[G.R. No. 145561.

June 15, 2005]

HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG
MANGGAGAWA SA HONDA, respondent.
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of the Court of Appeals
decision[1] dated September 14, 2000[2] and its resolution[3] dated October 18, 2000,
in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2,
2000 rendered by the Voluntary Arbitrator who ruled that petitioner Honda
Philippines, Inc.s (Honda) pro-rated payment of the 13 th and 14th month pay and
financial assistance to its employees was invalid.
As found by the Court of Appeals, the case stems from the Collective Bargaining
Agreement (CBA) forged between petitioner Honda and respondent union Samahan
ng Malayang Manggagawa sa Honda (respondent union) which contained the
following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation [of]
the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as
computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its
discretion, financial assistance to covered employees in December of each year, of
not less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties
started re-negotiations for the fourth and fifth years of their CBA. When the talks
between the parties bogged down, respondent union filed a Notice of Strike on the
ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. On
March 31, 1999, then Department of Labor and Employment (DOLE) Secretary
Laguesma assumed jurisdiction over the labor dispute and ordered the parties to
cease and desist from committing acts that would aggravate the situation. Both
parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike on
the ground of unfair labor practice alleging that Honda illegally contracted out work
to the detriment of the workers. Respondent union went on strike and picketed the

premises of Honda on May 19, 1999. On June 16, 1999, DOLE Acting Secretary
Felicisimo Joson, Jr. assumed jurisdiction over the case and certified the same to the
National Labor Relations Commission (NLRC) for compulsory arbitration. The striking
employees were ordered to return to work and the management accepted them
back under the same terms prior to the strike staged.
On November 22, 1999, the management of Honda issued a
memorandum[4] announcing its new computation of the 13 th and 14th month pay to
be granted to all its employees whereby the thirty-one (31)-day long strike shall be
considered unworked days for purposes of computing said benefits. As per the
companys new formula, the amount equivalent to 1/12 of the employees basic
salary shall be deducted from these bonuses, with a commitment however that in
the event that the strike is declared legal, Honda shall pay the amount deducted.
Respondent union opposed the pro-rated computation of the bonuses in a letter
dated November 25, 1999. Honda sought the opinion of the Bureau of Working
Conditions (BWC) on the issue. In a letter dated January 4, 2000, [5] the BWC agreed
with the pro-rata payment of the 13th month pay as proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with the
parties existing CBA but when the issue remained unresolved, it was submitted for
voluntary arbitration. In his decision[6] dated May 2, 2000, Voluntary Arbitrator
Herminigildo C. Javen invalidated Hondas computation, to wit:
WHEREFORE, in view of all foregoing premises being duly considered and evaluated,
it is hereby ruled that the Companys implementation of pro-rated 13 th Month pay,
14th Month pay and Financial Assistance [is] invalid. The Company is thus ordered to
compute each provision in full month basic pay and pay the amounts in question
within ten (10) days after this Decision shall have become final and executory.
The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.
SO ORDERED.[7]
Hondas Motion for Partial Reconsideration was denied in a resolution dated May
22, 2000. Thus, a petition was filed with the Court of Appeals, however, the petition
was dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the pro-rated
computation of the 13th month pay and the other bonuses in question is valid and
lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work

and all other terms and conditions of employment in a bargaining unit. [8] As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. [9] Thus, where the CBA is clear
and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law. [10]
In some instances, however, the provisions of a CBA may become contentious,
as in this case. Honda wanted to implement a pro-rated computation of the benefits
based on the no work, no pay rule. According to the company, the phrase present
practice as mentioned in the CBA refers to the manner and requisites with respect
to the payment of the bonuses, i.e., 50% to be given in May and the other 50% in
December of each year. Respondent union, however, insists that the CBA provisions
relating to the implementation of the 13 th month pay necessarily relate to the
computation of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions are
far from being unequivocal. A cursory reading of the provisions will show that they
did not state categorically whether the computation of the 13 th month pay,
14th month pay and the financial assistance would be based on one full months
basic salary of the employees, or pro-rated based on the compensation actually
received. The arbitrator thus properly resolved the ambiguity in favor of labor as
mandated by Article 1702 of the Civil Code. [11] The Court of Appeals affirmed the
arbitrators finding and added that the computation of the 13 th month pay should be
based on the length of service and not on the actual wage earned by the worker.
We uphold the rulings of the arbitrator and the Court of Appeals. Factual
findings of labor officials, who are deemed to have acquired expertise in matters
within their respective jurisdiction, are generally accorded not only respect but even
finality, and bind us when supported by substantial evidence. It is not our function
to assess and evaluate the evidence all over again, particularly where the findings
of both the arbiter and the Court of Appeals coincide. [12]
Presidential Decree No. 851, otherwise known as the 13 th Month Pay Law, which
required all employers to pay their employees a 13 th month pay, was issued to
protect the level of real wages from the ravages of worldwide inflation. It was
enacted on December 16, 1975 after it was noted that there had been no increase
in the minimum wage since 1970 and the Christmas season was an opportune time
for society to show its concern for the plight of the working masses so that they
may properly celebrate Christmas and New Year. [13]
Under the Revised Guidelines on the Implementation of the 13 th month pay
issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851
was removed. It further provided that the minimum 13 th month pay required by law
shall not be less than one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year. The guidelines pertinently provides:

The basic salary of an employee for the purpose of computing the 13 th month pay
shall include all remunerations or earnings paid by his employer for services
rendered but does not include allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits, overtime premium, night
differential and holiday pay, and cost-of-living allowances. [14] (Emphasis supplied)
For employees receiving regular wage, we have interpreted basic salary to
mean, not the amount actually received by an employee, but 1/12 of their standard
monthly wage multiplied by their length of service within a given calendar year.
Thus, we exclude from the computation of basic salary payments for sick, vacation
and maternity leaves, night differentials, regular holiday pay and premiums for work
done on rest days and special holidays. [15] In Hagonoy Rural Bank v. NLRC,[16] St.
Michael Academy v. NLRC,[17] Consolidated Food Corporation v. NLRC,[18] and similar
cases, the 13th month pay due an employee was computed based on the employees
basic monthly wage multiplied by the number of months worked in a calendar year
prior to separation from employment.
The revised guidelines also provided for a pro-ration of this benefit only in cases
of resignation or separation from work. As the rules state, under these
circumstances, an employee is entitled to a pay in proportion to the length of time
he worked during the year, reckoned from the time he started working during the
calendar year.[19] The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13 th month pay should be based
on the length of service and not on the actual wage earned by the worker. In the
present case, there being no gap in the service of the workers during the calendar
year in question, the computation of the 13 th month pay should not be pro-rated but
should be given in full.[20] (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented any
pro-rating of the 13th month pay before the instant case. Honda did not adduce
evidence to show that the 13th month, 14th month and financial assistance benefits
were previously subject to deductions or pro-rating or that these were dependent
upon the companys financial standing. As held by the Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that prompt[ed]
them to adopt a pro-rata computation, aside [from] being in [a] state of
rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and 215M lost
of sales in 1999 due to strike. This is an implicit acceptance that prior to the strike,
a full month basic pay computation was the present practice intended to be
maintained in the CBA.[21]
The memorandum dated November 22, 1999 which Honda issued shows that it
was the first time a pro-rating scheme was to be implemented in the company. It
was a convenient coincidence for the company that the work stoppage held by the

employees lasted for thirty-one (31) days or exactly one month. This enabled them
to devise a formula using 11/12 of the total annual salary as base amount for
computation instead of the entire amount for a 12-month period.
That a full month payment of the 13 th month pay is the established practice at
Honda is further bolstered by the affidavits executed by Feliteo Bautista and
Edgardo Cruzada. Both attested that when they were absent from work due to
motorcycle accidents, and after they have exhausted all their leave credits and
were no longer receiving their monthly salary from Honda, they still received the full
amount of their 13th month, 14th month and financial assistance pay. [22]
The case of Davao Fruits Corporation v. Associated Labor Unions, et al.
presented an example of a voluntary act of the employer that has ripened into a
company practice. In that case, the employer, from 1975 to 1981, freely and
continuously included in the computation of the 13 th month pay those items that
were expressly excluded by the law. We have held that this act, which was favorable
to the employees though not conforming to law, has ripened into a practice and
therefore can no longer be withdrawn, reduced, diminished, discontinued or
eliminated. Furthermore, in Sevilla Trading Company v. Semana,[24] we stated:
[23]

With regard to the length of time the company practice should have been exercised
to constitute voluntary employer practice which cannot be unilaterally withdrawn by
the employer, we hold that jurisprudence has not laid down any rule requiring a
specific minimum number of years. In the above quoted case of Davao Fruits
Corporation vs. Associated Labor Unions, the company practice lasted for six (6)
years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez,
the employer, for three (3) years and nine (9) months, approved the commutation
to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the
practice of giving a fixed monthly emergency allowance from November 1976 to
February 1980, or three (3) years and four (4) months. In all these cases, this Court
held that the grant of these benefits has ripened into company practice or policy
which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla
Trading kept the practice of including non-basic benefits such as paid leaves for
unused sick leave and vacation leave in the computation of their 13 th-month pay for
at least two (2) years. This, we rule likewise constitutes voluntary employer practice
which cannot be unilaterally withdrawn by the employer without violating Art. 100
of the Labor Code.[25](Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping
with the underlying principle for the grant of this benefit. It is primarily given to
alleviate the plight of workers and to help them cope with the exorbitant increases
in the cost of living. To allow the pro-ration of the 13 th month pay in this case is to
undermine the wisdom behind the law and the mandate that the workingmans
welfare should be the primordial and paramount consideration. [26] What is more, the
factual milieu of this case is such that to rule otherwise inevitably results to

dissuasion, if not a deterrent, for workers from the free exercise of their
constitutional rights to self-organization and to strike in accordance with law. [27]
WHEREFORE, the instant petition is DENIED. The decision and the resolution of
the Court of Appeals dated September 14, 2000 and October 18, 2000, respectively,
in CA-G.R. SP No. 59052, affirming the decision rendered by the Voluntary Arbitrator
on May 2, 2000, are hereby AFFIRMED in toto.
SO ORDERED.

G.R. No. 176985 : April 1, 2013

RICARDO E. VERGARA, JR., Petitioner, v. COCA-COLA BOTTLERS
PHILIPPINES, INC., Respondent.
PERALTA,J.:
FACTS:
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers
Philippines, Inc. from May 1968 until he retired on January 31, 2002 as a District
Sales Supervisor (DSS) for Las Pinas City, Metro Manila. As stipulated in respondents
existing Retirement Plan Rules and Regulations at the time, the Annual Performance
Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the computation of
retirement benefits.
Claiming his entitlement to an additional PhP474,600.00 as Sales Management
Incentives (SMI) and to the amount of PhP496,016.67 which respondent allegedly
deducted illegally, representing the unpaid accounts of two dealers within his
jurisdiction, petitioner filed a complaint before the NLRC on June 11, 2002 for the
payment of his Full Retirement Benefits, Merit Increase, Commission/Incentives,
Length of Service, Actual, Moral and Exemplary Damages, and Attorneys Fees.
Subsequently, they filed their respective Position Paper and Reply thereto dealing on
the two remaining issues of SMI entitlement and illegal deduction.
The LA rendered a Decision in favor of petitioner, directing respondent to reimburse
the amount illegally deducted from petitioners retirement package and to integrate
therein his SMI privilege. Upon appeal of respondent, however, the NLRC modified
the award and deleted the payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal deduction,
which the LA granted despite respondents opposition. Later, without prejudice to
the pendency of petitioners petition for certiorari before the CA, the parties
executed a Compromise Agreementon October 4, 2006, whereby petitioner
acknowledged full payment by respondent of the amount of PhP496,016.67
covering the amount illegally deducted.
The CA dismissed petitioners case on January 9, 2007 and denied his motion for

reconsideration thereafter. Hence, this present petition to resolve the singular issue
of whether the SMI should be included in the computation of petitioners retirement
benefits on the ground of consistent company practice. Petitioner insistently avers
that many DSSs who retired without achieving the sales and collection targets were
given the average SMI in their retirement package.
ISSUE: Whether or not petitioner is entitled to the payment of SMI
HELD: No. CA decision affirmed.
Labor Law- To be considered as a regular company practice, the employee must
prove by substantial evidence that the giving of the benefit is done over a long
period of time, and that it has been made consistently and deliberately.
There is diminution of benefits when the following requisites are present: (1) the
grant or benefit is founded on a policy or has ripened into a practice over a long
period of time; (2) the practice is consistent and deliberate; (3) the practice is not
due to error in the construction or application of a doubtful or difficult question of
law; and (4) the diminution or discontinuance is done unilaterally by the employer.
To be considered as a regular company practice, the employee must prove by
substantial evidence that the giving of the benefit is done over a long period of
time, and that it has been made consistently and deliberately. Jurisprudence has not
laid down any hard-and-fast rule as to the length of time that company practice
should have been exercised in order to constitute voluntary employer practice.The
common denominator in previously decided cases appears to be the regularity and
deliberateness of the grant of benefits over a significant period of time. It requires
an indubitable showing that the employer agreed to continue giving the benefit
knowing fully well that the employees are not covered by any provision of the law or
agreement requiring payment thereof. In sum, the benefit must be characterized by
regularity, voluntary and deliberate intent of the employer to grant the benefit over
a considerable period of time.
Upon review of the entire case records, the SC finds no substantial evidence to
prove that the grant of SMI to all retired DSSs regardless of whether or not they
qualify to the same had ripened into company practice. Despite more than sufficient
opportunity given him while his case was pending before the NLRC, the CA, and
even to this Court, petitioner utterly failed to adduce proof to establish his
allegation that SMI has been consistently, deliberately and voluntarily granted to all
retired DSSs without any qualification or conditions whatsoever.
DENIED
CENTRAL AZUCARERA DE TARLAC,
vs.
CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU,
G.R. No. 188949, July 26, 2010

Justice Nachura
FACTS:
The formula used by petitioner in computing the 13th-month pay was: Total
Basic Annual Salary divided by twelve (12). Included in petitioners computation of
the Total Basic Annual Salary were the following: basic monthly salary; first eight (8)
hours overtime pay on Sunday and legal/special holiday; night premium pay; and
vacation and sick leaves for each year. Throughout the years, petitioner used this
computation until 2006 from 1975.
After the strike and temporary cessation of operations in 2005, all the
striking union was allowed to return to work. Subsequently, petitioner declared
another temporary cessation of operations for the months of April and May 2006.
After the suspension was lifted on June 2006, the workers were allowed to report for
work on a fifteen day-per-month rotation basis until September 2005. In December
2006, petitioner gave the employees their 13th-month pay based on the employees
total earnings during the year divided by 12. In December 2006, petitioner gave the
employees their 13th-month pay based on the employees total earnings during the
year divided by 12.
Respondent objected to this computation. It claimed that the divisor should
have been eight (8) instead of 12, because the employees worked for only 8 months
in 2006.
Petitioner and respondent tried to thresh out their differences in accordance
with the grievance procedure as provided in their collective bargaining agreement.
Despite four (4) conciliatory meetings, the parties still failed to settle the dispute,
hence a complaint by for money claims based on the alleged diminution/erroneous
computation of 13th month pay before the Labor arbiter (LA).
The LA dismissed the complaint. NLRC reversed. MR denied. Petitioner then
filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. CA
dismissed the petition and affirm the NLRC. Hence petition before the SC (R45)
ISSUE:
Whether the computation of 13th month pay by the petitioner is correct.
HELD:
YES. "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary
of an employee within a calendar year; the term "basic salary" of an employee for
the purpose of computing the 13th-month pay was interpreted to include all
remuneration or earnings paid by the employer for services rendered, but does not
include allowances and monetary benefits which are not integrated as part of the
regular or basic salary, such as the cash equivalent of unused vacation and sick
leave credits, overtime, premium, night differential and holiday pay, and cost-ofliving allowances. However, these salary-related benefits should be included as part
of the basic salary in the computation of the 13th-month pay if, by individual or

collective agreement, company practice or policy, the same are treated as part of
the basic salary of the employees.
As correctly ruled by the CA, the practice of petitioner in giving 13th-month
pay based on the employees gross annual earnings which included the basic
monthly salary, premium pay for work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost thirty (30) years and has
ripened into a company policy or practice which cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule,
mandates that benefits given to employees cannot be taken back or reduced
unilaterally by the employer because the benefit has become part of the
employment contract, written or unwritten.
CALALANG v. WILLIAMS, 70 PHIL 726, GR No. 47800, December 2, 1940
FACTS: The National Traffic Commission resolved that animal-drawn vehicles be
prohibited from passing along some major streets such a Rizal Ave. in Manila for a
period of one year from the date of the opening of the Colgante Bridge to traffic.
The Secretary of Public Works approved the resolution on August 10,1940. The
Mayor of Manila and the Acting Chief of Police of Manila have enforced the rules and
regulation. As a consequence, all animal-drawn vehicles are not allowed to pass and
pick up passengers in the places above mentioned to the detriment not only of their
owners but of the riding public as well.
ISSUE: Does the rule infringe upon the constitutional precept regarding the
promotion of social justice? What is Social Justice?
HELD: No. The regulation aims to promote safe transit and avoid obstructions on
national roads in the interest and convenience of the public. Persons and property
may be subject to all kinds of restraints and burdens in order to secure the general
comfort, health, and prosperity of the State. To this fundamental aims of the
government, the rights of the individual are subordinated.
Social justice is neither communism, nor despotism, nor atomism, nor anarchy,
but 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. Social justice means the promotion of the welfare of all the
people, the adoption by the Government of measures calculated to insure economic
stability of all the competent elements of society, through the maintenance of a
proper economic and social equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures legally justifiable, or
extra-constitutionally, through the exercise of powers underlying the existence of all
governments on the time-honored principles of Salus Populi est Suprema Lex.
(Justice Laurel)

Philippine Long Distance Telephone Company (PLDT) v. National Labor

Relations Commission (NLRC)164 SCRA 671 (1988)
FACTS:
Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone
Company, was accused bytwo complainants of having demanded and received from
them the total amount of P3,800.00 in considerationof her promise to facilitate
approval of their applications for telephone installation. Investigated and heard,
shewas found guilty as charged and accordingly separated from the service. She
went to the Ministry of Labor andEmployment claiming she had been illegally
removed. Despite of her being dismissed for cause, (as contendedby PLDT) the
labor arbiter (from NLRC) in his decision ruled that the complainant (herein private
respondent)must be given one month pay for every year of service as financial
assistance. The labor arbiter finds the same asequitable, taking into consideration
her long years of service to the company whereby she had undoubtedlycontributed
to the success of the company.NOTE: Marilyn Abucay had served in the company for
10 years. Thus, she must be awarded 10 monthsseparation pay for every year of
her service.
ISSUE:
Whether or not the award of separation pay for the private respondent is just.
RULING:
NO. The rule embodied in the Labor Code is that a person dismissed for cause as
defined therein is notentitled to separation pay. The separation pay, when it was
considered warranted, was required regardless of the nature or degree of the
ground proved, be it mere inefficiency or something graver like immorality
ordishonesty. Separation pay shall be allowed as a measure of social justice only in
those instances where theemployee is validly dismissed for causes other than
serious misconduct or those reflecting on his moralcharacter. Where the reason for
the valid dismissal is, for example, habitual intoxication or an offense
involvingmoral turpitude, like theft or illicit sexual relations with a fellow worker, the
employer may not be required togive the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on theground of social
justice. If the employee who steals from the company is granted separation pay
even as he isvalidly dismissed, it is not unlikely that he will commit a similar offense
in his next employment because hethinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not going to dolabor in general any
good as it will encourage the infiltration of its ranks by those who do not deserve
theprotection and concern of the Constitution.
Those who invoke social justice may do so only if their hands areclean and their
motives blameless and not simply because they happen to be poor.

We hold that the grant of separation pay in the case at bar is unjustified.

The private respondent hasbeen dismissed for dishonesty, as found by the labor
arbiter and affirmed by the NLRC and as she herself hasimpliedly admitted. The fact
that she has worked with the PLDT for more than a decade, if it is to be
consideredat all, should be taken against her as it reflects a regrettable lack of
loyalty that she should have strengthenedinstead of betraying during all of her 10
years of service with the company. If regarded as a justification formoderating the
penalty of dismissal, it will actually become a prize for disloyalty, perverting the
meaning of social justice and undermining the efforts of labor to cleanse its ranks of
all undesirables.

TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TPCWA) vs.

NATIONAL LABOR RELATIONS COMMISSION, et al.
G.R. Nos 158798-99

19 October 2007

FACTS:

The Union is the sole and exclusive bargaining agent of all Toyota rank and file
employees. After the holding of a certification election, and the issuance of an
Order certifying the Union as the sole and exclusive bargaining agent of all the
Toyota rank and file employees, Toyota challenged said Order via appeal to the
DOLE Secretary. Thus, Toyota refused to negotiate CBAs with the Union pending
said appeal. The Unions subsequent notice to strike was converted into a
preventive mediation case.

The 21 February 2001 hearing on the exclusion of the votes of alleged supervisory
employees from the votes cast during the certification election was cancelled and
reset to the next day The Union requested that its members be absent on 22
February, but the same was denied. Despite said denal, more than 200 employees
staged mass actions on 22 and 23 February in front of the BLR and DOLE offices, to
protest the partisan and anti-union stance of Toyota. Due to the loss of the said
number of employees, Toyota experienced losses due to inability to meet production
goals. Soon thereafter, Toyota sent individual letters to some 360 employees
requiring them to explain within 24 hours why they should not be dismissed for their
obstinate defiance of the companys directives. The letters specifically cited the
Companys Code of Conduct wherein inciting or participating in riots, disorders,
alleged strikes, or concerted actions detrimental to Toyotas interest wherein the
first offense would amount to dismissal.

In response to the letters, the Union circulated a Manifesto which urged its members
to participate in a strike/picket and to abandon their posts. The Union members

explained that their refusal to work on their scheduled work time for two
consecutive days was simply an exercise of their constitutional right to peaceably
assemble and to petition the government for redress of grievances. On 16 March
2001, Toyota terminated 227 employees for participation in concerted actions in
violation of its Code of Conduct and for misconduct under Article 282 of the Labor
Code. In reaction to the dismissal of its union members and officers, the Union went
on strike on 17 March, 28 March ad 12 April. In the latter dates, the Union
intensified its strike by barricading the gates of Toyotas Bicutan and Sta. Rosa
plants. The strikers prevented workers who reported for work from entering the
plants.

ISSUE(S):

1.
Whether the mass actions committed by the Union on different occasions are
illegal strikes; and
2.
Whether separation pay should be awarded to the Union members who
participated in the illegal strikes.

HELD:
Yes. The alleged protest rallies in front of the offices of BLR and DOLE Secretary
and at the Toyota plants constituted illegal strikes. Even if the Union claims that the
said acts were not strikes, there was a lack of permit from the City of Manila to hold
rallies, nor were there any filing of a notice in the two-day walk-out. Shrouded by
demonstrations, they were in reality temporary stoppages of work perpetrated
through the converted action of the employees who deliberately failed to report for
work on the convenient excuse that they will hold a rally at the BLR and DOLE
offices in Intramuros, Manila. It is obvious that the real and ultimate goal of the
Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining
agent of the company. This is not a legal and valid exercise of the right of assembly
and to demand redress of grievance. A valid strike should comply with the
prerequisites under Article 263 of the Labor Code. These requisites were not
complied with by the Union. Furthermore, the February 2001 strikes are in blatant
violation of Toyotas Code of Conduct to which the Union and its members are bound
to. To make matters worse, the barricade done during the March and April strikes
are in palpable violation of Article 264(e) of the Labor Code, which proscribes acts of
violence, coercion, or intimidation, or which obstruct the free ingress to and egress
from the company premises.

No. There can be no good faith in intentionally incurring absences in a collective

fashion from work just to attend DOLE hearings. The Union members should know
from common sense that the company will incur substantial amounts of losses. In a
slew of cases, the Court refrained from awarding separation pay or financial
assistance to union officers and members who were separated from service due to
their participation in or commission of illegal acts during strikes.

G.R. No. 123294: October 20, 2010

PHILIPPINE AIRLINES, INC., Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION and AIDA M. QUIJANO, Respondents.
LEONARDO-DE CASTRO, J.:
FACTS:
An investigating committee chaired by Leslie W. Espino formally charged Quijano as
Manager-ASAD in connection with the processing and payment of commission
claims to Goldair Pty. Ltd. wherein PAL overpaid commissions to the latter.
Pending further investigation, the Espino Committee placed Quijano under
preventive suspension and at the same time required her to submit her answer to
the charges.
Another Administrative charge involving the same Goldair anomaly was filed, this
time including Committee Chairman Leslie W. Espino and Committee Member
Romeo R. Ines and several others, for "gross incompetence and inefficiency,
negligence, imprudence, mismanagement, dereliction of duty, failure to observe
and/or implement administrative and executive policies, and related acts or
omissions." Pending the result of investigation by another committee chaired by
Judge Martin S. Ocampo, the PAL Board of Directors suspended respondents.
The Ocampo Committee having submitted its findings to the PAL Board of Directors,
the latter considered respondents resigned from the service effective immediately,
for loss of confidence and for acts inimical to the interest of the company.
Her motion for reconsideration having been denied by the Board, Quijano filed the
instant case against PAL for illegal suspension and illegal dismissal.
The Labor Arbiter dismissed private respondents complaint. Undeterred, private
respondent filed an appeal before the NLRC which rendered the assailed Decision
vacated and set aside. Petitioner filed a Motion for Reconsideration but this was
denied by the NLRC.
ISSUE:
Whether or not respondent is illegally dismissed?
HELD:
LABOR LAW

At the onset, it should be noted that the parties do not dispute the validity of private
respondents dismissal from employment for loss of confidence and acts inimical to
the interest of the employer. The assailed September 29, 1995 Decision of the NLRC
was emphatic in declaring that it was "not prepared to rule as illegal the preventive
suspension and eventual dismissal from the service of [private respondent]" and
rightfully so because the last position that private respondent held, Manager-ASAD
(Agents Services Accounting Division), undeniably qualifies as a position of trust and
confidence.
Loss of confidence as a just cause for termination of employment is premised from
the fact that an employee concerned holds a position of trust and confidence. This
situation holds where a person is entrusted with confidence on delicate matters,
such as the custody, handling, or care and protection of the employers property.
But, in order to constitute a just cause for dismissal, the act complained of must be
"work-related" such as would show the employee concerned to be unfit to continue
working for the employer.
As a general rule, employers are allowed a wider latitude of discretion in
terminating the employment of managerial personnel or those who, while not of
similar rank, perform functions which by their nature require the employers full trust
and confidence. This must be distinguished from the case of ordinary rank and file
employees, whose termination on the basis of these same grounds requires a higher
proof of involvement in the events in question; mere uncorroborated assertions and
accusations by the employer will not suffice.
LABOR LAW
The language of Article 279 of the Labor Code is pregnant with the implication that
a legally dismissed employee is not entitled to separation pay, to wit:
An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of
his actual reinstatement.
However, in exceptional cases, this Court has granted separation pay to a legally
dismissed employee as an act of "social justice" or based on "equity." In both
instances, it is required that the dismissal (1) was not for serious misconduct; and
(2) does not reflect on the moral character of the employee or would involve moral
turpitude. This equitable and humanitarian principle was first discussed by the Court
in the landmark case of Philippine Long Distance Telephone Co. (PLDT) v. National
Labor Relations Commission.
Serious misconduct as a valid cause for the dismissal of an employee is defined
simply as improper or wrong conduct. It is a transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error of judgment. To be serious within the
meaning and intendment of the law, the misconduct must be of such grave and

aggravated character and not merely trivial or unimportant. However serious such
misconduct, it must, nevertheless, be in connection with the employees work to
constitute just cause for his separation. The act complained of must be related to
the performance of the employees duties such as would show him to be unfit to
continue working for the employer. On the other hand, moral turpitude has been
defined as "everything which is done contrary to justice, modesty, or good morals;
an act of baseness, vileness or depravity in the private and social duties which a
man owes his fellowmen, or to society in general, contrary to justice, honesty,
modesty, or good morals."
In the case at bar, the transgressions imputed to private respondent have never
been firmly established as deliberate and willful acts clearly directed at making
petitioner lose millions of pesos. At the very most, they can only be characterized as
unintentional, albeit major, lapses in professional judgment. Likewise, the same
cannot be described as morally reprehensible actions. Thus, private respondent may
be granted separation pay on the ground of equity which this Court had defined as
"justice outside law, being ethical rather than jural and belonging to the sphere of
morals than of law. It is grounded on the precepts of conscience and not on any
sanction of positive law, for equity finds no room for application where there is law."
G.R. No. 186621
March 12, 2014

SOUTH EAST INTERNATIONAL RATTAN, INC. and/or ESTANISLAO AGBAY,

Petitioners,
vs.
JESUS J. COMING, Respondent.

Facts:
South East International Rattan, Inc. (SEIRI) hired Jesus Coming (Coming) as Sizing
Machine Operator. His compensation was on pakiao basis but later on he was paid
weekly.
Coming was dismissed from work after many years of service without lawful cause.
He was told that the company is not doing well and he will be called back to work
only if they need his services again. He did not receive any call from the company
almost a year after his termination.
He filed a complaint before the regional arbitration branch.
SEIRI denied existence of employer-employee relationship with Coming and stressed
that he was not included in the list of employees submitted to Social Security
System (SSS) and his name does not appear in the payrolls and pay envelope
records.
Issue:

Does employer-employee relationship exist?

Law applicable:
Control Test
Jurisprudence in the case of Tan vs. Lagrama - The fact that a worker was not
reported as an employee to the SSS is not conclusive proof of the absence of
employer-employee relationship. Otherwise, an employer would be rewarded for his
failure or even neglect to perform his obligation.
Case History
April 30, 2004 - Labor Arbiter ruled that Coming is a regular employee of SEIRI and
that the termination of his employment was illegal.
July 28, 2005 NLRC set aside and vacated Labor Arbiter ruling and dismissed the
complaint.
February 21, 2008 Court of Appeals reversed the NLRC and ruled that there
existed an employer-employee relationship between petitioners and respondent
who was dismissed without just and valid cause.
Ruling of the Supreme Court
Employer-employee relationship exists.
The Court affirmed the control test applied by the Court of Appeals. The SEIRIs
control over the work of Coming was manifested on the following facts:
they required him to work within the company premises;
they obliged petitioner to report every day of the week and tasked him to usually
perform the same job;
they enforced the observance of definite hours of work from 8 oclock in the
morning to 5 oclock in the afternoon;
the mode of payment of petitioners salary was under their discretion, at first paying
him on pakiao basis and thereafter, on daily basis;
they implemented company rules and regulations;
Agbay directly paid petitioners salaries and controlled all aspects of his
employment and
Petitioner rendered work necessary and desirable in the business of the respondent
company.

Non-reporting of a worker as an employee to the SSS or the fact that Comings

name does not appear in the payrolls and pay envelopes records negate existence
of employer-employee relationship.

G.R. No. 195190

July 28, 2014

ROYALE HOMES MARKETING CORPORATION, Petitioner,

vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative
of employee-employer relationship. Rules and regulations that merely serve as
guidelines towards the achievement of a mutually desired result without dictating
the means and methods of accomplishing it do not establish employer-employee
relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the
Court of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed and set aside the
February 23, 2009 Decision4 of the National Labor Relations Commission (NLRC), (ii)
ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay
respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii)
remanded the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution 5 of the CA denying
Royale Homes Motion for Reconsideration,6 as well as its Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed
Alcantara asits Marketing Director for a fixed period of one year. His work consisted
mainly of marketing Royale Homes realestate inventories on an exclusive basis.
Royale Homes reappointed him for several consecutive years, the last of which
covered the period January 1 to December 31, 2003 where he held the position of
Division 5 Vice-President-Sales.8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal 9 against
Royale Homes and its President Matilde Robles, Executive Vice-President for
Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President
for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale
Homes since he is performing tasks that are necessary and desirable to its business;
that in 2003 the company gave him P1.2 million for the services he rendered to it;
that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to office
and sit at his table;10and that the actsof the executive officers of Royale Homes
amounted to his dismissal from work without any valid or just cause and in gross

disregard of the proper procedure for dismissing employees. Thus, he

alsoimpleaded the corporate officers who, he averred, effected his dismissal in bad
faith and in an oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of seniority
rights and other privileges, as well as to be paid backwages, moral and exemplary
damages, and attorneys fees. He further sought that the ownership of the
Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its
employee. It argued that the appointment paper of Alcantara isclear that it engaged
his services as an independent sales contractorfor a fixed term of one year only. He
never received any salary, 13th month pay, overtime pay or holiday pay from
Royale Homes as hewas paid purely on commission basis. In addition, Royale Homes
had no control on how Alcantara would accomplish his tasks and responsibilities as
he was free to solicit sales at any time and by any manner which he may deem
appropriateand necessary. He is even free to recruit his own sales personnel to
assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife,
who was once connectedwith it as a sales agent, had formed a brokerage company
that directly competed with its business, and even recruited some of its sales
agents. Although this was against the exclusivity clause of the contract, Royale
Homes still offered to accept Alcantaras wife back so she could continue to engage
in real estate brokerage, albeit exclusively for Royale Homes. In a special
management committee meeting on October 8,2003, however, Alcantara
announced publicly and openly that he would leave the company by the end of
October 2003 and that he would no longer finish the unexpired term of his contract.
He has decided to join his wifeand pursue their own brokerage business. Royale
Homes accepted Alcantaras decision. It then threw a despedidaparty in his honor
and, subsequently, appointed a new independent contractor. Two months after
herelinquished his post, however, Alcantara appeared in Royale Homes and
submitted a letter claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision 11 holding that
Alcantara is an employee of Royale Homes with a fixed-term employment period
from January 1 to December 31, 2003 and that the pre-termination of his contract
was against the law.Hence, Alcantara is entitled to an amount which he may have
earned on the average for the unexpired portion of the contract. With regard to the
impleaded corporate officers, the Labor Arbiter absolved them from any liability.
The dispositive portion of the Labor Arbiters Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the

respondent Royale Homes Marketing Corp. to pay the complainant the total amount
of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (P277,000.00) representing
his compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12
Both parties appealed the Labor Arbiters Decision to the NLRC. Royale Homes
claimed that the Labor Arbiter grievously erred inruling that there exists an
employer-employee relationship between the parties. It insisted that the contract
between them expressly statesthat Alcantara is an independent contractor and not
an ordinary employee. Ithad no control over the means and methods by which he
performed his work. RoyaleHomes likewise assailed the award of P277,000.00 for
lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not
to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his
employment was for a fixed-term and that he is not entitled to backwages,
reinstatement, unpaid commissions, and damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision, 13 ruling that Alcantara is not
an employee but a mere independent contractor of Royale Homes. It based its
ruling mainly on the contract which does not require Alcantara to observe regular
working hours. He was also free to adopt the selling methods he deemed most
effective and can even recruit sales agents to assist him in marketing the
inventories of Royale Homes. The NLRC also considered the fact that Alcantara was
not receiving monthly salary, but was being paid on commission basis as stipulated
in the contract. Being an independent contractor, the NLRC concluded that
Alcantaras Complaint iscognizable by the regular courts.
The falloof the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores PeraltaBeley dated September 5, 2005 is REVERSED and SET ASIDE and a NEW ONE
rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009,
however, the NLRC denied his motion.

Alcantara thus filed a Petition for Certiorari 17 with the CA imputing grave abuse of
discretion on the partof the NLRC in ruling that he is not an employee of Royale
Homes and that it is the regular courts which have jurisdiction over the issue of
whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision 18 granting Alcantaras Petition
and reversing the NLRCs Decision. Applying the four-fold and economic reality
tests, it held thatAlcantara is an employee of Royale Homes. Royale Homes
exercised some degree of control over Alcantara since his job, as observed by the
CA, is subject to company rules, regulations, and periodic evaluations. He was also
bound by the company code of ethics. Moreover, the exclusivity clause of the
contract has made Alcantara economically dependent on Royale Homes, supporting
the theory that he is anemployee of said company.
The CA further held that Alcantaras termination from employment was without any
valid or just cause, and it was carried out in violation of his right to procedural due
process. Thus, the CA ruled that he isentitled to backwages and separation pay, in
lieu of reinstatement. Considering,however, that the CA was not satisfied with the
proofadduced to establish the amount of Alcantaras annual salary, it remanded the
caseto the Labor Arbiter to determine the same and the monetary award he is
entitled to. With regard to the corporate officers, the CA absolved them from any
liability for want of clear proof that they assented to the patently unlawful acts or
that they are guilty of bad faith orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The
assailed decision of the National Labor Relations Commission in NLRC NCR CASE NO.
00-12-14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the
Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered
ordering the respondent company to pay petitioner backwages which shall be
computed from the time of his illegal termination in October 2003 up to the finality
of this decision, plus separation pay equivalent to one month salary for every year
of service. This case is REMANDED to the Labor Arbiter for the proper determination
and computation of back wages, separation pay and other monetary benefits that
petitioner is entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for
Reconsideration.21 In a Resolution22 dated January 18, 2011, however, the CA denied
said motions.
Issues

Hence, this Petition where Royale Homes submits before this Court the following
issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT
OF RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN
FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN
DISREGARDING THE EN BANCRULING OF THIS HONORABLE COURT IN THE
CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE
RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN
DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN
REFUSING TO CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and unambiguous
it engaged his services as an independent contractor. This can be readily seen
from the contract stating that no employer-employee relationship exists between
the parties; that Alcantara was free to solicit sales at any time and by any manner
he may deem appropriate; that he may recruit sales personnel to assist him in
marketing Royale Homes inventories; and, thathis remunerations are dependent on
his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised
control over Alcantara based on a shallow ground that his performance is subject to
company rules and regulations, code of ethics, periodic evaluation, and exclusivity
clause of contract. RoyaleHomes maintains that it is expected to exercise some
degree of control over its independent contractors,but that does not automatically
result in the existence ofemployer-employee relationship. For control to be
consideredas a proof tending to establish employer-employee relationship, the same
mustpertain to the means and method of performing the work; not on the
relationship of the independent contractors among themselves or their persons or
their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss
Alcantara. It was Alcantara who openly and publicly declared that he was preterminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an

independent contractor or anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an
employee or an independent contractor involves an evaluation of factual matters
which, ordinarily, is not within the province of this Court. In view of the conflicting
findings of the tribunals below, however, this Court is constrained to go over the
factual matters involved in this case.24
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties relationship in this case is the
written contract that they signed and executed in pursuanceof their mutual
agreement. While the existence of employer-employee relationship is a matter of
law, the characterization made by the parties in their contract as to the nature of
their juridical relationship cannot be simply ignored, particularly in this case where
the parties written contractunequivocally states their intention at the time they
entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc., 25 it
was held that:
To be sure, the Agreements legal characterization of the nature of the relationship
cannot be conclusive and binding on the courts; x x x the characterization of the
juridical relationship the Agreement embodied is a matter of law that is for the
courts to determine. At the same time, though, the characterization the parties
gave to their relationship in the Agreement cannot simply be brushed aside because
it embodiestheir intent at the time they entered the Agreement, and they were
governed by this understanding throughout their relationship. At the very least, the
provision on the absence of employer- employee relationship between the parties
can be an aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record. 26
In this case, the contract,27 duly signed and not disputed by the parties,
conspicuously provides that "no employer-employee relationship exists between"
Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not
want to be bound by employer-employee relationship atthe time ofthe signing of the
contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I

Marikina City
Dear Mr. Alcantara,
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE
HOMES MARKETING CORPORATION effective January 1, 2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE
BASIS under such price, terms and condition to be provided to you from time to
time.
As such, you can solicit sales at any time and by any manner which you deem
appropriate and necessary to market our real estate inventories subject to rules,
regulations and code of ethics promulgated by the company. Further, you are free to
recruit sales personnel/agents to assist you in marketing of our inventories provided
that your personnel/agents shall first attend the required seminars and briefing to
be conducted by us from time to time for the purpose of familiarizing them of terms
and conditionsof sale, the natureof property sold, etc., attendance of which shall be
a condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning January 1, 2003
booked by your sales agents.
2. Budget allocation depending on your divisions sale performance as per
our budget guidelines.
3. Sales incentive and other forms of company support which may be granted
from time to time. It is understood, however, that no employer-employee
relationship exists between us, that of your sales personnel/agents, and that
you shall hold our company x x x, its officers and directors, free and harmless
from any and all claims of liability and damages arising from and/or incident
to the marketing of our real estate inventories.
We reserve, however, our right to terminate this agreement in case of violation of
any company rules and regulations, policies and code of ethics upon notice for
justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which shall
be determined by the management.
If you are amenable to the foregoing terms and conditions, please indicate your
conformity by signing on the space provided below and return [to] us a duplicate
copy of this letter, duly accomplished, to constitute as our agreement on the matter.
(Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of itsstipulations should control." 28 No
construction is even needed asthey already expressly state their intention. Also, this
Court adopts the observation of the NLRC that it is rather strange on the part of
Alcantara, an educated man and a veteran sales broker who claimed to be
receiving P1.2 million as his annual salary, not to have contested the portion of the
contract expressly indicating that he is not an employee of Royale Homes if their
true intention were otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this Court has
generally relied on the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employee with respect to the means and methods
by which the work is to be accomplished.29 Among the four, the most determinative
factor in ascertaining the existence of employeremployee relationship is the "right
of control test".30 "It is deemed to be such an important factor that the other
requisites may even be disregarded." 31 This holds true where the issues to be
resolved iswhether a person who performs work for another is the latters employee
or is an independent contractor,32 as in this case. For where the person for whom
the services are performed reserves the right to control not only the end to
beachieved, but also the means by which such end is reached, employer-employee
relationship is deemed to exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated
that since the performance of his tasks is subject to company rules, regulations,
code of ethics, and periodic evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship.1wphi1 A
person who performs work for another and is subjected to its rules, regulations, and
code of ethics does not necessarily become an employee. 34As long as the level of
control does not interfere with the means and methods of accomplishing the
assigned tasks, the rules imposed by the hiring party on the hired party do not
amount to the labor law concept of control that is indicative of employer-employee
relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations
Commission35 it was pronounced that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employeremployee relationship

unlike the second, which address both the result and the means used to achieve it.
x x x36
In this case, the Court agrees with Royale Homes that the rules, regulations, code of
ethics, and periodic evaluation alluded to byAlcantara do not involve control over
the means and methods by which he was to performhis job. Understandably, Royale
Homes has to fix the price, impose requirements on prospective buyers, and lay
down the terms and conditionsof the sale, including the mode of payment, which
the independent contractors must follow. It is also necessary for Royale Homes to
allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined
criteria, and regularly monitor the result of their marketing and sales efforts. But
tothe mind of this Court, these do not pertain to the means and methods of how
Alcantara was to perform and accomplish his task of soliciting sales. They do not
dictate upon him the details of how he would solicit sales or the manner as to how
he would transact business with prospective clients. In Tongko, this Court held that
guidelines or rules and regulations that do notpertain to the means or methodsto be
employed in attaining the result are not indicative of control as understood inlabor
law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is
that a commitment to abide by the rules and regulations of an insurance company
does not ipso factomake the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agents conduct necessarily indicate "control"
as this term is defined in jurisprudence. Guidelines indicative of labor law "control,"
as the first Insular Lifecase tells us, should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature
of dictating the means or methods to beemployed in attaining the result, or of fixing
the methodology and of binding or restricting the party hired to the use of these
means.In fact, results-wise, the principal can impose production quotas and can
determine how many agents, with specific territories, ought to be employed to
achieve the companys objectives. These are management policy decisions that the
labor law element of control cannot reach. Our ruling in these respects in the first
Insular Lifecase was practically reiterated in Carungcong. Thus, as will be shown
more fully below, Manulifes codes of conduct, all of which do not intrude into the
insurance agents means and manner of conducting their sales and only control
them as to the desired results and Insurance Code norms, cannot be used as basis
for a finding that the labor law concept of control existed between Manulife and
Tongko.37 (Emphases in the original)
As the party claiming the existence of employer-employee relationship, it behoved
upon Alcantara to prove the elements thereof, particularly Royale Homes power of
control over the means and methods of accomplishing the work. 38 He, however,
failed to cite specificrules, regulations or codes of ethics that supposedly imposed
control on his means and methods of soliciting sales and dealing with prospective
clients. On the other hand, this case is replete with instances that negate the

element of control and the existence of employer-employee relationship. Notably,

Alcantara was not required to observe definite working hours. 39 Except for soliciting
sales, RoyaleHomes did not assign other tasks to him. He had full control over the
means and methods of accomplishing his tasks as he can "solicit sales at any time
and by any manner which [he may] deem appropriate and necessary." He
performed his tasks on his own account free from the control and direction of Royale
Homes in all matters connected therewith, except as to the results thereof. 40
Neither does the repeated hiring of Alcantara prove the existence of employeremployee relationship.41 As discussed above, the absence of control over the means
and methodsdisproves employer-employee relationship. The continuous rehiring of
Alcantara simply signifies the renewal of his contract with Royale Homes, and
highlights his satisfactory services warranting the renewal of such contract. Nor
does the exclusivity clause of contract establish the existence of the labor law
concept of control. In Consulta v. Court of Appeals, 42 it was held that exclusivity of
contract does not necessarily result in employer-employee relationship, viz:
x x x However, the fact that the appointment required Consulta to solicit business
exclusively for Pamana did not mean that Pamana exercised control over the means
and methods of Consultas work as the term control is understood in labor
jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did
not prohibit Consulta from engaging in any other business, or from being connected
with any other company, for aslong as the business [of the] company did not
compete with Pamanas business. 43
The same scenario obtains in this case. Alcantara was not prohibited from engaging
in any other business as long as he does not sell projects of Royale Homes
competitors. He can engage in selling various other products or engage in unrelated
businesses.
Payment of Wages
The element of payment of wages is also absent in thiscase. As provided in the
contract, Alcantaras remunerations consist only of commission override of 0.5%,
budget allocation, sales incentive and other forms of company support. There is no
proof that he received fixed monthly salary. No payslip or payroll was ever
presented and there is no proof that Royale Homes deducted from his supposed
salary withholding tax or that it registered him with the Social Security System,
Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint
merely states a ballpark figure of his alleged salary of P100,000.00, more or less. All
of these indicate an independent contractual relationship. 44 Besides, if Alcantara
indeed consideredhimself an employee of Royale Homes, then he, an experienced
and professional broker, would have complained that he was being denied
statutorily mandated benefits. But for nine consecutive years, he kept mum about
it, signifying that he has agreed, consented, and accepted the fact that he is not
entitled tothose employee benefits because he is an independent contractor.

This Court is, therefore,convinced that Alcantara is not an employee of Royale

Homes, but a mere independent contractor. The NLRC is, therefore, correct in
concluding that the Labor Arbiter has no jurisdiction over the case and that the
same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of
the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The
February 23, 2009 Decision of the National Labor Relations Commission is
REINSTATED and AFFIRMED. SO ORDERED.

ANGELINA FRANCISCO vs. NLRC

500 SCRA 690 (2006)
Facts: Petitoner was hired by Kasei Corporation during the incorporation stage. She
was designated as accountant and corporate secretary and was assigned to handle
all the accounting needs of the company. She was also designated as Liason Officer
to the City of Manila to secure permits for the operation of the company.
In 1996, Petitioner was designated as Acting Manager. She was assigned to handle
recruitment of all employees and perform management administration functions. In
2001, she was replaced by Liza Fuentes as Manager. Kasei Corporation reduced her
salary to P2,500 per month which was until September. She asked for her salary but
was informed that she was no longer connected to the company. She did not
anymore report to work since she was not paid for her salary. She filed an action for
constructive dismissal with the Labor Arbiter.
The Labor Arbiter found that the petitioner was illegally dismissed. NLRC affirmed
the decision while CA reversed it.
Issue: Whether or not there was an employer-employee relationship.
Ruling: The court held that in this jurisdiction, there has been no uniform test to
determine the existence of an employer-employee relation. Generally, courts have
relied on the so-called right of control test where the person for whom the services
are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. In addition to the standard of right-ofcontrol, the existing economic conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, can help in determining the existence of
an employer-employee relationship.
The better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employers power to control the employee with respect to the means and
methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.
In Sevilla v. Court of Appeals, the court observed the need to consider the existing
economic conditions prevailing between the parties, in addition to the standard of
right-of-control like the inclusion of the employee in the payrolls, to give a clearer

picture in determining the existence of an employer-employee relationship based on

an analysis of the totality of economic circumstances of the worker.
Thus, the determination of the relationship between employer and employee
depends upon the circumstances of the whole economic activity, such as: (1) the
extent to which the services performed are an integral part of the employers
business; (2) the extent of the workers investment in equipment and facilities; (3)
the nature and degree of control exercised by the employer; (4) the workers
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer;
and (7) the degree of dependency of the worker upon the employer for his
continued employment in that line of business. The proper standard of economic
dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business.
By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of Seiji
Kamura, the corporations Technical Consultant. It is therefore apparent that
petitioner is economically dependent on respondent corporation for her continued
employment in the latters line of business.
There can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and
is economically dependent upon respondent for her continued employment in that
line of business. Her main job function involved accounting and tax services
rendered to Respondent Corporation on a regular basis over an indefinite period of
engagement. Respondent Corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause. More importantly,
Respondent Corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.
OROZCO VS. CA
Wilhelmina Orozco was hired as a writer by the Philippine Daily Inquirer (PDI) in
1990. She was the columnist of Feminist Reflections under the Lifestyle section of
the publication. She writes on a weekly basis and on a per article basis (P250300/article).
In 1991, Magsanoc as the editor-in-chief sought to improve the Lifestyle section of
the paper. She said there were too many Lifestyle writers and that it was time to
reduce the number of writers. Orozcos column was eventually dropped.
Orozco filed for a case for Illegal Dismissal against PDI and Magsanoc. Orozco won in
the Labor Arbiter. The LA ruled that there exists an employer-employee relationship

between PDI and Orozco hence Orozco is entitled to receive backwages,

reinstatement, and 13th month pay.
PDI appealed to the National Labor Relations Commission. The NLRC denied the
appeal because of the failure of PDI to post a surety bond as required by Article 223
of the Labor Code. The Court of Appeals reversed the NLRC.
ISSUE: Whether or not there exists an employer-employee relationship between PDI
and Orozco. Whether or not PDIs appeal will prosper.
HELD: Under Article 223 of the Labor Code:
ART. 223. Appeal. Decisions, awards or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders.
In case of a judgment involving a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from.
The requirement that the employer post a cash or surety bond to perfect its/his
appeal is apparently intended to assure the workers that if they prevail in the case,
they will receive the money judgment in their favor upon the dismissal of the
employers appeal. It was intended to discourage employers from using an appeal
to delay, or even evade, their obligation to satisfy their employees just and lawful
claims.
But in this case, this principle is relaxed by the Supreme Court considering the fact
that the Labor Arbiter, in ruling that the Orozco is entitled to backwages, did not
provide any computation.
The case is then remanded to the Labor Arbiter for the computation. This
necessarily pended the resolution of the other issue of whether or not there exists
an employer-employee relationship between PDI and Orozco.

Peoples Broadcasting v. Sec. of DOLE

G.R. no. 179652. May 8, 2009Facts:

Jandeleon Juezan (respondent) filed a complaint against Peoples Broadcasting

Service, Inc. (BomboRadyo Phils., Inc) (petitioner) for illegal deduction, non-payment
of service incentive leave, 13 th month pay, premium pay for holiday and rest day
and illegal diminution of benefits, delayed payment of wages and non-coverage of
SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment
(DOLE)Regional Office No. VII,Cebu City.On the basis of the complaint, the DOLE
conducted a plant level inspection on 23 September 2003. In the Inspection Report
Form, the Labor Inspector wrote under the heading Findings/Recommendations
non-diminution of benefits and Note: Respondent deny employer-employee
relationship with the complainant- see Notice of Inspection results.Petitioner was
required to rectify/restitute the violations within five (5) days from receipt. No
rectificationwas effected by petitioner; thus, summary investigations were
conducted, with the parties eventually ordered tosubmit their respective position
papers.In his Order dated 27 February 2004, DOLE Regional Director Atty. Rodolfo M.
Sabulao (RegionalDirector) ruled that respondent is an employee of petitioner, and
that the former is entitled to his money claimsamounting to P203, 726.30. Petitioner
sought reconsideration of the Order, claiming that the Regional Director
gavecredence to the documents offered by respondent without examining the
originals, but at the same time he missed or failed to consider petitioners
evidence. Petitioners motion for reconsideration was denied.On appeal to theDOLE
Secretary, petitioner denied once more the existence of employer-employee
relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary
dismissed the appeal on the ground that petitioner did not post acash or surety
bond and instead submitted a Deed of Assignment of Bank Deposit. Petitioner
maintained that there isno employer-employee relationship had ever existed
between it and respondent because it was the drama directorsand producers who
paid, supervised and disciplined respondent. It also added that the case was beyond
the jurisdiction of the DOLE and should have been considered by the labor arbiter
because respondents claimexceeded P5,000.00.
Issue:
Does the Secretary of Labor have the power to determine the existence of an
employer-employee relationship?
Held:
No.Clearly the law accords a prerogative to the NLRC over the claim when the
employer-employee relationshiphas terminated or such relationship has not arisen
at all. The reason is obvious. In the second situation especially,the existence of an
employer-employee relationship is a matter which is not easily determinable from
an ordinaryinspection, necessarily so, because the elements of such a relationship
are not verifiable from a mere ocular examination. The intricacies and implications
of an employer-employee relationship demand that the level of scrutiny should be
far above the cursory and themechanical. While documents, particularly documents
found in the employers office are the primary sourcematerials, what may prove
decisive are factors related to the history of the employers business operations,
itscurrent state as well as accepted contemporary practices in the industry. More

often than not, the question of employer-employee relationship becomes a battle of

evidence, the determination of which should be comprehensiveand intensive and
therefore best left to the specialized quasi-judicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and enforcement
power somehow has tomake a determination of the existence of an employeremployee relationship. Such prerogativaldetermination, however, cannot be
coextensive with the visitorial and enforcement power itself. Indeed,
suchdetermination is merely preliminary, incidental and collateral to the DOLEs
primary function of enforcinglabor standards provisions. The determination of the
existence of employer-employee relationship is stillprimarily lodged with the NLRC.
This is the meaning of the clause in cases where the relationship of employeremployee still exists in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important
questions must beresolved: (1) Does the employer-employee relationship still exist,
or alternatively, was there ever an employer-employee relationship to speak of; and
(2) Are there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to
and a limitation onthe power of the Secretary of Labor, one which the legislative
branch is entitled to impose.
The rationale underlying this limitation is to eliminate the prospect of competing
conclusions of the Secretary of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by the quasi-judicial body, whichis
the NRLC, rather than an administrative official of the executive branch of the
government. If the Secretary of Labor proceeds to exercise his visitorial and
enforcement powers absent the first requisite, as the dissent proposes, his office
confers jurisdiction on itself which it cannot otherwise acquire.Reading of Art. 128 of
the Labor Code reveals that the Secretary of Labor or his authorized
representativeswas granted visitorial and enforcement powers for the purpose of
determining violations of, and enforcing, theLabor Code and any labor law, wage
order, or rules and regulations issued pursuant thereto. Necessarily, the
actualexistence of an employer-employee relationship affects the complexion of the
putative findings that the Secretary of Labor may determine, since employees are
entitled to a different set of rights under the Labor Code from theemployer as
opposed to non-employees. Among these differentiated rights are those accorded
by the labor standards provisions of the Labor Code, which the Secretary of Labor
is mandated to enforce. If there is noemployer-employee relationship in the first
place, the duty of the employer to adhere to those labor standards withrespect to
the non-employees is questionable.At least a prima facie showing of such absence
of relationship, as in this case, is needed to preclude theDOLE from the exercise of
its power. The Secretary of Labor would not have been precluded from exercising
the powers under Article 128 (b) over petitioner if another person with bettergrounded claim of employment than thatwhich respondent had. Respondent,
especially if he were an employee, could have very well enjoined other employees
to complain with the DOLE, and, at the same time, petitioner could ill-afford to

disclaim an employmentrelationship with all of the people under its aegis. The most
important consideration for the allowance of the instant petition is the opportunity
for theCourt not only to set the demarcation between the NLRCs jurisdiction and
the DOLEs prerogative but alsothe procedure when the case involves the
fundamental challenge on the DOLEs prerogative based on lack of employeremployee relationship. As exhaustively discussed here, the DOLEs prerogative
hinges on theexistence of employer-employee relationship, the issue is which is at
the very heart of this case. And theevidence clearly indicates private respondent
has never been petitioners employee. But the DOLE did notaddress, while the
Court of Appeals glossed over, the issue. The peremptory dismissal of the instant
petitionon a technicality would deprive the Court of the opportunity to resolve the
novel controversy
WHEREFOREthe petition isGRANTED

FIRST DIVISION
[G.R. No. L-7945. March 23, 1956.]
NATIONAL LABOR UNION, Petitioner, vs. BENEDICTO
DINGLASAN, Respondent.
DECISION
PADILLA, J.:
The Petitioner seeks a review and the setting aside of a resolution in banc of the
Court of Industrial Relations adopted on 23 June 1954 which held that there exists
no employer-employee relationship between the Respondent and the driver
complainants represented by the Petitionerand for that reason the Court of
Industrial Relations dismissed the complaint filed by the acting prosecutor of the
Court. The resolution in banc complained of reversed an order of an Associate Judge
of the Court which declared that there was such relationship of employer-employee
between the Respondent and the complainants represented by the Petitioner. The
last mentioned order of 16 February 1954 was just interlocutory but it was set aside
by the resolution of 23 June 1954. The National Labor Union in representation of the
complainants appealed from said resolution dismissing its complaint charging
the Respondent with the commission of unfair labor practices.
In the resolution complained of there are no findings of facts. It merely states that
cralaw the Court, in banc, finds that the said motion for reconsideration is welltaken and, therefore, it hereby reconsider the order of February 16, 1954, and
thereby declares that there is no employer- employee relation between Respondent,
Benedicto Dinglasan, and the driver-complainants in his case. As a consequence,
the motion to dismiss the complaint dated October 31, 1953, filed by the Acting
Prosecutor of the Court, is hereby granted. (Annex D.)
This resolution was adopted upon a motion for reconsideration of the previous order
of 16 February 1954. As there are no findings of fact in the resolution those set forth

in the previous order must have been relied upon by the Court. They are as
follows:chanroblesvirtuallawlibrary
(a) Respondent Dinglasan is the owner and operator of TPU jeepneys plying
between Espaa-Quiapo-Pier and vice versa.
(b) Petitioners are drivers who had verbal contracts with Respondent for the use of
the latters jeepneys upon payment of P7.50 for 10 hours use, otherwise known as
the boundary system.
(c) Said drivers did not receive salaries or wages from Mr. Dinglasan; chan
roblesvirtualawlibrarytheir days earnings being the excess over the P7.50 that they
paid for the use of the jeepneys. In the event that they did not earn
more, Respondent did not have to pay them anything;
(d) Mr. Dinglasans supervision over the drivers consisted in inspection of the
jeepneys that they took out when they passed his gasoline station for water,
checking the route prescribed by the Public Service Commission, or whether any
driver was driving recklessly and washing and changing the tires of jeepneys.
(Annex C.)
The main question to determine is whether there exists a relationship of employeremployee between the drivers of the jeeps and the owner thereof. The findings
contained in the first order are not disputed by both parties except the last to which
the Respondent took exception. But in the resolution setting aside the order of 16
February 1954 the Court of Industrial Relations in banc did not state that such
finding is not supported by evidence. It merely declares that there is no employeremployee relation between Respondent, Benedicto Dinglasan, and the drivercomplainants in this case. If the findings to which the Respondent took exception is
unsupported by the evidence, a pronouncement to that effect would have been
made by the Court in banc. In the absence of such pronouncement we are not at
liberty to ignore or disregard said finding. The findings of the Court of Industrial
Relations with respect to question of fact, if supported by substantial evidence on
the record shall be conclusive. 1 Taking into consideration the findings of fact made
by the Court of Industrial Relations we find it difficult to uphold the conclusion of the
Court set forth in its resolution of 23 June 1954. The drivers did not invest a single
centavo in the business and the Respondent is the exclusive owner of the jeeps. The
management of the business is in the Respondents hands. For even if the drivers of
the jeeps take material possession of the jeeps, still the Respondent as owner
thereof and holder of a certificate of public convenience is entitled to exercise, as he
does and under the law he must, supervision over the drivers by seeing to it that
they follow the route prescribed by the Public Service Commission and the rules and
regulations promulgated by it as regards their operation. And when they pass by the
gasoline station of the Respondent checking by his employees on the water tank, oil
and tire pressure is done. The only features that would make the relationship of
lessor and lessee between the Respondent and the drivers, members of the union,
as contended by theRespondent, are the fact that he does not pay them any fixed
wage but their compensation is the excess of the total amount of fares earned or
collected by them over and above the amount of P7.50 which they agreed to pay to
the Respondent, the owner of the jeeps, and the fact that the gasoline burned by
the jeeps is for the account of the drivers. These two features are not, however,

sufficient to withdraw the relationship between them from that of employeremployee, because the estimated earnings for fares must be over and above the
amount they agreed to pay to the Respondent for a ten-hour shift or ten-hour a day
operation of the jeeps. Not having any interest in the business because they did not
invest anything in the acquisition of the jeeps and did not participate in the
management thereof, their service as drivers of the jeeps being their only
contribution to the business, the relationship of lessor and lessee cannot be
sustained. 1 In the lease of chattels the lessor loses complete control over the
chattel leased although the lessee cannot make bad use thereof, for he would be
responsible for damages to the lessor should he do so. In this case there is a
supervision and a sort of control that the owner of the jeeps exercises over the
drivers. It is an attempt by ingenious scheme to withdraw the relationship between
the owner of the jeeps and the drivers thereof from the operation of the labor laws
enacted to promote industrial peace.
As to the point that the National Labor Union is not the real party in interest to bring
the complaint, suffice it to say that representative includes a legitimate labor
organization or any officer or agent of such organization, whether or not employed
by the employer or employees whom he represents. 2 And whenever it is charged
by an offended party or his representative that any person has engaged or is
engaging in any unfair labor practice, the Court of Industrial Relations must
investigate such charge. 3 Therefore, the objection to the institution of the charge
for unfair labor practice by the National Labor Union is not well taken.
The order of 23 June 1904 is reversed and set aside and the case remanded to the
Court of Industrial Relations for such further proceedings as may be required by law,
with costs against theRespondent.

San Miguel Corporation vs. NLRC

G.R. Nos. 146121-22, April 16, 2008
Facts:
Ibias (respondent) was employed by petitioner SMC on 24 December 1978 initially
as a CRO operator in its Metal Closure and Lithography Plant. Respondent
continuously worked therein until he advanced as Zamatic operator. He was also an
active and militant member of a labor organization called Ilaw Buklod Manggagawa
(IBM)-SMC Chapter.

According to SMCs Policy on Employee Conduct, absences without permission or

AWOPs, which are absences not covered either by a certification of the plant doctor
that the employee was absent due to sickness or by a duly approved application for
leave of absence filed at least 6 days prior to the intended leave, are subject to
disciplinary action characterized by progressively increasing weight. The same
Policy on Employee Conduct also punishes falsification of company records or
documents with discharge or termination for the first offense if the offender himself
or somebody else benefits from falsification or would have benefited if falsification
is not found on time.
It appears that per company records, respondent was AWOP on the following dates
in 1997: 2, 4 and 11 January; 26, 28 and 29 April; and 5, 7, 8, 13, 21, 22, 28 and 29
May. For his absences on 2, 4 and 11 January and 28 and 29 April, he was given a
written warning dated 9 May 1997 that he had already incurred five (5) AWOPs and
that further absences would be subject to disciplinary action. For his absences on 28
and 29 April and 7 and 8 May, respondent was alleged to have falsified his medical
consultation card by stating therein that he was granted sick leave by the plant
clinic on said dates when in truth he was not.
After the completion of the investigation, SMC concluded that respondent
committed the offenses of excessive AWOPs and falsification of company records or
documents, and accordingly dismissed him.
On 30 March 1998, respondent filed a complaint for illegal dismissal against SMC.
The labor arbiter believed that respondent had committed the absences pointed out
by SMC but found the imposition of termination of employment based on his AWOPs
to be disproportionate since SMC failed to show by clear and convincing evidence
that it had strictly implemented its company policy on absences. It also noted that

termination based on the alleged falsification of company records was unwarranted

in view of SMCs failure to establish respondents guilt.
The appellate court also held that respondents AWOPs did not warrant his dismissal
in view of SMCs inconsistent implementation of its company policies. It could not
understand why respondent was given a mere warning for his absences on 28 and
29 April which constituted his 5th and 6th AWOPs, respectively, when these should
have merited suspension under SMCs policy. According to the appellate court, since
respondent was merely warned, logically said absences were deemed committed for
the first time; thus, it follows that the subject AWOPs did not justify his dismissal
because under SMCs policy, the 4th to 9th AWOPs are meted the corresponding
penalty only when committed for the second time.
Issue: WON the Court of Appeals erred in sustaining the findings of the labor arbiter
and the NLRC and in dismissing SMCs claims that respondent was terminated from
service with just cause.
Held:
Proof beyond reasonable doubt is not required as a basis for judgment on the
legality of an employers dismissal of an employee, nor even preponderance of
evidence for that matter, substantial evidence being sufficient. In the instant case,
while there may be no denying that respondents medical card had falsified entries
in it, SMC was unable to prove, by substantial evidence, that it was respondent who
made the unauthorized entries. Besides, SMCs (Your) Guide on Employee Conduct
punishes the act of falsification of company records or documents; it does not
punish mere possession of a falsified document.
Respondent cannot feign surprise nor ignorance of the earlier AWOPs he had
incurred. He was given a warning for his 2, 4, and 11 January and 26, 28, and 29

April 1997 AWOPs. In the same warning, he was informed that he already had six
AWOPs for 1997. He admitted that he was absent on 7 and 8 May 1997. He was also
given notices to explain his AWOPs for the period 26 May to 2 June 1997, which he
received but refused to acknowledge. It does not take a genius to figure out that as
early as June 1997, he had more than nine AWOPs.
In any case, when SMC imposed the penalty of dismissal for the 12th and 13th
AWOPs, it was acting well within its rights as an employer. An employer has the
prerogative to prescribe reasonable rules and regulations necessary for the proper
conduct of its business, to provide certain disciplinary measures in order to
implement said rules and to assure that the same would be complied with. An
employer enjoys a wide latitude of discretion in the promulgation of policies, rules
and regulations on work-related activities of the employees.
It is axiomatic that appropriate disciplinary sanction is within the purview of
management imposition. Thus, in the implementation of its rules and policies, the
employer has the choice to do so strictly or not, since this is inherent in its right to
control and manage its business effectively. Consequently, management has the
prerogative to impose sanctions lighter than those specifically prescribed by its
rules, or to condone completely the violations of its erring employees. Of course,
this prerogative must be exercised free of grave abuse of discretion, bearing in mind
the requirements of justice and fair play.
All told, we find that SMC acted well within its rights when it dismissed respondent
for his numerous absences. Respondent was afforded due process and was validly
dismissed for cause.
Petition granted
G.R. No. 198534, July 03, 2013 - JENNY F. PECKSON, Petitioner, v. ROBINSONS SUPERMARKET
CORPORATION, JODY GADIA, ROENA SARTE, AND RUBY ALEX, Respondents.

FIRST DIVISION
G.R. No. 198534, July 03, 2013
JENNY F. PECKSON, Petitioner, v. ROBINSONS SUPERMARKET CORPORATION, JODY GADIA, ROENA
SARTE, AND RUBY ALEX, Respondents.
DECISION
REYES, J.:

For resolution is the Petition for Review on Certiorari1 of the Decision2 dated June 8, 2011 of the Court of
Appeals (CA) in CA-G.R. SP No. 109604 affirming the Decision3 dated February 25, 2009 of the
National Labor Relations Commission (NLRC) in NLRC NCR Case No. 00-11-09316-06/NLRC LAC No.
002020-07, which upheld the dismissal4 by the Labor Arbiter (LA) on May 30, 2007 of Jenny F. Pecksons
(petitioner) complaint for constructive dismissal.
Antecedent Facts and Proceedings
The petitioner first joined the Robinsons Supermarket Corporation (RSC) as a Sales Clerk on November 3,
1987. On October 26, 2006, she was holding the position of Category Buyer when respondent Roena Sarte
(Sarte), RSCs Assistant Vice-President for Merchandising, reassigned her to the position of Provincial
Coordinator, effective November 1, 2006.5 Claiming that her new assignment was a demotion
because it was non-supervisory and clerical in nature, the petitioner refused to turn over her
responsibilities to the new Category Buyer, or to accept her new responsibilities as Provincial Coordinator.
Jody Gadia (Gadia) and Ruby Alex (Alex) were impleaded because they were corporate officers of the RSC.
In a memorandum to the petitioner dated November 13, 2006, 6 the RSC, through Sarte, demanded an
explanation from her within 48 hours for her refusal to accept her new assignment despite written and
verbal demands. Sarte cited a company rule, Offenses Subject to Disciplinary Action No. 4.07, which
provided that [d]isobedience, refusal or failure to do assigned task or to obey superiors/officials
orders/instructions, or to follow established procedures or practices without valid reason would be meted
the penalty of suspension.
The petitioner ignored the 48-hour deadline to explain imposed by Sarte. On November 23, 2006, Sarte
issued her another memorandum,7 reiterating her demand to explain in writing within 48 hours why she
persistently refused to assume her new position, and warning her that this could be her final chance to
present her side or be deemed to have waived her right to be heard.
In her one-paragraph reply submitted on November 27, 2006, 8 the petitioner stated that she could not
accept the position of Provincial Coordinator since she saw it as a demotion. As it turned out, however, on
November 9, 2006, the petitioner had already filed a complaint for constructive dismissal 9 against RSC,
Sarte, Gadia and Alex (respondents).
On November 30, 2006, Sarte issued an instruction to the petitioner to report to RSCs Metroeast Depot to
help prepare all shipping manifests for Cagayan de Oro and Bacolod, but as witnessed by RSC employees
Raquel Torrechua and Alex, she did not obey as instructed. 10 Again on December 8, 2006, Sarte issued a
similar instruction, citing the need for certain tasks from the petitioner in preparation for the coming
Christmas holidays, but the petitioner again refused to heed. 11
As culled from the assailed appellate court decision,12 the petitioner argued before the LA that the true

organizational chart of the RSC showed that the position of Category Buyer was one level above that of the
Provincial Coordinator, and that moreover, the job description of a Provincial Coordinator was largely clerical
and did not require her to analyze stock levels and order points, or source new local and international
suppliers, or monitor stock level per store and recommend items for replenishment, or negotiate better
items and discounts from suppliers, duties which only a Category Buyer could perform. She also claimed
that she was instructed to file a courtesy resignation in exchange for a separation pay of one-half salary per
year of service.
The respondents in their position paper denied the correctness of the organizational chart presented by the
petitioner. They maintained that her transfer was not a demotion since the Provincial Coordinator occupied a
Level 5 position like the Category Buyer, with the same work conditions, salary and benefits. But while
both positions had no significant disparity in the required skill, experience and aptitude, the position of
Category Buyer demanded the traits of punctuality, diligence and attentiveness because it is a frontline
position in the day-to-day business operations of RSC which the petitioner, unfortunately, did not possess.
The respondents also raised the petitioners record of habitual tardiness as far back as 1999, as well as poor
performance rating in 2005. In addition to her performance rating of 2.8 out of 4.0 in 2005 equivalent
to below expectation, the petitioner was found to be tardy in June and July 2005, 13 times, and for the
entire 2005, 57 times; that she was suspended twice in 2006 for 20 instances of tardiness and absences
from July to September 2006 alone.13 We also note that the petitioner was suspended for seven (7) days in
September and October 2005 for deliberately violating a company policy after she was seen having lunch
with a company supplier.14
In her affidavit,15 respondent Sarte denied that the reassignment of the petitioner as Provincial Coordinator
was motivated by a desire to besmirch the name of the latter. She asserted that it was made in the exercise
of management prerogative and sound discretion, in view of the sensitive position occupied by the Category
Buyer in RSCs daily operations, vis--vis the petitioners below expectation performance rating and
habitual tardiness.
In dismissing the petitioners complaint, the LA in its Decision 16 dated May 30, 2007 ruled that job
reassignment or classification is a strict prerogative of the employer, and that the petitioner cannot refuse
her transfer from Category Buyer to Provincial Coordinator since both positions commanded the same salary
structure, high degree of responsibility and impeccable honesty and integrity. Upholding the employers
right not to retain an employee in a particular position to prevent losses or to promote profitability, the LA
found no showing of any illegal motive on the part of the respondents in reassigning the petitioner. The
transfer was dictated by the need for punctuality, diligence and attentiveness in the position of Category
Buyer, which the petitioner clearly lacked. Moreover, the LA ruled that her persistent refusal to accept her
new position amounted to insubordination, entitling the RSC to dismiss her from employment.
A month after the above ruling, or on June 22, 2007, the petitioner tendered her written forced
resignation,17 wherein she complained that she was being subjected to ridicule by clients and co-employees
alike on account of her floating status since the time she refused to accept her transfer. She likewise
claimed that she was being compelled to accept the position of Provincial Coordinator without due process.
On appeal, the NLRC in its Decision18 dated February 25, 2009 sustained the findings of the LA. It agreed
that the lateral transfer of the petitioner from Category Buyer to Provincial Coordinator was not a demotion
amounting to constructive dismissal, since both positions belonged to Job Level 5 and between them there is
no significant disparity in terms of the requirements of skill, experience and aptitude. Contrary to the
petitioners assertion, the NLRC found that the position of Provincial Coordinator is not a rank-and-file
position but in fact requires the exercise of discretion and independent judgment, as well as appropriate
recommendations to management to ensure the faithful implementation of its policies and programs; that it
even exercises influence over the Category Buyer in that it includes performing a recommendatory function
to guide the Category Buyer in making decisions on the right assortment, price and quantity of the items,
articles or merchandise to be sold by the store.
The NLRC then reiterated the settled rule that management may transfer an employee from one office to
another within the business establishment, provided there is no demotion in rank or diminution of salary,
benefits, and other privileges, and the action is not motivated by discrimination or bad faith or effected as a
form of punishment without sufficient cause. It ruled that the respondents were able to show that the
petitioners transfer was not unreasonable, inconvenient or prejudicial, but was prompted by her failure to
meet the demands of punctuality, diligence, and personal attention of the position of Category Buyer; that
management wanted to give the petitioner a chance to improve her work ethic, but her obstinate refusal to

assume her new position has prejudiced respondent RSC, even while she continued to receive her salaries
and benefits as Provincial Coordinator.
On petition for certiorari to the CA, the petitioner insisted that her transfer from Category Buyer to Provincial
Coordinator was a form of demotion without due process, and that the respondents unjustifiably depicted
her as remiss in her duties, flawed in her character, and unduly obstinate in her refusal to accept her new
post.
In its Decision19 dated June 8, 2011, the CA found no basis to deviate from the oft-repeated tenet that the
findings of fact and conclusions of the NLRC when supported by substantial evidence are generally accorded
not only great weight and respect but even finality, and are thus deemed binding. 20
Petition for Review in the Supreme Court
Now on petition for review to this Court, the petitioner maintains that her lateral transfer from Category
Buyer to Provincial Coordinator was a demotion amounting to constructive dismissal because her
reassignment was not a valid exercise of management prerogative, but was done in bad faith and without
due process. She claims that the respondents manipulated the facts to show that she was tardy; that they
even surreptitiously drew up a new organizational chart of the Merchandising Department of RSC, soon after
she filed her complaint for illegal dismissal, to show that the position of Provincial Coordinator belonged to
Job Level 5 as the Category Buyer, and not one level below; that the company deliberately embarrassed her
when it cut off her email access; that they sent memoranda to her clients that she was no longer a Category
Buyer, and to the various Robinsons branches that she was now a Provincial Coordinator, while Milo Padilla
(Padilla) was taking over her former position as Category Buyer; that for seven (7) months, they placed her
on floating status and subjected her to mockery and ridicule by the suppliers and her co-employees; that
not only was there no justification for her transfer, but the respondents clearly acted in bad faith and with
discrimination, insensibility and disdain to make her stay with the company intolerable for her.
Our Ruling
We find no merit in the petition.
This Court has consistently refused to
interfere with the exercise by management
of its prerogative to regulate the employees
work assignments, the working methods and
the place and manner of work.
As we all know, there are various laws imposing all kinds of burdens and obligations upon the employer in
relation to his employees, and yet as a rule this Court has always upheld the employers prerogative to
regulate all aspects of employment relating to the employees work assignment, the working methods and
the place and manner of work. Indeed, labor laws discourage interference with an employers judgment in
the conduct of his business.21
In Rural Bank of Cantilan, Inc. v. Julve,22 the Court had occasion to summarize the general jurisprudential
guidelines affecting the right of the employer to regulate employment, including the transfer of its
employees:
cralavvonlinelawlibrary

Under the doctrine of management prerogative, every employer has the inherent right to regulate, according
to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working
methods, the time, place and manner of work, work supervision, transfer of employees, lay-off of workers,
and discipline, dismissal, and recall of employees. The only limitations to the exercise of this prerogative are
those imposed by labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the employers
right to expect from its employees not only good performance, adequate work, and diligence, but also good
conduct and loyalty. In fact, the Labor Code does not excuse employees from complying with valid company
policies and reasonable regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a
movement from one position to another of equivalent rank, level or salary without break in the service or a
lateral movement from one position to another of equivalent rank or salary; (b) the employer has the

inherent right to transfer or reassign an employee for legitimate business purposes; (c) a transfer becomes
unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment or is a
demotion without sufficient cause; (d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee. 23 (Citations omitted)
In Philippine Japan Active Carbon Corporation v. NLRC,24 it was held that the exercise of managements
prerogative concerning the employees work assignments is based on its assessment of the qualifications,
aptitudes and competence of its employees, and by moving them around in the various areas of its business
operations it can ascertain where they will function with maximum benefit to the company.
It is the employers prerogative, based on its assessment and perception of its employees qualifications,
aptitudes, and competence, to move them around in the various areas of its business operations in order to
ascertain where they will function with maximum benefit to the company. An employees right to security of
tenure does not give him such a vested right in his position as would deprive the company of its prerogative
to change his assignment or transfer him where he will be most useful. When his transfer is not
unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to
a constructive dismissal.25
As a privilege inherent in the employers right to control and manage its enterprise effectively, its freedom to
conduct its business operations to achieve its purpose cannot be denied. 26 We agree with the appellate court
that the respondents are justified in moving the petitioner to another equivalent position, which presumably
would be less affected by her habitual tardiness or inconsistent attendance than if she continued as a
Category Buyer, a frontline position in the day-to-day business operations of a supermarket such as
Robinsons.
If the transfer of an employee is not unreasonable,
or inconvenient, or prejudicial to him, and it does
not involve a demotion in rank or a diminution of his
salaries, benefits and other privileges, the employee
may not complain that it amounts to a constructive
dismissal.
As we have already noted, the respondents had the burden of proof that the transfer of the petitioner was
not tantamount to constructive dismissal, which as defined in Blue Dairy Corporation v. NLRC,27is a quitting
because continued employment is rendered impossible, unreasonable or unlikely, or an offer involving a
demotion in rank and diminution of pay:
cralavvonline lawlibrary

The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the
manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid
himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employees transfer shall be tantamount to constructive dismissal, which has been defined as a
quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee
leaving him with no option but to forego with his continued employment.
Thus, as further held in Philippine Japan Active Carbon Corporation,28 when the transfer of an employee is
not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a
constructive dismissal.29
But like all other rights, there are limits to the exercise of managerial prerogative to transfer personnel, and
on the employer is laid the burden to show that the same is without grave abuse of discretion, bearing in
mind the basic elements of justice and fair play.30 Indeed, management prerogative may not be used as a
subterfuge by the employer to rid himself of an undesirable worker.31

Interestingly, although the petitioner claims that she was constructively dismissed, yet until the unfavorable
decision of the LA on May 30, 2007, for seven (7) months she continued to collect her salary while also
adamantly refusing to heed the order of Sarte to report to the Metroeast Depot. It was only on June 22,
2007, after the LAs decision, that she filed her forced resignation. Her deliberate and unjustified refusal to
assume her new assignment is a form of neglect of duty, and according to the LA, an act of insubordination.
We saw how the company sought every chance to hear her out on her grievances and how she ignored the
memoranda of Sarte asking her to explain her refusal to accept her transfer. All that the petitioner could say
was that it was a demotion and that her floating status embarrassed her before the suppliers and her coemployees.
The respondents have discharged the burden of
proof that the transfer of the petitioner was not
tantamount to constructive dismissal.
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, 32 a machinist who had been employed with the
petitioner company for 16 years was reduced to the service job of transporting filling materials after he
failed to report for work for one (1) day on account of an urgent family matter. This is one instance where
the employees demotion was rightly held to be an unlawful constructive dismissal because the employer
failed to show substantial proof that the employees demotion was for a valid and just cause:
cralavvonlinelawlibrary

In case of a constructive dismissal, the employer has the burden of proving that the transfer and demotion
of an employee are for valid and legitimate grounds such as genuine business necessity. Particularly, for a
transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer
is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Failure of the employer to overcome this burden of
proof, the employees demotion shall no doubt be tantamount to unlawful constructive dismissal. x x x. 33
(Citation omitted)
In the case at bar, we agree with the appellate court that there is substantial showing that the transfer of
the petitioner from Category Buyer to Provincial Coordinator was not unreasonable, inconvenient, or
prejudicial to her. The petitioner failed to dispute that the job classifications of Category Buyer and
Provincial Coordinator are similar, or that they command a similar salary structure and responsibilities. We
agree with the NLRC that the Provincial Coordinators position does not involve mere clerical functions but
requires the exercise of discretion from time to time, as well as independent judgment, since the Provincial
Coordinator gives appropriate recommendations to management and ensures the faithful implementation of
policies and programs of the company. It even has influence over a Category Buyer because of its
recommendatory function that enables the Category Buyer to make right decisions on assortment, price and
quantity of the items to be sold by the store.34
We also cannot sustain the petitioners claim that she was not accorded due process and that the
respondents acted toward her with discrimination, insensibility, or disdain as to force her to forego her
continued employment. In addition to verbal reminders from Sarte, the petitioner was asked in writing
twice to explain within 48 hours her refusal to accept her transfer. In the first, she completely remained
silent, and in the second, she took four (4) days to file a mere one-paragraph reply, wherein she simply said
that she saw the Provincial Coordinator position as a demotion, hence she could not accept it. Worse, she
may even be said to have committed insubordination when she refused to turn over her responsibilities to
the new Category Buyer, Padilla, and to assume her new responsibilities as Provincial Coordinator and report
to the Metroeast Depot as directed. This was precisely the reason why the petitioner was kept on floating
status. To her discredit, her defiance constituted a neglect of duty, or an act of insubordination, per the LA.
Neither can we consider tenable the petitioners contention that the respondents deliberately held her up to
mockery and ridicule when they cut off her email access, sent memoranda to her clients that she was no
longer a Category Buyer, and to the various Robinsons branches that she was now a Provincial Coordinator
on floating status and that Padilla was taking over her position as the new Category Buyer. It suffices to
state that these measures are the logical steps to take for the petitioners unjustified resistance to her
transfer, and were not intended to subject her to public embarrassment.
Judicial review of labor cases does not go beyond
the evaluation of the sufficiency of the evidence upon
which labor officials findings rest.

Finally, as reiterated in Acebedo Optical,35 this Court is not a trier of facts, and only errors of law are
generally reviewed in petitions for review on certiorari criticizing decisions of the CA. Questions of fact are
not entertained, and in labor cases, this doctrine applies with greater force. Factual questions are for labor
tribunals to resolve.36 Thus:
cralavvonlinelawlibrary

Judicial Review of labor cases does not go beyond the evaluation of the sufficiency of the evidence upon
which its labor officials findings rest. As such, the findings of facts and conclusion of the NLRC are generally
accorded not only great weight and respect but even clothed with finality and deemed binding on this Court
as long as they are supported by substantial evidence. This Court finds no basis for deviating from said
doctrine without any clear showing that the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft
of substantiation. Particularly when passed upon and upheld by the Court of Appeals, they are binding and
conclusive upon the Supreme Court and will not normally be disturbed.
xxxx
As earlier stated, we find no basis for deviating from the oft espoused legal tenet that findings of facts and
conclusion of the labor arbiter are generally accorded not only great weight and respect but even clothed
with finality and deemed binding on this Court as long as they are supported by substantial evidence,
without any clear showing that such findings of fact, as affirmed by the NLRC, are bereft of substantiation.
More so, when passed upon and upheld by the Court of Appeals, they are binding and conclusive upon us
and will not normally be disturbed; x x x.37 (Citations omitted)
It is our ruling, that the findings of fact and conclusion of the LA, as affirmed by the NLRC, are supported by
substantial evidence, as found by the CA.
WHEREFORE, the premises considered, the Decision of the Court of Appeals dated June 8, 2011 in CA-G.R.
SP No. 109604 is AFFIRMED.

JULIES BAKESHOP AND/OR

EDGAR REYES,
Petitioners,

G.R. No. 173882

Present:

- versusHENRY ARNAIZ
EDGAR NAPAL, and
JONATHAN TOLORES,
Respondents.

CORONA, C. J., Chairperson,

LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

Promulgated:
February 15, 2012
x------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

Management has a wide latitude to conduct its own affairs in accordance with the
necessities of its business. This so-called management prerogative, however, should be
exercised in accordance with justice and fair play.
By this Petition for Review on Certiorari,[1] petitioners Julies Bakeshop and/or
Edgar Reyes (Reyes) assail the September 23, 2005 Decision [2] of the Court of Appeals
(CA) in CA-G.R. SP No. 86257, which reversed the Resolutions dated December 18,
2003[3] and April 19, 2004[4] of the National Labor Relations Commission (NLRC) and
ordered petitioners to reinstate respondents Henry Arnaiz (Arnaiz), Edgar Napal (Napal)
and Jonathan Tolores (Tolores) and to pay them their backwages for having been
constructively dismissed, as well as their
other monetary benefits.
Factual Antecedents
Reyes hired respondents as chief bakers in his three franchise branches of Julies
Bakeshop in Sibalom and San Jose, Antique. On January 26, 2000, respondents filed
separate complaints against petitioners for underpayment of wages, payment of premium
pay for holiday and rest day, service incentive leave pay, 13 th month pay, cost of living
allowance (COLA) and attorneys fees. These complaints were later on consolidated.
Subsequently, in a memorandum dated February 16, 2000, Reyes reassigned respondents
as utility/security personnel tasked to clean the outside vicinity of his bakeshops and to
maintain peace and order in the area. Upon service of the memo, respondents, however,
refused to sign the same and likewise refused to perform their new assignments by not
reporting for work.
In a letter-memorandum dated March 13, 2000, Reyes directed respondents to report
back for work and to explain why they failed to assume their duties as utility/security
personnel. A second letter-memorandum of the same tenor dated March 28, 2000 was
also sent to respondents. Respondents did not heed both memoranda.
Proceedings before the Labor Arbiter

Meanwhile, in the preliminary conference set on February 21, 2000, respondents with
their counsel, Atty. Ronnie V. Delicana (Atty. Delicana), on one hand, and Reyes on the
other, appeared before the Labor Arbiter to explore the possibility of an amicable
settlement. It was agreed that the parties would enter into a compromise agreement on
March 7, 2000. However, on February 29, 2000, respondents, who were then represented
by a different counsel, Atty. Mariano R. Pefianco (Atty. Pefianco), amended their
complaints by including in their causes of action illegal dismissal and a claim for
reinstatement and backwages.
The supposed signing of the compromise agreement (which could have culminated in
respondents receiving the total amount of P54,126.00 as payment for their 13th month
pay and separation pay) was reset to March 28, 2000 because of respondents nonappearance in the hearing of March 7, 2000. On March 28, 2000, Atty. Pefianco failed to
appear despite due notice. On the next hearing scheduled on April 24, 2000, both Atty.
Delicana and Atty. Pefianco appeared but the latter verbally manifested his withdrawal as
counsel for respondents. Thus, respondents, through Atty. Delicana, and Reyes,
continued to explore the possibility of settling the case amicably. Manifesting that they
need to sleep on the proposed settlement, respondents requested for continuance of the
hearing on April 26, 2000. Come said date, however, respondents did not appear.
Realizing the futility of further resetting the case to give way to a possible settlement, the
Labor Arbiter ordered the parties to file their respective position papers.
Despite his earlier withdrawal as counsel, Atty. Pefianco filed a Joint Position Paper [5] on
behalf of respondents alleging that they were dismissed from employment on February
21, 2000 without valid cause. As for petitioners, they stated in their position paper[6] that
respondents were never dismissed but that they abandoned their jobs after filing their
complaints. Petitioners denied that Reyes is the employer of Arnaiz and Napal but
admitted such fact insofar as Tolores is concerned.
In his Decision[7] dated August 25, 2000, the Labor Arbiter expressed dismay over
respondents lack of good faith in negotiating a settlement. The Labor Arbiter denounced
the way respondents dealt with Atty. Delicana during their discussions for a possible
settlement since respondents themselves later on informed the said tribunal that at the
time of the said discussions, they no longer considered Atty. Delicana as their
counsel. Despite this, the Labor Arbiter still required the parties to submit their respective
position papers. And as respondents position paper was filed late and no evidence was

attached to prove the allegations therein, the Labor Arbiter resolved to dismiss the
complaints, thus:
WHEREFORE, premises considered the above-entitled cases should
be, as they are hereby dismissed without prejudice.
SO ORDERED.[8]

Proceedings before the National Labor Relations Commission

Respondents filed a joint appeal[9] with the NLRC. In a Decision[10] dated January 17,
2002, the NLRC overruled the Decision of the Labor Arbiter and held that the burden of
proof lies on herein petitioners as Reyes admitted being the employer of Tolores. Hence,
petitioners not Tolores, had the duty to advance proof. With respect to Arnaiz and Napal,
the NLRC noted that since their alleged employer was not impleaded, said respondents
cases should be remanded to the Labor Arbiter, and tried as new and separate cases. The
dispositive portion of the NLRCs Decision reads:
WHEREFORE, the case is REMANDED for purposes of identifying the real
respondents, to be separated as discussed, if warranted, and for
further proceedings to be conducted.
SO ORDERED.[11]

Respondents filed a Motion for Reconsideration,[12] alleging that the NLRC

Decision violated their right to speedy disposition of their cases. They also insisted that
Reyes is their employer as shown by his letter-memorandum dated March 13, 2000
which directed all of them to report back for work. In addition, the fact that Reyes was
willing to pay all the respondents the amount of P54,126.00 as settlement only proves
that there is an employer-employee relationship between them and Reyes.
In a Resolution[13] dated September 23, 2003, the NLRC found merit in
respondents Motion for Reconsideration. It held that Reyes failed to present concrete
proof of his allegation that a certain Rodrigo Gandiongco is the employer of Arnaiz and
Napal; hence, Reyes is still presumed to be their employer as franchise owner of the

branches where these employees were assigned. The NLRC further ruled that
respondents demotion in rank from chief bakers to utility/security personnel is
tantamount to constructive dismissal which entitles them to the reliefs available to
illegally dismissed employees. As for the money claims, the NLRC granted respondents
their salary differentials, premium pay for rest day, holiday pay, service incentive leave
pay, 13th month pay and COLA. In awarding such monetary awards, the NLRC
ratiocinated that the employer bears the burden of proving that the employees received
their wages and benefits. In this case, however, no proof of such payment was presented
by the petitioners. The claim for overtime pay though was denied since proof of overtime
work is necessary to warrant such award. Lastly, for Reyes unjustified act done in bad
faith, respondents were awarded 10% attorneys fees. The NLRC ruled as follows:
WHEREFORE, Our previous Decision is VACATED and a new one
rendered declaring complainants to have been illegally dismissed.
Complainants are to be reinstated to their former positions without loss of
seniority rights. Complainants are further awarded backwages reckoned from
the time they were constructively dismissed up to the time of their actual
reinstatement, whether physically or on payroll.
Complainants being underpaid are to be [paid] their salary differentials
reckoned three (3) years backwards from the time they filed the instant
complaints on January 26, 2000, premium pay for holiday, premium pay for
rest day, holiday pay, service incentive leave pay, 13th month pay and COLA,
if these have not been paid to them yet.
SO ORDERED.[14]

Petitioners sought to reconsider this ruling via a Motion for Reconsideration,

insisting that respondents were not illegally dismissed and that their reassignment or
transfer as utility/security personnel was indispensable, made in good faith and in the
exercise of a valid management prerogative. Hence, such reassignment does not amount
to constructive dismissal.Reyes claimed that it would be likely for respondents, after
filing complaints against him, to do something prejudicial to the business as chief bakers,
like mixing harmful ingredients into the bread that they bake. This could be inimical to
the health of the consuming public. Petitioners averred that respondents reassignment as
utility/security personnel is a preventive measure designed to protect the business and its
customers. They likewise added that the transfer was meant to be only temporary and
[15]

besides, same does not involve any diminution in pay, rights and privileges of the
respondents. Petitioners also alleged that respondents wage of P115.00 per day is in
consonance with and is even higher than the mandated minimum wage of P105.00 under
Wage Order No. RB6-09 for retail and service establishments employing not more than
10 workers as in his business.
The NLRC, in its Resolution[16] dated December 18, 2003, again reconsidered its
own ruling and held that respondents were not dismissed, either actually or
constructively, but instead willfully disobeyed the return to work order of their employer.
The NLRC upheld petitioners prerogative to transfer respondents if only to serve the
greater interest, safety and well-being of the buying public by forestalling irregular acts of
said employees. The NLRC then put the blame on respondents for disobeying the lawful
orders of their employer, noting that it was the same attitude displayed by them in their
dealings with their counsel, Atty. Delicana, in the proceedings before the Labor Arbiter. It
also reversed its previous ruling that respondents were underpaid their wages and
adjudged them to be even overpaid by P10.00 per Wage Order No. RB 6-09-A. Thus,
respondents complaints were dismissed except for their claims for premium pay for
holiday, and rest day, service incentive leave pay, 13 th month pay and COLA, which
awards would stand only if no payment therefor has yet been made.
Respondents filed a Motion for Reconsideration[17] and sought for the execution of
the NLRC Resolution dated September 23, 2003 due to the alleged finality of the
ruling. According to them, petitioners pro forma Motion for Reconsideration of the said
resolution did not suspend the running of the period for taking an appeal. This motion
was, however, denied in the NLRC Resolution[18] dated April 19, 2004.
Proceedings before the Court of Appeals
Respondents appealed to the CA through a petition for certiorari,[19] wherein they
imputed grave abuse of discretion on the part of the NLRC in not declaring them to have
been illegally dismissed and entitled to salary differentials.
The CA, in its Decision[20] dated September 23, 2005, found merit in the petition,
ruling that respondents were constructively dismissed since their designation from chief
bakers to utility/security personnel is undoubtedly a demotion in rank which involved a
drastic change in the nature of work resulting to a demeaning and humiliating work

condition. It also held that petitioners fear that respondents might introduce harmful
foreign substances in baking bread is more imaginary than real. Further, respondents
could not be held guilty of abandonment of work as this was negated by their immediate
filing of complaints to specifically ask for reinstatement. Nevertheless, the CA denied the
claim for salary differentials by totally agreeing with the NLRCs finding on the
matter. Said court then resolved to award respondents the rest of their monetary claims
for failure of petitioners to present proof of payment and 10% attorneys fees as
respondents dismissal was attended with bad faith which forced them to litigate, viz:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us SETTING ASIDE and REVERSING the Resolutions
dated December 18, 2003 and April 19, 2004 in NLRC Case No. V-0007852000. The record of this case is hereby REMANDED to the Labor Arbiter for
the computation of backwages, premium pay for holidays and rest days,
holiday pay, service incentive leave pay, 13thmonth pay and attorneys fees due
to the petitioners and, thereafter, for the payment thereof by the private
respondent Reyes.[21]

Petitioners filed a Motion for Reconsideration [22] but the same was denied by the
CA in a Resolution[23] dated May 25, 2006.
Issues
Hence, this present petition raising the following issues for the Courts consideration:
I.

DID THE HONORABLE COURT OF APPEALS, IN DISTURBING

THE FINDINGS OF FACTS OF THE LABOR ARBITER AS WELL AS
THE NATIONAL LABOR [RELATIONS] COMMISSION WHO HAVE
TRIED THE CASE, [COMMIT] GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OF JURISDICTION?

II.

DID THE HONORABLE COURT OF APPEALS MANIFESTLY

[OVERLOOK] RELEVANT FACTS NOT DISPUTED BY THE
RESPONDENTS, WHICH, IF PROPERLY CONSIDERED COULD
JUSTIFY A DIFFERENT CONCLUSION?

III. WAS THE TRANSFER/REASSIGNMENT OF RESPONDENTS TO

ANOTHER POSITION WITHOUT DIMINUTION IN PAY AND

OTHER PRIVILEGES
DISMISSAL?[24]

TANTAMOUNT

TO

CONSTRUCTIVE

Petitioners maintain that the NLRC, in its Resolution dated December 18, 2003,
merely upheld the findings of the Labor Arbiter that there was no constructive dismissal
because of the absence of any evidence to prove such allegation. As such, Reyes
supposition is that the CA erred in coming up with a contrary finding.
Petitioners insist that the order transferring or reassigning respondents from chief
bakers to utility/security personnel is a valid exercise of management prerogative for it
does not involve any diminution in pay and privileges and that same is in accordance
with the requirements of the business, viz: to protect its goodwill and reputation as well
as the health and welfare of the consuming public.
Our Ruling
We find no merit in the petition.
The Court of Appeals is correct in reviewing the
findings of the National Labor Relations
Commission.
Petitioners claim that the CA should have accorded respect and finality to the factual
findings rendered by the NLRC in its December 18, 2003 Resolution as the same merely
affirmed the findings of the Labor Arbiter. Citing several jurisprudence on the matter,
petitioners add that factual findings of labor officials who acquired expertise on matters
within their jurisdiction have conclusive effect.
We reject this contention as none of the NLRC divergent rulings affirmed the
findings of the Labor Arbiter. To recall, the Labor Arbiter dismissed respondents
complaints on a technicality, that is, on the ground that respondents Joint Position Paper
was filed late and that it did not contain any attachments to prove the allegations
therein. Upon appeal, the NLRC rendered its first Decision on January 17, 2002 which
remanded the case to the Labor Arbiter for purposes of identifying the real respondents
and separating the consolidated cases if warranted, and for the conduct of further

proceedings due to Reyess allegation that Arnaiz and Napal have a different
employer. The NLRC also disagreed with the Labor Arbiters ratiocination that it
behooved upon respondents to attach proof of their illegal dismissal. According to the
NLRC, since Reyes admitted that he is Toloress employer, the burden to prove that the
termination is valid as well as the due payment of money claims falls upon
petitioners. Upon petitioners motion, however, the NLRC reconsidered this ruling and
resolved the case on the merits. In so doing, it found the respondents to have been
constructively dismissed through its Resolution dated September 23, 2003. The NLRC,
however, once again reversed itself in a Resolution dated December 18, 2003 upon
Reyess filing of a Motion for Reconsideration. This time, the NLRC held that
respondents were not illegally dismissed but instead abandoned their jobs. It was at this
point that respondents sought recourse from the CA.
Indeed, factual findings of labor officials who are deemed to have acquired
expertise in matters within their respective jurisdictions are generally accorded not only
respect, but even finality.[25] It is a well-entrenched rule that findings of facts of the
NLRC, affirming those of the Labor Arbiter, are accorded respect and due consideration
when supported by substantial evidence.[26] We, however, find that the doctrine of great
respect and finality has no application to the case at bar. As stated, the Labor Arbiter
dismissed respondents complaints on mere technicality. The NLRC, upon appeal, then
came up with three divergent rulings. At first, it remanded the case to the Labor
Arbiter. However, in a subsequent resolution, it decided to resolve the case on the merits
by ruling that respondents were constructively dismissed. But later on, it again reversed
itself in its third and final resolution of the case and ruled in petitioners favor.Therefore,
contrary to Reyess claim, the NLRC did not, on any occasion, affirm any factual findings
of the Labor Arbiter. The CA is thus correct in reviewing the entire records of the case to
determine which findings of the NLRC is sound and in accordance with law. Besides, the
CA, at any rate, may still resolve factual issues by express mandate of the law despite the
respect given to administrative findings of fact.[27]
The transfer/reassignment of
constitutes constructive dismissal.

respondents

Petitioners contend that the order transferring or reassigning respondents from

their position as chief bakers to utility/security personnel is within the ambit of

management prerogative as employer. They harp on the fact that no evidence was
presented by respondents to show that they were dismissed from employment.
We have held that management is free to regulate, according to its own discretion
and judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of
workers and discipline, dismissal and recall of workers. The exercise of management
prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor.[28]
In constructive dismissal cases, the employer has the burden of proving that the
transfer of an employee is for just or valid ground, such as genuine business
necessity. The employer must demonstrate that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee and that the transfer does not involve a
demotion in rank or a diminution in salary and other benefits. If the employer fails to
overcome this burden of proof, the employees transfer is tantamount to unlawful
constructive dismissal.[29]
In this case, petitioners insist that the transfer of respondents was a measure of
self-preservation and was prompted by a desire to protect the health of the buying public,
claiming that respondents should be transferred to a position where they could not
sabotage the business pending resolution of their cases. According to petitioners, the
possibility that respondents might introduce harmful substances to the bread while in the
performance of their duties as chief bakers is not imaginary but real as borne out by what
Tolores did in one of the bakeshops in Culasi, Antique where he was assigned as baker.
This postulation is not well-taken. On the contrary, petitioners failed to satisfy the
burden of proving that the transfer was based on just or valid ground. Petitioners bare
assertions of imminent threat from the respondents are mere accusations which are not
substantiated by any proof. This Court is proscribed from making conclusions based on
mere presumptions or suppositions. An employees fate cannot be justly hinged upon
conjectures and surmises.[30] The act attributed against Tolores does not even convince us
as he was merely a suspected culprit in the alleged sabotage for which no investigation
took place to establish his guilt or culpability. Besides, Reyes still retained Tolores as an
employee and chief baker when he could have dismissed him for cause if the allegations

were indeed found true. In view of these, this Court finds no compelling reason to justify
the transfer of respondents from chief bakers to utility/security personnel. What appears
to this Court is that respondents transfer was an act of retaliation on the part of petitioners
due to the formers filing of complaints against them, and thus, was clearly made in bad
faith. In fact, petitioner Reyes even admitted that he caused the reassignments due to the
pending complaints filed against him. As the CA aptly held:
In the case at bench, respondent Reyes failed to justify petitioners
transfer from the position of chief bakers to utility/security personnel. We find
that the threat being alluded to by respondent Reyes that the petitioners might
introduce harmful foreign substances in baking bread is imaginary and not
real. We recall that what triggered the petitioners reassignment was the filing
of their complaints against private respondents in the NLRC. The petitioners
were not even given an opportunity to refute the reason for the transfer. The
drastic change in petitioners nature of work unquestionably resulted in, as
rightly perceived by them, a demeaning and humiliating work condition. The
transfer was a demotion in rank, beyond doubt. There is demotion when an
employee is transferred from a position of dignity to a servile or menial job.
One does not need to stretch the imagination to distinguish the work of a chief
baker to that of a security cum utility man.[31]

[D]emotion involves a situation in which an employee is relegated to a

subordinate or less important position constituting a reduction to a lower grade or rank,
with a corresponding decrease in duties and responsibilities, and usually accompanied by
a decrease in salary.[32] When there is a demotion in rank and/or a diminution in pay;
when a clear discrimination, insensibility or disdain by an employer becomes unbearable
to the employee; or when continued employment is rendered impossible, unreasonable or
unlikely, the transfer of an employee may constitute constructive dismissal.[33]
We agree with the CA in ruling that the transfer of respondents amounted to a
demotion. Although there was no diminution in pay, there was undoubtedly a demotion
in titular rank. One cannot deny the disparity between the duties and functions of a chief
baker to that of a utility/security personnel tasked to clean and manage the orderliness of
the outside premises of the bakeshop. Respondents were even prohibited from entering
the bakeshop. The change in the nature of their work undeniably resulted to a demeaning
and humiliating work condition.

In Globe Telecom, Inc. v. Florendo-Flores,[34] we held:

The managerial prerogative to transfer personnel must be exercised
without grave abuse of discretion. It must always bear in mind the basic
elements of justice and fair play. Having the right must not be confused with
the manner that right is exercised. Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker.

Petitioners claim that respondents abandoned their job stands on shallow

grounds. Respondents cannot be faulted for refusing to report for work as they were
compelled to quit their job due to a demotion without any just cause. Moreover, we have
consistently held that a charge of abandonment is inconsistent with the filing of a
complaint for constructive dismissal.[35]Respondents demand to maintain their positions
as chief bakers by filing a case and asking for the relief of reinstatement belies
abandonment.[36]
As the transfer proves unbearable to respondents as to foreclose any choice on
their part except to forego continued employment, same amounts to constructive
dismissal for which reinstatement without loss of seniority rights, full backwages,
inclusive of allowances, and other benefits or their monetary equivalent, computed from
the time their compensation was withheld up to the time of their actual reinstatement,
should be granted.[37] The CA, therefore, did not err in awarding the reliefs prayed for by
the respondents as they were, without a doubt, constructively dismissed.
WHEREFORE, the petition is DENIED. The September 23, 2005 Decision of
the Court of Appeals in CA-G.R. SP No. 86257 is AFFIRMED.
SO ORDERED.