PEOPLE’S BROADCASTING SERVICE VS SCRETARY OF DOLE

FACTS:

PR Jandeleon Juezan filed a complaint against petitioner with the DOLE, for illegal deduction, nonpayment of SIL,
13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages
and non-coverage of SSS, PAGIBIG nad PHILHEALTH.

After investigation and the parties submitted their position paper, DOLE Regional Director fount PR was an
employee of the petitioner and entitled to money claims. DOLE dismissed the petitioner’s appeal when petitioner
submitted Deed of Assignment of Bank Deposit instead of posting cash or surety bond.

The Court found that there was no employer-employee relationship. While DOLE may make determination of the
existence of an employee-employer relationship, this function could not be co-extensive with the visitorial and
enforcement power. NLRC was held to be the primary agency in determining the existence of employer-employee
relationship.

The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not considered as co-
extensive with the power to determine the existence of an employer-employee relationship. 6 In its Comment, 7 the
DOLE sought clarification as well, as to the extent of its visitorial and enforcement power under the Labor Code, as
amended. SID

It is apparent that there is a need to delineate the jurisdiction of the DOLE Secretary vis-à-vis that of the
NLRC.

Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and
decide any matter involving the recovery of wages and other monetary claims and benefits was qualified by the
proviso that the complaint not include a claim for reinstatement, or that the aggregate money claims not exceed
PhP5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the Secretary of
Labor, did away with the PhP5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and
enforcement power for claims beyond PhP5,000. The only qualification to this expanded power of the DOLE was
only that there still be an existing employer-employee relationship.

It is clear and beyond debate that an employer-employee relationship must exist for the exercise of the
visitorial and enforcement power of the DOLE. The question now arises, may the DOLE make a determination of
whether or not an employer-employee relationship exists, and if so, to what extent?

The first portion of the question must be answered in the affirmative.

The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of
the DOLE, that is, the determination of the existence of an employer-employee relationship cannot be co-extensive
with the visitorial and enforcement power of the DOLE. But even in conceding the power of the DOLE to determine
the existence of an employer-employee relationship, the Court held that the determination of the existence of an
employer-employee relationship is still primarily within the power of the NLRC, that any finding by the DOLE is
merely preliminary.

The use of the four fold 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.

ESGUERRA | LABOR DIGEST | ATTY. USITA. | 2018-2019

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.

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 􀀿led 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
employer-employee relationship present. Thus, the dismissal of the complaint against petitioner is proper.

WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the MODIFICATION
that in the exercise of the DOLE's visitorial and enforcement power, the Labor Secretary or the latter's authorized
representative shall have the power to determine the existence of an employer-employee relationship, to the
exclusion of the NLRC.

MRS. ALBERTA YANSON VS SECRETARY OF DOLE

FACTS:

On March 27, 1998, Mardy Cabigo and 40 other workers (private respondents)

ESGUERRA | LABOR DIGEST | ATTY. USITA. | 2018-2019

filed with the Department of Labor and Employment-Bacolod District Office (DOLE Bacolod) a request for payroll
inspection 4 of Hacienda Valentin Balabag owned by Alberta Yanson (petitioner). DOLE Bacolod conducted an
inspection of petitioner's establishment on May 27, 1998, and issued a Notice of Inspection Report, finding
petitioner liable for the following violations of labor standard laws:

1. Underpayment of salaries and wages; 2. Non-payment of 13th month pay; 3. Non-payment of social
amelioration bonus for two yrs; 4. Non-payment of employer’s 1/3 carabao share

and directed her to restitution and correction of the foregoing at the company or plant level within 10 calendar days
from notice thereof.

In addition, DOLE Bacolod scheduled a summary investigation and issued, by registered mail, notices of hearing 7
as well as a subpoena duces tecum 8 to the parties. Petitioner did not appear in any of the scheduled hearings, or
present any pleading or document.

Dole Bacolod directed petitioner to pay within 5 days 9, 084 each of the 41.respondents or total of P372, 444, and
submit proof of payment. DOLE Bacolod then issued Compliance Order.

Petitioner filed with DOLE Bacolod a Double Verified Special Appearance to Oppose "Writ of Execution" For
Being a Blatant and Dangerous Violation of Due Process, 13 claiming that she did not receive any form of
communication, or participate in any proceeding relative to the subject matter of the writ of execution. Petitioner
also impugned the validity of the August 12, 1998 Compliance Order subject of the writ of execution on the ground
of lack of employment relationship between her and private respondents.

The appeal which petitioner filed with public respondent ultimately questioned the August 12, 1998
Compliance Order in which DOLE Bacolod, in the exercise of its visitorial and enforcement power, awarded
private respondents P9,084.00 each in labor standard benefits or the aggregate sum of P377,444.

(read Article 128 of the Labor Code) ……. In case said order involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company
duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the
order appealed from.

When petitioner filed her Verified Appeal and Supplement to the Verified Appeal, she posted a mere P1,000.00-
appeal bond and attached a Motion to be Allowed to Post Minimal Bond with Motion for Reduction of Bond. Public
respondent rejected said appeal for insufficiency of the appeal bond, viz.:

We note and stress that there is no analogous application in the Office of the Secretary of the practice in
the NLRC of reducing the appeal bond; the law applicable to the Office of the Secretary of Labor and
Employment does not allow this practice. In other words, the respondent's request for the reduction of the
required bond cannot be allowed for lack of legal basis. Hence, for lack of the required bond, the
respondent's appeal was never duly perfected and must therefore be dismissed.

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Petitioner contends that the CA and public respondent denied her the right to appeal when they rejected her
P1,000.00-appeal bond. She insists that her appeal bond cannot be based on the monetary award of P372,444.00
granted by DOLE Bacolod in its August 14, 1998 Order which, having been rendered without prior notice to her,
was a patent nullity and completely without effect. 26 She argues that her appeal bond should instead be based on
her capacity to pay; otherwise, her right to free access to the courts as guaranteed under Article III, Section 2 of the
Constitution would be set to naught merely because of her diminished financial capacity.

In Guico, Jr. v. Hon. Quisumbing , 27 we held that the posting of the proper amount of the appeal bond under
Article 128 (b) is mandatory for the perfection of an appeal from a monetary award in labor standard cases:

The next issue is whether petitioner was able to perfect his appeal to the Secretary of Labor and Employment.
Article 128 (b) of the Labor Code clearly provides that the appeal bond must be "in the amount equivalent to the
monetary award in the order appealed from." The records show that petitioner failed to post the required amount of
the appeal bond. His appeal was therefore not perfected. 28

Just like the petitioner in the present case, the employer in Guico v. Secretary of Labor had also sought a reduction
of the appeal bond due to financial losses arising from the shutdown of his business; yet, we did not temper the strict
requirement of Article 128 (b) for him. The rationale behind the stringency of such requirement is that the employer-
appellant may choose between a cash bond and a surety bond. Hence, limitations in his liquidity should pose no
obstacle to his perfecting an appeal by posting a mere surety bond.

Moreover, Article 128 (b) deliberately employed the word "only" in reference to the requirements for perfection of
an appeal in labor standards cases. "Only" commands a restrictive application, giving no room for modification of
said requirements.

The Commission may, in justifiable cases and upon Motion of the Appellant, reduce the amount of the bond. The
filing of the motion to reduce bond shall not stop the running of the period to perfect appeal.

Section 9. Cash or surety bond; when required. — In case the order involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond issued by a duly accredited bonding
company. The bond should be in the amount equivalent to the monetary award indicated in the order.

Under the foregoing Implementing Rules, it is plain that public respondent has no authority to accept an appeal
under a reduced bond. Further applying the Implementing Rules, there is one other reason for holding that petitioner
failed to perfect her appeal. It is of record that she received the August 12, 1998 Compliance Order issued by
DOLE-Bacolod, as indicated in the registry return card marked Annex "I".

In fine, the CA was correct in holding that public respondent did not commit grave abuse of discretion in
rejecting the appeal of petitioner due to the insufficiency of her appeal bond.

Even if we delve into its substance, her appeal would still not prosper. Petitioner questions the August 12, 1998
Compliance Order on the grounds that she was never notified of the proceedings leading to its issuance, and that as
early as 1997, her employment relationship with the private respondents had already been severed
.
We dwell only on questions of law, not purely questions of fact, in petitions for review on certiorari under Rule 45
of the Rules of Court. The first issue which petitioner raised, that is, whether she was properly served the notices of
hearing issued by DOLE Bacolod, is purely factual. 37 The determination made by DOLE-Bacolod on this matter
binds us, especially as it was not reversed by public respondent and the CA. We therefore cannot supplant its factual

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finding with our own, 38 moreso that petitioner's bare denial cannot outweigh the probative value of the registry
return cards attached to the record which indicate that said notices were received by petitioner.

Anent the second issue, the records do not sustain petitioner's claim. In a
Collective Bargaining Agreement dated January 29, 1998, 40 petitioner acknowledged under oath that she is
the employer of private respondents Mardy Cabigo, et al., who are members of the union known as
Commercial and Agro-Industrial Labor Organization.

(can’t find full text)

ZIALCITA, ET AL. v. PALRO4-3-398-76. February 20, 1977ART. 136 OF THE LABOR CODEFACTS:
Complainant Zialcita, an international flight stewardess of PAL, was discharged from the service on account ofher
marriage. In separating Zialcita, PAL invoked its policy which stated that flight attendants must be single, andshall
be automatically separated from employment in the event they subsequently get married. They claimed thatthis
policy was in accordance with Article 132 of the Labor Code. On the other hand, Zialcita questioned hertermination
on account of her marriage, invoking Article 136 of the same law.

ISSUE:

Was Zialcita validly terminated on account of her marriage?

SC RULING:NO.
When Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was promulgated in 13
March 1973, PAL’s policy had met its doom. However, since no one challenged its validity, the said policy was able
to obtain a momentary reprieve.

Section 8 of PD148 is exactly the same provision reproducedverbatim in Article 136 of the Labor Code, which was
promulgated on 1 May 1974 and took effect six months later. Although 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 employersto determine appropriate minimum standards for termination in
special occupations, such as those of flight attendants, it is logical to presume that, in the absence of said standards
or regulations which are yet to be established, the policy of PAL against marriage is patently illegal. 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.

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STAR PAPER CORPORATION VS RONALDO SIMBOL, WILFREDA COMIA & LORNA ESTRELLA

FACTS:

We are called to decide an issue of first impression: whether the policy of the employer banning spouses from
working in the same company violates the rights of the employee under the Constitution and the Labor Code or is
a valid exercise of management prerogative.

Petitioner Star Paper is a corporation engaged in trading-principally of paper products. Josephine Ongsitco is its
manager of the Personnel and Administration Dept while Sebastian Chua is its managing Director.

Evidence for the petitioners show that respondents Simbol and Comia, Estrella were all regular employees of the
company.

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the
company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they
decide to get married, one of them should resign pursuant to a company policy promulgated in 1995.

1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of
relationship, already employed by the company.

2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them should resign to
preserve the policy stated above.

Simbol then resigned on June 20, 1998. Comia was hired by the company on February 5, 1997. She met Howard
Comia, co-employee whom she married on June 1, 2000. Ongsitco likewise reminded them about the company
policy. Comie resigned on June 30, 2000.

Estrella was hired July 29, 1994 and met Luisito Zuniga, a co-worker. Petitioners stated that Zuniga, a married man,
got Estrella pregnant. Company allegedly could have terminated her servied due to immorality, but she resigned.

The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no
money and property accountabilities in the company and that they release the latter of any claim or demand
of whatever nature.

RESPONDENTS’ VERSION

Simbol and Comia allege that they did not resign voluntarily; they were compelled in view of an illegal company
policy. Estrella, in order not to be dismissed from her work, severed the relationship with him to avoid dismissal dur
to the company policy. She met an accident, has 21 days leave, and when about to go to work, her name was in on-
hold at the gate. She was denied entry.

The memorandum stated that she was being dismissed for immoral conduct. She refused to sign the memorandum
because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management
asked her to write an explanation. However, after submission of the explanation, she was nonetheless dismissed by
the company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her
thirteenth month pay. 8

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Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorney's
fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the labor Code.
They also contended that they were dismissed due to their union membership.

LA Del Rosario dismissed the complaint on the ground of Management Prerogative.

On appeal, NLRC affirmed LA decision.

Respondents filed MR but was denied. They appealed to the respondent court, reversed NLRC decision.

On appeal to the SC, petitioners contend that CA erred.

HELD:

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. 17 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.

(US COURT)

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. 22

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 courts narrowly 25 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.

The courts that have broadly 26 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.

(EXCEPTION) We note that since the finding of a bonafide 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. 32

To justify a bonafide occupational qualification, the employer must prove two factors:

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(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 substantially all persons meeting the qualification would be
unable to properly perform the duties of the job. 33

The concept of a bonafide occupational qualification is not foreign in our jurisdiction. We employ the standard of
reasonableness of the company policy which is parallel to the bonafide occupational qualification requirement. In
the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines,
Inc., 34 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 circumstance 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 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 39 is evidently not the valid reasonable business necessity required
by the law.

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.

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. 4

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 41 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.

Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient
evidence on the part of petitioners that the resignation was voluntary, Estrella's dismissal is declared illegal.

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APEX MINING COMPANY VS NATIONAL LABOR RELATIONS COMMISSIONS

Is the househelper in the staff houses of an industrial company a domestic helper or a regular employee of the
said firm?

PR Sinclitica Candido was employed by petitioner Apex Mining to perform laundry services at its staff house
located at Masara, Maco, Davao del Norte. In the beginning she was paid on a piece rate basis. However, January
17, 1982, she was paid on a monthly basis P250 a month, increased to P575 a month.

On December 18, 1987, while she was attending to her assigned task and she was hanging her laundry, she
accidentally slipped and hit her back on a stone. She reported the accident to her immediate supervisor Mila de la
Rosa and to the personnel officer, Florendo D. Asirit. As a result of the accident she was not able to continue with
her work. She was permitted to go on leave for medication. De la Rosa offered her the amount of P2,000.00 which
was eventually increased to P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to
return to work. Petitioner did not allow her to return to work and dismissed her on February 4, 1988.

March 11, 1988, PR filed a request for assistance with the DOLE. LA rendered ordering the respondent Apex
Mining to pay the complainant: 1. Salary differential, 2. Emergency living allowance 3. 13th month pay 4.
Separation pay; a total of P25, 119.30

Petitioner then appealed to the NLRC, wherein due course was rendered by Fifth Division, dismissing the appeal for
lack of merit and affirming the appealed decision. MR thereof was denied in a resolution of the NLRC.

The main thrust of the petition is that private respondent should be treated as a mere househelper or
domestic servant and not as a regular employee of petitioner.

HELD:

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
de􀀼nition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and other similar
househelps.

The definition cannot be interpreted to include househelp or laundry women working in staffhouses of a
company, like petitioner who attends to the needs of the company's guest and other persons availing of said
facilities. By the same token, it cannot be considered to extend to the driver, houseboy, or gardener exclusively
working in the company, the staffhouses and its premises. They may not be considered as within the meaning of a
"househelper" or "domestic servant" as above-defined by law.

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

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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.

The 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.

Petitioner denies having illegally dismissed private respondent and maintains that respondent abandoned her work.
This argument notwithstanding, there is enough evidence to show that because of an accident which took place
while private respondent was performing her laundry services, she was not able to work and was ultimately
separated from the service. She is, therefore, entitled to appropriate relief as a regular employee of petitioner.
Inasmuch as private respondent appears not to be interested in returning to her work for valid reasons, the payment
of separation pay to her is in order.

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DEVELOPMENT BANK OF THE PHILIPPINES VS NATIONAL LABOR RELATIONS COMMISSION

DOCTRINES:
- We hold that public respondent gravely abused its discretion in affirming the decision of the Labor Arbiter.
In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it
would be premature to enforce the worker's preference.
- Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent
provisions of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets
of the debtor is avoided. Complementing Art. 110 is Sec. 10, Rule VIII, Book III, of the Revised Rules and
Regulations Implementing the Labor Code. We interpreted this provision in Development Bank of the
Philippines v . Santos to mean 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.
- Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated,
still in Development Bank of the Philippines v . NLRC , this Court did not alter its original position that the
right to preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its
presentation in distribution proceedings. In effect, we reiterated our previous interpretation in Development
Bank of the Philippines VS Santos.

Is declaration of bankruptcy or judicial liquidation required before the worker's preference may be invoked
under Art. 110 of the Labor Code?

FACTS:

PR Leonor Ang started employment as Executive Secratry with Tropical Philippines Wood Industries (TPWII),
corporation engaged in the manufacture and sale of veneer, plywood and sawdust panel boards. 1982, she was
promoted to the position of Personal Officer.

Petitioner DBP, as mortgagee of TPWII, foreclosed its plant facilities and equipment. Nevertheless, TPWII
continued its business operations interrupted only by brief shutdowns for the purpose of servicing its plant facilities
and equipment. In January 1986 petitioner took possession of the foreclosed properties. From then on the company
ceased its operations. As a consequence private respondent was on 15 April 1986 verbally terminated from the
service.

Aggrieved, PR filed with the Labor Arbiter a complaint for separation pay, 13 th month pay, vacation and sick leave
pay, salaries and allowances against TPWII, its General Manager and petitioner.

LA fount TPWII primarily liable to PR but only for separation pay and vacation and sick leave pay because her
claims for unpaid waged and 13th were later paid after the complaint was filed. Gen Man was absolved of any
liability.

But with respect to petitioner, it was held subsidiarily liable in the event the company failed to satisfy the judgment.
The Labor Arbiter rationalized that the right of an employee to be paid benefits due him from the properties of his
employer is superior to the right of the latter's mortgagee.

The issue now before us is whether public respondent committed grave abuse of discretion in holding that Art. 110
of the Labor Code, as amended, which refers to worker preference in case of bankruptcy or liquidation of an
employer's business, is applicable to the present case notwithstanding the absence of any formal declaration of
bankruptcy or judicial liquidation of TPWII.

ESGUERRA | LABOR DIGEST | ATTY. USITA. | 2018-2019

ARTICLE 110. 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 wages due them for services rendered during
the period prior to the bankruptcy or liquidation, any provision to the contrary notwithstanding. Unpaid wages shall
be paid in full before other creditors may establish any claim to a share in the assets of the employer.

Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules and Regulations Implementing the
Labor Code provides:

SECTION 10. Payment of wages in case of bankruptcy . — Unpaid wages earned by the employees before the
declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall
be paid in full before other creditors may establish any claim to a share in the assets of the employer.

The rationale is that to hold Art. 110 to be applicable also to extrajudicial proceedings would be putting the worker
in a better position than the State which could only assert its own prior preference in case of a judicial proceeding. 5
Art. 110, which was amended by R.A. 6715 effective 21 March 1989, now reads:

ARTICLE 110. 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.

Obviously, the amendment expanded the concept of "worker preference" to cover not only unpaid wages but
also other monetary claims to which even claims of the Government must be deemed subordinate. The Rules
and Regulations Implementing R.A. 6715, approved 24 May 1989, also amended the corresponding implementing
rule, and now reads:

SECTION 10. Payment of wages and other monetary claims in case of

bankruptcy . — In case of bankruptcy or liquidation of the employer's business, the unpaid wages and other
monetary claims of the employees shall be given first preference and shall be paid in full before the claims of
government and other creditors may be paid.

In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be
premature to enforce the worker's preference.

ESGUERRA | LABOR DIGEST | ATTY. USITA. | 2018-2019