SECOND DIVISION

[G.R. No. 179532, May 30 : 2011]

CLAUDIO S. YAP, PETITIONER, VS. THENAMARIS
SHIP'S MANAGEMENT AND INTERMARE MARITIME
AGENCIES, INC., RESPONDENTS.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review
on Certiorari[1] under Rule 45 of the Rules of Civil Procedure,
seeking the reversal of the Court of Appeals (CA)
Decision[2] dated February 28, 2007, which affirmed with
modification the National Labor Relations Commission
(NLRC) resolution[3] dated April 20, 2005.
The undisputed facts, as found by the CA, are as follows:
[Petitioner] Claudio S. Yap was employed as electrician of the
vessel, M/T SEASCOUT on 14 August 2001 by Intermare
Maritime Agencies, Inc. in behalf of its principal, Vulture
Shipping Limited. The contract of employment entered into
by Yap and Capt. Francisco B. Adviento, the General
Manager of Intermare, was for a duration of 12 months. On
23 August 2001, Yap boarded M/T SEASCOUT and
commenced his job as electrician. However, on or about 08
November 2001, the vessel was sold. The Philippine
Overseas Employment Administration (POEA) was informed
about the sale on 06 December 2001 in a letter signed by
Capt. Adviento. Yap, along with the other crewmembers, was
informed by the Master of their vessel that the same was sold
and will be scrapped. They were also informed about
the Advisory sent by Capt. Constatinou, which states, among
others:
" ...PLEASE ASK YR OFFICERS AND RATINGS IF THEY
WISH TO BE TRANSFERRED TO OTHER VESSELS AFTER
VESSEL S DELIVERY (GREEK VIA ATHENS-PHILIPINOS VIA
MANILA...
...FOR CREW NOT WISH TRANSFER TO DECLARE THEIR
PROSPECTED TIME FOR REEMBARKATION IN ORDER TO
SCHEDULE THEM ACCLY..."
Yap received his seniority bonus, vacation bonus, extra bonus
along with the scrapping bonus. However, with respect to
the payment of his wage, he refused to accept the payment of
one-month basic wage. He insisted that he was entitled to
the payment of the unexpired portion of his contract since he
was illegally dismissed from employment. He alleged that he
opted for immediate transfer but none was made.
[Respondents], for their part, contended that Yap was not
illegally dismissed. They alleged that following the sale of
the M/T SEASCOUT, Yap signed off from the vessel on 10
November 2001 and was paid his wages corresponding to the
months he worked or until 10 November 2001 plus his
seniority bonus, vacation bonus and extra bonus. They
further alleged that Yap's employment contract was validly
terminated due to the sale of the vessel and no arrangement
was made for Yap's transfer to Thenamaris' other vessels. [4]
Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal
Dismissal with Damages and Attorney's Fees before the
Labor Arbiter (LA). Petitioner claimed that he was entitled to
the salaries corresponding to the unexpired portion of his
contract. Subsequently, he filed an amended complaint,
impleading Captain Francisco Adviento of respondents
Intermare Maritime Agencies, Inc. (Intermare) and
Thenamaris Ship's Management (respondents), together with
C.J. Martionos, Interseas Trading and Financing Corporation,
and Vulture Shipping Limited/Stejo Shipping Limited.

On July 26, 2004, the LA rendered a decision [5] in favor of

petitioner, finding the latter to have been constructively and
illegally dismissed by respondents. Moreover, the LA found
that respondents acted in bad faith when they assured
petitioner of re-embarkation and required him to produce an
electrician certificate during the period of his contract, but
actually he was not able to board one despite of respondents'
numerous vessels. Petitioner made several follow-ups for his
re-embarkation but respondents failed to heed his plea; thus,
petitioner was forced to litigate in order to vindicate his
rights. Lastly, the LA opined that since the unexpired portion
of petitioner's contract was less than one year, petitioner was
entitled to his salaries for the unexpired portion of his
contract for a period of nine months. The LA disposed, as
follows:
WHEREFORE, in view of the foregoing, a decision is hereby
rendered declaring complainant to have been constructively
dismissed. Accordingly, respondents Intermare Maritime
Agency Incorporated, Thenamaris Ship's Mgt., and Vulture
Shipping Limited are ordered to pay jointly and severally
complainant Claudio S. Yap the sum of $12,870.00 or its peso
equivalent at the time of payment. In addition, moral
damages of ONE HUNDRED THOUSAND PESOS
(P100,000.00) and exemplary damages of FIFTY
THOUSAND PESOS (P50,000.00) are awarded plus ten
percent (10%) of the total award as attorney's fees.
Other money claims are DISMISSED for lack of merit.
SO ORDERED.[6]
Aggrieved, respondents sought recourse from the NLRC.
In its decision[7] dated January 14, 2005, the NLRC affirmed
the LA's findings that petitioner was indeed constructively
and illegally dismissed; that respondents' bad faith was
evident on their wilful failure to transfer petitioner to another
vessel; and that the award of attorney's fees was warranted.
However, the NLRC held that instead of an award of salaries
corresponding to nine months, petitioner was only entitled to
salaries for three months as provided under Section 10 [8] of
Republic Act (R.A.) No. 8042,[9] as enunciated in our ruling
in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission.[10] Hence, the NLRC ruled in this wise:
WHEREFORE, premises considered, the decision of the
Labor Arbiter finding the termination of complainant illegal is
hereby AFFIRMED with a MODIFICATION. Complainant['s]
salary for the unexpired portion of his contract should only
be limited to three (3) months basic salary.
Respondents Intermare Maritime Agency, Inc.[,] Vulture
Shipping Limited and Thenamaris Ship Management are
hereby ordered to jointly and severally pay complainant, the
following:
1. Three (3) months basic salary - US$4,290.00 or its peso
equivalent at the time of actual payment.
2. Moral damages - P100,000.00
3. Exemplary damages - P50,000.00
4. Attorney's fees equivalent to 10% of the total monetary
award.
SO ORDERED.[11]
Respondents filed a Motion for Partial Reconsideration,
[12]
praying for the reversal and setting aside of the NLRC
decision, and that a new one be rendered dismissing the
complaint. Petitioner, on the other hand, filed his own Motion
for Partial Reconsideration,[13] praying that he be paid the
nine (9)-month basic salary, as awarded by the LA.

On April 20, 2005, a resolution[14] was rendered by the NLRC,

affirming the findings of Illegal Dismissal and respondents'
failure to transfer petitioner to another vessel. However,
finding merit in petitioner's arguments, the NLRC reversed
its earlier Decision, holding that "there can be no choice to
grant only three (3) months salary for every year of the
unexpired term because there is no full year of unexpired
term which this can be applied." Hence WHEREFORE, premises considered, complainant's Motion
for Partial Reconsideration is hereby granted. The award of
three (3) months basic salary in the sum of US$4,290.00 is
hereby modified in that complainant is entitled to his salary
for the unexpired portion of employment contract in the sum
of US$12,870.00 or its peso equivalent at the time of actual
payment.
All aspect of our January 14, 2005 Decision STANDS.
SO ORDERED.[15]
Respondents filed a Motion for Reconsideration, which the
NLRC denied.
Undaunted, respondents filed a petition
for certiorari[16] under Rule 65 of the Rules of Civil Procedure
before the CA. On February 28, 2007, the CA affirmed the
findings and ruling of the LA and the NLRC that petitioner
was constructively and illegally dismissed. The CA held that
respondents failed to show that the NLRC acted without
statutory authority and that its findings were not supported
by law, jurisprudence, and evidence on record. Likewise, the
CA affirmed the lower agencies' findings that the advisory of
Captain Constantinou, taken together with the other
documents and additional requirements imposed on
petitioner, only meant that the latter should have been reembarked. In the same token, the CA upheld the lower
agencies' unanimous finding of bad faith, warranting the
imposition of moral and exemplary damages and attorney's
fees. However, the CA ruled that the NLRC erred in
sustaining the LA's interpretation of Section 10 of R.A. No.
8042. In this regard, the CA relied on the clause "or for three
months for every year of the unexpired term, whichever is
less" provided in the 5th paragraph of Section 10 of R.A. No.
8042 and held:
In the present case, the employment contract concerned has
a term of one year or 12 months which commenced on
August 14, 2001. However, it was preterminated without a
valid cause. [Petitioner] was paid his wages for the
corresponding months he worked until the 10th of November.
Pursuant to the provisions of Sec. 10, [R.A. No.] 8042,
therefore, the option of "three months for every year of the
unexpired term" is applicable.[17]
Thus, the CA provided, to wit:
WHEREFORE, premises considered, this Petition for
Certiorari is DENIED. The Decisiondated January 14, 2005,
and Resolutions, dated April 20, 2005 and July 29, 2005,
respectively, of public respondent National Labor Relations
Commission-Fourth Division, Cebu City, in NLRC No. V000038-04 (RAB VIII (OFW)-04-01-0006) are
herebyAFFIRMED with the MODIFICATION that private
respondent is entitled to three (3) months of basic salary
computed at US$4,290.00 or its peso equivalent at the time
of actual payment.
Costs against Petitioners.[18]
Both parties filed their respective motions for
reconsideration, which the CA, however, denied in its
Resolution[19] dated August 30, 2007.

Unyielding, petitioner filed this petition, raising the following

issues:
1) Whether or not Section 10 of R.A. [No.] 8042, to the extent
that it affords anillegally dismissed migrant worker the
lesser benefit of - "salaries for [the] unexpired portion of his
employment contract or for three (3) months for
every year of the unexpired term, whichever is less" - is
constitutional; and
2) Assuming that it is, whether or not the Court of Appeals
gravely erred in granting petitioner only three (3) months
backwages when his unexpired term of 9 months is far
short of the "every year of the unexpired term" threshold.[20]
In the meantime, while this case was pending before this
Court, we declared as unconstitutional the clause "or for
three months for every year of the unexpired term,
whichever is less" provided in the 5th paragraph of Section 10
of R.A. No. 8042 in the case of Serrano v. Gallant Maritime
Services, Inc.[21] on March 24, 2009.
Apparently, unaware of our ruling in Serrano, petitioner
claims that the 5th paragraph of Section 10, R.A. No. 8042, is
violative of Section 1,[22] Article III and Section 3,[23] Article
XIII of the Constitution to the extent that it gives an erring
employer the option to pay an illegally dismissed migrant
worker only three months for every year of the unexpired
term of his contract; that said provision of law has long been
a source of abuse by callous employers against migrant
workers; and that said provision violates the equal protection
clause under the Constitution because, while illegally
dismissed local workers are guaranteed under the Labor
Code of reinstatement with full backwages computed from
the time compensation was withheld from them up to their
actual reinstatement, migrant workers, by virtue of Section
10 of R.A. No. 8042, have to waive nine months of their
collectible backwages every time they have a year of
unexpired term of contract to reckon with. Finally, petitioner
posits that, assuming said provision of law is constitutional,
the CA gravely abused its discretion when it reduced
petitioner's backwages from nine months to three months as
his nine-month unexpired term cannot accommodate the
lesser relief of three months for every year of the unexpired
term.[24]
On the other hand, respondents, aware of our ruling
in Serrano, aver that our pronouncement of
unconstitutionality of the clause "or for three months for
every year of the unexpired term, whichever is less" provided
in the 5th paragraph of Section 10 of R.A. No. 8042
in Serrano should not apply in this case because Section 10
of R.A. No. 8042 is a substantive law that deals with the
rights and obligations of the parties in case of Illegal
Dismissal of a migrant worker and is not merely procedural
in character. Thus, pursuant to the Civil Code, there should
be no retroactive application of the law in this case.
Moreover, respondents asseverate that petitioner's tanker
allowance of US$130.00 should not be included in the
computation of the award as petitioner's basic salary, as
provided under his contract, was only US$1,300.00.
Respondents submit that the CA erred in its computation
since it included the said tanker allowance. Respondents
opine that petitioner should be entitled only to US$3,900.00
and not to US$4,290.00, as granted by the CA.
Invoking Serrano, respondents claim that the tanker
allowance should be excluded from the definition of the term
"salary." Also, respondents manifest that the full sum of
P878,914.47 in Intermare's bank account was garnished and
subsequently withdrawn and deposited with the NLRC
Cashier of Tacloban City on February 14, 2007. On February
16, 2007, while this case was pending before the CA, the LA
issued an Order releasing the amount of P781,870.03 to
petitioner as his award, together with the sum of P86,744.44
to petitioner's former lawyer as attorney's fees, and the

amount of P3,570.00 as execution and deposit fees. Thus,

respondents pray that the instant petition be denied and that
petitioner be directed to return to Intermare the sum of
US$8,970.00 or its peso equivalent.[25]

that the existence of a statute prior to a determination of

unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past
cannot always be erased by a new judicial declaration.

On this note, petitioner counters that this new issue as to the

inclusion of the tanker allowance in the computation of the
award was not raised by respondents before the LA, the
NLRC and the CA, nor was it raised in respondents'
pleadings other than in their Memorandum before this Court,
which should not be allowed under the circumstances. [26]

The doctrine is applicable when a declaration of

unconstitutionality will impose an undue burden on those
who have relied on the invalid law. Thus, it was applied to a
criminal case when a declaration of unconstitutionality would
put the accused in double jeopardy or would put in limbo the
acts done by a municipality in reliance upon a law creating it.
[30]

The petition is impressed with merit.

Prefatorily, it bears emphasis that the unanimous finding of
the LA, the NLRC and the CA that the dismissal of petitioner
was illegal is not disputed. Likewise not disputed is the
tribunals' unanimous finding of bad faith on the part of
respondents, thus, warranting the award of moral and
exemplary damages and attorney's fees. What remains in
issue, therefore, is the constitutionality of the 5thparagraph of
Section 10 of R.A. No. 8042 and, necessarily, the proper
computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.
Verily, we have already declared in Serrano that the clause
"or for three months for every year of the unexpired term,
whichever is less" provided in the 5th paragraph of Section 10
of R.A. No. 8042 is unconstitutional for being violative of the
rights of Overseas Filipino Workers (OFWs) to equal
protection of the laws. In an exhaustive discussion of the
intricacies and ramifications of the said clause, this Court,
in Serrano, pertinently held:
The Court concludes that the subject clause contains a
suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are
illegally discharged, it imposes a 3-month cap on the
claim of OFWs with an unexpired portion of one year or
more in their contracts, but none on the claims of
other OFWs or local workers with fixed-term
employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar
disadvantage.[27]
Moreover, this Court held therein that the subject clause
does not state or imply any definitive governmental purpose;
hence, the same violates not just therein petitioner's right to
equal protection, but also his right to substantive due
process under Section 1, Article III of the Constitution.
[28]
Consequently, petitioner therein was accorded his salaries
for the entire unexpired period of nine months and 23 days of
his employment contract, pursuant to law and jurisprudence
prior to the enactment of R.A. No. 8042.
We have already spoken. Thus, this case should not be
different from Serrano.
As a general rule, an unconstitutional act is not a law; it
confers no rights; it imposes no duties; it affords no
protection; it creates no office; it is inoperative as if it has not
been passed at all. The general rule is supported by Article 7
of the Civil Code, which provides:
Art. 7. Laws are repealed only by subsequent ones, and
their violation or non-observance shall not be excused by
disuse or custom or practice to the contrary.
The doctrine of operative fact serves as an exception to the
aforementioned general rule. In Planters Products, Inc. v.
Fertiphil Corporation,[29] we held:
The doctrine of operative fact, as an exception to the general
rule, only applies as a matter of equity and fair play. It
nullifies the effects of an unconstitutional law by recognizing

Following Serrano, we hold that this case should not be

included in the aforementioned exception. After all, it was
not the fault of petitioner that he lost his job due to an act of
illegal dismissal committed by respondents. To rule otherwise
would be iniquitous to petitioner and other OFWs, and would,
in effect, send a wrong signal that principals/employers and
recruitment/manning agencies may violate an OFW's security
of tenure which an employment contract embodies and
actually profit from such violation based on an
unconstitutional provision of law.
In the same vein, we cannot subscribe to respondents'
postulation that the tanker allowance of US$130.00 should
not be included in the computation of the lump-sum salary to
be awarded to petitioner.
First. It is only at this late stage, more particularly in their
Memorandum, that respondents are raising this issue. It was
not raised before the LA, the NLRC, and the CA. They did not
even assail the award accorded by the CA, which computed
the lump-sum salary of petitioner at the basic salary of
US$1,430.00, and which clearly included the US$130.00
tanker allowance. Hence, fair play, justice, and due process
dictate that this Court cannot now, for the first time on
appeal, pass upon this question. Matters not taken up below
cannot be raised for the first time on appeal. They must be
raised seasonably in the proceedings before the lower
tribunals. Questions raised on appeal must be within the
issues framed by the parties; consequently, issues not raised
before the lower tribunals cannot be raised for the first time
on appeal.[31]
Second. Respondents' invocation of Serrano is unavailing.
Indeed, we made the following pronouncements in Serrano,
to wit:
The word salaries in Section 10(5) does not include
overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard
Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime,
leave pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the
regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays. [32]
A close perusal of the contract reveals that the tanker
allowance of US$130.00 was not categorized as a bonus but
was rather encapsulated in the basic salary clause, hence,
forming part of the basic salary of petitioner. Respondents
themselves in their petition for certiorari before the CA
averred that petitioner's basic salary, pursuant to the
contract, was "US$1,300.00 + US$130.00 tanker
allowance."[33] If respondents intended it differently, the
contract per se should have indicated that said allowance
does not form part of the basic salary or, simply, the contract
should have separated it from the basic salary clause.
A final note.
We ought to be reminded of the plight and sacrifices of our
OFWs. In Olarte v. Nayona,[34] this Court held that:

Our overseas workers belong to a disadvantaged class. Most

of them come from the poorest sector of our society. Their
profile shows they live in suffocating slums, trapped in an
environment of crimes. Hardly literate and in ill health, their
only hope lies in jobs they find with difficulty in our country.
Their unfortunate circumstance makes them easy prey to
avaricious employers. They will climb mountains, cross the
seas, endure slave treatment in foreign lands just to survive.
Out of despondence, they will work under sub-human
conditions and accept salaries below the minimum. The least
we can do is to protect them with our laws.
WHEREFORE, the Petition is GRANTED. The Court of
Appeals Decision dated February 28, 2007 and Resolution
dated August 30, 2007 are hereby MODIFIED to the effect
that petitioner is AWARDEDhis salaries for the entire
unexpired portion of his employment contract consisting of
nine months computed at the rate of US$1,430.00 per month.
All other awards are hereby AFFIRMED. No costs.
SO ORDERED.
Carpio, J., Chairperson, Peralta, Abad, and Mendoza,
JJ., concur.

SECOND DIVISION
[G.R. No. 175558 : February 08, 2012]
SKIPPERS UNITED PACIFIC, INC. AND SKIPPERS
MARITIME SERVICES, INC., LTD., PETITIONERS, VS.
NATHANIEL DOZA, NAPOLEON DE GRACIA, ISIDRO L.
LATA, AND CHARLIE APROSTA, RESPONDENTS.
DECISION
CARPIO, J.:
The Case
This is a Petition for Review under Rule 45 assailing the 5
July 2006 Decision[1] and 7 November 2006 Resolution[2] of
the Court of Appeals in CA-G.R. SP No. 88148. [3]cralaw
This arose from consolidated labor case [4] filed by seafarers
Napoleon De Gracia (De Gracia), Isidro L. Lata (Lata),
Charlie Aprosta (Aprosta), and Nathaniel Doza (Doza) against
local manning agency Skippers United Pacific, Inc. and its
foreign principal, Skippers Maritime Services, Inc., Ltd.
(Skippers) for unremitted home allotment for the month of
December 1998, salaries for the unexpired portion of their
employment contracts, moral damages, exemplary damages,
and attorney's fees. Skippers, on the other hand, answered
with a claim for reimbursement of De Gracia, Aprosta and
Lata's repatriation expenses, as well as award of moral
damages and attorney's fees.
De Gracia, Lata, Aprosta and Doza's (De Gracia, et al.) claims
were dismissed by the Labor Arbiter for lack of merit. [5] The
Labor Arbiter also dismissed Skippers' claims. [6] De Gracia, et
al. appealed[7]the Labor Arbiter's decision with the National
Labor Relations Commission (NLRC), but the First Division of
the NLRC dismissed the appeal for lack of merit. [8] Doza, et
al.'s Motion for Reconsideration was likewise denied by the
NLRC,[9] so they filed a Petition for Certiorari with the Court
of Appeals (CA).[10]

The CA granted the petition, reversed the Labor Arbiter and

NLRC Decisions, and awarded to De Gracia, Lata and
Aprosta their unremitted home allotment, three months
salary each representing the unexpired portion of their
employment contracts and attorney's fees. [11] No award was
given to Doza for lack of factual basis. [12] The CA denied
Skippers' Motion for Partial Reconsideration. [13] Hence, this
Petition.
The Facts
Skippers United Pacific, Inc. deployed, in behalf of Skippers,
De Gracia, Lata, and Aprosta to work on board the vessel MV
Wisdom Star, under the following terms and conditions:
Name:
Position:
Contract
Duration:
Basic Monthly
Salary:
Contract Date:

Napoleon O. De Gracia
3rd Engineer
10 months

Name:
Position:
Contract
Duration:
Basic Monthly
Salary:
Contract Date:

Isidro L. Lata
4th Engineer
12 months

Name:
Position:
Contract
Duration:
Basic Monthly
Salary:
Contract Date:

Charlie A. Aprosta
Third Officer
12 months

US$800.00
17 July 1998[14]

US$600.00
17 April 1998[15]

US$600.00
17 April 1998[16]

Paragraph 2 of all the employment contracts stated that:

"The terms and conditions of the Revised Employment
Contract Governing the Employment of All Seafarers
approved per Department Order No. 33 and Memorandum
Circular No. 55, both series of 1996 shall be strictly and
faithfully observed."[17] No employment contract was
submitted for Nathaniel Doza.
De Gracia, et al. claimed that Skippers failed to remit their
respective allotments for almost five months, compelling
them to air their grievances with the Romanian Seafarers
Free Union.[18] On 16 December 1998, ITF Inspector Adrian
Mihalcioiu of the Romanian Seafarers Union sent Captain
Savvas of Cosmos Shipping a fax letter, relaying the
complaints of his crew, namely: home allotment delay, unpaid
salaries (only advances), late provisions, lack of laundry
services (only one washing machine), and lack of
maintenance of the vessel (perforated and unrepaired deck).
[19]
To date, however, Skippers only failed to remit the home
allotment for the month of December 1998.[20] On 28 January
1999, De Gracia, et al. were unceremoniously discharged
from MV Wisdom Stars and immediately repatriated. [21] Upon
arrival in the Philippines, De Gracia, et al. filed a complaint
for illegal dismissal with the Labor Arbiter on 4 April 1999
and prayed for payment of their home allotment for the
month of December 1998, salaries for the unexpired portion
of their contracts, moral damages, exemplary damages, and
attorney's fees.[22]
Skippers, on the other hand, claims that at around 2:00 a.m.
on 3 December 1998, De Gracia, smelling strongly of alcohol,
went to the cabin of Gabriel Oleszek, Master of MV Wisdom
Stars, and was rude, shouting noisily to the master. [23] De
Gracia left the master's cabin after a few minutes and was
heard shouting very loudly somewhere down the corridors.
[24]
This incident was evidenced by the Captain's Report sent

via telex to Skippers on said date.[25]

Skippers also claims that at 12:00 noon on 22 January 1999,
four Filipino seafarers, namely Aprosta, De Gracia, Lata and
Doza, arrived in the master's cabin and demanded immediate
repatriation because they were not satisfied with the ship.
[26]
De Gracia, et al. threatened that they may become crazy
any moment and demanded for all outstanding payments due
to them.[27] This is evidenced by a telex of Cosmoship MV
Wisdom to Skippers, which however bears conflicting dates
of 22 January 1998 and 22 January 1999.[28]
Skippers also claims that, due to the disembarkation of De
Gracia, et al., 17 other seafarers disembarked under
abnormal circumstsances.[29] For this reason, it was
suggested that Polish seafarers be utilized instead of Filipino
seamen.[30] This is again evidenced by a fax of Cosmoship MV
Wisdom to Skippers, which bears conflicting dates of 24
January 1998 and 24 January 1999.[31]
Skippers, in its Position Paper, admitted non-payment of
home allotment for the month of December 1998, but prayed
for the offsetting of such amount with the repatriation
expenses in the following manner:[32]
Seafarer

Repatriation
Expense

Home
Allotment

Balance

De Gracia

US$1,340.00

US$900.00

US$440.00

Aprosta

US$1,340.00

US$600.00

US$740.00

Lata

US$1,340.00

US$600.00

US$740.00

Since De Gracia, et al. pre-terminated their contracts,

Skippers claims they are liable for their repatriation
expenses[33] in accordance with Section 19(G) of Philippine
Overseas Employment Administration (POEA) Memorandum
Circular No. 55, series of 1996 which states:
G. A seaman who requests for early termination of his
contract shall be liable for his repatriation cost as well as the
transportation cost of his replacement. The employer may, in
case of compassionate grounds, assume the transportation
cost of the seafarer's replacement.
Skippers also prayed for payment of moral damages and
attorney's fees.[34]
The Decision of the Labor Arbiter
The Labor Arbiter rendered his Decision on 18 February
2002, with its dispositive portion declaring:
WHEREFORE, judgment is hereby rendered dismissing
herein action for lack of merit. Respondents' claim for
reimbursement of the expenses they incurred in the
repatriation of complainant Nathaniel Doza is likewise
dismissed.
SO ORDERED.[35]
The Labor Arbiter dismissed De Gracia, et al.'s complaint for
illegal dismissal because the seafarers voluntarily preterminated their employment contracts by demanding for
immediate repatriation due to dissatisfaction with the ship.
[36]
The Labor Arbiter held that such voluntary pretermination of employment contract is akin to resignation,
[37]
a form of termination by employee of his employment
contract under Article 285 of the Labor Code. The Labor
Arbiter gave weight and credibility to the telex of the master
of the vessel to Skippers, claiming that De Gracia, et al.
demanded for immediate repatriation.[38] Due to the absence
of illegal dismissal, De Gracia, et. al.'s claim for salaries
representing the unexpired portion of their employment

contracts was dismissed.[39]

The Labor Arbiter also dismissed De Gracia et al.'s claim for
home allotment for December 1998.[40]The Labor Arbiter
explained that payment for home allotment is "in the nature
of extraordinary money where the burden of proof is shifted
to the worker who must prove he is entitled to such monetary
benefit."[41] Since De Gracia, et al. were not able to prove
their entitlement to home allotment, such claim was
dismissed.[42]
Lastly, Skippers' claim for reimbursement of repatriation
expenses was likewise denied, since Article 19(G) of POEA
Memorandum Circular No. 55, Series of 1996 allows the
employer, in case the seafarer voluntarily pre-terminates his
contract, to assume the repatriation cost of the seafarer on
compassionate grounds.[43]
The Decision of the NLRC
The NLRC, on 28 October 2002, dismissed De Gracia, et al.'s
appeal for lack of merit and affirmed the Labor Arbiter's
decision.[44] The NLRC considered De Gracia, et al.'s claim for
home allotment for December 1998 unsubstantiated, since
home allotment is a benefit which De Gracia, et al. must
prove their entitlement to.[45] The NLRC also denied the claim
for illegal dismissal because De Gracia, et al. were not able to
refute the telex received by Skippers from the vessel's
master that De Gracia, et al. voluntarily pre-terminated their
contracts and demanded immediate repatriation due to their
dissatisfaction with the ship's operations. [46]
The Decision of the Court of Appeals
The CA, on 5 July 2006, granted De Gracia, et al.'s petition
and reversed the decisions of the Labor Arbiter and NLRC,
its dispositive portion reading as follows:
WHEREFORE, the instant petition for certiorari is GRANTED.
The Resolution dated October 28, 2002 and the Order dated
August 31, 2004 rendered by the public respondent NLRC
are ANNULLED and SET ASIDE. Let another judgment be
entered holding private respondents jointly and severally
liable to petitioners for the payment of:
1.

Unremitted home allotment pay for the

month of December, 1998 or the equivalent
thereof in Philippine pesos:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00

2.

Salary for the unexpired portion of the

employment contract or for 3 months for
every year of the unexpired term,
whichever is less, or the equivalent thereof
in Philippine pesos:
a. De Gracia = US$2,400.00
b. Lata = US$1,800.00
c. Aprosta = US$1,800.00

3.

Attorney's fees and litigation expenses

equivalent to 10% of the total claims.

"a self-serving document that does not satisfy the

requirement of substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as
adequate to justify the conclusion that petitioners indeed
voluntarily demanded their immediate repatriation." [49] For
this reason, the repatriation of De Gracia, et al. prior to the
expiration of their contracts showed they were illegally
dismissed from employment.[50]
In addition, the failure to remit home allotment pay was
effectively admitted by Skippers, and prayed to be offset from
the repatriation expenses.[51] Since there is no proof that De
Gracia, et al. voluntarily pre-terminated their contracts, the
repatriation expenses are for the account of Skippers, and
cannot be offset with the home allotment pay for December
1998.[52]
No relief was granted to Doza due to lack of factual basis to
support his petition.[53] Attorney's fees equivalent to 10% of
the total claims was granted since it involved an action for
recovery of wages or where the employee was forced to
litigate and incur expenses to protect his rights and interest.
[54]

The Issues
Skippers, in its Petition for Review on Certiorari, assigned
the following errors in the CA Decision:
a) The Court of Appeals seriously erred in not giving due
credence to the master's telex message showing that the
respondents voluntarily requested to be repatriated.
b) The Court of Appeals seriously erred in finding petitioners
liable to pay backwages and the alleged unremitted home
allotment pay despite the finding of the Labor Arbiter and the
NLRC that the claims are baseless.
c) The Court of Appeals seriously erred in awarding
attorney's fees in favor of respondents despite its findings
that the facts attending in this case do not support the claim
for moral and exemplary damages.[55]
The Ruling of this Court
We deny the petition and affirm the CA Decision, but modify
the award.
For a worker's dismissal to be considered valid, it must
comply with both procedural and substantive due process.
The legality of the manner of dismissal constitutes
procedural due process, while the legality of the act of
dismissal constitutes substantive due process. [56]
Procedural due process in dismissal cases consists of the
twin requirements of notice and hearing. The employer must
furnish the employee with two written notices before the
termination of employment can be effected: (1) the first
notice apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the
second notice informs the employee of the employer's
decision to dismiss him. Before the issuance of the second
notice, the requirement of a hearing must be complied with
by giving the worker an opportunity to be heard. It is not
necessary that an actual hearing be conducted. [57]

SO ORDERED.[47]

Substantive due process, on the other hand, requires that

dismissal by the employer be made under a just or authorized
cause under Articles 282 to 284 of the Labor Code.

The CA declared the Labor Arbiter and NLRC to have

committed grave abuse of discretion when they relied upon
the telex message of the captain of the vessel stating that De
Gracia, et al. voluntarily pre-terminated their contracts and
demanded immediate repatriation.[48] The telex message was

In this case, there was no written notice furnished to De

Gracia, et al. regarding the cause of their dismissal.
Cosmoship furnished a written notice (telex) to Skippers, the
local manning agency, claiming that De Gracia, et al. were
repatriated because the latter voluntarily pre-terminated

their contracts. This telex was given credibility and weight by

the Labor Arbiter and NLRC in deciding that there was pretermination of the employment contract "akin to resignation"
and no illegal dismissal. However, as correctly ruled by the
CA, the telex message is "a biased and self-serving document
that does not satisfy the requirement of substantial
evidence." If, indeed, De Gracia, et al. voluntarily preterminated their contracts, then De Gracia, et al. should have
submitted their written resignations.
Article 285 of the Labor Code recognizes termination by the
employee of the employment contract by "serving written
notice on the employer at least one (1) month in advance."
Given that provision, the law contemplates the requirement
of a written notice of resignation. In the absence of a written
resignation, it is safe to presume that the employer
terminated the seafarers. In addition, the telex message
relied upon by the Labor Arbiter and NLRC bore conflicting
dates of 22 January 1998 and 22 January 1999, giving doubt
to the veracity and authenticity of the document. In 22
January 1998, De Gracia, et al. were not even employed yet
by the foreign principal. For these reasons, the dismissal of
De Gracia, et al. was illegal.
On the issue of home allotment pay, Skippers effectively
admitted non-remittance of home allotment pay for the
month of December 1998 in its Position Paper. Skippers
sought the repatriation expenses to be offset with the home
allotment pay. However, since De Gracia, et al.'s dismissal
was illegal, their repatriation expenses were for the account
of Skippers and could not be offset with the home allotment
pay.
Contrary to the claim of the Labor Arbiter and NLRC that the
home allotment pay is in "the nature of extraordinary money
where the burden of proof is shifted to the worker who must
prove he is entitled to such monetary benefit," Section 8 of
POEA Memorandum Circular No. 55, series of 1996, states
that the allotment actually constitutes at least eighty
percent (80%) of the seafarer's salary:
The seafarer is required to make an allotment which is
payable once a month to his designated allottee in the
Philippines through any authorized Philippine bank. The
master/employer/agency shall provide the seafarer with
facilities to do so at no expense to the seafarer. The allotment
shall be at least eighty percent (80%) of the seafarer's
monthly basic salary including backwages, if any. (Emphasis
supplied)
Paragraph 2 of the employment contracts of De Gracia, Lata
and Aprosta incorporated the provisions of above
Memorandum Circular No. 55, series of 1996, in the
employment contracts. Since said memorandum states that
home allotment of seafarers actually constitutes at least
eighty percent (80%) of their salary, home allotment pay is
not in the nature of an extraordinary money or benefit, but
should actually be considered as salary which should be paid
for services rendered. For this reason, such non-remittance
of home allotment pay should be considered as unpaid
salaries, and Skippers shall be liable to pay the home
allotment pay of De Gracia, et al. for the month of December
1998.
Damages
As admitted by Skippers in its Position Paper, the home
allotment pay for December 1998 due to De Gracia, Lata and
Aprosta is:
Seafarer

Home Allotment Pay

De Gracia

US$900.00

Aprosta

US$600.00

Lata

US$600.00

The monthly salary of De Gracia, according to his

employment contract, is only US$800.00. However, since
Skippers admitted in its Position Paper a higher home
allotment pay for De Gracia, we award the higher amount of
home allotment pay for De Gracia in the amount of
US$900.00. Since the home allotment pay can be considered
as unpaid salaries, the peso equivalent of the dollar amount
should be computed using the prevailing rate at the time of
termination since it was due and demandable to De Gracia, et
al. on 28 January 1999.
Section 10 of Republic Act No. 8042 (Migrant Workers Act)
provides for money claims in cases of unjust termination of
employment contracts:
In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, the
workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year
of the unexpired term, whichever is less.
The Migrant Workers Act provides that salaries for the
unexpired portion of the employent contract or three (3)
months for every year of the unexpired term, whichever is
less, shall be awarded to the overseas Filipino worker, in
cases of illegal dismissal. However, in 24 March
2009, Serrano v. Gallant Maritime Services and Marlow
Navigation Co. Inc.,[58] the Court, in an En Banc Decision,
declared unconstitutional the clause "or for three months for
every year of the unexpired term, whichever is less" and
awarded the entire unexpired portion of the employment
contract to the overseas Filipino worker.
On 8 March 2010, however, Section 7 of Republic Act No.
10022 (RA 10022) amended Section 10 of the Migrant
Workers Act, and once again reiterated the provision of
awarding the unexpired portion of the employent contract or
three (3) months for every year of the unexpired term,
whichever is less.
Nevertheless, since the termination occurred on January
1999 before the passage of the amendatory RA 10022, we
shall apply RA 8042, as unamended, without touching on the
constitutionality of Section 7 of RA 10022.
The declaration in March 2009 of the unconstitutionality of
the clause "or for three months for every year of the
unexpired term, whichever is less" in RA 8042 shall be given
retroactive effect to the termination that occurred in January
1999 because an unconstitutional clause in the law confers
no rights, imposes no duties and affords no protection. The
unconstitutional provision is inoperative, as if it was not
passed into law at all.[59]
As such, we compute the claims as follows:
Seafar Contr Contra Repatria Unexpired Monthl
er
act ct Date tion Date
Term
y
Term
Salary
De
10 17 Jul.
Gracia month 1998
s

Total
Claims

28 Jan.
1999

3 months US$80 US$293

& 20 days
0
3.34

12 17 Apr. 28 Jan.
month 1998
1999
s

2 months US$60 US$160

& 20 days
0
0

Aprost 12 17 Apr. 28 Jan.

a
month 1998
1999
s

2 months US$60 US$160

& 20 days
0
0

Lata

In all cases, the attorney's fees and expenses of litigation

must be reasonable.
Given the above computation, we modify the CA's imposition
of award, and grant to De Gracia, et al. salaries representing
the unexpired portion of their contracts, instead of salaries
for three (3) months.
Article 2219 of the Civil Code of the Philippines provides for
recovery of moral damages in certain cases:
Art. 2219. Moral damages may be recovered in the following
and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28,
29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or
abused, referred to in No. 3 of this article, may also recover
moral damages.

Article 111 of the Labor Code provides for a maximum award

of attorney's fees in cases of recovery of wages:
Art. 111. Attorney's fees.
a.

In cases of unlawful withholding of wages,

the culpable party may be assessed
attorney's fees equivalent to ten percent of
the amount of wages recovered.

b.

It shall be unlawful for any person to

demand or accept, in any judicial or
administrative proceedings for the recovery
of wages, attorney's fees which exceed ten
percent of the amount of wages recovered.

Since De Gracia, et al. had to secure the services of the

lawyer to recover their unpaid salaries and protect their
interest, we agree with the CA's imposition of attorney's fees
in the amount of ten percent (10%) of the total claims.cralaw

The spouse, descendants, ascendants, and brothers and

sisters may bring the action mentioned in No. 9 of this
article, in the order named.

WHEREFORE, we AFFIRM the Decision of the Court of

Appeals dated 5 July 2006 withMODIFICATION. Petitioners
Skippers United Pacific, Inc. and Skippers Maritime Services
Inc., Ltd. are jointly and severally liable for payment of the
following:

Article 2229 of the Civil Code, on the other hand, provides for
recovery of exemplary damages:

1) Unremitted home allotment pay for the month of

December 1998 in its equivalent rate in Philippine Pesos at
the time of termination on 28 January 1999:

Art. 2229. Exemplary or corrective damages are imposed, by

way of example or correction for the public good, in addition
to the moral, temperate, liquidated or compensatory
damages.

a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00

In this case, we agree with the CA in not awarding moral and

exemplary damages for lack of factual basis.
Lastly, Article 2208 of the Civil Code provides for recovery of
attorney's fees and expenses of litigation:
Art. 2208. In the absence of stipulation, attorney's fees and
expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the
plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith
in refusing to satisfy the plaintiff's plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers,
laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation
and employer's liability laws;
(9) In a separate civil action to recover civil liability arising
from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation
should be recovered.

2) Salary for the unexpired portion of the employment

contract or its current equivalent in Philippine Pesos:
a. De Gracia = US$2,933.34
b. Lata = US$1,600.00
c. Aprosta = US$1,600.00
3) Attorney's fees and litigation expenses equivalent to 10%
of the total claims.
SO ORDERED.
Brion, Perez, Sereno, and Reyes, JJ., concur.

United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last
clause in the 5th paragraph of Section 10, Republic Act (R.A.)
No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of
overseas employment without just, valid or authorized cause
as defined by law or contract, the workers shall be entitled to
the full reimbursement of his placement fee with interest of
twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three
(3) months for every year of the unexpired term,
whichever is less.
x x x x (Emphasis and underscoring supplied)cralawlibrary
does not magnify the contributions of overseas Filipino
workers (OFWs) to national development, but exacerbates
the hardships borne by them by unduly limiting their
entitlement in case of illegal dismissal to their lump-sum
salary either for the unexpired portion of their employment
contract "or for three months for every year of the unexpired
term, whichever is less" (subject clause). Petitioner claims
that the last clause violates the OFWs' constitutional rights in
that it impairs the terms of their contract, deprives them of
equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of
Court, petitioner assails the December 8, 2004 Decision 3 and
April 1, 2005 Resolution4 of the Court of Appeals (CA), which
applied the subject clause, entreating this Court to declare
the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and
Marlow Navigation Co., Ltd. (respondents) under a Philippine
Overseas Employment Administration (POEA)-approved
Contract of Employment with the following terms and
conditions:

EN BANC
[G.R. NO. 167614 : March 24, 2009]
ANTONIO M. SERRANO, Petitioner, v. Gallant MARITIME
SERVICES, INC. and MARLOW NAVIGATION CO.,
INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift
entire families and communities out of poverty. Their
earnings have built houses, provided health care, equipped
schools and planted the seeds of businesses. They have
woven together the world by transmitting ideas and
knowledge from country to country. They have provided the
dynamic human link between cultures, societies and
economies. Yet, only recently have we begun to understand
not only how much international migration impacts
development, but how smart public policies can magnify this
effect.

Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay

7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was

constrained to accept a downgraded employment contract for
the position of Second Officer with a monthly salary of
US$1,000.00, upon the assurance and representation of
respondents that he would be made Chief Officer by the end
of April 1998.6
Respondents did not deliver on their promise to make
petitioner Chief Officer.7 Hence, petitioner refused to stay on
as Second Officer and was repatriated to the Philippines on
May 26, 1998.8
Petitioner's employment contract was for a period of 12
months or from March 19, 1998 up to March 19, 1999, but at
the time of his repatriation on May 26, 1998, he had served
only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twentythree (23) days.

Petitioner filed with the Labor Arbiter (LA) a

Complaint9 against respondents for constructive dismissal
and for payment of his money claims in the total amount of
US$26,442.73, broken down as follows:

fees equivalent to ten percent (10%) of the total amount

awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary
damages are hereby DISMISSED for lack of merit.

May 27/31, 1998 (5 days) incl. Leave pay

US$ 413.90

June 01/30, 1998

2,590.00

July 01/31, 1998

2,590.00

August 01/31, 1998

2,590.00

Sept. 01/30, 1998

2,590.00

Oct. 01/31, 1998

2,590.00

Nov. 01/30, 1998

2,590.00

Dec. 01/31, 1998

2,590.00

Jan. 01/31, 1999

2,590.00

Feb. 01/28, 1999

2,590.00

Mar. 1/19, 1999 (19 days) incl. leave pay

1,640.00
-

All other claims are hereby DISMISSED.

SO ORDERED.13 (Emphasis supplied)cralawlibrary
In awarding petitioner a lump-sum salary of US$8,770.00,
the LA based his computation on the salary period of three
months only - - rather than the entire unexpired portion of
nine months and 23 days of petitioner's employment contract
- applying the subject clause. However, the LA applied the
salary rate of US$2,590.00, consisting of petitioner's "[b]asic
salary, US$1,400.00/month + US$700.00/month, fixed
overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month."14

25,382.23

Respondents appealed15 to the National Labor Relations

Commission (NLRC) to question the finding of the LA that
petitioner was illegally dismissed.
-Petitioner also appealed16 to the NLRC on the sole issue that
-the LA erred in not applying the ruling of the Court in Triple
-Integrated Services, Inc. v. National Labor Relations
Commission17 that in case of illegal dismissal, OFWs are
entitled to their salaries for the unexpired portion of their
contracts.18

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) +

TOTAL CLAIM

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

Decision, to wit:

1,060.5010
-

US$ 26,442.7311

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

The LA rendered a Decision dated July 15, 1999, declaring
the dismissal of petitioner illegal and awarding him monetary
benefits, to wit:
WHEREFORE, premises considered, judgment is hereby
rendered declaring that the dismissal of the complainant
(petitioner) by the respondents in the above-entitled case was
illegal and the respondents are hereby ordered to pay the
complainant [petitioner], jointly and severally, in Philippine
Currency, based on the rate of exchange prevailing at the
time of payment, the amount of EIGHT THOUSAND SEVEN
HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainant's salary for three (3)
months of the unexpired portion of the aforesaid
contract of employment.rbl rl l lbrr
The respondents are likewise ordered to pay the complainant
[petitioner], jointly and severally, in Philippine Currency,
based on the rate of exchange prevailing at the time of
payment, the amount of FORTY FIVE U.S. DOLLARS (US$
45.00),12 representing the complainant's claim for a salary
differential. In addition, the respondents are hereby ordered
to pay the complainant, jointly and severally, in Philippine
Currency, at the exchange rate prevailing at the time of
payment, the complainant's (petitioner's) claim for attorney's

-WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.

-Respondents are hereby ordered to pay complainant, jointly
-and severally, in Philippine currency, at the prevailing rate of
-exchange at the time of payment the following:
1. Three (3) months salary
$1,400 x 3

US$4,200.00

2. Salary differential

45.00

US$4,245.00
3. 10% Attorney's fees

424.50

TOTAL

US$4,669.50

The other findings are affirmed.

SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum
salary awarded to petitioner by reducing the applicable
salary rate from US$2,590.00 to US$1,400.00 because R.A.
No. 8042 "does not provide for the award of overtime pay,
which should be proven to have been actually performed, and
for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this
time he questioned the constitutionality of the subject
clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA,
reiterating the constitutional challenge against the subject
clause.24 After initially dismissing the petition on a
technicality, the CA eventually gave due course to it, as

directed by this Court in its Resolution dated August 7, 2003

which granted the Petition for Certiorari, docketed as G.R.
No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the
NLRC ruling on the reduction of the applicable salary rate;
however, the CA skirted the constitutional issue raised by
petitioner.25
His Motion for Reconsideration26 having been denied by the
CA,27 petitioner brings his cause to this Court on the
following grounds:
I
The Court of Appeals and the labor tribunals have decided
the case in a way not in accord with applicable decision of
the Supreme Court involving similar issue of granting unto
the migrant worker back wages equal to the unexpired
portion of his contract of employment instead of limiting it to
three (3) months
II
In the alternative that the Court of Appeals and the Labor
Tribunals were merely applying their interpretation of
Section 10 of Republic Act No. 8042, it is submitted that the
Court of Appeals gravely erred in law when it failed to
discharge its judicial duty to decide questions of substance
not theretofore determined by the Honorable Supreme Court,
particularly, the constitutional issues raised by the petitioner
on the constitutionality of said law, which unreasonably,
unfairly and arbitrarily limits payment of the award for back
wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of]
Sec. 10 of Republic Act No. 8042, the Court of Appeals
gravely erred in law in excluding from petitioner's award the
overtime pay and vacation pay provided in his contract since
under the contract they form part of his salary. 28
On February 26, 2008, petitioner wrote the Court to
withdraw his petition as he is already old and sickly, and he
intends to make use of the monetary award for his medical
treatment and medication.29 Required to comment, counsel
for petitioner filed a motion, urging the court to allow partial
execution of the undisputed monetary award and, at the
same time, praying that the constitutional question be
resolved.30
Considering that the parties have filed their respective
memoranda, the Court now takes up the full merit of the
petition mindful of the extreme importance of the
constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the
dismissal of petitioner was illegal is not disputed. Likewise
not disputed is the salary differential of US$45.00 awarded to
petitioner in all three fora. What remains disputed is only the
computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed
the lump-sum salary of petitioner at the monthly rate of
US$1,400.00 covering the period of three months out of the

unexpired portion of nine months and 23 days of his

employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause,
petitioner contends that, in addition to the US$4,200.00
awarded by the NLRC and the CA, he is entitled to
US$21,182.23 more or a total of US$25,382.23, equivalent to
his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of
US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional
because it unduly impairs the freedom of OFWs to negotiate
for and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary
package.32 It also impinges on the equal protection clause, for
it treats OFWs differently from local Filipino workers (local
workers) by putting a cap on the amount of lump-sum salary
to which OFWs are entitled in case of illegal dismissal, while
setting no limit to the same monetary award for local
workers when their dismissal is declared illegal; that the
disparate treatment is not reasonable as there is no
substantial distinction between the two groups; 33 and that it
defeats Section 18,34 Article II of the Constitution which
guarantees the protection of the rights and welfare of all
Filipino workers, whether deployed locally or overseas. 35
Moreover, petitioner argues that the decisions of the CA and
the labor tribunals are not in line with existing jurisprudence
on the issue of money claims of illegally dismissed OFWs.
Though there are conflicting rulings on this, petitioner urges
the Court to sort them out for the guidance of affected
OFWs.36
Petitioner further underscores that the insertion of the
subject clause into R.A. No. 8042 serves no other purpose but
to benefit local placement agencies. He marks the statement
made by the Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary,
shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the
court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the
acts of the foreign employer. To protect them and to promote
their continued helpful contribution in deploying Filipino
migrant workers, liability for money claims was reduced
under Section 10 of R.A. No. 8042. 37 (Emphasis
supplied)cralawlibrary
Petitioner argues that in mitigating the solidary liability of
placement agencies, the subject clause sacrifices the wellbeing of OFWs. Not only that, the provision makes foreign
employers better off than local employers because in cases
involving the illegal dismissal of employees, foreign
employers are liable for salaries covering a maximum of only
three months of the unexpired employment contract while
local employers are liable for the full lump-sum salaries of
their employees. As petitioner puts it:
In terms of practical application, the local employers are not
limited to the amount of backwages they have to give their
employees they have illegally dismissed, following wellentrenched and unequivocal jurisprudence on the matter. On
the other hand, foreign employers will only be limited to
giving the illegally dismissed migrant workers the maximum
of three (3) months unpaid salaries notwithstanding the
unexpired term of the contract that can be more than three
(3) months.38

Lastly, petitioner claims that the subject clause violates the

due process clause, for it deprives him of the salaries and
other emoluments he is entitled to under his fixed-period
employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend
that the constitutional issue should not be entertained, for
this was belatedly interposed by petitioner in his appeal
before the CA, and not at the earliest opportunity, which was
when he filed an appeal before the NLRC. 40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No.
8042 took effect on July 15, 1995, its provisions could not
have impaired petitioner's 1998 employment contract.
Rather, R.A. No. 8042 having preceded petitioner's contract,
the provisions thereof are deemed part of the minimum terms
of petitioner's employment, especially on the matter of
money claims, as this was not stipulated upon by the
parties.42
Moreover, the OSG emphasizes that OFWs and local workers
differ in terms of the nature of their employment, such that
their rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that
distinguish OFWs from local workers: first, while local
workers perform their jobs within Philippine territory, OFWs
perform their jobs for foreign employers, over whom it is
difficult for our courts to acquire jurisdiction, or against
whom it is almost impossible to enforce judgment; and
second, as held in Coyoca v. National Labor Relations
Commission43 and Millares v. National Labor Relations
Commission,44 OFWs are contractual employees who can
never acquire regular employment status, unlike local
workers who are or can become regular employees. Hence,
the OSG posits that there are rights and privileges exclusive
to local workers, but not available to OFWs; that these
peculiarities make for a reasonable and valid basis for the
differentiated treatment under the subject clause of the
money claims of OFWs who are illegally dismissed. Thus, the
provision does not violate the equal protection clause nor
Section 18, Article II of the Constitution. 45
Lastly, the OSG defends the rationale behind the subject
clause as a police power measure adopted to mitigate the
solidary liability of placement agencies for this "redounds to
the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate
placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed
under decent and humane conditions."46
The Court's Ruling

aggrieved that the labor tribunals and the CA computed his

monetary award based on the salary period of three months
only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne
in mind that the requirement that a constitutional issue be
raised at the earliest opportunity entails the interposition of
the issue in the pleadings before a competent court, such
that, if the issue is not raised in the pleadings before that
competent court, it cannot be considered at the trial and, if
not considered in the trial, it cannot be considered on
appeal.52 Records disclose that the issue on the
constitutionality of the subject clause was first raised, not in
petitioner's appeal with the NLRC, but in his Motion for
Partial Reconsideration with said labor tribunal,53 and
reiterated in his Petition for Certiorari before the
CA.54 Nonetheless, the issue is deemed seasonably raised
because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is
a labor tribunal that merely performs a quasi-judicial
function - its function in the present case is limited to
determining questions of fact to which the legislative policy
of R.A. No. 8042 is to be applied and to resolving such
questions in accordance with the standards laid down by the
law itself;55 thus, its foremost function is to administer and
enforce R.A. No. 8042, and not to inquire into the validity of
its provisions. The CA, on the other hand, is vested with the
power of judicial review or the power to declare
unconstitutional a law or a provision thereof, such as the
subject clause.56 Petitioner's interposition of the
constitutional issue before the CA was undoubtedly
seasonable. The CA was therefore remiss in failing to take up
the issue in its decision.
The third condition that the constitutional issue be critical to
the resolution of the case likewise obtains because the
monetary claim of petitioner to his lump-sum salary for the
entire unexpired portion of his 12-month employment
contract, and not just for a period of three months, strikes at
the very core of the subject clause.
Thus, the stage is all set for the determination of the
constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes
with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive 57 is
not tenable.
Section 10, Article III of the Constitution provides:

The Court sustains petitioner on the first and second issues.

No law impairing the obligation of contracts shall be passed.

When the Court is called upon to exercise its power of

judicial review of the acts of its co-equals, such as the
Congress, it does so only when these conditions obtain: (1)
that there is an actual case or controversy involving a conflict
of rights susceptible of judicial determination;47 (2) that the
constitutional question is raised by a proper party48 and at
the earliest opportunity;49 and (3) that the constitutional
question is the very lis mota of the case, 50 otherwise the
Court will dismiss the case or decide the same on some other
ground.51

The prohibition is aligned with the general principle that

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

Without a doubt, there exists in this case an actual

controversy directly involving petitioner who is personally

As aptly observed by the OSG, the enactment of R.A. No.

8042 in 1995 preceded the execution of the employment

contract between petitioner and respondents in 1998. Hence,

it cannot be argued that R.A. No. 8042, particularly the
subject clause, impaired the employment contract of the
parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have
incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the
subject clause may not be declared unconstitutional on the
ground that it impinges on the impairment clause, for the law
was enacted in the exercise of the police power of the State
to regulate a business, profession or calling, particularly the
recruitment and deployment of OFWs, with the noble end in
view of ensuring respect for the dignity and well-being of
OFWs wherever they may be employed.61 Police power
legislations adopted by the State to promote the health,
morals, peace, education, good order, safety, and general
welfare of the people are generally applicable not only to
future contracts but even to those already in existence, for all
private contracts must yield to the superior and legitimate
measures taken by the State to promote public welfare. 62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property
without due process of law nor shall any person be denied
the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all
members of the labor sector, without distinction as to place
of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the
foregoing constitutional provisions translate to economic
security and parity: all monetary benefits should be equally
enjoyed by workers of similar category, while all monetary
obligations should be borne by them in equal degree; none
should be denied the protection of the laws which is enjoyed
by, or spared the burden imposed on, others in like
circumstances.65
Such rights are not absolute but subject to the inherent
power of Congress to incorporate, when it sees fit, a system
of classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is
based on substantial distinctions; 2) it is germane to the
purposes of the law; 3) it is not limited to existing conditions
only; and 4) it applies equally to all members of the class. 66
There are three levels of scrutiny at which the Court reviews
the constitutionality of a classification embodied in a law: a)
the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally
related to serving a legitimate state interest; 67 b) the middletier or intermediate scrutiny in which the government must
show that the challenged classification serves an important
state interest and that the classification is at least
substantially related to serving that interest;68 and c) strict
judicial scrutiny69 in which a legislative classification which
impermissibly interferes with the exercise of a fundamental
right70 or operates to the peculiar disadvantage of a suspect
class71 is presumed unconstitutional, and the burden is upon
the government to prove that the classification is necessary
to achieve a compelling state interest and that it is
the least restrictive means to protect such interest.72

Under American jurisprudence, strict judicial scrutiny is

triggered by suspect classifications73 based on race74 or
gender75 but not when the classification is drawn along
income categories.76
It is different in the Philippine setting. In Central Bank (now
Bangko Sentral ng Pilipinas) Employee Association, Inc. v.
Bangko Sentral ng Pilipinas,77 the constitutionality of a
provision in the charter of the Bangko Sentral ng
Pilipinas (BSP), a government financial institution (GFI), was
challenged for maintaining its rank-and-file employees under
the Salary Standardization Law (SSL), even when the rankand-file employees of other GFIs had been exempted from the
SSL by their respective charters. Finding that the disputed
provision contained a suspect classification based on salary
grade, the Court deliberately employed the standard of strict
judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the
Court revealed the broad outlines of its judicial philosophy, to
wit:
Congress retains its wide discretion in providing for a valid
classification, and its policies should be accorded recognition
and respect by the courts of justice except when they run
afoul of the Constitution. The deference stops where the
classification violates a fundamental right, or prejudices
persons accorded special protection by the
Constitution. When these violations arise, this Court must
discharge its primary role as the vanguard of constitutional
guaranties, and require a stricter and more exacting
adherence to constitutional limitations. Rational basis should
not suffice.
Admittedly, the view that prejudice to persons accorded
special protection by the Constitution requires a stricter
judicial scrutiny finds no support in American or English
jurisprudence. Nevertheless, these foreign decisions and
authorities are not per se controlling in this jurisdiction. At
best, they are persuasive and have been used to support
many of our decisions. We should not place undue and
fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot
come to our own decisions through the employment of our
own endowments. We live in a different ambience and must
decide our own problems in the light of our own interests and
needs, and of our qualities and even idiosyncrasies as a
people, and always with our own concept of law and justice.
Our laws must be construed in accordance with the intention
of our own lawmakers and such intent may be deduced from
the language of each law and the context of other local
legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all
and the end-all of all our laws. And it need not be stressed
that our public interest is distinct and different from others.
xxx
Further, the quest for a better and more "equal" world calls
for the use of equal protection as a tool of effective judicial
intervention.
Equality is one ideal which cries out for bold attention and
action in the Constitution. The Preamble proclaims "equality"
as an ideal precisely in protest against crushing inequities in
Philippine society. The command to promote social justice in
Article II, Section 10, in "all phases of national development,"
further explicitated in Article XIII, are clear commands to the
State to take affirmative action in the direction of greater
equality. x x x [T]here is thus in the Philippine Constitution no
lack of doctrinal support for a more vigorous state effort
towards achieving a reasonable measure of equality.

Our present Constitution has gone further in guaranteeing

vital social and economic rights to marginalized groups of
society, including labor. Under the policy of social justice, the
law bends over backward to accommodate the interests of
the working class on the humane justification that those with
less privilege in life should have more in law. And the
obligation to afford protection to labor is incumbent not only
on the legislative and executive branches but also on the
judiciary to translate this pledge into a living reality. Social
justice calls for the humanization of laws and the equalization
of social and economic forces by the State so that justice in
its rational and objectively secular conception may at least be
approximated.
xxx
Under most circumstances, the Court will exercise judicial
restraint in deciding questions of constitutionality,
recognizing the broad discretion given to Congress in
exercising its legislative power. Judicial scrutiny would be
based on the "rational basis" test, and the legislative
discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial
of a fundamental right, or the perpetuation of prejudice
against persons favored by the Constitution with
special protection, judicial scrutiny ought to be more
strict. A weak and watered down view would call for the
abdication of this Court's solemn duty to strike down any law
repugnant to the Constitution and the rights it enshrines.
This is true whether the actor committing the
unconstitutional act is a private person or the government
itself or one of its instrumentalities. Oppressive acts will be
struck down regardless of the character or nature of the
actor.
xxx
In the case at bar, the challenged proviso operates on the
basis of the salary grade or officer-employee status. It is akin
to a distinction based on economic class and status, with the
higher grades as recipients of a benefit specifically withheld
from the lower grades. Officers of the BSP now receive
higher compensation packages that are competitive with the
industry, while the poorer, low-salaried employees are limited
to the rates prescribed by the SSL. The implications are quite
disturbing: BSP rank-and-file employees are paid the strictly
regimented rates of the SSL while employees higher in rank possessing higher and better education and opportunities for
career advancement - are given higher compensation
packages to entice them to stay. Considering that majority, if
not all, the rank-and-file employees consist of people whose
status and rank in life are less and limited, especially in
terms of job marketability, it is they - and not the officers who have the real economic and financial need for the
adjustment . This is in accord with the policy of the
Constitution "to free the people from poverty, provide
adequate social services, extend to them a decent standard of
living, and improve the quality of life for all." Any act of
Congress that runs counter to this constitutional desideratum
deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)cralawlibrary
Imbued with the same sense of "obligation to afford
protection to labor," the Court in the present case also
employs the standard of strict judicial scrutiny, for it
perceives in the subject clause a suspect classification
prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially
neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a

discriminatory intent against, and an invidious impact on,

OFWs at two levels:
First, OFWs with employment contracts of less than one
year vis - -vis OFWs with employment contracts of one year
or more;
Second, among OFWs with employment contracts of more
than one year; and
Third, OFWs vis - -vis local workers with fixed-period
employment;
OFWs with employment contracts of less than one
year vis - -vis OFWs with employment contracts of one
year or more
As pointed out by petitioner,78 it was in Marsaman Manning
Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid
down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the
choice of which amount to award an illegally dismissed
overseas contract worker, i.e., whether his salaries for
the unexpired portion of his employment contract or
three (3) months' salary for every year of the unexpired
term, whichever is less, comes into play only when the
employment contract concerned has a term of at least
one (1) year or more. This is evident from the words
"for every year of the unexpired term" which follows
the words "salaries x x x for three months."
To follow petitioners' thinking that private respondent is
entitled to three (3) months salary only simply because it is
the lesser amount is to completely disregard and overlook
some words used in the statute while giving effect to some.
This is contrary to the well-established rule in legal
hermeneutics that in interpreting a statute, care should be
taken that every part or word thereof be given effect since
the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them
advisedly. Ut res magis valeat quam pereat. 80 (Emphasis
supplied)cralawlibrary
In Marsaman, the OFW involved was illegally dismissed two
months into his 10-month contract, but was awarded his
salaries for the remaining 8 months and 6 days of his
contract.
Prior to Marsaman, however, there were two cases in which
the Court made conflicting rulings on Section 10(5). One
was Asian Center for Career and Employment System and
Services v. National Labor Relations Commission (Second
Division, October 1998),81 which involved an OFW who was
awarded a two-year employment contract, but was dismissed
after working for one year and two months. The LA declared
his dismissal illegal and awarded him SR13,600.00 as lumpsum salary covering eight months, the unexpired portion of
his contract. On appeal, the Court reduced the award to
SR3,600.00 equivalent to his three months' salary, this being
the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from
overseas employment without just, valid or authorized cause
is entitled to his salary for the unexpired portion of his
employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private

respondent's employment contract is eight (8) months.
Private respondent should therefore be paid his basic salary
corresponding to three (3) months or a total of SR3,600. 82

The disparity in the treatment of these two groups cannot be

discounted. In Skippers, the respondent OFW worked for
only 2 months out of his 6-month contract, but was awarded
his salaries for the remaining 4 months. In contrast, the
respondent OFWs in Oriental andPCL who had also worked
for about 2 months out of their 12-month contracts were
awarded their salaries for only 3 months of the unexpired
portion of their contracts. Even the OFWs involved
in Talidano and Univan who had worked for a longer period
of 3 months out of their 12-month contracts before being
illegally dismissed were awarded their salaries for only 3
months.

Another was Triple-Eight Integrated Services, Inc. v. National

Labor Relations Commission(Third Division, December
1998),83 which involved an OFW (therein respondent Erlinda
Osdana) who was originally granted a 12-month contract,
which was deemed renewed for another 12 months. After
serving for one year and seven-and-a-half months,
respondent Osdana was illegally dismissed, and the Court
awarded her salaries for the entire unexpired portion of four
and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been
adopted in the following cases:

Title

Contract
Period

Period of
Service

Unexpired Period

ers v.
uad84

6 months

2 months

4 months

ipping v.
o Chua 85

9 months

8 months

4 months

nnial
arine v.
ruz l86

9 months

4 months

5 months

ano v.
on87

12 months

3 months

9 months

12 months

3 months

9 months

12 months

more than 2
months

10 months

NLRC90

12 months

more than 2
months

more or less 9
months

te v.
ona91

12 months

21 days

Ferrer92

12 months

16 days

v. CA

case of illegal dismissal, they are entitled to monetary award

equivalent to only 3 months of the unexpired portion of their
contracts.

88

v. CA

89

v.

93

mploy v.
, et al.94

12 months

9 months and 7
days

To illustrate the disparity even more vividly, the Court

assumes a hypothetical OFW-A with an employment contract
of 10 months
at a monthly salary rate of US$1,000.00 and a
Period Applied
in
hypothetical
OFW-B with an employment contract of 15
the Computation
of
months with the same monthly salary rate of US$1,000.00.
the Monetary
Both commenced work on the same day and under the same
Award
employer, and were illegally dismissed after one month of
work. Under the subject clause, OFW-A will be entitled to
4 months
US$9,000.00, equivalent to his salaries for the remaining 9
months of his contract, whereas OFW-B will be entitled to
only US$3,000.00, equivalent to his salaries for 3 months of
4 months
the unexpired portion of his contract, instead of
US$14,000.00 for the unexpired portion of 14 months of his
contract, as the US$3,000.00 is the lesser amount.
5 months
The disparity becomes more aggravating when the Court
takes into account jurisprudence that, prior to the
effectivity of R.A. No. 8042 on July 14, 1995, 97 illegally
3 months
dismissed OFWs, no matter how long the period of their
employment contracts, were entitled to their salaries for the
entire unexpired portions of their contracts. The matrix
3 months
below speaks for itself:
3 months

Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applie
Computation
Monetary A

11 months and 9ATCI v. CA,3et

months
days

2 years

2 months

22 months

22 month

v.
11 months and Phil.
24 Integrated
3 months
days

2 years

7 days

23 months and
23 days

9 months

15 months

15 month

2 months

22 months

22 month

5 months

19 months

19 month

4 months

8 months

8 month

6 months and
22 days

5 months and
18 days

3 months

NLC100 and 23 days

2 years
2 months and 23 JGB 2v.months
days
Agoy v. NLRC101
2 years

12 months

10 months

2 months

Unexpired portion
EDI v. NLRC, et
2 years

rish
me v.
nzor 95

2 years

26 days

23 months and 4
6 months or 3 months
Barros v.for
NLRC,
days
each year12
of months
contract

nna
wer v.
nos96

1 year, 10
months and
28 days

1 month

12 months
1 year, 9 months Philippine
6 months or 3 months
v. year of
and 28 days Transmarine
for
each
104
contract

As the foregoing matrix readily shows, the subject clause

classifies OFWs into two categories. The first category
includes OFWs with fixed-period employment contracts of
less than one year; in case of illegal dismissal, they are
entitled to their salaries for the entire unexpired portion of
their contract. The second category consists of OFWs with
fixed-period employment contracts of one year or more; in

23 months and

5 months and

It is plain that prior to R.A. No. 8042, all OFWs, regardless of

contract periods or the unexpired portions thereof, were
treated alike in terms of the computation of their monetary
benefits in case of illegal dismissal. Their claims were
subjected to a uniform rule of computation: their basic
salaries multiplied by the entire unexpired portion of their
employment contracts.

The enactment of the subject clause in R.A. No. 8042

introduced a differentiated rule of computation of the money
claims of illegally dismissed OFWs based on their
employment periods, in the process singling out one
category whose contracts have an unexpired portion of one
year or more and subjecting them to the peculiar
disadvantage of having their monetary awards limited to
their salaries for 3 months or for the unexpired portion
thereof, whichever is less, but all the while sparing the other
category from such prejudice, simply because the latter's
unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More
Than One Year
Upon closer examination of the terminology employed in the
subject clause, the Court now has misgivings on the accuracy
of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3)
months for every year of the unexpired term, whichever is
less" contains the qualifying phrases "every year" and
"unexpired term." By its ordinary meaning, the word "term"
means a limited or definite extent of time. 105 Corollarily, that
"every year" is but part of an "unexpired term" is significant
in many ways: first, the unexpired term must be at least one
year, for if it were any shorter, there would be no occasion
for such unexpired term to be measured by every year; and
second, the original term must be more than one year, for
otherwise, whatever would be the unexpired term thereof
will not reach even a year. Consequently, the more decisive
factor in the determination of when the subject clause "for
three (3) months forevery year of the unexpired
term, whichever is less" shall apply is not the length of the
original contract period as held in Marsaman,106 but the
length of the unexpired portion of the contract period - - the
subject clause applies in cases when the unexpired portion of
the contract period is at least one year, which arithmetically
requires that the original contract period be more than one
year.
Viewed in that light, the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for
more than one year: those who are illegally dismissed with
less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while
those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the subject
clause, and their monetary benefits limited to their salaries
for three months only.
To concretely illustrate the application of the foregoing
interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month
contract at a salary rate of US$1,000.00 per month. OFW-C is
illegally dismissed on the 12th month, and OFW-D, on the
13th month. Considering that there is at least 12 months
remaining in the contract period of OFW-C, the subject
clause applies to the computation of the latter's monetary
benefits. Thus, OFW-C will be entitled, not to US$12,000,00
or the latter's total salaries for the 12 months unexpired
portion of the contract, but to the lesser amount of
US$3,000.00 or the latter's salaries for 3 months out of the
12-month unexpired term of the contract. On the other hand,
OFW-D is spared from the effects of the subject clause, for
there are only 11 months left in the latter's contract period.
Thus, OFW-D will be entitled to US$11,000.00, which is
equivalent to his/her total salaries for the entire 11-month
unexpired portion.
OFWs vis - -vis Local Workers
With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system

of computation of the monetary awards of illegally dismissed
OFWs was in place. This uniform system was applicable even
to local workers with fixed-term employment.107
The earliest rule prescribing a uniform system of
computation was actually Article 299 of the Code of
Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their
shop clerks and employees should have been made of a fixed
period, none of the contracting parties, without the consent
of the other, may withdraw from the fulfillment of said
contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the
loss and damage suffered, with the exception of the
provisions contained in the following articles.
In Reyes v. The Compaia Maritima, 109 the Court applied the
foregoing provision to determine the liability of a shipping
company for the illegal discharge of its managers prior to the
expiration of their fixed-term employment. The Court therein
held the shipping company liable for the salaries of its
managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are
concerned: Article 605 of the Code of Commerce which
provides:
Article 605. If the contracts of the captain and members of
the crew with the agent should be for a definite period or
voyage, they cannot be discharged until the fulfillment of
their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and
damage caused to the vessel or to its cargo by malice or
manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc.
v. Ogilvie,110 in
which the Court held the shipping company liable for the
salaries and subsistence allowance of its illegally dismissed
employees for the entire unexpired portion of their
employment contracts.
While Article 605 has remained good law up to the
present,111 Article 299 of the Code of Commerce was replaced
by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other
laborers hired for a certain time and for a certain work
cannot leave or be dismissed without sufficient cause, before
the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the
disjunctive "or" in Article 1586 as a conjunctive "and" so as to
apply the provision to local workers who are employed for a
time certain although for no particular skill. This
interpretation of Article 1586 was reiterated in Garcia
Palomar v. Hotel de France Company.113 And in both Lemoine
and Palomar, the Court adopted the general principle that in
actions for wrongful discharge founded on Article 1586, local
workers are entitled to recover damages to the extent of the
amount stipulated to be paid to them by the terms of their
contract. On the computation of the amount of such
damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence,
and nothing has been brought to our attention to the
contrary under Spanish jurisprudence, that when an

employee is wrongfully discharged it is his duty to seek other

employment of the same kind in the same community, for the
purpose of reducing the damages resulting from such
wrongful discharge. However, while this is the general rule,
the burden of showing that he failed to make an effort to
secure other employment of a like nature, and that other
employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged
under a contract of employment his prima facie damage is
the amount which he would be entitled to had he continued
in such employment until the termination of the period.
(Howard v. Daly, 61 N. Y., 362; Allen v. Whitlark, 99 Mich.,
492; Farrell v. School District No. 2, 98 Mich.,
43.)115 (Emphasis supplied)cralawlibrary
On August 30, 1950, the New Civil Code took effect with new
provisions on fixed-term employment: Section 2 (Obligations
with a Period), Chapter 3, Title I, and Sections 2 (Contract of
Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title
VIII, Book IV.116Much like Article 1586 of the Civil Code of
1889, the new provisions of the Civil Code do not expressly
provide for the remedies available to a fixed-term worker
who is illegally discharged. However, it is noted that in
Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court
carried over the principles on the payment of damages
underlying Article 1586 of the Civil Code of 1889 and applied
the same to a case involving the illegal discharge of a local
worker whose fixed-period employment contract was entered
into in 1952, when the new Civil Code was already in
effect.118
More significantly, the same principles were applied to cases
involving overseas Filipino workers whose fixed-term
employment contracts were illegally terminated, such as in
First Asian Trans & Shipping Agency, Inc. v. Ople, 119 involving
seafarers who were illegally discharged. In Teknika Skills and
Trade Services, Inc. v. National Labor Relations
Commission,120 an OFW who was illegally dismissed prior to
the expiration of her fixed-period employment contract as a
baby sitter, was awarded salaries corresponding to the
unexpired portion of her contract. The Court arrived at the
same ruling in Anderson v. National Labor Relations
Commission,121 which involved a foreman hired in 1988 in
Saudi Arabia for a fixed term of two years, but who was
illegally dismissed after only nine months on the job - - the
Court awarded him salaries corresponding to 15 months, the
unexpired portion of his contract. In Asia World Recruitment,
Inc. v. National Labor Relations Commission,122 a Filipino
working as a security officer in 1989 in Angola was awarded
his salaries for the remaining period of his 12-month contract
after he was wrongfully discharged. Finally, in Vinta
Maritime Co., Inc. v. National Labor Relations
Commission,123 an OFW whose 12-month contract was
illegally cut short in the second month was declared entitled
to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with
fixed-term employment who were illegally discharged were
treated alike in terms of the computation of their money
claims: they were uniformly entitled to their salaries for the
entire unexpired portions of their contracts. But with the
enactment of R.A. No. 8042, specifically the adoption of the
subject clause, illegally dismissed OFWs with an unexpired
portion of one year or more in their employment contract
have since been differently treated in that their money claims
are subject to a 3-month cap, whereas no such limitation is
imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a
suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are
illegally discharged, it imposes a 3-month cap on the
claim of OFWs with an unexpired portion of one year or
more in their contracts, but none on the claims of

other OFWs or local workers with fixed-term

employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar
disadvantage.
There being a suspect classification involving a vulnerable
sector protected by the Constitution, the Court now subjects
the classification to a strict judicial scrutiny, and determines
whether it serves a compelling state interest through the
least restrictive means.
What constitutes compelling state interest is measured by
the scale of rights and powers arrayed in the Constitution
and calibrated by history.124 It is akin to the paramount
interest of the state125 for which some individual liberties
must give way, such as the public interest in safeguarding
health or maintaining medical standards,126 or in maintaining
access to information on matters of public concern. 127
In the present case, the Court dug deep into the records but
found no compelling state interest that the subject clause
may possibly serve.
The OSG defends the subject clause as a police power
measure "designed to protect the employment of Filipino
seafarers overseas x x x. By limiting the liability to three
months [sic], Filipino seafarers have better chance of getting
hired by foreign employers." The limitation also protects the
interest of local placement agencies, which otherwise may be
made to shoulder millions of pesos in "termination pay." 128
The OSG explained further:
Often, placement agencies, their liability being solidary,
shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the
court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the
acts of the foreign employer. To protect them and to promote
their continued helpful contribution in deploying Filipino
migrant workers, liability for money are reduced under
Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers
whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the
government that migrant workers are properly deployed and
are employed under decent and humane
conditions.129 (Emphasis supplied)cralawlibrary
However, nowhere in the Comment or Memorandum does the
OSG cite the source of its perception of the state interest
sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech
of Rep. Bonifacio Gallego in sponsorship of House Bill No.
14314 (HB 14314), from which the law originated;130 but the
speech makes no reference to the underlying reason for the
adoption of the subject clause. That is only natural for none
of the 29 provisions in HB 14314 resembles the subject
clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a
provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of
law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims

arising out of an employer-employee relationship or by virtue

of the complaint, the claim arising out of an employeremployee relationship or by virtue of any law or contract
involving Filipino workers for overseas employment including
claims for actual, moral, exemplary and other forms of
damages.
The liability of the principal and the recruitment/placement
agency or any and all claims under this Section shall be joint
and several.
Any compromise/amicable settlement or voluntary agreement
on any money claims exclusive of damages under this Section
shall not be less than fifty percent (50%) of such money
claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary
settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this
paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of
cases provided under this Section shall subject the
responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his
decision or resolution within the prescribed period shall be,
or caused to be, withheld until the said official complies
therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold
any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall
be without prejudice to any liability which any such official
may have incurred under other existing laws or rules and
regulations as a consequence of violating the provisions of
this paragraph.
But significantly, Section 10 of SB 2077 does not provide for
any rule on the computation of money claims.
A rule on the computation of money claims containing the
subject clause was inserted and eventually adopted as the
5th paragraph of Section 10 of R.A. No. 8042. The Court
examined the rationale of the subject clause in the
transcripts of the "Bicameral Conference Committee
(Conference Committee) Meetings on the Magna Carta on
OCWs (Disagreeing Provisions of Senate Bill No. 2077 and
House Bill No. 14314)." However, the Court finds no
discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the
subject clause.
In fine, the Government has failed to discharge its burden of
proving the existence of a compelling state interest that
would justify the perpetuation of the discrimination against
OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the
subject clause is to protect the employment of OFWs by
mitigating the solidary liability of placement agencies, such
callous and cavalier rationale will have to be rejected. There
can never be a justification for any form of government
action that alleviates the burden of one sector, but imposes
the same burden on another sector, especially when the
favored sector is composed of private businesses such as
placement agencies, while the disadvantaged sector is
composed of OFWs whose protection no less than the
Constitution commands. The idea that private business

interest can be elevated to the level of a compelling state

interest is odious.
Moreover, even if the purpose of the subject clause is to
lessen the solidary liability of placement agencies vis-avis their foreign principals, there are mechanisms already in
place that can be employed to achieve that purpose without
infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment
and Employment of Land-Based Overseas Workers, dated
February 4, 2002, imposes administrative disciplinary
measures on erring foreign employers who default on their
contractual obligations to migrant workers and/or their
Philippine agents. These disciplinary measures range from
temporary disqualification to preventive suspension. The
POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains
similar administrative disciplinary measures against erring
foreign employers.
Resort to these administrative measures is undoubtedly the
less restrictive means of aiding local placement agencies in
enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of
R.A. No. 8042 is violative of the right of petitioner and other
OFWs to equal protection.rbl rl l lbrr
Further, there would be certain misgivings if one is to
approach the declaration of the unconstitutionality of the
subject clause from the lone perspective that the clause
directly violates state policy on labor under Section
3,131 Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are
presumed self-executing,132 there are some which this Court
has declared not judicially enforceable, Article XIII being
one,133particularly Section 3 thereof, the nature of which, this
Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and
security of tenure may be deemed as self-executing in the
sense that these are automatically acknowledged and
observed without need for any enabling legislation. However,
to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein,
and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view
presents the dangerous tendency of being overbroad and
exaggerated. The guarantees of "full protection to labor" and
"security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible
suggests a blanket shield in favor of labor against any form of
removal regardless of circumstance. This interpretation
implies an unimpeachable right to continued employment-a
utopian notion, doubtless-but still hardly within the
contemplation of the framers. Subsequent legislation is still
needed to define the parameters of these guaranteed rights
to ensure the protection and promotion, not only the rights of
the labor sector, but of the employers' as well. Without
specific and pertinent legislation, judicial bodies will be at a
loss, formulating their own conclusion to approximate at
least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot,
on its own, be a source of a positive enforceable right to
stave off the dismissal of an employee for just cause owing to
the failure to serve proper notice or hearing. As manifested
by several framers of the 1987 Constitution, the provisions
on social justice require legislative enactments for their
enforceability.135 (Emphasis added)

Thus, Section 3, Article XIII cannot be treated as a principal

source of direct enforceable rights, for the violation of which
the questioned clause may be declared unconstitutional. It
may unwittingly risk opening the floodgates of litigation to
every worker or union over every conceivable violation of so
broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not
directly bestow on the working class any actual enforceable
right, but merely clothes it with the status of a sector for
whom the Constitution urges protection through executive or
legislative action andjudicial recognition. Its utility is best
limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to
protect the welfare of the working class.And it was in fact
consistent with that constitutional agenda that the Court
in Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas, penned by
then Associate Justice now Chief Justice Reynato S. Puno,
formulated the judicial precept that when the challenge to a
statute is premised on the perpetuation of prejudice against
persons favored by the Constitution with special protection - such as the working class or a section thereof - - the Court
may recognize the existence of a suspect classification and
subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict
judicial scrutiny formulated in Central Bank Employee
Association exaggerate the significance of Section 3, Article
XIII is a groundless apprehension. Central Bank applied
Article XIII in conjunction with the equal protection clause.
Article XIII, by itself, without the application of the equal
protection clause, has no life or force of its own as elucidated
in Agabon.
Along the same line of reasoning, the Court further holds that
the subject clause violates petitioner's right to substantive
due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental
purpose.136
The argument of the Solicitor General, that the actual
purpose of the subject clause of limiting the entitlement of
OFWs to their three-month salary in case of illegal dismissal,
is to give them a better chance of getting hired by foreign
employers. This is plain speculation. As earlier discussed,
there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of
respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a
pretext of one.
The subject clause does not state or imply any definitive
governmental purpose; and it is for that precise reason that
the clause violates not just petitioner's right to equal
protection, but also her right to substantive due process
under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is
entitled to his salaries for the entire unexpired period of nine
months and 23 days of his employment contract, pursuant to
law and jurisprudence prior to the enactment of R.A. No.
8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should
form part of the salary basis in the computation of his
monetary award, because these are fixed benefits that have
been stipulated into his contract.
Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime

and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard
Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave
pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the
regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the
automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is
evidence that he performed work during those periods. As
the Court held in Centennial Transmarine, Inc. v. Dela
Cruz,138
However, the payment of overtime pay and leave pay should
be disallowed in light of our ruling in Cagampan v. National
Labor Relations Commission, to wit:
The rendition of overtime work and the submission of
sufficient proof that said was actually performed are
conditions to be satisfied before a seaman could be entitled
to overtime pay which should be computed on the basis of
30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the
entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the
unexpired portion of the contract is unwarranted since the
same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject
clause "or for three months for every year of the unexpired
term, whichever is less" in the 5th paragraph of Section 10 of
Republic Act No. 8042
is DECLARED UNCONSTITUTIONAL; and the December
8, 2004 Decision and April 1, 2005 Resolution of the Court of
Appeals are MODIFIED to the effect that petitioner
is AWARDED his salaries for the entire unexpired portion of
his employment contract consisting of nine months and 23
days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.

On 28 September 1995 he was handed his Seaman's Service

Record Book with the following entry: "Cause of discharge Mutual Consent."2 Private respondent promptly objected to
the entry but was not able to do anything more as he was
immediately ushered to a waiting taxi which transported him
to the Amsterdam Airport for the return flight to Manila.
After his arrival in Manila on 29 September 1995 Cajeras
complained to MARSAMAN but to no
avail.3crlwvirtualibrry

SECOND DIVISION
[G.R. No. 127195. August 25, 1999]
MARSAMAN MANNING AGENCY, INC. and
DIAMANTIDES MARITIME,
INC.,Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION and WILFREDO T.
CAJERAS, Respondents.
DECISION
BELLOSILLO, J.:
MARSAMAN MANNING AGENCY, INC. (MARSAMAN) and its
foreign principal DIAMANTIDES MARITIME, INC.
(DIAMANTIDES) assail the Decision of public respondent
National Labor Relations Commission dated 16 September
1996 as well as its Resolution dated 12 November 1996
affirming the Labor Arbiter's decision finding them guilty of
illegal dismissal and ordering them to pay respondent
Wilfredo T. Cajeras salaries corresponding to the unexpired
portion of his employment contract, plus attorney's fees.
Private respondent Wilfredo T. Cajeras was hired by
petitioner MARSAMAN, the local manning agent of petitioner
DIAMANTIDES, as Chief Cook Steward on the MV Prigipos,
owned and operated by DIAMANTIDES, for a contract period
of ten (10) months with a monthly salary of US$600.00,
evidenced by a contract between the parties dated 15 June
1995. Cajeras started work on 8 August 1995 but less than
two (2) months later, or on 28 September 1995, he was
repatriated to the Philippines allegedly by mutual consent.
On 17 November 1995 private respondent Cajeras filed a
complaint for illegal dismissal against petitioners with the
NLRC National Capital Region Arbitration Branch alleging
that he was dismissed illegally, denying that his repatriation
was by mutual consent, and asking for his unpaid wages,
overtime pay, damages, and attorneys fees. 1 Cajeras alleged
that he was assigned not only as Chief Cook Steward but also
as assistant cook and messman in addition to performing
various inventory and requisition jobs. Because of his
additional assignments he began to feel sick just a little over
a month on the job constraining him to request for medical
attention. He was refused at first by Capt. Kouvakas Alekos,
master of the MV Prigipos, who just ordered him to continue
working. However a day after the ships arrival at the port of
Rotterdam, Holland, on 26 September 1995 Capt. Alekos
relented and had him examined at the Medical Center for
Seamen. However, the examining physician, Dr. Wden Hoed,
neither apprised private respondent about the diagnosis nor
issued the requested medical certificate allegedly because he
himself would forward the results to private respondents
superiors. Upon returning to the vessel, private respondent
was unceremoniously ordered to prepare for immediate
repatriation the following day as he was said to be suffering
from a disease of unknown origin.

MARSAMAN and DIAMANTIDES, on the other hand, denied

the imputation of illegal dismissal. They alleged that Cajeras
approached Capt. Alekos on 26 September 1995 and
informed the latter that he could not sleep at night because
he felt something crawling over his body. Furthermore,
Cajeras reportedly declared that he could no longer perform
his duties and requested for repatriation. The following
paragraph in the vessel's Deck Log was allegedly entered by
Capt. Alekos, to wit:
Cajeras approached me and he told me that he cannot sleep
at night and that he feels something crawling on his body and
he declared that he can no longer perform his duties and he
must be repatriated.4
Private respondent was then sent to the Medical Center for
Seamen at Rotterdam where he was examined by Dr. Wden
Hoed whose diagnosis appeared in a Medical Report as
paranoia and other mental problems.5 Consequently, upon Dr.
Hoeds recommendation, Cajeras was repatriated to the
Philippines on 28 September 1995.
On 29 January 1996 Labor Arbiter Ernesto S. Dinopol
resolved the dispute in favor of private respondent Cajeras
ruling that the latter's discharge from the MV
Prigipos allegedly by mutual consent was not proved by
convincing evidence. The entry made by Capt. Alekos in the
Deck Log was dismissed as of little probative value because it
was a mere unilateral act unsupported by any document
showing mutual consent of Capt. Alekos, as master of the MV
Prigipos, and Cajeras to the premature termination of the
overseas employment contract as required by Sec. H of
the Standard Employment Contract Governing the
Employment of all Filipino Seamen on Board Ocean-Going
Vessels. Dr. Hoeds diagnosis that private respondent was
suffering from paranoia and other mental problems was
likewise dismissed as being of little evidentiary value because
it was not supported by evidence on how the paranoia was
contracted, in what stage it was, and how it affected
respondent's functions as Chief Cook Steward which, on the
contrary, was even rated Very Good in respondent's Service
Record Book. Thus, the Labor Arbiter disposed of the case as
follows:
WHEREFORE, judgment is hereby rendered declaring the
repatriation and dismissal of complaint Wilfredo T. Cajeras as
illegal and ordering respondents Marsaman Manning Agency,
Inc. and Diamantides Maritime, Inc. to jointly and severally
pay complainant the sum of USD 5,100.00 or its peso
equivalent at the time of payment plus USD 510.00 as 10%
attorneys fees it appearing that complainant had to engage
the service of counsel to protect his interest in the
prosecution of this case.
The claims for nonpayment of wages and overtime pay are
dismissed for having been withdrawn (Minutes, December
18, 1995). The claims for damages are likewise dismissed for
lack of merit, since no evidence was presented to show that
bad faith characterized the dismissal. 6

Petitioners appealed to the NLRC.7 On 16 September 1996

the NLRC affirmed the appealed findings and conclusions of
the Labor Arbiter.8 The NLRC subscribed to the view that
Cajeras repatriation by alleged mutual consent was not
proved by petitioners, especially after noting that private
respondent did not actually sign his Seamans Service Record
Book to signify his assent to the repatriation as alleged by
petitioners. The entry made by Capt. Alekos in the Deck Log
was not considered reliable proof that private respondent
agreed to his repatriation because no opportunity was given
the latter to contest the entry which was against his interest.
Similarly, the Medical Report issued by Dr. Hoed of Holland
was dismissed as being of dubious value since it contained
only a sweeping statement of the supposed ailment of
Cajeras without any elaboration on the factual basis thereof.
Petitioners' motion for reconsideration was denied by the
NLRC in its Resolution dated 12 November 1996. 9 Hence,
this petition contending that the NLRC committed grave
abuse of discretion: (a) in not according full faith and credit
to the official entry by Capt. Alekos in the vessels Deck Log
conformably with the rulings in Haverton Shipping Ltd. v.
NLRC10 andWallem Maritime Services, Inc. v. NLRC;11 (b) in
not appreciating the Medical Report issued by Dr. Wden
Hoed as conclusive evidence that respondent Cajeras was
suffering from paranoia and other mental problems; (c) in
affirming the award of attorneys fees despite the fact that
Cajeras' claim for exemplary damages was denied for lack of
merit; and, (d) in ordering a monetary award beyond the
maximum of three (3) months salary for every year of service
set by RA 8042.
We deny the petition. In the Contract of
Employment12 entered into with private respondent,
petitioners convenanted strict and faithful compliance with
the terms and conditions of the Standard Employment
Contract approved by the POEA/DOLE13 which provides:
1. The employment of the seaman shall cease upon expiration
of the contract period indicated in the Crew Contract unless
the Master and the Seaman, by mutual consent, in writing,
agree to an early termination x x x x (underscoring ours).
Clearly, under the foregoing, the employment of a Filipino
seaman may be terminated prior to the expiration of the
stipulated period provided that the master and the seaman
(a) mutually consent thereto and (b) reduce their consent in
writing.
In the instant case, petitioners do not deny the fact that they
have fallen short of the requirement. No document exists
whereby Capt. Alekos and private respondent reduced to
writing their alleged mutual consent to the termination of
their employment contract. Instead, petitioners presented the
vessel's Deck Log wherein an entry unilaterally made by
Capt. Alekos purported to show that private respondent
himself asked for his repatriation. However, the NLRC
correctly dismissed its evidentiary value. For one thing, it is a
unilateral act which is vehemently denied by private
respondent. Secondly, the entry in no way satisfies the
requirement of a bilateral documentation to prove early
termination of an overseas employment contract by mutual
consent required by the Standard Employment Contract.
Hence, since the latter sets the minimum terms and
conditions of employment for the protection of Filipino
seamen subject only to the adoption of better terms and
conditions over and above the minimum standards,14 the
NLRC could not be accused of grave abuse of discretion in
not accepting anything less.

However petitioners contend that the entry should be

considered prima facie evidence that respondent himself
requested his repatriation conformably with the rulings
in Haverton Shipping Ltd. v. NLRC15 and Abacast Shipping
and Management Agency, Inc. v.
NLRC.16Indeed, Haverton says that a vessels log book
is prima facie evidence of the facts stated therein as they are
official entries made by a person in the performance of a duty
required by law. However, this jurisprudential principle does
not apply to win the case for petitioners. In Wallem Maritime
Services, Inc. v. NLRC17 the Haverton ruling was not given
unqualified application because the log book presented
therein was a mere typewritten collation of excerpts from
what could be the log book.18 The Court reasoned that since
the log book was the only piece of evidence presented to
prove just cause for the termination of respondent therein,
the log book had to be duly identified and authenticated lest
an injustice would result from a blind adoption of its contents
which were but prima facieevidence of the incidents stated
therein.
In the instant case, the disputed entry in the Deck Log was
neither authenticated nor supported by credible evidence.
Although petitioners claim that Cajeras signed his Seamans
Service Record Book to signify his conformity to the
repatriation, the NLRC found the allegation to be actually
untrue since no signature of private respondent appeared in
the Record Book.
Neither could the Medical Report prepared by Dr. Hoed be
considered corroborative and conclusive evidence that
private respondent was suffering from paranoia and other
mental problems, supposedly just causes for his repatriation.
Firstly, absolutely no evidence, not even an allegation, was
offered to enlighten the NLRC or this Court as to Dr. Hoed's
qualifications to diagnose mental illnesses. It is a matter of
judicial notice that there are various specializations in
medical science and that a general practitioner is not
competent to diagnose any and all kinds of illnesses and
diseases. Hence, the findings of doctors who are not proven
experts are not binding on this Court.19 Secondly, the Medical
Report prepared by Dr. Hoed contained only a general
statement that private respondent was suffering from
paranoia and other mental problems without providing the
details on how the diagnosis was arrived at or in what stage
the illness was. If Dr. Hoed indeed competently examined
private respondent then he would have been able to discuss
at length the circumstances and precedents of his diagnosis.
Petitioners cannot rely on the presumption of regularity in
the performance of official duties to make the Medical Report
acceptable because the presumption applies only to public
officers from the highest to the lowest in the service of the
Government, departments, bureaus, offices, and/or its
political subdivisions,20 which Dr. Wden Hoed was not shown
to be. Furthermore, neither did petitioners prove that private
respondent was incompetent or continuously incapacitated
for the duties for which he was employed by reason of his
alleged mental state. On the contrary his ability as Chief
Cook Steward, up to the very moment of his repatriation, was
rated Very Good in his Seamans Service Record Book as
correctly observed by public respondent.
Considering all the foregoing we cannot ascribe grave abuse
of discretion on the part of the NLRC in ruling that
petitioners failed to prove just cause for the termination of
private respondent's overseas employment. Grave abuse of
discretion is committed only when the judgment is rendered
in a capricious, whimsical, arbitrary or despotic manner,
which is not true in the present case.21crlwvirtualibrry

With respect to attorneys fees, suffice it to say that in actions

for recovery of wages or where an employee was forced to
litigate and thus incurred expenses to protect his rights and
interests, a maximum award of ten percent (10%) of the
monetary award by way of attorneys fees is legally and
morally justifiable under Art. 111 of the Labor Code,22 Sec. 8,
Rule VIII, Book III of its Implementing Rules, 23 and par. 7,
Art. 220824 of the Civil Code.25The case of Albenson
Enterprises Corporation v. Court of Appeals26 cited by
petitioners in arguing against the award of attorneys fees is
clearly not applicable, being a civil action for damages which
deals with only one of the eleven (11) instances when
attorneys fees could be recovered under Art. 2208 of the Civil
Code.
Lastly, on the amount of salaries due private respondent, the
rule has always been that an illegally dismissed worker
whose employment is for a fixed period is entitled to payment
of his salaries corresponding to the unexpired portion of his
employment.27 However on 15 July 1995, RA 8042 otherwise
known as the Migrant Workers and Overseas Filipinos Act of
1995 took effect, Sec. 10 of which provides:
Sec. 10. In case of termination of overseas employment
without just, valid or authorized cause as defined by law or
contract, the worker shall be entitled to the full
reimbursement of his placement fee with interest at twelve
percent (12%) per annum, plus his salaries for the unexpired
portion of the employment contract or for three (3) months
for every year of the unexpired term whichever is
less (underscoring ours).
The Labor Arbiter, rationalizing that the aforesaid law did not
apply since it became effective only one (1) month after
respondent's overseas employment contract was entered into
on 15 June 1995, simply awarded private respondent his
salaries corresponding to the unexpired portion of his
employment contract, i.e., for 8.6 months. The NLRC
affirmed the award and the Office of the Solicitor General
(OSG) fully agreed. But petitioners now insist that Sec. 10,
RA 8042 is applicable because although private respondents
contract of employment was entered into before the law
became effective his alleged cause of action, i.e., his
repatriation on 28 September 1995 without just, valid or
authorized cause, occurred when the law was already in
effect. Petitioners' purpose in so arguing is to invoke the law
in justifying a lesser monetary award to private respondent,
i.e., salaries for three (3) months only pursuant to the last
portion of Sec. 10 as opposed to the salaries for 8.6 months
awarded by the Labor Arbiter and affirmed by the NLRC.
We agree with petitioners that Sec. 10, RA 8042, applies in
the case of private respondent and to all overseas contract
workers dismissed on or after its effectivity on 15 July 1995
in the same way that Sec. 34,28 RA 6715,29 is made applicable
to locally employed workers dismissed on or after 21 March
1989.30 However, we cannot subscribe to the view that
private respondent is entitled to three (3) months salary only.
A plain reading of Sec. 10 clearly reveals that the choice of
which amount to award an illegally dismissed overseas
contract worker, i.e., whether his salaries for the unexpired
portion of his employment contract or three (3) months
salary for every year of the unexpired term, whichever is
less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more. This is
evident from the words for every year of the unexpired term
which follows the words salaries x x x for three months. To
follow petitioners thinking that private respondent is entitled
to three (3) months salary only simply because it is the lesser
amount is to completely disregard and overlook some words

used in the statute while giving effect to some. This is

contrary to the well-established rule in legal hermeneutics
that in interpreting a statute, care should be taken that every
part or word thereof be given effect31 since the law-making
body is presumed to know the meaning of the words
employed in the statue and to have used them advisedly. 32 Ut
res magis valeat quam pereat.33crlwvirtualibrry
WHEREFORE, the questioned Decision and Resolution
dated 16 September 1996 and 12 November 1996,
respectively, of public respondent National Labor Relations
Commission are AFFIRMED. Petitioners MARSAMAN
MANNING AGENCY, INC., and DIAMANTIDES MARITIME,
INC., are ordered, jointly and severally, to pay private
respondent WILFREDO T. CAJERAS his salaries for the
unexpired portion of his employment contract or
USD$5,100.00, reimburse the latter's placement fee with
twelve percent (12%) interest per annum conformably with
Sec. 10 of RA 8042, as well as attorney's fees of ten percent
(10%) of the total monetary award. Costs against petitioners.
SO ORDERED.

This case involves an overseas Filipino worker with shattered

dreams. It is our duty, given the facts and the law, to
approximate justice for her.
We are asked to decide a petition for review1 on certiorari
assailing the Court of Appeals decision 2dated June 27, 2005.
This decision partially affirmed the National Labor Relations
Commissions resolution dated March 31, 2004,3 declaring
respondents dismissal illegal, directing petitioner to pay
respondents three-month salary equivalent to New Taiwan
Dollar (NT$) 46,080.00, and ordering it to reimburse the
NT$3,000.00 withheld from respondent, and pay her
NT$300.00 attorneys fees.4cralawred
Petitioner, Sameer Overseas Placement Agency, Inc., is a
recruitment and placement agency.5Responding to an ad it
published, respondent, Joy C. Cabiles, submitted her
application for a quality control job in Taiwan.6cralawred
Joys application was accepted.7 Joy was later asked to sign a
one-year employment contract for a monthly salary of
NT$15,360.00.8 She alleged that Sameer Overseas Agency
required her to pay a placement fee of P70,000.00 when she
signed the employment contract.9cralawred
Joy was deployed to work for Taiwan Wacoal, Co. Ltd.
(Wacoal) on June 26, 1997.10 She alleged that in her
employment contract, she agreed to work as quality control
for one year.11 In Taiwan, she was asked to work as a
cutter.12cralawred
Sameer Overseas Placement Agency claims that on July 14,
1997, a certain Mr. Huwang from Wacoal informed Joy,
without prior notice, that she was terminated and that she
should immediately report to their office to get her salary and
passport.13 She was asked to prepare for immediate
repatriation.14cralawred
Joy claims that she was told that from June 26 to July 14,
1997, she only earned a total of NT$9,000. 15 According to
her, Wacoal deducted NT$3,000 to cover her plane ticket to
Manila.16cralawred
On October 15, 1997, Joy filed a complaint17 with the
National Labor Relations Commission against petitioner and
Wacoal. She claimed that she was illegally dismissed. 18 She
asked for the return of her placement fee, the withheld
amount for repatriation costs, payment of her salary for 23
months as well as moral and exemplary damages. 19 She
identified Wacoal as Sameer Overseas Placement Agencys
foreign principal.20cralawred
Sameer Overseas Placement Agency alleged that
respondent's termination was due to her inefficiency,
negligence in her duties, and her failure to comply with the
work requirements [of] her foreign [employer].21 The agency
also claimed that it did not ask for a placement fee of ?
70,000.00.22 As evidence, it showed Official Receipt No.
14860 dated June 10, 1997, bearing the amount of ?
20,360.00.23 Petitioner added that Wacoal's accreditation
with petitioner had already been transferred to the Pacific
Manpower & Management Services, Inc. (Pacific) as of
August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25cralawred

EN BANC
G.R. No. 170139, August 05, 2014
SAMEER OVERSEAS PLACEMENT AGENCY,
INC., Petitioner, v. JOY C. CABILES, Respondent.
DECISION
LEONEN, J.:

Pacific Manpower moved for the dismissal of petitioners

claims against it.26 It alleged that there was no employeremployee relationship between them.27 Therefore, the claims
against it were outside the jurisdiction of the Labor
Arbiter.28 Pacific Manpower argued that the employment
contract should first be presented so that the employers
contractual obligations might be identified. 29 It further
denied that it assumed liability for petitioners illegal
acts.30cralawred
On July 29, 1998, the Labor Arbiter dismissed Joys
complaint.31 Acting Executive Labor Arbiter Pedro C. Ramos

ruled that her complaint was based on mere

allegations.32 The Labor Arbiter found that there was no
excess payment of placement fees, based on the official
receipt presented by petitioner.33 The Labor Arbiter found
unnecessary a discussion on petitioners transfer of
obligations to Pacific34 and considered the matter immaterial
in view of the dismissal of respondents
complaint.35cralawred
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor
Relations Commission declared that Joy was illegally
dismissed.38 It reiterated the doctrine that the burden of
proof to show that the dismissal was based on a just or valid
cause belongs to the employer.39 It found that Sameer
Overseas Placement Agency failed to prove that there were
just causes for termination.40 There was no sufficient proof to
show that respondent was inefficient in her work and that
she failed to comply with company
requirements.41 Furthermore, procedural due process was
not observed in terminating respondent.42cralawred
The National Labor Relations Commission did not rule on the
issue of reimbursement of placement fees for lack of
jurisdiction.43 It refused to entertain the issue of the alleged
transfer of obligations to Pacific.44 It did not acquire
jurisdiction over that issue because Sameer Overseas
Placement Agency failed to appeal the Labor Arbiters
decision not to rule on the matter.45cralawred
The National Labor Relations Commission awarded
respondent only three (3) months worth of salary in the
amount of NT$46,080, the reimbursement of the NT$3,000
withheld from her, and attorneys fees of NT$300. 46cralawred

WHEREFORE, premises considered, the assailed

Resolutions are hereby partlyAFFIRMED in accordance with
the foregoing discussion, but subject to the caveat embodied
in the last sentence. No costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this
petition.54cralawred
We are asked to determine whether the Court of Appeals
erred when it affirmed the ruling of the National Labor
Relations Commission finding respondent illegally dismissed
and awarding her three months worth of salary, the
reimbursement of the cost of her repatriation, and attorneys
fees despite the alleged existence of just causes of
termination.
Petitioner reiterates that there was just cause for termination
because there was a finding of Wacoal that respondent was
inefficient in her work.55 Therefore, it claims that
respondents dismissal was valid.56cralawred
Petitioner also reiterates that since Wacoals accreditation
was validly transferred to Pacific at the time respondent filed
her complaint, it should be Pacific that should now assume
responsibility for Wacoals contractual obligations to the
workers originally recruited by petitioner. 57cralawred
Sameer Overseas Placement Agencys petition is without
merit. We find for respondent.
I

The Commission denied the agencys motion for

reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.

Sameer Overseas Placement Agency failed to show that there

was just cause for causing Joys dismissal. The employer,
Wacoal, also failed to accord her due process of law.

Aggrieved by the ruling, Sameer Overseas Placement Agency

caused the filing of a petition49 for certiorari with the Court of
Appeals assailing the National Labor Relations Commissions
resolutions dated March 31, 2004 and July 2, 2004.

Indeed, employers have the prerogative to impose

productivity and quality standards at work. 58They may also
impose reasonable rules to ensure that the employees comply
with these standards.59Failure to comply may be a just cause
for their dismissal.60 Certainly, employers cannot be
compelled to retain the services of an employee who is guilty
of acts that are inimical to the interest of the
employer.61 While the law acknowledges the plight and
vulnerability of workers, it does not authorize the
oppression or self-destruction of the
employer.62 Management prerogative is recognized in law
and in our jurisprudence.

The Court of Appeals50 affirmed the decision of the National

Labor Relations Commission with respect to the finding of
illegal dismissal, Joys entitlement to the equivalent of three
months worth of salary, reimbursement of withheld
repatriation expense, and attorneys fees. 51 The Court of
Appeals remanded the case to the National Labor Relations
Commission to address the validity of petitioner's allegations
against Pacific.52 The Court of Appeals held,
thus:chanRoblesvirtualLawlibrary
Although the public respondent found the dismissal of the
complainant-respondent illegal, we should point out that the
NLRC merely awarded her three (3) months backwages or
the amount of NT$46,080.00, which was based upon its
finding that she was dismissed without due process, a finding
that we uphold, given petitioners lack of worthwhile
discussion upon the same in the proceedings below or before
us. Likewise we sustain NLRCs finding in regard to the
reimbursement of her fare, which is squarely based on the
law; as well as the award of attorneys fees.
But we do find it necessary to remand the instant case to the
public respondent for further proceedings, for the purpose of
addressing the validity or propriety of petitioners third-party
complaint against the transferee agent or the Pacific
Manpower & Management Services, Inc. and Lea G.
Manabat. We should emphasize that as far as the decision of
the NLRC on the claims of Joy Cabiles, is concerned, the
same is hereby affirmed with finality, and we hold petitioner
liable thereon, but without prejudice to further hearings on
its third party complaint against Pacific for reimbursement.

This prerogative, however, should not be abused. It is

tempered with the employees right to security of
tenure.63 Workers are entitled to substantive and procedural
due process before termination. They may not be removed
from employment without a valid or just cause as determined
by law and without going through the proper procedure.
Security of tenure for labor is guaranteed by our
Constitution.64cralawred
Employees are not stripped of their security of tenure when
they move to work in a different jurisdiction. With respect to
the rights of overseas Filipino workers, we follow the
principle of lex loci contractus.
Thus, in Triple Eight Integrated Services, Inc. v. NLRC, 65 this
court noted:chanRoblesvirtualLawlibrary
Petitioner likewise attempts to sidestep the medical
certificate requirement by contending that since Osdana was
working in Saudi Arabia, her employment was subject to the
laws of the host country. Apparently, petitioner hopes to
make it appear that the labor laws of Saudi Arabia do not

require any certification by a competent public health

authority in the dismissal of employees due to illness.

termination by the employer.

Thus:chanRoblesvirtualLawlibrary

Again, petitioners argument is without merit.

Art. 282. Termination by employer. An employer may

terminate an employment for any of the following
causes:cralawlawlibrary

First, established is the rule that lex loci contractus (the

law of the place where the contract is made) governs in
this jurisdiction. There is no question that the contract
of employment in this case was perfected here in the
Philippines. Therefore, the Labor Code, its
implementing rules and regulations, and other laws
affecting labor apply in this case. Furthermore, settled is
the rule that the courts of the forum will not enforce any
foreign claim obnoxious to the forums public policy. Here in
the Philippines, employment agreements are more than
contractual in nature. The Constitution itself, in Article XIII,
Section 3, guarantees the special protection of workers, to
wit:chanRoblesvirtualLawlibrary
The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.
. . . .chanrobleslaw
This public policy should be borne in mind in this case
because to allow foreign employers to determine for and by
themselves whether an overseas contract worker may be
dismissed on the ground of illness would encourage illegal or
arbitrary pre-termination of employment
contracts.66 (Emphasis supplied, citation omitted)
Even with respect to fundamental procedural rights, this
court emphasized in PCL Shipping Philippines, Inc. v.
NLRC,67 to wit:chanRoblesvirtualLawlibrary
Petitioners admit that they did not inform private respondent
in writing of the charges against him and that they failed to
conduct a formal investigation to give him opportunity to air
his side. However, petitioners contend that the twin
requirements of notice and hearing applies strictly only when
the employment is within the Philippines and that these need
not be strictly observed in cases of international maritime or
overseas employment.
The Court does not agree. The provisions of the
Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether
working within the Philippines or abroad. Moreover,
the principle of lex loci contractus (the law of the place
where the contract is made) governs in this
jurisdiction. In the present case, it is not disputed that the
Contract of Employment entered into by and between
petitioners and private respondent was executed here in the
Philippines with the approval of the Philippine Overseas
Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and
other laws affecting labor apply in this case. 68 (Emphasis
supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be
terminated for a just or authorized cause and after
compliance with procedural due process requirements.
Article 282 of the Labor Code enumerates the just causes of

(a) Serious misconduct or willful disobedience by the

employee of the lawful orders of his employer or
representative in connection with his
work;chanroblesvirtuallawlibrary
(b) Gross and habitual neglect by the employee of his
duties;chanroblesvirtuallawlibrary
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;chanroblesvirtuallawlibrary
(d) Commission of a crime or offense by the employee against
the person of his employer or any immediate member of his
family or his duly authorized representatives;
andChanRoblesVirtualawlibrary
(e) Other causes analogous to the foregoing.
Petitioners allegation that respondent was inefficient in her
work and negligent in her duties 69 may, therefore, constitute
a just cause for termination under Article 282(b), but only if
petitioner was able to prove it.
The burden of proving that there is just cause for termination
is on the employer. The employer must affirmatively show
rationally adequate evidence that the dismissal was for a
justifiable cause.70 Failure to show that there was valid or
just cause for termination would necessarily mean that the
dismissal was illegal.71cralawred
To show that dismissal resulting from inefficiency in work is
valid, it must be shown that: 1) the employer has set
standards of conduct and workmanship against which the
employee will be judged; 2) the standards of conduct and
workmanship must have been communicated to the
employee; and 3) the communication was made at a
reasonable time prior to the employees performance
assessment.
This is similar to the law and jurisprudence on probationary
employees, which allow termination of the employee only
when there is just cause or when [the probationary
employee] fails to qualify as a regular employee in
accordance with reasonable standards made known by the
employer to the employee at the time of his [or her]
engagement.72cralawred
However, we do not see why the application of that ruling
should be limited to probationary employment. That rule is
basic to the idea of security of tenure and due process, which
are guaranteed to all employees, whether their employment
is probationary or regular.
The pre-determined standards that the employer sets are the
bases for determining the probationary employees fitness,
propriety, efficiency, and qualifications as a regular employee.
Due process requires that the probationary employee be
informed of such standards at the time of his or her
engagement so he or she can adjust his or her character or
workmanship accordingly. Proper adjustment to fit the
standards upon which the employees qualifications will be
evaluated will increase ones chances of being positively
assessed for regularization by his or her employer.
Assessing an employees work performance does not stop
after regularization. The employer, on a regular basis,
determines if an employee is still qualified and efficient,
based on work standards. Based on that determination, and

after complying with the due process requirements of notice

and hearing, the employer may exercise its management
prerogative of terminating the employee found unqualified.
The regular employee must constantly attempt to prove to his
or her employer that he or she meets all the standards for
employment. This time, however, the standards to be met are
set for the purpose of retaining employment or promotion.
The employee cannot be expected to meet any standard of
character or workmanship if such standards were not
communicated to him or her. Courts should remain vigilant
on allegations of the employers failure to communicate work
standards that would govern ones employment if [these
are] to discharge in good faith [their] duty to
adjudicate.73cralawred
In this case, petitioner merely alleged that respondent failed
to comply with her foreign employers work requirements
and was inefficient in her work.74No evidence was shown to
support such allegations. Petitioner did not even bother to
specify what requirements were not met, what efficiency
standards were violated, or what particular acts of
respondent constituted inefficiency.
There was also no showing that respondent was sufficiently
informed of the standards against which her work efficiency
and performance were judged. The parties conflict as to
the position held by respondent showed that even the
matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to
support a claim that there is just cause for termination. There
is no proof that respondent was legally terminated.
Petitioner failed to comply with
the due process requirements
Respondents dismissal less than one year from hiring and
her repatriation on the same day show not only failure on the
part of petitioner to comply with the requirement of the
existence of just cause for termination. They patently show
that the employers did not comply with the due process
requirement.
A valid dismissal requires both a valid cause and adherence
to the valid procedure of dismissal.75The employer is required
to give the charged employee at least two written notices
before termination.76 One of the written notices must inform
the employee of the particular acts that may cause his or her
dismissal.77 The other notice must [inform] the employee of
the employers decision.78 Aside from the notice
requirement, the employee must also be given an
opportunity to be heard.79cralawred
Petitioner failed to comply with the twin notices and hearing
requirements. Respondent started working on June 26, 1997.
She was told that she was terminated on July 14, 1997
effective on the same day and barely a month from her first
workday. She was also repatriated on the same day that she
was informed of her termination. The abruptness of the
termination negated any finding that she was properly
notified and given the opportunity to be heard. Her
constitutional right to due process of law was violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is
entitled to her salary for the unexpired portion of the
employment contract that was violated together with
attorneys fees and reimbursement of amounts withheld from
her salary.
Section 10 of Republic Act No. 8042, otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995, states
that overseas workers who were terminated without just,
valid, or authorized cause shall be entitled to the full

reimbursement of his placement fee with interest of twelve

(12%) per annum, plus his salaries for the unexpired portion
of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of
law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of any
law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damages.
The liability of the principal/employer and the
recruitment/placement agency for any and all claims under
this section shall be joint and several. This provisions [sic]
shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its
approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement agency
is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the
aforesaid claims and damages.
Such liabilities shall continue during the entire period or
duration of the employment contract and shall not be
affected by any substitution, amendment or modification
made locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement
on money claims inclusive of damages under this section
shall be paid within four (4) months from the approval of the
settlement by the appropriate authority.
In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, the
workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve (12%) per annum, plus
his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the
unexpired term, whichever is less.
....
(Emphasis supplied)chanrobleslaw
Section 15 of Republic Act No. 8042 states that repatriation
of the worker and the transport of his [or her] personal
belongings shall be the primary responsibility of the agency
which recruited or deployed the worker overseas. The
exception is when termination of employment is due solely
to the fault of the worker,80 which as we have established, is
not the case. It reads:chanRoblesvirtualLawlibrary
SEC. 15. REPATRIATION OF WORKERS; EMERGENCY
REPATRIATION FUND. The repatriation of the worker and
the transport of his personal belongings shall be the primary
responsibility of the agency which recruited or deployed the
worker overseas. All costs attendant to repatriation shall be
borne by or charged to the agency concerned and/or its
principal. Likewise, the repatriation of remains and transport
of the personal belongings of a deceased worker and all costs
attendant thereto shall be borne by the principal and/or local
agency. However, in cases where the termination of
employment is due solely to the fault of the worker, the
principal/employer or agency shall not in any manner be
responsible for the repatriation of the former and/or his
belongings.
....

The Labor Code81 also entitles the employee to 10% of the

amount of withheld wages as attorneys fees when the
withholding is unlawful.
The Court of Appeals affirmed the National Labor Relations
Commissions decision to award respondent NT$46,080.00 or
the three-month equivalent of her salary, attorneys fees of
NT$300.00, and the reimbursement of the withheld
NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of
these awards. The award of the three-month equivalent
of respondents salary should, however, be increased to
the amount equivalent to the unexpired term of the
employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow
Navigation Co., Inc.,82 this court ruled that the clause or for
three (3) months for every year of the unexpired term,
whichever is less83 is unconstitutional for violating the equal
protection clause and substantive due process. 84cralawred
A statute or provision which was declared unconstitutional is
not a law. It confers no rights; it imposes no duties; it affords
no protection; it creates no office; it is inoperative as if it has
not been passed at all.85cralawred
We are aware that the clause or for three (3) months for
every year of the unexpired term, whichever is less was
reinstated in Republic Act No. 8042 upon promulgation of
Republic Act No. 10022 in 2010. Section 7 of Republic Act
No. 10022 provides:chanRoblesvirtualLawlibrary
Section 7. Section 10 of Republic Act No. 8042, as amended,
is hereby amended to read as
follows:chanRoblesvirtualLawlibrary
SEC. 10. Money Claims. Notwithstanding any provision of
law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damage. Consistent with this mandate, the
NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.
The liability of the principal/employer and the
recruitment/placement agency for any and all claims under
this section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The
performance bond to de [sic] filed by the
recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement agency
is a juridical being, the corporate officers and directors and
partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the
aforesaid claims and damages.
Such liabilities shall continue during the entire period or
duration of the employment contract and shall not be
affected by any substitution, amendment or modification
made locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement
on money claims inclusive of damages under this section
shall be paid within thirty (30) days from approval of the
settlement by the appropriate authority.
In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, or

any unauthorized deductions from the migrant workers

salary, the worker shall be entitled to the full reimbursement
if [sic] his placement fee and the deductions made with
interest at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term,
whichever is less.
In case of a final and executory judgement against a foreign
employer/principal, it shall be automatically disqualified,
without further proceedings, from participating in the
Philippine Overseas Employment Program and from
recruiting and hiring Filipino workers until and unless it fully
satisfies the judgement award.
Noncompliance with the mandatory periods for resolutions of
case provided under this section shall subject the responsible
officials to any or all of the following
penalties:cralawlawlibrary
(a) The salary of any such official who fails to render his
decision or resolution within the prescribed period shall be,
or caused to be, withheld until the said official complies
therewith;chanroblesvirtuallawlibrary
(b) Suspension for not more than ninety (90) days; or
(c) Dismissal from the service with disqualification to hold
any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall
be without prejudice to any liability which any such official
may have incured [sic] under other existing laws or rules and
regulations as a consequence of violating the provisions of
this paragraph. (Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010.
This means that the reinstatement of the clause in Republic
Act No. 8042 was not yet in effect at the time of respondents
termination from work in 1997.86 Republic Act No. 8042
before it was amended by Republic Act No. 10022 governs
this case.
When a law is passed, this court awaits an actual case that
clearly raises adversarial positions in their proper context
before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law
passed incorporates the exact clause already declared as
unconstitutional, without any perceived substantial change in
the circumstances.
This may cause confusion on the part of the National Labor
Relations Commission and the Court of Appeals. At minimum,
the existence of Republic Act No. 10022 may delay the
execution of the judgment in this case, further frustrating
remedies to assuage the wrong done to petitioner. Hence,
there is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty
to [p]romulgate rules concerning the protection and
enforcement of constitutional rights.87 When cases become
moot and academic, we do not hesitate to provide for
guidance to bench and bar in situations where the same
violations are capable of repetition but will evade review.
This is analogous to cases where there are millions of
Filipinos working abroad who are bound to suffer from the
lack of protection because of the restoration of an identical
clause in a provision previously declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No
branch or office of the government may exercise its powers
in any manner inconsistent with the Constitution, regardless
of the existence of any law that supports such exercise. The
Constitution cannot be trumped by any other law. All laws
must be read in light of the Constitution. Any law that is

inconsistent with it is a nullity.

Thus, when a law or a provision of law is null because it is
inconsistent with the Constitution, the nullity cannot be
cured by reincorporation or reenactment of the same or a
similar law or provision. A law or provision of law that was
already declared unconstitutional remains as such unless
circumstances have so changed as to warrant a reverse
conclusion.
We are not convinced by the pleadings submitted by the
parties that the situation has so changed so as to cause us to
reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and
economy that attend to these cases.
The new law puts our overseas workers in the same
vulnerable position as they were prior toSerrano. Failure to
reiterate the very ratio decidendi of that case will result in
the same untold economic hardships that our reading of the
Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation that will
reduce their hard-earned wages as well as add to the
indignity of having been deprived of the protection of our
laws simply because our precedents have not been followed.
There is no constitutional doctrine that causes injustice in the
face of empty procedural niceties. Constitutional
interpretation is complex, but it is never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered
the parties and the Office of the Solicitor General to comment
on the constitutionality of the reinstated clause in Republic
Act No. 10022.
In its comment,89 petitioner argued that the clause was
constitutional.90 The legislators intended a balance between
the employers and the employees rights by not unduly
burdening the local recruitment agency. 91 Petitioner is also of
the view that the clause was already declared as
constitutional in Serrano.92cralawred
The Office of the Solicitor General also argued that the
clause was valid and constitutional. 93However, since the
parties never raised the issue of the constitutionality of the
clause as reinstated in Republic Act No. 10022, its contention
is that it is beyond judicial review.94cralawred
On the other hand, respondent argued that the clause was
unconstitutional because it infringed on workers right to
contract.95cralawred
We observe that the reinstated clause, this time as provided
in Republic Act. No. 10022, violates the constitutional rights
to equal protection and due process.96 Petitioner as well as
the Solicitor General have failed to show any compelling
change in the circumstances that would warrant us to revisit
the precedent.
We reiterate our finding in Serrano v. Gallant Maritime
that limiting wages that should be recovered by an
illegally dismissed overseas worker to three months is
both a violation of due process and the equal
protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under
like circumstances and falling within the same class are
treated alike, in terms of privileges conferred and liabilities
enforced.97 It is a guarantee against undue favor and
individual or class privilege, as well as hostile discrimination
or the oppression of inequality.98cralawred
In creating laws, the legislature has the power to make
distinctions and classifications.99 In exercising such power, it
has a wide discretion.100cralawred

The equal protection clause does not infringe on this

legislative power.101 A law is void on this basis, only if
classifications are made arbitrarily.102 There is no violation of
the equal protection clause if the law applies equally to
persons within the same class and if there are reasonable
grounds for distinguishing between those falling within the
class and those who do not fall within the class. 103 A law that
does not violate the equal protection clause prescribes a
reasonable classification.104cralawred
A reasonable classification (1) must rest on substantial
distinctions; (2) must be germane to the purposes of the law;
(3) must not be limited to existing conditions only; and (4)
must apply equally to all members of the same
class.105cralawred
The reinstated clause does not satisfy the requirement of
reasonable classification.
In Serrano, we identified the classifications made by the
reinstated clause. It distinguished between fixed-period
overseas workers and fixed-period local workers. 106 It also
distinguished between overseas workers with employment
contracts of less than one year and overseas workers with
employment contracts of at least one year. 107 Within the class
of overseas workers with at least one-year employment
contracts, there was a distinction between those with at least
a year left in their contracts and those with less than a year
left in their contracts when they were illegally
dismissed.108cralawred
The Congress classification may be subjected to judicial
review. In Serrano, there is a legislative classification which
impermissibly interferes with the exercise of a fundamental
right or operates to the peculiar disadvantage of a suspect
class.109cralawred
Under the Constitution, labor is afforded special
protection.110 Thus, this court in Serrano, [i]mbued with the
same sense of obligation to afford protection to labor, . . .
employ[ed] the standard of strict judicial scrutiny, for it
perceive[d] in the subject clause a suspect classification
prejudicial to OFWs.111cralawred
We also noted in Serrano that before the passage of Republic
Act No. 8042, the money claims of illegally terminated
overseas and local workers with fixed-term employment were
computed in the same manner.112 Their money claims were
computed based on the unexpired portions of their
contracts.113 The adoption of the reinstated clause in
Republic Act No. 8042 subjected the money claims of illegally
dismissed overseas workers with an unexpired term of at
least a year to a cap of three months worth of their
salary.114 There was no such limitation on the money claims of
illegally terminated local workers with fixed-term
employment.115cralawred
We observed that illegally dismissed overseas workers whose
employment contracts had a term of less than one year were
granted the amount equivalent to the unexpired portion of
their employment contracts.116 Meanwhile, illegally dismissed
overseas workers with employment terms of at least a year
were granted a cap equivalent to three months of their salary
for the unexpired portions of their contracts. 117cralawred
Observing the terminologies used in the clause, we also
found that the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for
more than one year: those who are illegally dismissed with
less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while
those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the
reinstated clause, and their monetary benefits limited to their
salaries for three months only.118cralawred
We do not need strict scrutiny to conclude that these

classifications do not rest on any real or substantial

distinctions that would justify different treatments in terms of
the computation of money claims resulting from illegal
termination.
Overseas workers regardless of their classifications are
entitled to security of tenure, at least for the period agreed
upon in their contracts. This means that they cannot be
dismissed before the end of their contract terms without due
process. If they were illegally dismissed, the workers right to
security of tenure is violated.
The rights violated when, say, a fixed-period local worker is
illegally terminated are neither greater than nor less than the
rights violated when a fixed-period overseas worker is
illegally terminated. It is state policy to protect the rights of
workers without qualification as to the place of
employment.119In both cases, the workers are deprived of
their expected salary, which they could have earned had they
not been illegally dismissed. For both workers, this
deprivation translates to economic insecurity and
disparity.120 The same is true for the distinctions between
overseas workers with an employment contract of less than
one year and overseas workers with at least one year of
employment contract, and between overseas workers with at
least a year left in their contracts and overseas workers with
less than a year left in their contracts when they were
illegally dismissed.
For this reason, we cannot subscribe to the argument that
[overseas workers] are contractual employees who can
never acquire regular employment status, unlike local
workers121 because it already justifies differentiated
treatment in terms of the computation of money
claims.122cralawred
Likewise, the jurisdictional and enforcement issues on
overseas workers money claims do not justify a
differentiated treatment in the computation of their money
claims.123 If anything, these issues justify an equal, if not
greater protection and assistance to overseas workers who
generally are more prone to exploitation given their physical
distance from our government.
We also find that the classifications are not relevant to the
purpose of the law, which is to establish a higher standard of
protection and promotion of the welfare of migrant workers,
their families and overseas Filipinos in distress, and for other
purposes.124 Further, we find specious the argument that
reducing the liability of placement agencies redounds to the
benefit of the [overseas] workers.125cralawred
Putting a cap on the money claims of certain overseas
workers does not increase the standard of protection
afforded to them. On the other hand, foreign employers are
more incentivized by the reinstated clause to enter into
contracts of at least a year because it gives them more
flexibility to violate our overseas workers rights. Their
liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they
violated. Meanwhile, these overseas workers who are
impressed with an expectation of a stable job overseas for
the longer contract period disregard other opportunities only
to be terminated earlier. They are left with claims that are
less than what others in the same situation would receive.
The reinstated clause, therefore, creates a situation where
the law meant to protect them makes violation of rights
easier and simply benign to the violator.
As Justice Brion said in his concurring opinion in
Serrano:chanRoblesvirtualLawlibrary
Section 10 of R.A. No. 8042 affects these well-laid rules and
measures, and in fact provides a hidden twist affecting the
principal/employers liability. While intended as an incentive
accruing to recruitment/manning agencies, the law, as

worded, simply limits the OFWs recovery in wrongful

dismissal situations. Thus, it redounds to the benefit of
whoever may be liable, including the principal/employer
the direct employer primarily liable for the wrongful
dismissal. In this sense, Section 10 read as a grant of
incentives to recruitment/manning agencies oversteps what
it aims to do by effectively limiting what is otherwise the full
liability of the foreign principals/employers.Section 10, in
short, really operates to benefit the wrong party and allows
that party, without justifiable reason, to mitigate its liability
for wrongful dismissals. Because of this hidden twist, the
limitation of liability under Section 10 cannot be an
appropriate incentive, to borrow the term that R.A. No.
8042 itself uses to describe the incentive it envisions under
its purpose clause.
What worsens the situation is the chosen mode of granting
the incentive: instead of a grant that, to encourage greater
efforts at recruitment, is directly related to extra efforts
undertaken, the law simply limits their liability for the
wrongful dismissals of already deployed OFWs. This is
effectively a legally-imposed partial condonation of their
liability to OFWs, justified solely by the laws intent to
encourage greater deployment efforts. Thus, the incentive,
from a more practical and realistic view, is really part of a
scheme to sell Filipino overseas labor at a bargain for
purposes solely of attracting the market. . . .
The so-called incentive is rendered particularly odious by its
effect on the OFWs the benefits accruing to the
recruitment/manning agencies and their principals are taken
from the pockets of the OFWs to whom the full salaries for
the unexpired portion of the contract rightfully belong. Thus,
the principals/employers and the recruitment/manning
agencies even profit from their violation of the security of
tenure that an employment contract embodies. Conversely,
lesser protection is afforded the OFW, not only because of the
lessened recovery afforded him or her by operation of law,
but also because this same lessened recovery renders a
wrongful dismissal easier and less onerous to undertake; the
lesser cost of dismissing a Filipino will always be a
consideration a foreign employer will take into account in
termination of employment decisions. . . . 126
Further, [t]here can never be a justification for any form of
government action that alleviates the burden of one sector,
but imposes the same burden on another sector, especially
when the favored sector is composed of private businesses
such as placement agencies, while the disadvantaged sector
is composed of OFWs whose protection no less than the
Constitution commands. The idea that private business
interest can be elevated to the level of a compelling state
interest is odious.127cralawred
Along the same line, we held that the reinstated clause
violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any
discernable valid purpose.128cralawred
Respondent Joy Cabiles is entitled to her salary for the
unexpired portion of her contract, in accordance with Section
10 of Republic Act No. 8042. The award of the three-month
equivalence of respondents salary must be modified
accordingly. Since she started working on June 26, 1997 and
was terminated on July 14, 1997, respondent is entitled to
her salary from July 15, 1997 to June 25, 1998. To rule
otherwise would be iniquitous to petitioner and other OFWs,
and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may
violate an OFWs security of tenure which an employment
contract embodies and actually profit from such violation
based on an unconstitutional provision of law. 129cralawred
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular

No. 799 of June 21, 2013, which revised the interest rate for
loan or forbearance from 12% to 6% in the absence of
stipulation, applies in this case. The pertinent portions of
Circular No. 799, Series of 2013,
read:chanRoblesvirtualLawlibrary
The Monetary Board, in its Resolution No. 796 dated 16 May
2013, approved the following revisions governing the rate of
interest in the absence of stipulation in loan contracts,
thereby amending Section 2 of Circular No. 905, Series of
1982:cralawlawlibrary
Section 1. The rate of interest for the loan or forbearance of
any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such
rate of interest, shall be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the
Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for NonBank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we
laid down the guidelines in computing legal interest in Nacar
v. Gallery Frames:130cralawred
II. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:chanRoblesvirtualLawlibrary
1.

2.

When the obligation is breached,

and it consists in the payment of a
sum of money, i.e., a loan or
forbearance of money, the interest
due should be that which may have
been stipulated in writing.
Furthermore, the interest due shall
itself earn legal interest from the
time it is judicially demanded. In
the absence of stipulation, the rate
of interest shall be 6% per
annum to be computed from
default, i.e., from judicial or
extrajudicial demand under and
subject to the provisions of Article
1169 of the Civil Code.
When an obligation, not
constituting a loan or forbearance
of money, is breached, an interest
on the amount of damages
awarded may be imposed at
the discretion of the court at the
rate of 6% per annum. No interest,
however, shall be adjudged on
unliquidated claims or damages,
except when or until the demand
can be established with reasonable
certainty. Accordingly, where the
demand is established with
reasonable certainty, the interest
shall begin to run from the time
the claim is made judicially or
extrajudicially (Art. 1169, Civil
Code), but when such certainty
cannot be so reasonably
established at the time the demand
is made, the interest shall begin to
run only from the date the
judgment of the court is made (at
which time the quantification of

damages may be deemed to have

been reasonably ascertained). The
actual base for the computation of
legal interest shall, in any case, be
on the amount finally adjudged.
3.

When the judgment of the court

awarding a sum of money becomes
final and executory, the rate of
legal interest, whether the case
falls under paragraph 1 or
paragraph 2, above, shall be
6% per annum from such finality
until its satisfaction, this interim
period being deemed to be by then
an equivalent to a forbearance of
credit.

And, in addition to the above, judgments that have become

final and executory prior to July 1, 2013, shall not be
disturbed and shall continue to be implemented applying the
rate of interest fixed therein.131
Circular No. 799 is applicable only in loans and forbearance
of money, goods, or credits, and in judgments when there is
no stipulation on the applicable interest rate. Further, it is
only applicable if the judgment did not become final and
executory before July 1, 2013.132cralawred
We add that Circular No. 799 is not applicable when there is
a law that states otherwise. While the Bangko Sentral ng
Pilipinas has the power to set or limit interest rates, 133 these
interest rates do not apply when the law provides that a
different interest rate shall be applied. [A] Central Bank
Circular cannot repeal a law. Only a law can repeal another
law.134cralawred
For example, Section 10 of Republic Act No. 8042 provides
that unlawfully terminated overseas workers are entitled to
the reimbursement of his or her placement fee with an
interest of 12% per annum. Since Bangko Sentral ng Pilipinas
circulars cannot repeal Republic Act No. 8042, the issuance
of Circular No. 799 does not have the effect of changing the
interest on awards for reimbursement of placement fees from
12% to 6%. This is despite Section 1 of Circular No. 799,
which provides that the 6% interest rate applies even to
judgments.
Moreover, laws are deemed incorporated in contracts. The
contracting parties need not repeat them. They do not even
have to be referred to. Every contract, thus, contains not only
what has been explicitly stipulated, but the statutory
provisions that have any bearing on the matter. 135 There is,
therefore, an implied stipulation in contracts between the
placement agency and the overseas worker that in case the
overseas worker is adjudged as entitled to reimbursement of
his or her placement fees, the amount shall be subject to a
12% interest per annum. This implied stipulation has the
effect of removing awards for reimbursement of placement
fees from Circular No. 799s coverage.
The same cannot be said for awards of salary for the
unexpired portion of the employment contract under
Republic Act No. 8042. These awards are covered by Circular
No. 799 because the law does not provide for a specific
interest rate that should apply.
In sum, if judgment did not become final and executory
before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money
claims under Section 10 of Republic Act No. 8042 shall be
subject to the 6% interest per annum in accordance with
Circular No. 799.

This means that respondent is also entitled to an interest of

6% per annum on her money claims from the finality of this
judgment.
IV
Finally, we clarify the liabilities of Wacoal as principal and
petitioner as the employment agency that facilitated
respondents overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act
of 1995 provides that the foreign employer and the local
employment agency are jointly and severally liable for money
claims including claims arising out of an employer-employee
relationship and/or damages. This section also provides that
the performance bond filed by the local agency shall be
answerable for such money claims or damages if they were
awarded to the employee.
This provision is in line with the states policy of affording
protection to labor and alleviating workers
plight.136cralawred
In overseas employment, the filing of money claims against
the foreign employer is attended by practical and legal
complications. The distance of the foreign employer alone
makes it difficult for an overseas worker to reach it and make
it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural
rules that may be raised to frustrate an overseas workers
attempt to advance his or her claims.
It may be argued, for instance, that the foreign employer
must be impleaded in the complaint as an indispensable
party without which no final determination can be had of an
action.137cralawred
The provision on joint and several liability in the Migrant
Workers and Overseas Filipinos Act of 1995 assures overseas
workers that their rights will not be frustrated with these
complications.
The fundamental effect of joint and several liability is that
each of the debtors is liable for the entire obligation. 138 A
final determination may, therefore, be achieved even if only
one of the joint and several debtors are impleaded in an
action. Hence, in the case of overseas employment, either the
local agency or the foreign employer may be sued for all
claims arising from the foreign employers labor law
violations. This way, the overseas workers are assured that
someone the foreign employers local agent may be
made to answer for violations that the foreign employer may
have committed.
The Migrant Workers and Overseas Filipinos Act of 1995
ensures that overseas workers have recourse in law despite
the circumstances of their employment. By providing that the
liability of the foreign employer may be enforced to the full
extent139 against the local agent, the overseas worker is
assured of immediate and sufficient payment of what is due
them.140cralawred
Corollary to the assurance of immediate recourse in law, the
provision on joint and several liability in the Migrant Workers
and Overseas Filipinos Act of 1995 shifts the burden of going
after the foreign employer from the overseas worker to the
local employment agency. However, it must be emphasized
that the local agency that is held to answer for the overseas
workers money claims is not left without remedy. The law
does not preclude it from going after the foreign employer
for reimbursement of whatever payment it has made to the
employee to answer for the money claims against the foreign
employer.
A further implication of making local agencies jointly and
severally liable with the foreign employer is that an

additional layer of protection is afforded to overseas workers.

Local agencies, which are businesses by nature, are
inoculated with interest in being always on the lookout
against foreign employers that tend to violate labor law. Lest
they risk their reputation or finances, local agencies must
already have mechanisms for guarding against unscrupulous
foreign employers even at the level prior to overseas
employment applications.
With the present state of the pleadings, it is not possible to
determine whether there was indeed a transfer of obligations
from petitioner to Pacific. This should not be an obstacle for
the respondent overseas worker to proceed with the
enforcement of this judgment. Petitioner is possessed with
the resources to determine the proper legal remedies to
enforce its rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may
encounter as they travel into the farthest and most difficult
reaches of our planet to provide for their families. In Prieto v.
NLRC:141cralawred
The Court is not unaware of the many abuses suffered by our
overseas workers in the foreign land where they have
ventured, usually with heavy hearts, in pursuit of a more
fulfilling future. Breach of contract, maltreatment, rape,
insufficient nourishment, sub-human lodgings, insults and
other forms of debasement, are only a few of the inhumane
acts to which they are subjected by their foreign employers,
who probably feel they can do as they please in their own
country. While these workers may indeed have relatively little
defense against exploitation while they are abroad, that
disadvantage must not continue to burden them when they
return to their own territory to voice their muted complaint.
There is no reason why, in their very own land, the protection
of our own laws cannot be extended to them in full measure
for the redress of their grievances.142chanrobleslaw
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their
heroism can be told a million times over; each of their stories
as real as any other. Overseas Filipino workers brave alien
cultures and the heartbreak of families left behind daily. They
would count the minutes, hours, days, months, and years
yearning to see their sons and daughters. We all know of the
joy and sadness when they come home to see them all grown
up and, being so, they remember what their work has cost
them. Twitter accounts, Facetime, and many other gadgets
and online applications will never substitute for their lost
physical presence.
Unknown to them, they keep our economy afloat through the
ebb and flow of political and economic crises. They are our
true diplomats, they who show the world the resilience,
patience, and creativity of our people. Indeed, we are a
people who contribute much to the provision of material
creations of this world.
This government loses its soul if we fail to ensure decent
treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when
their contracts are breached by the foreign employers. While
we sit, this court will ensure that our laws will reward our
overseas workers with what they deserve: their dignity.
Inevitably, their dignity is ours as well.
WHEREFORE, the petition is DENIED. The decision of the
Court of Appeals is AFFIRMED with modification. Petitioner
Sameer Overseas Placement Agency is ORDERED to pay
respondent Joy C. Cabiles the amount equivalent to her
salary for the unexpired portion of her employment contract

at an interest of 6% per annum from the finality of this

judgment. Petitioner is also ORDERED to reimburse
respondent the withheld NT$3,000.00 salary and pay
respondent attorneys fees of NT$300.00 at an interest of 6%
per annum from the finality of this judgment.
The clause, or for three (3) months for every year of the

unexpired term, whichever is less in Section 7 of Republic

Act No. 10022 amending Section 10 of Republic Act No. 8042
is declared unconstitutional and, therefore, null and void.
SO ORDERED.