Вы находитесь на странице: 1из 102

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 85519 February 15, 1990 UNIVERSITY OF STO.

TOMAS, FR. MAXIMO MARINA O.P. AND GILBERTO L. GAMEZ, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, HONORABLE LABOR ARBITER BIENVENIDO S. HERNANDEZ AND BASILIO E. BORJA, respondents. Abad, Leao & Associates for petitioners. Antonio B. Fidelino for private respondent.

GANCAYCO, J.: The herein private respondent Dr. Basilio E. Borja was first appointed as "affiliate faculty" in the Faculty of Medicine and Surgery at the University of Sto. Tomas (UST for short) on September 29, 1976. In the second semester of the school year 1976-77 he was appointed instructor with a load of twelve (12) hours a week. He was reappointed instructor for the school year 1977-78 with a load of nine (9) hours a week in the first semester and two (2) hours a week in the second. On June 10, 1978 he was appointed as Instructor III for the school year 1978-79. His load for the first semester was eight (8) hours a week, and for the second semester, seven (7) hours a week. On March 19, 1979 Dean Gilberto Gamez observed that Dr. Borja should not be reappointed based on the evaluation sheet that shows his sub-standard and inefficient performance. 1 Nevertheless in view of the critical shortage of staff members in the Department of
Neurology and Psychiatry Dr. Gamez recommended the reappointment of Dr. Borja, after informing the latter of the negative feedbacks regarding his teaching and his promise to improve his performance. Thus on July 27, 1979 he was extended a reappointment as Instructor III in the school year 1979-80. He was given a load of six (6) hours a week. In all these appointments he was a part time instructor.

At the end of the academic year, it appearing that Dr. Borja had not improved his performance in spite of his assurances of improvement, his reappointment was not recommended. In July, 1982 he filed a complaint in the National Labor Relations Commission (NLRC for short) for illegal dismissal against the UST. After the submission of the pleadings and due proceedings the labor arbiter rendered a decision on July 19, 1984, the dispositive part of which reads as follows:

WHEREFORE this Office finds in favor of the complainant. The respondents (sic) university are hereby ordered to effect the immediate reinstatement of complainant to his former position with full backwages, rights and benefits appertaining thereto. Respondent university is likewise ordered to pay the complainant the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) as and by way of moral damages and another 1 0% of the gross amount due him, and as and by way of attorney's fees. Respondents are hereby ordered to effect this decision immediately.
2

The UST appealed therefrom to the NLRC which in due course rendered a decision on September 30, 1988, modifying the appealed decision as follows: WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED with a modification limiting the backwages to three (3) years without qualification or deduction, computed at P660.00 per month, ordering respondents to pay complainant P100,000.00 as and for actual or compensatory damages, ordering respondents to pay complainant P300,000.00 as and for moral damages, and further ordering them to pay complainant P100,000.00 as and for exemplary damages. Finally, respondents are ordered to pay to complainant the sum of ten (10%) percent of the total sum due as and for attorney's fees. 3 Hence the instant petition for certiorari and prohibition with a prayer for the issuance of a writ of preliminary injunction and restraining order that was filed by the UST and its officers wherein it is alleged that the public respondent NLRC committed the following errors: I THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED SERIOUS REVERSIBLE ERRORS OF SUBSTANCE AMOUNTING TO GRAVE ABUSE OF DISCRETION AND/OR LACK OR EXCESS OF JURISDICTION IN FINDING THAT BASILIO E. BORJA ACQUIRED TENURE, THE SAID FINDING BEING CLEARLY CONTRARY TO THE EVIDENCE AT HAND AND DEVOID OF BASIS IN LAW. II THE HONORABLE NLRC COMMITTED A SERIOUS AND REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT THE SERVICES OF BASILIO E. BORJA HAD BEEN CONSTRUCTIVELY TERMINATED, HIS APPOINTMENT HAVING MERELY LAPSED IN ACCORDANCE WITH ITS TERMS AS ACCEPTED BY THE COMPLAINANT-APPELLEE BORJA. III

THE HONORABLE NLRC COMMITTED A SERIOUS AND GRAVE ERROR IN AFFIRMING, ALBEIT REDUCING THE AWARD OF THE HONORABLE LABOR ARBITER A QUO OF CLEARLY EXCESSIVE, UNJUST, UNCONSCIONABLE AND SHOCKING MORAL DAMAGES OF P300,000.00 AND IN AWARDING MOTU PROPIO EXEMPLARY DAMAGES IN THE AMOUNT OF P100,000.00 IN GRAVE ABUSE OF ITS DISCRETION AMOUNTING TO EXCESS OF JURISDICTION. 4 The petition is impressed with merit. In the questioned decision of the public respondent NLRC it found that private respondent had earned to his credit eight (8) semesters or four (4) academic years of professional duties with the UST and that he has met the requirements to become a regular employee under the three (3) years requirement in the Manual of Regulations for Private Schools. The appealed decision is correct insofar as it declares that it is the Manual of Regulations for Private Schools, not the Labor Code, that determines the acquisition of regular or permanent status of faculty members in an educational institution, but the Court disagrees with the observation that it is only the completion of three (3) years of service that is required to acquire such status. According to Policy Instructions No. 11 issued by the Department of Labor and Employment, "the probationary employment of professors, instructors and teachers shall be subject to standards established by the Department of Education and Culture." Said standards are embodied in paragraph 75 of the Manual of Regulations for Private Schools, to wit: 75. Full time teachers who have rendered three consecutive years of satisfactory service shall be considered permanent." (Emphasis supplied) The legal requisites, therefore, for acquisition by a teacher of permanent employment, or security of tenure, are as follows: 1) the teacher is a full time teacher; 2) the teacher must have rendered three (3) consecutive years of service; and 3) such service must have been satisfactory. Now, the Manual of Regulations also states that "a full-time teacher" is "one whose total working day is devoted to the school, has no other regular remunerative employment and is paid on a regular monthly basis regardless of the number of teaching hours" (Par. 77); and that in college, "the nominal teaching load of a full-time instructor shall be eighteen hours a week" (par. 78). It follows that a part-time member of the faculty cannot acquire permanence in employment under the Manual of Regulations in relation to the Labor Code.

Hence, the crucial question is whether or not the private respondent was a full-time or parttime member of the faculty during the three (3) years that he served in the petitioneruniversity's College of Medicine. Stated otherwise, the question is (1) whether or not the said respondent's "total working day ..... (was) devoted to the school" and he had "no other regular remunerative employment" and was "paid on a regular monthly basis regardless of the number of teaching hours;" and/or (2) whether or not his normal teaching load was eighteen (18) hours a week. It cannot be said that respondent's total working day was devoted to the school alone. It is clear from the record that he was practising his profession as a doctor and maintaining a clinic in the hospital for this purpose during the time that he was given a teaching load. In other words, he had another regular remunerative work aside from teaching. His total working day was not, therefore, devoted to the school. Indeed, his salaries from teaching were computed by the respondent Commission itself at only an average of P660.00 per month; he, therefore, had to have other sources of income, and this of course was his selfemployment as a practising psychiatrist. That the compensation for teaching had to be averaged also shows that he was not paid on a regular monthly basis. Moreover, there is absolutely no evidence that he performed other functions for the school when not teaching. All things considered, it would appear that teaching was only a secondary occupation or "sideline," his professional practice as a psychiatrist being his main vocation. The record also discloses that he never had a normal teaching load of eighteen (18) hours a week during the time that he was connected with the university. The only evidence on this equally vital issue was presented by the petitioner through the affidavit of Dr. Gilberts Gamez who was the dean of the medical school during the time material to the proceedings at bar. His sworn declaration is to the effect that as "affiliate faculty" member of the Department of Neurology and Psychiatry from September 29,1976, private respondent had no teaching functions: that in fact, when he was appointed in September, 1976, classes for the first semester were already nearing their end; that as "affiliate faculty" he was merely an observer acquainting himself with the functions of an instructor while awaiting issuance of a formal appointment as such; that in the school year 1977-78 he had a teaching load of nine (9) hours a week in the first semester and two (2) hours a week in the second semester; that in the school year 1978-1979 he had a load of eight (8) hours a week in the first semester and seven (7) hours a week in the second semester; that in the school year 19791980 he had a load of six (6) hours a week in each semester. This evidence does not appear to have been refuted at all by the private respondent, and has inexplicably been ignored by public respondent. No discussion of this particular point is found in the decisions of the Labor Arbiter or the NLRC. The private respondent, therefore, could not be regarded as a full- time teacher in any aspect. He could not be regarded as such because his total working day was not devoted to the school and he had other regular remunerative employment. Moreover, his average teaching load was only 6.33 hours a week. In view of the explicit provisions of the Manual of Regulations above-quoted, and the fact that private respondent was not a full- time teacher, he could not have and did not become a permanent employee even after the completion of three (3) years of service.

Having found that private respondent did not become a permanent employee of petitioner UST, it correspondingly follows that there was no duty on the part of petitioner UST to reappoint private respondent as Instructor, the temporary appointment having lapsed. Such appointment is a matter addressed to the discretion of said petitioner. The findings, therefore, of the public respondent NLRC that private respondent was constructively terminated is without lawful basis. By the same token, the order for reinstatement of private respondent with backwages plus an award of actual or compensatory, moral and exemplary damages must be struck down. WHEREFORE, the petition is hereby GRANTED. The questioned orders of public respondent NLRC dated September 13, 1988 and public respondent labor arbiter Bienvenido S. Hernandez dated July 19,1988 are hereby SET ASIDE and another judgment is hereby rendered DISMISSING the complaint of private respondent, without pronouncement as to costs. SO ORDERED. Fernan (C.J.), Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Cortes, GrioAquino, Medialdea and Regalado, JJ., concur. Narvasa and Padilla, JJ., took no part.

Separate Opinions

SARMIENTO, J., dissenting: I vote to deny this petition for lack of merit. From the records, it appears, that: Complainant is a Doctor of Medicine with well-rounded experience in the field of Psychiatry. In consideration of his impressive qualifications, respondents appointed him as a faculty member in the UST Faculty of Medicine and Surgery, Department of Neurology and Psychiatry. His services in respondent university are: Affiliate Faculty member for the school year 1976-77; Instructor I in 1976- 1977; Instructor III on January 5, 1977 and for the school year 1978-1979; professor-in-charge of Psychiatry II for the school year 1978-1979; and Instructor II for the school year 1979-1980. He was also allowed by respondents to hold his clinic in the UST Hospital by virtue of a contract which started in 1978, renewable from year to year. Complainant claims that respondents failed without justifiable reason to give him a teaching load for the school year 1980-1981, and, therefore, he called the attention of the Head of Academic Affairs and the Dean of the Faculty who referred the matter to the

University Rector. He further wrote a letter to the respondents on August 12, 1981, but the same was not answered at all, and so he went to the Rector's Office on March 16 and 18, 1982, but was told that the Rector could not see or talk to him. For these reasons, the complainant charged respondents of illegal dismissal as he was not given a teaching load for the school year 1980-1981. He further alleged that the door leading to his clinic was locked twice without notice. Based on the above allegations, complainant seeks recovery of actual and moral damages allegedly suffered by him by reason of his dismissal by the respondents. Most importantly, he alleges that he was also denied practice of his profession in the hospital. Respondents traversed complainant's charges alleging that complainant had not yet acquired tenure of employment under the provisions of the UST Faculty Code as he had not completed four (4) academic years of service; hence, his services in the university were no longer renewed upon its expiration. Respondents likewise denied complainant's allegation that the door leading to his clinic in the hospital was locked. (Rollo, 68-70.) The issues are: 1. Whether or not complainant's services in the university had been constructively terminated by the respondents when the former was not given a teaching load for the school year 1980-1981; and 2. Whether or not complainant's claims for actual, moral and exemplary damages as well as attorney's fees are supported by the facts and jurisprudence. It is Our considered opinion that complainant's services as a member of the faculty in respondent university were terminated without just cause. (Id., 70.) As I have indicated, I sustain the NLRC. No grave abuse of discretion, so I find, has been successfully attributed to it to warrant the extraordinary remedy of certiorari. There is no question that under the Manual of Regulations for Private Schools, employees on probation status have three years within which to serve their probation. Within that period they may not be terminated unless for just cause. From the records, the private respondent had been with the petitioner-university as instructor since 1976, when in 1980, he was laid off. He was also informed that there had been "previous negative feedbacks regarding his teaching." (Id., 6.) That notwithstanding, I submit he had acquired security of tenure after his three-year probation. The fact that it was extended another year means, in my view, that the school had been satisfied of his performance. The petitioner-university can not now be heard to say otherwise. I am agreed that:

The records show that the ground relied upon by the respondents in not renewing complainant's last appointment when no teaching load for the school year 1980-1981 was assigned to him was due to the alleged termination of his appointment and there was no obligation on the part of respondents to extend to him a permanent appointment in accordance with the provisions of the UST Faculty Code or Manual of Regulations for private Schools. We do not agree with respondents' view. Complainant was first employed as Affiliate Faculty of respondent University in the first semester of the school year 1976-1977 or on September 29, 1976 as shown in his appointment signed by the Dean of the Faculty of Medicine and Surgery of UST. (Annexes 'A" & 'B", Reply to Respondent's Position Paper.) Additional evidences which will fortify the fact of complainant having rendered forty (40) months of eight (8) semesters could be gleaned from the Faculty Statement of Earnings and Deductions (Exhibits "D', 'E" and 'H" to 'H-38", for complainant). Most likely, complainant's early appointment (supra) had been deliberately omitted by the respondents to confuse the Labor Arbiter a quo in believing that the former had not yet acquired the tenurial rights under the Faculty Code. This, to our mind, is a scheme resorted to by the respondents to preclude complainant from becoming a regular professor of the University. We find complainant to have earned to his credit eight (8) semesters or four (4) academic years of professional duties with the respondents. Suffice it to say, therefore, complainant met the requirement to become a regular employee under the 3 years requirement in the Manual of Regulations for Private Schools (par. 75), and, as such, complainant should not have been deprived of subject load by the respondents for the school year 1980-1981. (Decision, 4-6.) The university's contention that under the UST Faculty Code, tenure is acquired after four years in office, has no merit. First, the code can not prevail over the Manual of Regulations for Private Schools, which has the character and force of law. Under the Manual: 75). Full-time teachers who have rendered three consecutive years of satisfactory service shall be considered permanent. What "full-time" means is stated as follows: 76. ... For this purpose, a full-time teacher should be one whose total working day is devoted to the school. has no other regular remunerative employment, and is paid on a regular monthly basis regardless of the number of teaching hours. It is true that under paragraph 78 of the Manual, "the normal teaching load of a full-time instructor shall be eighteen hours a week." It is my reading of this provision, however, that a full-time instructor can not merely be made to teach for longer hours. Hence, the succeeding paragraph states: 79. Any teaching assignment in excess of the foregoing must be taken up with the Bureau, which case shall be considered only on the basis of

educational qualifications, experience, efficiency rating, and subject preparations of the teachers concerned. It is my understanding of paragraph 78 that it operates as a restraint upon schools against a grant of excessive manhours, although school authorities may prescribe a longer period, but provided that it has the imprimatur of the Bureau of Private Schools. A lesser number of hours, however, does not make an instructor part-time, if he has otherwise complied with the requisites of paragraph 76. The decision of the NLRC indicates that the private respondent worked on a full-time basis whatever the number of teaching hours given to him and we can not disturb its findings. (See Decision, id., 6.) Second, assuming that the four-year rule is permissible, the private respondent's tenure during that period was nevertheless secure, which could only be perished by a valid cause. "Negative feedbacks," short of actual violations of the faculty code, are no excuse for termination. The rule is that, unless otherwise provided by contract, a probationary employee can not be dismissed (during the three-year period), unless dismissal is compelled by a just cause or causes. However, if thereafter, the school finds the employee's performance unsatisfactory, it is at liberty to rehire or not the employee, unless a grave abuse of discretion has been committed. Here, the fact that the private respondent was allowed to stay one year more gave the latter security of tenure. I must not be understood, however, as holding that schools may or can not enter into contracts for specific periods (less or more than three years; see also Manual, par. 74) with teaching applicants. Here, however, there is no "contract" to speak of, other than the implied agreement between the parties. In that case, the Manual is applicable. The closure of the doctor's clinic, finally, is a valid basis for the award of moral and exemplary damages, and attorney's fees. Hence, I cast this dissenting vote.

Separate Opinions SARMIENTO, J., dissenting: I vote to deny this petition for lack of merit. From the records, it appears, that: Complainant is a Doctor of Medicine with well-rounded experience in the field of Psychiatry. In consideration of his impressive qualifications, respondents appointed him as a faculty member in the UST Faculty of Medicine and Surgery, Department of Neurology and

Psychiatry. His services in respondent university are: Affiliate Faculty member for the school year 1976-77; Instructor I in 1976- 1977; Instructor III on January 5, 1977 and for the school year 1978-1979; professor-in-charge of Psychiatry II for the school year 1978-1979; and Instructor II for the school year 1979-1980. He was also allowed by respondents to hold his clinic in the UST Hospital by virtue of a contract which started in 1978, renewable from year to year. Complainant claims that respondents failed without justifiable reason to give him a teaching load for the school year 1980-1981, and, therefore, he called the attention of the Head of Academic Affairs and the Dean of the Faculty who referred the matter to the University Rector. He further wrote a letter to the respondents on August 12, 1981, but the same was not answered at all, and so he went to the Rector's Office on March 16 and 18, 1982, but was told that the Rector could not see or talk to him. For these reasons, the complainant charged respondents of illegal dismissal as he was not given a teaching load for the school year 1980-1981. He further alleged that the door leading to his clinic was locked twice without notice. Based on the above allegations, complainant seeks recovery of actual and moral damages allegedly suffered by him by reason of his dismissal by the respondents. Most importantly, he alleges that he was also denied practice of his profession in the hospital. Respondents traversed complainant's charges alleging that complainant had not yet acquired tenure of employment under the provisions of the UST Faculty Code as he had not completed four (4) academic years of service; hence, his services in the university were no longer renewed upon its expiration. Respondents likewise denied complainant's allegation that the door leading to his clinic in the hospital was locked. (Rollo, 68-70.) The issues are: 1. Whether or not complainant's services in the university had been constructively terminated by the respondents when the former was not given a teaching load for the school year 1980-1981; and 2. Whether or not complainant's claims for actual, moral and exemplary damages as well as attorney's fees are supported by the facts and jurisprudence. It is Our considered opinion that complainant's services as a member of the faculty in respondent university were terminated without just cause. (Id., 70.) As I have indicated, I sustain the NLRC. No grave abuse of discretion, so I find, has been successfully attributed to it to warrant the extraordinary remedy of certiorari. There is no question that under the Manual of Regulations for Private Schools, employees on probation status have three years within which to serve their probation. Within that period they may not be terminated unless for just cause. From the records, the private respondent had been with the petitioner-university as instructor since 1976, when in 1980, he was laid off. He was also informed that there had

been "previous negative feedbacks regarding his teaching." (Id., 6.) That notwithstanding, I submit he had acquired security of tenure after his three-year probation. The fact that it was extended another year means, in my view, that the school had been satisfied of his performance. The petitioner-university can not now be heard to say otherwise. I am agreed that: The records show that the ground relied upon by the respondents in not renewing complainant's last appointment when no teaching load for the school year 1980-1981 was assigned to him was due to the alleged termination of his appointment and there was no obligation on the part of respondents to extend to him a permanent appointment in accordance with the provisions of the UST Faculty Code or Manual of Regulations for private Schools. We do not agree with respondents' view. Complainant was first employed as Affiliate Faculty of respondent University in the first semester of the school year 1976-1977 or on September 29, 1976 as shown in his appointment signed by the Dean of the Faculty of Medicine and Surgery of UST. (Annexes 'A" & 'B", Reply to Respondent's Position Paper.) Additional evidences which will fortify the fact of complainant having rendered forty (40) months of eight (8) semesters could be gleaned from the Faculty Statement of Earnings and Deductions (Exhibits "D', 'E" and 'H" to 'H-38", for complainant). Most likely, complainant's early appointment (supra) had been deliberately omitted by the respondents to confuse the Labor Arbiter a quo in believing that the former had not yet acquired the tenurial rights under the Faculty Code. This, to our mind, is a scheme resorted to by the respondents to preclude complainant from becoming a regular professor of the University. We find complainant to have earned to his credit eight (8) semesters or four (4) academic years of professional duties with the respondents. Suffice it to say, therefore, complainant met the requirement to become a regular employee under the 3 years requirement in the Manual of Regulations for Private Schools (par. 75), and, as such, complainant should not have been deprived of subject load by the respondents for the school year 1980-1981. (Decision, 4-6.) The university's contention that under the UST Faculty Code, tenure is acquired after four years in office, has no merit. First, the code can not prevail over the Manual of Regulations for Private Schools, which has the character and force of law. Under the Manual: 75). Full-time teachers who have rendered three consecutive years of satisfactory service shall be considered permanent. What "full-time" means is stated as follows: 76. ... For this purpose, a full-time teacher should be one whose total working day is devoted to the school. has no other regular remunerative employment, and is paid on a regular monthly basis regardless of the number of teaching hours.

It is true that under paragraph 78 of the Manual, "the normal teaching load of a full-time instructor shall be eighteen hours a week." It is my reading of this provision, however, that a full-time instructor can not merely be made to teach for longer hours. Hence, the succeeding paragraph states: 79. Any teaching assignment in excess of the foregoing must be taken up with the Bureau, which case shall be considered only on the basis of educational qualifications, experience, efficiency rating, and subject preparations of the teachers concerned. It is my understanding of paragraph 78 that it operates as a restraint upon schools against a grant of excessive manhours, although school authorities may prescribe a longer period, but provided that it has the imprimatur of the Bureau of Private Schools. A lesser number of hours, however, does not make an instructor part-time, if he has otherwise complied with the requisites of paragraph 76. The decision of the NLRC indicates that the private respondent worked on a full-time basis whatever the number of teaching hours given to him and we can not disturb its findings. (See Decision, id., 6.) Second, assuming that the four-year rule is permissible, the private respondent's tenure during that period was nevertheless secure, which could only be perished by a valid cause. "Negative feedbacks," short of actual violations of the faculty code, are no excuse for termination. The rule is that, unless otherwise provided by contract, a probationary employee can not be dismissed (during the three-year period), unless dismissal is compelled by a just cause or causes. However, if thereafter, the school finds the employee's performance unsatisfactory, it is at liberty to rehire or not the employee, unless a grave abuse of discretion has been committed. Here, the fact that the private respondent was allowed to stay one year more gave the latter security of tenure. I must not be understood, however, as holding that schools may or can not enter into contracts for specific periods (less or more than three years; see also Manual, par. 74) with teaching applicants. Here, however, there is no "contract" to speak of, other than the implied agreement between the parties. In that case, the Manual is applicable. The closure of the doctor's clinic, finally, is a valid basis for the award of moral and exemplary damages, and attorney's fees. Hence, I cast this dissenting vote. Footnotes

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-77629 May 9, 1990 KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVISM AND NATIONALISM-ORGANIZED LABOR ASSOCIATION IN LINE INDUSTRIES AND AGRICULTURE (KILUSAN-OLALIA), ROQUE JIMENEZ, MARIO C. RONGALEROS and OTHERS, petitioners, vs. HON. FRANKLIN M. DRILON, KIMBERLY-CLARK PHILIPPINES, INC., RODOLFO POLOTAN, doing business under the firm name "Rank Manpower Co." and UNITED KIMBERLY-CLARK EMPLOYEES UNION-PHILLIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (UKCEU-PTGWO), respondents. KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVITISM AND NATIONALISM-OLALIA (KILUSAN-OLALIA), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MANUEL AGUILAR, MA. ESTRELLA ALDA, CAPT. REY L. LANADA, COL. VIVENCIO MANAIG and KIMBERLY-CLARK PHILIPPINES, INC., respondents.

REGALADO, J.: Before us are two consolidated petitions for certiorari filed by the above-named petitioner union (hereinafter referred to as KILUSAN-OLALIA, for conciseness) and individual complainants therein, to wit (a) G.R. 77629, which seeks to reverse and set aside the decision, dated November 13, 1986, 1 and the resolution, dated January 9, 1987, 2respectively
handed down by the two former Ministers of Labor, both rendered in BLR Case No. NS-5-164-86; and (b) G.R. No. 78791, which prays for the reversal of the resolutions of the National Labor Relations 3 4 Commission, dated May 25, 1987 and June 19,1987 issued in Injunction Case No. 1442 thereof.

Kimberly-Clark Philippines, Inc. (KIMBERLY, for brevity) executed a three-year collective bargaining agreement (CBA) with United Kimberly-Clark Employees Union-Philippine Transport and General Workers' Organization (UKCEU-PTGWO) which expired on June 30, 1986. Within the 60-day freedom period prior to the expiration of and during the negotiations for the renewal of the aforementioned CBA, some members of the bargaining unit formed another union called "Kimberly Independent Labor Union for Solidarity, Activism and

Nationalism-Organized Labor Association in Line Industries and Agriculture (KILUSANOLALIA)." On April 21, 1986, KILUSAN-OLALIA filed a petition for certification election in Regional Office No. IV, Ministry of Labor and Employment (MOLE), docketed as Case No. RO4-ODM-415-86. 5 KIMBERLY and (UKCEU-PTGWO) did not object to the holding of a certification election
but objected to the inclusion of the so-called contractual workers whose employment with KIMBERLY was coursed through an independent contractor, Rank Manpower Company (RANK for short), as among the qualified voters.

Pending resolution of the petition for certification election by the med-arbiter, KILUSANOLALIA filed a notice of strike on May 7, 1986 with the Bureau of Labor Relations, docketed as BLR Case No. NS-5-164-86, 6 charging KIMBERLY with unfair labor practices based on the
following alleged acts: (1) dismissal of union members (KILUSAN-OLALIA); (2) non-regularization of casuals/contractuals with over six months service; (3) non-implementation of appreciation bonus for 1982 and 1983; (4) non-payment of minimum wages; (5) coercion of employees; and (6) engaging in CBA negotiations despite the pendency of a petition for certification election. This was later amended to withdraw the charge of coercion but to add, as new charges, the dismissal of Roque Jimenez and the 7 non-payment of backwages of the reinstated Emerito Fuentes .

Conciliation proceedings conducted by the bureau proved futile, and KILUSAN-OLALIA declared a strike at KIMBERLY's premises in San Pedro, Laguna on May 23, 1986. On May 26, 1986, KIMBERLY petitioned MOLE to assume jurisdiction over the labor dispute. On May 30, 1986, finding that the labor dispute would adversely affect national interest, then Minister Augusto S. Sanchez issued an assumption order, the dispositive portion whereof reads: Wherefore, premises considered, immediately upon receipt of this order, the striking union and its members are hereby enjoined to lift the picket and remove all obstacles to the free ingress to and egress from the company premises and to return to work, including the 28 contractual workers who were dismissed; likewise, the company is directed to resume its operations immediately thereafter and to accept all the employees back under the same terms and conditions of employment prevailing prior to the industrial action. Further, all issues in the notice of strike, as amended, are hereby assumed in this assumption order, except for the representation issue pending in Region IV in which the Med-Arbiter is also enjoined to decide the same the soonest possible time. 8 In obedience to said assumption order, KILUSAN-OLALIA terminated its strike and picketing activities effective June 1, 1986 after a compliance agreement was entered into by it with KIMBERLY. 9 On June 2, 1986, Med-Arbiter Bonifacio 1. Marasigan, who was handling the certification election case (RO4-OD-M-4-1586), issued an order 10 declaring the following as eligible to vote in
the certification election, thus:

1. The regular rank-and-file laborers/employees of the respondent company consisting of 537 as of May 14, 1986 should be considered qualified to vote; 2. Those casuals who have worked at least six (6) months as appearing in the payroll months prior to the filing of the instant petition on April 21, 1986; and 3. Those contractual employees who are allegedly in the employ of an independent contractor and who have also worked for at least six (6) months as appearing in the payroll month prior to the filing of the instant petition on April 21, 1986. During the pre-election conference, 64 casual workers were challenged by KIMBERLY and (UKCEU-PTGWO) on the ground that they are not employees, of KIMBERLY but of RANK. It was agreed by all the parties that the 64 voters shall be allowed to cast their votes but that their ballots shall be segregated and subject to challenge proceedings. The certification election was conducted on July I., 1986, with the following results: 11 1. KILUSAN-OLALIA = 246 votes 2. (UKCEU-PTGWO) = 266 votes 3. NO UNION = 1 vote 4. SPOILED BALLOTS = 4 votes 5. CHALLENGED BALLOTS = 64 votes TOTAL 581 votes On July 2, 1986, KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and Count Challenged Votes" 12 on the ground that the 64 workers are employees of KIMBERLY
within the meaning of Article 212(e) of the Labor Code. On July 7, 1986, KIMBERLY filed an opposition to the protest and motion, asserting that there is no employer-employee relationship between the casual workers and the company, and that the med-arbiter has no jurisdiction to rule on the issue of the status of the challenged workers which is one of the issues covered by the assumption order. The med-arbiter opted not to rule on the protest until the issue of regularization has been resolved by 13 MOLE.

On November 13, 1986, then Minister Sanchez rendered a decision in BLR Case No. NS-5164-86, 14 the disposition wherein is summarized as follows: 1. The service contract for janitorial and yard maintenance service between KIMBERLY and RANK was declared legal;

2. The other casual employees not performing janitorial and yard maintenance services were deemed labor-only contractual and since laboronly contracting is prohibited, such employees were held to have attained the status of regular employees, the regularization being effective as of the date of the decision; 3. UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA was certified as the exclusive bargaining representative of KIMBERLY's employees; 4. The reinstatement of 28 dismissed KILUSAN-OLALIA members was ordered; 5. Roque Jimenez was ordered reinstated without backwages, the period when he was out of work being considered as penalty for his misdemeanor; 6. The decision of the voluntary arbitrator ordering the reinstatement of Ermilo Fuentes with backwages was declared as already final and unappealable; and 7. KIMBERLY was ordered to pay appreciation bonus for 1982 and 1983. On November 25, 1986, KIMBERLY flied a motion for reconsideration with respect to the regularization of contractual workers, the appreciation bonus and the reinstatement of Roque Jimenez. 15 In a letter dated November 24, 1986, counsel for KILUSAN-OLALIA demanded from
KIMBERLY the implementation of the November 13, 1986 decision but only with respect to the 16 regularization of the casual workers.

On December 11, 1986, KILUSAN-OLALIA filed a motion for reconsideration questioning the authority of the Minister of Labor to assume jurisdiction over the representation issue. In the meantime, KIMBERLY and UKCEU-PTGWO continued with the negotiations on the new collective bargaining agreement (CBA), no restraining order or junctive writ having been issued, and on December 18, 1986, a new CBA was concluded and ratified by 440 out of 517 members of the bargaining unit. 17 In an order dated January 9, 1987, former Labor Minister Franklin Drilon denied both motions for reconsideration filed by KIMBERLY and KILUSAN-OLALIA. 18 On March 10, 1987,
the new CBA executed between KIMBERLY and UKCEU-PTGWO was signed.

On March 16, 1987, KILUSAN-OLALIA filed a petition for certiorari in this Court docketed as G.R. No. 77629, seeking to set aside the aforesaid decision, dated November 13, 1986, and the order, dated January 9, 1987, rendered by the aforesaid labor ministers. On March 25, 1987, this Court issued in G.R. No. 77629 a temporary restraining order, enjoining respondents from enforcing and/or carrying out the decision and order above stated, particularly that portion (1) recognizing respondent UKCEU-PTGWO as the exclusive bargaining representative of all regular rank-and-file employees in the establishment of respondent company, (2) enforcing and/or implementing the alleged CBA

which is detrimental to the interests of the members of the petitioner union, and (3) stopping respondent company from deducting monthly dues and other union assessments from the wages of all regular rank-and-file employees of respondent company and from remitting the said collection to respondent UKCEU-PTGWO issued in BLR Case No. NS-5-164-86, entitled, "In Re: Labor Dispute at Kimberly-Clark Philippines, Inc.," of the Department of Labor and Employment, Manila, 19 In its comment, 20 respondent company pointed out certain events which took place prior to the filing of
the petition in G.R. No. 77629, to wit:

1. The company and UKCEU-PTGWO have concluded a new collective bargaining agreement which had been ratified by 440 out of 517 members of the bargaining unit; 2. The company has already granted the new benefits under the new CBA to all its regular employees, including members of petitioner union who, while refusing to ratify the CBA nevertheless readily accepted the benefits arising therefrom; 3. The company has been complying with the check-off provision of the CBA and has been remitting the union dues to UKCEU-PTGWO 4. The company has already implement the decision of November 13, 1986 insofar as the regularization of contractual employees who have rendered more than one (1) year of service as of the filing of the Notice of Strike on May 7, 1986 and are not engaged in janitorial and yard maintenance work, are concerned 5. Rank Manpower Company had already pulled out, reassigned or replaced the contractual employees engaged in janitorial and yard maintenance work, as well as those with less than one year service; and 6. The company has reinstated Roque Jimenez as of January 11, 1987. In G.R. No. 78791, the records 21 disclose that on May 4, 1987, KILUSAN-OLALIA filed another
notice of strike with the Bureau of Labor Relations charging respondent company with unfair labor practices. On May 8, 1987, the bureau dismissed and considered the said notice as not filed by reason of the pendency of the representation issue before this Court in G.R. No. 77629. KILUSAN-OLALIA moved to reconsider said order, but before the bureau could act on said motion, KILUSAN-OLALIA declared a strike and established a picket on respondent company's premises in San Pedro, Laguna on May 17, 1987.

On May 18, 1987, KIMBERLY filed a petition for injunction with the National Labor Relations Commission (NLRC), docketed as Injunction Case No. 1442. A supplement to said petition was filed on May 19, 1987. On May 26, 1987, the commission en banc issued a temporary restraining order (TRO) on the basis of the ocular inspection report submitted by the commission's agent, the testimonies of KIMBERLY's witnesses, and pictures of the barricade. KILUSAN-OLALIA moved to dissolve the TRO on the ground of lack of jurisdiction.

Immediately after the expiration of the first TRO on June 9, 1987, the striking employees returned to their picket lines and reestablished their barricades at the gate. On June 19, 1987, the commission en banc issued a second TRO. On June 25, 1987, KILUSAN-OLALIA filed another petition for certiorari and prohibition with this Court, docketed as G.R. No. 78791, questioning the validity of the temporary restraining orders issued by the NLRC on May 26, 1987 and June 19, 1987. On June 29, 1987, KILUSAN-OLALIA filed in said case an urgent motion for a TRO to restrain NLRC from implementing the questioned orders. An opposition, as well as a reply thereto, were filed by the parties. Meanwhile, on July 3, 1987, KIMBERLY filed in the NLRC an urgent motion for the issuance of a writ of preliminary injunction when the strikers returned to the strike area after the second TRO expired. After due hearing, the commission issued a writ of preliminary injunction on July 14, 1987, after requiring KIMBERLY to post a bond in the amount of P20,000.00. Consequently, on July 17, 1987, KILUSAN-OLALIA filed in G.R. No. 78791 a second urgent motion for the issuance of a TRO by reason of the issuance of said writ of preliminary injunction, which motion was opposed by KIMBERLY. Thereafter, in its memorandum
23

filed on December 28, 1989 and in its motion for early resolution filed on February 28, 1990, both in G.R. No. 78791, KILUSAN-OLALIA alleged that it had terminated its strike and picketing activities and that the striking employees had unconditionally offered to return to work, although they were refused admission by KIMBERLY. By reason of this supervening development, the petition in G.R. No. 78791, questioning the propriety of the issuance of the two temporary restraining orders and the writ of injunction therein, has been rendered moot and academic.

22

In G.R. No. 77629, the petition of KILUSAN-OLALIA avers that the respondent Secretary of Labor and/or the former Minister of Labor have acted with grave abuse of discretion and/or without jurisdiction in (1) ruling on the issue of bargaining representation and declaring respondent UKCEU-PTGWO as the collective bargaining representative of all regular rankand-file employees of the respondent company; (2) holding that petitioners are not entitled to vote in the certification election; (3) considering the regularization of petitioners (who are not janitors and maintenance employees) to be effective only on the date of the disputed decision; (4) declaring petitioners who are assigned janitorial and yard maintenance work to be employees of respondent RANK and not entitled to be regularized; (5) not awarding to petitioners differential pay arising out of such illegal work scheme; and (6) ordering the mere reinstatement of petitioner Jimenez. The issue of jurisdiction actually involves a question of whether or not former Minister Sanchez committed a grave abuse of discretion amounting to lack of jurisdiction in declaring respondent UKCEU-PTGWO as the certified bargaining representative of the regular employees of KIMBERLY, after ruling that the 64 casual workers, whose votes are being challenged, were not entitled to vote in the certification election. KILUSAN-OLALIA contends that after finding that the 64 workers are regular employees of KIMBERLY, Minister Sanchez should have remanded the representation case to the medarbiter instead of declaring UKCEU-PTGWO as the winner in the certification election and

setting aside the med-arbiter's order which allowed the 64 casual workers to cast their votes. Respondents argue that since the issues of regularization and representation are closely interrelated and that a resolution of the former inevitably affects the latter, it was necessary for the former labor minister to take cognizance of the representation issue; that no timely motion for reconsideration or appeal was made from his decision of November 13, 1986 which has become final and executory; and that the aforesaid decision was impliedly accepted by KILUSAN-OLALIA when it demanded from KIMBERLY the issuance of regular appointments to its affected members in compliance with said decision, hence petitioner employees are now stopped from questioning the legality thereof. We uphold the authority of former Minister Sanchez to assume jurisdiction over the issue of the regularization of the 64 casual workers, which fact is not even disputed by KILUSANOLALIA as may be gleaned from its request for an interim order in the notice of strike case (BLR-NS-5-164-86), asking that the regularization issue be immediately resolved. Furthermore, even the med-arbiter who ordered the holding of the certification election refused to resolve the protest on the ground that the issue raised therein correctly pertains to the jurisdiction of the then labor minister. No opposition was offered by KILUSANOLALIA. We hold that the issue of regularization was properly addressed to the discretion of said former minister. However, the matter of the controverted pronouncement by former Minister Sanchez, as reaffirmed by respondent secretary, regarding the winner in the certification election presents a different situation. It will be recalled that in the certification election, UKCEU-PTGWO came out as the winner, by garnering a majority of the votes cast therein with the exception of 64 ballots which were subject to challenge. In the protest filed for the opening and counting of the challenged ballots, KILUSAN-OLALIA raised the main and sole question of regularization of the 64 casual workers. The med-arbiter refused to act on the protest on the ground that the issue involved is within the jurisdiction of the then Minister of Labor. KILUSAN-OLALIA then sought an interim order for an early resolution on the employment status of the casual workers, which was one of the issues included in the notice of strike filed by KILUSANOLALIA in BLR Case No. NS-5-164-86. Consequently, Minister Sanchez rendered the questioned decision finding that the workers not engaged in janitorial and yard maintenance service are regular employees but that they became regular only on the date of his decision, that is, on November 13, 1986, and, therefore, they were not entitled to vote in the certification election. On the basis of the results obtained in the certification election, Minister Sanchez declared UKCEU-PTGWO as the winner. The pivotal issue, therefore, is when said workers, not performing janitorial or yard maintenance service, became regular employees of KIMBERLY. We find and so hold that the former labor minister gravely abused his discretion in holding that those workers not engaged in janitorial or yard maintenance service attained the status of regular employees only on November 13, 1986, which thus deprived them of their

constitutionally protected right to vote in the certification election and choose their rightful bargaining representative. The Labor Code defines who are regular employees, as follows: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary not withstanding and regardless of the oral agreements 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 under the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph:Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. The law thus provides for two. kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. The individual petitioners herein who have been adjudged to be regular employees fall under the second category. These are the mechanics, electricians, machinists machine shop helpers, warehouse helpers, painters, carpenters, pipefitters and masons It is not disputed that these workers have been in the employ of KIMBERLY for more than one year at the time of the filing of the Petition for certification election by KILUSAN-OLALIA. Owing to their length of service with the company, these workers became regular employees, by operation of law, one year after they were employed by KIMBERLY through RANK. While the actual regularization of these employees entails the mechanical act of issuing regular appointment papers and compliance with such other operating procedures as may be adopted by the employer, it is more in keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the casual worker on the day immediately after the end of his first year of service. To rule otherwise, and to instead make their regularization dependent on the happening of some contingency or the fulfillment of certain requirements, is to impose a burden on the employee which is not sanctioned by law. That the first stated position is the situation contemplated and sanctioned by law is further enhanced by the absence of a statutory limitation before regular status can be acquired by a casual employee. The law is explicit. As long as the employee has rendered at least one year of service, he becomes a regular employee with respect to the activity in which he is employed. The law does not provide the qualification that the employee must first be issued

a regular appointment or must first be formally declared as such before he can acquire a regular status. Obviously, where the law does not distinguish, no distinction should be drawn. The submission that the decision of November 13, 1986 has become final and executory, on the grounds that no timely appeal has been made therefrom and that KILUSAN-OLALIA has impliedly acceded thereto, is untenable. Rule 65 of the Rules of Court allows original petitions for certiorari from decisions or orders of public respondents provided they are filed within a reasonable time. We believe that the period from January 9, 1987, when the motions for reconsideration separately filed by KILUSAN-OLALIA and KIMBERLY were denied, to March 16, 1987, when the petition in G.R. No. 77629 was filed, constitutes a reasonable time for availing of such recourse. We likewise do not subscribe to the claim of respondents that KILUSAN-OLALIA has impliedly accepted the questioned decision by demanding compliance therewith. In the letter of KILUSAN-OLALIA dated November 24, 1986 24 addressed to the legal counsel of
KIMBERLY, it is there expressly and specifically pointed out that KILUSAN-OLALIA intends to file a motion for reconsideration of the questioned decision but that, in the meantime, it was demanding the issuance of regular appointments to the casual workers who had been declared to be regular employees. The filing of said motion for reconsideration of the questioned decision by KILUSAN-OLALIA, which was later denied, sustains our position on this issue and denies the theory of estoppel postulated by respondents.

On the basis of the foregoing circumstances, and as a consequence of their status as regular employees, those workers not perforce janitorial and yard maintenance service were performance entitled to the payment of salary differential, cost of living allowance, 13th month pay, and such other benefits extended to regular employees under the CBA, from the day immediately following their first year of service in the company. These regular employees are likewise entitled to vote in the certification election held in July 1, 1986. Consequently, the votes cast by those employees not performing janitorial and yard maintenance service, which form part of the 64 challenged votes, should be opened, counted and considered for the purpose of determining the certified bargaining representative. We do not find it necessary to disturb the finding of then Minister Sanchez holding as legal the service contract executed between KIMBERLY and RANK, with respect to the workers performing janitorial and yard maintenance service, which is supported by substantial and convincing evidence. Besides, we take judicial notice of the general practice adopted in several government and private institutions and industries of hiring a janitorial service on an independent contractor basis. Furthermore, the occasional directives and suggestions of KIMBERLY are insufficient to erode primary and continuous control over the employees of the independent contractor. 25 Lastly, the duties performed by these workers are not independent and
integral steps in or aspects of the essential operations of KIMBERLY which is engaged in the manufacture of consumer paper products and cigarette paper, hence said workers cannot be considered regular employees.

The reinstatement of Roque Jimenez without backwages involves a question of fact best addressed to the discretion of respondent secretary whose finding thereon is binding and

conclusive upon this Court, absent a showing that he committed a grave abuse in the exercise thereof. WHEREFORE, judgment is hereby rendered in G.R. No. 77629: 1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open and count the 64 challenged votes, and that the union with the highest number of votes be thereafter declared as the duly elected certified bargaining representative of the regular employees of KIMBERLY; 2. Ordering KIMBERLY to pay the workers who have been regularized their differential pay with respect to minimum wage, cost of living allowance, 13th month pay, and benefits provided for under the applicable collective bargaining agreement from the time they became regular employees. All other aspects of the decision appealed from, which are not so modified or affected thereby, are hereby AFFIRMED. The temporary restraining order issued in G.R. No. 77629 is hereby made permanent. The petition filed in G.R. No. 78791 is hereby DISMISSED. SO ORDERED. Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

Footnotes

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 151981 December 1, 2003

DIAMOND MOTORS CORPORATION, petitioner, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and AGRIPINO C. CADAO, respondents. YNARES-SANTIAGO, J.: This is a petition for review of the decision of the Court of Appeals in CA-G.R. SP No. 63143,1 which affirmed the decision and resolution2 of the National Labor Relations Commission dated October 27, 2000 and December 28, 2001, respectively. The facts are as follows: Petitioner Diamond Motors Corporation hired respondent Agripino C. Cadao on May 17, 1989 and subsequently appointed him Special Accounts Manager in 1993 with a fixed monthly salary excluding commission for every car sold. His tasks included the promotion and sale of Mitsubishi vehicles to precisely listed corporate clients on fleet basis. Units purchased by fleet sale are usually lower by an average amount of P5,000.00 than those bought on retail. The transactions are usually done through letters of intent or purchase orders submitted by the client.3 TAPE, Inc. is one of petitioners clients on a fleet sale basis. On July 1, 1994, its purchasing officer and Executive Secretary to the President, Esper Reate, sent a letter of intent to respondent confirming an order for one unit of a 1994 Mitsubishi Lancer EL at P363,000.00, to be registered in the name of Ruth Racela. On July 28, 1994, two other letters of the same tenor were sent to the respondent confirming the orders for two Mitsubishi Lancer GLI 1300 to be registered in the names of Josefina Antonio and Federico de Joya, respectively.4 TAPE, Inc. subsequently sent Purchase Order No. 001508 to petitioner for the three units amounting to P1,213,000.00. Petitioner investigated the said transaction through its Finance and Insurance Operations Manager, Ms. Santa T. Vargas. The latter found out that, with the exception of Ruth Racela, the two other customers were not employees of TAPE, Inc. or its sister corporation, M-Zet. Therefore, the production companies manifested that they will not pay for the purchase orders. The report further noted that P.O. No. 001508 was 84 sheets ahead from the purchase order then in use, P.O. No. 001424; and that Esper Reate was not the authorized signatory for the purchases considering that only Mr. Antonio Tuviera as the President of TAPE, Inc., or, in his absence, Ms. Leslie Dionisio, AVP for Administration, can sign for them. On September 3, 1994, respondent received a memorandum dated August 31, 1994 from petitioner, asking him to explain the misrepresentation he committed in favor of the three customers. In addition, he was accused by petitioner of dishonesty and deceit in the conduct of said sale.

Respondent, on the same day, submitted his written explanation in answer to the allegations. On September 8, 1994, petitioner terminated the services of respondent. On February 2, 1995, private respondent filed a complaint for illegal dismissal with prayer for the payment of earned salary, commission and other accrued benefits against the petitioner before the National Labor Relations Commission. On April 2, 1998, the Labor Arbiter dismissed the complaint for lack of merit. Aggrieved, private respondent appealed to the National Labor Relations Commission which reversed the decision of the Labor Arbiter and declared his dismissal illegal. Respondent was awarded separation pay plus backwages. Petitioner filed a motion for reconsideration but the same was denied. Petitioner filed a petition for review with the Court of Appeals,5 contending that the NLRC acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter. Petitioner maintained that respondents dismissal was for a valid cause pursuant to Article 282 of the Labor Code and jurisprudence; and that because of his misrepresentation and deception it suffered losses in the total sum of P115,000.00 corresponding to the differences between the regular and fleet prices of the units sold. The Appellate Court dismissed the petition and affirmed the decision of the NLRC. Hence, this petition for review raising the following errors: I. THAT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT, PETITIONER FAILED TO SUBSTANTIATE ITS CLAIM OF DISHONESTY AND LOSS OF CONFIDENCE AGAINST PRIVATE RESPONDENT AGRIPINO CADAO; II. THAT SAID DECISION OF THE HONORABLE COURT OF APPEALS AND THE NATIONAL LABOR RELATIONS COMMISSION WERE PREMISED IN THE ABSENCE OF EVIDENCE BUT SUCH FINDINGS ARE CONTRADICTED BY THE EVIDENCE ON RECORD; AND THAT THE SAME HAVE BEEN MADE WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION; III. THAT THE PUBLIC RESPONDENT FAILED TO OBSERVE THE PRINCIPLE OF STARE DECISIS; IV. WHAT KIND OF EVIDENCE IS REQUIRED TO PROVE THE GUILT OF AN EMPLOYEE IN LABOR CASES? IS IT MERE PREPONDERANCE OF EVIDENCE OR PROOF BEYOND REASONABLE DOUBT?6 We find merit in the petition. A disharmony between the factual findings of the Labor Arbiter and the National Labor Relations Commission opens the door to a review thereof by this Court.7 Factual findings of administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness. Moreover, when the findings of the National Labor Relations Commission contradict those of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.8

In the case at bar, we find that private respondent was not illegally dismissed. In his decision, the Labor Arbiter ruled that based on the evidence adduced by the parties, respondent knowingly violated company rules and regulations. There was also a clear taint of deceit on his part when he passed off what was otherwise a retail sale as a fleet sale.9 Indeed, respondent cannot deny that at the time he was negotiating what he claimed to be a fleet sale to TAPE, Inc., he already knew that the would-be end users are not employees of TAPE, Inc. This is shown by Check Voucher No. 004297 dated August 15, 1994 issued by M-ZET in favor of Ruth Racela, two days ahead of the Purchase Order issued by TAPE, Inc. on August 17, 1994,10 which means that before TAPE, Inc. prepared and issued the purchase order, respondent already knew that Ruth Racela was an M-ZET employee, otherwise the latter would not have prepared and issued the corresponding check if there was no assurance of a fleet sale by him to the company.11 We reiterate the rule under Article 282(c) of the Labor Code, which states that an employer can terminate the employment of the employee concerned for "fraud or willful breach by an employee of the trust reposed in him by his employer or duly authorized representative." The loss of trust and confidence must be based on the willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.12 Moreover, we have laid down the guidelines for the application of the doctrine of loss of confidence in the case ofConcorde Hotel v. Court of Appeals,13 i.e., (a) the loss of confidence should not be simulated; (b) it should not be used as a subterfuge for causes which are improper, illegal or unjustified; (c) it should not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (d) it must be genuine, not a mere afterthought to justify earlier action taken in bad faith. Respondent claims that at the time of the purchase, there was a promotional program by petitioner on its units so that the promotional price of the same were as follows: UNIT Mitsubishi EL 1300 Mitsubishi Gli 1300 Mitsubishi GLXi Regular Price Promotional Price P 396, 000.00 465, 000.00 521, 000.00 P 363, 000.00 425, 000.00 486, 000.0014

He maintains that it was the promotional price that he quoted to the buyers and which the latter paid to petitioner without any further discount as in fleet sales; hence, no disadvantage was caused to petitioner since the promotional price is open to any client.15 We are not persuaded. The fact that petitioner failed to show it suffered losses in revenue as a consequence of private respondents questioned act is immaterial. The fact that respondent attempted to deprive petitioner of its lawful revenue is tantamount to fraud against the company, which warrants dismissal from the service.16 Finally, we hold that the Court of Appeals erred in declaring that there was nothing in the letters of intent, purchase orders and checks submitted which would lead petitioner to doubt or suspect that

said documents were accomplished through fraud. In the first place, the same were signed by TAPE Inc.s Purchasing Officer and Executive Secretary to the President Ms. Esper Reate, who is not an authorized signatory. It is only Mr. Antonio Tuviera, TAPE Inc. President, or in his absence, Ms. Leslie Dionisio, its Assistant Vice President for Administration, who can duly sign. Secondly, respondent was not able to explain the use of a purchase order not belonging to the series currently in use at the time the transaction took place. In fine, we find that the foregoing constitute substantial evidence to support the conclusion that respondents dismissal was just and legal. Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.17 The evidence relied upon by the Court of Appeals in affirming the NLRCs decision failed to establish the fact that respondent was illegally dismissed. WHEREFORE, in view of the foregoing, the instant petition for review is GRANTED. The Decision of the Court of Appeals dated October 18, 2001 and the Resolution dated January 25, 2002 in CA-G.R. SP No. 63143 which affirmed the decision and resolution of the National Labor Relations Commission dated October 27, 2000 and December 28, 2001, respectively are REVERSED and SET ASIDE. The decision dated April 2, 1998 of Labor Arbiter Jose G. De Vera in NLRC-NCR Case No. 00-02-01363-95, dismissing respondents complaint for illegal dismissal for lack of merit, is REINSTATED. SO ORDERED. Davide, Jr., C.J., Panganiban, Carpio, and Azcuna, JJ., concur.

Footnotes

THIRD DIVISION

[G.R. No. 146118. October 8, 2003]

SAMUEL SAMARCA, petitioner, INC., respondent.

vs. ARC-MEN

INDUSTRIES,

DECISION
SANDOVAL-GUTIERREZ, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeking to nullify and set aside the Decision [1] dated May 22, 2000 and Resolution[2] dated November 8, 2000 of the Court of Appeals in CA-G.R. SP No. 54028, entitled Arc-Men Industries, Inc. vs. National Labor Relations Commission (Fifth Division) and Samuel Samarca. The undisputed facts of this case are as follows: On March 8, 1981, Samuel Samarca (herein petitioner) was employed as a laborer by Arc-Men Industries, Inc. (herein respondent). Eventually, petitioner was assigned as a machine operator at respondents white plastic plant where he received P130.00 a day or in its loose bonding plant with a daily salary of P138.00. On September 26, 1993, petitioner filed an application for an emergency leave of absence on account of his sons hospitalization for acute gastroenteritis. Upon his return for work on September 29, 1993, petitioner was immediately served with a notice of respondents order suspending him for thirty (30) days effective September 30 to October 30, 1993 for alleged violation of company Rules and Regulations, particularly Rule No. 17[3] and Rule No. 25.[4] Feeling aggrieved, petitioner filed with the Regional Arbitration Branch No. XI at Davao City a complaint for illegal suspension against respondent and its owner, Arcadio P. Mendoza, docketed as NLRC Case No. RAB-11-10-00828-93. During the pendency of this complaint or on October 30, 1993, petitioners 30 -day suspension ended. Consequently, respondent, in a letter dated November 5, 1993, directed petitioner to report for work immediately. However, he refused, prompting respondent, on November 11, 1993, to send him a Notice to Terminate, directing him to submit, within five (5) days, a written explanation why he should not be dismissed from the service for abandonment of work. For his part, petitioner submitted to respondent a letter-reply explaining that because of the pendency of his complaint for illegal suspension with the Labor Arbiter, he could not report for work.

Respondent, finding that the petitioner failed to submit a sufficient written explanation, decided to terminate his services effective October 31, 1993 via a notice of termination dated November 23, 1993. On November 24, 1993, petitioner filed an amended complaint for illegal dismissal. On March 29, 1994, the Labor Arbiter rendered a Decision [5] declaring the dismissal of petitioner for cause and upholding its validity, thus:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered DISMISSING the above-entitled case for lack of merit and declaring the dismissal of complainant as valid and for cause. Complainant is, however, entitled to his proportionate 13th month pay for 1993, subject to computation by respondent AMII. SO ORDERED.
On appeal, the National Labor Relations Commission (NLRC), in a Resolution[6] dated August 21, 1995, reversed and set aside the Labor Arbiters Decision, ordering respondent to reinstate petitioner to his former position without loss of seniority rights and to pay his backwages from the date of dismissal up to his actual reinstatement but limited to a maximum period of three (3) years. The NLRC held:

Now brought to focus is the instant complaint for illegal dismissal where respondents bear the burden of proving that it was for just cause. For in labor law determinations, the employer shoulders the burden of proof to show that the dismissal is valid and legal. (Manggagawa ng Komunikasyon ng Pilipinas vs. NLRC, 194 SCRA 573). We note that respondents, in their notice to terminate dated November 11, 1993, gave complainant five (5) days to show cause why he should not be terminated from employment on the ground of abandonment of work. (Records, Vol. 1, p. 39). In a reply thereto, complainant informed respondents he had filed a case of illegal suspension against them with the NLRC. Consequently, respondents served complainant a notice of termination dated November 23, 1994 notifying the latter that effective October 31, 1993 he was deemed to have abandoned his work and as of that date was considered terminated. Accordingly, on November 24, 1994, complainant amended his complaint from illegal suspension to illegal dismissal. Respondents defense of abandonment must fail. It is belied by the fact that complainant had instituted the complaint for illegal dismissal the day after he was dismissed. It would be illogical for him to leave his job and later on file said complaint.

Clearly, there is no showing that complainant deliberately refused to continue his employment without a justifiable reason. Complainant initially instituted a complaint for illegal suspension wherein he prayed for backwages as he thought he was illegally suspended from work. We can not readily infer abandonment even if sometime during the pendency of the previous case he refused to heed the warning given by respondent while believing that he was suspended through no fault of his. Considering the circumstances of this case, We hold that complainant is entitled to reinstatement with backwages as it is clearly established that he did not abandon his work, in the absence of clear and deliberate intent to discontinue his employment without returning back. He was only compelled to leave the premises when he was ordered suspended and which suspension he had promptly questioned.
Respondent filed a motion for reconsideration but was denied with finality by the NLRC in a Resolution[7] dated April 19, 1996. On May 13, 1996, respondent filed with this Court a petition for certiorari. In a Resolution dated June 23, 1999, this Court referred the petition for disposition to the Court of Appeals. On May 22, 2000, the Court of Appeals rendered a Decision reversing the Resolutions of the NLRC and reinstating the Decision of the Labor Arbiter. In sustaining the validity and legality of petitioners termination from employment, the Appellate Court made the following pronouncements:

We agree with the petitioner and the OSG that the public respondent gravely abused its discretion when it ordered the reinstatement of the private respondent and the payment of backwages, for the following reasons: Firstly, there was just cause for terminating the employment of the private respondent under Article 282 of the Labor Code, which states that an employer may terminate an employment for serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with this work, as well as for causes analogous thereto. In the instant case, the private respondent failed to report to work after the expiration of his 30-day suspension. Even after the petitioner formally advised him to resume working five (5) days later, the private respondent still refused to go back to work. After the petitioner sent a Notice to Terminate to the private respondent on November 11, 1993, the latter wrote on the said notice that he has already questioned his alleged illegal suspension before the labor arbiter, and that the petitioner should report immediately to its company attorney about the second hearing. xxx

Secondly, the contention of the respondents that the private respondent cannot be deemed to have abandoned his work in light of his immediate filing of a case for illegal dismissal cannot be sustained. We are aware of such ruling of the Supreme Court that the filing of the complaint for illegal dismissal negates the charge of abandonment. However, we are of the view that such doctrine must be taken into consideration with the other factors present in each case. xxx In contrast, in the case at bar, except for his amendment of his complaint for illegal suspension to illegal dismissal, the private respondent committed no other overt actions indicating his desire to return back to work. We hold that both elements constituting abandonment are present, considering the absence of the private respondent from his place of employment after the expiration of his suspension without any explanation or application for leave, and his subsequent refusal to go back to work. It should be emphasized that private respondent was given several opportunities by the petitioner to explain his continuing absences, but he did not. He did not give any reason for his absence when he was ordered to resume working on November 5, 1993. He did not explain in writing why he should not be terminated for abandonment of work after having received a Notice to Terminate dated November 11, 1993. If he thought that his returning to work would jeopardize his case for illegal suspension, he could have informed the petitioner about such thinking, or he could have requested for an investigation regarding the charge of abandonment. But he did not. Moreover, a co-worker has reported that the private respondent expressed to him the latters intention not to return to work anymore. Such consistent, overt acts are manifestations of a lack of interest to report back to work. x x x.
On June 27, 2000, petitioner filed a motion for reconsideration but was denied in a Resolution dated November 8, 2000. Hence, this petition for review on certiorari. Petitioner contends that respondent failed to prove that he abandoned his work; and that the Court of Appeals and the Labor Arbiter erred in considering his alleged insubordination and/or willful disobedience as valid causes for his dismissal from the service inasmuch as respondents reason for dismissing him is abandonment. As an overture, clear and unmistakable is the rule that this Court is not a trier of facts.[8] Just as well entrenched is the doctrine that it is not the function of this Court to assess and evaluate the facts and the evidence all over again, our jurisdiction being generally limited to reviewing errors of law that might have been committed by the appellate court. Nevertheless, since the factual findings of the Court of Appeals are at

variance with those of the NLRC, we are compelled to review the records presented in both the Court of Appeals and the said labor tribunal.[9] We agree with petitioner that respondent has failed to substantiate its claim that he abandoned his work and that, therefore, the termination of his services is an unlawful sanction. Jurisprudence holds that for abandonment of work to exist, it is essential (1) that the employee must have failed to report for work or must have been absent without valid or justifiable reason; and (2) that there must have been a clear intention to sever the employer-employee relationship manifested by some overt acts. Deliberate and unjustified refusal on the part of the employee to go back to his work post and resume his employment must be established. Absence must be accompanied by overt acts unerringly pointing to the fact that the employee simply does not want to work anymore. And the burden of proof to show that there was unjustified refusal to go back to work rests on the employer.[10] We hold that the above twin essential requirements for abandonment to exist are not present in the case at bar. Petitioners absence is not without a justifiable reason. It must be recalled that upon receipt of the Notice to Terminate by reason of abandonment, petitioner sent respondent a letter explaining that he could not go back to work because of the pendency of his complaint for illegal suspension. And immediately after he was dismissed for "abandonment of work", he lost no time to amend his complaint to illegal dismissal. This alone negates any intention on his part to forsake his work. It is a settled doctrine that the filing of a complaint for illegal dismissal is inconsistent with the charge of abandonment, for an employee who takes steps to protest his dismissal cannot by logic be said to have abandoned his work.[11] Moreover, we find no indication that petitioner has shown by some overt acts his intention to sever the employer-employee relationship. The affidavit of Sergio L. Moreno stating that petitioner expressed his intention not to report for work anymore is plain hearsay. We are aware of the schemes employed by employers to extract favorable statements from their employees and entice them to testify in their favor for some financial considerations or promises. Abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts. To constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the employer-employee relationship. Clearly, the operative act is still the employees ultimate act of putting an end to his employment. Settled is the rule that mere absence or failure to report for work is not tantamount to abandonment of work. Even the failure to report for work after a notice to return to work has been served does not necessarily constitute abandonment nor does it bar reinstatement,[12] as correctly held by the NLRC. Finally, as prudently observed by the NLRC, it was unlikely that petitioner had abandoned his job for no reason at all considering the hardship of the times. To reiterate, if petitioner had truly forsaken his job, he would not have bothered to file an

amended complaint for illegal dismissal against respondent and prayed for reinstatement. In sum, we find that petitioner did not abandon his job but was illegally dismissed by respondent. An employee who is unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and other privileges as well as to his full backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.[13] However, the circumstances obtaining in this case do not warrant the reinstatement of petitioner. Antagonism caused a severe strain in the relationship between him and respondent. A more equitable disposition would be an award of separation pay equivalent to one (1) month's pay for every year of service. (This is in addition to his full backwages, allowances and other benefits). WHEREFORE, the petition is GRANTED. The Decision dated May 22, 2000 and Resolution dated November 8, 2000 of the Court of Appeals are hereby REVERSED and SET ASIDE. The Resolution dated August 21, 1995 of the NLRC is AFFIRMED with MODIFICATION in the sense that respondent is hereby ordered to pay petitioner (1) his separation pay (in lieu of his reinstatement) equivalent to one month pay for every year of service; and (2) his full backwages inclusive of allowances and other benefits or their monetary equivalent from his dismissal up to the time of his supposed actual reinstatement. SO ORDERED. Puno, J., (Chairman), Panganiban, and Carpio-Morales, JJ., concur. Corona, J., on leave.

[1]

Annex R, Petition for Review, Rollo at 144-152. Annex T, id. at 167. Making false, vicious and malicious utterances or statements, prejudicial to the company, its business, officers and employees. Failure or refusal to cooperate in any manner feasible with any superior or fellow employee in the performance of the latters duty. Annex J, Petition for Review, Rollo at 56-64. Annex M, id. at 82-89. Annex O, id. at 99-100. JMM Promotions and Management Inc. vs. CA, G.R. No. 139401, October 2, 2002. See Anflo Management and Investment Corp vs. Rodolfo Bolanio, G.R. No. 141608, October 4, 2002. MSMG-UWP vs. Ramos, G.R. No. 113907, February 28, 2000, 326 SCRA 428. KAMS International, Inc. vs. NLRC, G.R. No. 128806, September 28, 1999, 315 SCRA 316.

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 80609 August 23, 1988 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents. Nicanor G. Nuevas for petitioner.

CRUZ, J.: The only issue presented in the case at bar is the legality of the award of financial assistance to an employee who had been dismissed for cause as found by the public respondent. Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused by two complainants of having demanded and received from them the total amount of P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone installation. 1 Investigated and heard, she was found guilty as charged and accordingly
separated from the service. She went to the Ministry of Labor and Employment claiming she had been illegally removed. After consideration of the evidence and arguments of the parties, the company was sustained and the complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of labor arbiter's decision declared:
2

WHEREFORE, the instant complaint is dismissed for lack of merit. Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally blameless in the light of the fact that the deal happened outhide the premises of respondent company and that their act of giving P3,800.00 without any receipt is tantamount to corruption of public officers, complainant must be given one month pay for every year of service as financial assistance. 3 Both the petitioner and the private respondent appealed to the National Labor Relations Board, which upheld the said decision in toto and dismissed the appeals. 4 The private
respondent took no further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is now before us to question the affirmance of the above- quoted award as having been made with grave abuse of discretion.

In its challenged resolution of September 22, 1987, the NLRC said:

... Anent the award of separation pay as financial assistance in complainant's favor, We find the same to be equitable, taking into consideration her long years of service to the company whereby she had undoubtedly contributed to the success of respondent. While we do not in any way approve of complainants (private respondent) mal feasance, for which she is to suffer the penalty of dismissal, it is for reasons of equity and compassion that we resolve to uphold the award of financial assistance in her favor. 5 The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is entitled to reinstatement and backwages as required by the labor laws. However, an employee dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief at all because his dismissal is in accordance with law. In the case of the private respondent, she has been awarded financial assistance equivalent to ten months pay corresponding to her 10 year service in the company despite her removal for cause. She is, therefore, in effect rewarded rather than punished for her dishonesty, and without any legal authorization or justification. The award is made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such award puts a premium on dishonesty and encourages instead of deterring corruption. For its part, the public respondent claims that the employee is sufficiently punished with her dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to help her for the loss of her employment after working faithfully with the company for ten years. In support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation of
Davao, where the employees were dismissed for cause but were nevertheless allowed separation pay on grounds of social and compassionate justice. As the Court put it in the Firestone case:
7

In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of Lariosa and that the NLRC acted with grave abuse of discretion in ordering his reinstatement. However, considering that Lariosa had worked with the company for eleven years with no known previous bad record, the ends of social and compassionate justice would be served if he is paid full separation pay but not reinstatement without backwages by the NLRC. In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded him full separation pay for his 11 years of service with the company. In Soco, the employee was also legally separated for unauthorized use of a company vehicle and refusal to attend the grievance proceedings but he was just the same granted one-half month separation pay for every year of his 18-year service. Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed for
preferring certain dealers in violation of company policy but was allowed separation pay for his 2 years of 9 service. In Metro Drug Corporation v. NLRC, the employee was validly removed for loss of confidence because of her failure to account for certain funds but she was awarded separation pay equivalent to onehalf month's salary for every year of her service of 15 years. In Engineering Equipment, Inc. v. 10 NLRC, the dismissal of the employee was justified because he had instigated labor unrest among the workers and had serious differences with them, among other grounds, but he was still granted three 11 months separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, the employee's 3- year service was held validly terminated for lack of confidence and abandonment of work

but he was nonetheless granted three months separation pay. And in San Miguel Corporation v. Deputy 12 Minister of Labor and Employment, et al ., full separation pay for 6, 10, and 16 years service, respectively, was also allowed three employees who had been dismissed after they were found guilty of misappropriating company funds.

The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not entitled to separation pay. 13 The cases above cited constitute the exception, based
upon considerations of equity. Equity has been defined as justice outside law, being ethical rather than 15 jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience 16 and not on any sanction of positive law. Hence, it cannot prevail against the expressed provision of the labor laws allowing dismissal of employees for cause and without any provision for separation pay.
14

Strictly speaking, however, it is not correct to say that there is no express justification for the grant of separation pay to lawfully dismissed employees other than the abstract consideration of equity. The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub- topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause. The Court notes, however, that where the exception has been applied, the decisions have not been consistent as to the justification for the grant of separation pay and the amount or rate of such award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow workers in the Engineering Equipment case were both awarded separation pay notnvithstanding that the first cause was certainly more serious than the second. No less curiously, the employee in the Soco case was allowed only one-half month pay for every year of his 18 years of service, but in Filipro the award was two months separation pay for 2 years service. In Firestone, the emplovee was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee was granted only one-half month separation pay for every year of her 15year service. It would seem then that length of service is not necessarily a criterion for the grant of separation pay and neither apparently is the reason for the dismissal. The Court feels that distinctions are in order. We note that heretofore the separation pay, when it was considered warranted, was required regardless of the nature or degree of the ground proved, be it mere inefficiency or something graver like immorality or dishonesty. The benediction of compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the validly dismissed employee whatever the reason for his dismissal. This policy should be re-examined. It is time we rationalized the exception, to make it fair to both labor and management, especially to labor. There should be no question that where it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation pay to the dismissed

employee may be both just and compassionate, particularly if he has worked for some time with the company. For example, a subordinate who has irreconcilable policy or personal differences with his employer may be validly dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who has to be frequently absent because she has also to take care of her child may also be removed because of her poor attendance, this being another authorized ground. It is not the employee's fault if he does not have the necessary aptitude for his work but on the other hand the company cannot be required to maintain him just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under these and similar circumstances, however, the award to the employee of separation pay would be sustainable under the social justice policy even if the separation is for cause. But where the cause of the separation is more serious than mere inefficiency, the generosity of the law must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the situation is changed completely. This is not only inefficiency but immorality and the grant of separation pay would be entirely unjustified. We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution. The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be

poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character. Applying the above considerations, we hold that the grant of separation pay in the case at bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during all of her 10 years of service with the company. If regarded as a justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables. The Court also rules that the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material. This is without prejudice to the application of special agreements between the employer and the employee stipulating a higher rate of computation and providing for more benefits to the discharged employee. 17 WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is AFFIRMED in totoexcept for the grant of separation pay in the form of financial assistance, which is hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so ordered. Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and Medialdea, JJ., concur.

Separate Opinions

FERNAN, C.J., dissenting: The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed employees is that "our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers." 1 It is my firm belief that providing a rigid mathematical formula for determining the amounts of such separation pay will not be in keeping with these constitutional directives. By computing the allowable financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying these constitutional mandates that "those who have less in life should have more in law." It cannot be denied that a low salaried employee who is separated from work would suffer more hardship than a well-compensated one. Yet, if we

follow the formula suggested, we would in effect be favoring the latter instead of the former, as it would be the low- salaried employee who would encounter difficulty finding another job. I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the "environmental facts" of the case. PADILIA, J., separate opinion I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial assistance, to the private respondent, since the ground for termination of employment is dishonesty in the performance of her duties. I do not, however, subscribe to the view that "the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material." (p.11, Decision). It is my considered view that, except for terminations based on dishonesty and serious misconduct involving moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the termination of employment is for a valid cause without, however, involving dishonesty or serious misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that should be awarded to the terminated employee in accordance with the "environmental facts" of each case. It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay awarded by the NLRC in such cases of valid termination of employment but with the financial assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC. GRIO AQUINO, J., dissent: We should not rationalize compassion. I vote to affirm the grant of financial assistance.

Separate Opinions FERNAN, C.J., dissenting: The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed employees is that "our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers." 1

It is my firm belief that providing a rigid mathematical formula for determining the amounts of such separation pay will not be in keeping with these constitutional directives. By computing the allowable financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying these constitutional mandates that "those who have less in life should have more in law." It cannot be denied that a low salaried employee who is separated from work would suffer more hardship than a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the latter instead of the former, as it would be the low- salaried employee who would encounter difficulty finding another job. I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the "environmental facts" of the case. PADILIA, J., separate opinion I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial assistance, to the private respondent, since the ground for termination of employment is dishonesty in the performance of her duties. I do not, however, subscribe to the view that "the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material." (p.11, Decision). It is my considered view that, except for terminations based on dishonesty and serious misconduct involving moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the termination of employment is for a valid cause without, however, involving dishonesty or serious misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that should be awarded to the terminated employee in accordance with the "environmental facts" of each case. It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay awarded by the NLRC in such cases of valid termination of employment but with the financial assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC. GRIO AQUINO, J., dissent: We should not rationalize compassion. I vote to affirm the grant of financial assistance. Footnotes

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 158693 November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.: This petition for review seeks to reverse the decision1 of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00. Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2, 19922 until February 23, 1999 when they were dismissed for abandonment of work. Petitioners then filed a complaint for illegal dismissal and payment of money claims3 and on December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary claims. The dispositive portion of the decision states: WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of: 1. Jenny M. Agabon - P56, 231.93 2. Virgilio C. Agabon - 56, 231.93 and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR. SO ORDERED.4 On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also denied for lack of evidence. 5 Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals. The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision reads: WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00. SO ORDERED.6 Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7 Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing.8 Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work.9 In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not report for work because they had subcontracted to perform installation work for another company. Petitioners also demanded

for an increase in their wage to P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the illegal dismissal case.10 It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed by the Court of Appeals.11 However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and examine for itself the questioned findings. 12 Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just cause. They had abandoned their employment and were already working for another employer. To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give the employee the opportunity to be heard and to defend himself.13 Article 282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's representative in connection with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing. Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is a form of neglect of duty, hence, a just cause for termination of employment by the employer.15 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, with the second as the more determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified. 16 In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company. Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private respondent. This was not the first time they did this. In January 1996, they did not report for work because they were working for another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a relevant consideration in determining the penalty that should be meted out to him.17 In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work without leave or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job. We should apply that rule with more reason here where petitioners were absent because they were already working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct19 and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests. 20 After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were observed. The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code: Standards of due process: requirements of notice. In all cases of termination of employment, the following standards of due process shall be substantially observed: I. For termination of employment based on just causes as defined in Article 282 of the Code: (a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee's last known address. Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A termination for an authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and full backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted. Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must

give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed. In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability. In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement. In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process. The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employee's last known address.21 Thus, it should be held liable for non-compliance with the procedural requirements of due process. A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment termination in the light of Serrano v. National Labor Relations Commission.22 Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,23 we reversed this long-standing rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding backwages "may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to observe."24 We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employment. However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer.25 The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule. On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause. The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause. Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages. We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code which states: ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the doctrine. To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our entire history. Due process is that which comports with the deepest notions of what is fair and right and just.26 It is a constitutional restraint on the legislative as well as on the executive and judicial powers of the government provided by the Bill of Rights. Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due process requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply with constitutional due process. Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing. In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid cause but the employee was not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the employer. In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause,albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorney's fees. Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations Commission,30 which opinion he reiterated in Serrano, stated: C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally constitute the two-part due process requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would be no more than a useless formality and where,

accordingly, it would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31 After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to employees, but to employers as well. The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy. The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case.32 Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned. The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.33 It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the requirements of due process were complied with, would undoubtedly result in a valid dismissal. An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number."34

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances. Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labormanagement relations and dispense justice with an even hand in every case: We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for justice must always be served for the poor and the rich alike, according to the mandate of the law. 35 Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity and economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer. Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 37 As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer is liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee's right to statutory due process which was violated by the employer. 39 The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.40 Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter

employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules. Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay, service incentive leave pay and 13th month pay. We are not persuaded. We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions. As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but in the custody and absolute control of the employer.41 In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in the years disputed.42 Allegations by private respondent that it does not operate during holidays and that it allows its employees 10 days leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners. Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in the form of the 13th month pay to employees not already receiving the same43 so as "to further protect the level of real wages from the ravages of world-wide inflation."44 Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit: (f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee" from which an employer is prohibited under Article 11345 of the same Code from making any deductions without the employee's knowledge and consent. In the instant case, private

respondent failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims against private respondent. The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00. WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 isAFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc. is furtherORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process. No costs. SO ORDERED. Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, AustriaMartinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.

SEPARATE OPINION TINGA, J: I concur in the result, the final disposition of the petition being correct. There is no denying the importance of the Court's ruling today, which should be considered as definitive as to the effect of the failure to render the notice and hearing required under the Labor Code when an employee is being dismissed for just causes, as defined under the same law. The Court emphatically reaffirms the rule that dismissals for just cause are not invalidated due to the failure of the employer to observe the proper notice and hearing requirements under the Labor Code. At the same time, The Decision likewise establishes that the Civil Code provisions on damages serve as the proper framework for the appropriate relief to the employee dismissed for just cause if the notice-hearing requirement is not met. Serrano v. NLRC,1 insofar as it is controlling in dismissals for unauthorized causes, is no longer the controlling precedent. Any and all previous rulings and statements of the Court inconsistent with these determinations are now deemed inoperative.

My views on the questions raised in this petition are comprehensive, if I may so in all modesty. I offer this opinion to discuss the reasoning behind my conclusions, pertaining as they do to questions of fundamental importance. Prologue The factual backdrop of the present Petition for Review is not novel. Petitioners claim that they were illegally dismissed by the respondents, who allege in turn that petitioners had actually abandoned their employment. There is little difficulty in upholding the findings of the NRLC and the Court of Appeals that petitioners are guilty of abandonment, one of the just causes for termination under the Labor Code. Yet, the records also show that the employer was remiss in not giving the notice required by the Labor Code; hence, the resultant controversy as to the legal effect of such failure vis--vis the warranted dismissal. Ostensibly, the matter has been settled by our decision in Serrano2, wherein the Court ruled that the failure to properly observe the notice requirement did not render the dismissal, whether for just or authorized causes, null and void, for such violation was not a denial of the constitutional right to due process, and that the measure of appropriate damages in such cases ought to be the amount of wages the employee should have received were it not for the termination of his employment without prior notice.3 Still, the Court has, for good reason, opted to reexamine the so-called Serrano doctrine through the present petition Antecedent Facts Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in the manufacture and installation of gypsum board and cornice. In January of 1992, the Agabons were hired in January of 1992 as cornice installers by Riviera Home. According to their personnel file with Riviera Home, the Agabon given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk Subdivision, P-II Paraaque City, Metro Manila.4 It is not disputed that sometime around February 1999, the Agabons stopped rendering services for Riviera Home. The Agabons allege that beginning on 23 February 1999, they stopped receiving assignments from Riviera Home.5 When they demanded an explanation, the manager of Riviera Homes, Marivic Ventura, informed them that they would be hired again, but on a "pakyaw" (piece-work) basis. When the Agabons spurned this proposal, Riviera Homes refused to continue their employment under the original terms and agreement.6 Taking affront, the Agabons filed a complaint for illegal dismissal with the National Labor Relations Commission ("NLRC"). Riviera Homes adverts to a different version of events leading to the filing of the complaint for illegal dismissal. It alleged that in the early quarter of 1999, the Agabons stopped reporting for work with Riviera. Two separate letters dated 10 March 1999, were sent to the Agabons at the address indicated in their personnel file. In these notices, the Agabons were directed to report for work immediately.7 However, these notices were returned unserved with the notation "RTS Moved." Then, in June of 1999, Virgilio Agabon informed Riviera Homes by telephone that he and Jenny Agabon were ready to return to work for Riviera Homes, on the condition that their wages be first adjusted. On 18 June 1999, the Agabons went to Riviera Homes, and in a meeting with management, requested a wage increase of

up to Two Hundred Eighty Pesos (P280.00) a day. When no affirmative response was offered by Riviera Homes, the Agabons initiated the complaint before the NLRC. 8 In their Position Paper, the Agabons likewise alleged that they were required to work even on holidays and rest days, but were never paid the legal holiday pay or the premium pay for holiday or rest day. They also asserted that they were denied Service Incentive Leave pay, and that Virgilio Agabon was not given his thirteenth (13th) month pay for the year 1998.9 After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered a Decision dated 28 December 1999, finding the termination of the Agabons illegal, and ordering Riviera Homes to pay backwages in the sum of Fifty Six Thousand Two Hundred Thirty One Pesos and Ninety Three Centavos (P56,231.93) each. The Labor Arbiter likewise ordered, in lieu of reinstatement, the payment of separation pay of one (1) month pay for every year of service from date of hiring up to 29 November 1999, as well as the payment of holiday pay, service incentive leave pay, and premium pay for holiday and restday, plus thirteenth (13th) month differential to Virgilio Agabon.10 In so ruling, the Labor Arbiter declared that Riviera Homes was unable to satisfactorily refute the Agabons' claim that they were no longer given work to do after 23 February 1999 and that their rehiring was only on "pakyaw" basis. The Labor Arbiter also held that Riviera Homes failed to comply with the notice requirement, noting that Riviera Homes well knew of the change of address of the Agabons, considering that the identification cards it issued stated a different address from that on the personnel file.11 The Labor Arbiter asserted the principle that in all termination cases, strict compliance by the employer with the demands of procedural and substantive due process is a condition sine qua non for the same to be declared valid.12 On appeal, the NLRC Second Division set aside the Labor Arbiter's Decision and ordered the dismissal of the complaint for lack of merit.13 The NLRC held that the Agabons were not able to refute the assertion that for the payroll period ending on 15 February 1999, Virgilio and Jenny Agabon worked for only two and one-half (2) and three (3) days, respectively. It disputed the earlier finding that Riviera Homes had known of the change in address, noting that the address indicated in the identification cards was not the Agabons, but that of the persons who should be notified in case of emergency concerning the employee.14 Thus, proper service of the notice was deemed to have been accomplished. Further, the notices evinced good reason to believe that the Agabons had not been dismissed, but had instead abandoned their jobs by refusing to report for work. In support of its conclusion that the Agabons had abandoned their work, the NLRC also observed that the Agabons did not seek reinstatement, but only separation pay. While the choice of relief was premised by the Agabons on their purported strained relations with Riviera Homes, the NLRC pointed out that such claim was amply belied by the fact that the Agabons had actually sought a conference with Riviera Homes in June of 1999. The NLRC likewise found that the failure of the Labor Arbiter to justify the award of extraneous money claims, such as holiday and service incentive leave pay, confirmed that there was no proof to justify such claims.

A Petition for Certiorari was promptly filed with the Court of Appeals by the Agabons, imputing grave abuse of discretion on the part of the NLRC in dismissing their complaint for illegal dismissal. In a Decision15 dated 23 January 2003, the Court of Appeals affirmed the finding that the Agabons had abandoned their employment. It noted that the two elements constituting abandonment had been established, to wit: the failure to report for work or absence without valid justifiable reason, and; a clear intention to sever the employeremployee relationship. The intent to sever the employer-employee relationship was buttressed by the Agabon's choice to seek not reinstatement, but separation pay. The Court of Appeals likewise found that the service of the notices were valid, as the Agabons did not notify Riviera Homes of their change of address, and thus the failure to return to work despite notice amounted to abandonment of work. However, the Court of Appeals reversed the NLRC as regards the denial of the claims for holiday pay, service incentive leave pay, and the balance of Virgilio Agabon's thirteenth (13th) month pay. It ruled that the failure to adduce proof in support thereof was not fatal and that the burden of proving that such benefits had already been paid rested on Riviera Homes.16 Given that Riviera Homes failed to present proof of payment to the Agabons of their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998, the Court of Appeals chose to believe that such benefits had not actually been received by the employees. It also ruled that the apparent deductions made by Riviera Homes on the thirteenth (13th) month pay of Virgilio Agabon violated Section 10 of the Rules and Regulations Implementing Presidential Decree No. 851.17 Accordingly, Riviera Homes was ordered to pay the Agabons holiday for four (4) regular holidays in 1996, 1997 and 1998, as well as their service incentive leave pay for said years, and the balance of Virgilio Agabon's thirteenth (13th) month pay for 1998 in the amount of Two Thousand One Hundred Fifty Pesos (P2,150.00).18 In their Petition for Review, the Agabons claim that they had been illegally dismissed, reasserting their version of events, thus: (1) that they had not been given new assignments since 23 February 1999; (2) that they were told that they would only be re-hired on a "pakyaw" basis, and; (3) that Riviera Homes had knowingly sent the notices to their old address despite its knowledge of their change of address as indicated in the identification cards.19Further, the Agabons note that only one notice was sent to each of them, in violation of the rule that the employer must furnish two written notices before termination the first to apprise the employee of the cause for which dismissal is sought, and the second to notify the employee of the decision of dismissal.20 The Agabons likewise maintain that they did not seek reinstatement owing to the strained relations between them and Riviera Homes. The Agabons present to this Court only one issue, i.e.: whether or not they were illegally dismissed from their employment.21 There are several dimensions though to this issue which warrant full consideration. The Abandonment Dimension Review of Factual Finding of Abandonment As the Decision points out, abandonment is characterized by the failure to report for work or absence without valid or justifiable reason, and a clear intention to sever the employer-

employee relationship. The question of whether or not an employee has abandoned employment is essentially a factual issue.22 The NLRC and the Court of Appeals, both appropriate triers of fact, concluded that the Agabons had actually abandoned their employment, thus there is little need for deep inquiry into the correctness of this factual finding. There is no doubt that the Agabons stopped reporting for work sometime in February of 1999. And there is no evidence to support their assertion that such absence was due to the deliberate failure of Riviera Homes to give them work. There is also the fact, as noted by the NLRC and the Court of Appeals, that the Agabons did not pray for reinstatement, but only for separation pay and money claims.23 This failure indicates their disinterest in maintaining the employeremployee relationship and their unabated avowed intent to sever it. Their excuse that strained relations between them and Riviera Homes rendered reinstatement no longer feasible was hardly given credence by the NLRC and the Court of Appeals.24 The contrary conclusion arrived at by the Labor Arbiter as regards abandonment is of little bearing to the case. All that the Labor Arbiter said on that point was that Riviera Homes was not able to refute the Agabons' claim that they were terminated on 23 February 1999. 25 The Labor Arbiter did not explain why or how such finding was reachhy or how such finding was reachhe Agabons was more credible than that of Riviera Homes'. Being bereft of reasoning, the conclusion deserves scant consideration. Compliance with Notice Requirement At the same time, both the NLRC and the Court of Appeals failed to consider the apparent fact that the rules governing notice of termination were not complied with by Riviera Homes. Section 2, Book V, Rule XXIII of the Omnibus Rules Implementing the Labor Code (Implementing Rules) specifically provides that for termination of employment based on just causes as defined in Article 282, there must be: (1) written notice served on the employee specifying the grounds for termination and giving employee reasonable opportunity to explain his/her side; (2) a hearing or conference wherein the employee, with the assistance of counsel if so desired, is given opportunity to respond to the charge, present his evidence or rebut evidence presented against him/her; and (3) written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify termination. At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules does not require strict compliance with the above procedure, but only that the same be "substantially observed." Riviera Homes maintains that the letters it sent on 10 March 1999 to the Agabons sufficiently complied with the notice rule. These identically worded letters noted that the Agabons had stopped working without permission that they failed to return for work despite having been repeatedly told to report to the office and resume their employment. 26 The letters ended with an invitation to the Agabons to report back to the office and return to work.27

The apparent purpose of these letters was to advise the Agabons that they were welcome to return back to work, and not to notify them of the grounds of termination. Still, considering that only substantial compliance with the notice requirement is required, I am prepared to say that the letters sufficiently conform to the first notice required under the Implementing Rules. The purpose of the first notice is to duly inform the employee that a particular transgression is being considered against him or her, and that an opportunity is being offered for him or her to respond to the charges. The letters served the purpose of informing the Agabons of the pending matters beclouding their employment, and extending them the opportunity to clear the air. Contrary to the Agabons' claim, the letter-notice was correctly sent to the employee's last known address, in compliance with the Implementing Rules. There is no dispute that these letters were not actually received by the Agabons, as they had apparently moved out of the address indicated therein. Still, the letters were sent to what Riviera Homes knew to be the Agabons' last known address, as indicated in their personnel file. The Agabons insist that Riviera Homes had known of the change of address, offering as proof their company IDs which purportedly print out their correct new address. Yet, as pointed out by the NLRC and the Court of Appeals, the addresses indicated in the IDs are not the Agabons, but that of the person who is to be notified in case on emergency involve either or both of the Agabons. The actual violation of the notice requirement by Riviera Homes lies in its failure to serve on the Agabons the second notice which should inform them of termination. As the Decision notes, Riviera Homes' argument that sending the second notice was useless due to the change of address is inutile, since the Implementing Rules plainly require that the notice of termination should be served at the employee's last known address. The importance of sending the notice of termination should not be trivialized. The termination letter serves as indubitable proof of loss of employment, and its receipt compels the employee to evaluate his or her next options. Without such notice, the employee may be left uncertain of his fate; thus, its service is mandated by the Implementing Rules. Noncompliance with the notice rule, as evident in this case, contravenes the Implementing Rules. But does the violation serve to invalidate the Agabons' dismissal for just cause? The So-Called Constitutional Law Dimension Justices Puno and Panganiban opine that the Agabons should be reinstated as a consequence of the violation of the notice requirement. I respectfully disagree, for the reasons expounded below. Constitutional Considerations Of Due Process and the Notice-Hearing Requirement in Labor Termination Cases Justice Puno proposes that the failure to render due notice and hearing prior to dismissal for just cause constitutes a violation of the constitutional right to due process. This view, as acknowledged by Justice Puno himself, runs contrary to the Court's pronouncement

in Serrano v. NLRC28 that the absence of due notice and hearing prior to dismissal, if for just cause, violates statutory due process. The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent overview of the history of the doctrine: Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the employer-employee relationship the right to terminate their relationship by giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by paying him a mesadaequivalent to his salary for one month. This provision was repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving of advance notice for every year of service.29 Under Section 1 of the Termination Pay Law, an employer could dismiss an employee without just cause by serving written notice on the employee at least one month in advance or one-half month for every year of service of the employee, whichever was longer.30 Failure to serve such written notice entitled the employee to compensation equivalent to his salaries or wages corresponding to the required period of notice from the date of termination of his employment. However, there was no similar written notice requirement under the Termination Pay Law if the dismissal of the employee was for just cause. The Court, speaking through Justice JBL Reyes, ruled in Phil. Refining Co. v. Garcia:31 [Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes the right of the employer to dismiss his employees (hired without definite period) whether for just case, as therein defined or enumerated, or without it. If there be just cause, the employer is not required to serve any notice of discharge nor to disburse termination pay to the employee. xxx32 Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive to the notion that termination for just cause without notice or hearing violated the constitutional right to due process. Nonetheless, the Court recognized an award of damages as the appropriate remedy. In Galsim v. PNB,33 the Court held: Of course, the employer's prerogative to dismiss employees hired without a definite period may be with or without cause. But if the manner in which such right is exercised is abusive, the employer stands to answer to the dismissed employee for damages.34 The Termination Pay Law was among the repealed laws with the enactment of the Labor Code in 1974. Significantly, the Labor Code, in its inception, did not require notice or hearing before an employer could terminate an employee for just cause. As Justice Mendoza explained:

Where the termination of employment was for a just cause, no notice was required to be given to the employee. It was only on September 4, 1981 that notice was required to be given even where the dismissal or termination of an employee was for cause. This was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989.35 It cannot be denied though that the thinking that absence of notice or hearing prior to termination constituted a constitutional violation has gained a jurisprudential foothold with the Court. Justice Puno, in his Dissenting Opinion, cites several cases in support of this theory, beginning with Batangas Laguna Tayabas Bus Co. v. Court of Appeals36 wherein we held that "the failure of petitioner to give the private respondent the benefit of a hearing before he was dismissed constitutes an infringement on his constitutional right to due process of law.37 Still, this theory has been refuted, pellucidly and effectively to my mind, by Justice Mendoza's disquisition inSerrano, thus: xxx There are three reasons why, on the other hand, violation by the employer of the notice requirement cannot be considered a denial of due process resulting in the nullity of the employee's dismissal or layoff. The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to the exercise of private power, such as the termination of employment under the Labor Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or property without due process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with what are considered civilized methods. The second reason is that notice and hearing are required under the Due Process Clause before the power of organized society are brought to bear upon the individual. This is obviously not the case of termination of employment under Art. 283. Here the employee is not faced with an aspect of the adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist justifying the termination of his employment. xxx The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious misconduct

or willful disobedience by the employee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer or the latter's immediate family or duly authorized representatives, or other analogous cases).38 The Court in the landmark case of People v. Marti39 clarified the proper dimensions of the Bill of Rights. That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private individuals finds support in the deliberations of the Constitutional Commission. True, the liberties guaranteed by the fundamental law of the land must always be subject to protection. But protection against whom? Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the query which he himself posed, as follows: "First, the general reflections. The protection of fundamental liberties in the essence of constitutional democracy. Protection against whom? Protection against the state. The Bill of Rights governs the relationship between the individual and the state. Its concern is not the relation between individuals, between a private individual and other individuals. What the Bill of Rights does is to declare some forbidden zones in the private sphere inaccessible to any power holder." (Sponsorship Speech of Commissioner Bernas; Record of the Constitutional Commission, Vol. 1, p. 674; July 17,1986; Italics supplied) 40 I do not doubt that requiring notice and hearing prior to termination for just cause is an admirable sentiment borne out of basic equity and fairness. Still, it is not a constitutional requirement that can impose itself on the relations of private persons and entities. Simply put, the Bill of Rights affords protection against possible State oppression against its citizens, but not against an unjust or repressive conduct by a private party towards another. Justice Puno characterizes the notion that constitutional due process limits government action alone as "pass,"and adverts to nouvelle vague theories which assert that private conduct may be restrained by constitutional due process. His dissent alludes to the American experience making references to the post-Civil War/pre-World War II era when the US Supreme Court seemed overly solicitous to the rights of big business over those of the workers. Theories, no matter how entrancing, remain theoretical unless adopted by legislation, or more controversially, by judicial opinion. There were a few decisions of the US Supreme Court that, ostensibly, imposed on private persons the values of the constitutional guarantees. However, in deciding the cases, the American High Court found it necessary to link the actors to adequate elements of the "State" since the Fourteenth Amendment plainly begins with the words "No State shall"41 More crucially to the American experience, it had become necessary to pass legislation in order to compel private persons to observe constitutional values. While the equal protection clause was deemed sufficient by the Warren Court to bar racial segregation in public facilities, it necessitated enactment of the Civil Rights Acts of 1964 to prohibit segregation

as enforced by private persons within their property. In this jurisdiction, I have trust in the statutory regime that governs the correction of private wrongs. There are thousands of statutes, some penal or regulatory in nature, that are the source of actionable claims against private persons. There is even no stopping the State, through the legislative cauldron, from compelling private individuals, under pain of legal sanction, into observing the norms ordained in the Bill of Rights. Justice Panganiban's Separate Opinion asserts that corporate behemoths and even individuals may now be sources of abuses and threats to human rights and liberties. 42 The concern is not unfounded, but appropriate remedies exist within our statutes, and so resort to the constitutional trump card is not necessary. Even if we were to engage the premise, the proper juristic exercise should be to examine whether an employer has taken the attributes of the State so that it could be compelled by the Constitution to observe the proscriptions of the Bill of Rights. But the strained analogy simply does not square since the attributes of an employer are starkly incongruous with those of the State. Employers plainly do not possess the awesome powers and the tremendous resources which the State has at its command. The differences between the State and employers are not merely literal, but extend to their very essences. Unlike the State, the raison d'etre of employers in business is to accumulate profits. Perhaps the State and the employer are similarly capacitated to inflict injury or discomfort on persons under their control, but the same power is also possessed by a school principal, hospital administrator, or a religious leader, among many others. Indeed, the scope and reach of authority of an employer pales in comparison with that of the State. There is no basis to conclude that an employer, or even the employer class, may be deemed a de facto state and on that premise, compelled to observe the Bill of Rights. There is simply no nexus in their functions, distaff as they are, that renders it necessary to accord the same jurisprudential treatment. It may be so, as alluded in the dissent of Justice Puno, that a conservative court system overly solicitous to the concerns of business may consciously gut away at rights or privileges owing to the labor sector. This certainly happened before in the United States in the early part of the twentieth century, when the progressive labor legislation such as that enacted during President Roosevelt's New Deal regime most of them addressing problems of labor were struck down by an arch-conservative Court.43 The preferred rationale then was to enshrine within the constitutional order business prerogatives, rendering them superior to the express legislative intent. Curiously, following its judicial philosophy at the time the U. S. Supreme Court made due process guarantee towards employers prevail over the police power to defeat the cause of labor. 44 Of course, this Court should not be insensate to the means and methods by which the entrenched powerful class may maneuver the socio-political system to ensure selfpreservation. However, the remedy to rightward judicial bias is not leftward judicial bias. The more proper judicial attitude is to give due respect to legislative prerogatives, regardless of the ideological sauce they are dipped in. While the Bill of Rights maintains a position of primacy in the constitutional hierarchy, 45 it has scope and limitations that must be respected and asserted by the Court, even though

they may at times serve somewhat bitter ends. The dissenting opinions are palpably distressed at the effect of the Decision, which will undoubtedly provoke those reflexively sympathetic to the labor class. But haphazard legal theory cannot be used to justify the obverse result. The adoption of the dissenting views would give rise to all sorts of absurd constitutional claims. An excommunicated Catholic might demand his/her reinstatement into the good graces of the Church and into communion on the ground that excommunication was violative of the constitutional right to due process. A celebrity contracted to endorse Pepsi Cola might sue in court to void a stipulation that prevents him/her from singing the praises of Coca Cola once in a while, on the ground that such stipulation violates the constitutional right to free speech. An employee might sue to prevent the employer from reading outgoing e-mail sent through the company server using the company e-mail address, on the ground that the constitutional right to privacy of communication would be breached. The above concerns do not in anyway serve to trivialize the interests of labor. But we must avoid overarching declarations in order to justify an end result beneficial to labor. I dread the doctrinal acceptance of the notion that the Bill of Rights, on its own, affords protection and sanctuary not just from the acts of State but also from the conduct of private persons. Natural and juridical persons would hesitate to interact for fear that a misstep could lead to their being charged in court as a constitutional violator. Private institutions that thrive on their exclusivity, such as churches or cliquish groups, could be forced to renege on their traditional tenets, including vows of secrecy and the like, if deemed by the Court as inconsistent with the Bill of Rights. Indeed, that fundamental right of all private persons to be let alone would be forever diminished because of a questionable notion that contravenes with centuries of political thought. It is not difficult to be enraptured by novel legal ideas. Their characterization is susceptible to the same marketing traps that hook consumers to new products. With the help of unique wrapping, a catchy label, and testimonials from professed experts from exotic lands, a malodorous idea may gain wide acceptance, even among those self-possessed with their own heightened senses of perception. Yet before we join the mad rush in order to proclaim a theory as "brilliant," a rigorous test must first be employed to determine whether it complements or contradicts our own system of laws and juristic thought. Without such analysis, we run the risk of abnegating the doctrines we have fostered for decades and the protections they may have implanted into our way of life. Should the Court adopt the view that the Bill of Rights may be invoked to invalidate actions by private entities against private individuals, the Court would open the floodgates to, and the docket would be swamped with, litigations of the scurrilous sort. Just as patriotism is the last refuge of scoundrels, the broad constitutional claim is the final resort of the desperate litigant. Constitutional Protection of Labor The provisions of the 1987 Constitution affirm the primacy of labor and advocate a multifaceted state policy that affords, among others, full protection to labor. Section 18, Article II thereof provides:

The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. Further, Section 3, Article XIII states: The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equal employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security to tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. The constitutional enshrinement of the guarantee of full protection of labor is not novel to the 1987 Constitution. Section 6, Article XIV of the 1935 Constitution reads: The State shall afford protection to labor, especially to working women, and minors, and shall regulate the relations between the landowner and tenant, and between labor and capital in industry and in agriculture. The State may provide for compulsory arbitration. Similarly, among the principles and state policies declared in the 1973 Constitution, is that provided in Section 9, Article II thereof: The State shall afford full protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work. The State may provide for compulsory arbitration. On the other hand, prior to the 1973 Constitution, the right to security of tenure could only be found in legislative enactments and their respective implementing rules and regulations. It was only in the 1973 Constitution that security of tenure was elevated as a constitutional right. The development of the concept of security of tenure as a constitutionally recognized right was discussed by this Court in BPI Credit Corporation v. NLRC,46 to wit:

The enthronement of the worker's right to security or tenure in our fundamental law was not achieved overnight. For all its liberality towards labor, our 1935 Constitution did not elevate the right as a constitutional right. For a long time, the worker's security of tenure had only the protective mantle of statutes and their interpretative rules and regulations. It was as uncertain protection that sometimes yielded to the political permutations of the times. It took labor nearly four decades of sweat and tears to persuade our people thru their leaders, to exalt the worker's right to security of tenure as a sacrosanct constitutional right. It was Article II, section 2 [9] of our 1973 Constitution that declared as a policy that the State shall assure the right of worker's to security tenure. The 1987 Constitution is even more solicitous of the welfare of labor. Section 3 of its Article XIII mandates that the State shall afford full protection to labor and declares that all workers shall be entitled to security of tenure. Among the enunciated State policies are the promotion of social justice and a just and dynamic social order. In contrast, the prerogative of management to dismiss a worker, as an aspect of property right, has never been endowed with a constitutional status. The unequivocal constitutional declaration that all workers shall be entitled to security of tenure spurred our lawmakers to strengthen the protective walls around this hard earned right. The right was protected from undue infringement both by our substantive and procedural laws. Thus, the causes for dismissing employees were more defined and restricted; on the other hand, the procedure of termination was also more clearly delineated. These substantive and procedural laws must be strictly complied with before a worker can be dismissed from his employment.47 It is quite apparent that the constitutional protection of labor was entrenched more than eight decades ago, yet such did not prevent this Court in the past from affirming dismissals for just cause without valid notice. Nor was there any pretense made that this constitutional maxim afforded a laborer a positive right against dismissal for just cause on the ground of lack of valid prior notice. As demonstrated earlier, it was only after the enactment of the Labor Code that the doctrine relied upon by the dissenting opinions became en vogue. This point highlights my position that the violation of the notice requirement has statutory moorings, not constitutional. It should be also noted that the 1987 Constitution also recognizes the principle of shared responsibility between workers and employers, and the right of enterprise to reasonable returns, expansion, and growth. Whatever perceived imbalance there might have been under previous incarnations of the provision have been obviated by Section 3, Article XIII. In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption that all constitutional provisions are self-executing. We reasoned that to declare otherwise would result in the pernicious situation wherein by mere inaction and disregard by the legislature, constitutional mandates would be rendered ineffectual. Thus, we held: As against constitutions of the past, modern constitutions have been generally ed upon a different principle and have often become in effect extensive codes of laws intended to operate directly upon the people in a manner similar to that of statutory

enactments, and the function of constitutional conventions has evolved into one more like that of a legislative body. Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has always been, that . . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. 49 In further discussing self-executing provisions, this Court stated that: In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of powers directly granted by the constitution, further the operation of such a provision, prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of the rights secured or the determination thereof, or place reasonable safeguards around the exercise of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the violation of a self-executing constitutional provision does not render such a provision ineffective in the absence of such legislation. The omission from a constitution of any express provision for a remedy for enforcing a right or liability is not necessarily an indication that it was not intended to be self-executing. The rule is that a self-executing provision of the constitution does not necessarily exhaust legislative power on the subject, but any legislation must be in harmony with the constitution, further the exercise of constitutional right and make it more available. Subsequent legislation however does not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.50 Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in the sense that these are automatically acknowledged and observed without need for any enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies an unimpeachable right to continued employmenta utopian notion, doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of the

employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution. Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative enactments for their enforceability. This is reflected in the record of debates on the social justice provisions of the Constitution: MS. [FELICITAS S.] AQUINO: We appreciate the concern of the Commissioner. But this Committee [on Social Justice] has actually become the forum already of a lot of specific grievances and specific demands, such that understandably, we may have been, at one time or another, dangerously treading into the functions of legislation. Our only plea to the Commission is to focus our perspective on the matter of social justice and its rightful place in the Constitution. What we envision here is a mandate specific enough that would give impetus for statutory implementation. We would caution ourselves in terms of the judicious exercise of self-censorship against treading into the functions of legislation. (emphasis supplied)51 xxx [FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one section on social justice; the same is true with the 1973 Constitution. But they seem to have stood us in good stead; and I am a little surprised why, despite that attempt at self-censorship, there are certain provisions here which are properly for legislation.52 xxx BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during the presentation of the provisions on the Bill of Rights by Commissioner Bernas is very apropos here. He spoke of self-executing rights which belong properly to the Bill of Rights, and then he spoke of a new body of rights which are more of claims and that these have come about largely through the works of social philosophers and then the teaching of the Popes. They focus on the common good and hence, it is not as easy to pinpoint precisely these rights nor the situs of the rights. And yet, they exist in relation to the common good.53 xxx MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of collaboration will be left to legislation but the important thing now is the conservation, utilization or maximization of the very limited resources. xxx [RICARDO J.] ROMULO: The other problem is that, by and large, government services are inefficient. So, this is a problem all by itself. On Section 19, where the

report says that people's organizations as a principal means of empowering the people to pursue and protect through peaceful means, I do not suppose that the Committee would like to either preempt or exclude the legislature, because the concept of a representative and democratic system really is that the legislature is normally the principal means. [EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream of influencing the composition or the membership of the legislature, if they do not get organized. It is, in fact, a recognition of the principle that unless a citizenry is organized and mobilized to pursue its ends peacefully, then it cannot really participate effectively.54 There is no pretense on the part of the framers that the provisions on Social Justice, particularly Section 3 of Article XIII, are self-executory. Still, considering the rule that provisions should be deemed self-executing if enforceable without further legislative action, an examination of Section 3 of Article XIII is warranted to determine whether it is complete in itself as a definitive law, or if it needs future legislation for completion and enforcement.55Particularly, we should inquire whether or not the provision voids the dismissal of a laborer for just cause if no valid notice or hearing is attendant. Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant comment on Section 3, Article XIII of the 1987 Constitution: The [cluster] of rights guaranteed in the second paragraph are the right "to security of tenure, humane conditions of work, and a living wage." Again, although these have been set apart by a period (.) from the next sentence and are therefore not modified by the final phrase "as may be provided by law," it is not the intention to place these beyond the reach of valid laws. xxx (emphasis supplied)56 At present, the Labor Code is the primary mechanism to carry out the Constitution's directives. This is clear from Article 357 under Chapter 1 thereof which essentially restates the policy on the protection of labor as worded in the 1973 Constitution, which was in force at the time of enactment of the Labor Code. It crystallizes the fundamental law's policies on labor, defines the parameters of the rights granted to labor such as the right to security of tenure, and prescribes the standards for the enforcement of such rights in concrete terms. While not infallible, the measures provided therein tend to ensure the achievement of the constitutional aims. The necessity for laws concretizing the constitutional principles on the protection of labor is evident in the reliance placed upon such laws by the Court in resolving the issue of the validity of a worker's dismissal. In cases where that was the issue confronting the Court, it consistently recognized the constitutional right to security of tenure and employed the standards laid down by prevailing laws in determining whether such right was violated.58 The Court's reference to laws other than the Constitution in resolving the issue of dismissal is an implicit acknowledgment that the right to security of tenure, while recognized in the Constitution, cannot be implemented uniformly absent a law prescribing concrete standards for its enforcement.

As discussed earlier, the validity of an employee's dismissal in previous cases was examined by the Court in accordance with the standards laid down by Congress in the Termination Pay Law, and subsequently, the Labor Code and the amendments thereto. At present, the validity of an employee's dismissal is weighed against the standards laid down in Article 279, as well as Article 282 in relation to Article 277(b) of the Labor Code, for a dismissal for just cause, and Article 283 for a dismissal for an authorized cause. The Effect of Statutory Violation Of Notice and Hearing There is no doubt that the dismissal of an employee even for just cause, without prior notice or hearing, violates the Labor Code. However, does such violation necessarily void the dismissal? Before I proceed with my discussion on dismissals for just causes, a brief comment regarding dismissals for authorized cause under Article 283 of the Labor Code. While the justiciable question in Serrano pertained to a dismissal for unauthorized cause, the ruling therein was crafted as definitive to dismissals for just cause. Happily, the Decision today does not adopt the same unwise tack. It should be recognized that dismissals for just cause and dismissals for authorized cause are governed by different provisions, entail divergent requisites, and animated by distinct rationales. The language of Article 283 expressly effects the termination for authorized cause to the service of written notice on the workers and the Ministry of Labor at least one (1) month before the intended date of termination. This constitutes an eminent difference than dismissals for just cause, wherein the causal relation between the notice and the dismissal is not expressly stipulated. The circumstances distinguishing just and authorized causes are too markedly different to be subjected to the same rules and reasoning in interpretation. Since the present petition is limited to a question arising from a dismissal for just cause, there is no reason for making any pronouncement regarding authorized causes. Such declaration would be merely obiter, since they are neither the law of the case nor dispositive of the present petition. When the question becomes justiciable before this Court, we will be confronted with an appropriate factual milieu on which we can render a more judicious disposition of this admittedly important question. B. Dismissal for Just Cause There is no express provision in the Labor Code that voids a dismissal for just cause on the ground that there was no notice or hearing. Under Section 279, the employer is precluded from dismissing an employee except for a just cause as provided in Section 282, or an authorized cause under Sections 283 and 284. Based on reading Section 279 alone, the existence of just cause by itself is sufficient to validate the termination. Just cause is defined by Article 282, which unlike Article 283, does not condition the termination on the service of written notices. Still, the dissenting opinions propound that even if there is just cause, a termination may be invalidated due to the absence of notice or hearing. This view is anchored mainly on constitutional moorings, the basis of which I had

argued against earlier. For determination now is whether there is statutory basis under the Labor Code to void a dismissal for just cause due to the absence of notice or hearing. As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the Labor Code was amended to enshrine into statute the twin requirements of notice and hearing. 59 Such requirements are found in Article 277 of the Labor Code, under the heading "Miscellaneous Provisions." Prior to the amendment, the notice-hearing requirement was found under the implementing rules issued by the then Minister of Labor in 1981. The present-day implementing rules likewise mandate that the standards of due process, including the requirement of written notice and hearing, "be substantially observed."60 Indubitably, the failure to substantially comply with the standards of due process, including the notice and hearing requirement, may give rise to an actionable claim against the employer. Under Article 288, penalties may arise from violations of any provision of the Labor Code. The Secretary of Labor likewise enjoys broad powers to inquire into existing relations between employers and employees. Systematic violations by management of the statutory right to due process would fall under the broad grant of power to the Secretary of Labor to investigate under Article 273. However, the remedy of reinstatement despite termination for just cause is simply not authorized by the Labor Code. Neither the Labor Code nor its implementing rules states that a termination for just cause is voided because the requirement of notice and hearing was not observed. This is not simply an inadvertent semantic failure, but a conscious effort to protect the prerogatives of the employer to dismiss an employee for just cause. Notably, despite the several pronouncements by this Court in the past equating the notice-hearing requirement in labor cases to a constitutional maxim, neither the legislature nor the executive has adopted the same tack, even gutting the protection to provide that substantial compliance with due process suffices. The Labor Code significantly eroded management prerogatives in the hiring and firing of employees. Whereas employees could be dismissed even without just cause under the Termination Pay Law61, the Labor Code affords workers broad security of tenure. Still, the law recognizes the right of the employer to terminate for just cause. The just causes enumerated under the Labor Code serious misconduct or willful disobedience, gross and habitual neglect, fraud or willful breach of trust, commission of a crime by the employee against the employer, and other analogous causes are characterized by the harmful behavior of an employee against the business or the person of the employer. These just causes for termination are not negated by the absence of notice or hearing. An employee who tries to kill the employer cannot be magically absolved of trespasses just because the employer forgot to serve due notice. Or a less extreme example, the gross and habitual neglect of an employee will not be improved upon just because the employer failed to conduct a hearing prior to termination. In fact, the practical purpose of requiring notice and hearing is to afford the employee the opportunity to dispute the contention that there was just cause in the dismissal. Yet it must be understood if a dismissed employee is deprived of the right to notice and hearing, and thus denied the opportunity to present countervailing evidence that

disputes the finding of just cause, reinstatement will be valid not because the notice and hearing requirement was not observed, but because there was no just cause in the dismissal. The opportunity to dispute the finding of the just cause is readily available before the Labor Arbiter, and the subsequent levels of appellate review. Again, as held in Serrano: Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with the Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak of notice and hearing as the essence of procedural due process. Thus, compliance by the employer with the notice requirement before he dismisses an employee does not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission.62 The Labor Code presents no textually demonstrable commitment to invalidate a dismissal for just cause due to the absence of notice or hearing. This is not surprising, as such remedy will not restore the employer or employee into equity. Absent a showing of integral causation, the mutual infliction of wrongs does not negate either injury, but instead enforces two independent rights of relief. The Damages' Dimensions Award for Damages Must Have Statutory Basis The Court has grappled with the problem of what should be the proper remedial relief of an employee dismissed with just cause, but not afforded either notice or hearing. In a long line of cases, beginning with Wenphil Corp. v. NLRC63 and up until Serrano in 2000, the Court had deemed an indemnification award as sufficient to answer for the violation by the employer against the employee. However, the doctrine was modified in Serrano. I disagree with Serrano insofar as it held that employees terminated for just cause are to be paid backwages from the time employment was terminated "until it is determined that the termination is for just cause because the failure to hear him before he is dismissed renders the termination of his employment without legal effect."64 Article 279 of the Labor Code clearly authorizes the payment of backwages only if an employee is unjustly dismissed. A dismissal for just cause is obviously antithetical to an unjust dismissal. An award for backwages is not clearly warranted by the law. The Impropriety of Award for Separation Pay The formula of one month's pay for every year served does have statutory basis. It is found though in the Labor Code though, not the Civil Code. Even then, such computation is made for separation pay under the Labor Code. But separation pay is not an appropriate as a remedy in this case, or in any case wherein an employee is terminated for just cause. As Justice Vitug noted in his separate opinion in Serrano, an employee whose employment is terminated for a just cause is not entitled to the payment of separation

benefits.65 Separation pay is traditionally a monetary award paid as an alternative to reinstatement which can no longer be effected in view of the long passage of time or because of the realities of the situation.66 However, under Section 7, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, "[t]he separation from work of an employee for a just cause does not entitle him to the termination pay provided in the Code." 67 Neither does the Labor Code itself provide instances wherein separation pay is warranted for dismissals with just cause. Separation pay is warranted only for dismissals for authorized causes, as enumerated in Article 283 and 284 of the Labor Code. The Impropriety of Equity Awards Admittedly, the Court has in the past authorized the award of separation pay for duly terminated employees as a measure of social justice, provided that the employee is not guilty of serious misconduct reflecting on moral character.68 This doctrine is inapplicable in this case, as the Agabons are guilty of abandonment, which is the deliberate and unjustified refusal of an employee to resume his employment. Abandonment is tantamount to serious misconduct, as it constitutes a willful breach of the employer-employee relationship without cause. The award of separation pay as a measure of social justice has no statutory basis, but clearly emanates from the Court's so-called "equity jurisdiction." The Court's equity jurisdiction as a basis for award, no matter what form it may take, is likewise unwarranted in this case. Easy resort to equity should be avoided, as it should yield to positive rules which pre-empt and prevail over such persuasions.69 Abstract as the concept is, it does not admit to definite and objective standards. I consider the pronouncement regarding the proper monetary awards in such cases as Wenphil Corp. v. NLRC,70Reta,71 and to a degree, even Serrano as premised in part on equity. This decision is premised in part due to the absence of cited statutory basis for these awards. In these cases, the Court deemed an indemnity award proper without exactly saying where in statute could such award be derived at. Perhaps, equity or social justice can be invoked as basis for the award. However, this sort of arbitrariness, indeterminacy and judicial usurpation of legislative prerogatives is precisely the source of my discontent. Social justice should be the aspiration of all that we do, yet I think it the more mature attitude to consider that it ebbs and flows within our statutes, rather than view it as an independent source of funding. Article 288 of the Labor Code as a Source of Liability Another putative source of liability for failure to render the notice requirement is Article 288 of the Labor Code, which states: Article 288 states: Penalties. Except as otherwise provided in this Code, or unless the acts complained of hinges on a question of interpretation or implementation of ambiguous provisions of an existing collective bargaining agreement, any violation of the provisions of this Code declared to be unlawful or penal in nature shall be punished

with a fine of not less than One Thousand Pesos (P1,000.00) nor more than Ten Thousand Pesos (P10,000.00), or imprisonment of not less than three months nor more than three years, or both such fine and imprisonment at the discretion of the court. It is apparent from the provision that the penalty arises due to contraventions of the provisions of the Labor Code. It is also clear that the provision comes into play regardless of who the violator may be. Either the employer or the employee may be penalized, or perhaps even officials tasked with implementing the Labor Code. However, it is apparent that Article 288 is a penal provision; hence, the prescription for penalties such as fine and imprisonment. The Article is also explicit that the imposition of fine or imprisonment is at the "discretion of the court." Thus, the proceedings under the provision is penal in character. The criminal case has to be instituted before the proper courts, and the Labor Code violation subject thereof duly proven in an adversarial proceeding. Hence, Article 288 cannot apply in this case and serve as basis to impose a penalty on Riviera Homes. I also maintain that under Article 288 the penalty should be paid to the State, and not to the person or persons who may have suffered injury as a result of the violation. A penalty is a sum of money which the law requires to be paid by way of punishment for doing some act which is prohibited or for not doing some act which is required to be done.72 A penalty should be distinguished from damages which is the pecuniary compensation or indemnity to a person who has suffered loss, detriment, or injury, whether to his person, property, or rights, on account of the unlawful act or omission or negligence of another. Article 288 clearly serves as a punitive fine, rather than a compensatory measure, since the provision penalizes an act that violates the Labor Code even if such act does not cause actual injury to any private person. Independent of the employee's interests protected by the Labor Code is the interest of the State in seeing to it that its regulatory laws are complied with. Article 288 is intended to satiate the latter interest. Nothing in the language of Article 288 indicates an intention to compensate or remunerate a private person for injury he may have sustained. It should be noted though that in Serrano, the Court observed that since the promulgation of Wenphil Corp. v. NLRC73 in 1989, "fines imposed for violations of the notice requirement have varied from P1,000.00 to P2,000.00 to P5,000.00 to P10,000.00."74 Interestingly, this range is the same range of the penalties imposed by Article 288. These "fines" adverted to in Serrano were paid to the dismissed employee. The use of the term "fines," as well as the terminology employed a few other cases,75 may have left an erroneous impression that the award implemented beginning with Wenphil was based on Article 288 of the Labor Code. Yet, an examination of Wenphilreveals that what the Court actually awarded to the employee was an "indemnity", dependent on the facts of each case and the gravity of the omission committed by the employer. There is no mention in Wenphil of Article 288 of the Labor Code, or indeed, of any statutory basis for the award. The Proper Basis: Employer's Liability under the Civil Code

As earlier stated, Wenphil allowed the payment of indemnity to the employee dismissed for just cause is dependent on the facts of each case and the gravity of the omission committed by the employer. However, I considered Wenphil flawed insofar as it is silent as to the statutory basis for the indemnity award. This failure, to my mind, renders it unwise for to reinstate the Wenphil rule, and foster the impression that it is the judicial business to invent awards for damages without clear statutory basis. The proper legal basis for holding the employer liable for monetary damages to the employee dismissed for just cause is the Civil Code. The award of damages should be measured against the loss or injury suffered by the employee by reason of the employer's violation or, in case of nominal damages, the right vindicated by the award. This is the proper paradigm authorized by our law, and designed to obtain the fairest possible relief. Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction over claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations. It is thus the duty of Labor Arbiters to adjudicate claims for damages, and they should disabuse themselves of any inhibitions if it does appear that an award for damages is warranted. As triers of facts in a specialized field, they should attune themselves to the particular conditions or problems attendant to employer-employee relationships, and thus be in the best possible position as to the nature and amount of damages that may be warranted in this case. The damages referred under Section 217(4) of the Labor Code are those available under the Civil Code. It is but proper that the Civil Code serve as the basis for the indemnity, it being the law that regulates the private relations of the members of civil society, determining their respective rights and obligations with reference to persons, things, and civil acts. 76 No matter how impressed with the public interest the relationship between a private employer and employee is, it still is ultimately a relationship between private individuals. Notably, even though the Labor Code could very well have provided set rules for damages arising from the employer-employee relationship, referral was instead made to the concept of damages as enumerated and defined under the Civil Code. Given the long controversy that has dogged this present issue regarding dismissals for just cause, it is wise to lay down standards that would guide the proper award of damages under the Civil Code in cases wherein the employer failed to comply with statutory due process in dismissals for just cause. First. I believe that it can be maintained as a general rule, that failure to comply with the statutory requirement of notice automatically gives rise to nominal damages, at the very least, even if the dismissal was sustained for just cause. Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or invaded by another may be vindicated or recognized without having to indemnify the plaintiff for any loss suffered by him.77 Nominal damages may likewise be awarded in every obligation arising from law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or where any property right has been invaded.

Clearly, the bare act of failing to observe the notice requirement gives rise to nominal damages assessable against the employer and due the employee. The Labor Code indubitably entitles the employee to notice even if dismissal is for just cause, even if there is no apparent intent to void such dismissals deficiently implemented. It has also been held that one's employment, profession, trade, or calling is a "property right" and the wrongful interference therewith gives rise to an actionable wrong.78 In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the termination therein was for just and valid cause, the manner of termination was done in complete disregard of the necessary procedural safeguards.80 The Court found nominal damages as the proper form of award, as it was purposed to vindicate the right to procedural due process violated by the employer.81 A similar holding was maintained in Iran v. NLRC82 and Malaya Shipping v. NLRC.83 The doctrine has express statutory basis, duly recognizes the existence of the right to notice, and vindicates the violation of such right. It is sound, logical, and should be adopted as a general rule. The assessment of nominal damages is left to the discretion of the court, 84 or in labor cases, of the Labor Arbiter and the successive appellate levels. The authority to nominate standards governing the award of nominal damages has clearly been delegated to the judicial branch, and it will serve good purpose for this Court to provide such guidelines. Considering that the affected right is a property right, there is justification in basing the amount of nominal damages on the particular characteristics attaching to the claimant's employment. Factors such as length of service, positions held, and received salary may be considered to obtain the proper measure of nominal damages. After all, the degree by which a property right should be vindicated is affected by the estimable value of such right. At the same time, it should be recognized that nominal damages are not meant to be compensatory, and should not be computed through a formula based on actual losses. Consequently, nominal damages usually limited in pecuniary value.85 This fact should be impressed upon the prospective claimant, especially one who is contemplating seeking actual/compensatory damages. Second. Actual or compensatory damages are not available as a matter of right to an employee dismissed for just cause but denied statutory due process. They must be based on clear factual and legal bases,86 and correspond to such pecuniary loss suffered by the employee as duly proven.87 Evidently, there is less degree of discretion to award actual or compensatory damages. I recognize some inherent difficulties in establishing actual damages in cases for terminations validated for just cause. The dismissed employee retains no right to continued employment from the moment just cause for termination exists, and such time most likely would have arrived even before the employer is liable to send the first notice. As a result, an award of backwages disguised as actual damages would almost never be justified if the employee was dismissed for just cause. The possible exception would be if it can be proven the ground for just cause came into being only after the dismissed employee had stopped receiving wages from the employer.

Yet it is not impossible to establish a case for actual damages if dismissal was for just cause. Particularly actionable, for example, is if the notices are not served on the employee, thus hampering his/her opportunities to obtain new employment. For as long as it can be demonstrated that the failure of the employer to observe procedural due process mandated by the Labor Code is the proximate cause of pecuniary loss or injury to the dismissed employee, then actual or compensatory damages may be awarded. Third. If there is a finding of pecuniary loss arising from the employer violation, but the amount cannot be proved with certainty, then temperate or moderate damages are available under Article 2224 of the Civil Code. Again, sufficient discretion is afforded to the adjudicator as regards the proper award, and the award must be reasonable under the circumstances.88 Temperate or nominal damages may yet prove to be a plausible remedy, especially when common sense dictates that pecuniary loss was suffered, but incapable of precise definition. Fourth. Moral and exemplary damages may also be awarded in the appropriate circumstances. As pointed out by the Decision, moral damages are recoverable where the dismissal of the employee was attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or public policy, or the employer committed an act oppressive to labor.89 Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner. Appropriate Award of Damages to the Agabons The records indicate no proof exists to justify the award of actual or compensatory damages, as it has not been established that the failure to serve the second notice on the Agabons was the proximate cause to any loss or injury. In fact, there is not even any showing that such violation caused any sort of injury or discomfort to the Agabons. Nor do they assert such causal relation. Thus, the only appropriate award of damages is nominal damages. Considering the circumstances, I agree that an award of Fifteen Thousand Pesos (P15,000.00) each for the Agabons is sufficient. All premises considered, I VOTE to: (1) DENY the PETITION for lack of merit, and AFFIRM the Decision of the Court of Appeals dated 23 January 2003, with the MODIFICATION that in addition, Riviera Homes be ORDERED to pay the petitioners the sum of Fifteen Thousand Pesos (P15,000.00) each, as nominal damages. (2) HOLD that henceforth, dismissals for just cause may not be invalidated due to the failure to observe the due process requirements under the Labor Code, and that the only indemnity award available to the employee dismissed for just cause are damages under the Civil Code as duly proven. Any and all previous rulings and statements of the Court inconsistent with this holding are now deemed INOPERATIVE.

EN BANC

[G.R. No. 151378. March 28, 2005]

JAKA FOOD PROCESSING CORPORATION, petitioner, vs. DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and JONATHAN CAGABCAB, respondents. DECISION
GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,[1] reversing and setting aside an earlier decision of the National Labor Relations Commission (NLRC); and 2. Resolution dated reconsideration. 8 January 2002,[2] denying petitioners motion for

The material facts may be briefly stated, as follows: Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for short) until the latter terminated their employment on August 29, 1997 because the corporation was in dire financial straits. It is not disputed, however, that the termination was effected without JAKA complying with the requirement under Article 283 of the Labor Code regarding the service of a written notice upon the employees and the Department of Labor and Employment at least one (1) month before the intended date of termination. In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations Commission (NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service incentive leave and 13 th month pay against JAKA and its HRD Manager, Rosana Castelo. After due proceedings, the Labor Arbiter rendered a decision[3] declaring the termination illegal and ordering JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement is not possible. More specifically the decision dispositively reads:

WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and ordering respondents to reinstate them to their positions with full

backwages which as of July 30, 1998 have already amounted to P339,768.00. Respondents are also ordered to pay complainants the amount of P2,775.00 representing the unpaid service incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997 13th month pay as alluded in the above computation. If complainants could not be reinstated, respondents are ordered to pay them separation pay equivalent to one month salary for very (sic) year of service. SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,[4] affirmed in toto that of the Labor Arbiter. JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision dated January 28, 2000,[5] this time modifying its earlier decision, thus:

WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and the challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor Arbiter xxx are hereby modified by reversing an setting aside the awards of backwages, service incentive leave pay. Each of the complainants-appellees shall be entitled to a separation pay equivalent to one month. In addition, respondents-appellants is (sic) ordered to pay each of the complainantsappellees the sum of P2,000.00 as indemnification for its failure to observe due process in effecting the retrenchment. SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its resolution of April 28, 2000,[6] respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CA-G.R. SP No. 59847. As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000, applying the doctrine laid down by this Court inSerrano vs. NLRC,[7] reversed and set aside the NLRCs decision of January 28, 2000, thus:

WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission is REVERSED and SET ASIDE and another one entered ordering respondent JAKA Foods Processing Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th month pay and, in addition, full backwages from the time their employment was terminated on August 29, 1997 up to the time the Decision herein becomes final. SO ORDERED.

This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its resolution of January 8, 2002. Hence, JAKAs present recourse, submitting, for our consideration, the following issues:
I. II. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL BACKWAGES TO RESPONDENTS. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO RESPONDENTS.

As we see it, there is only one question that requires resolution, i.e. what are the legal implications of a situation where an employee is dismissed for cause but such dismissal was effected without the employers complian ce with the notice requirement under the Labor Code. This, certainly, is not a case of first impression. In the very recent case of Agabon vs. NLRC,[8] we had the opportunity to resolve a similar question. Therein, we found that the employees committed a grave offense, i.e., abandonment, which is a form of a neglect of duty which, in turn, is one of the just causes enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of the dismissal despite noncompliance with the notice requirement of the Labor Code. However, we required the employer to pay the dismissed employees the amount of P30,000.00, representing nominal damages for non-compliance with statutory due process, thus:

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta vs. National Labor Relations Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. xxx xxx xxx

The violation of petitioners right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules, (Emphasis supplied).

The difference between Agabon and the instant case is that in the former, the dismissal was based on a just cause under Article 282 of the Labor Code while in the present case, respondents were dismissed due to retrenchment, which is one of the authorized causes under Article 283 of the same Code. At this point, we note that there are divergent implications of a dismissal for just cause under Article 282, on one hand, and a dismissal for authorized cause under Article 283, on the other. A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the dismissal process. On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employers exercise of his management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement a retrenchment program. The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for authorized cause under Article 283 is further reinforced by the fact that in the first, payment of separation pay, as a rule, is not required, while in the second, the law requires payment of separation pay.[9] For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just causes under Article 282, and when based on one of the authorized causes under Article 283. Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative. The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it terminated respondents employment. As aptly found by the NLRC:

A careful study of the evidence presented by the respondent-appellant corporation shows that the audited Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by the respondent-appellant corporation, The Statement of Income and Deficit found in the Audited Financial Statement of the respondent-appellant corporation clearly shows the following in 1996, the deficit of the respondent-appellant corporation was P188,218,419.00 or 94.11% of the

stockholders [sic] equity which amounts to P200,000,000.00. In 1997 when the retrenchment program of respondent-appellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or 123.61% of the stockholders equity, thus a capital deficiency or impairment of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the stockholders equity. From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%. The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged losses was prepared by an independent auditor, SGV & Co. It convincingly showed that the respondent-appellant corporation was in dire financial straits, which the complainants-appellees failed to dispute. The losses incurred by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and satisfactory evidence. Losses incurred were adequately shown with respondent-appellants audited financial statement. Having established the loss incurred by the respondent-appellant corporation, it necessarily necessarily (sic) follows that the ground in support of retrenchment existed at the time the complainants-appellees were terminated. We cannot therefore sustain the findings of the Labor Arbiter that the alleged losses of the respondent-appellant was [sic] not well substantiated by substantial proofs. It is therefore logical for the corporation to implement a retrenchment program to prevent further losses.[10]
Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the NLRC which, incidentally, was also affirmed by the Court of Appeals. It is, therefore, established that there was ground for respondents dismissal, i.e., retrenchment, which is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA failed to comply with the notice requirement under the same Article. Considering the factual circumstances in the instant case and the above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00. We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs Corporation vs. NLRC,[11] we made the following declaration:

The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of the employer, the affected employee is entitled to separation pay. This is consistent with the state policy of treating labor as a primary social economic force, affording full protection to its rights as well as its welfare. The exception is when the closure of business or cessation of operations is due to serious business losses or financial reverses; duly proved, in which case, the right of affected employees to separation pay is lost for obvious reasons. xxx. (Emphasis supplied)

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new one entered upholding the legality of the dismissal but ordering petitioner to pay each of the respondents the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process. SO ORDERED. Davide, Jr., C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Chico-Nazario, JJ., concur. Puno, J., reiterate dissent in Agaban & Serrano. Panganiban, J., reiterate dissent in Agaban v. NLRC, GR 158693, Nov. 17, 2004, and Serrano v. NLRC, 380 Phil. 416, Jan. 27, 2000. Tinga, J., only in the result. See separate opinion.

[1]

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION
PHILIPPINE NATIONAL BANK, Petitioner, G.R. Nos. 180849 and 187143 Present:

- versus -

VELASCO, JR., J., Chairperson, PERALTA, ABAD,

DAN PADAO, Respondent.

PEREZ, and MENDOZA, JJ.

Promulgated:
November 16, 2011

X -------------------------------------------------------------------------------------X

DECISION
MENDOZA, J.:

These are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. In G.R. No. 180849, petitioner Philippine National Bank (PNB) seeks the reversal of the December 14, 2006 Decision[1] andOctober 2, 2007 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 76584, which upheld the ruling of the National Labor Relations Commission, Cagayan de Oro City (NLRC) in its October 30, 2002 Resolution,[3] reversing the June 21, 2001 Decision[4] of the Executive Labor Arbiter (ELA) which found the dismissal of respondent Dan Padao (Padao) valid. In G.R. No. 187143, PNB seeks the reversal of the December 9, 2008 Decision[5] and February 24, 2009 Resolution[6] of the CA in CA-G.R. SP No. 00945, which allowed the execution of the October 30, 2002 NLRC Resolution. THE FACTS A. G.R. No. 180849

On August 21, 1981, Padao was hired by PNB as a clerk at its Dipolog City Branch. He was later designated as a credit investigator in an acting capacity on November 9, 1993. On March 23, 1995, he was appointed regular Credit Investigator III, and was ultimately promoted to the position of Loan and Credit Officer IV. Sometime in 1994, PNB became embroiled in a scandal involving behest loans. A certain Sih Wat Kai complained to the Provincial Office of the Commission on Audit (COA) of Zamboanga del Norte that anomalous loans were being granted by its officers: Assistant Vice President (AVP) and Branch Manager Aurelio De Guzman (AVP de Guzman), Assistant Department Manager and Cashier Olson Sala (Sala), and Loans and Senior Credit Investigator Primitivo Virtudazo (Virtudazo).

The questionable loans were reportedly being extended to select bank clients, among them Joseph Liong, Danilo Dangcalan, Jacinto Salac, Catherine Opulentisima, and Virgie Pango. The expos triggered the conduct of separate investigations by the COA and PNBs Internal Audit Department (IAD) from January to August 1995. Both investigations confirmed that the collateral provided in numerous loan accommodations were grossly over-appraised. The credit standing of the loan applicants was also fabricated, allowing them to obtain larger loan portfolios from PNB. These borrowers eventually defaulted on the payment of their loans, causing PNB to suffer millions in losses. In August 1995, Credit Investigators Rolando Palomares (Palomares) and Cayo Dagpin (Dagpin) were administratively charged with Dishonesty, Grave Misconduct, Gross Neglect of Duty, Conduct Prejudicial to the Best Interest of the Service, and violation of Republic Act (R.A.) No. 3019 (Anti-Graft and Corrupt Practices Act), in connection with an anomalous loan granted to the spouses, Jaime and Allyn Lim (the Lims). These charges, however, were later ordered dropped by PNB, citing its findings that Dagpin and Palomares signed the Inspection and Appraisal Report (IAR) and the Credit Inspection Report (CIR) in support of the Lims loan application in good faith, and upon the instruction of their superior officers. PNB also considered using Dagpin and Palomares as prosecution witnesses against AVP de Guzman, Loan Division Chief Melindo Bidad (Bidad) and Sala. The following month, September 1995, administrative charges for Grave Misconduct, Gross Neglect of Duty and Gross Violations of Bank Rules and Regulations and criminal cases for violation of R.A. No. 3019 were filed against AVP de Guzman, Sala, Virtudazo, and Bidad. Consequently, they were all dismissed from the service by PNB in November 1996. Later, Virtudazo was ordered reinstated. On June 14, 1996, Padao and Division Chief Wilma Velasco (Velasco) were similarly administratively charged with Dishonesty, Grave Misconduct, Gross Neglect of Duty, Conduct Prejudicial to the Best Interest of the Service, and violation of R.A. No. 3019.

The case against Padao was grounded on his having allegedly presented a deceptively positive status of the business, credit standing/rating and financial capability of loan applicants Reynaldo and Luzvilla Baluma and eleven (11) others. It was later found that either said borrowers businesses were inadequate to meet their loan obligations, or that the projects they sought to be financed did not exist. Padao was also accused of having over-appraised the collateral of the spouses Gardito and Alma Ajero, the spouses Ibaba, and Rolly Pango. On January 10, 1997, after due investigation, PNB found Padao guilty of gross and habitual neglect of duty and ordered him dismissed from the bank. Padao appealed to the banks Board of Directors. On January 20, 1997, Velasco was also held guilty of the offenses charged against her, and was similarly meted the penalty of dismissal. Her motion for reconsideration, however, was later granted by the bank, and she was reinstated. On October 11, 1999, after almost three (3) years of inaction on the part of the Board, Padao instituted a complaint[7] against PNB and its then AVP, Napoleon Matienzo (Matienzo), with the Labor Arbitration Branch of the NLRC Regional Arbitration Branch(RAB) No. IX in Zamboanga City for 1] Reinstatement; 2] Backwages; 3] Illegal Dismissal; and 4] Treachery/Bad Faith and Palpable Discrimination in the Treatment of Employees with administrative cases. The case was docketed as RAB 09-0400098-01. In a Decision dated June 21, 2001, the ELA found Padaos dismissal valid. Despite the finding of legality, the ELA still awarded separation pay of one-half (1/2) months pay for every year of service, citing PLDT v. NLRC & Abucay.[8] The ELA held that in view of the peculiar conditions attendant to Padaos dismissal, there being no clear conclusive showing of moral turpitude, Padao should not be left without any remedy. Padao appealed to the NLRC, which, in its Resolution[9] dated October 30, 2002, reversed and set aside the ELA Decision and declared Padaos dismissal to

be illegal. He was thereby ordered reinstated to his previous position without loss of seniority rights and PNB was ordered to pay him full backwages and attorneys fees equivalent to ten percent (10%) of the total monetary award. PNBs Motion for Reconsideration[10] was denied by the NLRC in its Resolution[11] dated December 27, 2002. Aggrieved, PNB filed a petition for certiorari[12] with the CA but it was dismissed in a Decision[13] dated December 14, 2006. PNB moved for reconsideration[14] but the motion was denied in the CA [15] Resolution dated October 2, 2007.

B.

G.R. No. 187143

During the pendency of G.R. No. 180849 before the Court, the NLRC issued an entry of judgment on September 22, 2003, certifying that on February 28, 2003, its October 30, 2002 Resolution had become final and executory.[16] On December 5, 2003, Padao filed a Motion for Execution of the NLRC Resolution dated October 30, 2002. This was granted by the ELA on April 22, 2004. On May 4, 2004, PNB and AVP Matienzo sought reconsideration of the ELAs Order based on the following grounds: (1) the October 30, 2003 Resolution was inexistent and, thus, could not become final and executory; and (2) Padaos motion for execution was granted without hearing. Acting thereon, the ELA denied PNBs motion for reconsideration on the ground that motions for reconsideration of an order are prohibited under Section 19, Rule V of the NLRC Rules of Procedure. Thus, Padao filed his Motion to Admit Computation[17] dated July 14, 2004. In its Comment,[18] PNB alleged that the computation was grossly exaggerated and

without basis, and prayed for a period of thirty (30) days within which to submit its counter-computation since the same would come from its head office in Pasay City.

On September 22, 2004, the ELA issued the Order[19] granting Padaos Motion to Admit Computation. The order cited PNBs failure to submit its counter computation within the two extended periods (totaling forty days), which the ELA construed as a waiver to submit the same. Thus, the ELA ordered the issuance of a writ of execution for the payment of backwages due to Padao in the amount of 2,589,236.21. In a motion[20] dated September 29, 2004, PNB sought reconsideration of the order with an attached counter-computation. The ELA denied the same in its Order[21] dated October 20, 2004 on the ground that the motions for reconsideration of orders and decisions of the Labor Arbiter are prohibited under Section 19, Rule V of the NLRC Rules of Procedure. The ELA further stated that PNB had been given more than ample opportunity to submit its own computation in this case, and the belatedly submitted counter-computation of claims could not be considered. Thus, a writ of execution[22] was issued on October 21, 2004. On November 11, 2004 and January 19, 2005, PNB filed its Motion to Quash Writ of Execution and its Motion to Dissolve Alias Writ of Execution, respectively. Both were denied by the ELA in an Order[23] dated February 8, 2005. On February 18, 2005, PNB filed a Notice of Appeal with Memorandum on Appeal[24] with the NLRC. On September 20, 2005, however, the NLRC issued a Resolution[25] dismissing the banks appeal. PNBs Motion for [26] [27] Reconsideration was also denied in the December 21, 2005 Resolution. Thus, on March 7, 2006, PNB filed a Petition for Certiorari[28] with the CA, assailing the findings of ELA Plagata and the NLRC.

In a Decision[29] dated December 9, 2008, the CA dismissed the petition, and later denied PNBs motion for reconsideration on February 24, 2009. ISSUES In G.R. No. 180849, PNB presents the following Assignment of Errors:[30]
A. THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE POSITION OF A CREDIT INVESTIGATOR IS ONE IMBUED WITH [THE] TRUST AND CONFIDENCE OF THE EMPLOYER. B. THE COURT OF APPEALS ERRED IN TREATING THE ACT OF FALSIFYING THE CREDIT AND APPRAISAL REPORTS AND THAT OF MERELY AFFIXING ONES SIGNATURE IN A FALSE REPORT PREPARED BY ANOTHER AS ONE AND THE SAME DEGREE OF MISCONDUCT WHICH WARRANTS THE SAME PENALTY.

In G.R. No. 187143, PNB presents the following Assignment of Errors:[31]


THE LABOR COURTS AND THE APPELLATE COURT ERRED WHEN THEY INVARIABLY IGNORED PNBS COUNTER-COMPUTATION AND MERELY RELIED ON RESPONDENT DAN PADAOS SELFSERVING COMPUTATION OF HIS MONEY AWARD.

THE LABOR COURTS AND THE APPELLATE COURT ERRED WHEN THEY ACCEPTED THE COMPUTATION OF RESPONDENT PADAO WITHOUT REQUIRING PROOF TO SUPPORT THE SAME.

In G.R. No. 180849, PNB argues that the position of a credit investigator is one reposed with trust and confidence, such that its holder may be validly dismissed based on loss of trust and confidence. In disciplining employees, the employer has the right to exercise discretion in determining the individual liability of each erring employee and in imposing a penalty commensurate with the degree of participation of each. PNB further contends that the findings of the CA are not in accordance with the evidence on record, thus, necessitating a review of the facts of the present case by this Court.[32]

On the other hand, Padao counters that local bank policies implemented by the highest-ranking branch officials such as the assistant vice-president/branch manager, assistant manager/cashier, chief of the loans division and legal counsel, are presumed to be sanctioned and approved by the bank, and a subordinate employee should not be faulted for his reliance thereon. He argues that a person who acts in obedience to an order issued by a superior for some lawful purpose cannot be held liable. PNB is bound by the acts of its senior officers and he, like his fellow credit investigators, having acted in good faith in affixing his signature on the reports based on the instruction, order and directive of senior local bank officials, should not be held liable.[33] Padao also claims that PNB cruelly betrayed him by charging and dismissing him after using him as a prosecution witness to secure the conviction of the senior bank officials, that he was never part of the conspiracy, and that he did not derive any benefit from the scheme.[34] The Courts Ruling In the 1987 Constitution, provisions on social justice and the protection of labor underscore the importance and economic significance of labor. Article II, Section 18 characterizes labor as a primary social economic force, and as such, the State is bound to protect the rights of workers and promote their welfare. Moreover, workers are entitled to security of tenure, humane conditions of work, and a living wage.[35] The Labor Code declares as policy that the State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work.[36] While it is an employers basic right to freely select or discharge its employees, if only as a measure of self-protection against acts inimical to its

interest,[37] the law sets the valid grounds for termination as well as the proper procedure to be followed when terminating the services of an employee.[38] Thus, in cases of regular employment, the employer is prohibited from terminating the services of an employee except for a just or authorized cause.[39] Such just causes for which an employer may terminate an employee are enumerated in Article 282 of the Labor Code:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate family member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing.

Further, due process requires that employers follow the procedure set by the Labor Code:
Art. 277. Miscellaneous provisions. xxx b. Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer.

The Secretary of the Department of Labor and Employment may suspend the effects of the termination pending resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off. (As amended by Section 33, Republic Act No. 6715, March 21, 1989)

xxx In this case, Padao was dismissed by PNB for gross and habitual neglect of duties under Article 282 (b) of the Labor Code. Gross negligence connotes want of care in the performance of ones duties, while habitual neglect implies repeated failure to perform ones duties for a period of time, depending on the circumstances.[40] Gross negligence has been defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.[41] In the case at bench, Padao was accused of having presented a fraudulently positive evaluation of the business, credit standing/rating and financial capability of Reynaldo and Luzvilla Baluma and eleven other loan applicants.[42] Some businesses were eventually found not to exist at all, while in other transactions, the financial status of the borrowers simply could not support the grant of loans in the approved amounts.[43] Moreover, Padao over-appraised the collateral of spouses Gardito and Alma Ajero, and that of spouses Ihaba and Rolly Pango.[44] The role that a credit investigator plays in the conduct of a banks business cannot be overestimated. The amount of loans to be extended by a bank depends upon the report of the credit investigator on the collateral being offered. If a loan is not fairly secured, the bank is at the mercy of the borrower who may just opt to have the collateral foreclosed. If the scheme is repeated a hundredfold, it may lead to the collapse of the bank. In the case of Sawadjaan v. Court of Appeals,[45] the Court stressed the crucial role that a credit investigator or an appraiser plays. Thus:

Petitioner himself admits that the position of appraiser/inspector is "one of the most serious [and] sensitive job[s] in the banking operations." He should have been aware that accepting such a designation, he is obliged to perform the task at hand by the exercise of more than ordinary prudence. As appraiser/investigator, the petitioner was expected to conduct an ocular inspection of the properties offered by CAMEC as collaterals and check the copies of the certificates of title against those on file with the Registry of Deeds. Not only did he fail to conduct these routine checks, but he also deliberately misrepresented in his appraisal report that after reviewing the documents and conducting a site inspection, he found the CAMEC loan application to be in order. Despite the number of pleadings he has filed, he has failed to offer an alternative explanation for his actions. [Emphasis supplied]

In fact, banks are mandated to exercise more care and prudence in dealing with registered lands:
[B]anks are cautioned to exercise more care and prudence in dealing even with registered lands, than private individuals, "for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of the land registration statute Act 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. It is for this reason that banks before approving a loan send representatives to the premises of the land offered as collateral and investigate who are the true owners thereof.[46]

Padaos repeated failure to discharge his duties as a credit investigator of the bank amounted to gross and habitual neglect of duties under Article 282 (b) of the Labor Code. He not only failed to perform what he was employed to do, but also did so repetitively and habitually, causing millions of pesos in damage to PNB. Thus, PNB acted within the bounds of the law by meting out the penalty of dismissal, which it deemed appropriate given the circumstances. The CA was correct in stating that when the violation of company policy or breach of company rules and regulations is tolerated by management, it cannot serve as a basis for termination.[47] Such ruling, however, does not apply here. The principle only applies when the breach or violation is one which neither amounts to

nor involves fraud or illegal activities. In such a case, one cannot evade liability or culpability based on obedience to the corporate chain of command. Padao cited Llosa-Tan v. Silahis International Hotel,[48] where the violation of corporate policy was held not per se fraudulent or illegal. Moreover, the said violation was done in compliance with the apparent lawful orders of the concerned employees superiors. Management-sanctioned deviations in the said case did not amount to fraud or illegal activities. If anything, it merely represented flawed policy implementation. In sharp contrast, Padao, in affixing his signature on the fraudulent reports, attested to the falsehoods contained therein. Moreover, by doing so, he repeatedly failed to perform his duties as a credit investigator. Further, even Article 11(6) of the Revised Penal Code requires that any person, who acts in obedience to an order issued by a superior does so for some lawful purpose in order for such person not to incur criminal liability. The succeeding article exempts from criminal liability any person who acts under the compulsion of an irresistible force (Article 12, paragraph 6) or under the impulse of anuncontrollable fear of an equal or greater injury (Article 12, paragraph 7). Assuming solely for the sake of argument that these principles apply by analogy, even an extremely liberal interpretation of these justifying or exempting circumstances will not allow Padao to escape liability. Also, had Padao wanted immunity in exchange for his testimony as a prosecution witness, he should have demanded that there be a written agreement. Without it, his claim is self-serving and unreliable. That there is no proof that Padao derived any benefit from the scheme is immaterial.[49] What is crucial is that his gross and habitual negligence caused great damage to his employer. Padao was aware that there was something irregular about the practices being implemented by his superiors, but he went along with, became part of, and participated in the scheme.

It does not speak well for a person to apparently blindly follow his superiors, particularly when, with the exercise of ordinary diligence, one would be able to determine that what he or she was being ordered to do was highly irregular, if not illegal, and would, and did, work to the great disadvantage of his or her employer. PNB, as an employer, has the basic right to freely select and discharge employees (subject to the Labor Code requirements on substantive and procedural due process), if only as a measure of self-protection against acts inimical to its interests.[50] It has the authority to impose what penalty it deems sufficient or commensurate to an employees offense. Having satisfied the requirements of procedural and substantive due process, it is thus left to the discretion of the employer to impose such sanction as it sees befitting based on the circumstances. Finally, Padao claims that he should be accorded the same treatment as his co-employees.[51] As the ELA, however, correctly observed:
[A]s pointed out by the respondents, the case of the complainant was different, and his culpability, much more than his aforementioned coemployees. In the case of Palomares and Dagpin, they were involved in only one case of over-appraisal of collateral in the loan account of the spouses Jaime Lim and Allyn Tan (Respondents Comments, p. 1), bu t in the case of complainant, his over-appraisals involved three (3) loan accounts and amounting to 9,537,759.00 (Ibid.), not to mention that he also submitted falsified Credit Investigation Reports for the loan accounts of seven (7) other borrowers of PNB (Ibid., pp. 1-2). xxx The number of over-appraisals (3) and falsified credit investigation reports (7) or countersigned by the complainant indicates habituality, or the propensity to do the same. The best that can be said of his acts is the lack of moral strength to resist the repeated commission of illegal or prohibited acts in loan transactions. He thus cannot interpose undue pressure or coercion exerted upon [him] by his superiors, to absolve himself of liability for his signing or countersigning the aforementioned falsified reports. It may have been allowable or justifiable for him to give in to one anomalous loan transaction report, but definitely not for ten (10) loan accounts. It is axiomatic that obedience to ones superiors extends only to lawful orders, not to unlawful orders calling for unauthorized, prohibited or immoral acts to be done.

In the case of Wilma Velasco, PNB did not pursue legal action and even discontinued the administrative case filed against her because, according to PNB, she appeared to have been the victim of the misrepresentations and falsifications of the credit investigation and appraisal reports of the complainant upon which she had to reply in acting on loan applications filed with the PNB and for which such reports were made. She was not obliged to conduct a separate or personal appraisal of the properties offered as collaterals, or separate credit investigations of the borrowers of PNB. These functions pertained to PNB inspectors/credit investigators, like the complainant. Unfortunately, the latter was derelict in the performance of those duties, if he did not deliberately misuse or abuse such duties. As can be seen, therefore, the complainant and Wilma Velasco did not stand on the same footing relative to their involvement or participation in the anomalous loan transactions earlier mentioned. Therefore, PNB cannot be faulted for freeing her from liability and punishment, while dismissing the complainant from service. [Emphases supplied]

Given the above ruling of the Court in G.R. No. 180849, the ruling of the CA in CA-G.R. SP No. 00945, an action stemming from the execution of the decision in said case, must perforce be reversed.

However, Padao is not entitled to financial assistance. In Toyota Motor Phils. Corp. Workers Association v. NLRC,[52] the Court reaffirmed the general rule that separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, commission of a crime against the employer or his family, or those reflecting on his moral character. These five grounds are just causes for dismissal as provided in Article 282 of the Labor Code.

In Central Philippine Bandag Retreaders, Inc. v. Diasnes ,[53] cited in Quiambao v. Manila Electric Company,[54] we discussed the parameters of awarding separation pay to dismissed employees as a measure of financial assistance:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of separation pay based on social justice when an employees dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willfull breach of trust; or commission of a crime against the person of the employer or his immediate family grounds under Art. 282 of the Labor Code that sanction dismissal of employees. They must be judicious and circumspect in awarding separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the employers. The commitment of the Court to the cause of labor should not embarrass us from sustaining the employers when they are right, as here. In fine, we should be more cautions in awarding financial assistance to the undeserving and those who are unworthy of the liberality of the law.[55] [Emphasis original. Underscoring supplied]

Clearly, given the Courts findings, Padao is not entitled to financial assistance. WHEREFORE, the petitions in G.R. No. 180849 and G.R. No. 187143 are GRANTED. In G.R. No. 180849, the December 14, 2006 Decision and the October 2, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 76584 are REVERSED andSET ASIDE. In G.R. No. 187143, the December 9, 2008 Decision and the February 24, 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 00945 are REVERSED and SET ASIDE. The June 21, 2001 Decision of the Executive Labor Arbiter is hereby ordered REINSTATED, with the MODIFICATIONthat the award of financial assistance is DELETED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 152048 April 7, 2009

FELIX B. PEREZ and AMANTE G. DORIA, Petitioners, vs. PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY and JOSE LUIS SANTIAGO, Respondents. DECISION CORONA, J.: Petitioners Felix B. Perez and Amante G. Doria were employed by respondent Philippine Telegraph and Telephone Company (PT&T) as shipping clerk and supervisor, respectively, in PT&Ts Shipping Section, Materials Management Group. Acting on an alleged unsigned letter regarding anomalous transactions at the Shipping Section, respondents formed a special audit team to investigate the matter. It was discovered that the Shipping Section jacked up the value of the freight costs for goods shipped and that the duplicates of the shipping documents allegedly showed traces of tampering, alteration and superimposition. On September 3, 1993, petitioners were placed on preventive suspension for 30 days for their alleged involvement in the anomaly.1 Their suspension was extended for 15 days twice: first on October 3, 19932 and second on October 18, 1993.3 On October 29, 1993, a memorandum with the following tenor was issued by respondents: In line with the recommendation of the AVP-Audit as presented in his report of October 15, 1993 (copy attached) and the subsequent filing of criminal charges against the parties mentioned therein, [Mr. Felix Perez and Mr. Amante Doria are] hereby dismissed from the service for having falsified company documents.4 (emphasis supplied)

On November 9, 1993, petitioners filed a complaint for illegal suspension and illegal dismissal.5 They alleged that they were dismissed on November 8, 1993, the date they received the above-mentioned memorandum. The labor arbiter found that the 30-day extension of petitioners suspension and their subsequent dismissal were both illegal. He ordered respondents to pay petitioners their salaries during their 30-day illegal suspension, as well as to reinstate them with backwages and 13th month pay. The National Labor Relations Commission (NLRC) reversed the decision of the labor arbiter. It ruled that petitioners were dismissed for just cause, that they were accorded due process and that they were illegally suspended for only 15 days (without stating the reason for the reduction of the period of petitioners illegal suspension).6 Petitioners appealed to the Court of Appeals (CA). In its January 29, 2002 decision,7 the CA affirmed the NLRC decision insofar as petitioners illegal suspension for 15 days and dismissal for just cause were concerned. However, it found that petitioners were dismissed without due process. Petitioners now seek a reversal of the CA decision. They contend that there was no just cause for their dismissal, that they were not accorded due process and that they were illegally suspended for 30 days. We rule in favor of petitioners. Respondents Failed to Prove Just Cause and to Observe Due Process The CA, in upholding the NLRCs decision, reasoned that there was sufficient basis for respondents to lose their confidence in petitioners8 for allegedly tampering with the shipping documents. Respondents emphasized the importance of a shipping order or request, as it was the basis of their liability to a cargo forwarder.9 We disagree. Without undermining the importance of a shipping order or request, we find respondents evidence insufficient to clearly and convincingly establish the facts from which the loss of confidence resulted.10 Other than their bare allegations and the fact that such documents came into petitioners hands at some point, respondents should have provided evidence of petitioners functions, the extent of their duties, the procedure in the handling and approval of shipping requests

and the fact that no personnel other than petitioners were involved. There was, therefore, a patent paucity of proof connecting petitioners to the alleged tampering of shipping documents. The alterations on the shipping documents could not reasonably be attributed to petitioners because it was never proven that petitioners alone had control of or access to these documents. Unless duly proved or sufficiently substantiated otherwise, impartial tribunals should not rely only on the statement of the employer that it has lost confidence in its employee.11 Willful breach by the employee of the trust reposed in him by his employer or duly authorized representative is a just cause for termination.12 However, in General Bank and Trust Co. v. CA,13 we said: [L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith. The burden of proof rests on the employer to establish that the dismissal is for cause in view of the security of tenure that employees enjoy under the Constitution and the Labor Code. The employers evidence must clearly and convincingly show the facts on which the loss of confidence in the employee may be fairly made to rest.14 It must be adequately proven by substantial evidence.15 Respondents failed to discharge this burden. Respondents illegal act of dismissing petitioners was aggravated by their failure to observe due process. To meet the requirements of due process in the dismissal of an employee, an employer must furnish the worker with two written notices: (1) a written notice specifying the grounds for termination and giving to said employee a reasonable opportunity to explain his side and (2) another written notice indicating that, upon due consideration of all circumstances, grounds have been established to justify the employer's decision to dismiss the employee.16 Petitioners were neither apprised of the charges against them nor given a chance to defend themselves. They were simply and arbitrarily separated from work and served notices of termination in total disregard of their rights to due process and security of tenure. The labor arbiter and the CA correctly found that respondents failed to comply with the two-notice requirement for terminating employees.

Petitioners likewise contended that due process was not observed in the absence of a hearing in which they could have explained their side and refuted the evidence against them. There is no need for a hearing or conference. We note a marked difference in the standards of due process to be followed as prescribed in the Labor Code and its implementing rules. The Labor Code, on one hand, provides that an employer must provide the employee ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires: ART. 277. Miscellaneous provisions. x x x (b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. (emphasis supplied) The omnibus rules implementing the Labor Code, on the other hand, require a hearing and conference during which the employee concerned is given the opportunity to respond to the charge, present his evidence or rebut the evidence presented against him:17 Section 2. Security of Tenure. x x x (d) In all cases of termination of employment, the following standards of due process shall be substantially observed: For termination of employment based on just causes as defined in Article 282 of the Labor Code: (i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him. (iii) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. (emphasis supplied) Which one should be followed? Is a hearing (or conference) mandatory in cases involving the dismissal of an employee? Can the apparent conflict between the law and its IRR be reconciled? At the outset, we reaffirm the time-honored doctrine that, in case of conflict, the law prevails over the administrative regulations implementing it.18 The authority to promulgate implementing rules proceeds from the law itself. To be valid, a rule or regulation must conform to and be consistent with the provisions of the enabling statute.19 As such, it cannot amend the law either by abridging or expanding its scope.20 Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an employee must be given "ample opportunity to be heard and to defend himself." Thus, the opportunity to be heard afforded by law to the employee is qualified by the word "ample" which ordinarily means "considerably more than adequate or sufficient."21 In this regard, the phrase "ample opportunity to be heard" can be reasonably interpreted as extensive enough to cover actual hearing or conference. To this extent, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code is in conformity with Article 277(b). Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should not be taken to mean that holding an actual hearing or conference is a condition sine qua non for compliance with the due process requirement in termination of employment. The test for the fair procedure guaranteed under Article 277(b) cannot be whether there has been a formal pretermination confrontation between the employer and the employee. The "ample opportunity to be heard" standard is neither synonymous nor similar to a formal hearing. To confine the employees right to be heard to a solitary form narrows down that right. It deprives him of other equally effective forms of adducing evidence in his defense. Certainly, such an exclusivist and absolutist interpretation is overly restrictive. The "very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation."22

The standard for the hearing requirement, ample opportunity, is couched in general language revealing the legislative intent to give some degree of flexibility or adaptability to meet the peculiarities of a given situation. To confine it to a single rigid proceeding such as a formal hearing will defeat its spirit. Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code itself provides that the so-called standards of due process outlined therein shall be observed "substantially," not strictly. This is a recognition that while a formal hearing or conference is ideal, it is not an absolute, mandatory or exclusive avenue of due process. An employees right to be heard in termination cases under Article 277(b) as implemented by Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should be interpreted in broad strokes. It is satisfied not only by a formal face to face confrontation but by any meaningful opportunity to controvert the charges against him and to submit evidence in support thereof. A hearing means that a party should be given a chance to adduce his evidence to support his side of the case and that the evidence should be taken into account in the adjudication of the controversy.23 "To be heard" does not mean verbal argumentation alone inasmuch as one may be heard just as effectively through written explanations, submissions or pleadings.24 Therefore, while the phrase "ample opportunity to be heard" may in fact include an actual hearing, it is not limited to a formal hearing only. In other words, the existence of an actual, formal "trial-type" hearing, although preferred, is not absolutely necessary to satisfy the employees right to be heard. This Court has consistently ruled that the due process requirement in cases of termination of employment does not require an actual or formal hearing. Thus, we categorically declared in Skippers United Pacific, Inc. v. Maguad:25 The Labor Code does not, of course, require a formal or trial type proceeding before an erring employee may be dismissed. (emphasis supplied) In Autobus Workers Union v. NLRC,26 we ruled: The twin requirements of notice and hearing constitute the essential elements of due process. Due process of law simply means giving opportunity to be heard before judgment is rendered. In fact, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy. What is frowned upon is the denial of the opportunity to be heard.

xxxxxxxxx A formal trial-type hearing is not even essential to due process. It is enough that the parties are given a fair and reasonable opportunity to explain their respective sides of the controversy and to present supporting evidence on which a fair decision can be based. This type of hearing is not even mandatory in cases of complaints lodged before the Labor Arbiter. (emphasis supplied) In Solid Development Corporation Workers Association v. Solid Development Corporation,27 we had the occasion to state: [W]ell-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employers decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. In separate infraction reports, petitioners were both apprised of the particular acts or omissions constituting the charges against them. They were also required to submit their written explanation within 12 hours from receipt of the reports. Yet, neither of them complied. Had they found the 12-hour period too short, they should have requested for an extension of time. Further, notices of termination were also sent to them informing them of the basis of their dismissal. In fine, petitioners were given due process before they were dismissed. Even if no hearing was conducted, the requirement of due process had been met since they were accorded a chance to explain their side of the controversy. (emphasis supplied) Our holding in National Semiconductor HK Distribution, Ltd. v. NLRC28 is of similar import: That the investigations conducted by petitioner may not be considered formal or recorded hearings or investigations is immaterial. A formal or trial type hearing is not at all times and in all instances essential to due process, the requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy. It is deemed sufficient for the employer to follow the natural sequence of notice, hearing and judgment.

The above rulings are a clear recognition that the employer may provide an employee with ample opportunity to be heard and defend himself with the assistance of a representative or counsel in ways other than a formal hearing. The employee can be fully afforded a chance to respond to the charges against him, adduce his evidence or rebut the evidence against him through a wide array of methods, verbal or written. After receiving the first notice apprising him of the charges against him, the employee may submit a written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in support thereof, like relevant company records (such as his 201 file and daily time records) and the sworn statements of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His written explanation may also include a request that a formal hearing or conference be held. In such a case, the conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary disputes29 or where company rules or practice requires an actual hearing as part of employment pretermination procedure. To this extent, we refine the decisions we have rendered so far on this point of law. This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code reasonably implements the "ample opportunity to be heard" standard under Article 277(b) of the Labor Code without unduly restricting the language of the law or excessively burdening the employer. This not only respects the power vested in the Secretary of Labor and Employment to promulgate rules and regulations that will lay down the guidelines for the implementation of Article 277(b). More importantly, this is faithful to the mandate of Article 4 of the Labor Code that "[a]ll doubts in the implementation and interpretation of the provisions of [the Labor Code], including its implementing rules and regulations shall be resolved in favor of labor." In sum, the following are the guiding principles in connection with the hearing requirement in dismissal cases: (a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him and submit evidence in support of his defense, whether in a hearing, conference or some other fair, just and reasonable way. (b) a formal hearing or conference becomes mandatory only when requested by the employee in writing or substantial evidentiary disputes

exist or a company rule or practice requires it, or when similar circumstances justify it. (c) the "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or conference" requirement in the implementing rules and regulations. Petitioners Were Illegally Suspended for 30 Days An employee may be validly suspended by the employer for just cause provided by law. Such suspension shall only be for a period of 30 days, after which the employee shall either be reinstated or paid his wages during the extended period.30 In this case, petitioners contended that they were not paid during the two 15-day extensions, or a total of 30 days, of their preventive suspension. Respondents failed to adduce evidence to the contrary. Thus, we uphold the ruling of the labor arbiter on this point. Where the dismissal was without just or authorized cause and there was no due process, Article 279 of the Labor Code, as amended, mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement.31 In this case, however, reinstatement is no longer possible because of the length of time that has passed from the date of the incident to final resolution.32 Fourteen years have transpired from the time petitioners were wrongfully dismissed. To order reinstatement at this juncture will no longer serve any prudent or practical purpose.33 WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated January 29, 2002 in CA-G.R. SP No. 50536 finding that petitioners Felix B. Perez and Amante G. Doria were not illegally dismissed but were not accorded due process and were illegally suspended for 15 days, is SET ASIDE. The decision of the labor arbiter dated December 27, 1995 in NLRC NCR CN. 11-06930-93 is hereby AFFIRMED with the MODIFICATIONthat petitioners should be paid their separation pay in lieu of reinstatement. SO ORDERED. RENATO C. CORONA Associate Justice