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FIRST DIVISION March 24, 1987: Secretary of Labor certified the complaint to the NLRC for

G.R. No. 88168 August 30, 1990 resolution.

TRADERS ROYAL BANK, petitioner, In the meantime, the parties who had been negotiating for a collective
vs. bargaining agreement, agreed on the terms of the CBA, to wit:
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL 1. The whole of the bonuses given in previous years is not demandable,
BANK EMPLOYEES UNION, respondents. i.e., there is no diminution, as to be liable for a differential, if the bonus
given is less than that in previous years.
GRIÑO-AQUINO, J.
2. Since only two months bonus is guaranteed, only to that extent are
CASE: This petition for certiorari seeks to nullify or set aside the NLRC bonuses deemed part of regular compensation.
Decision (September 2, 1988), which found the petitioner, Traders Royal
Bank (or TRB), guilty of diminution of benefits due the private respondents 3. As regards the 3rd and 4th bonuses, they are entirely dependent on the
and ordered it to pay the said employees' claims for differentials in their income of the bank, and not demandable as part of compensation.
holiday, mid-year, and year-end bonuses.
Despite the terms of the CBA, however, the union insisted on pursuing the
FACTS: case, arguing that the CBA would apply prospectively only to claims arising
November 18, 1986: the Union (through its president) filed a letter- after its effectivity.
complaint against TRB -> Conciliation Division of the Bureau of Labor
Relations claiming that: Petitioner, on the other hand, insisted that it had paid the employees
holiday pay. The practice of giving them bonuses at year's end, would
1st: the management of TRB per memo (October 10, 1986) paid the depend on how profitable the operation of the bank had been. Generally,
employees their HOLIDAY PAY, but withheld basis of their computation. the bonus given was 2 months basic mid-year and 2 months gross end-
year.
2nd: the computation in question, has allegedly decreased the daily salary
rate of the employees. This diminution of existing benefits has decreased September 2, 1988: NLRC rendered a decision in favor of the employees
our overtime rate and has affected the employees' take home pay. and ordered respondent bank to pay petitioner members-employees the
following:
3rd: the diminution of benefits being enjoyed by the employees since time
immemorial, e.g. mid-year bonus, from 2 months gross pay to 2 months 1. Holiday differential for the period covering 1983-1986 as embodied in
basic and year-end bonus from 3 months gross to only 2 months. Resolution No. 4984-1986 of respondent's Board of Directors but to start
from November 11, 1983 and using the Divisor 251 days in determining
4th: the refusal by management to recall active union members from the the daily rate of the employees;
branches which were being transferred without prior notice, solely at the
instance of the branch manager. (p. 26, Rollo.) 2. Mid-year bonus differential representing the difference between 2
months gross pay and 2 months basic pay and end-year bonus differential
TRB’s Answer: TRB pointed out that the NLRC, not the Bureau of Labor of 1 month gross pay for 1986.
Relations, had jurisdiction over the money claims of the employees.
The claim for holiday differential for the period earlier than November 11,
1983 is hereby dismissed, the same having prescribed.

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company practice that may not be adjusted to the prevailing financial
Likewise, the charge of unfair labor practice against the respondent condition of the Bank has no legal and moral bases. Its fiscal condition
company is hereby dismissed for lack of merit. (pp. 72-73, Rollo.) having declined, the Bank may not be forced to distribute bonuses which it
can no longer afford to pay and, in effect, be penalized for its past
TRB’s MR -> NLRC. DENIED. Hence, this petition for certiorari. generosity to its employees.

ISSUE: WON TRB may be obliged to pay bonuses to its employees NO Private respondent's contention, that the decrease in the midyear and
year-end bonuses constituted a diminution of the employees' salaries, is
HELD: There is merit in the petitioner's contention that the NLRC gravely not correct, for bonuses are not part of labor standards in the same
abused its discretion in ordering it to pay mid-year/year-end bonus class as salaries, cost of living allowances, holiday pay, and leave
differential for 1986 to its employees. benefits, which are provided by the Labor Code.

A bonus is "a gratuity or act of liberality of the giver which the recipient Disposition: WHEREFORE, the petition for certiorari is granted. The NLRC
has no right to demand as a matter of right" (Aragon vs. Cebu Portland decision is modified by deleting the award of bonus differentials to the
Cement Co.). "It is something given in addition to what is ordinarily employees for 1986. In other respects, the decision is affirmed. Costs
received by or strictly due the recipient." The granting of a bonus is against the respondent union.
basically a management prerogative which cannot be forced upon the
employer "who may not be obliged to assume the onerous burden of THIRD DIVISION
granting bonuses or other benefits aside from the employee's basic G.R. No. 157802 October 13, 2010
salaries or wages" . . . (Kamaya Point Hotel vs. National Labor Relations
Commission, Federation of Free Workers and Nemia Quiambao). MATLING INDUSTRIAL AND COMMERCIAL CORPORATION,
RICHARD K. SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA,
It is clear from the above-cited rulings that the petitioner may not be Petitioners,
obliged to pay bonuses to its employees. The matter of giving them vs.
bonuses over and above their lawful salaries and allowances is entirely RICARDO R. COROS, Respondent.
dependent on the profits, if any, realized by the Bank from its operations
during the past year. BERSAMIN, J.
This case reprises the jurisdictional conundrum of whether a complaint for
From 1979-1985, the bonuses were less because the income of the Bank illegal dismissal is cognizable by the Labor Arbiter (LA) or by the Regional
had decreased. In 1986, the income of the Bank was only 20.2 million Trial Court (RTC). The determination of whether the dismissed officer was
pesos, but the Bank still gave out the usual 2 months basic mid-year and 2 a regular employee or a corporate officer unravels the conundrum. In the
months gross year-end bonuses. The petitioner pointed out, however, that case of the regular employee, the LA has jurisdiction; otherwise, the RTC
the Bank weakened considerably after 1986 on account of political exercises the legal authority to adjudicate.
developments in the country. Suspected to be a Marcos-owned or
controlled bank, it was placed under sequestration by the present Facts: After his dismissal by Matling as its Vice President for Finance and
administration and is now managed by the Presidential Commission on Administration, the respondent filed on August 10, 2000 a complaint for
Good Government (PCGG). illegal suspension and illegal dismissal against Matling and some of its
corporate officers (petitioners) in the NLRC, Sub-Regional Arbitration
In the light of these submissions of the petitioner, the contention of the Branch XII, Iligan City. The petitioners moved to dismiss the complaint,
Union that the granting of bonuses to the employees had ripened into a raising the ground, among others, that the complaint pertained to the

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jurisdiction of the Securities and Exchange Commission (SEC) due to the 3. If accompanied with a claim for reinstatement, those cases that workers
controversy being intracorporate inasmuch as the respondent was a may file involving wages, rates of pay, hours of work and other terms and
member of Matlings Board of Directors aside from being its Vice-President conditions of employment;
for Finance and Administration prior to his termination. The respondent 4. Claims for actual, moral, exemplary and other forms of damages arising
opposed the petitioners motion to dismiss, insisting that his status as a from the employer-employee relations;
member of Matlings Board of Directors was doubtful, considering that he 5. Cases arising from any violation of Article 264 of this Code, including
had not been formally elected as such; that he did not own a single share questions involving the legality of strikes and lockouts; and
of stock in Matling, considering that he had been made to sign in blank an 6. Except claims for Employees Compensation, Social Security, Medicare
undated indorsement of the certificate of stock he had been given in 1992; and maternity benefits, all other claims arising from employer-employee
that Matling had taken back and retained the certificate of stock in its relations, including those of persons in domestic or household service,
custody; and that even assuming that he had been a Director of Matling, involving an amount exceeding five thousand pesos (P 5,000.00)
he had been removed as the Vice President for Finance and regardless of whether accompanied with a claim for reinstatement.
Administration, not as a Director, a fact that the notice of his termination
dated April 10, 2000 showed. On October 16, 2000, the LA granted the (b) The Commission shall have exclusive appellate jurisdiction over all
petitioners motion to dismiss, ruling that the respondent was a corporate cases decided by Labor Arbiters. (c) Cases arising from the interpretation
officer because he was occupying the position of Vice President for Finance or implementation of collective bargaining agreements and those arising
and Administration and at the same time was a Member of the Board of from the interpretation or enforcement of company personnel policies shall
Directors of Matling; and that, consequently, his removal was a corporate be disposed of by the Labor Arbiter by referring the same to the grievance
act of Matling and the controversy resulting from such removal was under machinery and voluntary arbitration as may be provided in said
the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of agreements.
Presidential Decree No. 902.
Where the complaint for illegal dismissal concerns a corporate officer,
Issue: Whether or not the respondent is a corporate officer within the however, the controversy falls under the jurisdiction of the Securities and
jurisdiction of the regular courts. Exchange Commission (SEC), because the controversy arises out of intra-
corporate or partnership relations between and among stockholders,
Held: No. As a rule, the illegal dismissal of an officer or other employee of members, or associates, or between any or all of them and the
a private employer is properly cognizable by the LA. This is pursuant to corporation, partnership, or association of which they are stockholders,
Article 217 (a) 2 of the Labor Code, as amended, which provides as members, or associates, respectively; and between such corporation,
follows: partnership, or association and the State insofar as the controversy
concerns their individual franchise or right to exist as such entity; or
Article 217. Jurisdiction of the Labor Arbiters and the Commission. – (a) because the controversy involves the election or appointment of a director,
Except as otherwise provided under this Code, the Labor Arbiters shall trustee, officer, or manager of such corporation, partnership, or
have original and exclusive jurisdiction to hear and decide, within thirty association. Such controversy, among others, is known as an intra-
(30) calendar days after the submission of the case by the parties for corporate dispute.
decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non- Effective on August 8, 2000, upon the passage of Republic Act No. 8799,
agricultural: otherwise known as The Securities Regulation Code, the SECs jurisdiction
over all intra-corporate disputes was transferred to the RTC, pursuant to
1. Unfair labor practice cases; Section 5.2 of RA No. 8799.
2. Termination disputes;

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Thus, pursuant to the above provision (Section 25 of the Corporation Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC.,
Code), whoever are the corporate officers enumerated in the by-laws are Respondents.
the exclusive Officers of the corporation and the Board has no power to
create other Offices without amending first the corporate By-laws. AUSTRIA-MARTINEZ, J.:
However, the Board may create appointive positions other than the
positions of corporate Officers, but the persons occupying such positions FACTS: Petitioner was hired by Gallant Maritime Services, Inc. and Marlow
are not considered as corporate officers within the meaning of Section 25 Navigation Co., Ltd. (respondents) under a Philippine Overseas
of the Corporation Code and are not empowered to exercise the functions Employment Administration (POEA)-approved Contract of Employment
of the corporate Officers, except those functions lawfully delegated to with the following terms and conditions:
them. Their functions and duties are to be determined by the Board of
Directors/Trustees. Duration of contract 12 months
Position Chief Officer
Moreover, the Board of Directors of Matling could not validly delegate the Basic monthly salary US$1,400.00
power to create a corporate office to the President, in light of Section 25 of Hours of work 48.0 hours per week
the Corporation Code requiring the Board of Directors itself to elect the Overtime US$700.00 per month
corporate officers. Verily, the power to elect the corporate officers was a Vacation leave with pay 7.00 days per month
discretionary power that the law exclusively vested in the Board of
Directors, and could not be delegated to subordinate officers or agents. March 19, 1998 (date of his departure): petitioner was constrained to
The office of Vice President for Finance and Administration created by accept a downgraded employment contract for the position of Second
Matlings President pursuant to By Law No. V was an ordinary, not a Officer with a monthly salary of US$1,000.00, upon the assurance and
corporate, office. representation of respondents that he would be made Chief Officer by the
end of April 1998.
The criteria for distinguishing between corporate officers who may be
ousted from office at will, on one hand, and ordinary corporate employees Respondents did not deliver on their promise to make petitioner Chief
who may only be terminated for just cause, on the other hand, do not Officer. Hence, petitioner refused to stay on as Second Officer and was
depend on the nature of the services performed, but on the manner of repatriated to the Philippines on May 26, 1998.
creation of the office. In the respondents case, he was supposedly at once
an employee, a stockholder, and a Director of Matling. The circumstances Petitioner's employment contract was for a period of 12 months (March 19,
surrounding his appointment to office must be fully considered to 1998 - March 19, 1999) but at the time of his repatriation on May 26,
determine whether the dismissal constituted an intra-corporate 1998, he had served only 2 months and 7 days of his contract, leaving an
controversy or a labor termination dispute. We must also consider whether unexpired portion of 9 months and 23 days.
his status as Director and stockholder had any relation at all to his
appointment and subsequent dismissal as Vice President for Finance and Petitioner filed with the Labor Arbiter (LA) a Complaint against
Administration. respondents for constructive dismissal and for payment of his money
claims in the total amount of US$26,442.73.
EN BANC
G.R. No. 167614 March 24, 2009 LA rendered a Decision (July 15, 1999) declaring the dismissal of petitioner
illegal and awarding him monetary benefits in the amount of US
ANTONIO M. SERRANO, Petitioner, $8,770.00, representing the complainant’s salary for 3 months of the
vs. unexpired portion of the aforesaid contract of employment.

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this Court in its Resolution (August 7, 2003) which granted the petition for
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based certiorari.
his computation on the salary period of three months only -- rather than
the entire unexpired portion of nine months and 23 days of petitioner's December 8, 2004: CA AFFIRMED NLRC ruling on the reduction of the
employment contract - applying the subject clause. However, the LA applicable salary rate; however, the CA skirted the constitutional issue
applied the salary rate of US$2,590.00, consisting of petitioner's "basic raised by petitioner.
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, +
US$490.00/month, vacation leave pay = US$2,590.00/compensation per Petitioner’s MR having been denied by the CA, petitioner brings his cause
month." to this Court.

Respondents’ Appeal -> NLRC to question the finding of the LA that On the first and second issues
petitioner was illegally dismissed.
The unanimous finding of the LA, NLRC and CA that the dismissal of
Petitioner’s Appeal -> NLRC on the sole issue that the LA erred in not petitioner was illegal is not disputed. Likewise not disputed is the salary
applying the ruling of the Court in Triple Integrated Services, Inc. v. NLRC differential of US$45.00 awarded to petitioner in all three fora. What
that in case of illegal dismissal, OFWs are entitled to their salaries for the remains disputed is only the computation of the lump-sum salary to be
unexpired portion of their contracts. awarded to petitioner by reason of his illegal dismissal.

Last clause in the 5th paragraph of Section 10, Republic Act (R.A.) No. Applying the subject clause, the NLRC and the CA computed the lump-sum
8042 salary of petitioner at the monthly rate of US$1,400.00 covering the period
of three months out of the unexpired portion of 9 months and 23 days of
Sec. 10. Money Claims. - x x x In case of termination of overseas his employment contract or a total of US$4,200.00.
employment without just, valid or authorized cause as defined by law or
contract, the workers shall be entitled to the full reimbursement of his Impugning the constitutionality of the subject clause, petitioner contends
placement fee with interest of twelve percent (12%) per annum, plus his that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he
salaries for the unexpired portion of his employment contract or for three is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to
(3) months for every year of the unexpired term, whichever is less. his salaries for the entire 9 months and 23 days left of his employment
contract, computed at the monthly rate of US$2,590.00.
June 15, 2000: NLRC modified the LA Decision. NLRC corrected the LA's
computation of the lump-sum salary awarded to petitioner by reducing the ISSUE: WON the last clause in the 5th paragraph of Section 10, Republic
applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. Act (R.A.) No. 8042 is constitutional NO
8042 "does not provide for the award of overtime pay, which should be
proven to have been actually performed, and for vacation leave pay." Petitioner contends that the subject clause is unconstitutional because it
unduly impairs the freedom of OFWs to negotiate for and stipulate in their
Petitioner’s Motion for Partial Reconsideration -> NLRC. But this time he overseas employment contracts a determinate employment period and a
questioned the constitutionality of the subject clause. DENIED. fixed salary package. It also impinges on the equal protection clause, for it
treats OFWs differently from local Filipino workers (local workers) by
Petitioner’s Petition for Certiorari -> CA, reiterating the constitutional putting a cap on the amount of lump-sum salary to which OFWs are
challenge against the subject clause. After initially dismissing the petition entitled in case of illegal dismissal, while setting no limit to the same
on a technicality, the CA eventually gave due course to it, as directed by monetary award for local workers when their dismissal is declared illegal;

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that the disparate treatment is not reasonable as there is no substantial tribunals and the CA computed his monetary award based on the salary
distinction between the two groups;33 and that it defeats Section 18, period of 3 months only as provided under the subject clause.
Article II of the Constitution which guarantees the protection of the rights
and welfare of all Filipino workers, whether deployed locally or overseas. Records disclose that the issue on the constitutionality of the subject
Lastly, petitioner claims that the subject clause violates the due process clause was first raised, not in petitioner's appeal with the NLRC, but in his
clause, for it deprives him of the salaries and other emoluments he is Motion for Partial Reconsideration with said labor tribunal, and reiterated in
entitled to under his fixed-period employment contract. his Petition for Certiorari before the CA. Nonetheless, the issue is deemed
seasonably raised because it is not the NLRC but the CA which has the
Respondents contend that the constitutional issue should not be competence to resolve the constitutional issue. The NLRC is a labor
entertained, for this was belatedly interposed by petitioner in his appeal tribunal that merely performs a quasi-judicial function – its function in the
before the CA, and not at the earliest opportunity, which was when he filed present case is limited to determining questions of fact to which the
an appeal before the NLRC. legislative policy of R.A. No. 8042 is to be applied and to resolving such
questions in accordance with the standards laid down by the law itself;
The Solicitor General (OSG) points out that as R.A. No. 8042 took effect thus, its foremost function is to administer and enforce R.A. No. 8042, and
on July 15, 1995, its provisions could not have impaired petitioner's 1998 not to inquire into the validity of its provisions. The CA, on the other hand,
employment contract. Rather, R.A. No. 8042 having preceded petitioner's is vested with the power of judicial review or the power to declare
contract, the provisions thereof are deemed part of the minimum terms of unconstitutional a law or a provision thereof, such as the subject clause.
petitioner's employment, especially on the matter of money claims, as this Petitioner's interposition of the constitutional issue before the CA was
was not stipulated upon by the parties. undoubtedly seasonable. The CA was therefore remiss in failing to take up
the issue in its decision.
Moreover, the OSG emphasizes that OFWs and local workers differ in
terms of the nature of their employment, such that their rights to Does the subject clause violate Section 10, Article III of the
monetary benefits must necessarily be treated differently. The OSG Constitution on non-impairment of contracts? NO
enumerates the essential elements that distinguish OFWs from local
workers: first, while local workers perform their jobs within Philippine Petitioner's claim that the subject clause unduly interferes with the
territory, OFWs perform their jobs for foreign employers, over whom it is stipulations in his contract on the term of his employment and the fixed
difficult for our courts to acquire jurisdiction, or against whom it is almost salary package he will receive is not tenable.
impossible to enforce judgment; and second, as held in Coyoca v. National
Labor Relations Commission and Millares v. National Labor Relations Section 10, Article III of the Constitution provides: No law impairing the
Commission, OFWs are contractual employees who can never acquire obligation of contracts shall be passed.
regular employment status, unlike local workers who are or can become
regular employees. Hence, the OSG posits that there are rights and The prohibition is aligned with the general principle that laws newly
privileges exclusive to local workers, but not available to OFWs; that these enacted have only a prospective operation, and cannot affect acts or
peculiarities make for a reasonable and valid basis for the differentiated contracts already perfected; however, as to laws already in existence, their
treatment under the subject clause of the money claims of OFWs who are provisions are read into contracts and deemed a part thereof. Thus, the
illegally dismissed. Thus, the provision does not violate the equal non-impairment clause under Section 10, Article II is limited in application
protection clause nor Section 18, Article II of the Constitution. 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
HELD: Without a doubt, there exists in this case an actual controversy intention of the parties thereto.
directly involving petitioner who is personally aggrieved that the labor

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As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995
preceded the execution of the employment contract between petitioner Upon cursory reading, the subject clause appears facially neutral, for it
and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, applies to all OFWs. However, a closer examination reveals that the
particularly the subject clause, impaired the employment contract of the subject clause has a discriminatory intent against, and an invidious impact
parties. Rather, when the parties executed their 1998 employment on, OFWs at two levels:
contract, they were deemed to have incorporated into it all the provisions
of R.A. No. 8042. First, OFWs with employment contracts of less than one year vis-à-vis
OFWs with employment contracts of one year or more;
But even if the Court were to disregard the timeline, the subject clause
may not be declared unconstitutional on the ground that it impinges on the Second, among OFWs with employment contracts of more than one year;
impairment clause, for the law was enacted in the exercise of the police and
power of the State to regulate a business, profession or calling, particularly
the recruitment and deployment of OFWs, with the noble end in view of Third, OFWs vis-à-vis local workers with fixed-period employment;
ensuring respect for the dignity and well-being of OFWs wherever they
may be employed. Police power legislations adopted by the State to OFWs with employment contracts of less than one year vis-à-vis OFWs
promote the health, morals, peace, education, good order, safety, and with employment contracts of one year or more
general welfare of the people are generally applicable not only to future
contracts but even to those already in existence, for all private contracts As pointed out by petitioner, it was in Marsaman Manning Agency, Inc. v.
must yield to the superior and legitimate measures taken by the State to National Labor Relations Commission (Second Division, 1999) that the
promote public welfare. Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:
Does the subject clause violate Section 1, Article III of the
Constitution, and Section 18, Article II and Section 3, Article XIII A plain reading of Sec. 10 clearly reveals that the choice of which amount
on labor as a protected sector? YES to award an illegally dismissed overseas contract worker, i.e., whether his
salaries for the unexpired portion of his employment contract or three (3)
Section 1, Article III of the Constitution guarantees: months’ salary for every year of the unexpired term, whichever is less,
comes into play only when the employment contract concerned has a term
No person shall be deprived of life, liberty, or property without due process of at least one (1) year or more. This is evident from the words "for every
of law nor shall any person be denied the equal protection of the law. year of the unexpired term" which follows the words "salaries x x x for
three months." To follow petitioners’ thinking that private respondent is
Section 18, Article II and Section 3, Article XIII accord all members of the entitled to three (3) months salary only simply because it is the lesser
labor sector, without distinction as to place of deployment, full protection amount is to completely disregard and overlook some words used in the
of their rights and welfare. statute while giving effect to some. This is contrary to the well-established
rule in legal hermeneutics that in interpreting a statute, care should be
To Filipino workers, the rights guaranteed under the foregoing taken that every part or word thereof be given effect since the law-making
constitutional provisions translate to economic security and parity: all body is presumed to know the meaning of the words employed in the
monetary benefits should be equally enjoyed by workers of similar statue and to have used them advisedly. Ut res magis valeat quam pereat.
category, while all monetary obligations should be borne by them in equal
degree; none should be denied the protection of the laws which is enjoyed The first category includes OFWs with fixed-period employment contracts
by, or spared the burden imposed on, others in like circumstances. of less than one year; in case of illegal dismissal, they are entitled to their

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salaries for the entire unexpired portion of their contract. The second year of the unexpired term, whichever is less" shall apply is not the length
category consists of OFWs with fixed-period employment contracts of one of the original contract period as held in Marsaman, but the length of the
year or more; in case of illegal dismissal, they are entitled to monetary unexpired portion of the contract period -- the subject clause applies in
award equivalent to only 3 months of the unexpired portion of their cases when the unexpired portion of the contract period is at least one
contracts. year, which arithmetically requires that the original contract period be
Prior to the effectivity of R.A. No. 8042 on July 14, 1995, illegally more than one year.
dismissed OFWs, no matter how long the period of their employment
contracts, were entitled to their salaries for the entire unexpired portions Viewed in that light, the subject clause creates a sub-layer of
of their contracts. discrimination among OFWs whose contract periods are for more than one
year: those who are illegally dismissed with less than one year left in their
It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract contracts shall be entitled to their salaries for the entire unexpired portion
periods or the unexpired portions thereof, were treated alike in terms of thereof, while those who are illegally dismissed with one year or more
the computation of their monetary benefits in case of illegal dismissal. remaining in their contracts shall be covered by the subject clause, and
Their claims were subjected to a uniform rule of computation: their basic their monetary benefits limited to their salaries for three months only.
salaries multiplied by the entire unexpired portion of their employment
contracts. In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term
employment who were illegally discharged were treated alike in terms of
The enactment of the subject clause in R.A. No. 8042 introduced a the computation of their money claims: they were uniformly entitled to
differentiated rule of computation of the money claims of illegally their salaries for the entire unexpired portions of their contracts. But with
dismissed OFWs based on their employment periods, in the process the enactment of R.A. No. 8042, specifically the adoption of the subject
singling out one category whose contracts have an unexpired portion of clause, illegally dismissed OFWs with an unexpired portion of one year or
one year or more and subjecting them to the peculiar disadvantage of more in their employment contract have since been differently treated in
having their monetary awards limited to their salaries for 3 months or for that their money claims are subject to a 3-month cap, whereas no such
the unexpired portion thereof, whichever is less, but all the while sparing limitation is imposed on local workers with fixed-term employment.
the other category from such prejudice, simply because the latter's
unexpired contracts fall short of one year. The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits
Among OFWs With Employment Contracts of More Than One Year of fixed-term employees who are illegally discharged, it imposes a
3-month cap on the claim of OFWs with an unexpired portion of
The Court notes that the subject clause "or for three (3) months for every one year or more in their contracts, but none on the claims of other
year of the unexpired term, whichever is less" contains the qualifying OFWs or local workers with fixed-term employment. The subject
phrases "every year" and "unexpired term." By its ordinary meaning, the clause singles out one classification of OFWs and burdens it with a
word "term" means a limited or definite extent of time. Corollarily, that peculiar disadvantage.
"every year" is but part of an "unexpired term" is significant in many
ways: first, the unexpired term must be at least one year, for if it were There being a suspect classification involving a vulnerable sector protected
any shorter, there would be no occasion for such unexpired term to be by the Constitution, the Court now subjects the classification to a strict
measured by every year; and second, the original term must be more than judicial scrutiny, and determines whether it serves a compelling state
one year, for otherwise, whatever would be the unexpired term thereof will interest through the least restrictive means.
not reach even a year. Consequently, the more decisive factor in the
determination of when the subject clause "for three (3) months for every

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Government has failed to discharge its burden of proving the existence of "performed" in excess of the regular eight hours, and holiday pay is
a compelling state interest that would justify the perpetuation of the compensation for any work "performed" on designated rest days and
discrimination against OFWs under the subject clause. holidays.
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 By the foregoing definition alone, there is no basis for the automatic
him of property, consisting of monetary benefits, without any existing valid inclusion of overtime and holiday pay in the computation of petitioner's
governmental purpose. monetary award, unless there is evidence that he performed work during
those periods.
The argument of the Solicitor General, that the actual purpose of the
subject clause of limiting the entitlement of OFWs to their three-month EN BANC
salary in case of illegal dismissal, is to give them a better chance of getting G.R. No. 170139 August 5, 2014
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 SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,
leading to its enactment or the pleadings of respondent that would indicate vs.
that there is an existing governmental purpose for the subject clause, or JOY C. CABILES, Respondent.
even just a pretext of one.
LEONEN, J.:
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 CASE: Petition for review on certiorari assailing the CA Decision (June 27,
petitioner's right to equal protection, but also her right to substantive due 2005) which partially affirmed the NLRC Resolution (March 31, 2004)
process under Section 1, Article III of the Constitution. declaring respondent’s dismissal illegal, directing petitioner to pay
respondent’s three-month salary equivalent to New Taiwan Dollar (NT$)
The subject clause being unconstitutional, petitioner is entitled to his 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from
salaries for the entire unexpired period of nine months and 23 days of his respondent, and pay her NT$300.00 attorney’s fees.
employment contract, pursuant to law and jurisprudence prior to the
enactment of R.A. No. 8042. FACTS: Petitioner, Sameer Overseas Placement Agency, Inc., is a
recruitment and placement agency. Responding to an ad it published,
On the Third Issue respondent, Joy C. Cabiles, submitted her application for a quality control
job in Taiwan.
Petitioner contends that his overtime and leave pay should form part of
the salary basis in the computation of his monetary award, because these Joy’s application was accepted. Joy was later asked to sign a one-year
are fixed benefits that have been stipulated into his contract. employment contract for a monthly salary of NT$15,360.00. She alleged
that Sameer Overseas Agency required her to pay a placement fee of
Petitioner is mistaken. ₱70,000.00 when she signed the employment contract.

The word salaries in Section 10(5) does not include overtime and leave Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26,
pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1997. She alleged that in her employment contract, she agreed to work as
1996, provides a Standard Employment Contract of Seafarers, in which quality control for one year. In Taiwan, she was asked to work as a cutter.
salary is understood as the basic wage, exclusive of overtime, leave pay
and other bonuses; whereas overtime pay is compensation for all work

9
Sameer Overseas Placement Agency claims that on July 14, 1997, a Pacific and considered the matter immaterial in view of the dismissal of
certain Mr. Huwang from Wacoal informed Joy, without prior notice, that respondent’s complaint.
she was terminated and that "she should immediately report to their office
to get her salary and passport." She was asked to "prepare for immediate March 31, 2004: Joy’s Appeal -> NLRC. GRANTED.
repatriation. Joy was illegally dismissed. It reiterated the doctrine that the burden of
Joy claims that she was told that from June 26 to July 14, 1997, she only proof to show that the dismissal was based on a just or valid cause
earned a total of NT$9,000.According to her, Wacoal deducted NT$3,000 belongs to the employer. It found that Sameer Overseas Placement
to cover her plane ticket to Manila. Agency failed to prove that there were just causes for termination. There
was no sufficient proof to show that respondent was inefficient in her work
October 15, 1997: Joy filed a complaint -> NLRC, against petitioner and and that she failed to comply with company requirements. Furthermore,
Wacoal. She claimed that she was illegally dismissed. She asked for the procedural due process was not observed in terminating respondent.
return of her placement fee, the withheld amount for repatriation costs,
payment of her salary for 23 months as well as moral and exemplary The NLRC did not rule on the issue of reimbursement of placement fees for
damages. She identified Wacoal as Sameer Overseas Placement Agency’s lack of jurisdiction. It refused to entertain the issue of the alleged transfer
foreign principal. of obligations to Pacific. It did not acquire jurisdiction over that issue
because Sameer Overseas Placement Agency failed to appeal the LA’s
Sameer Overseas Placement Agency alleged that respondent's termination decision not to rule on the matter.
was due to her inefficiency, negligence in her duties, and her "failure to
comply with the work requirements [of] her foreign [employer]." The The NLRC awarded respondent only 3 months worth of salary in the
agency also claimed that it did not ask for a placement fee of ₱70,000.00. amount of NT$46,080, the reimbursement of the NT$3,000 withheld from
As evidence, it showed Official Receipt No. 14860 dated June 10, 1997, her, and attorney’s fees of NT$300.
bearing the amount of ₱20,360.00. Petitioner added that Wacoal's
accreditation with petitioner had already been transferred to the Pacific July 2, 2004: Sameer’s MR -> NLRC. DENIED.
Manpower & Management Services, Inc. (Pacific) as of August 6, 1997.
Thus, petitioner asserts that it was already substituted by Pacific Sameer Overseas Placement Agency caused the filing of a petition49 for
Manpower. certiorari with the Court of Appeals assailing the National Labor Relations
Commission’s resolutions.
Pacific Manpower moved for the dismissal of petitioner’s claims against it.
It alleged that there was no employer-employee relationship between CA AFFIRMED NLRC DECISION with respect to the finding of illegal
them. Therefore, the claims against it were outside the jurisdiction of the dismissal, Joy’s entitlement to the equivalent of 3 months worth of salary,
Labor Arbiter. Pacific Manpower argued that the employment contract reimbursement of withheld repatriation expense, and attorney’s fees. The
should first be presented so that the employer’s contractual obligations CA remanded the case to the NLRC to address the validity of petitioner's
might be identified. It further denied that it assumed liability for allegations against Pacific. The CA held, thus: Although the public
petitioner’s illegal acts. respondent found the dismissal of the complainant-respondent illegal, we
should point out that the NLRC merely awarded her 3 months backwages
July 29, 1998: LA DISMISSED JOY’S COMPLAINT. or the amount of NT$46,080.00, which was based upon its finding that she
Acting Executive LA Pedro C. Ramos ruled that her complaint was based on was dismissed without due process, a finding that we uphold, given
mere allegations. The LA found that there was no excess payment of petitioner’s lack of worthwhile discussion upon the same in the
placement fees, based on the official receipt presented by petitioner. The proceedings below or before us. Likewise we sustain NLRC’s finding in
LA found unnecessary a discussion on petitioner’s transfer of obligations to

10
regard to the reimbursement of her fare, which is squarely based on the
law; as well as the award of attorney’s fees. Indeed, employers have the prerogative to impose productivity and quality
standards at work. They may also impose reasonable rules to ensure that
But we do find it necessary to remand the instant case to the public the employees comply with these standards. Failure to comply may be a
respondent for further proceedings, for the purpose of addressing the just cause for their dismissal. Certainly, employers cannot be compelled to
validity or propriety of petitioner’s third-party complaint against the retain the services of an employee who is guilty of acts that are inimical to
transferee agent or the Pacific Manpower & Management Services, Inc. the interest of the employer. While the law acknowledges the plight and
and Lea G. Manabat. We should emphasize that as far as the decision of vulnerability of workers, it does not "authorize the oppression or self-
the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby destruction of the employer." Management prerogative is recognized in law
affirmed with finality, and we hold petitioner liable thereon, but without and in our jurisprudence.
prejudice to further hearings on its third party complaint against Pacific for
reimbursement. This prerogative, however, should not be abused. It is "tempered with the
employee’s right to security of tenure." Workers are entitled to substantive
Sameer Overseas Placement Agency filed this petition. and procedural due process before termination. They may not be removed
from employment without a validor just cause as determined by law and
We are asked to determine whether the Court of Appeals erred when it without going through the proper procedure.
affirmed the ruling of the National Labor Relations Commission finding
respondent illegally dismissed and awarding her three months’ worth of Security of tenure for labor is guaranteed by our Constitution.
salary, the reimbursement of the cost ofher repatriation, and attorney’s
fees despite the alleged existence of just causes of termination. Employees are not stripped of their security of tenure when they move to
work in a different jurisdiction. With respect to the rights of overseas
Petitioner reiterates that there was just cause for termination because Filipino workers, we follow the principle of lex loci contractus.
there was a finding of Wacoal that respondent was inefficient in her work.
First, established is the rule that lex loci contractus (the law of the place
Therefore, it claims that respondent’s dismissal was valid. where the contract is made) governs in this jurisdiction. There is no
question that the contract of employment in this case was perfected here
Petitioner also reiterates that since Wacoal’s accreditation was validly in the Philippines. Therefore, the Labor Code, its implementing rules and
transferred to Pacific at the time respondent filed her complaint, it should regulations, and other laws affecting labor apply in this case. Furthermore,
be Pacific that should now assume responsibility for Wacoal’s contractual settled is the rule that the courts of the forum will not enforce any foreign
obligations to the workers originally recruited by petitioner. claim obnoxious to the forum’s public policy. Herein the Philippines,
employment agreements are more than contractual in nature. The
ISSUE: WON Cabiles was entitled to the unexpired portion of her salary Constitution itself, in Article XIII, Section 3, guarantees the special
due to illegal dismissal YES protection of workers.

HELD: Sameer Overseas Placement Agency’spetition is without merit. We By our laws, overseas Filipino workers (OFWs) may only be terminated for
find for respondent. a just or authorized cause and after compliance with procedural due
process requirements.
Sameer Overseas Placement Agency failed to show that there was just
cause for causing Joy’s dismissal. The employer, Wacoal, also failed to Article 282 of the Labor Code enumerates the just causes of termination
accord her due process of law. by the employer. Thus:

11
efficiency standards were violated, or what particular acts of respondent
Art. 282. Termination by employer. An employer may terminate an constituted inefficiency.
employment for any of the following causes:
There was also no showing that respondent was sufficiently informed of
(a) Serious misconduct or willful disobedience by the employee of the the standards against which her work efficiency and performance were
lawful orders of his employer or representative in connection with his judged. The parties’ conflict as to the position held by respondent showed
work; that even the matter as basic as the job title was not clear.

(b) Gross and habitual neglect by the employee of his duties; The bare allegations of petitioner are not sufficient to support a claim that
there is just cause for termination. There is no proof that respondent was
(c) Fraud or willful breach by the employee of the trust reposed in him by legally terminated.
his employer or duly authorized representative;
Petitioner failed to comply with the due process requirements
(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 Respondent’s dismissal less than one year from hiring and her repatriation
authorized representatives; and on the same day show not only failure on the part of petitioner to comply
with the requirement of the existence of just cause for termination. They
(e) Other causes analogous to the foregoing. patently show that the employers did not comply with the due process
requirement.
Petitioner’s allegation that respondent was inefficient in her work and
negligent in her duties may, therefore, constitute a just cause for A valid dismissal requires both a valid cause and adherence to the valid
termination under Article 282(b), but only if petitioner was able to prove it. procedure of dismissal. The employer is required to give the charged
employee at least two written notices before termination. One of the
The burden of proving that there is just cause for termination is on the written notices must inform the employee of the particular acts that may
employer. "The employer must affirmatively show rationally adequate cause his or her dismissal. The other notice must "[inform] the employee
evidence that the dismissal was for a justifiable cause." Failure to show of the employer’s decision." Aside from the notice requirement, the
that there was valid or just cause for termination would necessarily mean employee must also be given "an opportunity to be heard."
that the dismissal was illegal.
Petitioner failed to comply with the twin notices and hearing requirements.
To show that dismissal resulting from inefficiency in work is valid, it must Respondent started working on June 26, 1997. She was told that she was
be shown that: 1) the employer has set standards of conduct and terminated on July 14, 1997 effective on the same day and barely a month
workmanship against which the employee will be judged; 2) the standards from her first workday. She was also repatriated on the same day that she
of conduct and workmanship must have been communicated to the was informed of her termination. The abruptness of the termination
employee; and 3) the communication was made at a reasonable time prior negated any finding that she was properly notified and given the
to the employee’s performance assessment. opportunity to be heard. Her constitutional right to due process of law was
violated.
In this case, petitioner merely alleged that respondent failed to comply
with her foreign employer’s work requirements and was inefficient in her Respondent Joy Cabiles, having been illegally dismissed, is entitled to her
work. No evidence was shown to support such allegations. Petitioner did salary for the unexpired portion ofthe employment contract that was
not even bother to specify what requirements were not met, what

12
violated together with attorney’s fees and reimbursement of amounts In case of termination of overseas employment without just, valid or
withheld from her salary. authorized cause as defined by law or contract, the workers shall be
entitled to the full reimbursement of his placement fee with interest of
Section 10 of Republic Act No. 8042,otherwise known as the Migrant twelve (12%) per annum, plus his salaries for the unexpired portion of his
Workers and Overseas Filipinos Act of1995, states that overseas workers employment contract or for three (3) months for every year of the
who were terminated without just, valid, or authorized cause "shall be unexpired term, whichever is less. (Emphasis supplied)
entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his Section 15 of Republic Act No. 8042 states that "repatriation of the worker
employment contract or for three (3) months for every year of the and the transport of his [or her] personal belongings shall be the primary
unexpired term, whichever is less." responsibility of the agency which recruited or deployed the worker
overseas." The exception is when "termination of employment is due solely
Sec. 10. MONEY CLAIMS. – Notwithstanding any provision of law to the to the fault of the worker,"80 which as we have established, is not the
contrary, the Labor Arbiters of the National Labor Relations Commission case. It reads: SEC. 15. REPATRIATION OF WORKERS; EMERGENCY
(NLRC) shall have the original and exclusive jurisdiction to hear and REPATRIATION FUND. – The repatriation of the worker and the transport
decide, within ninety (90) calendar days after filing of the complaint, the of his personal belongings shall be the primary responsibility of the agency
claims arising out of an employer-employee relationship or by virtue of any which recruited or deployed the worker overseas. All costs attendant to
law or contract involving Filipino workers for overseas deployment repatriation shall be borne by or charged to the agency concerned and/or
including claims for actual, moral, exemplary and other forms of damages. its principal. Likewise, the repatriation of remains and transport of the
personal belongings of a deceased worker and all costs attendant thereto
The liability of the principal/employer and the recruitment/placement shall be borne by the principal and/or local agency. However, in cases
agency for any and all claims under this section shall be joint and several. where the termination of employment is due solely to the fault of the
This provisions [sic] shall be incorporated in the contract for overseas worker, the principal/employer or agency shall not in any manner be
employment and shall be a condition precedent for its approval. The responsible for the repatriation of the former and/or his belongings.. . . .
performance bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or damages that The Labor Code also entitles the employee to 10% of the amount of
may be awarded to the workers. If the recruitment/placement agency is a withheld wages as attorney’s fees when the withholding is unlawful.
juridical being, the corporate officers and directors and partners as the
case may be, shall themselves be jointly and solidarily liable with the The Court of Appeals affirmed the NLRC’s decision to award respondent
corporation or partnership for the aforesaid claims and damages. NT$46,080.00 or the three-month equivalent of her salary, attorney’s fees
of NT$300.00, and the reimbursement of the withheld NT$3,000.00 salary,
Such liabilities shall continue during the entire period or duration of the which answered for her repatriation.
employment contract and shall not be affected by any substitution,
amendment or modification made locally or in a foreign country of the said We uphold the finding that respondent is entitled to all of these awards.
contract. The award of the three-month equivalent of respondent’s salary should,
however, be increased to the amount equivalent to the unexpired term of
Any compromise/amicable settlement or voluntary agreement on money the employment contract.
claims inclusive of damages under this section shall be paid within four (4)
months from the approval of the settlement by the appropriate authority. In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co.,
Inc., this court ruled that the clause "or for three (3) months for every

13
year of the unexpired term, whichever is less"83 is unconstitutional for joint and several liability is that "each of the debtors is liable for the entire
violating the equal protection clause and substantive due process. obligation."138 A final determination may, therefore, be achieved even if
only one of the joint and several debtors are impleaded in an action.
A statute or provision which was declared unconstitutional is not a law. It Hence, in the case of overseas employment, either the local agency or the
"confers no rights; it imposes no duties; it affords no protection; it creates foreign employer may be sued for all claims arising from the foreign
no office; it is inoperative as if it has not been passed at all." employer’s labor law violations. This way, the overseas workers are
assured that someone — the foreign employer’s local agent — may be
Republic Act No. 10022 was promulgated on March 8, 2010. This means made to answer for violations that the foreign employer may have
that the reinstatement of the clause in Republic Act No. 8042 was not yet committed.
in effect at the time of respondent’s termination from work in 1997.
Republic Act No. 8042 before it was amended by Republic Act No. 10022 The Migrant Workers and Overseas Filipinos Act of 1995 ensures that
governs this case. overseas workers have recourse in law despite the circumstances of their
employment. By providing that the liability of the foreign employer may be
In the hierarchy of laws, the Constitution is supreme. No branch or office "enforced to the full extent" against the local agent, the overseas worker is
of the government may exercise its powers in any manner inconsistent assured of immediate and sufficient payment of what is due them.
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 re-
enactment 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 observe that the reinstated clause, this time as provided in Republic


Act. No. 10022, violates the constitutional rights to equal protection and
due process.96 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.

The provision on joint and several liability in the Migrant Workers and
Overseas Filipinos Act of 1995 assures overseas workers that their rights
will not be frustrated with these complications. The fundamental effect of

14