LABOR STANDARDS

Finals Case Digests

Compilation
(A.Y. 2017-2018)

Submitted by:
SIAO, Kendrick Mario
EH405

Submitted to:
Atty. Jefferson M. Marquez

October 3, 2017
 Table of Contents
JURISDICTION OF THE LABOR ARBITER ..................................................................... 5
2011 NLRC RULES OF PROCEDURE .............................................................................. 5
Lockheed Detective & Watchman Agency, 2012 ......................................................................... 5
Portillo v Rudolf Lietz, Inc et al, 2012 ............................................................................................. 7
Building Care Corp. v Macaraeg, 2012 ......................................................................................... 9
McBurnie v Ganzon, 2013 ............................................................................................................. 10
Indophil Textile Mills, Inc v Engr. Adviento, 2014 ....................................................................... 13
Manila Mining Corp. v Amor, 2015, citing 2015 Mcburnie ........................................................ 15
Toyota Alabang inc v Games, 2015 ............................................................................................. 18
Social Security System v Ubana, 2015 ....................................................................................... 20
Ilaw Buklod ng Manggagawa Nestle Phils Chapter v Nestle Phils, 2015 ............................... 22
Quantum Foods, Inc. v Esloyo, 2015, citing 2015 Mcburnie .................................................... 24
Dela Rosa Liner inc et al v Borela, 2016 ..................................................................................... 26
Fontana Development Corp. v Vukasinovic, 2016 ..................................................................... 28
Manila Doctors College v Olomores, 2016 .................................................................................. 30
Dee Jay’s Inn & Café v Raneses, 2016 ....................................................................................... 32
Buenaflor Car Services v Cezar Durumpili David, 2016 ........................................................... 34
C.I.C.M Mission Seminaries School of Theology, Inc v Perez, 2017 ...................................... 34
Turks Shawarma Company v Pajaron, 2017 .............................................................................. 36
OTHER IMPORTANT LABOR PROVISIONS .................................................................. 42
A. CONTRACTING ARRANGEMENT .................................................................................... 42
Aliviado et al v Procter & Gamble Phils, 2010 ............................................................................ 42
San Miguel Corp. v Semillano et al, 2010 ................................................................................... 45
Manila Water Co. v Dalumpines, 2010 ........................................................................................ 47
Teng v Pahagac, 2010 ................................................................................................................... 49
GSIS v NLRC, 2010 ....................................................................................................................... 52
Sy et al v Fairland Knitcrat Co, Inc, 2011 .................................................................................... 54
Polyfoam-RGC International Corp. v Concepcion, 2012 .......................................................... 56
Superior Packaging Corp., v Balagsay et al, 2012 .................................................................... 58
Digital Telecommunications Phils. Inc, v Digitel Employees Union et al, 2012 ..................... 60
Norkis Trading Corp. v Buenavista, 2012 .................................................................................... 62
Goya Inc v Goya Inc Employees Union-FFW, 2013 .................................................................. 64
Vigilia et al v Phil. College of Criminology inc, 2013 .................................................................. 66
BPI Employees Union-Davao City-FUBU v Bank of the Philippine Islands et al, 2013 ........ 68
Alilin et al v Petron Corp, 2014 ..................................................................................................... 70
Ampeleloquio v Jaka Distribution Inc, 2014 ................................................................................ 73
FVR Skills & Services Exponenets Inc v Seva et al, 2014 ....................................................... 77
Fonterra Brand Phils v Largado et al, 2015 ................................................................................ 80
W.M. Manufacturing Inc v Dalag, 2015 ....................................................................................... 82
Diamond Farms v Southern Phils Fed of Labor, 2016, citing 2014 Alilin ............................... 84
Philippine Airlines v Ligan et al, 2016 .......................................................................................... 86
Cagayan Electric Power & Light Company Inc v Cepalco Employees Labor union-ALU
TUCP, 2016 ..................................................................................................................................... 88
Soliman Security Services Inc et al v Sarmiento et al, 2016 .................................................... 93
De Castro et al v CA, 2016 ............................................................................................................ 94

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 Nestle Philippines Inc v Puedan, Jr, 2017 ................................................................................... 97
Valencia v Classique Vinyl Products Corp, 2017 ....................................................................... 99
C. WORKER’S PREFERENCE ............................................................................................. 102
Barayoga v Asset Privatization Trust, 2005 .............................................................................. 102
Philippine Airlines v Zamora, 2007 ............................................................................................. 105
Philippine Airlines v Philippine Airlines Employees Association, 2007, citing Rubberworld v
NLRC, 1999 ................................................................................................................................... 108
Garcia v Philippine Airlines, 2009 ............................................................................................... 111
E. ATTORNEY’S FEES & APPEARANCE OF LAWYERS ................................................ 114
Sapio v Undaloc Construction et al, 2008 ................................................................................. 114
Atty. Ortiz v San Miguel Corp, 2008 ........................................................................................... 117
Masmud v NLRC et al, 2009 ....................................................................................................... 119
Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union v Manila
Water Company, 2011 ................................................................................................................. 121
Malvar v Kraft Food Phils Inc et al, 2013 ................................................................................... 123
T&H Shopfitters Corp., v T&H Shopfitters Corp. Workers Union, 2014 ................................ 126
MISCELLANEOUS PROVISIONS ................................................................................... 128
A. SPECIAL TYPES OF WORKERS .................................................................................... 128
Bernardo v NLRC, 1999 ............................................................................................................... 128
C. EMPLOYMENT OF WOMEN ............................................................................................ 130
PT&T v NLRC and De Guzman, 1997 ....................................................................................... 130
Del Monte Phils v Velasco, 2007 ................................................................................................ 132
E. EMPLOYMENT OF NURSING EMPLOYEES ................................................................. 134
F. EMPLOYMENT OF NIGHTWORKERS ........................................................................... 134
G. EMPLOYMENT OF CHILDREN ....................................................................................... 134
H. EMPLOYMENT OF DOMESTIC WORKERS .................................................................. 134
Remington Industrial Sales Corp., v Castaneda, 2006, citing Apex Mining ......................... 134
Co v Vargas, 2011 ........................................................................................................................ 137
I. EMPLOYMENT OF HOMEWORKERS ............................................................................ 138
J. EMPLOYMENT OF NON-RESIDENT ALIENS ............................................................... 138
K. EMPLOYMENT OF STUDENTS AND WORKING SCHOLARS .................................... 138
L. EMPLOYMENT OF ACADEMIC/ NON-ACADEMIC PERSONNEL IN PRIVATE
EDUCATIONAL INSTITUTION ................................................................................................. 138
M. EMPLOYMENT OF SENIOR CITIZENS ...................................................................... 138
N. EMPLOYMENT OF DRIVERS AND CONDUCTORS IN THE PUBLIC UTILITY
TRANSPORT INDUSTRY ......................................................................................................... 138
University of the East et al v Pepanio ........................................................................................ 138
Colegio Del Santismo Rosario et al v Rojo, 2013 citing Mercado et al v AMA Computer
College- Paranaque City, 2010 ................................................................................................... 140
MEDICAL, DENTAL AND OCCUPATIONAL SAFETY ................................................. 150
Tolosa v NLRC, 2003 ................................................................................................................... 150
U-Bix Corp., v Bandiola, 2007 ..................................................................................................... 152
Ocean Builders Construction v Sps. Cubacub, 2011 .............................................................. 154
MIGRANT WORKERS’ ACT AND OVERSEAS FILIPINO ACT OF 1995 AND
RECRUITMENT AND PLACEMENT ............................................................................... 156
ATCI Overseas Corp. et al v Echin, 2010 ................................................................................. 156

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 Yap v Thenamaris Ship Management et al, 2011 .................................................................... 158
Skippers United Pacific v Doza et al, 2012 ............................................................................... 160
International Management Services v Logarta, 2012 .............................................................. 162
PERT/ CPM Manpower Exponent Co., Inc v Vinuya et al, 2012 ........................................... 164
Hon. Sto. Tomas et al v Salac et al, 2012 ................................................................................. 167
Sameer Overseas Placement Agency Inc v Cabiles, 2014 .................................................... 169
Racelis v United Philippines Lines inc, 2014 ............................................................................ 171
Pentagon International Shipping Services v CA, 2015 ........................................................... 174
Austria v Crystal Shipping, 2016 ................................................................................................ 178
Asian International Manpower Services, Inc v DOLE, 2016 ................................................... 180
Dagasdas v Grand Placement & General Services Corp, 2017 ............................................ 182

4
 JURISDICTION OF THE LABOR ARBITER

2011 NLRC RULES OF PROCEDURE

Lockheed Detective & Watchman Agency, 2012

Principle: for a claims against a government instrumentality to be valid (such as UP), the
agency should process its claims before COA after the judgement has been final and
executory because the garnishment involves public funds

FACTS: Petitioner Lockheed Detective and Watchman Agency, Inc. (Lockheed) entered
into a contract for security services with respondent University of the Philippines (UP).

In 1998, several security guards assigned to UP filed separate complaints against

Lockheed and UP for payment of underpaid wages, 25% overtime pay, premium pay for
rest days and special holidays, holiday pay, service incentive leave pay, night shift
differentials, 13th month pay, refund of cash bond, refund of deductions for the Mutual
Benefits Aids System (MBAS), unpaid wages from December 16-31, 1998, and attorneys
fees.

The LA held Lockheed and UP as solidarily liable to complainants. As the parties did not
appeal the NLRC decision, the same became final and executory. A writ of execution was
then issued but later quashed by the Labor Arbiter upon motion of UP due to disputes
regarding the amount of the award. Later, however, said order quashing the writ was
reversed by the NLRC.

The NLRC order and resolution having become final, Lockheed filed a motion for the
issuance of an alias writ of execution which was subsequently granted. A Notice of
Garnishment was issued to Philippine National Bank (PNB) UP Diliman Branch for the
satisfaction of the award.

UP filed an Urgent Motion to Quash Garnishment. UP contended that the funds being
subjected to garnishment at PNB are government/public funds. The Labor Arbiter,
however, dismissed the urgent motion for lack of merit. UP filed a petition for certiorari
before the CA. The CA held that although the subject funds do not constitute public funds,
in light of the ruling in the case of National Electrification Administration v. Morales
mandates that all money claims against the government must first be filed with the
Commission on Audit (COA). Hence, petitioner filed this petition before the SC.

ISSUE: Whether or not the garnishment is against the funds of UP is valid.

HELD: No. Political Law Doctrine: It is the COA which has primary jurisdiction to examine,
audit and settle "all debts and claims of any sort" due from or owing the Government or
any of its subdivisions, agencies and instrumentalities, including government-owned or
controlled corporations and their subsidiaries.

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This Court finds that the CA correctly applied theNEAcase. Like NEA, UP is a juridical
personality separate and distinct from the government and has the capacity to sue and
be sued. Thus, also like NEA, it cannot evade execution, and its funds may be subject to
garnishment or levy. However, before execution may be had, a claim for payment of the
judgment award must first be filed with the COA.

Under Commonwealth Act No. 327, as amended by Section 26 of P.D. No. 1445, it is the
COA which has primary jurisdiction to examine, audit and settle "all debts and claims of
any sort" due from or owing the Government or any of its subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations and their
subsidiaries. With respect to money claims arising from the implementation of Republic
Act No. 6758,their allowance or disallowance is for COA to decide, subject only to the
remedy of appeal by petition for certiorari to this Court.

A reading of the pertinent Commonwealth Act provision clearly shows that it does not
make any distinction as to which of the government subdivisions, agencies and
instrumentalities, including government-owned or controlled corporations and their
subsidiaries whose debts should be filed before the COA.

As to the fait accompli argument of Lockheed, contrary to its claim that there is nothing
that can be done since the funds of UP had already been garnished, since the
garnishment was erroneously carried out and did not go through the proper procedure
(the filing of a claim with the COA), UP is entitled to reimbursement of the garnished funds
plus interest of 6% per annum, to be computed from the time of judicial demand to be
reckoned from the time UP filed a petition for certiorari before the CA which occurred right
after the withdrawal of the garnished funds from PNB.

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 Portillo v Rudolf Lietz, Inc et al, 2012

Principles:
1. Not all disputes between an employer and his employee(s) fall within the
jurisdiction of the labor tribunals. We differentiated between abandonment per se
and the manner and consequent effects of such abandonment and ruled that the
first, is a labor case, while the second, is a civil law case.
2. A complaint is grounded not on dismissal per se, as in fact the enployeedoes not
ask for reinstatement or backwages, but on the manner of his dismissal and the
consequent effects of such dismissal is under the jurisdiction of regular courts

Facts: Marietta was hired by Rudolf Lietz, Inc. The terms and conditions provided for
liquidated damages in case Marietta will engage in any gainful employment with any other
company directly or indirectly without the written consent of the company. After 10 years,
she was promoted and her salary raised. This time, she signed another letter agreement
which contained a “Goodwill Clause” providing for liquidated damages in favour of the
company if she will engage directly to indirectly in any capacity in a business similar or
competitive to that of the company within 3 years. After 3 years, Marietta resigned from
the company, for the reason that she intend to engage in a rice dealership business.
Again, the company reminded her of the non-compete clause, but she jotted a note that
the latests contract she signed in 2004 did not contain a “Goodwill Clause” The company
wrote back, informing her that it is standard prescription for a resigned employee not to
engage in a company that competes with the company’s business, and the document she
was alluding to pertain to an internal memorandum on salary increase. Subsequently,
Lietz learned that Marietta was hired by Ed Keller Philippines, Limited, a company that
directly engaged in competition with Lietz. When Marietta demanded the payment of her
remaining salaries from Lietz, she was given the run around, hence, she filed a case for
money claims against Lietz, which in turn answered that it indeed owes Marietta the
amount but that legal compensation applied because she owes the company liquidated
damages due to her violation of the “Goodwill Clause”.

The Labor Arbiter ruled in favour of Marietta, and the same affirmed by the NLRC and the
Court of Appeals. On motion for reconsideration, however, the CA reversed itself and
found Marietta liable for liquidated damages and applied set-off or compensation, ruling
that there was ostensible causal connection between the unpaid salaries claim of Marietta
and the claim for liquidated damages claimed by Lietz, as they arose out of the same
employment relations. Marietta thus appealed to the Supreme Court by way of petition
for certiorari.

Issue: WON the case should be filed on a regular court

Ruling: The Court of Appeals was misguided. Its conclusion was incorrect. There is no
causal connection between the petitioner employees’ claim for unpaid wages and the
respondent employers’ claim for damages for the alleged “Goodwill Clause” violation.
Portillo’s claim for unpaid salaries did not have anything to do with her alleged violation
of the employment contract as, in fact, her separation from employment is not “rooted” in

7
the alleged contractual violation. She resigned from her employment. She was not
dismissed. Portillo’s entitlement to the unpaid salaries is not even contested. Indeed, Lietz
Inc.’s argument about legal compensation necessarily admits that it owes the money
claimed by Portillo.

The alleged contractual violation did not arise during the existence of the employer-
employee relationship. It was a post-employment matter, a post-employment violation

When, as here, the cause of action is based on a quasi-delict or tort, which has no
reasonable causal connection with any of the claims provided for in Article 217,
jurisdiction over the action is with the regular courts. [citation omitted]
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties’ contract of employment as redress for
respondent’s breach thereof. Such cause of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the regular courts. More so must this be in the
present case, what with the reality that the stipulation refers to the postemployment
relations of the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject
matter is one of claim for damages arising from a breach of contract, which is within the
ambit of the regular court’s jurisdiction. [citation omitted]

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 Building Care Corp. v Macaraeg, 2012

Doctrine: The perfection of an appeal within the period and in the manner prescribed by
law is jurisdictional and non-compliance with such legal requirements is fatal and has the
effect of rendering the judgment final and executory.

Facts: Petitioners hired respondent as a security guard, assigning her in Caloocan City.
8 years later, she was re-assigned to Bayview Park Hotel for 4 days, but after said period,
she was allegedly no longer given any assignment. Conciliation and mediation
proceedings failed.
Respondent then filed an administrative complaint for illegal dismissal with the PNP-
Security Agencies and Guard Supervision Division, but she did not attend the conference
hearings for said case.

Larbor Arbiter dismissed the complaint. NLRC affirmed LA; the appeal having been filed
out of time, LA’s decision became final and executory.
CA reversed both LA and NLRC; ruling that Macaraeg was illegally dismissed and
ordered her reinstatement and payment of backwages and benefits.

Issue: W/N CA erred in liberally applying the rules of procedure and ruling that
respondent's appeal should be allowed and resolved on the merits despite having been
filed out of time. (YES)

Held: The resort to a liberal application, or suspension of the application of procedural

rules, must remain as the exception to the well-settled principle that rules must be
complied with for the orderly administration of justice.

To be sure, the relaxation of procedural rules cannot be made without any valid reasons
proffered for or underpinning it. To merit liberality, petitioner must show reasonable cause
justifying its non-compliance with the rules and must convince the Court that the outright
dismissal of the petition would defeat the administration of substantial justice. The desired
leniency cannot be accorded absent valid and compelling reasons for such a procedural
lapse.
The perfection of an appeal within the period and in the manner prescribed by law is
jurisdictional and non-compliance with such legal requirements is fatal and has the effect
of rendering the judgment final and executory. The limitation on the period of appeal is
not without reason. They must be strictly followed as they are considered indispensable
to forestall or avoid unreasonable delays in the administration of justice, to ensure an
orderly discharge of judicial business, and to put an end to controversies.

The Court will not override the finality and immutability of a judgment based only on the
negligence of a party’s counsel in timely taking all the proper recourses from the
judgment. To justify an override, the counsel’s negligence must not only be gross but
must also be shown to have deprived the party the right to due process.

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 McBurnie v Ganzon, 2013

Doctrine: Two conditions for a Motion to Reduce Bond to be effectual; Filing of a motion
to reduce bond shall not stop the running of the period to perfect an appeal is not absolute
(exceptional circumstances)

Facts: McBurnie, an Australian national, instituted a complaint for illegal dismissal and
other monetary claims against respondents. He claimed that he signed a 5-year
employment agreement with EGI as an Executive Vice-President who shall oversee the
management of the company hotels and resorts within the Philippines. He worked for 6
months until he figured in an accident that compelled him to go back to Australia while
recuperating from his injuries. While in Australia, he was informed by respondent Ganzon
that his services were no longer needed because their intended project would no longer
push through.

Labor Arbiter declared McBurnie as having been illegally dismissed from employment.
The respondents filed their Memorandum of Appeal and Motion to Reduce Bond, since it
was P60 Million, and posted an appeal bond in the amount of P100,000.

NLRC denied the motion explaining that in cases involving monetary award, an employer
seeking to appeal the LA decision to the Commission is unconditionally required by Art.
223 Labor Code to post bond equivalent to the monetary award. NLRC also required
them to post an additional bond of P54 Million. It eventually dismissed respondents’
appeal for failure to post the appeal bond.

CA granted respondents’ petition for certiorari. It ruled that the NLRC committed grave
abuse of discretion in immediately denying the motion without fixing an appeal bond in an
amount that was reasonable, as it denied the respondents of their right to appeal from the
decision of the LA. "While Art. 223 requiring bond equivalent to the monetary award is
explicit, Section 6, Rule VI of the NLRC Rules of Procedure recognized as exception a
motion to reduce bond upon meritorious grounds and upon posting of a bond in a
reasonable amount in relation to the monetary award." The appeal bond was prohibitive
and excessive.

Issue: W/N the appeal bond posted by respondents was sufficient

Held:
Rule on appeal bonds
Section 6, Rule VI of the 2011 NLRC Rules of Procedure: No motion to reduce bond shall
be entertained except on meritorious grounds and upon the posting of a bond in a
reasonable amount in relation to the monetary award. The filing of the motion to reduce
bond without compliance with the requisites in the preceding paragraph shall not stop the
running of the period to perfect an appeal.

While the CA, in this case, allowed an appeal bond in the reduced amount of
P10,000,000.00 and then ordered the case remand to the NLRC, this Court Decision

10
dated September 18, 2009 provides otherwise, as it reads in part: While the bond may be
reduced upon motion by the employer, this is subject to the conditions that (1) the motion
to reduce the bond shall be based on meritorious grounds; and (2) a reasonable amount
in relation to the monetary award is posted by the appellant, otherwise the filing of the
motion to reduce bond shall not stop the running of the period to perfect an appeal. The
qualification effectively requires that unless the NLRC grants the reduction of the cash
bond within the 10-day reglementary period, the employer is still expected to post the
cash or surety bond securing the full amount within the said 10-day period. If the NLRC
does eventually grant the motion for reduction after the reglementary period has elapsed,
the correct relief would be to reduce the cash or surety bond already posted by the
employer within the 10-day period.

Suspension of the period to perfect the appeal upon the filing of a motion to reduce bond
To clarify, the prevailing jurisprudence on the matter provides that the filing of a motion to
reduce bond, coupled with compliance with the two conditions for the grant of such
motion, namely, (1) a meritorious ground, and (2) posting of a bond in a reasonable
amount, shall suffice to suspend the running of the period to perfect an appeal from the
labor arbiter decision to the NLRC. To require the full amount of the bond within the 10-
day reglementary period would only render nugatory the legal provisions which allow an
appellant to seek a reduction of the bond.

The rule that the filing of a motion to reduce bond shall not stop the running of the period
to perfect an appeal is not absolute. The Court may relax the rule. An appeal from a
decision involving a monetary award may be perfected only upon the posting of cash or
surety bond. The Court, however, has relaxed this requirement under certain exceptional
circumstances in order to resolve controversies on their merits. These are: (1)
fundamental consideration of substantial justice; (2) prevention of miscarriage of justice
or of unjust enrichment; and (3) special circumstances of the case combined with its legal
merits, and the amount and the issue involved.
A serious error of the NLRC was its outright denial of the motion to reduce the bond,
without even considering the respondent's arguments and totally unmindful of the rules
and jurisprudence that allow the bond reduction. Instead of resolving the motion to reduce
the bond on its merits, the NLRC insisted on an amount that was equivalent to the
monetary award.
When the respondents sought to reconsider, the NLRC still refused to fully decide on the
motion.It refused to at least make a preliminary determination of the merits of the appeal.

Allowance of the reduction of appeal bonds

Time and again, the Court has cautioned the NLRC to give Article 223 of the Labor Code,
particularly the provisions requiring bonds in appeals involving monetary awards, a liberal
interpretation in line with the desired objective of resolving controversies on the merits.
Although the general rule provides that an appeal in labor cases from a decision involving
a monetary award may be perfected only upon the posting of a cash or surety bond, the
Court has relaxed this requirement under certain exceptional circumstances (see above)
in order to resolve controversies on their merits. The bond requirement in appeals
involving monetary awards has been and may be relaxed in meritorious cases, including

11
instances in which (1) there was substantial compliance with the Rules, (2) surrounding
facts and circumstances constitute meritorious grounds to reduce the bond, (3) a liberal
interpretation of the requirement of an appeal bond would serve the desired objective of
resolving controversies on the merits, or (4) the appellants, at the very least, exhibited
their willingness and/or good faith by posting a partial bond during the reglementary
period.

To ensure that the provisions of Section 6, Rule VI of the NLRC Rules of Procedure that
give parties the chance to seek a reduction of the appeal bond are effectively carried out,
without however defeating the benefits of the bond requirement in favor of a winning
litigant, all motions to reduce bond that are to be filed with the NLRC shall be
accompanied by the posting of a cash or surety bond equivalent to 10% of the monetary
award that is subject of the appeal, which shall provisionally be deemed the reasonable
amount of the bond in the meantime that an appellant motion is pending resolution by the
Commission. In conformity with the NLRC Rules, the monetary award, for the purpose of
computing the necessary appeal bond, shall exclude damages and attorney fees. Only
after the posting of a bond in the required percentage shall an appellant period to perfect
an appeal under the NLRC Rules be deemed suspended.

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 Indophil Textile Mills, Inc v Engr. Adviento, 2014

CONCEPT: Claims for damages under Article 217 (a) (4) of the Labor Code, to be
cognizable by the LA, must have reasonable causal connection with any of the claims
provided for in that article.

FACTS:
Engr Adviento consulted a physician due to recurring weakness and dizziness. Few days
later, he was diagnosed with Chronic Poly Sinusitis, and thereafter, with moderate, severe
and persistent Allergic Rhinitis. He filed a complaint against his employer, Indophil Textile
Mills, Inc. with the NLRC for alleged illegal dismissal and for the payment of backwages,
separation pay, actual damages and attorney's fees. The said case is still pending
resolution with the NLRC at the time the instant petition was filed. Subsequently, he filed
another Complaint with the RTC of Aparri, Cagayan, alleging that he contracted such
occupational disease by reason of the gross negligence of ITM to provide him with a safe,
healthy and workable environment. He alleged that as part of his job description, he
conducts regular maintenance check on petitioner's facilities including its dye house area,
which is very hot and emits foul chemical odor with no adequate safety measures
introduced by the company. He recommended to management to place roof insulation to
minimize, if not, eradicate the health hazards attendant in the work place. However, such
was turned down due to high cost. He further suggested to the management that the
engineering office be relocated because of its dent prone location. This was further
aggravated by the installation of new filters fronting the office. However, no action was
taken by management.

He further averred that, being the only breadwinner in the family, he made several
attempts to apply for a new job, but to his dismay and frustration, employers who knew of
his present health condition discriminated against him and turned down his application.
By reason thereof, respondent suffered intense moral suffering, mental anguish, serious
anxiety and wounded feelings, praying for the recovery of moral, exemplary and
compensatory damages.

In reply, ITM filed a Motion to Dismiss on the ground that: (1) the RTC has no jurisdiction
over the subject matter of the complaint because the same falls under the original and
exclusive jurisdiction of the Labor Arbiter (LA) under Article 217 (a) (4) of the Labor Code;
and (2) there is another action pending with the Regional Arbitration Branch of NLRC,
involving the same parties for the same cause.

ISSUES:

WON the RTC has jurisdiction over the subject matter of respondent's complaint praying
for moral damages, exemplary damages, compensatory damages, anchored on
petitioner's alleged gross negligence in failing to provide a safe and healthy working
environment for respondent.

RULING:

13
YES. The jurisdiction of the LA and the NLRC is outlined in Article 217 of the Labor Code,
as amended by Section 9 of RA No. 6715. Jurisprudence has evolved the rule that claims
for damages under Article 217 (a) (4) of the Labor Code, to be cognizable by the LA, must
have a reasonable causal connection with any of the claims provided for in that article.
Only if there is such a connection with the other claims can a claim for damages be
considered as arising from employer-employee relations.

In the case at bench, such connection is absent. True, the maintenance of a safe and
healthy workplace is ordinarily a subject of labor cases. More, the acts complained of
appear to constitute matters involving employee-employer relations since respondent
used to be the Civil Engineer of petitioner. However, it should be stressed that
respondent's claim for damages is specifically grounded on petitioner's gross negligence
to provide a safe, healthy and workable environment for its employees — a case of quasi-
delict. It also bears stressing that respondent is not praying for any relief under the Labor
Code of the Philippines. He neither claims for reinstatement nor backwages or separation
pay resulting from an illegal termination. The cause of action herein pertains to the
consequence of petitioner's omission which led to a work-related disease suffered by
respondent, causing harm or damage to his person. Such cause of action is within the
realm of Civil Law, and jurisdiction over the controversy belongs to the regular courts.
Where the resolution of the dispute requires expertise, not in labor management relations
nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law, such claim falls outside the area of competence of
expertise ordinarily ascribed to the LA and the NLRC.

14
 Manila Mining Corp. v Amor, 2015, citing 2015 Mcburnie

CONCEPT: The perfection of an appeal in the manner and within the period prescribed by law is
not only mandatory but also jurisdictional and failure of a party to conform to the rules
regarding appeal will render the judgment final and executory.

FACTS: Amor, et al were regular employees of Manila Mining Corporation, a domestic

corporation which operated a mining claim. When the mine tailings reached the maximum
level, the corporation temporarily shut down its mining operations. The corporation served
a notice, informing its employees and the DOLE of the temporary suspension of its
operations for 6 months and the temporary lay-off of 2/3 of its employees. After the lapse
of said period, petitioner notified the DOLE that it was extending the temporary shutdown
of its operations for another 6 months. Adversely affected, Amor et al filed the complaint
for constructive dismissal and monetary claims before the Regional Arbitration Branch of
the NLRC.

Executive LA: MMC liable for constructive dismissal in view of the suspension of its
operations beyond the six-month period allowed under Article 286 of the Labor Code of
the Philippines.

MMC – memorandum of appeal before NLRC; motion to reduce bond to P100,000.00;

monetary award is P2,138,190.02.

Amor et al – motion to dismiss the appeal; receipt of the appealed decision on 24

November 2004; mailed the memorandum of appeal only on 7 February 2005 (after 65
days); appeal bond tendered was so grossly disproportionate to the monetary award.

NLRC: Employees are not entitled to separation pay considering the eventual closure of
their employer's business due to serious business losses or financial reverses.
CA (Rule 65): MMC failed to perfect its appeal.

ISSUE: WON the decision of LA had already attained finality and, for said reason, had
been placed beyond the NLRC’s power of review.

RULING: YES. Article 223 of the Labor Code of the Philippines provides that decisions,
awards, or orders of the LA are final and executory unless appealed to the NLRC by any
or both parties within 10 calendar days from the receipt of such decisions, awards or
orders. In case of a judgment involving 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 NLRC in the amount equivalent to the monetary
award in the judgment appealed from. No motion to reduce bond shall be entertained
except on meritorious grounds and upon the posting of a bond in a reasonable amount in
relation to the monetary award. The filing of the motion to reduce bond without compliance
with the requisites shall not stop the running of the period to perfect an appeal.

15
In the case at bar, having received the LA’s Decision on Nov 24, 2004, MMC had 10
calendar days or until Dec 4, 2004 within which to perfect an appeal. Considering that the
latter date fell on a Saturday, it had until the next working day, Dec 6, 2004, within which
to comply with the requirements for the perfection of its appeal.

On the matter of the filing and acceptance of motions to reduce appeal bond, as provided
in Section 6, Rule VI of the 2011 NLRC Rules of Procedure, the following guidelines shall
be observed:
(a) The filing of a motion to reduce appeal bond shall be entertained by the NLRC subject
to the following conditions: (1) there is meritorious ground; and (2) a bond in a
reasonable amount is posted;
(b) For purposes of compliance with condition no. (2), a motion shall be accompanied by
the posting of a provisional cash or surety bond equivalent to 10% of the monetary
award subject of the appeal, exclusive of damages and attorney's fees;
(c) Compliance with the foregoing conditions shall suffice to suspend the running of the
10-day reglementary period to perfect an appeal from the labor arbiter's decision to
the NLRC;
(d) The NLRC retains its authority and duty to resolve the motion to reduce bond and
determine the final amount of bond that shall be posted by the appellant, still in
accordance with the standards of meritorious grounds and reasonable amount; and
(e) In the event that the NLRC denies the motion to reduce bond, or requires a bond that
exceeds the amount of the provisional bond, the appellant shall be given a fresh
period of 10 days from notice of the NLRC order within which to perfect the appeal by
posting the required appeal bond.

In this case, we see that with no proof to substantiate its claim, MMC moved for a
reduction of the appeal bond on the preferred basis of serious losses and reverses it
supposedly sustained in the years prior to the rendition of the LA's decision. The first
condition may be left for the nonce. As to the second condition, we may consider that the
amount of P100,000.00 supposedly posted was provisional bond sufficient to suspend
the running of the 10-day reglementary period to perfect an appeal from the Labor
Arbiter's decision. That would however not improve MMC’s position one bit. Amor
correctly called attention to the fact that the check submitted by petitioner was dishonored
upon presentment for payment, thereby rendering the tender thereof ineffectual. Although
the NLRC chose not to address the issue of the perfection of the appeal as well as the
reduction of the bond in its Resolution, the record shows that petitioner only manifested
its deposit of the funds for the check 24 days before the resolution of its appeal or 116
days after its right to appeal the LA’s decision had expired. Having filed its motion and
memorandum on the very last day of the reglementary period for appeal, moreover, MMC
had no one but itself to blame for failing to post the full amount pending the NLRC's action
on its motion for reduction of the appeal bond. Since it is the posting of a cash or surety
bond which confers jurisdiction upon the NLRC, the rule is settled that non-compliance is
fatal and has the effect of rendering the award final and executory. Viewed in the light of
the foregoing considerations, the CA cannot be faulted for no longer discussing the merits
of MMC’s case. The perfection of an appeal in the manner and within the period

16
prescribed by law is not only mandatory but also jurisdictional and failure of a party to
conform to the rules regarding appeal will render the judgment final and executory

17
 Toyota Alabang inc v Games, 2015

Doctrine: Appeal bond is required in all decisions of the LA involving monetary awards;
appeal is a mere statutory right and therefore should be taken in accordance with the
rules provided in the NLRC Rules of Procedure.

Facts: Games, who worked as a foreman for petitioner, allegedly stole its vehicle
lubricants. Subsequently, it charged him with qualified theft before the trial court. Two
years thereafter, Games filed a Complaint for illegal dismissal, nonpayment of benefits,
and damages against petitioner. The latter, through counsel, failed to file its Position
Paper on the date set.

Several resettings of the hearings ensued. During one of the hearings, petitioner
manifested that it had failed to file its Position Paper because its handling lawyer was no
longer connected with the company. Then, in another hearing, petitioner failed to appear
and even reneged on submitting its pleading. Accordingly, the case was declared
submitted for decision.

LA: Ruled against petitioner and ordered the latter to pay Games P535,553.07 for his
separation pay, back wages, service incentive leave pay and attorney's fees resulting
from his illegal dismissal. Petitioner did not file a motion for reconsideration so the LA's
ruling became final and executory. Accordingly, LA issued a Writ of Execution which
petitioner sought to quash. It prayed that the proceedings be reopened, explaining that it
had failed to present evidence because of its counsel's negligence in filing the appropriate
pleadings. LA denied the claims of petitioner.

NLRC: Denied petitioner’s appeal for failure to show proof of its security deposit for the
appeal bond.

CA: Denied the appeal. First, petitioner failed to comply with the bond requirement.
Second, a final judgment is no longer appealable. Third, petitioner’s own negligence
caused it to lose its right to appeal.

Issues: Whether or not the requirement of posting an appeal bond does not cover an
appeal from a decision of the LA denying a motion to quash writ of execution; and
Whether or not NLRC erred in requiring petitioner to accompany the appeal bond with
proof of a security deposit or collateral securing the bond.

Ruling: 1) No. Article 223 of the Labor Code and Section 6, Rule VI of the 2011 NLRC
Rules of Procedure, uniformly state thus: In case the decision of the Labor Arbiter or the
Regional Director involves a monetary award, an appeal by the employer may be
perfected only upon the posting of a bond, which shall either be in the form of cash deposit
or surety bond equivalent in amount to the monetary award, exclusive of damages and
attorney's fees.

18
Evidently, the above rules do not limit the appeal bond requirement only to certain kinds
of rulings of the LA. Rather, these rules generally state that in case the ruling of the LA
involves a monetary award, an employer's appeal may be perfected only upon the posting
of a bond. Therefore, absent any qualifying terms, so long as the decision of the LA
involves a monetary award, as in this case, that ruling can only be appealed after the
employer posts a bond.

2) No. According to the NLRC and the CA, the bonding company's mere declaration in
the Certification of Security Deposit that the bond is fully secured is not tantamount to a
faithful compliance with the rule, because there must first be an accompanying
assignment of the employer's bank deposit.

Notwithstanding this issue, the NLRC has given a well-founded reason for refusing to
entertain petitioner's appeal, namely, no appeal may be taken from an order of execution
of a final and executory judgment.

An appeal is not a matter of right, but is a mere statutory privilege. It may be availed of
only in the manner provided by law and the rules. Thus, a party who seeks to elevate an
action must comply with the requirements of the 2011 NLRC Rules of Procedure as
regards the period, grounds, venue, fees, bonds, and other requisites for a proper appeal
before the NLRC; and in Section 6, Rule VI, the aforesaid rules prohibit appeals from final
and executory decisions of the Labor Arbiter.

19
 Social Security System v Ubana, 2015

Doctrine: Regular courts have jurisdiction when there is no employer-employee

relationship.

Facts: Debbie Ubana filed a complaint before the RTC of Daet, Camarines Norte, alleging
that she applied for employment with the SSS. However, after passing the examinations
and accomplishing all the requirements for employment, she was instead referred to DBP
Service Corporation for "transitory employment." On May 28, 1996, she was made to sign
a six-month Service Contract Agreement by DBP Service Corporation with a daily wage
of only P171.00. On December 16, 2001, she was transferred to the SSS Retirees
Association as Processor at the Membership Section until her resignation on August 26,
2002. As Processor, she was paid only P229.00 daily or P5,038.00 monthly, while a
regular SSS Processor receives a monthly salary of P18,622.00 or P846.45 daily wage.
Her May 28, 1996 Service Contract Agreement with DBP Service Corporation was never
renewed, but she was required to work for SSS continuously under different assignments
with a maximum daily salary of only P229.00; at the same time, she was constantly
assured of being absorbed into the SSS plantilla. Because of the oppressive and
prejudicial treatment by SSS, she was forced to resign on August 26, 2002 as she could
no longer stand being exploited, the agony of dissatisfaction, anxiety, demoralization, and
injustice. She asserted that she dedicated six years of her precious time faithfully serving
SSS, foregoing more satisfying employment elsewhere, yet she was merely exploited and
given empty and false promises.

SSS’s contention: (1) maintains that there is a direct causal connection between
respondent's claims and her employment, which brings the subject matter within the
jurisdiction of the NLRC and (2) its existing manpower services agreements with DBP
Service Corporation and SSS Retirees Association are legitimate; and that some of
respondent's claims may not be entertained since these pertain to benefits enjoyed by
government employees, not by employees contracted via legitimate manpower service
providers.

Debbie’s contention: (1) her case is predicated not on labor laws but on Articles 19 and
20 of the Civil Code for petitioner's act of exploiting her and enriching itself at her expense
by not paying her the correct salary commensurate to the position she held within SSS.

RTC: Dismissed the complaint for lack of jurisdiction at first but granted respondents
motion for reconsideration on the ground that primary relief sought herein is for moral and
exemplary damages for the abuse of rights under Articles 19 and 20 of the Civil Code.

CA: Affirmed RTC.

Issue: Whether or not it is the NLRC that has jurisdiction over the case.

Ruling: No. In her Complaint, respondent acknowledges that she is not petitioner's
employee, but that precisely she was promised that she would be absorbed into the SSS

20
plantilla after all her years of service with SSS, and in its pleadings, petitioner denied the
existence of an employer-employee relationship between it and respondent. Since both
parties admit that there is no employment relation between them, then there is no dispute
cognizable by the NLRC.

There being no employer-employee relation or any other definite or direct contract

between respondent and petitioner, the latter being responsible to the former only for the
proper payment of wages under Article 19 and 20 of CC. The very broad Article 19 of the
Civil Code requires every person, 'in the exercise of his rights and in the performance of
his duties, [to] act with justice, give everyone his due, and observe honesty and good
faith'.

It is indeed unfair and unjust that as Processor who has worked with petitioner for six long
years, she was paid only P5,038.00 monthly, or P229.00 daily, while a regular SSS
employee with the same designation and who performs identical functions is paid a
monthly salary of P18,622.00, or P846.45 daily wage. Petitioner may not hide under its
service contracts to deprive respondent of what is justly due her. As a vital government
entity charged with ensuring social security, it should lead in setting the example by
treating everyone with justice and fairness.

In this jurisdiction, the long honored legal truism of ‘equal pay for equal work’ has been
impregnably institutionalized; persons who work with substantially equal qualifications,
skill, effort and responsibility, under similar conditions, should be paid similar salaries

21
 Ilaw Buklod ng Manggagawa Nestle Phils Chapter v Nestle Phils, 2015

Principle: A decision or order may be executed on motion within five (5) years from the
date it becomes final and executory. After the lapse of such period, the judgment shall
become dormant, and may only be enforced by an independent action within a period of
ten (10) years from date of its finality.

Facts:
Petitioner union staged a strike against herein respondent citing as grounds the alleged
respondent’s violation of the CBA, dismissal of union officers and members,
discrimination and other unfair labor practice acts. Respondent filed with the NLRC a
petition for Injunction with Prayer for issuance of TRO. It was granted. Respondent then
filed a Petition to Declare Strike Illegal. Subsequently, the DOLE Secretary assumed
jurisdiction over the strike and certified the same to the NLRC, but the petitioner
questioned such assumption. However, after series of conciliation meetings and
discussion between the parties, they arrived at a compromise and executed a MOA on
August 4, 1998 which was approved by the NLRC on October 12, 1998. On January 25,
2010, or after a lapse of more than 11 years, petitioners filed with the NLRC a Motion for
Writ of Execution contending that they have not been paid the amounts they are entitled
to in accordance with the MOA. Respondent filed opposition contending prescription.

Issue:
WON petitioner’s claim is barred by prescription.

Ruling:
YES. The most relevant rule in the instant case is Section 8, Rule XI, 2005 Revised Rules
of Procedure of the NLRC which states that:

Section 8. Execution By Motion or By Independent Action. - A decision or order may be

executed on motion within five (5) years from the date it becomes final and executory.
After the lapse of such period, the judgment shall become dormant, and may only be
enforced by an independent action within a period of ten (10) years from date of its finality.

In the present case, the five-and ten-year periods provided by law and the rules are more
than sufficient to enable petitioners to enforce their right under the subject MOA. In this
case, it is clear that the judgment of the NLRC, having been based on a compromise
embodied in a written contract, was immediately executory upon its issuance on October
12, 1998. Thus, it could have been executed by motion within five (5) years. It was not.
Nonetheless, it could have been enforced by an independent action within the next five
(5) years, or within ten (10) years from the time the NLRC Decision was promulgated. It
was not. Therefore, petitioners' right to have the NLRC judgment executed by mere
motion as well as their right of action to enforce the same judgment had prescribed by the
time they filed their Motion for Writ of Execution on January 25, 2010.

It is true that there are instances in which this Court allowed execution by motion even
after the lapse of five years upon meritorious grounds. However, in instances when this

22
Court allowed execution by motion even after the lapse of five years, there is, invariably,
only one recognized exception, i.e., when the delay is caused or occasioned by actions
of the judgment debtor and/or is incurred for his benefit or advantage.14 In the present
case, there is no indication that the delay in the execution of the MOA, as claimed by
petitioners, was caused by respondent nor was it incurred at its instance or for its benefit
or advantage

23
 Quantum Foods, Inc. v Esloyo, 2015, citing 2015 Mcburnie

Principles:
It is well to emphasize that technical rules are not binding in cases submitted before the
NLRC. In fact, labor officials are enjoined to use every and reasonable means to ascertain
the facts in each case speedily and objectively, without regard to technicalities of law or
procedure, in the interest of due process.

All motions to reduce bond that are to be filed with the NLRC shall be accompanied by
the posting of a cash or surety bond equivalent to 10% of the monetary award that is
subject of the appeal, which shall provisionally be deemed the reasonable amount of the
bond in the meantime that an appellant's motion is pending resolution by the Commission.

Facts:
Petitioner, a domestic corporation engaged in the distribution and selling of food products
nationwide, hired respondents Esloyo and Magsila. However, petitioner later on decided
to reorganize its sales force nationwide following a drastic drop in net income and Magsila
was among those retrenched. Subsequently, Esloyo was also informed of his termination
from work on the ground of loss of trust and confidence due to his numerous violations of
the company rules and regulation. Respondents then filed complaint for illegal dismissal
with money claims. LA ruled in favor of the respondents herein. Petitioner filed an appeal
before the NLRC. However, respondents filed a motion to dismiss the appeal for
petitioner’s failure: (a) to attach a Verification and Certification of Non-Forum Shopping
as required by the New Rules and Procedure of the NLRC; and (b) to post a bond in an
amount equivalent to the monetary judgment as mandated by law. Nevertheless, these
were complied with subsequently and before the NLRC can rule. NLRC reversed the
decision of LA and ruled that there was no illegal dismissal. But the CA reversed the
NLRC ruling and reinstated the LA ruling and further ruling that NLRC acted with abuse
of discretion on upholding the appeal despite its infirmities.

Issue:
WON the CA erred in ascribing grave abuse of discretion on the part of the NLRC in giving
due course to petitioner’s appeal.

Ruling:
YES. The rule is that in case of a judgment involving 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 Commission in the amount equivalent
to the monetary award in the judgment appealed from.

In the line of cases that were decided by the court, it ruled that subsequent submission of
proof of authority to act on behalf of a petitioner corporation justifies the relaxation of the
Rules for the purpose of allowing its petition to be given due course. That under justifiable
circumstances, the Court has relaxed the rule requiring the submission of such
certification of non-forum shopping considering that although it is obligatory, it is not
jurisdictional. It is well to emphasize that technical rules are not binding in cases submitted

24
before the NLRC. In fact, labor officials are enjoined to use every and reasonable means
to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, in the interest of due process. Consequently, the NLRC
cannot be faulted for relaxing its own rules in the interest of substantial justice.

Coming now to the bond requirement, while it has been settled that the posting of a cash
or surety bond is indispensable to the perfection of an appeal in cases involving monetary
awards from the decision of the LA,63 in several cases, the Court has relaxed this
stringent requirement whenever justified. No motion to reduce bond shall be
entertained except on meritorious grounds, and only upon the posting of a bond in a
reasonable amount in relation to the monetary award.

The bond requirement on appeals involving monetary awards has been and may be
relaxed in meritorious cases. These cases include instances in which (1) there was
substantial compliance with the Rules, (2) surrounding facts and circumstances constitute
meritorious grounds to reduce the bond, (3) a liberal interpretation of the requirement of
an appeal bond would serve the desired objective of resolving controversies on the
merits, or (4) the appellants, at the very least, exhibited their willingness and/or good faith
by posting a partial bond during the reglementary period.

All motions to reduce bond that are to be filed with the NLRC shall be accompanied by
the posting of a cash or surety bond equivalent to 10% of the monetary award that is
subject of the appeal, which shall provisionally be deemed the reasonable amount of the
bond in the meantime that an appellant's motion is pending resolution by the Commission.
In conformity with the NLRC Rules, the monetary award, for the purpose of computing
the necessary appeal bond, shall exclude damages and attorney's fees. Only after the
posting of a bond in the required percentage shall an appellant's period to perfect an
appeal under the NLRC Rules be deemed suspended.

Hence, the posting of a P400,000.00 cash bond equivalent to more than 20% of the
monetary judgment, together with the Motion to Reduce Bond within the reglementary
period was sufficient to suspend the period to perfect the appeal. The posting of the said
partial bond coupled with the subsequent posting of a surety bond in an amount
equivalent to the monetary judgment also signified QFI's good faith and willingness to
recognize the final outcome of its appeal.

25
 Dela Rosa Liner inc et al v Borela, 2016

Concept: Forum Shopping. The elements of forum shopping are: (1) identity of parties;
(2) identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and (3) identity of the 2 preceding particulars such that judgement rendered in the
other action will amount to res judicata in the other action. The test to determine whether
there is identity in causes of action is whether the same facts or evidence would support
both actions, or whether identity in the facts is essential to the maintenance of both
actions.

Facts: September 23, 2011, respondents Calixto Borela, a bus driver, and Estelo
Amarille, conductor, filed complaints against petitioners Dela Rosa Liner, a public
transport company, Rosauro Dela Rosa Sr., and Nora Dela Rosa, for underpayment/non-
payment of salaries, holiday pay, overtime pay, service incentive leave, 13th month pay,
sick leave and vacation leave, night shift differential, illegal deductions, and violation of
Wage Order Nos. 13, 14, 15 and 16.

In a motion dated Oct. 26, 2011, petitioners asked the LA to dismiss the case for forum
shopping. They alleged that on Sept. 28, 2011, the CA 13th Division disposed of a similar
case between the parties after they entered into a compromise agreement. Respondents
opposed the motion, contending that the causes of action are different.

Ruling on Compulsory Arbitration: Upheld the petitioners’ position and dismissed the
complaint on the grounds of forum shopping. Respondent appealed the LA’s ruling. On
July 31 2012, the NLRC 1st Division granted the appeal, reversed LA’s dismissal order,
and reinstated the complaint.

NLRC held that the respondents could not have committed forum shopping because there
was no identity of causes of action between the two cases. The first complaint charged
the petitioners with illegal dismissal and unfair labor practice, while the second was based
on non-payment/underpayment of salaries and monetary benefits, and violation of wage
orders. Petitioner moved for reconsideration, but NLRC denied.

CA Decision: CA denied the petitioner. It found no grave abuse of discretion in the NLRC
ruling. The parties resolved the first case through a compromise agreement, but it had a
different cause of action.

Issue: Whether or not the CA erred in ruling that there was no forum shopping nor res
judicata

Ruling: Supreme Court ruled that the NLRC did not commit any grave abuse of discretion
when it ruled that the second complaint is not barred by the rule on forum shopping nor
by the principle of res judicata.

Contrary to petitioners’ submission, respondents’ second complaint, a money claim, is

not a similar case to the first complaint. Thus, the filing of the second complaint did not

26
constitute forum shopping and the judgement in the first case is not a res judicata ruling
that bars the second complaint.

The CA established the elements of forum shopping which are: (1) identity of parties; (2)
identity of rights asserted and relief prayed for, and (3) identity of the two preceding
particulars such that any judgement in one would bar the other on the ground of res
judicata. Supreme Court said that there is no identity of rights asserted and reliefs prayed
for, and the judgement in the first case does not amount to res judicata.

There is also no identity of causes of action in the first and second complaint. In Yap v.
Chua, it was held that the test to ascertain whether there is an identity in causes of action
is if the same evidence would support both actions, or whether there is an identity in the
facts essential to the two actions. Under the circumstances of the case at bar, sufficient
basis exists that there is no identity of causes of action between the 2 complaints. CA
was correct in holding that the same facts/evidence would not support both actions.

The petitioners’ argument that the Compromise Agreement covered all claims and causes
of action cannot be accepted. The Compromise Agreement expressly stated that no
further actions shall be brought on the same grounds. The phrase same grounds can only
refer to the grounds raised in the first complaint. The coverage of “covered all claims and
causes of action” cannot be allowed because it is too sweeping and effectively excludes
all other claims by the respondents against petitioner, including those that cannot be
waived without appropriate consideration.

27
 Fontana Development Corp. v Vukasinovic, 2016

Concept: Penalty for forum shopping is summary dismissal not only of the case pending
in this Court, but of all cases pending in the lower courts. Elements of forum shopping:
identity of parties, identity of rights asserted, and identity of the two preceding particulars.

Facts: Sascha Vukasinovic was hired by petitioner Fontana Dev. Corp. (FDC) as its
Director for Business Development for one year. His employment was renewed for
another year at the end of his first contract. Sometime in May 2010, he allegedly received
a text message from one Jenny Mallari informing him that Nestor Dischoso and Chief
Hotel Engineer Jaime Villareal, both officers of FDC, were receiving commission from
company transactions.

Thereafter, respondent met with Mallari and offered her money in exchange for evidence.
She gave him a photocopy of a check issued to Engr. Villareal, as proof of receiving
commission. The check however, had an alteration so respondent asked Mallari to
execute an affidavit and provide more proof. Mallari was paid 14,000.
Mallari gave respondent 2 invoices issued by suppliers. Again, there were discrepancies.
Consequently, further investigations were to be made on the alleged corruptions of Engr.
Villareal. On June 15, 2010, Engr. Villareal and Mallari were brought to the NBI for
questioning. Mallari denied that Engr. Villareal asked for commission from her and said
she merely fabricated the story to ask money from respondent.

Engr. Villareal filed a complaint claiming that respondent paid Mallari to fabricate a story
depicting him as a corrupt employee. Respondent did not deny the allegations and
instead admitted that he gave money to Mallari because it is practice in Fontana to give
money to informants for vital information. Thus, FDC terminated respondent’s
employment after finding him guilty of acts of dishonest in the form of bribery. Respondent
however, refused to acknowledge its receipt and instead filed a complaint for illegal
dismissal.

Ruling of the LA: Dismissed the complaint for lack of factual or legal basis, and ruled
that respondent cannot be regularized as he is an employee with a legal and valid fixed-
term employment and his dismissal was for just cause.
Ruling of the NLRC: Dismissed appeal and affirmed LA.
Ruling of the CA: CA ordered award of unpaid salaries, but affirmed the decision that it
was a valid dismissal.

Issue: Whether or not the CA gravely erred in not dismissing the petition for forum
shopping

Ruling: Petition is meritorious. Respondent is guilty of forum shopping. There is forum

shopping when a party repetitively avails of several judicial remedies in different courts,
simultaneously or successively, all substantially founded on the same transactions and
the same essential facts and circumstances, and all raising similar issues either pending
or already resolved.

28
The test for determining the existence of forum shopping is whether a final judgment in
one case amounts tores judicata in another or whether the following elements of litis
pendentia are present: (a) identity of parties, or at least such parties as representing the
same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the
relief being founded on the same facts; and (c) the identity of the two preceding
particulars, such that any judgment rendered in the other action will, regardless of which
party is successful, amount to res judicata in the action under consideration. Said
requisites are also constitutive of the requisites for auter action pendant or lis pendens.
In this case, there is no doubt that all the elements are established.

When there is forum shopping, all pending claims on the same claim must be dismissed.
The penalty for forum shopping is summary dismissal not only of the petition pending
before this Court, but also of the other cases pending in the lower courts. This is so
because twin dismissal is the punitive measure to those who trifle with the orderly
administration of justice.

The rule essentially penalizes the forum shopper by dismissing all pending actions on
the same claim filed in any court. Because of the severity of the penalty of the rule, an
examination must first be made on the purpose of the rule. The purpose of the rule is to
avoid multiplicity of suits and to prevent a party from instituting two or more actions or
proceeding involving the same parties for the same cause of action, either
simultaneously or successively, on the supposition that one or the other court would
make a favorable disposition.

What is critical is the vexation brought upon the courts and the litigants by a party who
asks different courts to rule on the same or related causes and grant the same or
substantially the same reliefs and in the process, creates the possibility of conflicting
decisions being rendered by the different fora upon the same issues. Willful and
deliberate violation of the rule against forum shopping is a ground for summary
dismissal of the case; it may also constitute direct contempt.

29
 Manila Doctors College v Olomores, 2016

PRINCIPLE: Under Article 223 (now Article 229) of the Labor Code, "the decision of the
[LA] reinstating a dismissed or separated employee, insofar as the reinstatement aspect
is concerned, shall immediately be executory, even pending appeal. The employer is
duty-bound to reinstate the employee, failing which, the employer is liable instead to pay
the dismissed employee's salary.

FACTS: Respondent Olomores was a faculty member of petitioner Manila Doctors

College (MDC). He was dismissed for Grave Misconduct, Gross Inefficiency, and
Incompetence, after due investigation finding him guilty of employing a grading system
that was not in accordance with the guidelines set by MDC. Olomores then immediately
filed a case for illegal dismissal, money claims, regularization, damages, and attorney's
fees against petitioners MDC and Teresita O. Turla (petitioners), President of MDC,
before the NLRC claiming that there was no just cause for his dismissal, and that he
should be accorded a permanent appointment.

On December 8, 2010, the Labor Arbiter rendered a Decision (first decision) declaring
respondent to have been illegally dismissed. However, with respect to the claim for
regularization, the LA found that respondent failed to meet the requisites for the
acquisition of permanent status. The LA ordered petitioners to reinstate Olomores as
faculty member under the same terms and conditions of his employment, without loss of
seniority rights. However, also included in this decision is an alternative award where
instead of being reinstated, Olomores is given the option to receive a separation pay
equivalent to his full month's pay for every year of service, a fraction of at least six months
to be considered a full year.

Upon appeal of the petitioners, the NLRC, reversed the decision of the LA and dismissed
the complaint. The NLRC found Olomores guilty of serious misconduct. Separately, the
NLRC ordered the payment to Olomores of service incentive leave pay for a period of 3
years, considering petitioners' failure to prove payment thereof.

Meanwhile, while the case was pending appeal, Olomores filed a Motion for Issuance of
Writ of Execution seeking to collect (a) the service incentive leave pay ordered by the
NLRC, and (b) the equivalent wages from the issuance of the LA Decision (first decision)
on December 8, 2010 ordering reinstatement until the finality of the NLRC Decision
reversing it.

The LA granted respondent's motion and ordered the issuance of a writ of execution and
emphasized that an order of reinstatement entitles an employee to receive his accrued
backwages from the moment the reinstatement order was issued up to the date when the
same was reversed by a higher court without fear of refunding what he had received.

Aggrieved, petitioners appealed the issuance of the writ of execution in the NLRC. The
NLRC deleted the award of the supposed reinstatement backwages, but retained the
award for service incentive leave. The NLRC observed that since respondent's dismissal

30
was eventually determined to be legal, there is no more basis for either payroll
reinstatement backwages or separation pay.
The CA reversed the decision of the NLRC and reinstated the award for backwages.

ISSUE: Whether or not Olomores was entitled to the backwages from the time the order
of reinstatement was issued in the first LA decision up to the reversal of such decision by
the NLRC?

RULING: YES, Olomores is entitled to reinstatement backwages.

The decision of the LA reinstating a dismissed or separated employee is immediately
executory, even pending appeal. Additionally, the posting of bond by the employer shall
not stay the execution of the order.

However, in the event that the LA's decision is reversed by a higher tribunal, the
employer's duty to reinstate the dismissed employee is effectively terminated. This means
that an employer is no longer obliged to keep the employee in the actual service or in the
payroll. The employee, in turn, is not required to return the wages that he had received
prior to the reversal of the LA's decision. Notwithstanding the reversal of the finding of
illegal dismissal, an employer, who, despite the LA's order of reinstatement, did not
reinstate the employee during the pendency of the appeal up to the reversal by a higher
tribunal may still be held liable for the accrued wages of the employee, i.e., the unpaid
salary accruing up to the time of the reversal. By way of exception, an employee may be
barred from collecting the accrued wages if shown that the delay in enforcing the
reinstatement pending appeal was without fault on the part of the employer.

In this case, petitioners contend that that they should not be faulted for failing to enforce
the December 8, 2010 Decision (first decision) of the LA — which had given respondent
the option to receive separation pay in lieu of reinstatement — for the reason that it was
respondent who failed to choose either relief. However, as above-discussed, the
reinstatement aspect of the LA's Decision is immediately executory and, hence, the active
duty to reinstate the employee — either actually or in payroll — devolves upon no other
than the employer, even pending appeal. In any event, petitioners have no one else to
blame but themselves for misconstruing the first LA decision. The order of reinstatement
is clearly directive, and the alternative option given to Olomores is merely secondary to
such.

31
 Dee Jay’s Inn & Café v Raneses, 2016

PRINCIPLE: The verified position papers to be submitted shall cover only those claims
and causes of action raised in the complaint excluding those that may have been amicably
settled, and shall be accompanied by all supporting documents including the affidavits of
their respective witnesses which shall take the place of the latter's direct testimony. The
parties shall thereafter not be allowed to allege facts, or present evidence to prove facts,
not referred to and any cause or causes of action not included in the complaint or position
papers, affidavits and other documents.

FACTS: Respondent Ma. Lorina Rañeses filed against petitioners Dee Jay’s Inn and Café
(DJIC) and/or Melinda Ferraris a complaint for illegal dismissal with money claims and
damages. She averred that petitioner Ferraris terminated her employment on February
5, 2005 upon learning that she filed a complaint before the SSS office.

Petitioners countered that DJIC incurred a shortage of P400 in its earnings for February
4, 2005. Ferraris lost her temper and scolded Rañeses and a fellow employee, and
required them to produce the missing P400. However, Rañeses and the employee merely
walked out and did not report back to work anymore.

The Labor Arbiter (LA) ruled in favor of petitioners but granted respondent’s claim for 13th
month pay. The LA observed that there was no positive or unequivocal act on the part of
petitioners to support the assertion that Rañeses was dismissed. Besides, Rañeses did
not aver illegal dismissal as the same was not pleaded in her verified complaint. She
cannot be allowed to prove the same. The rule is clear that the "verified position papers
shall cover only those claims and causes of action raised in the complaint . . ." (Rule V,
Section 4, Par. 2, Rules of Procedure of the NLRC, as Amended). Incidentally, there is
no proof linking to the allegation of dismissal.

The National Labor Relations Commission (NLRC) affirmed in toto the LA decisions. The
Court of Appeals (CA) set aside the decision and resolution of the NLRC. It ruled that the
testimonies were tainted with bias, hence, they should not be relied upon. However, doubt
should be resolved in favor of the worker, respondent in this case.

ISSUE: Whether or not a claim not raised in the pro forma complaint may still be raised
in the position paper?

RULING: Yes.
The complaint is not the only document from which the complainant's cause of action is
determined in a labor case. Any cause of action that may not have been included in the
complaint or position paper, can no longer be alleged after the position paper is submitted
by the parties. In other words, the filing of the position paper is the operative act which
forecloses the raising of other matters constitutive of the cause of action. This necessarily
implies that the cause of action is finally ascertained only after both the complaint and
position paper are properly evaluated.

32
The Court observes herein that Rañeses could not have included the charge of illegal
dismissal in her complaint because she filed said complaint (which were for various
money claims against petitioners) in January 2005, and petitioners purportedly dismissed
her from employment only on February 5, 2005. However, since respondent subsequently
alleged and argued the matter of her illegal dismissal in her position paper filed on
September 8, 2005, then the Labor Arbiter could still take cognizance of the same.
Nevertheless, on the substantive issue of whether or not respondent was illegally
dismissed, the Court answers in the negative.

The Court, in Cañedo v. Kampilan Security and Detective Agency, Inc., expressly
recognized the rule that: In illegal dismissal cases, “while the employer bears the burden
x x x to prove that the termination was for a valid or authorized cause, the employee must
first establish by substantial evidence the fact of dismissal from service.” The burden of
proving the allegations rests upon the party alleging and the proof must be clear, positive
and convincing. Thus, in this case, it is incumbent upon petitioner to prove his claim of
dismissal.

The Court reiterated in Brown Madonna Press, Inc. v. Casas, that “in illegal dismissal
cases, the employer has the burden of proving that the employee’s dismissal was legal.
However, to discharge this burden, the employee must first prove, by substantial
evidence, that he had been dismissed from employment.”

It bears to point out that in the case at bar, the Labor Arbiter, the NLRC, and even the
Court of Appeals, all consistently found that Rañeses was not able to present substantial
evidence of her dismissal. They all rejected the joint affidavit of Rañeses’ witnesses, for
being partial and biased. It appears that the witnesses executed said affidavits to return
a favor as respondent testified for them in their own cases against petitioners. The Court
of Appeals only deviated from the findings of the Labor Arbiter and the NLRC by also
disregarding the affidavit of the petitioner’s witness, to corroborate their allegations, for
being insufficient to prove abandonment (NOTE: Rañeses did not return to work after
being scolded. Thus, the issue of “abandonment”.) The appellate court then applied the
equipoise doctrine: with all things considered equal, all doubts must be resolved in favor
of labor, that is, respondent.

The application by the Court of Appeals of the equipoise doctrine and the rule that all
doubts should be resolved in favor of labor was misplaced. Without the joint affidavit of
the witnesses, there only remained the bare allegation of respondent that she was
dismissed by petitioners on February 5, 2005, which hardly constitute substantial
evidence of her dismissal. As both the Labor Arbiter and the NLRC held, since Rañeses
was unable to establish with substantial evidence her dismissal from employment, the
burden of proof did not shift to petitioners to prove that her dismissal was for just or
authorized cause.

33
 Buenaflor Car Services v Cezar Durumpili David, 2016

Doctrine: NLRC should not be bound itself by the technical itself by the technical rules of
procedure as it is allowed to be the liberal in the application of its rules in deciding labor
cases.

Facts: Cesar David was employed as a Service Manager by Buenaflor Car Services. He
was charged in signing day-to-day operations of checks and vouchers. It was company
policy that all checks, should be issued in the name of the specific supplier and not in
cash. The Chief Finance Officer of the company received a call from the Branch Manager
of China Bank that they received checks issued by Cesar David bearing the words “OR
CASH”. Thereafter, the respondent were served respective notice of termination after
having been found violating the Company Code of Conduct and Behavior.

Issue: W/N an extra-judicial confession made by a co-employee testifying that it was the
respondent who is the author of the checks signed admissible as evidence?

Ruling: Sec. 30, Rule 130 of the Rules of Court, provides that the rights of the party
cannot be prejudiced by an act omission of another. Consequently, an extra-judicial
confession is not admissible as evidence against his/her co-accused because it is
considered hearsay evidence against him.

However, the NLRC should not be bound, itself by the technical rules of procedure as it
is allowed in liberally applying the rules in deciding labor cases. NLRC Rules of Procedure
state that the rules of procedure and evidence prevailing in courts of law and equity shall
not be controlling and the commission shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively, without regard to the technicality
of the rules of procedure.

C.I.C.M Mission Seminaries School of Theology, Inc v Perez, 2017

Doctrine: Failure to append the affidavit of service is essential to due process. The utter
disregard of this requirement as held in a catena of cases cannot be justified by harking
to substantial justice and the policy of liberal construction of the rules.

Facts: The case was an offshoot of an illegal dismissal case. The petitioners questioned
the writ of execution and questioned the legal basis for the computation of the back wages
and separation pay of an illegally dismissed employee. Throughout the course of the trial
the petitioners failed to submit an affidavit of service.

Issue: W/N Petitioners failure to append the required affidavit of service a fatal defect?

Ruling: YES. Failure to append the affidavit of service is essential to due process. The
utter disregard of this requirement as held in a catena of cases cannot be justified by
harking to substantial justice and the policy of liberal construction of the rules. Caveat:
Case mostly discusses illegal dismissal and computation for back wages, and

34
reinstatement. Not under the topic so I did not include. Very short discussion only with
regards to the NLRC Rules J

35
 Turks Shawarma Company v Pajaron, 2017

Doctrine: No motion to reduce bond shall be entertained except on meritorious

grounds and upon the posting of a bond in a reasonable amount.

Facts: Pajaron and Carbonilla were hired as service crew and head crew, respectively.
In 2010, they filed their respective Complaints for constructive and actual illegal dismissal,
non-payment of overtime pay, holiday pay, holiday premium, rest day premium, service
incentive leave and 13th month pay.

In 2010, Pajaron was asked by petitioner Zenarosa to sign a piece of paper stating that
he was receiving the correct amount of wages and that he had no claims whatsoever from
petitioners. Pajaron, disagreeing refused to sign the paper prompting Zenarosa to fire him
from work. Carbonilla, on the other hand, had an altercation with his supervisor while at
work. When the incident was brought to the attention of Zenarosa, he was immediately
dismissed from service. He was also asked by Zenarosa to sign a piece of paper
acknowledging his debt amounting to P7000.00.

Respondents’ Contention: Both Pajaron and Carbonilla claimed that there was no just
or authorized cause of their dismissal and that petitioners also failed to comply with the
requirements of due process.

Petitioner’s Contention: Petitioners averred that respondents abandoned their work.

They alleged that Pajaron would habitually absent himself from work for an unreasonable
length of time without notice while Carbonilla was reprimanded and admonished several
times for misbehavior and disobedience of lawful orders.

LA: In Dec 10, 2010, LA held that respondents were constructively and illegaly dismissed
by petitioners. Pajaron and Carbonilla were awarded the sum of P148,753.61 and
P49,182.66, respecitively.

NLRC: Due to alleged non-availability of counsel, Zenarosa himself filed a Notice of

Appeal with Memorandum and Motion to Reduce Bond with NLRC, where he posted a
partial cash bond for P15,000, maintaining that he cannot afford to post the full amount
of the award since he is a mere backyard micro-entrepreneur. NLRC denied the motion
to reduce bond and ruled that financial difficulties may not be invoked as valid ground to
reduce bond and that the partial bond amount of P15,000 is not reasonable in relation to
the award which totaled P197,936.27. Appeal was dismissed for non-perfection.

An MR was filed through a new counsel and along with this MR, petitioners tendered the
sum of P207,435.33 representing the deficiency of the appeal bond. MR was denied,
reiterating that the grounds for the reduction of the appeal bond are not meritorious and
that the partial bond is not reasonable. NLRS further held that the posting of the remaining
balance on April 7, 2011 or 3 months and 8 days from receipt of the LA decision cannot
be allowed, otherwise, it will be tantamount to extending the period to appeal.

36
CA: CA dismissed the Petition for Certiorari file by the petitioners, stating among others,
that financial difficulties is not enough justification to dispense the mandatory posting of
a bond in as much as there is an option of posting a surety bond from a reputable bonding
company duly accredited by NLRC, which, petitioners failed to do. Hence, the present
petition.

Issue:
1. WON there is a substantial compliance with the Rules on perfection of appeal.
2. If the appeal is to be given due course, WON respondents were illegally dismissed.

Ruling:
1. NO. The Court has time and again held that “the right to appeal is neither a natural
right nor is it a component of due process. It is mere statutory privilege, and may
be exercised only in the manner and in accordance with the provisions of the law”.
“The party who seeks to avail of the same must comply with the requirements of
the rules. Failing to do so, the right to appeal is lost.” (See Art 223 of LC and Sec
4 and 6 of Rule VI of the 2005 Revised Rules of Procedure of the NLRC for the
Rules on Appeal from the LA’s monetary award and Requisites for perfection of
appeal, including grounds for motion to reduce bond, respectively)

The posting of cash or surety bond is therefore mandatory and jurisdictional; failure to
comply with this requirement renders the decision of the LA final and executory. However,
to give way to equity and justice, the Court, in special and justified circumstances, has
relaxed the said requirement. Thus, under Sec 6 of Rule VI of the 2005 NLRC Revised
Rules of Procedure, the reduction of the appeal bond is allowed, subject to the following
conditions: (1) motion shall be based on meritorious grounds; and (2) a reasonable
amount in relation to the monetary award is posted by the appellant. In the case at
bar, the Motion to Reduce Bond filed by petitioners was not predicated in meritorious and
reasonable grounds and the amount tendered (P15,000) is not reasonable in relation to
the award. NLRC correctly held that the ground cited in the motion is not well-taken for
there was no evidence to prove petitioner’s claim that the payment of the full amount of
the award would greatly affect his business because the law does not require the outright
payment of the total monetary award. The appellant has an option to post either a cash
or surety bond.

In the case of McBurnie vs Ganzon, the Court has set a provisional percentage of 10%
of the monetary award (exclusive of damages and attorney’s fees) as reasonable amount
of bond that an appellant should post pending resolution by the NLRC of a motion for a
bond’s reduction. Only after the posting of this required percentage shall an appellant’s
period to perfect an appeal be suspended. Applying this parameter, the P15,000 partial
bond posted by petitioner is not considered reasonable in relation to the total monetary
award of P197,936.27.

2. YES. While petitioners vehemently argue that respondents abandoned their work,
the records are devoid of evidence to show that there was intent on their part to

37
 forego their employment. In fact, petitioners adamantly admitted that they refused
to rehire respondents despite their persistent requests to admit them to work.
Hence, petitioners essentially admitted the fact of dismissal. In addition, petitioners
did not proffer any evidence to support their claim of misconduct or misbehavior
on the part of the respondents. “In termination cases, the burden of proof rests on
the employer to show that the dismissal is for just cause.” For lack of any clear,
valid and just cause in terminating the respondents’ employment, petitioners are
indubitably guilty of illegal dismissal.

38
 Dutch Movers Inc v Lequin et al, 2017

Doctrine: The principle of immutability of judgment, or the rule that once a judgment has
become final and executory, the same can no longer be altered or modified and the court’s
duty is only to order its execution, is not absolute. One of its exceptions is when there is
a supervening event occurring after the judgement becomes final and executory, which
renders the decision unenforceable.

Facts: DMI employed Lequin as truck driver and the rest of the respondents as helpers.
On Dec 28, 2004, petitioner Cesar Lee informed the respondents that DMI would cease
its hauling operation for no reason; as such, they requested DMI to issue a formal notice
regarding the matter but to no avail. Later, upon respondent’s request, the DOLE NCR
issued a certification revealing that DMI did not file any notice of business closure. Thus,
respondents argued that they were illegally dismissed as their termination was without
cause and only on the pretext of closure.

In Oct 28, 2005, LA Mangandong dismissed the case for lack of cause of action.

On Nov 23, 2007, NLRC reversed and set aside the LA Decision and ruled that
respondents were illegally dismissed because DMI simply placed them on standby, and
no longer provide them with work. Dispositive portion provided that DMI is ordered to
reinstate complainants to their former positions without loss of seniority rights and other
privileges and that DMI is ordered to pay complainants.

NLRC decision became final and executory on Dec 30, 2007.

Respondents: Filed a Motion for Writ of Execution and later on, submitted a Reiterating
Motion for Writ of Execution with Updated Computation of Full Backwages. Pending
resolution of these motions, respondents filed a Manifestation and Motion to Implead
stating that upon investigation, they discovered that DMI no longer operates. They
nonetheless insisted that petitioners managed and operated DMI and consistently
represented to respondents that they were the owners of DMI. They likewise claimed that
per inquiry with the SEC and the DOLE, they learned that DMI did not file any notice of
business closure; and the creation and operation of DMI was attended with fraud making
it convenient for petitioners to evade their legal obligations to them. With these
developments, respondents prayed that petitioners, and the officers named in the Articles
of Incorporation (AOI), be impleaded, and be held solidarily liable with DMI in paying the
judgement award.

LA: On April 1, 2009, LA Savari issued an Order holding petitioners liable for the
judgement awards and decreed that petitioners represented themselves to respondents
as the owners of DMI and were the ones who managed the same. She further noted that
petitioners were afforded due process as they were impleaded from the beginning of the
case.

39
On July 31, 2009, LA Savari issued a Writ of Execution. It commanded the Deputy Sheriff
to proceed to respondents DMI AND/OR Cesar Lee and Yolanda Lee to collect the
judgment award.

Petitioners: Moved to quash the Writ of Execution contending that the April 1, 2009 LA
order was void because the LA has no jurisdiction to modify the final and executory NLRC
Decision and the same cannot anymore be altered or modified since there was no finding
of bad faith against them.

LA denied petitioner’s Motion to Quash because it did not contain any ground that must
be set forth in such motion.

NLRC: NLRC quashed the Writ of Execution in so far as it held petitioners liable to pay
the judgement awards. NLRC ruled in its Resolution that the Writ of Execution should
only pertain to DMI since petitioners were not held liable to pay the awards under the final
and executory NLRC decision. It added that petitioners could not be sued personally for
the acts for DMI because the latter had a separate and distinct personality from the
persons comprising it. NLRC denied the MR.

CA: CA reversed the NLRC Resolutions and affirmed the Writ of Execution impleading
petitioners as party-respondents liable to answer for the judgment awards. CA denied
MR.

Issue:
1. WON the NLRC decision can still be altered and modified and that petitioners
Cesar and Yolanda Lee are personally liable to pay the respondents the judgement
award
2. WON there is legal basis to pierce the veil of corporate fiction of DMI

Ruling:
1. YES. The principle of immutability of judgement, or the rule that once a judgement
has become final and executory, the same can no longer be altered or modified
and the court’s duty is only to order its execution, is not absolute. One of its
exceptions is when there is a supervening event occurring after the judgement
becomes final and executory, which renders the decision unenforceable.

Supervening event refers to facts that transpired after a judgment has become final
and executory, or to new situation that developed after the same attained finality.
It includes matters that the parties were unaware of before or during trial as they
were not yet existing during that time.

Supervening events transpired in this case after the NLRC Decision became final
and executory, which rendered its execution impossible and unjust. In the case at
bar, during the execution stage, DMI ceased operation and the same did not file
any formal notice regarding it.

40
 2. YES. The veil of corporate fiction must be pierced and petitioners should be held
personally liable for judgement awards.

Piercing the veil of corporate fiction is allowed, and responsible persons may be
impleaded, and be held solidarily liable even after final judgment and on execution,
provided that such persons deliberately used the corporate vehicle to unjustly
evade the judgment obligation, or resorted to fraud, bad faith, or malice in evading
their obligation. While it is true that one's control does not by itself result in the
disregard of corporate fiction; however, considering the irregularity in the
incorporation of DMI, then there is sufficient basis to hold that such corporation
was used for an illegal purpose, including evasion of legal duties to its employees,
and as such, the piercing of the corporate veil is warranted. The act of hiding
behind the cloak of corporate fiction will not be allowed in such situation where it
is used to evade one's obligations, which "equitable piercing doctrine was
formulated to address and prevent."

41
 OTHER IMPORTANT LABOR PROVISIONS

A. CONTRACTING ARRANGEMENT

Aliviado et al v Procter & Gamble Phils, 2010

Concept: Labor laws expressly prohibit "labor-only" contracting. To prevent its

circumvention, the Labor Code establishes an employer-employee relationship between
the employer and the employees of the 'labor-only' contractor.

FACTS: The 80 Petitioners worked as merchandisers of P&G from various dates. They
all individually signed employment contracts with either Promm-Gem or SAPS for
periods of more or less five months at a time. They were assigned at different outlets,
supermarkets and stores where they handled all the products of P&G. They received
their wages from Promm-Gem or SAPS.

P&G is principally engaged in the manufacture and production of different consumer

and health products, which it sells on a wholesale basis to various supermarkets and
distributors. To enhance consumer awareness and acceptance of the products, P&G
entered into contracts with Promm-Gem and SAPS for the promotion and
merchandising of its products.

In December 1991, petitioners filed a complaint against P&G for regularization, service
incentive leave pay and other benefits with damages. The complaint was later amended
to include the matter of their subsequent dismissal. LA dismissed. Affirmed by the NLRC
and CA.

Petitioners further assert that Promm-Gem and SAPS are labor-only contractors
providing services of manpower to their client. They claim that the contractors have
neither substantial capital nor tools and equipment to undertake independent labor
contracting. Petitioners insist that since they had been engaged to perform activities
which are necessary or desirable in the usual business or trade of P&G, then they are
its regular employees.

P&G argues that there is no employment relationship between it and petitioners. It was
Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid
their salaries; (3) wielded the power of dismissal; and (4) had the power of control over
their conduct of work.

ISSUES: Whether P&G is the employer of petitioners and whether petitioners were
illegally dismissed.

RULING: Employees hired by Promm-Gem are not employees of P&G since it is a

legitimate independent contractor. Employees hired by SAPS are employees of P&G
since it is a labor-only contractor. All employees were, however, illegally dismissed.

42
Clearly, the the Labor Code and its implementing rules allow contracting arrangements
for the performance of specific jobs, works or services. However, in order for such
outsourcing to be valid, it must be made to an independent contractor because the
current labor rules expressly prohibit labor-only contracting.

In the instant case, the financial statements of Promm-Gem show that it has authorized
capital stock of P1 million and a paid-in capital, or capital available for operations, of
P500,000.00 as of 1990. We find that Promm-Gem has substantial investment which
relates to the work to be performed. The records also show that Promm-Gem supplied
its complainant-workers with the relevant materials, such as markers, tapes, liners and
cutters, necessary for them to perform their work. It is also relevant to mention that
Promm-Gem already considered the complainants working under it as its regular, not
merely contractual or project, employees. Under the circumstances, Promm-Gem
cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in
capital of only P31,250.00. There is no other evidence presented to show how much its
working capital and assets are. Considering that SAPS has no substantial capital or
investment and the workers it recruited are performing activities which are directly
related to the principal business of P&G, we find that the former is engaged in "labor-
only contracting". SAPS acted as mere agent only for P&G and P&G is the employer of
the employees it hired.

We now discuss the issue of whether petitioners were illegally dismissed. In cases of
regular employment, the employer shall not terminate the services of an employee
except for a just or authorized cause.

In the instant case, petitioners-employees of Promm-Gem may have committed an error

of judgment in claiming to be employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so. As such, we find them guilty of only simple
misconduct for assailing the integrity of Promm-Gem as a legitimate and independent
promotion firm. A misconduct which is not serious or grave, as that existing in the instant
case, cannot be a valid basis for dismissing an employee. All told, we find no valid cause
for the dismissal of petitioners-employees of Promm-Gem.

With regard to the petitioners placed with P&G by SAPS, they were given no written notice
of dismissal. The records show that upon receipt by SAPS of P&G's letter terminating
their contract, they in turn verbally informed the concerned petitioners not to report for
work anymore. SAPS dismissed its employees upon the initiation of P&G. They were
illegally dismissed.

Only those hired by SAPS are entitled to damages since the records show that it
dismissed its employees in a manner oppressive to labor. Lastly, under Article 279 of
the Labor Code, all the petitioners, having been illegally dismissed are entitled to

43
reinstatement without loss of seniority rights and with full back wages and other benefits
from the time of their illegal dismissal up to the time of their actual reinstatement.

44
 San Miguel Corp. v Semillano et al, 2010

Concept: The principal employer is solidarily liable with the labor-only contractor for all
the rightful claims of respondents. Under this set-up, AMPCO, as the "labor-only"
contractor, is deemed an agent of the principal (SMC). The law makes the principal
responsible over the employees of the "labor-only" contractor as if the principal itself
directly hired the employees.

FACTS: It appears that AMPCO hired the services of Vicente et al in December of 1994.
All of them were assigned to work in SMC's Bottling Plant situated at Bacolod City, in
order to perform the following tasks: segregating bottles, removing dirt therefrom, filing
them in designated places, loading and unloading the bottles to and from the delivery
trucks, and performing other tasks as may be ordered by SMC's officers. They were
required to work inside the premises of SMC using SMC's equipment. They rendered
service with SMC for more than 6 months.

Subsequently, SMC entered into a Contract of Services with AMPCO designating the
latter as the employer of Vicente, et al., As a result, Vicente et al., failed to claim the
rights and benefits ordinarily accorded a regular employee of SMC. In fact, they were
not paid their 13th month pay. On June 6, 1995, they were not allowed to enter the
premises of SMC. The project manager of AMPCO, Merlyn Polidario, told them to wait
for further instructions from the SMC's supervisor. Vicente et al., waited for one month,
unfortunately, they never heard a word from SMC.
Consequently, Vicente et al. filed a COMPLAINT FOR ILLEGAL DISMISSAL with the
Labor Arbiter against AMPCO, they assert that they are regular employees of SMC.

On the other hand, respondent SMC raised the defense that it is not the employer of
the complainants. According to SMC, AMPCO is their employer because the latter is an
independent contractor.
LA rendered a decision in favor of complainants and ordered reinstatement. NLRC
affirmed, but upon motion for recon, reversed such ruling. CA however, favored Vicente,
et al.

ISSUE: Whether or not AMPCO is a legitimate job contractor and whether SMC is
solidarily liable with AMPCO.

RULING: AMPCO is a labor-only contractor. SMC is solidarily liable.

The test to determine the existence of independent contractorship is whether or not the
one claiming to be an independent contractor has contracted to do the work according
to his own methods and without being subject to the control of the employer, except
only as to the results of the work.

AMPCO failed to show how it took "entire charge, control and supervision of the work
and service agreed upon." AMPCO's Comment on the Petition is likewise utterly silent
on this point. Notably, both petitioner and AMPCO chose to ignore the uniform finding

45
of the LA, NLRC and the CA that one of the assigned jobs of respondents was to
"perform other acts as may be ordered by SMC's officers."

Moreover, the Court is not convinced that AMPCO wielded "exclusive discretion in the
discharge" of respondents. As the CA correctly pointed out, AMPCO's project manager,
even told respondents to "wait for further instructions from the SMC's supervisor" after
they were prevented from entering petitioner SMC's premises. Based on the foregoing,
no other logical conclusion can be reached than that it was petitioner, not AMPCO, who
wielded power of control.

Petitioner's averment that AMPCO had total assets amounting to P932,599.22 and
income of P2,777,603.46 in 1994 was squarely debunked by the LA which proved that
AMPCO only had a net income of 59,288.13 and its cash on hand is only 22,154.80.

As correctly pointed out by the NLRC, there is nothing in AMPCO's list of fixed assets,
machineries, tools, and equipment which it could have used, actually and directly, in the
performance or completion of its contracted job, work or service with petitioner. For said
reason, there can be no other logical conclusion but that the tools and equipment utilized
by respondents are owned by petitioner SMC. It is likewise noteworthy that neither
petitioner nor AMPCO has shown that the latter had clients other than petitioner.
Therefore, AMPCO has no independent business.

Petitioner cannot rely either on AMPCO's Certificate of Registration as an Independent

Contractor issued by the proper Regional Office of the DOLE to prove its claim. It is not
conclusive evidence of such status. In distinguishing between permissible job
contracting and prohibited labor-only contracting, the totality of the facts and the
surrounding circumstances of the case are to be considered.

The evidence is clear that respondents performed activities which were directly related
to petitioner's main line of business. Petitioner is primarily engaged in manufacturing
and marketing of beer products, and respondents' work of segregating and cleaning
bottles is unarguably an important part of its manufacturing and marketing process.

Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the labor-
only contractor, for all the rightful claims of respondents. Under this set-up, AMPCO, as
the "labor-only" contractor, is deemed an agent of the principal (SMC). The law makes
the principal responsible over the employees of the "labor-only" contractor as if the
principal itself directly hired the employees.

46
 Manila Water Co. v Dalumpines, 2010

Principle: In order for job contractor to be present, it is necessary for the contractor to
have sufficient investment in the form of tools, equipment and machinery to undertake
contract service

Facts: By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis
Act of 1995," the Metropolitan Waterworks and Sewerage System (MWSS) was given the
authority to enter into concession agreements allowing the private sector in its operations.
Petitioner Manila Water Company, Inc. (Manila Water) was one of two private
concessionaires contracted by the MWSS to manage the water distribution system in the
east zone of Metro Manila. The east service area included the following towns and cities:
Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon City
and Manila, Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong,
Pililla, Rodriguez, Tanay, Taytay, Teresa, and San Mateo.3

On November 21, 1997, before the expiration of the contract of services, the 121 bill
collectors formed a corporation duly registered with the Securities and Exchange
Commission (SEC) as the "Association Collector’s Group, Inc." (ACGI). ACGI was one of
the entities engaged by Manila Water for its courier service. However, Manila Water
contracted ACGI for collection services only in its Balara Branch.6

In December 1997, Manila Water entered into a service agreement with respondent First
Classic Courier Services, Inc. (FCCSI) also for its courier needs. The service agreements
between Manila Water and FCCSI covered the periods 1997 to 1999 and 2000 to 2002.7
Earlier, in a memorandum dated November 28, 1997, FCCSI gave a deadline for the bill
collectors who were members of ACGI to submit applications and letters of intent to
transfer to FCCSI. The individual respondents in this case were among the bill collectors
who joined FCCSI and were hired effective December 1, 1997.8

On various dates between May and October 2002, individual respondents were
terminated from employment. Manila Water no longer renewed its contract with FCCSI
because it decided to implement a "collectorless" scheme whereby Manila Water
customers would instead remit payments through "Bayad Centers."9 The aggrieved bill
collectors individually filed complaints for illegal dismissal, unfair labor practice, damages,
and attorney’s fees, with prayer for reinstatement and backwages against petitioner
Manila Water and respondent FCCSI. The complaints were consolidated and jointly
heard.

Petitioner Manila Water, for its part, denied that there was an employer-employee
relationship between its company and respondent bill collectors. Based on the agreement
between FCCSI and Manila Water, respondent bill collectors are the employees of the
former, as it is the former that has the right to select/hire, discipline, supervise, and
control. FCCSI has a separate and distinct legal personality from Manila Water, and it
was duly registered as an independent contractor before the DOLE.

47
Issues:
WON FCCSI was a labor-only contractor and that respondent bill collectors are
employees of petitioner Manila Water

Held:
Yes. FCCSI was a labor-only contractor and that respondent bill collectors are employees
of petitioner Manila Water.

"Contracting" or "subcontracting" refers to an arrangement whereby a principal agrees to

put out or farm out with a contractor or subcontractor the performance or completion of a
specific job, work, or service within a definite or predetermined period, regardless of
whether such job, work, or service is to be performed or completed within or outside the
premises of the principal.
Department Order No. 18-02, Series of 2002, enunciates that labor-only contracting refers
to an arrangement where the contractor or subcontractor merely recruits, supplies, or
places workers to perform a job, work, or service for a principal, and any of the following
elements are present: (i) the contractor or subcontractor does not have substantial capital
or investment which relates to the job, work, or service to be performed and the
employees recruited, supplied, or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or (ii)
the contractor does not exercise the right to control the performance of the work of the
contractual employee.

FCCSI has no sufficient investment in the form of tools, equipment and machinery to
undertake contract services for Manila Water involving a fleet of around 100 collectors
assigned to several branches and covering the service area of Manila Water customers
spread out in several cities/towns of the East Zone. The only rational conclusion is that it
is Manila Water that provides most if not all the logistics and equipment including service
vehicles in the performance of the contracted service, notwithstanding that the contract
between FCCSI and Manila Water states that it is the Contractor which shall furnish at its
own expense all materials, tools and equipment needed to perform the tasks of collectors

48
 Teng v Pahagac, 2010

Principle: If the contractor does not have substantial capital then there is an employer-
employee relationship between the principal and the employees contracted by the
contractor

Facts:
Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose, owns boats
(basnig), equipment, and other fishing paraphernalia. As owner of the business, Teng
claims that he customarily enters into joint venture agreements with master fishermen
(maestros) who are skilled and are experts in deep sea fishing; they take charge of the
management of each fishing venture, including the hiring of the members of its
complement. He avers that the maestros hired the respondent workers as checkers to
determine the volume of the fish caught in every fishing voyage.

On February 20, 2003, the respondent workers filed a complaint for illegal dismissal
against Albert Teng Fish Trading, Teng, and Chua before the NCMB, Region Branch No.
IX, Zamboanga City.

Issues:
1. WON the VA’s decision is not subject to a motion for reconsideration.
2. WON an employer-employee relationship existed between Teng and the
respondent workers.

Held: The petition is denied.

1. Article 262-A of the Labor Code does not prohibit the filing of a motion for
reconsideration.

On March 21, 1989, Republic Act No. 6715 took effect, amending, among others, Article
263 of the Labor Code which was originally worded as:
Art. 263 x x x Voluntary arbitration awards or decisions shall be final, unappealable, and
executory.

As amended, Article 263 is now Article 262-A, which states:

Art. 262-A. x x x [T]he award or decision x x x shall contain the facts and the law on which
it is based. It shall be final and executory after ten (10) calendar days from receipt of the
copy of the award or decision by the parties.

Notably, Article 262-A deleted the word "unappealable" from Article 263. The deliberate
selection of the language in the amendatory act differing from that of the original act
indicates that the legislature intended a change in the law, and the court should endeavor
to give effect to such intent. We recognized the intent of the change of phraseology in
Imperial Textile Mills, Inc. v. Sampang, where we ruled that:

It is true that the present rule [Art. 262-A] makes the voluntary arbitration award final and
executory after ten calendar days from receipt of the copy of the award or decision by the

49
parties. Presumably, the decision may still be reconsidered by the Voluntary Arbitrator on
the basis of a motion for reconsideration duly filed during that period.

Teng’s allegation that the VA’s decision had become final and executory by the time the
respondent workers filed an appeal with the CA thus fails. We consequently rule that the
respondent workers seasonably filed a motion for reconsideration of the VA’s judgment,
and the VA erred in denying the motion because no motion for reconsideration is allowed.

2. There exists an employer-employee relationship between Teng and the

respondent workers.

While Teng alleged that it was the maestros who hired the respondent workers, it was his
company that issued to the respondent workers identification cards (IDs) bearing their
names as employees and Teng’s signature as the employer. Generally, in a business
establishment, IDs are issued to identify the holder as a bona fide employee of the issuing
entity.

For the 13 years that the respondent workers worked for Teng, they received wages on
a regular basis, in addition to their shares in the fish caught. The worksheet showed that
the respondent workers received uniform amounts within a given year, which amounts
annually increased until the termination of their employment in 2002. Teng’s claim that
the amounts received by the respondent workers are mere commissions is incredulous,
as it would mean that the fish caught throughout the year is uniform and increases in
number each year.

More importantly, the element of control – which we have ruled in a number of cases to
be a strong indicator of the existence of an employer-employee relationship – is present
in this case. Teng not only owned the tools and equipment, he directed how the
respondent workers were to perform their job as checkers; they, in fact, acted as Teng’s
eyes and ears in every fishing expedition.

Teng cannot hide behind his argument that the respondent workers were hired by the
maestros. To consider the respondent workers as employees of the maestros would
mean that Teng committed impermissible labor-only contracting. As a policy, the Labor
Code prohibits labor-only contracting:

ART. 106. Contractor or Subcontractor – x x x The Secretary of Labor and Employment

may, by appropriate regulations, restrict or prohibit the contracting-out of labor.
xxxx
There is "labor-only" contracting where the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of such employer.
In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if
the latter were directly employed by him.

50
Section 5 of the DO No. 18-02, which implements Article 106 of the Labor Code, provides:
Section 5. Prohibition against labor-only contracting. – Labor-only contracting is hereby
declared prohibited.For this purpose, labor-only contracting shall refer to an arrangement
where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are
present:
(i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
(ii) The contractor does not exercise the right to control over the performance of the work
of the contractual employee.

In the present case, the maestros did not have any substantial capital or investment. Teng
admitted that he solely provided the capital and equipment, while the maestros supplied
the workers. The power of control over the respondent workers was lodged not with the
maestros but with Teng. As checkers, the respondent workers’ main tasks were to count
and classify the fish caught and report them to Teng. They performed tasks that were
necessary and desirable in Teng’s fishing business. Taken together, these incidents
confirm the existence of a labor-only contracting which is prohibited in our jurisdiction, as
it is considered to be the employer’s attempt to evade obligations afforded by law to
employees.

Accordingly, we hold that employer-employee ties exist between Teng and the
respondent workers. A finding that the maestros are labor-only contractors is equivalent
to a finding that an employer-employee relationship exists between Teng and the
respondent workers. As regular employees, the respondent workers are entitled to all the
benefits and rights appurtenant to regular employment

51
 GSIS v NLRC, 2010

Doctrine: Absent employer-employee relationship between the principal and the

contractor’s employee does not absolve the principal but is nonetheless solidarily liable
to the latter with regards to the failure of the contractor to pay the monetary claims due to
the employees without prejudice to reimbursement.

Dionisio Banlasan et al (private Banasan et al) were employed under DNL Security
Agency which engaged a service contract with GSIS, pursuant to which, Banlasan et al
were assigned to the Tacloban Office of the GSIS and receiving a montly salary of 1,400.
Years later, GSIS voluntarily increased the monthly salary of Banlasan et al, from 1,400
to 3,000. DNL Security informed Banasan et al some years later that its service contract
with GSIS was terminated, however they were instructed by DNL to continue reporting
for work at GSIS. Banlasan et al worked as instructed but without receiving their wages,
after which they terminated from employment.

They filed with the NLRC RAB in Tacloban City a complaint against DNL for illegal
dismissal, among others. The LA rendered a decision in favor of Banlasan et al. The LA
found that Banasan et al were not terminated illegally because the employment of security
guards is dependent on the service contract, however, Banlasan et al had been working
out of work for a long period and consonant with the principle of social justice, the LA
awarded separation pay equivalent to 1 month to be paid by DNL Security. GSIS was
made solidary liable as the indirect employer of Banasan et al. On appeal by DNL Security
in the NLRC. GSIS went on appeal to NLRC but was dismissed as it was filed beyond the
reglementary period. Hence this petition.

GSIS contends although the body of the LA decision made DNL Security solely liable for
Banasan et al’ wages and for their separation pay, the dispositive portion thereof made
GSIS solidarily liable for said awards. GSIS further questions the award of monetary
benefits for lack of evidence to substantiate said claims. Lastly, GSIS argues that the
enforcement of the decision is impossible, considering that GSIS charter unequivocally
exempts it from execution.

Issues:
1. WON GSIS is solidarily liable for the monetary awards as indirect employer?
2. WON the contention that GSIS charter exempt it from execution of monetary
awards arising from money claims in Labor cases?

Held:
1. Yes. The fact that there is no actual and direct employer-employee relationship
between GSIS and Banasan et al does not absolve the former from liability for the
latter’s monetary claims. When GSIS contracted DNL Security’s services, GSIS
became an indirect employer of Banasan et al, pursuant to Article 107 of the Labor
Code. After DNL Security failed to pay Banasan et al the correct wages and other
monetary benefits, GSIS, as principal, became jointly and severally liable, as
provided in Articles 106 and 109 of the Labor Code. This statutory scheme is

52
 designed to give the workers ample protection, consonant with labor and social
justice provisions of the 1987 Constitution.

In Rosewood Processing, Inc. v. NLRC,

The contractor or subcontractor is made liable by virtue of his or her status
as a direct employer, and the principal as the indirect employer of the
contractor’s employees. This liability facilitates, if not guarantees, payment
of the workers’ compensation, thus, giving the workers ample protection as
mandated by the 1987 Constitution.
GSIS’s liability covers the payment of Banasan et al’ salary differential and 13th
month pay during the time they worked for GSIS and unpaid wages. While it is true
that Banasan et alcontinued working for GSIS after the expiration of their contract,
based on the instruction of DNL Security, GSIS did not object to such assignment
and allowed Banasan et al to render service. Thus, GSIS impliedly approved the
extension of Banasan et al services. Accordingly, GSIS is bound by the provisions
of the Labor Code on indirect employment. GSIS cannot be allowed to deny its
obligation to Banasan et al after it had benefited from their services. So long as the
work, task, job, or project has been performed for GSIS’s benefit or on its behalf,
the liability accrues for such services. When one of the solidary debtors cannot,
because of his insolvency, reimburse his share to the debtor paying the obligation,
such share shall be borne by all his co-debtors, in proportion to the debt of each.

2. No. The argument of GSIS is impossible because its charter unequivocally

exempts it from execution.

53
 Sy et al v Fairland Knitcrat Co, Inc, 2011

Doctrine: There is a presumption that a contractor is a labor-only contractor unless such

contractor overcomes the burden of proving that it has substantial capital, investment,
tools and the like.

Facts:
Marialy Sy et al are the workers of Weesan owned by Susan De Leon that is engaged
with Fairland which is in turn engaged in the garments business. Sy et al filed before the
Arbitration Branch of the NLRC a complaint for underpayment of wages, OT pay, premium
pay for holidays, 13th month pay and other monetary benefits against Susan and Weesan.
On the other hand, Wessan filed befpre the DOLE a report of temporary closure for a
period of not less than 6 months. In its amended complaint and position paper, they
include the charge of illegal dismissal and impleaded Fairland. The Labor Arbiter
dismissed the complaint for lack of merit. On appeal by the workers Sy et al before the
NLRC, the order of dismissal of the LA was set aside. Fairland in its motion for
reconsideration assailed the jurisdiction of the LA and the NLRC as it was not served with
a summons. The NLRC however denied the motion for lack of merit. On appeal, the CA
denied the petition of Fairland, affirming the NLRC ruling that the workers were illegally
dismissed and that Weesan and Fairland are solidaryly liable to them as labor-only
contractor and principal respectively. In its MR, Fairland sought the inhibition of 2 justice
of the CA and this was case assigned to the Special Ninth Division which subsequently
ruled reversing the findings of the First Division ruling that labor tribunals did not acquire
jurisdiction over the person of Fairland, and even assuming they did, Fairland is not liable
to the workers since Weesan is not a mere labor-only contractor but a bona fide
independent contractor. Aggrieved, the workers filed a before the Supreme Court for
certiorari. Susan and Fairland filed their respective Motions for Reconsideration. But
before said motions could be resolved, the Court ordered the consolidation of Susans
petition with that of the workers. Susans Motion for Reconsideration of this Courts
Resolution in G.R No. 189658 is granted. Consequently, her Petition for Review on
Certiorari is reinstated.

As argued by Susan, the CA erred in ruling that Weesan is a labor-onlu contactor based
on the finding that its workplace is owned by Fairland and as according to the Contract of
Lesae, the workplace is actually owned by De Luxe.

The workers on the other hand argued that Weesan is an LOC because because it does
not have substantial capital or investment in the form of tools, equipment, machineries,
and work premises, among others, and that the workers it recruited are performing
activities which are directly related to the garments business of Fairland. Hence, Weesan
should be considered as a mere agent of Fairland, who shall be responsible to the
workers as if they were directly employed by it.

Fairland moreover argued that that it is a separate and distinct business entity from
Weesan; that Weesan is a legitimate job contractor, hence, the workers were actually its

54
(Weesan’s) employees; and that, consequently, the workers have no cause of action
against Fairland.

ISSUES:
In G.R. No. 189658,
WON petitioner is a labor-only contractor acting as an agent of respondent Fairland?

Held:
Yes. There is no question that the workers, majority of whom are sewers, were recruited
by Susan/Weesan and that they performed activities which are directly related to
Fairland’s principal business of garments. What must be determined is whether
Susan/Weesan has substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others. Nothing would show that Weesan has
investment in the form of tools, equipment or machineries. The records show that Fairland
has to furnish Weesan with sewing machines for it to be able to provide the sewing needs
of the former.

Weesan was unable to show that apart from the borrowed sewing machines, it owned
and possessed any other tools, equipment, and machineries necessary to its being a
contractor or sub-contractor for garments. Neither was Weesan able to prove that it has
substantial capital for its business. Likewise, significant is the fact that there is doubt as
to who really owns the work premises occupied by Weesan. To the workers, this is a clear
indication that Fairland indeed owned Weesan’s work premises. Fairland, for its part, tried
to explain this by saying that its incorporators, just like Weesan, were also mere lessees
of a portion of the multi-storey building owned by De Lux. In sum, Weesam’s effort to
negate Fairland’s ownership of the work premises is futile. The logical conclusion now is
that Weesan does not have its own workplace and is only utilizing the workplace of
Fairland to whom it supplied workers for its garment business.

Suffice it to say that "[t]he presumption is that a contractor is a labor-only contractor unless
such contractor overcomes the burden of proving that it has substantial capital,
investment, tools and the like." As Susan/Weesan was not able to adduce evidence that
Weesan had any substantial capital, investment or assets to perform the work contracted
for, the presumption that Weesan is a labor-only contractor stands.

55
 Polyfoam-RGC International Corp. v Concepcion, 2012

CONCEPT: Article 106 of the Labor Code explains the relations which may arise between
an employer, a contractor, and the contractors’ employees.

FACTS: Respondent filed a complaint against petitioner Polyfoam for illegal dismissal
alleging that he was an all-around factory worker who served for almost six years. He was
illegally dismissed when he discovered that his time card was not in the rack and that he
was informed by the security guard that he can no longer punch his card. Protesting to
the supervisor, he found out that he was dismissed due to an infraction of a company
rule. A request was sent to Polyfoam’s manager asking for respondent’s re-admittance
but was unheeded.

Co-petitioner Gramaje filed a Motion for Intervention claiming to be the real employer of
respondent. She alleges that her business PAGES is a legitimate job contractor.
Polyfoam, then, filed a Motion to Dismiss since there was no employer-employee
relationship between Polyfoam and respondent. Gramaje assert that respondent was not
illegally dismissed but rather, it was respondent that abandoned work.

The Motion to Intervene was granted but the Motion to Dismiss was denied. In denying
the motion to dismiss, the Labor Arbiter ruled that the non-existence of the relationship is
a matter of defense. In deciding the case, the Labor Arbiter ruled in favor of respondent
finding him to be illegally dismissed and awarded his money claims. It ruled that Polyfoam
and Gramaje are solidarily liable to respondent. On appeal the NLRC, the LA’s decision
was modified by exonerating Polyfoam from responsibility and deleting some of the
money awards. It ruled that Gramaje is an independent contractor and was not illegally
dismissed but abandoned work. On appeal to the CA, the NLRC’s decision was reversed
and the LA’s decision reinstated. Aggrieved, petitioners filed this petition for review on
ceritiorari.

ISSUES: Whether or not Polyfoam is solidarily liable? Whether or not respondent was
illegally dismissed?

RULING: Yes, Polyfoam is solidarily liable. Yes, respondent was illegally dismissed. The
Court ruled that Gramaje was involved in labor-only contracting and that respondent did
not abandon work but was illegally dismissed.

In support of its conclusion that Polyfoam is involved in labor-only contracting, the

following were considered by the Court: (a) Gramaje has no substantial capital; and (b)
Gramaje did not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the control and
supervision of its principal, Polyfoam. On the first ground, it was not able to prove
ownership over the equipment in Polyfoam’s premises that is allegedly owned by
Gramaje.

56
Respondent was illegally dismissed. Credence was given to respondent’s narration of
facts. Several circumstance also negated the theory of abandonment like: (a) he
immediately inquired from his supervisor; (b) he wrote a letter asking to be re-admitted
and (c) he filed a case for illegal dismissal.

57
 Superior Packaging Corp., v Balagsay et al, 2012

CONCEPT: Whether Superior Packaging Corporation may be held solidarily liable with
Lancer Staffing & Services Network, Inc. for respondents’ unpaid money claims.

FACTS: Superior Packaging Corporation (Superior) is involved in the manufacture and

sale of commercial and industrial corrugated boxes. It engaged the services of Lancer
Staffing & Services Network, Inc. (Lancer) to provide reliever services to its business. The
respondents in this case are the workers of Lancer assigned to Superior for such reliever
services.

The workers filed a complaint with the DOLE against Superior for underpayment of
wages, non- payment of premium pay for worked rest, overtime pay and non-payment of
salaries. The DOLE then conducted an inspection of the Superior’s premises and made
a finding, among others, that Superior is engaged in labor-only contracting and is
consequently an indirect employer of the workers. Having found that Superior committed
the violations alleged by the workers, the DOLE issued an Order finding in favor of the
workers and ordering Superior to pay their claims.

Superior filed a motion for reconsideration on the ground that the workers are not its
employees but of Lancer. It objects to the finding that it is engaged in labor-only
contracting and is consequently an indirect employer, and alleges that it is beyond the
visitorial and enforcement power of the DOLE to make such conclusion. According to
Superior, such conclusion may be made only upon consideration of evidentiary matters
and cannot be determined solely through a labor inspection.

ISSUE: Can the DOLE make a finding as to the existence or non-existence of employer-
employee relationship in the course of an inspection conducted pursuant to its visitorial
and enforcement power?

RULING: Yes, the DOLE can. Under Art. 128(b) of the Labor Code, as amended by RA
7730, the DOLE is fully empowered to make a determination as to the existence of an
employer-employee relationship in the exercise of its visitorial and enforcement power.

The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would
be rendered nugatory if the alleged employer could, by the simple expedient of disputing
the employer-employee relationship, force the referral of the matter to the NLRC. 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.

Here, the DOLE finding Lancer was not an independent contractor and that Superior and
Lancer were engaged in “labor-only contracting” is a finding as to the existence of
employer-employee relationship. Hence, Superior was considered an indirect employer
of the workers and liable to the latter for their unpaid money claims.

58
 59
 Digital Telecommunications Phils. Inc, v Digitel Employees Union et al, 2012

WARNING: Labor Relations case.

CONCEPT: If the contractor merely provides manpower, and does not undertake to
perform a specific job, it is a labor-only contractor. Moreover, the long period of
employment is an indication that the job is directly related to the main business of the
principal.

FACTS: By virtue of a certification election, Digitel Employees Union (Union) became the
exclusive bargaining agent of all rank and file employees of Digitel in 1994.
The Union and Digitel then commenced collective bargaining negotiations which resulted
in a bargaining deadlock. The Union threatened to go on strike, but then Acting Labor
Secretary Bienvenido E. Laguesma assumed jurisdiction over the dispute and eventually
directed the parties to execute a CBA, but unfortunately no CBA was formed.

Ten (10) years thereafter, Digitel received from Arceo Rafael A. Esplana (Esplana), who
identified himself as President of the Union, a letter containing the list of officers, CBA
proposals and ground rules. Digitel was reluctant to negotiate with the Union and
demanded that the latter show compliance with the provisions of the Union’s Constitution
and By-laws on union membership and election of officers.

On 4 November 2004, Esplana and his group filed a case for Preventive Mediation before
the National Conciliation and Mediation Board based on Digitel’s violation of the duty to
bargain. Then, Labor Secretary Patricia A. Sto. Tomas issued an Order4 assuming
jurisdiction over the labor dispute.

During the pendency of the controversy, Digitel Service, Inc. (Digiserv), a non-profit
enterprise engaged in call center servicing, filed with the Department of Labor and
Employment (DOLE) an Establishment Termination Report stating that it will cease its
business operation. The closure affected at least 100 employees, 42 of whom are
members of the herein respondent Union. The union is now alleging that Digiserv is a
labor-only contractor hence DIGITEL should be made liable.

ISSUE: Is Digiserv a labor-only contractor? Should Digitel be made liable?

RULING: After exhaustive examination of the records, the following are the findings of
the Supreme Court:
1. The paid up capital of Digiserv is only P62, 500.

2. In the Amended Articles of Incorporation, as well as in the General Information Sheets

for the years 1994, 2001 and 2005, the primary purpose of Digiserv is merely to provide
manpower services.

3. It is undisputed that as early as March 1994, the affected employees, except for two,
were already performing their job as Traffic Operator which was later renamed as

60
Customer Service Representative (CSR). It is equally undisputed that all throughout their
employment, their function as CSR remains the same until they were terminated effective
May 30, 2005. Their long period of employment as such is an indication that their job is
directly related to the main business of DIGITEL which is telecommunications. Because,
if it was not, DIGITEL would not have allowed them to render services as Customer
Service Representative for such a long period of time.

4. And lastly, Digiserv does not exercise control over the affected employees. The NLRC
highlighted the fact that Digiserv shared the same Human Resources, Accounting, Audit
and Legal Departments with Digitel which manifested that it was Digitel who exercised
control over the performance of the affected employees. The NLRC also relied on the
letters of commendation, plaques of appreciation and certification issued by Digitel to the
Customer Service Representatives as evidence of control.

Considering that Digiserv has been found to be engaged in labor-only contracting, the
dismissed employees are deemed employees of Digitel. Hence, DIGITEL is deemed
employer of the union’s members who were affected due to the ceasing of operations of
DIGISERV.

61
 Norkis Trading Corp. v Buenavista, 2012

CONCEPT: If the contractor does not have substantial capital or if the tools, equipment
and machinery used are owned & located in the premises of the principal and used by
the latter in its operations, then the principal is deemed the employer.

FACTS: The petition stems from an amended complaint for illegal suspension, illegal
dismissal, unfair labor practice and other monetary claims filed with the National Labor
Relations Commission (NLRC). The respondents were hired by Norkis Trading, a
domestic corporation engaged in the business of manufacturing and marketing of
Yamaha. Although they worked for Norkis Trading as skilled workers assigned in the
operation of industrial and welding machines owned and used by Norkis Trading for its
business, they were not treated as regular employees by Norkis Trading. Instead, they
were regarded by Norkis Trading as members of PASAKA, a cooperative organized under
the Cooperative Code of the Philippines, and which was deemed an independent
contractor that merely deployed the respondents to render services for Norkis Trading.4
The respondents nonetheless believed that they were regular employees of Norkis
Trading due to the following circumstances as stated in the position paper:

1. The machines used by complainants herein respondents in their work are all owned by
respondent Norkis Trading herein petitioner and these are installed and located in the
working area of the complainants inside the company’s premises.
3. The materials and supplies used by complainants in their work are supplied by
respondent Norkis Trading.
4. Respondent Norkis Trading gave instructions and supervised the work of complainants.
5. The salaries of complainants are paid inside the premises of respondent Norkis Trading
by Dalia Rojo and Belen Rubio, who are also employees of the said company assigned
at the accounting office.

Despite having served respondent Norkis Trading for many years and performing the
same functions as regular employees, complainants were not accorded regular status.

ISSUE: As to our topic, are the respondents employees of Norkis Trading and not of
PASAKA to make them liabe for dismissal?

RULING: The Supreme Court cited the ruling of the Labor Arbiter and of the Court of
Appeals:
In labor-only contracting, the following elements are present: (a) the contractor or
subcontractor does not have substantial capital or investment to actually perform the job,
work, or service under its own account and responsibility; and (b) the employees
recruited, supplied or placed by such contractor or subcontractor perform activities which
are directly related to the main business of the principal. These differentiate it from
permissible or legitimate job contracting or subcontracting, which refers to an
arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within a

62
definite or predetermined period, regardless of whether it is within or outside the premises
of the principal.

PASAKA failed to prove that it has substantial capitalization or investment in the form of
tools, equipment, machineries, work premises, among others, to qualify as an
independent contractor. PASAKA’s claim that it has machineries and equipment worth ₱
344,273.02 as reflected in its Financial Statements and Supplementary Schedules is
belied by private respondents’ among them, herein respondents evidence which
consisted of pictures showing machineries and equipment which were owned by and
located at the premises of petitioner NORKIS TRADING.

Even granting that indeed PASAKA had machineries and equipment worth ₱ 344,273.02,
it was not shown that said machineries and equipment were actually used in the
performance or completion of the job, work, or service that it was contracted to render
under its supposed job contract. PASAKA likewise did not carry out an independent
business from NORKIS TRADING since it merely presented a project contract with Norkis
Trading. Hence, Buenavista et al were considered employees of such company.

63
 Goya Inc v Goya Inc Employees Union-FFW, 2013

FACTS:
In Jan. 2004, Goya Inc, (Company) hired contractual employees from PESO Resources
Development Corporation. This prompted respondent Goya Inc, Employees Union-FFW
(Union) to request for a grievance conference on the ground that the contractual workers
do not belong to the categories stipulated in the existing CBA. It was unresolved, hence
it was referred to NCMB. It was later submitted for resolution because no amicable
settlement was arrived. The Union asserted that the hiring of contractual employees from
PESO is not a management prerogative, not part in the categories of employees, and
hence in gross violation of the CBA tantamount to unfair labor practice. It averred that the
categories of employees (regular, probationary, casual) had been part of the CBA in the
1970s, and due to this provision, a pool of casual employees had been maintained by the
Company which later became regular workers. It contended that with the hiring of the
contractual employees, there would no longer be probationary and casual employees, in
violation of the Union Security provision of the CBA. As an answer, the Company alleged
that the law allows contracting and subcontracting arrangements through DO No. 18-02,
and the hiring of contractual employees did not prejudice the Union, since not a single
employee was terminated.

Voluntary Arbitrator Laguesma dimissed the Union’s charge for unfair labor practice, but
the Company was directed to observe and comply with its commitment under the CBA.
Company went to CA, but the latter dismissed the petition saying that there is nothing
arbitrary in the VA’s order for the company to comply with the CBA. Reconsideration was
denied, hence this petition.

ISSUE: WON the voluntary arbitrator is empowered to rule on a matter not covered by
the issue submitted for arbitration

RULING:
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for
voluntary arbitration. Resultantly, the CA did not commit serious error when it sustained
the ruling that the hiring of contractual employees from PESO was not in keeping with the
intent and spirit of the CBA.

In Ludo & Luym vs Saornido, it was held that “generally, the arbitrator is expected to
decide only those questions expressly delineated by the submission agreement.
Nevertheless, the arbitrator can assume that he has the necessary power to make a final
settlement since arbitration is the final resort for the adjudication of disputes”. This case,
reaffirms the plenary jurisdiction and authority of the voluntary arbitrator to interpret the
CBA and to determine the scope of his/her own authority. The ultimate goal is to
provide speedy labor justice.

Moreover, the CBA, which refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and
conditions of employment in a bargaining unit, is the law between the Company and the

64
Union. Hence, both parties must comply with the stipulations contained in said
agreement. PETITION DENIED.

65
 Vigilia et al v Phil. College of Criminology inc, 2013

FACTS:
Philippine College of Criminology (PCCr) is a non-stock educational institution, while the
petitioners were janitors, janitresses and supervisor in the Maintenance Department of
PCCr under the supervision and control of Atty. Seril. They were however made to
understand, upon application, that they were under MBMSI, a corporation engaged in
providing janitorial services to clients. In 2008, PCCr discovered that the Certificate of
Incorporation of MBMSI had been revoked, hence the subsequent termination of its
relation with MBMSI which resulted to the dismissal of the petitioners. They now filed their
complaints for illegal dismissal and other claims. They alleged that it was the school, not
MBMSI which was their real employer. PCCr answered by claiming that it could not have
illegally dismissed the complainants because it was not their direct employer. PCCr
submitted several documents including releases, waivers and quitclaims in favor of
MBMSI executed by the petitioners that they were employees of MBMSI and not PCCr.

The LA decided that PCCr was the real principal employer of the petitioners, and that
MBMSI was a mere alter ego/labor-only contractor. It was PCCr which exercised control
over the means and methods of the petitioners’ work. Hence, PCCr was ordered to
reinstate the petitioners and pay their back wages and other monetary claims. The NLRC
affirmed the LA’s findings. However, it excused PCCr from their liability by virtue of the
releases, waivers and quitclaims purportedly executed by the petitioners, which were
presented by PCCr was evidence. On appeal, CA affirmed the NLRC resolution and
pointed out that based on the principle of solidary liability and Art. 1217 of the NCC,
petitioners’ respective releases, waivers and quitclaims in favor of MBMSI redounded to
the benefit of the respondents. Motion for recon was denied, hence the petition.

ISSUE: WON the petitioners’ claims against the respondents were amicably settled by
virtue of the releases, waivers and quitclaims which they had executed in favor of MBMSI

RULING:
1) ON THE VALIDITY OF THE RELEASES, WAIVERS AND QUITCLAIMS
The releases, waivers and quitclaims, which petitioners claimed were forged, were in
fact valid. This is because they had several opportunities to question the authenticity of
the said documents but did immediately do so.

2) ON THE REVOCATION OF MBMSI’ CERTIFICATE OF INCORPORATION

Petitioners argue that MBMSI had no legal personality to incur liabilities because of the
revocation of its Certificate of Incorporation. They prayed that MBMSI be exempted from
its liabilities because it no longer exists as a corporation.

The SC said that the executed releases, waivers and quitclaims are valid and binding
notwithstanding the revocation of MBMSI’s Certificate of Incorporation. The revocation
does not result in the termination of its liabilities. This is pursuant to Sec. 122 of the
Corporation Code, in which a corporation is allowed to settle and close its affairs even
after the winding up period of 3 years.

66
3) A LABOR-ONLY CONTRACTOR IS OLIDARILY LIABLE WITH THE EMPLOYER
The issue of whether there is solidary liability between the labor-only contractor and the
employer is crucial in this case.If a labor-only contractor is solidarily liable with the
employer, then the releases, waivers and quitclaims in favor of MBMSI will redound to the
benefit of PCCr. On the other hand, if a labor-only contractor is not solidarily liable with
the employer, the latter being directly liable, then the releases, waivers and quitclaims in
favor of MBMSI will not extinguish the liability of PCCr.

SC decided that the NLRC and the CA correctly ruled that the releases, waivers and
quitclaims executed by petitioners in favor of MBMSI redounded to the benefit of PCCr
pursuant to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily
liable with the respondents for the valid claims of petitioners pursuant to Article 109 of the
Labor Code.

Moreover, Sec. 19 of DO No. 18-02 which was still in effect at the time of the promulgation
of the subject decision and resolution, interprets Art. 106 in the wise that “the principal
shall be x x x, solidarily liable with the contractor or subcontractor for x x x”. In
addition, DOLE again recognized the solidary liability of the principal employer and
the labor-only contractor when it issued DO No. 18-A, series of 2011. It is likewise
enunciated in the case of San Miguel Corp vs MAERC Integrated Services wherein it was
held that “in labor-only contracting, x x x the principal employer therefore becomes
solidarily liable with the labor-only contractor for all the rightful claims of the
employees”

Considering that MBMSI, as the labor-only contractor, is solidarily liable with PCCr, as
the principal employer, then the laters solidary liability was already expunged by virtue
of the releases, waivers and quitclaims. PETITION DENIED.

67
 BPI Employees Union-Davao City-FUBU v Bank of the Philippine Islands et al, 2013

Concept – To contract certain functions in a company is valid management prerogative

unless it could be substantially proven to be motivated by ill will, anti-unionism or bad
faith so as to affect or interfere with the employees’ right to self-organization.

Facts: BOMC / BPI Operations Management Corporation was created pursuant to

Central Bank Circular 1388 Series of 1993. Its task was primarily in providing and/or
handling support support services for banks and other financial institutions and is a
subsidiary of the Bank of Philippine Islands (BPI) operating and functioning as an entirely
separate and distinct entity.

BOMC was first implemented in Manila and was implemented in Davao City on January
1 1996. Later, a merger between BPI and Far East Bank and Trust Company (FEBTC)
took effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPI’s
cashiering function and FEBTC’s cashiering, distribution and bookkeeping functions were
handled by BOMC. Consequently, twelve (12) former FEBTC employees were transferred
to BOMC to complete the latter’s service complement.

BPI Employees Union-Davao City-FUBU (Union), objected to the transfer of the functions
and the twelve (12) personnel to BOMC contending that the functions rightfully belonged
to the BPI employees and that the Union was deprived of membership of former FEBTC
personnel who, by virtue of the merger, would have formed part of the bargaining unit
represented by the Union pursuant to its union shop provision in the CBA. Union then
filed a formal protest so that it would be subjected to the grievance machinery as
mandated in the CBA but BPI did not consider them grievable. Instead, it was submitted
to a Labor Management Conference where BPI invoked management prerogative. The
resort was unsuccessful and was submitted to NCMB with a notice of strike by the Union.
DOLE later intervened as petitioned by BPI and mandated the parties to cease and decist
so that the situation would not exacerbate.

NLRC then decided that it was valid exercise of management prerogative and dismissed
the unfair labor practices case filed by the Union ruling that the Union did not present
even an iota of evidence showing that BPI had terminated employees, who were its
members. In fact, BPI exerted utmost diligence, care and effort to see to it that no union
member was terminated. CA affirmed the decision of NLRC.

Issue: WON it was a valid exercise of management prerogative or was in violation of the
CBA and the members of the Union’s right to self organization. - Valid exercise of
management prerogative

Held: As Stated under Art. 261, only gross violations of the economic provisions of the
CBA are treated as ULP. Otherwise, they are mere grievances. In the present case, the
alleged violation of the union shop agreement in the CBA, even assuming it was malicious
and flagrant, is not a violation of an economic provision in the agreement. The Union
failed to take into consideration its recognition of the bank’s exclusive rights and

68
prerogatives, likewise provided in the CBA, which included the hiring of employees,
promotion, transfers, and dismissals for just cause and the maintenance of order,
discipline and efficiency in its operations.

In the case at hand, the union has not presented even an iota of evidence that petitioner
bank has started to terminate certain employees, members of the union. In fact, what
appears is that the Bank has exerted utmost diligence, care and effort to see to it that no
union member has been terminated. In the process of the consolidation or merger of the
two banks which resulted in increased diversification of functions, some of these non-
banking functions were merely transferred to the BOMC without affecting the union
membership. BPI stresses that not a single employee or union member was or would be
dislocated or terminated from their employment as a result of the Service Agreement.30
Neither had it resulted in any diminution of salaries and benefits nor led to any reduction
of union membership.

As far as the twelve (12) former FEBTC employees are concerned, the Union failed to
substantially prove that their transfer, made to complete BOMC’s service complement,
was motivated by ill will, anti-unionism or bad faith so as to affect or interfere with the
employees’ right to self-organization.

Further, Absent proof that the management acted in a malicious or arbitrary manner, the
Court will not interfere with the exercise of judgment by an employer. In this case, bad
faith cannot be attributed to BPI because its actions were authorized by CBP Circular No.
1388, Series of 199333 issued by the Monetary Board of the then Central Bank of the
Philippines (now Bangko Sentral ng Pilipinas.

69
 Alilin et al v Petron Corp, 2014

Concept: A contractor is presumed to be a labor-only contractor, unless it proves that it

has the substantial capital, investment, tools and the like. However, where the principal
is the one claiming that the contractor is a legitimate contractor, the burden of proving the
supposed status of the contractor rests on the principal.

Facts:
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants
in the country for receiving, storing and distributing its petroleum products.

In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo
D. Gindang (Romualdo), started recruiting laborers for fielding to Petron’s Mandaue Bulk
Plant. When Romualdo died in1989, his son Romeo D. Gindang (Romeo), through
Romeo D. Gindang Services(RDG), took over the business and continued to provide
manpower services to Petron. Petitioners were among those recruited by Romualdo D.
Gindang Contractor and RDG to work in the premises of the said bulk plant.

On June 1, 2000, Petron and RDG entered into a Contract for Services for the period
from June 1, 2000 to May 31, 2002, whereby RDG undertook to provide Petron with
janitorial, maintenance, tanker receiving, packaging and other utility services in its
Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended
until September 30, 2002. Upon expiration thereof, no further renewal of the service
contract was done.

Petitioner then commenced an action for illegal dismissal in the LA. They contended that
they were regular employees of petron and that their jobs were directly related to the
business of petron. RDG corroborated the claim of the petitioner alleging that petron had
the power of control over them.

Decision of LA - Labor Arbiter ruled that petitioners are regular employees of Petron. LA
found that their jobs were directly related to petron’s business and that petron was
exercising control over the employees. LA also ruled that petron was only using RDG to
hide from its responsibilities in the labor code. This was affirmed by the NLRC but
reversed by the CA alleging there was no employer employee-relationship.

Issue: WON RDG is a legitimate job contractor – No. Petron failed to prove that they had
enough capital.

Held:
Petron failed to discharge the burden of proving that RDG is a legitimate contractor.
Hence, the presumption that RDG is a labor-only contractor stands.

Here, the audited financial statements and other financial documents of RDG for the years
1999 to 2001 establish that it does have sufficient working capital to meet the
requirements of its service contract. In fact, the financial evaluation conducted by Petron

70
of RDG’s financial statements for years 1998-2000 showed RDG to have a maximum
financial capability of Php4.807 Million as of December 1998,49 and Php1.611 Million as
of December 2000. Petron was able to establish RDG’s sufficient capitalization when it
entered into the service contract in 2000. The Court stresses though that this
determination of RDG’s status as an independent contractor is only with respect to its
financial capability for the period covered by the financial and other documents presented.
In other words, the evidence adduced merely proves that RDG was financially qualified
as a legitimate contractor but only with respect to its last service contract with Petron in
the year 2000.

Hence, while Petron was able to establish that RDG was financially capable as a
legitimate contractor at the time of the execution of the service contract in 2000, it
nevertheless failed to establish the financial capability of RDG at the time when petitioners
actually started to work for Petron in 1968, 1979, 1981, 1987, 1990,1992 and 1993.

The Court also finds, as will be discussed below, that the works performed by petitioners
were directly related to Petron’s business, another factor which negates Petron’s claim
that RDG is an independent contractor. Petron’s power of control over petitioners exists
in this case.

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries
were paid by them do not detract from the conclusion that there exists an employer-
employee relationship between the parties due to Petron’s power of control over the
petitioners. One manifestation of the power of control is the power to transfer employees
from one work assignment to another.55 Here, Petron could order petitioners to do work
outside of their regular "maintenance/utility" job. Also, petitioners were required to report
for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule,
and wear proper uniform and safety helmets as prescribed by the safety and security
measures being implemented within the bulk plant. All these imply control. In an industry
where safety is of paramount concern, control and supervision over sensitive operations,
such as those performed by the petitioners, are inevitable if not at all necessary.

Lastly, Petitioners were already Regular employees of Petron. Considering further that
petitioners’ length of service entitles them to become regular employees under the Labor
Code, petitioners are deemed by law to have already attained the status as Petron’s
regular employees. As such, Petron could not terminate their services on the pretext that
the service contract it entered with RDG has already lapsed. For one, and as previously
discussed, such regular status had already attached to them even before the execution
of the service contract in 2000. For another, the same does not constitute a just or
authorized cause for a valid dismissal of regular employees.

In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered
merely as an agent of Petron. Consequently, the employer-employee relationship which
the Court finds to exist in this case is between petitioners as employees and Petron as
their employer. Petron therefore, being the principal employer and RDG, being the labor-
only contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.

71
 72
 Ampeleloquio v Jaka Distribution Inc, 2014

Principle:
Seniority rights refer to the creditable years of service in the employment record of the
illegally dismissed employee as if he or she never ceased working for the employer.

Facts:
Monchito R. Ampeloquio (Ampeloquio) is a reinstated employee of respondent Jaka
Distribution, Inc. (JAKA), formerly RMI Marketing Corporation (RMI). When Ampeloquio
resumed work as merchandiser at JAKA, he received a daily wage of PhP252.00, without
meal and transportation allowance. While he was transferred outside of Metro Manila, to
Lucena City and subsequently to San Pablo City, he was receiving the same daily wage
of PhP252.00, without meal and transportation allowance. Ampeloquio was given a
monthly cost of living allowance (COLA) of PhP720.00.

Ampeloquio requested for salary adjustment and benefits retroactive to the date of his
reinstatement, and an increase of salary differential. He based his request on what other
merchandisers of JAKA received. Because of the discrepancy in wages, he filed before
the NLRC, a complaint for underpayment of wages, COLA, non-payment of meal and
transportation allowances.

The Labor Arbiter granted Ampeloquio's complaint for underpayment of wages, basic and
COLA and non-payment of allowances, meal and transportation who used the claim
should be limited to the three (3) year prescriptive period.

On appeal by JAKA, the NLRC noted the exemption of JAKA from the pertinent Wage
Order Nos. 10 & 11, and consequently, modified the amounts ordered by the Labor Arbiter
to be paid by JAKA to Ampeloquio who is only entitled to a salary differential applying the
12 months exemption or non-implementation of the P20.00 increase in ECOLA, in which
his basic salary remained at P250.00 but her ECOLA has increased to P50.00 because
of the expiration of the period for exemption amounting to a total salary of P300.00.
CETDHA

ISSUE:
Whether the wages of reinstatement includes "without loss of seniority rights and other
privileges."

Whether or not wages entitled to Ampeloquio is the wages or salary scale that governs
the minimum wage rate the prevailing or his actual daily wage rate (not equal to the wages
and benefits received by co-employees)

Ruling:
He is not entitled to the same terms and conditions of employment as that which was
offered to the other regular employees (not merchandisers) subsequently hired by JAKA.

73
Seniority rights refer to the creditable years of service in the employment record of the
illegally dismissed employee as if he or she never ceased working for the employer. In
other words, the employee's years of service is deemed continuous and never interrupted.
Such is likewise the rationale for reinstatement's twin relief of full backwages.

Ampeloquio is correct in asserting that he is a senior employee compared to the other

merchandisers whom he himself designates as casual or contractual merchandisers.
However, his reinstatement was ordered when merchandisers like him were no longer
employed by JAKA. He cannot likewise compare his wages to that received by "casual or
contractual merchandisers" or merchandisers who are admittedly outsourced from
manpower agencies or those who are considered seasonal employees hired only during
peak season.

These merchandisers are not, strictly speaking, employees of JAKA, but of a service
provider company which has a service contract with JAKA who simply perform the work
at JAKA's outlets, wearing uniforms approved by JAKA but provided by the service
company who is actually their employer. There is no employer-employee relationship
between JAKA and these merchandisers.

The existence of an independent and permissible contractor relationship is generally

established by considering the following determinants: whether the contractor is carrying
on an independent business; the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the performance of a specified piece
of work; the control and supervision of the work to another; the employer's power with
respect to the hiring, firing and payment of the contractor's workers; the control of the
premises; the duty to supply the premises, tools, appliances, materials and labor; and the
mode, manner and terms of payment.

On the other hand, existence of an employer-employee relationship is established by the

presence of the four-fold test.
Section 8 of DOLE Department Order No. 10, series of 1997, illuminate:
Sec. 8. Job contracting. — There is job contracting permissible under
the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes
the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.

In the same vein, seasonal employees hired only for the peak season do not have the
same status as regular employees and do not receive amounts considered as part of a
compensation and benefits scheme for regular employees. These seasonal employees
only receive payment for work rendered during the period for which they were hired, i.e.,

74
peak season. The wages and other monies seasonal employees may receive for the
duration of their limited employment period constitute bulk or wholesale payment for
services rendered.

Seasonal employment involves work or service that is seasonal in nature or lasting for
the duration of the season. Seasonal employees differ from those classified as regular
employees, in that: (1) the employee must be performing work or services that are
seasonal in nature; and (2) he had been employed for the duration of the season.

The phrase without loss of seniority rights applies with practical and real effect to
Ampeloquio upon his retirement because he will reach earlier than other regular
employees of JAKA the required number of years of service to qualify for retirement.
Reinstatement is the rule and such covers reinstatement to the same or substantially
equivalent position without loss of seniority rights and privileges.

We note that, specifically, JAKA could have claimed that the position of merchandiser no
longer exists and has been abolished with the contracting of this job function. However,
it merely opted to reinstate Ampeloquio to the same position. There is no quarrel that with
his reinstatement, Ampeloquio is now the lone regular merchandiser of JAKA.

The option of reinstatement to a substantially equivalent position does not apply as

reinstatement to a substantially equivalent position entails the same or similar job
functions and not just same wages or salary. As applied to this case, Ampeloquio cannot
be reinstated to a messengerial position although such is a regular employment enjoying
the same employment benefits and privileges. His employment cannot likewise be
converted into a contractual employment as such is actually a downgrade from his regular
employment enjoying security of tenure with JAKA.

As the sole regular merchandiser of JAKA, Ampeloquio's reinstatement entitles him, at

the minimum, to the standard minimum wage at the time of his employment and to the
wages he would have received had he not been illegally dismissed, as if there was no
cessation of employment. Ampeloquio is likewise entitled to any increase which JAKA
may have given across the board to all its regular employees. To repeat, Ampeloquio is
not entitled to all benefits or privileges received by other employees subsequently hired
by JAKA just by the fact of his seniority in the service with JAKA.
The Court of Appeals was correct in its disquisition that:
. . . [W]ithout loss of seniority rights and benefits, this does not necessarily
mean equal or more rights than those employees hired by JAKA prior or
subsequent to his reinstatement. The rule on how much pay a reinstated
employee shall receive is governed by paragraph 3 of Article 223 of the
Labor Code which provides as follows:
. . . In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation or,

75
at the option of the employer, merely reinstated in the payroll. The posting of a bond by
the employer shall not stay the execution for reinstatement provided therein.

76
 FVR Skills & Services Exponenets Inc v Seva et al, 2014

Principle:
In determining regular employment, there must be reasonable connection between the
particular activity performed by the employee and the employer's business or trade.

Facts:
FVR Skills and Services is an independent contractor engaged in the business of
providing janitorial and other manpower services to its clients. Respondents were
employees of FVR as early as 1998. On April 21, 2008, FVR entered into a contractual
janitorial service (service contract) w/ Robinsons Land Corporation. Their service contract
stated that FVR will supply janitorial and sanitation services to Robinsons Place Ermita
Mall for a period of 1 year (January 1, 2008 to December 31, 2008). Because of this, the
respondents were deployed to Robinsons. Halfway through the service contract, FVR
asked the respondents to execute individual contracts which stipulated that their
respective employments shall end on December 31, 2008, unless earlier terminated.

After a year, when the contract expired, FVR and Robinsons no longer extended their
contract of janitorial services. Because of this, respondents were dismissed by FVR,
reasoning out that they were mere project employees and the project (service contract w/
Robinsons) has ended. Respondents filed a case for illegal dismissal against FVR w/
NLRC, stating that they were regular employees and not mere project employees. They
also asked for payment of their unpaid wage differential, 13th month pay differential,
service incentive leave pay, holiday pay and separation pay.

The Labor Arbiter ruled in favor of FVR. He held that the respondents were not regular
employees. They were project employees whose employment was dependent on the
petitioner's service contract with Robinsons. Since this contract was not renewed, the
respondents' employment contracts must also be terminated. However, the Labor Arbiter
granted the money claims for wage differential, 13th month pay and holiday pay, awarding
respondents with an amount of P103,501.01. The respondents appealed this decision to
NLRC.

NLRC reversed LA’s ruling, stating that the respondents were regular employees because
they have been employed by FVR for more than a year (some as early as 1998) thus the
dismissal was illegal for they may only be dismissed for just or authorized causes. The
NLRC also awarded the respondents their separation pay of 1 month for every year of
service as well as their full backwages from February 1, 2009 — the date of their illegal
dismissal, until the finality of the decision.

The CA affirmed the decision of NLRC reasoning out that the respondents were hired
since 1998 to 2007 as janitors, service crews and sanitation aids. Their jobs were
considered necessary to the business of FVR, and respondents’ services were needed
for more than a year. CA also found that the fixed term employment contracts signed by
the respondents were only executed when FVR felt that their service contract will no
longer be extended, and such contracts were only signed by employees after they were

77
threatened with witholding of wages.

Issue: won the respondents are regular employees, resulting to an illegal dismissal?

Held: FVR lost

The respondents are regular employees and not project employees.
Under Art 280 (now 294) of the Labor Code, there are 2 kinds of regular employees: (1)
those who were engaged to perform activities which are usually necessary or desirable
in the usual business or trade of the employer; and (2) those casual employees who
became regular after one year of service, whether continuous or broken, but only with
respect to the activity for which they have been hired.

Meanwhile, a project employee is one whose employment was fixed for a specific project
or undertaking, whose completion or termination had been determined at the time of
engagement.

The SC ruled that in determining regular employment, there must be reasonable

connection between the particular activity performed by the employee and the employer's
business or trade. This connection can be ascertained by considering the nature of the
work performed and its relation to the scheme of the particular business, or the trade in
its entirety. This was present in this case, since the respondents' work as janitors, service
crews and sanitation aides, are necessary or desirable to the petitioner's business of
providing janitorial and manpower services to its clients as an independent contractor.

It is also important to note that respondents had already been working for the petitioner
as early as 1998. Even before the service contract with Robinsons, the respondents were
already under the petitioner's employ. They had been doing the same type of work and
occupying the same positions from the time they were hired and until they were dismissed
in January 2009.

Lastly, under Department Order (DO) 18-02, the applicable labor issuance to the
petitioner's case, the contractor or subcontractor is considered as the employer of the
contractual employee for purposes of enforcing the provisions of the Labor Code and
other social legislation. DO 18-02 grants contractual employees all the rights and
privileges due a regular employee, including the following: (a) safe and healthful working
conditions; (b) labor standards such as service incentive leave, rest days, overtime pay,
holiday pay, 13th month pay and separation pay; (c) social security and welfare benefits;
(d) self-organization, collective bargaining and peaceful concerted action; and (e) security
of tenure.

Although the respondents were assigned as contractual employees to the petitioner's

various clients, under the law, they remain to be the petitioner's regular employees, who
are entitled to all the rights and benefits of regular employment.

As for the fixed term employment contract, these were ruled by the court as voidable.
Under Article 1390 of the Civil Code, contracts where the consent of a party was vitiated

78
by mistake, violence, intimidation, undue influence or fraud, are voidable or annullable.
The petitioner's threat of nonpayment of the respondents' salaries clearly amounted to
intimidation.

For an employee to be validly categorized as a project employee, it is necessary that the

specific project or undertaking had been identified and its period and completion date
determined and made known to the employee at the time of his engagement. This
provision ensures that the employee is completely apprised of the terms of his hiring and
the corresponding rights and obligations arising from his undertaking. Notably, the
petitioner's service contract with Robinsons was from January 1 to December 31, 2008.
The respondents were only asked to sign their employment contracts for their deployment
with Robinsons halfway through 2008, when the petitioner's service contract was about
to expire.

We find the timing of the execution of the respondents' respective employment contracts
to be indicative of the petitioner's calculated plan to evade the respondents' right to
security of tenure, to ensure their easy dismissal as soon as the Robinsons' contract
expired. If the petitioner really intended the respondents to be project employees, then
the contracts should have been executed right from the time of hiring, or when the
respondents were first assigned to Robinsons, not when the petitioner's service contract
was winding up.

Finally, SC ruled that the respondents were illegally dismissed. Because of this, the court
ruled that respondents must be awarded w/ separation pay instead of reinstatement, the
respondents should be paid their respective separation pays equivalent to one (1) month
pay for every year of service. As stated earlier, Section 7 of DO 18-02 treats contractual
employees as the independent contractor's regular employees for purposes of enforcing
the Labor Code and other social legislation laws.

However, the FVR officers are not Solidary liable. To hold an officer personally liable
for the debts of the corporation, and thus pierce the veil of corporate fiction, it is necessary
to clearly and convincingly establish the bad faith or wrongdoing of such officer, since bad
faith is never presumed. Because the respondents were not able to clearly show the
definite participation of Burgos and Rana (Officeres of FVR) in their illegal dismissal, we
uphold the general rule that corporate officers are not personally liable for the money
claims of the discharged employees, unless they acted with evident malice and bad faith
in terminating their employment.

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 Fonterra Brand Phils v Largado et al, 2015

Concept:
Requirements and elements of legitimate job contracting or subcontracting.
Nature of project employees and fixed-term contracts.
The determining factor of fixed-term contracts is not the duty of the employee but
the day certain agreed upon by the parties for the commencement and termination
of the employment relationship.

Facts: Petitioner was a company which sells milk and dairy products. They contracted
the services of Zytron Marketing and Promotions Corp. for the marketing and promotion
of its products. Respondents were then employees of Zytron whom Zytron provided to
petitioner as Trade Merchandising representatives tasked to market the products of
petitioner. Subsequently, petitioner terminated the service agreement with Zytron and
later contracted the services of A.C. Sicat which is also a marketing and promotions
company. Respondents then left Zytron and applied for a job in A.C. Sicat which hired
them for a term of 5 months as trade merchandising representatives. Issue then came
when A.C. Sicat denied the renewal of the contract upon expiration of the 5-month job
contract which prompted them to file a case for illegal dismissal, regularization, and non-
payment of service incentive leave and 13th month pay.

Labor Arbiter ruled that respondents were not illegally dismissed.

NLRC affirmed the decision of the labor arbiter.
CA ruled that Zytron was not a legitimate service contractor and hence respondents are
employees of petitioner. Further, they were illegally dismissed.

Issue:
1. Whether or not Zytron and A.C. Sicat are legitimate service contractors.
2. Whether or not respondents were illegally dismissed.

Ruling:
1. A person is considered engaged in legitimate job contracting or subcontracting if
the following conditions concur:
1. The contractor or subcontractor carries on a distinct and independent
business and undertakes to perform the job, work or service on its own
account and under its own responsibility according to its own manner and
method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof;
2. The contractor or subcontractor has substantial capital or investment; and
3. The agreement between the principal and contractor or subcontractor
assures the contractual employees entitlement to all labor and occupational
safety and health standards, free exercise of the right to self-organization,
security of tenure, and social and welfare benefits.

80
On the other hand, contracting is prohibited when the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal and if
any of the following elements are present, thus:
1. The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main
business of the principal; or
2. The contractor does not exercise the right to control over the performance
of the work of the contractual employee.
Zytron is not a legitimate service contractor because it did not have enough substantial
capital and it did not have sufficient proof that it had the necessary tools and equipment
for its business.

A.C. Sicat was a legitimate service contractor as it was able to prove that it is engaged in
legitimate job contracting. A.C. Sicat had total assets of P5,926,155.76, was engaged in
an independent business and petitioner had no control over them.

2. No, respondents were not illegally dismissed by Zytron because it was they
themselves who voluntarily resigned.

They were also not illegally dismissed by A.C. Sicat because they were employed as
project employees having a fixed duration of employment. Fixed-term employment
contracts are not limited, as they are under the present Labor Code, to those by nature
seasonal or for specific projects with predetermined dates of completion; they also include
those to which the parties by free choice have assigned a specific date of termination.
The determining factor of such contracts is not the duty of the employee but the day
certain agreed upon by the parties for the commencement and termination of the
employment relationship.

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 W.M. Manufacturing Inc v Dalag, 2015

Concept:
When is there labor-only contracting.
Procedural requirements must be followed in the termination of employees for just
cause.
Due process requirement in dismissal of employees is complied with upon notice
to the employee.

Facts: Petitioner and respondent Golden Rock Manpower Services entered into a service
agreement whereby the latter would supply workers to petitioner. Respondent Dalag was
then employed by respondent Golden Rock for a fixed 5-month contract period.
Thereafter, respondent Dalag was then deployed as a factory worker for petitioner. Dalag
alleged that he was constructively dismissed illegally when the security guards of
petitioner escorted him to the locker and commanded him to take his belongings.
Petitioner contended that he was dismissed because he negligently caused the
breakdown of a machine and that he failed to report it to the company. Further, petitioner
contended that he was given two memorandums to serve as notice of his termination but
that he refused to receive both memos. With this, respondent Dalag filed a case against
petitioner for illegal dismissal and further he contended that petitioner and respondent
Golden Rock is engaged in labor only contracting since he was performing a job that is in
line with the principal business of petitioner.

LA dismissed Dalag’s complaint.

NLRC initially ruled in favor of Dalag but upon a Motion for reconsideration by petitioner,
the decision was changed in favor of petitioner. They ruled that Golden Rock is to be
deemed as a legitimate labor contractor taking into consideration the certificate of
registration issued by the DOLE and that there was not enough proof to refute such status
as a legitimate labor contractor.
CA was in favor of respondent Dalag ruling that the certificate of registration is not a
conclusive evidence that would support Golden Rock’s status as a legitimate labor
contractor

Issue:
1. Whether or not there was labor only contracting.
2. Whether or not respondent Dalag was illegally dismissed.

Ruling:
1. There was labor-only contracting. There is "labor-only" contracting where the
person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him. The certificate of registration

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 operates only to support a disputable presumption that one is engaged in
legitimate labor contracting. Hence, it can be overcome by sufficient evidence that
would show elements of labor-only contracting. Here, it was shown that Golden
lacked substantial capital and petitioner exercised control over the employees
supplied by Golden Rock. The "right to control" refers to the right to determine not
only the end to be achieved, but also the manner and means to be used in reaching
that end.

2. No, Dalag was dismissed for just cause but petitioner did not comply with the
procedural requirements. Dalag was guilty of Gross and Habitual neglect under
Art. 282 of P.D. 442 which is considered as a just cause for termination. The rule
however requires that the employee be served with notices to comply with due
process but here such notice was not served because there was not proof that
respondent Dalag received it. Here, the prudent recourse would have been to
serve the memos through registered mail instead of directly proceeding with the
investigation.

83
 Diamond Farms v Southern Phils Fed of Labor, 2016, citing 2014 Alilin

Concept: A finding that a contractor is a labor-only contractor is equivalent to a

declaration that there is an employer-employee relationship between the principal, and
the workers of the labor-only contractor; the labor-only contractor is deemed only as the
agent of the principal.

Facts: Diamond Farms, Inc (DFI) owns an 800-hectare banana plantation. The farmers
working in the plantation organized themselves into a multi-purpose cooperative named
"DARBMUPCO," which is one of the respondents in this case. To assist DARBMUPCO
in meeting its production obligations under the Banana Production and Purchase
Agreement (BPPA), DFI engaged the services of the respondent-contractors, who in turn
recruited the respondent-workers. Respondent Southern Philippines Federation of Labor
("SPFL") filed a petition for certification election in the Office of the Med-Arbiter. SPFL
filed the petition on behalf of some 400 workers (the respondent-workers in this petition)
"jointly employed by DFI and DARBMUPCO" working in the awarded plantation.
DARBMUPCO and DFI denied that they are the employers of the respondent-workers.
They claimed, instead, that the respondent-workers are the employees of the respondent-
contractors. SPFL, together with more than 300 workers, filed a case for underpayment
of wages, non-payment of 13th month pay and service incentive leave pay and attorney's
fees against DFI, DARBMUPCO and the respondentcontractors before the National
Labor Relations Commission ("NLRC"). The Labor Arbiter ("LA") held that the
respondent-contractors are "labor-only contractors." The NLRC modified the Decision of
the LA and declared that DARBMUPCO and DFI are the statutory employers of the
workers. The CA agreed with the ruling of the SOLE that DFI is the statutory employer of
the respondentworkers.

Issue: Who among DFI, DARBMUPCO and the respondent contractors is the employer
of the respondentworkers?

Ruling: Respondent-contractors are labor-only contractors and DFI is their principal.

Under Article 106 of the Labor Code, a principal or employer refers to the person who
enters into an agreement with a job contractor, either for the performance of a specified
work or for the supply of manpower. DFI does not deny that it engaged the services of
the respondent -contractors. It does not dispute the claims of respondent-contractors that
they sent their billing to DFI for payment; and that DFI's managers and personnel are in
close consultation with the respondent-contractors. DFI, through its manager and
supervisors provides for the work assignments and performance targets of the
respondent-workers. The managers and supervisors also have the power to directly hire
and terminate the respondent-workers. Evidently, DFI wields control over the respondent-
workers. Respondent-contractors categorically stated that they are "labor only"
contractors who have been engaged by DFI and DARBMUPCO. They admitted that they
do not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials, and they recruited workers to perform activities
directly related to the principal operations of their employer. As stated in the Alilin v.
Petron Corporation, a finding that a contractor is a labor-only contractor is equivalent to

84
a declaration that there is an employer-employee relationship between the principal, and
the workers of the labor-only contractor; the labor-only contractor is deemed only as the
agent of the principal. DFI shall be solidarity liable with the respondent-contractors for the
rightful claims of the respondent-workers, to the same manner and extent as if the latter
are directly employed by DFI

85
 Philippine Airlines v Ligan et al, 2016

Concept: If there is a finding that the contractor or subcontractor, is engaged in labor-

only contracting, the principal shall be deemed the direct employer of the contractor’s or
subcontractor’s employees.

Facts: PAL and Synergy Services Corporation (Synergy) entered into a station services
agreement and a janitorial services agreement whereby Synergy provided janitors and
station attendants to PAL at Mactan airport. Claiming to be performing duties directly
desirable and necessary to the business of PAL, the respondents, along with 12 other co-
employees, filed complaints against PAL and Synergy in the for regularization of their
status as employees of PAL, underpayment of salaries and non-payment of premium pay
for holidays, premium pay for rest days, service incentive leave pay, 13th month pay and
allowances. While the above regularization cases were pending in the CA, PAL
terminated its service agreements with Synergy alleging serious business losses.
Consequently, Synergy also terminated its employment contracts with the respondents,
who forthwith filed individual complaints for illegal dismissal against PAL. PAL in turn filed
a third-party complaint against Synergy. Labor Arbiter declared that Synergy was an
independent contractor and the respondents were its regular employees, and therefore
Synergy was solely liable for the payment of their separation pay, wage differential, and
attorney's fees. In their appeal to the NLRC, the respondents cited seven previous cases
wherein the NLRC also declared that Synergy was a labor-only contractor. They argued
that Synergy and PAL dismissed them without just cause. The NLRC found that the
functions performed by the respondents under Synergy's service contracts with PAL
indicated that they were directly related to PAL's air transport business, that Synergy
serviced PAL exclusively and had no other clients, that its activities were carried out within
PAL's premises and PAL shared supervision and control over the respondents. In
declaring that the respondents were regular employees of PAL, the NLRC cited a CA
case, Philippine Airlines, Inc. v. NLRC, CA-G.R. SP No. 50138, dated April 30, 1999, with
similar factual findings which also ruled that Synergy was a labor-only contactor and a
mere agent of PAL. After ruling that the respondents were dismissed without just cause
and without observance of procedural due process, the NLRC ordered PAL to pay them
separation pay, backwages, and wage differential. PAL moved for reconsideration which
was denied. CA dismissed PAL's petition for review and denied motion for
reconsideration.

Issues:
1. Whether Synergy is an independent-contractor or labor-only contractor.
2. Whether PAL is guilty of illegal dismissal.

Ruling: Synergy is a labor-only contractor. PAL was the employer of the respondents.
Thus, PAL is guilty of illegal dismissal. HEITAD Noting that this Court in G.R. No. 146408
has ruled that the respondents were regular employees of PAL, the CA ruled that they
cannot be whimsically terminated by PAL but it must show that: (1) their dismissal was
for any of the causes authorized in Article 282 of the Labor Code; and (2) they were given
opportunity to be heard and to defend themselves. PAL has thus always known that the

86
issue therein was whether Synergy was a labor-only contractor or a legitimate contractor;
that the respondents were adjudged as regular employees of PAL entitled to all the
benefits of its regular employees, that Synergy was a labor-only contractor and thus a
mere agent of PAL. Unfortunately, in this petition, PAL has advanced no such justification
whatsoever to dismiss or retrench the respondents. The Court is left with no conclusion:
PAL's petition is misleading and clearly baseless and dilatory. The motion for
reconsideration is denied.

87
 Cagayan Electric Power & Light Company Inc v Cepalco Employees Labor union-ALU
TUCP, 2016

Doctrine: Article 106 of the Labor Code, as amended, labor-only contracting is an

arrangement where the contractor, who does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises, among others, supplies
workers to an employer and the workers recruited are performing activities which are
directly related to the principal business of such employer

Facts:
Respondent is the duly certified bargaining representative of CEPALCO's regular rank-
and-le employees. On the other hand, CEPALCO is a domestic corporation engaged in
electric distribution in Cagayan de Oro and other municipalities in Misamis Oriental; while
CESCO is a business entity engaged in trading and services. On February 19, 2007,
CEPALCO and CESCO (petitioners) entered into a Contract for Meter Reading Work
where CESCO undertook to perform CEPALCO's m e t e r - m e t e r r e a d i n gr e a d i
n g activities. As a result, several employees and union members of CEPALCO were
relieved, assigned in floating positions, and replaced with CESCO workers, prompting
respondent to file a complaint for ULP against petitioners, docketed NLRC Case No.
RAB-10-07-00408-2007. Respondent alleged that when CEPALCO engaged CESCO to
perform its meter-reading activities, its intention was to evade its responsibilities under
the Collective Bargaining Agreement (CBA) and labor laws, and that it would ultimately
result in the dissipation of respondent's membership in CEPALCO. 11 Thus, respondent
claimed that CEPALCO's act of contracting out services, which used to be part of the
functions of the regular union members, is violative of Article 259 (c) 12 of the Labor Code,
as amended, 13 governing ULP of employers. It further averred that for engaging in labor-
only contracting, the workers placed by CESCO must be deemed regular rank-and-le
employees of CEPALCO, and that the Contract for Meter Reading Work be declared null
and void.

Pending resolution or on January 5, 2010, CEPALCO and CESCO entered into another
Contract of Service, this time for the w a r e h o u s i n g w a r e h o u s i n g works works
of CEPALCO. Alleging that three (3) union members who were assigned at the
warehouse of the logistics department were transferred to other positions and
departments without their conformity and, eventually, were replaced by workers recruited
by CESCO, respondent led another complaint for ULP against petitioners, docketed as
NLRC Case No. RAB-10-12-00602-2009 NLRC Case No. RAB-10-12-00602-2009,
similarly decrying that CEPALCO was engaged in labor-only contracting and, thus,
committed ULP.

Issues:
WON CA erred in declaring CESCO as a labor-only contractor notwithstanding the fact
that CEPALCO has already been absolved of the charges of ULP .

88
WON respondent is not a party-in-interest in this issue because the declaration of the CA
that the employees of CESCO are considered regular employees will not even benefit the
respondent.

RULING:
In these cases, the Court agrees with the CA that CEPALCO was engaged in labor-only
contracting as its Contract for Meter-Reading Work dated February 19, 2007 and Contract
of Service to Perform Warehousing Works dated January 5, 2010 (subject contracts) with
CESCO. To be specific, petitioners failed to show that CESCO has substantial capital or
investment which relates to the job, work or service to be performed.

While it is true that: ( a ) CESCO's Amended Articles of Incorporation as of November

26, 2008 shows that CESCO's authorized capital stock is P200,000,000.00 as of
September 26, 2008, which was increased from P100,000,000.00on May 30, 2007; and
( b ) its financial statement as of 2010 and 2011 shows that its paid-up capital stock is in
the sum of P81,063,000.00, there is no available document to show CESCO's authorized
capital stock at the time of the contracting out of CEPALCO's contracting out of
CEPALCO's m e t e r m e t e r r e a d i n gr e a d i n g activities to CESCO on February
19, 2007. As it is, the increases in its authorized capital stock and paid-up capital were
only made after November 26, 2008, hence, are only relevant with regard to the time
CEPALCO contracted out its warehousing works to CESCO on January 5, 2010.

Since the amount of CESCO's authorized capital stock at the time CEPALCO contracted
out its meter-reading activities was not shown, the Court has no means of determining
whether it had substantial capital at the time the contract therefor was entered into.
Furthermore, the list of CESCO's office equipment, furniture and vehicles offered in
evidence by petitioners does not satisfy the requirement that they could have been used
in the performance of the specific work contracted out, i.e. , meter-reading service. As the
CA aptly pointed out, the tools and equipment utilized by CESCO in the meter reading
activities are owned by CEPALCO, emphasizing the fact that CESCO has no basic
equipment to carry out the service contracted out by CEPALCO.

It is also evident that meter-reading is a job that is directly related to the main business of
CEPALCO, considering that the latter is an electric distribution utility, which is necessarily
tasked with the evaluation and appraisal of meters in order to bill its clients. More
significantly, records are devoid of evidence to prove that the work undertaken in
furtherance of the meter-reading contract was made under the sole control and
supervision of CESCO. Instead, as noted by the CA, it was CEPALCO that established
the working procedure and methods and supervised CESCO's workers in their tasks. On
the other hand, although it may be said that CESCO had substantial capital when
CEPALCO contracted out its w a r e h o u s i n g w a r e h o u s i n g works works on
January 5, 2010, there is, however, lack of credible evidence to show that CESCO had
the aforesaid substantial investment in the form of equipments.

The foregoing findings notwithstanding, the Court, similar to the CA and the labor
tribunals, finds that CEPALCO's contracting arrangements with CESCO did not amount

89
to ULP . This is because respondent was not able to present any evidence to show that
such arrangements violated CEPALCO's workers' right to self-organization, which, as
above-mentioned, constitutes the core of ULP . Records do not show that this finding was
further appealed by respondent. Thus, the complaints led by respondent Thus, the
complaints led by respondent should be dismissed with finality should be dismissed with
finality.

If at all, it would be the employees of CESCO who are entitled to seek the foregoing reliefs
since in cases of labor-only contracting, "the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him." However, they have
not been impleaded in these cases. Thus, as prayed for by petitioners, the Court must
set aside the portions of the assailed CA Decisions declaring: ( a ) the workers hired by
CESCO, pursuant to the contracts subject of these cases, as regular employees of
CEPALCO; and ( b ) the latter responsible to said workers in the same manner and extent
as if they were directly employed by it. This pronouncement not only squares with the
rules on real party-in-interest and legal standing, but also with the precept that no one
shall be affected by any proceeding to which he is a stranger, and that strangers to a case
are not bound by any judgment rendered by the court.

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 Quintanar et al v Coca-Cola Bottlers PhIls, 2016

Doctrine: Performing activities directly related to the principal business of the employer
is only one of the two indicators that “labor-only” contracting exists; the other is lack of
substantial capital or investment.

Facts:
Petitioners were direct-employees of Coca-cola from 1984-2000 they were assigned as
route helpers under the direct supervision of the Route Sales Supervisors. Their duties
were distributing the products to the stores and customers in their assigned routes. After
working for quite sometime they were transferred successively to different Manpower
agencies and to Interverse Manpower Agency being the last agency. However upon
inspection by DOLE, it held petitioners to be regular employees of Coca-Cola and ordered
herein respondents to pay several underpayments to petitioners, upon learning of such
herein petitioners were terminated by Coca-Cola in various dates which prompted
petitioners to file this case.

Interverse on their part maintained that they were a legitimate and registered Job Only
Contractor and on Coca-Cola’s defense they argued that they did not interfere with the
manner and the methods of the complainant’s performance at work as long as the desired
results are achieved.

Labor Arbiter
Petitioners were employees of Coca-Cola who were seconded to Interverse and that
Coca-Cola could not compromise the employees constitutional right to security of tenure
by entering into a service agreement to a manpower supply contractors, and to make
petitioners sign employment contracts with them and convert their employment status
from regular to contractual.
NLRC
The several Manpower Agencies including Interverse simply played to feign the
status of an employer so that its alleged principal would be free from any liabilities and
responsibilities to its employees.
Court of Appeals
Petitioners were not the employees of Coca-Cola but of Interverse, since it was
interverse who exercised the power of selection and engagement over the petitioner
considering that the petitioners applied for their job and went through pre-employment
processes of Interverse to evidence such claim is that personal data sheets and contracts
of employment were filed with Interverse. And that Interverse was the one who paid
petitioners and respondent also paid Interverse for the services rendered.

Issue: Whether or not Labor-only contracting exists.

Held: To determine whether an employment should be considered regular or non-regular,

the applicable test is the reasonable connection between the particular activity performed
by the employee in relation to the usual business of the employer. Although the work to
be performed is only for a specific project or seasonal where a person thus engaged has

91
been performing for more than 1 year, even if the performance is not continuous or is
merely intermittent, the law deems the repeated and continuing need for its performance
as being sufficient to indicate the necessity or desirability of that activity to the business
or trade of the employer.

The repeated rehiring of petitioner workers and the continuing need for their service
clearly attest to the necessity or desirability of their services in the regular conduct of the
business or trade of respondent company. The court found that the work of the
respondent therein, constituting distribution and sale of Coca-Cola Products was clearly
indispensable to the principal business of petitioner Coca-Cola.

Lastly, Interverse did not have substantial capital or investment in the form of tools,
equipment, machineries and work premises; and petitioners its supposed employees ,
performed work which was directly related to the principal business of the respondent.
Thus, in violation of Art. 106 of the Labor Code as well as section 5(I) of the Rules
Implementing Articles 106-109 of the Labor Code.
“the possession of substantial capital is only one element, labor-only contracting
exists when any of the two elements is present. Thus, even if the court would indulge
Coca-cola and admit that Interverse had more than sufficient capital or investment in the
form of tools, equipment, machineries, work premises, still, it cannot be denied that the
petitioners were performing activities which were directly related to the principal business
of the employer.”

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 Soliman Security Services Inc et al v Sarmiento et al, 2016

Doctrine: The justification for the failure to reassign should be the lack of service
agreements for a continuous period of six months aside from the other authorized causes
provided by the Labor Code.

Facts: Respondents were hired security guards by herein petitioner and were assigned
to a certain pharmaceutical company working 7 days a week and for 12 hours straight
daily. Respondent claimed that they were underpaid and said that they were not paid
holiday pays, night shift differential and rest day premiums. When they sought for the
discussion of such money claims they were relieved from their posts.

Agency contended that said security guards were placed on a floating status. Agency
admitted that the respondents were relieved but said action was done pursuant to the
contract with the client that there be replacing of security guards on duty every six months
without repeat assignment. Subsequently there was a hearing in the Labor Arbiter
wherein the LA dismissed the complaint upon finding that there was a memoranda that
asked the respondents to report to the office for work reassignment yet they did not
appeared and thus it was held that it amounted to abandonment.

NLRC
The said memoranda was just an afterthought devised after the case for illegal
dismissal was filed. It was not in the nature of return to work order, which may effectively
interrupt their return to work status. This was later on affirmed by the Court of Appeals.

Issue: WON there is a case of illegal dismissal.

Held: The employer has the right to transfer or assign its employees from one area of
operation to another, provided, there is no demotion in rank or diminution of salary,
benefits or other privileges, and transfer is not motivated by discrimination or bad faith, or
effected as a form of punishment or demotion without sufficient cause. It has long been
settled that placing of the security guards in floating status does not constitute dismissal
so long as it is done in good faith. The court emphasized that security guards cannot be
placed under floating status indefinitely;thus; the court has applied Art. 292 of the Labor
Code by analogy to set the specific period of temporary off detail to a maximum of
six months. To the notice/memoranda given by the agency, it is evident that the notices
sent were mere ostensible offers for new assignments. It was not intended to cover the
illegality of the termination of the respondents’ employment.

The court acknowledges however that had the reason for such failure to reassign
respondents been the lack of service agreements for a continuous period of six months,
petitioner agency could have exercised its right to terminate respondents for an
authorized cause upon compliance with the procedural requirement. Supreme Court
Applied section 9.3 of D.O. 14-01 in relation to section 6.5 of the same D.O

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 De Castro et al v CA, 2016

There is labor-only contracting where the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer.

Facts: Nuvoland, a corporation, was registered with the Securities and Exchange
Commission. Respondent Martinez (President of Nuvoland) recruited petitioner De
Castro to handle its sales and marketing operations, including the hiring and supervision
of the sales and marketing personnel. Martinez proposed to create a new corporation,
through which the De Castro's compensation, benefits and commissions, including those
of other sales personnel, would be coursed. It was stipulated in the said Memorandum of
Agreement that the new corporation would have an authorized capital stock of
P4,000,000.00, of which P1,000,000.00 was subscribed and paid equally by the Martinez
Group and the De Castro Group. The new corporation contemplated was Silvericon. De
Castro was then appointed the President and majority stockholder of Silvericon.

In the same MOA, Martinez was designated as Chairman of the new corporation to whom
De Castro, as President and Chief Operating Officer, would directly report. De Castro was
tasked to manage the day to day operations of the new corporation based on policies,
procedures and strategies set by Martinez. Later, De Castro, as Chief Operating Officer
of the newly created Silvericon, recruited forty (40) sales and marketing personnel. One
of them was petitioner Platon who occupied the position of Executive Property Consultant.

The Sales and Marketing Agreement (SMA) was executed by Nuvoland and Silvericon,
stipulating that all payments made for the condominium projects of Nuvoland were to be
given directly to it. But, later on Nuvoland terminated the SMA on the ground that
Silvericon personnel committed an unauthorized walkout and abandonment of the Nuvo
City Showroom for 2 days.

De Castro and all the sales and marketing personnel of Silvericon were barred from
entering the office premises. Aggrieved, De Castro and Platon filed a complaint for illegal
dismissal before the LA, demanding the payment of their unpaid wages, commissions
and other benefits against respondents.

Nuvoland insisted that the petitioners direct their claims to Silvericon. Nuvoland and its
directors and officers denied a direct contractual relationship with De Castro and Platon,
and contended that if there was any dispute at all, it was merely between the complainants
and Silvericon.

Labor Arbiter: Silvericon was a mere labor-only contractor and, therefore, a mere agent
of Nuvoland. Nuvoland was adjudged as the direct employer of De Castro and Platon
and, thus, liable to pay their money claims as a consequence of their illegal dismissal.

94
NLRC: Silvericon was an independent contractor, thus, the direct employer of De Castro
and Platon.

CA: Affirmed the findings of the NLRC. Considering that there was no employer-
employee relationship between the petitioners and Nuvoland, the CA deemed that the
latter could not be held liable for the claim of illegal dismissal. De Castro's employment
with Silvericon put him within the ambit of Section 5.2 of Republic Act (R.A.) No. 8799,
otherwise known as The Securities Regulation Code. As such, his claim should have
been brought before the Regional Trial Court (RTC) instead.

Issue: WON Silvericon is a Labor-Only Contractor.

Ruling: Silvericon is a Labor-Only Contractor. Hence, Nuvoland is solidarity liable with

Silvericon for the monetary claims of the petitioners who were clearly their employees.

There is labor-only contracting where the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business of such employer.
In such cases, the person or intermediary shall be considered merely as an agent of the
emplover who shall be responsible to the workers in the same manner and extent as if
the latter were directly employed by him. Basically, a legitimate job contractor complies
with the requirements on sufficient capitalization and equipment to undertake the needs
of its client. Although this is not the sole determining factor of legitimate contracting,
independent contractors are likewise required to register with the DOLE. Failure to
register shall give rise to the presumption that the contractor is engaged in labor-only
contracting.

In the present case, Silvericon was not an independent contractor were, conveniently
brushed aside resulting in an unjust outcome. First. Nuvoland did not bother to make
Silvericon comply with the requirement of registration if it had really entered into a
legitimate contracting arrangement with a truly independent outfit. Non-compliance with
the registration gives rise to a presumption n that the contractor is engaged in labor-only
contracting. Second. D.O. No. 18-A defines substantial capital as the paid-up capital
stocks/shares of at least P3,000,000.00 in the case of corporations, partnerships and
cooperatives. At the time Nuvoland engaged the services of Silvericon, the latter's
authorized stock capital was P4,000,000.00, out of which only P1,000,000.00 was
subscribed. For the sale and marketing of two condominium buildings, it would require
massive funds for promotions, advertisements, shows, salaries, and operating expenses
of its more or less 40 personnel.

It is obvious that the P1 million subscribed capital of Silvericon would hardly suffice to
satisfy this huge engagement. Nuvoland was apparently aware of this that it had to fund
the marketing expenses of the project in an amount not exceeding P30 million per
building. Hence, the paid-in capitalization of Silvericon amounting to P1 million was
woefully inadequate to be considered as substantial capital. Third, Silvericon had no

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substantial equipment in the form of tools, equipment, machinery, and work premises. At
the time of its engagement, Silvericon had no such investment necessary for the conduct
of its business. Fourth, Nuvoland and Silvericon shared the same officers and employees.
This fact alone does not give rise to an inference that Nuvoland and Silvericon are one
and the same. However, records would show that the termination of the SMA was one
and the same with the termination of all Silvericon personnel.

This conclusion proceeded from the irrefutable fact that Silvericon was actually a creation
of Nuvoland. As a labor-only contractor, for all intents and purposes, Silvericon was a
mere mock-up. The termination of the SMA was actually a ruse to make it appear that
Silvericon was an independent entity. It was simply a way to terminate the employment
of several employees altogether and escape liability as an employer. In a situation like
this, an employer-employee relationship between the principal and the dismissed
employees arises by operation of law. Silvericon being merely an agent, its employees
were in fact those of Nuvoland. In other words, Nuvoland was the principal employer of
the petitioners.

Lastly, in determining the presence or absence of an employer-employee relationship,

the Court has consistently looked for the following incidents, to wit; (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer's power to control the employee on the means and methods by which
the work is accomplished. The last element, the so-called control test, is the most
important element. In the case, it was respondent Nuvoland which paid the sales
commissions of the sales personnel of respondent Silvericon. The power to terminate
employees had also been exercised by Nuvoland when it clearly dispensed with the
cancellation of the SMA resulting with the termination of all Silvericon personnel. As
regards the power of control, Nuvoland dictated the end result of the undertaking, that is,
to sell at least eighty percent of the condominium project within a period of twenty-four
months; that Nuvoland decided on the models, designs and prices of the units; that
Nuvoland was the ultimate recipient of all amounts collected by the sales and marketing
team; and lastly, Nuvoland determined the maximum amount of marketing expenses for
the accomplishment of the goal.

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 Nestle Philippines Inc v Puedan, Jr, 2017

In a legitimate contracting arrangement, the principal does not demonstrate control on the
part of the contractor over the means and methods by which the contractor performs its
business.

Facts: ODSI and NPI hired respondents to sell various NPI products in the assigned
covered area. After some time, respondents demanded that they be considered regular
employees of NPI, but they were directed to sign contracts of employment with ODSI
instead. When respondents refused to comply with such directives, NPI and ODSI
terminated them from their position. 8 Thus, they were constrained to file the complaint,
claiming that: (a) ODSI is a labor-only contractor and, thus, they should be deemed
regular employees of NPI; and (b) there was no just or authorized cause for their
dismissal. For its part, ODSI averred that it is a company engaged in the business of
buying, selling, distributing, and marketing of goods and commodities of every kind and it
enters into all kinds of contracts for the acquisition thereof. ODSI admitted that it hired
respondents as its employees and assigned them to execute the Distributorship
Agreement. However, the business relationship between NPI and ODSI turned sour when
the former's sales department badgered the latter regarding the sales targets. Eventually,
NPI downsized its marketing and promotional support from ODSI which resulted to
business reverses and in the latter's filing of a petition for corporate rehabilitation and,
subsequently, the closure of its Nestle unit due to the termination of the Distributorship
Agreement and the failure of rehabilitation. Under the foregoing circumstances, ODSI
argued that respondents were not dismissed but merely put in floating status.

Then, a complaint for illegal dismissal, damages, and attorney's fees was filed by
respondents against ODSI and NPI. They were claiming that ODSI is a labor-only
contractor.

Labor Arbiter: Respondents were unable to prove that they were NPI employees;
and respondents were not illegally dismissed as ODSI had indeed closed down its
operations due to business losses.

NLRC: Reversed and set aside the LA ruling. While ODSI indeed shut down its
operations, it failed to prove that such closure was due to serious business losses.
Further, the NLRC found ODSI to be a labor-only contractor of NPI. Consequently, the
NLRC deemed NPI to be respondents' true employer, and thus, ordered it jointly and
severally liable with ODSI to pay the monetary claims of respondents.

CA: Affirmed the NLRC ruling.

Issue: WON ODSI is a labor-only contractor of NPI.

Ruling: ODSI was not a labor-only contractor of NPI, hence, the latter cannot be deemed
the true employer of respondents. As a consequence, NPI cannot be held jointly and
severally liable to ODSI's monetary obligations towards respondents.

97
The Distributorship Agreement reveals that the relationship of NPI and ODSI is not that
of a principal and a contractor (regardless of whether labor-only or independent), but that
of a seller and a buyer/re-seller. As stipulated in the Distributorship Agreement, NPI
agreed to sell its products to ODSI at discounted prices, which in turn will be re-sold to
identified customers, ensuring in the process the integrity and quality of the said products
based on the standards agreed upon by the parties. The goods it manufactures are
distributed to the market through various distributors, e.g., ODSI, that in turn, re-sell the
same to designated outlets through its own employees such as the respondents.
Therefore, the reselling activities allegedly performed by the respondents properly pertain
to ODSI, whose principal business consists of the "buying, selling, distributing, and
marketing goods and commodities of every kind" and "entering into all kinds of contracts
for the acquisition of such goods and commodities.”

Moreover, the stipulations in the Distributorship Agreement hardly demonstrate control

on the part of NPI over the means and methods by which ODSI performs its business,
nor were they intended to dictate how ODSI shall conduct its business as a distributor.
Otherwise stated, the stipulations in the Distributorship Agreement do not operate to
control or fix the methodology on how ODSI should do its business as a distributor of NPI
products, but merely provide rules of conduct or guidelines towards the achievement of a
mutually desired result, which in this case is the sale of NPI products to the end consumer.
The imposition of minimum standards concerning sales, marketing, finance and
operations is nothing more than an exercise of sound business practice to increase sales
and maximize profits for the benefit of both. For as long as these requirements do not
impinge on a distributor's independence, then there is nothing wrong with placing
reasonable expectations on them. Verily, it was only reasonable for NPI - it being a local
arm of one of the largest manufacturers of foods and grocery products worldwide - to
require its distributors, such as ODSI, to meet various conditions for the grant and
continuation of a distributorship agreement for as long as these conditions do not control
the means and methods on how ODSI does its distributorship business.

98
 Valencia v Classique Vinyl Products Corp, 2017

Concept: Certificate of Registration with the Department of Trade and Industry and,
License as private recruitment and placement agency from the Department of Labor and
Employment. Indeed, these documents are not conclusive evidence of the status of CMS
as a contractor. However, such fact of registration of CMS prevented the legal
presumption of it being a mere labor-only contractor from arising.

Facts:
• On March 24, 2010, Valencia filed with the Labor Arbiter a Complaint3 for
Underpayment of Salary and Overtime Pay; Non-Payment of Holiday Pay, Service
Incentive Leave Pay, 13th Month Pay; Regularization; Moral and Exemplary
Damages; and, Attorney's Fees against respondents Classique Vinyl Products
Corporation (Classique Vinyl) and its owner Johnny Chang (Chang) and/or
respondent Cantingas Manpower Services (CMS).
PETITIONER’S
• Valencia alleged that he applied for work with Classique Vinyl but was told by the
latter's personnel office to proceed to CMS, a local manpower agency, and therein
submit the requirements for employment.
• Valencia claimed that he worked 12 hours a day from Monday to Saturday and
was receiving ₱187.52 for the first eight hours and an overtime pay of ₱117.20 for
the next four hours, or beyond the then minimum wage mandated by law. Five
months later, he was made to serve as extruder operator but without the
corresponding increase in sa1aiy. He was neither paid his holiday pay, service
incentive leave pay, and 13th month pay. Worse, premiums for Philhealth and Pag-
IBIG Fund were not paid and his monthly deductions for Social Security System
(SSS) premiums were not properly remitted. He was also being deducted the
amounts of ₱100.00 and ₱60.00 a week for Cash Bond and Agency Fee,
respectively.
• He further averred that he worked for Classique Vinyl for four years until his
dismissal. Hence, by operation of law, he had already attained the status of a
regular employee of his true employer, Classique Vinyl, since according to him,
CMS is a mere labor-only contractor. Valencia, therefore, argued that Classique
Vinyl should be held guilty of illegal dismissal for failing to comply with the twin-
notice requirement when it dismissed him from the service and be made to pay for
his monetary claims. (His work was regularly supervised by Classique Vinyl.)
RESPONDENT’S
• Classique Vinyl, for its part, denied having hired Valencia and instead pointed to
CMS as the one who actually selected, engaged, and contracted out Valencia's
services. It averred that CMS would only deploy Valencia to Classique Vinyl
whenever there was an urgent specific task or temporary work and these
occasions took place sometime in the years 2005, 2007, 2009 and 2010. It
stressed that Valencia's deployment to Classique Vinyl was intermittent and limited
to three to four months only in each specific year.
• Classique Vinyl asserted that there was no employer-employee relationship
between it and Valencia, hence, it could not have illegally dismissed the latter nor

99
 can it be held liable for Valencia's monetary claims. Even assuming that Valencia
is entitled to monetary benefits, Classique Vinyl averred that it cannot be made to
pay the same since it is an establishment regularly employing less than 10
workers. As such, it is exempted from paying the prescribed wage orders in its
area and other benefits under the Labor Code.
• Classique Vinyl insisted that Valencia's true employer was CMS, the latter being
an independent contractor as shown by the fact that it was duly incorporated and
registered not only with the Securities and Exhange Commission but also with the
Department of Labor and Employment; and, that it has substantial capital or
investment in connection with the work performed and services rendered by its
employees to clients.
CMS’
• CMS, on the other hand, denied any employer-employee relationship between it
and Valencia. It contended that after it deployed Valencia to Classique Vinyl, it was
already the latter which exercised full control and supervision over him. Also,
Valencia's wages were paid by Classique Vinyl only that it was CMS which
physically handed the same to Valencia.
LA : VALENCIA IS NOT A REGULAR EMPLOYEE OF RESPONDENT VINYL CORP.

In Pangilinan v. General Milling Corporation, G.R. No. 149329, July 12, 2004, the
Supreme Court ruled that it does not necessarily follow that where the duties of the
employee consist of activities usually necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing on a period of time for the performance
of such activities. Thus, even if respondent [Classique Vinyl] exercises full control and
supervision over the activities perfom1ed by [Valencia], the latter's employment cannot
be considered as regular.

Likewise, respondent corp. cannot be made to pay the monetary claims (as stated above)
of petitioner because, the latter is not a rank and file employee, he as well failed to prove
that he rendered overtime work, did not work continuously or intermittently for one year
to be entitled to SIL, and he also failed to prove that there were unfounded deductions
made by respondent. Dismissed.

NLRC: Declared CMS as Valencia's employer. (Applying the four-fold test)

In Order to determine the existence of an employer-employee relationship, the following

yardstick had been consistently applied: (l) the selection and engagement; (2) payment
of wages; (3) power of dismissal and; (4) the power to control the employee[']s conduct.

In this case, [Valencia] admitted that he applied for work with respondent [CMS] x x x.
Upon the acceptance of his application, he was made to sign an employment contract x
x x. [Valencia] also admitted that he received his wages from respondent [CMS] x x x. As
a matter of fact, respondent [CMS] argued that [Valencia] was given a non-cash wage in
the approximate amount of Php3,000.00 x x x. (Relied heavily on the stipulations in the
contract)

100
CA: AFFIRMED NLRC (Relied heavily on the stipulations in the contract)

ISSUE: Whether there exists an employer-employee relationship between Classique

Vinyl and Valencia.

RULING: NO EMPLOYER-EMPLOYEE EXISTS BETWEEN CLASSIQUE AND

VALENCIA.

Most of Valencia's allegations even militate against his claim that Classique Vinyl was his
true employer. For one, Valencia stated in his Sinumpaang Salaysay that his application
was actually received and processed by CMS which required him to submit the necessary
requirements for employment. Upon submission thereof, it was CMS that caused him to
sign an employment contract, which upon perusal, is actually a contract between him and
CMS. It was only after he was engaged as a contractual employee of CMS that he was
deployed to Classique Vinyl. Clearly, Valencia's selection and engagement was
undertaken by CMS and conversely, this negates the existence of such element insofar
as Classique Vinyl is concerned. CA, therefore, did not err in relying on the said
employment contract in its determination of the merits of this case.

On the other hand, the employment contract which Valencia signed with CMS
categorically states that the latter possessed not only the power of control but also of
dismissal over him, viz.:
xxxx

2. That the employee shall observe all rules and regulations of the company during the
period of employment and [the] lawful instructions of the management or its
representatives. Failure to do so or if performance is below company standards,
management [has] the right to immediately cancel this contract.
Xxxx
Clearly, therefore, no error can be attributed on the part of the labor tribunals and the CA
in ruling out the existence of employer-employee relationship between Valencia and
Classique Vinyl.

Further, the Court finds untenable Valencia's argument that neither Classique Vinyl nor
CMS was able to present proof that the latter is a legitimate independent contractor and
therefore, unable to rebut the presumption that a contractor is presumed to be a labor-
only contractor.

Here, to prove that CMS was a legitimate contractor, Classique Vinyl presented the
former's Certificate of Registration with the Department of Trade and Industry and,
License as private recruitment and placement agency from the Department of Labor and
Employment. Indeed, these documents are not conclusive evidence of the status of CMS
as a contractor. However, such fact of registration of CMS prevented the legal
presumption of it being a mere labor-only contractor from arising. DENIED.

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 C. WORKER’S PREFERENCE

Barayoga v Asset Privatization Trust, 2005

Concept: Art. 110 of the labor code on worker’s lien contemplates ordinary lien. While
this provision raises the workers money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, however, the claim has no preference
over special preferred credits. In other words, being a mortgage credit, APTs lien on
BISUDECOs mortgaged assets is a special preferred lien that must be satisfied first
before the claims of the workers.

Facts:
Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar
Development Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili,
Camarines Sur.

• 1986, public trust was created under Proclamation No. 50, which then mandated
respondent APT to take title to and possession of, conserve, provisionally manage
and dispose of non-performing assets of the Philippine government identified for
privatization or disposition.
• Thereafter, administrative order no. 14 was issued by Pres. Aquino identifying
certain assets of government institutions that were to be transferred to the National
Government. Among the assets transferred was the financial claim of the
Philippine National Bank against BISUDECO in the form of a secured loan.
Consequently, by virtue of a Trust Agreement executed between the National
Government and APT on February 27, 1987, APT was constituted as trustee over
BISUDECOs account with the PNB.
• BISUDECO failed to pay its outstanding load with PNB, resulted to the foreclosure
of the mortgaged property, it was then sold to APT which was the sole bidder. April
2, 1991, APT was issued a Sheriffs Certificate of Sale.
• On July 23, 1991, the union filed a complaint for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages and other labor standard
benefits plus damages.
• APT board accepted the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy
the sugar plantation mill, thereafter the board of APT issued resolution authorizing
the payment of separation benefits to BISUDECOs employees in the event of the
company’s privatization.
• 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took
over its sugar milling operations under the trade name Peafrancia Sugar Mill
(Pensumil).
• On December 17, 1992, the union filed a similar complaint, later to be consolidated
with its earlier complaint and docketed as RAB V Case No. 07-00184-91.
• On March 2, 1993, it filed an amended complaint, impleading as additional party
respondents APT and Pensumil.

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 • In their Position Paper, the union alleged that when Philsucor initially took over the
operations of the company, it retained BISUDECOs existing personnel under the
same terms and conditions of employment. Nonetheless, at the start of the season
sometime in May 1991, Philsucor started recalling workers back to work, to the
exception of the union members. Management told them that they will be re-hired
only if they resign from the union. Just the same, thereafter, the company started
to employ the services of outsiders under the pakyaw system.
• BISUDECO, Pensumil and APT all interposed the defense of lack of employer-
employee relationship.

LA: Directed respondent APT to pay petitioners their employment benefits.

NLRC: AFFIRMED
While no employer-employee relationship existed between members of the petitioner
union and APT, at the time of the employees illegal dismissal, the assets of BISUDECO
had been transferred to the national government through APT. Moreover, the NLRC held
that APT should have treated petitioners claim as a lien on the assets of BISUDECO. The
Commission opined that APT should have done so, considering its awareness of the
pending complaint of petitioners at the time BISUDECO sold its assets to BAPCI, and
APT started paying separation pay to the workers. On the other hand, the NLRC ruled
that petitioners were not entitled to separation pay because of the huge business losses
incurred by BISUDECO, which had resulted in its bankruptcy.

CA: ruled that APT should not be held liable for petitioners claims for unfair labor practice,
illegal dismissal, illegal deduction and underpayment of wages, as well as other labor-
standard benefits plus damages. As found by the NLRC, APT was not the employer of
petitioners, but was impleaded only for possessing BISUDECOs mortgaged properties as
trustee and, later, as the highest bidder in the foreclosure sale of those assets.

ISSUE: Whether APT Is Liable for the Claims of Petitioners Against Their Former
Employer.

RULING: NO
The duties and liabilities of BISUDECO, including its monetary liabilities to its employees,
were not all automatically assumed by APT as purchaser of the foreclosed properties at
the auction sale. Any assumption of liability must be specifically and categorically agreed
upon. In Sundowner Development Corp. v. Drilonthe Court ruled that, unless expressly
assumed, labor contracts like collective bargaining agreements are not enforceable
against the transferee of an enterprise. Labor contracts are in personam and thus binding
only between the parties.

Between the employees of BISUDECO and APT, there is no privity of contract that would
make the latter a substitute employer that should be burdened with the obligations of the
corporation. To rule otherwise would result in unduly imposing upon APT an unwarranted
assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of
Transfer between the national government and PNB. Furthermore, under the principle of
absorption, a bona fide buyer or transferee of all, or substantially all, the properties of the

103
seller or transferor is not obliged to absorb the latters employees.[14] The most that the
purchasing company may do, for reasons of public policy and social justice, is to give
preference of reemployment to the selling companys qualified separated employees, who
in its judgment are necessary to the continued operation of the business establishment.

Even the NLRC found that no employer-employee relationship existed between APT and
petitioners. Thus, the Commission gravely abused its discretion in nevertheless holding
that APT, as the transferee of the assets of BISUDECO, was liable to petitioners.

In other words, the liabilities of the previous owner to its employees are not enforceable
against the buyer or transferee, unless (1) the latter unequivocally assumes them; or (2)
the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the
monetary claims of petitioners who had been dismissed even before it actually took over
BISUDECOs assets.

Moreover, it should be remembered that APT merely became a transferee of

BISUDECOs assets for purposes of conservation because of its lien on those assets -- a
lien it assumed as assignee of the loan secured by the corporation from PNB.
Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the
foreclosed properties.

Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by
Republic Act No. 6715, which reads:

Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy or

liquidation of the employers business, his workers shall enjoy first preference as
regards their unpaid wages and other monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid.

This Court has ruled in a long line of casesthat under Articles 2241 and 2242 of the Civil
Code, a mortgage credit is a special preferred credit that enjoys preference with respect
to a specific/determinate property of the debtor. On the other hand, the workers
preference under Article 110 of the Labor Code is an ordinary preferred credit. While this
provision raises the workers money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, the claim has no preference over special
preferred credits.

Thus, the right of employees to be paid benefits due them from the properties of their
employer cannot have any preference over the latters mortgage credit. In other words,
being a mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special
preferred lien that must be satisfied first before the claims of the workers. DENIED.

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 Philippine Airlines v Zamora, 2007

CONCEPT:
No other action may be taken in, including the rendition of judgment during the state of
suspension – what are automatically stayed or suspended are the proceedings of an
action or suit and not just the payment of claims during the execution stage after the case
had become final and executory.

FACTS:
Respondent Zamora had been in the employ of petitioner PAL since 9 February 1981
when the former was hired as a Cargo Representative at petitioner PAL’s Import
Operations Division. On 13 November 1995, respondent Zamora was dismissed from
service for having been found by petitioner PAL’s management to be liable for
insubordination, neglect of customer, disrespect for authority and absence without official
leave.

On 12 March 1996, respondent Zamora filed a complaint against petitioners PAL and
Francisco X. Yngente IV before the NLRC for illegal dismissal, unfair labor practice, non-
payment of wages, damages and attorney’s fees. NLRC found that the dismissal was
illegal and ordered to immediately reinstate complainant Bernardin J. Zamora to his
former position as Cargo Representative at the Import Operations Division of respondent
PAL without loss of seniority rights and other privileges and to pay him back salaries and
backwages beginning December 15, 1995 until his actual reinstatement, inclusive of
allowances and other benefits and increases thereto.
Claiming that the 26 July 1999 Decision of the NLRC respecting his reinstatement and
the payment of his backwages and other monetary benefits have become final and
executory, respondent Zamora, through counsel, wrote petitioner PAL demanding the
execution thereof. PAL now prayed for the reversal of said Order as well as for the
suspension of the proceedings in the subject case considering that petitioner PAL, was,
at that time, undergoing rehabilitation of the Securities and Exchange Commission (SEC)
appointing a permanent rehabilitation receiver for petitioner PAL in SEC Case entitled “In
the Matter of the Petition for the Approval of Rehabilitation Plan and for Appointment of a
Rehabilitation Receiver.”

ISSUE: Whether or not the proceedings in the instant case should have been suspended
on account of the appointment of its permanent rehabilitation receiver.

Contentions: Petitioners PAL, et al. are of the view that the proceedings in the instant
case should have been suspended on account of the appointment of its permanent
rehabilitation receiver. They posit that the suspension automatically applies on all stages
of the proceedings including enforcement of final and executory judgments. The
proceedings shall remain suspended until the receivership shall have been ordered lifted
by the Securities and Exchange Commission. To date, PAL is still under permanent
Rehabilitation Receiver.

105
Respondent Zamora, in his Memorandum, opines that “contrary to the noble purpose of
a receivership, that is, preservation of the distressed company’s assets for ultimate
distribution to all creditors and affected parties, petitioner’s Amended and Restated
Rehabilitation Plan (citation omitted) is actually for the restructuring and payment of
petitioner’s debts to certain creditors, excluding respondent and other employee-
claimants.”

HELD:
Yes. The relevant law dealing with the suspension of actions for claims against
corporations is Presidential Decree No. 902-A, as amended. Particularly, Section 6(c)
which reads:

SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall

possess the following:
c) To appoint one or more receivers of the property, real or personal, which is the subject
of the action pending before the Commission in accordance with the pertinent provisions
of the Rules of Court in such other cases whenever necessary in order to preserve the
rights of the parties-litigants and /or protect the interest of the investing public and
creditors: x x x Provided, finally, That upon appointment of a management committee,
the rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims
against corporations, partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended accordingly.

The term “claim,” as contemplated in Sec. 6 (c) of Presidential Decree No. 902-A, refers
“to debts or demands of a pecuniary nature. It means ‘the assertion of a right to have
money paid.’” The reason for suspending actions for claims against the corporation is to
enable the management committee or rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extra-judicial interference that might unduly hinder or
prevent the “rescue” of the debtor company. To allow such other action to continue would
only add to the burden of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims against the corporation
instead of being directed toward its restructuring and rehabilitation.

The law is clear: upon the creation of a management committee or the appointment of a
rehabilitation receiver, all claims for actions “shall be suspended accordingly.” No
exception in favor of labor claims is mentioned in the law. Since the law makes no
distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos
distinguere debemos. In Rubberworld (Phils.), Inc. v. NLRC, we held that worker’s claims
before the NLRC and labor arbiters are included among the actions suspended upon the
placing under receivership of the employer-corporations.

Otherwise stated, no other action may be taken in, including the rendition of judgment
during the state of suspension – what are automatically stayed or suspended are the
proceedings of an action or suit and not just the payment of claims during the execution
stage after the case had become final and executory.

106
The suspension of action for claims against a corporation under rehabilitation receiver or
management committee embraces all phases of the suit, be it before the trial court or
any tribunal or before this Court. Furthermore, the actions that are suspended cover all
claims against a distressed corporation whether for damages founded on a breach of
contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature.

107
 Philippine Airlines v Philippine Airlines Employees Association, 2007, citing
Rubberworld v NLRC, 1999

CONCEPT:
NLRC and labor arbiters are included among the actions suspended upon the placing
under receivership of the employer-corporations

FACTS:
This case arose from a labor Complaint, filed by herein PALEA against herein PAL and
one Mary Anne del Rosario, Director of Personnel, PAL, on 1 March 1989, charging them
with unfair labor practice for the non payment of 13th month pay of employees who had
not been regularized as of the 30th of April 1988, as allegedly stipulated in the Collective
Bargaining Agreement (CBA) entered into by herein parties.
the facts are:

On 6 February 1987, herein parties, PAL and PALEA, the collective bargaining agent of
the rank and file employees of PAL, entered into a CBA that was to cover the period of
1986 – 1989. Part of said agreement required PAL to pay its rank and file employees the
following bonuses:

Section 4 – 13th Month Pay (Mid-year Bonus)

A 13th month pay, equivalent to one month's current basic pay, consistent with the
existing practice shall be paid in advance in May.
Section 5 – Christmas Bonus
The equivalent of one month's basic pay as of November 30, shall be paid in December
as a Christmas bonus. Payment may be staggered in two (2) stages. It is distinctly
understood that nothing herein contained shall be construed to mean that the Company
may not at its sole discretion give an additional amount or increase the Christmas bonus.
Prior to the payment of the 13th month pay (mid – year bonus), PAL released an
implementing guideline on 22 April 1988. It stated that:
1) Eligibility
a) Ground employees in the general payroll who are regular as of April 30, 1988;
b) Other ground employees in the general payroll, not falling within category a) above
shall receive their 13th Month Pay on or before December 24, 1988;
2) Amount
a) For category a) above, one month basic salary as of April 30, 1988;
b) Employees covered under 1 b) above shall be paid not less than 1/12 of their basic
salary for every month of service within the calendar year.
3) Payment Date: May 9, 1988 for category 1 a) above.

PALEA assailed the implementation of the foregoing guideline. In response to the above,
PAL informed PALEA that rank and file employees who were regularized after 30 April
1988 were not entitled to the 13th month pay as they were already given the Christmas
bonus in December of 1988, per the Implementing Rules of Presidential Decree No. 851.

108
PALEA, disagreeing with PAL, filed a Complaint for unfair labor practice before the NLRC.
PAL answered that those rank and file employees who were not regularized by 30 April
of a particular year are, in principle, not denied their 13 month pay, considering they
receive said mandatory bonus in the form of the Christmas Bonus.

The Labor Arbiter rendered his decision dismissing the complaint for lack of merit. The
Labor Arbiter ruled that PAL was not guilty of unfair labor practice in withholding the grant
of the 13th Month Pay or Mid-Year Bonus, as set out in Section 4 of the CBA, to the
concerned employees. The giving of the particular bonus was said to be merely an
additional practice made in the past, "such being the case, it violated no agreement or
existing practice or committed unfair labor practice, as charged."

On appeal to the NLRC, the assailed decision of the Labor Arbiter was reversed.
Undaunted, PAL went to this Court via a Petition for Review on Certiorari, however, the
petition was referred to the Court of Appeals for proper resolution.

The Court of Appeals promulgated its Decision dismissing the petition filed by PAL. It
affirmed the 28 January 1998 NLRC Resolution.
Hence, this Petition for Review on Certiorari.

ISSUE:
Can an ongoing rehabilitation suspend the proceedings?

RULING:
Yes. The Securities and Exchange Commission (SEC) had mandated the rehabilitation
of PAL. Thus, PAL is still undergoing rehabilitation.

The pertinent law concerning the suspension of actions for claims against corporations
due to its rehabilitation is Presidential Decree No. 902-A, as amended.
The aforementioned law provides that SEC assumes jurisdiction in cases where the
corporation is undergoing rehabilitation with pending money claims against the
corporation.

The underlying principle behind the suspension of claims pending rehabilitation

proceedings was explained in the case of BF Homes, Incorporated v. Court of Appeals:
“the real justification is to enable the management committee or rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra-judicial interference that
might unduly hinder or prevent the "rescue" of the debtor company. To allow such other
action to continue would only add to the burden of the management committee or
rehabilitation receiver, whose time, effort and resources would be wasted in defending
claims against the corporation instead of being directed toward its restructuring and
rehabilitation.”

The Supreme Court citing Rubberworld vs. NLRC said:

“we held that worker's claims before the NLRC and labor arbiters are included among the
actions suspended upon the placing under receivership of the employer-corporations.

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Although strictly speaking, the ruling in Rubberworld dealt with actions for claims pending
before the NLRC and labor arbiters, we find that the rationale for the automatic
suspension therein set out would apply to the instant case where the employee's claim
was elevated on certiorari before this Court”

In another PAL case, specifically, Philippine Airlines, Inc. v. Court of Appeal, the SC held
that:
“that this Court is "not prepared to depart from the well-established doctrines" essentially
maintaining that all actions for claims against a corporation pending before any court,
tribunal or board shall ipso jure be suspended in whatever stage such actions may be
found upon the appointment by the SEC of a management committee or a rehabilitation
receiver.”

In view of the ongoing rehabilitation of petitioner Philippine Airlines, Inc., herein

proceedings are heretofore SUSPENDED

110
 Garcia v Philippine Airlines, 2009

Principle: Even if the order of reinstatement of the Labor Arbiter is reversed on appeal,
it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court.

Facts:
The case stemmed from the administrative charge filed by PAL against its employees-
herein petitioners after they were allegedly caught in the act of sniffing shabu when a
team of company security personnel and law enforcers raided the PAL Technical Center's
Toolroom Section on July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL
Code of Discipline, prompting them to file a complaint for illegal dismissal and damages
which was, by Decision of January 11, 1999, resolved by the Labor Arbiter in their favor,
thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the
decision.

Prior to the promulgation of the Labor Arbiter's decision, the Securities and Exchange
Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering
from severe financial losses, under an Interim Rehabilitation Receiver, who was
subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiter's decision, respondent appealed to the NLRC which, by
Resolution of January 31, 2000, reversed said decision and dismissed petitioners'
complaint for lack of merit.

Issues:
1. WON dismissed employee may collect their wages during the period between the
Labor Arbiter's order of reinstatement pending appeal and the NLRC decision
overturning that of the Labor Arbiter.
2. WON the impossibility to comply with the reinstatement order due to corporate
rehabilitation provides a reasonable justification for the failure to exercise the options
under Article 223 of the Labor Code

Ruling:
1. Yes.

On this score, the Court's attention is drawn to seemingly divergent decisions

concerning reinstatement pending appeal or, particularly, the option of payroll
reinstatement. At the core of the seeming divergence is the application of paragraph 3
of Article 223 of the Labor Code which reads:
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned,
shall immediately be executory, pending appeal. The employee shall
either be admitted back to work under the same terms and conditions

111
 prevailing prior to his dismissal or separation or, at the option of the
employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.
(Emphasis and underscoring supplied)
The view as maintained in a number of cases is that: cSIADa
...[E]ven if the order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to reinstate and pay the
wages of the dismissed employee during the period of appeal until
reversal by the higher court. On the other hand, if the employee has been
reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever
salary he received for he is entitled to such, more so if he actually
rendered services during the period. 12 (Emphasis in the original; italics
and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor
Arbiter is entitled to receive wages pending appeal upon reinstatement, which is
immediately executory. Unless there is a restraining order, it is ministerial upon the
Labor Arbiter to implement the order of reinstatement and it is mandatory on the
employer to comply therewith.

2. Yes, it is a justification. The Court sustains the appellate court's finding that the
peculiar predicament of a corporate rehabilitation rendered it impossible for
respondent to exercise its option under the circumstances.

After the labor arbiter's decision is reversed by a higher tribunal, the employee may be
barred from collecting the accrued wages, if it is shown that the delay in enforcing the
reinstatement pending appeal was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of
reinstatement pending appeal was not executed prior to its reversal; and (2) the delay
must not be due to the employer's unjustified act or omission. If the delay is due to the
employer's unjustified refusal, the employer may still be required to pay the salaries
notwithstanding the reversal of the Labor Arbiter's decision.

In the case at bar, petitioners exerted efforts to execute the Labor Arbiter's order of
reinstatement until they were able to secure a writ of execution, albeit issued on October
5, 2000 after the reversal by the NLRC of the Labor Arbiter's decision. Technically, there
was still actual delay which brings to the question of whether the delay was due to
respondent's unjustified act or omission.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for
claims before any court, tribunal or board against the corporation shall ipso jure be
suspended. As stated early on, during the pendency of petitioners' complaint before the
Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After

112
the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation
Receiver with a Permanent Rehabilitation Receiver.

The parallelism between a judicial order of corporation rehabilitation as a justification

for the non-exercise of its options, on the one hand, and a claim of actual and imminent
substantial losses as ground for retrenchment, on the other hand, stops at the red line
on the financial statements. Unlike the ground of substantial losses contemplated in a
retrenchment case, the state of corporate rehabilitation was judicially pre-determined
by a competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a
corporation under rehabilitation. Respondent was, during the period material to the
case, effectively deprived of the alternative choices under Article 223 of the Labor Code,
not only by virtue of the statutory injunction but also in view of the interim relinquishment
of management control to give way to the full exercise of the powers of the rehabilitation
receiver.

113
 E. ATTORNEY’S FEES & APPEARANCE OF LAWYERS

Sapio v Undaloc Construction et al, 2008

Principle: Entries in the payroll, being entries in the course of business, enjoy the
presumption of regularity.

Facts:
The controversy started with a complaint filed by petitioner against Undaloc Construction
and/or Engineer Cirilo Undaloc for illegal dismissal, underpayment of wages and
nonpayment of statutory benefits. Respondent Undaloc Construction, a single
proprietorship owned by Cirilo Undaloc, is engaged in road construction business in Cebu
City.

He claimed that from 1 May to 31 August 1995 and from 1 September to 31 December
1995, his daily wage rate was only P80.00 and P90.00, respectively, instead of P121.87
as mandated by Wage Order No. ROVII-03. From 1 March 1996 to 30 May 1998, his daily
rate was P105.00. He further alleged that he was made to sign two payroll sheets, the
first bearing the actual amount he received wherein his signature was affixed to the last
column opposite his name, and the second containing only his name and signature. To
buttress this allegation, petitioner presented the payroll sheet covering the period from 4
to 10 December 1995 in which the entries were written in pencil.

Banking on the fact that the December 1995 payroll sheet was written in pencil, the Labor
Arbiter concluded that the entries were susceptible to change or erasure and that that
susceptibility in turn rendered the other payroll sheets though typewritten less credible.
Labor Arbiter ruled that The efforts done in preparing the payroll in pencil is practically the
same if it was done in ballpen or through typewriters. Obviously, the purpose is to
circumvent the law. The probative value of the payrolls submitted by the respondent
becomes questionable, thus, cannot be given weight. It is most likely that the entries in
the payrolls are no longer the same entries when complainant signed them. Complainant
is therefore entitled to salary differential as complainant's salary was only P105.00.

Issue:
1. WON the payroll sheet which is written in pencil, susceptible to change or erasure,
be given credence.
2. WON petitioner is entitled to wage differential pay and attorneys fee.

Ruling:
1. No

The conclusion of the Labor Arbiter that entries in the December 1995 payroll sheet
could have been altered is utterly baseless. The claim that the December 1995 payroll
sheet was written in pencil and was thus rendered prone to alterations or erasures is
clearly non sequitur. The same is true with respect to the typewritten payroll sheets. In
fact, neither the Labor Arbiter nor the NLRC found any alteration or erasure or traces

114
thereat, whether on the pencil-written or typewritten payroll sheets. Indeed, the most
minute examination will not reveal any tampering. Furthermore, if there is any adverse
conclusion as regards the December 1995 payroll sheet, it must be confined only to it
and cannot be applied to the typewritten payroll sheets.

Moreover, absent any evidence to the contrary, good faith must be presumed in this
case. Entries in the payroll, being entries in the course of business, enjoy the
presumption of regularity under Rule 130, Section 43 of the Rules of Court. Hence, while
as a general rule, the burden of proving payment of monetary claims rests on the
employer, when fraud is alleged in the preparation of the payroll, the burden of evidence
shifts to the employee and it is incumbent upon him to adduce clear and convincing
evidence in support of his claim. Unfortunately, petitioner's bare assertions of fraud do
not suffice to overcome the disputable presumption of regularity.

While we adhere to the position of the appellate court that the "tendency" to alter the
entries in the payrolls was not substantiated, we cannot however subscribe to the total
deletion of the award of salary differential and attorney's fees, as it so ruled.

2. Yes to both.

The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00.
However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A.
No. 8188. Respondents are required to pay double the amount owed to petitioner,
bringing their total liability to P13,156.00.
Section 12. Any person, corporation, trust, firm, partnership, association
or entity which refuses or fails to pay any of the prescribed increases or
adjustments in the wage rates made in accordance with this Act shall be
punished by a fine not less than Twenty-five thousand pesos (P25,000.00)
nor more than One hundred thousand pesos (P100,000.00) or
imprisonment of not less than two (2) years nor more than four (4) years,
or both such fine and imprisonment at the discretion of the
court: Provided, That any person convicted under this Act shall not be
entitled to the benefits provided for under the Probation Law.
The employer concerned shall be ordered to pay an amount equivalent to
double the unpaid benefits owing to the employees: Provided, That
payment of indemnity shall not absolve the employer from the criminal
liability imposable under this Act.
If the violation is committed by a corporation, trust or firm, partnership,
association or any other entity, the penalty of imprisonment shall be
imposed upon the entity's responsible officers, including, but not limited
to, the president, vice president, chief executive officer, general manager,
managing director or partner. (Emphasis supplied) IE

The award of attorney's fees is warranted under the circumstances of this case. Under
Article 2208 of the New Civil Code, attorney's fees can be recovered in actions for the
recovery of wages of laborers and actions for indemnity under employer's liability laws

115
but shall not exceed 10% of the amount awarded. The fees may be deducted from the
total amount due the winning party.

116
 Atty. Ortiz v San Miguel Corp, 2008

Principle: Award of attorney's fees in its extraordinary concept, as opposed to ordinary

concept, may be waived for a lesser amount in exchange for the immediate end to
litigation.

FACTS: The petitioner in this case, Jose Max S. Ortiz, is a member of the Philippine Bar
who represented the complainants in NLRC Cases No. V-0255-94 (hereinafter referred
to as the Aguirre Cases) and No. V-0068-95 (hereinafter referred to as the Toquero Case)
instituted against herein private respondent San Miguel Corporation sometime in 1992
and 1993. The complainants in NLRC Cases, Aguirre Cases and Toquero Case were
employees at private respondent's Sales Offices in the Province of Negros Occidental.
The complainants of Cases, Aguire and Toquero got a favorable decision in NLRC
regarding their money claims against San Miguel Corporation. In effect, San Miguel
Corporation filed a Petitions for Certiorari. While this respondent’s petitions were pending
before the Court of Appeals, all but one of the remaining complainants in Aguirre and
Toquero Cases on various dates before two Labor Arbiters and in the presence of two
witnesses, signed separate Deeds of Release, Waiver and Quitclaim in favor of private
respondent. Based on the Deeds they executed, complainants agreed to settle their
claims against private respondent for amounts less than what the NLRC actually
awarded. Private respondent withheld 10% of the total amount agreed upon by the parties
in the said Deeds as attorney's fees and handed it over to petitioner. Private respondent
then attached the Deeds to its Manifestation and Motion filed before the appellate court.
Then the Court of appeals rendered a decision affirming the NLRC decisions, only in so
far as it concerned complainant Alfredo Gadian, Jr. (complainant Gadian), the only
complainant who did not execute a Deed of Release, Waiver and Quitclaim. With respect
to the other complainants in the Aguirre and Toquero Cases, their complaints were
dismissed on account of their duly executed Deeds of Release, Waiver and Quitclaim. In
a Resolution dated 9 January 2002, the appellate court denied the motion of complainant
Gadian and his counsel, herein petitioner, that the award of attorney's fees of 10% should
be based on the monetary awards adjudged by the NLRC.

Thus, this petition filed before the Court praying to affirm the award of attorney's fees
equivalent to 10% of the monetary award adjudged by the NLRC in its Decisions dated
21 July 1995 and 25 July 1995 in Toquero Case and Aguirre Cases respectively.

ISSUE: Whether he is entitled to the amount of attorney's fees as adjudged by the NLRC
or only to the 10% of the amounts actually paid to his clients

RULING:
Article 111 of the Labor Code, as amended, specifically provides:
ART. 111. ATTORNEY'S FEES. — (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney's fees equivalent to ten percent of the
amount of wages recovered. b) It shall be unlawful for any person to demand or
accept, in any judicial or administrative proceedings for the recovery of the wages,
attorney's fees which exceed ten percent of the amount of wages recovered.

117
In PCL Shipping Philippines, Inc. v. National Labor Relations Commission citing Dr.
Reyes v. Court of Appeals, this Court enunciated that there are two commonly accepted
concepts of attorney's fees, the so-called ordinary and extraordinary. In its ordinary
concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client
for the legal services the former has rendered to the latter. The basis of this compensation
is the fact of the attorney's employment by and his agreement with the client. In its
extraordinary concept, attorney's fees are deemed indemnity for damages ordered by the
court to be paid by the losing party in a litigation. The instances in which these may be
awarded are those enumerated in Article 2208 of the Civil Code, specifically paragraph 7
thereof, which pertains to actions for recovery of wages, and is payable not to the lawyer
but to the client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof. Article 111 of the Labor Code, as amended,
contemplates the extraordinary concept of attorney's fees.

Based on the foregoing, the attorney's fees awarded by the NLRC in its Decisions in the
Aguirre and Toquero Cases pertain to the complainants, petitioner's clients, as indemnity
for damages; and not to petitioner as compensation for his legal services. Records show
that the petitioner neither alleged nor proved that his clients, the complainants, willingly
agreed that the award of attorney's fees would accrue to him as an additional
compensation or part thereof. What the complainants explicitly agreed to in their individual
Deeds of Release, Waiver, and Quitclaim was that the 10% attorney's fees of the
petitioner shall be deducted from the amount of the gross settlement.
Thus, this Court has no recourse but to interpret the award of attorney's fees by the NLRC
in its extraordinary concept. And since the attorney's fees pertained to the complainants
as indemnity for damages, it was totally within the complainants' right to waive the amount
of said attorney's fees and settle for a lesser amount thereof in exchange for the
immediate end to litigation. Petitioner cannot prevent complainants from compromising
and/or withdrawing their complaints at any stage of the proceedings just to protect his
anticipated attorney's fees.

Even assuming arguendo that the complainants in the Aguirre and Toquero Cases did
indeed agree that the attorney's fees awarded by the NLRC should be considered in their
ordinary concept, i.e., as compensation for petitioner's services, we refer back to Article
111 of the Labor Code, as amended, which provides that the attorney's fees should be
equivalent to 10% of the amount of wages recovered. Since the complainants decided to
settle their complaints against the private respondent, the amounts actually received by
them pursuant to the Deeds of Release, Waiver and Quitclaim are the amounts
"recovered" and the proper basis for determining the 10% attorney's fees.

118
 Masmud v NLRC et al, 2009

Principle: The decree of unconscionability or unreasonableness of a stipulated amount

in a contingent fee contract for attorney’s fees in its ordinary concept will not preclude
recovery. It merely justifies the fixing by the court of a reasonable compensation for the
lawyer's services.

FACTS: The late Alexander J. Masmud (Alexander), the husband of Evangelina

Masmudn (Evangelina) filed a complaint against First Victory Shipping Services and
Angelakos (Hellas) S.A. on July 9, 2003 for non-payment of permanent disability benefits,
medical expenses, sickness allowance, moral and exemplary damages, and attorney's
fees. Alexander engaged the services of Atty. Rolando B. Go, Jr. (Atty. Go) as his
counsel. In consideration of Atty. Go's legal services, Alexander agreed to pay attorney's
fees on a contingent basis, as follows: twenty percent (20%) of total monetary claims as
settled or paid and an additional ten percent (10%) in case of appeal. On November 21,
2003, the Labor Arbiter (LA) rendered a Decision granting the monetary claims of
Alexander. Alexander's employer filed an appeal before the National Labor Relations
Commission (NLRC). During the pendency of the proceedings before the NLRC,
Alexander died. After explaining the terms of the lawyer's fees to Evangelina, Atty. Go
caused her substitution as complainant. On April 30, 2004, the NLRC rendered a Decision
dismissing the appeal of Alexander's employer. On appeal before the CA, the decision of
the LA was affirmed with modification. Thereafter, Alexander’s employer appealed to the
Supreme Court. On February 6, 2006, the Court issued a Resolution dismissing the case
for lack of merit.

On January 10, 2005, the LA directed the NLRC Cashier to release the amount of
P3,454,079.20 to Evangelina. Out of the said amount, Evangelina paid Atty. Go the sum
of P680,000.00. Dissatisfied, Atty. Go filed a motion to record and enforce the attorney's
lien alleging that Evangelina reneged on their contingent fee agreement. Evangelina paid
only the amount of P680,000.00, equivalent to 20% of the award as attorney's fees, thus,
leaving a balance of 10%, plus the award pertaining to the counsel as attorney's fees. In
her comment, Evangelina manifested that Atty. Go's claim for attorney's fees of 40% of
the total monetary award was null and void based on Article 111 of the Labor Code.

The Labor Arbiter issued an Order granting Atty. Go's motion. Then, Evangelina
questioned the decision of the Labor Arbiter before the NLRC. However, the NLRC
dismissed her appeal. Then, she elevated the case to the Court of Appeals. The CA
partially gramted the petition with some modification declaring that Atty. Go is fully
compensated by the amount of P1,347,950.11 that he has already received. Dissatisfied,
Angelina filed this petition.

ISSUE: Whether or not the legal compensation of a lawyer in a labor proceeding should
be based on Article 111 of the Labor Code.

RULING: There are two concepts of attorney's fees. In the ordinary sense, attorney's fees
represent the reasonable compensation paid to a lawyer by his client for the legal services

119
rendered to the latter. On the other hand, in its extraordinary concept, attorney's fees may
be awarded by the court as indemnity for damages to be paid by the losing party to the
prevailing party, such that, in any of the cases provided by law where such award can be
made, e.g., those authorized in Article 2208 of the Civil Code, the amount is payable not
to the lawyer but to the client, unless they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof.

Here, we apply the ordinary concept of attorney's fees, or the compensation that Atty. Go
is entitled to receive for representing Evangelina, in substitution of her husband, before
the labor tribunals and before the court. The retainer contract between Atty. Go and
Evangelina provides for a contingent fee. The contract shall control in the determination
of the amount to be paid, unless found by the court to be unconscionable or unreasonable.
Attorney's fees are unconscionable if they affront one's sense of justice, decency or
reasonableness. The decree of unconscionability or unreasonableness of a stipulated
amount in a contingent fee contract will not preclude recovery. It merely justifies the fixing
by the court of a reasonable compensation for the lawyer's services.

Contingent fee contracts are subject to the supervision and close scrutiny of the court in
order that clients may be protected from unjust charges. The amount of contingent fees
agreed upon by the parties is subject to the stipulation that counsel will be paid for his
legal services only if the suit or litigation prospers. A much higher compensation is allowed
as contingent fees because of the risk that the lawyer may get nothing if the suit fails. The
Court finds nothing illegal in the contingent fee contract between Atty. Go and
Evangelina's husband. The CA committed no error of law when it awarded the attorney's
fees of Atty. Go and allowed him to receive an equivalent of 39% of the monetary award.

Considering that Atty. Go successfully represented his client, it is only proper that he
should receive adequate compensation for his efforts. With his capital consisting of his
brains and with his skill acquired at tremendous cost not only in money but in expenditure
of time and energy, he is entitled to the protection of any judicial tribunal against any
attempt on the part of his client to escape payment of his just compensation. It would be
ironic if after putting forth the best in him to secure justice for his client, he himself would
not get his due

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 Kaisahan at Kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union v
Manila Water Company, 2011

CONCEPT:
Ten percent (10%) attorney’s fees awarded by the NLRC on the basis of Article 111 of
the Labor Code accrue to the Union’s members as indemnity for damages and not to the
Union’s counsel as compensation for his legal services, unless, they agreed that the
award shall be given to their counsel as additional or part of his compensation. Further
Beyond the limit fixed by Article 111 of the Labor Code, such as between the lawyer and
the client, the attorney’s fees may exceed ten percent (10%) on the basis of quantum
meruit.

FACTS:
The Union is the duly-recognized bargaining agent of the rank-and-file employees of the
respondent Manila Water Company, Inc. while Borela is the Union President. In 1997, the
Metropolitan Waterworks and Sewerage System (MWSS) entered into a Concession
Agreement with the Company to privatize the operations of the MWSS. The Agreement
provides that “the Concessionaire shall grant its employees benefits no less favorable
than those granted to MWSS employees at the time of their separation from MWSS.”
Among the benefits enjoyed by the employees of the MWSS were the amelioration
allowance (AA) and the cost-of-living allowance (COLA). The payment of the AA and the
COLA was discontinued pursuant to Republic Act No. 6758, otherwise known as the
“Salary Standardization Law,” which integrated the allowances into the standardized
salary. The Company agreed to reinstate them upon renegotiation of the parties’ CBA but
however failed to give them. As a result, the Union and Borela filed a complaint against
the Company for payment of the AA, COLA, moral and exemplary damages, legal
interest, and attorney’s fees before the National Labor Relations Commission (NLRC). In
his decision of August 20, 2003, Labor Arbiter Aliman D. Mangandog (LA) ruled in favor
of the petitioners and ordered the payment of ten percent (10%) attorney’s fees in addition
to their benefits and interests. The award of attorney’s fees was upheld by NLRC.
However, this was reversed by the CA.

CA’s Decision: The additional grant of 10% attorney’s fees violates Article 111 of the
Labor Code considering that the MOA between the parties already ensured the payment
of 10% attorney’s fees, deductible from the AA and CBA receivables of the Union’s
members.

ISSUE:
1. Whether or not the workers are entitled to attorney’s fees.

RULING:
Yes. In the present case, the ten percent (10%) attorney’s fees awarded by the NLRC on
the basis of Article 111 of the Labor Code accrue to the Union’s members as indemnity
for damages and not to the Union’s counsel as compensation for his legal services,
unless, they agreed that the award shall be given to their counsel as additional or part of
his compensation; in this case the Union bound itself to pay 10% attorney’s fees to its

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counsel under the MOA and also gave up the attorney’s fees awarded to the Union’s
members in favor of their counsel. This is supported by Borela’s affidavit which stated
that “[t]he 10% attorney’s fees paid by the members/employees is separate and distinct
from the obligation of the company to pay the 10% awarded attorney’s fees which we also
gave to our counsel as part of our contingent fee agreement.”[43] The limit to this
agreement is that the indemnity for damages imposed by the NLRC on the losing party
(i.e., the Company) cannot exceed ten percent (10%).

Properly viewed from this perspective, the award cannot be taken to mean an additional
grant of attorney’s fees, in violation of the ten percent (10%) limit under Article 111 of the
Labor Code since it rests on an entirely different legal obligation than the one contracted
under the MOA. Simply stated, the attorney’s fees contracted under the MOA do not refer
to the amount of attorney’s fees awarded by the NLRC; the MOA provision on attorney’s
fees does not have any bearing at all to the attorney’s fees awarded by the NLRC under
Article 111 of the Labor Code. Based on these considerations, it is clear that the CA erred
in ruling that the LA’s award of attorney’s fees violated the maximum limit of ten percent
(10%) fixed by Article 111 of the Labor Code.

Under this interpretation, the Company’s argument that the attorney’s fees are
unconscionable as they represent 20% of the amount due or about P21.4 million is more
apparent than real. Since the attorney’s fees awarded by the LA pertained to the Union’s
members as indemnity for damages, it was totally within their right to waive the amount
and give it to their counsel as part of their contingent fee agreement. Beyond the limit
fixed by Article 111 of the Labor Code, such as between the lawyer and the client, the
attorney’s fees may exceed ten percent (10%) on the basis of quantum meruit, as in the
present case

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 Malvar v Kraft Food Phils Inc et al, 2013

CONCEPT:
A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of the
attorney was without justifiable cause, he shall be entitled to recover from the client the
full compensation stipulated in the contract. However, the attorney may, in the discretion
of the court, intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the payment of money,
and executions issued in pursuance of such judgment, rendered in the case wherein his
services had been retained by the client.

FACTS:
The case initially concerned the execution of a final decision of the Court of Appeals (CA)
in a labor litigation, but has mutated into a dispute over attorney's fees between the
winning employee and her attorney after she entered into a compromise agreement with
her employer under circumstances that the attorney has bewailed as designed to prevent
the recovery of just professional fees.

Malvar filed a complaint for illegal suspension and illegal dismissal against KFPI and
Bautista in the National Labor Relations Commission (NLRC). The Labor Arbiter found
and declared her suspension and dismissal illegal, and ordered her reinstatement, and
the payment of her full backwages, inclusive of allowances and other benefits, plus
attorney’s fees.

NLRC and CA affirmed the decision of the Labor Arbiter. After the judgment in her favor
became final and executory on March 14, 2006, Malvar moved for the issuance of a writ
of execution but the execution failed due to questionable computation of the award.
Malvar requested for the 2nd issuance of the writ of execution and was partially complied
with but with protest on the part of Kraft by filing a TRO for further execution since the
computation is incorrect. CA ruled in favor of Kraft. Thus, Malvar appealed. While her
appeal was pending in this Court, Malvar and the respondents entered into a compromise
agreement.
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case,16 praying that the
appeal be immediately dismissed/withdrawn in view of the compromise agreement, and
that the case be considered closed and terminated.

Before the Court could act on Malvar’s Motion to Dismiss/Withdraw Case, the Court
received on February 15, 2011 a so-called Motion for Intervention to Protect Attorney’s
Rights.

The Intervenor indicated that Malvar’s precipitate action had baffled, shocked and even
embarrassed the Intervenor, because it had done everything legally possible to serve and
protect her interest. It added that it could not recall any instance of conflict or
misunderstanding with her, for, on the contrary, she had even commended it for its
dedication and devotion to her case. According to the Intervenor, it was certain that the

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compromise agreement was authored by the respondents to evade a possible loss of
P182, 000,000.00 or more as a result of the labor litigation, but considering the
Intervenor’s interest in the case as well as its resolve in pursuing Malvar’s interest, they
saw the Intervenor as a major stumbling block to the compromise agreement that it was
then brewing with her. Obviously, the only way to remove the Intervenor was to have her
terminate its services as her legal counsel. This prompted the Intervenor to bring the
matter to the attention of the Court to enable it to recover in full its compensation based
on its written agreement with her.

Opposing the Motion for Intervention,28 Malvar stresses that there was no truth to the
Intervenor’s claim to defraud it of its professional fees; that the Intervenor lacked the legal
capacity to intervene because it had ceased to exist after Atty. Marwil N. Llasos resigned
from the Intervenor and Atty. Richard B. Dasal became barred from private practice upon
his appointment as head of the Legal Department of the Small Business Guarantee and
Finance Corporation, a government subsidiary; and that Atty. Llasos and Atty. Dasal had
personally handled her case.

Malvar adds that even assuming, arguendo, that the Intervenor still existed as a law firm,
it was still not entitled to intervene for the following reasons, namely: firstly, it failed to
attend to her multiple pleas and inquiries regarding the case, as when communications
to the Intervenor through text messages were left unanswered; secondly, maintaining that
this was a justifiable cause to dismiss its services, the Intervenor only heeded her
repeated demands to withdraw from the case when Atty. Dasal was confronted about his
appointment to the government subsidiary; thirdly, it was misleading and grossly
erroneous for the Intervenor to claim that it had rendered to her full and satisfactory
services when the truth was that its participation was strictly limited to the preparation,
finalization and submission of the petition for review with the Supreme Court; and finally,
while the Intervenor withdrew its services on October 5, 2009, the compromise agreement
was executed with the respondents on December 9, 2010 and notarized on December
14, 2010, after more than a year and two months, dispelling any badge of bad faith on
their end.

ISSUE/S: Whether or not the Motion for Intervention to protect attorney’s rights can
prosper, and, if so, how much could it recover as attorney’s fees?

RULING:
Yes. A compromise agreement is a contract, whereby the parties undertake reciprocal
obligations to avoid litigation, or put an end to one already commenced. The client may
enter into a compromise agreement with the adverse party to terminate the litigation
before a judgment is rendered therein. If the compromise agreement is found to be in
order and not contrary to law, morals, good customs and public policy, its judicial approval
is in order. A compromise agreement, once approved by final order of the court, has the
force of res judicata between the parties and will not be disturbed except for vices of
consent or forgery.

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A client has an undoubted right to settle her litigation without the intervention of the
attorney, for the former is generally conceded to have exclusive control over the subject
matter of the litigation and may at any time, if acting in good faith, settle and adjust the
cause of action out of court before judgment, even without the attorney’s intervention.

It is important for the client to show, however, that the compromise agreement does not
adversely affect third persons who are not parties to the agreement.

By the same token, a client has the absolute right to terminate the attorney-client
relationship at any time with or without cause. But this right of the client is not unlimited
because good faith is required in terminating the relationship. The limitation is based on
Article 19 of the Civil Code, which mandates that “[e]very person must, in the exercise of
his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith.” The right is also subject to the right of the attorney
to be compensated.

This is clear from Section 26, Rule 138 of the Rules of Court, which provides:
Section 26. Change of attorneys.
An attorney may retire at any time from any action or special proceeding, by the written
consent of his client filed in court. He may also retire at any time from an action or special
proceeding, without the consent of his client, should the court, on notice to the client and
attorney, and on hearing, determine that he ought to be allowed to retire. In case of
substitution, the name of the attorney newly employed shall be entered on the docket of
the court in place of the former one, and written notice of the change shall be given to the
adverse party.

A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of the
attorney was without justifiable cause, he shall be entitled to recover from the client the
full compensation stipulated in the contract. However, the attorney may, in the discretion
of the court, intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the payment of money,
and executions issued in pursuance of such judgment, rendered in the case wherein his
services had been retained by the client.

In fine, it is basic that an attorney is entitled to have and to receive a just and reasonable
compensation for services performed at the special instance and request of his client.
The attorney who has acted in good faith and honesty in representing and serving the
interests of the client should be reasonably compensated for his service.

Note: Compromise agreement is to be approved despite favorable action on the

Intervenor’s Motion for Intervention.

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 T&H Shopfitters Corp., v T&H Shopfitters Corp. Workers Union, 2014

Principle: The award of Attorney’s fees in labor cases is governed by Article 111 of the
Labor Code. Pursuant to such article, the award of 10% attorney's fees is limited to cases
of unlawful withholding of wages. In this case, however, the Court cannot find any claim
or proof that petitioners unlawfully withheld the wages of respondents. Consequently, the
grant of 10% attorney's fees in favor of respondents is not justified under the
circumstances.

Facts: Respondents are employees of petitioners. In their desire to improve working

conditions, they decided to conduct a meeting for them to create a workers’ union.
Subsequently, some of them were barred from entering the premises of the petitioners’
factory. Some members were then transferred to another place where the petitioners’
warehouse was located. Some reported that they were sent to another place only to
perform work as grasscutters. Subsequently, the union was awarded by the Regional
Office of the Department Of Labor and Employment a certificate of registration. Prior to
the Certification Election, some employees of the petitioner corporation were sent on a
field trip. However, respondents’ members were excluded from the field trip. The
employees then who were included in the field trip were then forced by the petitioner to
vote “no” in the upcoming election and because of that, the votes for “no union” prevailed.
This prompted the respondents a complaint for Unfair Labor Practice with moral and
exemplary damages as well as Attorney’s fees.

Issue: 1. WON petitioners are guilty of Unfair Labor Practice

2. WON petitioners are liable for Attorney’s fees.

Held: 1. Article 257. Unfair labor practices of employers. It shall be unlawful for an
employer to commit any of the following unfair labor practices:
(a) To interfere with, restrain or coerce employees in the exercise of their right to self-
organization;

Article 256. Concept of unfair labor practice and procedure for prosecution thereof.
Unfair labor practices violate the constitutional right of workers and employees to self-
organization, are inimical to the legitimate interests of both labor and management,
including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the
promotion of healthy and stable labor-management relations.

The questioned acts of petitioners, namely: 1) sponsoring a field trip to Zambales for its
employees, to the exclusion of union members, before the scheduled certification
election; 2) the active campaign by the sales officer of petitioners against the union
prevailing as a bargaining agent during the field trip; 3) escorting its employees after the
field trip to the polling center. Indubitably, the various acts of petitioners, taken together,
reasonably support an inference that, indeed, such were all orchestrated to restrict
respondents’ free exercise of their right to self-organization.

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2. Anent the issue on the award of attorney's fees, the applicable law concerning the grant
thereof in labor cases is Article 11120 of the Labor Code. Pursuant thereto, the award of
10% attorney's fees is limited to cases of unlawful withholding of wages. In this case,
however, the Court cannot find any claim or proof that petitioners unlawfully withheld the
wages of respondents. Consequently, the grant of 10% attorney's fees in favor of
respondents is not justified under the circumstances. Accordingly, the Court deems it
proper to delete the same.

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 MISCELLANEOUS PROVISIONS
A. SPECIAL TYPES OF WORKERS

Bernardo v NLRC, 1999

Principle: No disabled person shall be denied access to opportunities for suitable

employment. A qualified disabled employee shall be subject to the same terms and
conditions of employment and the same compensation, privileges, benefits, fringe
benefits, incentives or allowances as a qualified able bodied person. Thus a disabled
person who performs a job that is necessary or essential to the business of an employer
may be deemed regular. Employment of at least 1 year whether continuous or broken
creates and evidence that work done is necessary or essential to the business.

Facts: Petitioners are deaf-mutes who were hired by Far Eastern Bank and Trust
Company as Money sorters and counters through an Employed Contract for Handicapped
Workers and that they were rehired by virtue of subsequent contract renewals. Petitioners
claimed that they are regular employees of the bank. On the other hand, the bank denied
such contention and contended instead that were special class of workers and were hired
under a special employment arrangement which was effected by reason of propositions
of various civic and political personalities to whom the bank granted such proposal and
that the contracts they entered stated that they could not become regular employees.
Further, the bank contended that the jobs that they did were part and parcel of the jobs
of the tellers of the bank. Thus, the tasks performed did not create a new position.
Petitioners maintain that they should be considered regular employees, because their
task as money sorters and counters was necessary and desirable to the business of
respondent bank. They further allege that their contracts served merely to preclude the
application of Article 280 and to bar them from becoming regular employees.

Issue: WON petitioners can be considered as regular employees of the bank?

Held: Petitioners are regular employees.

Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988
to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring of
others lead to the conclusion that their tasks were beneficial and necessary to the
bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In this light, the Magna Carta for Disabled Persons
mandates that a qualified disabled employee should be given the same terms and
conditions of employment as a qualified able-bodied person.Section 5 of the Magna Carta
provides:

Section 5. Equal Opportunity for Employment. No disabled person shall be denied access
to opportunities for suitable employment. A qualified disabled employee shall be subject
to the same terms and conditions of employment and the same compensation, privileges,
benefits, fringe benefits, incentives or allowances as a qualified able bodied person.
On the other hand, Art. 280 provides:

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ART. 280. Regular and Casual Employment. -- The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

The primary standard, therefore, of determining regular employment is the reasonable

connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of the employer. The connection
can be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. Also if the employee has been
performing the job for at least one year, even if the performance is not continuous and
merely intermittent, the law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but only with respect to such
activity, and while such activity exists. Without a doubt, the task of counting and sorting
bills is necessary and desirable to the business of respondent bank.

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 C. EMPLOYMENT OF WOMEN

PT&T v NLRC and De Guzman, 1997

Doctrine:
Employer’s policy of not accepting or considering as disqualified from work any woman
worker who contracts marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by our labor laws and by no less than the
Constitution.

Facts:

Grace de Guzman was initially hired by petitioner as a reliever for a fixed period twice for
different periods by petitioner company. Under the Reliever Agreement, her employment
was to be immediately terminated upon expiration of the agreed period. After August 8,
1991, her services were terminated. On September 2, 1991, when private respondent
was once more asked to join petitioner company as a probationary employee she
indicated in the job application, that she was single although she had contracted marriage.
Private respondent had apparently made the same representation in the two successive
reliever agreements which she signed. When petitioner supposedly learned about this,
its branch supervisor in Baguio City sent to private respondent a memorandum reminding
her about the company’s policy of not accepting married women for employment and to
answer for the discrepancy. In her reply letter, private respondent stated that she was not
aware of such PT&Ts policy, and that all along she had not deliberately hidden her true
civil status. Private respondent was dismissed from the company effective January 29,
1992, which she readily contested by initiating a complaint for illegal dismissal, coupled
with a claim for non-payment of cost of living allowances (COLA), before the Regional
Arbitration Branch of the National Labor Relations Commission in Baguio City. Labor
Arbiter declared respondent, who had already gained the status of a regular employee as
illegally dismissed. NLRC affirmed LA, although ordered de Guzman’s suspension for 3
months for her dishonesty.

Issue: WON private respondent had been illegally dismissed

Ruling: Yes. Petitioner’s policy of not accepting or considering as disqualified from work
any woman worker who contracts marriage runs afoul of the test of, and the right against,
discrimination, afforded all women workers by our labor laws and by no less than the
Constitution. Contrary to petitioner’s assertion that it dismissed private respondent from
employment on account of her dishonesty, the record discloses clearly that her ties with
the company were dissolved principally because of the company’s policy that married
women are not qualified for employment in PT&T, and not merely because of her
supposed acts of dishonesty.

ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require
as a condition of employment or continuation of employment that a woman shall not get
married, or to stipulate expressly or tacitly that upon getting married, a woman employee

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shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of marriage.

Private respondent’s act of concealing the true nature of her status from PT&T could not
be properly characterized as willful or in bad faith as she was practically forced by that
very same illegal company policy into misrepresenting her civil status for fear of being
disqualified from work. However, as she had undeniably committed an act of dishonesty
in concealing her status, albeit under the compulsion of an unlawful imposition of
petitioner, the three-month suspension imposed by respondent NLRC must be upheld to
obviate the impression or inference that such act should be condoned. It would be unfair
to the employer if she were to return to its fold without any sanction whatsoever for her
act which was not totally justified. Thus, her entitlement to back wages, which shall be
computed from the time her compensation was withheld up to the time of her actual
reinstatement, shall be reduced by deducting therefrom the amount corresponding to her
three months suspension.

A requirement that a woman employee must remain unmarried could be justified as a

bona fide occupational qualification, or BFOQ, where the particular requirements of the
job would justify the same, but not on the ground of a general principle. A requirement
of that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance.

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 Del Monte Phils v Velasco, 2007

Doctrine:
Employee’s sickness that is pregnancy-related cannot be a ground to terminate her
services because in doing so, employer will, in effect, be violating the Labor Code which
prohibits an employer to discharge an employee on account of the latter’s pregnancy.

Facts:
Lolita M. Velasco started working with Del Monte Philippines on October 21, 1976 as a
seasonal employee and was regularized on May 1, 1977. From 1987 to 1992, several
warning letters were sent to Velasco in light of her absences without permission. In view
of such, on September 17, 1994, a notice of hearing was sent to respondent notifying her
of the charges filed against her for violating the Absence Without Official Leave rule. On
January 10, 1995, after hearing, the petitioner terminated the services of respondent
effective January 16, 1994 due to excessive absences without permission.

Feeling aggrieved, respondent filed a case for illegal dismissal against petitioner asserting
that her dismissal was illegal because she was on the family way suffering from urinary
tract infection, a pregnancy-borne, at the time she committed the alleged absences. She
explained that for her absence from work on August 15, 16, 17 & 18, 1994 she had sent
an application for leave to her supervisor, Prima Ybañez. Thereafter, she went to the
company hospital for check-up and was advised accordingly to rest in quarters for four
(4) days or on August 27 to 30, 1994. Still not feeling well, she failed to work on September
1, 1994 and was again advised two days of rest in quarters on September 2-3, 1994.
Unable to recover, she went to see an outside doctor, Dr. Marilyn Casino, and the latter
ordered her to rest for another five (5) consecutive days, or from September 5 to 9, 1994.
She declared she did not file the adequate leave of absence because a medical certificate
was already sufficient per company policy. On September 10, 1994 she failed to report to
work but sent an application for leave of absence to her supervisor, Prima Ybañez, which
was not anymore accepted.

The Labor Arbiter held that the respondent was an incorrigible absentee. NLRC however
held that Velasco was illegally dismissed. CA affirmed the NLRC decision.

Issue: WON employment of Velasco had been validly terminated on the ground of
excessive absences without permission

Ruling:
Yes. In this case, by the measure of substantial evidence, what is controlling is the finding
of the NLRC and the CA that respondent was pregnant and suffered from related
ailments. It would be unreasonable to isolate such condition strictly to the dates stated in
the Medical Certificate or the Discharge Summary. As the CA and the NLRC correctly
noted, it is not disputed that respondent was pregnant and that she was suffering from
urinary tract infection, and that her absences were due to such facts. The Court agrees
with the CA in concluding that respondent’s sickness was pregnancy-related and,
therefore, the petitioner cannot terminate respondent’s services because in doing so,

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petitioner will, in effect, be violating the Labor Code which prohibits an employer to
discharge an employee on account of the latter’s pregnancy.

Art. 137. Prohibited acts. – It shall be unlawful for any employer:

(2) To discharge such woman on account of her pregnancy, while on leave or in
confinement due to her pregnancy; or

It must be emphasized that under petitioner’s company rules, absences may be

subsequently justified. The Court finds no cogent reason to disturb the findings of the
NLRC and the CA that the respondent was able to subsequently justify her absences in
accordance with company rules and policy; that the respondent was pregnant at the time
she incurred the absences; that this fact of pregnancy and its related illnesses had been
duly proven through substantial evidence; that the respondent attempted to file leaves of
absence but the petitioner’s supervisor refused to receive them; that she could not have
filed prior leaves due to her continuing condition; and that the petitioner, in the last
analysis, dismissed the respondent on account of her pregnancy, a prohibited act.

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 E. EMPLOYMENT OF NURSING EMPLOYEES

F. EMPLOYMENT OF NIGHTWORKERS

G. EMPLOYMENT OF CHILDREN

H. EMPLOYMENT OF DOMESTIC WORKERS

Remington Industrial Sales Corp., v Castaneda, 2006, citing Apex Mining

Concept: The term ‘househelper’ 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.

Facts: Erlinda Castaneda instituted a complaint for illegal dismissal, underpayment of

wages, non-payment of overtime services, non-payment of SIL pay and non-payment of
13th month pay against Remington Industrial Sales Corp. before the NLRC-NCR.

Erlinda alleged that she started working in 1983 as company cook for Remington, a
corporation engaged in the trading business and that she continuously worked with
Remington until she was unceremoniously prevented from reporting for work when
Remington transferred to a new site.

Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic
helper, not a regular employee; Erlinda worked as a cook and this job had nothing to
do with Remington’s business of trading in construction or hardware materials, steel
plates and wire rope products.

In a Decision, the LA dismissed the complaint and ruled that the respondent was a
domestic helper under the personal service of Antonio Tan (the Managing Director),
finding that her work as a cook was not usually necessary and desirable in the ordinary
course of trade and business of the petitioner corporation, and that the latter did not
exercise control over her functions. On the issue of illegal dismissal, the labor arbiter
found that it was the respondent who refused to go with the family of Antonio Tan when
the corporation transferred office and that, therefore, respondent could not have been
illegally dismissed.

Issue/s: 1) Whether or not, respondent is a domestic helper or a regular employee of the

company; 2) Whether or not, respondent was illegally dismissed.

Ruling:
1) Respondent is a regular employee of the company. There was no allegation by
respondent that complainant had ever worked in the residence of Mr. Tan. What is clear

134
from the facts narrated by the parties is that complainant continuously did her job as a
cook in the office of respondent serving the needed food for lunch and merienda of the
employees. Thus, her work as cook inured not for the benefit of the family members of
Mr. Tan but solely for the individual employees of respondent.

Complainant's work schedule and being paid a monthly salary of P4,000.00 are clear
indication that she is a company employee who had been employed to cater to the food
needed by the employees which were being provided by respondent to form part of the
benefit granted them.

In Apex Mining Company, Inc. v. NLRC, this Court held that a househelper in the staff
houses of an industrial company was a regular employee of the said firm. We ratiocinated
that:
Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms
"househelper" or "domestic servant" are defined as follows:

"The term 'househelper' as used herein is synonymous to the term 'domestic servant' and
shall refer to any person, whether male or female, who renders services in and about the
employer's home and which services are usually necessary or desirable for the
maintenance and enjoyment thereof, and ministers exclusively to the personal comfort
and enjoyment of the employer's family."

The foregoing definition clearly contemplates such househelper or domestic servant who
is employed in the employer's home to minister exclusively to the personal comfort and
enjoyment of the employer's family. Such definition covers family drivers, domestic
servants, laundry women, yayas, gardeners, houseboys and similar househelps.

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
staff houses 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

2) As a regular employee, respondent enjoys the right to security of tenure under Article
279 38 of the Labor Code and may only be dismissed for a just 39 or authorized 40 cause,
otherwise the dismissal becomes illegal and the employee becomes entitled to
reinstatement and full backwages computed from the time compensation was withheld
up to the time of actual reinstatement.

Abandonment is the deliberate and unjustified refusal of an employee to resume his

employment. It is a form of neglect of duty; hence, a just cause for termination of
employment by the employer under Article 282 of the Labor Code, which enumerates the
just causes for termination by the employer. For a valid finding of abandonment, these
two factors should be present: (1) the failure to report for work or absence without valid
or justifiable reason; and (2) a clear intention to sever employer-employee relationship,

135
with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employee has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was deliberate and
unjustified. This, the petitioner failed to do in the case at bar.

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 Co v Vargas, 2011

Facts: On 22 April 2003, respondent, Lina B. Vargas, filed against Nathaniel Bakeshop
and its owner, Fernando Co, a complaint for underpayment or non-payment of wages and
holiday pay. The complaint was later amended to include illegal dismissal as a cause of
action and the non-payment of service incentive leave.

Respondent alleged that she started working at the bakeshop in October 1994 as a baker
and worked from 8:00am to 8:30pm, Monday to Saturday. Aside from baking, respondent
also serve the customers and supervised the other workers in the absence of the owner.
Furthermore, respondent claimed that she sometimes cooked and did the chores of the
housemaid whenever the latter was not available. Respondent has a salary of P202/day,
which she received every Saturday afternoon. During the period of her employment,
respondent was not given a pay slip and she was never asked to sign a payroll.

On April 6, 2003, petitioner Co’s wife, Nely Co, told respondent to cook their lunch
because the housemaid was ironing clothes. Since respondent was busy preparing
customer’s orders, she lost track of time and was unable to cook lunch as instructed. Irate
at respondent’s failure to cook, Nely Co cussed respondent and told her to leave and
never to return because she was not needed anymore. Respondent was so humiliated
and could no longer bear the treatment she received from her employers that she decided
to take her salary and leave that same day. Respondent later filed the complaint against
Nathaniel Bakeshop and its owner, Fernando Co.

Issue/s:
1) Whether or not respondent was an employee or a mere house help of the petitioner;
2) Whether or not respondent was illegally dismissed.

Ruling:
1) The respondent of is an employee of the petitioner.
The evidence show that respondent is working within the premises of the business of Co
and in relation or in connection with such business. The place of business of Co and his
residence is located at the place. Thus, Co exercises control and supervision over
petitioners functions. Even if respondent was actually working as domestic servant in Co’s
residence, her act of taking orders, would warrant the conclusion that respondent should
be considered as a regular employee and not as a mere family house helper or domestic
servant of Co.

2) Yes, the respondent was illegally dismissed.

Since petitioner is an employee of private respondents, she is entitled to security of
tenure. Assuming further that respondent abandoned her job, the Supreme Court held in
Ultra Villa Food Haus and/or Rosie Tio vs. NLRC that to constitute abandonment, two
requisites must concur: (1) the failure to report to work or absence without valid or
justifiable reason, and (2) a clear intention to sever the employer-employee relationship
as manifested by some overt acts, with the second requisite as the more determinative
factor. The burden of proving abandonment as a just cause for dismissal is on the

137
employer. Petitioner failed to discharge this burden. The only evidence adduced by
petitioner to prove abandonment was the affidavits of their househelpers and employees.
I. EMPLOYMENT OF HOMEWORKERS

J. EMPLOYMENT OF NON-RESIDENT ALIENS

K. EMPLOYMENT OF STUDENTS AND WORKING SCHOLARS

L. EMPLOYMENT OF ACADEMIC/ NON-ACADEMIC PERSONNEL IN

PRIVATE EDUCATIONAL INSTITUTION

M. EMPLOYMENT OF SENIOR CITIZENS

N. EMPLOYMENT OF DRIVERS AND CONDUCTORS IN THE PUBLIC

UTILITY TRANSPORT INDUSTRY

University of the East et al v Pepanio

FACTS:
In 1992, the Department of Education, Culture and Sports (DECS) issued the Revised
Manual of Regulations for Private Schools, of which requires college faculty members to
have a master's degree as a minimum educational qualification for acquiring regular
status. In 1994, petitioner and UE Faculty Association executed a five-year Collective
Bargaining Agreement (CBA), which provides, among others, that UE shall extend only
semester-to-semester appointments to college faculty staffs who did not possess the
minimum qualifications. Those with such qualifications shall be given probationary
appointments and their performance on a full-time or full-load basis shall be reviewed for
four semesters.

In consonance with the Joint Order issued by several government agencies, UE President
issued a University Policy stating that, beginning the School Year 1996-1997, it would
hire those who have
no postgraduate units or master's degree for its college teaching staffs, in the absence of
qualified applicants, only on a semester-to-semester basis.

Petitioner hired the respondents on a semester-to-semester basis to teach in its college.

They
could not qualify for probationary or regular status because they lacked postgraduate
degrees. Another CBA was entered, extending probationary full-time appointments to full-
time faculty members who did not yet have the required postgraduate degrees provided
that the latter comply with such requirement within their probationary period. However,
the option to replace the appointees if a qualified teacher becomes available at the end
of the semester.

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ISSUE:
Whether or not a college teacher who does not have a postgraduate degree is a regular
employee considering he has been repeatedly extended semester-to-
semester appointments.

HELD:
No. First, the requirement of a masteral degree for tertiary education teachers is not
unreasonable. The operation of educational institutions involves public interest. The
government has a right to ensure that only qualified person, in possession of sufficient
academic knowledge and teaching skills, is allowed to teach in such institutions.

The policy requiring postgraduate degrees of college teachers was provided in the
Manual of Regulations as early as 1992. Indeed, recognizing this, the 1994 CBA provided
even then that UE was to extend only semester-to-semester appointments to college
faculty staffs, like respondents, who did not possess the minimum qualifications for their
positions.

Respondents were each given only semester-to-semester appointments from the

beginning of their employment with UE precisely because they lacked the required
master’s degree. It was only when UE and the faculty union signed their 2001 CBA that
the school extended petitioners a conditional probationary status subject to their obtaining
a master’s degree within their probationary period. It is clear, therefore, that the parties
intended to subject respondents’ permanent status appointments to the standards set by
the law and the university.

Here, UE gave respondents Bueno and Pepanio more than ample opportunities to
acquire the postgraduate degree required of them. But they did not take advantage of
such opportunities. Justice, fairness, and due process demand that an employer should
not be penalized for situations where it had little or no participation or control.

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 Colegio Del Santismo Rosario et al v Rojo, 2013 citing Mercado et al v AMA Computer
College- Paranaque City, 2010

Colegio Del Santismo Rosario et al v Rojo, 2013

FACTS:
Petitioner Colegio del Santisimo Rosario (CSR) hired respondent as a high school
teacher on probationary basis for the school years 1992-1995. On April 5, 1995, CSR,
through petitioner Sr. Zenaida S. Mofada, OP (Mofada), decided not to renew
respondents services.

Respondent filed a Complaint for illegal dismissal. He alleged that since he had served
three consecutive school years which is the maximum number of terms allowed for
probationary employment, he should be extended permanent employment. Citing
paragraph 75 of the 1970 Manual of Regulations for Private Schools (1970 Manual),
respondent asserted that "full- time teachers who have rendered three (3) consecutive
years of satisfactory services shall be considered permanent."

On the other hand, petitioners argued that respondent knew that his Teachers Contract
for school year 1994-1995 with CSR would expire on March 31, 1995.Accordingly,
respondent was not dismissed but his probationary contract merely expired and was not
renewed. Petitioners also claimed that the "three years" mentioned in paragraph 75 of the
1970 Manual refer to "36 months," not three school years and since respondent served
for only three school years of 10 months each or 30 months, then he had not yet served
the "three years" or 36 months mentioned in paragraph 75 of the 1970 Manual.

Labor Arbiter ruled in favor of respondent. The decision was affirmed by the NLRC and
the CA respectively on appeal hence this petition before the SC.

ISSUE:
Whether or not respondent has become a permanent employee upon three years of
service

HELD:
Yes. Court of Appeal decision affirmed.
Labor Law- Manual of Regulations for Private Schools (the Manual) in relation to the
Labor Code

In Mercado v. AMA Computer College-Paraque City, Inc.,we had occasion to rule that
cases dealing with employment on probationary status of teaching personnel are not
governed solely by the Labor Code as the law is supplemented, with respect to the period
of probation, by special rules found in the Manual of Regulations for Private Schools (the
Manual). With regard to the probationary period, Section 92 of the 1992 Manual provides

Section 92. Probationary Period. Subject in all instances to compliance with the
Department and school requirements, the probationary period for academic personnel

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shall not be more than three (3) consecutive years of satisfactory service for those in the
elementary and secondary levels, six (6) consecutive regular semesters of satisfactory
service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory
service for those in the tertiary level where collegiate courses are offered on a trimester
basis.

However, this scheme "of fixed-term contract is a system that operates during the
probationary period and for this reason is subject to Article 281 of the Labor Code," which
provides-

x x x The services of an employee who has been engaged on a probationary basis

may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at
the time of his engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee.

However, for teachers on probationary employment, in which case a fixed term contract
is not specifically used for the fixed term it offers, it is incumbent upon the school to have
not only set reasonable standards to be followed by said teachers in determining
qualification for regular employment, the same must have also been communicated to the
teachers at the start of the probationary period, or at the very least, at the start of the
period when they were to be applied. Corollarily, should the teachers not have been
apprised of such reasonable standards at the time specified above, they shall be deemed
regular employees.

In this case, glaringly absent from petitioner's evidence are the reasonable standards that
respondent was expected to meet that could have served as proper guidelines for
purposes of evaluating his performance. Nowhere in the Teacher's Contract could such
standards be found.Neither was it mentioned that the same were ever conveyed to
respondent. Even assuming that respondent failed to meet the standards set forth by
CSR and made known to the former at the time he was engaged as a teacher on
probationary status, still, the termination was flawed for failure to give the required notice
to respondent.

Curiously, despite the absence of standards, Mofada mentioned the existence of alleged
performance evaluations in respondent's case. We are, however, in a quandary as to
what could have been the basis of such evaluation, as no evidence were adduced to
show the reasonable standards with which respondents performance was to be assessed
or that he was informed thereof. Notably too, none of the supposed performance
evaluations were presented. These flaws violated respondent's right to due process. As
such, his dismissal is, for all intents and purposes, illegal.

It should be pointed out that absent any showing of unsatisfactory performance on the
part of respondent, it can be presumed that his performance was satisfactory, especially
taking into consideration the fact that even while he was still more than a year into his
probationary employment, he was already designated Prefect of Discipline. In such

141
capacity, he was able to uncover the existence of a drug syndicate within the school and
lessen the incidence of drug use therein. Yet despite respondent's substantial contribution
to the school, petitioners chose to disregard the same and instead terminated his
services; while most of those who were involved in drug activities within the school were
punished with a slap on the wrist as they were merely made to write letters promising that
the incident will not happen again.

Mercado et al v AMA Computer College-Paranaque City, 2010

Principle: Where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers (example of the phrase "fixed term it offers"
below), Article 281 should assume primacy and the fixed-period character of the contract
must give way.

Facts: The petitioners were faculty members who started teaching at AMACC on May
25, 1998. The petitioners executed individual Teacher's Contracts for each of the
trimesters that they were engaged to teach, with the following common stipulation:

The TEACHER has agreed to accept a non-tenured appointment to work in the

College of ...effective ...to ...or for the duration of the last term that the TEACHER is given
a teaching load based on the assignment duly approved by the DEAN/SAVP-COO.

For the school year 2000-2001 AMACC implemented new faculty screening guidelines,
set forth in its Guidelines on the Implementation of AMACC Faculty Plantilla. Under the
new screening guidelines, teachers were to be hired or maintained based on extensive
teaching experience, capability, potential, high academic qualifications and research
background. The performance standards under the new screening guidelines were also
used to determine the present faculty members' entitlement to salary increases. The
petitioners failed to obtain a passing rating based on the performance standards; hence
AMACC did not give them any salary increase.

Because of AMACC's action on the salary increases, the petitioners filed a complaint with
the Arbitration Branch of the NLRC on July 25, 2000, for underpayment of wages, non-
payment of overtime and overload compensation, 13th month pay, and for discriminatory
practices.

On Sep 7, 2000 petitioners individually received a memorandum from AMACC, informing

them that with the expiration of their contract to teach, their contract would no longer be
renewed. The petitioners amended their labor arbitration complaint to include the charge
of illegal dismissal against AMACC. In their Position Paper, the petitioners contended that
AMACC failed to give them adequate notice; hence, their dismissal was ineffectual.
AMACC contended in response that the petitioners worked under a contracted term under
a non-tenured appointment and were still within the three-year probationary period for
teachers. Their contracts were not renewed for the following term because they failed to
pass the Performance Appraisal System for Teachers (PAST) while others failed to
comply with the other requirements for regularization, promotion, or increase in salary.

142
This move, according to AMACC, was justified since the school has to maintain its high
academic standards.

Issue: WON the petitioners were illegally dismissed

Ruling: Yes. Rule on Employment on Probationary Status - probationary status of

teaching personnel are not governed purely by the Labor Code. The Labor Code
is supplemented with respect to the period of probation by special rules found in the
Manual of Regulations for Private Schools.

Section 92. Probationary Period. — Subject in all instances to compliance with the
Department and school requirements, the probationary period for academic personnel
shall not be more than three (3) consecutive years of satisfactory service for those in the
elementary and secondary levels, six (6) consecutive regular semesters of satisfactory
service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory
service for those in the tertiary level where collegiate courses are offered on a trimester
basis

Section 93. Regular or Permanent Status. — Those who have served the probationary
period shall be made regular or permanent. Full-time teachers who have satisfactorily
completed their probationary period shall be considered regular or permanent.

Rule on Fixed-period Employment

- The common practice is for the employer and the teacher to enter into a contract,
effective for one school year. At the end of the school year, the employer has the option
not to renew the contract, particularly considering the teacher's performance. If the
contract is not renewed, the employment relationship terminates. If the contract is
renewed, usually for another school year, the probationary employment continues. Again,
at the end of that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would then be the
last year — since it would be the third school year — of probationary employment. At the
end of this third year, the employer may now decide whether to extend a permanent
appointment to the employee, primarily on the basis of the employee having met the
reasonable standards of competence and efficiency set by the employer. For the entire
duration of this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he cannot
automatically claim security of tenure and compel the employer to renew his employment
contract. It is when the yearly contract is renewed for the third time that Section 93 of the
Manual becomes operative, and the teacher then is entitled to regular or permanent
employment status.

It is important that the contract of probationary employment specify the period or term of
its effectivity. The failure to stipulate its precise duration could lead to the inference that
the contract is binding for the full three-year probationary period.

Academic and Management Prerogative

143
A school enjoys academic freedom — a guarantee that enjoys protection from
the Constitution no less. Section 5 (2) Article XIV of the Constitution guarantees all
institutions of higher learning academic freedom.

The institutional academic freedom includes the right of the school or college to decide
and adopt its aims and objectives, and to determine how these objections can best be
attained, free from outside coercion or interference, save possibly when the overriding
public welfare calls for some restraint. The essential freedoms subsumed in the term
"academic freedom" encompass the freedom of the school or college to determine for
itself: (1) who may teach; (2) who may be taught; (3) how lessons shall be taught; and
(4) who may be admitted to study.

AMACC's right to academic freedom is particularly important in the present case,

because of the new screening guidelines for AMACC faculty put in place for the school
year 2000-2001. AMACC has the inherent right to establish high standards of
competency and efficiency for its faculty members in order to achieve and maintain
academic excellence. The school's prerogative to provide standards for its teachers and
to determine whether or not these standards have been met is in accordance with
academic freedom that gives the educational institution the right to choose who should
teach.

Nothing is illegitimate in defining the school-teacher relationship in this manner. The

school, however, cannot forget that its system of fixed-term contract is a system that
operates during the probationary period and for this reason is subject to the terms of
Article 281 of the Labor Code. Unless this reconciliation is made, the requirements of
this Article on probationary status would be fully negated as the school may freely
choose not to renew contracts simply because their terms have expired.(instead of just
cause required in Art 281).

Given the clear constitutional and statutory intents, we cannot but conclude that in a
situation where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281 should assume primacy and the
fixed-period character of the contract must give way. This conclusion is immeasurably
strengthened by the petitioners' and the AMACC's hardly concealed expectation that
the employment on probation could lead to permanent status, and that the contracts are
renewable unless the petitioners fail to pass the school's standards.

To highlight what we mean by a fixed-term contract specifically used for the fixed term
it offers, a replacement teacher, for example, may be contracted for a period of one year
to temporarily take the place of a permanent teacher on a one-year study leave. The
expiration of the replacement teacher's contracted term, under the circumstances, leads
to no probationary status implications as she was never employed on probationary
basis; her employment is for a specific purpose with particular focus on the term and
with every intent to end her teaching relationship with the school upon expiration of this
term.|

144
If the school were to apply the probationary standards (as in fact it says it did in the
present case),these standards must not only be reasonable but must have also been
communicated to the teachers at the start of the probationary period, or at the very least,
at the start of the period when they were to be applied. These terms, in addition to those
expressly provided by the Labor Code, would serve as the just cause for the termination
of the probationary contract. The details of this finding of just cause must be
communicated to the affected teachers as a matter of due process.

AMACC, by its submissions, admits that it did not renew the petitioners' contracts
because they failed to pass the Performance Appraisal System for Teachers and other
requirements for regularization that the school undertakes to maintain its high academic
standards. The evidence is unclear on the exact terms of the standards, although the
school also admits that these were standards under the Guidelines on the
Implementation of AMACC Faculty Plantilla put in place at the start of school year 2000-
2001.

While we can grant that the standards were duly communicated to the petitioners and
could be applied beginning the 1st trimester of the school year 2000-2001, glaring and
very basic gaps in the school's evidence still exist. The exact terms of the standards
were never introduced as evidence; neither does the evidence show how these
standards were applied to the petitioners. Without these pieces of evidence (effectively,
the finding of just cause for the non-renewal of the petitioners' contracts), we have
nothing to consider and pass upon as valid or invalid for each of the
petitioners. Inevitably, the non-renewal (or effectively, the termination of employment of
employees on probationary status) lacks the supporting finding of just cause that the
law requires and, hence, is illegal.

145
 Herrera-Manaois v St. Scholasticas College, 2013

Principle: Private educational institutions in the tertiary level may extend "full-time
faculty" status only to those who possess a master's degree in the field of study that will
be taught. This minimum requirement is neither subject to the prerogative of the school
nor to the agreement between the parties. The issue of whether probationers were
informed of this academic requirement before they were engaged as probationary
employees is thus no longer material, as those who are seeking to be educators are
presumed to know these mandated qualifications. (Minimum requirement basis: 1992
Manual of Regulations for Private Schools)

Facts: Petitioner Manaois works as a part-time English teacher at St. Scholastica's

College, a private educational institution offering elementary, secondary, and tertiary
education. Four years into the service, she was later on recommended by her Department
Chairperson to become a full-time faculty member of the English Department. Manaois
thus applied for a position as full-time instructor for school year 2000-2001. She
mentioned in her application letter||that she was completing her master's thesis| and that
her oral defense was scheduled for June 2000. This was approved by the SSC
Administrative Council. Accordingly, SSC hired her as a probationary full-time faculty
member with the assigned rank of instructor for the school year 2000-2001. Her
probationary employment continued for a total of three consecutive years. Upon the
forthcoming completion of her third year of probationary employment, Manaois wrote the
Dean of Arts and Sciences requesting an extension of her teaching load for the school
year 2003-2004. She again mentioned in her letter that she was a candidate for a master's
degree in English Studies; that the schedule of her oral defense may actually materialize
anytime within the first academic semester of 2003; and that she intended to fully earn
her degree that year. Furthermore, she indicated that it was her long-term goal to apply
for a return to full-time faculty status by then and for SSC to consider the aforesaid
matters.||| Manaois eventually received a letter from the Dean of College and Chairperson
of the Promotions and Permanency Board officially informing her of the board's decision
not to renew her contract due to her failure to comply with the terms which she herself
requested. The college clarified that the application for full-time faculty status of Manaois
was accepted with the specific qualification that she would submit the necessary papers
pertaining to her master's degree. It stressed that permanency may only be extended to
full-time faculty members if they had fulfilled the criteria provided in the SSC Faculty
Manual. Manaois eventually filed a complaint for illegal dismissal, payment of 13th month
pay, damages, and attorney's fees against SSC.

Issue: Whether the completion of a master's degree is required in order for a tertiary level
educator to earn the status of permanency in a private educational institution.|||

Ruling: Yes. SC went first into Article 281 of the Labor Code:

Probationary employment. -The services of an employee who has been engaged on a

probationary basis may be terminated for a just cause or when he fails to qualify as a

146
regular employee in accordance with reasonable standards made known by the employer
to the employee at the time of his engagement.
The contract she signed clearly incorporates the rules, regulations, and employment
conditions contained in the SSC Faculty Manual. It contains:
I. Employment - After having read and understood in full the contents of the COLLEGE
UNIT's current FACULTY MANUAL, the FACULTY MEMBER agrees to faithfully perform
all the duties and responsibilities attendant to her position as PROBATIONARY FULL-
TIME FACULTY MEMBER and comply with all the rules, regulations and employment
conditions of the SCHOOL, as provided in said FACULTY MANUAL including any
amendment/s pertinent to her position as may be hereinafter incorporated therein.
IV. Effectivity - The SCHOOL has the right to terminate the FACULTY MEMBER'S
services for just cause such as, among others, failure to comply with any of the provisions
of the FACULTY MANUAL pertinent to her status as FULL-TIME PROBATIONARY
FACULTY MEMBER.
Criteria for permanency is provided by the SSC Faculty Manual:
CRITERIA FOR PERMANENCY
1. The faculty member must have completed at least a master's
degree.
Mere completion of the three-year probation, even with an above-average
performance, does not guarantee that the employee will automatically acquire a
permanent employment status. It is settled jurisprudence that the probationer can
only qualify upon fulfillment of the reasonable standards set for permanent
employment as a member of the teaching personnel. In line with academic
freedom and constitutional autonomy, an institution of higher learning has the
discretion and prerogative to impose standards on its teachers and determine
whether these have been met. Upon conclusion of the probation period, the college
or university, being the employer, has the sole prerogative to make a decision on
whether or not to re-hire the probationer. The probationer cannot automatically
assert the acquisition of security of tenure and force the employer to renew the
employment contract. In the case at bar, Manaois failed to comply with the stated
academic qualifications required for the position of a permanent full-time faculty
member.

Notwithstanding the existence of the SSC Faculty Manual, Manaois still cannot legally
acquire a permanent status of employment. Private educational institutions must still
supplementarily refer to the prevailing standards, qualifications, and conditions set by the
appropriate government agencies (presently the Department of Education, the
Commission on Higher Education, and the Technical Education and Skills Development
Authority). This limitation on the right of private schools, colleges, and universities to
select and determine the employment status of their academic personnel has been
imposed by the state in view of the public interest nature of educational institutions, so as
to ensure the quality and competency of our schools and educators.

Manual of Regulations for Private Schools provides:

Section 92. Probationary Period. — Subject in all instances to
compliance with Department and school requirements, the probationary

147
 period for academic personnel shall not be more than three (3)
consecutive years of satisfactory service for those in the elementary and
secondary levels, six (6) consecutive regular semesters of satisfactory
service for those in the tertiary level, and nine (9) consecutive trimesters
of satisfactory service for those in the tertiary level where collegiate
courses are offered on the trimester basis.
Section 93. Regular or Permanent Status. — Those who have served
the probationary period shall be made regular or permanent. Full-time
teachers who have satisfactorily completed their probationary period shall
be considered regular or permanent.
Considering that petitioner ultimately sought for the position of a permanent full-
time instructor, we must further look into the following provisions under the 1992
Manual, which set out the minimum requirements for such status.
Section 44. Minimum Faculty Qualifications.
c. Tertiary
(1) For undergraduate courses, other than vocational:
(a) Holder of a master's degree, to
teach largely in his major field; or, for
professional courses, holder of the
appropriate professional license required for
at least a bachelor's degree. Any deviation
from this requirement will be subject to
regulation by the Department.
Section 45. Full-time and Part-time Faculty. — As a general rule, all
private schools shall employ full-time academic personnel consistent with
the levels of instruction.
Full-time academic personnel are those meeting all the following
requirements:
a. Who possess at least the minimum academic
qualifications prescribed by the Department under this Manual for
all academic personnel
All teaching personnel who do not meet the foregoing qualifications
are considered part-time.

Pursuant to the 1992 Manual, private educational institutions in the tertiary level
may extend "full-time faculty" status only to those who possess, inter alia, a
master's degree in the field of study that will be taught. This minimum requirement
is neither subject to the prerogative of the school nor to the agreement between
the parties. For all intents and purposes, this qualification must be deemed
impliedly written in the employment contracts between private educational
institutions and prospective faculty members. The issue of whether probationers
were informed of this academic requirement before they were engaged as
probationary employees is thus no longer material, as those who are seeking to
be educators are presumed to know these mandated qualifications. Thus, all those
who fail to meet the criteria under the 1992 Manual cannot legally attain the status
of permanent full-time faculty members, even if they have completed three years

148
of satisfactory service. There is then no legal obligation on the part of SSC to
reappoint Manaois after the lapse of her temporary appointment.

149
 MEDICAL, DENTAL AND OCCUPATIONAL SAFETY

Tolosa v NLRC, 2003

“Art. 161 of the Labor Code is only a safety and health standard under Book IV of the
same Code. The enforcement of this labor standard rests with the labor secretary. Thus,
claims for an employer's violation thereof are beyond the jurisdiction of the labor arbiter.
In other words, petitioner cannot enforce the labor standard provided for in Article 161 by
suing for damages before the labor arbiter. “

Facts: Evelyn Tolosa was the widow of Capt. Virgilio Tolosa who was hired by Qwana-
Kaiun, through its manning agent Asia Bulk Transport Phils, Inc, to be the master of the
vessel M/V Lady Dona. His contract officially began on Nov. 1, 1992, as supported by his
contract of employment when he assumed command of the vessel in Yokohama, Japan.
The vessel departed for California, passing by Hawaii in the middle of the voyage. At the
time of embarkation, Capt. Tolosa was allegedly shown to be in good health.

During channeling activities upon the vessel’s departure from Yokohama on Nov. 6, 1992,
Capt. Tolosa was drenched in rainwater. The following day, he had a slight fever and in
the succeeding 12 days, his health rapidly deteriorated resulting in his death on Nov. 8,
1992.

Because of the death of Capt. Tolosa, his wife Evelyn, as petitioner, filed a Complaint
before the POEA against Qwana-Kaiun, thru its resident-agent Mr. Fumio Nakagawa,
Asia Bulk , and Capt. Tolosa’s shipmates Pedro Garate and Mario Asis, as respondents.

The Labor Arbiter held respondents solidarily liable. NLRC, however, vacated the
decision of the LA and said that there was lack of jurisdiction over the subject matter by
the LA. The Court of Appeals sustained the NLRC, saying that the labor commission had
no jurisdiction over the subject matter of the action, furthermore saying that petitioner’s
cause did not arise from an employer-employer relation, but from a quasi-delict or tort.
Finally, CA said that there is no reasonable causal connection between petitioner’s suit
for damages and her claim under Art. 217(a)(4) of the Labor Code, which allows an award
of damages incident to an employer-employee relation

Issue: WON the LA and NLRC have jurisdiction over the case

Ruling: The petition as no merit. After carefully examining the complaint of petitioner, we
are convinced that the allegations therein are in the nature of an action based on a quasi-
delict or tort. It is evident that petitioner sued shipmates Pedro Garate and Mario Asis for
gross negligence, and that they had employer-employee relation with Capt. Tolosa. The
jurisdiction of labor tribunals is limited to disputes arising from employee-employer
relations. Not every dispute between an employer and employee involves matters that
only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-
judicial powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the
Labor Code is limited to disputes arising from an employer-employee relationship which

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can only be resolved by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement.

While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs
provided by labor laws, but also damages governed by the Civil Code, these reliefs must
still be based on an action that has a reasonable causal connection with the Labor Code,
other labor statutes, or CBAs. In the present case, petitioner's claim for damages is not
related to any other claim under Article 217, other labor statutes, or collective bargaining
agreements.

Petitioner argues that her cause of action is not predicated on a quasi-delict or tort, but
on the failure of private respondents — as employers of her husband — to provide him
with timely, adequate and competent medical services under Article 161 of the Labor
Code: "ART 161. Assistance of employer. It shall be the duty of any employer to provide
all the necessary assistance to ensure the adequate and immediate medical and dental
attendance and treatment to an injured or sick employee in case of emergency."

Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which
does not grant or specify a claim or relief. This provision is only a safety and health
standard under Book IV of the same Code. The enforcement of this labor standard rests
with the labor secretary. Thus, claims for an employer's violation thereof are beyond the
jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor
standard provided for in Article 161 by suing for damages before the labor arbiter.

Since petitioner's claim for damages is predicated on a quasi -delict or tort that has no
reasonable causal connection with any of the claims provided for in Article 217, other
labor statutes, or collective bargaining agreements, jurisdiction over the action lies with
the regular courts — not with the NLRC or the labor arbiters.

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 U-Bix Corp., v Bandiola, 2007

“An injury is said to arise "in the course of employment" when it takes place within the
period of employment, at a place where the employee may reasonably be, and while he
is fulfilling his duties or is engaged in doing something incidental thereto. “

Facts: On April 13, 1997, Bandiola and two other U-BIX employees were involved in a
vehicular accident on their way to Baguio, where they were assigned by U-BIX to install
furniture for an exhibit. Bandiola sustained a fracture on his left leg.

Bandiola and his co-employees were initially brought to the Rosario District Hospital. The
next day, they were transferred to the Philippine Orthopedic Hospital. After his broken leg
was cemented, Bandiola was advised to go back for further medical treatment. U-BIX
paid for the medical expenses incurred in both hospitals.

Bandiola claims that he asked U-BIX for financial assistance but that the latter refused.
As a consequence, he could no longer afford to go back to the Orthopedic in Quezon
City, which is of considerable distance from his residence in Parañaque. Instead, he went
to Medical Center Parañaque (MCP) where he had his leg cast in fiberglass. He attached
the receipts issued by MCP for medical expenses with a total amount of P7,742.50.
Bandiola's left leg was still fractured, even after the doctors at the Orthopedic put a plaster
cast on his leg.

Bandiola maintains that before his leg was cast in fiberglass, he asked Rey Reynes, U-
BIX's Assistant Manager for Project Management, for financial assistance but was
refused. After the medical procedure, he again went to Reynes and presented a receipt
for his medical expenses, but was told to pay for them in the meantime.

On September 1998, Bandiola filed a Complaint before the Labor Arbiter, where he
alleged underpayment of salary; non-payment of overtime pay; premium pay for work
performed on holidays and rest days; separation pay; service incentive leave pay; 13th
month pay; and the payment of actual, moral and exemplary damages. Bandiola asserts
that U-BIX failed to extend to him any financial assistance after he was injured in the
performance of his duties, and that as a result, he suffered physical pain, mental torture,
fright, sleepless nights, and serious anxiety. He claims that this entitles him to moral and
exemplary damages.

LA ordered U-BIX to pay Bandiola a salary differential, service incentive leave and 13th
month may. NLRC amended the decision, ruling that U-BIX should reimburse Bandiola
for the medical expenses of P12,742 plus moral and exemplary damages. CA modified
the NLRC judgment by reducing the medical expenses to P7,742.

Issue: WON CA erred in ordering petitioner to reimburse respondent for alleged medical
expenses of P7,742 when there is no evidence submitted by respondent in support
thereof

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Ruling: CA did not err. U-Bix is liable to reimburse Bandiola the amount of P7,742.50 for
medical expenses because its failure to comply with its duty to record and report
Bandiola's injury to the SSS precluded Bandiola from making any claims.

Moreover, U-BIX, by its own admission, reimbursed its other employees who were
involved in the same accident for their medical expenses. Clearly, the reimbursement of
medical expenses for injuries incurred in the course of employment is part of the benefits
enjoyed by U-BIX's employees. Articles 205 and 206 of the Labor Code set the reportorial
requirements in cases when an employee falls sick or suffers an injury arising in the
course of employment. An injury is said to arise "in the course of employment" when it
takes place within the period of employment, at a place where the employee may
reasonably be, and while he is fulfilling his duties or is engaged in doing something
incidental thereto.

As a general rule, the injured employee must notify his employer, who is obligated to enter
the notice in a logbook within 5 days after notification. Within 5 days after making the
entry, the employer of a private company reports the work-related sickness or injury to
the SSS. SSS then decides on the validity of the claim. When the SSS denies the claim,
the denial may be appealed to the Employees' Compensation Commission within 30
days.

In the present case, there is no dispute that Bandiola's leg injury was sustained in the
course of his employment with U-BIX. U-BIX admitted to providing Bandiola and his co-
employees with medical assistance and it even sent its representative, Rey Reynes, to
Rosario District Hospital, where they were confined, and had them transferred to the
Orthopedic. U-BIX was also aware that the Orthopedic instructed Bandiola to return for
further medical treatment. It is implicit that Bandiola needed further treatment for his
broken leg and was, thus, incapacitated to work.

Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent
information in connection with the injuries sustained by Bandiola in its logbook within 5
days after it had known about the injuries; and to report the same to the SSS within 5
days after it was recorded in the logbook, in accordance with Articles 205 and 206 of the
Labor Code. Had U-BIX performed its lawful duties, the SSS, or the ECC on appeal, could
have properly considered whether or not Bandiola was entitled to reimbursement for his
medical expenses, as well as disability benefits while he was unable to work. However,
U-BIX did not present any evidence showing that it had complied with these legal
requirements. It had not even replied to Bandiola's allegations in his Position Paper that
its employees were not even members of the SSS. By failing to report Bandiola's injury
to the SSS, U-BIX disregarded the law and its purpose.

153
 Ocean Builders Construction v Sps. Cubacub, 2011

DOCTRINE: Petitioner Haos advice for Bladimir totake a 3-day rest and to later have him
brought to the nearest hospital constituted adequate and immediate medical attendance
that he is mandated, under Art. 161, to provide to a sick employee in an emergency.
FACTS: Bladimir Cubacub (Bladimir) was employed as maintenance man by petitioner
company Ocean Builders Construction Corp. at its office in Caloocan City. On April 9,
1995, Bladimir was afflicted with chicken pox. He was thus advised by petitioner Dennis
Hao (Hao), the companys general manager, to rest for three days which he did at the
companys barracks where he lives free of charge.

Three days later, Bladimir went about his usual chores of manning the gate of the
company premises and even cleaned the company vehicles. Later in the afternoon,
however, he asked a co-worker, Ignacio Silangga (Silangga), to accompany him to his
house in Capas, Tarlac so he could rest.

Informed by Silangga of Bladimirs intention, Hao gave Bladimir P1K and ordered Silangga
to instead bring Bladimir to the nearest hospital. Along with a co-worker Narding, Silangga
thus brought Bladimir to the Caybiga Hospital, a primary-care hospital around one
kilometer away from the office of the company. The hospital did not allow Bladimir to leave
the hospital. He was then confined.

The next day, a doctor of the hospital informed Narding that they needed to talk to
Bladimirs parents, hence their co-workers Matias and Edrene fetched Bladimirs parents
from Tarlac. In the same day, Bladimir was transferred to the Quezon City General
Hospital (QCGH) where he was placed in the intensive care unit and died the following
day.

The death certificate issued by the QCGH recorded Bladimirs immediate cause of death
as cardio-respiratory arrest and the antecedent cause as pneumonia. Bladimirs parents-
herein respondents later filed before the RTC of Tarlac a complaint for damages against
petitioners, alleging that Hao was guilty of negligence which resulted in the deterioration
of Bladimirs condition leading to his death.

RTC dismissed the complaint. CA reversed the decision of the RTC holding that by Haos
failure to bring Bladimir to a better-equipped hospital, he violated Article 161 of the Labor
Code hence the current petition.

ISSUE: WON Petitioner is liable for damages

RULING: NO. Petitioner is not liable for damages as he was not negligent within the
purview of Article 161. At the onset, the Court notes that the present case is one for
damages based on torts, the employer-employee relationship being merely incidental.

The assailed decision of the appellate court held that it was the duty of petitioners to
provide adequate medical assistance to the employees under Art. 161 of the Labor Code

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failing which a breach is committed. Art. 161 provides: Assistance of employer. It shall be
the duty of any employer to provide all the necessary assistance to ensure the adequate
and immediate medical and dental attendance and treatment to an injured or sick
employee in case of emergency.

The IRR did not provide what the phrase adequate and immediate medical attendance
means in relation to an emergency. It would thus appear that the determination of what it
means is left to the employer, except when a full-time registered nurse or physician are
available on-site as required, also under the Labor Code, specifically Art. 157 which
provides:
Emergency Medical and Dental Services. ─ It shall be the duty of every employer
to furnish his employees in any locality with free medical and dental attendance and
facilities consisting of: (a) The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more than two hundred (200) except when
the employer does not maintain hazardous workplaces, xxx xxx

In the present case, there is no allegation that the company premises are
hazardous. Neither is there any allegation on the number of employees the company
has. If Haos testimony would be believed, the company had only 7 regular employees
and 20 contractual employees ─ still short of the minimum 50 workers that an
establishment must have for it to be required to have a full-time registered nurse.

The Court can thus only determine whether the actions taken by petitioners when Bladimir
became ill amounted to the necessary assistance to ensure adequate and immediate
medical . . . attendance to Bladimir as required under Art. 161 of the Labor Code. As
found by the trial court and borne by the records, petitioner Haos advice for Bladimir to,
as he did, take a 3-day rest and to later have him brought to the nearest hospital
constituted adequate and immediate medical attendance that he is mandated, under Art.
161, to provide to a sick employee in an emergency. AT ALL EVENTS, the alleged
negligence of Hao cannot be considered as the proximate cause of the death of Bladimir.

155
 MIGRANT WORKERS’ ACT AND OVERSEAS FILIPINO ACT OF 1995
AND RECRUITMENT AND PLACEMENT

ATCI Overseas Corp. et al v Echin, 2010

FACTS: Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation
in behalf of its principal-co-petitioner, the Ministry of Public Health of Kuwait (the Ministry),
for the position of medical technologist under a two-year contract (MOA), with a monthly
salary of US$1,200.00.

Under the MOA, all newly-hired employees undergo a probationary period of 1 year and
are covered by Kuwaits Civil Service Board Employment Contract No. 2.Respondent was
deployed on February 17, 2000 but was terminated from employment on February 11,
2001, she not having allegedly passed the probationary period.

As the Ministry denied respondents request for reconsideration, she returned to the
Philippines on March 17, 2001, shouldering her own air fare. Respondent filed with the
NLRC a complaint for illegal dismissal against petitioner ATCI as the local recruitment
agency, represented by petitioner, Amalia Ikdal (Ikdal), and the Ministry, as the foreign
principal.

The Labor Arbiter, held that respondent was illegally dismissed and accordingly
ordered petitioners to pay her US$3.6K representing her salary for the three
months unexpired portion of her contract. On appeal of petitioners ATCI and Ikdal, the
NLRC affirmed the Labor Arbiters decision. Petitioners appealed to the CA but the CA
affirmed the decision of the NLRC hence the current petition.

ISSUE: WON petitioner should be liable jointly and solidarily with the principal

RULING: YES. Petitioner should be liable. Petitioner ATCI, as a private recruitment

agency, cannot evade responsibility for the money claims of OFWs which it deploys
abroad by the mere expediency of claiming that its foreign principal is a government
agency clothed with immunity from suit, or that such foreign principals liability must first
be established before it, as agent, can be held jointly and solidarily liable.

In providing for the joint and solidary liability of private recruitment agencies with their
foreign principals, Republic Act No. 8042 precisely affords the OFWs with a recourse and
assures them of immediate and sufficient payment of what is due them. The imposition
of joint and solidary liability is in line with the policy of the state to protect and alleviate
the plight of the working class. Verily, to allow petitioners to simply invoke the immunity
from suit of its foreign principal or to wait for the judicial determination of the foreign
principals liability before petitioner can be held liable renders the law on joint and solidary
liability inutile.

As to petitioners contentions that Philippine labor laws on probationary employment are

not applicable since it was expressly provided in respondents employment contract, that

156
the terms of her engagement shall be governed by prevailing Kuwaiti Civil Service Laws
and Regulations as in fact POEA Rules accord respect to such rules, customs and
practices of the host country, the same was not substantiated.

Indeed, a contract freely entered into is considered the law between the parties who can
establish stipulations, clauses, terms and conditions as they may deem convenient,
including the laws which they wish to govern their respective obligations, as long as they
are not contrary to law, morals, good customs, public order or public policy.

The Philippines does not take judicial notice of foreign laws, hence, they must not only be
alleged; they must be proven. To prove a foreign law, the party invoking it must present
a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of
Court. Documents were given by petitioner to prove the Kuwaiti law. However, these
documents, whether taken singly or as a whole, do not sufficiently prove that respondent
was validly terminated as a probationary employee under Kuwaiti civil service laws.

Respecting Ikdals joint and solidary liability as a corporate officer, the same is in order
too following the express provision of R.A. 8042 on money claims, viz:
Xxx xxx The liability of the principal/employer and the recruitment/placement
agency for any and all claims under this section shall be joint and several. This provision
shall be incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. Xxx xxx If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership for the
aforesaid claims and damages. Petition is DENIED.

157
 Yap v Thenamaris Ship Management et al, 2011

DOCTRINE: Illegally dismissed OFWs should receive salaries for the unexpired term of
their contracts. Under DOLE DO No. 33, s. 1996, salary includes overtime, leave pay and
bonuses.

FACTS: Intermare Maritime Agencies, Inc. hired Yap as an electrician for the vessel M/T
SEASCOUT. The contract was for 12 months. On 23 AUG 2001, Yap commenced his
job. However, around 08 NOV 2001, the vessel was sold. The crewmembers were
informed that they may apply for reembarkation. Yap refused the payment of one-month
basic wage, insisting that he was entitled to the unexpired term of his contract. He opted
for reembarkation, but none was made. Upon his return, he filed a complaint for illegal
dismissal with damages and attorney’s fees. Respondents argued that Yap was validly
terminated due to the sale of the vessel.

LA: The LA held respondents in bad faith when they assured Yap of re-embarkation but
did not provide it. It awarded Yap his salaries for the unexpired portion of the employment
contract.

NLRC: NLRC affirmed the LA’s findings, but modified the award of salaries. It lessened
the amount to 3 months for every year of the unexpired term as provided under Sec. 10
of RA 8042 (Migrant Workers Act). Upon reconsideration, it changed the salary award to
the entire term.

CA: The CA lowered the salary award back to three months for every year of the
unexpired term. In its appeal before the Supreme Court, respondents first raised the issue
that the tanker allowance of US$130.00 should not be included in salaries because it is a
bonus.

ISSUES:
1. W/N Yap should receive salaries for the entire unexpired term of his contract.
2. W/N the tanker allowance should be included in the computation of salaries.

RULING: Petition is GRANTED.

1. YES. In the case of in Serrano v. Gallant Maritime Services and Marlow Navigation Co.
Inc. the Supreme Court held that the clause “or for three months for every year of the
unexpired term, whichever is less” provided in the 5th paragraph of Section 10 of R.A.
No. 8042 is unconstitutional. It violates OFWs right to equal protection of the laws. It
imposes a 3-month cap on the claim of OFWs with an unexpired term of one year or more
in their contracts, a limit not imposed on OFWs whose terms are shorter or local workers.
As a general rule, an unconstitutional act is not a law and it will be treated as having not
been passed.

2. YES. Matters not taken up below cannot be raised for the first time on appeal. They
must be raised seasonably in the proceedings before the lower tribunals. Besides, DOLE
DO No. 33, s. 1996 provides a Standard Employment Contract of Seafarers, in which

158
salary is understood as basic wage, inclusive of overtime, leave pay and other bonuses.
Furthermore, the tanker allowance was not categorized as a bonus, but as part of basic
wage.

159
 Skippers United Pacific v Doza et al, 2012

DOCTRINE: For dismissal to be valid, it must comply with procedural and substantive
due process. Illegally dismissed OFWs are entitled to salaries for the unexpired term of
their contract.

FACTS: Skippers deployed De Gracia, Lata, and Aprosta to work onboard the MV
Wisdom Star. The durations of their contracts were 10 months starting on 17 JUL 1998
for De Gracia, and 12 months starting on 17 APR 1998 for Lata and Aprosta. Doza had
no contract. When Skippers failed to remit their allotments for almost 5 months, they
complained to the Romanian Seafarers Free Union. Yet, Skippers still failed to remit their
DEC 1998 home allotments. On 28 JAN 1999, the seafarers were discharged and
repatriated. They filed for illegal dismissal and prayed for payment of their home
allotment, salaries for the unexpired portion of their contracts, moral damages, exemplary
damages, and attorney’s fees.

In its defense, Skippers alleged that the seafarers’ had demanded immediate repatriation
at 12 NN on 22 JAN 1999. This is evidenced by a telex of Cosmoship MV Wisdom to
Skippers which bore conflicting dates of 22 JAN 1998 and 22 JAN 1999. Since they
supposedly pre-terminated their contracts, Skippers argued the seafarers themselves are
liable for repatriation expenses in accordance with Sec. 19(G) of POEA Memorandum
Circular No. 55, s. 1996. The company admitted non-payment of DEC 1998 home
allotments, but it prayed for the offsetting of such amount with the repatriation expenses.

LA: The LA held that the seafarers voluntarily pre-terminated their contracts. It denied
their prayer for home allotments, on the grounds that these are in the nature of
extraordinary money. The worker has the burden to prove that they should receive such
allotments.

NLRC: The NLRC upheld the LA’s ruling because the seafarers’ were unable to refute
the telex.

CA: The CA considered the telex a self-serving document. It awarded the seafarers with
salaries for 3 months, in accordance with Sec. 10 of RA 8042 (Migrant Workers Act), as
well as attorney’s fees of 10%. No relief was granted to Doza due to lack of factual basis.

ISSUE:
1. W/N the seafarers’ were illegally dismissed.
2. W/N Skippers is liable for home allotment pay.
3. W/N the seafarers should receive salaries for the entire unexpired portion of their
contract.

RULING: Petition is DISMISSED.

1. YES. For dismissal to be considered valid, it must comply with procedural and
substantive due process. Procedural due process consists of the twin requirements of
notice and hearing. The employer must furnish the employee with 2 written notices: (1)

160
the 1st apprises the employee of the acts or omissions for which his dismissal is sought;
and (2) the 2nd informs the employee of the employer’s decision to dismiss him. Before
the issuance of the 2nd notice, the worker must be given an opportunity to be heard. In
this case, there was no written notice furnished to the seafarers’. The only evidence is the
telex claiming that they voluntarily pre-terminated their contracts. Besides being biased
and self-serving, the dates are wrong. The seafarers’ were not even employed yet on 22
JAN 1998.

On the other hand, substantive due process requires that dismissal be made under a just
or authorized cause. Art. 285 of the Labor Code recognizes termination by the employee
through a written notice of resignation to the employer at least 1 month in advance. In the
absence of a written resignation, it is presumed that the employer terminated the
seafarers. If the seafarers’ truly wanted to pre-terminate their contracts, they would have
submitted resignations.

2. YES. Skippers effectively admitted non-remittance of home allotment pay in its position
paper. Contrary to the LA’s ruling that the home allotment pay is in the nature of
extraordinary money, Sec. 8 of POEA Memorandum Circular No. 55, s. 1996, states that
the allotment actually constitutes at least 80% of a seafarer’s salary. For this reason, non-
remittance is equivalent to non-payment of salaries, and Skippers shall be liable to pay
the DEC 1998 home allotment.

3. YES. In the 24 MAR 2009 decision of Serrano v. Gallant Maritime Services and Marlow
Navigation Co. Inc. the Supreme Court struck down Sec. 10 of RA 8042 (Migrant Workers
Act) as unconstitutional. It held that salaries for the entire unexpired portion of the
employment contract should be awarded to illegally dismissed migrant workers. This
decision was given retroactive effect for this case.

161
 International Management Services v Logarta, 2012

Principle: Proper notice to the DOLE within 30 days prior to the intended date of
retrenchment is necessary and must be complied with despite the fact that the worker is
an OFW.

Facts:
Petitioner recruitment agency, International Management Services (IMS), a single
proprietorship owned and operated by Pascual, deployed respondent Logarta to work for
Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection
with general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi
Aramco). Logarta was employed as piping designer for a period of 2 years, with a monthly
salary of eight hundred US dollars.

Due to the reduction of man-hours allotted for cross-country pipeline projects, Petrocon
was constrained to terminate some of its employees, including Logarta. Petrocon sent
Logarta a 30-day notice of termination, with payment of all due benefits in accordance
with the terms and conditions of his employment contract, including his ticket back to the
Philippines.

Before his departure from Saudi Arabia, respondent received his final paycheck from
Petrocon. Upon his return, respondent filed a complaint with the Regional NLRC, Cebu
City, against petitioner as the recruitment agency on the ground of illegal dismissal.

Labor Arbiter Decision: In favor of the respondent

NLRC Decision: Affirmed the decision of the Labor Arbiter, but reduced the amount to
be paid by the petitioner
CA Decision: Petition affirmed decision of NLRC. CA agreed that reason for the
termination was valid but the DOLE was not given a copy of the 30-day notice of
termination.

Issue: Whether or not the 30-day notice to DOLE prior to retrenchment of OFW’s is
necessary? YES

Ruling:
In the case at bar, despite the fact that respondent was employed by Petrocon as an
OFW in Saudi Arabia, still both he and his employer are subject to the provisions of the
Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino
workers, whether employed locally or overseas, enjoy the protective mantle of Philippine
labor and social legislations.

Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or
overseas Filipino worker under Article 283 of the Labor Code.

Thus, retrenchment is a valid exercise of management prerogative subject to the strict

requirements set by jurisprudence:

162
 (1) That the retrenchment is reasonably necessary and likely to prevent business
losses which, if already incurred, are not merely de minimis, but substantial, serious,
actual and real, or if only expected, are reasonably imminent as perceived objectively and
in good faith by the employer;
(2) That the employer served written notice both to the employees and to the
Department of Labor and Employment at least one month prior to the intended date of
retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent
to one month pay or at least 1/2 month pay for every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interest and not to defeat or circumvent the employees' right
to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would
be dismissed and who would be retained among the employees, such as status, . . .
efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

As for the notice requirement, however, contrary to petitioner's contention, proper notice
to the DOLE within 30 days prior to the intended date of retrenchment is NECESSARY
and must be complied with despite the fact that respondent is an overseas Filipino worker.
In the present case, although respondent was duly notified of his termination by Petrocon
30 days before its effectivity, no allegation or proof was advanced by petitioner to
establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent
was terminated. Thus, this requirement of the law was not complied with.

163
 PERT/ CPM Manpower Exponent Co., Inc v Vinuya et al, 2012

Principle: Alteration or substitution of employment contracts duly approved and verified

by the Department of Labor and Employment without the approval of said Department
constitutes Illegal Dismissal as defined by the Labor Code and amended by Migrant
Workers and Overseas Filipinos Act of 1995.

Facts:
Respondents were contracted by the petitioner, PERT/CPM, for deployment to work as
aluminum fabricator/installer in Modern Metal Solution LLC (Modern Metal) in Dubai,
UAE. The contract was for 2 years, approved by POEA, providing 9 working hours a day,
a salary of 1,350 AED with overtime pay, food allowance, free and suitable housing, free
transportation, free laundry, free medical and dental services.

However, in Dubai, Modern Metals gave them appointment letters with terms different
from those they signed in the Philippines – increasing their employment terms, reducing
salaries, allowances, and benefits. The working conditions were also not as promised.
They complained to their agency but to no avail. Due to unbearable living and working
condition, they resigned from their job and indicated personal/family problems as their
reasons.

On March 15, 2008, respondents file a complaint for illegal dismissal against PERT CPM.
The agency alleged that they were not illegally dismissed because they resigned
voluntarily.

Labor Arbiter: Dismissed the petition, ruled that respondents voluntarily resigned
NLRC Decision: Reversed LA decision. Ruled that the respondents had been illegally
dismissed. It stressed that it is illegal for an employer to require its employees to execute
new employment papers, especially those which provide benefits that are inferior to the
POEA-approved contracts.
The agency moved for reconsideration. The respondents, on the other hand, moved for
partial reconsideration, maintaining that their salaries should have covered the unexpired
portion of their employment contracts.
NLRC Decision: Denied the agency's motion for reconsideration, but granted the
respondents' motion. It sustained the respondents' argument that the award needed to
be adjusted, particularly in relation to the payment of their salaries, consistent with the
Court's ruling in Serrano v. Gallant Maritime Services, Inc. The ruling declared
unconstitutional the clause, "or for three (3) months for every year of the unexpired term,
whichever is less," in Section 10, paragraph 5, of R.A. 8042, limiting the entitlement of
illegally dismissed overseas Filipino workers to their salaries for the unexpired term of
their contract or three months, whichever is less.
CA Decision: Dismissed the petition for lack of merit. It upheld the NLRC ruling that the
respondents were illegally dismissed.

Issue:
1. Whether or not respondents were illegally dismissed? YES

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2. Whether or not CA erred in affirming the NLRC’s award to the respondents of their
salaries for the unexpired portion of their employment contracts, pursuant to the Serrano
ruling? NO

Ruling:
1. The CA committed no reversible error and neither did it commit grave abuse of
discretion in affirming the NLRC's illegal dismissal ruling.

The agency and Modern Metal are guilty of contract substitution. The respondents
entered into a POEA-approved two-year employment contract, with Modern Metal
providing among others, as earlier discussed, for a monthly salary of 1350 AED. On April
2, 2007, Modern Metal issued to them appointment letters whereby the respondents were
hired for a longer three-year period and a reduced salary, from 1,100 AED to 1,200 AED,
among other provisions. Then, on May 5, 2007, they were required to sign new
employment contracts reflecting the same terms contained in their appointment letters,
except that this time, they were hired as "ordinary laborer," no longer aluminum
fabricator/installer. The respondents complained with the agency about the contract
substitution, but the agency refused or failed to act on the matter.

Clearly, the agency and Modern Metal committed a prohibited practice and engaged in
illegal recruitment under the law. Article 34 of the Labor Code provides:

Art. 34. Prohibited Practices. — It shall be unlawful for any individual, entity, licensee, or
holder of authority:
(i) To substitute or alter employment contracts approved and verified by the Department
of Labor from the time of actual signing thereof by the parties up to and including the
periods of expiration of the same without the approval of the Secretary of Labor[.]
Further, Article 38 of the Labor Code, as amended by R.A. 8042, 35 defined "illegal
recruitment" to include the following act:
(i) To substitute or alter to the prejudice of the worker, employment contracts
approved and verified by the Department of Labor and Employment from
the time of actual signing thereof by the parties up to and including the
period of the expiration of the same without the approval of the Department
of Labor and Employment.

2. The agency posits that in any event, the Serrano ruling has been nullified by R.A.
No. 10022, entitled "An Act Amending Republic Act No. 8042, Otherwise Known as the
Migrant Workers and Overseas Filipinos Act of 1995, As Amended, Further Improving
the Standard of Protection and Promotion of the Welfare of Migrant Workers, Their
Families and Overseas Filipinos in Distress, and for Other Purposes." It argues that R.A.
10022, which lapsed into law (without the Signature of the President) on March 8, 2010,
restored the subject clause in the 5th paragraph, Section 10 of R.A. 8042. The
amendment, contained in Section 7 of R.A. 10022, reads as follows:

In case of termination of overseas employment without just, valid or authorized cause as

defined by law or contract, or any unauthorized deductions from the migrant worker's

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salary, the worker shall be entitled to the full reimbursement "of" his placement fee and
the deductions made with interest at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

The SC held that the amendment introduced by R.A. 10022 cannot be given retroactive
effect not only because there is no express declaration of retroactivity of the law, but
because the retroactive application will result in an impairment of right that had accrued
to the respondents by virtue of the Serrano Ruling. The SC reiterated that all statutes are
to be construed as having only a prospective application, unless the purpose and intention
of the legislature to give them retrospective effect are expressly declared or are
necessarily implied from the language used.

166
 Hon. Sto. Tomas et al v Salac et al, 2012

Facts:
These consolidated cases pertain to the constitutionality of certain provisions of R.A. No.
8042, or the Migrant Workers and Overseas Filipinos Act of 1995.

Respondents question the constitutionality of Sections 29 and 30, R.A. 8042

Sections 29 and 30 of the Act commanded the Department of Labor and Employment
(DOLE) to begin deregulating within one year of its passage the business of handling the
recruitment and migration of overseas Filipino workers and phase out within five years
the regulatory functions of the Philippine Overseas Employment Administration (POEA).
*Sections 29 and 30 were repealed by RA 8042. Consequently, these 2 cases were
dismissed for being moot and academic.

In this case, the Philippine Association of Service Exporters, Inc. (PASEI) questioned the
validity of the following provisions of RA 8042:
a. Section 6, which defines the term “illegal recruitment”. PASEI claims that the definition
by the law is vague as it fails to distinguish between licensed and non-licensed recruiters;
b. Section 7, which penalizes violations against RA 8042. PASEI argues that the penalties
for simple violations against RA 8042, i.e., mere failure to render report or obstructing
inspection are already punishable for at least 6 years and 1 day imprisonment an a fine
of at least P200k. PASEI argues that such is unreasonable;
c. Section 9, which allows the victims of illegal recruitment to have the option to either file
the criminal case where he or she resides or at the place where the crime was committed.
PASEI argues that this provision is void for being contrary to the Rules of Court which
provides that criminal cases must be prosecuted in the place where the crime or any of
its essential elements were committed;
d. Section 10, which provides that corporate officers and directors of a company found to
be in violation of RA 8042 shall be themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages. PASEI claims that this
automatic liability imposed upon corporate officers and directors is void for being violative
of due process.
RTC Judge Jose Paneda of Quezon City agreed with PASEI and he declared the said
provisions of RA 8042 as void. Secretary Sto. Tomas petitioned for the annulment of the
RTC judgment.

ISSUE: Whether or not Sections 6, 7, 9, and 10 of RA 8042 are void.

HELD: No, they are valid provisions.

a. Section 6: The law clearly and unambiguously distinguished between licensed and non-
licensed recruiters. By its terms, persons who engage in “canvassing, enlisting,
contracting, transporting, utilizing, hiring, or procuring workers” without the appropriate
government license or authority are guilty of illegal recruitment whether or not they commit
the wrongful acts enumerated in that section. On the other hand, recruiters who engage
in the canvassing, enlisting, etc. of OFWs, although with the appropriate government

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license or authority, are guilty of illegal recruitment only if they commit any of the wrongful
acts enumerated in Section 6.
b. Section 7: The penalties are valid. Congress is well within its right to prescribed the
said penalties. Besides, it is not the duty of the courts to inquire into the wisdom behind
the law.
c. Section 9: The Rules on Criminal Procedure, particularly Section 15(a) of Rule 110,
itself, provides that the rule on venue when it comes to criminal cases is subject to existing
laws. Therefore, there is nothing arbitrary when Congress provided an alternative venue
for violations of a special penal law like RA 8042.
d. Section 10: The liability of corporate officers and directors is not automatic. To make
them jointly and solidarily liable with their company, there must be a finding that they were
remiss in directing the affairs of that company, such as sponsoring or tolerating the
conduct of illegal activities.

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 Sameer Overseas Placement Agency Inc v Cabiles, 2014

Facts:
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement
agency. Responding to an ad it published, respondent, Joy C. Cabiles, submitted her
application for a quality control job in Taiwan.

Joy’s application was accepted. Joy was later asked to sign a one year 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 ₱70,000.00 when she signed the
employment contract.Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on
June 26, 1997. She alleged that in her employment contract, she agreed to work as quality
control for one year. In Taiwan, she was asked to work as a cutter.

Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang
from Wacoal informed Joy, without prior notice, that 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 repatriation."

On October 15, 1997, Joy filed a complaint with the National Labor Relations Commission
against petitioner and Wacoal. She claimed that she was illegally dismissed. Sameer
Overseas Placement Agency alleged that respondent's termination was due to her
inefficiency, negligence in her duties, and her "failure to comply with the work
requirements [of] her foreign [employer]." The agency also claimed that it did not ask for
a placement fee of ₱70,000.00. As evidence, it showed Official Receipt No. 14860 dated
June 10, 1997, bearing the amount of ₱20,360.00. Petitioner added that Wacoal's
accreditation with petitioner had already been transferred to the Pacific Manpower &
Management Services, Inc. (Pacific) as of August 6, 1997. Thus, petitioner asserts that
it was already substituted by Pacific Manpower.

Pacific Manpower moved for the dismissal of petitioner’s claims against it. It alleged that
there was no employer-employee relationship between them. Therefore, the claims
against it were outside the jurisdiction of the Labor Arbiter. Pacific Manpower argued that
the employment contract should first be presented so that the employer’s contractual
obligations might be identified. It further denied that it assumed liability for petitioner’s
illegal acts. On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint. Acting
Executive Labor Arbiter Pedro C. Ramos ruled that her complaint was based on mere
allegations.

Joy appealed to the National Labor Relations Commission. In a resolution dated March
31, 2004, the National Labor Relations Commission declared that Joy was illegally
dismissed. The Court of Appeals affirmed the decision of the National Labor Relations
Commission with respect to the finding of illegal dismissal, Joy’s entitlement to the
equivalent of three months worth of salary, reimbursement of withheld repatriation
expense, and attorney’s fees.

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Issue:
WON the termination of Joy was valid and for just cause.

Ruling:
Sameer Overseas Placement Agency failed to show that there was just cause for causing
Joy’s dismissal. The employer, Wacoal, also failed to accord her due process of law.

Workers are entitled to substantive and procedural due process before termination. They
may not be removed from employment without a valid or just cause as determined by law
and without going through the proper procedure. By our laws, overseas Filipino workers
(OFWs) may only be terminated for a just or authorized cause and after compliance with
procedural due process requirements.

Petitioner’s allegation that respondent was inefficient in her work and negligent in her
duties may, therefore, constitute a just cause for termination under Article 282(b), but only
if petitioner was able to prove it. The burden of proving that there is just cause for
termination is on the employer. "The employer must affirmatively show rationally
adequate evidence that the dismissal was for a justifiable cause." Failure to show that
there was valid or just cause for termination would necessarily mean that the dismissal
was illegal.

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 Racelis v United Philippines Lines inc, 2014

Doctrine: the beneficiaries of a deceased seafarer may be able to claim death benefits
for as long as they are able to establish that (a) the seafarer’s death is work-related, and
(b) such death had occurred during the term of his employment contract

Facts: Complainant Conchita J. Racelis, as the surviving spouse of Rodolfo L. Racelis,

initiated a claim for death benefits pursuant to the International Transport Workers’
Federation-Collective Bargaining Agreement (ITWF-CBA), of which her husband was a
member. However, her claim was denied by the employer on the ground that the death
was not work-related as it was due to Brainstem (pontine) Cavernous Malformation, which
was congenital and it had familiar strains according to a doctor. Thus, complainant
instituted a labor case against them.

Previously, Rodolfo L. Racelis “was recruited and hired by respondent United Philippine
Lines, Inc. (UPL) for its principal, respondent Holland America Lines, Inc. (HAL) to serve
as ‘Demi Chef De Partie’ on board the vessel MS Prinsendam, with a basic monthly salary
of US$799.55.5 The Contract of Employment was for a term of 4 months, extendible for
another 2 months upon mutual consent. After complying with the required pre-
employment medical examination where he was declared fit to work, Rodolfo joined the
vessel on January 25, 2008. Prior thereto, Rodolfo was repeatedly contracted by said
respondents and was deployed under various contracts since December 17, 1985.”

On his last employment, Rodolfo experienced severe pain in his ears and high blood
pressure causing him to collapse while in the performance of his duties. He consulted a
doctor in Argentina and was medically repatriated on February 20, 2008 for further
medical treatment. Upon arrival in Manila, he was immediately brought to Medical City,
Pasig City, where he was seen by a company designated physician, Dr. Gerardo Legaspi,
M.D. (Dr. Legaspi), and was diagnosed to be suffering from Brainstem (pontine)
Cavernous Malformation. He underwent surgery twice for the said ailment but developed
complications and died on March 2, 2008.

Rodolfo's surviving spouse, herein petitioner, sought to claim death benefits pursuant to
the (ITWF-CBA), of which her husband was a member, but to no avail. Consequently,
she filed a Complaint for death benefits, burial assistance, moral and exemplary
damages, and attorney's fees against herein respondents before the LA.

The Labor Arbiter (LA) ruled in favor of petitioner, and thereby ordered respondents to
pay her death benefits pursuant to the ITWFCBA in the amount of US$60,000.00, burial
assistance in the amount of US$1,000.00, and attorney's fees equivalent to 10% of the
total monetary awards. The NLRC likewise affirmed the LA decision. However, the CA
granted respondents' certiorari petition, and thereby annulled and set aside the ruling of
the NLRC granting petitioner's claim for death benefits.

Issue: WON United Philippine Lines can be held liable for the death benefits of Rodolfo
Racelis,

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Ruling: The employer is liable. “Deemed incorporated in every seafarer’s employment
contract, denominated as the POEA-SEC or the Philippine Overseas Employment
Administration-Standard Employment Contract, is a set of standard provisions
determined and implemented by the POEA, called the ‘Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,’ which
are considered to be the minimum requirements acceptable to the government for the
employment of Filipino seafarers on board foreign ocean-going vessels.” In the 2000
POEA-SEC, it stipulates that “the beneficiaries of a deceased seafarer may be able to
claim death benefits for as long as they are able to establish that (a) the seafarer’s death
is work-related, and (b) such death had occurred during the term of his employment
contract.”

Under the 2000 POEA-SEC, “work-related injury” is defined as “injury(ies) resulting in

disability or death arising out of and in the course of employment.” On the other hand,
“work-related illness” is defined as “any sickness resulting to disability or death as a result
of an occupational disease listed under Section 32-A of this contract with the conditions
set therein satisfied.”

Jurisprudence provides that “[t]he words ‘arising out of’ refer to the origin or cause of the
accident, and are descriptive of its character, while the words ‘in the course of’ refer to
the time, place, and circumstances under which the accident takes place. As a matter of
general proposition, an injury or accident is said to arise ‘in the course of employment’
when it takes place within the period of the employment, at a place where the employee
reasonably may be, and while he is fulfilling his duties or is engaged in doing something
incidental thereto.”

Here, the death of the seafarer is evidently work-related. “While it is true that Brainstem
(pontine) Cavernous Malformation is not listed as an occupational disease under Section
32-A of the 2000 POEA-SEC, Section 20 (B) (4) of the same explicitly provides that ‘[t[he
liabilities of the employer when the seafarer suffers work-related injury or illness during
the term of his contract are as follows: (t)hose illnesses not listed in Section 32 of this
Contract are dispuatbly presumed as work related.’ In other words, the 2000 POEA-SEC
‘has created a disputable presumption in favor of compensability [,] saying that those
illnesses not listed in Section 32 are disputably presumed as work-related. This means
that even if the illness is not listed under Section 32-A of the POEA-SEC as an
occupational disease or illness, it will still be presumed as work-related, and it becomes
incumbent on the employer to overcome the presumption.’ This presumption should be
overturned only when the employer’s refutation is found to be supported by substantial
evidence, which, as traditionally defined is “such relevant evidence as a reasonable mind
might accept as sufficient to support a conclusion.”

Further, the seafarer’s death occurred during the term of employment. “While it is true
that a medical repatriation has the effect of terminating the seafarer’s contract of
employment, it is, however, enough that the work-related illness, which eventually

172
becomes the proximate cause of death, occurred while the contract was effective for
recovery to be had.”

The 1987 Constitution affords full protection to labor. “Consistent with the State’s avowed
policy to afford full protection to labor as enshrined in Article XIII of the 1987 Philippine
Constitution, the POEA-SEC was designed primarily for the protection and benefit of
Filipino seafarers in the pursuit of their employment on board ocean-going vessels. As
such, it is a standing principle that its provisions are to be construed and applied fairly,
reasonably, and liberally in their favor.” Guided by these principles, it has been held that
“a medical repatriation case constitutes an exception to the second requirement under
Section 20 (A) (1) of the 2000 POEA-SEC, i.e., that the seafarer’s death had occurred
during the term of his employment, in view of the terminative consequences of a medical
repatriation under Section 18 (B) of the same. In essence, the Court held that under such
circumstance, the work-related death need not precisely occur during the term of his
employment as it is enough that the seafarer’s work-related injury or illness which
eventually causes his death had occurred during the term of his employment.”

As for the award, respondents never deny and therefore admitted that “the late Rodolfo’s
membership in the AMOSUP that had entered into a collective bargaining agreement with
HAL, or the ITWF-CBA” is applicable. Its provisions therefore must prevail over the
standard terms and benefits formulated by the POEA in its Standard Employment
Contract. Hence, the NLRC’s award of US$60,000.00 as compensation for the death of
Rodolfo in accordance with Article 21.2.1 of the ITWF-CBA was in order. The same holds
true for the award of burial assistance in the amount of US$1,000.00 which is provided
under Section 20 (A) (4) (c) of the 2000 POEA-SEC. Moreover, conformably with existing
case law, the NLRC’s grant of attorney’s fees in the amount of US$6,100.00 was called
for since petitioner was forced to litigate to protect her valid claim. Where an employee is
forced to litigate and incur expenses to protect his right and interest, he is entitled to an
award of attorney’s fees equivalent to 10% of the award

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 Pentagon International Shipping Services v CA, 2015

Doctrine:. Before a transfer of accreditation can be effected, the transferee agency

should have to comply with the requirements for accreditation.

Facts: Pentagon, a domestic corporation, was a private manning agency licensed by

the POEA to engage in the recruitment of seafarers to service the crewing and
personnel management needs of shipping companies accredited to it. Respondent JDA
Inter-Phil, also a domestic corporation, was similarly engaged in the recruitment of
seafarers.

On March 27, 1998, Pentagon hired respondents Madrio and Rubiano as chief officer
and second engineer, respectively, in behalf of its foreign principal, Baleen Marine, a
corporation based in Singapore. When their 10-month contract expired, they were
repatriated to the Philippines. Alleging non-payment and underpayment of wages, and
claiming damages and attorney's fees, they separately brought claims against Pentagon
and the owners and managers of Baleen Marine, stating that Pentagon and Baleen
Marine had reduced their monthly gross salary by 20% without the prior approval by the
POEA; and that Pentagon and Baleen Marine had not paid their salaries from November
1, 1998 until their repatriation on March 24, 1999.

Pentagon denied liability, countering that it had ceased to be the manning agency of
Baleen Marine effective October 1, 1998; that on June 25, 1998, its Executive Vice-
President, Meynardo Bugia, Jr., had met with Baleen Marine in Singapore to notify the
latter that it had been meanwhile appointed by Neptank Bunkering Services Pte., Ltd.
as its exclusive local manning agency; that as one of the conditions of its appointment,
it was to immediately sever its manning contract with Baleen Marine; and that on
October 9, 1998, Baleen Marine had appointed JDA Inter-Phil as its new local agent for
Baleen Marine's vessels NP Trader No. 3 and NP Prima.

On its part, JDA Inter-Phil insisted that although it had applied with the POEA for the
transfer and accreditation of Baleen Marine's vessels in its favor, it withdrew the
application and did not execute an affidavit of assumption and responsibility as required;
that, consequently, Pentagon continued to be jointly and severally liable with Baleen
Marine for the money claims of Madrio and Rubiano. IHTE

Issues: Whether or not there was a valid substitution of the manning agent from
Pentagon to JDA Inter-Phil.

Ruling : No. To determine the pivotal issue, we review the guidelines set by law in the
accreditation of a principal by a manning agency. Rule I, Book III of the Rules and
Regulations Governing Overseas Employment states the following:
Section 2. Requirements for Accreditation. — An agency
applying for the accreditation of its principals or projects shall submit the
following:
b. For a Manning Agency for its Principals

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 (1) Authenticated special power of attorney and
manning agreement;
(2) Crew complement and wages;
(3) List of vessels and their particulars; and
(4) Other documents which the Administration may find
necessary.
Section 3. Verification or Authentication of Documents. —
Whenever required and determined by the Secretary, verification or
authentication of documents for accreditation of principals or projects
shall be undertaken by the following:
b. Authentication of documents at the site of
employment may be undertaken by the appropriate official
of any of the designated Ministries/Office of the Host
countries. \
Requirements for accreditation shall not be
authenticated if basic documents are signed by the
authorized officials of both the hiring company and its local
agent in the presence of any member of the POEA
Directorate or duly designated officers of the
Administration.
Section 8. Approval and Validity of Accreditation. — The
Administration shall issue to the agency an accreditation certificate for
its principal or project after approval of the accreditation request.
Full accreditation shall be valid for a maximum period of two (2)
years from date of issuance, subject to renewal.
Provisional accreditation may be granted for a period of ninety
(90) days for a principal or a project that meets the accreditation
requirements substantially. (Emphasis supplied)

A local manning agency seeking accreditation of its foreign principal is mandated to

submit the requirements listed under Section 2, supra. The use of the imperative
word shall in the provision has the invariable significance to impose the enforcement of
an obligation especially where public interest is involved. While the list is not exhaustive,
the POEA identified the foremost requisite to be the authenticated special power of
attorney and manning agreement. This identification is primarily due to the onerous
responsibility assumed by the manning agency under Section 10 of the Migrant
Workers' Act of 1995, to wit:

SEC. 10. MONEY CLAIMS. — . . .

The liability of the principal/employer and the
recruitment/placement agency for any and all claims under this section
shall be joint and several. This provision shall be incorporated in the
contract for overseas employment and shall be a condition precedent
for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable
for all money claims or damages that may be awarded to the workers. If

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 the recruitment/placement agency is a juridical being, the corporate
officers and directors and partners as the case may be, shall themselves
be jointly and solidarily liable with the corporation or partnership for the
aforesaid claims and damages.
Such liabilities shall continue during the entire period or
duration of the employment contract and shall not be affected by
any substitution, amendment or modification made locally or in a
foreign country of the said contract.

The law clearly mandates that the special power of attorney and manning agreement
should be authenticated, save only when the authorized officials of both the principal
or hiring company and its local agent signed the document in the presence of any
member of the POEA Directorate or duly designated officers of the POEA.

As regards the transfer of accreditation, the following provisions apply, thus:

Section 6. Transfer of Accreditation. — The accreditation of a
principal may be transferred to another agency provided that transfer
shall not involve any diminution of wages and benefits of workers.
The transferee agency in these instances shall comply with the
requirements for accreditation and shall assume full and complete
responsibility to all contractual obligations of the principals to its workers
originally recruited and processed by the former agency.
Prior to the transfer of accreditation, the Administration shall
notify the previous agency and principal of such application.
Section 7. Actions on Applications for Accreditation of
Projects Whose Contracting Partners or Principals Have
Outstanding Obligations. — Applications for the transfer of
accreditation of principals or projects shall be acted by the
Administration upon submission of all requirements by the new
transferee agency.
. . . . (Emphasis supplied)

In light of the foregoing, there was no effective transfer of agency from Pentagon to JDA
Inter-Phil. Even assumingarguendo that JDA Inter-Phil did not withdraw its application
for accreditation with the POEA, there was still no valid transfer of agency to speak of
in the first place because JDA Inter-Phil did not submit the required authenticated
special power of attorney and manning agreement. The minutes of the October 9, 1998
meeting could not, by any stretch of the imagination, supplant this mandatory
requirement..

Verily, the minutes of any meeting are simply the notes or written record of the meeting,
which usually describe what transpire during the meeting, identify the attendees, and
present the statements and related responses or resolutions of the issues discussed.
Often, the minutes are terse and meant to record only the basic information, like the
actions discussed and the decisions made. In contrast, the special power of attorney is
the grant of authority by the principal to the agent to act on a particular or specific matter,

176
while the manning agreement states, among others, the responsibilities of both principal
and manning agencies with respect to the employment of seafarers.

Although we do not preclude the possibility that, as Pentagon posits, JDA Inter-Phil had
really agreed to the transfer of accreditation, it remains that the agreement to do so did
not ultimately come to fruition. We cannot but hold that the agreement reached during
the meeting was only a preliminary step in the transfer of accreditation, and would not
have standing in the POEA for the purpose intended. \

Although JDA Inter-Phil undertook in the meeting of October 1, 1998 to assume the
responsibility as the local agent to Baleen Marine, the actual transfer of the accreditation
would not be completed without JDA Inter-Phil's compliance with the requirements
under the aforementioned rules. What actually happened between the time the meeting
took place and the eventual withdrawal of the application by the JDA Inter-Phil remained
to be mere conjecture. Nevertheless, Madrio and Rubiano should not be prejudiced by
any purported transfer of accreditation or agreement that they were not privy to. For
sure, Pentagon remained under the law the only recognized manning agent of Baleen
Marine.

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 Austria v Crystal Shipping, 2016

CONCEPT: Compensability of an ailment does not depend on whether the inquiry of

disease was pre-existing at the time of the employment but rather if the disease or injury
is work-related or aggravated his condition.

FACTS:
Albert Austria was hired as Chief Cook by Crystal Shipping through its manning agent,
Larvik Shipping. His employment was to run for a period of eight (8) months as evidenced
by his Employment Contract, which also provides that Austria was covered by the
Norwegian International Ship Register (NIS) CBA. Before the execution of the contract,
petitioner underwent a Pre-Employment Medical Examination (PEME), and since he was
certified as fit to work, he commenced his job as Chief Cook in board M/V Yara Gas on
August 27, 2008.

Sometime in the last week of September 2008, while on board the vessel, he started
suffering from chronic cough with excessive phlegm and difficulty in breathing. Upon
arrival in Germany, he was referred for medical examination and it was fund that he was
suffering from Bronchial Catarrh/Bronchitis; Pharynx Irritation. Notwithstanding this
finding, he was certified by the physician as fit for duty and so he resumed work. On
January 2009, he was confined at ZorgSaam Hospital and was diagnosed with Dilated
Cardiomyopathy secondary to Viral Myocarditis, a condition that would require further
medical treatment. Petitioner was then sent bank to the Philippines and was immediately
confined at the Metropolitan Medical Center. It was found that petitioner was suffering
from Bicuspid Aortic Stenosis, rendering him unfit for duty.

Austria sought for the payment of permanent disability benefits, claiming that his illness
that rendered him totally unfit for any sea duty is work-related. Respondent Crystal
Shipping refused to acknowledge that they are liable under the NIS CBA, citing the
medical report of the company designated physician that his condition is congenital in
nature and is not caused or aggravated by his work as Chief Cook. This prompted Austria
to initiate, among others, an action for recovery of permanent disability benefits in
accordance with the NIS CBA.

ISSUE: Whether or not petitioner is entitled to full disability compensation under the NIS
CBA.

RULING:
Yes. The material statutory provisions are Articles 191-193 of the Labor Code, in relation
with Rule X of the Rules and Regulations Implementing Book IV of the Labor Code. By
contract, the POEA-SEC and the parties’ CBA bind the seaman and his employer to each
other.

For disability to be compensable under Section 20(B) of the 2000 POEA-SEC, two
elements must concur: (1) the injury or illness must be work-related, and (2) work-related
injury or illness must have existed during the term of the seafarer’s employment contract.

178
In other words, to be entitled to compensation and benefits under this provision, it must
also be shown that there is a casual connection between the seafarer’s illness or injury
and the work for which he had been contracted. For an occupational disease and the
resulting disability or death to be compensable, all of the following conditions must be
satisfied: (1) seafarer’s work must involve the risks described herein. (2) disease was
contracted as a result of the seafarer’s exposure to the described risks, (3) disease was
contracted within aperiod of exposure and under such other factors necessary to contract
it. (4) no notorious negligence on the part of the seafarer. (Nisda vs Sea Serve Maritime
Agency)

Petitioner was employed as Chief Cook, which constantly exposes him to heat while
preparing food for the entire crew all throughout the day while he was under employ. The
steady and prolonged exposure to heart naturally causes exhaustion which could unduly
burden his heart and interfere with the normal functioning of his cardio-vascular system.
Even if it were shown that petitioner’s condition is congenital in nature, it does not
automatically take his ailment away from purview of compensability. Pre-existence of an
illness does not irrevocably bar compensability because disability laws still grant the same
provided seafarer’s working conditions bear casual connection with his illness.
Petitioner’s working environment constantly exposed him to factors that could aggravate
his heart condition.

Compensability of an ailment does not depend on whether the inquiry of disease was pre-
existing at the time of the employment but rather if the disease or injury is work-related or
aggravated his condition. The degree of contribution of the employment to the worsening
of the seafarer’s condition is not significant to the compensability of the illness.

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 Asian International Manpower Services, Inc v DOLE, 2016

CONCEPT: Advertisement for Overseas Jobs for the purpose of manpower pooling is
permitted even without the need of prior approval from the Philippine Overseas
Employment Administration. (Sections 1 and 2 of Rule VII, Part II of the 2002 POEA
Rules)

FACTS:
Pursuant to a surveillance order, the Anti-illegal Recruitment Branch of the Philippine
Overseas Employment Agency (POEA), conducted a surveillance of Asian International
Manpower Services, Inc. (AIMS) on November 8, 2006. The surveillance is for the
purpose of determining on whether AIMS was operating as a recruitment agency despite
the cancellation of its license on August 28, 2006. The surveillance did not reveal any
information, therefore another surveillance was performed. On the second surveillance
performed on February 20, 2007, posing as applicants, Atty. Abbang and Alogoc, inquired
as to the requirement for the position of executive staff, and a lady clerk of AIMS handed
them a flyer. Through the flyer, they learned that AIMS was hiring hotel workers for
deployment to Macau and grape pickers for California. The POEA operatives later
confirmed through the POEA Verification System that AIMS had regained its license and
good standing on December 6, 2006, but it had no approved job orders yet at that time.

The POEA Administrator Rosalinda Baldoz ruled that on the basis of the second
Surveillance Report, AIMS was liable for misrepresentation under Section 2(e), Rule I,
Part VI of the 2002 POEA Rules, since the POEA records showed that AIMS had no job

Section 2. Grounds for imposition of administrative sanctions:

xxx
e. Engaging in act/s of misrepresentation in connection with recruitment
and placement of workers, such as furnishing or publishing any false notice,
information or document in relation to recruitment or employment;

orders to hire hotel workers for Macau, nor grape pickers for California, as its flyer
allegedly advertised.

AIMS filed a motion for reconsideration, stating that their right to due process was violated
because the POEA did not furnish them with a copt of the Second Surveillance Report
dated on February 21, 2007, which was the basis of the POEA Administrator’s factual
findings. Department of Labor and Employment and Court of Appeals affirmed the order
of POEA.

ISSUE: Whether or not Asian International Manpower Services, INC is liable under
Section 2(e) Rule I, Part VI of the 2002 POEA Rules.

RULING:

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No. AIMS points out that the flyer advertising the jobs in Macau and California was never
presented or made part of the record, and neither was the AIMS lady clerk who allegedly
distributed the same even identified, as AIMS demanded. Besides, granting that AIMS
did advertise with flyers for hotel workers or grape pickers, for which it allegedly had no
existing approved job orders, it is provided in Sections 1 and 2 of Rule VII (Advertisement
for Overseas Jobs), Part II of the 2002 POEA Rules that the said activity is permitted for
manpower pooling purposes, without the need of prior approval from the POEA, upon the
following conditions:
(1)it is done by a licensed agency.
(2)the advertisement indicates in bold letters that it is for manpower pooling only
(3)no fees are collected from the applicants
the name, address, and POEA license number of the agency, name and worksite of the
prospective registered/accredited principal and the skill categories and qualification
standards are indicated

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 Dagasdas v Grand Placement & General Services Corp, 2017

Principle: Security of tenure remains even if employees(OFW) work in a different

jurisdiction. Because employment contracts of OFWs are perfected in the Philippines,
and following the principle of lex loci contractus, these contracts are governed by our
laws, primarily the Labor Code of the Philippines and its implementing rules and
regulations.

Facts: GPGS is a licensed recruitment or placement agency in the Philippines while

Saudi Aramco (Aramco) is its counterpart in Saudi Arabia. On the other hand, Industrial
& Management Technology Methods Co. Ltd. (ITM) is the principal of GPGS, a company
existing in Saudi Arabia.

GPGS employed Dagasdas as Network Technician under a 1 yr contract as Network

Technician. Nonetheless, his Job Offer indicated that he was accepted by Aramco and
ITM for the position of "Supt." Dagasdas contended that although his position under his
contract was as a Network Technician, he actually applied for and was engaged as a
Civil Engineer, that he had a degree in Civil Engineering, and his work experiences were
all related to this field. Purportedly, the position of Network Technician was only for the
purpose of securing a visa for Saudi Arabia because ITM could not support visa
application for Civil Engineers.

Dagasdas arrived in Saudi Arabia and signed with ITM a new employment contract
which stipulated that the latter contracted him as Superintendent or in any capacity within
the scope of his abilities. Under this contract, Dagasdas shall be placed under a three-
month probationary period; and, this new contract shall cancel all contracts prior
to its date from any source.

When Dagasdas reported at ITM's worksite in he was allegedly given tasks suited for a
Mechanical Engineer, which were foreign to the job he applied for and to his work
experience. Seeing that Dagasdas would not be able to perform well in his work ITM gave
him a termination notice and he was dismissed pursuant to his new contract, which
provided that ITM reserved the right to terminate any employee within the three-month
probationary period without need of any notice to the employee.

Before his repatriation, Dagasdas signed a Statement of Quitclaim with Final Settlement
stating that ITM paid him all the salaries and benefits for his and ITM was relieved from
all financial obligations due to Dagasdas.

Dagasdas returned to the Philippines and filed an illegal dismissal case against GPGS,
ITM, and Aramco. GPGS, ITM, and Aramco countered that Dagasdas was aware that he
was employed as Network Technician but he could not perform his work in accordance
with the standards of his employer and he conformed to his termination as evidenced by
his quitclaim.

Issue: Was Dagasdas validly dismissed from work?

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Ruling:
YES, the new contract which was used as basis for dismissing Dagasdas is void.
1.) Dagasdas' new contract is in clear violation of his right to security of tenure.
ITM terminated him for violating clause 17.4.3 of his new contract.
17.4 The Company reserves the right to terminate this agreement without serving any
notice to the Consultant in the following cases:
xxx xxx xxx
17.4.3 If the Consultant is terminated by company or its client within the probation period
of 3 months
The above-cited clause is contrary to law because as discussed, our Constitution
guarantees that employees, local or overseas, are entitled to security of tenure. To allow
employers to reserve a right to terminate employees without cause is violative of this
guarantee of security of tenure.

Moreover, even assuming that Dagasdas was still a probationary employee when he was
terminated, his dismissal must still be with a valid cause. His dismissal may be allowed
only if there is just cause or such reason to conclude that the employee fails to qualify as
regular employee pursuant to reasonable standards made known to the employee at the
time of engagement.

Here, ITM failed to prove, in the contract he signed while still in the Philippines, Dagasdas
was employed as Network Technician; on the other hand, his new contract indicated that
he was employed as Superintendent. However, no job description — or such duties and
responsibilities attached to either position — was adduced in evidence. It thus means that
the job for which Dagasdas was hired was not definite from the beginning.

2.) Dagasdas was not afforded due process when he was dismissed from work.
The employer must give the concerned employee at least two notices before his or her
termination. Aside from the notice requirement, the employee must be accorded the
opportunity to be heard.

Here, he was simply given a notice of termination. In fact, it appears that ITM intended
not to comply with the twin notice requirement. As above-quoted, under the new contract,
ITM reserved in its favor the right to terminate the contract without serving any notice to
Dagasdas in specified cases, which included such situation where the employer decides
to dismiss the employee within the probationary period.

3.) The employee’s waiver or quitclaim does not preclude him from filing a suit.
Unless it can be established that the person executing the waiver voluntarily did so, with
full understanding of its contents, and with reasonable and credible consideration, the
same is not a valid and binding undertaking. Moreover, the burden to prove that the waiver
or quitclaim was voluntarily executed is with the employer.

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In this case, however, neither did GPGS nor its principal, ITM, successfully discharged
its burden. GPGS and/or ITM failed to show that Dagasdas indeed voluntarily waived his
claims against the employer.

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