Employer Recognition

Romares v NLRC
Facts: Romares was hired by PILMICO to perform maintenance work and sometimes to operate company
machinery (mason). He was hired at different periods, terminated and rehired again for the same job as per his
employment contract. One day, with out the requisite due process, he was terminated. He filed a case for illegal
dismissal.
Ruling: Petition meritorious, NLRC ruling set aside.
Ratio: In determining the status as a regular employee, reference should be made to Art. 280 of the Labor Code. The
2 kinds of regular employees are: 1. Those who are engaged to perform activities which are necessary or desirable in
the usual business or trade of the employer; and 2. Those casual employees who rendered at least 1 year of service,
whether continuous or broken, with respect to the activity in which they are employed.
Petitioner comes within the definition of number 1. Assuming arguendo that he does not, he still comes under number
2 because of having worked with PILMICO for over 1 year. The limited period specified in the employment contract is
a convenient subterfuge to prevent his regularization. This is a clear circumvention of Romares right to security of
tenure. His status as a regular employee is established by operation of law and not by what his employer dictates.

Employer Determination/Designation
Phil. Federation of Credit Cooperatives (PFCCI) v NLRC
Facts: Victoria Abril was hired by PFCCI in Sept. 1982 and held different positions until 1988. She went on leave
until she gave birth and came back to realize that her former position has been given to someone else. Nevertheless,
she accepted another position but with an accompanying contract which stated that her employment was on
probationary status for a period of 6 mos. This was followed by another contract which provided for a period of 1 year
and after it elapsed, her employment was terminated. She filed a case for illegal dismissal.
Ruling: Petition dismissed. Abril reinstated with back wages.
Ratio: Art. 281 provides that a probationary employee who was engaged to work beyond the probationary term of 6
mos or for any length of time set by the employer shall be considered as a regular employee.
Even probationary employees enjoy security of tenure and may only be terminated for just cause or upon failure to
qualify with the reasonable standards set by the employer at the time of his engagement. In this case, the contract
stated first that Abrils employment was for a fixed period, the succeeding provisions contradicted this by stating that
she shall be probationary until 6 months. Regardless of the designation petitioner may have conferred upon Abrils
employment status, she has completed the probationary period and was allowed to work thereafter, became a regular
employee who may be dismissed only for just and authorized causes.

Nature of Work
Poseidon Fishing v NLRC
Facts: Jimmy Estoquia was hired by Poseidon in 1988 as Chief Mate and after 5 years was promoted to Boat
Captain. In 1999, Poseidon, without reason, demoted him to Radio Operator. One day, he was not able to record a
call in his logbook. At 2pm the same day, he was terminated. He filed a case for illegal dismissal.
Ruling: Petition denied, dismissal illegal.
Ratio: Petitioners assert their right to terminate its contract with Estoquia per their Kasunduan which stated that he
was employed on a per trip basis.
It has been held in Brent v Zamora that the test for the validity of fixed-term employment is that if from the
circumstances it is apparent that periods have been imposed to preclude the acquisition of tenurial security by the
employee, they should be disregarded for being contrary to public policy.

The Kasunduan was intended by the employer to evade the application of Art. 280. In Integrated Contractor and
Plumbing Works v NLRC, the SC held that the test in determining regular employment is the reasonable connection
between the particular activity performed in relation to the usual trade or business of the employer, even if broken but
for a period of 1 year.
Lastly, an employee is regular due to the nature of his work and the length of service not because of the mode or
reason for hiring him.

WPP Marketing Commission Inc, et al. v Galera

Facts: Galera, an American citizen, was recruited from the USA to work in the Philippines by WPP as Managing
Director. After more than 1 year and without substantive nor procedural due process, her employment was
terminated. She filed a case for illegal dismissal with the LA.
Ruling: Dismissal illegal but status quo prevails because Galera did not follow the law regarding AEP.
Ratio: WPP contends that LA, NLRC have no jurisdiction because Galera is a corporate officer and not an
employee as defined in the LC. However, her position and appointment to such are not in the by-laws and as such,
are ultra vires acts of WPP which are null and void. Not being an officer, Galera is an employee and this was
established by the 4 fold test as can be proven by stipulations in the employment contract. Also, her contract provided
that she would be probationary for the first 3 months and when the company is pleased then she will be considered
permanent.

Regular Employees Extended period

TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION, THOMAS
and JAMES DEVELOPERS (PHIL.), INC., petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, MARIO O. LABENDIA, SR., ROBERTO LABENDIA,
NARCISO ADAN, FLORENCIO GOMEZ, ERNESTO BAGATSOLON, SALVADOR
BABON, PATERNO BISNAR, CIPRIANO BERNALES, ANGEL MABULAY, SR., LEO
SURIGAO, and ROQUE MORILLO
Private respondents were construction workers who work for Tomas Lao
Construction. They individually filed complaints for illegal dismissal against
petitioners with the National Labor Relations.
They alternately worked for petitioners Tomas Lao Corporation (TLC), Thomas and
James Developers (T&J) and LVM Construction Corporation (LVM), altogether
informally referred to as the Lao Group of Companies, the three (3) entities
comprising a business conglomerate exclusively controlled and managed by
members of the Lao family.
Sometime in 1989 Andres Lao, Managing Director of LVM and President of T&J
issued a memorandum requiring all workers and company personnel to sign
employment contract forms and clearances which were issued on 1 July 1989 but
antedated 10 January 1989. These were to be used allegedly for audit purposes
pursuant to a joint venture agreement between LVM and T&J. To ensure compliance
with the directive, the company ordered the withholding of the salary of any
employee who refused to sign. Quite notably, the contracts expressly described the
construction workers as project employees whose employments were for a definite
period

Except for Florencio Gomez all private respondents refused to sign contending that
this scheme was designed by their employer to downgrade their status from regular
employees to mere project employees. The workers stood firm in their refusal to
comply with the directives their services were terminated.
National Labor Relations Commission (NLRC) of Cebu City which found that private
respondents were regular employees who were dismissed without just cause and
denied due process.
ISSUE: whether or not the respondents were regular employees of Lao Construction
HELD: YES. All the employees of either of the three petitioners were actually
assigned to a particular project to remain in said project until the completion or
termination of that project. However, after the completion of that particular project
or when their services are no longer needed in the project or particular phase of the
project where they were assigned, they were transferred and rehired in another ongoing project. Clearly, the continuous rehiring of the same set of employees within
the framework of the Lao Group of Companies is strongly indicative that private
respondents were an integral part of a work pool from which petitioners drew its
workers for its various projects.
SC RULING: Affirmed the ruling of NLRC
Petitioners are ordered to reinstate private respondents to their former positions
without loss of seniority rights and other privileges with full back wages, inclusive of
allowances, computed from the time compensation was withheld up to the time of
actual reinstatement. In the event that reinstatement is no longer feasible,
petitioners are directed to pay private respondents separation pay equivalent to one
month salary for every year of service, a fraction of at least six (6) months being
considered one (1) year in the computation thereof, and full back wages computed
from the time compensation was withheld until the finality of this decision

Repeated Renewal of Contract

BETA ELECTRIC CORPORATION, Petitioner V. NATIONAL LABOR RELATIONS
COMMISSION, LABOR ARBITER CRESENCIO INIEGO, BETA ELECTRIC
EMPLOYEES ASSOCIATION and LUZVIMINDA PETILLA,Respondents.

The petitioner questions the decision of the National Labor Relations Commission
affirming the judgment of the labor arbiter reinstating the private respondent with
back wages.
The petitioner hired the private respondent as clerk typist effective December 15,
1986 until January 16, 1987.

On January 16, 1987, the petitioner gave her an extension up to February 15, 1987.
On February 15, 1987, it gave her another extension up to March 15, 1987.
On March 15, 1987, it gave her a further extension until April 30, 1987. On May 1,
1987, she was given until May 31, 1987. On June 1, 1987, she was given up to June
30, 1987. Her appointments were covered by corresponding written contracts. On
June 22, 1987, her services were terminated without notice or investigation. On the
same day she filed a case of illegal dismissal.
Both the labor arbiter and the NLRC ruled in her favor.
The petitioner argues mainly that the private respondent's appointment was
temporary and, hence, she may be terminated at will. That she had been hired
merely on a "temporary basis" "for purposes of meeting the seasonal or peak
demands of the business
ISSUE: whether or not the private respondent was a regular employee
HELD:YES. Under Article 281 of the Labor Code, a probationary employee is
"considered a regular employee" if he has been "allowed to work after the
probationary period
The private respondent's work, that of "typist-clerk" is far from being "specific" or
"seasonal", but rather, one, according to the Code, "where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business." And under the Code, where one performs such activities, he is a regular
employee, "the provisions of written agreement to the contrary notwithstanding."
SC RULING:
WHEREFORE, the petition is dismissed. The private respondent is ordered
reinstated with backwages equivalent to three years with no qualifications or
deductions.
Project employees
HANJIN HEAVY INDUSTRIES AND CONSTRUCTION CO. V. FELICITO IBAEZ
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision, dated 28 July 2005, rendered by the Court of Appeals,
reversing the Decision, promulgated by the National Labor Relations Commission
(NLRC) on 7 May 2004. The Court of Appeals, in its assailed Decision, declared that
respondents are regular employees who were illegally dismissed by petitioner
Hanjin Heavy Industries and Construction Company, Limited (HANJIN).
Petitioner HANJIN is a foreign company duly registered with the Securities and
Exchange Commission to engage in the construction business in the Philippines.
Petitioners Hak Kon Kim and Jhunie Adajar were employed as Project Director and
Supervisor, respectively, by HANJIN.

On 11 April 2002, respondents Felicito Ibaez, Aligwas Carolino, Elmer Gacula,

Enrique Dagotdot, Ruel Calda, and four other co-workers filed a complaint before
the NLRC, , for illegal dismissal with prayer for reinstatement and full backwages
against petitioners.
Respondents stated that their tasks were usual and necessary or desirable in the
usual business or trade of HANJIN, Hanjin dismissed respondents from employment.
Respondents claimed that at the time of their dismissal, HANJIN had several
construction projects that were still in progress, such as Metro Rail Transit (MRT) II
and MRT III, and continued to hire employees to fill the positions vacated by the
respondents.
HANJIN and respondents purportedly executed contracts of employment, in which it
was clearly stipulated that the respondents were to be hired as project employees
for a period of only three months, but that the contracts may be renewed
The Labor Arbiter found merit in the respondents' complaint and declared that they
were regular employees who had been dismissed without just and valid causes and
without due process. It ruled that HANJIN's allegation that respondents were project
employees was negated by its failure to present proof thereof. It also noted that a
termination report should be presented after the completion of every project or a
phase thereof and not just the completion of one of these projects. The Labor
Arbiter further construed the number of years that respondents rendered their
services for HANJIN
The LA rules that Hanjin is guilty of illegal dismissal, Ordering respondent to
reinstate all the complainants to positions previously occupied by them with full
backwages from the time compensation was withheld from them up to date of
actual reinstatement and Ordering respondent to pay each complainant P50,000.00
for moral damages and P30,000.00 as exemplary damages
The NLRC gave probative value to the Termination Report submitted by HANJIN to
the DOLE, receipts signed by respondents for their completion bonus upon phase
completion, and the Quitclaims executed by the respondents in favor of HANJIN. The
NLRC REVERSED the decision of the labor arbiter.
THE CA reversed the decision of the NLRC and reinstates the decision of the LA but
deleting the award of damages.
ISSUE: Whether the respondents were regular employees or project employees?
HELD: They are Regular employees.
If respondents were actually project employees, petitioners should have filed as
many Termination Reports as there were construction projects actually finished and
for which respondents were employed. Thus, a lone Termination Report filed by
petitioners only upon the termination of the respondents' final project, and after

their previous continuous employment for other projects, is not only unconvincing,
but even suspicious.
Petitioners insist that the payment to the respondents of a completion bonus
indicates that respondents were project employees. Court finds that the payments
termed as "completion bonus" are not the completion bonus paid in connection with
the termination of the project. A completion bonus is paid in connection with the
completion of the project, and is not based on a fifteen-day period. Secondly, the
amount paid to each employee as his completion bonus was uniformly equivalent to
his fifteen-day wages, without consideration of the number of years of service
rendered.
Due to petitioners' failure to adduce any evidence showing that petitioners were
project employees who had been informed of the duration and scope of their
employment, they were unable to discharge the burden of proof required to
establish that respondents' dismissal was legal and valid
SC RULING: This Court AFFIRMS the assailed Decision of the Court of Appeals,
declaring that the respondents are regular employees who have been illegally
dismissed by Hanjin Heavy Industries Construction Company, Limited, and are,
therefore, entitled to full backwages, separation pay, and litigation expenses.

Project Employment
FELIX VILLA, vs. NATIONAL LABOR RELATIONS COMMISSION
Facts: Respondent National Steel Corporation produces hot rolled products, cold
rolled products, tinplates and billets. These products are in turn transformed by
downstream industries into truss assemblies, farm implements, pipe structures,
shipbuilding and repairing materials, automotive structures and machine parts, etc.
The NSC embarked on a Five-Year Expansion Program which had two phases. One of
the major projects of the NSC was the billet steelmaking plant. To produce the
billets, the plant would initially use 100% scrap as its raw materials. In line with its
program to use 100% scrap, the NSC ventured into a shipbreaking operation.
However, due to scarcity of vessels/ships for salvaging, the higher costs of
operation and the unsuitability of raw materials, this experimental project was
stopped after four or five ships had been chopped. When the project was completely
phased out in November 1986, the laborers hired for said project 4 were terminated.
Prior to the termination of the project, the NSC had been beset by labor problems
already and one of which was the claim of employees group, the the National Steel
Corporation Employees Association-Southern Philippines Federation of Labor
(NSCEA-SPFL) filed a notice of strike. It charged the NSC with unfair labor practices
consisting of (a) wage discrimination, (b) interference with the employees' right to
self-organization, (c) nonregularization of contractual employees, (d) illegal
termination of employees, (e) nonpayment of wage/benefit differentials, and (f)
nonrecognition of NSCEA-SPFL as the sole bargaining representative of the
company. In this other labor dispute, the Labor minister already said that the
masons, carpenters, labourers, etc should not be regularized since they were on a

contractual basis. The NLRC said that they were indeed casual employees only
according to article 280 of the code This rule is, however, subject to exemptions.
Where an employment or activity despite being usually necessary or desirable has
been fixed for a specific project or undertaking the completion of which has been
"pre-determined" at the time of engagement or where the services to be performed
is seasonal in nature, the same is still considered "casual" or "temporary" in nature
After the ruling another group, National Steel Corporation Workers
Association (NSCWA), a break-away group from the NSCEA-SPFL composed of 204
workers, filed a motion for reconsideration of the NLRC Decision, 15 assailing the
same for its incompleteness and failure to resolve the case with finality. The NLRC
denied the motion but again the NSCWA also filed a motion to declare the 204
complainant-workers as regular employees. On April 14, 1994, the NLRC rendered a
Resolution ruling that the project employees are not regular employees within the
purview of Art. 280 of the Labor Code. Focusing on the shipbreaking operation
which petitioners contend was a customary activity of the NSC, the NLRC found
that: The shipbreaking operation being a developmental program had long been
phased out due to non-viability. Since the employees assigned therein are project
employees, those dismissed are therefore not entitled to reinstatement. The NLRC
noted that, considering the immensity of the operations of the NSC, it was
understandable that project employees would work alongside regular employees.
However, such a situation did not imply that "a contract worker hired under the
FYEP or peakload or as a temporary replacement of a regular employee who is on
leave of absence," would be converted into a regular employee. Another motion of
reconsideration was done but was again denied by the NLRC.
ISSUE : whether or not workers contracted as project employees may be
considered as regular employees on account of their performance of duties inherent
in the business of the employer.
HELD: NO
The court held that it is true that they performed other activities which were
necessary or desirable in the usual business of the NSC and that the duration of
their employment was for a period of more than one year, these factors did not
make them regular employees in contemplation of Article 280 of the Labor Code, as
amended. Thus, the fact that petitioners worked for NSC under different project
employment contracts for several years cannot be made a basis to consider them
as regular employees, for they remain project employees regardless of the number
of projects in which they have worked. Length of service is not the controlling
determinant of the employment tenure of a project employee.
The Court also distinguished two kinds of projects which a business or
industry may undertake. First, "a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company,
but which is distinct and separate, and identifiable as such, from the other
undertakings of the company." The example given is a construction company that
may undertake two or more "projects" at the same time in different places. Second,
a project may refer to "a particular job or undertaking that is not within the regular
business of the corporation. Such a job or undertaking must also be identifiably

separate and distinct from the ordinary or regular business operations of the
employer. The job or undertaking also begins and ends at determined or
determinable times." Classifying the NSC's "project" as of the second type
Application of Rule in Non-Construction Industries
Maraguinot v NLRC
FACTS: Alejandro Maraguinot, Jr. maintains that he was employed by respondents
as part of the filming crew. He was later promoted as an electrician. Petitioners
tasks contained of loading movie equipment in the shooting area. He sought the
assistance of their supervisor, Cesario, to facilitate their request that respondents
adjust their salary in accordance with the minimum wage law. Mrs. Cesario informed
petitioners that del Rosario would agree to increase their salary only if they signed a
blank employment contract. As petitioner refused to sign, respondents forced Enero
(the other petitioner who worked as a crew member) to go on leave. However, when
he reported to work, respondent refused to take him back. Maraguinot was dropped
from the company payroll but when he returned, he was again asked to sign a blank
employment contract, and when he still refused, respondents terminated his
services. Petitioners thus sued for illegal dismissal.
Private respondents assert that they contract persons called "producers"
also referred to as "associate producers" to "produce" or make movies for private
respondents; and contend that petitioners are project employees of the association
producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.
However, petitioners cited that their performance of activities is necessary in
the usual trade or business of respondents and their work in continuous
LA: there was illegal dismissal since the work being done were necessary and
essential to the business of the respondents, that of movie-making and also he
producer cannot be considered as an independent contractor but should be
considered only as a labor-only contractor and as such, acts as a mere agent of the
real employer, the herein respondent. Respondents even failed to name and specify
who are the producers
NLRC: They were only project employees. They reverse the LA ruling
ISSUE: Whether or not the Employees are regular employees
Held : Ye s.
With regards to VIVAs contention that it does not make movies but merely
distributes motion pictures, there is no sufficient proof to prove this contention.
In respect to respondents allegation that petitioners are project employees, it is a
settled rule that the contracting out of labor is allowed only in case of job
contracting. However, assuming that the associate producers are job contactors,
they must then be engaged in the business of making motion pictures. Associate
producers must have tools necessary to make motion pictures. However, the

associate producers in this case have none of these. The movie-making equipment
are supplied to the producers and owned by VIVA. Thus, it is clear that the associate
producer merely leases the equipment from VIVA.
In addition, the associate producers of VIVA cannot be considered laboronly contractors as they did not supply, recruit nor hire the workers. It was Cesario,
the Shooting Supervisor of VIVA, who recruited crew members. Thus, the
relationship between VIVA and its producers or associate producers seems to be
that of agency.
With regards to the issue of illegal dismissal, petitioners assert that they
were regular employees who were illegally dismissed. Petitioners in this case had
already attained the status of regular employees in view of VIVAs conduct. Thus,
petitioners are entitled to back wages.
A project employee or a member of a work pool may acquire the status of a
regular employee when:
a. there is a continuous rehiring of project employees even after a cessation of
project
b. the tasks performed by the alleged project employee are vital and necessary to
the business of
employer
The tasks of petitioners in loading movie equipment and returning it to VIVAs
warehouse and fixing the lighting system were vital, necessary and indispensable to
the usual business or trade of the employer.

Casual Employees Nature of Work

Maranaw Vs Court of Appeals
Facts: Sheryl Oabel was initially hired by Maranaw Hotels as an extra beverage
attendant at Century Park Hotel on April 24, 1995. This lasted until February 7,
1997.On September 16, 1996, Maranaw contracted with Manila Resource
Development Corporation. Subsequently, private respondent Oabel was transferred
to MANRED, with the latter deporting itself as her employer. MANRED has
intervened at all stages of these proceedings and has consistently claimed to be the
employer of private respondent Oabel. For the duration of her employment, Oabel
was the secretary of public relations, gift shop attendant, waitress and shot
attendant. On July 20, 1998, private respondent filed before the Labor Arbiter a
petition for regularization of employment against the petitioner. On August 1, 1998,
however, private respondent Oabel was dismissed from employment. 6 Respondent
converted her petition for regularization into a complaint for illegal dismissal.
LA: Dismiss complaint of Oabel since she never disputed the fact that her work with
the same were on a per function basis or on a "need basis" co-terminus with the
function she was hired fo.Considering that complainant job with the respondent

hotel was on a per function basis or on a "need basis", complainant could not even
be considered as casual employee or provisional employee.
NLRC: The NLRC reversed the ruling of the Labor Arbiter and held that: (1) MANRED
is a labor-only contractor, and (2) private respondent was illegally dismissed.
Century Park Hotel and Manila Resource Development Corporation are hereby
declared jointly and severally liable
CA: Dismissed appeal because of noncompliance of the certificate of non-forum
shopping
Issue: Whether or not Century Park Hotel is the real employer of Oabel
SC: Yes, century park is the real employer of Oabel. This is because the Hotel had
already hired Oabel before having the contract with Manred. In this regard, it has
not escaped the notice of the Court that the operations of the hotel itself do not
cease with the end of each event or function and that there is an ever present need
for individuals to perform certain tasks necessary in the petitioners business. Thus,
although the tasks themselves may vary, the need for sufficient manpower to carry
them out does not. In any event, as borne out by the findings of the NLRC, the
petitioner determines the nature of the tasks to be performed by the private
respondent, in the process exercising control.
This being so, the Court finds no difficulty in sustaining the finding of the NLRC that
MANRED is a labor-only contractor. 20 Concordantly, the real employer of private
respondent Oabel is the petitioner.
It appears further that private respondent has already rendered more than one year
of service to the petitioner, for the period 1995-1998, for which she must already be
considered a regular employee, pursuant to Article 280 of the Labor Code.

Seasonal Employees
Philippine Tobacco Flue-curing & Redrying Corporation vs. NLRC, Lubat,
Luris
FACTS:
Case involves two groups of seasonal workers, namely, the Lubat group and the
Luris group. The Lubat group is composed of petitioners (P) seasonal employees
who were not rehired for the 94 tobacco season. They claimed that Ps refusal to
allow them to report for work w/o mention of any just or authorized cause
constituted illegal dismissal.
Luris group is made up of seasonal employees who worked during the 94 season.
On Aug 3, 94, they received a notice informing them that, due to serious business
losses, P planned to close its Balintawak plant and transfer its tobacco processing
and redrying operations to Ilocus Sur. Although the closure was to be effective Sep

15, they were no longer allowed to come to work starting Aug 4. Instead, they were
awarded separation pay according to the following formula: ((total no. days
worked/total no. of working days in a year)*daily rate*15).
LA ordered P to pay Rs separation pay differential plus attorneys fees. P
appealed.
NLRC affirmed LAs decision that the closure of Ps operations were due to serious
financial losses and ordered P to pay both the Lubat and Luris groups their
separation pay equivalent to 1/2 month salary for every year of service.
ISSUE:
(1) WON P was able to prove that the closure of its operations was due to serious
financial losses;
(2) WON dismissal of Rs was valid and (3) Computation of separation pay for
seasonal employees.
HELD:
An audited financial statement is the normal method of proof of showing
businesses are suffering from serious financial losses. But this norm does not
compel the court to accept the contents of the said documents blindly and without
thinking. The financial documents presented by P failed to show that it had incurred
from its operations serious losses sufficient to justify the termination of the
employment of its workers sans separation pay. Also, it did not comply with the at
least one month notice required by law.
The Court held previously in Manila Hotel vs. CIR that seasonal workers who are
called to work from time to time and are temporarily laid off during off-season are
not separated from service in said period, but are merely considered on leave w/o
pay until re-employed. Also, seasonal employees are considered as in-regular
employment in cases involving the determination of an employer-employee
relationship and security of tenure. Therefore P is guilty of illegal dismissal in the
case of terminating in its employ those belonging to the Lubat group.
Computation used by P is unfair and inapplicable. Articles 283 and 284 of LC both
state in connection w/ separation pay that a fraction of at least 6 months shall be
considered one whole year. The amount should be 1/2 the respective average
monthly pay during the last season they worked multiplied by the number of years
they actually rendered service, provided that they worked for at least six months
during a given year.
Decision by NLRC affirmed.

Mercado v. AMA Computer College-Paranaque City Inc. (AMACC)

Doctrine: Regular seasonal employees are those called to work from time to time.
The nature of their relationship with the employes is such that during off season
they are temporarily laid off but during summer season they are reemployed, or
when their services may be needed. They are not, strictly speaking , separated from
the services but are merely considered as on leave of absence without pay until

they are reemployed. Their employment relationship is never severed but only
suspended. As such those
employees can be considered as in the regular
employment of the employer.
Facts:
The (5) petitioners were all faculty members who started teaching at AMACC
on May 25 1998.
Each of executed a Teachers contract for each of the trimester that they
were engaged to teach, with ff. stipulation:

1. POSITION. The TEACHER has agreed to accept a non-tenured

appointment to work in the college of xxx effective xxx for the
duration of the last term that the TEACHER is given a
teaching load based on the assignment duly approved by
the DEAN/SAVP-COO

For school year 2000-2001 AMACC implemented new faculty screening

guidelines, set forth in its Guidelines on the Implementation of AMACC Faculty
Plantillla. The performance standards under this new screening guidelines
were also used to determine the present faculty members entitlement to
salary increases.
The petitioners failed to pass the performance standards; hence, AMACC did
not increase their salary.
In lieu of this, petitioners filed a complaint before the NLRC arbitration
branch for underpayment of wages.
Sept. 7, 2000, the petitioners individually receive a memorandum from
AMACC, informing them that with the expiration of their contract to teach,
their contract would no longer be renewed.
Upon receipt of this notice, petitioners amended their complaint of
underpayment of wages, and included the charge of illegal dismissal against
AMACC.
Petitioners contention: Their dismissal was AMACCs retaliation for their
complaint for monetary benefits
AMACCs contention: The petitioners worked under a contracted term under a
non-tenured appointment and were still with the three year probationary
period for teachers. And their contracts were not renewed because they
failed to pass the performance Appraisal system, while the others failed to
comply with other requirements for regularization.
Labor Arbiter: Petitioners were illegally dismissed.
NLRC: Affirmed LAs decision.
CA: dismissed petitioners complaint for illegal dismissal.

Issues:
Whether or not the teachers probationary status be disregarded simply
because the contracts were fixed term?
Held: NO.
a. Rule on Employment on Probationary status.
The Labor Code is supplemented with respect to the period of probation by
special rules found in the Maniual Regulations for Private Schools. On the
matter of probationary period, sec. 92 of these regulations provides:
Subject in all instances to compliance with the Department and school
requirements, the probationary period for academic personnel shall not be
more than three consecutive years of satisfactory service for those in the
elementary and secondary levels six consecutive regular semester of
satisfactory service for those in the tertiary level and nine consecutive
trimesters of satisfactory service for those in the tertiary level
where collegiate courses are offered on a trimester basis.
On the other hand, Art. 281 of the Labor Code still fully applies:
X X X The services of an employee who has been engaged on a
probationary basis may be
terminated for a just cause when he
fails to qualify as a regular employee in accordance with
reasonable
standards made know by the employes to the employee at the time of his
engagement.
An employee who is allowed to work after a probationary
period shall be considered a regular
employee
b. Fixed term Employment and Probationary Status
The existence of the term-to-term contracts covering the petitioners
employment is not disputed, nor it is disputed that they were on probationary
status-not permanent or regular status-from the time they were employed on
May 25 1998 and until expiration of their Teaching Contracts on September 7,
2000.
Under the given facts where the school year is divided into trimester, the
school apparently utilizes its fixed term contracts as convenient arrangement
dictated by the trimestral system and not because the workplace parties
really intended to limit the period of their relationship to any fixed term and
to finish this relationship at the end of that term. The nature of the contract is
a for a fixed-term conveniently used by the school to define and regulate its
relations with its teachers during their probationary period. Although there is
nothing illegitimate in this practice, the school however cannot forget that its
system of fixed-term contract is a system that operates during the
probationary period and for this reason is subject to the terms of Art 281 of
the labor code.

We cannot but conclude that in a situation where the probationary status

overlaps with a fixed term contract no specifically used for the fixed term it
offers, art 281 should assume primacy and the fixed period character of the
contract must give way. This conclusion is immeasurably strengthened by the
petitioners
and the AMACCs hardly concealed expectation that the
employment on probation could lead to permanent status, and that the
contracts are renewable unless the petitioners fail to pass the schools
standards/

Probationary Employees Definition/Purpose

Duration: Rule/ Exception

De la Cruz, Jr. vs. NLRC, December 11, 2003
Facts:
On May 27, 1996, petitioner Florencio M. De la Cruz was hired by Shemberg
Marketing Corporation as senior sales manager with monthly salary of Php
40,500. Shemberg was engaged in manufacturing, trading, distributing and
importing various consumer products. The position of senior sales manager is
newly created with the aim of product positioning in the consumer market.
On September 14, 1996, Shemberg terminated petitioners services on the
grounds of drop in companys sales. Petitioner requested for a meeting with
Shembergs vice president but was told that the decision to terminate him is
already final.
Petitioner then filed a complaint for illegal dismissal.
Respondent then premised that the termination was due on the following
grounds:
o Poor performance evidenced by a steady and substantial drop in sales
since his assumption as senior sales manager
o Dissatisfaction of his subordinates over his management style
o Unauthorized use of company cellular phone for overseas personal call
o Unauthorized reimbursement of plane tickets for his wife and child
In short the petitioner was terminated for his failure to meet the required
company standards for loss of trust and confidence.
The labor arbiter decided in favor of the petitioner and ordered the payment
of his separation pay, back wages and unpaid wages totaling to Php 438,
750.00
The NLRC initially dismissed the appeal. It however partially granted
Shembergs appeal by modifying the LAs decision. The NLRC ordered the
payment of unpaid wages and indemnity amounting to Php 18,900 and Php
5,000 respectively.

The CA dismissed the petitioners case for lack of merit.

Hence this petition.

Issue:
In the course of the case, petitioner vigorously contends that he was not a
probationary employee since Shemberg failed to disclose to him the
reasonable standards for qualifying as a regular employee.
The court then resolved as to whether or not the petitioner, even though
holding a managerial position, is deemed to be a probationary employee.
The court decided against the petitioner.
Ratio:
The court notes that the petitioners service lasted for 4 months and that he
is well informed of the standards to be met before he could qualify as a
regular employee (as shown by his appointment papers).
In relation to Art. 281 of the LC, a probationary employee is one who for a
given period of time is under observation and evaluation to determine
whether or not he is qualified for permanent employment. During this period
the employer has the opportunity to observe the skill, competence and
attitude of the employee.
There is no dispute that the petitioner is a probationary employee and
enjoyed only a temporary employment status. That he was terminable
anytime before permanent employment is attained. As long as the
termination was made before the expiration of the six months probation
period, the employer was well within his rights to sever the employeeemployer upon valid cause, in this case, unsatisfactory performance and loss
of trust and confidence.

Extension of Contract
PHIL. FEDERATION OF CREDIT COOPERATIVES, INC, (PFCCI) and FR.
BENEDICTO JAYOMA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION (First Division) and VICTORIA APRIL, respondents, G.R. No.
121071 December 11, 1998
Facts:
September 1982, private respondent Victoria Abril was employed by
petitioner Philippine Federation of Credit Cooperatives, Inc. (PFCCI), a
corporation engaged in organizing services to credit and cooperative entities,
as Junior Auditor/Field Examiner
She also held different positions as office secretary in 1985 and as
cashier-designate for four (4) months ending in April 1988.
Subsequently she went on leave until she gave birth to a baby girl.
Upon her return sometime in November 1989, however, she discovered that a
certain Vangie Santos had been permanently appointed to her former
position.

It is noteworthy to mention that the petitioner alleged that the private

respondent abandoned her work as a secretary for 8 months.
The private respondent, nevertheless, accepted the position of Regional Field
Officer as evidenced by a contract which stipulated, among other things,
that respondent's employment status shall be probationary for a
period of six (6) months.
Said period having elapsed, respondent was allowed to work until PFCCI
presented to her another employment contract for a period of one year
commencing on January 2, 1991 until December 31, 1991, after which period,
her employment was terminated.
Private respondent then filed a complaint for illegal dismissal.
The LA dismissed her complaint for lack of merit
On appeal, however, the said decision was reversed by the NLRC, directing
for her reinstatement as Regional Field Officer or to an equivalent position is
such position no longer feasible
NLRC dismissed petitioners appeal.
Hence this petition.

Issue:
Whether or not the private respondent is a probationary employee
notwithstanding her employment contract indicating her probationary status?
The court resolved in favor of the private respondent affirming the decision of
NLRC.
Ratio:
Under the light of Art. 280, the court elucidate three kinds of employees
o (a) regular employees or those whose work is necessary or desirable to
the usual business of the employer
o (b) project employees or those whose employment has been fixed for a
specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee
or where the work or services to be performed is seasonal in nature
and the employment is for the duration of the season; and
o (c) casual employees or those who are neither regular nor project
employees.
Then the court evaluated the employment contract between the petitioner
and private respondent.
The Court notes:
o contract show that respondent's employment was for a fixed period,
the succeeding provisions thereof contradicted the same when it
provided that respondent shall be under probationary status
commencing on February 17, 1990 and ending six (6) months
thereafter.
o Petitioner manifested that respondent's employment for a period of
one year, from January until December 1991, having been fixed for a
specified period, could not have converted her employment status to
one of regular employment.

Conversely, it likewise insisted that respondent was employed to

perform work related to a project funded by the World Council of Credit
Unions (WOCCU) and hence, her status is that of a project employee.
The Court is, thus, confronted with a situation under which the terms of the
contract are so ambiguous as to preclude a precise application of the
pertinent labor laws.
The Court resolved in the light of:
o Article 1702 of the Civil Code provides that, in case of doubt,
all labor contracts shall be construed in favor of the laborer.
o The termination due end of contract is in violation of right to security of
tenure guaranteed in Section 3 of Article XIII of the Constitution and in
Articles 279 and 281 of the Labor Code.
The Court held that regardless of the designation petitioner may have
conferred upon respondent's employment status, it is, however,
uncontroverted that the latter, having completed the probationary period and
allowed to work thereafter, became a regular employee who may be
dismissed only for just or authorized causes under Articles 282, 283 and 284
of the Labor Code.
o

Absorbed Employees
CEBU STEVEDORING v. THE HONORABLE REGIONAL DIRECTOR/MINISTER OF
LABOR, ARSENIO GELIG and MARIA LUZ QUIJANO
FACTS: Arsenio Gelig and Maria Luz Quijano were former employees of the Cebu
Customs Arrastre Service (CCAS). On May 2, 1977, CCAS was abolished because its
objectives had already been attained. Consequently, all the employees of CCAS,
including Gelig and Quijano were terminated and given separation pay.
On May 1, 1977, Cebu Stevedoring Co. Inc. (CSCI) absorbed all employees of CCAS
with the same positions that they held. However, private respondents were
dismissed by petitioner allegedly for redundancy and other alleged grounds.
Regional Director ordered to reinstate Arsenio Gelig and Maria Luz Quijano to their
positions without loss of seniority rights and with full backwages .Ministry of Labor
and the Office of the President affirmed the decision.
ISSUE: Whether the absorbed employees should undergo probationary period
employment when transferred to CSCI?
HELD: No.
RATIO: Complainants were employed by the Cebu Customs Arrastre Service long
time ago whose functions were carried over when they were absorbed by
respondent. There is no need to employ them as probationary considering that they
are already well trained in their respective functions. They were not absorbed for a
definite period but instead for an indefinite period.

A probationary period of employment means that an employee is hired for training

for a certain period in order to determine whether they are qualified for the position.
The complainants in this case cannot be mistakenly considered as probationary
because they have been holding the same positions for a quite a long time at the
CCAS before they were absorbed by CSCI with the same positions.

Private School Teachers Rule

LA SALETTE OF SANTIAGO, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and CLARITA JAVIER, respondents.
G.R. No. 82918 March 11, 1991, NARVASA, CJ.
Facts: The La Salette of Santiago, Inc., the petitioner in this case is one of a group
of educational institutions known as the La Salette School System, which also
includes the La Salette of Jones High School and La Salette College.
Clarita Javier, private respondent, was employed by the La Salette School System as
follows:
1. Principal of the La Salette of Jones High School for three years.
2. From 1969 to 1972, Teacher and Subject Area Coordinator ofthe La Salette of
Santiago, Inc.
3. From 1972 to 1979, Full-time college instructor of the La Salette College.
4. From 1977 to 1978, Head of the College's Education and Liberal Arts
Department.
5. In 1980, she accepted an offer to go back to La Salette of Santiago, Inc. as
Assistant Principal. She however made known that she said "did not intend to
sever . . . (her) professional and business relations with La Salette College . . .
(expressing the hope that her stay in the High School Department) will
deepen . . . (her) insight into the field of education and therefore be of service
to the La Salette College." It was no doubt pursuant to that reservation, which
the School System accepted, that while serving as such assistant Principal,
she retained her teaching assignment as part-time instructor at La Salette
College.
6. From 1981 to 1984, she returned to the La Salette College as a full time
instructor. However, during the second semester of school year 1983-1984,
Clarita Javier taught at La Salette College only on part-time because she was
at the same time completing her doctorate degree.
7. In school year 1984-1985, she transferred back to La Salette of Santiago, Inc.
as its High School Principal. She served as Principal in school year 1985-1986,
too.

8. She was extended a written appointment for another year, 1985-1986, to

complete the two-year term. The appointment specified her term as Principal
to be from June 1, 1985 to May 31, 1986." During her two-year stint as high
School Principal, Clarita Javier continued as professor on a part-time basis at
the Graduate School and College Department of La Salette College.
On June 9, 1986, the La Salette School System instructed her to report to La Salette
College. Sister Saturnina Pascual was named to replace her as a principal. On June
11, 1986, Clarita wrote to the Board of Trustees of La Salette of Santiago, Inc.
complaining of the suddenness of her removal from her post of principal. She
received no reply. However, on the same day, she received a letter from Ms. Yco,
head of the Education Department of La Salette College, advising her of her
teaching load of 12 units in that department.
Clarita went to Fr. Constante Dannog, Acting Chairman of the Board of Trustees and
Director of La Salette of Santiago High School. According to her, he said that he was
new to the position and could not give an explanation for the Board's decision not to
continue with her services as high school principal, but that he saw no alternative
but to implement that decision of the Board.
On June 18, 1986, Clarita filed a complaint for illegal dismissal against La Salette of
Santiago, Inc.
On June 20, 1986, she received a letter from the President of La Salette College, Fr.
Romeo Gonzales, assuring her that there would be neither dimunition of
compensation nor loss of seniority in her transfer from the high school to
department of education of the college. Nonetheless Clarita refused to accept the
termination of her services as principal; she refused to report her teaching
assignments at the education department, choosing instead to litigate for
vindication of her right to retain the position of principal of the High School of La
Salette of Santiago.
The Executive Labor Arbiter rendered judgment of January 26, 1987 in Clarita
Javier's favor, reinstating her to her former position as Principal of High School
Department.
La Salette of Santiago, Inc. appealed to the National Labor Relations Commission.
The latter affirmed the Labor Arbiter's decision. The Commission subsequently
denied La Salette's motion for reconsideration, by resolution dated February 18,
1988. Hence, this petition for certiorari by the latter.
Issue:
Whether or not she had also acquired permanency, or tenure in the position of high
school principal of the educational system of La Salette of Santiago Inc.
Held:

The Supreme Court reversed the decision of the Executive Labor Arbiter and the
NLRC. It held that unlike teachers (assistant instructors, assistant, professors,
associate professors, full professors) who aspire for and expect to acquired
permanency, or security of tenure, in their employment, as faculty members,
teachers who are appointed as department heads or administrative officials (e.g.,
college or department secretaries principals, directors, assistant deans, deans) do
not normally, and should not expect to, acquire a second status of permanency, or
an additional or second security of tenure as such officer. The acquisition of such an
additional tenure is not consistent with normal practice, constitutes the exception
rather than the rule, and may take place only where categorically and explicitly
provided by law or agreement of the parties.
While Clarita Javier's work as teacher in the La Salette School System was more or
less continuous, or was evidently intended to be on a permanent basis, her
assignment in one administrative office or another i.e., as high school principal,
subject area coordinator, head of a college department, assistant principal was
not. In these administrative posts, she served in a non-permanent capacity, either
at the pleasure of the school or for a fixed term. She could not but have become
aware of the pattern in her employment relationship with her employer, of the
duality in the nature of her employment, particularly of the permanent character of
her stints in the administrative positions to which she was designated.
The evidence indicates that she felt herself free to assert her preferences in
accepting offers of administrative assignments. When she acceded to the request
that she return to La Salette of Santiago, Inc. as Assistant Principal in 1980, she
manifested that she "did not intend to sever . . . (her) professional and business
relations with La Salette College . . .(and expressed the hope that her stay in the
High School Department) will deepen . . . (her) insight into the field of education and
therefore be of service to the La Salette College." In other words, she was fully
aware that her stint as Assistant Principal of the High School was merely temporary,
and she intended to return to the La Salette College thereafter; in fact, this is why,
while serving as such Assistant Principal, she continued to teach, part-time, at La
Salette College in the first semester of school year 1980-1981.
It thus appears to the Court that the practice and policy in the La Salette School
System that administrative positions are held by faculty members only on a
temporary or non-permanent basis, either for a fixed term or at the pleasure of the
School Head or Board of Regents must be upheld, being entirely in accord with
prevailing usage rule in private schools and corporations, and with case law.

Magis Young Achievers Learning Center, Petitioner, vs Manalo, Respondent

G.R. No. 178835, February 13, 2009, NACHURA, J.
Facts:
On April 18, 2002, respondent Adelaida P. Manalo was hired as a teacher and acting
principal of petitioner Magis Young Achievers Learning Center with a monthly salary
of P15,000.00. On March 29, 2003, respondent wrote a letter of resignation

addressed to Violeta T. Cario, directress of petitioner. On March 31, 2003,

respondent received a letter of termination from petitioner stating that she can no
longer renew her contract with the petitioner. On April 4, 2003, respondent
instituted against petitioner a Complaint for illegal dismissal and non-payment of
13th month pay, with a prayer for reinstatement, award of full backwages and moral
and exemplary damages. Respondent claimed that her termination violated the
provisions of her employment contract, and that the alleged abolition of the position
of Principal was not among the grounds for termination by an employer under
Article 282 of the Labor Code. She further asserted that petitioner infringed Article
283 of the Labor Code, as the required 30-day notice to the Department of Labor
and Employment (DOLE) and to her as the employee, and the payment of her
separation pay were not complied with. She also claimed that she was terminated
from service for the alleged expiration of her employment, but that her contract did
not provide for a fixed term or period. She likewise prayed for the payment of her
13th month pay under Presidential Decree (PD) No. 851.
Petitioner, in its position paper, countered that respondent was legally terminated
because the one-year probationary period, from April 1, 2002 to March 3, 2003, had
already lapsed and she failed to meet the criteria set by the school pursuant to the
Manual of Regulation for Private Schools, adopted by the then Department of
Education, Culture and Sports (DECS), paragraph 75 of which provides that: Fulltime teachers who have rendered three years of satisfactory service shall be
considered permanent.
Labor Arbiter (LA) Renell Joseph R. dela Cruz dismissed the complaint for illegal
dismissal. The LA ratiocinated that Petitioner was not dismissed illegally but she
resigned. On appeal, NLRC reversed the Arbiters judgment. Petitioner was ordered
to reinstate respondent as a teacher, who shall be credited with one-year service of
probationary employment, and to pay her the amounts of P3,750.00 and
P325,000.00 representing her 13th month pay and backwages, respectively.
Petitioners motion for reconsideration was denied by the NLRC. Petitioner went up
to the CA via a petition for certiorari. The CA, in its Decision dated January 31,
2007, affirmed the NLRC decision and dismissed the petition. It likewise denied
petitioners motion for reconsideration. Hence, this petition.
Issue:
Whether Manalo, a probationary employee, was illegally dismissed.
Held:
The Supreme Court dismissed the petition and affirmed the decision of the Court of
Appeals.
It discussed that for academic personnel in private schools, colleges and
universities, probationary employment is governed by Section 92 of the 1992
Manual of Regulations for Private Schools (Manual), which reads:
Section 92. Probationary Period. Subject in all instances to
compliance with the Department and school requirements, the
probationary period for academic personnel shall not be more than

three (3) consecutive years of satisfactory service for those in the

elementary and secondary levels, six (6) consecutive regular
semesters of satisfactory service for those in the tertiary level, and
nine (9) consecutive trimesters of satisfactory service for those in the
tertiary level where collegiate courses are offered on a trimester basis.
The probationary period of three years for private school teachers was, in fact,
confirmed earlier in Labajo v. Alejandro: There should be no question that the
employment of the respondent, as teacher, in petitioner school on April 18, 2002 is
probationary in character, consistent with standard practice in private schools.
There should also be no doubt that respondents appointment as Acting Principal is
merely temporary, or one that is good until another appointment is made to take its
place. An acting appointment is essentially a temporary appointment, revocable
at will.
The resignation of the respondent is not valid, not only because there was no
express acceptance by the employer, but because there is a cloud of doubt as to
the voluntariness of respondents resignation. In this case, respondent actively
pursued her illegal dismissal case against petitioner, such that she cannot be said to
have voluntarily resigned from her job. There was doubt as to the period of
effectivity of employment agreement - respondents copy remained in blank while
petitioners copy provided for one-year period, April 1, 2002 to March 31, 2003.
Respondent was hired April 18, 2002. The SC ruled that where the very
employment of respondent is at stake, the doubt as to the period of employment
must be construed in her favor.
Probationary employees enjoy security of tenure during the term of their
probationary employment such that they may only be terminated for cause as
provided for by law, or if at the end of the probationary period, the employee failed
to meet the reasonable standards set by the employer at the time of the
employees engagement. Undeniably, respondent was hired as a probationary
teacher and, as such, it was incumbent upon petitioner to show by competent
evidence that she did not meet the standards set by the school. This requirement,
petitioner failed to discharge. To note, the termination of respondent was effected
by that letter stating that she was being relieved from employment because the
school authorities allegedly decided, as a cost-cutting measure, that the position of
Principal was to be abolished. Nowhere in that letter was respondent informed
that her performance as a school teacher was less than satisfactory.

Security of Tenure
Espina et. al, Petitiones vs. CA and Monde MY San Biscuit, Inc., and Monde
MY SAN Corporation, Respondents
G.R. No. 164582, March 28, 2007, CHICO-NAZARIO, J.:
Facts:

Respondent M.Y. San Biscuits, Inc. (M.Y. San) was sold to Monde M.Y. San Corporation
(Monde). The M.Y. San Workers Union-PTGWO and M.Y. San Sales Force UnionPTGWO was informed of the closure or cessation of business operations of
respondent M.Y. San and was notified of their termination, effective 31 January
2001.
On 22 January 2001, respondent M.Y. San and the Union signed a Memorandum of
Agreement (MOA) embodying the agreements set forth in the Minutes/Agreement,
dated 27 December 2000. Embodied in the MOA is an agreement that the existing
Collective Bargaining Agreement shall cease to be effective on 31 January 2001 and
shall in no way be binding upon the buyer, respondent Monde, and that respondent
M.Y. San shall provide respondent Monde a list of all its present employees who shall
be given preference in employment by the latter. All employees hired by Monde
shall upon hiring, subject to the terms and conditions of their probationary
employment, become members of the UNION.
On 31 January 2001, all the employees of respondent M.Y. San received their
separation pay and the cash equivalent of their vacation and sick leaves.
Thereafter, they signed their respective Quitclaims. On 2 February 2001,
respondent Monde commenced its operations. All the former employees of
respondent M.Y. San who were terminated upon its closure and who applied and
qualified for probationary employment, including petitioners herein, started working
for respondent Monde on a contractual basis for a period of six months.
Subsequently, petitioners, who were terminated on various dates, filed a Complaint
for illegal dismissal and underpayment, damages and attorneys fees and litigation
cost with the National Labor Relations Commission (NLRC), Regional Arbitration
Branch No. IV. Petitioners alleged that respondent My San stopped its operations on
31 January 2001, but three days after, resumed its operation with the same top
management running the business; the union officers, in exchange for being rehired, acceded to bust the union; and the sale of respondent M.Y. San to respondent
Monde was merely a ploy to circumvent the provisions of the Labor Code.
Respondent M.Y. San insisted that its employer-employee relationship with
petitioners had ceased to exist, thus, the complaint for illegal dismissal against it
could no longer prosper. It further contended that the power to hire and fire
employees is now lodged in the new business owner, respondent Monde.
On the other hand, respondent Monde alleged that petitioners had no cause of
action against it. Monde gave complainants the remainder of their probationary
period within which to prove their qualification for regular employment but
petitioners: (a) resigned from their employment with Monde; (b) refused to report
for work on 02 May 2001 and on the days following; or (c) failed to qualify for
regular employment at the expiration of the period of their probationary
employment.
Labor Arbiter Vicente R. Layawen dismissed the case for lack of merit. It ruled that
respondent M.Y. Sans Decision to shut down its operations by selling its assets is its
sole prerogative which must be respected, and that it had faithfully complied with
the requirements of the law, i.e., the notice and payment of separation pay. As to

respondent Monde, the Labor Arbiter ruled that the former satisfactorily discharged
the burden of establishing a just and authorized cause for terminating the services
of petitioners.
On appeal, NLRC affirmed the Decision of the Labor Arbiter. Aggrieved, petitioners
went to the Court of Appeals. However, the appellate court dismissed the petition
on the ground that the Special Power of Attorney (SPA) executed by petitioners did
not bear the signatures of their three other co-petitioners therein. Petitioners filed a
motion to drop the names of their three co-petitioners who failed to sign the SPA
and prayed for the reconsideration of the dismissal of their petition. The Motion was
denied by the Court of Appeals on the ground that subsequent compliance does not
warrant a reconsideration of the Order of dismissal. The appellate court further
stated that there was no prima facie error committed by the NLRC in affirming the
Decision of the Labor Arbiter. Petitioners again filed a Motion for Reconsideration but
the same was denied by the Court of Appeals. According to the appellate court, the
said motion for reconsideration was actually a second motion for reconsideration,
which is a prohibited pleading under Sec. 2, Rule 52 of the Rules of Court. Hence,
the petition to the Supreme Court.
Issues:
1. Whether the alleged sale of M.Y. San to Monde is a mere ploy to circumvent
the provisions of the Labor Code, thus violated the tenurial security.
2. Whether the petitioners were illegally terminated from work by the
Respondents.
Held: The Supreme Court affirmed the decision of the NLRC. It held that:
1. Alleged Sale of M.Y. San to Monde
The right to close the operations of an establishment or undertaking is
explicitly recognized under the Labor Code as one of the authorized causes in
terminating employment of workers, the only limitation being that the closure
must not be for the purpose of circumventing the provisions on terminations
of employment embodied in the Labor Code, under Article 283. The phrase
closure or cessation of operations of establishment or undertaking includes
a partial or total closure or cessation. And the phrase closure or cessation
not due to serious business losses or financial reverses recognizes the right
of the employer to close or cease its business operations or undertaking even
in the absence of serious business losses or financial reverses, as long as he
pays his employees their termination pay in the amount corresponding to
their length of service. As long as the companys exercise of the same is in
good faith to advance its interest and not for the purpose of
circumventing the rights of employees under the law or a valid
agreement, such exercise will be upheld.
Under Article 283 of the Labor Code, three requirements are necessary for a
valid cessation of business operations, namely:

(1)
(2)
(3)

service of a written notice to the employees and to the DOLE at

least one (1) month before the intended date thereof;
the cessation must be bona fide in character; and
payment to the employees of termination pay amounting to at
least one half (1/2) month pay for every year of service, or one (1)
month pay, whichever is higher.

The ultimate test of the validity of closure or cessation of establishment or

undertaking is that it must be bona fide in character. And the burden of
proving such falls upon the employer. Respondent M.Y. San in good faith
complied with the requirements for closure; sold and conveyed all its assets
to respondent Monde for valuable consideration; and there were no previous
labor problems.
2. Illegal Dismissal
On the part of M.Y. SAN
M.Y. San employees were adequately informed of the intended business
closure and a written notice to the Regional Director of DOLE was filed by
respondent M.Y. San, informing the DOLE that M.Y. San will be closed effective
31 January 2001. The petitioners received their termination pay which was
even beyond the amount required by law. The computation of their
separation pay was 15 days for every year of service plus an additional nine
days for every year of service, and cash equivalent of their vacation and sick
leaves. Petitioners received their separation pay and accordingly signed their
quitclaims. Therefore, there was no illegal dismissal here.
On the part of Monde
There is no dispute that petitioners were probationary employees as stated in
their individual contracts of employment with respondent Monde. Petitioners
were notified of the standards they have to meet to qualify as regular
employees of respondent Monde when the latter apprised them.
a. Some of the petitioners voluntarily resigned from respondent Monde and
signed their respective release, waiver and quitclaims.
b. Respondent Monde exercised its management prerogative in good faith
when it dismissed other petitioners [Pilar Espina, Eleanor G. Aquino,
Maricris S.J. Bandino, Julio M. Petalio, Jr., Emiliano A. Ebreo, Benjamin Paz,
and Leonora Paz] due to absence without leave (AWOL), gross and
habitual neglect of duties, and only after the personal delivery of the
notices to their respective addresses or by registered mail. There were
two notices sent to petitioners individually a notice apprising them of the
particular acts or omissions for which their dismissal was sought and a
memorandum informing them that they were terminated from work.
c. For the remaining petitioners, they failed to qualify as regular employees
in accordance with the terms and conditions of their probationary

employment nd were duly informed of their failure to qualify as regular

employees terminating their probationary employment effective at the
close of the business on 2 July 2001. Again, there were two notices sent
to petitioners individually a notice apprising them of the particular acts
or omissions for which their dismissal was sought and a memorandum
informing them that they were terminated from work.
During the probationary period, the employer is given the opportunity to
observe the skill, competence and attitude of the employee to determine
if he has the qualification to meet the reasonable standards for permanent
employment. The length of time is immaterial in determining the
correlative rights of both the employer and the employee in dealing with
each other during said period. Thus, as long as the termination was made
before the expiration of the six-month probationary period, the employer
was well within his rights to sever the employer-employee relationship. A
contrary interpretation would defeat the clear meaning of the term
probationary.
Management has the prerogative to discipline its employees and to
impose appropriate penalties on erring workers pursuant to company rules
and regulations. Respondent Monde exercised in good faith its
management prerogative as there is no dispute that petitioners had been
habitually absent, neglectful of their work, and rendered unsatisfactory
service, to the damage and prejudice of the company.
Nature of Right/Tenure
Alhambra Industries, Inc v. NLRC
The facts according to the case:
On 27 June 1987, petitioner Alhambra Industries, Inc. (ALHAMBRA for brevity), a Filipino cigar and
cigarette manufacturing and distribution company, employed private respondent Danilo C. Rupisan as
salesman on a six-month probationary basis. From 9-12 December 1989, ALHAMBRA conducted a
surprise audit of the records of Rupisan. He was then called to the Head Office on 3 January 1990 where
alleged violations of company rules purportedly committed by him were brought to his attention. On 8
January 1990, Rupisan was placed under a one-month preventive suspension for serious violations of
company policies, rules and regulations, as reflected in the results of the surprise audit.
On 22 January 1990, Rupisan protested his suspension, reiterating vehement denial of the charges against
him and exposing the threat of termination at their meeting of 3 January 1990. He alleges that as of
30 December 1989 the charges against him had become academic when he was given a clearance of all
his accountabilities.
On 6 February 1990, a day before the end of his suspension, ALHAMBRA wrote Rupisan terminating his
services effective 8 February 1990.
Rupisan Sued Alhambra for illegal dismissal, unpaid comissions, illegal suspension and damages. The
Labor Arbiter held that the termination was for a just cause but also held that Rupisan was denied due
process. Alhambra failed to furnish Rupisan a copy of the audit on which his termination was based. Both
appealed to the NLRC which held that Rupisan could have explained the charges against him had he been
given a chance and thus ordered his reinstatement. Alhambra then went to the SC on rule 65.

The SC held that the NLRC should not have skirted the issue of WON respondent was terminated for just
cause. As is the case, since he was terminated with just cause but was denied only procedural due process,
he cannot demand for reinstatement or separation pay, but he is to be awarded only damages.
In relation to topic: quoted from the case.
Termination of employment is not anymore a mere cessation or severance of contractual relationship but
an economic phenomenon affecting members of the family. This explains why under the broad principles
of social justice the dismissal of employees is adequately protected by the laws of the state. Hence, Art.
277, par. (b), of the Labor Code of the Philippines, as amended by Sec. 33, R.A. 6715, provides
Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice
to the requirement of notice under Article 283 of this Code, the employer shall furnish the
worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires in
accordance with company rules and regulations promulgated pursuant to guidelines set
by the Department of Labor and Employment. Any decision taken by the employer shall
be without prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for a valid or authorized
cause shall rest on the employer. The Secretary of Labor and Employment may suspend
the effects of the termination pending resolution of the dispute in the event of a prima
facie finding by the appropriate official of the Department of Labor and Employment
before whom such dispute is pending that the termination may cause a serious labor
dispute or is in implementation of a mass lay-off.
Management Prerogative
Pantoja v. SCA Hygiene Products
Pantoja worked as a utility man in respondents paper mill no. 4. He was given a notice of transfer to mill
no. 5, because the respondent wanted to close down mill no. 4. Petitioner rejected the transfer and was
subsequently terminated because of redundancy. Pantoja received separation pay and executed a
quitclaim, and SCA informed DOLE of its reorganization and termination of 31 employees.
Pantoja filed a case for illegal dismissal, claiming that there was no cause. He alleged that mill no. 4
remained open, with contractual employees running the mill. SCA refuted the claim of illegal dismissal
and argued that Pantoja voluntarily separated himself from service instead of accepting the reassignment
offer.
The Labor Arbiter dismissed Pantojas complaint. The NLRC reversed, giving weight to the continued
operation of mill no. 4, thereby weakening the claim of redundancy by SCA. As such, the NLRC held
that SCA was guilty of illegal dismissal and ordered Pantojas reinstatement.
The Court of appeals reversed the NLRC decision and reinstated the LAs decision.
Pantoja now appeals to the SC. The SC held that SCA exercised its management prerogative in good
faith. SCA was able to prove that in 1999, sales were low. This led to the companys decision to
streamline operations. Shutting down paper mill no. 4 was clearly a business judgement arrived at in the
face of the low demand for the production of industrial paper at the time
Also, the court said this As can be seen, retrenchment was utilized by respondent only as an available
option in case the affected employee would not want to be transferred. Respondent did not proceed
directly to retrench. This, to our mind, is an indication of good faith on respondents part as it exhausted
other possible measures other than retrenchment.
Requisite for Lawful dismissal: Concurrence of Substantive and Procedural Due Process
Coca-Cola Bottlers Philippines v. Valtentina Garcia

Coca-Cola hired Valentina Garcia as a quality control technician. Coca-Cola then adopted modernization
programs, thus substantially reducing each employees workload. One e,ployee in the department became
redundant. Under the CBA, the most junor employee could be validly terminated. However, instead of
termination, coca-cola decided to transfer Garcia from the Tacloban plant to the Ilo-ilo plant. Garcia
resisted and brought the matter to their grievance machinery. Despite this, the transfer was made final.
Garcia still refused and reported to the Tacloban plant. The Security guard refused her entry. Nearly a year
after, Garcia then filed a case for illegal dismissal.
The labor arbiter found that Garcia was illegally dismissed. The NLRC reversed, holding that the transfer
was valid, and thus, Garcia consequently abandoned her work by not heeding the transfer order.
Coca-cola then went to the CA which held that the dismissal was ineffectual since it did not comply with
due process requirements. According to the CA, Garcia only received the notice of dismissal, she was not
given the initial notice to give her an opportunity to explain herself.
The SC held that Garcias right to procedural due process was violated by coca-cola and is awarded
nominal damages.
Coca-cola argues that it sent Garcia notices to her last known address to which they received no reply.
However, only envelopes of the said notices were presented as evidence. The contents were never
presented. Because of this, the court held that Coca-cola did not satisfy the 2 notice requirement.
Normal Consequences of Illegality of Dismissal
GOLDEN ACE BUILDERS and ARNOLD U. AZUL, vs. JOSE A. TALDE
TOPIC: Normal Consequences of Illegality of Dismissal
FACTS: Jose A. Talde (respondent) was hired in 1990 as a carpenter by petitioner
Golden Ace Builders of which its co-petitioner Arnold Azul (Azul) is the ownermanager. In February 1999, Azul, alleging the unavailability of construction projects,
stopped giving work assignments to respondent, prompting the latter to file a
complaint for illegal dismissal. Labor Arbiter ruled in favor of respondent and
ordered his immediate reinstatement without loss of seniority rights and other
privileges.
Petitioners, through counsel, advised respondent to report for work in the
construction site within 10 days from receipt thereof. On May 16, 2001, the
respondent submitted a manifestation to the Labor Arbiter that actual animosities
existed between him and petitioners and there had been threats to his life and his
familys safety, hence, he opted for the payment of separation pay. Petitioners
denied the existence of any such animosity.
NLRC dismissed petitioners holding that respondent was a regular employee and
not a project employee, and that there was no valid ground for the termination of
his services. The matter was referred to the Fiscal Examiner of the NLRC who
recomputed at P562,804.69 the amount due respondent, which was approved by
the Labor Arbiter. Petitioners filed a motion for reconsideration with the NLRC,
contending that since respondent refused to report back to work, he should be
considered to have abandoned the same.
NLRC: granted petitioners motion and accordingly vacated the computation. He
may not be afforded affirmative relief; and since he refused to go back to work, he

may recover backwages only up to May 20, 2001, the day he was supposed to
return to the job site.
Respondents motion for reconsideration: The appellate court set aside the NLRC
Resolutions, holding that respondent is entitled to both backwages and separation
pay.
Full backwages and separation pay to be awarded to the petitioner shall be
computed as follows:
Full Backwages as of June 30, P562,804.
2005 =
69
Separation Pay:
P220.00 x 26 days = P5,720,00
P5,720/month x 8 years =

45,760.00
P608,564
.69

ISSUE: WON the appellate court erred in awarding the respondent separation pay.
HELD/RATIO: NO
Separation pay is granted where reinstatement is no longer advisable because of
strained relations between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected because of the
unjust dismissal. The basis for computing backwages is usually the length of the
employees service while that for separation pay is the actual period when the
employee was unlawfully prevented from working.
Article 279 of the Labor Code: An employee who is dismissed without just cause and
without due process is entitled to backwages and reinstatement or payment of
separation pay.
The normal consequences of respondents illegal dismissal, then, are
reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of
actual reinstatement. Where reinstatement is no longer viable as an
option, separation pay equivalent to one (1) month salary for every year of
service should be awarded as an alternative. The payment of separation
pay is in addition to payment of backwages.
Velasco v. National Labor Relations Commission emphasizes:
The accepted doctrine is that separation pay may avail in lieu of
reinstatement if reinstatement is no longer practical or in the best
interest of the parties. Separation pay in lieu of reinstatement may likewise be
awarded if the employee decides not to be reinstated. Under the doctrine of

strained relations, the payment of separation pay is considered an acceptable

alternative to reinstatement when the latter option is no longer desirable or viable.
DECISION: petition denied
Respondent is entitled to backwages and separation pay as his reinstatement has
been rendered impossible due to strained relations. The backwages due respondent
must be computed from the time he was unjustly dismissed until his actual
reinstatement, or from February 1999 until June 30, 2005 when his reinstatement
was rendered impossible without fault on his part.
RE: computation of separation pay - He must be considered to have been in the
service not only until 1999, when he was unjustly dismissed, but until June 30,
2005, the day he is deemed to have been actually separated (his reinstatement
having been rendered impossible) from petitioner company or for a total of 15
years.

Burden of Proof
CHAVEZ vs NLRC
TOPIC: burden of proof

employer

FACTS: Supreme Packing Inc. is in the business of manufacturing cartons and other
packaging materials for export and distribution.
Pedro Chavez is a truck driver who delivers the respondent companys products to
its customers. He wanted to avail himself the benefits of a regular employee.
Alvin Lee, companys manager, failed to do so. Then the petitioner filed a complaint
for REGULARIZATION. However, the company terminated his services. Thus, the
petitioner amended the
complaint to ILLEGAL DISMISSAL.
Respondent company denied an employer-employee relationship.
RESPONDENTS CLAIM:
They averred that the petitioner was an INDEPENDENT CONTRACTOR.
He has the control over the means and methods by which he will accomplish
the work.
They did not dismiss the petitioner but there was a violation of terms and
conditions in the contract.
o Failed to observe the minimum degree of diligence in the proper
maintenance of the truck he was using
ISSUES: WON there is an employer-employee relationship.
HELD/RATIO:

YES.
He was performing a service that was necessary and desirable to the
company.
He discharged his service for a continuous period of more than 10 years.
CA: He cannot be considered as an Independent contractor since he had no
substantial capital in the form of tools and machineries.
The routing slips that the company issued to the petitioner showed that it
exercised control over the latter.
FOUR-FOLD TEST:
1. It was the respondents who engaged the services of the petitioner without
the intervention of a 3rd party
2. He received wages. No payroll was shown to support the claim of the
respondent company.
3. The companys power to dismiss is inherent in the fact that they engaged the
services of the petitioner as a truck driver.
4. He performed his work under the respondents supervision and control.

Decision:
Respondents are guilty of illegally terminating the employment of Chavez.
Award of separation pay equivalent to 1 month for every year of service from the
time of his illegal dismissal up to the finality of the judgment in addition to his full
backwages, allowances and other benefits.

Measure of Penalty
TIPTEO vs CA
TOPIC: measure of penalty
FACTS: Petitioner Magdalena T. Salon (Salon) was a College Instructor 3 of the
Humanities and Social Science Department (HSSD) of respondent Technological
Institute of the Philippines (TIP) and a member of the Technological Institute of the
Philippines Teachers and Employees Organization (TIPTEO).
TIP received complaints from students claiming that Salon was collecting P1.50 per
page for the test paper used in the subject she was teaching at the time. She
reportedly asked her students not to write on the test papers; these test papers
were not returned to the students after the test. An allegation was made, too, that
Salon committed an anomaly in the grading of her students.
TIP President Dr. Teresita U. Quirino notified Salon of the termination of her service
as member of the faculty of HSSD effective thirty (30) days from receipt of the
notice. The dismissal was based on the investigation committee's
recommendations.

Salon sought assistance from TIPTEO which then requested the TIP that a joint
grievance investigation be conducted to take up her dismissal. The TIP denied the
request arguing that Salon's dismissal was not proper for the grievance machinery
because the ground for dismissal was a violation of the school's rules and
regulations. TIPTEO opted to file a complaint for illegal dismissal with the National
Conciliation and Mediation Board (NCMB).
DECISION of VOLUNTARY ARBITRATOR:
Rendered an award in Salons favor.
Salon was dismissed without a valid cause and without due process
The school was unable to prove by substantial evidence that Salon
committed the acts charged.
Salon was not afforded an opportunity for a real investigation. She was
denied the right to counsel and the right to a hearing.
TIP to reinstate Salon as College Instructor 3 with full backwages, but
suspended her for one month for not getting a written permission from
responsible officials of the school in charging students with the cost of
examination papers.
CA DECISION:
FIRST: The appellate court agreed with the voluntary arbitrator that nothing in the
TIP rules warrants the dismissal of a faculty member for selling examination papers
without the school's written permission. It was not convinced that the violation
committed by Salon is a grave offense referred to in Memorandum No. P-25 s. 20002001 that the TIP cited as justification for the dismissal of Salon
SECOND: It declared that Salon was dismissed for a valid cause, but awarded her
separation pay at one month's basic salary for every year of service.
PETITIONERS CLAIM:
1. Salon and her union complain about the CA's shifting appreciation of the
nature of test/examination papers, from non-instructional material to
instructional.
2. Petitioners speculate that it is incorrect to conclude that Salon is guilty of
selling photocopied test questionnaires to her students; she was not selling
but merely securing reimbursement for the personal expenses she incurred in
the preparation of the test papers.
3. Salon submits that she changed the grade of Manalo the son of a fellow
faculty member from a failing mark of 5.0 to a grade of 6.0 (dropped) for a
noble intention to lessen the impact of the students mothers guilt and to
keep the student from being punished by his father.
4. She submits that there was no malice in what she did or an intent to violate
the school's grading system; at the very least, she committed an error in
judgment that does not warrant the harsh penalty of dismissal; her dismissal
would violate the constitutional guaranty of security of tenure.
5. No genuine investigation took place. She was not afforded an opportunity to
defend herself and to be represented by counsel of her own choice or a

representative from the union. TIP failed to comply with the two-notice
requirement before she was terminated from employment
TIPS CLAIM:
1. Salon admitted that she changed the grade of her student Manalo from a
failing grade of 5.0 to a mark of 6.0, which means that the student did not
fail, but officially dropped the subject; the act constituted tampering, a
violation not only of the school's explicit rules and regulations, but also of the
Manual of Regulations for Private Schools.
2. Salon did not ask for the approval of the school on her selling and costing of
the test questionnaires, an offense classified as grave under the general
disciplinary sanctions of the school, or Memorandum No. P-3 s. 1999-2000,
the penalty for which is dismissal.
3. TIP claims that it duly notified Salon of the charges against her consisting of
(1) her having collected money from her students for test papers without the
approval of the school, and (2) the complaint of the father of the tampering
of the grade of his son (Manalo). The school asked Salon to submit her
written answer to the charges against her. She was also given the
opportunity to explain her side at the investigation hearing. Thereafter, she
was given the required notice of termination.
ISSUE:
WON Salon is validly dismissed or WON she deserve the penalty of dismissal.
HELD/RATIO: YES
The CA reviewed the material dates contained in the petition and concluded that
the petition was filed within the fifteen (15)-day period from receipt of the
voluntary arbitrator's denial of its motion for reconsideration . The CA was
therefore properly guided in considering whether the petition had been timely filed.
Memorandum No. P-66 is the latest issuance and the one that specifies the
requirements and penalizes violations. Her wrongdoing spring from her failure to
secure prior approval of her use of photocopied exam papers, and of the attendant
cost. These transgressions link up directly with the students allegations that they
had to return and could not write on the exam papers they paid for a possible
indicator of the intent to abuse.
She changed in short, falsified her own records by changing the submitted
record and the supporting documents. This is a Serious Misconduct under Article
282(a) of the Labor Code, and a just cause for termination of employment.
Salon was notified in writing about the charges against her, she was given a
reasonable opportunity to explain her side; she was also called to an investigation
where, again, she had the opportunity to explain why she should not be dismissed.
She was only dismissed after the conclusion of the investigation and after she had
been given a second notice in writing that she was being terminated as a faculty
member of the school. In short, she has nothing to complain about in terms of the
process she underwent that led to her dismissal.
DECISION:PETITION DENIED.

Resignation
ORIENTAL SHIPMANAGEMENT CORP vs CA
TOPIC: resignation
FACTS: Petitioner Oriental Shipmanagement Co., Inc. (Oriental, for brevity) is a
recruitment agency duly licensed by POEA to recruit seafarers for employment on
board vessels accredited to it. Kara Seal Shipping Co., Ltd. (Kara Seal, for brevity) is
petitioner's foreign-based principal, which owns and manages M/V Agios Andreas, a
vessel accredited to petitioner.
Respondents Felicisimo Cuesta and Wilfredo Gonzaga were hired in the latter part of
1998 as Third Engineers on board M/V Agios Andreas for a one-year contract with a
monthly salary of nine hundred US dollars (US$900). It was through Oriental that
Kara Seal hired them. Cuesta boarded M/V Agios Andreas on November 14, 1998, at
Durban, South Africa while Gonzaga boarded the ship on January 5, 1999, at the
Port of Marseille, France.
Kara Seal and M/V Agios Andreas' Shipmaster signed an Agreement with the
International Transport Workers Federation (ITF for brevity) increasing the monthly
salary of the vessel's employees. Based on said Agreement, respondents were
entitled to an increased monthly salary of one thousand nine hundred thirty-six US
dollars (US$1,936).
At the Port of Marseille, an ITF Inspector boarded M/V Agios Andreas for a routine
check. He discovered that the vessel's crew had not been paid according to the ITF
Agreement. The Shipmaster assured the ITF Inspector he would comply as soon as
the vessel reached its next port, Piombino in Italy. However, upon reaching Port
Piombino on January 19, 1999, respondents were ordered repatriated to Manila.
Before their repatriation, they were made to sign Letters of Indemnity.
RESPONDENTS CLAIM:

Kara Seal repeatedly failed to pay their wages according to the ITF
Agreement.
They did not voluntarily resign, but were forced to sign the Letters of
Indemnity under threat of possible disciplinary actions.
Lack of adequate provisions such as medicine, winter jacket, and safety gears
as well as the lack of a washing machine and air conditioning units at the
vessel's control room and crew's cabin.

PETITIONERS CLAIM:

Respondents voluntarily resigned, as evidenced by the Letters of Indemnity

bearing their signatures.
Respondents were duly paid their full wages.

Respondents failed to substantiate claims of threat and intimidation allegedly

exerted by petitioner. Oriental stresses it could not have threatened or
intimidated respondents as the latter were abroad, while petitioner is based
in Manila.

Labor Arbiters Decision: dismissed the complaint.

The validity of the resignation and repatriation of the complainants must be
acknowledged.
NLRCs Decision: affirmed the Labor Arbiter's Decision with modification.
It reduced the vacation leave pay awarded to Cuesta from US$175 to US$75.
ISSUES: WON respondents resigned voluntarily.
HELD/RATIO: NO.
Quitclaims signed by our migrant workers, such as the Letters of Indemnity in the
instant case, are viewed with strong disfavor. It is the employer's duty to prove that
such quitclaims were voluntary.
Resignation is defined as the voluntary act of an employee who finds himself in a
situation where he believes that personal reasons cannot be sacrificed in favor of
the exigency of the service, and he has no other choice but to disassociate himself
from his employment.
It would have been illogical for respondents to resign and then claim that they were
illegally terminated. Well-entrenched is the rule that resignation is inconsistent with
the filing of a complaint for illegal dismissal.
Respondents were under the impression that they would be disciplinarily dealt with
if they would not sign the waiver. We are convinced that respondents were forced to
sign the Letters of Indemnity. Thus, said Letters of Indemnity must be deemed void.
The stamp and signature of the ITF representative thereon add nothing to render
the letters of any legal effect, but instead add to the impression of pressure exerted
by ITF on the individual Filipino seamen.
There was no due process in their dismissal, and we have here a clear case of illegal
dismissal.
DECISION: petition denied!
Letters of Indemnity', dated January 23, 1999, VOID AND WITHOUT ANY LEGAL
EFFECT. Petitioners, FELICISIMO S. CUESTA and WILFREDO B. GONZAGA, are
DECLARED to have been illegally dismissed from employment and private
respondents, KARA SEAL SHIPPING CO., LTD and ORIENTAL SHIP MANAGEMENT CO.,
INC. are, therefore, ORDERED to solidarily PAY CUESTA and GONZAGA

Without Just cause Requisites

Azcor Manufacturing Inc., Filipinas Paso vs. NLRC and Capulso (99)
FACTS:
Capulso, who was working as a ceramics worker for Azcor for more than 2 years
starting from Apr 89 to Jun 91, filed with LA a complaint for constructive illegal
dismissal and illegal deduction of P50/day for the period from Apr to Sep 89.
Feb 91, upon his doctors recommendation, Capulso requested to go on leave due
to bronchial asthma, which was directly caused by his job for lack of the prescribed
occupational safety gadgets. His supervisor approved the request.
Jun 91, Capulso went back to Azcor to resume his work but was allowed to do so
by his supervisors. When it became apparent that he would not be reinstated, he
immediately filed the instant complaint for illegal dismissal.
Capulso presented several evidences, w/c among others include: (a) his affidavit
and testimony proving that he was terminated w/o just cause and w/o due process;
(b) ID card issued by Azcor, which he continued to use even after his supposed
employment by Filipinas Paso; (c) payslips issued by Azcor.
Petitioners submitted the following evidences: (a) sworn statement by Capulsos
supervisor proving that he resigned voluntarily from Azcor to transfer to Filipinas
Paso; (b) Contract of employment with Filipinas; (c) several letters of resignation.
Dec 92, LA rendered decision dismissing complaint for illegal dismissal for lack of
merit but ordered Azcor to refund Capulso the sums of P200 illegally deducted from
him.
NLRC modified LAs decision declaring the dismissal as illegal for lack of just and
valid cause and ordered Azcor to reinstate Capulso.
ISSUE:
WON Capulso was illegally dismissed.
Held:
Court held that to constitute a resignation, it must be unconditional and there
must be an intention to relinquish a portion of the term of office accompanied by an
act of relinquishment. The fact that Capulso signified his desire to resume his work
when he went back to Azcor after recuperating from his illness and actively pursuing
his case for illegal dismissal negated any intention on his part to relinquish his job at
Azcor.
Letters of resignation submitted as evidence by Petitioners are concluded to have
been prepared by a person other than Capulso for the following reasons:

(a) both letters were identically worded and pre-drafted w/ blank spaces for
the dates of effectivity;
(b) it was written in English, which Capulso was not conversant w/;
(c) Capulso disowns the signatures and denied executing them.
It was also noted that an action for reinstatement by reason of illegal dismissal
may be brought within 4 years from the time of dismissal (Art 1146 of CC) and since
the case was filed within 4 months, it is more than sufficient compliance.
Azcor and Filipinas Pasos argument, that they are two separate and distinct legal
entities and hence cant be made solidarily and jointly liable, cant be given merit as
corporate fiction cant be used as a means to perpetrate a social injustice or as a
vehicle to evade obligations or confuse the legitimate issues.
SC concluded that the totality of evidence shows a veiled attempt by petitioners
to deprive Capulso of what he earned through hard labor by taking advantage of his
low level of education and confusing him as to who really was his true employer. SC
ordered Azcor and Filipinas to pay jointly and solidarily, the heirs of Capulso (as he
already died during pendency of case due to illness).
A Prime Security Services, Inc. vs. NLRC, Moreno (2000)
FACTS:
Moreno (PR) had been working as a security guard for a year with Sugarland
Security Services, Inc., as sister company of Petitioner (P). PR is among those
absorbed by P when it took over the security contracts of its sister company. PR was
assigned to the same post at the US Embassy Bui lding along Roxas Boulevard.
P alleged that PR was hired on Jan 88 on a probationary basis and that PR was
caught sleeping on post and also figured in a quarrel w/ another security guard,
which resulted in a near shootout. Moreover, PR didnt pass the company standard
on the psychological test and hence could not be hired as a regular employee.
PR filed a complaint w/ DOLE-NCR for illegal dismissal, illegal deduction and
underpayment of wages.
LA ordered reinstatement of the complainant and payment of backwages and to
refund him of any deductions taken from him.
NLRC affirmed LAs decision except the removal of the refund for illegal
deductions.
ISSUE:
WON PR was validly dismissed.
HELD:
PRs allegation that Sugarland is A Primes sister company and that the latter
absorbed the security contacts of the former was neither denied nor controverted
by P before the LA. Under Sec 1, Rule 9 of Rules of Court, defenses and objections

not pleaded either in a motion to dismiss or in the answer are deemed waived or
stated differently in Sec 3 Rule I of Rules of NLRC, material averments in the
complaint are deemed admitted when not specifically denied.
The Court cannot sanction the practice of some companies which, shortly after a
worker has become a regular employee, effects the transfer of the same employee
to another entity whose owners are the same, or identical, in order to deprive
subject employee of the benefits and protection he is entitled under law.
PRs resignation letter which appears to have been written and submitted at the
instance of P also cant be given weight as its form is of the companys and
wordings are more of a waiver and quitclaim. Moreover, it was acknowledged before
a notary public.
PR started working on Jan 30 88 and completed his probational period on Jul 27,
88. Thus, at the time of his dismissal, PR was already a regular employee with a
security of tenure and could only be dismissed for a just and authorized cause.
Also, PRs violations of sleeping on post and quarreling with a co-worker are all
first offenses and not proper grounds for dismissal. Results of the psychological test
were also found to have been produced in the same day of PRs dismissal and thus
cant be given weight.
Petition dismissed. NLRCs ruling affirmed.

Forced Resignation
JSS Indochina Corporation vs. Ferrer, et al. (2005)
FACTS:
Ferrer et al. (R) alleged that JSS Indochina Corp (P) hired them as construction
workers for its Taiwan-based principal/employer Formosa Plastics Corporation with a
monthly salary of NT 15,360, covering a period of one year.
May 1, 97, R were deployed to Taiwan but upon their arrival, only 20 workers,
excluding R, were employed as construction workers at Formosa. They sought
assistance from Manila Economic and Cultural Office (MECO) officials who directed
them to sign separate affidavits that they were assigned , not as construction
workers for
Formosa but as cable tray / pipe tract workers at Shin Kwan Enterprise Co., Ltd. May
17, 97, they were repatriated back to PH.
R filed a complaint with LA for illegal dismissal, payment of salaries, refund of
placement fees, damages and attys fees.
LA rendered a decision, finding that R were forced to resign, ordering P and its
principal. Formosa to pay jointly and severally R an amount representing their 3
months salary and to reimburse their placement fees.

 NLRC affirmed LAs decision. Ps motion for reconsideration (MFR) denied by NLRC.
CA dismissed decision holding that P was not able to prove that private
respondents dismissal was for just, valid or authorized causes. It was not able to
prove before LA or NLRC its allegation that Shin Kwan is a subcontractor of
Formosa. Under the 5th paragraph of sec 10, RA 8042 Migrant Workers and
Overseas Filipinos
Act of 1995 , terminat ion of overseas employment w/o just, valid or authorized
cause as defined by law or contract, the worker shall be entitled to the full
reimbursement of his placement fees w/ interest at 12% per annum, plus his
salaries for the unexpired portion of his employment contract or for 3 months for
every year of the unexpired term, whichever is less.
MFR denied by CA.
ISSUE: WON R were illegally dismissed from employment by P.
HELD:
There is no question that P violated its contract w/ R. P didnt assign them as
construction workers for Formosa. Instead, they were directed to work as cable
tray / pipe tract workers at Shin Kwan.
LA found that Rs decision to resign from their employment were by force of
circumstances not attributable to their own fault and it was not their fault that they
were left out from among those workers who were considered for employment by
the foreign employer.
Rs decision to go home to the PH was justified in view of the evident breach of
contract by P as it clearly appeared that upon their arrival at the job site, there was
no employer on hand.
Petition denied. CAs decision affirmed.
Basis Employer Right

Serious Misconduct/ Willful Disobedience (Insubordination)

Gross and Habitual Neglect of Duties

LBC Express and Nino vs Mateo
Facts:
Respondent James Mateo, designated as a customer associate, was a regular
employee of petitioner LBC Express Metro Manila, Inc. His job was to deliver and

pick-up packages to and from LBC and its customers. For this purpose, Mateo was
assigned the use of a Kawasaki motorcycle.
On April 30, 2001, Mateo arrived at LBCs Escolta office, along Burke Street,
to drop off packages coming from various LBC airposts. He parked his motorcycle
directly in front of the LBC office, switched off the engine and took the key with him.
However, he did not lock the steering wheel because he was primarily concerned
with the packages, including a huge sum of money that needed to be immediately
secured inside the LBC office. He returned promptly within three to five minutes but
the motorcycle was gone. He immediately reported the loss to his superiors and to
the nearest police station.
LBC directed Mateo to explain his side and for formal investigation. As
directed, Mateo appeared and presented his side. After investigation, he received a
notice of termination from LBC. He was barred from reporting for work.
Issue: w/n Mateo is illegally dismissed?
Decision:
The labor arbiter found Mateos dismissal to be lawful on the ground that he
was grossly negligent. NLRC affirmed the labor arbiters decision. CA ruled that
Mateo was illegally dismissed. According to CA, due process was not observed in
terminating Mateos employment.
SC ruled in favor of LBC saying that Mateo was grossly negligent in the
performance of his duties and that habituality may be dispensed with, especially if
the grossly negligent act resulted in substantial damage to the company. Although
Mateos infraction was not habitual, we must take into account the substantial
amount lost. In this case, LBC lost a motorcycle with a book value of P46,000 which
by any means could not be considered a trivial amount. Further, it only proved that
he did not exercise even the slightest degree of care during that very short time.
Mateo deliberately did not heed the employers very important precautionary
measure to ensure the safety of company property.
National Bookstore vs CA
Facts:
Petitioner National Bookstore employed private respondents Marietta M.
Ymasa as Cash Custodian and Edna L. Gabriel as Head Cashier. Private respondents
reported for work at their place of assignment, i.e., the SM North Edsa Branch to
count the previous days sales proceeds as a matter of routine. The counting was
done in the presence of a watcher. The counted money was placed inside two (2)
separate plastic bags which were sealed with scotch tapes. Private respondent
Ymasa put the plastic bags inside her cabinet which she accordingly locked.
Since both Branch Manager and Assistant Branch Manager were not in their
offices, it was only at around closing time at 8:30 in the evening that the two (2)

plastic bags stored in private respondent Ymasas cabinet were taken out for
safekeeping in the Branch vault.
The following day, private respondents retrieved from the Assistant Manager
the money already counted. The amount was found short of P42,758.70. All efforts
made to locate the missing amount failed. The Management-through Personnel
Manager asked private respondents to explain in writing not later than end of store
hours why they should not be dismissed for the loss of company funds. Private
respondents explained in writing what transpired but still notified them of the
termination of their services for gross neglect of duty and loss of confidence.
Issue: w/n private respondents were legally dismissed on the basis of gross neglect
of duty and
loss of confidence
Decision:
Labor Arbiter ruled in favor of private respondents stating that their dismissal
was not founded on valid and justifiable grounds. The NLRC affirmed the decision of
the Labor Arbiter. The Court of Appeals affirmed the resolutions of the NLRC based
on the doctrine that findings of fact of the NLRC affirming those of the Labor Arbiter
are generally accorded respect and even finality when supported by substantial
evidence, or that amount of evidence which a reasonable mind might accept as
adequate to justify a conclusion.
The Supreme Court affirmed the decision of the Court of Appeals. The
petitioner must show with convincing evidence that the dismissal was based on any
of the just or authorized causes provided by law for termination of employment by
an employer. In order to constitute a just cause for the employees dismissal, the
neglect of duties must not only be gross but also habitual. The single or isolated act
of negligence does not constitute a just cause for the dismissal of the employee. On
the other hand, loss of trust and confidence to be a valid ground for dismissal must
be based on a willful breach of trust and founded on clearly established facts. A
breach is willful if it is done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently. Private respondents were not proven responsible for the
lost of funds.

Loss of Trust and Confidence

M + W Zander Phil vs Enriquez
Facts: Respondent Enriquez was hired on probationary basis as the Administration
Manager and Executive Assistant to the General Manager of petitioner M + W
Zander, Inc. She was confirmed as a permanent employee on December 4, 2001. In
January 2002, M + W Zander relieved its General Manager, Mr. Eric Van Stiegeren,
and in his place appointed Mr. Wiltschek. The appointment of Wiltschek as the

Acting General Manager was announced in a meeting. On the same day, a Letter of
Appeal was signed by 29 employees of M + W Zander opposing the appointment of
Wiltschek. A day after the Letter of Appeal was released, a number of employees
did not report to work.
Petitioners allege that respondent actively solicited signatures for a letter
opposing the appointment of Wiltschek. The petitioners claimed that Enriquez used
her influence and moral ascendancy to coerce several employees into signing the
letter of appeal. Upon discovering respondent Enriquezs participation in drafting
and in circulating the Letter of Appeal, M + W Zander sent a Notice to respondent
Enriquez requiring her to explain within 48 hours from receipt of the notice why no
disciplinary action should be taken against her for willful breach of trust and using
her authority and/or influence over her subordinates to stage a no work day.
Unsatisfied with her explanation, she was dismissed.
Issue: w/n Enriques was illegally dismissed?
Decision:
Labor Arbiter held that respondent Enriquez was illegally dismissed. The
NLRC reversed the decision of the Labor Arbiter and found that respondent was not
illegally dismissed because she committed serious misconduct which destroyed the
trust and confidence of the management in her. The Court of Appeals reversed the
decision of the NLRC and reinstated the decision of the Labor Arbiter, declaring that
the dismissal of respondent was illegal.
SC affirmed the decision of the Court of Appeals and find that respondent was
illegally dismissed. The sole ground for respondents termination by petitioners is
"willful breach of trust and confidence in using her authority and/or influence as
Administrative Manager over her subordinate to stage a no work day. Article 282
(c) of the Labor Code allows an employer to terminate the services of an employee
for loss of trust and confidence. Loss of confidence should not be simulated. It must
be genuine, not a mere afterthought to justify earlier action taken in bad faith. Loss
of trust and confidence stems from a breach of trust founded on a dishonest,
deceitful or fraudulent act. In the case at bar, respondent did not commit any act
which was dishonest or deceitful. She did not use her authority as the
Administration Manager to misappropriate company property nor did she abuse the
trust reposed in her by petitioners with respect to her responsibility to implement
company rules. The most that can be attributed to respondent is that she influenced
a single subordinate, without exerting any force or making any threats, not to report
to work. This does not constitute dishonest or deceitful conduct which would justify
the conclusion of loss of trust and confidence.

Benjamin and Consolacion v. Amellar Corp.

Facts: Anabel Benjamin (Anabel) who was the Project Data Controller of its Content
Build Up (CBU) Department. CBU Department of respondent collates and cleanses
all the paper data gathered from the LGU-client which are then encoded and fed

into the designed operating system. Renato Consolacion (Consolacion) was a

supervising data controller in respondents Imus project, directly reported to Anabel.
Respondents client had complaints that their real property tax administration
database was not 100% complete, contrary to the report of respondents
supervising data controller. Respondent conducted hearings and found out that
Anabel falsely reported the completion of work in the Imus project; that she failed to
follow ordinary procedures and instructions, to monitor and correct operational
errors, and to comply with the lawful orders of her superiors. As for consolacion,
respondent asserts that he too misrepresented that the Imus project had been
completed; that he failed to follow procedures and instructions, to provide written
instructions for the separation of currently transacted records to the officials of
Imus, to advise or belatedly advise the data controllers of the separation of the
records, and to send the template letter or follow the time frame for sending such
letter. Then, respondent dismiss the two petitioners for willful breach of trust
reposed in them. Petitioners filed a case of illegal dismissal to the Labor Arbiter
which favored them. The NLRC affirmed the Labor Arbiters decision.
Issue: Whether or not they are illegally dismissed on willful breach of trust.
Held: Yes. To terminate the services of an employee for loss of trust and
confidence, two requisites must concur:
(1) the employee concerned must be holding a position of trust and confidence and
(2) there must be an act that would justify the loss of trust and confidence.
Anabel occupied a position of trust and confidence, she being the officer-in-charge
of the CBU Department. Consolacion occupied a position Imbued with trust and
confidence, he being a supervision data controller. It was his primary duty to
monitor and report the performance of the data controllers in relation to the scope
of work contracted out to respondent.
Respondent failed to justify its loss of trust and confidence on Consolacion even as
it imputed to him, via Notice of Formal Investigation of April 14, 2003, noncompliance with (a) established non-written procedures and standards; (b)
established written procedures and standards, and (c) verbal orders and/or
instructions. These alleged acts of non-compliance are too general and can
encompass just about any malfeasance. Nowhere in the Notice was there a detailed
narration of the facts and circumstances that would serve as bases to
terminate Consolacion, thus leaving to surmise what those procedures, standards
and orders were.

Analogous Causes
Lim v. NLRC
Facts: Sixta C. Lim held the position of Staff Accountant for Pepsi Bottling Co.
(Phils.) Inc. as such she assisted and worked closely with the Plant Accountant to
carry out the accounting departments tasks necessary to ensure an accurate,
timely, and coordinated compilation of data for each accounting transaction. As per

company policy, PEPSI regularly evaluated its employees performance. Petitioner

received an overall rating of BT or Below Target in the management performance
appraisal. This rating was heavily influenced by her performance in production
reporting, which accounted for foryt percent (40%) of the overall rating. Petitioner
asked for reevaluation of her performance appraisal and PEPSI conducted another
appraisal. Petitioner received an overall rating of BT. PEPSI asked the petitioner to
voluntarily resign and offered to pay her termination benefits, but she refused. Later
on she received a Termination Letter from PEPSI terminating her services for gross
inefficiency. She filed a case with the Labor Arbiter a complaint for dismissal
without due process against PEPSI. Labor Arbiter rendered judgment in favor of the
petitioner. NLRC reversed the decision of the Labor Arbiter.
Issue: Whether or not gross inefficiency was among the just causes prescribed by
law for dismissal.
Held: No. Gross inefficiency does not falls within the purview of other causes
analogous to the foregoing, and constitutes, therefore, just cause to terminate an
employee under Article 282 of the Labor Code. One is analogous to another if it is
susceptible of comparison with the latter either in general or in some specific detail;
or has a close relationship with the latter. Gross inefficiency is closely related to
gross neglect, for both involve specific acts of omission on the part of the employee
resulting in damage to the employer or to his business.
The evaluation report merely indicated her areas for improvement. Moreover in
PEPSIs brochure a BT rating does not merit dismissal from the service; as a matter
of fact, the lower rating-Significantly Below Targer (SB)-is not even a ground for
termination of employment, but may only justify putting the employee on probation
and that improvement is a necessity.

St. Lukes Medical Center v. Fadrigo

Facts:
Jennifer Lynne C. Fadrigo was the Customer Affairs Department
Manager of petitioner SLMC. As such, respondent supervised the Wellness Program
Office (WPO), which administers SLMCs check up packages. Dr. Gorospe called up
the WPO to refer a patient for immediate check up. The call was answered by
Michelle Rillo (Rillo), a trainee at the front desk, who transferred the call to Hazel
Tingzon (Tingzon), a casual employee. Tingzon explained to Dr. Gorospe the
mechanics of undergoing a check up, which could not be administered immediately
as Dr. Gorospe wanted. The same day respondent, who was then at home enjoying
her rest day, received a phone call from SLMCs Associate Director for Corporate
Affairs, Lagniton, informing her what had transpired at the WPO on that day; and
directing respondent to instruct Tingzon and Rillo not to report for duty the following
day. Respondent immediately called the WPO, however, she was not able to talk to
Tingzon and Rillo because the two already went home. She tried to reach them
through their cellular phones to inform them Lagnitons instruction not to report for
work, but respondents effort proved futile.

The following day, Lagniton called the WPO and found out that Tingzon and Rillo
were in the office. She talked to the two and instructed them to go home. Thus,
when respondent arrived in the office, Tingzon and Rillo had already gone home.
Then, respondent received a memorandum, from Lagniton requiring her to show
cause why no disciplinary action should be taken against her for insubordination,
gross inefficiency and incompetence due to the incident. The memorandum stated
that respondent allowed a trainee and a casual employee to man the WPO during
official business hours. Likewise, respondent allegedly failed to comply with the
management order to immediately pull out Rillo ang Tingzon. Respondent was
terminated from her employment; hence she filed with the Labor Arbiter for illegal
dismissal. Labor Arbiter rendered a decision finding respondents dismissal illegal,
but the NLRC reversed the Labor Arbiters decision. The Court of Appeals sustained
the Arbiters finding.
Issue:
Whether or not respondent was illegally dismissal on the ground of
gross inefficiency, incompetence and insurbordination.
Held:
No. Gross inefficiency is closely related to gross neglect, for both
involve specific acts of omission on the part of the employee resulting in damage to
the employer or to his business. As a just cause for an employees dismissal,
inefficiency or neglect of duty must not only be gross but also habitual. Thus, a
single or isolated act of negligence does not constitute a just cause for the dismissal
of the employee.
Willful disobedience or insubordination necessitates the concurrence of at least two
requisites:
(1) the employees assailed conduct must have been willful, that is,
characterized by a wrongful and perverse attitude; and
(2) the order violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which he had been engaged to
discharged.
The facts of this cased do not show the presence of the first requisite.

Abandonment
Pentagon Steel Corporation v. CA. et al.,
FACTS
Perfecto Balogo was an employee for 23 years of Pentagon Steel Corporation.
Without prior notice, he took a leave from work. Allegedly, Pentagon sent him two
written notices asking him to explain his absence, but no response was heard from
Balogo. Thus, Pentagon considered him on AWOL.
After a month however, Balogo filed before the Labor Arbiter a complaint for
underpayment and nonpayment of salaries and wages, overtime pay, holiday pay,

service incentive leave, 13th month pay,separation pay and ECOLA. According to
him he failed to report for work because he contracted flu. After ten days of
absence, he went back to work bringing with him a medical certificate, but
Pentagon refused to take him back.
During the conciliation proceedings, Pentagon insisted that it was Balogo who
refused to work and demanded for separation pay to which Pentagon did not agree.
Thereafter, Balogo amended his complaint to include his claim for illegal dismissal.
The Labor Arbiter dismissed the illegal dismissal charge but directed the payment of
SIL and 13th month pay. On appeal, the NLRC ruled that Balogo was illegally
dismissed. This ruling was affirmed by the CA which held that there was
constructive dismissal when Pentagon refused to accept Balogo back to work. The
CA however disagreed with the strained relations findings of the NLRC and
ordered the reinstatement of Balogo.
In its Petition for Review, Pentagon imputes grave abuse of discretion on the CA for
basing its decision on the proceedings that transpired when the parties were
negotiating for a compromise settlement during the conciliation proceedings and in
ruling that there was illegal dismissal and that Balogo should be reinstated.
ISSUE
Whether or not Perfecto Balogo abandoned his job or was he illegally dismissed
HELD: Perfecto Balago was illegally dismissed.
The Supreme Court did not find merit in Pentagons Petition. While the High Court
agreed with Pentagon that statements or agreements made during conciliation
proceedings are privileged and cannot be used as evidence, it still finds enough
evidence to rule that Balogo was illegally dismissed and that he must be reinstated.
Art 233 of the Labor Code states that information and statements made at
conciliation proceedings shall be treated as privileged communication and shall not
be used as evidence in the Commission. Conciliators and similar officials shall not
testify in any court or body regarding any matters taken up at conciliation
proceedings conducted by them.
According to the court, the reasons behind the exclusion are two-fold: First, since
the law favors the settlement of controversies out of court, a person is entitled to
buy his or her peace without danger of being prejudiced in case his or her efforts
fail; hence, any communication made toward that end will be regarded as
privileged. Indeed, if every offer to buy peace could be used as evidence against a
person who presents it, many settlements would be prevented and unnecessary
litigation would result, since no prudent person would dare offer or entertain a
compromise if his or her compromise position could be exploited as a confession of
weakness.

Second, offers for compromise are irrelevant because they are not intended as
admissions by the parties making them. A true offer of compromise does not, in
legal contemplation, involve an admission on the part of a defendant that he or she
is legally liable, or on the part of a plaintiff, that his or her claim is groundless or
even doubtful, since it is made with a view to avoid controversy and save the
expense of litigation. It is the distinguishing mark of an offer of compromise that it is
made tentatively, hypothetically, and in contemplation of mutual concessions.
Moreover, in ruling that evidence supports the claim for illegal dismissal, the
Supreme Court disregarded the theory of abandonment advanced by Pentagon. Said
the court, abandonment is a matter of opinion that cannot be lightly presumed from
equivocal acts. Two elements must concur to constitute abandonment: failure to
report for work without valid reason, and clear intent, manifested through overt
acts, to sever the employer-employee relationship.
In this case, the Supreme Court ruled that Balogos reason for absence, which is his
illness, is a justifiable reason. Also, there was no clear intention on his part to sever
his employment with Pentagon considering that he showed willingness to return to
work and his complaint before the Labor arbiter for illegal dismissal clearly negates
any intention to abandon work. Thus, Pentagons refusal to take Balogo back to
work constitutes constructive dismissal.
Finally, the Supreme Court affirmed the CA and ruled that Balogo is entitled to
reinstatement and not separation pay. The circumstances of the case do not allow
an exception to the rule that reinstatement is the consequence of illegal dismissal.
The court did not find enough evidentiary support that strained relations existed
between the parties as the conflict, if any, occasioned by the respondents filing of
an illegal dismissal case, does not merit the severance of the employer-employee
relationship between the parties.
The court further explained that payment of separation pay in lieu of respondents
reinstatement will work injustice to the latter when considered with his long and
devoted years in the petitioners service. Separation pay may take in to account the
respondents past years of service, but will deprive the respondent of compensation
for the future productive years that his security of tenure protects.

Courtesy Resignation
BATONGBACAL V ASSOCIATED BANK
FACTS
Bienvenido Batongbacal, a lawyer, worked for Citizens Bank and Trust
Company from 1961. On 1975, Citizens Bank and Trust Company merged with the
Associated Banking Corporation. The merged corporate entity later became known
as Associated Bank. In the new bank, petitioner resumed his position as assistant
vice-president.

On March 1982, he learned that his salary was very much below compared to
the other Asst. VPs of the bank. He wrote to the Board of Directors asking that he be
paid the proper amount. Apparently, said letter fell on deaf ears.
On March 15, 1982, the board approved the following resolution:
BE IT RESOLVED that the new management be given the necessary flexibility in
streamlining the operations of the bank and for the purpose it is hereby resolved
that the Bank officers at the Head Office and the Branches with corporate rank of
Manager and higher be required, as they hereby are required to submit
IMMEDIATELY to the President their courtesy resignations.
Petitioner did not submit his courtesy resignation. On May 3, 1983, he
received a letter from the Board saying that his resignation has been accepted.
Petitioner wrote to the executive VP asking for reconsideration. He stated therein
that he thought the call for the submission of courtesy resignations was only for
erring "loathsome" officers and not those like him who had served the bank
honestly and sincerely for sixteen years.
Starting May 4, 1983, he was not paid. He filed for illegal dismissal and
damages with the NLRC. The NLRC ruled in favor of the petitioner. On MFR, the NLRC
reversed.
ISSUE
Whether or not the bank may legally dismiss for refusal to tender the courtesy
resignation which the bank required in line with its reorganization plan
HELD
NO
While it may be said that the private respondent's call for courtesy
resignations was prompted by its determination to survive, we cannot lend legality
to the manner by which it pursued its goal by directing its employees to submit
letters of courtesy resignation, the bank in effect forced upon its employees an act
which they themselves should voluntarily do.
It should be emphasized that resignation per se means voluntary
relinquishment of a position or office. 11 Adding the word "courtesy" did not change
the essence of resignation. That courtesy resignations were utilized in government
reorganization did not give private respondent the right to use it as well in its own
reorganization and rehabilitation plan. There is no guarantee that all employers will
not use it to rid themselves arbitrarily of employees they do not like, in the guise of
"streamlining" its organization. On the other hand, employees would be unduly
exposed to outright termination of employment which is anathema to the
constitutional mandate of security of tenure
The record fails to show any valid reasons for terminating the employment of
petitioner. There are no proofs of malfeasance or misfeasance committed by
petitioner which jeopardized private respondent's interest.
However, we agree with the Solicitor General and the NLRC that petitioner is
not entitled to an award of the difference between his actual salary and that

received by the assistant vice-president who had been given the salary next higher
to his.
There is a semblance of discrimination in this aspect of the bank's
organizational set-up but we are not prepared to preempt the employer's
prerogative to grant salary increases to its employees. In this connection, we may
point out that private respondent's claim that it needed to trim down its employees
as a self-preservation measure is belied by the amount of salaries it was giving its
other assistant vice-presidents
Disposition Remanded to the NLRC to determine whether or not the petitioner is a
managerial employee.

Change of Ownership
Manlimos et. al vs. NLRC
FACT
On September 1, 1991, Super Mahogany Plywood Corporation was under a
new owner/management group headed by Alfredo Roxas which acquired complete
ownership of the corporation.
Employees of the corporation were advised of such change of ownership;
however, they continued to work for the new owner and were considered
terminated, with their conformity, only as of December 1991 when they received
their separation pay, 13th month pay, and all other benefits due them computed as
of the said month and when they all signed a Release and Waiver.
On December 27, 1991, the new owner caused the publication of a notice for the
hiring of workers, indicating therein who of the separated employees could be
accepted on probationary basis. The petitioners then filed their applications for
employment. Except for Rosario Cuarto, they were hired on probationary basis for
six months as patchers or tapers, but were compensated on piece-rate or task
basis.
However, for their alleged absence without leave, Perla Cumpay and Virginia Etic
were considered, as of May 4, 1992, to have abandoned their work. The rest were
dismissed on June 13, 1992 because they allegedly committed acts prejudicial to
the interest of the new management. Upon their appeal, the effectivity of such
termination was deferred to June 20, 1992.
There were two groups who filed for illegal termination and non-payment of benefits
against the new owners of Super Mahogany Plywood Corporation at the SubRegional Arbitration Branch X of Butuan City. The group of petitioners Ronald Booc,
Jaime Timbal, German Gista, Federico Amper, Francisco Evale, Renante Yacapin and
the group consists of petitioners Ronald Manlimos, Froilan Pagalan, Merlita Duhay
Lungsod, Elizabeth Andagan, Doris Serdan, Leonora Bibiano, Perla Cumpay, Virginia

Etic, Remegia Noel, and Rosario Cuarto. Both complaints were later amended and
consolidated.
The petitioners maintained that they remained regular employees regardless of the
change of management in September 1991 and their execution of the Release and
Waiver. They argue that being a corporation, the private respondent's juridical
personality was unaffected even if ownership of its shares of stock changed hands.
On the other hand, the private respondent contended that the petitioners were
deemed legally terminated from their previous employment as evidenced by the
execution of the Release and Waiver and the filing of their applications for
employment with the new owner; that the new owner was well within its legal right
or prerogative in considering as terminated the petitioners' probationary/temporary
appointment; and that the petitioners were not illegally dismissed; hence, they are
not entitled to the reliefs prayed for.
The Labor Arbiter ruled in favor of the petitioners because the 2 nd requisite before
the dismissal of employees was not complied, citing Mobil Employees Association
vs. National Labor Relations Commission, the following requisites must be complied
with before the dismissal of employees may be effected: (1) service of written
notice to the employees and to the Ministry of Labor and Employment (MOLE) at
least one month before the intended date thereof; (2) the cessation of or withdrawal
from business operations must be bona fide in character; and (3) payment to the
employees of termination pay amounting to at least one-half month pay for each
year of service or one month pay whichever is higher.
However, upon the appeal to the NLRC by the respondents, the NLRC reversed the
judgment of the Labor Arbiter. It found that the change of ownership in this case
was made in good faith and the LA was erroneous in applying the Mobil case in
ruling the case and should decide the case base on the ruling in Central Azucarera
del Danao vs. Court of Appeals. A motion for reconsideration was denied.
ISSUE
1. Whether or not the Labor Arbiter was erred in ruling the case base on the
Mobil case.
2. Whether or not the petitioners remained regular employees regardless of the
change of ownership/management
HELD
1. YES. The SC ruled that the Mobil case involved the termination of
employment under Article 283 (before Article 284) of the Labor Code and not
termination of employment as a result of the change of corporate ownership,
as in the case of private respondent Super Mahogany Plywood Corporation. In
Mobil, the original employer; Mobil Oil Philippines, Inc., completely withdrew
from business and was even dissolved. In the case at bar, there was only a
change of ownership of Super Mahogany Plywood Corporation which resulted
in a change of ownership.

2. NO. A change of ownership in a business concern is not proscribed by law.

Citing the case of Central Azucarera del Danao vs. Court of Appeals, the SC
ruled that where such transfer of ownership is in good faith, the transferee is
under no legal duty to absorb the transferor employees as there is no law
compelling such absorption. The most that the transferee may do, for reasons
of public policy and social justice, is to give preference to the qualified
separated employees in the filling of vacancies in the facilities of the
purchaser.
Since the petitioners were effectively separated from work due to a bona fide
change of ownership and they were accordingly paid their separation pay,
which they freely and voluntarily accepted, the private respondent
corporation was under no obligation to employ them; it may, however, give
them preference in the hiring. The private respondent in fact hired, but on
probationary basis, all the petitioners, except Rosario Cuarto. The non-hiring
of Cuarto was legally permissible.
The hiring of employees on a probationary basis is an exclusive management
prerogative.

Habitual Absenteeism
MANILA ELECTRIC COMPANY vs. NLRC and JEREMIAS G. CORTEZ
FACTS:
Private respondent was employed on probationary status by petitioner as lineman
driver. Six months later, he was regularized as a 3rd class lineman-driver assigned
at North Distribution Division. In 1977, and until the time of his dismissal, he worked
as 1st class lineman-driver whose duties and responsibilities includes the
maintenance of Meralco's distribution facilities
by responding to customer's
complaints of power failure, interruptions, line trippings and other line troubles.
Characteristic, however, of private respondent's service with petitioner is his
suspension from work. Due to his numerous infractions, private respondent was
administratively investigated for violation of Meralco's Code on Employee Discipline,
particularly his repeated and unabated absence from work without prior notice from
his superiors specifically from August 2 to September 19, 1989. After such
administrative investigation, it concluded that private respondent was found to have
grossly neglected his duties by not attending to his work as lineman without notice
to his superiors. In a letter, private respondent was notified of the investigation
result and consequent termination of his services. The foregoing instances plus
Cortez series of violations of the sick leave policy clearly show his gross and
habitual neglect of duties and responsibilities in the Company, a condition which is
patently inimical to the interests of the Company as a public utility vested with vital
public interests.

Private respondent filed a complaint for illegal dismissal and the Labor Arbiter
rendered a Decision dismissing the case for complainant committed serious
misconduct and gross neglect of duty. In doing so, complainant can be validly
dismissed. As held by the Supreme Court, dismissal for violation of the Company's
Rules and Regulations is a dismissal for cause. Private respondent elevated his case
on appeal to NLRC which set aside the decision of the Labor Arbiter and ordered
petitioner to reinstate respondent with back wages. Petitioner then filed a Motion for
Reconsideration which was denied.
ISSUE:
Whether or not private respondent's dismissal from service was illegal
HELD:
No. Petitioner alleges that there was grave abuse of discretion by NLRC on the
following grounds: (a) That petitioner admitted in its Position Paper that private
respondent "went into hiding as he was engaged in a trouble with a neighbor" and
(b) That in the said decision, the Labor Arbiter relied not so much on complainant's
absences from August 1 to September 19, 1989 which was the subject of the
investigation, but on complainant's previous infractions.
Article 283 of the Labor Code enumerates the just causes for termination. Among
such causes are the following:
a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work.
b) Gross and habitual neglect by the employee of his duties.
In the case at bar, the service record of private respondent with petitioner is
perpetually characterized by unexplained absences and unauthorized sick leave
extensions. The nature of his job i.e. as a lineman-driver requires his physical
presence to minister to incessant complaints often faulted with electricity. As aptly
stated by the Solicitor General: Habitual absenteeism of an errant employee is not
concordant with the public service that petitioner has to assiduously provide. To
have delayed power failure in a certain district simply because a MERALCO
employee assigned to such area was absent and cannot immediately be replaced is
a breach of public service of the highest order. A deep sense of duty would,
therefore, command that private respondent should, at the very least, limit his
absence for justifiable reasons.
In the case at bar, it was established that complainant violated respondent's Code
on Employee Discipline, not only once, but ten (10) times. On the first occasion,
complainant was simply warned. On the second time, he was suspended for 5 days.
With the hope of reforming the complainant, respondent generously imposed
penalties of suspension for his repeated unauthorized absences and violations of
sick leave policy which constitute violations of the Code. On the ninth time,
complainant was already warned that the penalty of dismissal will be imposed for

similar or equally serious violation. In total disregard of respondent's warning,

complainant, for the tenth time did not report for work without prior authority from
respondent; hence, unauthorized. Worse, in total disregard of his duties as lineman,
he did not report for work from August 1, 1989 to September 19, 1989; thus,
seriously affected respondent's operations as a public utility. This constitutes a
violation of respondent's Code and gross neglect of duty and serious misconduct
under Article 283 of the labor Code. Hence, an employee's habitual absenteeism
without leave, which violated company rules and regulations, is sufficient cause to
justify termination from service.
On the issue of Cortez hiding, a meticulous perusal of Annex "12" readily shows that
the statement "he went into hiding as he was engaged in a trouble with a neighbor"
was merely a defense adduced by respondent employee and is tantamount to an
alibi. The said defense only proved to be self-serving as the same had not been fully
substantiated by private respondent by means of a document or an affidavit
executed to attest to the alleged incidents. Furthermore, contrary to the findings of
public respondent, petitioner never admitted that private respondent "went into
hiding as he was engaged in a trouble with a neighbor." As found out by petitioner
in the course of its investigation, we verified from the Barangay where private
respondent resides to find out the nature of the cases he was allegedly got. Records
of the Barangay Captain of Bgy. Concepcion, Malabon, Metro Manila showed that
Cortez's wife has a pending complaint against a neighbor for physical injury the
complaint was filed on July 6, 1989. This report only bolstered the falsehood of
private respondent's alibi hence, petitioner had no other recourse but to mete the
penalty of dismissal as an exercise of its management prerogative.
Likewise, private respondent's prolonged absence from August 2, 1989 to
September 19, 1989 was the crucial period in this particular case. Subsequent
investigation conducted by petitioner, however, showed that private respondent
was given the full opportunity of defending himself, otherwise, petitioner could not
have possibly known of private respondent's side of the story. Statement of
Respondent explaining that his absences were inevitable due to family problems. He
insisted that his wife and his children suffered from LBM probably due to floods at
their place brought about by a typhoon. Since they were not treated by a physician,
he could not present a medical certificate to the effect. Cortez also intimated that
he was engaged in trouble and averred that, for security reasons, he went into
hiding in a town in Cavite Province. He claimed that in several occasions, he had
informed his office about his problems and requested the same that his absences be
considered excused. However, private respondent was given the opportunity of a
hearing as he was able to present his defense to the charge against him.
Unfortunately, petitioner found such defense inexcusable. In other words, the fact
that private respondent was given the chance to air his side of the story already
suffices. WHEREFORE, the petition is GRANTED. The decision rendered by the
National Labor Relations Commission is annulled and the decision rendered by the
Labor Arbiter is hereby AFFIRMED.

Fixed-term Employment

Medenilla et al vs. PVB

FACTS:
Petitioners were employees of the Philippine Veterans Bank where their services
were terminated as a result of the liquidation of PVB pursuant to the order of the
Monetary Board of the Central Bank embodied in MB Resolution No. 612. On the
same day of their termination, petitioners were rehired through PVB's Bank
Liquidator, Antonio T. Castro however, all of them were required to sign employment
contracts which provided that:
- The employment shall be strictly on a temporary basis. Such temporary
employment will not entitle an employee to any benefits except those
granted by law. The Liquidator reserves the right to terminate the services of
the employee at any time during the period of such employment if the
employee is found not qualified, competent or, efficient in the performance of
his job, or have violated any rules and regulations, or such circumstances and
conditions recognized by law.
On January, 1991, petitioners received a uniform notice of dismissal which
contained the reasons justifying the termination: (a) To reduce costs and expenses
in the liquidation of closed banks in order to protect the interests of the depositors,
creditors and stockholders of the Bank and (b) The employment were on strictly
temporary basis.
On February 4, 1991, petitioners instituted a case for illegal dismissal before Labor
Arbiter Oswald Lorenzo whose decision declares the petitioners' dismissal illegal.
The Bank appealed to the NLRC which reversed the decision of the Labor Arbiter
and dismissed the complaints for lack of merit. Petitioners presented a Motion for
Reconsideration but was denied by the NLRC
Issue:
Whether NLRC acted with grave abuse of discretion in ruling that there was a valid
fixed-period of employment and in reversing the finding of the Labor Arbiter that
there was illegal dismissal
Held:
On the issue of whether the NLRC gravely abused its discretion in holding that the
employment contract entered into by the complainants and the Liquidator of PVB
was for a fixed-period, the ruling of the Court upheld the validity of fixed-term
employment. In the case of Philippine National Oil Company-Energy Development
Corporation vs. NLRC, it was held:
The two guidelines, by which fixed contracts of employment can be said NOT
to circumvent security of tenure, are either:

1. The fixed period of employment was knowingly and voluntarily agreed

upon by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent; or
2. It satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever being
exercised by the former on the latter.
The employment contract entered into by the parties appears to have observed the
said guidelines. Furthermore, it is evident from the records that the subsequent rehiring of petitioners which was to continue during the period of liquidation and the
process of liquidation ended prior to the enactment of RA 7169 entitled, "An Act to
Rehabilitate Philippine Veterans Bank".
But did the NLRC act with grave abuse of discretion in finding that there was no
illegal dismissal, the Court rules in the affirmative. The employment contract
stipulated that:
- The Liquidator reserves the right to terminate your services at any time
during this period of temporary employment if you are found not qualified,
competent or inefficient in the performance of your job, or if you are found to
have violated any of the rules and regulations. The Liquidator also reserves
the right to terminate your services at any time under the circumstances and
conditions recognized by law on the matter.
The reason given by the Liquidator for the termination of petitioners' employment
was in line with the need of the objective of the Supervision and Examination
Sector, to reduce costs and expenses in the liquidation of closed banks in order to
protect the interest of the depositors, creditors and stockholders. In cases of illegal
dismissal, the burden is on the employer to prove that there was a valid ground for
dismissal. Mere allegation of reduction of costs without any proof to substantiate the
same cannot be given credence by the Court. As the respondents failed to rebut
petitioners' evidence, the irresistible conclusion is that the dismissal in question was
illegal. Since findings by the Labor Arbiter are binding on this Court if supported by
substantial evidence, the Court rules that there was illegal dismissal absent just
cause.
Such illegal dismissal warrants reinstatement and payment of back wages.
However, since petitioners' reinstatement is now considered impractical because
the new Philippine Veterans Bank has been rehabilitated by virtue of RA 7169, the
Court limits the relief to be granted to the petitioners to the unpaid wages during
the remaining period of their employment contract. As held by this Court, if the
contract is for a fixed term and the employee is dismissed without just cause, he is
entitled to the payment of his salaries corresponding to the unexpired portion of the
employment contract.
The period should be reckoned from the date of dismissal on February 18, 1991 to
January 1, 1992, which latter date is deemed to be the expiration date of the period

for liquidation as January 2, 1992 was the effectivity of RA 7169, entitled "An Act to
Rehabilitate the Philippine Veterans Bank", which legislation necessarily terminated
the period of liquidation.
WHEREFORE, the petition is PARTLY GRANTED and the decision of the NLRC is
accordingly modified. Philippine Veterans Bank is ordered to pay the petitioners
their corresponding salaries for the unexpired portion of their contract; without any
right to reinstatement.

PAMANTASANG LUNGSOD NG MAYNILA vs. CIVIL SERVICE COMMISION

FACTS:
The 16 individual private respondents were full-time instructors of Pamantasang
Lungsod ng Maynila (PLM) under temporary contracts of employment renewable
on a yearly basis. Half of them had been with PLM for a long time ranging from 6 to
6 years. Together with the other instructors, they joined Pamantasang Lungsod ng
Maynila Faculty Organization (PLMFO). They were part of the original founders of the
PLMFO and claim to be active members thereof. On April 24, 1990, they individually
received uniform notices of termination informing them that the expiration of their
temporary appointments would be the close of the office hours on May 31, 1990
and their contracts were not renewed for the school year (SY) 1990-1991. They
were advised that their retention was not recommended by their respective deans.
At the time of the private respondents separation, the union had just secured its
public sector union registration. The private respondents through PLMFO filed a
complaint for illegal dismissal and unfair labor practice with Civil Service
Commission. PLM in its defense claimed that the nature of the private respondents
contracts are temporary and those holding temporary contracts of employment may
not expect renewal of appointment as a matter of right, the decision being a
management prerogative.
ISSUE:
Whether or not the dismissal of the PLM instructors under temporary contracts
renewable yearly legal?
DECISION:
NO. The court held that the non renewal of an employment contract with a term, is
ordinarily a valid mode of removal at the end of each period. The court however
said that this rule must yield to the superior constitutional right of the employees,
permanent or temporary, to self organization. The Court said that while temporary
employment may be ended with or without just cause, it certainly may not,
however, be terminated for an illegal cause. According to the Court, PLM manifested
intention to submit evidence that it had valid grounds for not renewing the
temporary employment but it did not. This supposed evidence if true and being
material to substantiate its defense against the unfair labor charge should have
been duly presented. The finding of the Public Sector Labor-Management Council

that the non renewal by petitioner of questioned contracts of employment had

been motivated by private respondents union activities is conclusive on the parties.
The court also noted what CSC provided in its resolution, to wit, Even temporary
employees enjoy the basic right to form organization or association for purposes not
contrary to law. PLMFO is that organization. Thus, its members cannot be separated
from service for the simple reason of membership in the said organization. And
when appointment status of these members happens to be temporary in nature,
such become incidental and the doctrine that temporary employees have no
security of tenure must yield or is not applicable.

Past Offenses

Habitual Infractions

Immorality

Conviction/ Commission of a Crime

Case: Sampaguita Garments Corporation vs. NLRC
Facts:

Private respondent Emilia B. Santos was an employee of petitioner

Sampaguita Garments Corporation.
On April 14, 1987, Santos attempted to bring out of the companys premises
a piece of cloth belonging to the petitioner, without authorization of
petitioner Sampaguita Garments Corp.
Sampaguita dismissed her on the ground of theft.
She filed a complaint of illegal dismissal before the LA.
Labor Arbiter: sustained the companys dismissal.
NLRC: ordered her reinstatement with backwages from the time of her illegal
suspension.
Meantime, Petitioner Sampaguita also filed a criminal action against Santos
for the same offense in the Municipal Trial Court of Caloocan.

Municipal trial court of Caloocan: Santos was found guilty, and was
sentenced to an indeterminate penalty of one month and one day ( of arresto
mayor) as minimum to 4 months of arresto mayor maximum.
RTC of Caloocan: affirmed MTCs decision.
Private Respondent Santos: moved for the execution of the NLRC decision. It
has become final and executory.

Petitioners: In view of private respondents conviction, he decision of the

NLRC for her reinstatement and backwages should not be enforced because
she would be undeservedly rewarded.

Issue: Private respondent Santos who was dismissed because of theft but was later
absolved and obtained reinstatement from NLRC, will her subsequent conviction in a
criminal prosecution for the offense affect the administrative decision of NLRC?
Held: YES. The private respondents conviction of crime of theft of property
belonging to the petitioner has affirmed the existence of a valid ground for her
dismissal and thus removed
the justification for the administrative decision
ordering her reinstatement with back wages. Nevertheless, the petitioner is still
subject to sanction for its failure to accord the private respondent the right to an
administrative investigation in conformity with the procedural requirements of due
process. Petitioner is ordered indemnify private respondent 1,000php.

Qualification Requirements
Case: St. Lukes Medical Center Employees Association vs. NLRC and St.
Lukes medical Center(SLMC)
Facts:

Petitioner Maribel Santos was hired as X-ray Technician in the Radiology

Departmen of private respondent St. Lukes Medical Center on October 13
1984.
Shes a graduate of Associate in Radiologic Technology from the Family Clinic
Inc. School of Radiologic Technology
April 22 1992, Congress promulgated RA 7431 Radiologic Technology Act
192. Said law requires that no person shall practice or offer to practice as a
radiology and/or x-ray techonologist in the Philippines without having
obtained the proper certificate of registration from the the Board of
Radiologic Technology.
Despite of SLMCs repeated demands to Santos, the latter failed to obtain the
license requirement mandated by RA 7431.
Maribel Santos was dismissed by SLMC.
LA: valid dismissal, SLMC was ordered to pay Santos 115, 500php for
separation pay.
NLRC: affirmed the decision of LA.
CA: affirmed the decision of NLRC.
Issue:

Whether petitioner Santos was illegally dismissed by private respondent

SLMC on the basis of her inability to secure a certificate of registration from
the board of Radiologic Technology?

Held: No. The requirement for a certificate of registration is set forth under RA
7432:
Sec. 15. Requirement for the practice of radiologic technology and x-ray technologyUnless exempt from the examinations under Sec q6 and 17 hereof no person shall
practice or offer to practice as radiologic and/or x-ray technologist in the Philippines
without having been obtained the proper certificate of registration from the board.
It is significant to note that petitioners expressly concede that the sole cause for
petitioners separation from work is her failure to pass the board license exam for Xray Technician, a precondition for obtaining the certificate of registration from the
Board. It is argued, though, that petitioner Santos failure to comply with the
certification requirement did not constitute just cause for termination as it violated
her constitutional right to security of tenure.
While the right of workers to security of tenure is guaranteed by the Constitution, its
exercise may be reasonably regulated pursuant to the police power of the State to
safeguard health, morals, peace, education order, safety, and the general welfare of
the people. The enactment of RA 7431 and 4225 are recognized as an exercise of
the states inherent police power.
Indeed, Santos cannot insist on her sterling work performance without any
derogatory record to make her qualify as an x-ray technician in the absence of a
proper certificate of registration from the board of radiologic technology which can
only be obtained by passing the required examination. The law is clear that the
certificate of registration cannot be substituted by any other requirement to allow a
person to practice as a radiologic Technologist and/or X-ray Techonologist.

Constructive Dismissal
Case: Philippine Veterans Bank v. NLRC and Martinez
Facts:
Private Respondent Benigno Martinez was the manager of Petitioners
Dumaguete Branch from September 2001 until January 8 2003(his
resignation)
Private Respondent claim that his resignation stemmed from a report
published by the Philippine Daily inquirer regarding the anomalies hounding
the petitioners high-ranking officials.
This controversy resulted in the huge withdrawals of major depositors.
Concerned, the respondent approached Mr. Anino, the petitioners Area Head
for Visayas and Mindanao to discuss how to resolve the matter,
Mr Anino just brushed off the issue, private respondent then requested the
Mayor of Valencia (one of big depositor) to talk to Mr. Aninon.
The next day Mr. Aninon, apparently misinterpreted the respondents actions
and angrily confronted him:

you fool, you went to the mayor of Valencia to seek support. Let them
pull out all their deposits, they cannot threaten me! Let them pull out
immediately! I will see to it that you will be replaced there! If not, Id
manage the brach myself! Or Ill have Dumaguete Branch made under
the Luzon area so that I have nothing to do with your branch.

October 14 2002, Mr. Aninon brought along Mr. Mansueto Quijote as private
respondents replacement and new branch manager of petitioners
Dumaguete Branch
Mr Aninon then instructed the respondent the respondent to go to petitioners
head office in Makati to report to VP Loren (petitioners VP and head of branch
banking division.)
When he reported to the Makati Office, VP Lloren told him that he would
undergo training, but he did not undergo any training,he was made to do
clerical jobs instead.
In addition to that unjust treatment, he had to travel 4hours daily from his
rented house in cavite to Makati, his expense consumed half of his salary.
January 8 2003 private respondent tendered his resignation.
Private filed a petition for illegal dismissal.
LA: respondents complaint was dismissed.
NLRC: respondent was constructively dismissed.
CA: affirmed NLRCs decision.

Issue:
W/n private respondent was constructively dismissed

Held:
Yes. In constructive dismissal cases, the employer has the burden of proving
that is conduct and action or the transfer of an employee are valid and
legitimate grounds such as genuine business necessity. Particularly, for a
transfer not to be considered a constructive dismissa, the employer must be
able to show that such transfer is not unreasonable, inconvenient, or
prejudicial to the employee. Failure of the employer to over this burden of
proof taints the employees transfer as constructive dismissal
In the present case, the petitioner failed to discharge this burden. The NLRC,
as affirmed by the CA, correctly found that the combination of the harsh
actions of the petitioner rendered the employment condition of respondent
hostile and unbearable for the ff reasons.
1. The petitioner failed to show any urgency or genuine business
necessity to transfer the respondent to the Makati Head office.

2. The respondents transfer from Dumaguete to Makati city is clearly

unreasonable, inconvenient, oppressive, since the respondent and
his family are residents of Dumaguete city.

Transfer
WESTMONT PHARMACEUTICALS INC. vs. SAMANIEGO
FACTS:
Unilab initially hired Ricardo Samaniego as Professional Service Representative of its
marketing arm, Westmont.
Later, Unilab promoted him as Senior Business
Development Associate and assigned him in Isabela as Acting District Manager of
Westmont and Chairman of Unilab Special Projects.
In August 1995, he was
transferred to Metro Manila pending investigation of his subordinate and physicians
of Region II involved in a sales discount and Rx trade-off controversy. He was then
placed under floating status and assigned to perform duties not connected with
his position, like fetching at the airport physicians coming from the provinces;
making deposits in banks; fetching field men and doing messengerial works. His
transfer to Metro Manila resulted in the diminution of his salary as his per diem was
reduced from P13,194.00 to P2,299.00 only. Westmont and Unilab explain that his
transfer is based on a sound business judgment, a management prerogative On May
5, 1998, Ricardo C. Samaniego filed with the Office of the Labor Arbiter, Regional
Arbitration Branch (RAB) No. II, Tuguegarao City, Cagayan, a complaint for illegal
dismissal and damages against Westmont Pharmaceuticals, Inc. (Westmont) and
United Laboratories, Inc. (Unilab).
ISSUE:
Whether or not Saminiegos Transfer from Isabela to Metro Manila constituted
constructive dismissal?
DECISION:
YES. The court held that in constructive dismissal, the employer has the burden of
proving that the transfer of an employee is for just and valid grounds,
such as genuine business necessity. The employer must be able to show
that the transfer is not unreasonable, inconvenient, or prejudicial to the
employee.
It must not involve a demotion in rank or a diminution of
salary and other benefits. If the employer cannot overcome this burden
of proof, the employees transfer shall be tantamount to unlawful
constructive dismissal. According to the court, Westmont and Unilab
failed to discharge this burden and Samaniego was unceremoniously
transferred from Isabela to Metro Manila. It was held that such transfer is
economically and emotionally burdensome on Samaniegos part. He was
constrained to maintain two residences one for himself in Metro Manila,
and the other for his family in Tuguegarao City, Cagayan.
Worse,

immediately after his transfer to Metro Manila, he was placed on floating

status and was demoted in rank, performing functions no longer
supervisory in nature.
The Court also said that there may also be constructive dismissal if an act of clear
insensibility or disdain by an employer becomes so unbearable on the
part of the employee that it could foreclose any choice by him except to
forego his continued employment.
This was what happened to
Samaniego. Thus, he is entitled to reinstatement without loss of seniority
rights, full backwages, inclusive of allowances, and other benefits or their
monetary equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. The Court
however, considered the circumstances of the case and decided that
those do not warrant the reinstatement of Samaniego. The court found
that a more equitable disposition would be an award of separation pay
equivalent to at least one month pay, or one month pay for every year of
service, whichever is higher (with a fraction of at least six [6] months
being considered as one [1] whole year),
in addition to his full
backwages, allowances and other benefits.

Promotion
PHILIPPINE TELEGRAPH & TELEPHONE CORP. vs COURT OF APPEALS
FACTS:
PT&T is a domestic corporation engaged in the business of providing telegraph and
communication services through its branches al over the country. In 1997, after
conducting a sries of studies regarding the profitability of its retail operations,
branches and number of employees, PT &T came up with a Relocation and
Restructuring Program to sustain its operations, to decongest surplus workforce in
some branches to promote efficiency and productivity, lower expenses related to
hiring and training new personnel and avoid retrenchment of employees occupying
redundant positions. Private respondents Cristina Rodiel, Jesus Paracale,Romeo Tee,
Benjamin lakandula, Avelino Acha, Ignacio De Cerna and Guillermo Demigillo initially
were given options to choose the branch which they would be transferred and
thereafter were directed to relocate and report to their new PT&T branches. The
transfers imposed by the management involved distant places which would require
their separation from their respective families and involved increases in their Job
Grades and salaries. PT&T offered benefits or allowances to those who would agree
to be transferred under its new program. Private respondents rejected the offer and
were required to explain in writing why there is no disciplinary action should be
taken for their refusal to be transferred/relocated. They respectively replied that the
transfers would cause enormous difficulties as their new assignment was quite
distant. PT&T not satisfied with the explanation, considered private respondents
refusal as insubordination and willful disobedience to lawful order; hence
respondents were dismissed.

ISSUE:
Whether or not private respondents refusal to be transferred/relocated constitute
as insubordination and willful disobedience to lawful order thus valid ground for
dismissal?
DECISION:
NO. The said transfers is a promotion as the movement was not merely lateral but
of scalar ascent considering the movement of the Job Grades and corresponding
increase in salaries. With or without the corresponding salary increases, the
respective transfers of the private respondents were in fact promotions. In the case
Millares vs. Subido, promotion was defined as the advancement from one position
to another with an increase in duties and responsibilities as authorized by law and
usually accompanied by an increase in salary. And the indispensable element for
there be a promotion is that there must be an advancement from one position to
another or an upward vertical movement of the employees rank or position. Any
increase in the salary should be considered incidental but never a determinative of
whether or not there is promotion. The Court held that an employee cannot be
promoted, even if merely a result of a transfer without his consent. Further, the
Court said that there is no law that compels an employee to accept a promotion for
the reason that a promotion is in the nature of gift or reward which a person has a
right to refuse. Therefore the exercise of the right cannot be considered in law as
insubordination, or willful disobedience of a lawful order and not a valid ground for
dismissal.

Preventive Suspension
GATBONTON vs. NLRC
FACTS:
Renato Gatbonton is an associate professor of the of Faculty of Engineering in
Mapua Institute of Technology. In November 1998, a complaint for unfair/unjust
grading system, sexual harassment and conduct unbecoming of an academician
was filed by a civil engineering student. MIT through its Committee on Decorum and
investigation placed the professor under 30-day preventive suspension effective
January 11, 1999 pending the investigation believing that his continued stay during
the investigation would affect his performance as a faculty member, as well as the
students learning and that the suspension will allow him to prepare for the
investigation and will prevent his influences to other members of the community.
Gatbonton filed a complaint before the NLRC for illegal suspension, damages and
attorneys fees.
ISSUE: Whether or not Gatbontons suspension is legal?

DECISION: NO. The Court found no sufficient basis to justify his preventive
suspension. Under the Labor Code, the employer may place the worker concerned
under preventive suspension if his continued employment poses a serious threat to
life or property of the employer or of his co workers. There was nothing in record
that his continued employment poses a serious threat on the employer nor on his
co workers.
Second, Gatbontons preventive suspension was based on MITs Rules and
Regulations for the implementation of the Anti-Sexual Harassment Act of 1995 or
RA 7877, which is requirement of RA 7877 on educational or training institutions to
prescribe the procedures for the investigation of sexual harassment cases and the
administrative sanctions therefore. The court said that Administrative rules and
regulations must also be published if for their purpose is to enforce or implement
existing law pursuant also to a valid delegation. MIT published said rules and
regulations on February 23, 1999. At the time of the imposition of the suspension on
January 11, 1999, the Mapua Rules were not yet legally effective, and therefore
suspension has no legal basis.
Even assuming that the Mapua rules are applicable, the Court found that there is no
sufficient basis to justify his preventive suspension. Under the Mapua Rules, an
accused may be placed under preventive suspension when the guilt is strong and
school head is morally convinced that his continued stay during the pendency of the
investigation constitute distraction to normal operations of the institution or when
the accused poses a risk or danger to life or property of the other members of the
educational community. In this case, the Court said that there is no indication that
Gatbontons preventive suspension may be based on the above mentioned
circumstances.

Basis Employer Right

EDGE APPAREL INC, v NLRC
Facts:
Josephine Antipuesto, Norina Ando, Juliet Baguio, Apolinaria Velonta, Corazon
Pino and Josephine Caete were retrenched from employment effective 03
September 1992 by Edge Apparel, Inc.
Antipuesto, et al., later complained for illegal dismissal against the
corporation. The charge averred that the retrenchment program was a mere
subterfuge used by Edge Apparel to give a semblance of regularity and
validity to the dismissal of the complainants.
Edge Apparel countered that its financial obligations, amounting to about P8
Million, had begun to eat up most of its capital outlay and resulted in
unabated losses of P681,280.00 in 1989, P262,741.00 in 1990, P162,170.00
in 1991 and P749,294.00 in 1992, constraining the company to adopt and
implement a retrenchment program.
NLRC decided that these workers were dismissed thru redundancy.

Edge Apparel now filed a motion for a partial reconsideration of the NLRCs
decision insofar as it awarded "an additional separation pay equivalent to 1/2
month pay for every year of service" to the complainants in accordance with
redundancy stipulations.

Issues:

What is redundancy?
What is retrenchment?
W/n Antipuesto, et al., were legally dismissed by Edge Apparel, Inc. thru
retrenchment?

Held:

Termination of an employee's services because of a reduction of work force

due to a decrease in the scope or volume of work of the employer is
synonymous to, or a shade of termination because of redundancy under
Article 283 (formerly 284) of the Labor Code. Redundancy exists where the
services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of
a number of factors, such as over-hiring of workers, decreased volume of
business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. (Tierra International
Construction Corporation vs. NLRC, 77 SCRA Vol. 211)

In case of termination due to the installation of labor saving devices or

redundancy, the worker affected thereby shall be entitled to at least one (1)
month pay or to at least one month pay for every year of service, whichever
is higher. (Art. 283, Labor Code).

Retrenchment, in contrast to redundancy, is an economic ground to reduce

the number of employees. In order to be justified, the termination of
employment by reason of retrenchment must be due to business losses or
reverses which are serious, actual and real. Not every loss incurred or
expected to be incurred by the employer will justify retrenchment, since, in
the nature of things, the possibility of incurring losses is constantly present,
in greater or lesser degree, in carrying on the business operations.
Retrenchment is normally resorted to by management during periods of
business reverses and economic difficulties occasioned by such events as
recession, industrial depression, or seasonal fluctuations. It is an act of the
employer of reducing the work force because of losses in the operation of the

enterprise, lack of work, or considerable reduction on the volume of business.

Retrenchment is, in many ways, a measure of last resort when other less
drastic means have been tried and found to be inadequate. A lull caused by
lack of orders or shortage of materials must be of such nature as would
severely affect the continued business operations of the employer to the
detriment of all and sundry if not properly addressed. The institution of "new
methods or more efficient machinery, or of automation" is technically a
ground for termination of employment by reason of installation of laborsaving devices but where the introduction of these methods is resorted to not
merely to effect greater efficiency in the operations of the business but
principally because of serious business reverses and to avert further losses,
the device could then verily be considered one of retrenchment.
Yes. The Labor Arbiter and the NLRC both concluded that there had been a
valid ground for the retrenchment of private respondents. The documents
presented in evidence were found to "conclusively show that (petitioner)
suffered serious financial losses." The general standards or elements needed
for the retrenchment to be valid i.e., that the losses expected are
substantial and not merely de minimis in extent; that the expected losses are
reasonably imminent such as can be perceived objectively and in good faith
by the employer; that the retrenchment is reasonably necessary and likely to
effectively prevent the expected losses; and that the imminent losses sought
to be forestalled are substantiated were adequately shown in the this case.
Edge Apparel, Inc. also observed the two other requirements in accordance
with retrenchment, viz: (a) service of a prior written notice of at least one
month on the workers and the Department of Labor and Employment, and (b)
payment of the due separation pays.

Redundancy
Andrada vs. NLRC
Facts:
Ruben Andrada, et al., worked as architects, draftsmen, operators, engineers,
and surveyors in the Subic Legend Resorts and Casino, Inc. (Legend) Project
Development Division on various projects.
On January 6, 1998, Legend sent notice to the Department of Labor and
Employment of its intention to retrench and terminate the employment of
thirty-four (34) of its employees, which include petitioners, in the Project
Development Division.
Afterwards, on February 6, 1998, Legend informed the retrenched employees
of their permanent retrenchment and/or their options. Legend paid the
dismissed employees their salaries up to February 6, 1998, separation pay,
pro-rated 13th-month pay, ex-gratia, meal allowance, unused vacation leave

credits, and tax refund. Petitioners, in turn, signed quitclaims but reserved
their right to sue Legend.
Andrada, et al., learned the managements scheme of recruiting potential
employees similar to their held positions during their retrenchment process.
Andrada, et al. filed a complaint for illegal dismissal.

Issue:
Were complainants illegally dismissed?
W/n there a valid retrenchment?
W/n redundancy existed in Legends Project Development Division?
Held:
Yes. Legend failed to prove the legal and factual existence of the cause for
dismissal, and that it failed to comply with the requirements for the
implementation of retrenchment. Legend relied on its management
prerogative to justify the termination of petitioners employment.

A companys exercise of its management prerogatives is not absolute.

No. Legend failed to show its financial condition prior to and at the time it
enforced its retrenchment program. It failed to submit audited financial
statements regarding its alleged financial losses. Though Legend complied
with the notice requirements and the payment of separation benefits to the
retrenched employees, its failure to establish the basis for the retrenchment
of its employees deems the retrenchment illegal.
ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL.
The employer may also terminate the employment of any employee due to
the installation of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title by serving a written notice on the worker and the
Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to
separation pay equivalent to at least his one (1) month pay or at least one (1)
month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to one (1) month
pay or at least one half (1/2) month pay for every year of service, whichever
is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year.
Retrenchment is an exercise of managements prerogative to terminate
the employment of its employees en masse, to either minimize or

prevent losses, or when the company is about to close or cease

operations for causes not due to business losses.

No. The pieces of evidence submitted by Legend were mere allegations and
conclusions not supported by other evidence. Legend did not even bother to
illustrate or explain in detail how and why it considered petitioners positions
superfluous or unnecessary. The CA puts too much weight on petitioners
failure to refute Legends allegations contained in the document it submitted.
However, it must be remembered that the employer bears the burden of
proving the cause or causes for termination. Its failure to do so would
necessarily lead to a judgment of illegal dismissal.

Redundancy exists where the services of an employee are in excess of what is

reasonably demanded by the actual requirements of the enterprise. A position is
redundant where it is superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as over hiring of workers, decreased
volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.

Closure of Business
EASTRIDGE GOLF CLUB, INC., PETITIONER, VS. EASTRIDGE GOLF CLUB,
INC., LABOR UNION
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of
Court of petitioner Eastridge Golf Club, Inc. from the October 13, 2004 Decision [1] of
the Court of Appeals (CA) which ordered the reinstatement of the individual
respondents; and the January 19, 2005 Resolution of the CA which denied
petitioner's motion for reconsideration
Petitioner employed respondents as kitchen staff in its Food and Beverage (F&B)
Department. Effective October 1, 1999, petitioner terminated the employment of
respondents on the ground that the operations of the F&B Department had been
turned over to concessionaire Mother's Choice Meat Shop & Food Services.
Respondents filed with the National Labor Relations Commission (NLRC), Regional
Arbitration Branch, a complaint for illegal dismissal, unfair labor practice and
payment of 13th month pay. They claimed that their dismissal was not based on any
of the causes allowed by law, and that it was affected without due process.
The labor arbiters judgment rendered in favor of the complainants, holding that
no valid grounds to consider them resigned from their job and holding illegal their
dismissal from the service. Respondent company is ordered to reinstate them to
their former position without loss of seniority rights and with full back wages and

thereby ordered to pay each of the complainant and the union the amount of
P5,000.00 as and for damages
On appeal, the NLRC, reversed the LAs decision but ordered the respondents to pay
each complainant of one (1) month salary for every year of service.
But the Court of Appeals reversed the decision of the NLRC and reinstates the
decision of the Labor Arbiter.
ISSUE: Whether or not the turn over of the F&B department to a concessionaire is a
valid ground for termination of employees?
HELD:
NO, the courts found that the cessation of petitioner's F&B operations was a mere
subterfuge in view of evidence that the latter continued to act as the real employer
by paying for the salaries and insurance contributions of the employees of the F&B
Department even after the concessionaire allegedly took over its operations.
There was a documentary evidence presented by respondents hardly establish that
it remained the employer of the F&B staff even after the turn over of its operations
to the concessionaire
SC RULING:
It has noted that in reinstating the decision of the LA, the CA in effect affirmed the
finding of unfair labor practice.
The petition is DENIED

Temporary Closure/ Bona Fide Suspension of Operations

JPL Marketing Promotions, Petitioner vs CA and Gonzales et al., Respondents
G.R. No. 151966, July 8, 2005, TINGA, J.:
Facts: JPL Marketing and Promotions (JPL) is a domestic corporation engaged in the
business of recruitment and placement of workers. On the other hand, private
respondents Noel Gonzales, Ramon Abesa III and Faustino Aninipot were employed
by JPL as merchandisers on separate dates and assigned at different establishments
in Naga City and Daet, Camarines Norte as attendants to the display of California
Marketing Corporation (CMC), one of petitioners clients.
JPL notified private respondents that CMC would stop its direct merchandising
activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996.
They were advised to wait for further notice as they would be transferred to other

clients. However, private respondents Abesa and Gonzales filed before the NLRC
Sub V complaints for illegal dismissal, praying for separation pay, 13 th month pay,
service incentive leave pay and payment for moral damages. Aninipot filed a similar
case thereafter.
The complaints were consolidated and submitted for resolution. Executive Labor
Arbiter Gelacio L. Rivera, Jr. dismissed the complaints for lack of merit. The Labor
Arbiter found that Gonzales and Abesa applied with and were employed by the store
where they were originally assigned by JPL even before the lapse of the six (6)month period given by law to JPL to provide private respondents a new assignment.
Thus, they may be considered to have unilaterally severed their relation with JPL,
and cannot charge JPL with illegal dismissal. The Labor Arbiter held that it was
incumbent upon private respondents to wait until they were reassigned by JPL, and
if after six months they were not reassigned, they can file an action for separation
pay but not for illegal dismissal. The claims for 13 th month pay and service incentive
leave pay was also denied since private respondents were paid way above the
applicable minimum wage during their employment.
Private respondents appealed to the NLRC, which agreed with the Labor Arbiters
finding that when private respondents filed their complaints, the six-month period
had not yet expired, and that CMCs decision to stop its operations in the areas was
beyond the control of JPL, thus, they were not illegally dismissed. Aggrieved, JPL
filed a petition with the Court of Appeals, claiming that private respondents are not
by law entitled to separation pay, service incentive leave pay and 13 th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC
resolution. While conceding that there was no illegal dismissal, it justified the award
of separation pay on the grounds of equity and social justice. Hence, this petition.
Issue: Whether the respondents are entitled of separation pay and 13 th month pay
when they were terminated by the petitioner.
Held: The Supreme Court MODIFIED the decision of NLRC and CA. The award of
separation pay is deleted. It ordered Petitioner to pay private respondents their 13 th
month pay commencing from the date of employment up to 15 August 1996, as well
as service incentive leave pay from the second year of employment up to 15 August
1996.
The Supreme Court held that in the instant case, there was no dismissal to speak
of. Private respondents were simply not dismissed at all, whether legally or
illegally. What they received from JPL was not a notice of termination of
employment, but a memo informing them of the termination of CMCs contract with
JPL. More importantly, they were advised that they were to be reassigned. At that
time, there was no severance of employment to speak of.
Art. 286 of the Labor Code allows the bona fide suspension of the operation of a
business or undertaking for a period not exceeding six (6) months, wherein an
employee/employees are placed on the so-called floating status. When that
floating status of an employee lasts for more than six months, he may be
considered to have been illegally dismissed from the service. Thus, he is entitled to

the corresponding benefits for his separation, and this would apply to suspension
either of the entire business or of a specific component thereof.
Private respondents sought employment from other establishments even before the
expiration of the six (6)-month period provided by law. As they admitted in their
comment, all three of them applied for and were employed by another
establishment after they received the notice from JPL. JPL did not terminate their
employment; they themselves severed their relations with JPL. Thus, they are not
entitled to separation pay. Nonetheless, JPL cannot escape the payment of 13 th
month pay and service incentive leave pay to private respondents. Said benefits
are mandated by law and should be given to employees as a matter of right.
Admittedly, private respondents were not given their 13 th month pay and service
incentive leave pay while they were under the employ of JPL. Instead, JPL provided
salaries which were over and above the minimum wage. The Court rules that the
difference between the minimum wage and the actual salary received by private
respondents cannot be deemed as their 13 th month pay and service incentive leave
pay as such difference is not equivalent to or of the same import as the said
benefits contemplated by law. Thus, as properly held by the Court of Appeals and
by the NLRC, private respondents are entitled to the 13 th month pay and service
incentive leave pay.