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G.R. No.

79255 January 20, 1992


UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL
PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.
Jose C. Espinas for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J .:
This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the
change of the divisor in the computation of benefits from 251 to 261 days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National
Labor Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and
obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's
decision in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary
arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:
pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject
only to the exclusions and limitations specified in Article 82 and such other legal
restrictions as are provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2)
the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3)
deduction from the holiday pay award of overpayment for overtime, night differential, vacation and
sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made effective from the date of effectivity of the
Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday
pay, and that the use of 251 as divisor is an established employee benefit which cannot be
diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the
holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He
adjudged, however, that the company's sales personnel are field personnel and, as such, are not
entitled to holiday pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should
be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night
differential, vacation and sick leave pay due to the use of 251 days as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator
treated the two motions as appeals and forwarded the case to the NLRC which issued a resolution
dated May 25, 1987 remanding the case to the respondent arbitrator on the ground that it has no
jurisdiction to review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor
Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the
rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the
case reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned
from service effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251
to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for
overtime, night differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the
Labor Code. The respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as
"non-agritultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty."
The controversy centers on the interpretation of the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty."
It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to
the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales
personnel's working hours which can be determined with reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field be reasonably
ascertained. The company has no way of determining whether or not these sales personnel, even if
they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend
the hours in between in actual field work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly situated employees to report for
work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of
work in the field as defined in the Code but an exercise of purely management
prerogative of providing administrative control over such personnel. This does not in any
manner provide a reasonable level of determination on the actual field work of the
employees which can be reasonably ascertained. The theoretical analysis that
salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and
return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field
work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when
the sales personnel follow their field itinerary, and ends immediately before 4:00 or 4:30
p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or
4:30 p.m. comprises their hours of work in the field, the extent or scope and result of
which are subject to their individual capacity and industry and which "cannot be
determined with reasonable certainty." This is the reason why effective supervision over
field work of salesmen and medical representatives, truck drivers and merchandisers is
practically a physical impossibility. Consequently, they are excluded from the ten
holidays with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot be determined with
reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules
which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is unsupervised
by the employer . . . (Emphasis supplied)
While contending that such rule added another element not found in the law (Rollo, p. 13), the
petitioner nevertheless attempted to show that its affected members are not covered by the
abovementioned rule. The petitioner asserts that the company's sales personnel are strictly
supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular dated
March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add
another element to the Labor Code definition of field personnel. The clause "whose time and
performance is unsupervised by the employer" did not amplify but merely interpreted and expounded
the clause "whose actual hours of work in the field cannot be determined with reasonable certainty."
The former clause is still within the scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee's actual working hours in the field can be determined
with reasonable certainty, query must be made as to whether or not such employee's time and
performance is constantly supervised by the employer.
The SOD schedule adverted to by the petitioner does not in the least signify that these sales
personnel's time and performance are supervised. The purpose of this schedule is merely to ensure
that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not
earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number of actual hours spent in
field work by an employee through the imposition of sanctions on absenteeism contained in the
company circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter
based on their performance is proof that their actual hours of work in the field can be determined with
reasonable certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales
target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good
merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses precisely because
of the difficulty in measuring their actual hours of field work. These employees are evaluated by the
result of their work and not by the actual hours of field work which are hardly susceptible to
determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had
occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea
Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to
a greater extent, works individually. There are no restrictions respecting the time he
shall work and he can earn as much or as little, within the range of his ability, as his
ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to
the personal supervision of his employer, and his employer has no way of knowing the
number of hours he works per day.
While in that case the issue was whether or not salesmen were entitled to overtime pay, the same
rationale for their exclusion as field personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of
holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays
and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days'
divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered payment of ten holidays
certainly adds to or accelerates the basis of conversion and computation by ten days.
With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or
262 if election day is counted. This is indeed an extremely difficult legal question of
interpretation which accounts for what is claimed as falling within the concept of "solutio
indebti."
When the claim of the Union for payment of ten holidays was granted, there was a
consequent need to abandon that 251 divisor. To maintain it would create an impossible
situation where the employees would benefit with additional ten days with pay but would
simultaneously enjoy higher benefits by discarding the same ten days for purposes of
computing overtime and night time services and considering sick and vacation leave
credits. Therefore, reimbursement of such overpayment with the use of 251 as divisor
arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is already included
in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our
pronouncement inChartered Bank Employees Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the employees
are so computed as to include the holiday pay provided by law. The petitioner contends
otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered
Bank, in computing overtime compensation for its employees, employs a "divisor" of
251 days. The 251 working days divisor is the result of subtracting all Saturdays,
Sundays and the ten (10) legal holidays from the total number of calendar days in a
year. If the employees are already paid for all non-working days, the divisor should be
365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:
monthly rate x 12 months

251 days
Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by
respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise
the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary increases, is a
constant figure for the purpose of computing overtime and night differential pay and commutation of
sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for
computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower
daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the
Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend,
which represents the employee's annual salary, should correspondingly be increased to incorporate
the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is
P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10
days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 +
1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent
Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate, since the daily rate is still the same
before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days
as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor
of labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day
working schedule, the divisor used by the company was 303, indicating that the 10 holidays were
likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the
chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment
by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from
November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision
was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition
raising the issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is
not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other
grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he
has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La
Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]).
Nevertheless, in order to fully settle the issues so that the execution of the Court's decision in this
case may not be needlessly delayed by another petition, the Court resolved to take up the matter of
effectivity of the holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when
the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not
from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle,
we find its claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984],
hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February
16, 1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday
pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor
Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction
amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the
above ruling and added the "divisor" test.
However, prior to their being declared null and void, the implementing rule and policy instruction
enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the
promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid
rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the
effect to be given to a legislative or executive act subsequently declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with. This is
so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled
to obedience and respect. Parties may have acted under it and may have changed their
positions. What could be more fitting than that in a subsequent litigation regard be had
to what has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that prior to its
being nullified, its existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the government organ which has the
final say on whether or not a legislative or executive measure is valid, a period of time
may have elapsed before it can exercise the power of judicial review that may lead to a
declaration of nullity. It would be to deprive the law of its quality of fairness and justice
then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a
statute, prior to such a determination of [unconstitutionality], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official." (Chicot County
Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been
quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the
decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent
instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez
v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness
and resulting unfairness must be avoided. It is now almost the end of 1991. To require various
companies to reach back to 1975now and nullify acts done in good faith is unduly harsh. 1984 is a
fairer reckoning period under the facts of this case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the
implicit validity of the implementing rule and policy instruction before this Court nullified them, and
thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have
been moved to grant other concessions to its employees, especially in the collective bargaining
agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among the
highest paid in the industry. With this consideration, it would be unfair to impose additional burdens
on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to
Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the date of
promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from
October 23, 1984, the date of promulgation of the IBAA case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in
computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from
October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Padilla, Bidin, Medialdea, Grio-Aquino,
Regalado, Davide, Jr. and Romero, JJ., concur.
Cruz and Nocon, JJ., took no part.












[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.
D E C I S I O N
CARPIO, J .:
The Case
Before this Court is a petition for review on certiorari
[1]
assailing the 26 March 1999 Decision
[2]
of
the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza
(SONZA). The Court of Appeals affirmed the findings of the National Labor Relations Commission
(NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an
Agreement (Agreement) with the Mel and Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by
SONZA, as President and General Manager, and Carmela Tiangco (TIANGCO), as EVP and
Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide SONZAs services
exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA
would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.
[3]

ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year
and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees
on the 10
th
and 25
th
days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf
of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and
career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In
this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said
Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager
[4]

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor
and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did
not pay his salaries, separation pay, service incentive leave pay, 13
th
month pay, signing bonus,
travel allowance and amounts due under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee
relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with
the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under
the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter
[5]
denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company
until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over
the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon
the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the
respondents plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It
behooves upon it the duty to prove that there really is no employer-employee relationship between it and the
complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their
position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge
Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs
witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of
jurisdiction.
[6]
The pertinent parts of the decision read as follows:
x x x
While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a
talent, it stands to reason that a talent as above-described cannot be considered as an employee by reason of
the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as
a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he
undertook to render in accordance with his own style. The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant
Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was
covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the
parties and not by reason of employer-employee relationship. As correctly put by the respondent, All
these benefits are merely talent fees and other contractual benefits and should not be deemed as salaries, wages
and/or other remuneration accorded to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not
controlling, but the intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not
detract from the absence of employer-employee relationship. As held by the Supreme Court, The line
should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote
the result, create no employer-employee relationship unlike the second, which address both the result and the
means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)
[7]

SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming
the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its
Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals
assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered
a Decision dismissing the case.
[8]

Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed
between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the
following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management
company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not
between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to
the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the
latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as
the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there
exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts,
the same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-
appellee. As squarely apparent from complainant-appellants Position Paper, his claims for compensation for
services, 13
th
month pay, signing bonus and travel allowance against respondent-appellee are not based on the
Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock
Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay
complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13
th
month pay based on an amount not lower than the amount
he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit
amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations
with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely
resigning from ABS-CBN, complainant-appellant served upon the latter a notice of rescission of Agreement
with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee
benefits, he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-
appellants claims being anchored on the alleged breach of contract on the part of respondent-appellee, the same
can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of civil
law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs.
Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is intrinsically
a civil dispute.
[9]
(Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between
SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.
[10]
A
special civil action for certiorari extends only to issues of want or excess of jurisdiction of the
NLRC.
[11]
Such action cannot cover an inquiry into the correctness of the evaluation of the evidence
which served as basis of the NLRCs conclusion.
[12]
The Court of Appeals added that it could not re-
examine the parties evidence and substitute the factual findings of the NLRC with its own.
[13]

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND
EVIDENCE TO SUPPORT SUCH A FINDING.
[14]

The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming
the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the first time
that the Court will resolve the nature of the relationship between a television and radio station and
one of its talents. There is no case law stating that a radio and television program host is an
employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction
because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts
accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when
supported by substantial evidence.
[15]
Substantial evidence means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.
[16]
A party cannot prove the
absence of substantial evidence by simply pointing out that there is contrary evidence on record,
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in
determining where the weight of evidence lies or what evidence is credible.
[17]

SONZA maintains that all essential elements of an employer-employee relationship are present in
this case. Case law has consistently held that the elements of an employer-employee relationship
are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the means and methods by which
the work is accomplished.
[18]
The last element, the so-called control test, is the most important
element.
[19]

A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because of
SONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion used by
respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar
experience and qualification as complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills, expertise or talent to
distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA
did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel department just like any
other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his
status. We must consider all the circumstances of the relationship, with the control test being the
most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC.
SONZA asserts that this mode of fee payment shows that he was an employee of ABS-
CBN. SONZA also points out that ABS-CBN granted him benefits and privileges which he would not
have enjoyed if he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate
on benefits such as SSS, Medicare, x x x and 13
th
month pay
[20]
which the law automatically
incorporates into every employer-employee contract.
[21]
Whatever benefits SONZA enjoyed arose
from contract and not because of an employer-employee relationship.
[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge
and out of the ordinary that they indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such
huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual
relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of
SONZA as an independent contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to
turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other
than breach of contract, such as retrenchment to prevent losses as provided under labor laws.
[23]

During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement.
[24]
Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between SONZA
and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid
him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying
SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.
[25]

SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true that
complainant was really an employee, he would merely resign, instead. SONZA did actually resign
from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter
clearly bears this out.
[26]
However, the manner by which SONZA terminated his relationship with ABS-
CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee
or an independent contractor, we refer to foreign case law in analyzing the present case. The United
States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico
Para La Difusin Pblica (WIPR)
[27]
that a television program host is an independent contractor.
We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled
position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a
masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several theater and television
productions prior to her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically, she provided, or obtained sponsors to provide,
the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty
disputes that this factor favors independent contractor status because WIPR provided the equipment necessary
to tape the show. Albertys argument is misplaced. The equipment necessary for Alberty to conduct her
job as host of Desde Mi Pueblo related to her appearance on the show. Others provided equipment for
filming and producing the show, but these were not the primary tools that Alberty used to perform her particular
function. If we accepted this argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi Pueblo. Albertys contracts
with WIPR specifically provided that WIPR hired her professional services as Hostess for the Program Desde
Mi Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x
[28]
(Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an
independent contractor. The control test is the most important test our courts apply in distinguishing
an employee from an independent contractor.
[29]
This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control the hirer exercises, the more likely
the worker is deemed an employee. The converse holds true as well the less control the hirer
exercises, the more likely the worker is considered an independent contractor.
[30]

First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host
the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of
work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows,
as well as pre- and post-production staff meetings.
[31]
ABS-CBN could not dictate the contents of
SONZAs script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN
or its interests.
[32]
The clear implication is that SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZAs work.
[33]
ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN
merely reserved the right to modify the program format and airtime schedule for more effective
programming.
[34]
ABS-CBNs sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of
SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over
the means and methods of the performance of his work. Although ABS-CBN did have the option not
to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees. Thus, even if
ABS-CBN was completely dissatisfied with the means and methods of SONZAs performance of his
work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline
SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay
his talent fees in full.
[35]

Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to
continue paying in full SONZAs talent fees, did not amount to control over the means and methods of
the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work - how he delivered his lines and appeared on
television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only
to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,
[36]
the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the right to
delete objectionable features in their shows. Since the management did not have control over the
manner of performance of the skills of the artists, it could only control the result of the work by
deleting objectionable features.
[37]

SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to
broadcast the Mel & Jay programs. However, the equipment, crew and airtime are not the tools
and instrumentalities SONZA needed to perform his job. What SONZA principally needed were his
talent or skills and the costumes necessary for his appearance.
[38]
Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for
SONZA to display his talent during the airing of the programs.
[39]

A radio broadcast specialist who works under minimal supervision is an independent
contractor.
[40]
SONZAs work as television and radio program host required special skills and talent,
which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any
supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-
CBNs control not only [over] his manner of work but also the quality of his work.
The Agreement stipulates that SONZA shall abide with the rules and standards of performance
covering talents
[41]
of ABS-CBN. The Agreement does not require SONZA to comply with the rules
and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed
on SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code
of Ethics.
[42]
The KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the
rules and standards of performance referred to in the Agreement are those applicable to talents and
not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is
an employee of the former.
[43]
In this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are merely guidelines towards the achievement of the
mutually desired result, which are top-rating television and radio programs that comply with standards
of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim
only to promote the result, create no employer-employee relationship unlike the second, which address both the
result and the means used to achieve it.
[44]

The Vaughan case also held that one could still be an independent contractor although the hirer
reserved certain supervision to insure the attainment of the desired result. The hirer, however, must
not deprive the one hired from performing his services according to his own initiative.
[45]

Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme form of
control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively
to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.
[46]
This practice is not designed to control the means and methods of work of the talent, but
simply to protect the investment of the broadcast station. The broadcast station normally spends
substantial amounts of money, time and effort in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a commensurate
period of time.
[47]
Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for
exclusivity, as in the present case.
MJ MDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his
services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee
of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the
employee who is ostensibly under the employ of the labor-only contractor; and (3) the principal who
is deemed the real employer. Under this scheme, the labor-only contractor is the agent of the
principal. The law makes the principal responsible to the employees of the labor-only contractor as
if the principal itself directly hired or employed the employees.
[48]
These circumstances are not
present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-
CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted
as the AGENT of SONZA. The records do not show that MJMDC acted as ABS-CBNs
agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General Manager of
MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who
himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and
SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the
careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting as
agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.
[49]

Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect
of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A
mere executive issuance cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast industry into only two groups
under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando
Cruz without giving his counsel the opportunity to cross-examine these witnesses. SONZA brands
these witnesses as incompetent to attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to
conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
x x x
These verified position papers shall cover only those claims and causes of action raised in the complaint
excluding those that may have been amicably settled, and shall be accompanied by all supporting documents
including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. x
x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal
trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.
[50]

The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial.
[51]
The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right.
[52]
If the Labor Arbiter is confident that he can rely on the
documents before him, he cannot be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings
before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such practice
exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution
[53]
arises only if there is
an employer-employee relationship under labor laws. Not every performance of services for a fee
creates an employer-employee relationship. To hold that every person who renders services to
another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure cannot operate to deprive an
individual, possessed with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to render his services without
any one controlling the means and methods by which he performs his art or craft. This Court will not
interpret the right of labor to security of tenure to compel artists and talents to render their services
only as employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television hosts what they
say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)
[54]
in relation to Republic Act No. 7716,
[55]
as
amended by Republic Act No. 8241,
[56]
treats talents, television and radio broadcasters differently.
Under the NIRC, these professionals are subject to the 10% value-added tax (VAT) on services they
render. Exempted from the VAT are those under an employer-employee relationship.
[57]
This different
tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13
th
month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock
Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZAs
claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor
Code. Clearly, the present case does not call for an application of the Labor Code provisions but an
interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.
[58]

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26
March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.













G.R. No. 75112 August 17, 1992
FILAMER CHRISTIAN INSTITUTE, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ENRIQUE P. SUPLICO, in his capacity as
Judge of the Regional Trial Court, Branch XIV, Roxas City and POTENCIANO KAPUNAN,
SR., respondents.
Bedona & Bedona Law Office for petitioner.
Rhodora G. Kapunan for private respondents.

GUTIERREZ, JR., J .:
The private respondents, heirs of the late Potenciano Kapunan, seek reconsideration of the decision
rendered by this Court on October 16, 1990 (Filamer Christian Institute v. Court of Appeals, 190
SCRA 477) reviewing the appellate court's conclusion that there exists an employer-employee
relationship between the petitioner and its co-defendant Funtecha. The Court ruled that the petitioner
is not liable for the injuries caused by Funtecha on the grounds that the latter was not an authorized
driver for whose acts the petitioner shall be directly and primarily answerable, and that Funtecha was
merely a working scholar who, under Section 14, Rule X, Book III of the Rules and Regulations
Implementing the Labor Code is not considered an employee of the petitioner.
The private respondents assert that the circumstances obtaining in the present case call for the
application of Article 2180 of the Civil Code since Funtecha is no doubt an employee of the petitioner.
The private respondents maintain that under Article 2180 an injured party shall have recourse against
the servant as well as the petitioner for whom, at the time of the incident, the servant was performing
an act in furtherance of the interest and for the benefit of the petitioner. Funtecha allegedly did not
steal the school jeep nor use it for a joy ride without the knowledge of the school authorities.
After a re-examination of the laws relevant to the facts found by the trial court and the appellate court,
the Court reconsiders its decision. We reinstate the Court of Appeals' decision penned by the late
Justice Desiderio Jurado and concurred in by Justices Jose C. Campos, Jr. and Serafin E. Camilon.
Applying Civil Code provisions, the appellate court affirmed the trial court decision which ordered the
payment of the P20,000.00 liability in the Zenith Insurance Corporation policy, P10,000.00 moral
damages, P4,000.00 litigation and actual expenses, and P3,000.00 attorney's fees.
It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of
petitioner Filamer. He was, in relation to the school, an employee even if he was assigned to clean
the school premises for only two (2) hours in the morning of each school day.
Having a student driver's license, Funtecha requested the driver, Allan Masa, and was allowed, to
take over the vehicle while the latter was on his way home one late afternoon. It is significant to note
that the place where Allan lives is also the house of his father, the school president, Agustin Masa.
Moreover, it is also the house where Funtecha was allowed free board while he was a student of
Filamer Christian Institute.
Allan Masa turned over the vehicle to Funtecha only after driving down a road, negotiating a sharp
dangerous curb, and viewing that the road was clear. (TSN, April 4, 1983, pp. 78-79) According to
Allan's testimony, a fast moving truck with glaring lights nearly hit them so that they had to swerve to
the right to avoid a collision. Upon swerving, they heard a sound as if something had bumped against
the vehicle, but they did not stop to check. Actually, the Pinoy jeep swerved towards the pedestrian,
Potenciano Kapunan who was walking in his lane in the direction against vehicular traffic, and hit him.
Allan affirmed that Funtecha followed his advise to swerve to the right. (Ibid., p. 79) At the time of the
incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.
Allan testified that he was the driver and at the same time a security guard of the petitioner-school.
He further said that there was no specific time for him to be off-duty and that after driving the students
home at 5:00 in the afternoon, he still had to go back to school and then drive home using the same
vehicle.
Driving the vehicle to and from the house of the school president where both Allan and Funtecha
reside is an act in furtherance of the interest of the petitioner-school. Allan's job demands that he
drive home the school jeep so he can use it to fetch students in the morning of the next school day.
It is indubitable under the circumstances that the school president had knowledge that the jeep was
routinely driven home for the said purpose. Moreover, it is not improbable that the school president
also had knowledge of Funtecha's possession of a student driver's license and his desire to undergo
driving lessons during the time that he was not in his classrooms.
In learning how to drive while taking the vehicle home in the direction of Allan's house, Funtecha
definitely was not having a joy ride. Funtecha was not driving for the purpose of his enjoyment or for a
"frolic of his own" but ultimately, for the service for which the jeep was intended by the petitioner
school. (See L. Battistoni v. Thomas, Can SC 144, 1 D.L.R. 577, 80 ALR 722 [1932]; See also
Association of Baptists for World Evangelism, Inc. v. Fieldmen's Insurance Co., Inc. 124 SCRA 618
[1983]). Therefore, the Court is constrained to conclude that the act of Funtecha in taking over the
steering wheel was one done for and in behalf of his employer for which act the petitioner-school
cannot deny any responsibility by arguing that it was done beyond the scope of his janitorial duties.
The clause "within the scope of their assigned tasks" for purposes of raising the presumption of
liability of an employer, includes any act done by an employee, in furtherance of the interests of the
employer or for the account of the employer at the time of the infliction of the injury or damage.
(Manuel Casada, 190 Va 906, 59 SE 2d 47 [1950]) Even if somehow, the employee driving the
vehicle derived some benefit from the act, the existence of a presumptive liability of the employer is
determined by answering the question of whether or not the servant was at the time of the accident
performing any act in furtherance of his master's business. (Kohlman v. Hyland, 210 NW 643, 50 ALR
1437 [1926]; Jameson v. Gavett, 71 P 2d 937 [1937])
Section 14, Rule X, Book III of the Rules implementing the Labor Code, on which the petitioner
anchors its defense, was promulgated by the Secretary of Labor and Employment only for the
purpose of administering and enforcing the provisions of the Labor Code on conditions of
employment. Particularly, Rule X of Book III provides guidelines on the manner by which the powers
of the Labor Secretary shall be exercised; on what records should be kept; maintained and
preserved; on payroll; and on the exclusion of working scholars from, and inclusion of resident
physicians in the employment coverage as far as compliance with the substantive labor provisions on
working conditions, rest periods, and wages, is concerned.
In other words, Rule X is merely a guide to the enforcement of the substantive law on labor. The
Court, thus, makes the distinction and so holds that Section 14, Rule X, Book III of the Rules is not
the decisive law in a civil suit for damages instituted by an injured person during a vehicular accident
against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of employment between an alleged
employee and an alleged employer. It invokes a claim brought by one for damages for injury caused
by the patently negligent acts of a person, against both doer-employee and his employer. Hence, the
reliance on the implementing rule on labor to disregard the primary liability of an employer under
Article 2180 of the Civil Code is misplaced. An implementing rule on labor cannot be used by an
employer as a shield to avoid liability under the substantive provisions of the Civil Code.
There is evidence to show that there exists in the present case an extra-contractual obligation arising
from the negligence or reckless imprudence of a person "whose acts or omissions are imputable, by a
legal fiction, to other(s) who are in a position to exercise an absolute or limited control over (him)."
(Bahia v. Litonjua and Leynes, 30 Phil. 624 [1915])
Funtecha is an employee of petitioner Filamer. He need not have an official appointment for a driver's
position in order that the petitioner may be held responsible for his grossly negligent act, it being
sufficient that the act of driving at the time of the incident was for the benefit of the petitioner. Hence,
the fact that Funtecha was not the school driver or was not acting within the scope of his janitorial
duties does not relieve the petitioner of the burden of rebutting the presumption juris tantum that there
was negligence on its part either in the selection of a servant or employee, or in the supervision over
him. The petitioner has failed to show proof of its having exercised the required diligence of a good
father of a family over its employees Funtecha and Allan.
The Court reiterates that supervision includes the formulation of suitable rules and regulations for the
guidance of its employees and the issuance of proper instructions intended for the protection of the
public and persons with whom the employer has relations through his employees. (Bahia v. Litonjua
and Leynes, supra, at p. 628; Phoenix Construction, v. Intermediate Appellate Court, 148 SCRA 353
[1987])
An employer is expected to impose upon its employees the necessary discipline called for in the
performance of any act indispensable to the business and beneficial to their employer.
In the present case, the petitioner has not shown that it has set forth such rules and guidelines as
would prohibit any one of its employees from taking control over its vehicles if one is not the official
driver or prohibiting the driver and son of the Filamer president from authorizing another employee to
drive the school vehicle. Furthermore, the petitioner has failed to prove that it had imposed sanctions
or warned its employees against the use of its vehicles by persons other than the driver.
The petitioner, thus, has an obligation to pay damages for injury arising from the unskilled manner by
which Funtecha drove the vehicle. (Cangco v. Manila Railroad Co., 38 Phil. 768, 772 [1918]). In the
absence of evidence that the petitioner had exercised the diligence of a good father of a family in the
supervision of its employees, the law imposes upon it the vicarious liability for acts or omissions of its
employees. (Umali v. Bacani, 69 SCRA 263 [1976]; Poblete v. Fabros, 93 SCRA 200 [1979];
Kapalaran Bus Liner v. Coronado, 176 SCRA 792 [1989]; Franco v. Intermediate Appellate Court,
178 SCRA 331 [1989]; Pantranco North Express, Inc. v. Baesa, 179 SCRA 384 [1989]) The liability of
the employer is, under Article 2180, primary and solidary. However, the employer shall have recourse
against the negligent employee for whatever damages are paid to the heirs of the plaintiff.
It is an admitted fact that the actual driver of the school jeep, Allan Masa, was not made a party
defendant in the civil case for damages. This is quite understandable considering that as far as the
injured pedestrian, plaintiff Potenciano Kapunan, was concerned, it was Funtecha who was the one
driving the vehicle and presumably was one authorized by the school to drive. The plaintiff and his
heirs should not now be left to suffer without simultaneous recourse against the petitioner for the
consequent injury caused by a janitor doing a driving chore for the petitioner even for a short while.
For the purpose of recovering damages under the prevailing circumstances, it is enough that the
plaintiff and the private respondent heirs were able to establish the existence of employer-employee
relationship between Funtecha and petitioner Filamer and the fact that Funtecha was engaged in an
act not for an independent purpose of his own but in furtherance of the business of his employer. A
position of responsibility on the part of the petitioner has thus been satisfactorily demonstrated.
WHEREFORE, the motion for reconsideration of the decision dated October 16, 1990 is hereby
GRANTED. The decision of the respondent appellate court affirming the trial court decision is
REINSTATED.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.













G.R. No. L-69870 November 29, 1988
NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRY
OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION AND
ARTURO L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J .:
Consolidated special civil actions for certiorari seeking to review the decision * of the Third Division,
National Labor Relations Commission in Case No. 11-4944-83 dated 28 November 1984 and its
resolution dated 16 January 1985 denying motions for reconsideration of said decision.
Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic
corporation which provides security guards as well as messengerial, janitorial and other similar
manpower services to the Philippine National Bank (PNB) and its agencies. She was first employed
with NASECO as a lady guard on 18 July 1975. Through the years, she was promoted to Clerk
Typist, then Personnel Clerk until she became Chief of Property and Records, on 10 March 1980.
1

Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren,
Manager of Finance and Special Project and Evaluation Department of NASECO, stemming from her
non-compliance with Lloren's memorandum, dated 11 October 1983, regarding certain entry
procedures in the company's Statement of Billings Adjustment. Said charges alleged that Credo "did
not comply with Lloren's instructions to place some corrections/additional remarks in the Statement of
Billings Adjustment; and when [Credo] was called by Lloren to his office to explain further the said
instructions, [Credo] showed resentment and behaved in a scandalous manner by shouting and
uttering remarks of disrespect in the presence of her co-employees."
2

On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager of
NASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in
connection with the administrative charges filed against her. After said meeting, on the same date,
Credo was placed on "Forced Leave" status for 1 5 days, effective 8 November 1983.
3

Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint,
docketed as Case No. 114944-83, with the Arbitration Branch, National Capital Region, Ministry of
Labor and Employment, Manila, against NASECO for placing her on forced leave, without due
process.
4

Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on
Personnel Affairs deliberated and evaluated a number of past acts of misconduct or infractions
attributed to her.
5
As a result of this deliberation, said committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code of Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and employee of client company or officer of the
Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use of profane or insulting
language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a superior officer.
2. That, Management has already given due consideration to respondent's [Credo] scandalous
actuations for several times in the past. Records also show that she was reprimanded for some
offense and did not question it. Management at this juncture, has already met its maximum tolerance
point so it has decided to put an end to respondent's [Credo] being an undesirable employee.
6

The committee recommended Credo's termination, with forfeiture of benefits.
7

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was being
charged with certain offenses. Notably, these offenses were those which NASECO's Committee on
Personnel Affairs already resolved, on 22 November 1983 to have been committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was
made to explain her side in connection with the charges filed against her; however, due to her failure
to do so,
8
she was handed a Notice of Termination, dated 24 November 1983, and made effective 1
December 1983.
9
Hence, on 6 December 1983, Credo filed a supplemental complaint for illegal
dismissal in Case No. 11-4944-83, alleging absence of just or authorized cause for her dismissal and
lack of opportunity to be heard.
10

After both parties had submitted their respective position papers, affidavits and other documentary
evidence in support of their claims and defenses, on 9 May 1984, the labor arbiter rendered a
decision: 1) dismissing Credo's complaint, and 2) directing NASECO to pay Credo separation pay
equivalent to one half month's pay for every year of service.
11

Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on 28
November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former position,
or substantially equivalent position, with six (6) months' backwages and without loss of seniority rights
and other privileges appertaining thereto, and 2) dismissing Credo's claim for attorney's fees, moral
and exemplary damages. As a consequence, both parties filed their respective motions for
reconsideration,
12
which the NLRC denied in a resolution of 16 January 1985.
13

Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave abuse
of discretion the dispositive portion of the 28 November 1984 decision which ordered Credo's
reinstatement with backwages.
14
Petitioners contend that in arriving at said questioned order, the
NLRC acted with grave abuse of discretion in finding that: 1) petitioners violated the requirements
mandated by law on termination, 2) petitioners failed in the burden of proving that the termination of
Credo was for a valid or authorized cause, 3) the alleged infractions committed by Credo were not
proven or, even if proved, could be considered to have been condoned by petitioners, and 4) the
termination of Credo was not for a valid or authorized cause.
15

On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion the
dispositive portion of the 28 November 1984 decision which dismissed her claim for attorney's fees,
moral and exemplary damages and limited her right to backwages to only six (6) months.
16

As guidelines for employers in the exercise of their power to dismiss employees for just causes, the
law provides that:
Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a
written notice stating the particular acts or omission constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may answer the allegations stated against him in the
notice of dismissal within a reasonable period from receipt of such notice. The employer shall afford
the worker ample opportunity to be heard and to defend himself with the assistance of his
representative, if he so desires.
Section 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the reasons therefor.
17

These guidelines mandate that the employer furnish an employee sought to be dismissed two (2)
written notices of dismissal before a termination of employment can be legally effected. These are the
notice which apprises the employee of the particular acts or omissions for which his dismissal is
sought and the subsequent notice which informs the employee of the employer's decision to dismiss
him.
Likewise, a reading of the guidelines in consonance with the express provisions of law on protection
to labor
18
(which encompasses the right to security of tenure) and the broader dictates of procedural
due process necessarily mandate that notice of the employer's decision to dismiss an employee, with
reasons therefor, can only be issued after the employer has afforded the employee concerned ample
opportunity to be heard and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal.
Although she was apprised and "given the chance to explain her side" of the charges filed against
her, this chance was given so perfunctorily, thus rendering illusory Credo's right to security of tenure.
That Credo was not given ample opportunity to be heard and to defend herself is evident from the fact
that the compliance with the injunction to apprise her of the charges filed against her and to afford her
a chance to prepare for her defense was dispensed in only a day. This is not effective compliance
with the legal requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her)
was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO was
already bent on terminating her services when she was informed on 1 December 1983 of the charges
against her, and that any hearing which NASECO thought of affording her after 24 November 1983
would merely be pro forma or an exercise in futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures in
the company's Statement of Billings Adjustment did not warrant the severe penalty of dismissal of the
NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated 22 November 1983 that, "In
the process of her testimony/explanations she again exhibited a conduct unbecoming in front of
NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic and discourteous manner,
notwithstanding, the fact that she was inside the office of the Acctg. General Manager." Let it be
noted, however, that the Report did not even describe how the so called "conduct unbecoming" or
"discourteous manner" was done by complainant. Anent the "sarcastic" argument of complainant, the
purported transcript
19
of the meeting held on 7 November 1983 does not indicate any sarcasm on the
part of complainant. At the most, complainant may have sounded insistent or emphatic about her
work being more complete than the work of Ms. de Castro, yet, the complaining officer signed the
work of Ms. de Castro and did not sign hers.
As to the charge of insubordination, it may be conceded, albeit unclear, that complainant failed to
place same corrections/additional remarks in the Statement of Billings Adjustments as instructed.
However, under the circumstances obtaining, where complainant strongly felt that she was being
discriminated against by her superior in relation to other employees, we are of the considered view
and so hold, that a reprimand would have sufficed for the infraction, but certainly not termination from
services.
20

As this Court has ruled:
... where a penalty less punitive would suffice, whatever missteps may be committed by labor ought
not to be visited with a consequence so severe. It is not only because of the law's concern for the
working man. There is, in addition, his family to consider. Unemployment brings untold hardships and
sorrows on those dependent on the wage-earner.
21

Of course, in justifying Credo's termination of employment, NASECO claims as additional lawful
causes for dismissal Credo's previous and repeated acts of insubordination, discourtesy and sarcasm
towards her superior officers, alleged to have been committed from 1980 to July 1983.
22

If such acts of misconduct were indeed committed by Credo, they are deemed to have been
condoned by NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a
scandalous manner and raised her voice" in a discussion with NASECO's Acting head of the
Personnel Administration
23
no disciplinary measure was taken or meted against her. Nor was she
even reprimanded when she allegedly talked 'in a shouting or yelling manner" with the Acting
Manager of NASECO's Building Maintenance and Services Department in 1980
24
or when she
allegedly "shouted" at NASECO's Corporate Auditor "in front of his subordinates displaying arrogance
and unruly behavior" in 1980, or when she allegedly shouted at NASECO's Internal Control
Consultant in 1981.
25
But then, in sharp contrast to NASECO's penchant for ignoring the aforesaid
acts of misconduct, when Credo committed frequent tardiness in August and September 1983, she
was reprimanded.
26

Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven,
NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given a
salary adjustment for having performed in the job "at least [satisfactorily]"
27
and she was then rated
"Very Satisfactory"
28
as regards job performance, particularly in terms of quality of work, quantity of
work, dependability, cooperation, resourcefulness and attendance.
Considering that the acts or omissions for which Credo's employment was sought to be legally
terminated were insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent the
reason which gave rise to [the employee's] separation from employment, there is no intention on the
part of the employer to dismiss the employee concerned."
29
And, as a result of having been
wrongfully dismissed, Credo is entitled to three (3) years of backwages without deduction and
qualification.
30

However, while Credo's dismissal was effected without procedural fairness, an award of exemplary
damages in her favor can only be justified if her dismissal was effected in a wanton, fraudulent,
oppressive or malevolent manner.
31
A judicious examination of the record manifests no such conduct
on the part of management. However, in view of the attendant circumstances in the case, i.e., lack of
due process in effecting her dismissal, it is reasonable to award her moral damages. And, for having
been compelled to litigate because of the unlawful actuations of NASECO, a reasonable award for
attorney's fees in her favor is in order.
In NASECO's comment
32
in G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction
to order Credo's reinstatement. NASECO claims that, as a government corporation (by virtue of its
being a subsidiary of the National Investment and Development Corporation (NIDC), a subsidiary
wholly owned by the Philippine National Bank (PNB), which in turn is a government owned
corporation), the terms and conditions of employment of its employees are governed by the Civil
Service Law, rules and regulations. In support of this argument, NASECO cites National Housing
Corporation vs. JUCO,
33
where this Court held that "There should no longer be any question at this
time that employees of government-owned or controlled corporations are governed by the civil
service law and civil service rifles and regulations."
It would appear that, in the interest of justice, the holding in said case should not be given retroactive
effect, that is, to cases that arose before its promulgation on 17 January 1985. To do otherwise would
be oppressive to Credo and other employees similarly situated, because under the same 1973
Constitution ,but prior to the ruling inNational Housing Corporation vs. Juco, this Court had
recognized the applicability of the Labor Code to, and the authority of the NLRC to exercise
jurisdiction over, disputes involving terms and conditions of employment in government owned or
controlled corporations, among them, the National Service Corporation (NASECO).<re||an1w>
34

Furthermore, in the matter of coverage by the civil service of government-owned or controlled
corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon which National
Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was provided that:
The civil service embraces every branch, agency, subdivision, and instrumentality of the Government,
including every government-owned or controlled corporation. ...
35

On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original
charter.
36
(Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in the
National Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a circumvention or emasculation of
Section 1, Article XII-B of the constitution. It would be possible for a regular ministry of government to
create a host of subsidiary corporations under the Corporation Code funded by a willing legislature. A
government-owned corporation could create several subsidiary corporations. These subsidiary
corporations would enjoy the best of two worlds. Their officials and employees would be privileged
individuals, free from the strict accountability required by the Civil Service Decree and the regulations
of the Commission on Audit. Their incomes would not be subject to the competitive restrains of the
open market nor to the terms and conditions of civil service employment. Conceivably, all
government-owned or controlled corporations could be created, no longer by special charters, but
through incorporations under the general law. The Constitutional amendment including such
corporations in the embrace of the civil service would cease to have application. Certainly, such a
situation cannot be allowed to exist.
37

appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Service
embraces government-owned or controlled corporations with original charter; and, therefore, by clear
implication, the Civil Service does not include government-owned or controlled corporations which are
organized as subsidiaries of government-owned or controlled corporations under the general
corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent
and meaning in the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was reading the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the
government, including government-owned or controlled corporations.
My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the Commissioner please
state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1, under the Civil Service
Commission, says: "including government-owned or controlled corporations.' Does that include a
corporation, like the Philippine Airlines which is government-owned or controlled?
MR. FOZ. I would like to throw a question to the Commissioner. Is the Philippine Airlines controlled by
the government in the sense that the majority of stocks are owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is what we might call a tertiary corporation. The
GSIS is owned by the government. Would this be covered because the provision says "including
government-owned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as a private corporation. Later on, the government,
through the GSIS, acquired the controlling stocks. Is that not the correct situation?
MR. ROMULO. That is true as Commissioner Ople is about to explain. There was apparently a
Supreme Court decision that destroyed that distinction between a government-owned corporation
created under the Corporation Law and a government-owned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA vs. Juco to the effect that all
government corporations irrespective of the manner of creation, whether by special charter or by the
private Corporation Law, are deemed to be covered by the civil service because of the wide-
embracing definition made in this section of the existing 1973 Constitution. But we recall the response
to the question of Commissioner Ople that our intendment in this provision is just to give a general
description of the civil service. We are not here to make any declaration as to whether employees of
government-owned or controlled corporations are barred from the operation of laws, such as the
Labor Code of the Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name has been mentioned by both
sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is recognized.
MR. OPLE. In connection with the coverage of the Civil Service Law in Section 1 (1), may I volunteer
some information that may be helpful both to the interpellator and to the Committee. Following the
proclamation of martial law on September 21, 1972, this issue of the coverage of the Labor Code of
the Philippines and of the Civil Service Law almost immediately arose. I am, in particular, referring to
the period following the coming into force and effect of the Constitution of 1973, where the Article on
the Civil Service was supposed to take immediate force and effect. In the case of LUZTEVECO, there
was a strike at the time. This was a government-controlled and government-owned corporation. I
think it was owned by the PNOC with just the minuscule private shares left. So, the Secretary of
Justice at that time, Secretary Abad Santos, and myself sat down, and the result of that meeting was
an opinion of the Secretary of Justice which 9 became binding immediately on the government that
government corporations with original charters, such as the GSIS, were covered by the Civil Service
Law and corporations spun off from the GSIS, which we called second generation corporations
functioning as private subsidiaries, were covered by the Labor Code. Samples of such second
generation corporations were the Philippine Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these companies I have
mentioned as examples, except for the Manila Hotel, had collective bargaining agreements. In the
Philippine Airlines, there were, in fact, three collective bargaining agreements; one, for the ground
people or the PALIA one, for the flight attendants or the PASAC and one for the pilots of the ALPAC
How then could a corporation like that be covered by the Civil Service law? But, as the Chairman of
the Committee pointed out, the Supreme Court decision in the case of NHA vs. Juco unrobed the
whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt are now considered
under that decision covered by the Civil Service Law. I also recall that in the emergency meeting of
the Cabinet convened for this purpose at the initiative of the Chairman of the Reorganization
Commission, Armand Fabella, they agreed to allow the CBA's to lapse before applying the full force
and effect of the Supreme Court decision. So, we were in the awkward situation when the new
government took over. I can agree with Commissioner Romulo when he said that this is a problem
which I am not exactly sure we should address in the deliberations on the Civil Service Law or
whether we should be content with what the Chairman said that Section 1 (1) of the Article on the
Civil Service is just a general description of the coverage of the Civil Service and no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the moment, I would be satisfied if the Committee puts on
records that it is not their intent by this provision and the phrase "including government-owned or
controlled corporations" to cover such companies as the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when this draft was made, my proposal
was really to eliminate, to drop from the provision, the phrase "including government- owned or
controlled corporations."
MR. ROMULO. Would the Committee indicate that is the intent of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can make such a statement in the
face of an absolute exclusion of government-owned or controlled corporations. However, this does
not preclude the Civil Service Law to prescribe different rules and procedures, including emoluments
for employees of proprietary corporations, taking into consideration the nature of their operations. So,
it is a general coverage but it does not preclude a distinction of the rules between the two types of
enterprises.
MR. FOZ. In other words, it is something that should be left to the legislature to decide. As I said
before, this is just a general description and we are not making any declaration whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a definitive understanding of the
coverage and the Gentleman wants to exclude government-owned or controlled corporations like
Philippine Airlines, then the recourse is to offer an amendment as to the coverage, if the
Commissioner does not accept the explanation that there could be a distinction of the rules, including
salaries and emoluments.
MR. ROMULO. So as not to delay the proceedings, I will reserve my right to submit such an
amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is recognized.
MR. ROMULO. On page 2, line 5, I suggest the following amendment after "corporations": Add a
comma (,) and the phrase EXCEPT THOSE EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment to now read
as follows: "including government-owned or controlled corporations WITH ORIGINAL CHARTERS."
The purpose of this amendment is to indicate that government corporations such as the GSIS and
SSS, which have original charters, fall within the ambit of the civil service. However, corporations
which are subsidiaries of these chartered agencies such as the Philippine Airlines, Manila Hotel and
Hyatt are excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original charters," what exactly do we
mean?
MR. ROMULO. We mean that they were created by law, by an act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification, the Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those created by the general corporation law are out.
MR. ROMULO. That is correct:
38

On the premise that it is the 1987 Constitution that governs the instant case because it is the
Constitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief to the
parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the NASECO is a
government-owned or controlled corporation without original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion
in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694;
also published in 78 Phil. 221) on the effectivity of the principle of social justice embodied in the 1935
Constitution, said:
Certainly, this principle of social justice in our Constitution as generously conceived and so tersely
phrased, was not included in the fundamental law as a mere popular gesture. It was meant to (be) a
vital, articulate, compelling principle of public policy. It should be observed in the interpretation not
only of future legislation, but also of all laws already existing on November 15, 1935. It was intended
to change the spirit of our laws, present and future. Thus, all the laws which on the great historic
event when the Commonwealth of the Philippines was born, were susceptible of two interpretations
strict or liberal, against or in favor of social justice, now have to be construed broadly in order to
promote and achieve social justice. This may seem novel to our friends, the advocates of legalism but
it is the only way to give life and significance to the above-quoted principle of the Constitution. If it
was not designed to apply to these existing laws, then it would be necessary to wait for generations
until all our codes and all our statutes shall have been completely charred by removing every
provision inimical to social justice, before the policy of social justice can become really effective. That
would be an absurd conclusion. It is more reasonable to hold that this constitutional principle applies
to all legislation in force on November 15, 1935, and all laws thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with
modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, are
ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her termination, or if
such reinstatement is not possible, to place her in a substantially equivalent position, with three (3)
years backwages, from 1 December 1983, without qualification or deduction, and without loss of
seniority rights and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for
moral damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R.
No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo,
in addition to her backwages and damages as above described, separation pay equivalent to one-half
month's salary for every year of service, to be computed on her monthly salary at the time of her
termination on 1 December 1983.
SO ORDERED.
Fernan, C.J., Melencio-Herrera, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Narvasa, J., is on leave.
Gutierrez, Jr., J., in the result.

Separate Opinions

CRUZ, J ., concurring:
While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again
my disappointment over still another avoidable ambiguity in the 1987 Constitution.
It is clear now from the debates of the Constitutional Commission that the government-owned or
controlled corporations included in the Civil Service are those with legislative charters. Excluded are
its subsidiaries organized under the Corporation Code.
If that was the intention, the logical thing, I should imagine, would have been to simply say so. This
would have avoided the suggestion that there are corporations with duplicate charters as
distinguished from those with original charters.
All charters are original regardless of source unless they are amended. That is the acceptable
distinction. Under the provision, however, the charter is still and always original even if amended as
long it was granted by the legislature.
It would have been clearer, I think, to say "including government owned or controlled corporations
with legislative charters." Why this thought did not occur to the Constitutional Commission places one
again in needless puzzlement.


Separate Opinions
CRUZ, J ., concurring:
While concurring with Mr. Justice Padilla's well-researched ponencia, I have to express once again
my disappointment over still another avoidable ambiguity in the 1987 Constitution.
It is clear now from the debates of the Constitutional Commission that the government-owned or
controlled corporations included in the Civil Service are those with legislative charters. Excluded are
its subsidiaries organized under the Corporation Code.
If that was the intention, the logical thing, I should imagine, would have been to simply say so. This
would have avoided the suggestion that there are corporations with duplicate charters as
distinguished from those with original charters.
All charters are original regardless of source unless they are amended. That is the acceptable
distinction. Under the provision, however, the charter is still and always original even if amended as
long it was granted by the legislature.
It would have been clearer, I think, to say "including government owned or controlled corporations
with legislative charters." Why this thought did not occur to the Constitutional Commission places one
again in needless puzzlement.





























G.R. No. L-50734-37 February 20, 1981
WALLEM PHILIPPINES SHIPPING, INC., petitioner,
vs.
THE HON. MINISTER OF LABOR, in his capacity as Chairman of the National Seamen Board
Proper, JAIME CAUNCA, ANTONIO CABRERA, EFREN GARCIA, JOSE OJEDA and RODOLFO
PAGWAGAN,respondents.

DE CASTRO, J.:
Petition for certiorari with preliminary injunction with prayer that the Orders dated December 19, 1977
and April 3, 1979 of the National Seamen Board (NSB) be declared null and void. Private
respondents were hired by petitioner sometime in May 1975 to work as seamen for a period of ten
months on board the M/V Woermann Sanaga, a Dutch vessel owned and operated by petitioner's
European principals. While their employment contracts were still in force, private respondents were
dismissed by their employer, petitioner herein, and were discharged from the ship on charges that
they instigated the International Transport Federation (ITF) to demand the application of worldwide
ITF seamen's rates to their crew.
Private respondents were repatriated to the Philippines on October 27, 1975 and upon their arrival in
Manila, they instituted a complaint against petitioner for illegal dismissal and recovery of wages and
other benefits corresponding to the five months' unexpired period of their shipboard employment
contract.
In support of their complaint, private respondents submitted a Joint Affidavit
1
stating the
circumstances surrounding their employment and subsequent repatriation to the Philippines, material
averments of which are herein below reproduced:
J O I N T A F F I D A V I T
xxx xxx xxx
5. That aside from our basic monthly salary we are entitled to two (2) months vacation leave, daily
subsistence allowance of US$8.14 each, daily food allowance of US$2.50. as well as overtime pay
which we failed to receive because our Shipboard Employment Contract was illegally terminated;
6. That while we were in Rotterdam, on or about July 9, 1975, representative of the ITF boarded our
vessel and talked with the Ship's Captain;
7. That the following day, the representatives of the ITF returned and was followed by Mr. M.S.K.
Ogle who is the Company's Administrative Manager, again went to see the Captain;
8. That at around 7:00 in the evening all the crew members were called in the Mess Hall where the
ITF representatives informed us that they have just entered into a "Special Agreement" with the
Wallem Shipping Management, Ltd., represented by Mr. M.S.K. Ogle, Administrative Manager,
wherein new salary rates was agreed upon and that we were going to be paid our salary differentials
in view of the new rates;
9. That in the same meeting, Mr. M.S.K. Ogle also spoke where he told that a Special Agreement has
been signed and that we will be receiving new pay rate and enjoined us to work hard and be good
boys;
10. That the same evening we received our salary differentials based on the new rates negotiated for
us by the ITF.
11. That while we were in the Port Dubai, Saudi Arabia, we were not receiving our pay, since the
Ship's Captain refused to implement the world-wide rates and insisted on paying us the Far East
Rate;
12. That the Port Dubai is one that is within the Worldwide rates sphere.
13. That on October 22, 1975, Mr. Greg Nacional Operation Manager of respondent corporation,
arrived in Dubai Saudi Arabia and boarded our ship;
14. That on October 23, 1975, Mr. Nacional called all the crew members, including us to a meeting at
the Mess Hall and there he explained that the Company cannot accept the worldwide rate. The
Special Agreement signed by Mr. Ogle in behalf of the Company is nothing but a scrap of paper. Mr.
Jaime Caunca then asked Mr. Nacional, in view of what he was saying, whether the Company will
honor the Special Agreement and Mr. Nacional answered "Yes". That we must accept the Far East
Rates which was put to a vote. Only two voted for accepting the Far East Rates;
15. That immediately thereafter Mr. Nacional left us;
16. That same evening, Mr. Nacional returned and threatened that he has received a cable from the
Home Office that if we do not accept the Far East Rate, our services will be terminated and there will
be a change in crew;
17. That when Mr. Nacional left, we talked amongst ourselves and decided to accept the Far East
Rates;
18. That in the meeting that evening because of the threat we informed Mr. Nacional we were
accepting the Far East Rate and he made us sign a document to that effect;
19. That we the complainants with the exception of Leopoldo Mamaril and Efren Garcia, were not
able to sign as we were at the time on work schedules, and Mr. Nacional did not bother anymore if we
signed or not;
20. That after the meeting Mr. Nacional cabled the Home Office, informing them that we the
complainants with the exception of Messrs. Mamaril and Garcia were not accepting the Far East
Rates;
21. That in the meeting of October 25, 1975, Mr. Nacional signed a document whereby he promised
to give no priority of first preference in "boarding a vessel and that we are not blacklisted";
22. That in spite of our having accepted the Far East Rate, our services were terminated and advised
us that there was a change in crew;
23. That on October 27, 1975, which was our scheduled flight home, nobody attended us, not even
our clearance for our group travel and consequently we were not able to board the plane, forcing us
to sleep on the floor at the airport in the evening of October 27, 1975;
24. That the following day we went back to the hotel in Dubai which was a two hours ride from the
airport, where we were to await another flight for home via Air France;
25. That we were finally able to leave for home on November 2, 1975 arriving here on the 3rd of
November;
26. That we paid for all excess baggages;
27. That Mr. Nacional left us stranded, since he went ahead on October 27, 1975;
28. That immediately upon arriving in Manila, we went to respondent Company and saw Mr. Nacional,
who informed us that we were not blacklisted, however, Mr. Mckenzie, Administrative Manager did
inform us that we were all blacklisted;
29. That we were asking from the respondent Company our leave pay, which they refused to give, if
we did not agree to a US$100.00 deduction;
30. That with the exception of Messrs. Jaime Caunca Amado Manansala and Antonio Cabrera, we
received our leave pay with the US$100.00 deduction;
31. That in view of the written promise of Mr. Nacional in Dubai last October 23, 1975 to give us
priority and preference in boarding a vessel and that we were not blacklisted we have on several
occasions approached him regarding his promise, which up to the present he has refused to honor.
xxx xxx xxx
Answering the complaint, petitioner countered that when the vessel was in London, private
respondents together with the other crew insisted on worldwide ITF rate as per special agreement;
that said employees threatened the ship authorities that unless they agreed to the increased wages
the vessel would not be able to leave port or would have been picketed and/or boycotted and
declared a hot ship by the ITF; that the Master of the ship was left with no alternative but to agree;
that upon the vessel's arrival at the Asian port of Dubai on October 22, 1975, a representative of
petitioner went on board the ship and requested the crew together with private respondents to desist
from insisting worldwide ITF rate and instead accept the Far East rate; that said respondents refused
to accept Far East ITF rates while the rest of the Filipino crew members accepted the Far East rates;
that private respondents were replaced at the expense of petitioner and it was prayed that
respondents be required to comply with their obligations under the contract by requiring them to pay
their repatriation expenses and all other incidental expenses incurred by the master and crew of the
vessel.
After the hearing on the merits, the hearing Officer of the Secretariat rendered a decision
2
on March
14, 1977 finding private respondents to have violated their contract of employment when they
accepted salary rates different from their contract verified and approved by the National Seamen
Board. As to the issue raised by private respondents that the original contract has been novated, it
was held that:
xxx xxx xxx
For novation to be a valid defense, it is a legal requirement that all parties to the contract should give
their consent. In the instant case only the complainants and respondents gave their consent. The
National Seamen Board had no participation in the alleged novation of the previously approved
employment contract. It would have been different if the consent of the National Seamen Board was
first secured before the alleged novation of the approved contract was undertaken, hence, the
defense of novation is not in order.
xxx xxx xxx
The Hearing Officer likewise rules that petitioner violated the contract when its representative signed
the Special Agreement and he signed the same at his own risk and must bear the consequence of
such act, and since both parties are in paridelicto, complaint and counterclaim were dismissed for
lack of merit but petitioner was ordered to pay respondents Caunca and Cabrera their respective
leave pay for the period that they have served M/V Woermann Sanaga plus attorney's fees.
Private respondents filed a motion for reconsideration with the Board which modified the decision of
the Secretariat in an Order
3
of December 19, 1977 and ruled that petitioner is liable for breach of
contract when it ordered the dismissal of private respondents and their subsequent repatriation before
the expiration of their respective employment contracts. The Chairman of the Board stressed that
"where the contract is for a definite period, the captain and the crew members may not be discharged
until after the contract shall have been performed" citing the case of Madrigal Shipping Co., Inc. vs.
Ogilvie, et al. (104 Phil. 748). He directed petitioner to pay private respondents the unexpired portion
of their contracts and their leave pay, less the amount they received as differentials by virtue of the
special agreements entered in Rotterdam, and ten percent of the total amounts recovered as
attorney's fees.
Petitioner sought clarification and reconsideration of the said order and asked for a confrontation with
private respondents to determine the specific adjudications to be made. A series of conferences were
conducted by the Board. It was claimed by petitioner that it did not have in its possession the records
necessary to determine the exact amount of the judgment since the records were in the sole custody
of the captain of the ship and demanded that private respondents produce the needed records. On
this score, counsel for respondents manifested that to require the master of the ship to produce the
records would result to undue delay in the disposition of the case to the detriment of his clients, some
of whom are still unemployed.
Under the circumstances, the Board was left with no alternative but to issue an Order dated April 3,
1979
4
fixing the amount due private respondents at their three (3) months' salary equivalent without
qualifications or deduction. Hence,the instant petition before Us alleging grave abuse of discretion on
the part of the respondent official as Chairman of the Board, in issuing said order which allegedly
nullified the findings of the Secretariat and premised adjudication on imaginary conditions which were
never taken up with full evidence in the course of hearing on the merits.
The whole controversy is centered around the liability of petitioner when it ordered the dismissal of
herein private respondents before the expiration of their respective employment contracts.
In its Order of December 19, 1977
5
the Board, thru its Chairman, Minister Blas F. Ople, held that
there is no showing that the seamen conspired with the ITF in coercing the ship authorities to grant
salary increases, and the Special Agreement was signed only by petitioner and the ITF without any
participation from the respondents who, accordingly, may not be charged as they were, by the
Secretariat, with violation of their employment contract. The Board likewise stressed that the crew
members may not be discharged until after the expiration of the contract which is for a definite period,
and where the crew members are discharged without just cause before the contract shall have been
performed, they shall be entitled to collect from the owner or agent of the vessel their unpaid salaries
for the period they were engaged to render the services, applying the case of Madrigal Shipping Co.,
Inc. vs. Jesus Ogilivie et al.
6

The findings and conclusion of the Board should be sustained. As already intimated above, there is
no logic in the statement made by the Secretariat's Hearing Officer that the private respondents are
liable for breach of their employment contracts for accepting salaries higher than their contracted
rates. Said respondents are not signatories to the Special Agreement, nor was there any showing that
they instigated the execution thereof. Respondents should not be blamed for accepting higher
salaries since it is but human for them to grab every opportunity which would improve their working
conditions and earning capacity. It is a basic right of all workingmen to seek greater benefits not only
for themselves but for their families as well, and this can be achieved through collective bargaining or
with the assistance of trade unions. The Constitution itself guarantees the promotion of social welfare
and protection to labor. It is therefore the Hearing Officer that gravely erred in disallowing the
payment of the unexpired portion of the seamen's respective contracts of employment.
Petitioner claims that the dismissal of private respondents was justified because the latter threatened
the ship authorities in acceeding to their demands, and this constitutes serious misconduct as
contemplated by the Labor Code. This contention is not well-taken. The records fail to establish
clearly the commission of any threat. But even if there had been such a threat, respondents' behavior
should not be censured because it is but natural for them to employ some means of pressing their
demands for petitioner, who refused to abide with the terms of the Special Agreement, to honor and
respect the same. They were only acting in the exercise of their rights, and to deprive them of their
freedom of expression is contrary to law and public policy. There is no serious misconduct to speak of
in the case at bar which would justify respondents' dismissal just because of their firmness in their
demand for the fulfillment by petitioner of its obligation it entered into without any coercion, specially
on the part of private respondents.
On the other hand, it is petitioner who is guilty of breach of contract when they dismissed the
respondents without just cause and prior to the expiration of the employment contracts. As the
records clearly show, petitioner voluntarily entered into the Special Agreement with ITF and by virtue
thereof the crew men were actually given their salary differentials in view of the new rates. It cannot
be said that it was because of respondents' fault that petitioner made a sudden turn-about and
refused to honor the special agreement.
In brief, We declare petitioner guilty of breach of contract and should therefore be made to comply
with the directives contained in the disputed Orders of December 19, 1977 and April 3, 1979.
WHEREFORE, premises considered, the decision dated March 14, 1977 of the Hearing Officer is
SET ASIDE and the Orders dated December 19, 1977 and April 3, 1979 of the National Seamen
Board are AFFIRMED in toto. This decision is immediately executory. Without costs.
SO ORDERED.
Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.
Teehankee (Chairman), J., concur in the result.






EN BANC

ANTONIO M. SERRANO, G.R. No. 167614
Petitioner,
Present:

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
- versus - CORONA,
CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, Jr.,
NACHURA,
LEONARDO-DE CASTRO,
BRION, and
GALLANT MARITIME SERVICES, PERALTA, JJ.
INC. and MARLOW NAVIGATION
CO., INC., Promulgated:
Respondents. March 24, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x



D E C I S I O N



AUSTRIA-MARTINEZ, J.:


For decades, the toil of solitary migrants has helped lift entire families and communities out of
poverty. Their earnings have built houses, provided health care, equipped schools and planted the seeds
of businesses. They have woven together the world by transmitting ideas and knowledge from country to
country. They have provided the dynamic human link between cultures, societies and economies. Yet,
only recently have we begun to understand not only how much international migration impacts
development, but how smart public policies can magnify this effect.


United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 2007
[1]


For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5
th
paragraph of Section 10, Republic Act
(R.A.) No. 8042,
[2]
to wit:

Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of
his employment contract or for three (3) months for every year of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)

does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the
hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary either for
the unexpired portion of their employment contract or for three months for every year of the unexpired term, whichever
is less (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that it impairs the
terms of their contract, deprives them of equal protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004
Decision
[3]
and April 1, 2005 Resolution
[4]
of the Court of Appeals (CA), which applied the subject clause, entreating this
Court to declare the subject clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a
Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following terms and
conditions:
Duration of contract 12 months
Position Chief Officer
Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week
Overtime US$700.00 per month
Vacation leave with pay 7.00 days per month
[5]


On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment
contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation
of respondents that he would be made Chief Officer by the end of April 1998.
[6]


Respondents did not deliver on their promise to make petitioner Chief Officer.
[7]
Hence, petitioner refused to stay
on as Second Officer and was repatriated to the Philippineson May 26, 1998.
[8]


Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999,
but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twenty-three (23) days.

Petitioner filed with the Labor Arbiter (LA) a Complaint
[9]
against respondents for constructive dismissal and for
payment of his money claims in the total amount of US$26,442.73, broken down as follows:

May 27/31, 1998 (5 days)
incl. Leave pay
US$ 413.90
June 01/30,
1998
2,590.00
July 01/31,
1998
2,590.00
August 01/31,
1998
2,590.00
Sept. 01/30,
1998

2,590.00
Oct. 01/31,
1998

2,590.00
Nov. 01/30,
1998

2,590.00
Dec. 01/31,
1998

2,590.00
Jan. 01/31,
1999

2,590.00
Feb. 01/28,
1999

2,590.00
Mar. 1/19, 1999 (19 days)
incl. leave
pay
1,640.00
------
--------------------------------------------------------------------------


25,382.23
Amount adjusted to chief
mate's salary

(March 19/31, 1998 to
April 1/30,
1998) +
1,060.50
[10]

------------
----------------------------------------------------------------------------------
TO
TAL CLAIM
US$ 26,442.73
[11]


as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him
monetary benefits, to wit:

WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of
the complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are
hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN
HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for
three (3) months of the unexpired portion of the aforesaid contract of employment.

The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of
FORTY FIVE U.S. DOLLARS (US$ 45.00),
[12]
representing the complainants claim for a salary
differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and severally, in
Philippine Currency, at the exchange rate prevailing at the time of payment, the complainants (petitioner's)
claim for attorneys fees equivalent to ten percent (10%) of the total amount awarded to the aforesaid
employee under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack
of merit.

All other claims are hereby DISMISSED.

SO ORDERED.
[13]


(Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of
three months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's employment contract
- applying the subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's [b]asic
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month.
[14]


Respondents appealed
[15]
to the National Labor Relations Commission (NLRC) to question the finding of the LA
that petitioner was illegally dismissed.

Petitioner also appealed
[16]
to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court
in Triple Integrated Services, Inc. v. National Labor Relations Commission
[17]
that in case of illegal dismissal, OFWs are
entitled to their salaries for the unexpired portion of their contracts.
[18]


In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered
to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the
time of payment the following:

1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential 45.00
US$4,245.00
3. 10% Attorneys fees 424.50
TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.
[19]


The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable
salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 does not provide for the award of overtime pay,
which should be proven to have been actually performed, and for vacation leave pay.
[20]


Petitioner filed a Motion for Partial Reconsideration, but

this time he questioned the constitutionality of the subject
clause.
[21]
The NLRC denied the motion.
[22]


Petitioner filed a Petition for Certiorari
[23]
with the CA, reiterating the constitutional challenge against the subject
clause.
[24]
After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed by this
Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by
petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary
rate; however, the CA skirted the constitutional issue raised by petitioner.
[25]


His Motion for Reconsideration
[26]
having been denied by the CA,
[27]
petitioner brings his cause to this Court on the
following grounds:

I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker back
wages equal to the unexpired portion of his contract of employment instead of limiting it to three (3) months

II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely
erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the petitioner
on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award
for back wages of overseas workers to three (3) months.

III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the
Court of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation
pay provided in his contract since under the contract they form part of his salary.
[28]


On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he
intends to make use of the monetary award for his medical treatment and medication.
[29]
Required to comment, counsel for
petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and, at the same time,
praying that the constitutional question be resolved.
[30]


Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the
petition mindful of the extreme importance of the constitutional question raised therein.

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not
disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains
disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.

Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate
of US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his
employment contract or a total of US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00
awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries
for the entire nine months and 23 days left of his employment contract, computed at the monthly rate of US$2,590.00.
[31]


The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to
negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed salary
package.
[32]
It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers (local
workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while
setting no limit to the same monetary award for local workers when their dismissal is declared illegal; that the disparate
treatment is not reasonable as there is no substantial distinction between the two groups;
[33]
and that it defeats Section
18,
[34]
Article II of the Constitution which guarantees the protection of the rights and welfare of all Filipino workers, whether
deployed locally or overseas.
[35]


Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing
jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this,
petitioner urges the Court to sort them out for the guidance of affected OFWs.
[36]

Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but
to benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in
the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer
reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations
are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their
continued helpful contribution in deploying Filipino migrant workers, liability for money claims was
reduced under Section 10 of R.A. No. 8042.
[37]


(Emphasis supplied)

Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-
being of OFWs. Not only that, the provision makes foreign employers better off than local employers because in cases
involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only three
months of the unexpired employment contract while local employers are liable for the full lump-sum salaries of their
employees. As petitioner puts it:

In terms of practical application, the local employers are not limited to the amount of backwages
they have to give their employees they have illegally dismissed, following well-entrenched and unequivocal
jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the illegally
dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding the unexpired
term of the contract that can be more than three (3) months.
[38]


Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and
other emoluments he is entitled to under his fixed-period employment contract.
[39]


The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for
this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which was when
he filed an appeal before the NLRC.
[40]


The Arguments of the Solicitor General

The Solicitor General (OSG)
[41]
points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could
not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract, the
provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of money
claims, as this was not stipulated upon by the parties.
[42]


Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment,
such that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential
elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine territory,
OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or against
whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor Relations
Commission
[43]
and Millares v. National Labor Relations Commission,
[44]
OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular employees. Hence, the OSG posits
that there are rights and privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for a
reasonable and valid basis for the differentiated treatment under the subject clause of the money claims of OFWs who are
illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II of the
Constitution.
[45]


Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the
solidary liability of placement agencies for this redounds to the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant
workers are properly deployed and are employed under decent and humane conditions.
[46]


The Court's Ruling

The Court sustains petitioner on the first and second issues.

When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the
Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a conflict of
rights susceptible of judicial determination;
[47]
(2) that the constitutional question is raised by a proper party
[48]
and at the
earliest opportunity;
[49]
and (3) that the constitutional question is the very lis mota of the case,
[50]
otherwise the Court will
dismiss the case or decide the same on some other ground.
[51]


Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally
aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three months only
as provided under the subject clause.

The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue
be raised at the earliest opportunity entails the interposition of the issue in the pleadings before a competent court, such that,
if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial and, if not considered
in the trial, it cannot be considered on appeal.
[52]
Records disclose that the issue on the constitutionality of the subject clause
was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with said labor
tribunal,
[53]
and reiterated in his Petition for Certiorari before the CA.
[54]
Nonetheless, the issue is deemed seasonably raised
because it is not the NLRC but the CA which has the competence to resolve the constitutional issue. The NLRC is a labor
tribunal that merely performs a quasi-judicial function its function in the present case is limited to determining questions of
fact to which the legislative policy of R.A. No. 8042 is to be applied and to resolving such questions in accordance with the
standards laid down by the law itself;
[55]
thus, its foremost function is to administer and enforce R.A. No. 8042, and not to
inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power
to declare unconstitutional a law or a provision thereof, such as the subject clause.
[56]
Petitioner's interposition of the
constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue
in its decision.

The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the
monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment contract,
and not just for a period of three months, strikes at the very core of the subject clause.

Thus, the stage is all set for the determination of the constitutionality of the subject clause.

Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?


The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive
[57]
is not tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation,
[58]
and cannot affect acts or contracts already perfected;
[59]
however, as to laws already in existence, their provisions
are read into contracts and deemed a part thereof.
[60]
Thus, the non-impairment clause under Section 10, Article II is limited
in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging,
abridging or in any manner changing the intention of the parties thereto.

As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment
contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042.

But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the
ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the State to
regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the noble end in view
of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.
[61]
Police power legislations
adopted by the State to promote the health, morals, peace, education, good order, safety, and general welfare of the people
are generally applicable not only to future contracts but even to those already in existence, for all private contracts must yield
to the superior and legitimate measures taken by the State to promote public welfare.
[62]


Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?


The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall any
person be denied the equal protection of the law.

Section 18,
[63]
Article II and Section 3,
[64]
Article XIII accord all members of the labor sector, without distinction as
to place of deployment, full protection of their rights and welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic
security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary
obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by,
or spared the burden imposed on, others in like circumstances.
[65]


Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a
system of classification into its legislation; however, to be valid, the classification must comply with these requirements: 1)
it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions
only; and 4) it applies equally to all members of the class.
[66]


There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a
law: a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be rationally
related to serving a legitimate state interest;
[67]
b) the middle-tier or intermediate scrutiny in which the government must
show that the challenged classification serves an important state interest and that the classification is at least
substantially related to serving that interest;
[68]
and c) strict judicial scrutiny
[69]
in which a legislative classification
which impermissibly interferes with the exercise of a fundamental right
[70]
or operates to the peculiar disadvantage of a
suspect class
[71]
is presumed unconstitutional, and the burden is upon the government to prove that the classification is
necessary to achieve a compelling state interest and that it is the least restrictive means to protect such interest.
[72]


Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications
[73]
based
on race
[74]
or gender
[75]
but not when the classification is drawn along income categories.
[76]


It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association,
Inc. v. Bangko Sentral ng Pilipinas,
[77]
the constitutionality of a provision in the charter of the Bangko Sentral ng
Pilipinas (BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under
the Salary Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from the
SSL by their respective charters. Finding that the disputed provision contained a suspect classification based on salary grade,
the Court deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid classification, and its policies should be
accorded recognition and respect by the courts of justice except when they run afoul of the
Constitution. The deference stops where the classification violates a fundamental right, or prejudices
persons accorded special protection by the Constitution. When these violations arise, this Court must
discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more
exacting adherence to constitutional limitations. Rational basis should not suffice.

Admittedly, the view that prejudice to persons accorded special protection by the Constitution
requires a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless,
these foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are
persuasive and have been used to support many of our decisions. We should not place undue and fawning
reliance upon them and regard them as indispensable mental crutches without which we cannot come to
our own decisions through the employment of our own endowments. We live in a different ambience
and must decide our own problems in the light of our own interests and needs, and of our qualities and
even idiosyncrasies as a people, and always with our own concept of law and justice. Our laws must be
construed in accordance with the intention of our own lawmakers and such intent may be deduced from
the language of each law and the context of other local legislation related thereto. More importantly, they
must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And
it need not be stressed that our public interest is distinct and different from others.

x x x x

Further, the quest for a better and more equal world calls for the use of equal protection as a
tool of effective judicial intervention.

Equality is one ideal which cries out for bold attention and action in the Constitution. The
Preamble proclaims equality as an ideal precisely in protest against crushing inequities in Philippine
society. The command to promote social justice in Article II, Section 10, in all phases of national
development, further explicitated in Article XIII, are clear commands to the State to take affirmative
action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of
doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality.

Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justification that those
with less privilege in life should have more in law. And the obligation to afford protection to labor is
incumbent not only on the legislative and executive branches but also on the judiciary to translate this
pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social
and economic forces by the State so that justice in its rational and objectively secular conception may at
least be approximated.

x x x x

Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power.
Judicial scrutiny would be based on the rational basis test, and the legislative discretion would be given
deferential treatment.

But if the challenge to the statute is premised on the denial of a fundamental right, or the
perpetuation of prejudice against persons favored by the Constitution with special protection, judicial
scrutiny ought to be more strict. A weak and watered down view would call for the abdication of this
Courts solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is
true whether the actor committing the unconstitutional act is a private person or the government itself or one
of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the
actor.

x x x x

In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-
employee status. It is akin to a distinction based on economic class and status, with the higher grades as
recipients of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher
compensation packages that are competitive with the industry, while the poorer, low-salaried employees are
limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file
employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing
higher and better education and opportunities for career advancement - are given higher compensation
packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees consist
of people whose status and rank in life are less and limited, especially in terms of job marketability, it is
they - and not the officers - who have the real economic and financial need for the adjustment . This is in
accord with the policy of the Constitution "to free the people from poverty, provide adequate social services,
extend to them a decent standard of living, and improve the quality of life for all. Any act of Congress that
runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)

Imbued with the same sense of obligation to afford protection to labor, the Court in the present case also employs
the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at two
levels:

First, OFWs with employment contracts of less than one year vis--vis OFWs with employment
contracts of one year or more;

Second, among OFWs with employment contracts of more than one year; and

Third, OFWs vis--vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis--
visOFWs with employment contracts of one year or more

As pointed out by petitioner,
[78]
it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission
[79]
(Second Division, 1999) that the Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment
contract or three (3) months salary for every year of the unexpired term, whichever is less, comes into
play only when the employment contract concerned has a term of at least one (1) year or more. This is
evident from the words for every year of the unexpired term which follows the words salaries x x x for
three months. To follow petitioners thinking that private respondent is entitled to three (3) months salary
only simply because it is the lesser amount is to completely disregard and overlook some words used in the
statute while giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or word thereof be given effect since the law-
making body is presumed to know the meaning of the words employed in the statue and to have used them
advisedly. Ut res magis valeat quam pereat.
[80]
(Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded his
salaries for the remaining 8 months and 6 days of his contract.

Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section
10(5). One was Asian Center for Career and Employment System and Services v. National Labor Relations
Commission (Second Division, October 1998),
[81]
which

involved an OFW who was awarded a two-year employment
contract, but was dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded
him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court
reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just,
valid or authorized cause is entitled to his salary for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private respondents employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3) months
or a total of SR3,600.
[82]


Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division,
December 1998),
[83]
which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-month
contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half months,
respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of four and
one-half months of her contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:



Case Title

Contract
Period


Period of
Service


Unexpired
Period

Period Applied in
the Computation
of the Monetary
Award
Skippers v.
Maguad
[84]

6 months 2 months 4 months 4 months
Bahia Shipping
v. Reynaldo
Chua
[85]

9 months 8 months 4 months 4 months
Centennial
Transmarine v.
dela Cruz l
[86]

9 months 4 months 5 months 5 months
Talidano v.
Falcon
[87]

12 months 3 months 9 months 3 months
Univan v.
CA
[88]

12 months 3 months 9 months 3 months
Oriental v.
CA
[89]

12 months more than 2
months
10 months 3 months
PCL v.
NLRC
[90]

12 months more than 2
months
more or less 9
months
3 months

Olarte v.
Nayona
[91]

12 months 21 days 11 months and 9
days
3 months
JSS v.
Ferrer
[92]

12 months 16 days 11 months and
24 days
3 months
Pentagon v.
Adelantar
[93]

12 months 9 months
and 7 days
2 months and 23
days
2 months and 23
days
Phil. Employ
v. Paramio,
et al
.[94]

12 months 10 months 2 months Unexpired portion
Flourish
Maritime v.
Almanzor
[95]

2 years 26 days 23 months and 4
days
6 months or 3
months for each
year of contract
Athenna
Manpower v.
Villanos
[96]

1 year, 10
months and
28 days
1 month 1 year, 9 months
and 28 days
6 months or 3
months for each
year of contract
As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category
includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are entitled to
their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with fixed-period
employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary award equivalent to
only 3 months of the unexpired portion of their contracts.

The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked
for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast, the
respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts were
awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved
in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being
illegally dismissed were awarded their salaries for only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment
contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of
15 months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the same
employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to
US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only
US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00 for the
unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount.

The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the
effectivity of R.A. No. 8042 on J uly 14, 1995,
[97]
illegally dismissed OFWs, no matter how long the period of their
employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix below
speaks for itself:

Case Title Contract
Period

Period of
Service

Unexpired
Period

Period Applied in the
Computation of the
Monetary Award
ATCI v. CA,
et al.
[98]

2 years 2 months 22 months 22 months
Phil. Integrated
v. NLRC
[99]

2 years 7 days 23 months and
23 days
23 months and 23
days
JGB v. NLC
[100]
2 years 9 months 15 months 15 months
Agoy v.
NLRC
[101]

2 years 2 months 22 months 22 months
EDI v. NLRC,
et al.
[102]

2 years 5 months 19 months 19 months
Barros v.
NLRC, et al.
[103]

12 months 4 months 8 months 8 months

Philippine
Transmarine v.
Carilla
[104]

12 months 6 months
and 22 days
5 months and
18 days
5 months and 18 days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof,
were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims were
subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money
claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category whose
contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of having their
monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is less, but all the
while sparing the other category from such prejudice, simply because the latter's unexpired contracts fall short of one year.

Among OFWs With Employment
Contracts of More Than One Year


Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the
accuracy of the Marsaman interpretation.

The Court notes that the subject clause or for three (3) months for every year of the unexpired term, whichever is
less contains the qualifying phrases every year and unexpired term. By its ordinary meaning, the word term means a
limited or definite extent of time.
[105]
Corollarily, that every year is but part of an unexpired term is significant in many
ways: first, the unexpired term must be at least one year, for if it were any shorter, there would be no occasion for such
unexpired term to be measured by every year; and second, the original term must be more than one year, for otherwise,
whatever would be the unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the
determination of when the subject clause for three (3) months for every year of the unexpired term, whichever is less shall
apply is not the length of the original contract period as held in Marsaman,
[106]
but the length of the unexpired portion of the
contract period -- the subject clause applies in cases when the unexpired portion of the contract period is at least one year,
which arithmetically requires that the original contract period be more than one year.

Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods
are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries for
three months only.

To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month. OFW-C
is illegally dismissed on the 12
th
month, and OFW-D, on the 13
th
month. Considering that there is at least 12 months
remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's monetary
benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion
of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired
term of the contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there are only 11 months
left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total salaries
for the entire 11-month unexpired portion.

OFWs vis--vis Local Workers
With Fixed-Period Employment


As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally
dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term employment.
[107]


The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce
(1888),
[108]
to wit:

Article 299. If the contracts between the merchants and their shop clerks and employees should
have been made of a fixed period, none of the contracting parties, without the consent of the other, may
withdraw from the fulfillment of said contract until the termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the
exception of the provisions contained in the following articles.

In Reyes v. The Compaia Maritima,
[109]
the Court applied the foregoing provision to determine the liability of a
shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term employment. The Court
therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-term employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which
provides:

Article 605. If the contracts of the captain and members of the crew with the agent should be for a
definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for
reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to
the vessel or to its cargo by malice or manifest or proven negligence.

Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,
[110]
in
which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally dismissed
employees for the entire unexpired portion of their employment contracts.

While Article 605 has remained good law up to the present,
[111]
Article 299 of the Code of Commerce was replaced
by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for
a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan
[112]
read the disjunctive "or" in Article 1586 as a conjunctive "and" so as
to apply the provision to local workers who are employed for a time certain although for no particular skill. This
interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.
[113]
And in
bothLemoine and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on
Article 1586, local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by
the terms of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay
[114]
held:

The doctrine is well-established in American jurisprudence, and nothing has been brought to our
attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it
is his duty to seek other employment of the same kind in the same community, for the purpose of
reducing the damages resulting from such wrongful discharge. However, while this is the general rule, the
burden of showing that he failed to make an effort to secure other employment of a like nature, and that
other employment of a like nature was obtainable, is upon the defendant. When an employee is
wrongfully discharged under a contract of employment his prima facie damage is the amount which he
would be entitled to had he continued in such employment until the termination of the period. (Howard
vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)
[115]


(Emphasis supplied)

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2
(Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work),
Chapter 3, Title VIII, Book IV.
[116]
Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do
not expressly provide for the remedies available to a fixed-term worker who is illegally discharged. However, it is noted
that in Mackay Radio & Telegraph Co., Inc. v. Rich,
[117]
the Court carried over the principles on the payment of damages
underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local
worker whose fixed-period employment contract was entered into in 1952, when the new Civil Code was already in
effect.
[118]


More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term
employment contracts were illegally terminated,

such as inFirst Asian Trans & Shipping Agency, Inc. v. Ople,
[119]
involving
seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations
Commission,
[120]
an OFW who was illegally dismissed prior to the expiration of her fixed-period employment contract as a
baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the same
ruling in Anderson v. National Labor Relations Commission,
[121]
which involved a foreman hired in 1988 in Saudi Arabia for a
fixed term of two years, but who was illegally dismissed after only nine months on the job -- the Court awarded him
salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National
Labor Relations Commission,
[122]
a Filipino working as a security officer in 1989 in Angola was awarded his salaries for the
remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v.
National Labor Relations Commission,
[123]
an OFW whose 12-month contract was illegally cut short in the second month
was declared entitled to his salaries for the remaining 10 months of his contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged
were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for the
entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the
subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment contract have
since been differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is
imposed on local workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers
with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar
disadvantage.

There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now
subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest through the
least restrictive means.

What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution
and calibrated by history.
[124]
It is akin to the paramount interest of the state
[125]
for which some individual liberties must give
way, such as the public interest in safeguarding health or maintaining medical standards,
[126]
or in maintaining access to
information on matters of public concern.
[127]


In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause
may possibly serve.

The OSG defends the subject clause as a police power measure designed to protect the employment of Filipino
seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of getting hired
by foreign employers. The limitation also protects the interest of local placement agencies, which otherwise may be made
to shoulder millions of pesos in termination pay.
[128]


The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in
the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer
reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations
are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their
continued helpful contribution in deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose welfare the government seeks
to promote. The survival of legitimate placement agencies helps [assure] the government that migrant
workers are properly deployed and are employed under decent and humane conditions.
[129]
(Emphasis
supplied)

However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state
interest sought to be served by the subject clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House
Bill No. 14314 (HB 14314), from which the law originated;
[130]
but the speech makes no reference to the underlying reason
for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject
clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:

Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters
of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of
an employer-employee relationship or by virtue of the complaint, the claim arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal and the recruitment/placement agency or any and all claims under this
Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of
damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided, That
any installment payments, if applicable, to satisfy any such compromise or voluntary settlement shall not be
more than two (2) months. Any compromise/voluntary agreement in violation of this paragraph shall be null
and void.

Non-compliance with the mandatory period for resolutions of cases provided under this Section
shall subject the responsible officials to any or all of the following penalties:

(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies
therewith;

(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any appointive public office for
five (5) years.

Provided, however, That the penalties herein provided shall be without prejudice to any liability
which any such official may have incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.

A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the
5
th
paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the transcripts of the
Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing
Provisions of Senate Bill No. 2077 and House Bill No. 14314). However, the Court finds no discernible state interest, let
alone a compelling one, that is sought to be protected or advanced by the adoption of the subject clause.

In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that
would justify the perpetuation of the discrimination against OFWs under the subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by
mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected. There can
never be a justification for any form of government action that alleviates the burden of one sector, but imposes the same
burden on another sector, especially when the favored sector is composed of private businesses such as placement agencies,
while the disadvantaged sector is composed of OFWs whose protection no less than the Constitution commands. The idea
that private business interest can be elevated to the level of a compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-
vis their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose without
infringing on the constitutional rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers,
dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on their
contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range from
temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring foreign
employers.

Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement
agencies in enforcing the solidary liability of their foreign principals.

Thus, the subject clause in the 5
th
paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and
other OFWs to equal protection.

Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the
subject clause from the lone perspective that the clause directly violates state policy on labor under Section 3,
[131]
Article
XIII of the Constitution.

While all the provisions of the 1987 Constitution are presumed self-executing,
,[132]
there are some which this Court
has declared not judicially enforceable, Article XIII being one,
[133]
particularly Section 3 thereof, the nature of which, this
Court, in Agabon v. National Labor Relations Commission,
[134]
has described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as
self-executing in the sense that these are automatically acknowledged and observed without need for any
enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the
full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when
examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket
shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies
an unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within the
contemplation of the framers. Subsequent legislation is still needed to define the parameters of these
guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of
the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss,
formulating their own conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve
proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social
justice require legislative enactments for their enforceability.
[135]
(Emphasis added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of
which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of litigation to
every worker or union over every conceivable violation of so broad a concept as social justice for labor.

It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual
enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges protection
through executive or legislative action and judicial recognition. Its utility is best limited to being an impetus not just
for the executive and legislative departments, but for the judiciary as well, to protect the welfare of the working
class. And it was in fact consistent with that constitutional agenda that the Court in Central Bank (now Bangko
Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now
Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the
perpetuation of prejudice against persons favored by the Constitution with special protection -- such as the working
class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same to
strict judicial scrutiny.

The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee
Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied Article
XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal protection
clause, has no life or force of its own as elucidated in Agabon.

Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to
substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid
governmental purpose.
[136]


The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of
OFWs to their three-month salary in case of illegal dismissal, is to give them a better chance of getting hired by foreign
employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason
that the clause violates not just petitioner's right to equal protection, but also her right to substantive due process under
Section 1,
[137]
Article III of the Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of
nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A.
No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his
monetary award, because these are fixed benefits that have been stipulated into his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation
for all work performed in excess of the regular eight hours, and holiday pay is compensation for any work performed
on designated rest days and holidays.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is evidence that he performed work during those periods. As
the Court held in Centennial Transmarine, Inc. v. Dela Cruz,
[138]


However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in
Cagampan v. National Labor Relations Commission, to wit:

The rendition of overtime work and the submission of sufficient proof that said
was actually performed are conditions to be satisfied before a seaman could be entitled to
overtime pay which should be computed on the basis of 30% of the basic monthly salary.
In short, the contract provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established.

In the same vein, the claim for the day's leave pay for the unexpired portion of the
contract is unwarranted since the same is given during the actual service of the
seamen.

WHEREFORE, the Court GRANTS the Petition. The subject clause or for three months for every year of the
unexpired term, whichever is less in the 5
th
paragraph of Section 10 of Republic Act No. 8042
is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of
Appeals areMODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.

No costs.

SO ORDERED.

















FIRST DIVISION


PEOPLE OF THE PHILIPPINES, G.R. No. 168445
Appellee,
Present:

Davide, Jr., C.J. (Chairman),
*

- versus - Quisumbing,
**

Ynares-Santiago,
Carpio, and
Azcuna, JJ.
CAPT. FLORENCIO O. GASACAO,
Appellant. Promulgated:

November 11, 2005
x ---------------------------------------------------------------------------------------- x

DECISION


YNARES-SANTIAGO, J.:


This is an appeal from the May 18, 2005 Decision
[1]
of the Court of Appeals in CA-G.R. CR No. 00800
dismissing the appeal of appellant, Florencio O. Gasacao and affirming the March 5, 2001 Joint Decision
[2]
of
the Regional Trial Court (RTC) of Quezon City, Branch 218, finding appellant guilty beyond reasonable
doubt of Large Scale Illegal Recruitment in Crim. Case No. Q-00-94240 and acquitting him of the charge in
Crim. Case No. Q-00-94241.
The factual antecedents are as follows:

Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed local manning
agency, while his nephew and co-accused, Jose Gasacao, was the President. As the crewing manager,
appellants duties included receiving job applications, interviewing the applicants and informing them of the
agencys requirement of payment of performance or cash bond prior to deployment.

On August 4, 2000, appellant and Jose Gasacao were charged with Large Scale Illegal Recruitment
defined under Section 6, paragraphs (a), (l) and (m) of Republic Act (RA) No. 8042 or the Migrant Workers and
Overseas Filipinos Act of 1995, and penalized under Section 7 (b) of the same law, before the RTC of Quezon
City.

The informations read:

In Criminal Case No. Q-00-94240

That sometime in the months of May to December, 1999 or thereabout, in Quezon City,
Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-named
accused, conspiring, confederating and mutually helping one another, did then and there
willfully, unlawfully and criminally recruit, enlist and promise overseas employment to the
private complainants, namely, Lindy M. Villamor, Dennis Cabangahan, Erencio C. Alaba,
Victorino U. Caderao, Rommel B. Patolen, Joseph A. Demetria and Louie A. Arca, as overseas
seamen/seafarers, the said accused thereby charging, exacting and collecting from the said
private complainants cash bonds and/or performance bonds in amounts ranging from P10,000.00
to P20,000.00 without any authority to do so and despite the fact that the same is prohibited by
the POEA Rules and Regulations, which amount is greater than that specified in the schedule of
allowable fees prescribed by the Secretary of Labor and Employment, and despite the payment
of the said fees, the said accused failed to actually deploy the private complainants without valid
reasons as determined by the Department of Labor and Employment and despite the failure of
deployment, the said accused failed to reimburse the expenses incurred by the said private
complainants in connection with their documentation and processing for the purpose of their
supposed deployment.

CONTRARY TO LAW.
[3]



In Criminal Case No. Q-00-94241

That sometime in the months of September to November 1999 or thereabout, in Quezon
City, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-
named accused, conspiring, confederating and mutually helping one another, did then and there
willfully, unlawfully and criminally recruit, enlist and promise overseas employment to the
private complainants, namely, Melvin I. Yadao, Frederick Calambro and Andy Bandiola, as
overseas seamen/seafarers, the said accused thereby charging, exacting and collecting from the
said private complainants cash bonds and/or performance bonds in amounts ranging from
P10,000.00 to P20,000.00 without any authority to do so and despite the fact that the same is
prohibited by the POEA Rules and Regulations, which amount is greater that that specified in
the schedule of allowable fees prescribed by the Secretary Labor and Employment, and despite
the payment of said fees, the said accused failed to actually deploy the private complainants
without valid reasons as determined by the Department of Labor and Employment and despite
the failure of deployment, the said accused failed to reimburse the expenses incurred by the said
private complainants in connection with their documentation and processing for the purpose of
their supposed deployment.

SO ORDERED.
[4]


Only the appellant was arrested while Jose Gasacao remained at large. When arraigned, appellant
pleaded not guilty to the offense charged. Thereafter, trial on the merits ensued. On March 5, 2001, the RTC of
Quezon City, Branch 218, rendered its Joint Decision convicting appellant of Large Scale Illegal Recruitment in
Crim. Case No. Q-00-94240 and acquitting him of the charge in Crim. Case No. Q-00-94241. The dispositive
portion of the joint decision reads:

WHEREFORE, judgment is hereby rendered as follows:

1. In Crim. Case No. Q-00-94240, the prosecution having established the guilt of the
accused beyond reasonable doubt, the Court finds Florencio O. Gasacao GUILTY of
Large Scale Illegal Recruitment punishable under Section 7, (b) of R.A. 8042. He is
sentenced to suffer life imprisonment and a fine of P500,000.00. He shall also indemnify
Dennis C. Cabangahan in the amount of P8,750.00; Lindy M. Villamor for P20,000.00;
Victorino U. Caderao for P20,000.00; Rommel B. Patolen for P20,000.00; and Erencio C.
Alaba for P20,000.00. Complainants Louie A. Arca and Joseph A. Demetria did not
testify.

2. In Crim. Case No. Q-00-94241, complainants Melvin I. Yadao, Frederick Calambro and
Andy Bandiola did not testify. Moreover, the Court believes all these complainants
should have been grouped in just one (1) information. Hence, for failure of the
prosecution to prove the guilt of the accused beyond reasonable doubt, the Court finds
Florencio O. Gasacao NOT GUILTY of the offense charged.

SO ORDERED.
[5]


Conformably with our pronouncement in People v. Mateo,
[6]
which modified pertinent provisions of the
Rules of Court insofar as they provide for direct appeals from the RTC to the Supreme Court in cases where the
penalty imposed is death, reclusion perpetua or life imprisonment, as in this case, as well as this Courts
Resolution dated September 19, 1995, we resolved on February 2, 2005 to transfer the case to the Court of
Appeals for appropriate action and disposition.
[7]


On May 18, 2005, the Court of Appeals promulgated the assailed Decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack
of merit. The appealed Joint Decision dated March 5, 2001 of the trial court in Criminal Case
No. Q-00-94240 is hereby AFFIRMED and UPHELD.

With costs against the accused-appellant.

SO ORDERED.
[8]


Hence, this appeal.

The core issue for resolution is whether error attended the trial courts findings, as affirmed by the Court
of Appeals, that appellant was guilty beyond reasonable doubt of the crime of large scale illegal recruitment.

RA No. 8042 defines illegal recruitment as follows:

II. ILLEGAL RECRUITMENT

Sec. 6. DEFINITIONS. For purposes of this Act, illegal recruitment shall mean any act
of canvassing, enlisting, contracting, transporting, utilizing, hiring, procuring workers and
includes referring, contract services, promising or advertising for employment abroad, whether
for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated
under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor
Code of the Philippines: Provided, that such non-licensee or non-holder who, in any manner,
offers or promises for a fee employment abroad to two or more persons shall be deemed so
engaged. It shall likewise include the following acts, whether committed by any persons, whether
a non-licensee, non-holder, licensee or holder of authority.

(a) To charge or accept directly or indirectly any amount greater than the specified in
the schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make
a worker pay any amount greater than that actually received by him as a loan or advance;

....

(l) Failure to actually deploy without valid reason as determined by the Department
of Labor and Employment; and

(m) Failure to reimburse expenses incurred by the workers in connection with his
documentation and processing for purposes of deployment, in cases where the deployment does
not actually take place without the worker's fault. Illegal recruitment when committed by a
syndicate or in large scale shall be considered as offense involving economic sabotage.

Illegal recruitment is deemed committed by a syndicate carried out by a group of three
(3) or more persons conspiring or confederating with one another. It is deemed committed in
large scale if committed against three (3) or more persons individually or as a group.


A license is a document issued by the Department of Labor and Employment (DOLE) authorizing a
person or entity to operate a private employment agency, while an authority is a document issued by the DOLE
authorizing a person or association to engage in recruitment and placement activities as a private recruitment
entity. However, it appears that even licensees or holders of authority can be held liable for illegal recruitment
should they commit any of the above-enumerated acts.

Thus, it is inconsequential that appellant committed large scale illegal recruitment while Great Eastern
Shipping Agency, Inc. was holding a valid authority. We thus find that the court below committed no
reversible error in not appreciating that the manning agency was a holder of a valid authority when appellant
recruited the private complainants.

There is no merit in appellants contention that he could not be held liable for illegal recruitment since
he was a mere employee of the manning agency, pursuant to Section 6 of RA No. 8042 which provides:

The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having control, management or direction of
their business shall be liable.

Contrary to appellants claim, he is not a mere employee of the manning agency but the crewing
manager. As such, he receives job applications, interviews applicants and informs them of the agencys
requirement of payment of performance or cash bond prior to the applicants deployment. As the crewing
manager, he was at the forefront of the companys recruitment activities.

Private complainant Lindy Villamor testified that it was appellant who informed him that if he will give
a cash bond of P20,000.00, he will be included in the first batch of applicants to be deployed. Notwithstanding
the payment of the cash bond as evidenced by a receipt dated December 15, 1999 and issued by the appellant,
Villamor was not deployed overseas. He further testified that when he found out that appellant was no longer
connected with Great Eastern Shipping Agency Inc., he confronted Jose Gasacao and showed to him a
photocopy of the receipt. Jose Gasacao gave him the address of the appellant but he failed to recover the
amount from the latter.

Another private complainant, Erencio C. Alaba testified that he applied as a seaman with Great Eastern
Shipping Agency Inc. in May 1999 and submitted all the requirements to appellant. The latter told Alaba that
after payment of a cash bond, he will be deployed within three months. On June 3, 1999, Alaba gave
P10,000.00 to the appellant as evidenced by a cash voucher which was approved and signed by the appellant in
the presence of Alaba.

Afterwards, appellant asked Alaba to have his medical examination. He was also informed that those
who had completed paying the P20,000.00 cash bond will have priority in deployment. Thus, Alaba gave
another P10,000.00 to appellant on August 2, 1999 and was again informed that he will be deployed in a
dredging or supply boat within three months from August 1999. Despite appellants representations, Alaba was
never deployed and was also unable to recover the amount of the cash bond that he paid.

Private complainant Dennis Cabangahan testified that he applied as a seaman with Great Eastern
Shipping Agency Inc. on July 27, 1999 and paid the cash bond of P19,000.00 as evidenced by a receipt issued
by appellant. The latter informed him that he will be deployed abroad within three months. As what had
happened to the other complainants, Cabangahan was never deployed overseas nor did he recover his money.

Victoriano Cadirao
[9]
also testified that on August 1, 1999, he applied with the manning agency for the
position of mess man. He submitted his application to appellant who told him to come back when he has the
money to cover the cash bond of P20,000.00. Appellant told him that the payment of the cash bond is optional,
but that his deployment will be fast-tracked if he pays the cash bond. On August 10, 1999, he gave P20,000.00
to appellant who issued a receipt. When the promised employment failed to materialize, the appellant told
Cadirao to wait for another dredging vessel. In December 1999, he found out that appellant was no longer
connected with Great Eastern Shipping Agency Inc. so he went to his residence and demanded the return of his
money. Appellant however refused to return the amount of the cash bond.

On the other hand, Rommel B. Patolen testified that he applied with Great Eastern Shipping Agency Inc.
as an ordinary seaman in May 1999. After complying with the requirements, appellant told him to report to the
agency thrice a week. From May to December 1999, Patolen reported to the agency as instructed. On
December 11, 1999, he gave P20,000.00 to appellant who acknowledged its receipt. Patolen further testified
that he paid the cash bond because appellant told him that his prospective employer will arrive in December
1999 from Saudi Arabia with a vessel to accommodate him. He was further advised that he could leave within
three months if he paid the cash bond. However, Patolen was never deployed and when he found out that
appellant was no longer connected with Great Eastern Shipping Agency Inc., he went to the house of the latter
and informed him that he was withdrawing his application. Appellant asked him to wait for his new agency,
Ocean Grandeur, which has no license yet.

The foregoing testimonies of the private complainants clearly established that appellant is not a mere
employee of Great Eastern Shipping Agency Inc. As the crewing manager, it was appellant who made
representations with the private complainants that he can secure overseas employment for them upon payment
of the cash bond.

It is well settled that to prove illegal recruitment, it must be shown that appellant gave complainants the
distinct impression that he had the power or ability to send complainants abroad for work such that the latter
were convinced to part with their money in order to be employed.
[10]
Appellants act of promising the private
complainants that they will be deployed abroad within three months after they have paid the cash bond clearly
shows that he is engaged in illegal recruitment.

The trial courts appreciation of the complainants testimonies deserves the highest respect since it was
in a better position to asses their credibility.

Even assuming that appellant was a mere employee, such fact is not a shield against his conviction for
large scale illegal recruitment. In the case of People v. Cabais,
[11]
we have held that an employee of a company
or corporation engaged in illegal recruitment may be held liable as principal, together with his employer, if it is
shown that he actively and consciously participated in the recruitment process. We further stated that:

In this case, evidence showed that accused-appellant was the one who informed complainant of
job prospects in Korea and the requirements for deployment. She also received money from them
as placement fees. All of the complainants testified that they personally met the accused-
appellant and transacted with her regarding the overseas job placement offers. Complainants
parted with their money, evidenced by receipts signed by accused Cabais and accused Forneas.
Thus, accused-appellant actively participated in the recruitment of the complainants.
[12]


Clearly, the acts of appellant vis--vis the private complainants, either as the crewing manager of Great
Eastern Shipping Agency Inc. or as a mere employee of the same, constitute acts of large scale illegal
recruitment which should not be countenanced.

We find no reason to deviate from the findings of the trial court that appellant is guilty beyond
reasonable doubt of large scale illegal recruitment. It was established that he promised overseas employment to
five applicants, herein private complainants. He interviewed and required them to complete and submit
documents purportedly needed for their employment. Although he informed them that it is optional, he
collected cash bonds and promised their deployment notwithstanding the proscription against its collection
under Section 60 of the Omnibus Rules and Regulations Implementing R.A. No. 8042
[13]
which state that:


SEC. 60. Prohibition on Bonds and Deposits. In no case shall an employment
agency require any bond or cash deposit from the worker to guarantee performance under the
contract or his/her repatriation.

We find as flimsy and self serving appellants assertion that he was unaware of the prohibition against
the collection of bonds or cash deposits from applicants. It is an established dictum that ignorance of the law
excuses no one from compliance therewith.
[14]
The defense of good faith is neither available.

It is also undisputed that appellant failed to deploy the private complainants without any valid reason,
this notwithstanding his promise to them that those who can pay the cash bond will be deployed within three
months from payment of the same. Such failure to deploy constitutes a violation of Section 6 (l) of RA No.
8042. Worse, when it became clear that appellant cannot deploy the private complainants without their fault, he
failed to return the amount of the cash bond paid by them.

Illegal recruitment is deemed committed in large scale if committed against three or more persons
individually or as a group. In this case, five complainants testified against appellants acts of illegal
recruitment, thereby rendering his acts tantamount to economic sabotage. Under Section 7 (b) of RA No. 8042,
the penalty of life imprisonment and a fine of not less than P500,000.00 nor more than P1,000.000.00 shall be
imposed if illegal recruitment constitutes economic sabotage.

Verily, the trial court and the Court of Appeals correctly found appellant guilty beyond reasonable of
large scale illegal recruitment.

WHEREFORE, the May 18, 2005 Decision of the Court of Appeals in CA-G.R. CR No. 00800
is AFFIRMED.

SO ORDERED.











[G.R. No. 125044. July 13, 1998]
IMELDA DARVIN, petitioner, vs. HON. COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES, respondents.
D E C I S I O N
ROMERO, J .:
Before us is a petition for review of the decision of the Court of Appeals in C.A.-G.R. CR. No.
15624 dated January 31, 1996,
[1]
which affirmed in toto the judgment of the Regional Trial Court,
Branch 19, Bacoor, Cavite, convicting accused-appellant, Imelda Darvin for simple illegal recruitment
under Article 38 and Article 39, in relation to Article 13 (b) and (c), of the Labor Code, as amended.
Accused-appellant was charged under the following information:
That on or about the 13
th
day of April 1992, in the Municipality of Bacoor, Province of Cavite,
Philippines and within the jurisdiction of this Honorable Court, the above-named accused, through
fraudulent representation to one Macaria Toledo to the effect that she has the authority to recruit
workers and employees for abroad and can facilitate the necessary papers in connection thereof, did,
then and there, wilfully, unlawfully and feloniously, hire, recruit and promise a job abroad to one
Macaria Toledo, without first securing the necessary license and permit from the Philippine Overseas
Employment Administration to do so, thereby causing damage and prejudice to the aforesaid Macaria
Toledo.
Contrary to law.
[2]

The evidence for the prosecution, based on the testimony of private respondent, Macaria Toledo,
shows that sometime in March, 1992, she met accused-appellant Darvin in the latters residence at
Dimasalang, Imus, Cavite, through the introduction of their common friends, Florencio Jake Rivera
and Leonila Rivera. In said meeting, accused-appellant allegedly convinced Toledo that by giving her
P150,000.00, the latter can immediately leave for the United States without any appearance before
the U.S. embassy.
[3]
Thus, on April 13, 1992, Toledo gave Darvin the amount of P150,000.00, as
evidenced by a receipt stating that the amount of P150,000.00 was for U.S. Visa and Air fare.
[4]
After
receiving the money, Darvin assured Toledo that she can leave within one week. However, when
after a week, there was no word from Darvin, Toledo went to her residence to inquire about any
development, but could not find Darvin. Thereafter, on May 7, 1992, Toledo filed a complaint with
the Bacoor Police Station against Imelda Darvin. Upon further investigation, a certification was
issued by the Philippine Overseas Employment Administration (POEA) stating that Imelda Darvin is
neither licensed nor authorized to recruit workers for overseas employment.
[5]
Accused-appellant was
then charged for estafa and illegal recruitment by the Office of the Provincial Prosecutor of Cavite.
Accused-appellant, on the other hand, testified that she used to be connected with Dale Travel
Agency and that in 1992, or thereabouts, she was assisting individuals in securing passports, visa,
and airline tickets. She came to know Toledo through Florencio Jake Rivera, Jr. and Leonila Rivera,
alleging that Toledo sought her help to secure a passport, US visa and airline tickets to the
States. She claims that she did not promise any employment in the U.S. to Toledo. She, however,
admits receiving the amount of P150,000.00 from the latter on April 13, 1992 but contends that it was
used for necessary expenses of an intended trip to the United States of Toledo and her friend,
Florencio Rivera
[6]
as follows: P45,000.00 for plane fare for one person; P1,500.00 for passport,
documentation and other incidental expenses for each person; P20,000.00 for visa application cost
for each person; and P17,000.00 for services.
[7]
After receiving the money, she allegedly told Toledo
that the papers will be released within 45 days. She likewise testified that she was able to secure
Toledos passport on April 20, 1992 and even set up a date for an interview with the US embassy.
Accused alleged that she was not engaged in illegal recruitment but merely acted as a travel agent in
assisting individuals to secure passports and visa.
In its judgment rendered on June 17, 1993, the Bacoor, Cavite RTC found accused-appellant
guilty of the crime of simple illegal recruitment but acquitted her of the crime of estafa. The
dispositive portion of the judgment reads as follows:
WHEREFORE, premises considered, accused Imelda Darvin is hereby found guilty beyond
reasonable doubt of the crime of Simple Illegal Recruitment for having committed the prohibited
practice as defined by paragraph (b) of Article 34 and punished by paragraph (c) of Article 39 of the
Labor Code, as amended by PD 2018.
Accused Imelda Darvin is hereby ordered to suffer the prison term of Four (4) years, as minimum, to
Eight (8) years, as maximum; and to pay the fine of P25,000.00.
Regarding her civil liability, she is hereby ordered to reimburse the private complainant the sum
of P150,000.00 and attorneys fees of P10,000.00.
She is hereby acquitted of the crime of Estafa.
SO ORDERED.
[8]

On appeal, the Court of Appeals affirmed the decision of the trial court in toto, hence this petition.
Before this Court, accused-appellant assails the decision of the trial and appellate courts in
convicting her of the crime of simple illegal recruitment. She contends that based on the evidence
presented by the prosecution, her guilt was not proven beyond reasonable doubt.
We find the appeal impressed with merit.
Article 13 of the Labor Code, as amended, provides the definition of recruitment and placement
as:
x x x; b) any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring
workers, and includes referrals, contract services, promising or advertising for employment. locally or
abroad, whether for profit or not: Provided , that any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be deemed engaged in recruitment and
placement.
On the other hand, Article 38 of the Labor Code provides:
a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of
this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed
illegal and punishable under Article 39 of this Code. The Ministry of Labor and Employment or
any law enforcement officer may initiate complaints under this Article.
x x x x x x x x x.
Applied to the present case, to uphold the conviction of accused-appellant, two elements need to
be shown: (1) the person charged with the crime must have undertaken recruitment activities; and (2)
the said person does not have a license or authority to do so.
[9]

In this case, private respondent, Macaria Toledo alleged that she was offered a job in the United
States as nursing aide
[10]
by accused-appellant. In her direct examination, she testified as follows:
Atty Alejandro:
Q : How did you come to know the accused?
Witness : I was introduced by my two friends. One of whom is my best friend. That according to
them, this accused has connections and authorizations, that she can make people leave for
abroad, sir.
Court : What connections?
Witness : That she has connections with the Embassy and with people whom she can approach
regarding work abroad, your Honor.
x x x x x x x x x
Q : When you came to meet for the first time in Imus, Cavite, what transpired in that
meeting of yours?
A : When I came to her house, the accused convinced me that by means of P150,000.00,
I will be able to leave immediately without any appearance to any embassy, non-appearance,
Sir.
Q : When you mentioned non-appearance, as told to you by the accused, precisely, what
do you mean by that?
A : I was told by the accused that non-appearance, means without working personally for
my papers and through her efforts considering that she is capacitated as according to her I will
be able to leave the country, Sir.
x x x x x x x x x
Atty. Alejandro : What transpired after the accused told you all these things that you will be able
to secure all the documents without appearing to anybody or to any embassy and that you will
be able to work abroad?
Witness : She told me to get ready with my P150,000.00, that is if I want to leave immediately,
Sir.
Atty. Alejandro : When you mentioned kaagad, how many days or week?
Witness : She said that if I will able to part with my P150,000.00. I will be able to leave in just
one week time, Sir.
x x x x x x x x x.
[11]

The prosecution, as evidence, presented the certification issued by the POEA that accused-
appellant Imelda Darvin is not licensed to recruit workers abroad.
It is not disputed that accused-appellant does not have a license or authority to engage in
recruitment activities. The pivotal issue to be determined, therefore, is whether the accused-appellant
indeed engaged in recruitment activities, as defined under the Labor Code. Applying the rule laid
down in the case of People v. Goce,
[12]
to prove that accused-appellant was engaged in recruitment
activities as to commit the crime of illegal recruitment, it must be shown that the accused appellant
gave private respondent the distinct impression that she had the power or ability to send the private
respondent abroad for work such that the latter was convinced to part with her money in order to be
so employed.
In this case, we find no sufficient evidence to prove that accused-appellant offered a job to
private respondent. It is not clear that accused gave the impression that she was capable of
providing the private respondent work abroad. What is established, however, is that the private
respondent gave accused-appellant P150,000.00. The claim of the accused that the
P150,000.00 was for payment of private respondents air fare and US visa and other expenses
cannot be ignored because the receipt for the P150,000.00, which was presented by both parties
during the trial of the case, stated that it was for Air Fare and Visa to USA.
[13]
Had the amount been
for something else in addition to air fare and visa expenses, such as work placement abroad, the
receipt should have so stated.
By themselves, procuring a passport, airline tickets and foreign visa for another individual, without
more, can hardly qualify as recruitment activities. Aside from the testimony of private respondent,
there is nothing to show that accused-appellant engaged in recruitment activities. We also note that
the prosecution did not present the testimonies of witnesses who could have corroborated the charge
of illegal recruitment, such as Florencio Rivera, and Leonila Rivera, when it had the opportunity to do
so. As it stands, the claim of private respondent that accused-appellant promised her employment
abroad is uncorroborated. All these, taken collectively, cast reasonable doubt on the guilt of the
accused.
This Court can hardly rely on the bare allegations of private respondent that she was offered by
accused-appellant employment abroad, nor on mere presumptions and conjectures, to convict the
latter. No sufficient evidence was shown to sustain the conviction, as the burden of proof lies with the
prosecution to establish that accused-appellant indeed engaged in recruitment activities, thus
committing the crime of illegal recruitment.
In criminal cases, the burden is on the prosecution to prove, beyond reasonable doubt, the
essential elements of the offense with which the accused is charged; and if the proof fails to establish
any of the essential elements necessary to constitute a crime, the defendant is entitled to an
acquittal. Proof beyond reasonable doubt does not mean such a degree of proof as, excluding the
possibility of error, produces absolute certainty. Moral certainty only is required, or that degree of
proof which produces conviction in an unprejudiced mind.
[14]

At best, the evidence proffered by the prosecution only goes so far as to create a suspicion that
accused-appellant probably perpetrated the crime charged. But suspicion alone is insufficient, the
required quantum of evidence being proof beyond reasonable doubt. When the Peoples evidence fail
to indubitably prove the accuseds authorship of the crime of which he stands accused, then it is the
Courts duty, and the accuseds right, to proclaim his innocence. Acquittal, therefore, is in order.
[15]

WHEREFORE, the appeal is hereby GRANTED and the decision of the Court of Appeals in CA-
G.R. CR No. 15624 dated January 31, 1996, is REVERSED and SET ASIDE. Accused-appellant
Imelda Darvin is hereby ACQUITTED on ground of reasonable doubt. Accordingly, let the accused
be immediately released from her place of confinement unless there is reason to detain her further for
any other legal or valid cause. No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

























G.R. No. 180926 December 10, 2008

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
LOURDES VALENCIANO y DACUBA, accused-appellant.

D E C I S I O N

VELASCO, JR., J.:

This is an appeal from the Decision1 dated July 24, 2007 of the Court of Appeals (CA) in CA-G.R.
CR-H.C. No. 01390 which upheld the Decision2 of the Regional Trial Court (RTC), Branch 116 in
Pasay City in Criminal Case No. 97-9851. The RTC convicted Lourdes Valenciano of the crime of
Illegal Recruitment in Large Scale.

The Facts

In May 1996, Lourdes Valenciano, claiming to be an employee of Middle East International Manpower
Resources, Inc., went with one Susie Caraeg to the house of Agapito De Luna, and told him he could
apply for a job in Taiwan. A week later, De Luna went to Valencianos house, there to be told to
undergo a medical examination, with the assurance that if there were a job order abroad, he would be
able to leave. He was also told that the placement fee for his employment as a factory worker in
Taiwan was PhP 70,000.

After passing the medical examination, De Luna paid Valenciano at the latters residence the
following amounts: PhP 20,000 on June 21, 1996; PhP 20,000 on July 12, 1996; and PhP 30,000 on
August 21, 1996. The first and last payments were turned over by Valenciano to Teresita Imperial,
who issued the corresponding receipts, and the second payment was turned over by Valenciano to
Rodante Imperial, who also issued a receipt.

Also in May 1996, Valenciano visited the house of Allan De Villa, accompanied by Euziel N. Dela
Cuesta, Eusebio T. Candelaria, and De Luna, to recruit De Villa as a factory worker in Taiwan. De
Villa was also asked for PhP 70,000 as placement fee. He paid Valenciano the following amounts:
PhP 20,000 on May 16, 1996 at Valencianos residence; PhP 20,000 on May 30, 1996 at the Rural
Bank of Calaca, Batangas; PhP 20,000 on July 8, 1996 at Valencianos residence; and PhP 10,000
on August 14, 1996, also at her residence. Valenciano turned over the amounts to either Teresita or
Rodante. Teresita issued receipts for the May 16, July 8, and August 14, 1996 payments, while
Rodante issued a receipt for the payment made on May 30, 1996.

On May 20, 1996, Valenciano, accompanied by Rodante and Puring Caraeg, went to the house of
Dela Cuesta to recruit her for employment as a factory worker in Taiwan. Dela Cuesta paid
Valenciano PhP 20,000 as initial payment on May 20, 1996. On May 30, 1996, she paid Valenciano
another PhP 20,000. On August 12, 1996, she paid PhP 15,000, and on August 21, 1996, she paid
PhP 7,000. Valenciano turned the May 20 and 30, 1996 payments over to Rodante, who issued
receipts for these payments. The payments made on August 12 and 21, 1996 were turned over to
Teresita, who also issued receipts for them. These payments were to cover the placement fee and
other expenses for the processing of the requirements for the employment of Dela Cuesta in Taiwan.

On May 1, 1996, Valenciano, with Rodante, Teresita, and Rommel Imperial, went to Lian, Batangas
to recruit workers for employment abroad. Candelaria applied for a job as a factory worker in Taiwan
when Valenciano went to his residence in Lian. Valenciano asked him for an initial payment of PhP
20,000. On May 30, 1996, Candelaria paid Valenciano PhP 20,000 when she returned to Lian. He
then paid PhP 20,000 on June 24, 1996 and PhP 29,000 on July 17, 1996 at Valencianos residence
in Manila. These payments were to cover the placement fee and the expenses for the processing of
his passport and other papers connected with his application for employment as a factory worker in
Taiwan. The payments made on May 30 and July 17, 1996 were turned over to Rodante, who issued
a receipt for the said payments. The payment made on June 24, 1996 was turned over by Valenciano
to Teresita.

After the payments were made, Valenciano brought the prospective workers to the office of Middle
East International Manpower Resources, Inc. in Pasay City, where they were made to fill out
application forms for their employment as factory workers in Taiwan. The complainants were
introduced to Romeo Marquez, alias "Rodante Imperial," Teresita Marquez, alias "Teresita Imperial,"
and Rommel Marquez, alias "Rommel Imperial," whom Valenciano made to appear as the owners of
the employment agency. She assured the prospective workers that they could leave for Taiwan within
one month from the filing of their applications. During the period material, they have not yet found
employment as factory workers in Taiwan.

Valenciano, Rodante, Teresita, and Rommel were charged with the offense of illegal recruitment in
large scale, as defined under Article 13(b) of Presidential Decree No. (PD) 442, otherwise known as
the Labor Code of the Philippines, as amended, in relation to Art. 38(a), and penalized under Art.
39(c) of the Code, as amended by PD 1920 and PD 2018. The Information reads as follows:

That sometime in May, 1996 to August, 1996, or thereabout, in the City of Pasay, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused,
representing to have the capacity, authority or license to contract, enlist and deploy or transport
workers for overseas employment, conspiring, confederating, and mutually helping each other, did
then and there, wilfully, unlawfully and criminally recruit and promise to deploy the herein
complainants, namely, Agapito R. De Luna, Allan Ilagan De Villa, Euziel N. Dela Cuesta and Eusebio
T. Candelaria, as factory workers in Taiwan, in exchange for placement, processing and other fees
ranging from P62,000.00 to P70,000.00 or a total of P271,000.00, without first obtaining the required
license and/or authority from the Philippine Overseas Employment Administration (POEA).

CONTRARY TO LAW.3

Accused-appellant Valenciano pleaded not guilty and waived the pre-trial. The other three accused
remained at large.

The RTC found accused-appellant guilty, the dispositive portion of the decision reading as follows:

WHEREFORE, accused Lourdes Valenciano y Dacuba is found guilty beyond reasonable doubt of
the offense of illegal recruitment in large scale as charged in the aforequoted Information; and she is
sentenced to suffer the penalty of life imprisonment and to pay a fine of P100,000.00.

She is also ordered to indemnify complainants Agapito R. de Luna, Allan Ilagan de Villa, Euziel N.
dela Cuesta and Eusebio T. Candelaria the amounts of P70,000.00, P70,000.00, P62,000.00 and
P69,000.00, respectively, as reparation of the damage caused.

No other civil liability may be adjudged against the accused for lack of any factual or legal basis
therefor.

SO ORDERED.4
Accused-appellant appealed to this Court, but the case was transferred to the CA through a
Resolution dated September 6, 2004, following People v. Mateo.5

The CA, in CA-G.R. CR-H.C. No. 01390, affirmed the decision of the trial court finding accused-
appellant guilty of the offense charged.
Hence, we have this appeal.

The Issues
Accused-appellant raises the following assignment of errors: (1) the lower court gravely erred in not
acquitting accused-appellant on reasonable doubt; and (2) the lower court gravely erred in holding
that a conspiracy exists between accused-appellant and her co-accused.

The Courts Ruling

The appeal is without merit.

In her defense, accused-appellant claims that she was an ordinary employee of Middle East
International Manpower Resources, Inc., where her other co-accused were the owners and
managers. She also denies receiving payment from the complainants; that had she promised
employment in Taiwan, this promise was made in the performance of her duties as a clerk in the
company. She denies too having knowledge of the criminal intent of her co-accused, adding that she
might even be regarded as a victim in the present case, as she was in good faith when she made the
promise.

Art. 13(b) of the Labor Code reads:

"Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring or procuring workers, and includes referrals, contract services, promising or
advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or
entity which, in any manner, offers or promises for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement.

Art. 38(a) and (b) of the Labor Code reads as follows:

(a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of this
Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal and
punishable under Article 39 of this Code. x x x

(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring and/or confederating with one another in carrying out any unlawful or illegal
transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is
deemed committed in large scale if committed against three (3) or more persons individually or as a
group.

Art. 39(a) provides that the penalty of life imprisonment and a fine of PhP 100,000 shall be imposed if
illegal recruitment constitutes economic sabotage as defined above.

The claim of accused-appellant that she was a mere employee of her other co-accused does not
relieve her of liability. An employee of a company or corporation engaged in illegal recruitment may
be held liable as principal, together with his employer, if it is shown that the employee actively and
consciously participated in illegal recruitment.6 As testified to by the complainants, accused-appellant
was among those who met and transacted with them regarding the job placement offers. In some
instances, she made the effort to go to their houses to recruit them. She even gave assurances that
they would be able to find employment abroad and leave for Taiwan after the filing of their
applications. Accused-appellant was clearly engaged in recruitment activities, notwithstanding her
gratuitous protestation that her actions were merely done in the course of her employment as a clerk.

Accused-appellant cannot claim to be merely following the dictates of her employers and use good
faith as a shield against criminal liability. As held in People v. Gutierrez:

Appellant cannot escape liability by claiming that she was not aware that before working for her
employer in the recruitment agency, she should first be registered with the POEA. Illegal recruitment
in large scale is malum prohibitum, not malum in se. Good faith is not a defense.7

The claim of accused-appellant that she received no payment and that the payments were handed
directly over to her co-accused fails in the face of the testimony of the complainants that accused-
appellant was the one who received the money. In spite of the receipts having been issued by her co-
accused, the trial court found that payments were directly made to accused-appellant, and this finding
was upheld by the CA. Nothing is more entrenched than the rule that where, as here, the findings of
fact of the trial court are affirmed by the CA, these are final and conclusive upon this Court.8 And
even if it were true that no money changed hands, money is not material to a prosecution for illegal
recruitment, as the definition of "recruitment and placement" in the Labor Code includes the phrase,
"whether for profit or not." We held in People v. Jamilosa that it was "sufficient that the accused
promises or offers for a fee employment to warrant conviction for illegal recruitment."9 Accused-
appellant made representations that complainants would receive employment abroad, and this
suffices for her conviction, even if her name does not appear on the receipts issued to complainants
as evidence that payment was made.

Neither accused-appellant nor her co-accused had authority to recruit workers for overseas
employment. The Philippine Overseas Employment Administration (POEA), through its employee,
Corazon Aquino, issued on July 8, 1997 the following certification to that effect:

This is to certify that per available records of this Office, MIDDLE EAST INTERNATIONAL
MANPOWER RESOURCES INC., with office address at 2119 P. Burgos St., cor. Gil Puyat Ave.,
Pasay City represented by SAPHIA CALAMATA ASAAD is a licensed landbased agency whose
license expired on October 13, 1996. Per record, said agency has not filed any application for
renewal of license.

Per available records, the names of RODANTE IMPERIAL a.k.a. ROMEO MARQUEZ, TERESITA
IMPERIAL a.k.a. TERESITA MARQUEZ, ROMMEL MARQUEZ a.k.a. ROMMEL IMPERIAL and
LOURDES VALENCIANO do not appear on the list of employees submitted by agency.

This certification is being issued for whatever legal purpose it may serve.10

Another certification dated July 9, 1997 stated that accused-appellant in her personal capacity was
not licensed or authorized to recruit workers for overseas employment and that any recruitment
activities undertaken by her are illegal.11 Accused-appellant could thus point to no authority allowing
her to recruit complainants, as she was not an employee of Middle East International Manpower
Resources, Inc. nor was she allowed to do so in her personal capacity. Furthermore, she undertook
recruitment activities outside the premises of the office of a licensed recruitment agency, which can
only be done with the prior approval of the POEA, and neither she nor her co-accused had
permission to do so, as testified by Aquino of the POEA.12

Accused-appellant was convicted of Illegal Recruitment in Large Scale, and there could be no other
result. As held in Jamilosa:

To prove illegal recruitment in large scale, the prosecution is burdened to prove three (3) essential
elements, to wit: (1) the person charged undertook a recruitment activity under Article 13(b) or any
prohibited practice under Article 34 of the Labor Code; (2) accused did not have the license or the
authority to lawfully engage in the recruitment and placement of workers; and (3) accused committed
the same against three or more persons individually or as a group.13 x x x

The RTC found accused-appellant to have undertaken recruitment activities, and this was affirmed by
the CA. A POEA certification was submitted stating that accused-appellant was not authorized to
recruit applicants for overseas employment, and she did not contest this certification. In the present
case, there are four complainants: De Luna, De Villa, Dela Cuesta, and Candelaria. The three
essential elements for illegal recruitment in large scale are present. Thus, there can be no other
conclusion in this case but to uphold the conviction of accused-appellant and apply the penalty as
imposed by law.

WHEREFORE, premises considered, we AFFIRM the appealed CA Decision dated July 24, 2007 in
CA-G.R. CR-H.C. No. 01390, with no costs.

SO ORDERED.