TABLE OF CONTENTS

I.

RIGHT TO SECURITY OF TENURE

Cals Poultry Supply Corp. vs. Yap, G.R. No. 150660, July 30, 2002

4
Alcira vs. NLRC, G.R. No. 149859, June 9, 2004
.8
Mitsubishi Motors Phils. Corp. vs. Chrysler Phils. Labor Union, G.R. NO.
148738, June 29, 2004 10
Sonza vs. ABS-CBN, G.R. No. 138051, June 10, 2004

17
Farley Fulache, et al., vs. ABS-CBN, G.R. No. 183810, January, 27, 2010

25
Calamba Medical Center, Inc. vs. NLRC, et al., G.R. No. 176484, November
25, 2008

32
Ramos vs. CA, G.R. No. 124354, April 11, 2002
37
Professional Services, Inc. vs. CA, G.R. No. 126297, February 02, 2010
52

II.

MANAGEMENT PREROGATIVE

Bisig Manggagawa sa Tryco, et al., vs. NLRC, G.R. No. 151309, October 2008

57
Manila Jockey Club Employees Labor Union-PTGWO vs. Manila Jockey Clkub,
Inc.
G.R. No. 167760, March 07, 2007
61
Capitol Medical Center vs. Meris, G.R. No. 155098, September 15, 2005

64
San Miguel Corporation vs. Layoc, et al., G.R. No. 149640, October 19, 2007

69
Philippine Airlines, Inc. vs. NLRC, 225 SCRA 301
75
Wiltshire File Co. vs. NLRC, G.R. No. 82249, 193 SCRA 665
78
Almodiel vs. NLRC, 223 SCRA 341
81
PT&T vs. Laplana, 199 SCRA 485
84
Blue Dairy Corp. vs. NLRC, 314 SCRA 401
88

Pharmacia & Upjohn, Inc. vs. albayda, Jr., G.R. No. 172724, Aug. 23, 2010
..
90
Zafra, et al., vs. CA, et al., 389 SCRA 200
98
PT&T vs. CA, et al., G.R. No. 152057, Sept. 29, 2003
102
Philippine Industrial Security agency Corp. vs. Dapitan, 320 SCRA 124
108
Consolidated Food Corp. vs. NLRC, 315 SCRA 129
112
Farrol vs. CA, 325 SCRA 311
117
Aurelio vs. NLRC, 221 SCRA 432
119
Golden Thread Knitting vs. NLRC, 304 SCRA 568
125
Pantranco North Express, Inc. vs. NLRC, 314 SCRA 740
130
Pantoja vs. SCA Hygiene Products Corp., G.R. No. 163554, April 23, 2010
.
134
Star Paper vs. Simbol, G.R. No. 164774, April 12, 2006
.. 137
Duncan assn. of Detailman-PGTWO vs. Glaxo Wellcome Phils., G.R. No.
162994,
September 17, 2004
.141
Armando Yrasuegui vs. PAL, Inc., G.R. No. 168081, October 17, 2008
.146
Avon Cosmetics vs. Leticia Luna, G.R. No. 153647, Dec. 20, 2006
.153
St. Lukes Medical Center Employees Union-AFW vs. NLRC, G.R. No. 162053
March 07, 2007
160
Leonardo vs. NLRC, 333 SCRA 589
164
Producers Bank of the Philippines vs. NLRC, 355 SCRA 489
168
Lepanto Ceramics, Inc. vs. Lepanto Ceramics Employees Asso., G.R. No.
180866
March 02, 2010
.176
Interphil Laboratories Employees Union-FFW vs. Interphil Lab., Inc.
373 SCRA 658
.179

Malayan Employees Association-FFW vs. Malayan Insurance Co., Inc.

G.R. No. 181357, February 02, 2010
.185

III.

TERMINATION OF EMPLOYMENT

A. Serious Misconduct

Austria vs. NLRC, G.R. No. 124382, August 16, 1999

188
PLDT vs. NLRC, G.R. No. 80609, August 23, 1988

194
NLRC vs. Salgarino, G.R. No. 164376, July 31, 2006

196
Llamas vs. Ocean Gateway, G.R. No.179293, August 14, 2009

203

B. Willful Disobedience

Gold City Intergrated Port Services, Inc. vs. NLRC, G.R. No. 86000
September 21, 1990
.206
Permex, Inc. vs. NLRC, G.R. No. 117652, April 24, 2000
208
Aparente vs. NLRC, G.R. No. 117652, April 27, 2000
211
Nuez vs. NLRC, G.R. No. 107574, December 28, 1994
214
C. Gross and Habitual Neglect of Duties

Garcia vs. NLRC, G.R. No. 119527, July 3, 1996

218
Challenge Socks vs. CA, G.R. No. 165268, November 28, 1994
..
219

D. Fraud

San Miguel Corporation vs. NLRC, G.R. No. 82467, June 29, 1989
222

E. Willful Breach of Trust & Loss of Confidence

National Sugar Refineries Corp. vs. NLRC, G.R. No. 122277, Feb. 24, 1998

224
Falguera vs. Linsangan, G.R. No. 114848, Dec. 14, 1995
226

F. Commission of a crime or offense against the person of his employer,

immediate member of the
Family or his Duly authorized Representative

G. Analogous Cases
i. Sexual Harrasment
Libres vs. NLRC, G.R. No. 123737, May 28, 1999
230
Villarama vs. NLRC, G.R. No. 106341, Sept. 02, 1994
232
Veloso vs. Caminade, July 8, 2004
236
Aquino vs. Acosta, April 2, 2002
238

ii. Abandonment; Requisites

Agabon vs. NLRC, November 17, 2004
242

iii. Conflict of Interest

GT Printers vs. NLRC,
248

G.R.

No.

100749,

april

24,

1992

Duncan assn. of Detailman-PGTWO vs. Glaxo Wellcome Phils., G.R.

No. 162994,
September 17, 2004
141

iv. Attitude Problem

v. Poor Performance or Gross Inefficiency

Eastern Overseas Employment Center vs. Cecilia, G.R. No. 143023
November 29, 2005
249

vi. Drug Use

Roquero vs. PAL, G.R. No. 152329, April 22, 2003
253

CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL

A. Installation of Labor Saving Devices; Concept; Purpose

Philippine Sheet Metal Workers

255

Union

vs.

CIR,

83

Phil

453

Agustillo vs. CA, G.R. No. 142875, Sept. 07, 2001

257
Magnolia Dairy Products Corporation vs. NLRC, G.R. No. 114952,
January 29, 1996

263

B. Redundancy; Concept

Wiltshire File Co., vs. NLRC, G.R. No. 82249, February 07, 1991
266
Coats Manila Bay vs. Ortega, G.R. No. 172628, February 13, 2009
269
Asufrin vs. San Miguel Corporation, G.R. No. 156658, March 10, 2004
272
Caltex vs. NLRC, G.R. No. 159641, October 15, 2007
.. 275
De Ocampo vs. NLRC, G.R. No. 101539, September 4, 1992

280
Serrano vs. NLRC, G.R. No. 117040, January 27, 2000

285

C. Retrenchment

Alabang Country Club vs. NLRC, G.R. No. 157611, August 9, 2005

291

75700-01,

Lopez Sugar Corporation vs. Federation of Free Workers, G.R. Nos.

August 30, 1990

295
Edge Apparel Inc. vs. NLRC, G.R. No. 121314, February 12, 1998

300
Sebuguero vs. NLRC, G.R. No. 115394, September 27, 1995

303

D. Closure of Business Operations

JAT General Services vs. NLRC, G.R. No. 148340, January 26, 2004

308
La Union Cement Workers Union vs. NLRC, G.R. No. 174621,
January 30, 2009

312
Maya Farms Employees Organization vs. NLRC, G.R. No. 106256,
December 28, 1994

314
Mac Adams Union vs. Mac Adams, G.R. No. 141615, Oct 24, 2003

318

EFFECTS OF DISMISSAL

Equitable PCI Bank vs. Sadac, G.R. No. 164772, June 8, 2006

321
Wenphil Corp. vs. NLRC, G.R. No. 80587, Feb. 08, 1989

332
See:
Serrano vs. NLRC, G.R. No. 117040, January 27, 2000

285
Agabon vs. NLRC, November 17, 2004
242
Jaka Food Processing

vs. Pacot, G.R. No. 151378, March 28, 2005

334

CONSTRUCTIVE DISMISSAL; DEFINITION; EFFECT

Leonardo vs. NLRC, G.R. No. 125303, June 16, 2000

337

DISMISSAL BASED ON FALSE OR NON-EXISTENT CAUSE; EFFECT

Standard Electric Manufacturing Company vs. Standard Electric Employees

Union, G.R. No. 166111, August 25, 2005
341

PREVENTIVE SUSPENSION

Soriano vs. NLRC, 155 SCRA 124

345

IV.

DISEASE AS A GROUND FOR TERMINATION

Sy vs. Court of appeals, G.R. No. 142293, February 27, 2003

352

[G.R. No. 150660. July 30, 2002]

CALS POULTRY SUPPLY CORPORATION and DANILO YAP, petitioners, vs. ALFREDO
ROCO and CANDELARIA ROCO, respondents.
RESOLUTION
KAPUNAN, J.:
For our resolution is the motion for reconsideration of the Courts minute Resolution
dated April 1, 2002, denying the petition for review filed by CALS Poultry Supply Corporation
(hereinafter referred to as CALS) of the Court of Appeals decision in favor of herein private
respondents Alfredo Roco and Candelaria Roco. The Court of Appeals reversed the decision
of the National Labor Relations Commission affirming the Labor Arbiters decision which
dismissed private respondents complaint for illegal dismissal against CALS. Private
respondents filed a comment on the motion for reconsideration as required by the Court.
CALS Poultry Supply Corporation is engaged in the business of selling dressed chicken
and other related products and managed by Danilo Yap.[1]
On March 15, 1984, CALS hired Alfredo Roco as its driver. On the same date, CALS hired
Edna Roco, Alfredos sister, as a helper in the dressing room of CALS. [2] On May 16, 1995, it
hired Candelaria Roco, another sister, as helper, [3] also at its chicken dressing plant on a
probationary basis.
On March 5, 1996, Alfredo Roco and Candelaria Roco filed a complaint for illegal
dismissal against CALS and Danilo Yap alleging that Alfredo and Candelaria were illegally
dismissed on January 20, 1996 and November 5, 1996, respectively. [4] Both also claimed that
they were underpaid of their wages. [5] Edna Roco, likewise, filed a complaint for illegal
dismissal, alleging that on June 26, 1996, she was reassigned to the task of washing dirty

sacks and for this reason, in addition to her being transferred from night shift to day time
duties, which she considered as management act of harassment, she did not report for work.
[6]

According to Alfredo Roco, he was dismissed on January 20, 1996 when he refused to
accept P30,000.00 being offered to him by CALS lawyer, Atty. Myra Cristela A. Yngcong, in
exchange for his executing a letter of voluntary resignation. On the part of Candelaria Roco,
she averred that she was terminated without cause from her job as helper after serving
more than six (6) months as probationary employee.
The Labor Arbiter on April 16, 1998, issued a decision dismissing the complaints for
illegal dismissal for lack of merit. The Labor Arbiter found that Alfredo Roco applied for and
was granted a leave of absence for the period from January 4 to 18, 1996. He did not report
back for work after the expiration of his leave of absence, prompting CALS, through its Chief
Maintenance Officer to send him a letter on March 12, 1996 inquiring if he still had intentions
of resuming his work. Alfredo Roco did not respond to the letter despite receipt thereof, thus,
Alfredo was not dismissed; it was he who unilaterally severed his relation with his employer.
[7]

In the case of Candelaria Roco, the Labor Arbiter upheld CALS decision not to continue
with her probationary employment having been found her unsuited for the work for which
her services were engaged. She was hired on May 16, 1995 and her services were
terminated on November 15, 1995.
Edna Roco, according to the Labor Arbiter, began absenting herself on June 25,
1996. She was sent a memo on July 1, 1996 requiring her to report for work immediately,
but she did not respond.[8]
In their position papers, the complainants claimed that they were not given their
overtime pay, premium pay for holidays, premium pay for rest days, 13 th month pay,
allowances. They were also not given their separation pay after their dismissal. The Labor
Arbiter, however, denied their claims, stating that they had not substantiated the same; on
the other hand, CALS presented evidence showing that complainants received the correct
salaries and related benefits.
The National Labor Relations Commission (NLRC), in a decision promulgated on January
17, 2000, affirmed the judgment of the Labor Arbiter.
On appeal by Alfredo, Candelaria and Edna Roco to the Court of Appeals, the appellate
court set aside the NLRCs decision and ordered reinstatement of Alfredo and Candelaria
Roco to their former positions without loss of seniority of rights and benefits, with full
payment of backwages. However, in the case of Edna Roco, the Court of Appeals found that
her appeal cannot be favorably considered as she actually abandoned her work without
justification.
In holding that Alfredo Roco did not abandon his employment, but was illegally
dismissed, the Court of Appeals ratiocinated:
xxx (P)etitioner Alfredo can not be said to have abandoned his employment. The failure of
Alfredo to report for work was justified under the circumstances. The positive assertion of
petitioner that when he reported for work on January 20, 1996, he was told that his services
were already terminated is more convincing than the mere denial of respondent Danilo
Yap.Petitioner Alfredos failure to inquire from private respondent as to the cause of his
dismissal should not be taken against him. It should be noted that when the secretary of
respondent Danilo Yap conveyed the order of dismissal, Alfredo took steps to verify the same
from the companys Chief Maintenance Officer Rolando Sibugan who confirmed said
order. The filing of the illegal dismissal case against CALS by petitioner Alfredo negates the
charge of abandonment. Private respondent failed to show that Alfredo clearly and
unequivocably performed overt acts to sever the employer-employee relationship.
xxx
In termination cases, the burden of proving just and valid cause for dismissing an employee
from his employment rests upon the employer, and the latters failure to do so would result
in a finding that the dismissal is unjustified. Abandonment as a just and valid ground for
termination means the deliberate, unjustified refusal of the employee to resume his
employment, and the burden of proof is on the employer to show a clear, deliberate and
unequivocal intent on the part of the employee to discontinue employment without any
intention of returning. Other than its self-serving claim that petitioner Alfredo did not report

for work, private respondent failed to adduce other evidence of any overt act of Alfredo
showing an intent to abandon his work. In short, private respondent failed to discharge the
burden.
Moreover, not only was there a lack of a valid cause for the dismissal of petitioner Alfredo;
the record of the case is devoid of any evidence that Alfredo was afforded his right to due
process. If Alfredo was dismissed because of his abandonment of work, CALS should have
given him a written notice of termination in accordance with Section 2, Rule XVI, Book V of
the Omnibus Rules Implementing the Labor Code which provides:
Section 2. Notice of Dismissal. Any employer who seeks to dismiss a worker shall furnish him
a written notice stating the particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall be served at the workers last
known address.
In the instant case, private respondent failed to present as evidence such notice despite
every companys standard policy to record and file every transaction including notices of
termination.
CALS contention that the letter of Rolando Sibugan inquiring from Alfredo whether he still
had intention of resuming work is a manifestation of its willingness to reinstate the latter to
his former position, thereby negating any intention on its part to dismiss Alfredo, is not welltaken. The fact that the employer later made an offer to re-employ Alfredo did not cure the
vice of his earlier arbitrary dismissal. The wrong had been committed and the harm
done. Notably, it was only after the complaint had been filed that CALS, in a belated gesture
of good will, sought to invite Alfredo back to work. CALS sincerity is suspect. Its offer of
reinstatement is doubtful since the same could not have been made if Alfredo had not
complained against it. Whether the offer was sincere or not, the same could not correct the
earlier illegal dismissal of Alfredo. It must be borne in mind that CALS offer to reinstate
Alfredo was obviously an attempt to escape liability from having illegally terminated the
latters services. Hence, CALS incurred liability under the Labor Code from the moment
Alfredo was illegally dismissed, and the liability was not abated as a result of CALS offer to
reinstate.[9]
In ruling in favor of Candelaria Roco, the appellate court held that when her employment
was terminated on November 15, 1995 (she was hired on May 16, 1995), it was four (4) days
after she ceased to be a probationary employee and became a regular employee within the
ambit of Article 281 of the Labor Code, which provides:
ART. 281. Probationary employment. - Probationary employment shall not exceed six
months from the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The services of an employee who has
been engaged on a probationary basis may be terminated for a just cause or when he fails
to qualify as a regular employee in accordance with reasonable standards made known by
the employer to the employee at the time of his engagement. An employee who is allowed
to work after a probationary period shall be considered a regular employee.
Not satisfied with the decision of the Court of Appeals, CALS and Danilo Yap brought
before us the petition for review on certiorari claiming that said court erred in ruling that
respondents Alfredo Roco and Candelaria Roco were illegally dismissed and that they are
entitled to any money claims.
In considering that Alfredo Roco was illegally dismissed, the Court of Appeals relied on
his allegation that on January 20, 1996 when he reported for work, following his leave of
absence from January 10 to 18, 1996, he learned from Elvie Acantelado, a secretary of
Danilo Yap that he was already separated from his employment.
Yet, as observed in the decision of the NLRC, he did not even attempt to verify from
Danilo Yap, the owner and general manager of CALS, if his employment was being
terminated and the cause of the termination. Elvie Acantelado denied vehemently having
told Alfredo that he was being dismissed.
Private respondents also stated in their position paper that Alfredo was told by CALS
lawyer to sign a resignation letter in consideration of P30,000.00. Strangely, apart from this
bare allegation, which finds no corroboration, there is no explanation when, where and how
was the offer made. Alfredo did not advance any theory why CALS wanted him to
resign. Atty. Myra Cristela Yngcong, counsel for CALS categorically denied having offered
Alfredo Roco P30,000.00 in exchange for his resignation. She explained that, in fact, she met
Alfredo for the first time when he appeared before the Labor Arbiter on April 23, 1996.

10

On Alfredos assertion that CALS letter dated March 12, 1996 asking him to report for
duty was just an afterthought because it was sent after Alfredo filed his complaint for illegal
dismissal on March 5, 1996. CALS maintains that it came to know of the complaint filed by
the Rocos with the Labor Arbiter only on April 4, 1996 when it received the Notification and
Summons dated March 25, 1996 from the Labor Arbiter.
On the other hand, CALS imputed an ulterior motive for the complaint filed by the Rocos
against it. It said it was manipulated by their relatives Domingo Roco against whom CALS
filed several criminal cases for violation of B.P. Blg. 22 on account of Domingo Rocos failure
to fund the checks he issued as payment for CALS products he had purchase.
From the facts established, we are of the view that Alfredo Roco has not established
convincingly that he was dismissed. No notice of termination was given to him by
CALS. There is no proof at all, except his self-serving assertion, that he was prevented from
working after the end of his leave of absence on January 18, 1996. In fact, CALS notified him
in a letter dated March 12, 1996 to resume his work. Both the Labor Arbiter and the NLRC
found that Alfredo, as well as Candelaria Roco, was not dismissed. Their findings of fact are
entitled to great weight.
In Chong Guan Trading v. NLRC, et al.,[10] we held:
After a careful examination of the events that gave rise to the present controversy as shown
by the records, the Court is convinced that private respondent was never dismissed by the
petitioner. Even if it were true that Mariano Lim ordered private respondent to go and that at
that time he intended to dismiss private respondent, the record is bereft of evidence to show
that he carried out this intention. Private respondent was not even notified that he had been
dismissed. Nor was he prevented from returning to his work after the October 28
incident. The only thing that is established from the record, and which is not disputed by the
parties, is that private respondent Chua did not return to his work after his heated argument
with the Lim brothers.
xxx
In this case, private respondents failure to work was due to the misunderstanding between
the petitioners management and private respondent. As correctly observed by the Labor
Arbiter, private respondent must have construed the October 28 incident as his dismissal so
that he opted not to work for many days thereafter and instead filed a complaint for illegal
dismissal. On the other hand, petitioner interpreted private respondents failure to report for
work as an intentional abandonment. However, there was no intent to dismiss private
respondent since the petitioner is willing to reinstate him. Nor was there an intent to
abandon on the part of private respondent since he immediately filed a complaint for illegal
dismissal soon after the October 28 incident. It would be illogical for private respondent to
abandon his work and then immediately file an action seeking his reinstatement xxx. Under
these circumstances, it is but fair that each party must bear his own loss, thus placing the
parties on equal footing.
xxx.
With respect to Candelaria Roco, there is no dispute that she was employed on
probationary basis. She was hired on May 16, 1995 and her services were terminated on
November 15, 1995 due to poor work performance. She did not measure up to the work
standards on the dressing of chicken. The Labor Arbiter sustained CALS in terminating her
employment. The NLRC affirmed the Labor Arbiters ruling.
The Court of Appeals did not disagree with the NLRCs finding that Candelaria was
dismissed because she did not qualify as a regular employee in accordance with the
reasonable standards made known by the company to her at the time of her employment. [11]
The standards required by the National Meat Inspection Commission for dressing plants
with Double AA Rating to which CALS employee were brief and with regard to which
Candelaria failed to comply are stated in part in the affidavit dated March 7, 1997 of Rolly
Villaeba, Cold Storage Supervisor of CALS Dressing Plant:
xxx
2. As Cold Storage Supervisor of Cals; Dressing Plant, I am responsible among others, for
briefing the new employee on the workflow in the dressing plant, the nature of their
respective jobs pursuant to the said workflow, and the work standards required of them by

11

Cals, as well as seeing to it that Cals work standards are complied with/followed by the
employees.
xxx
4. It is the NMIC standard that the dressing of chickens and its parts must stricly (sic)
observe the chronological order of the following workflow, to wit:
1. Depinning
2. Detoing
3. Removals of entrails/cecum/liver/
Gizzard/heart/ Bile
4. Removal of Lungs
5. First Wash
6. Second Wash
7. Third Wash
8. Carcass Quality Control
a. Selection of Carcass
b. Leg Bonding
c. Weighing
d. First Chilling
e. Final Chilling
xxx
9. For the duration of Candelaria Rocos probationary employment, she failed to comply with
Cals standards in the work assigned to her. First, she frequently failed to observe the
allowable inches to be cut, which must only be 1.5 inches, in performing the surgical incision
of the chicken butt, either she cuts it too long, thereby distorting the appearance of the
chickens or she cuts it too short, thereby making it difficult to remove the chicken parts
without damaging these parts; Second, she frequently mishandles the pull-out of chicken
parts, such that, she damaged said parts; Third, she frequently completes her assigned
tasks in twenty (20) to even twenty-five (25) seconds, over and above the required time
limit, which is only eight (8) to ten (10) seconds. Resultantly, the chickens/parts which
passed through her hands frequently suffer from premature decomposition/bacterial or
salmonella contamination;
10. By reason of the foregoing, Cals management deemed it best to terminate her
probationary employment.
xxx[12]
However, the Court of Appeals set aside the NLRC ruling on the ground that at the time
Candelarias services were terminated, she had attained the status of a regular employee as
the termination on November 15, 1995 was effected four (4) days after the 6-month
probationary period had expired, hence, she is entitled to security of tenure in accordance
with Article 281 of the Labor Code.
CALS argues that the Court of Appeals computation of the 6-month probationary period
is erroneous as the termination of Candelarias services on November 15, 1995 was exactly
on the last day of the 6-month period.
We agree with CALS contention as upheld by both the Labor Arbiter and the NLRC that
Candelarias services was terminated within and not beyond the 6-month probationary

12

period. In Cebu Royal v. Deputy Minister of Labor,[13] our computation of the 6-month
probationary period is reckoned from the date of appointment up to the same calendar date
of the 6th month following. Thus, we held:
The original findings were contained in a one-page order reciting simply that complainant
was employed on a probationary period of employment for six (6) months. After said period,
he underwent medical examination for qualification as regular employee but the results
showed that he is suffering from PTB minimal. Consequently, he was informed of the
termination of his employment by respondent. The order then concluded that the
termination was justified. That was all.
As there is no mention of the basis of the above order, we may assume it was the temporary
payroll authority submitted by the petitioner showing that the private respondent was
employed on probation on February 16, 1978. Even supposing that it is not self-serving, we
find nevertheless that it is self-defeating. The six-month period of probation started from the
said date of appointment and so ended on August 17, 1978, but it is not shown that the
private respondents employment also ended then; on the contrary, he continued working as
usual. Under Article 282 of the Labor Code, an employee who is allowed to work after a
probationary period shall be considered a regular employee.' Hence, Pilones was already on
permanent status when he was dismissed on August 21, 1978, or four days after he ceased
to be a probationer.
WHEREFORE, our Resolution of April 1, 2002 denying the petition is hereby SET ASIDE
and another one entered REVERSING the decision of the Court of Appeals insofar as it ruled
in favor of herein respondents and the decisions of the Labor Arbiter and the National Labor
Relations Commission REINSTATED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Austria-Martinez, JJ., concur.

[G.R. No. 149859. June 9, 2004]

RADIN

C. ALCIRA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

MIDDLEBY PHILIPPINES CORPORATION/FRANK THOMAS, XAVIER G. PEA and
TRIFONA F. MAMARADLO, respondents.

DECISION
CORONA, J.:
Before us on appeal is the decision [1] of the Court of Appeals[2] dated June 22, 2001
affirming the decision[3] of the National Labor Relations Commission[4] dated March 23, 1999
which, in turn, affirmed the decision [5] of labor arbiter Pedro Ramos dated May 19, 1998
dismissing petitioner Radin Alciras complaint for illegal dismissal with prayer for
reinstatement, backwages, moral damages, exemplary damages and attorneys fees.
The facts follow.
Respondent Middleby Philippines Corporation (Middleby) hired petitioner as engineering
support services supervisor on a probationary basis for six months. Apparently unhappy with
petitioners performance, respondent Middleby terminated petitioners services. The bone of
contention centered on whether the termination occurred before or after the six-month
probationary period of employment.
The parties, presenting their respective copies of Alciras appointment paper, claimed
conflicting starting dates of employment: May 20, 1996 according to petitioner and May 27,
1996 according to respondent. Both documents indicated petitioners employment status as
probationary (6 mos.) and a remark that after five months (petitioners) performance shall be
evaluated and any adjustment in salary shall depend on (his) work performance. [6]
Petitioner asserts that, on November 20, 1996, in the presence of his co-workers and
subordinates, a senior officer of respondent Middleby in bad faith withheld his time card and

13

did not allow him to work. Considering this as a dismissal after the lapse of his probationary
employment, petitioner filed on November 21, 1996 a complaint in the National Labor
Relations Commission (NLRC) against respondent Middleby contending that he had already
become a regular employee as of the date he was illegally dismissed. Included as
respondents in the complaint were the following officers of respondent Middleby: Frank
Thomas (General Manager), Xavier Pea (Human Resources Manager) and Trifona Mamaradlo
(Engineering Manager).
In their defense, respondents claim that, during petitioners probationary employment,
he showed poor performance in his assigned tasks, incurred ten absences, was late several
times and violated company rules on the wearing of uniform. Since he failed to meet
company standards, petitioners application to become a regular employee was disapproved
and his employment was terminated.
On May 19, 1998, the labor arbiter dismissed the complaint on the ground that: (1)
respondents were able to prove that petitioner was apprised of the standards for becoming a
regular employee; (2) respondent Mamaradlos affidavit showed that petitioner did not
perform well in his assigned work and his attitude was below par compared to the companys
standard required of him and (3) petitioners dismissal on November 20, 1996 was before his
regularization, considering that, counting from May 20, 1996, the six-month probationary
period ended on November 20, 1996. [7]
On March 23, 1999, the NLRC affirmed the decision of the labor arbiter.
On June 22, 2001, the Court of Appeals affirmed the judgment of the NLRC. According to
the appellate court:
Even assuming, arguendo, that petitioner was not informed of the reasonable standards
required of him by Middleby, the same is not crucial because there is no termination to
speak of but rather expiration of contract. Petitioner loses sight of the fact that his
employment was probationary, contractual in nature, and one with a definite period. At the
expiration of the period stipulated in the contract, his appointment was deemed terminated
and a notice or termination letter informing him of the non-renewal of his contract was not
necessary.
While probationary employees enjoy security of tenure such that they cannot be removed
except for just cause as provided by law, such protection extends only during the period of
probation. Once that period expired, the constitutional protection could no longer be
invoked. Legally speaking, petitioner was not illegally dismissed. His contract merely
expired.[8]
Hence, this petition for review based on the following assignment of errors:

I
THE COURT OF APPEALS GRAVELY ERRED, BLATANTLY DISREGARDED THE LAW AND
ESTABLISHED JURISPRUDENCE, IN UPHOLDING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION.
II
THE COURT OF APPEALS GRAVELY ERRED AND BLATANTLY DISREGARDED THE LAW IN
HOLDING THAT PROBATIONARY EMPLOYMENT IS EMPLOYMENT FOR A DEFINITE PERIOD.
III
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT AN EMPLOYER CAN BE
PRESUMED TO HAVE COMPLIED WITH ITS DUTY TO INFORM THE PROBATIONARY EMPLOYEE
OF THE STANDARDS TO MAKE HIM A REGULAR EMPLOYEE.

14

IV
THE COURT OF APPEALS GRAVELY ERRED AND FAILED TO AFFORD PROTECTION TO LABOR IN
NOT APPLYING TO THE INSTANT CASE THE DOCTRINE LAID DOWN BY THIS HONORABLE
COURT IN SERRANO VS. NLRC, ET. AL., G.R. NO. 117040, JANUARY 27, 2000.[9]
Central to the matter at hand is Article 281 of the Labor Code which provides that:
ART. 281. PROBATIONARY EMPLOYMENT. Probationary employment shall not exceed six (6)
months from the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The services of an employee who has
been engaged on a probationary basis may be terminated for a just cause or when he fails
to qualify as a regular employee in accordance with reasonable standards made known by
the employer to the employee at the time of his engagement. An employee who is allowed
to work after a probationary period shall be considered a regular employee.
The first issue we must resolve is whether petitioner was allowed to work beyond his
probationary period and was therefore already a regular employee at the time of his alleged
dismissal. We rule in the negative.
Petitioner claims that under the terms of his contract, his probationary employment was
only for five months as indicated by the remark Please be informed that after five months,
your performance shall be evaluated and any adjustment in salary shall depend on your
work performance. The argument lacks merit. As correctly held by the labor arbiter, the
appointment contract also stated in another part thereof that petitioners employment status
was probationary (6 mos.). The five-month period referred to the evaluation of his work. [10]
Petitioner insists that he already attained the status of a regular employee when he was
dismissed on November 20, 1996 because, having started work on May 20, 1996, the sixmonth probationary period ended on November 16, 1996. According to petitioners
computation, since Article 13 of the Civil Code provides that one month is composed of thirty
days, six months total one hundred eighty days. As the appointment provided that
petitioners status was probationary (6 mos.) without any specific date of termination, the
180th day fell on November 16, 1996. Thus, when he was dismissed on November 20, 1996,
he was already a regular employee.
Petitioners contention is incorrect. In CALS Poultry Supply Corporation, et. al. vs. Roco,
et. al.,[11] this Court dealt with the same issue of whether an employment contract from May
16, 1995 to November 15, 1995 was within or outside the six-month probationary period. We
ruled that November 15, 1995 was still within the six-month probationary period. We
reiterate our ruling in CALS Poultry Supply:
(O)ur computation of the 6-month probationary period is reckoned from the date of
appointment up to the same calendar date of the 6th month following.(italics supplied)
In short, since the number of days in each particular month was irrelevant, petitioner
was still a probationary employee when respondent Middleby opted not to regularize him on
November 20, 1996.
The second issue is whether respondent Middleby informed petitioner of the standards
for regularization at the start of his employment.
Section 6 (d) of Rule 1 of the Implementing Rules of Book VI of the Labor Code
(Department Order No. 10, Series of 1997) provides that:
xxx xxx xxx
(d) In all cases of probationary employment, the employer shall make known to the
employee the standards under which he will qualify as a regular employee at the time of his
engagement. Where no standards are made known to the employee at that time, he shall be
deemed a regular employee.
xxx xxx xxx
We hold that respondent Middleby substantially notified petitioner of the standards to
qualify as a regular employee when it apprised him, at the start of his employment, that it
would evaluate his supervisory skills after five months. In Orient Express Placement

15

Philippines vs. National Labor Relations Commission,[12] we ruled that an employer failed to
inform an employee of the reasonable standards for becoming a regular employee:
Neither private respondent's Agency-Worker Agreement with ORIENT EXPRESS nor his
Employment Contract with NADRICO ever mentioned that he must first take and pass a
Crane Operator's License Examination in Saudi Arabia before he would be allowed to even
touch a crane. Neither did he know that he would be assigned as floorman pending release
of the results of the examination or in the event that he failed; more importantly, that he
would be subjected to a performance evaluation by his superior one (1) month after his
hiring to determine whether the company was amenable to continuing with his
employment. Hence, respondent Flores could not be faulted for precisely harboring the
impression that he was hired as crane operator for a definite period of one (1) year to
commence upon his arrival at the work-site and to terminate at the end of one (1) year. No
other condition was laid out except that he was to be on probation for three (3) months.
(emphasis supplied)
Conversely, an employer is deemed to substantially comply with the rule on notification
of standards if he apprises the employee that he will be subjected to a performance
evaluation on a particular date after his hiring. We agree with the labor arbiter when he
ruled that:
In the instant case, petitioner cannot successfully say that he was never informed by private
respondent of the standards that he must satisfy in order to be converted into regular
status. This rans (sic) counter to the agreement between the parties that after five months
of service the petitioners performance would be evaluated. It is only but natural that the
evaluation should be made vis--vis the performance standards for the job. Private
respondent Trifona Mamaradlo speaks of such standard in her affidavit referring to the fact
that petitioner did not perform well in his assigned work and his attitude was below par
compared to the companys standard required of him.[13]
The third issue for resolution is whether petitioner was illegally dismissed when
respondent Middleby opted not to renew his contract on the last day of his probationary
employment.
It is settled that even if probationary employees do not enjoy permanent status, they
are accorded the constitutional protection of security of tenure. This means they may only
be terminated for just cause or when they otherwise fail to qualify as regular employees in
accordance with reasonable standards made known to them by the employer at the time of
their engagement.[14]
But we have also ruled in Manlimos, et. al. vs. National Labor Relations
Commission[15] that this constitutional protection ends on the expiration of the probationary
period. On that date, the parties are free to either renew or terminate their contract of
employment. Manlimos concluded that (t)his development has rendered moot the question
of whether there was a just cause for the dismissal of the petitioners xxx. [16] In the case at
bar, respondent Middleby exercised its option not to renew the contract when it informed
petitioner on the last day of his probationary employment that it did not intend to grant him
a regular status.
Although we can regard petitioners severance from work as dismissal, the same cannot
be deemed illegal. As found by the labor arbiter, the NLRC and the Court of Appeals,
petitioner (1) incurred ten absences (2) was tardy several times (3) failed to wear the proper
uniform many times and (4) showed inferior supervisory skills. Petitioner failed to
satisfactorily refute these substantiated allegations. Taking all this in its entirety, respondent
Middleby was clearly justified to end its employment relationship with petitioner.
WHEREFORE, the petition is hereby DENIED.
No costs.
SO ORDERED.
Vitug, J., (Chairman), Sandoval-Gutierrez, and Carpio Morales, JJ., concur.

16

G.R. No. 148738

June 29, 2004
MITSUBISHI MOTORS PHILIPPINES CORPORATION, petitioner,
vs.
CHRYSLER PHILIPPINES LABOR UNION and NELSON PARAS, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals in CA-GR SP
No. 46030 and the Resolution denying the motion for reconsideration filed by petitioner
Mitsubishi Motors Philippines Corporation.
The Antecedents
Mitsubishi Motors Philippines Corporation (MMPC) is a domestic corporation engaged in the
assembly and distribution of Mitsubishi motor vehicles. Chrysler Philippines Labor Union
(CPLU) is a legitimate labor organization and the duly certified bargaining agent of the
hourly-paid regular rank and file employees of MMPC. Nelson Paras was a member of CPLU.
His wife, Cecille Paras, was the President of the Chrysler Philippines Salaried Employees
Union (CPSU).
Nelson Paras was first employed by MMPC as a shuttle bus driver on March 19, 1976. He
resigned on June 16, 1982. He applied for and was hired as a diesel mechanic and heavy
equipment operator in Saudi Arabia from 1982 to 1993. When he returned to the Philippines,
he was re-hired as a welder-fabricator at the MMPC tooling shop from October 3, 1994 to
October 31, 1994.2 On October 29, 1994, his contract was renewed from November 1, 1994
up to March 3, 1995.3
Sometime in May of 1996, Paras was re-hired on a probationary basis as a manufacturing
trainee at the Plant Engineering Maintenance Department. He and the new and re-hired
employees were given an orientation on May 15, 1996 4 by Emma P. Aninipot, respecting the
companys history, corporate philosophy, organizational structure, and company rules and
regulations, including the company standards for regularization, code of conduct and
company-provided benefits.5
Paras started reporting for work on May 27, 1996. He was assigned at the paint ovens, air
make-up and conveyors. As part of the MMPCs policy, Paras was evaluated by his
immediate supervisors Lito R. Lacambacal 6and Wilfredo J. Lopez7 after six (6) months, and
received an average rating. Later, Lacambacal informed Paras that based on his
performance rating, he would be regularized.8
However, the Department and Division Managers, A.C. Velando and H.T. Victoria, 9 including
Mr. Dante Ong,10reviewed the performance evaluation made on Paras. They unanimously
agreed, along with Paras immediate supervisors, that the performance of Paras was
unsatisfactory.11 As a consequence, Paras was not considered for regularization. On
November 26, 1996, he received a Notice of Termination dated November 25, 1996,
informing him that his services were terminated effective the said date since he failed to
meet the required company standards for regularization. 12
Utilizing the grievance machinery in the collective bargaining agreement, the CPLU
demanded the settlement of the dispute which arose from Paras termination. 13 The dispute
was thereafter submitted for voluntary arbitration, as the parties were unable to agree on a
mutually acceptable solution. CPLU posited that Paras was dismissed on his one hundred
eighty third (183rd) day of employment, or three (3) days after the expiration of the
probationary period of six (6) months. It was contended that Paras was already a regular
employee on the date of the termination of his "probationary employment."
According to CPLU and Paras, the latters dismissal was an offshoot of the heated argument
during the CBA negotiations between MMPC Labor Relations Manager, Atty. Carlos S. Cao, on
the one hand, and Cecille Paras, the President of the Chrysler Philippines Salaried Employees
Union (CPSU) and Paras wife, on the other.
On November 3, 1997, the Voluntary Arbitrator (VA) rendered a decision finding the
dismissal of Paras valid for his failure to pass the probationary standards of MMPC. The
dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered finding the
termination of Mr. Paras was valid for cause his failure to pass the probationary
period.14
The VA declared that hiring an employee on a probationary basis to determine his or her
fitness for regular employment was in accord with the MMPCs exercise of its management
prerogative. The VA pointed out that MMPC had complied with the requirement of apprising
Paras of the standards of performance evaluation and regularization at the inception of his
probationary employment. The VA agreed with the MMPC that the termination of Paras
employment was effected prior to the expiration of the six-month probationary period. As to
Paras contention that he was already a regular employee before he was dismissed in 1994
considering that he had an accumulated service of eleven (11) months, the VA ruled that
Paras delay in filing a complaint for regularization only in 1996, for services rendered in
October 1994 to March 1995, militated against him. The VA stated that Paras dismissal was
based on the unsatisfactory performance rating given to him by his direct supervisors Lito
Lacambacal and Wilfredo Lopez. The VA also found that the alleged heated argument
between Atty. Carlos S. Cao, the Labor Relations Manager of MMPC, and Cecille Paras, the
President of CPSU, was irrelevant in the termination of Paras services. 15
The Case Before the Court of Appeals
Aggrieved, Paras and CPLU filed a petition for review under Rule 43 of the Rules of Court
before the Court of Appeals, docketed as C.A.-G.R. SP No. 46030. They assigned the
following errors:
I
THE VOLUNTARY ARBITRATOR COMMITTED A SERIOUS ERROR OF LAW IN FAILING TO
HOLD THAT THE NOTICE OF TERMINATION WAS SERVED UPON PETITIONER NELSON
PARAS AFTER HE HAS ALREADY BECOME A REGULAR EMPLOYEE, HIS PERIOD FOR
PROBATION HAVING EXPIRED.
II
THE VOLUNTARY ARBITRATOR SERIOUSLY ERRED AND GRAVELY ABUSED HIS
DISCRETION IN HOLDING THAT PETITIONER NELSON PARAS SUPPOSED DELAY IN
FILING THE ILLEGAL DISMISSAL CASE WORKED AGAINST HIM.
III
THE VOLUNTARY ARBITRATOR ACTED WITH GRAVE ABUSE OF DISCRETION AND
COMMITTED SERIOUS ERRORS OF FACT AND LAW IN NOT HOLDING THAT THE
PERFORMANCE OF NELSON PARAS WAS SATISFACTORY AND THAT HIS DISMISSAL WAS
POLITICALLY MOTIVATED.16
Therein, Paras and CPLU asserted that pursuant to Article 13 of the New Civil Code, the
period of May 27, 1996 to November 26, 1996 consisted of one hundred eighty-three (183)
days. They asserted that the maximum of the probationary period is six (6) months, which is
equivalent to 180 days; as such, Paras, who continued to be employed even after the 180th
day, had become a regular employee as provided for in Article 282 of the Labor Code. They
averred that as a regular employee, Paras employment could be terminated only for just or
authorized causes as provided for under the Labor Code, and after due notice. They posited
that in the Letter of Termination dated November 25, 1996, the ground for Paras termination
was not among those sanctioned by the Labor Code; hence, his dismissal was illegal.
Paras and CPLU also stressed that he had already been in the employ of MMPC from October
3, 1994 to March 3, 1995 as a welder-fabricator in the production of jigs and fixtures, a
function necessary and desirable to the usual business of MMPC. Such period, in addition to
the six-month probationary period, amounted to eleven (11) months of service, which is
sufficient for him to be considered as a regular employee.
Paras and CPLU averred that the filing of an illegal dismissal complaint only after his
termination in 1996 did not make Paras claim for regularization specious, since an illegally
dismissed employee, like him, has four (4) years within which to file a complaint. 17
They emphasized that Paras performance evaluation was changed to unsatisfactory as an
off-shoot of the arguments between the latters wife, the President of the CPSU, and Atty.
Carlos S. Cao, one of MMPCs negotiators, over the provisions in the CBA. 18

The MMPC, for its part, averred that under Article 13 of the New Civil Code, Paras
probationary employment which commenced on May 27, 1996 would expire on November
27, 1996. Since he received the notice of termination of his employment on November 25,
1996, the same should be considered to have been served within the six-month
probationary period.
The MMPC asserted that the VA acted correctly in not considering the five-month period of
Paras contractual employment as a welder-fabricator to qualify him for regularization. It
argued that his rating showed that his immediate supervisors, in tandem with his
department head, found his performance unsatisfactory. Thus, his failure to meet a
satisfactory performance rating justified the termination of his probationary employment.
For its part, the Office of the Solicitor General (OSG), in representation of Voluntary
Arbitrator Danilo Lorredo, agreed that Parasand CPLUs allegation, that the notice of
termination was served on Paras 183rd day, was erroneous. The OSG opined that the sixmonth probationary period was to expire on November 27, 1996 and since Paras was served
such notice on November 25, 1996, his employment was deemed terminated within the sixmonth probationary period. It posited that the failure of Paras to get a satisfactory
performance rating justified the termination of his probationary employment, and that the
inclusion of his five-month contractual employment as welder-fabricator did not qualify him
for regular employment.
Finally, the OSG contended that the appointment of a probationary employee to a regular
status is voluntary and discretionary on the part of the employer.
In a Decision promulgated on September 13, 2000, the CA reversed the ruling of the
Voluntary Arbitrator, the dispositive portion of which is herein quoted:
WHEREFORE, the petition is GRANTED. The Decision of public respondent, dated
November 3, 1997, is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby
entered declaring Mitsubishi Motors Phils. Corporations dismissal of Nelson Paras as
ILLEGAL and ORDERING the former to reinstate Paras to his former position without
loss of seniority rights and other privileges. Conformably with the latest
pronouncement of the Supreme Court on backwages, supra, Mitsubishi Motors Phils.
Corporation is further ORDERED to pay Paras full backwages (without qualifications or
deductions), inclusive of allowances, and 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. Petitioners claims for attorneys fees, moral and
exemplary damages are, nevertheless, DENIED for lack of sufficient basis. No costs. 19
The CA agreed with Paras and CPLUs interpretation that six (6) months is equivalent to one
hundred eighty (180 days) and that computed from May 27, 1996, such period expired on
November 23, 1996. Thus, when Paras received the letter of termination on November 26,
1996, the same was served on the 183rd day or after the expiration of the six-month
probationary period. The CA stated that since he was allowed to work beyond the
probationary period, Paras became a regular employee. Hence, his dismissal must be based
on the just and authorized causes under the Labor Code, and in accordance with the twonotice requirement provided for in the implementing rules. The appellate court concluded
that for MMPCs failure to show that Paras was duly notified of the cause of his dismissal, the
latter was illegally dismissed; hence, his actual reinstatement without loss of seniority rights
and the payment of backwages up to the time of his reinstatement were in order.
Dissatisfied, the MMPC filed a motion for reconsideration of the decision, alleging that the CA
erred in holding that the six-month probationary period which commenced on May 27, 1996,
expired on November 23, 1996.
The MMPC contended that the reinstatement of Paras to his former position had become
moot and academic because it had retrenched approximately seven hundred (700)
employees as a result of its financial losses in 1997. It posited that the payment of full
backwages should only be computed up to February 1998, the date when MMPC effected the
first phase of its retrenchment program.
The CA denied the motion in a Resolution dated June 18, 2001. 20
The Present Petition
Undaunted, the MMPC, now the petitioner, filed this instant petition, alleging as follows:
A.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE 3

NOVEMBER 1997 DECISION OF THE HONORABLE VA DANILO LORREDO, AND IN
FINDING THAT RESPONDENT PARAS (WAS) ILLEGALLY DISMISSED AND ORDERING HIS
REINSTATEMENT.
B.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ORDERING THE
REINSTATEMENT OF PARAS WITH FULL BACKWAGES DESPITE THE CHANGE IN THE
FINANCIAL CIRCUMSTANCES OF THE COMPANY.
C.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE SIXMONTH PROBATIONARY PERIOD OF PARAS WHICH STARTED ON 27 MAY 1996 HAD
EXPIRED 23 NOVEMBER 1996.21
The petitioner asserts that the CA erred in ruling that respondent Paras was already a
regular employee when he was served the notice of termination. Citing Article 13 of the New
Civil Code, the petitioner argued that the six-month probationary period should be computed
as follows:
May 27-31

4 days

Jun(e) 1-30

1 month (30 days)

July 1-31

1 month (30 days)

Aug(.) 1-31

1 month (30 days)

Sept(.) 1-30

1 month (30 days)

Oct(.) 1-31

1 month (30 days)

Nov(.) 1-26

26 days22

Hence, according to the petitioner, when the termination letter was served on November 26,
1996, Paras was still a probationary employee. Considering that he did not qualify for
regularization, his services were legally terminated. As such, the CA erred in ordering his
reinstatement and the payment of his backwages.
According to the petitioner, even assuming that respondent Paras was a regular employee
when he was dismissed, his reinstatement had already become moot and academic because
of the retrenchment program effected as a result of the business losses it had suffered in the
year 1997. Respondent Paras, who was employed only in May 27, 1996, would have been
included in the first batch of employees retrenched in February of 1998, in accordance with
the "last in first out policy" embedded in the CBA. The petitioner further contends that Paras
backwages should be computed only up to February of 1998.
In their comment on the petition, the respondents argue that the CA was correct in
concluding that the termination letter was served on respondent Paras one hundred eighty
third (183rd) day of employment with the petitioner, asserting that six (6) months is
equivalent to one hundred eighty (180) days. Since respondent Paras was employed on May
27, 1996, the 180th day fell on November 23, 1996. Thus, respondent Paras was already a
regular employee when the termination letter was served on him. Consequently, his
dismissal should be based on the just or authorized causes provided for by the Labor Code,
and after proper notice.
The respondents, likewise, contend that the petitioner cannot raise new and unsubstantiated
allegations in its petition at bar.
The Issues
The issues for resolution are the following: (a) whether or not respondent Paras was already
a regular employee on November 26, 1996; (b) whether or not he was legally dismissed; (c)
if so, whether or not his reinstatement had been rendered moot and academic; and, (d)
whether or not his backwages should be computed only up to February of 1998.
The Courts Ruling

The petition is partially granted.

At the outset, we must stress that only errors of law are generally reviewed by this Court in
petitions for review on certiorari of CA decisions. 23 Questions of fact are not
entertained.24 This Court is not a trier of facts and, in labor cases, this doctrine applies with
greater force. Factual questions are for labor tribunals to resolve. 25 The findings of fact of
quasi-judicial bodies like the National Labor Relations Commission (NLRC), are accorded with
respect, even finality, if supported by substantial evidence.Particularly when passed upon
and upheld by the Court of Appeals, such findings are binding and conclusive upon the
Supreme Court and will not normally be disturbed.26
However, when the findings of the NLRC and the Court of Appeals are inconsistent with each
other, there is a need to review the records to determine which of them should be preferred
as more conformable to the evidentiary facts.27 Considering that the CAs findings of fact
clash with those of the Voluntary Arbitrator, this Court is compelled to go over the records of
the case, as well as the submissions of the parties.28
Regularization of Employment
Indeed, an employer, in the exercise of its management prerogative, may hire an employee
on a probationary basis in order to determine his fitness to perform work. 29 Under Article 281
of the Labor Code, the employer must inform the employee of the standards for which his
employment may be considered for regularization. Such probationary period, unless covered
by an apprenticeship agreement, shall not exceed six (6) months from the date the
employee started working. The employees services may be terminated for just cause or for
his failure to qualify as a regular employee based on reasonable standards made known to
him.30
Respondent Paras was employed as a management trainee on a probationary basis. During
the orientation conducted on May 15, 1996, he was apprised of the standards upon which
his regularization would be based. He reported for work on May 27, 1996. As per the
companys policy, the probationary period was from three (3) months to a maximum of six
(6) months.
Applying Article 13 of the Civil Code, 31 the probationary period of six (6) months consists of
one hundred eighty (180) days. 32 This is in conformity with paragraph one, Article 13 of the
Civil Code, which provides that the months which are not designated by their names shall be
understood as consisting of thirty (30) days each. The number of months in the probationary
period, six (6), should then be multiplied by the number of days within a month, thirty (30);
hence, the period of one hundred eighty (180) days.
As clearly provided for in the last paragraph of Article 13, in computing a period, the first
day shall be excluded and the last day included. Thus, the one hundred eighty (180) days
commenced on May 27, 1996, and ended on November 23, 1996. The termination letter
dated November 25, 1996 was served on respondent Paras only at 3:00 a.m. of November
26, 1996. He was, by then, already a regular employee of the petitioner under Article 281 of
the Labor Code.
The Legality of The Dismissal
An employee cannot be dismissed except for just or authorized cause as found in the Labor
Code and after due process.33 The following grounds would justify the dismissal of an
employee:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of
the employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or of any immediate member of his family or his duly authorized
representative; and
(e) Other causes analogous to the foregoing.34

The basis for which respondent Paras services were terminated was his alleged
unsatisfactory rating arising from poor performance. It is a settled doctrine that the
employer has the burden of proving the lawfulness of his employees dismissal. The validity
of the charge must be clearly established in a manner consistent with due process. 35
Under Article 282 of the Labor Code, an unsatisfactory rating can be a just cause for
dismissal only if it amounts to gross and habitual neglect of duties. Gross negligence has
been defined to be the want or absence of even slight care or diligence as to amount to a
reckless disregard of the safety of person or property. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. 36 A careful perusal of the records of
this case does not show that respondent Paras was grossly negligent in the performance of
his duties.
The company policy provides the following rule in performance evaluation:
The performance rating sheet must be accomplished by the immediate supervisor,
then reviewed by the Department Head, and concurred by the Division Head. The
Personnel Manager likewise must note all submitted performance sheets.
Once the rating sheet has gone through this standard procedure, the immediate
supervisor shall discuss the results of the performance rating with the employee. The
discussion/conference may be done in the presence of the Department Head. This is
to emphasize the point that the employee is given due importance especially in
matters pertaining to his development as a person and employee.37
In the present case, the immediate supervisor of respondent Paras gave him an average
performance rating and found him fit for regularization. 38 Thereafter, his immediate
supervisor and the department head reviewed the said rating, which was duly noted by the
personnel manager. However, in a complete turn around, the petitioner made it appear that
after the performance evaluation of respondent Paras was reviewed by the department and
division heads, it was unanimously agreed that the respondents performance rating was
unsatisfactory, making him unfit for regularization.
There is no showing that respondent Paras was informed of the basis for the volte face of the
management group tasked to review his performance rating. His immediate supervisor even
told him that he had garnered a satisfactory rating and was qualified for regularization, only
to later receive a letter notifying him that his employment was being terminated.
Considering that respondent Paras was not dismissed for a just or authorized cause, his
dismissal from employment was illegal. Furthermore, the petitioners failure to inform him of
any charges against him deprived him of due process. Clearly, the termination of his
employment based on his alleged unsatisfactory performance rating was effected merely to
cover up and "deodorize" the illegality of his dismissal.
Reinstatement and Backwages
The normal consequences of illegal dismissal are reinstatement without loss of seniority
rights and the payment of backwages computed from the time the employees
compensation was withheld from him. 39 Since respondent Paras dismissal from employment
is illegal, he is entitled tore instatement and to be paid backwages from the time of his
dismissal up to the time of his actual reinstatement.
The petitioner asserts that assuming respondent Paras was illegally dismissed, his
reinstatement had become moot and academic because of its retrenchment program which
was effected beginning February 1998. The petitioner posits that even if respondent Paras
had become a regular employee by November 26, 1996, he would have been included in the
first phase of its retrenchment program, pursuant to the "last in first out policy" embedded
in the CBA. Hence, the petitioner concludes, the payment of backwages should be computed
up to February of 1998.
The respondents, for their part, aver that the petitioner is proscribed from alleging new
circumstances and allegations of fact, particularly on financial reverses, before the Court of
Appeals and the Voluntary Arbitrator.
We do not agree with the respondents.
A cursory examination of the records shows that the petitioner could not raise its
retrenchment program as an issue before the VA, because it was implemented only in
February 1998, when the case was already in the CA. However, we note that the petitioner

did not raise the same in its comment to the petition. The petitioner asserted the matter
only in its October 20, 2000 motion for reconsideration of the decision of the CA, where it
alleged that the retrenchment program was effected to arrest the continuing business losses
resulting from the financial reverses it experienced in 1997.
Nevertheless, it is not denied that because of the petitioners losses, it retrenched seven
hundred (700) employees. Business reverses or losses are recognized by law as an
authorized cause for termination of employment. Still, it is an essential requirement that
alleged losses in business operations must be proven convincingly. Otherwise, such ground
for termination would be susceptible to abuse by scheming employers, who might be merely
feigning business losses or reverses in their business ventures to ease out
employees.40Retrenchment is an authorized cause for termination of employment which the
law accords an employer who is not making good in its operations in order to cut back on
expenses for salaries and wages by laying off some employees. The purpose of
retrenchment is to save a financially ailing business establishment from eventually
collapsing.41
In this case, the petitioner submitted in the CA its financial statements for 1996, 1997 and
199842 as well as its application for retrenchment. In its Statements of Income and
Unappropriated Retained Earning, it was shown that in 1996, the parent company of the
petitioner had a net income of P467,744,285. In 1997, it had a net loss of P29,253,511.43 In
1998, its net loss, after effecting retrenchment and closing several plants, was arrested and
dropped to P8,156,585.44 This shows that even after the retrenchment, the petitioner MMPC
still suffered net losses.
In 1996, the petitioners current assets amounted to P5,381,743,576; it increased
to P8,033,932,74545 in 1997, while in 1998, it was reduced to P5,053,874,359.46 This shows
that the petitioners assets acquired in 1997 diminished in 1998. The figures for Current
Liabilities are consistent with the movement of current assets for 1997 and 1998.
In 1996, the petitioner incurred current liabilities of P1,966,445,401 which increased
to P5,088,990,11747 in 1997 and decreased to P2,880,259,81148 in 1998. To reduce its
losses, the petitioner had to dispose of some of its current assets to cover the increased
liability incurred in 1997, and had to resort to borrowings in 1998. The continuity of losses
which started in 1997 is further illustrated in the figures on retained earnings for 1996, 1997
and 1998. In 1996, retained earnings stood at P1,838,098,175,49 which decreased
to P994,942,62850 in 1997 and further decreased to P592,614,54851 in 1998.
The petitioners losses in 1997 and 1998 are not insignificant. It is beyond cavil then, that
the serious and actual business reverses suffered by the petitioner justified its resort to
retrenchment of seven hundred (700) of its employees.
The records show that the petitioner informed the Department of Labor and Employment of
its plight and intention to retrench employees as a result of the shutdown of its plants. 52 The
termination of the five hundred thirty-one (531) affected employees were made effective a
month from receipt of the termination letter mailed on February 25, 1998. 53
In accordance with the CBA between MMPC and CPLU, employees who were recently hired
were the ones retrenched. Considering that respondent Paras had just been regularized on
November 24, 1996, he would have been included among those who had been retrenched
had he not been dismissed.
The unfavorable financial conditions of the petitioner may not justify reinstatement.
However, it is not a sufficient ground to deny backwages to respondent Paras who was
illegally dismissed.54 Considering that notices of retrenchment were mailed on February 25,
1998 and made effective one month therefrom, respondent Paras should be paid full
backwages from the date of his illegal dismissal up to March 25, 1998. Pursuant to Article
283 of the Labor Code, he should be paid separation pay equivalent to one (1) month salary,
or to at least one-half month pay for every year of service, whichever is higher, a fraction of
at least six months to be considered as one (1) year.55
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The September
13, 2000 Decision of the Court of Appeals in CAGR SP No. 46030 is hereby AFFIRMED
WITH MODIFICATIONS. The petitioner is ORDERED to pay respondent Nelson Paras
separation pay equivalent to one (1) month, or to at least one-half (1/2) month pay for every
year of service, whichever is higher, a fraction of at least six (6) months to be considered as
one year; and to pay full backwages, computed from the time of his dismissal up to March
25, 1998. That portion of the decision of the Court of Appeals directing the reinstatement of
the respondent Paras is DELETED.

No costs.
SO ORDERED.
Puno, Quisumbing, Austria-Martinez*, and Tinga, JJ., concur.

G.R. No. 138051

June 10, 2004

JOSE Y. SONZA, petitioner,

vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999
Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by
Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National Labor
Relations Commission ("NLRC"), which affirmed the Labor Arbiters dismissal of the case for
lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an
Agreement ("Agreement") with the Mel and Jay Management and Development Corporation
("MJMDC"). ABS-CBN was represented by its corporate officers while MJMDC was represented
by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP
and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZAs
services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the
services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first
year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which
reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into
by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y.
SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative of
the Agreement and the station as in breach thereof. In this connection, we hereby
serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,

(Sgd.)
JOSE
Y.
President and Gen. Manager4

SONZA

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor
and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN
did not pay his salaries, separation pay, service incentive leave pay, 13th month pay,
signing bonus, travel allowance and amounts due under the Employees Stock Option Plan
("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employeremployee relationship existed between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at
PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due
him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee
of respondent company until April 15, 1996 and that he was not paid certain claims,
it is sufficient enough as to confer jurisdiction over the instant case in this Office. And
as to whether or not such claim would entitle complainant to recover upon the causes
of action asserted is a matter to be resolved only after and as a result of a hearing.
Thus, the respondents plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove that there
really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted
their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to
Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are
affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses
stated in their affidavits that the prevailing practice in the television and broadcast industry
is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack
of jurisdiction.6 The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true
nature of the contract of a talent," it stands to reason that a "talent" as abovedescribed cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of
his peculiar skills and talent as a TV host and a radio broadcaster. Unlike an
ordinary employee, he was free to perform the services he undertook to
render in accordance with his own style. The benefits conferred to complainant
under the May 1994 Agreement are certainly very much higher than those generally
given to employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of work per
day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits
complainant enjoyed arose from specific agreement by the parties and not
by reason of employer-employee relationship. As correctly put by the
respondent, "All these benefits are merely talent fees and other contractual benefits
and should not be deemed as salaries, wages and/or other remuneration accorded
to an employee, notwithstanding the nomenclature appended to these benefits.
Apropos to this is the rule that the term or nomenclature given to a stipulated benefit

is not controlling, but the intent of the parties to the Agreement conferring such
benefit."
The fact that complainant was made subject to respondents Rules and
Regulations, likewise, does not detract from the absence of employeremployee relationship. As held by the Supreme Court, "The line should be drawn
between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address both the
result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al.,
G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming
the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC
denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of
Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of
Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship
existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court
quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the
contract merely as an agent of complainant Sonza, the principal. By all indication and
as the law puts it, the act of the agent is the act of the principal itself. This fact is
made particularly true in this case, as admittedly MJMDC is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner,
Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza
and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions
of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a
matter of fact, when complainant herein unilaterally rescinded said May 1994
Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza,
who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between
ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABSCBN such that there exist[s] employer-employee relationship between the latter and
Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed
belongs to the regular courts, the same being in the nature of an action for alleged
breach of contractual obligation on the part of respondent-appellee. As squarely
apparent from complainant-appellants Position Paper, his claims for compensation
for services, 13th month pay, signing bonus and travel allowance against
respondent-appellee are not based on the Labor Code but rather on the provisions of
the May 1994 Agreement, while his claims for proceeds under Stock Purchase
Agreement are based on the latter. A portion of the Position Paper of complainantappellant bears perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting of
shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an
amount not lower than the amount he was receiving prior to effectivity of
(the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a
commutable travel benefit amounting to at least One Hundred Fifty Thousand
Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact
that his contractual relations with ABS-CBN are founded on the New Civil Code, rather
than the Labor Code, that instead of merely resigning from ABS-CBN, complainantappellant served upon the latter a notice of rescission of Agreement with the
station, per his letter dated April 1, 1996, which asserted that instead of referring to
unpaid employee benefits, he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to such
recovery of the other benefits under said Agreement. (Annex 3 of the respondent
ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee that
complainant-appellant filed his complaint. Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee, the
same can be resolved by reference to civil law and not to labor law. Consequently,
they are within the realm of civil law and, thus, lie with the regular courts. As held in
the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically
a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between
SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to
resolve.10 A special civil action for certiorari extends only to issues of want or excess of
jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRCs conclusion. 12 The Court of
Appeals added that it could not re-examine the parties evidence and substitute the factual
findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND
REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN
SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE
AND EVIDENCE TO SUPPORT SUCH A FINDING.14
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals
affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the
first time that the Court will resolve the nature of the relationship between a television and
radio station and one of its "talents." There is no case law stating that a radio and television
program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.

SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts
accord the factual findings of the Labor Arbiter and the NLRC not only respect but also
finality when supported by substantial evidence. 15 Substantial evidence means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion. 16 A party
cannot prove the absence of substantial evidence by simply pointing out that there is
contrary evidence on record, direct or circumstantial. The Court does not substitute its own
judgment for that of the tribunal in determining where the weight of evidence lies or what
evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are
present in this case. Case law has consistently held that the elements of an employeremployee relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employee on the means and methods by which the work is accomplished. 18 The last
element, the so-called "control test", is the most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television and radio programs because of
SONZAs peculiar skills, talent and celebrity status. SONZA contends that the "discretion
used by respondent in specifically selecting and hiring complainant over other broadcasters
of possibly similar experience and qualification as complainant belies respondents claim of
independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or
talent to distinguish them from ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills, talent and celebrity
status, ABS-CBN would not have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine
his status. We must consider all the circumstances of the relationship, with the control test
being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of
ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which
he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the
Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to
stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay" 20 which the law
automatically incorporates into every employer-employee contract. 21 Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee
relationship.22
SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so
huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA
such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status
not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power
to bargain talent fees way above the salary scales of ordinary employees is a circumstance
indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status
of SONZA as an independent contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would
have to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds
other than breach of contract, such as retrenchment to prevent losses as provided under
labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
"AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still
paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life of the Agreement even if ABSCBN cancelled SONZAs programs through no fault of SONZA. 25
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that "if it were
true that complainant was really an employee, he would merely resign, instead." SONZA did
actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement.
SONZAs letter clearly bears this out.26 However, the manner by which SONZA terminated his
relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or
resigned from work does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an
employee or an independent contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit, recently held in AlbertyVlez v. Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR") 27 that a
television program host is an independent contractor. We quote the following findings of the
U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a
television actress is a skilled position requiring talent and training not
available on-the-job. x x x In this regard, Alberty possesses a masters degree in
public communications and journalism; is trained in dance, singing, and modeling;
taught with the drama department at the University of Puerto Rico; and acted in
several theater and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities"
necessary for her to perform. Specifically, she provided, or obtained sponsors to
provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent
contractor status because WIPR provided the "equipment necessary to tape the
show." Albertys argument is misplaced. The equipment necessary for Alberty to
conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show.
Others provided equipment for filming and producing the show, but these were not
the primary tools that Alberty used to perform her particular function. If we accepted
this argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different aspects
of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Albertys contracts with WIPR specifically provided that WIPR hired her
"professional services as Hostess for the Program Desde Mi Pueblo." There is no
evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but
an independent contractor. The control test is the most important test our courts apply in
distinguishing an employee from an independent contractor. 29 This test is based on the
extent of control the hirer exercises over a worker. The greater the supervision and control
the hirer exercises, the more likely the worker is deemed an employee. The converse holds
true as well the less control the hirer exercises, the more likely the worker is considered an
independent contractor.30

First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host
the "Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. To perform his
work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to
render eight hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the
Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests. 32 The
clear implication is that SONZA had a free hand on what to say or discuss in his shows
provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZAs work.33 ABS-CBN did not instruct SONZA how to perform his job. ABSCBN merely reserved the right to modify the program format and airtime schedule "for more
effective programming."34 ABS-CBNs sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power
over the means and methods of the performance of his work. Although ABS-CBN did have
the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs
talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and
methods of SONZAs performance of his work, or even with the quality or product of his
work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not
to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full. 35
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over the
means and methods of the performance of SONZAs work. ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his work - how he
delivered his lines and appeared on television - did not meet ABS-CBNs approval. This
proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent
fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have
control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed
to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not
the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his appearance. 38Even
though ABS-CBN provided SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did not supervise and control his
work. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the
programs.39
A radio broadcast specialist who works under minimal supervision is an independent
contractor.40 SONZAs work as television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised
any supervision and control over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN
subjected him to its rules and standards of performance. SONZA claims that this indicates
ABS-CBNs control "not only [over] his manner of work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance "covering talents"41 of ABS-CBN. The Agreement does not require SONZA to
comply with the rules and standards of performance prescribed for employees of ABS-CBN.
The code of conduct imposed on SONZA under the Agreement refers to the "Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted
by the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code applies to broadcasters,
not to employees of radio and television stations. Broadcasters are not necessarily

employees of radio and television stations. Clearly, the rules and standards of performance
referred to in the Agreement are those applicable to talents and not to employees of ABSCBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former. 43 In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules are merely guidelines towards
the achievement of the mutually desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it. 44
The Vaughan case also held that one could still be an independent contractor although the
hirer reserved certain supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services according to his own
initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme
form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the
same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.46 This practice is not designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast station. The broadcast station
normally spends substantial amounts of money, time and effort "in building up its talents as
well as the programs they appear in and thus expects that said talents remain exclusive with
the station for a commensurate period of time."47 Normally, a much higher fee is paid to
talents who agree to work exclusively for a particular radio or television station. In short, the
huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted
out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not
an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABSCBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2)
the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the "labor-only"
contractor is the agent of the principal. The law makes the principal responsible to the
employees of the "labor-only contractor" as if the principal itself directly hired or employed
the employees.48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and
ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that
MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABSCBNs agent. MJMDC, which stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President
and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is
owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering
into the Agreement with SONZA, who himself is represented by MJMDC. That would make
MJMDC the agent of both ABS-CBN and SONZA.

As SONZA admits, MJMDC is a management company devoted exclusively to managing the

careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from
acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and
television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8
January 1979 finally settled the status of workers in the broadcast industry. Under this policy,
the types of employees in the broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and
effect of law. There is no legal presumption that Policy Instruction No. 40 determines
SONZAs status. A mere executive issuance cannot exclude independent contractors from
the class of service providers to the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this
Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and
Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as
incompetent to attest on the prevailing practice in the radio and television industry. SONZA
views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion
whether to conduct a formal (trial-type) hearing after the submission of the position papers
of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and
shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission
of the parties of their position papers/memorandum, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or hearing. At this stage, he
may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or
witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting
documents without a formal trial. 51 The holding of a formal hearing or trial is something that
the parties cannot demand as a matter of right. 52 If the Labor Arbiter is confident that he can
rely on the documents before him, he cannot be faulted for not conducting a formal trial,
unless under the particular circumstances of the case, the documents alone are insufficient.
The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the rules obtaining in the courts of
law do not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there
is an employer-employee relationship under labor laws. Not every performance of services
for a fee creates an employer-employee relationship. To hold that every person who renders

services to another for a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as
independent contractors. The right to life and livelihood guarantees this freedom to contract
as independent contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent, of his right to
contract as an independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by which he
performs his art or craft. This Court will not interpret the right of labor to security of tenure
to compel artists and talents to render their services only as employees. If radio and
television program hosts can render their services only as employees, the station owners
and managers can dictate to the radio and television hosts what they say in their shows.
This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC") 54 in relation to Republic Act No. 7716, 55 as
amended by Republic Act No. 8241, 56 treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to the 10% value-added tax
("VAT") on services they render. Exempted from the VAT are those under an employeremployee relationship.57 This different tax treatment accorded to talents and broadcasters
bolters our conclusion that they are independent contractors, provided all the basic
elements of a contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the
Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court
of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the
May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is
intrinsically a civil dispute cognizable by the regular courts. 58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated
26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED. Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

G.R. No. 183810

January 21, 2010
FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY LAGUNZAD,
MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS, JR., HARVEY PONCE and ALAN
C. ALMENDRAS, Petitioners,
vs.
ABS-CBN BROADCASTING CORPORATION, Respondent.
DECISION
BRION, J.:
The petition for review on certiorari1 now before us seeks to set aside the decision2 and
resolution3 of the Court of Appeals, Nineteenth Division (CA) promulgated on March 25,
2008 and July 8, 2008, respectively, in CA- G.R. SP No. 01838.4
The Antecedents
The Regularization Case.
In June 2001, petitioners Farley Fulache, Manolo Jabonero, David Castillo, Jeffrey Lagunzad,
Magdalena Malig-on Bigno, Francisco Cabas, Jr., Harvey Ponce and Alan C. Almendras
(petitioners) and Cresente Atinen (Atinen) filed two separate complaints for regularization,
unfair labor practice and several money claims (regularization case) against ABS-CBN
Broadcasting Corporation-Cebu (ABS-CBN). Fulache and Castillo were drivers/cameramen;
Atinen, Lagunzad and Jabonero were drivers; Ponce and Almendras were
cameramen/editors; Bigno was a PA/Teleprompter Operator-Editing, and Cabas was a VTR
man/editor. The complaints (RAB VII Case Nos. 06-1100-01 and 06-1176-01) were
consolidated and were assigned to Labor Arbiter Julie C. Rendoque.

The petitioners alleged that on December 17, 1999, ABS-CBN and the ABS-CBN Rank-andFile Employees Union (Union) executed a collective bargaining agreement (CBA) effective
December 11, 1999 to December 10, 2002; they only became aware of the CBA when they
obtained copies of the agreement; they learned that they had been excluded from its
coverage as ABS-CBN considered them temporary and not regular employees, in violation of
the Labor Code. They claimed they had already rendered more than a year of service in the
company and, therefore, should have been recognized as regular employees entitled to
security of tenure and to the privileges and benefits enjoyed by regular employees. They
asked that they be paid overtime, night shift differential, holiday, rest day and service
incentive leave pay. They also prayed for an award of moral damages and attorneys fees.
ABS-CBN explained the nature of the petitioners employment within the framework of its
operations. It claimed that: it operates in several divisions, one of which is the Regional
Network Group (RNG). The RNG exercises control and supervision over all the ABS-CBN local
stations to ensure that ABS-CBN programs are extended to the provinces. A local station, like
the Cebu station, can resort to cost-effective and cost-saving measures to remain viable;
local stations produced shows and programs that were constantly changing because of the
competitive nature of the industry, the changing public demand or preference, and the
seasonal nature of media broadcasting programs. ABS-CBN claimed, too, that the production
of programs per se is not necessary or desirable in its business because it could generate
profits by selling airtime to block-timers or through advertising.
ABS-CBN further claimed that to cope with fluctuating business conditions, it contracts on a
case-to-case basis the services of persons who possess the necessary talent, skills, training,
expertise or qualifications to meet the requirements of its programs and productions. These
contracted persons are called "talents" and are considered independent contractors who
offer their services to broadcasting companies.
Instead of salaries, ABS-CBN pointed out that talents are paid a pre-arranged consideration
called "talent fee" taken from the budget of a particular program and subject to a ten
percent (10%) withholding tax. Talents do not undergo probation. Their services are engaged
for a specific program or production, or a segment thereof. Their contracts are terminated
once the program, production or segment is completed.
ABS-CBN alleged that the petitioners services were contracted on various dates by its Cebu
station as independent contractors/off camera talents, and they were not entitled to
regularization in these capacities.
On January 17, 2002, Labor Arbiter Rendoque rendered his decision5 holding that the
petitioners were regular employees of ABS-CBN, not independent contractors, and are
entitled to the benefits and privileges of regular employees.
ABS-CBN appealed the ruling to the National Labor Relations Commission (NLRC) Fourth
Division, mainly contending that the petitioners were independent contractors, not regular
employees.6
The Illegal Dismissal Case.
While the appeal of the regularization case was pending, ABS-CBN dismissed Fulache,
Jabonero, Castillo, Lagunzad and Atinen (all drivers) for their refusal to sign up contracts of
employment with service contractor Able Services. The four drivers and Atinen responded by
filing a complaint for illegal dismissal (illegal dismissal case). The case (RAB VII Case No. 071300-2002) was likewise handled by Labor Arbiter Rendoque.
In defense, ABS-CBN alleged that even before the labor arbiter rendered his decision of
January 17, 2002 in the regularization case, it had already undertaken a comprehensive
review of its existing organizational structure to address its operational requirements. It then
decided to course through legitimate service contractors all driving, messengerial, janitorial,
utility, make-up, wardrobe and security services for both the Metro Manila and provincial
stations, to improve its operations and to make them more economically viable. Fulache,
Jabonero, Castillo, Lagunzad and Atinen were not singled out for dismissal; as drivers, they
were dismissed because they belonged to a job category that had already been contracted
out. It argued that even if the petitioners had been found to have been illegally dismissed,
their reinstatement had become a physical impossibility because their employer-employee
relationships had been strained and that Atinen had executed a quitclaim and release.
In her April 21, 2003 decision in the illegal dismissal case,7 Labor Arbiter Rendoque upheld
the validity of ABS-CBN's contracting out of certain work or services in its operations. The
labor arbiter found that petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had

been dismissed due to redundancy, an authorized cause under the law.8 He awarded them
separation pay of one (1) months salary for every year of service.
Again, ABS-CBN appealed to the NLRC which rendered on December 15, 2004 a joint
decision on the regularization and illegal dismissal cases.9 The NLRC ruled that there was an
employer-employee relationship between the petitioners and ABS-CBN as the company
exercised control over the petitioners in the performance of their work; the petitioners were
regular employees because they were engaged to perform activities usually necessary or
desirable in ABS-CBN's trade or business; they cannot be considered contractual employees
since they were not paid for the result of their work, but on a monthly basis and were
required to do their work in accordance with the companys schedule. The NLRC thus
affirmed with modification the labor arbiter's regularization decision of January 17, 2002,
additionally granting the petitioners CBA benefits and privileges.
The NLRC reversed the labor arbiters ruling in the illegal dismissal case; it found that
petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had been illegally dismissed and
awarded them backwages and separation pay in lieu of reinstatement. Under both cases,
the petitioners were awarded CBA benefits and privileges from the time they became regular
employees up to the time of their dismissal.
The petitioners moved for reconsideration, contending that Fulache, Jabonero, Castillo and
Lagunzad are entitled to reinstatement and full backwages, salary increases and other CBA
benefits as well as 13th month pay, cash conversion of sick and vacation leaves, medical
and dental allowances, educational benefits and service awards. Atinen appeared to have
been excluded from the motion and there was no showing that he sought reconsideration on
his own.
ABS-CBN likewise moved for the reconsideration of the decision, reiterating that Fulache,
Jabonero, Castillo and Lagunzad were independent contractors, whose services had been
terminated due to redundancy; thus, no backwages should have been awarded. It further
argued that the petitioners were not entitled to the CBA benefits because they never
claimed these benefits in their position paper before the labor arbiter while the NLRC failed
to make a clear and positive finding that that they were part of the bargaining unit; neither
was there evidence to support this finding.
The NLRC resolved the motions for reconsideration on March 24, 200610 by reinstating the
two separate decisions of the labor arbiter dated January 17, 2002,11 and April 21, 2003,12
respectively. Thus, on the regularization issue, the NLRC stood by the ruling that the
petitioners were regular employees entitled to the benefits and privileges of regular
employees. On the illegal dismissal case, the petitioners, while recognized as regular
employees, were declared dismissed due to redundancy. The NLRC denied the petitioners
second motion for reconsideration in its order of May 31, 2006 for being a prohibited
pleading. 13
The CA Petition and Decision
The petitioners went to the CA through a petition for certiorari under Rule 65 of the Rules of
Court.14 They charged the NLRC with grave abuse of discretion in: (1) denying them the
benefits under the CBA; (2) finding no evidence that they are part of the companys
bargaining unit; (3) not reinstating and awarding backwages to Fulache, Jabonero, Castillo
and Lagunzad; and (4) ruling that they are not entitled to damages and attorneys fees.
ABS-CBN, on the other hand, questioned the propriety of the petitioners use of a certiorari
petition. It argued that the proper remedy for the petitioners was an appeal from the
reinstated decisions of the labor arbiter.
In its decision of March 25, 2008,15 the appellate court brushed aside ABS-CBNs procedural
question, holding that the petition was justified because there is no plain, speedy or
adequate remedy from a final decision, order or resolution of the NLRC; the reinstatement of
the labor arbiters decisions did not mean that the proceedings reverted back to the level of
the arbiter. It likewise affirmed the NLRC ruling that the petitioners second motion for
reconsideration is a prohibited pleading under the NLRC rules.16
On the merits of the case, the CA ruled that the petitioners failed to prove their claim to CBA
benefits since they never raised the issue in the compulsory arbitration proceedings, and did
not appeal the labor arbiters decision which was silent on their entitlement to CBA benefits.
The CA found that the petitioners failed to show with specificity how Section 1 (Appropriate
Bargaining Unit) and the other provisions of the CBA applied to them.
On the illegal dismissal issue, the CA upheld the NLRC decision reinstating the labor arbiters
April 21, 2003 ruling.17 Thus, the drivers Fulache, Jabonero, Castillo and Lagunzad were

not illegally dismissed as their separation from the service was due to redundancy; they had
not presented any evidence that ABS-CBN abused its prerogative in contracting out the
services of drivers. Except for separation pay, the CA denied the petitioners claim for
backwages, moral and exemplary damages, and attorneys fees.
The petitioners moved for reconsideration, but the CA denied the motion in a resolution
promulgated on July 8, 2008.18 Hence, the present petition.
The Petition
The petitioners challenge the CA ruling on both procedural and substantive grounds. As
procedural questions, they submit that the CA erred in: (1) affirming the NLRC resolution
which reversed its own decision; (2) sustaining the NLRC ruling that their second motion for
reconsideration is a prohibited pleading; (3) not ruling that ABS-CBN admitted in its position
paper before the labor arbiter that they were members of the bargaining unit as the matter
was not raised in its appeal to the NLRC; and, (4) not ruling that notwithstanding their failure
to appeal from the first decision of the Labor Arbiter, they can still participate in the appeal
filed by ABS-CBN regarding their employment status.
On the substantive aspect, the petitioners contend that the CA gravely erred in: (1) not
considering the evidence submitted to the NLRC on appeal to bolster their claim that they
were members of the bargaining unit and therefore entitled to the CBA benefits; (2) not
ordering ABS-CBN to pay the petitioners salaries, allowances and CBA benefits after the
NLRC has declared that they were regular employees of ABS-CBN; (3) not ruling that under
existing jurisprudence, the position of driver cannot be declared redundant, and that the
petitioners-drivers were illegally dismissed; and, (4) not ruling that the petitioners were
entitled to damages and attorneys fees.
The petitioners argue that the NLRC resolution of March 24, 200619 which set aside its joint
decision of December 15, 200420 and reinstated the twin decisions of the labor arbiter,21
had the effect of promulgating a new decision based on issues that were not raised in ABSCBNs partial appeal to the NLRC. They submit that the NLRC should have allowed their
second motion for reconsideration so that it may be able to equitably evaluate the parties
"conflicting versions of the facts" instead of denying the motion on a mere technicality.
On the question of their CBA coverage, the petitioners contend that the CA erred in not
considering that ABS-CBN admitted their membership in the bargaining unit, for nowhere in
its partial appeal from the labor arbiters decision in the regularization case did it allege that
the petitioners failed to prove that they are members of the bargaining unit; instead, the
company stood by its position that the petitioners were not entitled to the CBA benefits
since they were independent contractors/program employees.
The petitioners submit that while they did not appeal the labor arbiters decision in the
regularization case, ABS-CBN raised the employment status issue in its own appeal to the
NLRC; this appeal laid this issue open for review. They argue that they could still participate
in the appeal proceedings at the NLRC; pursue their position on the issue; and introduce
evidence as they did in their reply to the companys appeal.22 They bewail the appellate
courts failure to consider the evidence they presented to the NLRC (consisting of documents
and sworn statements enumerating the activities they are performing) clearly indicating that
they are part of the rank-and-file bargaining unit at ABS-CBN.
The petitioners then proceeded to describe the work they render for the company.
Collectively, they claim that they work as assistants in the production of the Cebuano news
program broadcast daily over ABS-CBN Channel 3, as follows: Fulache, Jabonero, Castillo and
Lagunzad as production assistants to drive the news team; Ponce and Almendras, to shoot
scenes and events with the use of cameras owned by ABS-CBN; Malig-on Bigno, as studio
production assistant and assistant editor/teleprompter operator; and Cabas, Jr., as
production assistant for video editing and operating the VTR machine recorder. As
production assistants, the petitioners submit that they are rank-and-file employees (citing in
support of their position the Courts ruling in ABS-CBN Broadcasting Corp. v. Nazareno23)
who are entitled to salary increases and other benefits under the CBA. Relying on the Courts
ruling in New Pacific Timber and Supply Company, Inc. v. NLRC,24 they posit that to exclude
them from the CBA "would constitute undue discrimination and would deprive them of
monetary benefits they would otherwise be entitled to."
As their final point, the petitioners argue that even if they were not able to prove that they
were members of the bargaining unit, the CA should not have dismissed their petition. When
the CA affirmed the rulings of both the labor arbiter and the NLRC that they are regular
employees, the CA should have ordered ABS-CBN to recognize their regular employee status
and to give them the salaries, allowances and other benefits and privileges under the
CBA.1avvphi1

On the dismissal of Fulache, Jabonero, Castillo and Lagunzad, the petitioners impute bad
faith on ABS-CBN when it abolished the positions of drivers claiming that the company failed
to comply with the requisites of a valid redundancy action. They maintain that ABS-CBN did
not present any evidence on the new staffing pattern as approved by the management of
the company, and did not even bother to show why it considered the positions of drivers
superfluous and unnecessary; it is not true that the positions of drivers no longer existed
because these positions were contracted out to an agency that, in turn, recruited four
drivers to take the place of Fulache, Jabonero, Castillo and Lagunzad. As further indication
that the redundancy action against the four drivers was done in bad faith, the petitioners
call attention to ABS-CBNs abolition of the position of drivers after the labor arbiter
rendered her decision declaring Fulache, Jabonero, Castillo and Lagunzad regular company
employees. The petitioners object to the dismissal of the four drivers when they refused to
sign resignation letters and join Able Services, a contracting agency, contending that the
four had no reason to resign after the labor arbiter declared them regular company
employees.
Since their dismissal was illegal and attended by bad faith, the petitioners insist that they
should be reinstated with backwages, and should likewise be awarded moral and exemplary
damages, and attorney's fees.
The Case for ABS-CBN
In its Comment filed on January 28, 2009,25 ABS-CBN presents several grounds which may
be synthesized as follows:
1. The petition raises questions of fact and not of law.
2. The CA committed no error in affirming the resolution of the NLRC reinstating the
decisions of the labor arbiter.
ABS-CBN submits that the petition should be dismissed for having raised questions of fact
and not of law in violation of Rule 45 of the Rules of Court. It argues that the question of
whether the petitioners were covered by the CBA (and therefore entitled to the CBA
benefits) and whether the petitioners were illegally dismissed because of redundancy, are
factual questions that cannot be reviewed on certiorari because the Court is not a trier of
facts.
ABS-CBN dismisses the petitioners issues and arguments as mere rehash of what they
raised in their pleadings with the CA and as grounds that do not warrant further
consideration. It further contends that because the petitioners did not appeal the labor
arbiter decisions, these decisions had lapsed to finality and could no longer be the subject of
a petition for certiorari; the petitioners cannot obtain from the appellate court affirmative
relief other than those granted in the appealed decision. It also argues that the NLRC did not
commit any grave abuse of discretion in reinstating the twin decisions of the labor arbiter,
thereby affirming that no CBA benefits can be awarded to the petitioners; in the absence of
any illegal dismissal, the petitioners were not entitled to reinstatement, backwages,
damages, and attorney's fees.
The Court's Ruling
We first resolve the parties procedural questions.
ABS-CBN wants the petition to be dismissed outright for its alleged failure to comply with the
requirement of Rule 45 of the Rules of Court that the petition raises only questions of law.26
We find no impropriety in the petition from the standpoint of Rule 45. The petitioners do not
question the findings of facts of the assailed decisions. They question the misapplication of
the law and jurisprudence on the facts recognized by the decisions. For example, they
question as contrary to law their exclusion from the CBA after they were recognized as
regular rank-and-file employees of ABS-CBN. They also question the basis in law of the
dismissal of the four drivers and the legal propriety of the redundancy action taken against.
To reiterate the established distinctions between questions of law and questions of fact, we
quote hereunder our ruling in New Rural Bank of Guimba (N.E.) Inc. v. Fermina S. Abad and
Rafael Susan:27
We reiterate the distinction between a question of law and a question of fact. A question of
law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not call for an examination of
the probative value of the evidence presented, the truth or falsehood of the facts being
admitted. A question of fact exists when a doubt or difference arises as to the truth or

falsehood of facts or when the query invites calibration of the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of specific surrounding
circumstances, as well as their relation to each other and to the whole, and the probability of
the situation.
We also find no error in the CAs affirmation of the denial of the petitioners second motion
for reconsideration of the March 24, 2006 resolution of the NLRC reinstating the labor
arbiters twin decisions. The petitioners second motion for reconsideration was a prohibited
pleading under the NLRC rules of procedure.28
The parties other procedural questions directly bear on the merits of their positions and are
discussed and resolved below, together with the core substantive issues of: (1) whether the
petitioners, as regular employees, are members of the bargaining unit entitled to CBA
benefits; and (2) whether petitioners Fulache, Jabonero, Castillo and Lagunzad were illegally
dismissed.
The Claim for CBA Benefits
We find merit in the petitioners positions.
As regular employees, the petitioners fall within the coverage of the bargaining unit and are
therefore entitled to CBA benefits as a matter of law and contract. In the root decision (the
labor arbiters decision of January 17, 2002) that the NLRC and CA affirmed, the labor arbiter
declared:
WHEREFORE, IN THE LIGHT OF THE FOREGOING, taking into account the factual scenario
and the evidence adduced by both parties, it is declared that complainants in these cases
are REGULAR EMPLOYEES of respondent ABS-CBN and not INDEPENDENT CONTRACTORS and
thus henceforth they are entitled to the benefits and privileges attached to regular status of
their employment.
This declaration unequivocally settled the petitioners employment status: they are ABSCBNs regular employees entitled to the benefits and privileges of regular employees. These
benefits and privileges arise from entitlements under the law (specifically, the Labor Code
and its related laws), and from their employment contract as regular ABS-CBN employees,
part of which is the CBA if they fall within the coverage of this agreement. Thus, what only
needs to be resolved as an issue for purposes of implementation of the decision is whether
the petitioners fall within CBA coverage.
The parties 1999-2002 CBA provided in its Article I (Scope of the Agreement) that:29
Section 1. APPROPRIATE BARGAINING UNIT. The parties agree that the appropriate
bargaining unit shall be regular rank-and-file employees of ABS-CBN BROADCASTING
CORPORATION but shall not include:
a) Personnel classified as Supervisor and Confidential employees;
b) Personnel who are on "casual" or "probationary" status as defined in Section 2 hereof;
c) Personnel who are on "contract" status or who are paid for specified units of work such as
writer-producers, talent-artists, and singers.
The inclusion or exclusion of new job classifications into the bargaining unit shall be subject
of discussion between the COMPANY and the UNION. [emphasis supplied]
Under these terms, the petitioners are members of the appropriate bargaining unit because
they are regular rank-and-file employees and do not belong to any of the excluded
categories. Specifically, nothing in the records shows that they are supervisory or
confidential employees; neither are they casual nor probationary employees. Most
importantly, the labor arbiters decision of January 17, 2002 affirmed all the way up to the
CA level ruled against ABS-CBNs submission that they are independent contractors. Thus,
as regular rank-and-file employees, they fall within CBA coverage under the CBAs express
terms and are entitled to its benefits.
We see no merit in ABS-CBNs arguments that the petitioners are not entitled to CBA
benefits because: (1) they did not claim these benefits in their position paper; (2) the NLRC
did not categorically rule that the petitioners were members of the bargaining unit; and (3)
there was no evidence of this membership. To further clarify what we stated above, CBA
coverage is not only a question of fact, but of law and contract. The factual issue is whether
the petitioners are regular rank-and-file employees of ABS-CBN. The tribunals below
uniformly answered this question in the affirmative. From this factual finding flows legal

effects touching on the terms and conditions of the petitioners regular employment. This
was what the labor arbiter meant when he stated in his decision that "henceforth they are
entitled to the benefits and privileges attached to regular status of their employment."
Significantly, ABS-CBN itself posited before this Court that "the Court of Appeals did not
gravely err nor gravely abuse its discretion when it affirmed the resolution of the NLRC dated
March 24, 2006 reinstating and adopting in toto the decision of the Labor Arbiter dated
January 17, 2002 x x x."30 This representation alone fully resolves all the objections
procedural or otherwise ABS-CBN raised on the regularization issue.
The Dismissal of Fulache, Jabonero,
Castillo and Lagunzad
The termination of employment of the four drivers occurred under highly questionable
circumstances and with plain and unadulterated bad faith.
The records show that the regularization case was in fact the root of the resulting bad faith
as this case gave rise and led to the dismissal case. First, the regularization case was filed
leading to the labor arbiters decision31 declaring the petitioners, including Fulache,
Jabonero, Castillo and Lagunzad, to be regular employees. ABS-CBN appealed the decision
and maintained its position that the petitioners were independent contractors.
In the course of this appeal, ABS-CBN took matters into its own hands and terminated the
petitioners services, clearly disregarding its own appeal then pending with the NLRC.
Notably, this appeal posited that the petitioners were not employees (whose services
therefore could be terminated through dismissal under the Labor Code); they were
independent contractors whose services could be terminated at will, subject only to the
terms of their contracts. To justify the termination of service, the company cited redundancy
as its authorized cause but offered no justificatory supporting evidence. It merely claimed
that it was contracting out the petitioners activities in the exercise of its management
prerogative.
ABS-CBNs intent, of course, based on the records, was to transfer the petitioners and their
activities to a service contractor without paying any attention to the requirements of our
labor laws; hence, ABS-CBN dismissed the petitioners when they refused to sign up with the
service contractor.32 In this manner, ABS-CBN fell into a downward spiral of irreconcilable
legal positions, all undertaken in the hope of saving itself from the decision declaring its
"talents" to be regular employees.
By doing all these, ABS-CBN forgot labor law and its realities.
It forgot that by claiming redundancy as authorized cause for dismissal, it impliedly admitted
that the petitioners were regular employees whose services, by law, can only be terminated
for the just and authorized causes defined under the Labor Code.
Likewise ABS-CBN forgot that it had an existing CBA with a union, which agreement must be
respected in any move affecting the security of tenure of affected employees; otherwise, it
ran the risk of committing unfair labor practice both a criminal and an administrative
offense.33 It similarly forgot that an exercise of management prerogative can be valid only if
it is undertaken in good faith and with no intent to defeat or circumvent the rights of its
employees under the laws or under valid agreements.34
Lastly, it forgot that there was a standing labor arbiters decision that, while not yet final
because of its own pending appeal, cannot simply be disregarded. By implementing the
dismissal action at the time the labor arbiters ruling was under review, the company
unilaterally negated the effects of the labor arbiters ruling while at the same time
appealling the same ruling to the NLRC. This unilateral move is a direct affront to the NLRCs
authority and an abuse of the appeal process.
All these go to show that ABS-CBN acted with patent bad faith. A close parallel we can draw
to characterize this bad faith is the prohibition against forum-shopping under the Rules of
Court. In forum-shopping, the Rules characterize as bad faith the act of filing similar and
repetitive actions for the same cause with the intent of somehow finding a favorable ruling
in one of the actions filed.35 ABS-CBNs actions in the two cases, as described above, are of
the same character, since its obvious intent was to defeat and render useless, in a
roundabout way and other than through the appeal it had taken, the labor arbiters decision
in the regularization case. Forum-shopping is penalized by the dismissal of the actions
involved. The penalty against ABS-CBN for its bad faith in the present case should be no
less.

The errors and omissions do not belong to ABS-CBN alone. The labor arbiter himself who
handled both cases did not see the totality of the companys actions for what they were. He
appeared to have blindly allowed what he granted the petitioners with his left hand, to be
taken away with his right hand, unmindful that the company already exhibited a badge of
bad faith in seeking to terminate the services of the petitioners whose regular status had
just been recognized. He should have recognized the bad faith from the timing alone of ABSCBNs conscious and purposeful moves to secure the ultimate aim of avoiding the
regularization of its so-called "talents."
The NLRC, for its part, initially recognized the presence of bad faith when it originally ruled
that:
While notice has been made to the employees whose positions were declared redundant, the
element of good faith in abolishing the positions of the complainants appear to be wanting.
In fact, it remains undisputed that herein complainants were terminated when they refused
to sign an employment contract with Able Services which would make them appear as
employees of the agency and not of ABS-CBN. Such act by itself clearly demonstrates bad
faith on the part of the respondent in carrying out the companys redundancy program x x
x.36
On motion for reconsideration by both parties, the NLRC reiterated its "pronouncement that
complainants were illegally terminated as extensively discussed in our Joint Decision dated
December 15, 2004."37 Yet, in an inexplicable turnaround, it reconsidered its joint decision
and reinstated not only the labor arbiters decision of January 17, 2002 in the regularization
case, but also his illegal dismissal decision of April 21, 2003.38 Thus, the NLRC joined the
labor arbiter in his error that we cannot but characterize as grave abuse of discretion.
The Court cannot leave unchecked the labor tribunals patent grave abuse of discretion that
resulted, without doubt, in a grave injustice to the petitioners who were claiming regular
employment status and were unceremoniously deprived of their employment soon after
their regular status was recognized. Unfortunately, the CA failed to detect the labor
tribunals gross errors in the disposition of the dismissal issue. Thus, the CA itself joined the
same errors the labor tribunals committed.
The injustice committed on the petitioners/drivers requires rectification. Their dismissal was
not only unjust and in bad faith as the above discussions abundantly show. The bad faith in
ABS-CBNs move toward its illegitimate goal was not even hidden; it dismissed the
petitioners already recognized as regular employees for refusing to sign up with its
service contractor. Thus, from every perspective, the petitioners were illegally dismissed.
By law,39 illegally dismissed employees are entitled to reinstatement without loss of
seniority rights and other privileges and to full backwages, inclusive of allowances, and to
other benefits or their monetary equivalent from the time their compensation was withheld
from them up to the time of their actual reinstatement. The four dismissed drivers deserve
no less.
Moreover, they are also entitled to moral damages since their dismissal was attended by
bad faith.40 For having been compelled to litigate and to incur expenses to protect their
rights and interest, the petitioners are likewise entitled to attorneys fees.41
WHEREFORE, premises considered, we hereby GRANT the petition. The decision dated March
25, 2008 and the resolution dated July 8, 2008 of the Court of Appeals in CA-G.R. SP No.
01838 are hereby REVERSED and SET ASIDE. Accordingly, judgment is hereby rendered as
follows:
1. Confirming that petitioners FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO,
JEFFREY LAGUNZAD, MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS, JR., HARVEY PONCE
and ALAN C. ALMENDRAS are regular employees of ABS-CBN BROADCASTING CORPORATION,
and declaring them entitled to all the rights, benefits and privileges, including CBA benefits,
from the time they became regular employees in accordance with existing company practice
and the Labor Code;
2. Declaring illegal the dismissal of Fulache, Jabonero, Castillo and Lagunzad, and ordering
ABS-CBN to immediately reinstate them to their former positions without loss of seniority
rights with full backwages and all other monetary benefits, from the time they were
dismissed up to the date of their actual reinstatement;
3. Awarding moral damages of P100,000.00 each to Fulache, Jabonero, Castillo and
Lagunzad; and,
4. Awarding attorneys fees of 10% of the total monetary award decreed in this Decision.

Costs against the respondent.

SO ORDERED.
ARTURO D. BRION
Associate Justice
G.R. No. 176484
November 25, 2008
CALAMBA MEDICAL CENTER, INC., petitioner
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION,
MERCEDITHA* LANZANAS, respondents.

RONALDO

LANZANAS

AND

DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services
of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr.
Merceditha) in March 1992 and August 1995, respectively, as part of its team of resident
physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents
were paid a monthly "retainer" of P4,800.00 each.1 It appears that resident physicians were
also given a percentage share out of fees charged for out-patient treatments, operating
room assistance and discharge billings, in addition to their fixed monthly retainer.2
The work schedules of the members of the team of resident physicians were fixed by
petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And they were issued
identification cards3 by petitioner and were enrolled in the Social Security System (SSS).4
Income taxes were withheld from them.5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital,
inadvertently overheard a telephone conversation of respondent Dr. Lanzanas with a fellow
employee, Diosdado Miscala, through an extension telephone line. Apparently, Dr. Lanzanas
and Miscala were discussing the low "census" or admission of patients to the hospital.6
Dr. Desipeda whose attention was called to the above-said telephone conversation issued to
Dr. Lanzanas a Memorandum of March 7, 1998 reading:
As a Licensed Resident Physician employed in Calamba Medical Center since several years
ago, the hospital management has committed upon you utmost confidence in the
performance of duties pursuant thereto. This is the reason why you were awarded the
privilege to practice in the hospital and were entrusted hospital functions to serve the
interest of both the hospital and our patients using your capability for independent
judgment.
Very recently though and unfortunately, you have committed acts inimical to the interest of
the hospital, the details of which are contained in the hereto attached affidavit of witness.
You are therefore given 24 hours to explain why no disciplinary action should be taken
against you.
Pending investigation of your case, you are hereby placed under 30-days [sic] preventive
suspension effective upon receipt hereof.7 (Emphasis, italics and underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the
said incident, any work schedule after sending her husband Dr. Lanzanas the
memorandum,8 nor inform her the reason therefor, albeit she was later informed by the
Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting
measures.9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998,10 admitted that
he spoke with Miscala over the phone but that their conversation was taken out of context
by Dr. Trinidad.
On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to
unresolved grievances over terms and conditions of employment.12

On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension13 before the
National Labor Relations Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr.
Merceditha subsequently filed a complaint for illegal dismissal.14
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and
Employment (DOLE) certified the labor dispute to the NLRC for compulsory arbitration and
issued on April 21, 1998 return-to-work Order to the striking union officers and employees of
petitioner pending resolution of the labor dispute.15
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the
Secretary of Labor directing all union officers and members to return-to-work "on or April 23,
1998, except those employees that were already terminated or are serving disciplinary
actions." Dr. Desipeda thus ordered the officers and members of the union to "report for
work as soon as possible" to the hospital's personnel officer and administrator for "work
scheduling, assignments and/or re-assignments."
Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25,
1998, indicating as grounds therefor his failure to report back to work despite the DOLE
order and his supposed role in the striking union, thus:
On April 23, 1998, you still did not report for work despite memorandum issued by the CMC
Medical Director implementing the Labor Secretary's ORDER. The same is true on April 24,
1998 and April 25, 1998,--you still did not report for work [sic].
You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of
BMCMC-UWP) to be unlawfully participating as member in the rank-and-file union's
concerted activities despite knowledge that your position in the hospital is managerial in
nature (Nurses, Orderlies, and staff of the Emergency Room carry out your orders using your
independent judgment) which participation is expressly prohibited by the New Labor Code
and which prohibition was sustained by the Med-Arbiter's ORDER dated February 24, 1998.
(Emphasis and italics in the original; underscoring partly in the original and partly supplied)
For these reasons as grounds for termination, you are hereby terminated for cause from
employment effective today, April 25, 1998, without prejudice to further action for
revocation of your license before the Philippine [sic] Regulations [sic] Commission.17
(Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal.18 His and Dr.
Merceditha's complaints were consolidated and docketed as NLRC CASE NO. RAB-IV-3-987998-L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses'
complaints for want of jurisdiction upon a finding that there was no employer-employee
relationship between the parties, the fourth requisite or the "control test" in the
determination of an employment bond being absent.
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings,
disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the
complainants their full backwages; separation pay of one month salary for every year of
service in lieu of reinstatement; moral damages of P500,000.00 each; exemplary damages
of P250,000.00 each plus ten percent (10%) of the total award as attorney's fees.
SO ORDERED.21
Petitioner's motion for reconsideration having been denied, it brought the case to the Court
of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision,22 initially granted petitioner's petition and
set aside the NLRC ruling. However, upon a subsequent motion for reconsideration filed by
respondents, it reinstated the NLRC decision in an Amended Decision23 dated September
26, 2006 but tempered the award to each of the spouses of moral and exemplary damages
to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's fees.
In finding the existence of an employer-employee relationship between the parties, the
appellate court held:
x x x. While it may be true that the respondents are given the discretion to decide on how to
treat the petitioner's patients, the petitioner has not denied nor explained why its Medical
Director still has the direct supervision and control over the respondents. The fact is the

petitioner's Medical Director still has to approve the schedule of duties of the respondents.
The respondents stressed that the petitioner's Medical Director also issues instructions or
orders to the respondents relating to the means and methods of performing their duties, i.e.
admission of patients, manner of characterizing cases, treatment of cases, etc., and may
even overrule, review or revise the decisions of the resident physicians. This was not
controverted by the petitioner. The foregoing factors taken together are sufficient to
constitute the fourth element, i.e. control test, hence, the existence of the employeremployee relationship. In denying that it had control over the respondents, the petitioner
alleged that the respondents were free to put up their own clinics or to accept other
retainership agreement with the other hospitals. But, the petitioner failed to substantiate the
allegation with substantial evidence. (Emphasis and underscoring supplied)24
The appellate court thus declared that respondents were illegally dismissed.
x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his
alleged participation in union activities, specifically in joining the strike and failing to observe
the return-to-work order issued by the Secretary of Labor. Yet, the petitioner did not adduce
any piece of evidence to show that respondent Ronaldo indeed participated in the strike. x x
x.
In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her
marriage to complainant Ronaldo has given rise to the presumption that her sympat[hies]
are likewise with her husband" as a ground for her dismissal is unacceptable. Such is not one
of the grounds to justify the termination of her employment.25 (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision
dated June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order
dated September 24, 2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with
the MODIFICATION that the moral and exemplary damages are reduced to P100,000.00 each
and P50,000.00 each, respectively.
SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)
Preliminarily, the present petition calls for a determination of whether there exists an
employer-employee relationship27 between petitioner and the spouses-respondents.
Denying the existence of such relationship, petitioner argues that the appellate court, as
well as the NLRC, overlooked its twice-a-week reporting arrangement with respondents who
are free to practice their profession elsewhere the rest of the week. And it invites attention
to the uncontroverted allegation that respondents, aside from their monthly retainers, were
entitled to one-half of all suturing, admitting, consultation, medico-legal and operating room
assistance fees.28 These circumstances, it stresses, are clear badges of the absence of any
employment relationship between them.
This Court is unimpressed.
Under the "control test," an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which the
physician is to accomplish his task.29
Where a person who works for another does so more or less at his own pleasure and is not
subject to definite hours or conditions of work, and is compensated according to the result of
his efforts and not the amount thereof, the element of control is absent.30
As priorly stated, private respondents maintained specific work-schedules, as determined by
petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight
hours each week and which were strictly to be observed under pain of administrative
sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact that
in the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has
the right to wield the power.31

With respect to respondents' sharing in some hospital fees, this scheme does not sever the
employment tie between them and petitioner as this merely mirrors additional form or
another form of compensation or incentive similar to what commission-based employees
receive as contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. x x x (Emphasis and
underscoring supplied),
Respondents were in fact made subject to petitioner-hospital's Code of Ethics,32 the
provisions of which cover administrative and disciplinary measures on negligence of duties,
personnel conduct and behavior, and offenses against persons, property and the hospital's
interest.
More importantly, petitioner itself provided incontrovertible proof of the employment status
of respondents, namely, the identification cards it issued them, the payslips33 and BIR W-2
(now 2316) Forms which reflect their status as employees, and the classification as "salary"
of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare
(Philhealth) program. It bears noting at this juncture that mandatory coverage under the SSS
Law34 is premised on the existence of an employer-employee relationship,35 except in
cases of compulsory coverage of the self-employed. It would be preposterous for an
employer to report certain persons as employees and pay their SSS premiums as well as
their wages if they are not its employees.36
And if respondents were not petitioner's employees, how does it account for its issuance of
the earlier-quoted March 7, 1998 memorandum explicitly stating that respondent is
"employed" in it and of the subsequent termination letter indicating respondent Lanzanas'
employment status.
Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an
employer-employee relationship exists between the resident physicians and the training
hospitals, unless there is a training agreement between them, and the training program is
duly accredited or approved by the appropriate government agency. In respondents' case,
they were not undergoing any specialization training. They were considered non-training
general practitioners,37 assigned at the emergency rooms and ward sections.
Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that
private respondents were illegally dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-andfile. This is the import of the Secretary of Labor's Resolution of May 22, 1998 in OS A-05-1598 which reads:
xxxx
In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24
members of petitioner are supervisors, namely x x x Rolando Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer
only proves that except for the contention that these employees allegedly supervise, they do
not however recommend any managerial action. At most, their job is merely routinary in
nature and consequently, they cannot be considered supervisory employees.
They are not therefore barred from membership in the union of rank[-]and[-]file, which the
petitioner [the union] is seeking to represent in the instant case.38 (Emphasis and
underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered
indispensable to the national interest. In labor disputes adversely affecting the continued
operation of a hospital, Article 263(g) of the Labor Code provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.
xxxx

(g) x x x x
x x x x. In labor disputes adversely affecting the continued operation of such hospitals,
clinics or medical institutions, it shall be the duty of the striking union or locking-out
employer to provide and maintain an effective skeletal workforce of medical and other
health personnel, whose movement and services shall be unhampered and unrestricted, as
are necessary to insure the proper and adequate protection of the life and health of its
patients, most especially emergency cases, for the duration of the strike or lockout. In such
cases, the Secretary of Labor and Employment is mandated to immediately assume, within
twenty-four hours from knowledge of the occurrence of such strike or lockout, jurisdiction
over the same or certify to the Commission for compulsory arbitration. For this purpose, the
contending parties are strictly enjoined to comply with such orders, prohibitions and/or
injunctions as are issued by the Secretary of Labor and Employment or the Commission,
under pain of immediate disciplinary action, including dismissal or loss of employment
status or payment by the locking-out employer of backwages, damages and other
affirmative relief, even criminal prosecution against either or both of them.
x x x x (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically results in a returnto-work of all striking workers, whether a corresponding return-to-work order had been
issued.39 The DOLE Secretary in fact issued a return-to-work Order, failing to comply with
which is punishable by dismissal or loss of employment status.40
Participation in a strike and intransigence to a return-to-work order must, however, be duly
proved in order to justify immediate dismissal in a "national interest" case. As the appellate
court as well as the NLRC observed, however, there is nothing in the records that would bear
out Dr. Lanzanas' actual participation in the strike. And the medical director's
Memorandum41 of April 22, 1998 contains nothing more than a general directive to all union
officers and members to return-to-work. Mere membership in a labor union does not ipso
facto mean participation in a strike.
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9,
1998, he was never given any work schedule42 was not refuted by petitioner. Petitioner in
fact never released any findings of its supposed investigation into Dr. Lanzanas' alleged
"inimical acts."
Petitioner thus failed to observe the two requirements,before dismissal can be effected
notice and hearing which constitute essential elements of the statutory process; the first
to apprise the employee of the particular acts or omissions for which his dismissal is sought,
and the second to inform the employee of the employer's decision to dismiss him.43 Nonobservance of these requirements runs afoul of the procedural mandate.44
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first
and only time that he was apprised of the reason for his dismissal. He was not afforded,
however, even the slightest opportunity to explain his side. His was a "termination upon
receipt" situation. While he was priorly made to explain on his telephone conversation with
Miscala,45 he was not with respect to his supposed participation in the strike and failure to
heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without
any just or authorized cause and without observance of due process. In fact, petitioner never
proferred any valid cause for her dismissal except its view that "her marriage to [Dr.
Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and
that when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their
workload by the medical doctor, he was presumed to be speaking for himself [and] for his
wife Merceditha."46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant
in the strike remained just that. Its termination of her employment on the basis of her
conjugal relationship is not analogous to
any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief,
no matter how strong, cannot substitute for factual findings carefully established through
orderly procedure.48
The Court even notes that after the proceedings at the NLRC, petitioner never even
mentioned Dr. Merceditha's case. There is thus no gainsaying that her dismissal was both
substantively and procedurally infirm.

Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list"49
including therein the names of respondents. Consider the following portions of Dr.
Merceditha's Memorandum of Appeal:
3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other
hospitals, one of which [was] procured from Foothills Hospital in Sto. Tomas, Batangas [that]
contains her name. The object of the said list is precisely to harass Complainant and malign
her good name and reputation. This is not only unprofessional, but runs smack of oppression
as CMC is trying permanently deprived [sic] Complainant of her livelihood by ensuring that
she is barred from practicing in other hospitals.
4. Other co-professionals and brothers in the profession are fully aware of these "watch out"
lists and as such, her reputation was not only besmirched, but was damaged, and she
suffered social humiliation as it is of public knowledge that she was dismissed from work.
Complainant came from a reputable and respected family, her father being a retired full
Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all professionals,
her brothers, Arnold and Romeo Jr., being engineers. The Complainant has a family
protection [sic] to protect. She likewise has a professional reputation to protect, being a
licensed physician. Both her personal and professional reputation were damaged as a result
of the unlawful acts of the respondents.50
While petitioner does not deny the existence of such list, it pointed to the lack of any board
action on its part to initiate such listing and to circulate the same, viz:
20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were merely
lists obtained by one Dr. Ernesto Naval of PAMANA Hospital. Said list was given by a
stockholder of respondent who was at the same time a stockholder of PAMAN[A] Hospital.
The giving of the list was not a Board action.51 (Emphasis and underscoring supplied)
The circulation of such list containing names of alleged union members intended to prevent
employment of workers for union activities similarly constitutes unfair labor practice,
thereby giving a right of action for damages by the employees prejudiced.52
A word on the appellate court's deletion of the award of attorney's fees. There being no
basis advanced in deleting it, as exemplary damages were correctly awarded,53 the award
of attorney's fees should be reinstated.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with
MODIFICATION in that the award by the National Labor Relations Commission of 10% of the
total judgment award as attorney's fees is reinstated. In all other aspects, the decision of the
appellate court is affirmed.
SO ORDERED.
G.R. No. 124354
December 29, 1999
ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural
guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS and RON
RAYMOND RAMOS, petitioners,
vs.
COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and
DRA. PERFECTA GUTIERREZ, respondents.
KAPUNAN, J.:
The Hippocratic Oath mandates physicians to give primordial consideration to the health and
welfare of their patients. If a doctor fails to live up to this precept, he is made accountable
for his acts. A mistake, through gross negligence or incompetence or plain human error, may
spell the difference between life and death. In this sense, the doctor plays God on his
patient's fate. 1
In the case at bar, the Court is called upon to rule whether a surgeon, an anesthesiologist
and a hospital should be made liable for the unfortunate comatose condition of a patient
scheduled for cholecystectomy. 2
Petitioners seek the reversal of the decision 3 of the Court of Appeals, dated 29 May 1995,
which overturned the decision 4 of the Regional Trial Court, dated 30 January 1992, finding
private respondents liable for damages arising from negligence in the performance of their
professional duties towards petitioner Erlinda Ramos resulting in her comatose condition.
The antecedent facts as summarized by the trial court are reproduced hereunder:

Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year old (Exh. "A")
robust woman (TSN, October 19, 1989, p. 10). Except for occasional complaints of
discomfort due to pains allegedly caused by the presence of a stone in her gall bladder (TSN,
January 13, 1988, pp. 4-5), she was as normal as any other woman. Married to Rogelio E.
Ramos, an executive of Philippine Long Distance Telephone Company, she has three children
whose names are Rommel Ramos, Roy Roderick Ramos and Ron Raymond Ramos (TSN,
October 19, 1989, pp. 5-6).
Because the discomforts somehow interfered with her normal ways, she sought professional
advice. She was advised to undergo an operation for the removal of a stone in her gall
bladder (TSN, January 13, 1988, p. 5). She underwent a series of examinations which
included blood and urine tests (Exhs. "A" and "C") which indicated she was fit for surgery.
Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January 13, 1988, p. 7), she
and her husband Rogelio met for the first time Dr. Orlino Hozaka (should be Hosaka; see
TSN, February 20, 1990, p. 3), one of the defendants in this case, on June 10, 1985. They
agreed that their date at the operating table at the DLSMC (another defendant), would be on
June 17, 1985 at 9:00 A.M.. Dr. Hosaka decided that she should undergo a
"cholecystectomy" operation after examining the documents (findings from the Capitol
Medical Center, FEU Hospital and DLSMC) presented to him. Rogelio E. Ramos, however,
asked Dr. Hosaka to look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio
that he will get a good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was
to include the anesthesiologist's fee and which was to be paid after the operation (TSN,
October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, February 27, 1990, p. 13; and TSN,
November 9, 1989, pp. 3-4, 10, 17).
A day before the scheduled date of operation, she was admitted at one of the rooms of the
DLSMC, located along E. Rodriguez Avenue, Quezon City (TSN, October 19,1989, p. 11).
At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the
operation by the hospital staff. Her sister-in-law, Herminda Cruz, who was the Dean of the
College of Nursing at the Capitol Medical Center, was also there for moral support. She
reiterated her previous request for Herminda to be with her even during the operation. After
praying, she was given injections. Her hands were held by Herminda as they went down
from her room to the operating room (TSN, January 13, 1988, pp. 9-11). Her husband,
Rogelio, was also with her (TSN, October 19, 1989, p. 18). At the operating room, Herminda
saw about two or three nurses and Dr. Perfecta Gutierrez, the other defendant, who was to
administer anesthesia. Although not a member of the hospital staff, Herminda introduced
herself as Dean of the College of Nursing at the Capitol Medical Center who was to provide
moral support to the patient, to them. Herminda was allowed to stay inside the operating
room.
At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka who was
not yet in (TSN, January 13, 1988, pp. 11-12). Dr. Gutierrez thereafter informed Herminda
Cruz about the prospect of a delay in the arrival of Dr. Hosaka. Herminda then went back to
the patient who asked, "Mindy, wala pa ba ang Doctor"? The former replied, "Huwag kang
mag-alaala, darating na iyon" (Ibid.).
Thereafter, Herminda went out of the operating room and informed the patient's husband,
Rogelio, that the doctor was not yet around (id., p. 13). When she returned to the operating
room, the patient told her, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor." So,
she went out again and told Rogelio about what the patient said (id., p. 15). Thereafter, she
returned to the operating room.
At around 10:00 A.M., Rogelio E. Ramos was "already dying [and] waiting for the arrival of
the doctor" even as he did his best to find somebody who will allow him to pull out his wife
from the operating room (TSN, October 19, 1989, pp. 19-20). He also thought of the feeling
of his wife, who was inside the operating room waiting for the doctor to arrive (ibid.). At
almost 12:00 noon, he met Dr. Garcia who remarked that he (Dr. Garcia) was also tired of
waiting for Dr. Hosaka to arrive (id., p. 21). While talking to Dr. Garcia at around 12:10 P.M.,
he came to know that Dr. Hosaka arrived as a nurse remarked, "Nandiyan na si Dr. Hosaka,
dumating na raw." Upon hearing those words, he went down to the lobby and waited for the
operation to be completed (id., pp. 16, 29-30).
At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the patient,
heard somebody say that "Dr. Hosaka is already here." She then saw people inside the
operating room "moving, doing this and that, [and] preparing the patient for the operation"
(TSN, January 13, 1988, p. 16). As she held the hand of Erlinda Ramos, she then saw Dr.
Gutierrez intubating the hapless patient. She thereafter heard Dr. Gutierrez say, "ang hirap
ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan" (id., p. 17). Because of

the remarks of Dra. Gutierrez, she focused her attention on what Dr. Gutierrez was doing.
She thereafter noticed bluish discoloration of the nailbeds of the left hand of the hapless
Erlinda even as Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for
someone to call Dr. Calderon, another anesthesiologist (id., p. 19). After Dr. Calderon arrived
at the operating room, she saw this anesthesiologist trying to intubate the patient. The
patient's nailbed became bluish and the patient was placed in a trendelenburg position a
position where the head of the patient is placed in a position lower than her feet which is an
indication that there is a decrease of blood supply to the patient's brain (Id., pp. 19-20).
Immediately thereafter, she went out of the operating room, and she told Rogelio E. Ramos
"that something wrong was . . . happening" (Ibid.). Dr. Calderon was then able to intubate
the patient (TSN, July 25, 1991, p. 9).
Meanwhile, Rogelio, who was outside the operating room, saw a respiratory machine being
rushed towards the door of the operating room. He also saw several doctors rushing towards
the operating room. When informed by Herminda Cruz that something wrong was
happening, he told her (Herminda) to be back with the patient inside the operating room
(TSN, October 19, 1989, pp. 25-28).
Herminda Cruz immediately rushed back, and saw that the patient was still in trendelenburg
position (TSN, January 13, 1988, p. 20). At almost 3:00 P.M. of that fateful day, she saw the
patient taken to the Intensive Care Unit (ICU).
About two days thereafter, Rogelio E. Ramos was able to talk to Dr. Hosaka. The latter
informed the former that something went wrong during the intubation. Reacting to what was
told to him, Rogelio reminded the doctor that the condition of his wife would not have
happened, had he (Dr. Hosaka) looked for a good anesthesiologist (TSN, October 19, 1989, p.
31).
Doctors Gutierrez and Hosaka were also asked by the hospital to explain what happened to
the patient. The doctors explained that the patient had bronchospasm (TSN, November 15,
1990, pp. 26-27).
Erlinda Ramos stayed at the ICU for a month. About four months thereafter or on November
15, 1985, the patient was released from the hospital.
During the whole period of her confinement, she incurred hospital bills amounting to
P93,542.25 which is the subject of a promissory note and affidavit of undertaking executed
by Rogelio E. Ramos in favor of DLSMC. Since that fateful afternoon of June 17, 1985, she
has been in a comatose condition. She cannot do anything. She cannot move any part of her
body. She cannot see or hear. She is living on mechanical means. She suffered brain damage
as a result of the absence of oxygen in her brain for four to five minutes (TSN, November 9,
1989, pp. 21-22). After being discharged from the hospital, she has been staying in their
residence, still needing constant medical attention, with her husband Rogelio incurring a
monthly expense ranging from P8,000.00 to P10,000.00 (TSN, October 19, 1989, pp. 32-34).
She was also diagnosed to be suffering from "diffuse cerebral parenchymal damage" (Exh.
"G"; see also TSN, December 21, 1989,
p. 6). 5
Thus, on 8 January 1986, petitioners filed a civil case 6 for damages with the Regional Trial
Court of Quezon City against herein private respondents alleging negligence in the
management and care of Erlinda Ramos.
During the trial, both parties presented evidence as to the possible cause of Erlinda's injury.
Plaintiff presented the testimonies of Dean Herminda Cruz and Dr. Mariano Gavino to prove
that the sustained by Erlinda was due to lack of oxygen in her brain caused by the faulty
management of her airway by private respondents during the anesthesia phase. On the
other hand, private respondents primarily relied on the expert testimony of Dr. Eduardo
Jamora, a pulmonologist, to the effect that the cause of brain damage was Erlinda's allergic
reaction to the anesthetic agent, Thiopental Sodium (Pentothal).
After considering the evidence from both sides, the Regional Trial Court rendered judgment
in favor of petitioners, to wit:
After evaluating the evidence as shown in the finding of facts set forth earlier, and applying
the aforecited provisions of law and jurisprudence to the case at bar, this Court finds and so
holds that defendants are liable to plaintiffs for damages. The defendants were guilty of, at
the very least, negligence in the performance of their duty to plaintiff-patient Erlinda Ramos.
On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to exercise reasonable
care in not only intubating the patient, but also in not repeating the administration of
atropine (TSN, August 20, 1991, pp. 5-10), without due regard to the fact that the patient

was inside the operating room for almost three (3) hours. For after she committed a mistake
in intubating [the] patient, the patient's nailbed became bluish and the patient, thereafter,
was placed in trendelenburg position, because of the decrease of blood supply to the
patient's brain. The evidence further shows that the hapless patient suffered brain damage
because of the absence of oxygen in her (patient's) brain for approximately four to five
minutes which, in turn, caused the patient to become comatose.
On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of Dr. Perfecta
Gutierrez whom he had chosen to administer anesthesia on the patient as part of his
obligation to provide the patient a good anesthesiologist', and for arriving for the scheduled
operation almost three (3) hours late.
On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of negligence
of the doctors in their "practice of medicine" in the operating room. Moreover, the hospital is
liable for failing through its responsible officials, to cancel the scheduled operation after Dr.
Hosaka inexcusably failed to arrive on time.
In having held thus, this Court rejects the defense raised by defendants that they have acted
with due care and prudence in rendering medical services to plaintiff-patient. For if the
patient was properly intubated as claimed by them, the patient would not have become
comatose. And, the fact that another anesthesiologist was called to try to intubate the
patient after her (the patient's) nailbed turned bluish, belie their claim. Furthermore, the
defendants should have rescheduled the operation to a later date. This, they should have
done, if defendants acted with due care and prudence as the patient's case was an elective,
not an emergency case.
xxx

xxx

xxx

WHEREFORE, and in view of the foregoing, judgment is rendered in favor of the plaintiffs and
against the defendants. Accordingly, the latter are ordered to pay, jointly and severally, the
former the following sums of money, to wit:
1)
the sum of P8,000.00 as actual monthly expenses for the plaintiff Erlinda Ramos
reckoned from November 15, 1985 or in the total sum of P632,000.00 as of April 15, 1992,
subject to its being updated;
2)

the sum of P100,000.00 as reasonable attorney's fees;

3)
the sum of P800,000.00 by way of moral damages and the further sum of
P200,000,00 by way of exemplary damages; and,
4)

the costs of the suit.

SO ORDERED. 7
Private respondents seasonably interposed an appeal to the Court of Appeals. The appellate
court rendered a Decision, dated 29 May 1995, reversing the findings of the trial court. The
decretal portion of the decision of the appellate court reads:
WHEREFORE, for the foregoing premises the appealed decision is hereby REVERSED, and the
complaint below against the appellants is hereby ordered DISMISSED. The counterclaim of
appellant De Los Santos Medical Center is GRANTED but only insofar as appellees are hereby
ordered to pay the unpaid hospital bills amounting to P93,542.25, plus legal interest for
justice must be tempered with mercy.
SO ORDERED. 8
The decision of the Court of Appeals was received on 9 June 1995 by petitioner Rogelio
Ramos who was mistakenly addressed as "Atty. Rogelio Ramos." No copy of the decision,
however, was sent nor received by the Coronel Law Office, then counsel on record of
petitioners. Rogelio referred the decision of the appellate court to a new lawyer, Atty. Ligsay,
only on 20 June 1995, or four (4) days before the expiration of the reglementary period for
filing a motion for reconsideration. On the same day, Atty. Ligsay, filed with the appellate
court a motion for extension of time to file a motion for reconsideration. The motion for
reconsideration was submitted on 4 July 1995. However, the appellate court denied the
motion for extension of time in its Resolution dated 25 July 1995. 9 Meanwhile, petitioners
engaged the services of another counsel, Atty. Sillano, to replace Atty. Ligsay. Atty. Sillano
filed on 7 August 1995 a motion to admit the motion for reconsideration contending that the
period to file the appropriate pleading on the assailed decision had not yet commenced to
run as the Division Clerk of Court of the Court of Appeals had not yet served a copy thereof
to the counsel on record. Despite this explanation, the appellate court still denied the motion

to admit the motion for reconsideration of petitioners in its Resolution, dated 29 March 1996,
primarily on the ground that the fifteen-day (15) period for filing a motion for reconsideration
had already expired, to wit:
We said in our Resolution on July 25, 1995, that the filing of a Motion for Reconsideration
cannot be extended; precisely, the Motion for Extension (Rollo, p. 12) was denied. It is, on
the other hand, admitted in the latter Motion that plaintiffs/appellees received a copy of the
decision as early as June 9, 1995. Computation wise, the period to file a Motion for
Reconsideration expired on June 24. The Motion for Reconsideration, in turn, was received by
the Court of Appeals already on July 4, necessarily, the 15-day period already passed. For
that alone, the latter should be denied.
Even assuming admissibility of the Motion for the Reconsideration, but after considering the
Comment/Opposition, the former, for lack of merit, is hereby DENIED.
SO ORDERED. 10
A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The next day,
or on 12 April 1996, Atty. Sillano filed before this Court a motion for extension of time to file
the present petition for certiorari under Rule 45. The Court granted the motion for extension
of time and gave petitioners additional thirty (30) days after the expiration of the fifteen-day
(15) period counted from the receipt of the resolution of the Court of Appeals within which to
submit the petition. The due date fell on 27 May 1996. The petition was filed on 9 May 1996,
well within the extended period given by the Court.
Petitioners assail the decision of the Court of Appeals on the following grounds:
I
IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS DRA. GUTIERREZ,
DRA. CALDERON AND DR. JAMORA;
II
IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT CAUSE THE
UNFORTUNATE COMATOSE CONDITION OF PETITIONER ERLINDA RAMOS;
III
IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR. 11
Before we discuss the merits of the case, we shall first dispose of the procedural issue on the
timeliness of the petition in relation to the motion for reconsideration filed by petitioners
with the Court of Appeals. In their
Comment, 12 private respondents contend that the petition should not be given due course
since the motion for reconsideration of the petitioners on the decision of the Court of
Appeals was validly dismissed by the appellate court for having been filed beyond the
reglementary period. We do not agree.
A careful review of the records reveals that the reason behind the delay in filing the motion
for reconsideration is attributable to the fact that the decision of the Court of Appeals was
not sent to then counsel on record of petitioners, the Coronel Law Office. In fact, a copy of
the decision of the appellate court was instead sent to and received by petitioner Rogelio
Ramos on 9 June 1995 wherein he was mistakenly addressed as Atty. Rogelio Ramos. Based
on the other communications received by petitioner Rogelio Ramos, the appellate court
apparently mistook him for the counsel on record. Thus, no copy of the decision of the
counsel on record. Petitioner, not being a lawyer and unaware of the prescriptive period for
filing a motion for reconsideration, referred the same to a legal counsel only on 20 June
1995.
It is elementary that when a party is represented by counsel, all notices should be sent to
the party's lawyer at his given address. With a few exceptions, notice to a litigant without
notice to his counsel on record is no notice at all. In the present case, since a copy of the
decision of the appellate court was not sent to the counsel on record of petitioner, there can
be no sufficient notice to speak of. Hence, the delay in the filing of the motion for
reconsideration cannot be taken against petitioner. Moreover, since the Court of Appeals
already issued a second Resolution, dated 29 March 1996, which superseded the earlier
resolution issued on 25 July 1995, and denied the motion for reconsideration of petitioner,
we believed that the receipt of the former should be considered in determining the
timeliness of the filing of the present petition. Based on this, the petition before us was
submitted on time.

After resolving the foregoing procedural issue, we shall now look into the merits of the case.
For a more logical presentation of the discussion we shall first consider the issue on the
applicability of the doctrine of res ipsa loquitur to the instant case. Thereafter, the first two
assigned errors shall be tackled in relation to the res ipsa loquitur doctrine.
Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks
for itself." The phrase "res ipsa loquitur'' is a maxim for the rule that the fact of the
occurrence of an injury, taken with the surrounding circumstances, may permit an inference
or raise a presumption of negligence, or make out a plaintiff's prima facie case, and present
a question of fact for defendant to meet with an explanation. 13 Where the thing which
caused the injury complained of is shown to be under the management of the defendant or
his servants and the accident is such as in ordinary course of things does not happen if
those who have its management or control use proper care, it affords reasonable evidence,
in the absence of explanation by the defendant, that the accident arose from or was caused
by the defendant's want of care. 14
The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a matter of
common knowledge and experience, the very nature of certain types of occurrences may
justify an inference of negligence on the part of the person who controls the instrumentality
causing the injury in the absence of some explanation by the defendant who is charged with
negligence. 15 It is grounded in the superior logic of ordinary human experience and on the
basis of such experience or common knowledge, negligence may be deduced from the mere
occurrence of the accident itself. 16 Hence, res ipsa loquitur is applied in conjunction with
the doctrine of common knowledge.
However, much has been said that res ipsa loquitur is not a rule of substantive law and, as
such, does not create or constitute an independent or separate ground of liability. 17
Instead, it is considered as merely evidentiary or in the nature of a procedural rule. 18 It is
regarded as a mode of proof, or a mere procedural of convenience since it furnishes a
substitute for, and relieves a plaintiff of, the burden of producing specific proof of
negligence. 19 In other words, mere invocation and application of the doctrine does not
dispense with the requirement of proof of negligence. It is simply a step in the process of
such proof, permitting the plaintiff to present along with the proof of the accident, enough of
the attending circumstances to invoke the doctrine, creating an inference or presumption of
negligence, and to thereby place on the defendant the burden of going forward with the
proof. 20 Still, before resort to the doctrine may be allowed, the following requisites must be
satisfactorily shown:
1.
The accident is of a kind which ordinarily does not occur in the absence of someone's
negligence;
2.
It is caused by an instrumentality within the exclusive control of the defendant or
defendants; and
3.
The possibility of contributing conduct which would make the plaintiff responsible is
eliminated. 21
In the above requisites, the fundamental element is the "control of instrumentality" which
caused the damage. 22 Such element of control must be shown to be within the dominion of
the defendant. In order to have the benefit of the rule, a plaintiff, in addition to proving
injury or damage, must show a situation where it is applicable, and must establish that the
essential elements of the doctrine were present in a particular incident. 23
Medical malpractice 24 cases do not escape the application of this doctrine. Thus, res ipsa
loquitur has been applied when the circumstances attendant upon the harm are themselves
of such a character as to justify an inference of negligence as the cause of that harm. 25 The
application of res ipsa loquitur in medical negligence cases presents a question of law since
it is a judicial function to determine whether a certain set of circumstances does, as a matter
of law, permit a given inference. 26
Although generally, expert medical testimony is relied upon in malpractice suits to prove
that a physician has done a negligent act or that he has deviated from the standard medical
procedure, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for
expert medical testimony is dispensed with because the injury itself provides the proof of
negligence. 27 The reason is that the general rule on the necessity of expert testimony
applies only to such matters clearly within the domain of medical science, and not to
matters that are within the common knowledge of mankind which may be testified to by
anyone familiar with the facts. 28 Ordinarily, only physicians and surgeons of skill and
experience are competent to testify as to whether a patient has been treated or operated
upon with a reasonable degree of skill and care. However, testimony as to the statements

and acts of physicians and surgeons, external appearances, and manifest conditions which
are observable by any one may be given by non-expert witnesses. 29 Hence, in cases where
the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon
proper proof of injury to the patient, without the aid of expert testimony, where the court
from its fund of common knowledge can determine the proper standard of care. 30 Where
common knowledge and experience teach that a resulting injury would not have occurred to
the patient if due care had been exercised, an inference of negligence may be drawn giving
rise to an application of the doctrine of res ipsa loquitur without medical evidence, which is
ordinarily required to show not only what occurred but how and why it occurred. 31 When
the doctrine is appropriate, all that the patient must do is prove a nexus between the
particular act or omission complained of and the injury sustained while under the custody
and management of the defendant without need to produce expert medical testimony to
establish the standard of care. Resort to res ipsa loquitur is allowed because there is no
other way, under usual and ordinary conditions, by which the patient can obtain redress for
injury suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the following situations:
leaving of a foreign object in the body of the patient after an operation, 32 injuries sustained
on a healthy part of the body which was not under, or in the area, of treatment, 33 removal
of the wrong part of the body when another part was intended, 34 knocking out a tooth
while a patient's jaw was under anesthetic for the removal of his tonsils, 35 and loss of an
eye while the patient plaintiff was under the influence of anesthetic, during or following an
operation for appendicitis, 36 among others.
Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably
enlarged, it does not automatically apply to all cases of medical negligence as to
mechanically shift the burden of proof to the defendant to show that he is not guilty of the
ascribed negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily
used but a rule to be cautiously applied, depending upon the circumstances of each case. It
is generally restricted to situations in malpractice cases where a layman is able to say, as a
matter of common knowledge and observation, that the consequences of professional care
were not as such as would ordinarily have followed if due care had been
exercised. 37 A distinction must be made between the failure to secure results, and the
occurrence of something more unusual and not ordinarily found if the service or treatment
rendered followed the usual procedure of those skilled in that particular practice. It must be
conceded that the doctrine of res ipsa loquitur can have no application in a suit against a
physician or surgeon which involves the merits of a diagnosis or of a scientific treatment. 38
The physician or surgeon is not required at his peril to explain why any particular diagnosis
was not correct, or why any particular scientific treatment did not produce the desired result.
39 Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is that the
desired result of an operation or treatment was not accomplished. 40 The real question,
therefore, is whether or not in the process of the operation any extraordinary incident or
unusual event outside of the routine performance occurred which is beyond the regular
scope of customary professional activity in such operations, which, if unexplained would
themselves reasonably speak to the average man as the negligent cause or causes of the
untoward consequence. 41 If there was such extraneous interventions, the doctrine of res
ipsa loquitur may be utilized and the defendant is called upon to explain the matter, by
evidence of exculpation, if he could. 42
We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will hereinafter be
explained, the damage sustained by Erlinda in her brain prior to a scheduled gall bladder
operation presents a case for the application of res ipsa loquitur.
A case strikingly similar to the one before us is Voss vs. Bridwell, 43 where the Kansas
Supreme Court in applying the res ipsa loquitur stated:
The plaintiff herein submitted himself for a mastoid operation and delivered his person over
to the care, custody and control of his physician who had complete and exclusive control
over him, but the operation was never performed. At the time of submission he was
neurologically sound and physically fit in mind and body, but he suffered irreparable damage
and injury rendering him decerebrate and totally incapacitated. The injury was one which
does not ordinarily occur in the process of a mastoid operation or in the absence of
negligence in the administration of an anesthetic, and in the use and employment of an
endoctracheal tube. Ordinarily a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia in the absence of
negligence. Upon these facts and under these circumstances a layman would be able to say,
as a matter of common knowledge and observation, that the consequences of professional
treatment were not as such as would ordinarily have followed if due care had been
exercised.

Here the plaintiff could not have been guilty of contributory negligence because he was
under the influence of anesthetics and unconscious, and the circumstances are such that the
true explanation of event is more accessible to the defendants than to the plaintiff for they
had the exclusive control of the instrumentalities of anesthesia.
Upon all the facts, conditions and circumstances alleged in Count II it is held that a cause of
action is stated under the doctrine of res ipsa loquitur. 44
Indeed, the principles enunciated in the aforequoted case apply with equal force here. In the
present case, Erlinda submitted herself for cholecystectomy and expected a routine general
surgery to be performed on her gall bladder. On that fateful day she delivered her person
over to the care, custody and control of private respondents who exercised complete and
exclusive control over her. At the time of submission, Erlinda was neurologically sound and,
except for a few minor discomforts, was likewise physically fit in mind and body. However,
during the administration of anesthesia and prior to the performance of cholecystectomy
she suffered irreparable damage to her brain. Thus, without undergoing surgery, she went
out of the operating room already decerebrate and totally incapacitated. Obviously, brain
damage, which Erlinda sustained, is an injury which does not normally occur in the process
of a gall bladder operation. In fact, this kind of situation does not in the absence of
negligence of someone in the administration of anesthesia and in the use of endotracheal
tube. Normally, a person being put under anesthesia is not rendered decerebrate as a
consequence of administering such anesthesia if the proper procedure was followed.
Furthermore, the instruments used in the administration of anesthesia, including the
endotracheal tube, were all under the exclusive control of private respondents, who are the
physicians-in-charge. Likewise, petitioner Erlinda could not have been guilty of contributory
negligence because she was under the influence of anesthetics which rendered her
unconscious.
Considering that a sound and unaffected member of the body (the brain) is injured or
destroyed while the patient is unconscious and under the immediate and exclusive control of
the physicians, we hold that a practical administration of justice dictates the application of
res ipsa loquitur. Upon these facts and under these circumstances the Court would be able
to say, as a matter of common knowledge and observation, if negligence attended the
management and care of the patient. Moreover, the liability of the physicians and the
hospital in this case is not predicated upon an alleged failure to secure the desired results of
an operation nor on an alleged lack of skill in the diagnosis or treatment as in fact no
operation or treatment was ever performed on Erlinda. Thus, upon all these initial
determination a case is made out for the application of the doctrine of res ipsa loquitur.
Nonetheless, in holding that res ipsa loquitur is available to the present case we are not
saying that the doctrine is applicable in any and all cases where injury occurs to a patient
while under anesthesia, or to any and all anesthesia cases. Each case must be viewed in its
own light and scrutinized in order to be within the res ipsa loquitur coverage.
Having in mind the applicability of the res ipsa loquitur doctrine and the presumption of
negligence allowed therein, the Court now comes to the issue of whether the Court of
Appeals erred in finding that private respondents were not negligent in the care of Erlinda
during the anesthesia phase of the operation and, if in the affirmative, whether the alleged
negligence was the proximate cause of Erlinda's comatose condition. Corollary thereto, we
shall also determine if the Court of Appeals erred in relying on the testimonies of the
witnesses for the private respondents.
In sustaining the position of private respondents, the Court of Appeals relied on the
testimonies of Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the
testimony of Dra. Gutierrez, the Court of Appeals rationalized that she was candid enough to
admit that she experienced some difficulty in the endotracheal intubation 45 of the patient
and thus, cannot be said to be covering her negligence with falsehood. The appellate court
likewise opined that private respondents were able to show that the brain damage sustained
by Erlinda was not caused by the alleged faulty intubation but was due to the allergic
reaction of the patient to the drug Thiopental Sodium (Pentothal), a short-acting barbiturate,
as testified on by their expert witness, Dr. Jamora. On the other hand, the appellate court
rejected the testimony of Dean Herminda Cruz offered in favor of petitioners that the cause
of the brain injury was traceable to the wrongful insertion of the tube since the latter, being
a nurse, was allegedly not knowledgeable in the process of intubation. In so holding, the
appellate court returned a verdict in favor of respondents physicians and hospital and
absolved them of any liability towards Erlinda and her family.
We disagree with the findings of the Court of Appeals. We hold that private respondents
were unable to disprove the presumption of negligence on their part in the care of Erlinda
and their negligence was the proximate cause of her piteous condition.

In the instant case, the records are helpful in furnishing not only the logical scientific
evidence of the pathogenesis of the injury but also in providing the Court the legal nexus
upon which liability is based. As will be shown hereinafter, private respondents' own
testimonies which are reflected in the transcript of stenographic notes are replete of
signposts indicative of their negligence in the care and management of Erlinda.
With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the
anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to properly
intubate the patient. This fact was attested to by Prof. Herminda Cruz, Dean of the Capitol
Medical Center School of Nursing and petitioner's sister-in-law, who was in the operating
room right beside the patient when the tragic event occurred. Witness Cruz testified to this
effect:
ATTY. PAJARES:
Q:

In particular, what did Dra. Perfecta Gutierrez do, if any on the patient?

A:

In particular, I could see that she was intubating the patient.

Q:
Do you know what happened to that intubation process administered by Dra.
Gutierrez?
ATTY. ALCERA:
She will be incompetent Your Honor.
COURT:
Witness may answer if she knows.
A:
As have said, I was with the patient, I was beside the stretcher holding the left hand
of the patient and all of a sudden heard some remarks coming from Dra. Perfecta Gutierrez
herself. She was saying "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan.
xxx

xxx

xxx

ATTY. PAJARES:
Q:

From whom did you hear those words "lumalaki ang tiyan"?

A:

From Dra. Perfecta Gutierrez.

xxx

xxx

xxx

Q:
After hearing the phrase "lumalaki ang tiyan," what did you notice on the person of
the patient?
A:

I notice (sic) some bluish discoloration on the nailbeds of the left hand where I was at.

Q:

Where was Dr. Orlino Ho[s]aka then at that particular time?

A:

I saw him approaching the patient during that time.

Q:

When he approached the patient, what did he do, if any?

A:

He made an order to call on the anesthesiologist in the person of Dr. Calderon.

Q:

Did Dr. Calderon, upon being called, arrive inside the operating room?

A:

Yes sir.

Q:

What did [s]he do, if any?

A:

[S]he tried to intubate the patient.

Q:

What happened to the patient?

A:
When Dr. Calderon try (sic) to intubate the patient, after a while the patient's nailbed
became bluish and I saw the patient was placed in trendelenburg position.

xxx

xxx

xxx

Q:

Do you know the reason why the patient was placed in that trendelenburg position?

A:
As far as I know, when a patient is in that position, there is a decrease of blood
supply to the brain. 46
xxx

xxx

xxx

The appellate court, however, disbelieved Dean Cruz's testimony in the trial court by
declaring that:
A perusal of the standard nursing curriculum in our country will show that intubation is not
taught as part of nursing procedures and techniques. Indeed, we take judicial notice of the
fact that nurses do not, and cannot, intubate. Even on the assumption that she is fully
capable of determining whether or not a patient is properly intubated, witness Herminda
Cruz, admittedly, did not peep into the throat of the patient. (TSN, July 25, 1991, p. 13).
More importantly, there is no evidence that she ever auscultated the patient or that she
conducted any type of examination to check if the endotracheal tube was in its proper place,
and to determine the condition of the heart, lungs, and other organs. Thus, witness Cruz's
categorical statements that appellant Dra. Gutierrez failed to intubate the appellee Erlinda
Ramos and that it was Dra. Calderon who succeeded in doing so clearly suffer from lack of
sufficient factual bases. 47
In other words, what the Court of Appeals is trying to impress is that being a nurse, and
considered a layman in the process of intubation, witness Cruz is not competent to testify on
whether or not the intubation was a success.
We do not agree with the above reasoning of the appellate court. Although witness Cruz is
not an anesthesiologist, she can very well testify upon matters on which she is capable of
observing such as, the statements and acts of the physician and surgeon, external
appearances, and manifest conditions which are observable by any one. 48 This is precisely
allowed under the doctrine of res ipsa loquitur where the testimony of expert witnesses is
not required. It is the accepted rule that expert testimony is not necessary for the proof of
negligence in non-technical matters or those of which an ordinary person may be expected
to have knowledge, or where the lack of skill or want of care is so obvious as to render
expert testimony unnecessary. 49 We take judicial notice of the fact that anesthesia
procedures have become so common, that even an ordinary person can tell if it was
administered properly. As such, it would not be too difficult to tell if the tube was properly
inserted. This kind of observation, we believe, does not require a medical degree to be
acceptable.
At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose long
experience and scholarship led to her appointment as Dean of the Capitol Medical Center
School at Nursing, was fully capable of determining whether or not the intubation was a
success. She had extensive clinical experience starting as a staff nurse in Chicago, Illinois;
staff nurse and clinical instructor in a teaching hospital, the FEU-NRMF; Dean of the Laguna
College of Nursing in San Pablo City; and then Dean of the Capitol Medical Center School of
Nursing. 50 Reviewing witness Cruz' statements, we find that the same were delivered in a
straightforward manner, with the kind of detail, clarity, consistency and spontaneity which
would have been difficult to fabricate. With her clinical background as a nurse, the Court is
satisfied that she was able to demonstrate through her testimony what truly transpired on
that fateful day.
Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez who
admitted that she experienced difficulty in inserting the tube into Erlinda's trachea, to wit:
ATTY. LIGSAY:
Q:
In this particular case, Doctora, while you were intubating at your first attempt (sic),
you did not immediately see the trachea?
DRA. GUTIERREZ:
A:

Yes sir.

Q:

Did you pull away the tube immediately?

A:

You do not pull the . . .

Q:

Did you or did you not?

A:

I did not pull the tube.

Q:

When you said "mahirap yata ito," what were you referring to?

A:

"Mahirap yata itong i-intubate," that was the patient.

Q:

So, you found some difficulty in inserting the tube?

A:

Yes, because of (sic) my first attempt, I did not see right away. 51

Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard defense that
she encountered hardship in the insertion of the tube in the trachea of Erlinda because it
was positioned more anteriorly (slightly deviated from the normal anatomy of a person) 52
making it harder to locate and, since Erlinda is obese and has a short neck and protruding
teeth, it made intubation even more difficult.
The argument does not convince us. If this was indeed observed, private respondents
adduced no evidence demonstrating that they proceeded to make a thorough assessment of
Erlinda's airway, prior to the induction of anesthesia, even if this would mean postponing the
procedure. From their testimonies, it appears that the observation was made only as an
afterthought, as a means of defense.
The pre-operative evaluation of a patient prior to the administration of anesthesia is
universally observed to lessen the possibility of anesthetic accidents. Pre-operative
evaluation and preparation for anesthesia begins when the anesthesiologist reviews the
patient's medical records and visits with the patient, traditionally, the day before elective
surgery. 53 It includes taking the patient's medical history, review of current drug therapy,
physical examination and interpretation of laboratory data. 54 The physical examination
performed by the anesthesiologist is directed primarily toward the central nervous system,
cardiovascular system, lungs and upper airway. 55 A thorough analysis of the patient's
airway normally involves investigating the following: cervical spine mobility,
temporomandibular mobility, prominent central incisors, diseased or artificial teeth, ability to
visualize uvula and the thyromental distance. 56 Thus, physical characteristics of the
patient's upper airway that could make tracheal intubation difficult should be studied. 57
Where the need arises, as when initial assessment indicates possible problems (such as the
alleged short neck and protruding teeth of Erlinda) a thorough examination of the patient's
airway would go a long way towards decreasing patient morbidity and mortality.
In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first time
on the day of the operation itself, on 17 June 1985. Before this date, no prior consultations
with, or pre-operative evaluation of Erlinda was done by her. Until the day of the operation,
respondent Dra. Gutierrez was unaware of the physiological make-up and needs of Erlinda.
She was likewise not properly informed of the possible difficulties she would face during the
administration of anesthesia to Erlinda. Respondent Dra. Gutierrez' act of seeing her patient
for the first time only an hour before the scheduled operative procedure was, therefore, an
act of exceptional negligence and professional irresponsibility. The measures cautioning
prudence and vigilance in dealing with human lives lie at the core of the physician's
centuries-old Hippocratic Oath. Her failure to follow this medical procedure is, therefore, a
clear indicia of her negligence.
Respondent Dra. Gutierrez, however, attempts to gloss over this omission by playing around
with the trial court's ignorance of clinical procedure, hoping that she could get away with it.
Respondent Dra. Gutierrez tried to muddle the difference between an elective surgery and
an emergency surgery just so her failure to perform the required pre-operative evaluation
would escape unnoticed. In her testimony she asserted:
ATTY. LIGSAY:
Q:
Would you agree, Doctor, that it is good medical practice to see the patient a day
before so you can introduce yourself to establish good doctor-patient relationship and gain
the trust and confidence of the patient?
DRA. GUTIERREZ:
A:
As I said in my previous statement, it depends on the operative procedure of the
anesthesiologist and in my case, with elective cases and normal cardio-pulmonary clearance
like that, I usually don't do it except on emergency and on cases that have an abnormalities
(sic). 58

However, the exact opposite is true. In an emergency procedure, there is hardly enough
time available for the fastidious demands of pre-operative procedure so that an
anesthesiologist is able to see the patient only a few minutes before surgery, if at all.
Elective procedures, on the other hand, are operative procedures that can wait for days,
weeks or even months. Hence, in these cases, the anesthesiologist possesses the luxury of
time to be at the patient's beside to do a proper interview and clinical evaluation. There is
ample time to explain the method of anesthesia, the drugs to be used, and their possible
hazards for purposes of informed consent. Usually, the pre-operative assessment is
conducted at least one day before the intended surgery, when the patient is relaxed and
cooperative.
Erlinda's case was elective and this was known to respondent Dra. Gutierrez. Thus, she had
all the time to make a thorough evaluation of Erlinda's case prior to the operation and
prepare her for anesthesia. However, she never saw the patient at the bedside. She herself
admitted that she had seen petitioner only in the operating room, and only on the actual
date of the cholecystectomy. She negligently failed to take advantage of this important
opportunity. As such, her attempt to exculpate herself must fail.
Having established that respondent Dra. Gutierrez failed to perform pre-operative evaluation
of the patient which, in turn, resulted to a wrongful intubation, we now determine if the
faulty intubation is truly the proximate cause of Erlinda's comatose condition.
Private respondents repeatedly hammered the view that the cerebral anoxia which led to
Erlinda's coma was due to bronchospasm 59 mediated by her allergic response to the drug,
Thiopental Sodium, introduced into her system. Towards this end, they presented Dr. Jamora,
a Fellow of the Philippine College of Physicians and Diplomate of the Philippine Specialty
Board of Internal Medicine, who advanced private respondents' theory that the oxygen
deprivation which led to anoxic encephalopathy, 60 was due to an unpredictable drug
reaction to the short-acting barbiturate. We find the theory of private respondents
unacceptable.
First of all, Dr. Jamora cannot be considered an authority in the field of anesthesiology simply
because he is not an anesthesiologist. Since Dr. Jamora is a pulmonologist, he could not
have been capable of properly enlightening the court about anesthesia practice and
procedure and their complications. Dr. Jamora is likewise not an allergologist and could not
therefore properly advance expert opinion on allergic-mediated processes. Moreover, he is
not a pharmacologist and, as such, could not have been capable, as an expert would, of
explaining to the court the pharmacologic and toxic effects of the supposed culprit,
Thiopental Sodium (Pentothal).
The inappropriateness and absurdity of accepting Dr. Jamora's testimony as an expert
witness in the anesthetic practice of Pentothal administration is further supported by his own
admission that he formulated his opinions on the drug not from the practical experience
gained by a specialist or expert in the administration and use of Sodium Pentothal on
patients, but only from reading certain references, to wit:
ATTY. LIGSAY:
Q:
In your line of expertise on pulmonology, did you have any occasion to use pentothal
as a method of management?
DR. JAMORA:
A:
We do it in conjunction with the anesthesiologist when they have to intubate our
patient.
Q:

But not in particular when you practice pulmonology?

A:

No.

Q:
In other words, your knowledge about pentothal is based only on what you have read
from books and not by your own personal application of the medicine pentothal?
A:

Based on my personal experience also on pentothal.

Q:

How many times have you used pentothal?

A:

They used it on me. I went into bronchospasm during my appendectomy.

Q:
And because they have used it on you and on account of your own personal
experience you feel that you can testify on pentothal here with medical authority?

A:

No. That is why I used references to support my claims. 61

An anesthetic accident caused by a rare drug-induced bronchospasm properly falls within

the fields of anesthesia, internal medicine-allergy, and clinical pharmacology. The resulting
anoxic encephalopathy belongs to the field of neurology. While admittedly, many
bronchospastic-mediated pulmonary diseases are within the expertise of pulmonary
medicine, Dr. Jamora's field, the anesthetic drug-induced, allergic mediated bronchospasm
alleged in this case is within the disciplines of anesthesiology, allergology and pharmacology.
On the basis of the foregoing transcript, in which the pulmonologist himself admitted that he
could not testify about the drug with medical authority, it is clear that the appellate court
erred in giving weight to Dr. Jamora's testimony as an expert in the administration of
Thiopental Sodium.
The provision in the rules of evidence 62 regarding expert witnesses states:
Sec. 49.
Opinion of expert witness. The opinion of a witness on a matter requiring
special knowledge, skill, experience or training which he is shown to possess, may be
received in evidence.
Generally, to qualify as an expert witness, one must have acquired special knowledge of the
subject matter about which he or she is to testify, either by the study of recognized
authorities on the subject or by practical experience. 63 Clearly, Dr. Jamora does not qualify
as an expert witness based on the above standard since he lacks the necessary knowledge,
skill, and training in the field of anesthesiology. Oddly, apart from submitting testimony from
a specialist in the wrong field, private respondents' intentionally avoided providing
testimony by competent and independent experts in the proper areas.
Moreover, private respondents' theory, that Thiopental Sodium may have produced Erlinda's
coma by triggering an allergic mediated response, has no support in evidence. No evidence
of stridor, skin reactions, or wheezing some of the more common accompanying signs of
an allergic reaction appears on record. No laboratory data were ever presented to the
court.
In any case, private respondents themselves admit that Thiopental induced, allergicmediated bronchospasm happens only very rarely. If courts were to accept private
respondents' hypothesis without supporting medical proof, and against the weight of
available evidence, then every anesthetic accident would be an act of God. Evidently, the
Thiopental-allergy theory vigorously asserted by private respondents was a mere
afterthought. Such an explanation was advanced in order to advanced in order to absolve
them of any and all responsibility for the patient's condition.
In view of the evidence at hand, we are inclined to believe petitioners' stand that it was the
faulty intubation which was the proximate cause of Erlinda's comatose condition.
Proximate cause has been defined as that which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces injury, and without which the result
would not have occurred. 64 An injury or damage is proximately caused by an act or a
failure to act, whenever it appears from the evidence in the case, that the act or omission
played a substantial part in bringing about or actually causing the injury or damage; and
that the injury or damage was either a direct result or a reasonably probable consequence of
the act or omission. 65 It is the dominant, moving or producing cause.
Applying the above definition in relation to the evidence at hand, faulty intubation is
undeniably the proximate cause which triggered the chain of events leading to Erlinda's
brain damage and, ultimately, her comatosed condition.
Private respondents themselves admitted in their testimony that the first intubation was a
failure. This fact was likewise observed by witness Cruz when she heard respondent Dra.
Gutierrez remarked, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki
ang tiyan." Thereafter, witness Cruz noticed abdominal distention on the body of Erlinda.
The development of abdominal distention, together with respiratory embarrassment
indicates that the endotracheal tube entered the esophagus instead of the respiratory tree.
In other words, instead of the intended endotracheal intubation what actually took place was
an esophageal intubation. During intubation, such distention indicates that air has entered
the gastrointestinal tract through the esophagus instead of the lungs through the trachea.
Entry into the esophagus would certainly cause some delay in oxygen delivery into the lungs
as the tube which carries oxygen is in the wrong place. That abdominal distention had been
observed during the first intubation suggests that the length of time utilized in inserting the
endotracheal tube (up to the time the tube was withdrawn for the second attempt) was fairly
significant. Due to the delay in the delivery of oxygen in her lungs Erlinda showed signs of

cyanosis. 66 As stated in the testimony of Dr. Hosaka, the lack of oxygen became apparent
only after he noticed that the nailbeds of Erlinda were already blue. 67 However, private
respondents contend that a second intubation was executed on Erlinda and this one was
successfully done. We do not think so. No evidence exists on record, beyond private
respondents' bare claims, which supports the contention that the second intubation was
successful. Assuming that the endotracheal tube finally found its way into the proper orifice
of the trachea, the same gave no guarantee of oxygen delivery, the hallmark of a successful
intubation. In fact, cyanosis was again observed immediately after the second intubation.
Proceeding from this event (cyanosis), it could not be claimed, as private respondents insist,
that the second intubation was accomplished. Even granting that the tube was successfully
inserted during the second attempt, it was obviously too late. As aptly explained by the trial
court, Erlinda already suffered brain damage as a result of the inadequate oxygenation of
her brain for about four to five minutes. 68
The above conclusion is not without basis. Scientific studies point out that intubation
problems are responsible for one-third (1/3) of deaths and serious injuries associated with
anesthesia. 69 Nevertheless, ninety-eight percent (98%) or the vast majority of difficult
intubations may be anticipated by performing a thorough evaluation of the patient's airway
prior to the operation. 70 As stated beforehand, respondent Dra. Gutierrez failed to observe
the proper pre-operative protocol which could have prevented this unfortunate incident. Had
appropriate diligence and reasonable care been used in the pre-operative evaluation,
respondent physician could have been much more prepared to meet the contingency
brought about by the perceived anatomic variations in the patient's neck and oral area,
defects which would have been easily overcome by a prior knowledge of those variations
together with a change in technique. 71 In other words, an experienced anesthesiologist,
adequately alerted by a thorough pre-operative evaluation, would have had little difficulty
going around the short neck and protruding teeth. 72 Having failed to observe common
medical standards in pre-operative management and intubation, respondent Dra. Gutierrez'
negligence resulted in cerebral anoxia and eventual coma of Erlinda.
We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of the
surgical team. As the so-called "captain of the ship," 73 it is the surgeon's responsibility to
see to it that those under him perform their task in the proper manner. Respondent Dr.
Hosaka's negligence can be found in his failure to exercise the proper authority (as the
"captain" of the operative team) in not determining if his anesthesiologist observed proper
anesthesia protocols. In fact, no evidence on record exists to show that respondent Dr.
Hosaka verified if respondent Dra. Gutierrez properly intubated the patient. Furthermore, it
does not escape us that respondent Dr. Hosaka had scheduled another procedure in a
different hospital at the same time as Erlinda's cholecystectomy, and was in fact over three
hours late for the latter's operation. Because of this, he had little or no time to confer with
his anesthesiologist regarding the anesthesia delivery. This indicates that he was remiss in
his professional duties towards his patient. Thus, he shares equal responsibility for the
events which resulted in Erlinda's condition.
We now discuss the responsibility of the hospital in this particular incident. The unique
practice (among private hospitals) of filling up specialist staff with attending and visiting
"consultants," 74 who are allegedly not hospital employees, presents problems in
apportioning responsibility for negligence in medical malpractice cases. However, the
difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants
and in the conduct of their work within the hospital premises. Doctors who apply for
"consultant" slots, visiting or attending, are required to submit proof of completion of
residency, their educational qualifications; generally, evidence of accreditation by the
appropriate board (diplomate), evidence of fellowship in most cases, and references. These
requirements are carefully scrutinized by members of the hospital administration or by a
review committee set up by the hospital who either accept or reject the application. 75 This
is particularly true with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally
required to attend clinico-pathological conferences, conduct bedside rounds for clerks,
interns and residents, moderate grand rounds and patient audits and perform other tasks
and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or
for the privilege of admitting patients into the hospital. In addition to these, the physician's
performance as a specialist is generally evaluated by a peer review committee on the basis
of mortality and morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly falls short of the
minimum standards acceptable to the hospital or its peer review committee, is normally
politely terminated.

In other words, private hospitals, hire, fire and exercise real control over their attending and
visiting "consultant" staff. While "consultants" are not, technically employees, a point which
respondent hospital asserts in denying all responsibility for the patient's condition, the
control exercised, the hiring, and the right to terminate consultants all fulfill the important
hallmarks of an employer-employee relationship, with the exception of the payment of
wages. In assessing whether such a relationship in fact exists, the control test is
determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of
allocating responsibility in medical negligence cases, an employer-employee relationship in
effect exists between hospitals and their attending and visiting physicians. This being the
case, the question now arises as to whether or not respondent hospital is solidarily liable
with respondent doctors for petitioner's condition. 76
The basis for holding an employer solidarily responsible for the negligence of its employee is
found in Article 2180 of the Civil Code which considers a person accountable not only for his
own acts but also for those of others based on the former's responsibility under a
relationship of patria potestas. 77 Such responsibility ceases when the persons or entity
concerned prove that they have observed the diligence of a good father of the family to
prevent damage. 78 In other words, while the burden of proving negligence rests on the
plaintiffs, once negligence is shown, the burden shifts to the respondents (parent, guardian,
teacher or employer) who should prove that they observed the diligence of a good father of
a family to prevent damage.
In the instant case, respondent hospital, apart from a general denial of its responsibility over
respondent physicians, failed to adduce evidence showing that it exercised the diligence of a
good father of a family in the hiring and supervision of the latter. It failed to adduce
evidence with regard to the degree of supervision which it exercised over its physicians. In
neglecting to offer such proof, or proof of a similar nature, respondent hospital thereby failed
to discharge its burden under the last paragraph of Article 2180. Having failed to do this,
respondent hospital is consequently solidarily responsible with its physicians for Erlinda's
condition.
Based on the foregoing, we hold that the Court of Appeals erred in accepting and relying on
the testimonies of the witnesses for the private respondents. Indeed, as shown by the above
discussions, private respondents were unable to rebut the presumption of negligence. Upon
these disquisitions we hold that private respondents are solidarily liable for damages under
Article 2176 79 of the Civil Code.
We now come to the amount of damages due petitioners. The trial court awarded a total of
P632,000.00 pesos (should be P616,000.00) in compensatory damages to the plaintiff,
"subject to its being updated" covering the period from 15 November 1985 up to 15 April
1992, based on monthly expenses for the care of the patient estimated at P8,000.00.
At current levels, the P8000/monthly amount established by the trial court at the time of its
decision would be grossly inadequate to cover the actual costs of home-based care for a
comatose individual. The calculated amount was not even arrived at by looking at the actual
cost of proper hospice care for the patient. What it reflected were the actual expenses
incurred and proved by the petitioners after they were forced to bring home the patient to
avoid mounting hospital bills.
And yet ideally, a comatose patient should remain in a hospital or be transferred to a
hospice specializing in the care of the chronically ill for the purpose of providing a proper
milieu adequate to meet minimum standards of care. In the instant case for instance, Erlinda
has to be constantly turned from side to side to prevent bedsores and hypostatic
pneumonia. Feeding is done by nasogastric tube. Food preparation should be normally made
by a dietitian to provide her with the correct daily caloric requirements and vitamin
supplements. Furthermore, she has to be seen on a regular basis by a physical therapist to
avoid muscle atrophy, and by a pulmonary therapist to prevent the accumulation of
secretions which can lead to respiratory complications.
Given these considerations, the amount of actual damages recoverable in suits arising from
negligence should at least reflect the correct minimum cost of proper care, not the cost of
the care the family is usually compelled to undertake at home to avoid bankruptcy. However,
the provisions of the Civil Code on actual or compensatory damages present us with some
difficulties.
Well-settled is the rule that actual damages which may be claimed by the plaintiff are those
suffered by him as he has duly proved. The Civil Code provides:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages.

Our rules on actual or compensatory damages generally assume that at the time of
litigation, the injury suffered as a consequence of an act of negligence has been completed
and that the cost can be liquidated. However, these provisions neglect to take into account
those situations, as in this case, where the resulting injury might be continuing and possible
future complications directly arising from the injury, while certain to occur, are difficult to
predict.
In these cases, the amount of damages which should be awarded, if they are to adequately
and correctly respond to the injury caused, should be one which compensates for pecuniary
loss incurred and proved, up to the time of trial; and one which would meet pecuniary loss
certain to be suffered but which could not, from the nature of the case, be made with
certainty. 80 In other words, temperate damages can and should be awarded on top of
actual or compensatory damages in instances where the injury is chronic and continuing.
And because of the unique nature of such cases, no incompatibility arises when both actual
and temperate damages are provided for. The reason is that these damages cover two
distinct phases.
As it would not be equitable and certainly not in the best interests of the administration of
justice for the victim in such cases to constantly come before the courts and invoke their
aid in seeking adjustments to the compensatory damages previously awarded temperate
damages are appropriate. The amount given as temperate damages, though to a certain
extent speculative, should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care for a
comatose patient who has remained in that condition for over a decade. Having premised
our award for compensatory damages on the amount provided by petitioners at the onset of
litigation, it would be now much more in step with the interests of justice if the value
awarded for temperate damages would allow petitioners to provide optimal care for their
loved one in a facility which generally specializes in such care. They should not be compelled
by dire circumstances to provide substandard care at home without the aid of professionals,
for anything less would be grossly inadequate. Under the circumstances, an award of
P1,500,000.00 in temperate damages would therefore be reasonable. 81
In Valenzuela vs. Court of Appeals, 82 this Court was confronted with a situation where the
injury suffered by the plaintiff would have led to expenses which were difficult to estimate
because while they would have been a direct result of the injury (amputation), and were
certain to be incurred by the plaintiff, they were likely to arise only in the future. We
awarded P1,000,000.00 in moral damages in that case.
Describing the nature of the injury, the Court therein stated:
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic amputation of her
left lower extremity at the distal left thigh just above the knee. Because of this, Valenzuela
will forever be deprived of the full ambulatory functions of her left extremity, even with the
use of state of the art prosthetic technology. Well beyond the period of hospitalization (which
was paid for by Li), she will be required to undergo adjustments in her prosthetic devise due
to the shrinkage of the stump from the process of healing.
These adjustments entail costs, prosthetic replacements and months of physical and
occupational rehabilitation and therapy. During the lifetime, the prosthetic devise will have
to be replaced and readjusted to changes in the size of her lower limb effected by the
biological changes of middle-age, menopause and aging. Assuming she reaches menopause,
for example, the prosthetic will have to be adjusted to respond to the changes in bone
resulting from a precipitate decrease in calcium levels observed in the bones of all postmenopausal women. In other words, the damage done to her would not only be permanent
and lasting, it would also be permanently changing and adjusting to the physiologic changes
which her body would normally undergo through the years. The replacements, changes, and
adjustments will require corresponding adjustive physical and occupational therapy. All of
these adjustments, it has been documented, are painful.
xxx

xxx

xxx

A prosthetic devise, however technologically advanced, will only allow a reasonable amount
of functional restoration of the motor functions of the lower limb. The sensory functions are
forever lost. The resultant anxiety, sleeplessness, psychological injury, mental and physical
pain are inestimable. 83
The injury suffered by Erlinda as a consequence of private respondents' negligence is
certainly much more serious than the amputation in the Valenzuela case.

Petitioner Erlinda Ramos was in her mid-forties when the incident occurred. She has been in
a comatose state for over fourteen years now. The burden of care has so far been heroically
shouldered by her husband and children, who, in the intervening years have been deprived
of the love of a wife and a mother.
Meanwhile, the actual physical, emotional and financial cost of the care of petitioner would
be virtually impossible to quantify. Even the temperate damages herein awarded would be
inadequate if petitioner's condition remains unchanged for the next ten years.
We recognized, in Valenzuela that a discussion of the victim's actual injury would not even
scratch the surface of the resulting moral damage because it would be highly speculative to
estimate the amount of emotional and moral pain, psychological damage and injury suffered
by the victim or those actually affected by the victim's condition. 84 The husband and the
children, all petitioners in this case, will have to live with the day to day uncertainty of the
patient's illness, knowing any hope of recovery is close to nil. They have fashioned their
daily lives around the nursing care of petitioner, altering their long term goals to take into
account their life with a comatose patient. They, not the respondents, are charged with the
moral responsibility of the care of the victim. The family's moral injury and suffering in this
case is clearly a real one. For the foregoing reasons, an award of P2,000,000.00 in moral
damages would be appropriate.
Finally, by way of example, exemplary damages in the amount of P100,000.00 are hereby
awarded. Considering the length and nature of the instant suit we are of the opinion that
attorney's fees valued at P100,000.00 are likewise proper.
Our courts face unique difficulty in adjudicating medical negligence cases because
physicians are not insurers of life and, they rarely set out to intentionally cause injury or
death to their patients. However, intent is immaterial in negligence cases because where
negligence exists and is proven, the same automatically gives the injured a right to
reparation for the damage caused.
Established medical procedures and practices, though in constant flux are devised for the
purpose of preventing complications. A physician's experience with his patients would
sometimes tempt him to deviate from established community practices, and he may end a
distinguished career using unorthodox methods without incident. However, when failure to
follow established procedure results in the evil precisely sought to be averted by observance
of the procedure and a nexus is made between the deviation and the injury or damage, the
physician would necessarily be called to account for it. In the case at bar, the failure to
observe pre-operative assessment protocol which would have influenced the intubation in a
salutary way was fatal to private respondents' case.
WHEREFORE, the decision and resolution of the appellate court appealed from are hereby
modified so as to award in favor of petitioners, and solidarily against private respondents the
following: 1) P1,352,000.00 as actual damages computed as of the date of promulgation of
this decision plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda
Ramos expires or miraculously survives; 2) P2,000,000.00 as moral damages, 3)
P1,500,000.00 as temperate damages; 4) P100,000.00 each as exemplary damages and
attorney's fees; and, 5) the costs of the suit.
SO ORDERED.
Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ., concur.

G.R. No. 126297

February 2, 2010
PROFESSIONAL SERVICES, INC., Petitioner,
vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 126467
NATIVIDAD [substituted by her children Marcelino Agana III, Enrique Agana, Jr.,
Emma Agana-Andaya, Jesus Agana and Raymund Agana] and ENRIQUE AGANA,
Petitioners,
vs.

THE COURT OF APPEALS and JUAN FUENTES, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 127590
MIGUEL AMPIL, Petitioner,
vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
RESOLUTION
CORONA, J.:
With prior leave of court,1 petitioner Professional Services, Inc. (PSI) filed a second motion
for reconsideration2 urging referral thereof to the Court en banc and seeking modification of
the decision dated January 31, 2007 and resolution dated February 11, 2008 which affirmed
its vicarious and direct liability for damages to respondents Enrique Agana and the heirs of
Natividad Agana (Aganas).
Manila Medical Services, Inc. (MMSI),3 Asian Hospital, Inc. (AHI),4 and Private Hospital
Association of the Philippines (PHAP)5 all sought to intervene in these cases invoking the
common ground that, unless modified, the assailed decision and resolution will jeopardize
the financial viability of private hospitals and jack up the cost of health care.
The Special First Division of the Court granted the motions for intervention of MMSI, AHI and
PHAP (hereafter intervenors),6 and referred en consulta to the Court en banc the motion for
prior leave of court and the second motion for reconsideration of PSI.7
Due to paramount public interest, the Court en banc accepted the referral8 and heard the
parties on oral arguments on one particular issue: whether a hospital may be held liable for
the negligence of physicians-consultants allowed to practice in its premises.9
To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan
Fuentes (Dr. Fuentes), was impleaded by Enrique Agana and Natividad Agana (later
substituted by her heirs), in a complaint10 for damages filed in the Regional Trial Court (RTC)
of Quezon City, Branch 96, for the injuries suffered by Natividad when Dr. Ampil and Dr.
Fuentes neglected to remove from her body two gauzes11 which were used in the surgery
they performed on her on April 11, 1984 at the Medical City General Hospital. PSI was
impleaded as owner, operator and manager of the hospital.
In a decision12 dated March 17, 1993, the RTC held PSI solidarily liable with Dr. Ampil and Dr.
Fuentes for damages.13 On appeal, the Court of Appeals (CA), absolved Dr. Fuentes but
affirmed the liability of Dr. Ampil and PSI, subject to the right of PSI to claim reimbursement
from Dr. Ampil.141avvphi1
On petition for review, this Court, in its January 31, 2007 decision, affirmed the CA
decision.15 PSI filed a motion for reconsideration16 but the Court denied it in a resolution
dated February 11, 2008.17
The Court premised the direct liability of PSI to the Aganas on the following facts and law:
First, there existed between PSI and Dr. Ampil an employer-employee relationship as
contemplated in the December 29, 1999 decision in Ramos v. Court of Appeals18 that "for
purposes of allocating responsibility in medical negligence cases, an employer-employee
relationship exists between hospitals and their consultants."19 Although the Court in Ramos
later issued a Resolution dated April 11, 200220 reversing its earlier finding on the existence
of an employment relationship between hospital and doctor, a similar reversal was not
warranted in the present case because the defense raised by PSI consisted of a mere
general denial of control or responsibility over the actions of Dr. Ampil.21
Second, by accrediting Dr. Ampil and advertising his qualifications, PSI created the public
impression that he was its agent.22 Enrique testified that it was on account of Dr. Ampil's
accreditation with PSI that he conferred with said doctor about his wife's (Natividad's)
condition.23 After his meeting with Dr. Ampil, Enrique asked Natividad to personally consult
Dr. Ampil.24 In effect, when Enrigue and Natividad engaged the services of Dr. Ampil, at the
back of their minds was that the latter was a staff member of a prestigious hospital. Thus,
under the doctrine of apparent authority applied in Nogales, et al. v. Capitol Medical Center,
et al.,25 PSI was liable for the negligence of Dr. Ampil.

Finally, as owner and operator of Medical City General Hospital, PSI was bound by its duty to
provide comprehensive medical services to Natividad Agana, to exercise reasonable care to
protect her from harm,26 to oversee or supervise all persons who practiced medicine within
its walls, and to take active steps in fixing any form of negligence committed within its
premises.27 PSI committed a serious breach of its corporate duty when it failed to conduct
an immediate investigation into the reported missing gauzes.28
PSI is now asking this Court to reconsider the foregoing rulings for these reasons:
I
The declaration in the 31 January 2007 Decision vis-a-vis the 11 February 2009 Resolution
that the ruling in Ramos vs. Court of Appeals (G.R. No. 134354, December 29, 1999) that "an
employer-employee relations exists between hospital and their consultants" stays should be
set aside for being inconsistent with or contrary to the import of the resolution granting the
hospital's motion for reconsideration in Ramos vs. Court of Appeals (G.R. No. 134354, April
11, 2002), which is applicable to PSI since the Aganas failed to prove an employer-employee
relationship between PSI and Dr. Ampil and PSI proved that it has no control over Dr. Ampil.
In fact, the trial court has found that there is no employer-employee relationship in this case
and that the doctor's are independent contractors.
II
Respondents Aganas engaged Dr. Miguel Ampil as their doctor and did not primarily and
specifically look to the Medical City Hospital (PSI) for medical care and support; otherwise
stated, respondents Aganas did not select Medical City Hospital (PSI) to provide medical care
because of any apparent authority of Dr. Miguel Ampil as its agent since the latter was
chosen primarily and specifically based on his qualifications and being friend and neighbor.
III
PSI cannot be liable under doctrine of corporate negligence since the proximate cause of
Mrs. Agana's injury was the negligence of Dr. Ampil, which is an element of the principle of
corporate negligence.29
In their respective memoranda, intervenors raise parallel arguments that the Court's ruling
on the existence of an employer-employee relationship between private hospitals and
consultants will force a drastic and complex alteration in the long-established and currently
prevailing relationships among patient, physician and hospital, with burdensome operational
and financial consequences and adverse effects on all three parties.30
The Aganas comment that the arguments of PSI need no longer be entertained for they have
all been traversed in the assailed decision and resolution.31
After gathering its thoughts on the issues, this Court holds that PSI is liable to the Aganas,
not under the principle of respondeat superior for lack of evidence of an employment
relationship with Dr. Ampil but under the principle of ostensible agency for the negligence of
Dr. Ampil and, pro hac vice, under the principle of corporate negligence for its failure to
perform its duties as a hospital.
While in theory a hospital as a juridical entity cannot practice medicine,32 in reality it
utilizes doctors, surgeons and medical practitioners in the conduct of its business of
facilitating medical and surgical treatment.33 Within that reality, three legal relationships
crisscross: (1) between the hospital and the doctor practicing within its premises; (2)
between the hospital and the patient being treated or examined within its premises and (3)
between the patient and the doctor. The exact nature of each relationship determines the
basis and extent of the liability of the hospital for the negligence of the doctor.
Where an employment relationship exists, the hospital may be held vicariously liable under
Article 217634 in relation to Article 218035 of the Civil Code or the principle of respondeat
superior. Even when no employment relationship exists but it is shown that the hospital
holds out to the patient that the doctor is its agent, the hospital may still be vicariously
liable under Article 2176 in relation to Article 143136 and Article 186937 of the Civil Code or
the principle of apparent authority.38 Moreover, regardless of its relationship with the
doctor, the hospital may be held directly liable to the patient for its own negligence or failure
to follow established standard of conduct to which it should conform as a corporation.39
This Court still employs the "control test" to determine the existence of an employeremployee relationship between hospital and doctor. In Calamba Medical Center, Inc. v.
National Labor Relations Commission, et al.40 it held:

Under the "control test", an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which the
physician is to accomplish his task.
xxx

xxx

xxx

As priorly stated, private respondents maintained specific work-schedules, as determined by

petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight
hours each week and which were strictly to be observed under pain of administrative
sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact that
in the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has
the right to wield the power. (emphasis supplied)
Even in its December 29, 1999 decision41 and April 11, 2002 resolution42 in Ramos, the
Court found the control test decisive.
In the present case, it appears to have escaped the Court's attention that both the RTC and
the CA found no employment relationship between PSI and Dr. Ampil, and that the Aganas
did not question such finding. In its March 17, 1993 decision, the RTC found "that defendant
doctors were not employees of PSI in its hospital, they being merely consultants without any
employer-employee relationship and in the capacity of independent contractors."43 The
Aganas never questioned such finding.
PSI, Dr. Ampil and Dr. Fuentes appealed44 from the RTC decision but only on the issues of
negligence, agency and corporate liability. In its September 6, 1996 decision, the CA
mistakenly referred to PSI and Dr. Ampil as employer-employee, but it was clear in its
discussion on the matter that it viewed their relationship as one of mere apparent agency.45
The Aganas appealed from the CA decision, but only to question the exoneration of Dr.
Fuentes.46 PSI also appealed from the CA decision, and it was then that the issue of
employment, though long settled, was unwittingly resurrected.
In fine, as there was no dispute over the RTC finding that PSI and Dr. Ampil had no employeremployee relationship, such finding became final and conclusive even to this Court.47 There
was no reason for PSI to have raised it as an issue in its petition. Thus, whatever discussion
on the matter that may have ensued was purely academic.
Nonetheless, to allay the anxiety of the intervenors, the Court holds that, in this particular
instance, the concurrent finding of the RTC and the CA that PSI was not the employer of Dr.
Ampil is correct. Control as a determinative factor in testing the employer-employee
relationship between doctor and hospital under which the hospital could be held vicariously
liable to a patient in medical negligence cases is a requisite fact to be established by
preponderance of evidence. Here, there was insufficient evidence that PSI exercised the
power of control or wielded such power over the means and the details of the specific
process by which Dr. Ampil applied his skills in the treatment of Natividad. Consequently, PSI
cannot be held vicariously liable for the negligence of Dr. Ampil under the principle of
respondeat superior.
There is, however, ample evidence that the hospital (PSI) held out to the patient
(Natividad)48 that the doctor (Dr. Ampil) was its agent. Present are the two factors that
determine apparent authority: first, the hospital's implied manifestation to the patient which
led the latter to conclude that the doctor was the hospital's agent; and second, the patients
reliance upon the conduct of the hospital and the doctor, consistent with ordinary care and
prudence.49
Enrique testified that on April 2, 1984, he consulted Dr. Ampil regarding the condition of his
wife; that after the meeting and as advised by Dr. Ampil, he "asked [his] wife to go to
Medical City to be examined by [Dr. Ampil]"; and that the next day, April 3, he told his
daughter to take her mother to Dr. Ampil.50 This timeline indicates that it was Enrique who
actually made the decision on whom Natividad should consult and where, and that the latter
merely acceded to it. It explains the testimony of Natividad that she consulted Dr. Ampil at
the instigation of her daughter.51
Moreover, when asked what impelled him to choose Dr. Ampil, Enrique testified:

Atty. Agcaoili
On that particular occasion, April 2, 1984, what was your reason for choosing Dr. Ampil to
contact with in connection with your wife's illness?
A. First, before that, I have known him to be a specialist on that part of the body as a
surgeon, second, I have known him to be a staff member of the Medical City which is a
prominent and known hospital. And third, because he is a neighbor, I expect more than the
usual medical service to be given to us, than his ordinary patients.52 (emphasis supplied)
Clearly, the decision made by Enrique for Natividad to consult Dr. Ampil was significantly
influenced by the impression that Dr. Ampil was a staff member of Medical City General
Hospital, and that said hospital was well known and prominent. Enrique looked upon Dr.
Ampil not as independent of but as integrally related to Medical City.
PSI's acts tended to confirm and reinforce, rather than negate, Enrique's view. It is of record
that PSI required a "consent for hospital care"53 to be signed preparatory to the surgery of
Natividad. The form reads:
Permission is hereby given to the medical, nursing and laboratory staff of the Medical City
General Hospital to perform such diagnostic procedures and to administer such medications
and treatments as may be deemed necessary or advisable by the physicians of this hospital
for and during the confinement of xxx. (emphasis supplied)
By such statement, PSI virtually reinforced the public impression that Dr. Ampil was a
physician of its hospital, rather than one independently practicing in it; that the medications
and treatments he prescribed were necessary and desirable; and that the hospital staff was
prepared to carry them out.1avvphi1
PSI pointed out in its memorandum that Dr. Ampil's hospital affiliation was not the exclusive
basis of the Aganas decision to have Natividad treated in Medical City General Hospital,
meaning that, had Dr. Ampil been affiliated with another hospital, he would still have been
chosen by the Aganas as Natividad's surgeon.54
The Court cannot speculate on what could have been behind the Aganas decision but would
rather adhere strictly to the fact that, under the circumstances at that time, Enrique decided
to consult Dr. Ampil for he believed him to be a staff member of a prominent and known
hospital. After his meeting with Dr. Ampil, Enrique advised his wife Natividad to go to the
Medical City General Hospital to be examined by said doctor, and the hospital acted in a way
that fortified Enrique's belief.
This Court must therefore maintain the ruling that PSI is vicariously liable for the negligence
of Dr. Ampil as its ostensible agent.
Moving on to the next issue, the Court notes that PSI made the following admission in its
Motion for Reconsideration:
51. Clearly, not being an agent or employee of petitioner PSI, PSI [sic] is not liable for Dr.
Ampil's acts during the operation. Considering further that Dr. Ampil was personally engaged
as a doctor by Mrs. Agana, it is incumbent upon Dr. Ampil, as "Captain of the Ship", and as
the Agana's doctor to advise her on what to do with her situation vis-a-vis the two missing
gauzes. In addition to noting the missing gauzes, regular check-ups were made and no signs
of complications were exhibited during her stay at the hospital, which could have alerted
petitioner PSI's hospital to render and provide post-operation services to and tread on Dr.
Ampil's role as the doctor of Mrs. Agana. The absence of negligence of PSI from the patient's
admission up to her discharge is borne by the finding of facts in this case. Likewise evident
therefrom is the absence of any complaint from Mrs. Agana after her discharge from the
hospital which had she brought to the hospital's attention, could have alerted petitioner PSI
to act accordingly and bring the matter to Dr. Ampil's attention. But this was not the case.
Ms. Agana complained ONLY to Drs. Ampil and Fuentes, not the hospital. How then could PSI
possibly do something to fix the negligence committed by Dr. Ampil when it was not
informed about it at all.55 (emphasis supplied)
PSI reiterated its admission when it stated that had Natividad Agana "informed the hospital
of her discomfort and pain, the hospital would have been obliged to act on it."56
The significance of the foregoing statements is critical.
First, they constitute judicial admission by PSI that while it had no power to control the
means or method by which Dr. Ampil conducted the surgery on Natividad Agana, it had the
power to review or cause the review of what may have irregularly transpired within its walls

strictly for the purpose of determining whether some form of negligence may have attended
any procedure done inside its premises, with the ultimate end of protecting its patients.
Second, it is a judicial admission that, by virtue of the nature of its business as well as its
prominence57 in the hospital industry, it assumed a duty to "tread on" the "captain of the
ship" role of any doctor rendering services within its premises for the purpose of ensuring
the safety of the patients availing themselves of its services and facilities.
Third, by such admission, PSI defined the standards of its corporate conduct under the
circumstances of this case, specifically: (a) that it had a corporate duty to Natividad even
after her operation to ensure her safety as a patient; (b) that its corporate duty was not
limited to having its nursing staff note or record the two missing gauzes and (c) that its
corporate duty extended to determining Dr. Ampil's role in it, bringing the matter to his
attention, and correcting his negligence.
And finally, by such admission, PSI barred itself from arguing in its second motion for
reconsideration that the concept of corporate responsibility was not yet in existence at the
time Natividad underwent treatment;58 and that if it had any corporate responsibility, the
same was limited to reporting the missing gauzes and did not include "taking an active step
in fixing the negligence committed."59 An admission made in the pleading cannot be
controverted by the party making such admission and is conclusive as to him, and all proofs
submitted by him contrary thereto or inconsistent therewith should be ignored, whether or
not objection is interposed by a party.60
Given the standard of conduct that PSI defined for itself, the next relevant inquiry is whether
the hospital measured up to it.
PSI excuses itself from fulfilling its corporate duty on the ground that Dr. Ampil assumed the
personal responsibility of informing Natividad about the two missing gauzes.61 Dr. Ricardo
Jocson, who was part of the group of doctors that attended to Natividad, testified that
toward the end of the surgery, their group talked about the missing gauzes but Dr. Ampil
assured them that he would personally notify the patient about it.62 Furthermore, PSI
claimed that there was no reason for it to act on the report on the two missing gauzes
because Natividad Agana showed no signs of complications. She did not even inform the
hospital about her discomfort.63
The excuses proffered by PSI are totally unacceptable.
To begin with, PSI could not simply wave off the problem and nonchalantly delegate to Dr.
Ampil the duty to review what transpired during the operation. The purpose of such review
would have been to pinpoint when, how and by whom two surgical gauzes were mislaid so
that necessary remedial measures could be taken to avert any jeopardy to Natividads
recovery. Certainly, PSI could not have expected that purpose to be achieved by merely
hoping that the person likely to have mislaid the gauzes might be able to retrace his own
steps. By its own standard of corporate conduct, PSI's duty to initiate the review was nondelegable.
While Dr. Ampil may have had the primary responsibility of notifying Natividad about the
missing gauzes, PSI imposed upon itself the separate and independent responsibility of
initiating the inquiry into the missing gauzes. The purpose of the first would have been to
apprise Natividad of what transpired during her surgery, while the purpose of the second
would have been to pinpoint any lapse in procedure that led to the gauze count discrepancy,
so as to prevent a recurrence thereof and to determine corrective measures that would
ensure the safety of Natividad. That Dr. Ampil negligently failed to notify Natividad did not
release PSI from its self-imposed separate responsibility.
Corollary to its non-delegable undertaking to review potential incidents of negligence
committed within its premises, PSI had the duty to take notice of medical records prepared
by its own staff and submitted to its custody, especially when these bear earmarks of a
surgery gone awry. Thus, the record taken during the operation of Natividad which reported
a gauze count discrepancy should have given PSI sufficient reason to initiate a review. It
should not have waited for Natividad to complain.
As it happened, PSI took no heed of the record of operation and consequently did not initiate
a review of what transpired during Natividads operation. Rather, it shirked its responsibility
and passed it on to others to Dr. Ampil whom it expected to inform Natividad, and to
Natividad herself to complain before it took any meaningful step. By its inaction, therefore,
PSI failed its own standard of hospital care. It committed corporate negligence.
It should be borne in mind that the corporate negligence ascribed to PSI is different from the
medical negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those

of the doctor-consultant practicing within its premises in relation to the patient; hence, the
failure of PSI to fulfill its duties as a hospital corporation gave rise to a direct liability to the
Aganas distinct from that of Dr. Ampil.
All this notwithstanding, we make it clear that PSIs hospital liability based on ostensible
agency and corporate negligence applies only to this case, pro hac vice. It is not intended to
set a precedent and should not serve as a basis to hold hospitals liable for every form of
negligence of their doctors-consultants under any and all circumstances. The ruling is unique
to this case, for the liability of PSI arose from an implied agency with Dr. Ampil and an
admitted corporate duty to Natividad.64
Other circumstances peculiar to this case warrant this ruling,65 not the least of which being
that the agony wrought upon the Aganas has gone on for 26 long years, with Natividad
coming to the end of her days racked in pain and agony. Such wretchedness could have
been avoided had PSI simply done what was logical: heed the report of a guaze count
discrepancy, initiate a review of what went wrong and take corrective measures to ensure
the safety of Nativad. Rather, for 26 years, PSI hemmed and hawed at every turn, disowning
any such responsibility to its patient. Meanwhile, the options left to the Aganas have all but
dwindled, for the status of Dr. Ampil can no longer be ascertained.66
Therefore, taking all the equities of this case into consideration, this Court believes P15
million would be a fair and reasonable liability of PSI, subject to 12% p.a. interest from the
finality of this resolution to full satisfaction.
WHEREFORE, the second motion for reconsideration is DENIED and the motions for
intervention are NOTED.
Professional Services, Inc. is ORDERED pro hac vice to pay Natividad (substituted by her
children Marcelino Agana III, Enrique Agana, Jr., Emma Agana-Andaya, Jesus Agana and
Raymund Agana) and Enrique Agana the total amount of P15 million, subject to 12% p.a.
interest from the finality of this resolution to full satisfaction.
No further pleadings by any party shall be entertained in this case.
Let the long-delayed entry of judgment be made in this case upon receipt by all concerned
parties of this resolution.
SO ORDERED.

G.R. No. 151309

October 15, 2008
BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President,
JOSELITO LARIO, VIVENCIO B. BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or
WILFREDO C. RIVERA, respondents.
DECISION
NACHURA, J.:
This petition seeks a review of the Decision1 of the Court of Appeals (CA) dated July 24,
2001 and Resolution dated December 20, 2001, which affirmed the finding of the National
Labor Relations Commission (NLRC) that the petitioners' transfer to another workplace did
not amount to a constructive dismissal and an unfair labor practice.
The pertinent factual antecedents are as follows:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal
office is located in Caloocan City. Petitioners Joselito Lario, Vivencio Barte, Saturnino Egera
and Simplicio Aya-ay are its regular employees, occupying the positions of helper, shipment
helper and factory workers, respectively, assigned to the Production Department. They are
members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative of
the rank-and-file employees.
Tryco and the petitioners signed separate Memorand[a] of Agreement2 (MOA), providing for
a compressed workweek schedule to be implemented in the company effective May 20,
1996. The MOA was entered into pursuant to Department of Labor and Employment
Department Order (D.O.) No. 21, Series of 1990, Guidelines on the Implementation of

Compressed Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to
Friday, shall be considered as the regular working hours, and no overtime pay shall be due
and payable to the employee for work rendered during those hours. The MOA specifically
stated that the employee waives the right to claim overtime pay for work rendered after
5:00 p.m. until 6:12 p.m. from Monday to Friday considering that the compressed workweek
schedule is adopted in lieu of the regular workweek schedule which also consists of 46
hours. However, should an employee be permitted or required to work beyond 6:12 p.m.,
such employee shall be entitled to overtime pay.
Tryco informed the Bureau of Working Conditions of the Department of Labor and
Employment of the implementation of a compressed workweek in the company.3
In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining
agreement (CBA) but failed to arrive at a new agreement.
Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal
Industry of the Department of Agriculture reminding it that its production should be
conducted in San Rafael, Bulacan, not in Caloocan City:
MR. WILFREDO C. RIVERA
President, Tryco Pharma Corporation
San Rafael, Bulacan
Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan
Dear Mr. Rivera:
This is to remind you that your License to Operate as Veterinary Drug and Product
Manufacturer is addressed at San Rafael, Bulacan, and so, therefore, your production should
be done at the above mentioned address only. Further, production of a drug includes
propagation, processing, compounding, finishing, filling, repacking, labeling, advertising,
storage, distribution or sale of the veterinary drug product. In no instance, therefore, should
any of the above be done at your business office at 117 M. Ponce St., EDSA, Caloocan City.
Please be guided accordingly.
Thank you.
Very truly yours,
(sgd.)
EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division4
Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which directed petitioner Ayaay to report to the company's plant site in Bulacan. When petitioner Aya-ay refused to obey,
Tryco reiterated the order on April 18, 1997.6 Subsequently, through a Memorandum7 dated
May 9, 1997, Tryco also directed petitioners Egera, Lario and Barte to report to the
company's plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it
constitutes unfair labor practice. In protest, BMT declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints8 for illegal dismissal,
underpayment of wages, nonpayment of overtime pay and service incentive leave, and
refusal to bargain against Tryco and its President, Wilfredo C. Rivera. In their Position Paper,9
petitioners alleged that the company acted in bad faith during the CBA negotiations because
it sent representatives without authority to bind the company, and this was the reason why
the negotiations failed. They added that the management transferred petitioners Lario,
Barte, Egera and Aya-ay from Caloocan to San Rafael, Bulacan to paralyze the union. They
prayed for the company to pay them their salaries from May 26 to 31, 1997, service
incentive leave, and overtime pay, and to implement Wage Order No. 4.
In their defense, respondents averred that the petitioners were not dismissed but they
refused to comply with the management's directive for them to report to the company's
plant in San Rafael, Bulacan. They denied the allegation that they negotiated in bad faith,
stating that, in fact, they sent the Executive Vice-President and Legal Counsel as the
company's representatives to the CBA negotiations. They claim that the failure to arrive at
an agreement was due to the stubbornness of the union panel.

Respondents further averred that, long before the start of the negotiations, the company
had already been planning to decongest the Caloocan office to comply with the government
policy to shift the concentration of manufacturing activities from the metropolis to the
countryside. The decision to transfer the company's production activities to San Rafael,
Bulacan was precipitated by the letter-reminder of the Bureau of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.10 The Labor
Arbiter held that the transfer of the petitioners would not paralyze or render the union
ineffective for the following reasons: (1) complainants are not members of the negotiating
panel; and (2) the transfer was made pursuant to the directive of the Department of
Agriculture.
The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages
was justified because the petitioners did not render work from May 26 to 31, 1997; overtime
pay is not due because of the compressed workweek agreement between the union and
management; and service incentive leave pay cannot be claimed by the complainants
because they are already enjoying vacation leave with pay for at least five days. As for the
claim of noncompliance with Wage Order No. 4, the Labor Arbiter held that the issue should
be left to the grievance machinery or voluntary arbitrator.
On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision, dismissing the case,
thus:
PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby AFFIRMED and
complainants' appeal therefrom DISMISSED for lack of merit. Complainants Joselito Lario,
Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are directed to report to work at
respondents' San Rafael Plant, Bulacan but without backwages. Respondents are directed to
accept the complainants back to work.
SO ORDERED.11
On December 22, 1999, the NLRC denied the petitioners' motion for reconsideration for lack
of merit.12
Left with no recourse, petitioners filed a petition for certiorari with the CA.
On July 24, 2001, the CA dismissed the petition for certiorari and ruled that the transfer
order was a management prerogative not amounting to a constructive dismissal or an unfair
labor practice. The CA further sustained the enforceability of the MOA, particularly the
waiver of overtime pay in light of this Court's rulings upholding a waiver of benefits in
exchange of other valuable privileges. The dispositive portion of the said CA decision reads:
WHEREFORE, the instant petition is DISMISSED. The Decision of the Labor Arbiter dated
February 27, 1998 and the Decision and Resolution of the NLRC promulgated on October 29,
1999 and December 22, 1999, respectively, in NLRC-NCR Case Nos. 08-05715-97, 08-0611597 and 08-05920-97, are AFFIRMED.
SO ORDERED.13
The CA denied the petitioners' motion for reconsideration on December 20, 2001.14
Dissatisfied, petitioners filed this petition for review raising the following issues:
-ATHE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE PATENTLY ERRONEOUS
RULING OF THE LABOR ARBITER AND THE COMMISSION THAT THERE WAS NO DISMISSAL,
MUCH LESS ILLEGAL DISMISSAL, OF THE INDIVIDUAL PETITIONERS.
-BTHE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING THAT PRIVATE
RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR PRACTICE.
-CTHE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING THAT PETITIONERS ARE
ENTITLED TO THEIR MONEY CLAIMS AND TO DAMAGES, AS WELL AS LITIGATION COSTS AND
ATTORNEY'S FEES.15
The petition has no merit.

We have no reason to deviate from the well-entrenched rule that findings of fact 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.16 This is particularly true when the findings of the Labor
Arbiter, the NLRC and the CA are in absolute agreement.17 In this case, the Labor Arbiter,
the NLRC, and the CA uniformly agreed that the petitioners were not constructively
dismissed and that the transfer orders did not amount to an unfair labor practice. But if only
to disabuse the minds of the petitioners who have persistently pursued this case on the
mistaken belief that the labor tribunals and the appellate court committed grievous errors,
this Court will go over the issues raised in this petition.
Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They
maintain that the letter of the Bureau of Animal Industry is not credible because it is not
authenticated; it is only a ploy, solicited by respondents to give them an excuse to effect a
massive transfer of employees. They point out that the Caloocan City office is still engaged
in production activities until now and respondents even hired new employees to replace
them.
We do not agree.
We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal
Industry conspired with the respondents just to effect the transfer of the petitioners. There is
not an iota of proof to support this outlandish claim. Absent any evidence, the allegation is
not only highly irresponsible but is grossly unfair to the government agency concerned. Even
as this Court has given litigants and counsel a relatively wide latitude to present arguments
in support of their cause, we will not tolerate outright misrepresentation or baseless
accusation. Let this be fair warning to counsel for the petitioners.
Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan,
regardless of whether it was made pursuant to the letter of the Bureau of Animal Industry,
was within the scope of its inherent right to control and manage its enterprise effectively.
While the law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve its purpose cannot be denied.18
This prerogative extends to the management's right to regulate, according to its own
discretion and judgment, all aspects of employment, including the freedom to transfer and
reassign employees according to the requirements of its business.19 Management's
prerogative of transferring and reassigning employees from one area of operation to another
in order to meet the requirements of the business is, therefore, generally not constitutive of
constructive dismissal.20 Thus, the consequent transfer of Tryco's personnel, assigned to the
Production Department was well within the scope of its management prerogative.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and
it does not involve a demotion in rank or diminution of salaries, benefits, and other
privileges, the employee may not complain that it amounts to a constructive dismissal.21
However, the employer has the burden of proving that the transfer of an employee is for
valid and legitimate grounds. The employer must 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.22
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or
diminution of salaries, benefits and other privileges of the petitioners. Petitioners, therefore,
anchor their objection solely on the ground that it would cause them great inconvenience
since they are all residents of Metro Manila and they would incur additional expenses to
travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to
warrant a claim of constructive dismissal.23 Objection to a transfer that is grounded solely
upon the personal inconvenience or hardship that will be caused to the employee by reason
of the transfer is not a valid reason to disobey an order of transfer.24
Incidentally, petitioners cite Escobin v. NLRC25 where the Court held that the transfer of the
employees therein was unreasonable. However, the distance of the workplace to which the
employees were being transferred can hardly compare to that of the present case. In that
case, the employees were being transferred from Basilan to Manila; hence, the Court noted
that the transfer would have entailed the separation of the employees from their families
who were residing in Basilan and accrual of additional expenses for living accommodations
in Manila. In contrast, the distance from Caloocan to San Rafael, Bulacan is not considerably

great so as to compel petitioners to seek living accommodations in the area and prevent
them from commuting to Metro Manila daily to be with their families.
Petitioners, however, went further and argued that the transfer orders amounted to unfair
labor practice because it would paralyze and render the union ineffective.
To begin with, we cannot see how the mere transfer of its members can paralyze the union.
The union was not deprived of the membership of the petitioners whose work assignments
were only transferred to another location.
More importantly, there was no showing or any indication that the transfer orders were
motivated by an intention to interfere with the petitioners' right to organize. Unfair labor
practice refers to acts that violate the workers' right to organize. With the exception of
Article 248(f) of the Labor Code of the Philippines, the prohibited acts are related to the
workers' right to self-organization and to the observance of a CBA. Without that element, the
acts, no matter how unfair, are not unfair labor practices.26
Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable as it
is contrary to law. The MOA is enforceable and binding against the petitioners. Where it is
shown that the person making the waiver did so voluntarily, with full understanding of what
he was doing, and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking.27
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the
employees will derive from the adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for establishments wishing to
save on energy costs, promote greater work efficiency and lower the rate of employee
absenteeism, among others. Workers favor the scheme considering that it would mean
savings on the increasing cost of transportation fares for at least one (1) day a week;
savings on meal and snack expenses; longer weekends, or an additional 52 off-days a year,
that can be devoted to rest, leisure, family responsibilities, studies and other personal
matters, and that it will spare them for at least another day in a week from certain
inconveniences that are the normal incidents of employment, such as commuting to and
from the workplace, travel time spent, exposure to dust and motor vehicle fumes, dressing
up for work, etc. Thus, under this scheme, the generally observed workweek of six (6) days
is shortened to five (5) days but prolonging the working hours from Monday to Friday without
the employer being obliged for pay overtime premium compensation for work performed in
excess of eight (8) hours on weekdays, in exchange for the benefits abovecited that will
accrue to the employees.
Moreover, the adoption of a compressed workweek scheme in the company will help temper
any inconvenience that will be caused the petitioners by their transfer to a farther
workplace.
Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21,
to protect the interest of the employees in the implementation of a compressed workweek
scheme:
1. The employees voluntarily agree to work more than eight (8) hours a day the total in a
week of which shall not exceed their normal weekly hours of work prior to adoption of the
compressed workweek arrangement;
2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and
fringe benefits of the employees;
3. If an employee is permitted or required to work in excess of his normal weekly hours of
work prior to the adoption of the compressed workweek scheme, all such excess hours shall
be considered overtime work and shall be compensated in accordance with the provisions of
the Labor Code or applicable Collective Bargaining Agreement (CBA);
4. Appropriate waivers with respect to overtime premium pay for work performed in excess
of eight (8) hours a day may be devised by the parties to the agreement.
5. The effectivity and implementation of the new working time arrangement shall be by
agreement of the parties.
PESALA v. NLRC,28 cited by the petitioners, is not applicable to the
case, an employment contract provided that the workday consists
employee will be paid a fixed monthly salary rate that was above the
However, unlike the present MOA which specifically states that the

present case. In that

of 12 hours and the
legal minimum wage.
employee waives his

right to claim overtime pay for work rendered beyond eight hours, the employment contract
in that case was silent on whether overtime pay was included in the payment of the fixed
monthly salary. This necessitated the interpretation by the Court as to whether the fixed
monthly rate provided under the employment contract included overtime pay. The Court
noted that if the employee is paid only the minimum wage but with overtime pay, the
amount is still greater than the fixed monthly rate as provided in the employment contract.
It, therefore, held that overtime pay was not included in the agreed fixed monthly rate.
Considering that the MOA clearly states that the employee waives the payment of overtime
pay in exchange of a five-day workweek, there is no room for interpretation and its terms
should be implemented as they are written.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24, 2001 and
Resolution dated December 20, 2001 are AFFIRMED.
SO ORDERED.
G.R. No. 167760
March 7, 2007
MANILA JOCKEY CLUB EMPLOYEES LABOR UNION-PTGWO, Petitioner,
vs.
MANILA JOCKEY CLUB, INC., Respondent.
DECISION
GARCIA, J.:
Challenged in this petition for review under Rule 45 of the Rules of Court is the decision1
dated December 17, 2004 of the Court of Appeals (CA), as reiterated in its resolution2 of
April 4, 2005, dismissing the petition for review of herein petitioner in CA-G.R. SP No. 69240,
entitled Manila Jockey Club Employees Labor Union- PTGWO v. Manila Jockey Club, Inc.
The facts:
Petitioner Manila Jockey Club Employees Labor Union-PTGWO and respondent Manila Jockey
Club, Inc., a corporation with a legislative franchise to conduct, operate and maintain horse
races, entered into a Collective Bargaining Agreement (CBA) effective January 1, 1996 to
December 31, 2000. The CBA governed the economic rights and obligations of respondents
regular monthly paid rank-and-file employees.3 In the CBA, the parties agreed to a 7-hour
work schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. on a work
week of Monday to Saturday, as contained under Section 1, Article IV,4 of the same CBA, to
wit:
Section 1. Both parties to this Agreement agree to observe the seven-hour work schedule
herewith scheduled to be from 9:00 a.m. to 12:00 noon and 1:00 p.m. to 5 p.m. on work
week of Monday to Saturday. All work performed in excess of seven (7) hours work schedule
and on days not included within the work week shall be considered overtime and paid as
such. Except those monthly compensation which includes work performed during Saturday,
Sunday, and Holiday when races are held at the Club.
xxx xxx xxx
Accordingly, overtime on an ordinary working day shall be remunerated in an amount
equivalent to the worker's regular basic wage plus twenty five percent (25%) thereof. Where
the employee is permitted or suffered to work on legally mandated holidays or on his
designated rest day which is not a legally mandated holiday, thirty percent (30%) shall be
added to his basic wage for a seven hour work; while work rendered in excess of seven
hours on legally mandated holidays and rest days not falling within the aforestated
categories day shall be additionally compensated for the overtime work equivalent to his
rate for the first seven hours on a legally mandated holiday or rest day plus thirty percent
(30%) thereof.
The CBA likewise reserved in respondent certain management prerogatives, including the
determination of the work schedule, as provided under Section 2, Article XI:
Section 2. The COMPANY shall have exclusive control in the management of the offices and
direction of the employees. This shall include, but shall not be limited to, the right to plan,
direct and control office operations, to hire, assign and transfer employees from one job to
another or from one department to another; to promote, demote, discipline, suspend,
discharge or terminate employees for proper cause and/or in accordance with law, to relieve
employees from duty because of lack of work or for other legitimate reasons; or to introduce
new or improved methods or facilities; or to change existing methods or facilities to change

the schedules of work; and to make and enforce rules and regulations to carry out the
functions of management, provided, however, that the COMPANY will not use these rights for
the purpose of discrimination against any employee because of his membership in the
UNION. Provided, further, that the prerogatives provided for under this Section shall be
subject to, and in accordance with pertinent directives, proclamations and their
implementing rules and regulations.
On April 3, 1999, respondent issued an inter-office memorandum declaring that, effective
April 20, 1999, the hours of work of regular monthly-paid employees shall be from 1:00 p.m.
to 8:00 p.m. when horse races are held, that is, every Tuesday and Thursday. The
memorandum, however, maintained the 9:00 a.m. to 5:00 p.m. schedule for non-race days.
On October 12, 1999, petitioner and respondent entered into an Amended and Supplemental
CBA retaining Section 1 of Article IV and Section 2 of Article XI, supra, and clarified that any
conflict arising therefrom shall be referred to a voluntary arbitrator for resolution.
Subsequently, before a panel of voluntary arbitrators of the National Conciliation and
Mediation Board (NCMB), petitioner questioned the above office memorandum as violative of
the prohibition against non-diminution of wages and benefits guaranteed under Section 1,
Article IV, of the CBA which specified the work schedule of respondent's employees to be
from 9:00 a.m. to 5:00 p.m. Petitioner claimed that as a result of the memorandum, the
employees are precluded from rendering their usual overtime work from 5:00 p.m. to 9:00
p.m.
The NCMBs panel of voluntary arbitrators, in a decision dated October 18, 2001, upheld
respondent's prerogative to change the work schedule of regular monthly-paid employees
under Section 2, Article XI, of the CBA. Petitioner moved for reconsideration but the panel
denied the motion.
Dissatisfied, petitioner then appealed the panels decision to the CA in CA-G.R. SP No.
69240. In the herein assailed decision of December 17, 2004, the CA upheld that of the
panel and denied petitioners subsequent motion for reconsideration via its equally
challenged resolution of April 4, 2005.
Hence, petitioners present recourse, raising the following issues:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT MJCI DID NOT RELINQUISH PART OF ITS MANAGEMENT PREROGATIVE WHEN IT
STIPULATED A WORK SCHEDULE IN THE CBA.
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT MJCI DID NOT VIOLATE THE NON-DIMINUTION PROVISION CONTAINED IN
ARTICLE 100 OF THE LABOR CODE.
We DENY.
Respondent, as employer, cites the change in the program of horse races as reason for the
adjustment of the employees work schedule. It rationalizes that when the CBA was signed,
the horse races started at 10:00 a.m. When the races were moved to 2:00 p.m., there was
no other choice for management but to change the employees' work schedule as there was
no work to be done in the morning. Evidently, the adjustment in the work schedule of the
employees is justified.
We are not unmindful that every business enterprise endeavors to increase profits. As it is,
the Court will not interfere with the business judgment of an employer in the exercise of its
prerogative to devise means to improve its operation, provided that it does not violate the
law, CBAs, and the general principles of justice and fair play. We have thus 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, layoff of workers and discipline, dismissal, and recall of
workers.5
While it is true that Section 1, Article IV of the CBA provides for a 7-hour work schedule from
9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays,
Section 2, Article XI, however, expressly reserves on respondent the prerogative to change
existing methods or facilities to change the schedules of work. As aptly ruled by the CA:

x x x. Such exact language lends no other meaning but that while respondent may have
allowed the initial determination of the work schedule to be done through collective
bargaining, it expressly retained the prerogative to change it.
Moreover, it cannot be said that in agreeing to Section 1 of Article IV, respondent already
waived that customary prerogative of management to set the work schedule. Had that been
the intention, Section 2 of Article XI would not have made any reference at all to the
retention by respondent of that prerogative. The CBA would have instead expressly
prohibited respondent from exercising it. x x x As it were, however, the CBA expressly
recognized in respondent the prerogative to change the work schedule. This effectively rules
out any notion of waiver on the part of respondent of its prerogative to change the work
schedule.
The same provision of the CBA also grants respondent the prerogative to relieve employees
from duty because of lack of work. Petitioners argument, therefore, that the change in work
schedule violates Article 100 of the Labor Code because it resulted in the diminution of the
benefit enjoyed by regular monthly-paid employees of rendering overtime work with pay, is
untenable. Section 1, Article IV, of the CBA does not guarantee overtime work for all the
employees but merely provides that "all work performed in excess of seven (7) hours work
schedule and on days not included within the work week shall be considered overtime and
paid as such.".5
While it is true that Section 1, Article IV of the CBA provides for a 7-hour work schedule from
9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from Mondays to Saturdays,
Section 2, Article XI, however, expressly reserves on respondent the prerogative to change
existing methods or facilities to change the schedules of work. As aptly ruled by the CA:
x x x. Such exact language lends no other meaning but that while respondent may have
allowed the initial determination of the work schedule to be done through collective
bargaining, it expressly retained the prerogative to change it.
Moreover, it cannot be said that in agreeing to Section 1 of Article IV, respondent already
waived that customary prerogative of management to set the work schedule. Had that been
the intention, Section 2 of Article XI would not have made any reference at all to the
retention by respondent of that prerogative. The CBA would have instead expressly
prohibited respondent from exercising it. x x x As it were, however, the CBA expressly
recognized in respondent the prerogative to change the work schedule. This effectively rules
out any notion of waiver on the part of respondent of its prerogative to change the work
schedule.
The same provision of the CBA also grants respondent the prerogative to relieve employees
from duty because of lack of work. Petitioners argument, therefore, that the change in work
schedule violates Article 100 of the Labor Code because it resulted in the diminution of the
benefit enjoyed by regular monthly-paid employees of rendering overtime work with pay, is
untenable. Section 1, Article IV, of the CBA does not guarantee overtime work for all the
employees but merely provides that "all work performed in excess of seven (7) hours work
schedule and on days not included within the work week shall be considered overtime and
paid as such."
Respondent was not obliged to allow all its employees to render overtime work everyday for
the whole year, but only those employees whose services were needed after their regular
working hours and only upon the instructions of management. The overtime pay was not
given to each employee consistently, deliberately and unconditionally, but as a
compensation for additional services rendered. Thus, overtime pay does not fall within the
definition of benefits under Article 100 of the Labor Code on prohibition against elimination
or diminution of benefits.
While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be presumed that every labor dispute will be automatically
decided in favor of labor. The partiality for labor has not in any way diminished our belief
that justice in every case is for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine.6
WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the
CA are AFFIRMED.
Costs against petitioner.
SO ORDERED.
G.R. No. 155098 September 16, 2005

CAPITOL MEDICAL CENTER, INC.

Petitioners,
vs.
DR. CESAR E. MERIS, Respondent.
DECISION

and

DR.

THELMA

NAVARETTE-CLEMENTE,

CARPIO MORALES, J.:

Subject of the present appeal is the Court of Appeals Decision1 dated February 15, 2002
reversing the NLRC Resolution2 dated January 19, 1999 and Labor Arbiter Decision3 dated
April 28, 1998 which both held that the closure of the Industrial Service Unit of the
Capitol Medical Center, Inc., resulting to the termination of the services of herein respondent
Dr. Cesar Meris as Chief thereof, was valid.
On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris
(Dr. Meris),4 one of its stockholders,5 as in charge of its Industrial Service Unit (ISU) at a
monthly salary of P10,270.00.
Until the closure of the ISU on April 30, 1992,6 Dr. Meris performed dual functions of
providing medical services to Capitols more than 500 employees and health workers as well
as to employees and workers of companies having retainer contracts with it.7
On March 31, 1992, Dr. Meris received from Capitols president and chairman of the board,
Dr. Thelma Navarette-Clemente (Dr. Clemente), a notice advising him of the managements
decision to close or abolish the ISU and the consequent termination of his services as Chief
thereof, effective April 30, 1992.8 The notice reads as follows:
March 31, 1992
Dr. Cesar E. Meris
Chief, Industrial Service Unit
Capitol Medical Center
Dear Dr. Meris:
Greetings!
Please be formally advised that the hospital management has decided to abolish CMCs
Industrial Service Unit as of April 30, 1992 in view of the almost extinct demand for direct
medical services by the private and semi-government corporations in providing health care
for their employees. Such a decision was arrived at, after considering the existing trend of
industrial companies allocating their health care requirements to Health Maintenance
Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and
designated hospitals.
As a consequence thereof, all positions in the unit will be decommissioned at the same time
industrial services [are] deactivated. In that event, you shall be entitled to return to your
private practice as a consultant staff of the institution and will become eligible to receive
your retirement benefits as a former hospital employee. Miss Jane Telan on the other hand
will be transferred back to Nursing Service for reassignment at the CSR.
We wish to thank you for your long and faithful service to the institution and hope that our
partnership in health care delivery to our people will continue throughout the future. Best
regards.
Very truly yours,
(SGD.) DR. THELMA NAVARETTE-CLEMENTE9 (Emphasis and underscoring supplied)
Dr. Meris, doubting the reason behind the managements decision to close the ISU and
believing that the ISU was not in fact abolished as it continued to operate and offer services
to the client companies with Dr. Clemente as its head and the notice of closure was a mere
ploy for his ouster in view of his refusal to retire despite Dr. Clementes previous prodding for
him to do so,10 sought his reinstatement but it was unheeded.
Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for
illegal dismissal and reinstatement with claims for backwages, moral and exemplary
damages, plus attorneys fees.11

Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was
a valid and lawful exercise of management prerogatives and there was convincing evidence
to show that ISU was being operated at a loss.12 The decretal text of the decision reads:
WHEREFORE, judgment is hereby rendered dismissing the complaint. Respondents are
however ordered to pay complainant all sums due him under the hospital retirement plan.
SO ORDERED.13 (Emphasis supplied)
On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the Labor
Arbiters decision. It held that in the exercise of Capitols management prerogatives, it had
the right to close the ISU even if it was not suffering business losses in light of Article 283 of
the Labor Code and jurisprudence.14
And the NLRC set aside the Labor Arbiters directive for the payment of retirement benefits
to Dr. Meris because he did not retire. Instead, it ordered the payment of separation pay as
provided under Article 283 as he was discharged due to closure of ISU, to be charged against
the retirement fund.15
Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for review16
which, in the interest of substantial justice, was treated as one for certiorari.17
Discrediting Capitols assertion that the ISU was operating at a loss as the evidence showed
a continuous trend of increase in its revenue for three years immediately preceding Dr.
Meriss dismissal on April 30, 1992,18 and finding that the ISUs "Analysis of Income and
Expenses" which was prepared long after Dr. Meriss dismissal, hence, not yet available, on
or before April 1992, was tainted with irregular entries, the appellate court held that
Capitols evidence failed to meet the standard of a sufficient and adequate proof of loss
necessary to justify the abolition of the ISU.19
The appellate court went on to hold that the ISU was not in fact abolished, its operation and
management having merely changed hands from Dr. Meris to Dr. Clemente; and that there
was a procedural lapse in terminating the services of Dr. Meris, no written notice to the
Department of Labor and Employment (DOLE) of the ISU abolition having been made,
thereby violating the requirement embodied in Article 283.20
The appellate court, concluding that Capitol failed to strictly comply with both procedural
and substantive due process, a condition sine qua non for the validity of a case of
termination,21 held that Dr. Meris was illegally dismissed. It accordingly reversed the NLRC
Resolution and disposed as follows:
IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC are hereby set aside,
and another one entered
1 declaring illegal the dismissal of petitioner as Chief of the Industrial Service Unit of
respondent Medical Center;
2 ordering respondents to pay petitioner
a) backwages from the date of his separation in April 1992 until this decision has attained
finality;
b) separation pay in lieu of reinstatement computed at the rate of one (1) month salary for
every year of service with a fraction of at least six (6) months being considered as one year;
c) other benefits due him or their money equivalent;
d) moral damages in the sum of P50,000.00;
e) exemplary damages in the sum of P50,000.00; and
f) attorneys fees of 10% of the total monetary award payable to petitioner.
SO ORDERED.22
Hence, the present petition for review assigning to the appellate court the following errors:
I

. . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF BOTH THE NATIONAL

LABOR RELATIONS COMMISSION (NLRC) AND THE LABOR ARBITER.
II
. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND THE
NATIONAL LABOR RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT (ISU) WAS NOT
INCURRING LOSSES AND THAT IT WAS NOT IN FACT ABOLISHED.
III
. . . IN NOT UPHOLDING PETITIONERS MANAGEMENT PREROGATIVE TO ABOLISH THE
INDUSTRIAL SERVICE UNIT (ISU).
IV
. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT BACKWAGES AS WELL AS DAMAGES
AND ATTORNEYS FEES.23
Capitol questions the appellate courts deciding of the petition of Dr. Meris on the merits,
instead of merely determining whether the administrative bodies acted with grave abuse of
discretion amounting to lack or excess of jurisdiction.
The province of a special civil action for certiorari under Rule 65, no doubt the appropriate
mode of review by the Court of Appeals of the NLRC decision,24 is limited only to correct
errors of jurisdiction or grave abuse of discretion amounting to lack or excess of
jurisdiction.25 In light of the merits of Dr. Meris claim, however, the relaxation by the
appellate court of procedural technicality to give way to a substantive determination of a
case, as this Court has held in several cases,26 to subserve the interest of justice, is in order.
Capitol argues that the factual findings of the NLRC, particularly when they coincide with
those of the Labor Arbiter, as in the present case, should be accorded respect, even
finality.27
For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded
respect, if not finality, however, the same must be sufficiently supported by evidence on
record.28 Where there is a showing that such findings are devoid of support, or that the
judgment is based on a misapprehension of facts,29 the lower tribunals factual findings will
not be upheld.
As will be reflected in the following discussions, this Court finds that the Labor Arbiter and
the NLRC overlooked some material facts decisive of the instant controversy.
Capitol further argues that the appellate courts conclusion that the ISU was not incurring
losses is arbitrary as it was based solely on the supposed increase in revenues of the unit
from 1989-1991, without taking into account the "Analysis of Income and Expenses" of ISU
from July 1, 1990 to July 1, 1991 which shows that the unit operated at a loss;30 and that
the demand for the services of ISU became almost extinct in view of the affiliation of
industrial establishments with HMOs such as Fortunecare, Maxicare, Health Maintenance,
Inc. and Philamcare and of tripartite arrangements with medical insurance carriers and
designated hospitals,31 and the trend resulted in losses in the operation of the ISU.
Besides, Capitol stresses, the health care needs of the hospital employees had been taken
over by other units without added expense to it;32 the appellate courts decision is at best
an undue interference with, and curtailment of, the exercise by an employer of its
management prerogatives;33 at the time of the closure of the ISU, Dr. Meris was already
eligible for retirement under the Capitols retirement plan; and the appellate court adverted
to the alleged lack of notice to the DOLE regarding Dr. Meriss dismissal but the latter never
raised such issue in his appeal to the NLRC or even in his petition for review before the Court
of Appeals, hence, the latter did not have authority to pass on the matter.34
Work is a necessity that has economic significance deserving legal protection. The social
justice and protection to labor provisions in the Constitution dictate so.
Employers are also accorded rights and privileges to assure their self-determination and
independence and reasonable return of capital. This mass of privileges comprises the socalled management prerogatives. Although they may be broad and unlimited in scope, the
State has the right to determine whether an employers privilege is exercised in a manner
that complies with the legal requirements and does not offend the protected rights of labor.
One of the rights accorded an employer is the right to close an establishment or
undertaking.

The right to close the operation of an establishment or undertaking is explicitly recognized

under the Labor Code as one of the authorized causes in terminating employment of
workers, the only limitation being that the closure must not be for the purpose of
circumventing the provisions on termination of employment embodied in the Labor Code.
ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected shall be entitled to a separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is higher. In case
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year. (Emphasis and underscoring supplied)
The phrase "closures or cessation of operations of establishment or undertaking" includes a
partial or total closure or cessation.35
x x x Ordinarily, the closing of a warehouse facility and the termination of the services of
employees there assigned is a matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The applicable law in such a case is
Article 283 of the Labor Code which permits closure or cessation of operation of an
establishment or undertaking not due to serious business losses or financial reverses,
which, in our reading includes both the complete cessation of operations and the cessation
of only part of a companys business. (Emphasis supplied)
And the phrase "closures or cessation x x x not due to serious business losses or financial
reverses" recognizes the right of the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business losses or financial reverses, as
long as he pays his employees their termination pay in the amount corresponding to their
length of service.36
It would indeed be stretching the intent and spirit of the law if a court were to unjustly
interfere in managements prerogative to close or cease its business operations just because
said business operation or undertaking is not suffering from any loss.37 As long as the
companys exercise of the same is in good faith to advance its interest and not for the
purpose of defeating or circumventing the rights of employees under the law or a valid
agreement, such exercise will be upheld.38
Clearly then, the right to close an establishment or undertaking may be justified on grounds
other than business losses but it cannot be an unbridled prerogative to suit the whims of the
employer.
The ultimate test of the validity of closure or cessation of establishment or undertaking is
that it must be bona fide in character.39 And the burden of proving such falls upon the
employer.40
In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.
From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was
due to the "almost extinct demand for
direct medical service by the private and semi-government corporations in providing health
care for their employees;" and that such extinct demand was brought about by "the existing
trend of industrial companies allocating their health care requirements to Health
Maintenance Organizations (HMOs) or thru a tripartite arrangement with medical insurance
carriers and designated hospitals."
The records of the case, however, fail to impress that there was indeed extinct demand for
the medical services rendered by the ISU. The ISUs Annual Report for the fiscal years 1986
to 1991, submitted by Dr. Meris to Dr. Clemente, and uncontroverted by Capitol, shows the
following:
Fiscal Year No. of Industrial No of No. of Capitol
Patients Companies Employees

1986-1987 466 11 1445

1987-1988 580 17 1707
1988-1989 676 14 1888
1989-1990 571 16 2731
1990-1991 759 18 232041
If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente
purport to convey, why the number of client companies of the ISU increased from 11 to 18
from 1986 to 1991, as well as the number of patients from both industrial corporations and
Capitol employees, they did not explain.
The "Analysis of Income and Expenses" adduced by Capitol showing that the ISU incurred
losses from July 1990 to February 1992, to wit:
July 1, 1990 to July 1, 1991 to
June 30, 1991 February 29, 1992
INCOME P16, 772.00 P35, 236.00
TOTAL EXPENSES P225, 583.70 P169,244.34
NET LOSS P(208,811.70) P(134,008.34),42
was prepared by its internal auditor Vicenta Fernandez,43 a relative of Dr. Clemente, and not
by an independent external auditor, hence, not beyond doubt. It is the financial statements
audited by independent external auditors which constitute the normal method of proof of the
profit and loss performance of a company.44
At all events, the claimed losses are contradicted by the accounting records of Capitol itself
which show that ISU had increasing revenue from 1989 to 1991.
Year In-Patient Out-Patient Total Income
1989 P230,316.38 P 79,477.50 P309,793.88
1990 P278,438.10 P124,256.65 P402,694.75
1991 P305,126.35 P152,920.15 P458,046.5045
The foregoing disquisition notwithstanding, as reflected above, the existence of business
losses is not required to justify the closure or cessation of establishment or undertaking as a
ground to terminate employment of employees. Even if the ISU were not incurring losses, its
abolition or closure could be justified on other grounds like that proffered by Capitol extinct
demand. Capitol failed, however, to present sufficient and convincing evidence to support
such claim of extinct demand. In fact, the employees of Capitol submitted a petition46 dated
April 21, 1992 addressed to Dr. Clemente opposing the abolition of the ISU.
The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on
termination of employment.
The termination of the services of Dr. Meris not having been premised on a just or authorized
cause, he is entitled to either reinstatement or separation pay if reinstatement is no longer
viable, and to backwages.
Reinstatement, however, is not feasible in case of a strained employer-employee
relationship or when the work or position formerly held by the dismissed employee no longer
exists, as in the instant case.47 Dr. Meris is thus entitled to payment of separation pay at the
rate of one (1) month salary for every year of his employment, with a fraction of at least six
(6) months being considered as one(1) year,48 and full backwages from the time of his
dismissal from April 30, 1992 until the expiration of his term as Chief of ISU or his mandatory
retirement, whichever comes first.
The award by the appellate court of moral damages,49 however, cannot be sustained, solely
upon the premise that the employer fired his employee without just cause or due process.
Additional facts must be pleaded and proven to warrant the grant of moral damages under

the Civil Code, such as that the act of dismissal was attended by bad faith or fraud, or was
oppressive to labor, or done in a manner contrary to morals, good customs, or public policy;
and of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom.50 Such circumstances, however, do not obtain in the instant case. More
specifically on bad faith, lack of it is mirrored in Dr. Clementes offer to Dr. Meris to be a
consultant of Capitol, despite the abolition of the ISU.
There being no moral damages, the award of exemplary damages does not lie.51
The award for attorneys fees, however, remains.52
WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is hereby
AFFIRMED with MODIFICATION. As modified, judgment is hereby rendered ordering Capitol
Medical Center, Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1) Month
salary for every year of his employment, with a fraction of at least Six (6) Months being
considered as One (1) Year, full backwages from the time of his dismissal from April 30, 1992
until the expiration of his term as Chief of the ISU or his mandatory retirement, whichever
comes first; other benefits due him or their money equivalent; and attorneys fees.
Costs against petitioners.
SO ORDERED.
G.R. No. 149640
October 19, 2007
SAN MIGUEL CORPORATION, ANDRES SORIANO III, FRANCISCO C. EIZMENDI, JR.,
and FAUSTINO F. GALANG, Petitioners,
vs.
NUMERIANO LAYOC, JR., CARLOS APONESTO, PAULINO BALDUGO, QUEZON BARIT,
BONIFACIO BOTOR, HERMINIO CALINA, DANILO CAMINGAL, JUAN DE MESA,
REYNOLD DESEMBRANA, BERNARDITO DEUS, EDUARDO FILLARTA, MAXIMIANO
FRANCISCO, MARIO MARILIM, DEMETRIO MATEO, FILOMENO MENDOZA, CONRADO
NIEVA, FRANCISCO PALINES, FELIPE POLINTAN, MALCOLM SATORRE, and
ALEJANDRO TORRES, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the decision2 promulgated on
29 August 2001 by the Court of Appeals (appellate court) in CA-G.R. SP No. 55838. The
appellate courts decision set aside the decision3 in NLRC NCR Case No. 00-12-08656-94
dated 23 March 1998, the decision4 dated 27 November 1998, and the resolution5 dated 31
August 1999 in NLRC CA No. 015710-98. The appellate court ordered San Miguel Corporation
(SMC), Andres Soriano III, Francisco C. Eizmendi, Jr., and Faustino F. Galang (collectively,
petitioners) to pay respondent Numeriano Layoc, Jr. (Layoc) P125,000, representing overtime
pay for services that he could have rendered from January 1993 up to his retirement on 30
June 1997, and respondents Carlos Aponesto, Paulino Baldugo, Quezon Barit, Bonifacio
Botor, Herminio Calina, Danilo Camingal, Juan de Mesa, Reynold Desembrana, Bernardito
Deus, Eduardo Fillarta, Maximiano Francisco, Mario Marilim, Demetrio Mateo, Filomeno
Mendoza, Conrado Nieva, Francisco Palines, Felipe Polintan, Malcolm Satorre, and Alejandro
Torres (collectively, respondents) P10,000 each as nominal damages.
The Facts
The appellate court stated the facts as follows:
[Respondents] were among the "Supervisory Security Guards" of the Beer Division of the
San Miguel Corporation (p. 10, Rollo), a domestic corporation duly organized and existing
under and by virtue of the laws of the Republic of the Philippines with offices at No. 40 San
Miguel Avenue, Mandaluyong City.1wphi1 They started working as guards with the
petitioner San Miguel Corporation assigned to the Beer Division on different dates until such
time that they were promoted as supervising security guards. The dates of their
employment commenced as follows (Ibid., pp. 87-89):
As guards
a.
b.

Aponesto, Carlos
Baldugo, Paulino

As supervising guards
June 1970
February 1983
November 1978
May 1984

c.
Barit, Quezon January 1969 May 1984
d.
Botor, Bonifacio
April 1980
January 1987
e.
De Mesa, JuanNovember 1977
May 1984
f.
Calina, Herminio
February 1976
May 1984
g.
Desembrana, Reynold
November 1976
April 1983
h.
Camingal, Danilo
December 1975
December 1985
i.
Deus, Bernardito
July 1976
May 1983
j.
Fillarta, Eduardo
January 1979 May 1989
k.
Francisco, MaximianoOctober 1977 May 1984
l.
Layoc, Numeriano
June 1974
January 1982
m.
Marilim, Mario December 1977
June 1984
n.
Mateo, Demetrio
November 1976
March 1984
o.
Mendoza, Filomena March 1980 May 1983
p.
Palines, Francisco
May 1979
May 1985
q.
Nieva, Conrado
January 1977 June 1987
r.
Polintan, Felipe
June 1972
May 1983
s.
Satorre, Malcolm
September 1970
May 1984
t.
Torres, Alejandro
January 1974 May 1984
As supervising security guards, the private respondents were performing the following
functions (Ibid., pp. 202-204):
1. Supervises the facility security force under his shift;
2. Inspects all company-owned firearms and ammunition and promptly submits report as
regards to discrepancy and/or state of doubtful/suspected serviceability;
3. Receives and transfers from outgoing to incoming supervising security guard all company
property, all official papers, documents and/or cases investigated including pieces of
evidence properly labeled and secured;
4. Physically checks and accounts for all company property within his area of responsibility
immediately upon assumption of duty;
5. Updates compilation of local security rules, policies and regulations and ensures that all
his guards are posted thereon;
6. Conducts regular and irregular inspection to determine his guards compliance with all
guard force instructions, corporate security standards and procedures;
7. Passes on all official communications, requests, applications of leaves, etc. and makes his
comments and/or recommendations to his superior;
8. Systematically and continuously screens the good performers from the marginal or poor
among his guards; concentrates on teaching and guiding the latter; determines further what
training and/or skills that should be learned and submits appropriate report to superior;
9. Corrects, on the spot, all deficiencies noted and institutes corrective measures within his
authority; recommends commendations for those guards who deserves [sic] recognition for
good work;
10. Conducts an investigation of all cases coming to his attention and promptly submits
appropriate report to his superiors;
11. Evaluates individual guard performance and renders efficiency reports in accordance
with standing instructions;
12. Ensures that all his guards are courteous, respectful and accommodating at all times;
13. Ensures that even those who have been found violating the facilitys policies, rules and
procedures are professionally treated with courtesy and understanding to preclude
embarrassment and humiliation;
14. Ensures the maintenance of [a] logbook of all incidents, communications, personnel and
materials movements;
15. Responds to all calls for assistance;
16. Conducts continuing physical checks of the facilitys critical and vulnerable areas;
17. Obtains critical security information and passes it on to his superiors;

18. Assesses the need for extra guard service requirements;

19. Continuously monitors the personal needs and problems of his men to his superiors;
20. Acts as Detachment Commander in the latters absence;
21. Responds to emergencies and activates the Corporate Security Alerting System as
appropriate; and
22. Performs such other duties as may be required by his Detachment Commander/Plant
Security Officer.
From the commencement of their employment, the private respondents were required to
punch their time cards for purposes of determining the time they would come in and out of
the companys work place. Corollary [sic], the private respondents were availing the benefits
for overtime, holiday and night premium duty through time card punching (Rollo, p. 89).
However, in the early 1990s, the San Miguel Corporation embarked on a Decentralization
Program aimed at enabling the separate divisions of the San Miguel Corporation to pursue a
more efficient and effective management of their respective operations (Ibid., p. 99).
As a result of the Decentralization Program, the Beer Division of the San Miguel Corporation
implemented on January 1, 1993 a "no time card policy" whereby the Supervisory I and II
composing of the supervising security guards of the Beer Division were no longer required to
punch their time cards (Ibid., p. 100). Consequently, on January 16, 1993, without prior
consultation with the private respondents, the time cards were ordered confiscated and the
latter were no longer allowed to render overtime work (Ibid., p. 117).
However, in lieu of the overtime pay and the premium pay, the personnel of the Beer
Division of the petitioner San Miguel Corporation affected by the "No Time Card Policy" were
given a 10% across-the-board increase on their basic pay while the supervisors who were
assigned in the night shift (6:00 p.m. to 6:00 a.m.) were given night shift allowance ranging
from P2,000.00 to P2,500.00 a month (Rollo, p. 12).6
On 1 December 1994, respondents filed a complaint for unfair labor practice, violation of
Article 100 of the Labor Code of the Philippines, and violation of the equal protection clause
and due process of law in relation to paragraphs 6 and 8 of Article 32 of the New Civil Code
of the Philippines. Respondents prayed for actual damages for two years (1993-1994), moral
damages, exemplary damages, and overtime, holiday, and night premium pay.
In their position paper dated 28 February 1995, respondents stated that the Beer Division of
SMC maliciously and fraudulently refused payment of their overtime, holiday, and night
premium pay from 1 to 15 January 1993 because of the "no time card policy." Moreover,
petitioners had no written authority to stop respondents from punching their time cards
because the alleged memorandum authorizing such stoppage did not include supervisory
security guards. Thus, the respondents suffered a diminution of benefits, making petitioners
liable for non-payment of overtime, holiday, and night premium pay.
In their position paper dated 23 February 1995, petitioners maintained that respondents
were supervisory security guards who were exempt from the provisions of the Labor Code on
hours of work, weekly rest periods, and rest days. The "no time card policy" did not just
prevent respondents from punching their time cards, but it also granted respondents an
across-the-board increase of 10% of basic salary and either a P2,000 or P2,500 night shift
allowance on top of their yearly merit increase. Petitioners further asserted that the "no time
card policy" was a valid exercise of management prerogative and that all supervisors in the
Beer Division were covered by the "no time card policy," which classification was distinct
and separate from the other divisions within SMC.
Respondents filed their reply dated 15 March 1995 to petitioners position paper. Petitioners,
on the other hand, filed their rejoinder dated 27 March 1995 to respondents reply.
Respondents filed a request for admission dated 2 May 1995 to which petitioners filed their
reply dated 15 May 1995.
The Ruling of the Labor Arbiter
In his decision dated 23 March 1998, Labor Arbiter Potenciano S. Canizares, Jr. (Arbiter
Canizares) stated that the principal issue is whether petitioners can, in their "no time card
policy," remove the benefits that respondents have obtained through overtime services.
Arbiter Canizares then stated that the facts and the evidence are in respondents favor.
Arbiter Canizares ruled that rendering services beyond the regular eight-hour work day has
become company practice. Moreover, petitioners failed to show good faith in the exercise of
their management prerogative in altering company practice because petitioners changed

the terms and conditions of employment from "hours of work rendered" to "result" only with
respect to respondents and not with other supervisors in other departments. The dispositive
portion of Arbiter Canizares decision reads:
WHEREFORE, the [petitioners] are hereby ordered to restore to the [respondents] their right
to earn for overtime services rendered as enjoyed by the other employees.
The [petitioners] are further ordered to indemnify the [respondents] for lost earnings after
their terms and conditions of employment have been unilaterally altered by the [petitioners],
namely in the amount of P500,000.00 each as computed by the [respondents], and the
[petitioners] failed to refute.
[Petitioners] are furthermore ordered to pay the [respondents] P100,000.00 each as moral
and exemplary damages.
All other claims are hereby dismissed for lack of evidence.
SO ORDERED.7
On 26 May 1998, petitioners filed their notice of appeal and memorandum of appeal with the
National Labor Relations Commission (NLRC).
The Ruling of the NLRC
On 27 November 1998, the NLRC affirmed with modification the ruling of Arbiter Canizares
that respondents suffered a diminution of benefits as a result of the adoption of the "no time
card policy." The NLRC cited a well-established rule that employees have a vested right over
existing benefits voluntarily granted to them by their employer, who may not unilaterally
withdraw, eliminate, or diminish such benefits. In the present case, there was a company
practice which allowed the enjoyment of substantial additional remuneration. Furthermore,
there is no rule excluding managerial employees from the coverage of the principle of nondiminution of benefits.
The NLRC ruled thus:
WHEREFORE, the decision appealed from is hereby AFFIRMED, with slight modification
deleting the award of moral and exemplary damages.
SO ORDERED.8
Both petitioners and respondents filed their respective motions for reconsideration.
Petitioners stated that the NLRC erred in sustaining the award of overtime pay despite its
finding that respondents were managerial personnel. Furthermore, there was no evidence
that respondents rendered overtime work and respondents admitted that they never or
seldom rendered overtime work. The award of overtime pay was thus contrary to the
principle of no work, no pay. For their part, respondents stated that the NLRC erred in
deleting the award of moral and exemplary damages. The implementation of the "no time
card policy," the discrimination against them vis-a-vis the supervising security officers in
other divisions of SMC, and the execution of quitclaims and releases during the pendency of
the case were all attended with bad faith, thus warranting the award of moral and exemplary
damages.
On 31 August 1999, the NLRC further modified Arbiter Canizares decision. The NLRC ruled
thus:
WHEREFORE, the November 27, 1998 Decision of this Commission is hereby REITERATED
with a slight modification to the effect that the computation of the [respondents] withdrawn
benefits at P125,000.00 yearly from 1993 should terminate in 1996 or the date of each
complainants retirement, whichever came first.
SO ORDERED.9
Petitioners then filed their petition for certiorari before the appellate court on 16 November
1999.
The Ruling of the Appellate Court
On 29 August 2001, the appellate court set aside the ruling of the NLRC and entered a new
judgment in favor of respondents. The appellate court stated that there is no legal issue that
respondents, being the supervisory security guards of the Beer Division of SMC, were
performing duties and responsibilities being performed by those who were considered as

officers or members of the managerial staff as defined under Section 2, paragraph (c), Rule
1, Book III of the Implementing Rules of the Labor Code.10 The appellate court ruled that
while the implementation of the "no time card policy" was a valid exercise of management
prerogative, the rendering of overtime work by respondents was a long-accepted practice in
SMC which could not be peremptorily withdrawn without running afoul with the principles of
justice and equity. The appellate court affirmed the deletion of the award of actual, moral,
and exemplary damages. With the exception of Layoc, respondents did not present proof of
previous earnings from overtime work and were not awarded with actual damages.
Moreover, the appellate court did not find that the implementation of the "no time card
policy" caused any physical suffering, moral shock, social humiliation, besmirched
reputation, and similar injury to respondents to justify the award of moral and exemplary
damages. Nonetheless, in the absence of competent proof on the specific amounts of actual
damages suffered by respondents, the appellate court awarded them nominal damages.
The dispositive portion of the appellate courts decision reads thus:
WHEREFORE, foregoing considered, the instant petition is hereby GIVEN DUE COURSE and is
GRANTED. The Decision issued in NLRC NCR CASE No. 00-12-08656-94 dated March 23,
1998, the Decision issued in NLRC CA No. 015710-98 dated November 27, 1998 and the
Resolution dated August 31, 1999, are hereby ANNULLED and SET ASIDE, and a new
judgment is hereby entered ordering the petitioners to pay as follows:
1) the private respondent Numeriano Layoc, Jr., the amount of One Hundred Twenty-Five
Thousand (P125,000.00) Pesos per year, representing overtime pay for overtime services
that he could have rendered computed from the date of the implementation of the "no time
card policy" or on January 1993 and up to the date of his retirement on June 30, 1997; and
2) the other private respondents, the amount of Ten Thousand (P10,000.00) Pesos each as
nominal damages.
SO ORDERED.11
Dissatisfied with the appellate courts ruling, petitioners filed a petition before this Court.
The Issues
Petitioners ask whether the circumstances in the present case constitute an exception to the
rule that supervisory employees are not entitled to overtime pay.
Respondents, on the other hand, question petitioners procedure. Respondents submit that
the Court should dismiss the present petition because petitioners did not file a motion for
reconsideration before the appellate court.
The Ruling of the Court
The petition has merit.
Requirement of Prior Filing of a
Motion for Reconsideration
It appears that respondents confuse certiorari as a mode of appeal under Rule 45 of the
1997 Rules of Civil Procedure with certiorari as an original special civil action under Rule 65
of the same Rules. In Paa v. Court of Appeals,12 we stated that:
There are, of course, settled distinctions between a petition for review as a mode of appeal
and a special civil action for certiorari, thus:
a. In appeal by certiorari, the petition is based on questions of law which the appellant
desires the appellate court to resolve. In certiorari as an original action, the petition raises
the issue as to whether the lower court acted without or in excess of jurisdiction or with
grave abuse of discretion.
b. Certiorari, as a mode of appeal, involves the review of the judgment, award or final order
on the merits. The original action for certiorari may be directed against an interlocutory
order of the court prior to appeal from the judgment or where there is no appeal or any other
plain, speedy or adequate remedy.
c. Appeal by certiorari must be made within the reglementary period for appeal. An original
action for certiorari may be filed not later than sixty (60) days from notice of the judgment,
order or resolution sought to be assailed.

d. Appeal by certiorari stays the judgment, award or order appealed from. An original action
for certiorari, unless a writ of preliminary injunction or a temporary restraining order shall
have been issued, does not stay the challenged proceeding.
e. In appeal by certiorari, the petitioner and respondent are the original parties to the action,
and the lower court or quasi-judicial agency is not to be impleaded. In certiorari as an
original action, the parties are the aggrieved party against the lower court or quasi-judicial
agency and the prevailing parties, who thereby respectively become the petitioner and
respondents.
f. In certiorari for purposes of appeal, the prior filing of a motion for reconsideration is not
required (Sec. 1, Rule 45); while in certiorari as an original action, a motion for
reconsideration is a condition precedent (Villa-Rey Transit vs. Bello, L-18957, April 23, 1963),
subject to certain exceptions.
g. In appeal by certiorari, the appellate court is in the exercise of its appellate jurisdiction
and power of review for, while in certiorari as an original action, the higher court exercises
original jurisdiction under its power of control and supervision over the proceedings of lower
courts. (Emphasis added)
Respondents contention that the present petition should be denied for failure to file a
motion for reconsideration before the appellate court is, therefore, incorrect.
Overtime Work and Overtime Pay
for Supervisory Employees
Both petitioners and respondents agree that respondents are supervising security guards
and, thus, managerial employees.1avvphi1 The dispute lies on whether respondents are
entitled to render overtime work and receive overtime pay despite the institution of the "no
time card policy" because (1) SMC previously allowed them to render overtime work and
paid them accordingly, and (2) supervising security guards in other SMC divisions are
allowed to render overtime work and receive the corresponding overtime pay.
Article 8213 of the Labor Code states that the provisions of the Labor Code on working
conditions and rest periods shall not apply to managerial employees. The other provisions in
the Title include normal hours of work (Article 83), hours worked (Article 84), meal periods
(Article 85), night shift differential (Article 86), overtime work (Article 87), undertime not
offset by overtime (Article 88), emergency overtime work (Article 89), and computation of
additional compensation (Article 90). It is thus clear that, generally, managerial employees
such as respondents are not entitled to overtime pay for services rendered in excess of eight
hours a day. Respondents failed to show that the circumstances of the present case
constitute an exception to this general rule.
First, respondents assert that Article 10014 of the Labor Code prohibits the elimination or
diminution of benefits. However, contrary to the nature of benefits, petitioners did not freely
give the payment for overtime work to respondents. Petitioners paid respondents overtime
pay as compensation for services rendered in addition to the regular work hours.
Respondents rendered overtime work only when their services were needed after their
regular working hours and only upon the instructions of their superiors. Respondents even
differ as to the amount of overtime pay received on account of the difference in the
additional hours of services rendered. To illustrate, Layocs records15 show the varying
number of hours of overtime work he rendered and the varying amounts of overtime pay he
received from the years 1978 to 1981 and from 1983 to 1994:
Number of Hours Worked Overtime Overtime Pay Received
(in Pesos)
1974 Appointment
as guard
No record
No record
1975 No record
No record
1976 No record
No record
1977 No record
No record
1978 1,424.00
5,214.88
1979 1,312.56
5,189.30
1980 1,357.50
5,155.71
1981 474.00 1,781.81
1982 Appointment as
supervising security guard No record
No record
1983 947.50 6,304.33
1984 889.00 8,937.00
1985 898.00 12,337.47
1986 1,086.60
18,085.34

1987 1,039.50
32,109.85
1988 633.00 29,126.10
1989 723.50 39,594.55
1990 376.50 21,873.33
1991 149.50 12,694.97
1992 144.00 17,403.38
1993 0.50 47.69
1994 0.00 0.00
1995 0.00 0.00
Aside from their allegations, respondents were not able to present anything to prove that
petitioners were obliged to permit respondents to render overtime work and give them the
corresponding overtime pay. Even if petitioners did not institute a "no time card policy,"
respondents could not demand overtime pay from petitioners if respondents did not render
overtime work. The requirement of rendering additional service differentiates overtime pay
from benefits such as thirteenth month pay or yearly merit increase. These benefits do not
require any additional service from their beneficiaries. Thus, overtime pay does not fall
within the definition of benefits under Article 100 of the Labor Code.16
Second, respondents allege that petitioners discriminated against them vis-a-vis supervising
security guards in other SMC divisions. Respondents state that they should be treated in the
same manner as supervising security guards in the Packaging Products Division, who are
allowed to render overtime work and thus receive overtime pay. Petitioners counter by
saying that the "no time card policy" was applied to all supervisory personnel in the Beer
Division. Petitioners further assert that there would be discrimination if respondents were
treated differently from other supervising security guards within the Beer Division or if other
supervisors in the Beer Division are allowed to render overtime work and receive overtime
pay. The Beer Division merely exercised its management prerogative of treating its
supervisors differently from its rank-and-file employees, both as to responsibilities and
compensation, as they are not similarly situated.
We agree with petitioners position that given the discretion granted to the various divisions
of SMC in the management and operation of their respective businesses and in the
formulation and implementation of policies affecting their operations and their personnel,
the "no time card policy" affecting all of the supervisory employees of the Beer Division is a
valid exercise of management prerogative. The "no time card policy" undoubtedly caused
pecuniary loss to respondents.17 However, petitioners granted to respondents and other
supervisory employees a 10% across-the-board increase in pay and night shift allowance, in
addition to their yearly merit increase in basic salary, to cushion the impact of the loss. So
long as a companys management prerogatives are exercised in good faith for the
advancement of the employers interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements,
this Court will uphold them.18
WHEREFORE, the petition is GRANTED. The Decision dated 29 August 2001 of the Court of
Appeals in CA-G.R. SP No. 55838 ordering petitioners San Miguel Corporation, Andres
Soriano III, Francisco C. Eizmendi, Jr., and Faustino F. Galang to pay Numeriano Layoc, Jr.
overtime pay and the other respondents nominal damages is SET ASIDE. The complaint of
respondents is DISMISSED.
SO ORDERED.

G.R. No. 85985

August 13, 1993
PHILIPPINE AIRLINES, INC. (PAL), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P.
ORTIGUERRA and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA),
respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.
MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of whether or not the
formulation of a Code of Discipline among employees is a shared responsibility of the
employer and the employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the employees and was immediately
implemented, and some employees were forthwith subjected to the disciplinary measures
embodied therein.
Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a
complaint before the National Labor Relations Commission (NLRC) for unfair labor practice
(Case No. NCR-7-2051-85) with the following remarks: "ULP with arbitrary implementation of
PAL's Code of Discipline without notice and prior discussion with Union by Management"
(Rollo, p. 41). In its position paper, PALEA contended that PAL, by its unilateral
implementation of the Code, was guilty of unfair labor practice, specifically Paragraphs E and
G of Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the Code
had been circulated in limited numbers; that being penal in nature the Code must conform
with the requirements of sufficient publication, and that the Code was arbitrary, oppressive,
and prejudicial to the rights of the employees. It prayed that implementation of the Code be
held in abeyance; that PAL should discuss the substance of the Code with PALEA; that
employees dismissed under the Code be reinstated and their cases subjected to further
hearing; and that PAL be declared guilty of unfair labor practice and be ordered to pay
damages (pp. 7-14, Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to
prescibe rules and regulations regarding employess' conduct in carrying out their duties and
functions, and alleging that by implementing the Code, it had not violated the collective
bargaining agreement (CBA) or any provision of the Labor Code. Assailing the complaint as
unsupported by evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA
reffered to the requirements for negotiating a CBA which was inapplicable as indeed the
current CBA had been negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code
was violated when PAL unilaterally implemented the Code, and cited provisions of Articles IV
and I of Chapter II of the Code as defective for, respectively, running counter to the
construction of penal laws and making punishable any offense within PAL's contemplation.
These provisions are the following:
Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and
regulations of the company. Every employee is bound to comply with all applicable rules,
regulations, policies, procedures and standards, including standards of quality, productivity
and behaviour, as issued and promulgated by the company through its duly authorized
officials. Any violations thereof shall be punishable with a penalty to be determined by the
gravity and/or frequency of the offense.
Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The
penalty for an offense shall be determined on the basis of his past record of offenses of any
nature or the absence thereof. The more habitual an offender has been, the greater shall be
the penalty for the latest offense. Thus, an employee may be dismissed if the number of his
past offenses warrants such penalty in the judgment of management even if each offense
considered separately may not warrant dismissal. Habitual offenders or recidivists have no
place in PAL. On the other hand, due regard shall be given to the length of time between
commission of individual offenses to determine whether the employee's conduct may
indicate occasional lapses (which may nevertheless require sterner disciplinary action) or a
pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but
they failed to appear at the scheduled date. Interpreting such failure as a waiver of the
parties' right to present evidence, the labor arbiter considered the case submitted for
decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of
PAL in adopting the Code and ruling that no unfair labor practice had been committed.
However, the arbiter held that PAL was "not totally fault free" considering that while the
issuance of rules and regulations governing the conduct of employees is a "legitimate
management prerogative" such rules and regulations must meet the test of
"reasonableness, propriety and fairness." She found Section 1 of the Code aforequoted as
"an all embracing and all encompassing provision that makes punishable any offense one
can think of in the company"; while Section 7, likewise quoted above, is "objectionable for it
violates the rule against double jeopardy thereby ushering in two or more punishment for
the same misdemeanor." (pp. 38-39, Rollo.)
The labor arbiter also found that PAL "failed to prove that the new Code was amply
circulated." Noting that PAL's assertion that it had furnished all its employees copies of the
Code is unsupported by documentary evidence, she stated that such "failure" on the part of
PAL resulted in the imposition of penalties on employees who thought all the while that the
1966 Code was still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance

of the law excuses no one from compliance . . . finds application only after it has been
conclusively shown that the law was circulated to all the parties concerned and efforts to
disseminate information regarding the new law have been exerted. (p. 39, Rollo.) She
thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:
1.

Furnish all employees with the new Code of Discipline;

2.
Reconsider the cases of employees meted with penalties under the New Code of
Discipline and remand the same for further hearing; and
3.
Discuss with PALEA the objectionable provisions specifically tackled in the body of the
decision.
All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.
SO ORDERED. (p. 40, Rollo.)
PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner
Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya
concurring, found no evidence of unfair labor practice committed by PAL and affirmed the
dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations:
Indeed, failure of management to discuss the provisions of a contemplated code of discipline
which shall govern the conduct of its employees would result in the erosion and
deterioration of an otherwise harmonious and smooth relationship between them as did
happen in the instant case. There is no dispute that adoption of rules of conduct or discipline
is a prerogative of management and is imperative and essential if an industry, has to survive
in a competitive world. But labor climate has progressed, too. In the Philippine scene, at no
time in our contemporary history is the need for a cooperative, supportive and smooth
relationship between labor and management more keenly felt if we are to survive
economically. Management can no longer exclude labor in the deliberation and adoption of
rules and regulations that will affect them.
The complainant union in this case has the right to feel isolated in the adoption of the New
Code of Discipline. The Code of Discipline involves security of tenure and loss of employment
a property right! It is time that management realizes that to attain effectiveness in its
conduct rules, there should be candidness and openness by Management and participation
by the union, representing its members. In fact, our Constitution has recognized the
principle of "shared responsibility" between employers and workers and has likewise
recognized the right of workers to participate in "policy and decision-making process
affecting their rights . . ." The latter provision was interpreted by the Constitutional
Commissioners to mean participation in "management"' (Record of the Constitutional
Commission, Vol. II).
In a sense, participation by the union in the adoption of the code if conduct could have
accelerated and enhanced their feelings of belonging and would have resulted in
cooperation rather than resistance to the Code. In fact, labor-management cooperation is
now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the appealed decision in the sense that the
New Code of Discipline should be reviewed and discussed with complainant union,
particularly the disputed provisions [.] (T)hereafter, respondent is directed to furnish each
employee with a copy of the appealed Code of Discipline. The pending cases adverted to in
the appealed decision if still in the arbitral level, should be reconsidered by the respondent
Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition for certiorari charging public respondents with grave
abuse of discretion in: (a) directing PAL "to share its management prerogative of formulating
a Code of Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said
prerogative with the union; (c) deciding beyond the issue of unfair labor practice, and (d)
requiring PAL to reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the Principal issue submitted for resolution in the instant petition is
whether management may be compelled to share with the union or its employees its
prerogative of formulating a code of discipline.

PAL asserts that when it revised its Code on March 15, 1985, there was no law which
mandated the sharing of responsibility therefor between employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending
Article 211 of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure
the participation of workers in decision and policy-making processes affecting the rights,
duties and welfare." However, even in the absence of said clear provision of law, the
exercise of management prerogatives was never considered boundless. Thus, in Cruz vs.
Medina (177 SCRA 565 [1989]) it was held that management's prerogatives must be without
abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld
the company's right to implement a new system of distributing its products, but gave the
following caveat:
So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements,
this Court will uphold them.
(at p. 28.)
All this points to the conclusion that the exercise of managerial prerogatives is not unlimited.
It is circumscribed by limitations found in law, a collective bargaining agreement, or the
general principles of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758
[1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it
must be duly established that the prerogative being invoked is clearly a managerial one.
A close scrutiny of the objectionable provisions of the Code reveals that they are not purely
business-oriented nor do they concern the management aspect of the business of the
company as in the San Miguel case. The provisions of the Code clearly have repercusions on
the employee's right to security of tenure. The implementation of the provisions may result
in the deprivation of an employee's means of livelihood which, as correctly pointed out by
the NLRC, is a property right (Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]).
In view of these aspects of the case which border on infringement of constitutional rights, we
must uphold the constitutional requirements for the protection of labor and the promotion of
social justice, for these factors, according to Justice Isagani Cruz, tilt "the scales of justice
when there is doubt, in favor of the worker" (Employees Association of the Philippine
American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of the employees. In treating the latter,
management should see to it that its employees are at least properly informed of its
decisions or modes action. PAL asserts that all its employees have been furnished copies of
the Code. Public respondents found to the contrary, which finding, to say the least is entitled
to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June
27, 1990, PALEA in effect, recognized PAL's "exclusive right to make and enforce company
rules and regulations to carry out the functions of management without having to discuss
the same with PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12,
Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the following
provision of the agreement:
The Association recognizes the right of the Company to determine matters of management
it policy and Company operations and to direct its manpower. Management of the Company
includes the right to organize, plan, direct and control operations, to hire, assign employees
to work, transfer employees from one department, to another, to promote, demote,
discipline, suspend or discharge employees for just cause; to lay-off employees for valid and
legal causes, to introduce new or improved methods or facilities or to change existing
methods or facilities and the right to make and enforce Company rules and regulations to
carry out the functions of management.
The exercise by management of its prerogative shall be done in a just reasonable, humane
and/or lawful manner.
Such provision in the collective bargaining agreement may not be interpreted as cession of
employees' rights to participate in the deliberation of matters which may affect their rights
and the formulation of policies relative thereto. And one such mater is the formulation of a
code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just
participation in the discussion of matters affecting their rights. Thus, even before Article 211
of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared
a policy of the State, "(d) To promote the enlightenment of workers concerning their rights
and obligations . . . as employees." This was, of course, amplified by Republic Act No 6715
when it decreed the "participation of workers in decision and policy making processes
affecting their rights, duties and welfare." PAL's position that it cannot be saddled with the
"obligation" of sharing management prerogatives as during the formulation of the Code,
Republic Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p.
212), cannot thus be sustained. While such "obligation" was not yet founded in law when the
Code was formulated, the attainment of a harmonious labor-management relationship and
the then already existing state policy of enlightening workers concerning their rights as
employees demand no less than the observance of transparency in managerial moves
affecting employees' rights.
Petitioner's assertion that it needed the implementation of a new Code of Discipline
considering the nature of its business cannot be overemphasized. In fact, its being a local
monopoly in the business demands the most stringent of measures to attain safe travel for
its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly
implemented in the absence of full cooperation of the employees. Such cooperation cannot
be attained if the employees are restive on account, of their being left out in the
determination of cardinal and fundamental matters affecting their employment.
WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special
pronouncement is made as to costs.
SO ORDERED.
G.R. No. 82249
February 7, 1991
WILTSHIRE FILE CO., INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T. ONG, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Jose R. Millares & Associates for private respondent.
FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File Co., Inc.
("Wiltshire") from 16 March 1981 up to 18 June 1985. As such, he received a monthly salary
of P14,375.00 excluding commissions from sales which averaged P5,000.00 a month. He
also enjoyed vacation leave with pay equivalent to P7,187,50 per year, as well as
hospitalization privileges to the extent of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a business and pleasure trip abroad,
he was informed by the President of petitioner Wiltshire that his services were being
terminated. Private respondent maintains that he tried to get an explanation from
management of his dismissal but to no avail. On 18 June 1985, when private respondent
again tried to speak with the President of Wiltshire, the company's security guard handed
him a letter which formally informed him that his services were being terminated upon the
ground of redundancy.
Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for illegal
dismissal alleging that his position could not possibly be redundant because nobody (save
himself) in the company was then performing the same duties. Private respondent further
contended that retrenching him could not prevent further losses because it was in fact
through his remarkable performance as Sales Manager that the Company had an
unprecedented increase in domestic market share the preceding year. For that
accomplishment, he continued, he was promoted to Marketing Manager and was authorized
by the President to hire four (4) Sales Executives five (5) months prior to his termination.
In its answer, petitioner company alleged that the termination of respondent's services was
a cost-cutting measure: that in December 1984, the company had experienced an unusually
low volume of orders: and that it was in fact forced to rotate its employees in order to save
the company. Despite the rotation of employees, petitioner alleged; it continued to
experience financial losses and private respondent's position, Sales Manager of the
company, became redundant.
On 2 December 1986, during the proceedings before the Labor Arbiter, petitioner, in a
letter1 addressed to the Regional Director of the then Ministry of Labor and Employment,
notified that official that effective 2 January 1987, petitioner would close its doors
permanently due to substantial business losses.

In a decision dated 11 March 1987, the Labor Arbiter declared the termination of private
respondent's services illegal and ordered petitioner to pay private respondent backwages in
the amount of P299,000.00, unpaid salaries in the amount of P22,352.11, accumulated sick
and vacation leaves in the amount of P12,543.91, hospitalization benefit package in the
amount of P10,000.00, unpaid commission in the amount of P57,500,00, moral damages in
the amount of P100,000.00 and attorney's fees in the amount of P51,639.60.
On appeal by petitioner Wiltshire, the National Labor Relations Commission ("NLRC")
affirmed in toto on 9 February 1988 the decision of the Labor Arbiter. The NLRC held that:
The termination letter clearly spelled out that the main reason in terminating the services of
complainant is REDUNDANT and not retrenchment.
The supposed duplication of work of herein complainant and Mr. Deliva, the Vice-President is
absent that would justify redundancy. . . .
On the claim for moral damages, the NLRC pointed out that the effective date of private
respondent's termination was 18 July 1985, although it was only 18 June 1985 that he
received the letter of termination, and concluded that he was not given any opportunity to
explain his position on the matter. The NLRC held that the termination was attended by
malice and bad faith on the part of petitioner, considering the manner of private respondent
was ordered by the President to pack up and remove his personal belongings from the office.
Private respondent was said to have been embarrassed before his immediate family and
other acquaintance due to his inability to explain the reasons behind the termination of his
services.
In this Petition for Certiorari, it is submitted that private respondent's dismissal was justified
and not illegal. Petitioner maintains that it had been incurring business losses beginning
1984 and that it was compelled to reduce the size of its personnel force. Petitioner also
contends that redundancy as a cause for termination does not necessarily mean duplication
of work but a "situation where the services of an employee are in excess of what is
demanded by the needs of an undertaking . . ."
Having reviewed the record of this case, the Court has satisfied itself that indeed petitioner
had serious financial difficulties before, during and after the termination of the services of
private respondent. For one thing, the audited financial statements of the petitioner for its
fiscal year ending on 31 July 1985 prepared by a firm of independent auditors, showed a net
loss in the amount of P4,431,321.00 and a total deficit or capital impairment at the end of
year of P6,776,493.00.2
In the preceding fiscal year (1983-1984), while the company showed a net after tax income
of P843,506.00, it actually suffered a deficit or capital impairment of P2,345,172.00. Most
importantly, petitioner Wiltshire finally closed its doors and terminated all operations in the
Philippines on January 1987, barely two (2) years after the termination of private
respondent's employment. We consider that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous financial distress. The Court
finds it very difficult to suppose that petitioner Wiltshire would take the final and irrevocable
step of closing down its operations in the Philippines simply for the sole purpose of easing
out a particular officer or employee, such as the private respondent.
Turning to the legality of the termination of private respondent's employment, we find merit
in petitioner's basic argument. We are unable to sustain public respondent NLRC's holding
that private respondent's dismissal was not justified by redundancy and hence illegal. In the
first place, we note that while the letter informing private respondent of the termination of
his services used the word "redundant", that letter also referred to the company having
"incur[red] financial losses which [in] fact has compelled [it] to resort to retrenchment to
prevent further losses".3
Thus, what the letter was in effect saying was that because of financial losses, retrenchment
was necessary, which retrenchment in turn resulted in the redundancy of private
respondent's position.
In the second place, we do not believe that redundancy in an employer's personnel force
necessarily or even ordinarily refers to duplication of work. That no other person was holding
the same position that private respondent held prior to the termination of his services, does
not show that his position had not become redundant. Indeed, in any well-organized
business enterprise, it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for purposes of our Labor
Code, exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. Succinctly put, a position is

redundant where it is superfluous, and superfluity of a position or positions may be the

outcome of a number of factors, such as overhiring of workers, decreased volume of
business, or dropping of a particular product line or service activity previously manufactured
or undertaken by the enterprise.4
The employer has no legal obligation to keep in its payroll more employees than are
necessarily for the operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its
volume of sales and in order to cut down its operating expenses, effected some changes in
its organization by abolishing some positions and thereby effecting a reduction of its
personnel. Thus, the position of Sales Manager was abolished and the duties previously
discharged by the Sales Manager simply added to the duties of the General Manager, to
whom the Sales Manager used to report.
It is of no legal moment that the financial troubles of the company were not of private
respondent's making. Private respondent cannot insist on the retention of his position upon
the ground that he had not contributed to the financial problems of Wiltshire. The
characterization of private respondent's services as no longer necessary or sustainable, and
therefore properly terminable, was an exercise of business judgment on the part of
petitioner company. The wisdom or soundness of such characterization or decision was not
subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and malicious action is not shown. It should
also be noted that the position held by private respondent, Sales Manager, was clearly
managerial in character. In D.M. Consunji, Inc. v. National Labor Relations Commission,5 the
Court held:
An employer has a much wider discretion in terminating the employment relationship of
managerial personnel as compared to rank and file employees. However, such prerogative of
management to dismiss or lay off an employee must be made without abuse of discretion,
for what is at stake is not only the private respondent's position but also his means of
livelihood . . . .6
The determination of the continuing necessity of a particular officer or position in a business
corporation is management's prerogative, and the courts will not interfere with the exercise
of such so long as no abuse of discretion or merely arbitrary or malicious action on the part
of management is shown.7
On the issue of moral damages, petitioner assails the finding of the NLRC that the dismissal
was done in bad faith. Petitioner argues that it had complied with the one-month notice
required by law; that there was no need for private respondent to be heard in his own
defense considering that the termination of his services was for a statutory or authorized
cause; and that whatever humiliation might have been suffered by private respondent arose
from a lawful cause and hence could not be the basis of an award of moral damages.
Termination of an employee's services because of retrenchment to prevent further losses or
redundancy, is governed by Article 283 of the Labor Code which provides as follows:
Art. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
Termination of services for any of the above described causes should be distinguished from
termination of employment by reason of some blameworthy act or omission on the part of
the employee, in which case the applicable provision is Article 282 of the Labor Code which
provides as follows:
Art. 282.
Termination by employer. An employer may terminate an employment for
any of the following causes:

(a)
Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b)

Gross and habitual neglect by the employee of his duties;

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

Other causes analogous to the foregoing.

Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to

Implement the Labor Code" read as follows:
Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him
a written notice stating the particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall be served at the worker's last
known address.
xxx

xxx

xxx

Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in
the notice of dismissal within a reasonable period from receipt of such notice. The employer
shall afford the worker ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires. (emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the notice to specify "the
particular acts or omissions constituting the ground for his dismissal", a requirement which
is obviously applicable where the ground for dismissal is the commission of some act or
omission falling within Article 282 of the Labor Code. Again, Section 5 gives the employee
the right to answer and to defend himself against "the allegations stated against him in the
notice of dismissal". It is such allegations by the employer and any counter-allegations that
the employee may wish to make that need to be heard before dismissal is effected. Thus,
Section 5 may be seen to envisage charges against an employee constituting one or more of
the just causes for dismissal listed in Article 282 of the Labor Code. Where, as in the instant
case, the ground for dismissal or termination of services does not relate to a blameworthy
act or omission on the part of the employee, there appears to us no need for an
investigation and hearing to be conducted by the employer who does not, to begin with,
allege any malfeasance or non-feasance on the part of the employee. In such case, there are
no allegations which the employee should refute and defend himself from. Thus, to require
petitioner Wiltshire to hold a hearing, at which private respondent would have had the right
to be present, on the business and financial circumstances compelling retrenchment and
resulting in redundancy, would be to impose upon the employer an unnecessary and inutile
hearing as a condition for legality of termination.
This is not to say that the employee may not contest the reality or good faith character of
the retrenchment or redundancy asserted as grounds for termination of services. The
appropriate forum for such controversion would, however, be the Department of Labor and
Employment and not an investigation or hearing to be held by the employer itself. It is
precisely for this reason that an employer seeking to terminate services of an employee or
employees because of "closure of establishment and reduction of personnel", is legally
required to give a written notice not only to the employee but also to the Department of
Labor and Employment at least one month before effectivity date of the termination. In the
instant case, private respondent did controvert before the appropriate labor authorities the
grounds for termination of services set out in petitioner's letter to him dated 17 June 1985.
We hold, therefore, that the NLRC's finding that private respondent had not been accorded
due process, is bereft of factual and legal bases. The award of moral damages that rests on
such ground must accordingly fall.
While private respondent may well have suffered personal embarrassment by reason of
termination of his services, such fact alone cannot justify the award of moral damages. Moral
damages are simply a species of damages awarded to compensate one for injuries brought
about by a wrongful act.8 As discussed above, the termination of private respondent's
services was not a wrongful act. There is in this case no clear and convincing evidence of
record showing that the termination of private respondent's services, while due to an
authorized or statutory cause, had been carried out in an arbitrary, capricious and malicious
manner, with evident personal ill-will. Embarrassment, even humiliation, that is not

proximately caused by a wrongful act does not constitute a basis for an award of moral
damages.
Private respondent is, of course, entitled to separation pay and other benefits under Act 283
of the Labor Code and petitioner's letter dated 17 June 1985.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari. The
Resolutions of the National Labor Relations Commission dated 9 February 1988 and 7 March
1988 are hereby SET ASIDE and NULLIFIED. The Temporary Restraining Order issued by this
Court on 21 March 1988 is hereby made PERMANENT. No pronouncement as to costs.
SO ORDERED.

G.R. No. 100641

June 14, 1993
FARLE P. ALMODIEL, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), RAYTHEON PHILS.,
INC., respondents.
Apolinario Lomabao, Jr. for petitioner.
Vicente A. Cruz, Jr., for private respondent.
NOCON, J.:
Subject of this petition for certiorari is the decision dated March 21, 1991 of the National
Labor Relations Commission in NLRC Case No.
00-00645-89 which reversed and set aside the Labor Arbiter's decision dated September 27,
1989 and ordered instead the payment of separation pay and financial assistance of
P100,000.00. Petitioner imputes grave abuse of discretion on the part of the Commission
and prays for the reinstatement of the Labor Arbiter's decision which declared his
termination on the ground of redundancy illegal.
Petitioner Farle P. Almodiel is a certified public accountant who was hired in October, 1987 as
Cost Accounting Manager of respondent Raytheon Philippines, Inc. through a reputable
placement firm, John Clements Consultants, Inc. with a starting monthly salary of
P18,000.00. Before said employment, he was the accounts executive of Integrated
Microelectronics, Inc. for several years. He left his lucrative job therein in view of the
promising career offered by Raytheon. He started as a probationary or temporary employee.
As Cost Accounting Manager, his major duties were: (1) plan, coordinate and carry out year
and physical inventory; (2) formulate and issue out hard copies of Standard Product costing
and other cost/pricing analysis if needed and required and (3) set up the written Cost
Accounting System for the whole company. After a few months, he was given a
regularization increase of P1,600.00 a month. Not long thereafter, his salary was increased
to P21,600.00 a month.
On August 17, 1988, he recommended and submitted a Cost Accounting/Finance
Reorganization, affecting the whole finance group but the same was disapproved by the
Controller. However, he was assured by the Controller that should his position or department
which was apparently a one-man department with no staff becomes untenable or unable to
deliver the needed service due to manpower constraint, he would be given a three (3) year
advance notice.
In the meantime, the standard cost accounting system was installed and used at the
Raytheon plants and subsidiaries worldwide. It was likewise adopted and installed in the
Philippine operations. As a consequence, the services of a Cost Accounting Manager
allegedly entailed only the submission of periodic reports that would use computerized
forms prescribed and designed by the international head office of the Raytheon Company in
California, USA.
On January 27, 1989, petitioner was summoned by his immediate boss and in the presence
of IRD Manager, Mr. Rolando Estrada, he was told of the abolition of his position on the
ground of redundancy. He pleaded with management to defer its action or transfer him to
another department, but he was told that the decision of management was final and that
the same has been conveyed to the Department of Labor and Employment. Thus, he was
constrained to file the complaint for illegal dismissal before the Arbitration Branch of the
National Capital Region, NLRC, Department of Labor and Employment.
On September 27, 1989, Labor Arbiter Daisy Cauton-Barcelona rendered a decision, the
dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered declaring that complainant's termination on the

ground of redundancy is highly irregular and without legal and factual basis, thus ordering
the respondents to reinstate complainant to his former position with full backwages without
lost of seniority rights and other benefits. Respondents are further ordered to pay
complainant P200,000.00 as moral damages and P20,000.00 as exemplary damages, plus
ten percent (10%) of the total award as attorney's fees. 1
Raytheon appealed therefrom on the grounds that the Labor Arbiter committed grave abuse
of discretion in denying its rights to dismiss petitioner on the ground of redundancy, in
relying on baseless surmises and self-serving assertions of the petitioner that its act was
tainted with malice and bad faith and in awarding moral and exemplary damages and
attorney's fees.
On March 21, 1991, the NLRC reversed the decision and directed Raytheon to pay petitioner
the total sum of P100,000.00 as separation pay/financial assistance. The dispositive portion
of which is hereby quoted as follows:
WHEREFORE, the appealed decision is hereby set aside. In its stead, Order is hereby issued
directing respondent to pay complainant the total separation pay/financial assistance of One
Hundred Thousand Pesos (P100,000.00).
SO ORDERED. 2
From this decision, petitioner filed the instant petition averring that:
The public respondent committed grave abuse of discretion amounting to (lack of) or in
excess of jurisdiction in declaring as valid and justified the termination of petitioner on the
ground of redundancy in the face of clearly established finding that petitioner's termination
was tainted with malice, bad faith and irregularity. 3
Termination of an employee's services because of redundancy is governed by Article 283 of
the Labor Code which provides as follows:
Art. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the worker and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in
cases of closure or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to at
least one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole
year.
There is no dispute that petitioner was duly advised, one (1) month before, of the
termination of his employment on the ground of redundancy in a written notice by his
immediate superior, Mrs. Magdalena B.D. Lopez sometime in the afternoon of January 27,
1989. He was issued a check for P54,863.00 representing separation pay but in view of his
refusal to acknowledge the notice and the check, they were sent to him thru registered mail
on January 30, 1989. The Department of Labor and Employment was served a copy of the
notice of termination of petitioner in accordance with the pertinent provisions of the Labor
Code and the implementing rules.
The crux of the controversy lies on whether bad faith, malice and irregularity crept in the
abolition of petitioner's position of Cost Accounting Manager on the ground of redundancy.
Petitioner claims that the functions of his position were absorbed by the Payroll/Mis/Finance
Department under the management of Danny Ang Tan Chai, a resident alien without any
working permit from the Department of Labor and Employment as required by law. Petitioner
relies on the testimony of Raytheon's witness to the effect that corollary functions
appertaining to cost accounting were dispersed to other units in the Finance Department.
And granting that his department has to be declared redundant, he claims that he should
have been the Manager of the Payroll/Mis/Finance Department which handled general
accounting, payroll and encoding. As a B. S. Accounting graduate, a CPA with M.B.A. units,
21 years of work experience, and a natural born Filipino, he claims that he is better qualified
than Ang Tan Chai, a B.S. Industrial Engineer, hired merely as a Systems Analyst
Programmer or its equivalent in early 1987, promoted as MIS Manager only during the
middle part of 1988 and a resident alien.

On the other hand, Raytheon insists that petitioner's functions as Cost Accounting Manager
had not been absorbed by Ang Tan Chai, a permanent resident born in this country. It claims
to have established below that Ang Tan Chai did not displace petitioner or absorb his
functions and duties as they were occupying entirely different and distinct positions
requiring different sets of expertise or qualifications and discharging functions altogether
different and foreign from that of petitioner's abolished position. Raytheon debunks
petitioner's reliance on the testimony of Mr. Estrada saying that the same witness testified
under oath that the functions of the Cost Accounting Manager had been completely
dispensed with and the position itself had been totally abolished.
Whether petitioner's functions as Cost Accounting Manager have been dispensed with or
merely absorbed by another is however immaterial. Thus, notwithstanding the dearth of
evidence on the said question, a resolution of this case can be arrived at without delving into
this matter. For even conceding that the functions of petitioner's position were merely
transferred, no malice or bad faith can be imputed from said act. A survey of existing case
law will disclose that in Wiltshire File Co., Inc. v. NLRC, 4 the position of Sales Manager was
abolished on the ground of redundancy as the duties previously discharged by the Sales
Manager simply added to the duties of the General Manager to whom the Sales Manager
used to report. In adjudging said termination as legal, this Court said that redundancy, for
purposes of our Labor Code, exists where the services of an employee are in excess of what
is reasonably demanded by the actual requirements of the enterprise. The characterization
of an employee's services as no longer necessary or sustainable, and therefore, properly
terminable, was an exercise of business judgment on the part of the employer. The wisdom
or soundness of such characterization or decision was not subject to discretionary review on
the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely
arbitrary and malicious action is not shown.
In the case of International Macleod, Inc. v. Intermediate Appellate Court, 5 this Court also
considered the position of Government Relations Officer to have become redundant in view
of the appointment of the International Heavy Equipment Corporation as the company's
dealer with the government. It held therein that the determination of the need for the
phasing out of a department as a labor and cost saving device because it was no longer
economical to retain said services is a management prerogative and the courts will not
interfere with the exercise thereof as long as no abuse of discretion or merely arbitrary or
malicious action on the part of management is shown.
In the same vein, this Court ruled in Bondoc v. People's Bank and Trust Co., 6 that the bank's
board of directors possessed the power to remove a department manager whose position
depended on the retention of the trust and confidence of management and whether there
was need for his services. Although some vindictive motivation might have impelled the
abolition of his position, this Court expounded that it is undeniable that the bank's board of
directors possessed the power to remove him and to determine whether the interest of the
bank justified the existence of his department.
Indeed, an employer has no legal obligation to keep more employees than are necessary for
the operation of its business. Petitioner does not dispute the fact that a cost accounting
system was installed and used at Raytheon subsidiaries and plants worldwide; and that the
functions of his position involve the submission of periodic reports utilizing computerized
forms designed and prescribed by the head office with the installation of said accounting
system. Petitioner attempts to controvert these realities by alleging that some of the
functions of his position were still indispensable and were actually dispersed to another
department. What these indispensable functions that were dispersed, he failed however, to
specify and point out. Besides, the fact that the functions of a position were simply added to
the duties of another does not affect the legitimacy of the employer's right to abolish a
position when done in the normal exercise of its prerogative to adopt sound business
practices in the management of its affairs.
Considering further that petitioner herein held a position which was definitely managerial in
character, Raytheon had a broad latitude of discretion in abolishing his position. An
employer has a much wider discretion in terminating employment relationship of managerial
personnel compared to rank and file employees. 7 The reason obviously is that officers in
such key positions perform not only functions which by nature require the employer's full
trust and confidence but also functions that spell the success or failure of an enterprise.
Likewise destitute of merit is petitioner's imputation of unlawful discrimination when
Raytheon caused corollary functions appertaining to cost accounting to be absorbed by
Danny Ang Tan Chai, a resident alien without a working permit. Article 40 of the Labor Code
which requires employment permit refers to non-resident aliens. The employment permit is
required for entry into the country for employment purposes and is issued after
determination of the non-availability of a person in the Philippines who is competent, able

and willing at the time of application to perform the services for which the alien is desired.
Since Ang Tan Chai is a resident alien, he does not fall within the ambit of the provision.
Petitioner also assails Raytheon's choice of Ang Tan Chai to head the Payroll/Mis/Finance
Department, claiming that he is better qualified for the position. It should be noted,
however, that Ang Tan Chai was promoted to the position during the middle part of 1988 or
before the abolition of petitioner's position in early 1989. Besides the fact that Ang Tan
Chai's promotion thereto is a settled matter, it has been consistently held that an objection
founded on the ground that one has better credentials over the appointee is frowned upon
so long as the latter possesses the minimum qualifications for the position. In the case at
bar, since petitioner does not allege that Ang Tan Chai does not qualify for the position, the
Court cannot substitute its discretion and judgment for that which is clearly and exclusively
management prerogative. To do so would take away from the employer what rightly belongs
to him as aptly explained in National Federation of Labor Unions v. NLRC: 8
It is a well-settled rule that labor laws do not authorize interference with the employer's
judgment in the conduct of his business. The determination of the qualification and fitness of
workers for hiring and firing, promotion or reassignment are exclusive prerogatives of
management. The Labor Code and its implementing Rules do not vest in the Labor Arbiters
nor in the different Divisions of the NLRC (nor in the courts) managerial authority. The
employer is free to determine, using his own discretion and business judgment, all elements
of employment, "from hiring to firing" except in cases of unlawful discrimination or those
which may be provided by law. There is none in the instant case.
Finding no grave abuse of discretion on the part of the National Labor Relations Commission
in reversing and annulling the decision of the Labor Arbiter and that on the contrary, the
termination of petitioner's employment was anchored on a valid and authorized cause under
Article 283 of the Labor Code, the instant petition for certiorari must fail.
SO ORDERED.
G.R. No. 76645
July 23, 1991
PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner,
vs.
ALICIA LAPLANA, Hon. RICARDO ENCARNACION, and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
D.P. Mercado & Associates for petitioner.
NARVASA, J.:p
Alicia Laplana was the cashier of the Baguio City Branch Office of the Philippine Telegraph
and Telephone Corporation (hereafter, simply PT & T). Sometime in March 1984, PT & T's
treasurer, Mrs. Alicia A. Arogo, directed Laplana to transfer to the company's branch office at
Laoag City. Laplana refused the reassignment and proposed instead that qualified clerks in
the Baguio Branch be trained for the purpose. She set out her reasons therefor in her letter
to Mrs. Arogo dated March 27, 1984, viz.:
1.
I have established Baguio City as my permanent residence. Working in Laoag will
involve additional expenses like for my board and lodgingly, fare, and other miscellaneous
expenses. My salary alone will not be enough there will be no savings and my family will
spend more on account of my transfer.
2.
I will be away from my family. A far assignment would be a big sacrifice on my part
keeping me away from my husband and family which might affect my efficiency.
3.
Since I have been with PT & T for more than six years already, I have learned to work
with my co-employees here more effectively. Working in another place with entirely different
environment will require long adjustment period, thereby affecting performance of my job.
On April 12, 1984, Mrs. Arogo reiterated her directive for Laplana's transfer to the Laoag
Branch, this time in the form of a written Memorandum, informing Laplana that "effective
April 16, 1984, you will be reassigned to Laoag branch assuming the same position of branch
cashier," and ordering her "to turn over your accountabilities such as PCF, undeposited
collections, used and unused official receipts, other accountable forms and files to Rose
Caysido who will be in charge of cashiering in Baguio."
Apparently Laplana was not allowed to resume her work as Cashier of the Baguio Branch
when April 16, 1984 came. She thereupon wrote again to Mrs. Arogo advising that the
directed transfer was unacceptable, reiterating the reasons already given by her in her first

letter dated March 27, 1984. On April 30, 1984, Laplana received a telegram from Mrs. Arogo
reading as follows:
PLEASE REPORT TO MANILA ON MAY 2, 1984 FOR NEW JOB ASSIGNMENT
IF YOU DON'T REPORT ON MAY 2, 1984, WE WILL CONSIDER THIS AS ABANDONMENT OF
YOUR JOB AND THIS MIGHT CONSTRAIN US TO IMPOSE DISCIPLINARY ACTION AGAINST YOU
YOU CAN GET YOUR CASH ADVANCE FOR TRANSPORTATION PETITION FROM MRS. BAUTISTA
TODAY.
On May 8, 1984, Laplana in turn sent a telex message to Mrs. Arogo which reads as follows:
I LOVE WORKING FOR OUR COMPANY HOWEVER I AM SORRY I CANNOT ACCEPT YOUR JOB
OFFER IN MANIIA THANK YOU AND RETRENCH ME INSTEAD. MY BEST REGARDS.
Thereafter, Laplana sent a letter to Mrs. Arogo on May 15, 1984, expatiating on her telex
message and reiterating her request to be retrenched, as follows:
Dear Mrs. Arogo:
Thank you for the job in Manila. However, I cannot accept the said offer because I have
established Baguio City as my permanent residence. Considering the high cost of living in
Manila it will surely involve additional expenses on my part. My salary alone will not be
enough to sustain my expenses. Furthermore, a far assignment will be a big sacrifice on my
part keeping me away from my husband which might affect my health due to an entirely
new environment and climate, thereby affecting my efficiency.
In view of the above reasons, I hereby request management to retrench me.
xxx

xxx

xxx

Termination of Laplana's employment on account of retrenchment thereupon followed. On

May 19, 1984, PT & T issued an "Employees's Service Report" which contained the following
remarks regarding Laplana: "Services terminated due to retrenchment with corresponding
termination pay effective May 16, 1984. " And on June 30, 1984, Mrs. Arogo sent a
Memorandum to the company's Baguio Branch Manager embodying the computation of the
separation and 13th month pay due to Laplana, together with a check for the amount
thereof, P2,512.50 and a quitclaim deed, and instructing said manager to "have the
quitclaim signed by Alicia Laplana before releasing the check and return all copies of said
form . . . immediately." On July 4, 1984, Laplana signed the quitclaim and received the check
representing her 13th month and separation pay.
On October 9, 1984, Laplana filed with the Labor Arbiters' Office at Baguio City, thru the
CLAO, a complaint against PT & T its "Baguio Northwestern Luzon Branch, Baguio City," and
Paraluman Bautista, Area Manager. In her complaint, she set forth substantially the facts just
narrated, and alleged, as right of action, that "when she insisted on her right of refusing to
be transferred, the Defendants made good its warning by terminating her services on May
16, 1984 on alleged ground of "retrenchment," although the truth is, she was forced to be
terminated and that there was no ground at all for the retrenchment;" that the company's
"act of transferring is not only without any valid ground but also arbitrary and without any
purpose but to harass and force . . . (her) to eventually resign."
In answer, the defendants alleged that
1)
Laplana "was being transferred to Laoag City because of increase in sales due to the
additional installations of vodex line;"
2)
in connection with her transfer, Laplana had been informed "that she would be given
ten (10) days. relocation allowance and transportation expense from Baguio to Laoag City;"
3)
the company "was exercising management prerogatives in transferring complainant .
. . and there is no showing that this exercise was arbitrarily and whimsically done;"
4)
Laplana's services were terminated on her explicit declaration that "she was willing to
be retrenched rather than be assigned to Laoag City or Manila;"
5)
in any event, the company had been actually suffering losses; in fact, in June, 1984,
several employees "were retrenched because of losses incurred due to rising costs in wages,
rentals, production supplies and other operational costs."

Upon the issues thus raised, judgment was rendered on March 28, 1985 by the Labor Arbiter
in Laplana's favor. 1 The Arbiter's verdict was made to rest essentially on the following
pronouncements (made avowedly in reliance on the doctrine laid down by this Court in
Helmut Dosch v. NLRC and Northwest Airlines, Inc., G.R. No. 51182, July 5, 1983 2), to wit:
Transferring an employee from one place to another is not by itself unlawful. It is within the
inherent right of an employer to transfer or assign an employee in the pursuit of its
legitimate business interests. However, this right is not absolute.
Transfer becomes unlawful where it is motivated by discrimination or in bad faith, or is
effected as a form of punishment or demonition without sufficient cause.
The transfer of the complainant from Baguio City to Laoag City or to Manila is patently a
demotion and a form of punishment without just cause and would cause untold suffering on
the part of the complainant. . . .
With these premises in mind, the Arbiter ruled "that the complainant was illegally
dismissed . . . (and her) acceptance of separation pay . . . cannot cure the illegality of her
dismissed because it was forced upon her she was compelled to accept the lesser evil,"
and that there was "no evidence to show that the complainant was retrenched to prevent
losses," but that on the contrary, "it is continuously expanding and improving its facilities,
and hiring new employees." Accordingly, he ordered
1)
PT & T "to reinstate immediately the complainant, Alicia R. Laplana, to her former
position or equivalent position without loss of seniority rights and benefits earned with full
backwages and benefits less P2,512.50, the amount she received as separation, from the
time her compensation was suspended until reinstated;"
2)

the dismissal of the claim for moral and exemplary damages for lack of merit; and

3)

the dismissal of the case against Mrs. Paraluman Bautista also for lack of merit.

The National Labor Relations Commission affirmed the Arbiter's judgment and dismissed the
respondents' appeal, by Resolution dated August 5, 1986. 3
There can be no quarrel with the Arbiter's formulation of the general principle governing an
employer's prerogative to transfer his employees from place to place or from one position to
another. The Arbiter acknowledges "the inherent right of an employer to transfer or assign
an employee in the pursuit of its legitimate business interests" subject only to the condition
that it be not "motivated by discrimination or (made) in bad faith, or . . . effected as a form
of punishment or demotion without sufficient cause." This is a principle uniformly adhered to
by this Court. 4
The case law on the matter is succinctly set out by a noted commentator on Labor Relations
Law as follows: 5
. . . Except as limited by special laws, the employer is free to regulate, according to his own
discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers, and the discipline, dismissal and recall of workers. This flows
from the established rule that labor law does not authorize the substitution of the judgment
of the employer in the conduct of his business and does not deprive the employer of the
right to select or dismiss his employees for any cause, except in cases of unlawful
discrimination (NLU v. Insular-Yebana Tobacco Corp., 2 SCRA 924, 931; Republic Savings Bank
v. CIR, 21 SCRA 226, 235).
. . . The employer has the prerogative of making transfers and reassignment of employees to
meet the requirements of the business. Thus, where the rotation of employees from the day
shift to the night shift was a standard operating procedure of management, an employee
who had been on the day shift for some time may be transferred to the night shift (Castillo v.
CIR, 39 SCRA 81). Similarly, transfers effected pursuant to a company policy to transfer
employees from one theater to other theaters operated by the employer, in order to prevent
connivance among them, was sustained (Cinema, Stage and Radio Entertainment Free
Workers v. CIR, 18 SCRA 1071). Similar transfers and re-assignments of employees have
been upheld such as the re-assignment of one from a position of supervisor to that of
engineer at the power house (Interwood Employees Assn. v. Interwood, 99 Phil. 82), or the
transfer of the union president from his position of messenger clerk in a hotel to purely office
work and two other unionists from the position of hotel guard to line and elevator men,
without diminution of pay or other employee's rights (Bay View Hotel Employees Union v.

Bay View Hotel, L-10393, March 30, 1960), or the temporary assignment of a sales clerk to
another section of the store (Marcaida v. PECO, 63 O.G. 8559).
Subsequent decisions of this Court have made no deviation from the doctrine. In Philippine
Japan Active Carbon Corp. v. NLRC, promulgated on March 8, 1989 6 this Court made the
following pronouncement, to wit:
It is the employer's 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 employee's 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 diminution of his salaries, benefits, and other privileges, the employee may not
complain that it amounts to a constructive dismissal.
In Yuco Chemical Industries, Inc. v. MOLE et al. (judgment promulgated on May 28, 1990) 7
the same "general principles on transfer" were re-stated. The Court said:
. . . In a number of cases, the Court has recognized and upheld the prerogative of
management to transfer an employee from one office to another within the business
establishment provided that there is no demotion in rank or diminution of his salary, benefits
and other privileges. This is a privilege inherent in the employer's right to control and
manage its enterprise effectively. Even as the law is solicitous of the employees' welfare, it
cannot ignore the right of the employer to exercise what are clearly and obviously
management prerogatives. The freedom of management to conduct its business operations
to achieve its purpose cannot be denied.
But like all other rights, there are limits. The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion and putting to mind the basic elements
of justice and fair play. Having the right should not be confused with the manner in which
that right must be exercised. Thus it cannot be used as a subterfuge by the employer to rid
himself of an undesirable worker. Nor when the real reason is to penalize an employee for
his union activities and thereby defeat his right to self-organization. But the transfer can be
upheld when there is no showing that it is unnecessary, inconvenient and prejudicial to the
displaced employee.
The acceptability of the proposition that transfers made by an employer for an illicit or
underhanded purpose e.g., to evade the duty to bargain collectively, or to defeat the
welfare, right of collective bargaining, or discriminate against one or some of them on
account of their union activities is self-evident and cannot be gainsaid. The difficulty lies
in the situation where no such illicit, improper or underhanded purpose can be ascribed to
the employer, the objection to the transfer being ground solely upon the, personal
inconvenience or hardship that will be caused to the employee by reason of the transfer.
What then?
In Dosch v. NLRC, supra, this Court found itself unable to agree with the NLRC that the
petitioner employee was guilty of disobedience and insubordination in refuse to accept his
transfer from the Philippines to an overseas post. Said the Court:
. . . The only piece of evidence on which (respondent employer) Northwest bases the charge
of contumacious refusal is petitioner's letter dated August 28, 1975 to R.C. Jenkins wherein
petitioner acknowledged receipt of the former's memorandum dated August 18, 1975,
appreciated his promotion to Director of International Sales but at the same time regretted
"that at this time for personal reasons and reasons of my family, I am unable to accept the
transfer from the Philippines' and thereafter expressed his preference to remain in my
Position of Manager-Philippines until such time that my services in that capacity are no
longer required by Northwest Airlines." From this evidence, We cannot discern even the
slightest hint of defiance, much less imply insubordination on the part of petitioner.
Withal, it is evident that the courteous tone of the employee's letter did not alter the
actuality of his refusal to accept the transfer decreed by his employer in the exercise of its
sound business judgment and discretion; and that the transfer of an employee to an
overseas post cannot be likened to a transfer from a city to another within the country, as in
the case at bar.
In this case, the employee (Laplana) had to all intents and purposes resigned from her
position. She had unequivocally asked that she be considered dismissed, herself suggesting
the reason therefor retrenchment. When so dismissed, she accepted separation pay. On
the other hand, the employer has not been shown to be acting otherwise than in good faith,

and in the legitimate pursuit of what it considered its best interests, in deciding to transfer
her to another office. There is no showing whatever that the employer was transferring
Laplana to another work place, not because she would be more useful there, but merely "as
a subterfuge to rid . . . (itself) of an undesirable worker," or "to penalize an employee for . . .
union activities. . . ." The employer was moreover not unmindful of Laplana's initial plea for
reconsideration of the directive for her transfer to Laoag; in fact, in response to that plea not
to be moved to the Laoag Office, the employer opted instead to transfer her to Manila, the
main office, offering at the same time the normal benefits attendant upon transfers from an
office to another.
The situation here presented is of an employer transferring an employee to another office in
the exercise of what it took to be sound business judgment and in accordance with predetermined and established office policy and practice, and of the latter having what was
believed to be legitimate reasons for declining that transfer, rooted in considerations of
personal convenience and difficulties for the family. Under these circumstances, the solution
proposed by the employee herself, of her voluntary termination of her employment and the
delivery to her of corresponding separation pay, would appear to be the most equitable.
Certainly, the Court cannot accept the proposition that when an employee opposes his
employer's decision to transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the employee's wishes that should be
made to prevail. In adopting that proposition by way of resolving the controversy, the
respondent NLRC gravely abused its discretion.
WHEREFORE, the writ of certiorari prayed for is GRANTED and the Resolution of August 5,
1986 of respondent NLRC is thereby nullified and set aside, and the termination of services
of private respondent is declared legal and proper. No costs.
SO ORDERED.
G.R. No. 129843
September 14, 1999
BLUE DAIRY CORPORATION and/or EDISON T. AVIGUETERO and PEDRO G. MIGUEL,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELVIRA R. RECALDE, respondents.
BELLOSILLO, J.:
BLUE DAIRY CORPORATION, engaged in the processing of dairy and chocolate products,
juices and vegetables, hired on 14 May 1994 private respondent Elvira R. Recalde as a food
technologist in its laboratory with the following specific functions: microanalysis of toppings
and syrup, onions and garlic, and liquid mixes (soft serve and milk shake); physical and
chemical analysis of liquid mixes, including raw materials for toppings and syrup and its
inspection; routine computation for liquid mixes and supervision while weighing the
materials; performing chlorine test for lettuce, red onion, white onion and green pepper;
preparation of forms for topping and syrup; sensory evaluation of toppings and syrup;
product development (assistant); and, preparation of food coloring for orange syrup
production. 1
On 22 May 1994, a Sunday, Recalde reported for work but claimed that she was not given
her premium pay.
On 21 October 1994 Recalde accompanied Production Manager Editha N. Nicolas in
conducting a sensory evaluation of vanilla syrup in one of the outlets of a client. While on
their way back to the office a post fell on the company vehicle they were riding due to a
raging typhoon damaging the vehicle's windshield and side mirror.
On 3 December 1994 Recalde was transferred from the laboratory to the vegetable
processing section where she cored lettuce, minced and repacked garlic and performed
similar work, and was restricted from entering the laboratory. She was unhappy. She
considered her new job humiliating and menial. On 14 December 1994 she stopped
reporting for work. The following day she sent a letter to petitioner Edison T. Aviguetero, the
President and Chairman of the Board of Director of Blue Dairy corporation, reading
I would like to inform you that I will no longer report for work because of your drastic and
oppressive action. And besides, I have already filed a case against BLUE DAIRY
CORPORATION and/or EDISON T. AVIGUETERO, PEDRO G. MIGUEL . . . . 2
On December 16, 1994 Recalde filed a complaint against petitioner Blue Dairy Corporation,
Edison T. Aviguetero and Pedro G. Miguel 3 for constructive dismissal and non-payment of
premium pay. She also claimed overtime pay as well as moral and exemplary damages plus
attorney's fees.

Petitioners contended that Recalde was given a less sensitive assignment outside of the
laboratory on account of her dishonesty which resulted in loss of trust and confidence. They
seriously took into account the result of the investigation concerning the 21 October incident
that Recalde was actually scouting for a new residence using company vehicle without prior
permission from the General Manager and during office hours, in violation of par. IV,
subpars. B and G, of the company's General Rules and Regulations. Petitioners accorded
credence to the narrations of Rolando V. Flores, driver of the damaged vehicle, to that effect
which act of dishonesty could even have merited dismissal from employment had they
adhered simply to jurisprudential rule but took into account instead the spirit of the
approaching Christmas season.
The Labor Arbiter was convinced that petitioners were guilty of constructive dismissal as he
found the justification for Recalde's transfer unreasonable: first, the unofficial trip on the way
back to the office on 21 October was undertaken through the bidding of the Production
Manager; second, loss of trust and confidence must necessarily occur in the performance of
duties; and third, the new position of Recalde was too humiliating and demeaning. The Labor
Arbiter also found that petitioners failed to grant premium pay to Recalde for her work
performed on 22 May 1994, a Sunday.
On 31 October 1996 petitioners were thus ordered to reinstate Recalde to her former
position as food technologist assisting in the quality assurance processes of the company
and performing laboratory work without loss of seniority rights and privileges, with full back
wages as well as to grant her premium pay, initially computed thus
Back Wages:
12/14/94 - 12/30/96 =

24.53 mos.

P183.33 x 30 days

24.53 mos.

P134,912.54

Premium Pay for Rest Day:

(May 22, 1994): P183.33 x 30% = P55.00

55.00

TOTAL AWARD:

P134,967.54

==========
The other claims were dismissed for lack of merit. 4
On 30 April 1997 public respondent National Labor Relations Commission (NLRC) affirmed
the ruling. 5 On 19 June 1997 reconsideration was denied. 6
Petitioners insist that the transfer of Recalde from the laboratory to the vegetable processing
section was effected in the exercise of management prerogative. It did not amount to a
constructive dismissal as Recalde erroneously maintained. Moreover, petitioners submit that
the coring of lettuce together with the other production jobs connected therewith is one of
the most important aspects of the corporation's existence; in fact, those assigned to the
vegetable processing section are mostly professionals like teachers, computers secretaries
and forestry graduates.
No grave abuse of discretion was committed by the NLRC. Indeed, it is the prerogative of
management to transfer an employee from one office to another within the business
establishment based on its assessment and perception of the employee's qualifications,
aptitudes and competence, and in order to ascertain where he can function with maximum
benefit to the company. 7 This is a privilege inherent in the employer's right to control and
manage his enterprise effectively. The freedom of management to conduct its business
operations to achieve its purpose cannot be denied. 8
But, like other rights, there are limits thereto. 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 subterfuge by the employer to rid
himself of an undesirable worker. 9 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. 10 Should
the employer fail to overcome this burden of proof the employee's 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. 11 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. 12
In the present case, petitioners failed to justify Recalde's transfer from the position of food
technologist in the laboratory to a worker in the vegetable processing section. We recall that
what triggered Recalde's transfer was the 21 October incident where she was found to have
allegedly utilized company vehicle in looking for a new residence during office hours without
permission from management. In petitioners' view, she was dishonest such that they lost
their trust and confidence in her. Yet, it does not appear that Recalde was provided an
opportunity to refute the reason for the transfer. Petitioners merely relied on the narrations
of the company driver. Nor was Recalde notified in advance of her impending transfer which
was, as we shall elucidate later, a demotion in rank. In Gaco v. NLRC 13 we noted
While due process required by law is applied in dismissals, the same is also applicable to
demotions as demotions likewise affect the employment of a worker whose right to
continued employment, under the same terms and conditions, is also protected by law.
Moreover, considering that demotion is, like dismissal, also a punitive action, the employee
being demoted should, as in case of dismissal, be given a chance to contest the same.
Further, petitioners overstretched the effect of Recalde's claimed wrongdoing. We have ruled
that breach of trust and confidence as a ground for dismissal from employment must be
related to the performance of the duties of the employee such as would show him to be
thereby unfit to continue working for the employer. 14 By analogy, breach of trust and
confidence as a ground for reassignment must be related to the performance of the duties of
the employee such as would show him to be thereby unfit to discharge the same task.
Clearly, the act of dishonesty imputed to Recalde has no bearing at all to her work in the
laboratory.
Further still, granting that Recalde was proved guilty of dishonesty, the company's General
Rules and Regulations provide the corresponding sanctions therefor. Recalde appears to
have no prior record of infractions. For "leaving post temporarily without permission during
working hours" committed for the first time, "warning" is imposable, whereas for
"unauthorized use of any company vehicle" committed for the first time, the commensurate
penalty is" 15 days suspension." 15 Although petitioners invoked the pertinent provisions of
the rules and regulations which Recalde allegedly violated, for reasons known only to them,
they disregarded those sanctions. Instead, they gave her a less sensitive assignment outside
of the laboratory as they claimed that had they adhered to the rules she would have been
dismissed outright for her dishonesty in the unauthorized use of company property. Then too
is their claim that they were moved by compassion on account of the then approaching
Christmas season. Commendable as this "compassionate" gesture may seem, nevertheless,
petitioners failed to realize that it was not relief from dismissal which they provided to
Recalde when they assigned her to the vegetable processing section but discomfiture.
We find insignificant the submission of petitioners that "the coring of lettuce together with
other production jobs connected therewith is one of the most important aspects of the
corporation's existence" and that "those assigned to the vegetable processing section are
mostly professionals like teachers, computers secretaries and forestry graduates." Rather,
the focus should be on the comparison between the nature Recalde's work in the laboratory
and in the vegetable processing section. As food technologist in the laboratory, she occupied
a highly technical position requiring use of her mental faculty. As a worker in the vegetable
processing section, she performed mere mechanical work. It was virtually a transfer from a
position of dignity to a servile or menial job. 16 We agree with the observation of the Office
of the Solicitor General that the radical change in Recalde's nature of work unquestionably
resulted in, as rightly perceived by her, a demeaning and humiliating work condition. The
transfer was a demotion in rank, beyond doubt.
Another aspect of comparison is the workplaces themselves. Petitioners admitted in their
answer to Recalde's complaint that
Respondent's Laboratory is the most expensive area, on a per-square-meter basis, in the
company's premises. It is here where the quality of the company's product is tested and
assured. Since these products are food items ingested by the consuming public, this
Laboratory becomes several folds critical. Hence, only highly trusted authorized personnel
are allowed access to this place. 17
In other words, the laboratory is the place where the quality of the totality of petitioners'
products such as dairy, juices, chocolates and vegetables is tested. On the other hand, the
vegetable processing section, as the name implies, involves processing of vegetables alone.

Definitely, a transfer from a workplace where only highly trusted authorized personnel are
allowed access to a workplace that is not as critical is another reason enough for Recalde to
howl a protest.
We reiterate that the NLRC did not commit grave abuse of discretion in affirming the ruling
of the Labor Arbiter that petitioners are guilty of constructive dismissal. Recalde is entitled
to reinstatement as food technologist without loss of seniority rights and privileges and with
full back wages, as directed by the Labor Arbiter. We clarify however that conformably with
Art. 279 of the Labor Code, as amended by Sec. 34 of RA 6715, to be included in the
computation of back wages are the illegally dismissed employee's allowances and other
benefits or their monetary equivalent.
WHEREFORE, the petition is DISMISSED. The Decision of public respondent National Labor
Relations Commission finding that private respondent Elvira R. Recalde was constructively
dismissed from employment and entitled to premium pay is AFFIRMED. Petitioners Blue
Dairy Corporation, Edison T. Aviguetero and Pedro G. Miguel are ordered to reinstate private
respondent Recalde as food technologist in the laboratory without loss of seniority rights and
privileges and with full back wages inclusive of allowances and other benefits or their
monetary equivalent to be computed from her dismissal on 14 December 1994 up to the
actual reinstatement, and to grant her premium pay of P55.00 for work performed on 22
May 1994, a Sunday. Cost against the petitioner.
SO ORDERED.
G.R. No. 172724
August 23, 2010
PHARMACIA and UPJOHN, INC. (now PFIZER PHILIPPINES, INC.), ASHLEY MORRIS,
ALEDA CHU, JANE MONTILLA & FELICITO GARCIA, Petitioners,
vs.
RICARDO P. ALBAYDA, JR., Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules of Court,
seeking to set aside the November 30, 2005 Decision2 and May 5, 2006 Resolution3 of the
Court of Appeals (CA), in CA-G.R. SP No. 00386.
The facts of the case are as follows:
Respondent Ricardo P. Albayda, Jr. (respondent) was an employee of Upjohn, Inc. (Upjohn) in
1978 and continued working there until 1996 when a merger between Pharmacia and
Upjohn was created. After the merger, respondent was designated by petitioner Pharmacia
and Upjohn (Pharmacia) as District Sales Manager assigned to District XI in the Western
Visayas area. During the period of his assignment, respondent settled in Bacolod City.
Sometime on August 9, 1999, a district meeting was held in Makati City wherein one of the
topics discussed was the district territorial configuration for the new marketing and sales
direction for the year 2000.
In December 1999, respondent received a Memorandum4 announcing the sales force
structure for the year 2000. In the said memorandum, respondent was reassigned as District
Sales Manager to District XII in the Northern Mindanao area. One of the key areas covered in
District XII is Cagayan de Oro City.
In response to the memorandum, respondent wrote a letter5 dated December 27,1999 to
Felicito M. Garcia (Garcia), Pharmacias Vice-President for Sales and Marketing, questioning
his transfer from District XI to District XII. Respondent said that he has always been assigned
to the Western Visayas area and that he felt that he could not improve the sales of products
if he was assigned to an unfamiliar territory. Respondent concluded that his transfer might
be a way for his managers to dismiss him from employment. Respondent added that he
could not possibly accept his new assignment in Cagayan de Oro City because he will be
dislocated from his family; his wife runs an established business in Bacolod City; his elevenyear-old daughter is studying in Bacolod City; and his two-year-old son is under his and his
wifes direct care.
On January 10, 2000, Garcia wrote a letter6 to respondent denying his request to be
reassigned to the Western Visayas area. Garcia explained that the factors used in
determining assignments of managers are to maximize business opportunities and growth
and development of personnel. Garcia stressed that other people both reprensentatives
and district sales managers have been re-located in the past and in the year 2000 realignment.

On February 16, 2000, respondent wrote a letter7 to Aleda Chu (Chu), Pharmacias National
Sales and External Business Manager, reiterating his request to be reassigned to the
Western Visayas area. Respondent alleged that during one conversation, Chu assured him
that as long as he hits his sales target by 100%, he would not be transferred. Respondent
again speculated that the real reason behind his transfer was that it was petitioners way of
terminating his employment. Respondent harped that his transfer would compel him to lose
his free housing and his wifes compensation of P50,000.00 from her business in Bacolod
City.
In a letter8 dated March 3, 2000, Chu said that she did not give any assurance or
commitment to respondent that he would not be transferred as long as he achieved his
100% target for 1999. Chu explained to respondent that they are moving him to Cagayan de
Oro City, because of their need of respondents expertise to build the business there. Chu
added that the district performed dismally in 1999 and, therefore, they were confident that
under respondents leadership, he can implement new ways and develop the sales force to
become better and more productive. Moreover, since respondent has been already in
Bacolod and Iloilo for 22 years, Chu said that exposure to a different market environment
and new challenges will contribute to respondents development as a manager. Finally, Chu
stressed that the decision to transfer respondent was purely a business decision.
Respondent replied through a letter9 dated March 16, 2000. Respondent likened his transfer
to Mindanao as a form of punishment as he alleged that even Police Chief General Panfilo
Lacson transferred erring and non-performing police officers to Mindanao. Respondent
argued that Chu failed to face and address the issues he raised regarding the loss of his
family income, the additional cost of housing and other additional expenses he will incur in
Mindanao.
In a memorandum10 dated May 11, 2000, Jane B. Montilla (Montilla), Pharmacias Human
Resource Manager, notified respondent that since he has been on sick leave since January 5,
2000 up to the present, he had already consumed all his sick leave credits for the year 2000.
Montilla stated that per company policy, respondent would then be considered on indefinite
sick leave without pay. In another memorandum11 dated May 15, 2000, Montilla informed
respondent of the clinic schedule of the company appointed doctor.
In a letter12 dated May 17, 2000, respondent acknowledged his receipt of the letters from
Montilla. Respondent informed Montilla that his doctors had already declared him fit for work
as of May 16, 2000. Respondent stated that he was already ready to take on his regular
assignment as District Sales Manager in Negros Occidental or in any district in the Western
Visayas area.
In a letter13 dated May 17, 2000, Chu expressed her disappointment on the way respondent
viewed their reason for moving his place of assignment. Chu was likewise disappointed with
respondents opinion that with the movement, he be given additional remuneration, when in
fact, such was never done in the past and never the practice in the industry and in the
Philippines. Chu concluded that it appeared to her that respondent would not accept any
reason for the movement and that nothing is acceptable to him except a Western Visayas
assignment. Consequently, Chu referred the case to the Human Resource Department for
appropriate action.
Montilla met with respondent to discuss his situation. After the meeting, Montilla sent
respondent a memorandum14 wherein his request to continue his work responsibilities in
Negros Occidental or in any district in the Western Visayas area was denied as there was no
vacant position in those areas. Montilla stressed that the company needed respondent in
Cagayan de Oro City, because of his wealth of experience, talent and skills. Respondent,
however, was also given an option to be assigned in Metro Manila as a position in the said
territory had recently opened when Joven Rodriguez was transferred as Government
Accounts and Special Projects Manager. Montilla gave respondent until June 2, 2000 to talk
to his family and weigh the pros and cons of his decision on whether to accept a post in
Cagayan de Oro City or in Manila.
In a letter15 dated May 31, 2000, respondent reiterated the concerns he raised in his
previous letters.
Montilla sent respondent another memorandum16 dated June 6, 2000, stating that it is in
the best interest of the company for respondent to report to the Makati office to assume his
new area of assignment.
In a letter17 dated June 8, 2000, respondent told Montilla that he will be airing his grievance
before the National Labor Relations Commission (NLRC).

In a memorandum18 dated June 15, 2000, Montilla stated that contrary to the opinion of
respondent, respondent is entitled to Relocation Benefits and Allowance pursuant to the
companys Benefits Manual. Montilla directed respondent to report for work in Manila within
5 working days from receipt of the memorandum.
In another memorandum19 dated June 26, 2000, Montilla stated that she had not heard
from respondent since his June 8, 2000 letter and that he has not replied to their last
memorandum dated June 15, 2000. Respondent was warned that the same would be a final
notice for him to report for work in Manila within 5 working days from receipt of the memo;
otherwise, his services will be terminated on the basis of being absent without official leave
(AWOL).
On July 13, 2000, Montilla sent respondent a memorandum20 notifying him of their decision
to terminate his services after he repeatedly refused to report for work despite due notice,
the pertinent portions of which read:
As I mentioned many times in our talks, you are in a Sales position for which you had signed
up. Your employment contract actually states that you are willing to be assigned anywhere
else in the Philippines, wherever the company needs you sees you fit.
Metro Manila is the biggest and most advanced market we have in the Philippines. It is
where the success or failure of our business lies. It is, therefore, the most competitive and
significant area for sales. It is the most challenging and most rewarding of all areas. Only the
best field managers are given the opportunity to manage a territory in Metro Manila. This is
why I chose Manila over Cagayan de Oro for you in my letter dated June 6, 2000. And
because you had assured us that you were fit to work, after being on sick leave for about
five and a half months, I asked you to assume your new assignment in Metro Manila before
June 16, 2000.
Before June 16, 2000, you wrote us a letter advising us that you can not accept the new
assignment in Manila. In response, we advised you that the assignment in Manila is a
business need and for said reason you were requested to report for work within five working
days from receipt of notice. However, you failed to comply. So we issued another memo
dated June 26, 2000, instructing you to report for work and advising you that should you
continue to fail to report for work, the company shall be constrained to terminate your
employment.
In view of the foregoing, we have no alternative but to terminate your services on the basis
of absence without official leave (AWOL) and insubordination pursuant to Article 282 of the
Labor Code of the Philippines, which shall be effective on July 19, 2000.21
On August 14, 2000, respondent filed a Complaint22 with the NLRC, Regional Arbitration
Branch No. VI, Bacolod City against Pharmacia, Chu, Montilla and Garcia for constructive
dismissal. Also included in the complaint was Ashley Morris, Pharmacias President. Since
mandatory conciliation failed between the parties, both sides were directed to submit their
position papers.
On July 12, 2002, the Labor Arbiter (LA) rendered a Decision23 dismissing the case, the
dispositive portion of which reads:
WHEREFORE, premises considered, the complaint against respondents in the above-entitled
case is DISMISSED for lack of merit.
SO ORDERED.24
Respondent appealed to the NLRC. In a Decision25 dated July 26, 2004, the NLRC dismissed
the appeal, the dispositive portion of which reads:
WHEREFORE, premises considered, the appeal of complainant is hereby DISMISSED for lack
of merit. The decision of the Labor Arbiter is AFFIRMED en toto.
SO ORDERED.26
Respondent filed a Motion for Reconsideration,27 which was denied by the NLRC in a
Resolution28 dated November 10, 2004.
Aggrieved, respondent filed a Petition for Certiorari29 before the CA.
On November 30, 2005, the CA rendered a Decision ruling in favor of respondent, the
dispositive portion of which reads:

WHEREFORE, premises considered, this petition is hereby given due course and the
Resolution dated November 10, 2004 and the Decision dated July 26, 2004 of the NLRC
Fourth Division in NLRC Case No. V-000521-2000 (RAB Case No. 06-08-10650-2000), are
hereby REVERSED and SET ASIDE. Accordingly, the case is REMANDED to the National Labor
Relations Commission, Regional Arbitration Branch No. VI, Bacolod City, for the proper
determination of the petitioners claims.
SO ORDERED.30
Petitioners filed a Motion for Reconsideration, which was, however, denied by the CA in a
Resolution dated May 5, 2006.
Hence, herein petition, with petitioner raising a lone assignment of error to wit:
WHETHER OR NOT THE COURT OF APPEALS (CEBU CITY) CAN REVERSE OR SET ASIDE THE
FACTUAL AND LEGAL FINDINGS OF THE NLRC WHICH WAS BASED ON SUBSTANTIAL
EVIDENCE WHEN THERE IS NO SHOWING OF PALPABLE ERROR OR THAT THE FINDINGS OF
FACTS OF THE LABOR ARBITER IS CONTRARY TO THAT OF THE NLRC.31
The petition is meritorious.
As a general rule, this Court does not entertain factual issues. The scope of our review in
petitions filed under Rule 45 is limited to errors of law or jurisdiction.32 This Court leaves the
evaluation of facts to the trial and appellate courts which are better equipped for this task.
However, there are instances in which factual issues may be resolved by this Court, to wit:
(1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2)
the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6)
the CA goes beyond the issues of the case, and its findings are contrary to the admissions of
both appellant and appellees; (7) the findings of fact of the CA are contrary to those of the
trial court; (8) said findings of fact are conclusions without citation of specific evidence on
which they are based; (9) the facts set forth in the petition, as well as in the petitioners
main and reply briefs, are not disputed by the respondent; and (10) the findings of fact of
the CA are premised on the supposed absence of evidence and contradicted by the evidence
on record.33
In the present case, this Court is prompted to evaluate the findings of the LA, the NLRC, and
the CA which are diametrically opposed.
Petitioners argue that the CA erred when it reversed the factual and legal findings of the
NLRC which affirmed the decision of the LA. Petitioners contend that it is well established
that factual findings of administrative agencies and quasi-judicial bodies are accorded great
respect and finality and are not to be disturbed on appeal unless patently erroneous.
After a judicious examination of the records herein, this Court sustains the findings of the LA
and the NLRC which are more in accord with the facts and law of the case.
On petitioners exercise of management prerogative
Jurisprudence recognizes the exercise of management prerogative to transfer or assign
employees from one office or area of operation to another, provided there is no demotion in
rank or diminution of salary, benefits, and other privileges, and the action is not motivated
by discrimination, made in bad faith, or effected as a form of punishment or demotion
without sufficient cause.34
To determine the validity of the transfer of employees, the employer must 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 employee's transfer shall be
tantamount to constructive dismissal.35
Both the LA and the NLRC ruled that the reassignment of respondent was a valid exercise of
petitioners management prerogative.
The LA shared petitioners posture that the transfer of respondent was a valid exercise of a
legitimate management prerogative to maximize business opportunities, growth and
development of personnel and that the expertise of respondent was needed to build the
companys business in Cagayan de Oro City which dismally performed in 1999.36

In addition, the LA explained that the reassignment of respondent was not a demotion as he
will also be assigned as a District Sales Manager in Mindanao or in Metro Manila and that the
notice of his transfer did not indicate that his emoluments will be reduced. Moreover, the LA
mentioned that respondent was entitled to Relocation Benefits and Allowance in accordance
with petitioners Benefits Manual.
On respondents allegation that his family stands to lose income from his wifes business,
the LA ruled:
The allegation of complainant that his income will be affected because his wife who is doing
business in Bacolod City and earns P50,000.00, if true, should not be taken in consideration
of his transfer. What is contemplated here is the diminution of the salary of the complainant
but not his wife. Besides, even if complainant may accept his new assignment in Cagayan de
Oro or in Metro Manila, his wife may still continue to do her business in Bacolod City.
Anyway, Bacolod City and Manila is just one (1) hour travel by plane.37
Lastly, the LA pointed out that in respondents contract of employment, he agreed to be
assigned to any work or workplace as may be determined by the company whenever the
operations require such assignment.
The NLRC affirmed in toto the findings of the LA. The NLRC ruled that petitioners
restructuring move was a valid exercise of its management prerogative and authorized
under the employment contract of respondent, to wit:
We do not see in the records any evidence to prove that the restructuring move of
respondent company was done with ill motives or with malice and bad faith purposely to
constructively terminate complainants employment. Such misinterpretation or misguided
supposition by complainant is belied by the fact that respondents officers had in several
communications officially sent to complainant, expressly recognized complainants expertise
and capabilities as a top sales man and manager for which reason the respondent company
needs his services and skills to energize the low-performing areas in order to maximize
business opportunities and to afford complainant an opportunity for further growth and
development. Complainant persistently refused instead of taking this opportunity as a
challenge after all, the nature of employment of a sales man or sales manager is that it is
mobile or ambulant being always seeking for possible areas to market goods and services.
He totally forgot the terms and conditions in his employment contract, stated in part, thus:
xxxx
You agree, during the period of employment, to be assigned to any work or workplace for
such period as may be determined by the company and whenever the operations thereof
require such assignment.38
The rule in our jurisdiction is that findings of fact of the NLRC, affirming those of the LA, are
entitled to great weight and will not be disturbed if they are supported by substantial
evidence.39 Substantial evidence is an amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion.40 As explained in Ignacio v. CocaCola Bottlers Phils., Inc:41
x x x Factual findings of the NLRC affirming those of the Labor Arbiter, both bodies being
deemed to have acquired expertise in matters within their jurisdictions, when sufficiently
supported by evidence on record, are accorded respect if not finality, and are considered
binding on this Court. As long as their decisions are devoid of any unfairness or arbitrariness
in the process of their deduction from the evidence proffered by the parties, all that is left is
for the Court to stamp its affirmation and declare its finality.42
Based on the foregoing, this Court rules that the CA had overstepped its legal mandate by
reversing the findings of fact of the LA and the NLRC as it appears that both decisions were
based on substantial evidence. There is no proof of arbitrariness or abuse of discretion in the
process by which each body arrived at its own conclusions. Thus, the CA should have
deferred to such specialized agencies which are considered experts in matters within their
jurisdictions.
Moreover, what is objectionable with the CA decision is that in finding that the reassignment
of respondent was arbitrary and unreasonable it had, in effect, imposed on petitioners its
own opinion or judgment on what should have been a purely business decision, to wit:
Discussing the issues jointly, a perusal of the records shows that there was no overwhelming
evidence to prove that petitioner was terminated for a just and valid cause. Public
respondent had overlooked the fact that the reassignment of petitioner was arbitrary and
unreasonable as the same was in contrast to the purposes espoused by private respondents.

Undoubtedly, petitioner is a complete alien to the territory and as no established contacts

therein, thus, he cannot be effective nor can he maximize profits. It cannot also contribute to
his professional growth and development considering that he had already made a mark on
his territory by virtue of his twenty-two (22) long years of valuable service. Considering the
quality of his performance in his territory, the private respondents cannot therefore reason
out that they are merely exercising their management prerogative for it would be
unreasonable since petitioner has not been amiss in his responsibilities. Furthermore, it
would undeniably cause undue inconvenience to herein petitioner who would have to
relocate, disrupting his familys peaceful living, and with no additional monthly
remuneration.43
In the absence of arbitrariness, the CA should not have looked into the wisdom of a
management prerogative. 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.44
As a matter of fact, while the CAs observations may be acceptable to some quarters, it is
nevertheless not universal so as to foreclose another view on what may be a better business
decision. While it would be profitable to keep respondent in an area where he has
established contacts and therefore the probability of him reaching and even surpassing his
sales quota is high, on the one hand, one can also make a case that since respondent is one
of petitioners best district managers, he is the right person to turn around and improve the
sales numbers in Cagayan de Oro City, an area which in the past had been dismally
performing. After all, improving and developing a new market may even be more profitable
than having respondent stay and serve his old market. In addition, one can even make a
case and say that the transfer of respondent is also for his professional growth. Since
respondent
has been already assigned in the Western Visayas area for 22 years, it may mean that his
market knowledge is very limited. In another territory, there will be new and more
challenges for respondent to face. In addition, one can even argue that for purposes of
future promotions, it would be better to promote a district manager who has experience in
different markets.
The foregoing illustrates why it is dangerous for this Court and even the CA to look into the
wisdom of a management prerogative. Certainly, one can argue for or against the pros and
cons of transferring respondent to another territory. Absent a definite finding that such
exercise of prerogative was tainted with arbitrariness and unreasonableness, the CA should
have left the same to petitioners better judgment. The rule is well settled that labor laws
discourage interference with an employer's judgment in the conduct of his business. Even as
the law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. As long as the company's
exercise of the same is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the laws or valid agreements,
such exercise will be upheld.45
In addition, this Court cannot agree with the findings of the CA that the transfer of
respondent was unreasonable, considering he had not been remiss in his responsibilities.
What the CA failed to recognize is that the very nature of a sales man is that it is mobile and
ambulant. On this point, it bears to stress that respondent signed two documents signifying
his assent to be assigned anywhere in the Philippines. In respondents Employment
Application,46 he checked the box which asks, "Are you willing to be relocated anywhere in
the Philippines?"47 In addition, in respondents Contract of Employment,48 item (8) reads:
You agree, during the period of your employment, to be assigned to any work or workplace
for such period as may be determined by the company and whenever the operations thereof
require such assignment.49
Even if respondent has been performing his duties well it does not mean that petitioners
hands are tied up that they can no longer reassign respondent to another territory. And it is
precisely because of respondents good performance that petitioners want him to be
reassigned to Cagayan de Oro City so that he could improve their business there.
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,50 which
involved a complaint filed by a medical representative against his employer drug company
for illegal dismissal for allegedly terminating his employment when he refused to accept his
reassignment to a new area, the Court upheld the right of the drug company to transfer or
reassign its employee in accordance with its operational demands and requirements. The
ruling of the Court therein, quoted hereunder, also finds application in the instant case:

Therefore, Bobadilla had no valid reason to disobey the order of transfer. He had tacitly
given his consent thereto when he acceded to the petitioners policy of hiring sales staff who
are willing to be assigned anywhere in the Philippines which is demanded by petitioners
business.
By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its representatives
or detail men to new markets calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments are part of the employment
contract.51
On the existence of grounds to dismiss respondent from the service
Because of respondents adamant refusal to be reassigned, the LA ruled that petitioners had
valid grounds to terminate his employment, to wit:
As early as in December 27, 1999, complainant already signified his refusal to accept his
new assignment in Cagayan de Oro. Complainant was on sick leave since January 5, 2000 up
to May 11, 2000, for about four (4) months and he already consumed his leave credits up to
March 2000. Hence, starting April 2000 he was already on indefinite leave without pay.
xxxx
In his letter dated May 17, 2000, addressed to respondent Jane B. Montilla, complainant
informed her that his doctors have already declared him fit for work as of May 16, 2000, and
he was ready to assume to his regular assignment as District Sales Manager of Negros
Occidental. This is a strong indication that complainant really does not want to accept his
new assignment either in Cagayan de Oro or in Metro Manila, which is clearly a defiance of
the lawful order of his employer, and a ground to terminate his services pursuant to Article
282 of the Labor Code.
Notwithstanding his adamant refusal to resume working to his new assignment in Metro
Manila, complainant was still given by respondent Montilla another chance to think it over up
to June 2, 2000. By way of reply, complainant, in his letter dated May 31, 2000 to Ms.
Montilla, he clearly expressed his disagreement to his transfer and would rather seek justice
elsewhere in another forum.
But still the respondent company, notwithstanding the position taken by complainant in his
letter dated May 31, 2000 that he is refusing his transfer gave complainant until June 16,
2000 to reconsider his position. In a letter dated June 5, 2000, respondent Montilla gave
complainant a period of five (5) days from receipt thereof to report to Manila, but still
complainant did not comply. Ms. Montilla sent complainant a final notice dated June 26, 2000
for him to report to Manila within five (5) working days from receipt of the same, with a
warning that his failure to do so, the company would be constraint to terminate his services
for being absent without official leave.
Finally, is was only on July 19, 2000, when the services of complainant was terminated by
respondent company through its Human Resource Manager on the ground of absence
without leave and insubordination pursuant to Article 282 of the Labor Code.
Clearly, the complainant had abandoned his work by reason of his being on AWOL as a
consequence of vigorous objection to his transfer to either Cagayan de Oro or Metro Manila.
The long period of absence of complainant without official leave from April to July 19, 2000 is
more than sufficient ground to dismiss him. The refusal of complainant to accept his transfer
of assignment is a clear willful disobedience of the lawful order of his employer and a ground
to terminate his services under Article 282, par. (a) of the Labor Code, as amended. The
series of chances given complainant to report for work, coupled by his adamant refusal to
report to his new assignment, is a conclusive indication of willful disobedience of the lawful
orders of his employer.52
In addition, the NLRC also ruled that respondent was guilty of insubordination, thus:
Apparently, complainant, by his unjustified acts of refusing to be transferred either to
Mindanao or Manila for personal reasons, absent any bad faith or malice on the part of
respondents, has deliberately ignored and defied lawful orders of his employer. An employee
who refuses to be transferred, when such transfer is valid, is guilty of insubordination. x x
x53
Based on the foregoing, this Court rules that the findings of the LA and the NLRC are
supported by substantial evidence. The LA clearly outlined the steps taken by petitioners

and the manner by which respondent was eventually dismissed. The NLRC, for its part,
explained why respondent was guilty of insubordination. No abuse of discretion can,
therefore, be attributed to both agencies, and the CA was certainly outside its mandate in
reversing such findings.
This Court has long stated that the objection to the transfer being grounded solely upon the
personal inconvenience or hardship that will be caused to the employee by reason of the
transfer is not a valid reason to disobey an order of transfer.54 Such being the case,
respondent cannot adamantly refuse to abide by the order of transfer without exposing
himself to the risk of being dismissed. Hence, his dismissal was for just cause in accordance
with Article 282(a)55 of the Labor Code.
The CA, however, ruled that respondent was not guilty of insubordination, to wit:
As to the findings of insubordination, the records show that petitioner was not guilty of such
offense. For insubordination to exist, the order must be reasonable and lawful, sufficiently
known to the employee and in connection to his duties. Where an order or rule is not
reasonable, in view of the terms of the contract of employment and the general right of the
parties, a refusal to obey does not constitute a just cause for the employees discharge. It is
undeniable that the order given by the company to petitioner to transfer to a place where he
has no connections, leaving his family behind, and with no clear additional remuneration,
can be considered unreasonable and petitioners actuation cannot be considered
insubordination.56
This Court cannot agree with the findings of the CA, in view of the fact that it was an error
for it to substitute its own judgment and interfere with management prerogatives. No iota of
evidence was presented that the reassignment of respondent was a demotion as he would
still be a District Sales Manager in Cagayan de Oro City or in Metro Manila. Furthermore, he
would be given relocation benefits in accordance with the Benefits Manual. If respondent
feels that what he was given is less than what is given to all other district managers who
were likewise reassigned, the onus is on him to prove such fact. Furthermore, records reveal
that respondent has been harping on the fact that no additional remuneration would be
given to him with the transfer. However, again, respondent did not present any evidence
that additional remuneration were being given to other district managers who were
reassigned to different locations, or that such was the practice in the company. This Court,
therefore, is inclined to believe the statement of Chu in her May 17, 2000 letter to
respondent that additional remuneration is never given to people who are reassigned, to wit:
x x x Likewise, I am disappointed that with the movement, you expect to be paid additional
remuneration when in fact, this has never been done in the past and never a practice within
the industry and the Philippines.57
Lastly, while it is understandable that respondent does not want to relocate his family, this
Court agrees with the NLRC when it observed that such inconvenience is considered an
"employment" or "professional" hazard which forms part of the concessions an employee is
deemed to have offered or sacrificed in the view of his acceptance of a position in sales.
On the observance of due process
The CA ruled that respondent was denied due process in the manner he was dismissed by
petitioners, to wit:
Furthermore, the finding that petitioner was afforded due process is bereft of any legal basis.
An employee must be given notice and an ample opportunity, prior to dismissal to
adequately prepare for his defense. This is an elementary rule in labor law that due process
in dismissal cases contemplates the twin requisites of notice and hearing. These procedural
requirements have been mandatorily imposed to the employer to accord its employees the
right to be heard. Failure of the employer to comply with such requirements renders its
judgment of dismissal void and inexistent. A written notice from the employer containing the
causes for the dismissal must be given. The employee is then given ample opportunity to be
heard and to defend himself, appraising him of his right to counsel if he desires. Lastly, a
written notice informing the employee of the decision of the employer, citing there reasons
therefore, is given. The above procedure was not followed in the instant case and the series
of communications and meetings cannot take the place and is therefore not sufficient to
take the place of notice and hearing.58
In termination proceedings of employees, procedural due process consists of the twin
requirements of notice and hearing. The employer must furnish the employee with two
written notices before the termination of employment can be effected: (1) the first apprises
the employee of the particular acts or omissions for which his dismissal is sought; and (2)
the second informs the employee of the employers decision to dismiss him. The

requirement of a hearing is complied with as long as there was an opportunity to be heard,

and not necessarily that an actual hearing was conducted.59
While no actual hearing was conducted before petitioners dismissed respondent, the same is
not fatal as only an "ample opportunity to be heard" is what is required in order to satisfy
the requirements of due process.60 Accordingly, this Court is guided by Solid Development
Corporation Workers Association v. Solid Development Corporation61 (Solid), where the
validity of the dismissal of two employees was upheld notwithstanding that no hearing was
conducted, to wit:
[W]ell-settled is the dictum that the twin requirements of notice and hearing constitute the
essential elements of due process in the dismissal of employees. It is a cardinal rule in our
jurisdiction that the employer must furnish the employee with two written notices before the
termination of employment can be effected: (1) the first apprises the employee of the
particular acts or omissions for which his dismissal is sought; and (2) the second informs the
employee of the employers decision to dismiss him. The requirement of a hearing, on the
other hand, is complied with as long as there was an opportunity to be heard, and not
necessarily that an actual hearing was conducted.
In separate infraction reports, petitioners were both apprised of the particular acts or
omissions constituting the charges against them. They were also required to submit their
written explanation within 12 hours from receipt of the reports. Yet, neither of them
complied. Had they found the 12-hour period too short, they should have requested for an
extension of time. Further, notices of termination were also sent to them informing them of
the basis of their dismissal. In fine, petitioners were given due process before they were
dismissed. Even if no hearing was conducted, the requirement of due process had been met
since they were accorded a chance to explain their side of the controversy62
In the case at bar, this Court finds that petitioners had complied with the requirements of
law in effecting the dismissal of respondent. Petitioners sent respondent a first notice in the
form of a memorandum63 dated June 26, 2000, warning him that the same would serve as a
final notice for him to report to work in Manila within 5 working days from receipt thereof,
otherwise, his services would be terminated on the basis of AWOL. After receiving the
memorandum, respondent could have requested for a conference with the assistance of
counsel, if he so desired. Like in Solid, had respondent found the time too short, he should
have responded to the memorandum asking for more time. It, however, appears to this
Court that respondent made no such requests. On July 13, 2000, petitioners sent another
memorandum64 notifying respondent that they are terminating his services effective July
19, 2000, after he repeatedly refused to report to work despite due notice. Even if no actual
hearing was conducted, this Court is of the opinion that petitioners had complied with the
requirements of due process as all that the law requires is an ample opportunity to be heard.
In conclusion, it bears to stress that the CA should not have disturbed the factual findings of
the LA and the NLRC in the absence of arbitrariness or palpable error. The reassignment of
respondent to another territory was a valid exercise of petitioners management prerogative
and, consequently, his dismissal was for cause and in accordance with the due process
requirement of law.
This Court, however, is not unmindful of previous rulings,65 wherein separation pay has
been granted to a validly dismissed employee after giving considerable weight to long years
of employment.661wphi1
An employee who is dismissed for cause is generally not entitled to any financial assistance.
Equity considerations, however, provide an exception. Equity has been 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.67
In Philippine Long Distance Telephone Co. v. National Labor Relations Commission,68 the
Court laid down the guidelines in the grant of separation pay to a lawfully dismissed
employee, thus:
We hold that henceforth separation pay shall be allowed as a measure of social justice only
in those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.69

In the instant case, this Court rules that an award to respondent of separation pay by way of
financial assistance, equivalent to one-half (1/2) months pay for every year of service, is
equitable. Although respondent's actions constituted a valid ground to terminate his
services, the same is to this Court's mind not so reprehensible as to warrant complete
disregard of his long years of service. It also appears that the same is respondent's first
offense. While it may be expected that petitioners will argue that respondent has only been
in their service for four years since the merger of Pharmacia and Upjohn took place in 1996,
equity considerations dictate that respondent's tenure be computed from 1978, the year
when respondent started working for Upjohn.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The November 30,
2005 Decision and May 5, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 00386
are REVERSED and SET ASIDE.
In view of the above disquisitions, petitioners are ordered to pay respondent separation pay
by way of financial assistance equivalent to one-half (1/2) month pay for every year of
service.
SO ORDERED.
[G.R. No. 139013. September 17, 2002]
ZEL T. ZAFRA and EDWIN B. ECARMA, petitioners, vs. HON. COURT OF APPEALS,
PHILIPPINE LONG DISTANCE TELEPHONE CO., INC., AUGUSTO COTELO, and
ERIBERTO MELLIZA, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision[1] of the Court of Appeals dated December 22, 1998,
in CA-G.R. SP. No. 48578, reversing that of the voluntary arbitrator which ordered respondent
Philippine Long Distance Telephone Co. (PLDT) to reinstate petitioners. Also impugned is the
resolution dated May 24, 1999, denying petitioners motion for reconsideration.
The undisputed facts, as set forth in the decision of the Court of Appeals, are as follows:
Petitioner Zel T. Zafra was hired by PLDT on October 1, 1984 as Operations Analyst II with a
monthly salary of P14,382 while co-petitioner Edwin B. Ecarma was hired as Junior
Operations Analyst I on September 16, 1987 at a monthly rate of P12,032. Both were regular
rank-and-file employees assigned at the Regional Operations and Maintenance Control
Center (ROMCC) of PLDTs Cebu Provincial Division. They were tasked to maintain the
operations and maintenance of the telephone exchanges in the Visayas and Mindanao areas.
[2]
In March 1995, petitioners were chosen for the OMC Specialist and System Software
Acceptance Training Program in Germany in preparation for ALCATEL 1000 S12, a World
Bank-financed PLDT project in line with its Zero Backlog Program. ALCATEL, the foreign
supplier, shouldered the cost of their training and travel expenses. Petitioners left for
Germany on April 10, 1995 and stayed there until July 21, 1995.[3]
On July 12, 1995, while petitioners were in Germany, a certain Mr. R. Relucio, SwitchNet
Division Manager, requested advice, through an inter-office memorandum, from the Cebu
and Davao Provincial Managers if any of the training participants were interested to transfer
to the Sampaloc ROMCC to address the operational requirements therein. The transfer was
to be made before the ALCATEL exchanges and operations and maintenance center in
Sampaloc would become operational.
Upon petitioners return from Germany, a certain Mr. W.P. Acantillado, Senior Manager of the
PLDT Cebu Plant, informed them about the memorandum. They balked at the idea, but
PLDT, through an inter-office memorandum dated December 21, 1995, proceeded to transfer
petitioners to the Sampaloc ROMCC effective January 3, 1996.[4]
Petitioners left Cebu for Manila on December 27, 1995 to air their grievance to PLDT and to
seek assistance from their union head office in Mandaluyong. PLDT ordered petitioners to
report for work on January 16, 1996, but they asked for a deferment to February 1, 1996.
Petitioners reported for work at the Sampaloc office on January 29, 1996. Meanwhile PLDT
moved the effectivity date of their transfer to March 1, 1996. On March 13, 1996, petitioners
again appealed to PLDT to no avail. And, because all their appeals fell on deaf ears,
petitioners, while in Manila, tendered their resignation letters on March 21, 1996.
Consequently, the expenses for their training in Germany were deducted from petitioners
final pay.

On September 11, 1996, petitioners filed a complaint with the National Labor Relations
Commission Regional Arbitration Branch No. 7 for alleged constructive dismissal and nonpayment of benefits under the Collective Bargaining Agreement.[5] In an order dated
November 10, 1996, the presiding labor arbiter referred the complaint to the National
Conciliation and Mediation Board, Cebu City, for appropriate action.[6] On January 17, 1997,
the parties agreed to designate lawyer Rolando M. Lim as their voluntary arbitrator.[7]
In their complaint, petitioners prayed that their dismissal from employment be declared
illegal. They also asked for reinstatement with full backwages, refund of unauthorized
deductions from their final pay, including damages, costs of litigation, and attorneys fees.[8]
Respondent PLDT, for its part, averred that petitioners agreed to accept any assignment
within PLDT in their application for employment[9] and also in the undertaking[10] they
executed prior to their training in Germany. It prayed that petitioners complaint be
dismissed.
After submission of their respective position papers and admission of facts, the case was set
for hearing. Petitioners presented their witnesses and made their formal offer of
documentary evidence. PLDT, however, requested for a re-setting of the hearing from
October 9 and 10, 1997 to November 10 and 11, 1997.[11] But on those dates PLDT did not
appear. Nor did it file any notice of postponement or motion to cancel the hearings.[12]
Upon petitioners motion and pursuant to Article 262-A of the Labor Code,[13] the voluntary
arbitrator issued an order admitting all documentary exhibits offered in evidence by
petitioners and submitting the case for resolution.[14] In said order, PLDT was declared to
have waived its right to present evidence on account of its unjustified failure to appear in
the November 10 to 11 hearings.
On December 1, 1997, the voluntary arbitrator issued a decision which reads:
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered in the
above case, in favor of complainants Zel Zafra and Edwin Ecarma and against respondent
PLDT, as follows:
1. Declaring that complainants were illegally dismissed by reason of the forced resignations
or constructive discharge from their respective employment with PLDT;
2. Ordering the reinstatement of complainants without loss of seniority rights and other
privileges, and granting the award of full backwages from April 22, 1996, inclusive of
allowances granted in the CBA or their monetary equivalent computed from the time
complainants compensation were withheld up to the time of their actual reinstatement, or in
lieu thereof, ordering the payment of separation pay with full backwages;
3. Ordering the refund of P35,721.81 to complainant Zafra and P24,186.67 to complainant
Ecarma, which amounts constitute as unauthorized deductions from their final pay;
4. Ordering payment of P50,000.00 as moral damages; P20,000.00 as exemplary damages
and P20,000.00 as refund for litigation expenses;
5. Ordering payment of 10% Attorneys Fees computed on all adjudicated claims.
SO ORDERED.[15]
PLDTs motion for reconsideration of the above decision was denied on July 10, 1998.[16] On
August 7, 1998, PLDT initiated a special civil action for certiorari with the Court of Appeals,
[17] which was treated as a petition for review.[18] On December 22, 1998, the CA ruled in
favor of PLDT and reversed the voluntary arbitrators decision, in this wise:
WHEREFORE, the instant petition is hereby given due course. Accordingly, the assailed Order
is hereby REVERSED with the exception of the refund, which is hereby ordered, of the
amount of P35,721.81 to respondent Zafra and P24,186.67 to respondent Ecarma
representing unauthorized deductions from their final pay.
SO ORDERED.[19]
Zafra and Ecarma as respondents below moved for reconsideration of the CA decision which,
however, was denied on May 24, 1999.[20]
Petitioners now anchor their petition on the following grounds:

I. THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN THE RESPONDENTS

PETITION IN A WAY PROBABLY NOT IN ACCORD WITH THE LAW OR THE APPLICABLE
DECISIONS OF THE SUPREME COURT.
A. THE COURT A QUO, INSTEAD OF RESOLVING ERRORS OF JURISDICTION ALLEGED IN THE
RESPONDENTS PETITION ERRED IN RENDERING THE DECISION ON ITS MERITS, IN EFFECT
NOT ACCORDING RESPECT AND SETTING ASIDE THE VOLUNTARY ARBITRATORS EVALUATION
OF THE EVIDENCE AND FACTUAL FINDINGS BASED THEREON.
B. THE COURT A QUO, IN GIVING DUE COURSE TO THE RESPONDENTS PETITION ERRED IN
PROCEEDING TO RESOLVE THE SAME ON THE MERITS, WITHOUT FIRST REVIEWING THE
ENTIRE RECORD OF THE PROCEEDINGS OF THE VOLUNTARY ARBITRATOR.
II. THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS, AS TO CALL FOR AN EXERCISE OF THE HONORABLE SUPREME
COURTS SUPERVISION.
A. THE COURT A QUO COMMITTED GRAVE ABUSE OF DISCRETION IN RENDERING THE
DECISION THROUGH ITS UTTER DISREGARD OF THE APPROPRIATE MODE OF APPEAL TO BE
TAKEN BY THE RESPONDENTS FROM THE JUDGMENT OF THE VOLUNTARY ARBITRATOR.
B. THE COURT A QUO COMMITTED GRAVE ABUSE OF ITS DISCRETION IN TREATING JOINTLY
THE RESPONDENTS PETITION EITHER AS AN APPEAL UNDER RULE 43, OR IN THE
ALTERNATIVE, A SPECIAL CIVIL ACTION FOR CERTIORARI UNDER RULE 65.
C. THE COURT A QUO COMMITTED GRAVE ABUSE OF ITS DISCRETION IN FAILING TO DISMISS
THE RESPONDENTS PETITION FOR CERTIORARI OUTRIGHTLY FOR FAILURE TO COMPLY WITH
THE STRICT REQUIREMENTS IN THE FILING THEREOF.[21]
Briefly, the issues in this case may be restated as follows: (1) whether or not the CA erred in
treating the special civil action for certiorari filed by respondent as a petition for review, and
(2) whether or not the CA erred in its appreciation of facts and the decision it rendered.
Petitioners invoke Luzon Development Bank vs. Association of Luzon Development Bank
Employees, et al.[22] and Rule 43 of the 1997 Rules of Civil Procedure[23] in arguing that an
appeal and not a petition for certiorari should be the proper remedy to question the decision
or award of the voluntary arbitrator. Even assuming that Rule 65 applies, petitioners argue
that PLDT, nevertheless, erred in not including the voluntary arbitrator as one of the
respondents in the petition and in not serving him a copy thereof.[24] These procedural
flaws, they aver, merit the outright dismissal by the CA of the petition.[25]
A perusal of the petition before the CA shows that the mode chosen by PLDT was a petition
for review under Rule 43 and not a special civil action for certiorari under Rule 65. While it
was captioned as a petition for certiorari, it is not the caption of the pleading but the
allegations therein that determine the nature of the action.[26] The appellate court was not
precluded from granting relief as warranted by PLDTs allegations in the petition and the
evidence it had presented to support the petition.
A perusal of the petition before the CA discloses the following: First, under the heading
Nature of the Action, the PLDT averred it was a petition for review on certiorari of the
Decision dated December 1, 1997 and Order dated July 10, 1998 of Voluntary Arbitrator Atty.
Rolando M. Lim.[27] Second, while the assigned errors alleged that the voluntary arbitrator
acted with grave abuse of discretion, nevertheless, the issue set forth was whether or not
there existed sufficient evidence to show that complainants [herein petitioners] were
constructively dismissed, and whether they were entitled to reinstatement, back wages and
other monetary awards.[28] Clearly, the issue was factual and not limited to questions of
jurisdiction and grave abuse of discretion. Third, the petition was filed within the 15-day
period to perfect an appeal and did not implead the voluntary arbitrator as a respondent. All
of these indicate that the petition below was indeed one for review.
Moreover, contrary to petitioners contention that the voluntary arbitrator was not furnished
a copy of the petition, the records reveal otherwise. Attached to the petition filed before the
appellate court was a registry receipt of the copy sent to the voluntary arbitrator.[29]
Coming now to the substantive merits of the petition before us. Considering that the CAs
findings of fact clash with those of the voluntary arbitrator, with contradictory results, this
Court is compelled to go over the records of the case as well as the submissions of the
parties. Having done so carefully, we are not convinced that the voluntary arbitrator erred in
his factual conclusions so as to justify reversal thereof by the appellate court. We are
persuaded to rule in favor of the complaining workers, herein petitioners, following the well-

established doctrine in labor-management relations that in case of doubt, labor should

prevail.
The fact that petitioners, in their application for employment,[30] agreed to be transferred or
assigned to any branch[31] should not be taken in isolation, but rather in conjunction with
the established company practice in PLDT.
The standard operating procedure in PLDT is to inform personnel regarding the nature and
location of their future assignments after training abroad. This prevailing company practice
is evidenced by the inter-office memorandum[32] of a certain PLDTs First Vice President
(Reyes), dated May 3, 1996 to PLDTs Chief Operating Officer (Perez), duly-acknowledged by
private respondents:
xxx
To : Atty. E.D. Perez, SEVP & COO
Thru : J.P. de Jesus, EVP - Meet Demand Group
From : FVP - Program Planning & Engineering Sector
Subject: NON-ASSIGNABLE TRAINED PERSONNEL
=====================================================
During the Group Heads Meeting on 03 April 1996, Mr. R.R. Zarate reported on the case of
some provincial personnel who had foreign training for functions intended for Manila
Operations but refused to be relocated and assigned to Manila, and who eventually resigned
on account of the said transfer. In view of this situation, two (2) issues were raised as
follows:
1. Network Services to be involved in the planning of facilities, specially when this involves
trainees from Network.
2. Actual training to be undertaken only after the sites where such training will be utilized
have been determined.
xxx
A total of 53 slots (for the Exchange O&M, System Software/Acceptance Engineering and
OMC Specialist Courses) were allocated to Network Services by the Steering Committee
composed of representatives from ProgPlan and TechTrain. The O&M slots were equally
distributed to Provincial Operations on the basis where Alcatel switches will be
geographically installed. With regards to NSC, since the contract has defined its location to
be in Sampaloc and considering that its monitoring function would focus on provincial
exchanges, slots were opened both for Provincial and Metro Manila Operations. Please note
that all these relevant informations were disseminated to concerned parties as inputs, to
enable them to recommend the appropriate training participants.
The choice of trainees were made by Network and, therefore, it is incumbent upon them to
brief the participants or trainees they selected on the nature and assignment of their
employment after training.
To prevent similar instances in the future, we strongly recommend the following:
1. Prior to the training, all concerned groups should conform with the standard practice of
informing personnel regarding the nature and/or location of their future assignments after
the training.
2. The contractual obligation of the trainees should include a provision on their willingness
and commitment to perform the related training functionalities required by the company.
x x x (Underscoring supplied.)
The want of notice of transfer to petitioners was the subject of another inter-office
memorandum dated November 24, 1995, from one Mr. Relucio, SwitchNet Division Manager,
to a certain Mr. Albania, First Vice President-Regional & Toll Network. It states:
As the cheaper option is to relocate personnel who have attended the training already, we
have solicited the desire of the Cebu and Davao-based provincial personnel to transfer to
SwitchNet Sampaloc ROMCC which they declined, x x x We should note that these personnel
were not made aware prior to start of training, that they will be transferred to Manila.[33]
A third inter-office memorandum dated November 29, 1995 confirmed this procedural flaw,
thus:

Alternative 1: Require the four Jones and Davao ROMCC personnel to transfer [to] the
Sampaloc ROMCC, as service requirement. This is the least cost alternative. x x x We should
note however, that these personnel were not aware that they would relocate after training.
[34]
Under these circumstances, the need for the dissemination of notice of transfer to
employees before sending them abroad for training should be deemed necessary and later
to have ripened into a company practice or policy that could no longer be peremptorily
withdrawn, discontinued, or eliminated by the employer. Fairness at the workplace and
settled expectations among employees require that we honor this practice and commend
this policy.
The appellate courts justification that petitioners transfer was a management prerogative
did not quite square with the preceding evidence on record, which are not disputed. To say
that petitioners were not constructively dismissed inasmuch as the transfer was effected
without demotion in rank or diminution of salary benefits is, to our mind, inaccurate. It is
well to remember that constructive dismissal does not always involve forthright dismissal or
diminution in rank, compensation, benefits, and privileges. For an act of clear discrimination,
insensibility, or disdain by an employer may become so unbearable on the part of the
employee that it could foreclose any choice by him except to forego his continued
employment.[35] The insensibility of private respondents is at once deducible from the
foregoing circumstances.
Despite their knowledge that the lone operations and maintenance center of the 33 ALCATEL
1000 S12 Exchanges would be homed in Sampaloc,[36] PLDT officials neglected to disclose
this vital piece of information to petitioners before they acceded to be trained abroad. On
arriving home, they did not give complaining workers any other option but placed them in an
either/or straightjacket, that appeared too oppressive for those concerned.
As pointed out in the abovementioned inter-office memorandum by Mr. Reyes:
All sites where training will be utilized are already pre-determined and pinpointed in the
contract documents and technical protocols signed by PLDT and the contractor. Hence, there
should be no reason or cause for the misappointment of the training participants.[37]
Needless to say, had they known about their pre-planned reassignments, petitioners could
have declined the foreign training intended for personnel assigned to the Manila office. The
lure of a foreign trip is fleeting while a reassignment from Cebu to Manila entails major and
permanent readjustments for petitioners and their families.
We are not unaware that the transfer of an employee ordinarily lies within the ambit of
management prerogatives. However, a transfer amounts to constructive dismissal when the
transfer is unreasonable, inconvenient, or prejudicial to the employee, and involves a
demotion in rank or diminution of salaries, benefits, and other privileges.[38] In the present
case, petitioners were unceremoniously transferred, necessitating their families relocation
from Cebu to Manila. This act of management appears to be arbitrary without the usual
notice that should have been done even prior to their training abroad. From the employees
viewpoint, such action affecting their families are burdensome, economically and
emotionally. It is no exaggeration to say that their forced transfer is not only unreasonable,
inconvenient, and prejudicial, but to our mind, also in defiance of basic due process and fair
play in employment relations.
WHEREFORE, this petition for review is GRANTED. The decision of the Court of Appeals in CAG.R. SP No. 48578, dated December 22, 1998, is REVERSED and SET ASIDE. The decision of
the Voluntary Arbitrator dated December 1, 1997, is REINSTATED. No pronouncement as to
costs.
SO ORDERED.
[G.R. No. 152057. September 29, 2003]
PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION, petitioner, vs. COURT OF
APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PT&T PROGRESSIVE
WORKERS UNION-NAFLU-KMU, CRISTINA RODIEL, JESUS PARACALE, ROMEO TEE,
BENJAMIN LAKANDULA, AVELINO ACHA, IGNACIO DELA CERNA and GUILLLERMO
DOMEGILLO, respondents.
DECISION
CALLEJO, SR., J.:

This is a petition for review filed by petitioner Philippine Telegraph and Telephone
Corporation (PT&T) of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 54346
promulgated on June 15, 2001 affirming the resolution of the National Labor Relations
Commission (NLRC) promulgated on May 31, 1999 reversing the decision of the Labor
Arbiter, and its Resolution dated February 6, 2002 denying the petitioners motion for
reconsideration.
The petitioner is a domestic corporation engaged in the business of providing telegraph and
communication services thru its branches all over the country. It employed various
employees, among whom were the following:
1. Cristina Rodiel, initially as a Probationary Junior Counter- Clerk on July 1, 1995 at the
Cabanatuan Branch, regularized on November 28, 1995;
2. Jesus Paracale as a Probationary Junior CW Operator in Padada, Davao del Sur on
November 16, 1988, regularized on April 15, 1990, transferred to Malita, Davao Branch on
November 16, 1990, to Makar, South Cotabato Branch on September 1, 1994 and to Kiamba,
South Cotabato Branch on April 1, 1995;
3. Romeo Tee as Counter-Clerk at the Zamboanga Branch on January 16, 1982, as a TTY
Operator on November 16, 1986, promoted as TTY Operator General on November 1, 1989
and designated as TRITY Operator Regions on July 1, 1997;
4. Benjamin Lakandula as a Counter-Clerk at the Iligan City Branch on January 16, 1982;
5. Avelino Acha as Probationary Junior Counter at the Naga City Branch, regularized on June
10, 1983, transferred to Legaspi City Branch on November 16, 1989;
6. Ignacio Dela Cerna as a Probationary Junior CW-Operator in at the Pagadian City Branch
regularized on March 15, 1986 and designated as TR/TTY Operator Regions on July 1, 1993
at the Pagadian City Branch, and
7. Guillermo Demigillo as Clerk.[2]
Sometime in 1997, after conducting a series of studies regarding the profitability of its retail
operations, its existing branches and the number of employees, the petitioner came up with
a Relocation and Restructuring Program designed to (a) sustain its (PT&Ts) retail operations;
(b) decongest surplus workforce in some branches, to promote efficiency and productivity;
(c) lower expenses incidental to hiring and training new personnel; and (d) avoid
retrenchment of employees occupying redundant positions.[3]
On August 11, 1997, private respondents Cristina Rodiel, Jesus Paracale, Romeo Tee,
Benjamin Lakandula, Avelino Acha, Ignacio Dela Cerna and Guillermo Demigillo received
separate letters from the petitioner, giving them the option to choose the branch to which
they could be transferred. Thereafter through HRAG Bulletin No. 97-06-16, the private
respondents and other petitioners employees were directed to relocate to their new PT&T
Branches. The affected employees were directed to report to their respective relocation
assignments in a Letter dated September 16, 1997.
The petitioner offered benefits/allowances to those employees who would agree to be
transferred under its new program, thus:
EXISTING RELOCATION ALLOWANCE
SPECIAL RELOCATION ALLOWANCE
FLAT RELOCATION ALLOWANCE
MOVING EXPENSES (FREIGHT)
1. Temporary relocation per diem of P260.00/day
2.1 Married employee bringing along his family
P17,500.00
P15,000
2. Permanent relocation a flat monthly allowance of P5,100.00
2.2 Married employee not bringing along his family

P10,000.00
N/A
2.3 Single employee bringing along his qualified dependent/s
P10,000.00
P15,000
2.4 Single employee not bringing along his dependent/s
P7,000.00
N/A[4]
Moreover, the employees who would agree to the transfers would be considered promoted,
thus:
FROM
TO
NAME
POSITION/JG*
WORK LOCATION
POSITION
WORK LOCATION
1. ACHA, AVELINO
Jr. Counter-JG2
Legaspi (Br)
Courier JG3
Romblon/
Odiongan (SL)
2. RODIEL, CRISTINA
Jr. Counter Clerk-JG2
Cabanatuan (CL)
Clerk-JG4
Baguio (NWL)
3. DELA CERNA, IGNACIO
Jr. CW Operator-JG2
Cotabato City (CM)
Clerk-JG4
Kidapawan (CM)
4. DEMIGILLO GUILLERMO
Jr. CW Operator-JG2
Midsayap North
Courier-JG3
Lebak (CM)
5. LAKANDULA, BENJAMIN
Counter-JG3
Iligan (NM)
Clerk JG4
Butuan (EM)
6. PARACALE, JESUS
Jr. CW Operator-JG2
Makar, Gen. Santos (SM)
Clerk JG4
Butuan (EM)
7. TEE, ROMEO
TTY Operator-Gen. JG4
Zamboanga City (WM)
Clerk JG4
Jolo (WM)[5]
The private respondents rejected the petitioners offer. On October 2, 1997, the petitioner
sent letters to the private respondents requiring them to explain in writing why no
disciplinary action should be taken against them for their refusal to be transferred/relocated.
[6]
In their respective replies to the petitioners letters, the private respondents explained that:

The transfers imposed by the management would cause enormous difficulties on the
individual complainants. For one, their new assignment involve distant places which would
require their separation from their respective families. For instance, in the case of Avelino
Acha who would be coming from Bicol Region, he would have to take a boat in going to his
new assignment in Odiongan, Romblon. The voyage would take a considerable period of
time and it would be imperative for him to relocate to Romblon to be able to attend to his
new assignment.
The same holds true with the other complainants. Romeo Tee for instance, will have to take
an overnight boat trip from his previous assignment in Zamboanga to his new assignment in
Jolo, Sulu. He would have to part with his family and resettle to Jolo in connection with his
transfer. Cristina Rodiel on the other hand, would be transferred to Baguio City which is quite
distant from her previous workbase and residence at Cabanatuan. Jesus Paracale finds
himself in the same difficult situation as he would be transferred from General Santos City at
the Southern tip of Mindanao to Butuan City, almost a days travel by bus and located at the
northernmost tip of the island. Benjamin Lakandula and Guillermo Demigillo, are also in the
same situation as their new assignments are quite distant from their previous places of
work.[7]
Dissatisfied with this explanation, the petitioner considered the private respondents refusal
as insubordination and willful disobedience to a lawful order; hence, the private respondents
were dismissed from work.[8] They forthwith filed their respective complaints against the
petitioner before the appropriate sub-regional branches of the NLRC.[9]
Subsequently, the private respondents bargaining agent, PT&T Workers Union-NAFLU-KMU,
filed a complaint against the petitioner for illegal dismissal and unfair labor practice for and
in behalf of the private respondents, including Ignacio Dela Cerna, before the arbitration
branch of the NLRC.[10]
In their position paper, the complainants (herein private respondents) declared that their
refusal to transfer could not possibly give rise to a valid dismissal on the ground of willful
disobedience, as their transfer was prejudicial and inconvenient; thus unreasonable. The
complainants further asserted that since they were active union members, the petitioner
was clearly guilty of unfair labor practice[11] especially considering their new work stations:
1. Jesus Paracale, from General Santos Branch to Butuan City Branch;
2. Romeo Tee, from Zamboanga Branch to Jolo Branch;
3. Benjamin Lakandula, from Iligan City to Butuan City;
4. Avelino Acha, from Legaspi City Branch to Odiongan Branch;
5. Ignacio Dela Cerna, from Pagadian City Branch to Butuan Branch; and
6. Guillermo Demigillo, from Midsayap to Lebak Cotabato Branch.[12]
For its part, the petitioner (respondent therein) alleged that the private respondents
transfers were made in the lawful exercise of its management prerogative and were done in
good faith. The transfers were aimed at decongesting surplus employees and detailing them
to a more demanding branch.
In their reply to the petitioners position paper, the private respondents opined that since
their respective transfers resulted in their promotion, they had the right to refuse or decline
the positions being offered to them. Resultantly, the refusal to accept the transfer could not
have amounted to insubordination or willful disobedience to the lawful orders of the
employer.
After the parties filed their respective pleadings, the Honorable Labor Arbiter Celenito N.
Daing rendered a Decision on September 25, 1998 dismissing the complaint for lack of
merit.[13]
The labor arbiter ratiocinated that an employer, in the exercise of his management
prerogative, may cause the transfer of his employees provided that the same is not
attended by bad faith nor would result in the demotion of the transferred employees. The
labor arbiter ruled in favor of the petitioner, finding that the aforesaid transfers indeed
resulted in the private respondents promotion, and that the complaint for unfair labor
practice was not fully substantiated and supported by evidence.
Aggrieved, the private respondents appealed that aforesaid decision to the NLRC.

On May 31, 1999, the NLRC issued a Resolution which reversed and set aside the decision of
the labor arbiter. The NLRC ruled that the petitioner illegally dismissed the private
respondents, thus:
WHEREFORE, premises considered, the Appeal is hereby GRANTED. Accordingly, the
Decision appealed from is REVERSED and SET ASIDE and a new one entered declaring
respondent-appellee guilty of illegal dismissal and ordering Philippine Telegraph and
Telephone Corporation to reinstate individual complainants-appellants to their former
positions without loss of seniority rights and other privileges and to pay them full backwages
from the date of their dismissal up to the date of their actual reinstatement, computed as
follows [14]
The NLRC interpreted the said transfers of the respondents as a promotion; that the
movement was not merely lateral but of scalar ascent, considering the movement of the job
grades, and the corresponding increase in salaries. As such, the respondents had the right to
accept or refuse the said promotions. The NLRC concluded that in the exercise of their right
to refuse the promotion given them, they could not be dismissed.
Without filing a motion for reconsideration, the petitioner filed a petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure before the Court of Appeals, assailing the May
31, 1999 Resolution of the NLRC. The petitioner raised the following errors:
4.1
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT RULED AGAINST PRIVATE RESPONDENTS DISMISSAL ON THE
GROUND OF INSUBORDINATION FOR REFUSING TO HEED TO THE TRANSFER ORDER OR THE
PETITIONER.
4.2
PUBLIC RESPONDENT COMMITTEE GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT SUSTAINED PRIVATE RESPONDENTS CONTENTION THAT THEY WERE
IN FAC BEING PROMOTED AND NOT TRANSFERRED, THUS RENDERING THE LATTERS
DISOBEDIENCE JUSTIFIED.
PUBLIC RESPONDENTS (SIC) COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION WHEN IT RULED THAT PRIVATE RESPONDENTS ARE ENTITLED TO
REINSTATEMENT WITHOUT LOSS OF SENIORITY RIGHTS AND OTHER PRIVILEGES, AS WELL AS
PAYMENT OF FULL BACKWAGES FROM DATE OF DISMISSAL UP TO DATE OF ACTUAL
REINSTATEMENT.[15]
On June 15, 2001, the Court of Appeals rendered a Decision affirming the resolution of the
NLRC, the dispositive portion of which reads:
WHEREFORE, finding no grave abuse of discretion on the part of the respondent commission,
the petition is hereby DISMISSED for lack of merit. The assailed May 31, 1999 Resolution of
the National Labor Relations Commission, Third Division is hereby AFFIRMED IN TOTO.[16]
The petitioner filed a motion for reconsideration. On February 6, 2002, the CA issued a
Resolution denying the motion.[17]
Dissatisfied, the petitioner filed its petition for review assailing the decision and resolution of
the CA, insisting that:
I
PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT ISSUED THE ORDERS DATED JUNE 15, 2001
AND FEBRUAR 6, 2002 AFFIRMING THE ORDER DATED MAY 31, 1999 OF THE THIRD DIVISION
OF THE NATIONAL LABOR RELATIONS COMMISSION, CONSIDERING THAT:
a. THE ORDER DATED MAY 31, 1999 OF THE NATIONAL LABOR RELATIONS COMMISSION IS
NOT SUPPORTED BY SUBSTANTIAL EVIDENCE;
b. THE PETITIONER DID NOT ADMIT IN ITS POSITION PAPER FILED BEFORE THE LABOR
ARBITER THAT THE PRIVATE RESPONDENTS WERE BEING PROMOTED. ON THE CONTRARY, IT
HAS ALWAYS BEEN THE CONTENTION OF THE PETITIONER THAT THE PRIVATE RESPONDENTS
WERE SIMPLY ORDERED TRANSFERRED TO OTHER WORK STATIONS WITHOUT DEMOTION IN
RANK AND DIMINUTION IN SALARY;

c. THE PRIVATE RESPONDENTS WERE LEGALLY TERMINATED FOR JUST AND AUTHORIZED
CAUSE FOR WILFULL DISOBEDIENCE TO THE LAWFUL ORDERS OF THE PETITIONER
(TRANSFER ORDER PURSUANT TO ITS RELOCATION AND RESTRUCTURING PROGRAM), AFTER
AFFORDING THEM DUE PROCESS OF LAW AND THUS NOT ENTITLED TO REINSTATEMENT;
AND
d. PETITIONER ACTED IN GOOD FAITH IN IMPLEMENTING ITS RELOCATION AND
RESTRUCTUTING PROGRAM WHICH RESULTED IN THE TERMINATION OF THE PRIVATE
RESPONDENTS. AND AS SUCH, THE PRIVATE RESPONDENTS ARE NOT ENTITLED TO THE
PAYMENT OF ANY BACKWAGES.[18]
In their Comment, the private respondents argue that the petition should be dismissed for
the following reasons: (a) that a petition for review under Ruler 45 is limited to questions of
law; (b) the private respondents were promoted and not only transferred as established by
the evidence on record; and (b) private respondents could not be penalized with dismissal
for declining their promotions.
The petition is denied due course.
As has been enunciated in numerous cases, the issues that can be delved into a petition for
review under Rule 45 are limited to questions of law. Thus, the Court is not tasked to
calibrate and assess the probative weight of evidence adduced by the parties during trial all
over again.[19] The test of whether the question is one of law or of fact is whether the
appellate court can determine the issue raised without reviewing or evaluating the evidence,
in which case, it is a question of law; otherwise, it is a question of fact.[20]
In the case at bar, the petitioner would want this Court to ascertain whether or not the
findings of NLRC, as affirmed by the CA, are substantiated by the evidence on record; hence,
requiring a review involving questions of facts. For this reason alone, this case should be
dismissed.
Even if the Court were to review the instant case on its merits, the dismissal of the petition is
inevitable.
Section 3, Rule V of the NLRC provides that:
Section 3. Submission of Position Papers/Memorandum Should the parties fail to agree upon
an amicable settlement, either in whole or in part, during the conferences, the Labor Arbiter
shall issue an order stating therein the matters taken up and agree upon during the
conferences and directing the parties to simultaneously file their respective verified position
papers.
These verified position papers shall cover only those claims and causes of action raised in
the complaint excluding those that may have been amicably settled, and shall be
accompanied by all supporting documents including the affidavits of their respective
witnesses which shall take the place of the latters direct testimony. The parties shall
thereafter not be allowed to allege facts, or present evidence to prove facts, not referred to
and any cause or causes of action not included in the complaint or position papers. Without
prejudice to the provisions of Section 2 of this Rule, the Labor Arbiter shall direct both
parties to submit simultaneously their position papers with supporting documents and
affidavits within an inextendible period of ten (10) days from notice of termination of the
mandatory conciliation. mediation conference.
In its position with the labor arbiter, the petitioner adverted that when the private
respondents were transferred, they were also promoted, thus:
Clearly, the transfer of the complainants is not unreasonable nor does it involve demotion in
rank. They are being moved to branches where the complainants will function with
maximum benefit to the company and they were in fact promoted not demoted from a lower
job-grade to a higher job-grade and receive even higher salaries than before. Thus, transfer
of the complainants would not also result in diminution in pay benefit and privilege since the
salaries of the complainant would be receiving a bigger salary if not the same salary plus
additional special relocation package. Although the increase in the pay is not significant this
however would be translated into an increase rather than decrease in their salary because
the complainants who were transferred from the city to the province would greatly benefit
because it is of judicial notice that the cost of living in the province is much lower than in the
city. This would mean a higher purchasing power of the same salary previously being
received by the complainants.[21]
Indeed, the increase in the respondents responsibility can be ascertained from the scalar
ascent of their job grades. With or without a corresponding increase in salary, the respective

transfer of the private respondents were in fact promotions, following the ruling enunciated
in Homeowners Savings and Loan Association, Inc. v. NLRC:[22]
[P]romotion, as we defined in Millares v, Subido, is the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually
accompanied by an increase in salary. Apparently, the indispensable element for there to be
a promotion is that there must be an advancement from one position to another or an
upward vertical movement of the employees rank or position. Any increase in salary should
only be considered incidental but never determinative of whether or not a promotion is
bestowed upon an employee. This can be likened to the upgrading of salaries of government
employees without conferring upon the, the concomitant elevation to the higher positions.
[23]
The admissions of the petitioner are conclusive on it. An employee cannot be promoted,
even if merely as a result of a transfer, without his consent. A transfer that results in
promotion or demotion, advancement or reduction or a transfer that aims to lure the
employee away from his permanent position cannot be done without the employees
consent.[24]
There is no law that compels an employee to accept a promotion for the reason that a
promotion is in the nature of a gift or reward, which a person has a right to refuse.[25]
Hence, the exercise by the private respondents of their right cannot be considered in law as
insubordination, or willful disobedience of a lawful order of the employer. As such, there was
no valid cause for the private respondents dismissal.
As the questioned dismissal is not based on any of the just or valid grounds under Article
282 of the Labor Code, the NLRC correctly ordered the private respondents reinstatement
without loss of seniority rights and the payment of backwages from the time of their
dismissal up to their actual reinstatement.
IN LIGHT OF THE ALL THE FOREGOING, the Decision of the Court of Appeals dated June 15,
2001 is hereby AFFIRMED.
SO ORDERED.

[G.R. No. 127421. December 8, 1999]

PHILIPPINE INDUSTRIAL SECURITY AGENCY CORPORATION, petitioner, vs. VIRGILIO
DAPITON and the NATIONAL LABOR RELATIONS COMMISSION, respondents.
DECISION
PUNO, J.:
This case arose from a complaint for illegal dismissal, underpayment of salaries and wages,
overtime pay, holiday pay, 13th month pay and service incentive leave pay filed by
respondent Virgilio D. Dapiton against petitioner Philippine Industrial Security Agency
Corporation and its President, Isidro Lirag.
The evidence for petitioner shows that on November 2, 1990 petitioner hired respondent as
a security guard. His initial assignment was at PCIBank in Kalookan City. During his tour of
duty at PCIBank on January 25, 1994, respondent had a heated argument with his fellow
security guard, Roderick Lumen. The incident almost led to a shootout. After investigation,
petitioners chief investigator recommended their dismissal. Lumen was compelled to resign
while respondent was suspended from work for seven (7) days.
Petitioner alleged that respondent did not serve his suspension and instead went on a leave
of absence. Nonetheless, he was assigned at the BPI Family Bank in Navotas when he
reported back for duty. Allegedly, respondent refused to accept his assignment.
In March 1994, respondent was assigned at Sevilla Candle Factory in Malabon. Three (3)
weeks later, he abandoned his post and went on absence without leave (AWOL).
Respondent was given another assignment at Security Bank and Trust Company. He was
required to report for an interview and to undergo a neurological examination. Respondent
refused and allegedly again went on AWOL.
On April 15, 1994, petitioner sent a telegram to respondent to report to its office for a
conference. Respondent did not show up. Instead, on April 22, 1994, respondent filed the
present illegal dismissal case.

Respondent denied petitioners allegations. He claimed that after he served his suspension,
he was assigned at BPI Family Bank in Navotas. He accepted the new post. However, after a
short period, he was relieved and was transferred to the Mercury Drugstore in Grand Central,
Kalookan City. Again, after a brief tour of duty, he was relieved.
In March 1994, he was posted at Sevilla Candle Factory. While on duty, he witnessed some
shabu dealers doing their illegal trade. Fearful for his life, he left his post and requested
petitioner to transfer him to another post.
He admitted that his assignment at Security Bank did not materialize for he failed to take
the neurological test. He explained he could not pay the examination fee in the amount of
P250.00. He asked petitioner to pay the said amount but it refused.
Respondent alleged that thereafter, he was reduced to a mere reliever of absent security
guards and was frequently transferred from one post to another. His last assignment was at
the Philippine Savings Bank (PSB) in Makati. It lasted for only one (1) day. Since April 13,
1994, he was not given any assignment. He reported to petitioners office regularly for his
posting but to no avail. Consequently, on April 22, 1994, he sued petitioner for illegal
dismissal and asked for separation pay. The case was docketed as NLRC-NCR Case No. 0004-03291-94.
On June 15, 1994, respondent filed an Amended Complaint and Position Paper.[1] He prayed
for reinstatement and further charged petitioner with underpayment of salaries and wages,
overtime pay, holiday pay, 13th month pay and service incentive leave pay. He alleged that
he was only paid P4,800.00 monthly for 12 hours of work per day. He became a reliever of
absent security guards and sometimes he worked for more than eight (8) hours. The daily
rate before December 1993 was P118.00. The rate increased by P17.00 in December 1993
and by P10.00 in April 1994. Thus, using the rate of P118.00 alone, respondent claimed that
petitioner should have paid him as much as P5,752.50 per month.
On August 25, 1994, after further exchange of pleadings, Labor Arbiter Felipe Pati issued an
order declaring the case as submitted for decision.[2] Nonetheless, on October 24, 1994,
petitioner filed a Motion to Admit to rebut respondents money claims.[3] Attached to the
motion was a summary of the computation of the salaries, overtime pay, 13th month pay
and other monetary benefits allegedly received by respondent from 1992-1994. Petitioner
did not submit the employment records and payrolls of respondent for the said period
allegedly because they were voluminous. However, petitioner undertook to submit said
documents should the labor arbiter require it. Additionally, its managing director executed
an affidavit[4] attesting to the truthfulness of its computation per the existing records of the
company. The motion was not acted upon.
On December 14, 1994, Labor Arbiter Felipe P. Pati rendered a decision[5] finding petitioner
liable for constructive dismissal. Essentially, the labor arbiter found that from 1990 up to
1993, respondent was assigned at PCIBank in Kalookan City. After his suspension on January
26, 1994, respondent was transferred frequently to different posts and despite its accusation
that respondent was always absent from work, it continued to give him new assignments
and did not take any disciplinary action against him. Thus, the labor arbiter concluded that
said transfers were a mere scheme of petitioner to ease out respondent from work. The
labor arbiter ordered respondents reinstatement with payment of backwages. Moreover,
petitioner and its president, Isidro Lirag, were required to pay the sum of P74,844.24,
representing respondents wage differential, overtime pay, 13th month pay and night shift
differential.
Petitioner and Lirag appealed to the NLRC.
The NLRC dismissed the appeal, albeit respondent Isidro Lirag was held not liable for the
money claims of respondent. The fallo of the NLRC decision reads:[6]
WHEREFORE, the appealed Decision is hereby AFFIRMED, except the awards, conformably
with this Resolution, shall be solely the liability of (petitioner) appellant agency.
Petitioners motion for reconsideration was denied on July 31, 1996.[7] Hence, this petition.
Petitioner contends that the NLRC gravely abused its discretion in:
I
DENYING PETITIONERS MOTION FOR RECONSIDERATION AND AFFIRMING THE LABOR
ARBITERS FINDING OF ILLEGAL DISMISSAL NOTWITHSTANDING THE FACT THAT THERE WERE
OVERWHELMING EVIDENCE TO SHOW THAT IT WAS THE PRIVATE RESPONDENT HIMSELF
WHO ABANDONED HIS POST AND REFUSED PETITIONERS OFFER OF NEW ASSIGNMENT;

II
AFFIRMING THE DECISION OF THE LABOR ARBITER HOLDING PETITIONER LIABLE FOR
UNDERPAYMENT SOLELY ON THE BASIS OF PRIVATE RESPONDENTS UNSUBSTANTIATED
ALLEGATIONS OR CLAIMS AND AT THE SAME TIME, TOTALLY DISREGARDING PETITIONERS
EVIDENCE.
The petition is partly meritorious.
The first issue is substantivewhether petitioner constructively dismissed the respondent.
Petitioner contends that there was no dismissal, constructive or otherwise. Petitioner claims
that respondent abandoned his post, refused to accept his new assignments and went on
AWOL.
The records belie petitioners posture.
Constructive dismissal is 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.[8] On the other hand, abandonment of work means a clear, deliberate and unjustified
refusal of an employee to resume his employment and a clear intention to sever the
employer-employee relationship.[9] Abandonment is incompatible with constructive
dismissal.[10]
In the case at bar, we hold that there was no deliberate intent on the part of the respondent
to abandon his employment with petitioner. The clear evidence that respondent did not wish
to be separated from work is that, after his last assignment on April 12, 1994, he reported to
petitioners office regularly for a new posting but to no avail. He then lost no time in filing the
illegal dismissal case. An employee who forthwith takes steps to protest his layoff cannot by
any logic be said to have abandoned his work.[11]
Moreover, respondent's failure to assume his posts in Sevilla Candle Factory and the Security
Bank and Trust Company is not without reason. He explained that he requested for a transfer
of assignment from Sevilla Candle Factory because he feared for his life after he witnessed
shabu dealers doing their business in his workstation. As regards the Security Bank
assignment, he failed to take the neurological test for lack of money to pay for the
examination fee.
Petitioner cannot overinflate the significance of the fact that respondent often absented
himself from work without an approved leave. It is a settled rule that mere absence or failure
to report for work is not tantamount to abandonment of work.[12] Even the failure to report
for work after a notice to return to work has been served does not necessarily constitute
abandonment nor does it bar reinstatement.[13]
The burden of proving that respondent has abandoned his job rests with petitioner. However,
petitioner failed miserably to discharge the burden. The records show no memoranda
concerning respondents alleged unauthorized absences and refusal to work. Even the
telegram petitioner sent to respondent after he allegedly went on AWOL merely required
respondent to report to its office for a conference but did not mention anything about his
absences. We find it incredible that petitioner did not even write respondent on his alleged
refusal to accept the posts assigned to him and the abandonment of his posts considering
that such acts constitute willful disobedience and gross neglect of duty which are valid
grounds for dismissal.[14]
Petitioner could have also submitted the daily time records of respondent to prove that he
indeed went on AWOL. It did not. Instead, it only submitted the following documents, viz: a
letter-petition of respondents fellow security guards demanding respondents removal from
their unit for his alleged arrogance (Annex A); the result of petitioners investigation on the
January 25, 1994 incident at the PCIBank, where its chief investigator recommended the
dismissal of respondent and Lumen from the service (Annex B); a memorandum dated
January 26, 1994, addressed to respondent, informing the latter of his suspension for seven
(7) days due to his involvement in the January 25, 1994 incident (Annex C); a letter of
introduction dated April 15, 1994, addressed to Security Bank and Trust Company, issued by
Mr. Isidro Lirag for the benefit of respondent for his possible detail at said bank (Annex D),
and a telegram dated April 15, 1994 allegedly sent by petitioner to respondent, requiring
him to report to petitioners office for a conference.
By no stretch of the imagination can the foregoing documents prove that respondent has
abandoned his job or that he unjustifiably refused the new posts assigned to him. They only
show that respondent had bad relationship with his fellow security guards and that petitioner
was justified in suspending and subsequently relieving him from his post at PCIBank.

Petitioner contends that respondent was only provisionally relieved from his last post and
not dismissed from employment. Hence, the filing of the illegal dismissal case on April 22,
1994 was premature. If at all, it is argued that respondent should be considered on
temporary off-detail status. Petitioner relies on the case of Superstar Security Agency, Inc.
vs. NLRC,[15] where we held that placing an employee on temporary off-detail is not
equivalent to dismissal provided that such temporary inactivity should continue only for a
period of six (6) months. Otherwise, the security agency concerned could be held liable for
constructive dismissal under Article 287 (now Article 286) of the Labor Code.
Petitioners argument lacks merit. The case of Superstar Security Agency does not apply to
the case at bar as it was decided on a different factual milieu. In said case, the security
guard was temporarily sidelined because the agencys client, SMY, did not renew its security
contract pursuant to its cost-cutting program. The agency was constrained to put the guard
detailed at SMY on a floating status for lack of available post. We then held that there was
no constructive dismissal to speak of, taking into consideration that, at times, security
guards could be placed on temporary off-detail as their assignments primarily depend on the
contracts entered into by the security agency with third parties. The ruling was anchored in
Article 286 of the Labor Code. It reads:
Art. 286. When employment not deemed terminated.The bona fide suspension of the
operation of a business or undertaking for a period not exceeding six (6) months, or the
fulfillment by the employee of a military or civic duty shall not terminate employment. In all
such cases, the employer shall reinstate the employee to his former position without loss of
seniority rights if he indicates his desire to resume his work not later than one (1) month
from the resumption of operations of his employer or from his relief from the military or civic
duty.
We stress that Article 286 applies only when there is a bona fide suspension of the
employers operation of a business or undertaking for a period not exceeding six (6) months.
In such a case, there is no termination of employment but only a temporary displacement of
employees, albeit the displacement should not exceed six (6) months. The paramount
consideration should be the dire exigency of the business of the employer that compels it to
put some of its employees temporarily out of work. In security services, the temporary offdetail of guards takes place when the security agencys clients decide not to renew their
contracts with the security agency, resulting in a situation where the available posts under
its existing contracts are less than the number of guards in its roster.[16]
In the case at bar, the records do not show that respondent had to be placed on temporary
off-detail for lack of available post. Petitioner just stopped giving respondent his assignment
after his duty at the PSB. It was the straw that broke the camels back, so to speak, as far as
respondent was concerned.
This is not to denigrate the inherent prerogative of an employer to transfer and reassign its
employees to meet the requirements of its business.[17] For instance, where the rotation of
employees from the day shift to the night shift was a standard operating procedure of
management, an employee who had been on the day shift for sometime may be transferred
to the night shift.[18] Similarly, transfers can be effected pursuant to a company policy to
transfer employees from one place of work to another place of work owned by the employer
to prevent connivance among them.[19] Likewise, we have affirmed the right of an employer
to transfer an employee to another office in the exercise of what it took to be sound
business judgment and in accordance with pre-determined and established office policy and
practice. Particularly so when no illicit, improper or underhanded purpose can be ascribed to
the employer and the objection to the transfer was grounded solely on the personal
inconvenience or hardship that will be caused to the employee by virtue of the transfer.[20]
In security services, the transfer connotes a changing of guards or exchange of their posts,
or their reassignment to other posts. However, all are considered given their respective
posts.
Be that as it may, the prerogative of the management to transfer its employees must be
exercised without grave abuse of discretion. The exercise of the prerogative should not
defeat an employee's right to security of tenure. The employers privilege to transfer its
employees to different workstations cannot be used as a subterfuge to rid itself of an
undesirable worker.[21]
In the case at bar, the evidence show that respondent enjoyed a single post at the PCIBank
for three (3) years. It changed after his suspension. In a span of less than three (3) months,
respondent was assigned to at least four (4) establishments, namely, BPI Family Bank,
Mercury Drugstore, Sevilla Candle Factory and Philippine Savings Bank. He suddenly found
himself being tossed to different posts and relieving absent security guards. Respondent was
then left uncertain as to when and where his next assignments would be. Considering the
totality of the facts of this case, the labor officials below rightly found that the frequent

transfers of respondent to different posts on short periods of time were indirect ways of
dismissing him.[22]
The second issue is proceduraldid public respondent gravely abuse its discretion in affirming
petitioners monetary liabilities without considering the evidence it submitted to the labor
arbiter?
The settled rule is that the NLRC is not precluded from receiving evidence on appeal as
technical rules of evidence are not binding in labor cases.[23] In fact, labor officials are
mandated by the Labor Code to use every and all reasonable means to ascertain the facts in
each case speedily and objectively, without regard to technicalities of law or procedure, all in
the interest of due process.[24] Thus, in Lawin Security Services vs. NLRC[25] and Bristol
Laboratories Employees Association-DFA vs. NLRC,[26] we held that even if the evidence
was not submitted to the labor arbiter, the fact that it was duly introduced on appeal to the
NLRC is enough basis for the latter to be more judicious in admitting the same, instead of
falling back on the mere technicality that said evidence can no longer be considered on
appeal. Certainly, the first course of action would be more consistent with equity and the
basic notions of fairness.
We find no cogent reason to disregard the above ruling.
We note that the labor arbiters decision hardly mentioned the basis for allowing the money
claims of respondent. The labor arbiter merely held that
As regards the issue of money claims, we likewise find for the complainants. Records show
that complainant was not paid the correct minimum wage, overtime pay, night shift
differential and 13th month pay.
WHEREFORE, foregoing premises considered, judgment is hereby rendered finding
respondents (petitioners) to have illegally dismissed the complainant. Accordingly,
respondents (petitioners) are hereby ordered to reinstate complainant with backwages.
Respondents (Petitioners) are likewise ordered to pay complainant the amount of Seventy
Four Thousand Eight Hundred Forty Four Pesos and 24/100 (P74,844.24), representing his
wage differential, overtime pay, 13th month pay, night shift differential, computation of
which is hereto attached.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.
The computation of the sum awarded to respondent is also vague, thus:
RE: COMPUTATION OF UNDERPAYMENT AND OVERTIME PAY AS PER INSTRUCTION OF L.A.
FELIPE P. PATI
Underpayment 12-hours
4/22/91 - 12/15/93 = 31.77 mos.
P6,826.37 - P4,800 = P2,026.37
x 31.77 mos = . . . . . . . . . . . . . . . . . . . . . . . . .P64,377.77
12/16/93 3/31/94 = 3.5/ mos.
P7,790.42 P4,800 = P2,990.42
X 3.5 mos. = . . . . . . . . . . . . . . . . . . . . . . . . . . 10,466.47
Total . . . . . . . . . . . . . . P74,844.24
Manila, Philippines, December 20, 1994.
It assumes that respondent rendered overtime work from April 22, 1991 to March 31, 1994.
We could not even tell from said computation which part of the sum awarded was for the
wage differential, 13th month pay, overtime pay, etc. Moreover, respondents salary and
other monetary benefits, if any, from April 1-12, 1994, were not included in the computation.
Even the computation of the backwages was not specified, although the labor arbiters
decision stated that said claim for backwages was already included in the sum of
P74,844.24. However, judging from the dates mentioned in the computation, i.e., from April
22, 1991 to March 31, 1994, it appears that no backwages were awarded. Backwages have
to be paid by an employer as part of the price or penalty he has to pay for illegally

dismissing his employee. It is computed from the time of the employees illegal dismissal (or
from the time his compensation was withheld from him) up to the time of his reinstatement.
[27]
Article 291 of the Labor Code should also be considered. It reads:
Art. 291. Money claims.All money claims arising from employer-employee relations accruing
during the effectivity of this Code shall be filed within three (3) years from the time the
cause of action accrued; otherwise, they shall be forever barred.
Clearly, respondents money claims should be filed within three (3) years from the time his
cause of action accrued or forever be barred by prescription. Respondent filed his money
claims on June 15, 1994, through his Amended Complaint and Position Paper. His money
claims from November 2, 1990 to June 14, 1992, are barred by prescription pursuant to
Article 291 of the Labor Code. Apparently, the labor arbiter mistakenly relied on the date of
filing of the original complaint of respondent. It is true that said complaint was filed on April
22, 1994, however, at that time, respondent merely accused petitioner of illegal dismissal
and has not yet charged petitioner with underpayment of wages or non-payment of overtime
pay, 13th month pay, etc.
Before the labor arbiter decided the case, petitioner had already submitted its computation
of the salaries and other benefits received by respondent during his employment. Yet, the
labor arbiter simply ignored petitioners evidence and decided the case without even stating
the basis of his decision. The labor arbiters failure to discuss the facts and the law which
would support the award of P74,844.24 in favor of the respondent should have prompted the
NLRC to remand the case to the labor arbiter for further proceedings to determine the
monetary liabilities of petitioner to respondent. A stringent application of procedural rules
may be relaxed to meet the ends of substantial justice.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC-NCR No. 00-04-03291-94, dated May 10, 1996, is
AFFIRMED, subject to the modification that the monetary award in favor of respondent
Virgilio Dapiton in the sum of P74,844.24 is SET ASIDE. Accordingly, the case is remanded to
the labor arbiter for further proceedings solely for the purpose of determining the monetary
liabilities of petitioner, if any.
SO ORDERED.
[G.R. No. 118647. September 23, 1999]
CONSOLIDATED FOOD CORPORATION/PRESIDENT JOHN GOKONGWEI, GEN. MGR.
VICTORIO FADRILAN, JR., and UNIT MGR. JAIME S. ABALOS, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION AND WILFREDO M. BARON,
respondents.
DECISION
BELLOSILLO, J.:
This petition for certiorari under Rule 65 of the Rules of Court, as amended, assails the 8 July
1994 Decision of public respondent National Labor Relations Commission (NLRC) affirming
the Labor Arbiters decision which held that private respondent Wilfredo M. Baron was
constructively dismissed from employment hence should be reinstated and paid his back
wages and 13th month pay. It likewise assails the 9 September 1994 Resolution of the NLRC
maintaining that private respondent was constructively dismissed.
Petitioner Consolidated Food Corporation (CFC) is a domestic corporation engaged in the
sale of food products, e.g., Presto Ice Cream, with petitioner John Gokongwei as its President,
Victorio V. Fadrilan Jr. as General Manager, and Jaime S. Abalos as Unit Manager for Northern
Luzon. Private respondent Wilfredo M. Baron was a Bonded Merchandiser at CFC since
November 1985 and received commendations for being a consistent member of the
millionaires group, a title given to provincial salesmen who filled sales quotas in their
assigned areas. In March and December 1989, and February and April 1990, he was given
commendations by Gen. Mgr. Victorio V. Fadrilan Jr. and Unit Mgr. Jaime S. Abalos for his good
performance in sales.[1] Thereafter he was assigned as Acting Section Manager for Northern
Luzon (NL) 2 Area covering Baguio City, La Trinidad and Benguet. He was tasked, among
others, to deliver for sale CFC Presto Ice Cream products to stores and outlets in Baguio City,
make inventories thereof, replace or retrieve bad orders or damaged ice cream stocks, and
to handle funds in relation to his functions. He received a basic salary of P3,300.00 per
month plus commissions averaging monthly at P30,000.00 or one percent (1%) of his sales.
[2]
On 16 July 1990 a killer earthquake hit Baguio City causing severe damage in the area.
Power lines were cut off and the roads to and from the city became impassable. Hence, the

Presto ice cream products in the possession of customers and sales outlets in Baguio were
damaged and became bad orders.
On 1 August 1990 Unit Mgr. Abalos issued an Action Plan for NL-2 Area approved by Gen.
Mgr. Fadrilan Jr. which provided among others the cut-off audit of Sec. Mgr. Wilfredo M. Baron
to determine accountabilities that should be liquidated on account of non-sales operations
due to fortuitous event, and a plan for the reorganization of the Northern Luzon Sections
(NL-1, 3 and 4) to create only one (1) section from the existing outlets. It was proposed that
Baron start with at least fifty (50) freezers to immediately service and develop potential
outlets in the assigned area.[3]
On 15 August 1990 the Field Audit Group of CFC conducted an audit on the accountabilities
of Baron that reflected a shortage of P1,985.12 in the cash purchase fund and expense
allowance fund. On 8 October 1990 Unit Mgr. Abalos requested a field audit of the area to
further evaluate private respondents exposure, particularly on sales account, freezer and
bad orders stocks.[4]
On 15 October 1990 Unit Mgr. Abalos issued a Memorandum directing Baron to temporarily
stop routing in his assigned areas until such time that the complete audit of the customers
bad orders stocks within the area had been finished. Thereafter, Unit Mgr. Abalos issued
another memorandum ordering the turnover of accountabilities of Baron to Branch Mgr.
Josedario Calura, who should take over the route operation of Baguio City effective 15
October 1990 as private respondents presence would be required in the audit being
conducted on bad orders stocks caused by the earthquake.
On 1 December 1990 the field Audit Group submitted its report declaring that the quantity of
bad orders stocks per Bad Orders Summary Sheets (BOSS) prepared by Baron was higher
than the total quantity of bad orders stocks per confirmed customers listings. Some
customers claimed through written statements that Baron did not totally dispose of their bad
orders stocks but instead loaded some in his truck. They could not, however, recall the
quantity of bad orders stocks taken private respondent. These findings tended to indicate
that Barons funds presented for audit as of 15 August 1990 could have been manipulated to
replace good stocks and/or cash with customers bad orders stocks. The following
discrepancies were noted:
a. Probable BO stocks returned to warehouse were in excess of truck BO stocks.
Cases Pieces Amount
BO initially presented per audit
as of August 15, 1990 covered by BOSS
Nos. 24379-80 dated August 1, 1990 642 841 87,202.27
Should be good stocks as of August 15,
1990 that would have turned B.O. and
returned to warehouse (See Schedule II) 216 111 22,461.71
Excess BO returned to warehouse 426 730 64,740.56
b. The excess B.O. presented above could have been used to partially cover cash collections
which he did not present as of August 15, 1990.
Upon examination of the sales transactions reflected in the Daily Sales Report (DSR) and
other pertinent documents from 11-16 July 1990, it was further discovered that Baron had no
sales operations from 16 July 1990 to 15 August 1990 per DSR. The following were further
noted:
a. DSR (Daily Sales Report) was not accomplished prior to 9 July 1990. Had there been a
cash balance at that time the amount of P33,908.30 which was not presented as of audit
date could have been more.
b. Cash balance of Sec. Mgr. Baron was nil as of the cut-off audit on 15 august 1990.
c. Sec. Mgr. Baron did not make any remittance on 12 July 1990 (reporting day) though he
had sales collection of P73,725.30 on 9-12 July 1990. PSTA No. 4721 dated 12 July 1990
amounting to P82,873.00 intended to Sec. Mgr. Baron was not paid/withdrawn instead said
PSTA was cancelled.

If No. 1 and 2 findings were to be considered in the result of the audit on 15 August 1990
(Memo 09-C66-90 dated 3 September 1990), it would apparently show an amount of
P66,725.68 (represented by cash/truck stocks) covered up through customers BO. Sec. Mgr.
Baron could have gained benefit from this thru illegitimate means. Details follow:
15 August 1190 Should be
Audit
CPF Accountability 200,000.00 200,000.00
EAF Accountability 10,000.00 10,000.00
P210,000.00 P210,000.00
Accounted for as follows:
Cash ---------------------------- 33,908.30
BO Stocks/Good Stocks ------ 87,201.40 22,461.71
Turned B.O.
Unrefunded B.O. stocks ------- 7,763.96 7,763.96
Unserved PSTA ---------------- 46,607.65 46,607.65
Unserved DP ------------------- 2,959.46 2,959.46
Unreplenished 3% discount --- 3,221.41 3,221.41
Sales account ------------------- 47,364,50 47,364.50
Unreplaced promo items------- 2,373.00 2,373.00
Unreplenished expenses-------- 10,323.50 10,323.50
208,014.88 177,183.49
.87
___________ (33,908.30)
Net Shortage ------------------- P1,985.12 P66,725.68[5]
Thus, on 15 January 1991 a memorandum signed by Unit Mgr. Abalos and approved by Gen.
Mgr. Fadrilan Jr. was sent to Baron informing him of the discrepancies appearing in the audit
of accountabilities and giving him opportunity to explain his side in writing. Meanwhile, his
normal sales route was temporarily suspended until further notice but he was instructed to
report daily to the head office in Pasig City.[6]
On 28 January 1991 Unit Mgr. Abalos and Gen. Mgr. Fadrilan Jr. issued a memorandum
requesting the Corporate Auditing Department to conduct a cut-off audit on Baron to
determine the extent of his accountabilities which should be turned over to them pending
result of the investigation of his case. On the same date, private respondent submitted his
answer addressed to Gen. Mgr. Fadrilan Jr. explaining that the inventory of the bad orders
stocks at the Trinidad Bakery was done in haste as he and his companions would all rush out
of the building every time aftershocks were felt, and hesistantly return to resume the
inventory-taking. He reasoned that circumstances then obtaining should be taken into
consideration before concluding that funds were manipulated to replace good stocks/cash
with customers bad orders stocks, and that this was the first time that such a glaring error
was ever committed by him.
On the alleged cash shortage of P33,908.30, Baron explained that on 14 July 1990 his total
cash accountability per audit was P24,033.35 after remitting the amount of P81,087.05. The
amount was intentionally not remitted because it was paid to Mr. Supermart to cover bad
orders stocks thereby partially accounting for the difference between the BOSS and the
customers listings. The shortage of P1,985.12 could be attributed to the unusual
circumstances then prevailing and not due to manipulation of his accountability.

On 18 February 1991 petitioners issued a memorandum assigning Sec. Mgr. Edgardo

Hemosura from Greater Manila Area (Pasig, Marikina, Mandaluyong, Cainta) to NL-2 Area
covering Baguio City which was the area assigned to Baron.
On 13 April 1991 private respondent received a memorandum from petitioners stating
among others that they had carefully evaluated his written explanation and noted that he
failed to categorically explain how he came to have excess Truck Bad Orders (TBOS)
amounting to P87,202.27 when the should-be good stocks as of 15 August 1990 were worth
P22,461.71 only. Such TBOS were returned to the Dairy Products Division (DPD) Bad Orders
Warehouse and for which Baron withdrew replacement good stocks worth P87,201.10 under
DR No. 24632 dated 18 August 1990. Petitioners further noted that in Barons effort to
explain the wehereabouts of cash totalling P33,908.30 which he failed to show during the
audit, he mentioned about the P24,033.35 allegedly paid to Mr. Supermart, and another
amount of P5,000.00 again to Mr. Supermart, Anniversary Promotion. These payments were
absolutely not authorized by the Company and constituted personal use of company funds
for purposes other than those for which the same were intended. Baron also failed to explain
why even the balance of P4,874.95 was not accounted for during the audit. Petitioners
declared however that before any decision could be formalized, private respondent should
submit his written explanation on the points indicated within a period of seven (7) days from
receipt of the memorandum. He was also requested to explain why no additional action
should be taken against him for his continued absence from 18 March to 13 April 1991.
On 18 April 1991 petitioners sent notice to private respondent requiring him to explain
within ten (10) days why he should not be dismissed from the service for having been
absent without leave (AWOL). On 29 April 1991 Baron sent a letter to petitioners stating that
he was advised by his doctor not to report for work because he was sick and would have to
take his medication until 15 May 1991.
On 14 May 1991 private respondent Baron filed a complaint with the Labor Arbiter for
constructive dismissal, non-payment of salaries, commissions, service incentive leave pay
and allowances.[7] On 12 November 1993 the Labor Arbiter rendered a decision holding that
private respondent was constructively dismissed due to the fact that he was subjected to
audit after audit, uprooted from Baguio City which was his assigned area, floated and
grounded in the head office in Pasig City thus depriving him of the opportunity to earn
commissions. The Labor Arbiter also considered the audit reports as mere conjectures of the
auditing team; that petitioners did not have a credible list of customers bad orders stocks
which could be the basis of the accusation that Baron bloated his Bad Orders Summary
Sheet; that there was no proof of the number of stocks prior to 1 August 1990 which he
replaced with new ones that were released to him by the Dairy Products Division (DPD); that
this could not be the basis of the alleged excess bad orders amounting to P64,740.56; and,
that finally, Baron was able to fully explain the shortage on his expense allowance fund.[8]
For this reason, CFC was ordered to reinstate Baron without loss of seniority of rights, pay his
back wages in the amount of P116,545.00 and lost commissions in the amount of
P230,418.93.
Petitioner appealed the decision of the Labor Arbiter. On 8 July 1994 the NLRC upheld CFCs
prerogative to investigate Baron and to reassign him to the main office, but considered his
deprivation of salaries during the period as an indication of the Companys intent to dismiss
him.[9] It affirmed the Labor Arbiters finding that private respondent was constructively
dismissed and further held that commissions should be included in the computation of the
13th month pay to be awarded to private respondent. Petitioner moved for the
reconsideration of the decision. The NLRC granted the motion but only to the extent that it
excluded the commission in the computation of the 13th month pay. The declaration that
private respondent was constructively dismissed hence should be reinstated and paid his
back wages, lost commissions and 13th month pay was maintained.
Petitioners now contend that public respondent NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in holding that private respondent Baron was
constructively dismissed simply because he was subjected to various audits concerning his
sales activities. They argue that the audits conducted by the Company on its Baguio City
operations were necessary because of the destruction caused by the earthquake and were
done to protect the companys interests considering Barons gross violations of company
procedures and policies, and the shortages he incurred which he failed to satisfactorily
explain. Moreover, the audits were part of standard operating procedure conducted to
protect and maintain the integrity of its business and not to harass private respondent.
Petitioners further assert that Barons being required to temporarily report in the Companys
head office in Pasig City while a full audit was being conducted should not be taken to mean
that he was being eased out of his employment since his presence was required to allow him
to participate in the comprehensive audit of his sales activities in Baguio City.

Petitioners also contend that the Labor Arbiters finding that the audit on Barons
accountabilities was a form of harassment has no factual or legal basis because other
personnel of the Dairy Products Division were not subjected to similar accusations but in fact
allowed to work under normal conditions. The case of Baron was different because he was a
field salesman entrusted with cash funds which he was under obligation to account to the
Company while other DPD personnel who worked in the main office were not assigned in the
field and did not receive monetary advances to be accounted to the Company. In the event
of discrepancies in the products released and the amount actually remitted to the Company,
it was the salesmen, like Baron, who were directly accountable to the Company thereby
necessitating the conduct of audit on him.[10]
Petitioners argue that Baron was neither expressly nor constructively dismissed from his job
but, a shown by his unjustified act of absenting himself without reason, left his job on his
own volition. Baron remained in the employees payroll before he disappeared in March 1991.
He was neither terminated nor was there any intention to terminate his employment as
shown by his assignment in the company head office during the audit. His being separated
from the service was borne out of his decision to absent himself and file a complaint with the
Labor Arbiter and not because of any act attributable to petitioners.
We are compelled by the evidence on record to sustain petitioners and reverse the findings
of both the NLRC and the Labor Arbiter. This Court has defined a valid exercise of
management prerogative as one which covers hiring, work assignment, working methods,
time, place and manner of work, tools to be used, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay-off of workers and
the discipline, dismissal and recall of workers. Except as provided for or limited by special
laws, employers are free to regulate, according to their own discretion and judgment, all
aspects of employment.[11] Re-assignments made by management pending investigation of
irregularities allegedly committed by an employee fall within the ambit of management
prerogative. The purpose of reassignments is no different from that of preventive suspension
which management could validly impose as a disciplinary measure for the protection of the
companys property pending investigation of any alleged malfeasance or misfeasance
committed by the employee.[12]
In the instant case, the result of the initial audit on the accountabilities of private respondent
Baron conducted on 15 August 1990 showed a net shortage of P1,985.12 in the Cash
Purchase Fund (CPF) and Expense Allowance Fund (EAF) in his possession. A follow-up audit
was conducted by the Company during which petitioners: (a) obtained confirmation from
customers on the correctness of the quantity of damaged ice cream stocks which were
disposed of as reflected in the Bad Orders Summary Sheets (BOSS) submitted by respondent
Baron; (b) analyzed Barons daily sales reports and entries prior to and after the 16 July 1990
earthquake with regard to truck stocks and cash balances as of these dates; and, (c)
compared results with the result of the audit conducted on 15 August 1990.[13] The result of
the follow-up audit showed that the quantity of damaged stocks per summary of the report
prepared by Baron was higher than the total quantity of damaged stocks per confirmed
customers listings. Further, the quantity of damaged stocks he initially presented for audit
on 15 August 1990, for which he had already acquired replacement stocks from the
Company on 1 August 1990, was declared at P87,202.27. It appears from company records
however that the quantity of damaged stocks as of 15 August 1990 was valued only at
P22,461.71 showing an excess of bad orders stocks declared by Baron to the Company in
the amount of P64,740.56.
The audit result also showed that Baron failed to account for his expense allowance fund in
the amount of P33,908.30. Although Baron had given his written explanation, petitioners
found it unsatisfactory and his defense inexcusable. While there may be no direct evidence
to prove that Baron actually and deliberately committed fraud or misappropriation of
Company funds, there was substantial proof of the existence of irregularities committed by
him in the use of the funds. We have ruled that substantial proof, and not clear and
convincing evidence or proof beyond reasonable doubt, is sufficient as basis for the
imposition of any disciplinary action upon the employee. The standard of substantial
evidence is satisfied where the employer has reasonable ground to believe that the
employee is responsible for the misconduct and his participation therein renders him
unworthy of the trust and confidence demanded by his position.[14]
We find that petitioners acts of conducting audits and investigation on the alleged
irregularities committed by private respondent and in reassigning him to another place of
work pending the results of the investigation were based on valid and legitimate grounds. As
such, these acts of management cannot amount to constructive dismissal. It is worthy to
note that petitioners gave Baron every opportunity to raise his defense and fully explain the
discrepancies in the funds in his possession. In fact private respondent informed petitioners
that he would be returning for work on 5 March 1991 after his sick leave. But instead of
doing so, he filed a complaint for constructive dismissal before the Labor Arbiter.

By leaving his job without submitting the required final explanation on the alleged
irregularities, private respondent deprived himself of the opportunity to face his accusers
and prove his innocence of the charges hurled against him. In fact, the results of the final
investigation conducted by the Company and presented during the proceedings before the
Labor Arbiter affirmed the initial results of the audit concerning the existence of anomalies in
the transactions of Baron as follows:
(a) Sec. Mgr. Baron disposed of the bad orders stocks retrieved from the customers without
the presence of the unit manager and representatives from the Audit and Quality Control
Departments;
(b) the summary of BO stocks accomplished by Sec. Mgr. Baron per his Bad Orders Summary
Sheet (BOSS) was overstated by P7,908.00 when compared against the customers listing of
BO stocks signed by Sec. Mgr. Baron of P170,072.00 x x x x;
(c) Sec. Mgr. Baron did not present the should-be cash balance on hand totalling P33,908.30
as of audit date; and,
(d) Sec. Mgr. Baron returned BO stocks to the DPD warehouse on 15 August 1990 totalling
P87,201.40. However his should-be stock balance on 15 August 1990 amounted only to
P22,461.71. With the pricing difference of P0.87, Sec. Mgr. Barons excess BO stocks
amounted to P64,740.56 which could be the amount of BO stocks not disposed but retrieved
from the customers and included in his truck BO stocks to make it appear that these were
part of his Cash Purchase Fund (CPF) accountability.[15]
The records show that during the audit and investigation Baron was reassigned to the head
office of the Company in Pasig City without pay beginning 1 January 1991 to 15 March 1991
when he did not return to work anymore. He was required to report for work for the
Company although his regular sales route in Baguio City was suspended. There is nothing in
the records however that would show that petitioners placed private respondent under
preventive suspension. Hence for services rendered arising from his new assignment from
January 1991 to 15 March 1991 he should have been paid his salaries for the period as well
as proportionate 13th month pay. Computed on the basis of his basic salary at P3,300.02[16]
per month x 2.5 months, private respondent is entitled to receive unpaid salaries in the
amount of P8,250.05. With regard to the 13th month pay based on the following
computation:
Basic pay (P3,300.02) = 275 x 2.5 = P687.50
12
private respondent is entitled to P687.50 as proportionate 13th month pay. The
circumstances of this case clearly show that the petitioners had knowledge and allowed the
withholding of salaries of private respondent starting 1 January 1991 up to the time he
resigned from his employment. Therefore, they are held jointly and severally liable to pay
private respondent the amounts indicated above in the total amount of P8,937.55. Further,
private respondent was forced to litigate for the recovery of his wages, hence, he is entitled
to an award of attorneys fees of P1,000.00 which amount is reasonable in this case.[17]
WHEREFORE, the petition is GRANTED. The Decision of respondent National Labor Relations
Commission affirming the Labor Arbiters Decision is REVERSED and SET ASIDE. However,
petitioners Consolidated Food Corporation (CFC), CFC President John Gokongwei, Gen. Mgr.
Victorio Fadrilan, Jr., and Unit Mgr. Jaime Abalos are ordered jointly and severally to pay
private respondent Wilfredo M. Baron unpaid salaries in the amount of P8,250.05,
proportionate 13th month pay in the amount of P687.50 plus attorneys fees of P1,000.00.
SO ORDERED.
[G.R. No. 133259. February 10, 2000]
WENIFREDO FARROL, petitioner, vs. The HONORABLE COURT OF APPEALS and
RADIO COMUNICATIONS of the PHILIPPINES INC. (RCPI), respondents.
DECISION
YNARES_SANTIAGO, J.:
Petitioner Wenifredo Farrol was employed as station cashier at respondent RCPIs Cotabato
City station. On June 18, 1993, respondent RCPIs district manager in Cotabato City informed
their main office that "Peragram funds"[1] from said branch were used for the payment of
retirement benefits of five employees. On October 1, 1993, petitioner verified as correct
RCPIs Field Auditors report that there was a shortage of P50,985.37 in their branchs

Peragram, Petty and General Cash Funds. Consequently, petitioner was required by the Field
Auditor to explain the cash shortage within 24 hours from notice.[2] The next day, petitioner
paid to RCPI P25,000.00 of the cash shortage.
On October 16, 1993, RCPI required petitioner to explain why he should not be dismissed
from employment.[3] Two days thereafter, petitioner wrote a letter to the Field Auditor
stating that the missing funds were used for the payment of the retirement benefits earlier
referred to by the branch manager and that he had already paid P25,000.00 to RCPI. After
making two more payments of the cash shortage to RCPI, petitioner was informed by the
district manager that he is being placed under preventive suspension.[4] Thereafter, he
again paid two more sums on different dates to RCPI leaving a balance of P6,995.37 of the
shortage.
Respondent RCPI claims that it sent a letter to petitioner on November 22, 1993 informing
him of the termination of his services as of November 20, 1993 due to the following reasons:
"a) Your allegation that part of your cash shortages was used for payment of salaries/wages
and retirement benefits is not true because these have been accounted previously per
auditors report;
"b) As Station Cashier you must be aware of our company Circular No. 63 which strictly
requires the daily and up-to-date preparation of Statistical Report and depositing of cash
collections twice a day. But these procedures - more particularly on depositing of cash
collections twice a day - was completely disregarded by you;
"c) Deliberate withholding of collections to hide shortages/malversation or misappropriation
in any form, as emphasized under Section No. 20 of our Rules and Regulations, is penalized
by immediate dismissal;
"d) The position of Station Cashier is one which requires utmost trust and confidence.[5]
Unaware of the termination letter, petitioner requested that he be reinstated considering
that the period of his preventive suspension had expired.
Sometime in September 1995, petitioner manifested to RCPI his willingness to settle his case
provided he is given his retirement benefits. However, RCPI informed petitioner that his
employment had already been terminated earlier as contained in the letter dated November
22, 1993. The conflict was submitted to the grievance committee. Despite the lapse of more
than two years, the case remained unresolved before the grievance committee, hence, it
was submitted for voluntary arbitration.
After hearing, the Voluntary Arbitrator ruled that petitioner was illegally dismissed from
employment and ordered RCPI to pay him backwages, separation pay, 13th month pay and
sick leave benefits.[6] Aggrieved, RCPI filed a petition for certiorari before the Court of
Appeals (CA), which reversed the ruling of the arbitrator and dismissed the complaint for
illegal dismissal.[7] Upon denial of petitioners motion for reconsideration by the CA,[8] he
filed the instant petition for review on certiorari on the grounds that his dismissal was illegal
because he was not afforded due process and that he "cannot be held liable for the loss of
trust and confidence reposed in him" by RCPI.[9]
The Court is called upon to resolve the validity of petitioners dismissal. In cases involving the
illegal termination of employment, it is fundamental that the employer must observe the
mandate of the Labor Code, i.e., the employer has the burden of proving that the dismissal
is for a cause provided by the law[10] and that it afforded the employee an opportunity to
be heard and to defend himself.[11]
Anent the procedural requirement, Book V, Rule XIV, of the Omnibus Rules Implementing the
Labor Code existing at the time petitioner was discharged from work, outlines the procedure
for termination of employment, to wit:
"Sec. 1. Security of tenure and due process. - No worker shall be dismissed except for a just
or authorized cause provided by law and after due process.
"Sec. 2. Notice of Dismissal. - Any employer who seeks to dismiss a worker shall furnish him
a written notice stating the particular acts or omissions constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall be served at the workers last
known address.
xxxxxxxxx

"Sec. 5. Answer and hearing. - The worker may answer the allegations stated against him in
the notice of dismissal within a reasonable period from receipt of such notice. The employer
shall afford the worker ample opportunity to be heard and to defend himself with the
assistance of his representatives, if he so desires.
"Sec. 6. Decision to dismiss. - The employer shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the reasons therefor.
"Sec. 7. Right to contest dismissal. - Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality of his dismissal by filing
a complaint with the Regional Branch of the Commission.
xxxxxxxxx
"Sec. 11. Report on dismissal. - The employer shall submit a monthly report to the Regional
Office having jurisdiction over the place of work all dismissals effected by him during the
month, specifying therein the names of the dismissed workers, the reasons for their
dismissal, the dates of commencement and termination of employment, the positions last
held by them and such other information as may be required by the Ministry (Department)
for policy guidance and statistical purposes." (Underscoring supplied).
As set forth in the foregoing procedures, the employer must comply with the twin
requirements of two notices and hearing.[12] The first notice is that which apprises the
employee of the particular acts or omissions for which his dismissal is sought, and after
affording the employee an opportunity to be heard, a subsequent notice informing the latter
of the employers decision to dismiss him from work.[13]
As regards the first notice, RCPI simply required petitioner to "explain in writing why he
failed to account" for the shortage and demanded that he restitute the same.[14] On the
assumption that the foregoing statement satisfies the first notice, the second notice sent by
RCPI to petitioner does not "clearly" cite the reasons for the dismissal, contrary to the
requirements set by the above-quoted Section 6 of Book V, Rule XIV of the Omnibus Rules.
A perusal of RCPIs dismissal notice reveals that it merely stated a conclusion to the effect
that the withholding was deliberately done to hide alleged malversation or misappropriation
without, however, stating the facts and circumstances in support thereof. It further
mentioned that the position of cashier requires utmost trust and confidence but failed to
allege the breach of trust on the part of petitioner and how the alleged breach was
committed. On the assumption that there was indeed a breach, there is no evidence that
petitioner was a managerial employee of respondent RCPI. It should be noted that the term
"trust and confidence" is restricted to managerial employees.[15] It may not even be
presumed that when there is a shortage, there is also a corresponding breach of trust. Cash
shortages in a cashiers work may happen, and when there is no proof that the same was
deliberately done for a fraudulent or wrongful purpose, it cannot constitute breach of trust
so as to render the dismissal from work invalid.
Assuming further that there was breach of trust and confidence, it appears that this is the
first infraction committed by petitioner. Although the employer has the prerogative to
discipline or dismiss its employee, such prerogative cannot be exercised wantonly, but must
be controlled by substantive due process and tempered by the fundamental policy of
protection to labor enshrined in the Constitution.[16] Infractions committed by an employee
should merit only the corresponding sanction demanded by the circumstances. The penalty
must be commensurate with the act, conduct or omission imputed to the employee[17] and
imposed in connection with the employers disciplinary authority.
RCPI alleged that under its rules, petitioners infraction is punishable by dismissal. However,
employers rules cannot preclude the State from inquiring whether the strict and rigid
application or interpretation thereof would be harsh to the employee. Petitioner has no
previous record in his twenty-four long years of service - this would have been his first
offense. The Court thus holds that the dismissal imposed on petitioner is unduly harsh and
grossly disproportionate to the infraction which led to the termination of his services. A
lighter penalty would have been more just, if not humane. In any case, petitioner paid back
the cash shortage in his accounts. Considering, however, that the latter is about to retire or
may have retired from work, it would no longer be practical to order his reinstatement.
Accordingly, in lieu of reinstatement, the award of separation pay computed at one-month
salary for every year of service, with a fraction of at least six (6) months considered as one
whole year, is proper.[18] In the computation of separation pay, the period wherein
backwages are awarded must be included.[19]

WHEREFORE, in view of the foregoing, the assailed decision of the Court of Appeals is
REVERSED and SET ASIDE and new one entered REINSTATING the decision of the Voluntary
Arbitrator subject to the MODIFICATION that petitioners separation pay be recomputed to
include the period within which backwages are due. For this purpose, this case is REMANDED
to the Voluntary Arbitrator for proper computation of backwages, separation pay, 13th
month pay, sick leave conversion and vacation leave conversion.
SO ORDERED.

G.R. No. 99034. April 12, 1993.

JEAN C. AURELIO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NORTHWESTERN COLLEGE, BEN A.
NICOLAS, ERNESTO B. ASUNCION, JOFFREY AURELIO, JOSE G. CASTRO, FRANCISCO
SANTELLA, ALBA B. CADAY, LILIA PAZ, WILFRED A. NICOLAS, GLENN AQUINO,
LUCIDIA RUIZ-FLOREZ, respondents.
Pedro Q. Qadra for petitioner.
Ponce, Enrile, Cayetano, & Reyes & Manalastas for private respondents.
SYLLABUS
1.
LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; RULES OF
EMPLOYMENT REGARDING MANAGERIAL EMPLOYEES; EMPLOYERS ALLOWED A GREATER
LATITUDE. The rules on termination of employment, penalties for infractions, and resort to
concerted actions, insofar as managerial employees are concerned, are not necessarily the
same as those applicable to termination of employment of ordinary employees. Employers,
generally, are allowed a wider latitude of discretion in terminating the employment of
managerial personnel or those of similar rank performing functions which by their nature
require the employer's trust and confidence, than in the case of ordinary rank-and-file
employees (Cruz vs. Medina, 177 SCRA 565 [1989]).
2.
ID.; ID.; ID.; LOSS OF TRUST AND CONFIDENCE, VALID GROUND FOR DISMISSING
MANAGERIAL EMPLOYEE. Under Article 282(c) of the Labor Code, loss of trust and
confidence is a valid ground for dismissing an employee. Termination of employment on this
ground does not require proof beyond reasonable doubt. All that is needed is for the
employer to establish sufficient basis for the dismissal of the employee (Cruz vs. Medina,
supra).
3.
ID.; ID.; ID.; TERMINATION; REQUIREMENTS FOR VALIDITY THEREOF. Under Section
1, Rule XIV of the Implementing Rules and Regulations of the Labor Code, the dismissal of an
employee must be for a just or authorized cause and after due process. The two
requirements of this legal provision are: 1. The legality of the act of dismissal, that is,
dismissal under the ground provided under Article 283 of the New Labor Code; and 2. The
legality in the manner of dismissal, that is, with due observance of the procedural
requirements of Sections 2, 5, and 6 of Batas Pambansa Blg. 130 (Shoemart vs. NLRC, 176
SCRA 385 [1989]).
4.
ID.; ID.; ID.; ID.; ID.; NON-OBSERVANCE OF DUE PROCESS ENTITLES EMPLOYEE TO
AWARD OF P1,000.00; CASE AT BAR. In cases where there was a valid ground to dismiss
an employee but there was non-observance of due process, this Court held that only a
sanction must be imposed upon the employer for failure to give formal notice and to conduct
an investigation required by law before dismissing the employee in consonance with the
ruling in Wenphil v. NLRC, 170 SCRA 69 [1989]; Shoemart, Inc. vs. NLRC, supra; and in Pacific
Mills, Inc. vs. Zenaida Alonzo, 199 SCRA 617 [1991]). Public respondent's finding that
petitioner was not afforded due process is correct but the Commission erred when it
awarded separation pay in the amount of P32,750.00. In the Pacific Mills, Inc. and Wenphil
cases, this Court merely awarded P1,000.00 as penalty for non-observance of due process.
The decision under review is hereby AFFIRMED with the MODIFICATION that the award of
separation pay is DELETED and that private respondents are ORDERED to pay petitioner the
amount of One Thousand Pesos (P1,000.00) as indemnity for non-observance of due
process.
5.
ID.; ID.; ID.; MANAGEMENT, AT LIBERTY TO ABOLISH POSITIONS NO LONGER
NECESSARY. The prerogative of management to conduct its own business affairs to
achieve its purposes cannot be denied (San Miguel Brewery Sales Force Union [PTGHWO] vs.
Ople, 110 SCRA 25 [1981]; Abbot Laboratories vs. NLRC, 154 SCRA 713 [1987]).

Management is at liberty, absent any malice on its part, to abolish positions which it deems
no longer necessary (Great Pacific Life Assurance Corp. vs. NLRC, 188 SCRA 139 [1990]).
When petitioner was stripped by the Board of her positions as Executive Vice President and
Vice President for Administration, with a corresponding reduction in salary, the Board did not
act in a capricious, whimsical, and arbitrary manner, thus negating malice and bad faith.
DECISION
MELO, J p:
The appeal before us has reference to the decision of the National Labor Relations
Commission (NLRC) dated March 27, 1991 which modified the decision of the Labor Arbiter
involving petitioner's charge of illegal dismissal. The reviewing authority merely awarded
separation pay equivalent to one-half month pay for every year of service and denied
petitioner's prayer for reinstatement, backwages, moral and exemplary damages, including
attorney's fees (p. 89, Rollo).
Petitioner started as clinical instructor of the College of Nursing of Northwestern College
(NWC) in June 1917 with a basic salary of P600.00 a month. In October 1979, petitioner was
appointed Dean of the College of Nursing with a starting salary of P3,000.00 a month. In
September 1981, petitioner was promoted to College Administrator or Vice-President for
Administration, retaining concurrently her position of Dean of the College of Nursing, with an
increased salary of P3,500.00 per month. She was later promoted to Executive VicePresident with the corresponding salary of P7,500.00.
On April 10, 1988, petitioner's husband, Oscar Aurelio, a stockholder of respondent NWC,
was elected Auditor. On May 1, 1988, the individual respondents, as Board of Directors, took
over the management of respondent NWC. This new management unleashed a series of
reorganization affecting the petitioner and her husband, Oscar Aurelio, to wit:
(a)
On May 30, 1988, petitioner's husband, then in the United States, was removed as
Auditor of the college;
(b)
Without prior notice, petitioner's office was stripped of its facilities. First, the
airconditioner, then the refrigerator;
(c)
Respondents asked petitioner, "to justify," the continued use of the conference room
which was used for team teaching; the librarian of the College of Nursing was removed and
assigned as secretary of the Chairman of Academic Matters and all the facilities of the
College of Nursing were taken over by the individual respondents;
(d)
Petitioner's salary was reduced from P7,500.00 to P5,000.00 then to P2,500.00 a
month;
(e)
While petitioner was absent because of influenza, respondents assigned her office
room to the Chairman on Management and Planning; the Nursing conference room was
assigned as the lounge room of the members of the Board of Directors;
Because of the indignities and humiliation suffered by the petitioner, she wrote a letter on
September 20, 1988 informing the President of Northwestern College that she was going on
an indefinite leave, thus:
Dear Sir:
This is to inform your office that I am taking an indefinite leave of absence effective
immediately due to the following reasons:
1.
My having been demoted in rank from Executive Vice-President to Vice-President for
Administration to Dean of the College of Nursing without prior notice and without any
dialogue whatsoever with management. This mote(s) of the administration was coupled with
innuendos perpetuated by some people close to management giving rise to speculations
that besmirched my reputation and character.
2.
Since the new management took over on May 1, 1988, my office has been stripped of
its facilities one after the other, again without prior notice. First, the air-conditioner was
removed, then the refrigerator.
3.
My efforts and that of my staff to complete and improve our physical plant and
facilities such as the conference room, library, team teaching requirements and nutrition
laboratory did not get any support from management. In fact, our efforts were even seen as
mere exercises to satisfy our personal whims. Imagine being asked to "justify" the continued

use of our conference room which is a basic requirement for team teaching? To make
matters worse, our librarian was assigned as secretary to the Chairman of Academic Matters
and our facilities were taken over by same officers of the college.
4.
My salary was reduced from P7,500.00 per month to P5,000.00, and then finally to
P2,500.00 per month since May 1, 1980. This defies logic because in 1979, I had the starting
salary of P3,000.00. Nine years later, I am to be paid P2,500.00 per month.
5.
To cap all these, while I was absent because of influenza, management decided to
assign my office to the Chairman on Management Planning, and the Nursing conference
room to the members of the board to be used as their lounging room. This singular act has
caused me extreme anguish and embarrassment which I feel I don't deserve and it has
caused much damage to my integrity.
Because of the above-cited development, I feel that I have been inflicted with an injustice
that has caused irreparable damage to my reputation, and has rendered me ineffective in
discharging my duties as member of administration and as Dean of the College of Nursing.
Yours truly,
(SGD) Jean C. Aurelio
(pp. 6-7, Rollo.)
On September 21, 1988, petitioner sent a copy of the above letter to the Secretary of
Education, Culture and Sports praying for assistance. On October 26, 1988, the Secretary of
Education, Culture and Sports-referred the letter to the DECS Director of Region I. On
October 28, 1988, the Director of the Bureau of Higher Education ordered the DECS Regional
Director of Region I through telegram "to investigate NWC College of Nursing, Laoag City
immediately PRC recommends suspension of the operation of College of Nursing due to lack
of Dean and faculty to supervise students." On November 3, 1988, the Regional Director
informed respondent Northwestern College of the order of investigation and that pursuant
thereto, the Director was sending her representatives "to look into the problem stated
thereon which is apparently facing the College of Nursing." On November 7, 1988, the
representatives of the Regional Director submitted their official findings and
recommendations confirming the truth of the allegations of petitioner in her September 20,
1988 letter. The DECS also confirmed the willingness of petitioner to withdraw her indefinite
leave of absence. The matter of petitioner's resumption of her position as Dean of the
College of Nursing was addressed by the DECS to the attention of respondents who were
given up to November 13, 1988 to make their decision. On November 7, 1988, the Regional
Director sent a telegram stating: "Please submit written decision status position dean
college of nursing not later than November 14, 1988 pd."
Private respondents did not answer. They refused to accept petitioner. On November 16,
1988, petitioner filed her complaint for illegal dismissal against private respondents and
prayed for reinstatement plus backwages, moral and exemplary damages, and attorney's
fees. At the arbitration level, petitioner and private respondents submitted their respective
position papers. On December 29, 1989, the labor arbiter issued a decision dismissing the
complaint.
It appears that private respondent Northwestern College is managed by its Board of
Directors elected annually by the stockholders and who serve as such for the ensuing year
until their successors shall have been duly elected and qualified.
The individual respondents Ben Nicolas, Ernesto Asuncion, Joffrey Aurelio, Alva B. Caday,
Lilia Paz, Wilfredo Santillan, and Glen Aquino, are members of the Board of Directors of
Northwestern College of which Jean C. Aurelio is a stockholder.
On April 30, 1988, the annual regular meeting of stockholders was held at the principal
office of the corporation in Laoag City. Elected Directors were the following: Alva Caday,
Lucidia Flores, Nicolas Nicolas, Oscar Aurelio, Cherry Caday, Lilia Paz, Ben Nicolas, Joffrey
Aurelio, Francisco Santella, Glenn Aquino, and Wilfredo Nicolas. The following members were
elected as officers of the Northwestern College: Alva Caday, Chairman of the Board; Ben
Nicolas, Vice-Chairman and President; Joffrey Aurelio, Treasurer; Oscar Aurelio, Corporate
Auditor and Lucidia Flores, Corporate Secretary. Nicolas Nicolas, Oscar Aurelio, and Cherry
Caday later resigned and in their stead, Atty. Ernesto Asuncion, Atty. Jose Castro, and Dr.
Juanito Chan were elected by the stockholders.
Since their election into office, the Board members have taken effective control of the
management of the college and have regularly exercised their corporate powers. The new
Board conducted a preliminary audit which revealed that the college was financially

distressed, unable to meet its maturing obligations with its creditor bank. The new
management headed by its President, Ben Nicolas, embarked on a realignment of positions
and functions of the different department in order to minimize expenditures.
As a result of the audit, NWC was compelled to abolish the administrative positions held by
petitioner, which she did not contest, because of the following reasons:
a)
In 1988, NWC realized that it was violating the Administrative Manual for Private
Schools. Thus, the position of Administrator/Vice President had to be eliminated;
b)
At that time, NWC was reeling from the effects of ,j its failure to meet its obligations
with its creditors and all efforts to minimize expenditures were being undertaken;
c)
NWC realized after a study of the realignment of the positions that the functions and
duties of Administrator/Vice President for Administration were being performed by the
President. Consequently, the former positions had become redundant.
During the first semester of the school year 1988-1989, Northwestern College uncovered
irregularities allegedly committed by the petitioner, to wit:
a)
She personally exacted without receipt P25.00 from every student in the College of
Nursing for the maintenance of the College Library.
b)
She did not remit nor liquidate the sum of P600.00 out of the P1,295.91 Related
Learning Experience (RLE) fee paid by all students in the College of Nursing. The total sum
thereof in the amount of P114,280.00 suspiciously remained unremitted and unliquidated for
an unreasonable length of time.
c)
She drew salaries for teaching in the College of Nursing although she did not have a
teaching load. Before the investigation could be concluded, petitioner sent a letter to the
President of the college on September 20, 1988 manifesting that she is on an indefinite
leave of absence.
On December 29, 1989, the labor arbiter dismissed the complaint on the basis of these
findings which were adopted by the NLRC:
. . . Undoubtedly, complainant had occupied managerial positions, thus the rule of loss of
trust and confidence applies. This office is however aware that allegations of loss of trust
and confidence must have some basis and such is not lacking on record.
Respondent had alleged and submitted evidence of irregularities of complainant during her
tenure at the college. The complainant instead of refuting the charges cited alleged
irregularities committed by the respondents in their respective offices. Needless to state, the
allegation does not detract anything from the charges of irregularities against her by the
respondent school. As the records of this case stand, our complainant has not sufficiently
explained the substantiated charges of Northwestern College anent exaction of P25.00 from
every student of the College of nursing, receipt of salaries for alleged teaching services for
which she did not have any teaching load and failure to remit nor liquidate a total amount of
P120,000.00. (p. 29 and 94, Rollo.)
It must be emphasized that the rules of dismissal for managerial employees are different
from those governing ordinary employees for it would be unjust and inequitable to compel
an employer to continue with the employment of a person who occupies a managerial and
sensitive position despite loss of trust and confidence. At the very least, the relationship
must be considered seriously strained, foreclosing the remedy of reinstatement. We find that
the allegations of irregularities were sufficiently substantiated thus justifying petitioner's
separation.
Moreover, and still on the issue of dismissal, the records disclose that in holding on to the
two positions, petitioner violated the Administrative Manual for Private Schools. Thus, the
respondent had no other recourse but to take away one of the positions from her or abolish
the same. Undoubtedly, the College Board of Directors has the authority to reorganize and
streamline the operations of the college with the end in view of minimizing expenditures.
We believe that the instant case was an offshoot of a corporate reorganization, a prerogative
reposed on the Board of Directors of the College.
The NLRC found that:

Admittedly, complainant was a managerial employee who has to have the complete trust
and confidence of respondents. While it may be true that complainant was not strictly an
accountable employee primarily responsible for disbursement of whatever funds,
respondents had some basis in losing its trust and confidence in complainant. Respondents'
evidence showed that under the principle of command responsibility, complainant was in a
sense responsible in the monitoring of monetary transactions involving funds from library
collections and from Related Learning Science collection (pp. 29-32, 136). For it has been
held that in case of termination due to loss of trust and confidence proof beyond reasonable
doubt of misconduct is not necessary but some basis being sufficient (Villadolid vs. Inciong,
121 SCRA 205).
However, we find that complainant was not accorded notice and investigation prior to
termination. Indeed, circumstances herein resulted in constructive dismissal. We lend
credence to complainant's allegation that investigation was conducted after she tendered
her indefinite leave. Law and jurisprudence mandate due process prior to termination
(Century Textile vs. NLRC, 161 SCRA 528). Considering the circumstances obtaining and in
the spirit of compassionate justice, we find complainant entitled to separation pay,
equivalent to one-half month per year of service based on her salary of P7,500.00 or the
total amount of P32,750.00.
Except for the allegation on constructive dismissal, this petition is a repetition of what
petitioner had already alleged below and which the labor arbiter and the NLRC dismissed for
lack of merit.
Petitioner's claim of constructive dismissal stems from her alleged removal from the
positions of Administrator, Vice President for Administration and Executive Vice President.
From the time petitioner assumed the position of Executive Vice President, she did not
possess any legal right to claim security of tenure concerning this position because she
assumed the same without authority from the Board of Directors. Petitioner cannot claim
that she was dismissed from the position of Administrator and Vice-President for
Administration because her continuous occupation of the positions is at the discretion or
pleasure of the Board of Directors.
In La Sallete of Santiago, Inc. vs. NLRC (195 SCRA 80 [1991]), this Court explained:
The acquisition of security of tenure by the teacher in the manner indicated signifies that he
shall thenceforth have the right to remain in employment as such teacher until he reaches
the compulsory retirement age in accordance with the rules of the school or the law. That
tenure, once acquired, cannot be adversely affected or defeated by requiring the teacher to
execute contracts stipulating the termination of his employment upon the expiration of a
fixed period or term. Contracts of that sort are anathema and will be struck down as null and
void.
Now, a teacher may also be appointed as a department head or administrative officer of the
school, e.g., as member of the school's governing council, as college dean or assistant dean,
as high school principal, as college secretary. Except in the case of a clear and explicit
agreement to the contrary, the acceptance by a teacher of an administrative position
offered to him or to which he might have aspired, does not operate as a relinquishment or
loss by him of his security of tenure as a faculty member; he retains his tenure as a teacher
during all the time that he occupies the additional position of department head or
administrative officer of the school. Indeed, the agreement between him and the school may
very well include a provision for him to continue teaching even on a part-time basis.
The teacher designated as administrative officer ordinarily serves for a definite term or at
the pleasure of the school head or board of trustees or regents depending on the rules of the
school and the agreement he may enter into with the institution. This appears to the Court
to be the invariable practice in most private schools, the purpose being, as the Court en
banc has also had occasion to point out, to afford to as many of the teaching staff as
possible the opportunity to serve as dean or principal or as administrative officer of one type
or another. There is, to be sure, nothing whatever amiss in said practice of having teachers
serve as administrative officials for a fixed term or in a non-permanent capacity.
xxx xxx xxx
A distinction should thus be drawn between the teaching staff of private educational
institutions, on one hand teachers, assistant instructors, assistant professors, associate
professors, full professors and department or administrative heads or officials on the
other college or department secretaries, principals, directors," assistant, deans, deans.
The teaching staff, the faculty members, may and should acquire tenure in accordance with
the rules and regulations of the Department of Education and Culture and the school's own
rules and standards. On the other hand, teachers appointed to serve as administrative

officials do not normally and should not expect to, acquire a second or additional tenure. The
acquisition of such an additional tenure is not normal, is the exception rather than the rule,
and should therefore be clearly and specifically provided by law or contract. (at pp. 82-83,
and 85.)
The management of NWC rests on its Board of Directors including the selection of members
of the faculty who may be allowed to assume other positions in the college aside from that
of teacher or instructor. In 1988, when the then new Board of Directors abolished the
additional positions held by the petitioner, it was merely exercising its right.
The Board abolished the positions not because the petitioner was the occupant thereof but
because the positions had become redundant with functions overlapping those of the
President of the college. The Board realized that the college was violating the Administrative
Manual for Private School which requires that all collegiate departments should have a fulltime head.
In Philippine School of Business Administration, et al. vs. Labor Arbiter Lacandola S. Leano
and Rufino R. Tan (127 SCRA 778 [1984]), this Court held:
This is not a case of dismissal. The situation is that of a corporate office having been
declared vacant, and of TAN's not having been elected thereafter, The matter of whom to
elect is a prerogative that belongs to the Board, and involves the exercise of deliberate
choice and the faculty of discriminative selection. Generally speaking, the relationship of a
person to a corporation, whether as officer or agent or employee, is not determined by the
nature of the services performed, but by the incidents of the relationship as they actually
exist. (At p. 783.).
The Board of Directors of NWC merely exercised rights vested in it by the Articles of
Incorporation. Petitioner failed to refute the evidence proffered by NWC before the labor
arbiter. In her appeal to the NLRC, petitioner also failed to rebut the findings of the labor
arbiter. In the instant petition, she has again failed to overturn private respondents'
evidence as well as the findings of the labor arbiter which were affirmed by the NLRC.
Petitioner's application for an indefinite leave of absence was not approved by the college
authorities, but this notwithstanding, she failed to follow-up her application and did not
report for work. Believing she was dismissed, petitioner filed the complaint for illegal
dismissal, illegal deductions, underpayment, unpaid wages or commissions and for moral
damages and attorney's fees on November 16, 1988.
As pointed out earlier, the rules on termination of employment, penalties for infractions, and
resort to concerted actions, insofar as managerial employees are concerned, are not
necessarily the same as those applicable to termination of employment of ordinary
employees. Employers, generally, are allowed a wider latitude of discretion in terminating
the employment of managerial personnel or those of similar rank performing functions which
by their nature require the employer's trust and confidence, than in the case of ordinary
rank-and-file employees (Cruz vs. Medina, 177 SCRA S65 [1989]).
Article 282(c) of the Labor Code provides that an employer may terminate an employment
for "fraud or willful breach by the employee of the trust reposed in him by his employer or
his duly authorized representative."
Under this provision, loss of trust and confidence is a valid ground for dismissing an
employee. Termination of employment on this ground does not require proof beyond
reasonable doubt. All that is needed is for the employer to establish sufficient basis for the
dismissal of the employee (Cruz vs. Medina, supra)
Both the labor arbiter and the public respondent NLRC found that there is some basis for
respondent NWC's loss of trust and confidence on petitioner.
The dismissal of the petitioner was for a just and valid cause. However, public respondent
gave credence to petitioner's allegation that she was not accorded notice and hearing prior
to termination. It appears on record that the investigation of petitioner's alleged
irregularities was conducted after the filing of the complaint for illegal dismissal.
Under Section 1, Rule XIV of the Implementing Rules and Regulations of the Labor Code, the
dismissal of an employee must be for a just or authorized cause and after due process.
The two requirements of this legal provision are:
1.
The legality of the act of dismissal, that is, dismissal under the ground provided
under Article 283 of the New Labor Code; and

2.
The legality in the manner of dismissal, that is, with due observance of the
procedural requirements of Sections 2, 5, and 6 of Batas Pambansa Blg. 130 (Shoemart vs.
NLRC, 176 SCRA 385 [1989]).
While the Labor Code treats of the nature and the remedies available with regard to the first,
such as: (a) reinstatement to his former position without loss of seniority rights, and (b)
payment of backwages corresponding to the period from his illegal dismissal up to actual
reinstatement, said Code does not deal at all with the second, that is, the manner of
dismissal, which is therefore, governed exclusively by the Civil Code (Primero vs. IAC, 156
SCRA 436 [1987]; Shoemart vs. NLRC, supra).
In cases where there was a valid ground to dismiss an employee but there was nonobservance of due process, this Court held that only a sanction must be imposed upon the
employer for failure to give formal notice and to conduct an investigation required by law
before dismissing the employee in consonance with the ruling in Wenphil v. NLRC, 170 SCRA
69 (1989); Shoemart, Inc. vs. NLRC, supra; and in Pacific Mills, Inc. vs. Zenaida Alonzo, 199
SCRA 617 (1991).
In Wenphil, we held:
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as
discussed above. The dismissal of an employee must be for just or authorized cause and
after due process (Emphasis in the original). Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and
conduct an investigation as required by law before dismissing petitioner from employment.
Considering the circumstance of this case petitioner must indemnify the private respondent
the amount of P1,000.00. The measure of this award depends on the facts of each case and
the gravity of the omission committed by the employer. (at p. 76, reiterated in Pacific Mills,
supra, at p. 261.)
Public respondent's finding that petitioner was not afforded due process is correct but the
Commission erred when it awarded separation pay in the amount of P32,750.00. In the
Pacific Mills, Inc. and Wenphil cases, this Court merely awarded P1,000.00 as penalty for
non-observance of due process.
The Board of Directors, composed of the individual private respondents herein, has the
power granted by the Corporation Code to implement a reorganization of respondent
college's offices, including the abolition of various positions, since it is implied or incidental
to its power to conduct the regular business affairs of the corporation.
The prerogative of management to conduct its own business affairs to achieve its purposes
cannot be denied (San Miguel Brewery Sales Force Union [FTGHWO] vs. Ople, 110 SCRA 25
[1981]; Abbot Laboratories vs. NLRC, 154 SCRA 713 [1987]). Management is at liberty,
absent any malice on its part, to abolish positions which it deems no longer necessary (Great
Pacific Life Assurance Corp. vs. NLRC, 188 SCRA 139 [1990]).
When petitioner was stripped by the Board of her positions as Executive Vice President and
Vice President for Administration, with a corresponding reduction in salary, the Board did not
act in a capricious, whimsical, and arbitrary manner, thus negating malice and bad faith.
WHEREFORE, the decision under review is hereby AFFIRMED with the MODIFICATION that the
award of separation pay is DELETED and that private respondents are ORDERED to pay
petitioner the amount of One Thousand Pesos (P1,000.00) as indemnity for non-observance
of due process.
SO ORDERED.

[G.R. No. 119157. March 11, 1999]

GOLDEN THREAD KNITTING INDUSTRIES, INC., GEORGE NG and WILFREDO BICO,
petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, GEORGE MACASPAC,
MARY ANN MACASPAC, ROMULO ALBASIN, MELCHOR CACHUCHA, GILBERT RIVERA
and FLORA BALBINO, respondents.
DECISION
BELLOSILLO, J.:

From 16 July to 2 September 1992 four (4) separate complaints were filed against petitioners
Golden Thread Knitting Industries, Inc., George Ng and Wilfredo Bico by their employees: the
first, on 16 July 1992 for unfair labor practice, illegal dismissal, overtime pay, premium pay,
holiday pay and illegal rotation by Gilbert Rivera, Mary Ann Macaspac, Deogracias Balingit,
Lolita Geraldez, Mila Santos, Perlita Matias, Lourdes Barranco, Melchor Cachucha, Romulo
Albasin, Lani Agudo, Rosalie Cachucha, Cristina Balingit, Rossie Rejuso, Carmen Balingit,
George Macaspac, Flora Balbino, Ma. Luisa Balbino, Angelina Albasin, Vilma Ballesteros,
Evelyn Carlos and Letty Bejamonde; the second, on 22 July 1992, for unfair labor practice,
illegal dismissal, reduction of working days, fabrication/frame-up of union member and union
busting, by Flora Balbino, Mary Ann Macaspac, Rossie Rejuso, Rosalie Cachucha, Lolita
Geraldez, Angelina Albasin, Ma. Luisa Balbino, Vilma Ballesteros and Carmen Balingit; the
third, on 24 August 1992, for unfair labor practice and withholding of wages filed by
Deogracias Balingit; and the fourth, on 2 September 1992, for unfair labor practice and
illegal dismissal, by Gilbert Rivera and Mary Ann Macaspac. Thereafter, the four (4)
complaints had to be, as they in fact were, consolidated.
During the pendency of these cases, Lolita Geraldez, Perlita Matias, Mila Santos and
Angelina Albasin moved that they be dropped as complainants in view of their subsequent
resignation/ separation from employment.
The complainants alleged that in the first week of May 1992 they organized a labor union.
On 22 May 1992 Cristina Balingit, wife of the union Chairman, was dismissed from
employment as sewer. In the last week of May union Chairman Deogracias Balingit himself
was suspended from work as knitting operator. On 1 June 1992 petitioners shortened the
number of working days of the union officers and members from six (6) to three (3) days a
week.
On 1 July 1992 the union filed a petition for certification election.
On 6 July 1992 union members Romulo Albasin, Melchor Cachucha and George Macaspac,
who worked as printers, were barred from entering the company premises. On 5 August
1992 Flora Balbino was suspended, then on the same day terminated from her job as sewer.
On 14 August 1992 union Vice Chairman Gilbert Rivera, as artist, was dismissed from
employment together with union Secretary Mary Ann Macaspac. On 10 September 1992 Mila
Santos was suspended. The complainants thus considered the foregoing acts as retaliatory
measures of petitioners on account of the former having established a union.
Petitioners contended that they resorted to rotation of work, which affected practically all
employees, because of the low demand for their towels and shirts. Petitioners also avowed
that they validly dismissed five (5) of the complainants, namely, Romulo Albasin, George
Macaspac, Gilbert Rivera, Mary Ann Macaspac and Flora Balbino. According to petitioners,
Romulo Albasin and George Macaspac slashed several bundles of towels on 3 July 1992,
while the positions of Gilbert Rivera and Mary Ann Macaspac became redundant. Flora
Balbino threatened the Personnel Manager and violated company rules by removing her
time card from the rack, while Melchor Cachucha was not dismissed but abandoned his
employment on 7 July 1992.
On 17 March 1993 the Labor Arbiter partly ruled in favor of the complainants. On the issue
of unfair labor practice, he opined that the reduction of working days and suspension or
dismissal of union officers or members were not shown to have been done in retaliation to
the complainants' act of organizing a union. He noted that those events transpired before
petitioners came to know about the existence of the union which was in the later part of July
1992 when they received the notice of hearing on the petition for certification election.
Moreover, he was convinced that the reduction of working days which was company wide
was brought about by the low demand for the company's products.
With respect to the dismissals of Romulo Albasin, George Macaspac, Gilbert Rivera, Mary
Ann Macaspac and Flora Balbino, the Labor Arbiter upheld petitioners on the validity thereof
except that Gilbert Rivera and Mary Ann Macaspac should be paid separation pay of one-half
(1/2) month for every year of service or P4,602.00 each. On the other hand, Flora Balbino
should be paid her two (2) days' salary of P236.00 that was withheld from her. As for Melchor
Cachucha, the Labor Arbiter sustained petitioners' contention that he was guilty of
abandonment.
Regarding the claims of Deogracias and Cristina Balingit, the Labor Arbiter found that these
were barred by their previous separate complaints, one of which was pending appeal while
the other was already dismissed. The rest of the claims was dismissed for lack of merit.[1]
Public respondent National Labor Relations Commission evaluated the evidence in a different
manner. Except for the dismissal of the charge of unfair labor practice and the award of
unpaid wages to Flora Balbino, the rest of the Labor Arbiter's ruling was set aside on 22

November 1994. According to the NLRC George Macaspac, Mary Ann Macaspac, Romulo
Albasin, Melchor Cachucha, Gilbert Rivera and Flora Balbino were illegally dismissed so that
petitioners were directed to immediately reinstate them with full back wages and other
benefits.
Furthermore, the NLRC found merit in the claim for holiday pay for 1990, 1991 and 1992 and
thus ordered petitioners to give complainants their pay for ten (10) regular holidays for each
year. Finally, it required petitioners to pay attorney's fees equivalent to ten (10%) percent of
the total monetary awards.[2]
Petitioners maintain that valid causes exist for the termination of the five (5) complainants
earlier mentioned. Romulo Albasin and George Macaspac were caught by security guards M.
Abelgas and E. Antonio slashing with razor blades several bundles of towels in the
warehouse at about 12:30 o'clock in the afternoon of 3 July 1992. The incident, which
constituted serious misconduct, was witnessed by another employee, Jose Arnel Mejia.
Gilbert Rivera and Mary Ann Macaspac were terminated on 14 August 1992 due to
redundancy, i.e., the Design Section where they worked as artists became overmanned
when the volume of work was drastically reduced. Flora Balbino was guilty of serious
misconduct by hurling invectives at petitioner Bico and threatening him in front of several
workers, and taking her time card off the rack on 5 August 1992.
In the case of Melchor Cachucha, petitioners insist that he unjustifiably left his employment
on 7 July 1992 and refused to return to work despite notice sent through his wife, who was
also employed by petitioner company, through a memorandum dated 22 July 1992[3] and
personal notification by another employee, Nilo Wales.[4] Petitioners insist that private
respondents are not entitled to holiday pay on the basis of bare allegations and without
specifying the unpaid holidays.
Clearly, there are only two (2) issues that confront this Court: (1) whether respondent NLRC
committed grave abuse of discretion in ordering petitioners to reinstate private respondents
Romulo Albasin, George Macaspac, Gilbert Rivera, Mary Ann Macaspac, Flora Balbino and
Melchor Cachucha; and, (2) whether these private respondents are entitled to holiday pay.
The factual findings of administrative bodies, being considered experts in their field, are
binding on this Court. But this is a general rule which holds true only when established
exceptions do not obtain. One of these exceptions is where the findings of the Labor Arbiter
and the NLRC are contrary to each other, as in the present case. Thus, there is a necessity to
review the records to determine which conclusions are more conformable to the evidentiary
facts.[5]
With regard to George Macaspac and Romulo Albasin, security guards M. Abelgas and E.
Antonio submitted an incident report to the Manager of petitioner company regarding the
destruction of several bundles of towels by Macaspac and Albasin with the use of razor
blades.[6] In fact, on 20 July 1992 petitioner Bico as Supervisor of petitioner company filed a
complaint for malicious mischief against them the property destroyed being worth
P3,800.00.[7] In this connection, another employee of petitioners, Jose Arnel Mejia, executed
a sworn statement on the same day before the State Prosecutor regarding the incident xxxx
03. T: Ano naman ang iyong titistiguhan na nakita mo?
S: Nakita ko po na hinihiwa ng dalawang kasamahan ko sa trabaho iyong nakarolliong
tuwalya at ito ay kanilang ikinalat at iyong nakabalot na plastic sa mga nakarollio ay
kanilang pinagsisira.
04. T: Sino naman itong dalawang kasamahan mo na sumira sa mga nakarolliong tuwalya?
S: Sila ay sina R(O)M(U)LO ALBASIN at GEORGE MACASPAC, na pawang mga kasamahan ko
sa trabaho.
05. T: Kailan at saan naman nangyari ang mga bagay na ito?
S: Noon pong ika-3 ng (H)ul(y)o 1992, mga bandang alas 12:00 ng tanghali, doon po sa
warehouse ng Golden Thread (K)nitting (I)ndustries, sa no. 270 Tangka St., Malinta,
Valenzuela, Metro Manila.
06. T: Nakita mo ba n(an)g kasalukuyan nilang sinisira iyong mga tuwalya?
S: Opo, nakita ko dahil sabay-sabay kaming lumabas at isa lamang ang aming dinadaanan.

07. T: Kasama mo ba si(l)a sa isang department?

S: Opo, at lunch break na po iyon at maglalabasan kami para kumain at pagdaan nila doon
sa mga nakakamadang tuwalya ay ginulo nila iyong mga kamada at pinaghihiwa nila.
08. T: Alam mo ba ang dahilan at kung bakit ginawa nila ang bagay na iyon?
S: Nagalit po siguro sila dahil inalis ni Manager iyong pinaskil nilang karatula tungkol sa labor
x x x x[8]
On 5 November 1992 Mejia executed another affidavit substantially reiterating his prior
narrations.[9]
On 6 August 1992 Macaspac and Albasin executed a counter-affidavit denying the
accusation against them. They claim that they were having lunch outside the company
premises during the time and date of the alleged incident.[10] Their denial and alibi were
substantiated by the joint affidavits of Mary Ann Macaspac, Perlita Matias, Lolita Geraldez,
Melchor Cachucha and Ma. Luisa Balbino.[11]
NLRC did not find lawful cause for the dismissal of Macaspac and Albasin since x x x x Records show that respondents failed to give the aforenamed complainants an
opportunity to be heard. There was no investigation conducted, calling the attention of the
aforenamed complainants (to) the charge imputed against them and requiring them to
explain and/or answer the same. Respondents' lone witness in the person of Jose Arnel Mejia
was not presented for confrontation by the said complainants. Thus, with the vehement
denial of the complainants, together with their own witnesses (pp. 157-163, Records), We
find the charge imputed against them of questionable veracity x x x x[12]
The ruling is correct. We find that petitioners were unable to substantiate the charge of
serious misconduct against Macaspac and Albasin. The incident report of the two (2) security
guards was on its face categorical on the culpability of subject respondents, yet it is
perplexing that the report was not utilized as supporting evidence in the criminal
proceedings. The affidavit of petitioner Bico sworn to before the State Prosecutor only
mentioned that xxxx
03. T: Ano ang dahilan at naririto ka sa aming tang(g)apan at nagbibigay ng salaysay?
S: Dahil sa ako po ang napag(-)utusan ng aming Manager upang maghain ng reklamo laban
doon sa dalawang trabahador n(a) sumira sa produktong tuwalya x x x x
09. T: Papaano mo naman nalaman na sila ang nagsira ng mga produktong tuwalya?
S: Nagpunta po sa akin iyong lady guard at sinabi niya na iyong mga nakarolliong tuwalya
na nakaka(l)at ay mga (h)iniwa at sira. (A)ng ginawa ko ay pumunta ako doon sa lugar ng
mga tuwalya at nakita ko na sira nga ang mga tuwalya, pinagtanong ko kung sino ang
nakakita na sumira sa mga tuwalya at doon ay mayroon umamin sa akin at sinabi na sila
R(o)m(u)lo Albasin at George Macaspac ang sumira x x x x[13]
As previously stated, the incident report was addressed to the Manager of the company.
Considering that it was the Manager who instructed petitioner Bico to lodge the criminal
complaint, and if the report was submitted after the incident, then there was no reason for it
not to form part of the evidence in the criminal proceedings. As it is, we can gather from the
narration of petitioner Bico that the person who revealed to him the identities of the culprits
was not one of the security guards but Mejia who supplied the supporting affidavit. These
circumstances inevitably lead us to the conclusion that the incident report was merely
concocted by petitioners in view of the filing of the labor cases against them.
The narration of Mejia regarding the alleged slashing incident is obviously another
fabrication. In answer to the query, "Nakita mo ba n(an)g kasalukuyan nilang sinisira iyong
mga tuwalya?" Mejia replied, "Opo, nakita ko dahil sabay-sabay kaming lumabas at isa
lamang ang aming dinadaanan." Indeed, it is hard to believe that Macaspac and Albasin
destroyed company properties in Mejia's full view who did not appear to be with them in the
controversy. Often, misdeeds are committed either in the presence of an ally, if nobody is
around to blow the whistle, or when darkness has adequately shrouded the surroundings.
Moreover, it has not been shown that Macaspac and Albasin were such feckless individuals
who would resort to destruction of company properties in total disregard of its dire
consequences. On the contrary, they were union members fighting for their rights as
employees. Even the reason advanced by Mejia for their misconduct banks on speculation.

Further still, it does not appear that the criminal case filed by petitioner Bico primarily on the
strength of the affidavit of Mejia ever prospered at the prosecutor's level.
Macaspac and Albasin were likewise denied procedural due process. As correctly observed
by respondent NLRC, petitioners failed to afford Macaspac and Albasin the benefit of hearing
and investigation before termination. It is also our observation that neither did petitioners
comply with the requirement on notices. An established rule of long standing is that to effect
a completely valid and unassailable dismissal, an employer must show not only sufficient
ground therefor but must also prove that procedural due process has been observed by
giving the employee two (2) notices: one, of the intention to dismiss, indicating therein his
acts or omissions complained against, and two, notice of the decision to dismiss.[14]
Macaspac and Albasin were summarily eased out of employment when they were refused
entry into the company premises three (3) days after allegedly slashing the bundles of
towels or on 6 July 1992.
As regards Gilbert Rivera and Mary Ann Macaspac, petitioners claim that they were
constrained to trim down the number of their artists in the Design Section from five (5) to
two (2) as a consequence of the drastic reduction of their volume of work, and Rivera and
Macaspac were among the three (3) employees dismissed for redundancy.
Rivera and Macaspac assail the alleged redundancy as the events that transpired prior to
their termination proved otherwise. According to Rivera, on 27 July 1992 he was dismissed
on account allegedly of poor revenues and was in fact offered separation pay, which he
refused. He further said that the following day he was dismissed, he sent a letter to
petitioners Ng and Bico protesting his dismissal, claiming that he had not done anything
wrong to them nor to the company.[15] Further still, Rivera claimed that on 4 August 1992
he was advised by petitioner Ng to report for work immediately,[16] although upon his
return he was again offered separation pay but opted instead to continue working.
On her part, Macaspac claims that she was also offered separation pay on the same ground
but she also rejected the offer. Both Rivera and Macaspac requested evidence of the
company's financial setback but petitioners failed to furnish them any. Rivera's working days
were further reduced from three (3) to two (2) days a week.[17] Insisting on the redundancy
of the positions of Rivera and Macaspac, petitioners finally dismissed them on 14 August
1992.
The circumstances recounted by Rivera and Macaspac were considered by the NLRC to have
cast serious doubt on the validity and propriety of their termination. Moreover, the NLRC
found that their dismissal was not reported by petitioners to the Department of Labor and
Employment (DOLE) as required by law.
Again, we agree with respondent NLRC. The characterization of an employee's services as no
longer necessary or sustainable, and therefore properly terminable, is an exercise of
business judgment on the part of the employer. The wisdom or soundness of such
characterization or decision is not subject to discretionary review on the part of the Labor
Arbiter nor the NLRC provided, of course, that violation of law or arbitrary or malicious action
is not shown.[18] In the instant case, we question petitioners' exercise of management
prerogative because it was not shown that Rivera and Macaspac's positions were indeed
unnecessary, much less was petitioners' claim supported by any evidence. It is not enough
for a company to merely declare that it has become overmanned. It must produce adequate
proof that such is the actual situation in order to justify the dismissal of the affected
employees for redundancy.[19]
Furthermore, we have laid down the principle that in selecting the employees to be
dismissed, a fair and reasonable criteria must be used, such as but not limited to: (a) less
preferred status (e. g., temporary employee), (b) efficiency, and (c) seniority.[20] The
records disclose that no criterion whatsoever was adopted by petitioners in dismissing
Rivera and Macaspac. Another procedural lapse committed by petitioners is the lack of
written notice to the DOLE required under Art. 283 of the Labor Code.[21] The purpose of
such notice is to ascertain the verity of the cause of termination of employment.[22]
Quite related to the alleged drastic reduction of their volume of work, petitioners further
contended in the proceedings below that they resorted to rotation of employees due to the
low demand for their products. But respondent NLRC was not persuaded since, other than
petitioners' bare contention, they miserably failed to support it with concrete evidence.[23]
On the part of Flora Balbino, petitioner Bico submitted a certification dated 5 August 1992
stating that on that day he explained to Flora Balbino the company memorandum on her 3day suspension on the ground that she repeatedly slowed down her production. He told her
to sign the memorandum which, according to Bico, obviously infuriated her thus prompting
her to hurl invectives at him in the presence of many persons inside his office. She even

threatened him, "Humanda ka sa darating na araw ipatitiklo kita." The certification was
attested to by five (5) witnesses.[24]
Security guard Abelgas submitted a written report regarding Balbino's act of stealing the
time card in her name after bad mouthing petitioner Bico and refusing to sign the
memorandum on her suspension.[25] Another employee submitted her own report
corroborating Balbino's act of removing her time card from the rack.[26]
Balbino's story is completely different. According to her, she was dismissed outright by Bico
on the same date she asked for a memorandum on her suspension. She was however silent
on the other charge that she stole the time card in her name.
The NLRC lent full credence to the version of Balbino. Here, we disagree. As between the
uncorroborated account of Balbino and the narration of petitioner Bico, which was attested
to by witnesses and substantiated by other employees, we accord weight to the latter. The
utterances by an employee of obscene, insulting or offensive words against a superior justify
his dismissal for gross misconduct. The scornful attitude is also destructive of his coemployees' morale.[27] However, the dismissal will not be upheld where it appears, as in
this case, that the employee's act of disrespect was provoked by the employer.[28] It may
be recalled that Balbino was suspended because she allegedly continually slowed down in
her production. Yet, as found by the NLRC, to which we agree, petitioners failed to show that
there was an established quota for production as a point of reference to determine whether
an employee was performing below or above the quota to warrant the charge.[29] What
surfaces from our assessment of the evidence of petitioners is that Balbino hurled invectives
at petitioner Bico because she was provoked by the baseless suspension imposed on her.
The penalty of dismissal must be commensurate with the act, conduct or omission imputed
to the employee.[30] Under the circumstances, we believe that dismissal was a harsh
penalty; one (1) week suspension would have sufficed.
Balbino might have taken the time card in her name but the Court considers this act as a
mere emotional outburst and an offshoot of her suspension. Anyway, no material damage
was demonstrated to have been suffered by petitioners on account thereof. A time card
shows the actual number of hours and days in a certain period performed by an employee
such that the loss thereof will surely pose a problem. But not so in the case of Balbino since
only her work performed on 31 July and 3 August 1992 was unpaid. These circumstances on
non-payment were uncontroverted by petitioners, rightfully entitling Balbino to an award
therefor which the NLRC determined to be P236.00. Also worth mentioning is the fact that
Balbino was denied procedural due process when she was summarily dismissed.[31]
Insofar as Melchor Cachucha is concerned, petitioners insist that he abandoned his work on
7 July 1992 and refused to return despite notice sent through his wife, through a
memorandum dated 22 July 1992, and personal notification by co-employee Nilo Wales. But
disputing the charge, Cachucha claimed that together with Macaspac and Albasin, he was
prevented by the company security guards from reporting for work on 6 July 1992.
The NLRC sustained Cachucha that he did not abandon his work considering that he
seasonably filed a complaint for illegal dismissal against petitioners on 16 July 1992 and
positively disavowed any notice to return to work allegedly sent to him by petitioners.
The NLRC is correct. For abandonment to exist, it is essential that (1) the employee must
have failed to report for work or must have been absent without valid or justifiable reason;
and, (2) there must have been a clear intention to sever the employer-employee relationship
manifested by some overt acts.[32] The circumstance that Cachucha lost no time in filing a
complaint for illegal dismissal against petitioners on 16 July 1992 is incompatible with the
charge of abandonment[33] and confirms in fact that he was refused entry into the company
premises on 6 July 1992.
Petitioners' allegation that they informed Cachucha's wife that Cachucha must report to
work immediately is unsubstantiated and self-serving. The alleged notification through the
memorandum of 22 July 1992 has not been shown to have been received by Cachucha. On
the other hand, the affidavit of Wales stating that on 23 July 1992 he relayed to Cachucha
the directive to return to work which the latter turned down for lack of interest does not
inspire belief. If Wales' narrations were true, then Cachucha would have simply abided by the
directive and moved for the dismissal of his complaint which was filed earlier. After all, it was
precisely reinstatement that he was seeking.[34]
Dismissal is the ultimate penalty that can be meted to an employee. It must therefore be
based on a clear and not on an ambiguous or ambivalent ground.[35] From our assessment
of the records, we find that petitioners exercised their authority to dismiss without due
regard to the pertinent exacting provisions of the Labor Code. The right to terminate should
be utilized with extreme caution because its immediate effect is to put an end to an

employee's present means of livelihood while its distant effect, upon a subsequent finding of
illegal dismissal, is just as pernicious to the employer who will most likely be required to
reinstate the subject employee and grant him full back wages and other benefits.[36]
The award of compensation for ten (10) regular holidays for 1990, 1991 and 1992 by the
NLRC is proper. The dismissed workers distinctly set forth in their Position Paper that they
were not remunerated for ten (10) regular holidays for the years 1990, 1991 and 1992.[37]
This claim stands undisputed.
WHEREFORE, the Resolution of public respondent National Labor Relations Commission of 22
November 1994 directing petitioners GOLDEN THREAD KNITTING INDUSTRIES, INC., GEORGE
NG and WILFREDO BICO to immediately reinstate private respondents George Macaspac,
Mary Ann Macaspac, Romulo Albasin, Melchor Cachucha, Gilbert Rivera and Flora Balbino to
their former positions without loss of seniority rights and other privileges and with full back
wages, inclusive of allowances, and to their other benefits or their monetary equivalent
computed from the time of their dismissal up to actual reinstatement, is AFFIRMED but with
modification as regards private respondent Balbino whose date of termination should be 12
August 1992, taking into account her one (1) week suspension. All the rest of the dispositive
portion, particularly the order to petitioners to pay private respondents for ten (10) regular
holidays for 1990, 1991 and 1992; to pay private respondent Balbino her wages for two (2)
days amounting to P236.00; and, to pay private respondents attorney's fees equivalent to
ten per cent (10%) of the total monetary awards, is likewise AFFIRMED. Costs against
petitioners.
SO ORDERED.
[G.R. No. 95940. July 24, 1996]
PANTRANCO NORTH EXPRESS, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and URBANO SUIGA, respondents.
DECISION
PANGANIBAN, J.:
Is a Collective Bargaining Agreement provision allowing compulsory retirement before age
60 but after twenty five years of service legal and enforceable? Who has jurisdiction over a
case involving such a question -- the labor arbiter or arbitrators authorized by such CBA?
The foregoing questions are presented in the instant petition for Certiorari seeking the
nullification of the Resolution[1] promulgated September 28, 1990 by the National Labor
Relations Commission[2] in an illegal dismissal case brought by private respondent. In its
assailed Resolution, the public respondent affirmed the decision of Labor Arbiter Ricardo N.
Olairez dated March 26, 1990[3] declaring that the compulsory retirement of private
respondent constituted illegal dismissal, ordering his reinstatement and granting him
backwages.
The Antecedent Facts
Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually joined
the Pantranco Employees Association-PTGWO. He continued in petitioner's employ until
August 12, 1989, when he was retired at the age of fifty-two (52) after having rendered
twenty five years' service. The basis of his retirement was the compulsory retirement
provision of the collective bargaining agreement between the petitioner and the aforenamed
union. Private respondent received P49,300.00 as retirement pay.
On February 15, 1990, private respondent filed a complaint[4] for illegal dismissal against
petitioner with the Sub-Regional Arbitration Branch of the respondent Commission in
Dagupan City. The complaint was consolidated with two other cases of illegal dismissal[5]
having similar facts and issues, filed by other employees, non-union members.
After hearings were held and position papers submitted, on March 26, 1990, Labor Arbiter
Olairez rendered his decision, the dispositive portion of which reads:
"WHEREFORE, with all the foregoing considerations, we find the three complainants illegally
and unjustly dismissed and we hereby order the respondent to reinstate them to their
former or substantially equivalent positions without loss of seniority rights with full
backwages and other benefits, computed as follows:
xxx xxx xxx
3. Urbano Suiga

27,375.00 Backwages Aug. 16/89 to March 31/90 (P3,650.00 x 7.5 mos.)

1,368.75 13th month pay for 1989 (P16,425.00 over 12)
P28,743.75
2,874.37 10% attorney's fees
P31,618.12 Total as of March 31/90 plus additional backwages and other benefits but not to
exceed 3 years and the corresponding attorney's fees.
The amounts already received by complainants shall be considered as advanced payment of
their retirement pay which shall be deducted when they shall actually retire or (be)
separated from the service.
The order of reinstatement is immediately executory even pending appeal."
Petitioner appealed to public respondent, which issued the questioned Resolution affirming
the labor arbiter's decision in toto. Hence, this petition.
The Issues
Petitioner raises the following issues for decision:
"I. The National Labor Relations Commission gravely abused its discretion in holding that the
Labor Arbiter has jurisdiction over the case.
II. Assuming that the Labor Arbiter has jurisdiction over the case, the National Labor
Relations Commission gravely abused its discretion in affirming the Labor Arbiter's decision
that private respondent Urbano Zuiga (sic) was illegally dismissed."
Of course, it is obvious that the underlying and pivotal issue is whether the CBA stipulation
on compulsory retirement after twenty-five years of service is legal and enforceable. If it is,
private respondent has been validly retired. Otherwise, petitioner is guilty of illegal
dismissal. The answer to said question will settle the issue of the validity of the questioned
resolution of the public respondent.
The Court's Ruling
On the key issue, the Court finds the petition meritorious, thus warranting reversal of the
questioned Resolution.
First Issue: Jurisdiction of Labor Arbiter
Petitioner contends that the labor arbiter had no jurisdiction because the dispute concerns a
provision of the CBA and its interpretation. It claims that the case falls under the jurisdiction
of the voluntary arbitrator or panel of arbitrators under Article 261 of the Labor Code, which
provides:
"Article 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. -- The
Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies referred to in the immediately
preceding Article. Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor practice and shall be
resolved as grievances under the Collective Bargaining Agreement. For purposes of this
Article, gross violations of a Collective Bargaining agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor
and Employment shall not entertain disputes, grievances or matters under the exclusive and
original jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall
immediately dispose and refer the same to the Grievance Machinery or Voluntary Arbitration
provided in the Collective Bargaining Agreement."
The Labor Arbiter believed otherwise. In his decision[6], he stated:
"In our honest opinion we have Jurisdiction over the complaint on the following grounds:

First, this is a complaint of illegal dismissal of which original and exclusive jurisdiction under
Article 217 has been conferred to the Labor Arbiters. The interpretation of the CBA or
enforcement of the company policy is only corollary to the complaint of illegal dismissal.
Otherwise, an employee who was on AWOL, or who committed offenses contrary to the
personnel polices (sic) can no longer file a case of illegal dismissal because the discharge is
premised on the interpretation or enforcement of the company polices (sic).
Second. Respondent voluntarily submitted the case to the jurisdiction of this labor tribunal. It
adduced arguments to the legality of its act, whether such act may be retirement and/or
dismissal, and prayed for reliefs on the merits of the case. A litigant cannot pray for reliefs
on the merits and at the same time attacks (sic) the jurisdiction of the tribunal. A person
cannot have one's cake and eat it too. x x x."
The Court agrees with the public respondent's affirmance of the arbiter's decision in respect
of the question of jurisdiction.
In Sanyo Philippines Workers Union PSSLU vs. Caizares,[7] a case cited by the petitioner, this
Court ruled:
x x x Hence, only disputes involving the union and the company shall be referred to the
grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an
agreement regarding the dismissal of private respondents. No grievance between them
exists which could be brought to a grievance machinery. The problem or dispute in the
present case is between the union and the company on the one hand and some union and
non-union members who were dismissed, on the other hand. The dispute has to be settled
before an impartial body. The grievance machinery with members designated by the union
and the company cannot be expected to be impartial against the dismissed employees. Due
process demands that the dismissed workers grievances be ventilated before an impartial
body. Since there has already been an actual termination, the matter falls within the
jurisdiction of the Labor Arbiter."
Applying the same rationale to the case at bar, it cannot be said that the "dispute" is
between the union and petitioner company because both have previously agreed upon the
provision on "compulsory retirement" as embodied in the CBA. Also, it was only private
respondent on his own who questioned the compulsory retirement. Thus, the case is
properly denominated as a "termination dispute" which comes under the jurisdiction of labor
arbiters.
Therefore, public respondent did not commit a grave abuse of discretion in upholding the
jurisdiction of the labor arbiter over this case.
Second Issue: Private Respondent's Compulsory Retirement Is Not Illegal Dismissal
The bone of contention in this case is the provision on compulsory retirement after 25 years
of service. Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement[8]
between petitioner company and the union states:
"Section 1. The COMPANY shall formulate a retirement plan with the following main features:
xxx xxx xxx
(e) The COMPANY agrees to grant the retirement benefits herein provided to regular
employees who may be separated from the COMPANY for any of the following reasons:
xxx xxx xxx
(5) Upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of
service to the COMPANY, whichever comes first, and the employee shall be compulsory
retired and paid the retirement benefits herein provided."
Petitioner contends that the aforequoted provision is valid and in consonance with Article
287 of the Labor Code. The respondent Commission holds otherwise.
The said Code provides:
"Art. 287. Retirement. -- Any employee may be retired upon reaching the retirement age
established in the Collective Bargaining Agreement or other applicable employment
contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as
he may have earned under existing laws and any collective bargaining or other agreement."
The Solicitor General, in his Manifestation in Lieu of Comment,[9] agrees with petitioner's
contention that the law leaves to the employer and employees the fixing of the age of
retirement. He cites Section 13, Rule I, Book VI of the Omnibus Rule Implementing the Labor
Code, which reads:
"Retirement. -- In the absence of any collective bargaining agreement or other applicable
agreement concerning terms and condition of employment which provides for retirement at
an older age, an employee may be retired upon reaching the age of sixty (60) years."
Arguing that the law on compulsory retirement age is open-ended, as indicated by the use of
the word "may," the Solicitor General maintains that there is no prohibition against parties
fixing a lower age for retirement.[10]
Additionally, the Solicitor General and the petitioner contend that a CBA provision lowering
compulsory retirement age to less than sixty (60) is not contrary to law because it does not
diminish the employee's benefits. Rather, they argue that early retirement constitutes a
reward of employment, and therefore, retirement pursuant to the CBA provision in question
cannot be considered a dismissal following this Court's ruling in Soberano vs. Clave,10a the
relevant portions of which read as follows:
"Retirement and dismissal are entirely different from each other. Retirement is the result of a
bilateral act of the parties, a voluntary agreement between the employer and the employees
whereby the latter after reaching a certain age agrees and/or consents to severe his
employment with the former. On the other hand, dismissal refers to the unilateral act of the
employer in terminating services of an employee with or without cause. In fine, in the case
of dismissal, it is only the employer who decides when to terminate the services of an
employee x x x Moreover, concomitant with the provisions on retirement in a Labor
Agreement is a stipulation regarding retirement benefits pertaining to a retired employee.
Here again, the retirement benefits are subject to stipulation by the parties unlike in
dismissals where separation pay is fixed by law in cases of dismissals without just cause.
Evident, therefore, from the foregoing is that retirements which are agreed upon by the
employer and the employee in their collective bargaining agreement are not dismissals x x
x. To further fortify the aforesaid conclusion, it is noteworthy that even the New Labor Code
recognizes this distinction when it treats retirement from service under a separate title from
that of dismissal or termination of employment, aside from expressly recognizing the right of
the employer to retire any employee who has reached the retirement age established in the
collective bargaining agreement or other applicable employment contract and the latter to
receive such retirement benefits as he may have earned under existing laws and any
collective bargaining or other agreement (Art. 277, New Labor Code)."
We agree with petitioner and the Solicitor General. Art. 287 of the Labor Code as worded
permits employers and employees to fix the applicable retirement age at below 60 years.
Moreover, providing for early retirement does not constitute diminution of benefits. In almost
all countries today, early retirement, i.e., before age 60, is considered a reward for services
rendered since it enables an employee to reap the fruits of his labor particularly retirement
benefits, whether lump-sum or otherwise at an earlier age, when said employee, in
presumably better physical and mental condition, can enjoy them better and longer. As a
matter of fact, one of the advantages of early retirement is that the corresponding
retirement benefits, usually consisting of a substantial cash windfall, can early on be put to
productive and profitable uses by way of income-generating investments, thereby affording
a more significant measure of financial security and independence for the retiree who, up till
then, had to contend with life's vicissitudes within the parameters of his fortnightly or
weekly wages. Thus we are now seeing many CBAs with such early retirement provisions.
And the same cannot be considered a diminution of employment benefits.
It is also further argued that, being a union member, private respondent is bound by the CBA
because its terms and conditions constitute the law between the parties.[11] The parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which according to their nature, may be in keeping with good faith, usage and
law.[12] It binds not only the union but also its members.[13] Thus, the Solicitor General[14]
said:
"Private respondent cannot therefore claim illegal dismissal when he was compulsory retired
after rendering twenty-five (25) years of service since his retirement is in accordance with
the CBA."
We again concur with the Solicitor General's position. A CBA incorporates the agreement
reached after negotiations between employer and bargaining agent with respect to terms

and conditions of employment. A CBA is not an ordinary contract. "(A)s a labor contract
within the contemplation of Article 1700 of the Civil Code of the Philippines which governs
the relations between labor and capital, (it) is not merely contractual in nature but
impressed with public interest, thus it must yield to the common good. As such, it must be
construed liberally rather than narrowly and technically, and the courts must place a
practical and realistic construction upon it, giving due consideration to the context in which
it is negotiated and purpose which it is intended to serve."[15]
Being a product of negotiation, the CBA between the petitioner and the union intended the
provision on compulsory retirement to be beneficial to the employees-union members,
including herein private respondent. When private respondent ratified the CBA with the
union, he not only agreed to the CBA but also agreed to conform to and abide by its
provisions. Thus, it cannot be said that he was illegally dismissed when the CBA provision on
compulsory retirement was applied to his case.
Incidentally, we call attention to Republic Act No. 7641, known as "The Retirement Pay Law,"
which went into effect on January 7, 1993. Although passed many years after the
compulsory retirement of herein private respondent, nevertheless, the said statute sheds
light on the present discussion when it amended Art. 287 of the Labor Code, to make it read
as follows:
"ART. 7. Retirement. Any employee may be retired upon reaching the retirement age
establish in the collective bargaining agreement or other applicable employment contract.
xxx xxx xxx
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory
retirement age, who has served at least five (5) years in the said establishment may retire x
x x."
The aforequoted provision makes clear the intention and spirit of the law to give employers
and employees a free hand to determine and agree upon the terms and conditions of
retirement. Providing in a CBA for compulsory retirement of employees after twenty-five (25)
years of service is legal and enforceable so long as the parties agree to be governed by such
CBA. The law presumes that employees know what they want and what is good for them
absent any showing that fraud or intimidation was employed to secure their consent thereto.
On this point then, public respondent committed a grave abuse of discretion in affirming the
decision of the labor arbiter. The compulsory retirement of private respondent effected in
accordance with the CBA is legal and binding.
WHEREFORE, premises considered, the petition is GRANTED and the questioned Resolution
is hereby set aside. No costs.
SO ORDERED.
SECOND DIVISION
DANNIE M. PANTOJA,
G.R. No. 163554
Petitioner,
- versus SCA HYGIENE PRODUCTS
CORPORATION,
Promulgated:
Respondent. April 23, 2010
DECISION
DEL CASTILLO, J.:
Once again, we uphold the employers exercise of its management prerogative because it
was done for the advancement of its interest and not for the purpose of defeating the lawful
rights of an employee.
This petition for review on certiorari[1] assails the Decision[2] dated January 30, 2004 and
Resolution[3] dated May 13, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 73076,
which affirmed the May 30, 2002 Decision[4] of the National Labor Relations Commission
(NLRC) and reinstated the Labor Arbiters dismissal of the illegal dismissal complaint filed by
petitioner Dannie M. Pantoja against respondent SCA Hygiene Products Corporation.
Factual Antecedents

Respondent, a corporation engaged in the manufacture, sale and distribution of industrial

paper and tissue products, employed petitioner as a utility man on March 15, 1987.
Petitioner was eventually assigned at respondents Paper Mill No. 4, the section which
manufactures the companys industrial paper products, as a back tender in charge of the
proper operation of the sections machineries.
In a Notice of Transfer dated March 27, 1999,[5] respondent informed petitioner of its
reorganization plan and offered him a position at Paper Mill No. 5 under the same terms and
conditions of employment in anticipation of the eventual closure and permanent shutdown
of Paper Mill No. 4 effective May 5, 1999. The closure and concomitant reorganization is in
line with respondents decision to streamline and phase out the companys industrial paper
manufacturing operations due to financial difficulties brought about by the low volume of
sales and orders for industrial paper products.
However, petitioner rejected respondents offer for his transfer. Thus, a notice of
termination[6] of employment effective May 5, 1999 was sent to petitioner as his position
was declared redundant by the closure of Paper Mill No. 4. He then received his separation
pay equivalent to two months pay for every year of service in the amount of P356,335.20
and thereafter executed a release and quitclaim[7] in favor of respondent. On April 5, 1999,
respondent informed the Department of Labor and Employment (DOLE) of its reorganization
and partial closure by submitting with the said office an Establishment Termination Report[8]
together with the list[9] of 31 terminated employees.
On June 20, 2000, petitioner filed a complaint for illegal dismissal against respondent
assailing his termination as without any valid cause. He averred that the alleged redundancy
never occurred as there was no permanent shutdown of Paper Mill No. 4 due to its
continuous operation since his termination. A co-employee, Nestor Agtang, confirmed this
fact and further attested that several contractual workers were employed to operate Paper
Mill No. 4.[10] Petitioner also presented in evidence documents pertaining to the actual and
continuous operation of Paper Mill No. 4 such as the Paper Mill Personnel Schedule for July 28, 2000[11] and 23-29, 2000[12] and Paper Machine No. 4 Production Report and Operating
Data dated April 28, 2000[13] and May 18, 2000.[14]
In its defense, respondent refuted petitioners claim of illegal dismissal. It argued that
petitioner has voluntarily separated himself from service by opting to avail of the separation
benefits of the company instead of accepting reassignment/transfer to another position of
equal rank and pay. According to respondent, petitioners discussion on the alleged
resumption of operation of Paper Mill No. 4 is rendered moot by the fact of petitioners
voluntary separation.
Ruling of the Labor Arbiter
On March 23, 2001, the Labor Arbiter rendered a Decision[15]
dismissing petitioners complaint for lack of merit. The Labor Arbiter ruled that inasmuch as
petitioner rejected the position offered to him, opted to receive separation pay and executed
a release and quitclaim releasing the company from any claim or demand in connection with
his employment, petitioners claim that he was illegally dismissed must perforce fail.
Ruling of the National Labor Relations Commission
Upon appeal by petitioner, the NLRC reversed the Labor Arbiters Decision by finding
petitioners separation from employment illegal. The NLRC gave credence to petitioners
evidence of Paper Mill No. 4s continuous operation and consequently opined that the feigned
shutdown of operations renders respondents redundancy program legally infirm. According
to the NLRC, petitioners refusal to be transferred to an equal post in Paper Mill No. 5 is of no
consequence since he would not have had the need to make a choice where the situation, in
the first place, never called for it. The NLRC further disregarded the validity of the quitclaim
because its execution cannot be considered as having been done voluntarily by petitioner
there being fraud and misrepresentation on the part of respondent. The dispositive portion
of the NLRC Decision reads:
WHEREFORE, premises considered, the decision under review is hereby REVERSED and SET
ASIDE, and another entered, declaring complainants dismissal from employment as ILLEGAL.
Accordingly, respondent is ordered to REINSTATE the complainant to his former position
without loss of seniority rights and pay him FULL BACKWAGES in the amount corresponding
to the period when he was actually dismissed until actual reinstatement, less the sum of
THREE HUNDRED FIFTY SIX THOUSAND THREE HUNDRED THIRTY FIVE & 20/100 Pesos
(P356,335.20) representing his separation pay.

Respondent is further ordered to pay the complainant, by way of attorneys fees, ten percent
(10%) of the total net amount due as backwages.
SO ORDERED.[16]

Respondent sought reconsideration of the NLRCs ruling. It denied the fact that Paper Mill No.
4 continued to be fully operational in 1999. Respondent asseverated that when Paper Mill
No. 4 was shut down in 1999 due to its low production output as certified in an affidavit[17]
executed by SCAs VP-Tissue Manufacturing Director, there was a necessity to occasionally
run from time to time the machines in Paper Mill No. 4 only for the purpose of maintaining
and preserving the same and does not mean that Paper Mill No. 4 continued to be
operational. It was only in 2000 that Paper Mill No. 4 was subsequently reopened due to a
more favorable business climate, which decision is recognized as a rightful exercise of
management prerogative. Moreover, respondent maintained that this is a case of voluntary
separation and not illegal dismissal.
In a Resolution[18] dated August 22, 2002, respondents motion was denied.
Ruling of the Court of Appeals
Aggrieved, respondent filed a petition for certiorari with the CA. On January 30, 2004, the CA
reversed the NLRCs Decision and reinstated the Labor Arbiters Decision dismissing the
compliant. It ruled that there was no illegal dismissal as the act of petitioner in rejecting the
transfer and accepting the separation pay constitutes a valid basis for the separation from
employment. Respondents Motion to Annul the NLRCs Entry of Judgment was granted by the
CA.
Petitioner filed a motion for reconsideration but it was denied.
Issue
The lone issue in this petition for review on certiorari is whether or not respondent is guilty
of illegal dismissal.
Petitioner contends that respondents streamlining of operations which resulted in the
reduction of personnel was a mere scheme to get rid of regular employees whose security of
tenure is protected by law. As there was evident bad faith in the implementation of a flawed
retrenchment program, petitioner argued that his separation from employment due to his
decision to accept separation pay is illegal since respondent has no valid basis to give him
an option either to be transferred or be separated. Further, neither can the quitclaim he
executed stamp legality to his precipitate separation.
Our Ruling
The petition lacks merit.
Respondents right of management prerogative was exercised in good faith.

Respondent presented evidence of the low volume of sales and orders for the production of
industrial paper in 1999 which inevitably resulted to the companys decision to streamline its
operations. This fact was corroborated by respondents VP-Tissue Manufacturing Director and
was not disputed by petitioner. Exercising its management prerogative and sound business
judgment, respondent decided to cut down on operational costs by shutting down one of its
paper mill. As held in International Harvester Macleod, Inc. v. Intermediate Appellate Court,
[19] the determination of the need to phase out a particular department and consequent
reduction of personnel and reorganization as a labor and cost saving device is a recognized
management prerogative which the courts will not generally interfere with.
In this case, the abolishment of Paper Mill No. 4 was undoubtedly a business judgment
arrived at in the face of the low demand for the production of industrial paper at the time.
Despite an apparent reason to implement a retrenchment program as a cost-cutting
measure, respondent, however, did not outrightly dismiss the workers affected by the
closure of Paper Mill No. 4 but gave them an option to be transferred to posts of equal rank
and pay. As can be seen, retrenchment was utilized by respondent only as an available
option in case the affected employee would not want to be transferred. Respondent did not
proceed directly to retrench. This, to our mind, is an indication of good faith on respondents
part as it exhausted other possible measures other than retrenchment. Besides, the
employers prerogative to bring down labor costs by retrenching must be exercised

essentially as a measure of last resort, after less drastic means have been tried and found
wanting. Giving the workers an option to be transferred without any diminution in rank and
pay specifically belie petitioners allegation that the alleged streamlining scheme was
implemented as a ploy to ease out employees, thus, the absence of bad faith. Apparently,
respondent implemented its streamlining or reorganization plan with good faith, not in an
arbitrary manner and without prejudicing the tenurial rights of its employees.
Petitioner harps on the fact that there was no actual shutdown of Paper Mill No. 4 but that it
continued to be operational. No evidence, however, was presented to prove that there was
continuous operation after the shutdown in the year 1999. What the records reveal is that
Paper Mill No. 4 resumed its operation in 2000 due to a more favorable business climate. The
resumption of its industrial paper manufacturing operations does not, however, make
respondents streamlining/reorganization plan illegal because, again, the abolishment of
Paper Mill No. 4 in 1999 was a business judgment arrived at to prevent a possible financial
drain at that time. As long as no arbitrary or malicious action on the part of an employer is
shown, the wisdom of a business judgment to implement a cost saving device is beyond this
courts determination. After all, the free will of management to conduct its own business
affairs to achieve its purpose cannot be denied.[20]
Petitioners voluntary separation from employment renders his claim of illegal dismissal
unfounded and baseless.

Petitioner claims that he had no choice but to resign on the belief that Paper Mill No. 4 will
be permanently closed as misrepresented by respondent and thus can invalidate the release
and quitclaim executed by him.
We find this contention untenable.
We held that work reassignment of an employee as a genuine business necessity is a valid
management prerogative.[21] After being given an option to be transferred, petitioner
rejected the offer for reassignment to Paper Mill No. 5 even though such transfer would not
involve any diminution of rank and pay. Instead, he opted and preferred to be separated by
executing a release and quitclaim in consideration of which he received separation pay in
the amount of P356,335.20 equal to two months pay for every year of service plus other
accrued benefits. Clearly, petitioner freely and voluntarily consented to the execution of the
release and quitclaim. Having done so apart from the fact that the consideration for the
quitclaim is credible and reasonable, the waiver represents a valid and binding undertaking.
[22] As aptly concluded by the CA, the quitclaim was not executed under force or duress and
that petitioner was given a separation pay more than what the law requires from
respondent.
WHEREFORE, the petition is DENIED. The assailed January 30, 2004 Decision of the Court of
Appeals in CA-G.R. SP No. 73076 dismissing petitioner Dannie M. Pantojas complaint for
illegal dismissal and the May 13, 2004 Resolution denying the Motion for Reconsideration are
AFFIRMED.
SO ORDERED.
G.R. No. 164774
April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA,
Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer
banning spouses from working in the same company violates the rights of the employee
under the Constitution and the Labor Code or is a valid exercise of management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor
Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda
N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the
company.1

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage,
Ongsitco advised the couple that should they decide to get married, one of them should
resign pursuant to a company policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the]
3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then decided to
get married, one of them should resign to preserve the policy stated above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a coemployee, whom she married on June 1, 2000. Ongsitco likewise reminded them that
pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December
21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated therein
that they have no money and property accountabilities in the company and that they
release the latter of any claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they
did not resign voluntarily; they were compelled to resign in view of an illegal company policy.
As to respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who
misrepresented himself as a married but separated man. After he got her pregnant, she
discovered that he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an accident and was
advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days.
She returned to work on December 21, 1999 but she found out that her name was on-hold at
the gate. She was denied entry. She was directed to proceed to the personnel office where
one of the staff handed her a memorandum. The memorandum stated that she was being
dismissed for immoral conduct. She refused to sign the memorandum because she was on
leave for twenty-one (21) days and has not been given a chance to explain. The
management asked her to write an explanation. However, after submission of the
explanation, she was nonetheless dismissed by the company. Due to her urgent need for
money, she later submitted a letter of resignation in exchange for her thirteenth month
pay.8
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorneys fees. They averred that the aforementioned company policy is
illegal and contravenes Article 136 of the Labor Code. They also contended that they were
dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack
of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived
as management prerogative. This management prerogative is quite broad and
encompassing for it covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Except as provided for or limited by special law, an employer
is free to regulate, according to his own discretion and judgment all the aspects of
employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January
11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as
follows:
(1) Declaring illegal, the petitioners dismissal from employment and ordering private
respondents to reinstate petitioners to their former positions without loss of seniority rights
with full backwages from the time of their dismissal until actual reinstatement; and
(2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of the
award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards
marriage and the family of employees and of Article 136 of the Labor Code; and
2. x x x respondents resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the
following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a living
wage. They shall also participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case at
bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed resigned
or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege that
its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new
meaning if read together with the first paragraph of the rule. The rule does not require the
woman employee to resign. The employee spouses have the right to choose who between
them should resign. Further, they are free to marry persons other than co-employees.
Hence, it is not the marital status of the employee, per se, that is being discriminated. It is

only intended to carry out its no-employment-for-relatives-within-the-third-degree-policy

which is within the ambit of the prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working in the same
company takes the nature of an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability.17 These policies focus upon the potential employment
problems arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment policies
specifically prohibiting spouses from working for the same company. We note that two types
of employment policies involve spouses: policies banning only spouses from working in the
same company (no-spouse employment policies), and those banning all immediate family
members, including spouses, from working in the same company (anti-nepotism
employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19
there are twenty state statutes20 in the United States prohibiting marital discrimination.
Some state courts21 have been confronted with the issue of whether no-spouse policies
violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants
utilize two theories of employment discrimination: the disparate treatment and the disparate
impact. Under the disparate treatment analysis, the plaintiff must prove that an employment
policy is discriminatory on its face. No-spouse employment policies requiring an employee of
a particular sex to either quit, transfer, or be fired are facially discriminatory. For example,
an employment policy prohibiting the employer from hiring wives of male employees, but
not husbands of female employees, is discriminatory on its face.22
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be required
to transfer or leave the company, the policy often disproportionately affects one sex.23
The state courts rulings on the issue depend on their interpretation of the scope of marital
status discrimination within the meaning of their respective civil rights acts. Though they
agree that the term "marital status" encompasses discrimination based on a person's status
as either married, single, divorced, or widowed, they are divided on whether the term has a
broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader
definition it would have either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and ruled that they did not
violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it encompassed
the identity, occupation and employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of the state statute. They reason
that the no-spouse employment policy violate the marital status provision because it
arbitrarily discriminates against all spouses of present employees without regard to the
actual effect on the individual's qualifications or work performance.27 These courts also find
the no-spouse employment policy invalid for failure of the employer to present any evidence
of business necessity other than the general perception that spouses in the same workplace
might adversely affect the business.28 They hold that the absence of such a bona fide
occupational qualification29 invalidates a rule denying employment to one spouse due to
the current employment of the other spouse in the same office.30 Thus, they rule that
unless the employer can prove that the reasonable demands of the business require a
distinction based on marital status and there is no better available or acceptable policy
which would better accomplish the business purpose, an employer may not discriminate
against an employee based on the identity of the employees spouse.31 This is known as the
bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employers no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other
than the discriminatory practice.32 To justify a bona fide occupational qualification, the
employer must prove two factors: (1) that the employment qualification is reasonably

related to the essential operation of the job involved; and, (2) that there is a factual basis for
believing that all or substantially all persons meeting the qualification would be unable to
properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
employ the standard of reasonableness of the company policy which is parallel to the bona
fide occupational qualification requirement. In the recent case of Duncan Association of
Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the
validity of the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company. We held that Glaxo has a right to guard its trade
secrets, manufacturing formulas, marketing strategies and other confidential programs and
information from competitors. We considered the prohibition against personal or marital
relationships with employees of competitor companies upon Glaxos employees reasonable
under the circumstances because relationships of that nature might compromise the
interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo
only aims to protect its interests against the possibility that a competitor company will gain
access to its secrets and procedures.35
The requirement that a company policy must be reasonable under the circumstances to
qualify as a valid exercise of management prerogative was also at issue in the 1997 case of
Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the employee was
dismissed in violation of petitioners policy of disqualifying from work any woman worker
who contracts marriage. We held that the company policy violates the right against
discrimination afforded all women workers under Article 136 of the Labor Code, but
established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a
"bona fide occupational qualification," or BFOQ, where the particular requirements of the job
would justify the same, but not on the ground of a general principle, such as the desirability
of spreading work in the workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory job performance.37
(Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be
clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two (2) or more of
its employees related between the third degree by affinity and/or consanguinity"38 is lame.
That the second paragraph was meant to give teeth to the first paragraph of the questioned
rule39 is evidently not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were found
fit for the job, but were asked to resign when they married a co-employee. Petitioners failed
to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then
an employee of the Repacking Section, could be detrimental to its business operations.
Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia,
then a Production Helper in the Selecting Department, who married Howard Comia, then a
helper in the cutter-machine. The policy is premised on the mere fear that employees
married to each other will be less efficient. If we uphold the questioned rule without valid
justification, the employer can create policies based on an unproven presumption of a
perceived danger at the expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a coemployee, but they are free to marry persons other than co-employees. The questioned
policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate
effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a
showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The
failure of petitioners to prove a legitimate business concern in imposing the questioned
policy cannot prejudice the employees right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is
vast and extensive that we cannot prudently draw inferences from the legislatures
silence41 that married persons are not protected under our Constitution and declare valid a
policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the questioned policy is an

invalid exercise of management prerogative. Corollarily, the issue as to whether respondents

Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular
fact that her resignation letter was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent court failed to categorically rule
whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol
and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in dire
need of money. We examined the records of the case and find Estrellas contention to be
more in accord with the evidence. While findings of fact by administrative tribunals like the
NLRC are generally given not only respect but, at times, finality, this rule admits of
exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to
her alleged immoral conduct. At first, she did not want to sign the termination papers but
she was forced to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or talked about
as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation,
she would not have gone back to work at all. Nor would she have filed a suit for illegal
dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of abandonment.
44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal.
Given the lack of sufficient evidence on the part of petitioners that the resignation was
voluntary, Estrellas dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated
August 3, 2004 is AFFIRMED.1avvphil.net
SO ORDERED.

G.R. No. 162994

September 17, 2004
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones,
involving the validity of the policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the
Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc.
(Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training
and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he
agrees to study and abide by existing company rules; to disclose to management any
existing or future relationship by consanguinity or affinity with co-employees or employees
of competing drug companies and should management find that such relationship poses a
possible conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to
inform management of any existing or future relationship by consanguinity or affinity with
co-employees or employees of competing drug companies. If management perceives a
conflict of interest or a potential conflict between such relationship and the employees
employment with the company, the management and the employee will explore the
possibility of a "transfer to another department in a non-counterchecking position" or
preparation for employment outside the company after six months.

Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines
Norte sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3 (Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in
Albay. She supervised the district managers and medical representatives of her company
and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager
regarding the conflict of interest which his relationship with Bettsy might engender. Still, love
prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a
conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which
one of them would resign from their jobs, although they told him that they wanted to retain
him as much as possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a
relationship with an employee of a competitor company. He explained that Astra, Bettsys
employer, was planning to merge with Zeneca, another drug company; and Bettsy was
planning to avail of the redundancy package to be offered by Astra. With Bettsys separation
from her company, the potential conflict of interest would be eliminated. At the same time,
they would be able to avail of the attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September
1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not
have a milk division, the potential conflict of interest would be eliminated. His application
was denied in view of Glaxos "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur
sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to
Glaxos Grievance Committee. Glaxo, however, remained firm in its decision and gave
Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer
order and continued acting as medical representative in the Camarines Sur-Camarines Norte
sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not
issued samples of products which were competing with similar products manufactured by
Astra. He was also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they
submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of onehalf () month pay for every year of service, or a total of P50,000.00 but he declined the
offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB)
rendered its Decision declaring as valid Glaxos policy on relationships between its
employees and persons employed with competitor companies, and affirming Glaxos right to
transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB
Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for
Review on the ground that the NCMB did not err in rendering its Decision. The appellate
court held that Glaxos policy prohibiting its employees from having personal relationships
with employees of competitor companies is a valid exercise of its management
prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion
was denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in
affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying
an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not
finding that Tecson was constructively dismissed when he was transferred to a new sales
territory, and deprived of the opportunity to attend products seminars and training
sessions.6

Petitioners contend that Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy
restricts the employees right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to
the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was
excluded from attending seminars and training sessions for medical representatives, and (4)
he was prohibited from promoting respondents products which were competing with Astras
products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its
employees from having a relationship with and/or marrying an employee of a competitor
company is a valid exercise of its management prerogatives and does not violate the equal
protection clause; and that Tecsons reassignment from the Camarines Norte-Camarines Sur
sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to
constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical
products, it has a genuine interest in ensuring that its employees avoid any activity,
relationship or interest that may conflict with their responsibilities to the company. Thus, it
expects its employees to avoid having personal or family interests in any competitor
company which may influence their actions and decisions and consequently deprive Glaxo of
legitimate profits. The policy is also aimed at preventing a competitor company from gaining
access to its secrets, procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes
existing or future relationships with employees of competitor companies, and is therefore
not violative of the equal protection clause. It maintains that considering the nature of its
business, the prohibition is based on valid grounds.11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and
potential conflict of interest. Astras products were in direct competition with 67% of the
products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case
was a valid exercise of its management prerogatives.12 In any case, Tecson was given
several months to remedy the situation, and was even encouraged not to resign but to ask
his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company policy
because when he signed his contract of employment, he was aware that such policy was
stipulated therein. In said contract, he also agreed to resign from respondent if the
management finds that his relationship with an employee of a competitor company would be
detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion
from seminars regarding respondents new products did not amount to constructive
dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area.
Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons
family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to
Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales
area would be favorable to him and his family as he would be relocating to a familiar
territory and minimizing his travel expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new antiasthma drug was due to the fact that said product was in direct competition with a drug
which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for
him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up
created by his refusal to transfer to the Butuan City sales area (his paraphernalia was
delivered to his new sales area instead of Naga City because the supplier thought he already
transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in
ruling that Glaxos policy against its employees marrying employees from competitor
companies is valid, and in not holding that said policy violates the equal protection clause of
the Constitution; (2) Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.

The stipulation in Tecsons contract of employment with Glaxo being questioned by

petitioners provides:

10. You agree to disclose to management any existing or future relationship you may have,
either by consanguinity or affinity with co-employees or employees of competing drug
companies. Should it pose a possible conflict of interest in management discretion, you
agree to resign voluntarily from the Company as a matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules
of Glaxo, and to study and become acquainted with such policies.18 In this regard, the
Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict
of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run
counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any competitor
supplier or other businesses which may consciously or unconsciously influence their actions
or decisions and thus deprive Glaxo Wellcome of legitimate profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to
advance their outside personal interests, that of their relatives, friends and other
businesses.
c. To avoid outside employment or other interests for income which would impair their
effective job performance.
d. To consult with Management on such activities or relationships that may lead to conflict of
interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with coemployees of competing drug companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential conflict of interest, every
effort shall be made, together by management and the employee, to arrive at a solution
within six (6) months, either by transfer to another department in a non-counter checking
position, or by career preparation toward outside employment after Glaxo Wellcome.
Employees must be prepared for possible resignation within six (6) months, if no other
solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy
prohibiting an employee from having a relationship with an employee of a competitor
company is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies
and other confidential programs and information from competitors, especially so that it and
Astra are rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxos employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. In laying down
the assailed company policy, Glaxo only aims to protect its interests against the possibility
that a competitor company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less
than the Constitution recognizes the right of enterprises to adopt and enforce such a policy
to protect its right to reasonable returns on investments and to expansion and growth.20
Indeed, while our laws endeavor to give life to the constitutional policy on social justice and
the protection of labor, it does not mean that every labor dispute will be decided in favor of
the workers. The law also recognizes that management has rights which are also entitled to
respect and enforcement in the interest of fair play.21

As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business

confidentiality and protect a competitive position by even-handedly disqualifying from jobs
male and female applicants or employees who are married to a competitor. Consequently,
the court ruled than an employer that discharged an employee who was married to an
employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964.23
The Court pointed out that the policy was applied to men and women equally, and noted
that the employers business was highly competitive and that gaining inside information
would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the commands
of the equal protection clause are addressed only to the state or those acting under color of
its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions
that the equal protection clause erects no shield against merely private conduct, however,
discriminatory or wrongful.25 The only exception occurs when the state29 in any of its
manifestations or actions has been found to have become entwined or involved in the
wrongful private conduct.27 Obviously, however, the exception is not present in this case.
Significantly, the company actually enforced the policy after repeated requests to the
employee to comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee
handbook, it is clear that Glaxo does not impose an absolute prohibition against
relationships between its employees and those of competitor companies. Its employees are
free to cultivate relationships with and marry persons of their own choosing. What the
company merely seeks to avoid is a conflict of interest between the employee and the
company that may arise out of such relationships. As succinctly explained by the appellate
court, thus:
The policy being questioned is not a policy against marriage. An employee of the company
remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual. However, an employees personal
decision does not detract the employer from exercising management prerogatives to ensure
maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part
of respondents Employee Code of Conduct and of its contracts with its employees, such as
that signed by Tescon, was made known to him prior to his employment. Tecson, therefore,
was aware of that restriction when he signed his employment contract and when he entered
into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a
contract of employment with Glaxo, the stipulations therein have the force of law between
them and, thus, should be complied with in good faith."29 He is therefore estopped from
questioning said policy.
The Court finds no merit in petitioners contention that Tescon was constructively dismissed
when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan
City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the
companys seminar on new products which were directly competing with similar products
manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary
resignation resorted to when continued employment becomes impossible, unreasonable, or
unlikely; when there is a demotion in rank or diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.30 None of these conditions are present in the instant case. The record does not
show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As
found by the appellate court, Glaxo properly exercised its management prerogative in
reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in keeping
with the policy of the company in avoidance of conflict of interest, and thus validNote that
[Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her employercompany which requires her to work in close coordination with District Managers and
Medical Representatives. Her duties include monitoring sales of Astra products, conducting
sales drives, establishing and furthering relationship with customers, collection, monitoring
and managing Astras inventoryshe therefore takes an active participation in the market
war characterized as it is by stiff competition among pharmaceutical companies. Moreover,
and this is significant, petitioners sales territory covers Camarines Sur and Camarines Norte
while his wife is supervising a branch of her employer in Albay. The proximity of their areas
of responsibility, all in the same Bicol Region, renders the conflict of interest not only
possible, but actual, as learning by one spouse of the others market strategies in the region

would be inevitable. [Managements] appreciation of a conflict of interest is therefore not

merely illusory and wanting in factual basis31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which
involved a complaint filed by a medical representative against his employer drug company
for illegal dismissal for allegedly terminating his employment when he refused to accept his
reassignment to a new area, the Court upheld the right of the drug company to transfer or
reassign its employee in accordance with its operational demands and requirements. The
ruling of the Court therein, quoted hereunder, also finds application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of their
business. It would be a poor drug corporation which cannot even assign its representatives
or detail men to new markets calling for opening or expansion or to areas where the need for
pushing its products is great. More so if such reassignments are part of the employment
contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave
Tecson several chances to eliminate the conflict of interest brought about by his relationship
with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo
constantly reminded him about its effects on his employment with the company and on the
companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the
conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo
even expressed its desire to retain Tecson in its employ because of his satisfactory
performance and suggested that he ask Bettsy to resign from her company instead. Glaxo
likewise acceded to his repeated requests for more time to resolve the conflict of interest.
When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his wife for
Astra. Notably, the Court did not terminate Tecson from employment but only reassigned
him to another area where his home province, Agusan del Sur, was included. In effecting
Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the
foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners. SO
ORDERED.
ARMANDO G. YRASUEGUI, G.R. No. 168081
Petitioner,
- versus PHILIPPINE AIRLINES, INC.,
Respondent. October 17, 2008
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight steward who was dismissed
because of his failure to adhere to the weight standards of the airline company.
He is now before this Court via a petition for review on certiorari claiming that he was
illegally dismissed. To buttress his stance, he argues that (1) his dismissal does not fall under
282(e) of the Labor Code; (2) continuing adherence to the weight standards of the company
is not a bona fide occupational qualification; and (3) he was discriminated against
because other overweight employees were promoted instead of being disciplined.
After a meticulous consideration of all arguments pro and con, We uphold the legality of
dismissal. Separation pay, however, should be awarded in favor of the employee as an act of
social justice or based on equity. This is so because his dismissal is not for serious
misconduct. Neither is it reflective of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former
Airlines, Inc. (PAL). He stands five feet and eight
proper weight for a man of his height and body
ideal weight being 166 pounds, as mandated
Manual[1] of PAL.

international flight steward of Philippine

inches (58) with a large body frame. The
structure is from 147 to 166 pounds, the
by the Cabin and Crew Administration

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on
an extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the companys weight standards, prompting
another leave without pay from March 5, 1985 to November 1985.

After meeting the required weight, petitioner was allowed to return to work. But petitioners
weight problem recurred. He again went on leave without pay from October 17, 1988 to
February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line
with company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989.
He was formally requested to trim down to his ideal weight and report for weight checks on
several dates. He was also told that he may avail of the services of the company physician
should he wish to do so. He was advised that his case will be evaluated on July 3, 1989.[2]
On February 25, 1989, petitioner underwent weight check. It was discovered that he gained,
instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the
limit. Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his
residence to check on the progress of his effort to lose weight. Petitioner weighed 217
pounds, gaining 2 pounds from his previous weight. After the visit, petitioner made a
commitment[3] to reduce weight in a letter addressed to Cabin Crew Group Manager
Augusto Barrios. The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss from 217 pounds to 200
pounds from today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable percentage until such time
that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated time schedule you
will set for my weight check.
Respectfully Yours,
F/S Armando Yrasuegui[4]
Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner
remained overweight. On January 3, 1990, he was informed of the PAL decision for him to
remain grounded until such time that he satisfactorily complies with the weight standards.
Again, he was directed to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was given one more month to
comply with the weight requirement. As usual, he was asked to report for weight check on
different dates. He was reminded that his grounding would continue pending satisfactory
compliance with the weight standards.[5]
Again, petitioner failed to report for weight checks, although he was seen submitting his
passport for processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report for
weight check would be dealt with accordingly. He was given another set of weight check
dates.[6] Again, petitioner ignored the directive and did not report for weight checks. On
June 26, 1990, petitioner was required to explain his refusal to undergo weight checks.[7]
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he
was still way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his case requesting for
leniency on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205
pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for
violation of company standards on weight requirements. He was given ten (10) days from
receipt of the charge within which to file his answer and submit controverting evidence.[8]

On December 7, 1992, petitioner submitted his Answer.[9] Notably, he did not deny being
overweight. What he claimed, instead, is that his violation, if any, had already been
condoned by PAL since no action has been taken by the company regarding his case since

1988. He also claimed that PAL discriminated against him because the company has not
been fair in treating the cabin crew members who are similarly situated.
On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he
was undergoing a weight reduction program to lose at least two (2) pounds per week so as
to attain his ideal weight.[10]
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain
his ideal weight, and considering the utmost leniency extended to him which spanned a
period covering a total of almost five (5) years, his services were considered terminated
effective immediately.[11]
His motion for reconsideration having been denied,[12] petitioner filed a complaint for illegal
dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled[13] that petitioner was
illegally dismissed. The dispositive part of the Arbiter ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the
complainants dismissal illegal, and ordering the respondent to reinstate him to his former
position or substantially equivalent one, and to pay him:

a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until
reinstated, which for purposes of appeal is hereby set from June 15, 1993 up to August 15,
1998 at P651,000.00;
b. Attorneys fees of five percent (5%) of the total award.
SO ORDERED.[14]
The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature
of the job of petitioner.[15] However, the weight standards need not be complied with under
pain of dismissal since his weight did not hamper the performance of his duties.[16]
Assuming that it did, petitioner could be transferred to other positions where his weight
would not be a negative factor.[17] Notably, other overweight employees, i.e., Mr. Palacios,
Mr. Cui, and Mr. Barrios, were promoted instead of being disciplined.[18]
Both parties appealed to the National Labor Relations Commission (NLRC).[19]
On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement
of petitioner without loss of seniority rights and other benefits.[20]
On February 1, 2000, the Labor Arbiter denied[21] the Motion to Quash Writ of Execution[22]
of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC.[23]

On June 23, 2000, the NLRC rendered judgment[24] in the following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18 November 1998 as
modified by our findings herein, is hereby AFFIRMED and that part of the dispositive portion
of said decision concerning complainants entitlement to backwages shall be deemed to refer
to complainants entitlement to his full backwages, inclusive of allowances and to his other
benefits or their monetary equivalent instead of simply backwages, from date of dismissal
until his actual reinstatement or finality hereof. Respondent is enjoined to manifests (sic) its
choice of the form of the reinstatement of complainant, whether physical or through payroll
within ten (10) days from notice failing which, the same shall be deemed as complainants
reinstatement through payroll and execution in case of non-payment shall accordingly be
issued by the Arbiter. Both appeals of respondent thus, are DISMISSED for utter lack of merit.
[25]
According to the NLRC, obesity, or the tendency to gain weight uncontrollably regardless of
the amount of food intake, is a disease in itself.[26] As a consequence, there can be no
intentional defiance or serious misconduct by petitioner to the lawful order of PAL for him to
lose weight.[27]

Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable.
However, it found as unnecessary the Labor Arbiter holding that petitioner was not remiss in
the performance of his duties as flight steward despite being overweight. According to the
NLRC, the Labor Arbiter should have limited himself to the issue of whether the failure of
petitioner to attain his ideal weight constituted willful defiance of the weight standards of
PAL.[28]

PAL moved for reconsideration to no avail.[29] Thus, PAL elevated the matter to the Court of
Appeals (CA) via a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
[30]
By Decision dated August 31, 2004, the CA reversed[31] the NLRC:
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed NLRC
decision is declared NULL and VOID and is hereby SET ASIDE. The private respondents
complaint is hereby DISMISSED. No costs.
SO ORDERED.[32]
The CA opined that there was grave abuse of discretion on the part of the NLRC because it
looked at wrong and irrelevant considerations[33] in evaluating the evidence of the parties.
Contrary to the NLRC ruling, the weight standards of PAL are meant to be a continuing
qualification for an employees position.[34] The failure to adhere to the weight standards is
an analogous cause for the dismissal of an employee under Article 282(e) of the Labor Code
in relation to Article 282(a). It is not willful disobedience as the NLRC seemed to suggest.[35]
Said the CA, the element of willfulness that the NLRC decision cites is an irrelevant
consideration in arriving at a conclusion on whether the dismissal is legally proper.[36] In
other words, the relevant question to ask is not one of willfulness but one of reasonableness
of the standard and whether or not the employee qualifies or continues to qualify under this
standard.[37]

Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are
reasonable.[38] Thus, petitioner was legally dismissed because he repeatedly failed to meet
the prescribed weight standards.[39] It is obvious that the issue of discrimination was only
invoked by petitioner for purposes of escaping the result of his dismissal for being
overweight.[40]
On May 10, 2005, the CA denied petitioners motion for reconsideration.[41] Elaborating on
its earlier ruling, the CA held that the weight standards of PAL are a bona fide occupational
qualification which, in case of violation, justifies an employees separation from the service.
[42]
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONERS
OBESITY CAN BE A GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE
LABOR CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONERS
DISMISSAL FOR OBESITY CAN BE PREDICATED ON THE BONA FIDE OCCUPATIONAL
QUALIFICATION (BFOQ) DEFENSE;
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER
WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE OTHER
OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR PROMOTED;
IV.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED ASIDE
PETITIONERS CLAIMS FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT AND
ACADEMIC.[43] (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article 282(e) [44] of the Labor
Code.
A reading of the weight standards of PAL would lead to no other conclusion than that they
constitute a continuing qualification of an employee in order to keep the job. Tersely put, an
employee may be dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee would thus fall under
Article 282(e) of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case were not mere orders of the employer; they were
the prescribed weights that a cabin crew must maintain in order to qualify for and keep his
or her position in the company. In other words, they were standards that establish continuing
qualifications for an employees position. In this sense, the failure to maintain these
standards does not fall under Article 282(a) whose express terms require the element of
willfulness in order to be a ground for dismissal. The failure to meet the employers qualifying
standards is in fact a ground that does not squarely fall under grounds (a) to (d) and is
therefore one that falls under Article 282(e) the other causes analogous to the foregoing.
By its nature, these qualifying standards are norms that apply prior to and after an employee
is hired. They apply prior to employment because these are the standards a job applicant
must initially meet in order to be hired. They apply after hiring because an employee must
continue to meet these standards while on the job in order to keep his job. Under this
perspective, a violation is not one of the faults for which an employee can be dismissed
pursuant to pars. (a) to (d) of Article 282; the employee can be dismissed simply because he
no longer qualifies for his job irrespective of whether or not the failure to qualify was willful
or intentional. x x x[45]
Petitioner, though, advances a very interesting argument. He claims that obesity is a
physical abnormality and/or illness.[46] Relying on Nadura v. Benguet Consolidated, Inc.,[47]
he says his dismissal is illegal:
Conscious of the fact that Naduras case cannot be made to fall squarely within the specific
causes enumerated in subparagraphs 1(a) to (e), Benguet invokes the provisions of
subparagraph 1(f) and says that Naduras illness occasional attacks of asthma is a cause
analogous to them.
Even a cursory reading of the legal provision under consideration is sufficient to convince
anyone that, as the trial court said, illness cannot be included as an analogous cause by any
stretch of imagination.
It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others
expressly enumerated in the law are due to the voluntary and/or willful act of the employee.
How Naduras illness could be considered as analogous to any of them is beyond our
understanding, there being no claim or pretense that the same was contracted through his
own voluntary act.[48]
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different
from the case at bar. First, Nadura was not decided under the Labor Code. The law applied in
that case was Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in
Nadura, thus, the rationale there cannot apply here. Third, in Nadura, the employee who was
a miner, was laid off from work because of illness, i.e., asthma. Here, petitioner was
dismissed for his failure to meet the weight standards of PAL. He was not dismissed due to
illness. Fourth, the issue in Nadura is whether or not the dismissed employee is entitled to
separation pay and damages. Here, the issue centers on the propriety of the dismissal of
petitioner for his failure to meet the weight standards of PAL. Fifth, in Nadura, the employee
was not accorded due process. Here, petitioner was accorded utmost leniency. He was given
more than four (4) years to comply with the weight standards of PAL.

In the case at bar, the evidence on record militates against petitioners claims that obesity is
a disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude, determination, and self-discipline.
Indeed, during the clarificatory hearing on December 8, 1992, petitioner himself claimed

that [t]he issue is could I bring my weight down to ideal weight which is 172, then the
answer is yes. I can do it now.[49]
True, petitioner claims that reducing weight is costing him a lot of expenses.[50] However,
petitioner has only himself to blame. He could have easily availed the assistance of the
company physician, per the advice of PAL.[51] He chose to ignore the suggestion. In fact, he
repeatedly failed to report when required to undergo weight checks, without offering a valid
explanation. Thus, his fluctuating weight indicates absence of willpower rather than an
illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health,
Retardation and Hospitals,[52] decided by the United States Court of Appeals (First Circuit).
In that case, Cook worked from 1978 to 1980 and from 1981 to 1986 as an institutional
attendant for the mentally retarded at the Ladd Center that was being operated by
respondent. She twice resigned voluntarily with an unblemished record. Even respondent
admitted that her performance met the Centers legitimate expectations. In 1988, Cook reapplied for a similar position. At that time, she stood 52 tall and weighed over 320 pounds.
Respondent claimed that the morbid obesity of plaintiff compromised her ability to evacuate
patients in case of emergency and it also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to discrimination on the basis of a
handicap. This was in direct violation of Section 504(a) of the Rehabilitation Act of 1973,[53]
which incorporates the remedies contained in Title VI of the Civil Rights Act of 1964.
Respondent claimed, however, that morbid obesity could never constitute a handicap within
the purview of the Rehabilitation Act. Among others, obesity is a mutable condition, thus
plaintiff could simply lose weight and rid herself of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability under the
Rehabilitation Act and that respondent discriminated against Cook based on perceived
disability. The evidence included expert testimony that morbid obesity is a physiological
disorder. It involves a dysfunction of both the metabolic system and the neurological
appetite suppressing signal system, which is capable of causing adverse effects within the
musculoskeletal, respiratory, and cardiovascular systems. Notably, the Court stated that
mutability is relevant only in determining the substantiality of the limitation flowing from a
given impairment, thus mutability only precludes those conditions that an individual can
easily and quickly reverse by behavioral alteration.
Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for
the District of Rhode Island, Cook was sometime before 1978 at least one hundred pounds
more than what is considered appropriate of her height. According to the Circuit Judge, Cook
weighed over 320 pounds in 1988. Clearly, that is not the case here. At his heaviest,
petitioner was only less than 50 pounds over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the context of his work as
flight attendant, becomes an analogous cause under Article 282(e) of the Labor Code that
justifies his dismissal from the service. His obesity may not be unintended, but is
nonetheless voluntary. As the CA correctly puts it, [v]oluntariness basically means that the
just cause is solely attributable to the employee without any external force influencing or
controlling his actions. This element runs through all just causes under Article 282, whether
they be in the nature of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the element of intent found
in Article 282(a), (c), and (d).[54]
II. The dismissal of petitioner can be predicated on the bona fide occupational qualification
defense.
Employment in particular jobs may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or national origin is an actual
qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ).[55] In the United States, there are a few federal and many state job
discrimination laws that contain an exception allowing an employer to engage in an
otherwise unlawful form of prohibited discrimination when the action is based on a BFOQ
necessary to the normal operation of a business or enterprise.[56]
Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute
providing for it.[57] Further, there is no existing BFOQ statute that could justify his dismissal.
[58]
Both arguments must fail.

First, the Constitution,[59] the Labor Code,[60] and RA No. 7277[61] or the Magna Carta for
Disabled Persons[62] contain provisions similar to BFOQ.
Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British
Columbia Government and Service Employees Union (BCGSEU),[63] the Supreme Court of
Canada adopted the so-called Meiorin Test in determining whether an employment policy is
justified. Under this test, (1) the employer must show that it adopted the standard for a
purpose rationally connected to the performance of the job;[64] (2) the employer must
establish that the standard is reasonably necessary[65] to the accomplishment of that workrelated purpose; and (3) the employer must establish that the standard is reasonably
necessary in order to accomplish the legitimate work-related purpose. Similarly, in Star
Paper Corporation v. Simbol,[66] this Court held that in order to justify a BFOQ, the employer
must prove that (1) the employment qualification is reasonably related to the essential
operation of the job involved; and (2) that there is factual basis for believing that all or
substantially all persons meeting the qualification would be unable to properly perform the
duties of the job.[67]
In short, the test of reasonableness of the company policy is used because it is parallel to
BFOQ.[68] BFOQ is valid provided it reflects an inherent quality reasonably necessary for
satisfactory job performance.[69]
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc.,[70] the
Court did not hesitate to pass upon the validity of a company policy which prohibits its
employees from marrying employees of a rival company. It was held that the company policy
is reasonable considering that its purpose is the protection of the interests of the company
against possible competitor infiltration on its trade secrets and procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting
statute. Too, the Labor Arbiter,[71] NLRC,[72] and CA[73] are one in holding that the weight
standards of PAL are reasonable. A common carrier, from the nature of its business and for
reasons of public policy, is bound to observe extraordinary diligence for the safety of the
passengers it transports.[74] It is bound to carry its passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances.[75]
The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is
only logical to hold that the weight standards of PAL show its effort to comply with the
exacting obligations imposed upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely transport
its passengers. In order to achieve this, it must necessarily rely on its employees, most
particularly the cabin flight deck crew who are on board the aircraft. The weight standards of
PAL should be viewed as imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for
cabin crew is flight safety. It cannot be gainsaid that cabin attendants must maintain agility
at all times in order to inspire passenger confidence on their ability to care for the
passengers when something goes wrong. It is not farfetched to say that airline companies,
just like all common carriers, thrive due to public confidence on their safety records. People,
especially the riding public, expect no less than that airline companies transport their
passengers to their respective destinations safely and soundly. A lesser performance is
unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or attending to
the whims and caprices of the passengers. The most important activity of the cabin crew is
to care for the safety of passengers and the evacuation of the aircraft when an emergency
occurs. Passenger safety goes to the core of the job of a cabin attendant. Truly, airlines need
cabin attendants who have the necessary strength to open emergency doors, the agility to
attend to passengers in cramped working conditions, and the stamina to withstand grueling
flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to
consider in case of emergency. Aircrafts have constricted cabin space, and narrow aisles and
exit doors. Thus, the arguments of respondent that [w]hether the airlines flight attendants
are overweight or not has no direct relation to its mission of transporting passengers to their
destination; and that the weight standards has nothing to do with airworthiness of
respondents airlines, must fail.
The rationale in Western Air Lines v. Criswell[76] relied upon by petitioner cannot apply to
his case. What was involved there were two (2) airline pilots who were denied reassignment
as flight engineers upon reaching the age of 60, and a flight engineer who was forced to

retire at age 60. They sued the airline company, alleging that the age-60 retirement for flight
engineers violated the Age Discrimination in Employment Act of 1967. Age-based BFOQ and
being overweight are not the same. The case of overweight cabin attendants is another
matter. Given the cramped cabin space and narrow aisles and emergency exit doors of the
airplane, any overweight cabin attendant would certainly have difficulty navigating the
cramped cabin area.
In short, there is no need to individually evaluate their ability to perform their task. That an
obese cabin attendant occupies more space than a slim one is an unquestionable fact which
courts can judicially recognize without introduction of evidence.[77] It would also be absurd
to require airline companies to reconfigure the aircraft in order to widen the aisles and exit
doors just to accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of impeding
passengers from evacuating the aircraft, should the occasion call for it. The job of a cabin
attendant during emergencies is to speedily get the passengers out of the aircraft safely.
Being overweight necessarily impedes mobility. Indeed, in an emergency situation, seconds
are what cabin attendants are dealing with, not minutes. Three lost seconds can translate
into three lost lives. Evacuation might slow down just because a wide-bodied cabin
attendant is blocking the narrow aisles. These possibilities are not remote.

Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were
made known to him prior to his employment. He is presumed to know the weight limit that
he must maintain at all times.[78] In fact, never did he question the authority of PAL when
he was repeatedly asked to trim down his weight. Bona fides exigit ut quod convenit fiat.
Good faith demands that what is agreed upon shall be done. Kung ang tao ay tapat kanyang
tutuparin ang napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on height and
body frame for both male and female cabin attendants. A progressive discipline is imposed
to allow non-compliant cabin attendants sufficient opportunity to meet the weight standards.
Thus, the clear-cut rules obviate any possibility for the commission of abuse or arbitrary
action on the part of PAL.
III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient excuse to
discriminate against him.[79] We are constrained, however, to hold otherwise. We agree
with the CA that [t]he element of discrimination came into play in this case as a secondary
position for the private respondent in order to escape the consequence of dismissal that
being overweight entailed. It is a confession-and-avoidance position that impliedly admitted
the cause of dismissal, including the reasonableness of the applicable standard and the
private respondents failure to comply.[80] It is a basic rule in evidence that each party must
prove his affirmative allegation.[81]
Since the burden of evidence lies with the party who asserts an affirmative allegation,
petitioner has to prove his allegation with particularity. There is nothing on the records which
could support the finding of discriminatory treatment. Petitioner cannot establish
discrimination by simply naming the supposed cabin attendants who are allegedly similarly
situated with him. Substantial proof must be shown as to how and why they are similarly
situated and the differential treatment petitioner got from PAL despite the similarity of his
situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin attendants,
petitioner miserably failed to indicate their respective ideal weights; weights over their ideal
weights; the periods they were allowed to fly despite their being overweight; the particular
flights assigned to them; the discriminating treatment they got from PAL; and other relevant
data that could have adequately established a case of discriminatory treatment by PAL. In
the words of the CA, PAL really had no substantial case of discrimination to meet.[82]
We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter
and the NLRC, are accorded respect, even finality.[83] The reason is simple: administrative
agencies are experts in matters within their specific and specialized jurisdiction.[84] But the
principle is not a hard and fast rule. It only applies if the findings of facts are duly supported
by substantial evidence. If it can be shown that administrative bodies grossly
misappreciated evidence of such nature so as to compel a conclusion to the contrary, their
findings of facts must necessarily be reversed. Factual findings of administrative agencies do
not have infallibility and must be set aside when they fail the test of arbitrariness.[85]

Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul
their findings.
To make his claim more believable, petitioner invokes the equal protection clause
guaranty[86] of the Constitution. However, in the absence of governmental interference, the
liberties guaranteed by the Constitution cannot be invoked.[87] Put differently, the Bill of
Rights is not meant to be invoked against acts of private individuals.[88] Indeed, the United
States Supreme Court, in interpreting the Fourteenth Amendment,[89] which is the source of
our equal protection guarantee, is consistent in saying that the equal protection erects no
shield against private conduct, however discriminatory or wrongful.[90] Private actions, no
matter how egregious, cannot violate the equal protection guarantee.[91]

IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and wages have not
been mooted. He is entitled to reinstatement and his full backwages, from the time he was
illegally dismissed up to the time that the NLRC was reversed by the CA.[92]
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be executory,
even pending appeal. The employee shall either be admitted back to work under the same
terms and conditions prevailing prior to his dismissal or separation or, at the option of the
employer, merely reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement provided herein.
The law is very clear. Although an award or order of reinstatement is self-executory and does
not require a writ of execution,[93] the option to exercise actual reinstatement or payroll
reinstatement belongs to the employer. It does not belong to the employee, to the labor
tribunals, or even to the courts.
Contrary to the allegation of petitioner that PAL did everything under the sun to frustrate his
immediate return to his previous position,[94] there is evidence that PAL opted to physically
reinstate him to a substantially equivalent position in accordance with the order of the Labor
Arbiter.[95] In fact, petitioner duly received the return to work notice on February 23, 2001,
as shown by his signature.[96]
Petitioner cannot take refuge in the pronouncements of the Court in a case[97] that [t]he
unjustified refusal of the employer to reinstate the dismissed employee entitles him to
payment of his salaries effective from the time the employer failed to reinstate him despite
the issuance of a writ of execution[98] and even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and
pay the wages of the employee during the period of appeal until reversal by the higher
court.[99] He failed to prove that he complied with the return to work order of PAL. Neither
does it appear on record that he actually rendered services for PAL from the moment he was
dismissed, in order to insist on the payment of his full backwages.
In insisting that he be reinstated to his actual position despite being overweight, petitioner
in effect wants to render the issues in the present case moot. He asks PAL to comply with
the impossible. Time and again, the Court ruled that the law does not exact compliance with
the impossible.[100]
V. Petitioner is entitled to separation pay.
Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to separation pay. This may be
deduced from the language of Article 279 of the Labor Code that [a]n 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. Luckily for petitioner, this is
not an ironclad rule.
Exceptionally, separation pay is granted to a legally dismissed employee as an act social
justice,[101] or based on equity.[102] 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.[103]
Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every
year of service.[104] It should include regular allowances which he might have been
receiving.[105] We are not blind to the fact that he was not dismissed for any serious
misconduct or to any act which would reflect on his moral character. We also recognize that
his employment with PAL lasted for more or less a decade.
WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in
that petitioner Armando G. Yrasuegui is entitled to separation pay in an amount equivalent
to one-half (1/2) months pay for every year of service, which should include his regular
allowances.
SO ORDERED.
G.R. No. 153674
December 20, 2006
AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO, petitioners,
vs.
LETICIA H. LUNA, respondent.
DECISION
CHICO-NAZARIO, J.:
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking
to reverse and set aside the Decision1 dated 20 May 2002 of the Court of Appeals in CA-G.R.
CV No. 52550, which affirmed in toto the Decision2 dated 26 January 1996 of the Regional
Trial Court (RTC) of Makati City, Branch 138, in Civil Case No. 88-2595, in favor of herein
respondent Leticia H. Luna (Luna), rendered by the Honorable Ed Vicente S. Albano,
designated as the "assisting judge" pursuant to Supreme Court Administrative Order No. 7094, dated 16 June 1994.
The Facts
The facts of the case are not in dispute. As culled from the records, they are as follows:
The present petition stemmed from a complaint3 dated 1 December 1988, filed by herein
respondent Luna alleging, inter alia that she began working for Beautifont, Inc. in 1972, first
as a franchise dealer and then a year later, as a Supervisor.
Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over
the management and operations of Beautifont, Inc. Nonetheless, respondent Luna continued
working for said successor company.
Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of
petitioner Avons Theatrical Promotions Group, for which she received a per diem for each
theatrical performance.
On 5 November 1985, petitioner Avon and respondent Luna entered into an agreement,
entitled Supervisors Agreement, whereby said parties contracted in the manner quoted
below:
The Company agrees:
xxxx
1) To allow the Supervisor to purchase at wholesale the products of the Company.
xxxx
The Supervisor agrees:
1) To purchase products from the Company exclusively for resale and to be responsible for
obtaining all permits and licenses required to sell the products on retail.
xxxx
The Company and the Supervisor mutually agree:
xxxx

2) That this agreement in no way makes the Supervisor an employee or agent of the
Company, therefore, the Supervisor has no authority to bind the Company in any contracts
with other parties.
3) That the Supervisor is an independent retailer/dealer insofar as the Company is
concerned, and shall have the sole discretion to determine where and how products
purchased from the Company will be sold. However, the Supervisor shall not sell such
products to stores, supermarkets or to any entity or person who sells things at a fixed place
of business.
4) That this agreement supersedes any agreement/s between the Company and the
Supervisor.
5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively
products sold by the Company.
6) Either party may terminate this agreement at will, with or without cause, at any time
upon notice to the other.
x x x x.4
By virtue of the execution of the aforequoted Supervisors Agreement, respondent Luna
became part of the independent sales force of petitioner Avon.
Sometime in the latter part of 1988, respondent Luna was invited by a former Avon
employee who was then currently a Sales Manager of Sandr Philippines, Inc., a domestic
corporation engaged in direct selling of vitamins and other food supplements, to sell said
products. Respondent Luna apparently accepted the invitation as she then became a Group
Franchise Director of Sandr Philippines, Inc. concurrently with being a Group Supervisor of
petitioner Avon. As Group Franchise Director, respondent Luna began selling and/or
promoting Sandr products to other Avon employees and friends. On 23 September 1988,
she requested a law firm to render a legal opinion as to the legal consequence of the
Supervisors Agreement she executed with petitioner Avon. In response to her query, a
lawyer of the firm opined that the Supervisors Agreement was "contrary to law and public
policy."
Wanting to share the legal opinion she obtained from her legal counsel, respondent Luna
wrote a letter to her colleagues and attached mimeographed copies of the opinion and then
circulated them. The full text of her letter reads:
We all love our work as independent dealers and we all love to continue in this livelihood.
Because my livelihood is important to me, I have asked the legal opinion of a leading Makati
law office regarding my status as an independent dealer, I am sharing this opinion with you.
I have asked their advice on three specific things:
1) May the company legally change the conditions of the existing "Supervisors Agreement"
without the Supervisors consent? If I should refuse to sign the new Agreement, may the
company terminate my dealership?
On the first issue, my lawyers said that the company cannot change the existing
"Agreement" without my consent, and that it would be illegal if the company will compel me
to sign the new agreement.
2) Is Section 5 of the "Supervisors Agreement" which says that a dealer may only sell
products sold by the company, legal?
My lawyers said that Section 5 of the Supervisors Agreement is NOT valid because it is
contrary to public policy, being an unreasonable restraint of trade.
3) Is Section 6 of the "Supervisors Agreement" which authorizes the company to terminate
the contract at any time, with or without cause, legal?
My lawyer said Section 6 is NOT valid because it is contrary to law and public policy. The
company cannot terminate the "Supervisors Agreement" without a valid cause.
Therefore, I can conclude that I dont violate Section 5 if I sell any product which is not in
direct competition with the companys products, and there is no valid reason for the
company to terminate my dealership contract if I sell a non-competitive product.

Dear co-supervisor[s], let us all support the reasonable and legal policies of the company.
However, we must all be conscious of our legal rights and be ready to protect ourselves if
they are trampled upon.
I hope we will all stay together selling Avon products for a long time and at the same time
increase our earning opportunity by engaging in other businesses without being afraid to do
so.
In a letter5 dated 11 October 1988, petitioner Avon, through its President and General
Manager, Jose Mari Franco, notified respondent Luna of the termination or cancellation of her
Supervisors Agreement with petitioner Avon. Said letter reads in part:
In September, (sic) 1988, you brought to our attention that you signed up as Group
Franchise Director of another company, Sandr Philippines, Inc. (SPI).
Not only that. You have also sold and promoted products of SPI (please refer for example to
SPI Invoice No. 1695 dated Sept. 30, 1988). Worse, you promoted/sold SPI products even to
several employees of our company including Mary Arlene Nolasco, Regina Porter, Emelisa
Aguilar, Hermie Esteller and Emma Ticsay.
To compound your violation of the above-quoted provision, you have written letters to other
members of the Avon salesforce inducing them to violate their own contracts with our
company. x x x.
For violating paragraph 5 x x x, the Company, pursuant to paragraph 6 of the same
Agreement, is terminating and canceling its Supervisors Agreement with you effective upon
your receipt of this notice. We regret having to do this, but your repeated disregard of the
Agreement, despite warnings, leaves (sic) the Company no other choice.
xxxx
Aggrieved, respondent Luna filed a complaint for damages before the RTC of Makati City,
Branch 138. The complaint was docketed as Civil Case No. 88-2595.
On 26 January 1996, after trial on the merits, the RTC rendered judgment in favor of
respondent Luna stating that:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered in favor of the
plaintiff, and against defendant, Avon, ordering the latter:
1) to pay moral damages to the plaintiff in the amount of P100,000.00 with interest from the
date of this judgment up to the time of complete payment;
2) to pay attorneys fees in the amount of P20,000.00;
3) to pay the costs.6
On 8 February 1996, petitioner Avon filed a Notice of Appeal dated the same day. In an
Order7 dated 15 February 1996, the RTC gave due course to the appeal and directed its
Branch Clerk of Court to transmit the entire records of the case to the Court of Appeals,
which docketed the appeal as CA G.R. CV No. 52550.
On 20 May 2002, the Court of Appeals promulgated the assailed Decision, the dispositive
part of which states thus:
WHEREFORE, the foregoing premises considered, the decision appealed from is hereby
AFFIRMED in toto.8
The Issues
In predictable displeasure with the conclusions reached by the appellate court, petitioner
Avon now implores this Court to review, via a petition for review on certiorari under Rule 45
of the Revised Rules of Court, the formers decision and to resolve the following assigned
errors:9
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN DECLARING THAT THE
SUPERVISORS AGREEMENT EXECUTED BETWEEN AVON AND RESPONDENT LUNA AS NULL
AND VOID FOR BEING AGAINST PUBLIC POLICY;

II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT AVON HAD NO
RIGHT TO TERMINATE OR CANCEL THE SUPERVIOSRS AGREEMENT;
III.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN UPHOLDING THE AWARD OF MORAL
DAMAGES AND ATTORNEYS FEES IN FAVOR OF RESPONDENT LUNA; and
IV.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT AWARDING ATTORNEYS FEES
AND LITIGATION EXPENSES IN FAVOR OF PETITIONER.
The Courts Ruling
A priori, respondent Luna objects to the presentation, and eventual resolution, of the issues
raised herein as they allegedly involve questions of facts.
To be sure, questions of law are those that involve doubts or controversies on what the law is
on certain state of facts; and questions of fact, on the other hand, are those in which there is
doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been
held, is whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case it is a question of law, otherwise it will be a question
of fact.10
In the present case, the threshold issues are a) whether or not paragraph 5 of the
Supervisors Agreement is void for being violative of law and public policy; and b) whether or
not paragraph 6 of the Supervisors Agreement which authorizes petitioner Avon to
terminate or cancel the agreement at will is void for being contrary to law and public policy.
Certainly, it is quite obvious that the foregoing issues are questions of law.
In affirming the decision of the RTC declaring the subject contract null and void for being
against public policy, the Court of Appeals ruled that the exclusivity clause, which states
that:
The Company and the Supervisor mutually agree:
xxxx
5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively
products sold by the Company. [Emphasis supplied.]
should be interpreted to apply solely to those products directly in competition with those of
petitioner Avons, i.e., cosmetics and/or beauty supplies and lingerie products. Its
declaration is anchored on the fact that Avon products, at that time, were not in any way
similar to the products sold by Sandr Philippines, Inc. At that time, the latter was merely
selling vitamin products. Put simply, the products of the two companies do not compete with
each other. The appellate court ratiocinated that:
x x x If the agreement were interpreted otherwise, so as to include products that do not
directly compete with the products of defendant-appellant Avon, such would result in
absurdity. x x x [A]greements which prohibit a person from engaging in any enterprise
whether similar or not to the enterprise of the employer constitute an unreasonable restraint
of trade, thus, it is void as against public policy.11
Petitioner Avon disputes the abovestated conclusion reached by the Court of Appeals. It
argues that the latter went beyond the literal and obvious intent of the parties to the subject
contract when it interpreted the abovequoted clause to apply only to those products that do
not compete with that of petitioner Avons; and that the words "only and exclusively" need
no other interpretation other than the literal meaning that "THE SUPERVISORS CANNOT
SELL THE PRODUCTS OF OTHER COMPANIES WHETHER OR NOT THEY ARE COMPETING
PRODUCTS."12
Moreover, petitioner Avon reasons that:
The exclusivity clause was directed against the supervisors selling other products utilizing
their training and experience, and capitalizing on Avons existing network for the promotion
and sale of the said products. The exclusivity clause was meant to protect Avon from other

companies, whether competitors or not, who would exploit the sales and promotions
network already established by Avon at great expense and effort.
xxxx
Obviously, Sandre Phils., Inc. did not have the (sic) its own trained personnel and network to
sell and promote its products. It was precisely why Sandre simply invited, and then and
there hired Luna and other Avon supervisors and dealers to sell and promote its products.
They had the training and experience, they also had a ready market for the other products
the customers to whom they had been selling the Avon products. It was easy to entice the
supervisors to sign up. The supervisors could continue to sell Avon products, and at the
same time earn additional income by selling other products.
This is most unfair to Avon. The other companies cannot ride on and exploit the training and
experience of the Avon sales force to sell and promote their own products. [Emphasis
supplied.]
On the other hand, in her Memorandum, respondent Luna counters that "there is no
allegation nor any finding by the trial court or the Court of Appeals of an existing nationwide
sales and promotions network established by Avon or Avons existing sales promotions
network or Avons tried and tested sales and promotions network nor the alleged damage
caused to such system caused by other companies." Further, well worth noting is the opinion
of respondent Lunas counsel which started the set off the series of events which culminated
to the termination or cancellation of the Supervisors Agreement. In response to the queryletter13 of respondent Luna, the latters legal counsel opined that, as allegedly held in the
case of Ferrazzini v. Gsell,14 paragraph 5 of the subject Supervisors Agreement "not only
prohibits the supervisor from selling products which compete with the companys product
but restricts likewise the supervisor from engaging in any industry which involves sales in
general."15 Said counsel thereafter concluded that the subject provision in the Supervisors
Agreement constitutes an unreasonable restraint of trade and, therefore, void for being
contrary to public policy.
At the crux of the first issue is the validity of paragraph 5 of the Supervisors Agreement, viz:
The Company and the Supervisor mutually agree:
xxxx
5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively
products sold by the Company. [Emphasis supplied.]
In business parlance, this is commonly termed as the "exclusivity clause." This is defined as
agreements which prohibit the obligor from engaging in "business" in competition with the
obligee.
This exclusivity clause is more often the subject of critical scrutiny when it is perceived to
collide with the Constitutional proscription against "reasonable restraint of trade or
occupation." The pertinent provision of the Constitution is quoted hereunder. Section 19 of
Article XII of the 1987 Constitution on the National Economy and Patrimony states that:
SEC. 19. The State shall regulate or prohibit monopolies when the public interest so requires.
No combinations in restraint of trade or unfair competition shall be allowed.
First off, restraint of trade or occupation embraces acts, contracts, agreements or
combinations which restrict competition or obstruct due course of trade.16
Now to the basics. From the wordings of the Constitution, truly then, what is brought about
to lay the test on whether a given agreement constitutes an unlawful machination or
combination in restraint of trade is whether under the particular circumstances of the case
and the nature of the particular contract involved, such contract is, or is not, against public
interest.17
Thus, restrictions upon trade may be upheld when not contrary to public welfare and not
greater than is necessary to afford a fair and reasonable protection to the party in whose
favor it is imposed.18 Even contracts which prohibit an employee from engaging in business
in competition with the employer are not necessarily void for being in restraint of trade.
In sum, contracts requiring exclusivity are not per se void. Each contract must be viewed vis-vis all the circumstances surrounding such agreement in deciding whether a restrictive
practice should be prohibited as imposing an unreasonable restraint on competition.

The question that now crops up is this, when is a restraint in trade unreasonable? Authorities
are one in declaring that a restraint in trade is unreasonable when it is contrary to public
policy or public welfare. As far back as 1916, in the case of Ferrazzini v. Gsell,19 this Court
has had the occasion to declare that:
There is no difference in principle between the public policy (orden pblico) in the in the two
jurisdictions (United States and the Philippine Islands) as determined by the Constitution,
laws, and judicial decisions.
In the United States it is well settled that contracts in undue or unreasonable restraint of
trade are unenforcible because they are repugnant to the established public policy in that
country. Such contracts are illegal in the sense that the law will not enforce them. The
Supreme Court in the United States, in Oregon Steam Navigation Co. vs. Winsor )20 Will.,
64), quoted with approval in Gibbs v. Consolidated gas Co. of Baltimore (130 U.S., 396), said:
Cases must be judged according to their circumstances, and can only be rightly judged
when reason and grounds of the rule are carefully considered. There are two principle
grounds on which the doctrine is founded that a contract in restraint of trade is void as
against public policy. One is, the injury to the public by being deprived of the restricted
partys industry; and the other is, the injury to the party himself by being precluded from
pursuing his occupation, and thus being prevented from supporting himself and his family.
And what is public policy? In the words of the eminent Spanish jurist, Don Jose Maria
Manresa, in his commentaries of the Codigo Civil, public policy (orden pblico):
Represents in the law of persons the public, social and legal interest, that which is
permanent and essential of the institutions, that which, even if favoring an individual in
whom the right lies, cannot be left to his own will. It is an idea which, in cases of the waiver
of any right, is manifested with clearness and force. 20
As applied to agreements, Quintus Mucius Scaevola, another distinguished civilist gives the
term "public policy" a more defined meaning:
Agreements in violation of orden pblico must be considered as those which conflict with
law, whether properly, strictly and wholly a public law (derecho) or whether a law of the
person, but law which in certain respects affects the interest of society. 21
Plainly put, public policy is that principle of the law which holds that no subject or citizen can
lawfully do that which has a tendency to be injurious to the public or against the public
good.22 As applied to contracts, in the absence of express legislation or constitutional
prohibition, a court, in order to declare a contract void as against public policy, must find
that the contract as to the consideration or thing to be done, has a tendency to injure the
public, is against the public good, or contravenes some established interests of society, or is
inconsistent with sound policy and good morals, or tends clearly to undermine the security
of individual rights, whether of personal liability or of private property.23
From another perspective, the main objection to exclusive dealing is its tendency to
foreclose existing competitors or new entrants from competition in the covered portion of
the relevant market during the term of the agreement.24 Only those arrangements whose
probable effect is to foreclose competition in a substantial share of the line of commerce
affected can be considered as void for being against public policy. The foreclosure effect, if
any, depends on the market share involved. The relevant market for this purpose includes
the full range of selling opportunities reasonably open to rivals, namely, all the product and
geographic sales they may readily compete for, using easily convertible plants and
marketing organizations.25
Applying the preceding principles to the case at bar, there is nothing invalid or contrary to
public policy either in the objectives sought to be attained by paragraph 5, i.e., the
exclusivity clause, in prohibiting respondent Luna, and all other Avon supervisors, from
selling products other than those manufactured by petitioner Avon. We quote with approval
the determination of the U.S. Supreme Court in the case of Board of Trade of Chicago v.
U.S.26 that "the question to be determined is whether the restraint imposed is such as
merely regulates and perhaps thereby promotes competition, or whether it is such as may
suppress or even destroy competition."
Such prohibition is neither directed to eliminate the competition like Sandr Phils., Inc. nor
foreclose new entrants to the market. In its Memorandum, it admits that the reason for such
exclusion is to safeguard the network that it has cultivated through the years. Admittedly,
both companies employ the direct selling method in order to peddle their products. By direct
selling, petitioner Avon and Sandre, the manufacturer, forego the use of a middleman in
selling their products, thus, controlling the price by which they are to be sold. The limitation

does not affect the public at all. It is only a means by which petitioner Avon is able to protect
its investment.
It was not by chance that Sandr Philippines, Inc. made respondent Luna one of its Group
Franchise Directors. It doesnt take a genius to realize that by making her an important part
of its distribution arm, Sandr Philippines, Inc., a newly formed direct-selling business, would
be saving time, effort and money as it will no longer have to recruit, train and motivate
supervisors and dealers. Respondent Luna, who learned the tricks of the trade from
petitioner Avon, will do it for them. This is tantamount to unjust enrichment. Worse, the
goodwill established by petitioner Avon among its loyal customers will be taken advantaged
of by Sandre Philippines, Inc. It is not so hard to imagine the scenario wherein the sale of
Sandr products by Avon dealers will engender a belief in the minds of loyal Avon customers
that the product that they are buying had been manufactured by Avon. In other words, they
will be misled into thinking that the Sandr products are in fact Avon products. From the
foregoing, it cannot be said that the purpose of the subject exclusivity clause is to foreclose
the competition, that is, the entrance of Sandr products in to the market. Therefore, it
cannot be considered void for being against public policy. How can the protection of ones
property be violative of public policy? Sandr Philippines, Inc. is still very much free to
distribute its products in the market but it must do so at its own expense. The exclusivity
clause does not in any way limit its selling opportunities, just the undue use of the resources
of petitioner Avon.
It has been argued that the Supervisors Agreement is in the nature of a contract of
adhesion; but just because it is does not necessarily mean that it is void. A contract of
adhesion is so-called because its terms are prepared by only one party while the other party
merely affixes his signature signifying his adhesion thereto.27 Such contract is just as
binding as ordinary contracts. "It is true that we have, on occasion, struck down such
contracts as void when the weaker party is imposed upon in dealing with the dominant
bargaining party and is reduced to the alternative of taking it or leaving it, completely
deprived of the opportunity to bargain on equal footing. Nevertheless, contracts of adhesion
are not invalid per se and they are not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely, if he adheres, he gives his consent."28 In the
case at bar, there was no indication that respondent Luna was forced to sign the subject
agreement. Being of age, financially stable and with vast business experience, she is
presumed to have acted with due care and to have signed the assailed contract with full
knowledge of its import. Under the premises, it would be difficult to assume that she was
morally abused. She was free to reject the agreement if she wanted to.
Accordingly, a contract duly executed is the law between the parties, and they are obliged to
comply fully and not selectively with its terms. A contract of adhesion is no exception.29
The foregoing premises noted, the Court of Appeals, therefore, committed reversible error in
interpreting the subject exclusivity clause to apply merely to those products in direct
competition to those manufactured and sold by petitioner Avon. When the terms of the
agreement are clear and explicit, that they do not justify an attempt to read into any alleged
intention of the parties, the terms are to be understood literally just as they appear on the
face of the contract.30 Thus, in order to judge the intention of the contracting parties, "the
circumstances under which it was made, including the situation of the subject thereof and of
the parties to it, may be shown, so that the judge may be placed in the position of those
whose language he is to interpret."31 It has been held that once this intention of the parties
has been ascertained, it becomes an integral part of the contract as though it has been
originally expressed therein in unequivocal terms.32
Having held that the "exclusivity clause" as embodied in paragraph 5 of the Supervisors
Agreement is valid and not against public policy, we now pass to a consideration of
respondent Lunas objections to the validity of her termination as provided for under
paragraph 6 of the Supervisors Agreement giving petitioner Avon the right to terminate or
cancel such contract. The paragraph 6 or the "termination clause" therein expressly provides
that:
The Company and the Supervisor mutually agree:
xxxx
6) Either party may terminate this agreement at will, with or without cause, at any time
upon notice to the other. [Emphasis supplied.]
In the case of Petrophil Corporation v. Court of Appeals,33 this Court already had the
opportunity to opine that termination or cancellation clauses such as that subject of the case
at bar are legitimate if exercised in good faith. The facts of said case likewise involved a
termination or cancellation clause that clearly provided for two ways of terminating the

contract, i.e., with or without cause. The utilization of one mode will not preclude the use of
the other. Therein, we stated that the finding that the termination of the contract was "for
cause," is immaterial. When petitioner terminated the contract "without cause," it was
required only to give x x x a 30-day prior written notice, which it did.
In the case at bar, the termination clause of the Supervisors Agreement clearly provides for
two ways of terminating and/or canceling the contract. One mode does not exclude the
other. The contract provided that it can be terminated or cancelled for cause, it also stated
that it can be terminated without cause, both at any time and after written notice. Thus,
whether or not the termination or cancellation of the Supervisors Agreement was "for
cause," is immaterial. The only requirement is that of notice to the other party. When
petitioner Avon chose to terminate the contract, for cause, respondent Luna was duly
notified thereof.
Worth stressing is that the right to unilaterally terminate or cancel the Supervisors
Agreement with or without cause is equally available to respondent Luna, subject to the
same notice requirement. Obviously, no advantage is taken against each other by the
contracting parties.
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated
20 May 2002 rendered by the Court of Appeals in CA-G.R. CV No. 52550, affirming the
judgment of the RTC of Makati City, Branch 138, in Civil Case No. 88-2595, are hereby
REVERSED and SET ASIDE. Accordingly, let a new one be entered dismissing the complaint
for damages. Costs against respondent Leticia Luna.
SO ORDERED.
G.R. No. 162053
March 7, 2007
ST. LUKE'S MEDICAL CENTER EMPLOYEE'S ASSOCIATION-AFW (SLMCEA-AFW) AND
MARIBEL S. SANTOS, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND ST. LUKE'S MEDICAL
CENTER, INC., Respondents.
DECISION
AZCUNA, J.:
Challenged in this petition for review on certiorari is the Decision1 of the Court of Appeals
(CA) dated January 29, 2004 in CA-G.R. SP No. 75732 affirming the decision2 dated August
23, 2002 rendered by the National Labor Relations Commission (NLRC) in NLRC CA No.
026225-00.
The antecedent facts are as follows:
Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology department of
private respondent St. Luke's Medical Center, Inc. (SLMC) on October 13, 1984. She is a
graduate of Associate in Radiologic Technology from The Family Clinic Incorporated School of
Radiologic Technology.
On April 22, 1992, Congress passed and enacted Republic Act No. 7431 known as the
"Radiologic Technology Act of 1992." Said law requires that no person shall practice or offer
to practice as a radiology and/or x-ray technologist in the Philippines without having
obtained the proper certificate of registration from the Board of Radiologic Technology.
On September 12, 1995, the Assistant Executive Director-Ancillary Services and HR Director
of private respondent SLMC issued a final notice to all practitioners of Radiologic Technology
to comply with the requirement of Republic Act No. 7431 by December 31, 1995; otherwise,
the unlicensed employee will be transferred to an area which does not require a license to
practice if a slot is available.
On March 4, 1997, the Director of the Institute of Radiology issued a final notice to petitioner
Maribel S. Santos requiring the latter to comply with Republic Act. No. 7431 by taking and
passing the forthcoming examination scheduled in June 1997; otherwise, private respondent
SLMC may be compelled to retire her from employment should there be no other position
available where she may be absorbed.
On May 14, 1997, the Director of the Institute of Radiology, AED-Division of Ancillary
Services issued a memorandum to petitioner Maribel S. Santos directing the latter to submit
her PRC Registration form/Examination Permit per Memorandum dated March 4, 1997.

On March 13, 1998, the Director of the Institute of Radiology issued another memorandum
to petitioner Maribel S. Santos advising her that only a license can assure her of her
continued employment at the Institute of Radiology of the private respondent SLMC and that
the latter is giving her the last chance to take and pass the forthcoming board examination
scheduled in June 1998; otherwise, private respondent SLMC shall be constrained to take
action which may include her separation from employment.
On November 23, 1998, the Director of the Institute of Radiology issued a notice to
petitioner Maribel S. Santos informing the latter that the management of private respondent
SLMC has approved her retirement in lieu of separation pay.
On November 26, 1998, the Personnel Manager of private respondent SLMC issued a "Notice
of Separation from the Company" to petitioner Maribel S. Santos effective December 30,
1998 in view of the latter's refusal to accept private respondent SLMC's offer for early
retirement. The notice also states that while said private respondent exerted its efforts to
transfer petitioner Maribel S. Santos to other position/s, her qualifications do not fit with any
of the present vacant positions in the hospital.
In a letter dated December 18, 1998, a certain Jack C. Lappay, President of the Philippine
Association of Radiologic Technologists, Inc., wrote Ms. Judith Betita, Personnel Manager of
private respondent SLMC, requesting the latter to give "due consideration" to the
organization's three (3) regular members of his organization (petitioner Maribel S. Santos
included) "for not passing yet the Board of Examination for X-ray Technology," "by giving
them an assignment in any department of your hospital awaiting their chance to pass the
future Board Exam."
On January 6, 1999, the Personnel Manager of private respondent SLMC again issued a
"Notice of Separation from the Company" to petitioner Maribel S. Santos effective February
5, 1999 after the latter failed to present/ submit her appeal for rechecking to the
Professional Regulation Commission (PRC) of the recent board examination which she took
and failed.
On March 2, 1999, petitioner Maribel S. Santos filed a complaint against private respondent
SLMC for illegal dismissal and non-payment of salaries, allowances and other monetary
benefits. She likewise prayed for the award of moral and exemplary damages plus attorney's
fees.
In the meantime, petitioner Alliance of Filipino Workers (AFW), through its President and
Legal Counsel, in a letter dated September 22, 1999 addressed to Ms. Rita Marasigan,
Human Resources Director of private respondent SLMC, requested the latter to
accommodate petitioner Maribel S. Santos and assign her to the vacant position of CSS Aide
in the hospital arising from the death of an employee more than two (2) months earlier.
In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:
Gentlemen:
Thank you for your letter of September 22, 1999 formally requesting to fill up the vacant
regular position of a CSS Aide in Ms. Maribel Santos' behalf.
The position is indeed vacant. Please refer to our Recruitment Policy for particulars
especially on minimum requirements of the job and the need to meet said requirements, as
well as other pre-employment requirements, in order to be considered for the vacant
position. As a matter of fact, Ms. Santos is welcome to apply for any vacant position on the
condition that she possesses the necessary qualifications.
As to the consensus referred to in your letter, may I correct you that the agreement is,
regardless of the vacant position Ms. Santos decides to apply, she must go through the usual
application procedures. The formal letter, I am afraid, will not suffice for purposes of
recruitment processing. As you know, the managers requesting to fill any vacancy has a say
on the matter and correctly so. The manager's inputs are necessarily factored into the
standard recruitment procedures. Hence, the need to undergo the prescribed steps.
Indeed we have gone through the mechanics to accommodate Ms. Santos' transfer while she
was employed with SLMC given the prescribed period. She was given 30 days from issuance
of the notice of termination to look for appropriate openings which incidentally she wittingly
declined to utilize. She did this knowing fully well that the consequences would be that her
application beyond the 30-day period or after the effective date of her termination from
SLMC would be considered a re-application with loss of seniority and shall be subjected to
the pertinent application procedures.

Needless to mention, one of the 3 X-ray Technologists in similar circumstances as Ms. Santos
at the time successfully managed to get herself transferred to E.R. because she opted to
apply for the appropriate vacant position and qualified for it within the prescribed 30-day
period. The other X-ray Technologist, on the other hand, as you may recall, was eventually
terminated not just for his failure to comply with the licensure requirement of the law but for
cause (refusal to serve a customer).
Why Ms. Santos opted to file a complaint before the Labor Courts and not to avail of the
opportunity given her, or assuming she was not qualified for any vacant position even if she
tried to look for one within the prescribed period, I simply cannot understand why she also
refused the separation pay offered by Management in an amount beyond the minimum
required by law only to re-apply at SLMC, which option would be available to her anyway
even (if she) chose to accept the separation pay!
Well, here's hoping that our Union can timely influence our employees to choose their
options well as it has in the past.
(Signed)
RITA MARASIGAN
Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita, Personnel Manager of
private respondent SLMC wrote Mr. Angelito Calderon, President of petitioner union as
follows:
Dear Mr. Calderon:
This is with regard to the case of Ms. Maribel Santos. Please recall that last Oct. 8, 1999, Ms.
Rita Marasigan, HR Director, discussed with you and Mr. Greg Del Prado the terms regarding
the re-hiring of Ms. Maribel Santos. Ms. Marasigan offered Ms. Santos the position of
Secretary at the Dietary Department. In that meeting, Ms. Santos replied that she would
think about the offer. To date, we still have no definite reply from her. Again, during the
conference held on Dec. 14, 1999, Atty. Martir promised to talk to Ms. Santos, and inform us
of her reply by Dec. 21, 1999. Again we failed to hear her reply through him.
Please be informed that said position is in need of immediate staffing. The Dietary
Department has already been experiencing serious backlog of work due to the said vacancy.
Please note that more than 2 months has passed since Ms. Marasigan offered this
compromise. Management cannot afford to wait for her decision while the operation of the
said department suffers from vacancy.
Therefore, Management is giving Ms. Santos until the end of this month to give her decision.
If we fail to hear from her or from you as her representatives by that time, we will consider it
as a waiver and we will be forced to offer the position to other applicants so as not to
jeopardize the Dietary Department's operation.
For your immediate action.
(Signed)
JUDITH BETITA
Personnel Manager
On September 5, 2000, the Labor Arbiter came out with a Decision ordering private
respondent SLMC to pay petitioner Maribel S. Santos the amount of One Hundred Fifteen
Thousand Five Hundred Pesos (P115,500.00) representing her separation pay. All other
claims of petitioner were dismissed for lack of merit.
Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public respondent
NLRC.
On August 23, 2002, public respondent NLRC promulgated its Decision affirming the Decision
of the Labor Arbiter. It likewise denied the Motion for Reconsideration filed by petitioners in
its Resolution promulgated on December 27, 2002.
Petitioner thereafter filed a petition for certiorari with the CA which, as previously
mentioned, affirmed the decision of the NLRC.
Hence, this petition raising the following issues:
I. Whether the CA overlooked certain material facts and circumstances on petitioners' legal
claim in relation to the complaint for illegal dismissal.

II. Whether the CA committed grave abuse of discretion and erred in not resolving with
clarity the issues on the merit of petitioner's constitutional right of security of tenure.3
For its part, private respondent St. Luke's Medical Center, Inc. (SLMC) argues in its
comment4 that: 1) the petition should be dismissed for failure of petitioners to file a motion
for reconsideration; 2) the CA did not commit grave abuse of discretion in upholding the
NLRC and the Labor Arbiter's ruling that petitioner was legally dismissed; 3) petitioner was
legally and validly terminated in accordance with Republic Act Nos. 4226 and 7431; 4)
private respondent's decision to terminate petitioner Santos was made in good faith and was
not the result of unfair discrimination; and 5) petitioner Santos' non-transfer to another
position in the SLMC was a valid exercise of management prerogative.
The petition lacks merit.
Generally, the Court has always accorded respect and finality to the findings of fact of the
CA particularly if they coincide with those of the Labor Arbiter and the NLRC and are
supported by substantial evidence.5 True this rule admits of certain exceptions as, for
example, when the judgment is based on a misapprehension of facts, or the findings of fact
are not supported by the evidence on record6 or are so glaringly erroneous as to constitute
grave abuse of discretion.7 None of these exceptions, however, has been convincingly
shown by petitioners to apply in the present case. Hence, the Court sees no reason to
disturb such findings of fact of the CA.
Ultimately, the issue raised by the parties boils down to whether petitioner Santos was
illegally dismissed by private respondent SLMC on the basis of her inability to secure a
certificate of registration from the Board of Radiologic Technology.
The requirement for a certificate of registration is set forth under R.A. No. 74318 thus:
Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray Technology. Unless exempt from the examinations under Sections 16 and 17 hereof, no person shall
practice or offer to practice as a radiologic and/or x-ray technologist in the Philippines
without having obtained the proper certificate of registration from the Board.
It is significant to note that petitioners expressly concede that the sole cause for petitioner
Santos' separation from work is her failure to pass the board licensure exam for X-ray
technicians, a precondition for obtaining the certificate of registration from the Board. It is
argued, though, that petitioner Santos' failure to comply with the certification requirement
did not constitute just cause for termination as it violated her constitutional right to security
of tenure. This contention is untenable.
While the right of workers to security of tenure is guaranteed by the Constitution, its
exercise may be reasonably regulated pursuant to the police power of the State to safeguard
health, morals, peace, education, order, safety, and the general welfare of the people.
Consequently, persons who desire to engage in the learned professions requiring scientific
or technical knowledge may be required to take an examination as a prerequisite to
engaging in their chosen careers.9 The most concrete example of this would be in the field
of medicine, the practice of which in all its branches has been closely regulated by the State.
It has long been recognized that the regulation of this field is a reasonable method of
protecting the health and safety of the public to protect the public from the potentially
deadly effects of incompetence and ignorance among those who would practice medicine.10
The same rationale applies in the regulation of the practice of radiologic and x-ray
technology. The clear and unmistakable intention of the legislature in prescribing guidelines
for persons seeking to practice in this field is embodied in Section 2 of the law:
Sec. 2. Statement of Policy. - It is the policy of the State to upgrade the practice of radiologic
technology in the Philippines for the purpose of protecting the public from the hazards posed
by radiation as well as to ensure safe and proper diagnosis, treatment and research through
the application of machines and/or equipment using radiation.11
In this regard, the Court quotes with approval the disquisition of public respondent NLRC in
its decision dated August 23, 2002:
The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's
inherent police power. It should be noted that the police power embraces the power to
prescribe regulations to promote the health, morals, educations, good order, safety or
general welfare of the people. The state is justified in prescribing the specific requirements
for x-ray technicians and/or any other professions connected with the health and safety of
its citizens. Respondent-appellee being engaged in the hospital and health care business, is
a proper subject of the cited law; thus, having in mind the legal requirements of these laws,

the latter cannot close its eyes and [let] complainant-appellant's private interest override
public interest.
Indeed, complainant-appellant cannot insist on her "sterling work performance without any
derogatory record" to make her qualify as an x-ray technician in the absence of a proper
certificate of Registration from the Board of Radiologic Technology which can only be
obtained by passing the required examination. The law is clear that the Certificate of
Registration cannot be substituted by any other requirement to allow a person to practice as
a Radiologic Technologist and/or X-ray Technologist (Technician).12
No malice or ill-will can be imputed upon private respondent as the separation of petitioner
Santos was undertaken by it conformably to an existing statute. It is undeniable that her
continued employment without the required Board certification exposed the hospital to
possible sanctions and even to a revocation of its license to operate. Certainly, private
respondent could not be expected to retain petitioner Santos despite the inimical threat
posed by the latter to its business. This notwithstanding, the records bear out the fact that
petitioner Santos was given ample opportunity to qualify for the position and was sufficiently
warned that her failure to do so would result in her separation from work in the event there
were no other vacant positions to which she could be transferred. Despite these warnings,
petitioner Santos was still unable to comply and pass the required exam. To reiterate, the
requirement for Board certification was set by statute. Justice, fairness and due process
demand that an employer should not be penalized for situations where it had no
participation or control.13
It would be unreasonable to compel private respondent to wait until its license is cancelled
and it is materially injured before removing the cause of the impending evil. Neither can the
courts step in to force private respondent to reassign or transfer petitioner Santos under
these circumstances. Petitioner Santos is not in the position to demand that she be given a
different work assignment when what necessitated her transfer in the first place was her
own fault or failing. The prerogative to determine the place or station where an employee is
best qualified to serve the interests of the company on the basis of the his or her
qualifications, training and performance belongs solely to the employer.14 The Labor Code
and its implementing Rules do not vest in the Labor Arbiters nor in the different Divisions of
the NLRC (nor in the courts) managerial authority.15
While our laws endeavor to give life to the constitutional policy on social justice and the
protection of labor, it does not mean that every labor dispute will be decided in favor of the
workers. The law also recognizes that management has rights which are also entitled to
respect and enforcement in the interest of fair play.16 Labor laws, to be sure, do not
authorize interference with the employer's judgment in the conduct of the latter's business.
Private respondent is free to determine, using its own discretion and business judgment, all
elements of employment, "from hiring to firing" except in cases of unlawful discrimination or
those which may be provided by law. None of these exceptions is present in the instant case.
The fact that another employee, who likewise failed to pass the required exam, was allowed
by private respondent to apply for and transfer to another position with the hospital does not
constitute unlawful discrimination. This was a valid exercise of management prerogative,
petitioners not having alleged nor proven that the reassigned employee did not qualify for
the position where she was transferred. In the past, the Court has ruled that an objection
founded on the ground that one has better credentials over the appointee is frowned upon
so long as the latter possesses the minimum qualifications for the position.17 Furthermore,
the records show that Ms. Santos did not even seriously apply for another position in the
company.
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
G.R. No. 125303
June 16, 2000
DANILO LEONARDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION
CORPORATION, ET. AL., respondents.

and

REYNALDO'S

MARKETING

x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 126937
AURELIO FUERTE and DANILO LEONARDO, petitioners,
vs.
RAUL T. AQUINO, VICTORIANO R. CALAYCAY and ROGELIO I. RALAYA, as Chairman
and Members of the NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION
and REYNALDO'S MARKETING and/or REYNALDO PADUA, respondents.

DE LEON, JR., J.:

Before us is a consolidation of G.R. Nos. 125303 and 126937, both petitions for certiorari
under Rule 65 of the 1997 Rules of Civil Procedure, seeking the annulment of a Decision1
and Resolution2 dated March 28, 1996 and May 29, 1996, respectively, of the public
respondent in NLRC NCR 00-02-01024-92.
The facts are:
Petitioner AURELIO FUERTE was originally employed by private respondent REYNALDO'S
MARKETING CORPORATION on August 11, 1981 as a muffler specialist, receiving P45.00 per
day. When he was appointed supervisor in 1988, his compensation was increased to P122.00
a day, augmented by a weekly supervisor's allowance of P600.00. On the other hand,
DANILO LEONARDO was hired by private respondent on March 4, 1988 as an auto-aircon
mechanic at a salary rate of P35.00 per day. His pay was increased to P90.00 a day when he
attained regular status six months later. From such time until he was allegedly terminated,
he claims to have also received a monthly allowance equal to P2,500.00 as his share in the
profits of the auto-aircon division.
FUERTE alleges that on January 3, 1992, he was instructed to report at private respondent's
main office where he was informed by the company's personnel manager that he would be
transferred to its Sucat plant due to his failure to meet his sales quota, and for that reason,
his supervisor's allowance would be withdrawn. For a short time, FUERTE reported for work
at the Sucat plant; however, he protested his transfer, subsequently filing a complaint for
illegal termination.
On his part, LEONARDO alleges that on April 22, 1991, private respondent was approached
by the same personnel manager who informed him that his services were no longer needed.
He, too, filed a complaint for illegal termination.
The case was heard by Labor Arbiter Jesus N. Rodriguez, Jr. On December 15, 1994, Labor
Arbiter Emerson C. Tumanon, to whom the case was subsequently assigned, rendered
judgment in favor of petitioners. The dispositive portion of the arbiter's decision3 states:
WHEREFORE, premises considered, respondents are hereby ordered:
1. To reinstate complainant Aurelio Fuerte, to the position he was holding before the
demotion, and to reinstate likewise complainant Danilo Leogardo to his former position or in
lieu thereof, they be reinstated through payroll reinstatement without any of them losing
their seniority rights and other privileges, inclusive of allowance and to their other benefits;
2. To pay AURELIO FUERTE, the sum of TWO HUNDRED EIGHTY THOUSAND EIGHT HUNDRED
NINETY-SIX PESOS and 72/100 (280,896.72);
3. To pay DANILO LEOGARDO, the sum of TWO HUNDRED FORTY ONE THOUSAND NINE
HUNDRED EIGHT PESOS and 67/100 (P241,908.67).
SO ORDERED.
On appeal, the respondent Commission modified the aforesaid decision as follows:
WHEREFORE, premises considered, the Decision of December 15, 1994 is hereby modified
as follows:
1. Ordering the reinstatement of complainant Aurelio Fuerte to his former position without
loss of his seniority rights but without backwages;
2. Dismissing the complaint of Danilo leonardo [sic] for lack of merit; and
3. Deleting the rests [sic] of the monetary award as well as the award of moral damages and
attorney's fees in favor of the complainants also for lack of merit.
SO ORDERED.
Petitioners filed a motion for reconsideration4 on April 30, 1996, which the Commission
denied in its Resolution dated May 29, 1996.
On July 1, 1996, LEONARDO, represented by the Public Attorney's Office, filed G.R. No.
125303, a special civil action for certiorari assailing the Commission's decision and

resolution. However, on November 15, 1996, FUERTE, again joined by LEONARDO, filed G.R.
No. 126937, a similar action praying for the annulment of the same decision and resolution.
On October 7, 1997, private respondent filed its Comment5 to the petition in G.R. No.
125303. On April 2, 1997, it filed its Comments 6 to the petition in G.R. No. 126937 with a
motion to drop petitioner LEONARDO and consolidate G.R. No. 126937 with G.R. No. 125303.
We granted private respondent's motion in our Resolution dated June 16, 1997.7
The petition in G.R. No. 1269378 raises the following issues:
I. RESPONDENT COMMISSIONERS GRAVELY ABUSED THEIR DISCRETION AMOUNTING TO
LACK OR IN EXCESS OF JURISDICTION WHEN THEY GRANTED RESPONDENTS APPEAL.
II. RESPONDENT COMMISSIONERS GRAVELY ABUSED THEIR DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN THEY FOUND FOR RESPONDENT REYNALDO'S
MARKETING PRONOUNCING THAT THERE WAS NO ILLEGAL DISMISSAL DESPITE CONTRARY
FINDINGS MADE BY THE LABOR ARBITER CONTRARY TO LAW AND EXISTING JURISPRUDENCE.
Private respondent contends that it never terminated petitioners' services. In FUERTE's case,
private respondent claims that the latter was demoted pursuant to a company policy
intended to foster competition among its employees. Under this scheme, private
respondent's employees are required to comply with a monthly sales quota. Should a
supervisor such as FUERTE fail to meet his quota for a certain number of consecutive
months, he will be demoted, whereupon his supervisor's allowance will be withdrawn and be
given to the individual who takes his place. When the employee concerned succeeds in
meeting the quota again, he is re-appointed supervisor and his allowance is restored.9
With regard to LEONARDO, private respondent likewise insists that it never severed the
former's employment. On the contrary, the company claims that it was LEONARDO who
abandoned his post following an investigation wherein he was asked to explain an incident
of alleged "sideline" work which occurred on April 22, 1991. It would appear that late in the
evening of the day in question, the driver of a red Corolla arrived at the shop looking for
LEONARDO. The driver said that, as prearranged, he was to pick up LEONARDO who would
perform a private service on the vehicle. When reports of the "sideline" work reached
management, it confronted LEONARDO and asked for an explanation. According to private
respondent, LEONARDO gave contradictory excuses, eventually claiming that the
unauthorized service was for an aunt. When pressed to present his aunt, it was then that
LEONARDO stopped reporting for work, filing his complaint for illegal dismissal some ten
months after his alleged termination.
Insofar as the action taken against FUERTE is concerned, private respondent's justification is
well-illustrated in the record. He was unable to meet his quota for five months in 1991, from
July to November of that year. 10 Yet he insists that it could not possibly be so. He argues
that he must have met his quota considering that he received his supervisor's allowance for
the period aforesaid. The Commission, however, negated this view, finding the alleged
inconsistency to be adequately explained in the record. We quite agree. As found by the
Commission, placing special emphasis on the reasoning of the labor arbiter
We find otherwise. Complainant Fuerte's failure to meet his sales quota which caused his
demotion and the subsequent withdrawal of his allowance is fully supported by Exhibit "4" of
respondents' position paper showing that his performance for the months of July 1991 to
November 1991 is below par. While it is the policy of the respondent company that an
employer who fails to meet his sales quota for three (3) consecutive months, he is stripped
of his supervisor's designation and allowance. In the case of Fuerte, the respondents went
beyond the three (3) months period before withdrawing his allowance. On this basis, the
Labor Arbiter sweepingly concluded that the withdrawal of Fuerte's allowance is illegal since
the respondents should have withdrawn the same after Fuerte failed to meet his sales quota
for three consecutive months. However, the apparent flaw had been sufficiently reconciled
by the respondents when they state that a supervisor like Fuerte, continues to receive his
allowance until he is officially stripped of his supervisor's designation and assigned to
another job as ordinary employee. This is precisely the reason why complainant Fuerte
continued to receive his allowance even beyond the three (3) consecutive months period to
meet his sales quota considering that it was only on the fifth consecutive months when the
respondent company decided to strip him of his designation as supervisor. This is
corroborated by the "Sinumpaang Salaysay" (Exh. "A" respondents' position paper) of
some employees of the respondent company who had been previously demoted for failure
to meet their sales quota when they unformably stated:
5. Na alam naming kapagka hindi namin maabot and quotang nabanggit na may ilang
buwan, kami'y maaring mademote at kapagka nagkaganoon ang supervisor allowance

sampu ng, may mataas na parte sa profit sharing at winnings ay maalis sa amin at
maibibigay sa hahalili sa amin.
Surprisingly, the Labor Arbiter failed to take into consideration this material allegations of
the respondents in his assailed decision except his sweeping statement that the
"Sinumpaang Salaysay" was purposely done with malice to justify respondents' withdrawal
of Fuerte's supervisor's allowance. [emphasis supplied]
FUERTE nonetheless decries his transfer as being violative of his security of tenure, the clear
implication being that he was constructively dismissed. We have held that an employer acts
well within its rights in transferring an employee as it sees fit provided that there is no
demotion in rank or diminution in pay. 11 The two circumstances are deemed badges of bad
faith, and thus constitutive of constructive dismissal. In this regard, constructive dismissal is
defined in the following manner:
an involuntary resignation resorted to when continued employment becomes impossible,
unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a
clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee. 12
Yet here, the transfer was undertaken beyond the parameters as aforesaid. The instinctive
conclusion would be that his transfer is actually a constructive dismissal, but oddly, private
respondent never denies that it was really demoting FUERTE for cause. It should be borne in
mind, however, that the right to demote an employee also falls within the category of
management prerogatives. 13
This arrangement appears to us to be an allowable exercise of company rights. An employer
is entitled to impose productivity standards for its workers, and in fact, non-compliance may
be visited with a penalty even more severe than demotion. Thus,
[t]he practice of a company in laying off workers because they failed to make the work quota
has been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery
and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners' failure to meet
the sales quota assigned to each of them constitute a just cause of their dismissal,
regardless of the permanent or probationary status of their employment. Failure to observe
prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency
may constitute just cause for dismissal. Such inefficiency is understood to mean failure to
attain work goals or work quotas, either by failing to complete the same within the allotted
reasonable period, or by producing unsatisfactory results. This management prerogative of
requiring standards may be availed of so long as they are exercised in good faith for the
advancement of the employer's interest. 14
Neither can we say that FUERTE's actions are indicative of abandonment. To constitute such
a ground for dismissal, there must be (1) failure to report for work or absence without valid
or justifiable reason; and (2) a clear intention, as manifested by some overt acts, to sever
the employer-employee relationship. 15 We have accordingly held that the filing of a
complaint for illegal dismissal, as in this case, is inconsistent with a charge of abandonment.
16
There remains a question regarding the manner of demotion. In Jarcia Machine Shop and
Auto Supply, Inc. v. National Labor Relations Commission, 17 we ruled that:
Besides, even assuming arguendo that there was some basis for the demotion, as alleged by
petitioner, the case records are bereft of any showing that private respondent was notified in
advance of his impending transfer and demotion. Nor was he given an opportunity to refute
the employer's grounds or reasons for said transfer and demotion. In Gaco v. National Labor
Relations Commission, it was noted that:
While due process required by law is applied on dismissals, the same is also applicable to
demotions as demotions likewise affect the employment of a worker whose right to
continued employment, under the same terms and conditions, is also protected by law.
Moreover, considering that demotion is, like dismissal, also a punitive action, the employee
being demoted should as in cases of dismissals, be given a chance to contest the same.
After reviewing the record, we are sufficiently persuaded that private respondent had offered
substantial proof of compliance with this procedural requisite. 18
Accordingly, given that FUERTE may not be deemed to have abandoned his job, and neither
was he constructively dismissed by private respondent, the Commission did not err in
ordering his reinstatement but without backwages. In a case where the employee's failure to

work was occasioned neither by his abandonment nor by a termination, the burden of
economic loss is not rightfully shifted to the employer; each party must bear his own loss. 19
Neither do we discern any grave abuse of discretion in the Commission's ruling dismissing
LEONARDO's complaint. On this score, the public respondent found that:
Coming now to the case of complainant Danilo Leonardo, the evidence on record indubitably
shows that he abandoned his work with the respondents. As sufficiently established by
respondents, complainant Leonardo, after being pressed by the respondent company to
present the customer regarding his unauthorized solicitation of sideline work from the latter
and whom he claims to be his aunt, he never reported back to work anymore. This finding is
bolstered by the fact that after he left the respondent company, he got employed with
Dennis Motors Corporation as Air-Con Mechanic from October 12, 1992 to April 3, 1995
(Certification attached to respondents' Manifestation filed June 5, 1996)
It must be stressed that while Leonardo alleges that he was illegally dismissed from his
employment by the respondents, surprisingly, he never stated any reason why the
respondents would want to ease him out from his job. Moreover, why did it take him ten (10)
long months to file his case if indeed he was aggrieved by respondents. All the above facts
clearly point that the filing of his case is a mere afterthought on the part of complainant
Leonardo. In the case of Flexo Mfg. Corp. vs. NLRC, et. al., 135 SCRA 145, the Supreme Court
held, thus:
For abandonment to constitute a valid cause for termination of employment, there must be a
delibarate [sic] unjustified refusal of the employee to resume his employment. This refusal
must be clearly shown, mere absence is not sufficient, it must be accompanied by overt acts
unerringly pointing to the fatcs [sic] that the employee simply does not want to work
anymore.
LEONARDO protests that he was never accorded due process.1awphi1 This begs the
question, for he was never terminated; 20 he only became the subject of an investigation in
which he was apparently loath to participate. As testified to by Merlin P. Orallo, the personnel
manager, he was given a memorandum 21 asking him to explain the incident in question,
but he refused to receive it. 22 In an analogous instance, we held that an employee's refusal
to sign the minutes of an investigation cannot negate the fact that he was accorded due
process. 23 So should it be here. We find no reason to disturb the Commission's ruling that
LEONARDO had abandoned his position, the instant case being a petition for certiorari where
questions of fact are not entertained. 24 Whether a worker has abandoned his employment
is essentially a question of fact. 25 We reiterate that it is not for us "to re-examine conflicting
evidence, re-evaluate the credibility of witnesses, nor substitute the findings of fact of an
administrative tribunal which has gained expertise in its special field." 26
In concluding, we feel that it will not be amiss to point out that a petition for certiorari under
Rule 65 is intended to rectify errors of jurisdiction or grave abuse of discretion. As we held in
Philippine Advertising Counselors, Inc. v. National Labor Relations Commission, 27
The well-settled rule confines the original and exclusive jurisdiction of the Supreme Court in
the review of decisions of the NLRC under Rule 65 of the Revised Rules of Court only to the
issue of jurisdiction or grave abuse of discretion amounting to lack of jurisdiction. Grave
abuse of discretion is committed when the judgment is rendered in a capricious, whimsical,
arbitrary or despotic manner. An abuse of discretion does not necessarily follow just because
there is a reversal by the NLRC of the decision of the Labor Arbiter. Neither does the mere
variance in the evidentiary assessment of the NLRC and that of the Labor Arbiter would, as a
matter of course, so warrant another full review of the facts. The NLRC's decision, so long as
it is not bereft of support from the records, deserves respect from the Court.
WHEREFORE, the petitions for certiorari in G.R. Nos. 125303 and 126937 are hereby
DISMISSED for lack of merit.
The Decision dated March 28, 1998 and the Resolution dated May 29, 1996 of public
respondents is AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
G.R. No. 100701
March 28, 2001
PRODUCERS BANK OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES
ASSOCIATION,1 respondents.
GONZAGA-REYES, J.:

Before us is a special civil action for certiorari with prayer for preliminary injunction and/or
restraining order seeking the nullification of (1) the decision of public respondent in NLRCNCR Case No. 02-00753-88, entitled "Producers Bank Employees Association v. Producers
Bank of the Philippines," promulgated on 30 April 1991, reversing the Labor Arbiter's
dismissal of private respondent's complaint and (2) public respondent's resolution dated 18
June 1991 denying petitioner's motion for partial reconsideration.1wphi1.nt
The present petition originated from a complaint filed by private respondent on 11 February
1988 with the Arbitration Branch, National Capital Region, National Labor Relations
Commission (NLRC), charging petitioner with diminution of benefits, non-compliance with
Wage Order No. 6 and non-payment of holiday pay. In addition, private respondent prayed
for damages.2
On 31 March 1989, Labor Arbiter Nieves V. de Castro found private respondent's claims to be
unmeritorious and dismissed its complaint.3 In a complete reversal, however, the NLRC4
granted all of private respondent's claims, except for damages.5 The dispositive portion of
the NLRC's decision provides
WHEREFORE, premises considered, the appealed Decision is, as it is hereby, SET ASIDE and
another one issued ordering respondent- appellee to pay complainant-appellant:
1. The unpaid bonus (mid-year and Christmas bonus) and 13th month pay;
2. Wage differentials under Wage Order No. 6 for November 1, 1984 and the corresponding
adjustment thereof; and
3. Holiday pay under Article 94 of the Labor Code, but not to exceed three (3) years.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.
Petition filed a Motion for Partial Reconsideration, which was denied by the NLRC in a
Resolution issued on 18 June 1991. Hence, recourse to this Court.
Petitioner contends that the NLRC gravely abused its discretion in ruling as it did for the
succeeding reasons stated in its Petition 1. On the alleged diminution of benefits, the NLRC gravely abused its discretion when (1) it
contravened the Supreme Court decision in Traders Royal Bank v. NLRC, et al., G.R. No.
88168, promulgated on August 30, 1990, (2) its ruling is not justified by law and Art. 100 of
the Labor Code, (3) its ruling is contrary to the CBA, and (4) the so-called "company practice
invoked by it has no legal and moral bases" (p. 2, Motion for Partial Reconsideration, Annex
"H");
2. On the alleged non-compliance with Wage Order No. 6, the NLRC again gravely abused its
discretion when it patently and palpably erred in holding that it is "more inclined to adopt
the stance of appellant (private respondent UNION) in this issue since it is more in keeping
with the law and its implementing provisions and the intendment of the parties as revealed
in their CBA" without giving any reason or justification for such conclusions as the stance of
appellant (private respondent UNION) does not traverse the clear and correct finding and
conclusion of the Labor Arbiter.
Furthermore, the petitioner, under conservatorship and distressed, is exempted under Wage
Order No. 6.
Finally, the "wage differentials under Wage Order No. 6 for November 1, 1984 and the
corresponding adjustment thereof" (par. 2, dispositive portion, NLRC Decision), has
prescribed (p. 12, Motion for Partial Reconsideration, Annex "H").
3. On the alleged non-payment of legal holiday pay, the NLRC again gravely abused its
discretion when it patently and palpably erred in approving and adopting "the position of
appellant (private respondent UNION)" without giving any reason or justification therefor
which position does not squarely traverse or refute the Labor Arbiter's correct finding and
ruling (p. 18, Motion for Partial Reconsideration, Annex "H").6
On 29 July 1991, the Court granted petitioner's prayer for a temporary restraining order
enjoining respondents from executing the 30 April 1991 Decision and 18 June 1991
Resolution of the NLRC.7

Coming now to the merits of the petition, the Court shall discuss the issues ad seriatim.
Bonuses
As to the bonuses, private respondent declared in its position papers filed with the NLRC that

1. Producers Bank of the Philippines, a banking institution, has been providing several
benefits to its employees since 1971 when it started its operation. Among the benefits it had
been regularly giving is a mid-year bonus equivalent to an employee's one-month basic pay
and a Christmas bonus equivalent to an employee's one whole month salary (basic pay plus
allowance);
2. When P.D. 851, the law granting a 13th month pay, took effect, the basic pay previously
being given as part of the Christmas bonus was applied as compliance to it (P.D. 851), the
allowances remained as Christmas bonus;
3. From 1981 up to 1983, the bank continued giving one month basic pay as mid-year
bonus, one month basic pay as 13th month pay but the Christmas bonus was no longer
based on the allowance but on the basic pay of the employees which is higher;
4. In the early part of 1984, the bank was placed under conservatorship but it still provided
the traditional mid-year bonus;
5. By virtue of an alleged Monetary Board Resolution No. 1566, bank only gave a one-half
(1/2) month basic pay as compliance of the 13th month pay and none for the Christmas
bonus. In a tabular form, here are the bank's violations:
YEAR
MID- YEAR BONUS
CHRISTMAS BONUS
13TH MO. PAY
previous years
one mo. basic
one mo. basic
one mo. Basic
1984
[one mo. basic]
-noneone-half mo. Basic
1985
one-half mo. basic
-noneone-half mo. Basic
1986
one-half mo. basic
one-half mo. basic
one mo. Basic
1987
one-half mo. basic

one-half mo. basic

one mo. basic
Private respondent argues that the mid-year and Christmas bonuses, by reason of their
having been given for thirteen consecutive years, have ripened into a vested right and, as
such, can no longer be unilaterally withdrawn by petitioner without violating Article 100 of
Presidential Decree No. 4429 which prohibits the diminution or elimination of benefits
already being enjoyed by the employees. Although private respondent concedes that the
grant of a bonus is discretionary on the part of the employer, it argues that, by reason of its
long and regular concession, it may become part of the employee's regular compensation.10
On the other hand, petitioner asserts that it cannot be compelled to pay the alleged bonus
differentials due to its depressed financial condition, as evidenced by the fact that in 1984 it
was placed under conservatorship by the Monetary Board. According to petitioner, it
sustained losses in the millions of pesos from 1984 to 1988, an assertion which was affirmed
by the labor arbiter. Moreover, petitioner points out that the collective bargaining agreement
of the parties does not provide for the payment of any mid-year or Christmas bonus. On the
contrary, section 4 of the collective bargaining agreement states that
Acts of Grace. Any other benefits or privileges which are not expressly provided in this
Agreement, even if now accorded or hereafter accorded to the employees, shall be deemed
purely acts of grace dependent upon the sole judgment and discretion of the BANK to grant,
modify or withdraw .11
A bonus is an amount granted and paid to an employee for his industry and loyalty which
contributed to the success of the employer's business and made possible the realization of
profits. It is an act of generosity granted by an enlightened employer to spur the employee
to greater efforts for the success of the business and realization of bigger profits.12 The
granting of a bonus is a management prerogative, something given in addition to what is
ordinarily received by or strictly due the recipient.13 Thus, a bonus is not a demandable and
enforceable obligation,14 except when it is made part of the wage, salary or compensation
of the employee.15
However, an employer cannot be forced to distribute bonuses which it can no longer afford
to pay. To hold otherwise would be to penalize the employer for his past generosity. Thus, in
Traders Royal Bank v. NLRC,16 we held that It is clear x x x that the petitioner may not be obliged to pay bonuses to its employees. The
matter of giving them bonuses over and above their lawful salaries and allowances is
entirely dependent on the profits, if any, realized by the Bank from its operations during the
past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In
1986, the income of the Bank was only 20.2 million pesos, but the Bank still gave out the
usual two (2) months basic mid-year and two months gross year-end bonuses. The petitioner
pointed out, however, that the Bank weakened considerably after 1986 on account of
political developments in the country. Suspected to be a Marcos-owned or controlled bank, it
was placed under sequestration by the present administration and is now managed by the
Presidential Commission on Good Government (PCGG).
In light of these submissions of the petitioner, the contention of the Union that the granting
of bonuses to the employees had ripened into a company practice that may not be adjusted
to the prevailing financial condition of the Bank has no legal and moral bases. Its fiscal
condition having declined, the Bank may not be forced to distribute bonuses which it can no
longer afford to pay and, in effect, be penalized for its past generosity to its employees. Private respondent's contention, that the decrease in the mid-year and year-end bonuses
constituted a diminution of the employees' salaries, is not correct, for bonuses are not part
of labor standards in the same class as salaries, cost of living allowances, holiday pay, and
leave benefits, which are provided by the Labor Code.
This doctrine was reiterated in the more recent case of Manila Banking Corporation v. NLR17
wherein the Court made the following pronouncements
By definition, a "bonus" is a gratuity or act of liberality of the giver which the recipient has
no right to demand as a matter of right. It is something given in addition to what is ordinarily
received by or strictly due the recipient. The granting of a bonus is basically a management
prerogative which cannot be forced upon the employer who may not be obliged to assume

the onerous burden of granting bonuses or other benefits aside from the employee's basic
salaries or wages, especially so if it is incapable of doing so.
xxx xxx xxx
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on
account of success in business or realization of profits. How then can an employer be made
liable to pay additional benefits in the nature of bonuses to its employees when it has been
operating on considerable net losses for a given period of time?
Records bear out that petitioner Manilabank was already in dire financial straits in the mid80's. As early as 1984, the Central Bank found that Manila bank had been suffering financial
losses. Presumably, the problems commenced even before their discovery in 1984. As
earlier chronicled, the Central Bank placed petitioner bank under comptrollership in 1984
because of liquidity problems and excessive interbank borrowings. In 1987, it was placed
under receivership and ordered to close operation. In 1988, it was ordered liquidated.
It is evident, therefore, that petitioner bank was operating on net losses from the years
1984, 1985 and 1986, thus, resulting to its eventual closure in 1987 and liquidation in 1988.
Clearly, there was no success in business or realization of profits to speak of that would
warrant the conferment of additional benefits sought by private respondents. No company
should be compelled to act liberally and confer upon its employees additional benefits over
and above those mandated by law when it is plagued by economic difficulties and financial
losses. No act of enlightened generosity and self-interest can be exacted from near empty ,
if not empty coffers.
It was established by the labor arbiter18 and the NLRC19 and admitted by both parties20
that petitioner was placed under conservatorship by the Monetary Board, pursuant to its
authority under Section 28-A of Republic Act No. 265,21 as amended by Presidential Decree
No. 72,22 which provides
Sec.28-A. Appointment of conservator. - Whenever, on the basis of a report submitted by the
appropriate supervising and examining department, the Monetary Board finds that a bank is
in a state of continuing inability or unwillingness to maintain a condition of solvency and
liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary
Board may appoint a conservator to take charge of the assets, liabilities, and the
management of that banking institution, collect all monies and debts due said bank and
exercise all powers necessary to preserve the assets of the bank, reorganize the
management thereof and restore its viability .He shall have the power to overrule or revoke
"the actions of the previous management and board of directors of the bank, any provision
of law to the contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary.1wphi1.nt
xxx xxx xxx
Under Section 28-A, the Monetary Board may place a bank under the control of a
conservator when it finds that the bank is continuously unable or unwilling to maintain a
condition of solvency or liquidity .In Central Bank of the Philippines v. Court of Appeals,23
the Court declared that the order placing petitioner herein under conservatorship had long
become final and its validity could no longer be litigated upon. Also, in the same case, the
Court found that sometime in August, 1983, some news items triggered a bank-run in
petitioner which resulted in continuous over- drawings on petitioner's demand deposit
account with the Central Bank; the over- drawings reached P143.955 million by 17 January
1984; and as of 13 February 1990, petitioner had over-drawings of up to P1.233 billion,
which evidences petitioner's continuing inability to maintain a condition of solvency and
liquidity, thus justifying the conservatorship. Our findings in the Central Bank case coincide
with petitioner's claims that it continuously suffered losses from 1984 to 1988 as follows
YEAR
NET LOSSES IN MILLIONS OF PESOS
1984
P 144.418
1985
P 144.940
1986

P 132.940
1987
P 84.182
January-February 1988
P 9.271
These losses do not include the interest expenses on the overdraft loan of the petitioner to
the Central Bank, which interest as of July 31, 1987, amounted to P610.065 Million, and
penalties on reserve deficiencies which amounted to P89.029 Million. The principal balance
of the overdraft amounted to P971.632 Million as of March 16, 1988.24
Petitioner was not only experiencing a decline in its profits, but was reeling from tremendous
losses triggered by a bank-run which began in 1983. In such a depressed financial condition,
petitioner cannot be legally compelled to continue paying the same amount of bonuses to its
employees. Thus, the conservator was justified in reducing the mid-year and Christmas
bonuses of petitioner's employees. To hold otherwise would be to defeat the reason for the
conservatorship which is to preserve the assets and restore the viability of the financially
precarious bank. Ultimately, it is to the employees' advantage that the conservatorship
achieve its purposes for the alternative would be petitioner's closure whereby employees
would lose not only their benefits, but their jobs as well.
13th Month Pay
With regard to the 13th month pay, the NLRC adopted the position taken by private
respondent and held that the conservator was not justified in diminishing or not paying the
13th month pay and that petitioner should have instead applied for an exemption, in
accordance with section 7 of Presidential Decree No. 851 (PD 851), as amended by
Presidential Decree No. 1364, but that it did not do so.25 The NLRC held that the actions of
the conservator ran counter to the provisions of PD 851.
In its position paper,26 private respondent claimed that petitioner made the following
payments to its members
YEAR
MID-YEAR BONUS
13th MONTH PAY
CHRISTMAS BONUS
1984
1 month basic
month basic
None
1985
month basic
month basic
None
1986
month basic
1 month basic
month basic

1987
month basic
1 month basic
month basic
However, in its Memorandum27 filed before this Court, private respondent revised its claims
as follows
YEAR
MID- YEAR BONUS
13th MONTH PAY
CHRISTMAS BONUS
1984
1 month basic
None
month basic
1985
month basic
None
month basic
1986
month basic
1/2 month basic
1 month basic
1987
1/2 month basic
month basic
1 month basic
1988
1/2 month basic
month basic
1 month basic
Petitioner argues that it is not covered by PD 851 since the mid-year and Christmas bonuses
it has been giving its employees from 1984 to 1988 exceeds the basic salary for one month
(except for 1985 where a total of one month basic salary was given). Hence, this amount
should be applied towards the satisfaction of the 13th month pay, pursuant to Section 2 of
PD 851.28
PD 851, which was issued by President Marcos on 16 December 1975, requires all employers
to pay their employees receiving a basic salary of not more than P 1,000 a month,29
regardless of the nature of the employment, a 13th month pay, not later than December 24
of every year.30 However, employers already paying their employees a 13th month pay or

its equivalent are not covered by the law. Under the Revised Guidelines on the
Implementation of the 13th-Month Pay Law,31 the term "equivalent" shall be construed to
include Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to
not less than 1/12 of the basic salary. The intention of the law was to grant some relief - not
to all workers - but only to those not actually paid a 13th month salary or what amounts to
it, by whatever name called. It was not envisioned that a double burden would be imposed
on the employer already paying his employees a 13th month pay or its equivalent whether
out of pure generosity or on the basis of a binding agreement. To impose upon an employer
already giving his employees the equivalent of a 13th month pay would be to penalize him
for his liberality and in all probability, the employer would react by withdrawing the bonuses
or resist further voluntary grants for fear that if and when a law is passed giving the same
benefits, his prior concessions might not be given due credit.32
In the case at bar, even assuming the truth of private respondent's claims as contained in its
position paper or Memorandum regarding the payments received by its members in the form
of 13th month pay, mid-year bonus and Christmas bonus, it is noted that, for each and every
year involved, the total amount given by petitioner would still exceed, or at least be equal
to, one month basic salary and thus, may be considered as an "equivalent" of the 13th
month pay mandated by PD 851.
Thus, petitioner is justified in crediting the mid-year bonus and Christmas bonus as part of
the 13th month pay.
Wage Order No. 6
Wage Order No.6, which came into effect on 1 November 1984, increased the statutory
minimum wage of workers, with different increases being specified for agricultural plantation
and non-agricultural workers. The bone of contention, however, involves Section 4 thereof
which reads
All wage increase in wage and/or allowance granted by employers between June 17, 1984
and the effectivity of this Order shall be credited as compliance with the minimum wage and
allowance adjustments prescribed herein, provided that where the increases are less than
the applicable amount provided in this Order, the employer shall pay the difference. Such
increases shall not include anniversary wage increases provided in collective bargaining
agreements unless the agreement expressly provide otherwise.
On 16 November 1984, the parties entered into a collective bargaining agreement providing
for the following salary adjustments
Article VIII. Section 1. Salary Adjustments. - Cognizant of the effects of, among others, price
increases of oil and other commodities on the employees' wages and earnings, and the
certainty of continued governmental or statutory actions adjusting employees' minimum
wages, earnings, allowances, bonuses and other fringe benefits, the parties have formulated
and agreed on the following highly substantial packaged increases in salary and allowance
which take into account and cover (a) any deflation in income of employees because of such
price increases and inflation and (b) the expected governmental response thereto in the
form of statutory adjustments in wages, allowances and benefits, during the next three (3)
years of this Agreement:
(i) Effective March 1, 1984 - P225.00 per month as salary increase plus P100.00 per month
as increase in allowance to employees within the bargaining unit on March 1, 1984.
(ii) Effective March 1,1985 -P125.00 per month as salary increase plus P100.00 per month as
increase in allowance to employees within the bargaining unit on March 1,1985.
(iii) Effective March 1,1986 -P125.00 per month as salary increase plus P100.00 per month
as increase in allowance to employees within the bargaining unit on March 1, 1986.
In addition, the collective bargaining agreement of the parties also included a provision on
the chargeability of such salary or allowance increases against government-ordered or
legislated income adjustments
Section 2. Pursuant to the MOLE Decision dated October 2, 1984 and Order dated October
24, 1984, the first-year salary and allowance increases shall be chargeable against
adjustments under Wage Order No. 5, which took effect on June 16, 1984. The charge ability
of the foregoing salary increases against government-ordered or legislated income
adjustments subsequent to Wage Order No. 5 shall be determined on the basis of the
provisions of such government orders or legislation.

Petitioner argues that it complied with Wage Order No. 6 because the first year salary and
allowance increase provided for under the collective bargaining agreement can be credited
against the wage and allowance increase mandated by such wage order. Under Wage Order
No. 6, all increases in wages or allowances granted by the employer between 17 June 1984
and 1 November 1984 shall be credited as compliance with the wage and allowance
adjustments prescribed therein. Petitioner asserts that although the collective bargaining
agreement was signed by the parties on 16 November. 1984, the first year salary and
allowance increase was made to take effect retroactively, beginning from 1 March 1984 until
28 February 1985. Petitioner maintains that this period encompasses the period of
creditability provided for under Wage Order No. 6 and that, therefore, the balance remaining
after applying the first year salary and allowance increase in the collective bargaining
agreement to the increase mandated by Wage Order No. 5, in the amount of P125.00, should
be made chargeable against the increase prescribed by Wage Order No. 6, and if not
sufficient, petitioner is willing to pay the difference.33
On the other hand, private respondent contends that the first year salary and allowance
increases under the collective bargaining agreement cannot be applied towards the
satisfaction of the increases prescribed by Wage Order No. 6 because the former were not
granted within the period of creditability provided for in such wage order. According to
private respondent, the significant dates with regard to the granting of the first year
increases are 9 November 1984 the date of issuance of the MOLE Resolution, 16 November
1984 - the date when the collective bargaining agreement was signed by the parties and 1
March 1984 the retroactive date of effectivity of the first year increases. Private respondent
points out that none of these dates fall within the period of creditability under Wage Order
No. 6 which is from 17 June 1984 to 1 November 1984. Thus, petitioner has not complied
with Wage Order No. 6.34
The creditability provision in Wage Order No. 6 is based on important public policy, that is,
the encouragement of employers to grant wage and allowance increases to their employees
higher than the minimum rates of increases prescribed by statute or administrative
regulation. Thus, we held in Apex Mining Company, Inc. v. NLRC35 that
[t]o obliterate the creditability provisions in the Wage Orders through interpretation or
otherwise, and to compel employers simply to add on legislated increases in salaries or
allowances without regard to what is already being paid, would be to penalize employers
who grant their workers more than the statutorily prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as securing the interest of labor is
concerned. The creditability provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for statutorily prescribed increases
in salary or allowances and pay their workers more than what the law or regulations require.
Section 1 of Article VIII of the collective bargaining agreement of the parties states that
"...the parties have formulated and agreed on the following highly substantial packaged
increases in salary and allowance which take into account and cover (a) any deflation in
income of employees because of such price increases and inflation and (b) the expected
governmental response thereto in the form of statutory adjustments in wages, allowances
and benefits, during the next three (3) years of this Agreement..." The unequivocal wording
of this provision manifests the clear intent of the parties to apply the wage and allowance
increases stipulated in the collective bargaining agreement to any statutory wage and
allowance, adjustments issued during the effectivity of such agreement from 1 March 1984
to 28 February 1987. Furthermore, contrary to private respondent's contentions, there is
nothing in the wording of Section 2 of Article VIII of the collective bargaining agreement that
would prevent petitioner from crediting the first year salary and allowance increases against
the increases prescribed by Wage Order No. 6.
It would be inconsistent with the above stated rationale underlying the creditability provision
of Wage Order No. 6 if, after applying the first year increase to Wage Order No. 5, the
balance was not made chargeable to the increases under Wage Order No. 6 for the fact
remains that petitioner actually granted wage and allowance increases sufficient to cover
the increases mandated by Wage Order No. 5 and part of the increases mandated by Wage
Order No. 6.
Holiday Pay
Article 94 of the Labor Code provides that every worker shall be paid his regular daily wage
during regular holidays36 and that the employer may require an employee to work on any
holiday but such employee shall be paid a compensation equivalent to twice his regular rate.
In this case, the Labor Arbiter found that the divisor used by petitioner in arriving at the
employees' daily rate for the purpose of computing salary-related benefits is 314.37 This
finding was not disputed by the NLRC.38 However, the divisor was reduced to 303 by virtue
of an inter-office memorandum issued on 13 August 1986, to wit

To increase the rate of overtime pay for rank and filers, we are pleased to inform that
effective August 18, 1986, the acting Conservator approved the use of 303 days as divisor in
the computation of Overtime pay. The present Policy of 314 days as divisor used in the
computation for cash conversion and determination of daily rate, among others, still remain,
Saturdays, therefore, are still considered paid rest days.
Corollarily, the Acting Conservator also approved the increase of meal allowance from
P25.00 to P30.00 for a minimum of four (4) hours of work for Saturdays.
Proceeding from the unambiguous terms of the above quoted memorandum, the Labor
Arbiter observed that the reduction of the divisor to 303 was for the sole purpose of
increasing the employees' overtime pay and was not meant to replace the use of 314 as the
divisor in the computation of the daily rate for salary-related benefits.39
Private respondent admits that, prior to 18 August 1986, petitioner used a divisor of 314 in
arriving at the daily wage rate of monthly-salaried employees. Private respondent also
concedes that the divisor was changed to 303 for purposes of computing overtime pay only.
In its Memorandum, private respondent states that
49. The facts germane to this issue are not debatable. The Memorandum Circular issued by
the Acting Conservator is clear. Prior to August 18,1986, the petitioner bank used a divisor of
314 days in arriving at the daily wage rate of the monthly-salaried employees. Effective
August 18, 1986, this was changed. It adopted the following formula:
Basic salary x 12 months = Daily Wage Rate
303 days
50. By utilizing this formula even up to the present, the conclusion is inescapable that the
petitioner bank is not actually paying its employees the regular holiday pay mandated by
law. Consequently, it is bound to pay the salary differential of its employees effective
November 1, 1974 up to the present.
xxx

xxx

xxx

54. Since it is a question of fact, the Inter-office Memorandum dated August 13,1986 (Annex
"E") provides for a divisor of 303 days in computing overtime pay. The clear import of this
document is that from the 365 days in a year, we deduct 52 rest days which gives a total of
313 days. Now, if 313 days is the number of working days of the employees then, there is a
disputable presumption that the employees are paid their holiday pay. However, this is not
so in the case at bar. The bank uses 303 days as its divisor. Hence, it is not paying its
employees their corresponding holiday pay.40
In Union of Filipro Employees v. Vivar, ]r.41 the Court held that "[t]he divisor assumes an
important role in determining whether or not holiday pay is already included in the monthly
paid employee's salary and in the computation of his daily rate." This was also our ruling in
Chartered Bank Employees Association v. Ople,42 as follows
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the employees are
so computed as to include the holiday pay provided by law. The petitioner contends
otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in
computing overtime compensation for its employees, employs a "divisor" of 251 days. The
251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10)
legal holidays form the total number of calendar days in a year. If the employees are already
paid for all non-working days, the divisor should be 365 and not 251.
Apparently, the divisor of 314 is arrived at by subtracting all Sundays from the total number
of calendar days in a year, since Saturdays are considered paid rest days, as stated in the
inter-office memorandum. Thus, the use of 314 as a divisor leads to the inevitable
conclusion that the ten legal holidays are already included therein.
We agree with the labor arbiter that the reduction of the divisor to 303 was done for the sole
purpose of increasing the employees' overtime pay, and was not meant to exclude holiday
pay from the monthly salary of petitioner's employees. In fact, it was expressly stated in the
inter-office memorandum - also referred to by private respondent in its pleadings - that the
divisor of 314 will still be used in the computation for cash conversion and in the
determination of the daily rate. Thus, based on the records of this case and the parties' own

admissions, the Court holds that petitioner has complied with the requirements of Article 94
of the Labor Code.1wphi1.nt
Damages
As to private respondent's claim for damages, the NLRC was correct in ruling that there is no
basis to support the same.
WHEREFORE, for the reasons above stated, the 30 April 1991 Decision of public respondent
in NLRC-NCR Case No. 02-00753-88, entitled "Producers Bank Employees Association v.
Producers Bank of the Philippines," and its 18 June 1991 - Resolution issued in the same case
are hereby SET ASIDE, with the exception of public respondent's ruling on damages.
SO ORDERED.
G.R. No. 180866
March 2, 2010
LEPANTO CERAMICS, INC., Petitioner,
vs.
LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari under Rule 451 of the 1997 Rules of
Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1)
Decision2 of the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which
affirmed in toto the decision of the Voluntary Arbitrator3 granting the members of the
respondent association a Christmas Bonus in the amount of Three Thousand Pesos
(P3,000.00), or the balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year
2002, and the (2) Resolution4 of the same court dated 13 December 2007 denying
Petitioners Motion for Reconsideration.
The facts are:
Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and
operating by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy
and sell, on wholesale basis, among others, tiles, marbles, mosaics and other similar
products.5
Respondent Lepanto Ceramics Employees Association (respondent Association) is a
legitimate labor organization duly registered with the Department of Labor and Employment.
It is the sole and exclusive bargaining agent in the establishment of petitioner.6
In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the
respondent Association.7
Subsequently, in September 1999, petitioner and respondent Association entered into a
Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a
Christmas gift package/bonus to the members of the respondent Association.8 The
Christmas bonus was one of the enumerated "existing benefit, practice of traditional rights"
which "shall remain in full force and effect."
The text reads:
Section 8. All other existing benefits, practice of traditional rights consisting of Christmas
Gift package/bonus, reimbursement of transportation expenses in case of breakdown of
service vehicle and medical services and safety devices by virtue of company policies by the
UNION and employees shall remain in full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall remain in full force
and effect without change for a period of four (4) years or up to August 31, 2004 except as
to the representation aspect which shall be effective for a period of five (5) years. It shall
bind each and every employee in the bargaining unit including the present and future
officers of the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead,
petitioner gave each of the members of respondent Association Tile Redemption Certificates
equivalent to P3,000.00.9 The bonus for the year 2002 is the root of the present dispute.

Petitioner gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a cash
advance to interested employees equivalent to one (1) month salary payable in one year.10
The respondent Association objected to the P600.00 cash benefit and argued that this was in
violation of the CBA it executed with the petitioner.
The parties failed to amicably settle the dispute. The respondent Association filed a Notice of
Strike with the National Conciliation Mediation Board, Regional Branch No. IV, alleging the
violation of the CBA. The case was placed under preventive mediation. The efforts to
conciliate failed. The case was then referred to the Voluntary Arbitrator for resolution where
the Complaint was docketed as Case No. LAG-PM-12-095-02.
In support of its claim, respondent Association insisted that it has been the traditional
practice of the company to grant its members Christmas bonuses during the end of the
calendar year, each in the amount of P3,000.00 as an expression of gratitude to the
employees for their participation in the companys continued existence in the market. The
bonus was either in cash or in the form of company tiles. In 2002, in a speech during the
Christmas celebration, one of the companys top executives assured the employees of said
bonus. However, the Human Resources Development Manager informed them that the
traditional bonus would not be given as the companys earnings were intended for the
payment of its bank loans. Respondent Association argued that this was in violation of their
CBA.
The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had
no basis as the same was not a demandable and enforceable obligation. It argued that the
giving of extra compensation was based on the companys available resources for a given
year and the workers are not entitled to a bonus if the company does not make profits.
Petitioner adverted to the fact that it was debt-ridden having incurred net losses for the
years 2001 and 2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the
companys accumulated losses amounted to over P2.7 billion. Petitioner further argued that
the grant of a one (1) month salary cash advance was not meant to take the place of a
bonus but was meant to show the companys sincere desire to help its employees despite its
precarious financial condition. Petitioner also averred that the CBA provision on a "Christmas
gift/bonus" refers to alternative benefits. Finally, petitioner emphasized that even if the CBA
contained an unconditional obligation to grant the bonus to the respondent Association, the
present difficult economic times had already legally released it therefrom pursuant to Article
1267 of the Civil Code.11
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is
bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the
bonus was given prior to the effectivity of the CBA between the parties and that the financial
losses of the company is not a sufficient reason to exempt it from granting the same. It
stressed that the CBA is a binding contract and constitutes the law between the parties. The
Voluntary Arbitrator further expounded that since the employees had already been given
P600.00 cash bonus, the same should be deducted from the claimed amount of P3,000.00,
thus leaving a balance of P2,400.00. The dispositive portion of the decision states, viz:
Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of
the complainant union LCEA their respective Christmas bonus in the amount of three
thousand (P3,000.00) pesos for the year 2002 less the P600.00 already given or a balance of
P2,400.00.12
Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an
Order dated 27 June 2003, in this wise:
The Motion for Reconsideration filed by the respondent in the above-entitled case which was
received by the Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule
XIX on Grievance Machinery and Voluntary Arbitration; Amending The Implementing Rules of
Book V of the Labor Code of the Philippines; to wit:
Section 7. Finality of Award/Decision The decision, order, resolution or award of the
voluntary arbitrator or panel of voluntary arbitrators shall be final and executory after ten
(10) calendar days from receipt of the copy of the award or decision by the parties and it
shall not be subject of a motion for reconsideration.13
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule
65 of the Rules of Court docketed as CA-G.R. SP No. 78334.14 As adverted to earlier, the
Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court
also denied petitioners motion for reconsideration.
In affirming respondent Associations right to the Christmas bonus, the Court of Appeals
held:

In the case at bar, it is indubitable that petitioner offered private respondent a Christmas
bonus/gift in 1998 or before the execution of the 1999 CBA which incorporated the said
benefit as a traditional right of the employees. Hence, the grant of said bonus to private
respondent can be deemed a practice as the same has not been given only in the 1999 CBA.
Apparently, this is the reason why petitioner specifically recognized the grant of a Christmas
bonus/gift as a practice or tradition as stated in the CBA. x x x.
xxxx
Evidently, the argument of petitioner that the giving of a Christmas bonus is a management
prerogative holds no water. There were no conditions specified in the CBA for the grant of
said benefit contrary to the claim of petitioner that the same is justified only when there are
profits earned by the company. As can be gleaned from the CBA, the payment of Christmas
bonus was not contingent upon the realization of profits. It does not state that if the
company derives no profits, there are no bonuses to be given to the employees. In fine, the
payment thereof was not related to the profitability of business operations.
Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay,
has further been giving its employees an additional Christmas bonus at the end of the year
since 1998 or before the effectivity of the CBA in September 1999. Clearly, the grant of
Christmas bonus from 1998 up to 2001, which brought about the filing of the complaint for
alleged non-payment of the 2002 Christmas bonus does not involve the exercise of
management prerogative as the same was given continuously on or about Christmas time
pursuant to the CBA. Consequently, the giving of said bonus can no longer be withdrawn by
the petitioner as this would amount to a diminution of the employees existing benefits.15
Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether
or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the
petitioner is obliged to give the members of the respondent Association a Christmas bonus
in the amount of P3,000.00 in 2002.16
We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. 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, and bind us when
supported by substantial evidence. This is the rule particularly where the findings of both the
arbitrator and the Court of Appeals coincide.17
As a general proposition, an arbitrator is confined to the interpretation and application of the
CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate
only in so far as it draws its essence from the CBA.18 That was done in this case.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in
addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and
paid to an employee for his industry and loyalty which contributed to the success of the
employers business and made possible the realization of profits.19
A bonus is also granted by an enlightened employer to spur the employee to greater efforts
for the success of the business and realization of bigger profits.20
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be
enforceable, it must have been promised by the employer and expressly agreed upon by the
parties.21 Given that the bonus in this case is integrated in the CBA, the same partakes the
nature of a demandable obligation. Verily, by virtue of its incorporation in the CBA, the
Christmas bonus due to respondent Association has become more than just an act of
generosity on the part of the petitioner but a contractual obligation it has undertaken.22
A CBA refers to a 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. As in all other contracts, the parties to 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.23
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the
parties and they are obliged to comply with its provisions.24 This principle stands strong and
true in the case at bar.1avvphi1
A reading of the provision of the CBA reveals that the same provides for the giving of a
"Christmas gift package/bonus" without qualification. Terse and clear, the said provision did
not state that the Christmas package shall be made to depend on the petitioners financial

standing. The records are also bereft of any showing that the petitioner made it clear during
CBA negotiations that the bonus was dependent on any condition. Indeed, if the petitioner
and respondent Association intended that the P3,000.00 bonus would be dependent on the
company earnings, such intention should have been expressed in the CBA.
It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that
"the 1997 financial crisis in the Asian region adversely affected the Philippine economy."25
From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that petitioner was very much aware of the imminence
and possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner
suffered a net loss of P14,347,548.00.26 Yet it gave a P3,000.00 bonus to the members of
the respondent Association. In 1999, when petitioners very own financial statement
reflected that "the positive developments in the economy have yet to favorably affect the
operations of the company,"27 and reported a loss of P346,025,733.00,28 it entered into the
CBA with the respondent Association whereby it contracted to grant a Christmas gift
package/bonus to the latter. Petitioner supposedly continued to incur losses in the years
200029 and 2001. Still and all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give P3,000.00 each to the members of the respondent
Association in the years 1999, 2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under
the CBA. The rule is settled that any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the employer. The
principle of non-diminution of benefits is founded on the constitutional mandate to protect
the rights of workers and to promote their welfare and to afford labor full protection.30
Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or duress, it
is presumed that it entered into the CBA voluntarily and had full knowledge of the contents
thereof and was aware of its commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA provision may
further deplete petitioners resources. Petitioners remedy though lies not in the Courts
invalidation of the provision but in the parties clarification of the same in subsequent CBA
negotiations. Article 253 of the Labor Code is relevant:
Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. When there is a collective bargaining agreement, the duty to bargain collectively shall also
mean that neither party shall terminate nor modify such agreement during its lifetime.
However, either party can serve a written notice to terminate or modify the agreement at
least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of the
existing agreement during the sixty (60)-day period and/or until a new agreement is reached
by the parties.
WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of
the Court of Appeals dated 5 April 2006 and the Resolution of the same court dated 13
December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.
SO ORDERED.
G.R. No. 142824
December 19, 2001
INTERPHIL LABORATORIES EMPLOYEES UNION-FFW, ENRICO GONZALES and MA.
THERESA MONTEJO, petitioners,
vs.
INTERPHIL LABORATORIES, INC., AND HONORABLE LEONARDO A. QUISUMBING,
SECRETARY OF LABOR AND EMPLOYMENT, respondents.
KAPUNAN, J.:
Assailed in this petition for review on certiorari are the decision, promulgated on 29
December 1999, and the resolution, promulgated on 05 April 2000, of the Court of Appeals
in CA-G.R. SP No. 50978.
Culled from the questioned decision, the facts of the case are as follows:
Interphil Laboratories Employees Union-FFW is the sole and exclusive bargaining agent of
the rank-and-file employees of Interphil Laboratories, Inc., a company engaged in the
business of manufacturing and packaging pharmaceutical products. They had a Collective
Bargaining Agreement (CBA) effective from 01 August 1990 to 31 July 1993.

Prior to the expiration of the CBA or sometime in February 1993, Allesandro G. Salazar,1
Vice-President-Human Resources Department of respondent company, was approached by
Nestor Ocampo, the union president, and Hernando Clemente, a union director. The two
union officers inquired about the stand of the company regarding the duration of the CBA
which was set to expire in a few months. Salazar told the union officers that the matter could
be best discussed during the formal negotiations which would start soon.
In March 1993, Ocampo and Clemente again approached Salazar. They inquired once more
about the CBA status and received the same reply from Salazar. In April 1993, Ocampo
requested for a meeting to discuss the duration and effectivity of the CBA. Salazar acceded
and a meeting was held on 15 April 1993 where the union officers asked whether Salazar
would be amenable to make the new CBA effective for two (2) years, starting 01 August
1993. Salazar, however, declared that it would still be premature to discuss the matter and
that the company could not make a decision at the moment. The very next day, or on 16
April 1993, all the rank-and-file employees of the company refused to follow their regular
two-shift work schedule of from 6:00 a.m. to 6:00 p.m., and from 6:00 p.m. to 6:00 a.m. At
2:00 p.m. and 2:00 a.m., respectively, the employees stopped working and left their
workplace without sealing the containers and securing the raw materials they were working
on. When Salazar inquired about the reason for their refusal to follow their normal work
schedule, the employees told him to "ask the union officers." To minimize the damage the
overtime boycott was causing the company, Salazar immediately asked for a meeting with
the union officers. In the meeting, Enrico Gonzales, a union director, told Salazar that the
employees would only return to their normal work schedule if the company would agree to
their demands as to the effectivity and duration of the new CBA. Salazar again told the union
officers that the matter could be better discussed during the formal renegotiations of the
CBA. Since the union was apparently unsatisfied with the answer of the company, the
overtime boycott continued. In addition, the employees started to engage in a work
slowdown campaign during the time they were working, thus substantially delaying the
production of the company.2
On 14 May 1993, petitioner union submitted with respondent company its CBA proposal, and
the latter filed its counter-proposal.
On 03 September 1993, respondent company filed with the National Labor Relations
Commission (NLRC) a petition to declare illegal petitioner union's "overtime boycott" and
"work slowdown" which, according to respondent company, amounted to illegal strike. The
case, docketed NLRC-NCR Case No. 00-09-05529-93, was assigned to Labor Arbiter Manuel
R. Caday.
On 22 October 1993, respondent company filed with the National Conciliation and Mediation
Board (NCMB) an urgent request for preventive mediation aimed to help the parties in their
CBA negotiations.3 The parties, however, failed to arrive at an agreement and on 15
November 1993, respondent company filed with the Office of the Secretary of Labor and
Employment a petition for assumption of jurisdiction.
On 24 January 1994, petitioner union filed with the NCMB a Notice of Strike citing unfair
labor practice allegedly committed by respondent company. On 12 February 1994, the union
staged a strike.
On 14 February 1994, Secretary of Labor Nieves Confesor issued an assumption order4 over
the labor dispute. On 02 March 1994, Secretary Confesor issued an order directing
respondent company to "immediately accept all striking workers, including the fifty-three
(53) terminated union officers, shop stewards and union members back to work under the
same terms and conditions prevailing prior to the strike, and to pay all the unpaid accrued
year end benefits of its employees in 1993."5 On the other hand, petitioner union was
directed to "strictly and immediately comply with the return-to-work orders issued by (the)
Office x x x6 The same order pronounced that "(a)ll pending cases which are direct offshoots
of the instant labor dispute are hereby subsumed herewith."7
In the i, the case before Labor Arbiter Caday continued. On 16 March 1994, petitioner union
filed an "Urgent Manifestation and Motion to Consolidate the Instant Case and to Suspend
Proceedings" seeking the consolidation of the case with the labor dispute pending before the
Secretary of Labor. Despite objection by respondent company, Labor Arbiter Caday held in
abeyance the proceedings before him. However, on 06 June 1994, Acting Labor Secretary
Jose S. Brillantes, after finding that the issues raised would require a formal hearing and the
presentation of evidentiary matters, directed Labor Arbiters Caday and M. Sol del Rosario to
proceed with the hearing of the cases before them and to thereafter submit their report and
recommendation to his office.

On 05 September 1995, Labor Arbiter Caday submitted his recommendation to the then
Secretary of Labor Leonardo A. Quisumbing.8 Then Secretary Quisumbing approved and
adopted the report in his Order, dated 13 August 1997, hence:
WHEREFORE, finding the said Report of Labor Arbiter Manuel R. Caday to be supported by
substantial evidence, this Office hereby RESOLVES to APPROVE and ADOPT the same as the
decision in this case, and judgment is hereby rendered:
(1)

Declaring the 'overtime boycott' and 'work slowdown' as illegal strike;

(2)

Declaring the respondent union officers namely:

Nestor Ocampo
President
Carmelo Santos
Vice-President
Marites Montejo
Treasurer/Board Member
Rico Gonzales
Auditor
Rod Abuan
Director
Segundino Flores
Director
Hernando Clemente
Director
who spearheaded and led the overtime boycott and work slowdown, to have lost their
employment status; and
(3)
Finding the respondents guilty of unfair labor practice for violating the then existing
CBA which prohibits the union or any employee during the existence of the CBA from staging
a strike or engaging in slowdown or interruption of work and ordering them to cease and
desist from further committing the aforesaid illegal acts.
Petitioner union moved for the reconsideration of the order but its motion was denied. The
union went to the Court of Appeals via a petition for certiorari. In the now questioned
decision promulgated on 29 December 1999, the appellate court dismissed the petition. The
union's motion for reconsideration was likewise denied.
Hence, the present recourse where petitioner alleged:
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS, LIKE THE HONORABLE PUBLIC
RESPONDENT IN THE PROCEEDINGS BELOW, COMMITTED GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION WHEN IT COMPLETELY
DISREGARDED "PAROL EVIDENCE RULE" IN THE EVALUATION AND APPRECIATION OF
EVIDENCE PROFERRED BY THE PARTIES.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION, WHEN IT DID NOT
DECLARE PRIVATE RESPONDENT'S ACT OF EXTENDING SUBSTANTIAL SEPARATION PACKAGE
TO ALMOST ALL INVOLVED OFFICERS OF PETITIONER UNION, DURING THE PENDENCY OF THE
CASE, AS TANTAMOUNT TO CONDONATION, IF INDEED, THERE WAS ANY MISDEED
COMMITTED.
THE HONORABLE FIFTH DIVISION OF THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION WHEN IT HELD THAT
THE SECRETARY OF LABOR AND EMPLOYMENT HAS JURISDICTION OVER A CASE (A PETITION

TO DECLARE STRIKE ILLEGAL) WHICH HAD LONG BEEN FILED AND PENDING BEFORE THE
LABOR ARBITER.9
We sustain the questioned decision.
On the matter of the authority and jurisdiction of the Secretary of Labor and Employment to
rule on the illegal strike committed by petitioner union, it is undisputed that the petition to
declare the strike illegal before Labor Arbiter Caday was filed long before the Secretary of
Labor and Employment issued the assumption order on 14 February 1994. However, it
cannot be denied that the issues of "overtime boycott" and "work slowdown" amounting to
illegal strike before Labor Arbiter Caday are intertwined with the labor dispute before the
Labor Secretary. In fact, on 16 March 1994, petitioner union even asked Labor Arbiter Caday
to suspend the proceedings before him and consolidate the same with the case before the
Secretary of Labor. When Acting Labor Secretary Brillantes ordered Labor Arbiter Caday to
continue with the hearing of the illegal strike case, the parties acceded and participated in
the proceedings, knowing fully well that there was also a directive for Labor Arbiter Caday to
thereafter submit his report and recommendation to the Secretary. As the appellate court
pointed out, the subsequent participation of petitioner union in the continuation of the
hearing was in effect an affirmation of the jurisdiction of the Secretary of Labor.
The appellate court also correctly held that the question of the Secretary of Labor and
Employment's jurisdiction over labor and labor-related disputes was already settled in
International Pharmaceutical, Inc. vs. Hon. Secretary of Labor and Associated Labor Union
(ALU)10 where the Court declared:
In the present case, the Secretary was explicitly granted by Article 263(g) of the Labor Code
the authority to assume jurisdiction over a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, and decide the same
accordingly. Necessarily, this authority to assume jurisdiction over the said labor dispute
must include and extend to all questions and controversies arising therefrom, including
cases over which the labor arbiter has exclusive jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but contemplates, exceptions
thereto. This is evident from the opening proviso therein reading '(e)xcept as otherwise
provided under this Code . . .' Plainly, Article 263(g) of the Labor Code was meant to make
both the Secretary (or the various regional directors) and the labor arbiters share
jurisdiction, subject to certain conditions. Otherwise, the Secretary would not be able to
effectively and efficiently dispose of the primary dispute. To hold the contrary may even lead
to the absurd and undesirable result wherein the Secretary and the labor arbiter concerned
may have diametrically opposed rulings. As we have said, '(i)t is fundamental that a statute
is to be read in a manner that would breathe life into it, rather than defeat it.
In fine, the issuance of the assailed orders is within the province of the Secretary as
authorized by Article 263(g) of the Labor Code and Article 217(a) and (5) of the same Code,
taken conjointly and rationally construed to subserve the objective of the jurisdiction vested
in the Secretary.11
Anent the alleged misappreciation of the evidence proffered by the parties, it is axiomatic
that the factual findings of the Labor Arbiter, when sufficiently supported by the evidence on
record, must be accorded due respect by the Supreme Court.12 Here, the report and
recommendation of Labor Arbiter Caday was not only adopted by then Secretary of Labor
Quisumbing but was likewise affirmed by the Court of Appeals. We see no reason to depart
from their findings.
Petitioner union maintained that the Labor Arbiter and the appellate court disregarded the
"parol evidence rule"13 when they upheld the allegation of respondent company that the
work schedule of its employees was from 6:00 a.m. to 6:00 p.m. and from 6:00 p.m. to 6:00
am. According to petitioner union, the provisions of their CBA on working hours clearly
stated that the normal working hours were "from 7:30 a.m. to 4:30 p.m."14 Petitioner union
underscored that the regular work hours for the company was only eight (8) hours. It further
contended that the Labor Arbiter as well as the Court of Appeals should not have admitted
any other evidence contrary to what was stated in the CBA.
The reliance on the parol evidence rule is misplaced. In labor cases pending before the
Commission or the Labor Arbiter, the rules of evidence prevailing in courts of law or equity
are not controlling.15 Rules of procedure and evidence are not applied in a very rigid and
technical sense in labor cases.16 Hence, the Labor Arbiter is not precluded from accepting
and evaluating evidence other than, and even contrary to, what is stated in the CBA.
In any event, the parties stipulated:

Section 1.
Regular Working Hours A normal workday shall consist of not more than
eight (8) hours. The regular working hours for the Company shall be from 7:30 A.M. to 4:30
P.M. The schedule of shift work shall be maintained; however the company may change the
prevailing work time at its discretion, should such change be necessary in the operations of
the Company. All employees shall observe such rules as have been laid down by the
company for the purpose of effecting control over working hours.17
It is evident from the foregoing provision that the working hours may be changed, at the
discretion of the company, should such change be necessary for its operations, and that the
employees shall observe such rules as have been laid down by the company. In the case
before us, Labor Arbiter Caday found that respondent company had to adopt a continuous
24-hour work daily schedule by reason of the nature of its business and the demands of its
clients. It was established that the employees adhered to the said work schedule since 1988.
The employees are deemed to have waived the eight-hour schedule since they followed,
without any question or complaint, the two-shift schedule while their CBA was still in force
and even prior thereto. The two-shift schedule effectively changed the working hours
stipulated in the CBA. As the employees assented by practice to this arrangement, they
cannot now be heard to claim that the overtime boycott is justified because they were not
obliged to work beyond eight hours.
As Labor Arbiter Caday elucidated in his report:
Respondents' attempt to deny the existence of such regular overtime schedule is belied by
their own awareness of the existence of the regular overtime schedule of 6:00 A.M. to 6:00
P.M. and 6:00 P.M. to 6:00 A.M. of the following day that has been going on since 1988. Proof
of this is the case undisputedly filed by the union for and in behalf of its members, wherein it
is claimed that the company has not been computing correctly the night premium and
overtime pay for work rendered between 2:00 A.M. and 6:00 A.M. of the 6:00 P.M. to 6:00
A.M. shift. (tsn pp. 9-10, testimony of Alessandro G. Salazar during hearing on August 9,
1994). In fact, the union Vice-President Carmelo C. Santos, demanded that the company
make a recomputation of the overtime records of the employees from 1987 (Exh. "P"). Even
their own witness, union Director Enrico C. Gonzales, testified that when in 1992 he was still
a Quality Control Inspector at the Sucat Plant of the company, his schedule was sometime at
6:00 A.M. to 6:00 P.M., sometime at 6:00 A.M. to 2:00 P.M., at 2:00 P.M. to 10:00 P.M. and
sometime at 6:00 P.M. to 6:00 A.M., and when on the 6 to 6 shifts, he received the
commensurate pay (t.s.n. pp. 7-9, hearing of January 10, 1994). Likewise, while in the
overtime permits, dated March 1, 6, 8, 9 to 12, 1993, which were passed around daily for the
employees to sign, his name appeared but without his signatures, he however had rendered
overtime during those dates and was paid because unlike in other departments, it has
become a habit to them to sign the overtime schedule weekly (t.s.n. pp. 26-31, hearing of
January 10, 1994). The awareness of the respondent union, its officers and members about
the existence of the regular overtime schedule of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to
6:00 A.M. of the following day will be further shown in the discussion of the second issue.18
As to the second issue of whether or not the respondents have engaged in "overtime
boycott" and "work slowdown" from April 16, 1993 up to March 7, 1994, both amounting to
illegal strike, the evidence presented is equally crystal clear that the "overtime boycott" and
"work slowdown" committed by the respondents amounted to illegal strike.
As undisputably testified to by Mr. Alessandro G. Salazar, the company's Vice-PresidentHuman Resources Department, sometime in February, 1993, he was approached by the
union President Nestor Ocampo and Union Director Hernando Clemente who asked him as to
what was the stand of the company regarding the duration of the CBA between the company
and which was set to expire on July 31, 1993. He answered that the matter could be best
discussed during the formal renegotiations which anyway was to start soon. This query was
followed up sometime in March, 1993, and his answer was the same. In early April, 1993, the
union president requested for a meeting to discuss the duration and effectivity of the CBA.
Acceding to the request, a meeting was held on April 15, 1993 wherein the union officers
asked him if he would agree to make the new CBA effective on August 1, 1993 and the term
thereof to be valid for only two (2) years. When he answered that it was still premature to
discuss the matter, the very next day, April 16, 1993, all the rank and file employees of the
company refused to follow their regular two-shift work schedule of 6:00 A.M. to 6:00 P.M. and
6:00 P.M. to 6:00 A.M., when after the 8-hours work, they abruptly stopped working at 2:00
P.M. and 2:00 A.M., respectively, leaving their place of work without sealing the containers
and securing the raw materials they were working on. When he saw the workers leaving
before the end of their shift, he asked them why and their reply was "asked (sic) the union
officers." Alarmed by the overtime boycott and the damage it was causing the company, he
requested for a meeting with the union officers. In the meeting, he asked them why the
regular work schedule was not being followed by the employees, and union Director Enrico
Gonzales, with the support of the other union officers, told him that if management would
agree to a two-year duration for the new CBA and an effectivity date of August 1, 1993, all

employees will return to the normal work schedule of two 12-hour shifts. When answered
that the management could not decide on the matter at the moment and to have it
discussed and agreed upon during the formal renegotiations, the overtime boycott
continued and the employees at the same time employed a work slowdown campaign during
working hours, causing considerable delay in the production and complaints from the
clients/customers (Exh. "O", Affidavit of Alessandro G. Salazar which formed part of his direct
testimony). This testimonial narrations of Salazar was, as earlier said, undisputed because
the respondents' counsel waived his cross examination (t.s.n. p. 15, hearing on August 9,
1994).
Aside from the foregoing undisputed testimonies of Salazar, the testimonies of other
Department Managers pointing to the union officers as the instigators of the overtime
boycott and work slowdown, the testimony of Epifanio Salumbides (Exh. "Y") a union
member at the time the concerted activities of the respondents took place, is quoted
hereunder:
"2.
Noon Pebrero 1993, ipinatawag ng Presidente ng Unyon na si Nestor Ocampo ang
lahat ng taga-maintenance ng bawat departamento upang dumalo sa isang miting. Sa
miting na iyon, sinabi ni Rod Abuan, na isang Direktor ng Unyon, na mayroon ilalabas na
memo ang Unyon na nag-uutos sa mga empleyado ng Kompanya na mag-imbento ng sarisaring dahilan para lang hindi sila makapagtrabaho ng "overtime". Sinabihan rin ako ni
Tessie Montejo na siya namang Treasurer ng Unyon na 'Manny, huwag ka na lang pumasok
sa Biyernes para hindi ka masabihan ng magtrabaho ng Sabado at Linggo' na siya namang
araw ng "overtime" ko x x x
"3.
Nakalipas ang dalawang buwan at noong unang bahagi ng Abril 1993, miniting kami
ng Shop Stewards namin na sina Ariel Abenoja, Dany Tansiongco at Vicky Baron. Sinabihan
kami na huwag ng mag-overtime pag nagbigay ng senyas ang Unyon ng "showtime."
"4.
Noong umaga ng ika-15 ng Abril 1993, nagsabi na si Danny Tansiongco ng
"showtime". Dahil dito wala ng empleyadong nag-overtime at sabay-sabay silang umalis,
maliban sa akin. Ako ay pumasok rin noong Abril 17 at 18, 1993 na Sabado at Linggo.
"5.
Noong ika-19 ng Abril 1993, ako ay ipinatawag ni Ariel Abenoja Shop Steward, sa
opisina ng Unyon. Nadatnan ko doon ang halos lahat ng opisyales ng Unyon na sina:
Nestor Ocampo
Presidente
Carmelo Santos
Bise-Presidente
Nanding Clemente
Director
TessMontejo
Chief Steward
Segundo Flores
Director
Enrico Gonzales
Auditor
Boy Alcantara
Shop Steward
Rod Abuan
Director
at marami pang iba na hindi ko na maala-ala. Pagpasok ko, ako'y pinaligiran ng mga
opisyales ng Unyon. Tinanong ako ni Rod Aguan kung bakit ako "nag-overtime" gayong
"Binigyan ka na namin ng instruction na huwag pumasok, pinilit mo pa ring pumasok."

"Management ka ba o Unyonista." Sinagot ko na ako ay Unyonista. Tinanong niya muli kung

bakit ako pumasok. Sinabi ko na wala akong maibigay na dahilan para lang hindi pumasok at
"mag-overtime." Pagkatapos nito, ako ay pinagmumura ng mga opisyales ng Unyon kaya't
ako ay madaliang umalis.
xxx

xxx

xxx

Likewise, the respondents' denial of having a hand in the work slowdown since there was no
change in the performance and work efficiency for the year 1993 as compared to the
previous year was even rebuffed by their witness Ma. Theresa Montejo, a Quality Control
Analyst. For on cross-examination, she (Montejo) admitted that she could not answer how
she was able to prepare the productivity reports from May 1993 to February 1994 because
from April 1993 up to April 1994, she was on union leave. As such, the productivity reports
she had earlier shown was not prepared by her since she had no personal knowledge of the
reports (t.s.n. pp. 32-35, hearing of February 27, 1995). Aside from this admission, the
comparison made by the respondents was of no moment, because the higher production for
the years previous to 1993 was reached when the employees regularly rendered overtime
work. But undeniably, overtime boycott and work slowdown from April 16, 1993 up to March
7, 1994 had resulted not only in financial losses to the company but also damaged its
business reputation.
Evidently, from all the foregoing, respondents' unjustified unilateral alteration of the 24-hour
work schedule thru their concerted activities of "overtime boycott" and "work slowdown"
from April 16, 1993 up to March 7, 1994, to force the petitioner company to accede to their
unreasonable demands, can be classified as a strike on an installment basis, as correctly
called by petitioner company x x x19
It is thus undisputed that members of the union by their own volition decided not to render
overtime services in April 1993.20 Petitioner union even admitted this in its Memorandum,
dated 12 April 1999, filed with the Court of Appeals, as well as in the petition before this
Court, which both stated that "(s)ometime in April 1993, members of herein petitioner, on
their own volition and in keeping with the regular working hours in the Company x x x
decided not to render overtime".21 Such admission confirmed the allegation of respondent
company that petitioner engaged in "overtime boycott" and "work slowdown" which, to use
the words of Labor Arbiter Caday, was taken as a means to coerce respondent company to
yield to its unreasonable demands.
More importantly, the "overtime boycott" or "work slowdown" by the employees constituted
a violation of their CBA, which prohibits the union or employee, during the existence of the
CBA, to stage a strike or engage in slowdown or interruption of work.22 In Ilaw at Buklod ng
Manggagawa vs. NLRC ,23 this Court ruled:
x x x (T)he concerted activity in question would still be illicit because contrary to the
workers' explicit contractual commitment "that there shall be no strikes, walkouts, stoppage
or slowdown of work, boycotts, secondary boycotts, refusal to handle any merchandise,
picketing, sit-down strikes of any kind, sympathetic or general strikes, or any other
interference with any of the operations of the COMPANY during the term of x x x (their
collective bargaining) agreement."
What has just been said makes unnecessary resolution of SMC's argument that the workers'
concerted refusal to adhere to the work schedule in force for the last several years, is a
slowdown, an inherently illegal activity essentially illegal even in the absence of a no-strike
clause in a collective bargaining contract, or statute or rule. The Court is in substantial
agreement with the petitioner's concept of a slowdown as a "strike on the installment plan;"
as a willful reduction in the rate of work by concerted action of workers for the purpose of
restricting the output of the employer, in relation to a labor dispute; as an activity by which
workers, without a complete stoppage of work, retard production or their performance of
duties and functions to compel management to grant their demands. The Court also agrees
that such a slowdown is generally condemned as inherently illicit and unjustifiable, because
while the employees "continue to work and remain at their positions and accept the wages
paid to them," they at the same time "select what part of their allotted tasks they care to
perform of their own volition or refuse openly or secretly, to the employer's damage, to do
other work;" in other words, they "work on their own terms." x x x24
Finally, the Court cannot agree with the proposition that respondent company, in extending
substantial separation package to some officers of petitioner union during the pendency of
this case, in effect, condoned the illegal acts they committed.
Respondent company correctly postured that at the time these union officers obtained their
separation benefits, they were still considered employees of the company. Hence, the
company was merely complying with its legal obligations.25 Respondent company could

have withheld these benefits pending the final resolution of this case. Yet, considering
perhaps the financial hardships experienced by its employees and the economic situation
prevailing, respondent company chose to let its employees avail of their separation benefits.
The Court views the gesture of respondent company as an act of generosity for which it
should not be punished.
WHEREFORE, the petition is DENIED DUE COURSE and the 29 December 1999 decision of
the Court of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 181357
February 2, 2010
MALAYAN EMPLOYEES ASSOCIATION-FFW and RODOLFO MANGALINO, Petitioners,
vs.
MALAYAN INSURANCE COMPANY, INC., Respondent.
DECISION
BRION, J.:
The petitioner Malayan Employees Association-FFW (union) asks us in this petition for
certiorari,1 to set aside the June 26, 2007 decision2 and the November 29, 2007 resolution3
of the Court of Appeals (CA) in CA-G.R. SP No. 80691, ruling that the suspension imposed by
the respondent Malayan Insurance Company, Inc. (company) on union member Rodolfo
Mangalino (Mangalino) is valid. Mangalino was suspended for taking a union leave without
the prior authority of his department head and despite a previous disapproval of the
requested leave.
BACKGROUND FACTS
The union is the exclusive bargaining agent of the rank-and-file employees of the company.
A provision in the unions collective bargaining agreement (CBA) with the company allows
union officials to avail of union leaves with pay for a total of "ninety-man" days per year for
the purpose of attending grievance meetings, Labor-Management Committee meetings,
annual National Labor Management Conferences, labor education programs and seminars,
and other union activities.
The company issued a rule in November 2002 requiring not only the prior notice that the
CBA expressly requires, but prior approval by the department head before the union and its
members can avail of union leaves. The rule was placed into effect in November 2002
without any objection from the union until a union officer, Mangalino, filed union leave
applications in January and February, 2004. His department head disapproved the
applications because the department was undermanned at that time.
Despite the disapproval, Mangalino proceeded to take the union leave. He said he believed
in good faith that he had complied with the existing company practice and with the
procedure set forth in the CBA. The company responded by suspending him for one week
and, thereafter, for a month, for his second offense in February 2004.
The union raised the suspensions as a grievance issue and went through all the grievance
processes, including the referral of the matter to the companys president, Yvonne
Yuchengco. After all internal remedies failed, the union went to the National Conciliation and
Mediation Board for preventive mediation. When this recourse also failed, the parties
submitted the dispute to voluntary arbitration4 on the following issues:
1. whether or not Mangalinos suspensions were valid; and
2. whether or not Mangalino should be paid backwages for the duration of the suspensions.
The Voluntary Arbitrators decided the submitted dispute on November 26, 2004,5 ruling as
follows:
WHEREFORE, in view of the foregoing, this Honorable Office adjudged the suspension of Mr.
Rodolfo Mangalinos on first availment of union leave invalid while the second suspension
valid but illicit in terms of penalty of thirty (30) days suspension. We consider the honesty of
the same as mitigating circumstances, for the Chairman of this panel of Arbitrators attested
that complainant attended labor matter in the Office of Voluntary Arbitrator last January 19,
2004 and February 5, 2004. However, it is good to note the wisdom of Justice Narvasa in the
aforecited Supreme Court Ruling of obey first before you complain.

In view thereof, this Honorable Office reduced the suspension from thirty seven (37) days to
ten (10) days only. Henceforth, the Complainant is entitled to twenty seven (27) days
backwages.
Proof of payment of backwages should be submitted to the chairman of this Panel of
Arbitrators within ten (10) days from receipt hereof.
Parties are hereby enjoined to comply in this Award as provided in the submission
Agreement.
SO ORDERED.
Notably, the decision was not unanimous. Voluntary Arbitrator dela Fuente submitted the
following dissent:6
The act of any employee that can only be interpreted to be an open and utter display of
arrogance and unconcern for the welfare of his Company thru the use of what he pretends to
believe to be an unbridled political right cannot be allowed to pass without sanction lest the
employer desires anarchy and chaos to reign in its midst.
Hence, having failed to comply with the requirements for availment of union leaves and for
going on such leave despite the express disapproval of his superior, Mr. Mangalinos two
suspensions are valid and he is not entitled to any backwages for the duration of his
suspensions.
The company appealed the decision to the CA on May 12, 2005 through a petition for review
under Rule 43 of the Rules of Court (Rules). In a decision promulgated on June 26, 2007, the
CA granted the companys petition and upheld the validity of Mangalinos suspension on the
basis of the companys prerogative to prescribe reasonable rules to regulate the use of union
leaves.7
The union moved for the reconsideration of the CA decision and received the CAs denial
(through its resolution of November 29, 2007) on December 8, 2007.8
THE PETITION
The union seeks relief from this Court against the CA decision through its Rule 65 petition for
certiorari filed on February 6, 2008.9 It alleged that the CA committed grave abuse of
discretion when, despite the clear terms of the CBA grant of union leaves, it disregarded the
evidence on record and recognized that the companys use of its management prerogative
as justification was proper.
In our Resolution of March 5, 2008, we resolved to treat the Rule 65 petition as a petition for
review on certiorari under Rule 45 of the Rules, and required the respondent company to
comment.10 After comment, we required the union to file its reply.11 Thereafter, the parties
submitted their respective memoranda.12
In its comment, the company raised both procedural and substantive objections.
It questioned the petitions compliance with the Rules, particularly the use of a petition for
certiorari under Rule 65 to question the CA decision, when the appropriate remedy is a
petition for review on certiorari under Rule 45. The company also asserted that the union
violated Section 2, Rule 45 when it failed to attach the material portions of the record as
would support its petition, such as the companys pleadings and the entirety of the
companys evidence. More importantly, it posited that the petition is barred by time
limitation and has lapsed to finality as it was filed sixty-two (62) days after the unions
receipt of the CA decision.
On the substantive aspect, the company mainly contended that the regulation of the use of
union leaves is within the companys management prerogative, and the company was
simply exercising its management prerogative when it required its employees to first obtain
the approval of either the department head or the human resource manager before making
use of any union leave. Thus, Mangalino committed acts of insubordination when he insisted
on going on leave despite the disapproval of his leave applications.
In its reply and subsequent memorandum, the union presented its justification for the
technical deficiencies the company cited (quoted below), and maintained as well that the
use of management prerogative was improper because the CBA grant of the union leave
benefit did not require prior company approval as a condition; any change in the CBA grant
requires union conformity. The union posited as well that any unilateral change in the CBA
terms violates Article 255 of the Labor Code, which guarantees the right of employees to

participate in the companys policy and decision-making processes on matters directly

affecting their interests. It argued against the company position that it had not objected to
the company rule and is now in estoppel.
THE COURTS RULING
We deny the petition for lack of merit.
The company position that the union should have filed an appeal under Rule 45 of the Rules
and not a petition for certiorari is correct. Section 1, Rule 45 of the Rules states that:
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari
from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the
Regional Trial Court or other courts whenever authorized by law, may file with the Supreme
Court a verified petition for review on certiorari. The petition shall raise only questions of law
which must be distinctly set forth. [Emphasis supplied.]
Complementing this Rule is Section 1, Rule 65 which provides that a special civil action for
certiorari under Rule 65 lies only when "there is no appeal, nor plain, speedy and adequate
remedy in the ordinary course of law." From this Rule proceeds the established
jurisprudential ruling that a petition for certiorari cannot be allowed when a party fails to
appeal a judgment despite the availability of that remedy, as certiorari is not a substitute for
a lost appeal.13
In our Resolution of March 5, 2008, we opted to liberally apply the rules and to treat the
petition as a petition for review on certiorari under Rule 45 in order to have a total view of
the merits of the petition in light of the importance of a ruling on the presented issues. The
union which did not present any justification at the outset for the petitions deficiencies,
particularly for the late filing had this to say:
9) In a resolution dated 05 March 2008, this Honorable Court resolved to treat the petition in
the above-captioned case as a petition for review on certiorari under Rule 45 of the Rules of
Civil Procedure. All along the petitioner thought that the filing of the petition for certiorari
under Rule 65 is appropriate considering that the ground raised is grave abuse of discretion
by the Honorable Court of Appeals for reversing the decision of the majority decision of the
Panel of Voluntary Arbitration in arbitrary and whimsical manner.
10) For having treated this petition under Rule 45 of the Rules of Civil Procedure, petitioner
humbly admits that delay was incurred in the filing thereof, such delay was caused by
several factors beyond control such as the transfer of handling legal assistant to another
office and the undersigned had to reassign the case for the preparation of the petition.
Furthermore, the undersigned counsel, other than being the Chief of FFW LEGAL CENTER is
also the Vice President of the Federation of Free Workers (FFW), who has to attend similar
and urgent pressing problems of local affiliates arising from the effects of contracting out
and closure of companies.
11) Considering the issue to be resolved requires only two CBA provisions (1) the
recognition of management prerogative (Section 1, Article III of the CBA), and union leave
(Section 3, Article XV of the CBA) to guide the Honorable Court reached (sic) a decision,
petitioner honestly thought that the other pleadings referred to by respondent are not
relevant.
With this kind and tenor of justification, we appear to have acted with extreme liberality in
recognizing the petition as a Rule 45 petition and in giving it due course. We cannot extend
the same liberality, however, with respect to the unions violation of the established rules on
timelines in the filing of petitions, which violations the company has kept alive by its
continuing objection. While we can be liberal in considering the mode of review of lower
court decisions (and even in the contents of the petition which the company insists are
deficient), we cannot do the same with respect to the time requirements that govern the
finality of these decisions. A final judgment can no longer be disturbed under the combined
application of the principles of immutability of final judgments14 and res judicata,15 subject
only to very exceptional circumstances not at all present in this case.16
Under Rule 45, a petition for review on certiorari should be filed within 15 days from notice
of judgment, extendible in meritorious cases for a total of another 30 days.17 Given that a
Rule 45 petition is appropriate in the present case, the period of 60 days after notice of
judgment is way past the deadline allowed, so that the CA decision had lapsed to finality by
the time the petition with us was filed. This reason alone even without considering the
companys other technical objection based on the unions failure to attach relevant
documents in support of the petition amply supports the denial of the petition.

The lack of merit of the petition likewise precludes us from resolving it in the unions favor. In
short, we see no reversible error in the CAs ruling.
While it is true that the union and its members have been granted union leave privileges
under the CBA, the grant cannot be considered separately from the other provisions of the
CBA, particularly the provision on management prerogatives where the CBA reserved for the
company the full and complete authority in managing and running its business.18 We see
nothing in the wordings of the union leave provision that removes from the company the
right to prescribe reasonable rules and regulations to govern the manner of availing of union
leaves, particularly the prerogative to require prior approval. Precisely, prior notice is
expressly required under the CBA so that the company can appropriately respond to the
request for leave. In this sense, the rule requiring prior approval only made express what is
implied in the terms of the CBA.
In any event, any doubt in resolving any interpretative conflict is settled by subsequent
developments in the course of the parties implementation of the CBA, specifically, by the
establishment of the company regulation in November 2002 requiring prior approval before
the union leave can be used. The union accepted this regulation without objection since its
promulgation (or more than a year before the present dispute arose), and the rule on its face
is not unreasonable, oppressive, nor violative of CBA terms. Ample evidence exists in the
records indicating the unions acquiescence to the rule.19 Notably, no letter from the union
complaining about the unilateral change in policy or any request for a meeting to discuss
this policy appears on record. The union and its members have willingly applied for approval
as the rule requires.20 Even Mangalino himself, in the past, had filed applications for union
leave with his department manager, and willingly complied with the disapproval without
protest of any kind.21 Thus, when Mangalino asserted his right to take a leave without prior
approval, the requirement for prior approval was already in place and established, and could
no longer be removed except with the companys consent or by negotiation and express
agreement in future CBAs.
The "prior approval" policy fully supported the validity of the suspensions the company
imposed on Mangalino. We point out additionally that as an employee, Mangalino had the
clear obligation to comply with the management disapproval of his requested leave while at
the same time registering his objection to the company regulation and action. That he still
went on leave, in open disregard of his superiors orders, rendered Mangalino open to the
charge of insubordination, separately from his absence without official leave.22 This charge,
of course, can no longer prosper even if laid today, given the lapse of time that has since
transpired.
In light of the petitions procedural infirmities, particularly its late filing that rendered the CA
decision final, and the petitions lack of substantive merit, denial of the petition necessarily
follows.
WHEREFORE, premises considered, we DENY the petition for lack of merit. Costs against the
petitioners.
SO ORDERED.
G.R. No. 124382
August 16, 1999
PASTOR DIONISIO V. AUSTRIA, petitioner,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY,
CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY
ADVENTISTS, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L.
ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR
GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA,
MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO
KARA-AN, and MR. ELEUTERIO LOBITANA, respondents.
KAPUNAN, J.:
Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the
Resolution1 of public respondent National Labor Relations Commission (the "NLRC"),
rendered on 23 January 1996, in NLRC Case No. V-0120-93, entitled "Pastor Dionisio V.
Austria vs. Central Philippine Union Mission Corporation of Seventh Day Adventists, et al.,"
which dismissed the case for illegal dismissal filed by the petitioner against private
respondents for lack of jurisdiction.1wphi1.nt
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day
Adventists (hereinafter referred to as the "SDA") is a religious corporation duly organized

and existing under Philippine law and is represented in this case by the other private
respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the SDA until
31 October 1991, when his services were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty
eight (28) years from 1963 to 1991.2 He began his work with the SDA on 15 July 1963 as a
literature evangelist, selling literature of the SDA over the island of Negros. From then on,
petitioner worked his way up the ladder and got promoted several times. In January, 1968,
petitioner became the Assistant Publishing Director in the West Visayan Mission of the SDA.
In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering
the island of Panay, and the provinces of Romblon and Guimaras. Petitioner held the same
position up to 1988. Finally, in 1989, petitioner was promoted as District Pastor of the Negros
Mission of the SDA and was assigned at Sagay, Balintawak and Toboso, Negros Occidental,
with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was transferred
to Bacolod City. He held the position of district pastor until his services were terminated on
31 October 1991.
On various occasions from August up to October, 1991, petitioner received several
communications3 from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him
to admit accountability and responsibility for the church tithes and offerings collected by his
wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the
same to the Negros Mission.
In his written explanation dated 11 October 1991,4 petitioner reasoned out that he should
not be made accountable for the unremitted collections since it was private respondents
Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes
and offerings since he was very sick to do the collecting at that time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor
Buhat, the president of the Negros Mission. During said call, petitioner tried to persuade
Pastor Buhat to convene the Executive Committee for the purpose of settling the dispute
between him and the private respondent, Pastor David Rodrigo. The dispute between Pastor
Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny
Diamada, to collect from Pastor Rodrigo the unpaid balance for the repair of the latter's
motor vehicle which he failed to pay to Diamada.5 Due to the assistance of petitioner in
collecting Pastor Rodrigo's debt, the latter harbored ill-feelings against petitioner. When
news reached petitioner that Pastor Rodrigo was about to file a complaint against him with
the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date
abovementioned and asked the latter to convene the Executive Committee. Pastor Buhat
denied the request of petitioner since some committee members were out of town and there
was no quorum. Thereafter, the two exchanged heated arguments. Petitioner then left the
office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying,
"Pastor daw inisog na ina iya (Pador you are talking tough)."6 Irked by such remark,
petitioner returned to the office of Pastor Buhat, and tried to overturn the latter's table,
though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attach case of
Pastor Buhat on the table, scattered the books in his office, and threw the phone.7
Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montao were around
and they pacified both Pastor Buhat and petitioner.
On 17 October 1991, petitioner received a letter8 inviting him and his wife to attend the
Executive Committee meeting at the Negros Mission Conference Room on 21 October 1991,
at nine in the morning. To be discussed in the meeting were the non-remittance of church
collection and the events that transpired on 16 October 1991. A fact-finding committee was
created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding
committee conducted an investigation of petitioner. Sensing that the result of the
investigation might be one-sided, petitioner immediately wrote Pastor Rueben Moralde,
president of the SDA and chairman of the fact-finding committee, requesting that certain
members of the fact-finding committee be excluded in the investigation and resolution of
the case.9 Out of the six (6) members requested to inhibit themselves from the investigation
and decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor
Rodrigo. Subsequently, on 29 October 1991, petitioner received a letter of dismissal10 citing
misappropriation of denominational funds, willful breach of trust, serious misconduct, gross
and habitual neglect of duties, and commission of an offense against the person of
employer's duly authorized representative, as grounds for the termination of his services.
Reacting against the adverse decision of the SDA, petitioner filed a complaint11 on 14
November 1991, before the Labor Arbiter for illegal dismissal against the SDA and its officers
and prayed for reinstatement with backwages and benefits, moral and exemplary damages
and other labor law benefits.

On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of

petitioner, the dispositive portion of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION
CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents
herein, are hereby ordered to immediately reinstate complainant Pastor Dionisio Austria to
his former position as Pastor of Brgy. Taculing, Progreso and Banago, Bacolod City, without
loss of seniority and other rights and backwages in the amount of ONE HUNDRED FIFTEEN
THOUSAND EIGHT HUNDRED THIRTY PESOS (P115,830.00) without deductions and
qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A.

13th month pay

B.

Allowance

4,770.83

C.

Service Incentive

Leave Pay

D.

Moral Damages

E.

Exemplary

Damages
F.

Attorney's Fee

21,060.00

3,461.85

50,000.00

25,000.00
P

22,012.27

SO ORDERED.12
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National
Labor Labor Relations Commission, Fourth Division, Cebu City. In a decision, dated 26 August
1994, the NLRC vacated the findings of the Labor Arbiter. The decretal portion of the NLRC
decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED
dismissing this case for want of merit.
SO ORDERED.13
Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995,
the NLRC issued a Resolution reversing its original decision. The dispositive portion of the
resolution reads:
WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the
decision of the Labor Arbiter dated February 15, 1993 is REINSTATED.
SO ORDERED.14
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for
reconsideration of the above resolution. Notable in the motion for reconsideration filed by
private respondents is their invocation, for the first time on appeal, that the Labor Arbiter
has no jurisdiction over the complaint filed by petitioner due to the constitutional provision
on the separation of church and state since the case allegedly involved an ecclesiastical
affair to which the State cannot interfere.
The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the
argument posed by private respondents and, accordingly, dismissed the complaint of
petitioner. The dispositive portion of the NLRC resolution dated 23 January 1996, subject of
the present petition, is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby
granted. Accordingly, this case is hereby DISMISSED for lack of jurisdiction.
SO ORDERED.15
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor General (the
"OSG") to file its comment on behalf of public respondent NLRC. Interestingly, the OSG filed

a manifestation and motion in lieu of comment16 setting forth its stand that it cannot
sustain the resolution of the NLRC. In its manifestation, the OSG submits that the
termination of petitioner from his employment may be questioned before the NLRC as the
same is secular in nature, not ecclesiastical. After the submission of memoranda of all the
parties, the case was submitted for decision.
The issues to be resolved in this petition are:
1)
Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the
complaint filed by petitioner against the SDA;
2)
Whether or not the termination of the services of petitioner is an ecclesiastical affair,
and, as such, involves the separation of church and state; and
3)

Whether or not such termination is valid.

The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of church and state,
the Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed by
petitioner. Since the matter at bar allegedly involves the discipline of a religious minister, it
is to be considered a purely ecclesiastical affair to which the State has no right to interfere.
The contention of private respondents deserves scant consideration. The principle of
separation of church and state finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the
familiar saying, "Strong fences make good-neighbors."17 The idea advocated by this
principle is to delineate the boundaries between the two institutions and thus avoid
encroachments by one against the other because of a misunderstanding of the limits of their
respective exclusive jurisdictions.18 The demarcation line calls on the entities to "render
therefore unto Ceasar the things that are Ceasar's and unto God the things that are
God's."19 While the state is prohibited from interfering in purely ecclesiastical affairs, the
Church is likewise barred from meddling in purely secular matters.20
The case at bar does not concern an ecclesiastical or purely religious affair as to bar the
State from taking cognizance of the same. An ecclesiastical affair is "one that concerns
doctrine, creed, or form of worship of the church, or the adoption and enforcement within a
religious association of needful laws and regulations for the government of the membership,
and the power of excluding from such associations those deemed unworthy of
membership.21 Based on this definition, an ecclesiastical affair involves the relationship
between the church and its members and relate to matters of faith, religious doctrines,
worship and governance of the congregation. To be concrete, examples of this so-called
ecclesiastical affairs to which the State cannot meddle are proceedings for
excommunication, ordinations of religious ministers, administration of sacraments and other
activities with attached religious significance. The case at bar does not even remotely
concern any of the abovecited examples. While the matter at hand relates to the church and
its religious minister it does not ipso facto give the case a religious significance. Simply
stated, what is involved here is the relationship of the church as an employer and the
minister as an employee. It is purely secular and has no relation whatsoever with the
practice of faith, worship or doctrines of the church. In this case, petitioner was not excommunicated or expelled from the membership of the SDA but was terminated from
employment. Indeed, the matter of terminating an employee, which is purely secular in
nature, is different from the ecclesiastical act of expelling a member from the religious
congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's
dismissal, namely: misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties and commission of an offense against the
person of his employer's duly authorized representative, are all based on Article 282 of the
Labor Code which enumerates the just causes for termination of employment.22 By this
alone, it is palpable that the reason for petitioner's dismissal from the service is not religious
in nature. Coupled with this is the act of the SDA in furnishing NLRC with a copy of
petitioner's letter of termination. As aptly stated by the OSG, this again is an eloquent
admission by private respondents that NLRC has jurisdiction over the case. Aside from these,
SDA admitted in a certification23 issued by its officer, Mr. Ibesate, that petitioner has been
its employee for twenty-eight (28) years. SDA even registered petitioner with the Social
Security System (SSS) as its employee. As a matter of fact, the worker's records of petitioner
have been submitted by private respondents as part of their exhibits. From all of these it is
clear that when the SDA terminated the services of petitioner, it was merely exercising its
management prerogative to fire an employee which it believes to be unfit for the job. As

such, the State, through the Labor Arbiter and the NLRC, has the right to take cognizance of
the case and to determine whether the SDA, as employer, rightfully exercised its
management prerogative to dismiss an employee. This is in consonance with the mandate of
the Constitution to afford full protection to labor.
Under the Labor Code, the provision which governs the dismissal of employees, is
comprehensive enough to include religious corporations, such as the SDA, in its coverage.
Article 278 of the Labor Code on post-employment states that "the provisions of this Title
shall apply to all establishments or undertakings, whether for profit or not." Obviously, the
cited article does not make any exception in favor of a religious corporation. This is made
more evident by the fact that the Rules Implementing the Labor Code, particularly, Section
1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes
religious institutions in the coverage of the law, to wit:
Sec. 1. Coverage. This Rule shall apply to all establishments and undertakings, whether
operated for profit or not, including educational, medical, charitable and religious institutions
and organizations, in cases of regular employment with the exception of the Government
and its political subdivisions including government-owned or controlled corporations.24
With this clear mandate, the SDA cannot hide behind the mantle of protection of the
doctrine of separation of church and state to avoid its responsibilities as an employer under
the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are estopped from raising
the issue of lack of jurisdiction for the first time on appeal. It is already too late in the day for
private respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the
SDA had fully participated in the trials and hearings of the case from start to finish. The
Court has already ruled that the active participation of a party against whom the action war
brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial
body where the action is pending, is tantamount to an invocation of that jurisdiction and a
willingness to abide by the resolution of the case and will bar said party from later on
impugning the court or body's jurisdiction.25 Thus, the active participation of private
respondents in the proceedings before the Labor Arbiter and the NLRC mooted the question
on jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine whether the
dismissal of petitioner was valid.
At the outset, we note that as a general rule, findings of fact of administrative bodies like the
NLRC are binding upon this Court. A review of such findings is justified, however, in instances
when the findings of the NLRC differ from those of the labor arbiter, as in this case.26 When
the findings of NLRC do not agree with those of the Labor Arbiter, this Court must of
necessity review the records to determine which findings should be preferred as more
comfortable to the evidentiary facts.27
We turn now to the crux of the matter. In termination cases, the settled rule is that the
burden of proving that the termination was for a valid or authorized cause rests on the
employer.28 Thus, private respondents must not merely rely on the weaknesses of
petitioner's evidence but must stand on the merits of their own defense.
The issue being the legality of petitioner's dismissal, the same must be measured against
the requisites for a valid dismissal, namely: (a) the employee must be afforded due process,
i.e., he must be given an opportunity to be heard and to defend himself, and; (b) the
dismissal must be for a valid cause as provided in Article 282 of the Labor Code.29 Without
the concurrence of this twin requirements, the termination would, in the eyes of the law, be
illegal.30
Before the services of an employee can be validly terminated, Article 277 (b) of the Labor
Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further
require the employer to furnish the employee with two (2) written notices, to wit: (a) a
written notice served on the employee specifying the ground or grounds for termination, and
giving to said employee reasonable opportunity within which to explain his side; and, (b) a
written notice of termination served on the employee indicating that upon due consideration
of all the circumstances, grounds have been established to justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise the
employee of the particular acts or omissions for which his dismissal is sought.31 The second
notice on the other hand seeks to inform the employee of the employer's decision to dismiss
him.32 This decision, however, must come only after the employee is given a reasonable
period from receipt of the first notice within which to answer the charge and ample
opportunity to be heard and defend himself with the assistance of a representative, if he so

desires.33 This is in consonance with the express provision of the law on the protection to
labor and the broader dictates of procedural due process.34 Non-compliance therewith is
fatal because these requirements are conditions sine qua non before dismissal may be
validly effected.35
Private respondent failed to substantially comply with the above requirements. With regard
to the first notice, the letter,36 dated 17 October 1991, which notified petitioner and his wife
to attend the meeting on 21 October 1991, cannot be construed as the written charge
required by law. A perusal of the said letter reveals that it never categorically stated the
particular acts or omissions on which petitioner's impending termination was grounded. In
fact, the letter never even mentioned that petitioner would be subject to investigation. The
letter merely mentioned that petitioner and his wife were invited to a meeting wherein what
would be discussed were the alleged unremitted church tithes and the events that
transpired on 16 October 1991. Thus, petitioner was surprised to find out that the alleged
meeting turned out to be an investigation. From the tenor of the letter, it cannot be
presumed that petitioner was actually on the verge of dismissal. The alleged grounds for the
dismissal of petitioner from the service were only revealed to him when the actual letter of
dismissal was finally issued. For this reason, it cannot be said that petitioner was given
enough opportunity to properly prepare for his defense. While admittedly, private
respondents complied with the second requirement, the notice of termination, this does not
cure the initial defect of lack of the proper written charge required by law.
In the letter of termination,37 dated 29 October 1991, private respondents enumerated the
following as grounds for the dismissal of petitioner, namely: misappropriation of
denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect
of duties, and commission of an offense against the person of employer's duly authorized
representative. Breach of trust and misappropriation of denominational funds refer to the
alleged failure of petitioner to remit to the treasurer of the Negros Mission tithes, collections
and offerings amounting to P15,078.10 which were collected by his wife, Mrs. Thelma
Austria, in the churches under his jurisdiction. On the other hand, serious misconduct and
commission of an offense against the person of the employer's duly authorized
representative pertain to the 16 October 1991 incident wherein petitioner allegedly
committed an act of violence in the office of Pastor Gideon Buhat. The final ground invoked
by private respondents is gross and habitual neglect of duties allegedly committed by
petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of trust. Private
respondents allege that they have lost their confidence in petitioner for his failure, despite
demands, to remit the tithes and offerings amounting to P15,078.10, which were collected in
his district. A careful study of the voluminous records of the case reveals that there is simply
no basis for the alleged loss of confidence and breach of trust. Settled is the rule that under
Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is
done intentionally, knowingly and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently.38 It must rest on
substantial grounds and not on the employer's arbitrariness, whims, caprices or suspicion;
otherwise the employee would eternally remain at the mercy of the employer.39 It should be
genuine and not simulated.40 This ground has never been intended to afford an occasion for
abuse, because of its subjective nature. The records show that there were only six (6)
instances when petitioner personally collected and received from the church treasurers the
tithes, collections, and donations for the church.41 The stenographic notes on the testimony
of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private
respondents, show that Pastor Austria was able to remit all his collections to the treasurer of
the Negros Mission.42
Though private respondents were able to establish that petitioner collected and received
tithes and donations several times, they were notable to establish that petitioner failed to
remit the same to the Negros Mission, and that he pocketed the amount and used it for his
personal purpose. In fact, as admitted by their own witness, Naomi Geniebla, petitioner
remitted the amounts which he collected to the Negros Mission for which corresponding
receipts were issued to him. Thus, the allegations of private respondents that petitioner
breached their trust have no leg to stand on.
In a vain attempt to support their claim of breach of trust, private respondents try to pin on
petitioner the alleged non-remittance of the tithes collected by his wife. This argument
deserves little consideration. First of all, as proven by convincing and substantial evidence
consisting of the testimonies of the witnesses for private respondents who are church
treasurers, it was Mrs. Thelma Austria who actually collected the tithes and donations from
them, and, who failed to remit the same to the treasurer of the Negros Mission. The
testimony of these church treasurers were corroborated and confirmed by Ms. Geniebla and
Mr. Ibesate, officers of the SDA. Hence, in the absence of conspiracy and collusion, which
private respondents failed to demonstrate, between petitioner and his wife, petitioner

cannot be made accountable for the alleged infraction committed by his wife. After all, they
still have separate and distinct personalities. For this reason, the Labor Arbiter found it
difficult to see the basis for the alleged loss of confidence and breach of trust. The Court
does not find any cogent reason, therefore, to digress from the findings of the Labor Arbiter
which is fully supported by the evidence on record.
With respect to the grounds of serious misconduct and commission of an offense against the
person of the employer's duly authorized representative, we find the same unmeritorious
and, as such, do not warrant petitioner's dismissal from the service.
Misconduct has been defined as improper or wrong conduct. It is the 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 in judgment.43 For misconduct to
be considered serious it must be of such grave and aggravated character and not merely
trivial or unimportant.44 Based on this standard, we believe that the act of petitioner in
banging the attach case on the table, throwing the telephone and scattering the books in
the office of Pastor Buhat, although improper, cannot be considered as grave enough to be
considered as serious misconduct. After all, as correctly observed by the Labor Arbiter,
though petitioner committed damage to property, he did not physically assault Pastor Buhat
or any other pastor present during the incident of 16 October 1991. In fact, the alleged
offense committed upon the person of the employer's representatives was never really
established or proven by private respondents. Hence, there is no basis for the allegation that
petitioner's act constituted serious misconduct or that the same was an offense against the
person of the employer's duly authorized representative. As such, the cited actuation of
petitioner does not justify the ultimate penalty of dismissal from employment. While the
Constitution does condone wrongdoing by the employee, it nevertheless urges a moderation
of the sanctions that may be applied to him in light of the many disadvantages that weigh
heavily on him like an albatross on his neck.45 Where a penalty less punitive would suffice,
whatever missteps may have been committed by the worker ought not be visited with a
consequence so severe such as dismissal from employment.46 For the foregoing reasons,
we believe that the minor infraction committed by petitioner does not merit the ultimate
penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner, gross and habitual
neglect of duties, does not require an exhaustive discussion. Suffice it to say that all private
respondents had were allegations but not proof. Aside from merely citing the said ground,
private respondents failed to prove culpability on the part of petitioner. In fact, the evidence
on record shows otherwise. Petitioner's rise from the ranks disclose that he was actually a
hard-worker. Private respondents' evidence,47 which consisted of petitioner's Worker's
Reports, revealed how petitioner travelled to different churches to attend to the faithful
under his care. Indeed, he labored hard for the SDA, but, in return, he was rewarded with a
dismissal from the service for a non-existent cause.
In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was
terminated from service without just or lawful cause. Having been illegally dismissed,
petitioner is entitled to reinstatement to his former position without loss of seniority right48
and the payment of full backwages without any deduction corresponding to the period from
his illegal dismissal up to actual reinstatement.46
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public
respondent National Labor Relations Commission, rendered on 23 January 1996, is
NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is
REINSTATED and hereby AFFIRMED.1wphi1.nt
SO ORDERED.
G.R. No. 80609
August 23, 1988
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN
respondents.
Nicanor G. Nuevas for petitioner.

ABUCAY,

CRUZ, J.:
The only issue presented in the case at bar is the legality of the award of financial assistance
to an employee who had been dismissed for cause as found by the public respondent.
Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was
accused by two complainants of having demanded and received from them the total amount

of P3,800.00 in consideration of her promise to facilitate approval of their applications for

telephone installation. 1 Investigated and heard, she was found guilty as charged and
accordingly separated from the service. 2 She went to the Ministry of Labor and Employment
claiming she had been illegally removed. After consideration of the evidence and arguments
of the parties, the company was sustained and the complaint was dismissed for lack of
merit. Nevertheless, the dispositive portion of labor arbiter's decision declared:
WHEREFORE, the instant complaint is dismissed for lack of merit.
Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally
blameless in the light of the fact that the deal happened outhide the premises of respondent
company and that their act of giving P3,800.00 without any receipt is tantamount to
corruption of public officers, complainant must be given one month pay for every year of
service as financial assistance. 3
Both the petitioner and the private respondent appealed to the National Labor Relations
Board, which upheld the said decision in toto and dismissed the appeals. 4 The private
respondent took no further action, thereby impliedly accepting the validity of her dismissal.
The petitioner, however, is now before us to question the affirmance of the above- quoted
award as having been made with grave abuse of discretion.
In its challenged resolution of September 22, 1987, the NLRC said:
... Anent the award of separation pay as financial assistance in complainant's favor, We find
the same to be equitable, taking into consideration her long years of service to the company
whereby she had undoubtedly contributed to the success of respondent. While we do not in
any way approve of complainants (private respondent) mal feasance, for which she is to
suffer the penalty of dismissal, it is for reasons of equity and compassion that we resolve to
uphold the award of financial assistance in her favor. 5
The position of the petitioner is simply stated: It is conceded that an employee illegally
dismissed is entitled to reinstatement and backwages as required by the labor laws.
However, an employee dismissed for cause is entitled to neither reinstatement nor
backwages and is not allowed any relief at all because his dismissal is in accordance with
law. In the case of the private respondent, she has been awarded financial assistance
equivalent to ten months pay corresponding to her 10 year service in the company despite
her removal for cause. She is, therefore, in effect rewarded rather than punished for her
dishonesty, and without any legal authorization or justification. The award is made on the
ground of equity and compassion, which cannot be a substitute for law. Moreover, such
award puts a premium on dishonesty and encourages instead of deterring corruption.
For its part, the public respondent claims that the employee is sufficiently punished with her
dismissal. The grant of financial assistance is not intended as a reward for her offense but
merely to help her for the loss of her employment after working faithfully with the company
for ten years. In support of this position, the Solicitor General cites the cases of Firestone
Tire and Rubber Company of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation
of Davao, 7 where the employees were dismissed for cause but were nevertheless allowed
separation pay on grounds of social and compassionate justice. As the Court put it in the
Firestone case:
In view of the foregoing, We rule that Firestone had valid grounds to dispense with the
services of Lariosa and that the NLRC acted with grave abuse of discretion in ordering his
reinstatement. However, considering that Lariosa had worked with the company for eleven
years with no known previous bad record, the ends of social and compassionate justice
would be served if he is paid full separation pay but not reinstatement without backwages
by the NLRC.
In the said case, the employee was validly dismissed for theft but the NLRC nevertheless
awarded him full separation pay for his 11 years of service with the company. In Soco, the
employee was also legally separated for unauthorized use of a company vehicle and refusal
to attend the grievance proceedings but he was just the same granted one-half month
separation pay for every year of his 18-year service.
Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed
for preferring certain dealers in violation of company policy but was allowed separation pay
for his 2 years of service. In Metro Drug Corporation v. NLRC, 9 the employee was validly
removed for loss of confidence because of her failure to account for certain funds but she
was awarded separation pay equivalent to one-half month's salary for every year of her
service of 15 years. In Engineering Equipment, Inc. v. NLRC, 10 the dismissal of the
employee was justified because he had instigated labor unrest among the workers and had
serious differences with them, among other grounds, but he was still granted three months

separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, 11
the employee's 3- year service was held validly terminated for lack of confidence and
abandonment of work but he was nonetheless granted three months separation pay. And in
San Miguel Corporation v. Deputy Minister of Labor and Employment, et al ., 12 full
separation pay for 6, 10, and 16 years service, respectively, was also allowed three
employees who had been dismissed after they were found guilty of misappropriating
company funds.
The rule embodied in the Labor Code is that a person dismissed for cause as defined therein
is not entitled to separation pay. 13 The cases above cited constitute the exception, based
upon considerations of equity. Equity has been defined as justice outside law, 14 being
ethical rather than jural and belonging to the sphere of morals than of law. 15 It is grounded
on the precepts of conscience and not on any sanction of positive law. 16 Hence, it cannot
prevail against the expressed provision of the labor laws allowing dismissal of employees for
cause and without any provision for separation pay.
Strictly speaking, however, it is not correct to say that there is no express justification for the
grant of separation pay to lawfully dismissed employees other than the abstract
consideration of equity. The reason is that our Constitution is replete with positive
commands for the promotion of social justice, and particularly the protection of the rights of
the workers. The enhancement of their welfare is one of the primary concerns of the present
charter. In fact, instead of confining itself to the general commitment to the cause of labor in
Article II on the Declaration of Principles of State Policies, the new Constitution contains a
separate article devoted to the promotion of social justice and human rights with a separate
sub- topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with
management, in the advancement of the national economy and the welfare of the people in
general. The categorical mandates in the Constitution for the improvement of the lot of the
workers are more than sufficient basis to justify the award of separation pay in proper cases
even if the dismissal be for cause.
The Court notes, however, that where the exception has been applied, the decisions have
not been consistent as to the justification for the grant of separation pay and the amount or
rate of such award. Thus, the employees dismissed for theft in the Firestone case and for
animosities with fellow workers in the Engineering Equipment case were both awarded
separation pay notnvithstanding that the first cause was certainly more serious than the
second. No less curiously, the employee in the Soco case was allowed only one-half month
pay for every year of his 18 years of service, but in Filipro the award was two months
separation pay for 2 years service. In Firestone, the emplovee was allowed full separation
pay corresponding to his 11 years of service, but in Metro, the employee was granted only
one-half month separation pay for every year of her 15year service. It would seem then that
length of service is not necessarily a criterion for the grant of separation pay and neither
apparently is the reason for the dismissal.
The Court feels that distinctions are in order. We note that heretofore the separation pay,
when it was considered warranted, was required regardless of the nature or degree of the
ground proved, be it mere inefficiency or something graver like immorality or dishonesty.
The benediction of compassion was made to cover a multitude of sins, as it were, and to
justify the helping hand to the validly dismissed employee whatever the reason for his
dismissal. This policy should be re-examined. It is time we rationalized the exception, to
make it fair to both labor and management, especially to labor.
There should be no question that where it comes to such valid but not iniquitous causes as
failure to comply with work standards, the grant of separation pay to the dismissed
employee may be both just and compassionate, particularly if he has worked for some time
with the company. For example, a subordinate who has irreconcilable policy or personal
differences with his employer may be validly dismissed for demonstrated loss of confidence,
which is an allowable ground. A working mother who has to be frequently absent because
she has also to take care of her child may also be removed because of her poor attendance,
this being another authorized ground. It is not the employee's fault if he does not have the
necessary aptitude for his work but on the other hand the company cannot be required to
maintain him just the same at the expense of the efficiency of its operations. He too may be
validly replaced. Under these and similar circumstances, however, the award to the
employee of separation pay would be sustainable under the social justice policy even if the
separation is for cause.
But where the cause of the separation is more serious than mere inefficiency, the generosity
of the law must be more discerning. There is no doubt it is compassionate to give separation
pay to a salesman if he is dismissed for his inability to fill his quota but surely he does not
deserve such generosity if his offense is misappropriation of the receipts of his sales. This is
no longer mere incompetence but clear dishonesty. A security guard found sleeping on the
job is doubtless subject to dismissal but may be allowed separation pay since his conduct,

while inept, is not depraved. But if he was in fact not really sleeping but sleeping with a
prostitute during his tour of duty and in the company premises, the situation is changed
completely. This is not only inefficiency but immorality and the grant of separation pay
would be entirely unjustified.
We hold that henceforth separation pay shall be allowed as a measure of social justice only
in those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather
than punishing the erring employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay has nothing to do with the
wrong he has committed. Of course it has. Indeed, if the employee who steals from the
company is granted separation pay even as he is validly dismissed, it is not unlikely that he
will commit a similar offense in his next employment because he thinks he can expect a like
leniency if he is again found out. This kind of misplaced compassion is not going to do labor
in general any good as it will encourage the infiltration of its ranks by those who do not
deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will
not condone the offense. Compassion for the poor is an imperative of every humane society
but only when the recipient is not a rascal claiming an undeserved privilege. Social justice
cannot be permitted to be refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands
are clean and their motives blameless and not simply because they happen to be poor. This
great policy of our Constitution is not meant for the protection of those who have proved
they are not worthy of it, like the workers who have tainted the cause of labor with the
blemishes of their own character.
Applying the above considerations, we hold that the grant of separation pay in the case at
bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the
labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact
that she has worked with the PLDT for more than a decade, if it is to be considered at all,
should be taken against her as it reflects a regrettable lack of loyalty that she should have
strengthened instead of betraying during all of her 10 years of service with the company. If
regarded as a justification for moderating the penalty of dismissal, it will actually become a
prize for disloyalty, perverting the meaning of social justice and undermining the efforts of
labor to cleanse its ranks of all undesirables.
The Court also rules that the separation pay, if found due under the circumstances of each
case, should be computed at the rate of one month salary for every year of service,
assuming the length of such service is deemed material. This is without prejudice to the
application of special agreements between the employer and the employee stipulating a
higher rate of computation and providing for more benefits to the discharged employee. 17
WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is
AFFIRMED in toto except for the grant of separation pay in the form of financial assistance,
which is hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is
LIFTED. It is so ordered.
G.R. No. 164376
July 31, 2006
NATIONAL LABOR RELATIONS COMMISSION, ST. JUDE CATHOLIC SCHOOL, REV. FR.
NOEL BEJO, MS. PRISCILLA LOPEZ, MS. NATIVIDAD TAN, MS. VILMA LAO, MS.
JENNIFER GIL, MS. REMEDIOS CABANLIT and MR. CAMILO GELIDO, petitioners,
vs.
MA. BERNADETTE S. SALGARINO, respondent.
DECISION
CHICO-NAZARIO, J.:
Before us is a Petition for Review of the Decision1 and Resolution2 of the Court of Appeals,
dated 21 May 2003 and 1 July 2004, respectively, reversing and setting aside the Decision3
dated 28 September 2001, and Resolution4 dated 29 November 2001 of National Labor
Relations Commission (NLRC), and reinstating the Decision5 of Labor Arbiter Edgardo M.
Madriaga, dated 11 January 2001, finding petitioners guilty of illegal dismissal.

The facts are:

In April 1988, respondent Maria Bernadette A. Salgarino was employed by petitioner St. Jude
Catholic School as Mathematics teacher. She was tasked to teach Algebra, Trigonometry,
Statistics and Analytical Geometry for third and fourth year high school students.6
On 15 February 1999, or two weeks before the fourth periodical test of that school year,
respondent went on maternity leave. She was expected to be back in petitioner school on 19
March 1999. During her official leave, she conducted make-up tests in her house in order to
improve the grades of some of her students. However, this was done by the respondent
without the prior permission of petitioners. At this same period, her co-teachers, Ms. Maria
Luisa Capistrano (Capistrano), Mrs. Angelita Rivera and Mrs. Michel Bongyad substituted for
her in her classes. On 2 March 1999, the periodical test for Mathematics IV was conducted
and the same was administered by Capistrano, since respondent was still on leave.7
One of herein petitioners, Head Teacher Ms. Priscila Lopez (Lopez), instructed the substitute
teachers to check the test papers and compute the grades of the students in Sections 4-A, 4B and 4-C.8
On 9 March 1999, the white sheets or the grading sheets for the 4th year students were
accomplished by the substitute teachers. It was shown that some 4th year students
obtained a failing grade in Math.9 Subsequently, respondent, while still on leave, requested
Capistrano to deliver to her house the white sheets which contained the grades in Math of
respondent's students. Capistrano delivered the white sheets to respondent's home through
a student named Eunice Weeguano.10 Upon receiving them, respondent encircled the failing
grades under the column of Daily Work (DW) and placed a passing grade beside each
encircled grade. Respondent asserted that as the handling teacher, she had the prerogative
to pass her students. She revealed that she required her students to do some projects and
conducted make-up tests for them before she went on maternity leave and to improve the
final grades of the concerned students. She avers that out of valid and humanitarian
reasons, she indicated a passing grade of 75% beside the grades of those with failing
grades. Her decision was based on:
(1) The concerned students could have performed better in their periodical test if a
substitute teacher was assigned during the two weeks that she was on maternity leave
before the examination;
(2) [Respondent] had required her students before she went on leave to make extra projects
and activities and those who had failing grades made well enough to pull up their grades;
(3) The concerned students have good 4th quarter test results before she went on leave;
and
(4) Had the student[s] with the lowest grade (70%) been failed x x x, the school would have
violated Section 68 (b) of the Manual of Regulation for Private Schools.11
Upon return of the white sheets, the substitute teachers noticed therein the additions made
by respondent. The substitute teachers immediately reported the matter to Lopez who, in
turn, referred the matter to petitioner Rev. Fr. Noel Bejo (Fr. Bejo), SVD, Acting
Director/Principal of petitioner school.12
On 24 March 1999, Fr. Bejo instructed respondent to report to his office. He gave her a letter
which directed her to submit herself to a panel of investigators and explain why she had
allegedly tampered school records, violated school policies and committed misconduct.13
On 26 March 1999, respondent was investigated for her act of increasing the grades of her
students while she was on maternity leave. Respondent and the substitute teachers were
allowed to attend and participate in the investigation. The investigation yielded the following
relevant facts14:
(1) That respondent increased the grades of her students who failed;
(2) That respondent gave tests in her house to some students;
(3) That respondent's reason for giving tests in her house is because she wanted to help the
students who were failing x x x. [S]he wanted to give considerations and she admitted that it
was her fault for asking the students go to her house;
(4) That respondent admitted changing her student's grades before they were submitted
and checked by the school principal;

(5) Respondent x x x argued that she had the right to pass her students.
The investigating panel reached the conclusion that respondent altered her students' grades
while she was on leave, which is, according to them, a case of education malpractice or
grave misconduct and grossly prejudicial to the good name of the petitioner school. In
particular, the investigating committee found respondent to have violated Article XV, Section
79 and Article XVII, Section 94, paragraph (b) of the Manual of Regulations for Private
Schools, to wit:
Article XV, Section 79. Basis for Grading. The final grade or rating given to a pupil or student
in a subject should be based solely on his scholastic performance. Any addition or diminution
to the grade in a subject for co-curricular activities, attendance, or misconduct shall not be
allowed, except as may otherwise be explicitly provided for by an individual school x x x, and
provided further that such adjustments are relevant to the subject content and requirements
x x x.
Article XVII, Section 94, par. (b). Negligence in keeping school or student records, or
tampering with or falsification of the same; x x x.
On these bases, the members of the investigating committee ruled to terminate
respondent's services. On 15 April 1999, a termination letter was served on respondent. On
29 April 1999, respondent filed with the Labor Arbiter a Complaint for illegal dismissal,
proportionate 13th month pay, actual, moral and exemplary damages, and attorney's fees
against petitioners.15
In his Decision16 dated 11 January 2001, Labor Arbiter Edgardo Madriaga ruled that
respondent was illegally dismissed as there was no valid or just cause to terminate her
employment. The relevant portion of the Decision reads:
A teacher has the academic freedom to pass or fail any or all her students as (sic) per his or
her discretion. In this case, the teacher opted for liberality rather than strictness. There was
no proof that she did so out of malice or immoral considerations. There are liberal or
generous teachers and there are so-called terror teachers who prefer to flunk all their
students. They balance each other out.
We, therefore, rule that complainant was not dismissed for a valid or just cause.
She is therefore entitled to reinstatement with backwages, proportionate 13th month pay
and 10% thereof as attorney's fees, computed below as follows:
xxxx
WHEREFORE, premises considered, complainant is hereby declared to have been illegally
dismissed, and respondent school is hereby directed to reinstate her and pay her money
claims as computed above.
On appeal by petitioners, the NLRC reversed and set aside the Decision of the Labor Arbiter,
on the ground that respondent's act of giving failing students higher grades than what they
actually earned is tantamount to serious misconduct which justified her dismissal. The
relevant portion of the NLRC Decision17 reads:
The very actuations of the complainant first claiming that it was her prerogative to pull up
failing grades, then blaming the substitute teachers for copying the grades she gave the
failing students, and even Mr. Lopez for supposedly scheming to get rid of her; claiming that
she gave the failing students extra projects before she went on leave, yet failing to reflect
the credits they earned from the supposed extra projects in the grading sheets are not
consistent with her avowed innocence.
In conclusion, this Commission finds the complainant's act of giving failing students higher
grades than what they actually earned to be tantamount to serious misconduct, which
justifies her dismissal. The notion of academic freedom, which to her credit, she did not raise
as a defense, does not excuse her misconduct.
WHEREFORE, the decision appealed from is hereby REVERSED and the instant case
DISMISSED for lack of merit.
Respondent filed a Motion for Reconsideration of the NLRC Decision which was denied for
lack of merit in a Resolution dated 29 November 2001.18 Aggrieved, respondent filed a
Petition for Certiorari before the Court of Appeals. The appellate court reversed and set aside
the Decision dated 28 September 2001, and Resolution dated 29 November 2001 of the

NLRC. Reinstating the 11 January 2001 Decision of the Labor Arbiter, the Court of Appeals
ratiocinated:
Absent any proof that the giving of passing grades was done with malice or immoral
considerations, this court has no other choice but to declare that the herein petitioner
[respondent] was illegally dismissed for choosing to be a considerate mentor to her
students. Whether such choice is a mistake of the teacher should not be visited with a
consequence so severe. Indeed, the penalty of dismissal is unduly harsh considering that the
petitioner had been in the employ of the respondent school for eleven years and it does not
appear that she had a previous derogatory record, notwithstanding the claim there was
alleged breach of trust. The law regards the workers with compassion. Unemployment brings
untold hardships and sorrows upon those dependent on the wage-earner.
WHEREFORE, for having been issued with grave abuse of discretion, the assailed decision
and resolution of the respondent commission are REVERSED and SET ASIDE. The Decision of
Labor Arbiter Edgardo M. Madriaga is hereby REINSTATED.19
Petitioners moved for a reconsideration thereof, which was denied by the appellate court20
in the Resolution dated 1 July 2004.
Consequently, on 2 September 2004, petitioners filed before this Court, a Petition for Review
on Certiorari. In our Resolution21 dated 13 October 2004, we denied the Petition in this wise:
In accordance with Rule 45 and other related provisions of the 1997 Rules of Civil Procedure,
as amended, governing appeals by certiorari to the Supreme Court, only petitions which are
accompanied by or comply strictly with the requirements specified therein shall be
entertained. On the basis thereof, the Court Resolves to DENY the petition for review on
certiorari for petitioners' failure to:
(a) submit a valid affidavit of service of copies of the petition in accordance with Sections 3
and 5, Rule 45 and Section 5(d), Rule 56 in relation to Section 13, Rule 13 of the Rules, since
the jurat of the attached affidavit of service does not indicate the affiants' community tax
certificate numbers or any competent evidence of affiants' identity; and
(b) properly verify the petition in accordance with Section 1, Rule 45 in relation to Section 4,
Rule 7, and submit a valid certification on nonforum shopping in accordance with Section
4(e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule 42 and Sections 4 and 5(d), Rule
56, since only five (5) of seven (7) petitioners signed the attached verification and
certification of nonforum shopping, and no proof of authority has been shown by affiants to
sign on behalf of petitioner school and co-petitioners x x x.22
On 4 April 2005, petitioners filed a Motion for Reconsideration with motion to exclude Rev. Fr.
Noel Bejo and Jennifer Gill as petitioners, alleging therein that:
The reason for the failure of Fr. Bejo and Ms. Gill to sign the verification and certification of
non-forum shopping is the fact that they were impleaded in the case below merely in their
representative capacities. Since they are no longer connected with the school, they are, for
all intents, no longer interested in this case. The undersigned counsel still included their
names in the caption with the intention to maintain consistency in the caption of the case as
Fr. Bejo and Ms. Gill were also impleaded by herein respondent Salgarino in the Court of
Appeals case she filed. Undersigned counsel now realizes that they should not have been
included as petitioners in this case since there could be no personal liability on their part.
The matter now in issue are limited to backwages and reinstatement, which concern only
the school.23
Thus, we reinstated the Petition but replaced Rev. Fr. Teodoro Gapuz for Fr. Bejo as one of the
petitioners hereof since Fr. Bejo was replaced by Fr. Gapuz as School Director in 2001.24
Petitioners raise the following issues for our consideration:
I
WHETHER OR NOT RESPONDENT LABOR ARBITER MADRIAGA AND THE COURT OF APPEALS
ACTED WITH GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR IN EXCESS OF
JURISDICTION WHEN IT FOUND PRIVATE RESPONDENT SALGARINO TO HAVE BEEN ILLEGALLY
DISMISSED NOTHWITHSTANDING THE FACT THAT PRIVATE RESPONDENT ADMITTED TO HAVE
CHANGED THE FAILING GRADES TO PASSING MARKS OF THIRTY TWO (32) OF HER STUDENTS
WHILE SHE WAS ON MATERNITY LEAVE.
II

WHETHER OR NOT RESPONDENT LABOR ARBITER MADRIAGA AND THE COURT OF APPEALS
ACTED WITH GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF
JURISDICTION WHEN IT RULED THAT PRIVATE RESPONDENT SALGARINO WAS ENTITLED TO
REINSTATEMENT, BACKWAGES, 13th MONTH PAY AND ATTORNEY'S FEES;
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
ERRONEOUS DECISION OF THE RESPONDENT LABOR ARBITER;
(A) THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT DID
NOT RULE CATEGORICALLY ON THE ISSUE OF WHETHER OR NOT A TEACHER MAY CHANGE
THE FAILING GRADES TO PASSING MARKS OF HER STUDENTS OR THAT THE GIVING OF
GRADES IS DISCRETIONARY;
(B) THE HONORABLE COURT OF APPEALS COMMITTED A GLARING ERROR AND/OR ABUSE OF
DISCRETION IN RULING THAT PETITIONERS FAILED TO PROVE THE JUST CAUSE OF PRIVATE
COMPLAINANT'S DISMISSAL;
(C) THE HONORABLE COURT OF APPEALS COMMITTED GROSS ABUSE OF DISCRETION IN
RULING THAT THERE WAS NO BREACH OF TRUST COMMITTED BY THE ERRANT PRIVATE
RESPONDENT;
(D) THE HONORABLE COURT OF APPEALS COMMITTED GROSS ABUSE OF DISCRETION IN
RULING THAT THE ERRANT TEACHER HAD THE RIGHT OR DISCRETION TO GIVE PASSING
GRADES OUT OF HUMANITARIAN CONSIDERATIONS.
According to petitioners, Section 79 of the Manual of Regulations for Private Schools
mandates that a student's grade should be based solely on his academic performance; that
it is therefore a serious academic malpractice or grave misconduct for respondent to give
grades that are not based on their scholastic performance; that it is a serious misconduct for
respondent to give grades at the time she was still on maternity leave because she has no
moral or legal authority then to do so; that there is nothing in the Manual which states that a
teacher has the discretion or the option as to what grade she will give her students; and that
a teacher has the obligation to determine the grades of students based solely on their
academic performance.
The Labor Code commands that before an employer may legally dismiss an employee from
the service, the requirement of substantial and procedural due process must be complied
with. Under the requirement of substantial due process, the grounds for termination of
employment must be based on just or authorized causes. The following are just causes for
the termination of employment under Article 282 of the Labor Code:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
In the instant case, it appears that since respondent was still on maternity leave, the
substitute teachers conducted the final exams in Math for the 4th year students of
respondent. Upon computation by the substitute teachers of the grades of the said students,
it was shown that some of them obtained failing grades in Math. Subsequently, respondent
requested one of the substitute teachers (Capistrano) to deliver to her house the white
sheets which contained the grades in Math of respondent's students. With due respect to,
and trust in, respondent as the handling teacher in Math, Capistrano delivered the white
sheets to respondent through a student named Eunice Weeguano. Upon return of the white
sheets, the substitute teachers discovered that the failing grades under the column of Daily
Work (DW) were encircled and a passing grade was written beside each encircled grade.25
The substitute teachers immediately reported the matter to Lopez who referred the matter
to Fr. Bejo. The increase in grades enabled the concerned students to obtain a passing grade
in Mathematics IV, and thus, were able to graduate on time.

Proceeding therefrom, we shall determine whether the aforesaid act of respondent

constitutes serious misconduct which justified her dismissal from employment.
To our mind, the acts of the respondent in increasing the marks and indicating passing
grades on the white sheets of her students while she was on maternity leave; of not having
sought permission from petitioners before conducting the make-up tests in her house,26
contrary to the policy of the petitioners that permission should first be granted before
conducting make-up tests that must be conducted in the school premises; of making the
increases in the grades of the students during her maternity leave which is not allowed since
the substitute teachers were the ones authorized to compute and give the grades for the
concerned students; and of invoking humanitarian consideration in doing so which is not a
basis in the Manual of Regulations for Private Schools for grading a student, are all acts of
transgression of school rules, regulations and policies.
Truly, then, respondent had committed a misconduct. However, such misconduct is not
serious enough to warrant her dismissal from employment under paragraph (a) of Article
282 of the Labor Code.
Misconduct is defined as improper or wrong conduct. It is the 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. The misconduct to be
serious within the meaning of the act must be of such a grave and aggravated character and
not merely trivial or unimportant. Such misconduct, however serious, must nevertheless be
in connection with the work of the employee to constitute just cause from his separation.27
In order to constitute serious misconduct which will warrant the dismissal of an employee
under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or
conduct complained of has violated some established rules or policies. It is equally important
and required that the act or conduct must have been performed with wrongful intent.
There is no evidence to show that there was ulterior motive on the part of the respondent
when she decided to pass her students. Also, it was not shown that respondent received
immoral consideration when she did the same. From the Labor Arbiter up to this Court,
respondent has maintained her stand that her decision to pass the concerned students was
done out of humanitarian consideration.
Respondent was moved by pity when she learned that some of her students obtained a
failing grade in her subject and, thus, will not graduate on time. Respondent believes that
some of her students obtained a failing grade in her subject because they were not properly
prepared for the 4th periodical exams. She claims that, although the substitute teachers
conducted the 4th periodical exams and computed their grades, there were no teachers
assigned to conduct classes, lectures and review before the said exam. Thus, unmindful of
the events that may transpire thereafter, respondent decided to increase the marks of her
students and gave them passing grades.
Respondent argued that had she failed the subject students, some of them would be
enrolling in more than two subjects for summer which is not allowed under Section 68(b),
Article XIII of the Manual28 that provides that a student may enroll in no more than two
subjects during the summer, either for the purpose of making up for subjects previously
failed, or for earning advanced credits in other subjects. Respondent avers that some of the
students with failing grades in Math had also failed in their two Chinese subjects. Hence, to
avoid the violation of the Manual, respondent decided to pass these students.
Based on the foregoing, respondent may have committed an error of judgment in deciding
to pass her students, but it cannot be said that she was motivated by any wrongful intent in
doing so. As such, her misconduct cannot be considered as grave in character which would
warrant her dismissal from employment. We, thus, find her to be guilty only of simple
misconduct. It is settled that a misconduct, which is not serious or grave, cannot be a valid
basis for dismissing an employee.29
Special consideration should also be given to the fact that respondent has been in the
employ of petitioners for 10 years or more, and she has no previous derogatory record.
Further, respondent is a recipient of numerous academic excellence awards and recognized
by her students and some of her peers in the profession as a competent teacher. Given the
foregoing, the penalty of dismissal imposed by petitioners on respondent for a first offense
seems unduly harsh and disproportionate to the misconduct being complained of.30 This
Court has consistently ruled that the penalty to be imposed on an erring employee must be
commensurate with the gravity of his offense.31
In the actual imposition by the employer of the penalties on erring employees, due
consideration must be given to their length of service and the number of violations they

have committed during their employ.32 Where a penalty less punitive would suffice,
whatever missteps may be committed by labor ought not to be visited with a consequence
so severe.33 In light of the aforestated considerations, the penalty of dismissal will appear to
be too drastic and unreasonable.
Petitioner invoked Section 94(b), Article XVII of the Manual of Regulations for Private
Schools34 which provides that the employment of a teacher may be terminated for
negligence in keeping school or student records, or tampering with or falsification of the
same. According to petitioners, respondent violated the said section when she encircled the
failing grades under the DW and indicated a passing grade beside each encircled grade.
Assuming for the sake of argument that respondent had indeed violated Section 94(b) of the
Manual, her dismissal from employment is still invalid. Section 94(b) uses the word "may"
and not "shall." In this jurisdiction, the tendency has been to interpret the word "shall" or
"may" as the context or a reasonable construction of the statute in which they are used
demands or requires. As a general rule, the word "may" when used in statute is permissive
only and operates to confer discretion while the word "shall" is imperative, operating to
impose a duty which may be enforced.35 In the case at bar, the use of the word "may"
under Section 94(b) thereof implies that petitioners are permitted and authorized to
terminate the employment of respondent for tampering or falsification of school records.
However, such authority is not absolute. It does not give petitioners the unlimited power to
automatically terminate the employment of respondent. Such authority is merely permissive
and discretionary. Such prerogative cannot be permitted by this Court if exercised arbitrarily
and unfairly to defeat the constitutional protection to labor. Moreover, as heretofore pointed
out, there are circumstances present in this case which mitigate the misconduct of
respondent. It would be different if the word "shall" is used or the same is phrased in a
negative manner. In such a case, the dismissal of respondent is mandatory and
automatic.36 We find no exception to deviate from this general rule of statutory
construction.
Petitioners argue that the Labor Arbiter erred in ruling that respondent, as a teacher, has the
academic freedom to pass or fail any or all students per his or her discretion.
We agree, however, with the Court of Appeals that the issue of academic freedom is
misplaced in this labor case. Academic freedom of faculty members refer to the freedom of
teachers from control of thought or utterance of his academic research, findings or
conclusions, and has nothing to do with the discretion of teachers to pass or fail any or all
her students according to his discretion.37 Hence, we find no compelling reason to
determine the same.
Finally, petitioners contend that when respondent tampered the grades of her students, she
willfully breached the trust and confidence reposed upon her by petitioners, thus, her
dismissal is valid under paragraph (c) of Article 282 of the Labor Code.
We deviate.
In several cases, we made pronouncements that loss of confidence as a ground for validly
dismissing an employee under Article 282 of Labor Code applies only to employees
occupying positions of trust and confidence or those routinely charged with the care and
custody of the employer's money or property. In the case of Mabeza v. National Labor
Relations Commission,38 we ruled that:
[L]oss of confidence should ideally apply only to cases involving employees occupying
positions of trust and confidence or to those situations where the employee is routinely
charged with the care and custody of the employer's money or property. To the first class
belong the managerial employees, i.e., those vested with the powers or prerogatives to lay
down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign, or discipline employees or effectively recommend such managerial actions; and to
the second class belong cashiers, auditors, property custodians, etc., or those who, in the
normal and routine exercise of their functions, regularly handle significant amounts of
money or property x x x.
Likewise, in the case of Concorde Hotel v. Court of Appeals,39 we declared that:
Loss of confidence applies only to cases involving employees who occupy positions of trust
and confidence, or those situations where the employee is routinely charged with the care
and custody of the employer's money or property x x x.
In the instant case, it is clear that respondent is neither a managerial employee or one
vested with the powers or prerogatives to lay down management prerogatives. Nor one
belonging to the class of cashiers, auditors, property custodians, or those, who, in the

normal and routine exercise of their functions, regularly handle significant amounts of
money or property.
It is now settled that petitioners failed to comply with the requirement of substantial due
process in terminating the employment of respondent. We will now determine whether
petitioners had complied with the procedural aspect of lawful dismissal.
In the termination of employment, the employer must (a) give the employee a written notice
specifying the ground or grounds of termination, giving to said employee reasonable
opportunity within which to explain his side; (b) conduct a hearing or conference during
which the employee concerned, with the assistance of counsel if the employee so desires, is
given the opportunity to respond to the charge, present his evidence or rebut the evidence
presented against him; and (c) give the employee a written notice of termination indicating
that upon due consideration of all circumstances, grounds have been established to justify
his termination.40
Petitioners had complied with all of the above stated requirements as shown by the following
established facts:
On 24 March 1999, petitioner Fr. Bejo instructed respondent to report to the former's office.
He gave her a letter which instructed her to submit herself to a panel and explain why she
had allegedly tampered school records and violated school policies.41
On 26 March 1999, petitioners conducted an investigation on the matter which was held at
the New Guidance Office of the petitioner School. The panel of investigators were composed
of petitioners Fr. Bejo, Ms. Vilma Lao (Registrar), Mrs. Naty Tan, (Guidance Office Head),
Lopez, Mr. Camilo Gelido, Mrs. Jennifer Gill, Ms. Remedios Cabanlit (High School
Coordinators). Also present during the investigation were respondent and the substitute
teachers. Petitioner Fr. Bejo propounded the following questions to respondent:
1. Why did you ask students to take their tests in your house?
2. Why did you make changes in the grades in class record and white sheets even before
they were checked by Ms. Lopez?
3. Why was there a big discrepancy in the grades?
4. Why did you ask a student to bring the white sheets to your house? These are official
school documents.
Respondent was allowed to answer the abovementioned questions. She explained and
defended her acts. After the investigation, petitioners deliberated as to their course of action
in resolving respondent's case. Subsequently, petitioners decided to dismiss the respondent
from employment for violating Sections 79 and 94 of the Manual of Regulations for Private
Schools, and for undue disregard of school policies.42
On 15 April 1999, a termination letter was served by petitioners on respondent.43
While petitioners had complied with the procedural aspect of due process in terminating the
employment of respondent, they failed to comply with the substantive aspect of due process
as the act complained of does not constitute serious misconduct. Hence, we still hold that
the dismissal is illegal.
It must be emphasized at this point that the onus probandi to prove the lawfulness of the
dismissal rests with the employer. In termination cases, the burden of proof rests upon the
employer to show that the dismissal is for just and valid cause. Failure to do so would
necessarily mean that the dismissal was not justified and therefore was illegal.44 In the
instant case, petitioners failed to discharge the burden of proving the legality and validity of
respondent's dismissal.
We are not unmindful of the equally important right of petitioners, as employer, under our
Constitution to be protected on their property and interest. However, the particular
circumstances attendant in the instant case convinced us that the supreme penalty of
dismissal upon respondent is not justified. The law regards the workers with compassion.
Even where a worker has committed an infraction of company rules and regulations, a
penalty less punitive than dismissal may suffice. This is not only because of the law's
concern for the workingman. There is, in addition, his family to consider. Unemployment
brings untold hardships and sorrows on those dependent upon the wage-earner.45

As a caveat, it would do well for respondent to act more conscientiously and with more
regard to the policies of petitioners in the future. A repetition or similar misconduct may call
for a more severe penalty in the future.
Finally, there being no evidentiary support for the claim of respondent for damages, the
same was correctly denied by the Labor Arbiter and Court of Appeals.
WHEREFORE, the Petition for Review is DENIED. The Decision of the Court of Appeals dated
21 May 2003 and its Resolution dated 1 July 2004 in CA-G.R. SP No. 69955, are hereby
AFFIRMED. Petitioners are hereby ORDERED to reinstate respondent to her former position or
its equivalent without loss of seniority rights or privileges plus full backwages computed
from the time her salaries were withheld until she is finally reinstated. With costs.
G.R. No. 179293
August 14, 2009
EDEN LLAMAS, Petitioner,
vs.
OCEAN GATEWAY MARITIME AND MANAGEMENT, INC. Respondent.
DECISION
CARPIO MORALES, J.:
Ocean Gateway Maritime and Management, Inc. (respondent or the company) hired Eden
Llamas (petitioner) on August 1, 2001 as an accounting manager.
On February 9, 2002, Mary Anne T. Macaraig (Mary Anne), respondents Chief Executive
Officer, called petitioners attention to her failure, despite repeated demands, to accomplish
the long overdue monthly and annual company financial reports and to remit the companys
contributions to the Social Security System (SSS) and PhilHealth for November and
December 2001.
Subsequently or on February 20, 2002, Mary Anne again instructed petitioner to remit on
that day or until the following day the companys contributions to the SSS and PhilHealth for
January 2002. By petitioners claim, she failed to comply with the instruction as money for
the purpose was not, as of February 20, 2002, credited to the companys account at the
bank. The following day, February 21, 2002, petitioner did not report for work as she was
allegedly suffering from hypertension, hence, she was again unable to remit the
contributions.
On February 26, 2002 Mary Anne sent a memorandum to petitioner charging her with gross
and habitual neglect of duty and/or misconduct or willful disobedience and insubordination,
detailing therein the bases of the charges, and requiring her to submit a written explanation
why she should not be penalized or dismissed from employment.
Complying with the show cause order, petitioner claimed that the delay was due to the fact
that she was overloaded with work and undermanned. Her explanation reads:
I was able to submit SSS/PhilHealth reports and payment from July to October, 2001 because
I was assisted by an on-the-job trainee who stayed only up to November.
In spite of my repeated request to give me some help because of my heavy load nothing has
been provided. I have to stay working for 10 to 12 hours a day and sometimes for more than
12 hours without overtime pay just to lessen my load and meet the deadlines.
In our February 9th meeting, Ms. Abigail Carranza was instructed to help me in order to
finish the needed report for SSS/Philhealth for November up to January and she was able to
finish on February 14th after she unloaded herself of her regular duties and concentrated on
the SSS/Philhealth reports. Her regular work was divided between Ms. Sonia Gonzales & Mr.
Efren Robles.
On February 20th at about 12:10 P.M. Ms. Macaraig gave me, in the presence of Capt.
Picardal, the finished work of Ms. Carranza and instructed me to pay the SSS on that day or
the next day. I called up BPI to check if the remittance from MMM has already been credited
to our bank account but I was informed by BPI Forex Dept. that the money is not yet
credited. The payment was made the following day by Ms. Macaraig and Ms. Carranza since I
was not able to report because I got sick.
With the above explanation, the penalties imposed therefore, on non-remittance of the
contribution to SSS and PhilHealth on time should not be blamed on me.
xxxx

I believe I did something good for the office when our declaration of gross income submitted
to City Hall for the renewal of our municipal license was lower than our actual gross income
for which the office paid a lower amount. City Hall is only after the gross income which
amount I got from our Agency Fee received during the year.
If only I will be provided with some assistance that I always request, who will do some of my
additional tasks especially the vouchers & check preparation, reports for SSS/Philhealth,
POEA & BIR, and filing, I could perform all the tasks given to me by the Management and
submit all the reports on time;
x x x x1 (Underscoring supplied)
On account of the delay in the remittance of those contributions, respondent was penalized
in the amount of P18,580.41 which it charged to petitioner via salary deductions.
Sometime in July 2002, Mary Anne instructed petitioner to encash a check and remit the
proceeds thereof to the architect who renovated respondents new office in Makati.
Petitioner instead suggested that she would ask one of the cadets to encash the check
because she was scheduled to go to the Bureau of Internal Revenue, and reminded Mary
Anne that it was very risky to pay in cash. Insisting that she was the boss, Mary Anne told
petitioner to follow her orders. Petitioner complied. Getting wind of the incident,
respondents president asked her to give a statement of facts thereof which she did.
As respondent found petitioners explanation unsatisfactory, it sent her a notice of
termination from employment on July 31, 2002,2 anchored on gross and habitual neglect of
duty and/or serious misconduct or willful disobedience/insubordination, drawing, petitioner
to file on August 5, 2002 before the National Labor Relations Commission (NLRC) a
Complaint3 against respondent and Mary Anne for illegal dismissal, damages and attorneys
fees.
She later amended her complaint to include as cause of action non-payment of overtime
pay.4 Still, in her Position Paper,5 she included illegal deductions as additional cause of
action.
Petitioner, claiming that she was fired because of the heated discussion between her and
Mary Anne, maintained that her delay in the remittance of the companys SSS/PhilHealth
contributions was occasioned by the circumstances she had spelled out.
Upon the other hand, respondent maintained its justification of petitioners dismissal,
highlighting her failure to accomplish the companys monthly and annual financial reports
for 2001 reflecting its gross income which is determinative of the amount to be paid to
secure government licenses and permits.
Respecting petitioners claim for overtime pay, respondent contended that she, being a
managerial employee and/or a member of the managerial staff, is not entitled
thereto.1avvphi1
By Decision6 of April 15, 2003, the Labor Arbiter found petitioners dismissal to have been
for a just cause and with due process. However, he ordered respondent to pay petitioners
"proportionate 13th month pay for the year 2000 [sic] and final assistance" in the amount of
Thirty Three Thousand Two Hundred Fifty Pesos (P33,250).
On appeal, the NLRC, finding petitioner to have been illegally dismissed, set aside the Labor
Arbiters decision and awarded backwages, separation pay, and 13th month pay. It held that
petitioners dismissal was due to the heated argument between her and Mary Anne and that
she was already penalized when she was required to pay via salary deduction the abovestated fine meted the company.
On petition for certiorari, the Court of Appeals nullified the NLRC decision and reinstated the
Labor Arbiters decision.7 The appellate court ruled that petitioner neglected her duties not
just once, but four times. Furthermore, it held that, following Amadeo Fishing Corporation v.
Nierra,8 as petitioner occupied a position of trust and confidence, the company could not be
compelled to continuously engage her services which is detrimental to its interests.
Petitioners motion for reconsideration having been denied by Resolution9 dated August 17,
2007, she filed the present petition.10
The petition fails.
Under Article 282 (b) of the Labor Code, negligence must be both gross and habitual to
justify the dismissal of an employee. Gross negligence is characterized by want of even

slight care, acting or omitting to act in a situation where there is a duty to act, not
inadvertently but willfully and intentionally with a conscious indifference to consequences
insofar as other persons may be affected.11
In the present case, petitioner, as respondents Accounting Manager, failed to discharge her
important duty of remitting SSS/PhilHealth contributions not once but quadruple times,
resulting in respondents incurring of penalties totaling P18,580.41, not to mention the
employees/members contributions being unupdated.
Her claim of being overworked and undermanned does not persuade. As noted by
respondent, the company had been in operation for less than three (3) months at the time
the negligence and delays were committed, with only a few transactions and only with one
principal, Malaysian Merchant Marine Bhd., hence, its financial and accounting books should
not have been difficult to prepare. Moreover, as claimed by respondent which was not
refuted by petitioner, she failed to remit the contributions as early as November 2001 during
which time, however, on-the-job trainees were still with the company, hence, her claim of
being undermanned behind such failure does not lie.
As to the delay in the remittance of SSS/PhilHealth contributions for January 2002, which
petitioner claims to be due to the fact that the money intended for payment was not yet
credited as of February 20, 2002 to respondents bank account, as well as to her absence
the following day or on February 21, 2002 due to hypertension, the Court is not persuaded,
given that at that time, she had already been in delay in the performance of her duties.
On petitioners declaration that "I believe that I did something good for our office when our
declaration of gross income submitted to City Hall for the renewal of our municipal license
was lower than our actual gross income for which the office had paid a lower amount," the
Court finds the same as betraying a streak of dishonesty in her. It partakes of serious
misconduct.
x x x Misconduct has been defined as improper or wrong conduct. It is the 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. The misconduct to
be serious must be of such grave and aggravated character and not merely trivial and
unimportant. Such misconduct, however serious, must nevertheless be in connection with
the employees work to constitute just cause for his separation. Thus, for misconduct or
improper behavior to be a just cause for dismissal, (a) it must be serious; (b) must relate to
the performance of the employees duties; and (c) must show that the employee has
become unfit to continue working for the employer. Indeed, an employer may not be
compelled to continue to employ such person whose continuance in the service would be
patently inimical to his employers interest.12 (Emphasis supplied)
For her act of understating the companys profits or financial position was willful and not a
mere error of judgment, committed as it was in order to "save" costs, which to her warped
mind, was supposed to benefit respondent. It was not merely a violation of company policy,
but of the law itself, and put respondent at risk of being made legally liable. Verily, it
warrants her dismissal from employment as respondents Accounting Manager, for as
correctly ruled by the appellate court, an employer cannot be compelled to retain in its
employ someone whose services is inimical to its interests.
As to whether due process was accorded petitioner, the Court rules in the affirmative. Far
from being arbitrary, the termination of her services was effected after she was afforded the
opportunity to, as she did, submit her explanation on why she should not be disciplined or
dismissed, which explanation, it bears reiteration, was, however, found unsatisfactory.
WHEREFORE, the May 25, 2007 Decision of the Court of Appeals reinstating the April 15,
2003 decision of the Labor Arbiter is AFFIRMED.
SO ORDERED.
G.R. No. 86000
September 21, 1990
GOLD CITY INTEGRATED PORT SERVICES, INC. (INPORT), petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (NLRC) and JOSE L.
BACALSO, respondents.
Jerry M. Pacuribot for petitioner.
Francisco D. Alas for private respondent.
FELICIANO, J.:

Private respondent Jose Bacalso was employed as an admeasurer by the petitioner Gold City
Integrated Port Services, Inc. ("Gold City"). He was suspected by management of under
measuring cargo. Hence, on 23 January 1987, the cargo control officer ordered two (2) other
admeasurers to re-measure three (3) pallets of bananas which had already been measured
by private respondent. 1 The re-measurement revealed that respondent had undermeasured the bananas by 1.427 cubic meters. 2
Private respondent felt insulted by the re-measurement and so the next day he went to the
office of the Chief Admeasurer, Rolando Guanaco, and there confronted Nigel Mabalacad,
one of the two (2) admeasurers who had re-checked his work, regarding the matter. Private
respondent quarreled with Mabalacad in the presence of Guanaco, their immediate superior,
inside the latter's office. Guanaco directed private respondent to stop provoking Mabalacad
and told both that being in his office, they should behave properly. Private respondent
ignored this oral directive and a fistfight erupted then and there between him and
Mabalacad. Both were eventually pacified by their co-workers. 3
Private respondent Bacalso was then charged with assaulting a co-employee and falsifying
reports and records of the company relative to the performance of his duties, and was
preventively suspended pending investigation of his case by the union-management
grievance committee. 4 In a letter dated 20 March 1987, the grievance committee referred
the disposition of the matter to management in view of the objections of the aggrieved
parties to the proposal that private respondent be meted out a penalty of forty-five (45)
days suspension. 5 Apparently, Guangco and Mabalacad did not consider suspension an
adequate sanction considering private respondent's alleged inability to get along with the
other admeasurers and with the company's customers. On 11 April 1987, private respondent
received a notice of termination of services upon the grounds of assaulting a co-employee
and of insubordination. 6
Private respondent Bacalso filed a complaint for illegal dismissal with the Regional
Arbitration Branch No. 10 of the Department of Labor and Employment on 25 May 1987. He
controverted the finding of insubordination, contending that there was no evidence he had
wilfully disobeyed any order given by his superior during the incident. He admitted
assaulting his co-employee but claimed that that did not constitute just cause for his
dismissal under Article 282 (d) of the Labor Code because that act was not an offense
committed against his employer's duly authorized representative. He prayed for
reinstatement with backwages and damages. 7
Petitioner Gold City in its answer argued that Bacalso's failure to heed Guangco's order to
stop provoking Mabalacad constituted insubordination or disrespect towards a superior
officer punishable by dismissal under the Schedule of disciplinary sanctions and norms of
conduct, incorporated in the existing Collective Bargaining Agreement ("CBA") with the
union. 8
The Labor Arbiter rendered an award in favor of private respondent Bacalso holding that the
dismissal was illegal because there was no evidence to support the charge of
insubordination, and that assault on a co-employee was punishable only with fifteen (15)
days suspension under the CBA's Schedule of penalties. In view of the strained relations
between the parties, however, the Labor Arbiter did not order reinstatement and awarded
Bacalso separation pay and attorney's fees instead. 9
Both parties appealed to the National Labor Relations Commission ("NLRC").
The NLRC, in a decision dated 30 August 1988, held that only Bacalso's appeal was
meritorious. It declined to characterize the assailed conduct of Bacalso as insubordination
under Article 282 (a) of the Labor Code because Guangco's order was "not connected with"
Bacalso's work, and did not amount to wilful or gross disrespect. The NLRC modified the
Labor Arbiter's decision by ordering private respondent Bacalso's reinstatement with
backwages. 10
Petitioner, having moved for reconsideration without success, is before this Court on
certiorari. On 20 February 1989, the Court issued a temporary restraining order enjoining
execution of the NLRC's decision pending resolution of this Petition, effective upon
petitioner's posting of a cash or surety bond in the amount of P60,000.00. 11 Petitioner Gold
City posted a cash deposit in the required amount. 12
In its Petition, Gold City emphasizes management's prerogative to promulgate rules of
discipline and to enforce the Schedule of disciplinary sanctions providing for dismissal of an
employee who commits gross disrespect of a superior officer. 13
In his Comment on the Petition, private respondent Bacalso alleged that he was apprised of
the charge of insubordination only in his notice of termination, and that he was thereby

denied an opportunity to be heard on this charge before being dismissed, in violation of

Sections 2 and 5 of Rule 14 of the Omnibus Rules Implementing the Labor Code. 14
Two (2) issues are posed for resolution in this case; (a) whether private respondent was
denied due process in the course of his dismissal; and (b) whether private respondent was
dismissed for a just cause.
In respect of the first issue, it must be noted that petitioner did not properly inform private
respondent of all the infractions of company regulations which subsequently became the
justification for his dismissal. After being preventively suspended, he was charged with
assaulting a co-employee and falsifying reports and records of the company relating to the
performance of his duties. Consequently, throughout the investigation conducted at the
company level, private respondent's explanations in defense were shaped to meet only
those charges. Petitioner discovered it could not sustain the charge of falsification of
company records against private respondent. Since assault upon a co-employee, the charge
admitted by private respondent, is punishable only with fifteen (15) days suspension under
the CBA's Schedule of penalties, it in effect became necessary for petitioner to characterize
said assault as an act of "insubordination or disrespect towards a superior officer", an
offense punishable with dismissal under the Schedule. 15 So it came to pass that when
private respondent received his notice of termination, the causes therefor were stated as
assault on a co-employee and insubordination.
The Court considers that there was here at least a partial deprivation of private respondent's
right to procedural due process. He could not be expected adequately to defend himself as
he was not fully or correctly informed of the charges against him which management
intended to prove. It is less than fair for management to charge an employee with one
offense and then to dismiss him for having committed another offense with which he had
not been charged and against which he was therefore unable adequately to defend himself.
Correct specification of private respondent's alleged wrongdoing was obviously important
here, since the penalty that could appropriately be meted out depended upon what offense
was charged and proven. It has been stressed by the Court that the right of an employee to
procedural due process consists of the twin rights of notice and hearing. 16 The purpose of
the requirement of notice is obviously to enable the employee to defend himself against the
charge preferred against him by presenting and substantiating his version of the facts. Since
Gold City here in effect charged private respondent with a second offense other than
falsification of company records, it was incumbent upon petitioner employer to have given
private respondent additional time and opportunity to meet the new charge against him of
insubordination. Gold City failed to do that here. In so failing, Gold City failed to accord to
private respondent the full measure of his right to procedural due process. The fact that in
the proceedings before the Labor Arbiter the conduct of private respondent that petitioner
regarded as insubordination was substantiated, does not militate against this conclusion.
Coming to the second issue, Article 282 of the Labor Code provides in part:
Art. 282. Termination by Employer.-An employer may terminate an employment for any of
the following causes: a) Serious misconduct or wilful disobedience by the employee of the
lawful orders of his employer or representative in connection with his work.
xxx

xxx

xxx

(Emphasis supplied)
Wilful disobedience of the employer's lawful orders, as a just cause for the dismissal of an
employee, envisages the concurrence of at least two (2) requisites: the employee's assailed
conduct must have been wilful or intentional, the wilfulness being characterized by a
"wrongful and perverse attitude"; and the order violated must have been reasonable, lawful,
made known to the employee and must pertain to the duties which he had been engaged to
discharge. 17 Both requisites are present in the instant case.
By private respondent Bacalso's own admission, he felt insulted by the re-measurement of
the cargo he had already measured. He was apparently much offended by the implication he
perceived that management was uncertain either about his honesty or his competence or
possibly both. He determined to lose his temper, became very angry and picked a fight with
one of the co-workers who had been instructed by their common superior to carry out the remeasurement of private respondent's pallets of bananas. In the process, private respondent
Bacalso completely disregarded the courtesy and respect due from a subordinate to his
superior. Indeed, he may have been, consciously or otherwise, precisely sending a signal to
his superior officer in whose presence he provoked and then engaged in physical violence
with his co-worker. Prior to the fistfight, Guangco had warned Bacalso to desist from further
provoking his co-worker with insulting language. This warning constituted an order from
private respondent's immediate superior not to breach the peace and order of the

Surveyors'(Admeasurers') Division; Guangco was obviously attempting to maintain basic

employee discipline in the workplace.
It is thus not easy to understand how public respondent NLRC could have reasonably
concluded that Guangco's order and warning were "not connected" with private
respondent's work. We believe and so hold that private respondent's act constituted wilful
disobedience to a lawful order of petitioner's representative obviously connected with
private respondent's work.
It does not follow, however, that private respondent Bacalso's services were lawfully
terminated either under Article 282 (a) of the Labor Code or under the CBA Schedule of
penalties. We believe that not every case of insubordination or wilful disobedience by an
employee of a lawful work-connected order of the employer or its representative is
reasonably penalized with dismissal. For one thing, Article 282 (a) refers to "serious
misconduct or wilful disobedience". There must be reasonable proportionality between, on
the one hand, the wilful disobedience by the employee and, on the other hand, the penalty
imposed therefor. Examination of the circumstances surrounding private respondent's
assault upon his co-employee shows that no serious or substantial danger had been posed
by that fistfight to the well-being of his other co-employees or of the general public doing
business with petitioner employer; and neither did such behavior threaten substantial
prejudice for the business of his employer. The fistfight occurred inside the offices of the
Surveyors' Division, more particularly, Mr. Guangco's office, away from the view of
petitioner's customers or of the general public. In Lausa v. National Labor Relations
Commission, 18 petitioner Lausa exhibited disorderly and pugnacious behavior in the course
of an argument with his immediate superior, in the presence of passengers and other
crewmen on board the inter-island vessel of which Lausa was a crew-member. In that case,
the Court sustained the dismissal of petitioner Reynaldo Lausa considering that his
"behavior could easily have provoked or triggered off a brawl and mindless panic on board
the vessel, and endangered the safety of people and crew-members, and under certain
conditions, the safety of the vessel itself." In Wenphil Corporation v. National Labor Relations
Commission, 19 the Court also sustained the dismissal of private respondent Roberto Mallare
who, while tending the salad bar of a fast food restaurant, engaged in an altercation a coworker slapping the latter on the head, stepping on his foot, brandishing an ice scooper
against him and refusing to be pacified, right in front and in plain sight of customers dining
in the restaurant, thus posing a substantial threat of disorder in the restaurant. In the instant
case, private respondent Bacalso's disorderly behavior did not present a comparable threat
to the safety or peace of mind of his co-workers or that of the customers of Gold City.
Considering that private respondent Bacalso's unruly temper did not become an effective
threat to his co-workers or the safety of the customers dealing with his employer, or to the
goodwill of his employer, and considering further that he had been quite candid in admitting
that he had been at fault as soon as the investigation began in the company level, we agree
with the NLRC that termination of his services was a disproportionately heavy penalty. We
believe that suspension without pay for three (3) months would be an adequate penalty for
the assault on a co-worker and act of insubordination that private respondent Bacalso
actually committed.
It follows that private respondent Bacalso is entitled to reinstatement. 20 Should
reinstatement to his previous position not be feasible because of his relationship or lack of
relationship with his fellow admeasurers, he should be reinstated to a substantially
equivalent position in another division of the company. If that is not possible or feasible
either, then in lieu of such reinstatement, petitioner shall pay private respondent separation
pay equivalent to one-month's pay for every year of service. 21 Private respondent is also
entitled to his backwages; however, an amount equivalent to his three (3) months pay shall
be deducted from such backwages. The award of attorney's fees stays.
WHEREFORE, the Petition for certiorari is hereby DISMISSED for lack of merit, and the
Decision dated 30 August 1988 of public respondent NLRC is hereby AFFIRMED with the
modifications that: (1) from private respondent's backwages, there shall be deducted an
amount equivalent to his three-month's pay corresponding to the penalty properly
imposable upon him; and (2) should reinstatement to private respondent Bacalso's former
position, or to a substantially equivalent position in another division of petitioner Gold City,
not be feasible, petitioner shall pay private respondent Bacalso, in lieu of such
reinstatement, separation pay equivalent to one-month's pay for every year of service. The
temporary restraining order dated 20 February 1989 is hereby LIFTED. No pronouncement as
to costs.
SO ORDERED.
G.R. No. 125031
January 24, 2000
PERMEX INC. and/or JANE (JEAN) PUNZALAN, PERSONNEL MANAGER and EDGAR
LIM, MANAGER, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL FILOTEO, respondents.
QUISUMBING, J.:
This special civil action for certiorari impugns the Resolution of the National Labor Relations
Commission, Fifth Division, dated March 14, 1996, which reversed the decision of the Labor
Arbiter in NLRC Case No. RAB-09-00259-94, as well as its Resolution, dated April 17, 1996,
denying the motion for reconsideration.
Petitioner, Permex Producer and Exporter Corporation (hereinafter Permex), is a company
engaged in the business of canning tuna and sardines, both for export and domestic
consumption. Its office and factory are both located in Zamboanga City.
Co-petitioners Edgar Lim and Jean Punzalan1 are its Manager and Personnel Manager,
respectively.
Private respondent Emmanuel Filoteo, an employee of Permex, was terminated by
petitioners allegedly for flagrantly and deliberately violating company rules and regulations.
More specifically, he was dismissed allegedly for falsifying his daily time record.
The pertinent facts, as found by both the NLRC and the Labor Arbiter, are as follows:
Permex initially hired Emmanuel Filoteo on October 1, 1990, as a mechanic. Eventually,
Filoteo was promoted to water treatment operator, a position he held until his termination on
August 29, 1994. As water treatment operator, Filoteo did not have a fixed working
schedule. His hours of work were dependent upon the company's shifting production
schedules.
On July 31, 1994, Filoteo was scheduled for the night shift from 7:00 p.m. to 7:00 a.m. the
following day. That night he reported for work together with his co-workers, Felix Pelayo and
Manuel Manzan. They logged in at the main gate and guardhouse of the petitioner's factory.
Filoteo entered his time-in at 8:45 p.m. and since he was scheduled to work until 7:00 a.m.
the next day, he wrote 7:00 a.m. in his scheduled time-out. This practice of indicating the
time out at the moment they time in, was customarily done by most workers for
convenience and practicality since at the end of their work shift, they were often tired and in
a hurry to catch the available service vehicle for their trip home, so they often forgot to log
out. There were times also when the Log Book was brought to the Office of the Personnel
Manager and they could not enter their time out. The company had tolerated the
practice.1wphi1.nt
On the evening of July 31, 1994, at around 9:20 p.m., Filoteo, together with Pelayo, went to
see the Assistant Production Manager to inquire if "butchering" of fish would be done that
evening so they could start operating the boiler. They were advised to wait from 9:30 p.m. to
10:00 p.m. for confirmation.
At or about 10:00 p.m., Filoteo and Pelayo went back to the Assistant Production Manager's
office. There they were informed that there would be no "butchering" of tuna that night.
Filoteo then sought permission to go home, which was granted. Filoteo then hurriedly got his
things and dashed off to the exit gate to catch the service jeep provided by Permex.
The next day, August 1, 1994, Filoteo reported for work as usual. He then remembered that
he had to make a re-entry in his daily time record for the previous day. He proceeded to the
Office of the Personnel Manager to retime his DTR entry. Later, he received a memorandum
from the Assistant Personnel Officer asking him to explain, in writing, the entry he made in
his DTR. Filoteo complied and submitted his written explanation that same evening.
On August 8, 1994, Filoteo was suspended indefinitely. His explanation was found
unsatisfactory. He was dismissed from employment on August 23, 1994.
The dismissal arose from Filoteo's alleged violation of Article 2 of the company rules and
regulations. The offense charged was entering in his DTR that he had worked from 8:45 p.m.
of July 31, 1994 to 7:00 a.m. of August 1, 1994, when in fact he had worked only up to 10:00
p.m.
On September 5, 1994, Filoteo filed a complaint for illegal dismissal with claims for
separation pay, damages, and attorney's fees with the Labor Arbiter. His complaint was
docketed as NLRC Case No. RAB 09-09-00259-94.
On June 9, 1995, the Labor Arbiter dismissed the complaint for lack of merit. The decretal
portion of the decision reads:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered

dismissing the complaint for lack of merit. However, for violation of compliance of (sic)
procedural due process, the respondent is hereby ordered thru its Authorized Officer to pay
complainant P1,000.00 by way of indemnity pay. Furthermore, complainant's claims for
damages and attorney's fees be dismissed for lack of merit.
SO ORDERED.2
Filoteo appealed to the NLRC. Finding merit therein, the Commission's Fifth Division
promulgated its resolution, reversing and setting aside the Labor Arbiter's decision, by
disposing as follows:
WHEREFORE, the decision appealed from, is Vacated and Set Aside and a new one entered
declaring the complainant to have been illegally dismissed by respondent company.
Accordingly, respondent Permex, Inc., through its corporate officers, is hereby ordered and
directed to pay complainant, Emmanuel Filoteo, separation pay at the rate of one (1) month
salary for every year of service or in the equivalent of four (4) months separation pay and
backwages effective August 23, 1994 up to the promulgation of this decision, inclusive of
fringe benefits, if any. Further, respondent company is ordered to pay complainant moral and
exemplary damages in the sum of P10,000.00 and P5,000.00, respectively, as well as
attorney's fees equivalent to ten (10%) percent of the total monetary award after
computation thereof at the execution stage.
SO ORDERED.3
On April 3, 1996, petitioners filed a motion for reconsideration. It was denied for lack of
merit by the NLRC in a resolution dated April 17, 1996.
Hence, the present petition, assigning the following errors:
I
PUBLIC RESPONDENT'S RESOLUTIONS ARE CONTRARY TO THE EVIDENCE ON RECORD AND
ADMITTED FACTS.
II
PUBLIC RESPONDENT ERRED WHEN IT RULED THAT PRIVATE RESPONDENT WAS ILLEGALLY
DISMISSED.
III
PUBLIC RESPONDENT ERRED WHEN IT AWARDED PRIVATE RESPONDENT SEPARATION PAY,
BACKWAGES, DAMAGES AND ATTORNEY'S FEES SANS FACTUAL AND LEGAL BASIS.
We will now consider these assigned errors to resolve the principal issue of whether or not
private respondent was illegally terminated from his employment.
Note that, firstly, petitioners seek a reversal of the public respondent's findings of the facts.
But as the Court has repeatedly ruled the findings of facts of the NLRC, particularly where
the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive upon
the Court.4 For the Court is not a trier of facts.5 Second, resort to judicial review of the
decisions of the NLRC in a special civil action for certiorari under Rule 65 of the Rules of
Court, is limited only to the question generally of grave abuse of discretion amounting to
lack or excess of jurisdiction.6 Thirdly, in this case, the NLRC's factual findings are supported
by the evidence on record. We are therefore constrained not to disturb said findings of fact.
Whether private respondent was illegally dismissed or not is governed by Article 282 of the
Labor Code.7 To constitute a valid dismissal from employment, two requisites must concur:
(a) the dismissal must be for any of the causes provided for in Article 282 of the Labor Code;
and (b) the employee must be afforded an opportunity to be heard and defend himself.8 This
means that an employer can terminate the services of an employee for just and valid
causes, which must be supported by clear and convincing evidence.9 It also means that,
procedurally, the employee must be given notice, with adequate opportunity to be heard,10
before he is notified of his actual dismissal for cause.
In the present case, the NLRC found that the two-fold requirements for a valid dismissal were
not satisfied by the petitioners.

First, petitioner's charge of serious misconduct of falsification or deliberate

misrepresentation was not supported by the evidence on the record contrary to Art. 277 of
the Labor Code which provides that:
Art. 277. Miscellaneous provisions.
xxx

xxx

xxx

(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause. . . The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer. . .
Second, the private respondent was not afforded an opportunity to be heard. As found by
the NLRC:
. . . Aside from the fact that there was no valid and justifiable cause for his outright dismissal
from the service, complainant's dismissal as correctly held by the Labor Arbiter was tainted
with arbitrariness for failure of respondent company (petitioner herein) to observe
procedural due process in effecting his dismissal. Admittedly, complainant was suspended
indefinitely on August 8, 1994 and subsequently dismissed on August 23, 1994 without any
formal investigation to enable complainant to defend himself.11
Such dismissal, in our view, was too harsh a penalty for an unintentional infraction, not to
mention that it was his first offense committed without malice, and committed also by
others who were not equally penalized.12
It is clear that the alleged false entry in private respondent's DTR was actually the result of
having logged his scheduled time-out in advance on July 31, 1994. But it appears that when
he timed in, he had no idea that his work schedule (night shift) would be cancelled. When it
was confirmed at 10:00 p.m. that there was no "butchering" of tuna to be done, those who
reported for work were allowed to go home, including private respondent. In fact, Filoteo
even obtained permission to leave from the Assistant Production Manager.
Considering the factory practice which management tolerated, we are persuaded that
Filoteo, in his rush to catch the service vehicle, merely forgot to correct his initial time-out
entry. Nothing is shown to prove he deliberately falsified his daily time record to deceive the
company. The NLRC found that even management's own evidence reflected that a certain
Felix Pelayo, a co-worker of private respondent, was also allowed to go home that night and
like private respondent logged in advance 7:00 a.m. as his time-out. This supports Filoteo's
claim that it was common practice among night-shift workers to log in their usual time-out in
advance in the daily time record.
Moreover, as early as Tide Water Associated Oil Co. v. Victory Employees and Laborers'
Association, 85 Phil. 166 (1949), we ruled that, where a violation of company policy or
breach of company rules and regulations was found to have been tolerated by management,
then the same could not serve as a basis for termination.
All told we see no reason to find that the NLRC gravely abused its discretion when it ruled
that private respondent was illegally dismissed. Hence we concur in that ruling. Nonetheless,
we find that the award of moral and exemplary damages by the public respondent is not in
order and must be deleted. Moral damages are recoverable only where the dismissal of the
employee was tainted by bad faith or fraud, or where it constituted an act oppressive to
labor, and done in a manner contrary to morals, good customs, or public policy.13 Exemplary
damages may be awarded only if the dismissal was done in a wanton, oppressive, or
malevolent manner.14 None of these circumstances exist in the present case.
WHEREFORE, the petition is DENIED. The assailed resolutions of the National Labor Relations
Commission dated March 14, 1996 and April 17, 1996 in NLRC CA No. M-002808-95 are
AFFIRMED with MODIFICATION. Petitioner Permex, through its corporate officers, is ORDERED
to pay jointly and solidarily the private respondent separation pay at the rate of one (1)
month salary for every year of service as well as backwages effective August 23, 1994,
inclusive of fringe benefits if any, with legal interest until fully paid, and attorney's fees
equivalent to ten (10%) percent of the total monetary award computed at the execution
stage hereof. The award of moral and exemplary damages, however, is DELETED. Costs
against petitioners.1wphi1.nt
SO ORDERED.
G.R. No. 117652
April 27, 2000
ROLANDO APARENTE, SR., petitioner,
vs.

NATIONAL LABOR RELATIONS

PHILIPPINES, INC., respondents.

COMMISSION,

and

COCA-COLA

BOTTLERS

DE LEON, JR., J.:

Before us is a petition for certiorari1 seeking to annul the Resolution dated September 19,
1994 of the National Labor Relations Commission (NLRC)2 which reversed the decision of the
labor arbiter dated April 23, 1990 and found the dismissal of petitioner for violation of
company rules and regulations as valid.
The pertinent facts are as follows:
Petitioner Rolando Aparante, Sr. was first employed by private respondent Coca-Cola Bottlers
Phils., Inc. (CCBPI), General Santos City Plant as assistant mechanic in April 1970. He rose
through the ranks to eventually hold the position of advertising foreman until his termination
on May 12, 1988 for alleged violation of company rules and regulations.3 His monthly salary
at the time of his termination was P5,600.00.4
On November 9, 1987 at around 10:30 in the morning, petitioner drove private respondent's
advertising truck with plate number LBV-970 to install a panel sign. While traversing Zenia
St. Ext., Polomolok, South Cotabato, petitioner sideswiped Marilyn Tejero, a ten-year old girl.
Petitioner brought Tejero to Heramil Clinic for first aid treatment. As the girl suffered a 2 cm.
fracture on her skull which was attributed to the protruding bolt on the truck's door, she was
subsequently transferred to the General Santos City Doctor's Hospital where she underwent
surgical operation. She stayed in the hospital for about a month.5
On November 14, 1987 or five days after the accident, petitioner reported the incident to
private respondent. At about the same time, petitioner submitted himself to the police
authorities at Polomolok, South Cotabato for investigation6 where it was discovered that
petitioner had no driver's license at the time of the accident. In view thereof, FGU Insurance
Corporation, an insurer of private respondent's vehicles, did not reimburse the latter for the
expenses it incurred in connection with Tejero's hospitalization.7 Private respondent spent a
total amount of P19,534.45, P17,988.48 of which was spent for hospitalization expenses
while the remaining amount served as Tejero's living allowance during her confinement.
On November 26, 1987, private respondent conducted an investigation of the incident where
petitioner was given the opportunity to explain his side and to defend himself.
On May 12, 1988, private respondent dismissed petitioner from employment for having
violated the company rules and regulations particularly Sec. 12 of Rule 005-858 for blatant
disregard of established control procedures resulting in company damages amounting to
P19,534.45.9
Aggrieved, petitioner instituted a case for illegal dismissal 10 against private respondent
before the Labor Arbiter. After the parties filed their respective position papers, the Labor
Arbiter rendered a decision, the dispositive portion of which reads:
ACCORDINGLY, respondent Coca-Cola Bottlers Phil. Inc. (CCBPI) is hereby directed to
reinstate complainant to his former or substantially equivalent position in General Santos
City without loss of seniority rights and other privileges. Pursuant to RA 6715, the
reinstatement of complainant is immediately executory upon the promulgation of this
Decision.
The claim for backwages and damages is however DENIED for reasons aforecited. 11
Dissatisfied, both parties appealed to the NLRC which dismissed both appeals and affirmed
the decision of the Labor Arbiter in a resolution dated June 27, 1994.
Private respondent filed a motion for reconsideration of the said resolution which was
granted by the NLRC on September 19, 1994. In reversing its previous resolution, the NLRC
ruled:
WHEREFORE, the Resolution of this Commission dated June 27, 1994 is reconsidered.
Accordingly, the Resolution [affirming] 12 the decision of Labor Arbiter below dated April 23,
1990 is vacated and set aside. In its stead, judgment is hereby rendered declaring the
dismissal of complainant as one for just cause and effected after observance of due process.
His dismissal, is, thus, Sustained as valid and lawful. However, considering that
complainant's violation of company rule is not reflective of his moral character plus his
eighteen (18) long years of loyal and efficient service to the company, respondent company
is ordered to pay complainant separation pay by way of financial assistance equivalent to
one-half (1/2) month pay for every year of service.

Complainant's appeal is ordered Dismissed for lack of merit. 13

Hence, this petition.
Petitioner contends that the NLRC erred in holding that private respondent afforded him due
process. He argues that when he was investigated for his involvement in the vehicular
accident, it was simply for the offense of driving without a valid driver's license. He further
asserts that had he been informed of the alleged damages incurred by private respondent,
he could have presented evidence to prove otherwise. Thus, he would not have been
terminated from service pursuant to Sec. 12 of Rule 005-85 of CCBPI's Code of Disciplinary
Rules and Regulations which provides that:
A first, second and third offense is punishable only by a suspension of 6 days, 15 days, and
30 days, respectively. The penalty of "discharge" is imposed only after the fourth offense or
when the damage caused upon private respondent is more than P5,000.00. (Emphasis
supplied).
Petitioner's contention is baseless. He was fully aware that he was being investigated for his
involvement in the vehicular accident that took place on November 9, 1987. The
investigation was conducted because he figured in an accident in which he sideswiped
Marilyn Tejero, and not for mere violation of traffic rules. It was also known to petitioner that
as a result of the accident, the victim suffered a 2 cm. fracture on her skull which led to the
latter's surgical operation and confinement in the hospital for which private respondent
incurred expenses amounting to P19,534.45 which FGU Insurance Corporation refused to
reimburse upon finding that petitioner was driving without a valid driver's license. Thus,
being aware of all these circumstances and the imposable sanctions under private
respondent's Code of Disciplinary Rules and Regulations, petitioner should have taken it
upon himself to present evidence to lessen his culpability.
While the stenographic notes taken during the investigation of petitioner do not state that
the amount of P19,534.45 was paid for the hospitalization of the victim and that the
insurance company did not reimburse private respondent for its expenses, the Memorandum
dated May 12, 1988 terminating petitioner's employment clearly states that:
xxx

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xxx

You, therefore, have violated the Company Rules and Regulations, particularly Sec. 12 of
Rule 005-85 for blatant disregard of established control procedures which resulted in
Company damages amounting to Nineteen Thousand Five Hundred Thirty Four and 45/100
(P19,534.45).
xxx

xxx

xxx

If petitioner did not agree with the amount purporting to be the loss suffered by the
company, he should have refuted the same before the labor arbiter. This omission creates an
adverse inference that such uncontroverted evidence speaks of the truth. 14 Not only did
petitioner fail to contradict the same, he even impliedly admitted the amount of such
expenses when he alleged in his position papers that:
. . . But for the paltry and measly sum of P19,534.45 (yes, the sum is paltry and measly
considering the wealth of respondent), he got his walking papers! 15
Entrenched is the rule that the essence of due process does not necessarily mean or require
a hearing but simply a reasonable opportunity or a right to be heard or as applied to
administrative proceedings, an opportunity to explain one's side. 16 In labor cases, the filing
of position papers and supporting documents fulfill the requirements of due process. 17
Petitioner also contends that the NLRC erred in ordering his dismissal despite its initial
finding that the private respondent had implicitly tolerated his driving without a license.
According to petitioner, he informed the company that he had lost his license five months
before the accident. Notwithstanding such fact, the company allowed petitioner to continue
performing his job which necessarily included driving the vehicle assigned to him. Thus,
petitioner shifts the blame to the company, claiming that it should have simply ordered him
to desist from driving the vehicle once it was informed of the loss of petitioner's license.
Private respondent's failure to do so amounted to a waiver of its own rules and regulations
which it cannot now invoke to justify petitioner's dismissal from service.
Petitioner's contention is belied by his very own admission in his position papers filed before
the Labor Arbiter and the NLRC that the company had in fact prohibited him from driving

immediately after he lost his license, and had requested him to secure a new license. 18
However, through misrepresentations, the petitioner led the private respondent to believe
that he had procured another driver's license. Thus, he was permitted to drive again. 19
In fact, during the investigation conducted by private respondent after the accident,
petitioner attempted once more to mislead the private respondent into believing that he had
a driver's license at the time of the accident. He declared as follows:
Q11. Upon (sic) basing on the Police report of Traffic Division Head, Cpl. George Valencia, he
disclosed further that you were not carrying a valid driver's license during the vehicular
accident last November 9, 1987. What can you say about his finding?
A11. That is only the Police allegation that I was not carrying a valid driver's license during
the vehicular accident. In fact I presented my driver's license to him. My license number is PL04-65-011834, which will expire on October 28, 1988.
Q12. On (sic) this investigation, can you present your Professional Driver's license to me?
A12. Yes.
Q13. Upon further analysis on (sic) your Professional Driver's License which bears the
number P-L04-65-11834, which will expire on October 28, 1988, I noticed that it was only
issued to you by Gen. Santos LTC last November 16, 1987. What can you say about this?
A13. It was only on that very day that I was able to claim the original copy of the Driver's
License for legal purposes. 20
If it were true that the private respondent had known all along that petitioner was driving
without a license, then there would have been no need for the latter to assert the contrary
during the investigation.
Hence, the issue that arises now is whether or not the infraction committed by petitioner
warrants the penalty of dismissal despite the fact that it was his first offense during his
eighteen (18) long years of satisfactory and unblemished service.
We answer in the affirmative.
First, the petitioner's dismissal is justified by company rules and regulations. It is true that
his violation of company rules is his first offense. Nonetheless, the damage caused to private
respondent amounted to more than P5,000.00, thus, the penalty of discharge is properly
imposable as provided by Section 12 of Rule 005-85 of CCBPI's Code of Disciplinary Rules
and Regulations.
It is recognized that company policies and regulations, unless shown to be grossly
oppressive or contrary to law, are generally valid and binding on the parties and must be
complied with until finally revised or amended, unilaterally or preferably through
negotiation, by competent authority. 21 The Court has upheld a company's management
prerogatives so long as they are exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements. 22
Second, Article 282 23 (a) of the Labor Code of the Philippines sanctions termination by the
employer of the employee's services for serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in connection with his work.
In the instant case, petitioner Aparente was terminated from service after having been found
guilty of driving without a valid driver's license, which is a clear violation of the company's
rules and regulations.1wphi1.nt
In order that an employer may dismiss an employee on the ground of willful disobedience,
there must be concurrence of at least two requisites: the employee's assailed conduct must
have been willful or intentional, the willfulness being characterized by a wrongful and
perverse attitude; and the order violated must have been reasonable, lawful, made known to
the employee and must pertain to the duties which he had been engaged to discharge. 24
We have found these requisites to be present in the case at bar. The extant evidence on
record clearly reveals the willful act of petitioner Aparente in driving without a valid driver's
license, a fact that he even tried to conceal during the investigation conducted by private
respondent. Such misconduct should not be rewarded with re-employment and backwages,
for to do so would wreak havoc on the disciplinary rules that employees are required to
observe. The law warrants the dismissal of an employee without making any distinction
between a first offender and a habitual delinquent where the totality of the evidence was

sufficient to warrant his dismissal. In protecting the rights of the laborer, the law authorizes
neither oppression nor self-destruction of the employer. 25
An employee who is dismissed for cause is generally not entitled to any financial assistance.
Equity considerations, however, provide an exception. Equity has been 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. 26 In the case of Camua v. NLRC, 27
the Court laid down the guidelines in the grant of separation pay to a lawfully dismissed
employee, thus:
We hold that henceforth separation pay shall be allowed as a measure of social justice only
in those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
In the instant case, we find the award to petitioner of separation pay by way of financial
assistance equivalent to one-half (1/2) month's pay for every year of service equitable.
Although meriting termination of employment, petitioner's infraction is not so reprehensible
nor unscrupulous as to warrant complete disregard for the fact that this is his first offense in
an employment that has spanned eighteen (18) long years.
WHEREFORE, the petition is DISMISSED, and the assailed resolution of public respondent
NLRC dated September 19, 1994 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 107574
December 28, 1994
FEDERICO NUEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER MANUEL ASUNCION,
PHILIPPINE OVERSEAS TELECOMMUNICATIONS CORPORATION (PHILCOMSAT),
HONORIO POBLADOR, RAMON NIETO, FRED AUJERO and ROMEO VALENCIA,
respondents.
Cesar F. Maravilla, Jr. for petitioner.
Tanjuatco, Corpus, Tanjuatco, Tagle-Chua, Cruz & Aquino for private respondent.
BELLOSILLO, J.:
After nineteen years of service to private respondent company, the Philippine Overseas
Telecommunications Corporation (PHILCOMSAT), petitioner Federico Nuez found himself
dismissed from his job for his refusal to heed an order of a ranking company official. He is
now before us contending that his inaction did not constitute willful disobedience and, in any
case, his dismissal from the service is a penalty grossly disproportionate to the charge of
willful disobedience in view of his length of service. He seeks reinstatement.
Petitioner Nuez was a driver of private respondent PHILCOMSAT since 1 May 1970. On 25
November 1988 he was assigned to its station in Baras, Antipolo, Rizal, from seven-thirty in
the morning to three-thirty in the afternoon. At one-thirty that afternoon, Engr. Jeremias
Sevilla, the officer in charge and the highest ranking official of the station, asked Nuez to
drive the employees to the Makati head office to collect their profit shares. Nuez declined
saying that he had an important personal appointment right after office hours. At two-thirty
that same afternoon, he also declined a similar order given on the phone by his vehicle
supervisor, Pedro Sibal, reasoning that "Ayaw kong magmaneho dahil may bibilhin ako sa
Lagundi. Kung gusto mo yong 'loyalist' ang magmaneho."
In his memorandum of 28 November 1988, Station Manager Ramon Bisuna required Nuez to
explain within seventy-two hours why he should not be administratively dealt with for
disobeying an order of their most senior officer on 25 November 1988. In his written reply
dated 1 December 1988, Nuez mentioned a personal appointment in justification for his
refusal to render "overtime" service and that "ferrying employees . . . was not a kind of
emergency that . . . warrants (the) charge of disobedience."
Taking into consideration the reports of Engr. Sevilla and Supervisor Sibal as well as the
letter of petitioner Nuez, AVP for Transport and Maintenance Fredelino Aujero referred the
matter to Vice President for Administration Ramon V. Nieto for appropriate action and invited
his attention to the Code of Disciplinary Action of the company providing that "refusal to

obey any lawful order or instruction of a superior is classified as insubordination, an

extremely serious offense and its first infraction calls for dismissal of the erring employee."
The report of Aujero pointed out that Nuez could have obeyed the directive and still have
enough time to attend to his appointment because the order was given him two hours
before his tour of duty ended and, moreover, he was seen playing billiards after office hours.
Vice President Nieto then issued a memorandum to Nuez terminating his employment
effective 26 December 1988 for insubordination.
In his letter for reconsideration dated 1 January 1989, Nuez explained to Vice President Nieto
that after failing to get a ride to Lagundi, he went with the company coaster at four-thirty in
the afternoon and then proceeded to TMC to play billiards when the person he wanted to see
at Lagundi had already left.
On 6 March 1989, Nuez filed this suit for illegal dismissal, indemnity pay, moral and
exemplary damages and attorney's fees.
On 29 January 1990, Labor Arbiter Manuel P. Asuncion dismissed the complaint for lack of
merit but awarded Nuez a "monetary consideration" in an amount equivalent to his one-half
month salary for every year of service. On appeal, the National Labor Relations Commission
affirmed on 15 June 1992 the decision of the Labor Arbiter but limited the financial
assistance to Nuez in an amount equivalent to three months basic pay only.
In this extraordinary recourse for certiorari, Nuez seeks to set aside the decision of the NLRC
and prays for reinstatement with full back wages from the date of dismissal to actual
reinstatement without loss of seniority rights and other benefits, an award of P50,000 in
moral damages and P50,000 in exemplary damages, attorney's fees of 10% of the total
monetary award and other equitable reliefs. Nuez avers that NLRC committed grave abuse
of discretion in failing to consider the evidence on record and in relying only on the
memorandum of PHILCOMSAT; in finding that there was just cause for dismissal; and, in
affirming his dismissal which is too harsh and disproportionate a penalty for a minor charge
considering his 19 years of good service.
It is undisputed that Nuez deliberately refused to obey the directive of officer-in-charge Engr.
Sevilla and his supervisor Sibal. The argument that Engr. Sevilla is not the immediate
superior of Nuez is not an excuse not only because Sibal, the other officer who reiterated the
same directive, was his own supervisor but more importantly because it is not required that
the officer giving the order must be the immediate superior of the employee, it being
sufficient that the officer is the alter ego of the employer with regard to the order and the
order relates to the duty of the employee. In Family Planning Organization of the Philippines,
Inc. v. National Labor Relations Commission, 1 we said
In order that the willful disobedience by the employee of the orders, regulations or
instructions of the employer may constitute a just cause for terminating his employment,
said orders, regulations, or instructions must be: (1) reasonable and lawful, (2) sufficiently
known to the employee, and (3) in connection with the duties which the employee has been
engaged to discharge.
Petitioner claims that the absence of an emergency situation when the alleged infraction
was committed would not warrant his dismissal, considering that he is a recipient of two
citations for exemplary service during his 19-year stint with the company and that not one of
the employees supposedly adversely affected complained.
We are not persuaded. In San Miguel Corporation v. Ubaldo, 2 we acknowledged the
discretion of the employer to regulate all aspects of employment as well as the
corresponding obligation of the workers to obey company rules and regulations. Deliberate
disregard or disobedience of the rules cannot be countenanced and any justification for the
violation is deemed inconsequential. In fact, this is one ground the Labor Code provides for
termination of employment since an employer cannot be compelled to continue retaining a
worker found guilty of maliciously committing acts detrimental to its interests. A contrary
rule would render a mockery of the regulations the employees are required to observe.
The existence of an emergency situation is irrelevant to the charge of willful disobedience;
an opposite principle would allow a worker to shield himself under his self-designed concept
of "non-emergency situation" to deliberately defy the directive of the employer. Neither is
the resulting damage vital. The heart of the charge is the crooked and anarchic attitude of
the employee towards his employer. Damage aggravates the charge but its absence does
not mitigate nor negate the employee's liability. The fact that a replacement driver was able
to perform the task could neither alter the gravity of the charge, this responsibility being
personal to the perpetrator. The length of service rendered by the employee is also
inconsequential for it does not lessen a bit the rebellious temper of the employee object of

the charge. We thus find no grave abuse of discretion in the finding of the NLRC that there is
a just ground for the termination of petitioner from the services.
As regards the procedural due process, it is provided in Art. 277,
par. (b), of the Labor Code that
Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to
the requirement of notice under Article 283 of this Code, the employer shall furnish the
worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his representative if he so desires in
accordance with company rules and regulations promulgated pursuant to guidelines set by
the Department of Labor and Employment. Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or legality of his dismissal
by filing a complaint with the regional branch of the National Labor Relations Commission.
The burden of proving that the termination was for a valid or authorized cause shall rest on
the
employer . . . .
Particularly, the Implementing Rules and Regulations of the Labor Code provides that
Sec. 1. Security of tenure and due process. No worker shall be dismissed except for a just
or authorized cause provided by law and after due process.
Sec. 2. Notice of Dismissal. Any employer who seeks to dismiss a worker shall furnish him
a written notice stating the particular acts or omission constituting the grounds for his
dismissal . . . .
Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in
the notice of dismissal within a reasonable period from receipt of such notice. The employer
shall afford the worker ample opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
Sec. 6. Decision to dismiss. The employer shall immediately notify a worker in writing of a
decision to dismiss him stating clearly the reasons therefor.
Sec. 7. Right to contest dismissal. Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality of his dismissal by filing
a complaint with the Regional Branch of the Commission . . . .
Sec. 11.
Report on dismissal. The employer shall submit a monthly report to the
Regional Office having jurisdiction over the place of work all dismissal effected by him during
the month, specifying therein the names of the dismissed workers, the reasons for their
dismissal, the dates of commencement and termination of employment, the positions last
held by them and such other information as may be required by the Ministry for policy
guidance and statistical purposes. 3
We also held in Manggagawa ng Komunikasyon sa Pilipinas v. National Labor Relations
Commission: 4
What the law requires, as held in De Leon v. NLRC (G.R. No.
L-52056, October 30, 1980, 100 SCRA 691), cited by petitioners, is for the employer to
inform the employee of the specific charges against him and to hear his side or defenses.
This does not however mean a full adversarial proceeding. Litigants may be heard thru: (1)
pleadings, written explanations, position papers, memorandum; (2) oral arguments. In both
instances, the employer plays an active role he must provide the employee the
opportunity to present his side and answer the charges, in substantial compliance with due
process. Actual adversarial proceeding becomes necessary only for clarification or when
there is a need to propound searching questions to unclear witnesses. This is a procedural
right which the employee must, however, ask for it is not an inherent right, and summary
proceedings may be conducted. This is to correct the common but mistaken perception that
procedural due process entails lengthy oral arguments. Hearing in administrative
proceedings and before quasi-judicial agencies are neither oratorical contests nor debating
skirmishes where cross examination skills are displayed. Non-verbal devices such as written
explanations, affidavits, position papers or other pleadings can establish just as clearly and
concisely aggrieved parties' predicament or defense. What is essential is ample opportunity
to be heard, meaning, every kind of assistance that management must accord the employee
to prepare adequately for his defense.

In the case at bar, petitioner was given adequate opportunity under the circumstances to
answer the charge. His written explanation was taken into consideration in arriving at the
decision to dismiss him. His demand for a hearing before his employer is now too late. First,
he should have insisted on a hearing in the initial proceedings conducted by the company,
and second, his written explanation admitted the complained inaction thereby rendering
unnecessary any hearing thereon. Since the defense Nuez interposed was in the nature of a
justifying circumstance, the burden shifted to him to prove that his inaction was warranted.
This, Nuez failed to overthrow not only before the company but also before the Labor Arbiter
and NLRC.
Nuez now seeks refuge in Sec. 8, Art. VII, of the existing Collective Bargaining Agreement
which provides
No employee shall be deemed dismissed, suspended, demoted or reprimanded without any
just, lawful and reasonable cause and previous due process. Both the employee concerned
and the Union shall be informed in writing of the charges against the former who shall be
allowed union representation during the investigation. If no disciplinary action is taken by
the company within fifteen (15) days from and after the case has been reviewed by the VP
concerned, the case shall be considered closed. 5
The CBA provision imposes on PHILCOMSAT three (3) non-statutory responsibilities, namely,
to inform the union in writing of the charge, to allow the employee union representation, and
for its Vice-President to take action on the charge within fifteen days otherwise the case shall
be deemed closed. The testimony of union lady President Frances Cario discloses that the
union was served the show cause memorandum addressed to Nuez the day after Nuez
received his and that the union helped edit the explanation submitted by Nuez to
PHILCOMSAT. There was no occasion for PHILCOMSAT to disallow, hence to violate, the right
of Nuez to union representation for the reason that neither Nuez nor the union asked for an
investigation where that right may be demanded. The allegation of Nuez that the AVP/VP
concerned acted on the report of Station Manager Bisuna 12 days from receipt thereof 6
proves compliance with the third responsibility. The fact that under the company rules, the
AVP/VP concerned must decide the case within 48 hours from receipt of the papers from the
Personnel Manager is inconsequential for two reasons: first, this provision does not impose a
sanction for failure to meet the 48 hour deadline (unlike in the aforequoted CBA provision)
and it cannot be fairly presumed that the charge prescribes after the 48th hour; and second,
the rule presupposes the transmittal of papers from the Personnel Manager who does not
appear to have participated in the proceedings below.
There is no ground, statutory or contractual, for the claim of Nuez that he should have been
required to present his side before Aujero and Bisuna in the course of the making of their
reports. This is not required by law nor by the aforequoted CBA provision.
As if grasping for straws, Nuez hurls a malicious allegation that NLRC "relied only on the
memorandum of respondents." Strangely, what he quotes in support of this accusation is not
the said memorandum but the findings of fact of the Labor Arbiter which the NLRC
reaffirmed. In any case, however, the discretion of a quasi-judicial body, like the Labor
Arbiter or the NLRC, to decide a case one way or another is broad enough to justify his or its
adoption of the arguments put forth by one of the parties, as long as these are legally
tenable and supported by facts on record. Since in almost all cases only one of the
contending parties prevails and usually the tribunal adopts the theory of the prevailing
party, it is not safe to postulate that the evidence of the losing party is never considered.
There is also no basis to disregard the letter report of Sibal containing the quotations in the
vernacular for being hearsay. Although Sibal was not presented by PHILCOMSAT nothing
prevented Nuez from summoning him to scrutinize the veracity of the report. If he was able
to present Station Manager Bisuna as a hostile witness, there is no reason why he could not
do the same to Sibal. Moreover, not only was the Sibal report not categorically denied by
Nuez, but worse, he even used it in evidence against PHILCOMSAT. 7 Notwithstanding the
foregoing, we need only reiterate our ruling in Rabago v. NLRC 8
. . . . The argument that the affidavit is hearsay because the affiants were not presented for
cross-examination is not persuasive because the rules of evidence are not strictly observed
in proceedings before administrative bodies like the NLRC, where decisions may be reached
on the basis of position papers only.
The same could be said of the logbook reports of the security guard which are being assailed
as hearsay.
Without admitting culpability, Nuez asserts that the penalty of dismissal is too harsh to
warrant his dismissal, citing the cases of Philippine Airlines, Inc. v. Philippine Airlines
Employees Association (PALEA), 9 decided under the

pre-Labor Code laws and jurisprudence, and Catalan v. Genilo. 10

The factual circumstances attending these two cases are different from what transpired in
the case at bench. In the PAL case, Fidel Gotangco, charged with theft of company property,
was ordered reinstated by the Court not only because this was his first offense in his 17
years of service and in the absence of damage to the company but also because of having
been "under preventive suspension to date." More revealing in the said decision is the
incertitude of the Court whether the facts did constitute the charge so much so that we
considered the situation as "too harsh an appraisal to view it as constituting a theft." The
Catalan case where petitioners therein were charged with violation of the company rule
against "Drinking in the Company Premises or Coming to Work Under the Influence of
Alcohol," is similar to the PAL case aforecited. There, we sustained the observation of the
Solicitor General that "the actual violation of the company rule or regulation was not
committed." In the case at bar, the charge of willful disobedience is clearly established,
hence, the dismissal of petitioner was inevitable.
We held in Aguilar v. NLRC 11 that
Willful disobedience of the employer's lawful orders, as a just cause for the dismissal of an
employee, envisages the concurrence of at least two (2) requisites: the employee's assailed
conduct must have been willful or intentional, the willfulness being characterized by a
"wrongful and perverse attitude." The order violated must have been reasonable, lawful,
made known to the employee and must pertain to the duties which he had been engaged to
discharge (Gold City Integrated Port Services v. NLRC, 89 SCRA 811 [1990]) . . . .
We agree with the NLRC that the acts of herein complainant in defiantly disobeying the rules
of the company even after investigation, shows her cavalier attitude which leaves the
management no other recourse but to terminate her services. To condone such conduct will
certainly erode the discipline that an employer would uniformly enforce so that it can expect
compliance with said rules and obligations by its other employees. Otherwise the rule
necessary and proper for the operation of its business would be rendered ineffectual (Soco
vs. Mercantile Corporation of Davao, et al., 148 SCRA 526 [1987]). An employer cannot
legally be compelled to continue with the employment of a person who admittedly was
guilty of misfeasance or malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interests (Colgate Palmolive Phils., Inc. vs.
Ople, et al., 163 SCRA 323 [1988]).
As regards monetary awards given petitioner, we have no reason to deviate from our
disposition in Aguilar v. NLRC, supra, thus
With regard to the award of financial assistance to petitioner, We find that the same is not
justified. Petitioner's willful disobedience of the orders of her employer constitutes serious
misconduct. As We held in the case of Del Monte Phil., Inc. vs. NLRC (188 SCRA 370 [1990]),
"henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character." Hence, the employer . . . . may not be required to
give the petitioner separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
In fine, petitioner's employment with PHILCOMSAT for 19 years cannot save him in the same
way as the 23 years of Aguilar with her employer.
WHEREFORE the assailed decision is AFFIRMED except as regards the award of financial
assistance which is ordered deleted.
SO ORDERED.
G.R. No. 119527
July 3, 1996
EVELYN J. GARCIA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, THIRD DIVISION, HOLY TRINITY
ACADEMY, and MSGR. MANUEL GABRIEL, respondents.
ROMERO, J.:p
How much is the price of trust? For petitioner Evelyn Garcia, the loss of trust in her by her
employer resulted in her dismissal after nineteen years of faithful service. She claims the
penalty was too harsh for a single mistake. On the other hand, her employer avers that her
services were terminated only after an investigation revealed that she had committed
several infractions in the past which put in question her very honesty and trustworthiness as
an employee.

Petitioner served as school cashier for private respondent Holy Trinity Academy (the school)
from June 1974 until her dismissal on October 5, 1993 for alleged loss of confidence, gross
negligence of duty, gross inefficiency and dishonesty. As school cashier, she was the
custodian of all school funds, including tuition fees, the petty cash and canteen cash
receipts. In her position paper, she alleged that her termination was brought about by an
incident which occurred on June 15, 1993. There appeared to be a discrepancy in one of the
deposits she made where the amount indicated in the deposit slip and the money actually
received by the bank did not tally. A sum of P50,000.00 was missing and such loss was
blamed exclusively on her by the private respondents, after considering the separate reports
of the National Bureau of Investigation and the Diaz Murillo Dalupan Auditing Firm.
The school administration, on the other hand, relied on audit and fact-finding reports which
showed irregularities in the handling of school funds, such as delays in making deposits,
infidelity and lack of control and inventory over official receipts, accommodation of checks
from cash collections, non-use of the bank armored car in the pick-up of large deposits and
shortages in collections from the school canteen, not the least of which was the incident of
June 15, 1993.
Prior to her dismissal on October 5, 1993, petitioner was suspended for a total of 90 days.
On December 23, 1993, she filed a complaint for illegal dismissal, non-payment of overtime
pay and damages. In the decision of Labor Arbiter Nieves V. de Castro on June 30, 1994, the
school was ordered to pay petitioner P45,500.00 as separation pay. She opined that
petitioner's dismissal was not for a valid or authorized cause and that she was denied due
process as she was not given prior written notice of the charges against her. Both parties
appealed to the National Labor Relations Commission.
On November 21, 1994, the Commission promulgated its decision. Reversing the Labor
Arbiter, it found that petitioner was validly dismissed for gross negligence and for loss of
trust and confidence but it directed private respondents to indemnify petitioner in the
amount of P10,000.00 for their failure to comply with the requisites of due process prior to
her termination. Petitioner's motion for reconsideration was likewise denied in the
Commission's resolution of January 31, 1995.
In this petition for certiorari, petitioner anchors her arguments on the presupposition that
she was dismissed solely on the basis of the June 15, 1993 incident. An examination of the
records of the case reveals, however, that said incident was merely one of several acts of
dishonesty discovered by the auditing firm and the fact-finding committee formed by the
school.
Bearing in mind that the position of cashier is a highly sensitive position, requiring as it does
the attributes of absolute trust and honesty because of the temptations attendant to the
daily handling of money, petitioner's acts could not help but sow mistrust and loss of
confidence on the part of respondent employer. The Court agrees with the Commission that
the resulting breach of trust constitutes a valid cause for the dismissal of petitioner.
The Court likewise concludes that due process was not observed by the school in
terminating the services of petitioner. After the June 15, 1993 incident, petitioner was put
under preventive suspension for a total of 90 days. Within that period, an on-the-spot audit
was conducted by an auditing firm and an investigation was conducted by a fact-finding
committee. The findings of these two groups, though impartial, were reached without
hearing petitioner's side. In short, there was never an opportunity for petitioner to defend
herself against the charges hurled against her.
Public respondent Commission did not err in penalizing the school for non-observance of due
process even if it had a valid ground to dismiss its erring employee. The Court, however, in
line with past jurisprudence reduces the indemnity from P10,000.00 to P1,000.00.
WHEREFORE, the assailed decision dated November 21, 1994 is hereby AFFIRMED with the
MODIFICATION that the indemnification awarded by the public respondent Commission to
petitioner be reduced from P10,000.00 to P1,000.00, in keeping with the Court's policy
regarding the same. The instant petition for certiorari is hereby DISMISSED without costs to
petitioner. SO ORDERED.
G.R. No. 165268 November 8, 2005
Challenge socks corporation, Petitioner,
vs.
COURT OF APPEALS (Former First Division), NATIONAL LABOR RELATIONS
COMMISSION (First Division), HON. ANTONIO R. MACAM, in his capacity as Labor
Arbiter and ELVIE BUGUAT, Respondents.

DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court assails the May 11,
2004 Decision1 of the Court of Appeals in CA-G.R. SP No. 75761, and its September 13, 2004
Resolution2 denying the motion for reconsideration.
The antecedent facts show that respondent Elvie Buguat was hired on January 17, 1997 by
petitioner Challenge Socks Corporation as knitting operator.3 In the course of her
employment, she incurred absences and tardiness without prior approval and had been
neglectful of her duties.4 On May 25, 1998, she failed to check the socks she was working on
causing excess use of yarn and damage to the socks design. She was suspended for five
days and warned that a repetition of the same act would mean dismissal from the service.5
On February 2, 1999, she committed the same infraction and was given a warning.6 Despite
the previous warnings, Buguat continued to be habitually absent and inattentive to her task.
On March 1, 1999, she again failed to properly count the bundle of socks assigned to her.
Thus, on March 2, 1999, petitioner terminated her services on grounds of habitual
absenteeism without prior leave, tardiness and neglect of work.7
Thereafter, Buguat filed a complaint for illegal dismissal.8
On February 11, 2000, the labor arbiter9 rendered a Decision10 holding that Buguat was
illegally dismissed. The dispositive portion of the decision reads:
WHEREFORE, following the pronouncement in the case of ALU-TUCP v. NLRC (G.R. No.
120450, February 10, 1999), judgment is hereby rendered ordering respondents to reinstate
complainants without loss of seniority rights and benefits, but without backwages.
SO ORDERED.11
The labor arbiter found Buguats dismissal too harsh and disproportionate to the infraction
committed. It was observed that counting volumes of socks is tedious and the worker is
prone to commit mistakes especially if the counting is done on a regular basis. The labor
arbiter ruled that mistake in counting bundles of socks is tolerable and should be punished
by suspension only.12
The National Labor Relations Commission (NLRC) adopted the findings of the labor arbiter. It
denied13 petitioners appeal and motion for reconsideration.
Petitioner filed a petition for certiorari before the Court of Appeals which rendered a Decision
on May 11, 2004 reversing and setting aside that of the labor arbiter and the NLRC, the
dispositive portion of which provides:
WHEREFORE, the Decision dated October 30, 2001 and the Order of December 19, 2002 of
the National Labor Relations Commission are hereby REVERSED and SET ASIDE and a new
one entered herein.
CHALLENGE SOCKS CORPORATION, having terminated private respondent with just and valid
cause but without observing the proper procedure in terminating private respondents
services, is ordered to pay ELVIE BUGUAT full backwages from the time her employment was
terminated on March 2, 1999 up to the time the herein decision becomes final. For this
purpose, this case is REMANDED to the Regional Labor Arbiter for the computation of the
backwages due private respondent.
SO ORDERED.14
The appellate court found that there was just cause for terminating the services of Buguat
considering the series of infractions she committed.15 However, it was noted that petitioner
failed to comply with the twin-notice requirement in terminating an employee hence, the
dismissal was considered ineffectual.16 Petitioner was ordered to pay Buguat her back
wages computed from the time of her dismissal up to the finality of the decision.17
Petitioner sought reconsideration of the appellate courts decision but the same was denied
on September 13, 2004.
Hence, this petition.
The issue for resolution is the validity of Buguats termination.
One of the just causes for terminating an employment under Article 282 of the Labor Code is
gross and habitual neglect by the employee of her duties. This cause includes gross

inefficiency, negligence and carelessness. Such just causes is derived from the right of the
employer to select and engage his employees.18
In the instant case, there is no doubt that Buguat was habitually absent, tardy and neglectful
of her duties. We agree with the Court of Appeals that:
Elvies commission of three (3) violations of the companys rules and regulations, including
her unauthorized absences and tardiness, all committed in the span of two years, shows that
she did not only fail to observe due diligence in performing her job, but she has little regard
for the consequences of her acts and inactions. She repeatedly committed error in counting
the socks to be given to the Looping Section. As a knitting operator, Elvie was required to
check the socks she was working on and to count the bundles of socks she had to pack to be
forwarded to the Looping Section. Elvie did not question the authenticity of the May 25,
1998 suspension letter and the February 2, 1999 memorandum.
While a first violation could be considered excusable, repeated commission of the same
offense could be considered willful disobedience. Elvie, despite the suspension and warning,
continued to disregard the company rules and regulations.19
Habitual neglect implies repeated failure to perform ones duties for a period of time.
Buguats repeated acts of absences without leave and her frequent tardiness reflect her
indifferent attitude to and lack of motivation in her work. Her repeated and habitual
infractions, committed despite several warnings, constitute gross misconduct. Habitual
absenteeism without leave constitute gross negligence and is sufficient to justify termination
of an employee.20
We find the penalty of dismissal from the service reasonable and appropriate to Buguats
infraction. Her repeated negligence is not tolerable; neither should it merit the penalty of
suspension only. The record of an employee is a relevant consideration in determining the
penalty that should be meted out.21 Buguat committed several infractions in the past and
despite the warnings and suspension, she continued to display a neglectful attitude towards
her work. An employees past misconduct and present behavior must be taken together in
determining the proper imposable penalty.22 The totality of infractions or the number of
violations committed during the period of employment shall be considered in determining
the penalty to be imposed upon an erring employee. The offenses committed by him should
not be taken singly and separately but in their totality. Fitness for continued employment
cannot be compartmentalized into tight little cubicles of aspects of character, conduct, and
ability separate and independent of each other.23 It is the totality, not the
compartmentalization, of such company infractions that Buguat had consistently committed
which justified her dismissal.24
Besides, terminating an employment is one of petitioners prerogatives. As the employer,
petitioner has the right to regulate, according to its discretion and best judgment, all aspects
of employment, including work assignment, working methods, processes to be followed,
working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers. Management has the prerogative to discipline its
employees and to impose appropriate penalties on erring workers pursuant to company
rules and regulations.25
This Court has upheld a companys management prerogatives so long as they are exercised
in good faith for the advancement of the employers interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or under valid
agreements.26
In the case at bar, petitioner exercised in good faith its management prerogative as there is
no dispute that Buguat had been habitually absent, tardy and neglectful of her work, to the
damage and prejudice of the company. Her dismissal was therefore proper.
The law imposes many obligations on the employer such as providing just compensation to
workers, observance of the procedural requirements of notice and hearing in the termination
of employment. On the other hand, the law also recognizes the right of the employer to
expect from its workers not only good performance, adequate work and diligence, but also
good conduct and loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to his interests.27
The employer has the burden of proving that the dismissed worker has been served two
notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is
sought, and (2) the other to inform him of his employers decision to dismiss him.28
As found by the Court of Appeals, petitioner failed to comply with this requirement, thus:

A review of the records shows that private respondent was served a written termination
notice on the very day she was actually dismissed from the service. The case records are
bereft of any showing that Challenge Socks Corporation notified Elvie in advance of the
charge or charges against her. Likewise, she was not given an opportunity to refute the
charges made against her, thus, depriving her of the right to defend herself. In other words,
petitioner fell short in observing the two-notice rule required by law.29
In Agabon v. National Labor Relations Commission,30 we upheld as valid the dismissal for
just cause although it did not comply with the requirements of procedural due process. We
ruled that while the procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be held liable for non-compliance with the
procedural requirements of due process.31 The violation of Buguats right to statutory due
process by the petitioner warrants the payment of indemnity in the form of nominal
damages in the amount of P30,000, which is appropriate under the circumstances.32
Conformably, the award of backwages in the present case should be deleted. Instead,
private respondent should be indemnified in the amount of P30,000.00 as nominal
damages.33
WHEREFORE, the May 11, 2004 Decision and the September 13, 2004 Resolution of the
Court of Appeals in CA-G.R. SP No. 75761, which declared that petitioner Challenge Socks
Corporation did not comply with the statutory due process requirements in terminating the
employment of private respondent Elvie Buguat, are AFFIRMED with the MODIFICATION that
the award of backwages is DELETED. Petitioner is ordered to pay private respondent Elvie
Buguat nominal damages in the amount of P30,000.00.
No costs.
SO ORDERED.

G.R. No. 82467

June 29, 1989
SAN MIGUEL CORPORATION, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, PEDRO B. DELEN, FELIPE P.
MERCADO, ROGELIO Z. MISOLAS, HENRY S. LOGAN & EFREN M. QUERUBIN,
respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Mildred A. Ramos for private respondents.
GRIO-AQUINO, J.:
This is a petition for review under Rule 65 of the Rules of Court of the resolution dated
December 15, 1987 of the National Labor Relations Commission (NLRC) in NLRC-NRC Case
No. 6-2896-83, entitled "Pedro Delen, Felipe Mercado, Rogelio Z. Misolas, Henry S. Logan,
Efren Querubin, Complainants versus San Miguel Corporation, Respondent," dismissing the
appeal of the respondent corporation (now petitioner) and affirming in toto the decision
dated March 17, 1986 of the Labor Arbiter, Ceferina J. Diosana, who found that the
complainants (herein private respondents) were illegally dismissed by the petitioner, and
directed the latter "to reinstate them to their former positions without loss of seniority rights
and with full backwages and other benefits appurtenant to their respective positions" (Annex
I).
We dismissed the petition on April 11, 1988 on the ground that it failed to show that the
NLRC had acted with grave abuse of discretion in rendering its questioned resolution (p. 311,
Rollo). The petitioner's motion for reconsideration was prematurely denied by Us on August
29, 1988 (p. 416, Rollo). At that time, We inadvertently overlooked the fact that the
petitioner had filed an omnibus motion on August 24, 1988: (1) for leave to file a reply to
private respondents' comment; and (2) to require private respondents to furnish petitioner a
copy of page 5 of their comment (p. 345, Rollo). The petitioner's consolidated reply to the
separate comments filed by the NLRC and the private respondents (pp. 335-343 and 349415, Rollo) was filed on September 21, 1988 (p. 417, Rollo). On October 14, 1988, the
petitioner filed an "Extremely Urgent Motion for Leave of Court En Banc to File Appeal En
Banc." (p. 479, Rollo.)
While it is necessary to disabuse the mind of the petitioner of the impression that the Court
En Banc is an appellate court within the Supreme Court to which parties may appeal
decisions of the Division, for it is the same Supreme Court, and the referral of a case by a
Division to the En Banc rests entirely in the discretion of the Division, We have decided to

deny the plea for referral of this case to the Court En Banc, but instead, to treat the "appeal
to the Court En Banc" (p. 479, Rollo) as a second motion for reconsideration of the
resolutions of this Court dated April 11, 1988 and August 29, 1988.
The complainants were former security guards of the petitioner which dismissed them for
falsification of their lame cards. They made false entries in their time cards showing that
they reported for work on February 19 and 20, 1983 when the truth was that they went on a
hunting tap to San Juan, Batangas, with their chief Major Martin Asaytuno, then head of the
Administrative Services Department of the Security Directorate of the petitioner.
Besides the falsification of the entries for February 19 and 20, 1983 in their time cards,
complainant Misolas was caught redhanded by Security Guard Romeo Martin at 7:45 A.M. on
March 2, 1983 punching in not only his own time card but also the time cards of Delen and
Querubin (p. 51, Rollo). Seeing Misolas in a tight fix, Querubin rushed to the bundy clock and
punched in a time card (which turned out to be the card of one Rodrigo de Castro) to save
Misolas and to make it appear to Martin that he (Querubin), punched in his own time card.
On the basis of the evidence, the Labor Arbiter found that the complainants did go on a
hunting trip to San Juan, Batangas on February 19 and 20, 1983, upon the invitation of their
department head, Major Asaytuno. They went along to please him because they believed
that his invitation was equivalent to a command (p. 229, Rollo). Being an army man,
Asaytuno expected "total obedience" from his subordinates (p. 229, Rollo). The complainants
and Asaytuno left the office at 2:00 P.M. on February 19, 1983 and tarried in Batangas up to
February 20. Asaytuno signed four (4) sets of overtime authority for February 19-20 so that
the private respondents could collect overtime pay (p. 230, Rollo). When they reported for
work on February 21, 1983, Major Asaytuno asked for their time cards and initialed the false
entries showing that they reported for work on February 19-20 (p. 230, Rollo). The Labor
Arbiter held that under those circumstances 'the dismissal of the complainants cannot be
sustained" (p. 230, Rollo).
With regard to the charge that complainants Misolas and Querubin dishonestly punched the
time cards of Delen and others, the Labor Arbiter found "material discrepancies in the
testimony of the petitioner's principal witness, Security Guard Romeo Martin, and rejected
his evidence as 'questionable'" (p. 231, Rollo). The Labor Arbiter directed the company "to
reinstate the complainants to their respective former positions without loss of seniority
rights and with full backwages and other benefits appurtenant to their respective positions"
(p. 232, Rollo) but dismissed the complainants' claim for damages for lack of merit (p. 233,
Rollo).
The petitioner appealed to the NLRC, Third Division, which in a resolution dated December
15, 1987 (Annex K), dismissed the appeal for lack of merit and affirmed the appealed
judgment (p. 269, Rollo). The petitioner filed a motion for reconsideration which the NLRC
denied on March 10, 1988 (Annex N).
The company filed a petition for review in this Court on March 25, 1988, alleging that the
NLRC committed grave abuse of discretion in upholding the Labor Arbiter's decision and "in
not finding that the private respondents were guilty of serious misconduct, fraud, and willful
breach of trust" (p. 14, Rollo) which warranted their dismissal from the service.
As the decisions of the Labor Arbiter and the NLRC adverted to the testimony of Major
Asaytuno as a witness for the company, but were silent regarding any disciplinary action
that the company took against him, and as the petitioner admittedly put him on the witness
stand "to clear his name," and considered him a "victim of his friendship with the
complainants" (p. 19, Rollo), this Court was misled to believe that the company let Asaytuno,
the "big fish," go, but penalized the "little fish" (his subordinates) for the misconduct that
they all committed. Since We could not sanction that brand of selective justice, We
dismissed the petition for review.
However, after a more careful consideration of the pleadings and their annexes, We found
these statements in paragraph 19 of the petition for certiorari and in Annex J of the petition
(petitioner's Appeal Memorandum in the NLRC):
l 9.
After a thorough and impartial investigation conducted both by the Security and
Legal Directorate of the petitioner, private respondents, together with Major Asaytuno, were
found to have committed serious irregularities in the performance of their duties.
Accordingly, they were dismissed from the service and termination letters were respectively
served on them. (p. 11, Rollo.)
16. ... all the five (5) complainants together with Major Asaytuno were found to have
committed serious irregularities in the performance of their duties. Accordingly, they were

dismissed from the service and termination letters were respectively served on them. (p.
243, Rollo.)
We, therefore, now resolve to grant the petitioner's second motion for reconsideration, for,
although it may be conceded that the private respondents acted under some degree of
moral compulsion when they agreed to accompany Major Asaytuno on a hunting trip to San
Juan, Batangas, they were certainly under no compulsion from him to falsify their time cards
and thereby defraud the company by collecting wages for the dates when they did not
report for work.
In order for obedience to be considered as an exempting circumstance ... it must be in
compliance with a lawful order not opposed to a higher positive duty of the subaltern, and
that the person commanding act within the scope of his authority. As a general rule, an
inferior should obey his superior. But between a general law which enjoins obedience to a
superior giving just orders, etc., and a prohibitive law which plainly forbids what the superior
commands, the choice is not doubtful. (Viada, I Penal Code 528, 5th Ed.; People vs. Barroga,
54 Phil. 247).
In order to be exempted (on the ground of obedience) it must be shown that both the person
who gives the order and the person who executes it are acting within the limitations
prescribed by law. (People vs. Wilson, 52 Phil. 919.)
The falsification and fraud which the private respondents committed against their employer
were inexcusable. Major Asaytuno's initials on the false entries in their time cards did not
purge the documents of their falsity. Their acts constituted dishonesty and serious
misconduct, lawful grounds for their dismissal under Art. 282, sub-pars. (a) and (c), of the
Labor Code, which provides:
ART. 282.
Termination by employer. An employer may terminate an employment for any
of the following just causes:
(a)
Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work.
xxx

xxx

xxx

(c)
Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative.
The NLRC gravely abused its discretion in ordering the reinstatement of the private
respondents to their positions with backwages. Its decision was an unjustified departure
from the rule that:
An employer cannot legally be compelled to continue with the employment of a person who
admittedly was guilty of misfeasance or malfeasance towards his employer, and whose
continuance in the service of the latter is patently inimical to his interests. The law, in
protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the
employer. (Manila Trading & Supply Co. vs. The Hon. Francisco Zulueta, et al., 69 Phil. 485,
cited in San Miguel Brewery, Inc. vs. National Labor Union et al., 97 Phil. 387.)
WHEREFORE, our resolutions dated April 11, 1988 and August 29, 1988 are hereby recalled
and the petition for certiorari is granted. The decisions of the Labor Arbiter and the NLRC in
NLRC-NCR Case No. 6-2896-83 are hereby set aside. The private respondents' complaint for
illegal dismissal and reinstatement with backwages and damages is dismissed. Costs against
the private respondents.
SO ORDERED.
G.R. No. 122277
February 24, 1998
NATIONAL SUGAR REFINERIES CORPORATION (NASUREFCO), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Fourth Division) and SUSAN PABIONA,
respondents.
BELLOSILLO, J.:
This is a petition for certiorari and prohibition filed by the National Sugar Refineries
Corporation (NASUREFCO) to annul the 23 June 1995 Decision of the National Labor
Relations Commission (NLRC) which affirmed that of the Labor Arbiter holding that private
respondent Susan Pabiona was illegally dismissed by NASUREFCO, and the Resolution of 20
September 1995 denying its motion for reconsideration.

NASUREFCO is a domestic corporation engaged in sugar refinery. In January 1989 it launched

its Raw and Refined Sugar Exchange Program under which clients of NASUREFCO were no
longer required to deliver raw sugar as a precondition to their withdrawal of refined sugar.
All they had to do was to present properly endorsed documents chargeable against their
future deliveries of raw sugar to NASUREFCO.
In line with the Raw and Refined Sugar Exchange Program, Pabiona was appointed as Sugar
Accountant-Bookkeeper. She was tasked to maintain records of all transactions pertaining to
the Raw and Refined Sugar Exchange Program, validate Raw Sugar Quedans submitted by
Exchange participants prior to issuance of the Refined Sugar Delivery Orders only after
validation procedures have been properly complied with. The procedures consisted of (a)
substantiating the Raw Sugar Quedans by checking if these were properly signed by the
authorized surveyor in accordance with the pre-agreed scope of services, weights, manner
of weighing, calibration procedures, and the absence/presence of representatives; (c)
checking the mathematical accuracy of the quantities shown in the quedans; and, (d)
computing the refined sugar equivalent of the raw sugar exchanged based on POL
analyses/refining yield.
When the books of NASUREFCO were audited in 1990 anomalous and irregular transactions
were uncovered in the Raw Sugar Movement Report.
Thus
1.
On or about December 14, 1989, she prepared RSDO No. 0212 in favor of Shantung
Commercial without even seeing the corresponding RSQ's or DO's. This resulted in Shantung
Commercial being able to withdraw more refined sugar than was due them because the DO's
for the raw sugar to be delivered to NASUREFCO were marked "to be served with
DETERIORATED SUGAR." Deteriorated sugar is of lower quality hence, with less refined sugar
equivalent than the normal raw sugar. Involved in the transaction were 7,031.99 piculs.
2.
Sometime in October 1989, Shantung Commercial was able to withdraw refined sugar
on the strength of RSDO No. 0121 prepared by complainant. This RSDO was issued based on
the RSQ of Victorias Milling Company (VMC) for 383.05 piculs. Due to some problems with
the VMC RSQ, Shantung was required to replace them. Complainant made it appear that the
RSQ was already replaced when in fact it was not. NASUREFCO was not able to get the raw
sugar. The VMC RSQ which complainant should have kept until replaced was later sold by
Ms. C. Alfonso, a co-employee of complainant.
3.
In her report on Raw Sugar Endorsements and withdrawals as of February 11, 1990,
complainant made it appear that Dacongcogon Producers endorsed 18,000 piculs of raw
sugar under DO No. 035 on December 28, 1989. DO No. 035 was never endorsed on that
date as it was received by NASUREFCO only on January 1990. Complainant intentionally and
deliberately included the supposed endorsement in the 1989 transactions to make it appear
that Dacongcogon Producers endorsed more than 200,000 piculs of raw sugar for the period,
hence, entitled to claim a volume incentive of PHP 1.00 per picul. Complainant also included
the endorsements made by other parties under Dacongcogon Producers to qualify it for the
incentive.
NASUREFCO found Pabiona's written explanation flawed, unsatisfactory. Hence, on 31 May
1990 NASUREFCO through its Human Resource Division Officer-in-Charge charged Pabiona
with several violations of accounting policies. Pabiona was again given the chance to air her
side, which she did through a memorandum. On 2 and 3 July 1990 a formal investigation was
conducted. Pabiona was advised to retain a counsel of her choice to assist her in presenting
her case. After the formal investigation, NASUREFCO terminated the services of Pabiona for
willful violation of company policies, gross and habitual neglect of duties, and willful breach
of trust.
Thus Pabiona filed her complaint with the Labor Arbiter for illegal dismissal. On the other
hand, NASUREFCO maintained that the dismissal was for a just cause after proper
procedures were observed, hence, legal and valid.
On 26 November 1993 Labor Arbiter Dennis D. Juanon sustained Pabiona and ruled that her
dismissal was illegal because
To our considered opinion, she merely record (and) reports whatever transactions ought to
be recorded by her as such personnel. Whatever defects in number or quality of the goods
transacted by the corporation is no longer within the ambit of her functions.
She, however, as projected in the testimony of respondent's personnel, was exercising
functions which to our mind, appears to be more than . . . (the) ordinary functions of an
accountant-bookkeeper. For this, we believe that whatever mistakes made in the process of

performance of her work as designated, are more than her ordinary functions, (hence) she
cannot be ordinarily blamed.
xxx

xxx

xxx

In resume, it is our considered opinion that while complainant may have committed some
neglect of duty however, the same was not within her ordinary functions as per job
description . . . Evidences (sic) adduced by either party show that if at all there was
negligence that may have been committed in the performance of her work, absent was the
character of regularity in committing negligence.
xxx

xxx

xxx

Complainant herself to reiterate, admits that she may be negligent yet it was not gross and
habitual; that her acts in violating company policies as basis for her dismissal may be
viewed by respondent as breach of trust, yet the same is not willful. 1
On appeal NASUREFCO insisted that the Labor Arbiter committed serious errors in his
findings of fact and appreciation of evidence and that his conclusion was contrary to law,
jurisprudence and the evidence on record.
But the NLRC upheld the Labor Arbiter and ruled that under the Raw and Refined Sugar
Exchange Program a client of NASUREFCO was allowed to withdraw refined sugar even if it
had not yet delivered the corresponding raw sugar provided a properly endorsed Raw Sugar
Quedan or Delivery Order was presented. After examination and validation of the sugar
quedan, a corresponding Refined Sugar Delivery Order was issued to the client allowing
withdrawal of refined sugar from NASUREFCO's warehouse. The Refined Sugar Delivery
Order was the sole document that enabled a client to withdraw refined sugar. The
examination and validation of all these procedures rested with Pabiona. The NLRC thus
affirmed the Labor Arbiter
After examining both complainant's and respondent's evidence, We find that the infractions
imputed to the complainant are not gross and habitual, but rather her inability to exercise
due diligence in the performance of her duties or her failure to follow-up transactions and
make the necessary correction on the records or report she prepares. The infractions are not
deliberate and intentional on the part of the complainant with full intent to cause great
damage and prejudice to the respondent. In fact, the latter failed to prove that irreparable
damage was incurred due to the negligent acts of the complainant. Neither did we find
intent for personal gain when complainant committed these acts. Respondent did not submit
any evidence that complainant benefited from these infractions. On the other hand, we find
that complainant acted in good faith when she performed her duties which led to these
omissions attributed to her. In fine, we could conclude that complainant was negligent, but
not gross and habitual in her record keeping, but this does not constitute a sufficient ground
to cause her termination.
With the denial of its motion for reconsideration, NASUREFCO is now before us imputing
grave abuse of discretion on the part of NLRC.
Pabiona's duties, according to her Job Value Contribution Statement, consist of
1.
Maintaining records of all transactions pertaining to the Raw and Refined Sugar
Exchange Program.
2.
Validating Raw Sugar Quedans submitted by Exchange Program participants prior to
issuance of Refined Sugar Delivery Order. Validation procedures are as follows:
a.
Substantiate the Raw Sugar Quedans by checking if quedans are properly signed by
authorized quedan holders;
b.
Validate written reports of the authorized surveyor on polarization analyses,
compliance of surveyor in accordance with pre-agreed scope of services, weights, manner of
weighing, calibration procedures, the absence/presence of representatives;
c.

Check mathematical accuracy of the quantities shown in the quedans; and

d.
Compute the refined sugar equivalent of the raw sugar exchanged based on POL
analysis/Refining yield.
3.

Preparing Refined Sugar Delivery Orders (RSDO) after validating procedures.

The Labor Arbiter found that although Pabiona was guilty of neglect of duty, the duties which
she performed and of which she was being charged of neglect, were not within her ordinary
functions as Sugar Accountant-Bookkeeper. The Labor Arbiter ratiocinated that as Pabiona
merely recorded transactions that ought to be recorded, whatever defects in the quantity or
quality items transacted were no longer her responsibility.
For its part, NLRC found that Pabiona's infractions were not gross nor habitual but that she
merely failed to exercise due diligence in performing her duties, forgot to follow up
transactions and make necessary corrections on the records and reports she prepared.
Neither were the infractions deliberate nor intentional as NASUREFCO failed to prove intent
on the part of Pabiona to personally gain from the transactions; in other words, her
infractions were in good faith.
The preparation and validation of documents for purposes of withdrawing refined sugar from
NASUREFCO's warehouse involve trust and confidence. It is only through the issuance by
Pabiona of a Refined Sugar Delivery Order that the planters could avail of the refined sugar
of NASUREFCO.
The rule is settled that if the employee is guilty of breach of trust or that his employer has
justifiable reason to distrust him, the labor tribunal cannot justly deny the freedom and
authority to dismiss his employee. 2
The basic premise for dismissal on the ground of loss of confidence is that the employee
concerned holds a position of trust and confidence. It is the breach of this trust that results
in the employer's loss of confidence in the employee. Under Art. 282 of the Labor Code, as
amended, loss of confidence would be the result of "fraud or willful breach by the employee
of the trust reposed in him by his employer or duly authorized representative," a just cause
for termination. It cannot be gainsaid that the breach of trust must be related to the
performance of the employee's functions. 3
Contrary to the findings of the Labor Arbiter and the NLRC, the infractions committed by
Pabiona were directly within the purview of her job description. It was only through her
active participation and involvement in the illicit infringement of the company's accounting
procedures that some clients of NASUREFCO were able to withdraw refined sugar in larger
quantities to the prejudice of the latter.
Neglect of duty, to be a ground for dismissal, must be both gross and habitual. 4 In the
instant case, Pabiona's neglect of duty was gross. As her position related to money matters,
she was expected and required to be extra vigilant in the performance of her job as it
involved the financial interest of the company. She was also habitually remiss in her duties.
She issued a Refined Sugar Delivery Order to Shantung Commercial without first examining
the corresponding Raw Sugar Quedan and Delivery Order. Consequently, Shantung
Commercial was able to withdraw a larger quantity of refined sugar than what was allowable
to it. In another instance, Pabiona again issued a Refined Sugar Delivery Order to Shantung
Commercial without the corresponding Raw Sugar Quedan. Thus, NASUREFCO was not able
to collect raw sugar from Shantung Commercial equivalent to the refined sugar it had
withdrawn. Thirdly, Pabiona made it appear that in 1989 Dacongcogon Producers endorsed
more than 200,000 piculs of raw sugar to NASUREFCO thereby allowing it to qualify in the
Volume Incentive Program under which NASUREFCO would pay P1.00 per picul of raw sugar
to every planter that endorsed 200,000 piculs or more of raw sugar to NASUREFCO. The fact
that NASUREFCO did not suffer losses from the anomalies committed by Pabiona because of
timely discovery does not excuse the latter as she was very much aware that her acts would
be greatly prejudicial to NASUREFCO.
In fine, we hold that the dismissal of Pabiona as Sugar Accountant-Bookkepper was for a just
and valid cause and that NASUREFCO faithfully observed procedural due process in effecting
her dismissal.
WHEREFORE, the instant petition is GRANTED. The decision of public respondent National
Labor Relations Commission of 23 June 1995 affirming the decision of the Labor Arbiter of 26
November 1993 which found the dismissal of respondent Susan Pabiona to be illegal, and
the Resolution of 20 September 1995 denying NASUREFCO's motion for reconsideration are
REVISED and SET ASIDE; consequently, the complaint of respondent Susan Pabiona filed
with the Labor Arbiter is DISMISSED. No Costs.
SO ORDERED.
G.R. No. 114848
December 14, 1995
ALEX A. FALGUERA, petitioner,
vs.

HON. LABOR ARBITER CORNELIO L. LINSANGAN, NATIONAL LABOR RELATIONS

COMMISSION, PHILIPPINE REFINING CO. (PRC) or UNILEVER-PRC, and JESUS
JAVELONA, respondents.
DAVIDE, JR., J.:
This is a special civil action for certiorari seeking the reversal of the decision 1 of public
respondent National Labor Relations Commission (NLRC) in NLRC NCR Case No. 00-1005993-91, which affirmed in toto the decision 2 of public respondent Labor Arbiter Cornelio
L. Linsangan dismissing the petitioner's complaint but awarding him the sum of P7,000.00
which is equivalent to his one-month salary as a sanction against the private respondent.
The pleadings disclose the following factual and procedural antecedent.
The petitioner was an employee of private respondent Philippine Refining Co., Inc., now
known as Unilever Philippines (PRC), Inc. (hereinafter Company). He was hired in 1977 as a
craftsman helper. During his employment, he was twice promoted first, as mechanic and
then as warehouseman, which was his position at the time he was terminated from
employment. As a warehouseman, he received a salary of P340.00 a day and reported to
work five times a week. 3
Among his duties and responsibilities were the custody and safekeeping of the engineering
stores' stock of materials for the exclusive use of the Company; the signing of the materials
and requisition forms (hereinafter MRs); the release of materials duly requisitioned; the
forwarding of the original MRs to the accounting department; and the acceptance of new
stocks in replenishment of those which have been requisitioned. 4
The normal procedure 5 in the requisition of materials is as follows:
1)
An MR is filled up and approved by the department manager of the requisitioning
department for the release of supplies or materials. The MR comes in triplicate copies: the
white, which is the original and is eventually forwarded to the accounting department; the
green, which is retained by the requisitioning department; and the yellow, which is given to
the issuing department, the engineering stores.
(2)
The MR, in triplicate, is presented to the engineering storeman of the engineering
stores for the release of the requisitioned materials as specified therein. He and the
representative of the requisitioning department duly sign the MR to confirm the release of
the materials, with the latter retaining the green copy of the MR for the files of the
requisitioning department.
(3)
The engineering storeman retains the yellow copy for the files of the engineering
stores and, thereafter, delivers the original white copy of the MR to the accounting
department, which in turn places an order of the materials requisitioned with the Company
supplier. The original MR is separately filed and recorded in the stock cards of the accounting
department.
(4)
The ordered materials are directly delivered by the Company supplier to the
engineering storeman, who acknowledges receipt thereof.
Sometime in August, 1991, the assistant soapery engineer of the Company observed an
unusual increase in the reported requisitions by the soapery department of Parker packing
materials for the month of June. Upon his examination of the green copies of the MRs of the
soapery department, he discovered that P27,025.00 worth of Parker packing materials
chargeable to his department could not be accounted for and were not reflected in the said
copies. He therefore sought the original white copies of the MRs from the accounting
department. A meticulous scrutiny disclosed that while the original MRs contained entries of
the packing items worth P27,050.00, they, however, showed alterations, superimpositions,
and erasures. 6
The anomaly was duly reported to the Company's engineering department manager, herein
private respondent Jesus Javelona. Upon his request, an investigation was conducted by the
Company's internal audit section. Two particular MRs were in question: (1) MR No. 449727,
which had an erasure and contained an insertion of 5 kgs. of 5/8" Parker packing materials
worth P12,075.00 in the original copy; and (2) MR No. 449748, which contained an insertion
of 5 kgs. of 5/16" Parker packing materials worth P14,950.00, also in the original copy. 7 The
audit team concluded that the insertions were made with the connivance of at least two
employees after the approval of the MRs by the manager of the soapery department.
A second investigation was made, wherein MRs issued from January to June 1991 were
examined and certain employees were interviewed, specifically the issuing engineering

storemen and the area mechanics who had received the requisitions recorded in the
questioned MRs. 8
On 22 August 1991, the petitioner was placed under preventive suspension pending the
investigation of the anomaly. 9
On 26 August 1991, the audit team submitted its memorandum which contained its findings
and conclusion. In summary, it found that eight original MRs 10 were tampered by two
engineering storemen, in particular, the petitioner and Felipe Viado. The latter admitted
having tampered one MR and offered to testify against the petitioner in case the matter
would be brought to court. The total loss suffered by the Company amounted to
P104,225.00. 11
The following month, the petitioner was summoned by private respondent Javelona and the
Company's Industrial Relations Manager, Bernardo Jambolos III. He was informed that the
Company was filing charges against him for tampering with its documents, resulting in its
loss of P105,225.00. The petitioner was shown the file on the investigation and was asked to
explain his side. In his defense, he claimed that he only released what were written in the
original copy of the MRs in question. 12
On 23 September 1991, the petitioner received a letter signed by private respondent
Javelona informing him that the Company was terminating his employment for loss of
confidence and breach of trust, effective as of the time he was placed under preventive
suspension. 13
On 2 October 1991, the Company's rank-and-file union, Bisig ng Manggagawa, intervened.
But, after being apprised of the evidence against the petitioner and Felipe Viado, the union
requested that in lieu of dismissal, the said employees be allowed to avail of retirement
benefits, considering their length of service. 14
On 10 October 1991, the petitioner filed with the NLRC Regional Arbitration Branch a
complaint for illegal dismissal and damages with prayer for attorney's fees against the
Company, private respondent Javelona, and the Company's president, Cesar Bautista. 15
The complaint was docketed as NLRC-NCR-Case No. 00-10-05993-91.
After a full-blown trial, respondent Labor Arbiter Cornelio L. Linsangan rendered on 25 June
1993 a decision 16 disposing as follows:
WHEREFORE, judgment is hereby rendered dismissing the above-entitled complaint for lack
of merit. However, by way of sanction the respondent is ordered to pay complainant the sum
of P7,000.00 which is equivalent to his one month salary. 17
The Labor Arbiter held that the petitioner occupied a position of trust and confidence, as he
had in his custody and care certain company properties. The loss of goods in the amount of
P105,225.00 while in the petitioner's custody was sufficient basis for the Company to lose its
trust and confidence in the petitioner. His dismissal was, therefore, justified. 18
Nevertheless, the Labor Arbiter found that the Company "did not observe the procedure for
terminating employment as provided for in paragraph (b) of Article 272 [sic] of the Labor
Code." 19 Accordingly, and pursuant to this Court's ruling in Wenphil Corporation vs.
National Labor Relations Commission, 20 reiterated in subsequent cases, the Labor Arbiter
resolved to impose upon the Company a sanction, in an amount equivalent to the
petitioner's one-month salary, for its failure to observe the due process requirements of
notice and hearing.
The petitioner appealed the decision to the NLRC which, however, sustained the Labor
Arbiter in its 29 October 1993 decision.
Hence, this petition wherein the petitioner contends that the public respondents committed
grave abuse of discretion and serious error in law (a) in finding just cause for his dismissal
on mere allegation of loss of trust and confidence, (b) in applying the Wenphil case, and (c)
in not awarding him damages. 21
The petitioner submits that he was dismissed on mere suspicion as there was even no proof
that the Company actually suffered loss of goods worth P105,225.00 or that he actually
tampered with the questioned MRs. In support of this contention, he cites portions of the
transcripts of stenographic notes where: (1) Teodoro Lopez, manager of the Internal Audit
Section of the Company, admitted that the actual physical count of the inventory tallied with
the stock records and that the tampering of the original MRs resulted in overusage of the
materials; 22 (2) private respondent Javelona admitted that no theft or pilferage in the
warehouse where the petitioner worked was reported by the Company security; 23 and (3)

Crismon Castro Igtiben, a Company auditor, disclosed that the original recommendation of
the investigating committee was the petitioner's retirement or transfer. 24
The petitioner also claims that he was a mere rank-and-file employee whose position was
not reposed with trust and confidence. And considering that he had rendered fourteen years
of service to the company, dismissal was too harsh a penalty. Moreover, he was virtually
deprived of his retirement benefits.
It is further asserted that the assailed decision went beyond what was originally claimed by
the private respondents. The loss originally imputed to him was only P69,000.00, yet he was
ultimately blamed for the alleged loss of P105,225.00.
For their part, the private respondents contend that the petitioner raises questions of fact
which may no longer be entertained by this Court. In any event, he was entrusted with the
issuance, receipt, and custody of the lost materials. His position required a high degree of
trust and confidence, and his breach thereof justified his dismissal.
The Solicitor General debunks the petitioner's claim that there was no evidence of loss. The
two investigations undeniably disclosed the petitioner's active participation in the
questioned MRs. Also, the lengthy testimonies cited by the petitioner were all taken out of
context. The physical count or inventory of the packing items tallied with the stock records
because the latter were based on the tampered MRs. 25 No theft was reported by the
security force, since the loss was attributed to an inside job. And the fact that the
investigating team recommended either the petitioner's retirement or transfer instead of
dismissal bolstered the claim that the petitioner had indeed committed the anomalies.
We see no merit in the instant petition.
The petitioner's basic grievance is the findings of fact of the public respondents. It is settled
that the factual findings of quasi-judicial agencies, such as the NLRC, which have acquired
expertise in the matters entrusted to their jurisdiction are accorded by this Court not only
respect but even finality if they are supported by substantial evidence, 26 or that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.
27
As disclosed in the decision of respondent Labor Arbiter, the search for the facts in this case
was not solely confined within the position papers of the parties. He conducted "a full-blown
trial" 28 with the petitioner presenting as hostile witnesses respondent Jesus Javelona,
Teodoro Lopez, and Crismon Castro Igtiben, who are, respectively, the Manager of the
Engineering Department, Manager of the Internal Audit Section, and Auditor of the latter
section of the Company. The petitioner found it convenient not to testify. On the other hand,
the Company presented Teodoro Lopez and submitted the affidavits of private respondent
Jesus Javelona and the other officials of the Company, namely, Renato Amancio, Manager of
the Oil Mill Engineering Department; Jerry Casino, Manager of the NSD Powder Engineering
Department; Gerardo Parungao, Manager of the Soapery Engineering Department; and
Antonio Ronquillo, Manager of Foods Engineering Department. 29 The Labor Arbiter had the
further advantage of personally observing the deportment of the witnesses while they were
testifying. It is doctrinally entrenched that the evaluation of the testimony of witnesses by
the one who personally receives the testimony and has the direct opportunity to observe
them on the witness stand is received by an appellate court with the highest respect and is
even binding upon that court in the absence of a clear showing that the evaluation was
reached arbitrarily. 30
It is not disputed that the petitioner is a rank-and-file employee. Ordinarily, a rank-and-file
employee is not reposed with a high degree of trust and confidence expected of a
supervisory or managerial employee. It must, however, be noted that the petitioner served
as a warehouseman and was in charge of the custody, safekeeping, and release of the
Company's materials. The nature of his work and the scope and special character of his
duties, therefore, involved utmost trust and confidence.
The Labor Arbiter found that the evidence sufficiently established the following:
(1)

Petitioner signed all copies of the questioned MRs 449727 and 449748;

(2)

Petitioner released the items covered by the said MRs;

(3)
There were discrepancies in the MRs the quantity indicated in the white (original)
copy exceeded that in the green and yellow copies;
(4)

The white copies contained erasures and insertions;

(5)

The discrepancies amounted to P27,025.00; and

(6)
The total amount of discrepancies of the MRs issued from January to July, 1991
amounted to P105,225.00. 31
The two detailed audit reports by the Internal Audit Section 32 were made the basis for the
conclusions of the Labor Arbiter, which were likewise adopted by the NLRC. The reports
indicated that there were eight questionable MRs with erasures and insertions and that the
petitioner was the issuing warehouseman in five of these tampered MRs as shown by his
signature therein. The interviews conducted with the personnel in the Company's different
divisions revealed that the recipients received less than what were stated in the tampered
MRs.
It must be emphasized that the petitioner did not deny his signatures in the questioned MRs.
And when confronted with the reports of the anomalies, he offered no explanation or theory
which could account for the loss. What remains significant is that the warehousemen
involved in the said MRs were either the petitioner or Felipe Viado, with the former
answerable to five of eight tampered MRs. The loss to which the petitioner is accountable to
is in the amount of P69,000.00. This is too much of a coincidence to ignore, considering that
his position is one reposed with trust and confidence.
This case is analogous to Segismundo vs. National Labor Relations Commission 33 where the
charge of pilferage against two rank-and-file employees was supported by the thorough
investigation conducted by the employer. We ruled that the dismissal of the employees was
with just cause. In the said case, the documentary evidence pointed to the culpability of the
dismissed employees and prevailed over the latter's self-serving denials. While there was no
direct evidence to prove that they actually committed the pilferage, we nonetheless ruled
that substantial proof and not clear and convincing evidence or proof beyond reasonable
doubt is sufficient as basis for their dismissal. The standard of substantial evidence is
satisfied where "the employer has reasonable ground to believe that the employee is
responsible for the misconduct, and his participation therein renders him unworthy of the
trust and confidence demanded by his position." 34
Among the just causes or valid grounds for termination of employment by the employer is
"fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative." 35 Ordinary breach will not suffice; it must be willful and without
justifiable excuse; there must be basis therefor, and it must be supported by substantial
evidence and not merely by the whims or caprice of the employer. 36
In the instant case, we find no difficulty in agreeing with the public respondents that the
petitioner committed willful breach of the trust and confidence reposed in him by the
Company.
We also uphold the finding of both the Labor Arbiter and the NLRC that the petitioner was
not accorded the due process requirements prescribed in paragraph (b), Article 277 of the
Labor Code. It is not enough that the petitioner was apprised of the results of the
investigations and asked to explain his side. This, definitely, is not the kind of notice
contemplated by the Labor Code.
The twin requirements of notice and hearing are indispensable for a dismissal to be validly
effected. 37 Failure to observe these requirements does not, however, operate to invalidate
or nullify the dismissal for a just and valid cause. A distinction should be made between the
legality of the act of dismissal and the legality of the manner by which the act of dismissal
was performed. The first refers to dismissal under the grounds provided for under Article 282
38 of the Labor Code. The second involves the observance of the procedural due process
requirements. 39 It is now settled that where the dismissal of an employee is proven to be
for a just and valid cause but he is not accorded his right to procedural due process, the
dismissal shall be upheld but the employer must be sanctioned for non-compliance with the
requirements of due process. The sanction, which is in the nature of indemnification or
penalty, depends on the facts of each case and the gravity of the omission committed by the
employer and ranges from P1,000.00 40 to P10,000.00. 41 More recently, in Worldwide
Papermills, Inc. vs. National Labor Relations Commission, 42 the sum of P5,000.00 was
awarded to the employee as indemnification for the employer's failure to comply with the
requirements of procedural due process.
That the Company must be sanctioned and ordered to indemnify the petitioner is inevitable.
However, the indemnity must be in conformity with the above decisions. We thus reduce it
from P7,000.00 to P5,000.00.
WHEREFORE, the decision of the Rational Labor Relations Commission in NLRC NCR Case No.
00-10-05993-91 is hereby AFFIRMED subject to the modification of the sanction for the

violation of the due process requirements of notice and hearing by private respondent
Philippine Refining Co., Inc. or Unilever Philippines (PRC), Inc., which is hereby reduced from
P7,000.00 to P5,000.00.
SO ORDERED.
G.R. No. 123737
May 28, 1999
CARLOS C. LIBRES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL STEEL CORPORATION,
OSMUNDO G. WAGA, JR., ANTONIE D. SEVA, PETER J. LOQUILLANO, SATURNINO P.
MEJORADA and ISIDRO F. HYNSON, JR., respondent.
BELLOSILLO, J.:
This petition for certiorari seeks to annul the decision of public respondent National Labor
Relations Commission (NLRC) sustaining the Labor Arbiter's finding that petitioner was
validly suspended by private respondents, as well as the NLRC resolution denying
petitioner's motion to reconsider its decision.
Petitioner Carlos G. Libres, an electrical engineer, was holding a managerial position with
National Steel Corporation (NSC) as Assistant Manager. On 3 August 1993 he received a
Notice of Investigation from Assistant Vice president Isidro F. Hynson Jr., his immediate
superior, requesting him to submit a written explanation relative to the charge of sexual
harassment made by Susan D. Capiral, Hynson's secretary, allegedly committed by Libres
sometime in May 1992, and subsequently to answer clarificatory questions on the matter.
The notice also warned him that failure to file his written explanation would be construed as
a waiver of his right to be heard. On 14 August 1993 petitioner submitted his written
explanation denying the accusation against him and offering to submit himself for
clarificatory interrogation.
Subsequently, Hynson Jr. conducted an internal investigation to which Libres and Capiral
were invited to ventilate their respective sides of the issue. They readily responded.
Thereafter, Hynson Jr. submitted his report to the Management Evaluation Committee (MEC).
The MEC, after deliberation concluded that the charges against petitioner constituted a
violation of Item 2, Table V, of the Plant's Rules and Regulations. 1 It opined that "touching a
female subordinate's hand and shoulder, caressing her nape and telling other people that
Capiral was the one who hugged and kissed or that she responded to the sexual advances
are unauthorized acts that damaged her honor". 2 Referring to the Manual of the Philippine
Daily Inquirer in defining sexual harassment, 3 the MEC finally concluded that petitioner's
acts clearly constituted sexual harassment as charged and recommended petitioner's
suspension for thirty (30) days without pay.
On 5 January 1994 petitioner wrote Melchor Q. Villamor, Vice President for Manufacturing
requesting reconsideration of his suspension, but the same was denied. On 12 February
1994 the suspension order was finally implemented.
Seeking to reverse his misfortune, Libres filed a complaint for illegal suspension and unjust
discrimination against respondent NSC and its officers, private respondents herein, before
the Labor Arbiter. Citing the failure of the MEC to grant him audience despite his offer to
answer clarificatory questions, petitioner claimed denial of due process. Labor Arbiter
Nicodemus G. Palangan however ruled that due process was properly observed and that
there was a positive finding of sexual harassment to justify petitioner's suspension. He
pointed out that there was no substantial inconsistency between the narration of
complainant Capiral and petitioner regarding the incident in the evening of May 1992. The
Labor Arbiter found that aside from a few facts which were controverted by Capiral in her
complaint-affidavit, petitioner's admissions approximated the truth; consequently, he ruled
that the MEC was correct in concluding that sexual harassment had indeed transpired. The
Labor Arbiter observed that petitioner should welcome that his penalty was only for
suspension of thirty (30) days as opposed to termination imposed in Villarama v. NLRC and
Golden Donuts. 4
In this recourse petitioner maintains that public respondent grievously erred amounting to
lack or excess of jurisdiction in finding that he committed sexual harassment justifying his
suspension, and in concluding that he was afforded due process.
Petitioner argues that the issue of sexual harassment was not adequately considered as he
noted that the finding of the NLRC was made without proper basis in fact and in law. He
maintains that the NLRC merely adopted the conclusions of the Labor Arbiter which in turn
were simply derived from the report of the MEC. Petitioner primarily disputes the failure of

the NLRC to apply RA No. 7877, "An Act Declaring Sexual Harassment Unlawful in the
Employment, Education or Training Environment and for Other Purposes," in determining
whether he actually committed sexual harassment. He asserts that his acts did not fall
within the definition and criteria of sexual harassment as laid down in Sec. 3 of the law. 5
Specifically, he cites public respondent's failure to show that his acts of fondling the hand
and massaging the shoulders of Capiral "discriminated against her continued employment,"
"impaired her rights and privileges under the Labor Code," or "created a hostile, intimidating
or offensive environment." 6
Petitioner also contends that public respondent's reliance on Villarama v. NLRC and Golden
Donuts 7 was misplaced. He draws attention to victim Divina Gonzaga's immediate filing of
her letter of resignation in the Villarama case as opposed to the one-year delay of Capiral in
filing her complaint against him. He now surmises that the filing of the case against him was
merely an afterthought and not borne out of a valid complaint, hence, the Villarama case
should have no bearing on the instant case.
As regards his assertion that he was not afforded due process, petitioner would point to his
demand for personal confrontation which was brushed aside by the MEC. He argues strongly
that in rejecting his plea, the MEC clearly denied him an opportunity to be heard and present
his side.
The issues raised in this petition require this Court to delve into the findings of fact by the
public respondent. We have ruled in a litany of cases that resort to judicial review of the
decisions of the NLRC under Rule 65 of the Rules of Court is confined only to issues of want
or excess of jurisdiction and grave abuse of discretion on the part of the tribunal rending
them. It does not include an inquiry on the correctness of the evaluation of evidence, which
served as basis for the labor official in determining his conclusion. Findings of fact of
administrative officers are generally given finality. 8 Nonetheless, the Court shall discuss the
matter if only to emphasize that the contentions of petitioner are definitely without merit.
Petitioner assails the failure of the NLRC to strictly apply RA No. 7877 to the instant case. We
note however that petitioner never raised the applicability of the law in his appeal to the
NLRC nor in his motion for reconsideration. Issues or arguments must chiefly be raised
before the court or agency concerned so as to allow it to pass upon and correct its mistakes
without the intervention of a higher court. Having failed to indicate his effort along this line,
petitioner cannot now belatedly raise its application in this petition.
Republic Act No. 7877 was not yet in effect at the time of the occurrence of the act
complained of. It was still being deliberated upon in Congress when petitioner's case was
decided by the Labor Arbiter. As a rule, laws shall have no retroactive effect unless otherwise
provided, or except in a criminal case when their application will favor the accused. 9 Hence,
the Labor Arbiter have to rely on the MEC report and the common connotation of sexual
harassment as it is generally as understood by the public. Faced with the same predicament,
the NLRC had to agree with the Labor Arbiter. In so doing, the NLRC did not commit any
abuse of discretion in affirming the decision of the Labor Arbiter.
Petitioner next trains his gun on the reliance by the NLRC on Villarama and claims it was
erroneous. We rule otherwise and hold that it was both fitting and appropriate since it
singularly addressed the issue of a managerial employee committing sexual harassment on
a subordinate. The disparity in the periods of filing the complaints in the two (2) cases did
not in any way reduce this case into insignificance. On the contrary, it even invited the
attention of the Court to focus on sexual harassment as a just and valid cause for
termination. Whereas petitioner Libres was only meted a 30-day suspension by the NLRC,
Villarama in the other case was penalized with termination. As Mr. Justice Puno elucidated,
"As a managerial employee, petitioner is bound by more exacting work ethics. He failed to
live up to his higher standard of responsibility when he succumbed to his moral perversity.
And when such moral perversity is perpetrated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust and confidence. It is the right, nay, the
duty of every employer to protect its employees from oversexed superiors." 10 Public
respondent therefore is correct in its observation that the Labor Arbiter was in fact lenient in
his application of the law and jurisprudence for which petitioner must be grateful and not
gripe against.
Petitioner further claims that the delay in instituting the complaint shows that it was only an
afterthought. We disagree. As pointed out by the Solicitor General, it could be expected
since Libres was Capiral's immediate superior. Fear of retaliation and backlash, not to forget
the social humiliation and embarrassment that victims of this human frailty usually suffer,
are all realities that Capiral had to contend with. Moreover, the delay did not detract from
the truth derived from the facts. Petitioner Libres never questioned the veracity of Capiral's
allegations. In fact his narration even corroborated the latter's assertion in several material
points. He only raised issue on the complaint's protracted filing.

On the question of due process, we find that the requirements thereof were sufficiently
complied with. Due process as a constitutional precept does not always and in all situations
require a trial type proceeding. Due process is satisfied when a person is notified of the
charge against him and given an opportunity to explain or defend himself. The essence of
due process is simply to be heard, or as applied to administrative proceedings, an
opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or
ruling complained of. 11 It is undeniable that petitioner was given a Notice of Investigation
informing him of the charge of sexual harassment as well as advising him to submit a
written explanation regarding the matter; that he submitted his written explanation to his
superior, Isidro F. Hyson Jr.; that Hynson Jr. further allowed him to air his grievance in a
private session; and, that upon release of the suspension order made by the MEC petitioner
requested its reconsideration but was denied. From the foregoing it can be gleaned that
petitioner was given more than adequate opportunity to explain his side and air his
grievances.
The personal confrontation with the MEC officers, which he requested, was not necessary.
The parties had already exhaustively presented their claims and defenses in different fora.
As stated in Howevers Savings and Loan Association v. NLRC, litigants may be heard through
pleadings, written explanations, position papers, memoranda or oral arguments. 12
Petitioner has been afforded all of the above means to air his side. Due process was
therefore properly observed.
WHEREFORE, the petition is DISMISSED, no grave abuse of discretion having been
committed by public respondent National Labor Relations Commission in upholding the
suspension of petitioner Carlos G. Libres as justified and in accordance with due process.
Consequently, its decision of 28 August 1995 as well as its resolution of 31 October 1995 is
AFFIRMED.1wphi1.nt
SO ORDERED.

G.R. No. 106341

September 2, 1994
DELFIN G. VILLARAMA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION
respondents.
Rogelio R. Udarbe for petitioner.
Armando V. Ampil for private respondent.
PUNO, J.:

AND

GOLDEN

DONUTS,

INC.,

Sexual harassment abounds in all sick societies. It is reprehensible enough but more so
when inflicted by those with moral ascendancy over their victims. We rule that it is a valid
cause for separation from service.
First, the facts. On November 16, 1987, petitioner DELFIN VILLARAMA was employed by
private respondent GOLDEN DONUTS, INC., as its Materials Manager. His starting salary was
P6,500.00 per month, later increased to P8,500.00.
On July 15, 1989, petitioner Villarama was charged with sexual harassment by Divina
Gonzaga, a clerk-typist assigned in his department. The humiliating experience compelled
her to resign from work. Her letter-resignation, dated July 15, 1989, reads:
MR. LEOPOLDO H. PRIETO
President
Golden Donuts, Inc.
Dear Sir:
I would like to tender my resignation from my post as Clerk Typist of Materials Department
effective immediately.
It is really my regret to leave this company which has given me all the opportunity I long
desired. My five (5) months stay in the company have been very gratifying professionally
and financially and I would not entertain the idea of resigning except for the most shocking
experience I have had in my whole life.
Last Friday, July 7, 1989, Mr. Delfin Villarama and Mr. Jess de Jesus invited all the girls of
Materials Department for a dinner when in (sic) the last minute the other three (3) girls
decided not to join the groupp anymore. I do (sic) not have second thought(s) in accepting

their invitation for they are my colle(a)gues and I had nothing in mind that would in any
manner prompt me to refuse to what appeared to me as a simple and cordial invitation. We
went to a restaurant along Makati Avenue where we ate our dinner. Mr. Villarama, Mr.
Olaybar and Mr. Jess de Jesus were drinking while we were eating and (they) even offered
me a few drinks and when we were finished, they decided to bring me home. While on my
way, I found out that Mr. Villarama was not driving the way to my house. I was wondering
why we were taking the wrong way until I found out that we were entering a motel. I was
really shock(ed). I did not expect that a somewhat reputable person like Mr. Villarama could
do such a thing to any of his subordinates. I should have left the company without any word
but I feel that I would be unfair to those who might be similarly situated. I hope that you
would find time to investigate the veracity of my allegations and make each (sic) responsible
for is own deed. (emphasis ours)
Thank you very much and more power.
Very respectfully yours,
DIVINA GONZAGA
The letter prompted Mr. Leopoldo Prieto, President of Golden Donuts, Inc., to call petitioner
to a meeting on August 4, 1989. Petitioner was then required to explain the letter against
him. It appears that petitioner agreed to tender his resignation. Private respondent moved
swiftly to separate petitioner. Thus, private respondent approved petitioner's application for
leave of absence with pay from August 5-28, 1989. It also issued an inter-office
memorandum, dated August 4, 1989, advising "all concerned" that petitioner was no longer
connected with the company effective August 5, 1989. 1 Two (2) days later, or on August 7,
1989, Mr. Prieto sent a letter to petitioner confirming their agreement that petitioner would
be officially separated from the private respondent. The letter reads:
Dear Mr. Villarama:
This is to officially confirm our discussion last Friday, August 4, 1989, regarding your
employment with us. As per our agreement, you will be officially separated from the
company effective August 23, 1989.
May I, therefore, request you to please submit or send us your resignation letter on or before
the close of business hours of August 22, 1989.
Please see the Personnel & Industrial Relations Office for your clearance.
Very truly yours,
(SGD). LEOPOLDO H. PRIETO, JR.
President
In the interim, petitioner had a change of mind. In a letter dated August 16, 1989, petitioner
sought reconsideration of the management's decision to terminate him, viz.:
DEAR SIR:
MAY I REQUEST FOR A RECONSIDERATION ON THE DECISION HANDED DURING OUR MEETING
OF AUGUST 4, 1989, TERMINATING MY SERVICES WITH THE COMPANY EFFECTIVE AUGUST 5,
1989.
THE SIGNIFICANT CONTRIBUTION OF THE MATERIALS DEPARTMENT, WHICH I HAD BEEN
HEADING FOR THE PAST 21 MONTHS, TO THE PERFORMANCE OF THE COMPANY FAR
OUTWEIGHS THE ERROR THAT I HAD COMMITTED. AN ERROR THAT MUST NOT BE A BASIS
FOR SUCH A DRASTIC DECISION.
AS I AM STILL OFFICIALLY ON LEAVE UNTIL THE 29th, OF THIS MONTH, MAY I EXPECT THAT I
WILL RESUME MY REGULAR DUTY ON THE 29th?
ANTICIPATING YOUR FAVORABLE REPLY.
VERY TRULY YOURS,
(SGD.) DELFIN G. VILLARAMA
For his failure to tender his resignation, petitioner was dismissed by private respondent on
August 23, 1989. Feeling aggrieved, petitioner filed an illegal dismissal case 2 against
private respondent.

In a decision dated January 23, 1991, Labor Arbiter Salimar V. Nambi held that due process
was not observed in the dismissal of petitioner and there was no valid cause for dismissal.
Private respondent GOLDEN DONUTS, INC. was ordered to: (1) reinstate petitiner DELFIN G.
VILLARAMA to his former position, without loss of seniority rights, and pay his backwages at
the rate of P8,500.00 per month from August 1989, until actual reinstatement; (2) pay
petitioner the amount of P24,866.66, representing his unused vacation leave and
proportionate 13th month pay; (3) pay petitioner P100,000.00, as moral damages, and
P20,000.00, as exemplary damages; and (3) pay the attorney's fees equivalent to ten
percent of the entire monetary award.
Private respondent appealed to the National Labor Relations Commission. On July 16, 1992,
public respondent reversed the decision of the labor arbiter. The dispositive portion of its
Resolution reads:
WHEREFORE, premises considered, the decision appealed from is hereby set aside and a
new one entered declaring the cause of dismissal of complainant as valid; however, for the
procedural lapses, respondent (Golden Donuts, Inc.) is hereby ordered to indemnify
complainant (petitioner) in the form of separation pay equivalent to two month's (sic) pay
(for his two years of service, as appears (sic) in the records), or the amount of P17,000.00.
SO ORDERED.
Hence, this petition where the following arguments are raised:
THE ALLEGED IMMORALITY CHARGED AGAINST PETITIONER IS NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE ON RECORD.
THE MERE ADMISSION OF THE VIOLATION OF DUE PROCESS ENTITLES PETITIONER TO
REINSTATEMENT.
IN ANY EVENT, PETITIONER IS ENTITLED TO HIS SALARIES FROM RECEIPT BY PRIVATE
RESPONDENT OF THE DECISION OF THE LABOR ARBITER ON 4 FEBRUARY 1991 TO (sic) AT
LEAST THE PROMULGATION OF THE ASSAILED RESOLUTION ON (sic) 16 JULY 1992.
IN ANY EVENT, PETITIONER IS ALSO ENTITLED TO HIS UNUSED VACATION LEAVE AND
PROPORTIONATE 13TH MONTH PAY IN THE TOTAL AMOUNT OF P24,866.66, ADJUDGED BY
THE LABOR ARBITER.
THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES BY THE LABOR
ARBITER IS JUSTIFIED.
We affirm with modification the impugned Resolution.
At the outset, we note that the Petition was not accompanied by a certified true copy of the
assailed July 16, 1992 NLRC Resolution, 3 in violation of Revised Circular No. 1-88. Neither
was there any certification under oath that "petitioner has not commenced any other action
or proceeding involving the same issues in the Supreme Court, the Court of Appeals or
different Divisions thereof, or any other tribunal or agency, and that to the best of his
knowledge, no such action or proceeding is pending in the Supreme Court, the Court of
Appeals, or different Divisions thereof or any other tribunal or agency," as required under
Circular No. 28-91. It is settled that non-compliance with the provisions of Revised Circular
No. 1-88 and Circular No. 28-91, would result in the outright dismissal of the petition. 4
In addition, under Rule 65 of the Revised Rules of Court, the special civil action for certiorari
is available in cases where the concerned "tribunal, board or officer exercising judicial
functions had acted without or in excess of its jurisdiction, or with grave abuse of discretion
and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course
of law." In Antonio v. National Labor Relations Commission, 5 we held that the plain and
adequate remedy expressly provided by law is a motion for reconsideration of the assailed
decision, and the resolution thereof, which is not only expected to be but would actually
have provided adequate and more speedy remedy than a petition for certiorari. The
rationale for this requirement is to enable the court or agency concerned to pass upon and
correct its mistakes without the intervention of a higher court. 6 In this case, the assailed
July 16, 1992 Resolution of the National Labor Relations Commission was received by
petitioner's counsel on July 23, 1992. 7 Petitioner did not file a motion for reconsideration,
instead, he commenced this special civil action for certiorari. Be that as it may, we allowed
the petition to enable us to rule on the significant issues raised before us, viz.: (1) whether
or not petitioner's right to procedural due process was violated, and (2) whether or not he
was dismissed for a valid or just cause.

The procedure for terminating an employee is found in Article 277 (b) of the Labor Code,
viz.:
xxx

xxx

xxx

(b)
Subject to the constitutional right of workers to security of tenure and their right to
be protected against dismissal except for a just and authorized cause and without prejudice
to the requirement of notice under Article 283 of this Code the employer shall furnish the
worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be
heard and to defend himself with the assistance of his counsel if he so desires in accordance
with company rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality of his dismissal by filing
a complaint with the regional branch of the National Labor Relations Commission. The
burden of proving that the termination was for a valid or authorized cause shall rest on the
employer. . . . (emphasis supplied)
This procedure protects not only rank-and-file employees but also managerial employees.
Both have the right to security of tenure as provided for in Section 3, Article XIII of the 1987
Constitution. In the case at bench, petitioner decided to seek reconsideration of the
termination of his service thru his August 16, 1989 letter. While admitting his error, he felt
that its gravity did not justify his dismissal. Considering this stance, and in conformity with
the aforequoted Article 277 (b) of the Labor Code, petitioner should have been formally
charged and given an opportunity to refute the charges. Under the facts in field, we hold
that petitioner was denied procedural due process.
We now come to the more important issue of whether there was valid cause to terminate
petitioner.
Petitioner claims that his alleged immoral act was unsubstantiated, hence, he could not be
dismissed. We hold otherwise. The records show that petitioner was confronted with the
charge against him. Initially, he voluntarily agreed to be separated from the company. He
took a leave of absence preparatory to this separation. This agreement was confirmed by
the letter to him by Mr. Prieto dated August 7, 1989. A few days after, petitioner reneged on
the agreement. He refused to be terminated on the ground that the seriousness of his
offense would not warrant his separation from service. So he alleged in his letter to Mr.
Prieto dated August 16, 1989. But even in this letter, petitioner admitted his "error" vis-a-vis
Miss Gonzaga. As a manager, petitioner should know the evidentiary value of his
admissions. Needless to stress, he cannot complain there was no valid cause for his
separation.
Moreover, loss of trust and confidence is a good ground for dismissing a managerial
employee. It can be proved by substantial evidence which is present in the case at bench. As
further observed by the Solicitor General:
. . . assuming arguendo that De Jesus and Gonzaga were sweethearts and that petitioner
merely acceded to the request of the former to drop them in the motel, petitioner acted in
collusion with the immoral designs of De Jesus and did not give due regard to Gonzaga's
feeling on the matter and acted in chauvinistic disdain of her honor, thereby justifying public
respondent's finding of sexual harassment. Thus, petitioner not only failed to act accordingly
as a good father of the family because he was not able to maintain his moral ascendancy
and authority over the group in the matter of morality and discipline of his subordinates, but
he actively facilitated the commission of immoral conduct of his subordinates by driving his
car into the motel.
(Comment, April 29, 1993, p. 9)
As a managerial employee, petitioner is bound by a more exacting work ethics. He failed to
live up to this higher standard of responsibility when he succumbed to his moral perversity.
And when such moral perversity is perpetrated against his subordinate, he provides
justifiable ground for his dismissal for lack of trust and confidence. It is the right, nay, the
duty of every employer to protect its employees from over sexed superiors.
To be sure, employers are given wider latitude of discretion in terminating the employment
of managerial employees on the ground of lack of trust and confidence. 8
We next rule on the monetary awards due to petitioner. The public respondent erred in
awarding separation pay of P17,000.00 as indemnity for his dismissal without due process of
law. The award of separation pay is proper in the cases enumerated under Articles 283 and
284 of the Labor Code, 9 and in cases where there is illegal dismissal (for lack of valid cause)

and reinstatement is no longer feasible. But this is not to state that an employer cannot be
penalized for failure to give formal notice and conduct the necessary investigation before
dismissing an employee. 10 Thus, in Wenphil vs. NLRC 11 and Pacific Mills, Inc. vs. Alonzo,
12 this Court awarded P1,000.00 as penalty for non-observance of due process.
Petitioner is not also entitled to moral and exemplary damages. There was no bad faith or
malice on the part of private respondent in terminating the services of petitioner. 13
Petitioner is entitled, however, to his unused vacation/sick leave and proportionate 13th
month pay, as held by the labor arbiter. These are monies already earned by petitioner and
should be unaffected by his separation from the service.
WHEREFORE, premises considered, the assailed resolution of public respondent is hereby
AFFIRMED WITH MODIFICATION that the award of separation pay is DELETED. Private
respondent is ordered to pay petitioner the amount of P1,000.00 for non-observance of due
process, and the equivalent amount of his unused vacation/sick leave and proportionate
13th month pay. No pronouncement as to costs.
SO ORDERED.
A.M. No. RTJ-01-1655
July 8, 2004
(Formerly OCA IPI 91-1174- RTJ)
ATTY. GRACE M. VELOSO AND MA. JOEYLYNN B. QUIONES, complainants,
vs.
JUDGE ANACLETO M. CAMINADE, RTC, Branch 6, Cebu City, respondent.
RESOLUTION
CORONA, J.:
Before this Court is an administrative complaint for sexual harassment separately filed by
Atty. Grace Veloso and Ma. Joeylynn Quiones against Judge Anacleto M. Caminade of the
Regional Trial Court of Cebu City, Branch 6.
Atty. Veloso, a lawyer of the Public Attorneys Office (PAO) assigned to the RTC branch
presided by Judge Caminade, alleged in her affidavit that, on March 9, 2001, she went to the
court to check on her work schedule for the following week. Judge Caminade was then
having a conversation with two men at the lawyers table. She was about to leave when
Judge Caminade asked her to join them. She acceded to respondents request as she
considered him as her superior. After a few minutes, the two men and Atty. Veloso rose to
leave but the judge told her to stay behind because they needed to discuss a case. Judge
Caminade then ushered her to his chambers. She was made to sit on the visitors chair
which was just a foot away from where the judge sat.
While discussing the case, she was stunned when Judge Caminade suddenly placed his hand
on her right thigh and squeezed it. He then took her hand and kissed it. She immediately
stood up and headed towards the door leading to the staff room. He, however, caught up
with her and placed his hand on her shoulder. Before she could open the door, Judge
Caminade told her "Kiss ko bi" (Let me kiss you). Atty. Veloso, who was so shocked, retorted
"Kalo-od nimo Judge uy" (You are so disgusting, Judge). She then opened the door and went
out of his chambers.
At the staff room, respondent judge, acting as if nothing happened, ordered his researcher to
show her certain court records. Although she was trembling, she pretended to look at the
records then ran out of the staff room and cried.
On March 12, 2001, Atty. Veloso sent a letter to Judge Caminade informing him of her
decision not to appear in his court again as resident PAO lawyer. She was thereafter
assigned to another branch of the court.
In his comment dated April 25, 2001, respondent judge averred that, after the court session
on March 9, 2001, Atty. Veloso entered his chambers to discuss a case she was handling.
Inside the chambers were Atty. Myrna Valderrama-Limbaga, branch clerk of court, and Mr.
Othello Capangpangan, a court employee. After discussing her case, she allegedly reminded
respondent judge of the motion filed by her father, Atty. Eustacio Veloso, pertaining to a case
pending before his sala. The judge told her to convey to her father that he could not act on
the motion yet since he needed more time to review the voluminous records of the case.
She promised to relay the message to her father. Purportedly as a gesture of appreciation,
Judge Caminade spontaneously placed his hand on her thigh and pressed it while saying
"Thank you" to her. He then playfully took her hand and kissed it. She allegedly did nothing
to protest such action because she knew that he was just teasing her. He also opined that
the complaint was filed by Atty. Veloso in order to erase any doubt about her moral values,
knowing that Atty. Limbaga and Mr. Capangpangan were present when he kissed her hand.

Further, Judge Caminade explained that he had a tendency to tease and play pranks on his
friends, both male and female, because of his congenial nature. In fact, even before his
appointment to the judiciary, it had been his natural way of complimenting women for their
physical attributes but he never had any malice or lustful designs in his actuations.
On the other hand, Joeylynn Quiones, Clerk III in the office of Judge Caminade, claimed that
respondent judge squeezed her hand on three different occasions in February 2001. She
noticed that the judge would squeeze her hand whenever she gave him the case records.
Although offended by his actions, Joeylynn opted to remain silent out of deference to or fear
of respondent judge.
Then, on February 14, 2001, Judge Caminade asked her to open a jar of sugar; he was
unable to do so due to his disability of having only one hand. Joeylynn entered the judges
chambers and handed him the jar. Once inside, he greeted her "Happy Valentines Day" and
asked "Asa mo gabii?" (Where did you go last night?). She replied "Sa balay" (At home). To
Joeylynns surprise, he suddenly grabbed her right hand and kissed her on the cheek. She
was so shocked that she could not react. Thereafter, Joeylynn left the chambers and cried.
From then on, Joeylynn avoided entering respondents chambers, asking the court aide or
legal researcher instead to bring in the case records even when respondent called for her.
On March 23, 2001, upon her request, Joeylynn was detailed to Branch 16 of RTC Cebu City
and eventually to the Office of the Clerk of Court.
Judge Caminade filed his comment on May 18, 2001 and reiterated his earlier defense that
he was just being friendly to his staff. He admitted pressing Joeylynns hand on several
occasions but insisted that they were innocent gestures. On February 14, 2001, he merely
greeted Joeylynn and kissed her on the cheek as it was Valentines Day. He asserted that
Joeylynn merely misinterpreted his actions towards her.
The two administrative complaints were consolidated and referred to then Associate Justice
Conchita Carpio Morales1 of the Court of Appeals for investigation, report and
recommendation.
In her report received by this Court on September 5, 2002, Justice Morales found Judge
Caminade guilty of violating Canon 2 and Rule 2.01 of the Code of Judicial Conduct and
Canon 3 of the Canons of Judicial Ethics and recommended that respondent be suspended
for six months without pay.
After carefully evaluating the records of this case, we find the conclusions and
recommendation of the investigating justice to be adequately supported by the evidence
and based on applicable law and jurisprudence.
Those who serve in the judiciary, particularly justices and judges, must not only know the
law but must also possess the highest degree of integrity and probity, and an
unquestionable moral uprightness both in their public and private lives.2
In this particular case, we are principally concerned with the moral fiber of Judge Caminade.
His penchant for teasing and showing unwelcome affection to women indicates a certain
moral depravity and lack of respect towards his female employees. They were his
subordinates and he should have treated them like his own children. Instead, he took
advantage of his superior position.
We have repeatedly held that, while every office in the government service is a public trust,
no position exacts greater moral righteousness than a seat in the judiciary.3 Performing as
he does an exalted role in the administration of justice, a judge must pay a high price for the
honor bestowed upon him. Thus, a judge must comport himself at all times in such a manner
that his conduct, official or otherwise, can weather the most exacting scrutiny of the public
that looks up to him as the epitome of integrity and justice.4
Canons 35 and 46 of the new Code of Judicial Conduct mandate, respectively, that "judges
shall ensure that not only is their conduct above reproach, but that it is perceived to be so in
the view of the reasonable observer" and that "judges shall avoid improprieties and the
appearance of impropriety in all of their activities." These very stringent standards of
decorum are demanded of all magistrates and employees of the courts.
Judge Caminades behavior must be sanctioned. We are neither amused by his claims of
innocent playfulness nor impressed by his excessive display of congeniality. He acted
beyond the bounds of decency, morality and propriety. He failed to meet the standard of
conduct embodied in the Code of Judicial Conduct. His abusive and distasteful acts

unmistakably constituted sexual harassment because they resulted in an intimidating,

hostile, or offensive environment for his female subordinates.
Section 8 of Rule 140 of the Rules of Court, as amended, considers a violation of the Code of
Judicial Conduct as a serious offense. A respondent found guilty of a serious charge may be
meted the penalty of: (1) dismissal from the service, forfeiture of all or part of the benefits
as the Court may determine, and disqualification from reinstatement or appointment to any
public office, including government-owned or controlled corporations, provided, that the
forfeiture of benefits shall in no case include accrued leave credits; (2) suspension from
office without salary and other benefits for more than three but not exceeding six months; or
(3) a fine of more than P20,000 but not exceeding P40,000.
We find it proper to adopt Justice Morales recommendation to suspend respondent judge for
six months without pay.
WHEREFORE, respondent judge is found guilty of violating Canons 3 and 4 of the new Code
of Judicial Conduct by committing sexual harassment and is hereby SUSPENDED from office
for a period of six months without pay effective immediately, with the warning that a
repetition of the same offense shall be punished with dismissal from the service.
SO ORDERED.

A.M. No. CTA-01-1

April 2, 2002
ATTY. SUSAN M. AQUINO, complainant,
vs.
HON. ERNESTO D. ACOSTA, Presiding Judge, Court of Tax Appeals, respondent.
SANDOVAL-GUTIERREZ, J.:
The present administrative case filed with this Court originated from a sworn affidavitcomplaint1 of Atty. Susan M. Aquino, Chief of the Legal and Technical Staff of the Court of Tax
Appeals (CTA), charging Judge Ernesto Acosta, Presiding Judge of the same court, with sexual
harassment under R.A. 7877 and violation of the Canons of Judicial Ethics and Code of
Professional Responsibility.
In her affidavit-complaint, complainant alleged several instances when respondent judge
sexually harassed her.
On November 21, 2000, she reported for work after her vacation in the United States,
bringing gifts for the three judges of the CTA, including respondent. In the afternoon of the
same day, he entered her room and greeted her by shaking her hand. Suddenly, he pulled
her towards him and kissed her on her cheek.
On December 28, 2000, while respondent was on official leave, he called complainant by
phone, saying he will get something in her office. Shortly thereafter, he entered her room,
shook her hand and greeted her, "Merry Christmas." Thereupon, he embraced her and
kissed her. She was able to free herself by slightly pushing him away. Complainant submitted
the Joint Affidavit2 of Ma. Imelda C. Samonte and Anne Benita M. Santos, CTA Tax
Specialists, to prove that respondent went to her office that day.
On the first working day in January, 2001, respondent phoned complainant, asking if she
could see him in his chambers in order to discuss some matters. When complainant arrived
there, respondent tried to kiss her but she was able to evade his sexual attempt. She then
resolved not to enter his chambers alone.
Weeks later, after the Senate approved the proposed bill expanding the jurisdiction of the
CTA, while complainant and her companions were congratulating and kissing each other,
respondent suddenly placed his arms around her shoulders and kissed her.
In the morning of February 14, 2001, respondent called complainant, requesting her to go to
his office. She then asked Ruby Lanuza, a clerk in the Records Section, to accompany her.
Fortunately, when they reached his chambers, respondent had left.
The last incident happened the next day. At around 8:30 a.m., respondent called
complainant and asked her to see him in his office to discuss the Senate bill on the CTA. She
again requested Ruby to accompany her. The latter agreed but suggested that they should
act as if they met by accident in respondent's office. Ruby then approached the secretary's
table which was separated from respondent's office by a transparent glass. For her part,
complainant sat in front of respondent's table and asked him what he wanted to know about
the Senate bill. Respondent seemed to be at a loss for words and kept glancing at Ruby who

was searching for something at the secretary's desk. Forthwith, respondent approached
Ruby, asked her what she was looking for and stepped out of the office. When he returned,
Ruby said she found what she was looking for and left. Respondent then approached
complainant saying, "me gusto akong gawin sa iyo kahapon pa." Thereupon, he tried to
"grab" her. Complainant instinctively raised her hands to protect herself but respondent held
her arms tightly, pulled her towards him and kissed her. She pushed him away, then
slumped on a chair trembling. Meantime, respondent sat on his chair and covered his face
with his hands. Thereafter, complainant left crying and locked herself inside a comfort room.
After that incident, respondent went to her office and tossed a note3 stating, "sorry, it won't
happen again."
In his comment, respondent judge denied complainant's allegation that he sexually harassed
her six times. He claimed that he has always treated her with respect, being the head of the
CTA Legal Staff. In fact, there is no strain in their professional relationship.
On the first incident, he explained that it was quite unlikely that complainant would ask him
to go to her office on such date in order to give him a "pasalubong."
With respect to the second incident on December 28, he claimed it could not have happened
as he was then on official leave.
Anent the third incident, respondent explained that he went to the various offices of the CTA
to extend New Year's greetings to the personnel. He also greeted complainant with a casual
buss on her cheek and gave her a calendar. In turn, she also greeted him.
As to the fourth episode, he averred that he and complainant had been attending the
deliberations of the Bicameral Conference Committee at the Senate on the bill expanding
the jurisdiction of the CTA. Hence, when the bill was finally approved that particular day,
respondent, in jubilation and in the presence of other people, gave complainant a
spontaneous peck on her cheek. He could not recall any resentment on her part when he
kissed her. She even congratulated him in return, saying "Justice ka na Judge." Then he
treated her to a lunch to celebrate the event. Respondent recounted several times when
they would return to the CTA in the evening after attending the committee hearings in
Congress to retrieve complainant's personal belongings from her office. Surely, if he had
malice in his mind, those instances would have been the perfect opportunities for him to
sexually harass her.
As to the fifth incident, respondent alleged that he did not call complainant to harass her,
but to discuss with her and Elizabeth Lozano, HRMO III, and Elsie T. Forteza, Administrative
Officer, the health plan for the CTA officers and employees. The fact that such meeting took
place was confirmed by a Certification issued by Lozano.4
Regarding the sixth incident, respondent narrated his version as follows: Complainant
arrived in his office past 9 a.m. that day, followed by another court employee, Ruby Lanuza.
He proceeded to discuss the CTA Expansion Bill with complainant. Then he went for a while
to the rest room. When he returned, Ruby had already left but complainant was still there.
Forthwith, he remarked that he forgot to greet her on Valentine's Day, the day before. He
approached complainant to give her a casual buss on the cheek. But she suddenly stood and
raised her arms to cover her face, causing her to lose her balance. So he held her arms to
prevent her from falling. Her rejection came as a surprise to him and made him feel quite
embarrassed. Shortly, complainant excused herself and left the room. Stunned at the
thought that she might misinterpret his gesture, he sent her a short note of apology.
Respondent further explained that the structure of his office, being seen through a
transparent glass divider, makes it impossible for anyone to commit any improper conduct
inside.
In a Resolution dated August 21, 2001, this Court referred the instant case to Justice Josefina
G. Salonga of the Court of Appeals for investigation, report and recommendation.
Justice Salonga set the hearing of the case on November 6, 2001. However, the parties,
through counsel, manifested that "they will not be adducing any further evidence." On
November 7, 2001, Justice Salonga issued an Order directing them to submit their
memoranda simultaneously, after which, the case shall be considered submitted for
resolution.
On January 9, 2002, Justice Salonga forwarded to this Court her Report on Investigation and
Recommendation, thus:
"We find for the respondent.

"The complainant failed to show by convincing evidence that the acts of Judge Acosta in
greeting her with a kiss on the cheek, in a 'beso-beso' fashion, were carried out with lustful
and lascivious desires or were motivated by malice or ill-motive. It is clear under the
circumstances that most of the kissing incidents were done on festive and special occasions.
In fact, complainant's testimony that she was sexually harassed on November 21, 2000, is
hardly believable. Notably, complainant declared in her affidavit-complaint that she brought
some 'pasalubongs' for the respondent judge from her trip abroad. Therefore, Atty. Aquino
could not have been 'taken aback' by the respondent's act of greeting her in a friendly
manner and thanking her by way of a kiss on the cheek. Moreover, it was established that
Judge Acosta was on official leave of absence from December 26-29, 2000. This was
corroborated by Ricardo Hebia, the driver of respondent judge, in his Panunumpa (Affidavit)
dated March 26, 2001, where he stated among others, to wit:
x xx
"Corollarily, the joint affidavit of Ms. Santos and Ms. Samonte attesting to the fact that
respondent dropped by at the third floor of the CTA and greeted them Happy New Year, even
if it true, can not be given any evidentiary weight. Clearly, they did not make any categorical
statement that they had witnessed or seen Judge Acosta making sexual advances on the
complainant. Nor did they even attribute any malicious acts on respondent constituting
sexual harassment.
"In addition, the respondent admitted that when he handed a calendar and greeted
complainant with a buss, complainant reciprocated by greeting him a Happy New Year. The
allegation of Atty. Aquino that the respondent merely used the calendars as 'props' to kiss
her on the cheek and that she was singled out by respondent is not supported by any
convincing evidence. The affidavit of Ms. Aurora U. Aso and Renelyn L. Larga that Ms.
Carmen Acosta gave them calendars for the office of Attys. Margarette Guzman and
Felizardo O. Consing, is immaterial and irrelevant, as Judge Acosta had stated that he
handed to complainant Aquino, a 2001 calendar in the course of greeting her with a buss on
the cheek. Said affidavit could not account for the calendars distributed to the other offices
in the CTA, more specifically, the Legal and Technical Staff headed by Atty. Aquino.
"Moreover, the claim of the complainant that she was sexually harassed immediately after
the final reading of the bill anent the expansion of the CTA at the Senate, can not be
accorded great evidentiary value. The alleged kissing incident took place in the presence of
other people and the same was by reason of the exaltation or happiness of the moment, due
to the approval of the subject bill. Quite interesting to note, is that Atty. Aquino reciprocated
by congratulating respondent and remarking "justice ka na judge" after the latter had
bussed her on the cheek. Complainant even failed to dispute the fact that after the kissing
incident, she joined Judge Acosta and his driver for lunch at a seafood restaurant in Luneta.
There was even a time that she allowed the respondent judge to accompany her to the
office alone and at nighttime at that, to retrieve her car keys and bag when they returned to
the CTA after the hearing at the Senate on the CTA expansion bill. These acts are not at
square with the behavior of one who has been sexually harassed, for the normal reaction of
a victim of sexual harassment would be to avoid the harasser or decline his invitations after
being offended. In fact, this occasion could have provided the respondent judge with the
right opportunity to commit malicious acts or to sexually harass complainant, but then Judge
Acosta never even attempted to do so. Undoubtedly, it could be said that no strained
relations existed between Atty. Aquino and Judge Acosta at that moment.
"Neither can the alleged continuous call of Judge Acosta on complainant in the morning of
February 14, 2001 to see him in his office, be considered as acts constituting sexual
harassment. Atty. Aquino failed to state categorically in her affidavit-complaint that
respondent demanded sexual advances or favors from her, or that the former had
committed physical conduct of sexual nature against her. The telephone calls were
attributed malicious implications by the complainant. To all intents and purposes, the
allegation was merely a product of her imagination, hence, the same deserves no weight in
law. Indeed, Atty. Aquino's own version, indicates that she well knew that the purpose of the
respondent in calling her in the morning of February 14, 2001 was to discuss the CTA Health
Plan which was disapproved by the Supreme Court and not for the respondent to demand
sexual favors from her. This was corroborated by Atty. Margarette Guzman in her affidavit
dated February 28, 2001, attached to the complainant's affidavit, where she stated:
x xx
"Finally, while Judge Acosta admitted having pecked Atty. Aquino on her cheek, which was
avoided by the latter, the same was not meant to sexually harass her. Judge Acosta's act of
extending his post Valentine greeting to complainant was done in good faith and sans any
malice. This is so because immediately after the complainant had displayed annoyance to

the kissing episode, Judge Acosta immediately extended an apology by way of a handwritten
note saying that the incident won't happen again.
"Parenthetically, the undersigned is convinced that Ms. Lanuza's affidavit that she
supposedly accompanied complainant to respondent's office as she allegedly had a previous
'bad experience' with the latter when he was still an Associate Judge, was merely concocted
to add flavor to the baseless imputations hurled against Judge Acosta. The accusation is
implausible as Ms. Lanuza did not seem to complain about the alleged bad experience she
had with Judge Acosta or relate it to anyone until ten (10) years later. It must be stressed
that Ms. Lanuza is a biased-witness who harbored ill feelings against the respondent, as she
was reprimanded by Judge Acosta for habitual absenteeism and tardiness in 1996. More
importantly, Ms. Lanuza did not even attest that she was a witness to the alleged sexual
advances of Judge Acosta.
"In all the incidents complained of, the respondent's pecks on the cheeks of the complainant
should be understood in the context of having been done on the occasion of some festivities,
and not the assertion of the latter hat she was singled out by Judge Acosta in his kissing
escapades. The busses on her cheeks were simply friendly and innocent, bereft of malice
and lewd design. The fact that respondent judge kisses other people on the cheeks in the
'beso-beso' fashion, without malice, was corroborated by Atty. Florecita P. Flores, Ms.
Josephine Adalem and Ms. Ma. Fides Balili, who stated that they usually practice 'beso-beso'
or kissing on the cheeks, as a form of greeting on occasions when they meet each other, like
birthdays, Christmas, New Year's Day and even Valentine's Day, and it does not matter
whether it is Judge Acosta's birthday or their birthdays. Theresa Cinco Bactat, a lawyer who
belongs to complainant's department, further attested that on occasions like birthdays,
respondent judge would likewise greet her with a peck on the cheek in a 'beso-beso' manner.
Interestingly, in one of several festive occasions, female employees of the CTA pecked
respondent judge on the cheek where Atty. Aquino was one of Judge Acosta's well wishers.
(Annex "8" to Comment, p. 65, Rollo)
"In sum, no sexual harassment had indeed transpired on those six occasions. Judge Acosta's
acts of bussing Atty. Aquino on her cheek were merely forms of greetings, casual and
customary in nature. No evidence of intent to sexually harass complainant was apparent,
only that the innocent acts of 'beso-beso' were given malicious connotations by the
complainant. In fact, she did not even relate to anyone what happened to her. Undeniably,
there is no manifest sexual undertone in all those incidents."5
Justice Salonga then made the following recommendation:
"Considering the above, the undersigned respectfully recommends that the administrative
complaint for sexual harassment and violations of the Canons of Judicial Ethics and the Code
of Professional Responsibility be DISMISSED and accordingly, respondent Presiding Judge
Ernesto D. Acosta be exonerated therefrom; that in view of these charges which might have
tainted the image of the Court, though unsubstantiated they may be, Judge Acosta is
WARNED to refrain from doing similar acts, or any act for that matter on the complainant
and other female employees of the Court of Tax Appeals, which in any manner may be
interpreted as lustful advances."6
We agree with the findings of Justice Salonga.
Administrative complaints against members of the judiciary are viewed by this Court with
utmost care, for proceedings of this nature affect not only the reputation of the respondents
concerned, but the integrity of the entire judiciary as well.
We have reviewed carefully the records of this case and found no convincing evidence to
sustain complainant's charges. What we perceive to have been committed by respondent
judge are casual gestures of friendship and camaraderie, nothing more, nothing less. In
kissing complainant, we find no indication that respondent was motivated by malice or lewd
design. Evidently, she misunderstood his actuations and construed them as work-related
sexual harassment under R.A. 7877.
As aptly stated by the Investigating Justice:
"A mere casual buss on the cheek is not a sexual conduct or favor and does not fall within
the purview of sexual harassment under R.A. No. 7877. Section 3 (a) thereof provides, to wit:
'Sec. 3. Work, Education or Training - related Sexual Harassment Defined. - Work, education
or training-related sexual harassment is committed by an employer, employee, manager,
supervisor, agent of the employer, teacher, instructor, professor, coach, trainor, or any other
person who, having authority, influence or moral ascendancy over another in a work or
training or education environment, demands, requests or otherwise requires any sexual

favor from the other, regardless of whether the demand, request or requirement for
submission is accepted by the object of said Act.
a) In a work-related or employment environment, sexual harassment is committed when:
1) The sexual favor is made as a condition in the hiring or in the employment, reemployment or continued employment of said individual, or in granting said individual
favorable compensation, terms, conditions, promotions or privileges; or the refusal to grant
sexual favor results in limiting, segregating or classifying the employee which in anyway
would discriminate, deprive or diminish employment opportunities or otherwise adversely
affect said employees;
2) The above acts would impair the employee's right or privileges under existing labor laws;
or
3) The above acts would result in an intimidating, hostile, or offensive environment for the
employee.'
"Clearly, under the foregoing provisions, the elements of sexual harassment are as follows:
1) The employer, employee, manager, supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor, or any other person has authority, influence or moral
ascendancy over another;
2) The authority, influence or moral ascendancy exists in a working environment;
3) The employer, employee, manager, supervisor, agent of the employer, teacher,
instructor, professor, coach, or any other person having authority, influence or moral
ascendancy makes a demand, request or requirement of a sexual favor.
"In her Complaint-affidavit, Reply and Sur-rejoinder, complainant did not even allege that
Judge Acosta demanded, requested or required her to give him a buss on the cheek which,
she resented. Neither did Atty. Aquino establish by convincing evidence that the busses on
her cheek, which she considers as sexual favors, discriminated against her continued
employment, or resulted in an intimidating, hostile or offensive environment. In fact,
complainant continued to perform her work in the office with the usual normalcy. Obviously,
the alleged sexual favor, if there ever was, did not interfere with her working condition
(Annexes "9" - "9-FFF"). Moreover, Atty. Aquino also continued to avail of benefits and leaves
appurtenant to her office and was able to maintain a consistent outstanding performance.
On top of this, her working area which, is at the third floor of the CTA, is far removed from
the office of Judge Acosta located at the fourth floor of the same building. Resultantly, no
hostile or intimidating working environment is apparent.
"Based on the foregoing findings, there is no sufficient evidence to create a moral certainty
that Judge Acosta committed the acts complained of; that Atty. Aquino's determination to
seek justice for herself was not substantiated by convincing evidence; that the testimony of
respondent judge and his witnesses are credible and therefore, should be given weight and
probative value; that the respondent's acts undoubtedly do not bear the marks of
misconduct, impropriety or immorality, either under R.A. No. 7877 or the Canons of Judicial
Ethics and the Code of Professional Responsibility."7
Indeed, from the records on hand, there is no showing that respondent judge demanded,
requested or required any sexual favor from complainant in exchange for "favorable
compensation, terms, conditions, promotion or privileges" specified under Section 3 of R.A.
7877. Nor did he, by his actuations, violate the Canons of Judicial Ethics or the Code of
Professional Responsibility.
While we exonerate respondent from the charges herein, however, he is admonished not to
commit similar acts against complainant or other female employees of the Court of Tax
Appeals, otherwise, his conduct may be construed as tainted with impropriety.
We laud complainant's effort to seek redress for what she honestly believed to be an affront
to her honor. Surely, it was difficult and agonizing on her part to come out in the open and
accuse her superior of sexual harassment. However, her assessment of the incidents is
misplaced for the reasons mentioned above.
WHEREFORE, respondent Judge Ernesto D. Acosta is hereby EXONERATED of the charges
against him. However, he is ADVISED to be more circumspect in his deportment.
SO ORDERED.

G.R. No. 158693

November 17, 2004
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION
(NLRC),
IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.

RIVIERA

HOME

DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision1 of the Court of Appeals dated January
23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations
Commission (NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling
and installing ornamental and construction materials. It employed petitioners Virgilio Agabon
and Jenny Agabon as gypsum board and cornice installers on January 2, 19922 until February
23, 1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims3 and on
December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal
and ordered private respondent to pay the monetary claims. The dispositive portion of the
decision states:
WHEREFORE, premises considered, We find the termination of the complainants illegal.
Accordingly, respondent is hereby ordered to pay them their backwages up to November 29,
1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for every
year of service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and service
incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for
holidays and rest days and Virgilio Agabon's 13th month pay differential amounting to TWO
THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE
HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93)
Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED
TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached
computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had
abandoned their work, and were not entitled to backwages and separation pay. The other
money claims awarded by the Labor Arbiter were also denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with
the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal
because they had abandoned their employment but ordered the payment of money claims.
The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only
insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their
service incentive leave pay for said years, and to pay the balance of petitioner Virgilio
Agabon's 13th month pay for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were illegally
dismissed.7
Petitioners assert that they were dismissed because the private respondent refused to give
them assignments unless they agreed to work on a "pakyaw" basis when they reported for

duty on February 23, 1999. They did not agree on this arrangement because it would mean
losing benefits as Social Security System (SSS) members. Petitioners also claim that private
respondent did not comply with the twin requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners were not dismissed but
had abandoned their work.9 In fact, private respondent sent two letters to the last known
addresses of the petitioners advising them to report for work. Private respondent's manager
even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him
about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice
installation work. However, petitioners did not report for work because they had
subcontracted to perform installation work for another company. Petitioners also demanded
for an increase in their wage to P280.00 per day. When this was not granted, petitioners
stopped reporting for work and filed the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not
only respect but even finality if the findings are supported by substantial evidence. This is
especially so when such findings were affirmed by the Court of Appeals.11 However, if the
factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the
reviewing court may delve into the records and examine for itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners'
dismissal was for a just cause. They had abandoned their employment and were already
working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but
also enjoins the employer to give the employee the opportunity to be heard and to defend
himself.13 Article 282 of the Labor Code enumerates the just causes for termination by the
employer: (a) serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection with the employee's work;
(b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by
the employee of the trust reposed in him by his employer or his duly authorized
representative; (d) commission of a crime or offense by the employee against the person of
his employer or any immediate member of his family or his duly authorized representative;
and (e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his
employment.14 It is a form of neglect of duty, hence, a just cause for termination of
employment by the employer.15 For a valid finding of abandonment, these two factors
should be present: (1) the failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee relationship, with the second
as the more determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to discontinue the
employment must be shown by clear proof that it was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an installation
work for another company. Subcontracting for another company clearly showed the intention
to sever the employer-employee relationship with private respondent. This was not the first
time they did this. In January 1996, they did not report for work because they were working
for another company. Private respondent at that time warned petitioners that they would be
dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear
intention to sever their employer-employee relationship. The record of an employee is a
relevant consideration in determining the penalty that should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from
work without leave or permission from his employer, for the purpose of looking for a job
elsewhere, is considered to have abandoned his job. We should apply that rule with more
reason here where petitioners were absent because they were already working in another
company.
The law imposes many obligations on the employer such as providing just compensation to
workers, observance of the procedural requirements of notice and hearing in the termination
of employment. On the other hand, the law also recognizes the right of the employer to
expect from its workers not only good performance, adequate work and diligence, but also
good conduct19 and loyalty. The employer may not be compelled to continue to employ
such persons whose continuance in the service will patently be inimical to his interests.20
After establishing that the terminations were for a just and valid cause, we now determine if
the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the
Omnibus Rules Implementing the Labor Code:

Standards of due process: requirements of notice. In all cases of termination of

employment, the following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain his
side;
(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present
his evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination.
In case of termination, the foregoing notices shall be served on the employee's last known
address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee
while dismissals based on authorized causes involve grounds under the Labor Code which
allow the employer to terminate employees. A termination for an authorized cause requires
payment of separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under Article 279. If reinstatement is no
longer possible where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer
must give the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the
dismissal is based on authorized causes under Articles 283 and 284, the employer must give
the employee and the Department of Labor and Employment written notices 30 days prior to
the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a
just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or
for health reasons under Article 284, and due process was observed; (2) the dismissal is
without just or authorized cause but due process was observed; (3) the dismissal is without
just or authorized cause and there was no due process; and (4) the dismissal is for just or
authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any
liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that
the employee is entitled to reinstatement without loss of seniority rights and other privileges
and full backwages, inclusive of allowances, and other benefits or their monetary equivalent
computed from the time the compensation was not paid up to the time of actual
reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot
be cured, it should not invalidate the dismissal. However, the employer should be held liable
for non-compliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld
because it was established that the petitioners abandoned their jobs to work for another
company. Private respondent, however, did not follow the notice requirements and instead
argued that sending notices to the last known addresses would have been useless because
they did not reside there anymore. Unfortunately for the private respondent, this is not a
valid excuse because the law mandates the twin notice requirements to the employee's last
known address.21 Thus, it should be held liable for non-compliance with the procedural
requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to
clarify the various rulings on employment termination in the light of Serrano v. National
Labor Relations Commission.22

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not
given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations
Commission,23 we reversed this long-standing rule and held that the dismissed employee,
although not given any notice and hearing, was not entitled to reinstatement and
backwages because the dismissal was for grave misconduct and insubordination, a just
ground for termination under Article 282. The employee had a violent temper and caused
trouble during office hours, defying superiors who tried to pacify him. We concluded that
reinstating the employee and awarding backwages "may encourage him to do even worse
and will render a mockery of the rules of discipline that employees are required to
observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as
above discussed. The dismissal of an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of the second requirement. Thus, it
must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering
the circumstances of this case petitioner must indemnify the private respondent the amount
of P1,000.00. The measure of this award depends on the facts of each case and the gravity
of the omission committed by the employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an employee but
did not follow the due process requirement, the dismissal may be upheld but the employer
will be penalized to pay an indemnity to the employee. This became known as the Wenphil
or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We
held that the violation by the employer of the notice requirement in termination for just or
authorized causes was not a denial of due process that will nullify the termination. However,
the dismissal is ineffectual and the employer must pay full backwages from the time of
termination until it is judicially declared that the dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant
number of cases involving dismissals without requisite notices. We concluded that the
imposition of penalty by way of damages for violation of the notice requirement was not
serving as a deterrent. Hence, we now required payment of full backwages from the time of
dismissal until the time the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay later" by
imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article
279 of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the justified or authorized
causes provided by law. Payment of backwages and other benefits, including reinstatement,
is justified only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong
dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a
system of rights based on moral principles so deeply imbedded in the traditions and feelings
of our people as to be deemed fundamental to a civilized society as conceived by our entire
history. Due process is that which comports with the deepest notions of what is fair and right
and just.26 It is a constitutional restraint on the legislative as well as on the executive and
judicial powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the
Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process

requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended,
otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended
by Department Order Nos. 9 and 10.27 Breaches of these due process requirements violate
the Labor Code. Therefore statutory due process should be differentiated from failure to
comply with constitutional due process.
Constitutional due process protects the individual from the government and assures him of
his rights in criminal, civil or administrative proceedings; while statutory due process found
in the Labor Code and Implementing Rules protects employees from being unjustly
terminated without just cause after notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and
valid cause but the employee was not accorded due process. The dismissal was upheld by
the Court but the employer was sanctioned. The sanction should be in the nature of
indemnification or penalty, and depends on the facts of each case and the gravity of the
omission committed by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee
was not given due process, the failure did not operate to eradicate the just causes for
dismissal. The dismissal being for just cause, albeit without due process, did not entitle the
employee to reinstatement, backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National
Labor Relations Commission,30 which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly observed
by an employer, it would not be right to order either the reinstatement of the dismissed
employee or the payment of backwages to him. In failing, however, to comply with the
procedure prescribed by law in terminating the services of the employee, the employer must
be deemed to have opted or, in any case, should be made liable, for the payment of
separation pay. It might be pointed out that the notice to be given and the hearing to be
conducted generally constitute the two-part due process requirement of law to be accorded
to the employee by the employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be no more than a useless
formality and where, accordingly, it would not be imprudent to apply the res ipsa loquitur
rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the law on
employment termination, we believe that in cases involving dismissals for cause but without
observance of the twin requirements of notice and hearing, the better rule is to abandon the
Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but
imposing sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by
dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but
not complying with statutory due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most notorious violators of company
policy are rewarded by invoking due process. This also creates absurd situations where there
is a just or authorized cause for dismissal but a procedural infirmity invalidates the
termination. Let us take for example a case where the employee is caught stealing or
threatens the lives of his co-employees or has become a criminal, who has fled and cannot
be found, or where serious business losses demand that operations be ceased in less than a
month. Invalidating the dismissal would not serve public interest. It could also discourage
investments that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be a sword to
oppress employers. The commitment of this Court to the cause of labor does not prevent us
from sustaining the employer when it is in the right, as in this case.32 Certainly, an
employer should not be compelled to pay employees for work not actually performed and in
fact abandoned.
The employer should not be compelled to continue employing a person who is admittedly
guilty of misfeasance or malfeasance and whose continued employment is patently inimical
to the employer. The law protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer.33
It must be stressed that in the present case, the petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due process were complied with, would
undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected
by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should
be used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social
justice must be founded on the recognition of the necessity of interdependence among
diverse units of a society and of the protection that should be equally and evenly extended
to all groups as a combined force in our social and economic life, consistent with the
fundamental and paramount objective of the state of promoting the health, comfort, and
quiet of all persons, and of bringing about "the greatest good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano
and related cases. Social justice is not based on rigid formulas set in stone. It has to allow for
changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labormanagement relations and dispense justice with an even hand in every case:
We have repeatedly stressed that social justice or any justice for that matter is for the
deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that,
in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the
Constitution fittingly extends its sympathy and compassion. But never is it justified to give
preference to the poor simply because they are poor, or reject the rich simply because they
are rich, for justice must always be served for the poor and the rich alike, according to the
mandate of the law.35
Justice in every case should only be for the deserving party. It should not be presumed that
every case of illegal dismissal would automatically be decided in favor of labor, as
management has rights that should be fully respected and enforced by this Court. As
interdependent and indispensable partners in nation-building, labor and management need
each other to foster productivity and economic growth; hence, the need to weigh and
balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights, as ruled in
Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be
stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to
deter in the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special consideration the
gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an
employer is liable to pay indemnity in the form of nominal damages to an employee who has
been dismissed if, in effecting such dismissal, the employer fails to comply with the
requirements of due process. The Court, after considering the circumstances therein, fixed
the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This
indemnity is intended not to penalize the employer but to vindicate or recognize the
employee's right to statutory due process which was violated by the employer.39
The violation of the petitioners' right to statutory due process by the private respondent
warrants the payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances.40 Considering the prevailing circumstances in the case at bar, we deem it
proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right granted to the
latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay
petitioners' holiday pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private respondent
is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without
deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege non-payment, the general rule is that the burden rests on the
employer to prove payment, rather than on the employee to prove non-payment. The reason
for the rule is that the pertinent personnel files, payrolls, records, remittances and other
similar documents which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid are not in the possession of the worker but in the
custody and absolute control of the employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and service
incentive leave pay, it could have easily presented documentary proofs of such monetary
benefits to disprove the claims of the petitioners. But it did not, except with respect to the
13th month pay wherein it presented cash vouchers showing payments of the benefit in the
years disputed.42 Allegations by private respondent that it does not operate during holidays
and that it allows its employees 10 days leave with pay, other than being self-serving, do not
constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby
making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's
13th month pay, we find the same to be unauthorized. The evident intention of Presidential
Decree No. 851 is to grant an additional income in the form of the 13th month pay to
employees not already receiving the same43 so as "to further protect the level of real wages
from the ravages of world-wide inflation."44 Clearly, as additional income, the 13th month
pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money whether fixed or ascertained on a
time, task, piece , or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee"
from which an employer is prohibited under Article 11345 of the same Code from making
any deductions without the employee's knowledge and consent. In the instant case, private
respondent failed to show that the deduction of the SSS loan and the value of the shoes
from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of
authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included
the same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter
ordering the private respondent to pay each of the petitioners holiday pay for four regular
holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the
same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth
month pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and
Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of
P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and
the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is
AFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc.
is further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal
damages for non-compliance with statutory due process.
No costs.
SO ORDERED.
G.R. No. 100749
April 24, 1992
GT PRINTERS and/or TRINIDAD G. BARBA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (4TH DIVISION) and EDWIN RICARDO,
respondents.
GRIO-AQUINO, J.:
The private respondent, Edwin Ricardo, was employed in 1968 as an apprentice of GT
Printers, a single proprietorship owned by Mrs. Trinidad Barba of East Capitol Site, Cebu City.
Having gained enough experience and expertise in the printing business and after
undergoing special schooling in Manila at company expense, Ricardo was promoted to the
position of production manager of GT Printers. In 1978, he became general manager after

the untimely demise of the owner's husband, who held that position. Ricardo earned a
monthly basic salary of P1,680, an ECOLA of P485, representation allowance of P1,000 and
or top of these, a three (3%) per cent share in the gross receipts of the business.
In February, 1985, Ricardo's wife established Insta Printers, a rival printing press, with Edwin
Ricardo himself as consultant and owner. Since the establishment of Insta Printers, Ricardo
became a habitual absentee from his job at GT Printers. He neglected his duties and
responsibilities, and became lax in directing and supervising the work force, resulting in
numerous major printing errors and failure to meet printing specifications leading to the
rejection of several job orders from regular customers.
Mrs. Barba noticed that Ricardo not only used GT Printers' bookcloth and other printing
materials for his Insta Printers, but he also gave specific instructions to the production staff
to give priority to book and magazine job orders for Insta Printers. Eventually, the regular
customers of GT Printers were pirated by Insta Printers. Ricardo also manipulated price
quotations during the canvassing of bids to favor his own outfit instead of GT Printers.
Because of those irregularities, GT Printers suspended Ricardo as general manager for 30
days. Effective June 18, 1986, Richard Barba was designated to take his place. Contracts
concluded by respondent Ricardo thereafter were no longer honored. However, he continued
to be a sales agent for GT Printers, hence, he continued to receive commissions. Notices of
his investigation scheduled on July 24, 1986 and August 13, 1986 were sent to him but he
did not appear at the investigation. He stopped reporting for work and soon after filed a
complaint for illegal dismissal in the Regional Arbitration Branch No. VII, of the Department
of Labor and Employment in Cebu City, entitled "Edwin Ricardo vs. GT Printers and/or
Trinidad G. Barba." (NLRC Case No. RAB-VII-0398-86)
The case was heard by Labor Arbiter Bonifacio Tumanak who rendered a decision on January
4, 1990 finding that Ricardo was lawfully dismissed from employment. Nevertheless, the
Labor Arbiter ordered the payment to him of separation pay equivalent to one-half month
pay for every year of service (pp. 28-42, Rollo).
Ricardo appealed that decision to the NLRC which on April 18, 1991 (pp. 43-51, Rollo), set
aside the labor arbiter's decision and entered a new one, finding Ricardo's dismissal illegal
and ordering his reinstatement with backwages. However, aware that strained relations had
developed between the parties, the Commission ordered GT Printers to pay Ricardo
backwages for three (3) years and separation pay of one month for every year of service in
lieu of reinstatement.
GT Printers filed a motion for reconsideration but it was denied. Hence, this petition for
review on certiorari, with a prayer for the issuance of a writ of preliminary injunction or
temporary restraining order. On July 29, 1991, the Court issued a temporary restraining
order upon petitioner's filing a P100,000 bond enjoining the respondents to desist from
enforcing the NLRC decision during the pendency of this action.
The petition for review is premised on the petitioner's contention that grave abuse of
discretion was committed by the NLRC
1.

in disregarding the labor arbiter's findings of fact;

2.
in finding that Ricardo was denied due process before being dismissed on July 18,
1986;
3.

in finding that Ricardo was dismissed without just cause; and

4.
in reversing the decision of the labor arbiter and ordering Ricardo's reinstatement
with payment of back wages and separation pay.
The petition has merit.
The twin requirements of a valid termination: due process and just cause were met
substantially for Ricardo was given ample opportunity to appear at the two scheduled
investigations in order to present his side, but he chose to boycott the investigation. Even at
the hearing before the Labor Arbiter, he waived, through counsel, the presentation and
cross-examination of witnesses.
Due process does not necessarily mean or require a hearing, but simply an opportunity or
right to be heard (Hian vs. CTA, 59 SCRA 110; Azul vs. Castro, 133 SCRA 271). The affidavits,
testimonies and other documentary evidence presented by the petitioner stand
uncontroverted and are therefore entitled to full credit. It is well-settled that this Court is not
a trier of facts, so we defer to the superior opportunity of the lower courts or administrative

bodies to test the credibility of the witnesses and to examine the authenticity of the
documentary evidence directly before them (Mapa vs. Arroyo, 175 SCRA 76; Dagupan Bus
Co., Inc. vs. NLRC, 191 SCRA 328).
The security of tenure accorded to labor under the Constitution does not embrace infractions
of accepted company rules amounting to breach of trust and loss of confidence (Rosello, Jr.
vs. NLRC, 190 SCRA 779). The right of an employer to dismiss a managerial employee for
breach of trust and loss of confidence, as in this case, cannot be doubted. As a measure of
self-preservation against acts inimical to its interests, an employer has the right to dismiss
an employee found committing acts of dishonesty and disloyalty. The employer may not be
compelled to continue to employ such a person whose continuance in the service would
patently be inimical to his employer's interest (Colgate Palmolive Phils. Inc. vs. Ople, 163
SCRA 323). The dismissal of a dishonest employee is in the best interest not only of
management but also of labor for the law never intended to impose an unjust situation on
either labor or management (Coca-Cola Bottlers Phils. Inc. vs. NLRC, 172 SCRA 751).
Reinstatement would be ill-advised and incompatible with the labor arbiter's finding that
"from those documentary evidences presented by respondent, it can be safely conclude[d]
that . . . there exist visible conflict of interest amounting to willful breach of trust and
confidence repose (sic) upon him by his employer, . . . as well as (b) habitual neglect of his
duties . . ." (pp. 216-217, Rollo). The reinstatement of erring managers may not be ordered
with the same ease and liberality as rank and file workers (Pacific Cement Co., Inc. vs. NLRC,
173 SCRA 192).
WHEREFORE, the assailed decision of the NLRC is hereby reversed and set aside. As the
complainant (herein private respondent), Edwin Ricardo, was lawfully dismissed for
dishonesty and serious misconduct, his complaint for illegal dismissal is DISMISSED for lack
of merit.
SO ORDERED.
G.R. No. 143023 November 29, 2005
EASTERN OVERSEAS EMPLOYMENT CENTER, INC., Petitioner,
vs.
CECILIA BEA, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the January 5, 2000 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 51312 which
affirmed the Resolutions of the National Labor Relations Commission (NLRC) dated
November 28, 1997 and January 22, 1998 in POEA ADJ (L) CN. 93-05-827/CA NO. 009966-95;
and the CA Resolution2 of April 24, 2000, denying petitioners motion for reconsideration.
The factual and procedural antecedents of the case, as narrated by the CA in its assailed
Decision, are as follows:
On February 11, 1992, private respondent Bea was hired as Senior Head Staff Nurse by
Elbualy Group/Sultan Qaboos University Hospital (SQUH), the principal employer through its
placement agency in the Philippines, petitioner Eastern Overseas Employment Center, Inc.
(Eastern). Her contractual employment was for two (2) years, the same to end on February
11, 1994 with a basic monthly salary of US$1,456.00. Private respondent Beas placement
with SQUH was subject to a three-(3) month probationary period during said contractual
employment.
Private respondent Beas probationary status ended on May 1992 but she still continued
being in the employ of SQUH. She, like all other employees of the hospital, was also
periodically subjected to performance evaluation.
After an alleged poor evaluation of private respondent Beas performance as a nurse, she
was transferred to the Neo-Natal Unit on December 26, 1992 and her performance was
supposedly under observation until January 23, 1993.
On February 24, 1993, the Director of Nursing Services notified private respondent Bea that
her contract would be terminated on May 24, 1993. Because of this, she wrote a letter dated
March 7, 1993 addressed to H.E. Yahyah Mahfoudh Al-Mantheir, Vice Chancellor of SQUH,
requesting for a reconsideration of the decision to terminate her.
In the Memorandum dated June 8, 1993, the Acting Director of Nursing Services explained
how the decision to terminate private respondent Bea was arrived at. It stated the following:

TO: Personnel Officer

Through : Nasser Al Lamki
Acting Hospital Director
From : Helen Macilwaine
Acting Director of
Nursing Services
Subject : Termination of Cecilia
Bea. I.D. No. 2644
Date : 8th June 1993
____________________________________
The above named was terminated from this hospital on the recommendation of the
Department of Nursing Services after three very poor evaluations. After her second poor
evaluation, she was given intensive management assistance through a specialized training
plan from 26th December 1992 to 23rd January 1993, but she did not improve. She was
unable to function as a Senior Head Staff Nurse on the Neonatal Unit and therefore a
recommendation was made on February 17, 1993 that she should be terminated since she
could not fulfill her contractual obligations within Nursing Services.
(Sgd.) Helen Macilwaine
Acting Director of Nursing Services
(Annex D of Petition)
Consequently, private respondent Beas contractual employment was terminated and she
was repatriated to the Philippines on April 21, 1993.
Private respondent Bea thereafter filed a case of illegal dismissal against instant petitioner
before the POEA Adjudication Office on December 7, 1993, docketed as POEA Case No. 9305-827.
In the Decision dated August 8, 1995, the POEA Administrator held that private respondent
Bea herein was illegally dismissed...
...
Unsatisfied with this Decision, petitioner Eastern appealed to the NLRC. The NLRC affirmed
the Decision of the POEA Administrator, ...
. . .3
Eastern Overseas Employment Center, Inc. (Eastern) filed a motion for reconsideration of the
NLRC Resolution but the same was denied.
Aggrieved, Eastern appealed to this Court via a petition for certiorari under Rule 65 of the
Rules of Court. After the Office of the Solicitor General filed its Comment to the petition, this
Court referred the case to the CA pursuant to the ruling in St. Martins Funeral Homes vs.
National Labor Relations Commission, et al.4 On January 5, 2000, the CA promulgated herein
assailed Decision. On April 24, 2000, the CA denied petitioners motion for reconsideration.
Hence, the herein petition based on the sole ground that the CA committed grave abuse of
discretion in denying the petition filed with it.5 Petitioner claims that the CA gravely abused
its discretion when it blindly adhered to the patently erroneous findings and conclusions of
the NLRC that Bea was illegally dismissed.
We are not persuaded.
The question of whether or not Bea was illegally dismissed from her employment is a
question of fact. The Philippine Overseas Employment Administration (POEA) Adjudication
Office ruled that Bea was indeed illegally dismissed. The settled rule is that the factual

findings of quasi-judicial agencies like the POEA, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only respect, but,
at times, even finality if such findings are supported by substantial evidence.6 This is
especially so in the present case where the findings of the POEA were affirmed by both the
NLRC and the CA.
Moreover, in a petition for review on certiorari, the scope of the Supreme Courts judicial
review of decisions of the CA is generally confined only to errors of law; questions of fact are
not entertained.7 This doctrine applies with greater force in labor cases inasmuch as factual
questions are mainly for the labor tribunals to resolve.8 In the present case, the POEA
Adjudication Office and the NLRC have already determined the factual issues. Their findings,
which are supported by substantial evidence, were affirmed by the CA. Thus, they are
entitled to great respect and are rendered conclusive upon this Court, absent a clear
showing of palpable error or arbitrary disregard of evidence.9
We find no cogent reason to disturb the findings and conclusions of the POEA Adjudication
Office as affirmed by the NLRC and the CA.
Petitioner argues that it has complied with the twin requirements imposed by law for an
employees dismissal to be considered valid, to wit: (1) the dismissal must be for a valid or
authorized cause; and (2) the employee must be afforded due process.
As to the question of whether Bea was afforded due process, petitioner contends that Beas
work performance was evaluated three times and that she was even given intensive
management assistance through a specialized training plan but she still did not improve.
Petitioner further contends that after Bea was informed of her termination in February 1993,
she was given a chance to ask for a reconsideration of her case; that after re-evaluation, her
employer found no merit in her request for reconsideration; that only then was her
termination implemented in April 1993.
Procedural due process in labor law requires the employer to give the employee two
notices.10 The first is the notice which apprises the employee of the particular acts or
omissions for which his dismissal is being sought along with the opportunity for the
employee to air his side, while the second is the subsequent notice of the employers
decision to dismiss him.11 More particularly, Book VI, Rule I, Section 2(d) of the Omnibus
Rules Implementing the Labor Code provides for the standards of due process to be
substantially observed in cases of termination of employment, to wit:
(d) In all cases of termination of employment, the following standards of due process shall
be substantially observed:
For termination of employment based on just causes as defined in Article 282 of the Labor
Code:
(i) A written notice served on the employee specifying the ground or grounds for
termination, and giving the said employee reasonable opportunity within which to explain
his side.
(ii) A hearing or conference during which the employee concerned, with the assistance of
counsel if he so desires is given opportunity to respond to the charge, present his evidence,
or rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon
consideration of all the circumstances, grounds have been established to justify his
termination.
For termination of employment as defined in Article 283 of the Labor Code, the requirement
of due process shall be deemed complied with upon service of a written notice to the
employee and the appropriate Regional Office of the Department of Labor and Employment
at least thirty days before effectivity of the termination, specifying the ground or grounds for
termination.
If the termination is brought about by the completion of a contract or phase thereof, or by
failure of an employee to meet the standards of the employer in the case of probationary
employment, it shall be sufficient that a written notice is served the employee within a
reasonable time from effective date of termination.
In the present case, since Beas termination was based on her alleged poor performance, the
procedure to be followed should be that outlined for termination of employment based on
just causes as defined under Article 282 of the Labor Code. However, the POEA Adjudication
Office found that the only notice given to Bea was a letter informing her that she was

already terminated. Petitioner did not give Bea the first notice apprising her of the particular
acts or omissions for which her dismissal was based together with the opportunity for her to
explain her side. Nonetheless, petitioner contends that Bea was afforded due process
because she herself admitted in her position paper that she was given all the opportunity to
explain her side and refute the evaluation and findings of her employer. Bea, on the other
hand, counters in her Memorandum submitted to this Court that she was given the chance
to air her side only after she was notified of her termination from work.
The essence of due process is simply an opportunity to be heard, or as applied to
administrative proceedings, a fair and reasonable opportunity to explain ones side.12 It is
also an opportunity to seek a reconsideration of the action or ruling complained of.13 It is
not the denial of the right to be heard but denial of the opportunity to be heard that
constitutes violation of due process of law.14 In the case at bar, while it was established that
Bea was not given prior notice apprising her of the particular acts or omissions for which her
dismissal is being sought, she, however, admits that she was subsequently able to explain
her side and refute the findings of her employer when she was given the chance to ask for a
reconsideration of her employers decision to terminate her. Hence, such opportunity to seek
reconsideration cured the procedural defect of lack of prior notice to Bea.
The foregoing notwithstanding, we agree with the findings of the POEA Adjudication Office
that Beas termination was illegal for failure of petitioner to prove the existence of a just or
authorized cause for terminating her. Petitioner maintains that Bea was terminated from her
employment because of her poor performance and lack of enthusiasm in doing her duties
and responsibilities as a nurse. Contending that the CA erred in ruling that the alleged poor
performance of respondent is not a just or authorized cause as it is not one of the valid
grounds for termination enumerated under Articles 282 and 283 of the Labor Code,
petitioner posits that an analytical evaluation of the phrase "poor performance" would show
that it would mean the same as gross and habitual neglect by an employee of his duties,
which is a just cause to terminate an employee under Article 282(b) of the Labor Code.
Insisting that poor performance is the result and effect of gross and habitual neglect of duty,
petitioner concludes that it is considered as a lawful cause for termination of employment.
We are not convinced.
We take cognizance of the fact that in any given workplace, not all of the employees perform
in accordance with what is expected of them. As such, it is not uncommon that an
employees work performance is found to be unsatisfactory. As a general concept, "poor
performance" is equivalent to inefficiency and incompetence in the performance of official
duties.15 Under Article 282 of the Labor Code, an unsatisfactory rating can be a just cause
for dismissal only if it amounts to gross and habitual neglect of duties.16 The fact that an
employees performance is found to be poor or unsatisfactory does not necessarily mean
that the employee is grossly and habitually negligent of his duties. Gross negligence implies
a want or absence of or failure to exercise slight care or diligence, or the entire absence of
care.17 It evinces a thoughtless disregard of consequences without exerting any effort to
avoid them.18
In the present case, petitioner failed to present substantial evidence to prove that Beas
alleged poor performance in her duties as Senior Head Staff Nurse amounted to gross and
habitual neglect. In the first place, the POEA Adjudication Office found that aside from the
Memorandum dated June 8, 1993 issued by the Acting Director of Nursing Services of Sultan
Qaboos University Hospital where Bea was deployed, petitioner failed to present any other
evidence to prove that Beas work performance was indeed poor. Although petitioner
contends that three separate evaluations of Beas work performance were conducted; that
after the first evaluation, Bea was notified about the poor quality of her work; that following
the second evaluation, she was given an intensive management assistance through a
specialized training program; and, that only after the third evaluation was made that Bea
was advised that her employment would be terminated, we find no error in the findings of
the POEA and the NLRC that these claims of petitioner remain to be allegations since no
substantial evidence was presented to prove them.
In termination cases, the burden of proving just and valid cause for dismissing an employee
from his employment rests upon the employer, and the latter's failure to discharge that
burden would result in a finding that the dismissal is unjustified.19 In the instant case, we
agree with the CA that the just cause relied upon by the petitioner in dismissing the private
respondent was not proved.
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the
Court of Appeals dated January 5, 2000 and April 24, 2000, respectively, are AFFIRMED.
SO ORDERED.

G.R. No. 152329

April 22, 2003
ALEJANDRO ROQUERO, petitioner,
vs.
PHILIPPINE AIRLINES, INC., respondent.
PUNO, J.:
Brought up on this Petition for Review is the decision of the Court of Appeals dismissing
Alejandro Roquero as an employee of the respondent Philippine Airlines, Inc.
Roquero, along with Rene Pabayo, were ground equipment mechanics of respondent
Philippine Airlines, Inc. (PAL for brevity). From the evidence on record, it appears that
Roquero and Pabayo were caught red-handed possessing and using Methampethamine
Hydrochloride or shabu in a raid conducted by PAL security officers and NARCOM personnel.
The two alleged that they did not voluntarily indulge in the said act but were instigated by a
certain Jojie Alipato who was introduced to them by Joseph Ocul, Manager of the Airport
Maintenance Division of PAL. Pabayo alleged that Alipato often bragged about the drugs he
could smuggle inside the company premises and invited other employees to take the
prohibited drugs. Alipato was unsuccessful, until one day, he was able to persuade Pabayo to
join him in taking the drugs. They met Roquero along the way and he agreed to join them.
Inside the company premises, they locked the door and Alipato lost no time in preparing the
drugs to be used. When they started the procedure of taking the drugs, armed men entered
the room, arrested Roquero and Pabayo and seized the drugs and the paraphernalia used.1
Roquero and Pabayo were subjected to a physical examination where the results showed
that they were positive of drugs. They were also brought to the security office of PAL where
they executed written confessions without the benefit of counsel.2
On March 30, 1994, Roquero and Pabayo received a "notice of administrative charge"3 for
violating the PAL Code of Discipline. They were required to answer the charges and were
placed under preventive suspension.
Roquero and Pabayo, in their "reply to notice of administrative charge,"4 assailed their arrest
and asserted that they were instigated by PAL to take the drugs. They argued that Alipato
was not really a trainee of PAL but was placed in the premises to instigate the commission of
the crime. They based their argument on the fact that Alipato was not arrested. Moreover,
Alipato has no record of employment with PAL.
In a Memorandum dated July 14, 1994, Roquero and Pabayo were dismissed by PAL.5 Thus,
they filed a case for illegal dismissal.6
In the Labor Arbiter's decision, the dismissal of Roquero and Pabayo was upheld. The Labor
Arbiter found both parties at fault PAL for applying means to entice the complainants into
committing the infraction and the complainants for giving in to the temptation and
eventually indulging in the prohibited activity. Nonetheless, the Labor Arbiter awarded
separation pay and attorney's fees to the complainants.7
While the case was on appeal with the National Labor Relations Commission (NLRC), the
complainants were acquitted by the Regional Trial Court (RTC) Branch 114, Pasay City, in the
criminal case which charged them with "conspiracy for possession and use of a regulated
drug in violation of Section 16, Article III of Republic Act 6425," on the ground of instigation.
The NLRC ruled in favor of complainants as it likewise found PAL guilty of instigation. It
ordered reinstatement to their former positions but without backwages.8 Complainants did
not appeal from the decision but filed a motion for a writ of execution of the order of
reinstatement. The Labor Arbiter granted the motion but PAL refused to execute the said
order on the ground that they have filed a Petition for Review before this Court.9 In
accordance with the case of St. Martin Funeral Home vs. NLRC and Bienvenido Aricayos,10
PAL's petition was referred to the Court of Appeals.11
During the pendency of the case with the Court of Appeals, PAL, and Pabayo filed a Motion to
Withdraw/Dismiss the case with respect to Pabayo, after they voluntarily entered into a
compromise agreement.12 The motion was granted in a Resolution promulgated by the
Former Thirteenth Division of the Court of Appeals on January 29, 2002.13
The Court of Appeals later reversed the decision of the NLRC and reinstated the decision of
the Labor Arbiter insofar as it upheld the dismissal of Roquero. However, it denied the award
of separation pay and attorney's fees to Roquero on the ground that one who has been
validly dismissed is not entitled to those benefits.14
The motion for reconsideration by Roquero was denied. In this Petition for Review on
Certiorari under Rule 45, he raises the following issues:

1.
Whether or not the instigated employee shall be solely responsible for an action
arising from the instigation perpetrated by the employer;
2.
Can the executory nature of the decision, more so the reinstatement aspect of a labor
tribunal's order be halted by a petition having been filed in higher courts without any
restraining order or preliminary injunction having been ordered in the meantime?
3.
Would the employer who refused to reinstate an employee despite a writ duly issued
be held liable to pay the salary of the subject employee from the time that he was ordered
reinstated up to the time that the reversed decision was handed down?15
I
There is no question that petitioner Roquero is guilty of serious misconduct for possessing
and using shabu. He violated Chapter 2, Article VII, section 4 of the PAL Code of Discipline
which states:
"Any employee who, while on company premises or on duty, takes or is under the influence
of prohibited or controlled drugs, or hallucinogenic substances or narcotics shall be
dismissed."16
Serious misconduct is defined as "the 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 in judgment."17 For serious misconduct to warrant the dismissal of an
employee, it (1) must be serious; (2) must relate to the performance of the employee's duty;
and (3) must show that the employee has become unit to continue working for the
employer.18
It is of public knowledge that drugs can damage the mental faculties of the user. Roquero
was tasked with the repair and maintenance of PAL's airplanes. He cannot discharge that
duty if he is a drug user. His failure to do his job can mean great loss of lives and properties.
Hence, even if he was instigated to take drugs he has no right to be reinstated to his
position. He took the drugs fully knowing that he was on duty and more so that it is
prohibited by company rules. Instigation is only a defense against criminal liability. It cannot
be used as a shield against dismissal from employment especially when the position
involves the safety of human lives.
Petitioner cannot complain he was denied procedural due process. PAL complied with the
twin-notice requirement before dismissing the petitioner. The twin-notice rule requires (1)
the notice which apprises the employee of the particular acts or omissions for which his
dismissal is being sought along with the opportunity for the employee to air his side, and (2)
the subsequent notice of the employer's decision to dismiss him.19 Both were given by
respondent PAL.
II
Article 223 (3rd paragraph) of the Labor Code20 as amended by Section 12 of Republic Act
No. 6715,21 and Section 2 of the NLRC Interim Rules on Appeals under RA No. 6715,
Amending the Labor Code,22 provide that an order of reinstatement by the Labor Arbiter is
immediately executory even pending appeal. The rationale of the law has been explained in
Aris (Phil.) Inc. vs. NLRC:23
"In authorizing execution pending appeal of the reinstatement aspect of a decision of the
Labor Arbiter reinstating a dismissed or separated employee, the law itself has laid down a
compassionate policy which, once more, vivifies and enhances the provisions of the 1987
Constitution on labor and the working man.
xxx

xxx

xxx

These duties and responsibilities of the State are imposed not so much to express sympathy
for the workingman as to forcefully and meaningfully underscore labor as a primary social
and economic force, which the Constitution also expressly affirms with equal intensity. Labor
is an indispensable partner for the nation's progress and stability.
xxx

xxx

xxx

. . . In short, with respect to decisions reinstating employees, the law itself has determined a
sufficiently overwhelming reason for its execution pending appeal.
xxx

xxx

xxx

. . . Then, by and pursuant to the same power (police power), the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or
separated employee since that saving act is designed to stop, although temporarily since
the appeal may be decided in favor of the appellant, a continuing threat or danger to the
survival or even the life of the dismissed or separated employee and his family."
The order of reinstatement is immediately executory. The unjustified refusal of the employer
to reinstate a dismissed employee entitles him to payment of his salaries effective from the
time the employer failed to reinstate him despite the issuance of a writ of execution.24
Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter to
implement the order of reinstatement. In the case at bar, no restraining order was granted.
Thus, it was mandatory on PAL to actually reinstate Roquero or reinstate him in the payroll.
Having failed to do so, PAL must pay Roquero the salary he is entitled to, as if he was
reinstated, from the time of the decision of the NLRC until the finality of the decision of this
Court.
We reiterate the rule that technicalities have no room in labor cases where the Rules of
Court are applied only in a suppletory manner and only to effectuate the objectives of the
Labor Code and not to defeat them.25 Hence, even if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and
pay the wages of the dismissed employee during the period of appeal until reversal by the
higher court. On the other hand, if the employee has been reinstated during the appeal
period and such reinstatement order is reversed with finality, the employee is not required
to reimburse whatever salary he received for he is entitled to such, more so if he actually
rendered services during the period.
IN VIEW WHEREOF, the dismissal of petitioner Roquero is AFFIRMED, but respondent PAL is
ordered to pay the wages to which Roquero is entitled from the time the reinstatement order
was issued until the finality of this decision.
SO ORDERED.
G.R. No. L-2028
April 28, 1949
PHILIPPINE SHEET METAL WORKERS' UNION (CLO), petitioner,
vs.
THE COURT OF INDUSTRIAL RELATIONS, PHILIPPINE CAN COMPANY, and LIBERAL
LABOR UNION, respondents.
Lazatin & Caballero for petitioners.
Juan R. Maralit for respondent Court of Industrial Relations.
REYES, J.:
This is a petition for certiorari to review an order of the Court of Industrial Relations on the
ground that the same was rendered in excess of jurisdiction and with grave abuse of
discretion.
The said order was issued in case No. 37-V (2) of said court involving an industrial dispute
between the respondent company (a corporation engaged in the manufacture of tin plates,
aluminum sheets, etc.) and its laborers some of whom belong to the Philippine Sheet Metal
Workers' Union (CLO) and some to the Liberal Labor Union. The dispute was over certain
demands made upon the company by the laborers, one of the demands (No. 13th in the list)
being for the recall of eleven workers who had been laid off. Temporarily taken back on
certain conditions pending final determination of the controversy, these eleven workers were
in the end ordered retained in the decision handed down by the court on February 19, 1947,
which disposed of this part of the case as follows:
The petitioner tried to prove that the 11 laborers were laid off by the respondent company
due to their union activities. As a matter of fact, of the 11 workers laid off, there are included
officers and members of the petitioning union, namely, the president, Pablo Sicat; the vicepresident, Generoso Villanueva; and the secretary, Marcos Eugenio. The respondent
company proved that the laying off of these eleven workers was due to lack of materials.
With regard to this contention, the examining division of this Court was ordered to
investigate the availability of materials used in connection with the work performed by these
eleven laborers, the volume of business and the work performed by these workers during
Sundays, legal holidays, and night shift.
After considering the evidence, both testimonial and documentary and the response of the
chief of the examining division of this Court, we are of the opinion that there was really lack
of materials at the time of the laying off of these 11 laborers. However, there is also
sufficient evidence to the effect that the respondent company, in reducing the number of its
personnel, selected workers that belonged to the petitioning union. This is discrimination

and the same can not be tolerated. The right to reduce personnel must not be abused and
must not be taken advantage of to dismiss laborers with whom the management is
displeased due to their union activities. In the present case, it is the opinion of the Court that
the management of the company selected these 11 workers because they organized a labor
union. Although the company has the right to reduce its personnel, the said company erred
in abusing this right. It is, therefore, ordered that these 11 workers be retained in the
respondent company until the occurrence of facts that may give rise to a just cause of their
laying off or dismissal, or there is evidence of sufficient weight to convince the Court that
their conduct is not satisfactory. As a consequence, the company is ordered to pay their
corresponding wages from the date of their lay-off to the date of their temporary readmission in the company.
As a separate incident from the above, the company, on February 10, 1947, that is, nine
days before the decision came down, filed a motion in the case, asking for authority to lay
off at least 15 workers in its can department on the ground that the installation and
operation of nine new labor-saving machines in said department had rendered the services
of the said workers unnecessary. The Philippine Sheet Metal Workers' Union (CLO) opposed
the motion, alleging that there was more than sufficient work in the company to keep all its
workers busy, and, on the further allegation that the company had hired without the
authority of the courts some ten new laborers pending resolution of the principal case, it in
turn asked that the company be declared guilty of contempt of court. About a year later, the
court, after due hearing and investigation, rendered an order, dated February 5, 1948,
granting the company's motion to lay off 15 workers and denied the petition to have the
company declared in contempt of court. This order is the one now before us for review.
The fifteen laborers slated for dismissal had each of them a bad record according to the list
submitted by the company, which reads as follows:
1. Pablo Sicat, coppersmith, por haber abandonado por mucho tiempo su trabajo;
2. Manuel Pajarillo, making the handles of the cans, por frecuentes ausencias;
3. Marcos Eugenio, solderer, por haber estado saliendo a menudo en horas de trabajo y
dejado el servicio sin causa razonable ni permiso;
4. Miguel Magcalin, solderer, por haber abandonado definitivamente el trabajo;
5. Juanito Villanueva, solderer, por ineficiencia;
6. Melitona Basilio, solderer, por haber estado saliendo a menudo en horas de trabajo sin
causa razonable;
7. Felicidad Villanueva, painting rubber, por ineficiencia;
8. Conchita Basilio, painting rubber, por ser perezosa y salidas a menudo en horas de
trabajo;
9. Soledad del Rosario, painting rubber, por no tener interes en el trabajo y salidas a
menudo en horas de labor;
10. Fortunata Angelo, painting rubber, por ser ineficiente y desobediente;
11. Segundina San Juan, painting rubber, por ineficiencia e inobediencia; todos miembros de
la union recurrente;
12. Fermino Tiozon, can maker, por ser perezoso;
13. Genaro Galvez, general helper, por ser perezoso;
14. Leonardo Soliman, operator-messenger, por ineficiencia, por haber estado llegando tarde
a la fabrica y durmiendo en horas de trabajo; miembros de la union terceristas; y
15. Ho Ching Sing, laborer, por haber abandonado el trabajo sin previa notificacion; no
unionista.
And the order complained of is based upon the following conclusions of fact of the court
below:
1. La compania tiene instalada y en operacion en su fabrica, ademas de las maquinas
antiguas, trece (13) nuevas unidades de 'labor saving machines', entre similares y

enteramente diferentes, que llegaron de los Estados Unidos de America en distintas fechas,
desde el agosto de 1946 hasta el junio de 1947.
2. Dichas nuevas maquinas ahorran obra de mano y tiempo, hacen mas faciles y rapidos los
trabajos y aumentan el volumen de la produccion.
3. En su fabrica la compania tiene ochenta y cinco (85) obreros, y el propuesto despido de
los quince (15) obreros, entre hombres y mujeres, se debe principalmente a que sus
servicios son ya innecesarios porque sus trabajos han sido absorbidos por las nuevas
maquinas.
4. En la seleccion de dichos quince (15) obreros la compania, mediante un grupo o comite
de tres (3) de sus funcionarios y empleados de confianza, con el gerente de la misma a la
cabeza, se baso en los servicios y la conducta de cada obrero.
5. El comite de seleccion no se guio por la afiliacion de los obreros a ninguna de las dos
uniones obreras existentes en el seno de la fabrica, y solamente tuvo en cuenta al verificar
la seleccion estos (a) Abandono del trabajo, sin aviso o justa causa; (b) Frecuentes ausencias
injustificadas en la (el) servicio; (c) Salidas a menudo durante las horas de labor, sin causa
razonable; y (d) ineficiencia, negligencia o falta de interes en el cumplimiento del deber.
6. Lot obreros cuyo despido esta propuesto por la compania han incurrido en las faltas que
se atribuyen por la misma a cada uno de ellos.
7. La compaia no ha aceptado nuevos obreros y si ha hecho trabajar algunas veces a
ciertos obreros o mecanicos suyos en exceso de las ocho horas, ha sido en interes de la
eficiencia o por exigencias del servicio y no por haber tenido mucho volumen de trabajo en
su fabrica.
Indudablemente, la compaia abrigando el deseo laudable de desarrollar su negocio y
aumentar su produccion, ha introducido importantes cambios y mejoras en la elaboracion de
sus productos, recurriendo al empleo de maquinarias modernas para atender debidamente y
satisfacer mejor las demandas del publico consumidor. El proposito de la compania merece
aplausos, el medio de que se vale para realizarlo es digno de encomio y su objetivo significa
desenvolvimiento progresivo en la solucion de los problemas industriales para el beneficio
de la comunidad. Todo paso o medida que tienda a favorecer el interes publico y con miras a
dar impulso a la mecanizacion de las industrias, contribuye a la mejora de la economia y la
ansiada rehabilitacion del pais; y por lo tanto, no debe ser obstruido sino, por el contrario,
fomentado.
It appearing that there has been fair hearing and that there is ample evidence to support the
conclusions of fact of the lower court, we would have no grounds for interfering with those
conclusions. And these make it clear that there was real justification for reducing the
number of workers in respondent company's factory, such a measure having been made
necessary by the introduction of machinery in the manufacture of its products, and that the
company cannot be charged with discrimination in recommendating the dismissal of the
fifteen laborers named in the above list since their selection was made by a committee
composed of both officers and employees who took no account of the laborers' affiliation to
the unions and only considered their proven record.
There can be no question as to the right of the manufacturer to use new labor-saying
devices with a view to effecting more economy and efficiency in its method of production. As
the lower court observes in its order,
No se puede detener el curso de los tiempos. Si se quiere sobrevivir y prosperar, la unica
alternativa es adaptarse a las exigencias del presente mundo moderno. No se puede cerrar
los ojos a la realidad. No se puede depender de metodos antiguos, hay que recurrir a
metodos mas eficientes y avanzados. La produccion no solo debe ser de elevada calidad
sino ilimitada y su costo al alcance de todos. Debe seguirse el ejemplo de otros paises.
The right to reduce personnel should, of course, not be abused. It should not be made a
pretext for easing out laborers on account of their union activities. But neither should it be
denied when it is shows that they are not discharging their duties in a manner consistent
with good discipline and the efficient operation of an industrial enterprise. We, therefore,
approve of the following pronouncement of the court below:
La compaia tiene derecho de despedir a sus empleados u obreros. Si bien este derecho
esta sujeto a la regulacion del Estado, en su normal ejercicio no se inmiscuye la ley. El
patrono paga el jornal de sus obreros por su trabajo, y es logico y justo que el mismo tenga
derecho a esperar de los mismos lealtad y fiel cumplimiento de sus obligaciones. No es el
proposito de la ley obligar al principal a retener en su servicio a un obrero cuando no recibe

de este trabajo adecuado, deligencia (diligencia) y buen comportamiento, o cuando su

continuacion en el empleo es claramente opuesta a los intereses de su patrono, porque la
ley al proteger los derechos del obrero no autoriza la opresion ni la destruccion del principal.
The petitioner contends that the order complained of was made with grave abuse of
discretion and in excess of jurisdiction in that it is contrary to the pronouncement made by
the lower court in its decision in the main case where it disapproved of the dismissal of
eleven workers "with whom the management is displeased due to their union activities." It
appears, however, that the pronouncement was made upon a distinct set of facts, which are
different from those found by the court in connection with the present incident, and that
very decision, in ordering the reinstatement of the eleven laborers, qualifies the order by
saying that those laborers are to be retained only "until the occurrence of facts that may
give rise to a just cause of their laying off or dismissal, or there is evidence of sufficient
weight to convince the Court that their conduct is not satisfactory."
After a careful review of the record, we find that the Court of Industrial Relations has neither
exceeded its jurisdiction nor committed grave abuse of discretion in rendering the order
complained of. The petition for certiorari is, therefore, denied, but without costs against the
petitioner for the reasons stated in its motion to litigate as pauper.
Moran, C.J., Paras, Feria, Pablo, Perfecto, Bengzon, Briones, Tuason and Montemayor, JJ.,
concur.
G.R. No. 142875
September 7, 2001
EDGAR AGUSTILO, petitioner,
vs.
COURT OF APPEALS, SAN MIGUEL CORPORATION, FRANCISCO MANZON, JR., VICE
PRESIDENT and DIRECTOR, LEONOR CANEJA, PERSONNEL OFFICER, and RODRIGO
GURREA, ENGINEERING DEPARTMENT MANAGER, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision,1 dated October 22, 1999, and
resolution, dated April 6, 2000, of the Court of Appeals, which reversed and set aside the
decision,2 dated May 25, 1998, and resolution, dated January 11, 1999, of the National
Labor Relations Commission (NLRC) and reinstated the decision,3 dated March 20, 1996, of
the executive labor arbiter, dismissing petitioner's complaint for unfair labor practice, illegal
dismissal, and payment of separation pay and attorney's fees due to lack of merit.
Petitioner Edgar Agustilo was hired on July 1, 1979 by respondent San Miguel Corporation
(SMC) as a temporary employee at its Mandaue Brewery in Mandaue, Cebu. On October 1,
1979, he was made permanent and designated as a safety clerk. On May 1, 1982, he was
transferred to the Engineering Department of the SMC Mandaue Brewery as an
administrative secretary. Sometime in 1991, SMC Mandaue Brewery adopted a policy that
managers would no longer be assigned secretaries and that only director level positions may
be given secretaries. As a result, on August 5, 1991, petitioner's position as administrative
secretary was abolished and he was transferred to the company's Plant Director's OfficeQuality Improvement Team (PDO QIT).
On February 7, 1992, petitioner was informed that 584 employees, including him, would be
retrenched due to the modernization program of the company. Petitioner was told that his
services would be terminated effective March 15, 1992 and that he would be paid his
benefits 30 days after he was cleared of all accountabilities. In a letter, dated February 13,
1992, SMC notified the DOLE of its modernization program.
On April 8, 1992, petitioner was given separation pay in the amount of P302,450.38,
representing 175% of his entitlements under the Labor Code. He signed a quitclaim
designated as "Receipt and Release" in favor of SMC before Senior Labor Employment
Officer Mateo P. Baldago of the Labor Standards Enforcement Division of the DOLE, Region
VII.
Petitioner then filed a complaint against respondents for unfair labor practice, illegal
dismissal, and payment of separation pay, attorney's fees, and damages. He alleged that he
was a regular employee of SMC from 1979 to 1992; that on May 1, 1982, he was promoted
to the position of administrative secretary of the Engineering Department until his
employment was terminated on March 15, 1992 by reason of union activities; that in May
1986, he tried to convince some employees to form a union so that they could participate in
the certification elections; that respondent Francisco Manzon, Jr. learned of his union
activities and advised him to proceed with it as union and non-union employees would
receive the same benefits; that he and other non-union members were eventually given a

salary increase of P2,500.00 a month retroactive from January 1986; that in 1987, a group of
Ilonggo workers formed an organization called Mga Kasimanwa sa Sugbu, with him as
president and respondent Manzon, Jr. as its adviser; that he resigned from the union after
realizing that the organization was a pro-management group designed to bust union
activities; that in 1990, he received a salary increment of P3,315.00 to "[dissuade] him from
joining a labor union"; that on June 16, 1990, he was given the "Model Employee Award";4
that in July 1991, he approached Felix Lapingcao, the National President of Buklod ng
Manggagawang Pilipino (BMP), expressing his desire to join the latter's organization and was
advised to gather signatories for direct membership; that when respondent Manzon, Jr.
learned about his activities, he threatened petitioner with dismissal; and that his
reassignment on August 5, 1991 from the Engineering Department to the PDO-QIT was
illegal as was his subsequent dismissal. Petitioner further claimed that when he reported to
his new work post, he was not given any work to do so that he simply sat on the visitor's
bench from 8:00 a. m. to 12:00 noon and from 1:00 to 5:00 p.m. everyday. Later, because he
continued with his union activities, his schedule was changed from 4:00 p.m. to 12:00
midnight. Petitioner prayed that he be reinstated to his former position without loss of
seniority rights and paid moral damages in the amount of P500,000 00, exemplary damages
of P200,000.00, and attorney's fees equivalent to 25% of the total award in his favor.
On March 20, 1996, the executive labor arbiter rendered a decision dismissing petitioners
complaint for lack of merit. The pertinent portions of his decision state:
In the [latter] part of 1990 and the early part of 1991, the respondent company [herein
respondent SMC] conducted a study on the possible modernization program which will
automate the processes of brewing, bottling and auxiliary services. This study was approved
for implementation by management, in fact, actually implemented [in] April 1991. As a
result of this modernization program, the manning levels of the Mandaue Brewery Plant was
reduced by 584 personnel. The reduction was implemented in two (2) phases, the first on
March 15, 1992, the second on November 5, 1992. Complainant [herein petitioner] was
included in the first batch.
....
The foremost issue here is whether or not petitioner was illegally dismissed.
We find for the respondents. Evidence in the records prove that complainant's termination
was justified and that respondents adhered to the procedural requirements governing the
same. We have noted very clearly that petitioner's separation from employment was
brought about by the installation of labor saving devices and machineries pursuant to the
employer's reorganizational and expansion program. The law in this regard allows such a
state of change. Art. 283 of the Labor Code allows the reduction of personnel with the
installation of labor saving devices.
Complainant claims that his separation was not valid because in reality respondent firm had
not carried on its program of modernization. As a matter of fact, after three (3) years from
the time he was separated, the equipment and machineries installed have not yet been
operational as certified to by the respective government agencies concerned (Rebuttal
Affidavit Exh. "A-6"). This implies that complainant was merely deceived into believing that
an impending change was about to take place, but which, in reality, did not materialize. We
went over the records on this claim and we find that while respondent firm had not fully
accomplished the projected physical changes, nevertheless, we noted that there were
indeed changes undertaken and these were substantial enough to justify the respondents'
act. To our mind, with the huge funding involved (P2.6 Billion), we could not see any reason
why respondent company will not pursue its modernization program to a successful end. Its
non-operational status is merely temporary. And it is our view that these machineries and
equipment installed will not be kept idle for long or merely laid to total waste.
....
While we sympathize with the complainant recognizing the considerable period of his
employment of more than 11 years, yet equally too, we recognize the respondents'
judgment in the conduct of its business for which the laws do not authorize interference. As
a matter of fact, the Labor Code and its Implementing Rules do not vest in the labor Arbiters
nor in the different divisions of the NLRC managerial authority. The employer is free to
determine, using his own discretion and business judgment, all elements of employment
"from hiring to firing" (National Federation of Labor Union v. NLRC, 202 SCRA 346 (1991)).
Moreover, the freedom of management to conduct its business operations to achieve its
purpose cannot be denied (Yuco Chemical Industries v. Min. of Labor, 185 SCRA 727 (1990)).
For as we see in the case at bench, complainant was not discriminated against. In the
respondents' program of modernization, more than 500 others, to be precise, 583 workers,
were likewise affected. And we cannot view this as a manifestation of bad faith and

insincerity of respondents taking into account the installation of machineries and equipment
pursuant to the program as a means of streamlining the personnel structure. In a program
like this, the eventuality of personnel being removed cannot be avoided. To contend
otherwise would be to intrude into the conduct of an enterprise whose main reason for being
is the profitability of its operations.5
The labor arbiter found the "Receipt and Release"6 signed by petitioner to be valid. In
addition, he held that the complaint was barred as it was filed only on January 4, 1994, or
almost two years after his employment was terminated. He based his ruling on Art. 290, par.
2 of the Labor Code which provides that complaints for unfair labor practices shall be filed
with the appropriate agency within one (1) year from accrual of such unfair labor practice.
On appeal by petitioner, the NLRC reversed. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby ANNULLED and SET ASIDE and judgment
is hereby rendered:
1.
Declaring the dismissal of complainant to be without any just or authorized cause
and, therefore, illegal;
2.
Ordering respondent San Miguel Corporation to reinstate the complainant to his
former or equivalent position without loss of seniority rights and other privileges, and with
full backwages from March 16, 1992 up to the time of his actual reinstatement. However,
should reinstatement be no longer possible due to some valid reasons, respondent San
Miguel Corporation is ordered to pay the complainant separation pay of one (1) month pay
for every year of service, in addition to complainant's full backwages;
3.
Ordering respondent San Miguel Corporation to pay complainant moral damages of
P300,000.00 and exemplary damages of P150,000.00, plus ten (10%) percent of the total
monetary awards, as attorney's fees.
SO ORDERED.7
Respondents filed a motion for reconsideration. On January 11, 1999, the NLRC rendered a
resolution8 affirming its decision, although deleting the award of damages in favor of
petitioner.
On April 13, 1999, respondents filed a petition for certiorari with prayer for the issuance of a
temporary restraining order and/or injunction in the Court of Appeals.
In the meantime, on April 14, 1999, petitioner filed before the NLRC Regional Arbitration
Branch No. VII a Motion for the Issuance of a Writ of Execution.9 On May 31, 1999, the labor
arbiter ordered the SMC to reinstate petitioner.10 However, on motion of respondents, the
Court of Appeals issued a temporary restraining order enjoining the execution of the decision
of the NLRC.11 The TRO lapsed after 60 days, but the labor arbiter refused to enforce the
writ of execution he had previously issued in view of the June 11, 1999 resolution of the
Court of Appeals issuing the TRO.12
On October 22, 1999, the Court of Appeals rendered its decision reversing the decision of
the NLRC and reinstating that of the labor arbiter. On April 6, 2000, it denied petitioner's
motion for reconsideration. Hence, this petition for review on certiorari.
First. Petitioner contends that the Court of Appeals cannot revise the factual findings of the
NLRC and substitute the same with its own. He insists that the Court of Appeals acted with
grave abuse of discretion when it refused to dismiss the original special civil action of
certiorari filed by private respondents before it. He claims that by substituting the factual
findings of the NLRC, the Court of Appeals disregarded the ruling laid down in the case of
Jamer v. NLRC 13 in which it was held that mere variance in the assessment of the evidence
by the NLRC resulting in its dismissal of the complaints for illegal dismissal and by the labor
arbiter finding the complainants to have been validly dismissed did not necessarily warrant
another full review of the facts by the appellate court provided that the findings of the NLRC
are supported by the records. Applying the ruling in that case, petitioner argues that
whatever error of judgment the NLRC may have committed in this case is not correctible
through an original special civil action for certiorari before the Court of Appeals.
The contention has no merit. In St. Martin Funeral Homes v. NLRC,14 it was held that the
special civil action of certiorari is the mode of judicial review of the decisions of the NLRC
either by this Court and the Court of Appeals, although the latter court is the appropriate
forum for seeking the relief desired "in strict observance of the doctrine on the hierarchy of
courts" and that, in the exercise of its power, the Court of Appeals can review the factual
findings or the legal conclusions of the NLRC. The contrary rule in Jamer was thus overruled.

Second. Petitioner contends that the Court of Appeals committed grave abuse of discretion
in issuing a temporary restraining order against the decision of the NLRC and in later "giving
the TRO a lifetime similar to that of a preliminary injunction without the benefit of an
injunction bond in blatant disregard of par. 4, Rule 58, section 5, of the 1997 Rules of Civil
Procedure."
There is merit in this argument. However, the point is now moot and academic as the Court
of Appeals has already rendered its decision.
Rule 58, 5 of the Rules of Civil Procedure provides in pertinent part:
In the event that the application for preliminary injunction is denied or not resolved within
the said period, the temporary restraining order is deemed automatically vacated. The
effectivity of a temporary restraining order is not extendible without need of any judicial
declaration to that effect and no court shall have authority to extend or renew the same on
the same ground for which it was issued.
However, if issued by the Court of Appeals or a member thereof, the temporary restraining
order shall be effective for sixty (60) days from service on the party or person sought to be
enjoined. A restraining order issued by the Supreme Court or a member thereof shall be
effective until further orders. (Emphasis added)
In its order of June 11, 1999 granting a TRO, the Court of Appeals said:
2.0.
GRANT the petitioners' prayer for a TEMPORARY RESTRAINING ORDER, pending Our
resolution of the case on its merits, so as not to frustrate the ends of justice, prohibiting
respondents from executing the Decision, dated 25 May 1998, and the Resolution, dated 11
January 1999, in NLRC Case No. V-0138-96.15
Pursuant to Rule 58, 5, as above quoted, a TRO issued by the Court of Appeals is effective
only for sixty (60) days from service on the party or person sought to be enjoined. The 60day period is intended to give the appeals court time to determine the propriety of granting
a preliminary injunction which goes no further than to preserve the status quo until that
determination is made. Hence, when the period lapsed without a writ of preliminary
injunction being issued, the TRO automatically expired and a judicial declaration to this
effect was not necessary .16 It was thus error for the labor arbiter to deny petitioner's
motion for execution unless the Court of Appeals "clearly mandate[d] otherwise." However,
petitioner should have filed an action for mandamus to compel the labor arbiter to enforce
the writ of execution he had issued. As he did not do so and the Court of Appeals has already
decided the case, this Matter is now moot and academic.
Third. Coming now to the merits of this case, petitioner contends that he was illegally
dismissed and that his transfer on August 5, 1991 from the Engineering Department to the
PDO-QIT, in which he worked until February 12, 1992, amounted to a constructive dismissal.
Petitioner claims that the date of his dismissal should, therefore, be reckoned from February
12, 1992, not March 15, 1992.
The contention has no merit. Petitioner's employment was terminated on the ground of the
installation of labor saving devices by SMC. Art. 283 of the Labor Code provides:
ART. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half () month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
The notice of termination17 send upon petitioner states:
February 7, 1992
MR. EDGAR G. AGUSTILO

Mandaue Brewery
Mandaue City
Dear Mr. Agustilo:
As previously discussed with you, the PDO-QIT GROUP has been abolished after a thorough
study. Consequently, your position therein has also been abolished.
The company is, therefore, constrained to separate you from service effective at [the] close
of business hours, March 15, 1992. This very difficult decision has been taken as a last
recourse and only after exhausting all possible alternatives.
During the period from February 16, 1992 to March 15, 1992, you will be paid your regular
compensation, however, you will not be required to report for work, unless requested by the
company, to enable you to make the necessary preparations for your separation. In this
connection, you are urged to attend the Total Assistance Plan Seminars, sponsored by the
company for your benefit, from February 17, 1992 to April 30, 1992.
All benefits due you in this regard will be released within thirty (30) days from the date of
your separation upon your accomplishment of the required clearances. Please call the Head
of HR Operations Services, Mr. Leo L. Ypil, at telephone numbers 87100 or 87439, for the
final arrangements.
We would like to thank you for your past services to the company and wish you success in
your future undertakings.
Very truly yours,
SAN MIGUEL CORPORATION
By:
(Sgd.) FRANCISCO B. MANZON, JR.
Vice President & Director
Mandaue Plant Operations
Received copy:
Name & Signature

Date
In its letter,18 dated February 13, 1992, to the Department of Labor and Employment, SMC
stated:
February 13, 1992
HON. BARTOLOME AMOGUIS
Director
Department of Labor and Employment
Region VII
Dear Hon. Director Amoguis:
San Miguel Corporation constantly reviews its various businesses in terms of viability and
strategic fit. Along this direction, the company's Mandaue Brewery plant has embarked into
a "Modernization Program" bringing in new technology in beer processing with high-tech,
state-of-the-art machines, a much improved layout/process and multi-skilled employees.
In anticipation of this modernization effort, the plant has been reorganized and restructured
to determine the appropriate manning requirement necessary to efficiently run a modern
plant. This consequently resulted into a reduction in manning.
The excess employees will be separated from service in two batches the first batch of 205
employees will be separated at [the] close of business hours on March 15, 1992 and the
second batch will be separated in September when the new machines and equipment will be
operational.
The Company, before coming with this inevitable decision, has exerted all efforts to find
suitable placements for the affected employees within the company. However, no positions

are available, considering all other units are also undergoing streamlining of their
organizations. Hence, the Company had to resort to declaring them redundant.
However, to minimize the negative impact of losing employment, the Company has
prepared the Total Assistance Plan which covers the following:
a.
Financial package of 100% basic for every year of service plus an additional premium
of up to 75% of basic rate;
b.

3-year free hospitalization coverage.

In the implementation of this decision, our Company will comply with all pertinent provisions
of the Labor Code and undertakes to respect accrued employees' rights, benefits and
privileges under our established policies, practices and existing Collective Bargaining
Agreements.
Attached is the list of affected employees.
Very truly yours,
SAN MIGUEL CORPORATION
By:
BALDOMERO C. ESTENZO
Assistant Vice President & Head
Mandaue Legal Unit
We hold that the Court of Appeals correctly found petitioner's separation from work to be
due to a valid reason, i.e., the installation of labor saving devices. As the appeals court
stated:
In the case at bar, We are of the opinion, and so hold that petitioners have demonstrated
before the Labor Arbiter by clear and convincing evidence that the Mandaue plant where
private respondent used to work had instituted a modernization program which consisted of,
among others, "a 45 million cases per year capacity brewhouse; a 1,400 HI per hour
filtration system; a complete cellaring system with six cylindro-conical tanks at 10,000 HI
each to include other tankages and accessories; a 1,000 bottles per minute liter bottling
line; and support systems such as three 1,000 HP NH3 compressors with two liquid overfeed
NH3 separators; an 80,000 lbs. per hour water tube steam generator and a 700-HO air
compressor" the operations of which are "all automated using microprocessor and electronic
process controllers and instrumentation systems through intelligent interfacing with Siemens
Industrial computers." All of these high-technology innovations, at the cost of 2.6 billion
pesos, truly render the functions of the Plant Director's Office Quality Control Unit, where
private respondent was transferred after his post as Administrative Secretary to the plant
manager was validly abolished, upon management prerogative that the same "did not add
value to the organization."19
Fourth. Petitioner asserts that he was merely forced by necessity accept the separation
benefits given by SMC and that the quitclaim he executed in favor of SMC was not voluntary.
The notarized quitclaim, entitled "Receipt and Release,"20 reads in pertinent parts:
RECEIPT AND RELEASE
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, I, EDGAR G. AGUSTILO, Filipino, of legal age, with residence at 38 A. S. FORTUNA
ST., MANDAUE CITY, has been employed by San Miguel Corporation as ADMINISTRATIVE
SECRETARY at its Mandaue Brewery;
WHEREAS, I am fully aware of the streamlining of San Miguel Corporation's Mandaue
Brewery operations due to merger of some functions, closure of some operating lines,
equipment upgrading and reorganization which resulted to reduction of its workforce;
WHEREAS, I have accepted to be separated from the service of San Miguel Corporation
effective at the close of business hours of March 15, 1992;
NOW THEREFORE, for and in consideration of the premises and of the sum of THREE
HUNDRED TWO THOUSAND FOUR HUNDRED FIFTY & 38/00 ONLY (P302,450.38), Philippine
Currency, receipt of which is hereby acknowledged, in full payment and settlement of all the

compensation, benefits, and privileges due me in connection with my employment in and

separation from San Miguel Corporation, I, the said EDGAR G. AGUSTILO, have remised,
released, and forever discharged the said San Miguel Corporation, its successors and
assigns, and/or any of its directors, officers, and employees, of and from any manner of
action or actions, cause or causes of action, sum or sums of money; accounts, damages,
claims and demands whatsoever, in law or equity which [may be filed] against said San
Miguel Corporation, its successors and assigns, and/or directors, officers, and employees, I
ever had, now have, or which my heirs, executors, and administrators shall or may have
upon and by reason upon any matter, cause or thing whatsoever in connection with my
employment in and separation from the said San Miguel Corporation;
I do hereby acknowledge and declare that I have been paid by San Miguel Corporation all
amounts due me by way of salaries or wages, overtime compensation, Sunday and holiday
and/or night differential pay or other compensation arising out and in the course of my
employment; and that I signed these presents after having read and fully understood its
content.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of April, 1992, at Cebu
City, Philippines.
(Sgd.) EDGAR G. AGUSTILO
SIGNED IN THE PRESENCE OF:
(Sgd.) _____________
(Sgd.) _____________
While quitclaims and releases are generally held contrary to public policy, there are
nevertheless voluntary agreements which represent reasonable settlements and are
considered binding on the parties. Such is the "Receipt and Release" involved in this case.
Petitioner is not an illiterate person who needs special protection. As the labor arbiter found,
petitioner holds a master's degree in library science and is an instructor in political science
at the University of San Carlos. He was also at that time a law student in the said university.
While it is the duty of the courts to be vigilant in preventing the exploitation of employees, it
also behooves them to protect the integrity of contracts so long as they are not contrary to
law.21 In this case, when petitioner acknowledged receipt of the letter of termination, he
wrote: "Accepted under protest and without prejudice." But when he later signed the
"Receipt and Release,"22 he did not qualify his act. Considering the foregoing, it is hard to
conclude that he was merely forced by necessity to execute the quit claim.
WHEREFORE, the petition is DENIED for lack of showing that the Court of Appeals committed
any reversible error.
SO ORDERED.
G.R. No. 114952
January 29, 1996
MAGNOLIA DAIRY PRODUCTS CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JENNY A. CALIBO, respondents.
DECISION
FRANCISCO, J.:
Petitioner, a division of San Miguel Corporation (SMC), entered into a contract of service with
Skillpower, Inc., a duly organized corporation engaged in the business of offering and
providing manpower services to the public. On June 11, 1983, Skillpower, Inc., assigned
private respondent Jenny A. Calibo to petitioner's Tetra Paster Division with these functions:
"(i) to remove "bulgings" (damaged goods) from dilapidated cartons; (ii) to replace damaged
goods and re-paste the carton thereof; (iii) to dispose the damaged goods or returned goods
from Magnolia's warehouse to avoid bad odors; and (iv) to clean leftovers of leaking tetra
pack by mopping or washing the contaminated premises."1
In September 1986, Skillpower, Inc., pulled-out private respondent from petitioner's Tetra
Paster Division, but assigned her back on May 2, 1987 with the same functions. When
petitioner's contract with Skillpower, Inc., expired, private respondent applied with Lippercon
Services, Inc., also a corporation engaged in providing manpower services. In July 1987,
Lippercon Services, Inc., assigned her to petitioner's Tetra Paster Division as a cleaning aide.
In December 1987, she was terminated from service due to petitioner's installation of

automated machines. On July 11, 1989, private respondent instituted a complaint for illegal
dismissal against petitioner. In answer thereto, petitioner averred that it has no employeremployee relationship with private respondent and that the dismissal was prompted by the
installation of labor saving devices an authorized cause for dismissal under the Labor
Code, as amended.
The Labor Arbiter ruled that petitioner is the private respondent's employer because
Skillpower, Inc., and Lippercon Services, Inc., were mere "labor-only" contractors falling
under Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code. The
installation of labor saving devices was also ruled a valid ground for the termination of
private respondent's employment, but the Labor Arbiter emphasized that this did not
exculpate petitioner from the charge of illegal dismissal for its failure to observe the due
process of law in terminating from service its employee. Accordingly, petitioner was ordered
"to pay [private respondent] her backwages in the amount of P23,296.00 [and] [i]n lieu of
reinstatement, . . . to pay [private respondent] separation pay in the amount of
P11,648.00."2 On appeal, the NLRC modified the decision by directing private respondent's
reinstatement and payment of backwages not exceeding three (3) years.3 Thus, this
petition.
The forefront question is whether or not an employer-employee relationship exists between
petitioner and private respondent.
Petitioner insists that it has no employer-employee relationship with private respondent
since Skillpower, Inc., and Lippercon Services, Inc., were solely responsible for private
respondent's employment. More than that, petitioner points out that private respondent is
assigned to a janitorial work which is neither related to nor connected with its business of
producing or manufacturing fruit juices. Petitioner argues that Skillpower, Inc., and Lippercon
Services, Inc., cannot be deemed to be engaged in "labor-only" contracting since both have
sufficient investment in the form of tools, equipments, machineries and work materials.
Belatedly, in its petition and reply to public respondent's comment, petitioner additionally
contends that both manpower corporations have sufficient capitalization with subscribed
capital stocks amounting to P600,000.00 and P100,000.00 respectively.4
A perusal of petitioner's contracts of service with Skillpower, Inc., and Lippercon Services,
Inc. reveals that the workers supplied by the two manpower corporations perform usual,
regular and necessary services for petitioner's production of goods.5 In this connection, the
Labor Arbiter observed:
. . . The undertaking given by respondents Skillpower and/or Lippercon in favor of
respondent Magnolia was not the performance of a specific job. In the instant case, the
undertaking of respondents Skillpower and/or Lippercon was to provide respondent Magnolia
with a certain number of persons able to carry out the works in the production line. These
workers supplied by Skillpower and/or Lippercon in performing their works utilized the
premises, tools, equipments and machineries of respondent Magnolia and not those of the
former. The work being performed by complainant, such as, to remove "bulgings" (damaged
goods) from dilapidated cartoons, (sic) to replace damaged goods and re-paste the cartoon
(sic) thereof, to dispose the damaged goods or returned goods from Magnolia's warehouse
to avoid bad odors, to clean leftovers of leaking tetra-pak by mopping or washing the
contaminated premises, and others, are of course directly related to the day to day
operations of respondent Magnolia. Respondent Magnolia failed to negate this evidence that
the undertaking assigned to the complainant is not related or necessary to its business
operations. Necessarily, if the undertaking assigned to the complainant is not related nor
necessary to the business operations, she cannot be considered as employee of respondent
Magnolia. But the contrary holds true.6
In full agreement with the Labor Arbiter's finding, public respondent NLRC categorically
stated the following, which we quote with approval:
As borne by the evidence on record, respondents Skillpower and Lipercon were merely
agents of the respondent Magnolia and that the latter was the real employer. Consequently,
the respondent Magnolia was responsible to the employee of the labor-only contract as if
such employee had been directly employed by the employer. Thus, where "labor only"
contracting exists, as in the case at bar, the status itself implies or establishes an employeremployee relationship between the employer and the employees of the "labor-only"
contractor. The law in effect holds both the employer and the "labor only" contractor
responsible to the latter's employees for the more effective safeguarding of the employees'
rights under the Labor Code. (PBCom vs. NLRC, 146 SCRA 347 [1986]).7
We note that petitioner also exercises the power to discipline and suspend private
respondent a factor that further militates against its claim. In fact, the latter was meted a
suspension by Mr. Antonio Cinco, a supervisor of SMC.8

The existence of an employer-employee relationship is factual in nature9 and we give due

deference to the NLRC's findings in the absence of a clear showing of arbitrariness in its
appreciation of the evidence. Its findings in this case are fully supported by substantial
evidence on record. Findings of fact of administrative agencies and quasi-judicial bodies
which have acquired expertise because their jurisdiction is confined to specific matters, like
the NLRC, are generally accorded not only respect but even finality and are binding upon the
Court.10
Thus, petitioner's contention that both Skillpower, Inc., and Lippercon Services, Inc., should
be considered the employer of private respondent because they have sufficient investments
in the form of tools, equipments, and machineries deserves scant consideration in view of
the findings of the Labor Arbiter and the NLRC. In addition, petitioner's contention that both
corporations have sufficient capitalization merits no significance. This issue was belatedly
raised in this appeal. Issues and arguments not adequately and seriously brought below
cannot be raised for the first time on appeal. The resolution of this issue requires the
admission and calibration of evidence and the Labor Arbiter and the NLRC did not pass upon
it in their assailed decisions. Our review of labor cases are confined to questions of
jurisdiction or grave abuse of discretion and the Supreme Court is not a trier of facts. We
thus find that the NLRC neither exceeded its jurisdiction, nor abused its discretion, in
ascertaining the existence of an employer-employee relationship between petitioner and
private respondent.
Petitioner next asseverates that private respondent was not illegally dismissed since the
termination of her employment was due to a cause expressly authorized by the Labor Code
and the absence of notice therefor did not make it so. Petitioner cites Wenphil Corp. v. NLRC,
et al. (170 SCRA 69 [1989]) in support of its claim that private respondent is only entitled to
an indemnity of P1,000.00, but not backwages or separation pay. The NLRC, on the other
hand, insists that termination without the benefit of any investigation or notice makes an
employee's dismissal from service illegal.
Article 283 of the Labor Code provides in part:
Art. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, . . ., by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. . . A fraction of at
least six (6) months shall be considered one (1) whole year.
The law authorizes an employer, like the herein petitioner, to terminate the employment of
any employee due to the installation of labor saving devices. The installation of these
devices is a management prerogative, and the courts will not interfere with its exercise in
the absence of abuse of discretion, arbitrariness, or maliciousness on the part of
management, as in this case. Nonetheless, this did not excuse petitioner from complying
with the required written notice to the employee and to the Department of Labor and
Employment (DOLE) at least one month before the intended date of termination. This
procedure enables an employee to contest the reality or good faith character of the asserted
ground for the termination of his services before the DOLE.11
The failure of petitioner to serve the written notice to private respondent and to the DOLE,
however, does not ipso facto make private respondent's termination from service illegal so
as to entitle her to reinstatement and payment of backwages.12 If at all, her termination
from service is merely defective because it was not tainted with bad faith or arbitrariness
and was due to a valid cause.
The well settled rule is that the employer shall be sanctioned for non-compliance with the
requirements of, or for failure to observe due process in terminating from service its
employee. In Wenphil Corp. v. NLRC,13 we sanctioned the employer for this failure by
ordering it to indemnify the employee the amount of P1,000.00. Similarly, we imposed the
same amount as indemnification in Rubberworld (Phils.), Inc. v. NLRC,14 and, in Aurelio v.
NLRC.15 The indemnity was raised to P10,000.00 in Reta v. NLRC16 and Alhambra
Industries, Inc. v. NLRC.17 Subsequently, the sum of P5,000.00 was awarded to an employee
in Worldwide Papermills, Inc. v. NLRC,18 and P2,000.00 in Sebuguero, et al. v. NLRC, et al.19
Recently, the sum of P5,000.00 was again imposed as indemnity against the employer.20
We see no valid and cogent reason why petitioner should not be likewise sanctioned for its
failure to serve the mandatory written notice. Under the attendant facts, we find the amount
of P5,000.00, to be just and reasonable.

Lastly, the NLRC's grant of backwages and order of reinstatement are untenable. These
awards are proper for illegally dismissed employees which obviously is not the situation in
this case. The appropriate award is separation pay pursuant to the ruling of this Court in
Philippine Long Distance Telephone Co., Inc. v. NLRC:21
We hold that henceforth separation pay shall be allowed as a measure of social justice only
in those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
and Article 283 of the Labor Code which explicitly provides that an employee removed from
service due to the installation of labor saving devices is entitled to separation pay.
WHEREFORE, the decision appealed from is MODIFIED by setting aside the award of
reinstatement and backwages. In lieu thereof, petitioner is ordered to pay separation pay
equivalent to one (1) month pay for every year of service. In addition, petitioner is ordered
to pay the sum of P5,000.00 as indemnification for its failure to serve the required notice
mandated by law.
SO ORDERED.
G.R. No. 82249
February 7, 1991
WILTSHIRE FILE CO., INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T. ONG, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Jose R. Millares & Associates for private respondent.
FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of petitioner Wiltshire File Co., Inc.
("Wiltshire") from 16 March 1981 up to 18 June 1985. As such, he received a monthly salary
of P14,375.00 excluding commissions from sales which averaged P5,000.00 a month. He
also enjoyed vacation leave with pay equivalent to P7,187,50 per year, as well as
hospitalization privileges to the extent of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a business and pleasure trip abroad,
he was informed by the President of petitioner Wiltshire that his services were being
terminated. Private respondent maintains that he tried to get an explanation from
management of his dismissal but to no avail. On 18 June 1985, when private respondent
again tried to speak with the President of Wiltshire, the company's security guard handed
him a letter which formally informed him that his services were being terminated upon the
ground of redundancy.
Private respondent filed, on 21 October 1985, a complaint before the Labor Arbiter for illegal
dismissal alleging that his position could not possibly be redundant because nobody (save
himself) in the company was then performing the same duties. Private respondent further
contended that retrenching him could not prevent further losses because it was in fact
through his remarkable performance as Sales Manager that the Company had an
unprecedented increase in domestic market share the preceding year. For that
accomplishment, he continued, he was promoted to Marketing Manager and was authorized
by the President to hire four (4) Sales Executives five (5) months prior to his termination.
In its answer, petitioner company alleged that the termination of respondent's services was
a cost-cutting measure: that in December 1984, the company had experienced an unusually
low volume of orders: and that it was in fact forced to rotate its employees in order to save
the company. Despite the rotation of employees, petitioner alleged; it continued to
experience financial losses and private respondent's position, Sales Manager of the
company, became redundant.
On 2 December 1986, during the proceedings before the Labor Arbiter, petitioner, in a
letter1 addressed to the Regional Director of the then Ministry of Labor and Employment,
notified that official that effective 2 January 1987, petitioner would close its doors
permanently due to substantial business losses.
In a decision dated 11 March 1987, the Labor Arbiter declared the termination of private
respondent's services illegal and ordered petitioner to pay private respondent backwages in

the amount of P299,000.00, unpaid salaries in the amount of P22,352.11, accumulated sick
and vacation leaves in the amount of P12,543.91, hospitalization benefit package in the
amount of P10,000.00, unpaid commission in the amount of P57,500,00, moral damages in
the amount of P100,000.00 and attorney's fees in the amount of P51,639.60.
On appeal by petitioner Wiltshire, the National Labor Relations Commission ("NLRC")
affirmed in toto on 9 February 1988 the decision of the Labor Arbiter. The NLRC held that:
The termination letter clearly spelled out that the main reason in terminating the services of
complainant is REDUNDANT and not retrenchment.
The supposed duplication of work of herein complainant and Mr. Deliva, the Vice-President is
absent that would justify redundancy. . . .
On the claim for moral damages, the NLRC pointed out that the effective date of private
respondent's termination was 18 July 1985, although it was only 18 June 1985 that he
received the letter of termination, and concluded that he was not given any opportunity to
explain his position on the matter. The NLRC held that the termination was attended by
malice and bad faith on the part of petitioner, considering the manner of private respondent
was ordered by the President to pack up and remove his personal belongings from the office.
Private respondent was said to have been embarrassed before his immediate family and
other acquaintance due to his inability to explain the reasons behind the termination of his
services.
In this Petition for Certiorari, it is submitted that private respondent's dismissal was justified
and not illegal. Petitioner maintains that it had been incurring business losses beginning
1984 and that it was compelled to reduce the size of its personnel force. Petitioner also
contends that redundancy as a cause for termination does not necessarily mean duplication
of work but a "situation where the services of an employee are in excess of what is
demanded by the needs of an undertaking . . ."
Having reviewed the record of this case, the Court has satisfied itself that indeed petitioner
had serious financial difficulties before, during and after the termination of the services of
private respondent. For one thing, the audited financial statements of the petitioner for its
fiscal year ending on 31 July 1985 prepared by a firm of independent auditors, showed a net
loss in the amount of P4,431,321.00 and a total deficit or capital impairment at the end of
year of P6,776,493.00.2
In the preceding fiscal year (1983-1984), while the company showed a net after tax income
of P843,506.00, it actually suffered a deficit or capital impairment of P2,345,172.00. Most
importantly, petitioner Wiltshire finally closed its doors and terminated all operations in the
Philippines on January 1987, barely two (2) years after the termination of private
respondent's employment. We consider that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous financial distress. The Court
finds it very difficult to suppose that petitioner Wiltshire would take the final and irrevocable
step of closing down its operations in the Philippines simply for the sole purpose of easing
out a particular officer or employee, such as the private respondent.
Turning to the legality of the termination of private respondent's employment, we find merit
in petitioner's basic argument. We are unable to sustain public respondent NLRC's holding
that private respondent's dismissal was not justified by redundancy and hence illegal. In the
first place, we note that while the letter informing private respondent of the termination of
his services used the word "redundant", that letter also referred to the company having
"incur[red] financial losses which [in] fact has compelled [it] to resort to retrenchment to
prevent further losses".3
Thus, what the letter was in effect saying was that because of financial losses, retrenchment
was necessary, which retrenchment in turn resulted in the redundancy of private
respondent's position.
In the second place, we do not believe that redundancy in an employer's personnel force
necessarily or even ordinarily refers to duplication of work. That no other person was holding
the same position that private respondent held prior to the termination of his services, does
not show that his position had not become redundant. Indeed, in any well-organized
business enterprise, it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for purposes of our Labor
Code, exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. Succinctly put, a position is
redundant where it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers, decreased volume of

business, or dropping of a particular product line or service activity previously manufactured

or undertaken by the enterprise.4
The employer has no legal obligation to keep in its payroll more employees than are
necessarily for the operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of the contraction of its
volume of sales and in order to cut down its operating expenses, effected some changes in
its organization by abolishing some positions and thereby effecting a reduction of its
personnel. Thus, the position of Sales Manager was abolished and the duties previously
discharged by the Sales Manager simply added to the duties of the General Manager, to
whom the Sales Manager used to report.
It is of no legal moment that the financial troubles of the company were not of private
respondent's making. Private respondent cannot insist on the retention of his position upon
the ground that he had not contributed to the financial problems of Wiltshire. The
characterization of private respondent's services as no longer necessary or sustainable, and
therefore properly terminable, was an exercise of business judgment on the part of
petitioner company. The wisdom or soundness of such characterization or decision was not
subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of
course, as violation of law or merely arbitrary and malicious action is not shown. It should
also be noted that the position held by private respondent, Sales Manager, was clearly
managerial in character. In D.M. Consunji, Inc. v. National Labor Relations Commission,5 the
Court held:
An employer has a much wider discretion in terminating the employment relationship of
managerial personnel as compared to rank and file employees. However, such prerogative of
management to dismiss or lay off an employee must be made without abuse of discretion,
for what is at stake is not only the private respondent's position but also his means of
livelihood . . . .6
The determination of the continuing necessity of a particular officer or position in a business
corporation is management's prerogative, and the courts will not interfere with the exercise
of such so long as no abuse of discretion or merely arbitrary or malicious action on the part
of management is shown.7
On the issue of moral damages, petitioner assails the finding of the NLRC that the dismissal
was done in bad faith. Petitioner argues that it had complied with the one-month notice
required by law; that there was no need for private respondent to be heard in his own
defense considering that the termination of his services was for a statutory or authorized
cause; and that whatever humiliation might have been suffered by private respondent arose
from a lawful cause and hence could not be the basis of an award of moral damages.
Termination of an employee's services because of retrenchment to prevent further losses or
redundancy, is governed by Article 283 of the Labor Code which provides as follows:
Art. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
Termination of services for any of the above described causes should be distinguished from
termination of employment by reason of some blameworthy act or omission on the part of
the employee, in which case the applicable provision is Article 282 of the Labor Code which
provides as follows:
Art. 282.
Termination by employer. An employer may terminate an employment for
any of the following causes:
(a)
Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;

(b)

Gross and habitual neglect by the employee of his duties;

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

Other causes analogous to the foregoing.

Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of the "Rules to

Implement the Labor Code" read as follows:
Sec. 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him
a written notice stating the particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall be served at the worker's last
known address.
xxx

xxx

xxx

Sec. 5. Answer and hearing. The worker may answer the allegations stated against him in
the notice of dismissal within a reasonable period from receipt of such notice. The employer
shall afford the worker ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires. (emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the notice to specify "the
particular acts or omissions constituting the ground for his dismissal", a requirement which
is obviously applicable where the ground for dismissal is the commission of some act or
omission falling within Article 282 of the Labor Code. Again, Section 5 gives the employee
the right to answer and to defend himself against "the allegations stated against him in the
notice of dismissal". It is such allegations by the employer and any counter-allegations that
the employee may wish to make that need to be heard before dismissal is effected. Thus,
Section 5 may be seen to envisage charges against an employee constituting one or more of
the just causes for dismissal listed in Article 282 of the Labor Code. Where, as in the instant
case, the ground for dismissal or termination of services does not relate to a blameworthy
act or omission on the part of the employee, there appears to us no need for an
investigation and hearing to be conducted by the employer who does not, to begin with,
allege any malfeasance or non-feasance on the part of the employee. In such case, there are
no allegations which the employee should refute and defend himself from. Thus, to require
petitioner Wiltshire to hold a hearing, at which private respondent would have had the right
to be present, on the business and financial circumstances compelling retrenchment and
resulting in redundancy, would be to impose upon the employer an unnecessary and inutile
hearing as a condition for legality of termination.
This is not to say that the employee may not contest the reality or good faith character of
the retrenchment or redundancy asserted as grounds for termination of services. The
appropriate forum for such controversion would, however, be the Department of Labor and
Employment and not an investigation or hearing to be held by the employer itself. It is
precisely for this reason that an employer seeking to terminate services of an employee or
employees because of "closure of establishment and reduction of personnel", is legally
required to give a written notice not only to the employee but also to the Department of
Labor and Employment at least one month before effectivity date of the termination. In the
instant case, private respondent did controvert before the appropriate labor authorities the
grounds for termination of services set out in petitioner's letter to him dated 17 June 1985.
We hold, therefore, that the NLRC's finding that private respondent had not been accorded
due process, is bereft of factual and legal bases. The award of moral damages that rests on
such ground must accordingly fall.
While private respondent may well have suffered personal embarrassment by reason of
termination of his services, such fact alone cannot justify the award of moral damages. Moral
damages are simply a species of damages awarded to compensate one for injuries brought
about by a wrongful act.8 As discussed above, the termination of private respondent's
services was not a wrongful act. There is in this case no clear and convincing evidence of
record showing that the termination of private respondent's services, while due to an
authorized or statutory cause, had been carried out in an arbitrary, capricious and malicious
manner, with evident personal ill-will. Embarrassment, even humiliation, that is not
proximately caused by a wrongful act does not constitute a basis for an award of moral
damages.

Private respondent is, of course, entitled to separation pay and other benefits under Act 283
of the Labor Code and petitioner's letter dated 17 June 1985.
ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Certiorari. The
Resolutions of the National Labor Relations Commission dated 9 February 1988 and 7 March
1988 are hereby SET ASIDE and NULLIFIED. The Temporary Restraining Order issued by this
Court on 21 March 1988 is hereby made PERMANENT. No pronouncement as to costs.
SO ORDERED.
G.R. No. 172628
February 13, 2009
COATS MANILA BAY, INC., Petitioner,
vs.
PURITA M. ORTEGA (represented by Alejandro San Pedro, Jr.) and MARINA A.
MONTERO, Respondents.
DECISION
TINGA, J.:
In this Petition for Review,1 Coats Manila Bay, Inc. (petitioner) assails the decision2 of the
Court of Appeals dated 25 January 2002 which ruled that respondents were illegally
dismissed by petitioner as the latter failed to substantiate its claim that it observed fair and
reasonable criteria in selecting employees for dismissal as part of its redundancy program.
The appellate court set aside the decision and resolution of the National Labor Relations
Commission (NLRC) reversing the labor arbiters decision granting respondents complaints
for illegal dismissal.
The facts are as follows:
Petitioner, a corporation registered under Philippine laws, is primarily engaged in the
business of thread production. Purita M. Ortega and Marina A. Montero (respondents) were
both employed by petitioner as Clerk Analysts in the Industrial Engineering Department.
Both were members of Anglo-KMU Monthly Union (Union).3
On 27 April 2000, petitioner issued a memorandum announcing that a redundancy plan
would be implemented.4 It was stated that the redundancy program was necessary to
prevent further losses. Petitioner assured its employees that implementing a redundancy
program rather than a retrenchment program would result in better benefits to those
dismissed.
As a result of this redundancy program, 135 employees were terminated, including
respondents. They were advised on 9 May 2000 that they would be dismissed effective 15
June 2000.5 On 10 May 2000, petitioner filed with the Department of Labor and Employment
its Establishment Termination Report,6 indicating that it was terminating 135 of its
employees, including respondents, on the ground of redundancy. On 31 May 2000, petitioner
and the Union held a labor-management meeting to discuss the fate of the employees
affected by the redundancy program.7 On 1 June 2000, respondents received their
respective separation payments and thereafter executed release waivers and quitclaims in
favor of petitioner.8 In the meantime, 11 of the terminated employees were rehired by
petitioner to different positions but with lower salaries.1awphi1
On 8 June 2000, respondents filed a complaint for illegal dismissal, backwages,
reinstatement, vacation/sick leave, 13th month pay, moral and exemplary damages,
attorneys fees, litigation expenses and CBA benefits with the NLRC against petitioner and/or
its Chief Executive Officer Arsenio N. Tanco (Tanco).9
Respondents asserted in their position paper that despite their dismissal due to redundancy,
their functions were assigned to other workers.10 They also claimed that they were
constrained to sign the quitclaims and release waivers due to their pressing need for the
separation pay. They further alleged that as a result of their termination they had suffered
humiliation, wounded feelings, mental anguish and thus prayed for exemplary and morals
damages well as attorneys fees.
Petitioner and Tanco claimed that they had the management prerogative to implement a
redundancy program as per Article 283 of the Labor Code.11 They aver that both
respondents were notified that they would be subject to redundancy and that they never
objected thereto as shown by the execution of their respective waivers/quitclaims.
On 21 October 2002, the Labor Arbiter rendered a decision12 declaring illegal respondents
dismissal and directing petitioner to reinstate respondents to their former positions. The
dispositive portion of the decision reads:

WHEREFORE, premises considered, the complainants are hereby declared illegally

dismissed, and respondent Coats Manila Bay, Inc. is thereby directed to reinstate them to
their former positions without loss of seniority rights and other benefits, to pay their full
backwages, including their 13th month pay, from the time of their termination up to the time
of their actual reinstatement, and to pay each complainant 10% of the total award as
attorneys fees.
Nevertheless, the sums of money already paid by and received from the respondents by the
complainants when they were terminated from the service shall be deducted from the total
amount of their respective awards in this case, in the amount as computed by the NLRC NCR
Computation Unit.
All other claims are dismissed for lack of merit.
SO ORDERED.13
On 18 November 2002, petitioner appealed the decision of the Labor Arbiter to the NLRC. On
21 January 2004, the NLRC reversed the decision of the Labor Arbiter and held that the
dismissal was valid due to redundancy. Respondents moved for reconsideration but this was
denied by the NLRC in a resolution dated 30 March 2005.
Undaunted, respondents filed a petition for certiorari with the Court of Appeals. The Court of
Appeals granted their petition, reversed the decision of the NLRC and reinstated the decision
of the Labor Arbiter. The dispositive portion of the decision states:
WHEREFORE, the petition, being meritorious is GRANTED. The decision of the NLRC dated
January 21, 2004 and its Resolution dated March 30, 2005 in NLRC NCR CA No. 033967-03
(NLRC NCR Case No. 06-03132-2000) are hereby REVERSED and SET ASIDE. The decision of
the Labor Arbiter dated October 21, 2002 (NLRC NCR Case No. 06-03132-2000) is
REINSTATED and AFFIRMED.
SO ORDERED.
The Court of Appeals ratiocinated that the record is bare of any evidence that fair and
reasonable criteria in selecting the respondents were used. Moreover, the waivers and
quitclaims executed by respondents did not negate their right to pursue their claims, the
appellate court stated.
In the instant petition, petitioner asserts that the implementation of its redundancy program
was not discriminatory, and that it implemented reasonable criteria in selecting employees
to be retrenched. Moreover, the decision to dismiss respondents was reached after
consultations with the Union. Petitioner also maintains that the quitclaims executed by
respondents, in which the latter acknowledged receipt of their salaries, 13th month pay,
vacation leave conversion, retrenchment pay and refund of withholding taxes, were not
procured through fraud or deceit on its part, and that respondents had better educational
attainment than the other workers; hence, the two understood what they were signing.
Respondents filed their comment,14 asserting that petitioner raised no substantial argument
to warrant reconsideration.15 They contend that petitioner cannot invoke redundancy since
there was no showing that the functions of respondents are duplicitous or superfluous. They
also assert that petitioner failed to show that it was suffering from a serious downturn in
business that would warrant redundancy given that such serious business downturn was the
cause given by petitioner in the termination letters sent to respondents. They also assert
that their educational attainment is irrelevant since the compelling factor in their
acceptance of separation pay was the dire economic necessity to be caused by their
impending loss of jobs.1avvphi1
The issues posed before the Court may thus be simplified into two: (i) the propriety of the
redundancy program implemented by petitioner; and (ii) the validity of the waivers and
quitclaims executed by respondents.
The petition is meritorious.
Propriety of redundancy program
For purposes of the Labor Code, redundancy exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position
or positions may be the outcome of a number of factors, such as over hiring of workers,
decreased volume of business, or dropping of a particular product line or service activity

previously manufactured or undertaken by the enterprise.16 That no other person was

holding the same position prior to the termination of ones services, does not show that his
position had not become redundant. Indeed, in any well-organized business enterprise, it
would be surprising to find duplication of work and two (2) or more people doing the work of
one person.17 Just like installation of labor-saving devices, the ground of redundancy does
not require the exhibition of proof of losses or imminent losses. In fact, of all the statutory
grounds provided in Article 283 of the Labor Code, it is only retrenchment which requires
proof of losses or possible losses as justification for termination of employment.18
The Court recognizes that a host of relevant factors comes into play in determining costefficient saving measures and in choosing who among the employees should be retained or
separated. It is well settled that the characterization of an employees services as no longer
necessary or sustainable, and, therefore, properly terminable, is an exercise of business
judgment on the part of the employer. However, the wisdom or soundness of such
characterization or decision is not subject to discretionary review provided, of course, that
violation of law or arbitrary or malicious action is not shown.19 In several instances, the
Court has held that it is important for a company to have fair and reasonable criteria in
implementing its redundancy program, such as but not limited to, (a) preferred status, (b)
efficiency and (c) seniority.20
\
We are satisfied that petitioner employed reasonable criteria in choosing which positions to
declare redundant.
The Court notes that considerable deliberations were made before the redundancy program
was implemented. As early as 22 April 2000, management had been upfront regarding its
plans to implement a redundancy program, issuing a memorandum informing its employees
that imminent "serious business downturn" had forced it to take "urgent steps to reduce (its)
workforce." The memorandum also mentioned the criteria for selection of employees to be
made redundant. Thus: "x x x primarily performance, viz absenteeism, record of disciplinary
action, efficiency and work attitude. All other things being equal, the basis will be
seniority."21
Records also show that petitioner held a labor-management meeting on 31 May 2000,
wherein it discussed with the Union the redundant positions as well as the possible
placement of the would-be displaced employees, the wage rate and work hours. Obviously,
the redundancy program was carried out with the full consent and participation of the duly
recognized labor union, which represents the employees-members. The minutes of the
meeting which were duly signed by both the management and the union panels read in part:
Marina Montero and Purita Ortegas positions are redundant. The same is true with Robert
Higados position. As earlier mentioned, Management told the Union there are no more
available monthly positions but should they wish to take up daily jobs Management is willing
to accommodate them.
xxx
On the case of Marina Montero, Mr. Dequito suggested that Management accommodate M.
Montero for one or two more years since she is already retirable. Engr. Valle told the Union
that they have checked the records and found out that M. Monteros service is not even
close to 28 years.22
Moreover, a review of the records shows that respondents positions were abolished because
there was duplicity of functions of clerk analysts in the Industrial Engineering Section and
finishing production clerks in the Operations Department. Even the union representatives
agreed that respondents positions were redundant. Petitioner found that it was more costefficient to maintain only one employee to handle the computation of incentives of the
production employees with the use of computers. 23
Respondents, as well as the Court of Appeals, insist that petitioner did not present a clear
criteria in implementing its redundancy program. We do not agree. Petitioners failure to
exactly state in the memorandum or in the termination notices that respondents do not
enjoy a "preferred status," or are not "efficient" or do not possess "seniority," cannot be
equated with failure to apply reasonable criteria. A simple reading of the memorandum and
the deliberations during the labor-management meeting shows that the fate of the affected
employees was deliberated upon and decided with circumspection. The totality of the
actions of petitioner shows that the redundancy program was fair, well-thought of, and made
in good faith.

Neither is the claim of discrimination well-founded. Respondents compare themselves to the

other employees who were included in the redundancy program and allegedly "reinstated"
by petitioner. Upon closer scrutiny, however, we find that said employees were indeed part
of the redundancy program but were taken back, upon the agreement between the Union
and petitioner. Of the 135 terminated employees, only 11 were taken back. It must be
stressed, however, that true, the 11 employees were re-employed but they were not
reinstated in their former positions. Aside from agreeing to a reduced workweek, these
employees conceded to pay cuts, and accepted positions which were different from the ones
they originally held prior to the implementation to the redundancy program.24
Moreover, of the remaining terminated employees who were not re-employed, only
respondents complained of illegal dismissal and discrimination. It would probably be a
different matter had petitioner re-employed each and every terminated employee, save for
respondents. Had such been the case, it would have been easy to infer that respondents
were singled out and discriminated against, and more
important, it would prove that there was no valid reason to implement a redundancy
program. But, precisely, that is not the case here. Besides, petitioner and the Union had
exercised business judgment in choosing who should be re-employed. Absent any showing of
arbitrariness or bad faith, the Court will not interfere with their decision.
Validity of Release Waiver and Quitclaim
The Court of Appeals ruled that the release waivers and quitclaims had not negated
respondents right to pursue their claims, ratiocinating that:
What appears is that petitioners by reason of dire economic necessity were constrained to
accept their separation pay and signed the quitclaims. When petitioners signed the
quitclaims, they faced the impending threat of losing their jobs after June 15, 2000. This
dilemma placed petitioners in no position to resist their employers offer of separation pay.
The fact, however, is that petitioners continue to press their claims against private
respondent company, which negates the idea that they waived their rights or claims. The
reason for this is that the employee does not really stand on an equal footing with his
employer. In some cases, he may be so penurious that he is willing to bargain even rights
secured to him by law.25 (emphasis supplied)
The Court disagrees. Not all quitclaims are per se invalid or against policy, except: (1) where
there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or
(2) where the terms of settlement are unconscionable on their face; in these cases, the law
will step in to annul the questionable transaction.26 Indeed, there are legitimate waivers
that represent a voluntary and reasonable settlement of laborers claims which should be
respected by the Court as the law between the parties. Where the person making the waiver
has done so voluntarily, with a full understanding thereof, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as being a valid
and binding undertaking,27 and may not later be disowned simply because of a change of
mind.28
In the case at bar, the release waivers and quitclaims were executed by respondents without
any force or duress exerted on them. Respondents merely alleged that they voluntarily
executed the documents by reason of dire economic necessity. "Dire necessity" may be an
acceptable ground to annul quitclaims if the consideration is unconscionably low and the
employee was tricked into accepting it,29 but is not an acceptable ground for annulling the
release when it is not shown that the employee has been forced to execute it.30
The release documents embodied reasonable settlement of the parties claims. Respondents
received hefty sumsOrtega received P363,594.28 while Montero got P348,975.97the
said amounts being what they are by law entitled to receive,31 much higher than the
separation pay they would have received had petitioners hand been forced and a
retrenchment program initiated. Respondents were made fully aware of the implications of
release documents. They are not unlearned nor gullible. They even wrote down in Filipino
that they understood the terms of the release document and attested that they have
received all the benefits due them.32 There would have been no question on their right to
file their complaint had they not signed and executed the Release Waiver and Quitclaim. In
the absence of any showing that they were forced or tricked into signing the release
documents, the Court cannot set aside the same merely because respondents had
subsequently changed their minds.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated January
25, 2002 in C.A. G.R. SP No. 89754 is REVERSED and SET ASIDE and the Decision of the
NLRC dated 21 January 2004 is REINSTATED. No costs.

SO ORDERED.
G.R. No. 156658
March 10, 2004
BONIFACIO ASUFRIN, JR., petitioner,
vs.
SAN MIGUEL CORPORATION and the COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
Coca Cola Plant, then a department of respondent San Miguel Beer Corporation (SMC), hired
petitioner as a utility/miscellaneous worker in February 1972. On November 1, 1973, he
became a regular employee paid on daily basis as a Forklift Operator. On November 16,
1981, he became a monthly paid employee promoted as Stock Clerk.
Sometime in 1984, the sales office and operations at the Sum-ag, Bacolod City Sales Office
were reorganized. Several positions were abolished including petitioners position as Stock
Clerk. After reviewing petitioners qualifications, he was designated warehouse checker at
the Sum-ag Sales Office.
On April 1, 1996, respondent SMC implemented a new marketing system known as the "preselling scheme" at the Sum-ag Beer Sales Office. As a consequence, all positions of route
sales and warehouse personnel were declared redundant. Respondent notified the DOLE
Director of Region VI that 22 personnel of the Sales Department of the Negros Operations
Center1 would be retired effective March 31, 1995.
Respondent SMC thereafter wrote a letter2 to petitioner informing him that, owing to the
implementation of the "pre-selling operations" scheme, all positions of route and warehouse
personnel will be declared redundant and the Sum-ag Sales Office will be closed effective
April 30, 1996. Thus, from April 1, 1996 to May 15, 1996, petitioner reported to respondents
Personnel Department at the Sta. Fe Brewery, pursuant to a previous directive.
Thereafter, the employees of Sum-ag sales force were informed that they can avail of
respondents early retirement package pursuant to the retrenchment program, while those
who will not avail of early retirement would be redeployed or absorbed at the Brewery or
other sales offices. Petitioner opted to remain and manifested to Acting Personnel Manager
Salvador Abadesco his willingness to be assigned to any job, considering that he had three
children in college.3
Petitioner was surprised when he was informed by the Acting Personnel Manager that his
name was included in the list of employees who availed of the early retirement package.
Petitioners request that he be given an assignment in the company was ignored by the
Acting Personnel Manager.
Petitioner thus filed a complaint for illegal dismissal with the NLRC, docketed as RAB Case
No. 06-06-10233-96. On December 27, 1996, the Labor Arbiter dismissed the complaint for
lack of merit. Petitioner appealed to the National Labor Relations Commission (NLRC) which
set aside the Labor Arbiters decision and ordered respondent SMC to reinstate petitioner to
his former or equivalent position with full backwages.4
Respondent filed a petition with the Court of Appeals which reversed the decision of the
NLRC and reinstated the judgment of the Labor Arbiter dismissing the complaint for illegal
dismissal. Petitioners motion for reconsideration5 was denied in a Resolution dated
December 11, 2002.6
Hence, this petition for review assigning the following errors:
1. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS, WITH DUE RESPECT,
COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT PETITIONER WAS "NOT
SINGLED-OUT FOR TERMINATION, AS MANY OTHERS WERE ALSO ADVERSELY AFFECTED."
2. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GROSS
MISAPPREHENSION OF FACT WHEN IT AFFIRMED THE FINDING OF THE LABOR ARBITER THAT
THE POSITION OF PETITIONER BECAME REDUNDANT AT THE SUM-AG SALES OFFICES.
3. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION WHEN IT HELD THAT THE DISMISSAL OF PETITIONER WAS VALID.
4. THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS ERRED IN DISMISSING THE
ENTIRE RELIEFS PRAYED FOR BY THE PETITIONER.

The primordial issue to be resolved is whether or not the dismissal of petitioner is based on a
just and authorized cause.
Factual findings of administrative bodies, being considered experts in their fields, are binding
on this Court. However, this is a general rule which holds true only when established
exceptions do not obtain. One of these exceptive circumstances is when the findings of the
Labor Arbiter and the NLRC are conflicting. Considering that the ruling of the Labor Arbiter
was reversed by the NLRC whose judgment was in turn overturned by the appellate court, it
behooves us in the exercise of our equity jurisdiction to determine which findings are more
conformable to the evidentiary facts.7
In the case at bar, petitioner was dismissed on the ground of redundancy, one of the
authorized causes for dismissal.8 In Dole Philippines, Inc. v. NLRC,9 citing the leading case of
Wiltshire File Co., Inc. v. NLRC,10 we explained the nature of redundancy as an authorized
cause for dismissal thus:
. . . redundancy in an employers personnel force necessarily or even ordinarily refers to
duplication of work. That no other person was holding the same position that private
respondent held prior to the termination of his services, does not show that his position had
not become redundant. Indeed, in any well-organized business enterprise, it would be
surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise.
The determination that employees services are no longer necessary or sustainable and,
therefore, properly terminable is an exercise of business judgment of the employer. The
wisdom or soundness of this judgment is not subject to discretionary review of the Labor
Arbiter and the NLRC, provided there is no violation of law and no showing that it was
prompted by an arbitrary or malicious act.11 In other words, it is not enough for a company
to merely declare that it has become overmanned. It must produce adequate proof that such
is the actual situation to justify the dismissal of the affected employees for redundancy.12
Persuasive as the explanation proffered by respondent may be to justify the dismissal of
petitioner, a number of disturbing circumstances, however, leave us unconvinced.
First, of the 23 SMC employees assigned at the Sum-ag Sales Office/Warehouse, 9 accepted
the offer of SMC to avail of the early retirement whose separation benefits was computed at
250% of their regular pay. The rest, including petitioner, did not accept the offer. Out of the
remaining fourteen 14, only petitioner clearly manifested, through several letters,13 his
desire to be redeployed to the Sta. Fe Brewery or any sales office and for any position not
necessarily limited to that of a warehouse checker. In short, he was even willing to accept a
demotion just to continue his employment. Meanwhile, other employees who did not even
write a letter to SMC were redeployed to the Sta. Fe Brewery or absorbed by other
offices/outlets outside Bacolod City.14
Second, petitioner was in the payroll of the Sta. Fe Brewery and assigned to the Materials
Section, Logistics Department, although he was actually posted at the Sum-ag
Warehouse.15 Thus, even assuming that his position in the Sum-ag Warehouse became
redundant, he should have been returned to the Sta. Fe Brewery where he was actually
assigned and where there were vacant positions to accommodate him.
Third, it appears that despite respondents allegation that it ceased and closed down its
warehousing operations at the Sum-ag Sales Office, actually it is still used for warehousing
activities and as a transit point where buyers and dealers get their stocks.16 Indeed, the
Sum-ag Office is strategically situated on the southern part of Bacolod City making it
convenient for dealers from the southern towns of Negros Occidental to get their stocks and
deposit their empty bottles in the said warehouse, thereby decongesting the business
activities at the Sta. Fe Brewery.
Fourth, in selecting employees to be dismissed, a fair and reasonable criteria must be used,
such as but not limited to (a) less preferred status, e.g. temporary employee; (b) efficiency;
and (c) seniority.17 In the case at bar, no criterion whatsoever was adopted by respondent in
dismissing petitioner. Furthermore, as correctly observed by the NLRC, respondent "has not
shown how the cessation of operations of the Sum-ag Sales Office contributed to the ways
and means of improving effectiveness of the organization with the end in view of efficiency
and cutting distribution overhead and other related costs. Respondent, thus, clearly resorted

to sweeping generalization[s] in dismissing complainant."18 Indeed, petitioners

predicament may have something to do with an incident where he incurred the ire of an
immediate superior in the Sales Logistics Unit for exposing certain irregularities committed
by the latter.19
In the earlier case of San Miguel Corporation v. NLRC,20 respondents reasons for
terminating the services of its employees in the very same Sum-ag Sales Office was
rejected, to wit:
Even if private respondents were given the option to retire, be retrenched or dismissed, they
were made to understand that they had no choice but to leave the company. More bluntly
stated, they were forced to swallow the bitter pill of dismissal but afforded a chance to
sweeten their separation from employment. They either had to voluntarily retire, be
retrenched with benefits or be dismissed without receiving any benefit at all.
What was the true nature of petitioners offer to private respondents? It was in reality a
Hobsons choice.21 All that the private respondents were offered was a choice on the means
or method of terminating their services but never as to the status of their employment. In
short, they were never asked if they wanted to work for petitioner.
In the case at bar, petitioner is similarly situated. It bears stressing that whether it be by
redundancy or retrenchment or any of the other authorized causes, no employee may be
dismissed without observance of the fundamentals of good faith.
It is not difficult for employers to abolish positions in the guise of a cost-cutting measure and
we should not be easily swayed by such schemes which all too often reduce to near nothing
what is left of the rubble of rights of our exploited workers.22 Given the nature of
petitioners job as a Warehouse Checker, it is inconceivable that respondent could not
accommodate his services considering that the warehousing operations at Sum-ag Sales
Office has not shut down.
All told, to sustain the position taken by the appellate court would be to dilute the
workingmans most important right: his constitutional right to security of tenure. While
respondent may have offered a generous compensation package to those whose services
were terminated upon the implementation of the "pre-selling scheme," we find such an offer,
in the face of the prevailing facts, anathema to the underlying principles which give life to
our labor statutes because it would be tantamount to likening an employer-employee
relationship to a salesman and a purchaser of a commodity. It is an archaic abomination. To
quote what has been aptly stated by former Governor General Leonard Wood in his inaugural
message before the 6th Philippine Legislature on October 27, 1922 "labor is neither a chattel
nor a commodity, but human and must be dealt with from the standpoint of human
interest."23
As has been said: "We do not treat our workers as merchandise and their right to security of
tenure cannot be valued in precise peso-and-centavo terms. It is a right which cannot be
allowed to be devalued by the purchasing power of employers who are only too willing to
bankroll the separation pay of their illegally dismissed employees to get rid of them."24 This
right will never be respected by the employer if we merely honor it with a price tag. The
policy of "dismiss now and pay later" favors moneyed employers and is a mockery of the
right of employees to social justice.25
WHEREFORE, in view of all the foregoing, the petition is GRANTED. The Decision of the Court
of Appeals in CA-G.R. SP No. 53521 dated April 10, 2002, and the Resolution dated
December 11, 2002 denying petitioners Motion for Reconsideration, are SET ASIDE. The
decision of the National Labor Relations Division dated February 20, 1998 is REINSTATED.
Accordingly, petitioners dismissal is declared illegal, and respondent is ordered to reinstate
him to his former or equivalent position, with full backwages computed from April 1, 1996 up
to his actual reinstatement. Respondent is likewise ordered to pay petitioner the sum
equivalent to ten percent (10%) of his total monetary award as attorneys fees.
SO ORDERED.

CALTEX (PHILS.), INC. (now

CHEVRON PHILIPPINES, INC.),* G.R. No. 159641
Petitioner, versus NATIONAL LABOR RELATIONS
COMMISSION AND
ROMEO T. STO. TOMAS,
Respondents.** Promulgated:

October 15, 2007

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 filed by Caltex (Philippines) Inc.,
now Chevron Philippines, Inc. (petitioner) seeking to annul and set aside the Decision[1]
dated May 15, 2003, and the Resolution[2] dated August 21, 2003 of the Court of Appeals
(CA) in CA-G.R. SP No. 65405.
Romeo T. Sto Tomas (private respondent) was a regular employee of petitioner since
February 2, 1984. He was a Senior Accounting Analyst receiving a monthly salary of
P29,860.00 at the time of his termination on July 31, 1997.
In a letter[3] dated October 21, 1996, petitioner informed the Department of Labor and
Employment (DOLE) of its plan to implement a redundancy program in its Marketing Division
and some departments in its Batangas Refinery for the period starting October 1996 to
December 1998. The letter alleged that the redundancy program is a response to the market
situation which constrained petitioner to rationalize and simplify its business processes; that
petitioner undertook a review, restructuring and streamlining of its organization which
resulted in consolidation, abolition and outsourcing of certain functions and in the
identification of certain redundant positions. The letter also states that petitioner will provide
the DOLE a list of affected employees as it implements each phase of the redundancy
program.
Petitioner, through a letter[4] dated June 30, 1997, notified private respondent of his
termination effective July 31, 1997 due to the redundancy of his position and awarded him a
separation package in the amount of P559,458.90 consisting of the following:
Regular separation/retirement benefits P352,721.25
under the New Retirement Plan; and
Ex-gratia payment computed at months
basic pay for every year of service 206,737.65
TOTAL P559,458.90[5]
On June 8, 1998, respondent filed with the Labor Arbiter a complaint[6] for illegal dismissal
against petitioner and its President and Chief Executive Officer, Mr. Clifton Hon. Private
respondent alleged that: being petitioners regular employee, he is entitled to security of
tenure; he did not commit any serious misconduct, willful disobedience, gross and habitual
neglect of duty or fraud and willful breach of trust to warrant the penalty of dismissal from
employment; there was no independent proof or evidence presented by petitioner to
substantiate its claim of redundancy nor was he afforded due process as he was not given
any opportunity to present his side; he was dismissed due to his active participation in union
activities; petitioner opened positions for hiring some of which offered jobs that are the
same as what private respondent was performing; petitioner failed to give written notice to
him and DOLE at least one month before the intended date of termination as required by the
Labor Code.
In its position paper, petitioner and Mr. Hon averred that private respondents dismissal from
the service was due to redundancy of his position which was determined after petitioners
business process re-engineering study and organization review, conducted with private
respondents knowledge; that redundancy is an authorized cause to terminate an employee
which is a management prerogative and cannot be interfered with absent any abuse of
discretion; and that there is nothing in the law that requires petitioner to conduct impartial
investigation or hearing to terminate an employee due to redundancy.
On March 31, 1999, the Labor Arbiter (LA) rendered a decision[7] dismissing the complaint
without prejudice to the payment of private respondents separation pay as required by law
or as granted by petitioner pursuant to company practice whichever is higher.
The LA found that private respondent's dismissal from the service on the ground of
redundancy was done in good faith and a valid exercise of management prerogative; that
redundancy did not deter the employer to hire additional workers when it is deemed best for
proper management; and that there is no need for petitioner to conduct an impartial
investigation or hearing since private respondents dismissal was not related to his
blameworthy act or omission. While the LA found that petitioner failed to give notice to

DOLE one month before the intended date of private respondents termination, the LA ruled
that non-compliance with the procedural requirement will not per se make the termination
illegal and held that requirement of procedural process was not totally disregarded.
Respondent filed his appeal with the National Labor Relations Commission (NLRC) which in a
Decision[8] dated January 30, 2001, reversed the decision of the LA, the dispositive portion
of which reads:
WHEREFORE, the decision of the Labor Arbiter is hereby VACATED and SET ASIDE and
judgment is hereby rendered:
Declaring the dismissal of complainant to be without a just or authorized cause and,
therefore, illegal.
Ordering respondent Caltex (Phils.) Inc. to reinstate the complainant to his former or
substantially equivalent position, without loss of seniority rights and other privileges and to
pay complainant his full backwages inclusive of allowance and other benefits computed from
August 1, 1997 up to his actual reinstatement. However, should complainants reinstatement
be no longer feasible due to some valid reasons, respondent Caltex (Phils.) Inc., is hereby
ordered to pay complainant his separation pay computed at one (1) month pay for every
year of service, a fraction of at least six (6) months to be considered as one (1) whole year.
The separation pay shall be in addition to complainants full backwages.
All other claims of complainant are hereby DISMISSED for lack of merit.[9]
In so ruling, the NLRC expounded that although Article 283 of the Labor Code authorizes
termination due to redundancy, there must be factual basis; that the records did not disclose
any evidence to show basis for respondents termination; that neither did petitioner send
notice to DOLE one month prior to respondents dismissal.
Petitioners Motion for Reconsideration was denied in a Resolution[10] dated March 27, 2001.
Petitioner filed with the CA a Petition for Certiorari alleging grave abuse of discretion
committed by the NLRC in finding respondents termination illegal.
In a Decision dated May 15, 2003, the CA denied the petition. The CA ruled that there was
no reason to deviate from the findings of the NLRC since the pieces of evidence presented
by petitioner are not only insufficient but also baseless and self-serving; that petitioners
main argument that private respondents dismissal on the ground of redundancy was only
resorted to after a conduct of thorough business process reengineering study and research is
nothing but a bare assertion; that nowhere in the records can it be found that there was
indeed a study conducted by petitioner which culminated in the abolition and consolidation
of certain positions in the office; that neither was there any proof that petitioner truly had a
concrete redundancy program that is reflective of any financial loss or possible and
obtainable substantial profits in case the program is implemented nor were there any named
factors considered by the petitioner in undertaking the reduction program; that what
petitioner presented was merely a copy of its letter to the DOLE informing the latter of its
intention to implement a redundancy program and nothing more; and that petitioner failed
to apply the criteria in effecting private respondents dismissal due to redundancy as there
was no showing that it underwent painstaking selection from among its employees to be
dismissed.
The CA further found that petitioner failed to send DOLE a written notice of its
implementation of the redundancy program one month prior to the intended date thereof
since petitioner had admitted such failure in its Answer to respondents appeal to the NLRC.
The CA likewise found that petitioners belated submission to the CA of the letter dated June
30, 1997 purportedly notifying DOLE of the plan to implement a redundancy program is
dubious because of petitioners earlier admission that it did not send DOLE a written notice of
termination; that petitioner should have submitted the evidence at the earliest opportunity;
and that the letter was self-serving since it did not bear any proof of receipt by the DOLE.
The CA denied petitioners Motion for Reconsideration in a Resolution dated August 21, 2003.
Hence, herein petition filed by petitioner on the following grounds:
THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR IN EXCESS OF ITS JURISDICTION WHEN IT ISSUED THE DECISION
DATED MAY 15, 2003 AND THE RESOLUTION DATED AUGUST 21, 2003 AFFIRMING THE

ORDERS DATED JANUARY 30, 2001 AND MARCH 27, 2001 OF THE RESPONDENT NLRC
CONSIDERING THAT THEY ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.
THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT AFFIRMED THE FINDING OF
THE RESPONDENT NLRC THAT THE DISMISSAL OF THE PRIVATE RESPONDENT WAS WITHOUT
JUST AND AUTHORIZED CAUSE.
THE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF ITS JURISDICTION WHEN IT AFFIRMED THE FINDING
OF THE RESPONDENT NLRC DIRECTING THE REINSTATEMENT OF THE PRIVATE RESPONDENT
AND THE PAYMENT OF HIS BACKWAGES COMPUTED FROM AUGUST 1, 1997.[11]
Petitioner insists that it had already informed the DOLE Secretary through a letter-notice
dated October 21, 1996 of its plan to implement a redundancy program which was received
on October 24, 1996; that the CA ignored such earlier notice and concentrated on its alleged
failure to send notice one month prior to private respondents termination; that the June 30,
1997 notice to DOLE was belatedly submitted since it was not easily located; that the
belated submission should not be taken against petitioner; that the subsequent notice to the
DOLE was only a follow up to the earlier notice dated October 21, 1996; and that there was
substantial compliance with the notice requirement of the Labor Code for a valid redundancy
program.
Petitioner further argues that private respondents termination due to redundancy is valid
considering that he consented to his termination by accepting and benefiting from the
package given by petitioner in the total amount of P559,458.90; that his separation package
is equivalent to 1.39 months basic pay for every year of service, way above the minimum
separation pay required by law; that if private respondents termination is indeed illegal and
that he should be reinstated with full backwages, he should be ordered to pay back
petitioner the benefits he received on account of its redundancy program as he unjustly
enriched himself in the amount of P206,737.65 representing ex-gratia benefit paid only to
terminated employees on account of the redundancy program.
Petitioner further claims that private respondent was not retrenched but dismissed on
account of petitioners redundancy program, thus, the finding that petitioner was not able to
provide proof that it truly had an extensive engineering study on account of business losses
arising out of massive oil deregulation is misplaced; that retrenchment and redundancy are
two different authorized causes terminating employment relationship and the elements of
one do not apply to the other; that its right to terminate respondents employment is
embodied under Article 283 of the Labor Code which required employers to give notice of
redundancy to the worker and the DOLE one month before the intended date of actual
termination; that the twin notice requirement is the only condition precedent mandated by
law before any valid redundancy may be effected which petitioner had duly complied with;
that termination due to redundancy is a valid exercise of management prerogative which
courts ordinarily hesitate to interfere with unless the act is marked with bad faith.
The issues for resolution are (1) whether private respondents termination on the ground of
redundancy was valid, and (2) whether petitioner gave a written notice to DOLE as required
under Article 283 of the Labor Code.
Under Rule 45 of the Rules of Court, only questions of law may be raised in this Court.
However, factual issues may be considered and resolved when the findings of facts and the
conclusions of the Labor Arbiter are inconsistent with those of the NLRC and the CA,[12] as
obtaining in the present case.
The CA correctly dismissed herein petitioners petition for certiorari. The NLRC did not
commit grave abuse of discretion in finding that respondent was illegally dismissed.
Private respondent was dismissed by petitioner on the ground of redundancy, one of the
authorized causes for dismissal under Article 283 of the Labor Code, to wit:
Article 283. Closure of establishment and reduction of personnel.- The employer may also
terminate the employment of any employee due to the installment of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or reverses, the separation
pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay for every

year of service, whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year (emphasis supplied).
In Becton Dickinson Phils., Inc. v. National Labor Relations Commission,[13] citing the
leading case, Wiltshire File Co., Inc. v. National Labor Relations Commission,[14] we
explained the nature of redundancy as an authorized cause for dismissal in the following
manner:
x x x redundancy in an employers personnel force necessarily or even ordinarily refers to
duplication of work. That no other person was holding the same position that private
respondent held prior to the termination of his services, does not show that his position had
not become redundant. Indeed, in any well organized business enterprise, it would be
surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the
services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decrease in volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise.[15]
We are mindful of the rule that the characterization of an employees services as no longer
necessary or sustainable, and therefore, properly terminable, is an exercise of business
judgment on the part of the employer, and that the wisdom or soundness of such
characterization or decision is not subject to discretionary review. However, such
characterization may be rejected if the same is found to be in violation of law or is arbitrary
or malicious.[16]
We have held that the employer must comply with the following requisites to ensure the
validity of the implementation of a redundancy program: 1) a written notice served on both
the employees and the Department of Labor and Employment (DOLE) at least one month
prior to the intended date of retrenchment; 2) payment of separation pay equivalent to at
least one month pay or at least one month pay for every year of service, whichever is
higher; 3) good faith in abolishing the redundant positions; and 4) fair and reasonable
criteria in ascertaining what positions are to be declared redundant and accordingly
abolished.[17]
In Asufrin, Jr. v. San Miguel Corporation,[18] we ruled that it is not enough for a company to
merely declare that it has become overmanned. It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees.
In Panlilio v. National Labor Relations Commission,[19] we held that evidence must be
presented to substantiate redundancy such as but not limited to the new staffing pattern,
feasibility studies/proposal, on the viability of the newly created positions, job description
and the approval by the management of the restructuring.
In the instant case, we find no reversible error committed by the CA in upholding the
findings of the NLRC that there was no substantial evidence presented by petitioner to justify
private respondent's dismissal due to redundancy. As correctly found by the CA, petitioners
evidence to show redundancy merely consisted of a copy of petitioners letter to the DOLE
informing the latter of its intention to implement a redundancy program and nothing more.
The letter which merely stated that petitioner undertook a review, restructuring and
streamlining of its organization which resulted in consolidation, abolition and outsourcing of
certain functions; and which resulted in identified and redundant positions instead of
simplifying its business process restructuring, does not satisfy the requirement of substantial
evidence, that is, the amount of evidence which a reasonable mind might accept as
adequate to justify a conclusion.[20]
Petitioner failed to demonstrate the superfluity of private respondents position as there was
nothing in the records that would establish any concrete and real factors recognized by law
and relevant jurisprudence,[21] such as overhiring of workers, decreased volume of
business, or dropping of a particular product line or service activity previously manufactured
or undertaken by the enterprise, which were adopted by petitioner in implementing the
redundancy program.
Petitioner also failed to show any fair and reasonable criteria in ascertaining what positions
are redundant and how the selection of employees to be dismissed was made.

In Capitol Wireless, Inc. v. Confesor,[22] we have held that in selecting the employee to be
dismissed, fair and reasonable criteria must be used such as but not limited to (a) less
preferred status, e.g. temporary employee; (b) efficiency; and (c) seniority. No such
appraisal was done in the present case. The absence of criteria in the selection of an
employee to be dismissed renders the dismissal arbitrary.
Moreover, petitioner failed to refute private respondents assertion that it opened positions of
accountants for hiring to which he could have qualified rather than be dismissed. In
petitioners Memorandum dated May 28, 1997[23] and July 4, 1997,[24] it declared vacant
the positions of Terminal Accountant and Internal Auditor, respectively, the minimum
requirements of which are being accountants and having 4-5 years experience in handling
accounting and supervisory functions, among others. There is no showing that private
respondent could not perform the functions demanded of the vacant positions considering
his experience as petitioners Senior Accounting Analyst for 13 years and to which he could
be transferred instead of being dismissed. We find such hiring of accountants inconsistent
with respondents termination due to redundancy.
In fact, petitioner expressly stated in its Answer to private respondents Appeal Memorandum
filed with the NLRC that it may still hire additional employees so long as it is not for the
position previously declared and determined to be redundant.[25]
As we ruled, redundancy exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirement of the enterprise.[26] It is the burden of
petitioner, as employer, to prove the factual and legal basis for the dismissal of its
employees on the ground of redundancy.[27]
The CA committed no reversible error when it found that petitioner failed to discharge the
burden of proving respondents dismissal as valid.
There is merit in petitioners claim that the CAs finding that it (petitioner) failed to provide
proof that it truly had an extensive reengineering study on account of business losses arising
out of massive oil deregulation is misplaced considering that Article 283 of the Labor Code
does not require that the employer should be suffering financial losses before he can
terminate the services of the employee on the ground of redundancy.[28] Nevertheless, the
CA finding on this matter does not detract from the fact that petitioner failed to show proof
of fair and reasonable criteria for the implementation of a valid redundancy program. Thus,
whether it is retrenchment or redundancy, or any of the other authorized causes, no
employee may be dismissed without observance of the fundamentals of fair play.[29]
Petitioner committed a fatal error when it failed to give a written notice to DOLE as required
under Article 283 of the Labor Code. All three, the LA, NLRC and the CA, found the absence
of notice sent by petitioner to DOLE one month before the intended date of private
respondents termination. While petitioner claims that it sent a notice to the DOLE through a
letter dated June 30, 1997, petitioner failed to show that the same was actually received by
DOLE. The purpose of the written notice to the DOLE is to give it the opportunity to ascertain
the verity of the alleged authorized cause of termination.[30]
Petitioners insistence that its written notice of redundancy program per its October 1996
letter addressed to DOLE is a substantial compliance with the notice requirement, is not
persuasive since the said letter merely stated its plan of implementing a redundancy
program but did not contain the details necessary to effect the program such as the reason
for finding certain portions as redundant, the name of the employees to be terminated and
the actual date of termination. In fact, petitioner in its October letter wrote that it would
provide DOLE with a list of affected employees as it implements each phase of the
redundancy program which it failed to do.
Petitioners failure to show an authorized cause for private respondents termination is
sufficient to declare the dismissal illegal.
Petitioners claim that private respondent consented to his termination by accepting his
separation pay deserves scant consideration. Private respondent had no other recourse but
to accept his separation pay since petitioners letter made it clear that his position had been
determined to be redundant and his services shall be terminated effective July 31, 1997. As
private respondent was dismissed allegedly due to redundancy, he is entitled to separation
pay under Article 283 of the Labor Code. And since there was no extra consideration for the
private respondent to give up his employment, such undertaking cannot be allowed to bar
the action for illegal dismissal.[31]
Petitioner asserts that private respondents reinstatement is no longer possible since his
former position was already abolished when it was declared redundant. Notably, this matter
was only raised for the first time in petitioners motion for reconsideration[32] of the assailed
CA decision dated May 15, 2003. Private respondent, in his comment[33] to the motion,

contends that petitioners claim is doubtful considering that the establishment where he is to
be reinstated has not ceased operation or closed. The CA disregarded the claim of petitioner
that private respondents reinstatement is no longer possible and denied the motion for
reconsideration finding no cogent reason to reconsider its earlier decision.
The issue of whether private respondents reinstatement to his former or substantially
equivalent position is no longer possible, is a factual matter which is not a proper subject of
the present petition for review on certiorari since we are not a trier of facts. The parties
conflicting claims on this matter can be best determined by the Labor Arbiter upon the
execution of the judgment after our Decision shall have become final and executory.
Finally, we find merit in petitioners claim that private respondent should return the amount
of P206,737.65 representing ex-gratia benefit paid only to terminated employees on account
of the redundancy program. While we note that this matter is raised only for the first time,
we have ample authority to review and resolve it if we find the consideration and
determination of the same essential and indispensable in order[34] to arrive at a just
decision in the case. The ex-gratia benefit should be returned following the principle against
unjust enrichment which is held applicable in labor cases.[35]
WHEREFORE, the petition is DENIED. The Decision dated May 15, 2003 and the Resolution
dated August 21, 2003 of the Court of Appeals in CA-G.R. SP No. 65405 are AFFIRMED.
However, in the higher interest of justice, private respondent is ordered to return the amount
of P206,737.65, representing the ex-gratia benefit paid to him by petitioner.
No costs.
SO ORDERED.
G.R. No. 101539

September 4, 1992

CECILE DE OCAMPO, WILFREDO SAN PEDRO, REYNALDO DOVICAR, BIEN MEDINA,

CESAR ABRIOL, ARTEMIO CASTRO, LARRY ALCANTARA, MICHAEL NOCUM, JESUS
DEO JR., PUBLEO DARAG, EDUARDO BINO, EDUARDO VELES, ERVIN DAVID,
PROTACIO PEREZ, NOEL VICTOR, ELENO DACATIMBAN, ANTONIO BERNARDO,
CARLITO VICTORIA, TIMOTEO MIJARES, ALEX RAMOS, REYNALDO CRUZ, MODESTO
MAMESIA, DOMINGO SILARDE, RENATO PUENTAS, RENE VILLANUEVA, MARCELO
DELA CRUZ and HERNANDO LEGASPI, petitioners
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION
and
BALIWAG
MAHOGANY
CORPORATION, respondents.

MEDIALDEA, J.:
This Petition for certiorari seeks to annul and set aside the resolution issued by the
respondent National Labor Relations Commission on July 8, 1991, in Certified Case No. 0548
entitled "In Re: Labor Dispute at Baliwag Mahogany Corporation," affirming with modification
its previous decision dated October 23, 1990, declaring the union officers and/or members
who participated in the illegal strike staged on February 6, 1990 to have lost their status of
employment; and directing private respondent Baliwag Mahogany Corporation to pay
separation pay to certain employees and to reinstate without backwages all union Members
not found to have committed prohibited acts.
The antecedent facts are as follows:
Petitioners Cecile de Ocampo, Wilfredo San Pedro, Reynaldo Dovicar, Bien Medina, Cesar
Abriol, Artemio Castro, Larry Alcantara, Michael Nocum, Jesus Deo, Jr., Publeo Darag,
Eduardo Bino, Eduardo Veles, Ervin David, Prostacio Perez, Noel Victor, Eleno Dacatimban,
Antonio Bernardo, Carlito Victoria, Timoteo Mijares, Alex Ramos, Reynaldo Cruz, Modesto
Mamesia, Domingo Silarde, Renato Puertas, Rene Villanueva, Marcelo dela Cruz and
Hernando Legaspi are employees of private respondent Baliwag Mahogany Corporation.
They are either officers or members of the Baliwag Mahogany Corporation Union-CFW, the
existing collective bargaining agent of the rank and file employees in the company. Private
respondent Baliwag Mahogany Corporation is an enterprise engaged in the production of
wooden doors and furniture and has a total workforce of about 900 employees.
In 1988, private respondent Baliwag Mahogany Corporation (company) and Baliwag
Mahogany Corporation Union-CFW (union) entered into a collective bargaining agreement
containing, among other things, provisions on conversion into cash of unused vacation and

sick leaves; grievance machinery procedure; and the right of the company to schedule work
on Sundays and holidays.
In November, 1989, the union made several requests from the company, one of which was
the cash conversion of unused vacation and sick leave for 1987-1988 and 1988-1989.
Acting on the matter, the company ruled to allow payment of unused vacation and sick
leaves for the period of 1987-1988 but disallowed cash conversion of the 1988-1989 unused
leaves.
On January 3, 1990, the company issued suspension orders affecting twenty (20) employees
for failure to render overtime work on December 30, 1989. The suspension was for a period
of three (3) days effective January 3, 1996 to January 5, 1990.
On the same day, the union filed a notice of strike on the grounds of unfair labor practice
particularly the violation of the CBA provisions on non-payment of unused leaves and illegal
dismissal of seven (7) employees in November, 1989.
On January 13, 1990, the company issued a notice of termination to three (3) employees or
union members, namely, Cecile de Ocampo, Rene Villanueva and Marcelo dela Cruz, of the
machinery department, allegedly to effect cost reduction and redundancy.
The members of the union conducted a picket at the main gate of the company on January
18, 1990.
On the same day, the company filed a petition to declare the strike illegal with prayer for
injunction against the union, Cecile de Ocampo, Wilfredo San Pedro and Rene Aguilar.
An election of officers was conducted by the union on January 19, 1990. Consequently,
Cecile de Ocampo was elected as president.
During the conciliation meeting held at National Conciliation and Mediation Board (NCMB) on
January 22, 1990 relative to the notice of strike filed by the union on January 3, 1990, the
issue pertaining to the legality of the termination of three (3) union members was raised by
the union. However, both parties agreed to discuss it separately.
Subsequently, in a letter dated January 28, 1990, the union requested for the presence of a
NCMB representative during a strike vote held by the union. The strike vote resulted to 388
votes out of 415 total votes in favor of the strike.
Consequently, the union staged a strike on February 6, 1990.
On February 7, 1990, the company filed a petition to assume jurisdiction with the
Department of Labor and Employment.
On February 16, 1990, the company filed an amended petition, praying among other things,
that the strike staged by the union on February 6, 1990 be declared illegal, there being no
genuine strikeable issue and the violation of the no-strike clause of the existing CBA
between the parties.
The Secretary of Labor in an order dated February 15, 1990, certified the entire labor dispute
to the respondent Commission for compulsory arbitration and directed all striking workers
including the dismissed employees to return to work and the management to accept them
back.
The company filed an urgent motion for assignment of a sheriff to enforce the order of the
Secretary.
In an order dated February 22, 1990, the Secretary of Labor directed Sheriff Alfredo Antonio,
Jr., to implement the order.
On February 23, 1990, the sheriff, with the assistance of the PC/INP of San Rafael, removed
the barricades and opened the main gate of the company.
Criminal complaints for illegal assembly, grave threats, and grave coercion were filed
against Cecile de Ocampo, Timoteo Mijares, Modesto Mamesia and Domingo Silarde by the
local police authorities on February 24, 1990.
On February 25, 1990, the company caused the publication of his return to work order in two
(2) newspapers, namely NGAYON and ABANTE.

In its letter dated February 27, 1990, the union, through its President Cecile de Ocampo,
requested the Regional Director of DOLE, Region III to intervene in the existing dispute with
management.
Meanwhile, the company extended the February 26, 1990 deadline for the workers to return
to work until March 15, 1990.
The respondent Commission rendered a decision on October 23, 1990, declaring the strikes
staged on January 18, 1990 and February 6, 1990 illegal, the dispositive portion of which
provides as follows, to wit:
WHEREFORE, judgment is hereby rendered as follows:
1.
The strike staged on January 18, 1990 is hereby declared illegal and all employees
who participated therein are reprimanded therefor or an further warned that future similar
acts shall be dealt more severely;
2.
The strike staged on February 6, 1990 is hereby declared illegal and the Union
officers/members are deemed suspended from March 15, 1990 the last deadline of the
company for them to report to the date of promulgation of this Decision. In short, the Union
officers/members are ordered reinstated to their positions but without backwages;.
3.
Baliwag Mahogany Corporation is hereby directed to immediately reinstate Cecile de
Ocampo, Rene Villanueva and Marcelo dela Cruz to their former positions without loss of
seniority rights to pay them full backwages for the period from January 17, 1990 to March
15, 1990 only;
4.
The Baliwag Mahogany Corporation is hereby directed to immediately reinstate Alex
Ramos, Ronaldo Cruz, Fernando Hernandez, Renato Puertas, Hernando Legaspi to their
former positions and to pay them backwages from date of dismissal to March 15, 1990 only;
5.
The Baliwag Mahogany Corporation is hereby exonerated of the charge of unfair labor
practice;
6.
The Baliwag Mahogany Corporation is directed to pay its employment the cash
equivalent of unused sick leaves for year 1989;
7.
The Baliwag Mahogany Corporation is directed to remit to the Union the dues for the
month of January 1990.
SO ORDERED. (Rollo, pp. 68-69)
Such decision prompted the company to file a motion for reconsideration substantially on
the ground that public respondent seriously erred in not dismissing the employees
particularly the union officers, who participated in the illegal strike.
In its supplemental motion for reconsideration, the company contended that as a result of
the strike, it failed to meet the purchase orders for the quarter valued at fifteen million
pesos.
Petitioners filed an opposition to the company's motion for reconsideration and subsequently
a supplemental comment/opposition to motion for reconsideration.
On December 13, 1990, the respondent Commission directed the Labor Arbiter to receive
evidence on the issues raised in the motion for reconsideration and additional evidence on
the issues already passed upon and to submit a report thereon.
On July 8, 1991, the respondent Commission rendered a resolution affirming with
modification the decision dated October 23, 1990, the dispositive portion of which provides
as follows:
WHEREFORE, premises considered, the Decision of October 23, 1990 is hereby MODIFIED, to
wit:
1.
The strike staged on February 6, 1990 is hereby declared illegal and the Union
officers/members who participated in said strike committed prohibited acts are deemed to
have lost their status of employment, to wit:
1.
2.
3.

Cecile de Ocampo
Wilfredo San Pedro
Reynaldo Aguilar

4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.

Bren Medina (Bien Medina)

Cesar Abriol
Artemio Castro
Larry Alcantara
Melie Nocum (Michael Nocum)
Jesus Deo, Jr.
Publeo Darag
Eduardo Bino
Eduardo Vices (Eduardo Veles)
Abroin David (Ervin David)
Protacio Perez (Prostacio Perez)
Celso Sarmiento
Neol Vicbon (Noel Victor)
Alano Dacatimban (Eleno Dacatimban)
Antonio Bernardo
Carlito Victoria
Timoteo Mijares
Alex Ramos
Reynaldo Cruz
Modesto Manesia
Domingo Silarde
Renato Puertas
Hernando Legaspi

2.
The Baliwag Mahogany Corporation is directed to pay Cecile de Ocampo, Rene
Villanueva and Marcelo Cruz separation pay computed at one month per year of service in
addition to one month pay as indemnification pay for lack of notice (Art. 283, Labor Code).
3.
The Baliwag Mahogany Corporation is directed to pay Alex Ramos, Reynaldo Cruz,
Renato Puertas, Hernando Legaspi separation pay computed at one (1) month per year of
service in addition to backwages limited to six (6) months.
4.
The Baliwag Mahogany Corporation is directed to reinstate but without backwages all
Union members not found herein to have committed prohibited acts nor found to have
accepted settlement from it nor have voluntarily left the Company for reasons of their own.
5.

All other findings in the questioned Decision are affirmed.

SO ORDERED. (Rollo, pp. 45-47)

Hence, this present petition raising three (3) issues, to wit:
1.
Whether or not there is legal basis for declaring the loss of employment status by
petitioners on account of the strike in respondent Company.
2.
Whether or not the dismissals of petitioners Cecile de Ocampo, Rene Villanueva, and
Marcelo dela Cruz from their positions by the company on the ground of redundancy was
done in good faith.
3.
Whether or not respondent NLRC acted correctly in allowing respondent company to
submit additional evidence in support of its Motion for Reconsideration and in giving
credence to the said evidence despite the fact that the same were not newly-discovered
evidence as defined under the Rules of Court. (Rollo, p. 11)
After a careful review of the records of this case, the Court finds the petition devoid of merit.
Petitioners insist that there is no specific finding by the respondent commision regarding the
particular participation of the individual petitioners in the supposed acts of violence or
commission of prohibited acts during the strike such as denial of free ingress to the premises
of the company and egress therefrom as well as illegal acts of coercion during the February,
1990 strike.
The Solicitor General disagrees and claims that it is undisputed that the union resorted to
illegal acts during the strike arguing that private respondent's personnel manager
specifically identified the union officers and members who committed the prohibited acts
and actively participated therein.
Moreover, the Solicitor General maintains that the illegality of the strike likewise stems from
the failure of the petitioners to honor the certification order and heed the return-to-work
order issued by the Secretary of Labor.

Answering this contention, the petitioners argued that their failure to immediately return to
work was not impelled by any malicious or malevolent motive but rather, by their
apprehension regarding their physical safety due to the presence of military men in the
factory who might cause them harm.
The law on the matter is Article 264 (a) of the Labor Code, to wit:
Article 264.

(a) Prohibited activities. (a)

No strike or lockout shall be declared after assumption of jurisdiction by the President or the
Minister or after certification or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same grounds for the strike or
lockout.
Any worker whose employment has been terminated as a consequence of an unlawful
lockout shall be entitled to reinstatement with full backwages. Any union officer who
knowingly participates in an illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a worker in a lawful strike shall not
constitute sufficient ground for termination of his employment, even if a replacement had
been hired by the employer during such lawful strike.
The clear mandate of the aforequoted article was stressed in the case of Union of Filipro
Employees v. Nestle Philippines, Inc. (G.R. Nos. 88710-13, December 19, 1990, 192 SCRA
396, 411) where it was held that a strike that is undertaken despite the issuance by the
Secretary of Labor of an assumption or certification order becomes a prohibited activity and
thus illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as Amended
and the Union officers and members, as a result, are deemed to have lost their employment
status for having knowingly participated in an illegal act.
Unrebutted evidence shows that the individual petitioners defied the return-to-work order of
the Secretary of Labor issued on February 15, 1990. As a matter of fact, it was only on
February 23, 1990 when the barricades were removed and the main gate of the company
was opened. Hence, the termination of the services of the individual petitioners is justified
on this ground alone.
Anent the contention that the respondent Commission gravely abused its discretion when it
allowed the presentation of additional evidence to prove the loss suffered by the company
despite the fact that they were mere afterthoughts and just concocted by the company, time
and again, We emphasize that "technical rules of evidence are not binding in labor cases.
Labor officials should use every and reasonable means to ascertain the facts in each case
speedily and objectively, without regard to technicalities of law or procedure, all in the
interest of due process" (Philippine Telegraph and Telephone Corporation v. National Labor
Relations Commission, G.R. No. 80600, March 21, 1990, 183 SCRA 451, 457).
Turning to the legality of the termination of three (3) of the individual petitioners, petitioners
contend that the company acted in bad faith when it terminated the services of the three
mechanics because the positions held by them were not at all abolished but merely given to
Gemac Machineries.
On the contrary, the company stresses that when it contracted the services of Gemac
Machineries for the maintenance and repair of its industrial machinery, it only adopted a
cost saving and cost-consciousness program in order to improve production efficiency.
We sustain respondent Commission's finding that petitioners' dismissal was justified by
redundancy due to superfluity and hence legal.
We believe that redundancy, for purposes of our Labor Code, exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirement of the
enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of
a position or positions may be the outcome of a number of factors, such as over hiring of
workers, decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise. The employer had no
legal obligation to keep in its payroll more employees, than are necessary for the operation
of its business. (Wiltshire File Co., Inc. v. National Labor Relations Commission, G.R. No.
82249, February 7, 1991; 193 SCRA 665,672).
The reduction of the number of workers in a company made necessary by the introduction of
the services of Gemac Machineries in the maintenance and repair of its industrial machinery
is justified. There can be no question as to the right of the company to contract the services

of Gemac Machineries to replace the services rendered by the terminated mechanics with a
view to effecting more economic and efficient methods of production.
In the same case, We ruled that "(t)he characterization of (petitioners') services as no longer
necessary or sustainable, and therefore properly terminable, was an exercise of business
judgment on the part of (private respondent) company. The wisdom or soundness of such
characterization or decision was not subject to discretionary review on the part of the Labor
Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and
malicious action is not shown" (ibid, p. 673).
In contracting the services of Gemac Machineries, as part of the company's cost-saving
program, the services rendered by the mechanics became redundant and superfluous, and
therefore properly terminable. The company merely exercised its business judgment or
management prerogative. And in the absence of any proof that the management abused its
discretion or acted in a malicious or arbitrary manner, the court will not interfere with the
exercise of such prerogative.
Well-settled is the rule that the factual findings of administrative bodies are entitled to great
weight, and these findings are accorded not only respect but even finality when supported
by substantial evidence (Family Planning Organization of the Philippines, Inc. v. National
Labor Relations Commission, G.R. No. 75987, March 23, 1992, p. 7 citing Asian Construction
and Development Corporation v. National Labor Relations Commission, G.R. No. 85866, July
24, 1998, 187 SCRA 784, 787). Hence, the truth or the falsehood of alleged facts is not for
this Court now to re-examine.
In the light of the foregoing considerations, it is clear that the assailed resolution of the
respondent Commission is not tainted with arbitrariness nor grave abuse of discretion.
ACCORDINGLY, the petition is DISMISSED for lack of merit and the resolution of the
respondent Commission dated July 8, 1991 is hereby AFFIRMED. SO ORDERED.
G.R. No. 117040
January 27, 2000
RUBEN SERRANO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE,
respondents.
MENDOZA, J.:
This is a Petition seeking review of the resolutions, dated March 30, 1994 and August 26,
1994, of the National Labor Relations Commission (NLRC) which reversed the decision of the
Labor Arbiter and dismissed petitioner Ruben Serrano's complaint for illegal dismissal and
denied his motion for reconsideration. The facts are as follows:
Petitioner was hired by private respondent Isetann Department Store as a security checker
to apprehend shoplifters and prevent pilferage of merchandise.1 Initially hired on October 4,
1984 on contractual basis, petitioner eventually became a regular employee on April 4,
1985. In 1988, he became head of the Security Checkers Section of private respondent.2
Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its
entire security section and engage the services of an independent security agency. For this
reason, it wrote petitioner the following memorandum:3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Seranno,
In view of the retrenchment program of the company, we hereby reiterate our verbal notice
to you of your termination as Security Section Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for
illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, and
nonpayment of salary and overtime pay.4
The parties were required to submit their position papers, on the basis of which the Labor
Arbiter defined the issues as follows:5
Whether or not there is a valid ground for the dismissal of the complainant.
Whether or not complainant is entitled to his monetary claims for underpayment of wages,
nonpayment of salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision
finding petitioner to have been illegally dismissed. He ruled that private respondent failed to
establish that it had retrenched its security section to prevent or minimize losses to its
business; that private respondent failed to accord due process to petitioner; that private
respondent failed to use reasonable standards in selecting employees whose employment
would be terminated; that private respondent had not shown that petitioner and other
employees in the security section were so inefficient so as to justify their replacement by a
security agency, or that "cost-saving devices [such as] secret video cameras (to monitor and
prevent shoplifting) and secret code tags on the merchandise" could not have been
employed; instead, the day after petitioner's dismissal, private respondent employed a
safety and security supervisor with duties and functions similar to those of
petitioner.1wphi1.nt
Accordingly, the Labor Arbiter ordered:6
WHEREFORE, above premises considered, judgment is hereby decreed:
(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is
ordered to pay complainant full backwages without qualification or deduction in the amount
of P74,740.00 from the time of his dismissal until reinstatement. (computed till promulgation
only) based on his monthly salary of P4,040.00/month at the time of his termination but
limited to (3) three years;
(b) Ordering the Respondent to immediately reinstate the complainant to his former position
as security section head or to a reasonably equivalent supervisorial position in charges of
security without loss of seniority rights, privileges and benefits. This order is immediately
executory even pending appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73
and proportionate 13th month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10%
attorney's fees based on the total judgment award of P79,959.12.
All other claims of the complainant whether monetary or otherwise is hereby dismissed for
lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March 30, 1994; reversed
the decision of the Labor Arbiter and ordered petitioner to be given separation pay
equivalent to one month pay for every year of service, unpaid salary, and proportionate 13th
month pay. Petitioner filed a motion for reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security section and the hiring of
an independent security agency constituted an exercise by private respondent of "[a]
legitimate business decision whose wisdom we do not intend to inquire into and for which
we cannot substitute our judgment"; that the distinction made by the Labor Arbiter between
"retrenchment" and the employment of cost-saving devices" under Art. 283 of the Labor
Code was insignificant because the company official who wrote the dismissal letter
apparently used the term "retrenchment" in its "plain and ordinary sense: to layoff or
remove from one's job, regardless of the reason therefor"; that the rule of "reasonable
criteria" in the selection of the employees to be retrenched did not apply because all
positions in the security section had been abolished; and that the appointment of a safety
and security supervisor referred to by petitioner to prove bad faith on private respondent's
part was of no moment because the position had long been in existence and was separate
from petitioner's position as head of the Security Checkers Section.

Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO
REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE
EMPLOYEES CLASSED UNDER THE LATTER?7
Petitioner contends that abolition of private respondent's Security Checkers Section and the
employment of an independent security agency do not fall under any of the authorized
causes for dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. The employer may also terminate
the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operations of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the, workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,8 this Court upheld the termination of
employment of three mechanics in a transportation company and their replacement by a
company rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the company's cost-saving
program, the services rendered by the mechanics became redundant and superfluous, and
therefore properly terminable. The company merely exercised its business judgment or
management prerogative. And in the absence of any proof that the management abused its
discretion or acted in a malicious or arbitrary manner, the court will not interfere with the
exercise of such prerogative.9
In Asian Alcohol Corporation v. National Labor Relations Commission,10 the Court likewise
upheld the termination of employment of water pump tenders and their replacement by
independent contractors. It ruled that an employer's good faith in implementing a
redundancy program is not necessarily put in doubt by the availment of the services of an
independent contractor to replace the services of the terminated employees to promote
economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a company] cannot be
denied the faculty of promoting efficiency and attaining economy by a study of what units
are essential for its operation. To it belongs the ultimate determination of whether services
should be performed by its personnel or contracted to outside agencies . . . [While there]
should be mutual consultation, eventually deference is to be paid to what management
decides."11 Consequently, absent proof that management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of judgment by an employer.12
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the
security section, private respondent's real purpose was to avoid payment to the security
checkers of the wage increases provided in the collective bargaining agreement approved in
1990.13 Such an assertion is not sufficient basis for concluding that the termination of
petitioner's employment was not a bona fide decision of management to obtain reasonable
return from its investment, which is a right guaranteed to employers under the
Constitution.14 Indeed, that the phase-out of the security section constituted a "legitimate
business decision" is a factual finding of an administrative agency which must be accorded
respect and even finality by this Court since nothing can be found in the record which fairly
detracts from such finding.15
Accordingly, we hold that the termination of petitioner's services was for an authorized
cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be
given separation pay at the rate of one month pay for every year of service.

Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment of an employee for any of the
authorized causes the employer must serve "a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date
thereof." In the case at bar, petitioner was given a notice of termination on October 11,
1991. On the same day, his services were terminated. He was thus denied his right to be
given written notice before the termination of his employment, and the question is the
appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen. In Subuguero v. NLRC,16
workers in a garment factory were temporarily laid off due to the cancellation of orders and
a garment embargo. The Labor Arbiter found that the workers had been illegally dismissed
and ordered the company to pay separation pay and backwages. The NLRC, on the other
hand, found that this was a case of retrenchment due to business losses and ordered the
payment of separation pay without backwages. This Court sustained the NLRC's finding.
However, as the company did not comply with the 30-day written notice in Art. 283 of the
Labor Code, the Court ordered the employer to pay the workers P2,000.00 each as
indemnity.
The decision followed the ruling in several cases involving dismissals which, although based
on any of the just causes under Art. 282,17 were effected without notice and hearing to the
employee as required by the implementing rules.18 As this Court said: "It is now settled that
where the dismissal of one employee is in fact for a just and valid cause and is so proven to
be but he is not accorded his right to due process, i.e., he was not furnished the twin
requirements of notice and opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of, or for failure to
observe, due process."19
The rule reversed a long standing policy theretofore followed that even though the dismissal
is based on a just cause or the termination of employment is for an authorized cause, the
dismissal or termination is illegal if effected without notice to the employee. The shift in
doctrine took place in 1989 in Wenphil Corp. v. NLRC.20 In announcing the change, this
Court said:21
The Court holds that the policy of ordering the reinstatement to the service of an employee
without loss of seniority and the payment of his wages during the period of his separation
until his actual reinstatement but not exceeding three (3) years without qualification or
deduction, when it appears he was not afforded due process, although his dismissal was
found to be for just and authorized cause in an appropriate proceeding in the Ministry of
Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an employee who has been shown to be
guilty of the charges that warranted his dismissal from employment. Indeed, it will
demoralize the rank and file if the undeserving, if not undesirable, remains in the service.
xxx

xxx

xxx

However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as
above discussed. The dismissal of an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of the second requirement. Thus, it
must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering
the circumstances of this case petitioner must indemnify the private respondent the amount
of P1,000.00. The measure of this award depends on the facts of each case and the gravity
of the omission committed by the employer.
The fines imposed for violations of the notice requirement have varied from P1,000.0022 to
P2,000.0023 to P5,000.0024 to P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate sanctions for violations of the
notice experience during the last decade or so with the Wenphil doctrine. The number of
cases involving dismissals without the requisite notice to the employee, although effected
for just or authorized causes, suggest that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the notice requirement. Justice
Panganiban finds the monetary sanctions "too insignificant, too niggardly, and sometimes
even too late." On the other hand, Justice Puno says there has in effect been fostered a
policy of "dismiss now; pay later" which moneyed employers find more convenient to comply
with than the requirement to serve a 30-day written notice (in the case of termination of

employment for an authorized cause under Arts. 283-284) or to give notice and hearing (in
the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the requisite notice to be null and
void even though there are just or authorized cause for such dismissal or layoff.
Consequently, in their view, the employee concerned should be reinstated and paid
backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should
rethink the sanction of fine for an employer's disregard of the notice requirement. We do not
agree, however, that disregard of this requirement by an employer renders the dismissal or
termination of employment null and void. Such a stance is actually a reversion to the
discredited pre-Wenphil rule of ordering an employee to be reinstated and paid backwages
when it is shown that he has not been given notice and hearing although his dismissal or
layoff is later found to be for a just or authorized cause. Such rule was abandoned in Wenphil
because it is really unjust to require an employer to keep in his service one who is guilty, for
example, of an attempt on the life of the employer or the latter's family, or when the
employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's right to notice before he is
dismissed or laid off, at the same time acknowledges the right of the employer to dismiss for
any of the just causes enumerated in Art. 282 or to terminate employment for any of the
authorized causes mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an
employer who is found to have dismissed an employee for cause without prior notice is
deemed ineffective in deterring employer violations of the notice requirement, the remedy is
not to declare the dismissal void if there are just or valid grounds for such dismissal or if the
termination is for an authorized cause. That would be to uphold the right of the employee
but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the court
finds that the dismissal was for a just cause. But, otherwise, his dismissal must be upheld
and he should not be reinstated. This is because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e.,
installation of a labor-saving device, but the employer did not give him and the DOLE a 30day written notice of termination in advance, then the termination of his employment should
be considered ineffectual and he should be paid backwages. However, the termination of his
employment should not be considered void but he should simply be paid separation pay as
provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the notice requirement
constitutes a denial of the employee's right to due process. Prescinding from this premise,
he quotes the statement of Chief Justice Concepcion Vda. de Cuaycong v. Vda. de
Sengbengco26 that "acts of Congress, as well as of the Executive, can deny due process
only under the pain of nullity, and judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision to the contrary notwithstanding."
Justice Puno concludes that the dismissal of an employee without notice and hearing, even if
for a just cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283284, is a nullity. Hence, even if just or authorized cause exist, the employee should be
reinstated with full back pay. On the other hand, Justice Panganiban quotes from the
statement in People v. Bocar27 that "[w]here the denial of the fundamental right of due
process is apparent, a decision rendered in disregard of that right is void for lack of
jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due
process by the State, which is not the case here. There are three reasons why, on the other
hand, violation by the employer of the notice requirement cannot be considered a denial of
due process resulting in the nullity of the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on governmental
powers. It does not apply to the exercise of private power, such as the termination of
employment under the Labor Code. This is plain from the text of Art. III, 1 of the
Constitution, viz.: "No person shall be deprived of life, liberty, or property without due
process of law. . . ." The reason is simple: Only the State has authority to take the life,
liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that
the exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause
before the power of organized society are brought to bear upon the individual. This is
obviously not the case of termination of employment under Art. 283. Here the employee is
not faced with an aspect of the adversary system. The purpose for requiring a 30-day
written notice before an employee is laid off is not to afford him an opportunity to be heard
on any charge against him, for there is none. The purpose rather is to give him time to
prepare for the eventual loss of his job and the DOLE an opportunity to determine whether
economic causes do exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and
hearing is not to comply with Due Process Clause of the Constitution. The time for notice and
hearing is at the trial stage. Then that is the time we speak of notice and hearing as the
essence of procedural due process. Thus, compliance by the employer with the notice
requirement before he dismisses an employee does not foreclose the right of the latter to
question the legality of his dismissal. As Art. 277(b) provides, "Any decision taken by the
employer shall be without prejudice to the right of the worker to contest the validity or
legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due
process is to overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of
Commerce of 1882 which gave either party to the employer-employee relationship the right
to terminate their relationship by giving notice to the other one month in advance. In lieu of
notice, an employee could be laid off by paying him a mesada equivalent to his salary for
one month.28 This provision was repealed by Art. 2270 of the Civil Code, which took effect
on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the
Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was
amended by R.A. No. 1787 providing for the giving of advance notice or the payment of
compensation at the rate of one-half month for every year of service.29
The Termination Pay Law was held not to be a substantive law but a regulatory measure, the
purpose of which was to give the employer the opportunity to find a replacement or
substitute, and the employee the equal opportunity to look for another job or source of
employment. Where the termination of employment was for a just cause, no notice was
required to be given to the, employee.30 It was only on September 4, 1981 that notice was
required to be given even where the dismissal or termination of an employee was for cause.
This was made in the rules issued by the then Minister of Labor and Employment to
implement B.P. Blg. 130 which amended the Labor Code. And it was still much later when
the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A.
No. 6715 on March 2, 1989. It cannot be that the former regime denied due process to the
employee. Otherwise, there should now likewise be a rule that, in case an employee leaves
his job without cause and without prior notice to his employer, his act should be void instead
of simply making him liable for damages.
The third reason why the notice requirement under Art. 283 can not be considered a
requirement of the Due Process Clause is that the employer cannot really be expected to be
entirely an impartial judge of his own cause. This is also the case in termination of
employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience
by the employee of the lawful orders of the employer, gross and habitual neglect of duties,
fraud or willful breach of trust of the employer, commission of crime against the employer or
the latter's immediate family or duly authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases
have been won by employees before the grievance committees manned by impartial judges
of the company." The grievance machinery is, however, different because it is established by
agreement of the employer and the employees and composed of representatives from both
sides. That is why, in Batangas Laguna Tayabas Bus Co. v. Court of Appeals,31 which Justice
Puno cites, it was held that "Since the right of [an employee] to his labor is in itself a
property and that the labor agreement between him and [his employer] is the law between
the parties, his summary and arbitrary dismissal amounted to deprivation of his property
without due process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery. Accordingly in
Montemayor v. Araneta University Foundation,32 although a professor was dismissed
without a hearing by his university, his dismissal for having made homosexual advances on
a student was sustained, it appearing that in the NLRC, the employee was fully heard in his
defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a
procedure to be followed before a right granted to a party can be exercised. Others are

simply an application of the Justinian precept, embodied in the Civil Code,33 to act with
justice, give everyone his due, and observe honesty and good faith toward one's fellowmen.
Such is the notice requirement in Arts. 282-283. The consequence of the failure either of the
employer or the employee to live up to this precept is to make him liable in damages, not to
render his act (dismissal or resignation, as the case may be) void. The measure of damages
is the amount of wages the employee should have received were it not for the termination of
his employment without prior notice. If warranted, nominal and moral damages may also be
awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to
comply with the notice requirement does not constitute a denial of due process but a mere
failure to observe a procedure for the termination of employment which makes the
termination of employment merely ineffectual. It is similar to the failure to observe the
provisions of Art. 1592, in relation to Art. 1191, of the Civil Code34 in rescinding a contract
for the sale of immovable property. Under these provisions, while the power of a party to
rescind a contract is implied in reciprocal obligations, nonetheless, in cases involving the
sale of immovable property, the vendor cannot exercise this power even though the vendee
defaults in the payment of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand.35 Consequently, a notice of rescission given in
the letter of an attorney has no legal effect, and the vendee can make payment even after
the due date since no valid notice of rescission has been given.36
Indeed, under the Labor Code, only the absence of a just cause for the termination of
employment can make the dismissal of an employee illegal. This is clear from Art. 279 which
provides:
Security of Tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.37
Thus, only if the termination of employment is not for any of the causes provided by law is it
illegal and, therefore, the employee should be reinstated and paid backwages. To contend,
as Justices Puno and Panganiban do, that even if the termination is for a just or authorized
cause the employee concerned should be reinstated and paid backwages would be to
amend Art. 279 by adding another ground for considering a dismissal illegal. What is more, it
would ignore the fact that under Art. 285, if it is the employee who fails to give a written
notice to the employer that he is leaving the service of the latter, at least one month in
advance, his failure to comply with the legal requirement does not result in making his
resignation void but only in making him liable for damages.38 This disparity in legal
treatment, which would result from the adoption of the theory of the minority cannot simply
be explained by invoking resident Ramon Magsaysay's motto that "he who has less in life
should have more in law." That would be a misapplication of this noble phrase originally from
Professor Thomas Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in support of his view that an
illegal dismissal results not only from want of legal cause but also from the failure to observe
"due process." The Pepsi-Cola case actually involved a dismissal for an alleged loss of trust
and confidence which, as found by the Court, was not proven. The dismissal was, therefore,
illegal, not because there was a denial of due process, but because the dismissal was
without cause. The statement that the failure of management to comply with the notice
requirement "taints the dismissal with illegality" was merely a dictum thrown in as additional
grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate sanction for the failure to give
notice is the payment of backwages for the period when the employee is considered not to
have been effectively dismissed or his employment terminated. The sanction is not the
payment alone of nominal damages as Justice Vitug contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal
The refusal to look beyond the validity of the initial action taken by the employer to
terminate employment either for an authorized or just cause can result in an injustice to the
employer. For not giving notice and hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt against the life of the employer, an
employer will be forced to keep in his employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force."40 But so does
it declare that it "recognizes the indispensable role of the private sector, encourages private

enterprise, and provides incentives to needed investment."41 The Constitution bids the
State to "afford full protection to labor."42 But it is equally true that "the law, in protecting
the right's of the laborer, authorizes neither oppression nor self-destruction of the
employer."43 And it is oppression to compel the employer to continue in employment one
who is guilty or to force the employer to remain in operation when it is not economically in
his interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the
termination of employment was due to an authorized cause, then the employee concerned
should not be ordered reinstated even though there is failure to comply with the 30-day
notice requirement. Instead, he must be granted separation pay in accordance with Art. 283,
to wit:
In case of termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one month for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six months shall be
considered one (1) whole year.
If the employee's separation is without cause, instead of being given separation pay, he
should be reinstated. In either case, whether he is reinstated or only granted separation pay,
he should be paid full backwages if he has been laid off without written notice at least 30
days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the
employee was dismissed for any of the just causes mentioned in said Art. 282, then, in
accordance with that article, he should not be reinstated. However, he must be paid
backwages from the time his employment was terminated until it is determined that the
termination of employment is for a just cause because the failure to hear him before he is
dismissed renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations
Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to
pay petitioner separation pay equivalent to one (1) month pay for every year of service, his
unpaid salary, and his proportionate 13th month pay and, in addition, full backwages from
the time his employment was terminated on October 11, 1991 up to the time the decision
herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for
computation of the separation pay, backwages, and other monetary awards to petitioner.
SO ORDERED.
[G.R. No. 157611. August 9, 2005]
ALABANG COUNTRY CLUB INC., ROBERTO ANONAS, CATALINO SANTOS, ERNESTO
CAYETANO and ROGELIO MANALO, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION, ALABANG COUNTRY CLUB INDEPENDENT EMPLOYEES UNION,
MARILOU ABADIANO, ERNESTO BANAL, BENEDICTO CATALAN, ABNER CAVESTANY,
ROMULO DALAYGON, ELENA DELA CRUZ, RONALDO IBARRA, MA. ISABELITA
PIZARRO, FELIX ARISME, EDILBERTO BANTILLES, BERNARDO DE CHAVEZ,
MEDARDO ENRIQUEZ, ERNESTO DEREZA, DOMINGO IBALLAR, GINA DUMALAON,
JOSE MASAGCA, MARIO FRANCHE, SHARON DANTES-PLATERO, ANNALISSA GARCIA,
JULIET TENORIO, ROLANDO GANNABAN, EMERSON ARGOSO, ANICETO GLEAN,
FELIPE CADENA, PERLITA HENARES, JOSEPH TAYONG, JAIME HIDALGO, ROSANNA
ROSARIAL, LEODEGARIO HUMIRANG, EFREN ABIADA, FILIPINO DIZON, ELPIDIO
IBUOS, JR., ROBERTO LANON, ARNOLD LAYUG, JOEL LINAOGO, EDUARDO LLENAS,
JOSELITO LORINO, FERDINAND MABITASAN, GEORGE MARASIGAN, PERLA MARGES,
CYNTHIA MATHAY, WERLITO NAVARRO, CRISTINA OLEGARIO, CRISTINA OMAYAO,
NENEN ORTIGOZA, ELEONOR PALIMA, MARIA PANTALITA, EDUARDO PERALTA,
RICHARD PEREZ, JOVITO PIDLAOAN, PACITA PILONGO, BENJAMIN PINTOR, NARCISO
QUIZANA, AGRIFINO REYES, DENNIS REYES, EDUARDO RUBINA, ARISTEO SANTOS,
ROBERTO SOLANTE, ARMANDO SUAREZ, DOLORES VALIENTE, REMEDIOS UMALI,
INGERSOL POMIDA, and FLORO MACABIT, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner Alabang Country Club Inc. (ACCI), a stock, non-profit corporation that operates and
maintains a country club and various sports and recreational facilities for the exclusive use

of its members, seeks to set aside the appellate courts Decision[1] of August 14, 2002 as
well as its Resolution[2] of March 6, 2003 denying petitioners motion for reconsideration.
The appellate court reversed and set aside the National Labor Relation Commissions (NLRC)
Decision[3] of March 15, 2002, and ordered the reinstatement of herein sixty-three (63)
respondents-members of a duly registered labor organization - Alabang Country Club
Independent Employees Union (the Union), without loss of seniority rights and other
privileges, and the payment of their full backwages including attorneys fees.
Sometime in 1993, Francisco Ferrer, then President of ACCI, requested its Internal Auditor,
Irene Campos-Ugalde, to conduct a study on the profitability of ACCIs Food and Beverage
Department (F & B Department).[4] Ugalde made use of the audited figures in the financial
statements[5] prepared by Sycip Gorres Velayo & Co. (SGV&Co.) for the years 1989-1993 in
reflecting the total revenue and costs and expenses of the F & B Department. However,
while SGV&Co. deducted the entire undistributed operating costs and expenses consisting of
general and maintenance costs from the total income of ACCI,[6] Ugalde allocated a
percentage of these expenses and charged the same against the total revenue of the F & B
Department.[7] Consequently, her report showed that from1989 to 1993, F & B Department
had been incurring substantial losses in the aggregate amount of Eight Million Seven
Hundred Twenty-Seven Thousand One Hundred Thirty-Five Pesos (P8,727,135.00).[8] Her
report further showed that:
1. It was only in 1993 when the losses dropped as compared to the 1992 figures. This was
the result of an effective joint management employee undertaking in 1993 towards costcutting and efficient resource administration; and
2. The endeavor succeeded only in reducing losses but not totally raising the figures upward
to at least a break-even level;
3. ACCI can generate income from F & B Department if its operation will be transferred to a
concessionaire;
4. Actual breakages alone w[ere] approximately P298,000 [from] January 1, 1994 to May 15,
1994 or an average of P60,000 a month.[9]
Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the
management decided to cease from operating the department and to open the same to a
contractor, such as a concessionaire, which would be willing to operate its own food and
beverage business within the club.[10]
ACCIs Labor Committee Chairman Catalino Santos thus met on November 11, 1994 with the
Union officers and members and discussed the financial standing of the F & B Department.
[11]
ACCI subsequently entered on December 1, 1994 into an agreement with La Tasca
Restaurant Inc. (La Tasca), for it to operate the F & B Department.[12] Under the agreement,
La Tasca would pay ACCI fifteen (15%) percent of its gross sales net of sales tax plus the
expenses for light and water in the amount of five (5%) percent of monthly gross sales net of
sales tax.[13]
Also on December 1, 1994, ACCI sent its F & B Department employees individual letters
informing them that their services were being terminated effective January 1, 1995;[14] and
that they would be paid separation pay equivalent to one hundred twenty five (125%)
percent of their monthly salary for every year of service.[15] ACCI also informed them that
La Tasca agreed to absorb all affected employees immediately with the status of regular
employees without need of undergoing a probationary period, and that all affected
employees would receive the same salary they were receiving from ACCI at the time of their
termination.[16]
On December 11, 1994, the Union, with the authority of individual respondents, filed before
the NLRC a complaint for illegal dismissal, unfair labor practice, regularization and damages
with prayer for the issuance of a writ of preliminary injunction against ACCI.[17]
The Union then filed a notice of strike.[18] ACCI, finding that the requirements under the
Labor Code had not been complied with, suspended on December 28, 1994 those who
participated in the strike.[19]
The Union averred, however, that no strike was actually held and that it was caught by
surprise when, upon reporting for work on December 28, 1994, employees of La Tasca
brought their equipment and took over the posts held by most of [the individual
respondents].[20]

As scheduled, ACCI ceased operating its F & B Department by January 1, 1995 as La Tasca
began operating its own F & B business at the Alabang Country Club.
Meanwhile, in the proceedings before the Labor Arbiter, respondent union and individual
respondents informed that the F & B Division had been reporting gaining profits as shown by
the Statement of Income and Deficit prepared by SGV&Co.[21] They thus argued that
compliance with the standards for losses in Lopez Sugar Corporation v. Federation of Free
Workers[22] to justify their retrenchment were not met by ACCI.
ACCI averred, however, that it may exercise management prerogatives to adopt a costsaving and cost-consciousness program to improve efficiency in its operations,[23] prevent
losses, and concentrate on core businesses,[24] and to lay-off workers and contract out their
jobs.[25]
During the pendency of the complaint for illegal dismissal before the Labor Arbiter, fortyseven (47) of the individual respondents accepted separation benefits from ACCI at 125% of
their monthly salary for every year of service, on account of which they executed Waivers
and Quitclaims in favor of ACCI: Marilou Abadiano, Ernesto Banal, Benedicto Catalan, Abner
Cavestany, Romulo Dalaygon, Elena dela Cruz, Ernesto Dereza, Gina Dumalaon, Mario
Franche, Annalissa Garcia, Rolando Gannaban, Aniceto Glean, Perlita Henares, Jaime Hidalgo,
Leodegario Humirang, Elpidio Ibuos, Jr., Roberto Lanon, Arnold Layug, Joel Linaogo, Eduardo
Llenas, Joselito Lorino, Ferdinand Mabitasan, George Marasigan, Perla Marges, Cynthis
Mathay, Werlito Navarro, Cristina Olegario, Cristina Omayao, Nenen Ortigoza, Eleonor
Palima, Maria Pantalita, Eduardo Peralta, Richard Perez, Jovito Pidlaoan, Pacita Pilongo,
Benjamin Pintor, Narciso Quizana, Agrifino Reyes, Dennis Reyes, Eduardo Rubina, Aristeo
Santos, Roberto Solante, Armando Suarez, Dolores Valiente, Remedios Umali, Ingersol
Pomida and Floro Macabit.[26]
By decision of April 30, 1999, the Labor Arbiter dismissed the complaint for illegal dismissal
on the ground that a business entity has the right to reduce its work force if necessitated by
compelling economic factors which endanger its existence or stability.[27] The Labor Arbiter
in fact found that the study made by Ugalde which was a more detailed version of the
financial statements prepared by SGV&Co. clearly established that the F & B Department
was incurring losses, thus justifying ACCI to exercise its inherent prerogative to retrench its
workers to prevent further losses.[28]
On appeal, the NLRC acknowledged the right of ACCI to regulate, according to its own
discretion and judgment, all aspects of employment including the lay-off of workers because
of losses in the operation of its business, lack of work and considerable reduction in the
volume of business.[29] It thus dismissed the appeal.
Private respondents motion for reconsideration of the NLRCs dismissal of the appeal was
denied by Resolution[30] of April 28, 2000.
Private respondents thereupon brought their case, via petition for certiorari,[31] before the
Court of Appeals, alleging that the Labor Arbiter and the NLRC committed grave abuse of
discretion and utter ignorance of the law in completely disregarding the audited financial
statements prepared by SGV&Co. showing that ACCIs F & B Department had been
consistently earning profits.[32]
During the pendency of the petition before the appellate court, fifteen (15) of the individual
respondents received their separation package equivalent to 125% of their monthly salary
for every year of service, on account of which they executed Waivers and Quitclaims in favor
of ACCI: Ronaldo Ibarra, Ma. Isabelita Pizarro, Felix Arisme, Edilberto Bantilles, Bernardo de
Chavez, Medardo Enriquez, Domingo Iballar, Jose Masagca, Sharon Dantes-Platero, Juliet
Tenorio, Emerson Argoso, Felipe Cadena, Joseph Tayong, Rosanna Rosarial, and Efren Abadia.
[33]
By decision of August 14, 2002, the Court of Appeals reversed those of the NLRC and the
Labor Arbiter. It held that due to ACCIs failure to prove by sufficient and competent evidence
that its alleged losses were substantial, continuing and without any immediate prospect of
abating them, the bona fide nature of the retrenchment appeared doubtful.[34] Passing on
ACCIs financial status, the appellate court, citing Bogo-Medellin Sugarcane Planters
Association, Inc. v. NLRC[35] and Dela Salle University v. Dela Salle University Employees
Association,[36] held that financial statements audited by independent external auditors,
and not a mere study report of an internal auditor of a company, constitute the normal
method of proof of the profit and loss of the company.[37]
ACCIs motion for reconsideration[38] having been denied by the appellate court by
Resolution[39] of March 6, 2003, it comes before this Court via petition for review on
certiorari, advancing the following arguments:

A.
CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE, THE COURT OF APPEALS GRAVELY
DISREGARDED THE CLUBS RIGHT TO TERMINATE ITS EMPLOYEES FOR AN AUTHORIZED
CAUSE, PARTICULARLY TO SECURE ITS CONTINUED VIABILITY AND EXISTENCE.
B.
CONSISTENT WITH ESTABLISHED LAW AND JURISPRUDENCE, INASMUCH AS BOTH FINDINGS
OF PUBLIC RESPONDENT NLRC AND THE LABOR ARBITER A QUO THAT THE CLUBS F & B
EMPLOYEES WERE VALIDLY TERMINATED, ARE SUPPORTED BY AUDITED FINANCIAL
STATEMENTS AND OTHER SUBSTANTIAL EVIDENCE, THE PETITION BELOW SHOULD HAVE
BEEN DISMISSED.
C.
THE ORDER FOR REINSTATEMENT, PAYMENT OF BACKWAGES, AND THE AWARD OF
ATTORNEYS FEES ARE NOT PROPER SINCE RESPONDENTS WERE TERMINATED FOR AN
AUTHORIZED CAUSE AND AFTER COMPLIANCE WITH DUE PROCESS.
D.
THE COURT OF APPEALS SHOULD HAVE RECOGNIZED THAT SIXTY-TWO OUT OF THE SIXTY
THREE PETITIONERS INDICATED IN THE PETITION BELOW HAVE ALREADY ACKNOWLEDGED
RECEIPT OF THE MONETARY AWARD AFFIRMED IN THE COMISSIONS DECISION DATED 15
MARCH 2000 IN FULL SATISFACTION THEREOF.[40]
The petition is impressed with merit.
ACCI, hereinafter referred to as petitioner, justifies the closure of its F & B Department based
on business losses incurred for the past years as reflected in its letter to its employees dated
December 1, 1994, to wit:
As you probably have known, our Food and Beverage Division has been losing for the past
several years. Your management tried to remedy the situation through changes and
innovations but to no avail. This being so and to prevent further losses, management has
deemed it necessary to concessionize (sic) our Food and Beverage operations. Since La
Tasca won in the bidding and pursuant to our agreement with the same, La Tasca shall,
effective January 1, 1995, be operating all our Food and Beverage outlets. As a consequence
thereof, please be informed that effective January 1, 1995, your services shall be terminated
as effective said date ACCI shall cease to operate all Food and Beverage outlets. x x x[41]
(Underscoring supplied).
In Lopez Sugar Corporation v. Federation of Free Workers[42] cited by respondents, this
Court held that retrenchment on the ground of serious business losses is allowed subject to
the conditions that (1) the losses expected should be substantial and not merely de minimis
in extent; (2) the substantial losses apprehended must be reasonably imminent as such
imminence can be perceived objectively in good faith by the employer; (3) retrenchment
must be reasonably necessary and likely to effectively prevent the expected losses; and (4)
the alleged losses, if already realized and the expected imminent losses sought to be
forestalled, must be proven by sufficient and convincing evidence.[43]
This Court, however, views the case as one involving closure of a business undertaking, not
retrenchment. While retrenchment and closure of a business establishment or undertaking
are often used interchangeably and are interrelated, they are actually two separate and
independent authorized causes for termination of employment.[44]
Retrenchment is the reduction of personnel for the purpose of cutting down on costs of
operations in terms of salaries and wages[45] resorted to by an employer because of losses
in operation of a business occasioned by lack of work and considerable reduction in the
volume of business.[46]
Closure of a business or undertaking due to business losses is the reversal of fortune of the
employer whereby there is a complete cessation of business operations to prevent further
financial drain upon an employer who cannot pay anymore his employees since business has
already stopped.[47]
One of the prerogatives of management is the decision to close the entire establishment or
to close or abolish a department or section thereof for economic reasons, such as to
minimize expenses and reduce capitalization.[48]

While the Labor Code provides for the payment of separation package in case of
retrenchment to prevent losses, it does not obligate the employer for the payment thereof if
there is closure of business due to serious losses.[49]
In the present case, when petitioner decided to cease operating its F & B Department and
open the same to a concessionaire, it did not reduce the number of personnel assigned
thereat. It terminated the employment of all personnel assigned at the department.
As in the case of retrenchment, however, for the closure of a business or a department due
to serious business losses to be regarded as an authorized cause for terminating employees,
it must be proven that the losses incurred are substantial and actual or reasonably
imminent; that the same increased through a period of time; and that the condition of the
company is not likely to improve in the near future.[50]
As did the appellate court, this Court finds that the study report submitted by the internal
auditor of petitioner, the only evidence submitted to prove its alleged losses, is selfserving[51] and falls short of the stringent requirement of the law that the employer prove
sufficiently and convincingly its allegation of substantial losses.
In contrast, part of the evidence presented by respondents are audited financial statements
prepared by SGV&Co. for 1989 to 1993 which show a positive net income for the F & B
Department ranging from P959,533 - P2,911,810 and, except for the year 1992, marked
increases in annual net income per year.[52] Moreover, for the year 1994, its last year of
operation, the F & B Department posted an annual net income of P1,562,385.[53]
In claiming that the F & B Department had been losing, petitioners internal auditor deducted
from the departments annual income the undistributed operating costs and expenses.
However, the study report failed to provide the necessary details on how the undistributed
operating costs and expenses charged to the F & B Department was arrived at, including the
basis, for example, of allocating association dues and real estate tax directly to the F & B
Department as expenses.
Petitioners failure to prove that the closure of its F & B Department was due to substantial
losses notwithstanding, this Court finds that individual respondents were dismissed on the
ground of closure or cessation of an undertaking not due to serious business losses or
financial reverses, which is allowed under Article 283 of the Labor Code:
Art. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of the establishment
or undertaking unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the worker and the Ministry of Labor and Employment at
least one (1) month before its intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closures or cessation of operations of the establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half () month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year. (Emphasis in
the original)
The closure of operation of an establishment or undertaking not due to serious business
losses or financial reverses includes both the complete cessation of operations and the
cessation of only part of a companys activities.[54]
For any bona fide reason, an employer can lawfully close shop anytime. Just as no law forces
anyone to go into business, no law can compel anybody to continue the same.[55] It would
be stretching the intent and spirit of the law if a court interferes with managements
prerogative to close or cease its business operations just because the business is not
suffering from any loss or because of the desire to provide the workers continued
employment.[56]
While petitioner did not sufficiently establish substantial losses to justify closure of its F & B
Department on this ground, there is basis for its claim that the continued maintenance of
said department had become more expensive through the years. An evaluation of the
financial figures appearing in the audited financial statements prepared by the SGV&Co.
shows that ninety one to ninety six (91% - 96%) percent of the actual revenues earned by
the F & B Department comprised the costs and expenses in maintaining the department.[57]

Petitioners decision to place its F & B operations under a concessionaire must then be
respected, absent a showing of bad faith on its part.
In fine, managements exercise of its prerogative to close a section, branch, department,
plant or shop[58] will be upheld as long as it is done in good faith to advance the employers
interest and not for the purpose of defeating or circumventing the rights of employees under
the law or a valid agreement.[59]
While the closure of F & B Department is found to be justified, petitioner is, under the abovequoted provision of Art. 283 of the Labor Code, mandated to pay separation pay computed
from the time individual respondents commenced their employment until the time the
department ceased operations, in an amount equivalent to one (1) month pay or at least
one-half () month pay for every year of service, whichever is higher. In petitioners case, it in
fact voluntarily doled out to some of individual respondents separation pay equivalent to
one month and a quarter (1) for every year of service, a fraction of a year being considered
as one year.[60]
Respondents not having been illegally dismissed, they are not entitled to backwages.
By petitioners information, it had paid, during the pendency of the case, the separation
package of sixty-two (62) of the sixty-three (63) individual respondents on account of which
they executed Releases, Waivers and Quitclaims in its favor.[61]
A waiver or quitclaim is a valid and binding agreement between the parties, provided that it
constitutes a credible and reasonable settlement and the one accomplishing it has done so
voluntarily and with a full understanding of its import.[62] As the waivers and quitclaims
executed by individual respondents who had been given their separation pay were duly
notarized, the certificate of acknowledgement in each of them serves as prima facie
evidence of their due execution.[63] Not one of individual respondents who executed the
waivers or quitclaims has come forward to challenge the reasonableness of the settlement
and/or voluntariness of the execution of the documents.
WHEREFORE, the petition is hereby GRANTED. The assailed Decision of August 14, 2002 and
the Resolution of March 6, 2003 of the Court of Appeals are hereby REVERSED and SET
ASIDE.
Petitioner, Alabang Country Club, Inc., is hereby ORDERED to pay the remaining individual
respondent, Filipino Dizon, who does not appear to have received separation package
equivalent to one month and a quarter (1) for every year of service, as agreed upon by
petitioner.
SO ORDERED.
G.R. Nos. 75700-01
August 30, 1990
LOPEZ SUGAR CORPORATION, petitioner,
vs.
FEDERATION OF FREE WORKERS, PHILIPPINE LABOR UNION ASSOCIATION (PLUANACUSIP) and NATIONAL LABOR RELATIONS COMMISSION, respondents.
Sicangco, Diaz, Ortiz and Lapak for petitioner.
Reynaldo J. Gulmatico for private respondents.
FELICIANO, J.:
In this Petition, petitioner Lopez Sugar Corporation seeks reversal of the Decision dated 2
July 1986 of public respondent National labor Relations Commission ("NLRC") which affirmed
the decision of the Labor Arbiter dated 30 September 1983. The Labor Arbiter (a) had denied
petitioner's application to retrench some of its employees and (b) had ordered the
reinstatement of twenty-seven (27) employees and to pay them full backwages from the
time of termination until actual reinstatement.
Petitioner, allegedly to prevent losses due to major economic problems, and exercising its
privilege under Article XI, Section 2 of its 1975-1977 Collective Bargaining Agreement
("CBA") entered into between petitioner and private respondent Philippine Labor Union
Association ("PLUA-NACUSIP"), caused the retrenchment and retirement of a number of its
employees.
Thus, on 3 January 1980, petitioner filed with the Bacolod District Office of the then Ministry
of Labor and Employment ("MOLE") a combined report on retirement and application for
clearance to retrench, dated 28 December 1979, 1 affecting eighty six (86) of its employees.
This was docketed as NLRC Case Ne. A-217-80. Of these eighty-six (86) employees, fifty-nine

(59) were retired effective 1 January 1980 and twenty-eight (27) were to be retrenched
effective 16 January 1980 "in order to prevent losses."
Also, on 3 January 1980, private respondent Federation of Free Workers ("FFW"), as the
certified bargaining agent of the rank-and-file employees of petitioner, filed with the Bacolod
District Office of the MOLE a complaint dated 27 December 1979 for unfair labor practices
and recovery of union dues docketed as NLRC Case No. A-198-80. In said complainant, FFW
claimed that the terminations undertaken by petitioner were violative of the security of
tenure of its members and were intended to "bust" the union and hence constituted an
unfair labor practice. FFW claimed that after the termination of the services of its members,
petitioner advised 110 casuals to report to its personnel office. FFW further argued that to
justify retrenchment, serious business reverses must be "actual, real and amply supported
by sufficient and convincing evidence." FFW prayed for reinstatement of its members who
had been retired or retrenched.
Petitioner denied having hired casuals to replace those it had retired or retrenched. It
explained that the announcement calling for 110 workers to report to its personnel office
was only for the purpose of organizing a pool of extra workers which could be tapped
whenever there were temporary vacancies by reason of leaves of absence of regular
workers.
On 22 January 1980, another report on retirement affecting an additional twenty-five (25)
employees effective 1 February 1980 was filed by petitioner. 2
On 3 March 1980, petitioner filed its Position Paper in NLRC Case No. A-217-80 contending
that certain economic factors jeopardizing its very existence rendered the dismissals
necessary. Petitioner explained:
As a business firm, the Applicant must earn [a] fair return of (sic) its investment. Its income
is generated from the sales of the Central's shares of sugar and molasses production. It has
however no control of the selling price of both products. It is of common knowledge that for
the past years the price of sugar has been very low. In order to survive, the Applicant has
effected several forms of cost reduction. Now that there is hope in the price of sugar the
applicant is again faced with two major economic problems, i.e., the stoppage of its railway
operation and the spiralling cost of production.
The Applicant was forced to stop its railway operation because the owners of the land upon
which the Applicant's railway lines traverse are no longer willing to allow the Applicant to
make further use of portions of their lands. . . .
The other economic problem that confronted the Applicant is the rising cost of labor,
materials, supplies, equipment, etc. These two major economic problems the rising cost of
production and the stoppage of its railway facilities, put together pose a very serious threat
against the economic survival of the Applicant. In view of this, the Applicant was constrained
to touch on the last phase of its cost reduction program which is the reduction of its
workforce.
xxx

xxx

xxx

The Applicant as a business proposition must be allowed to earn income in order to survive.
This is the essence of private enterprise. Being plagued with two major economic problems,
the applicant is not expected to remain immobile. It has to react accordingly. As many other
business firms have resorted to reduction of force in view of the present economic crisis
obtaining here and abroad, the applicant was likewise compelled to do the same as a last
alternative remedy for survival. 3
In a decision dated 30 September 1983, 4 the Labor Arbiter denied petitioner's application
for clearance to retrench its employees on the ground that for retrenchment to be valid, the
employer's losses must be serious, actual and real and must be amply supported by
sufficient and convincing evidence. The application to retire was also denied on the ground
that petitioner's prerogative to so retire its employees was granted by the 1975-77 collective
bargaining agreement which agreement had long ago expired. Petitioner was, therefore,
ordered to reinstate twenty-seven retired or retrenched employees represented by private
respondent Philippine Labor Union Association ("PLUA") and FFW and to pay them full
backwages from the time of termination until actual reinstatement.
Both dissatisfied with the Labor Arbiter's decision, petitioner and respondent FFW appealed
the case to public respondent NLRC. On appeal, the NLRC, finding no justifiable reason for
disturbing the decision of the Labor Arbiter, affirmed that decision on 2 July 1986. 5
Hence, this Petition for certiorari making the following arguments:

1.
That portions of the decision of public respondent NLRC dated July 2, 1986 affirming
the decision of Labor Arbiter Ethelwoldo Ovejera dated September 30, 1983 are contrary to
law and jurisprudence;
2.
That said decision subject of this petition are in some respects not supported by
evidence and self-contradictory;
3.
That said decision subject of this petition were rendered with grave abuse of
discretion and in excess of jurisdiction;
4.
That the dismissals at bar are valid and based on justifiable
grounds. 6
Petitioner contends that the NLRC acted with grave abuse of discretion in denying its
combined report on retirement and application for clearance to retrench. Petitioner argues
that under the law, it has the right to reduce its workforce if made necessary by economic
factors which would endanger its existence, and that for retrenchment to be valid, it is not
necessary that losses be actually sustained. The existence of valid grounds to anticipate or
expect losses would be sufficient justification to enable the employer to take the necessary
actions to prevent any threat to its survival.
Upon the other hand the Solicitor General argued that the Decision rendered by the Labor
Arbiter and affirmed by the NLRC is supported by substantial evidence on record; that,
therefore, no grave abuse of discretion was committed by public respondent NLRC when it
rendered that Decision.
Article 283 of the Labor Code provides:
Article 283. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of cricumventing
the provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employer at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a se pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases, of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis supplied)
In ts ordinary connotation, he phrase "to revent losses" means hat retrenchment or
termination of the services of some employees is authorized to be undertaken by the
employer sometime before the losses anticipated are actually sustained or realized. It is not,
in other words, the intention of the lawmaker to compel the employer to stay his hand and
keep all his employees until sometime after losses shall have in fact materialized ; 7 if such
an intent were expressly written into the law, that law may well be vulnerable to
constitutional attack as taking property from one man to give to another. This is simple
enough.
At the other end of the spectrum, it seems equally clear that not every asserted possibility
of loss is sufficient legal warrant for reduction of personnel. In the nature of things, the
possibility of incurring losses is constantly present, in greater or lesser degree, in the
carrying on of business operations, since some, indeed many, of the factors which impact
upon the profitability or viability of such operations may be substantially outside the control
of the employer. Thus, the difficult question is determination of when, or under what
circumstances, the employer becomes legally privileged to retrench and reduce the number
of his employees.
We consider it may be useful to sketch the general standards in terms of which the acts of
petitioner employer must be appraised. Firstly, the losses expected should be substantial
and not merely de minimis in extent. If the loss purportedly sought to be forestalled by
retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona
fide nature of the retrenchment would appear to be seriously in question. Secondly, the
substantial loss apprehended must be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all a drastic recourse with
serious consequences for the livelihood of the employees retired or otherwise laid-off.

Because of the consequential nature of retrenchment, it must, thirdly, be reasonably

necessary and likely to effectively prevent the expected losses. The employer should have
taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other
costs than labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or so-called
"golden parachutes", can scarcely claim to be retrenching in good faith to avoid losses. To
impart operational meaning to the constitutional policy of providing "full protection" to labor,
the employer's prerogative to bring down labor costs by retrenching must be exercised
essentially as a measure of last resort, after less drastic means e.g., reduction of both
management and rank-and-file bonuses and salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising costs, etc. have been
tried and found wanting.
Lastly, but certainly not the least important, alleged if already realized, and the expected
imminent losses sought to be forestalled, must be proved by sufficient and convincing
evidence. The reason for requiring this quantum of proof is readily apparent: any less
exacting standard of proof would render too easy the abuse of this ground for termination of
services of employees. In Garcia v. National Labor Relations Commissions, 8 the Court said:
. . . But it is essentially required that the alleged losses in business operations must be
prove[n] (National Federation of Labor Unions [NAFLU] vs. Ople, 143 SCRA 124 [1986]).
Otherwise, said ground for termination would be susceptible to abuse by scheming
employers who might be merely feigning business losses or reverses in their business
ventures in order to ease out employees. (Emphasis supplied) 9
Whether or not an employer would imminently suffer serious or substantial losses for
economic reasons is essentially a question of fact for the Labor Arbiter and the NLRC to
determine. In the instant case, the Labor Arbiter found no sufficient and convincing evidence
to sustain petitioner's essential contention that it was acting in order to prevent substantial
and serious losses. The Labor Arbiter said:
There is no question that an employer may reduce its work force to prevent losses, however,
these losses must be serious, actual and real. In the instant case, even assuming arguendo
that applicant company was, in fact, surrounded by the major economic problems stated
earlier, the question may be asked will it suffer serious losses as a result of the said
economic problems? We find the answer to be negative. We have scanned the records but
failed to find evidence submitted to show that applicant company would suffer serious
business losses or reverses as a consequence of the alleged major economic problems. In
fact, applicant company asseverated that these problems only threatens its survival, hence,
it had to reduce its work force. Another thing, while applicant company was retrenching its
regular employees, it also hired the services of casuals. This militated its claim to reduce its
work force to set up cost reduction. It must be stated that settled is the rule that serious
business losses or reverses must be actual, real and amply supported by sufficient and
convincing evidence. 10 (Emphasis supplied)
We are in principle bound by such findings in accordance with well-established jurisprudence
that the factual findings of labor administrative officials, if supported by substantial
evidence, are entitled not only to great respect but even to finality, 11 unless, indeed,
petitioner is able to show that the Labor Arbiter and the NLRC simply and arbitrarily
disregarded evidence before them or had misapprehended evidence of such a nature as to
compel a contrary conclusion if properly appreciated.
The submissions made by petitioner in this respect are basically that from the crop year
1975-1976 to the crop year 1980-981, the amount of cane deliveries made to petitioner
Central was declining and that the degree of utilization of the mill's capacity and the sugar
recovery from the cane actually processed, were similarly declining. 12 Petitioner also
argued that the competition among the existing sugar mills for the limited supply of sugar
cane was lively and that such competition resulted in petitioner having to close
approximately thirty-eight (38) of its railroad lines by the end of 1979. 13 According to the
petitioner, the cost of producing one (1) picul of sugar during the same period (i.e., from
crop year 1976-1977 to crop year 1979-1980) increased from P69.97 to P93.11.
The principal difficulty with petitioner's case as above presented was that no proof of actual
declining gross and net revenues was submitted. No audited financial statements showing
the financial condition of petitioner corporation during the above mentioned crop years were
submitted. Since financial statements audited by independent external auditors constitute
the normal method of proof of the profit and loss performance of a company, it is not easy to
understand why petitioner should have failed to submit such financial statements.
Moreover, while petitioner made passing reference to cost reduction measures it had
allegedly undertaken, it was, once more, a fairly conspicuous failure to specify the cost-

reduction measures actually undertaken in good faith before resorting to retrenchment.

Upon the other hand, it appears from the record that petitioner, after reducing its work force,
advised 110 casual workers to register with the company personnel officer as extra workers.
Petitioner, as earlier noted, argued that it did not actually hire casual workers but that it
merely organize(d] a pool of "extra workers" from which workers could be drawn whenever
vacancies occurred by reason of regular workers going on leave of absence. Both the Labor
Arbiter and the NLRC did not accord much credit to petitioner's explanation but petitioner
has not shown that the Labor Arbiter and the NLRC were merely being arbitrary and
capricious in their evaluation. We note also that petitioner did not claim that the retrenched
and retired employees were brought into the "pool of extra workers" rather than new casual
workers.
Petitioner next contends that the NLRC committed grave abuse of discretion in affirming the
ruling of the Labor Arbiter that the retirements effected by petitioner were na valid since the
basis therefor, i.e. Article XI Section 2 of the 1975-1977 CBA, had by then already expired
and was thus no longer enforceable or operative. 14 Article XI, 2 of the CBA provides:
2.
Section 2. Any employee may apply for after having rendered the of at least
eighteen (18) year of service to the COMPANY. The COMPANY, as a right , may retire any
employee who has rendered twenty (20) years of service, or has reached the age of sixty
(60) years. Employees who are physically incapacitated to continue to work in the COMPANY
upon certification of the COMPANY Physician, shall be entitled to a separation pay equivalent
to the retirement benefits herein provided for that may have accrued. The heirs or surviving
legally married spouse of the deceased employee shall be granted by the COMPANY the
amount equivalent to the accrued retirement benefit of the deceased employee at the time
of his death." 15 (Emphasis supplied)
Petitioner argues that the CBA was "extended" not merely by implication, but by reciprocal
acts in the sense that even after the CBA had expired, petitioner continued to give, and
the workers continued to receive, the benefits and exercise the prerogatives provided
therein. Under these circumstances, petitioner urges, the employees are estopped from
denying the extended effectivity of the CBA.
The Solicitor General, as well as private respondents, argue basically that petitioner's right
to retire its employees was coterminous with the life of the CBA.
On this point, we must find for petitioner. Although the CBA expired on 31 December 1977, it
continued to have legal effects as between the parties until a new CBA had been negotiated
and entered into. This proposition finds legal support in Article 253 of the Labor Code, which
provides:
Article 253 Duty to bargain collectively when there exists a collective bargaining
agreement. When there is a collective bargaining agreement, the duty to bargain
collectively shall also mean that neither party shall terminate nor modify such agreement
during its lifetime. However, either party can serve a written notice to terminate or modify
the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both
parties to keep the status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period and/or until a new agreement
is reached by the parties. (Emphasis supplied)
Accordingly, in the instant case, despite the lapse of the formal effectivity of the CBA by
virtue of its own provisions, the law considered the same as continuing in force and effect
until a new CBA shall have been validly executed. Hence, petitioner acted within legal
bounds when it decided to retire several employees in accordance with the CBA. That the
employees themselves similarly acted in accordance with the CBA is plain from the record.
Even after the expiration of the CBA, petitioner's employees continued to receive the
benefits and enjoy the privileges granted therein. They continued to avail of vacation and
sick leaves as computed in accordance with Articles VII and VIII of the CBA. They also
continued to avail of medical and dental aid under Article IX, death aid and bereavement
leave under Articles X and XIV, insurance coverage under Article XVI and housing allowance
under Article XVIII. Seventeen (17) employees even availed of Section XI (dealing with
retirement) when they voluntarily retired between 1 January 1978 and 31 December 1980
and received retirement pay computed on the basis of Section 3 of the same article. If the
workers chose to avail of the CBA despite its expiration, equity if not the law-dictates that
the employer should likewise be able to invoke the CBA.
The fact that several workers signed quitclaims will not by itself bar them from joining in the
complaint. Quitclaims executed by laborers are commonly frowned upon as contrary to
public policy and ineffective to bar claims for the full measure of the worker's legal rights. In
AFP Mutual Benefit Association, Inc. v. AFP-MBAI-EU, 16 the Court held:

In labor jurisprudence, it is well establish that quitclaims and/or complete releases executed
by the employees do not estop them from pursuing their claims arising from the unfair labor
practice of the employer. The basic reason for this is that such quitclaimants and/or
complete releases are against public policy and, therefore, null and void. The acceptance of
termination pay does not divest a laborer of the right to prosecute his employer for unfair
labor practice acts. (Cario vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 183;
Philippine Sugar Institute vs. CIR, L-13475, September 29, 1960, 109 Phil. 452; Mercury Drug
Co. vs. CIR, L-23357, April 30, 1974, 56 SCRA 694, 704)
In the Cario case, supra, the Supreme Court, speaking thru Justice Sanchez, said:
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer
and employee, obviously, do not stand on the same footing The employer drove the
employee to the wall. The latter must have to get hold of money. Because, out of job, he had
to face the harsh necessities of life. He thus found himself in no position to resist money
proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that
petitioners did not relent their claim. They pressed it. They are deemed not to have waived
any of their rights. Renuntiatio non praesumitur (Emphasis supplied)
We conclude that because the attempted retrenchment on the part of the petitioner was
legally ineffective, all retrenched employees should be reinstated and backwages paid them
corresponding to a period of three (3) years without qualification or deduction, in accordance
with the three-year rule laid down in a long line of cases. 17 In the case of employees who
had received payments for which they had executed quitclaims, the amount of such
payments shall be deducted from the backwages due to them. Where reinstatement is no
longer possible because the positions they had previously filled are no longer in existence,
petitioner shall pay backwages plus, in lieu of reinstatement, separation pay in the amount
of one-month's pay for every year of service including the three (3) year-period of putative
service for which backwages will be paid. Upon the other hand, we find valid the retirement
of those employees who were retired by petitioner pursuant to the applicable provisions of
the CBA.
WHEREFORE, the Petition for Certiorari is partially GRANTED due course and the Decision
dated 2 July 1986 of the public respondent NLRC is hereby MODIFIED to the extent that it
had affirmed that portion of the Decision of the Labor Arbiter dated 30 September 1983
ordering the reinstatement judgment of employees who had been retired by petitioner under
the applicable provisions of the CBA. Except as so modified, the Decision of the NLRC is
hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 121314
February 12, 1998
EDGE APPAREL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Fourth Division, Cebu City; Regional
Arbitration Branch No. 7, Cebu City; and JOSEPHINE ANTIPUESTO, NORINA ANDO,
JULIET BAGUIO, APOLINARIA VELONTA, CORAZON PINO, and JOSEPHINE CAETE,
respondents.
VITUG, J.:
Pursuing its retrenchment program, petitioner Edge Apparel, Inc., dismissed private
respondents Josephine Antipuesto, Norina Ando, Juliet Baguio, Apolinaria Velonta, Corazon
Pino and Josephine Caete from employment effective 03 September 1992. Feeling
aggrieved, Antipuesto, et al., consulted with the Regional Director of the Department of
Labor and Employment ("DOLE") who opined that it would be best for them to receive the
separation pay being offered by the corporation. His advice was heeded. The subsequent
receipt of their separation pay benefits, nevertheless, did not deter Antipuesto, et al., from
later going through with their complaint for illegal dismissal against the corporation. The
charge averred that the retrenchment program was a mere subterfuge used by Edge Apparel
to give a semblance of regularity and validity to the dismissal of the complainants.
Edge Apparel countered that its financial obligations, amounting to about P8 Million, had
begun to eat up most of its capital outlay and resulted in unabated losses of P681,280.00 in
1989, P262,741.00 in 1990, P162,170.00 in 1991 and P749,294.00 in 1992, constraining the
company to adopt and implement a retrenchment program.
Satisfied with the legality of the retrenchment program, Labor Arbiter Nicasio C. Anion, on
20 June 1994, dismissed the complaint of Antipuesto, et al., against Edge Apparel.

Antipuesto, et al., appealed the decision of the Labor Arbiter to the National Labor Relations
Commission ("NLRC"). In their appeal, Antipuesto, et al., claimed that the documents
submitted by Edge Apparel to demonstrate its alleged losses had been "bloated" so as to
reflect financial losses.
In its decision, promulgated on 26 April 1995, the NLRC held:
There is therefore basis in the retrenchment of these 27 workers .
We note however that these 27 workers were assigned to row #8 of the sewing line for
simple garments which was phased out due in fact to the dropping of this particular line of
business.
Termination of an employee's services because of a reduction of work force due to a
decrease in the scope or volume of work of the employer is synonymous to, or a shade of
termination because of redundancy under Article 283 (formerly 284) of the Labor Code.
Redundancy exist where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise. (Tierra International Construction Corporation vs. NLRC, 77 SCRA Vol. 211)
In case of termination due to the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to at least one (1) month pay or to at least one
month pay for every year of service, which ever is higher. (Art. 283, Labor Code).
Under the circumstances obtaining in this case, the termination of the 27 retrenched
employees is considered a redundancy. Hence, the complainants, who were already paid the
separation pay equivalent to 1/2 month pay per year of service, are entitled to be paid the
additional separation pay equivalent to 1/2 month pay for every year of service.
WHEREFORE, the respondents are ordered to pay the complainants an additional separation
pay equivalent to 1/2 month pay for every year of service. The Decision of the Labor Arbiter
is AFFIRMED in all other respects.
SO ORDERED. 1
Edge Apparel filed a motion for a partial reconsideration of the above decision insofar as it
awarded "an additional separation pay equivalent to 1/2 month pay for every year of
service" to the complainants. In a resolution, dated 21 June 1995, the NLRC denied the
motion; thus:
From the foregoing, it can clearly be gleaned that row #8 in which complainants were
employed, was phased out because respondent Company's "buyers had already ceased its
orders for simple style garments." This is similar to "dropping of a particular product line" or
a "decrease in the volume of business," two (2) of the reasons which justify the classification
of positions as redundant, as ruled in Tierra- International Construction Corporation vs.
NLRC, 77 SCRA 211, cited in Our decision.
Although the phasing out of row #8 was also caused by financial and business losses of
respondent company, the real and proximate cause thereof was the cessation of orders from
respondent Company's buyers.
We, therefore, rule, as We did in Our Decision, that the cause of termination of the
employment of the complainants was redundancy.
WHEREFORE, the Motion for Reconsideration of respondent is hereby DENIED, for lack of
merit. 2
In its instant petition for certiorari and prohibition, Edge Apparel argues that
RESPONDENT NLRC'S AWARD TO PRIVATE RESPONDENTS OF "ADDITIONAL SEPARATION PAY"
IS CONTRARY TO THE DOCTRINE LAID DOWN BY THIS HONORABLE COURT IN THE FACTUALLYSIMILAR CASE OF CAFFCO INTERNATIONAL LIMITED VS. OFFICE OF THE MINISTER-MINISTRY
OF LABOR AND EMPLOYMENT . 3
The employer has a right to dismiss employees for valid causes after proper observance of
due process. 4 These valid causes are categorized into two groups, i.e., "just" causes under
Article 282 of the Labor Code and "authorized" causes under Articles 283 and 284 of the
same code.

The just causes for termination of employment, enumerated in Article 282, include
(a)
Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative relative to his work; 5
(b)

Gross and habitual neglect by the employee of his duties;

(c)
Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative; 6
(d)
Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative; 7
and
(e)

Other causes analogous to the foregoing.

An employee who is terminated from employment for a just cause is not entitled to payment
of separation benefits. 8 Section 7, Rule I, Book VI, of the Omnibus Rules Implementing the
Labor Code provides, thus:
Sec. 7. Termination of employment by employer. The just causes for terminating the
services of an employee shall be those provided in Article 282 of the Code. The separation
from work of an employee for a just cause does not entitle him to the termination pay
provided in Code, without prejudice, however, to whatever rights, benefits and privileges he
may have under the applicable individual or collective bargaining agreement with the
employer or voluntary employer policy or practice.
Article 283, in turn, specifies the authorized causes for the termination of employment, viz:
(a)

installation of labor-saving devices;

(b)

redundancy;

(c)

retrenchment to prevent losses; and

(d)
closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of law. 9
In addition, Article 284 provides that an employer would be authorized to terminate the
services of an employee found to be suffering from any disease if the employee's continued
employment is prohibited by law or is prejudicial to his health or to the health of his fellow
employees.
The installation of labor-saving devices contemplates the installation of machinery to effect
economy and efficiency in its method of production. 10
Redundancy exists where the services of an employee are in excess of what would
reasonably be demanded by the actual requirements of the enterprise. 11 A position is
redundant when it is superfluous, and superfluity of a position or positions could be the
result of a number of factors, such as the overhiring of workers, a decrease in the volume of
business or the dropping of a particular line or service previously manufactured or
undertaken by the enterprise. 12 An employer has no legal obligation to keep on the payroll
employees more than the number needed for the operation of the business. 13
Retrenchment, in contrast to redundancy, is an economic ground to reduce the number of
employees. In order to be justified, the termination of employment by reason of
retrenchment must be due to business losses or reverses which are serious, actual and real.
14 Not every loss incurred or expected to be incurred by the employer will justify
retrenchment, 15 since, in the nature of things, the possibility of incurring losses is
constantly present, in greater or lesser degree, in carrying on the business operations. 16
Retrenchment is normally resorted to by management during periods of business reverses
and economic difficulties occasioned by such events as recession, industrial depression, or
seasonal fluctuations. 17 It is an act of the employer of reducing the work force because of
losses in the operation of the enterprise, lack of work, or considerable reduction on the
volume of business. 18 Retrenchment is, in many ways, a measure of last resort when other
less drastic means have been tried and found to be inadequate. 19 A lull caused by lack of
orders or shortage of materials must be of such nature as would severely affect the
continued business operations of the employer to the detriment of all and sundry if not
properly addressed. The institution of "new methods or more efficient machinery, or of
automation" is technically a ground for termination of employment by reason of installation

of labor-saving devices but where the introduction of these methods is resorted to not
merely to effect greater efficiency in the operations of the business but principally because
of serious business reverses and to avert further losses, the device could then verily be
considered one of retrenchment.
The payment of separation pay would be due when a dismissal is on account of an
authorized cause. The amount of separation pay depends on the ground for the termination
of employment. A dismissal due to the installation of labor saving devices, redundancy
(Article 283) or disease (Article 284), entitles the worker to a separation pay equivalent to
"one (1) month pay or at least one (1) month pay for every year of service, whichever is
higher." When the termination of employment is due to retrenchment to prevent losses, or to
closure or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay is only an equivalent of "one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher." In the above instances, a fraction of at least six (6) months is considered as one (1)
whole year.
In this case, the Labor Arbiter and the NLRC both concluded that there had been a valid
ground for the retrenchment of private respondents. The documents presented in evidence
were found to "conclusively show that (petitioner) suffered serious financial losses." 20 The
general standards or elements needed for the retrenchment to be valid i.e., that the
losses expected are substantial and not merely de minimis in extent; that the expected
losses are reasonably imminent such as can be perceived objectively and in good faith by
the employer; that the retrenchment is reasonably necessary and likely to effectively
prevent the expected losses; and that the imminent losses sought to be forestalled are
substantiated 21 were adequately shown in the present case. The findings of the Labor
Arbiter and the NLRC would negate any impression that petitioner was guilty of bad faith or
misdoing in its retrenchment policy; the NLRC stated:
The complainants questioned the firm's financial statements which were made the bases to
support the validity of the retrenchment. The complainants pointed out in their appeal that
while the gross profit on sales increased by about 26% in 1989, expenses on representation
and entertainment increased by 45.65% in 1989. These expenses were manipulated,
according to the complainants, to justify the retrenchment of these 27 employees.
A perusal of the financial statements show that the company incurred recreation and
entertainment expenses as follows: 1988 P385,711; 1989 P561,816; 1990 P261,120;
1991 P327,081; and 1992 P374,290 for a total of P1,910,018 in five (5) years or at an
average of P382,003.60 per year.
These 27 retrenched employees received a daily wage of P105 in 1992. Multiplying this daily
wage by 314 days will result in a yearly income of P32,970 per retrenched worker. To retain
the services of these 27 workers would cost the company P964,372.50 per annum just to
pay their basic wages & 13th month pay.
It is therefore very clear, that the deletion of this annual entertainment & representation
expense of P382,003.60 and reallocate it for the budget on salaries and wages would not be
sufficient to pay the salaries of the 27 retrenched workers amounting to P964,372.50 as of
1992. 22
Procedurally, in order to validly effect retrenchment, the employer must observe two other
requirements, viz: (a) service of a prior written notice of at least one month on the workers
and the Department of Labor and Employment, and (b) payment of the due separation pay.
23 In the decision of Labor Arbiter Nicasio C. Anion, affirmed by the NLRC, petitioner has
been found to have complied with the above requirements of the law, including the payment
of separation pay equivalent to at least one month pay or to one-half (1/2) month pay for
every year of service, whichever is higher, with a fraction of at least six months being
considered one whole year. 24
The NLRC, unfortunately, went further by holding that the dismissal of private respondents
could likewise be considered to have been occasioned by redundancy since it was only
private respondents' line of work which was phased out by petitioner.
The Court agrees with the Solicitor General that here the NLRC has gravely abused its
discretion. The law acknowledges the right of every business entity to reduce its work force
if such measure is made necessary or compelled by economic factors that would otherwise
endanger its stability or existence. 25 In exercising its right to retrench employees, the firm
may choose to close all, or a part of, its business to avoid further losses or mitigate
expenses. 26 In Caffco International Limited vs. Office of the Minister-Ministry of Labor and
Employment, 27 the Court has aptly observed that

Business enterprises today are faced with the pressures of economic recession, stiff
competition, and labor unrest. Thus, businessmen are always pressured to adopt certain
changes and programs in order to enhance their profits and protect their investments. Such
changes may take various forms. Management may even choose to close a branch, a
department, a plant, or a shop (Phil. Engineering Corp. vs. CIR, 41 SCRA 89 [1971]). 28
Clearly, the fact alone that a mere portion of the business of an employer, not the whole of
it, is shut down does not necessarily remove that measure from the ambit of the term
"retrenchment" within the meaning of Section 283(c) of the Labor Code.
The Court, accordingly, must sustain the position taken by the Labor Arbiter that private
respondents should only be entitled to severance compensation equivalent to one-half (1/2)
month pay for every year of service.
WHEREFORE, the appealed decision, promulgated on 26 April 1995, is MODIFIED by deleting
the additional award of separation pay to private respondents decreed by the NLRC. No
costs.
SO ORDERED.
G.R. No. 115394
September 27, 1995
FE S. SEBUGUERO, CARLOS ONG, NENE MANAOG, JUANITO CUSTODIO, CRISANTA
LACSAM, SATURNINO GURAL, WILMA BALDERA, LEONILA VALDEZ, FATIMA
POTESTAD, EVANGELINE AGNADO, RESTITUTO GLORIOSO, JANESE DE LOS REYES,
RODOLFO SANCHEZ, WILMA ORBELLO, DAISY PASCUA, and ALEX MASAYA,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, G.T.I. SPORTSWEAR CORPORATION
and/or BENEDICTO YUJUICO, respondents.
DAVIDE, JR., J.:
This is a special civil action for certiorari under Rule 65 of the Rules of Court to set aside for
having been rendered with grave abuse of discretion the decision of 29 November 1993 1
and resolution of 9 February 1994 2 of public respondent National Labor Relations
Commission (NLRC) in NLRC NCR CA Case No. 004673-93. The former modified the decision
of 26 February 1993 of the Labor Arbiter 3 by setting aside the award of back wages,
proportionate 13th month pay for 1991 and attorney's fees, while the latter denied the
motion to reconsider the former.
The antecedent facts as disclosed by the decisions of the Labor Arbiter and the NLRC, as
well as by the pleadings of the parties, are not complicated.
The petitioners were among the thirty-eight (38) regular employees of private respondent
GTI Sportswear Corporation (hereinafter GTI), a corporation engaged in the manufacture and
export of ready-to-wear garments, who were given "temporary lay-off" notices by the latter
on 22 January 1991 due to alleged lack of work and heavy losses caused by the cancellation
of orders from abroad and by the garments embargo of 1990.
Believing that their "temporary lay-off" was a ploy to dismiss them, resorted to because of
their union activities and was in violation of their right to security of tenure since there was
no valid ground therefor, the 38 laid-off employees filed with the Labor Arbiter's office in the
National Capital Region complaints for illegal dismissal, unfair labor practice, underpayment
of wages under Wage Orders Nos. 01 and 02, and non-payment of overtime pay and 13th
month pay. 4
Private respondent GTI denied the claim of illegal dismissal and asserted that it was its
prerogative to lay-off its employees temporarily for a period not exceeding six months to
prevent losses due to lack of work or job orders from abroad, and that the lay-off affected
both union and non-union members. It justified its failure to recall the 38 laid-off employees
after the lapse of six months because of the subsequent cancellations of job orders made by
its foreign principals, a fact which was communicated to the petitioners and the other
complainants who were all offered severance pay. Twenty-two (22) of the 38 complainants
accepted the separation pay. The petitioners herein did not.
The cases then involving those who accepted the separation pay were pro tanto dismissed
with prejudice.
In his decision of 26 February 1993 with respect to the claims of the petitioners, Labor
Arbiter Pablo C. Espiritu, Jr. found for them and disposed as follows:

WHEREFORE, above premises considered, judgment is hereby rendered finding Respondent,

G.T.I. Sportswear Corporation, liable for constructive dismissal, underpayment of wages
under NCR 01 and 02, and 13th-month pay differentials and concomitantly, Respondent
corporation is hereby ordered:
a.
To pay the following complainants backwages from the time of their constructive
dismissal (July 22, 1991) till promulgation considering that reinstatement is no longer
decreed: . . .
b.
To pay complainants separation pay of 1/2 month for every year of service in lieu of
reinstatement in the following amounts: . . .
c.
To pay complainants 13th-month pay differentials arising out of underpayment of
wages and proportionate 13th-month pay for 1991 in the following amounts: . . .
d.
To pay complainants underpayment of wages under NCR Wage 01 and NCR Wage 02
in the following amounts: . . .
e.
To pay complainants the amount of P120,618.87 representing 10% attorney's fees
based on the total judgment award of P1,326,807.63.
The claims for unfair labor practice, nonpayment of overtime pay, moral damages, and
exemplary damages are hereby denied for lack of merit.
SO ORDERED. 5
In support of the disposition, the Labor Arbiter made the following ratiocinations:
On the validity of the temporary lay-off, this Arbitration Branch finds that there was ample
justification on the part of Respondent company to lay-off temporarily some of its employees
to prevent losses as a result of the reduction of the garment quota allocated to Respondent
company due to the garment embargo of 1990. In fact, in the months of March, April, and
May of 1991 respondent company received several messages/correspondence from its
foreign principals informing them (Respondent) that they are canceling/transferring some of
their quotas/orders to other countries. The evidence presented by Respondent company
proves this fact (Exhibits "12", "13", "14", "15", "15-A", "16", "17" and Annexes "5", "6", "7",
showing the different documentary evidence on cancellation of orders and forced leave
schedules of workers due to lack of work). This is sustainable, as in this case, where the
Respondent found it unnecessary to continue employing some of its workers because of
business recession, lack of materials to work on due to government controls (garments
embargo) and due to the lack of the demand for export quota from its principal foreign
buyers.
Although, as a general rule, Respondent company has the prerogative and right to resort to
temporary lay-off, such right is likewise limited to a period of six (6) months applying Art.
286 of the Labor Code on suspension of employer-employee relationship not exceeding six
(6) months.
In this case, respondent company was justified in the temporary lay-off of some of its
employees. However, Respondent company should have recalled them after the end of the
six month period or at the least reasonably informed them (complainants) that the
Respondent company is still not in a position to recall them due to the continuous drop of
demand in the export market (locally or internationally), thereby extending the temporary
lay-off with a definite period of recall and if the same cannot be met, then the company
should implement retrenchment and pay its employees separation pay. Failing in this regard,
respondent company chose not to recall nor send notice to the complainants after the lapse
of the six (6) month period. Hence, there is in this complaint a clear case of constructive
dismissal. While there is a valid reason for the temporary lay-off, the same is also limited to
a duration of six months. Thereafter the employees, complainants herein, are entitled under
the law (Art. 286) to be recalled back to work. As result thereof, the temporary lay-off of the
complainants from January 22, 1991 (date of lay-off) to July 22, 1991 is valid, however,
thereafter complainants are already entitled to backwages, in view of constructive dismissal,
due to the fact that they were no longer recalled back to work. Complainants cannot be
placed on temporary lay-off forever. The limited period of six (6) months is based
provisionally too prevent circumvention on the right to security of tenure and to prevent
grave abuse of discretion on the part of the employer. However, since during the trial it was
proven, as testified by the Vice-President for marketing and personnel manager, that the
lack of work and selection of personnel continued to persist and considering the antagonism
and hostility displayed by both litigants, as observed by this Arbiter, during the trial of this
case and in view of the strained relations between the parties, reinstatement of the

complainants would not be prudent. (Divine Word High School vs. NLRC, G.R. 72207, 6 Aug.
1986; Esmalin vs. NLRC, G.R. 67880, 15 Sept. 1989; Hernandez vs. NLRC, G.R. 34302, 10
Aug. 1989). Hence, separation pay of 1/2 month for every year of service in lieu of
reinstatement is in order. . . .
On the issue of monetary claims this Arbitration Branch finds that Respondent is liable for
underpayment of wages under NCR Wage Order 01 and 02 considering that respondent
failed to rebut the claims of the complainants. Respondent failed to show proof by means of
payrolls to disprove the claim of the complainants. Complainants are also entitled to their
proportionate 13th-month pay differentials as a result of the underpayment of wages under
NCR-01 and 02 and likewise to their proportionate 13th-month pay for 1991 for the month of
January 1991. . . .
However, complainants are entitled to reasonable attorney's fees considering they were
forced to engage the services of counsel in order to fully ventilate their rights and
grievances in accordance with the Labor Code as amended. 6
The Labor Arbiter found no sufficient evidence to prove the petitioners' charges of unfair
labor practice, overtime pay, and for moral and exemplary damages.
Private respondent GTI seasonably appealed the aforesaid decision to the NLRC, which
docketed the appeal as NLRC NCR CA Case No. 004673-93.
In its challenged decision, the NLRC concurred with the findings of the Labor Arbiter that
there was a valid lay-off of the petitioners due to lack of work, but disagreed with the latter's
ruling granting back wages after 22 July 1991. The NLRC justified its postulation as follows:
However, we cannot sustain the findings of the Labor Arbiter in awarding the complainants
backwages after July 22, 1991 in view of constructive dismissal, it being acknowledged by
him that ". . . during the trial it was proven, as testified by the Vice-President for marketing
and personnel manager, that the lack of work and selection of personnel continued to
persist . . ." Besides, it was not denied by the complainants that during the proceeding of the
case, the respondents conveyed to the complainants the impossibility of having them
recalled in view of the continued unavailability of work as the economic recession of the
respondent's principal market persisted. In fact, the respondent company offered to
complainants payment of their separation pay which offer [w]as accepted by 22 out of 38
complainants.
Having established lack of work, it necessarily follow[s] that retrenchment did take place and
not constructive dismissal. Dismissal by its term, presuppose that there was still work
available and that the employer terminated the services of the employee therefrom. The
same cannot be said of the case at bar. The complainants did not question the evidence of
lack of work on account of reduction of government quota or cancellation of orders.
Art. 286 of the Labor Code is precised [sic] in this regards when it provided that:
Art. 286.
When employment not deemed terminated. The bona fide suspension of
the operation of a business or undertaking for a period not exceeding six (6) months, . . .
shall not terminate employment . . . .
It is only after the six months period that an employee can be presumed to have been
terminated. 7
It thus set aside the awards for back wages, proportionate 13th month pay for 1991, and for
attorney's fees which it found to be without basis, and disposed as follows:
WHEREFORE, premises considered the decision of the Labor Arbiter dated February 26, 1993
is hereby modified by deleting the award of backwages, the proportionate 13th month pay
for 1991 and attorney's fees for lack of legal basis and direct, the payment of separation pay
equal to one-half month salary for every year of service as of July 22, 1991. 8
Unable to accept the NLRC judgment, the petitioners filed this special civil action for
certiorari. They contend that the NLRC acted without or in excess of jurisdiction or with
grave abuse of discretion when it: (a) ruled that there was a valid and legal reduction of
business and in sustaining the theory of redundancy in justifying the dismissal of the
petitioners; (b) failed to apply in full the provisions of law and of jurisprudence as to the full
payment of back wages in cases of illegal dismissal; and (c) deleted the award of attorney's
fees.

We gave due course to this petition after the filing of the separate comments to the petition
by the public and private respondents and the petitioners' reply to the public respondent's
comment.
The petitioners' first contention is based on a wrong premise or on a miscomprehension of
the statement of the NLRC. What the NLRC sustained and affirmed is not redundancy, but
retrenchment as a ground for termination of employment. They are not synonymous but
distinct and separate grounds under Article 283 of the Labor Code, as amended. 9
Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise. 10
Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer through no fault of the employee's and
without prejudice to the latter, resorted to by management during periods of business
recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack
of orders, shortage of materials, conversion of the plant for a new production program or the
introduction of new methods or more efficient machinery, or of automation. 11 Simply put, it
is an act of the employer of dismissing employees because of losses in the operation of a
business, lack of work, and considerable reduction on the volume of his business, a right
consistently recognized and affirmed by this Court. 12
Article 283 of the Labor code which covers retrenchment, reads as follows:
Art. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by servicing a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
This provision, however, speaks of a permanent retrenchment as opposed to a temporary
lay-off as is the case here. There is no specific provision of law which treats of a temporary
retrenchment or lay-off and provides for the requisites in effecting it or a period or duration
therefor. These employees cannot forever be temporarily laid-off. To remedy this situation or
fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that
employees may remain temporarily laid-off or in floating status. 13 Six months is the period
set by law that the operation of a business or undertaking may be suspended thereby
suspending the employment of the employees concerned. The temporary lay-off wherein the
employees likewise cease to work should also not last longer than six months. After six
months, the employees should either be recalled to work or permanently retrenched
following the requirements of the law, and that failing to comply with this would be
tantamount to dismissing the employees and the employer would thus be liable for such
dismissal.
To determine, therefore, whether the petitioners were validly retrenched or were illegally
dismissed, we must determine whether there was compliance with the law regarding a valid
retrenchment at anytime within the six month-period that they were temporarily laid-off.
Under the aforequoted Article 283 of the Labor Code, there are three basic requisites for a
valid retrenchment:
(1)

the retrenchment is necessary to prevent losses and such losses are proven;

(2)
written notice to the employees and to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment; and
(3)
payment of separation pay equivalent to one month pay or at least 1/2 month pay for
every year of service, whichever is higher.

As for the first requisite, whether or not an employer would imminently suffer serious or
substantial losses for economic reasons is essentially a question of fact for the Labor Arbiter
and the NLRC to determine. 14 Here, both the Labor Arbiter and the NLRC found that the
private respondent was suffering and would continue to suffer serious losses, thereby
justifying the retrenchment of some of its employees, including the petitioners. We are not
prepared to disregard this finding of fact. It is settled that findings of quasi-judicial agencies
which have acquired expertise in the matters entrusted to their jurisdiction are accorded by
this Court not only with respect but with finality if they are supported by substantial
evidence. 15 The latter means that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. 16 In the instant case, no claim was made
by any of the parties that such a finding was not supported by substantial evidence.
Furthermore, the petitioners did not appeal the finding of the Labor Arbiter that their
temporary lay-off to prevent losses was amply justified. They cannot now question this
finding that there is a valid ground to lay-off or retrench them.
The requirement of notice to both the employees concerned and the Department of Labor
and Employment (DOLE) is mandatory and must be written and given at least one month
before the intended date of retrenchment. In this case, it is undisputed that the petitioners
were given notice of the temporary lay-off. There is, however, no evidence that any written
notice to permanently retrench them was given at least one month prior to the date of the
intended retrenchment. The NLRC found that GTI conveyed to the petitioners the
impossibility of recalling them due to the continued unavailability of work. 17 But what the
law requires is a written notice to the employees concerned and that requirement is
mandatory. 18 The notice must also be given at least one month in advance of the intended
date of retrenchment to enable the employees to look for other means of employment and
therefore to ease the impact of the loss of their jobs and the corresponding income. 19 That
they were already on temporary lay-off at the time notice should have been given to them is
not an excuse to forego the one-month written notice because by this time, their lay-off is to
become permanent and they were definitely losing their employment.
There is also nothing in the records to prove that a written notice was ever given to the
DOLE as required by law. GTI's position paper, 20 offer of exhibits, 21 Comment to the
Petition, 22 and Memorandum 23 in this case do not mention of any such written notice. The
law requires two notices one to the employee/s concerned and another to the DOLE not
just one. The notice to the DOLE is essential because the right to retrench is not an absolute
prerogative of an employer but is subject to the requirement of law that retrenchment be
done to prevent losses. The DOLE is the agency that will determine whether the planned
retrenchment is justified and adequately supported by facts. 24
With respect to the payment of separation pay, the NLRC found that GTI offered to give the
petitioners their separation pay but that the latter rejected such offer which was accepted
only by 22 out of the 38 original complainants in this case. 25 As to when this offer was
made was not, however, proven. All that the parties, the Labor Arbiter and the NLRC stated
in their respective pleadings and decisions was that the offer and payment were made
during the pendency of the illegal dismissal case with the Labor Arbiter. But with or without
this offer of separation pay, our conclusion would remain the same: that the retrenchment of
the petitioners is defective in the face of our finding that the required notices to both the
petitioners and the DOLE were not given.
The lack of written notice to the petitioners and to the DOLE does not, however, make the
petitioners' retrenchment illegal such that they are entitled to the payment of back wages
and separation pay in lieu of reinstatement as they contend. Their retrenchment, for not
having been effected with the required notices, is merely defective. In those cases where we
found the retrenchment to be illegal and ordered the employees' reinstatement and the
payment of back wages, the validity of the cause for retrenchment, that is the existence of
imminent or actual serious or substantial losses, was not proven. 26 But here, such a cause
is present as found by both the Labor Arbiter and the NLRC. There is only a violation by GTI
of the procedure prescribed in Article 283 of the Labor Code in effecting the retrenchment of
the petitioners.
It is now settled that where the dismissal of an employee is in fact for a just and valid cause
and is so proven to be but he is not accorded his right to due process, i.e., he was not
furnished the twin requirements of notice and the opportunity to be heard, the dismissal
shall be upheld but the employer must be sanctioned for non-compliance with the
requirements of or for failure to observe due process. The sanction, in the nature of
indemnification or penalty, depends on the facts of each case and the gravity of the
omission committed by the employer and has ranged from P1,000.00 as in the cases of
Wenphil vs. National Labor Relations Commission, 27 Seahorse Maritime Corp. vs. National
Labor Relations Commission, 28 Shoemart, Inc. vs. National Labor Relations Commission, 29
Rubberworld (Phils.), Inc. vs. National Labor Relations Commission, 30 Pacific Mills, Inc. vs.

Alonzo, 31 and Aurelio vs. National Labor Relations Commission 32 to P10,000.00 in Reta vs.
National Labor Relations Commission 33 and Alhambra Industries, Inc. vs. National Labor
Relations Commission. 34 More recently, in Worldwide Papermills, Inc. vs. National Labor
Relations Commission, 35 the sum of P5,000.00 was awarded to the employee as
indemnification for the employer's failure to comply with the requirements of procedural due
process.
Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because
the required notices of the petitioners' retrenchment were not served upon the petitioners
and the DOLE, GTI must be sanctioned for such failure and thereby required to indemnify
each of the petitioners the sum of P2,000.00 which we find to be just and reasonable under
the circumstances of this case.
As for the award of the 13th-month pay made by the Labor Arbiter and deleted by the NLRC,
we do not find anything in the decision of the NLRC to support the deletion of this award
other than its opinion that there is lack of legal basis to support such an award, without,
however, furnishing any explanation for this finding. Thus, the award of the 13th-month pay
made and sufficiently justified by the Labor Arbiter must be reinstated as prayed for by the
petitioners.
Also, the petitioners are entitled to an award for attorney's fees pursuant to paragraph 7,
Article 2208 of the Civil Code which must, however, be reasonable. The award of
P120,618.87, which is equivalent to ten percent (10%) of the amounts recovered, as
attorney's fees should be reduced to P25,000.00, an amount we find to be reasonable. The
ten percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section
11, Rule VIII, Book III of the Implementing Rules is the maximum; hence, any amount less
than that may be awarded as the circumstances of the case may warrant.
WHEREFORE, the instant petition is partially GRANTED and the challenged decision of public
respondent National Labor Relations Commission in NLRC NCR CA Case No. 004673-93 is
modified by reversing and setting aside its deletion of the awards in the Labor Arbiter's
decision of proportionate 13th month pay for 1991 and attorney's fees, the latter being
reduced to P25,000.00. Separation pay equivalent to one-half (1/2) month pay for every year
of service shall be computed from the dates of the commencement of the petitioners'
respective employment until the end of their six-month temporary lay-off which is 22 July
1991. In addition, private respondent G.T.I. Sportswear Corporation is ordered to pay each of
the petitioners the sum of P2,000.00 as indemnification for its failure to observe due process
in effecting the retrenchment.
Costs against the private respondent.
SO ORDERED.
[G.R. No. 148340. January 26, 2004]
J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION and JOSE F. MASCARINAS,
respondents.
DECISION
QUISUMBING, J.:
For review are the Decision[1] dated February 27, 2001 of the Court of Appeals in CA-G.R. SP
No. 60337, and its Resolution[2] dated May 28, 2001, denying the motion for
reconsideration. The Court of Appeals dismissed the petition for certiorari filed by petitioners
and affirmed the Resolution[3] of the National Labor Relations Commission (NLRC), Third
Division, which affirmed the Decision[4] of Labor Arbiter Jose G. De Vera in NLRC-NCR Case
No. 00-03-02279-98, which found petitioners liable for illegal dismissal and ordered
petitioners to pay private respondent Jose Mascarinas separation pay, backwages, legal
holiday pay, service incentive leave pay and 13th month pay in the aggregate sum of
P85,871.00.
The facts, as culled from the records, are as follows:
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged
in the business of selling second-hand heavy equipment. JAT is owned by its namesake, copetitioner Jesusa Adlawan Torobu. Sometime in April 1997, JAT hired private respondent Jose
F. Mascarinas as helper tasked to coordinate with the cleaning and delivery of the heavy
equipment sold to customers. Initially, private respondent was hired as a probationary
employee and was paid P165 per day that was increased to P180 in July 1997 and P185 in
January 1998.

In October 1997, the sales of heavy equipment declined because of the Asian currency
crisis. Consequently, JAT temporarily suspended its operations. It advised its employees,
including private respondent, not to report for work starting on the first week of March 1998.
JAT indefinitely closed shop effective May 1998.
A few days after, private respondent filed a case for illegal dismissal and underpayment of
wages against petitioners before the NLRC.
In his Complaint, private respondent alleged that he started as helper mechanic of JAT on
January 6, 1997 with an initial salary rate of P165.00 per day, which was increased to
P180.00 per day after six (6) months in employment. He related that he was one of those
retrenched from employment by JAT and was allegedly required to sign a piece of paper
which he refused, causing his termination from employment.
On December 14, 1998, JAT filed an Establishment Termination Report with the Department
of Labor and Employment (DOLE), notifying the latter of its decision to close its business
operations due to business losses and financial reverses.
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding the
dismissal of herein private respondent unjustified and ordering JAT to pay private respondent
separation pay and backwages, among others. The decretal portion of the decision reads as
follows:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
ordering the respondents [herein petitioners] to pay complainant the aggregate sum of
P85,871.00.
SO ORDERED.[5]
The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas dismissal was
unjustified because of petitioners failure to serve upon the private respondent and the DOLE
the required written notice of termination at least one month prior to the effectivity thereof
and to submit proof showing that petitioners suffered a business slowdown in operations and
sales effective January 1998; (2) private respondent may recover backwages from March 1,
1998 up to March 1, 1999 or P66,924.00[6] and separation pay, in lieu of reinstatement, at
the rate of one (1) month pay for every year of service, or P10,296.00;[7] (3) the payrolls
submitted by JAT showed that effective May 1, 1997, private respondents wages did not
conform to the prevailing minimum wage, hence, private respondent is entitled to salary
differentials from May 1, 1997 to January 6, 1998, in the amount of P1,066.00;[8] (4) that
private respondent be awarded legal holiday pay in the amount of P1,850.00,[9] service
incentive leave pay in the amount of P925.00[10] and 13th month pay for 1997 in the
amount of P4,810.00.[11]
On appeal, the NLRC affirmed the decision of the labor arbiter.[12] The NLRC found that the
financial statements submitted on appeal were questionable, unreliable and inconsistent
with petitioners allegations in the pleadings, particularly as to the date of the alleged closure
of operation; hence, they cannot be used to support private respondents dismissal. The
NLRC also affirmed the monetary awards because petitioners failed to prove the payment of
benefits claimed by private respondent.
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of
Appeals, which the latter dismissed. The decretal portion of the decision reads as follows:
WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact
and in law, is hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed
decision of the National Labor Relations Commission AFFIRMED, with costs to petitioners.
SO ORDERED.[13]
The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal
of the private respondent. The appellate court held that the petitioners failed to prove by
clear and convincing evidence their compliance with the requirements for valid
retrenchment. It cited the findings of the NLRC on the belated submission of the financial
statements during appeal that could not be given sufficient weight, and that the petitioners
late submission of notice of closure is indicative of their bad faith.
Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.
Hence, the present petition alleging that the:

A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE DEPARTMENT OF
LABOR AND EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF TEMPORARY SUSPENSION OF
BUSINESS;
B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS NOT DISMISSED FROM
SERVICE AT THE TIME THE COMPLAINT WAS FILED;
C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE BURDEN OF
PROVING THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES;
D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED TO COMPLY
WITH THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN AWARDING BACKWAGES
AND/OR SEPARATION PAY TO PRIVATE RESPONDENT EVEN FOR PERIOD AFTER PETITIONERS
FILED A NOTICE OF ACTUAL CLOSURE OF THE COMPANY BEFORE THE LABOR DEPARTMENT.
[14]
The relevant issues for our resolution are: (a) whether or not private respondent was illegally
dismissed from employment due to closure of petitioners business, and (b) whether or not
private respondent is entitled to separation pay, backwages and other monetary awards.
On the first issue, the petitioners claim that the Court of Appeals erroneously concluded that
they are liable for illegal dismissal because of non-compliance of the procedural and
substantive requirements of terminating employment due to retrenchment and cessation of
business. They argued that there was no closure but only suspension of operation in good
faith in March 1998, when private respondent claimed to have been illegally dismissed, due
to the decline in sales and heavy losses incurred in its business arising from the 1997 Asian
financial crisis. Petitioners assert that under Article 286 of the Labor Code, a bona fide
suspension of the operation of a business for a period not exceeding six (6) months shall not
terminate employment and no notice to an employee is required. However, petitioners relate
that JAT was compelled to permanently close its operation eight (8) months later or on
November 1998, when the hope of recovery became nil but only after sending notices to all
its workers and DOLE. Thus, petitioners argue that it cannot be held liable for illegal
dismissal in March 1998 since there was no termination of employment during suspension of
operations and a notice to employee is not required, unlike in the case of permanent closure
of business operation.
We need not belabor the issue of notice requirement for a suspension of operation of
business under Article 286[15] of the Labor Code. This matter is not pertinent to, much less
determinative of, the disposition of this case. Suffice it to state that there is no termination
of employment during the period of suspension, thus the procedural requirement for
terminating an employee does not come into play yet. Rather, the issue demanding a
sharpened focus here concerns the validity of dismissal resulting from the closure of JAT.
A brief discussion on the difference between retrenchment and closure of business as
grounds for terminating an employee is necessary. While the Court of Appeals defined the
issue to be the validity of dismissal due to alleged closure of business, it cited jurisprudence
relating to retrenchment to support its resolution and conclusion. While the two are often
used interchangeably and are interrelated, they are actually two separate and independent
authorized causes for termination of employment. Termination of an employment may be
predicated on one without need of resorting to the other.
Closure of business, on one hand, is the reversal of fortune of the employer whereby there is
a complete cessation of business operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business as an authorized cause for
termination of employment aims to prevent further financial drain upon an employer who
cannot pay anymore his employees since business has already stopped. On the other hand,
retrenchment is reduction of personnel usually due to poor financial returns so as to cut
down on costs of operations in terms of salaries and wages to prevent bankruptcy of the
company. It is sometimes also referred to as down-sizing. Retrenchment is an authorized
cause for termination of employment which the law accords an employer who is not making
good in its operations in order to cut back on expenses for salaries and wages by laying off
some employees. The purpose of retrenchment is to save a financially ailing business
establishment from eventually collapsing.[16]
In the present case, we find the issues and contentions more centered on closure of business
operation rather than retrenchment. Closure or cessation of operation of the establishment
is an authorized cause for terminating an employee under Article 283 of the Labor Code, to
wit:

ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of
retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall
be considered one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the employer.[17] In
the present case, JAT justifies its closure of business due to heavy losses caused by declining
sales. It belatedly submitted its 1997 Income Statement[18] and Comparative Statement of
Income and Capital for 1997 and 1998[19] to the NLRC to prove that JAT suffered losses
starting 1997. However, as noted earlier, these were not given much evidentiary weight by
the NLRC as well as the Court of Appeals, to wit:
The financial statements submitted by the respondents on appeal are questionable for the
following reasons: (1) the figures in Annexes D-2 and E of the appeal memorandum (which
both refer to 1997) do not tally; (2) they (the respondents) allegedly closed on March 1,
1998. Yet, their 1998 financial statement (Annex E) indicates operations up to and ending
December 31, 1998. In view of the foregoing, the above-mentioned financial statements do
not justify the complainants dismissal. [20]
The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent reason
to set it aside. While business reverses or losses are recognized by law as an authorized
cause for terminating employment, it is an essential requirement that alleged losses in
business operations must be proven convincingly. Otherwise, said ground for termination
would be susceptible to abuse by scheming employers, who might be merely feigning
business losses or reverses in their business ventures in order to ease out employees.[21] In
this case, the financial statements were not only belatedly submitted but were also bereft of
necessary details on the extent of the alleged losses incurred, if any. The income statements
only indicated a decline in sales in 1998 as compared to 1997. These fell short of the
stringent requirement of the law that the employer prove sufficiently and convincingly its
allegation of substantial losses. While the comparative income statement shows a net loss of
P207,091 in 1998, the income statement of 1997 still shows JAT posting a net income of
P19,361. Both statements need interpretation as to their impact on the companys
termination of certain personnel as well as business closure.
Having concluded that private respondent was not validly dismissed resulting from closure of
business operations due to substantial losses, we now proceed to determine whether or not
private respondent was validly dismissed on the ground of closure or cessation of operations
for reasons other than substantial business losses.
A careful examination of Article 283 of the Labor Code shows that closure or cessation of
business operation as a valid and authorized ground of terminating employment is not
limited to those resulting from business losses or reverses. Said provision in fact provides for
the payment of separation pay to employees terminated because of closure of business not
due to losses, thus implying that termination of employees other than closure of business
due to losses may be valid.
Hence, in one case,[22] we emphasized that:
Art. 283 governs the grant of separation benefits in case of closures or cessation of
operation of business establishments NOT due to serious business losses or financial
reverses x x x. Where, however, the closure was due to business lossesas in the instant
case, in which the aggregate losses amounted to over P20 billionthe Labor Code does not
impose any obligation upon the employer to pay separation benefits, for obvious reasons.
There is no need to belabor this point. Even the public respondents, in their Comment filed
by the Solicitor General, impliedly concede this point.
In another case,[23] we held more emphatically that:
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his
business operations or undertaking even if he is not suffering from serious business losses or
financial reverses, as long as he pays his employees their termination pay in the amount
corresponding to their length of service. It would, indeed, be stretching the intent and spirit
of the law if we were to unjustly interfere in managements prerogative to close or cease its

business operations just because said business operation or undertaking is not suffering
from any loss.
In the present case, while petitioners did not sufficiently establish substantial losses to
justify closure of the business, its income statement shows declining sales in 1998,
prompting the petitioners to suspend its business operations sometime in March 1998,
eventually leading to its permanent closure in December 1998. Apparently, the petitioners
saw the declining sales figures and the unsustainable business environment with no hope of
recovery during the period of suspension as indicative of bleak business prospects, justifying
a permanent closure of operation to save its business from further collapse. On this score,
we agree that undue interference with an employers judgment in the conduct of his business
is uncalled for. Even as the law is solicitous of the welfare of employees, it must also protect
the right of an employer to exercise what is clearly a management prerogatives. As long as
the companys exercise of the same is in good faith to advance its interest and not for the
purpose of defeating or circumventing the rights of employees under the law or a valid
agreement such exercise will be upheld.[24]
In the event, under Article 283 of the Labor Code, three requirements are necessary for a
valid cessation of business operations, namely: (a) service of a written notice to the
employees and to the DOLE at least one (1) month before the intended date thereof; (b) the
cessation of business must be bona fide in character; and (c) payment to the employees of
termination pay amounting to at least one-half (1/2) month pay for every year of service, or
one (1) month pay, whichever is higher.[25]
The closure of business operation by petitioners, in our view, is not tainted with bad faith or
other circumstance that arouses undue suspicion of malicious intent. The decision to
permanently close business operations was arrived at after a suspension of operation for
several months precipitated by a slowdown in sales without any prospects of improving.
There were no indications that an impending strike or any labor-related union activities
precipitated the sudden closure of business. Further, contrary to the findings of the Labor
Arbiter, petitioners had notified private respondent[26] and all other workers through written
letters dated November 25, 1998 of its decision to permanently close its business and had
submitted a termination report to the DOLE.[27] Generally, review of labor cases elevated to
this Court on a petition for review on certiorari is confined merely to questions of law. But in
certain cases, we are constrained to analyze or weigh the evidence again if the findings of
fact of the labor tribunals and the appellate court are in conflict, or not supported by
evidence on record or the judgment is based on a misapprehension of facts.[28]
In this case, we are persuaded that the closure of JATs business is not unjustified. Further we
hold that private respondent was validly terminated, because the closure of business
operations is justified.
Nevertheless in this case, we must stress that the closure of business operation is allowed
under the Labor Code, provided separation pay be paid to the terminated employee. It is
settled that in case of closure or cessation of operation of a business establishment not due
to serious business losses or financial reverses, the employees are always given separation
benefits.[29] The amount of separation pay must be computed from the time private
respondent commenced employment with petitioners until the time the latter ceased
operations.[30]
Considering that private respondent was not illegally dismissed, however, no backwages
need to be awarded. Backwages in general are granted on grounds of equity for earnings
which a worker or employee has lost due to illegal dismissal.[31] It is well settled that
backwages may be granted only when there is a finding of illegal dismissal.[32]
The other monetary awards to private respondent are undisputed by petitioners and
unrefuted by any contrary evidence. These awards, namely legal holiday pay, service
incentive leave pay and 13th month pay, should be maintained.
WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of
Appeals in CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that the award of
P66,924.00 as backwages is deleted. The award of separation pay amounting to P10,296.00
and the other monetary awards, namely salary differentials in the amount of P1,066.00,
legal holiday pay in the amount of P1,850.00, service incentive leave pay in the amount of
P925.00 and 13th month pay in the amount of P4,910, or a total of P29,047.00 are
maintained. No pronouncement as to costs.
SO ORDERED.
LA UNION CEMENT WORKERS G.R. No. 174621

UNION & ARNULFO ALMOITE,

Petitioners, - versus NATIONAL LABOR RELATIONS
COMMISSION and BACNOTAN
CEMENT CORPORATION (now
HOLCIM PHILIPPINES, INC.), January 30, 2009
Respondents.
DECISION
TINGA, J.:
Before the Court is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of
Civil Procedure assailing the decision[2] and resolution[3] of the Court of Appeals in CA-G.R.
SP No. 90597. The challenged decision affirmed the judgment of the National Labor
Relations Commission (NLRC), which declared as valid the termination of petitioner Arnulfo
Almoite on the ground of redundancy while the resolution denied petitioners motion for
reconsideration.
As culled from the records of the case, the following antecedent facts appear:
Private respondent Bacnotan Cement Corporation (respondent company), now known as
Holcim Philippines, Inc., is engaged in the manufacture of cement. Prior to 1994, respondent
company had been utilizing the wet process technology in its operations. Sometime in 1992,
respondent company introduced the dry process technology as part of its modernization
program. In 1995, the new dry process technology became fully operational. After a
comparative study of the two production lines, respondent company discovered that the dry
process technology or the dry line proved to be more efficient as the cost was minimized by
P15.00 per cement bag while the wet process technology or the wet line consumed more
fuel and had to undergo frequent repairs and shutdowns due to its obsolescence.[4]
Amid this backdrop of cost inefficiencies was the increasing competition in the cement
industry due to the trade liberalization, the expansion of other plants and the entry of new
industry players. Thus, after studying the situation, respondent company concluded that it
would be uncompetitive and impractical to operate the wet line and decided to close it
down.[5]
To implement the closure of the wet line, respondent company and petitioner La Union
Cement Workers Union (petitioner Union) entered into a Memorandum of Agreement on 19
July 1997, whereby respondent company committed to grant separation pay equivalent to
150% of the monthly basic pay for every year of service plus the additional fixed amount of
P27,000.00 to employees who would be terminated as a result of the closure of the wet line.
In an open letter dated 11 August 1997,[6] Magdaleno B. Albarracin, Jr., the respondent
companys Senior Executive Vice President, notified the employees of the its decision to
mothball the wet line and the termination of those whose employment would become
unnecessary as a result of the closure.[7]

On 15 August 1997, respondent company sent a letter to the office of Ricardo S. Martinez,
Regional Director of the Department of Labor and Employment (DOLE), informing him about
respondent companys decision to shut down the wet line and furnishing him the list of
affected employees.[8] On 16 August 1997, respondent company sent notices of termination
to more or less 200 employees including petitioner Almoite. Upon the receipt of the
separation pay, a number of the affected employees signed individual Release Waiver and
Quitclaim.[9]
Sometime in November 1997, petitioner Union and some 80 of its members including
petitioner Almoite filed complaints for unfair labor practice, illegal lay-off and illegal
dismissal against respondent company before the NLRC Regional Arbitration Branch 1 in San
Fernando, La Union. The petitioners alleged that while the closure affected only the wet line,
among the employees terminated were operating the dry line or performing support services
for both wet and dry lines. They further alleged that after the closure of the wet line,
respondent company contracted out the services performed by the employees who were
terminated.

Only 31 of the 80 employees pursued the complaints before the Labor Arbiter. After
submission of the parties position papers and pleadings, Labor Arbiter Irenarco R. Rimando
rendered a Decision[10] on 19 March 1999 dismissing the complaints. Labor Arbiter Rimando
found that respondent company complied with the requisite notice and severance pay
mandated under Article 283 of the Labor Code. As regards the claim that the services
performed by the complainants were eventually assumed by employees who were retained
or were contracted out, Labor Arbiter Rimando ruled that the employer had the prerogative
to utilize its remaining workforce to the maximum.

Petitioners appealed to the NLRC, arguing that respondent company failed to prove with
substantial evidence that the retrenchment was absolutely necessary and unavoidable
mainly because the affected employees were also performing support services in the wet
line.
Public respondent NLRC affirmed in toto the decision of Labor Arbiter Rimando. It held that
the appeal was brought by petitioner Union and not by its members who were the real
parties-in-interest and, thus, must be dismissed outright. The NLRC held that the
retrenchment on the ground of redundancy was valid in any case. It concluded that the
scaling down of activities requiring support services was a consequence of the closure of the
wet line; hence, the termination of the excess employees performing such support services
followed as a matter of course.[11]

Only petitioner Union and petitioner Almoite elevated the matter to the Court of Appeals via
a petition for certiorari. The appellate court found no grave abuse of discretion committed by
public respondent NLRC in affirming the decision of Labor Arbiter Rimando. In a Resolution
dated 06 September 2006, the Court of Appeals denied petitioners motion for
reconsideration for lack of merit.
Hence, the instant petition, raising the following issues:
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO LAW IN FINDING THAT
PETITIONER UNION IS NOT A REAL PARTY-IN-INTEREST AND MAY NOT REPRESENT ITS
MEMBERS IN A CASE QUESTIONING THEIR DISMISSAL.
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO LAW AND THE EVIDENCE IN
UPHOLDING PUBLIC RESPONDENTS FINDING THAT PETITIONER ALMOITES TERMINATION WAS
VALID.[12]
In a Resolution dated 13 December 2006, the Court dismissed the petition with respect to
petitioner Union for insufficiency or defective verification and certification of non-forum
shopping, as only the president of petitioner Union signed the same in violation of Sections 4
and 5, Rule 7 of the Rules of Court.[13] The judgment of dismissal has become final and
executory with respect to petitioner Union on 08 February 2007.[14]
As regards the claim of petitioner Almoite, the Court resolved to require respondent
company to comment thereon. In its comment, respondent company prays that the petition
raises factual issues and should be dismissed for lack of merit.
The instant petition raises two issues: namely, whether petitioner Union is the real party-ininterest in this case and whether petitioner Almoites termination was valid. The question of
petitioner Unions capacity to sue on behalf of its members has become moot and academic
in view of the judgment of dismissal of the instant petition which has already become final
and executory with respect to petitioner Union.
Thus, the remaining issue to be resolved in this petition pertains to petitioner Almoites claim
that petitioner Union has failed to prove that his work as an oiler for both the wet and dry
lines has become redundant with the closure of the wet line.
Petitioner Almoites claim is clearly a factual question which is beyond the province of a Rule
45 petition. As an overture, clear and unmistakable is the rule that the Supreme Court is not
a trier of facts. Just as well entrenched is the doctrine that pure issues of fact may not be the
proper subject of appeal by certiorari under Rule 45 of the Revised Rules of Court as this
mode of appeal is generally confined to questions of law. We therefore take this opportunity
again to reiterate that only questions of law, not questions of fact, may be raised before the
Supreme Court in a petition for review under Rule 45 of the Rules of Court. This Court cannot
be tasked to go over the proofs presented by the petitioners in the lower courts and analyze,
assess and weigh them to ascertain if the court a quo and the appellate court were correct
in their appreciation of the evidence.[15]

In any event, the Court finds no cogent reason to disturb the judgment of the Court of
Appeals affirming the Labor Arbiter and NLRC rulings that the termination of petitioner
Almoite and the other employees of respondent company. As explained by the NLRC, the
termination of petitioner Almoite was a necessary consequence of the partial closure of
operations of respondent company. Petitioner Almoites work as an oiler for both the wet line
and dry line has become redundant or superfluous following the closure of the wet line. By
and large, the determination of whether to maintain or phase out an entire department or
section or to reduce personnel lies with the management.[16] Thus, his termination on the
ground of redundancy is an authorized cause for termination under Article 283 of the Labor
Code.
The Court quotes with approval the following conclusions of the NLRC:

x x x There is no dispute as to the fact that there was a partial closure or cessation of
operations with the mothballing of the old wet-process production line of the company a
situation which falls among the authorized causes for termination allowed under Article 283
of the Labor Code. x x x Neither is there any dispute that the logical and consequence [sic]of
such partial cessation of operations was to render certain employees redundant. Obviously
enough, since there was a curtailment in operations, certain activities were rendered either
excess or no longer necessary, hence, redundant.
xxxx
The only ostensible argument presented by appellant is the bare allegation that most of
them were not exclusively assigned to the wet process line but were performing support
services for both the wet line and the dry line. Therefore, they argue that they could not be
declared redundant by virtue of the closure of the wet line alone. This line of argument is
non sequitur, fallacious and totally untenable. It proceeds from the erroneous premise that
only those exclusively assigned to the wet line can be declared redundant. The mere fact
that an employee was performing support services for both the wet and the dry line does
not in any way exclude him from being declared as redundant. On the contrary, with the
closure of the wet line and the consequent scaling down of activities requiring support
services, it stands to reason that there was already an excess of employees performing
support services. Respondent had therefore all the reason to include such employees among
those whom it considered redundant. [Citation omitted][17]

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. We find no basis for deviating from
the aforestated doctrine without any clear showing that the findings of the labor arbiter, as
affirmed by the NLRC and the Court of Appeals, are bereft of sufficient substantiation.[18]
WHEREFORE, the instant petition for review on certiorari is DENIED and the decision and
resolution of the Court of Appeals in CA-G.R. SP No. 90597 are AFFIRMED.
SO ORDERED.
G.R. No. 106256
December 28, 1994
MAYA FARMS EMPLOYEES ORGANIZATION, MAYA REALTY AND LIVESTOCK
SUPERVISORY UNION, MAYA FARMS EMPLOYEES ASSOCIATION, and MAYA FARMS,
INC. SUPERVISORY UNION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MAYA REALTY & LIVESTOCK, INC.,
MAYA FARMS, INC., and LIBERTY FLOUR MILLS, INC., respondents.
Paterno D. Menzon Law Office for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.
KAPUNAN, J.:

This petition for review on certiorari seeks to set aside the decision of public respondent
National Labor Relations Commission (NLRC) which upheld the legality of the separation of
sixty-six (66) employees who are members of petitioner unions, thereby dismissing
petitioners' complaint against private respondents for violation of collective bargaining
agreement (CBA) and unfair labor practice.
Private respondents Maya Farms, Inc. and Maya Realty and Livestock Corporation belong to
the Liberty Mills group of companies whose undertakings include the operation of a meat
processing plant which produces ham, bacon, cold cuts, sausages and other meat and
poultry products.
Petitioners, on the other hand, are the exclusive bargaining agents of the employees of
Maya Farms, Inc. and the Maya Realty and Livestock Corporation.
On April 12, 1991, private respondents announced the adoption of an early retirement
program as a cost-cutting measure considering that their business operations suffered major
setbacks over the years. The program was voluntary and could be availed of only by
employees with at least eight (8) years of service. 1 Dialogues were thereafter conducted to
give the parties an opportunity to discuss the details of the program. Accordingly, the
program was amended to reduce the minimum requirement of eight (8) years of service to
only five (5) years.
However, the response to the program was nil. There were only a few takers. To avert further
losses, private respondents were constrained to look into the companies' organizational setup in order to streamline operations. Consequently, the early retirement program was
converted into a special redundancy program intended to reduce the work force to an
optimum number so as to make operations more viable.
In December 1991, a total of sixty-nine (69) employees from the two companies availed of
the special redundancy program.
On January 17, 1992, the two companies sent letters to sixty-six (66) employees informing
them that their respective positions had been declared redundant. The notices likewise
stated that their services would be terminated effective thirty (30) days from receipt thereof.
Separation benefits, including the conversion of all earned leave credits and other benefits
due under existing CBAs were thereafter paid to those affected.
On January 24, 1992, a notice of strike was filed by the petitioners which accused private
respondents, among others, of unfair labor practice, violation of CBA and discrimination.
Conciliation proceedings were held by the National Conciliation and Mediation Board (NCMB)
but the parties failed to arrive at a settlement.
On February 6, 1992, the two companies filed a petition with the
Employment asking the latter to assume jurisdiction over the case
for compulsory arbitration. Thus, on February 12, 1992, the then
(now Secretary) Nieves Confesor certified the case to herein
compulsory arbitration.

Secretary of Labor and

and/or certify the same
Acting Labor Secretary
public respondent for

On March 4, 1992, the parties were called to a hearing to identify the issues involved in the
case. Thereafter, they were ordered to submit their respective position papers.
In their position paper, petitioners averred that in the dismissal of
sixty-six (66) union officers and members on the ground of redundancy, private respondents
circumvented the provisions in their CBA, more particularly, Section 2, Article III thereof. Said
provision reads:
Sec. 2. LIFO RULE. In all cases of lay-off or retrenchment resulting in termination of
employment in the line of work, the
Last-In-First-Out (LIFO) Rule must always be strictly observed.
Petitioners also alleged that the companies' claim that they were in economic crisis was
fabricated because in 1990, a net income of over 83 million pesos was realized by Liberty
Flour Mills Group of Companies. 2 Furthermore, with the termination of the sixty-six (66)
employees pursuant to the special redundancy program, the remaining work force,
especially the drivers, became overworked and overburdened so much so that they found
themselves doing overtime work and reporting for duty even during rest days.

Invoking the workers' constitutional right to security of tenure, petitioners prayed for the
reinstatement of the sixty-six (66) employees and the payment of attorney's fees as they
were constrained to hire the services of counsel in order to protect the workers' rights.
On their part, private respondents contend that their decision to implement a special
redundancy program was an exercise of management prerogative which could not be
interfered with unless it is shown to be tainted with bad faith and ill motive. Private
respondents explained that they had no choice but to reduce their work force, otherwise,
they would suffer more losses. Furthermore, they denied that the program violated CBA
provisions.
On June 29, 1992, public respondent rendered a decision, 3 the dispositive portion of which
reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered confirming the legality
of the separation of the 66 employees of management thereby dismissing the charges of
violation of CBA and unfair labor practice on the part of management. Accordingly, Maya
Farms Incorporated and Maya Realty and Livestocks Inc. are hereby ordered to comply with
its (sic) undertaking per the notice of termination dated January 17, 1992 issued to the
remaining fifty three (53) employees paying them their respective separation benefits as
listed in the attached sheet considered part of this Decision. Said awards (sic) is in addition
to other benefits as extended by the companies in the letter of termination.
SO ORDERED. 4
Not satisfied with the above-quoted decision, petitioners interposed the instant petition.
Petitioners maintain that public respondent grossly erred and gravely abused its discretion
when it ruled that: (a) the termination of the sixty-six (66) employees was in accordance
with the LIFO rule in the CBA; (b) the termination of the sixty-six (66) employees was in
accordance with Article 283 of the Labor Code; and (c) the payment or offer of payment can
substitute for the 30-day required notice prior to termination. 5
A close scrutiny of these assigned errors however, shows that the same primarily deal with
the factual findings of public respondent which we are not at liberty to set aside in the
absence of grave abuse of discretion amounting to lack or in excess of jurisdiction.
This Court has consistently ruled that findings of fact of administrative agencies and quasijudicial bodies which have acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect but even finality 6 and are binding
upon this Court unless there is a showing of grave abuse of discretion, 7 or where it is clearly
shown that they were arrived at arbitrarily or in disregard of the evidence on record. 8
Nevertheless, we will look into the factual findings of public respondent if only to determine
whether there was grave abuse of discretion amounting to lack or in excess of jurisdiction.
The termination of the sixty-six employees was done in accordance with Article 283 of the
Labor Code. The basis for this was the companies' study to streamline operations so as to
make them more viable. Positions which overlapped each other, or which are in excess of
the requirements of the service, were declared redundant.
Article 283 provides:
Art. 283.
Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor-saving
devises, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing in
the provisions of this title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of
retrenchment to prevent losses of operations of establishment or undertaking not due to
serious business losses or financial reverses, the one (1) month pay or at least
one-half (1/2) pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
We fully agree with the findings and conclusions of the public respondent on the issue of
termination, to wit:
We sustain the companies' prerogative to adopt the alleged redundancy/retrenchment
program to minimize if not, to avert losses in the conduct of its operations. This has been
recognized in a line of cases. (Wiltshire File Co. vs. NLRC, G.R. No. L-82249, February 7,
1991). However, the companies' decision on this matter is not absolute. The basis for such

an action must be far from being whimsical and the same must be proved by substantial
evidence. In addition, the implementation of such a decision or policy must be in accordance
with existing laws, rules and procedure and provisions of the CBA between the parties, if
there be any. Short of any of these conditions, management policy to pursue and terminate
its employees allegedly to avert losses, must fail.
In subject case, the 66 complaining employees were separated from service as a result of
the decision of management to limit its operations and streamline positions and personnel
requirements.
In the case of Maya Farms, Inc. its meat processing department, prior to the adoption of
special redundancy program had four (4) sections each of which is headed by an assistant
superintendent. These 3 sections are: (a) meat processing; (b) slaughterhouse; (c) packing.
With the implementation of the decision of management to limit meat processing with
sausages as the only output, only one position for assistant superintendent was retained
that of Asst. Superintendent for meat processing held by Lydia Bandong. (Plantilla attached
to the letter of May 24, 1992; also Exh. "E." Likewise, positions of slicer/seater operator,
debonner/skinner, ham and bacon operative, were scrapped. Similarly, positions for packers
were decreased retaining only five positions out of 21 packers. Also affected were the
positions of egg sorters/stockers as only 4 positions were retained out of ten (10) positions.
A close examination of the positions retained by management show that said positions such
as egg sorter, debonner were but the minimal positions required to sustain the limited
functions/operations of the meat processing department. In the absence of any evidence to
prove bad faith on the part of management in arriving at such decision, which records on
hand failed to show in instant case, the rationality of the act of management in this regard
must be sustained. While it may be true that the Liberty Flour Mills Group of Companies as a
whole posted a net income of P83.3 Million, it is admitted that with respect to operations of
the meat processing and livestock which were undertaken by herein companies sustained
losses in the sum of P2,257,649.88 (Exh. "3"). This is the reason, as advanced by
management, for its decision to streamline positions resulting in the reduction of manpower
compliment (sic). 9
In Abbott Laboratories (Phils.) Inc. vs. NLRC, 10 we had occasion to uphold the employer in
its exercise of what are clearly management prerogatives, thus:
The hiring, firing, transfer, demotion, and promotion of employees has been traditionally,
identified as a management prerogative subject to limitations found in law, a collective
bargaining agreement or general principles of fair play and justice. This is a function
associated with the employer's inherent right to control and manage effectively its
enterprise. Even as the law is solicitous of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives. The free will
of management to conduct its own business affairs to achieve its purpose cannot be denied
(see Dangan vs. National Labor Relations Commission, 127 SCRA 706).
The rule is well-settled that labor laws discourage interference with an employer's judgment
in the conduct of his business. Even as the law is solicitous of the welfare of employees, it
must also protect the right of an employer to exercise what are clearly management
prerogatives. As long as the company's exercise of the same is in good faith to advance its
interest and not for the purpose of defeating or circumventing the rights of employees under
the laws or valid agreements, such exercise will be upheld. 11
The NLRC correctly held that private respondents did not violate the LIFO rule under Section
2, Article III of the CBA which provides:
Sec. 2. LIFO RULE.
In all cases of lay-off or retrenchment resulting in termination of
employment in the line of work, the
Last-in-First-Out (LIFO) Rule must always be strictly observed.
It is not disputed that the LIFO rule applies to termination of employment in the line of work.
12 Verily, what is contemplated in the LIFO rule is that when there are two or more
employees occupying the same position in the company affected by the retrenchment
program, the last one employed will necessarily be the first to go.
Moreover, the reason why there was no violation of the LIFO rule was amply explained by
public respondent in this wise:
. . . . The LIFO rule under the CBA is explicit. It is ordained that in cases of retrenchment
resulting in termination of employment in line of work, the employee who was employed on
the latest date must be the first one to go. The provision speaks of termination in the line of

work. This contemplates a situation where employees occupying the same position in the
company are to be affected by the retrenchment program. Since there ought to be a
reduction in the number of personnel in such positions, the length of service of each
employees is the determining factor, such that the employee who has a longer period of
employment will be retained.
In the case under consideration, specifically with respect to Maya Farms, several positions
were affected by the special involuntary redundancy program. These are packers, egg
sorters/stockers, drivers. In the case of packers, prior to the involuntary redundancy
program,
twenty-one employees occupied the position of packers. Out of this number, only 5 were
retained. In this group of employees, the earliest date of employment was October 27, 1969,
and the latest packer was employed in 1989. The most senior employees occupying the
position of packers who were retained are as follows:
Santos, Laura C.
Estrada, Mercedes
Hortaleza, Lita
Jimenez, Lolita
Aquino, Teresita

Oct. 27, 1969

Aug. 20, 1970
June 11, 1971
April 25, 1972
June 25, 1975

All the other packers employed after June 2, 1975 (sic) were separated from the service.
The same is true with respect to egg sorters. The egg sorters employed on or before April
26, 1972 were retained. All those employed after said date were separated.
With respect to the position of drivers, there were eight drivers prior to the involuntary
redundancy program. Thereafter only 3 positions were retained. Accordingly, the three
drivers who were most senior in terms of period of employment, were retained. They are:
Ceferino D. Narag, Efren Macaraig and Pablito Macaraig.
The case of Roberta Cabrera and Lydia C. Bandong, Asst. Superintendent for packing and
Asst. Superintendent for meat processing respectively was presented by the union as an
instance where the LIFO rule was not observed by management. The union pointed out that
Lydia Bandong who was retained by management was employed on a much later date than
Roberta Cabrera, and both are Assistant Superintendent. We cannot sustain the union's
argument. It is indeed true that Roberta Cabrera was employed earlier (January 28, 1961)
and (sic) Lydia Bandong (July 9, 1966). However, it is maintained that in meat processing
department there were 3 Asst. Superintendents assigned as head of the 3 sections thereat.
The reason advanced by the company in retaining Bandong was that as Asst.
Superintendent for meat processing she could "already take care of the operations of the
other sections." The nature of work of each assistant superintendent as well as experience
were taken into account by management. Such criteria was not shown to be whimsical nor
carpricious (sic). 13 (Emphasis supplied).
Finally, contrary to petitioners' contention, there is nothing on record to show that the 30day notice of termination to the workers was disregarded and that the same substituted with
separation pay by private respondents. As found by public respondent, written notices of
separation were sent to the employees on January 17, 1992. The notices expressly stated
that the termination of employment was to take effect one month from receipt thereof.
Therefore, the allegation that separation pay was given in lieu of the 30-day notice required
by law is baseless.
WHEREFORE, finding no grave abuse of discretion amounting to lack or in excess of
jurisdiction on the part of public respondent, the instant petition is hereby DISMISSED.
SO ORDERED.
G.R. No. 141615
October 24, 2003
MAC ADAMS METAL ENGINEERING WORKERS UNION-INDEPENDENT and MARIO
GARCIA, RUPERTO JUADIONG JR., MARCELINO JIMENEZ, et al., petitioners,
vs.
MAC ADAMS METAL ENGINEERING and/or LYDIA SISON; GBS ENGINEERING
SERVICES and/or GERONIMO SISON; and MVS HEAVY EQUIPMENT RENTALS and
BUILDERS and/or DOMINIC SISON, and the COURT OF APPEALS, respondents.
DECISION
CORONA, J.:

Assailed in this petition for review on certiorari filed by Mac Adams Metal Engineering
Workers Union-Independent (MAMEWU) and 38 employees of private respondents Mac
Adams Metal and Engineering (MAME) and GBS Engineering Services (GBS), is the decision1
dated July 9, 1999 of the Court of Appeals affirming the decision2 of the National Labor
Relations Commission (NLRC) which, in turn, upheld the findings of the labor arbiter.3
The present controversy stemmed from two separate complaints: the first complaint, filed on
November 9, 1993 by petitioner MAMEWU and its president, petitioner Mario A. Garcia, for
and in behalf of 29 other petitioners, charged private respondents MAME and GBS with
unfair labor practices (ULP) committed through union busting and illegal closure, and illegal
dismissal. The second complaint, filed on November 9, 1993 by the last eight petitioners led
by Halim Roldan, alleged that aside from ULP and illegal dismissal, private respondents were
likewise liable for non-payment of premium pay for holidays and rest days, night differential
pay and 13th month pay.
Insisting that the closure of MAME and GBS was illegal as it was calculated to bust their
union, petitioners claimed that MAME and GBS continued doing business under new business
names, i.e., MBS Machine and Industrial Supply (MBS) and MVS Heavy Equipment Rental and
Builders (MVS). Thus, MBS and MVS were impleaded as respondents in the complaint for
allegedly being run-away shops of MAME and GBS.
In both complaints, petitioners prayed for alternative reliefs for reinstatement with
backwages and/or separation pay.
In their answer, private respondent spouses Geronimo and Lydia V. Sison, proprietors of GBS
and MAME respectively, denied petitioners allegations. Explaining the closure of MAME and
GBS, private respondents narrated that respondent Lydia V. Sison decided to retire from
business when she became sickly in 1988. Her health did not improve despite proper
medical attention. In the general meeting of the workers held sometime in July 1992, she
announced her plan to close shop effective early 1993. The announcement in advance was
intended to give the workers ample time to look for alternative employment. Accordingly,
she declined to accept new projects and proceeded with the winding up of her business.
After the July 1992 workers general meeting, some employees formed a union ostensibly for
the purpose of making representations with the management to reconsider its decision to
cease business operations or, at least, see to it that all benefits due the affected employees
would be paid. In the course of negotiations with the management, the union leadership
demanded separation pay computed at 45 days for every year of service, a proposal private
respondents rejected. As it turned out, even before respondent Lydia V. Sison could formally
notify the employees and the concerned government agencies of the intended closure and
cessation of her business, MAMEWU and its members started resorting to concerted
activities such as work slowdown, picketing, refusal to report for work and ultimately, strikes.
Meanwhile, the workers of GBS joined in the concerted activities in sympathy with the
striking employees of MAME. As a consequence, GBS was also forced to close and cease its
business operations.
For their part, MBS and MVS denied being run-away shops of MAME and GBS.
Private respondent Geronimo B. Sison admitted being a part-owner of MBS which, he
maintained, was an entirely separate and distinct business enterprise from MAME and GBS.
MBS was engaged in manufacturing carton boxes and other allied products. On the other
hand, MAME and GBS were both engaged in the businesses of machine shop operations,
fabrication and construction.
Private respondent Dominic Sison, son of private respondent spouses Geronimo and Lydia V.
Sison, claimed that he was the sole proprietor of MVS. He denied that MVS was a run-away
shop of his parents. On the contrary, MVS was a legitimate business outfit engaged in
leasing out heavy equipment. With an initial capital of P 1M, MVS used to rent from
respondent MAME some of its heavy equipment which MVS, in turn, offered for lease to
others. Sometime in May 1994, respondent Dominic Sison obtained an P 8M loan from the
PNB and, with the fresh capital, he branched out into the construction business. Hence, MVS
was an entirely separate and distinct business entity with a capital of its own, completely
different personnel complement, equipment, machineries and implements, and whose
clients were different from those of MAME and GBS.
On June 20, 1997, the labor arbiter rendered a decision declaring that the closure of
business of MAME and GBS was legitimate, having been done in good faith and in
accordance with law. Hence, no unfair labor practice or illegal dismissal was committed:
xxx

All told, finding the charge of unfair labor practice to be bereft of any factual basis, but on
the contrary, the evidence amply shows that the closure of respondent MAME and GBS was
legitimately and validly carried out in compliance with the legal mandates and in good faith,
it necessarily follows that the charge of illegal dismissal may not be upheld.
The labor arbiter further ruled that only 16 out the 38 petitioners were regular employees.
The rest were hired on a contractual basis and therefore not entitled to separation pay.
On appeal to the NLRC, the assailed decision of the labor arbiter was affirmed.
Aggrieved, petitioners filed a petition for review before the Court of Appeals questioning the
decision of the NLRC. On July 9, 1999, the Court of Appeals rendered a decision affirming the
findings of both the labor arbiter and the NLRC that there was a legitimate and bona fide
closure and cessation of business by MAME and GBS. The appellate court, however, modified
the assailed decision and declared the second group of petitioners, led by Halim Roldan, as
regular employees also entitled to separation pay.
Petitioners are now before us imputing the following errors to the Court of Appeals:
I
THE PUBLIC RESPONDENT COMMITTED A SERIOUS ERROR OF LAW IN NOT AWARDING
BACKWAGES TO PETITIONERS DESPITE THE FACT THAT THEIR DISMISSAL FROM WORK WAS
TAINTED WITH VIOLATION OF THEIR RIGHT TO DUE PROCESS.
II
THE PUBLIC RESPONDENT COMMITTED A SERIOUS ERROR OF LAW IN NOT HOLDING THAT
RESPONDENTS MAME AND GBS WERE GUILTY OF UNION BUSTING IN CLOSING THEIR
OPERATIONS IN BAD FAITH.
III
PUBLIC RESPONDENT COMMITTED A SERIOUS LEGAL ERROR IN NOT HOLDING THAT
RESPONDENTS WERE GUILTY OF ENGAGING IN A RUN-AWAY SHOP.
IV
PUBLIC RESPONDENT LEGALLY ERRED IN NOT HOLDING THAT PRIVATE RESPONDENTS
GERONIMO AND LYDIA SISONS ACTS OF INTERROGATING EMPLOYEES WHO HAD JOINED THE
UNION CONSTITUTED UNFAIR LABOR PRACTICE.4
The foregoing assignments of error boil down to the lone issue of whether the closure of
private respondents business was done in good faith and for legitimate business reasons.
The applicable law is Article 283 of the Labor Code which provides:
ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. - The employer
may also terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the worker and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least onehalf (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered as one (1) whole year.
Explicit from the above provision is that closure or cessation of business operations is
allowed even if the business is not undergoing economic losses. The owner, for any bona
fide reason, can lawfully close shop at anytime. Just as no law forces anyone to go into
business, no law can compel anybody to continue in it. It would indeed be stretching the
intent and spirit of the law if we were to unjustly interfere with the managements
prerogative to close or cease its business operations just because said business operation or
undertaking is not suffering from any loss5 or simply to provide the workers continued
employment.

The employer need only comply with the following requirements for a valid cessation of
business operations. (a) service of a written notice to the employees and to the DOLE at
least one month before the intended date thereof; (b) the cessation of or withdrawal from
business operations must be bona fide in character and (c) payment of termination pay
equivalent to at least one-half month pay for each year of service, or one month pay,
whichever is higher.6
The records reveal that private respondents complied with the aforecited requirements.
MAMEs employees were adequately informed of the intended business closure and a written
notice to the Regional Director of the Department of Labor and Employment (DOLE) was
filed by private respondents, informing the DOLE that except for winding-up operations,
MAME will be closed effective March 8, 1993. Similar notices were served by Lydia V. Sison to
the Social Security System (SSS), Bureau of Internal Revenue (BIR), Department of Trade and
Industry (DTI) and the Municipal Licensing Division of Antipolo, Rizal. Thus, the licenses and
registration of respondent MAME with the SSS, the Municipality of Antipolo, Rizal and the DTI
were subsequently canceled and/or withdrawn.
In the case of respondent GBS, the employees were likewise sufficiently informed and formal
notices were served on the appropriate government offices, namely, DOLE, DTI, BIR, SSS,
and the Municipality of Antipolo Rizal at least one month prior to March 8, 1993.
The labor arbiter, the NLRC and the Court of Appeals were unanimous in their findings that
private respondents closure of business was bona fide and that private respondents did not
engage in the operation of run-away shops. We have always held that we are bound, in
principle, by the factual findings of administrative officials, if supported by substantial
evidence. Their factual findings are entitled not only to great weight and respect but even
finality, unless petitioners are able to show that the labor arbiter and the NLRC arbitrarily
disregarded the evidence before them or misapprehended evidence of such nature as to
compel a contrary conclusion if properly appreciated. We find no cogent reason to depart
from the rule.
Finally, since private respondents cessation and closure of business was lawful, there was
no illegal dismissal to speak of. This fact negated the obligation to pay backwages. Instead
private respondents were required to give separation pay, which they already did, to all their
regular employees except petitioners Rolando Cortes, Herminigildo Justo, Guillermo
Macaraeg, Felixberto Mirana, Arsenio Ortiz, Manuel Pranada, Ruben Saringan and Ramon
Seraspi who refused to accept their separation pay.
We conclude that petitioners have failed to show any reversible error on the part of the
Court of Appeals in rendering the assailed decision.
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.

G.R. No. 164772

June 8, 2006
EQUITABLE BANKING CORPORATION
petitioner,
vs.
RICARDO SADAC, Respondent.

(now

known

as

EQUITABLE-PCI

BANK),

DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court
En Banc filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking
to reverse the Decision1 and Resolution2 of the Court of Appeals, dated 6 April 2004 and 28
July 2004, respectively, as amended by the Supplemental Decision3 dated 26 October 2004
in CA-G.R. SP No. 75013, which reversed and set aside the Resolutions of the National Labor
Relations Commission (NLRC), dated 28 March 2001 and 24 September 2002 in NLRC-NCR
Case No. 00-11-05252-89.
The Antecedents
As culled from the records, respondent Sadac was appointed Vice President of the Legal
Department of petitioner Bank effective 1 August 1981, and subsequently General Counsel
thereof on 8 December 1981. On 26 June 1989, nine lawyers of petitioner Banks Legal

Department, in a letter-petition to the Chairman of the Board of Directors, accused

respondent Sadac of abusive conduct, inter alia, and ultimately, petitioned for a change in
leadership of the department. On the ground of lack of confidence in respondent Sadac,
under the rules of client and lawyer relationship, petitioner Bank instructed respondent
Sadac to deliver all materials in his custody in all cases in which the latter was appearing as
its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing and
formal investigation but the same remained unheeded. On 9 November 1989, respondent
Sadac filed a complaint for illegal dismissal with damages against petitioner Bank and
individual members of the Board of Directors thereof. After learning of the filing of the
complaint, petitioner Bank terminated the services of respondent Sadac. Finally, on 10
August 1989, respondent Sadac was removed from his office and ordered disentitled to any
compensation and other benefits.4
In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the
complaint for lack of merit. On appeal, the NLRC in its Resolution6 of 24 September 1991
reversed the Labor Arbiter and declared respondent Sadacs dismissal as illegal. The
decretal portion thereof reads, thus:
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990
be, as it is hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the
complainant as illegal, and consequently ordering the respondents jointly and severally to
reinstate him to his former position as bank Vice-President and General Counsel without loss
of seniority rights and other privileges, and to pay him full backwages and other benefits
from the time his compensation was withheld to his actual reinstatement, as well as moral
damages of P100,000.00, exemplary damages of P50,000.00, and attorneys fees equivalent
to Ten Percent (10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and severally to grant
separation pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date,
subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral
damages), P50,000.00 (exemplary damages) and attorneys fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53.7
Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing
the NLRC Resolution of 24 September 1991 in Equitable Banking Corporation v. National
Labor Relations Commission, docketed as G.R. No. 102467.8
In our Decision9 of 13 June 1997, we held respondent Sadacs dismissal illegal. We said that
the existence of the employer-employee relationship between petitioner Bank and
respondent Sadac had been duly established bringing the case within the coverage of the
Labor Code, hence, we did not permit petitioner Bank to rely on Sec. 26, Rule 13810 of the
Rules of Court, claiming that the association between the parties was one of a client-lawyer
relationship, and, thus, it could terminate at any time the services of respondent Sadac.
Moreover, we did not find that respondent Sadacs dismissal was grounded on any of the
causes stated in Article 282 of the Labor Code. We similarly found that petitioner Bank
disregarded the procedural requirements in terminating respondent Sadacs employment as
so required by Section 2 and Section 5, Rule XIV, Book V of the Implementing Rules of the
Labor Code. We decreed:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement
benefits in accordance with law; that private respondent shall be paid an additional amount
of P5,000.00; that the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other petitioners
being absolved from solidary liability. No costs.11
On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and
executory.12
Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution13
thereof. Likewise, petitioner Bank filed a Manifestation and Motion14 praying that the award
in favor of respondent Sadac be computed and that after payment is made, petitioner Bank
be ordered forever released from liability under said judgment.
Per respondent Sadacs computation, the total amount of the monetary award is
P6,030,456.59, representing his backwages and other benefits, including the general
increases which he should have earned during the period of his illegal termination.
Respondent Sadac theorized that he started with a monthly compensation of P12,500.00 in
August 1981, when he was appointed as Vice President of petitioner Banks Legal
Department and later as its General Counsel in December 1981. As of November 1989,

when he was dismissed illegally, his monthly compensation amounted to P29,365.00 or

more than twice his original compensation. The difference, he posited, can be attributed to
the annual salary increases which he received equivalent to 15 percent (15%) of his monthly
salary.
Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines,
and cited as authority the cases of East Asiatic Company, Ltd. v. Court of Industrial
Relations,15 St. Louis College of Tuguegarao v. National Labor Relations Commission,16 and
Sigma Personnel Services v. National Labor Relations Commission.17 According to
respondent Sadac, the catena of cases uniformly holds that it is the obligation of the
employer to pay an illegally dismissed employee the whole amount of the salaries or wages,
plus all other benefits and bonuses and general increases to which he would have been
normally entitled had he not been dismissed; and therefore, salary increases should be
deemed a component in the computation of backwages. Moreover, respondent Sadac
contended that his check-up benefit, clothing allowance, and cash conversion of vacation
leaves must be included in the computation of his backwages.
Petitioner Bank disputed respondent Sadacs computation. Per its computation, the amount
of monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the
latters general salary increases and other claimed benefits which, it maintained, were
unsubstantiated. The jurisprudential precedent relied upon by petitioner Bank in assailing
respondent Sadacs computation is Evangelista v. National Labor Relations Commission,18
citing Paramount Vinyl Products Corp. v. National Labor Relations Commission,19 holding
that an unqualified award of backwages means that the employee is paid at the wage rate
at the time of his dismissal. Furthermore, petitioner Bank argued before the Labor Arbiter
that the award of salary differentials is not allowed, the established rule being that upon
reinstatement, illegally dismissed employees are to be paid their backwages without
deduction and qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike.
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order20 adopting
respondent Sadacs computation. In the main, the Labor Arbiter relying on Millares v.
National Labor Relations Commission21 concluded that respondent Sadac is entitled to the
general increases as a component in the computation of his backwages. Accordingly, he
awarded respondent Sadac the amount of P6,030,456.59 representing his backwages
inclusive of allowances and other claimed benefits, namely check-up benefit, clothing
allowance, and cash conversion of vacation leave plus 12 percent (12%) interest per annum
equivalent to P1,367,590.89 as of 30 June 1999, or a total of P7,398,047.48. However,
considering that respondent Sadac had already received the amount of P1,055,740.48 by
virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor Arbiter directed
petitioner Bank to pay respondent Sadac the amount of P6,342,307.00. The Labor Arbiter
also granted an award of attorneys fees equivalent to ten percent (10%) of all monetary
awards, and imposed a 12 percent (12%) interest per annum reckoned from the finality of
the judgment until the satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued
commanding the Sheriff, this Branch, to collect from respondent Bank the amount of
Ph6,342,307.00 representing the backwages with 12% interest per annum due
complainant.23
Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,24 promulgated on 28 March 2001. It ratiocinated that the doctrine on general
increases as component in computing backwages in Sigma Personnel Services and St. Louis
was merely obiter dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground
that the original circumstances therein are not only peculiar to the said case but also
completely strange to the case of respondent Sadac. Further, the NLRC disallowed
respondent Sadacs claim to check-up benefit ratiocinating that there was no clear and
substantial proof that the same was being granted and enjoyed by other employees of
petitioner Bank. The award of attorneys fees was similarly deleted.
The dispositive portion of the Resolution states:
WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation
prepared by respondent Equitable Banking Corporation on the award of backwages in favor
of complainant Ricardo Sadac under the decision promulgated by the Supreme Court on June
13, 1997 in G.R. No. 102476 in the aggregate amount of P2,981,442.98 is hereby ordered.25
Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,26 promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari
seeking nullification of the twin resolutions of the NLRC, dated 28 March 2001 and 24
September 2002, as well as praying for the reinstatement of the 2 August 1999 Order of the
Labor Arbiter.
For the resolution of the Court of Appeals were the following issues, viz.:
(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance,
and cash conversion of vacation leave are included in the computation of full backwages for
illegally dismissed employees;
(2) Whether respondent is entitled to attorneys fees; and
(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all
accounts outstanding until full payment thereof.
Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision
on 6 April 2004, the dispositive portion of which is quoted hereunder:
WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002
Resolutions of the National Labor Relations Commissions (sic) are REVERSED and SET ASIDE
and the August 2, 1999 Order of the Labor Arbiter is REVIVED to the effect that private
respondent is DIRECTED TO PAY petitioner the sum of PhP6,342,307.00, representing full
back wages (sic) which sum includes annual general increases in basic salary, check-up
benefit, clothing allowance, cash conversion of vacation leave and other sundry benefits
plus 12% per annum interest on outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.27
The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases
should be added as part of his backwages. According to the appellate court, respondent
Sadacs entitlement to the annual general increases has been duly proven by substantial
evidence that the latter, in fact, enjoyed an annual increase of more or less 15 percent
(15%). Respondent Sadacs check-up benefit, clothing allowance, and cash conversion of
vacation leave were similarly ordered added in the computation of respondent Sadacs basic
wage.
Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It ruled that
our Decision28 of 13 June 1997 did not award attorneys fees in respondent Sadacs favor as
there was nothing in the aforesaid Decision, either in the dispositive portion or the body
thereof that supported the grant of attorneys fees. Resolving the final issue, the Court of
Appeals imposed a 12 percent (12%) interest per annum on the total monetary award to be
computed from 28 July 1997 or the date our judgment in G.R. No. 102467 became final and
executory until fully paid at which time the quantification of the amount may be deemed to
have been reasonably ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration29 of the 6 April
2004 Court of Appeals Decision insofar as the appellate court did not award him attorneys
fees. Similarly, petitioner Bank filed a Motion for Partial Reconsideration thereon. Following
an exchange of pleadings between the parties, the Court of Appeals rendered a
Resolution,30 dated 28 July 2004, denying petitioner Banks Motion for Partial
Reconsideration for lack of merit.
Assignment of Errors
Hence, the instant Petition for Review by petitioner Bank on the following assignment of
errors, to wit:
(a) The Hon. Court of Appeals erred in ruling that general salary increases should be
included in the computation of full backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are:
(i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v. NLRC,
177 SCRA 151 (1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993); and (iv)
Millares v. NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor Code; (ii) Paramount
Vinyl Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista v. NLRC, 249 SCRA 194 (1995);
and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit,
clothing allowance and cash conversion of vacation leaves notwithstanding that respondent
did not present any evidence to prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal
interest even if the principal amount due him has not yet been correctly and finally
determined.31
Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision
granting respondent Sadacs Partial Motion for Reconsideration and amending the
dispositive portion of the 6 April 2004 Decision in this wise, viz.:
WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002
Resolutions of the National Labor Relations Commission are hereby REVERSED and SET
ASIDE and the August 2, 1999 Order of the Labor Arbiter is hereby REVIVED to the effect
that private respondent is hereby DIRECTED TO PAY petitioner the sum of P6,342,307.00,
representing full backwages which sum includes annual general increases in basic salary,
check-up benefit, clothing allowance, cash conversion of vacation leave and other sundry
benefits "and attorneys fees equal to TEN PERCENT (10%) of all the monetary award" plus
12% per annum interest on all outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.32
On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review33
contending in the main that the Court of Appeals erred in issuing the Supplemental Decision
by directing petitioner Bank to pay an additional amount to respondent Sadac representing
attorneys fees equal to ten percent (10%) of all the monetary award.
The Courts Ruling
I.
We are called to write finis to a controversy that comes to us for the second time. At the core
of the instant case are the divergent contentions of the parties on the manner of
computation of backwages.
Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not
contemplate the inclusion of salary increases in the definition of "full backwages." It
controverts the reliance by the appellate court on the cases of (i) East Asiatic; (ii) St. Louis;
(iii) Sigma Personnel; and (iv) Millares. While it is in accord with the pronouncement of the
Court of Appeals that Republic Act No. 6715, in amending Article 279, intends to give more
benefits to workers, petitioner Bank submits that the Court of Appeals was in error in relying
on East Asiatic to support its finding that salary increases should be included in the
computation of backwages as nowhere in Article 279, as amended, are salary increases
spoken of. The prevailing rule in the milieu of the East Asiatic doctrine was to deduct
earnings earned elsewhere from the amount of backwages payable to an illegally dismissed
employee.
Petitioner Bank posits that even granting that East Asiatic allowed general salary increases
in the computation of backwages, it was because the inclusion was purposely to cushion the
blow of the deduction of earnings derived elsewhere; with the amendment of Article 279 and
the consequent elimination of the rule on the deduction of earnings derived elsewhere, the
rationale for including salary increases in the computation of backwages no longer exists. On
the references of salary increases in the aforementioned cases of (i) St. Louis; (ii) Sigma
Personnel; and (iii) Millares, petitioner Bank contends that the same were merely obiter
dicta. In fine, petitioner Bank anchors its claim on the cases of (i) Paramount Vinyl Products
Corp. v. National Labor Relations Commission;34 (ii) Evangelista v. National Labor Relations
Commission;35 and (iii) Espejo v. National Labor Relations Commission,36 which ruled that
an unqualified award of backwages is exclusive of general salary increases and the
employee is paid at the wage rate at the time of the dismissal.
For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled
that his backwages should include the general increases on the basis of the following cases,
to wit: (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares.
Resolving the protracted litigation between the parties necessitates us to revisit our
pronouncements on the interpretation of the term backwages. We said that backwages in
general are granted on grounds of equity for earnings which a worker or employee has lost
due to his illegal dismissal.37 It is not private compensation or damages but is awarded in
furtherance and effectuation of the public objective of the Labor Code. Nor is it a redress of a
private right but rather in the nature of a command to the employer to make public

reparation for dismissing an employee either due to the formers unlawful act or bad faith.38
The Court, in the landmark case of Bustamante v. National Labor Relations Commission,39
had the occasion to explicate on the meaning of full backwages as contemplated by Article
27940 of the Labor Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715.
The Court in Bustamante said, thus:
The Court deems it appropriate, however, to reconsider such earlier ruling on the
computation of backwages as enunciated in said Pines City Educational Center case, by now
holding that conformably with the evident legislative intent as expressed in Rep. Act No.
6715, above-quoted, backwages to be awarded to an illegally dismissed employee, should
not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere
during the period of his illegal dismissal. The underlying reason for this ruling is that the
employee, while litigating the legality (illegality) of his dismissal, must still earn a living to
support himself and family, while full backwages have to be paid by the employer as part of
the price or penalty he has to pay for illegally dismissing his employee. The clear legislative
intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was
previously given them under the Mercury Drug rule or the "deduction of earnings elsewhere"
rule. Thus, a closer adherence to the legislative policy behind Rep. Act No. 6715 points to
"full backwages" as meaning exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his illegal
dismissal. In other words, the provision calling for "full backwages" to illegally dismissed
employees is clear, plain and free from ambiguity and, therefore, must be applied without
attempted or strained interpretation. Index animi sermo est.41
Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved.
In Mercury Drug Co., Inc. v. Court of Industrial Relations,42 the rule was that backwages
were granted for a period of three years without qualification and without deduction,
meaning, the award of backwages was not reduced by earnings actually earned by the
dismissed employee during the interim period of the separation. This came to be known as
the Mercury Drug rule.43 Prior to the Mercury Drug ruling in 1974, the total amount of
backwages was reduced by earnings obtained by the employee elsewhere from the time of
the dismissal to his reinstatement. The Mercury Drug rule was subsequently modified in
Ferrer v. National Labor Relations Commission44 and Pines City Educational Center v.
National Labor Relations Commission,45 where we allowed the recovery of backwages for
the duration of the illegal dismissal minus the total amount of earnings which the employee
derived elsewhere from the date of dismissal up to the date of reinstatement, if any. In Ferrer
and in Pines, the three-year period was deleted, and instead, the dismissed employee was
paid backwages for the entire period that he was without work subject to the deductions, as
mentioned. Finally came our ruling in Bustamante which superseded Pines City Educational
Center and allowed full recovery of backwages without deduction and without qualification
pursuant to the express provisions of Article 279 of the Labor Code, as amended by Rep. Act
No. 6715, i.e., without any deduction of income the employee may have derived from
employment elsewhere from the date of his dismissal up to his reinstatement, that is,
covering the entirety of the period of the dismissal.
The first issue for our resolution involves another aspect in the computation of full
backwages, mainly, the basis of the computation thereof. Otherwise stated, whether general
salary increases should be included in the base figure to be used in the computation of
backwages.
In so concluding that general salary increases should be made a component in the
computation of backwages, the Court of Appeals ratiocinated, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521
(1971) that "general increases" should be added as a part of full backwages, to wit:
In other words, the just and equitable rule regarding the point under discussion is this: It is
the obligation of the employer to pay an illegally dismissed employee or worker the whole
amount of the salaries or wages, plus all other benefits and bonuses and general increases,
to which he would have been normally entitled had he not been dismissed and had not
stopped working, but it is the right, on the other hand of the employer to deduct from the
total of these, the amount equivalent to the salaries or wages the employee or worker would
have earned in his old employment on the corresponding days he was actually gainfully
employed elsewhere with an equal or higher salary or wage, such that if his salary or wage
in his other employment was less, the employer may deduct only what has been actually
earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of
Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA
181 (1993) and Millares v. National Labor Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioners contention, alleged in his Memorandum that
only the wage rate at the time of the employees illegal dismissal should be considered
private respondent citing the following decisions of the Supreme Court: Paramount Vinyl
Corp. v. NLRC 190 SCRA 525 (1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v.
NLRC, 255 SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic, Ltd. v. Court
of Industrial Relations, 40 SCRA 521 (1971).
We are not convinced.
The Supreme Court had consistently held that payment of full backwages is the price or
penalty that the employer must pay for having illegally dismissed an employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and
Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear legislative
intent in the amendment in Republic Act 6715 was to give more benefits to workers than
was previously given them under the Mercury Drug rule or the "deductions of earnings
elsewhere" rule.
The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are
inapplicable to the case at bar. The doctrines therein came about as a result of the old
Mercury Drug rule, which was repealed with the passage of Republic Act 6715 into law. It
was in Alex Ferrer v. NLRC 255 SCRA 430 (1993) when the Supreme Court returned to the
doctrine in East Asiatic, which was soon supplanted by the case of Bustamante v. NLRC and
Evergreen Farms, Inc., which held that the backwages to be awarded to an illegally
dismissed employee, should not, as a general rule, be diminished or reduced by the earnings
derived from him during the period of his illegal dismissal. Furthermore, the Mercury Drug
rule was never meant to prejudice the workers, but merely to speed the recovery of their
backwages.
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the
Supreme Court to increase the backwages due an illegally dismissed employee. In the
Mercury Drug case, full backwages was to be recovered even though a three-year limitation
on recovery of full backwages was imposed in the name of equity. Then in Bustamante, full
backwages was interpreted to mean absolutely no deductions regardless of the duration of
the illegal dismissal. In Bustamante, the Supreme Court no longer regarded equity as a basis
when dealing with illegal dismissal cases because it is not equity at play in illegal dismissals
but rather, it is employers obligation to pay full back wages (sic). It is an obligation of the
employer because it is "the price or penalty the employer has to pay for illegally dismissing
his employee."
The applicable modern definition of full backwages is now found in Millares v. National Labor
Relations Commission 305 SCRA 500 (1999), where although the issue in Millares concerned
separation pay separation pay and backwages both have employees wage rate at their
foundation.
x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an
illegally dismissed employee the whole amount of his salaries plus all other benefits,
bonuses and general increases to which he would have been normally entitled had he not
been dismissed and had not stopped working. The same holds true in case of retrenched
employees. x x x
xxxx
x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)
We do not agree.
Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by
Section 34 of Rep. Act No. 6715. The law provides as follows:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.
(Emphasis supplied.)
Article 279 mandates that an employees full backwages shall be inclusive of allowances and
other benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals,
we do not see that a salary increase can be interpreted as either an allowance or a benefit.

Salary increases are not akin to allowances or benefits, and cannot be confused with either.
The term "allowances" is sometimes used synonymously with "emoluments," as indirect or
contingent remuneration, which may or may not be earned, but which is sometimes in the
nature of compensation, and sometimes in the nature of reimbursement.47 Allowances and
benefits are granted to the employee apart or separate from, and in addition to the wage or
salary. In contrast, salary increases are amounts which are added to the employees salary
as an increment thereto for varied reasons deemed appropriate by the employer. Salary
increases are not separate grants by themselves but once granted, they are deemed part of
the employees salary. To extend the coverage of an allowance or a benefit to include salary
increases would be to strain both the imagination of the Court and the language of law. As
aptly observed by the NLRC, "to otherwise give the meaning other than what the law speaks
for by itself, will open the floodgates to various interpretations."48 Indeed, if the intent were
to include salary increases as basis in the computation of backwages, the same should have
been explicitly stated in the same manner that the law used clear and unambiguous terms in
expressly providing for the inclusion of allowances and other benefits.
Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein
petitioner East Asiatic Company, Ltd. was found guilty of unfair labor practices against
therein respondent, Soledad A. Dizon, and the Court ordered her reinstatement with back
pay. On the question of the amount of backwages, the Court granted the dismissed
employee the whole amount of the salaries plus all general increases and bonuses she
would have received during the period of her lay-off with the corresponding right of the
employer to deduct from the total amounts, all the earnings earned by the employee during
her lay-off. The emphasis in East Asiatic is the duty of both the employer and the employee
to disclose the material facts and competent evidence within their peculiar knowledge
relative to the proper determination of backwages, especially as the earnings derived by the
employee elsewhere are deductions to which the employer are entitled. However, East
Asiatic does not find relevance in the resolution of the issue before us. First, the material
date to consider is 21 March 1989, when the law amending Article 279 of the Labor Code,
Rep. Act No. 6715, otherwise known as the Herrera-Veloso Law, took effect. It is obvious that
the backdrop of East Asiatic, decided by this Court on 31 August 1971 was prior to the
current state of the law on the definition of full backwages. Second, it bears stressing that
East Asiatic was decided at a time when even as an illegally dismissed employee is entitled
to the whole amount of the salaries or wages, it was the recognized right of the employer to
deduct from the total of these, the amount equivalent to the salaries or wages the employee
or worker would have earned in his old employment on the corresponding days that he was
actually gainfully employed elsewhere with an equal or higher salary or wage, such that if
his salary or wage in his other employment was less, the employer may deduct only what
has been actually earned.49 It is for this reason the Court centered its discussion on the
duty of both parties to be candid and open about facts within their knowledge to establish
the amount of the deductions, and not leave the burden on the employee alone to establish
his claim, as well as on the duty of the court to compel the parties to cooperate in disclosing
such material facts. The inapplicability of East Asiatic to respondent Sadac was sufficiently
elucidated upon by the NLRC, viz.:
A full discernment of the pertinent portion of the judgment sought to be executed in East
Asiatic Co., Ltd. would reveal as follows:
"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from
September 1, 1958 until actually reinstated with all the rights and privileges acquired and
due her, including seniority and such other terms and conditions of employment AT THE
TIME OF HER LAY-OFF"
The basis on which this doctrine was laid out was summed up by the Supreme Court which
ratiocinated in this light. To quote:
"x x x on the other hand, of the employer to deduct from the total of these, the amount
equivalent to these salaries or wages the employee or worker would have earned in his old
employment on the corresponding days that he was actually gainfully employed elsewhere
with an equal or higher salary or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what has been actually earned x x x"
(Ibid, pp. 547-548).
But the Supreme Court, in the instant case, pronounced a clear but different judgment from
that of East Asiatic Co. decretal portion, in this wise:
"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement
benefits in accordance with law; xxx"

Undisputably (sic), it was decreed in plain and unambiguous language that complainant
Sadac "shall be entitled to backwages." No more, no less.
Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with
the award of backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd.50
In the same vein, we cannot accept the Court of Appeals reliance on the doctrine as
espoused in Millares. It is evident that Millares concerns itself with the computation of the
salary base used in computing the separation pay of petitioners therein. The distinction
between backwages and separation pay is elementary. Separation pay is granted where
reinstatement is no longer advisable because of strained relations between the employee
and the employer. Backwages represent compensation that should have been earned but
were not collected because of the unjust dismissal. The bases for computing the two are
different, the first being usually the length of the employees service and the second the
actual period when he was unlawfully prevented from working.51
The issue that confronted the Court in Millares was whether petitioners housing and
transportation allowances therein which they allegedly received on a monthly basis during
their employment should have been included in the computation of their separation pay. It is
plain to see that the reference to general increases in Millares citing East Asiatic was a mere
obiter. The crux in Millares was our pronouncement that the receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part of salary
because the nature of the grant is a factor worth considering. Whether salary increases are
deemed part of the salary base in the computation of backwages was not the issue in
Millares.
Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was
mainly contentious therein was the inclusion of fringe benefits in the computation of the
award of backwages, in particular additional vacation and sick leaves granted to therein
concerned employees, it evidently appearing that the reference to East Asiatic in a footnote
was a mere obiter dictum. Salary increases are not akin to fringe benefits52 and neither is it
logical to conceive of both as belonging to the same taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to the case at
bar. The basic issue before the Court therein was whether the employee, Susan Sumatre, a
domestic helper in Abu Dhabi, United Arab Emirates, had been illegally dismissed, in light of
the contention of Sigma Personnel Services, a duly licensed recruitment agency, that the
former was a mere probationary employee who was, on top of this status, mentally
unsound.53 Even a cursory reading of Sigma Personnel Services citing St. Louis College of
Tuguegarao would readily show that inclusion of salary increases in the computation of
backwages was not at issue. The same was not on all fours with the instant petition.
What, then, is the basis of computation of backwages? Are annual general increases in basic
salary deemed component in the computation of full backwages? The weight of authority
leans in petitioner Banks favor and against respondent Sadacs claim for the inclusion of
general increases in the computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means that the employee
is paid at the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages requires simply an
application of judicial precedents defining the term "backwages". Unfortunately, the Labor
Arbiter erred in this regard. An unqualified award of backwages means that the employee is
paid at the wage rate at the time of his dismissal [Davao Free Worker Front v. Court of
Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418; Capital Garments
Corporation v. Ople, G.R. No. 53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping
Plant & Company v. NLRC, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has
declared that the base figure to be used in the computation of backwages due to the
employee should include not just the basic salary, but also the regular allowances that he
had been receiving, such as the emergency living allowances and the 13th month pay
mandated under the law [See Pan-Philippine Life Insurance Corporation v. NLRC, G.R. No.
53721, June 29, 1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721, September 21, 1987,
154 SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155 SCRA 124; Insular
Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis supplied.)
There is no ambivalence
backwages is pegged at
regular allowances that
allowances and the 13th

in Paramount, that the base figure to be used in the computation of

the wage rate at the time of the employees dismissal, inclusive of
the employee had been receiving such as the emergency living
month pay mandated under the law.

In Evangelista v. National Labor Relations Commission,55 we addressed the sole issue of

whether the computation of the award of backwages should be based on current wage level
or the wage levels at the time of the dismissal. We resolved that an unqualified award of
backwages means that the employee is paid at the wage rate at the time of his dismissal,
thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the determination of the
salary base for the computation of backwages requires simply an application of judicial
precedents defining the term "backwages." An unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal. Furthermore, the award of
salary differentials is not allowed, the established rule being that upon reinstatement,
illegally dismissed employees are to be paid their backwages without deduction and
qualification as to any wage increases or other benefits that may have been received by
their co-workers who were not dismissed or did not go on strike.56
The case of Paramount was relied upon by the Court in the latter case of Espejo v. National
Labor Relations Commission,57 where we reiterated that the computation of backwages
should be based on the basic salary at the time of the employees dismissal plus the regular
allowances that he had been receiving. Further, the clarification made by the Court in
General Baptist Bible College v. National Labor Relations Commission,58 settles the issue,
thus:
We also want to clarify that when there is an award of backwages this actually refers to
backwages without qualifications and deductions. Thus, We held that:
"The term backwages without qualification and deduction means that the workers are to be
paid their backwages fixed as of the time of the dismissal or strike without deduction for
their earnings elsewhere during their layoff and without qualification of their wages as thus
fixed; i.e., unqualified by any wage increases or other benefits that may have been received
by their co-workers who are not dismissed or did not go on strike. Awards including salary
differentials are not allowed. The salary base properly used should, however, include not
only the basic salary but also the emergency cost of living allowances and also
transportation allowances if the workers are entitled thereto."59 (Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of the Courts Decision of 13 June
1997 in G.R. No. 102467, awarding backwages to respondent Sadac, readily shows that the
award of backwages therein is unqualified, ergo, without qualification of the wage as thus
fixed at the time of the dismissal and without deduction.
A demarcation line between salary increases and backwages was drawn by the Court in
Paguio v. Philippine Long Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on
account of his illegal transfer sought backwages, including an amount equal to 16 percent
(16%) of his monthly salary representing his salary increases during the period of his
demotion, contending that he had been consistently granted salary increases because of his
above average or outstanding performance. We said:
In several cases, the Court had the opportunity to elucidate on the reason for the grant of
backwages. Backwages are granted on grounds of equity to workers for earnings lost due to
their illegal dismissal from work. They are a reparation for the illegal dismissal of an
employee based on earnings which the employee would have obtained, either by virtue of a
lawful decree or order, as in the case of a wage increase under a wage order, or by rightful
expectation, as in the case of ones salary or wage. The outstanding feature of backwages is
thus the degree of assuredness to an employee that he would have had them as earnings
had he not been illegally terminated from his employment.
Petitioners claim, however, is based simply on expectancy or his assumption that, because
in the past he had been consistently rated for his outstanding performance and his salary
correspondingly increased, it is probable that he would similarly have been given high
ratings and salary increases but for his transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this
contention is based merely on speculation. Furthermore, it assumes that in the other
position to which he had been transferred petitioner had not been given any performance
evaluation. As held by the Court of Appeals, however, the mere fact that petitioner had been
previously granted salary increases by reason of his excellent performance does not
necessarily guarantee that he would have performed in the same manner and, therefore,
qualify for the said increase later. What is more, his claim is tantamount to saying that he
had a vested right to remain as Head of the Garnet Exchange and given salary increases
simply because he had performed well in such position, and thus he should not be moved to
any other position where management would require his services.61

Applying Paguio to the case at bar, we are not prepared to accept that this degree of
assuredness applies to respondent Sadacs salary increases. There was no lawful decree or
order supporting his claim, such that his salary increases can be made a component in the
computation of backwages. What is evident is that salary increases are a mere expectancy.
They are, by its nature volatile and are dependent on numerous variables, including the
companys fiscal situation and even the employees future performance on the job, or the
employees continued stay in a position subject to management prerogative to transfer him
to another position where his services are needed. In short, there is no vested right to salary
increases. That respondent Sadac may have received salary increases in the past only
proves fact of receipt but does not establish a degree of assuredness that is inherent in
backwages. From the foregoing, the plain conclusion is that respondent Sadacs computation
of his full backwages which includes his prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage
and not salary, and therefore, the rule is inapplicable to him. It is respondent Sadacs stance
that he was not paid at the wage rate nor was he engaged in some form of manual or
physical labor as he was hired as Vice President of petitioner Bank. He cites Gaa v. Court of
Appeals62 where the Court distinguished between wage and salary.
The reliance is misplaced. The distinction between salary and wage in Gaa was for the
purpose of Article 1708 of the Civil Code which mandates that, "[t]he laborers wage shall
not be subject to execution or attachment, except for debts incurred for food, shelter,
clothing and medical attendance." In labor law, however, the distinction appears to be
merely semantics. Paramount and Evangelista may have involved wage earners, but the
petitioner in Espejo was a General Manager with a monthly salary of P9,000.00 plus
privileges. That wage and salary are synonymous has been settled in Songco v. National
Labor Relations Commission.63 We said:
Broadly, the word "salary" means a recompense or consideration made to a person for his
pains or industry in another mans business. Whether it be derived from "salarium," or more
fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of
compensation for services rendered. Indeed, there is eminent authority for holding that the
words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38
Am. Jur. 496). "Salary," the etymology of which is the Latin word "salarium," is often used
interchangeably with "wage", the etymology of which is the Middle English word "wagen".
Both words generally refer to one and the same meaning, that is, a reward or recompense
for services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Blacks Law
Dictionary, 5th Ed). x x x64 (Italics supplied.)
II.
Petitioner Bank ascribes as its second assignment of error the Court of Appeals ruling that
respondent Sadac is entitled to check-up benefit, clothing allowance and cash conversion of
vacation leaves notwithstanding that respondent Sadac did not present any evidence to
prove entitlement to these claims.65
The determination of respondent Sadacs entitlement to check-up benefit, clothing
allowance, and cash conversion of vacation leaves involves a question of fact. The wellentrenched rule is that only errors of law not of facts are reviewable by this Court in a
petition for review.66 The jurisdiction of this Court in a petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited to reviewing only errors
of law, not of fact, unless the factual findings being assailed are not supported by evidence
on record or the impugned judgment is based on a misapprehension of facts.67 This Court is
also not precluded from delving into and resolving issues of facts, particularly if the findings
of the Labor Arbiter are inconsistent with those of the NLRC and the Court of Appeals.68
Such is the case in the instant petition. The Labor Arbiter and the Court of Appeals are in
agreement anent the entitlement of respondent Sadac to check-up benefit, clothing
allowance, and cash conversion of vacation leaves, but the findings of the NLRC were to the
contrary. The Labor Arbiter sustained respondent Sadacs entitlement to check-up benefit,
clothing allowance and cash conversion of vacation leaves. He gave weight to petitioner
Banks acknowledgment in its computation that respondent Sadac is entitled to certain
benefits, namely, rice subsidy, tuition fee allowance, and medicine allowance, thus, there
exists no reason to deprive respondent Sadac of his other benefits. The Labor Arbiter also
reasoned that the petitioner Bank did not adduce evidence to support its claim that the
benefits sought by respondent Sadac are not granted to its employees and officers.
Similarly, the Court of Appeals ratiocinated that if ordinary employees are entitled to receive
these benefits, so it is with more reason for a Vice President, like herein respondent Sadac to
receive the same.

We find in the records that, per petitioner Banks computation, the benefits to be received by
respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance
per year.69 Contained nowhere is an acknowledgment of herein claimed benefits, namely,
check-up benefit, clothing allowance, and cash conversion of vacation leaves. We cannot
sustain the rationalization that the acknowledgment by petitioner Bank in its computation of
certain benefits granted to respondent Sadac means that the latter is also entitled to the
other benefits as claimed by him but not acknowledged by petitioner Bank. The rule is, he
who alleges, not he who denies, must prove. Mere allegations by respondent Sadac does not
suffice in the absence of proof supporting the same.
III.
We come to the third assignment of error raised by petitioner Bank in its Supplement to
Petition for Review, assailing the 26 October 2004 Supplemental Decision of the Court of
Appeals which amended the fallo of its 6 April 2004 Decision to include "attorneys fees
equal to TEN PERCENT (10%) of all the monetary award" granted to respondent Sadac.
Petitioner Bank posits that neither the dispositive portion of our 13 June 1997 Decision in
G.R. No. 102467 nor the body thereof awards attorneys fees to respondent Sadac. It is
postulated that the body of the 13 June 1997 Decision does not contain any findings of facts
or conclusions of law relating to attorneys fees, thus, this Court did not intend to grant to
respondent Sadac the same, especially in the light of its finding that the petitioner Bank was
not motivated by malice or bad faith and that it did not act in a wanton, oppressive, or
malevolent manner in terminating the services of respondent Sadac.70
We do not agree.
At the outset it must be emphasized that when a final judgment becomes executory, it
thereby becomes immutable and unalterable. The judgment may no longer be modified in
any respect, even if the modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the modification is attempted
to be made by the Court rendering it or by the highest Court of the land. The only
recognized exceptions are the correction of clerical errors or the making of so-called nunc
pro tunc entries which cause no prejudice to any party, and, of course, where the judgment
is void.71 The Courts 13 June 1997 Decision in G.R. No. 102467 became final and executory
on 28 July 1997. This renders moot whatever argument petitioner Bank raised against the
grant of attorneys fees to respondent Sadac. Of even greater import is the settled rule that
it is the dispositive part of the judgment that actually settles and declares the rights and
obligations of the parties, finally, definitively, and authoritatively, notwithstanding the
existence of inconsistent statements in the body that may tend to confuse.72
Proceeding therefrom, we make a determination of whether the Court in Equitable Banking
Corporation v. National Labor Relations Commission,73 G.R. No. 102467, dated 13 June
1997, awarded attorneys fees to respondent Sadac. In recapitulation, the dispositive portion
of the aforesaid Decision is hereunder quoted:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement
benefits in accordance with law; that private respondent shall be paid an additional amount
of P5,000.00; that the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other petitioners
being absolved from solidary liability. No costs.74
The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent
Sadac attorneys fees equivalent to ten percent (10%) of the monetary award, viz:
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990
be, as it is hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the
complainant as illegal, and consequently ordering the respondents jointly and severally to
reinstate him to his former position as bank Vice-President and General Counsel without loss
of seniority rights and other privileges, and to pay him full backwages and other benefits
from the time his compensation was withheld to his actual reinstatement, as well as moral
damages of P100,000.00, exemplary damages of P50,000.00, and attorneys fees equivalent
to Ten Percent (10%) of the monetary award. Should reinstatement be no longer possible
due to strained relations, the respondents are ordered likewise jointly and severally to grant
separation pay at one (1) month per year of service in the total sum of P293,650.00 with
backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date,
subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral
damages), P50,000.00 (exemplary damages) and attorneys fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53.75 (Italics Ours.)

As can be gleaned from the foregoing, the Courts Decision of 13 June 1997 AFFIRMED with
MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch
upon the award of attorneys fees as granted, hence, the award stands. Juxtaposing the
decretal portions of the NLRC Decision of 24 September 1991 with that of the Courts
Decision of 13 June 1997, we find that what was deleted by the Court was "the award of
moral and exemplary damages," but not the award of "attorneys fees equivalent to Ten
Percent (10%) of the monetary award." The issue on the grant of attorneys fees to
respondent Sadac has been adequately and definitively threshed out and settled with finality
when petitioner Bank came to us for the first time on a Petition for Certiorari in Equitable
Banking Corporation v. National Labor Relations Commission, docketed as G.R. No. 102467.
The Court had spoken in its Decision of 13 June 1997 in the said case which attained finality
on 28 July 1997. It is now immutable.
IV.
We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve
percent (12%) interest per annum on the outstanding balance as of 28 July 1997, the date
when our Decision in G.R. No. 102467 became final and executory.
In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking through the
Honorable Justice Jose C. Vitug, laid down the following rules of thumb:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages.
II. With regard particularly to an award of interest in the concept of actual or compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Article 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the court is made
(at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2 above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.77
It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from
the time judgment becomes final and executory, until full satisfaction thereof. Therefore,
petitioner Bank is liable to pay interest from 28 July 1997, the finality of our Decision in G.R.
No. 102467.78 The Court of Appeals was not in error in imposing the same notwithstanding
that the parties were at variance in the computation of respondent Sadacs backwages.
What is significant is that the Decision of 13 June 1997 which awarded backwages to
respondent Sadac became final and executory on 28 July 1997.
V.
Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily be denied as
established in our foregoing discussion. We are not herein modifying or reversing a doctrine
or principle laid down by the Court en banc or in a division. The instant case is not one that
should be heard by the Court en banc.791avvphil.net
Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the
backwages, respondent Sadacs claimed prospective salary increases, check-up benefit,
clothing allowance, and cash conversion of vacation leaves are excluded. The petition is
PARTIALLY DENIED insofar as we AFFIRMED the grant of attorneys fees equal to ten percent
(10%) of all the monetary award and the imposition of twelve percent (12%) interest per
annum on the outstanding balance as of 28 July 1997. Hence, the Decision and Resolution of
the Court of Appeals in CA-G.R. SP No. 75013, dated 6 April 2004 and 28 July 2004,
respectively, and the Supplemental Decision dated 26 October 2004 are MODIFIED in the
following manner, to wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:
(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467
with a clarification that the award of backwages EXCLUDES respondent Sadacs claimed
prospective salary increases, check-up benefit, clothing allowance, and cash conversion of
vacation leaves;
(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all monetary award;
and
(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum of
all monetary award from 28 July 1997, the date of finality of Our Decision in G.R. No. 102467
until full payment of the said monetary award.
The Motion to Refer the Petition to the Court En Banc is DENIED.
No costs.
SO ORDERED.
G.R. No. 80587
February 8, 1989
WENPHIL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND ROBERTO MALLARE, respondents.
Renato B. Valdecantos & Associates for petitioner.
The Solicitor General for public respondent.
Diego O. Untalan for private respondent.
GANCAYCO, J.:
Once again the dismissal of an employee without affording him due process is brought to the
attention of this Court by this petition.
Private respondent was hired by petitioner on January 18, 1984 as a crew member at its
Cubao Branch. He thereafter became the assistant head of the Backroom department of the
same branch. At about 2:30 P.M. on May 20, 1985 private respondent had an altercation with
a co-employee, Job Barrameda, as a result of which he and Barrameda were suspended on
the following morning and in the afternoon of the same day a memorandum was issued by
the Operations Manager advising private respondent of his dismissal from the service in
accordance with their Personnel Manual. The notice of dismissal was served on private
respondent on May 25, 1985.
Thus private respondent filed a complaint against petitioner for unfair labor practice, illegal
suspension and illegal dismissal. After submitting their respective position papers to the
Labor Arbiter and as the hearing could not be conducted due to repeated absence of counsel
for respondent, the case was submitted for resolution. Thereafter a decision was rendered by
the Labor Arbiter on December 3, 1986 dismissing the complaint for lack of merit.
Private respondent appealed to the National Labor Relations Commission (NLRC) wherein in
due course a decision was rendered on October 16, 1987 setting aside the appealed decision
and ordering the reinstatement of private respondent to his former position without loss of
seniority and other related benefits and one (1) year backwages without qualification and
deduction.
Hence the herein petition for certiorari with preliminary injunction and/or restraining order
wherein petitioner alleges that the public respondent NLRC committed a grave abuse of
discretion in rendering its decision contrary to the evidence on record.

On December 2, 1987, the court issued a restraining order as prayed for in the petition
enjoining the enforcement of the decision dated October 16, 1987 of public respondent
NLRC upon petitioner posting a bond of P20,000.00.
The theory of the petitioner is that on the aforesaid date, May 20, 1985, when private
respondent and Barrameda had a misunderstanding about tending the Salad Bar, private
respondent slapped Barrameda's cap, stepped on his foot and picked up the ice scooper and
brandished it against the latter. Marijo B. Kolimlim who was a management trainee tried to
pacify private respondent but he defied her so Kolimlim reported the incident to the
assistant manager, Delilah C. Hermosura, who immediately asked private respondent to see
her. Private respondent refused to see Hermosura and it took the security guard to bring him
to her. Private respondent then shouted and uttered profane words instead of making an
explanation before her. He stated the matter should be settled only by him and Barrameda.
The following day Kolimlim and Hermosura submitted a report on the incident and
recommended the imposition of the appropriate penalties on both. It was the store manager
who issued a report meting out the penalty of suspension on the two until further notice in
the following morning. Later that day the Operations Manager issued a memorandum
advising Barrameda of one (1) week suspension and the dismissal of private respondent
from the service.
The main thrust of the petition is that under the Personnel Manual of petitioner which had
been read and understood by private respondent, private respondent waived his right to the
investigation. It is provided therein that INVESTIGATION
If the offense is punishable with a penalty higher than suspension for fifteen (15) days, upon
the request of the erring employee, there shall be convened an investigation board
composed of the following
1.

The Parlor Manager or Supervisor on duty when the incident occurred.

2. The General Manager or the Assistant Manager.

The investigation board shall discuss the merits of the case and shall issue a ruling, which
shall be final and conclusive. (p. 3, Personnel Manual: Emphasis supplied).
From the foregoing it appears that an investigation shall only be conducted if the offense
committed by the employee is punishable with the penalty higher than suspension of fifteen
(15) days and the erring employee requests for an investigation of the incident. Petitioner
alleges that private respondent not having asked for an investigation he is thus deemed to
have waived his right to the same. Petitioner avers that immediately after the incident when
private respondent was asked to see Hermosura, he was defiant and showed that he was not
interested to avail of an investigation.
The contention of petitioner is untenable. The incident happened on May 20, 1985 and right
then and there as afore repeated on the following day private respondent was suspended in
the morning and was dismissed from the service in the afternoon. He received an official
notice of his termination four (4) days later.
The defiant attitude of private respondent immediately after the incident amounted to
insubordination. Nevertheless his refusal to explain his side under the circumstances cannot
be considered as a waiver of his right to an investigation.
Although in the Personnel Manual of the petitioner, it states that an erring employee must
request for an investigation it does not thereby mean that petitioner is thereby relieved of
the duty to conduct an investigation before dismissing private respondent. Indeed said
provision of the Personnel Manual of petitioner which may effectively deprive its employees
of the right to due process is clearly against the law and hence null and void. The security of
tenure of a laborer or employee is enshrined in the Constitution, the Labor Code and other
related laws. 1
Under Section 1, Rule XIV of the Implementing Regulations of the Labor Code, it is provided
that "No worker shall be dismissed except for just or authorized cause provided by law and
after due process." Sections 2, 5, 6, and 7 of the same rules require that before an employer
may dismiss an employee the latter must be given a written notice stating the particular act
or omission constituting the grounds thereof; that the employee may answer the allegations
within a reasonable period; that the employer shall afford him ample opportunity to be heard
and to defend himself with the assistance of his representative, if he so desires; and that it is
only then that the employer may dismiss the employee by notifying him of the decision in

writing stating clearly the reasons therefor. Such dismissal is without prejudice to the right of
the employee to contest its validity in the Regional Branch of the NLRC.
Petitioner insists that private respondent was afforded due process but he refused to avail of
his right to the same; that when the matter was brought to the labor arbiter he was able to
submit his position papers although the hearing cannot proceed due to the non-appearance
of his counsel; and that the private respondent is guilty of serious misconduct in threatening
or coercing a co-employee which is a ground for dismissal under Article 283 of the Labor
Code.
The failure of petitioner to give private respondent the benefit of a hearing before he was
dismissed constitutes an infringement of his constitutional right to due process of law and
equal protection of the laws. 2 The standards of due process in judicial as well as
administrative proceedings have long been established. In its bare minimum due process of
law simply means giving notice and opportunity to be heard before judgment is rendered. 3
The claim of petitioner that a formal investigation was not necessary because the incident
which gave rise to the termination of private respondent was witnessed by his coemployees and supervisors is without merit. The basic requirement of due process is that
which hears before it condemns, which proceeds upon inquiry and renders judgment only
after trial. 4
However, it is a matter of fact that when the private respondent filed a complaint against
petitioner he was afforded the right to an investigation by the labor arbiter. He presented his
position paper as did the petitioner. If no hearing was had, it was the fault of private
respondent as his counsel failed to appear at the scheduled hearings. The labor arbiter
concluded that the dismissal of private respondent was for just cause. He was found guilty of
grave misconduct and insubordination. This is borne by the sworn statements of witnesses.
The Court is bound by this finding of the labor arbiter.
By the same token, the conclusion of the public respondent NLRC on appeal that private
respondent was not afforded due process before he was dismissed is binding on this Court.
Indeed, it is well taken and supported by the records. However, it can not justify a ruling that
private respondent should be reinstated with back wages as the public respondent NLRC so
decreed. Although belatedly, private respondent was afforded due process before the labor
arbiter wherein the just cause of his dismissal bad been established. With such finding, it
would be arbitrary and unfair to order his reinstatement with back wages.
The Court holds that the policy of ordering the reinstatement to the service of an employee
without loss of seniority and the payment of his wages during the period of his separation
until his actual reinstatement but not exceeding three (3) years without qualification or
deduction, when it appears he was not afforded due process, although his dismissal was
found to be for just and authorized cause in an appropriate proceeding in the Ministry of
Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an employee who has been shown to be
guilty of the charges that warranted his dismissal from employment. Indeed, it will
demoralize the rank and file if the undeserving, if not undesirable, remains in the service.
Thus in the present case, where the private respondent, who appears to be of violent
temper, caused trouble during office hours and even defied his superiors as they tried to
pacify him, should not be rewarded with re-employment and back wages. It may encourage
him to do even worse and will render a mockery of the rules of discipline that employees are
required to observe. Under the circumstances the dismissal of the private respondent for
just cause should be maintained. He has no right to return to his former employer.
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as
above discussed. The dismissal of an employee must be for just or authorized cause and
after due process. 5 Petitioner committed an infraction of the second requirement. Thus, it
must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering
the circumstances of this case petitioner must indemnify the private respondent the amount
of P1,000.00. The measure of this award depends on the facts of each case and the gravity
of the omission committed by the employer.
WHEREFORE, the petition is GRANTED. The questioned decision of the public respondent
NLRC dated October 16, 1987 for the reinstatement with back wages of private respondent
is REVERSED AND SET ASIDE, and the decision of the labor arbiter dated December 3, 1986
dismissing the complaint is revived and affirmed, but with the modification that petitioner is
ordered to indemnify private respondent in the amount of P1,000.00. The restraining order

issued by this Court on December 2, 1987 is hereby made permanent and the bond posted
by petitioner is cancelled. This decision is immediately executory.
SO ORDERED.
G.R. No. 151378. March 28, 2005
JAKA FOOD PROCESSING CORPORATION, Petitioners,
vs.
DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL
LESCANO and JONATHAN CAGABCAB, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a petition for review on
certiorari under rule 45 of the Rules of Court are the following issuances of the Court of
Appeals in CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,1 reversing and setting aside an earlier decision of the
National Labor Relations Commission (NLRC); and
2. Resolution dated 8 January 2002,2 denying petitioners motion for reconsideration.
The material facts may be briefly stated, as follows:
Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano
and Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation
(JAKA, for short) until the latter terminated their employment on August 29, 1997 because
the corporation was "in dire financial straits". It is not disputed, however, that the
termination was effected without JAKA complying with the requirement under Article 283 of
the Labor Code regarding the service of a written notice upon the employees and the
Department of Labor and Employment at least one (1) month before the intended date of
termination.
In time, respondents separately filed with the regional Arbitration Branch of the National
Labor Relations Commission (NLRC) complaints for illegal dismissal, underpayment of wages
and nonpayment of service incentive leave and 13th month pay against JAKA and its HRD
Manager, Rosana Castelo.
After due proceedings, the Labor Arbiter rendered a decision3 declaring the termination
illegal and ordering JAKA and its HRD Manager to reinstate respondents with full backwages,
and separation pay if reinstatement is not possible. More specifically the decision
dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination of
complainants and ordering respondents to reinstate them to their positions with full
backwages which as of July 30, 1998 have already amounted to P339,768.00. Respondents
are also ordered to pay complainants the amount of P2,775.00 representing the unpaid
service incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of
P19,239.96 as payment for 1997 13th month pay as alluded in the above computation.
If complainants could not be reinstated, respondents are ordered to pay them separation
pay equivalent to one month salary for very (sic) year of service.
SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,4
affirmed in toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another
decision dated January 28, 2000,5 this time modifying its earlier decision, thus:
WHEREFORE, premises considered, the instant motion for reconsideration is hereby
GRANTED and the challenged decision of this Commission [dated] 30 August 1999 and the
decision of the Labor Arbiter xxx are hereby modified by reversing an setting aside the
awards of backwages, service incentive leave pay. Each of the complainants-appellees shall
be entitled to a separation pay equivalent to one month. In addition, respondents-appellants
is (sic) ordered to pay each of the complainants-appellees the sum of P2,000.00 as
indemnification for its failure to observe due process in effecting the retrenchment.

SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its resolution of April 28,
2000,6 respondents went to the Court of Appeals via a petition for certiorari, thereat
docketed as CA-G.R. SP No. 59847.
As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000,
applying the doctrine laid down by this Court in Serrano vs. NLRC,7 reversed and set aside
the NLRCs decision of January 28, 2000, thus:
WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations
Commission is REVERSED and SET ASIDE and another one entered ordering respondent JAKA
Foods Processing Corporation to pay petitioners separation pay equivalent to one (1) month
salary, the proportionate 13th month pay and, in addition, full backwages from the time
their employment was terminated on August 29, 1997 up to the time the Decision herein
becomes final.
SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by the appellate court
in its resolution of January 8, 2002.
Hence, JAKAs present recourse, submitting, for our consideration, the following issues:
"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL BACKWAGES TO
RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO
RESPONDENTS".
As we see it, there is only one question that requires resolution, i.e. what are the legal
implications of a situation where an employee is dismissed for cause but such dismissal was
effected without the employers compliance with the notice requirement under the Labor
Code.
This, certainly, is not a case of first impression. In the very recent case of Agabon vs. NLRC,8
we had the opportunity to resolve a similar question. Therein, we found that the employees
committed a grave offense, i.e., abandonment, which is a form of a neglect of duty which, in
turn, is one of the just causes enumerated under Article 282 of the Labor Code. In said case,
we upheld the validity of the dismissal despite non-compliance with the notice requirement
of the Labor Code. However, we required the employer to pay the dismissed employees the
amount of P30,000.00, representing nominal damages for non-compliance with statutory
due process, thus:
"Where the dismissal is for a just cause, as in the instant case, the lack of statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights, as ruled in
Reta vs. National Labor Relations Commission. The indemnity to be imposed should be stiffer
to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or penalty and
should depend on the facts of each case, taking into special consideration the gravity of the
due process violation of the employer.
xxx xxx xxx
The violation of petitioners right to statutory due process by the private respondent
warrants the payment of indemnity in the form of nominal damages. The amount of such
damages is addressed to the sound discretion of the court, taking into account the relevant
circumstances. Considering the prevailing circumstances in the case at bar, we deem it
proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right granted to the
latter under the Labor Code and its Implementing Rules," (Emphasis supplied).
The difference between Agabon and the instant case is that in the former, the dismissal was
based on a just cause under Article 282 of the Labor Code while in the present case,
respondents were dismissed due to retrenchment, which is one of the authorized causes
under Article 283 of the same Code.

At this point, we note that there are divergent implications of a dismissal for just cause
under Article 282, on one hand, and a dismissal for authorized cause under Article 283, on
the other.
A dismissal for just cause under Article 282 implies that the employee concerned has
committed, or is guilty of, some violation against the employer, i.e. the employee has
committed some serious misconduct, is guilty of some fraud against the employer, or, as in
Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated
the dismissal process.
On another breath, a dismissal for an authorized cause under Article 283 does not
necessarily imply delinquency or culpability on the part of the employee. Instead, the
dismissal process is initiated by the employers exercise of his management prerogative, i.e.
when the employer opts to install labor saving devices, when he decides to cease business
operations or when, as in this case, he undertakes to implement a retrenchment program.
The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal
for authorized cause under Article 283 is further reinforced by the fact that in the first,
payment of separation pay, as a rule, is not required, while in the second, the law requires
payment of separation pay.9
For these reasons, there ought to be a difference in treatment when the ground for dismissal
is one of the just causes under Article 282, and when based on one of the authorized causes
under Article 283.
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article
282 but the employer failed to comply with the notice requirement, the sanction to be
imposed upon him should be tempered because the dismissal process was, in effect,
initiated by an act imputable to the employee; and (2) if the dismissal is based on an
authorized cause under Article 283 but the employer failed to comply with the notice
requirement, the sanction should be stiffer because the dismissal process was initiated by
the employers exercise of his management prerogative.
The records before us reveal that, indeed, JAKA was suffering from serious business losses at
the time it terminated respondents employment. As aptly found by the NLRC:
"A careful study of the evidence presented by the respondent-appellant corporation shows
that the audited Financial Statement of the corporation for the periods 1996, 1997 and 1998
were submitted by the respondent-appellant corporation, The Statement of Income and
Deficit found in the Audited Financial Statement of the respondent-appellant corporation
clearly shows the following in 1996, the deficit of the respondent-appellant corporation was
P188,218,419.00 or 94.11% of the stockholders [sic] equity which amounts to
P200,000,000.00. In 1997 when the retrenchment program of respondent-appellant
corporation was undertaken, the deficit ballooned to P247,222,569.00 or 123.61% of the
stockholders equity, thus a capital deficiency or impairment of equity ensued. In 1998, the
deficit grew to P355,794,897.00 or 177% of the stockholders equity. From 1996 to 1997, the
deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%.
The Statement of Income and Deficit of the respondent-appellant corporation to prove its
alleged losses was prepared by an independent auditor, SGV & Co. It convincingly showed
that the respondent-appellant corporation was in dire financial straits, which the
complainants-appellees failed to dispute. The losses incurred by the respondent-appellant
corporation are clearly substantial and sufficiently proven with clear and satisfactory
evidence. Losses incurred were adequately shown with respondent-appellants audited
financial statement. Having established the loss incurred by the respondent-appellant
corporation, it necessarily necessarily (sic) follows that the ground in support of
retrenchment existed at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of the respondentappellant was [sic] not well substantiated by substantial proofs. It is therefore logical for the
corporation to implement a retrenchment program to prevent further losses."10
Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing
finding of the NLRC which, incidentally, was also affirmed by the Court of Appeals.
It is, therefore, established that there was ground for respondents dismissal, i.e.,
retrenchment, which is one of the authorized causes enumerated under Article 283 of the
Labor Code. Likewise, it is established that JAKA failed to comply with the notice requirement
under the same Article. Considering the factual circumstances in the instant case and the
above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay
respondents separation pay equivalent to one (1) month salary for every year of service.
This is because in Reahs Corporation vs. NLRC,11 we made the following declaration:
"The rule, therefore, is that in all cases of business closure or cessation of operation or
undertaking of the employer, the affected employee is entitled to separation pay. This is
consistent with the state policy of treating labor as a primary social economic force,
affording full protection to its rights as well as its welfare. The exception is when the closure
of business or cessation of operations is due to serious business losses or financial reverses;
duly proved, in which case, the right of affected employees to separation pay is lost for
obvious reasons. xxx". (Emphasis supplied)
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and
resolution of the Court of Appeals respectively dated November 16, 2001 and January 8,
2002 are hereby SET ASIDE and a new one entered upholding the legality of the dismissal
but ordering petitioner to pay each of the respondents the amount of P50,000.00,
representing nominal damages for non-compliance with statutory due process.
SO ORDERED.
G.R. No. 125303
June 16, 2000
DANILO LEONARDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION
CORPORATION, ET. AL., respondents.

and

REYNALDO'S

MARKETING

G.R. No. 126937

AURELIO FUERTE and DANILO LEONARDO, petitioners,
vs.
RAUL T. AQUINO, VICTORIANO R. CALAYCAY and ROGELIO I. RALAYA, as Chairman
and Members of the NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION
and REYNALDO'S MARKETING and/or REYNALDO PADUA, respondents.
DE LEON, JR., J.:
Before us is a consolidation of G.R. Nos. 125303 and 126937, both petitions for certiorari
under Rule 65 of the 1997 Rules of Civil Procedure, seeking the annulment of a Decision1
and Resolution2 dated March 28, 1996 and May 29, 1996, respectively, of the public
respondent in NLRC NCR 00-02-01024-92.
The facts are:
Petitioner AURELIO FUERTE was originally employed by private respondent REYNALDO'S
MARKETING CORPORATION on August 11, 1981 as a muffler specialist, receiving P45.00 per
day. When he was appointed supervisor in 1988, his compensation was increased to P122.00
a day, augmented by a weekly supervisor's allowance of P600.00. On the other hand,
DANILO LEONARDO was hired by private respondent on March 4, 1988 as an auto-aircon
mechanic at a salary rate of P35.00 per day. His pay was increased to P90.00 a day when he
attained regular status six months later. From such time until he was allegedly terminated,
he claims to have also received a monthly allowance equal to P2,500.00 as his share in the
profits of the auto-aircon division.
FUERTE alleges that on January 3, 1992, he was instructed to report at private respondent's
main office where he was informed by the company's personnel manager that he would be
transferred to its Sucat plant due to his failure to meet his sales quota, and for that reason,
his supervisor's allowance would be withdrawn. For a short time, FUERTE reported for work
at the Sucat plant; however, he protested his transfer, subsequently filing a complaint for
illegal termination.
On his part, LEONARDO alleges that on April 22, 1991, private respondent was approached
by the same personnel manager who informed him that his services were no longer needed.
He, too, filed a complaint for illegal termination.
The case was heard by Labor Arbiter Jesus N. Rodriguez, Jr. On December 15, 1994, Labor
Arbiter Emerson C. Tumanon, to whom the case was subsequently assigned, rendered
judgment in favor of petitioners. The dispositive portion of the arbiter's decision3 states:
WHEREFORE, premises considered, respondents are hereby ordered:

1. To reinstate complainant Aurelio Fuerte, to the position he was holding before the
demotion, and to reinstate likewise complainant Danilo Leogardo to his former position or in
lieu thereof, they be reinstated through payroll reinstatement without any of them losing
their seniority rights and other privileges, inclusive of allowance and to their other benefits;
2. To pay AURELIO FUERTE, the sum of TWO HUNDRED EIGHTY THOUSAND EIGHT HUNDRED
NINETY-SIX PESOS and 72/100 (280,896.72);
3. To pay DANILO LEOGARDO, the sum of TWO HUNDRED FORTY ONE THOUSAND NINE
HUNDRED EIGHT PESOS and 67/100 (P241,908.67).
SO ORDERED.
On appeal, the respondent Commission modified the aforesaid decision as follows:
WHEREFORE, premises considered, the Decision of December 15, 1994 is hereby modified
as follows:
1. Ordering the reinstatement of complainant Aurelio Fuerte to his former position without
loss of his seniority rights but without backwages;
2. Dismissing the complaint of Danilo leonardo [sic] for lack of merit; and
3. Deleting the rests [sic] of the monetary award as well as the award of moral damages and
attorney's fees in favor of the complainants also for lack of merit.
SO ORDERED.
Petitioners filed a motion for reconsideration4 on April 30, 1996, which the Commission
denied in its Resolution dated May 29, 1996.
On July 1, 1996, LEONARDO, represented by the Public Attorney's Office, filed G.R. No.
125303, a special civil action for certiorari assailing the Commission's decision and
resolution. However, on November 15, 1996, FUERTE, again joined by LEONARDO, filed G.R.
No. 126937, a similar action praying for the annulment of the same decision and resolution.
On October 7, 1997, private respondent filed its Comment5 to the petition in G.R. No.
125303. On April 2, 1997, it filed its Comments 6 to the petition in G.R. No. 126937 with a
motion to drop petitioner LEONARDO and consolidate G.R. No. 126937 with G.R. No. 125303.
We granted private respondent's motion in our Resolution dated June 16, 1997.7
The petition in G.R. No. 1269378 raises the following issues:
I. RESPONDENT COMMISSIONERS GRAVELY ABUSED THEIR DISCRETION AMOUNTING TO
LACK OR IN EXCESS OF JURISDICTION WHEN THEY GRANTED RESPONDENTS APPEAL.
II. RESPONDENT COMMISSIONERS GRAVELY ABUSED THEIR DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN THEY FOUND FOR RESPONDENT REYNALDO'S
MARKETING PRONOUNCING THAT THERE WAS NO ILLEGAL DISMISSAL DESPITE CONTRARY
FINDINGS MADE BY THE LABOR ARBITER CONTRARY TO LAW AND EXISTING JURISPRUDENCE.
Private respondent contends that it never terminated petitioners' services. In FUERTE's case,
private respondent claims that the latter was demoted pursuant to a company policy
intended to foster competition among its employees. Under this scheme, private
respondent's employees are required to comply with a monthly sales quota. Should a
supervisor such as FUERTE fail to meet his quota for a certain number of consecutive
months, he will be demoted, whereupon his supervisor's allowance will be withdrawn and be
given to the individual who takes his place. When the employee concerned succeeds in
meeting the quota again, he is re-appointed supervisor and his allowance is restored.9
With regard to LEONARDO, private respondent likewise insists that it never severed the
former's employment. On the contrary, the company claims that it was LEONARDO who
abandoned his post following an investigation wherein he was asked to explain an incident
of alleged "sideline" work which occurred on April 22, 1991. It would appear that late in the
evening of the day in question, the driver of a red Corolla arrived at the shop looking for
LEONARDO. The driver said that, as prearranged, he was to pick up LEONARDO who would
perform a private service on the vehicle. When reports of the "sideline" work reached
management, it confronted LEONARDO and asked for an explanation. According to private
respondent, LEONARDO gave contradictory excuses, eventually claiming that the
unauthorized service was for an aunt. When pressed to present his aunt, it was then that

LEONARDO stopped reporting for work, filing his complaint for illegal dismissal some ten
months after his alleged termination.
Insofar as the action taken against FUERTE is concerned, private respondent's justification is
well-illustrated in the record. He was unable to meet his quota for five months in 1991, from
July to November of that year. 10 Yet he insists that it could not possibly be so. He argues
that he must have met his quota considering that he received his supervisor's allowance for
the period aforesaid. The Commission, however, negated this view, finding the alleged
inconsistency to be adequately explained in the record. We quite agree. As found by the
Commission, placing special emphasis on the reasoning of the labor arbiter
We find otherwise. Complainant Fuerte's failure to meet his sales quota which caused his
demotion and the subsequent withdrawal of his allowance is fully supported by Exhibit "4" of
respondents' position paper showing that his performance for the months of July 1991 to
November 1991 is below par. While it is the policy of the respondent company that an
employer who fails to meet his sales quota for three (3) consecutive months, he is stripped
of his supervisor's designation and allowance. In the case of Fuerte, the respondents went
beyond the three (3) months period before withdrawing his allowance. On this basis, the
Labor Arbiter sweepingly concluded that the withdrawal of Fuerte's allowance is illegal since
the respondents should have withdrawn the same after Fuerte failed to meet his sales quota
for three consecutive months. However, the apparent flaw had been sufficiently reconciled
by the respondents when they state that a supervisor like Fuerte, continues to receive his
allowance until he is officially stripped of his supervisor's designation and assigned to
another job as ordinary employee. This is precisely the reason why complainant Fuerte
continued to receive his allowance even beyond the three (3) consecutive months period to
meet his sales quota considering that it was only on the fifth consecutive months when the
respondent company decided to strip him of his designation as supervisor. This is
corroborated by the "Sinumpaang Salaysay" (Exh. "A" respondents' position paper) of
some employees of the respondent company who had been previously demoted for failure
to meet their sales quota when they unformably stated:
5. Na alam naming kapagka hindi namin maabot and quotang nabanggit na may ilang
buwan, kami'y maaring mademote at kapagka nagkaganoon ang supervisor allowance
sampu ng, may mataas na parte sa profit sharing at winnings ay maalis sa amin at
maibibigay sa hahalili sa amin.
Surprisingly, the Labor Arbiter failed to take into consideration this material allegations of
the respondents in his assailed decision except his sweeping statement that the
"Sinumpaang Salaysay" was purposely done with malice to justify respondents' withdrawal
of Fuerte's supervisor's allowance. [emphasis supplied]
FUERTE nonetheless decries his transfer as being violative of his security of tenure, the clear
implication being that he was constructively dismissed. We have held that an employer acts
well within its rights in transferring an employee as it sees fit provided that there is no
demotion in rank or diminution in pay. 11 The two circumstances are deemed badges of bad
faith, and thus constitutive of constructive dismissal. In this regard, constructive dismissal is
defined in the following manner:
an involuntary resignation resorted to when continued employment becomes impossible,
unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a
clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee. 12
Yet here, the transfer was undertaken beyond the parameters as aforesaid. The instinctive
conclusion would be that his transfer is actually a constructive dismissal, but oddly, private
respondent never denies that it was really demoting FUERTE for cause. It should be borne in
mind, however, that the right to demote an employee also falls within the category of
management prerogatives. 13
This arrangement appears to us to be an allowable exercise of company rights. An employer
is entitled to impose productivity standards for its workers, and in fact, non-compliance may
be visited with a penalty even more severe than demotion. Thus,
[t]he practice of a company in laying off workers because they failed to make the work quota
has been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery
and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners' failure to meet
the sales quota assigned to each of them constitute a just cause of their dismissal,
regardless of the permanent or probationary status of their employment. Failure to observe
prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency
may constitute just cause for dismissal. Such inefficiency is understood to mean failure to
attain work goals or work quotas, either by failing to complete the same within the allotted

reasonable period, or by producing unsatisfactory results. This management prerogative of

requiring standards may be availed of so long as they are exercised in good faith for the
advancement of the employer's interest. 14
Neither can we say that FUERTE's actions are indicative of abandonment. To constitute such
a ground for dismissal, there must be (1) failure to report for work or absence without valid
or justifiable reason; and (2) a clear intention, as manifested by some overt acts, to sever
the employer-employee relationship. 15 We have accordingly held that the filing of a
complaint for illegal dismissal, as in this case, is inconsistent with a charge of abandonment.
16
There remains a question regarding the manner of demotion. In Jarcia Machine Shop and
Auto Supply, Inc. v. National Labor Relations Commission, 17 we ruled that:
Besides, even assuming arguendo that there was some basis for the demotion, as alleged by
petitioner, the case records are bereft of any showing that private respondent was notified in
advance of his impending transfer and demotion. Nor was he given an opportunity to refute
the employer's grounds or reasons for said transfer and demotion. In Gaco v. National Labor
Relations Commission, it was noted that:
While due process required by law is applied on dismissals, the same is also applicable to
demotions as demotions likewise affect the employment of a worker whose right to
continued employment, under the same terms and conditions, is also protected by law.
Moreover, considering that demotion is, like dismissal, also a punitive action, the employee
being demoted should as in cases of dismissals, be given a chance to contest the same.
After reviewing the record, we are sufficiently persuaded that private respondent had offered
substantial proof of compliance with this procedural requisite. 18
Accordingly, given that FUERTE may not be deemed to have abandoned his job, and neither
was he constructively dismissed by private respondent, the Commission did not err in
ordering his reinstatement but without backwages. In a case where the employee's failure to
work was occasioned neither by his abandonment nor by a termination, the burden of
economic loss is not rightfully shifted to the employer; each party must bear his own loss. 19
Neither do we discern any grave abuse of discretion in the Commission's ruling dismissing
LEONARDO's complaint. On this score, the public respondent found that:
Coming now to the case of complainant Danilo Leonardo, the evidence on record indubitably
shows that he abandoned his work with the respondents. As sufficiently established by
respondents, complainant Leonardo, after being pressed by the respondent company to
present the customer regarding his unauthorized solicitation of sideline work from the latter
and whom he claims to be his aunt, he never reported back to work anymore. This finding is
bolstered by the fact that after he left the respondent company, he got employed with
Dennis Motors Corporation as Air-Con Mechanic from October 12, 1992 to April 3, 1995
(Certification attached to respondents' Manifestation filed June 5, 1996)
It must be stressed that while Leonardo alleges that he was illegally dismissed from his
employment by the respondents, surprisingly, he never stated any reason why the
respondents would want to ease him out from his job. Moreover, why did it take him ten (10)
long months to file his case if indeed he was aggrieved by respondents. All the above facts
clearly point that the filing of his case is a mere afterthought on the part of complainant
Leonardo. In the case of Flexo Mfg. Corp. vs. NLRC, et. al., 135 SCRA 145, the Supreme Court
held, thus:
For abandonment to constitute a valid cause for termination of employment, there must be a
delibarate [sic] unjustified refusal of the employee to resume his employment. This refusal
must be clearly shown, mere absence is not sufficient, it must be accompanied by overt acts
unerringly pointing to the fatcs [sic] that the employee simply does not want to work
anymore.
LEONARDO protests that he was never accorded due process.1awphi1 This begs the
question, for he was never terminated; 20 he only became the subject of an investigation in
which he was apparently loath to participate. As testified to by Merlin P. Orallo, the personnel
manager, he was given a memorandum 21 asking him to explain the incident in question,
but he refused to receive it. 22 In an analogous instance, we held that an employee's refusal
to sign the minutes of an investigation cannot negate the fact that he was accorded due
process. 23 So should it be here. We find no reason to disturb the Commission's ruling that
LEONARDO had abandoned his position, the instant case being a petition for certiorari where
questions of fact are not entertained. 24 Whether a worker has abandoned his employment
is essentially a question of fact. 25 We reiterate that it is not for us "to re-examine conflicting

evidence, re-evaluate the credibility of witnesses, nor substitute the findings of fact of an
administrative tribunal which has gained expertise in its special field." 26
In concluding, we feel that it will not be amiss to point out that a petition for certiorari under
Rule 65 is intended to rectify errors of jurisdiction or grave abuse of discretion. As we held in
Philippine Advertising Counselors, Inc. v. National Labor Relations Commission, 27
The well-settled rule confines the original and exclusive jurisdiction of the Supreme Court in
the review of decisions of the NLRC under Rule 65 of the Revised Rules of Court only to the
issue of jurisdiction or grave abuse of discretion amounting to lack of jurisdiction. Grave
abuse of discretion is committed when the judgment is rendered in a capricious, whimsical,
arbitrary or despotic manner. An abuse of discretion does not necessarily follow just because
there is a reversal by the NLRC of the decision of the Labor Arbiter. Neither does the mere
variance in the evidentiary assessment of the NLRC and that of the Labor Arbiter would, as a
matter of course, so warrant another full review of the facts. The NLRC's decision, so long as
it is not bereft of support from the records, deserves respect from the Court.
WHEREFORE, the petitions for certiorari in G.R. Nos. 125303 and 126937 are hereby
DISMISSED for lack of merit.
The Decision dated March 28, 1998 and the Resolution dated May 29, 1996 of public
respondents is AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.

G.R. No. 166111 August 25, 2005

STANDARD ELECTRIC MANUFACTURING CORPORATION, Petitioners,
vs.
STANDARD ELECTRIC EMPLOYEES UNION-NAFLU- KMU and ROGELIO JAVIER,
Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari seeking to review the Decision1 and
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 76657, which annulled and set
aside the Resolution of the National Labor Relations Commission (NLRC) affirming the Labor
Arbiters Decision3 in NLRC NCR Case No. 00-08-04760-96.
Rogelio Javier was employed by the Standard Electric Manufacturing Corporation (SEMC) on
January 15, 1973 as radial spot machine operator in its Production Department. Javier was a
member of the Standard Electric Employees Union-NAFLU (Union).4
On July 31, 1995, Javier failed to report for work. He failed to notify the SEMC of the reason
for his absences. On August 9, 1995, he was arrested and detained for the charge of rape
upon complaint of his neighbor, Genalyn Barotilla. After the requisite preliminary
investigation, an Information for rape was filed in the Regional Trial Court (RTC) of Pasig,
docketed as Criminal Case No. 108593.5
On January 13, 1996, the SEMC received a letter6 from Javier, through counsel, informing the
SEMC that Javier was detained for the charge of rape and for that reason failed to report for
work. He requested the SEMC to defer the implementation of its intention to dismiss him,
citing the ruling of this Court in Magtoto v. NLRC.7 The SEMC denied Javiers request and
issued a Memorandum terminating his employment for (a) having been absent without leave
(AWOL) for more than fifteen days from July 31, 1995; and (b) for committing rape.8
On May 17, 1996, the RTC issued an Order9 granting Javiers demurrer to evidence and
ordered his release from jail. Shortly thereafter, Javier reported for work, but the SEMC
refused to accept him back.
A grievance meeting between the Union, Javier and the SEMC was held, but SEMC refused to
re-admit Javier. On August 2, 1996, the Union and Javier filed a Complaint10 for illegal
dismissal against the SEMC before the NLRC. He averred that since the reason for his
detention for rape was non-existent, the termination of his employment was illegal. Javier
cited the ruling of this Court in Magtoto v. NLRC.11
For its part, the SEMC averred that Javiers prolonged absences caused irreparable damages
to its orderly operation; he had to be replaced so that the continuity and flow of production
would not be jeopardized. It could not afford to wait for Javiers indefinite return from

detention, if at all. The SEMC insisted that conformably with its Rules and Regulations, it was
justified in dismissing Javier for being absent without leave for fifteen days or so.
On January 14, 1997, the Labor Arbiter rendered judgment ordering the dismissal of the
complaint.12 The Labor Arbiter ruled that the complaint was within the exclusive jurisdiction
of the Voluntary Arbitrators or Panel of Arbitrators. On appeal, the NLRC reversed the Labor
Arbiters decision
and ruled that the latter had jurisdiction over the complaint; it thus ordered the remand of
the case to the Labor Arbiter for resolution on the merits.13
On August 16, 1999, the Labor Arbiter rendered judgment ordering the dismissal of the
complaint.14 However, the SEMC was ordered to pay separation pay to the complainant. The
dispositive portion reads:
WHEREFORE, in view of the foregoing, the complaint for illegal dismissal is hereby ordered
DISMISSED for lack of merit.
The respondents Standard Electric Manufacturing Corporation and Mr. Jose Uy are, however,
ordered to pay complainant Rogelio Javier the amount of SEVENTY-ONE THOUSAND SEVEN
HUNDRED SIXTY PESOS (P71,760.00) representing his financial assistance/separation pay.
SO ORDERED.15
On appeal, the NLRC affirmed the Labor Arbiters ruling in its Resolution of September 24,
2002. The NLRC declared that:
Appellants contention is baseless. A perusal of the evidence on record clearly shows that
prior to his dismissal from his job by respondents-appellees, he was made to explain his side
(Exhibit "5," respondents Formal Offer of Evidence). Evidence on record further shows that a
grievance machinery as provided for in the CBA was activated by respondents-appellees for
the purpose of affording complainant a chance to present his side prior to his dismissal.
(Exhibits "4" to "4-b," respondents Formal Offer of Evidence).
Considering the adequate evidence presented by respondents-appellants on which the
findings of the Labor Arbiter were based, this Commission finds no merit on complainantsappellants contention that the Labor Arbiter had committed serious errors in his findings of
facts and the law in this instant case.
Hence, the assailed decision must stand for "the matter of evaluating the merits and
demerits of the case, as long as the Decision is supported by the facts and the evidence, is
left to the sound discretion of the Labor Arbiter." (Metropolitan Bank and Trust Company vs.
NLRC, et al., 235 SCRA 400, 403).
WHEREFORE, in the light of the foregoing premises, [the] Decision of the Labor Arbiter dated
August 16, 1999 is hereby AFFIRMED.
SO ORDERED.16
When the NLRC denied the motion for reconsideration of the said decision, Javier and the
Union filed a petition for certiorari with the CA, questioning such ruling, as follows:
I
PUBLIC RESPONDENT ACTED WITH GRAVE ABUSE OF DISCRETION IN NOT HOLDING THAT
RESPONDENT COMPANY VIOLATED PETITIONER ROGELIO JAVIERS RIGHT TO PRIOR NOTICE
RELATIVE TO THE LATTERS DISMISSAL.
II
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN HOLDING THAT
PETITIONER ROGELIO JAVIER WENT AWOL (ABSENCE WITHOUT LEAVE) FROM HIS JOB.
III
PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN NOT APPLYING THE RULING IN
MAGTOTO VS. NLRC TO THE INSTANT CASE.17
In the Decision18 dated August 19, 2004, the CA reversed the findings of the Labor Arbiter
and the NLRC. The fallo of the decision reads:

WHEREFORE, the NLRCs Resolution dated September 24, 2002 is ANNULLED and SET ASIDE.
Private respondent Standard Electric Manufacturing Corporation is hereby ORDERED to
REINSTATE Rogelio Javier to his former position, without loss of seniority rights and other
privileges appurtenant thereto, with full backwages from the time of his dismissal until he is
actually reinstated, or to pay him separation pay, if reinstatement is no longer feasible.
SO ORDERED.
The appellate court cited the rulings of this Court in Magtoto v. NLRC19 and City Government
of Makati City v. Civil Service Commission20 as precedents. It declared that it was not
Javiers intention to abandon his job; his incarceration reasonably justified his failure to
report for work and negated the theory that he was on AWOL. Likewise, the CA held that
Javier could not be terminated on the ground of commission of a crime, as when he was
acquitted of the rape charges, the second ground relied upon by the
SEMC ceased to have factual basis. Hence, despite the fact that Javier was allegedly
afforded the opportunity to explain his side, the same was unnecessary since, in the first
place, there was no just or authorized cause for the dismissal.
The motion for reconsideration seasonably filed by the SEMC on August 19, 2004 was denied
by the CA in its November 23, 2004 Resolution.21 Hence, this recourse.
The issues posed by the petitioner are the following:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED PATENT AND
REVERSIBLE ERROR IN APPLYING THE CASE OF MAGTOTO VS. NLRC IN THIS CASE.
II
WHETHER OF NOT THE HONORABLE COURT OF APPEALS COMMITTED PATENT AND
REVERSIBLE ERROR IN APPLYING THE CASE OF CITY GOVERNMENT OF MAKATI CITY IN THIS
CASE.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED PATENT AND
REVERSIBLE ERROR IN REINSTATING [RESPONDENT] ROGELIO JAVIER AND GRANTING HIM
FULL BACKWAGES.
IV
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED PATENT AND
REVERSIBLE ERROR IN TOTALLY DISREGARDING THE FINDINGS OF THE NATIONAL LABOR
RELATIONS COMMISSION AND THE LABOR ARBITER A QUO.22
The Court finds that the petition is bereft of merit.
The petitioner asserts that the ruling of the Court in Magtoto finds no application in the
present case. It argues that in Magtoto, no criminal information was filed in the regular court
against the employee, as the city prosecutor found no probable cause to hold the
respondent therein for trial. The petitioner argues that respondent Javier was indicted for the
crime of rape in the RTC. Another difference, the petitioner points out, is that the employee
in the cited case was dismissed solely on account of his absences during his imprisonment;
respondent Javier was terminated due to truancy prior to his detention from July 31, 1995, to
his detention for rape on August 9, 1995, until his release on May 24, 1996. Respondent
Javier never informed the petitioner why he was absent on the said dates, and subsequent
thereto. It was only on January 13, 1996 that respondent Javier, through his counsel,
informed the petitioner of his detention for rape for the first time.
The petitioner avers that the ruling of this Court in City Government of Makati City is not
applicable because respondent Javier was dismissed on a demurrer to evidence, and not
because he did not commit the offense alleged. The case was dismissed because of the
prosecutions failure to prove his guilt beyond reasonable doubt. In marked contrast, the
petitioner notes, the employee in City Government of Makati City was acquitted by reason of
the prosecutions failure to prove her complicity in the crime.
The petitioner maintains that the mere filing of the Information for the crime of rape against
respondent Javier rendered its Rules and Regulations operational, particularly Serious
Offense No. 7. It avers that substantial proof, not clear and convincing evidence or proof

beyond reasonable doubt, is sufficient basis for the imposition of any disciplinary action over
an erring employee.
The petitioners contentions are wrong.
Respondent Javier was dismissed by the petitioner effective February 5, 1996 for (a) being
AWOL from July 31, 1995 up to January 30, 1996; and (b) committing rape. However, on
demurrer to evidence, respondent Javier was acquitted of the charge. With respondent
Javiers acquittal, the cause of his dismissal from his employment turned out to be nonexistent.
In the Magtoto case, Alejandro Jonas Magtoto was arrested by virtue of an Arrest, Search and
Seizure Order dated September 1, 1980. He was
charged with violation of Article 136 (Conspiracy and Proposal to Commit Rebellion) and
Article 138 (Inciting to Rebellion or Insurrection) of the Revised Penal Code (RPC). Although
Magtoto informed his employer and pleaded that he be considered as "on leave" until
released, his employer denied the request. On April 10, 1981, or about seven (7) months
after his arrest, Magtoto was released after the City Fiscal dismissed the criminal charges for
lack of evidence. On the same date, he informed his employer of his intent to start working
again, but the employer rejected the offer. In ruling that his termination was illegal, the
Supreme Court ruled as follows:
The employer tries to distance itself from the detention by stressing that the petitioner was
dismissed due to prolonged absence. However, Mr. Magtoto could not report for work
because he was in a prison cell. The detention cannot be divorced from prolonged absence.
One caused the other. Since the causes for the detention, which in turn gave the employer a
ground to dismiss the petitioner, proved to be non-existent, we rule that the termination was
illegal and reinstatement is warranted. A non-existent cause for dismissal was explained in
Pepito v. Secretary of Labor (96 SCRA 454).

"... A distinction, however, should be made between a dismissal without cause and a
dismissal for a false or non-existent cause. In the former, it is the intention of the employer
to dismiss his employee for no cause whatsoever, in which case the Termination Pay Law
would apply. In the latter case, the employer does not intend to dismiss the employee but for
a specific cause which turns out to be false or non-existent. Hence, absent the reason which
gave rise to his separation from employment, there is no intention on the part of the
employer to dismiss the employee concerned. Consequently, reinstatement is in order. And
this is the situation here. Petitioner was separated because of his alleged involvement in the
pilferage in question. However, he was absolved from any responsibility therefor by the
court. The cause for his dismissal having been proved non-existent or false, his
reinstatement is warranted. It would be unjust and unreasonable for the Company to dismiss
petitioner after the latter had proven himself innocent of the cause for which he was
dismissed."23
The facts in Pedroso v. Castro24 are similar to the set of facts in the present case. The
petitioners therein were arrested and detained by the military authorities by virtue of a
Presidential Commitment Order allegedly for the commission of Conspiracy to Commit
Rebellion under Article 136 of the RPC. As a result, their employer hired substitute workers
to avoid disruption of work and business operations. They were released when the charges
against them were not proven. After incarceration, they reported back to work, but were
refused admission by their employer. The Labor Arbiter and the NLRC sustained the validity
of their dismissal. Nevertheless, this Court again held that the dismissed employees should
be reinstated to their former positions, since their separation from employment was founded
on a false or non-existent cause; hence, illegal.
Respondent Javiers absence from August 9, 1995 cannot be deemed as an abandonment of
his work. Abandonment is a matter of intention and cannot lightly be inferred or legally
presumed from certain equivocal acts. To constitute as such, two requisites must concur:
first, the employee must have failed to report for work or must have been absent without
valid or justifiable reason; and second, there must have been a clear intention on the part of
the employee to sever the employer-employee relationship as manifested by some overt
acts, with the second element being the more determinative factor. Abandonment as a just
ground for dismissal requires clear, willful, deliberate, and unjustified refusal of the
employee to resume his employment. Mere absence or failure to report for work, even after
notice to return, is not tantamount to abandonment.25
Moreover, respondent Javiers acquittal for rape makes it more compelling to view the
illegality of his dismissal. The trial court dismissed the case for "insufficiency of evidence,"
and such ruling is tantamount to an acquittal of the crime charged, and proof that

respondent Javiers arrest and detention were without factual and legal basis in the first
place.
The petitioner acted with precipitate haste in terminating respondent Javiers employment
on January 30, 1996, on the ground that he had raped the complainant therein. Respondent
Javier had yet to be tried for the said charge. In fine, the petitioner prejudged him, and
preempted the ruling of the RTC. The petitioner had, in effect, adjudged respondent Javier
guilty without due process of law. While it may be true that after the preliminary
investigation of the complaint, probable cause for rape was found and respondent Javier had
to be detained, these cannot be made as legal bases for the immediate termination of his
employment.
Moreover, the petitioner did not accord respondent Javier an opportunity to explain his
absences from July 31, 1995. The petitioners reliance on the alleged Letter dated August 17,
1995 is misplaced. There is no evidence on record that respondent Javier received such
letter, and its
sudden presence is highly suspect. The Court agrees with respondent Javiers observation
that the letter was not mentioned nor annexed in the petitioners Position Paper, Rejoinder
and even in its Opposition to the Appeal. The letter surfaced only on a much later date, in
1999, when it was formally offered in evidence26 and referred to in the petitioners
Memorandum27 before the Labor Arbiter a clear inference that the said letter was but an
afterthought to justify petitioners termination of respondent Javiers employment.
Further, we cannot subscribe to the petitioners contention that the due process requirement
relative to the dismissal of respondent Javier was duly complied with when he was allowed to
explain his side during the grievance machinery conferences. Indeed, in the case at bar, the
petitioner did not conduct any investigation whatsoever prior to his termination, despite
being informed of respondent Javiers predicament by the latters siblings, his Union and his
counsel.28 The meetings held pursuant to the grievance machinery provisions of the
collective bargaining agreement were only done after his dismissal had already taken effect
on February 5, 1996. Clearly, well-meaning these conferences might be, they can not cure
an otherwise unlawful termination.
It bears stressing that for a dismissal to be validly effected, the twin requirements of due
process notice and hearing must be observed. In dismissing an employee, an employer
has the burden of proving that the
former worker has been served two notices: (1) one to apprise him of the particular acts or
omissions for which his dismissal is sought; and (2) the other to inform him of his employers
decision to dismiss him. As to the requirement of a hearing, the essence of due process lies
in an opportunity to be heard, and not always and indispensably in an actual hearing.29
Finally, in line with the rulings of this Court in Magtoto and Pedroso on the matter of
backwages, respondent Javier is not entitled to any salary during the period of his detention.
His entitlement to full backwages commenced from the time the petitioner refused his
reinstatement. In the instant case, when respondent Javier was freed on May 24, 1996 by
virtue of the judgment of acquittal dated May 17, 1996, he immediately proceeded to the
petitioner but was not accepted back to work; hence, the reckoning point for the grant of
backwages started therefrom.
IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby DISMISSED for lack of merit.
The assailed Decision of the Court of Appeals is AFFIRMED WITH MODIFICATION. Petitioner is
hereby ORDERED to reinstate respondent Rogelio Javier to his former position or, if no longer
possible, a substantially equivalent position without loss of seniority rights and other
privileges appurtenant thereto, with full backwages from the time it refused to allow his
reinstatement on May 24, 1996 until actually reinstated; or, if reinstatement is no longer
feasible, to pay him separation pay equivalent to one (1) month salary for every year of
service.
Costs against the petitioner. SO ORDERED.
G.R. No. 165594
April 23, 2007
FRANCISCO SORIANO, JR., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY, INCORPORATED, Respondents.
DECISION
CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, petitioner
Francisco Soriano Jr. seeks to set aside the Decision dated 29 April 20042 and Resolution
dated 4 October 20043 of the Court of Appeals in CA-G.R. SP No. 75152, affirming the
Decision and Resolution of the National Labor Relations Commission (NLRC) dated 20 August
20024 and 28 October 2002,5 respectively, in NLRC-CA No. 024050-2000. In its Decision and
Resolution, the NLRC affirmed the Decision of Labor Arbiter Joel S. Lustria (Labor Arbiter
Lustria) dated 23 March 2000 in NLRC-NCR Case No. 00-08-05259-966 dismissing the
petitioners complaint for illegal dismissal against respondent Philippine Long Distance
Telephone Company, Incorporated.
The factual antecedents of the petition at bar are as follows:
In 1980, petitioner and certain individuals namely Sergio Benjamin (Benjamin), Maximino
Gonzales (Gonzales), and Noel Apostol (Apostol) were employed by the respondent as
Switchman Helpers in its Tondo Exchange Office (TEO). After participating in several
trainings and seminars, petitioner, Benjamin, and Gonzales were promoted as Switchmen.
Apostol, on the other hand, was elevated to the position of Frameman. One of their duties as
Switchmen and Frameman was the manual operation and maintenance of the Electronic
Mechanical Device (EMD) of the TEO.7
In November 1995, respondent PLDT implemented a company-wide redundancy program.8
In its "Notice of Separation Due to Redundancy" dated 27 November 1995 to the Director of
the Department of Labor and Employment, National Capital Region (DOLE-NCR),9
respondent PLDT cited the following reasons for the aforesaid redundancy program:
a) Technological changes where new technologies necessitate reduction in workforce, e.g.,
conversion of electro-mechanical switches; outmoded electronic switches to modern digital
switches.
b) Position declared redundant due to collapsing/merging of functions where the required
number of personnel became less, i.e. rehoming of toll centers or centralization of toll
centers.
c) Non-replacement of function upon retirement of executive where attached staffs with the
executive are no longer needed Staff Assistant, Secretary, Clerk.
d) Process Improvements and Automation of functions which render the positions as
redundant since the new process or Automation require less personnel.
e) Functions or positions which are affected adversely by market forces, thereby
necessitating reduction of current workforce to match the reduction of workload, i.e., Traffic
due to decreasing number of handled calls.
Subsequently, the respondent PLDT gave separate letters dated 15 July 1996 to petitioner,
Benjamin, Gonzales, and Apostol informing them that their respective positions were
deemed redundant due to the above-cited reasons and that their services will be terminated
on 16 August 1996.10 They requested the respondent PLDT for transfer to some vacant
positions but their requests were denied since all positions were already filled up. Hence, on
16 August 1996, respondent PLDT dismissed the four from employment.11
On 20 August 1996, Benjamin received an amount of P315,435.04 from the respondent PLDT
as separation pay,12 while Apostol and Gonzales received on 2 September 1996 their
separation pay from the respondent PLDT in the amounts of P486,484.95 and P472,897.08,
respectively.13 Likewise, petitioner received on 21 October 1996 an amount of P644,194.64
from the respondent PLDT as his separation pay.14 All four of them executed a document
entitled, "Receipt, Release and Quitclaim" in favor of the respondent PLDT;15 they, however,
placed a note of "Under Protest" beside their signatures in the said document.16
Thereafter, petitioner, Benjamin, Gonzales, and Apostol filed a joint complaint for illegal
dismissal against respondent PLDT.17 On 23 March 2000, Labor Arbiter Lustria rendered his
Decision dismissing the complaint for lack of merit. He stated that the respondent PLDT
legitimately exercised its management prerogative in terminating the services of petitioner,
Benjamin, Gonzales, and Apostol, on the ground of a valid redundancy program. He was also
convinced that the respondent PLDT complied with the requirements for dismissing an
employee for redundancy under Article 283 of the Labor Code.18
Further, Labor Arbiter Lustria opined that respondent PLDTs redundancy program was
effected in good faith as the reduction of the latters employees was brought about by its
adoption of the latest communication technology equipment which can be operated by
computers alone. This undertaking was also done pursuant to the demand of the public for
clearer signal, faster service and digital features. He found no ill-motive or bad faith on the

part of the respondent PLDT in implementing the redundancy program and noted that
petitioner, Benjamin, Gonzales and Apostol had already received their respective separation
pay and had executed release and quitclaim in favor of respondent PLDT. In conclusion,
Labor Arbiter Lustria held:
Finally, we have often stressed that it has always been an avowed policy of this Arbitration
Branch that in carrying out and interpreting the provisions of the Labor Code and its
Implementing Rules and Regulations, the working mans welfare should be the paramount
and primordial consideration. In protecting the working class, however, we could not simply
close our eyes to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine. This, is so, for while we
favor the cause of the working class in his conflict with management, we likewise have to
consider the rights and interest of the employers, which are equally entitled to legal
protection.
WHEREFORE, foregoing premises considered, judgment is hereby rendered dismissing the
instant complaint for lack of merit.19
Petitioner, Benjamin, Gonzales, and Apostol appealed to the NLRC. On 20 August 2002, the
NLRC promulgated its Decision dismissing the appeal and affirming in toto the decision of
Labor Arbiter Lustria. It ruled that the findings, conclusions and legal bases of Labor Arbiter
Lustria were supported by the evidence on record. In parting, it ruled:
Needless to state, not having been illegally dismissed, as comprehensively discussed above,
Complainants-Appellants are therefore not entitled to reinstatement to their former positions
without loss of seniority right and privileges and to payment of full back wages.
WHEREFORE, premises considered, the Appeal is hereby DISMISSED for lack of merit.
Accordingly, the Decision appealed from is sustained in toto.20
Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for Reconsideration of the NLRC
Decision but the same was denied for lack of compelling reason in the Resolution dated 28
October 2002.
Thereafter, the four dismissed employees assailed the NLRC Decision and Resolution, dated
20 August 2002 and 28 October 2002, respectively, via a Petition for Certiorari to the Court
of Appeals. On 29 April 2004, the Court of Appeals dismissed the Petition and found no grave
abuse of discretion on the part of the NLRC in rendering its assailed Decision and Resolution.
Pertinent portions of the said decision read:
At any rate, grave abuse of discretion, the ground invoked to support the petition at bench,
has been defined as "such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction, or, x x x where the power is exercised in an arbitrary or despotic manner
by reason of passion or personal hostility, and it must be so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law. It is not in fact sufficient that a tribunal, in the exercise of its
power, abused its discretion; (the) abuse must be grave.
Noting that no such abuse of discretion as defined attended the assailed resolutions, We
have no choice but to dismiss the petition.
WHEREFORE, the petition for certiorari is DISMISSED.21
Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for Reconsideration but the same
was denied by the Court of Appeals in its Resolution dated 4 October 2004.
On 24 November 2004, petitioner, Benjamin, Gonzales, and Apostol filed before this Court a
Petition for Review on Certiorari of the Court of Appeals Decision and Resolution, dated 29
April 2004 and 4 October 2004, respectively. In our Resolution dated 24 January 2005, we
denied the Petition for failure of Benjamin, Gonzales, and Apostol to sign the attached
verification and certificate of non-forum shopping, thus:
In accordance with Rule 45 and other related provisions of the 1997 Rules of Civil Procedure,
as amended, governing appeals by certiorari to the Supreme Court, only petitions which are
accompanied by or comply strictly with the requirements specified therein shall be
entertained. On the basis thereof, the Court Resolves to DENY the petition for review on
certiorari dated 24 November 2004 assailing the decision and resolution of the Court of
Appeals for petitioners failure to submit a valid certification of non-forum shopping in
accordance with Section 4 (e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule 42,
and Sections 4 and 5 (d), Rule 56, the attached verification and certification of non-forum
shopping having been signed by only one (1) of four (4) petitioners.22

On 28 February 2004, petitioner filed a Motion for Reconsideration alleging therein that:
Since the cause of action of each petitioner is independent of the other three, petitioner
SORIANO, JR. could validly proceed with his own petition for review on certiorari without the
intervention of his co-petitioners. Consequently, he should not be prejudiced by the failure of
his co-petitioners to verify the petition and submit a valid certification of non-forum
shopping.
Petitioner SORIANO, JR. signed the verification and certificate of non-forum shopping in the
petition for review on certiorari. Hence, as far as he is concerned, his petition has complied
with Section 4 (e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule 42, and Sections 4
and 5 (d), Rule 56 of the 1997 Rules of Civil Procedure. The petition in regard to him should
not have been dismissed by this Honorable Court.23
Hence, we reinstated the Petition but excluded Benjamin, Gonzales, and Apostol as
petitioners.24
Petitioner raises the following issues for our consideration:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS RULED CONTRARY TO LAW AND
EXISTING JURISPRUDENCE IN REFUSING TO REVIEW THE FACTUAL FINDINGS OF THE NLRC.
II.
WHETHER OR NOT THE FINDING OF THE NLRC THAT PETITIONER WAS LAWFULLY
TERMINATED FROM EMPLOYMENT IS SUPPORTED BY SUBSTANTIAL EVIDENCE.
III.
WHETHER OR NOT PETITIONERS ACCEPTANCE OF SEPARATION BENEFITS AMOUNTS TO A
WAIVER OF HIS RIGHT TO QUESTION THE VALIDITY OF HIS DISMISSAL.25
Apropos the first issue, petitioner argues that the Court of Appeals may review the findings
of fact of the NLRC in a petition for certiorari under Rule 65 even if the factual findings of the
Labor Arbiter and the NLRC do not conflict with each other; that the reliance of the Court of
Appeals on the case of Gonzales v. National Labor Relations Commission26 was contrary to
law and jurisprudence; that our ruling in Gonzales v. National Labor Relations Commission, to
wit: "Only when the factual findings and conclusion of the Labor Arbiter and NLRC are clearly
in conflict with each other is this Court behooved to give utmost attention to and thoroughly
scrutinize the records of the case, more particularly the evidence presented, to arrive at a
correct decision," is not absolute; that the aforecited ruling is only a general rule and is only
binding if the factual findings of the Labor Arbiter and the NLRC are supported by substantial
evidence; and that in the case of Maya Farms Employees Organization v. National Labor
Relations Commission,27 this Court held that findings of fact of the NLRC, even though these
do not conflict with the findings of the Labor Arbiter, may be reviewed on certiorari when
these findings are made in disregard of the evidence on record.28
We reject these contentions.
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate
court does not assess and weigh the sufficiency of evidence upon which the Labor Arbiter
and the NLRC based their conclusion. The query in this proceeding is limited to the
determination of whether or not the NLRC acted without or in excess of its jurisdiction or
with grave abuse of discretion in rendering its decision. However, as an exception, the
appellate court may examine and measure the factual findings of the NLRC if the same are
not supported by substantial evidence.29
In the case at bar, the Court of Appeals was correct in limiting its determination to the issue
of whether there was grave abuse of discretion on the part of the NLRC, and in refusing to
review the factual findings of the said administrative body, since its factual findings and
conclusions are anchored on substantial evidence.
The Labor Arbiter, the NLRC, and the Court of Appeals all found that substantial evidence
supports the absence of illegal dismissal in the present case.
Article 283 of the Labor Code provides that an employer may dismiss from work an
employee by reason of redundancy. The same provision also states the procedural
requirements for the validity of the dismissal, viz:

ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL. The employer

may also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the worker and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker
affected thereof shall be entitled to a separation pay equivalent to at least his one month
pay or to at least one (1) month pay for every year of service, whichever is higher.
(Emphases supplied.)
In upholding the legality of petitioners dismissal from work, the NLRC relied on the
documents submitted by the respondent PLDT showing compliance with the requirements
abovestated, to wit: 1) a letter notifying the Director of the DOLE-NCR of the impending
termination from work of the petitioner by reason of redundancy and stating the
grounds/reasons for the implementation of the redundancy program;30 2) a letter apprising
the petitioner of his dismissal from employment due to redundancy;31 3) a receipt certifying
that the petitioner had already received his separation pay from the respondent PLDT;32 4)
a release/waiver/quitclaim executed by the petitioner in favor of the respondent PLDT;33
and 5) affidavits executed by the officers of the respondent PLDT explaining the reasons and
necessities for the implementation of the redundancy program.34 Petitioner failed to
question, impeach or refute the existence, genuineness, and validity of these documents.
It is clear that the foregoing documentary evidence constituted substantial evidence to
support the findings of Labor Arbiter Lustria and the NLRC that petitioners employment was
terminated by respondent PLDT due to a valid or legal redundancy program since substantial
evidence merely refers to that amount of evidence which a reasonable mind might accept as
adequate to support a conclusion.35
With regard to petitioners allegation that the NLRC committed grave abuse of discretion in
affirming the validity of his dismissal from work, it should be borne in mind that an act of a
court or tribunal may constitute grave abuse of discretion when the same is performed in a
capricious or whimsical exercise of judgment amounting to lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of positive duty, or to a
virtual refusal to perform a duty enjoined by law, as where the power is exercised in an
arbitrary and despotic manner because of passion or personal hostility.36
As earlier discussed, the ruling of the NLRC was premised on substantial evidence
comprising of documentary proofs submitted by the respondent PLDT showing compliance
with the requirements of law for terminating petitioners employment due to redundancy.
This obviously negates any capriciousness or arbitrariness in the exercise of judgment of the
NLRC. Thus, no grave abuse of discretion can be ascribed to the NLRC for promulgating its
Decision dated 20 August 2002.
Petitioners reliance on the case of Maya Farms Employees Organization v. National Labor
Relations Commission37 is misplaced. We did not make a categorical statement in the said
case that the Court of Appeals may review the findings of fact of the NLRC in a petition for
certiorari under Rule 65 of the Rules of Court even if the factual findings of the Labor Arbiter
and the NLRC do not conflict with each other. What we stated therein was that findings of
fact of administrative agencies and quasi-judicial bodies which have acquired expertise
because their jurisdiction is confined to specific matters are generally accorded not only
respect but even finality and are binding upon this Court unless there is a showing of grave
abuse of discretion, or where it is clearly shown that they were arrived at arbitrarily or in
disregard of the evidence on record.38
In Maya Farms, this Court deemed it necessary to look into the factual findings of the NLRC
to determine whether there was grave abuse of discretion on the part of the latter. Even
then, we found substantial evidence to support the NLRC decision and, thus, we held that
there was no grave abuse of discretion on the part of the latter.
Moreover, the circumstances in Maya Farms are different from the instant case. The facts
and issues of Maya Farms were initially referred to the Secretary of the DOLE which,
subsequently, endorsed these to the NLRC. Thereafter, the said case was immediately
elevated to this Court by a petition for certiorari under Rule 65 of the Rules of Court. On the
other hand, the present case was initially referred to the Labor Arbiter, whose findings were
affirmed by the NLRC. From the NLRC, the instant case was appealed to the Court of Appeals
through a petition for certiorari under Rule 65 of the Rules of Court. Finding that the NLRC
did not commit grave abuse of discretion, the Court of Appeals denied the petition.
Thereafter, this case was brought before this Court by way of Petition for Review on
Certiorari under Rule 45 of the Rules of Court.

The jurisdiction of this Court in petitions for review on certiorari under Rule 45 of the Rules of
Court is limited to reviewing errors of law, not of fact.39 Nevertheless, this Court may review
the facts where: (1) the findings and conclusions of the Labor Arbiter, on one hand, and the
NLRC and the Court of Appeals, on the other, are inconsistent on material and substantial
points; (2) the findings of the NLRC and the Court of Appeals are capricious and arbitrary;
and (3) the Court of Appeals findings that are premised on a supposed absence of evidence
are in fact contradicted by the evidence on record.40 None of the foregoing exceptions to
our limited power to review the facts is present in the case at bar.
Anent the second issue, petitioner contends that there was no substantial evidence showing
that the position of Switchman had become redundant; that the affidavits of the respondent
PLDTs officers have no probative value and should not have been considered by the NLRC
because the said officers are not competent to testify on the technical aspects and effects of
respondent PLDTs adoption of new technology; that the existence of redundancy was belied
by the respondent PLDTs acts of employing outside plant personnel as Switchmen and
Framemen, and of hiring contractual employees to perform the functions of Switchmen; and
that the respondent PLDT did not present proof of the method and criteria it used in
determining the Switchman to be terminated from work.41
Petitioner further avers that he passed several qualifying exams and received awards for
outstanding work; that by reason of his qualifications and exemplary work, he should have
been among the last Switchmen to be laid-off; that the respondent PLDT violated its
Collective Bargaining Agreement with the petitioners union, Manggagawa ng Komunikasyon
sa Pilipinas, when it terminated his job; that the respondent PLDT did not undertake sincere
efforts and actual measures to avoid loss of employment due to its adoption of new
technology; that at the time he was dismissed from work, there were 163 vacant positions
for which he was qualified; that he timely applied for transfer to these positions; and that the
respondent PLDT denied his applications without showing any evidence that the said
positions were already filled up.42
Redundancy exists when the service capability of the workforce is in excess of what is
reasonably needed to meet the demands of the business enterprise. A position is redundant
where it is superfluous, and superfluity of a position or positions may be the outcome of a
number of factors such as over-hiring of workers, decrease in volume of business, or
dropping a particular product line or service activity previously manufactured or undertaken
by the enterprise.43
The records show that respondent PLDT had sufficiently established the existence of
redundancy in the position of Switchman. In his affidavit dated 27 September 1999, Roberto
D. Lazam (Lazam), Senior Manager of GMM Network Surveillance Division of respondent
PLDT, explained:
17. The work, on the other hand, of all the complainants as switchmen is to MAINTAIN ALL
the strowger switches in an exchange. The exchange is the center of an areas telephone
network. PLDT, thus, have a Sta. Mesa Exchange that houses the switchtrains servicing the
Sta. Mesa, Manila and its neighboring areas while it has exchanges in other areas like the
Quezon City exchange, Paraaque, etc., that house the switchtrains of the telephones in the
said respective territories.
18. To maintain a single strowger switch, the following are performed according to a regular
schedule:
a. Spring Gauging it is the adjusting of stationary springs to ensure that they open enough
to break circuits when they should, and so "stationary" springs, "follow" moving springs to
exert pressure in break contracts when the relay is unoperated, and makes contact when
operated.
b. Margining it is the measuring of moving spring tension by checking response of the
armature and specific electrical limits. It measures the total mechanical resistance to the
operation of the armature due to the tension of the springs.
c. Stroke is the normal armature air gap and is adjusted by bending the armature backstop.
d. Routine it is a periodic check of the functioning of telephone apparatus to detect faults.
The foregoing are some of the duties and work of a switchman. Considering the number of
strowger switches in a single switchtrain and considering further the number of switchtrains
in an exchange (bearing in mind the ratio of 30 switchtrains is to 200 subsribers), certainly,
the use of a step-by-step automatic telephone system necessitates intensive maintenance

costs and procedures, not to mention the big number of people needed to perform the
maintenance work.
19. With the advent, however, of new technology that is, feature for feature, more advanced
than the step-by-step automatic telephone system, the company decided to upgrade its
system and abandon the use of the old system.
20. One of the features of the digital technology is that it does not make use of switches
every step of connection. Instead, a single card studded with microchips is issued for each
telephone number so that if a caller wishes to call another, the microchips in the assigned
card do all the work and in a speed of light gets in contact with the microchips of the called
partys card. These "cards" are stored in a "bookshelf like" structure and practically requires
zero maintenance because if a card or a chip in the card is defective, a computer that
monitors the entire exchange will automatically inform the computer operator of a defect,
the card involved, its exact location and the specific "bookshelf." All the computer operator
has to do then is to rise up from his chair, proceed to the computer identified bookshelf,
locate the card, pull out the card from the "bookshelf", throw it in the waste-can, and put in
a new card programmed of course with the telephone number. Programming a card, upon
the other hand, is a fairly simple procedure that it is almost similar to the programming of
the PIN number of an ATM card.
21. With the utter simplicity of the above system, albeit ultimately hi-tech, a lot of tedious
tasks have been done away with. Where before a big number of switchmen were required to
keep the system in shape and where before every strowger switch was scrutinized and
measured, the new system requires only one human being to ensure that an exchange
servicing a million subscribers is in tip top shape. To illustrate, consider an exchange serving
50,000 subscribers. Such an exchange, using the old system, would need 100 personnel
working in 3 8-hour shifts to perform preventive and corrective switch maintenance. On the
other hand, an exchange using the new system would need only one man working from 8
a.m. to 5 p.m. to take care of switch maintenance.
22. In addition to the simplicity of maintenance another advantage of the digital technology
is the added services never before known by ordinary Filipinos. These are to name a few:
(a) The call waiting feature
(b) Terminal Portability
(c) Direct dialing long distance features (International and Domestic)
(d) Do not disturb feature
(e) Automatic Recall
(f) Redial gadgets
(g) Call forwarding facilities
(h) Conference call capacity
23. The new technology simply rendered the position of switchmen redundant. And since
there is no other position available and suited for their qualifications, the company had no
other option but to terminate their employment under a redundancy program.
24. With the features of the new system, it certainly cannot be said that the companys
decision and implementation of the redundancy program was arbitrary or whimsical.44
It is evident from the foregoing facts that respondent PLDTs utilization of high technology
equipment in its operation such as computers and digital switches necessarily resulted in
the reduction of the demand for the services of a Switchman since computers and digital
switches can aptly perform the function of several Switchmen. Indubitably, the position of
Switchman has become redundant.
As to whether Lazam was competent to testify on the effects of respondent PLDTs adoption
of new technology vis--vis the petitioners position of Switchman, the records show that
Lazam was highly qualified to do so. He is a licensed electrical engineer and has been
employed by the respondent PLDT since 1971. He was a Senior Manager for Switching
Division in several offices of the respondent PLDT, and had attended multiple training
programs on Electronic Switching Systems in progressive countries. He was also a training
instructor of Switchmen in the respondents office.45

The fact that respondent PLDT hired contractual employees after implementing its
redundancy program does not necessarily negate the existence of redundancy. As amply
stated by the respondent PLDT, such hiring was intended solely for winding up operations
using the old system.
The respondent PLDT, as employer, has the recognized right and prerogative to select the
persons to be hired and to designate the work as well as the employee or employees to
perform it.46 This includes the right of the respondent PLDT to determine the employees to
be retained or discharged and who among the applicants are qualified and competent for a
vacant position. The rationale for this principle is that respondent PLDT is in the best position
to ascertain what is proper for the advancement of its interest. Thus, this Court cannot
interfere in the wisdom and soundness of the respondent PLDTs decision as to who among
the Switchmen should be retained or discharged or who should be transferred to vacant
positions, as long as such was made in good faith and not for the purpose of curbing the
rights of an employee.47 Since the respondent PLDT determined that petitioners services
are no longer necessary either as a Switchman or in any other position, and such
determination was made in good faith and in furtherance of its business interest, the
petitioners contention that he should be the last switchman to be laid-off by reason of his
qualifications and outstanding work must fail.
Coming now to the third issue, petitioner asseverates that his acceptance of separation pay
from the respondent PLDT does not bar the filing of his complaint for illegal dismissal against
the latter, nor does it imply that he had already waived his right to question the validity of
his dismissal; that he accepted the separation pay only after the lapse of two months from
the time he filed an illegal dismissal case against respondent PLDT; that he had no intention
of accepting the separation pay; that he was only forced to accept the separation pay when
his parent fell ill and, thus, needed a large amount of money to cover the expenses for
treatment; and that he was compelled to execute a quitclaim in favor of respondent PLDT
since this was the only way he could avail himself of the necessary amount for the treatment
of his parent.48
Generally, deeds of release, waiver or quitclaims cannot bar employees from demanding
benefits to which they are legally entitled or from contesting the legality of their dismissal
since quitclaims are looked upon with disfavor and are frowned upon as contrary to public
policy.49 Where, however, the person making the waiver has done so voluntarily, with a full
understanding thereof, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as being a valid and binding undertaking.50
The requisites for a valid quitclaim are: 1) that there was no fraud or deceit on the part of
any of the parties; 2) that the consideration for the quitclaim is credible and reasonable; and
3) that the contract is not contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with a right recognized by law.51
It cannot be gainfully said that the petitioner did not fully understand the consequences of
signing the "Receipt, Release, and Quitclaim" dated 15 August 1996. Petitioner is not an
illiterate person who needs special protection. He held responsible positions in the office of
the respondent PLDT and had attended and passed various training courses for his position.
It is thus assumed that he comprehended the contents of the "Receipt, Release, and
Quitclaim" which he signed on 15 August 1996. There is also no showing that the execution
thereof was tainted with deceit or coercion. By his own admission, petitioner signed the
quitclaim voluntarily, compelled by personal circumstances, rather than by respondent PLDT.
He had received his separation pay and benefited therefrom. Certainly, it would result in
unjust enrichment on the part of the petitioner if he is allowed to question the legality of his
dismissal from work.
Further, the petitioner received separation pay from the respondent PLDT, the amount of
which was more than the amount required under Article 283 of the Labor Code.52 Indeed,
there was a credible and reasonable consideration for his separation from work.
Given the foregoing circumstances, the "Receipt, Release, and Quitclaim" dated 15 August
1996 should be considered as legal and binding on petitioner. It is settled that a legitimate
waiver which represents a voluntary and reasonable settlement of a workers claim should
be respected as the law between the parties.53 Thus, the petitioner is bound by the
"Receipt, Release and Quitclaim" dated 15 August 1996 and, as such, he is already
precluded from assailing the validity of his dismissal.
Finally, it should be noted that the ruling of Labor Arbiter Lustria sustaining the validity of
petitioners dismissal from work by reason of a valid redundancy program was affirmed by
the NLRC and the Court of Appeals. As heretofore discussed, their findings were predicated
on the evidence on records and prevailing jurisprudence. It is well-established that the
findings of the Labor Arbiter, the NLRC and the Court of Appeals, when in absolute

agreement, are accorded not only respect but even finality as long as they are supported by
substantial evidence.54 We find no compelling reason to depart from this principle.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 75152 dated 29 April 2004 and 4 October 2004, respectively, are hereby
AFFIRMED. No costs.
SO ORDERED.
G.R. No. 142293
February 27, 2003
VICENTE SY, TRINIDAD PAULINO, 6BS TRUCKING CORPORATION, and SBT1
TRUCKING CORPORATION, petitioners,
vs.
HON. COURT OF APPEALS and JAIME SAHOT, respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision2 of the Court of Appeals dated
February 29, 2000, in CA-G.R. SP No. 52671, affirming with modification the decision3 of the
National Labor Relations Commission promulgated on June 20, 1996 in NLRC NCR CA No.
010526-96. Petitioners also pray for the reinstatement of the decision4 of the Labor Arbiter
in NLRC NCR Case No. 00-09-06717-94.
Culled from the records are the following facts of this case:
Sometime in 1958, private respondent Jaime Sahot5 started working as a truck helper for
petitioners family-owned trucking business named Vicente Sy Trucking. In 1965, he became
a truck driver of the same family business, renamed T. Paulino Trucking Service, later 6Bs
Trucking Corporation in 1985, and thereafter known as SBT Trucking Corporation since 1994.
Throughout all these changes in names and for 36 years, private respondent continuously
served the trucking business of petitioners.
In April 1994, Sahot was already 59 years old. He had been incurring absences as he was
suffering from various ailments. Particularly causing him pain was his left thigh, which
greatly affected the performance of his task as a driver. He inquired about his medical and
retirement benefits with the Social Security System (SSS) on April 25, 1994, but discovered
that his premium payments had not been remitted by his employer.
Sahot had filed a week-long leave sometime in May 1994. On May 27th, he was medically
examined and treated for EOR, presleyopia, hypertensive retinopathy G II (Annexes "G-5"
and "G-3", pp. 48, 104, respectively),6 HPM, UTI, Osteoarthritis (Annex "G-4", p. 105),7 and
heart enlargement (Annex G, p. 107).8 On said grounds, Belen Paulino of the SBT Trucking
Service management told him to file a formal request for extension of his leave. At the end
of his week-long absence, Sahot applied for extension of his leave for the whole month of
June, 1994. It was at this time when petitioners allegedly threatened to terminate his
employment should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing dismissal if he refused to
work, But he could not retire on pension because petitioners never paid his correct SSS
premiums. The fact remained he could no longer work as his left thigh hurt abominably.
Petitioners ended his dilemma. They carried out their threat and dismissed him from work,
effective June 30, 1994. He ended up sick, jobless and penniless.
On September 13, 1994, Sahot filed with the NLRC NCR Arbitration Branch, a complaint for
illegal dismissal, docketed as NLRC NCR Case No. 00-09-06717-94. He prayed for the
recovery of separation pay and attorneys fees against Vicente Sy and Trinidad Paulino-Sy,
Belen Paulino, Vicente Sy Trucking, T. Paulino Trucking Service, 6Bs Trucking and SBT
Trucking, herein petitioners.
For their part, petitioners admitted they had a trucking business in the 1950s but denied
employing helpers and drivers. They contend that private respondent was not illegally
dismissed as a driver because he was in fact petitioners industrial partner. They add that it
was not until the year 1994, when SBT Trucking Corporation was established, and only then
did respondent Sahot become an employee of the company, with a monthly salary that
reached P4,160.00 at the time of his separation.
Petitioners further claimed that sometime prior to June 1, 1994, Sahot went on leave and
was not able to report for work for almost seven days. On June 1, 1994, Sahot asked
permission to extend his leave of absence until June 30, 1994. It appeared that from the
expiration of his leave, private respondent never reported back to work nor did he file an

extension of his leave. Instead, he filed the complaint for illegal dismissal against the
trucking company and its owners.
Petitioners add that due to Sahots refusal to work after the expiration of his authorized
leave of absence, he should be deemed to have voluntarily resigned from his work. They
contended that Sahot had all the time to extend his leave or at least inform petitioners of his
health condition. Lastly, they cited NLRC Case No. RE-4997-76, entitled "Manuelito Jimenez
et al. vs. T. Paulino Trucking Service," as a defense in view of the alleged similarity in the
factual milieu and issues of said case to that of Sahots, hence they are in pari material and
Sahots complaint ought also to be dismissed.
The NLRC NCR Arbitration Branch, through Labor Arbiter Ariel Cadiente Santos, ruled that
there was no illegal dismissal in Sahots case. Private respondent had failed to report to
work. Moreover, said the Labor Arbiter, petitioners and private respondent were industrial
partners before January 1994. The Labor Arbiter concluded by ordering petitioners to pay
"financial assistance" of P15,000 to Sahot for having served the company as a regular
employee since January 1994 only.
On appeal, the National Labor Relations Commission modified the judgment of the Labor
Arbiter. It declared that private respondent was an employee, not an industrial partner, since
the start. Private respondent Sahot did not abandon his job but his employment was
terminated on account of his illness, pursuant to Article 2849 of the Labor Code. Accordingly,
the NLRC ordered petitioners to pay private respondent separation pay in the amount of
P60,320.00, at the rate of P2,080.00 per year for 29 years of service.
Petitioners assailed the decision of the NLRC before the Court of Appeals. In its decision
dated February 29, 2000, the appellate court affirmed with modification the judgment of the
NLRC. It held that private respondent was indeed an employee of petitioners since 1958. It
also increased the amount of separation pay awarded to private respondent to P74,880,
computed at the rate of P2,080 per year for 36 years of service from 1958 to 1994. It
decreed:
WHEREFORE, the assailed decision is hereby AFFIRMED with MODIFICATION. SB Trucking
Corporation is hereby directed to pay complainant Jaime Sahot the sum of SEVENTY-FOUR
THOUSAND EIGHT HUNDRED EIGHTY (P74,880.00) PESOS as and for his separation pay.10
Hence, the instant petition anchored on the following contentions:
I
RESPONDENT COURT OF APPEALS IN PROMULGATING THE QUESTION[ED] DECISION
AFFIRMING WITH MODIFICATION THE DECISION OF NATIONAL LABOR RELATIONS
COMMISSION DECIDED NOT IN ACCORD WITH LAW AND PUT AT NAUGHT ARTICLE 402 OF
THE CIVIL CODE.11
II
RESPONDENT COURT OF APPEALS VIOLATED SUPREME COURT RULING THAT THE NATIONAL
LABOR RELATIONS COMMISSION IS BOUND BY THE FACTUAL FINDINGS OF THE LABOR
ARBITER AS THE LATTER WAS IN A BETTER POSITION TO OBSERVE THE DEMEANOR AND
DEPORTMENT OF THE WITNESSES IN THE CASE OF ASSOCIATION OF INDEPENDENT UNIONS
IN THE PHILIPPINES VERSUS NATIONAL CAPITAL REGION (305 SCRA 233).12
III
PRIVATE RESPONDENT
CORPORATION.13

WAS

NOT

DISMISS[ED]

BY

RESPONDENT

SBT

TRUCKING

Three issues are to be resolved: (1) Whether or not an employer-employee relationship

existed between petitioners and respondent Sahot; (2) Whether or not there was valid
dismissal; and (3) Whether or not respondent Sahot is entitled to separation pay.
Crucial to the resolution of this case is the determination of the first issue. Before a case for
illegal dismissal can prosper, an employer-employee relationship must first be
established.14
Petitioners invoke the decision of the Labor Arbiter Ariel Cadiente Santos which found that
respondent Sahot was not an employee but was in fact, petitioners industrial partner.15 It is
contended that it was the Labor Arbiter who heard the case and had the opportunity to
observe the demeanor and deportment of the parties. The same conclusion, aver
petitioners, is supported by substantial evidence.16 Moreover, it is argued that the findings

of fact of the Labor Arbiter was wrongly overturned by the NLRC when the latter made the
following pronouncement:
We agree with complainant that there was error committed by the Labor Arbiter when he
concluded that complainant was an industrial partner prior to 1994. A computation of the
age of complainant shows that he was only twenty-three (23) years when he started working
with respondent as truck helper. How can we entertain in our mind that a twenty-three (23)
year old man, working as a truck helper, be considered an industrial partner. Hence we rule
that complainant was only an employee, not a partner of respondents from the time
complainant started working for respondent.17
Because the Court of Appeals also found that an employer-employee relationship existed,
petitioners aver that the appellate courts decision gives an "imprimatur" to the "illegal"
finding and conclusion of the NLRC.
Private respondent, for his part, denies that he was ever an industrial partner of petitioners.
There was no written agreement, no proof that he received a share in petitioners profits, nor
was there anything to show he had any participation with respect to the running of the
business.18
The elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct. The most
important element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it.19
As found by the appellate court, petitioners owned and operated a trucking business since
the 1950s and by their own allegations, they determined private respondents wages and
rest day.20 Records of the case show that private respondent actually engaged in work as an
employee. During the entire course of his employment he did not have the freedom to
determine where he would go, what he would do, and how he would do it. He merely
followed instructions of petitioners and was content to do so, as long as he was paid his
wages. Indeed, said the CA, private respondent had worked as a truck helper and driver of
petitioners not for his own pleasure but under the latters control.
Article 176721 of the Civil Code states that in a contract of partnership two or more persons
bind themselves to contribute money, property or industry to a common fund, with the
intention of dividing the profits among themselves.22 Not one of these circumstances is
present in this case. No written agreement exists to prove the partnership between the
parties. Private respondent did not contribute money, property or industry for the purpose of
engaging in the supposed business. There is no proof that he was receiving a share in the
profits as a matter of course, during the period when the trucking business was under
operation. Neither is there any proof that he had actively participated in the management,
administration and adoption of policies of the business. Thus, the NLRC and the CA did not
err in reversing the finding of the Labor Arbiter that private respondent was an industrial
partner from 1958 to 1994.
On this point, we affirm the findings of the appellate court and the NLRC. Private respondent
Jaime Sahot was not an industrial partner but an employee of petitioners from 1958 to 1994.
The existence of an employer-employee relationship is ultimately a question of fact23 and
the findings thereon by the NLRC, as affirmed by the Court of Appeals, deserve not only
respect but finality when supported by substantial evidence. Substantial evidence is such
amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.24
Time and again this Court has said that "if doubt exists between the evidence presented by
the employer and the employee, the scales of justice must be tilted in favor of the latter."25
Here, we entertain no doubt. Private respondent since the beginning was an employee of,
not an industrial partner in, the trucking business.
Coming now to the second issue, was private respondent validly dismissed by petitioners?
Petitioners contend that it was private respondent who refused to go back to work. The
decision of the Labor Arbiter pointed out that during the conciliation proceedings, petitioners
requested respondent Sahot to report back for work. However, in the same proceedings,
Sahot stated that he was no longer fit to continue working, and instead he demanded
separation pay. Petitioners then retorted that if Sahot did not like to work as a driver
anymore, then he could be given a job that was less strenuous, such as working as a
checker. However, Sahot declined that suggestion. Based on the foregoing recitals,
petitioners assert that it is clear that Sahot was not dismissed but it was of his own volition
that he did not report for work anymore.

In his decision, the Labor Arbiter concluded that:

While it may be true that respondents insisted that complainant continue working with
respondents despite his alleged illness, there is no direct evidence that will prove that
complainants illness prevents or incapacitates him from performing the function of a driver.
The fact remains that complainant suddenly stopped working due to boredom or otherwise
when he refused to work as a checker which certainly is a much less strenuous job than a
driver.26
But dealing the Labor Arbiter a reversal on this score the NLRC, concurred in by the Court of
Appeals, held that:
While it was very obvious that complainant did not have any intention to report back to work
due to his illness which incapacitated him to perform his job, such intention cannot be
construed to be an abandonment. Instead, the same should have been considered as one of
those falling under the just causes of terminating an employment. The insistence of
respondent in making complainant work did not change the scenario.
It is worthy to note that respondent is engaged in the trucking business where physical
strength is of utmost requirement (sic). Complainant started working with respondent as
truck helper at age twenty-three (23), then as truck driver since 1965. Complainant was
already fifty-nine (59) when the complaint was filed and suffering from various illness
triggered by his work and age.
x x x27
In termination cases, the burden is upon the employer to show by substantial evidence that
the termination was for lawful cause and validly made.28 Article 277(b) of the Labor Code
puts the burden of proving that the dismissal of an employee was for a valid or authorized
cause on the employer, without distinction whether the employer admits or does not admit
the dismissal.29 For an employees dismissal to be valid, (a) the dismissal must be for a
valid cause and (b) the employee must be afforded due process.30
Article 284 of the Labor Code authorizes an employer to terminate an employee on the
ground of disease, viz:
Art. 284. Disease as a ground for termination- An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health as well as the health of his coemployees: xxx
However, in order to validly terminate employment on this ground, Book VI, Rule I, Section 8
of the Omnibus Implementing Rules of the Labor Code requires:
Sec. 8. Disease as a ground for dismissal- Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his health or to the health of
his co-employees, the employer shall not terminate his employment unless there is a
certification by competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6) months even with proper
medical treatment. If the disease or ailment can be cured within the period, the employer
shall not terminate the employee but shall ask the employee to take a leave. The employer
shall reinstate such employee to his former position immediately upon the restoration of his
normal health. (Italics supplied).
As this Court stated in Triple Eight integrated Services, Inc. vs. NLRC,31 the requirement for
a medical certificate under Article 284 of the Labor Code cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary determination by the employer of
the gravity or extent of the employees illness and thus defeat the public policy in the
protection of labor.
In the case at bar, the employer clearly did not comply with the medical certificate
requirement before Sahots dismissal was effected. In the same case of Sevillana vs. I.T.
(International) Corp., we ruled:
Since the burden of proving the validity of the dismissal of the employee rests on the
employer, the latter should likewise bear the burden of showing that the requisites for a
valid dismissal due to a disease have been complied with. In the absence of the required
certification by a competent public health authority, this Court has ruled against the validity
of the employees dismissal. It is therefore incumbent upon the private respondents to prove
by the quantum of evidence required by law that petitioner was not dismissed, or if

dismissed, that the dismissal was not illegal; otherwise, the dismissal would be unjustified.
This Court will not sanction a dismissal premised on mere conjectures and suspicions, the
evidence must be substantial and not arbitrary and must be founded on clearly established
facts sufficient to warrant his separation from work.32
In addition, we must likewise determine if the procedural aspect of due process had been
complied with by the employer.
From the records, it clearly appears that procedural due process was not observed in the
separation of private respondent by the management of the trucking company. The
employer is required to furnish an employee with two written notices before the latter is
dismissed: (1) the notice to apprise the employee of the particular acts or omissions for
which his dismissal is sought, which is the equivalent of a charge; and (2) the notice
informing the employee of his dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his defense.33 These, the petitioners
failed to do, even only for record purposes. What management did was to threaten the
employee with dismissal, then actually implement the threat when the occasion presented
itself because of private respondents painful left thigh.
All told, both the substantive and procedural aspects of due process were violated. Clearly,
therefore, Sahots dismissal is tainted with invalidity.
On the last issue, as held by the Court of Appeals, respondent Jaime Sahot is entitled to
separation pay. The law is clear on the matter. An employee who is terminated because of
disease is entitled to "separation pay equivalent to at least one month salary or to one-half
month salary for every year of service, whichever is greater xxx."34 Following the formula
set in Art. 284 of the Labor Code, his separation pay was computed by the appellate court at
P2,080 times 36 years (1958 to 1994) or P74,880. We agree with the computation, after
noting that his last monthly salary was P4,160.00 so that one-half thereof is P2,080.00.
Finding no reversible error nor grave abuse of discretion on the part of appellate court, we
are constrained to sustain its decision. To avoid further delay in the payment due the
separated worker, whose claim was filed way back in 1994, this decision is immediately
executory. Otherwise, six percent (6%) interest per annum should be charged thereon, for
any delay, pursuant to provisions of the Civil Code.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals dated February
29, 2000 is AFFIRMED. Petitioners must pay private respondent Jaime Sahot his separation
pay for 36 years of service at the rate of one-half monthly pay for every year of service,
amounting to P74,880.00, with interest of six per centum (6%) per annum from finality of
this decision until fully paid.
Costs against petitioners.
SO ORDERED.