of eight in a day (Art. 87, Labor Code). Considering that overload work
may be performed either within or outside eight hours in a day, overload work may or may not
be overtime work.
b. Work on weekend/undertime
Caltex Regular Employees vs. Caltex, G.R. No. 113359, August 15, 1995, Feliciano, J.
Christian V. Asas
Page 129
==============================================
Doctrine. Overtime work consists of hours worked on a given day in excess of the
applicable work period, which here is eight (8) hours. It is not enough that the hours worked fall
on disagreeable or inconvenient hours. In order that work may be considered as overtime work,
the hours worked must be in excess of and in addition to the eight (8) hours worked during the
prescribed daily work period, or the forty (40) hours worked during the regular work week
Monday thru Friday.
In the present case, under the 1985 CBA, hours worked on a Saturday do not, by that fact
alone, necessarily constitute overtime work compensable at premium rates of pay, contrary to
petitioner's assertion. These are normal or regular work hours, compensable at regular rates of
pay, as provided in the 1985 CBA; under that CBA, Saturday is not a rest day or a "day off". It is
only when an employee has been required on a Saturday to render work in excess of the forty
(40) hours which constitute the regular work week that such employee may be considered as
performing overtime work on that Saturday. We consider that the statutory prohibition against
offsetting undertime one day with overtime another day has no application in the case at bar.
Petitioner's counsel, in his final attempt to lay a basis for compelling private respondent
to pay premium rates of pay for all hours worked on a Saturday, regardless of the number of
hours actually worked earlier during the week, i.e., on Monday to Friday, insists that private
respondent cannot require its employees to complete the 40-hour regular work week on a
Saturday, after it has allowed its employees to render only 37-1/2 hours of work.
The company practice of allowing employees to leave thirty (30) minutes earlier than the
scheduled off-time had been established primarily for the convenience of the employees most of
whom have had to commute from work place to home and in order that they may avoid the
heavy rush hour vehicular traffic. There is no allegation here by petitioner Union that such
practice was resorted to by Caltex in order to escape its contractual obligations. This practice,
while it effectively reduced to 37-1/2 the number of hours actually worked by employees who
had opted to leave ahead of off-time, is not be construed as modifying the other terms of the
1985 CBA. As correctly pointed out by private respondent, the shortened work period did not
result in likewise shortening the work required for purposes of determining overtime pay, as well
as for purposes of determining premium pay for work beyond forty (40) hours within the
calendar week. It follows that an employee is entitled to be paid premium rates, whether for work
in excess of eight (8) hours on any given day, or for work beyond the forty (40)-hour requirement
for the calendar week, only when the employee had, in fact already rendered the requisite
number of hours — 8 or 40 — prescribed in the 1985 CBA.
c. Seafarers
Legahi vs. NLRC, G.R. No. 122240, November 18, 1999, Kapunan, J. (*This was asked in
the 2016 Jurist Mock Bar Examination)
ISSUE: Are seafarers entitled to overtime pay?

Christian V. Asas
Page 130
==============================================
HELD: Yes, provided they actually rendered overtime work. We already resolved the question
of overtime pay of worker aboard a vessel in the case of National Shipyards and Steel
Corporation v. CIR (3 SCRA 890). We ruled: We cannot agree with the Court below that
respondent Malondras should be paid overtime compensation for every hour in excess of the
regular working hours that he was on board his vessel or barge each day, irrespective of whether
or not he actually put in work during those hours. Seamen are required to stay on board their
vessels by the very nature of their duties, and it is for this reason that, in addition to their regular
compensation, they are given free living quarters and subsistence allowances when required to be
on board. It could not have been the purpose of our law to require their employers to pay them
overtime even when they are not actually working; otherwise, every sailor on board a vessel
would be entitled to overtime for sixteen hours each a day, even if he spent all those hours
resting or sleeping in his bunk, after his regular tour of duty. The correct criterion in determining
whether or not sailors are entitled to overtime pay is not, therefore, whether they were on board
and cannot leave ship beyond the regular eight working hours a day, but whether they actually
rendered service in excess of said number of hours.
d. Evidence/Required proof
Pigcaulan vs. Security & Credit, G.R. No. 173648, January 16, 2012, Del Castillo, J.
Doctrine. The handwritten itemized computations are self-serving, unreliable and

unsubstantial evidence to sustain the grant of salary differentials, particularly overtime pay.
Unsigned and unauthenticated as they are, there is no way of verifying the truth of the
handwritten entries stated therein. Written only in pieces of paper and solely prepared by Canoy
and Pigcaulan, these representative daily time records, as termed by the Labor Arbiter, can hardly
be considered as competent evidence to be used as basis to prove that the two were underpaid of
their salaries. We find nothing in the records which could substantially support Pigcaulan’s
contention that he had rendered service beyond eight hours to entitle him to overtime pay and
during Sundays to entitle him to restday pay. Hence, in the absence of any concrete proof that
additional service beyond the normal working hours and days had indeed been rendered, we
cannot affirm the grant of overtime pay to Pigcaulan.
Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he
does not work. Likewise, express provision of the law entitles him to service incentive leave
benefit for he rendered service for more than a year already. Furthermore, under Presidential
Decree No. 851, he should be paid his 13th month pay. As employer, SCII has the burden of
proving that it has paid these benefits to its employees.
SCII presented payroll listings and transmittal letters to the bank to show that Canoy and
Pigcaulan received their salaries as well as benefits which it claimed are already integrated in the
employees’ monthly salaries. However, the documents presented do not prove SCII’s allegation.
SCII failed to show any other concrete proof by means of records, pertinent files or similar
Christian V. Asas
Page 131
==============================================
documents reflecting that the specific claims have been paid. With respect to 13th month pay,
SCII presented proof that this benefit was paid but only for the years 1998 and 1999. To repeat,
the burden of proving payment of these monetary claims rests on SCII, being the employer. It is
a rule that one who pleads payment has the burden of proving it. "Even when the plaintiff alleges
non-payment, still the general rule is that the burden rests on the defendant to prove payment,
rather than on the plaintiff to prove non-payment." Since SCII failed to provide convincing proof
that it has already settled the claims, Pigcaulan should be paid his holiday pay, service incentive
leave benefits and proportionate 13th month pay for the year 2000.
xiv. Undertime
xv. Night work (Art. 86, Labor Code; R.A. No. 10151; DOLE
D.O. No. 119-12)
R.A. No. 10151
This law governs employment of night workers amending certain provisions of the Labor
Code. DOLE D.O. No. 119-12 is the implementing rule. This law caused the renumbering of
Labor Code provisions.
"Article 154. Coverage. - This chapter' shall apply to all persons, who shall be employed
or permitted or suffered to work at night, except those employed in agriculture, stock raising,
fishing, maritime transport and inland navigation, during a period of not less than seven (7)
consecutive hours, including the interval from midnight to five o'clock in the morning, to be
determined by the Secretary of Labor and Employment, after consulting the workers'
representatives/labor organizations and employers.
“Night worker' means any employed person whose work requires performance of a
substantial number of hours of night work which exceeds a specified limit. This limit shall be
fixed by the Secretary of Labor after consulting the workers' representatives/labor organizations
and employers."
"Article 155. Health Assessment. - At their request, workers shall have the right to
undergo a health assessment without charge and to receive advice on how to reduce or avoid
health problems associated with their work:
"(a) Before taking up an assignment as a night worker;

"(b) At regular intervals during such an assignment; and
"(c) If they experience health problems during such, an assignment which are not caused
by factors other than the performance of night work.
Christian V. Asas
Page 132
==============================================
"With the exception of a finding of unfitness for night work, the findings of such
assessments shall not be transmitted to others without the workers' consent and shall not be used
to their detriment."
"Article 156. Mandatory Facilities. - Suitable first·aid facilities shall be made available
for workers performing night work, including arrangements where such workers, where
necessary, can be taken immediately to a place for appropriate treatment. The employers are
likewise required to provide safe and healthful working conditions and adequate or reasonable
facilities such as sleeping or resting quarters in the establishment and transportation from the
work premises to the nearest point of their residence subject to exceptions and guidelines to be
provided by the DOLE."
"Article 157. Transfer. - Night workers who are certified as unfit for night work, due to
health reasons, shall be transferred, whenever practicable, to a similar job for which they are fit
to work.
"If such transfer to a similar job is not practicable, these workers shall be granted the
same benefits as other workers who are unable to work, or to secure employment during such
period.
"A night worker certified as temporarily unfit for night work shall be given the same
protection against dismissal or notice of dismissal as other workers who are prevented from
working for reasons of health."
"Article 158. Women Night Workers. - Measures shall be taken to ensure that an
alternative to night work is available to women workers who would otherwise be called upon to
perform such work:
"(a) Before and after childbirth, for a period of at least sixteen (16) weeks, which shall be
divided between the time before and after childbirth;
"(b) For additional periods, in respect of winch a medical certificate IS produced stating
that said additional periods are necessary for the health of the mother or child:
"(1) During pregnancy;

"(2) During a specified time beyond the period, after childbirth is fixed pursuant
to subparagraph (a) above, the length of which shall be determined by the DOLE
after consulting the labor organizations and employers.
"During the periods referred to in this article:
"(i) A woman worker shall not be dismissed or given notice of dismissal,

except for just or authorized causes provided for in this Code that are not
connected with pregnancy, childbirth and childcare responsibilities.
Christian V. Asas
Page 133
==============================================
"(ii) A woman worker shall not lose the benefits regarding her status,
seniority, and access to promotion which may attach to her regular night
work position.
"Pregnant women and nursing mothers may be allowed to work .at night
only if a competent physician, other than the company physician, shall
certify their fitness to render night work, and specify, in the case of
pregnant employees, the period of the pregnancy that they can safely
work.
"The measures referred to in this article may include transfer to day work
where this is possible, the provision of social security benefits or an
extension of maternity leave.
"The provisions of this article shall not leave the effect of reducing the
protection and benefits connected with maternity leave under existing
laws."
"Article 159. Compensation. The compensation for night workers in the form of working
time, pay or similar benefits shall recognize the exceptional nature of night work."
"Article 160. Social Services. - Appropriate social services shall be provided for night
workers and, where necessary, for workers performing night work."
"Article 161. Night Work Schedules. - Before introducing work schedules requiring the
services of night workers, the employer shall consult the workers' representatives/labor
organizations concerned on the details of such schedules and the forms of organization of night
work that are best adapted to the establishment and its personnel, as well as on the occupational
health measures and social services which are required. In establishments employing night
workers, consultation shall take place regularly."
Section 8. Penalties. - Any violation of this Act, and the rules and regulations issued
pursuant hereof shall be punished with a fine of not less than Thirty thousand pesos (P30,000.00)
nor more than Fifty thousand pesos (P50,000.00) or imprisonment of not less than six (6)
months, or both, at the discretion of the court. If the offense is committed by a corporation, trust,
firm, partnership at association, or other entity, the penalty shall be imposed upon the guilty
officer or officers of such corporation, trust, firm, partnership or association, or entity.
a. Rationale
Association of International Shipping Lines, Inc. vs. United Harbors’ Pilot Association,
G.R. No. 172029, August 6, 2008, Reyes, R.T., J.
Christian V. Asas
Page 134
==============================================
Doctrine. It bears pointing out that additional compensation for nighttime work is
founded on public policy. Working at night is violative of the law of nature for it is the period for
rest and sleep. An employee who works at night has less stamina and vigor. Thus, he can easily
contract disease. The lack of sunlight tends to produce anemia and tuberculosis and predispose
him to other ills. Night work brings increased liability to eyestrain and accident. Serious moral
dangers also are likely to result from the necessity of traveling the street alone at night, and from
the interference with normal home life. Hygienic, medical, moral, cultural and socio-biological
reasons are in accord that night work has many inconveniences and when there is no alternative
but to perform it, it is but just that the laborer should earn greater salary than ordinary work so as
to compensate the laborer to some extent for the said inconveniences.
Anent the payment of overtime pay, the Court explained its rationale in Philippine
National Bank v. Philippine National Bank Employees Association (PEMA):
x x x Why is a laborer or employee who works beyond the regular hours of work entitled
to extra compensation called in this enlightened time, overtime pay? Verily, there can be no other
reason than that he is made to work longer than what is commensurate with his agreed
compensation for the statutorily fixed or voluntarily agreed hours of labor he is supposed to do.
When he thus spends additional time to his work, the effect upon him is multi-faceted: he puts in
more effort, physical and/or mental; he is delayed in going home to his family to enjoy the
comforts thereof; he might have no time for relaxation, amusement or sports; he might miss
important pre-arranged engagements; etc., etc. It is thus the additional work, labor or service
employed and the adverse effects just mentioned of his longer stay in his place of work that
justify and is the real reason for the extra compensation that he called overtime pay.
Overtime work is actually the lengthening of hours developed to the interests of the
employer and the requirements of his enterprise. It follows that the wage or salary to be received
must likewise be increased, and more than that, a special additional amount must be added to
serve either as encouragement or inducement or to make up for the things he loses which we
have already referred to. And on this score, it must always be borne in mind that wage is
indisputably intended as payment for work done or services rendered.
b. Seafarers
Dacut vs. CA, G.R. No. 169434, March 28, 2008, Quisumbing, J.
Doctrine. Apropos the monetary claims, there is insufficient evidence to prove

petitioners’ entitlement thereto. As crew members, petitioners were required to stay on board the
vessel by the very nature of their duties, and it is for this reason that, in addition to their regular
compensation, they are given free living quarters and subsistence allowances when required to be
on board. It could not have been the purpose of our law to require their employers to give them
overtime pay or night shift differential, even when they are not actually working. Thus, the
correct criterion in determining whether they are entitled to overtime pay or night shift
differential is not whether they were on board and cannot leave ship beyond the regular eight
Christian V. Asas
Page 135
==============================================
working hours a day, but whether they actually rendered service in excess of said number of
hours. In this case, petitioners failed to submit sufficient proof that overtime and night shift work
were actually performed to entitle them to the corresponding pay.
xvi. No offsetting rule (Art. 88)
2. Chapter II, Arts. 91-96
a. Rest day (Art. 91)
b. Compulsory work on rest day (Art. 92, 93)
c. Regular holiday vs. special holiday (Art. 94)
Executive Order No. 203
E.O. No. 203 amended Art. 94 by adding National Heroes day in the list of regular/legal
holidays and removing the day designated by law for holding a general election (found in ATC
vs. CA)
Republic Act No. 9177
Section 2. Section 26, Chapter 7 of Executive Order No 292, otherwise known as the
Revised Administrative Code of 1987 is hereby amended to read as follows:
Sec. 26. Regular Holidays and Nationwide Special Days (1) Unless otherwise modified
by law, order or proclamation, the following regular holidays and special days shall observed in
the country.
a) Regular Holidays
New Year's Day - January 1
Maundy Thursday - Movable Date
Good Friday - Movable Date
Eidul Fitr - Movable Date
Araw ng Kagitingan
- April 9
(Bataan and Corregidor Day)
Labor Day - May 1
Independence Day - June 12
National Heroes Day - Last Sunday of August
Christian V. Asas
Page 136
==============================================
Bonifacio Day - November 30

Christmas Day - December 25
Rizal Day - December 30
b) Nationwide Special Holidays
All Saints Day - November 1
Last Day of the Year - December 31
Provided, however That Eidul Adha shall be celebrated as a regional holiday in

Autonomous Region in Muslim Mindanao."
Section 1. Ninoy Aquino Day. - In order to commemorate the death anniversary of

Former Senator Benigno "Ninoy" S. Aquino J., August twenty-one of every year is hereby
declared as the Ninoy Aquino Day which shall be a national nonworking holiday.
Section 2. Section 26, Chapter 7, Book I of Executive Order No. 292, otherwise known
as "The Administrative Code of 1987", as amended, is hereby amended to read as follows:
"SEC. 26. Regular Holidays and Nationwide Special Days. –
(1) Unless otherwise modified by law, order, or proclamation, the following regular
holidays and special days shall be observed in the country:
"(a) Regular Holidays

New Year's Day -January 1
Maundy Thursday - Movable Date
Good Friday - Movable Date
Eidul Fitr - Movable Date
Eidul Adha - Movable Date
Araw ng Kagitingan - Monday nearest April 9
(Bataan and Corregidor Day)
Labor Day - Monday nearest May 1
Independence Day - Monday nearest June 12
Christian V. Asas
Page 137
==============================================
National Heroes Day - Last Monday of August

Bonifacio Day - Monday nearest November 30
Christmas Day - December 25
Rizal Day - Monday nearest December 30
"(b) Nationwide Special Holidays
Ninoy Aquino Day - Monday nearest August 21
All Saints Day - November 1
Last Day of the Year - December 31
"(c) In the event the holiday falls on a Wednesday, the holiday will be observed on the
Monday of the week. If the holiday falls on a Sunday, the holiday will be observed on the
Monday that follows:
"Provided,That for movable holidays, the President shall issue a specific date shall be
declared as a nonworking day."
Proclamation No. 831 s 2014 – Proclamation declaring regular and special holidays for the year
2014. Chinese New Year is included as special holiday
a. Rationale/Entitlement; two regular holidays on one day
Asian Transmission Corp. (ATC) vs. CA, G.R. No. 144644, March 15, 2004, Carpio-
Morales, J.
FACTS: In 1993, two legal holidays i.e. Good Friday and Araw ng Kagitingan fell on the same
day (April 9, 1993). Hence, DOLE Usec. Cresenciano B. Trajano issued an Explanatory Bulletin
clarifying that employees are entitled to 200% of their basic wage on the said date. The said
bulletin was reproduced on January 23, 1998 considering that Maundy Thursday and Araw ng
Kagitingan also fell on the same date (April 9, 1998) on that year. Despite the bulletin, ATC paid
only its employees of 100% of their basic wage. Thus, Bisig ng Asian Transmission Labor
Union (BATLU) protested and pursuant to the CBA, the parties submitted the controversy to
voluntary arbitrator who ruled in favor of BATLU. The ruling of the voluntary arbitrator was
affirmed by the CA. Hence, the case reached the SC.
ISSUE: Whether or not the employees are entitled to 200% of their basic wage if two legal
holidays fall on the same date.
HELD: Yes. Holiday pay is a legislated benefit enacted as part of the Constitutional imperative
that the State shall afford protection to labor. Its purpose is not merely "to prevent diminution of
the monthly income of the workers on account of work interruptions. In other words, although
the worker is forced to take a rest, he earns what he should earn, that is, his holiday pay." It is
Christian V. Asas
Page 138
==============================================
also intended to enable the worker to participate in the national celebrations held during the days
identified as with great historical and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last
Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30) were declared
national holidays to afford Filipinos with a recurring opportunity to commemorate the heroism of
the Filipino people, promote national identity, and deepen the spirit of patriotism. Labor Day
(May 1) is a day traditionally reserved to celebrate the contributions of the working class to the
development of the nation, while the religious holidays designated in Executive Order No. 203
allow the worker to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the
enjoyment of ten paid regular holidays. The provision is mandatory, regardless of whether an
employee is paid on a monthly or daily basis. Unlike a bonus, which is a management
prerogative, holiday pay is a statutory benefit demandable under the law. Since a worker is
entitled to the enjoyment of ten paid regular holidays, the fact that two holidays fall on the same
date should not operate to reduce to nine the ten holiday pay benefits a worker is entitled to
receive.
It is elementary, under the rules of statutory construction, that when the language of the
law is clear and unequivocal, the law must be taken to mean exactly what it says. In the case at
bar, there is nothing in the law which provides or indicates that the entitlement to ten days of
holiday pay shall be reduced to nine when two holidays fall on the same day.
Petitioner’s assertion that Wellington v. Trajano has "overruled" the DOLE March 11,
1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthly-paid
employees are entitled to an additional day’s pay if a holiday falls on a Sunday. This Court, in
answering the issue in the negative, observed that in fixing the monthly salary of its employees,
Wellington took into account "every working day of the year including the holidays specified by
law and excluding only Sunday." In the instant case, the issue is whether daily-paid employees
are entitled to be paid for two regular holidays which fall on the same day.
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be
resolved in favor of labor. For the working man’s welfare should be the primordial and
paramount consideration. Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to
Implement the Labor Code provides that "Nothing in the law or the rules shall justify an
employer in withdrawing or reducing any benefits, supplements or payments for unworked
regular holidays as provided in existing individual or collective agreement or employer practice
or policy."
Moreover, in the CBA, ATC obligated itself to pay the legal holidays as required by law.
Christian V. Asas
Page 139
==============================================
*NOTE: If the employee worked on two holidays which coincided in one day, he is
entitled to 300% pay. Reason: 200% is for the two holidays and the 100% is for the actual work
on that day.
b. Teachers paid by hour
Jose Rizal College (JRC) vs. NLRC, G.R. No. L-65482, 156 SCRA 27, Paras, J.
FACTS: JRC has the following categories of employees: (a) personnel on monthly basis, who
receive their monthly salary uniformly throughout the year, irrespective of the actual number of
working days in a month without deduction for holidays; (b) personnel on daily basis who are
paid on actual days worked and they receive unworked holiday pay and (c) collegiate faculty
who are paid on the basis of student contract hour. Unable to receive their holiday pay in 1975
to 1977, National Alliance of Teachers and Office Workers filed a complaint before Minister of
Labor in behalf of faculty and personnel of JRC which was certified for compulsory arbitration.
The Labor Arbiter ruled that employees in category a and b are entitled to holiday pay but not the
faculty under category c. Upon appeal, the NLRC modified the decision saying that the faculty
shall be entitled to holiday pay.
ISSUE: Whether or not the faculty is entitled to holiday pay during special holiday.
HELD: Yes. Holiday pay is provided for under Article 94 of the Labor Code and in the IRR,
Rule IV, Book III which reads, “SEC. 8. Holiday pay of certain employees. — (a) Private school
teachers, including faculty members of colleges and universities, may not be paid for the regular
holidays during semestral vacations. They shall, however, be paid for the regular holidays during
Christmas vacations. . .” Under the these provisions, apparently, the petitioner, although a non-
profit institution is under obligation to give pay even on unworked regular holidays to hourly
paid faculty members subject to the terms and conditions provided for therein.
We believe that the aforementioned implementing rule is not justified by the provisions of
the law which after all is silent with respect to faculty members paid by the hour who because of
their teaching contracts are obliged to work and consent to be paid only for work actually done
(except when an emergency or a fortuitous event or a national need calls for the declaration of
special holidays). Regular holidays specified as such by law are known to both school and
faculty members as no class days;" certainly the latter do not expect payment for said unworked
days, and this was clearly in their minds when they entered into the teaching contracts.
On the other hand, both the law and the Implementing Rules governing holiday pay are
silent as to payment on Special Public Holidays. It is readily apparent that the declared purpose
of the holiday pay which is the prevention of diminution of the monthly income of the employees
on account of work interruptions is defeated when a regular class day is cancelled on account of
a special public holiday and class hours are held on another working day to make up for time lost
in the school calendar. Otherwise stated, the faculty member, although forced to take a rest, does
Christian V. Asas
Page 140
==============================================
not earn what he should earn on that day. Be it noted that when a special public holiday is
declared, the faculty member paid by the hour is deprived of expected income, and it does not
matter that the school calendar is extended in view of the days or hours lost, for their income that
could be earned from other sources is lost during the extended days. Similarly, when classes are
called off or shortened on account of typhoons, floods, rallies, and the like, these faculty
members must likewise be paid, whether or not extensions are ordered.
c. Muslim holidays
San Miguel Corp. (SMC) vs. CA, G.R. No. 146775, 375 SCRA 311, January 30, 2002,
Kapunan, J.
FACTS: DOLE Iligan District Office conducted a routine inspection in the premises of SMC in
Sta. Filomena, Iligan City and it was discovered that there was an underpayment of Muslim
holidays to its employees; the result of which was sent to Personnel Officer Elena dela Puerta.
SMC contested the findings; hence, DOLE conducted summary hearings. Still, SMC failed to
submit proof that it was paying its employees for holiday pay on Muslim holidays prompting
Director Macaraya to issue a compliance order. SMC appealed to DOLE Manila but the latter
dismissed the same initially on technicality (late appeal) and later on for lack of merit.
ISSUE: Whether or not holiday pay on Muslim holidays is applicable even to non-Muslims in
the area covered by its observance.
HELD: Yes. Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of
Presidential Decree No. 1083. Article 169 enumerates the Muslim holidays as follows: (a)
‘Amun Jadīd (New Year), which falls on the first day of the first lunar month of Muharram; (b)
Maulid-un-Nabī (Birthday of the Prophet Muhammad), which falls on the twelfth day of the
third lunar month of Rabi-ul-Awwal; (c) Lailatul Isrā Wal Mi’rāj (Nocturnal Journey and
Ascension of the Prophet Muhammad), which falls on the twenty-seventh day of the seventh
lunar month of Rajab; (d) ‘Īd-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth
lunar month of Shawwal, commemorating the end of the fasting season; and (e) ‘Īd-ūl-Adhā
(Hari Raya Haji),which falls on the tenth day of the twelfth lunar month of Dhū’l-Hijja. Article
170 provides, “(1) Muslim holidays shall be officially observed in the Provinces of Basilan,
Lanao del Norte, Lanao del Sur, Maguindanao, North Cotabato, Iligan, Marawi, Pagadian, and
Zamboanga and in such other Muslim provinces and cities as may hereafter be created; (2) Upon
proclamation by the President of the Philippines, Muslim holidays may also be officially
observed in other provinces and cities.” These provisions shall be read in relation to Article 94
of the Labor Code.
Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that "(t)he
provisions of this Code shall be applicable only to Muslims x x x." However, there should be no
distinction between Muslims and non-Muslims as regards payment of benefits for Muslim
holidays. The Court of Appeals did not err in sustaining Undersecretary Español who stated:
Christian V. Asas
Page 141
==============================================
Assuming arguendo that the respondent’s position is correct, then by the same token, Muslims
throughout the Philippines are also not entitled to holiday pays on Christian holidays declared by
law as regular holidays. We must remind the respondent-appellant that wages and other
emoluments granted by law to the working man are determined on the basis of the criteria laid
down by laws and certainly not on the basis of the worker’s faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that "x x x nothing
herein shall be construed to operate to the prejudice of a non-Muslim." In addition, the 1999
Handbook on Workers’ Statutory Benefits, approved by then DOLE Secretary Bienvenido E.
Laguesma on 14 December 1999 categorically stated: Considering that all private corporations,
offices, agencies, and entities or establishments operating within the designated Muslim
provinces and cities are required to observe Muslim holidays, both Muslim and Christians
working within the Muslim areas may not report for work on the days designated by law as
Muslim holidays.
d. Service Incentive Leave (Art. 95); Vacation and Sick Leave
i. When demandable; commutation
Fernandez vs. NLRC, G.R. No. 105892, January 28, 1998, Panganiban, J.
FACTS: Petitioners herein Fernandez et al. filed a consolidated complaint against Agencia
Cebuana-H. Lhuillier and/or Margueritte Lhuillier for illegal dismissal before the Regional
Arbitration Branch. Petitioners alleged that they demanded for a salary increase considering that
the business of Lhuillier was making good and was evading payment of taxes by making false
entries in the records of accounts. Lhuillier became angry and threatened them that something
would happen in their employment if they reported her to the BIR and if they joined ALU or
Association of Labor Union. Thereafter, they were informed not to report for work as they had
been terminated. The Labor Arbiter ruled in petitioners favor and part of the award is the
accumulated service incentive leave of the employees based on their length of tenure ranging
from 6 years to 33 years. Upon appeal to the NLRC, the latter reversed the Labor Arbiter.
Hence, the case reached the SC via petition for certiorari. Though recommending for the
reinstatement of the Labor Arbiter’s decision, the Solicitor General argued that the award for SIL
shall be limited to 3 years only pursuant to Art. 291 of the Labor Code which provides, “All
money claims arising from employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of action accrued; otherwise
they shall be forever barred.”
ISSUE: Whether or not the computation of the SIL is limited only to 3 years.
HELD: No. The clear policy of the Labor Code is to grant service incentive leave pay to
workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that "[e]very employee who has rendered at least
Christian V. Asas
Page 142
==============================================
one year of service shall be entitled to a yearly service incentive leave of five days with pay."
Service incentive leave is a right which accrues to every employee who has served "within 12
months, whether continuous or broken reckoned from the date the employee started working,
including authorized absences and paid regular holidays unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contracts, is
less than 12 months, in which case said period shall be considered as one year." It is also
"commutable to its money equivalent if not used or exhausted at the end of the year." In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or
he may collect its monetary value. To limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right. The law indeed does not prohibit its commutation.
Moreover, the solicitor general's recommendation is contrary to the ruling of the Court in
Bustamante et al. vs. NLRC et al., lifting the three-year restriction on the amount of backwages
and other allowances that may be awarded an illegally dismissed employee, thus: Therefore, in
accordance with R.A. No. 6715, petitioners are entitled to their full backwages, inclusive of
allowances and other benefits or their monetary equivalent, from the time their actual
compensation was withheld from them up to the time of their actual reinstatement.
Since a service incentive leave is clearly demandable after one year of service — whether
continuous or broken — or its equivalent period, and it is one of the "benefits" which would have
accrued if an employee was not otherwise illegally dismissed, it is fair and legal that its
computation should be up to the date of reinstatement as provided under Section 279 of the
Labor Code, as amended, which reads: Art. 279. Security of Tenure. — An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his compensation is withheld from him up
to the time of his actual reinstatement.
ii. Employees not entitled
Doctrine. In short, the payment of an employee on task or pakyaw basis alone is

insufficient to exclude one from the coverage of SIL and holiday pay. They are exempted from
the coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of "workers paid
by results" found in Article 82 from the coverage of holiday and SIL pay. This is the only
reasonable interpretation since the determination of excluded workers who are paid by results
from the coverage of Title I is "determined by the Secretary of Labor in appropriate regulations."
In one case, the SC held that a careful perusal of said provisions of law will result in the
conclusion that the grant of service incentive leave has been delimited by the Implementing
Rules and Regulations of the Labor Code to apply only to those employees not explicitly
Christian V. Asas
Page 143
==============================================
excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave
shall not apply to employees classified as "field personnel." The phrase "other employees whose
performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted. Rather, it serves
as an amplification of the interpretation of the definition of field personnel under the Labor Code
as those "whose actual hours of work in the field cannot be determined with reasonable
certainty."
The same is true with respect to the phrase "those who are engaged on task or contract
basis, purely commission basis." Said phrase should be related with "field personnel," applying
the rule on ejusdem generis that general and unlimited terms are restrained and limited by the
particular terms that they follow.
iii. At least one year of service; reckoning period
JPL Marketing Promotions vs. CA, G.R. No. 151966, July 8, 2005, Tinga, J.
FACTS: JPL was engaged in the business of recruitment and placement of workers. Gonzales
et al. were employed by JPL as merchandisers on separate dates and assigned at different
establishments in Naga City and Daet, Camarines Norte as attendants to the display of California
Marketing Corporation (CMC). Thereafter, Gonzales et al. were notified by JPL that CMC
would stop its direct merchandising activity at the Bicol area and other areas and they were
advised to wait until further notice as they will be transferred to other clients. However,
Gonzales et al. filed an illegal dismissal case before the Regional Arbitration Branch of the
NLRC. The Executive Labor Arbiter dismissed the complaint as it found that Gonzales and
Abesa applied with and were employed by the store where they were originally assigned by JPL
even before the lapse of 6 months provided by law to JPL reassign them. Upon appeal, the
NLRC agreed with the ELA but awarded a separation pay to Gonzales et al. as it found that
despite its effort to look for clients to whom they can reassign Gonzales et al., it failed to do so.
Included in the separation pay is the service incentive leave. JPL went to CA but the latter
affirmed the NLRC. Hence, the case reached the SC.
ISSUE: Whether or not Gonzales et al. are entitled to SIL.
HELD: Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive
leave pay to private respondents. Said benefits are mandated by law and should be given to
employees as a matter of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and file
employees a 13th month pay not later than 24 December of every year. However, employers not
paying their employees a 13th month pay or its equivalent are not covered by said law. The term
"its equivalent" was defined by the law’s implementing guidelines as including Christmas bonus,
mid-year bonus, cash bonuses and other payment amounting to not less than 1/12 of the basic
Christian V. Asas
Page 144
==============================================
salary but shall not include cash and stock dividends, cost-of-living-allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary benefits.
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a
yearly leave benefit of five (5) days with pay, enjoyed by an employee who has rendered at least
one year of service. Unless specifically excepted, all establishments are required to grant service
incentive leave to their employees. The term "at least one year of service" shall mean service
within twelve (12) months, whether continuous or broken reckoned from the date the employee
started working. The Court has held in several instances that "service incentive leave is clearly
demandable after one year of service."
Admittedly, private respondents were not given their 13th month pay and service
incentive leave pay while they were under the employ of JPL. Instead, JPL provided salaries
which were over and above the minimum wage. The Court rules that the difference between the
minimum wage and the actual salary received by private respondents cannot be deemed as their
13th month pay and service incentive leave pay as such difference is not equivalent to or of the
same import as the said benefits contemplated by law. Thus, as properly held by the Court of
Appeals and by the NLRC, private respondents are entitled to the 13th month pay and service
incentive leave pay.
However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay
and service incentive leave pay should be computed from the start of employment up to the
finality of the NLRC resolution. While computation for the 13th month pay should properly
begin from the first day of employment, the service incentive leave pay should start a year after
commencement of service, for it is only then that the employee is entitled to said benefit. On the
other hand, the computation for both benefits should only be up to 15 August 1996, or the last
day that private respondents worked for JPL. To extend the period to the date of finality of the
NLRC resolution would negate the absence of illegal dismissal, or to be more precise, the want
of dismissal in this case. Besides, it would be unfair to require JPL to pay private respondents the
said benefits beyond 15 August 1996 when they did not render any service to JPL beyond that
date. These benefits are given by law on the basis of the service actually rendered by the
employee, and in the particular case of the service incentive leave, is granted as a motivation for
the employee to stay longer with the employer. There is no cause for granting said incentive to
one who has already terminated his relationship with the employer.
Section 29. Leave Benefits. – A domestic worker who has rendered at least one (1) year
of service shall be entitled to an annual service incentive leave of five (5) days with
pay: Provided, That any unused portion of said annual leave shall not be cumulative or carried
over to the succeeding years. Unused leaves shall not be convertible to cash. (Possible Bar
Problem)
Christian V. Asas
Page 145
==============================================
f. Service charges; Tips (Art. 96; Secs. 1-5, Rule IV, Book III, Rules)
i. Tips, defined
Ace Navigation Co. vs. CA, G.R. No. 140364, August 15, 2000, Puno, J.
FACTS: Ace Navigation recruited Orlando Alonsagay as a bartender on the vessel MV Orient
Express owned by its principal Conning Shipping Ltd. Under their POEA approved contract of
employment, Orlando shall receive a monthly basic salary of four hundred fifty U.S. dollars
(U.S. $450.00), flat rate, including overtime pay for 12 hours of work daily plus tips of two U.S.
dollars (U.S. $2.00) per passenger per day. He, was also entitled to 2.5 days of vacation leave
with pay each month. The contract was to last for one (1) year. After the expiration of the
contract, Orlando returned to the Philippines and demanded from Ace Navigation his vacation
leave pay. Ace Navigation did not pay him immediately as it reasoned that Conning did not
remit for his VL pay but Ace Navigation promised him that it will verify the matter and asked
him to ruturn. Orlando filed a complaint before the Labor Arbiter (LA) for the payment of VL
and unpaid tips. The LA ordered Ace Navigation and Conning to pay Orlando jointly and
severally of VL but dismissed the claim for tips for lack of merit. Upon appeal to NLRC, the
latter modified the LA’s decision by saying that Orlando is entitled to unpaid tips. The CA
affirmed the NLRC. Hence, the case reached the SC.
ISSUE: Whether or not Orlando is entitled for unpaid tips.
HELD: No. The word ["tip"] has several meanings, with origins more or less obscure,
connected with "tap" and with "top." In the sense of a sum of money given for good service,
other languages are more specific, e.g., Fr. pourboire, for drink. It is suggested that [the word] is
formed from the practice, in early 18th c. London coffeehouses, of having a box in which
persons in a hurry would drop a small coin, to gain immediate attention. The box was labelled To
Insure Promptness; then just with the initials T.I.P.
It is more frequently used to indicate additional compensation, and in this sense "tip" is
defined as meaning a gratuity; a gift; a present; a fee; money given, as to a servant to secure
better or more prompt service. A tip may range from pure gift out of benevolence or friendship,
to a compensation for a service measured by its supposed value but not fixed by an agreement,
although usually the word is applied to what is paid to a servant in addition to the regular
compensation for his service in order to secure better service or in recognition of it. It has been
said that a tip denotes a voluntary act, but it also has been said that from the very beginning of
the practice of tipping it was evident that, whether considered from the standpoint of the giver or
the recipient, a tip lacked the essential element of a gift, namely, the free bestowing of a gratuity
without a consideration, and that, despite its apparent voluntariness, there is an element of
compulsion in tipping.
Christian V. Asas
Page 146
==============================================
Tipping is done to get the attention and secure the immediate services of a waiter, porter
or others for their services. Since a tip is considered a pure gift out of benevolence or friendship,
it cannot be demanded from the customer. Whether or not tips will be given is dependent on the
will and generosity of the giver. Although a customer may give a tip as a consideration for
services rendered, its value still depends on the giver. They are given in addition to the
compensation by the employer. A gratuity given by an employer in order to inspire the employee
to exert more effort in his work is more appropriately called a bonus.
The contract of employment between petitioners and Orlando is categorical that the
monthly salary of Orlando is US$450.00 flat rate. This already included his overtime pay which
is integrated in his 12 hours of work. The words "plus tips of US$2.00 per passenger per day"
were written at the line for overtime. Since payment for overtime was included in the monthly
salary of Orlando, the supposed tips mentioned in the contract should be deemed included
thereat.
The actuations of Orlando during his employment also show that he was aware his
monthly salary is only US$450.00, no more no less. He did not raise any complaint about the
non-payment of his tips during the entire duration of his employment. After the expiration of his
contract, he demanded payment only of his vacation leave pay. He did not immediately seek the
payment of tips. He only asked for the payment of tips when he filed this case before the labor
arbiter. This shows that the alleged non-payment of tips was a mere afterthought to bloat up his
claim. The records of the case do not show that Orlando was deprived of any monthly salary. It
will now be unjust to impose a burden on the employer who performed the contract in good faith.
Furthermore, it is presumed that the parties were aware of the plain, ordinary and common
meaning of the word "tip." As a bartender, Orlando cannot feign ignorance on the practice of
tipping and that tips are normally paid by customers and not by the employer.
It is also absurd that petitioners intended to give Orlando a salary higher than that of the
ship captain. As petitioners point out, the captain of M/V "Orient Princess" receives
US$3,000.00 per month while Orlando will receive US$3,450.00 per month if the tip of US$2.00
per passenger per day will be given in addition to his US$450.00 monthly salary. It will be
against common sense for an employer to give a lower ranked employee a higher compensation
than an employee who holds the highest position in an enterprise.
However, Orlando should be paid his vacation leave pay. Petitioners denied this liability
by raising the defense that the usual practice is that vacation leave pay is given before
repatriation. But as the labor arbiter correctly observed, petitioners did not present any evidence
to prove that they already paid the amount. The burden of proving payment was not discharged
by the petitioners.
ii. When not entitled

Christian V. Asas
Page 147
==============================================
Maranaw Hotels vs. NLRC, G.R. No. 123880, 303 SCRA 540, February 23, 1999, Purisima,
J.
FACTS: Eddie Damalerio was a room attendant of the Century Park Hotel operated by
Maranaw Hotel and Resort Corporation. He was seen by a hotel guest Jamie Glaser with his left
hand in the latter’s suitcase. Not satisfied with Damalerio’s explanation upon confrontation,
Glaser lodged a written complaint before Shift In Charge of Security Despuig. The complaint
was brought later by Despuig to Chief Security Buluran. Later on, Damalerio was given a
Disciplinary Action Notice and an administrative hearing was conducted. Damalerio denied the
allegations and explained that he was just fixing the room as there were several items scattered
around. Subsequently, he was found to have committed qualified theft and served with notice of
termination. He filed a complaint for illegal dismissal. The Labor Arbiter ruled in his favor and
ordered his reinstatement with backwages during the period of preventive suspension. Included
in the backwages is his share in the service charges and/or tips. Upon appeal, the NLRC
modified the decision by awarding a separation pay instead of reinstatement. The case reached
the SC.
ISSUES: (1.) Whether or not Damalerio is illegally dismissed.

(2.) Whether or not Damalerio is entitled for service charges and/or tips.
HELD: (1.) Yes. Although it was not completely proper for Damalerio to be touching the things
of a hotel guest while cleaning the hotel rooms, personal belongings of hotel guests being off-
limits to roomboys, under the attendant facts and circumstances, we believe that the dismissal of
Damalerio was unwarranted. To be sure, the investigation held by the hotel security people did
not unearth enough evidence of culpability. It bears repeating that subject hotel guest lost
nothing. Albeit petitioner may have reasons to doubt the honesty and trustworthiness of
Damalerio, as a result of what happened, absent sufficient proof of guilt, he (Damalerio), who is
a rank-and-file employee, cannot be legally dismissed. Unsubstantiated suspicions and baseless
conclusions by employers are not legal justification for dismissing employees. The burden of
proving the existence of a valid and authorized cause of termination is on the employer. Any
doubt should be resolved in favor of the employee, in keeping with the principle of social justice
enshrined in the Constitution.
(2.) Yes. As regards the share of Damalerio in the service charges collected during the
period of his preventive suspension, the same form part of his earnings, and his dismissal having
been adjudged to be illegal, he is entitled not only to full backwages but also to other benefits,
including a just share in the service charges, to be computed from the start of his preventive
suspension until his reinstatement.
f. 13th Month Pay
Presidential Decree No. 851 (13th Month Pay Law)

Christian V. Asas
Page 148
==============================================
i. Employees not entitled
Doctrine. Section 3 of the Rules and Regulations Implementing P.D. No.

851 enumerates the exemptions from the coverage of 13th month pay benefits. Under Section
3(e), "employers of those who are paid on xxx task basis, and those who are paid a fixed amount
for performing a specific work, irrespective of the time consumed in the performance
thereof" are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the
Rules and Regulations Implementing PD No. 851 exempts employees "paid on task basis"
without any reference to "field personnel." This could only mean that insofar as payment of the
13th month pay is concerned, the law did not intend to qualify the exemption from its coverage
with the requirement that the task worker be a "field personnel" at the same time.
House of Sara Lee vs. Rey, G.R. No. 149013, August 31, 2006, Austria-Martinez, J.
Doctrine. In the present case, the respondent is not an ordinary rank-and-file employee.
The nature of her work requires a substantial amount of trust and confidence on the part of the
employer. Being the Credit Administration Supervisor of the Cagayan de Oro and Butuan City
branches of the petitioner, respondent occupied a highly sensitive and critical position and may
thus be dismissed on the ground of loss of trust and confidence. The duties of the respondent
included the strict monitoring of the 38- or 52-day "rolling due date" of each of its IBMs and
IGSs, as well as the supervision of the credit and collection of payments and outstanding
accounts due to the petitioner from its dealers. More importantly, respondent has a direct hand in
the preparation and computation of the Service Fees or sales commissions accruing to each
dealer. The computation of these commissions depends on whether the dealer concerned was
able to remit the sales proceeds within the 38-day or 52-day rolling deadline.
The award of 13th month pay must be deleted. Respondent is not a rank-and-file
employee and is, therefore, not entitled to thirteenth-month pay.
Petroleum Shipping Limited vs. NLRC, G.R. No. 148130, June 16, 2006, Caprio, J.
ISSUE: Are seafarers entitled to 13th month pay?
HELD: No. The WHEREAS clauses of PD 851 provides:
WHEREAS, it is necessary to further protect the level of real wages from ravages of
world-wide inflation;
WHEREAS, there has been no increase in the legal minimum wage rates since 1970;
Christian V. Asas
Page 149
==============================================
WHEREAS, the Christmas season is an opportune time for society to show its concern
for the plight of the working masses so they may properly celebrate Christmas and New Year.
PD 851 contemplates the situation of land-based workers, and not of seafarers who
generally earn more than domestic land-based workers.
Tanchico’s employment is governed by his Contract of Enlistment ("Contract"). The

Contract has been approved by the POEA in accordance with Title I, Book One of the Labor
Code and the POEA Rules Governing Employment. The coverage of the Contract includes
Compensation, Overtime, Sundays and Holidays, Vacations, Living Allowance, Sickness, Injury
and Death, Transportation and Travel Expense, Subsistence and Living Quarters. It does not
provide for the payment of 13th month pay. The Contract of Employment, which is the standard
employment contract of the POEA, likewise does not provide for the payment of 13th month
pay.
In Coyoca v. NLRC which involves a claim for separation pay, this Court held:
Furthermore, petitioner’s contract did not provide for separation benefits. In this connection, it is
important to note that neither does POEA standard employment contract for Filipino seamen
provide for such benefits.
As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing

Overseas Employment and the said Rules do not provide for separation or termination pay. x x x
Hence, in the absence of any provision in his Contract governing the payment of 13th month pay,
Tanchico is not entitled to the benefit.
ii. Basis for computation
Honda Phils. vs. Samahan ng Malalayang Mangagawa sa Honda, G.R. No. 145561, June
15, 2005, Ynarez-Santiago, J.
Doctrine. Presidential Decree No. 851, otherwise known as the 13th Month Pay Law,
which required all employers to pay their employees a 13 th month pay, was issued to protect the
level of real wages from the ravages of worldwide inflation. It was enacted on December 16,
1975 after it was noted that there had been no increase in the minimum wage since 1970 and the
Christmas season was an opportune time for society to show its concern for the plight of the
working masses so that they may properly celebrate Christmas and New Year.
Under the Revised Guidelines on the Implementation of the 13 th month pay issued on
November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further
provided that the minimum 13th month pay required by law shall not be less than one-twelfth
(1/12) of the total basic salary earned by an employee within a calendar year. The guidelines
pertinently provides:
Christian V. Asas
Page 150
==============================================
The "basic salary" of an employee for the purpose of computing the 13 th month pay shall
include all remunerations or earnings paid by his employer for services rendered but does not
include allowances and monetary benefits which are not considered or integrated as part of the
regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits,
overtime premium, night differential and holiday pay, and cost-of-living allowances.
For employees receiving regular wage, we have interpreted "basic salary" to mean, not
the amount actually received by an employee, but 1/12 of their standard monthly wage
multiplied by their length of service within a given calendar year. Thus, we exclude from the
computation of "basic salary" payments for sick, vacation and maternity leaves, night
differentials, regular holiday pay and premiums for work done on rest days and special
holidays. In Hagonoy Rural Bank v. NLRC, St. Michael Academy v. NLRC, Consolidated Food
Corporation v. NLRC, and similar cases, the 13th month pay due an employee was computed
based on the employee’s basic monthly wage multiplied by the number of months worked in a
calendar year prior to separation from employment.
The revised guidelines also provided for a pro-ration of this benefit only in cases of
resignation or separation from work. As the rules state, under these circumstances, an employee
is entitled to a pay in proportion to the length of time he worked during the year, reckoned from
the time he started working during the calendar year. The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13th month pay should be based on the length
of service and not on the actual wage earned by the worker. In the present case, there being no
gap in the service of the workers during the calendar year in question, the computation of the
13th month pay should not be pro-rated but should be given in full.
iii. Bonus
United CMC Textile Workers Union vs. Valenzuela, G.R. No. 70763, April 30, 1987, Paras,
J.
Doctrine. We find the contentions of petitioner more meritorious than the contentions of
respondents. When We dismissed the petition for review of private respondents in G.R. No.
58666 on January 20,1982, for lack of merit, We did so upon the doctrine laid down in the
Marcopper Case which was promulgated on June 11, 1981. Before the dismissal of said case
became final and executory, We decided the La Carlota case on May 31, 1982 wherein We ruled
that employees are no longer entitled to an additional Christmas bonus or other Christmas
benefits if they are already entitled to a 13th month pay. Meanwhile in Case No. 58666 the
company filed their motion for reconsideration of the dismissal of their petition which We denied
as per Our resolution on August 18, 1982. Subsequently, said dismissal became final and
executory as per Entry of Judgment dated September 22, 1982. Thus, it can be seen that despite
the La Carlota ruling, We denied the company's Motion for reconsideration and We reiterated
Our previous dismissal of the petition for review for lack of merit. This only goes to show that
Christian V. Asas
Page 151
==============================================
We refused to apply or did not choose to apply the La Carlota doctrine to the case at bar. And We
have consistently held in a number of Our decisions that judgments which had long become final
and executory can no longer be amended or modified by the courts. Such is the doctrine known
as "the law of the case."
Furthermore, the findings of the NLRC as stated in its decision show that the claim is for
Christmas bonus for the year 1978 only. It appears from the records that the employees of the
respondent company had been paid their bonuses in accordance with the collective bargaining
agreement, in addition to the 13th month pay, for the years 1979 and 1980. The Page 431
collective bargaining agreement in question took effect on November 1, 1978, 3 years after the
promulgation of P.D. No. 851. If the Christmas bonus was included in the 13th month pay, then
there would be no need for having a specific provision on Christmas bonus in the CBA. But it
did provide for a bonus in graduated amounts depending on the length of service of the
employee. The intention is clear therefore that the bonus provided in the CBA was meant to be in
addition to the legal requirement. Moreover, why exclude the payment of the 1978 Christmas
bonus and pay only the 1979-1980 bonus. The classification of the company's workers in the
CBA according to their years of service supports the allegation that the reason for the payment of
bonus was to give bigger reward to the senior employees — a purpose which is not found in P.D.
851. A bonus under the CBA is an obligation created by the contract between the management
and workers while the 13th month pay is mandated by the law (P.D. 851).
Producers Bank vs. NLRC, G.R. No. 100701, March 28, 2001, Gonzaga-Reyes, J.
FACTS: Producers Bank was placed under conservatorship by the Monetary Board, pursuant to
its authority under Section 28-A of Republic Act No. 265.
ISSUE: Is Producers Bank obliged to give bonuses to its employees?
HELD: No. A bonus is an amount granted and paid to an employee for his industry and loyalty
which contributed to the success of the employer's business and made possible the realization of
profits. It is an act of generosity granted by an enlightened employer to spur the employee to
greater efforts for the success of the business and realization of bigger profits. The granting of a
bonus is a management prerogative, something given in addition to what is ordinarily received
by or strictly due the recipient. Thus, a bonus is not a demandable and enforceable
obligation, except when it is made part of the wage, salary or compensation of the employee.
However, an employer cannot be forced to distribute bonuses which it can no longer

afford to pay. To hold otherwise would be to penalize the employer for his past generosity.
In Traders Royal Bank v. NLRC, it was held that the decrease in the mid-year and year-
end bonuses constituted a diminution of the employees' salaries, is not correct, for bonuses are
not part of labor standards in the same class as salaries, cost of living allowances, holiday pay,
and leave benefits, which are provided by the Labor Code.
Christian V. Asas
Page 152
==============================================
3. Chapter III, Arts. 97-96; Title II, Arts. 97-105, 110-119, 123-129
a. No work, no pay
Escario vs. NLRC, G.R. No. 160302, October 10, 2010, Bersamin, J.
Doctrine. That backwages are not granted to employees participating in an illegal strike
simply accords with the reality that they do not render work for the employer during the period
of the illegal strike. According to G&S Transport Corporation v. Infante:
With respect to backwages, the principle of a "fair day’s wage for a fair day’s labor"
remains as the basic factor in determining the award thereof. If there is no work performed by the
employee there can be no wage or pay unless, of course, the laborer was able, willing and ready
to work but was illegally locked out, suspended or dismissed or otherwise illegally prevented
from working. xxx In Philippine Marine Officers’ Guild v. Compañia Maritima, as affirmed in
Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees Union, the Court
stressed that for this exception to apply, it is required that the strike be legal, a situation that does
not obtain in the case at bar.
The petitioners herein do not deny their participation in the June 15, 1993 strike. As such,
they did not suffer any loss of earnings during their absence from work. Their reinstatement sans
backwages is in order, to conform to the policy of a fair day’s wage for a fair day’s labor.
Under the principle of a fair day’s wage for a fair day’s labor, the petitioners were not
entitled to the wages during the period of the strike (even if the strike might be legal), because
they performed no work during the strike. Verily, it was neither fair nor just that the dismissed
employees should litigate against their employer on the latter’s time. Thus, the Court deleted the
award of backwages and held that the striking workers were entitled only to reinstatement in
Philippine Diamond Hotel and Resort, Inc. (Manila Diamond Hotel) v. Manila Diamond Hotel
Employees Union, considering that the striking employees did not render work for the employer
during the strike.
b. Wages/Salary, Facilities, Supplement
DOLE Department Order No. 118-12 s 2012
Labor Advisory on Payment of Salaries thru ATM, November 25, 1996
Conditions for the adoption of ATM:
1.) The ATM system payment is with the written consent of the employees concerned;
Christian V. Asas
Page 153
==============================================
2.) The employees are given reasonable time to withdraw their wages from the bank
facility which time, if done during working hours, shall be considered compensable hours
worked;
3.) The system shall allow workers to receive their wages within the period or frequency
and in the amount prescribed under the Labor Code, as amended;
4.) There is a bank or ATM facility within a radius of one kilometer to the place of work;
5.) Upon request of the concerned employee/s the employer shall issue a record of
payment of wages, benefits and deductions for particular period;
6.) There shall be no additional expenses and no diminution of benefits and priveleges as
a result of the ATM system of payment;
7.) The employer shall assume responsibility in cae the wage protection provisions of the
law and regulations are not complied with under the arrangement.
SLL International Cables vs. NLRC, G.R. No. 172161, March 2, 2011, Mendoza, J.
Doctrine. Section 3, Rule VII of the Rules to Implement the Labor Code specifically
enumerates those who are not covered by the payment of minimum wage. Project employees are
not among them.
On whether the value of the facilities should be included in the computation of the
"wages" received by private respondents, Section 1 of DOLE Memorandum Circular No. 2
provides that an employer may provide subsidized meals and snacks to his employees provided
that the subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In
such cases, the employer may deduct from the wages of the employees not more than 70% of the
value of the meals and snacks enjoyed by the latter, provided that such deduction is with the
written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the employees’ wages, the
following requisites must all be attendant: first, proof must be shown that such facilities are
customarily furnished by the trade; second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee; and finally, facilities must be charged at
reasonable value. Mere availment is not sufficient to allow deductions from employees’ wages.
These requirements, however, have not been met in this case. SLL failed to present any
company policy or guideline showing that provisions for meals and lodging were part of the
employee’s salaries. It also failed to provide proof of the employees’ written authorization, much
less show how they arrived at their valuations. At any rate, it is not even clear whether private
respondents actually enjoyed said facilities.
Christian V. Asas
Page 154
==============================================
The Court, at this point, makes a distinction between "facilities" and "supplements." It is
of the view that the food and lodging, or the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements. In the case of Atok-Big Wedge Assn.
v. Atok-Big Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges or benefits

given to or received by the laborers over and above their ordinary earnings or wages.
"Facilities," on the other hand, are items of expense necessary for the laborer's and his family's
existence and subsistence so that by express provision of law (Sec. 2[g]), they form part of the
wage and when furnished by the employer are deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage is supplement; and when said
benefit or privilege is part of the laborers' basic wages, it is a facility. The distinction lies not so
much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose
for which it is given. In the case at bench, the items provided were given freely by SLL for the
purpose of maintaining the efficiency and health of its workers while they were working at their
respective projects.
Millares vs. NLRC, G.R. No. 122827, March 29, 1999, Bellosillo, J.
Doctrine. "Pay" is not defined therein but "wage." In Songco the Court explained that
both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or
recompense for services performed. Specifically, "wage" is defined in letter (f) as the
remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee.
We invite attention to the above-underlined clause. Stated differently, when an employer

customarily furnishes his employee board, lodging or other facilities, the fair and reasonable
value thereof, as determined by the Secretary of Labor and Employment, is included in "wage."
In order to ascertain whether the subject allowances form part of petitioner's "wages," we divide
the discussion on the following — "customarily furnished;" "board, lodging or other facilities;"
and, "fair reasonable value as determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice connoting

regularity. The receipt of an allowance on a monthly basis does not ipso facto characterize it as
regular and forming part of salary because the nature of the grant is a factor worth considering.
Christian V. Asas
Page 155
==============================================
We agree with the observation of the Office of the Solicitor General that the subject allowances
were temporarily, not regularly, received by petitioners because —
In the case of the housing allowance, once a vacancy occurs in the company-
provided housing accommodations, the employee concerned transfers to the
company premises and his housing allowance is discontinued . . . .
On the other hand, the transportation allowance is in the form of advances for
actual transportation expenses subject to liquidation . . . given only to employees
who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers

assigned in Bislig, Surigao del Norte. Once the officer is transferred outside
Bislig, the allowance stops.
We add that in the availment of the transportation allowance, respondent PICOP set
another requirement that the personal cars be used by the employees in the performance of their
duties. When the conditions for availment ceased to exist, the allowance reached the cutoff point.
The finding of the NLRC along the same line likewise merits concurrence, i.e., petitioners'
continuous enjoyment of the disputed allowances was based on contingencies the occurrence of
which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so with

"facilities." Thus Sec. 5, Rule VII, Book III, of the Rules Implementing the Labor Code gives
meaning to the term as including articles or services for the benefit of the employee or his family
but excluding tools of the trade or articles or service primarily for the benefit of the employer or
necessary to the conduct of the employer's business. The Staff/Manager's allowance may fall
under "lodging" but the transportation and Bislig allowances are not embraced in "facilities" on
the main consideration that they are granted as well as the Staff/Manager's allowance for
respondent PICOP's benefit and convenience, i.e., to insure that petitioners render quality
performance. In determining whether a privilege is a facility, the criterion is not so much its kind
but its purpose. That the assailed allowances were for the benefit and convenience of respondent
company was supported by the circumstance that they were not subjected to withholding tax.
Revenue Audit Memo Order No. 1-87 pertinently provides —
3.2. . . . transportation, representation or entertainment expenses shall not

constitute taxable compensation if:
(a) It is for necessary travelling and representation or entertainment expenses paid

or incurred by the employee in the pursuit of the trade or business of the
employer, and
Christian V. Asas
Page 156
==============================================
(b) The employee is required to, and does, make an accounting/liquidation for
such expense in accordance with the specific requirements of substantiation for
such category or expense.
Board and lodging allowances furnished to an employee not in excess of the

latter's needs and given free of charge, constitute income to the latter except if
such allowances or benefits are furnished to the employee for the convenience of
the employer and as necessary incident to proper performance of his duties in
which case such benefits or allowances do not constitute taxable income.
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules
Implementing the Labor Code may from time to time fix in appropriate issuances the "fair and
reasonable value of board, lodging and other facilities customarily furnished by an employer to
his employees." Petitioners' allowances do not represent such fair and reasonable value as
determined by the proper authority simply because the Staff/Manager's allowance and
transportation allowance were amounts given by respondent company in lieu of actual provisions
for housing and transportation needs whereas the Bislig allowance was given in consideration of
being assigned to the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not
form part of petitioners' wages.
Our Haus Realty vs. Parian, G.R. No. 204651, August 6, 2014, Brion, J.
FACTS: Our Haus Realty argued that they are complying with the minimum wage law since
aside from paying the monetary amount of the respondents’ wages, it also subsidized their meals
(3 times a day), and gave them free lodging near the construction project they were assigned
to. In determining the total amount of the respondents’ daily wages, the value of these benefits
should be considered, in line with Article 97(f) of the Labor Code.
ISSUE: Whether or not Our Haus’ argument is correct.
HELD: No. The facility must be customarily furnished by the trade. Our Haus could not
really be expected to prove compliance with the first requirement since the living
accommodation of workers in the construction industry is not simply a matter of business
practice. Peculiar to the construction business are the occupational safety and health (OSH)
services which the law itself mandates employers to provide to their workers. This is to ensure
the humane working conditions of construction employees despite their constant exposure to
hazardous working environments. Under Section 16 of DOLE Department Order (DO) No. 13,
series of 1998, construction industries are required to provide welfare ameneties.
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the
implementation ofDOLE DO No. 13, mandates that the cost of the implementation of the
requirements for the construction safety and health of workers, shall be integrated to the overall
Christian V. Asas
Page 157
==============================================
project cost. The rationale behind this is to ensure that the living accommodation of the workers
is not substandard and is strictly compliant with the DOLE’s OSH criteria.
The Purpose Test. Even if a benefit is customarily provided by the trade, it must still
pass the purpose test set by jurisprudence. Under this test, if a benefit or privilege granted to the
employee is clearly for the employer’s convenience, it will not be considered as a facility but a
supplement. Here, careful consideration is given to the nature of the employer’s business in
relation to the work performed by the employee. This test is used to address inequitable
situations wherein employers consider a benefit deductible from the wages even if the factual
circumstances show that it clearly redounds to the employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose
test additionally recognizes that the employer and the employee do not stand at the same
bargaining positions on benefits that must or must not form part of an employee’s wage. In the
ultimate analysis, the purpose test seeks to prevent a circumvention of the minimum wage law.
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it
was given by the employer. If it is primarily for the employee’s gain, then the benefit is a facility;
if its provision is mainly for the employer’s advantage, then it is a supplement. Again, this is to
ensure that employees are protected in circumstances where the employer designates a benefit as
deductible from the wages even though it clearly works to the employer’s greater convenience or
advantage.
Under the purpose test, substantial consideration must be given to the nature of the
employer’s business in relation to the character or type of work performed by the employees
involved.
Our Haus is engaged in the construction business, a labor intensive enterprise. The
success of its projects is largely a function of the physical strength, vitality and efficiency of its
laborers. Its business will be jeopardized if its workers are weak, sickly, and lack the required
energy to perform strenuous physical activities. Thus, by ensuring that the workers are
adequately and well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction
industry relies heavily and directly on the physical capacity and endurance of its workers. This is
not to say that desk jobs do not require muscle strength; we simply emphasize that in the
construction business, bulk of the work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the problem of
meeting target deadlines. More often than not, work is performed continuously, day and night, in
order to finish the project on the designated turn-over date. Thus, it will be more convenient to
the employer if its workers are housed near the construction site to ensure their ready availability
during urgent or emergency circumstances. Also, productivity issues like tardiness and
Christian V. Asas
Page 158
==============================================
unexpected absences would be minimized. This observation strongly bears in the present case
since three of the respondents are not residents of the National Capital Region. The board and
lodging provision might have been a substantial consideration in their acceptance of employment
in a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the
subsidized meals and free lodging provided by Our Haus are actually supplements. Although
they also work to benefit the respondents, an analysis of the nature of these benefits in relation to
Our Haus’ business shows that they were given primarily for Our Haus’ greater convenience and
advantage. If weighed on a scale, the balance tilts more towards Our Haus’ side. Accordingly,
their values cannot be considered in computing the total amount of the respondents’ wages.
Under the circumstances, the daily wages paid to the respondents are clearly below the
prescribed minimum wage rates in the years 2007-2010.
The provision of deductible facilities must be voluntarily accepted in writing by the

employee. These five kasunduans were also undated, making us wonder if they had really been
executed when respondents first assumed their jobs. Moreover, in the earlier sinumpaang
salaysay by Our Haus’ four employees, it was not mentioned that they also executed a kasunduan
for their board and lodging benefits.
The facility must be charged at a fair and reasonable value. Our Haus never explained
how it came up with the valuesit assigned for the benefits it provided; it merely listed its
supposed expenses without any supporting document. Since Our Haus is using these additional
expenses (cook’s salary, water and LPG) to support its claim that it did not withhold the full
amount of the meals’ value, Our Haus is burdened to present evidence to corroborate its claim.
The records however, are bereft of any evidence to support Our Haus’ meal expense
computation. Even the value it assigned for the respondents’ living accommodations was not
supported by any documentary evidence. Without any corroborative evidence, it cannot be said
that Our Haus complied with this third requisite.
i. Bonus included/not included; a demandable obligation
Metro Transit Organizations, Inc. vs. NLRC, G.R. No. 116008, July 11, 1995, Feliciano, J.
Doctrine. Basically, Metro's argument is that such increase was merely a bonus given to
supervisory employees. A "bonus" is an amount granted and paid to an employee for his industry
and loyalty which contributed to the success of the employer's business and made possible the
realization of profits. It is something given in addition to what is ordinarily received by or strictly
due to the recipient.
The general rule is that a bonus is a gratuity or an act of liberality which the recipient has
no right to demand as a matter of right. A bonus, however, is a demandable or enforceable
obligation when it is made part of the wage or salary or compensation of the employee. Whether
or not a bonus forms part of wages depends upon the circumstances and conditions for its
Christian V. Asas
Page 159
==============================================
payment. If it is additional compensation which the employer promised and agreed to give
without any conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if profits are realized or if a
certain level of productivity is achieved, it can not be considered part of the wage. Where it is not
payable to all but only to some employees and only when their labor becomes more efficient or
more productive, it is only an inducement for efficiency, a prize therefor, not a part of the wage.
In the case at bar, the increase of P550.00 sought by private respondent SEAM was
neither an inducement nor was it contingent on (a) the success of the business of petitioner
Metro; or (b) the increased production or work output of the company or (c) the realization of
profits. The demand for this increase was based on a company practice, admitted by Metro, of
granting a salary increase (and a premium) to supervisory employees whenever rank-and-file
employees were granted a salary increase. That those increases were precisely designed to
correct or minimize the wage distortion effects of increases given to rank-and-file employees
(under their CBA or under Wage Orders), highlights the fact that those increases were part of the
wage structure of supervisory employees. The demanded increase therefore is not a bonus that is
generally not demandable as a matter of right. The demanded increase, in this instance, is an
enforceable obligation so far as the supervisory employees of Metro are concerned.
We conclude that the supervisory employees, who then (i.e., on 17 April 1989) had,
unlike the rank-and-file employees, no CBA governing the terms and conditions of their
employment, had the right to rely on the company practice of unilaterally correcting the wage
distortion effects of a salary increase given to the rank-and-file employees, by giving the
supervisory employees a corresponding salary increase plus a premium. For reasons, however,
shortly to be stated in the disposition of the second issue, we hold that the P550.00 increase is
demandable by SEAM only in respect of the period beginning 17 April 1989 and ending on 30
November 1989.
It is true enough that, in the present case, the wage distortion to be corrected by the award
of P550.00 increase for supervisory employees beginning 17 April 1989, was due to the time gap
between the effectivity date (17 April 1989) of the increase of P500.00 per month given to rank-
and-file employees under their CBA and the effectivity date (1 December 1989) of the P800.00
increase given to supervisory employees under their own CBA. It is also true that had the
P800.00 increase to supervisory employees been made retroactive to 17 April 1989 by an
appropriate synchronizing provision in the Metro-SEAM CBA, no wage distortion would have
arisen. The fact, however, remains that Metro and SEAM did not agree upon such remedy in
their CBA and that the CBA increase given to rank-and-file employees did produce a distortion
effect by obliterating or drastically reducing the previous gap between the salary rates of rank-
and-file and supervisory employees. The point to be stressed is that considering the prior practice
of petitioner Metro, its supervisory employees had the right to expect rectification of that
distortion.
Eastern Telecoms Philippines, Inc. vs. Eastern Telecoms Employees Union, G.R. No.
185665, February 8, 2012, Mendoza, J.
Christian V. Asas
Page 160
==============================================
Doctrine. A reading of the CBA provision reveals that the same provides for the giving
of 14th, 15th and 16th month bonuses without qualification. The wording of the provision does
not allow any other interpretation. There were no conditions specified in the CBA Side
Agreements for the grant of the benefits contrary to the claim of ETPI that the same is justified
only when there are profits earned by the company. Terse and clear, the said provision does not
state that the subject bonuses shall be made to depend on the ETPI’s financial standing or that
their payment was contingent upon the realization of profits. Neither does it state that if the
company derives no profits, no bonuses are to be given to the employees. In fine, the payment of
these bonuses was not related to the profitability of business operations.
The records are also bereft of any showing that the ETPI made it clear before or during
the execution of the Side Agreements that the bonuses shall be subject to any condition. Indeed,
if ETPI and ETEU intended that the subject bonuses would be dependent on the company
earnings, such intention should have been expressly declared in the Side Agreements or the
bonus provision should have been deleted altogether. In the absence of any proof that ETPI’s
consent was vitiated by fraud, mistake or duress, it is presumed that it entered into the Side
Agreements voluntarily, that it had full knowledge of the contents thereof and that it was aware
of its commitment under the contract. Verily, by virtue of its incorporation in the CBA Side
Agreements, the grant of 14th, 15th and 16th month bonuses has become more than just an act of
generosity on the part of ETPI but a contractual obligation it has undertaken. Moreover, the
continuous conferment of bonuses by ETPI to the union members from 1998 to 2002 by virtue of
the Side Agreements evidently negates its argument that the giving of the subject bonuses is a
management prerogative.
Granting arguendo that the CBA Side Agreement does not contractually bind petitioner
ETPI to give the subject bonuses, nevertheless, the Court finds that its act of granting the same
has become an established company practice such that it has virtually become part of the
employees’ salary or wage. A bonus may be granted on equitable consideration when the giving
of such bonus has been the company’s long and regular practice.
ii. Sales commissions
Philippine Duplicators, Inc. vs. NLRC, G.R. No. 110068, February 15, 1995, Feliciano, J.
Doctrine. In other words, the sales commissions received for every duplicating machine
sold constituted part of the basic compensation or remuneration of the salesmen of Philippine
Duplicators for doing their job. The portion of the salary structure representing commissions
simply comprised an automatic increment to the monetary value initially assigned to each unit of
work rendered by a salesman. Especially significant here also is the fact that the fixed or
guaranteed portion of the wages paid to the Philippine Duplicators' salesmen represented only
15%-30% of an employee's total earnings in a year.
Christian V. Asas
Page 161
==============================================
The Third Division held, correctly, that the sales commissions were an integral part of the
basic salary structure of Philippine Duplicators' employees salesmen. These commissions are not
overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, the
salesmen's commissions, comprising a pre-determined percent of the selling price of the goods
sold by each salesman, were properly included in the term "basic salary" for purposes of
computing their 13th month pay.
We recognize that both productivity bonuses and sales commissions may have an
incentive effect. But there is reason to distinguish one from the other here. Productivity bonuses
are generally tied to the productivity or profit generation of the employer corporation.
Productivity bonuses are not directly dependent on the extent an individual employee exerts
himself. A productivity bonus is something extra for which no specific additional services are
rendered by any particular employee and hence not legally demandable, absent a contractual
undertaking to pay it. Sales commissions, on the other hand, such as those paid in Duplicators,
are intimately related to or directly proportional to the extent or energy of an employee's
endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It
is a percentage of the sales closed by a salesman and operates as an integral part of such
salesman's basic pay.
iii. Meal coupons
States Marine Corp. vs. Cebu Seamen’s Asso., Inc., G.R. No. L-12444, February 28, 1963,
Paredes, J.
Doctrine. We hold that such deductions are not authorized. In the coastwise business of
transportation of passengers and freight, the men who compose the complement of a vessel are
provided with free meals by the shipowners, operators or agents, because they hold on to their
work and duties, regardless of "the stress and strain concomitant of a bad weather, unmindful of
the dangers that lurk ahead in the midst of the high seas."
It is argued that the food or meals given to the deck officers, marine engineers and
unlicensed crew members in question, were mere "facilities" which should be deducted from
wages, and not "supplements" which, according to said section 19, should not be deducted from
such wages, because it is provided therein: "Nothing in this Act shall deprive an employee of the
right to such fair wage ... or in reducing supplements furnished on the date of enactment." In the
case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two terms are defined as follows —
"Supplements", therefore, constitute extra remuneration or special privileges or benefits

given to or received by the laborers over and above their ordinary earnings or wages.
"Facilities", on the other hand, are items of expense necessary for the laborer's and his
family's existence and subsistence so that by express provision of law (Sec. 2[g]), they
form part of the wage and when furnished by the employer are deductible therefrom,
since if they are not so furnished, the laborer would spend and pay for them just the same.
Christian V. Asas
Page 162
==============================================
In short, the benefit or privilege given to the employee which constitutes an extra
remuneration above and over his basic or ordinary earning or wage, is supplement; and when
said benefit or privilege is part of the laborers' basic wages, it is a facility. The criterion is not so
much with the kind of the benefit or item (food, lodging, bonus or sick leave) given, but its
purpose. Considering, therefore, as definitely found by the respondent court that the meals were
freely given to crew members prior to August 4, 1951, while they were on the high seas "not as
part of their wages but as a necessary matter in the maintenance of the health and efficiency of
the crew personnel during the voyage", the deductions therein made for the meals given after
August 4, 1951, should be returned to them, and the operator of the coastwise vessels affected
should continue giving the same benefit.
In the case of Cebu Autobus Company v. United Cebu Autobus Employees Assn., the
company used to pay to its drivers and conductors, who were assigned outside of the City limits,
aside from their regular salary, a certain percentage of their daily wage, as allowance for food.
Upon the effectivity of the Minimum Wage Law, however, that privilege was stopped by the
company. The order CIR to the company to continue granting this privilege, was upheld by this
Court.
The shipping companies argue that the furnishing of meals to the crew before the
effectivity of Rep. Act No. 602, is of no moment, because such circumstance was already taken
into consideration by Congress, when it stated that "wage" includes the fair and reasonable value
of boards customarily furnished by the employer to the employees. If We are to follow the theory
of the herein petitioners, then a crew member, who used to receive a monthly wage of P100.00,
before August 4, 1951, with no deduction for meals, after said date, would receive only P86.00
monthly (after deducting the cost of his meals at P.40 per meal), which would be very much less
than the P122.00 monthly minimum wage, fixed in accordance with the Minimum Wage Law.
Instead of benefiting him, the law will adversely affect said crew member. Such interpretation
does not conform with the avowed intention of Congress in enacting the said law.
One should not overlook a fact fully established, that only unlicensed crew members
were made to pay for their meals or food, while the deck officers and marine engineers receiving
higher pay and provided with better victuals, were not. This pictures in no uncertain terms, a
great and unjust discrimination obtaining in the present case.
c. Equal pay for work of equal value
International School Alliance of Educators vs. Quisumbing, G.R. No. 128845, June 1, 2000,
Kapunan, J.
Doctrine. The foregoing provisions (general principles of law and the Constitution)
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
Christian V. Asas
Page 163
==============================================
responsibility, under similar conditions, should be paid similar salaries. 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. 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 Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National
Labor Relations Commission, 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.
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," "to afford labor full protection." The State, therefore, has the right and duty to regulate
the relations between labor and capital. These relations are not merely contractual but are so
impressed with public interest that labor contracts, collective bargaining agreements included,
Christian V. Asas
Page 164
==============================================
must yield to the common good. 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.
d. Withholding of wages
SHS Perforated Materials vs. Diaz, G.R. No. 185814, October 13, 2010, Mendoza, J.
Doctrine. ART. 116. Withholding of wages and kickbacks prohibited. – It shall be

unlawful for any person, directly or indirectly, to withhold any amount from the wages of a
worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by
any other means whatsoever without the worker’s consent.
Any withholding of an employee’s wages by an employer may only be allowed in the

form of wage deductions under the circumstances provided in Article 113 of the Labor Code, as
set forth below:
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off
has been recognized by the employer or authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
As correctly pointed out by the LA, "absent a showing that the withholding of
complainant’s wages falls under the exceptions provided in Article 113, the withholding thereof
is thus unlawful."
Milan vs. NLRC, G.R. No. 202961, February 4, 2015, Leonen, J. (*This is a possible Bar
problem)
Christian V. Asas
Page 165
==============================================
ISSUE: Is the refusal to return company’s property a valid reason under Art. 113(c) to withhold
employee’s separation benefits?
HELD: Yes. The Civil Code provides that the employer is authorized to withhold wages for
debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer
.
"Debt" in this case refers to any obligation due from the employee to the employer. It
includes any accountability that the employee may have to the employer. There is no reason to
limit its scope to uniforms and equipment, as petitioners would argue.
More importantly, respondent Solid Mills and NAFLU, the union representing
petitioners, agreed that the release of petitioners’ benefits shall be "less accountabilities."
"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning
of the term "accountability" does not limit the definition of accountability to those incurred in the
worksite. As long as the debt or obligation was incurred by virtue of the employer-employee
relationship, generally, it shall be included in the employee’s accountabilities that are subject to
clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in respondent Solid
Mills’ property. However, this alone does not imply that this privilege when enjoyed was not a
result of the employer-employee relationship. Those who did avail of the privilege were
employees of respondent Solid Mills. Petitioners’ possession should, therefore, be included in the
term "accountability."
Accountabilities of employees are personal. They need not be uniform among all
employees in order to be included in accountabilities incurred by virtue of an employer-
employee relationship. Petitioners do not categorically deny respondent Solid Mills’ ownership
of the property, and they do not claim superior right to it. What can be gathered from the findings
ofthe Labor Arbiter, National Labor Relations Commission, and the Court ofAppeals is that
respondent Solid Mills allowed the use of its property for the benefit of petitioners as its
employees. Petitioners were merely allowed to possess and use it out of respondent Solid Mills’
liberality. The employer may, therefore, demand the property at will.
The return of the property’s possession became an obligation or liability on the part of the
employees when the employer-employee relationship ceased. Thus, respondent Solid Mills has
the right to withhold petitioners’ wages and benefits because of this existing debt or liability. In
Solas v. Power and Telephone Supply Phils., Inc., et al., this court recognized this right of the
employer when it ruled that the employee in that case was not constructively dismissed. Thus:
Christian V. Asas
Page 166
==============================================
There was valid reason for respondents’ withholding of petitioner’s salary for the month
of February 2000. Petitioner does not deny that he is indebted to his employer in the amount of
around 95,000.00. Respondents explained that petitioner’s salary for the period of February 1-15,
2000 was applied as partial payment for his debt and for withholding taxes on his income; while
for the period of February 15-28, 2000, petitioner was already on absence without leave, hence,
was not entitled to any pay.
The law does not sanction a situation where employees who do not even assert any claim
over the employer’s property are allowed to take all the benefits out of their employment while
they simultaneously withhold possession of their employer’s property for no rightful reason.
Withholding of payment by the employer does not mean that the employer may renege on its
obligation to pay employees their wages, termination payments, and due benefits. The
employees’ benefits are also not being reduced. It is only subjected to the condition that the
employees return properties properly belonging to the employer. This is only consistent with the
equitable principle that "no one shall be unjustly enriched or benefited at the expense of another."
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld
separation benefits. These benefits were properly withheld by respondent Solid Mills because of
their refusal to return its property.
e. Direct payment principle
d. Non-diminution of benefits principle
Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-NLU, G.R. No.
188949, July 26, 2010, Nachura, J.
Doctrine. As correctly ruled by the CA, the practice of petitioner in giving 13th-month
pay based on the employees’ gross annual earnings which included the basic monthly salary,
premium pay for work on rest days and special holidays, night shift differential pay and holiday
pay continued for almost thirty (30) years and has ripened into a company policy or practice
which cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates
that benefits given to employees cannot be taken back or reduced unilaterally by the employer
because the benefit has become part of the employment contract, written or unwritten. The rule
against diminution of benefits applies if it is shown that the grant of the benefit is based on an
express policy or has ripened into a practice over a long period of time and that the practice is
consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the
construction or application of a doubtful or difficult question of law. But even in cases of error, it
should be shown that the correction is done soon after discovery of the error.
The argument of petitioner that the grant of the benefit was not voluntary and was due to
error in the interpretation of what is included in the basic salary deserves scant consideration. No
Christian V. Asas
Page 167
==============================================
doubtful or difficult question of law is involved in this case. The guidelines set by the law are not
difficult to decipher. The voluntariness of the grant of the benefit was manifested by the number
of years the employer had paid the benefit to its employees. Petitioner only changed the formula
in the computation of the 13th-month pay after almost 30 years and only after the dispute
between the management and employees erupted. This act of petitioner in changing the formula
at this time cannot be sanctioned, as it indicates a badge of bad faith.
g. Preferential right in case of bankruptcy
DBP vs. NLRC, G.R. Nos. 100264-81, January 29, 1993, Gutierrez, J. (*This was asked in
the 2016 Jurist Mock Bar Examination)
Doctrine. We have repeatedly stressed that before the workers' preference provided by Article
110 may be invoked, there must first be a declaration of bankruptcy or a judicial liquidation of
the employer's business.
In DBP v. Santos, supra, the Court discussed the import of Article 110 and Section 10 of
Rule VIII, Book III and stated:
It is quite clear from the provisions that a declaration of bankruptcy or a judicial

liquidation must be present before the worker's preference may be enforced. Thus, Article 110 of
the Labor Code and its implementing rule cannot be invoked by the respondents in this case
absent a formal declaration of bankruptcy or a liquidation order.
xxx xxx xxx
Moreover, the reason behind the necessity for a judicial proceeding or a proceeding in
rem before the concurrence and preference of credits may be applied was explained by this Court
in the case of Philippines Savings Bank v. Lantin. We said:
The proceedings in the court below do not partake of the nature of the insolvency
proceedings or settlement of a decedent's estate. The action filed by Ramos was only to collect
the unpaid cost of the construction of the duplex apartment. It is far from being a general
liquidation of the estate of the Tabligan spouses.
Insolvency proceedings and settlement of a decedent's estate are both proceedings in

rem which are binding against the whole world. All persons having interest in the subject matter
involved, whether they were notified or not, are equally bound. Consequently, a liquidation of
similar import or other equivalent general liquidation must also necessarily be a proceeding in
rem so that all interested persons whether known to the parties or not may be bound by such
proceeding.
In the case at bar, although the lower court found that "there were no known creditors
other than the plaintiff and the defendant herein", this cannot be conclusive. It will not bar other
creditors in the event they show up and present their claims against the petitioner bank, claiming
that they also have preferred liens against the property involved. Consequently, Transfer
Christian V. Asas
Page 168
==============================================
Certificate of Title No. 101864 issued in favor of the bank which is supposed to be indefeasible
would remain constantly unstable and questionable. Such could not have been the intention of
Article 2243 of the Civil Code although it considers claims and credits under Article 2242 as
statutory liens. Neither does the De Barreto case . . . .
The claims of all creditors whether preferred or non-preferred, the identification of the
preferred ones and the totality of the employer's asset should be brought into the picture. There
can then be an authoritative, fair, and binding adjudication instead of the piece meal settlement
which would result from the questioned decision in this case.
The NLRC, therefore, committed grave abuse of discretion when it affirmed the labor
arbiter's ruling that the workers' preference espoused in Article 110 may be applied even in the
absence of a declaration of bankruptcy or a liquidation order.
We must also emphasize that DBP's lien on RHI's mortgaged assets, being a mortgage
credit, is a special preferred credit under Article 2242 of the Civil Code while the workers'
preference is an ordinary preferred credit under Article 2244.
Thus, in DBP v. NLRC, it was held: A distinction should be made between a preference
of credit and a lien. A preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The right of first preference as regards
unpaid wages recognized by Article 110 does not constitute a lien on the property of the
insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in
application. It is a method adopted to determine and specify the order in which credits should be
paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor.
In the words of Republic v. Peralta, Article 110 of the Labor Code does not purport to
create a lien in favor of workers or employees for unpaid wages either upon all of the properties
or upon any particular property owned by their employer. Claims for unpaid wages do not
therefore fall at all within the category of specially preferred claims established under Articles
2241 and 2242 of the Civil Code, except to the extent that such claims for unpaid wages are
already covered Article 2241, number 6: "claims for laborers" wages, on the goods manufactured
or the work done; or by Article 2242, number 3: "claims of laborers and other workers engaged
in the construction, reconstruction or repair of buildings, canals and other works, upon said
buildings, canals and other works. To the extent that claims for unpaid wages fall outside the
scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the
category of ordinary preferred credits under Article 2244.
The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately
subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment
of the obligation for whose security it was constituted (Article 2176, Civil Code). It creates a real
right which is enforceable against the whole world. It is a lien on an identified immovable
Christian V. Asas
Page 169
==============================================
property, which a preference is not. A recorded mortgage credit is a special preferred credit under
Article 2242 (5) of the Civil Code on classification of credits. The preference given by Article
110, when not falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and not
attached to any specific property, is an ordinary preferred credit although its impact is to move it
from second priority to first priority in the order of preference established by Article 2244 of the
Civil Code.
Clearly, even if DBP and the private respondents assert their preferred credits in a judicial
proceeding, the former's claim must first be satisfied.
Article 110 of the Labor Code has been amended by R.A. No. 6715 and now reads:
Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards their unpaid wages and
other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid
wages, and monetary claims shall be paid in full before the claims of the Government and other
creditors may be paid.
We ruled in DBP v. NLRC, supra, that the amendment "expands worker preference to
cover not only unpaid wages but also other monetary claims to which even claims of the
Government must be deemed subordinate." Hence, under the new law, even mortgage credits are
subordinate to workers' claims.
In this connection, respondent NLRC ruled: Lastly, while we are cognizant of the
pronouncement of the Supreme Court with respect to Art. 110 and while we hold in respect said
pronouncements, we are of the earnest view that considering that Art. 110 has been amended by
RA 6715, complainants' preference over government claims and other creditors be adhered to.
R.A. No. 6715, however, took effect only on March 21, 1989. The amendment cannot
therefore be retroactively applied to, nor can it affect, the mortgage credit which was secured by
the petitioner several years prior to its effectivity.
This was our pronouncement in DBP v. NLRC: Even if Article 110 and its Implementing
Rule, as amended, should be interpreted to mean "absolute preference," the same should be given
only prospective effect in line with the cardinal rule that laws shall have no retroactive effect,
unless the contrary is provided (Article 4, Civil Code). Thereby, any infringement on the
constitutional guarantee on non-impairment of the obligation of contracts (Section 10, Article III,
1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit antedated by several
years the amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe
out the mortgage in DBP's favor and expose it to a risk which it sought to protect itself against by
requiring a collateral in the form of real property.
h. Attorney’s Fees
Christian V. Asas
Page 170
==============================================
Traders Royal Bank vs. NLRC, G.R. No. 120592, March 14, 1997, Regalado, J. (2016 Bar)
Doctrine. There are two commonly accepted concepts of attorney's fees, the so-called
ordinary and extraordinary. In its ordinary concept, an attorney's fee is the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to the latter.
The basis of this compensation is the fact of his employment by and his agreement with the
client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The basis of this is any of the cases provided
by law where such award can be made, such as those authorized in Article 2208, Civil Code, and
is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain
to the lawyer as additional compensation or as part thereof.
It is the first type of attorney's fees which private respondent demanded before the labor
arbiter. Also, the present controversy stems from petitioner's apparent misperception that the
NLRC has jurisdiction over claims for attorney's fees only before its judgment is reviewed and
ruled upon by the Supreme Court, and that thereafter the former may no longer entertain claims
for attorney's fees.
It will be noted that no claim for attorney's fees was filed by private respondent before
the NLRC when it acted on the money claims of petitioner, nor before the Supreme Court when
it reviewed the decision of the NLRC. It was only after the High Tribunal modified the judgment
of the NLRC awarding the differentials that private respondent filed his claim before the NLRC
for a percentage thereof as attorney's fees.
It would obviously have been impossible, if not improper, for the NLRC in the first
instance and for the Supreme Court thereafter to make an award for attorney's fees when no
claim therefor was pending before them. Courts generally rule only on issues and claims
presented to them for adjudication. Accordingly, when the labor arbiter ordered the payment of
attorney's fees, he did not in any way modify the judgment of the Supreme Court.
As an adjunctive episode of the action for the recovery of bonus differentials in NLRC-
NCR Certified Case No. 0466, private respondent's present claim for attorney's fees may be filed
before the NLRC even though or, better stated, especially after its earlier decision had been
reviewed and partially affirmed. It is well settled that a claim for attorney's fees may be asserted
either in the very action in which the services of a lawyer had been rendered or in a separate
action.
With respect to the first situation, the remedy for recovering attorney's fees as an incident
of the main action may be availed of only when something is due to the client. Attorney's fees
cannot be determined until after the main litigation has been decided and the subject of the
Christian V. Asas
Page 171
==============================================
recovery is at the disposition of the court. The issue over attorney's fees only arises when
something has been recovered from which the fee is to be paid.
While a claim for attorney's fees may be filed before the judgment is rendered, the
determination as to the propriety of the fees or as to the amount thereof will have to be held in
abeyance until the main case from which the lawyer's claim for attorney's fees may arise has
become final. Otherwise, the determination to be made by the courts will be premature. Of
course, a petition for attorney's fees may be filed before the judgment in favor of the client is
satisfied or the proceeds thereof delivered to the client.
It is apparent from the foregoing discussion that a lawyer has two options as to when to
file his claim for professional fees. Hence, private respondent was well within his rights when he
made his claim and waited for the finality of the judgment for holiday pay differential, instead of
filing it ahead of the award's complete resolution. To declare that a lawyer may file a claim for
fees in the same action only before the judgment is reviewed by a higher tribunal would deprive
him of his aforestated options and render ineffective the foregoing pronouncements of this Court.
Assailing the rulings of the labor arbiter and the NLRC, petitioner union insists that it is not
guilty of unjust enrichment because all attorney's fees due to private respondent were covered by
the retainer fee of P3,000.00 which it has been regularly paying to private respondent under their
retainer agreement. To be entitled to the additional attorney's fees as provided in Part D (Special
Billings) of the agreement, it avers that there must be a separate mutual agreement between the
union and the law firm prior to the performance of the additional services by the latter. Since
there was no agreement as to the payment of the additional attorney's fees, then it is considered
waived.
It is elementary that an attorney is entitled to have and receive a just and reasonable
compensation for services performed at the special instance and request of his client. As long as
the lawyer was in good faith and honestly trying to represent and serve the interests of the client,
he should have a reasonable compensation for such services. It will thus be appropriate, at this
juncture, to determine if private respondent is entitled to an additional remuneration under the
retainer agreement entered into by him and petitioner.
The parties subscribed therein to the following stipulations:

xxx xxx xxx
The Law Firm shall handle cases and extend legal services under the parameters of the
following terms and conditions:
A. GENERAL SERVICES
1. Assurance that an Associate of the Law Firm shall be designated and be
available on a day-to-day basis depending on the Union's needs;
2. Legal consultation, advice and render opinion on any actual and/or anticipatory
situation confronting any matter within the client's normal course of business;
3. Proper documentation and notarization of any or all transactions entered into by
the Union in its day-to-day course of business;
Christian V. Asas
Page 172
==============================================
4. Review all contracts, deeds, agreements or any other legal document to which
the union is a party signatory thereto but prepared or caused to be prepared by any
other third party;
5. Represent the Union in any case wherein the Union is a party litigant in any
court of law or quasi-judicial body subject to certain fees as qualified hereinafter;
6. Lia(i)se with and/or follow-up any pending application or any papers with any
government agency and/or any private institution which is directly related to any
legal matter referred to the Law Firm.
B. SPECIAL LEGAL SERVICES

1. Documentation of any contract and other legal instrument/documents arising
and/or required by your Union which do not fall under the category of its ordinary
course of business activity but requires a special, exhaustive or detailed study and
preparation;
2. Conduct or undertake researches and/or studies on special projects of the
Union;
3. Render active and actual participation or assistance in conference table
negotiations with TRB management or any other third person(s), juridical or
natural, wherein the presence of counsel is not for mere consultation except CBA
negotiations which shall be subject to a specific agreement (pursuant to PD 1391
and in relation to BP 130 & 227);
4. Preparation of Position Paper(s), Memoranda or any other pleading for and in
behalf of the Union;
5. Prosecution or defense of any case instituted by or against the Union; and,
6. Represent any member of the Union in any proceeding provided that the
particular member must give his/her assent and that prior consent be granted by
the principal officers. Further, the member must conform to the rules and policies
of the Law Firm.
C. FEE STRUCTURE
In consideration of our commitment to render the services enumerated above
when required or necessary, your Union shall pay a monthly retainer fee of
THREE THOUSAND PESOS (PHP 3,000.00), payable in advance on or before
the fifth day of every month.
An Appearance Fee which shall be negotiable on a case-to-case basis.

Any and all Attorney's Fees collected from the adverse party by virtue of a
successful litigation shall belong exclusively to the Law Firm.
It is further understood that the foregoing shall be without prejudice to our claim
for reimbursement of all out-of-pocket expenses covering filing fees,
transportation, publication costs, expenses covering reproduction or
authentication of documents related to any matter referred to the Law Firm or that
which redound to the benefit of the Union.
Christian V. Asas
Page 173
==============================================
D. SPECIAL BILLINGS
In the event that the Union avails of the services duly enumerated in Title B, the
Union shall pay the Law Firm an amount mutually agreed upon PRIOR to the
performance of such services. The sum agreed upon shall be based on actual time
and effort spent by the counsel in relation to the importance and magnitude of the
matter referred to by the Union. However, charges may be WAIVED by the Law
Firm if it finds that time and efforts expended on the particular services are
inconsequential but such right of waiver is duly reserved for the Law Firm.
xxx xxx xxx
The provisions of the above contract are clear and need no further interpretation; all that
is required to be done in the instant controversy is its application. The P3,000.00 which petitioner
pays monthly to private respondent does not cover the services the latter actually rendered before
the labor arbiter and the NLRC in behalf of the former. As stipulated in Part C of the agreement,
the monthly fee is intended merely as a consideration for the law firm's commitment to render the
services enumerated in Part A (General Services) and Part B (Special Legal Services) of the
retainer agreement.
The difference between a compensation for a commitment to render legal services and a
remuneration for legal services actually rendered can better be appreciated with a discussion of
the two kinds of retainer fees a client may pay his lawyer. These are a general retainer, or a
retaining fee, and a special retainer.
A general retainer, or retaining fee, is the fee paid to a lawyer to secure his future services
as general counsel for any ordinary legal problem that may arise in the routinary business of the
client and referred to him for legal action. The future services of the lawyer are secured and
committed to the retaining client. For this, the client pays the lawyer a fixed retainer fee which
could be monthly or otherwise, depending upon their arrangement. The fees are paid whether or
not there are cases referred to the lawyer. The reason for the remuneration is that the lawyer is
deprived of the opportunity of rendering services for a fee to the opposing party or other parties.
In fine, it is a compensation for lost opportunities.
A special retainer is a fee for a specific case handled or special service rendered by the
lawyer for a client. A client may have several cases demanding special or individual attention. If
for every case there is a separate and independent contract for attorney's fees, each fee is
considered a special retainer.
As to the first kind of fee, the Court has had the occasion to expound on its concept
in Hilado vs. David in this wise:
There is in legal practice what is called a "retaining fee," the purpose of which
stems from the realization that the attorney is disabled from acting as counsel for
Christian V. Asas
Page 174
==============================================
the other side after he has given professional advice to the opposite party, even if
he should decline to perform the contemplated services on behalf of the latter. It is
to prevent undue hardship on the attorney resulting from the rigid observance of
the rule that a separate and independent fee for consultation and advice was
conceived and authorized. "A retaining fee is a preliminary fee given to an
attorney or counsel to insure and secure his future services, and induce him to act
for the client. It is intended to remunerate counsel for being deprived, by being
retained by one party, of the opportunity of rendering services to the other and of
receiving pay from him, and the payment of such fee, in the absence of an express
understanding to the contrary, is neither made nor received in payment of the
services contemplated; its payment has no relation to the obligation of the client
to pay his attorney for the services for which he has retained him to perform."
Evidently, the P3,000.00 monthly fee provided in the retainer agreement between the
union and the law firm refers to a general retainer, or a retaining fee, as said monthly fee covers
only the law firm's pledge, or as expressly stated therein, its "commitment to render the legal
services enumerated." The fee is not payment for private respondent's execution or performance
of the services listed in the contract, subject to some particular qualifications or permutations
stated there.
Generally speaking, where the employment of an attorney is under an express valid

contract fixing the compensation for the attorney, such contract is conclusive as to the amount of
compensation. We cannot, however, apply the foregoing rule in the instant petition and treat the
fixed fee of P3,000.00 as full and sufficient consideration for private respondent's services, as
petitioner would have it.
We have already shown that the P3,000.00 is independent and different from the
compensation which private respondent should receive in payment for his services. While
petitioner and private respondent were able to fix a fee for the latter's promise to extend services,
they were not able to come into agreement as to the law firm's actual performance of services in
favor of the union. Hence, the retainer agreement cannot control the measure of remuneration for
private respondent's services.
We, therefore, cannot favorably consider the suggestion of petitioner that private
respondent had already waived his right to charge additional fees because of their failure to come
to an agreement as to its payment.
Firstly, there is no showing that private respondent unequivocally opted to waive the
additional charges in consonance with Part D of the agreement. Secondly, the prompt actions
taken by private respondent, i.e., serving notice of charging lien and filing of motion to
determine attorney's fees, belie any intention on his part to renounce his right to compensation
for prosecuting the labor case instituted by the union. And, lastly, to adopt such theory of
petitioner may frustrate private respondent's right to attorney's fees, as the former may simply
Christian V. Asas
Page 175
==============================================
and unreasonably refuse to enter into any special agreement with the latter and conveniently
claim later that the law firm had relinquished its right because of the absence of the same.
The fact that petitioner and private respondent failed to reach a meeting of the minds with
regard to the payment of professional fees for special services will not absolve the former of civil
liability for the corresponding remuneration therefor in favor of the latter.
Obligations do not emanate only from contracts. One of the sources of extra-contractual
obligations found in our Civil Code is the quasi-contract premised on the Roman maxim
that nemo cum alterius detrimento locupletari protest. As embodied in our law, certain lawful,
voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense of another.
A quasi-contract between the parties in the case at bar arose from private respondent's
lawful, voluntary and unilateral prosecution of petitioner's cause without awaiting the latter's
consent and approval. Petitioner cannot deny that it did benefit from private respondent's efforts
as the law firm was able to obtain an award of holiday pay differential in favor of the union. It
cannot even hide behind the cloak of the monthly retainer of P3,000.00 paid to private
respondent because, as demonstrated earlier, private respondent's actual rendition of legal
services is not compensable merely by said amount.
Private respondent is entitled to an additional remuneration for pursuing legal action in

the interest of petitioner before the labor arbiter and the NLRC, on top of the P3,000.00 retainer
fee he received monthly from petitioner. The law firm's services are decidedly worth more than
such basic fee in the retainer agreement. Thus, in Part C thereof on "Fee Structure," it is even
provided that all attorney's fees collected from the adverse party by virtue of a successful
litigation shall belong exclusively to private respondent, aside from petitioner's liability for
appearance fees and reimbursement of the items of costs and expenses enumerated therein.
A quasi-contract is based on the presumed will or intent of the obligor dictated by equity
and by the principles of absolute justice. Some of these principles are: (1) It is presumed that a
person agrees to that which will benefit him; (2) Nobody wants to enrich himself unjustly at the
expense of another; and (3) We must do unto others what we want them to do unto us under the
same circumstances.
As early as 1903, we allowed the payment of reasonable professional fees to an

interpreter, notwithstanding the lack of understanding with his client as to his remuneration, on
the basis of quasi-contract. Hence, it is not necessary that the parties agree on a definite fee for
the special services rendered by private respondent in order that petitioner may be obligated to
pay compensation to the former. Equity and fair play dictate that petitioner should pay the same
after it accepted, availed itself of, and benefited from private respondent's services.
Christian V. Asas
Page 176
==============================================
We are not unaware of the old ruling that a person who had no knowledge of, nor
consented to, or protested against the lawyer's representation may not be held liable for attorney's
fees even though he benefited from the lawyer's services. But this doctrine may not be applied in
the present case as petitioner did not object to private respondent's appearance before the NLRC
in the case for differentials.
Viewed from another aspect, since it is claimed that petitioner obtained respondent's legal
services and assistance regarding its claims against the bank, only they did not enter into a
special contract regarding the compensation therefor, there is at least the innominate contract
of facio ut des (I do that you may give). This rule of law, likewise founded on the principle
against unjust enrichment, would also warrant payment for the services of private respondent
which proved beneficial to petitioner's members. In any case, whether there is an agreement or
not, the courts can fix a reasonable compensation which lawyers should receive for their
professional services. However, the value of private respondent's legal services should not be
established on the basis of Article 111 of the Labor Code alone. Said article provides:
Art. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney's fees equivalent to ten percent of the
amount of the wages recovered.
xxx xxx xxx
The implementing provision of the foregoing article further states:

Sec. 11. Attorney's fees. — Attorney's fees in any judicial or administrative
proceedings for the recovery of wages shall not exceed 10% of the amount
awarded. The fees may be deducted from the total amount due the winning party.
In the first place, the fees mentioned here are the extraordinary attorney's fees recoverable
as indemnity for damages sustained by and payable to the prevailing part. In the second place,
the ten percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section
11, Rule VIII, Book III of the Implementing Rules is the maximum of the award that may thus be
granted. Article 111 thus fixes only the limit on the amount of attorney's fees the victorious party
may recover in any judicial or administrative proceedings and it does not even prevent the NLRC
from fixing an amount lower than the ten percent (10%) ceiling prescribed by the article when
circumstances warrant it.
The measure of compensation for private respondent's services as against his client
should properly be addressed by the rule of quantum meruit long adopted in this
jurisdiction. Quantum meruit, meaning "as much as he deserves," is used as the basis for
determining the lawyer's professional fees in the absence of a contract, but recoverable by him
from his client.
Christian V. Asas
Page 177
==============================================
Where a lawyer is employed without a price for his services being agreed upon, the
courts shall fix the amount on quantum meruit basis. In such a case, he would be entitled to
receive what he merits for his services.
It is essential for the proper operation of the principle that there is an acceptance of the
benefits by one sought to be charged for the services rendered under circumstances as reasonably
to notify him that the lawyer performing the task was expecting to be paid compensation
therefor. The doctrine of quantum meruit is a device to prevent undue enrichment based on the
equitable postulate that it is unjust for a person to retain benefit without paying for it.
Over the years and through numerous decisions, this Court has laid down guidelines in
ascertaining the real worth of a lawyer's services. These factors are now codified in Rule 20.01,
Canon 20 of the Code of Professional Responsibility and should be considered in fixing a
reasonable compensation for services rendered by a lawyer on the basis of quantum meruit.
These are: (a) the time spent and the extent of services rendered or required; (b) the novelty and
difficulty of the questions involved; (c) the importance of the subject matter; (d) the skill
demanded; (e) the probability of losing other employment as a result of acceptance of the
proffered case; (f) the customary charges for similar services and the schedule of fees of the IBP
chapter to which the lawyer belongs; (g) the amount involved in the controversy and the benefits
resulting to the client from the services; (h) the contingency or certainty of compensation; (i) the
character of the employment, whether occasional or established; and (j) the professional standing
of the lawyer.
Here, then, is the flaw we find in the award for attorney's fees in favor of private
respondent. Instead of adopting the above guidelines, the labor arbiter forthwith but erroneously
set the amount of attorney's fees on the basis of Article 111 of the Labor Code. He completely
relied on the operation of Article 111 when he fixed the amount of attorney's fees at
P17,574.43. Observe the conclusion stated in his order.
xxx xxx xxx

FIRST. Art. 111 of the Labor Code, as amended, clearly declares movant's right to
a ten (10%) per cent of the award due its client. In addition, this right to ten (10%)
per cent attorney's fees is supplemented by Sec. 111, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code, as amended.
xxx xxx xxx
As already stated, Article 111 of the Labor Code regulates the amount recoverable as
attorney's fees in the nature of damages sustained by and awarded to the prevailing party. It may
not be used therefore, as the lone standard in fixing the exact amount payable to the lawyer by
his client for the legal services he rendered. Also, while it limits the maximum allowable amount
of attorney's fees, it does not direct the instantaneous and automatic award of attorney's fees in
such maximum limit.
Christian V. Asas
Page 178
==============================================
It, therefore, behooves the adjudicator in questions and circumstances similar to those in
the case at bar, involving a conflict between lawyer and client, to observe the above guidelines in
cases calling for the operation of the principles of quasi-contract and quantum meruit, and to
conduct a hearing for the proper determination of attorney's fees. The criteria found in the Code
of Professional Responsibility are to be considered, and not disregarded, in assessing the proper
amount. Here, the records do not reveal that the parties were duly heard by the labor arbiter on
the matter and for the resolution of private respondent's fees.
It is axiomatic that the reasonableness of attorney's fees is a question of fact. Ordinarily,

therefore, we would have remanded this case for further reception of evidence as to the extent
and value of the services rendered by private respondent to petitioner. However, so as not to
needlessly prolong the resolution of a comparatively simple controversy, we deem it just and
equitable to fix in the present recourse a reasonable amount of attorney's fees in favor of private
respondent. For that purpose, we have duly taken into account the accepted guidelines therefor
and so much of the pertinent data as are extant in the records of this case which are assistive in
that regard. On such premises and in the exercise of our sound discretion, we hold that the
amount of P10,000.00 is a reasonable and fair compensation for the legal services rendered by
private respondent to petitioner before the labor arbiter and the NLRC
i. Wage Order
j. Wage distortion
P.I. Manufacturing vs. P.P. Manufacturing Supervisors and Foremen Association, G.R. No.
167217, February 4, 2008, Sandoval-Gutierrez, J.
FACTS: The President signed into law Republic Act (R.A.) No. 6640 providing, among
others, an increase in the statutory minimum wage and salary rates of employees and workers in
the private sector.
ISSUE: Is wage distortion present in this case?
HELD: Yes. R.A. No. 6727 (Wage Rationalization Act) explicitly defines "wage distortion" as:
x x x a situation where an increase in prescribed wage rates results in the elimination or severe
contraction of intentional quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical bases of differentiation.
Otherwise stated, wage distortion means the disappearance or virtual disappearance of

pay differentials between lower and higher positions in an enterprise because of compliance with
a wage order. In this case, the Court of Appeals correctly ruled that a wage distortion occurred
due to the implementation of R.A. No. 6640.
Christian V. Asas
Page 179
==============================================
Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00 in the
wage rates of Alcantara, supervisor, and Morales and Salvo, both foremen. They are
petitioner’s lowest paid supervisor and foremen. As a consequence, the increased wage rates
of foremen Morales and Salvo exceeded that of supervisor Buencuchillo. Also, the increased
wage rate of supervisor Alcantara exceeded those of supervisors Buencuchillo and Del
Prado. Consequently, the P9.79 gap or difference between the wage rate of supervisor Del Prado
and that of supervisor Alcantara was eliminated. Instead, the latter gained a P.21 lead over Del
Prado. Like a domino effect, these gaps or differences between and among the wage rates of all
the above employees have been substantially altered and reduced. It is therefore undeniable
that the increase in the wage rates by virtue of R.A. No. 6640 resulted in wage distortion or the
elimination of the intentional quantitative differences in the wage rates of the above
employees.
However, while we find the presence of wage distortions, we are convinced that the same
were cured or remedied when respondent PIMASUFA entered into the 1987 CBA with
petitioner after the effectivity of R.A. No. 6640. The 1987 CBA increased the monthly salaries of
the supervisors by P625.00 and the foremen, by P475.00, effective May 12, 1987. These
increases re-established and broadened the gap, not only between the supervisors and the
foremen, but also between them and the rank-and-file employees. Significantly, the 1987 CBA
wage increases almost doubled that of the P10.00 increase under R.A. No. 6640.
The P625.00/month means P24.03 increase per day for the supervisors, while
the P475.00/month means P18.26 increase per day for the foremen. These increases were to be
observed every year, starting May 12, 1987 until July 26, 1989. Clearly, the gap between the
wage rates of the supervisors and those of the foremen was inevitably re-established. It continued
to broaden through the years.
Interestingly, such gap as re-established by virtue of the CBA is more than a substantial
compliance with R.A. No. 6640.
Prubankers Association vs. Prudential Bank & Trust Company, G.R. No. 131247, January
25, 1999, Panganiban, J.
ISSUE: Is wage distortion present in this case?
HELD: No. Elaborating on this statutory definition, this Court ruled: "Wage distortion
presupposes a classification of positions and ranking of these positions at various levels. One
visualizes a hierarchy of positions with corresponding ranks basically in terms of wages and
other emoluments. Where a significant change occurs at the lowest level of positions in terms of
basic wage without a corresponding change in the other level in the hierarchy of positions,
negating as a result thereof the distinction between one level of position from the next higher
level, and resulting in a parity between the lowest level and the next higher level or rank,
between new entrants and old hires, there exists a wage distortion. . . . . The concept of a wage
distortion assumes an existing grouping or classification of employees which establishes
Christian V. Asas
Page 180
==============================================
distinctions among such employees on some relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the existing classes of employees"
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary rates;
2. A significant change in the salary rate of a lower pay class without a

concomitant increase in the salary rate of a higher one;
3. The elimination of the distinction between the two levels; and
4. The existence of the distortion in the same region of the country.
In the present case, it is clear that no wage distortion resulted when respondent
implemented the subject Wage Orders in the covered branches. In the said branches, there was an
increase in the salary rates of all pay classes. Furthermore, the hierarchy of positions based on
skills, lengh of service and other logical bases of differentiation was preserved. In other words,
the quantitative difference in compensation between different pay classes remained the same in
all branches in the affected region. Put differently, the distinction between Pay Class 1 and Pay
Class 2, for example, was not eliminated as a result of the implementation of the two Wage
Orders in the said region. Hence, it cannot be said that there was a wage distortion.
Petitioner argues that a wage distortion exists, because the implementation of the two
Wage Orders has resulted in the discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains that, as a result of the two Wage
Orders, the employees in the affected regions have higher compensation than their counterparts
of the same level in other regions. Several tables are presented by petitioner to illustrate that the
employees in the regions covered by the Wage Orders are receiving more than their counterparts
in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees in different rungs, is not at
issue here, but a wage disparity between employees in the same rung but located in different
regions of the country.
Contrary to petitioner's postulation, a disparity in wages between employees holding

similar positions but in different regions does not constitute wage distortion as contemplated by
law. As previously enunciated, it is the hierarchy of positions and the disparity of their
corresponding wages and other emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when a wage order engenders wage
parity between employees in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves a parity in the salary rates
Christian V. Asas
Page 181
==============================================
of different pay classes which, as a result, eliminates the distinction between the different ranks
in the same region.
The claim of wage distortion shall also be denied on other reason. The difference in
wages between employees in the same pay scale in different regions is not the mischief sought to
be banished by the law. In fact, Republic Act No. 6727 (the Wage Rationalization Act),
recognizes "existing regional disparities in the cost of living."
From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity
in wages between employees with similar positions in different regions is necessarily expected.
In insisting that the employees of the same pay class in different regions should receive the same
compensation, petitioner has apparently misunderstood both the meaning of wage distortion and
the intent of the law to regionalize wage rates.
It must be understood that varying in each region of the country are controlling factors
such as the cost of living; supply and demand of basic goods, services and necessities; and the
purchasing power of the peso. Other considerations underscore the necessity of the law. Wages in
some areas may be increased in order to prevent migration to the National Capital Region and,
hence, to decongest the metropolis. Therefore, what the petitioner herein bewails is precisely
what the law provides in order to achieve its purpose.
Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant
to RA 6727 do not have the authority to issue wage orders based on the distinctive situations and
needs existing in each region. So also, . . . it does not insist that the [B]ank should not implement
regional wage orders. Neither does it seek to penalize the Bank for following Wage Order VII-
03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon a national
wage structure and replace the same with a regionalized structure in violation of the principle of
equal pay for equal work. And, it is wrong to say that its act of abandoning its national wage
structure is mandated by law."
As already discussed above, we cannot sustain this argument. Petitioner contradicts itself
in not objecting, on the one hand, to the right of the regional wage boards to impose a
regionalized wage scheme; while insisting, on the other hand, on a national wage structure for
the whole Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of
RA 6727.
The objective of the law also explains the wage disparity in the example cited by
petitioner: Armae Librero, though only in Pay Class 4 in Mabolo, was, as a result of the Wage
Order, receiving more than Bella Cristobal, who was already in Pay Class 5 in Subic. RA 6727
recognizes that there are different needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region does not necessarily mean that he
or she is better off than a person receiving less in another region. We must consider, among
others, such factors as cost of living, fulfillment of national economic goals, and standard of
Christian V. Asas
Page 182
==============================================
living. In any event, this Court, in its decisions, merely enforces the law. It has no power to pass
upon its wisdom or propriety.
Metrobank vs. National Wages and Productivity Commission, G.R. No. 144322, February
6, 2007, Austria-Martinez, J.
ISSUE: Can NWPC grant wage increase across the board? (*This was asked in the 2016 Jurist
Mock Bar Examination)
HELD. No. NWPC has authority to set minimum wage only. It cannot grant wage increase to
those already earning above minimum wage. R.A. No. 6727 declared it a policy of the State to
rationalize the fixing of minimum wages and to promote productivity-improvement and gain-
sharing measures to ensure a decent standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of production; to enhance employment
generation in the countryside through industrial dispersal; and to allow business and industry
reasonable returns on investment, expansion and growth.
In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the power
to prescribe rules and guidelines for the determination of appropriate minimum wage and
productivity measures at the regional, provincial or industry levels; and authorized the RTWPB
to determine and fix the minimum wage rates applicable in their respective regions, provinces, or
industries therein and issue the corresponding wage orders, subject to the guidelines issued by
the NWPC. Pursuant to its wage fixing authority, the RTWPB may issue wage orders which set
the daily minimum wage rates, based on the standards or criteria set by Article 124 of the Labor
Code.
In ECOP, the Court declared that there are two ways of fixing the minimum wage: the
"floor-wage" method and the "salary-ceiling" method. The "floor-wage" method involves the
fixing of a determinate amount to be added to the prevailing statutory minimum wage rates. On
the other hand, in the "salary-ceiling" method, the wage adjustment was to be applied to
employees receiving a certain denominated salary ceiling. In other words, workers already being
paid more than the existing minimum wage (up to a certain amount stated in the Wage Order) are
also to be given a wage increase.
To illustrate: under the "floor wage method", it would have been sufficient if the Wage
Order simply set P15.00 as the amount to be added to the prevailing statutory minimum wage
rates, while in the "salary-ceiling method", it would have been sufficient if the Wage Order states
a specific salary, such as P250.00, and only those earning below it shall be entitled to the salary
increase.
In the present case, the RTWPB did not determine or fix the minimum wage rate by the
"floor-wage method" or the "salary-ceiling method" in issuing the Wage Order. The RTWPB did
not set a wage level nor a range to which a wage adjustment or increase shall be added. Instead,
Christian V. Asas
Page 183
==============================================
it granted an across-the-board wage increase of P15.00 to all employees and workers of Region
2. In doing so, the RTWPB exceeded its authority by extending the coverage of the Wage Order
to wage earners receiving more than the prevailing minimum wage rate, without a denominated
salary ceiling. As correctly pointed out by the OSG, the Wage Order granted additional benefits
not contemplated by R.A. No. 6727.
In no uncertain terms must it be stressed that the function of promulgating rules and
regulations may be legitimately exercised only for the purpose of carrying out the provisions of a
law. The power of administrative agencies is confined to implementing the law or putting it into
effect. Corollary to this guideline is that administrative regulation cannot extend the law and
amend a legislative enactment. It is axiomatic that the clear letter of the law is controlling and
cannot be amended by a mere administrative rule issued for its implementation. Indeed,
administrative or executive acts, orders, and regulations shall be valid only when they are not
contrary to the laws or the Constitution.
Where the legislature has delegated to an executive or administrative officers and boards
authority to promulgate rules to carry out an express legislative purpose, the rules of
administrative officers and boards, which have the effect of extending, or which conflict with the
authority-granting statute, do not represent a valid exercise of the rule-making power but
constitute an attempt by an administrative body to legislate.
It has been said that when the application of an administrative issuance modifies existing
laws or exceeds the intended scope, as in this case, the issuance becomes void, not only for being
ultra vires, but also for being unreasonable.
Thus, the Court finds that Section 1, Wage Order No. R02-03 is void insofar as it grants a
wage increase to employees earning more than the minimum wage rate; and pursuant to the
separability clause of the Wage Order, Section 1 is declared valid with respect to employees
earning the prevailing minimum wage rate.
Prior to the passage of the Wage Order, the daily minimum wage rates in Region II was
set at P104.00 for the Province of Isabela, P103.00 for the Province of Cagayan, P101.00 for the
Province of Nueva Vizcaya, and P100.00 for the Provinces of Quirino and Batanes. Only
employees earning the above-stated minimum wage rates are entitled to the P15.00 mandated
increase under the Wage Order.
Section 24. Minimum Wage. – The minimum wage of domestic workers shall not be less
than the following:
(a) Two thousand five hundred pesos (P2,500.00) a month for those employed in the
National Capital Region (NCR);
Christian V. Asas
Page 184
==============================================
(b) Two thousand pesos (P2,000.00) a month for those employed in chartered cities and
first class municipalities; and
(c) One thousand five hundred pesos (P1,500.00) a month for those employed mother
municipalities.
After one (1) year from the effectivity of this Act, and periodically thereafter, the
Regional Tripartite and Productivity Wage Boards (RTPWBs) shall review, and if proper,
determine and adjust the minimum wage rates of domestic workers.
Section 25. Payment of Wages. – Payment of wages shall be made on time directly to the
domestic worker to whom they are due in cash at least once a month. The employer, unless
allowed by the domestic worker through a written consent, shall make no deductions from the
wages other than that which is mandated by law. No employer shall pay the wages of a domestic
worker by means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any object
other than the cash wage as provided for under this Act.
The domestic worker is entitled to a thirteenth month pay as provided for by law.
Section 26. Pay Slip. – The employer shall at all times provide the domestic worker with
a copy of the pay slip containing the amount paid in cash every pay day, and indicating all
deductions made, if any. The copies of the pay slip shall be kept by the employer for a period of
three (3) years.
Section 27. Prohibition on Interference in the Disposal of Wages. – It shall be unlawful

for the employer to interfere with the freedom of any domestic worker to dispose of the latter’s
wages. The employer shall not force, compel or oblige the domestic worker to purchase
merchandise, commodities or other properties from the employer or from any other person, or
otherwise make use of any store or services of such employer or any other person.
Section 28. Prohibition Against Withholding of Wages. – It shall be unlawful for an

employer, directly or indirectly, to withhold the wages of the domestic worker. If the domestic
worker leaves without any justifiable reason, any unpaid salary for a period not exceeding fifteen
(15) days shall be forfeited. Likewise, the employer shall not induce the domestic worker to give
up any part of the wages by force, stealth, intimidation, threat or by any other means whatsoever.
k. Visitorial and enforcement power
l. Adjudicatory power
Bay Haven vs. Abuan, G.R. No. 160859, July 30, 2008, Austria-Martinez, J. (2016 Bar
Examination)
Christian V. Asas
Page 185
==============================================
FACTS: Upon complaint of one of the respondents, Florentino Abuan, the DOLE, in the
exercise of its visitorial, inspection and enforcement powers, through its Regional Director (RD)
for the National Capital Region (NCR), issued an Order commanding petitioners to pay
respondents a total of P638,187.15 corresponding to the latter's claims for underpayment as
petitioners' workers. The order was based on the results the inspection conducted by one of the
inspectors of the RD showing that New Bay Haven Restaurant committed violation of Labor
Standards Law (underpayment of minimum wage, 13th moth pay, regular holiday, special holiday,
night-shift differential) and Occupational Safety and Health Standards (non-registration of the
firm under Rule 1020 of OSHS). The order of the RD was eventually affirmed by the DOLE
Secretary. Petitioners went to CA via petition for certiorari. Hence, the case reached the SC.
One of the contentions of the petitioners is that it is the NLRC which has jurisdiction over the
case and not the DOLE-NCR considering the amount of the claims involved.
ISSUE: Whether or not the DOLE-NCR has jurisdiction over this case pursuant to its visitorial
and enforcement power.
HELD: Yes. The visitorial and enforcement powers of the Secretary, exercised through his
representatives, encompass compliance with all labor standards laws and other labor legislation,
regardless of the amount of the claims filed by workers. This has been the rule since R.A. No.
7730 was enacted on June 2, 1994, amending Article 128(b) of the Labor Code, to expand the
visitorial and enforcement powers of the DOLE Secretary. Under the former rule, the DOLE
Secretary had jurisdiction only in cases where the amount of the claim does not exceed
P5,000.00.
The allegations of Abuan regarding illegal dismissal does not divest the DOLE-NCR of
its jurisdiction since it does not hold for other respondents. Under Art. 128, the Regional
Director can conduct inspections and check all violations of labor laws, and enforce compliance
measures for the benefit of all employees, without being compelled to rely on a complaint that
has been filed or its allegations. In fact, the article is silent on whether the filing of a complaint is
even required to initiate the exercise of the inspection and enforcement powers.
Moreover, the exception clause under Art. 128(b) is not applicable in this case. In order
for the said clause to apply, the following elements must concur: (a) that the employer contests
the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve
such issues, there is a need to examine evidentiary matters; and (c) that such matters are not
verifiable in the normal course of inspection. In the present case, the alleged pieces of evidence
of petitioner e.g. contract of lease, payroll sheets, and quitclaims were all verifiable in the normal
course of inspection and, granting that they were not examined by the labor inspector, they have
nevertheless been thoroughly examined by the Regional Director and the DOLE Secretary.
Ex-Bataan Veterans vs. Sec. of Labor, G.R. No. 152396, November 20, 2007, Carpio, J.
Christian V. Asas
Page 186
==============================================
FACTS: Private respondents led by Alexander Pocding (Pocding) instituted a complaint for
underpayment of wages against Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) before the
Regional Office of the Department of Labor and Employment (DOLE). The Regional Office
conducted a complaint inspection and noted certain violations (non-presentation of records, non-
payment of holiday pay, non-payment of rest day premium, underpayment of night shift
differential pay, non-payment of service incentive leave, underpayment of 13th month pay, no
registration, no annual medical report, no annual work accidental report, no safety committee,
and no trained first aider). The Regional Director issued an order ordering EBVSAI to pay the
affected employees the total amount of P763,997-85. Upon appeal to the Secretary of Labor, the
latter affirmed the RD. When the case reached the CA via petition for certiorari, the latter agreed
with the ruling of RD and the Secretary of Labor. Hence, the case reached the SC. It is the
contention of EBVSAI that RD has no jurisdiction over the case since the claims exceeds
P5,000.
ISSUE: Whether or not this case falls within the visitorial and enforcement power of the
Secretary of Labor or his duly authorized representative.
HELD: Yes. In Allied Investigation Bureau, Inc. vs. Sec. of Labor, the SC held that Articles
129 and 217 of the Labor Code do not contemplate nor cover the visitorial and enforcement
powers of the Secretary of Labor or his duly authorized representatives. Moreover, RA No. 7730
explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the phrase
"Notwithstanding the provisions of Articles 129 and 217of this Code to the contrary x x x"
thereby retaining and further strengthening the power of the Secretary of Labor or his duly
authorized representatives to issue compliance orders to give effect to the labor standards
provisions of said Code and other labor legislation based on the findings of labor employment
and enforcement officer or industrial safety engineer made in the course of inspection.
Also, this case does not fall to the exception clause of Art. 128(b) which will warrant the
endorsement of the case to the appropriate Arbitration Branch of the NLRC. In order for the said
clause to apply, the following elements must concur: (a) that the employer contests the findings
of the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues,
there is a need to examine evidentiary matters; and (c) that such matters are not verifiable in the
normal course of inspection. The rules also provide that the employer shall raise such objections
during the hearing of the case or at any time after receipt of the notice of inspection results.
4. Title III, Arts. 122-155
RA No. 7322 (Maternity Leave Act)
Sec. 1. Section 14-A of Republic Act No. 1161, as amended, is further amended to read as
follows:
Christian V. Asas
Page 187
==============================================
"SEC. 14-A. Maternity Leave Benefit. - A covered female employee who has paid at least
three monthly maternity contributions in the twelve-month period preceding the semester of her
childbirth, abortion or miscarriage and who is currently employed shall be paid a daily maternity
benefit equivalent to one hundred percent (100%) of her present basic salary, allowances and
other benefits or the cash equivalent of such benefits for sixty (60) days subject to the following
conditions:
"(a) That the employee shall have notified her employer of her pregnancy and the probable
date of her childbirth which notice shall be transmitted to the SSS in accordance with the rules
and regulations it may provide;
"(b) That the payment shall be advanced by the employer in two equal installments within
thirty (30) days from the filing of the maternity leave application:
"(c) That in case of caesarian delivery, the employee shall be paid the daily maternity benefit
for seventy-eight (78) days;
"(d) That payment of daily maternity benefits shall be a bar to the recovery of sickness
benefits provided by this Act for the same compensable period of sixty (60) days for the same
childbirth, abortion, or miscarriage;
"(e) That the maternity benefits provided under this Section shall be paid only for the first
four deliveries after March 13, 1973;
"(f) That the SSS shall immediately reimburse the employer of one hundred percent (100%)
of the amount of maternity benefits advanced to the employee by the employer upon receipt of
satisfactory proof of such payment and legality thereof; and
"(g) That if an employee should give birth or suffer abortion or miscarriage without the
required contributions having been remitted for her by her employer to the SSS, or without the
latter having been previously notified by the employer of the time of the pregnancy, the employer
shall pay to the SSS damages equivalent to the benefits which said employee would otherwise
have been entitled to, and the SSS shall in turn pay such amount to the employee concerned."
Sec. 2. Nothing in this Act shall be construed as to diminish existing maternity benefits under
present laws and collective bargaining agreements.
R.A. No. 8187 (Paternity Leave Act)
Sec. 2. Notwithstanding any law, rules and regulations to the contrary, every married
male employee in the private and public sectors shall be entitled to a paternity leave of seven (7)
days with full pay for the first four (4) deliveries of the legitimate spouse with whom he is
Christian V. Asas
Page 188
==============================================
cohabiting. The male employee applying for paternity leave shall notify his employer of the
pregnancy of his legitimate spouse and the expected date of such delivery.
For purposes, of this Act, delivery shall include childbirth or any miscarriage.
Sec 3. Definition of Term. - For purposes of this Act, Paternity Leave refers to the benefits
granted to a married male employee allowing him not to report for work for seven (7) days but
continues to earn the compensation therefor, on the condition that his spouse has delivered a
child or suffered a miscarriage for purposes of enabling him to effectively lend support to his
wife in her period of recovery and/or in the nursing of the newly-born child.
R.A. No. 8282 (SSS Law)
"SEC. 14. Sickness Benefit. - (a) A member who has paid at least three (3) monthly contributions
in the twelve-month period immediately preceding the semester of sickness or injury and is
confined therefor for more than three (3) days in a hospital or elsewhere with the approval of the
SSS, shall, for each day of compensable confinement or a fraction thereof, be paid by his
employer, or the SSS, if such person is unemployed or self-employed, a daily sickness benefit
equivalent to ninety percent (90%) of his average daily salary credit, subject to the following
conditions:
"(1) In no case shall the daily sickness benefit be paid longer than one hundred twenty (120) days
in one (1) calendar year, nor shall any unused portion of the one hundred twenty (120) days of
sickness benefit granted under this section be carried forward and added to the total number of
compensable days allowable in the subsequent year;
"(2) The daily sickness benefit shall not be paid for more than two hundred forty (240) days on
account of the same confinement; and
"(3) The employee member shall notify his employer of the fact of his sickness or injury within
five (5) calendar days after the start of his confinement unless such confinement is in a hospital
or the employee became sick or was injured while working or within the premises of the
employer in which case, notification to the employer is necessary: Provided, That if the member
is unemployed or self-employed, he shall directly notify the SSS of his confinement within five
(5) calendar days after the start thereof unless such confinement is in a hospital in which case
notification is also not necessary: Provided, further, That in cases where notification is necessary,
the confinement shall be deemed to have started not earlier than the fifth day immediately
preceding the date of notification.
"(b) The compensable confinement shall begin on the first day of sickness, and the payment of
such allowances shall be promptly made by the employer every regular payday or on the
fifteenth and last day of each month, and similarly in the case of direct payment by the SSS, for
as long as such allowances are due and payable: Provided, That such allowance shall begin only
Christian V. Asas
Page 189
==============================================
after all sick leaves of absence with full pay to the credit of the employee member shall have
been exhausted.
"(c) One hundred percent (100%) of the daily benefits provided in the preceding paragraph shall
be reimbursed by the SSS to said employer upon receipt of satisfactory proof of such payment
and legality thereof: Provided, That the employer has notified the SSS of the confinement within
five (5) calendar days after receipt of the notification from the employee member: Provided,
further, That if the notification to the SSS is made by the employer beyond five (5) calendar days
after receipt of the notification from the employee member, said employer shall be reimbursed
only for each day of confinement starting from the tenth calendar day immediately preceding the
date of notification to the SSS: Provided, finally, That the SSS shall reimburse the employer or
pay the unemployed member only for confinement within the one-year period immediately
preceding the date the claim for benefit or reimbursement is received by the SSS, except
confinement in a hospital in which case the claim for benefit or reimbursement must be filed
within one (1) year from the last day of confinement.
"(d) Where the employee member has given the required notification but the employer fails to
notify the SSS of the confinement or to file the claim for reimbursement within the period
prescribed in this section resulting in the reduction of the benefit or denial of the claim, such
employer shall have no right to recover the corresponding daily allowance he advanced to the
employee member as required in this section.
"(e)The claim of reimbursement shall be adjudicated by the SSS within a period of two (2)
months from receipt thereof: Provided, That should no payment be received by the employer
within one (1) month after the period prescribed herein for adjudication, the reimbursement shall
thereafter earn simple interest of one percent (1%) per month until paid.
"(f) The provisions regarding the notification required of the member and the employer as well
as the period within which the claim for benefit or reimbursement may be filed shall apply to all
claims filed with the SSS.
"SEC. 14-A. Maternity Leave Benefit. - A female member who has paid at least three (3)
monthly contributions in the twelve-month period immediately preceding the semester of her
childbirth or miscarriage shall be paid a daily maternity benefit equivalent to one hundred
percent (100%) of her average daily salary credit for sixty (60) days or seventy-eight (78) days in
case of caesarian delivery, subject to the following conditions:
"(a) That the employee shall have notified her employer of her pregnancy and the probable date
of her childbirth, which notice shall be transmitted to the SSS in accordance with the rules and
regulations it may provide;
"(b) The full payment shall be advanced by the employer within thirty (30) days from the filing
of the maternity leave application;
Christian V. Asas
Page 190
==============================================
"(c) That payment of daily maternity benefits shall be a bar to the recovery of sickness benefits
provided by this Act for the same period for which daily maternity benefits have been received;
"(d) That the maternity benefits provided under this section shall be paid only for the first four
(4) deliveries or miscarriages;
"(e) That the SSS shall immediately reimburse the employer of one hundred percent (100%) of
the amount of maternity benefits advanced to the employee by the employer upon receipt of
satisfactory proof of such payment and legality thereof; and
"(f) That if an employee member should give birth or suffer miscarriage without the required
contributions having been remitted for her by her employer to the SSS, or without the latter
having been previously notified by the employer of the time of the pregnancy, the employer shall
pay to the SSS damages equivalent to the benefits which said employee member would
otherwise have been entitled to.
Sec. 43, RA No. 9262 (Anti-Violence Against Women and their Children Act)
Entitled to Leave. – Victims under this Act shall be entitled to take a paid leave of
absence up to ten (10) days in addition to other paid leaves under the Labor Code and Civil
Service Rules and Regulations, extendible when the necessity arises as specified in the protection
order.
Any employer who shall prejudice the right of the person under this section shall be
penalized in accordance with the provisions of the Labor Code and Civil Service Rules and
Regulations. Likewise, an employer who shall prejudice any person for assisting a co-employee
who is a victim under this Act shall likewise be liable for discrimination.
RA No. 9710 (Magna Carta of Women)
Sec. 4(b). "Discrimination Against Women" refers to any gender-based distinction,

exclusion, or restriction which has the effect or purpose of impairing or nullifying the
recognition, enjoyment, or exercise by women, irrespective of their marital status, on a basis of
equality of men and women, of human rights and fundamental freedoms in the political,
economic, social, cultural, civil, or any other field.
It includes any act or omission, including by law; policy, administrative measure, or

practice, that directly or indirectly excludes or restricts women in the recognition and promotion
of their rights and their access to and enjoyment of opportunities, benefits, or privileges.
Sec. 12. Equal Treatment Before the Law. - The State shall take steps to review and,
when necessary, amend and/or repeal existing laws that are discriminatory to women within three
(3) years from the effectivity of this Act.
Christian V. Asas
Page 191
==============================================
Sec. 13. Equal Access and Elimination of Discrimination in Education, Scholarships,

and Training. - (a) The State shall ensure that gender stereotypes and images in educational
materials and curricula are adequately and appropriately revised. Gender-sensitive language shall
be used at all times. Capacity-building on gender and development (GAD), peace and human
rights, education for teachers, and all those involved in the education sector shall be pursued
toward this end. Partnerships between and among players of the education sector, including the
private sector, churches, and faith groups shall be encouraged.
(b) Enrollment of women in nontraditional skills training in vocational and tertiary levels
shall be encouraged.
(c) Expulsion and non-readmission of women faculty due to pregnant; outside of

marriage shall be outlawed. No school shall turn out or refuse admission to a female student
solely on the account of her having contracted pregnancy outside of marriage during her term in
school.
Sec. 18. Special Leave Benefits for Women. - A woman employee having rendered
continuous aggregate employment service of at least six (6) months for the last twelve (12)
months shall be entitled to a special leave benefit of two (2) months with full pay based on her
gross monthly compensation following surgery caused by gynecological disorders.
Sec. 8, RA No. 8972 (Solo Parent Act)
Parental Leave. - In addition to leave privileges under existing laws, parental leave of not
more than seven (7) working days every year shall be granted to any solo parent employee who
has rendered service of at least one (1) year.
RA No. 7877 (Anti-Sexual Harrassment Act)
Sec. 3. Work, Education or Training -Related, Sexual Harassment Defined. - Work,

education or training-related sexual harassment is committed by an employer, employee,
manager, supervisor, agent of the employer, teacher, instructor, professor, coach, trainor, or any
other person who, having authority, influence or moral ascendancy over another in a work or
training or education environment, demands, requests or otherwise requires any sexual favor
from the other, regardless of whether the demand, request or requirement for submission is
accepted by the object of said Act.
(a) In a work-related or employment environment, sexual harassment is committed when:
(1) The sexual favor is made as a condition in the hiring or in the employment, re-
employment or continued employment of said individual, or in granting said
individual favorable compensation, terms of conditions, promotions, or privileges;
Christian V. Asas
Page 192
==============================================
or the refusal to grant the sexual favor results in limiting, segregating or

classifying the employee which in any way would discriminate, deprive or
diminish employment opportunities or otherwise adversely affect said employee;
(2) The above acts would impair the employee's rights or privileges under existing
labor laws; or
(3) The above acts would result in an intimidating, hostile, or offensive

environment for the employee.
(b) In an education or training environment, sexual harassment is committed:
(1) Against one who is under the care, custody or supervision of the offender;
(2) Against one whose education, training, apprenticeship or tutorship is entrusted

to the offender;
(3) When the sexual favor is made a condition to the giving of a passing grade, or
the granting of honors and scholarships, or the payment of a stipend, allowance or
other benefits, privileges, or consideration; or
(4) When the sexual advances result in an intimidating, hostile or offensive

environment for the student, trainee or apprentice.
Any person who directs or induces another to commit any act of sexual
harassment as herein defined, or who cooperates in the commission thereof by another
without which it would not have been committed, shall also be held liable under this Act.
Sec. 4. Duty of the Employer or Head of Office in a Work-related, Education or Training

Environment. - It shall be the duty of the employer or the head of the work-related, educational
or training environment or institution, to prevent or deter the commission of acts of sexual
harassment and to provide the procedures for the resolution, settlement or prosecution of acts of
sexual harassment. Towards this end, the employer or head of office shall:
(a) Promulgate appropriate rules and regulations in consultation with and joint1y
approved by the employees or students or trainees, through their duly designated
representatives, prescribing the procedure for the investigation of sexual harassment
cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in the proper courts for
unlawful acts of sexual harassment.
Christian V. Asas
Page 193
==============================================
The said rules and regulations issued pursuant to this subsection (a) shall include,
among others, guidelines on proper decorum in the workplace and educational or training
institutions.
(b) Create a committee on decorum and investigation of cases on sexual harassment. The
committee shall conduct meetings, as the case may be, with officers and employees,
teachers, instructors, professors, coaches, trainors, and students or trainees to increase
understanding and prevent incidents of sexual harassment. It shall also conduct the
investigation of alleged cases constituting sexual harassment.
In the case of a work-related environment, the committee shall be composed of at

least one (1) representative each from the management, the union, if any, the employees
from the supervisory rank, and from the rank and file employees.
In the case of the educational or training institution, the committee shall be

composed of at least one (1) representative from the administration, the trainors,
instructors, professors or coaches and students or trainees, as the case may be.
The employer or head of office, educational or training institution shall

disseminate or post a copy of this Act for the information of all concerned.
Sec. 5. Liability of the Employer, Head of Office, Educational or Training Institution. -

The employer or head of office, educational or training institution shall be solidarily liable for
damages arising from the acts of sexual harassment committed in the employment, education or
training environment if the employer or head of office, educational or training institution is
informed of such acts by the offended party and no immediate action is taken.
Sec. 6. Independent Action for Damages. - Nothing in this Act shall preclude the victim
of work, education or training-related sexual harassment from instituting a separate and
independent action for damages and other affirmative relief.
RA No. 7610, Section 12, as amended by RA No. 7658 and RA 9231
Sec. 2. Section 12 of the same Act, as amended, is hereby further amended to read as
follows:
"Sec. 2. Employment of Children - Children below fifteen (15) years of age shall not be
employed except:
"1) When a child works directly under the sole responsibility of his/her parents or
legal guardian and where only members of his/her family are
employed: Provided, however, That his/her employment neither endangers his/her
life, safety, health, and morals, nor impairs his/her normal
Christian V. Asas
Page 194
==============================================
development: Provided, further, That the parent or legal guardian shall provide
the said child with the prescribed primary and/or secondary education; or
"2) Where a child's employment or participation in public entertainment or

information through cinema, theater, radio, television or other forms of media is
essential: Provided, That the employment contract is concluded by the child's
parents or legal guardian, with the express agreement of the child concerned, if
possible, and the approval of the Department of Labor and
Employment: Provided, further, That the following requirements in all instances
are strictly complied with:
"(a) The employer shall ensure the protection, health, safety, morals and
normal development of the child;
"(b) The employer shall institute measures to prevent the child's

exploitation or discrimination taking into account the system and level of
remuneration, and the duration and arrangement of working time; and
"(c) The employer shall formulate and implement, subject to the approval
and supervision of competent authorities, a continuing program for
training and skills acquisition of the child.
"In the above-exceptional cases where any such child may be employed,
the employer shall first secure, before engaging such child, a work permit from
the Department of Labor and Employment which shall ensure observance of the
above requirements.
"For purposes of this Article, the term "child" shall apply to all persons
under eighteen (18) years of age."
Sec. 3. The same Act, as amended, is hereby further amended by adding new sections to
be denominated as Sections 12-A, 12-B, 12-C, and 12-D to read as follows:
"Sec. 2-A. Hours of Work of a Working Child. - Under the exceptions provided in Section
12 of this Act, as amended:
"(1) A child below fifteen (15) years of age may be allowed to work for not more than
twenty (20) hours a week: Provided, That the work shall not be more than four (4) hours
at any given day;
"(2) A child fifteen (15) years of age but below eighteen (18) shall not be allowed to work
for more than eight (8) hours a day, and in no case beyond forty (40) hours a week;
Christian V. Asas
Page 195
==============================================
"(3) No child below fifteen (15) years of age shall be allowed to work between eight
o'clock in the evening and six o'clock in the morning of the following day and no child
fifteen (15) years of age but below eighteen (18) shall be allowed to work between ten
o'clock in the evening and six o'clock in the morning of the following day."
"Sec. 12-B. Ownership, Usage and Administration of the Working Child's Income.
- The wages, salaries, earnings and other income of the working child shall belong to
him/her in ownership and shall be set aside primarily for his/her support, education or
skills acquisition and secondarily to the collective needs of the family: Provided, That not
more than twenty percent (20%) of the child's income may be used for the collective
needs of the family.
"The income of the working child and/or the property acquired through the work
of the child shall be administered by both parents. In the absence or incapacity of either
of the parents, the other parent shall administer the same. In case both parents are absent
or incapacitated, the order of preference on parental authority as provided for under the
Family Code shall apply.
"Sec. 12-C. Trust Fund to Preserve Part of the Working Child's Income. - The
parent or legal guardian of a working child below eighteen (18) years of age shall set up a
trust fund for at least thirty percent (30%) of the earnings of the child whose wages and
salaries from work and other income amount to at least two hundred thousand pesos
(P200,000.00) annually, for which he/she shall render a semi-annual accounting of the
fund to the Department of Labor and Employment, in compliance with the provisions of
this Act. The child shall have full control over the trust fund upon reaching the age of
majority.
"Sec. 12-D. Prohibition Against Worst Forms of Child Labor. - No child shall be
engaged in the worst forms of child labor. The phrase "worst forms of child labor" shall
refer to any of the following:
"(1) All forms of slavery, as defined under the "Anti-trafficking in Persons Act of
2003", or practices similar to slavery such as sale and trafficking of children, debt
bondage and serfdom and forced or compulsory labor, including recruitment of
children for use in armed conflict; or
"(2) The use, procuring, offering or exposing of a child for prostitution, for the
production of pornography or for pornographic performances; or
"(3) The use, procuring or offering of a child for illegal or illicit activities,
including the production and trafficking of dangerous drugs and volatile
substances prohibited under existing laws; or
Christian V. Asas
Page 196
==============================================
"(4) Work which, by its nature or the circumstances in which it is carried out, is
hazardous or likely to be harmful to the health, safety or morals of children, such
that it:
"a) Debases, degrades or demeans the intrinsic worth and dignity of a
child as a human being; or
"b) Exposes the child to physical, emotional or sexual abuse, or is found to

be highly stressful psychologically or may prejudice morals; or
"c) Is performed underground, underwater or at dangerous heights; or
"d) Involves the use of dangerous machinery, equipment and tools such as
power-driven or explosive power-actuated tools; or
"e) Exposes the child to physical danger such as, but not limited to the
dangerous feats of balancing, physical strength or contortion, or which
requires the manual transport of heavy loads; or
"f) Is performed in an unhealthy environment exposing the child to

hazardous working conditions, elements, substances, co-agents or
processes involving ionizing, radiation, fire, flammable substances,
noxious components and the like, or to extreme temperatures, noise levels,
or vibrations; or
"g) Is performed under particularly difficult conditions; or
"h) Exposes the child to biological agents such as bacteria, fungi, viruses,
protozoans, nematodes and other parasites; or
"i) Involves the manufacture or handling of explosives and other

pyrotechnic products."
Barcenas vs. NLRC, G.R. No. 87210, July 16, 1990, Medialdea, J.
FACTS: Chua Se Su (Su for brevity), in his capacity as the Head Monk of the Buddhist Temple
of Manila and Baguio City and as President and Chairman of the Board of Directors of the Poh
Toh Buddhist Association of the Phils. Inc. hired the petitioner Filomena Barcenas who speaks
the Chinese language as secretary and interpreter. Barcenas duties include receiving and
assisting Chinese visitors to the temple, act as tourist guide for foreign Chinese visitors,
attending to the callers of the Head Monk as well as to the food for the temple visitors, running
errands for the Head Monk such as paying the Meralco, PLDT, MWSS bills and acting as liaison
in some government offices. Aside from her pay and allowances under the law, she received an
amount of P500.00 per month plus free board and lodging in the temple. Also, Su assumed the
Christian V. Asas
Page 197
==============================================
responsibility of paying the education of Barcenas’ nephew as it is alleged that Su has an

amorous relationship with Barcenas. Thereafter, Barcenas went to Bicol in order to give birth to
her alleged child with Su. Upon death of Su, Barcenas went back to the temple and remained
and continued with her job. However, when Manuel Chua was elected as President and
Chairman of the Board of Poh Toh Buddhist and Rev. Sim Dee was elected as Head Buddhist
Priest, they discontinued the payment of monthly allowance and additional P500 of Barcenas.
Also, she and her son was evicted from the temple and compelled to sign an undertaking not to
return at the temple in consideration of P10,000. Hence, Barcenas filed a complaint before the
NLRC. The Labor Arbiter (LA) ruled in her favor. However, the NLRC reversed the decision of
the LA. The case reached the SC. It is the contention of Chua and Dee that Barcenas is not an
employee of the temple.
ISSUES: (1.) Whether or not Barcenas is an employee of the temple at the time she filed the
complaint.
(2.) Whether or not Barcenas claim for unpaid wages since May 1982 and filed in
1986 is proper.
HELD: (1.) No. Initially, Barcenas is a regular employee as secretary and interpreter of the
Head Monk. The By-Laws of the Association authorized the President, in this case Su, to hire
Barcenas. The approval of the Board is required only when the President is representing the
association “in all its dealings with the public”. Assuming that approval is required, it was tacitly
given since no protest was raised until the present controversy. However, her status as regular
employee ended when she returned to Bicol. As found by the NLRC, it was only when Su died
when she returned to the temple. There was no proof that she was re-hired by the new Head
Monk.
(2.) No. the said claim has already prescribed. Under Article 292 of the Labor Code, all
money claims arising from employer-employee relations must be filed within three years from
the time the cause of action accrued, otherwise they shall forever be barred.
Bacsin vs. Wahiman, G.R. No. 146053, April 30, 2008, Velasco, Jr. J.
FACTS: Dioscoro F. Bacsin is a public school teacher of Pandan Elementary School, Pandan,
Mabajao, Camiguin while Eduardo O. Wahiman is the father of an elementary school student,
AAA. Bacsin was charged with Misconduct with the Civil Service Commission (CSC). The
charge arose from an incident wherein Bacsin called AAA to his office to do an errand.
However, when AAA was already inside the office, Bacsin fondled her breast five times making
AAA afraid at that time. The CSC found Bacsin guilty of Grave Misconduct (Acts of Sexual
Harassment) specifically an act constituting sexual harassment as defined in Sec. 3 of RA No.
7877 and dismissed him from the service. Bacsin appealed to CA via Rule 43 but the latter
affirmed the decision of the CSC. Hence, the case reached the SC.
ISSUE: Whether or not Bacsin committed an act of sexual harassment.

Christian V. Asas
Page 198
==============================================
HELD: Yes. As held in Domingo vs. Rayala, it is true that this provision of RA 7877 calls for a
‘demand, request or requirement of a sexual favor.’ But it is not necessary that the demand,
request, or requirement of a sexual favor be articulated in a categorical oral or written statement.
It may be discerned, with equal certitude, from the acts of the offender. The CSC found, as did
the CA, that even without an explicit demand from petitioner his act of mashing the breast of
AAA was sufficient to constitute sexual harassment. Moreover, under Section 3 (b) (4) of RA
7877, sexual harassment in an education or training environment is committed "(w)hen the
sexual advances result in an intimidating, hostile or offensive environment for the student,
trainee or apprentice.
NOTES: Pertaining to the issue that Bacsin was charged with Misconduct but convicted with
Grave Misconduct. As held in Dadubo vs. CSC, the charge against the respondent in an
administrative case need not be drafted with the precision of an information in a criminal
prosecution. It is sufficient that he is apprised of the substance of the charge against him; what is
controlling is the allegation of the acts complained of, not the designation of the offense. In the
present case, Bacsin was sufficiently informed of the basis of the charge against him, which was
his act of improperly touching one of his students.
Bacsin is guilty of grave misconduct. The term "misconduct" denotes intentional

wrongdoing or deliberate violation of a rule of law or standard of behavior. In grave misconduct,
the elements of corruption, clear intent to violate the law, or flagrant disregard of established rule
must be manifest. The act of petitioner of fondling one of his students is against a law, RA 7877,
and is doubtless inexcusable. The particular act of petitioner cannot in any way be construed as a
case of simple misconduct. Sexually molesting a child is, by any norm, a revolting act that it
cannot but be categorized as a grave offense. Parents entrust the care and molding of their
children to teachers, and expect them to be their guardians while in school. Petitioner has
violated that trust. The charge of grave misconduct proven against petitioner demonstrates his
unfitness to remain as a teacher and continue to discharge the functions of his office.
5.) Book Four, Arts. 156-161
Ocean Builders Construction Corp. vs. Sps. Cubacub, G.R. No. 150898, April 13, 2011,
Carpio-Morales, J.
FACTS: Bladimir Cubacub was employed as maintenance man by Ocean Builders Construction
Corp. at its office in Caloocan City. Then, he was afflicted with chicken prompting the
company’s general manager, Dennis Hao, to advise him to rest for three days at the company’s
barracks where he lives free of charge. Thereafter, he went about his usual chores of manning
the gate and cleaning company vehicles. Then, he asked his co-worker Silangga to accompany
him to his house in Capas, Tarlac; so, he could rest. Upon learning the same, Hao gave Bladimir
P 1,000 and ordered Silangga to bring the latter to the nearest hospital. Bladimir was confined at
Caybiga Community Hospital which is one kilometer away from the company. Thereafter,
Christian V. Asas
Page 199
==============================================
Bladimir was transferred by his parents to the Quezon City General Hospital but died therein the
following day. Hence, Bladimir’s parents, Sps. Cubacub, filed a complaint for damages against
Hao and Ocean Builders before RTC Br. 66, Tarlac but the latter dismissed the complaint. Upon
appeal, the CA reversed the lower court reasoning that failure of Hao to bring Bladimir to a
better-equipped hospital violated Art. 161 of the Labor Code. Hence, the case reached the SC.
ISSUE: Whether or not Art. 157 and Art. 161 of the Labor Code are violated in this case.
HELD: No. In the present case, there is no allegation that the company premises are hazardous.
Neither is there any allegation on the number of employees the company has. If Hao’s testimony
would be believed, the company had only seven regular employees and 20 contractual employees
─ still short of the minimum 50 workers that an establishment must have for it to be required to
have a full-time registered nurse.
As found by the trial court and borne by the records, petitioner Hao’s advice for Bladimir
to, as he did, take a 3-day rest and to later have him brought to the nearest hospital constituted
"adequate and immediate medical" attendance that he is mandated, under Art. 161, to provide to
a sick employee in an emergency.
Escasinas vs. Shangri-La’s Mactan Island Resort, G.R. No. 178827, March 4, 2009, Carpio-
Morales, J.
FACTS: Registered nurses Jeromie Escasinas and Evan Rigor Singco were engaged by Dr.
Jessica Joyce R. Pepito to work in her clinic at Shangri-la in Cebu where the latter is a retained
physician. Escasinas and Singco filed with the NLRC Regional Arbitration Branch a complaint
for regularization and underpayment of wages and other benefits claiming that they are regular
employees of Shangri-la. Shangri-la contended that Escasinas and Singco were not its
employees but of Dr. Pepito whom it retained via MOA pursuant to Art. 157 of the Labor Code.
The Labor Arbiter ruled in favor of Escasinas and Singco. Upon appeal to NLRC, the latter
reversed the ruling of the Labor Arbiter. The CA affirmed the decision of the NLRC. Hence, the
case reached the SC.
ISSUE: Whether or not Art. 157 requires the hiring of full-time nurses as regular employees.
HELD: No. Art. 157 does not require the engagement of full-time nurses as regular employees
of a company employing not less than 50 workers. Under the foregoing provision, Shangri-la,
which employs more than 200 workers, is mandated to "furnish" its employees with the services
of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which
means that it should provide or make available such medical and allied services to its employees,
not necessarily to hire or employ a service provider.
As held, in Philippine Global Communications vs. De Vera, while it is true that the
provision requires employers to engage the services of medical practitioners in certain
Christian V. Asas
Page 200
==============================================
establishments depending on the number of their employees, nothing is there in the law which
says that medical practitioners so engaged be actually hired as employees, adding that the law, as
written, only requires the employer "to retain", not employ, a part-time physician who needed to
stay in the premises of the non-hazardous workplace for two (2) hours.
The term "full-time" in Art. 157 cannot be construed as referring to the type of
employment of the person engaged to provide the services, for Article 157 must not be read
alongside Art. 280 in order to vest employer-employee relationship on the employer and the
person so engaged. So De Vera teaches: For, we take it that any agreement may provide that one
party shall render services for and in behalf of another, no matter how necessary for the latter’s
business, even without being hired as an employee. This set-up is precisely true in the case of
an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the
Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of
an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of
employees, i.e., regular and casual.
The phrase "services of a full-time registered nurse" should thus be taken to refer to the
kind of services that the nurse will render in the company’s premises and to its employees, not
the manner of his engagement.
NOTES: Dr. Pepito is an independent contractor pursuant to DOLE Dept. Order No. 10 s 1997.
Shangri-la provides the clinic premises and medical supplies for use of its employees and guests
does not necessarily prove that respondent doctor lacks substantial capital and investment.
Besides, the maintenance of a clinic and provision of medical services to its employees is
required under Art. 157, which are not directly related to Shangri-la’s principal business –
operation of hotels and restaurants.
6.) Book Six, Post-employment
a.) Termination of employment (Arts. 278-286)
1.) Classification of employees
i.) Contractor, independent contractor, labor-only contractor

a.) Arts. 106-109, Labor Code
b.) Department Order No. 18-A s 2011 (November 14, 2011)
c.) Department Order No. 19 s 1993 (Guideline Governing the Employment
of Workers in the Construction Industry)
Babas vs. Lorenzo Shipping Corp. (LSC), G.R. No. 186091, December 15, 2015, Nachura, J.
FACTS: LSC entered into a General Equipment Maintenance Repair and Management Services
Agreement (Agreement) with Best Manpower Services, Inc. (BMSI) wherein the latter
Christian V. Asas
Page 201
==============================================
undertook to provide maintenance and repair services to LSC's container vans, heavy equipment,
trailer chassis, and generator sets. BMSI further undertook to provide checkers to inspect all
containers received for loading to and/or unloading from its vessels. Also, LSC leased its
equipment, tools, and tractors to BMSI. The period of lease was coterminous with the
Agreement. The BMSI hired petitioners Babas et al. to work at LSC as checkers, welders, utility
men, clerks, forklift operators, motor pool and machine shop workers, technicians, trailer drivers,
and mechanics. Six years later, LSC entered into another contract with BMSI, this time, a
service contract. Then, petitioners filed with the Labor Arbiter a complaint for regularization
against LSC and BMSI. Subsequently, LSC terminated the Agreement causing petitioners to loss
their employment. BMSI denied liability as it claimed that it is an independent contractor. The
Labor Arbiter dismissed the complaint but the NLRC reversed the former. BMSI went to CA via
petition for certiorari and latter ruled in its favor. Hence, the case reached the SC.
ISSUE: Whether or not BMSI is an independent contractor.
HELD: No. The reliance of the CA to the Agreement is misplaced. The parties cannot dictate
by the mere expedience of a unilateral declaration in a contract the character of their business.
The language of a contract is neither determinative nor conclusive of the relationship between
the parties. In distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the case are to be
considered.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or

subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a
principal. In labor-only contracting, the following elements are present: (a) the contractor or
subcontractor does not have substantial capital or investment to actually perform the job, work,
or service under its own account and responsibility; and (b) the employees recruited, supplied,
or placed by such contractor or subcontractor perform activities which are directly related to the
main business of the principal. On the other hand, permissible job contracting or subcontracting
refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within a definite
or predetermined period, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal.
A person is considered engaged in legitimate job contracting or subcontracting if the

following conditions concur: (a) The contractor carries on a distinct and independent business
and 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
the contractor or subcontractor assures the contractual employees' entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security
of tenure, and social welfare benefits.
Christian V. Asas
Page 202
==============================================
In this case, BMSI is engaged in labor-only contracting. First, petitioners worked at

LSC's premises, and nowhere else. Second, LSC was unable to present proof that BMSI had
substantial capital. Third, petitioners performed activities which were directly related to the
main business of LSC. Lastly, as found by the NLRC, BMSI had no other client except for LSC,
and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC finding that BMSI
is a labor-only contractor. The CA erred in considering BMSI's Certificate of Registration as
sufficient proof that it is an independent contractor. The fact of registration simply prevents the
legal presumption of being a mere labor-only contractor from arising.
NOTES: As a consequence of the ruling, petitioners were regular employees of LSC. Hence,
they were illegally dismissed as the termination of the Agreement is not one of those just or
authorized causes for termination of employment.
Oregas vs. NLRC, 559 SCRA 153, G.R. No. 166757, July 21, 2008, Quisumbing, J.
FACTS: Rommel C. Oregas et al. worked as valet and parking attendants and door attendants in
Dusit Hotel Nikko (Dusit) as evidenced by employment contracts with FVA Manpower Training
(FVA). Then, they were recalled by FVA from Dusit. Hence, Oregas et al. instituted a complaint
for illegal dismissal, regularization, and payment of certain benefits against Dusit and FVA.
Both Dusit and FVA argued that the latter is a legitimate contractor; hence, Oregas et al. were
employees of the latter. The Labor Arbiter (LA) dismissed the complaint and held that Oregas et
al. were employees of FVA. It further ruled that they were not dismissed but merely recalled.
The NLRC modified the decision of the LA holding that Oregas et al. were constructively
dismissed since more than 6 months have elapsed from the time they were recalled and were not
given assignments. The CA affirmed the NLRC ruling. Hence, the case reached the SC.
ISSUE: Whether or not FVA is a legitimate contractor.
HELD: Yes. Among the circumstances that established the status of FVA as a legitimate
contractor are: (1.) FVA is registered with DOLE and DTI; (2.) FVA has a Contract of Services
with Dusit for the supply of valet parking and door attendants services; (3.) FVA has an
independent business and provides valet parking and door attendant services to other clients like
Mandarin Hotel, Western Philippine Plaza, etc.; and (4.) FVA’s total assets from 1997 to 1999
amount to P1,502,597.70 to P9,021,335.13. In addition, it provides the uniforms and lockers of
its employees.
Begino vs. ABS-CBN, G.R. No. 199166, April 20, 2015, Perez, J. (Possible Bar Problem)
FACTS: ABS-CBN engaged the services of petitioners Begino et al. as cameramen, editors, and
reporters through Talent Contracts which they regularly renewed over the years, provided the
terms ranging from 3 years to 1 year, wherein they were given Project Assignment Forms which
detailed, among other matters, the duration of a particular project as well as the budget and the
Christian V. Asas
Page 203
==============================================
daily technical requirements thereof. Petitioners were tasked with coverage of news items for
subsequent daily airings in respondent’s TV Patrol Bicol Program. The Talent Contracts provide
inter alia the performance of petitioners pursuant to ABS-CBN standards and regulations of KBP,
non-engagement with the competitor, results-oriented nature of the work without normal or fixed
working hours. Claiming that they were regular employees of ABS-CBN, petitioners filed a
complaint before the NLRC Sub-Regional Arbitration Branch. ABS-CBN denied the existence
of employer-employee relationship between them and the petitioners. The Labor Arbiter ruled in
favor of the petitioners which was affirmed by the NLRC. The CA, via petition for certiorari,
reversed the Labor Arbiter and the NLRC. Hence, the case reached the SC.
ISSUE: Whether or not petitioners are regular employees of ABS-CBN.
HELD: Yes. Notwithstanding the nomenclature of their Talent Contracts and/or Project
Assignment Forms and the terms and conditions embodied therein, petitioners are regular
employees of ABS-CBN. In addition to the classification of employees under Art. 280 of the
Labor Code into regular, project, seasonal, and casual, jurisprudence has added that of
contractual or fixed term employee which, if not for the fixed term, would fall under the category
of regular employment in view of nature of the employee’s engagement, which is to perform
activity usually necessary or desirable in the employer’s business. Time and again, it has been
ruled that the test to determine whether employment is regular or not is the reasonable
connection between the activity performed by the employee in relation to the business or trade of
the employer. Petitioners herein were undoubtedly performing functions necessary and essential
to ABS-CBN’s business of broadcasting television and radio content.
This case shall be distinguished with Sonza vs. ABS-CBN which involved a well-known
television and radio personality who was legitimately considered a talent and amply
compensated as such. Also, in ABS-CBN vs. Nazareno, it was held that the presumption is that
when the work done is an integral part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an independent business or professional
service, such work is regular employment of such employee and not an independent contractor.
San Miguel Corporation vs. Semillano, G.R. No. 164257, July 5, 2010, Mendoza, J.
Doctrine. Department of Labor and Employment (DOLE) Department Order No. 10,
Series of 1997, defines "job contracting" and "labor-only contracting" as follows:
Sec. 8. Job contracting. – There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work
on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and
Christian V. Asas
Page 204
==============================================
(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of
his business.
Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of
the circumstances of each case and after considering the operating needs of the employer
and the rights of the workers involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers.
Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules Implementing
Articles 106 to 109 of the Labor Code further provides that:
"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.
The test to determine the existence of independent contractorship is whether or not the
one claiming to be an independent contractor has contracted to do the work according to his own
methods and without being subject to the control of the employer, except only as to the results of
the work.
The existence of an independent and permissible contractor relationship is generally

established by the following criteria: whether or not the contractor is carrying on an independent
Christian V. Asas
Page 205
==============================================
business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to supply the premises,
tools, appliances, materials, and labor; and the mode, manner and terms of payment.
Although there may be indications of an independent contractor arrangement between

petitioner and AMPCO, the most determinant of factors exists which indicate otherwise.
Furthermore, there are no pieces of evidence that AMPCO has substantial capital or
investment. An examination its "Statement of Income and Changes in Undivided Savings" show
that its income for the year 1994 was P2,777,603.46 while its operating expenses for said year
is P2,718,315.33 or a net income of P59,288.13 for the year 1994; that its cash on hand for 1994
is P22,154.80.
In fact, the NLRC in its original decision likewise stated as follows: In contrast, the (sic)
AMPCO’s main business activity is trading, maintaining a store catering to members and the
public. Its job contracting with SMC is only a minor activity or sideline. The component of
AMPCO’s substantial capital are [sic]in fact invested and used in the trading business. This is
palpably shown in the sizable amount of its accounts receivables amounting to more than P.6M
out of its members’ capital of only P.47M in 1994.
Neither did petitioner prove that AMPCO had substantial equipment, tools, machineries,
and supplies actually and directly used by it in the performance or completion of the segregation
and piling job. In fact, as correctly pointed out by the NLRC in its original decision, there is
nothing in AMPCO’s list of fixed assets, machineries, tools, and equipment which it could have
used, actually and directly, in the performance or completion of its contracted job, work or
service with petitioner. For said reason, there can be no other logical conclusion but that the tools
and equipment utilized by respondents are owned by petitioner SMC. It is likewise noteworthy
that neither petitioner nor AMPCO has shown that the latter had clients other than petitioner.
Therefore, AMPCO has no independent business.
In connection therewith, DOLE Department Order No. 10 also states that an independent
contractor carries on an independent business and undertakes the contract work on his own
account, under his own responsibility, according to his own manner and method, and free from
the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof. This embodies what has long been
jurisprudentially recognized as the control test18 to determine the existence of employer-
employee relationship.
In the case at bench, petitioner faults the CA for holding that the respondents were under
the control of petitioner whenever they performed the task of loading in the delivery trucks and
unloading from them. It, however, fails to show how AMPCO took "entire charge, control and
Christian V. Asas
Page 206
==============================================
supervision of the work and service agreed upon." AMPCO’s Comment on the Petition is
likewise utterly silent on this point. Notably, both petitioner and AMPCO chose to ignore the
uniform finding of the LA, NLRC (in its original decision) and the CA that one of the assigned
jobs of respondents was to "perform other acts as may be ordered by SMC’s officers."
Significantly, AMPCO, opted not to challenge the original decision of the NLRC that found it a
mere labor-only contractor.
Moreover, the Court is not convinced that AMPCO wielded "exclusive discretion in the
discharge" of respondents. As the CA correctly pointed out, Merlyn Polidario, AMPCO’s project
manager, even told respondents to "wait for further instructions from the SMC’s supervisor" after
they were prevented from entering petitioner SMC’s premises. Based on the foregoing, no other
logical conclusion can be reached than that it was petitioner, not AMPCO, who wielded power of
control.
Despite the fact that the service contracts contain stipulations which are earmarks of
independent contractorship, they do not make it legally so. The language of a contract is neither
determinative nor conclusive of the relationship between the parties. Petitioner SMC and
AMPCO cannot dictate, by a declaration in a contract, the character of AMPCO’s business, that
is, whether as labor-only contractor, or job contractor. AMPCO’s character should be measured
in terms of, and determined by, the criteria set by statute. At a closer look, AMPCO’s actual
status and participation regarding respondents’ employment clearly belie the contents of the
written service contract.
Petitioner cannot rely either on AMPCO’s Certificate of Registration as an Independent

Contractor issued by the proper Regional Office of the DOLE to prove its claim. It is not
conclusive evidence of such status. The fact of registration simply prevents the legal presumption
of being a mere labor-only contractor from arising. In distinguishing between permissible job
contracting and prohibited labor-only contracting, the totality of the facts and the surrounding
circumstances of the case are to be considered.
Petitioner also argues that among the permissible contracting arrangements include "work
or services not directly related or not integral to the main business or operation of the principal
including… work related to manufacturing processes of manufacturing establishments." The
Court is not persuaded. The evidence is clear that respondents performed activities which were
directly related to petitioner’s main line of business. Petitioner is primarily engaged in
manufacturing and marketing of beer products, and respondents’ work of segregating and
cleaning bottles is unarguably an important part of its manufacturing and marketing process.
Lastly, petitioner claims that the present case is outside the jurisdiction of the labor
tribunals because respondent Vicente Semillano is a member of AMPCO, not SMC. Precisely, he
has joined the others in filing this complaint because it is his position that petitioner SMC is his
true employer and liable for all his claims under the Labor Code.
Christian V. Asas
Page 207
==============================================
Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the labor-
only contractor, for all the rightful claims of respondents. Under this set-up, AMPCO, as the
"labor-only" contractor, is deemed an agent of the principal (SMC). The law makes the principal
responsible over the employees of the "labor-only" contractor as if the principal itself directly
hired the employees
Bernarte vs. PBA, G.R. No. 192084, September 14, 2011, Carpio, J. (Possible Bar Problem)
Doctrine. We agree with respondents that once in the playing court, the referees exercise
their own independent judgment, based on the rules of the game, as to when and how a call or
decision is to be made. The referees decide whether an infraction was committed, and the PBA
cannot overrule them once the decision is made on the playing court. The referees are the only,
absolute, and final authority on the playing court. Respondents or any of the PBA officers cannot
and do not determine which calls to make or not to make and cannot control the referee when he
blows the whistle because such authority exclusively belongs to the referees. The very nature of
petitioner’s job of officiating a professional basketball game undoubtedly calls for freedom of
control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent

contractor: (1) the referees are required to report for work only when PBA games are scheduled,
which is three times a week spread over an average of only 105 playing days a year, and they
officiate games at an average of two hours per game; and (2) the only deductions from the fees
received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours per
day for five days a week, petitioner is required to report for work only when PBA games are
scheduled or three times a week at two hours per game. In addition, there are no deductions for
contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual
deductions from employees’ salaries. These undisputed circumstances buttress the fact that
petitioner is an independent contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares 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.
Fonterra Brands vs. Largado, G.R. No. 205300, March 18, 2015, Velasco, Jr., J. (2016 Bar
Examination but the facts are twisted)
Doctrine. As correctly held by the Labor Arbiter and the NLRC, the termination of
respondents’ employment with 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.
Christian V. Asas
Page 208
==============================================
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.
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 x x x." 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, it 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 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
Christian V. Asas
Page 209
==============================================
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.
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.
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;

2.Certificate of Registration with the Bureau of Internal Revenue;
3.Mayor’s Permit;
4.Certificate of Membership with the Social Security System;
5.Certificate of Registration with the Department of Labor and Employment;
6.Company Profile; and
7.Certifications issued by its clients.
Furthermore, A.C. Sicat has substantial capital, having assets totaling 5,926,155.76 (in
the 2016 Bar Problem, the assets is only 1,000,000) 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 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,
Christian V. Asas
Page 210
==============================================
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. 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.
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 x x x which is expected to be finished on or before Nov. 06,
2006."
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 of
their fixed-term employment thereat. We, thus, see no reason to disturb the ruling of the CA in
this respect
ii. Regular employee, project/seasonal employee,

probationary, casual (Arts. 280-281, Labor Code)
Omni Hauling vs. Bon, G.R. No. 199388, September 3, 2014, Perlas-Bernabe, J.
FACTS: Omni Hauling Services, Inc. (Omni), a company owned by petitioners Lolita and
Aniceto Franco (petitioners), was awarded a one (1) year service contract by the local
government of Quezon City to provide garbage hauling services for the period July 1, 2002 to
Christian V. Asas
Page 211
==============================================
June 30, 2003. For this purpose, Omni hired Bon et al. as garbage truck drivers and paleros who
were then paid on a per trip basis.
ISSUE: Are Bon et al. project employees?
HELD: No. 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.
xxxx
A project employee is assigned to a project which begins and ends at determined or

determinable times. 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
employees" may be lawfully terminated at the completion of the project.
According to jurisprudence, the principal test for determining whether particular

employees are properly characterized as "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 (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 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.
Even though the absence of a written contract does not by itself grant regular status to
respondents, such a contract is evidence that respondents were informed of the duration and
scope of their work and their status as project employees. As held in Hanjin Heavy Industries
and Construction Co., Ltd. v. Ibañez, citing numerous precedents on the matter, where no other
evidence was offered, the absence of the employment contracts raises a serious question of
whether the employees were properly informed of their employment status as project employees
at the time of their engagement.
In this case, records are bereft of any evidence to show that respondents were made to
sign employment contracts explicitly stating that they were going to be hired as project
Christian V. Asas
Page 212
==============================================
employees, with the period of their employment to be co-terminus with the original period of
Omni’s service contract with the Quezon City government. Neither is petitioners’ allegation that
respondents were duly apprised of the project-based nature of their employment supported by
any other evidentiary proof. Thus, the logical conclusion is that respondents were not clearly and
knowingly informed of their employment status as mere project employees, with the duration
and scope of the project specified at the time they were engaged. As such, the presumption of
regular employment should be accorded in their favor pursuant to Article 280 of the Labor Code
which provides that "[employees] who have rendered at least one year of service, whether such
service is continuous or broken [– as respondents in this case –] shall be considered as [regular
employees]with respect to the activity in which [they] are employed and [their] employment
shall continue while such activity actually exists." Add to this the obvious fact that respondents
have been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of Omni, i.e., garbage hauling, thereby confirming the strength of the aforesaid
conclusion.
Hacienda Leddy vs. Villegas, G.R. 179654, September 22, 2014, Peralta, J.
Doctrine. In the instant case, if we are to follow the length of time that Villegas had
worked with the Gamboas, it should be more than 20 years of service. Even Gamboa admitted
that by act of generosity and compassion, Villegas was given a privilege of erecting his house
inside the hacienda during his employment. While it may indeed be an act of good will on the
part of the Gamboas, still, such act is usually done by the employer either out of gratitude for the
employee’s service or for the employer's convenience as the nature of the work calls for it.
Indeed, petitioner's length of service is an indication of the regularity of his employment. Even
assuming that he was doing odd jobs around the farm, such long period of doing said odd jobs is
indicative that the same was either necessary or desirable to petitioner's trade or business. Owing
to the length of service alone, he became a regular employee, by operation of law, one year after
he was employed.
Article 280 of the Labor Code, describes a regular employee as one who is either (1)
engaged to perform activities which are necessary or desirable in the usual business or trade of
the employer; and (2) those casual employees who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which he is employed.
In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations

Commission, we held that 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. Clearly, with more than 20 years of service,
Villegas, without doubt, passed this test to attain employment regularity.
Christian V. Asas
Page 213
==============================================
While length of time may not be the controlling test to determine if Villegas is indeed a
regular employee, it is vital in establishing if he was hired to perform tasks which are necessary
and indispensable to the usual business or trade of the employer. If it was true that Villegas
worked in the hacienda only in the year 1993, specifically February 9, 1993 and February 11,
1993, why would then he be given the benefit to construct his house in the hacienda? More
significantly, petitioner admitted that Villegas had worked in the hacienda until his father's
demise. Clearly, even assuming that Villegas' employment was only for a specific duration, the
fact that he was repeatedly re-hired over a long period of time shows that his job is necessary and
indispensable to the usual business or trade of the employer.
Gamboa likewise argued that Villegas was paid on a piece-rate basis. However, 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."
We are likewise unconvinced that it was Villegas who suddenly stopped working.
Considering that he was employed with the Gamboas for more than 20 years and was even given
a place to call his home, it does not make sense why Villegas would suddenly stop working
therein for no apparent reason. To justify a finding of abandonment of work, there must be proof
of a deliberate and unjustified refusal on the part of an employee to resume his employment. The
burden of proof is on the employer to show an unequivocal intent on the part of the employee to
discontinue employment. Mere absence is not sufficient. It must be accompanied by manifest
acts unerringly pointing to the fact that the employee simply does not want to work anymore.
Petitioner failed to discharge this burden. Other than the self-serving declarations in the
affidavit of his employee, petitioner did not adduce proof of overt acts of Villegas showing his
intention to abandon his work. Abandonment is a matter of intention; it cannot be inferred or
presumed from equivocal acts. On the contrary, the filing of the instant illegal dismissal
complaint negates any intention on his part to sever their employment relationship. The delay of
more than 1 year in filing the instant illegal dismissal case likewise is non-issue considering that
the complaint was filed within a reasonable period during the three-year period provided under
Article 291 of the Labor Code. As aptly observed by the appellate court, Villegas appeared to be
without educational attainment. He could not have known that he has rights as a regular
employee that is protected by law.
The Labor Code draws a fine line between regular and casual employees to protect the
interests of labor. We ruled in Baguio Country Club Corporation v. NLRC that "its language
evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied
the rights and benefits due a regular employee by virtue of lopsided agreements with the
economically powerful employer who can maneuver to keep an employee on a casual status for
as long as convenient." Thus, notwithstanding any agreements to the contrary, what determines
whether a certain employment is regular or casual is not the will and word of the employer, to
Christian V. Asas
Page 214
==============================================
which the desperate worker often accedes, much less the procedure of hiring the employee or the
manner of paying his salary. It is the nature of the activities performed in relation to the
particular business or trades considering all circumstances, and in some cases the length of time
of its performance and its continued existence.
FVR Skills and Services vs. Seva, G.R. No. 200857, October 22, 2014, Brion, J.
FACTS: The twenty-eight (28) respondents in this case were employees of petitioner FVR
Skills and Services Exponents, Inc., an independent contractor engaged in the business of
providing janitorial and other manpower services to its clients.
ISSUE: Are the respondents regular employees?
Doctrine. Under Art. 280, there are two kinds of regular employees, namely: (1) those who were
engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer; and (2) those casual employees who became regular after one year of
service, whether continuous or broken, but only with respect to the activity for which they have
been hired.
We distinguish these two types of regular employees from a project employee, or one
whose employment was fixed for a specific project or undertaking, whose completion or
termination had been determined at the time of engagement.
A careful look at the factual circumstances of this case leads us to the legal conclusion
that the respondents are regular and not project employees.
The primary standard in determining regular employment is the reasonable connection

between the particular activity performed by the employee and the employer's business or trade.
This connection can be ascertained by considering the nature of the work performed and its
relation to the scheme of the particular business, or the trade in its entirety.
Guided by this test, we conclude that the respondents' work as janitors, service crews and
sanitation aides, are necessary or desirable to the petitioner's business of providing janitorial and
manpower services to its clients as an independent contractor.
Also, the respondents had already been working for the petitioner as early as 1998. Even
before the service contract with Robinsons, the respondents were already under the petitioner's
employ. They had been doing the same type of work and occupying the same positions from the
time they were hired and until they were dismissed in January 2009.The petitioner did not
present any evidence to refute the respondents' claim that from the time of their hiring until the
time of their dismissal, there was no gap in between the projects where they were assigned to.
The petitioner continuously availed of their services by constantly deploying them to its clients.
Christian V. Asas
Page 215
==============================================
Lastly, under Department Order (DO) 18-02, the applicable labor issuance to the
petitioner's case, the contractor or subcontractor is considered as the employer of the contractual
employee for purposes of enforcing the provisions of the Labor Code and other social legislation.
DO 18-02 grants contractual employees all the rights and privileges due a regular
employee, including the following: (a) safe and healthful working conditions;(b) labor standards
such as service incentive leave, rest days, overtime pay, holiday pay, 13th month pay and
separation pay; (c) social security and welfare benefits; (d) self-organization, collective
bargaining and peaceful concerted action; and (e) security of tenure.
Manalo vs. TNS Philippines, G.R. No. 208567, November 26, 2014, Mendoza, J.
FACTS: Jeanette V. Manalo, Vilma P. Barrios, Lourdes Lynn Michelle Fernandez, and Leila B.
Taiño were hired by TNS as field personnel on various dates starting 1996 for several projects.
They were made to sign a project-to-project employment contract. Thereafter, TNS would file
the corresponding termination report with the Department of Labor and Employment Regional
Office (DOLE-RO).
ISSUE: Are Manalo et al. project employees?
HELD: No. Article 280 of the Labor Code, as amended, clearly defined a project employee as
one whose employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and the employment is for the
duration of the season. Additionally, a project employee is one whose termination of his
employment contract is reported to the DOLE everytime the project for which he was engaged
has been completed.
TNS contended that the repeated and successive rehiring of project employees does not
qualify petitioners 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 and its completion has been determined at the time of the
engagement of the employee. The repeated rehiring was only a natural consequence of the
experience gained from past service rendered in other projects.
In Maraguinot, Jr. vs. NLRC, the Court held that once a project or work pool employee
has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the
same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the
usual business or trade of the employer, then the employee must be deemed a regular employee.
Although it is true that the length of time of the employee’s service is not a controlling
determinant of project employment, it is vital in determining whether he was hired for a specific
undertaking or in fact tasked to perform functions vital, necessary and indispensable to the usual
business or trade of the employer.
Christian V. Asas
Page 216
==============================================
Petitioners’ successive re-engagement in order to perform the same kind of work firmly
manifested the necessity and desirability of their work in the usual business of TNS as a market
research facility. Undisputed also is the fact that the petitioners were assigned office-based tasks
from 9:00 o’clock in the morning up to 6:00 o’clock in the evening, at the earliest, without any
corresponding remuneration.
The project employment scheme used by TNS easily circumvented the law and precluded
its employees from attaining regular employment status in the subtlest way possible. Petitioners
were rehired not intermittently, but continuously, contract after contract, month after month,
involving the very same tasks. They practically performed exactly the same functions over
several years. Ultimately, without a doubt, the functions they performed were indeed vital and
necessary to the very business or trade of TNS.
Granting arguendo that petitioners were rehired intermittently, a careful review of the
project employment contracts of petitioners reveals some other vague provisions. Oddly, one of
the terms and conditions in the said contract stated that:
1. The need for your services being determinable and for a specific project starting
____________ your employment will be for the duration of said project of the Company,
namely Project ___________ which is expected to be finished on _____________. The
Company shall have the option of renewing or extending the period of this agreement for
such time as it may be necessary to complete the project or because we need further
time to determine your competence on the job.
To the Court, the phrase "because we need further time to determine your competence on
the job" would refer to a probationary employment. Such phrase changes the tenor of the
contract and runs counter to the very nature of a project employment. TNS can, therefore, extend
the contract which was already fixed when it deemed it necessary to determine whether or not
the employee was qualified and fit for the job. Corollarily, TNS can likewise pre-terminate the
contract not because the specific project was completed ahead of time, but because of failure to
qualify for the job. Consistently, the terms and conditions of the contract, reads:
4. It is expressly agreed and understood that the Company may terminate your
employment after compliance with procedural requirements of law, without benefit of
termination pay and without any obligation on the part of the Company, in the event of
any breach of any conditions hereof: a) If the project is completed or cancelled before the
expected date of completion as specified in paragraph 1 hereof;
b) If we should find that you are not qualified, competent or efficient in the above-stated
positions for which you are hired in accordance with the company standards made known to you
at the start of your employment;
xxx
Christian V. Asas
Page 217
==============================================
For said reason, at the outset, the supposed project employment contract was highly
doubtful. In determining the true nature of an employment, the entirety of the contract, not
merely its designation or by which it was denominated, is controlling. Though there is a rule that
conflicting provisions in a contract should be harmonized to give effect to all, in this case,
however, harmonization is impossible because project employment and probationary
employment are distinct from one another and cannot co-exist with each other. Hence, should
there be ambiguity in the provisions of the contract, the rule is that all doubts, uncertainties,
ambiguities and insufficiencies should be resolved in favor of labor. This is in consonance with
the constitutional policy of providing full protection to labor.
Basan vs. Coca-Cola Bottlers, G.R. Nos. 174365-66, February 4, 2015, Peralta, J.
FACTS: Romeo Basan, Danilo Dizon, Jaime L. Tumabiao, Jr., Roberto Dela Rama,Jr., Ricky S.
Nicolas, Crispulo D. Donor, Galo Falguera were hired as route helpers of Coca-Cola Bottlers
Philippines.
ISSUE: Are Basan et al. regular employees?
HELD: Yes. The repeated rehiring of respondent workers and the continuing need for their
services clearly attest to the necessity or desirability of their services in the regular conduct of the
business or trade of petitioner company. The Court of Appeals has found each of respondents to
have worked for at least one year with petitioner company. While this Court, in Brent School,
Inc. vs. Zamora, has upheld the legality of a fixed-term employment, it has done so, however,
with a stern admonition that where from the circumstances it is apparent that the period has been
imposed to preclude the acquisition of tenurial security by the employee, then it should be struck
down as being contrary to law, morals, good customs, public order and public policy. The
pernicious practice of having employees, workers and laborers, engaged for a fixed period of few
months, short of the normal six-month probationary period of employment, and, thereafter, to be
hired on a day-to-day basis, mocks the law. Any obvious circumvention of the law cannot be
countenanced. The fact that respondent workers have agreed to be employed on such basis and to
forego the protection given to them on their security of tenure, demonstrate nothing more than
the serious problem of impoverishment of so many of our people and the resulting unevenness
between labor and capital. A contract of employment is impressed with public interest. The
provisions of applicable statutes are deemed written into the contract, and "the parties are not at
liberty to insulate themselves and their relationships from the impact of labor laws and
regulations by simply contracting with each other."
An employment shall be deemed to be casual if it is not covered under Art. 280:

Provided, That, any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity exists.
Thus, pursuant to Art. 280, there are two kinds of regular employees, namely: (1) those who are
engaged to perform activities which are usually necessary or desirable in the usual business or
Christian V. Asas
Page 218
==============================================
trade of the employer; and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activities in which they are employed. Simply stated,
regular employees are classified into: (1) regular employees by nature of work; and (2) 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.
Thus, under the above Brent doctrine, while it was not expressly mentioned in the Labor
Code, this Court has recognized a fixed-term type of employment embodied in a contract
specifying that the services of the employee shall be engaged only for a definite period, the
termination of which occurs upon the expiration of said period irrespective of the existence of
just cause and regardless of the activity the employee is called upon to perform. Considering,
however, the possibility of abuse by employers in the utilization of fixed-term employment
contracts, this Court, in Brent, laid down the following criteria to prevent the circumvention of
the employee’s security of tenure:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the
latter. Unfortunately, however, the records of this case is bereft of any proof which will
show that petitioners freely entered into agreements with respondent to perform services
for a specified length of time. In fact, there is nothing in the records to show that there
was any agreement at all, the contracts of employment not having been presented. While
respondent company persistently asserted that petitioners knowingly agreed upon a fixed
period of employment and repeatedly made reference to their contracts of employment,
the expiration thereof being made known to petitioners at the time of their engagement,
respondent failed to present the same in spite of all the opportunities to do so. Notably, it
was only at the stage of its appeal to the CA that respondent provided an explanation as to
why it failed to submit the contracts they repeatedly spoke of. Even granting that the
contracts of employment were destroyed by fire, respondent could have easily submitted
other pertinent files, records, remittances, and other similar documents which would
show the fixed period of employment voluntarily agreed upon by the parties. They did
not, however, aid this Court with any kind of proof which might tend to show that
petitioners were truly engaged for specified periods, seemingly content with the
convenient excuse that the contracts were destroyed by fire. Indeed, respondent’s failure
to submit the necessary documents, which as employers are in their possession, gives rise
to the presumption that their presentation is prejudicial to its cause.
Hacienda Cataywa vs. Lorezo, G.R. No. 179640, March 18, 2015, Peralta, J.
Christian V. Asas
Page 219
==============================================
Doctrine. Jurisprudence has identified the three types of employees mentioned in the
provision of the Labor Code: (1) regular employees or those who have been engaged to perform
activities that are usually necessary or desirable in the usual business or trade of the employer;
(2) project employees or those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of their
engagement, or those whose work or service is seasonal in nature and is performed for the
duration of the season; and (3) casual employees or those who are neither regular nor project
employees.
Farm workers generally fall under the definition of seasonal employees. It was also
consistently held that seasonal employees may be considered as regular employees when they are
called to work from time to time. 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.
The nature of the services performed and not the duration thereof, is determinative of
coverage under the law. 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. 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, viz.:
The primary standard, therefore, of determining a regular employment is the reasonable

connection between the particular activity performed by the employee in relation to the usual
business or trade of the employer. The test is whether the former is usually necessary or desirable
in the usual business or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the particular business or trade
in its entirety. Also, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and continuing
need for its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is also considered regular, but only with respect
to such activity and while such activity exists.
A reading of the records 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. They merely alleged
that respondent was a very casual worker because she only rendered work for 16 months. Thus,
Christian V. Asas
Page 220
==============================================
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. 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.
Paz vs. Northern Tobacco Redrying, G.R. No. 199554, February 18, 2015, Leonen, J.
Doctrine. Article 280 of the Labor Code and jurisprudence identified three types of
employees, namely: "(1) regular employees or those who have been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer;
(2) project employees or those whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season; and (3) casual employees or those who are
neither regular nor project employees."
This court explained that the proviso in the second paragraph of Article 280 in 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" applies only to "casual" employees and not
"project" and regular employees in the first paragraph of Article 280.
The primary standard, therefore, of determining regular employment is the reasonable

connection between the particular activity performed by the employee in relation to the usual
trade or business of the employer. The test is whether the former is usually necessary or desirable
in the usual business or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the particular business or trade
in its entirety. Also if the employee has been performing the job for at least a year, even if the
performance is not continuous and merely intermittent, the law deems repeated and continuing
need for its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only with respect to
such activity, and while such activity exists.
Thus, the nature of one’s employment does not depend solely on the will or word of the
employer. Nor on the procedure for hiring and the manner of designating the employee, but on
the nature of the activities to be performed by the employee, considering the employer's nature of
business and the duration and scope of work to be done.
Christian V. Asas
Page 221
==============================================
The services petitioner Paz performed as a sorter were necessary and indispensable to
respondent NTRCI’s business of flue-curing and redrying tobacco leaves. She was also regularly
rehired as a sorter during the tobacco seasons for 29 years since 1974. These considerations
taken together allowed the conclusion that petitioner Paz was a regular seasonal employee.
Dela Cruz vs. Maersk Filipinas Crewing, Inc., G.R. No. 172038, April 14, 2008, Corona, J.
ISSUE: Are seafarers entitled to regular employment?
HELD: No. It is well to remind both parties that, as early as Brent School, Inc. v. Zamora, we
already held that seafarers are not covered by the term regular employment, as defined under
Article 280 of the Labor Code. This was reiterated in Coyoca v. National Labor Relations
Commission. Instead, they are considered contractual employees whose rights and obligations
are governed primarily by the POEA Standard Employment Contract for Filipino Seamen (POEA
Standard Employment Contract), the Rules and Regulations Governing Overseas Employment,
and, more importantly, by Republic Act No. 8042, otherwise known as The Migrant Workers and
Overseas Filipinos Act of 1995. Even the POEA Standard Employment Contract itself mandates
that in no case shall a contract of employment concerning seamen exceed 12 months.
It is an accepted maritime industry practice that the employment of seafarers is for a fixed
period only. The Court acknowledges this to be for the mutual interest of both the seafarer and
the employer. Seafarers cannot stay for a long and indefinite period of time at sea as limited
access to shore activity during their employment has been shown to adversely affect them.
Furthermore, the diversity in nationality, culture and language among the crew necessitates the
limitation of the period of employment.
While we recognize that petitioner was a registered member of the Associated Marine
Officers and Seamen's Union of the Philippines which had a CBA with respondent Elite Shipping
A.S. providing for a probationary period of employment, the CBA cannot override the provisions
of the POEA Standard Employment Contract. The law is read into, and forms part of, contracts.
And provisions in a contract are valid only if they are not contrary to law, morals, good customs,
public order or public policy.
In Millares v. NLRC, this Court had occasion to rule on the use of the terms "permanent
and probationary masters and employees" vis-à-vis contracts of enlistment of seafarers. In that
case, petitioners made much of the fact that they were continually re-hired for 20 years by
private respondent Esso International. By such circumstances, they claimed to have acquired
regular status with all the rights and benefits appurtenant thereto. The Court quoted with favor
the NLRC's explanation that the reference to permanent and probationary masters and employees
was a misnomer. It did not change the fact that the contract for employment was for a definite
period of time. In using the terms "probationary" and "permanent" vis-à-vis seafarers,
what was really meant was "eligible for re-hire."
Christian V. Asas
Page 222
==============================================
Gadia vs. Sykes Asia, G.R. No. 209499, January 28, 2015, Perlas-Bernabe, J.
Doctrine. 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." In this case, Sykes Asia substantially complied with this
requisite when it expressly indicated in petitioners’ 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 Report and an Establishment Termination Report 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.
Aro vs. NLRC, G.R. No. 174792, March 7, 2012, Peralta, J.
Doctrine. The principal test for determining whether employees are "project employees"
or "regular employees" is whether they are assigned to carry out a specific project or
undertaking, the duration and scope of which are specified at the time they are engaged for that
project. Such duration, as well as the particular work/service to be performed, is defined in an
employment agreement and is made clear to the employees at the time of hiring.
In this case, petitioners did not have that kind of agreement with respondents. Neither did
they inform respondents of the nature of the latter’s work at the time of hiring. Hence, for failure
Christian V. Asas
Page 223
==============================================
of petitioners to substantiate their claim that respondents were project employees, we are
constrained to declare them as regular employees.
This Court agrees with the findings of the CA that petitioners were project employees. It
is not disputed that petitioners were hired for the construction of the Cordova Reef Village Resort
in Cordova, Cebu. By the nature of the contract alone, it is clear that petitioners' employment
was to carry out a specific project. Hence, the CA did not commit grave abuse of discretion when
it affirmed the findings of the Labor Arbiter. The CA correctly ruled:
A review of the facts and the evidence in this case readily shows that a finding had been
made by Labor Arbiter Ernesto Carreon, in his decision dated May 28, 1998, that complainants,
including private respondents, are project employees. They were hired for the construction of the
Cordova Reef Village Resort in Cordova, Cebu. We note that no appeal had been made by the
complainants, including herein private respondents, from the said finding. Thus, that private
respondents are project employees has already been effectively established.
Lynvil Fishing Enterprises vs. Ariola, G.R. No. 181974, February 1, 2012, Perez, J.
Doctrine. Jurisprudence, laid two conditions for the validity of a fixed-contract

agreement between the employer and employee:
First, 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
Second, 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.
Textually, the provision that: "NA ako ay sumasang-ayon na maglingkod at gumawa ng

mga gawain sang-ayon sa patakarang "por viaje" na magmumula sa pagalis sa Navotas papunta
sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila" is for a fixed
period of employment. In the context, however, of the facts that: (1) the respondents were doing
tasks necessarily to Lynvil’s fishing business with positions ranging from captain of the vessel to
bodegero; (2) after the end of a trip, they will again be hired for another trip with new contracts;
and (3) this arrangement continued for more than ten years, the clear intention is to go around the
security of tenure of the respondents as regular employees. And respondents are so by the
express provisions of the second paragraph of Article 280, thus:
xxx 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.
Christian V. Asas
Page 224
==============================================
The same set of circumstances indicate clearly enough that it was the need for a
continued source of income that forced the employees’ acceptance of the "por viaje" provision.
Lacuesta vs. Ateneo De Manila, G.R. No. 152777, December 9, 2005, Quisumbing, J.
Doctrine. The Manual of Regulations for Private Schools, and not the Labor Code,
determines whether or not a faculty member in an educational institution has attained regular or
permanent status. In University of Santo Tomas v. National Labor Relations Commission the
Court en banc said that under Policy Instructions No. 11 issued by the Department of Labor and
Employment, "the probationary employment of professors, instructors and teachers shall be
subject to the standards established by the Department of Education and Culture." Said standards
are embodied in paragraph 75 (now Section 93) of the Manual of Regulations for Private
Schools.
Section 93 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. Moreover, for those teaching in the tertiary level, the probationary period shall not
be more than six consecutive regular semesters of satisfactory service. The requisites to acquire
permanent employment, or security of tenure, are (1) the teacher is a full-time teacher; (2) the
teacher must have rendered three consecutive years of service; and (3) such service must have
been satisfactory.
As previously held, a part-time teacher cannot acquire permanent status. Only when one
has served as a full-time teacher can he acquire permanent or regular status. The petitioner was a
part-time lecturer before she was appointed as a full-time instructor on probation. As a part-time
lecturer, her employment as such had ended when her contract expired. Thus, the three semesters
she served as part-time lecturer could not be credited to her in computing the number of years
she has served to qualify her for permanent status.
Petitioner posits that after completing the three-year probation with an above-average
performance, she already acquired permanent status. On this point, we are unable to agree with
petitioner.
Completing the probation period does not automatically qualify her to become a
permanent employee of the university. Petitioner could only qualify to become a permanent
employee upon fulfilling the reasonable standards for permanent employment as faculty
member. Consistent with academic freedom and constitutional autonomy, an institution of higher
learning has the prerogative to provide standards for its teachers and determine whether these
standards have been met. At the end of the probation period, the decision to re-hire an employee
on probation, belongs to the university as the employer alone.
We reiterate, however, that probationary employees enjoy security of tenure, but only
within the period of probation. Likewise, an employee on probation can only be dismissed for
just cause or when he fails to qualify as a regular employee in accordance with the reasonable
Christian V. Asas
Page 225
==============================================
standards made known by the employer at the time of his hiring. Upon expiration of their
contract of employment, academic personnel on probation cannot automatically claim security of
tenure and compel their employers to renew their employment contracts. In the instant case,
petitioner, did not attain permanent status and was not illegally dismissed. As found by the
NLRC, her contract merely expired.
Mt. Carmel College, Inc. vs. NLRC, G.R. No. 117514, October 4, 1996, Puno, J.
ISSUE: Does the three-year probationary period for teachers refer to calendar year?
HELD: Yes. Private respondent's employment contract stipulated that her employment "shall
be deemed to run from SY 1989-1990 to SY 1991-1992 (day to day of month to month)". Under
Section 48 of the Manual of Regulations for Private Schools, a school year or academic year
begins on the second Monday of June and shall consist of "approximately forty weeks of
normally five school days each, exclusive of approved vacations and including legal and special
holidays, and special activities."
In the cases of Espiritu Santo Parochial School vs. NLRC and Colegio San Agustin
vs. NLRC, the court recognized the distinction between a calendar year and a school year.
In Espiritu Santo Parochial School, we held:
. . . the petitioners cannot talk of a "three-year probationary employment expiring

each school year." If it expires per school year, it is not a three-year period.
Then in Colegio San Agustin, we said:
. . . As applied to private school teachers, the probationary period is three years as

provided in the Manual of Regulations for Private Schools. It must be stressed
that the law speaks of three years not three school years . . . .
Needless to say, a calendar year consists of twelve (12) months, while a school
year consists only of ten (10) months. A school year begins in June of one calendar year
and ends in March of the succeeding calendar year.
Public respondent therefore erred in finding that private respondent's probationary

employment was supposed to end in June 1992. The contract clearly states the duration of private
respondent's term — it shall begin at the opening of school year 1989-1990 (i.e., June 1989) and
shall end at the closing of school year 1991-1992 (i.e., March, 1992). Hence, petitioners are not
obliged to pay private respondent her salary for the months of April, May and June as her
employment already ceased in March, in accordance with the provisions of her employment
contract.
2010 Manual of Regulations for Private Schools, Sec. 63

Christian V. Asas
Page 226
==============================================
2008 Manual of Regulations for Private Higher Education, Secs. 35-36, 117
2. Termination by employee
a. Just cause [Art. 285(b)]
b. Without cause [Art. 285(a)]
i. Resignation
Alfaro vs. CA, G.R. No. 140812, August 28, 2001, Panganiban, J.
Doctrine. Voluntary resignation is defined as the act of an employee, who finds himself
in a situation in which he believes that personal reasons cannot be sacrificed in favor of the
exigency of the service; thus, he has no other choice but to disassociate himself from his
employment. As discussed above, petitioner negotiated for a resignation with separation pay as
the manner in which his employment relations with private respondent would end. He was
already suffering from a lingering illness at the time he tendered his resignation. His continued
employment would have been detrimental not only to his health, but also to his performance as
an employee of private respondent.
Hence, the termination of the employment relations of petitioner with private respondent
was ultimately, if not outrightly inevitable. Resignation with separation pay was the best option
for him under the circumstances. Rightly so, this was the mode adopted and agreed upon by the
parties, as evidenced by the Release and Quitclaim petitioner executed in connection with his
resignation.
Clearly then, the claim of petitioner that he was illegally dismissed cannot be sustained,
considering that his voluntary resignation has been indubitably established as a fact by the three
tribunals below. Indeed, illegal dismissal and voluntary resignation are adversely opposed modes
of terminating employment relations, in that the presence of one precludes that of the other.
Intertrod Maritime vs. NLRC, G.R. No. 81087, June 19, 1991, Padilla, J.
FACTS: Ernesto de la Cruz signed a shipboard employment contract with petitioner Troodos
Shipping Company as principal and petitioner Intertrod Maritime, Inc., as agent to serve as Third
Engineer on board the M/T "BREEDEN" for a period of twelve (12) months. While the ship
(M/T "Afamis") was at Port Pylos, Greece, private respondent requested for relief, due to
"personal reason." The Master of the ship approved his request but informed private respondent
that repatriation expenses were for his account and that he had to give thirty (30) days notice in
view of the Clause 5 of the employment contract so that a replacement for him (private
respondent) could be arranged.
Christian V. Asas
Page 227
==============================================
ISSUE: Can the resignation be withdrawn after it was accepted by the employer?
HELD: No. Private respondent claims that his request for relief was only for the reason of
taking care of a fellow member of the crew so much so that when he was not allowed to
disembark in Port Pylos, Greece, the reason no longer existed and, therefore, when he was forced
to "sign off" at Port Said, Egypt even when he signified intentions of continuing his work, he was
illegally dismissed. We sympathize with the private respondent; however, we cannot sustain such
contention. Resignation is the voluntary act of an employee who "finds himself in a situation
where he believes that personal reasons cannot be sacrificed in favor of the exigency of the
service, then he has no other choice but to disassociate himself from his employment." The
employer has no control over resignations and so, the notification requirement was devised in
order to ensure that no disruption of work would be involved by reason of the resignation. This
practice has been recognized because "every business enterprise endeavors to increase its profits
by adopting a device or means designed towards that goal."
Resignations, once accepted and being the sole act of the employee, may not be
withdrawn without the consent of the employer. In the instant case, the Master had already
accepted the resignation and, although the private respondent was being required to serve the
thirty (30) days notice provided in the contract, his resignation was already approved. Private
respondent cannot claim that his resignation ceased to be effective because he was not
immediately discharged in Port Pylos, Greece, for he could no longer unilaterally withdraw such
resignation. When he later signified his intention of continuing his work, it was already up to the
petitioners to accept his withdrawal of his resignation. The mere fact that they did not accept
such withdrawal did not constitute illegal dismissal for acceptance of the withdrawal of the
resignation was their (petitioners') sole prerogative.
Once an employee resigns and his resignation is accepted, he no longer has any right to
the job. If the employee later changes his mind, he must ask for approval of the withdrawal of his
resignation from his employer, as if he were re-applying for the job. It will then be up to the
employer to determine whether or not his service would be continued. If the employer accepts
said withdrawal, the employee retains his job. If the employer does not, as in this case, the
employee cannot claim illegal dismissal for the employer has the right to determine who his
employees will be. To say that an employee who has resigned is illegally dismissed, is to
encroach upon the right of employers to hire persons who will be of service to them.
Moreover, under the terms of the employment contract, it is the ship's Master who
determines where a seaman requesting relief may be "signed off." It is, therefore, erroneous for
private respondent to claim that his resignation was effective only in Greece and that because he
was not immediately allowed to disembark in Greece (as the employer wanted compliance with
the contractual conditions for termination on the part of the employee), the resignation was to be
deemed automatically withdrawn.
Blue Angel Manpower and Security Services, Inc. vs. CA, G.R. No. 161196, July 28, 2008,
Velasco, Jr., J.
Christian V. Asas
Page 228
==============================================
Doctrine. Blue Angel insists that the guards had pleaded to be allowed to resign when
they were told of the pending investigation, and that they eventually tendered their pro-forma
resignation letters followed by their own handwritten resignation letters. Our review of the
circumstances surrounding these resignation letters does not support Blue Angel’s contentions
that these letters are indications that private respondents had voluntarily resigned. We agree with
the labor arbiter when he pointed out that the undated, similarly worded resignation letters
tended to show that the guards were made to copy the pro-forma letters, in their own hand, to
make them appear more convincing that the guards had voluntarily resigned. As the labor arbiter
noted, the element of voluntariness of the resignations is even more suspect considering that the
second set of resignation letters were pre-drafted, similarly worded, and with blank spaces filled
in with the effectivity dates of the resignations. In their Comment, private respondents claimed
being forced to sign and copy the pro-forma resignation letters and quitclaims on pain that they
would not get their remaining compensations.
We are more inclined to believe the dismissed guards. Other circumstances have been
aptly pointed out by respondents-guards in their Comment that we are wont to agree that they
were forced into a situation where to refuse to sign the resignation letters and quitclaims meant
loss of money for the immediate and urgent basic needs of their family. To buttress the
conclusion that the resignation letters were involuntary on the part of the guards, we find
convincing the circumstances mentioned in the Comment of respondents-guards. For one, it
seemed unlikely and improbable that Garces and Ciriaco would voluntarily resign on April 26,
1999 when they had 15 and 12 days earlier, or on April 11 and 12, 1999, already been
terminated. Then again, it was likewise inconsistent and implausible that Castillo would
voluntarily tender his resignation and sign a quitclaim on April 28, 1999, when Mercader and he
had in fact already filed a complaint against Blue Angel with the NLRC regarding illegal
deductions of their salary eight days earlier, or on April 20, 1999. Lastly, there is nothing on
record showing that Blue Angel provided any proof that Castillo, Ciriaco, and Garces had indeed
committed the infractions attributed to them. Blue Angel merely enumerated the offenses without
providing particulars as to the date and place these infractions were committed. Neither did Blue
Angel present written notices, warnings, and affidavits of the OIC to support its allegations
against the guards.
We are not unaware that the execution of the resignation letters was undisputed, but the
aforementioned circumstances of this case and the fact that private respondents filed a complaint
for illegal dismissal from employment against Blue Angel completely negate the claim that
private respondents voluntarily resigned. Well-entrenched is the rule that resignation is
inconsistent with the filing of a complaint for illegal dismissal. To constitute resignation, the
resignation must be unconditional with the intent to operate as such. There must be clear
intention to relinquish the position. In this case, private respondents actively pursued their illegal
dismissal case against Blue Angel such that they cannot be said to have voluntarily resigned from
their jobs.
Christian V. Asas
Page 229
==============================================
Vicente vs. CA, G.R. No. 175988, August 24, 2007, Ynarez-Santiago, J.
Doctrine. From the totality of evidence on record, it was clearly demonstrated that
respondent Cinderella has sufficiently discharged its burden to prove that petitioner’s resignation
was voluntary. In voluntary resignation, the employee is compelled by personal reason(s) to
disassociate himself from employment. It is done with the intention of relinquishing an office,
accompanied by the act of abandonment. To determine whether the employee indeed intended to
relinquish such employment, the act of the employee before and after the alleged resignation
must be considered.
Petitioner relinquished her position when she submitted the letters of resignation. The
resignation letter submitted on February 15, 2000 confirmed the earlier resignation letter she
submitted on February 7, 2000. The resignation letter contained words of gratitude which can
hardly come from an employee forced to resign.
Subsequently, petitioner stopped reporting for work although she met with the officers of
the corporation to settle her accountabilities but never raised the alleged intimidation employed
on her. Also, though the complaint was filed within the 4-year prescriptive period, its belated
filing supports the contention of respondent that it was a mere afterthought. Taken together, these
circumstances are substantial proof that petitioner’s resignation was voluntary.
Hence, petitioner cannot take refuge in the argument that it is the employer who bears the
burden of proof that the resignation is voluntary and not the product of coercion or intimidation.
Having submitted a resignation letter, it is then incumbent upon her to prove that the resignation
was not voluntary but was actually a case of constructive dismissal with clear, positive, and
convincing evidence. Petitioner failed to substantiate her claim of constructive dismissal.
Bare allegations of constructive dismissal, when uncorroborated by the evidence on

record, cannot be given credence. In St. Michael Academy v. National Labor Relations
Commission, we ruled that mere allegations of threat or force do not constitute substantial
evidence to support a finding of forced resignation. We enumerated the requisites for
intimidation to vitiate consent as follows:
(1) that the intimidation caused the consent to be given; (2) that the threatened act be
unjust or unlawful; (3) that the threat be real or serious, there being evident disproportion
between the evil and the resistance which all men can offer, leading to the choice of doing the act
which is forced on the person to do as the lesser evil; and (4) that it produces a well-grounded
fear from the fact that the person from whom it comes has the necessary means or ability to
inflict the threatened injury to his person or property. x x x
None of the above requisites was established by petitioner. Other than the allegation that
Mr. Tecson intimidated petitioner into resigning, there were no other proofs presented to support
a finding of forced resignation to stand against respondent’s denial and proof against dismissal.
Neither can we consider the conduct of audits and other internal investigations as a form of
Christian V. Asas
Page 230
==============================================
harassment against petitioner. Said investigation was legitimate and justified, conducted in view
of the discovery of the anomalous transaction involving the employees of the respondent
including petitioner.
Moreover, we note that petitioner is holding a managerial position with a salary

of P27,000.00 a month. Hence, she is not an ordinary employee with limited understanding such
that she would be easily maneuvered or coerced to resign against her will. Thus, we find no
compelling reason to disturb the findings and conclusions of the Court of Appeals that petitioner
voluntarily resigned and was not constructively dismissed by respondent.
c. Civic or Military duty (Art. 286)
3. Termination by Employer
a. Substantive Due Process
1. Just causes (Art. 282)
1.1. Serious Misconduct/Willful disobedience

[Art. 282(a)]
Northwest Airlines vs. del Rosario, G.R. No. 157633, September 10, 2014, Bersamin, J.
(Possible Bar Problem)
FACTS: The confrontation between flight attendant Ma. Concepcion del Rosario and the other
flight attendant escalated into a heated argument. Escaño intervened but the two ignored her,
prompting her to rush outside the aircraft to get Maria Rosario D. Morales, the Assistant Base
Manager, to pacify them.
ISSUE: Whether or not del Rosario is guilty serious misconduct and willful disobedience.
HELD: Yes. Under Art. 282, an employer may terminate an employee 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
Christian V. Asas
Page 231
==============================================
(e) Other causes analogous to the foregoing.
Northwest argues that Del Rosario was dismissed on the grounds of serious misconduct
and willful disobedience. Misconduct refers to the improper or wrong conduct that transgresses
some established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. But misconduct or
improper behavior, to be a just cause for termination of employment, must: (a) be serious; (b)
relate to the performance of the employee’s duties; and (c) show that the employee has become
unfit to continue working for the employer.
There is no doubt that the last two elements of misconduct were present in the case of Del
Rosario. The cause of her dismissal related to the performance of her duties as a flight attendant,
and she became unfit to continue working for Northwest. Remaining to be determined is,
therefore, whether the misconduct was serious as to merit Del Rosario’s dismissal. In that
respect, the fight between her and Gamboa should be so seriousthat it entailed the termination of
her employment even if it was her first offense. Northwest insists that what transpired on May
18, 1998 between her and Gamboa was obviously a form of fight that it strictly prohibited, but
Del Rosario disputes this by contending that it was only an animated discussion between her and
Gamboa. She argues that as settled in American jurisprudence fight pertained to combat or battle,
like the hostile encounter or engagement between opposing forces, suggesting primarily the
notion of a brawl or unpremeditated encounter, or of a pugilistic combat; while argument was a
connected discourse based upon reason, or a course of reasoning tending and intended to
establish a position and to induce belief.
In several rulings where the meaning of fight was decisive, the Court has observed that
the term fight was considered to be different from the term argument. In People v. Asto, for
instance, the Court characterized fight as not just a merely verbal tussle but a physical combat
between two opposing parties, to wit:
Well into their second bottle of gin, at about eleven o'clock that morning, Fernando
Aquino and Peregrino had a verbal tussle. Fernando Aquino declared that he was going to run for
councilor of Alcala, Pangasinan. Peregrino countered by saying: "If you will run for that post,
cousin, I will fight you." After a brief exchange of words, Fernando Aquino, laughing, went to sit
beside Abagat. As Aquino continued with his mirth, Abagat stared at Peregrino with contempt.
Based on the foregoing, the incident involving Del Rosario and Gamboa could not be
justly considered as akin to the fight contemplated by Northwest. In the eyes of the NLRC, Del
Rosario and Gamboa were arguing but not fighting. The understanding of fight as one that
required physical combat was absent during the incident of May 18, 1998. Moreover, the claim
of Morales that Del Rosario challenged Gamboa to a brawl (sabunutan) could not be given
credence by virtue of its being self-serving in favor of Northwest, and of its being an apparent
afterthought on the part of Morales during the investigation of the incident, without Del Rosario
having the opportunity to contest Morales' statement. In that context, the investigation then
Christian V. Asas
Page 232
==============================================
served only as Northwest's means to establish that the grounds of a valid dismissal based on
serious misconduct really existed.
Moreover, even assuming arguendo that the incident was the kind of fight prohibited by
Northwest's Rules of Conduct, the same could not be considered as of such seriousness as to
warrant Del Rosario's dismissal from the service. The gravity of the fight, which was not more
than a verbal argument between them, was not enough to tarnish or diminish Northwest's public
image.
Colegio de San Juan de Letran-Calamba vs. Villas, G.R. No. 137795, March 26, 2003,
Corona, J.
FACTS: Belen Villas was employed by the petitioner school as high school teacher in
September 1985. She applied for a study leave for six months. The principal of the school,
Quiatchon, told her that her application was approved subject to certain conditions. Villas
alleged that she intended to utilize the first semester of her study leave to finish her masteral
degree at the Philippine Women’s University (PWU). Unfortunately, it did not push through so
she took up an Old Testament course in a school of religion and at the same time utilized her free
hours selling insurance and cookware to augment her family’s income. However, during the
second semester of her study leave, she studied and passed 12 units of education subjects at the
Golden Gate Colleges in Batangas City. In response to the letters sent her by petitioner to justify
her study leave, she submitted a certification from Golden Gate Colleges and a letter explaining
why she took up an Old Testament course instead of enrolling in her masteral class during the
first semester.
Subsequently, the President and Rector of the School, Fr. Ramonclaro G. Mendez, O. P.,
wrote her, stating that her failure to enroll during the first semester was a violation of the
conditions of the study leave and that the reasons she advanced for failure to enroll during the
first semester were not acceptable.
ISSUE: Whether or not violation of the conditions of study leave is a ground for dismissal.
HELD: No. Misconduct is improper or wrongful conduct. It is the transgression of some

established and definite rule of action, a forbidden act, a dereliction of duty, willful in character,
and implies wrongful intent and not mere error of judgment. Under Article 282 of the Labor
Code, the misconduct, to be a just cause for termination, must be serious. This implies that it
must be of such grave and aggravated character and not merely trivial or unimportant. Examples
of serious misconduct justifying termination, as held in some of our decisions, include: sexual
harassment (the manager’s act of fondling the hands, massaging the shoulder and caressing the
nape of a secretary); fighting within company premises;12 uttering obscene, insulting or offensive
words against a superior; misrepresenting that a student is his nephew and pressuring and
intimidating a co-teacher to change that student’s failing grade to passing.
Christian V. Asas
Page 233
==============================================
Assuming arguendo that she did fail to report for work on April 1, 1996 and enroll during
the first semester, the most respondent could be charged with was simple misconduct. In both
instances, there was evidence of substantial compliance by respondent.
Her alleged failure to report for work exactly on April 1, 1996 is not equivalent to "failure
to return for work," a sanctionable offense under the Faculty Manual. As correctly pointed out by
the VA, petitioner failed to establish that there was a distinct and definite assignment that needed
to be done personally by respondent, and specifically on April 1, 1996, which she failed to do on
said date. Although we give credence to petitioner’s argument that a private high school teacher
still has work at the end of the school year – to assist in the graduation preparations – and in the
beginning of the school year – to assist in the enrollment – such tasks cannot be considered a
teacher’s main duties, the failure to perform which would be tantamount to dereliction of duty or
abandonment. Besides, there is no disagreement that respondent reported for work on May 15,
1996 at which time petitioner School could have asked her to assist in the enrollment period. At
most, respondent failed to help out during the preparations for graduation and this, to us, was not
a significant reason for terminating or dismissing her from her job.
With regard to her alleged failure to enroll during the first semester, although we agree
with the President and Rector, Fr. Mendez, that respondent should have first ascertained whether
she was still eligible to study at the PWU before applying for a study leave, such lapse was more
of an error in judgment rather than an act of serious misconduct. If respondent intended to use
her study leave for other unauthorized purposes, as petitioner would like us to believe, she would
not have enrolled at the Golden Gate Colleges during the second semester. Yet she did, as borne
out by the certification prepared by the Registrar of Golden Gate Colleges.
Furthermore, we find that respondent did not violate the prohibition on engaging in
employment outside the school as specified in her study leave grant and as provided in the
Faculty Manual. We find the provision of the Faculty Manual ambiguous as the term
"employment" connotes a number of meanings. Employment in its general sense connotes any
work or service rendered in exchange for money. The loose connotation of employment may
therefore cover jobs without an employer-employee relationship. However, inasmuch as in this
case, petitioner School drafted the said policy, the term "employment" should be strictly
construed against it.
Leus vs. St. Scholastica’s College, G.R. No. 187226, January 28, 2015, Reyes, J. (*Possible
Bar Problem)
FACTS: Leus and her boyfriend conceived a child out of wedlock. When SSCW learned of the
petitioner’s pregnancy, Sr. Edna Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to
file a resignation letter effective June 1, 2003. In response, the petitioner informed Sr. Quiambao
that she would not resign from her employment just because she got pregnant without the benefit
of marriage.
Christian V. Asas
Page 234
==============================================
ISSUE: Is pregnancy out of wedlock a valid ground for dismissal?
HELD: No. The morality referred to in the law is public and necessarily secular, not religiousx
x x. "Religious teachings as expressed in public debate may influence the civil public order but
public moral disputes may be resolved only on grounds articulable in secular terms."
For a particular conduct to constitute "disgraceful and immoral" behavior under civil
service laws, it must be regulated on account of the concerns of public and secular morality. It
cannot be judged based on personal bias, specifically those colored by particular mores. Nor
should it be grounded on "cultural" values not convincingly demonstrated to have been
recognized in the realm of public policy expressed in the Constitution and the laws. At the same
time, the constitutionally guaranteed rights (such as the right to privacy) should be observed to
the extent that they protect behavior that may be frowned upon by the majority.
In this case, it was not disputed that, like respondent, the father of her child was
unmarried. Therefore, respondent cannot be held liable for disgraceful and immoral conduct
simply because she gave birth to the child Christian Jeon out of wedlock.
Admittedly, the petitioner is employed in an educational institution where the teachings

and doctrines of the Catholic Church, including that on pre-marital sexual relations, is strictly
upheld and taught to the students. That her indiscretion, which resulted in her pregnancy out of
wedlock, is anathema to the doctrines of the Catholic Church. However, viewed against the
prevailing norms of conduct, the petitioner’s conduct cannot be considered as disgraceful or
immoral; such conduct is not denounced by public and secular morality. It may be an unusual
arrangement, but it certainly is not disgraceful or immoral within the contemplation of the law.
Benitez vs. Sta. Fe Moving & Relocation, G.R. No. 208163, April 20, 2015, Brion, J.
(*Possible Bar Problem)
FACTS: During the Christmas Party, Union’s Vice President Benitez berated and maligned
company’s Managing Director Kurangil by throwing foul and offensive words at him, such as
"putang ina mo ka VK, gago ka! "Benitez’s tirade, they added, included the company and it
officers. Moreover, the incident happened in front of the company’s employees, their families, as
well as company clients and guests.
ISSUE: Are the acts of Benitez constitute ground for dismissal?
HELD: Yes. The instant case should be distinguished from the previous cases where we held
that the use of insulting and offensive language constituted gross misconduct justifying an
employee’s dismissal. In De la Cruz vs. NLRC, the dismissed employee shouted "saying ang
pagka-professional mo!" and "putang ina mo" at the company physician when the latter refused
to give him a referral slip. In Autobus Workers’ Union (AWU) v. NLRC, the dismissed employee
called his supervisor "gago ka" and taunted the latter by saying "bakit anong gusto mo tang ina
Christian V. Asas
Page 235
==============================================
mo." In these cases, the dismissed employees personally subjected their respective superiors to
the foregoing verbal abuses. The utter lack of respect for their superiors was patent. In contrast,
when petitioner was heard to have uttered the alleged offensive words against respondent
company’s president and general manager, the latter was not around.
Under the foregoing circumstances, we are convinced - as the Labor Arbiter, the NLRC
and the CA had been - that Benitez's offense constituted a serious misconduct as defined by law.
His display of insolent and disrespectful behavior, in utter disregard of the time and place of its
occurrence, had very much to do with his work. He set a bad example as a union officer and as a
crew leader of a vital division of the company. His actuations during the company's Christmas
Party, to our mind, could have had negative repercussions for his employer had he been allowed
to stay on the job. His standing before those clients who witnessed the incident and those who
would hear of it would surely be diminished, to the detriment of the company.
The Coffee Bean & Tea Leaf (CBTL) vs. Arenas, G.R. No. 208908, March 11, 2015, Brion,
J.
FACTS: To ensure the quality of its crew’s services, CBTL regularly employs a "mystery guest
shopper" who poses as a customer, for the purpose of covertly inspecting the baristas’ job
performance. Mystery guest shopper at the Paseo Center Branch submitted a report stating that
Arenas was seen eating non-CBTL products at CBTL’s al fresco dining area while on duty. As a
result, the counter was left empty without anyone to take and prepare the customers’ orders.
On another occasion, Katrina Basallo (Basallo), the duty manager of CBTL, conducted a
routine inspection of the Paseo Center Branch. While inspecting the store’s products, she noticed
an iced tea bottle being chilled inside the bin where the ice for the customers’ drinks is stored;
thus, she called the attention of the staff on duty. When asked, Arenas muttered, "kaninong iced
tea?" and immediately picked the bottle and disposed it outside the store.
ISSUE: Whether or not Arenas’ acts constitute a valid ground for dismissal.
HELD: No. For willful disobedience to be a valid cause for dismissal, these two elements must
concur: (1) the employee’s assailed conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful,
made known to the employee, and must pertain to the duties which he had been engaged to
discharge.
Tested against these standards, it is clear that Arenas’ alleged infractions do not amount to
such a wrongful and perverse attitude. Though Arenas may have admitted these wrongdoings,
these do not amount to a wanton disregard of CBTL’s company policies. As Arenas mentioned in
his written explanation, he was on a scheduled break when he was caught eating at CBTL’s al
fresco dining area. During that time, the other service crews were the one in charge of manning
the counter. Notably, CBTL’s employee handbook imposes only the penalty of written warning
for the offense of eating non-CBTL products inside the store’s premises.
Christian V. Asas
Page 236
==============================================
Gross negligence implies a want or absence of, or failure to exercise even a slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences
without exerting any effort to avoid them. There is habitual neglect if based on the
circumstances, there is a repeated failure to perform one’s duties for a period of time.
In light of the foregoing criteria, we rule that Arenas’ three counts of tardiness cannot be
considered as gross and habitual neglect of duty. The infrequency of his tardiness already
removes the character of habitualness. These late attendances were also broadly spaced out,
negating the complete absence of care on Arenas’ part in the performance of his duties. Even
CBTL admitted in its notice to explain that this violation does not merit yet a disciplinary action
and is only an aggravating circumstance to Arenas’ other violations.
To further justify Arenas’ dismissal, CBTL argues that he committed serious misconduct
when he lied about using the ice bin as cooler for his bottled iced tea. Under CBTL’s employee
handbook, dishonesty, even at the first instance, warrants the penalty of termination from service.
For misconduct or improper behavior to be a just cause for dismissal, (a) it must be
serious; (b) it must relate to the performance of the employee’s duties; and (c) it must show that
the employee has become unfit to continue working for the employer.
However, the facts on record reveal that there was no active dishonesty on the part of
Arenas. When questioned about who placed the bottled iced tea inside the ice bin, his immediate
reaction was not to deny his mistake, but to remove the bottle inside the bin and throw it outside.
More importantly, when he was asked to make a written explanation of his action, he admitted
that the bottled iced tea was his.
Thus, even if there was an initial reticence on Arenas’ part, his subsequent act of owing to
his mistake only shows the absence of a deliberate intent to lie or deceive his CBTL superiors.
On this score, we conclude that Arenas’ action did not amount to serious misconduct.
St. Lukes Medical Center vs. Sanchez, G.R. No. 212054, March 11, 2015, Perlas-Bernabe, J.
FACTS: Sanchez passed through the SLMC Centralization Entrance/Exit where she was
subjected to the standard inspection procedure by the security personnel. In the course thereof,
the Security Guard on-duty, Jaime Manzanade (SG Manzanade), noticed a pouch in her bag and
asked her to open the same. When opened, said pouch contained assortment of medical stocks
which were subsequently confiscated. She was brought to the SLMC In-House Security
Department (IHSD) where she was directed to write an Incident Report explaining why she had
the questioned items in her possession. She complied with the directive and also submitted an
undated handwritten letter of apology.
ISSUE: Whether or not Sanchez’s act is a valid ground for dismissal.

Christian V. Asas
Page 237
==============================================
HELD: Yes. Note that for an employee to be validly dismissed on this ground [Art. 282(a)], the
employer's orders, regulations, or instructions must be: (1) reasonable and lawful, (2) sufficiently
known to the employee, and (3) in connection with the duties which the employee has been
engaged to discharge."
Tested against the foregoing, the Court finds that Sanchez was validly dismissed by
SLMC for her willful disregard and disobedience of Section 1, Rule I of the SLMC Code of
Discipline, which reasonably punishes acts of dishonesty, i.e., "theft, pilferage of hospital or co-
employee property, x x x or its attempt in any form or manner from the hospital, co-employees,
doctors, visitors, [and] customers (external and internal)" with termination from
employment. Such act is obviously connected with Sanchez's work, who, as a staff nurse, is
tasked with the proper stewardship of medical supplies. Significantly, records show that Sanchez
made a categorical admission in her handwritten letter - i.e., "[k]ahit alam kong bawal ay nagawa
kong [makapag-uwi] ng gamit" - that despite her knowledge of its express prohibition under the
SLMC Code of Discipline, she still knowingly brought out the subject medical items with her. It
is apt to clarify that SLMC cannot be faulted in construing the taking of the questioned items as
an act of dishonesty (particularly, as theft, pilferage, or its attempt in any form or manner)
considering that the intent to gain may be reasonably presumed from the furtive taking of useful
property appertaining to another. Note that Section 1, Rule 1 of the SLMC Code of Discipline is
further supplemented by the company policy requiring the turn-over of excess medical
supplies/items for proper handling and providing a restriction on taking and bringing such items
out of the SLMC premises without the proper authorization or "pass" from the official
concerned, which Sanchez was equally aware thereof. Nevertheless, Sanchez failed to turn-over
the questioned items and, instead, "hoarded" them, as purportedly practiced by the other staff
members in the Pediatric Unit. As it is clear that the company policies subject of this case are
reasonable and lawful, sufficiently known to the employee, and evidently connected with the
latter's work, the Court concludes that SLMC dismissed Sanchez for a just cause.
1.2. Gross and habitual neglect of duty [Art. 282(b)]
Mansion Printing Center vs. Bitara, Jr., G.R. No. 168120, January 25, 2012, Perez, J.
FACTS: Petitioners engaged the services of respondent as a helper (kargador). Respondent was
later promoted as the company’s sole driver tasked to pick-up raw materials for the printing
business, collect account receivables and deliver the products to the clients within the delivery
schedules. Petitioners aver that the timely delivery of the products to the clients is one of the
foremost considerations material to the operation of the business. It being so, they closely
monitored the attendance of respondent. They noted his habitual tardiness and absenteeism.
ISSUE: Whether or not a ground exist to dismiss Bitara, Jr.
HELD: Yes. In the present case, however, petitioners have repeatedly called the attention of
respondent concerning his habitual tardiness. The Memorandum dated 23 June 1999 of petitioner
Cheng required him to explain his tardiness. Also in connection with a similar infraction,
Christian V. Asas
Page 238
==============================================
respondent even wrote petitioner Cheng a letter dated 29 November 1999 where he admitted that
his tardiness has affected the delivery schedules of the company, offered an apology, and
undertook to henceforth report for duty on time. Despite this undertaking, he continued to either
absent himself from work or report late during the first quarter of 2000.
The imputed absence and tardiness of the complainant are documented. He faltered on his
attendance 38 times of the 66 working days. His last absences on 11, 13, 14, 15 and 16 March
2000 were undertaken without even notice/permission from management. These attendance
delinquencies may be characterized as habitual and are sufficient justifications to terminate the
complainant’s employment.
There is likewise no merit in the observation of the Court of Appeals that the petitioners
themselves are not certain of the official time of their employees after pointing out the seeming
inconsistencies between the statement of the petitioners that "there is no need for written rules
since even the [respondent] is aware that his job starts from 8 am to 5 pm" and its Memorandum
of 23 June 1999, where it was mentioned that respondent’s official time was from 8:30 a.m. to
5:30 p.m. On the contrary, it was clearly stated in the Memorandum that the Management
adjusted his official time from 8:00 a.m. to 5:00 p.m. to 8:30 a.m. to 5:30 p.m. to hopefully solve
the problem on his tardiness.
Neither is there basis to hold that the company tolerates the offsetting of undertime with
overtime services. The Weekly Time Record relied upon by respondent does not conclusively
confirm the alleged practice.
In Valiao, we defined gross negligence as "want of care in the performance of one’s

duties" and habitual neglect as "repeated failure to perform one’s duties for a period of time,
depending upon the circumstances." These are not overly technical terms, which, in the first
place, are expressly sanctioned by the Labor Code of the Philippines, to wit:
Art. 282. Termination by employer. - An employer may terminate an employment for any
of the following causes:
(a) xxx
(b) Gross and habitual neglect by the employee of his duties;
xxx
Clearly, even in the absence of a written company rule defining gross and habitual
neglect of duties, respondent’s omissions qualify as such warranting his dismissal from the
service.
Aliling vs. Feliciano, G.R. No. 185829, April 25, 2012, Velasco, Jr., J.
Christian V. Asas
Page 239
==============================================
FACTS: Wide Wide World Express Corporation (WWWEC) offered to employ petitioner
Armando Aliling (Aliling) as "Account Executive (Seafreight Sales)". Training then started.
However, instead of a Seafreight Sale assignment, WWWEC asked Aliling to handle Ground
Express (GX), a new company product launched on June 18, 2004 involving domestic cargo
forwarding service for Luzon. Marketing this product and finding daily contracts for it formed
the core of Aliling’s new assignment. Barely a month after, Manuel F. San Mateo III (San
Mateo), WWWEC Sales and Marketing Director, emailed Aliling to express dissatisfaction with
the latter’s performance.
ISSUE: Is Aliling grossly inefficient?
HELD: No. In Lim v. National Labor Relations Commission, the Court considered inefficiency
as an analogous just cause for termination of employment under Article 282 of the Labor Code:
We cannot but agree with PEPSI that "gross inefficiency" falls within the purview of
"other causes analogous to the foregoing," this constitutes, therefore, just cause to terminate an
employee under Article 282 of the Labor Code. One is analogous to another if it is susceptible of
comparison with the latter either in general or in some specific detail; or has a close relationship
with the latter. "Gross inefficiency" is closely related to "gross neglect," for both involve specific
acts of omission on the part of the employee resulting in damage to the employer or to his
business. In Buiser vs. Leogardo, this Court ruled that failure to observed prescribed standards to
inefficiency may constitute just cause for dismissal.
It did so anew in Leonardo v. National Labor Relations Commission on the following

rationale:
An employer is entitled to impose productivity standards for its workers, and in fact, non-
compliance may be visited with a penalty even more severe than demotion. Thus, the practice of
a company in laying off workers because they failed to make the work quota has been recognized
in this jurisdiction. In the case at bar, the petitioners' failure to meet the sales quota assigned to
each of them constitute a just cause of their dismissal, regardless of the permanent or
probationary status of their employment. Failure to observe prescribed standards of work, or to
fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal.
Such inefficiency is understood to mean failure to attain work goals or work quotas, either by
failing to complete the same within the allotted reasonable period, or by producing unsatisfactory
results. This management prerogative of requiring standards may be availed of so long as they
are exercised in good faith for the advancement of the employer's interest.
In fine, an employee’s failure to meet sales or work quotas falls under the concept of
gross inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for
dismissal under Article 282 of the Code. However, in order for the quota imposed to be
considered a valid productivity standard and thereby validate a dismissal, management’s
prerogative of fixing the quota must be exercised in good faith for the advancement of its
Christian V. Asas
Page 240
==============================================
interest. The duty to prove good faith, however, rests with WWWEC as part of its burden to
show that the dismissal was for a just cause. WWWEC must show that such quota was imposed
in good faith. This WWWEC failed to do, perceptibly because it could not. The fact of the matter
is that the alleged imposition of the quota was a desperate attempt to lend a semblance of validity
to Aliling’s illegal dismissal. It must be stressed that even WWWEC’s sales manager, Eve
Amador (Amador), in an internal e-mail to San Mateo, hedged on whether petitioner performed
below or above expectation: Could not quantify level of performance as he as was tasked to
handle a new product (GX). Revenue report is not yet administered by IT on a month-to-month
basis. Moreover, this in a way is an experimental activity. Practically you have a close
monitoring with Armand with regards to his performance. Your assessment of him would be
more accurate.
Being an experimental activity and having been launched for the first time, the sales of
GX services could not be reasonably quantified. This would explain why Amador implied in her
email that other bases besides sales figures will be used to determine Aliling’s performance. And
yet, despite such a neutral observation, Aliling was still dismissed for his dismal sales of GX
services. In any event, WWWEC failed to demonstrate the reasonableness and the bona fides on
the quota imposition.
Reyes-Rayel vs. Philippine Luen Thai Holdings, G.R. No. 174893, July 11, 2012, Del
Castillo, J.
FACTS: PLTHC hired Reyes-Rayel as Corporate Human Resources (CHR) Director for
Manufacturing for its subsidiary/affiliate company, L&T. In the employment contract, petitioner
was tasked to perform functions in relation to administration, recruitment, benefits,
audit/compliance, policy development/ structure, project plan, and such other works as may be
assigned by her immediate superior, Frank Sauceda (Sauceda), PLTHC’s Corporate Director for
Human Resources.
ISSUE: Whether or not Reyes-Rayel committed gross inefficiency.
HELD: Yes. First, records show that petitioner indeed unreasonably failed to effectively
communicate with her immediate superior. There was an apparent neglect in her obligation to
maintain constant communication with Sauceda in order to ensure that her work is up to par. This
is evident from the various emails showing that she failed to update Sauceda on the progress of
her important assignments on several occasions. While petitioner explained in her written reply
to the Prerequisite Notice that such failure to communicate was due to the company’s computer
system breakdown, respondents however were able to negate this as they have shown that the
computer virus which affected the company’s system only damaged some email addresses of
certain employees which did not include that of Sauceda’s. On the other hand, petitioner failed to
present any concrete proof that the said computer virus also damaged Sauceda’s email account as
to effectively disrupt their regular communication. Moreover, we agree with respondents’ stance
Christian V. Asas
Page 241
==============================================
that petitioner could still reach Sauceda through other means of communication and should not
completely rely on the web.
Second, the affidavits of petitioner’s co-workers revealed her negative attitude and
unprofessional behavior towards them and the company. In her affidavit, Agnes Suzette
Pasustento, L&T’s Manager for the Corporate Communications Department, attested to
petitioner’s "badmouthing" of Sauceda in one of their meetings abroad and of discussing with
her about filing a labor case against the company. Also, in the affidavits of Rizza S.
Esplana (Sauceda’s Executive Assistant), Cynthia Yñiguez (Corporate Human Resources
Manager of an affiliate of L&T), and Ana Wilma Arreza (Human Resources and Administration
Division Manager of an affiliate of L&T), they narrated several instances which demonstrated
petitioner’s notoriously bad temper. They all described her to have an "irrational" behavior and
"superior and condescending" attitude in the workplace. Unfortunately for petitioner, these sworn
statements which notably remain uncontroverted and unrefuted, militate against her innocence
and strengthen the adverse averments against her. It is well to state that as a CHR Director tasked
to efficiently manage the company’s human resource team and practically being considered the
"face" of the Human Resource, petitioner should exhibit utmost concern for her employer’s
interest. She should likewise establish not only credibility but also respect from co-workers
which can only be attained if she demonstrates maturity and professionalism in the discharge of
her duties. She is also expected to act as a role model who displays uprightness both in her own
behavior and in her dealings with others.
The third and most important is petitioner’s display of inefficiency and ineptitude in
her job as a CHR Director. In the affidavit of Ornida B. Calma, Chief Accountant of L&T’s
affiliate company, petitioner, on two occasions, gave wrong information regarding issues on
leave and holiday pay which generated confusion among employees in the computation of
salaries and wages. Due to the nature of her functions, petitioner is expected to have strong
working knowledge of labor laws and regulations to help shed light on issues and questions
regarding the same instead of complicating them. Petitioner obviously failed in this respect.
No wonder she received a less than par performance in her performance evaluation
conducted in June 2001, contrary to her assertion that an 80.2% rating illustrates good and
dependable work performance. As can be gleaned in the performance appraisal form, petitioner
received deficient marks and low ratings on areas of problem solving and decision making,
interpersonal relationships, planning and organization, project management and integrity
notwithstanding an overall passing grade. As aptly remarked by the CA, these low marks
revealed the "degree of [petitioner’s] work handicap" and should have served as a notice for her
to improve on her job. However, she appeared complacent and remained lax in her duties and
this naturally resulted to respondents’ loss of confidence in her managerial abilities.
1.3. Loss of trust and confidence [Art. 282(c)]
1.3.1. Managerial and rank-and-file employees

Christian V. Asas
Page 242
==============================================
Villanueva, Jr. vs. NLRC, G.R. No. 176893, June 13, 2012, Mendoza, J.
Doctrine. Dismissal from employment has two aspects: 1) the legality of the act of
dismissal per se, which constitutes substantive due process, and 2) the legality of the manner of
dismissal, which constitutes procedural due process.
In the case of Cruz v. Court of Appeals, the Court had the occasion to enumerate the
essential elements for "willful breach by the employee of the trust reposed in him by his
employer":
xxx the loss of trust and confidence must be based on willful breach of the trust reposed
in the employee by his employer. Such breach is willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently. Moreover, it must be based on substantial evidence and not on the
employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at
the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by
the employer against a claim that the dismissal of an employee was arbitrary. And, in order to
constitute a just cause for dismissal, the act complained of must be work-related and shows that
the employee concerned is unfit to continue working for the employer. In addition, loss of
confidence as a just cause for termination of employment is premised on the fact that the
employee concerned holds a position of responsibility, trust and confidence or that the employee
concerned is entrusted with confidence with respect to delicate matters, such as handling or case
and protection of the property and assets of the employer. The betrayal of this trust is the essence
of the offense for which an employee is penalized.
As a safeguard against employers who indiscriminately use "loss of trust and confidence"
to justify arbitrary dismissal of employees, the Court, in addition to the above elements, came up
with the following guidelines for the application of the doctrine: (1) loss of confidence should
not be simulated; (2) it should not be used as a subterfuge for causes which are improper, illegal
or unjustified; (3) it may not be arbitrarily asserted in the face of overwhelming evidence to the
contrary; and (4) it must be genuine, not a mere afterthought, to justify an earlier action taken in
bad faith.
In this case, the above requisites have been met. Meralco’s loss of trust and confidence
arising out of Villanueva’s act of misappropriation of company funds in the course of processing
customer applications has been proven by substantial evidence, thus, justified. Verily, the
issuance of additional receipts for excessive payments exacted from customers is a willful breach
of the trust reposed in him by the company.
Philippine Plaza Holdings vs. Episcope, G.R. No. 192826, February 7, 2013, Perlas-
Bernabe, J.
Doctrine. Among the just causes for termination isthe employer’s loss of trust and
confidence in its employee. Article 296 (c) (formerly Article 282 [c]) of the Labor Code provides
Christian V. Asas
Page 243
==============================================
that an employer may terminate the services of an employee for fraud or willful breach of the
trust reposed in him. But in order for the said cause to be properly invoked, certain requirements
must be complied with namely, (1) the employee concerned must be holding a position of
trust and confidence and (2) there must be an act that would justify the loss of trust and
confidence.
It is noteworthy to mention that there are two classes of positions of trust: on the one
hand, there are managerial employees whose primary duty consists of the management of the
establishment in which they are employed or of a department or a subdivision thereof, and to
other officers or members of the managerial staff; on the other hand, there are fiduciary rank-
and-file employees, such as cashiers, auditors, property custodians, or those who, in the normal
exercise of their functions, regularly handle significant amounts of money or property. These
employees, though rank-and-file, are routinely charged with the care and custody of the
employer's money or property, and are thus classified as occupying positions of trust and
confidence. Episcope belongs to this latter class and therefore, occupies a position of trust and
confidence.
As may be readily gleaned from the records, Episcope was employed by PPHI as a
service attendant in its Café Plaza. In this regard, she was tasked to attend to dining guests,
handle their bills and receive their payments for transmittal to the cashier. It is also apparent that
whenever discount cards are presented, she maintained the responsibility to take them to the
cashier for the application of discounts. Being therefore involved in the handling of company
funds, Episcope is undeniably considered an employee occupying a position of trust and
confidence and as such, was expected to act with utmost honesty and fidelity.
In the present case, records would show that Episcope committed acts of dishonesty
which resulted to monetary loss on the part of PPHI and more significantly, led to the latter’s loss
of trust and confidence in her. Notwithstanding the impaired probative value of the unaudited
and unsigned auditor’s report, the totality of circumstances supports the foregoing findings:
First, it remains unrefuted that Episcope attended to the auditors when they dined at the
Café Plaza on the date and time in question. In fact, Episcope herself admitted that she tendered
Check No. 565938 bearing the amount of P2,306.65 and received the amount of P2,400.00 as
payment;
Second, it is likewise undisputed that the check receipt on file with the Hotel for the same
transaction reflected only the amount of P1,400.20 in view of the application of a certain
Starwood Privilege Discount Card registered in the name of one Peter Pamintuan, while the
receipt given to the auditors bore the undiscounted amount of P2,306.65 which thus, resulted to
a P906.45 discrepancy. During the proceedings, both receipts were actually presented in
evidence yet, Episcope never interposed any objection on the authenticity of the same; and
Christian V. Asas
Page 244
==============================================
Third, when asked to explain the said discrepancy, Episcope merely imputed culpability
on the part of the cashier, whom she claimed prepared all the receipts that were returned to the
guests.
From the foregoing incidents, it is clear that Episcope was remiss in her duty to carefully
account for the money she received from the cafe's guests. It must be observed that though the
receipts were prepared by the cashier, Episcope; as a service attendant,. was the one who actually
handled the money tendered to her by the hotel clients. In this regard, prudence dictates that
Episcope should have at least known why there was a shortage in remittance. Yet when asked,
Episcope could not offer any plausible explanation but merely shifted the blame to the cashier.
Irrefragably, as an employee who was routinely charged with the care and custody of her
employer's money, Episcope was expected to have been more circumspect in the performance of
her duties as a service attendant. This she failed to observe in the case at bar which thus, justifies
PPHI's loss of trust and confidence in her as well as her consequent dismissal.
Torres vs. Rural Bank of San Juan, G.R. No. 184520, March 13, 2013, Reyes, J.
Doctrine. Further, the law mandates that before validity can be accorded to a dismissal
premised on loss of trust and confidence, two requisites must concur, viz: (1) the employee
concerned must be holding a position of trust; and (2) the loss of trust must be based on willful
breach of trust founded on clearly established facts.
There is no arguing that the petitioner was part of the upper echelons of RBSJI’s
management from whom greater fidelity to trust is expected. At the time when he committed the
act which allegedly led to the loss of RBSJI’s trust and confidence in him, he was the Acting
Manager of N. Domingo branch. It was part of the petitioner’s responsibilities to effect a smooth
turn-over of pending transactions and to sign and approve instructions within the limits assigned
to the position under existing regulations. Prior thereto and ever since he was employed, he has
occupied positions that entail the power or prerogative to dictate management policies – as
Personnel and Marketing Manager and thereafter as Vice-President.
The presence of the first requisite is thus certain. Anent the second requisite, the Court
finds that the respondents failed to meet their burden of proving that the petitioner’s dismissal
was for a just cause.
The act alleged to have caused the loss of trust and confidence of the respondents in the
petitioner was his issuance, without prior authority and audit, of a clearance to Jacinto who
turned out to be still liable for unpaid cash advances and for an P11-million fraudulent
transaction that exposed RBSJI to suit. According to the respondents, the clearance barred RBSJI
from running after Jacinto. The records are, however, barren of any evidence in support of these
claims.
As correctly argued by the petitioner and as above set forth, the onus of submitting a copy
of the clearance allegedly exonerating Jacinto from all his accountabilities fell on the
Christian V. Asas
Page 245
==============================================
respondents. It was the single and absolute evidence of the petitioner’s act that purportedly
kindled the respondents’ loss of trust. Without it, the respondents’ allegation of loss of trust and
confidence has no leg to stand on and must thus be rejected. Moreover, one can reasonably
expect that a copy of the clearance, an essential personnel document, is with the respondents.
Their failure to present it and the lack of explanation for such failure or the document’s
unavailability props up the presumption that its contents are unfavorable to the respondents’
assertions.
At any rate, the absence of the clearance upon which the contradicting claims of the
parties could ideally be resolved, should work against the respondents. With only sworn
pleadings as proof of their opposite claims on the true contents of the clearance, the Court is
bound to apply the principle that the scales of justice should be tilted in favor of labor in case of
doubt in the evidence presented.
RBSJI also failed to substantiate its claim that the petitioner’s act estopped them from
pursuing Jacinto for his standing obligations. There is no proof that RBSJI attempted or at least
considered to demand from Jacinto the payment of his unpaid cash advances. Neither was RBSJI
able to show that it filed a civil or criminal suit against Jacinto to make him responsible for the
alleged fraud. There is thus no factual basis for RBSJI’s allegation that it incurred damages or
was financially prejudiced by the clearance issued by the petitioner.
More importantly, the complained act of the petitioner did not evince intentional breach
of the respondents’ trust and confidence. Neither was the petitioner grossly negligent or
unjustified in pursuing the course of action he took.
It must be pointed out that the petitioner was caught in the quandary of signing on the
spot a standard employment clearance for the furious Jacinto sans any information on his
outstanding accountabilities, and refusing to so sign but risk alarming or scandalizing RBSJI, its
employees and clients. Contrary to the respondents’ allegation, the petitioner did not concede to
Jacinto’s demands. He was, in fact, able to equalize two equally undesirable options by
bargaining to instead clear Jacinto only of his settled financial obligations after proper
verification with branch cashier Lily. It was only after Lily confirmed Jacinto’s recorded
payments that the petitioner signed the clearance. The absence of an audit was precisely what
impelled the petitioner to decline signing a standard employment clearance to Jacinto and instead
issue a different one pertaining only to his paid accountabilities.
Under these circumstances, it cannot be concluded that the petitioner was in any way
prompted by malicious motive in issuing the clearance. He was also able to ensure that RBSJI’s
interests are protected and that Jacinto is pacified. He did what any person placed in a similar
situation can prudently do. He was able to competently evaluate and control Jacinto’s demands
and thus prevent compromising RBSJI’s image, employees and clients to an alarming scene.
Christian V. Asas
Page 246
==============================================
The Court has repeatedly emphasized that the act that breached the trust must be willful
such that it was done intentionally, knowingly, and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. The
conditions under which the clearance was issued exclude any finding of deliberate or conscious
effort on the part of the petitioner to prejudice his employer.
Also, the petitioner did not commit an irregular or prohibited act. He did not falsify or
misrepresent any company record as it was officially confirmed by Lily that the items covered by
the clearance were truly settled by Jacinto. Hence, the respondents had no factual basis in
declaring that the petitioner violated Category B Grave Offense No. 1 of the Company Code of
Conduct and Discipline.
The respondents cannot capitalize on the petitioner’s lack of authority to issue a clearance
to resigned employees. First, it remains but an unsubstantiated allegation despite the several
opportunities for them in the proceedings below to show, through bank documents, that the
petitioner is not among those officers so authorized. Second, it is the Court’s considered view
that by virtue of the petitioner’s stature in respondent bank, it was well-within his discretion to
sign or certify the truthfulness of facts as they appear in RBSJI’s records. Here, the records of
RBSJI cashier Lily clearly showed that Jacinto paid the cash advances and salary loan covered
by the clearance issued by the petitioner.
Lastly, the seven-month gap between the clearance incident and the April 17, 1997
memorandum asking the petitioner to explain his action is too lengthy to be ignored. It likewise
remains uncontroverted that during such period, respondent Jesus verbally terminated the
petitioner only to recall the same and instead ask the latter to tender a resignation letter. When
the petitioner refused, he was sent the memorandum questioning his issuance of a clearance to
Jacinto seven months earlier. The confluence of these undisputed circumstances supports the
inference that the clearance incident was a mere afterthought used to gain ground for the
petitioner’s dismissal.
Loss of trust and confidence as a ground for dismissal has never been intended to afford
an occasion for abuse because of its subjective nature. It should not be used as a subterfuge for
causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought
intended to justify an earlier action taken in bad faith.
PJ Lhuiller vs. Velayo, G.R. No. 198620, November 12, 2014, Reyes, J.
FACTS: In addition to its pawnshop operations, the PJLI offers its "Pera Padala" cash
remittance service whereby, for a fee or "sending charge," a customer may remit money to a
consignee through its network of pawnshop branches all over the country. It hired Velayo as
accounting clerk and also performing the functions of vault custodian and cashier. One day, a
customer sent P500.00 through its branch in Capistrano, Cagayan de Oro City, and paid a
remittance fee of P40.00. Inexplicably, however, no corresponding entry was made to recognize
Christian V. Asas
Page 247
==============================================
the cash receipt of P540.00 in the computerized accounting system (operating system) of the
PJLI.
ISSUE: Can Velayo be terminated on the ground of loss of trust and confidence?
HELD: Yes. In order that an employer may invoke loss of trust and confidence in terminating
an employee under Article 282(c) of the Labor Code, certain requirements must be complied
with, namely: (1) the employee must be holding a position of trust and confidence; and (2) there
must be an act that would justify the loss of trust and confidence. While loss of trust and
confidence should be genuine, it does not require proof beyond reasonable doubt, it being
sufficient that there is some basis to believe that the employee concerned is responsible for the
misconduct and that the nature of the employee’s participation therein rendered him unworthy of
trust and confidence demanded by his position.
The petitioners are fully justified in claiming loss of trust and confidence in the
respondent. While it is natural and understandable that the respondent should feel apprehensive
about Tuling’s reaction concerning her cash overage, considering that it was their first time to be
working together in the same branch, we must keep in mind that the unaccounted cash can only
be imputed to the respondent’s own negligence in failing to keep track of the transaction from
which the money came. A subsequent branch audit revealed that it came from a "Pera Padala"
remittance, implying that although the amount had been duly remitted to the consignee, the
sending branch failed to record the payment received from the consigning customer. For days
following the overage, the respondent tried but failed to reconcile her records, and for this inept
handling of a "Pera Padala" remittance, she already deserved to be sanctioned.
Further, as a matter of strict company policy, unexplained cash is recognized at the end of
the day as miscellaneous income. Inexplicably, despite being with the company for four years as
accounting clerk and cashier, the respondent failed to make the required entry in the branch
operating system recognizing miscellaneous income. Such an entry could have been easily
reversed once it became clear how the overage came about.
But the respondent obviously thought that by skipping the entry, she could keep Tuling
from learning about the overage. Her trustworthiness as branch cashier and bookkeeper has been
irreparably tarnished. The respondent’s untrustworthiness is further demonstrated when she
began to concoct lies concerning the overage: first, by denying its existence to Tuling and again
to the company auditor; later, when she falsely claimed that a computer glitch or malfunction had
prevented her from posting the amount on October 29, 2007; and finally, when she was forced to
admit before the company’s investigating panel that she took and spent the money.
The respondent’s actuations were willful and deliberate. A cashier who, through
carelessness, lost a document evidencing a cash receipt, and then wilfully chose not to record the
excess cash as miscellaneous income and instead took it home and spent it on herself, and later
repeatedly denied or concealed the cash overage when confronted, deserves to be dismissed.
Christian V. Asas
Page 248
==============================================
A cashier’s inability to safeguard and account for missing cash is sufficient cause to
dismiss her.
The respondent insisted that she never intended to misappropriate the missing fund, but in
Santos v. San Miguel Corp., the Court held that misappropriation of company funds,
notwithstanding that the shortage has been restituted, is a valid ground to terminate the services
of an employee for loss of trust and confidence. Also, in Cañeda v. Philippine Airlines, Inc., the
Court held that it is immaterial what the respondent’s intent was concerning the missing fund, for
the undisputed fact is that cash which she held in trust for the company was missing in her
custody. At the very least, she was negligent and failed to meet the degree of care and fidelity
demanded of her as cashier. Her excuses and failure to give a satisfactory explanation for the
missing cash only gave the petitioners sufficient reason to lose confidence in her. As it was held
in Metro Drug Corporation v. NLRC: It would be most unfair to require an employer to continue
employing as its cashier a person whom it reasonably believes is no longer capable of giving full
and whole hearted trustworthiness in the stewardship of company funds.
1.4. Commission of crime [Art. 282(d)]
1.5. Analogous cases [Art. 282(e)]
> Theft committed by an employee against a person other than his employer is analogous to
serious misconduct. (Hocheng Philippines vs. Farrales, G.R. No. 211497, March 18, 2015,
Reyes, J.)
> Obesity in the context of flight attendant. (Yrasuegui vs. PAL, G.R. No. 168081, October 17,
2008, Reyes, R.T., J.)
> Attitude problem is analogous to loss of trust and confidence. (Heavylift Manila vs. CA &
Galay, G.R. No. 154410, October 20, 2005, Quisumbing, J.)
Hocheng Philippines vs. Farrales, G.R. No. 211497, March 18, 2015, Reyes, J.
FACTS: Farrales borrowed a helmet from his co-worker Eric Libutan ("Eric") since they reside
in the same barangay. However, he got a wrong helmet as there were many motorcycles with
helmets in the parking area. When he learned that he made a mistake, he immediately phoned
the HPC’s guard to report the situation that he mistook the helmet which he thought belonged to
Eric. After several employees were asked as to the ownership of the helmet, he finally found the
owner thereof, which is Jun Reyes’s ("Jun") nephew, Reymar, who was with him on November
27, 2009. Farrales promptly apologized to Jun and undertook to return the helmet the following
day and explained that it was an honest mistake.
ISSUE: Is the act of Farrales a ground for his dismissal.

Christian V. Asas
Page 249
==============================================
HELD: Yes. Theft committed by an employee against a person other than his employer, if
proven by substantial evidence, is a cause analogous to serious misconduct. Misconduct is
improper or wrong conduct, it is the transgression of some established and definite rule of action,
a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment. The misconduct to be serious must be of such grave and aggravated
character and not merely trivial or unimportant. Such misconduct, however serious, must,
nevertheless, be in connection with the employee’s work to constitute just cause for his
separation.
But where there is no showing of a clear, valid and legal cause for termination of
employment, the law considers the case a matter of illegal dismissal. If doubts exist between the
evidence presented by the employer and that of the employee, the scales of justice must be tilted
in favor of the latter. The employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause.
The Court agrees with the CA that Farrales committed no serious or willful misconduct or
disobedience to warrant his dismissal. It is not disputed that Farrales lost no time in returning the
helmet to Reymar the moment he was apprised of his mistake by Eric, which proves, according
to the CA, that he was not possessed of a depravity of conduct as would justify HPC’s claimed
loss of trust in him. Farrales immediately admitted his error to the company guard and sought
help to find the owner of the yellow helmet, and this, the appellate court said, only shows that
Farrales did indeed mistakenly think that the helmet he took belonged to Eric.
Yrasuegui vs. PAL, G.R. No. 168081, October 17, 2008, Reyes, R.T., J.
FACTS: Armando G. Yrasuegui was a former international flight steward of Philippine

Airlines, Inc. (PAL). He stands five feet and eight inches (5’8") with a large body frame. The
proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual of PAL.
ISSUE: Is failure to comply with the weight standard a ground for dismissal?
HELD: Yes. In fine, We hold that the obesity of petitioner, when placed in the context of his
work as flight attendant, becomes an analogous cause under Article 282(e) of the Labor Code
that justifies his dismissal from the service. His obesity may not be unintended, but is
nonetheless voluntary. As the CA correctly puts it, "voluntariness basically means that the just
cause is solely attributable to the employee without any external force influencing or controlling
his actions. This element runs through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a recognized just cause, is
considered voluntary although it lacks the element of intent found in Article 282(a), (c), and (d)."
Heavylift Manila vs. CA & Galay, G.R. No. 154410, October 20, 2005, Quisumbing, J.
Christian V. Asas
Page 250
==============================================
FACTS: Heavylift, a maritime agency, thru a letter signed by Josephine Evangelio,

Administrative and Finance Manager of Heavylift, informed Ma. Dottie Galay, Heavylift
Insurance and Provisions Assistant, of her low performance rating and the negative feedback
from her team members regarding her work attitude. The letter also notified her that she was
being relieved of her other functions except the development of the new Access program.
ISSUE: Whether or not a valid ground exist to dismiss Galay.
HELD: None. An employee who cannot get along with his co-employees is detrimental to the
company for he can upset and strain the working environment. Without the necessary teamwork
and synergy, the organization cannot function well. Thus, management has the prerogative to
take the necessary action to correct the situation and protect its organization. When personal
differences between employees and management affect the work environment, the peace of the
company is affected. Thus, an employee’s attitude problem is a valid ground for his
termination. It is a situation analogous to loss of trust and confidence that must be duly proved
by the employer. Similarly, compliance with the twin requirement of notice and hearing must
also be proven by the employer.
However, we are not convinced that in the present case, petitioners have shown
sufficiently clear and convincing evidence to justify Galay’s termination. Though they are correct
in saying that in this case, proof beyond reasonable doubt is not required, still there must be
substantial evidence to support the termination on the ground of attitude. The mere mention of
negative feedback from her team members, and the letter dated February 23, 1999, are not proof
of her attitude problem. Likewise, her failure to refute petitioners’ allegations of her negative
attitude does not amount to admission. Technical rules of procedure are not binding in labor
cases. Besides, the burden of proof is not on the employee but on the employer who must
affirmatively show adequate evidence that the dismissal was for justifiable cause.
1.6. Abandonment
Protective Maximum Security vs. Fuentes, G.R. No. 169303, February 11, 2015, Leonen, J.
Doctrine. Abandonment as a just cause for dismissal is based on Article 282(b) of the
Labor Code i.e. gross and habitual neglect by the employee of his duties.
Abandonment constitutes a just cause for dismissal because "the law in protecting the
rights of the laborer, authorizes neither oppression nor self-destruction of the employer." The
employer cannot be compelled to maintain an employee who is remiss in fulfilling his duties to
the employer, particularly the fundamental task of reporting to work.
In Agabon v. National Labor Relations Commission, this court discussed the concept of
abandonment: Abandonment is the deliberate and unjustified refusal of an employee to resume
his employment. It is a form of neglect of duty, hence, a just cause for termination of
employment by the employer. For a valid finding of abandonment, these two factors should be
Christian V. Asas
Page 251
==============================================
present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a
clear intention to sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be deduced that the
employees has [sic] no more intention to work. The intent to discontinue the employment must
be shown by clear proof that it was deliberate and unjustified.
There is no abandonment in this case.
The first element of abandonment is the failure of the employee to report to work without
a valid and justifiable reason. Petitioner asserts that respondent failed to report for work
immediately after his release from prison. He also failed to abide by company procedure and
report to his immediate superior. According to petitioner, respondent’s actions constitute a failure
to report to work without a valid and justifiable reason.
The National Labor Relations Commission and the Court of Appeals found that
respondent’s failure to return to work was justified because of his detention and its adverse
effects. The Court of Appeals found that petitioner did not refute the allegation that respondent,
while in the custody of the police, suffered physical violence in the hands of its employees. Thus,
the Court of Appeals gave credence to the report submitted by Inspector Escartin, which stated
that respondent was "so traumatized that he actually asked to remain in the custody of the police
because he feared for his life." The Court of Appeals further found that respondent experienced
intense fear, "manifest[ed] by the fact that he left the custody of the police only when his mother
accompanied him."
Thus, the intervening period when respondent failed to report for work, from
respondent’s prison release to the time he actually reported for work, was justified. Since there
was a justifiable reason for respondent’s absence, the first element of abandonment was not
established.
The second element is the existence of overt acts which show that the employee has no
intention to return to work. Petitioner alleges that since respondent "vanished" and failed to
report immediately to work, he clearly intended to sever ties with petitioner.
However, respondent reported for work after August 15, 2001, when the criminal
Complaint against him was dropped. Further, petitioner refused to allow respondent to resume
his employment because petitioner believed that respondent was a member of the New People’s
Army and had already hired a replacement.
Respondent’s act of reporting for work after being cleared of the charges against him
showed that he had no intention to sever ties with his employer. He attempted to return to work
after the dismissal of the Complaint so that petitioner would not have any justifiable reason to
deny his request to resume his employment. Thus, respondent’s actions showed that he intended
to resume working for petitioner. The second element of abandonment was not proven, as well.
Christian V. Asas
Page 252
==============================================
Calipay vs. NLRC, G.R. No. 166411, August 3, 2010, Peralta, J.
Doctrine. Abandonment is present in this case. In the instant case, petitioner Calipay
had failed to report for work for unknown reasons x x x His continued absences without the
private respondents’ approval constituted gross and habitual neglect which is a just cause for
termination under Article 282 of the Labor Code of the Philippines.
Petitioner harps on the fact that on February 1, 2002, the NLRC issued a Resolution
which was in his favor. While petitioner relies heavily on the said Resolution, he, however,
always fails to mention that in a subsequent Resolution dated September 24, 2002, the NLRC
reversed itself and reinstated the Decision of the Labor Arbiter dismissing the complaint filed by
petitioner and his former co-employees.
Furthermore, petitioner insists that he is not guilty of abandoning his job and that his
failure to report for work was justified by his unceremonious dismissal from employment.
However, the Labor Arbiter made the following categorical findings:
Complainant Ernesto Dimalanta claimed that he was dismissed on January 30, 1998. x x
x Complainants Alfredo Mission and Elpidio Calipay, for their part, alleged that they were
dismissed by the respondents on May 25, 1998 and May 27, 1998, respectively x x x. The record,
however, shows that complainants actually reported for work and were paid wages by the
respondent company even after their alleged termination as evidenced by their Daily Time
Records and Salary Vouchers submitted by respondents. Complainant Mission worked with the
respondent until July 15, 1998, complainant Calipay up to November 2, 1998 while complainant
Dimalanta until May 17, 1998. After those dates, they absented themselves from their work
without any permission from the management or without filing any leave of absence. Thus, two
(2) written notices were sent to each complainant and the Department of Labor and Employment
by the respondent through its General Manager.
Calipay and the other complainants failed to sufficiently refute these findings of the
Labor Arbiter in their appeal filed with the NLRC. They simply insisted that they did not report
for work, because they were already terminated. However, they did not present any evidence to
prove their allegation. On the other hand, as held by the Labor Arbiter, private respondents were
able to present the DTRs and Salary Vouchers of Calipay and the other complainants showing
that they indeed reported for work even after their alleged termination from employment.
Calipay and the other complainants also failed to present evidence to prove their allegation that
they were forced to sign blank forms of their DTRs and Salary Vouchers.
On the basis of the foregoing, the Court arrives at the conclusion that the filing of the
complaint for illegal dismissal appears only as a convenient afterthought on the part of petitioner
and the other complainants after they were dismissed in accordance with law.
Christian V. Asas
Page 253
==============================================
Jurisprudence has held time and again that abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more so if the same is accompanied by a
prayer for reinstatement. In the present case, however, petitioner filed his complaint more than
one year after his alleged termination from employment. Moreover, petitioner and the other
complainants’ inconsistency in their stand is also shown by the fact that in the complaint form
which they personally filled up and filed with the NLRC, they only asked for payment of
separation pay and other monetary claims. They did not ask for reinstatement. It is only in their
Position Paper later prepared by their counsel that they asked for reinstatement. This is an
indication that petitioner and the other complainants never had the intention or desire to return to
their jobs. In fact, there is no evidence to prove that petitioner and his former co-employees ever
attempted to return to work after they were dismissed from employment.
On the other hand, private respondents were able to present memoranda or show-cause
letters served on petitioner and the other complainants at their last known address requiring them
to explain their absence, with a warning that their failure would be construed as abandonment of
work. Also, private respondents served on petitioner and the other complainants a notice of
termination as required by law. Private respondents’ compliance with said requirements, taken
together with the other circumstances above-discussed, only proves petitioner and the other
complainants’ abandonment of their work.
1.7. Totality of circumstances
MERALCO vs. Gana, G.R. No. 191288, March 7, 2012, Brion, J.
Doctrine. Gala misses the point. He forgets that as a probationary employee, his overall
job performance and his behavior were being monitored and measured in accordance with the
standards (i.e., the terms and conditions) laid down in his probationary employment
agreement. Under paragraph 8 of the agreement, he was subject to strict compliance with, and
non-violation of the Company Code on Employee Discipline, Safety Code, rules and regulations
and existing policies. Par. 10 required him to observe at all times the highest degree of
transparency, selflessness and integrity in the performance of his duties and responsibilities, free
from any form of conflict or contradicting with his own personal interest.
The evidence on record established Gala’s presence in the worksite where the pilferage of
company property happened. It also established that it was not only on May 25, 2006 that Llanes,
the pilferer, had been seen during a Meralco operation. He had been previously noticed by
Meralco employees, including Gala (based on his admission), in past operations. If Gala had
seen Llanes in earlier projects or operations of the company, it is incredulous for him to say that
he did not know why Llanes was there or what Zuñiga and Llanes were talking about. To our
mind, the Meralco crew (the foremen and the linemen) allowed or could have even asked Llanes
to be there during their operations for one and only purpose — to serve as their conduit for
pilfered company supplies to be sold to ready buyers outside Meralco worksites.
Christian V. Asas
Page 254
==============================================
The familiarity of the Meralco crew with Llanes, a non-Meralco employee who had been
present in Meralco field operations, does not contradict at all but rather support the Meralco
submission that there had been "reported pilferage" or "rampant theft," by the crew, of company
property even before May 25, 2006. Gala downplays this particular point with the argument that
the labor arbiter made no such finding as she merely assumed it to be a fact, her only "basis"
being the statement that "may natanggap na balita na ang mga crew na ito ay palagiang hindi
nagsasauli ng mga electric facilities na kanilang ginagamit o pinapalitan bagkus ito ay ibinenta
palabas." Gala impugns the statement as hearsay. He also wonders why Meralco’s supposed
"video footage" of the incident on May 25, 2006 was never presented in evidence.
The established fact that Llanes, a non-Meralco employee, was often seen during
company operations, conversing with the foremen, for reason or reasons connected with the
ongoing company operations, gives rise to the question: what was he doing there? Apparently, he
had been visiting Meralco worksites, at least in the Valenzuela Sector, not simply to socialize, but
to do something else. As testified to by witnesses, he was picking up unused supplies and
materials that were not returned to the company. From these factual premises, it is not hard to
conclude that this activity was for the mutual pecuniary benefit of himself and the crew who
tolerated the practice. For one working at the scene who had seen or who had shown familiarity
with Llanes (a non-Meralco employee), not to have known the reason for his presence is to
disregard the obvious, or at least the very suspicious.
We consider, too, and we find credible the company submission that the Meralco crew
who worked at the Pacheco Subdivision in Valenzuela City on May 25, 2006 had not been
returning unused supplies and materials, to the prejudice of the company. From all these, the
allegedly hearsay evidence that is not competent in judicial proceedings (as noted above), takes
on special meaning and relevance.
With respect to the video footage of the May 25, 2006 incident, Gala himself admitted
that he viewed the tape during the administrative investigation, particularly in connection with
the accusation against him that he allowed Llanes (binatilyong may kapansanan sa bibig) to
board the Meralco trucks. The choice of evidence belongs to a party and the mere fact that the
video was shown to Gala indicates that the video was not an evidence that Meralco was trying to
suppress. Gala could have, if he had wanted to, served a subpoena for the production of the video
footage as evidence. The fact that he did not does not strengthen his case nor weaken the case of
Meralco.
On the whole, the totality of the circumstances obtaining in the case convinces us that
Gala could not but have knowledge of the pilferage of company electrical supplies on May 25,
2006; he was complicit in its commission, if not by direct participation, certainly, by his inaction
while it was being perpetrated and by not reporting the incident to company authorities. Thus, we
find substantial evidence to support the conclusion that Gala does not deserve to remain in
Meralco’s employ as a regular employee. He violated his probationary employment agreement,
especially the requirement for him "to observe at all times the highest degree of transparency,
Christian V. Asas
Page 255
==============================================
selflessness and integrity in the performance of their duties and responsibilities." He failed to
qualify as a regular employee.
1.8. Preventive suspension
Blue Sky Trading Co. vs. Blas, G.R. No. 190559, March 7, 2012, Reyes, J.
Doctrine. Blue Sky committed no impropriety in imposing preventive suspension

against Arlene and Joseph pending investigation of the theft allegedly committed against
the company.
We, however, find no merit in the challenge made by Arlene and Joseph against the
legality of the preventive suspension imposed by Blue Sky upon them pending the investigation
of the alleged theft.
In Mandapat v. Add Force Personnel Services, Inc., we explained that preventive

suspension may be legally imposed on an employee whose alleged violation is the subject of an
investigation. The purpose of the suspension is to prevent an employee from causing harm or
injury to his colleagues and to the employer. The maximum period of suspension is 30 days,
beyond which the employee should either be reinstated or be paid wages and benefits due to him.
In Arlene and Joseph's case, Blue Sky issued to them notices to explain on February 3,
2005. They submitted their written explanation the day after and they were dismissed from
service on February 5, 2005. While we do not agree with Blue Sky's subsequent decision to
terminate them from service, we find no impropriety in its act of imposing preventive suspension
upon the respondents since the period did not exceed the maximum imposed by law and there
was a valid purpose for the same.
1.9. Termination of probationary employee
Canadian Opportunities Unlimited vs. Dalangin, Jr., G.R. No. 172223, February 6, 2012,
Brion, J.
Doctrine. The essence of a probationary period of employment fundamentally lies in the

purpose or objective of both the employer and the employee during the period. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is
qualified for permanent employment, the latter seeks to prove to the former that he has the
qualifications to meet the reasonable standards for permanent employment.
The "trial period" or the length of time the probationary employee remains on probation
depends on the parties’ agreement, but it shall not exceed six (6) months under Article 281 of the
Labor Code, unless it is covered by an apprenticeship agreement stipulating a longer period.
Article 281 provides:
Christian V. Asas
Page 256
==============================================
Probationary employment. — Probationary employment shall not exceed six (6)

months from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee.
As the Court explained in International Catholic Migration Commission, "the word

‘probationary,’ as used to describe the period of employment, implies the purpose of the term or
period, but not its length." Thus, the fact that Dalangin was separated from the service after only
about four weeks does not necessarily mean that his separation from the service is without basis.
Contrary to the CA’s conclusions, we find substantial evidence indicating that the company was
justified in terminating Dalangin’s employment, however brief it had been. Time and again, we
have emphasized that substantial evidence is such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.
Dalangin overlooks the fact, wittingly or unwittingly, that he offered glimpses of his own
behavior and actuations during his four-week stay with the company; he betrayed his negative
attitude and regard for the company, his co-employees and his work.
Dalangin admitted in compulsory arbitration that the proximate cause for his dismissal
was his refusal to attend the company’s "Values Formation Seminar" scheduled for October 27,
2001, a Saturday. He refused to attend the seminar after he learned that it had no relation to his
duties, as he claimed, and that he had to leave at 2:00 p.m. because he wanted to be with his
family in the province. When Abad insisted that he attend the seminar to encourage his co-
employees to attend, he stood pat on not attending, arguing that marked differences exist
between their positions and duties, and insinuating that he did not want to join the other
employees. He also questioned the scheduled 2:00 p.m. seminars on Saturdays as they were not
supposed to be doing a company activity beyond 2:00 p.m. He considers 2:00 p.m. as the close
of working hours on Saturdays; thus, holding them beyond 2:00 p.m. would be in violation of the
law.
The "Values Formation Seminar" incident is an eye-opener on the kind of person and
employee Dalangin was. His refusal to attend the seminar brings into focus and validates what
was wrong with him, as Abad narrated in her affidavit 36 and as reflected in the termination of
employment memorandum. It highlights his lack of interest in familiarizing himself with the
company’s objectives and policies. Significantly, the seminar involved acquainting and updating
the employees with the company’s policies and objectives. Had he attended the seminar,
Dalangin could have broadened his awareness of the company’s policies, in addition to Abad’s
briefing him about the company’s policies on punctuality and attendance, and the procedures to
Christian V. Asas
Page 257
==============================================
be followed in handling the clients’ applications. No wonder the company charged him with
obstinacy.
The incident also reveals Dalangin’s lack of interest in establishing good working
relationship with his co-employees, especially the rank and file; he did not want to join them
because of his view that the seminar was not relevant to his position and duties. It also betrays an
arrogant and condescending attitude on his part towards his co-employees, and a lack of support
for the company objective that company managers be examples to the rank and file employees.
Additionally, very early in his employment, Dalangin exhibited negative working habits,
particularly with respect to the one hour lunch break policy of the company and the observance
of the company’s working hours. Thus, Abad stated that Dalangin would take prolonged lunch
breaks or would go out of the office – without leave of the company – only to call the personnel
manager later to inform the latter that he would be unable to return as he had to attend to
personal matters. Without expressly countering or denying Abad’s statement, Dalangin dismissed
the charge for the company’s failure to produce his daily time record.
The same thing is true with Dalangin’s handling of Tecson’s application for immigration
to Canada, especially his failure to find ways to appeal the denial of Tecson’s application, as
Abad stated in her affidavit. Again, without expressly denying Abad’s statement or explaining
exactly what he did with Tecson’s application, Dalangin brushes aside Abad’s insinuation that he
was not doing his job well, with the ready argument that the company did not even bother to
present Tecson’s testimony.
In the face of Abad’s direct statements, as well as those of his co-employees, it is

puzzling that Dalangin chose to be silent about the charges, other than saying that the company
could not cite any policy he violated. All along, he had been complaining that he was not able to
explain his side, yet from the labor arbiter’s level, all the way to this Court, he offered no
satisfactory explanation of the charges. In this light, coupled with Dalangin’s adamant refusal to
attend the company’s "Values Formation Seminar" and a similar program scheduled earlier, we
find credence in the company’s submission that Dalangin was unfit to continue as its
Immigration and Legal Manager. As we stressed earlier, we are convinced that the company had
seen enough from Dalangin’s actuations, behavior and deportment during a four-week period to
realize that Dalangin would be a liability rather than an asset to its operations.
We, therefore, disagree with the CA that the company could not have fully determined
Dalangin’s performance barely one month into his employment. As we said in International
Catholic Migration Commission, the probationary term or period denotes its purpose but not its
length. To our mind, four weeks was enough for the company to assess Dalangin’s fitness for the
job and he was found wanting. In separating Dalangin from the service before the situation got
worse, we find the company not liable for illegal dismissal.
2. Authorized Causes (Art. 283, 284)

Christian V. Asas
Page 258
==============================================
2.1. Retrenchment to prevent losses (Art. 283)
a. Definition; Requisites; Relocation of business
Cheniver Deco Print Technics vs. NLRC, 325 SCRA 758, G.R. No. 122876, February 17,
2000, Quisumbing, J.
Doctrine. Broadly speaking, there appears no complete dissolution of petitioner's

business undertaking but the relocation of petitioner's plant to Batangas, in our view, amounts to
cessation of petitioner's business operations in Makati. It must be stressed that the phrase
"closure or cessation of operation of an establishment or undertaking not due to serious business
losses or reverses" under Article 283 of the Labor Code includes both the complete cessation of
all business operations and the cessation of only part of a company's business. In Philippine
Tobacco Flue-Curing & Redrying Corp. vs. NLRC, a company transferred its tobacco processing
plant in Balintawak, Quezon City to Candon, Ilocos Sur. The company therein did not actually
close its entire business but merely relocated its tobacco processing and redrying operations to
another place. Yet, this Court considered the transfer as closure not due to serious business losses
for which the workers are entitled to separation pay.
There is no doubt that petitioner has legitimate reason to relocate its plant because of the
expiration of the lease contract on the premises it occupied. That is its prerogative. But even
though the transfer was due to a reason beyond its control, petitioner has to accord its employees
some relief in the form of severance pay. Thus, in E. Razon, Inc. vs. Secretary of Labor and
Employment, petitioner therein provides arrastre services in all piers in South Harbor, Manila,
under a management contract with the Philippine Ports Authority. Before the expiration of the
term of the contract, the PPA cancelled the said contract resulting in the termination of
employment of workers engaged by petitioner. Obviously, the cancellation was not sought, much
less desired by petitioner. Nevertheless, this Court required petitioner therein to pay its workers
separation pay in view of the cessation of its arrastre operations.
Now, let it be noted that the termination of employment by reason of closure or cessation
of business is authorized under Article 283 of the Labor Code which provides:
Art. 283. Closure of establishment and reduction of personnel. — The employer may
terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or at least one (1) month pay for every year of service,
Christian V. Asas
Page 259
==============================================
whichever is higher. In case of retrenchment to prevent losses and in cases of closures or

cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
Consequently, petitioner herein must pay his employees their termination pay in the
amount corresponding to their length of service. Since the closure of petitioner's business is not
on account of serious business losses, petitioner shall give private respondents separation pay
equivalent to at least one (1) month or one-half (1/2) month pay for every year of service,
whichever is higher.
Am-Phil Food Concepts vs. Padilla, G.R. No. 188753, October 1, 2014, Leonen, J.
Doctrine. In Sebuguero v. National Labor Relations Commission, this court explained

the concept of retrenchment as follows:
Retrenchment . . . is used interchangeably with the term "lay-off." It is the termination of

employment initiated by the employer through no fault of the employee's and without prejudice
to the latter, resorted to by management during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the introduction of new
methods or more efficient machinery, or of automation. Simply put, it is an act of the employer
of dismissing employees because of losses in the operation of a business, lack of work, and
considerable reduction on the volume of his business, a right consistently recognized and
affirmed by this Court.
As correctly pointed out by Am-Phil, retrenchment entails an exercise of management

prerogative. In Andrada v. National Labor Relations Commission, this court stated:
Retrenchment is an exercise of management’s prerogative to terminate the employment

of its employees en masse, to either minimize or prevent losses, or when the company is about to
close or cease operations for causes not due to business losses.
Nevertheless, as has also been emphasized in Andrada, the exercise of management

prerogative is not absolute:
A company’s exercise of its management prerogatives is not absolute. It cannot exercise

its prerogative in a cruel, repressive, or despotic manner. We held in F.F. Marine Corp. v. NLRC:
This Court is not oblivious of the significant role played by the corporate sector in the
country’s economic and social progress. Implicit in turn in the success of the corporate form in
doing business is the ethos of business autonomy which allows freedom of business
Christian V. Asas
Page 260
==============================================
determination with minimal governmental intrusion to ensure economic independence and

development in terms defined by businessmen. Yet, this vast expanse of management choices
cannot be an unbridled prerogative that can rise above the constitutional protection to labor.
Employment is not merely a lifestyle choice to stave off boredom. Employment to the common
man is his very life and blood, which must be protected against concocted causes to legitimize an
otherwise irregular termination of employment. Imagined or undocumented business losses
present the least propitious scenario to justify retrenchment.
Thus, retrenchment has been described as "a measure of last resort when other less drastic
means have been tried and found to be inadequate."
Retrenchment is, therefore, not a tool to be wielded and used nonchalantly. To justify
retrenchment, it "must be due to business losses or reverses which are serious, actual and real."
There are substantive requirements relating to the losses or reverses that must underlie a
retrenchment. That these losses are serious relates to their gravity and that they are actual and
real relates to their veracity and verifiability. Likewise, that a retrenchment is anchored on
serious, actual, and real losses or reverses is to say that the retrenchment is done in good faith
and not merely as a veneer to disguise the illicit termination of employees. Equally significant is
an employer’s basis for determining who among its employees shall be retrenched. Apart from
these substantive requirements are the procedural requirements imposed by Article 283 of the
Labor Code.
Thus, this court has outlined the requirements for a valid retrenchment (2016 Bar),
each of which must be shown by clear and convincing evidence, as follows:
(1) that the retrenchment is reasonably necessary and likely to prevent business
losses which, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or if only expected, are reasonably imminent as perceived
objectively and in good faith by the employer;
(2) that the employer served written notice both to the employees and to the
Department of Labor and Employment at least one month prior to the intended date
of retrenchment;
(3) that the employer pays the retrenched employees separation pay equivalent to
one month pay or at least ½ month pay for every year of service, whichever is
higher;
(4) that the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interest and not to defeat or circumvent the employees’
right to security of tenure; and
Christian V. Asas
Page 261
==============================================
(5) that the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status (i.e.,
whether they are temporary, casual, regular or managerial employees), efficiency,
seniority, physical fitness, age, and financial hardship for certain workers.
Am-Phil failed to establish compliance with the requisites for a valid retrenchment.
Am-Phil’s 2001 to 2004 audited financial statements, the sole proof upon which Am-Phil
relies on to establish its claim that it suffered business losses, have been deemed unworthy of
consideration. These audited financial statements were mere annexes to the motion for leave to
admit supplemental rejoinder which Labor Arbiter Chuanico validly disregarded. No credible
explanation was offered as to why these statements were not presented when the evidence-in-
chief was being considered by the labor arbiter. It follows that there is no clear and convincing
evidence to sustain the substantive ground on which the supposed validity of Padilla’s
retrenchment rests.
Moreover, it is admitted that Am-Phil did not serve a written notice to the Department of
Labor and Employment one (1) month before the intended date of Padilla’s retrenchment, as
required by Article 283 of the Labor Code.
While it is true that Am-Phil gave Padilla separation pay, compliance with none but one
(1) of the many requisites for a valid retrenchment does not absolve Am-Phil of liability.
Mount Carmel Employees Union vs. Mount Carmel, G.R. No. 187621, September 24, 2014,
Reyes, J.
Doctrine. Retrenchment, as an authorized cause for the dismissal of employees, finds

basis in Article 283.
In the present case, the respondent’s justification for implementing the retrenchment of
the petitioners was due to the alleged closure or cessation of its elementary and high school
departments. According to them, the continued operations of these departments was an exercise
of management prerogative to protect its business and it was no longer viable to maintain the two
departments as it was already being subsidized by the college department. As proof thereof, the
respondent submitted its audited Financial Statements for the years 1997, 1998 and 1999.
Respondent also alleged that such closure was recognized by the "Tuition Fee Law," which
mandates that 70% of the tuition incremental proceeds should be allocated for salaries, wages
and other benefits of its personnel. Respondent claimed that in its case, personnel benefits are
already "eating into" the portion of the budget allocated for capital and administrative
development, and faced further with the demands of the employees of additional increase in
salaries and benefits, it had "no choice" but to close down.
Christian V. Asas
Page 262
==============================================
The burden of proving that the termination of services is for a valid or authorized cause
rests upon the employer. In termination by retrenchment, not every loss incurred or expected to
be incurred by an employer can justify retrenchment. The employer must prove, among others,
that the losses are substantial and that the retrenchment is reasonably necessary to avert such
losses. In this case, while the respondent may have presented its Financial Statements, the
respondent, nevertheless, failed to establish with reasonable certainty that the proportion of its
revenues are largely expended for its elementary and high school personnel salaries, wages and
other benefits. Its Financial Statements30 showed the following figures, among others:
1997 1998 1999

Financial Statement
Gross Revenues 10,529,810.39 12,603,283.12 12,438,060.00
Personnel Expenses 6,273,646.00 7,199,859.58 6,688,710.32
Net Surplus 405,091.76 769,460.93 130,681.44
The Financial Statements pertain to its assets, liabilities, gross revenues and expenses for
the entire college system, that is, from elementary, high school to the college department. The
expenses for the elementary and high school departments were not set out in detail and instead,
were lumped together with the college department. Such detail becomes material in the light of
the respondent’s claim that the personnel expenses for the elementary and high school
departments were "eating into" the portion of its budget allocated for other purposes. There could
be no practical basis from which the respondent’s claim finds support. Aside from this, the
respondent failed to present any proof establishing how the continued operations of the
elementary and high school departments has become impracticable. The respondent merely
assumed, which the NLRC and CA improperly sustained, that "[f]aced with the intractable
demands of complainant Union for additional increases in salaries and economic benefits, with
the steady decline in enrolment and the increase in overhead expenses, respondent had no choice
but to close down the two departments and make do with the College Department x x x." There
is nothing on record showing how the respondent came up with such conclusion, save for the
alleged decline in its elementary and high school enrolment, and no feasibility studies, analysis,
or at the very least, an academic projection was presented to validate its "forecast." Note that the
Financial Statements show that the respondent was not operating at a loss but actually had
surplus, albeit at a minimum. Thus, it has been held that –
Not every loss incurred or expected to be incurred by a company will justify

retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary
to avert such losses. The employer bears the burden of proving the existence or the imminence of
substantial losses with clear and satisfactory evidence that there are legitimate business reasons
justifying a retrenchment. Should the employer fail to do so, the dismissal shall be deemed
unjustified.
Christian V. Asas
Page 263
==============================================
The respondent, likewise, cannot rely on the alleged condition in the Tuition Fee Law that
"70% of tuition incremental proceeds should be allocated for the payment of salaries, wages and
other benefits of the school’s academic and non-academic personnel." In the first place, the
Tuition Fee Law alluded to by the respondent refers to R.A. No. 6728, as amended or the
"Government Assistance to Students and Teachers in Private Education Act." Section 5 of R.A.
No. 6728 allows the increase in tuition fees in private educational institutions and provides for
the allocation of the increment, to wit:
(2) Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and tuition
fees under subparagraph (c) may be increased, on the condition that seventy percent (70%) of the
amount subsidized allotted for tuition fee or of the tuition fee increases shall go to the payment
of salaries, wages, allowances and other benefits of teaching and non-teaching personnel x x x
and may be used to cover increases as provided for in the collective bargaining agreements
existing or in force at the time when this Act is approved and made effective: x x x At least
twenty percent (20%) shall go to the improvement or modernization of buildings, equipment,
libraries, laboratories, gymnasia and similar facilities and to the payment of other costs of
operation. x x x.
The 70% allocation presupposes an increase in a school’s tuition fee, which was not
established in this case. Moreover, the Court has already ruled that the 70% allocation set by law
is only the minimum, and not the maximum percentage, and there is actually a 10% portion the
disposition of which the law does not regulate. 36Even assuming that the allocation provided by
law is applicable in the respondent’s situation, the bare fact that the expenses allotted for the
salaries, wages and benefits of the respondent’s personnel exceeded the minimum allocation,
without more, does not constitute reasonable justification for the closure of its elementary and
high school departments, and the retrenchment of the petitioners. The respondent must establish
by substantial and convincing evidence that the impending losses it expected to incur, based on
such allocation, were imminent and that the retrenchment it conducted was necessary to prevent
such losses. Another factor that militates against the respondent’s reason was that it re-opened
after two years, due to the "clamor" for its re-opening. This is contrary to the respondent’s
"perceived" impending loss considering that there was actually a demand for its educational
services. While enrolment may have declined, the Court is not convinced that the closure of the
elementary and high school departments was a reasonable necessity, especially in the absence of
any showing on the part of the respondent that it explored other less drastic and/or cost-saving
measures to avoid serious financial or economic problems.
b. Proof required
PT & T vs. NLRC, 456 SCRA 264, G.R. No. 147002, April 15, 2005, Callejo, Sr., J.
Doctrine. Retrenchment has been defined as the termination of employment initiated by

the employer through no fault of the employees and without prejudice to the latter, resorted by
management during periods of business recession, industrial depression, or seasonal fluctuations,
Christian V. Asas
Page 264
==============================================
or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a
new production program or the introduction of new methods or more efficient machinery, or of
automation. It is a management prerogative resorted to by an employer to avoid or minimize
business losses which is consistently recognized by the Court.
Under Article 283, in order that retrenchment due to serious business losses may be
validly exercised, the following requisites must concur: (a) necessity of the retrenchment to
prevent losses, and proof of such losses; (b) written notice to the employees and to the DOLE at
least one (1) month prior to the intended date of retrenchment; and (c) payment of separation pay
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
Under the first requisite, it is imperative and incumbent on the part of the employer to
sufficiently and convincingly establish business reverses of the kind or in the amount that would
justify retrenchment. To justify retrenchment, the employer must prove serious business losses,
as not all business losses suffered by an employer would justify retrenchment under the aforesaid
Article 283. The loss referred to in the said provision cannot be of just any kind or amount,
otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself
of unwanted employees. As consistently held by this Court, to guard against abuse, any claim of
actual or potential business losses must satisfy the following established standards, to wit; (a) the
losses incurred are substantial and not de minimis; (b) the losses are actual or reasonably
imminent; (c) the retrenchment is reasonably necessary and is likely to be effective in preventing
the expected losses; and (d) the alleged losses, if already incurred, or the expected imminent
losses sought to be forestalled are proven by sufficient and convincing evidence.
The Court has previously ruled that financial statements audited by independent
external auditors constitute the normal method of proof of the profit and loss performance of a
company (Possible Bar Problem).
In this case, to prove that the company incurred losses, the petitioners presented its
audited financial statements for the corporate fiscal years 1996 to 1998 and emphasized that, in
the October 20, 1998 Audit Report prepared by SGV & Co., the auditing firm declared that
petitioner PT&T incurred a substantial loss of about P558 million for the fiscal year ending June
30, 1998, resulting to a total deficit of about P574 million as of the same date; and that petitioner
PT&T even negotiated with its creditors for the suspension of payments of its outstanding
balances until the completion of an acceptable restructuring plan.
Based on the financial statements submitted, petitioner PT&T suffered a net loss
of P40,780,017 in 1995 and P85,423,641 in 1996, posted a net income of P1,491,532 in 1997,
and again suffered a net loss of P557,892,627 in 1998. The foregoing clearly indicates that the
petitioner PT&T sufficiently complied with its burden to prove that it incurred substantial losses
as to warrant the exercise of the extreme measure of retrenchment to prevent the company from
totally going under.
Christian V. Asas
Page 265
==============================================
While an employer may have a valid ground for implementing a retrenchment program, it
is not excused from complying with the required written notice served both to the employee
concerned and the DOLE at least one month prior to the intended date of retrenchment. The
purpose of this requirement is not only to give employees some time to prepare for the eventual
loss of their jobs and their corresponding income, look for other employment and ease the impact
of the loss of their jobs but also to give the DOLE the opportunity to ascertain the verity of the
alleged cause of termination.
In the case at bar, the memorandum of Del Rosario, the vice-president of the COG, to
respondents Bayao and Castillo informing the latter that they were included in the TSRP to be
implemented effective September 1, 1998 was dated August 21, 1998. The said memorandum
was received by Castillo on August 24, 1998 and Bayao on August 26, 1998. The respondents
had barely two weeks’ notice of the intended retrenchment program. Clearly then, the one-month
notice rule was not complied with. At the same time, the petitioners never showed that any notice
of the retrenchment was sent to the DOLE.
The petitioners insist that the one-month notice requirement does not apply in this
situation, as the retrenchment involved was merely temporary and not permanent. They aver that
this has been recognized by this Court, and quote Sebuguero v. NLRC in this manner: Article
283 speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case
here. There is no specific provision of law which treats of a temporary retrenchment or lay-
off and provides for the requisites in effecting it or a period or duration therefor.
The petitioners’ adherence to the above pronouncement of the Court is misplaced. The
particular issue involved in the said decision was the duration of the period of temporary lay-off,
and not the compliance with the one month notice requirement. Reading the entire paragraph of
the quoted portion of the decision would readily show what it was referring to, thus: This
provision, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is
the case here. There is no specific provision of law which treats of a temporary retrenchment or
lay-off and provides for the requisites in effecting it or a period or duration therefor. These
employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus,
Article 286 may be applied but only by analogy to set a specific period that employees may
remain temporarily laid-off or in floating status. Six months is the period set by law that the
operation of a business or undertaking may be suspended thereby suspending the employment of
the employees concerned. The temporary lay-off wherein the employees likewise cease to work
should also not last longer than six months. After six months, the employees should either be
recalled to work or permanently retrenched following the requirements of the law, and that
failing to comply with this would be tantamount to dismissing the employees and the employer
would thus be liable for such dismissal.
Nowhere can it be found in Sebuguero that the one month notice may be dispensed with.
On the contrary, the Court, speaking through now Chief Justice Hilario G. Davide, Jr.,
emphasized the mandatory nature of the said notice, to wit: The requirement of notice to both
Christian V. Asas
Page 266
==============================================
the employees concerned and the Department of Labor and Employment (DOLE) is mandatory
and must be written and given at least one month before the intended date of retrenchment. In
this case, it is undisputed that the petitioners were given notice of the temporary lay-off. There is,
however, no evidence that any written notice to permanently retrench them was given at least one
month prior to the date of the intended retrenchment. The NLRC found that GTI conveyed to the
petitioners the impossibility of recalling them due to the continued unavailability of work. But
what the law requires is a written notice to the employees concerned and that requirement is
mandatory. The notice must also be given at least one month in advance of the intended date of
retrenchment to enable the employees to look for other means of employment and therefore to
ease the impact of the loss of their jobs and the corresponding income. That they were already on
temporary lay-off at the time notice should have been given to them is not an excuse to forego
the one-month written notice because by this time, their lay-off is to become permanent and they
were definitely losing their employment.
The Court further emphasized therein that – There is also nothing in the records to prove
that a written notice was ever given to the DOLE as required by law. GTI's position paper, offer
of exhibits, Comment to the Petition, and Memorandum in this case do not mention of any such
written notice. The law requires two notices ― one to the employee/s concerned and another to
the DOLE ― not just one. The notice to the DOLE is essential because the right to retrench is
not an absolute prerogative of an employer but is subject to the requirement of law that
retrenchment be done to prevent losses. The DOLE is the agency that will determine whether the
planned retrenchment is justified and adequately supported by facts.
Interestingly enough, the evidence on record indicates that respondents Bayao and
Castillo were not merely temporarily laid-off. The October 26, 1998 Letter of Del Rosario
addressed to the respondents clearly stated that the latter were to be considered separated from
the company effective August 31, 1998 and that they were each being extended a separation
package. In the said letter, Del Rosario even showed signs of consoling the respondents stating
that: "It really pains us to separate you from the company but it is a necessary measure we have
to take to ensure the survival of the company."
It must be stressed, however, that compliance with the one-month notice rule is
mandatory regardless of whether the retrenchment is temporary or permanent. This is so because
Article 283 itself does not speak of temporary or permanent retrenchment; hence, there is no
need to qualify the term. Ubi lex non distinguit nec nos distinguere debemus (when the law does
not distinguish, we must not distinguish).
However, the employer’s failure to comply with the one month notice requirement prior
to retrenchment does not render the termination illegal; it merely renders the same defective,
entitling the dismissed employee to payment of indemnity in the form of nominal
damages. Based on prevailing jurisprudence, the amount of indemnity is pegged at P30,000.00.
Christian V. Asas
Page 267
==============================================
Finally, since petitioner PT&T was able to establish that it incurred serious business
losses, justifying the retrenchment, the final requisite is the payment of separation pay. Pursuant
to Section 283 of the Labor Code, as amended, the retrenchment having been effected due to
serious business losses, respondents Bayao and Castillo are each entitled to one month pay or to
at least one-half month pay for every year of service, whichever is higher. A fraction of at least
six months shall be considered one whole year.
c. Standards to be observed
Maya Farms Employees Organization vs. NLRC, 239 SCRA 508, G.R. No. 106256,
December 28, 1994, Kapunan, J.
Doctrine. The termination of the sixty-six employees was done in accordance with
Article 283 of the Labor Code. The basis for this was the companies' study to streamline
operations so as to make them more viable. Positions which overlapped each other, or which are
in excess of the requirements of the service, were declared redundant.
We fully agree with the findings and conclusions of the public respondent on the issue of
termination, to wit:
We sustain the companies' prerogative to adopt the alleged redundancy/retrenchment

program to minimize if not, to avert losses in the conduct of its operations. This has been
recognized in a line of cases. However, the companies' decision on this matter is not absolute.
The basis for such an action must be far from being whimsical and the same must be proved by
substantial evidence. In addition, the implementation of such a decision or policy must be in
accordance with existing laws, rules and procedure and provisions of the CBA between the
parties, if there be any. Short of any of these conditions, management policy to pursue and
terminate its employees allegedly to avert losses, must fail.
In subject case, the 66 complaining employees were separated from service as a result of
the decision of management to limit its operations and streamline positions and personnel
requirements.
In the case of Maya Farms, Inc. its meat processing department, prior to the adoption of
special redundancy program had four (4) sections each of which is headed by an assistant
superintendent. These 3 sections are: (a) meat processing; (b) slaughterhouse; (c) packing. With
the implementation of the decision of management to limit meat processing with sausages as the
only output, only one position for assistant superintendent was retained that of Asst.
Superintendent for meat processing held by Lydia Bandong. Likewise, positions of slicer/seater
operator, debonner/skinner, ham and bacon operative, were scrapped. Similarly, positions for
packers were decreased retaining only five positions out of 21 packers. Also affected were the
positions of egg sorters/stockers as only 4 positions were retained out of ten (10) positions.
Christian V. Asas
Page 268
==============================================
A close examination of the positions retained by management show that said positions
such as egg sorter, debonner were but the minimal positions required to sustain the limited
functions/operations of the meat processing department. In the absence of any evidence to prove
bad faith on the part of management in arriving at such decision, which records on hand failed to
show in instant case, the rationality of the act of management in this regard must be sustained.
While it may be true that the Liberty Flour Mills Group of Companies as a whole posted a net
income of P83.3 Million, it is admitted that with respect to operations of the meat processing and
livestock which were undertaken by herein companies sustained losses in the sum of
P2,257,649.88. This is the reason, as advanced by management, for its decision to streamline
positions resulting in the reduction of manpower complement.
In Abbott Laboratories (Phils.) Inc. vs. NLRC, we had occasion to uphold the employer in
its exercise of what are clearly management prerogatives, thus: The hiring, firing, transfer,
demotion, and promotion of employees has been traditionally, identified as a management
prerogative subject to limitations found in law, a collective bargaining agreement or general
principles of fair play and justice. This is a function associated with the employer's inherent right
to control and manage effectively its enterprise. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve its
purpose cannot be denied.
The rule is well-settled that labor laws discourage interference with an employer's
judgment in the conduct of his business. Even as the law is solicitous of the welfare of
employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. As long as the company's exercise of the same is in good faith to advance its
interest and not for the purpose of defeating or circumventing the rights of employees under the
laws or valid agreements, such exercise will be upheld.
The NLRC correctly held that private respondents did not violate the LIFO rule under
Section 2, Article III of the CBA which provides:
Sec. 2. LIFO RULE. In all cases of lay-off or retrenchment resulting in

termination of employment in the line of work, the
Last-in-First-Out (LIFO) Rule must always be strictly observed.
It is not disputed that the LIFO rule applies to termination of employment in the line of
work. Verily, what is contemplated in the LIFO rule is that when there are two or more
employees occupying the same position in the company affected by the retrenchment program,
the last one employed will necessarily be the first to go.
Moreover, the reason why there was no violation of the LIFO rule was amply explained
by public respondent in this wise: . . . . The LIFO rule under the CBA is explicit. It is ordained
that in cases of retrenchment resulting in termination of employment in line of work, the
Christian V. Asas
Page 269
==============================================
employee who was employed on the latest date must be the first one to go. The provision speaks
of termination in the line of work. This contemplates a situation where employees occupying the
same position in the company are to be affected by the retrenchment program. Since there ought
to be a reduction in the number of personnel in such positions, the length of service of each
employees is the determining factor, such that the employee who has a longer period of
employment will be retained.
In the case under consideration, specifically with respect to Maya Farms, several
positions were affected by the special involuntary redundancy program. These are packers, egg
sorters/stockers, drivers. In the case of packers, prior to the involuntary redundancy program,
twenty-one employees occupied the position of packers. Out of this number, only 5 were
retained. In this group of employees, the earliest date of employment was October 27, 1969, and
the latest packer was employed in 1989.
The case of Roberta Cabrera and Lydia C. Bandong, Asst. Superintendent for packing and
Asst. Superintendent for meat processing respectively was presented by the union as an instance
where the LIFO rule was not observed by management. The union pointed out that Lydia
Bandong who was retained by management was employed on a much later date than Roberta
Cabrera, and both are Assistant Superintendent. We cannot sustain the union's argument. It is
indeed true that Roberta Cabrera was employed earlier (January 28, 1961) and (sic) Lydia
Bandong (July 9, 1966). However, it is maintained that in meat processing department there were
3 Asst. Superintendents assigned as head of the 3 sections thereat. The reason advanced by the
company in retaining Bandong was that as Asst. Superintendent for meat processing she could
"already take care of the operations of the other sections." The nature of work of each assistant
superintendent as well as experience were taken into account by management. Such criteria was
not shown to be whimsical nor capricious.
Finally, contrary to petitioners' contention, there is nothing on record to show that the 30-
day notice of termination to the workers was disregarded and that the same substituted with
separation pay by private respondents. As found by public respondent, written notices of
separation were sent to the employees on January 17, 1992. The notices expressly stated that the
termination of employment was to take effect one month from receipt thereof. Therefore, the
allegation that separation pay was given in lieu of the 30-day notice required by law is baseless.
Golden Thread Knitting vs. NLRC, 304 SCRA 568, G.R. No. 119157, March 11, 1999,
Bellosillo, J.
Doctrine. As regards Gilbert Rivera and Mary Ann Macaspac, petitioner claim that they
were constrained to trim down the number of their artists in the Design Section from five (5) to
two (2) is a consequence of the drastic reduction of their volume of work, and Rivera and
Macaspac were among the three (3) employees dismissed for redundancy.
Christian V. Asas
Page 270
==============================================
Rivera and Macaspac assail the alleged redundancy as the events that transpired prior to
their termination proved otherwise. According to Rivera, on 27 July 1992 he was dismissed on
account allegedly of poor revenues and was in fact offered separation pay, which he refused. He
further said that the following day he was dismissed, he sent a letter to petitioners Ng and Bico
protesting his dismissal, claiming that he had not done anything wrong to them nor to the
company. Further still, Rivera claimed that on 4 August 1992 he was advised by petitioner Ng to
report for work immediately, although upon his return he was again offered separation pay but
opted instead to continue working.
On her part, Macaspac claims that she was also offered separation pay on the same
ground but she also rejected the offer. Both Rivera and Macaspac requested evidence of the
company's financial setback but petitioners failed to furnish them any. Rivera's working days
were further reduced from three (3) to two (2) days a week. Insisting on the redundancy of the
positions of Rivera and Macaspac, petitioners finally dismissed them on 14 August 1992.
The circumstances recounted by Rivera and Macaspac were considered by the NLRC to
have cast serious doubt on the validity and propriety of their termination. Moreover, the NLRC
found that their dismissal was not reported by petitioners to the Department of Labor and
Employment (DOLE) as required by law.
Again, we agree with respondent NLRC. The characterization of an employee's services

as no longer necessary or sustainable, and therefore properly terminable, is an exercise of
business judgment on the part of the employer. The wisdom or soundness of such
characterization or decision is not subject to discretionary review on the part of the Labor Arbiter
nor the NLRC provided, of course, that violation of law or arbitrary or malicious action is not
shown. In the instant case, we question petitioners' exercise of management prerogative because
it was not shown that Rivera and Macaspac's positions were indeed unnecessary, much less was
petitioners' claim supported by any evidence. It is not enough for a company to merely declare
that it has become overmanned. It must produce adequate proof that such is the actual situation
in order to justify the dismissal of the affected employees for redundancy.
Furthermore, we have laid down the principle that in selecting the employees to be
dismissed, a fair and reasonable criteria must be used, such as but not limited to: (a) less
preferred status (e.g., temporary employee), (b) efficiency, and (c) seniority. The records disclose
that no criterion whatsoever was adopted by petitioners in dismissing Rivera and Macaspac.
Another procedural lapse committed by petitioners is the lack of written notice to the DOLE
required under Art. 283 of the Labor Code. The purpose of such notice is to ascertain the verity
of the cause of termination of employment.
Quite related to the alleged drastic reduction of their volume of work, petitioners further
contended in the proceedings below that they resorted to rotation of employees due to the low
demand for their products. But respondent NLRC was not persuaded since other than petitioners'
bare contention, they miserably failed to support it with concrete evidence.
Christian V. Asas
Page 271
==============================================
4. Substantial loss
GJT Builders vs. Ambos, G.R. No. 174184, January 28, 2015, Leonen, J.
Doctrine. Serious business losses are substantial losses, not de minimis. "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" that the business’ financial standing is unlikely to
improve in the future.
The burden of proving serious business losses is with the employer. 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.
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.
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.
Shimizu Phils. vs. Callanta, G.R. No. 165923, September 29, 2010, Del Castillo, J.
Doctrine. In implementing its retrenchment scheme, petitioner was constrained to

streamline its operations and to downsize its complements in a progressive manner in order not
to jeopardize the completion of its projects. Thus, several departments like the Civil Works
Division, Electro-mechanical Works Division and the Territorial Project Management Offices,
among others, were abolished in the early part of 1996 and thereafter the Structural Steel
Division, of which respondent was an Administrator. Respondent was among the last batch of
employees who were retrenched and by the end of year 1997, all of the employees of the
Structural Steel Division were severed from employment.
Respondent, in any of the pleadings filed by him, never refuted the foregoing facts.
Respondent’s argument that he was singled out for termination as allegedly shown in petitioner’s
monthly termination report for the month of July 1997 filed with the DOLE does not persuade
this Court. Standing alone, this document is not proof of the total number of retrenched
employees or that respondent was the only one retrenched. It merely serves as notice to DOLE of
Christian V. Asas
Page 272
==============================================
the names of employees terminated/ retrenched only for the month of July. In other words, it
cannot be deemed as an evidence of the number of employees affected by the retrenchment
program. Thus we cannot conclude that no other employees were previously retrenched.
Respondent then claimed that petitioner did not observe seniority in retrenching him. He
further alleged that he is more qualified and efficient than those retained by petitioner. Notably,
however, the records do not bear any proof that these allegations were substantiated. On the
contrary, the Labor Arbiter found respondent’s notoriety due to pieces of evidence showing
numerous company violations imputed against respondent. This fact of being subject of several
administrative investigations, respondent failed to refute. Moreover, the Labor Arbiter likewise
found respondent guilty of several misrepresentations in the pleadings filed before the tribunal
with regard to the latter’s employment position. By advancing that other employees were less
efficient, qualified and senior than him, respondent has the burden of proving these allegations
which he failed to discharge.
On the contrary, we find that petitioner implemented its retrenchment program in good
faith because it undertook several measures in cutting down its costs, to wit, withdrawing certain
privileges of petitioner’s executives and expatriates; limiting the grant of additional monetary
benefits to managerial employees and cutting down expenses; selling of company vehicles; and
infusing fresh capital into the company. Respondent did not attempt to refute that petitioner
adopted these measures before implementing its retrenchment program.
In fine, we hold that petitioner was able to prove that it incurred substantial business
losses, that it offered to pay respondent his separation pay, that the retrenchment scheme was
arrived at in good faith, and lastly, that the criteria or standard used in selecting the employees to
be retrenched was work efficiency which passed the test of fairness and reasonableness.
a. Retrenchment of OFW
International Mgt. vs. Logarta, G.R. No. 163657, April 18, 2012, Peralta, J.
Doctrine. Retrenchment is the reduction of work personnel usually due to poor financial
returns, aimed to cut down costs for operation particularly on salaries and wages. It is one of the
economic grounds to dismiss employees and is resorted by an employer primarily to avoid or
minimize business losses.
Retrenchment programs are purely business decisions within the purview of a valid and
reasonable exercise of management prerogative. It is one way of downsizing an employer’s
workforce and is often resorted to by the employer during periods of business recession,
industrial depression, or seasonal fluctuations, and during lulls in production occasioned by lack
of orders, shortage of materials, conversion of the plant for a new production program, or
introduction of new methods or more efficient machinery or automation. It is a valid
Christian V. Asas
Page 273
==============================================
management prerogative, provided it is done in good faith and the employer faithfully complies
with the substantive and procedural requirements laid down by law and jurisprudence.
In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW
in Saudi Arabia, still both he and his employer are subject to the provisions of the Labor Code
when applicable. The basic policy in this jurisdiction is that all Filipino workers, whether
employed locally or overseas, enjoy the protective mantle of Philippine labor and social
legislations. In the case of Royal Crown Internationale v. NLRC, this Court has made the policy
pronouncement, thus: x x x. Whether employed locally or overseas, all Filipino workers enjoy
the protective mantle of Philippine labor and social legislation, contract stipulations to the
contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the
State to 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. x x x
Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or
overseas Filipino worker under Article 283 of the Labor Code.
Applying the above-stated requisites for a valid retrenchment (see the requisites in the
case digest of Am-Phil Food Concepts vs. Padilla) in the case at bar, it is apparent that the first,
fourth and fifth requirements were complied with by respondent’s employer. However, the
second and third requisites were absent when Petrocon terminated the services of respondent.
As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its
prerogative to retrench its employees in good faith and the considerable reduction of work
allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon to reduce the number
of its personnel, thus: Moreover, from the standard form of employment contract relied upon by
the Labor Arbiter, it is clear that unilateral cancellation (sic) may be effected for "legal, just and
valid cause or causes." Clearly, contrary to the Labor Arbiter’s perception, the enumerated causes
for employment termination by the employer in the standard form of employment contract is not
exclusive in the same manner that the listed grounds for termination by the employer is not
exclusive. As pointed out above, under Sec. 10 of RA 8042, it is clear that termination of
employment may be for just, valid or authorized cause as defined by law or contract.
Retrenchment being indubitably a legal and authorized cause may be availed of by the
respondent.
From the records, it is clearly shown that there was a drastic reduction in Petrocon’s 1998
work allocation from 250,000 man-hours to only 80,000 man-hours. Under these circumstances
over which respondent’s principal, Petrocon had no control, it was clearly a valid exercise of
management prerogative to reduce personnel particularly those without projects to work on. To
force Petrocon to continue maintaining all its workers even those without projects is tantamount
to oppression. "The determination to cease operation is a prerogative of management which the
state does not usually interfere with as no business or undertaking must be required to continue at
Christian V. Asas
Page 274
==============================================
a loss simply because it has to maintain its employees in employment. Such an act would be
tantamount to a taking of property without due process of law.
As to complying with the fifth requirement, the CA was correct when it ruled that: As to
the fifth requirement, the NLRC considered the following criteria fair and reasonable in
ascertaining who would be dismissed and who would be retained among the employees; (i) less
preferred status; (ii) efficiency rating; (iii) seniority; and (iv) proof of claimed financial losses.
The primary reason for respondent’s termination is lack of work project specifically
related to his expertise as piping designer. Due to the highly specialized nature of Logarta’s job,
we find that the availability of work and number of allocated man-hours for pipeline projects are
sufficient and reasonable criteria in determining who would be dismissed and who would be
retained among the employees. Consequently, we find the criterion of less preferred status and
efficiency rating not applicable.
The list of terminated employees submitted by Petrocon, shows that other employees,
with the same designation as Logarta’s (Piping Designer II), were also dismissed. Terminated,
too, were employees designated as Piping Designer I and Piping Designer. Hence, employees
whose job designation involves pipeline works were without bias terminated.
As to seniority, at the time the notice of termination was given to him, Logarta’s
employment was eight (8) months, clearly, he has not accumulated sufficient years to claim
seniority.
As to proof of claimed financial losses, the NLRC itself has recognized the drastic
reduction of Petrocon’s work allocation, thereby necessitating the retrenchment of some of its
employees.
As for the notice requirement, however, contrary to petitioner’s contention, proper notice
to the DOLE within 30 days prior to the intended date of retrenchment is necessary and must be
complied with despite the fact that respondent is an overseas Filipino worker. In the present case,
although respondent was duly notified of his termination by Petrocon 30 days before its
effectivity, no allegation or proof was advanced by petitioner to establish that Petrocon ever sent
a notice to the DOLE 30 days before the respondent was terminated. Thus, this requirement of
the law was not complied with.
Also, petitioner’s contention that respondent freely consented to his dismissal is

unsupported by substantial evidence. Respondent’s recourse of finding a new employer during
the 30-day period prior to the effectivity of his dismissal and eventual return to the Philippines is
but logical and reasonable under the circumstances. Faced with the eventuality of his termination
from employment, it is understandable for respondent to seize the opportunity to seek for other
employment and continue working in Saudi Arabia.
Christian V. Asas
Page 275
==============================================
Moreover, petitioner’s insistence that the case of Jariol v. IMS should be applied in the
present case is untenable. Being a mere decision of the NLRC, it could not be considered as a
precedent warranting its application in the case at bar. Suffice it to state that although Article 8 of
the Civil Code recognizes judicial decisions, applying or interpreting statutes as part of the legal
system of the country, such level of recognition is not afforded to administrative decisions.
Anent the proper amount of separation pay to be paid to respondent, petitioner maintains
that respondent was paid the appropriate amount as separation pay. However, a perusal of his
Payroll Check Details, clearly reveals that what he received was his compensation for the month
prior to his departure, and hence, was justly due to him as his salary. Furthermore, the amounts
which he received as his "End of Contract Benefit" and "Other Earning/Allowances: for July
1998" form part of his wages/salary, as such, cannot be considered as constituting his separation
pay.
Verily, respondent is entitled to the payment of his separation pay. However, this Court
disagrees with the conclusion of the Labor Arbiter, the NLRC and the CA, that respondent
should be paid his separation pay in accordance with the provision of Section 10 of R.A. No.
8042. A plain reading of the said provision clearly reveals that it applies only to an illegally
dismissed overseas contract worker or a worker dismissed from overseas employment without
just, valid or authorized cause.
2.2. Closure of Business (Art. 283)
North Davao Mining vs. NLRC, 254 SCRA 721, G.R. No. 112546 March 13, 1996,
Panganiban, J.
“Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land”
Doctrine. Where, however, the closure was due to business losses — as in the instant
case, in which the aggregate losses amounted to over P20 billion — the Labor Code
does not impose any obligation upon the employer to pay separation benefits, for obvious
reasons. There is no need to belabor this point. Even the public respondents, in their
Comment filed by the Solicitor General, impliedly concede this point.
However, respondents tenaciously insist on the award of separation pay, anchoring their
claim solely on petitioner North Davao's long-standing policy of giving separation pay benefits
equivalent to 30-days' pay, which policy had been in force in the years prior to its closure.
Respondents contend that, by denying the same separation benefits to private respondent and the
others similarly situated, petitioners discriminated against them. They rely on this Court's ruling
in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In said case,
petitioner BISSI, after experiencing financial reverses, decided "as a retrenchment measure" to
lay-off some employees on May 16, 1988 and gave them separation pay equivalent to one-half
(1/2) month pay for every year of service. BISSI retained some employees in an attempt to
rehabilitate its business as a trading company. However, barely two and a half months later, these
Christian V. Asas
Page 276
==============================================
remaining employees were likewise discharged because the company decided to cease business
operations altogether. Unlike the earlier terminated employees, the second batch received
separation pay equivalent to a full month's salary for every year of service, plus a mid-year
bonus. This Court ruled that "there was impermissible discrimination against the private
respondents in the payment of their separation benefits. The law requires an employer to extend
equal treatment to its employees. It may not, in the guise of exercising management prerogatives,
grant greater benefits to some and less to others. . . ."
In resolving the present case, it bears keeping in mind at the outset that the factual
circumstances of BISSI are quite different from the current case. The Court noted that BISSI
continued to suffer losses even after the retrenchment of the first batch of employees: clearly,
business did not improve despite such drastic measure. That notwithstanding, when BISSI finally
shut down, it could well afford to (and actually did) pay off its remaining employees with MORE
separation benefits as compared with those earlier laid off; obviously, then, there was no
reason for BISSI to skimp on separation pay for the first batch of discharged employees. That it
was able to pay one-month separation benefit for employees at the time of closure of its business
meant that it must have been also in a position to pay the same amount to those who were
separated prior to closure. That it did not do so was a wrongful exercise of management
prerogatives. That is why the Court correctly faulted it with "impermissible discrimination."
Clearly, it exercised its management prerogatives contrary to "general principles of fair play and
justice."
In the instant case however, the company's practice of giving one month's pay for every
year of service could no longer be continued precisely because the company could not afford it
anymore. It was forced to close down on account of accumulated losses of over P20 billion. This
could not be said of BISSI. In the case of North Davao, it gave 30-days' separation pay to its
employees when it was still a going concern even if it was already losing heavily. As a going
concern, its cash flow could still have sustained the payment of such separation benefits. But
when a business enterprise completely ceases operations, i.e., upon its death as a going business
concern, its vital lifeblood — its cashflow — literally dries up. Therefore, the fact that less
separation benefits ware granted when the company finally met its business death cannot be
characterized as discrimination. Such action was dictated not by a discriminatory management
option but by its complete inability to continue its business life due to accumulated losses.
Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land.
As already stated, Art. 283 of the Labor Code does not obligate an employer to pay
separation benefits when the closure is due to losses. In the case before us, the basis for the claim
of the additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment
of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under
the facts and circumstances of the present case, the grant of a lesser amount of separation pay to
private respondent was done, not by reason of discrimination, but rather, out of sheer financial
bankruptcy — a fact that is not controlled by management prerogatives. Stated differently, the
total cessation of operation due to mind-boggling losses was a supervening fact that prevented
Christian V. Asas
Page 277
==============================================
the company from continuing to grant the more generous amount of separation pay. The fact that
North Davao at the point of its forced closure voluntarily paid any separation benefits at all —
although not required by law — and 12.5-days worth at that, should have elicited admiration
instead of condemnation. But to require it to continue being generous when it is no longer in a
position to do so would certainly be unduly oppressive, unfair and most revolting to the
conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta, and reiterated in San
Miguel Corporation vs. NLRC and later, in Allied Banking Corporation vs. Castro, "(t)he law, in
protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the
employer."
At this juncture, we note that the Solicitor General in his Comment challenges the
petitioners' assertion that North Davao, having closed down, no longer has the means to pay for
the benefits. The Solicitor General stresses that North Davao was among the assets transferred by
PNB to the national government, and that by virtue of Proclamation No. 50 dated December 8,
1986, the APT was constituted trustee of this government asset. He then concludes that "(i)t
would, therefore, be incongruous to declare that the National Government, which should always
be presumed to be solvent, could not pay now private respondents' money claims." Such
argumentation is completely misplaced. Even if the national government owned or controlled
81.8% of the common stock and 100% of the preferred stock of North Davao, it remains only a
stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a rule
is not directly, individually and/or personally liable for the indebtedness of the corporation. The
obligation of North Davao cannot be considered the obligation of the national government,
hence, whether the latter be solvent or not is not material to the instant case. The respondents
have not shown that this case constitutes one of the instances where the corporate veil may be
pierced. From another angle, the national government is not the employer of private respondent
and his co-complainants, so there is no reason to expect any kind of bailout by the national
government under existing law and jurisprudence.
Benson Industries Employees Union vs. Benson Employees, G.R. No. 200746, August 6,
2014, Perlas-Bernabe, J. (*Possible Bar Problem)
*This case differs from North Davao Mining vs. NLRC because in the latter, company
practice is the source of company’s obligation to give separation pay. In this case, the source of
the obligation is the CBA.
Doctrine. When the obligation to pay separation benefits, however, is not sourced from
law (particularly, Article 297 of the Labor Code), but from contract, such as an existing
collective bargaining agreement between the employer and its employees, an examination of the
latter’s provisions becomes necessary in order to determine the governing parameters for the said
obligation. To reiterate, an employer which closes shop due to serious business losses is exempt
from paying separation benefits under Article 297 of the Labor Code for the reason that the said
provision explicitly requires the same only when the closure is not due to serious business losses;
conversely, the obligation is maintained when the employer’s closure is not due to serious
Christian V. Asas
Page 278
==============================================
business losses. For a similar exemption to obtain against a contract, such as a CBA, the tenor of
the parties’ agreement ought to be similar to the law’s tenor. When the parties, however, agree to
deviate therefrom, and unqualifiedly covenant the payment of separation benefits irrespective of
the employer’s financial position, then the obligatory force of that contract prevails and its terms
should be carried out to its full effect. Verily, it is fundamental that obligations arising from
contracts have the force of law between the contracting parties and thus should be complied with
in good faith; and parties are bound by the stipulations, clauses, terms and conditions they have
agreed to, the only limitation being that these stipulations, clauses, terms and conditions are not
contrary to law, morals, public order or public policy. Hence, if the terms of a CBA are clear and
there is no doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall prevail. As enunciated in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement 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.
In this case, it is undisputed that a CBA was forged by the employer, Benson, and its
employees, through the Union, to govern their relations effective July 1, 2005 to June 30, 2010.
It is equally undisputed that Benson agreed to and was thus obligated under the CBA to pay its
employees who had been terminated without any fault attributable to them separation benefits at
the rate of 19 days for every year of service. This is particularly found in Section 1, Article VIII
of the same contract, to wit:
Section 1. Separation Pay – The Company shall pay to any employee/laborer who is
terminated from the service without any fault attributable to him, a "Separation Pay" equivalent
to not less than nineteen (19) days’ pay for every year of service based upon the latest rate of pay
of the employee/laborer concerned.
As may be gleaned from the following whereas clauses in a Memorandum of

Agreement dated November 20, 2003 between the parties, Benson had been fully aware of its
distressed financial condition even at the time of the previous CBA (effective from July 1, 2000
to June 30, 2005):
WHEREAS, on February 01, 2001 the Company and the Union entered into a Collective
Bargaining Agreement (CBA) with effectivity from July 01, 2000 to June 30, 2005;
xxxx
WHEREAS, the Company and the Union recognize that the Philippines is at present in
grave economic crisis;
Christian V. Asas
Page 279
==============================================
WHEREAS, the Union recognizes and acknowledges that the Company in particular is in
grave financial difficulties and that the Company is hard up to meet its financial obligations to
creditor banks that said creditor banks have even threatened to foreclose the mortgages on and to
seize the Company’s factory, realties, machineries and assets and in fact, the Bank of the
Philippine Islands, one of the creditor banks scheduled on November 17, 1998 a foreclosure sale
of the Company’s factory, realties, machineries and assets in Extrajudicial Foreclosure Case No.
EJF-2773-CEB;
Benson even admits in its Comment that it was already saddled with loan from banks as
early as 1997 and that it had been unable to service its loan obligations. And yet, nothing appears
on record to discount the fact that it still unqualifiedly and freely agreed to the separation pay
provision in the July 1, 2005 to June 30, 2010 CBA, its distressed financial condition
notwithstanding.
Thus, in view of the foregoing, the Court disagrees with the CA in negating Benson’s
obligation to pay petitioners their full separation benefits under the said agreement. The
postulation that Benson had closed its establishment and ceased operations due to serious
business losses cannot be accepted as an excuse to clear itself of any liability since the ground of
serious business losses is not, unlike Article 297 of the Labor Code, considered as an exculpatory
parameter under the aforementioned CBA. Clearly, Benson, with full knowledge of its financial
situation, freely and voluntarily entered into such agreement with petitioners. Hence, having
failed to show that the subject CBA provision on separation benefits is contrary to law, morals,
public order or public policy, or that the same can be interpreted as one with a condition – for
instance, that the parties actually contemplated non-payment of separation benefits in the event
of closure due to serious business losses – the Court is constrained to reinstate the October 24,
2008 VA Decision ordering Benson to pay each of the petitioners separation benefits in "an
amount equivalent to four (4) days for every year of service based on the latest rate of pay of the
[individual petitioner] concerned, subject to whatever legally valid deductions chargeable against
[said individual petitioner], whenever applicable."
All given, business losses are a feeble ground for petitioner to repudiate its obligation
under the CBA. The rule is settled that any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the employer. The
principle of non-diminution of benefits is founded on the constitutional mandate to protect the
rights of workers and to promote their welfare and to afford labor full protection.
Hence, absent any proof that petitioner’s consent was vitiated by fraud, mistake or duress,
it is presumed that it entered into the CBA voluntarily and had full knowledge of the contents
thereof and was aware of its commitments under the contract.
a. Cessation of business operations

Christian V. Asas
Page 280
==============================================
Lopez vs. Irvine Construction, G.R. No. 207253, August 20, 2014, Perlas-Bernabe, J.
Doctrine. Notably, in both a permanent and temporary lay-off, jurisprudence dictates

that the one-month notice rule to both the DOLE and the employee under Article 283 of the
Labor Code is mandatory. Also, in both cases, the lay-off, being an exercise of the employer's
management prerogative, must be exercised in good faith - that is, one which is intended for the
advancement of employers' interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements. Instructive on the nature of
a lay-off as a management prerogative is the following excerpt from the case of Industrial Timber
Corporation v. NLRC:
Closure or [suspension] of operations for economic reasons is, therefore, recognized as a

valid exercise of management prerogative. The determination to cease [or suspend] operations is
a prerogative of management, which the State does not usually interfere with, as no business or
undertaking [is] required to continue operating at a loss simply because it has to maintain its
workers in employment. Such an act would be tantamount to a taking of property without due
process of law.
In the case at bar, Irvine asserts that it only temporarily laid-off Lopez from work on
December 27, 2005 for the reason that its project in Cavite had already been finished. To support
its claim, it submitted the following pieces of evidence: (a) a copy of an Establishment
Termination Report evidencing Lopez's lay-off; (b) a copy of the return to work order dated June
5, 2006; and (c) an affidavit from Irvine's personnel manager, Aguinaldo Santos, which purports
that said return to work order was sent to Lopez by ordinary mail on June 5, 2006. The CA gave
credence to the foregoing and thus granted Irvine's certiorari petition against the NLRC ruling
which affirmed the LA's finding of illegal dismissal.
The CA is mistaken. As the NLRC correctly ruled in this case, Lopez, who, as earlier
discussed was a regular employee of Irvine, was not merely temporarily laid off from work but
was terminated from his employment without any valid cause therefor; thus, the proper
disposition is to affirm the LA's ruling that Lopez had been illegally dismissed.
Although the NLRC did not expound on the matter, it is readily apparent that the
supposed lay-off of Lopez was hardly justified considering the absence of any causal relation
between the cessation of Irvine's project in Cavite with the suspension of Lopez's work. To
repeat, Lopez is a regular and not a project employee. Hence, the continuation of his engagement
with Irvine, either in Cavite, or possibly, in any of its business locations, should not have been
affected by the culmination of the Cavite project alone. In light of the well-entrenched rule that
the burden to prove the validity and legality of the termination of employment falls on the
employer, Irvine should have established the bona fide suspension of its business operations or
undertaking that would have resulted in the temporary lay-off of its employees for a period not
exceeding six (6) months in accordance with Article 286 of the Labor Code. As enunciated in
Christian V. Asas
Page 281
==============================================
Nasipit Lumber Co. v. National Organization of Workingmen (NOWM), citing Somerville

Stainless Steel Corporation v. NLRC:
[T]he burden of proving, with sufficient and convincing evidence, that such closure or
suspension is bona fide falls upon the employer. As we ruled in Somerville Stainless Steel
Corporation v. NLRC:
Considering the severe consequences occasioned by retrenchment on the livelihood of the

employee(s) to be dismissed, and the avowed policy of the State - under Sec. 3, Art. XIII of the
Constitution, and Art. 3 of the Labor Code - to afford full protection to labor and to assure the
employee's right to enjoy security of tenure, the Court reiterates that "not every loss incurred or
expected to be incurred by a company will justify retrenchment. The losses must be substantial
and the retrenchment must be reasonably necessary to avert such losses. Settled is the rule that
the employer bears the burden of proving this allegation of the existence or imminence of
substantial losses, which by its nature is an affirmative defense. It is the duty of the employer to
prove with clear and satisfactory evidence that legitimate business reasons exist to justify
retrenchment. Failure to do so "inevitably results in a finding that the dismissal is unjustified."
And the determination of whether an employer has sufficiently and successfully discharged this
burden of proof "is essentially a question of fact for the Labor Arbiter and the NLRC to
determine."
Otherwise, such ground for termination would be susceptible to abuse by scheming

employers who might be merely feigning business losses or reverses in their business ventures to
ease out employees.
In this case, Irvine failed to prove compliance with the parameters of Article 286 of the
Labor Code. As the records would show, it merely completed one of its numerous construction
projects which does not, by and of itself, amount to a bonafide suspension of business operations
or undertaking. In invoking Article 286 of the Labor Code, the paramount consideration should
be the dire exigency of the business of the employer that compels it to put some of its employees
temporarily out of work. This means that the employer should be able to prove that it is faced
with a clear and compelling economic reason which reasonably forces it to temporarily shut
down its business operations or a particular undertaking, incidentally resulting to the temporary
lay-off of its employees.
Due to the grim economic consequences to the employee, case law states that the
employer should also bear the burden of proving that there are no posts available to which the
employee temporarily out of work can be assigned. Thus, in the case of Mobile Protective &
Detective Agency v. Ompad, the Court found that the security guards therein were constructively
dismissed considering that their employer was not able to show any dire exigency justifying the
latter's failure to give said employees any further assignment, viz.:
Christian V. Asas
Page 282
==============================================
[Article 286 of the Labor Code] has been applied by analogy to security guards in a
security agency who are placed "off detail" or on "floating" status. In security agency parlance,
to be placed "off detail" or on "floating" status means "waiting to be posted." Pursuant to Article
286 of the Labor Code, to be put off detail or in floating status requires no less than the dire
exigency of the employer's bona fide suspension of operation, business or undertaking. In
security services, this happens when there is a surplus of security guards over available
assignments as when the clients that do not renew their contracts with the security agency are
more than those clients that do and the new ones that the agency gets.
Again, petitioners only alleged that respondent's last assignment was with VVCC for the
period of September 29 to October 31, 1997. He was not given further assignment as he
allegedly went on AWOL and lost interest to work. As explained, these claims are unconvincing.
Worse still, they are inadequate under the law. The records do not show that there was a lack of
available post after October 1997. It appears that petitioners simply stopped giving respondent
any assignment. Absent any dire exigency justifying their failure to give respondent further
assignment, the only logical conclusion is that respondent was constructively dismissed.
The same can be said of the employee in this case as no evidence was submitted by Irvine
to show any dire exigency which rendered it incapable of assigning Lopez to any of its projects.
Add to this the fact that Irvine did not proffer any sufficient justification for singling out Lopez
for lay-off among its other three hundred employees, thereby casting a cloud of doubt on Irvine's
good faith in pursuing this course of action. Verily, Irvine cannot conveniently suspend the work
of any of its employees in the guise of a temporary lay-off when it has not shown compliance
with the legal parameters under Article 286 of the Labor Code. With Irvine failing to prove such
compliance, the resulting legal conclusion is that Lopez had been constructively dismissed; and
since the same was effected without any valid cause and due process, the NLRC properly
affirmed the LA's ruling that Lopez's dismissal was illegal.
Poseidon International vs. Tamala, G.R. No. 186475, Brion, J.
Doctrine. Art. 283 of the Labor Code applies in the present case as under the contract
the employer and the workers signed and submitted to the Philippine Overseas Employment
Agency (POEA), the Philippine labor law expressly applies.
This legal reality is reiterated under Section 18-B, paragraph 2, in relation with Section
23 of the POEA Standard Employment Contract (POEA-SEC) (which is deemed written into
every overseas employment contract) which recognizes the validity of the cessation of the
business operations as a valid ground for the termination of an overseas employment. This
recognition is subject to compliance with the following requisites:
1. The decision to close or cease operations must be bona fide in character;

Christian V. Asas
Page 283
==============================================
2. Service of written notice on the affected employees and on the Department of

Labor and Employment (DOLE) at least one (1) month prior to the effectivity of the
termination; and
3. Payment to the affected employees of termination or separation pay equivalent to

one (1) month pay or at least one-half (1/2) month pay for every year of service,
We are sufficiently convinced, based on the records, that Van Doorn’s termination of the
respondents’ employment arising from the cessation of its fishing operations complied with the
above requisites and is thus valid.
We observe that the records of the case do not show that Van Doorn ever intended to
defeat the respondents’ rights under our labor laws when it undertook its decision to close its
fishing operations on November 20, 2004. From this date until six months after, the undertaking
was at a complete halt. That Van Doorn and its partners might have suffered losses during the
six-month period is not entirely remote. Yet, Van Doorn did not immediately repatriate the
respondents or hire another group of seafarers to replace the respondents in a move to resume its
fishing operations. Quite the opposite, the respondents, although they were no longer rendering
any service or doing any work, still received their full salary for November 2004 up to January
2005. In fact, from February 2005 until they were repatriated to the Philippines in May 2005, the
respondents still received wages, albeit half of their respective basic monthly salary rate. Had
Van Doorn intended to stop its fishing operations simply to terminate the respondents’
employment, it would have immediately repatriated the respondents to the Philippines soon after,
in order that it may hire other seafarers to replace them – a possibility that did not take place.
Considering therefore the absence of any indication that Van Doorn stopped its fishing
operations to circumvent the protected rights of the respondents, our courts have no basis to
question the reason that might have impelled Van Doorn to reach its closure decision.
Manila Mining Corp. vs. Amor, G.R. No. 182800, April 20, 2015, Perez, J.
Doctrine. Without necessarily resulting to a termination of employment, an employer

may at any rate, bona fide suspend the operation of its business for a period of not exceeding six
months under Article 286 of the Labor Code. While the employer is, on the one hand, duty bound
to reinstate his employees to their former positions without loss of seniority rights if the
operation of the business is resumed within six months, employment is deemed terminated where
the suspension exceeds said period. Not having resumed its operations within six months from
the time it suspended its operations on 27 July 2001, it necessarily follows that petitioner is liable
to pay respondents’ separation pay computed at one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher, as well as the damages and attorney’s
fees adjudicated by the Labor Arbiter. Without proof of the serious business losses it allegedly
sustained and/or compliance with the reportorial requirements under Article 283 of the Labor
Code, petitioner cannot expediently plead exemption from said liabilities due to the supposed
Christian V. Asas
Page 284
==============================================
financial reverses which led to the eventual closure of its business. It is essentially required that
the alleged losses in business operations must be proven for, otherwise, said ground for
termination would be susceptible to abuse by scheming employers who might be merely feigning
business losses or reverses in their business ventures in order to ease out employees. The
condition of business losses justifying retrenchment is normally shown by audited financial
documents like yearly balance sheets and profit and loss statements as well as annual income tax
returns which were not presented in this case.
Manarpiis vs. Texan Philippines, G.R. No. 197011, January 28, 2015, Villarama, J.
Doctrine. Closure or cessation of business is the complete or partial cessation of the

operations and/or shut-down of the establishment of the employer. It is carried out to either stave
off the financial ruin or promote the business interest of the employer. Closure of business as an
authorized cause for termination of employment is governed by Article 283 of the Labor Code,
as amended.
If the business closure is due to serious losses or financial reverses, the employer must
present sufficient proof of its actual or imminent losses; it must show proof that the cessation of
or withdrawal from business operations was bona fide in character. A written notice to the DOLE
thirty days before the intended date of closure is also required, the purpose of which is to inform
the employees of the specific date of termination or closure of business operations, and which
must be served upon each and every employee of the company one month before the date of
effectivity to give them sufficient time to make the necessary arrangement.
The ultimate test of the validity of closure or cessation of establishment or undertaking is

that it must be bona fide in character. And the burden of proving such falls upon the
employer. After evaluating the evidence on record, we uphold the factual findings and
conclusions of the labor tribunals that petitioner was dismissed without just or authorized cause,
and that the announced cessation of business operations was a subterfuge for getting rid of
petitioner. While the introduction of additional evidence before the NLRC is not proscribed, the
said tribunal was still not persuaded by the company closure purportedly averted only by the
alleged fresh funding procured by respondent Tan, for the latter claim remained unsubstantiated.
The CA’s finding of serious business losses is not borne by the evidence on record. The financial
statements supposedly bearing the stamp mark of BIR were not signed by an independent
auditor. Besides, the non-compliance with the requirements under Article 283 of the Labor Code,
as amended, gains relevance in this case not for the purpose of proving the illegality of the
company closure or cessation of business, which did not materialize, but as an indication of bad
faith on the part of respondents in hastily terminating petitioner’s employment. Under the
circumstances, the subsequent investigation and termination of petitioner on grounds of
dishonesty, loss of confidence and abandonment of work, clearly appears as an afterthought as it
was done only after petitioner had filed an illegal dismissal case and respondents have been
summoned for hearing before the LA.
Christian V. Asas
Page 285
==============================================
2.3. Redundancy (Art. 283)
> Redundancy, for purposes of our Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the enterprise. (Wiltshire
File Co. vs. NLRC, 193 SCRA 665, February 7, 1991, Feliciano, J.)
> Private respondent PRC had no valid and acceptable basis to declare the position of Pollution
Control and Safety Manager redundant as the same may not be considered as superfluous; by the
express mandate of the provisions earlier cited, said positions are required by law. (Escareal
vs. NLRC, 213 SCRA 472, G.R. No. 99359, September 2, 1992, Davide, Jr., J.)
> In contracting the services of Gemac Machineries, as part of the company's cost-saving
program, the services rendered by the mechanics became redundant and superfluous, and
therefore properly terminable. (De Ocampo vs. NLRC, 213 SCRA 652, G.R. No. 101539,
September 4, 1992, Medialdea, J.)
SPI Technologies vs. Mapua, G.R. No. 191154, April 7, 2014, Reyes, J.
Doctrine. Moving on to the issue of the validity of redundancy program, SPI asserted
that an employer has the unbridled right to conduct its own business in order to achieve the
results it desires. To prove that Villanueva’s functions are redundant, SPI submitted an Inter-
Office Memorandum and affidavit executed by its Human Resources Director, Villanueva. The
pertinent portions of the memorandum read:
ORGANIZATION STRUCTURE
One of the most important elements of successfully effecting change is to create an

organization structure that is streamlined, clear and efficient. We think we have done that and the
new format is illustrated in Attachment A. The upper part shows my direct reports who are heads
of the various shared services departments and the lower part shows the set up of the business
units. The important features of the structure are discussed in the following sections. For brevity,
I have purposely not summarized the roles that will remain the same.
xxxx
Corporate Development
Peter Maquera will continue to head Corporate Development but the group’s scope will
be expanded to include Marketing across the whole company. Essentially, Marketing will be
taken out of the business units and centralized under Corporate Development. Elizabeth Nolan
will move from her role as Publishing’s VP of Sales and Marketing to become the head of Global
Marketing. The unit will continue to focus on strengthening the SPI brand, while at the same
time maximizing the effectiveness of our spending. Josie Gonzales, head of Corporate Relations,
will also be transitioned to Corporate Development.
Christian V. Asas
Page 286
==============================================
The memorandum made no mention that the position of the Corporate Development
Manager or any other position would be abolished or deemed redundant. In this regard, may the
affidavit of Villanueva which enumerated the various functions of a Corporate Development
Manager being performed by other SPI employees be considered as sufficient proof to uphold
SPI’s redundancy program?
In AMA Computer College, Inc. v. Garcia, et al., the Court held that the presentation of
the new table of the organization and the certification of the Human Resources Supervisor that
the positions occupied by the retrenched employees are redundant are inadequate as evidence to
support the college’s redundancy program. The Court quotes the related portion of its ruling:
In the case at bar, ACC attempted to establish its streamlining program by presenting its
new table of organization. ACC also submitted a certification by its Human Resources
Supervisor, Ma. Jazmin Reginaldo, that the functions and duties of many rank and file
employees, including the positions of Garcia and Balla as Library Aide and Guidance Assistant,
respectively, are now being performed by the supervisory employees. These, however, do not
satisfy the requirement of substantial evidence that a reasonable mind might accept as adequate
to support a conclusion. As they are, they are grossly inadequate and mainly self-serving. More
compelling evidence would have been a comparison of the old and new staffing patterns, a
description of the abolished and newly created positions, and proof of the set business targets and
failure to attain the same which necessitated the reorganization or streamlining.
Also connected with the evidence negating redundancy was SPI’s publication of job
vacancies after Mapua was terminated from employment. SPI maintained that the CA erred when
it considered Mapua’s self-serving affidavit as regards the Prime Manpower advertisement
because the allegations therein were based on Mapua’s unfounded suspicions. Also, the failure of
Mapua to present a sworn statement of Dimatulac renders the former’s statements hearsay.
Even if we disregard Mapua’s affidavit as regards the Prime Manpower advertisement,

SPI admitted that it caused the Inquirer advertisement for a Marketing Communications Manager
position. Mapua alleged that this advertisement belied the claim of SPI that her position is
redundant because the Corporate Development division was only renamed to Marketing division.
Instead of explaining how the functions of a Marketing Communications Manager differ from a
Corporate Development Manager, SPI hardly disputed Mapua when it stated that, "[j]udging
from the titles or designation of the positions, it is obvious that the functions of one are entirely
different from that of the other." SPI, being the employer, has possession of valuable information
concerning the functions of the offices within its organization. Nevertheless, it did not even
bother to differentiate the two positions.
Furthermore, on the assumption that the functions of a Marketing Communications

Manager are different from that of a Corporate Development Manager, it was not even discussed
why Mapua was not considered for the position. While SPI had no legal duty to hire Mapua as a
Christian V. Asas
Page 287
==============================================
Marketing Communications Manager, it could have clarified why she is not qualified for that
position. In fact, Mapua brought up the subject of transfer to Villanueva and Raina several times
prior to her termination but to no avail. There was even no showing that Mapua could not
perform the duties of a Marketing Communications Manager.
Therefore, even though the CA based its ruling only on the Prime Manpower
advertisement coupled with the purported disclosure to Mapua, the Court holds that the
confluence of other factors supports the said ruling.
The Court does not agree with the rationalization of the NLRC that "[i]f it were true that
her position was not redundant and indispensable, then the company must have already hired a
new one to replace her in order not to jeopardize its business operations. The fact that there is
none only proves that her position was not necessary and therefore superfluous."
What the above reasoning of the NLRC failed to perceive is that "[o]f primordial
consideration is not the nomenclature or title given to the employee, but the nature of his
functions." "It is not the job title but the actual work that the employee performs." Also, change
in the job title is not synonymous to a change in the functions. A position cannot be abolished by
a mere change of job title. In cases of redundancy, the management should adduce evidence and
prove that a position which was created in place of a previous one should pertain to functions
which are dissimilar and incongruous to the abolished office.
Thus, in Caltex (Phils.), Inc. (now Chevron Phils., Inc.) v. NLRC, the Court dismissed the
employer’s claim of redundancy because it was shown that after declaring the employee’s
position of Senior Accounting Analyst as redundant, the company opened other accounting
positions (Terminal Accountant and Internal Auditor) for hiring. There was no showing that the
private respondent therein could not perform the functions demanded of the vacant positions, to
which he could be transferred to instead of being dismissed.
Wiltshire File Co. vs. NLRC, 193 SCRA 665, February 7, 1991, Feliciano, J.
Doctrine. Turning to the legality of the termination of private respondent's employment,

we find merit in petitioner's basic argument. We are unable to sustain public respondent NLRC's
holding that private respondent's dismissal was not justified by redundancy and hence illegal. In
the first place, we note that while the letter informing private respondent of the termination of his
services used the word "redundant", that letter also referred to the company having "incur[red]
financial losses which [in] fact has compelled [it] to resort to retrenchment to prevent further
losses".
Thus, what the letter was in effect saying was that because of financial losses,
retrenchment was necessary, which retrenchment in turn resulted in the redundancy of private
respondent's position.
Christian V. Asas
Page 288
==============================================
In the second place, we do not believe that redundancy in an employer's personnel force
necessarily or even ordinarily refers to duplication of work. That no other person was holding the
same position that private respondent held prior to the termination of his services, does not show
that his position had not become redundant. Indeed, in any well-organized business enterprise, it
would be surprising to find duplication of work and two (2) or more people doing the work of
one person. We believe that redundancy, for purposes of our Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous,
and superfluity of a position or positions may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.
The employer has no legal obligation to keep in its payroll more employees than are
necessarily for the operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its
volume of sales and in order to cut down its operating expenses, effected some changes in its
organization by abolishing some positions and thereby effecting a reduction of its personnel.
Thus, the position of Sales Manager was abolished and the duties previously discharged by the
Sales Manager simply added to the duties of the General Manager, to whom the Sales Manager
used to report.
It is of no legal moment that the financial troubles of the company were not of private
respondent's making. Private respondent cannot insist on the retention of his position upon the
ground that he had not contributed to the financial problems of Wiltshire. The characterization of
private respondent's services as no longer necessary or sustainable, and therefore properly
terminable, was an exercise of business judgment on the part of petitioner company. The wisdom
or soundness of such characterization or decision was not subject to discretionary review on the
part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely
arbitrary and malicious action is not shown. It should also be noted that the position held by
private respondent, Sales Manager, was clearly managerial in character. In D.M. Consunji, Inc. v.
National Labor Relations Commission, the Court held:
An employer has a much wider discretion in terminating the employment relationship of

managerial personnel as compared to rank and file employees. However, such prerogative
of management to dismiss or lay off an employee must be made without abuse of
discretion, for what is at stake is not only the private respondent's position but also his
means of livelihood . . . .
The determination of the continuing necessity of a particular officer or position in a

business corporation is management's prerogative, and the courts will not interfere with the
exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the
part of management is shown.
Christian V. Asas
Page 289
==============================================
Escareal vs. NLRC, 213 SCRA 472, G.R. No. 99359, September 2, 1992, Davide, Jr., J.
Doctrine. In Wiltshire File Co., Inc. v. NLRC, this Court held that redundancy, for
purposes of the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise; a position is redundant when
it is superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as the overhiring of workers, a decreased volume of business or the dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise. Redundancy in an employer’s personnel force, however, does not necessarily or even
ordinarily refer to duplication of work. That no other person was holding the same position
which the dismissed employee held prior to the termination of his services does not show that his
position had not become redundant.
Private respondent PRC had no valid and acceptable basis to declare the position of
Pollution Control and Safety Manager redundant as the same may not be considered as
superfluous; by the express mandate of the provisions earlier cited, said positions are required by
law. Thus, it cannot be gainsaid that the services of the petitioner are in excess of what is
reasonably required by the enterprise. Otherwise, PRC would not have allowed ten (10) long
years to pass before opening its eyes to that fact; neither would it have increased the petitioner’s
salary to P23,100.00 a month effective 1 April 1988. The latter by itself is an unequivocal
admission of the specific and special need for the position and an open recognition of the
valuable services rendered by the petitioner. Such admission and recognition are inconsistent
with the proposition that petitioner’s positions are redundant. It cannot also be argued that the
said functions were duplicative, and hence could be absorbed by the duties pertaining to the
Industrial Engineering Manager. If indeed they were, and assuming that the Industrial
Engineering department of the PRC had been created earlier, petitioner’s positions should not
have been created and filled up. If, on the other hand, the department was created later, and there
is no evidence to this effect, and it was to absorb the petitioner’s positions, then there would be
no reason for the unexplained delay in its implementation, the restructuring then should have
been executed long before the salary increases in petitioner’s favor. That petitioner’s positions
were not duplicitous is best evidenced by the PRC’s recognition of their imperative need thereof,
this is underscored by the fact that Miguelito S. Navarro, the company’s Industrial Engineering
Manager, was designated as Pollution Control and Safety Manager on the very same day of
petitioner’s termination. While the petitioner had over ten (10) years of experience as a pollution
control and safety officer, Navarro was a virtual greenhorn lacking the requisite training and
experience for the assignment. A cursory perusal of his bio-data 31 reveals that it was only
several months after his appointment that he attended his first Occupational Safety & Health
Seminar, moreover, it was only after his second seminar (Loss Control Management Seminar)
that the PRC requested his accreditation with the Safety Organization of the Philippines. In
trying to prop up Navarro’s competence for the position, PRC alleges that the former finished
from the University of the Philippines with a degree in Chemical Engineering, took some units in
pollution in the process and had "undergone job training in pollution in cement firms through the
Christian V. Asas
Page 290
==============================================
Bureau of Mines." Compared to the training and experience of the petitioner, Navarro’s
orientation would seem to pale.
The private respondent alleges further that its decision to declare petitioner’s position as
redundant "stemmed from its well-considered view that in order for the corporation’s safety and
pollution program to be more effective, such program would have to be tied up with the
functions of the Industrial Engineering Manager." It is further posited that since the job of safety
and pollution engineer "requires coordination with operating departments, knowledge of the
manufacturing processes, and adequate presence in plant areas, a task which the company’s
safety and pollution control officer would not be up to as he works singlehandedly, it is only the
Industrial Engineer, commanding a department of five (5) engineers and one (1) clerk, who can
live up to corporate expectations. Indeed, the proposition that a department manned by a number
of engineers presumably because of the heavy workload, could still take on the additional
responsibilities which were originally reposed in an altogether separate section headed by the
petitioner, is difficult to accept. It seems more reasonable to view the set-up which existed before
the termination as being more conducive to efficient operations. And even if We were to sustain
PRC’s explanation, why did it so suddenly incorporate functions after the separate position of
Pollution and Safety Control Manager had existed for over ten (10) years? No effort whatsoever
was undertaken to gradually integrate both functions over this span of time. Anent this specific
point, all that the private respondent has to say is that the declaration of redundancy was made
pursuant to its continuing program, which has been ongoing for the past ten (10) years, of
streamlining the personnel complement and maintaining a lean and effective organization.
Besides, there would seem to be no compelling reason to save money by removing such
an important position. As shown by their recent financial statements, PRC’s year-end net profits
had steadily increased from 1987 to 1990. While concededly, Article 283 of the Labor Code does
not require that the employer should be suffering financial losses before he can terminate the
services of the employee on the ground of redundancy, it does not mean either that a company
which is doing well can effect such a dismissal whimsically or capriciously. The fact that a
company is suffering from business losses merely provides stronger justification for the
termination.
The respondent NLRC relied on Wiltshire File Co., v. NLRC in declaring that the
employer has no legal obligation to keep in its payroll more employees than are necessary for the
operation of its business. Aside from the fact that in the case at bar, there was no compelling
reason to dismiss the petitioner as the company was not incurring any losses, the position
declared redundant in the Wiltshire case was that of a Sales Manager, a management created
position. In the case at bar, petitioner’s position is one created by law.
The NLRC adds further that the termination was effected in the exercise of management
prerogative and that account should also be taken of the "life of the company which is . . . an
active pillar of our economy and upon whose existence still depends the livelihood of a great
number of workers." It goes on to observe that" [t]he records are bereft of proof which could
Christian V. Asas
Page 291
==============================================
have been the basis of vengeful termination other than the company’s legitimate objective to trim
its work force." In the face of the circumstances surrounding the dismissal, this Court finds it
extremely difficult to give credence to such conclusions.
De Ocampo vs. NLRC, 213 SCRA 652, G.R. No. 101539, September 4, 1992, Medialdea, J.
Doctrine. We sustain respondent Commission's finding that petitioners' dismissal was

justified by redundancy due to superfluity and hence legal.
We believe that redundancy, for purposes of our Labor Code, exists where the services of
an employee are in excess of what is reasonably demanded by the actual requirement of the
enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as over hiring of workers,
decreased volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise. The employer had no legal obligation
to keep in its payroll more employees, than are necessary for the operation of its business.
The reduction of the number of workers in a company made necessary by the

introduction of the services of Gemac Machineries in the maintenance and repair of its industrial
machinery is justified. There can be no question as to the right of the company to contract the
services of Gemac Machineries to replace the services rendered by the terminated mechanics
with a view to effecting more economic and efficient methods of production.
In the same case, We ruled that "(t)he characterization of (petitioners') services as no

longer necessary or sustainable, and therefore properly terminable, was an exercise of business
judgment on the part of (private respondent) company. The wisdom or soundness of such
characterization or decision was not subject to discretionary review on the part of the Labor
Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious
action is not shown"
In contracting the services of Gemac Machineries, as part of the company's cost-saving

program, the services rendered by the mechanics became redundant and superfluous, and
therefore properly terminable. The company merely exercised its business judgment or
management prerogative. And in the absence of any proof that the management abused its
discretion or acted in a malicious or arbitrary manner, the court will not interfere with the
exercise of such prerogative.
2.4. Temporary Closure (Art. 286)
2.5. Disease (Art. 284)
*Article 157 of R.A. No. 10151 (Night Workers Act) provides that “a night worker
certified as temporarily unfit for night work shall be given the same protection against dismissal
Christian V. Asas
Page 292
==============================================
or notice of dismissal as other workers who are prevented from working for reasons of health.”
The underline phrase refers to Article 284 of the Labor Code. (Possible Bar Problem)
Sy vs. CA, G.R. No. 142293, February 27, 2003, Quisumbing, J.
Doctrine. Article 284 of the Labor Code authorizes an employer to terminate an

employee on the ground of disease, viz:
Art. 284. Disease as a ground for termination- An employer may terminate the services of
an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health as well as the health of his co-
employees: xxx
However, in order to validly terminate employment on this ground, Book VI, Rule I,
Section 8 of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his health or to the health of his
co-employees, the employer shall not terminate his employment unless there is a certification by
competent public 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.
As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC, the requirement
for a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of the
gravity or extent of the employee’s illness and thus defeat the public policy in the protection of
labor.
In the case at bar, the employer clearly did not comply with the medical certificate
requirement before Sahot’s dismissal was effected. In the same case of Sevillana vs. I.T.
(International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the
employer, the latter should likewise bear the burden of showing that the requisites for a valid
dismissal due to a disease have been complied with. In the absence of the required certification
by a competent public health authority, this Court has ruled against the validity of the employee’s
dismissal. It is therefore incumbent upon the private respondents to prove by the quantum of
evidence required by law that petitioner was not dismissed, or if dismissed, that the dismissal
was not illegal; otherwise, the dismissal would be unjustified. This Court will not sanction a
dismissal premised on mere conjectures and suspicions, the evidence must be substantial and not
Christian V. Asas
Page 293
==============================================
arbitrary and must be founded on clearly established facts sufficient to warrant his separation
from work.
Villaruel vs. Yeo Han Guan, G.R. No. 169191, June 1, 2011, Peralta, J.
FACTS: Romeo Villaruel was employed as a machine operator by Ribonette Manufacturing

Company (now Yuhans Enterprises) which is owned and managed by Yeo Han Guan. Villaruel
filed a complaint for payment of separation pay before the NLRC against Yuhans Enterprises.
He alleged in his complaint that on October 5, 1998, he got sick and was confined in a hospital;
on December 12, 1998, he reported for work but was no longer permitted to go back because of
his illness; he asked that respondent allow him to continue working but be assigned a lighter kind
of work but his request was denied; instead, he was offered a sum of P15,000.00 as his
separation pay; however, the said amount corresponds only to the period between 1993 and
1999; petitioner prayed that he be granted separation pay computed from his first day of
employment in June 1963, but respondent refused. Yeo Han Guan disputed the allegations of
Villaruel that after the latter’s recovery from illness, he was directed to report for work but never
showed up. Also, Yeo Han Guan denied the allegation that he terminated Villaruel; the truth of
the matter being that he told Villaruel that he could go back to work but the latter refused as he is
no longer interested. The Labor Arbiter ruled in favor of Villaruel which was affirmed an later on
modified by the NLRC. Upon appeal to CA, the latter reversed the Labor Arbiter and the NLRC.
Hence, the case reached the SC.
ISSUE: Whether or not Villaruel’s employment is terminated under Article 284 of the Labor
Code.
HELD: No. Article 284 of the Labor Code provides, “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 (½) month salary for every year of service whichever is greater, a fraction of at least
six months being considered as one (1) whole year.” A plain reading of the said provision clearly
presupposes that it is the employer who terminates the services of the employee 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. It does not contemplate a
situation where it is the employee who severs his or her employment ties. This is precisely the
reason why Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code,
directs that an employer shall not terminate the services of the employee 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.
In the case at bar, Yeo Han Gaun did not terminate Villaruel’s employment on the ground
of disease. This is evident from the various pleadings filed by petitioner that he never intended
Christian V. Asas
Page 294
==============================================
to return to his employment with respondent on the ground that his health is failing. Indeed,
petitioner did not ask for reinstatement. In fact, he rejected respondent's offer for him to return to
work. This is tantamount to resignation.
Since petitioner was not terminated from his employment and, instead, is deemed to have
resigned therefrom, he is not entitled to separation pay under the provisions of the Labor Code.
The rule is that an employee who voluntarily resigns from employment is not entitled to
separation pay, except when it is stipulated in the employment contract or CBA, or it is
sanctioned by established employer practice or policy.
Wuerth Philippines vs. Ynson, G.R. No. 175932, February 15, 2012, Peralta, J.
FACTS: Wuerth Philippines, Inc. (subsidiary of Wuerth Germany) hired Rodante Ynson as
National Sales Manager (NSM) for Automotive. As NSM, Ynson was required to travel to
different parts of the country so as to supervise the sales activities of the company’s sales
managers, make a schedule of activities geared towards increasing the sales of petitioner's
products, and submit said schedule to Marlon Ricanor, Chief Executive Officer of Wuerth. It
turned out that on January 24, 2003, he suffered a stroke, and on the succeeding days, he was
confined at the Davao Doctor's Hospital. He immediately informed petitioner about his ailment.
On March 27, 2003, Dr. Daniel de la Paz, a Neurologist-Electroencephalographer in Davao City,
issued a Certification stating that respondent has been under his care since January 24, 2003 and
was confined in the hospital from January 24 to February 3, 2003 due to sudden weakness on the
left side of his body. In another Medical Certificate dated June 4, 2003, Dr. De la Paz certified
that respondent may return to work, but advised him to continue with his rehabilitation regimen
for another month and a half. Dr. Bernard S. Chiew, a specialist on Adult Cardiology, also issued
an undated Medical Certificate stating that he examined respondent who was diagnosed with
primary hypertension, diabetes mellitus II, S/P stroke on June 4, 2003, and recommended that the
latter should continue with his physical rehabilitation until July 2003. On June 9, 2003,
respondent sent an e-mail to Hans Sigrit of Wuerth Germany, informing the latter that he can
return to work on June 19, 2003, but in view of the recommendation of doctors that he should
continue with his rehabilitation until July, he requested that administrative work be given to him
while in Davao City, until completion of his therapy. On June 10, 2003, Alexandra Knapp,
Secretary of the Management Board of Wuerth Germany, forwarded the e-mail to Ricanor.
Thereafter, Ynson was required to appear for investigation in the Manila office for the
charges of AWOL starting January 24, 2003 and abandonment of work. However, Ynson replied
that he cannot attend such investigation as his attending physician frowned him from travelling.
Subsequently, his request to be assigned for administrative work was denied. Later, Ricanor
again sent letters to Ynson for him to attend the investigation; now, with additional charge of
gross efficiency. However, Ynson reiterated its previous reasoning. Consequently, Ynson was
informed by Ricanor that the management decided to terminate his employment.
Christian V. Asas
Page 295
==============================================
As a consequence, Ynson filed a complaint for illegal dismissal before the NLRC
Regional Arbitration Branch of Davao City. Labor Arbiter Solamo ruled in his favor which was
affirmed by the NLRC. Upon petition for certiorari, the CA partly granted the said petition
holding that Wuerth had the right to terminate the employment of Ynson and that it had observed
due process. However, the CA awarded Ynson some monetary awards including damages.
Hence, the case reached the SC.
ISSUE: Whether or not Ynson can be terminated under Article 284 of the Labor Code.
HELD: Yes. The SC agreed with the CA that pursuant to Article 284 of the Labor Code,
respondent’s illness is considered an authorized cause to justify his termination from
employment. The CA ruled that although petitioner did not comply with the medical certificate
requirement before respondent’s dismissal was effected, this was offset by respondent's absence
for more than the six (6)-month period that the law allows an employee to be on leave in order to
recover from an ailment.
It further stated that with regard to disease as a ground for termination, Article 284 of the
Labor Code provides that 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.
In order to validly terminate employment on this ground, Section 8, Rule I, Book VI of

the Omnibus Rules Implementing the Labor Code requires, “Where the employee suffers from a
disease and his continued employment is prohibited by law or prejudicial to his health or to the
health of his co-employees, the employer shall not terminate his employment unless there is a
certification by a competent public health authority that the disease is of such nature or at such a
stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not
terminate the employee but shall ask the employee to take a leave. The employer shall reinstate
such employee to his former position immediately upon the restoration of his normal health.”
Even considering the directive of respondent's doctor to continue with his present
regimen for at least another month and a half, it could be safely deduced that, counted from June
4, 2003, respondent's rehabilitation regimen ended on July 19, 2003. Despite the completion of
his treatment, respondent failed to attend the investigations set on July 25, 2003 and August 18,
2003. Thus, his unexplained absence in the proceedings should be construed as waiver of his
right to be present therein in order to adduce evidence that would have justified his continued
absence from work.
Clearly, since there is no more hindrance for him to return to work and attend the
investigations set by petitioner, respondent's failure to do so was without any valid or justifiable
reason. Respondent's conduct shows his indifference and utter disregard of his work and his
employer's interest, and displays his clear, deliberate, and gross dereliction of duties.
Christian V. Asas
Page 296
==============================================
In Triple Eight Integrated Services, Inc. v. NLRC, the Court held that the requirement for
a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it
would sanction the unilateral and arbitrary determination by the employer of the gravity or extent
of the employee’s illness and, thus, defeat the public policy on the protection of labor. In the
present case, there was no showing that prior to terminating respondent's employment, petitioner
secured the required certification from a competent public health authority that the disease he
suffered was of such nature or at such a stage that it cannot be cured within six months despite
proper medical treatment, pursuant to Section 8, Rule I, Book VI of the Omnibus Rules
Implementing the Labor Code.
2.6. Reorganization/abolition
Hantex Trading Co., Inc. vs. Court of Appeals, G.R. No. 148241, September 27, 2002,
Bellosillo, J.
FACTS: Bernardo Singson was employed by Hantex as sales representative. One time, the
management of Hantex called the attention of Singson regarding his deteriorating sales
performance. Despite thereof, Singson’s performance showed no sign of improvement as it
remained inadequate and unsatisfactory. Thus, Hantex, through its president, Mariano Chua, held
a "one-on-one" conference with him. Conflicting versions of what transpired during the
conference were offered. Singson alleged that Chua asked for his resignation from the company,
and required him to submit a resignation letter otherwise his separation pay, 13th month pay and
other monetary benefits would not be paid. When he refused, Chua ejected him from the
premises of Hantex and left instructions to the guards on-duty to refuse him admittance. On the
other hand, petitioners denied that they dismissed Singson and maintained that the conference
was merely intended to motivate him "to exert more effort in his job and mend his work
attitude;" and that Singson apparently resented Chua for it that he never reported back for work
after the conference. Hence, Singson filed a complaint for illegal dismissal. The Labor Arbiter
ruled in Singson’s favor. The ruling was affirmed by the NLRC. Hence, the case reached the
SC.
ISSUE: Whether or not Singson was illegally dismissed.
HELD: Yes. Singson did not abandon his work contrary to Hantex’s assertion. Considering the
hard times in which we are in, it is incongruous for respondent to simply give up his work after
receiving a mere reprimand from his employer. No employee would recklessly abandon his job
knowing fully well the acute unemployment problem and the difficulty of looking for a means of
livelihood nowadays. With a family to support, we doubt very much that respondent would so
easily sacrifice his only source of income and unduly expose his family to hunger and untold
hardships. Certainly, no man in his right mind would do such thing.
Christian V. Asas
Page 297
==============================================
Moreover, Singson immediately instituted the instant case for illegal dismissal with a
prayer for reinstatement against his employer. An employee who loses no time in protesting his
layoff cannot by any reasoning be said to have abandoned his work, for it is already a well-
settled doctrine that the filing by an employee of a complaint for illegal dismissal with a prayer
for reinstatement is proof enough of his desire to return to work, thus negating the employer’s
charge of abandonment. Verily, it would be illogical for respondent Singson to have left his job
and thereafter file the complaint against his employee.
Abandonment is a matter of intention and cannot lightly be presumed from certain

equivocal acts. For abandonment to exist, it is essential (a) that the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and, (b) that there
must have been a clear intention to sever the employer-employee relationship manifested by
some overt acts — the second element is the more determinative factor. Mere absence of the
employee is not sufficient. The burden of proof is on the employer to show a clear and deliberate
intent on the part of the employee to discontinue employment without any intention of returning.
At any rate, petitioners undoubtedly could have presented better evidence to buttress their
claim of abandonment. After all, being the employers, they are in possession of documents
relevant to this case. For instance, they could have at least presented in evidence copies of
respondent’s daily time records, which are on-file in its office, to prove the dates respondent was
on AWOL (absence without leave); or any letter wherein they required respondent to report for
work and explain his unauthorized absences. But, as it is, petitioners’ defense of abandonment
cannot be given credence for lack of evidentiary support.
As we see it, respondent’s refusal to be reinstated is more of a symptom of strained

relations between the parties, rather than an indicium of abandonment of work as obstinately
insisted by petitioners. While respondent desires to have his job back, it must have later dawned
on him that the filing of the complaint for illegal dismissal and the bitter incidents that followed
have sundered the erstwhile harmonious relationship between the parties. Respondent must have
surely realized that even if reinstated, he will find it uncomfortable to continue working under
the hostile eyes of the employer who had been forced to reinstate him. He had every reason to
fear that if he accepted petitioners’ offer, their watchful eyes would thereafter be focused on him,
to detect every small shortcoming of his as a ground for vindictive disciplinary action. In such
instance, reinstatement would no longer be beneficial to him.
b. Procedural Due Process
1. Twin-notice requirement (2016 Bar)
King of Kings vs. Mamac, G.R. No. 166208, June 29, 2007, Velasco, Jr., J.
FACTS: Santiago Mamac was hired as bus conductor of Don Mariano Transit Corporation
(DMTC). DMTC employees including Mamac formed the Damayan ng mga Manggagawa,
Christian V. Asas
Page 298
==============================================
Tsuper at Conductor-Transport Workers Union and registered it with the Department of Labor
and Employment. Pending the holding of a certification election in DMTC, King of Kings
Transport, Inc. (KKTI) was incorporated with the Securities and Exchange Commission which
acquired new buses. Many DMTC employees were subsequently transferred to KKTI and
excluded from the election. The KKTI employees later organized the Kaisahan ng mga Kawani
sa King of Kings (KKKK) which was registered with DOLE wherein Mamac was elected KKKK
president. As bus conductor of KKTI, Mamac was required to accomplish a Conductor’s Trip
Report and to submit it to the company for each trip. If there is an irregularity discovered, the
company will issue an Irregularity Report and will require the employee to explain it.
Upon audit of Mamac’s conductor’s report, KKTI noted irregularity. It discovered that
respondent declared several sold tickets as returned tickets causing KKTI to lose an income of
eight hundred and ninety pesos. While no irregularity report was prepared on the October 28,
2001 incident, KKTI nevertheless asked respondent to explain the discrepancy. In his letter,
respondent said that the erroneous declaration in his October 28, 2001 Trip Report was
unintentional. He explained that during that day’s trip, the windshield of the bus assigned to them
was smashed; and they had to cut short the trip in order to immediately report the matter to the
police. As a result of the incident, he got confused in making the trip report. KKTI terminated
Mamac. The dismissal letter alleged that the October 28, 2001 irregularity was an act of fraud
against the company. KKTI also cited as basis for respondent’s dismissal the other offenses he
allegedly committed since 1999.
Mamac filed a complaint for illegal dismissal but Labor Arbiter Reyes dismissed the
same. Upon appeal to NLRC, the latter modified the decision by ordering KKTI to pay Mamac
P 10,000 for failure to comply with the due process requirement. The CA affirmed the NLRC
with modification as to the awards. Hence, the case reached the SC.
ISSUE: Whether or not procedural due was process was complied with in this case.
HELD: No. As provided in Art. 277 of the Labor Code and the implementing rule, the
following should be considered in terminating the services of employees based on just causes
under Art. 282: (1.) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that the employees are
given the opportunity to submit their written explanation within a reasonable period.
"Reasonable opportunity" under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare adequately for their
defense. This should be construed as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation
and defenses, the notice should contain a detailed narration of the facts and circumstances that
will serve as basis for the charge against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which company rules, if any, are
Christian V. Asas
Page 299
==============================================
violated and/or which among the grounds under Art. 282 is being charged against the employees.
(2.) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support of their defenses; and (3)
rebut the evidence presented against them by the management. During the hearing or conference,
the employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference or hearing could be used by
the parties as an opportunity to come to an amicable settlement. (3.) After determining that
termination of employment is justified, the employers shall serve the employees a written notice
of termination indicating that: (1) all circumstances involving the charge against the employees
have been considered; and (2) grounds have been established to justify the severance of their
employment.
In the instant case, KKTI admits that it had failed to provide respondent with a "charge
sheet." However, it maintains that it had substantially complied with the rules, claiming that
"respondent would not have issued a written explanation had he not been informed of the charges
against him." This contention of KKTI is not tenable. First, respondent was not issued a written
notice charging him of committing an infraction. The law is clear on the matter. A verbal
appraisal of the charges against an employee does not comply with the first notice requirement.
In Pepsi Cola Bottling Co. v. NLRC, the Court held that consultations or conferences are not a
substitute for the actual observance of notice and hearing. Also, in Loadstar Shipping Co., Inc. v.
Mesano, the Court, sanctioning the employer for disregarding the due process requirements, held
that the employee’s written explanation did not excuse the fact that there was a complete absence
of the first notice. Second, even assuming that petitioner KKTI was able to furnish respondent
an Irregularity Report notifying him of his offense, such would not comply with the requirements
of the law. We observe from the irregularity reports against respondent for his other offenses that
such contained merely a general description of the charges against him. The reports did not even
state a company rule or policy that the employee had allegedly violated. Likewise, there is no
mention of any of the grounds for termination of employment under Art. 282 of the Labor Code.
Thus, KKTI’s "standard" charge sheet is not sufficient notice to the employee. Third, no hearing
was conducted. Regardless of respondent’s written explanation, a hearing was still necessary in
order for him to clarify and present evidence in support of his defense. Moreover, respondent
made the letter merely to explain the circumstances relating to the irregularity in his October 28,
2001 Conductor’s Trip Report. He was unaware that a dismissal proceeding was already being
effected. Thus, he was surprised to receive the November 26, 2001 termination letter indicating
as grounds, not only his October 28, 2001 infraction, but also his previous infractions.
Article 277 of the LC. (b) Subject to the constitutional right of workers to security of
tenure and their right to be protected against dismissal except for a just and authorized cause
without prejudice to the requirement of notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be heard
and to defend himself with the assistance of his representative if he so desires in accordance with
Christian V. Asas
Page 300
==============================================
company rules and regulations promulgated pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the employer shall be without prejudice to the
right of the worker to contest the validity or legality of his dismissal by filing a complaint with
the regional branch of the National Labor Relations Commission. The burden of proving that the
termination was for a valid or authorized cause shall rest on the employer.
Implementing Rule of 277. SEC. 2. Standards of due process; requirements of notice.––

In all cases of termination of employment, the following standards of due process shall be
substantially observed: I. For termination of employment based on just causes as defined in
Article 282 of the Code: (a) A written notice served on the employee specifying the ground or
grounds for termination, and giving said employee reasonable opportunity within which to
explain his side. (b) A hearing or conference during which the employee concerned, with the
assistance of counsel if he so desires is given opportunity to respond to the charge, present his
evidence, or rebut the evidence presented against him. (c) A written notice of termination served
on the employee, indicating that upon due consideration of all the circumstances, grounds have
been established to justify his termination.
Maersk-Filipinas vs. Avestruz, G.R. No. 207010, February 18, 2015, Perlas-Berbabe, J.
FACTS: Maersk-Filipinas Crewing, Inc. (Maersk), on behalf of its foreign principal, A.P.
Moller Singapore Pte. Ltd. (A.P. Moller), hired Toribio C. Avestruz as Chief Cook on board the
vessel M/V Nedlloyd Drake. While in the course of the weekly inspection of the vessel’s galley,
Captain Charles C. Woodward (Captain Woodward) noticed that the cover of the garbage bin in
the kitchen near the washing area was oily. As part of Avestruz’s job was to ensure the
cleanliness of the galley, Captain Woodward called Avestruz and asked him to stand near the
garbage bin where the former took the latter’s right hand and swiped it on the oily cover of the
garbage bin, telling Avestruz to feel it. Shocked, Avestruz remarked, “Sir if you are looking for
[dirt], you can find it[;] the ship is big. Tell us if you want to clean and we will clean it.” Captain
Woodward replied by shoving Avestruz’s chest, to which the latter complained and said, “Don’t
touch me,” causing an argument to ensue between them. Later that afternoon, Captain
Woodward summoned and required Avestruz to state in writing what transpired in the galley that
morning. Avestruz complied and submitted his written statement on that same day. Captain
Woodward likewise asked Messman Jomilyn P. Kong (Kong) to submit his own written
statement regarding the incident, to which the latter immediately complied. On the very same
day, Captain Woodward informed Avestruz that he would be dismissed from service and be
disembarked in India.
As a consequence, Avestruz filed a complaint for illegal dismissal when he arrived in the
Philippines. The Labor Arbiter dismissed the complaint. Upon appeal to NLRC, the latter found
that there is a just cause for the dismissal for Avestruz but the employer failed to comply with
procedural due process. When the case reached the CA, the latter ruled that Avestruz was
illegally dismissed. Hence, the case reached the SC.
Christian V. Asas
Page 301
==============================================
ISSUE: Whether or not Avestruz Maersk complied with the twin-notice requirement.
HELD: No. The SC affirmed the finding of the CA that Avestruz was not accorded procedural
due process, there being no compliance with the provisions of Section 17 of the POEA-SEC
which requires twin-notice rule.
SECTION 17 OF POEA-SEC. DISCIPLINARY PROCEDURES
The Master shall comply with the following disciplinary procedures against an erring
seafarer:
A. The Master shall furnish the seafarer with a written notice containing the following:
1. Grounds for the charges as listed in Section 33 of this Contract or analogous act
constituting the same.
2. Date, time and place for a formal investigation of the charges against the
seafarer concerned.
B. The Master or his authorized representative shall conduct the investigation or

hearing, giving the seafarer the opportunity to explain or defend himself against the
charges. These procedures must be duly documented and entered into the ship’s
logbook.
C. If after the investigation or hearing, the Master is convinced that imposition of a penalty
is justified, the Master shall issue a written notice of penalty and the reasons for it to
the seafarer, with copies furnished to the Philippine agent.
Dismissal for just cause may be effected by the Master without furnishing the seafarer with a
notice of dismissal if there is a clear and existing danger to the safety of the crew or the vessel.
The Master shall send a complete report to the manning agency substantiated by witnesses,
testimonies and any other documents in support thereof.
As explained in Skippers Pacific, Inc. vs. Mira: An erring seaman is given a written
notice of the charge against him and is afforded an opportunity to explain or defend himself.
Should sanctions be imposed, then a written notice of penalty and the reasons for it shall be
furnished the erring seafarer. It is only in the exceptional case of clear and existing danger to the
safety of the crew or vessel that the required notices are dispensed with; but just the same, a
complete report should be sent to the manning agency, supported by substantial evidence of the
findings.
In this case, there is dearth of evidence to show that Avestruz had been given a written
notice of the charge against him, or that he was given the opportunity to explain or defend
himself. The statement given by Captain Woodward requiring him to explain in writing the
events that transpired at the galley in the morning of June 22, 2011 hardly qualifies as a written
Christian V. Asas
Page 302
==============================================
notice of the charge against him, nor was it an opportunity for Avestruz to explain or defend
himself. While Captain Woodward claimed in his e-mail that he conducted a “disciplinary
hearing” informing Avestruz of his inefficiency, no evidence was presented to support the same.
Neither was Avestruz given a written notice of penalty and the reasons for its imposition.
Instead, Captain Woodward verbally informed him that he was dismissed from service and would
be disembarked from the vessel. It bears stressing that only in the exceptional case of clear and
existing danger to the safety of the crew or vessel that the required notices may be dispensed
with, and, once again, records are bereft of evidence showing that such was the situation when
Avestruz was dismissed.
i. Failure to comply
Agabon vs. NLRC, G.R. No. 158693, November 17, 2003, Ynarez-Santiago, J.
FACTS: Virgilio and Jenny Agabon worked for respondent Riviera Home Improvements, Inc. as gypsum
and cornice installers from January 1992 until Feb 1999. Their employment was terminated when they were
dismissed for allegedly abandoning their work. Petitioners Agabon then filed a case of illegal dismissal.
The Labor Arbiter ruled in favor of the spouses Agabon and ordered Riviera to pay them their money
claims. On appeal, the NLRC reversed the Labor Arbiter’s ruling, finding that the Agabons were indeed
guilty of abandonment. The Court of Appeals in turn ruled that the dismissal of the petitioners was
not illegal because they had abandoned their employment but ordered the payment of money
claims. Hence, the case was elevated to the Supreme Court. The Agabons claim, among others
that Riviera violated the requirements of notice and hearing when the latter did not send written letters
of termination to their addresses. Riviera Home Improvement admitted to not sending the Agabons letters
of termination to their last known addresses because the same would be futile, as the Agabons do not reside
there anymore. However, it also claims that the Agabons abandoned their work. More than once, they
subcontracted installation works for other companies. They were warned of termination if the same act was
repeated, still, they disregarded the warning.
ISSUE: Whether or not the award of nominal damages in case of termination with just cause but
without complying with procedural due process is proper.
HELD: Yes. The dismissal is valid, but Riviera should pay nominal damages in the amount of P30,000 to
the Agabons in vindication of the latter for violating their right to notice and hearing. The penalty is in the
nature of a penalty or indemnification, the amount dependent on the facts of each case, including the nature
of gravity of offense of the employer. In this case, the Serrano doctrine was re-examined. First, in the
Serrano case, the dismissal was upheld, but it was held to be ineffectual (without legal effect). Hence, Serrano
was still entitled to the payment of his backwages from the time of dismissal until the promulgation of the
court of the existence of an authorized cause. Further, he was entitled to his separation pay as mandated under
Art.283. The ruling is unfair to employers and has the danger of the following consequences: (a.) of filing
frivolous suits even by notorious employees who were justly dismissed but were deprived of statutory due
process; they are rewarded by invoking due process; (b.) It would create absurd situations where there is just or
Christian V. Asas
Page 303
==============================================
authorized cause but a procedural infirmity invalidates the termination, i.e. an employee who became a
criminal and threatened his co-workers’ lives, who fled and could not be found; (c.) it could discourage
investments that would generate employment in the economy. Resultantly, where there is just cause for
dismissal but due process has not been properly observed by an employer, it would not be right to order either
the reinstatement of the dismissed employee or the payment of backwages to him. In failing, however, to
comply with the procedure prescribed by law in terminating the services of the employee, the employer must
be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might
be pointed out that the notice to be given and the hearing to be conducted generally constitute the
two-part due process requirement of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the
above steps would be no more than a useless formality and where, accordingly, it would not be
imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal
damages to the employee.
Jaka Food Processing vs. Pacot, G.R. No. 151378, March 28, 2005, Garcia, J.
FACTS: Respondents Darwin Pacot et al. were earlier hired by petitioner Jaka Foods Processing
Corporation until the latter terminated their employment because the corporation was “in dire
financial straits”. It is not disputed, however, that the termination was effected without JAKA
complying with the requirement under Article 283 of the Labor Code regarding the service of a
written notice upon the employees and the Department of Labor and Employment at least one (1)
month before the intended date of termination. Hence, Pacot et al. filed a complaint for illegal
dismissal. The Labor Arbiter ruled in their favor and order Jaka and its HRD Manager to
reinstate Pacot et al. with full backwages and separation pay if reinstatement is not possible. The
NLRC affirmed the Labor Arbiter. However, the Court of Appeals reversed the decision of the
NLRC applying the doctrine laid down by the Supreme Court in Serrano vs. NLRC.
ISSUE: Whether or not the award of nominal damages in case of termination with authorized
cause but without complying with procedural due process is proper.
HELD: Yes. In Agabon vs. NLRC, the SC had the opportunity to resolve a similar question.
Therein, SC found that the employees committed a grave offense, i.e., abandonment, which is a
form of a neglect of duty which, in turn, is one of the just causes enumerated under Article 282
of the Labor Code. In said case, the SC upheld the validity of the dismissal despite non-
compliance with the notice requirement of the Labor Code. However, the SC required the
employer to pay the dismissed employees the amount of P30,000.00, representing nominal
damages for non-compliance with statutory due process.
The difference between Agabon and the instant case is that in the former, the dismissal
was based on a just cause under Article 282 of the Labor Code while in the present case,
respondents were dismissed due to retrenchment, which is one of the authorized causes under
Article 283 of the same Code.
Christian V. Asas
Page 304
==============================================
A dismissal for just cause under Article 282 implies that the employee concerned has
committed, or is guilty of, some violation against the employer, i.e. the employee has committed
some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has
neglected his duties. Thus, it can be said that the employee himself initiated the dismissal
process. On the other hand, a dismissal for an authorized cause under Article 283 does not
necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal
process is initiated by the employer’s exercise of his management prerogative, i.e. when the
employer opts to install labor saving devices, when he decides to cease business operations or
when, as in this case, he undertakes to implement a retrenchment program. The clear-cut
distinction between a dismissal for just cause under Article 282 and a dismissal for authorized
cause under Article 283 is further reinforced by the fact that in the first, payment of separation
pay, as a rule, is not required, while in the second, the law requires payment of separation pay.
For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of
the just causes under Article 282, and when based on one of the authorized causes under Article 283.
Accordingly, it is wise to hold that: (1.) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be imposed upon him should be
tempered because the dismissal process was in effect initiated by an act imputable to the employee; and (2.) if
the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the
notice requirement, the sanction should be stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative.
It is, therefore, established that there was ground for respondents’ dismissal, i.e.,
retrenchment, which is one of the authorized causes enumerated under Article 283 of the Labor
Code. Likewise, it is established that JAKA failed to comply with the notice requirement under
the same Article. Considering the factual circumstances in the instant case and the above
ratiocination, Supreme Court, therefore, deem it proper to fix the indemnity at P50,000.00. The
rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of
the employer, the affected employee is entitled to separation pay. This is consistent with the state
policy of treating labor as a primary social economic force, affording full protection to its rights
as well as its welfare. The exception is when the closure of business or cessation of
operations is due to serious business losses or financial reverses; duly proved, in which case,
the right of affected employees to separation pay is lost for obvious reasons.
ii. Ample opportunity to be heard; Hearing
Perez vs. PT & T, G.R. No. 152048, April 7, 2009, Corona, J.
FACTS: Felix B. Perez and Amante G. Doria were employed by Philippine Telegraph and
Telephone Company as shipping clerk and supervisor respectively. Acting on an alleged
unsigned letter regarding anomalous transactions at the Shipping Section, respondents formed a
special audit team to investigate the matter. It was discovered that the Shipping Section jacked up
the value of the freight costs for goods shipped and that the duplicates of the shipping documents
Christian V. Asas
Page 305
==============================================
allegedly showed traces of tampering, alteration and superimposition. Perez and Doria were
placed under preventive suspension for 30 days which was extended for 15 days twice.
Eventually, they were dismissed. Hence, they filed a complaint for illegal dismissal and illegal
suspension. The Labor Arbiter found that there was illegal dismissal and suspension. The
NLRC reversed the said decision. Upon appeal to CA, the latter affirmed the NLRC but found
that Perez and Doria were denied due process. Hence, the case reached the SC.
ISSUE: Whether or not procedural due process requires a formal hearing.
HELD: No. The SC noted a marked difference in the standards of due process to be followed
as prescribed in the Labor Code and its implementing rules. The Labor Code, on one hand,
provides that an employer must provide the employee ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires. The omnibus rules
implementing the Labor Code, on the other hand, require a hearing and conference during which
the employee concerned is given the opportunity to respond to the charge, present his evidence
or rebut the evidence presented against him. The Labor Code provision prevails over the
implementing rule under the time-honored doctrine that in case of conflict, the law prevails over
the administrative regulations implementing it. The authority to promulgate implementing rules
proceeds from the law itself.
Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an
employee must be given "ample opportunity to be heard and to defend himself." Thus, the
opportunity to be heard afforded by law to the employee is qualified by the word "ample" which
ordinarily means "considerably more than adequate or sufficient." In this regard, the phrase
"ample opportunity to be heard" can be reasonably interpreted as extensive enough to cover
actual hearing or conference. To this extent, Section 2(d), Rule I of the Implementing Rules of
Book VI of the Labor Code is in conformity with Article 277(b).
Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor
Code should not be taken to mean that holding an actual hearing or conference is a condition
sine qua non for compliance with the due process requirement in termination of employment.
The test for the fair procedure guaranteed under Article 277(b) cannot be whether there has been
a formal pretermination confrontation between the employer and the employee. The "ample
opportunity to be heard" standard is neither synonymous nor similar to a formal hearing. To
confine the employee’s right to be heard to a solitary form narrows down that right. It deprives
him of other equally effective forms of adducing evidence in his defense. Certainly, such an
exclusivist and absolutist interpretation is overly restrictive. The "very nature of due process
negates any concept of inflexible procedures universally applicable to every imaginable
situation."
The standard for the hearing requirement, ample opportunity, is couched in general
language revealing the legislative intent to give some degree of flexibility or adaptability to meet
the peculiarities of a given situation. To confine it to a single rigid proceeding such as a formal
Christian V. Asas
Page 306
==============================================
hearing will defeat its spirit. Significantly, Section 2(d), Rule I of the Implementing Rules of
Book VI of the Labor Code itself provides that the so-called standards of due process outlined
therein shall be observed "substantially," not strictly. This is a recognition that while a formal
hearing or conference is ideal, it is not an absolute, mandatory or exclusive avenue of due
process.
An employee’s right to be heard in termination cases under Article 277(b) as

implemented by Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code
should be interpreted in broad strokes. It is satisfied not only by a formal face to face
confrontation but by any meaningful opportunity to controvert the charges against him and to
submit evidence in support thereof.
A hearing means that a party should be given a chance to adduce his evidence to support
his side of the case and that the evidence should be taken into account in the adjudication of the
controversy. "To be heard" does not mean verbal argumentation alone inasmuch as one may be
heard just as effectively through written explanations, submissions or pleadings. Therefore,
while the phrase "ample opportunity to be heard" may in fact include an actual hearing, it is not
limited to a formal hearing only. In other words, the existence of an actual, formal "trial-type"
hearing, although preferred, is not absolutely necessary to satisfy the employee’s right to be
heard.
The jurisprudence cited by the SC recognizes that the employer may provide an
employee with ample opportunity to be heard and defend himself with the assistance of a
representative or counsel in ways other than a formal hearing. The employee can be fully
afforded a chance to respond to the charges against him, adduce his evidence or rebut the
evidence against him through a wide array of methods, verbal or written.
NOTES: Summary of principles: (a) "ample opportunity to be heard" means any

meaningful opportunity (verbal or written) given to the employee to answer the charges against
him and submit evidence in support of his defense, whether in a hearing, conference or some
other fair, just and reasonable way. (b) a formal hearing or conference becomes mandatory only
when requested by the employee in writing or substantial evidentiary disputes exist or a company
rule or practice requires it, or when similar circumstances justify it. (c) the "ample opportunity
to be heard" standard in the Labor Code prevails over the "hearing or conference" requirement in
the implementing rules and regulations.
Wallem Maritime vs. NLRC, G.R. No. 108433, October 15, 1996, Romero, J.
FACTS: Joselito V. Macatuno was hired by Wallem Shipmanagement Limited thru its local
manning agent, Wallem Maritime Services, Inc., as an able-bodied seaman on board the M/T
Fortuna, a vessel of Liberian registry. While the vessel was berthed at the port of Kawasaki,
Japan, an altercation took place between Macatuno and fellow Filipino crew member, Julius E.
Gurimbao, on the one hand, and a cadet/apprentice officer of the same nationality as the captain
Christian V. Asas
Page 307
==============================================
of the vessel on the other hand. The master entered the incident in the tanker's logbook. As a
consequence, Macatuno and Gurimbao were repatriated to the Philippines where they lost no
time in lodging separate complaints for illegal dismissal with the POEA. POEA Deputy
Administrator Imson found the dismissal illegal. The NRLC affirmed the POEA. Hence, the
case reached the SC.
ISSUE: Whether or not procedural due process is complied with in this case.
HELD: No. Petitioners' failure to substantiate the grounds for a valid dismissal was aggravated
by the manner by which the employment of private respondent was terminated. It must be borne
in mind that the right of an employer to dismiss an employee is to be distinguished from and
should not be confused with the manner in which such right is exercised. Dismissal from
employment must not be effected abusively and oppressively as it affects one's person and
property. Thus, Batas Pambansa Blg. 130, amending paragraph (b) of Article 278 of the Labor
Code, imposed as a condition sine qua non that any termination of employment under the
grounds provided in Article 283 must be done only after notice and formal investigation have
been accorded the supposed errant worker.
That the workers involved in the incident were "mustered" or convened thereafter by the
captain is inconsequential. It is insufficient compliance with the law which requires, as a vital
component of due process, observance of the twin requirements of notice and hearing before
dismissing an employee. As regards the notice requirement, the Court has stated: On the issue of
due process . . . , the law requires the employer to furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the cause or causes for
termination and shall afford him ample opportunity to be heard and to defend himself with the
assistance of a representative. Specifically, the employer must furnish the worker with two (2)
written notices before termination of employment can be legally effected: (a) notice which
apprises the employee of the particular acts or omissions for which his dismissal is sought; and
(b) the subsequent notice which informs the employee of the employer's decision to dismiss him.
Neither is the ship captain's having witnessed the altercation an excuse for dispensing with the
notice and hearing requirements. Serving notice to private respondent under the circumstances
cannot be regarded as an "absurdity and superfluity."
Lopez vs. Alturas, G.R. No. 191008, April 11, 2011, Carpio-Morales, J.
Doctrine. It is, however, with respect to the appellate court’s finding that petitioner was
not afforded procedural due process that the Court deviates from. Procedural due process has
been defined as giving an opportunity to be heard before judgment is rendered. In termination
cases, Perez v. Philippine Telegraph and Telephone Company, illuminates on the correct
proceedings to be followed therein in order to comply with the due process requirement:
Christian V. Asas
Page 308
==============================================
The above rulings are a clear recognition that the employer may provide an employee
with ample opportunity to be heard and defend himself with the assistance of a representative or
counsel in ways other than a formal hearing. The employee can be fully afforded a chance to
respond to the charges against him, adduce his evidence or rebut the evidence against him
through a wide array of methods, verbal or written.
After receiving the first notice apprising him of the charges against him, the employee
may submit a written explanation (which may be in the form of a letter, memorandum, affidavit
or position paper) and offer evidence in support thereof, like relevant company records (such as
his 201 file and daily time records) and the sworn statements of his witnesses. For this purpose,
he may prepare his explanation personally or with the assistance of a representative or counsel.
He may also ask the employer to provide him copy of records material to his defense. His written
explanation may also include a request that a formal hearing or conference be held. In such a
case, the conduct of a formal hearing or conference becomes mandatory, just as it is where there
exist substantial evidentiary disputes or where company rules or practice requires an actual
hearing as part of employment pretermination procedure.
Petitioner was given the opportunity to explain his side when he was informed of the
charge against him and required to submit his written explanation with which he complied. That
there might have been no hearing is of no moment, for as Autobus Workers’ Union v.
NLRC holds:
This Court has held that there is no violation of due process even if no hearing was
conducted, where the party was given a chance to explain his side of the controversy. What is
frowned upon is the denial of the opportunity to be heard.
Parenthetically, the Court finds that it was error for the NLRC to opine that petitioner
should have been afforded counsel or advised of the right to counsel. The right to counsel and the
assistance of one in investigations involving termination cases is neither indispensable nor
mandatory, except when the employee himself requests for one or that he manifests that he wants
a formal hearing on the charges against him. In petitioner’s case, there is no showing that he
requested for a formal hearing to be conducted or that he be assisted by counsel. Verily, since he
was furnished a second notice informing him of his dismissal and the grounds therefor, the twin-
notice requirement had been complied with to call for a deletion of the appellate court’s award of
nominal damages to petitioner.
iii. Contents of a valid notice
King of Kings vs. Mamac, G.R. No. 166208, June 29, 2007, Velasco, Jr., J.
Doctrine. As provided in Art. 277 of the Labor Code and the implementing rule, the
following should be considered in terminating the services of employees based on just causes
under Art. 282: (1.) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that the employees are
Christian V. Asas
Page 309
==============================================
given the opportunity to submit their written explanation within a reasonable period.
"Reasonable opportunity" under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare adequately for their
defense. This should be construed as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation
and defenses, the notice should contain a detailed narration of the facts and circumstances that
will serve as basis for the charge against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged against the employees.
(2.) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support of their defenses; and (3)
rebut the evidence presented against them by the management. During the hearing or conference,
the employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference or hearing could be used by
the parties as an opportunity to come to an amicable settlement. (3.) After determining that
termination of employment is justified, the employers shall serve the employees a written notice
of termination indicating that: (1) all circumstances involving the charge against the employees
have been considered; and (2) grounds have been established to justify the severance of their
employment.
iv. Terminating a probationary employee
Phil. Daily Inquier vs. Magtibay, 528 SCRA 355, G.R. No. 164532, July 24, 2007, Garcia, J.
Doctrine. Art. 281. Probationary employment. ̶ Probationary employment shall not

exceed six (6) months from the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The services of an employee who has been
engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as
a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee.
In International Catholic Migration Commission v. NLRC, we have elucidated what

probationary employment entails:
x x x. A probationary employee, as understood under Article 282 (now Article 281) of the
Labor Code, is one who is on trial by an employer during which the employer determines
whether or not he is qualified for permanent employment. A probationary appointment is made to
afford the employer an opportunity to observe the fitness of a probationer while at work, and to
ascertain whether he will become a proper and efficient employee. The word "probationary," as
Christian V. Asas
Page 310
==============================================
used to describe the period of employment, implies the purpose of the term or period but not its
length.
Being in the nature of a "trial period" the essence of a probationary period of employment
fundamentally lies in the purpose or objective sought to be attained by both the employer and the
employee during said period. The length of time is immaterial in determining the correlative
rights of both in dealing with each other during said period. While the employer, as stated earlier,
observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified
for permanent employment, the probationer, on the other, seeks to prove to the employer, that he
has the qualifications to meet the reasonable standards for permanent employment.
It is well settled that the employer has the right or is at liberty to choose who will be hired
and who will be denied employment. In that sense, it is within the exercise of the right to select
his employees that the employer may set or fix a probationary period within which the latter may
test and observe the conduct of the former before hiring him permanently. x x x.
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.
PDI invokes the second ground under the premises. In claiming that it had adequately
apprised Magtibay of the reasonable standards against which his performance will be gauged for
purposes of permanent employment, PDI cited the one-on-one seminar between Magtibay and its
Personnel Assistant, Ms. Rachel Isip-Cuzio. PDI also pointed to Magtibay’s direct superior,
Benita del Rosario, who diligently briefed him about his responsibilities in PDI. These factual
assertions were never denied nor controverted by Magtibay. Neither did he belie the existence of
a specific rule prohibiting unauthorized persons from entering the telephone operator’s booth and
that he violated that prohibition. This notwithstanding, the NLRC and the CA proceeded
nonetheless to rule that the records of the case are bereft of any evidence showing that these rules
and regulations form part of the so-called company standards.
We do not agree with the appellate court when it cleared the NLRC of commission of
grave abuse of discretion despite the latter’s disregard of clear and convincing evidence that
there were reasonable standards made known by PDI to Magtibay during his probationary
employment. It is on record that Magtibay committed obstinate infractions of company rules and
regulations, which in turn constitute sufficient manifestations of his inadequacy to meet
reasonable employment norms. The suggestion that Magtibay ought to have been made to
understand during his briefing and orientation that he is expected to obey and comply with
company rules and regulations strains credulity for acceptance. The CA’s observation that
"nowhere can it be found in the list of Basic Responsibility and Specific Duties and
Responsibilities of respondent Magtibay that he has to abide by the duties, rules and regulations
Christian V. Asas
Page 311
==============================================
that he has allegedly violated" is a strained rationalization of an unacceptable conduct of an

employee. Common industry practice and ordinary human experience do not support the CA’s
posture. All employees, be they regular or probationary, are expected to comply with company-
imposed rules and regulations, else why establish them in the first place. Probationary employees
unwilling to abide by such rules have no right to expect, much less demand, permanent
employment. We, therefore find sufficient factual and legal basis, duly established by substantial
evidence, for PDI to legally terminate Magtibay’s probationary employment effective upon the
end of the 6-month probationary period.
Unlike under the first ground for the valid termination of probationary employment
which is for just cause, the second ground does not require notice and hearing. Due process of
law for this second ground consists of making the reasonable standards expected of the employee
during his probationary period known to him at the time of his probationary employment. By the
very nature of a probationary employment, the employee knows from the very start that he will
be under close observation and his performance of his assigned duties and functions would be
under continuous scrutiny by his superiors. It is in apprising him of the standards against which
his performance shall be continuously assessed where due process regarding the second ground
lies, and not in notice and hearing as in the case of the first ground.
Even if perhaps he wanted to, Magtibay cannot deny – as he has not denied – PDI’s
assertion that he was duly apprised of the employment standards expected of him at the time of
his probationary employment when he underwent a one-on-one orientation with PDI’s personnel
assistant, Ms. Rachel Isip-Cuzio. Neither has he denied nor rebutted PDI’s further claim that his
direct superior, Benita del Rosario, briefed him regarding his responsibilities in PDI.
Lest it be overlooked, Magtibay had previously worked for PDI as telephone operator
from February 7, 1995 to July 31, 1995 as a contractual employee. Thus, the Court entertains no
doubt that when PDI took him in on September 21, 1995, Magtibay was already very much
aware of the level of competency and professionalism PDI wanted out of him for the entire
duration of his probationary employment.
PDI was only exercising its statutory hiring prerogative when it refused to hire Magtibay
on a permanent basis upon the expiration of the six-month probationary period. This was
established during the proceedings before the labor arbiter and borne out by the records and the
pleadings before the Court. When the NLRC disregarded the substantial evidence establishing
the legal termination of Magtibay’s probationary employment and rendered judgment grossly
and directly contradicting such clear evidence, the NLRC commits grave abuse of discretion
amounting to lack or excess of jurisdiction. It was, therefore, reversible error on the part of the
appellate court not to annul and set aside such void judgment of the NLRC.
Abbot Laboratories vs. Alcaraz, G.R. No. 192571, July 23, 2013, Perlas-Bernabe, J.
Doctrine. A probationary employee, like a regular employee, enjoys security of tenure.

However, in cases of probationary employment, aside from just or authorized causes of
Christian V. Asas
Page 312
==============================================
termination, an additional ground is provided under Article 295 of the Labor Code, i.e., the
probationary employee may also be terminated for failure to qualify as a regular employee in
accordance with the reasonable standards made known by the employer to the employee at the
time of the engagement. Thus, the services of an employee who has been engaged on
probationary basis may be terminated for any of the following: (a) a just or (b) an authorized
cause; and (c) when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor
Code provides that if the employer fails to inform the probationary employee of the reasonable
standards upon which the regularization would be based on at the time of the engagement, then
the said employee shall be deemed a regular employee, viz.:
(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.
In other words, the employer is made to comply with two (2) requirements when dealing
with a probationary employee: first, the employer must communicate the regularization standards
to the probationary employee; and second, the employer must make such communication at the
time of the probationary employee’s engagement. If the employer fails to comply with either, the
employee is deemed as a regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made known the standards that
would qualify a probationary employee to be a regular employee when it has exerted reasonable
efforts to apprise the employee of what he is expected to do or accomplish during the trial period
of probation. This goes without saying that the employee is sufficiently made aware of his
probationary status as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance,
in the case of maids, cooks, drivers, or messengers. Also, in Aberdeen Court, Inc. v. Agustin, it
has been held that the rule on notifying a probationary employee of the standards of
regularization should not be used to exculpate an employee who acts in a manner contrary to
basic knowledge and common sense in regard to which there is no need to spell out a policy or
standard to be met. In the same light, an 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.
A punctilious examination of the records reveals that Abbott had indeed complied with
the above-stated requirements. This conclusion is largely impelled by the fact that Abbott clearly
conveyed to Alcaraz her duties and responsibilities as Regulatory Affairs Manager prior to,
during the time of her engagement, and the incipient stages of her employment.
Christian V. Asas
Page 313
==============================================
Considering the totality of the circumstances, it cannot, therefore, be doubted that Alcaraz
was well-aware that her regularization would depend on her ability and capacity to fulfill the
requirements of her position as Regulatory Affairs Manager and that her failure to perform such
would give Abbott a valid cause to terminate her probationary employment.
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.
In fine, the Court rules that Alcaraz’s status as a probationary employee and her
consequent dismissal must stand. Consequently, in 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 lead to her non-regularization and eventually, her termination.
A different procedure is applied when terminating a probationary employee; the usual

two-notice rule does not govern. Section 2, Rule I, Book VI of the Implementing Rules of the
Labor Code states that "if the termination is brought about by the 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."
As the records show, Alcaraz's dismissal was effected through a letter dated May 19,
2005 which she received on May 23, 2005 and again on May 27, 2005. Stated therein were the
reasons for her termination, i.e., that after proper evaluation, Abbott determined that she failed to
meet the reasonable standards for her regularization considering her lack of time and people
management and decision-making skills, which are necessary in the performance of her
functions as Regulatory Affairs Manager. Undeniably, this written notice sufficiently meets the
Christian V. Asas
Page 314
==============================================
criteria set forth above, thereby legitimizing the cause and manner of Alcaraz’s dismissal as a
probationary employee under the parameters set by the Labor Code.
Nonetheless, despite the existence of a sufficient ground to terminate Alcaraz’s

employment and Abbott’s compliance with the Labor Code termination procedure, it is readily
apparent that Abbott breached its contractual obligation to Alcaraz when it failed to abide by its
own procedure in evaluating the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between the
employer and employee. In Parts Depot, Inc. v. Beiswenger, it has been held that: Employer
statements of policy . . . can give rise to contractual rights in employees without evidence that the
parties mutually agreed that the policy statements would create contractual rights in the
employee, and, hence, although the statement of policy is signed by neither party, can be
unilaterally amended by the employer without notice to the employee, and contains no reference
to a specific employee, his job description or compensation, and although no reference was made
to the policy statement in pre-employment interviews and the employee does not learn of its
existence until after his hiring. Toussaint, 292 N.W .2d at 892. The principle is akin to estoppel.
Once an employer establishes an express personnel policy and the employee continues to work
while the policy remains in effect, the policy is deemed an implied contract for so long as it
remains in effect. If the employer unilaterally changes the policy, the terms of the implied
contract are also thereby changed.
Hence, given such nature, company personnel policies create an obligation on the part of
both the employee and the employer to abide by the same.
Records show that Abbott’s PPSE procedure mandates, inter alia, that the job
performance of a probationary employee should be formally reviewed and discussed with the
employee at least twice: first on the third month and second on the fifth month from the date of
employment. Abbott is also required to come up with a Performance Improvement Plan during
the third month review to bridge the gap between the employee’s performance and the standards
set, if any. In addition, a signed copy of the PPSE form should be submitted to Abbott’s HRD as
the same would serve as basis for recommending the confirmation or termination of the
probationary employment.
In this case, it is apparent that Abbott failed to follow the above-stated procedure in
evaluating Alcaraz. For one, there lies a hiatus of evidence that a signed copy of Alcaraz’s PPSE
form was submitted to the HRD. It was not even shown that a PPSE form was completed to
formally assess her performance. Neither was the performance evaluation discussed with her
during the third and fifth months of her employment. Nor did Abbott come up with the necessary
Performance Improvement Plan to properly gauge Alcaraz’s performance with the set company
standards.
Christian V. Asas
Page 315
==============================================
While it is Abbott’s management prerogative to promulgate its own company rules and
even subsequently amend them, this right equally demands that when it does create its own
policies and thereafter notify its employee of the same, it accords upon itself the obligation to
faithfully implement them. Indeed, a contrary interpretation would entail a disharmonious
relationship in the work place for the laborer should never be mired by the uncertainty of flimsy
rules in which the latter’s labor rights and duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcaraz’s probationary employment
for her failure to meet the standards required for her regularization, and while it must be further
pointed out that Abbott had satisfied its statutory duty to serve a written notice of termination,
the fact that it violated its own company procedure renders the termination of Alcaraz’s
employment procedurally infirm, warranting the payment of nominal damages.
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.
Anent the proper amount of damages to be awarded, the Court observes that Alcaraz’s
dismissal proceeded from her failure to comply with the standards required for her
regularization. As such, it is undeniable that the dismissal process was, in effect, initiated by an
act imputable to the employee, akin to dismissals due to just causes under Article 296 of the
Labor Code. Therefore, the Court deems it appropriate to fix the amount of nominal damages at
the amount of P30,000.00, consistent with its rulings in both Agabon and Jaka.
2. Failure to comply with the requirements of due process
2.1. Substantive
2.1.1. Reinstatement, Doctrine of Strained Relations
PAL vs. Paz, G.R. No. 192924, November 26, 2014, Reyes, J.
Doctrine. The rule is that the employee is entitled to reinstatement salaries

notwithstanding the reversal of the LA decision granting him said relief. In Roquero vs.
Philippine Airlines, the Court underscored that it is obligatory on the part of the employer to
reinstate and pay the wages of the dismissed employee during the period of appeal until reversal
by the higher court. This is so because the order of reinstatement is immediately executory.
Christian V. Asas
Page 316
==============================================
Unless there is a restraining order issued, it is ministerial upon the LA to implement the order of
reinstatement. The unjustified refusal of the employer to reinstate a dismissed employee entitles
him to payment of his salaries effective from the time the employer failed to reinstate him.
In Garcia, however, the Court somehow relaxed the rule by taking into consideration the
cause of delay in executing the order of reinstatement of the LA. It was declared, thus:
After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be
barred from collecting the accrued wages, if it is shown that the delay in enforcing the
reinstatement pending appeal was without fault on the part of the employer.
The test is two-fold: (1) there must be actual delay or the fact that the order of
reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be
due to the employer’s unjustified act or omission. If the delay is due to the employer’s unjustified
refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the
Labor Arbiter’s decision.
It is clear from the records that PAL failed to reinstate the respondent pending appeal of
the LA decision to the NLRC. It can be recalled that the LA rendered the decision ordering the
reinstatement of the respondent on March 5, 2001. And, despite the self-executory nature of the
order of reinstatement, the respondent nonetheless secured a partial writ of execution on May 25,
2001. Even then, the respondent was not reinstated to his former position or even through
payroll.
A scrutiny of the circumstances, however, will show that the delay in reinstating the
respondent was not due to the unjustified refusal of PAL to abide by the order but because of the
constraints of corporate rehabilitation. It bears noting that a year before the respondent filed his
complaint for illegal dismissal on June 25, 1999, PAL filed a petition for approval of
rehabilitation plan and for appointment of a rehabilitation receiver with the SEC. On June 23,
1998, the SEC appointed an Interim Rehabilitation Receiver. Thereafter, the SEC issued an
Order dated July 1, 1998, suspending all claims for payment against PAL.
The inopportune event of PAL’s entering rehabilitation receivership justifies the delay or
failure to comply with the reinstatement order of the LA. Thus, in Garcia, the Court held:
It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for
claims before any court, tribunal or board against the corporation shall ipso jure be suspended.
As stated early on, during the pendency of petitioners’ complaint before the Labor Arbiter, the
SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter
rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent
Rehabilitation Receiver.
Case law recognizes that unless there is a restraining order, the implementation of the
order of reinstatement is ministerial and mandatory. This injunction or suspension of claims by
Christian V. Asas
Page 317
==============================================
legislative fiat partakes of the nature of a restraining order that constitutes a legal justification for
respondent's non-compliance with the reinstatement order. Respondent's failure to exercise the
alternative options of actual reinstatement and payroll reinstatement was thus justified. Such
being the case, respondent's obligation to pay the salaries pending appeal, as the normal effect of
the non-exercise of the options, did not attach.
In light of the fact that PAL's failure to comply with the reinstatement order was justified
by the exigencies of corporation rehabilitation, the respondent may no longer claim salaries
which he should have received during the period that the LA decision ordering his reinstatement
is still pending appeal until it was overturned by the NLRC. Thus, the CA committed a reversible
error in recognizing the respondent's right to collect reinstatement salaries albeit suspending its
execution while PAL is still under corporate rehabilitation.
Garcia vs. PAL, G.R. No. 164856, January 20, 2009, Quisumbing, J.
Doctrine. Worth stressing, upon appointment by the SEC of a rehabilitation receiver, all
actions for claims against the corporation pending before any court, tribunal or board shall ipso
jure be suspended. The purpose of the automatic stay of all pending actions for claims is to
enable the rehabilitation receiver to effectively exercise its/his powers free from any judicial or
extra-judicial interference that might unduly hinder or prevent the rescue of the corporation.
More importantly, the suspension of all actions for claims against the corporation
embraces all phases of the suit, be it before the trial court or any tribunal or before this Court. No
other action may be taken, including the rendition of judgment during the state of suspension. It
must be stressed that what are automatically stayed or suspended are the proceedings of a suit
and not just the payment of claims during the execution stage after the case had become final and
executory.
Furthermore, the actions that are suspended cover all claims against the corporation
whether for damages founded on a breach of contract of carriage, labor cases, collection suits or
any other claims of a pecuniary nature. No exception in favor of labor claims is mentioned in the
law.
This Court’s adherence to the above-stated rule has been resolute and steadfast as
evidenced by its oft-repeated application in a plethora of cases involving PAL, the most recent of
which is Philippine Airlines, Inc. v. Zamora.
Since petitioners’ claim against PAL is a money claim for their wages during the
pendency of PAL’s appeal to the NLRC, the same should have been suspended pending the
rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should
have abstained from resolving petitioners’ case for illegal dismissal and should instead have
directed them to lodge their claim before PAL’s receiver.
Christian V. Asas
Page 318
==============================================
However, to still require petitioners at this time to re-file their labor claim against PAL
under the peculiar circumstances of the case – that their dismissal was eventually held valid with
only the matter of reinstatement pending appeal being the issue – this Court deems it legally
expedient to suspend the proceedings in this case.
Aurelio vs. NLRC, 221 SCRA 432, G.R. No. 99034, April 12, 1993, Melo, J.
Doctrine. Under Section 1, Rule XIV of the Implementing Rules and Regulations of the
Labor Code, the dismissal of an employee must be for a just or authorized cause and after due
process.
The two requirements of this legal provision are: (1.) The legality of the act of dismissal,
that is, dismissal under the ground provided under Article 283 of the New Labor Code; and (2.)
The legality in the manner of dismissal, that is, with due observance of the procedural
requirements of Sections 2, 5, and 6 of Batas Pambansa Blg. 130.
While the Labor Code treats of the nature and the remedies available with regard to the
first, such as: (a) reinstatement to his former position without loss of seniority rights, and (b)
payment of backwages corresponding to the period from his illegal dismissal up to actual
reinstatement, said Code does not deal at all with the second, that is, the manner of dismissal,
which is therefore, governed exclusively by the Civil Code.
In cases where there was a valid ground to dismiss an employee but there was non-
observance of due process, this Court held that only a sanction must be imposed upon the
employer for failure to give formal notice and to conduct an investigation required by law before
dismissing the employee in consonance with jurisprudence.
In Wenphil, we held: However, the petitioner must nevertheless be held to account for
failure to extend to private respondent his right to an investigation before causing his dismissal.
The rule is explicit as discussed above. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and
conduct an investigation as required by law before dismissing petitioner from employment.
Considering the circumstance of this case petitioner must indemnify the private respondent the
amount of P1,000.00. The measure of this award depends on the facts of each case and the
gravity of the omission committed by the employer.
Public respondent's finding that petitioner was not afforded due process is correct but the
Commission erred when it awarded separation pay in the amount of P32,750.00. In the Pacific
Mills, Inc. and Wenphil cases, this Court merely awarded P1,000.00 as penalty for non-
observance of due process.
The Board of Directors, composed of the individual private respondents herein, has the
power granted by the Corporation Code to implement a reorganization of respondent college's
Christian V. Asas
Page 319
==============================================
offices, including the abolition of various positions, since it is implied or incidental to its power
to conduct the regular business affairs of the corporation.
The prerogative of management to conduct its own business affairs to achieve its
purposes cannot be denied. Management is at liberty, absent any malice on its part, to abolish
positions which it deems no longer necessary.
Cabigting vs. San Miguel Foods, Inc., G.R. No. 167706, November 5, 2009, Peralta, J.
Doctrine. Under the law and prevailing jurisprudence, an illegally dismissed employee
is entitled to reinstatement as a matter of right. However, if reinstatement would only exacerbate
the tension and strained relations between the parties, or where the relationship between the
employer and the employee has been unduly strained by reason of their irreconcilable
differences, particularly where the illegally dismissed employee held a managerial or key
position in the company, it would be more prudent to order payment of separation pay instead of
reinstatement.
In Globe-Mackay Cable and Radio Corporation vs. National Labor Relations

Commission, this Court discussed the limitations and qualifications for the application of the
"strained relations" principle, in this wise:
x x x If, in the wisdom of the Court, there may be a ground or grounds for non-
application of the above-cited provision, this should be by way of exception, such as when the
reinstatement may be inadmissible due to ensuing strained relations between the employer and
the employee.
In such cases, it should be proved that the employee concerned occupies a position where
he enjoys the trust and confidence of his employer; and that it is likely that if reinstated, an
atmosphere of antipathy and antagonism may be generated as to adversely affect the efficiency
and productivity of the employee concerned.
A few examples will suffice to illustrate the Court's application of the above principle:
where the employee is a Vice-President for Marketing and, as such, enjoys the full trust and
confidence of top management; or is the Officer-In-Charge of the extension office of the bank
where he works; or is an organizer of a union who was in a position to sabotage the union's
efforts to organize the workers in commercial and industrial establishments; or is a
warehouseman of a non-profit organization whose primary purpose is to facilitate and maximize
voluntary gifts by foreign individuals and organizations to the Philippines; or is a manager of its
Energy Equipment Sales.
Obviously, the principle of "strained relations" cannot be applied indiscriminately.

Otherwise, reinstatement can never be possible simply because some hostility is invariably
engendered between the parties as a result of litigation. That is human nature.
Christian V. Asas
Page 320
==============================================
Besides, no strained relations should arise from a valid and legal act of asserting one's
right; otherwise, an employee who shall assert his right could be easily separated from the
service, by merely paying his separation pay on the pretext that his relationship with his
employer had already become strained.
Moreover, Chief Justice Reynato S. Puno, in his dissenting opinion in MGG Marine
Services, Inc. v. National Labor Relations Commission, gives the following suggestion in the
application of the doctrine of strained relations:
x x x At the very least, I suggest that, henceforth, we should require that the alleged
"strained relationship" must be pleaded and proved if either the employer or the employee does
not want the employment tie to remain. By making "strained relationship" a triable issue of fact
before the Arbiter or the NLRC we will eliminate rulings on "strained relationship" based on
mere impression alone.
Based on the foregoing, in order for the doctrine of strained relations to apply, it should
be proved that the employee concerned occupies a position where he enjoys the trust and
confidence of his employer and that it is likely that if reinstated, an atmosphere of antipathy and
antagonism may be generated as to adversely affect the efficiency and productivity of the
employee concerned.
Accordingly, this Court is of the opinion that both the LA and the CA based their
conclusions on impression alone. It bears to stress that reinstatement is the rule and, for the
exception of strained relations to apply, it should be proved that it is likely that if reinstated, an
atmosphere of antipathy and antagonism would be generated as to adversely affect the efficiency
and productivity of the employee concerned. However, both the LA and the CA failed to state the
basis for their finding that a strained relationship exists.
This Court shares petitioner’s view that the words allegedly imputing malice and bad
faith towards the respondent cannot be made a basis for denying his reinstatement. Respondent’s
perceived antipathy and antagonism is not of such degree as would preclude reinstatement of
petitioner to his former position. In addition, by themselves alone, the words used by petitioner
in his pleadings are insufficient to prove the presence of strained relations. Thus, this Court finds
that one should not fault petitioner for his choice of words, especially in light of overwhelming
evidence showing he was illegally dismissed.
Moreover, the filing of the complaint by petitioner cannot be used as a basis for strained
relations. As a rule, no strained relations should arise from a valid and legal act asserting one’s
right. Likewise, respondent’s claim that it was betrayed by petitioner, after several
accommodations it had extended to him, deserves scant consideration. On this note, the NLRC
was categorical that no such accommodation existed, to wit: On the argument that Cabigting
Christian V. Asas
Page 321
==============================================
was merely accommodated by the respondent after the closure of the Tacoma Warehouse, it,
however, appears that no such accommodation existed. x x x
The doctrine of strained relations has been made applicable to cases where the employee
decides not to be reinstated and demands for separation pay. The same, however, does not apply
to herein petition, as petitioner is asking for his reinstatement despite his illegal dismissal.
Lastly, this Court takes note of the findings of fact of the NLRC that the position of
inventory controller and warehouseman is still existing up to date. Petitioner has been an
inventory controller for so many years, and there should be no problem in ordering the
reinstatement with facility of a laborer, clerk, or other rank-and-file employee.
In conclusion, it bears to stress that it is human nature that some hostility will inevitably
arise between parties as a result of litigation, but the same does not always constitute strained
relations in the absence of proof or explanation that such indeed exists.
Bank of Lubao vs. Manabat, G.R. No. 188722, February 1, 2012, Reyes, J.
Doctrine. 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.
Under the law and prevailing jurisprudence, an illegally dismissed employee is entitled to
reinstatement as a matter of right. However, if reinstatement would only exacerbate the tension
and strained relations between the parties, or where the relationship between the employer and
the employee has been unduly strained by reason of their irreconcilable differences, particularly
where the illegally dismissed employee held a managerial or key position in the company, it
would be more prudent to order payment of separation pay instead of reinstatement.
Under the doctrine of strained relations, the payment of separation pay is considered an
acceptable alternative to reinstatement when the latter option is no longer desirable or viable. On
one hand, such payment liberates the employee from what could be a highly oppressive work
environment. On the other hand, it releases the employer from the grossly unpalatable obligation
of maintaining in its employ a worker it could no longer trust.
In such cases, it should be proved that the employee concerned occupies a position where
he enjoys the trust and confidence of his employer; and that it is likely that if reinstated, an
atmosphere of antipathy and antagonism may be generated as to adversely affect the efficiency
and productivity of the employee concerned.
Christian V. Asas
Page 322
==============================================
Here, we agree with the CA that the relations between the parties had been already
strained thereby justifying the grant of separation pay in lieu of reinstatement in favor of the
respondent.
First, it cannot be gainsaid that the petitioner’s reinstatement to his former position would
only serve to intensify the atmosphere of antipathy and antagonism between the parties.
Undoubtedly, the petitioner’s filing of various criminal complaints against the respondent for
qualified theft and the subsequent filing by the latter of the complaint for illegal dismissal against
the latter, taken together with the pendency of the instant case for more than six years, had
caused strained relations between the parties.
Second, considering that the respondent’s former position as bank encoder involves the
handling of accounts of the depositors of the Bank of Lubao, it would not be equitable on the
part of the petitioner to be ordered to maintain the former in its employ since it may only inspire
vindictiveness on the part of the respondent.
Third, the refusal of the respondent to be re-admitted to work is in itself indicative of the
existence of strained relations between him and the petitioner. In the case of Lagniton, Sr. v.
National Labor Relations Commission, the Court held that the refusal of the dismissed employee
to be re-admitted is constitutive of strained relations: It appears that relations between the
petitioner and the complainants have been so strained that the complainants are no longer willing
to be reinstated. As such reinstatement would only exacerbate the animosities that have
developed between the parties, the public respondents were correct in ordering instead the grant
of separation pay to the dismissed employees in the interest of industrial peace.
Time and again, this Court has recognized that strained relations between the employer
and employee is an exception to the rule requiring actual reinstatement for illegally dismissed
employees for the practical reason that the already existing antagonism will only fester and
deteriorate, and will only worsen with possible adverse effects on the parties, if we shall compel
reinstatement; thus, the use of a viable substitute that protects the interests of both parties while
ensuring that the law is respected.
2.1.2. Backwages
2.1.2.1. Basis/Rationale
Bustamante vs. NLRC, 265 SCRA 61, G.R. No. 111651, March 15, 1996, Padilla, J.
Doctrine. Reliance by public respondent on the case of Manila Electric Company

vs. NLRC is misplaced. In that case, the Court ordered the reinstatement of an employee, without
backwages because, although there was a valid cause for dismissal, the penalty was too severe
for an employee who had rendered service for an uninterrupted period of twenty (20) years with
two commendations for honesty. In the case at bar, there is no valid cause for dismissal. The
employees (petitioners) have not performed any act to warrant termination of their employment.
Christian V. Asas
Page 323
==============================================
Consequently, petitioners are entitled to their full backwages and other benefits from the time
their compensation was withheld from them up to the time of their actual reinstatement.
Lim vs. HMR Philippines, G.R. No. 201483, August 4, 2014, Mendoza, J. (Possible Bar
Problem in Labor Law and Remedial Law)
Doctrine. Considering that the judgment decreeing the computation of backwages up to

the promulgation of the NLRC decision has long become final and executory, the key question is
whether a recomputation of backwages up to the date of the actual reinstatement of Lim would
violate the principle of immutability of judgments.
The rule is that it is the dispositive portion that categorically states the rights and
obligations of the parties to the dispute as against each other. Thus, it is the dispositive portion
that must be enforced to ensure the validity of the execution. That a judgment should be
implemented according to the terms of its dispositive portion is a long and well-established rule.
A companion to this rule is the principle of immutability of final judgments. Save for recognized
exceptions, a final judgment may no longer be altered, amended or modified, even if the
alteration, amendment or modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law and regardless of what court renders it. Any attempt to insert, change or
add matters not clearly contemplated in the dispositive portion violates the rule on immutability
of judgments.
The cases of Session Delights Ice Cream and Fast Foods v. Court of Appeals and Nacar v.
Gallery Frames shed much light on the apparent discrepancy in the case at hand. As in the
present case, both involve labor cases finding that the employees therein were illegally
dismissed. At the LA level, in awarding backwages, a precise computation was provided from
the time of illegal dismissal up to the promulgation of the LA decision. Additionally, the
dispositive portion of the LA decision in Nacar also made a declaration that separation pay in
lieu of reinstatement be "computed only up to promulgation of this decision." The LA decisions
in these cases were affirmed by the NLRC and the CA and subsequently became final and
executory. At the execution stage, the computation of backwages came into issue.
Session Delights made clear that a case for illegal dismissal is one that relates to status,
where the decision or ruling is essentially declaratory of the status and of the rights, obligations
and monetary consequences that flow from the declared status, such as, the payment of
separation pay and backwages. In execution, what is primarily implemented is the declaratory
finding on the status and the rights and obligations of the parties therein; the arising monetary
consequences from the declaration only follow as component of the parties’ rights and
obligations. The precise amount of backwages should ideally be stated in the final decision;
otherwise, the matter is for handling and computation by the LA of origin as the labor official
charged with the implementation of decisions before the NLRC.
Christian V. Asas
Page 324
==============================================
The Court’s disquisition in Session Delights, also referenced with approval in Nacar, is
enlightening:
A source of misunderstanding in implementing the final decision in this case proceeds

from the way the original labor arbiter framed his decision. The decision consists essentially of
two parts. The first is that part of the decision that cannot now be disputed because it has been
confirmed with finality. This is the finding of the illegality of the dismissal and the awards of
separation pay in lieu of reinstatement, backwages, attorney’s fees, and legal interests.
The second part is the computation of the awards made. On its face, the computation the
labor arbiter made shows that it was time-bound as can be seen from the figures used in the
computation. This part, being merely a computation of what the first part of the decision
established and declared, can, by its nature, be recomputed. This is the part, too, that the
petitioner now posits should no longer be re-computed because the computation is already in the
labor arbiter’s decision that the CA had affirmed. The public and private respondents, on the
other hand, posit that a recomputation is necessary because the relief in an illegal dismissal
decision goes all the way up to reinstatement if reinstatement is to be made, or up to the finality
of the decision, if separation pay is to be given in lieu of reinstatement.
xxx
Clearly implied from this original computation is its currency up to the finality of the
labor arbiter’s decision. As we noted above, this implication is apparent from the terms of the
computation itself, and no question would have arisen had the parties terminated the case and
implemented the decision at that point.
However, the petitioner disagreed with the labor arbiter’s findings on all counts – i.e., on
the finding of illegality as well as on all the consequent awards made. Hence, the petitioner
appealed the case to the NLRC which, in turn, affirmed the labor arbiter’s decision. By law, the
NLRC decision is final, reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional

grounds through a timely filed Rule 65 petition for certiorari. The CA decision, finding that
NLRC exceeded its authority in affirming the payment of 13th month pay and indemnity, lapsed
to finality and was subsequently returned to the labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal
portion of the original labor arbiter’s decision, the implementing labor arbiter ordered the award
recomputed; he apparently read the figures originally ordered to be paid to be the computation
due had the case been terminated and implemented at the labor arbiter’s level. Thus, the labor
arbiter recomputed the award to include the separation pay and the backwages due up to the
finality of the CA decision that fully terminated the case on the merits. Unfortunately, the labor
arbiter’s approved computation went beyond the finality of the CA decision (July 29, 2003) and
included as well the payment for awards the final CA decision had deleted – specifically, the
Christian V. Asas
Page 325
==============================================
proportionate 13th month pay and the indemnity awards. Hence, the CA issued the decision now
questioned in the present petition.
We see no error in the CA decision confirming that a recomputation is necessary as it

essentially considered the labor arbiter’s original decision in accordance with its basic
component parts as we discussed above. To reiterate, the first part contains the finding of
illegality and its monetary consequences; the second part is the computation of the awards or
monetary consequences of the illegal dismissal, computed as of the time of the labor arbiter’s
original decision.
To illustrate these points, had the case involved a pure money claim for a specific sum
(e.g. salary for a specific period) or a specific benefit (e.g. 13th month pay for a specific year)
made by a former employee, the labor arbiter’s computation would admittedly have continuing
currency because the sum is specific and any variation may only be on the interests that may run
from the finality of the decision ordering the payment of the specific sum.
In contrast with a ruling on a specific pure money claim, is a claim that relates to status
(as in this case, where the claim is the legality of the termination of the employment
relationship). In this type of cases, the decision or ruling is essentially declaratory of the status
and of the rights, obligations and monetary consequences that flow from the declared status (in
this case, the payment of separation pay and backwages and attorney’s fees when illegal
dismissal is found). When this type of decision is executed, what is primarily implemented is the
declaratory finding on the status and the rights and obligations of the parties therein; the arising
monetary consequences from the declaration only follow as component of the parties’ rights and
obligations.
In the present case, the CA confirmed that indeed an illegal dismissal had taken place, so
that separation pay in lieu of reinstatement and backwages should be paid. How much that
separation pay would be, would ideally be stated in the final CA decision; if not, the matter is for
handling and computation by the labor arbiter of origin as the labor official charged with the
implementation of decisions before the NLRC.
xxx
Consistent with what we discussed above, we hold that under the terms of the decision
under execution, no essential change is made by a re-computation as this step is a necessary
consequence that flows from the nature of the illegality of dismissal declared in that decision. A
re-computation (or an original computation, if no previous computation has been made) is a part
of the law – specifically, Article 279 of the Labor Code and the established jurisprudence on this
provision – that is read into the decision. By the nature of an illegal dismissal case, the reliefs
continue to add on until full satisfaction, as expressed under Article 279 of the Labor Code. The
re-computation of the consequences of illegal dismissal upon execution of the decision does not
constitute an alteration or amendment of the final decision being implemented. The illegal
dismissal ruling stands; only the computation of monetary consequences of this dismissal is
affected and this is not a violation of the principle of immutability of final judgments.
Christian V. Asas
Page 326
==============================================
xxx
That the amount the petitioner shall now pay has greatly increased is a consequence that
it cannot avoid as it is the risk that it ran when it continued to seek recourses against the labor
arbiter’s decision. Article 279 provides for the consequences of illegal dismissal in no uncertain
terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of
reinstatement is allowed. When that happens, the finality of the illegal dismissal decision
becomes the reckoning point instead of the reinstatement that the law decrees. In allowing
separation pay, the final decision effectively declares that the employment relationship ended so
that separation pay and backwages are to be computed up to that point. x x x
Although the NLRC decision in the present case did not provide a precise computation,
the principles enunciated in Session Delights still equally apply. In Session Delights, the
computation of the LA was found to be time-bound, which implied the currency of the
computation up to the finality of the LA decision. In the present case, the NLRC declared
backwages to be reckoned "up to the promulgation" of its decision, which was an express
declaration of the currency of the computation up to the finality of the NLRC decision, especially
considering that HMR was "ordered to reinstate immediately" petitioner Lim. The decisions in
both cases are premised on their immediate execution, in that no question would have arisen had
the parties terminated the case and the decision implemented at that point.
As discussed above, no essential change is being made by a recomputation because such

is a necessary consequence which flows from the nature of the illegality of the dismissal. To
reiterate, a recomputation, or an original computation, if no previous computation was made, as
in the present case, is a part of the law that is read into the decision, namely, Article 279 of the
Labor Code and established jurisprudence. Article 279 provides for the consequences of illegal
dismissal, one of which is the payment of full backwages until actual reinstatement, qualified
only by jurisprudence when separation pay in lieu of reinstatement is allowed, where the finality
of the illegal dismissal decision instead becomes the reckoning point.
The nature of an illegal dismissal case requires that backwages continue to add on until
full satisfaction. The computation required to reflect full satisfaction does not constitute an
alteration or amendment of the final decision being implemented as the illegal dismissal ruling
stands. Thus, in the present case, a computation of backwages until actual reinstatement is not a
violation of the principle of immutability of final judgments.
The respondents aver that the recoverable backwages cannot go beyond December 26,
2007, the date HMR offered to reinstate Lim, who allegedly refused to be reinstated and
abandoned his job.
HMR sent the petitioner a letter, dated December 22, 2007, directing him to report for
work on December 26,2007, with an offer of separation pay in the amount of P150,000.00 in lieu
of reinstatement which he could avail of not later than December26, 2007. Lim replied in a
letter, dated December 24, 2007, requesting for a meeting in January 2008, considering that his
Christian V. Asas
Page 327
==============================================
counsel was out of the country; that the NLRC was still in the process of computing the amount
of the award which was necessary to consider the offer of separation pay; and that a writ of
execution had not yet been issued. HMR never responded to the petitioner’s request, and up to
the present, the latter has yet to be reinstated.
From the above, it is apparent that the petitioner cannot be deemed to have refused
reinstatement or to have abandoned his job. HMR’s offer of reinstatement appeared superficial
and insincere considering that it never replied to the petitioner’s letter. It did not make any
further attempt to reinstate the petitioner either. The recoverable backwages, thus, continue to
run, and must be reckoned up until the petitioner’s actual reinstatement.
In Equitable Banking Corporation v. Sadac, the Court held that although Article 279 of
the Labor Code mandates that an employee’s full backwages be inclusive of allowances and
other benefits, salary increases cannot be interpreted as either an allowance or a benefit, as
allowances and benefits are separate from salary, while a salary increase is added to salary as an
increment thereto. It was further held therein that the base figure to be used in the computation of
backwages was pegged at the wage rate at the time of the employee’s dismissal, inclusive of
regular allowances that the employee had been receiving such as the emergency living
allowances and the 13th month pay mandated by law. The award of salary differentials was not
allowed, the rule being that upon reinstatement, illegally dismissed employees were to be paid
their backwages without deduction and qualification as to any wage increases or other benefits
that might have been received by their co-workers who were not dismissed.
It must be noted that the NLRC did not err in awarding the unpaid salary increase for the
years 1998-2000 as such did not constitute backwages as a consequence of the petitioner’s illegal
dismissal, but was earned and owing to the petitioner before he was illegally terminated.
Whether or not holiday pay is included in the monthly salary of an employee, may be
gleaned from the divisors used by the company in the computation of overtime pay and
employees’ absences. To illustrate, if all nonworking days are paid, the divisor ofthe monthly
salary to obtain daily rate should be 365. If nonworking days are not paid, the divisor is 251,
which is a result of subtracting all Saturdays, Sundays, and the ten legal holidays. Hence, if the
petitioner’s base pay does not yet include holiday pay, it must be added to his monetary award.
In both Session Delights and Nacar, no interest was expressly awarded before the
judgments became final and executory, yet in both cases, the Court, nonetheless, awarded legal
interest. Session Delights explained that the decision had become a judgment for money from
which another consequence flowed, namely, the payment of interest in case of delay in
accordance with Eastern Shipping Lines v. Court of Appeals (This underlined portion was
asked in the 2016 Bar). It was held therein that when the judgment of the court awarding a sum
of money became final and executory, the rate of legal interest, should be 12% per annumfrom
finality until satisfaction.
Christian V. Asas
Page 328
==============================================
The rules on legal interest in Eastern Shipping have, however, been recently modified by
Nacar in accordance with Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) Circular No.
799, which became effective on July 1, 2013. Pertinently, it amended the rate of legal interest in
judgments from 12% to 6% per annum, with the qualification that the new rate be applied
prospectively. Thus, the 12% per annum legal interest in judgments under Eastern Shipping shall
apply only until June 30, 2013, and the new rate of 6% per annum shall be applied from July 1,
2013 onwards (This underlined portion was asked in the 2016 Bar in Civil Law).
Petitioner also prays that he be awarded interest at a rate of 6% per annum on the
amounts awarded from the time they became legally due him until entry of judgment,
presumably under the second paragraph in Eastern Shipping (which was not modified by Nacar),
which states: 2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on the amount finally adjudged.
It is plain from the above that the interest of 6% per annum for obligations not
constituting a loan or forbearance of money is one that may be imposed at the discretion of the
court. This form of interest is not mandatory but discretionary in nature and therefore, not
necessarily owing to the petitioner in the present case.
2.1.2.2. Not availing
Palteng vs. UCPB, G.R. No. 172199, February 27, 2009, Quisumbing, J.
Doctrine. Settled is the rule that an employee who is illegally dismissed from work is
entitled to reinstatement without loss of seniority rights, and other privileges as well as to full
backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his actual
reinstatement. However, in the event that reinstatement is no longer possible, the employee may
be given separation pay instead.
Notably, reinstatement and payment of backwages are distinct and separate reliefs given
to alleviate the economic setback brought about by the employee’s dismissal. The award of one
does not bar the other. Backwages may be awarded without reinstatement, and reinstatement may
be ordered without awarding backwages.
Christian V. Asas
Page 329
==============================================
In a number of cases, the Court, despite ordering reinstatement or payment of separation

pay in lieu of reinstatement, has not awarded backwages as penalty for the misconduct or
infraction committed by the employee.
In the case at bar, petitioner admitted that she granted the BP accommodation against
Mercado’s personal checks beyond and outside her authority. The Labor Arbiter, the NLRC and
the Court of Appeals all found her to have committed an "error of judgment," "honest
mistake," "honest mistake" vis-à-vis a "major offense."
Since petitioner was not faultless in regard to the offenses imputed against her, we hold
that the award of separation pay only, without backwages, is proper.
2.1.2.3. Period Covered
Bank of Lubao vs. Manabat, G.R. No. 188722, February 1, 2012, Reyes, J.
Doctrine. However, the backwages that should be awarded to the respondent should be
modified. Employees who are illegally dismissed are entitled to full backwages, inclusive of
allowances and other benefits or their monetary equivalent, computed from the time their actual
compensation was withheld from them up to the time of their actual reinstatement. But if
reinstatement is no longer possible, the backwages shall be computed from the time of their
illegal termination up to the finality of the decision.
Thus, when there is an order of reinstatement, the computation of backwages shall be

reckoned from the time of illegal dismissal up to the time that the employee is actually reinstated
to his former position.
Pursuant to the order of reinstatement rendered by the LA, the petitioner sent the
respondent a letter requiring him to report back to work on May 4, 2007. Notwithstanding the
said letter, the respondent opted not to report for work. Thus, it is but fair that the backwages that
should be awarded to the respondent be computed from the time that the respondent was illegally
dismissed until the time when he was required to report for work, i.e. from September 1, 2005
until May 4, 2007. It is only during the said period that the respondent is deemed to be entitled to
the payment of backwages.
The fact that the CA, in its April 4, 2009 decision, ordered the payment of separation pay
in lieu of the respondent’s reinstatement would not entitle the latter to backwages. It bears
stressing that decisions of the CA, unlike that of the LA, are not immediately executory.
Accordingly, the petitioner should only pay the respondent backwages from September 1, 2005,
the date when the respondent was illegally dismissed, until May 4, 2007, the date when the
petitioner required the former to report to work.
2.1.3. Separation pay

Christian V. Asas
Page 330
==============================================
2.1.3.1. Basis for computation
Phil. Tobacco Flue Curing vs. NLRC, 300 SCRA 37, G.R. No. 127395, December 10, 1998,
Panganiban, J.
Doctrine. Petitioner posits that the separation pay of a seasonal worker, who works for
only a fraction of a year, should not be equated with that of a regular worker. Positing that the
total number of working days in one year is 303 days, petitioner submits the following formula
for the computation of a seasonal worker's separation pay:
Total No. of Days Actually Worked

———————————————— x Daily Rate x 15 days
Total No. of Working Days In One Year
Agreeing with the labor arbiter and the NLRC, private respondents, on the other hand,
claim that their separation pay should be based on the actual number of years they have been in
petitioner's service. They cite the law on service incentive leave, the implementing rules
regarding the 13th month pay, Manila Hotel v. CIR, and Chartered Bank v. Ople which allegedly
stated that "each season in a year in a year should be construed as one year of service."
The amount of separation pay is based on two factors: the amount of monthly salary and
the number of years of service. Although the Labor Code provides different definitions as to
what constitutes "one year of service," Book Six does not specifically define "one year of
service" for purposes of computing separation pay. However, Articles 283 and 284 both state in
connection with separation pay that a fraction of at least six months shall be considered one
whole year. Applying this to the case at bar, we hold that the amount of separation pay which
respondent members of the Lubat and Luris groups should receive is one-half (1/2) their
respective average monthly pay during the last season they worked multiplied by the number of
years they actually rendered service, provided that they worked for at least six months during a
given year.
The formula that petitioner proposes, wherein a year of work is equivalent to actual work
rendered for 303 days, is both unfair and inapplicable, considering that Articles 283 and 284
provide that in connection with separation pay, a fraction of at least six months shall be
considered one whole year. Under these provisions, an employee who worked for only six
months in a given year — which is certainly less than 303 days — is considered to have worked
for one whole year.
In the same manner, Chartered Bank v. Ople, which private respondents cite, does not
support their cause. The said case ruled that regular workers and those who are paid by the
month are both entitled to holiday pay. On the other hand, the law on service incentive leave
pay does not necessarily apply to retirement benefits or separation pay. Likewise, the provision
Christian V. Asas
Page 331
==============================================
regarding the 13th month pay is not applicable to separation pay. In fact, an employee who
worked for a single month in a year is entitled to a 13th month pay equivalent to only 1/12 of his
or her monthly salary. Finally, Manila Hotel Company v. CIR did not rule that seasonal workers
are considered at work during off season with regard to the computation of separation pay. Said
case merely held that, in regard to season workers, the employer-employee relationship is not
severed during off-season but merely suspended.
2.1.3.1. Who is liable to pay
E. Razon, Inc. vs. Secretary of Labor, 222 SCRA 1, G.R. No. 85867, May 13, 1993, Melo, J.
Doctrine. There appears to be no quarrel over the issue of whether or not separation pay
should be paid to the workers of ERI/MPSI. The controversy actually is: which of the contending
corporations, petitioner ERI/MPSI or private respondent MARINA, should pay such benefit to
the employees concerned.
Separation or severance pay is an allowance usually based on length or service that is

payable to an employee on severance except usually in case of disciplinary discharge, or as
compensation due an employee upon the severance of his employment status with the employer.
Under Article 283 of the Labor Code, separation pay is required where the termination of
employment relationship is occasioned by the "cessation of operations" of an establishment. The
said article, therefore, puts the burden of paying separation pay on ERI/MPSI, the employer for
whom services had been rendered by the employees who were separated from employment in
view of the cessation of its business operations by the cancellation of its management contract
with the PPA. Petitioner, however, argues otherwise and would shift liability for separation pay
to MARINA on the strength of Paragraph 7 of the additional terms and conditions appended to
the permit to operate granted to MARINA.
Paragraph 7 aforequoted provides that the employees of the "previous operator", meaning
ERI/MPSI, shall be "absorbed" by the permit "grantee", meaning MARINA, and the benefits
given the same employees under the "existing CBA" shall be "honored". A key in the
interpretation of this paragraph is the word "absorbed" which is synonymous with the words
"assimilate" or "incorporate" and which, in business parlance, means "to take over". As such, it
appears at first blush, that an "absorbing" employer shall be responsible for all the benefits
accruing to the "absorbed" employees.
The circumstances of this case, however, do not warrant the conclusion that, by
"absorbing" the ERI/MPSI employees, MARINA took the place of the ERI/MPSI as an employer
as if there had been no interruption in the employer-employee relationship between ERI/MPSI
and its employees and, therefore, MARINA should assume all responsibilities of ERI/MPSI. For,
while in Marina Port Services, Inc. vs. NLRC, the Court opined that by virtue of Paragraph 7,
security guards of the MPSI did become employees of MARINA, the undeniable fact is that, by
the termination of its management contract with the PPA, ERI/MPSI ceased to be an employer.
Admittedly, the consequent separation from the employment of its employees was not of the
Christian V. Asas
Page 332
==============================================
ERI/MPSI's own making. However, it may not validly lay such consequence on the lap of
MARINA which, like itself, had no hand in the termination of the management contract by the
PPA. The fact that a couple of days later, the PPA, without public bidding, issued to MARINA,
permit to operate, does not imply that MARINA stepped into the shoes of ERI/MPSI as if there
were absolute identity between them. Parenthetically, the issue of the legality of the cancellation
of MPSI's permit to operate was laid to rest in E. Razon, Inc. vs. Philippine Ports Authority.
By absorbing ERI/MPSI employees and honoring the terms and conditions in the
collective bargaining agreement between ERI/MPSI and the employees, MARINA did not
assume the responsibility of ERI/MPSI to pay separation pay to its employees. As correctly put
by public respondent, Paragraph 7, insofar as it refers to employees' benefits, should be applied
prospectively with respect to MARINA. This conclusion is supported by Paragraph 14 of Permit
No. 104286 granted to MARINA which states:
14. Grantee shall be responsible for all obligations, liabilities or claims arising out
of any transactions or undertakings in connections with their cargo handling
operations as of the actual date of transfer thereof to grantee.
MARINA might have been impelled not only by compassion for the employees but also
by their tested skills in hiring them back upon their separation from the employment of
ERI/MPSI. It should be recalled, however, there is no law that requires the purchaser to absorb
the employees of the selling corporation. As such, when MARINA rehired the ERI/MPSI
employees, it had all the right to consider them as new ones. On the other hand, ERI/MPSI, to
whom years of service had been rendered by its suddenly jobless employees, had the
corresponding obligation to grant them what is theirs under the law and the collective bargaining
agreement. After all, a collective bargaining agreement is the law between the parties and
compliance therewith is mandated by the express policy of the law.
The situation in this case is completely different from that obtaining in Filipinas Port
Services, Inc. vs. NLRC, where the petitioner was obligated "not only to absorb the workers of
the dissolved companies but also to include the length of service earned by the absorbed
employees with their former employers as well" because said case involved a merger of different
companies into a single company as a result of the PPA's integration of stevedoring/arastre
services. On the other hand, in the case at bar, there is no privity of contract between ERI/MPSI
and MARINA so as to make the latter a common or even substitute employer that it should be
burdened with the obligations of the former.
2.1.3.2. Employer not liable
National Federation of Labor vs. NLRC, 327 SCRA 158, G.R. No. 127718, March 2, 2000,
De Leon, Jr., J. (Possible Bar Problem)
Christian V. Asas
Page 333
==============================================
ISSUE: Whether or not an employer that was compelled to cease its operation because of the
compulsory acquisition by the government of its land for purposes of agrarian reform, is liable to
pay separation pay to its affected employees.
HELD: No. It is clear that Article 283 of the Labor Code applies in cases of closures of
establishment and reduction of personnel. The peculiar circumstances in the case at bar, however,
involves neither the closure of an establishment nor a reduction of personnel as contemplated
under the aforesaid article. When the Patalon Coconut Estate was closed because a large portion
of the estate was acquired by DAR pursuant to CARP, the ownership of that large portion of the
estate was precisely transferred to PEARA and ultimately to the petitioners as members thereof
and as agrarian lot beneficiaries. Hence, Article 283 of the Labor Code is not applicable to the
case at bench.
Even assuming, arguendo, that the situation in this case were a closure of the business
establishment called Patalon Coconut Estate of private respondents, still the
petitioners/employees are not entitled to separation pay. The closure contemplated under Article
283 of the Labor Code is a unilateral and voluntary act on the part of the employer to close the
business establishment as may be gleaned from the wording of the said legal provision that "The
employer may also terminate the employment of any employee due to. . .". The use of the word
"may," in a statute, denotes that it is directory in nature and generally permissive only. The "plain
meaning rule" or verba legis in statutory construction is thus applicable in this case. Where the
words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning
and applied without attempted interpretation.
In other words, Article 283 of the Labor Code does not contemplate a situation where the
closure of the business establishment is forced upon the employer and ultimately for the benefit
of the employees.
As earlier stated, the Patalon Coconut Estate was closed down because a large portion of
the said estate was acquired by the DAR pursuant to the CARP. Hence, the closure of the Patalon
Coconut Estate was not effected voluntarily by private respondents who even filed a petition to
have said estate exempted from the coverage of RA 6657. Unfortunately, their petition was
denied by the Department of Agrarian Reform. Since the closure was due to the act of the
government to benefit the petitioners, as members of the Patalon Estate Agrarian Reform
Association, by making them agrarian lot beneficiaries of said estate, the petitioners are not
entitled to separation pay. The termination of their employment was not caused by the private
respondents. The blame, if any, for the termination of petitioners' employment can even be laid
upon the petitioner-employees themselves inasmuch as they formed themselves into a
cooperative, PEARA, ultimately to take over, as agrarian lot beneficiaries, of private
respondents' landed estate pursuant to RA 6657. The resulting closure of the business
establishment, Patalon Coconut Estate, when it was placed under CARP, occurred through no
fault of the private respondents.
Christian V. Asas
Page 334
==============================================
While the Constitution provides that "the State . . . shall protect the rights of workers and
promote their welfare", that constitutional policy of providing full protection to labor is not
intended to oppress or destroy capital and management. Thus, the capital and management
sectors must also be protected under a regime of justice and the rule of law.
c. Constructive dismissal
> Clearly, constructive dismissal had already set in when the suspension went beyond the
maximum period allowed by law. (Hyatt Taxi Services, Inc. vs. Catinoy, 359 SCRA 686, G.R.
No. 143204, June 21, 2001, Gonzaga-Reyes, J.)
> A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.
(Siemens Philippines, Inc. vs. Domingo, 560 SCRA 86, G.R. No. 150488, July 28, 2008,
Nachura, J.)
> This Court thus rules that petitioner’s prolonged suspension, owing to respondent’s neglect to
conclude the investigation, had ripened to constructive dismissal. (Pido vs. NLRC, G.R. No.
169812, February 23, 2007, Carpio-Morales, J.)
> In cases of a transfer of an employee, the rule is settled that the employer is charged with the
burden of proving that its conduct and action are for valid and legitimate grounds such as
genuine business necessity and that the transfer is not unreasonable, inconvenient or prejudicial
to the employee. If the employer cannot overcome this burden of proof, the employee’s transfer
shall be tantamount to unlawful constructive dismissal. (Morales vs. Harbour Center, G.R. No.
174208, January 25, 2012, Perez, J.)
Jo Cinema Corp. vs. Abellana, 360 SCRA 142, G.R. No. 132837, June 28, 2001, Buena, J.
Doctrine. A constructive discharge is defined as a quitting because continued

employment is rendered impossible, unreasonable or unlikely; as an offer involving demotion in
rank and a diminution in pay.
Private respondent was not demoted nor suffered any diminution of pay, neither was she
prevented from returning for work. As discussed earlier, private respondent was suspended from
work for twenty (20) days for violating company rules. Petitioners stance to oblige private
respondent to pay the amount of the checks is just fair and reasonable considering that she
indorsed the subject checks. As an endorser, private respondent undertook to pay the amount of
the dishonored checks. The payment of said amount is not discriminatory, impossible, and
unreasonable to foreclose any choice on the part of the private respondent to forego her
continued employment. It was private respondent who signified her intention not to report for
work when she filed the instant case.
Hyatt Taxi Services, Inc. vs. Catinoy, 359 SCRA 686, G.R. No. 143204, June 21, 2001,
Gonzaga-Reyes, J.
Christian V. Asas
Page 335
==============================================
Doctrine. Clearly, constructive dismissal had already set in when the suspension went
beyond the maximum period allowed by law. Section 4, Rule XIV, Book V of the Omnibus
Rules provides that preventive suspension cannot be more than the maximum period of 30 days.
Hence, we have ruled that after the 30-day period of suspension, the employee must be reinstated
to his former position because suspension beyond this maximum period amounts to constructive
dismissal.
Petitioner denies that it constructively dismissed respondent and alleges that it was
respondent who went AWOL and who refused to resume his work because he could not account
for union funds. Both the Labor Arbiter and the NLRC rejected petitioner's claims. We affirm the
rejection. It bears stressing that in illegal dismissal cases, it is the employer who has the burden
of proof. Since petitioner claims that respondent abandoned his work, petitioner has to establish
the concurrence of the following: (1) the employee's intention to abandon employment and (2)
overt acts from which such intention may be inferred—as when the employee shows no desire to
resume work. Petitioner failed to make out its case of abandonment. Even the NLRC in its
modified decision confirmed that there were no overt acts unerringly pointing to the fact that
respondent had no intention of returning to work anymore. Also, the fact that respondent filed a
complaint against his employer within a reasonable period of time belies abandonment.
Petitioner implores this Court to respect the modified decision of the NLRC. While it is
true that the essence of a motion for reconsideration is a second review of the facts, this theory
does not apply in the case at bar. As correctly pointed out by the Court of Appeals, the motion for
reconsideration of petitioner before the NLRC contained no factual basis that could support the
NLRC's change of heart. The evidence as it stands shows that after the lapse of the 30-day
suspension period, respondent reported for work but he was not allowed to resume his duties as a
taxi driver. To reiterate, from the time that the 30-day suspension period had expired, respondent
can be already deemed as constructively dismissed.
Second, the strict adherence by the NLRC to the definition of constructive dismissal is
erroneous. Apparently, the NLRC ruled out constructive dismissal in this case mainly because
according to it "constructive dismissal consists in the act of quitting because continued
employment is rendered impossible, unreasonable or unlikely as in the case of an offer involving
demotion in rank and a diminution in pay". Based on this definition, the NLRC concluded that
since respondent neither resigned nor abandoned his job and the fact that respondent pursued his
reinstatement negate constructive dismissal. What makes this conclusion tenuous is the fact that
constructive dismissal does not always involve forthright dismissal or diminution in rank,
compensation, benefit and privileges. There may be constructive dismissal if an act of clear
discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it could foreclose any choice by him except to forego his continued employment.
Here, what made it impossible or unacceptable for respondent to resume work was
petitioner's insistence that respondent first desist from filing his criminal complaint against the
Christian V. Asas
Page 336
==============================================
acting president of the union and to withdraw his complaint for illegal suspension against
petitioner before he could be allowed to return to work. Respondent refused and amended his
complaint to include constructive dismissal. Respondent's refusal to yield to petitioner's
conditioned offer to take him back is understandable for respondent has every right not to
bargain away his right to prosecute his complaints in exchange for the employment to which he
was in the first place rightfully entitled.
In acting on the motion for reconsideration of petitioner, the NLRC gave credence to
petitioner's contention that petitioner's failure to reinstate respondent to his job was merely a
result of a miscommunication between the two parties since petitioner was willing to take back
respondent as its employee.
We disagree. Instead, we are in full accord with the Court of Appeals that the predicament
respondent faced was not just a product of miscommunication, an argument that the NLRC had
in fact branded in its earlier decision as a mere afterthought. Respondent had written the assistant
vice president of petitioner to complain about his non-reinstatement after the lapse of his
preventive suspension. Petitioner failed to reply, and it is actually from petitioner's inaction
where the supposed miscommunication sprung.
Moreover, from the time that petitioner failed to recall respondent to work after the
expiration of the suspension period, taken together with petitioner's precondition that respondent
withdraw the complaints against the acting president of the union and against petitioner itself,
respondent's security of tenure was already undermined by petitioner. Petitioner's actions
undoubtedly constitute constructive dismissal. w
Siemens Philippines, Inc. vs. Domingo, 560 SCRA 86, G.R. No. 150488, July 28, 2008,
Nachura, J.
Doctrine. We believe, and so hold, that Domingo was constructively dismissed from
employment.
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.

The gauge 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.
Constructive dismissal is defined as quitting when continued employment is rendered
impossible, unreasonable or unlikely as the offer of employment involves a demotion in rank or
diminution in pay. It exists when the resignation on the part of the employee was involuntary due
to the harsh, hostile and unfavorable conditions set by the employer. It is brought about by the
clear discrimination, insensibility or disdain shown by an employer which becomes unbearable
to the employee. An employee who is forced to surrender his position through the employer’s
unfair or unreasonable acts is deemed to have been illegally terminated and such termination is
deemed to be involuntary.
Christian V. Asas
Page 337
==============================================
We have, under the law’s mandate, consistently resolved this situation in favor of the
employee in order to protect his rights and interests from the coercive acts of the employer.
In the instant case, Domingo’s resignation was brought about by the decision of the
management of Siemens Philippines not to renew ― or work for the renewal of ― his
consultancy contract with Siemens Germany which clearly resulted in the substantial diminution
of his salary. The situation brought about the feeling of oppression which compelled Domingo to
resign. The diminution in pay created an adverse working environment that rendered it
impossible for Domingo to continue working for Siemens Philippines. His resignation from the
company was in reality not his choice but a situation created by the company, thereby amounting
to constructive dismissal.
The argument of Siemens Philippines that it is not privy to the consultancy agreement
between Domingo and Siemens Germany is unacceptable. By virtue of its employment contract
with Domingo, Siemens Philippines stepped into the shoes of ETSI as Domingo’s employer. The
stipulation in the contract that Domingo shall suffer no diminution in salary, benefits and
privileges that he enjoyed as employee of ETSI is, in effect, assumption by Siemens Philippines
of ETSI’s obligations and commitments. This included the guarantee that Domingo’s consultancy
contract with Siemens Germany would be renewed. After all, there was a commitment by
Siemens Germany that the consultancy contract would continue as long as Domingo remained an
employee of ETSI; and Domingo’s employment with Siemens Philippines was merely a
continuation of his employment with ETSI.
While admittedly, Siemens Philippines is not a party to the arrangement between Siemens
Germany, ETSI and Domingo, knowledge of and acquiescence to – if not actual concurrence in –
the arrangement can be imputed to Siemens Philippines as to bind it to the arrangement. This
conclusion finds support in the following:
First, based on the findings of facts of the LA, NLRC and CA ― MATEC, ETSI,
Siemens Philippines and Siemens Germany are related companies, the first three being
subsidiaries of the parent company, and the fourth, Siemens Germany, having an investment in
Siemens Philippines. Short of piercing the veil of corporate fiction, we note the intimate
corporate relationship of Siemens Germany and Siemens Philippines, including the practice of
the two companies of integrating their workforce.
Second, in Domingo’s contract of employment with Siemens Philippines, it is provided

that Domingo shall not be connected in any other work capacity or employment or be otherwise
involved, directly or indirectly, with any other business or concern without first having obtained
the written consent of the company. Yet, Siemens Philippines never questioned the continued
consultancy work of Domingo with Siemens Germany, not even when the consultancy
agreement was renewed twice during the lifetime of Domingo’s contract of employment with
Siemens Philippines.
Christian V. Asas
Page 338
==============================================
Third, the guarantee letter issued by Siemens Germany in favor of Domingo was never
questioned, much less revoked by Siemens Philippines when it assumed the employment of
Domingo. The Guarantee Letter was a security given to Domingo by Siemens Germany assuring
Domingo that Siemens Philippines would ensure that Siemens Germany would extend the
consultancy agreement as long as Domingo was under its employ.
Fourth, the consultancy agreement was a form of benefit or privilege given to Domingo
by ETSI, a privilege that was allowed by Siemens Philippines to continue when it took over the
majority of the business activities of ETSI and, consequently, became Domingo’s employer. The
outright removal of the privilege contravenes the law, because it resulted in the effective
diminution of Domingo’s salary.
Pido vs. NLRC, G.R. No. 169812, February 23, 2007, Carpio-Morales, J.
Doctrine. We stress that Article 286 applies only when there is a bona fide suspension of
the employer's operation of a business or undertaking for a period not exceeding six (6)
months. In such a case, there is no termination of employment but only a temporary displacement
of employees, albeit the displacement should not exceed six (6) months. The paramount
consideration should be the dire exigency of the business of the employer that compels it to put
some of its employees temporarily out of work. In security services, the temporary "off-detail" of
guards takes place when the security agency's clients decide not to renew their contracts with the
security agency, resulting in a situation where the available posts under its existing contracts are
less than the number of guards in its roster.
Verily, a floating status requires the dire exigency of the employer's bona fide suspension
of operation of a business or undertaking. In security services, this happens when the security
agency’s clients which do not renew their contracts are more than those that do and the new ones
that the agency gets. Also, in instances when contracts for security services stipulate that the
client may request the agency for the replacement of the guards assigned to it even for want of
cause, the replaced security guard may be placed on temporary "off-detail" if there are no
available posts under respondent’s existing contracts.
When a security guard is placed on a "floating status," he does not receive any salary or
financial benefit provided by law. Due 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. This, respondent failed to discharge.
From the January 23, 2000 Recall Order issued by respondent reading:
1. You are hereby instructed to report to Cherubim Office tomorrow, 24 January 2000 for
investigation and effective to date, your duty at Tower One Console is [t]emporarily
suspended.
Christian V. Asas
Page 339
==============================================
2. The outright suspension is due to the argumentation (sic) [that] happened between you
and ASF Alcantara last 21 January 2000, 0900 Hrs.
3. In this regard, report to Mr. Marcelino N. Tolod, the Operation[s] Manager, after your
investigation for further instruction,
it is gathered that respondent intended to put petitioner under preventive suspension for an
indefinite period of time pending the investigation of the complaint against him. The allowable
period of suspension in such a case is not six months but only 30 days, following Sections 8 and
9 of Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code (Implementing
Rules), viz:
SEC. 8. Preventive suspension. - The employer may place the worker concerned
under preventive suspension if his continued employment poses a serious and imminent threat to
the life or property of the employer or of his co-workers.
SEC. 9. Period of suspension. - No preventive suspension shall last longer than thirty (30)
days. The employer shall thereafter reinstate the worker in his former or in a substantially
equivalent position or the employer may extend the period of suspension provided that during the
period of extension, he pays the wages and other benefits due to the worker. In such case, the
worker shall not be bound to reimburse the amount paid to him during the extension if the
employer decides, after completion of the hearing, to dismiss the worker.
As above-quoted Section 9 of the said Implementing Rules expressly provides, in the

event the employer chooses to extend the period of suspension, he is required to pay the wages
and other benefits due the worker and the worker is not bound to reimburse the amount paid to
him during the extended period of suspension even if, after the completion of the hearing or
investigation, the employer decides to dismiss him.
Respondent did not inform petitioner that it was extending its investigation, nor did it pay
him his wages and other benefits after the lapse of the 30-day period of suspension. Neither did
respondent issue an order lifting petitioner’s suspension, or any official assignment,
memorandum or detail order for him to assume his post or another post. Respondent merely
chose to dawdle with the investigation, in absolute disregard of petitioner’s welfare.
At the time petitioner filed the complaint for illegal suspension and/or constructive
dismissal on October 23, 2000, petitioner had already been placed under preventive suspension
for nine months. To date, there is no showing or information that, if at all, respondent still intends
to conclude its investigation.
This Court thus rules that petitioner’s prolonged suspension, owing to respondent’s
neglect to conclude the investigation, had ripened to constructive dismissal.
Morales vs. Harbour Center, G.R. No. 174208, January 25, 2012, Perez, J.
Christian V. Asas
Page 340
==============================================
Doctrine. Constructive dismissal exists where there is cessation of work because

"continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay" and other benefits. Aptly called a dismissal in disguise
or an act amounting to dismissal but made to appear as if it were not, constructive dismissal may,
likewise, exist if an act of clear discrimination, insensibility, or disdain by an employer becomes
so unbearable on the part of the employee that it could foreclose any choice by him except to
forego his continued employment. In cases of a transfer of an employee, the rule is settled that
the employer is charged with the burden of proving that its conduct and action are for valid and
legitimate grounds such as genuine business necessity and that the transfer is not unreasonable,
inconvenient or prejudicial to the employee. If the employer cannot overcome this burden of
proof, the employee’s transfer shall be tantamount to unlawful constructive dismissal.
Our perusal of the record shows that HCPTI miserably failed to discharge the foregoing
onus. While there was a lack of showing that the transfer or reassignment entailed a diminution
of salary and benefits, one fact that must not be lost sight of was that Morales was already
occupying the position of Division Manager at HCPTI’s Accounting Department as a
consequence of his promotion to said position on 22 October 2002. Concurrently appointed as
member of HCPTI’s Management Committee (MANCOM) on 2 December 2002, Morales was
subsequently reassigned by HCPTI "from managerial accounting to Operations Cost
Accounting" on 27 March 2003, without any mention of the position to which he was actually
being transferred. That the reassignment was a demotion is, however, evident from Morales’ new
duties which, far from being managerial in nature, were very simply and vaguely described as
inclusive of "monitoring and evaluating all consumables requests, gears and equipments related
to [HCPTI’s] operations" as well as "close interaction with [its] sub-contractor Bulk Fleet Marine
Corporation."
We have carefully pored over the records of the case but found no evidentiary basis for
the CA’s finding that Morales was designated as head of HCPTI’s Operations Department which,
as indicated in the corporation’s plantilla, had the Vice-President for Operations at its helm. On
the contrary, Morales’ demotion is evident from the fact that his reassignment entailed a transfer
from a managerial position to one which was not even included in the corporation’s plantilla. For
an employee newly charged with functions which even the CA recognized as pertaining to the
Operations Department, it also struck a discordant chord that Morales was, just the same,
directed by HCPTI to report to Filart, its Vice- President for Finance with whom he already had a
problematic working relationship. This matter was pointed out in Morales’ 31 March 2003
protest but was notably brushed aside by HCPTI by simply invoking management prerogative in
its inter-office memorandum dated 4 April 2003.
d. Floating Status
Exocet Security vs. Serrano, G.R. No. 198538, September 29, 2014, Velasco, Jr., J. (Possible
Bar Problem)
Christian V. Asas
Page 341
==============================================
Doctrine. While there is no specific provision in the Labor Code which governs the
"floating status" or temporary "off-detail" of security guards employed by private security
agencies, this situation was considered by this Court in several cases as a form of temporary
retrenchment or lay-off. The concept has been defined as that 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. As pointed out by the CA, 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. It also happens in instances where contracts for security services stipulate
that the client may request the agency for the replacement of the guards assigned to it, even for
want of cause, such that the replaced security guard may be placed on temporary "off-detail" if
there are no available posts under the agency’s existing contracts.
As the circumstance is generally outside the control of the security agency or the
employer, the Court has ruled that when a security guard is placed on a "floating status," he or
she does not receive any salary or financial benefit provided by law.
It must be emphasized, however, that although placing a security guard on "floating

status" or a temporary "off-detail" is considered a temporary retrenchment measure, there is
similarly no provision in the Labor Code which treats of a temporary retrenchment or lay-off.
Neither is there any provision which provides for its requisites or its duration. Nevertheless,
since an employee cannot be laid-off indefinitely, the Court has applied Article 292 (previously
Article 286) of the Labor Code by analogy to set the specific period of temporary lay-off to a
maximum of six (6) months. The said provision states:
ART. 292. When employment not deemed terminated.- The bonafide 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.
Thus, this Court has held, citing Sebuguero v. NLRC, that the placement of the employee
on a floating status should not last for more than six months. After six months, the employee
should be recalled for work, or for a new assignment; otherwise, he is deemed terminated.
There is no specific provision of law which treats of a temporary retrenchment or lay-off

and provides for the requisites in effecting it or a period or duration therefor. These employees
cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286
[now 292] may be applied but only by analogy to set a specific period that employees may
remain temporarily laid-off or in floating status. Six months is the period set by law that the
operation of a business or undertaking may be suspended thereby suspending the employment of
the employees concerned. The temporary lay-off wherein the employees likewise cease to work
Christian V. Asas
Page 342
==============================================
should also not last longer than six months. After six months, the employees should either be
recalled to work or permanently retrenched following the requirements of the law, and that
failing to comply with this would be tantamount to dismissing the employees and the employer
would thus be liable for such dismissal.
In accordance with the aforementioned ruling, the Department of Labor and Employment
(DOLE) issued Department Order No. 14, Series of 2001 (DO 14-01), entitled "Guidelines
Governing the Employment and Working Conditions of Security Guards and Similar Personnel
in the Private Security Industry," Section 6.5, in relation to Sec. 9.3, of which states that the lack
of service assignment for a continuous period of six (6) months is an authorized cause for the
termination of the employee, who is then entitled to a separation pay equivalent to half month
pay for every year of service, viz:
6.5 Other Mandatory Benefits. In appropriate cases, security guards/similar personnel are
entitled to the mandatory benefits as listed below, although the same may not be included in the
monthly cost distribution in the contracts, except the required premiums form their coverage:
a. Maternity benefit as provided under SS Law;

b. Separation pay if the termination of employment is for authorized causeas provided by
law and as enumerated below:
Half-Month Pay Per Year of Service, but in no case less than One Month Pay if
separation pay is due to:
1. Retrenchment or reduction of personnel effected by management to prevent

serious losses;
2. Closure or cessation of operation of an establishment not due to serious losses
or financial reverses;
3. Illness or disease not curable within a period of 6 months and continued
employment is prohibited by law or prejudicial to the employee’s health or that of
coemployees;
4. Lack of service assignment for a continuous period of 6 months.
xxxx
9.3 Reserved Status – A security guard or similar personnel may be placed in a work pool
or on reserved status due to lack of service assignments after the expiration or termination of the
service contract with the principal where he/she or assigned or due to temporary suspension of
agency operations.
No security guard or personnel can be placed in a work pool or on reserved status in any
of the following situations: a) after expiration of a service contract if there are other principals
where he/she can be assigned; b) as a measure to constructively dismiss the security guard; and
c) as an act of retaliation for filing complaints against the employer on violations of labor laws,
among others.
Christian V. Asas
Page 343
==============================================
If after the period of 6 months, the security agency/employer cannot provide work or give
assignment to the reserved security guard, the latter can be dismissed from service and shall be
entitled to separation pay as described in subsection 6.5.
Security guards on reserved status who accept employment in other security agencies or
employers before the end of the above six-month period may not be given separation pay.
In Reyes v. RP Guardians Security Agency, Inc., the Court explained the application of
DO 14-01 to security agencies and their security guards, and the procedural requirements with
which the security agencies must comply:
Furthermore, the entitlement of the dismissed employee to separation pay of one month
for every year of service should not be confused with Section 6.5 (4) of DOLE D.O. No. 14
which grants a separation pay of one half month for every year service x x x.
xxxx
The said provision contemplates a situation where a security guard is removed for
authorized causes such as when the security agency experiences a surplus of security guards
brought about by lack of clients. In such a case, the security agency has the option to resort to
retrenchment upon compliance with the procedural requirements of "two-notice rule" set forth in
the Labor Code.
Thus, to validly terminate a security guard for lack of service assignment for a continuous
period of six months under Secs. 6.5 and 9.3 of DO 14-01, the security agency must comply with
the provisions of Article 289 (previously Art. 283) of the Labor Code, which mandates that a
written notice should be served on the employee on temporary off-detail or floating status and to
the DOLE one (1) month before the intended date of termination. This is also clear in Sec. 9.2of
DO 14-01 which provides:
9.2 Notice of Termination - In case of termination of employment due to authorized

causes provided in Article 283 and 284 of the Labor Code and in the succeeding subsection, the
employer shall serve a written notice on the security guard/personnel and the DOLE at least one
(1) month before the intended date thereof.
In every case, the Court has declared that the burden of proving that there are no posts
available to which the security guard may be assigned rests on the employer. We ruled in
Nationwide Security and Allied Services Inc. v. Valderama:
In cases involving security guards, a relief and transfer order in itself does not sever
employment relationship between a security guard and his agency. An employee has the right to
security of tenure, but this does not give him a vested right to his position as would deprive the
company of its prerogative to change his assignment or transfer him where his service, as
security guard, will be most beneficial to the client. Temporary "off-detail" or the period of time
Christian V. Asas
Page 344
==============================================
security guards are made to wait until they are transferred or assigned to a new post or client
does not constitute constructive dismissal, so long as such status does not continue beyond six
months.
It cannot, therefore, be gainsaid that the right of security guards to security of tenure is
safeguarded by administrative issuances and jurisprudence, in parallel with the mandate of the
Labor Code and the Constitution to protect labor and the working people. Nonetheless, while the
Court has recognized the security guards’ right to security of tenure under the "floating status"
rule, the Court has similarly acknowledged the management prerogative of security agencies to
transfer security guards when necessary in conducting its business, provided it is done in good
faith. In Megaforce Security and Allied Services, Inc. v. Lactao, the Court explained:
In cases involving security guards, a relief and transfer order in itself does not sever
employment relationship between a security guard and his agency. An employee has the right to
security of tenure, but this does not give him such a vested right in his position as would deprive
the company of its prerogative to change his assignment or transfer him where his service, as
security guard, will be most beneficial to the client. Temporary "off-detail" or the period of time
security guards are made to wait until they are transferred or assigned to a new post or client
does not constitute constructive dismissal as their assignments primarily depend on the contracts
entered into by the security agencies with third parties. Indeed, the Court has repeatedly
recognized that "off-detailing" is not equivalent to dismissal, so long as such status does not
continue beyond a reasonable time; when such a "floating status" lasts for more than six months,
the employee may be considered to have been constructively dismissed.
In the controversy now before the Court, there is no question that the security guard,
Serrano, was placed on floating status after his relief from his post as a VIP security by his
security agency’s client. Yet, there is no showing that his security agency, petitioner Exocet,
acted in bad faith when it placed Serrano on such floating status. What is more, the present case
is not a situation where Exocet did not recall Serrano to work within the six-month period as
required by law and jurisprudence. Exocet did, in fact, make an offer to Serrano to go back to
work. It is just that the assignment—although it does not involve a demotion in rank or
diminution in salary, pay, benefits or privileges—was not the security detail desired by Serrano.
Clearly, Serrano’s lack of assignment for more than six months cannot be attributed to
petitioner Exocet. On the contrary, records show that, as early as September 2006, or one month
after Serrano was relieved as a VIP security, Exocet had already offered Serrano a position in the
general security service because there were no available clients requiring positions for VIP
security. Notably, even though the new assignment does not involve a demotion in rank or
diminution in salary, pay, or benefits, Serrano declined the position because it was not the post
that suited his preference, as he insisted on being a VIP Security.
In fact, even during the meeting with the Labor Arbiter, Exocet offered a position in the
general security only to be rebuffed by Serrano. It was as if Serrano obliged Exocet to look for a
Christian V. Asas
Page 345
==============================================
client in need of a VIP security—the availability of which is obviously not within Exocet’s
control, and by nature, difficult to procure as these contracts depend on the trust and confidence
of the client or principal on the security guard. As aptly found by the NLRC:
Anent the client’s action, respondent agency had no recourse but to assign complainant to
a new posting. However, complainant, having had a taste of VIP detail and perhaps the perks that
come with such kind of assignment, vaingloriously assumed that he can only be assigned to VIP
close-in posting and that he would accept nothing less. In fact, after his relief and tardy
appearance at respondent’s office, he was offered reassignment albeit to general security services
which he refused. Respondents clearly made known to him that as of the moment no VIP detail
was vacant or sought by other clients but complainant was adamant in his refusal. Complainant
even had the nerve to assert that he just be informed if there is already a VIP detail available for
him and that he will just report for re-assignment by then. It is also well to note that to these
allegations, complainant made no denial.
To repeat for emphasis, the security guard’s right to security of tenure does not give him a
vested right to the position as would deprive the company of its prerogative to change the
assignment of, or transfer the security guard to, a station where his services would be most
beneficial to the client. Indeed, an employer has the right to transfer or assign its employees from
one office or area of operation to another, or in pursuit of its legitimate business interest,
provided there is no demotion in rank or diminution of salary, benefits, and other privileges, and
the transfer is not motivated by discrimination or bad faith, or effected as a form of punishment
or demotion without sufficient cause.
Thus, it is manifestly unfair and unacceptable to immediately declare the mere lapse of
the six-month period of floating status as a case of constructive dismissal, without looking into
the peculiar circumstances that resulted in the security guard’s failure to assume another post.
This is especially true in the present case where the security guard’s own refusal to accept a non-
VIP detail was the reason that he was not given an assignment within the six-month period. The
security agency, Exocet, should not then be held liable.
Indeed, from the facts presented, Serrano was guilty of wilful disobedience to a lawful
order of his employer in connection with his work, which is a just cause for his termination under
Art. 288 (previously Art. 282) of the Labor Code. Nonetheless, Exocet did not take Serrano’s
wilful disobedience against him. Hence, Exocet is considered to have waived its right to
terminate Serrano on such ground.
In this factual milieu, since respondent Serrano was not actually or constructively
dismissed from his employment by petitioner Exocet, it is best that petitioner Exocet direct him
to report for work, if any security assignment is still available to him. If respondent Serrano still
refuses to be assigned to any available guard position, he shall be deemed to have abandoned his
employment with petitioner.
Christian V. Asas
Page 346
==============================================
If no security assignment is available for respondent, petitioner Exocet should comply

with the requirements of DO 14-01, in relation to Art. 289 of the Labor Code, and serve a written
notice on Serrano and the DOLE one (1) month before the intended date of termination, and pay
Serrano separation pay equivalent to half month pay for every year of his actual service.
Tatel vs. JLFP Investigation, G.R. No. 206942, February 25, 2015, Perlas-Bernabe, J.
Doctrine. In Superstar Security Agency, Inc. and/or Col. Andrada v. NLRC, the Court
ruled that placing an employee on temporary "off-detail" is not equivalent to dismissal provided
that such temporary inactivity should continue only for a period of six (6) months. In security
agency parlance, being placed "off-detail" or on "floating status" means "waiting to be
posted." In Salvaloza vs. NLRC, the Court further explained the nature of the "floating status," to
wit: 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. It also happens in
instances where contracts for security services stipulate that the client may request the agency for
the replacement of the guards assigned to it even for want of cause, such that the replaced
security guard may be placed on temporary "off-detail" if there are no available posts under the
agency's existing contracts. During such time, the security guard does not receive any salary or
any financial assistance provided by law. It does not constitute a dismissal, as the assignments
primarily depend on the contracts entered into by the security agencies with third parties, so long
as such status does not continue beyond a reasonable time. When such a "floating status" lasts for
more than six (6) months, the employee may be considered to have been constructively
dismissed.
Relative thereto, constructive dismissal exists when an act of clear discrimination,

insensibility, or disdain, on the part of the employer has become so unbearable as to leave an
employee with no choice but to forego continued employment, or when there is cessation of
work because continued employment is rendered impossible, unreasonable, or unlikely, as an
offer involving a demotion in rank and a diminution in pay.
In this case, respondents themselves claimed that after having removed Tatel from his
post at BaggerWerken on August 24, 2009 due to several infractions committed thereat, they
subsequently reassigned him to SKI from September 16, 2009 to October 12, 2009 and then to
IPVG from October 21 to 23, 2009. Thereafter, and until Tatel filed the instant complaint for
illegal dismissal six (6) months later, or on May 4, 2010, he was not given any other postings or
assignments. While it may be true that respondents summoned him back to work through the
November 26, 2009 Memorandum, which Tatel acknowledged to have received on December 11,
2009, records are bereft of evidence to show that he was given another detail or assignment. As
the "off-detail" period had already lasted for more than six (6) months, Tatel is therefore deemed
to have been constructively dismissed.
Christian V. Asas
Page 347
==============================================
b. Retirement (Art. 287)
Grace Christian High School vs. Lavandera, G.R. No. 177845, August 20, 2014, Perlas-
Bernabe, J.
Doctrine. RA 7641, which was enacted on December 9, 1992, amended Article 287 of
the Labor Code, providing for the rules on retirement pay to qualified private sector employees
in the absence of any retirement plan in the establishment. The said law states that "an
employee’s retirement benefits under any collective bargaining [agreement (CBA)] and other
agreements shall not be less than those provided" under the same – that is, at least one half (1/2)
month salary for every year of service, a fraction of at least six (6) months being considered as
one whole year – and that "[u]nless the parties provide for broader inclusions, the term one-half
(1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay
and the cash equivalent of not more than five (5) days of service incentive leaves."
The foregoing provision is applicable where (a) there is no CBA or other applicable
agreement providing for retirement benefits to employees, or (b) there is a CBA or other
applicable agreement providing for retirement benefits but it is below the requirement set by
law. Verily, the determining factor in choosing which retirement scheme to apply is still
superiority in terms of benefits provided.
In the present case, GCHS has a retirement plan for its faculty and non-faculty members,
which gives it the option to retire a teacher who has rendered at least 20 years of service,
regardless of age, with a retirement pay of one-half (1/2) month for every year of service.
Considering, however, that GCHS computed Filipinas’ retirement pay without including one-
twelfth (1/12) of her 13th month pay and the cash equivalent of her five (5) days SIL, both the
NLRC and the CA correctly ruled that Filipinas’ retirement benefits should be computed in
accordance with Article 287 of the Labor Code, as amended by RA 7641, being the more
beneficent retirement scheme. They differ, however, in the resulting benefit differentials due to
divergent interpretations of the term "one-half (1/2) month salary" as used under the law.
The Court, in the case of Elegir vs. Philippine Airlines, Inc., has recently affirmed that
"one-half (1/2) month salary means 22.5 days: 15 days plus 2.5 days representing one-twelfth
(1/12) of the 13th month pay and the remaining 5 days for [SIL]." The Court sees no reason to
depart from this interpretation. GCHS’ argument therefore that the 5 days SIL should be likewise
pro-rated to their 1/12 equivalent must fail.
Section 5.2, Rule II of the Implementing Rules of Book VI of the Labor Code, as
amended, promulgated to implement RA 7641, further clarifies what comprises the "½ month
salary" due a retiring employee, to wit:
RULE II
Retirement Benefits
Christian V. Asas
Page 348
==============================================
xxxx
SEC. 5. Retirement Benefits.
xxxx
5.2 Components of One-half (1/2) Month Salary.— For the purpose of determining the
minimum retirement pay due an employee under this Rule, the term "one-half month salary"
shall include all the following:
(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used
herein, the term "salary" includes all remunerations paid by an employer to his employees
for services rendered during normal working days and hours, whether such payments are
fixed or ascertained on a time, task, piece or commission basis, or other method of
calculating the same, and includes the fair and reasonable value, as determined by the
Secretary of Labor and Employment, of food, lodging or other facilities customarily
furnished by the employer to his employees. The term does not include cost of living
allowance, profit-sharing payments and other monetary benefits which are not considered
as part of or integrated into the regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree upon that should be
included in the computation of the employee’s retirement pay.
xxxx
The foregoing rules are, thus, clear that the whole 5 days of SIL are included in the
computation of a retiring employees’ pay, as correctly ruled by the CA.
Universal Robina Sugar Milling Corp. vs. Caballeda, 560 SCRA 115, G.R. No. 156644, July
28, 2008, Nachura, J.
Doctrine. The issue of the retroactive effect of R.A. 7641 on prior existing employment
contracts has long been settled. In Enriquez Security Services, Inc. vs. Cabotaje , we held: RA
7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure
and as a curative statute that — absent a retirement plan devised by, an agreement with, or a
voluntary grant from, an employer — can respond, in part at least, to the financial well-being of
workers during their twilight years soon following their life of labor. There should be little doubt
about the fact that the law can apply to labor contracts still existing at the time the statute has
taken effect, and that its benefits can be reckoned not only from the date of the law's enactment
but retroactively to the time said employment contracts have started.
Christian V. Asas
Page 349
==============================================
This doctrine has been repeatedly upheld and clarified in several cases. Pursuant thereto,
this Court imposed two (2) essential requisites in order that R.A. 7641 may be given retroactive
effect: (1) the claimant for retirement benefits was still in the employ of the employer at the time
the statute took effect; and (2) the claimant had complied with the requirements for eligibility for
such retirement benefits under the statute.
It is evident from the records that when respondents were compulsorily retired from the
service, R.A. 7641 was already in full force and effect. The petitioners failed to prove that the
respondents did not comply with the requirements for eligibility under the law for such
retirement benefits. In sum, the aforementioned requisites were adequately satisfied, thus,
warranting the retroactive application of R.A. 7641 in this case.
Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or
her employment with the former. The age of retirement is primarily determined by the existing
agreement between the employer and the employees. However, in the absence of such
agreement, the retirement age shall be fixed by law. Under Art. 287 of the Labor Code as
amended, the legally mandated age for compulsory retirement is 65 years, while the set
minimum age for optional retirement is 60 years.
In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely provides
that the retirement benefits accorded to an employee shall be in accordance with law. Thus, we
must apply Art. 287 of the Labor Code which provides for two types of retirement: (a)
compulsory and (b) optional. The first takes place at age 65, while the second is primarily
determined by the collective bargaining agreement or other employment contract or employer's
retirement plan. In the absence of any provision on optional retirement in a collective bargaining
agreement, other employment contract, or employer's retirement plan, an employee may
optionally retire upon reaching the age of 60 years or more, but not beyond 65 years, provided he
has served at least five years in the establishment concerned. That prerogative is exclusively
lodged in the employee.
Indubitably, the voluntariness of the respondents' retirement is the meat of the instant
controversy. Petitioners postulate that respondents voluntarily retired particularly when
Alejandro filed his application for retirement, submitted all the documentary requirements,
accepted the retirement benefits and executed a quitclaim in favor of URSUMCO. Respondents
claim otherwise, contending that they were merely forced to comply as they were no longer
given any work assignment and considering that the severance of their employment with
URSUMCO is a condition precedent for them to receive their retirement benefits.
Cainta Catholic School vs. Cainta Catholic School Employees Union, 489 SCRA 468, G.R.
No. 151021, May 4, 2006, Tinga, J.
Christian V. Asas
Page 350
==============================================
Doctrine. ART. 287. Retirement. – Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other applicable employment
contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as
he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee’s retirement benefits under any collective
bargaining agreement and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of

employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
The CBA in the case at bar established 60 as the compulsory retirement age. However, it
is not alleged that either Javier or Llagas had reached the compulsory retirement age of 60 years,
but instead that they had rendered at least 20 years of service in the School, the last three (3)
years continuous. Clearly, the CBA provision allows the employee to be retired by the School
even before reaching the age of 60, provided that he/she had rendered 20 years of service. Would
such a stipulation be valid? Jurisprudence affirms the position of the School.
Pantranco North Express, Inc. v. NLRC, cited by petitioners, finds direct application in
this case. The CBA involved in Pantranco allowed the employee to be compulsorily retired upon
reaching the age of 60 "or upon completing [25] years of service to [Pantranco]." On the basis of
the CBA, private respondent was compulsorily retired by Pantranco at the age of 52, after 25
years of service. Interpreting Article 287, the Court ruled that the Labor Code permitted
employers and employees to fix the applicable retirement age at below 60 years of age.
Moreover, the Court also held that there was no illegal dismissal since it was the CBA itself that
incorporated the agreement reached between the employer and the bargaining agent with respect
to the terms and conditions of employment; hence, when the private respondent ratified the CBA
with his union, he concurrently agreed to conform to and abide by its provisions. Thus, the Court
asserted, "[p]roviding in a CBA for compulsory retirement of employees after twenty-five (25)
years of service is legal and enforceable so long as the parties agree to be governed by such
CBA."
A similar set of facts informed our decision in Progressive Development Corporation v.

NLRC. The CBA therein stipulated that an employee "with [20] years of service, regardless of
age, may be retired at his option or at the option of the company." The stipulation was used by
management to compulsorily retire two employees with more than 20 years of service, at the
ages of 45 and 38. The Court affirmed the validity of the stipulation on retirement as consistent
with Article 287 of the Labor Code.
Christian V. Asas
Page 351
==============================================
Philippine Airlines, Inc. v. Airline Pilots Association of the Phils. further bolsters the
School’s position. At contention therein was a provision of the PAL-ALPAP Retirement Plan, the
Plan having subsequently been misquoted in the CBA mutually negotiated by the parties. The
Plan authorized PAL to exercise the option of retirement over pilots who had chosen not to retire
after completing 20 years of service or logging over 20,000 hours for PAL. After PAL exercised
such option over a pilot, ALPAP charged PAL with illegal dismissal and union-busting. While the
Secretary of Labor upheld the unilateral retirement, it nonetheless ruled that PAL should first
consult with the pilot to be retired before it could exercise such option. The Court struck down
that proviso, ruling that "the requirement to consult the pilots prior to their retirement defeats the
exercise by management of its option to retire the said employees, [giving] the pilot concerned
an undue prerogative to assail the decision of management."
By their acceptance of the CBA, the Union and its members are obliged to abide by the
commitments and limitations they had agreed to cede to management. The questioned retirement
provisions cannot be deemed as an imposition foisted on the Union, which very well had the
right to have refused to agree to allowing management to retire employees with at least 20 years
of service.
It should not be taken to mean that retirement provisions agreed upon in the CBA are
absolutely beyond the ambit of judicial review and nullification. A CBA, as a labor contract, is
not merely contractual in nature but impressed with public interest. If the retirement provisions
in the CBA run contrary to law, public morals, or public policy, such provisions may very well be
voided. Certainly, a CBA provision or employment contract that would allow management to
subvert security of tenure and allow it to unilaterally "retire" employees after one month of
service cannot be upheld. Neither will the Court sustain a retirement clause that entitles the
retiring employee to benefits less than what is guaranteed under Article 287 of the Labor Code,
pursuant to the provision’s express proviso thereto in the provision.
Yet the CBA in the case at bar contains no such infirmities which must be stricken down.
There is no essential difference between the CBA provision in this case and those we affirmed in
Pantranco and Progressive. Twenty years is a more than ideal length of service an employee can
render to one employer. Under ordinary contemplation, a CBA provision entitling an employee
to retire after 20 years of service and accordingly collect retirement benefits is "reward for
services rendered since it enables an employee to reap the fruits of his labor — particularly
retirement benefits, whether lump-sum or otherwise — at an earlier age, when said employee, in
presumably better physical and mental condition, can enjoy them better and longer."
We affirm the continued validity of Pantranco and its kindred cases, and thus reiterate
that under Article 287 of the Labor Code, a CBA may validly accord management the
prerogative to optionally retire an employee under the terms and conditions mutually agreed
upon by management and the bargaining union, even if such agreement allows for retirement at
an age lower than the optional retirement age or the compulsory retirement age. The Court of
Christian V. Asas
Page 352
==============================================
Appeals gravely erred in refusing to consider this case from the perspective of Pantranco, or
from the settled doctrine enunciated therein.
What the Court of Appeals did instead was to favorably consider the claim of the Union
that the real purpose behind the retirement of Llagas and Javier was to "bust" the union, they
being its president and vice-president, respectively. To that end, the appellate court favorably
adopted the citation by the Union of the American case of NLRB v. Ace Comb, Co., which in
turn was taken from a popular local labor law textbook. The citation stated that "[f]or the purpose
of determining whether or not a discharge is discriminatory, it is necessary that the underlying
reason for the discharge be established. The fact that a lawful cause for discharge is available is
not a defense where the employee is actually discharged because of his union activities."
Reliance on NLRB v. Ace Comb, Co. was grossly inapropos. The case did not involve an
employee sought to be retired, but one who cited for termination from employment for cause,
particularly for violating Section 8(a)(3) of the National Labor Relations Act, or for
insubordination. Moreover, the United States Court of Appeals Eighth Circuit, which decided the
case, ultimately concluded that "here the evidence abounds that there was a justifiable cause for
[the employee’s] discharge," his union activities notwithstanding. Certainly, the Union and the
Court of Appeals would have been better off citing a case wherein the decision actually
concluded that the employee was invalidly dismissed for union activities despite the ostensible
existence of a valid cause for termination.
Nonetheless, the premise warrants considering whether management may be precluded

from retiring an employee whom it is entitled to retire upon a determination that the true cause
for compulsory retirement is the employee’s union activities.
The law and this Court frowns upon unfair labor practices by management, including so-
called union-busting. Such illegal practices will not be sustained by the Court, even if guised
under ostensibly legal premises. But with respect to an active unionized employee who claims
having lost his/her job for union activities, there are different considerations presented if the
termination is justified under just or authorized cause under the Labor Code; and if separation
from service is effected through the exercise of a duly accorded management prerogative to retire
an employee. There is perhaps a greater imperative to recognize the management prerogative on
retirement than the prerogative to dismiss employees for just or authorized causes. For one, there
is a greater subjectivity, not to mention factual dispute, attached to the concepts of just or
authorized cause than retirement which normally contemplates merely the attainment of a certain
age or a certain number of years in the service. It would be easier for management desirous to
eliminate pesky union members to abuse the prerogative of termination for such purpose since
the determination of just or authorized cause is rarely a simplistic question, but involves facts
highly prone to dispute and subjective interpretation.
On the other hand, the exercise by management of its retirement prerogative is less
susceptible to dubitability as to the question whether an employee could be validly retired. The
Christian V. Asas
Page 353
==============================================
only factual matter to consider then is whether the employee concerned had attained the requisite
age or number of years in service pursuant to the CBA or employment agreement, or if none,
pursuant to Article 287 of the Labor Code. In fact, the question of the amount of retirement
benefits is more likely to be questioned than the retirement itself. Evidently, it more clearly
emerges in the case of retirement that management would anyway have the right to retire an
employee, no matter the degree of involvement of said employee in union activities.
There is another point that militates against the Union. A ruling in its favor is tantamount
to a concession that a validly drawn management prerogative to retire its employees can be
judicially interfered on a showing that the employee in question is highly valuable to the union.
Such a rule would be a source of mischief, even if narrowly carved out by the Court, for it would
imply that an active union member or officer may be, by reason of his/her importance to the
union, somehow exempted from the normal standards of retirement applicable to the other,
perhaps less vital members of the union. Indeed, our law’s protection of the right to organize
labor does not translate into perpetual job security for union leaders by reason of their leadership
role alone. Should we entertain such a notion, the detriment is ultimately to the union itself,
promoting as it would a stagnating entrenched leadership.
We can thus can comfortably uphold the principle, as reiterated in Philippine

Airlines, that the exercise by the employer of a valid and duly established prerogative to retire an
employee does not constitute unfair labor practice.
Serrano vs. Severino Santos Transit, G.R. No. 187698, August 9, 2010, Carpio-Morales, J.
Doctrine. Republic Act No. 7641 which was enacted on December 9,

1992 amended Article 287 of the Labor Code by providing for retirement pay to qualified private
sector employees in the absence of any retirement plan in the establishment. The pertinent
provision of said law reads:
Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise known as
the Labor Code of the Philippines, is hereby amended to read as follows:
xxxx
In the absence of a retirement plan or agreement providing for retirement benefits
of employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment, may retire
and shall be entitled to retirement pay equivalent to at least one-half ( 1/2) month salary for
every year of service, a fraction of at least six (6) months being considered as one whole
year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month
salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
Christian V. Asas
Page 354
==============================================
Retail, service and agricultural establishments or operations employing not more

than (10) employees or workers are exempted from the coverage of this provision.
xxxx
Further, the Implementing Rules of said law provide:
RULE II
Retirement Benefits
SECTION 1.
General Statement on Coverage. — This Rule shall apply to all employees in the
private sector, regardless of their position, designation or status and irrespective of the
method by which their wages are paid, except to those specifically exempted under Section
2 hereof. As used herein, the term "Act" shall refer to Republic Act No. 7641 which took effect
on January 7, 1993.
SECTION 2
Exemptions. — This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political subdivisions, including
Government-owned and/or controlled corporations, if they are covered by the Civil Service Law
and its regulations.
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or operations regularly
employing not more than ten (10) employees. As used in this sub-section;
xxxx
SECTION 5
Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an employee who retires
pursuant to the Act shall be entitled to retirement pay equivalent to at least one-half (―) month
salary for every year of service, a fraction of at least six (6) months being considered as one
whole year.
5.2 Components of One-half (―) Month Salary. — For the purpose of determining the
minimum retirement pay due an employee under this Rule, the term "one-half month salary"
shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used
herein, the term "salary" includes all remunerations paid by an employer to his
employees for services rendered during normal working days and hours, whether
such payments are fixed or ascertained on a time, task, piece of commission basis, or
other method of calculating the same, and includes the fair and reasonable value, as
determined by the Secretary of Labor and Employment, of food, lodging or other
facilities customarily furnished by the employer to his employees. The term does not
Christian V. Asas
Page 355
==============================================
include cost of living allowances, profit-sharing payments and other monetary benefits
which are not considered as part of or integrated into the regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree upon that should be
included in the computation of the employee’s retirement pay.
Admittedly, petitioner worked for 14 years for the bus company which did not adopt any
retirement scheme. Even if petitioner as bus conductor was paid on commission basis then, he
falls within the coverage of R.A. 7641 and its implementing rules. As thus correctly ruled by the
Labor Arbiter, petitioner’s retirement pay should include the cash equivalent of the 5-day SIL
and 1/12 of the 13th month pay.
The affirmance by the appellate court of the reliance by the NLRC on R & E Transport,
Inc. is erroneous. In said case, the Court held that a taxi driver paid according to the "boundary
system" is not entitled to the 13th month and the SIL pay, hence, his retirement pay should be
computed on the sole basis of his salary.
For purposes, however, of applying the law on SIL, as well as on retirement, the Court
notes that there is a difference between drivers paid under the "boundary system" and conductors
who are paid on commission basis.
In practice, taxi drivers do not receive fixed wages. They retain only those sums in excess
of the "boundary" or fee they pay to the owners or operators of the vehicles. Conductors, on the
other hand, are paid a certain percentage of the bus’ earnings for the day.
It bears emphasis that under P.D. 851 or the SIL Law, the exclusion from its coverage of
workers who are paid on a purely commission basis is only with respect to field personnel. The
more recent case of Auto Bus Transport Systems, Inc., v. Bautista clarifies that an employee who
is paid on purely commission basis is entitled to SIL:
A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly excluded by Section 1 of Rule
V. According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as "field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate classification of employees
to which service incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or
contract basis, purely commission basis." Said phrase should be related with "field
Christian V. Asas
Page 356
==============================================
personnel," applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow. Hence, employees engaged on task or
contract basis or paid on purely commission basis are not automatically exempted from the
grant of service incentive leave, unless, they fall under the classification of field personnel.
xxxx
According to Article 82 of the Labor Code, "field personnel" shall refer to non-
agricultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical
Commercial Employees Association which states that:
As a general rule, [field personnel] are those whose performance of their job/service is
not supervised by the employer or his representative, the workplace being away from the
principal office and whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific times, employees including drivers
cannot be said to be field personnel despite the fact that they are performing work away from
the principal office of the employee.
Obusan vs. PNB, G.R. No. 181178, July 26, 2010, Nachura, J.
Doctrine. The pertinent law on this matter, Article 287 of the Labor Code, as amended
by Republic Act No. 7641, which took effect on January 7, 1993, provides –
ART. 287. Retirement. – Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as
he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee’s retirement benefits under any collective
bargaining agreement and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of

employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
Christian V. Asas
Page 357
==============================================
Undoubtedly, under this provision, the retirement age is primarily determined by the
existing agreement or employment contract. Absent such an agreement, the retirement age shall
be fixed by law. The above-cited law mandates that the compulsory retirement age is at 65 years,
while the minimum age for optional retirement is set at 60 years. Moreover, Article 287 of the
Labor Code, as amended, applies only to a situation where (1) there is no CBA or other
applicable employment contract providing for retirement benefits for an employee; or (2) there is
a collective bargaining agreement or other applicable employment contract providing for
retirement benefits for an employee, but it is below the requirement set by law. The rationale for
the first situation is to prevent the absurd situation where an employee, deserving to receive
retirement benefits, is denied them through the nefarious scheme of employers to deprive
employees of the benefits due them under existing labor laws. The rationale for the second
situation is to prevent private contracts from derogating from the public law.
In this case, Obusan was initially hired in 1979 as a government employee, PNB then
being a government-owned and controlled corporation. As such, she was governed by civil
service laws, and the compulsory retirement age, as imposed by law, was at 65 years. Peculiar to
her situation, however, was that the corporate entity that hired her ceased to be government-
owned and controlled when it was privatized in 1996. As a result of the privatization of PNB, all
of its officers and employees were deemed retired from the government service. Consequently,
many of them, Obusan included, received their respective retirement gratuities.
It cannot be said that the PNB-RRP is a retirement plan providing retirement benefits less
than what the law requires. In fact, in the computation of the employees’ retirement pay, the plan
factored what Article 287 requires. Thus the plan provides:
3. For service rendered after privatization, a Member, regardless whether or not he

received GSIS Retirement Gratuity Benefits, shall be entitled to one hundred twelve (112%)
percent of his "Latest Monthly Plan Salary" for every year of service rendered, a fraction of at
least six (6) months being considered as one (1) whole year.
The vesting multiple of one hundred twelve (112%) percent that is applied to the "Latest
Monthly Plan Salary" is derived as the sum of fifteen (15) days of the "Latest Daily Plan Salary"
plus five (5) days of the service incentive leave (based on Latest Daily Plan Salary) plus one-
twelfth (1/12) of the "Latest Monthly Plan Salary." The Daily Plan Salary used is computed as
"Latest Monthly Plan Salary" multiplied by thirteen (13) months and divided by two hundred
fifty-one (251) days.
Moreover, the PNB-RRP also considered the effects of PNB’s privatization, as it also
provided for additional benefits to those employees who were not qualified to receive the GSIS
Retirement Gratuity Benefits, viz. –
Christian V. Asas
Page 358
==============================================
2. A Member who failed to qualify to receive GSIS Retirement Gratuity Benefits shall be
entitled [to] one Month Basic Salary (as of May 26, 1996) for every year of service rendered
before privatization.
Retirement plans allowing employers to retire employees who have not yet reached the
compulsory retirement age of 65 years are not per se repugnant to the constitutional guaranty of
security of tenure. By its express language, the Labor Code permits employers and employees to
fix the applicable retirement age at 60 years or below, provided that the employees’ retirement
benefits under any CBA and other agreements shall not be less than those provided therein. By
this yardstick, the PNB-RRP complies.
However, company retirement plans must not only comply with the standards set by
existing labor laws, but they should also be accepted by the employees to be commensurate to
their faithful service to the employer within the requisite period.
To our mind, Obusan’s invocation of Jaculbe on account of her lack of consent to the
PNB-RRP, particularly as regards the provision on compulsory retirement age, is rather
misplaced.
It is true that her membership in the PNB-RRP was made automatic, to wit –
Section 1. Membership. Membership in the Plan shall be automatic for all full-time
regular and permanent officers and employees of the Bank as of the effectivity date of the Plan.
For employees hired after the effectivity of this Plan, their membership shall be effective on
"Date Entered Bank."
The records show that the PNB Board of Directors approved the PNB-RRP on December
22, 2000. On February 21, 2001, PNB informed all of its officers and employees about it,
complete with its terms and conditions and the guidelines for its implementation. Then, the PNB-
RRP was registered with the BIR and, later, was recognized by the Philnabank Employees
Association in the CBA it entered with PNB.
With the information properly disseminated to all of PNB’s officers and employees, the
PNB-RRP was then opened for scrutiny. The employees had every opportunity to question the
plan if, indeed, it would not be beneficial to the employees, as compared to what was mandated
by Article 287 of the Labor Code. Consequently, the union of PNB’s rank-and-file employees
recognized it as a legally-compliant and reasonable retirement plan by the act of incorporating it
in their CBA with PNB.
With respect to Obusan and the PNB Supervisors and Officers Association, of which she
was the President when she was compulsorily retired, there is nothing on record to show that
they expressed their dissent to the PNB-RRP. This deafening silence eloquently speaks of their
Christian V. Asas
Page 359
==============================================
lack of disagreement with its provisions. It was only at the time that she was to be compulsorily
retired that Obusan questioned the PNB-RRP’s provision on compulsory retirement age.
Besides, we already had the occasion to strike down the added requirement that an
employer must first consult its employee prior to retiring him, as this requirement unduly
constricts the exercise by management of its option to retire the said employee. Due process only
requires that notice of the employer’s decision to retire an employee be given to the employee.
Finally, it is also worthy to mention that, unlike in Jaculbe, the PNB-RRP is solely and
exclusively funded by PNB, and no financial burden is imposed on the employees for their
retirement benefits.
Paz vs. Northern Tobacco Redrying, G.R. No. 199554, February 18, 2015, Leonen, J.
Doctrine. An employer may provide for retirement benefits in an agreement with its
employees such as in a Collective Bargaining Agreement. Otherwise, Article 287 of the Labor
Code, as amended, governs.
Since respondent NTRCI failed to present a copy of a Collective Bargaining Agreement

on the alleged retirement policy, we apply Article 287 of the Labor Code, as amended by
Republic Act No. 7641.
Respondent NTRCI followed the formula in Article 287 and offered petitioner Paz the
amount of P12,487.50 as retirement pay based on the three years she worked for at least six
months in 1995, 1999, and 2000.
The Labor Arbiter agreed with respondent NTRCI’s computation based on these three
years and reached the same amount as petitioner Paz’s retirement pay.
On appeal, the National Labor Relations Commission found that petitioner Paz "became a
regular seasonal employee by virtue of her long years of service and the repetitive hiring of her
services by respondent NTRCI every season."87 It then considered her as having worked for
every tobacco season from 1974 to 2003 or for a total of 29 years.
The National Labor Relations Commission discussed that "[i]t would be a great injustice
if [petitioner Paz’s]services which did not last long for six months be disregarded in computing
her retirement pay especially so that it is upon the sole discretion of the respondent company on
how long her services for a given season was required." Thus, it explained that "Zenaida Paz’s
retirement pay should be computed pursuant to RA 7641 and that all the months she was engaged
to work for respondent for the last twenty eight (28) years should be added and divide[d] by six
(for a fraction of six months is considered as one year) to get the number of years her retirement
pay should be computed."
Christian V. Asas
Page 360
==============================================
The National Labor Relations Commission also discussed that applying the computation
of separation pay in Philippine Tobacco to this case "would render nugatory the very purpose of
RA 7641, which seeks to reward employees of their long and dedicated service to their employer,
as well as its humanitarian purpose to provide for the retiree’s sustenance and hopefully even
comfort, when he no longer has the stamina to continue earning his livelihood."
This court in Philippine Tobacco explained its computation of separation pay as follows:
The amount of separation pay is based on two factors: the amount of monthly salary and the
number of years of service. Although the Labor Code provides different definitions as to what
constitutes "one year of service," Book Six does not specifically define "one year of service" for
purposes of computing separation pay. However, Articles 283 and 284 both state in connection
with separation pay that a fraction of at least six months shall be considered one whole year.
Applying this to the case at bar, we hold that the amount of separation pay which respondent
members of the Lubat and Luris groups should receive is one-half (1/2) their respective average
monthly pay during the last season they worked multiplied by the number of years they actually
rendered service, provided that they worked for at least six months during a given year.
The formula that petitioner proposes, wherein a year of work is equivalent to actual work
rendered for 303 days, is both unfair and inapplicable, considering that Articles 283 and 284
provide that in connection with separation pay, a fraction of at least six months shall be
considered one whole year. Under these provisions, an employee who worked for only six
months in a given year — which is certainly less than 303 days — is considered to have worked
for one whole year.
. . . . Finally, Manila Hotel Company v. CIR did not rule that seasonal workers are
considered at work during off-season with regard to the computation of separation pay. Said case
merely held that, in regard to seasonal workers, the employer-employee relationship is not
severed during off-season but merely suspended.
Philippine Tobacco considered Articles 283 and 284 of the Labor Code on separation pay,
and these articles include the proviso "a fraction of at least six (6) months shall be considered
one (1) whole year."
While the present case involves retirement pay and not separation pay, Article 287 of the
Labor Code on retirement pay similarly provides that "a fraction of at least six (6) months being
considered as one whole year."
Thus, this court’s reading of this proviso in the Labor Code in Philippine Tobacco applies
in this case. An employee must have rendered at least six months in a year for said year to be
considered in the computation.
The Court of Appeals found "no positive proof o[n] the total number of months
[petitioner Paz] actually rendered work [for respondent NTRCI]." On the other hand, both the
Christian V. Asas
Page 361
==============================================
Labor Arbiter and the Court of Appeals established from the records that she rendered at least six
months of service for 1995, 1999, and 2000 only.
Based on these factual findings, retirement pay pursuant to Article 287 of the Labor Code
was correctly computed at 12,487.50 and was awarded to petitioner Paz.
Goodyear Phils. vs. Angus, G.R. No. 185449, November 12, 2014, Del Castillo, J.
Doctrine. In Aquino v. National Labor Relations Commission, citing Batangas Laguna

Tayabas Bus Company v. Court of Appeals and University of the East v. Hon. Minister of
Labor, the Court held that an employee is entitled to recover both separation pay and retirement
benefits in the absence of a specific prohibition in the Retirement Plan or CBA. Concomitantly,
the Court ruled that an employee's right to receive separation pay in addition to retirement
benefits depends upon the provisions of the company's Retirement Plan and/or CBA.
Here, petitioners allege that there is a provision in the last CBA against the recovery of
both retirement benefits and separation pay. To support their claim, petitioners submitted a copy
of what appears to be a portion of the company CBA entitled "Retirement Plan, Life Insurance,
Physical Disability Pay and Resignation Pay." Section 1, Article XI thereof provides that the
availment of retirement benefits precludes entitlement to any separation pay. The same, however,
can hardly be considered as substantial evidence because it does not appear to be an integral part
of Goodyear's CBA. Even assuming that it is, it would still not suffice as there is no showing if
the CBA under which the said provision is found was the one in force at the time material to this
case. On the other hand, Angus presented the parties' 2001-2004 CBA and upon examination of
the same, the Court agrees with her that it does not contain any restriction on the availment of
benefits under the company's Retirement Plan and of separation pay. Indeed, the Labor Arbiter
and the NLRC erred in ignoring this material piece of evidence which is decisive of the issue
presented before them. The CA, thus, committed no error in reversing the Decisions of the labor
tribunals when it ruled in favor of Angus' entitlement to both retirement benefits and separation
pay.
Moreover, the Court agrees with the CA that the amount Angus received from petitioners
represented only her retirement pay and not separation pay. A cursory reading of petitioners'
September 18, 2001 letter notifying Angus of her termination from employment shows that they
granted her early retirement benefits pegged at 47 days' pay per year of service. This rate was
arrived at after petitioners considered respondent's length of service with the company, as well as
her age which qualified her for early retirement. In fact, petitioners were even explicit in stating
in the said letter that the amount she was to receive would come from the company's Pension
Fund, which, as correctly asserted by Angus, was created to cover retirement benefit payment of
employees. In addition, the document showing a detailed account of Angus' termination benefits
speaks for itself as the same is entitled "Sununary of Retirement Pay and other Company
Benefits." In view therefore of the clear showing that what petitioners decided to grant Angus
Christian V. Asas
Page 362
==============================================
was her early retirement benefits, they cannot now be permitted to deny having paid such
benefit.
Petitioners further argue that Angus is not entitled to retirement pay because she does not
meet the requirements enumerated in the Retirement Plan provision of the CBA. The Court
disagrees. While it is obvious that Angus is not entitled to compulsory retirement as she has not
yet reached the age of 60, there is no denying, however, that she is qualified for early retirement.
Under the provision of the Retirement Plan of the CBA as earlier quoted, a worker who is at least
50 years old and with at least 15 years of service, and who has been recommended by the
President of the Union for early retirement and duly approved by the Human Resources Director,
shall be entitled to lump sum retirement benefits. At the time of her termination, Angus was
already 57 years of age and had been in the service for more than 34 years. The exchange of
correspondence between Angus and Ramos also shows that the latter, as Goodyear's Human
Resources Director, offered, recommended and approved the grant of early retirement in favor of
the former. Clearly, all the requirements for Angus' availment of early retirement under the
Retirement Plan of CBA were substantially complied with.
It is worthy to mention at this point that retirement benefits and separation pay are not
mutually exclusive. Retirement benefits are a form of reward for an employee's loyalty and
service to an employer and are earned under existing laws, CBAs, employment contracts and
company policies. On the other hand, separation pay is that amount which an employee receives
at the time of his severance from employment, designed to provide the employee with the
wherewithal during the period that he is looking for another employment and is recoverable only
in instances enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal
cases when reinstatement is not feasible. In the case at bar, Article 283 clearly entitles Angus to
separation pay apart from the retirement benefits she received from petitioners.
R.A. No. 10361 (Domestic Workers’ Act or Batas Kasambahay)
Section 32. Termination of Service. – Neither the domestic worker nor the employer may
terminate the contract before the expiration of the term except for grounds provided for in
Sections 33 and 34 of this Act. If the domestic worker is unjustly dismissed, the domestic worker
shall be paid the compensation already earned plus the equivalent of fifteen (15) days work by
way of indemnity. If the domestic worker leaves without justifiable reason, any unpaid salary due
not exceeding the equivalent fifteen (15) days work shall be forfeited. In addition, the employer
may recover from the domestic worker costs incurred related to the deployment expenses, if
any: Provided, That the service has been terminated within six (6) months from the domestic
worker’s employment.
If the duration of the domestic service is not determined either in stipulation or by the
nature of the service, the employer or the domestic worker may give notice to end the working
relationship five (5) days before the intended termination of the service.
Christian V. Asas
Page 363
==============================================
The domestic worker and the employer may mutually agree upon written notice to pre-
terminate the contract of employment to end the employment relationship.
Section 33. Termination Initiated by the Domestic Worker. – The domestic worker may
terminate the employment relationship at any time before the expiration of the contract for any of
the following causes:
(a) Verbal or emotional abuse of the domestic worker by the employer or any member of
the household;
(b) Inhuman treatment including physical abuse of the domestic worker by the employer
or any member of the household;
(c) Commission of a crime or offense against the domestic worker by the employer or any
member of the household;
(d) Violation by the employer of the terms and conditions of the employment contract and
other standards set forth under this law;
(e) Any disease prejudicial to the health of the domestic worker, the employer, or
member/s of the household; and
(f) Other causes analogous to the foregoing.
Section 34. Termination Initiated by the Employer. – An employer may terminate the
services of the domestic worker at any time before the expiration of the contract, for any of the
following causes:
(a) Misconduct or willful disobedience by the domestic worker of the lawful order of the
employer in connection with the former’s work;
(b) Gross or habitual neglect or inefficiency by the domestic worker in the performance
of duties;
(c) Fraud or willful breach of the trust reposed by the employer on the domestic worker;
(d) Commission of a crime or offense by the domestic worker against the person of the
employer or any immediate member of the employer’s family;
(e) Violation by the domestic worker of the terms and conditions of the employment
contract and other standards set forth under this law;
(f) Any disease prejudicial to the health of the domestic worker, the employer, or
member/s of the household; and
(g) Other causes analogous to the foregoing.
Section 35. Employment Certification. – Upon the severance of the employment

relationship, the employer shall issue the domestic worker within five (5) days from request a
certificate of employment indicating the nature, duration of the service and work performance.
c. Prescription
Montero vs. Times Transportation, G.R. No. 190828, March 16, 2015, Reyes, J. (Possible
Bar Problem)
Christian V. Asas
Page 364
==============================================
Doctrine. In the case at bar, October 26, 1997 and November 24, 1997 appear on record
to be the dates when the petitioners’ employment were terminated by TTCI. The antecedent facts
that gave rise to the petitioners’ dismissal from employment are not disputed in this case. There
is no question about the fact that the petitioners’ complaints for unfair labor practice and money
claims have already prescribed. The petitioners however argue that their complaints for illegal
dismissal were duly filed within the four-year prescriptive period since the period during which
their cases were pending should be deducted from the period of prescription. On the other hand,
the respondents insist that said complaints have already prescribed. Hence, the pivotal question
in resolving the issues hinges on the resolution of whether the period during which the
petitioners’ cases were pending should be excluded from the period of prescription.
Settled is the rule that when one is arbitrarily and unjustly deprived of his job or means of
livelihood, the action instituted to contest the legality of one’s dismissal from employment
constitutes, in essence, an action predicated upon an injury to the rights of the plaintiff, as
contemplated under Article 1146 of the New Civil Code, which must be brought within four
years.
The petitioners contend that the period when they filed a labor case on May 14, 1998 but
withdrawn on March 22, 1999 should be excluded from the computation of the four-year
prescriptive period for illegal dismissal cases. However, the Court had already ruled that the
prescriptive period continues even after the withdrawal of the case as though no action has been
filed at all. The applicability of Article 1155 of the Civil Code in labor cases was upheld in the
case of Intercontinental Broadcasting Corporation v. Panganiban where the Court held that
"although the commencement of a civil action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the
same position as though no action had been commenced at all."
In like manner, while the filing of the complaint for illegal dismissal before the LA
interrupted the running of the prescriptive period, its voluntary withdrawal left the petitioners in
exactly the same position as though no complaint had been filed at all. The withdrawal of their
complaint effectively erased the tolling of the reglementary period.
A prudent review of the antecedents of the claim reveals that it has in fact prescribed due
to the petitioners’ withdrawal of their labor case docketed as NLRC RAB-I-01-1007. Hence,
while the filing of the said case could have interrupted the running of the four-year prescriptive
period, the voluntary withdrawal of the petitioners effectively cancelled the tolling of the
prescriptive period within which to file their illegal dismissal case, leaving them in exactly the
same position as though no labor case had been filed at all. The running of the four-year
prescriptive period not having been interrupted by the filing of NLRC RAB-I-01-1007, the
petitioners’ cause of action had already prescribed in four years after their cessation of
employment on October 26, 1997 and November 24, 1997. Consequently, when the petitioners
Christian V. Asas
Page 365
==============================================
filed their complaint for illegal dismissal, separation pay, retirement benefits, and damages in
2002, their claim, clearly, had already been barred by prescription.
III. Social Legislation
A. Social Security Act of 1997 (R.A. No. 8282)
a. Definitions
"SEC. 8. Terms Defined. - For purposes of this Act, the following terms shall, unless the
context indicates otherwise, have the following meanings:
"(a) SSS - The Social Security System created by this Act.
"(b) Commission - The Social Security Commission as herein created.
"(c) Employer- Any person, natural or juridical, domestic or foreign, who carries on in
the Philippines any trade, business, industry, undertaking, or activity of any kind and uses
the services of another person who is under his orders as regards the employment, except
the Government and any of its political subdivisions, branches or instrumentalities,
including corporations owned or controlled by the Government: Provided, That a self-
employed person shall be both employee and employer at the same time.
"(d) Employee - Any person who performs services for an employer in which either or
both mental or physical efforts are used and who receives compensation for such
services, where there is an employer-employee relationship: Provided, That a self-
employed person shall be both employee and employer at the same time.
"(e) Dependents - The dependents shall be the following:
"(1) The legal spouse entitled by law to receive support from the member;
"(2) The legitimate, legitimated or legally adopted, and illegitimate child who is
unmarried, not gainfully employed, and has not reached twenty-one (21) years of
age, or if over twenty-one (21) years of age, he is congenitally or while still a
minor has been permanently incapacitated and incapable of self-support,
physically or mentally; and
"(3) The parent who is receiving regular support from the member.
"(f) Compensation - All actual remuneration for employment, including the mandated
cost-of-living allowance, as well as the cash value of any remuneration paid in any
Christian V. Asas
Page 366
==============================================
medium other than cash except that part of the remuneration in excess of the maximum
salary credit as Provided under Section Eighteen of this Act.
"(g) Monthly salary credit - The compensation base for contributions and benefits as
indicated in the schedule in Section Eighteen of this Act.
"(h) Monthly - The period from one end of the last payroll period of the preceding month
to the end of the last payroll period of the current month if compensation is on hourly,
daily or weekly basis; if on any other basis, 'monthly' shall mean a period of one (1)
month.
"(i) Contribution - The amount paid to the SSS by and on behalf of the members in
accordance with Section Eighteen of this Act.
"(j) Employment - Any service performed by an employee for his employer except:
"(1) Employment purely casual and not for the purpose of occupation or business
of the employer;
"(2) Service performed on or in connection with an alien vessel by an employee if

he is employed when such vessel is outside the Philippines;
"(3) Service performed in the employ of the Philippine Government or

instrumentality or agency thereof;
"(4) Service performed in the employ of a foreign government or international

organization, or their wholly-owned instrumentality: Provided, however, That this
exemption notwithstanding, any foreign government, international organization or
their wholly-owned instrumentality employing workers in the Philippines or
employing Filipinos outside of the Philippines, may enter into an agreement with
the Philippine Government for the inclusion of such employees in the SSS except
those already covered by their respective civil service retirement
systems: Provided, further, That the terms of such agreement shall conform with
the provisions of this Act on coverage and amount of payment of contributions
and benefits: Provided, finally, That the provisions of this Act shall be
supplementary to any such agreement; and
"(5) Such other services performed by temporary and other employees which may
be excluded by regulation of the Commission. Employees of bona fide
independent contractors shall not be deemed employees of the employer engaging
the service of said contractors.
Christian V. Asas
Page 367
==============================================
"(k) Beneficiaries - The dependent spouse until he or she remarries, the dependent
legitimate, legitimated or legally adopted, and illegitimate children, who shall be the
primary beneficiaries of the member: Provided, That the dependent illegitimate children
shall be entitled to fifty percent (50%) of the share of the legitimate, legitimated or
legally adopted children: Provided, further, That in the absence of the dependent
legitimate, legitimated children of the member, his/her dependent illegitimate children
shall be entitled to one hundred percent (100%) of the benefits. In their absence, the
dependent parents who shall be the secondary beneficiaries of the member. In the absence
of all the foregoing, any other person designated by the member as his/her secondary
beneficiary.
"(l) Contingency - The retirement, death, disability, injury or sickness and maternity of
the member.
"(m) Average monthly salary credit - The result obtained by dividing the sum of the last
sixty (60) monthly salary credits immediately preceding the semester of contingency by
sixty (60), or the result obtained by dividing the sum of all the monthly salary credits paid
prior to the semester of contingency by the number of monthly contributions paid in the
same period, whichever is greater: Provided, That the injury or sickness which caused the
disability shall be deemed as the permanent disability for the purpose of computing the
average monthly salary credit.
"(n) Average daily salary credit- The result obtained by dividing the sum of the six (6)
highest monthly salary credits in the twelve-month period immediately preceding the
semester of contingency by one hundred eighty (180).
"(o) Semester - A period of two (2) consecutive quarters ending in the quarter of
contingency.
"(p) Quarter - A period of three (3) consecutive calendar months ending on the last day of
March, June, September and December.
"(q) Credited years of service - For a member covered prior to January nineteen hundred
and eighty five (1985) minus the calendar year of coverage plus the number of calendar
years in which six (6) or more contributions have been paid from January nineteen
hundred and eighty five (1985) up to the calendar year containing the semester prior to
the contingency. For a member covered in or after January nineteen hundred and eighty
five (1985), the number of calendar years in which six (6) or more contributions have
been paid from the year of coverage up to the calendar year containing the semester prior
to the contingency: Provided, That the Commission may provide for a different number
of contributions in a calendar year for it to be considered as a credited year of service.
Christian V. Asas
Page 368
==============================================
"(r) Member - The worker who is covered under Section Nine and Section Nine-A of this
Act.
"(s) Self-employed - Any person whose income is not derived from employment, as
defined under this Act, as well as those workers enumerated in Section Nine-A hereof.
"(t) Net earnings - Net income before income taxes plus non-cash charges such as
depreciation and depletion appearing in the regular financial statement of the issuing or
assuming institution.
"(u) Fixed charges - Recurring expense such as amortization of debt discount or rentals
for leased properties, including interest on funded and unfunded debt.
b. Compulsory members
"SEC. 9. Coverage. - (a) Coverage in the SSS shall be compulsory upon all employees
not over sixty (60) years of age and their employers: Provided, That in the case of
domestic helpers, their monthly income shall not be less than One thousand pesos
(P1,000.00) a month: Provided, further, That any benefit already earned by the
employees under private benefit plans existing at the time of the approval of this Act shall
not be discontinued, reduced or otherwise impaired: Provided, further, That private plans
which are existing and in force at the time of compulsory coverage shall be integrated
with the plan of the SSS in such a way where the employer's contribution to his private
plan is more than that required of him in this Act, he shall pay to the SSS only the
contribution required of him and he shall continue his contribution to such private plan
less his contribution to the SSS so that the employer's total contribution to his benefit
plan and to the SSS shall be the same as his contribution to his private benefit plan before
the compulsory coverage: Provided, further, That any changes, adjustments,
modifications, eliminations or improvements in the benefits to be available under the
remaining private plan, which may be necessary to adopt by reason of the reduced
contributions thereto as a result of the integration, shall be subject to agreements between
the employers and employees concerned: Provided, further, That the private benefit plan
which the employer shall continue for his employees shall remain under the employer's
management and control unless there is an existing agreement to the
contrary: Provided, finally, That nothing in this Act shall be construed as a limitation on
the right of employers and employees to agree on and adopt benefits which are over and
above those Provided under this Act.
"SEC. 9-A. Compulsory Coverage of the Self-Employed. - Coverage in the SSS

shall also be compulsory upon such self-employed persons as may be determined by the
Commission under such rules and regulations as it may prescribe, including but not
limited to the following:
Christian V. Asas
Page 369
==============================================
"1. All self-employed professionals;
"2. Partners and single proprietors of businesses;
"3. Actors and actresses, directors, scriptwriters and news correspondents who do
not fall within the definition of the term "employee" in Section 8 (d) of this Act;
"4. Professional athletes, coaches, trainers and jockeys; and
"5. Individual farmers and fishermen.
"Unless otherwise specified herein, all provisions of this Act applicable to covered
employees shall also be applicable to the covered self-employed persons.
c. Voluntary members
"(b) Spouses who devote full time to managing the household and family affairs,
unless they are also engaged in other vocation or employment which is subject to
mandatory coverage, may be covered by the SSS on a voluntary basis.
"(c) Filipinos recruited by foreign-based employers for employment abroad may

be covered by the SSS on a voluntary basis.
d. Non-payment of premium
"SEC. 22. Remittance of Contributions. -- (a) The contributions imposed in the

preceding Section shall be remitted to the SSS within the first ten (10) days of each
calendar month following the month for which they are applicable or within such time as
the Commission may prescribe. Every employer required to deduct and to remit such
contributions shall be liable for their payment and if any contribution is not paid to the
SSS as herein prescribed, he shall pay besides the contribution a penalty thereon of three
percent (3%) per month from the date the contribution falls due until paid. If deemed
expedient and advisable by the Commission, the collection and remittance of
contributions shall be made quarterly or semi-annually in advance, the contributions
payable by the employees to be advanced by their respective employers: Provided, That
upon separation of an employee, any contribution so paid in advance but not due shall be
credited or refunded to his employer.
"(b) The contributions payable under this Act in cases where an employer refuses
or neglects to pay the same shall be collected by the SSS in the same manner as taxes are
made collectible under the National Internal Revenue Code, as amended. Failure or
refusal of the employer to pay or remit the contributions herein prescribed shall not
prejudice the right of the covered employee to the benefits of the coverage.
Christian V. Asas
Page 370
==============================================
"The right to institute the necessary action against the employer may be
commenced within twenty (20) years from the time the delinquency is known or the
assessment is made by the SSS, or from the time the benefit accrues, as the case may be.
"(c) Should any person, natural or juridical, default in any payment of contributions, the
Commission may also collect the same in either of the following ways:
"1. By an action in court, which shall hear and dispose of the case in preference to
any other civil action; or
"2. By issuing a warrant to the Sheriff of any province or city commanding him to
levy upon and sell any real and personal property of the debtor. The Sheriff's sale
by virtue of said warrant shall be governed by the same procedure prescribed for
executions against property upon judgments by a court of record.
"(d) The last complete record of monthly contributions paid by the employer or
the average of the monthly contributions paid during the past three (3) years as of the date
of filing of the action for collection shall be presumed to be the monthly contributions
payable by and due from the employer to the SSS for each of the unpaid month, unless
contradicted and overcome by other evidence: Provided, That the SSS shall not be barred
from determining and collecting the true and correct contributions due the SSS even after
full payment pursuant to this paragraph, nor shall the employer be relieved of his liability
under Section Twenty-eight of this Act.
"SEC. 22-A. Remittance of Contributions of Self-Employed Member. - Self-employed

members shall remit their monthly contributions quarterly on such dates and schedules as the
Commission may specify through rules and regulations: Provided, That no retroactive payment
of contributions shall be allowed, except as Provided in this Section.
"SEC. 28. Penal Clause. - (a) Whoever, for the purpose of causing any payment to be
made under this Act, or under an agreement thereunder, where none is authorized to be paid,
shall make or cause to be made false statement or representation as to any compensation paid or
received or whoever makes or causes to be made any false statement of a material fact in any
claim for any benefit payable under this Act, or application for loan with the SSS, or whoever
makes or causes to be made any false statement, representation, affidavit or document in
connection with such claim or loan, shall suffer the penalties Provided for in Article One hundred
seventy-two of the Revised Penal Code.
"(b) Whoever shall obtain or receive any money or check under this Act or any agreement
thereunder, without being entitled thereto with intent to defraud any member, employer or the
SSS, shall be fined not less than Five thousand pesos (P5,000.00) nor more than Twenty
thousand pesos (P20,000.00) and imprisoned for not less than six (6) years and one (1) day nor
more than twelve (12) years.
Christian V. Asas
Page 371
==============================================
"(c) Whoever buys, sells, offers for sale, uses, transfers or takes or gives in exchange, or
pledges or gives in pledge, except as authorized in this Act or in regulations made pursuant
thereto, any stamp, coupon, ticket, book or other device, prescribed pursuant to Section Twenty-
three hereof by the Commission for the collection or payment of contributions required herein,
shall be fined not less than Five thousand pesos (P5,000.00) nor more than Twenty thousand
pesos (P20,000.00), or imprisoned for not less than six (6) years and one (1) day nor more than
twelve (12) years, or both, at the discretion of the court.
"(d) Whoever, with intent to defraud, alters, forges, makes or counterfeits any stamp,
coupon, ticket, book or other device prescribed by the Commission for the collection or payment
of any contribution required herein, or uses, sells, lends, or has in his possession any such
altered, forged or counterfeited materials, or makes, uses, sells or has in his possession any such
altered, forged, material in imitation of the material used in the manufacture of such stamp,
coupon, ticket, book or other device, shall be fined not less than Five thousand pesos (P5,000.00)
non more than Twenty thousand pesos (P20,000.00) or imprisoned for not less than six years (6)
and one (1) day nor more than twelve (12) years, or both, at the discretion of the court.
"(e) Whoever fails or refuses to comply with the provisions of this Act or with the rules
and regulations promulgated by the Commission, shall be punished by a fine of not less than
Five thousand pesos (P5,000.00) nor more than Twenty thousand pesos (P20,000.00), or
imprisonment for not less than six (6) years and one (1) day nor more than twelve (12) years, or
both, at the discretion of the court: Provided, That where the violation consists in failure or
refusal to register employees or himself, in case of the covered self-employed or to deduct
contributions from the employees' compensation and remit the same to the SSS, the penalty shall
be a fine of not less Five thousand pesos (P5,000.00) nor more than Twenty thousand pesos
(P20,000.00) and imprisonment for not less than six (6) years and one (1) day nor more than
twelve (12) years.
"(f) If the act or omission penalized by this Act be committed by an association,

partnership, corporation or any other institution, its managing head, directors or partners shall be
liable for the penalties Provided in this Act for the offense.
"(g) Any employee of the SSS who receives or keeps funds or property belonging,
payable or deliverable to the SSS and who shall appropriate the same, or shall take or
misappropriate, or shall consent, or through abandonment or negligence, shall permit any other
person to take such property or funds, wholly or partially, or shall otherwise be guilty of
misappropriation of such funds or property, shall suffer the penalties Provided in Article Two
hundred seventeen of the Revised Penal Code.
"(h) Any employer who, after deducting the monthly contributions or loan amortizations
from his employee's compensation, fails to remit the said deduction to the SSS within thirty (30)
days from the date they became due, shall be presumed to have misappropriated such
Christian V. Asas
Page 372
==============================================
contributions or loan amortizations and shall suffer the penalties Provided in Article Three
hundred fifteen of the Revised Penal Code.
"(i) Criminal action arising from a violation of the provisions of this Act may be
commenced by the SSS or the employee concerned either under this Act or in appropriate cases
under the Revised Penal Code: Provided, That such criminal action may be filed by the SSS in
the city or municipality where the SSS office is located, if the violation was committed within its
territorial jurisdiction or in Metro Manila, at the option of the SSS.
*Some parts of the foregoing provisions were asked in the 2016 Bar
e. Nature of fund
(look at the jurisprudence below)
f. Failure to remit
(see the provisions in letter “d”)
SSS vs. Azote, G.R. No. 209741, April 15, 2015, Mendoza, J.
Doctrine. The law in force at the time of Edgardo’s death was Republic Act (R.A.) No.
8282, the amendatory law of R.A. No. 1161 or the "Social Security Law." It is a tax-exempt
social security service designed to promote social justice and provide meaningful protection to
members and their beneficiaries against the hazards of disability, sickness, maternity, old age,
death, and other contingencies resulting in loss of income or financial burden. As a social
security program of the government, Section 8 (e) and (k) of the said law expressly provides who
would be entitled to receive benefits from its deceased-member, to wit:
SEC. 8. Terms Defined. - For purposes of this Act, the following terms shall, unless the
context indicates otherwise, have the following meanings:
xxxx
(e) Dependents - The dependents shall be the following:
(1) The legal spouse entitled by law to receive support from the member;
(2) The legitimate, legitimated or legally adopted, and illegitimate child who is
unmarried, not gainfully employed, and has not reached twenty-one (21) years of
age, or if over twenty-one (21) years of age, he is congenitally or while still a
minor has been permanently incapacitated and incapable of self-support,
physically or mentally; and
(3) The parent who is receiving regular support from the member.
xxxx
(k) Beneficiaries - The dependent spouse until he or she remarries, the dependent
legitimate, legitimated or legally adopted, and illegitimate children, who shall be the
Christian V. Asas
Page 373
==============================================
primary beneficiaries of the member: Provided, That the dependent illegitimate children
shall be entitled to fifty percent (50%) of the share of the legitimate, legitimated or
legally adopted children: Provided, further, That in the absence of the dependent
legitimate, legitimated children of the member, his/her dependent illegitimate children
shall be entitled to one hundred percent (100%) of the benefits. In their absence, the
dependent parents who shall be the secondary beneficiaries of the member. In the absence
of all the foregoing, any other person designated by the member as his/her secondary
beneficiary.
Applying Section 8(e) and (k) of R.A. No. 8282, it is clear that only the legal spouse of
the deceased-member is qualified to be the beneficiary of the latter’s SS benefits. In this case,
there is a concrete proof that Edgardo contracted an earlier marriage with another individual as
evidenced by their marriage contract. Edgardo even acknowledged his married status when he
filled out the 1982 Form E-4 designating Rosemarie as his spouse.
It is undisputed that the second marriage of Edgardo with Edna was celebrated at the time
when the Family Code was already in force. Article 41 of the Family Code expressly states, “A
marriage contracted by any person during subsistence of a previous marriage shall be null and
void, unless before the celebration of the subsequent marriage, the prior spouse had been absent
for four consecutive years and the spouse present has a well-founded belief that the absent
spouse was already dead. In case of disappearance where there is danger under the circumstances
set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be
sufficient.
For the purpose of contracting a subsequent marriage under the preceding paragraph, the
spouse present must institute a summary proceeding as provided in this Code for the declaration
of presumptive death of the absentee, without prejudice to the effect of reappearance of the
absent spouse.”
Using the parameters outlined in Article 41 of the Family Code, Edna, without doubt,
failed to establish that there was no impediment or that the impediment was already removed at
the time of the celebration of her marriage to Edgardo. Settled is the rule that "whoever claims
entitlement to the benefits provided by law should establish his or her right thereto by substantial
evidence." Edna could not adduce evidence to prove that the earlier marriage of Edgardo was
either annulled or dissolved or whether there was a declaration of Rosemarie’s presumptive death
before her marriage to Edgardo. What is apparent is that Edna was the second wife of Edgardo.
Considering that Edna was not able to show that she was the legal spouse of a deceased-member,
she would not qualify under the law to be the beneficiary of the death benefits of Edgardo.
The Court does not subscribe to the disquisition of the CA that the updated Form E-4 of
Edgardo was determinative of Edna’s status and eligibility to claim the death benefits of
deceased-member. Although an SSS member is free to designate a beneficiary, the designation
must always conform to the statute. To blindly rely on the form submitted by the deceased-
Christian V. Asas
Page 374
==============================================
member would subject the entire social security system to the whims and caprices of its members
and would render the SS Law inutile.
Although the SSC is not intrinsically empowered to determine the validity of marriages,
it is required by Section 4(b) (7) of R.A. No. 8282 to examine available statistical and economic
data to ensure that the benefits fall into the rightful beneficiaries. As held in Social Security
Commission vs. Favila, SSS, as the primary institution in charge of extending social security
protection to workers and their beneficiaries is mandated by Section 4(b)(7) of RA 8282 to
require reports, compilations and analyses of statistical and economic data and to make an
investigation as may be needed for its proper administration and development. Precisely, the
investigations conducted by SSS are appropriate in order to ensure that the benefits provided
under the SS Law are received by the rightful beneficiaries. It is not hard to see that such
measure is necessary for the system’s proper administration, otherwise, it will be swamped with
bogus claims that will pointlessly deplete its funds. Such scenario will certainly frustrate the
purpose of the law which is to provide covered employees and their families protection against
the hazards of disability, sickness, old age and death, with a view to promoting their well-being
in the spirit of social justice. Moreover and as correctly pointed out by SSC, such investigations
are likewise necessary to carry out the mandate of Section 15 of the SS Law which provides in
part, viz:
Sec. 15. Non-transferability of Benefits. - The SSS shall pay the benefits provided for in
this Act to such [x x xj persons as may be entitled thereto in accordance with the provisions of
this Act x x x.
The existence of two Form E-4s designating, on two different dates, two different women
as his spouse is already an indication that only one of them can be the legal spouse. As can be
gleaned from the certification issued by the NSO, there is no doubt that Edgardo married
Rosemarie in 1982. Edna cannot be considered as the legal spouse of Edgardo as their marriage
took place during the existence of a previously contracted marriage. For said reason, the denial
of Edna's claim by the SSC was correct. It should be emphasized that the SSC determined Edna's
eligibility on the basis of available statistical data and documents on their database as expressly
permitted by Section 4(b) (7) of R.A. No. 8282.
It is of no moment that the first wife, Rosemarie, did not participate or oppose Edna's
claim. Rosemarie's non-participation or her subsequent death on November 11, 2004 did not cure
or legitimize the status of Edna.
Dy Caico vs. SSS, G.R. No. 161357, November 30, 2009, Callejo, Sr., J.
Doctrine. The Court holds that the proviso "as of the date of his retirement" in Section
12-B(d) of Rep. Act No. 8282, which qualifies the term "primary beneficiaries," is
unconstitutional for it violates the due process and equal protection clauses of the Constitution.
Christian V. Asas
Page 375
==============================================
In an analogous case, Government Service Insurance System v. Montesclaros, the Court

invalidated the proviso in Presidential Decree (P.D.) No. 1146 which stated that "the dependent
spouse shall not be entitled to said pension if his marriage with the pensioner is contracted within
three years before the pensioner qualified for the pension." In the said case, the Court
characterized retirement benefits as property interest of the pensioner as well as his or her
surviving spouse. The proviso, which denied a dependent spouse’s claim for survivorship
pension if the dependent spouse contracted marriage to the pensioner within the three-year
prohibited period, was declared offensive to the due process clause. There was outright
confiscation of benefits due the surviving spouse without giving him or her an opportunity to be
heard. The proviso was also held to infringe the equal protection clause as it discriminated
against dependent spouses who contracted their respective marriages to pensioners within three
years before they qualified for their pension.
For reasons which shall be discussed shortly, the proviso "as of the date of his retirement"
in Section 12-B(d) of Rep. Act No. 8282 similarly violates the due process and equal protection
clauses of the Constitution.
The proviso infringes the equal protection clause. As illustrated by the petitioner’s
case, the proviso "as of the date of his retirement" in Section 12-B(d) of Rep. Act No. 8282
which qualifies the term "primary beneficiaries" results in the classification of dependent spouses
as primary beneficiaries into two groups:
(1) Those dependent spouses whose respective marriages to SSS members were
contracted prior to the latter’s retirement; and
(2) Those dependent spouses whose respective marriages to SSS members were
contracted after the latter’s retirement.
Underlying these two classifications of dependent spouses is that their respective

marriages are valid. In other words, both groups are legitimate or legal spouses. The distinction
between them lies solely on the date the marriage was contracted. The petitioner belongs to the
second group of dependent spouses, i.e., her marriage to Bonifacio was contracted after his
retirement. As such, she and those similarly situated do not qualify as "primary beneficiaries"
under Section 12-B(d) of Rep. Act No. 8282 and, therefore, are not entitled to survivor’s pension
under the same provision by reason of the subject proviso.
It is noted that the eligibility of "dependent children" who are biological offsprings of a
retired SSS member to be considered as his primary beneficiaries under Section 12-B(d) of Rep.
Act No. 8282 is not substantially affected by the proviso "as of the date of his retirement." A
biological child, whether legitimate, legitimated or illegitimate, is entitled to survivor’s pension
upon the death of a retired SSS member so long as the said child is unmarried, not gainfully
employed and has not reached twenty-one (21) years of age, or if over twenty-one (21) years of
age, he or she is congenitally or while still a minor has been permanently incapacitated and
incapable of self-support, physically or mentally.
Christian V. Asas
Page 376
==============================================
On the other hand, the eligibility of legally adopted children to be considered "primary
beneficiaries" under Section 12-B(d) of Rep. Act No. 8282 is affected by the proviso "as of the
date of his retirement" in the same manner as the dependent spouses. A legally adopted child who
satisfies the requirements in Section 8(e)(2) thereof is considered a primary beneficiary of a
retired SSS member upon the latter’s death only if the said child had been legally adopted prior
to the member’s retirement. One who was legally adopted by the SSS member after his or her
retirement does not qualify as a primary beneficiary for the purpose of entitlement to survivor’s
pension under Section 12-B(d) of Rep. Act No. 8282.
In any case, the issue that now confronts the Court involves a dependent spouse who
claims to have been unjustly deprived of her survivor’s pension under Section 12-B(d) of Rep.
Act No. 8282. Hence, the subsequent discussion will focus on the resultant classification of the
dependent spouses as primary beneficiaries under the said provision.
As earlier stated, the petitioner belongs to the second group of dependent spouses, i.e.,
her marriage to Bonifacio was contracted after his retirement. She and those similarly situated
are undoubtedly discriminated against as the proviso "as of the date of his retirement"
disqualifies them from being considered "primary beneficiaries" for the purpose of entitlement to
survivor’s pension.
Generally, a statute based on reasonable classification does not violate the constitutional
guaranty of the equal protection clause of the law. With respect to Rep. Act No. 8282, in
particular, as a social security law, it is recognized that it "is permeated with provisions that draw
lines in classifying those who are to receive benefits. Congressional decisions in this regard are
entitled to deference as those of the institution charged under our scheme of government with the
primary responsibility for making such judgments in light of competing policies and interests."
However, as in other statutes, the classification in Rep. Act No. 8282 with respect to
entitlement to benefits, to be valid and reasonable, must satisfy the following requirements: (1) it
must rest on substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must
not be limited to existing conditions only; and (4) it must apply equally to all members of the
same class.
The legislative history of Rep. Act No. 8282 does not bear out the purpose of Congress in
inserting the proviso "as of the date of his retirement" to qualify the term "primary beneficiaries"
in Section 12-B(d) thereof. To the Court’s mind, however, it reflects congressional concern with
the possibility of relationships entered after retirement for the purpose of obtaining benefits. In
particular, the proviso was apparently intended to prevent sham marriages or those contracted by
persons solely to enable one spouse to claim benefits upon the anticipated death of the other
spouse.
Christian V. Asas
Page 377
==============================================
This concern is concededly valid. However, classifying dependent spouses and

determining their entitlement to survivor’s pension based on whether the marriage was
contracted before or after the retirement of the other spouse, regardless of the duration of the said
marriage, bears no relation to the achievement of the policy objective of the law, i.e., "provide
meaningful protection to members and their beneficiaries against the hazard of disability,
sickness, maternity, old age, death and other contingencies resulting in loss of income or
financial burden." The nexus of the classification to the policy objective is vague and flimsy. Put
differently, such classification of dependent spouses is not germane to the aforesaid policy
objective.
For if it were the intention of Congress to prevent sham marriages or those entered in
contemplation of imminent death, then it should have prescribed a definite "duration-of-
relationship" or durational period of relationship as one of the requirements for entitlement to
survivor’s pension. For example, in the United States, a provision in their social security law
which excludes from social security benefits the surviving wife and stepchild of a deceased wage
earner who had their respective relationships to the wage earner for less than nine months prior
to his death, was declared valid. Thus, nine months is recognized in the United States as the
minimum duration of a marriage to consider it as having been contracted in good faith for the
purpose of entitlement to survivorship pension.
In contrast, the proviso "as of the date of his retirement" in Section 12-B(d) in Rep. Act
No. 8282 effectively disqualifies from entitlement to survivor’s pension all those dependent
spouses whose respective marriages to retired SSS members were contracted after the latter’s
retirement. The duration of the marriage is not even considered. It is observed that, in certain
instances, the retirement age under Rep. Act No. 8282 is sixty (60) years old. A marriage
contracted by a retired SSS member after the said age may still last for more than ten years,
assuming the member lives up to over seventy (70) years old. In such a case, it cannot be said
that the marriage was a sham or was entered into solely for the purpose of enabling one spouse to
obtain the financial benefits due upon the death of the other spouse. Nonetheless, the said
surviving spouse is not entitled to survivor’s pension because he or she is not a primary
beneficiary as of the date of retirement of the SSS member following Section 12-B(d) of Rep.
Act No. 8282.
Further, the classification of dependent spouses on the basis of whether their respective
marriages to the SSS member were contracted prior to or after the latter’s retirement for the
purpose of entitlement to survivor’s pension does not rest on real and substantial distinctions. It
is arbitrary and discriminatory. It is too sweeping because the proviso "as of the date of his
retirement," which effectively disqualifies the dependent spouses whose respective marriages to
the retired SSS member were contracted after the latter’s retirement as primary beneficiaries,
unfairly lumps all these marriages as sham relationships or were contracted solely for the
purpose of acquiring benefits accruing upon the death of the other spouse. The proviso thus
unduly prejudices the rights of the legal surviving spouse, like the petitioner, and defeats the
avowed policy of the law "to provide meaningful protection to members and their
Christian V. Asas
Page 378
==============================================
beneficiaries against the hazards of disability, sickness, maternity, old age, death, and other
contingencies resulting in loss of income or financial burden."
The proviso infringes the due process clause. As earlier opined, in Government Service
Insurance System v. Montesclaros, the Court characterized retirement benefits as a property
interest of a retiree. We held therein that "[i]n a pension plan where employee participation is
mandatory, the prevailing view is that employees have contractual or vested rights in the pension
where the pension is part of the terms of employment." Thus, it was ruled that, "where the
employee retires and meets the eligibility requirements, he acquires a vested right to benefits that
is protected by the due process clause" and "[r]etirees enjoy a protected property interest
whenever they acquire a right to immediate payment under pre-existing law." Further, since
pursuant to the pertinent law therein, the dependent spouse is entitled to survivorship pension, "a
widow’s right to receive pension following the demise of her husband is also part of the
husband’s contractual compensation."
Although the subject matter in the above-cited case involved the retirement benefits
under P.D. No. 1146 or the Revised Government Service Insurance Act of 1977 covering
government employees, the pronouncement therein that retirees enjoy a protected property
interest in their retirement benefits applies squarely to those in the private sector under Rep. Act
No. 8282. This is so because the mandatory contributions of both the employers and the
employees to the SSS do not, likewise, make the retirement benefits under Rep. Act No. 8282
mere gratuity but form part of the latter’s compensation. Even the retirement benefits of self-
employed individuals, like Bonifacio, who have been included in the compulsory coverage of
Rep. Act No. 8282 are not mere gratuity because they are required to pay both the employer and
employee contributions. Further, under Rep. Act No. 8282, the surviving spouse is entitled to
survivor’s pension accruing on the death of the member; hence, the surviving spouse’s right to
receive such benefit following the demise of the wife or husband, as the case may be, is also part
of the latter’s contractual compensation.
The proviso "as of the date of his retirement" in Section 12-B(d) of Rep. Act No. 8282
runs afoul of the due process clause as it outrightly deprives the surviving spouses whose
respective marriages to the retired SSS members were contracted after the latter’s retirement of
their survivor’s benefits. There is outright confiscation of benefits due such surviving spouses
without giving them an opportunity to be heard.
By this outright disqualification of the surviving spouses whose respective marriages to

SSS members were contracted after the latter’s retirement, the proviso "as of the date of his
retirement" qualifying the term "primary beneficiaries" for the purpose of entitlement to
survivor’s pension has created the presumption that marriages contracted after the retirement
date of SSS members were entered into for the purpose of securing the benefits under Rep. Act
No. 8282. This presumption, moreover, is conclusive because the said surviving spouses are not
afforded any opportunity to disprove the presence of the illicit purpose. The proviso, as it creates
this conclusive presumption, is unconstitutional because it presumes a fact which is not
Christian V. Asas
Page 379
==============================================
necessarily or universally true. In the United States, this kind of presumption is characterized as
an "irrebuttable presumption" and statutes creating permanent and irrebutable presumptions have
long been disfavored under the due process clause.
In the petitioner’s case, for example, she asserted that when she and Bonifacio got
married in 1997, it was merely to legalize their relationship and not to commit fraud. This claim
is quite believable. After all, they had been living together since 1980 and, in fact, during that
time their eldest child was already twenty-four (24) years old. However, the petitioner was not
given any opportunity to prove her claim that she was Bonifacio’s bona fide legal spouse as she
was automatically disqualified from being considered as his primary beneficiary. In effect, the
petitioner was deprived of the survivor’s benefits, a property interest, accruing from the death of
Bonifacio without any opportunity to be heard. Standards of due process require that the
petitioner be allowed to present evidence to prove that her marriage to Bonifacio was contracted
in good faith and as his bona fide spouse she is entitled to the survivor’s pension accruing upon
his death. Hence, the proviso "as of the date of his retirement" in Section 12-B(d) which deprives
the petitioner and those similarly situated dependent spouses of retired SSS members this
opportunity to be heard must be struck down.
Social Service Commission vs. Alba, 559 SCRA 477, G.R. No. 165482, July 23, 2008, Tinga,
J.
Doctrine. First, the Court observes that Far Alba was no ordinary administrator. He was
no less than the son of the hacienda’s owner and as such he was an owner-in-waiting prior to his
father’s death. He was a member of the owner’s family assigned to actively manage the
operations of the hacienda. As he stood to benefit from the hacienda’s successful operation, he
ineluctably took his job and his father’s wishes to heart. As emphasized by the Commission his
and the owner’s interests in the business were plainly and inextricably linked by filial bond. He
more than just acted in the interests of his father as employer, and could himself pass off as the
employer, the one carrying on the undertaking.
Second, nomenclature aside, Far Alba was not merely an administrator of the hacienda.
Applying the control test which is used to determine the existence of employer-employee
relationship for purposes of compulsory coverage under the SSS law, Far Alba is technically
Lamboso’s employer.
The essential elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
power of control with regard to the means and methods by which the work is to be accomplished,
with the power of control being the most determinative factor.
Lamboso testified that he was selected and his services were engaged by Far Alba
himself. Corollarily, Far Alba held the prerogative of terminating Lamboso’s employment.
Lamboso also testified in a direct manner that he had been paid his wages by Far Alba. This
Christian V. Asas
Page 380
==============================================
testimony was seconded by Lamboso’s co-worker, Rodolfo Sales. Anent the power of control
with regard to the work of the employee, the element refers merely to the existence of the power
and not the actual exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is sufficient that the former has a right to wield the
power.
Third, not to be forgotten is the definition of an employer under Article 167(f) of the
Labor Code which deals with employees’ compensation and state insurance fund. The said
provision of the law defines an employer as "any person, natural or juridical, employing the
services of the employee." It also defines a person as "any individual, partnership, firm,
association, trust, corporation or legal representative thereof." Plainly, Far Alba, as
the hacienda administrator, acts as the legal representative of the employer and is thus an
employer within the meaning of the law liable to pay the SS contributions.
Finally, the Court believes that Section 8(c) of the Social Security Act of 1954 is broad
enough to include those persons acting directly or indirectly in the interest of the employer. As
pointed out by the Court of Appeals, that the said provision does not contain the definitive phrase
contained in Article 212(e) of the Labor Code should not be taken to mean that administrators
such as Far Alba, whose interests are closely linked with his father-employer, do not come within
the purview of the law. If under Article 212(e), persons acting in the interest of the employer,
directly or indirectly, are obliged to follow the government labor relations policy, it could be
reasonably concluded that such persons may likewise be held liable for the remittance of SS
contributions which is an obligation created by law and an is employee’s right protected by law.
Having established Far Alba’s accountability to the SSS for Lamboso’s unremitted
contributions from 1960 to 1970, a discussion on the propriety of filing a claim of such nature
against the estate proceedings of Arturo Alba, Sr. becomes unnecessary. In any event, the Court
sustains the jurisdiction of the Commission over disputes under the Social Security Act "with
respect to coverage, benefits, contributions and penalties thereon or any other matter related
thereto. Moreover, the Court agrees with the Commission’s assertion that an action for
remittance of SS monthly contributions is not a type of money claim which needs to be filed
against the estate proceedings. In the case of Vera, et al. v. Judge Fernandez, the Court declared
that claims by the government for unpaid taxes are not covered by the statute of non-claims as
these are monetary obligations created by law. Even after the distribution of the estate, claims for
taxes may be enforced against the distributees in proportion to their shares in the
inheritance. Similarly, employers are required to remit the contributions to the SSS by mandate
of law. As such, actions of this type should be treated in much the same way as taxes—that they
are not required to be filed against the estate and that they be claimed against the heirs of the
errant decedent.
SSS vs. Atlantic Gulf and Pacific Company of Manila, 553 SCRA 677, G.R. No. 175952,
April 30, 2008, Tinga, J.
Christian V. Asas
Page 381
==============================================
Doctrine. The pertinent provision of law detailing the jurisdiction of the Commission is
Section 5(a) of R.A. No. 1161, as amended by R.A. No. 8282, otherwise known as the Social
Security Act of 1997, to wit:
SEC. 5. Settlement of Disputes.– (a) Any dispute arising under this Act with respect to
coverage, benefits, contributions and penalties thereon or any other matter related thereto,
shall be cognizable by the Commission, and any case filed with respect thereto shall be
heard by the Commission, or any of its members, or by hearing officers duly authorized
by the Commission and decided within the mandatory period of twenty (20) days after
the submission of the evidence. The filing, determination and settlement of disputes shall
be governed by the rules and regulations promulgated by the Commission.
The law clearly vests upon the Commission jurisdiction over "disputes arising under this
Act with respect to coverage, benefits, contributions and penalties thereon or any matter related
thereto..." Dispute is defined as "a conflict or controversy."
From the allegations of respondents’ complaint, it readily appears that there is no longer
any dispute with respect to respondents’ accountability to the SSS. Respondents had, in fact,
admitted their delinquency and offered to settle them by way of dacion en pago subsequently
approved by the SSS in Resolution No. 270-s. 2001. SSS stated in said resolution that "the
dacion en pago proposal of AG&P Co. of Manila and Semirara Coals Corporation to pay their
liabilities in the total amount of P30,652,710.71 as of 31 March 2001 by offering their 5.8 ha.
property located in San Pascual, Batangas, be, as it is hereby, approved.."
The controversy, instead, lies in the non-implementation of the approved and

agreed dacion en pago on the part of the SSS. As such, respondents filed a suit to obtain its
enforcement which is, doubtless, a suit for specific performance and one incapable of pecuniary
estimation beyond the competence of the Commission.
Ortega vs. Social Security Commission, 555 SCRA 353, G.R. No. 176150, June 25, 2008,
Carpio-Morales, J.
Doctrine. Claims under the Labor Code for compensation and under the Social Security
Law for benefits are not the same as to their nature and purpose. On the one hand, the pertinent
provisions of the Labor Code govern compensability of work-related disabilities or when there is
loss of income due to work-connected or work-aggravated injury or illness. On the other hand,
the benefits under the Social Security Law are intended to provide insurance or protection
against the hazards or risks of disability, sickness, old age or death, inter alia, irrespective of
whether they arose from or in the course of the employment. And unlike under the Social
Security Law, a disability is total and permanent under the Labor Code if as a result of the injury
or sickness the employee is unable to perform any gainful occupation for a continuous period
exceeding 120 days regardless of whether he loses the use of any of his body parts.
Christian V. Asas
Page 382
==============================================
The Court notes that the main issue petitioner proffers is whether he is entitled to total
permanent disability benefits from the SSS given his "angioplasty operation of the heart,
coronary artery disease, ischemic heart disease, severe hypertension and a host of other serious
illnesses filed with the SSS[.]"
A perusal of the records shows that when the case was already submitted for decision
before the appellate court, petitioner manifested that he suffered a heart attack on February 25,
2004, for which he claimed to have undergone a coronary angiogram on March 9, 2005 and a
coronary angioplasty on September 27, 2005 at the Philippine Heart Center.
Unfortunate as these events were, the appellate court correctly ruled that it could not
consider such allegation of subsequent events since "a factual question may not be raised for the
first time on appeal[,] and documents forming no part of the proofs before the appellate court
will not be considered in disposing of the issues of an action."
The issues in every case are limited to those presented in the pleadings. The object of the
pleadings is to draw the lines of battle between the litigants and to indicate fairly the nature of
the claims or defenses of both parties. A change of theory on appeal is not allowed. In this case,
the matter of petitioner’s serious heart condition was not raised in his application before the SSS
or in his June 19, 2000 petition before the SSC.
Fair play dictates that the SSS be afforded the opportunity to properly meet the issue with
respect to the new ailments besetting petitioner, in line with the actual practice that only qualified
government physicians, by virtue of their oath as civil service officials, are competent to examine
persons and issue medical certificates which will be used by the government for a specific
official purpose. This holds greater significance where there exist differences or doubts as to the
medical condition of the person.
In this case, the SSS medical examiners are tasked by law to analyze the extent of
personal incapacity resulting from disease or injury. Oftentimes, a physician who is adequately
versed in the knowledge of anatomy and physiology will find himself deficient when called upon
to express an opinion on the permanent changes resulting from a disability. Unlike the general
practitioner who merely concerns himself with the examination of his patient for purposes of
diagnosis and treatment, the medical examiner has to consider varied factors and ascertain the
claimant’s related history and subjective complaints. The members of this Court cannot strip
their judicial robe and don the physician’s gown, so to speak, in a pretense to correlate variances
in medical findings.
SSC vs. Rizal Poultry and Livestock Corp., G.R. No. 167050, June 1, 2011, Perez, J.
Doctrine. The remittance of SSS contributions is mandated by Section 22(a) of the

Social Security Act of 1997, viz:
Christian V. Asas
Page 383
==============================================
SEC. 22. Remittance of Contributions. - (a) The contributions imposed in the preceding
Section shall be remitted to the SSS within the first ten (10) days of each calendar month
following the month for which they are applicable or within such time as the Commission may
prescribe. Every employer required to deduct and to remit such contributions shall be liable for
their payment and if any contribution is not paid to the SSS as herein prescribed, he shall pay
besides the contribution a penalty thereon of three percent (3%) per month from the date the
contribution falls due until paid. x x x.
The mandatory coverage under the Social Security Act is premised on the existence of an
employer-employee relationship. This is evident from Section 9(a) which provides:
SEC. 9. Coverage. - (a) Coverage in the SSS shall be compulsory upon all employees not
over sixty (60) years of age and their employers: Provided, That in the case of domestic helpers,
their monthly income shall not be less than One thousand pesos (P1,000.00) a month x x x.
Section 8(d) of the same law defines an employee as any person who performs services
for an employer in which either or both mental or physical efforts are used and who receives
compensation for such services, where there is an employer-employee relationship. The illegal
dismissal case before the NLRC involved an inquiry into the existence or non-existence of an
employer-employee relationship. The very same inquiry is needed in the SSC case. And there
was no indication therein that there is an essential conceptual difference between the definition
of "employee" under the Labor Code and the Social Security Act.
In the instant case, therefore, res judicata in the concept of "conclusiveness of judgment"
applies. The judgment in the NLRC case pertaining to a finding of an absence of employer-
employee relationship between Angeles and respondents is conclusive on the SSC case.
B. Workmen’s Compensation (P.D. No. 628, Arts. 166-208)
a. Compensable contingencies (Art. 166)
b. Definitions
c. Coverage
d. Compensability (Injury)
a. Accident, work-related
Hinoguin vs. ECC, G.R. No. 84307, April 17, 1989, Feliciano, J.
FACTS: Sgt. Hinoguin and two (2) members of his Detachment, Cpl. Rogelio Clavo and Dft.
Nicomedes Alibuyog, sought permission from Captain Frankie Z. Besas, Commanding Officer of
Christian V. Asas
Page 384
==============================================
"A" Company to go on overnight pass to Aritao, Nueva Viscaya, "to settle [an] important matter
thereat." Captain Besas orally granted them permission to go to Aritao and to take their issued
firearms with them, considering that Aritao was regarded as "a critical place " that is, it had peace
and order problems due to the presence of elements of the New People's Army ("NPA!') in or in
the vicinity of Aritao.
Sgt. Hinoguin, Cpl. Clavo and Dft. Alibuyog left Carranglan, Nueva Ecija, about noon on
1 August 1985 and arrived in Aritao, Nueva Viscaya, about 1:30 o'clock P.M. on the same
day. They proceeded to the home of Dft. Alibuyog's parents where they had lunch. About 4:00
o'clock P.M., the three (3) soldiers with a fourth man, a civilian and relative of Dft. Alibuyog,
had some gin and beer, finishing a bottle of gin and two (2) large bottles of beer. Three hours
later, at about 7:00 o'clock P.M., the soldiers left the Alibuyog home to return to their Company
Headquarters. They boarded a tricycle, presumably a motor-driven one, Sgt. Hinoguin and Cpl.
Clavo seating themselves in the tricycle cab while Dft. Alibuyog occupied the seat behind the
driver. Upon reaching the poblacion of Aritao, Dft. Alibuyog dismounted, walked towards and in
front of the tricycle cab, holding his M-16 rifle in his right hand, not noticing that the rifle's
safety lever was on semi automatic (and not on "safety"). He accidentally touched the trigger,
firing a single shot in the process and hitting Sgt. Hinoguin, then still sitting in the cab, in the left
lower abdomen. The Sergeant did not apparently realize immediately that he had been hit; he
took three (3) steps forward, cried that he had been hit and fell to the ground.
ISSUE: Whether or not Hinoguin’s death is compensable.
HELD: Yes. Turning to the question of whether Sgt. Hinoguin was performing official
functions at the time he sustained the gunshot wound, it has already been pointed out above that
the Line of Duty Board of Officers of the 14th Infantry Battalion Headquarters had already
determined that the death of Sgt. Hinoguin had occurred "in line of duty." It may be noted in this
connection that a soldier on active duty status is really on 24 hours a day official duty status and
is subject to military discipline and military law 24 hours a day. He is subject to call and to the
orders of his superior officers at all times, 7 days a week, except, of course, when he is on
vacation leave status (which Sgt. Hinoguin was not). 'Thus, we think that the work-connected
character of Sgt. Hinoguins injury and death was not effectively precluded by the simple
circumstance that he was on an overnight pass to go to the home of Dft. Alibuyog, a soldier
under his own command. Sgt. Hinoguin did not effectively cease performing "official functions"
because he was granted a pass. While going to a fellow soldier's home for a few hours for a meal
and some drinks was not a specific military duty, he was nonetheless in the course of
performance of official functions. Indeed, it appears to us that a soldier should be presumed to be
on official duty unless he is shown to have clearly and unequivocally put aside that status or
condition temporarily by, e.g., going on an approved vacation leave. Even vacation leave may, it
should be remembered, be preterminated by superior orders.
More generally, a soldier in the Armed Forces must accept certain risks, for instance, that
he will be fired upon by forces hostile to the State or the Government. That is not, of course, the
Christian V. Asas
Page 385
==============================================
only ask that he is compelled to accept by the very nature of his occupation or profession as a
soldier. Most of the persons around him are necessarily also members of the Armed Forces who
carry firearms, too. In other words, a soldier must also assume the risk of being accidentally fired
upon by his fellow soldiers. This is reasonably regarded as a hazard or risk inherent in his
employment as a soldier.
We hold, therefore, that the death of Sgt. Hinoguin that resulted from his being hit by an
accidental discharge of the M-16 of Dft. Alibuyog, in the circumstances of this case, arose out of
and in the course of his employment as a soldier on active duty status in the Armed Forces of the
Philippines and hence compensable.
b. Proximate cause
c. Act of ministration
Visayan Stevedore Transport Company vs. Workmen’s Compensation Commission, G.R.

No. L-22135, December 27, 1963, Dizon, J.
FACTS: After having rendered the usual eight hours of work, the laborers were given time off
to take their evening meal before working over time, as it was the purpose of the employer to
finish the loading of the sugar as soon as possible. After taking their meal on board the ship,
Gutana and some of the laborers had to answer the call of nature by the left side of a barge tied
along the right side of the Japanese ship, in view of the insufficiency of the sanitary facilities
board. After relieving himself, and as he was standing and buttoning up his pants, the raft
"Narwhal" came along the right side of the barge and bumped it, causing it to hit the right side of
the Japanese vessel. As a result, Gutana was pinned by the end of the hatch cover of the barge
against the side of the vessel, thereby suffering physical injuries which resulted in his death.
ISSUE: Whether or not Gutana’s death is compensable.
HELD: Yes. Petitioner likewise contends that the death of Gutana was due to his notorious
negligence. On this matter, we are of the opinion, as was the Workmen's Compensation
Commission, that the facts established by the evidence do not support petitioner's contention.
Due to the number of laborers engaged in the loading work, the sanitary facilities on board the
"Hiyeharu Maru" were rendered inadequate, thus compelling some of the laborers to answer the
call of nature by going down a barge tied along the right side of the ship. The deceased Gutana
was among those who was forced, to resort to this uncomfortable way of relieving himself.
Moreover, in the circumstances of this case, it is but logical to consider the barge as an extension
of the premises where the laborers were working. As already stated, they took their evening meal
on board the ship and were supposed to resume their work (overtime work) a reasonable time
thereafter. As, because of this, they were not free to leave the vessel, the accident must be
deemed to be one arising out of, or in the course of employment.
d. Coming ang Going rule

Christian V. Asas
Page 386
==============================================
Alano vs. ECC, G.R. No. L-48594, March 16, 1988, Gutierrez, Jr., J.
FACTS: Dedicacion de Vera worked as principal of Salinap Community School in San Carlos
City, Pangasinan. Her tour of duty was from 7:30 a.m. to 5:30 p.m. On November 29, 1976, at
7:00 A.M., while she was waiting for a ride at Plaza Jaycee in San Carlos City on her way to the
school, she was bumped and run over by a speeding Toyota mini-bus which resulted in her
instantaneous death. She is survived by her four sons and a daughter.
ISSUE: Whether or not de Vera’s death is compensable.
HELD: Yes. In Vda. de Torbela vs. Employees' Compensation Commission, the SC held that
when an employee is accidentally injured at a point reasonably proximate to the place at work,
while he is going to and from his work, such injury is deemed to have arisen out of and in the
course of his employment.
In this case, it is not disputed that the deceased died while going to her place of work. She
was at the place where, as the petitioner puts it, her job necessarily required her to be if she was
to reach her place of work on time. There was nothing private or personal about the school
principal's being at the place of the accident. She was there because her employment required her
to be there.
Lazo vs. ECC, G.R. No. 78617, June 18, 1990, Padilla, J.
FACTS: Salvador Lazo, is a security guard of the Central Bank of the Philippines assigned to its
main office in Malate, Manila. His regular tour of duty is from 2:00 o'clock in the afternoon to
10:00 o'clock in the evening. On 18 June 1986, the petitioner rendered duty from 2:00 o'clock in
the afternoon to 10:00 o'clock in the evening. But, as the security guard who was to relieve him
failed to arrive, the petitioner rendered overtime duty up to 5:00 o'clock in the morning of 19
June 1986, when he asked permission from his superior to leave early in order to take home to
Binangonan, Rizal, his sack of rice.
On his way home, at about 6:00 o'clock in the morning of 19 June 1986, the passenger
jeepney the petitioner was riding on turned turtle due to slippery road. As a result, he sustained
injuries.
ISSUE: Whether or not the injuries sustained by Lazon are compensable.
HELD: Yes. In the case at bar, it can be seen that petitioner left his station at the Central Bank
several hours after his regular time off, because the reliever did not arrive, and so petitioner was
asked to go on overtime. After permission to leave was given, he went home. There is no
evidence on record that petitioner deviated from his usual, regular homeward route or that
interruptions occurred in the journey.
Christian V. Asas
Page 387
==============================================
While the presumption of compensability and theory of aggravation under the Workmen's
Compensation Act (under which the Baldebrin case was decided) may have been abandoned
under the New Labor Code, it is significant that the liberality of the law in general in favor of the
workingman still subsists. As agent charged by the law to implement social justice guaranteed
and secured by the Constitution, the Employees Compensation Commission should adopt a
liberal attitude in favor of the employee in deciding claims for compensability, especially where
there is some basis in the facts for inferring a work connection to the accident.
This kind of interpretation gives meaning and substance to the compassionate spirit of the
law as embodied in Article 4 of the New Labor Code which states that 'all doubts in the
implementation and interpretation of the provisions of the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor.
The policy then is to extend the applicability of the decree (PD 626) to as many
employees who can avail of the benefits thereunder. This is in consonance with the avowed
policy of the State to give maximum aid and protection to labor.
There is no reason, in principle, why employees should not be protected for a reasonable
period of time prior to or after working hours and for a reasonable distance before reaching or
after leaving the employer's premises.
If the Vano ruling awarded compensation to an employee who was on his way from home
to his work station one day before an official working day, there is no reason to deny
compensation for accidental injury occurring while he is on his way home one hour after he had
left his work station.
We are constrained not to consider the defense of the street peril doctrine and instead
interpret the law liberally in favor of the employee because the Employees Compensation Act,
like the Workmen's Compensation Act, is basically a social legislation designed to afford relief to
the working men and women in our society.
e. Official Functions
f. 24-Hour Duty
GSIS vs. Alegre, G.R. No. 128524, April 20, 1999, Romero, J.
FACTS: Felonila Alegre's deceased husband, SPO2 Florencio A.. Alegre, was a police officer
assigned to the Philippine National Police station in the town of Vigan, Ilocos Sur. On that fateful
day of December 6, 1994, he was driving his tricycle and ferrying passengers within the vicinity
of Imelda Commercial Complex when SPO4 Alejandro Tenorio, Jr., Team/Desk Officer of the
Police Assistance Center located at said complex, confronted him regarding his tour of duty.
Christian V. Asas
Page 388
==============================================
SPO2 Alegre allegedly snubbed SPO4 Tenorio and even directed curse words upon the latter. A
verbal tussle then ensued between the two which led to the fatal shooting of the deceased police
officer.
ISSUE: Whether or not SPO2 Alegre’s death is compensable.
HELD: No. Under the pertinent guidelines of the ECC on compensability, it is provided that
"for the injury and the resulting disability or death to be compensable, the injury must be the
result of an employment accident satisfying all of the following conditions: (1) The employee
must have been injured at the place where his work requires him to be; (2) The employee must
have been performing his official functions; and (3) If the injury is sustained elsewhere, the
employee must have been executing an order for the employer.
Actually, jurisprudence is rather scant with respect to the above rules' application in the
case of police officers. Nevertheless, owing to the similarity of functions, that is, to keep peace
and order, and the risks assumed, the Court has treated police officers similar to members of the
Armed Forces of the Philippines with regard to the compensability of their deaths. Thus,
echoing Hinoguin v. Employees' Compensation Commission, a case involving a soldier who was
accidentally fired at by a fellow soldier, we held in Employees' Compensation Commission v.
Court of Appeals, that "members of the national police are by the nature of their functions
technically on duty 24 hours a day" because "policemen are subject to call at any time and may
be asked by their superiors or by any distressed citizen to assist in maintaining the peace and
security of the community."
Upon examination of the Court of Appeals' reasoning, we believe that the appellate court
committed reversible error in applying the precepts enunciated in the cited cases. While we agree
that policemen, like soldiers, are at the beck and call of public duty as peace officers and
technically on duty round-the-clock, the same does not justify the grant of compensation benefits
for the death of SPO2 Alegre based on the facts disclosed by the records.
Obviously, the matter SPO2 Alegre was attending to at the time he met his death, that of
ferrying passengers for a fee, was intrinsically private and unofficial in nature proceeding as it
did from no particular directive or permission of his superior officer. In the absence of such prior
authority as in the cases of Hinoguin and Nitura, or peacekeeping nature of the act attended to by
the policeman at the time he died even without the explicit permission or directive of a superior
officer, as in the case of P/Sgt. Alvaran, there is no justification for holding that SPO2 Alegre met
the requisites set forth in the ECC guidelines. That he may be called upon at any time to render
police work as he is considered to be on a round-the-clock duty and was not on an approved
vacation leave will not change the conclusion arrived at considering that he was not placed in a
situation where he was required to exercise his authority and duty as a policeman. In fact, he was
refusing to render one pointing out that he had already complied with the duty detail. At any rate,
the 24-hour duty doctrine, as applied to policemen and soldiers, serves more as an after-the-fact
validation of their acts to place them within the scope of the guidelines rather than a blanket
Christian V. Asas
Page 389
==============================================
license to benefit them in all situations that may give rise to their deaths. In other words, the 24-
hour duty doctrine should not be sweepingly applied to all acts and circumstances causing the
death of a police officer but only to those which, although not on official line of duty, are
nonetheless basically police service in character.
Valeriano vs. ECC, G.R. No. 136200, June 8, 2000, Panganiban, J.
FACTS: Celerino S. Valeriano was employed as a fire truck driver assigned at the San Juan Fire
Station. Sometime on the evening of July 3, 1985, petitioner was standing along Santolan Road,
Quezon City, when he met a friend by the name of Alexander Agawin. They decided to proceed
to Bonanza Restaurant in EDSA, Quezon City, for dinner. On their way home at around 9:30
PM, the owner-type jeepney they were riding in figured in a head-on collision with another
vehicle at the intersection of N. Domingo and Broadway streets in Quezon City. Due to the
strong impact of the collision, petitioner was thrown out of the vehicle and was severely injured.
ISSUE: Whether or not Valeriano’s injuries are compensable.
HELD: No. In one case, the SC held that "arising out of" and "in the course of employment" —
are said to be separate tests which must be independently satisfied; however, it should not be
forgotten that the basic concept of compensation coverage is unitary, not dual, and is best
expressed in the word, "work-connection, because an uncompromising insistence on an
independent application of each of the two portions of the test can, in certain cases, exclude
clearly work-connected injuries. The words "arising out of" refer to the origin or cause of the
accident, and are descriptive of its character, while the words "in the course of" refer to the time,
place and circumstances under which the accident takes place.
As a matter of general proposition, an injury or accident is said to arise "in the course of
employment" when it takes place within the period of the employment, at a place where the
employee may reasonably . . . be, and while he is fulfilling his duties or is engaged in doing
something incidental thereto.
Thus, for injury to be compensable, the standard of "work connection" must be

substantially satisfied. The injury and the resulting disability sustained by reason of employment
are compensable regardless of the place where the injured occurred, if it can be proven that at the
time of the injury, the employee was acting within the purview of his or her employment and
performing an act reasonably necessary or incidental thereto.
Petitioner Valeriano was not able to demonstrate solidly how his job as a firetruck driver
was related to the injuries he had suffered. That he sustained the injuries after pursuing a purely
personal and social function — having dinner with some friends — is clear from the records of
the case. His injuries were not acquired at his work place; nor were they sustained while he was
performing an act within the scope of his employment or in pursuit of an order of his superior.
Thus, we agree with the conclusion reached by the appellate court that his injuries and
consequent disability were not work-connected and thus not compensable.
Christian V. Asas
Page 390
==============================================
We recognize the importance and laud the efforts of firemen in our society. Indeed, the
nature of their job requires them to be always on alert, like soldiers and police officers, and to
respond to fire alarms which may occur anytime of the day. Be that as it may, the circumstances
in the present case do not call for the application of Hinoguin and Nitura. Following the
rationalization in GSIS, the 24-hour-duty doctrine cannot be applied to petitioner's case,
because he was neither at his assigned work place nor in pursuit of the orders of his superiors
when he met an accident. But the more important justification for the Court's stance is that he
was not doing an act within his duty and authority as a firetruck driver, or any other act of such
nature, at the time he sustained his injuries. We cannot find any reasonable connection between
his injuries and his work as a firetruck driver.
g. Compensability (illness)
a. Proof
b. Work-connected illness
c. Cause of illness is unknown; Increased Risk Doctrine
GSIS vs. Capacite, G.R. No. 199780, September 24, 2014, Brion J.
FACTS: Elma Capacite (Elma) was an employee in the Department of Agrarian Reform (DAR)
– Eastern Samar Provincial Office, Borongan, Eastern Samar. Due to persistent cough coupled
with abdominal pain, Elma was admitted at the Bethany Hospital. The pathology examination
showed thatshe was suffering from "Adenocarcinoma, moderately differentiated, probably cecal
origin with metastases to mesenteric lymph node and seeding of the peritoneal surface." Elma
died due to "Respiratory Failure secondary to Metastatic Cancer to the lungs; Bowel cancer with
Hepatic and Intraperitoneal Seeding and Ovarian cancer."
ISSUE: Whether or not Elma’s death is compensable.
HELD: No. PD 626, as amended, defines compensable sicknessas "any illness definitely
accepted as an occupational disease listed by the Commission, or any illness caused by
employment subject to proof by the employee that the risk of contracting the same is increased
by the working conditions." Of particular significance in this definition is the use of the
conjunction "or," which indicates alternative situations.
Based on this definition, we ruled in GSIS v. Vicencio that for sickness and the resulting
death of an employee to be compensable, the claimant must show either: (1) that it is a result of
an occupational disease listed under Annex "A" of the Amended Rules on Employees'
Compensation with the conditions set therein satisfied; or (2) if not so listed, that the risk of
contracting the disease was increased by the working conditions.
Christian V. Asas
Page 391
==============================================
While item 17, Annex "A" of the Amended Rules of Employee’s Compensation considers
lung cancer to be a compensable occupational disease, it likewise provides that the employee
should be employed as a vinyl chloride worker or a plastic worker. In this case, however, Elma
did not work in an environment involving the manufacture of chlorine or plastic, for her lung
cancer to be considered an occupational disease. There was, therefore, no basis for the CA to
simply categorize her illness as an occupational disease without first establishing the nature of
Elma’s work. Both the law and the implementing rules clearly state that the given alternative
conditions must be satisfied for a disease to be compensable.
No proof exists showing that Elma’s lung cancer was induced or aggravated by her
working conditions. In contrast with the present case, Jose merely alleged that throughout
Elma’s 27-year service atthe DAR, she had a very demanding job; that she rose from the ranks as
a Junior Statistician, until she reached the position of Accountant I. Jose also explained that Elma
had to examine various financial statements for accuracy; perform complex accounting reports;
and prepare financial statements. She also had to constantly render overtime work, even during
weekends, in order to study, analyze, balance, formulate and finalize reports. All these involved
prolonged sitting, exposure to cold room temperature at the office, physical effort and mental
exertion, making her highly susceptible to physical and mental fatigue, stress and strain.
Aside from Jose’s general allegationsproving the stressful duties of his late wife, no
reasonable proof exists to support the claim that her respiratory disease, which is similar to lung
cancer, was aggravated by her working conditions. The records do not support the contention that
she had been exposed to voluminous and dusty records, nor do they provide any definite picture
of her working environment.
We cannot, under this evidentiary situation, grant death compensation benefits solely on
the assumption thatshe might have been exposed to deleterious substances while working as
bookkeeper and accountant. We cannot likewise award compensation benefits on the basis of
stress and fatigue, which are general consequences of working in practically all kinds of human
activity; otherwise, we would unreasonably open the flood gates of compensability and render
the purposes ofa system like GSIS meaningless.
GSIS vs. Calumpiano, G.R. No. 196102, November 26, 2014, Del Castillo, J.
FACTS: Aurelia Y. Calumpiano was employed as Court Stenographer at the then Court of First
Instance of Samar from January 5, 1972 until her retirement on March 30, 2002. On March 7,
2002, shortly before her retirement, she filed before the Supreme Court, an application for
disability retirement on account of her ailment[s], Hypertensive Cardiovascular Disease [and]
Acute Angle Closure Glaucoma. To bolster her claim, [respondent] submitted the medical
certificates issued by her attending physicians, Dr. Alfred I. Lim and Dr. Elmer Montes, both of
whom are Op[h]thalmologists [at] Eastern Samar Provincial Hospital. She submitted them
together with the results of her perimetry test, [a certificate of] which x x x was issued by Dr.
Christian V. Asas
Page 392
==============================================
Lim. On September 30, 2002, the Supreme Court approved Calumpiano’s application for
disability retirement, under Republic Act No. 8291.
ISSUE: Whether or not the approval of Calumpiano’s disability requirement is proper.
HELD: Yes. In the instant case, medical reports and drug prescriptions of respondent’s
attending physicians sufficiently support her claim for disability benefits. Neither the GSIS nor
the ECC convincingly deny their genuineness and due execution. The reports are made part of
the record and there is no showing that they are false or erroneous, or resorted to [for the
purpose] of deceiving the Court, hence, are entitled to due probative weight. The failure of
respondent to submit to a full medical examination, as required by the rules, to substantiate her
essential hypertension, is of no moment. The law is that laboratory reports such as X-ray and
ECG are not indispensable prerequisites to compensability, the reason being that the strict rules
of evidence need not be observed in claims for compensation. Medical findings of the attending
physician may be received in evidence and used as proof[s] of the fact in dispute. The doctor’s
certification as to the nature of claimant’s disability may begiven credence as he orshe normally
would not make untruthful certification. Indeed, no physician in his right mind and who is aware
of the far[-]reaching and serious effect that his or her statements would cause on a money claim
against a government agency would vouch indiscriminately without regarding his own interests
and protection.
Applying Bauland De Castro to the instant case and looking at the factual milieu, the
Court agrees with the CA’s conclusion and so declares that respondent’s illness is compensable.
Respondent served the government for 30 long years; veritably, as the ECC itself said, "[h]er
duties were no doubt stressful and the same may have caused her to develop her ailment,
hypertension" – which is a listed occupational disease, contrary to the CA’s pronouncement that
itis not. And because it is a listed occupational disease, the " increased risk theory" does not
apply – again, contrary to the CA’s declaration; no proof of causation is required.
It can also be said that given respondent’s age at the time, and taking into account the
nature, working conditions, and pressures of her work as court stenographer – which requires her
to faithfully record each and every day virtually all of the court’s proceedings; transcribe these
notes immediately in order to make them available to the court or the parties who require them;
take down dictations by the judge, and transcribe them; and type in final form the judge’s
decisions, which activities extend beyond office hours and without additional compensation or
overtime pay – all these contributed to the development of her hypertension – or hypertensive
cardiovascular disease, as petitioner would call it. Consequently, her age, work, and hypertension
caused the impairment of vision in both eyes due to "advanced to late stage glaucoma",which
rendered her "legally blind."
Contrary to petitioner’s submissions, there appears to be a link between blood pressure

and the development of glaucoma, which leads the Court to conclude that respondent’s glaucoma
developed as a result of her hypertension.
Christian V. Asas
Page 393
==============================================
Although intra ocular pressure (IOP) remains an important risk factor for glaucoma, it is
clear that other factors can also influence disease development and progression. More recently,
the role that blood pressure (BP) has in the genesis of glaucoma has attracted attention, as it
represents a clinically modifiable risk factor and thus provides the potential for new treatment
strategies beyond IOP reduction. The interplay between blood pressure and IOP determines the
ocular perfusion pressure (OPP), which regulates blood flow to the optic nerve. If OPP is a more
important determinant of ganglion cell injury than IOP, then hypotension should exacerbate the
detrimental effects of IOP elevation, whereas hypertension should provide protection against IOP
elevation. Epidemiological evidence provides some conflicting outcomes of the role of systemic
hypertension in the development and progression of glaucoma. The most recent study showed
that patients at both extremes of the blood pressure spectrum show an increased prevalence of
glaucoma. Those with low blood pressure would have low OPP and thus reduced blood flow;
however, that people with hypertension also show increased risk is more difficult to reconcile.
This finding may reflect an inherent blood flow dysregulation secondary to chronic hypertension
that would render retinal blood flow less able to resist changes in ocular perfusion pressure.
In recent years, we’ve learned a lot about ocular perfusion pressure (OPP), i.e., the
pressure difference between blood entering the eye and IOP. It’s clear that three forces — OPP,
IOP and blood pressure — are interconnected in the glaucoma disease process. The mechanics of
that relationship, however, remain ambiguous.
The ties between hypertension and glaucoma are less well established but the data, in
addition to my involvement in a new study (discussed below), have convinced me they probably
do exist. Therefore, I believe potential hypertension, along with potential low blood pressure,
should be investigated in patients whose glaucoma continues to progress despite what appears to
be well controlled IOP.
We suspect there is a close relationship among IOP, OPP, blood pressure and glaucoma,
but the exact nature of these associations remains elusive. Complicating matters is the
physiological phenomenon known as autoregulation.
Clemente vs. GSIS, G.R. No. L-47521, July 31, 1987, Gutierrez, J.
FACTS: Pedro Clemente, was for ten (10) years a janitor in the Department of Health (Dagupan
City), assigned at the Ilocos Norte Skin Clinic, Laoag City. He was hospitalized from November
3 to 14, 1976 at the Central Luzon Sanitarium, Tala Sanitarium, Tala, Caloocan City, due to his
ailment of "nephritis," as per medical certification of his attending physician, Dr. Winifredo
Samson. He was also found to be suffering from such ailments as portal cirrhosis and leprosy,
otherwise known as Hansen's Disease. On November 14, 1976, Pedro Clemente died of uremia
due to nephritis.
ISSUE: Whether or not Clemente’s death is compensable.

Christian V. Asas
Page 394
==============================================
HELD: Yes. In one case, the SC held that strict rules of evidence are not applicable in claims
for compensation. There are no stringent criteria to follow. The degree of proof required under
P.D. 626; is merely substantial evidence, which means, "such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion". The claimant must show, at least, by
substantial evidence that the development of the disease is brought largely by the conditions
present in the nature of the job. What the law requires is a reasonable work-connection and not a
direct causal relation. It is enough that the hypothesis on which the workmen's claim is based is
probable. Medical opinion to the contrary can be disregarded especially where there is some
basis in the facts for inferring a work-connection. Probability not certainty is the touchstone.
The medical authorities support rather than negate the theory of increased risk. We note
that the major ailments of the deceased, i.e. nephritis, leprosy, etc., could be traced from bacterial
and viral infections. In the case of leprosy, it is known that the source of infection is the
discharge from lesions of persons with active cases. It is believed that the bacillus enters the
body through the skin or through the mucous membrane of the nose and throat.
Pedro Clemente worked in a skin clinic. As janitor of the Ilocos Norte Skin Clinic, Mr.
Clemente was exposed to different carriers of viral and bacterial diseases. He had to clean the
clinic itself where patients with different illnesses come and go. He had to put in order the
hospital equipments that had been used. He had to dispose of garbage and wastes that
accumulated in the course of each working day. He was the employee most exposed to the
dangerous concentration of infected materials, and not being a medical practitioner, least likely
to know how to avoid infection. It is, therefore, not unreasonable to conclude that Mr. Clemente's
working conditions definitely increased the risk of his contracting the aforementioned ailments.
This Court has held in appropriate cases that the conservative posture of the respondents
is not consistent with the liberal interpretation of the Labor Code and the social justice guarantee
embodied in the Constitution in favor of the workers. It clashes with the injunction in the Labor
Code (Article 4, New Labor Code) that, as a rule, doubts should be resolved in favor of the
claimant-employee.
The respondents admit there may have been aggravation of an existing ailment but point
out that aggravating is no longer a ground for compensation under the present law. They contend
that the compensable factor of increased risks of contracting the disease is not present in this
case.
The fallacy in this theory lies in the failure to explain how a sick person was able to enter
the government service more than ten years before he became too ill to work and at a time when
aggravation of a disease was compensable. There is no evidence to show that Mr. Clemente was
hired inspite of having an existing disease liable to become worse.
Christian V. Asas
Page 395
==============================================
The petitioner's arguments of recurrence of an already cured disease or the contracting of

the disease due to increased risks become more plausible. When there are two or more possible
explanations regarding an issue of compensability that which favors the claimant must be
chosen.
Limbo vs. ECC, G.R. No. 146891, July 30, 2002, Kapunan, J.
FACTS: Ruben T. Limbo was employed at Nestlé Philippines, Incorporated from November 25,
1966 to December 31, 1996, first, as a salesman until he was promoted as Area Sales Supervisor
in 1977. Sometime in December 1994, Limbo was confined for one week at the Philippine
General Hospital (PGH) because of joint pains. His work-up revealed that he had elevated BUN,
creatinine and anemia. When Limbo was subjected to a renal ultrasound, it was further
discovered that he had chronic renal disease and he was forthwith referred to a nephrologist and
was advised to undergo a kidney transplant. On January 2, 1995, Limbo underwent a renal
transplant at the PGH and was discharged therefrom on January 13, 1995.
ISSUE: Whether or not Limbo’s illness is compensable.
HELD: Yes. Under the Amended Rules on Employees Compensation, "(f)or the sickness and
the resulting disability to be compensable, the sickness must be the result of an occupational
disease listed under Annex "A" of these Rules with the conditions set therein satisfied; otherwise,
proof must be shown that the risk of contracting the disease is increased by the working
conditions." Concededly, "end-stage renal disease secondary to uric acid nephropathy" is not
among the Occupational Diseases under Annex "A" of the Amended Rules on Employees
Compensation. This, however, would not automatically bar petitioner’s claim for as long as he
could prove that the risk of contracting the illness was increased by his working conditions.
Considering the workload and areas of responsibility of petitioner in this case, it is not
unlikely for him to develop hypertension, which in turn led to uremia. It should be stressed that
in determining whether a disease is compensable, it is enough that there exists a reasonable work
connection. It is sufficient that the hypothesis on which the workmen’s claim is based is probable
since probability, not certainty, is the touchstone.
We agree with the Office of the Solicitor General (OSG) that the findings of petitioner’s
attending physician supported the claim that his disease was work-related. As correctly pointed
out by the OSG, a physician’s report is the best evidence of work-connection of workmen’s
ailments and can be the basis of an award even if the physician was not presented as a
witness. We have no reason to doubt the findings of Dr. Mejia who is an expert in her field of
work. Verily, petitioner was able to show that his ailment was work-related.
C. National Health Insurance Act of 1995 (as amended by R.A. No. 9241; R.A. No.
10606)
1. Important Principles
Christian V. Asas
Page 396
==============================================
a. Equity – The Program shall provide for uniform basic benefits. Access
to care must be a function of a person’s health needs rather than his
ability to pay. (Art. 1, Sec. 2(c), R.A. No. 7875)
b. Responsiveness – The Program shall adequately meet the needs for

personal health services at various stages of a member’s life. (Art. 1,
Sec. 2(d), R.A. No. 7875)
c. Social Solidarity – The Program shall be guided by community spirit.

It must enhance risk-sharing among income groups, age groups, and
persons of differing health status, and residing in different geographic
areas. (Art. 1, Sec. 2(e), R.A. No. 7875)
d. Fiduciary Responsibility – The Program shall provide effective

stewardship, funds management, and maintenance of reserves. (Art. 1,
Sec. 2(i), R.A. No. 7875)
e. Informed Choice – The Program shall encourage members to choose

from among accredited health care providers. The Corporation’s local
offices shall objectively apprise its members of the full range of
providers involved in the Program and of the services and privileges to
which they are entitled as members. This explanation, which the
member may use as a guide in selecting the appropriate and most
suitable provider, shall be given in clear and simple Filipino and in the
local language that is comprehensible to the members. (Art. 1, Sec.
2(j), R.A. No. 7875)
f. Compulsory Coverage – All citizens of the Philippines shall be

required to enroll in the National Health Insurance Program in order to
avoid adverse selection and social inequity. (Art. 1, Sec. 2(l), R.A. No.
7875)
g. Cost-sharing – The Program shall continuously evaluate its cost-

sharing schedule to ensure that the costs borne by the members are fair
and equitable and that the charges by health care providers are
reasonable. ((Art. 1, Sec. 2(m), R.A. No. 7875)
2. Definition
a. Benificiary – Any person entitled to health care benefits under this

Act. (Sec. 4(a), R.A. 7875 as amended by R.A. No. 9241)
Christian V. Asas
Page 397
==============================================
b. Capitation – A payment mechanism where a fixed rate, whether per

person, family, household or group, is negotiated with a health care
provider who shall be responsible in delivering or arranging for the
delivery of health services required by the covered person under the
conditions of a health care provider contract. (Sec. 4(c), R.A. 7875 as
amended by R.A. No. 9241)
c. Contribution – The amount paid by or in behalf of a member to the

Program for coverage, based on salaries or wages in the case of formal
sector employees, and on household earnings and assets, in the case of
self-employed, or on other criteria as may be defined by the
Corporation in accordance with the guiding principles set forth in
Article 1 of this Act. (Sec. 4(d), R.A. 7875 as amended by R.A. No.
9241)
d. Dependent – The legal dependents of a member are: 1) the legitimate

spouse who is not a member; 2) the unmarried and unemployed
legitimate, legitimated, illegitimate, acknowledged children as
appearing in the birth certificate; legally adopted or step-children
below twenty-one (21) years of age; 3)children who are twenty-one
(21) years old and above but suffering from congenital disability,
either physical or mental, or any disability acquired that renders them
totally dependent on the member of our support; 4) the parents who are
sixty (60) years old or above whose monthly income is below an
amount to be determined by the Corporation in accordance with the
guiding principles set forth in Article I of this Act; 5) parents with
permanent disability that render them totally dependent on the member
for subsistence. (Sec. 4(f), R.A. No. 7875 as amended by R.A. No.
9241 and R.A. No. 10606)
e. Health Care Provider – refers to: (1) a health care institution , which
is duly licensed and accredited devoted primarily to the maintenance
and operation of facilities for health promotion, prevention, diagnosis,
injury, disability, or deformity, drug addiction or in need of obstetrical
or other medical and nursing care. It shall also be construed as any
institution, building, or place where there are installed beds, cribs, or
bassinets for twenty-four hour use or longer by patients in the
treatment of diseases, injuries, deformities, or abnormal physical and
mental states, maternity cases or sanitarial care; or infirmaries,
nurseries, dispensaries, rehabilitation centers and such other similar
names by which they may be designated; or (2) a health care
professional, who is any doctor of medicine, nurse, midwife, dentist,
or other health care professional or practitioner duly licensed to
Christian V. Asas
Page 398
==============================================
practice in the Philippines and accredited by the Corporation; or (3) a

health maintenance organization, which is entity that provides, offers,
or arranges for coverage of designated health services needed by plan
members for a fixed prepaid premium; or (4) a community-based
health organization, which is an association of indigenous members of
the community organized for the purpose of improving the health
status of that community through preventive, promotive and curative
health services. (Sec. 4(o), R.A. No. 7875 as amended by R.A. No.
9241)
f. Portability – The enablement of a member to avail of Program benefits

in an area outside the jurisdiction of his Local Health Insurance Office.
(Sec. 4(aa), R.A. No. 7875 as amended by R.A. No. 9241)
3. Coverage
Mandatory Coverage. – All citizens of the Philippines shall be covered by

the National Health Insurance Program. In accordance with the principles of
universality and compulsory coverage enunciated in Section 2(b) and 2(l) hereof,
implementation of the Program shall ensure sustainability of coverage and
continuous enhancement of the quality of service: Provided, That the Program
shall be compulsory in all provinces, cities and municipalities nationwide,
notwithstanding the existence of LGU-based health insurance
programs: Provided, further, That the Corporation, Department of Health (DOH),
local government units (LGUs), and other agencies including nongovernmental
organizations (NGOs) and other national government agencies (NGAs) shall
ensure that members in such localities shall have access to quality and cost-
effective health care services. (Sec. 6, R.A. No. 7875 as amended by R.A. No.
9241)
4. Change of residence
A citizen can be under only one Local Health Insurance Office which shall
be located in the province or city of his place of residence. A person who changes
residence, becomes temporarily employed, or for other justifiable reasons, is
transferred to another locality, should inform said Office of such transfer and
subsequently transfer his Program membership. (Sec. 9, R.A. No. 7875)
5. Exclusion and Benefits
Excluded Personal Health Services. – The Corporation shall not cover

expenses for health services which the Corporation and the DOH consider cost-
ineffective through health technology assessment.
Christian V. Asas
Page 399
==============================================
The Corporation may institute additional exclusions and limitations as it

may deem reasonable in keeping with its protection objectives and financial
sustainability. (Sec. 11, R.A. No. 7875 as amended by R.A. No. 10606)
Entitlement to Benefits. – A member whose premium contributions for at

least three (3) months have been paid within six (6) months prior to the first day
of availment, including those of the dependents, shall be entitled to the benefits of
the Program: Provided, That such member can show that contributions have been
made with sufficient regularity: Provided, further, That the member is not
currently subject to legal penalties as provided for in Section 44 of this Act.
The following need not pay the monthly contributions to be entitled to the
Program’s benefits:
(a) Retirees and pensioners of the SSS and GSIS prior to the effectivity of
this Act; and
(b) Lifetime members. (Sec. 12, R.A. No. 7875 as amended by R.A. No.
10606)
6. Quasi-judicial powers
The Corporation, to carry out its tasks more effectively, shall be vested
with the following powers:
(a) Subject to the respondent’s right to due process, to conduct

investigations for the determination of a question, controversy, complaint, or
unresolved grievance brought to its attention, and render decisions, orders, or
resolutions thereon. It shall proceed to hear and determine the case even in the
absence of any party who has been properly served with notice to appear. It shall
conduct its proceedings or any part thereof in public or in executive session;
adjourn its hearings to any time and place; refer technical matters or accounts to
an expert and to accept his reports as evidence; direct parties to be joined in or
excluded from the proceedings; and give all such directions as it may deem
necessary or expedient in the determination of the dispute before it;
(b) to summon the parties to a controversy, issue subpoenas requiring the

attendance and testimony of witnesses or the production of documents and other
materials necessary to a just determination of the case under investigation.
(c) Subject to the respondent’s right to due process, to suspend

temporarily, revoke permanently, or restore the accreditation of a health care
provider or the right to benefits of a member and/or impose fines. The decision
Christian V. Asas
Page 400
==============================================
shall immediately be executory, even pending appeal, when the public interest so
requires and as may be provided for in the implementing rules and regulations.
Suspension of accreditation shall not exceed six (6) months. Suspension of the
rights of members shall not exceed six (6) months.
The revocation of a health care provider’s accreditation shall operate to

disqualify him from obtaining another accreditation in his own name, under a
different name, or through another person, whether natural or juridical.
The Corporation shall not be bound by the technical rules of evidence.

(Sec. 17, R.A. No. 7875 as amended by R.A. No. 10606)
7. Grievance and Appeal
Grievance System. A system of grievance is hereby established, wherein

members, dependents, or health care providers of the Program who believe they
have been aggrieved by any decision of the implementors of the Program, may
seek redress of the grievance in accordance with the provisions of this Article.
(Sec. 39, R.A. No. 7875)
Grievance and Appeal Review Committee. The Board shall create a

Grievance Appeal Review Committee, composed of three (3) to five (5) members,
hereinafter referred to as the Committee, which, subject to the procedures
enumerated above, shall receive and recommend appropriate action on complaints
from members and health care providers relative to this Act and its implementing
rules and regulations. (Sec. 43, R.A. No. 7875)
*Read IRR of R.A. No. 7875
D. Government Service Insurance System Act (R.A. No. 8291)
a. Definitions (Sec. 2, P.D. No. 1146 as amended by R.A. No. 8291)
(a) GSIS- The Government Service Insurance System created by Commonwealth Act No.
186.
(b) Board- The Board of Trustees of the Government Service Insurance System.
(c) Employer- The national government, its political subdivisions, branches, agencies or
instrumentalities, including government-owned or controlled corporations, and financial
institutions with original charters, the constitutional commissions and the judiciary.
Christian V. Asas
Page 401
==============================================
(d) Employee or Member- Any person receiving compensation while in the service of an
employer as defined herein, whether by election or appointment, irrespective of status of
appointment, including barangay and Sanggunian officials.
(e) Active Member- A member who is not separated from the service.
(f) Dependents- Dependents shall be the following: (a) the legitimate spouse 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.
(g) Primary beneficiaries- The legal dependent spouse until he/she remarries and the
dependent children.
(h) Secondary beneficiaries- The dependent parents and, subject to the restrictions on
dependent children, the legitimate descendants.
(i) Compensation- The basic pay or salary received by an employee, pursuant to his
election/appointment, excluding per diems, bonuses, overtime pay, honoraria, allowances and
any other emoluments received in addition to the basic pay which are not integrated into the
basic pay under existing laws.
(j) Contribution- The amount payable to the GSIS by the member and the employer in
accordance with Section 5 of this Act.
(k) Current Daily Compensation- The actual daily compensation or the actual monthly
compensation divided by the number of working days in the month of contingency but not to
exceed twenty-two (22) days.
(l) Average Monthly Compensation (AMC)- The quotient arrived at after dividing the
aggregate compensation received by the member during his last thirty-six (36) months of service
preceding his separation/retirement/ disability/death by thirty-six (36), or by the number of
months he received such compensation if he has less than thirty-six (36) months of
service: Provided, That the average monthly compensation shall in no case exceed the amount
and rate as may be respectively set by the Board under the rules and regulations implementing
this Act as determined by the actuary of the GSIS: Provided, further, That initially the average
monthly compensation shall not exceed Ten thousand pesos (P10,000.00), and premium shall be
nine percent (9%) and twelve percent (12%) for employee and employer covering the AMC limit
and below and two percent (2%) and twelve percent (12%) for employee and employer covering
the compensation above the AMC limit.
Christian V. Asas
Page 402
==============================================
(m) Revalued average monthly compensation- An amount equal to one hundred seventy
percent (170%) of the first One thousand pesos (P1,000.00) of the average monthly
compensation plus one hundred percent (100%) of the average monthly compensation in excess
of One thousand pesos (P1,000.00).
(n) Lump sum- The basic monthly pension multiplied by sixty (60).
(o) Pensioner- Any person receiving old-age permanent total disability pension or any
person who has received the lump sum excluding one receiving survivorship pension benefits as
defined in Section 20 of this Act.
(p) Gainful Occupation- Any productive activity that provided the member with income
at least equal to the minimum compensation of government employees.
(q) Disability- Any loss or impairment of the normal functions of the physical and/or
mental faculty of a member which reduces or eliminates his/her capacity to continue with his/her
current gainful occupation or engage in any other gainful occupation.
(r) Total Disability- Complete incapacity to continue with his present employment or
engage in any gainful occupation due to the loss or impairment of the normal functions of the
physical and/or mental faculties of the member.
(s) Permanent Total Disability- Accrues or arises when recovery from the impairment
mentioned in Section 2 (Q) is medically remote.
(t) Temporary Total Disability- Accrues or arises when the impaired physical and/or
mental faculties can be rehabilitated and/or restored to their normal functions.
(u) Permanent Partial Disability- Accrues or arises upon the irrevocable loss or
impairment of certain portion/s of the physical faculties, despite which the member is able to
pursue a gainful occupation.
b. Membership
Compulsory Membership. - Membership in the GSIS shall be compulsory for all

employees receiving compensation who have not reached the compulsory retirement age,
irrespective of employment status, except members of the Armed Forces of the Philippines and
the Philippine National Police, subject to the condition that they must settle first their financial
obligation with the GSIS, and contractuals who have no employer and employee relationship
with the agencies they serve.
Except for the members of the judiciary and constitutional commissions who shall have
life insurance only, all members of the GSIS shall have life insurance, retirement, and all other
Christian V. Asas
Page 403
==============================================
social security protections such as disability, survivorship, separation, and unemployment

benefits. (Sec. 3, P.D. No. 1146 as amended by R.A. No. 8291)
Effect of Separation from the Service. - A member separated from the service shall
continue to be a member, and shall be entitled to whatever benefits he has qualified to in the
event of any contingency compensable under this Act. (Sec. 4, P.D. No. 1146 as amended by
R.A. No. 8291)
c. Benefits (P.D. No. 1146 as amended by R.A. No. 8291)
Section 9. Computation of the Basic Monthly Pension. - (a) The basic monthly pension is
equal to:
1) thirty-seven and one-half percent (37.5%) of the revalued average monthly

compensation; plus
2) two and one-half percent (2.5%) of said revalued average monthly compensation for
each year of service in excess of (15) years: Provided, That the basic monthly pension shall not
exceed ninety percent (90%) of the average monthly compensation.
(b) The basic monthly pension may be adjusted upon the recommendation of the
President and General Manager of the GSIS and approved by the President of the Philippines in
accordance with the rules and regulations prescribed by the GSIS: Provided, however, that the
basic monthly pension shall not be less than One thousand and three hundred pesos
(P1,300.00): Provided, further, that the basic monthly pension for those who have rendered at
least twenty (20) years of service after the effectivity of this Act shall not be less than Two
thousand four hundred pesos (P2,400.00) a month.
Section 10. Computation of Service. - (a) The computation of service for the purpose of
determining the amount of benefits payable under this Act shall be from the date of original
appointment/election, including periods of service at different times under one or more
employers, those performed overseas under the authority of the Republic of the Philippines, and
those that may be prescribed by the GSIS in coordination with the Civil Service Commission.
(b) All service credited for retirement, resignation or separation for which corresponding
benefits have been awarded under this Act or other laws shall be excluded in the computation of
service in case of reinstatement in the service of an employer and subsequent retirement or
separation which is compensable under this Act.
For the purpose of this section, the term service shall include full-time service with
compensation: Provided, that part-time and other services with compensation may be included
under such rules and regulations as may be prescribed by the GSIS.
Christian V. Asas
Page 404
==============================================
SEPARATION BENEFITS
Section 11. Separation Benefits. - The separation benefits shall consist of: (a) a cash
payment equivalent to one hundred percent (100%) of his average monthly compensation for
each year of service he paid contributions, but not less than Twelve thousand pesos (P12,000)
payable upon reaching sixty (60) years of age upon separation, whichever comes
later: Provided, that the member resigns or separates from the service after he has rendered at
least three (3) years of service but less than fifteen (15) years; or (b) a cash payment equivalent
to eighteen (18) times his basic monthly pension at the time of resignation or separation, plus an
old-age pension benefit equal to the basic monthly pension payable monthly for life upon
reaching the age of sixty (60): Provided, that the member resigns or separates from the service
after he has rendered at least fifteen (15) years of service and is below sixty (60) years of age at
the time of resignation or separation.
Section 12. Unemployment or Involuntary Separation Benefits. - Unemployment benefits

in the form of monthly cash payments equivalent to fifty percent (50%) of the average monthly
compensation shall be paid to a permanent employee who is involuntarily separated from the
service due to the abolition of his office or position usually resulting from
reorganization: Provided, That he has been paying integrated contributions for at least one (1)
year prior to separation. Unemployment benefits shall be paid in accordance with the following
schedules:
Contributions Made Benefit Duration

1 year but less than 3 years 2 months
3 or more years but less than 6 years 3 months
The first payment shall be equivalent to two (2) monthly benefits. A seven-day (7)
waiting period shall be imposed on succeeding monthly payments.
All accumulated unemployment benefits paid to the employee during his entire
membership with the GSIS shall be deducted from voluntary separation benefits.
The GSIS shall prescribe the detailed guidelines in the operationalization of this section
in the rules and regulations implementing this Act.
RETIREMENT BENEFITS
Section 13. Retirement Benefits. - (a) Retirement benefits shall be: (1) the lump sum
payment as defined in this Act payable at the time of retirement plus an old-age pension benefit
equal to the basic monthly pension payable monthly for life, starting upon expiration of the five-
Christian V. Asas
Page 405
==============================================
year (5) guaranteed period covered by the lump sum; or (2) cash payment equivalent to eighteen
(18) months of his basic monthly pension plus monthly pension for life payable immediately
with no five-year (5) guarantee.
(b) Unless the service is extended by appropriate authorities, retirement shall be

compulsory for an employee of sixty-five (65) years of age with at least fifteen (15) years of
service: Provided, That if he has less than fifteen (15) years of service, he may be allowed to
continue in the service in accordance with existing civil service rules and regulations.
Section 13-A. Conditions for Entitlement. - A member who retires from the service shall
be entitled to the retirement benefits enumerated in paragraph (a) of Section 13
hereof: Provided, That:
(1) he has rendered at least fifteen years of service;

(2) he is at least sixty (60) years of age at the time of retirement; and
(3) he is not receiving a monthly pension benefit from permanent total disability.
Section 14. Periodic Pension Adjustment. - The monthly pension of all pensioners
including all those receiving survivorship pension benefits shall be periodically adjusted as may
be recommended by the GSIS actuary and approved by the Board in accordance with the rules
and regulations prescribed by the GSIS.
PERMANENT DISABILITY BENEFITS

Section 15. General Conditions for Entitlement. - A member who suffers permanent
disability for reasons not due to his grave misconduct, notorious negligence, habitual
intoxication, or willful intention to kill himself or another, shall be entitled to the benefits
provided for under Sections 16 and 17 immediately following, subject to the corresponding
conditions thereof.
Section 16. Permanent Total Disability Benefits. - (a) If the permanent disability is total,
he shall receive a monthly income benefit for life equal to the basic monthly pension effective
from the date of disability: Provided, That: (1) he is in the service at the time of disability; or (2)
if separated from the service, he has paid at least thirty-six (36) monthly contributions within the
five (5) year period immediately preceding disability, or has paid a total of at least one hundred
eighty (180) monthly contributions, prior to his disability: Provided, further, That if at the time of
disability, he was in the service and has paid a total of at least one hundred eighty (180) monthly
contributions, in addition to the monthly income benefit, he shall receive a cash payment
equivalent to eighteen (18) times his basic monthly pension: Provided, finally, That a member
cannot enjoy the monthly income benefit for permanent disability and the old-age retirement
simultaneously.
(b) If a member who suffers permanent total disability does not satisfy conditions (1) and
(2) in paragraph (a) of this section but has rendered at least three (3) years of service at the time
Christian V. Asas
Page 406
==============================================
of his disability, he shall be advanced the cash payment equivalent to one hundred percent
(100%) of his average monthly compensation for each year of service he paid contributions, but
not less than Twelve thousand pesos (P12,000.00) which should have been his separation benefit.
(c) Unless the member has reached the minimum retirement age, disability benefit shall
be suspended when: (1) he is reemployed; or (2) he recovers from his disability as determined
by the GSIS, whose decision shall be final and binding; or (3) he fails to present himself for
medical examination when required by the GSIS.
(d) The following disabilities shall be deemed total and permanent: (1) complete loss of
sight of both eyes; (2) loss of two (2) limbs at or above the ankle or wrist; (3) permanent
complete paralysis of two (2) limbs; (4) brain injury resulting in incurable imbecility or insanity;
and (5) such other cases as may be determined by the GSIS.
Section 17. Permanent Partial Disability Benefits. - (a) If the disability is partial, he shall
receive a cash payment in accordance with a schedule of disabilities to be prescribed by the
GSIS: Provided, That he satisfies either conditions (1) or (2) of Section 16 (a); (b) The following
disabilities shall be deemed permanent partial: (1) complete and permanent loss of the use of: (i)
any finger (ii) any toe (iii) one arm (iv) one hand (v) one foot (vi) one leg (vii) one or both ears
(viii) hearing of one or both ears (ix) sight of both eyes (2) such other cases as my be determined
by the GSIS.
TEMPORARY DISABILITY BENEFITS

Section 18. Temporary Total Disability Benefits. - (a) A member who suffers temporary
total disability for reasons not due to any of the conditions enumerated in Section 15 hereof shall
be entitled to seventy-five percent (75%) of his current daily compensation for each day or
fraction thereof of temporary disability benefit not exceeding one hundred twenty (120) days in
one calendar year after exhausting all his sick leave credits and collective bargaining agreement
sick leave benefits, if any, but not earlier than the fourth day of his temporary total
disability: Provided, That: (1) he is in the service at the time of his disability; or (2) if separated,
he has rendered at least three (3) years of service and has paid at least six (6) monthly
contributions in the twelve-month period immediately preceding his disability. Provided,
however, That a member cannot enjoy the temporary total disability benefit and sick leave pay
simultaneously: Provided, further, That if the disability requires more extensive treatment that
lasts beyond one hundred twenty (120) days, the payment of the temporary total disability
benefit may be extended by the GSIS but not to exceed a total of two hundred forty (240) days.
(b) The temporary total disability benefit shall in no case be less than Seventy pesos
(P70.00) a day.
(c) The notices required of the member and the employer, the mode of payment, and the
other requirements for entitlement to temporary total disability benefits shall be provided in the
rules and regulations to be prescribed by the GSIS.
Christian V. Asas
Page 407
==============================================
Section 19. Non-scheduled Disability. - For injuries or illnesses resulting in a disability

not listed in the schedule of partial/total disability provided herein, the GSIS shall determined the
nature of the disability and the corresponding benefits therefor.
SURVIVORSHIP BENEFITS
Section 20. Survivorship Benefits. - When a member or pensioner dies, the beneficiaries
shall be entitled to survivorship benefits provided in Sections 21 and 22 hereunder subject to the
conditions therein provided for. The survivorship pension shall consist of: (1) the basic
survivorship pension which is fifty percent (50%) of the basic monthly pension; and (2) the
dependent children’s pension not exceeding fifty percent (50%) of the basic monthly pension.
Section 21. Death of a Member. - (a) Upon the death of a member, the primary
beneficiaries shall be entitled to: (1) survivorship pension: Provided, That the deceased: (i) was
in the service at the time of his death; or (ii) if separated from the service, has at least three (3)
years of service at the time of his death and has paid thirty-six (36) monthly contributions within
the five-year period immediately preceding his death; or has paid a total of at least one hundred
eighty (180) monthly contributions prior to his death; or (2) the survivorship pension plus a cash
payment equivalent to one hundred percent (100%) of his average monthly compensation for
every year of service: Provided, That the deceased was in the service at the time of his death with
at least three (3) years of service; or (3) a cash payment equivalent to one hundred percent
(100%) of his average monthly compensation for each year of service he paid contributions, but
not less than Twelve thousand pesos (P12,000.00): Provided, That the deceased has rendered at
least three (3) years of service prior to his death but does not qualify for the benefits under item
(1) or (2) of this paragraph.
(b) The survivorship pension shall be paid as follows: (1) when the dependent spouse is
the only survivor, he/she shall receive the basic survivorship pension for life or until he/she
remarries; (2) when only dependent children are the survivors, they shall be entitled to the basic
survivorship pension for as long as they are qualified, plus the dependent children’s pension
equivalent to ten percent (10%) of the basic monthly pension for every dependent child not
exceeding five (5), counted from the youngest and without substitution; (3) when the survivors
are the dependent spouse and the dependent children, the dependent spouse shall receive the
basic survivorship pension for life or until he/she remarries, and the dependent children shall
receive the dependent children’s pension mentioned in the immediately preceding paragraph (2)
hereof.
(c) In the absence of primary beneficiaries, the secondary beneficiaries shall be entitled
to: (1) the cash payment equivalent to one hundred percent (100%) of his average monthly
compensation for each year of service he paid contributions, but not less than Twelve thousand
pesos (P12,000.00): Provided, That the member is in the service at the time of his death and has
Christian V. Asas
Page 408
==============================================
at least three (3) years of service; or (2) in the absence of secondary beneficiaries, the benefits
under this paragraph shall be paid to his legal heirs.
(d) For purposes of the survivorship benefits, legitimate children shall include legally
adopted and legitimated children.
Section 22. Death of a Pensioner. - Upon the death of an old-age pensioner or a member
receiving the monthly income benefit for permanent disability, the qualified beneficiaries shall
be entitled to the survivorship pension defined in Section 20 of this Act, subject to the provisions
of paragraph (b) of Section 21 hereof. When the pensioner dies within the period covered by the
lump sum, the survivorship pension shall be paid only after the expiration of the said period.
FUNERAL BENEFITS
Section 23. Funeral Benefits. - The amount of the funeral benefits shall be determined
and specified by the GSIS in the rules and regulations but shall not be less than Twelve thousand
pesos (P12,000.00): Provided, That it shall be increased to at least Eighteen thousand pesos
(P18,000.00) after five (5) years and shall be paid upon the death of: (a) an active member as
defined under Section 2 (e) of this Act; or (b) a member who has been separated from the
service, but who may be entitled to future benefit pursuant to Section 4 of this Act; or (c) a
pensioner, as defined in Section 2 (o) of this Act; or (d) a retiree who at the time of his retirement
was of pensionable age under this Act but who opted to retire under Republic Act No. 1616.
LIFE INSURANCE BENEFITS

Section 24. Compulsory Life Insurance. - All employees except for Members of the
Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP) shall, under
such terms and conditions as may be promulgated by the GSIS, be compulsorily covered with
life insurance, which shall automatically take effect as follows: (1) for those employed after the
effectivity of this Act, their insurance shall take effect on the date of their employment; (2) for
those whose insurance will mature after the effectivity of this Act, their insurance shall be
deemed renewed on the day following the maturity or expiry date of their insurance; (3) for those
without any life insurance as of the effectivity of this Act, their insurance shall take effect
following said effectivity.
Section 25. Dividends. - An annual dividend may be granted to all members of the GSIS
whose life insurance is in force for at least one (1) year in accordance with a dividends allocation
formula to be determined by the GSIS.
Section 26. Optional Insurance. - Subject to the rules and regulations prescribed by the
GSIS, a member may apply for insurance and/or pre-need coverage embracing life, health,
hospitalization, education, memorial plans, and such other plans as may be designed by the
GSIS, for himself and/or his dependents. Any employer may likewise apply for group insurance
coverage for its employees. The payment of the premiums/installments for optional insurance
Christian V. Asas
Page 409
==============================================
and pre-need products may be made by the insured or his employer and/or any person acceptable
to the GSIS.
Section 27. Reinsurance. - The GSIS may reinsure any of its interests or part thereof with
any private company or reinsurer whether domestic of foreign: Provided, That the GSIS shall
submit an annual report on its reinsurance operations to the Insurance Commission.
d. Claims and Disputes (P.D. No. 1146 as amended by R.A. No. 8291)
Section 28. Prescription. - Claims for benefits under this Act except for life and
retirement shall prescribe after four (4) years from the date of contingency.
Section 29. Facility of Payment. - The GSIS shall prescribe rules and regulations to
facilitate payment of benefits, proceeds, and claims under this Act and any other laws
administered by the GSIS. Payments made by the GSIS prior to its receipt of an adverse claim, to
a beneficiary or claimant subsequently found not entitled thereto, shall not bar the legal and
eligible recipient to his right to demand the payment of benefits, proceeds, and claims from the
GSIS, who shall, however, have a right to institute the appropriate action in a court of law
against the ineligible recipient.
Section 30. Settlement of Disputes. - The GSIS shall have original and exclusive
jurisdiction to settle any disputes arising under this Act and any other laws administered by the
GSIS.
The Board may designate any member of the Board, or official of the GSIS who is a
lawyer, to act as hearing officer to receive evidence, make findings of fact and submit
recommendations, together with all documentary and testimonial evidence to the Board within
thirty (30) working days from the time the parties have closed their respective evidence and filed
their last pleading. The Board shall decide the case within thirty (30) days from the receipt of the
hearing officer’s findings and recommendations. The cases heard directly by the Board shall be
decided within thirty (30) working days from the time they are submitted by the parties for
decision.
Section 31. Appeals. - Appeals from any decision or award of the Board shall be
governed by Rules 43 and 45 of the 1997 Rules of Civil Procedure adopted by the Supreme
Court on April 8, 1997 which will take effect on July 1, 1997: Provided, That pending cases and
those filed prior to July 1, 1997 shall be governed by the applicable rules of procedure: Provided,
further, That the appeal shall take precedence over all other cases except criminal cases when the
penalty of life imprisonment or death or reclusion perpetua is imposable.
The appeal shall not stay the execution of the order or award unless ordered by the Board,
by the Court of Appeals or by the Supreme Court and the appeal shall be without prejudice to the
special civil action of certiorari when proper.
Christian V. Asas
Page 410
==============================================
Section 32. Execution of Decision. - When no appeal is perfected and there is no order to
stay by the Board, by the Court of Appeals or by the Supreme Court, any decision or award of
the Board shall be enforced and executed in the same manner as decisions of the Regional Trial
Court. For this purpose, the Board shall have the power to issue to the city or provincial sheriff
or its appointed sheriff such writs of execution as may be necessary for the enforcement of such
decision or award, and any person who shall fail or refuse to comply with such decision, award,
writ or process after being required to do so shall, upon application by the GSIS, be punished for
contempt.
Section 33. Oaths, Witnesses, and Production of Records. - When authorized by the
Board, an official or employee of the GSIS shall have the power to administer oath and
affirmation, take deposition, certify to official acts, and issue subpoena ad
testificandum and subpoena duces tecum to compel the attendance of witnesses and the
production of books, papers, correspondences, and other records deemed necessary as evidence
in connection with any question arising under this Act. Any case of contumacy shall be dealt
with in accordance with the provisions of Section 580 of the Revised Administrative Code.
e. Portability
The GSIS shall exercise the following powers and functions: xxx (p.) to enter into
agreement with the Social Security System or any other entity, enterprise, corporation or
partnership for the benefit of members transferring from one system to another subject to the
provisions of Republic Act No. 7699, otherwise known as the Portability Law; xxx (Sec. 41, P.D.
No. 1146 as amended by R.A. No. 8291)
Portability shall refer to the transfer of funds for the account and benefit of a worker who
transfers from one system to the other. (Sec. 2(b), R.A. No. 7699)
System shall refer to either the SSS as created under Republic Act No. 1161, as amended
or the GSIS as created under Presidential Decree No. 1146, as amended. (Sec. 2(d), R.A. No.
7699)
Totalization shall refer to the process of adding up the periods of creditable services or
contributions under each of the Systems, for purposes of eligibility and computation of benefits.
(Sec. 2(e), R.A. No. 7699)
Provisions of any general or special law or rules and regulations to the contrary
notwithstanding, a covered worker who transfers employment from one sector to another or is
employed in both sectors shall have his credible services or contributions in both Systems
credited to his service or contribution record in each of the Systems and shall be totalized for
purposes of old-age, disability, survivorship and other benefits in case the covered member does
not qualify for such benefits in either or both Systems without totalization: Provided, however,
Christian V. Asas
Page 411
==============================================
That overlapping periods of membership shall be credited only once for purposes of totalization.
(Sec. 3, R.A. No. 7699)
f. Penalties (R.A. No. 8291)
Section 52. Penalty. - (a) Any person found to have participated directly or indirectly in
the commission of fraud, collusion, falsification, or misrepresentation in any transaction with the
GSIS, whether for him or for some other persons, shall suffer the penalties provided for in
Article 172 of the Revised Penal Code.
(b) Whoever shall obtain or receive any money or check invoking any provision of this
Act or any agreement thereunder, without being entitled thereto with the intent to defraud any
member, any employer, the GSIS, or any third party, shall be punished by a fine of not less than
Five thousand pesos (P5,000.00) nor more than Twenty thousand pesos (P20,000.00) or by
imprisonment of not less than six (6) years and one (1) day to twelve (12) years, or both, at the
discretion of the court.
(c) Whoever fails or refuses to comply with the provisions of this Act or with the rules
and regulations adopted by the GSIS, shall be punished by a fine of not less than Five thousand
pesos (P5,000.00) nor more than Twenty thousand pesos (P20,000.00) or imprisonment of not
less than six (6) years and one (1) day to twelve (12) years, or both, at the discretion of the court.
(d) The treasurer, finance officer, cashier, disbursing officer, budget officer or other
official or employee who fails to include in the annual budget the amount corresponding to the
employer and employee contributions, or who fails or refuses or delays by more than thirty (30)
days from the time such amount becomes due and demandable, or to deduct the monthly
contributions of the employee shall, upon conviction by final judgment, suffer the penalties of
imprisonment from six (6) months and one (1) day to six (6) years, and a fine of not less than
Three thousand pesos (P3,000.00) but not more than Six thousand pesos (P6,000.00), and in
addition, shall suffer absolute perpetual disqualification from holding public office and from
practicing any profession or calling licensed by the government.
(e) Any employee or member who receives or keeps fund or property belonging, payable
or deliverable to the GSIS and appropriates the same, or takes or misappropriates or uses the
same for any purpose other than authorized by this Act, or permits another person to take,
misappropriate or use said fund or property by expressly consenting thereto, or through
abandonment or negligence, or is otherwise guilty of the misappropriation of said fund or
property, in whole or in part, shall suffer the penalties provided in Article 217 of the Revised
Penal Code, and in addition, shall suffer absolute perpetual disqualification from holding public
office and from practicing any profession or calling licensed by the government.
(f) Any employee who, after deducting the monthly contribution or loan amortization
from a member’s compensation, fails to remit the same to the GSIS within thirty (30) days from
Christian V. Asas
Page 412
==============================================
the date they should have been remitted under Section 6(a), shall be presumed to have
misappropriated such contribution or loan amortization and shall suffer the penalties provided in
Article 315 of the Revised Penal Code, and in addition, shall suffer absolute perpetual
disqualification from holding public office and from practicing any profession or calling licensed
by the government.
(g) The heads of the offices of the national government, its political subdivisions,
branches, agencies and instrumentalities, including government-owned or controlled
corporations and government financial institutions, and the personnel of such offices who are
involved in the collection of premium contributions, loan amortization and other accounts due
the GSIS who shall fail, refuse or delay the payment, turnover, remittance or delivery of such
accounts to the GSIS within thirty (30) days from the time that the same shall have been due and
demandable shall, upon conviction by final judgment, suffer the penalties of imprisonment of not
less than one (1) year nor more than five (5) years and a fine of not less than Ten thousand pesos
(P10,000.00) nor more than Twenty thousand pesos (P20,000.00), and in addition, shall suffer
absolute perpetual disqualification from holding public office and from practicing any profession
or calling licensed by the government.
(h) The officers and/or personnel referred to in paragraph (g) of this section shall be liable
not only criminally but also civilly to the GSIS or to the employee or member concerned in the
form of damages, including surcharges and interests.
(i) For the charges or complaints referred to in paragraph (g) of this section, the liabilities
therein set forth shall be construed as waiver of the State of its immunity from suit, hence, the
above-mentioned officials and/or personnel may not invoke the defense of non-suability of the
State.
(j) Failure of the Members of the GSIS Board, including the chairman and the vice-
chairman, to comply with the provisions of paragraph (w) of Section 41 hereof, shall subject
them to imprisonment of not less than six (6) months nor more than one (1) year or a fine of not
less than Five thousand pesos (P5,000.00) nor more than Ten thousand pesos (P10,000.00)
without prejudice to any civil or administrative liability which may also arise therefrom.
(k) Criminal actions arising from violations of the provisions of this Act may be
commenced by the GSIS or by the aggrieved member, either under this Act or, in appropriate
cases, under the Revised Penal Code.
Section 30. Social and Other Benefits. – A domestic worker who has rendered at least
one (1) month of service shall be covered by the Social Security System (SSS), the Philippine
Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund or Pag-
IBIG, and shall be entitled to all the benefits in accordance with the pertinent provisions
provided by law.
Christian V. Asas
Page 413
==============================================
Premium payments or contributions shall be shouldered by the employer. However, if the

domestic worker is receiving a wage of Five thousand pesos (P5,000.00) and above per month,
the domestic worker shall pay the proportionate share in the premium payments or contributions,
as provided by law.
The domestic worker shall be entitled to all other benefits under existing laws.

Reviewer in Labor Law - Labor Standards

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Reviewer in Labor Law - Labor Standards

Uploaded by

Copyright:

Available Formats

(Patterned in the Course Outline of Atty. Charisma I. Nolasco)

a. Labor, in ordinary signification, is understood as physical toil although it does

b. Labor Law consists of statutes, regulations and jurisprudence governing the

c. Labor Standards vs. Labor Relations

As to Subject Matter. Labor standards is the material or the substance to be

d. Social Legislation is defined as those laws that provide particular kinds of

Section 4. No law shall be passed abridging the freedom of speech, of expression, or of

b. Statutes and jurisprudence

To be considered as a regular company practice, the employee must prove by substantial

The declarations of Hidalgo and Velazquez were sufficiently countered by respondent

ISSUE: Whether or not the grant of separation pay is justified.

HELD: No. Moreover, a review of jurisprudence relating to the application of "compassionate

As to the matter of the proper amount of separation pay to be awarded to private

a. Four-fold test applied

ISSUE: Whether or not Coming is an employee of SEIRI.

ISSUE: Whether or not Alcantara is an employee of Royale.

In determining the existence of an employer-employee relationship, this Court has

As the party claiming the existence of employer-employee relationship, it behoved upon

David vs. Macasio, G.R. No. 195466, July 2, 2014, Brion, J.

ISSUE: Whether or not Macasio is an employee of David.

To determine the existence of an employer-employee relationship, four elements

A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to

In sum, the existence of employment relationship between the parties is determined by

b. Economic reality/dependence test

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning

ISSUE: Whether or not Francisco is an employee of Kasei Corporation.

comprehensive analysis of the true classification of the individual, whether as employee,

It is therefore apparent that petitioner is economically dependent on respondent

In Domasig v. National Labor Relations Commission, we held that in a business

ISSUE: Whether or not Orozco is an employee of PDI.

b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines

There is no inflexible rule to determine if a person is an employee or an independent

On this point, Sonza v. ABS-CBN Broadcasting Corporation is enlightening. In that case,

A radio broadcast specialist who works under minimal supervision is an independent

c. Who determines employer-employee relationship

The DOLE, in determining the existence of an employer-employee relationship, has a

The determination of the existence of an employer-employee relationship by the DOLE

If the DOLE makes a finding that there is an existing employer-employee relationship, it

disproportionate to respondents absences in view of SMCs inconsistent and lax implementation

It is axiomatic that appropriate disciplinary sanction is within the purview of management

b. Not subject to judicial interference; Exceptions

c. Exercise in good faith

Ymbong vs. ABS-CBN, G.R. No. 184885, March 7, 2012, Villarama, J.

Doctrine. We have consistently held that so long as a company’s management

6.6. Any mass media columnist, commentator, announcer, reporter, on-air

d. Transfer; Promotion (demotion)

Doctrine. Being piece-rate workers assigned to individual sewing machines,

"[D]emotion involves a situation in which an employee is relegated to a subordinate or

a. Prohibition against competitive employment

Doctrine. In cases where an employee assails a contract containing a provision

We are not impervious of the distinction between restrictive covenants barring an

retirement plans either incorporated in employment contracts or in collective bargaining

A post-retirement competitive employment restriction is designed to protect the employer

b. Prohibition on employment of relatives

United Kimberly-Clark Employees Union vs. Kimberly-Clark Philippines, G.R. No.

Doctrine. A CBA is more than a contract; it is a generalized code to govern a myriad of

D. Definition of the phrase "immediate member of the family of an employee"

2. A resigned/retired employee may be allowed to recommend a collateral relative within

a. Where the retired/resigned employee is single or if married has no legitimate

1. The privilege to recommend a replacement can be exercised by the employee

a. where the recommendee fails to pass in his performance evaluation.

b. where the recommendee resigns without completing his probationary period.