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LABOR LAW I CASES

1. PASEI VS. TORRES, ET AL G.R. No. 101279 August 6, 1992

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 101279 August 6, 1992

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,

vs.
HON. RUBEN D. TORRES, as Secretary of the Department of Labor & Employment, and JOSE N.
SARMIENTO, as Administrator of the PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION, respondents.

De Guzman, Meneses & Associates for petitioner.

GRIO-AQUINO, J.:

This petition for prohibition with temporary restraining order was filed by the Philippine Association of
Service Exporters (PASEI, for short), to prohibit and enjoin the Secretary of the Department of Labor and
Employment (DOLE) and the Administrator of the Philippine Overseas Employment Administration (or
POEA) from enforcing and implementing DOLE Department Order No. 16, Series of 1991 and POEA
Memorandum Circulars Nos. 30 and 37, Series of 1991, temporarily suspending the recruitment by
private employment agencies of Filipino domestic helpers for Hong Kong and vesting in the DOLE,
through the facilities of the POEA, the task of processing and deploying such workers.

PASEI is the largest national organization of private employment and recruitment agencies duly licensed
and authorized by the POEA, to engaged in the business of obtaining overseas employment for Filipino
landbased workers, including domestic helpers.

On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino housemaids
employed in Hong Kong, DOLE Secretary Ruben D. Torres issued Department Order No. 16, Series of
1991, temporarily suspending the recruitment by private employment agencies of "Filipino domestic
helpers going to Hong Kong" (p. 30, Rollo). The DOLE itself, through the POEA took over the business of
deploying such Hong Kong-bound workers.

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In view of the need to establish mechanisms that will enhance the protection for Filipino
domestic helpers going to Hong Kong, the recruitment of the same by private
employment agencies is hereby temporarily suspended effective 1 July 1991. As such,
the DOLE through the facilities of the Philippine Overseas Employment Administration
shall take over the processing and deployment of household workers bound for Hong
Kong, subject to guidelines to be issued for said purpose.

In support of this policy, all DOLE Regional Directors and the Bureau of Local
Employment's regional offices are likewise directed to coordinate with the POEA in
maintaining a manpower pool of prospective domestic helpers to Hong Kong on a
regional basis.

For compliance. (Emphasis ours; p. 30, Rollo.)

Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30, Series of 1991,
dated July 10, 1991, providing GUIDELINES on the Government processing and deployment of Filipino
domestic helpers to Hong Kong and the accreditation of Hong Kong recruitment agencies intending to
hire Filipino domestic helpers.

Subject: Guidelines on the Temporary Government Processing and Deployment of

Domestic Helpers to Hong Kong.

Pursuant to Department Order No. 16, series of 1991 and in order to operationalize the
temporary government processing and deployment of domestic helpers (DHs) to Hong
Kong resulting from the temporary suspension of recruitment by private employment
agencies for said skill and host market, the following guidelines and mechanisms shall
govern the implementation of said policy.

I. Creation of a joint POEA-OWWA Household Workers Placement Unit (HWPU)

An ad hoc, one stop Household Workers Placement Unit [or HWPU] under the
supervision of the POEA shall take charge of the various operations involved in the Hong
Kong-DH industry segment:

The HWPU shall have the following functions in coordination with appropriate units and
other entities concerned:

1. Negotiations with and Accreditation of Hong Kong Recruitment Agencies

2. Manpower Pooling

3. Worker Training and Briefing

4. Processing and Deployment

5. Welfare Programs

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II. Documentary Requirements and Other Conditions for Accreditation of Hong Kong
Recruitment Agencies or Principals

Recruitment agencies in Hong Kong intending to hire Filipino DHs for their employers
may negotiate with the HWPU in Manila directly or through the Philippine Labor Attache's
Office in Hong Kong.

xxx xxx xxx

X. Interim Arrangement

All contracts stamped in Hong Kong as of June 30 shall continue to be processed by

POEA until 31 July 1991 under the name of the Philippine agencies concerned.
Thereafter, all contracts shall be processed with the HWPU.

Recruitment agencies in Hong Kong shall submit to the Philippine Consulate General in
Hong kong a list of their accepted applicants in their pool within the last week of July. The
last day of acceptance shall be July 31 which shall then be the basis of HWPU in
accepting contracts for processing. After the exhaustion of their respective pools the only
source of applicants will be the POEA manpower pool.

For strict compliance of all concerned. (pp. 31-35, Rollo.)

On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37, Series of 1991,
on the processing of employment contracts of domestic workers for Hong Kong.

TO: All Philippine and Hong Kong Agencies engaged in the recruitment of Domestic
helpers for Hong Kong

Further to Memorandum Circular No. 30, series of 1991 pertaining to the government
processing and deployment of domestic helpers (DHs) to Hong Kong, processing of
employment contracts which have been attested by the Hong Kong Commissioner of
Labor up to 30 June 1991 shall be processed by the POEA Employment Contracts
Processing Branch up to 15 August 1991 only.

Effective 16 August 1991, all Hong Kong recruitment agent/s hiring DHs from the
Philippines shall recruit under the new scheme which requires prior accreditation which
the POEA.

Recruitment agencies in Hong Kong may apply for accreditation at the Office of the Labor
Attache, Philippine Consulate General where a POEA team is posted until 31 August
1991. Thereafter, those who failed to have themselves accredited in Hong Kong may
proceed to the POEA-OWWA Household Workers Placement Unit in Manila for
accreditation before their recruitment and processing of DHs shall be allowed.

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Recruitment agencies in Hong Kong who have some accepted applicants in their pool
after the cut-off period shall submit this list of workers upon accreditation. Only those DHs
in said list will be allowed processing outside of the HWPU manpower pool.

For strict compliance of all concerned. (Emphasis supplied, p. 36, Rollo.)

On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the aforementioned
DOLE and POEA circulars and to prohibit their implementation for the following reasons:

1. that the respondents acted with grave abuse of discretion and/or in excess of their
rule-making authority in issuing said circulars;

2. that the assailed DOLE and POEA circulars are contrary to the Constitution, are
unreasonable, unfair and oppressive; and

3. that the requirements of publication and filing with the Office of the National
Administrative Register were not complied with.

There is no merit in the first and second grounds of the petition.

Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate recruitment and
placement activities.

Art. 36. Regulatory Power. The Secretary of Labor shall have the power to restrict and
regulate the recruitment and placement activities of all agencies within the coverage of
this title [Regulation of Recruitment and Placement Activities] and is hereby authorized to
issue orders and promulgate rules and regulations to carry out the objectives and
implement the provisions of this title. (Emphasis ours.)

On the other hand, the scope of the regulatory authority of the POEA, which was created by Executive
Order No. 797 on May 1, 1982 to take over the functions of the Overseas Employment Development
Board, the National Seamen Board, and the overseas employment functions of the Bureau of
Employment Services, is broad and far-ranging for:

1. Among the functions inherited by the POEA from the defunct Bureau of Employment
Services was the power and duty:

"2. To establish and maintain a registration and/or licensing system to

regulate private sector participation in the recruitment and placement of
workers, locally and overseas, . . ." (Art. 15, Labor Code, Emphasis
supplied). (p. 13, Rollo.)

2. It assumed from the defunct Overseas Employment Development Board the power
and duty:

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3. To recruit and place workers for overseas employment of Filipino

contract workers on a government to government arrangement and in
such other sectors as policy may dictate . . . (Art. 17, Labor Code.) (p.
13, Rollo.)

3. From the National Seamen Board, the POEA took over:

2. To regulate and supervise the activities of agents or representatives of

shipping companies in the hiring of seamen for overseas employment;
and secure the best possible terms of employment for contract seamen
workers and secure compliance therewith. (Art. 20, Labor Code.)

The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional,
unreasonable and oppressive. It has been necessitated by "the growing complexity of the modern
society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are
necessary to help in the regulation of society's ramified activities. "Specialized in the particular field
assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be
expected from the legislature or the courts of justice" (Ibid.).

It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in the recruitment
and deployment of Filipino landbased workers for overseas employment. A careful reading of the
challenged administrative issuances discloses that the same fall within the "administrative and policing
powers expressly or by necessary implication conferred" upon the respondents (People vs. Maceren, 79
SCRA 450). The power to "restrict and regulate conferred by Article 36 of the Labor Code involves a grant
of police power (City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" means "to confine, limit or
stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to protect, foster, promote,
preserve, and control with due regard for the interests, first and foremost, of the public, then of the utility
and of its patrons" (Philippine Communications Satellite Corporation vs. Alcuaz, 180 SCRA 218).

The Solicitor General, in his Comment, aptly observed:

. . . Said Administrative Order [i.e., DOLE Administrative Order No. 16] merely restricted
the scope or area of petitioner's business operations by excluding therefrom recruitment
and deployment of domestic helpers for Hong Kong till after the establishment of the
"mechanisms" that will enhance the protection of Filipino domestic helpers going to Hong
Kong. In fine, other than the recruitment and deployment of Filipino domestic helpers for
Hongkong, petitioner may still deploy other class of Filipino workers either for Hongkong
and other countries and all other classes of Filipino workers for other countries.

Said administrative issuances, intended to curtail, if not to end, rampant violations of the
rule against excessive collections of placement and documentation fees, travel fees and
other charges committed by private employment agencies recruiting and deploying
domestic helpers to Hongkong. [They are reasonable, valid and justified under the
general welfare clause of the Constitution, since the recruitment and deployment
business, as it is conducted today, is affected with public interest.

xxx xxx xxx

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The alleged takeover [of the business of recruiting and placing Filipino domestic helpers
in Hongkong] is merely a remedial measure, and expires after its purpose shall have
been attained. This is evident from the tenor of Administrative Order No. 16 that
recruitment of Filipino domestic helpers going to Hongkong by private employment
agencies are hereby "temporarily suspended effective July 1, 1991."

The alleged takeover is limited in scope, being confined to recruitment of domestic

helpers going to Hongkong only.

xxx xxx xxx

. . . the justification for the takeover of the processing and deploying of domestic helpers
for Hongkong resulting from the restriction of the scope of petitioner's business is
confined solely to the unscrupulous practice of private employment agencies victimizing
applicants for employment as domestic helpers for Hongkong and not the whole
recruitment business in the Philippines. (pp. 62-65, Rollo.)

The questioned circulars are therefore a valid exercise of the police power as delegated to the executive
branch of Government.

Nevertheless, they are legally invalid, defective and unenforceable for lack of power publication and filing
in the Office of the National Administrative Register as required in Article 2 of the Civil Code, Article 5 of
the Labor Code and Sections 3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987 which
provide:

Art. 2. Laws shall take effect after fifteen (15) days following the completion of their
publication in the Official Gazatte, unless it is otherwise provided. . . . (Civil Code.)

Art. 5. Rules and Regulations. The Department of Labor and other government
agencies charged with the administration and enforcement of this Code or any of its parts
shall promulgate the necessary implementing rules and regulations. Such rules and
regulations shall become effective fifteen (15) days after announcement of their
adoption in newspapers of general circulation. (Emphasis supplied, Labor Code, as
amended.)

Sec. 3. Filing. (1) Every agency shall file with the University of the Philippines Law
Center, three (3) certified copies of every rule adopted by it. Rules in force on the date of
effectivity of this Code which are not filed within three (3) months shall not thereafter be
the basis of any sanction against any party or persons. (Emphasis supplied, Chapter 2,
Book VII of the Administrative Code of 1987.)

Sec. 4. Effectivity. In addition to other rule-making requirements provided by law not

inconsistent with this Book, each rule shall become effective fifteen (15) days from the
date of filing as above provided unless a different date is fixed by law, or specified in the
rule in cases of imminent danger to public health, safety and welfare, the existence of
which must be expressed in a statement accompanying the rule. The agency shall take

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appropriate measures to make emergency rules known to persons who may be affected
by them. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987).

Once, more we advert to our ruling in Taada vs. Tuvera, 146 SCRA 446 that:

. . . Administrative rules and regulations must also be published if their purpose is to

enforce or implement existing law pursuant also to a valid delegation. (p. 447.)

Interpretative regulations and those merely internal in nature, that is, regulating only the
personnel of the administrative agency and not the public, need not be published. Neither
is publication required of the so-called letters of instructions issued by administrative
superiors concerning the rules or guidelines to be followed by their subordinates in the
performance of their duties. (p. 448.)

We agree that publication must be in full or it is no publication at all since its purpose is to
inform the public of the content of the laws. (p. 448.)

For lack of proper publication, the administrative circulars in question may not be enforced and
implemented.

WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department Order No.
16, Series of 1991, and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by the public
respondents is hereby SUSPENDED pending compliance with the statutory requirements of publication
and filing under the aforementioned laws of the land.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Medialdea, Regalado, Davide, Jr., Romero,
Nocon and Bellosillo, JJ., concur.

2. Arco Metal Products vs. Samahan ng mga Manggagawa sa Arco Metal NAFLU 554
SCRA 111 (2008), G.R. No. 170734

DECISION

TINGA, J.:

This treats of the Petition for Review[1] of the Resolution[2] and

[3]
Decision of the Court of Appeals dated 9 December 2005 and 29 September 2005,
respectively in CA-G.R. SP No. 85089 entitled Samahan ng mga Manggagawa sa Arco Metal-NAFLU
(SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary
Arbitrator Apron M. Mangabat,[4] which ruled that the 13th month pay, vacation leave and sick leave
conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they
rendered within a year.

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Petitioner is a company engaged in the manufacture of metal products, whereas respondent is

the labor union of petitioners rank and file employees. Sometime in December 2003, petitioner paid the
13th month pay, bonus, and leave encashment of three union members in amounts proportional to the
service they actually rendered in a year, which is less than a full twelve (12) months. The employees
were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004

2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not
prorate the payment of the same benefits to seven (7) employees who had not served for the full 12
months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to
respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the
Labor Code. Thus, they filed a complaint before the National Conciliation and Mediation Board
(NCMB). The parties submitted the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving
of the contested benefits in full, irrespective of the actual service rendered within one year has
not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing group head of
petitioner, which states that the giving in full of the benefit was a mere error. He also interpreted the
phrase for each year of service found in the pertinent CBA provisions to mean that an employee must
have rendered one year of service in order to be entitled to the full benefits provided in the CBA.[5]

Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the Court of Appeals,
imputing serious error to Mangabats conclusion. The Court of Appeals ruled that the CBA did not intend
to foreclose the application of prorated payments of leave benefits to covered employees. The appellate
court found that petitioner, however, had an existing voluntary practice of paying the aforesaid benefits in
full to its employees, thereby rejecting the claim that petitioner erred in paying full benefits to its
seven employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not
presented any evidence in support of its position that it has no voluntary practice of granting the
contested benefits in full and without regard to the service actually rendered within the year. It also
questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The
dispositive portion of the courts decision reads:

WHEREFORE, premises considered, the instant petition is

hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in
NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH
MODIFICATION in that the 13th month pay, bonus, vacation leave and sick leave
conversions to cash shall be paid to the employees in full, irrespective of the actual
service rendered within a year.[7]

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this
petition.

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Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay,
bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary employer
practice and, consequently, the prorated payment of the said benefits does not constitute diminution of
benefits under Article 100 of the Labor Code.[8]

The petition ultimately fails.

First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of
service actually rendered by an employee to the company. According to petitioner, there is a one-year
cutoff in the entitlement to the benefits provided in the CBA which is evident from the wording of its
pertinent provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at

least one (1) year of service shall be entitled to sixteen (16) days vacation leave with pay
for each year of service. Unused leaves shall not be cumulative but shall be converted into
its cash equivalent and shall become due and payable every 1 st Saturday of December of
each year.

However, if the 1st Saturday of December falls in December 1, November 30

(Friday) being a holiday, the management will give the cash conversion of leaves in
November 29.

Section 2. In case of resignation or retirement of an employee, his vacation leave

shall be paid proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at

least one (1) year of service shall be entitled to sixteen (16) days of sick leave with pay
for each year of service. Unused sick leave shall not be cumulative but shall be
converted into its cash equivalent and shall become due and payable every 1 st Saturday
of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the
Company physician or by a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon

retirement or separation.

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ARTICLE XVI EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees
covered by this agreement and if unused shall be converted into cash and become due
and payable on the 1st Saturday of December each year.

Section 2. Employees/workers covered by this agreement who have rendered at

least one (1) year of service shall be entitled to seven (7) days of Paternity Leave with pay
in case the married employees legitimate spouse gave birth. Said benefit shall be non-
cumulative and non-commutative and shall be deemed in compliance with the law on the
same.

Section 3. Maternity leaves for married female employees shall be in accordance

with the SSS Law plus a cash grant of P1,500.00 per month.

xxx

ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by
this agreement. The basis of computing such pay shall be the basic salary per day of the
employee multiplied by 30 and shall become due and payable every 1 st Saturday of
December.

Section 2. The Company shall grant a bonus to all employees as practiced which
shall be distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five
Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.[9] (Underscoring
ours)

There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of
vacation and sick leave, one must have rendered at least one year of service. The clear wording of the
provisions does not allow any other interpretation. Anent the 13th month pay and bonus, we agree with
the findings of Mangabat that the CBA provisions did not give any meaning different from that given by
the law, thus it should be computed at 1/12 of the total compensation which an employee receives for the
whole calendar year. The bonus is also equivalent to the amount of the 13th month pay given, or in
proportion to the actual service rendered by an employee within the year.

On the second issue, however, petitioner founders.

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As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does
not normally embark on a re-examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding
on the Court.[10] The rule, however, admits of several exceptions, one of which is when the findings of the
Court of Appeals are contrary to that of the lower tribunals. Such is the case here, as the factual
conclusions of the Court of Appeals differ from that of the voluntary arbitrator.

Petitioner granted, in several instances, full benefits to employees who have not served a full
year, thus:

Name Reason Duration

1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 2003[11]

Petitioner claims that its full payment of benefits regardless of the length of service to the
company does not constitute voluntary employer practice. It points out that the payments had been
erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and
2003. According to petitioner, it was only in 2003 that the accounting department discovered the error
when there were already three (3) employees involved with prolonged absences and the error was
corrected by implementing the pro-rata payment of benefits pursuant to law and their existing CBA.[12] It
adds that the seven earlier cases of full payment of benefits went unnoticed considering the proportion
of one employee

concerned (per year) vis vis the 170 employees of the company. Petitioner describes the situation as
a clear oversight which should not be taken against it. [13] To further bolster its case, petitioner argues
that for a grant of a benefit to be considered a practice, it should have been practiced over a long period
of time and must be shown to be consistent, deliberate and intentional, which is not what happened in this
case. Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate
the giving of full benefits regardless of the length of service, proof that the grant has not ripened into
company practice.

We disagree.

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer.[14] The principle of non-diminution of benefits is founded on
the Constitutional mandate to "protect the rights of workers and promote their welfare, [15] and to afford
labor full protection.[16] Said mandate in turn is the basis of Article 4 of the Labor Code which states that
all doubts in the implementation and interpretation of this Code, including its implementing rules and
regulations shall be rendered in favor of labor. Jurisprudence is replete with cases which recognize the

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right of employees to benefits which were voluntarily given by the employer and which ripened into
company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.[17] where an
employer had freely and continuously included in the computation of the 13 th month pay those items that
were expressly excluded by the law, we held that the act which was favorable to the employees though
not conforming to law had thus ripened into a practice and could not be withdrawn, reduced, diminished,
discontinued or eliminated. In Sevilla Trading Company v. Semana,[18]we ruled that the employers act of
including non-basic benefits in the computation of the 13th month pay was a voluntary act and had ripened
into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao Integrated Port
Stevedoring Services v. Abarquez,[19] the Court ordered the payment of the cash equivalent of the
unenjoyed sick leave benefits to its intermittent workers after finding that said workers had received
these benefits for almost four years until the grant was stopped due to a different interpretation of the
CBA provisions. We held that the employer cannot unilaterally withdraw the existing privilege of
commutation or conversion to cash given to said workers, and as also noted that the employer had in fact
granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to some
intermittent workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of service
rendered. True, there were only a total of seven employees who benefited from such a practice, but it
was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a minimum
number of years within which a company practice must be exercised in order to constitute voluntary
company practice.[20] Thus, it can be six (6) years,[21] three (3) years,[22] or even as short as two (2)
years.[23] Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an
error, supported only by an affidavit of its manufacturing group head portions of which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave,
sick leave and emergency leave are computed and paid in full to employees who
rendered services to the company for the entire year and proportionately to those
employees who rendered service to the company for a period less than one (1) year or
twelve (12) months in accordance with the CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the
aforesaid benefits to the employees in full regardless of whether or not the employee has
rendered services to the company for the entire year, otherwise, it would be unjust and
inequitable not only to the company but to other employees as well. [24]

In cases involving money claims of employees, the employer has the

burden of proving that the employees did receive the wages and benefits and that the same we
re paid in accordance with law.[25]

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily
presented other proofs, such as the names of other employees who did not fully serve for one year and
thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the
goal but it is seldom achieved. There must have been other employees who had reported for work less
than a full year and who, as a consequence received only prorated benefits. This could have easily
bolstered petitioners theory of mistake/error, but sadly, no evidence to that effect was presented.

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IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP
No. 85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby
AFFIRMED.

SO ORDERED.

3. St. Lukes Medical Center Employees Foundation-AFW vs. NLRC 517 SCRA 677 (2007),
G.R. No. 162053

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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
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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
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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
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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:

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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 record 6 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
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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
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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.

4. JJM Promotion vs. CA, August 5, 1996

[G.R. No. 120095. August 5, 1996]

JMM PROMOTION AND MANAGEMENT, INC., and KARY INTERNATIONAL, INC., petitioner, vs.
HON. COURT OF APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of the
Department of the Labor and Employment, HON. JOSE BRILLANTES, in his capacity as
acting Secretary of the Department of Labor and Employment and HON. FELICISIMO
JOSON, in his capacity as Administrator of the Philippine Overseas Employment
Administration, respondents.

DECISION

KAPUNAN, J.:

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The limits of government regulation under the State's Police Power are once again at the vortex of
the instant controversy. Assailed is the government's power to control deployment of female entertainers
to Japan by requiring an Artist Record Book (ARB) as a precondition to the processing by the POEA of
any contract for overseas employment. By contending that the right to overseas employment, is a
property right within the meaning of the Constitution, petitioners vigorously aver that deprivation thereof
allegedly through the onerous requirement of an ARB violates the due process clause and constitutes an
invalid exercise of the police power.

The factual antecedents are undisputed.

Following the much-publicized death of Maricris Sioson in 1991, former President Corazon C. Aquino
ordered a total ban against the deployment of performing artists to Japan and other foreign
destinations. The ban was, however, rescinded after leaders of the overseas employment industry
promised to extend full support for a program aimed at removing kinks in the system of deployment. In its
place, the government, through the Secretary of Labor and Employment, subsequently issued
Department Order No. 28, creating the Entertainment Industry Advisory Council (EIAC), which was tasked
with issuing guidelines on the training, testing certification and deployment of performing artists abroad.

Pursuant to the EIAC's recommendations,[1] the Secretary of Labor, on January 6, 1994, issued
Department Order No. 3 establishing various procedures and requirements for screening performing
artists under a new system of training, testing, certification and deployment of the former. Performing
artists successfully hurdling the test, training and certification requirement were to be issued an Artist's
Record Book (ARB), a necessary prerequisite to processing of any contract of employment by the
POEA. Upon request of the industry, implementation of the process, originally scheduled for April 1, 1994,
was moved to October 1, 1994.

Thereafter, the Department of Labor, following the EIAC's recommendation, issued a series of orders
fine-tuning and implementing the new system. Prominent among these orders were the following
issuances:

1. Department Order No. 3-A, providing for additional guidelines on the training, testing, certification and
deployment of performing artists.

2. Department Order No. 3-B, pertaining to the Artist Record Book (ARB) requirement, which could be
processed only after the artist could show proof of academic and skills training and has passed the
required tests.

3. Department Order No. 3-E, providing the minimum salary a performing artist ought to receive (not less
than US$600.00 for those bound for Japan) and the authorized deductions therefrom.

4. Department Order No. 3-F, providing for the guidelines on the issuance and use of the ARB by
returning performing artists who, unlike new artists, shall only undergo a Special Orientation Program
(shorter than the basic program) although they must pass the academic test.

In Civil Case No. 95-72750, the Federation of Entertainment Talent Managers of the Philippines
(FETMOP), on January 27, 1995 filed a class suit assailing these department orders, principally
contending that said orders 1) violated the constitutional right to travel; 2) abridged existing contracts for
employment; and 3) deprived individual artists of their licenses without due process of law. FETMOP,
likewise, averred that the issuance of the Artist Record Book (ARB) was discriminatory and illegal and "in
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gross violation of the constitutional right... to life liberty and property." Said Federation consequently
prayed for the issuance of a writ of preliminary injunction against the aforestated orders.

On February 2, 1992, JMM Promotion and Management, Inc. and Kary International, Inc., herein
petitioners, filed a Motion for Intervention in said civil case, which was granted by the trial court in an
Order dated 15 February, 1995.

However, on February 21, 1995, the trial court issued an Order denying petitioners' prayer for a writ
of preliminary injunction and dismissed the complaint.

On appeal from the trial court's Order, respondent court, in CA G.R. SP No. 36713 dismissed the
same. Tracing the circumstances which led to the issuance of the ARB requirement and the assailed
Department Order, respondent court concluded that the issuances constituted a valid exercise by the
state of the police power.

We agree.

The latin maxim salus populi est suprema lex embodies the character of the entire spectrum of public
laws aimed at promoting the general welfare of the people under the State's police power. As an inherent
attribute of sovereignty which virtually "extends to all public needs," [2] this "least limitable"[3] of
governmental powers grants a wide panoply of instruments through which the state, as parens
patriae gives effect to a host of its regulatory powers.

Describing the nature and scope of the police power, Justice Malcolm, in the early case of Rubi v.
Provincial Board of Mindoro[4] wrote:

"The police power of the State," one court has said...'is a power coextensive with self-protection, and is
not inaptly termed 'the law of overruling necessity.' It may be said to be that inherent and plenary power in
the state which enables it to prohibit all things hurtful to the comfort, safety and welfare of society.' Carried
onward by the current of legislature, the judiciary rarely attempts to dam the onrushing power of
legislative discretion, provided the purposes of the law do not go beyond the great principles that mean
security for the public welfare or do not arbitrarily interfere with the right of the individual."[5]

Thus, police power concerns government enactments which precisely interfere with personal liberty
or property in order to promote the general welfare or the common good. As the assailed Department
Order enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that the
said order, particularly, its ARB requirement, does not enhance the public welfare or was exercised
arbitrarily or unreasonably.

A thorough review of the facts and circumstances leading to the issuance of the assailed orders
compels us to rule that the Artist Record Book requirement and the questioned Department Order related
to its issuance were issued by the Secretary of Labor pursuant to a valid exercise of the police power.

In 1984, the Philippines emerged as the largest labor sending country in Asia dwarfing the labor
export of countries with mammoth populations such as India and China. According to the National
Statistics Office, this diaspora was augmented annually by over 450,000 documented and clandestine or
illegal (undocumented) workers who left the country for various destinations abroad, lured by higher
salaries, better work opportunities and sometimes better living conditions.

Of the hundreds of thousands of workers who left the country for greener pastures in the last few
years, women composed slightly close to half of those deployed, constituting 47% between 1987-1991,

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exceeding this proportion (58%) by the end of 1991,[6] the year former President Aquino instituted the ban
on deployment of performing artists to Japan and other countries as a result of the gruesome death of
Filipino entertainer Maricris Sioson.

It was during the same period that this Court took judicial notice not only of the trend, but also of the
fact that most of our women, a large number employed as domestic helpers and entertainers, worked
under exploitative conditions "marked by physical and personal abuse." [7] Even then, we noted that "[t]he
sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of torture,
confirmed by testimonies of returning workers" compelled "urgent government action." [8]

Pursuant to the alarming number of reports that a significant number of Filipina performing artists
ended up as prostitutes abroad (many of whom were beaten, drugged and forced into prostitution), and
following the deaths of a number of these women, the government began instituting measures aimed at
deploying only those individuals who met set standards which would qualify them as legitimate performing
artists. In spite of these measures, however, a number of our countrymen have nonetheless fallen victim
to unscrupulous recruiters, ending up as virtual slaves controlled by foreign crime syndicates and forced
into jobs other than those indicated in their employment contracts. Worse, some of our women have been
forced into prostitution.

Thus, after a number of inadequate and failed accreditation schemes, the Secretary of Labor issued
on August 16, 1993, D.O. No. 28, establishing the Entertainment Industry Advisory Council (EIAC), the
policy advisory body of DOLE on entertainment industry matters.[9] Acting on the recommendations of the
said body, the Secretary of Labor, on January 6, 1994, issued the assailed orders. These orders
embodied EIAC's Resolution No. 1, which called for guidelines on screening, testing and accrediting
performing overseas Filipino artists. Significantly, as the respondent court noted, petitioners were duly
represented in the EIAC,[10] which gave the recommendations on which the ARB and other requirements
were based.

Clearly, the welfare of Filipino performing artists, particularly the women was paramount in the
issuance of Department Order No. 3. Short of a total and absolute ban against the deployment of
performing artists to "high risk" destinations, a measure which would only drive recruitment further
underground, the new scheme at the very least rationalizes the method of screening performing artists by
requiring reasonable educational and artistic skills from them and limits deployment to only those
individuals adequately prepared for the unpredictable demands of employment as artists abroad. It
cannot be gainsaid that this scheme at least lessens the room for exploitation by unscrupulous individuals
and agencies.

Moreover, here or abroad, selection of performing artists is usually accomplished by auditions, where
those deemed unfit are usually weeded out through a process which is inherently subjective and
vulnerable to bias and differences in taste. The ARB requirement goes one step further, however,
attempting to minimize the subjectivity of the process by defining the minimum skills required from
entertainers and performing artists. As the Solicitor General observed, this should be easily met by
experienced artists possessing merely basic skills. The tests are aimed at segregating real artists or
performers from those passing themselves off as such, eager to accept any available job and therefore
exposing themselves to possible exploitation.

As to the other provisions of Department Order No. 3 questioned by petitioners, we see nothing
wrong with the requirement for document and booking confirmation (D.O. 3-C), a minimum salary scale
(D.O. 3-E), or the requirement for registration of returning performers. The requirement for a venue
certificate or other documents evidencing the place and nature of work allows the government closer
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monitoring of foreign employers and helps keep our entertainers away from prostitution fronts and other
worksites associated with unsavory, immoral, illegal or exploitative practices. Parenthetically, none of
these issuances appear to us, by any stretch of the imagination, even remotely unreasonable or
arbitrary. They address a felt need of according greater protection for an oft-exploited segment of our
OCW's. They respond to the industry's demand for clearer and more practicable rules and
guidelines. Many of these provisions were fleshed out following recommendations by, and after
consultations with, the affected sectors and non-government organizations. On the whole, they are aimed
at enhancing the safety and security of entertainers and artists bound for Japan and other destinations,
without stifling the industry's concerns for expansion and growth.

In any event, apart from the State's police power, the Constitution itself mandates government to
extend the fullest protection to our overseas workers. The basic constitutional statement on labor,
embodied in Section 18 of Article II of the Constitution provides:

Sec. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers
and promote their welfare.

More emphatically, the social justice provision on labor of the 1987 Constitution in its first paragraph
states:

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.

Obviously, protection to labor does not indicate promotion of employment alone. Under the welfare
and social justice provisions of the Constitution, the promotion of full employment, while desirable, cannot
take a backseat to the government's constitutional duty to provide mechanisms for the protection of our
workforce, local or overseas. As this Court explained in Philippine Association of Service
Exporters (PASEI) v. Drilon,[11] in reference to the recurring problems faced by our overseas workers:

What concerns the Constitution more paramountly is that such an employment be above all, decent, just,
and humane. It is bad enough that the country has to send its sons and daughters to strange lands
because it cannot satisfy their employment needs at home. Under these circumstances, the Government
is duty-bound to insure that our toiling expatriates have adequate protection, personally and
economically, while away from home.

We now go to petitioners' assertion that the police power cannot, nevertheless, abridge the right of
our performing workers to return to work abroad after having earlier qualified under the old process,
because, having previously been accredited, their accreditation became a property right," protected by
the due process clause. We find this contention untenable.

A profession, trade or calling is a property right within the meaning of our constitutional
guarantees. One cannot be deprived of the right to work and the right to make a living because these
rights are property rights, the arbitrary and unwarranted deprivation of which normally constitutes an
actionable wrong.[12]

Nevertheless, no right is absolute, and the proper regulation of a profession, calling, business or
trade has always been upheld as a legitimate subject of a valid exercise of the police power by the state
particularly when their conduct affects either the execution of legitimate governmental functions, the
preservation of the State, the public health and welfare and public morals. According to the maxim, sic

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utere tuo ut alienum non laedas, it must of course be within the legitimate range of legislative action to
define the mode and manner in which every one may so use his own property so as not to pose injury to
himself or others.[13]

In any case, where the liberty curtailed affects at most the rights of property, the permissible scope of
regulatory measures is certainly much wider.[14] To pretend that licensing or accreditation requirements
violates the due process clause is to ignore the settled practice, under the mantle of the police power, of
regulating entry to the practice of various trades or professions. Professionals leaving for abroad are
required to pass rigid written and practical exams before they are deemed fit to practice their
trade. Seamen are required to take tests determining their seamanship. Locally, the Professional
Regulation Commission has began to require previously licensed doctors and other professionals to
furnish documentary proof that they had either re-trained or had undertaken continuing education courses
as a requirement for renewal of their licenses. It is not claimed that these requirements pose an
unwarranted deprivation of a property right under the due process clause. So long as Professionals and
other workers meet reasonable regulatory standards no such deprivation exists.

Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of the
Constitution to support their argument that the government cannot enact the assailed regulatory
measures because they abridge the freedom to contract. In Philippine Association of Service Exporters,
Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution... must yield to the loftier
purposes targeted by the government."[15] Equally important, into every contract is read provisions of
existing law, and always, a reservation of the police power for so long as the agreement deals with a
subject impressed with the public welfare.

A last point. Petitioners suggest that the singling out of entertainers and performing artists under the
assailed department orders constitutes class legislation which violates the equal protection clause of the
Constitution. We do not agree.

The equal protection clause is directed principally against undue favor and individual or class
privilege. It is not intended to prohibit legislation which is limited to the object to which it is directed or by
the territory in which it is to operate. It does not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges conferred and liabilities imposed.[16] We have held,
time and again, that the equal protection clause of the Constitution does not forbid classification for so
long as such classification is based on real and substantial differences having a reasonable relation to the
subject of the particular legislation.[17] If classification is germane to the purpose of the law, concerns all
members of the class, and applies equally to present and future conditions, the classification does not
violate the equal protection guarantee.

In the case at bar, the challenged Department Order clearly applies to all performing artists and
entertainers destined for jobs abroad. These orders, we stressed hereinbefore, further the Constitutional
mandate requiring Government to protect our workforce, particularly those who may be prone to abuse
and exploitation as they are beyond the physical reach of government regulatory agencies. The tragic
incidents must somehow stop, but short of absolutely curtailing the right of these performers and
entertainers to work abroad, the assailed measures enable our government to assume a measure of
control.

WHEREFORE, finding no reversible error in the decision sought to be reviewed, petition is hereby
DENIED.

SO ORDERED.

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 Page 25 of 278

Padilla (Chairman), Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

5. Gandara Mill Supply vs. NLRC 300 SCRA 702

[G.R. No. 126703. December 29, 1998]

GANDARA MILL SUPPLY and MILAGROS SY, petitioners, vs. THE NATIONAL LABOR RELATIONS
COMMISSION AND SILVESTRE GERMANO, respondents.

DECISION

PURISIMA, J.:

At bar is a special civil action for Certiorari under Rule 65 of the Revised Rules of Court, assailing the
Resolution[1] of the National Labor Relations Commission[2] (NLRC) promulgated on May 22, 1996, and
NLRC Resolution[3] dated July 23, 1996, denying petitioners motion for reconsideration in NLRC NCR 00-
02-1653-94.

From the records on hand, it appears that:

Milagros Sy, owner of Gandara Mill Supply, at No. 708 Gandara St., Binondo, Manila, was the
respondent in NLRC Case No. 02-01653-94 instituted by Silvestre Germano (now the private
respondent).

On February 6, 1995, the private respondent, without notifying his employer, Milagros Sy, did not
report for work until February 11, 1995. Like any expectant father, he chose to be near his wife who was
then about to deliver. The wife gave birth on February 12, 1995. Upon private respondents request,
Milagros Sy extended some financial assistance to the Germano couple.

The petition avers inter alia that Gandara Mill Supply is a small business enterprise with only
two (2) employees, including the herein private respondent, to do manual work. With inadequate
manpower, the absence of just one worker can spell untold difficulties in its operations. Matters became
even worse when private respondent, without informing his employer, was absent for a long time, so
much so that the former incurred the ire of the latter. Two (2) weeks after, private respondent returned to
duty, and to his surprise, he was met by his employer to personally tell him that someone had been hired
to take his place. He was advised, however, that he was to be re-admitted in June 1996.

On February 27, 1995, a case of illegal dismissal was commenced by the private respondent with
the Department of Labor and Employment.

To buy peace, petitioner offered P5,000.00 but to no avail. The offer was flatly rejected by private
respondent. When conciliation efforts proved futile, the Labor Arbiter directed the parties to submit their
position papers on or before April 28, 1995, which deadline was extended to May 5, 1995. In his Order of
May 9, 1995, Labor Arbiter Facundo L. Leda gave petitioner a last opportunity to file/submit their (sic)

Page 25 of 278
 Page 26 of 278

Position Paper within seven (7) days from receipt hereof otherwise their (sic) right to be heard are (sic)
deemed waived and this case will be decided on the basis of the documents on file. [4]

Despite receipt of the aforesaid Order, however, petitioner still failed to comply therewith, prompting
the Labor Arbiter to hand down a decision on January 29, 1996, disposing, thus:

WHEREFORE, decision is hereby rendered ordering respondent/s Gandara Mill Supply and/or Milagros
Sy to pay complainant Silvestre Germano the sum of SIXTY FIVE THOUSAND SIX HUNDRED EIGHTY
FIVE PESOS AND 90/100 (P65,685.90) representing separation pay, backwages, SLIP and attorneys fee
as iscussed and computed above.

On March 4, 1996, petitioner appealed said decision to the NLRC. To the appeal, an Opposition was
interposed on March 15, 1996.

On May 22, 1996, the NLRC dismissed petitioners appeal for failure to post a cash or surety bond.

The appeal was predicated on the submission that petitioners business is small, on which invoked
ground petitioner sought exemption from posting a bond. Should its prayer for exemption of a bond be
denied, petitioner asked for at least twenty (20) days to put up such bond.

The petition attacks the July 23, 1996 Resolution of public respondent, affirming the decision of the
Labor Arbiter dated January 29, 1996. On August 14, 1996, a Motion for Execution was presented by
private respondent. NLRC entered its judgment on August 26, 1996.

On September 6, 1996, private respondent sent in an Ex-parte Motion for Execution, which was
granted. The corresponding Writ of Execution issued on September 13, 1996.

The issues posited for resolution :

FIRST, did the public respondent act with grave abuse of discretion in dismissing petitioners appeal
and in not giving petitioner a chance to prove that the private respondent was not illegally dismissed but
was merely suspended for abandoning his job?; and

SECOND, did the public respondent act with grave abuse of discretion in awarding to the private
respondent the amount of SIXTY-FIVE THOUSAND SIX HUNDRED EIGHTY-FIVE AND
90/00 (P65,685.90), which amount petitioner assails as excessive?

To be sure, the petitioner was afforded a chance to show that the private respondent was not illegally
dismissed. Unfortunately, petitioner failed to discharge its burden of proof.

In a long line of cases, the Court has consistently ruled that, findings of fact by quasi-judicial
agencies like the NLRC are conclusive upon the court in the absence of proof of grave error in the
appreciation of facts. Petitioners bare allegation that it was denied the right to be heard is negated by the
Labor Arbiters extension of much leniency to petitioner by allowing the latter to submit a position paper on
April 28, 1995, then on May 5, 1995, and finally, seven (7) days from receipt of the Order dated May 9,
1995. Generally, reglementary periods are strictly observed to the end that orderly administration of
justice be safeguarded. In the case under consideration, the public respondent had been quite liberal in
observing and enforcing the rules. Consequently, petitioners protestation of denial of opportunity to be
heard is barren of any factual basis. The principle of laches finds a wide room for application
here. Laches, in a general sense, is failure or neglect for an unreasonable length of time to do that which
by exercising due diligence could or should have been done earlier; it is negligence or omission to assert
a right within a reasonable time warranting a presumption that the party entitled to assert it has either
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 Page 27 of 278

abandoned or declined to raise it. The doctrine of laches or stale demands is based upon grounds of
public policy which require for the peace of society, discouragement of stale claims. And unlike the statute
of limitations, it is not a mere question of time but is principally a question of inequity or unfairness or
permitting a right or claim to be enforced or asserted. (Tijam v. Sibonghanoy, 23 SCRA 29).So also, in the
Order, dated May 9, 1995, respondent Commission declared in clear and unequivocal terms that failure to
file a position paper is deemed a waiver of the right to be heard and that decisions will be based on the
position paper submitted. Evidently, for making good his said Order, the Labor Arbiter cannot be faulted
for acting arbitrarily .

Neither can grave error be ascribed to respondent NLRC for handing down its decision without
petitioners Position Paper. By its inaction, petitioner was properly considered to have waived or forfeited
the right to refute private respondents stance. Indeed, petitioner cannot now be permitted to belatedly
complain of a denial of due process.

That petitioner was not represented by a lawyer in all the aforesaid proceedings was solely
attributable to its own negligence or inattention to the case. While the court has held that representation
by a lawyer is a fundamental right of litigants, petitioner has nobody to blame but itself for its failure to
secure the services of counsel resulting to the dismissal of its case. In the case under scrutiny, petitioner
was represented by a non-lawyer, Ramon Flores, who was present from the beginning of the case but
failed to efficiently follow-up the case until the promulgation of judgment. While the right to due process is
available to all the parties, it does not countenance self-serving excuses devised to undermine orderly
administration of justice.

After a careful study, and a thorough examination of the pleadings and supporting documents, it
appears decisively clear that private respondent Silvestre Germano was illegally dismissed. While a
prolonged absence without leave may constitute as a just cause of dismissal, its illegality stems from the
non-observance of due process. Applying the WenPhil Doctrine by analogy, where dismissal was not
preceded by the twin requirement of notice and hearing, the legality of the dismissal in question, is under
heavy clouds and therefore illegal. While it cannot be deduced unerringly from the records on hand that
private respondent was really dismissed, there is no clear indication that the latter was to be reinstated. In
fact, since the inception of the case, what petitioner merely endeavored was to compromise for a measly
sum of P5,000.00, and no mention of taking respondent back to his job was ever offered as part of the
deal to end the controversy. What can be surmised from petitionerss offer to re-admit the private
respondent, was nothing but a polite gesture couched in words intended to make the impact of his so-
called suspension less severe. Invoking the plight of a working man, where no work, no pay is the rule of
thumb, the court cannot sanction an over extended suspension. The Labor Code explicitly provides, that :

No preventive suspension shall last longer than thirty (30) days. The employer shall thereafter reinstate
the worker to his former or substantially equivalent position or the employer may extend the period of
suspension provided that during the period of extension, he pays the wages and other benefits due to the
worker. In such case, the worker shall not be bound to reimburse the amount paid to him during the
extension if the employer decides after completion of the hearing to dismiss the worker.[5]

In this case, the supposed suspension was expected to last for more than the period allowed by law,
thus making the suspension constitutive of an illegal dismissal. Therefore, the Labor Arbiters contention is
upheld by the Court.

Granting arguendo that private respondents absence engendered undue difficulty to the smooth
operations of petitioners business, considering the predicament of respondent Silvestre Germano, his
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 Page 28 of 278

dismissal is unwarranted. In holding the constitutional mandate of protection to labor, the rigid rules of
procedure may sometimes be dispensed with to give room for compassion. The doctrine of
compassionate justice is applicable under the premises, private respondent being the breadwinner of his
family. The Social Justice policy mandates a compassionate attitude toward the working class in its
relation to management. In calling for the protection to labor, the Constitution does not condone
wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to
him in the light of the many disadvantages that weigh heavily on him like an albatross on his neck.[6]

The timeliness of petitioners appeal is an issue which this court endeavors to pass upon. While the
rule governing the instant Petition does not fix a period within which to file an appeal, the yardstick to
measure the seasonableness of a Petition for Certiorari is the reasonableness of the duration of time that
expired from the commission of the act complained of, to the institution of the proceedings to annul the
same.[7] The court had the occasion to hold that where no law can be applied, resort to the fundamental
law can be had. The Constitution provides that :

All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial and
administrative bodies.[8]

Taking into account the interval of time that elapsed from the receipt of the assailed Resolution by
petitioner, to the time the court received the present petition, an interregnum of almost three (3) months,
the irresistible conclusion is that the Petition was not filed on time.

All things studiedly considered, we are of the view that public respondent NLRC did not act with
grave abuse of discretion in awarding to private respondent the amount of P65,685.90 which is not at all
excessive under the facts and circumstances of the case. Time and again, the court held that factual
findings by the Labor Arbiter are to treated as final absent any showing that he erred in his evaluation.
The familiarity with the parties, circumstances and opportunity to observe their demeanor is something
the court did not have the privilege to witness.

Untenable is petitioners contention that the said amount awarded, representing backwages,
separation pay and attorneys fee is excessive and tantamount to a deprivation of petitioners property
without due process of law. Once a finding of illegal dismissal is established, an award of separation pay
and backwages is in order and binding upon the court, unless the contrary is proved. The court shares
the Labor Arbiters observation and ratiocination that the amount of the questioned award is not excessive
in light of prevailing economic conditions.

WHEREFORE, the Petition for Certiorari under consideration is hereby DISMISSED on the grounds,
that : (1) It was filed out of time; (2) It is devoid of merit; and (3) it was interposed for purposes of delay.

Accordingly, the NLRC Resolution of July 23, 1996 is AFFIRMED in toto; the writ of execution issued
on September 13, 1996 upheld; and petitioners prayer for a restraining order DENIED.

No pronouncement as to costs.

SO ORDERED.

Romero, Kapunan, and Pardo, JJ., concur.

6. Marcoper Mining Corp. vs. NLRC G.R. No. 103525 March 29, 1996

Page 28 of 278
 Page 29 of 278

[G.R. No. 103525. March 29, 1996]

MARCOPPER MINING CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NATIONAL MINES AND ALLIED WORKERS UNION (NAMAWU-
MIF), respondents.

DECISION

KAPUNAN, J.:

Social justice and full protection to labor guaranteed by the fundamental law of this land is not some
romantic notion, high in rhetoric but low in substance. The case at bench provides yet another example of
harmonizing and balancing 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.[1]

In this petition for certiorari and prohibition under Rule 65 of the Revised Rules of Court, Marcopper
Mining Corporation impugns the decision rendered by the National Labor Relations Commission (NLRC)
on 18 November 1991 in RAB-IV-12-2588-88 dismissing petitioners appeal, and the resolution issued by
the said tribunal dated 20 December 1991 denying petitioners motion for reconsideration.

There is no disagreement as to the following facts:

On 23 August 1984, Marcopper Mining Corporation, a corporation duly organized and existing under
the laws of the Philippines, engaged in the business of mineral prospecting, exploration and extraction,
and private respondent NAMAWU-MIF, a labor federation duly organized and registered with the
Department of Labor and Employment (DOLE), to which the Marcopper Employees Union (the exclusive
bargaining agent of all rank-and-file workers of petitioner) is affiliated, entered into a Collective Bargaining
Agreement (CBA) effective from 1 May 1984 until 30 April 1987.

Sec. 1, Art. V of the said Collective Bargaining Agreement provides:

Section 1. The COMPANY agrees to grant general wage increase to all employees within the bargaining
unit as follows:

Effectivity Increase per day on

the Basic Wage

May 1,1985 5%

May 1,1986 5%

It is expressly understood that this wage increase shall be exclusive of any increase in the minimum wage
and/or mandatory living allowance that may be promulgated during the life of this Agreement.[2]

Prior to the expiration of the aforestated Agreement, on 25 July 1986, petitioner and private
respondent executed a Memorandum of Agreement (MOA) wherein the terms of the CBA, specifically on
matters of wage increase and facilities allowance, were modified as follows:

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 Page 30 of 278

1. The COMPANY hereby grants a wage increase of 10% of the basic rate to all employees and workers
within the bargaining units (sic) as follows:

(a) 5% effective May 1,1986.

This will mean that the members of the bargaining unit will get an effective increase of 10% from May 1,
1986.

(b) 5% effective May 1,1987.

2. The COMPANY hereby grants an increase of the facilities allowance from P50.00 to P100.00 per
month effective May 1, 1986.[3]

In compliance with the amended CBA, petitioner implemented the initial 5% wage increase due on 1
May 1986.[4]

On 1 June 1987, Executive Order (E.O.) No. 178 was promulgated mandating the integration of the
cost of living allowance under Wage Orders Nos. 1, 2, 3, 5 and 6 into the basic wage of workers, its
effectivity retroactive to 1 May 1987.[5] Consequently, effective on 1 May 1987, the basic wage rate of
petitioners laborers categorized as non-agricultural workers was increased by P9.00 per day. [6]

Petitioner implemented the second five percent (5%) wage increase due on 1 May 1987 and
thereafter added the integrated COLA.[7]

Private respondent, however, assailed the manner in which the second wage increase was
effected. It argued that the COLA should first be integrated into the basic wage before the 5% wage
increase is computed.[8]

Consequently, on 15 December 1988, the union filed a complaint for underpayment of wages before
the Regional Arbitration Branch IV, Quezon City.

On 24 July 1989, the Labor Arbiter promulgated a decision in favor of the union. The dispositive part
reads, thus:

WHEREFORE, consistent with the tenor hereof, judgment is rendered directing respondent company to
pay the wage differentials due its rank-and-file workers retroactive to 1 May 1987.

SO ORDERED.[9]

The Labor Arbiter ruled in this wise:

First and foremost, the written instrument and the intention of the parties must be brought to the fore. And
talking of intention, we conjure to sharp focus the provision embossed in Section 1, Article V of the
collective agreement, viz:

xxx xxx xxx.

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 Page 31 of 278

It is expressly understood that this wage increase shall be exclusive of increase in the minimum wage
and/or mandatory living allowance that may be promulgated during the life of this Agreement. (Italics
ours.)

The foregoing phrase albeit innocuously framed offers the cue. This ushers us to the inner sanctum of
what really was the intention of the parties to the contract.Treading along its lines, it becomes readily
discernible that this portion of the contract is the stop-lock gate or known in its technical term as the non-
chargeability clause. There can be no quibbling that on the strength of this provision, the wage/allowance
granted under this accord cannot be credited to similar form of benefit that may be thereafter ordained by
the government through legislation. That the parties therefore were consciously aware at the time of the
conclusion of the agreement of the never-ending rise in the cost of living is a logical corollary. And while
this upward trend may not be a welcome phenomenon, there was the intention to yield and comply in the
event of an imposition. Of course, there cannot likewise be any rivalry that if the Executive Order were to
retroact to 2 May 1987 or a day after the last contractual increase, this question will not arise. It is in this
sense of fairness that we cannot allow this one (1) day to be an insulating medium to deny the workers
the benediction endowed by Executive Order No. 178.[10]

Petitioner appealed the Labor Arbiters decision and on 18 November 1991 the NLRC rendered its
decision sustaining the Labor Arbiters ruling. The dispositive portion states:

WHEREFORE, in view of the foregoing, the Decision of the Labor Arbiter is hereby AFFIRMED and the
appeal filed is hereby DISMISSED for lack of merit.

SO ORDERED.[11]

The NLRC declared:

x x x Increments to the laborers financial gratification, be they in the form of salary increases or changes
in the salary scale are aimed at one thing -improvement of the economic predicament of the laborers. As
such, they should be viewed in the light of the States avowed policy to protect labor. Thus, having entered
into an agreement with its employees, an employer may not be allowed to renege on its obligation under
a collective bargaining agreement should, at the same time, the law grants the employees the same or
better terms and conditions of employment. Employee benefits derived from law are exclusive of benefits
arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by
law. (Meycauayan College v. Hon. Franklin N. Drilon, 185 SCRA 50).[12]

Petitioners motion for reconsideration was denied by the NLRC in its resolution dated 20 December
1991.

In the present petition, Marcopper challenges the NLRC decision on the following grounds:

PUBLIC RESPONDENT NLRC ACTED WITH GRAVE ABUSE OF DISCRETION IN AFFIRMING THE
DECISION OF LABOR ARBITER JOAQUIN TANODRA DIRECTING MARCOPPER TO PAY WAGE
DIFFERENTIALS DUE ITS RANK-AND-FILE EMPLOYEES RETROACTIVE TO 1 MAY 1987
CONSIDERING THAT SANS EO 178, THE FUNDAMENTAL MEANING OF THE BASIC WAGE IS
CLEARLY DIFFERENT FROM, AND DOES NOT INCLUDE THE COLA AT THE TIME THE CBA WAS
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 Page 32 of 278

ENTERED INTO. THUS, PUBLIC RESPONDENTS READING OF THE CBA, AS AMENDED BY THE
MEMORANDUM OF AGREEMENT DATED 25 JULY 1986, ULTIMATELY DISREGARDED THE
ORDINARY MEANING OF THE PHRASE BASIC WAGE, OTHERWISE INTENDED BY THE PARTIES
DURING THE TIME THE CBA WAS EXECUTED.

II

THE LABOR ARBITER AND PUBLIC RESPONDENT NLRCS RELIANCE ON THE LAST PARAGRAPH
OF SECTION 1, ARTICLE V OF THE CBA WHICH STATES: IT IS EXPRESSLY UNDERSTOOD THAT
THIS WAGE INCREASE SHALL BE EXCLUSIVE OF ANY INCREASE IN THE MINIMUM WAGE
AND/OR MANDATORY LIVING ALLOWANCE THAT MAY BE PROMULGATED DURING THE LIFE OF
THIS AGREEMENT IS MISPLACED AND WITHOUT BASIS BECAUSE SAID PROVISION HARDLY
OFFERS A HINT AS TO WHAT BASIC WAGE THE PARTIES HAD IN MIND AT THE TIME THEY
EXECUTED THE CBA AS AMENDED BY THE MEMORANDUM OF AGREEMENT.

III

PETITIONER COMPUTED THE 5% WAGE INCREASE BASED ON THE UNINTEGRATED BASIC

WAGE IN ACCORDANCE WITH THE INTENT AND TERMS OF THE CBA, AS AMENDED BY THE
MEMORANDUM OF AGREEMENT. THIS WAS IN FULL ACCORD AND IN FAITHFUL COMPLIANCE
WITH EO 178. HENCE, PETITIONER DID NOT COMMIT ANY UNDERPAYMENT.

IV

THE DOCTRINE OF LIBERAL INTERPRETATION IN FAVOR OF LABOR IN CASE OF DOUBT IS NOT

APPLICABLE TO THE INSTANT CASE.[13]

Stripped of the non-essentials, the question for our resolution is what should be the basis for the
computation of the CBA increase, the basic wage without the COLA or the so-called integrated basic
wage which, by mandate of E.O. No. 178, includes the COLA.

It is petitioners contention that the basic wage referred to in the CBA pertains to the unintegrated
basic wage. Petitioner maintains that the rules on interpretation of contracts, particularly Art. 1371 of the
New Civil Code which states that:

Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.

should govern. Accordingly, applying the aforequoted provision in the case at bench, petitioner concludes
that it was clearly not the intention of the parties (petitioner and private respondent) to include the COLA
in computing the CBA/MOA mandated increase since the MOA was entered into a year before E.O. No.
178 was enacted even though their effectivity dates coincide. In other words, the situation
contemporaneous to the execution of the amendatory MOA was that there was yet no law requiring the
integration of the COLA into the basic wage.[14] Petitioner, therefore, cannot be compelled to undertake an
obligation it never assumed or contemplated under the CBA or MOA.

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 Page 33 of 278

Siding with the petitioner, the Solicitor General opines that for the purpose of complying with the
obligations imposed by the CBA, the integrated COLA should not be considered due to the exclusivity of
the benefits under the said CBA and E.O. No. 178. He explains thus:

A collective bargaining agreement is a contractual obligation. It is distinct from an obligation imposed by

law. The terms and conditions of a CBA constitute the law between the parties. Thus, employee benefits
derived from either the law or a contract should be treated as distinct and separate from each other.
(Meycauayan College vs. Drilon, supra.)

xxx xxx xxx.

Very clearly, the CBA and E.O. 178 provided for the exclusiveness of the benefits to be given or awarded
to the employees of petitioner. Thus, when petitioner computed the 5% wage increase based on the
unintegrated basic wage, it complied with its contractual obligations under the CBA. When it thereafter
integrated the COLA into the basic wage, it complied also with the mandate of E.O. 178. Petitioner,
therefore, complied with its contractual obligations in the CBA as well as with the legal mandate of the
law. Consequently, petitioner is not guilty of underpayment.

To follow the theory of private respondent, that is - to integrate first the COLA into the basic wage and
thereafter compute the 5% wage increase therefrom, would violate the exclusiveness of the benefits
granted under the CBA and under E.O. 178.[15]

Private respondent counters by asserting that the purpose, nature and essence of CBA negotiation is
to obtain wage increases and benefits over and above what the law provides and that the principle of
non-diminution of benefits should prevail.

The NLRC, which filed its own comment, likewise, made the following assertions:

x x x However, to state outright that the parties intended the basic wage to remain invariable even after
the advent of EO 178 is unfounded and presumptuous a claim as such inevitably works to the utmost
disadvantage of the workers and runs counter to the constitutional guarantee of affording protection to
labor.Evidently, the rationale for the integration of the COLA with the basic wage was primarily to increase
the base wage for purposes of computation of such items as overtime and premium pay, fringe benefits,
etc. To adopt the statement and claim of the petitioner would then redound to depriving the workers of the
full benefits the law intended for them, which in the final analysis was solely for the purpose of alleviating
their plight due to the continuous undue hardship they suffer caused by the ever escalating prices of
prime commodities.[16]

We rule for the respondents.

The principle that the CBA is the law between the contracting parties stands strong and
true.[17]
However, the present controversy involves not merely an interpretation of CBA provisions. More
importantly, it requires a determination of the effect of an executive order on the terms and the conditions
of the CBA. This is, and should be, the focus of the instant case.

It is unnecessary to delve too much on the intention of the parties as to what they allegedly meant by
the term basic wage at the time the CBA and MOA were executed because there is no question that as of
1 May 1987, as mandated by E.O. No. 178, the basic wage of workers, or the statutory minimum wage,

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was increased with the integration of the COLA. As of said date, then, the term basic wage includes the
COLA. This is what the law ordains and to which the collective bargaining agreement of the parties must
conform.

Petitioners arguments eventually lose steam in the light of the fact that compliance with the law is
mandatory and beyond contractual stipulation by and between the parties; consequently, whether or not
petitioner intended the basic wage to include the COLA becomes immaterial. There is evidently nothing to
construe and interpret because the law is clear and unambiguous. Unfortunately for petitioner, said law,
by some uncanny coincidence, retroactively took effect on the same date the CBA increase became
effective. Therefore, there cannot be any doubt that the computation of the CBA increase on the basis of
the integrated wage does not constitute a violation of the CBA.

Petitioners contention that under the Rules Implementing E.O. No. 178, the definition of the term -
basic wage has remained unchanged is off the mark since said definition expressly allows integration of
monetary benefits into the regular pay of employees:

Chapter 1. Definition of Terms and Coverage.

Section 1. Definition of Terms.

xxx xxx xxx.

(j) Basic Wage means all regular remuneration or earnings paid by an employer for services rendered on
normal working days and hours but does not include cost-of- living allowances, profit-sharing payments,
premium payments, 13th month pay, and other monetary benefits which are not considered as part of or
integrated into the regular salary of the employee on the date the Order became effective. (Italics ours.)

What E.O. No. 178 did was exactly to integrate the COLA under Wage Orders Nos. 1, 2, 3, 5 and 6
into the basic pay so as to increase the statutory daily minimum wage. Section 2 of the Rules is quite
explicit:

Section 2. Amount to be Integrated. - Effective on the dates specified, as a result of the integration, the
basic wage rate of covered workers shall be increased by the following amounts: (Italics ours.)

xxx xxx xxx.

Integration of monetary benefits into the basic pay of workers is not a new method of increasing the
minimum wage.[18] But even so, we are still guided by our ruling in Davao Integrated Port Stevedoring
Services v. Abarquez,[19] which we herein reiterate:

While the terms and conditions of the CBA constitute the law between the parties, it is not, however,
an ordinary contract to which is applied the principles of law governing ordinary contracts. A CBA, as a
labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which governs
the relations between labor and capital, 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.

Page 34 of 278
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Finally, petitioner misinterprets the declaration of the Labor Arbiter in the assailed decision that when
the pendulum of judgment swings to and fro and the forces are equal on both sides, the same must be
stilled in favor of labor. While petitioner acknowledges that all doubts in the interpretation of the Labor
Code shall be resolved in favor of labor,[20] it insists that what is involved-here is the amended CBA which
is essentially a contract between private persons. What petitioner has lost sight of is the avowed policy of
the State, enshrined in our Constitution, to accord utmost protection and justice to labor, a policy, we are,
likewise, sworn to uphold.

In Philippine Telegraph & Telephone Corporation v. NLRC,[21] we categorically stated that:

When conflicting interests of labor and capital are to be weighed on the scales of social justice, the
heavier influence of the latter should be counter-balanced by sympathy and compassion the law must
accord the underprivileged worker.

Likewise, in Terminal Facilities and Services Corporation v. NLRC,[22] we declared:

Any doubt concerning the rights of labor should be resolved in its favor pursuant to the social justice
policy.

The purpose of E.O. No. 178 is to improve the lot of the workers covered by the said statute. We are
bound to ensure its fruition.

WHEREFORE, premises considered, the petition is hereby DISMISSED.

SO ORDERED.

Padilla, Bellosillo, Vitug, and Hermosisima, Jr., concur.

7. NFSW vs. Ovejera GR L-59743 May 31, 1982

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-59743 May 31 1982

NATIONAL FEDERATION OF SUGAR WORKERS (NFSW), petitioner,

vs.
ETHELWOLDO R. OVEJERA, CENTRAL AZUCARERA DE LA CARLOTA (CAC), COL. ROGELIO
DEINLA, as Provincial Commander, 3311st P.C. Command, Negros Occidental, respondents.

PLANA, J:

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This is a petition for prohibition seeking to annul the decision dated February 20, 1982 of Labor Arbiter
Ethelwoldo R. Ovejera of the National Labor Relations Commission (NLRC) with station at the Regional
Arbitration Branch No. VI-A, Bacolod City, which, among others, declared illegal the ongoing strike of the
National Federation of Sugar Workers (NFSW) at the Central Azucarera de la Carlota (CAC), and to
restrain the implementation thereof.

I. FACTS

1. NFSW has been the bargaining agent of CAC rank and file employees (about 1200 of more than 2000
personnel) and has concluded with CAC a collective bargaining agreement effective February 16, 1981
February 15, 1984. Under Art. VII, Sec. 5 of the said CBA

Bonuses The parties also agree to maintain the present practice on the grant of
Christmas bonus, milling bonus, and amelioration bonus to the extent as the latter is
required by law.

The Christmas and milling bonuses amount to 1- months' salary.

2. On November 28, 1981, NFSW struck allegedly to compel the payment of the 13th month pay under
PD 851, in addition to the Christmas, milling and amelioration bonuses being enjoyed by CAC workers.

3. To settle the strike, a compromise agreement was concluded between CAC and NFSW on November
30,1981. Under paragraph 4 thereof

The parties agree to abide by the final decision of the Supreme Court in any case
involving the 13th Month Pay Law if it is clearly held that the employer is liable to pay a
13th month pay separate and distinct from the bonuses already given.

4. As of November 30, 1981, G.R. No. 51254 (Marcopper Mining Corp. vs. Blas Ople and Amado Inciong,
Minister and Deputy Minister of Labor, respectively, and Marcopper Employees Labor Union, Petition for
certiorari and Prohibition) was still pending in the Supreme Court. The Petition had been dismissed on
June 11, 1981 on the vote of seven Justices. 1 A motion for reconsideration thereafter filed was denied in
a resolution dated December 15, 1981, with only five Justices voting for denial. (3 dissented; 2 reserved
their votes: 4 did not take part.)

On December 18, 1981 the decision of June 11, 1981 having become final and executory entry of
judgment was made.

5. After the Marcopper decision had become final, NFSW renewed its demand that CAC give the 13th
month pay. CAC refused.

6. On January 22, 1982, NFSW filed with the Ministry of Labor and Employment (MOLE) Regional Office
in Bacolod City a notice to strike based on non-payment of the 13th month pay. Six days after, NFSW
struck.

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7. One day after the commencement of the strike, or on January 29, 1982, a report of the strike-vote was
filed by NFSW with MOLE.

8. On February 8, 1982, CAC filed a petition (R.A.B. Case No. 0110-82) with the Regional Arbitration
Branch VI-A, MOLE, at Bacolod City to declare the strike illegal, principally for being violative of Batas
Pambansa Blg. 130, that is, the strike was declared before the expiration of the 15-day cooling-off period
for unfair labor practice (ULP) strikes, and the strike was staged before the lapse of seven days from the
submission to MOLE of the result of the strike-vote.

9. After the submission of position papers and hearing, Labor Arbiter Ovejera declared the NFSW strike
illegal. The dispositive part of his decision dated February 20, 1982 reads:

Wherefore, premises considered, judgment is hereby rendered:

1. Declaring the strike commenced by NFSW on January 28, 1982, illegal,

2. Directing the Central to resume operations immediately upon receipt hereof;

3. Directing the Central to accept back to work all employees appearing in its payroll as of
January 28, 1982 except those covered by the February 1, 1982 memorandum on
preventive suspension but without prejudice to the said employees' instituting appropriate
actions before this Ministry relative to whatever causes of action they may have obtained
proceeding from said memorandum;

4. Directing the Central to pay effective from the date of resumption of operations the
salaries of those to be placed on preventive suspension as per February 1, 1982
memorandum during their period of preventive suspension; and

5. Directing, in view of the finding that the subject strike is illegal, NFSW, its officers,
members, as well as sympathizers to immediately desist from committing acts that may
impair or impede the milling operations of the Central

The law enforcement authorities are hereby requested to assist in the peaceful
enforcement and implementation of this Decision.

SO ORDERED.

10. On February 26, 1982, the NFSW by passing the NLRC filed the instant Petition for prohibition
alleging that Labor Arbiter Ovejera, CAC and the PC Provincial Commander of Negros Occidental were
threatening to immediately enforce the February 20, 1982 decision which would violate fundamental
rights of the petitioner, and praying that

WHEREFORE, on the foregoing considerations, it is prayed of the Honorable Court that

on the Petition for Preliminary Injunction, an order, after hearing, issue:

1. Restraining implementation or enforcement of the Decision of February 20, 1982;

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2. Enjoining respondents to refrain from the threatened acts violative of the rights of
strikers and peaceful picketers;

3. Requiring maintenance of the status quo as of February 20, 1982, until further orders
of the Court;

and on the Main Petition, judgment be rendered after hearing.

1. Declaring the Decision of February 2O, l982 null and void;

2. Making the preliminary injunction permanent;

3. Awarding such other relief as may be just in the premises.

11. Hearing was held, after which the parties submitted their memoranda. No restraining order was
issued.

II ISSUES

The parties have raised a number of issues, including some procedural points. However, considering their
relative importance and the impact of their resolution on ongoing labor disputes in a number of industry
sectors, we have decided in the interest of expediency and dispatch to brush aside non-substantial
items and reduce the remaining issues to but two fundamental ones:

1. Whether the strike declared by NFSW is illegal, the resolution of which mainly depends on the
mandatory or directory character of the cooling-off period and the 7-day strike ban after report to MOLE of
the result of a strike-vote, as prescribed in the Labor Code.

2. Whether under Presidential Decree 851 (13th Month Pay Law), CAC is obliged to give its workers a
13th month salary in addition to Christmas, milling and amelioration bonuses, the aggregate of which
admittedly exceeds by far the disputed 13th month pay. (See petitioner's memorandum of April 12, 1982,
p. 2; CAC memorandum of April 2, 1982, pp. 3-4.) Resolution of this issue requires an examination of the
thrusts and application of PD 851.

III. DISCUSSION

1. Articles 264 and 265 of the Labor Code, insofar as pertinent, read:

Art. 264, Strikes, picketing and lockouts. ...

(c) In cases of bargaining deadlocks, the certified or duly recognized bargaining

representative may file a notice of strike with the Ministry (of Labor and Employment) at
least thirty (30) days before the intended date thereof. In cases of unfair labor practices,
the period of notice shall be shortened to fifteen (15) days; ...

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(d) During the cooling-off period, it shall be the duty of the voluntary sttlement. Should the
dispute remain unsettled until the lapse of the requisite number of days from the
mandatory filing of the notice, the labor union may strike or the employer may declare a
lockout.

(f) A decision to declae a strike must be approved by at least two-thirds (2/3) of the total
union membership in the bargaining unit concerened by secret ballots in meetings or
referenda. A decision to declae a lockout must be approved by at least two-thirds (2/3) of
the board of direcotrs of the employer corporation or association or of the partners in a
partnership obtained by secret ballot in a meeting called for the purpose. the decision
shall be valid for the duration of the dispute based on substantially the same grounds
considered when the strike or lockout vote was taken . The Ministry, may at its own
intitiative or upon the request of any affected party, supervise the conduct of the secret
balloting. In every case, the union of the employer shall furnish the Ministry the results of
the voting at least seven (7) days before the intended strike or lockout, subject to the
cooling-off period herein provided. (Emphasis supplied).

ART. 265. Prohibited activities. It shall be unlawful for any labor organization or
employer to declare a strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having filed the notice required in the
preceding Article or without the necessary strike or lockout vote first having been
obtained and reported to the Ministry.

It shall likewise be unlawful to declare a strike or lockout 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. (Emphasis supplied.)

(a) Language of the law. The foregoing provisions hardly leave any room for doubt that the cooling-off
period in Art. 264(c) and the 7-day strike ban after the strike-vote report prescribed in Art. 264(f) were
meant to be, and should be deemed, mandatory.

When the law says "the labor union may strike" should the dispute "remain unsettled until the lapse of the
requisite number of days (cooling-off period) from the filing of the notice," the unmistakable implication is
that the union may not strike before the lapse of the cooling-off period. Similarly, the mandatory character
of the 7-day strike ban after the report on the strike-vote is manifest in the provision that "in every case,"
the union shall furnish the MOLE with the results of the voting "at least seven (7) days before the intended
strike, subject to the (prescribed) cooling-off period." It must be stressed that the requirements of cooling-
off period and 7-day strike ban must both be complied with, although the labor union may take a strike
vote and report the same within the statutory cooling-off period.

If only the filing of the strike notice and the strike-vote report would be deemed mandatory, but not the
waiting periods so specifically and emphatically prescribed by law, the purposes (hereafter discussed) for
which the filing of the strike notice and strike-vote report is required would not be achieved, as when a
strike is declared immediately after a strike notice is served, or when as in the instant case the
strike-vote report is filed with MOLE after the strike had actually commenced Such interpretation of the
law ought not and cannot be countenanced. It would indeed be self-defeating for the law to imperatively
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require the filing on a strike notice and strike-vote report without at the same time making the prescribed
waiting periods mandatory.

(b) Purposes of strike notice and strike-vote report. In requiring a strike notice and a cooling-off period,
the avowed intent of the law is to provide an opportunity for mediation and conciliation. It thus directs the
MOLE "to exert all efforts at mediation and conciliation to effect a voluntary settlement" during the cooling-
off period . As applied to the CAC-NFSW dispute regarding the 13th month pay, MOLE intervention could
have possibly induced CAC to provisionally give the 13th month pay in order to avert great business loss
arising from the project strike, without prejudice to the subsequent resolution of the legal dispute by
competent authorities; or mediation/conciliation could have convinced NFSW to at least postpone the
intended strike so as to avoid great waste and loss to the sugar central, the sugar planters and the sugar
workers themselves, if the strike would coincide with the mining season.

So, too, the 7-day strike-vote report is not without a purpose. As pointed out by the Solicitor General

Many disastrous strikes have been staged in the past based merely on the insistence of
minority groups within the union. The submission of the report gives assurance that a
strike vote has been taken and that, if the report concerning it is false, the majority of the
members can take appropriate remedy before it is too late. (Answer of public
respondents, pp. 17-18.)

If the purpose of the required strike notice and strike-vote report are to be achieved, the periods
prescribed for their attainment must, as aforesaid, be deemed mandatory.,

... when a fair interpretation of the statute, which directs acts or proceedings to be done in
a certain way, shows the legislature intended a compliance with such provision to be
essential to the validity of the act or proceeding, or when some antecedent and
prerequisite conditions must exist prior to the exercise of power or must be performed
before certain other powers can be exercised, the statute must be regarded as
mandatory. So it has been held that, when a statute is founded on public policy [such as
the policy to encourage voluntary settlement of disputes without resorting to strikes],
those to whom it applies should not be permitted to waive its provisions. (82 C.J.S. 873-
874. Emphasis supplied.)

(c) Waiting period after strike notice and strike-vote report, valid regulation of right to strike. To quote
Justice Jackson in International Union vs. Wisconsin Employment Relations Board, 336 U.S. 245, at 259

The right to strike, because of its more serious impact upon the public interest, is more
vulnerable to regulation than the right to organize and select representatives for lawful
purposes of collective bargaining ...

The cooling-off period and the 7-day strike ban after the filing of a strike- vote report, as prescribed in Art.
264 of the Labor Code, are reasonable restrictions and their imposition is essential to attain the legitimate
policy objectives embodied in the law. We hold that they constitute a valid exercise of the police power of
the state.

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(d) State policy on amicable settlement of criminal liability. Petitioner contends that since the non-
compliance (with PD 851) imputed to CAC is an unfair labor practice which is an offense against the
state, the cooling-off period provided in the Labor Code would not apply, as it does not apply to ULP
strikes. It is argued that mediation or conciliation in order to settle a criminal offense is not allowed.

In the first place, it is at best unclear whether the refusal of CAC to give a 13th month pay to NFSW
constitutes a criminal act. Under Sec. 9 of the Rules and regulations Implementing Presidential Decree
No. 851

Non-payment of the thirteenth-month pay provided by the Decree and these rules shall
be treated as money claims cases and shall be processed in accordance with the Rules
Implementing the Labor Code of the Philippines and the Rules of the National Labor
Relations Commission.

Secondly, the possible dispute settlement, either permanent or temporary, could very well
be along legally permissible lines, as indicated in (b) above or assume the form of
measures designed to abort the intended strike, rather than compromise criminal liability,
if any. Finally, amicable settlement of criminal liability is not inexorably forbidden by law.
Such settlement is valid when the law itself clearly authorizes it. In the case of a dispute
on the payment of the 13th month pay, we are not prepared to say that its voluntary
settlement is not authorized by the terms of Art. 264(e) of the Labor Code, which makes it
the duty of the MOLE to exert all efforts at mediation and conciliation to effect a voluntary
settlement of labor disputes.

(e) NFSW strike is illegal. The NFSW declared the strike six (6) days after filing a
strike notice, i.e., before the lapse of the mandatory cooling-off period. It also failed to file
with the MOLE before launching the strike a report on the strike-vote, when it should
have filed such report "at least seven (7) days before the intended strike." Under the
circumstances, we are perforce constrained to conclude that the strike staged by
petitioner is not in conformity with law. This conclusion makes it unnecessary for us to
determine whether the pendency of an arbitration case against CAC on the same issue of
payment of 13th month pay [R.A.B No. 512-81, Regional Arbitration Branch No. VI-A,
NLRC, Bacolod City, in which the National Congress of Unions in the Sugar Industry of
the Philippines (NACUSIP) and a number of CAC workers are the complainants, with
NFSW as Intervenor seeking the dismissal of the arbitration case as regards unnamed
CAC rank and file employees] has rendered illegal the above strike under Art. 265 of the
Labor Code which provides:

It shall likewise be unlawful to declare a strike or lockout 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. (Emphasis supplied.)

(2) The Second Issue. At bottom, the NFSW strike arose from a dispute on the meaning and
application of PD 851, with NFSW claiming entitlement to a 13th month pay on top of bonuses given by
CAC to its workers, as against the diametrically opposite stance of CAC. Since the strike was just an
offshoot of the said dispute, a simple decision on the legality or illegality of the strike would not spell the
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end of the NFSW-CAC labor dispute. And considering further that there are other disputes and strikes
actual and impending involving the interpretation and application of PD 851, it is important for this
Court to definitively resolve the problem: whether under PD 851, CAC is obliged to give its workers a 13th
month salary in addition to Christmas, milling and amelioration bonuses stipulated in a collective
bargaining agreement amounting to more than a month's pay.

Keenly sensitive to the needs of the workingmen, yet mindful of the mounting production cost that are the
woe of capital which provides employment to labor, President Ferdinand E. Marcos issued Presidential
Decree No. 851 on 16 December 1975. Thereunder, "all employers are hereby required to pay salary of
not more than all their employees receiving a basic P1,000 a month, regardless of the nature of their
employment, a 13th month pay not later than December 24 of every year." Exempted from the obligation
however are:

Employers already paying their employees a 13th month pay or its equivalent ...
(Section 2.)

The evident intention of the law, as revealed by the law itself, was to grant an additional income in the
form of a 13th month pay to employees not already receiving the same. Otherwise put, the intention was
to grant some relief not to all workers but only to the unfortunate ones not actually paid a 13th
month salary or what amounts to it, by whatever name called; but 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 and, in the latter
ease, regardless of the conditional character of the grant (such as making the payment dependent on
profit), so long as there is actual payment. Otherwise, what was conceived to be a 13th month salary
would in effect become a 14th or possibly 15th month pay.

This view is justified by the law itself which makes no distinction in the grant of exemption:
"Employers already paying their employees a 13th month pay or its equivalent are not covered by this
Decree." (P.D. 851.)

The Rules Implementing P.D. 851 issued by MOLE immediately after the adoption of said law reinforce
this stand. Under Section 3(e) thereof

The term "its equivalent" ... shall include Christmas bonus, mid-year bonus, profit-sharing
payments and other cash bonuses amounting to not less than 1/12th of the basic salary
but shall not include cash and stock dividends, cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where
an employer pays less than 1/12th of the employee's basic salary, the employer shall pay
the difference." (Italics supplied.)

Having been issued by the agency charged with the implementation of PD 851 as its contemporaneous
interpretation of the law, the quoted rule should be accorded great weight.

Pragmatic considerations also weigh heavily in favor of crediting both voluntary and contractual bonuses
for the purpose of determining liability for the 13th month pay. To require employers (already giving their
employees a 13th month salary or its equivalent) to give a second 13th month pay would be unfair and
productive of undesirable results. To the employer who had acceded and is already bound to give
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bonuses to his employees, the additional burden of a 13th month pay would amount to a penalty for his
munificence or liberality. The probable reaction of one so circumstance would be to withdraw 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; and this negative attitude would have an adverse impact
on the employees.

In the case at bar, the NFSW-CAC collective bargaining agreement provides for the grant to CAC workers
of Christmas bonus, milling bonus and amelioration bonus, the aggregate of which is very much more
than a worker's monthly pay. When a dispute arose last year as to whether CAC workers receiving the
stipulated bonuses would additionally be entitled to a 13th month pay, NFSW and CAC concluded a
compromise agreement by which they

agree(d) to abide by the final decision of the Supreme Court in any case involving the
13th Month Pay Law if it is clearly held that the employer is liable to pay a 13th month
pay separate and distinct from the bonuses already given.

When this agreement was forged on November 30,1981, the original decision dismissing the petition in
the aforecited Marcopper case had already been promulgated by this Court. On the votes of only 7
Justices, including the distinguished Chief Justice, the petition of Marcopper Mining Corp. seeking to
annul the decision of Labor Deputy Minister Amado Inciong granting a 13th month pay to Marcopper
employees (in addition to mid- year and Christmas bonuses under a CBA) had been dismissed. But a
motion for reconsideration filed by Marcopper was pending as of November 30, 1981. In December 1981,
the original decision was affirmed when this Court finally denied the motion for reconsideration. But the
resolution of denial was supported by the votes of only 5 Justices. The Marcopper decision is therefore a
Court decision but without the necessary eight votes to be doctrinal. This being so, it cannot be said that
the Marcopper decision "clearly held" that "the employer is liable to pay a 13th month pay separate and
distinct from the bonuses already given," within the meaning of the NFSW-CAC compromise agreement.
At any rate, in view of the rulings made herein, NFSW cannot insist on its claim that its members are
entitled to a 13th month pay in addition to the bonuses already paid by CAC. WHEREFORE, the petition
is dismissed for lack of merit. No costs.

SO ORDERED.

Aquino, Guerrero, Escolin, Vasquez, Relova and Gutierrez, JJ., concur.

Concepcion, J., is on leave.

Teehankee, J., concurs in the result.

8. Sarocam vs. Interrorient Maritime Ent., G.R. No. 167813 June 27, 2006

Republic of the Philippines

SUPREME COURT
Manila
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FIRST DIVISION

G.R. No. 167813 June 27, 2006

BENJAMIN L. SAROCAM, Petitioner,

vs.
INTERORIENT MARITIME ENT., INC., and DEMACO UNITED LTD., Respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a Petition for Review on certiorari under Rule 45 of the Rules of Court of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 84883, which affirmed the February 19,
20042 and April 27, 20043Resolutions of the National Labor Relations Commission (NLRC) in NCR Case
No. 01-11-2492-00.

The Antecedents

On June 27, 2000 petitioner Benjamin L. Sarocam was hired by Interorient Maritime Ent., Inc. and
Demaco United Ltd., for a twelve-month contract as 'bosun on board M/V Despina. His basic monthly
salary was US$450.00 on a 48-hour work week, with a fixed overtime pay of US$180.00 per month for
105 hours, supplementary wage of US$70.00, and vacation leave with pay of 2.5 days. 4

While the vessel was navigating to China, petitioner suffered lumbar sprain when he accidentally fell from
a ladder.5 On November 15, 2000, he was examined and found to have neuromyositis with the waist and
diabetes. The examining physician prescribed medicine and recommended the signing off and
hospitalization of petitioner.6His employers agreed to repatriate him on November 30, 2000.

On December 5, 2000, petitioner was referred to the company-designated physician, Dr. Teodoro F.
Pidlaoan, Medical Director of the Our Lady of Fatima Medical Clinic. The x-ray of his lumbosacral spine
revealed normal results and his Fasting Blood Sugar test revealed 9.1 (NV 4.1-6.1 umol/l). Petitioner was
given Alaxan tablet for his back pain and Euglocon for his elevated blood sugar. He was also advised to
return for follow-up evaluation. On December 13, 2000, he returned to the clinic with no more complaints
of back pains. His sugar examination likewise revealed normal results. Petitioner was then declared 'fit for
duty effective on that day.7

On March 20, 2001, or barely three months from being pronounced fit to work, petitioner executed a
release and quitclaim 8 in favor of his employers where he acknowledged the receipt of US$405.00 as his
sickwages and freed his employers from further liability.

However, on November 27, 2001, petitioner filed a complaint with the labor arbitration branch of the
NLRC for disability benefit, illness allowance/reimbursement of medical expenses, damages and
attorney's fees.9 To support his claim, he presented the following: (1) a medical certificate 10 dated July 25,
2001 issued by Dr. Rimando C. Saguin recommending a Grade VIII disability under the POEA schedule
of disability grading; (2) a medical certificate11 dated July 27, 2001 issued by Dr. Antonio A. Pobre,

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recommending the same Grade VIII disability; and (3) a medical certificate 12 dated August 2, 2001 issued
by Dr. Efren R. Vicaldo recommending a Grade VI disability.

On July 11, 2003, Labor Arbiter Antonio R. Macam rendered a Decision 13 dismissing the complaint,
holding that petitioner was not entitled to disability benefits because he was declared 'fit for duty. The
Labor Arbiter noted that petitioner had previously executed a release and quitclaim in favor of his
employers and already received his sickness allowance. Thus, he could not claim for reimbursement for
medical expenses due to lack of pertinent substantiation. Petitioner's claim for moral damages and
attorney's fees were, likewise, not awarded on the Labor Arbiter's ruling that there was no evidence of
bad faith and malice on the part of the employers.

The fallo of the Labor Arbiter's decision reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered dismissing the
complaint for lack of merit.

SO ORDERED.14chanroblesvirtuallawlibrary

Petitioner appealed the Decision15 to the NLRC onJuly 31, 2003 which issued its Resolution16 dated
February 19, 2004, affirming the decision of the Labor Arbiter, with the modification that petitioner was
entitled to US$1,350.00 or its peso equivalent, representing his salary for three (3) months. The NLRC
ruled that petitioner should have been reinstated by respondents considering that when the former was
declared 'fit for duty, his employment contract had not yet expired. Thus, respondents were liable for his
salary corresponding to the unexpired portion of the employment contract or three months' salary for
every year of the unexpired term whichever is less, pursuant to Section 10 of Republic Act No. 8042. The
fallo of the Resolution reads:

WHEREFORE, premises considered, the Appeal is DENIED. However, for reasons stated above, the
Decision dated 11 July 2003 is hereby MODIFIED, ordering respondents-appellees to indemnify
complainant-appellant in the amount of US$1,350.00 or its peso equivalent at time of payment.

SO ORDERED.17chanroblesvirtuallawlibrary

Petitioner filed a Motion for Reconsideration which the NLRC denied on April 27, 2004. 18 He forthwith filed
a Petition for Certiorari19 with the CA, assailing the ruling of the labor tribunal.

On January 25, 2005, the CA rendered judgment dismissing the petition.The appellate court declared that
the issues raised by petitioner relating to the credibility and probative weight of the evidence presented
were factual in nature, hence, proscribed under Rule 65 of the Rules of Court. The CA noted that
petitioner did not even contest the due execution, voluntariness and veracity of his own handwritten
quitclaim. Thus, he was estopped from assailing the Deed of Release and Quitclaim he executed after
receiving US$405.00 from respondents.Considering that petitioner was examined by the company-
designated physician and did not protest the findings thereon and later received sickwages, the appellate
court concluded that the NLRC was correct in its ruling. The dispositive portion of the CA decision states:

IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED. No pronouncements as
to costs.
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SO ORDERED.20chanroblesvirtuallawlibrary

Petitioner's motion for reconsideration was denied by the CA in its Resolution 21 dated April 19, 2005.

Petitioner thus filed the instant petition, raising the following issues:

I.

IN LIGHT OF THE DECISION OF THIS HONORABLE COURT IN 'GERMAN MARINE AGENCIES, INC.
VS. NLRC, ET AL., 350 SCRA 629, CAN THE RESPONDENTS' COMPANY-DESIGNATED DOCTOR
BE CONSIDERED COMPETENT AND RELIABLE ENOUGH TO DECLARE PETITIONER AS FIT TO
WORK CONTRARY TO THE DECLARATIONS OF THREE (3) INDEPENDENT PHYSICIANS
SIMILARLY FINDING HIM OTHERWISE?

II.

DOES THE EXECUTION BY PETITIONER OF A RELEASE AND QUITCLAIM ESTOP HIM FROM
CLAIMING DISABILITY BENEFITS UNDER THE POEA STANDARD EMPLOYMENT CONTRACT?22

The Court's Ruling

As in the CA, the issues raised by the petitioner are factual.He maintains that the diagnosis of his three
(3) personal doctors declaring him unfit to work is more accurate and reliable than that of Dr. Pidlaoan,
the company-designated physician. These three physicians, two of whom are orthopedic surgeons, are
likewise in a better position to determine his fitness or unfitness for work, unlike Dr. Pidlaoan whose
expertise cannot be ascertained from the medical certificate he issued. Petitioner thus assails the
competence of Dr. Pidlaoan to assess his fitness to work.

Petitioner avers that the quitclaim he executed is invalid, as the amount he received as consideration
therefor was much lower than what he should have received under the POEA Standard Employment
Contract. He went on to argue that quitclaims are frowned upon by this Court as they are contrary to
public policy.

It must be stressed that in a petition for review on certiorari under Rule 45 of the Rules of Court, only
questions of law may be raised.23 The Court is not a trier of facts and is not to reassess the credibility and
probative weight of the evidence of the parties and the findings and conclusions of the Labor Arbiter and
the NLRC as affirmed by the appellate court. Moreover, the factual findings of the Labor Arbiter and the
NLRC are accorded respect and finality when supported by substantial evidence, which means
suchevidence as that which a reasonable mind might accept as adequate to support a conclusion. 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.24

In the instant case, the CA, the NLRC and the Labor Arbiter are one in their findings that based on the
evidence on record, petitioner is not entitled to disability benefits.

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Prescinding from the foregoing, the Court finds and so rules that under the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessel or the POEA
Standard Employment Contract issued pursuant to DOLE Department Order No. 4, and POEA
Memorandum Circular No. 9, both Series of 2000, petitioner is not entitled to disability benefits. Section
20-B, paragraph 2 of the POEA Standard Employment Contract provides:

SECTION 20. COMPENSATION AND BENEFITS

xxxx

B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS

The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of
his contract are as follows:

xxxx

2. If the injury or illness requires medical and/or dental treatment in a foreign port, the employer shall be
liable for the full cost of such medical, serious dental, surgical and hospital treatment as well as board and
lodging until the seafarer is declared fit to work or to be repatriated.

However, if after repatriation, the seafarer still requires medical attention arising from said injury or illness,
he shall be so provided at cost to the employer until such time he is declared fit or the degree of his
disability has been established by the company-designated physician.

In the instant case, Dr. Pidlaoan diagnosed petitioner as 'fit for duty as gleaned from his December 13,
2000 Medical Report, to wit:

xxxx

Referred and consulted our medical clinic on December 05, 2000 still complaining of on-and-off low back
pain aggravated by movements. X-ray of the lumbosacral spine revealed normal findings, Fasting Blood
Sugar revealed 9.1 (NV 4.1 - 6.1 umol/l). Patient was given Alaxan tablet 2-3x a day for his back pain and
Eugoclon 1 tablet daily for his elevated blood sugar and advised to come back regularly for repeat blood
sugar and for follow-up evaluation on his back pain.

Today, December 13, 2000, he came back with no more complaints of back pain and repeat sugar
examination revealed already normal results.

DIAGNOSIS: Lumbar Strain

Diabetes Mellitus

RECOMMENDATION: Fit for duty effective today, December 13, 2000.

xxxx

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Since he was declared fit for work, petitioner has no more right to claim disability benefits under the
contractual provisions of the POEA Standard Employment Contract.

Under Section 20-B, paragraph 3 of the said contract, petitioner is obliged to submit himself to a post-
employment medical examination by a company-designated physician within three working days upon his
return, except when he is physically incapacitated to do so, in which case, a written notice to the agency
within the same period is deemed as compliance. Failure to comply with this mandatory reporting
requirement shall result in forfeiture of the right to claim the above benefits.It is likewise provided that if a
doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly
between the employer and the seafarer whose decision shall be final and binding on both parties.

Petitioner did not question the findings of Dr. Pidlaoan and his recommendation.He questioned the
doctor's competency and the correctness of his findings only when he filed the complaint against
respondents before the Labor Arbiter, roughly 11 months after petitioner was examined by the doctor.
Petitioner consulted his personal doctors only in July and August 2001, long after he had been examined
by the company-designated physician.

Petitioner's invocation of this Court's ruling in German Marine Agencies v. NLRC 25 militates against his
claim for disability benefits. As explicitly laid in the said case, it is the company-designated physician who
should determine the degree of disability of the seaman or his fitness to work, thus:

x x x In order to claim disability benefits under the Standard Employment Contract, it is the company-
designated physician who must proclaim that the seaman suffered a permanent disability, whether total or
partial, due to either injury or illness, during the term of the latter's employment. x x x It is a cardinal rule in
the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.There is no ambiguity
in the wording of the Standard Employment Contract ' the only qualification prescribed for the physician
entrusted with the task of assessing the seaman's disability is that he be company-designated.26

Dr. Pidlaoan examined and treated petitioner from the time he was repatriated up to his recovery and
subsequent assessment as fit for duty on December 13, 2000. As in the German Marine case, the
extensive medical attention extended by Dr. Pidlaoan enabled the latter to acquire familiarity, if not
detailed knowledge, of petitioner's medical condition. No doubt such specialized knowledge enabled Dr.
Pidlaoan to arrive at a much more accurate appraisal of petitioner's condition, as compared to another
physician not privy to petitioner's case from the very beginning.27Indeed, the assessment of the three
other personal doctors of petitioner could not have been that reliable considering that they based their
conclusions on the prior findings of Dr. Pidlaoan; moreover, they examined petitioner 7 or 8 months after
he was assessed as fit to work and treated him for only one day.

The only requirement stated in the POEA Standard Employment Contract, as explained in the German
Marine case, is that the doctor be company-designated, and no other. Though it is prudent and advisable
to have a doctor specialized in his field to examine the seafarer's condition ordegree of illness, the
contractual provisions of the parties only require that the doctor be 'company-designated. When the
language of the contract is explicit, as in the case at bar, leaving no doubt as to the intention of the
drafters thereof, the courts may not read into it any other intention that would contradict its plain import.28

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Furthermore and most importantly, petitioner did not question the competency of Dr. Pidlaoan and his
assessment when the latter declared him as fit for duty or fit to work.

Additionally, petitioner, instead of questioning the assessment of the company-designated doctor,

executed a release and quitclaim in favor ofrespondents, around three months after the assessment. In
executing the said document, petitioner thus impliedly admitted the correctness of the assessment of the
company-designated physician, and acknowledged that he could no longer claim for disability benefits.

While petitioner may be correct in stating that quitclaims are frowned upon for being contrary to public
policy, the Court has, likewise, recognized legitimate waivers that represent a voluntary and reasonable
settlement of a worker's claim which should be respected 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.29

In the instant case, petitioner, by his own hand, wrote the following in the March 20, 2001 release and
quitclaim:

That I have read this paper from beginning to and [sic] and understand the contents thereof.

That I know this paper that I am signing.

That I know that signing this paper settles and ends every right or claim I have for all damages including
but not limited to loss of earning capacity [sic] of past and future maintenance. [sic] support [sic] suffering
[sic] mental anguish. [sic] serious anxiety and similar injury.

That I have received the amount of US$405 or P18,630.

That I know that upon receipt of the above amount I waive all claims I may have for damage against the
vessel's owners and her agents, insurers, charterers, operators [sic] underwriters, p.i. clube [sic], shipper
and all other persons in interest therein or thereon, under all and all other
countries.30chanroblesvirtuallawlibrary

From the document itself, the element of voluntariness in its execution is evident. Petitioner also appears
to have fully understood the contents of the document he was signing, as the important provision thereof
had been relayed to him in Filipino. Thus, the document also states:

Na alam ko na pagkatanggap ko nang halagang ito ay pinawawalang bisa at iniuurong ko nang lahat [ng]
aking interes, karapatan, at anumang reklamo o damyos laban sa barko, may-ari nito, mga ahente,
seguro at lahat-lahat ng may kinalaman sa barkong ito maging dito sa Pilipinas o anumang
bansa.31chanroblesvirtuallawlibrary

Likewise, the US$405.00 which he received in consideration of the quitclaim is a credible and reasonable
amount. He was truly entitled thereto, no more and no less, given that he was sick for only less than a
month or from November 15, 2000 to December 13, 2000. The same would not, therefore, invalidate the
said quitclaim. As we held in Periquet v. National Labor Relations Commission: 32

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Not all waivers and quitclaims are invalid as against public policy.1wphi1 If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not
later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable transaction. But 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.33chanroblesvirtuallawlibrary

As a final note, let it be emphasized that 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.34

WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 84883 are AFFIRMED. Costs against the
petitioner.

SO ORDERED.

9. NS Transport Employees Association (NSTEA) vs. NS Transport Service, Inc. G.R. No.
164049 October 30, 2006

[G.R. NO. 164049 : October 30, 2006]

This treats of the Petition for Review filed by the NS Transport Employees Association (Union)
and the individual petitioners assailing the Decision of the Court of Appeals in CA-G.R. SP No. 75155
promulgated on 30 July 2003,1 which found grave abuse of discretion on the part of the National Labor
Relations Commission (NLRC).

The facts, as found by the Court of Appeals, follow.

In April of 1997, the union filed a petition for certification election for the rank and file employees of NS
Transport Services, Inc. (the company), a public utility transport corporation. 2 The petition was denied by
the Department of Labor and Employment (DOLE), prompting the union to appeal the denial to the DOLE
Secretary.

On 20 May 1997, the Union filed a Notice of Strike before the National Conciliation and Mediation Board
(NCMB), alleging illegal dismissal of its officers and members, as well as discrimination and coercion of
employees. However, despite the mediation conducted by the NCMB, the parties failed to amicably settle
their differences, thus the Union pushed through with its strike.3

The DOLE Secretary, upon the company's petition,4 assumed jurisdiction over the dispute and issued a
Return-to-Work Order and certified the dispute to the NLRC for compulsory arbitration. Likewise, upon
motion of the company, the DOLE Secretary deputized police authorities to assist in the peaceful and
orderly enforcement of the DOLE's orders.5
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Thereafter, the company filed a complaint for declaration of illegality of strike and damages before the
NLRC, alleging that while mediation was in progress, the Union staged a strike, and that during the strike,
the Union members resorted to threats, intimidation and coercion upon their co-employees. They also
allegedly blocked the ingress and egress of the company and caused damage to company property. On
the other hand, the Union sought to hold the company for contempt for allegedly refusing to accept its
returning members. The cases were then consolidated by the NLRC. 6

Conciliation conferences were conducted, but the parties still failed to settle the disputes, prompting the
labor arbiter to require the parties to submit their respective position papers. The Union claimed that the
company committed unfair labor practice when it dismissed several union officers and members because
of union activities, and that it resorted to selective acceptance of striking employees. On the other hand,
the company averred that even while mediation was on-going, the Union filed a notice of strike to
pressure the company to recognize it as the bargaining representative of its employees. Likewise, the
company alleged that the Union committed prohibited acts during its strike, such as property destruction,
violence and coercion. The company denied that it refused to accept the employees who returned in
compliance with the Return-to-Work Order, claiming that it even caused the publication of the Order and
issued individual return-to-work directives to each striking employee.7

The parties agreed to the conduct of a formal hearing. The Union was first to present evidence. 8

Meanwhile, the DOLE Secretary reversed the order of the Med-Arbiter denying the Union's petition for
Certification Election.9

During the proceedings before the NLRC, the Union filed a motion submitting the case for decision on
account of the company's apparent failure to appear in the 14, 21 and 28 June 2001 hearings. The
company filed its opposition to the said motion on the ground that they were not notified of the said
settings and prayed that the case be set for further hearings. The opposition and plea to adduce evidence
notwithstanding, the NLRC stated:

In this trial, NSTEA was able to present all their witnesses for examination.

In the case of NSTS, however, they miserably failed to appear and present their witnesses for
examination despite having been repeatedly notified to do so.

Due to this persisting [sic] failure, NSTEA filed its Motion Submitting Case for Decision dated 6 July 2001,
seeking resolution of the instant case based solely on its adduced evidence on record. However, in the
interest of justice, we decided to consider the instant case submitted for resolution based on all the
available records submitted on account of such obtaining failure.10

The NLRC held that the strike staged by the Union was legal and ordered the reinstatement of the
individual complainants with full backwages.11

The company sought reconsideration of the resolution, claiming that it was denied due process when they
were not allowed to adduce evidence on the illegality of the strike and the violation of the Return-to-Work
Order. The NLRC dismissed the motion without resolving the company's protest on the lack of notice of
the hearings.12

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In a petition under Rule 65 before the Court of Appeals, the company claimed grave abuse of discretion
on the part of the NLRC when it issued its questioned resolution despite lack of notice to the company
and without providing it the opportunity to present its witnesses and evidence. 13

The Court of Appeals ruled in favor of the company and remanded the case to the NLRC for further
proceedings. It found that counsel for the company changed his address while the cases were pending
before the NLRC, and that the NLRC was in fact cognizant of such change of address since it had
previously sent notices of hearings to the new address for almost three (3) years while the case was on-
going. In fact, the Union even served a copy of its motion submitting the case for decision on the same
address. The company's opposition to the said motion even called the NLRC's attention to its counsel's
new address, the Court of Appeals noted. The appellate court observed that the NLRC and petitioners
were unable to show that notices for the 14, 21 and 28 June 2001 hearings were duly received by said
counsel.14

According to the Court of Appeals, the NLRC failed to verify from the service return card on record
whether the notice for the three (3) hearings were duly served on the company's counsel. The NLRC also
failed to state such fact in its questioned resolutions to forestall complaints of denial of due process.
Moreover, there is no indication that the NLRC looked into and resolved the company's opposition to the
Union's motion to submit the case for decision and to set the case for further hearing before rendering the
questioned resolutions. The Court of Appeals also noted that the NLRC and the Union failed to dispute
the company's averment that notices of hearings were not received by the company or its counsel.15

The Court of Appeals pointed out that failure to appear and present evidence on the scheduled hearings
should not be solely imputed to the company since the Union also failed to appear in several hearings.
Further, it held that the company's complaint for illegal strike and its defense against the Union's
complaints of unfair labor practice raised substantial issues which cannot be resolved based on the
Union's averments alone, but deserve a hearing wherein both parties can present their sides. 16

The Union sought reconsideration of the Decision but it was denied by the Court of Appeals.17

Petitioners now claim that the NLRC did not violate the company's right to due process since its
resolutions were based on the parties' respective pleadings and on the records of the case. In any case,
the company was given the opportunity to cross-examine the petitioners' witnesses but it failed to attend
the hearings and similarly failed to appear in the hearings intended for the reception of its
evidence.18According to petitioners, the order of remand by the Court of Appeals violates the worker's
right to speedy and inexpensive disposition of cases, considering that the appellate court was in a
position to resolve the case on its merits.19 Petitioners reiterate their position that the company did not
have any just cause for dismissing the concerned employees, and that their strike was legal and based
on respondent's unfair labor practices.20

For their part, respondents21 maintain that the company was deprived of its constitutional right to due
process when the NLRC disallowed it to present its evidence due to the conceived "failure to attend" the
three (3) scheduled hearings, when in fact the company and its counsel were not notified of the hearings
since the NLRC sent the notice of said hearings to a wrong address.22 Respondents claim that the order
of remand for further reception of evidence is not violative of petitioners' right to speedy and inexpensive
disposition of cases. Furthermore, the Court of Appeals not being a trier of facts, reception of evidence

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should be made by the NLRC itself. Besides, petitioners cannot now claim violation of the right to speedy
disposition of cases since they contributed to the delay in the resolution of the case. 23

Respondents point out that petitioners misled the NLRC in their motion submitting the case for resolution
when they alleged that the company failed to attend the scheduled hearings despite due notice, when in
fact the notice was sent to the wrong address.24 They aver that the NLRC has not been consistent in
dealing with the absences of the parties since it was considerate and lenient to petitioners but hard and
strict against the company.25

The petition must be denied.

It is well-settled that the essence of due process in administrative proceedings is the opportunity to
explain one's side or a chance to seek reconsideration of the action or ruling complained of. 26 In labor
cases, it has been held that due process is simply an opportunity to be heard and not that an actual
hearing should always and indispensably be held27 since a formal type or trial-type hearing is not at all
times and in all instances essential to due process the requirements of which are satisfied where the
parties are afforded fair and reasonable opportunity to explain their side of controversy. 28

The holding of an adversarial trial is discretionary on the labor arbiter and the parties cannot demand it as
a matter of right.29 Section 4, Rule V30 of the New Rules of Procedure of the NLRC31 grants a labor arbiter
wide latitude to determine, after the submission by the parties of their position papers/memoranda,
whether there is need for a formal trial or hearing.

Indeed, a formal hearing is not necessary in labor cases. However, when such a formal hearing is
allowed but a party is not informed thereof, as a consequence of which he is unable to attend the same,
such failure to attend should not be taken against him. As the labor arbiter allowed the holding of a formal
hearing, he must accord the parties the opportunity to participate therein and allow the formal hearing to
proceed its natural course, if due process and the elements of fair play are to be observed.

In the instant case, the labor arbiter has granted his imprimatur on the holding of a formal hearing, as
agreed upon by the parties.32 In fact, the hearing has commenced and petitioners were given the
opportunity to present their side. However, the company was not given the chance to exercise the same
privilege, since the case was submitted for decision even before it was able to adduce its evidence during
the formal hearing. Worse, the labor arbiter did not even deign to address the issues posed by the
company in its opposition to submit the case for resolution, particularly the claim that it was not notified of
the 14, 21, and 28 June 2001 hearings. While the labor arbiter has the discretion to conduct a formal
hearing, such discretion does not permit him to arbitrarily allow and/or prevent a party from presenting its
case once the formal hearing has commenced.

The company's failure to appear in the 14, 21, and 28 June 2001 hearings are not the only instances
when it did not attend the proceedings before the NLRC. Indeed, the records are replete
with constancias showing and noting such absences. However, the company is not the only one guilty of
absences. As observed by the Court of Appeals, petitioners equally contributed to the delay in the
resolution of the consolidated cases. It is totally unfair to blame only the company for the delay in the
resolution of the cases when such delay was the result of both parties' failure to attend the scheduled
hearings. If the NLRC is disposed to be strict in the enforcement of its rules of procedure, it must do so
fairly and reasonably, not consistently against one party only.
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The law, in protecting the rights of the employee, authorizes neither oppression nor self-destruction of the
employer.33 Contrary to petitioners' claim, remand of the case to the NLRC is proper since the company
has yet to present its evidence during the formal hearing. It is true that both parties have been provided
the opportunity to prove their cases through the pleadings submitted before the NLRC; however, only
petitioners were given the chance to present its side in the formal hearing. The factual issues raised in the
consolidated cases could still be affected by the additional evidence to be presented by the company.
Equity demands that the company must be equally allowed to adduce its evidence, if the NLRC is to
come up with a rational and impartial decision.

Besides, while the speedy and inexpensive disposition of cases is much desired and should be pursued,
the swift resolution of labor disputes is counterproductive if it is achieved through a lop-sided hearing and
at the expense of the employer's rights. Thus, it has been held that while labor laws mandate the speedy
disposition of cases with the least attention to technicalities, the fundamental requisites of due process
must not be sacrificed.34

Until both parties are able to adduce their respective evidence in a formal hearing, no resolution of the
issues concerning the legality of the Union's strike or the allegations of unfair labor practices can be
safely arrived at. The resulting delay, if any, in the disposition of the cases a quo due to the remand to the
NLRC is regrettable to say the least.

The NLRC and the parties are urged to proceed with the formal hearing and conclude with dispatch.

There is nothing in this decision that should be construed as would render ineffective the discretionary
power of the labor arbiter to conduct adversarial trial. All that this decision seeks to impart is the
recognition that even in administrative proceedings, the basic tenets of due process and fair play must be
respected and upheld.

WHEREFORE, the petition is DENIED and the Decision dated 30 July 2003 of the Court of Appeals in
CA-G.R. Sp No. 75155 is AFFIRMED. Costs against petitioners.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco, Jr., JJ., concur.

10. Serrano vs. NLRC ( G.R. No. 117040, January 27, 2000)

[G.R. No. 117040. January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ISETANN
DEPARTMENT STORE, respondents.

DECISION

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 Page 55 of 278

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 Serranos 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. Serrano,

......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.

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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 petitioners dismissal, private respondent employed a safety and security supervisor with duties and
functions similar to those of petitioner.

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% attorneys 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.

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The NLRC held that the phase-out of private respondents 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 ones 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 respondents part was of no moment because the position had long been in
existence and was separate from petitioners 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 respondents 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

Petitioners 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 companys cost-saving

program, the services rendered by the mechanics became redundant and superfluous,
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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 employers 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 respondents 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 a sufficient
basis for concluding that the termination of petitioners 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 petitioners 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 petitioners right.

To be sure, this is not the first time this question has arisen. In Sebuguero 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 NLRCs finding. However, as the company did not comply with the 30-day written
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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.

....

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 P1,000.00[22] to P2,000.00[23] to P5,000.00[24] 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
requirement in light of our 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
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authorized causes, suggests 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 causes for such dismissal or layoff. Consequently, in their view, the
employee concerned should be reinstated and paid backwages.

Validity of Petitioners 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 employers 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 latters family, or when the employer is
precisely retrenching in order to prevent losses.

The need is for a rule which, while recognizing the employees 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 30-day 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 employers failure to comply with the notice requirement constitutes a denial
of the employees right to due process. Prescinding from this premise, he quotes the statement of Chief
Justice Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco [26] 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."
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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. 283-284, is a nullity.
Hence, even if just or authorized causes exist, the employee should be reinstated with full back pay. On
the other hand, Justice Panganiban quotes from the statement in People v. Bocar[27] 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 employees 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]
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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 latters 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 ones 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 employers 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
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ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of the
Civil Code[34] 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
President Ramon Magsaysays 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

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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 rights 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 employees 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.
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11. Agabon vs. NLRC (G.R. No. 158693, November 17, 2004)

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision[1] 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, 1992 [2] until February 23, 1999 when they were
dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims [3] 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 Agabons 13 th 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]

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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 petitioners 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 Agabons 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 respondents 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 latters representative in
connection with the employees 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

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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 conduct[19] 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;

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(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 employees 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

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private respondent, this is not a valid excuse because the law mandates the twin notice requirements to
the employees 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.

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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

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being for just cause, albeit without due process, did not entitle the employee to reinstatement,
backwages, damages and attorneys 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]

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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 labor-
management 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]

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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
employees one month salary. This indemnity is intended not to penalize the employer but to vindicate or
recognize the employees 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 Agabons 13 th 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 same[43] 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,

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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 113[45] of the same Code from making any deductions
without the employees 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 Agabons 13 th 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 Agabons 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 Agabons 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.

12. Duncan Association of Detailman-PTGWO vs. Glaxo Welcome Philippines, Inc. (G.R. No.
162994, September 17, 2004)

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 Decision[1] dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.[2]

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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
Pharmaceuticals[3] (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,

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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 one-half () 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 Decisiondeclaring 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
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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 from 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 Sur-
Camarines 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 ButuanCity, 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 anti-asthma
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.

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[17]

The same contract also stipulates that Tecson 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 co-employees 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

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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
state[26] 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
Tecson, 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.

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The Court finds no merit in petitioners contention that Tecson 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
Tecson 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 employer-company 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 basis [31]

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
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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.

Austria-Martinez and Callejo, Sr., JJ., concur.

Puno (Chairman), J., in the result.
Chico-Nazario, J., on leave.

13. Manuel vs. N.C. Construction Supply (G.R. No. 127553, November 28, 1997)

[G.R. No. 127553. November 28, 1997]

EDDIE MANUEL, ROMEO BANA, ROGELIO PAGTAMA, JR. and JOEL REA, petitioners, vs. N.C.
CONSTRUCTION SUPPLY, JOHNNY LIM, ANITA SY and NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION), respondents.

DECISION

PUNO, J.:

This special civil action for certiorari seeks to review the decision of the National Labor Relations
Commission (NLRC) dated June 27, 1996 in NLRC-NCR-00-07-04925-95 entitled Eddie Manuel, Romeo
Bana, Rogelio Patama, Jr. and Joel Rea v. N.C. Construction Supply, Johnny Lim and Anita Sy. [1]

Petitioners Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea were employed as
drivers at N.C. Construction Supply owned by private respondents Johnny Lim (a.k.a. Lao Ching Eng)
and Anita Sy.

On June 3, 1995, the security guards of respondent company caught Aurelio Guevara, a company
driver, and Jay Calso, his helper ("pahinante"), taking out from the company premises two rolls of
electrical wire worth P500.00 without authority. Calso was brought to the Pasig Police station for
questioning. During the investigation, Calso named seven other employees who were allegedly involved
in a series of thefts at respondent company, among them petitioners Manuel, Bana, Pagtama, Jr. and
Rea.[2]

On June 5, 1995, petitioners received separate notices from respondent company informing them
that they were positively identified by their co-worker, Jay Calso, as perpetrators of the series of thefts
committed at respondent company. They were thus invited to the Pasig police station for investigation
regarding their alleged involvement in the offense.
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Atty. Ramon Reyes, private respondents' counsel conducted in their behalf an investigation
regarding petitioners' involvement in the theft. Atty. Reyes interrogated the petitioners on their alleged
participation in the series of thefts committed at respondent company. Petitioners initially denied the
charge. However, after being positively identified by Jay Calso, petitioners admitted their guilt and offered
to resign in exchange for the withdrawal of any criminal charge against them. [3] Petitioners Bana and Rea
filed separate resignation letters while petitioners Manuel and Pagtama, Jr. tendered their resignations
orally. Petitioner Bana's resignation letter[4] reads:

Hunyo 6, 1995

Dear Bong,

Sa ganitong sitwasyon nagpapasalamat rin ako na humantong sa ganito para hindi na tumagal ang
masama naming gawain. Piro lubos rin ako nagpapasalamat sa iyong pagpapatawad sa akin, at ang
masasabi ko lang na I'm very, very sorry na lang. Kasi alam mo naman na kapos na kapos talaga
ako. Kaya alam mo halos hindi na nga ako nag-a-absent dahil sa sahod ko lang kapos pa sa pamilya
ko. Kaya sana sa pag-resign ko sana mabigyan mo man lang ako nang kaunti para makapamasahi man
lang pau-wi sa Mindanao kasama ang mga anak ko. Yon lang . . .

Gumagalang,

Boy

Petitioner Rea's resignation letter,[5] on the other hand, states:

Hunyo 6, 1995

Boss,

Dahil sa hindi maganda ang aking naging performance sa inyo sa loob ng NC Construction Supply sa
nakakahiya na aking nasangkutan magreresign na ho ako, magsisimula Hunyo 6, 1995. Siguro naman
Boss alam naman ninyo ang totoo nakikisama lang ako sa mga dati ninyong tauhan dahil kailangan ko
talaga ng trabaho kahit labag man sa aking kalooban ang gumawa ng hindi maganda.

Boss, kahit paano sana maintindihan mo ako, tatanggalin nyo na ho ako sana bigyan nyo na lang ako ng
kahit pamasahe namin pauwing probinsya para makapagbagong buhay na ako.

Salamat po.

Sumasainyo,

Joel Rea

Atty. Reyes accepted petitioners' resignation effective June 5, 1995.

On July 17, 1995, petitioners filed a complaint against private respondents for illegal
dismissal. Petitioners alleged that they were not informed of the charge against them nor were they given
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an opportunity to dispute the same. They also alleged that their admission made at the Pasig police
station regarding their involvement in the theft as well as their resignation were not voluntary but were
obtained by private respondents' lawyer by means of threat and intimidation.

Labor Arbiter Manuel R. Caday ruled in favor of petitioners and found their dismissal to be illegal. He
held that private respondents failed to show a just cause for the termination of petitioners' services. He
declared that petitioners' admission regarding their involvement in the theft was inadmissible in evidence
as it was taken without the assistance of counsel, in violation of Section 12 Article III of the 1987
Constitution.[6] He also held that petitioners were not afforded due process before their services were
terminated. Hence, Labor Arbiter Caday ordered private respondents to reinstate petitioners to their
former position without loss of seniority rights and to pay them full backwages. He also ordered private
respondents to pay petitioners their service incentive leave benefits plus attorney's fees. [7]

On appeal, the NLRC reversed the decision of the Labor Arbiter. It ruled that petitioners were
dismissed for a just cause. It held that petitioners failed to adduce competent evidence to show a vitiation
of their admission regarding their participation in the theft. It further stated that such admission may be
admitted in evidence because Section 12 Article III of the 1987 Constitution applies only to criminal
proceedings but not to administrative proceedings. The NLRC, however, agreed with the Labor Arbiter
that petitioners were denied due process. Hence, it ordered private respondents to pay petitioners the
amount of P1,000.00 as indemnity. The dispositive portion of the decision reads:

WHEREFORE, premises duly considered, the decision appealed from is hereby reversed and set aside.
A new one is hereby entered ordering respondents to pay to the complainants the amount of P1,000.00
each as and for indemnity for failure of the respondents to observe due process.

SO ORDERED.[8]

Petitioners filed the instant petition on the following grounds:

1. The National Labor Relations Commission committed grave abuse of discretion in declaring
the dismissal legal;

2. The National Labor Relations Commission committed grave abuse of discretion in declaring
that the admission of petitioners is admissible in evidence despite the fact that it was
obtained in a hostile environment and without the presence or assistance of counsel;

3. The National Labor Relations Commission committed grave abuse of discretion in finding that
respondents N.C. Construction Supply et al. are right in withdrawing their trust and
confidence with petitioners without any valid and legal basis.[9]

We affirm the decision of the NLRC.

An employer has a right to terminate the services of an employee subject to both substantive and
procedural limitations. This means that (1) the dismissal must be for a just or authorized cause provided
in the Labor Code,[10] and (2) the employee must be accorded due process before his employment is
terminated. The validity of the dismissal hinges on the employer's compliance with these two
requirements.[11]

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In the case at bar, petitioners who were employed as drivers at respondent company were found
guilty of stealing company property consisting of electrical wire, welding rod, G.I. sheet, steel bar and
plywood. Article 282 of the Labor Code authorizes an employer to terminate the services of an employee
for loss of trust and confidence, provided that the loss of confidence arises from particular proven
facts. The law does not require proof beyond reasonable doubt of the employee's misconduct. Substantial
evidence is sufficient.[12] Substantial evidence has been defined as such relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.[13]

Petitioners' culpability in the instant case was sufficiently proved by private respondents. Jay Calso,
an employee of respondent company who has personal knowledge about the series of thefts that has
been going on at respondent company, positively identified petitioners as among the perpetrators of the
theft. Petitioners have not shown any ill motive on the part of Calso to implicate them in the offense,
unless it was true. In addition, petitioners admitted their participation in the theft during an investigation
conducted by private respondents' lawyer.

We are not convinced by petitioners' allegation that such admission was obtained by means of threat
or intimidation as such allegation is couched in general terms and is unsupported by evidence.

We also reject petitioners' argument that said admission is inadmissible as evidence against them
under Section 12 Article III of the 1987 Constitution. The right to counsel under Section 12 of the Bill of
Rights is meant to protect a suspect in a criminal case under custodial investigation. Custodial
investigation is the stage where the police investigation is no longer a general inquiry into an unsolved
crime but has begun to focus on a particular suspect who had been taken into custody by the police to
carry out a process of interrogation that lends itself to elicit incriminating statements. It is when questions
are initiated by law enforcement officers after a person has been taken into custody or otherwise deprived
of his freedom of action in any significant way. The right to counsel attaches only upon the start of such
investigation.[14] Therefore, the exclusionary rule under paragraph (3) Section 12 of the Bill of Rights
applies only to admissions made in a criminal investigation but not to those made in an administrative
investigation.

In the case at bar, the admission was made by petitioners during the course of the investigation
conducted by private respondents' counsel to determine whether there is sufficient ground to terminate
their employment. Petitioners were not under custodial investigation as they were not yet accused by the
police of committing a crime. The investigation was merely an administrative investigation conducted by
the employer, not a criminal investigation. The questions were propounded by the employer's lawyer, not
by police officers. The fact that the investigation was conducted at the police station did not necessarily
put petitioners under custodial investigation as the venue of the investigation was merely
incidental. Hence, the admissions made by petitioners during such investigation may be used as
evidence to justify their dismissal.

Private respondents, however, failed to observe due process in terminating the employment of
petitioners. Due process demands that the employer should furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the cause(s) for termination and afford
him ample opportunity to be heard and to defend himself with the assistance of a representative if he so
desires. Specifically, the employer must furnish the worker with two written notices before termination of
employment can be legally effected: (1)notice which apprises the employee of the particular acts or
omissions for which his dismissal is sought, and (2) the subsequent notice which informs the employee of
the employer's decision to dismiss him.[15] There is no showing in this case that private respondents
furnished petitioners with such notices. Private respondents, through their counsel, Atty. Reyes,

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immediately terminated petitioners' services upon conclusion of the investigation. Private respondents
must therefore indemnify petitioners for failure to observe due process before dismissing them from work.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed decision is hereby AFFIRMED. No
costs.

SO ORDERED.

Regalado, (Chairman), and Martinez, JJ., concur.

Mendoza, J., on official leave.

14. Punzal vs. ETSI Technologies Inc. (G.R. Nos. 170384-85, March 9, 2007)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. Nos. 170384-85 March 9, 2007

LORNA DISING PUNZAL, Petitioner,

vs.
ETSI TECHNOLOGIES, INC., WERNER GEISERT, and CARMELO D. REMUDARO, Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner, Lorna Dising Punzal, had been working for respondent, ETSI Technologies, Inc. (ETSI), for 12
years prior to the termination of her services on November 26, 2001 on which date she was holding the
position of Department Secretary.

On October 30, 2001, petitioner sent an electronic mail (e-mail) message to her officemates announcing
the holding of a Halloween party that was to be held in the office the following day. The e-mail message
read verbatim:

Dear ETSI-JMT Colleagues,

Good day!

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As you all know, tomorrow is the day before HALLOWEEN. And many of our kids will go around "TRICK
OR TREATING". We will be dressing them up in costumes of all sorts, from cute to outrageous, from wild
to "scary."

What we want to have is a similar activity here in the office. So we invite you to participate in this effort.
You can also dress your kids up in funny costumes. Also the kids will then go around the office Trick or
Treating. So, we ask you to prepare your Treats, like candies, biscuits, cookies, etc., (Cash is also
welcome for parents like me . . . he he he)

Why are we doing this? Well, we just want the kids to have a good time. Kung gusto ninyo, mag-costume
din kayo.

Alright! See you tomorrow morning, [October 31, 2001].1 (Underscoring supplied)

Petitioners immediate superior, respondent Carmelo Remudaro (Remudaro), who was one of those to
whom the e-mail message was sent, advised petitioner to first secure the approval of the Senior Vice
President, respondent Werner Geisert (Geisert), for the holding of the party in the office.

Petitioner soon learned that Geisert did not approve of the plan to hold a party in the office. She
thereupon sent also on October 30, 2001 another e-mail message to her officemates, reading verbatim:

Sorry for the mail that I sent you, unfortunately the SVP of ETSI Technologies, Inc. did not agree to our
idea to bring our children in the office for the TRICK or TREATING. He was so unfairpara bang palagi
siyang iniisahan sa trabahobakit most of the parents na mag-joined ang anak ay naka-VL naman.
Anyway, solohin na lang niya bukas ang office.

Anyway, to those parents who would like to bring their Kids in Megamall there will be Trick or Treating at
Mc Donalds Megamall Bldg. A at 10:00 AM tomorrow and lets not spoil the fun for our
kids.2 (Underscoring supplied)

Remudaro and Arnold Z. David (David), the Assistant Vice President of Human Resources/TQM of ETSI,
later informed petitioner, by letter of November 13, 2001, that Geisert got a copy of her e-mail message
and that he required her to explain in writing within 48 hours why she

. . . should not be given disciplinary action for committing Article IV, No. 5 & 8 Improper conduct or
acts of discourtesy or disrespect and Making malicious statements concerning Company
Officer, whereby such offenses may be subject to suspension to termination depending upon the gravity
of the offense/s as specified in our ETSIs Code of Conduct and Discipline.3 (Emphasis in the original)

Petitioner replied by letter of November 14, 2001 that she had no malicious intention in sending the
second e-mail message and that she "never expected such kind of words can be called as acts of
discourtesy or disrespect." 4

On November 19, 2001, Geisert and Remudaro conferred with petitioner to give her a chance to explain
her side.5

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David and Remudaro subsequently sent petitioner a letter on November 26, 2001, finding her explanation
"not acceptable" and terminating her services, effective immediately, "for committing Article IV, No[s]. 5 &
8, Improper conduct or act of discourtesy or disrespect and making malicious statements concerning
company officer."6

On February 11, 2002, petitioner filed before the National Labor Relations Commission (NLRC) a
complaint7 for illegal dismissal against ETSI, Geisert, and Remudaro.

By Order of November 26, 2002, the Labor Arbiter dismissed petitioners complaint, finding that she was
legally dismissed for serious misconduct, and that she was afforded due process. 8

On petitioners appeal, the NLRC, by Resolution9 dated October 27, 2003, found that while she was
indeed guilty of misconduct, the penalty of dismissal was disproportionate to her infraction. 10 The NLRC
thus ordered that petitioner was entitled to reinstatement which, however, was no longer feasible due to
strained relations. The NLRC thus ordered that petitioner be awarded separation pay equivalent to one
month pay for every year of service, a period of at least six months to be considered one whole year. 11

Noting that petitioner was not entirely faultless, the NLRC denied her prayer for backwages 12 as well as
her prayer for exemplary and moral damages and attorneys fees in the absence of the legal conditions
justifying their award.13

Both parties filed their respective motions for reconsideration14 which the NLRC denied.15 Both parties
thereupon filed their respective petitions for certiorari16 with the Court of Appeals.

In the petition of petitioner, docketed as CA-G.R. SP No. 83296, she questioned the denial of her prayer
for backwages.17 Upon the other hand, in the petition of respondent ETSI, et al., docketed as CA-G.R. SP
No. 83205, they questioned the finding of illegal dismissal, the grant of separation pay, and the imputation
of liability to Geisert and Remudaro.18

In her comment to the petition of ETSI, et al. in CA-G.R. SP No. 83205, petitioner raised the issue of due
process, alleging that her employer did not inform her of her right to be assisted by counsel during the
conference with respondents Geisert and Remudaro.19

By Decision20 of May 13, 2005, the Court of Appeals, which priorly consolidated the petitions of both
parties, held that petitioners dismissal was in order:21

The gravity of Punzals infraction is borne by the fact that her e-mail message to the workers of
ETSI tended to cast scorn and disrespect toward a senior vice president of the company. The message
itself resounds of subversion and undermines the authority and credibility of management.

xxxx

Also, this message was not a mere expression of dissatisfaction privately made by one person to another,
but was circulated to everyone in the work area. The message was sent close at the heels of SVP
Geiserts disapproval of Punzals plan to hold a Halloween affair in the office, because the said event
would disrupt the operations and peace and order in the office. Punzal therefore displayed a tendency to

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act without managements approval, and even against managements will, as she invited her co-workers
to join a trick or treating activity at another venue during office hours.

The message also comes across as an encouragement to ignore SVP Geiserts authority, and portrayed
him as unworthy of respect because of his unpopular personality.

This is in clear violation of Article IV, Section 5 of the companys Code of Conduct and Discipline, which
clearly imposes the penalty of "suspension to dismissal, depending upon the gravity of the offense" in
cases where an employee displays "improper conduct or acts of discourtesy or disrespect to fellow
employees, visitors, guests, clients, at any time."

The imposition of the penalty of dismissal is proper, because of the gravity of Punzals misconduct, as
earlier pointed out, and considering that:

(1) Punzals statements were discourteous and disrespectful not only to a mere co-employee, but
to a high ranking executive official of the company;

(2) Punzals statements tended to ridicule and undermine the credibility and authority of SVP
Geisert, and even encouraged disobedience to the said officer;

(3) Punzals message was sent to a great number of employees of ETSI, which tended to sow
dissent and disrespect to management among a great number of employees of ETSI;

(4) Punzals message could not have been made in good faith, because the message itself used
language that placed SVP Geisert in ridicule and portrayed him as an object of scorn, betraying
the senders bad faith.

Given these circumstances, the fact that Punzals infraction occurred only once should be largely
insignificant. The gravity and publicity of the offense as well as its adverse impact in the workplace is
more than sufficient to place the same in the level of a serious misconduct.22 (Underscoring supplied)

Contrary to petitioners contention, the Court of Appeals also found that due process was observed in her
dismissal.23

The Court of Appeals thus reinstated the Labor Arbiters Order. Thus it disposed:

WHEREFORE, premises considered, the petition filed by Lorna Dising Punzal in CA-G.R. SP No. 83296
is hereby DISMISSED, while the petition filed by ETSI, Werner Geisert and Carmelo D. Remudaro is
hereby GRANTED. The assailed Resolutions, dated October 27, 2003 and January 28, 2004, of the
respondent National Labor Relations Commission are hereby SET ASIDE. In lieu thereof, the Decision of
Labor Arbiter Joel S. Lustria, dated November 26, 2002, dismissing the complaint filed by Lorna Dising
Punzal is hereby REINSTATED.

SO ORDERED.24 (Underscoring supplied)

Hence, petitioners present Petition for Review on Certiorari,25 faulting the appellate court to have erred

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. . . WHEN IT RULED THAT PETITIONERS STATEMENT WAS DISCOURTEOUS AND

DISRESPECTFUL CONSTITUTING GROSS DISRESPECT AND SERIOUS MISCONDUCT;

. . . WHEN IT FOUND THAT DUE PROCESS WAS ACCORDED THE PETITIONER;

. . . WHEN IT FAILED TO AWARD THE PETITIONER HER RIGHT TO REINSTATEMENT AND

BACKWAGES.26

Petitioner posits that her second e-mail message was merely an exercise of her right to freedom of
expression without any malice on her part.27

On the other hand, ETSI, et al. maintain that petitioners second e-mail message was tainted with bad
faith and constituted a grave violation of the companys code of discipline. 28

In Philippines Today, Inc. v. NLRC,29 this Court, passing on the attitude or respect that an employee is
expected to observe towards an employer, held:

Alegres choice of words and way of expression betray his allegation that the memorandum was simply
an "opportunity to open the eyes of (Petitioner) Belmonte to the work environment in petitioners
newspaper with the end in view of persuading (her) to take a hand at improving said environment."
Apprising his employer (or top-level management) of his frustrations in his job and differences with his
immediate superior is certainly not done in an abrasive, offensive, and disrespectful manner. A cordial or,
at the very least, civil attitude, according due deference to ones superiors, is still observed, especially
among high-ranking management officers. The Court takes judicial notice of the Filipino values
of pakikisama and paggalang which are not only prevalent among members of a family and community
but within organizations as well, including work sites. An employee is expected to extend due respect to
management, the employer being the "proverbial hen that lays the golden egg," so to speak. An
aggrieved employee who wants to unburden himself of his disappointments and frustrations in his job or
relations with his immediate superior would normally approach said superior directly or otherwise ask
some other officer possibly to mediate and discuss the problem with the end in view of settling their
differences without causing ferocious conflicts. No matter how [much] the employee dislikes the employer
professionally, and even if he is in a confrontational disposition, he cannot afford to be disrespectful and
dare to talk with an unguarded tongue and/or with a bileful pen.30 (Underscoring supplied)

A scrutiny of petitioners second e-mail message shows that her remarks were not merely an expression
of her opinion about Geiserts decision; they were directed against Geisert himself, viz: "He was so unfair
. . . para bang palagi siyang iniisahan sa trabaho. . . Anyway, solohin na lang niya bukas ang office."
(Emphasis supplied)31

As the Court of Appeals noted, petitioner, in her closing statement "Anyway, to those parents who
would like to bring their Kids in Megamall there will be Trick or Treating at Mc Donalds x x x tomorrow and
lets not spoil the fun for our kids"32 even invited her co-workers to join a trick or treating activity at
another venue during office hours33(10:00 AM), October 31, 2001 being a Wednesday and there is no
showing that it was declared a holiday, encouraging them to ignore Geiserts authority.

Additionally, petitioner sent the e-mail message in reaction to Geiserts decision which he had all the right
to make. That it has been a tradition in ETSI to celebrate occasions such as Christmas, birthdays,
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Halloween, and others34does not remove Geiserts prerogative to approve or disapprove plans to hold
such celebrations in office premises and during company time. It is settled that

x x x it is the prerogative of management to regulate, according to its discretion and judgment, all aspects
of employment. This flows from the established rule that labor law does not authorize the substitution of
the judgment of the employer in the conduct of its business. Such management prerogative may be
availed of without fear of any liability so long as it is exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the rights of employees under
special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or
wanton manner or out of malice or spite.35 (Underscoring supplied)

In the case at bar, the disapproval of the plan to hold the Halloween party on October 31, 2001 may not
be considered to have been actuated by bad faith. As the Labor Arbiter noted:

It may not be ignored that holding a trick or treat party in the office premises of respondent ETSI would
certainly affect the operations of the office, since children will be freely roaming around the office
premises, things may get misplaced and the noise in the office will simply be too hard to ignore. Contrary
to complainants position, it is immaterial if the parents of the children who will participate in the trick or
treat will be on vacation leave, since it is the work of the employees who will not be on leave and who will
be working on that day which will be disrupted, possibly resulting in the disruption of the operations of the
company.36 (Underscoring supplied)

Given the reasonableness of Geiserts decision that provoked petitioner to send the second e-mail
message, the observations of the Court of Appeals that "the message x x x resounds of subversion and
undermines the authority and credibility of management"37 and that petitioner "displayed a tendency to act
without managements approval, and even against managements will" are well taken. 38

Moreover, in circulating the second e-mail message, petitioner violated Articles III (8) and IV (5) of ETSIs
Code of Conduct on "making false or malicious statements concerning the Company, its officers and
employees or its products and services"39 and "improper conduct or acts of discourtesy or disrespect to
fellow employees, visitors, guests, clients, at any time."40

Petitioner invokes Samson v. National Labor Relations Commission41 where this Court held that the
dismissal of the therein petitioner was too harsh a penalty for uttering "Si EDT [Epitacio D. Titong, the
General Manager and President of the employer], bullshit yan," "sabihin mo kay EDT yan" and "sabihin
mo kay EDT, bullshit yan," while making the "dirty finger" gesture, and warning that the forthcoming
national sales conference of the company would be a "very bloody one."

Petitioners reliance on Samson is misplaced. First, in that case, this Court found that the misconduct
committed was not related with the employees work as the offensive remarks were verbally made during
an informal Christmas gathering of the employees, an occasion "where tongues are more often than not
loosened by liquor or other alcoholic beverages"42 and "it is to be expected x x x that employees freely
express their grievances and gripes against their employers."43

In petitioners case, her assailed conduct was related to her work. It reflects an unwillingness to comply
with reasonable management directives.

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 Page 91 of 278

While in Samson, Samson was held to be merely expressing his dissatisfaction over a management
decision,44 in this case, as earlier shown, petitioners offensive remarks were directed against Geisert.

Additionally, in Samson, this Court found that unlike in Autobus Workers Union (AWU) v. NLRC45 where
dismissal was held to be an appropriate penalty for uttering insulting remarks to the supervisor,46 Samson
uttered the insulting words against EDT in the latters absence.47 In the case at bar, while petitioner did
not address her e-mail message to Geisert, she circulated it knowing or at least, with reason to know
that it would reach him. As ETSI notes, "[t]hat [petitioner] circulated this e-mail message with the
knowledge that it would reach the eyes of management may be reasonably concluded given that the first
e-mail message reached her immediate supervisors attention."48

Finally, in Samson, this Court found that the "lack of urgency on the part of the respondent company in
taking any disciplinary action against [the employee] negates its charge that the latters misbehavior
constituted serious misconduct."49 In the case at bar, the management acted 14 days after petitioner
circulated the quoted e-mail message.50

Petitioner asks that her 12 years of service to ETSI during which, so she claims, she committed no other
offense be taken as a mitigating circumstance.51 This Court has held, however, that "the longer an
employee stays in the service of the company, the greater is his responsibility for knowledge and
compliance with the norms of conduct and the code of discipline in the company."52

In fine, petitioner, having been dismissed for just cause, is neither entitled to reinstatement nor to
backwages.

Petitioners contention that she was denied due process is well-taken however, as the records do not
show that she was informed of her right to be represented by counsel during the conference with Geisert
and Remudaro.

The protestations of ETSI, et al. that the right to be informed of the right to counsel does not apply to
investigations before administrative bodies and that law and jurisprudence merely give the employee the
option to secure the services of counsel in a hearing or conference53 fall in light of the clear provision of
Article 277 (b) of the Labor Code that

the employer xxx shall afford [the worker whose employment is sought to be terminated] ample
opportunity to be heard and to defend himself with the assistance of his representatives if he so desires in
accordance with company rules and regulations pursuant to guidelines set by the Department of Labor
and Employment,

and this Courts explicit pronouncement that "[a]mple opportunity connotes every kind of assistance that
management must accord the employee to enable him to prepare adequately for his defense including
legal representation."54

Following Agabon, et al. v. National Labor Relations Commission,55 the violation of petitioners statutory
due process right entitles her to an award of nominal damage, which this Court fixes at P30,000.56

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 Page 92 of 278

WHEREFORE, the petition is in part GRANTED. The questioned decision is AFFIRMED with
the MODIFICATION that respondent ETSI Technologies, Inc. is ordered to pay petitioner, Lorna Punzal,
nominal damages in the amount of P30,000.

SO ORDERED.

15. Magallanes vs. Sun Yat Sen Elementary School 542 SCRA 79 (2008)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 160876 January 18, 2008

AZUCENA MAGALLANES, EVELYN BACOLOD and HEIRS OF JUDITH COTECSON, petitioners,

vs.
SUN YAT SEN ELEMENTARY SCHOOL, PAZ GO, ELENA CUBILLAN, WILLY ANG GAN TENG,
BENITO ANG, and TEOTIMO TAN, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Resolution of the
Court of Appeals (Seventh Division) dated October 29, 2001 in CA-G.R. SP No. 67068; its Resolution of
May 8, 2003 denying the motion for reconsideration; and its Resolution of October 10, 2003, denying the
motion for reconsideration of the Resolution of May 8, 2003.

The facts of the case are:

Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented by her heirs), petitioners, Grace
Gonzales, and Bella Gonzales were all employed as teachers in the Sun Yat Sen Elementary School in
Surigao City.

Paz Go and Elena Cubillan are principals of the said school. Willy Ang Gan Teng and Benito Ang are its
directors, while Teotimo Tan is the school treasurer. They are all respondents herein.

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On May 22, 1994, respondents terminated the services of petitioners. Thus, on August 3, 1994, they filed
with the Sub-Regional Arbitration Branch No. X, National Labor Relations Commission (NLRC), Butuan
City, complaints against respondents for illegal dismissal, underpayment of wages, payment of
backwages, 13th month pay, ECOLA, separation pay, moral damages, and attorneys fees. Likewise, on
August 22, 1994, petitioner Cotecson filed a separate complaint praying for the same reliefs.

On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a Decision declaring that petitioners were
illegally dismissed from the service and ordering respondents to reinstate them to their former or
equivalent positions without loss of seniority rights, and to pay them their backwages, salary differential,
13th month pay differential, and service incentive leave benefits "as of June 20, 1995." Respondents were
likewise directed to pay petitioners moral and exemplary damages.

On appeal by respondents, the NLRC, in its Decision dated February 20, 1996, reversed the Arbiters
judgment, holding that petitioners are contractual employees and that respondents merely allowed their
contracts to lapse.

Petitioners timely filed a motion for reconsideration, but it was denied by the NLRC in its Resolution dated
April 17, 1996.

Petitioners then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No.
50531.

On October 28, 1999, the Court of Appeals (Special Sixteenth Division) rendered its Decision, 1 the
dispositive portion of which reads:

WHEREFORE, the instant petition is GRANTED with respect to petitioners Cotecson, Bacolod,
and Magallanes, the questioned Resolutions of the NLRC dated February 20 and April 1996 are
hereby REVERSED and SET ASIDE as to them.

The Decision dated July 3, 1995 of the Labor Arbiter is hereby REINSTATED as to the said
petitioners except as to the award of moral and exemplary damages which is hereby DELETED.

SO ORDERED.

The Court of Appeals (Special Sixteenth Division) ruled that in lieu of reinstatement, petitioners Cotecson,
Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and
backwages computed from the time of their illegal dismissal up to the time of the promulgation of its
Decision." With respect to Bella Gonzales and Grace Gonzales, the Court of Appeals found that that they
have not acquired the status of regular employees having rendered only two years of service.
Consequently, their dismissal from the service is valid. Under the Manual of Regulations for Private
Schools, only full-time teachers who have rendered three (3) years of consecutive service shall be
considered permanent.

Respondents filed a motion for reconsideration but it was denied by the appellate court in its Resolution
dated January 13, 2000.

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 Page 94 of 278

Respondents then filed with this Court a petition for certiorari, docketed as G.R. No. 142270. However, it
was dismissed for lack of merit in a Minute Resolution dated April 12, 2000. Their motion for
reconsideration was denied with finality by this Court on July 19, 2000.

Meanwhile, on October 4, 2000, petitioners filed with the Labor Arbiter a motion for execution of his
Decision as modified by the Court of Appeals.

In an Order dated January 8, 2001, the Labor Arbiter computed the petitioners monetary awards
reckoned from the time of their illegal dismissal in June 1994 up to October 29, 1999, pursuant to the
Decision of the Court of Appeals (Special Sixteenth Division) in CA-G.R. SP No. 50531. Respondents
interposed an appeal to the NLRC (docketed as NLRC Case No. M-006176-2001), contending that the
computation should only be up to June 20, 1995 (the date indicated in the Labor Arbiters Decision).

In an Order dated March 30, 2001, the NLRC modified the Labor Arbiters computation and ruled that the
monetary awards due to petitioners should be computed from June 1994 up to June 20, 1995.

Petitioners then filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No.
67068, raffled off to the Seventh Division. However, in its Resolution of October 29, 2001, the petition was
dismissed outright for their failure to attach to their petition copies of the pleadings filed with the Labor
Arbiter, thus:

No copies of the pleadings filed before the Labor Arbiter appear to have been attached to the
petition in violation of the provisions of Section 1, Rule 65 and Section 3, Rule 46 of the 1997
Rules of Civil Procedure, as amended, which requires that the petition:

x x x shall be accompanied by a clearly legible duplicate original or certified true copy of

the judgment, order, resolution or ruling subject thereof, such material portions of the
record as are referred to therein and other documents relevant or pertinent thereto x x x

WHEREFORE, the instant petition is DISMISSED OUTRIGHT pursuant to Section 3, Rule 46 of

the 1997 Rules of Civil Procedure.

SO ORDERED.

Petitioners filed a motion for reconsideration, but they erroneously indicated therein the case number
as CA-G.R. SP No. 50531, instead of CA-G.R. SP No. 67068. Their error was compounded by stating
that the petition was with the Special Sixteenth Division, instead of the Seventh Division. As a result, the
Special Sixteenth Division issued a Minute Resolution dated April 22, 2002 which merely noted the
motion, thus:

The petitioners motion for reconsideration dated November 22, 2001 and filed by registered mail
on November 26, 2001 is merely noted since there was no October 29, 2001 resolution that was
issued in this case which the motion for reconsideration seeks to be reconsidered.

On realizing their mistake, petitioners then filed with the Seventh Division a Motion to Transfer The Case
to it.

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 Page 95 of 278

In a Resolution promulgated on May 8, 2003, the Seventh Division denied petitioners Motion To Transfer
The Case on the ground, among others, that the motion is "non-existent" since it does not bear the
correct case number, hence, could not be attached to the records of CA-G.R. SP No. 67068.

Unfazed, petitioners filed a motion for reconsideration, but it was denied by the Seventh Division in its
Resolution of October 10, 2003.

At first glance, the petition before us appears to be a futile attempt to revive an extinct motion denied by
the appellate court (Seventh Division) by reason of technicality. But in the interest of speedy
administration of justice, we should not only delve in technicalities. We shall then address these two
issues: (1) whether the Court of Appeals (Seventh Division) erred in holding that affixing a wrong docket
number on a motion renders it "non-existent;" and (2) whether the issuance by the NLRC of the Order
dated March 30, 2001, amending the amounts of separation pay and backwages, awarded by the Court
of Appeals (Sixteenth Division) to petitioners and computed by the Labor Arbiter, is tantamount to grave
abuse of discretion amounting to lack or excess of jurisdiction.

On the first issue, the Court of Appeals (Seventh Division) is correct when it ruled that petitioners motion
for reconsideration of its Resolution dated October 29, 2001 in CA-G.R. SP No. 67068 is "non-existent."
Petitioners counsel placed a wrong case number in their motion, indicating CA-G.R. SP No. 50531
(Special Sixteenth Division) instead of CA-G.R. SP No. 50531 (Seventh Division), the correct case
number. In Llantero v. Court of Appeals,2 we ruled that where a pleading bears an erroneous docket
number and thus "could not be attached to the correct case," the said pleading is, for all intents and
purposes, "non-existent." As aptly stated by the Special Sixteenth Division, it has neither the duty nor the
obligation to correct the error or to transfer the case to the Seventh Division. In Mega Land Resources
and Development Corporation v. C-E Construction Corporation,3 which likewise involves a wrong docket
number in a motion, we ruled that the duty to correct the mistake falls solely on the party litigant whose
fault caused the anomaly. To hold otherwise would be to impose upon appellate courts the burden of
being nannies to appellants, ensuring the absence of pitfalls that hinder the perfection of petitions and
appeals. Strictly speaking, it is a dogma that the mistake or negligence of counsel binds the clients 4 and
appellate courts have no share in that burden.

However, we opt for liberality in the application of the rules to the instant case in light of the following
considerations. First, the rule that negligence of counsel binds the client may be relaxed where
adherence thereto would result in outright deprivation of the clients liberty or property or where the
interests of justice so require.5Second, this Court is not a slave of technical rules, shorn of judicial
discretion in rendering justice, it is guided by the norm that on the balance, technicalities take a
backseat against substantive rights. Thus, if the application of the rules would tend to frustrate rather than
promote justice, it is always within this Courts power to suspend the rules or except a particular case
from its application.6

This case involving a labor dispute has dragged on for over a decade now. Petitioners have waited too
long for what is due them under the law. One of the original petitioners, Judith Cotecson, died last
September 28, 2003 and has been substituted by her heirs. It is time to write finis to this controversy. The
Labor Code was promulgated to promote the welfare and well-being of the working man. Its spirit and
intent mandate the speedy administration of justice, with least attention to technicalities but without
sacrificing the fundamental requisites of due process.7

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 Page 96 of 278

We recall that in CA-G.R. SP No. 50531, the Court of Appeals (Special Sixteenth Division) held that
petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one
month salary and backwages computed from the time of their illegal dismissal up to the time of the
promulgation of this decision." This Decision was promulgated on October 28, 1999. The respondents
motion for reconsideration was denied by the Court of Appeals (Former Special Sixteenth Division) on
January 13, 2000. On April 12, 2000, this Court dismissed respondents petition for certiorari, docketed as
G.R. No. 142270, and denied their motion for reconsideration with finality as early as July 19, 2000.

Clearly, the Decision in CA-G.R. SP No. 50531 had long become final and executory. The Labor Arbiter
computed the monetary awards due to petitioners corresponding to the period from June 1994 to October
28, 1999, in accordance with the Decision of the Court of Appeals (Special Sixteenth Division). The award
for backwages and money claims is in the total sum of P912,086.15.

It does not escape our attention that upon respondents appeal from the Labor Arbiters Order computing
the benefits due to petitioners, the NLRC modified the final and executory Decision of the Court of
Appeals (Special Sixteenth Division) when it decreed that the monetary award due to petitioners
should be computed up to June 20, 1995 only (not October 28, 1999), thus, amounting to a lesser
amount of P147,673.16.

We sustain petitioners contention that the NLRC, in modifying the award of the Court of Appeals,
committed grave abuse of discretion amounting to lack or excess of jurisdiction. Quasi-judicial agencies
have neither business nor power to modify or amend the final and executory Decisions of the
appellate courts. Under the principle of immutability of judgments, any alteration or amendment which
substantially affects a final and executory judgment is void for lack of jurisdiction. 8 We thus rule that the
Order dated March 30, 2001 of the NLRC directing that the monetary award should be computed from
June 1994, the date petitioners were dismissed from the service, up to June 20, 1995 only, is void.

WHEREFORE, we GRANT the petition. The challenged Resolutions dated October 29, 2001, May 8,
2003, and October 10, 2003 in CA-G.R. SP No. 67068 are REVERSED. The Order of the NLRC dated
March 30, 2001 in NLRC Case No. M-006176-2001 is SET ASIDE. The Order of the Labor Arbiter dated
January 8, 2001 is REINSTATED.

SO ORDERED.

Puno, C.J., Chairperson, Corona, Azcuna, Leonardo-de Castro, JJ., concur.

16. Acuna vs. Court of Appeals G.R. No. 159832, May 5, 2006

DECISION

QUISUMBING, J.:

This petition seeks the review and reversal of the Court of Appeals Decision[1] dated January 27,
2003, in CA-G.R. SP No. 70724, entitled Join International Corporation and/or Elizabeth Alaon v. National

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 Page 97 of 278

Labor Relations Commission (Third Division), Mercedita Acua, Juliet Mendez, and Myrna Ramones,
setting aside the resolutions of the NLRC and dismissing the complaint of petitioners.

Petitioners are Filipino overseas workers deployed by private respondent Join International
Corporation (JIC), a licensed recruitment agency, to its principal, 3D Pre-Color Plastic, Inc., (3D)
in Taiwan, Republic of China, under a uniformly-worded employment contract for a period of two
years. Herein private respondent Elizabeth Alaon is the president of Join International Corporation.

Sometime in September 1999, petitioners filed with private respondents applications for
employment abroad. They submitted their passports, NBI clearances, medical clearances and other
requirements and each paid a placement fee of P14,850, evidenced by official receipts[2] issued by
private respondents.

After their papers were processed, petitioners claimed they signed a uniformly-worded
employment contract[3] with private respondents which stipulated that they were to work as machine
operators with a monthly salary of NT$15,840.00, exclusive of overtime, for a period of two years.

On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the
job site, a factory owned by 3D, they were made to sign another contract which stated that their salary
was only NT$11,840.00.[4] They were likewise informed that the dormitory which would serve as their
living quarters was still under construction.They were requested to temporarily bear with the
inconvenience but were assured that their dormitory would be completed in a short time. [5]

Petitioners alleged that they were brought to a small room with a cement floor so dirty and
smelling with foul odor (sic). Forty women were jampacked in the room and each person was given a
pillow. Since the ladies comfort room was out of order, they had to ask permission to use the mens
comfort room.[6] Petitioners claim they were made to work twelve hours a day, from 8:00 p.m. to 8:00 a.m.

The petitioners averred that on December 16, 1999, due to unbearable working conditions, they
were constrained to inform management that they were leaving. They booked a flight home, at their own
expense. Before they left, they were made to sign a written waiver. [7] In addition, petitioners were not paid
any salary for work rendered on December 11-15, 1999.[8]

Immediately upon arrival in the Philippines, petitioners went to private respondents office,
narrated what happened, and demanded the return of their placement fees and plane fare. Private
respondents refused.

On December 28, 1999, private respondents offered a settlement. Petitioner Mendez

received P15,080.[9] The next day, petitioners Acua and Ramones went back and
[10] [11]
received P13,640 and P16,200, respectively. They claim they signed a waiver, otherwise they would
not be refunded.[12]

On January 14, 2000, petitioners Acua and Mendez invoking Republic Act No. 8042,[13] filed a
complaint for illegal dismissal and non-payment/underpayment of salaries or wages, overtime pay, refund
of transportation fare, payment of salaries/wages for 3 months, moral and exemplary damages, and
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refund of placement fee before the National Labor Relations Commission

(NLRC). Petitioner Ramones filed her complaint on January 20, 2000.

The Labor Arbiter ruled in favor of petitioners, declaring that Myrna Ramones, Juliet Mendez and
Mercedita Acua did not resign voluntarily from their jobs. Thus, private respondents were ordered to pay
jointly and severally, in Philippine Peso, at the rate of exchange prevailing at the time of payment, the
following:

1. MERCEDITA ACUA
a. Unexpired Portion NT$95,000.00
b. Salary for 4 days 2,436.92
c. Overtime pay for 4 hrs. in 4
days 1,523.07
NT$98,960.00*
d. Refund of placement fee PHP45,000.00
(Less: Amount received per Quitclaim) 13,640.00 31,360.00
e. Moral damages 25,000.00
f. Exemplary damages 40,000.00

2. JULIET C. MENDEZ
a. Unexpired Portion NT$95,000.00
b. Salary for 4 days 2,436.92
c. Overtime pay for 4 hrs. in 4
days 1,523.07
NT$98,960.00*
d. Refund of placement fee PHP45,000.00
(Less: Amount received per Quitclaim) 15,080.00[14] 29,920.00
e. Moral damages 25,000.00
f. Exemplary damages 40,000.00

3. MYRNA R. RAMONES
a. Unexpired Portion NT$95,000.00
b. Salary for 4 days 2,436.92
c. Overtime pay for 4 hrs. in 4
days 1,523.07
NT$98,960.00*
d. Refund of placement fee PHP45,000.00
(Less: Amount received per Quitclaim) 16,200.00 28,800.00
e. Moral damages 25,000.00
f. Exemplary damages 40,000.00[15]

The Labor Arbiter likewise ordered the payment of attorneys fees equivalent to ten percent (10%)
of the award which totaled NT$296,880.00 and P285,080.00 The other claims were dismissed for lack of
merit.

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Private respondents thereafter appealed the decision to the National Labor Relations
Commission. The NLRC ruled that the inclusion of Alaon as party respondent in this case had no basis
since respondent JIC, being a juridical person, has a legal personality, separate and distinct from its
officers.[16] It partially granted the appeal and ordered that the amounts of P15,080, P13,640 and P16,200
received under the quitclaim by Mendez, Acua and Ramones, respectively, be deducted from their
respective awards. They were awarded attorneys fees equivalent to ten percent (10%) of their awarded
labor-standards claims for unpaid wages and overtime pays. No moral and exemplary damages and
placement fees were awarded.[17] Private respondents motion for partial reconsideration was denied.

On appeal, the Court of Appeals ruled for private respondents. It set aside the resolutions
dated February 26, 2002 and December 10, 2001 of the NLRC and dismissed the complaint of
petitioners.[18]

In their petition before us, petitioners raise the following issues:

WHETHER OR NOT PUBLIC RESPONDENT COURT OF APPEALS ERRED AND/OR

GRAVELY ABUSED ITS DISCRETION, AMOUNTING TO LACK OF JURISDICTION, IN
TAKING COGNIZANCE OF THE PETITION FOR CERTIORARI FILED BY THE
PRIVATE RESPONDENTS, DESPITE THE FACT THAT THE NLRCS RESOLUTION OF
DECEMBER 10, 2001 HAD ALREADY BECOME FINAL AND EXECUTORY, PRIVATE
RESPONDENTS MOTION FOR PARTIAL RECONSIDERATION WITH THE NLRC
HAVING BEEN FILED OUT OF TIME

II

ALTERNATIVELY, WHETHER OR NOT PUBLIC RESPONDENT COURT OF APPEALS

ERRED IN SETTING ASIDE THE RESOLUTIONS OF THE NLRC, AND IN DISMISSING
THE COMPLAINT OF THE PETITIONERS.[19]

Prefatorily, petitioners aver that private respondents Verification and Certification of the Petition
for Certiorari stated that the copy of the resolution of the NLRC dated December 10, 2001 was received
on January 4, 2002 and its partial motion for reconsideration filed on January 29, 2002, or 15 days
beyond the reglementary period. However, a perusal of the Partial Motion for Reconsideration[20] filed by
private respondents show that the NLRC Resolution dated December 10, 2001 was in fact received by
private respondents on January 24, 2002 and not on January 4, 2002. Hence, the appeal was properly
filed within the 10-day reglementary period.

In this petition the issue left for resolution is whether petitioners were illegally dismissed under
Rep. Act No. 8042, thus entitling them to benefits plus damages.

The Labor Arbiter and the NLRC found that petitioners admitted they resigned from their jobs
without force, coercion, intimidation and pressure from private respondents principal abroad.[21]

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According to the Labor Arbiter, while it may be true that petitioners were not coerced into giving
up their jobs, the deplorable, oppressive and sub-human working conditions drove petitioners to resign. In
effect, according to the Labor Arbiter, the petitioners did not voluntarily resign. [22]

The NLRC also ruled that there was constructive dismissal since working under said conditions
was unbearable.[23]

As we have held previously, constructive dismissal covers the involuntary resignation resorted to
when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in
rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to an employee.[24]

In this case, the appellate court found that petitioners did not deny that the accommodations were
not as homely as expected. In the petitioners memorandum, they admitted that they were told by the
principal, upon their arrival, that the dormitory was still under construction and were requested to bear
with the temporary inconvenience and the dormitory would soon be finished. We likewise note that
petitioners did not refute private respondents assertion that they had deployed approximately sixty other
workers to their principal, and to the best of their knowledge, no other worker assigned to the same
principal has resigned, much less, filed a case for illegal dismissal. [25]

To our mind these cited circumstances do not reflect malice by private respondents nor do they
show the principals intention to subject petitioners to unhealthy accommodations. Under these facts, we
cannot rule that there was constructive dismissal.

Private respondents also claim that petitioners were not entitled to overtime pay, since they had
offered no proof that they actually rendered overtime work. Petitioners, on the other hand, say that they
could not show any documentary proof since their employment records were all in the custody of the
principal employer. It was sufficient, they claim, that they alleged the same with particularity.

On this matter, we rule for the petitioners. The claim for overtime pay should not have been
disallowed because of the failure of the petitioners to substantiate them. [26]The claim of overseas workers
against foreign employers could not be subjected to same rules of evidence and procedure easily
obtained by complainants whose employers are locally based.[27] While normally we would require the
presentation of payrolls, daily time records and similar documents before allowing claims for overtime
pay, in this case, that would be requiring the near-impossible.

To our mind, it is private respondents who could have obtained the records of their principal to
refute petitioners claim for overtime pay. By their failure to do so, private respondents waived their
defense and in effect admitted the allegations of the petitioners.

It is a time-honored rule that in controversies between a worker and his employer, doubts
reasonably arising from the evidence, or in the interpretation of agreements and writing should be
resolved in the workers favor.[28] The policy is to extend the applicability of the decree to a greater number
of employees who can avail of the benefits under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection to labor. [29] Accordingly, we rule that private respondents
are solidarily liable with the foreign principal for the overtime pay claims of petitioners.

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 Page 101 of 278

On the award of moral and exemplary damages, we hold that such award lacks legal basis. Moral
and exemplary damages are recoverable only where the dismissal of an employee was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy.[30] The person claiming moral damages must prove the existence of bad faith by
clear and convincing evidence, for the law always presumes good faith. [31] Petitioners allege they suffered
humiliation, sleepless nights and mental anguish, thinking how they would pay the money they borrowed
for their placement fees.[32] Even so, they failed to prove bad faith, fraud or ill motive on the part of private
respondents.[33] Moral damages cannot be awarded. Without the award of moral damages, there can be
no award of exemplary damages, nor attorneys fees.[34]

Quitclaims executed by the employees are commonly frowned upon as contrary to public policy
and ineffective to bar claims for the full measure of the workers legal rights, considering the economic
disadvantage of the employee and the inevitable pressure upon him by financial
necessity.[35] Nonetheless, the so-called economic difficulties and financial crises allegedly confronting the
employee is not an acceptable ground to annul the compromise agreement [36] unless it is accompanied
by a gross disparity between the actual claim and the amount of the settlement.[37]

A perusal of the records reveals that petitioners were not in any way deceived, coerced or
intimidated into signing a quitclaim waiver in the amounts of P13,640, P15,080 and P16,200
respectively. Nor was there a disparity between the amount of the quitclaim and the amount actually due
the petitioners.

Conformably then the petitioners are entitled to the following amounts in Philippine Peso at the
rate of exchange prevailing at the time of payment:

1. MERCEDITA ACUA
a. Salary for 4 days NT $ 2,436.92
b. Overtime pay for 4 hours in 4 days 1,523.07
NT $ 3,959.99

2. JULIET C. MENDEZ
a. Salary for 4 days NT $ 2,436.92
b. Overtime pay for 4 hours in 4 days 1,523.07
NT $ 3,959.99

3. MYRNA R. RAMONES
a. Salary for 4 days NT $ 2,436.92
b. Overtime pay for 4 hours in 4 days 1,523.07
NT $ 3,959.99

According to the Bangko Sentral Treasury Department, the prevailing exchange rates on
December 1999 was NT$1 to P1.268805. Hence, after conversion to Philippine pesos, the amount of the
quitclaim paid to petitioners was actually higher than the amount due them.

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WHEREFORE, the petition is DISMISSED, without prejudice to the filing of illegal recruitment
complaint against the respondents pursuant to Section 6(i) of The Migrant Workers and Overseas Filipino
Act of 1995 (Rep. Act No. 8042).
SO ORDERED.

17. G and M Philippines, Inc. vs. Cuambot, G.R. No. 162308, November 22, 2006

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision [1] of
the Court of Appeals (CA) in CA-G.R. SP No. 64744, as well as the Resolution[2] dated February 20,
2004 denying the motion for reconsideration thereof.
The antecedent facts are as follows:

On November 7, 1994, respondent Romil V. Cuambot applied for deployment to Saudi Arabia as
a car body builder with petitioner G & M Philippines, Inc., a duly licensed placement and recruitment
agency. Respondents application was duly processed and he later signed a two-year employment
contract to work at the Al Waha Workshop in Unaizah City, Gassim, Kingdom of Saudi Arabia. He left the
country on January 5, 1995. However, respondent did not finish his contract and returned to
the Philippines barely six months later, on July 24, 1995. On July 26, 1995, he filed before the National
Labor Relations Commission (NLRC) a complaint for unpaid wages, withheld salaries, refund of plane
ticket and repatriation bond, later amended to include illegal dismissal, claim for the unexpired portion of
his employment contract, actual, exemplary and moral damages, and attorneys fees. The complaint was
docketed as NLRC-NCR Case No. 00-07-05252-95.

Respondent narrated that he began working for Mohd Al Motairi,[3] the President and General
Manager of the Al Waha Workshop, on January 8, 1995. Along with his Filipino co-workers, he was
subjected to inhuman and unbearable working conditions, to wit:

1. [He] was required to work from 7:00 oclock in the morning to 10:00 oclock in the
evening everyday, except Friday, or six (6) hours overtime work daily from the usual
eight (8) working hours per day.

2. [He] was never paid x x x his monthly basic salary of 1,200 [Riyals] including his
overtime pay for the six (6) hours overtime work he rendered every working day
during his work in Saudi Arabia except for the amount of 100 [Riyals] given every
month for his meal allowance;

3. [He] was subjected to serious insult by respondent Muthiri everytime he asked or

demanded for his salary; and,

4. [S]ome of complainants letters that were sent by his family were not given by
respondent Muthiri and/or his staff x x x.[4]

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When respondent asked Motairi for his salary, he was told that since a huge sum had been paid
to the agency for his recruitment and deployment, he would only be paid after the said amount had
already been recovered. He was also told that his salary was only 800 Saudi Riyals (SAR) per month, in
contrast to the SAR1200 that was promised him under the contract. Motairi warned that he would be sent
home the next time he demanded for his salary. Due to his familys incessant letters asking for financial
support, however, respondent mustered the courage to again demand for his salaries during the second
week of July 1996. True to his word, Motairi ordered him to pack up and leave. He was able to purchase
his plane ticket only through the contributions of his fellow Filipinos. Motairi even accompanied him to the
airport when he bought his plane ticket. In the meantime, his wife had been making inquiries about him.
To corroborate his claims, respondent submitted the following documents: an undated letter [5] he
had written addressed to the Philippine Labor Attach in Riyadh, with Arabic translation; [6] his wifes
letter[7] dated June 28, 1995 addressed to the Gulangco Monteverde Agency, Manila Head Office, asking
for a favor to help [her] husband to come home as early as possible; a fax message[8] dated July 17, 1995
from a representative of the Land Bank of the Philippines (LBP) to a
counterpart in Riyadh, asking for assistance to locate respondent;[9] and the

reply[10] from the Riyadh LBP representative requesting for contact numbers to facilitate communication
with respondent.

Respondent further claimed that his employers actuations violated Articles 83 and 103 of the
Labor Code. While he was entitled to terminate his employment in accordance with Article 285 (b) due to
the treatment he received, he did not exercise this right. He was nevertheless illegally dismissed by his
employer when he tried to collect the salaries due him. Respondent further claimed that the reduction of
his monthly salary from SAR1,200 to SAR800 and petitioners failure to furnish him a copy of the
employment contract before his departure amounted to prohibited practices under Article 34 (i) and (k) of
the Labor Code.

Respondent prayed for the following relief:

WHEREFORE, premises considered, complainant most respectfully prays unto this

Honorable Office that the instant complaint be given due course and that a decision be
rendered in his favor and against
respondents G & M (Phils.), Inc., Alwaha (sic) Workshop and/or Muhamd (sic) Muthiri, as
follows:

(1) Ordering the respondents to pay, jointly and severally,

complainant the unpaid salaries and overtime pay in the amounts
of P61,560.00 and P66,484.80, respectively, including interests,
until the same will be fully paid;

(2) Ordering the respondents to pay, jointly and severally,

complainant[s] salary for the unexpired portion of the contract in the
amount of P184,680.00, including interests, until the same will be
fully paid;

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(3) Ordering the respondents to pay, jointly and severally,

complainant[s] actual expenses which he incurred in applying for
the job, including expenses in leaving for the job, including
expenses in leaving for Saudi Arabia and plane ticket, as well as
repatriation bond and incidental expenses in going home to the
Philippines in the amounts ofP49,000.00 and P20,000.00,
respectively, including interests, until the same will be fully paid;

(4) Ordering the respondents to pay, jointly and severally,

complainant moral damages in the amount of P150,000.00 and
exemplary damages in the amount of P150,000.00, including
interests, until the same will be fully paid;

(5) Ordering the respondents to pay, jointly and severally,

complainant for and as attorneys fees in the amount of P68,172.48
or the amount equivalent to 10% of the total amount of the
foregoing claims and damages that may be awarded by the
Honorable Office to the complainant.[11]

In its position paper, petitioner alleged that respondent was deployed for overseas work as car
body builder for its Principal Golden Wings Est. for General Services and Recruitment in Saudi Arabia for
an employment period of 24 months, with a monthly salary of US$400.00.[12] It insisted that respondent
was religiously paid his salaries as they fell due. After working for a little over seven months, respondent
pleaded with his employer to be allowed to return home since there were family problems he had to settle
personally. Respondent even submitted a resignation letter [13] dated July 23, 1995.

To support its claim that respondent had been paid his salaries as they fell due, petitioner
submitted in evidence copies of seven payslip[14] authenticated by the Philippine Labor Attach
in Riyadh, Saudi Arabia. Petitioner asserted that since respondent only worked for a little over seven
months and did not finish his contract, he should pay the cost of the plane ticket. It pointed out that
according to the standard employment contract, the employer would provide the employee with a free
plane ticket for the flight home only if the worker finishes his contract.

Respondent countered that his signatures in the purported payslips were forged. He denied
having received his salaries for the said period, except only for the SAR100 as monthly allowance. He
pointed out that the authentication of the alleged pay slips and resignation letter before the labor attach
in Riyadh is immaterial, since the documents themselves were falsified.

Respondent further claimed that petitioner required him to pay a P10,000.00 placement fee and
that he had to borrow P2,000.00 from a relative. He was then told that the amount would be considered
as an advance payment and that the balance would be deducted from his salary. He was not, however,
given any receipt. He insisted that the employment contract which he signed indicated that he was
supposed to receive a monthly salary of SAR1,200 for working eight hours a day, excluding overtime pay.
He was repeatedly promised to be furnished a copy of the contract and was later told that it would be
given to his wife, Minda. However, she was also given the run-around and was told that the contract had
already been given to her husband.

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To counter the allegation of forgery, petitioner claimed that there was a great possibility that
respondent had changed his signature while abroad so that he could file a complaint for illegal dismissal
upon his return. The argument that the stroke and handwriting on the payslip was written by one and the
same person is mere conjecture, as respondent could have requested someone, i.e., the cashier, to
prepare the resignation letter for him. While it is the employer who fills up the pay slip, respondent could
have asked another employee to prepare the resignation letter, particularly if he (respondent) did not
know how to phrase it himself. Moreover, it could not be presumed that the payslipand resignation letter
were prepared by one and the same person, as respondent is not a handwriting expert. Petitioner further
pointed out that respondent has different signatures, not only in the pleadings submitted before the Labor
Arbiter, but also in respondents personal documents.
On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of respondent on the following
ratiocination:

What convinced this Arbitration Branch about the unreliability of the complainants
signature in the payslip is the close semblance of the handwritings in the payslips and the
handwritings in the purported handwritten resignation of the complainant. It unmistakably
appears to this Arbitration Branch that the payslips as well as the handwritten letter-
resignation were prepared by one and the same person. If it were true that the
handwritten letter-resignation was prepared by the complainant, it follows that he also
prepared the payslips because the handwritings in both documents are exactly the same
and identical. But [this] is quite unbelievable that complainant himself as the payee
prepared the payslips with the corresponding entries therein in his own handwriting.
Under the circumstances, the only logical conclusion is that both the payslips and the
handwritten letter-resignation were prepared and signed by one and the same person
definitely not the complainant.

With the foregoing findings and conclusions, this Arbitration Branch is of the well-
considered view that complainant was not paid his salaries from January 5, 1995 up
to July 23, 1995and that he was unjustifiably dismissed from his employment when he
repeatedly demanded for his unpaid salaries. Respondents are, therefore, liable to pay
the complainant his salaries from January 5, 1995 up to July 23, 1995 which amount to
US$2,640.00 (US$400 x 6.6 mos). Further, respondents are also liable to the
complainant for the latters salaries for the unexpired portion of his contract up to the
maximum of three (3) months pursuant to Section 10 of RA 8042, which amount to
US$1,200.00. Respondents must also refund complainants plane fare for his return flight.
And finally, being compelled to litigate his claims, it is but just and x x x that complainant
must be awarded attorneys fees at the rate of ten percent (10%) of the judgment award.

WHEREFORE, all the foregoing premises considered, judgment is hereby

rendered ordering the respondents to pay complainant the aggregate sum of
US$3,840.00 or its equivalent in Philippine Currency at the exchange rate prevailing at
the time of payment, and to refund complainants plane fare for his return flight. Further,
respondents are ordered to pay complainant attorneys fees at the rate of Ten percent
(10%) of the foregoing judgment award.[15]

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Petitioner appealed the Decision of the Labor Arbiter to the NLRC, alleging that the Labor Arbiter,
not being a handwriting expert, committed grave abuse of discretion amounting to lack of jurisdiction in
finding for respondent. In its Decision[16] dated December 9, 1997, the NLRC upheld this contention
and remanded the case to the Arbitration Branch of origin for referral to the government agency
concerned for calligraphy examination of the questioned documents.[17]

The case was then re-raffled to Labor Arbiter Enrico Angelo Portillo. On September 11, 1998, the
parties agreed to a resetting to enable petitioner to secure the original copies of documents from its
foreign principal. However, on December 9, 1998, the parties agreed to submit the case for resolution
based on the pleadings and on the evidence on record.

This time, the complaint was dismissed for lack of merit. According to Labor Arbiter Portillo, aside
from respondents bare allegations, he failed to substantiate his claim of poor working conditions and long
hours of employment. The fact that he executed a handwritten resignation letter is enough evidence of
the fact that he voluntarily resigned from work. Moreover, respondent failed to submit any evidence to
refute the pay slips duly signed and authenticated by the labor attach in Saudi Arabia, inasmuch as their
probative value cannot be impugned by mere self-serving allegations. The Labor Arbiter concluded that
as between the oral allegations of workers that they were not paid monetary benefits and the
documentary evidence presented by employer, the latter should prevail. [18]

Respondent appealed the decision before the NLRC, alleging that the Labor Arbiter failed to
consider the genuineness of the signature which appears in the purported resignation letter dated July 23,
1995, as well as those that appear in the seven pay slips. He insisted that these documents should have
been endorsed to the National Bureau of Investigation Questioned Documents Division or the Philippine
National Police Crime Laboratory for calligraphy examination.

The NLRC dismissed the appeal for lack of merit in a Resolution [19] dated December 27, 2000. It
held that the questioned documents could not be endorsed to the agency concerned since mere
photocopies had been submitted in evidence. The records also revealed that petitioner had
communicated to the foreign employer abroad, who sent the original copies, but there was no response
from respondent. It also stressed that during the December 9, 1998 hearing, the parties agreed to submit
the case for resolution on the basis of the pleadings and the evidence on record; if respondent had
wanted to have the documents endorsed to the NBI or the PNP, he should have insisted that the
documents be examined by a handwriting expert of the government. Thus, respondent
was estopped from assailing the Labor Arbiters ruling.

Unsatisfied, respondent elevated the matter to the CA via petition for certiorari. He pointed out
that he merely acceded to the submission of the case for resolution due to the inordinate delays in the
case. Moreover, the questioned documents were within petitioners control, and it was petitioner that
repeatedly failed to produce the original copies.

The CA reversed the ruling of the NLRC. According to the appellate court, a visual examination of
the questioned signatures would instantly reveal significant differences in the handwriting movement,
stroke, and structure, as well as the quality of lines of the signatures; Labor Arbiter Portillo committed
patent error in examining the signatures, and it is the decision of Labor Arbiter De Vera which must be
upheld. The CA also pointed out the initial ruling of the NLRC (Second Division) dated December 9, 1997
which set aside the earlier decision of Labor Arbiter De Vera included a special directive to the Arbitration

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Branch of origin to endorse the questioned documents for calligraphy examination. However,
respondent Cuambot failed to produce original copies of the documents; hence, Labor Arbiter Portillo
proceeded with the case and ruled in favor of petitioner G.M.Phils. The dispositive portion of the CA ruling
reads:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED.

Accordingly, the assailed Resolutions dated 27 December 2000 and 12 February 2001,
respectively, of the NLRC Second Division are hereby SET ASIDE and the Decision
dated 20 February 1997 rendered by Labor Arbiter Jose De Vera is
hereby REINSTATED.[20]

Petitioner filed a motion for reconsideration, which the CA denied for lack of merit in its
Resolution[21] dated February 20, 2004.

Hence, the present petition, where petitioner claims that

THE COURT OF APPEALS GRAVELY ERRED ON A MATTER OF LAW IN HOLDING

THAT LABOR ARBITER ENRICO PORTILLO GRAVELY ABUSED HIS DISCRETION
WHEN HE HELD THAT THE SIGNATURES APPEARING ON THE QUESTIONED
DOCUMENTS ARE THOSE OF THE PETITIONER.[22]

Petitioner points out that most of the signatures which Labor Arbiter De Vera used as standards for
comparison with the signatures appearing on the questioned documents were those in the pleadings filed
by the respondent long after the questioned documents had been supposedly signed by him. It claims
that respondent affixed his signatures on the pleadings in question and intentionally made them different
from his true signature so that he could later on conveniently impugn their authenticity. Petitioner claims
that had Labor Arbiter De Vera taken pains in considering these circumstances, he could have
determined that respondent may have actually intentionally given a different name and slightly changed
his signature in his application, which name and signature he used when he signed the questioned letter
of resignation and payslips, only to conveniently disown the same when he came back to the country to
file the present case.[23] Thus, according to petitioner, the CA clearly committed a palpable error of law
when it reversed the ruling of the NLRC, which in turn affirmed Labor Arbiter Portillos decision.

For his part, respondent contends that petitioners arguments were already raised in the pleadings filed
before Labor Arbiter De Vera which had already been passed upon squarely in the Labor Arbiters
Decision of January 30, 1997.

The determinative issues in this case are essentially factual in nature - (a) whether the signatures of
respondent in the payslips are mere forgeries, and (b) whether respondent executed the resignation
letter. Generally, it is not our function to review findings of fact. However, in case of a divergence in the
findings and conclusions of the NLRC on the one hand, and those of the Labor Arbiter and the CA on the
other, the Court may examine the evidence presented by the parties to determine whether or not the
employee was illegally dismissed or voluntarily resigned from employment. [24] The instant case thus falls
within the exception.

We have carefully examined the evidence on record and find that the petition must fail.

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In its Decision[25] dated December 9, 1997, the NLRC had ordered the case remanded to the
Labor Arbiter precisely so that the questioned documents purportedly signed/executed by respondent
could be subjected to calligraphy examination by experts. It is precisely where a judgment or ruling fails to
make findings of fact that the case may be remanded to the lower tribunal to enable it to determine
them.[26] However, instead of referring the questioned documents to the NBI or the PNP as mandated by
the Commissions ruling, Labor Arbiter Portillo proceeded to rule in favor of petitioner, concluding that
respondents signatures were not forged, and as such, respondents separation from employment was
purely voluntary. In fine, then, the Labor Arbiter gravely abused his discretion when he ruled in favor of
petitioner without abiding by the Commissions directive.

We note, however, that a remand of the case at this juncture would only result in unnecessary
delay, especially considering that this case has been pending since 1995. Indeed, it is this Courts duty to
settle, whenever possible, the entire controversy in a single proceeding, leaving no root or branch to bear
the seeds of future litigation.[27] Hence, the case shall be fully resolved on its merits.

We find that petitioners failure to submit the original copies of the pay slips and the resignation
letter raises doubts as to the veracity of its claim that they were actually signed/penned by respondent.
The failure of a party to produce the original copy of the document which is in issue has been taken
against such party, and has even been considered as a mere bargaining chip, a dilatory tactic so that
such party would be granted the opportunity to adduce controverting evidence.[28] In fact, petitioner did not
even present in evidence the original copy of the employment contract, much less a machine copy, giving
credence to respondents claim that he was not at all given a copy of the employment contract after he
signed it. What petitioner presented was a mere photocopy of the OCW Info Sheet [29] issued by the
Philippine Overseas Employment Administration as well as the Personal Data Sheet[30] which respondent
filled up. It bears stressing that the original copies of all these documents, including the employment
contract, were in the possession of petitioner, or, at the very least, petitioners principal.

Moreover, as correctly noted by the CA, the opinions of handwriting experts, although helpful in
the examination of forged documents because of the technical procedure involved in the analysis, are not
binding upon the courts.[31] As such, resort to these experts is not mandatory or indispensable to the
examination or the comparison of handwriting. A finding of forgery does not depend entirely on the
testimonies of handwriting experts, because the judge must conduct an independent examination of the
questioned signature in order to arrive at a reasonable conclusion as to its authenticity. [32] No less than
Section 22, Rule 132 of the Rules of Court explicitly authorizes the court, by itself, to make a comparison
of the disputed handwriting with writings admitted or treated as genuine by the party against whom the
evidence is offered or proved to be genuine to the satisfaction of the judge. Indeed, the authenticity of
signatures is not a highly technical issue in the same sense that questions concerning, e.g., quantum
physics or topology, or molecular biology, would constitute matters of a highly technical nature. The
opinion of a handwriting expert on the genuineness of a questioned signature is certainly much less
compelling upon a judge than an opinion rendered by a specialist on a highly technical issue. [33]

Even a cursory perusal of the resignation letter[34] and the handwritten pay slips will readily show
that they were written by only one person. A mere layman will immediately notice that the strokes and
letters in the documents are very similar, if not identical, to one another. It is also quite apparent from a
comparison of the signatures in the pay slips that they are inconsistent, irregular, with uneven and
faltering strokes.

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We also find it unbelievable that after having waited for so long to be deployed to Saudi
Arabia and with the hopes of opportunity to earn a better living within his reach, respondent would just
suddenly decide to abandon his work and go home due to family problems. At the very least, respondent
could have at least specified the reason or elaborated on the details of such an urgent matter so as not to
jeopardize future employment opportunities.

That respondent also filed the complaint immediately gives more credence to his claim that he was
illegally dismissed. He arrived in the Philippines on July 24, 1995, and immediately filed his complaint for
illegal dismissal two days later, on July 26, 1995.

We are not impervious of petitioners claim that respondent could have asked another person to
execute the resignation letter for him. However, petitioner failed to present even an affidavit from a
representative of its foreign principal in order to support this allegation.

Indeed, the rule is that all doubts in the implementation and the interpretation of the Labor Code
shall be resolved in favor of labor,[35] in order to give effect to the policy of the State to afford protection to
labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers, and to assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work.[36] We
reiterate the following pronouncement in Nicario v. National Labor Relations Commission:[37]

It is a well-settled doctrine, that if doubts exist between the evidence

presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter. It is a time-honored rule that in controversies between a laborer
and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in the formers favor.
The policy is to extend the doctrine to a greater number of employees who can
avail of the benefits under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection of labor.

Moreover, one who pleads payment has the burden of proving it. 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. Thus, the burden of
showing with legal certainty that the obligation has been discharged with payment falls on the debtor, in
accordance with the rule that one who pleads payment has the burden of proving it.[38] Only when the
debtor introduces evidence that the obligation has been extinguished does the burden shift to the creditor,
who is then under a duty of producing evidence to show why payment does not extinguish the
obligation.[39] In this case, petitioner was unable to present ample evidence to prove its claim that
respondent had received all his salaries and benefits in full.

IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. The Decision of
the Court of Appeals in CA-G.R. SP No. 64744 is AFFIRMED. Costs against the petitioners.

SO ORDERED.

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18. Navarro vs. Coca-cola Bottlers Philippines, Inc. G.R. No. 162583, June 8, 2007

DECISION

QUISUMBING, J.:

This is an appeal to reverse and set aside both the Decision[1] dated August 27, 2003 and the
Resolution[2] dated March 8, 2004 of the Court of Appeals in CA-G.R. SP No. 63379. The appellate court
had reversed the Resolution[3] of the National Labor Relations Commission (NLRC) and held that
petitioner Alberto Navarro was validly dismissed by the respondents.

The facts are undisputed.

Petitioner was an employee of the respondent Coca-Cola Bottlers Phils., Inc. (Coca-Cola) for more
than a decade. Specifically, he worked as a forklift operator for Coca-Cola from November 1,
1987 to February 27, 1998.

The respondent company has an Employees Code of Disciplinary Rules and Regulations, which
includes Rule 002-85. Section 4(i) of the rule provided for the penalty of DISCHARGE for a tenth
AWOP[4]/AWOL,[5] whether consecutive or not, following other AWOP/AWOLs within one calendar year.

On August 11, 1997, petitioner did not report to work because of heavy rains which flooded the
entire barangay where he resided. In a Memorandum dated October 1, 1997, he was required to explain
in writing within 24 hours why no disciplinary action should be imposed on him for his tenth
absence without permission. In response, petitioner submitted a written explanation accompanied by a
Certification[6] from his Barangay Captain, stating that his absence was due to heavy rains and
subsequent flooding that hit his barangay. Later, petitioner filed a Supplemental Written Explanation,[7] in
lieu of answers to a questionnaire provided by the company. Petitioner stated that on August 11, 1997,
his house was heavily flooded and that on the next day, he immediately filed an application for leave of
absence. Despite his compliance and explanation, petitioner was dismissed on February 27, 1998 and
given a notice of termination[8] which enumerated the dates of his absences without permission.

Thereafter, petitioner filed a complaint for illegal dismissal with the Labor Arbiter, which was
dismissed for lack of merit.

On appeal, the NLRC reversed the Decision of the Labor Arbiter. The dispositive portion of the
NLRC Resolution reads:

WHEREFORE, premises considered, Complainants appeal is GRANTED. The

Labor Arbiters decision in the above-entitled case is hereby ANNULLED and SET ASIDE.
A new one is entered declaring that Complainant Navarros dismissal from his
employment is illegal.

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Respondent Coca-Cola Bottlers Phils., Inc. is hereby ordered to immediately

reinstate Complainant Navarro to his former position without loss of seniority rights and
other privileges and to pay his full backwages, inclusive of allowances, and his other
benefits or their monetary equivalent computed from the time he was illegally dismissed
up to the time of his actual reinstatement.

Respondent Coca-Cola Bottlers Phils., Inc. is likewise ordered to pay

Complainant Navarro attorneys fees equivalent to ten percent (10%) of his total monetary
award.

SO ORDERED.[9]

Respondent elevated the case to the Court of Appeals. The Court of Appeals annulled the
resolution of the NLRC. It ruled as follows:

WHEREFORE, premises considered, the Decision (sic) as well as the Resolution

of the National Labor Relations Commission is hereby SET ASIDE and the Decision of
the Labor Arbiter is reinstated with the MODIFICATION that petitioner Coca-Cola Bottlers
Phils., Inc. is ordered to pay private respondent Alberto Navarro separation pay
equivalent to one-half (1/2) month salary for every year of service starting from November
1, 1987 until his dismissal on February 27, 1998.

SO ORDERED.[10]

The appellate court also denied petitioners motion for reconsideration.

Hence the instant petition before us, raising the following issues:
-A-
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN REVERSING
AND SETTING ASIDE THE DECISION OF THE NLRC AND REINSTATING, WITH
MODIFICATION, THAT OF THE LABOR ARBITER WHEN, OBVIOUSLY, THE RULING
OF THE COMMISSION IS MORE IN ACCORD WITH THE EVIDENCE AND SETTLED
JURISPRUDENCE.

-B-
THE HONORABLE COURT OF APPEALS DID NOT HEED THE INJUNCTION OF THIS
HONORABLE COURT THAT: AS IS WELL-SETTLED, IF DOUBTS EXIST BETWEEN
THE EVIDENCE PRESENTED BY THE EMPLOYER AND THE EMPLOYEE, THE
SCALES OF JUSTICE MUST BE TILTED IN FAVOR OF THE EMPLOYEE. SINCE IT IS
A TIME-HONORED RULE THAT IN CONTROVERSIES BETWEEN A LABORER AND
HIS MASTER, DOUBTS REASONABLY ARISING FROM THE EVIDENCE, OR IN THE
INTERPRETATION OF AGREEMENTS AND WRITINGS SHOULD BE RESOLVED IN
THE FORMERS FAVOR IN RENDERING THE DISPUTED DECISION AND
RESOLUTION.[11]

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Raised also as the threshold issue in this petition is: WHETHER PETITIONERS APPLICATION FOR
LEAVE OF ABSENCE SHOULD HAVE BEEN ALLOWED BY THE COMPANY.

Respondents contend that the application for leave was correctly denied, and that petitioner violated the
Employees Code of Disciplinary Rules and Regulations when he incurred his tenth absence. Petitioner, on
the other hand, argues that his absence was excusable under the circumstances.

On this point, we are in agreement that petitioners application for leave should have been approved by
the company. His absence was due to a fortuitous event outside of petitioners control.

In our view, petitioner had no wrongful, perverse or even negligent attitude, intended to defy the order of
his employer when he absented himself. He did so because heavy rains flooded their residential area
which was along the railroad.[12] In his favor, the Barangay Captain certified that indeed there was
flooding in their place of residence.

A worker cannot be reasonably expected to anticipate times of sickness nor emergency. Hence,
to require prior notice of such times would be absurd. He can only give proper notice after the occurrence
of the event which is what petitioner did in this case.

In earlier cases, we have expressed disapproval of dismissal of employees who have absented
themselves due to emergency circumstances. In Brew Master International, Inc. v. National Federation of
Labor Unions (NAFLU),[13] the employees absence was precipitated by a grave family problem when his
wife unexpectedly deserted him and abandoned the family. Under said circumstances, his absence was
deemed justified. Similarly, in this case, the reason for petitioners absence was not of his own doing
much less to his liking, thus we are of the view that he did not merit the extreme penalty of dismissal from
the service.

We reiterate that the State policy is to afford full protection to labor. When conflicting interests of
labor and capital are weighed on the scales of social justice, the heavier influence of capital should be
counterbalanced by the compassion that the law accords the less privileged workingman.[14] Under Article
279[15] of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement, without loss
of seniority rights and other privileges, and to the payment of full backwages, inclusive of allowances, and
other benefits or their monetary equivalent, computed from the time his compensation was withheld from
him.[16]

WHEREFORE, both the assailed Decision dated August 27, 2003 of the Court of Appeals and its
Resolution dated March 8, 2004 denying the motion for reconsideration are REVERSED and SET
ASIDE.

Respondent Coca-Cola Bottlers Phils., Inc. is hereby ORDERED:

(1) to immediately reinstate petitioner Navarro to his former position without loss of seniority
rights and other privileges;

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(2) to pay his full backwages, inclusive of allowances, and his other benefits or their
monetary equivalent computed from the time he was illegally dismissed up to the time of his actual
reinstatement; and

(3) to pay petitioner Navarro attorneys fees equivalent to 10% of his total monetary award.

Costs against respondents.

SO ORDERED.

19. De Castro vs. Liberty Broadcasting Network Inc. G.R. No. 165153 September 23, 2008

RESOLUTION

BRION, J.:

The respondent, Liberty Broadcasting Network, Inc. (LBNI), filed the present Motion for
Reconsideration with Motion to Suspend Proceedings, asking us, first, to set aside our
Decision[1] and, second, to suspend the court proceedings in view of the Stay Order issued on August 19,
2005 by the Regional Trial Court (RTC) of Makati, Branch 138, in relation to the corporate rehabilitation
proceedings that LBNI initiated.

The dispositive part of our Decision reads:

WHEREFORE, premises considered, we hereby GRANT the petition.

Accordingly, we REVERSE and SET ASIDE the Decision and Resolution of the CA
promulgated on May 25, 2004 and August 30, 2004, respectively, and REINSTATE in all
respects the Resolution of the National Labor Relations Commission dated September
20, 2002. Costs against the respondents.

SO ORDERED.[2]

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The facts, as recited in our Decision, are summarized below:

The petitioner, Carlos C. de Castro, worked as a chief building administrator at LBNI. On May 31,
1996, LBNI dismissed de Castro on the grounds of serious misconduct, fraud, and willful breach of the
trust reposed in him as a managerial employee. Allegedly, de Castro committed the following acts:

1. Soliciting and/or receiving money for his own benefit from suppliers/dealers/traders
[Cristino Samarita and Jose Aying], representing commissions for job contracts
involving the repair, reconditioning and replacement of parts of the airconditioning
units at the companys Antipolo Station, as well as the installation of fire exits at the
[LBNIs] Technology Centre;

2. Diversion of company funds by soliciting and receiving on different occasions a total

of P14,000.00 in commissions from Aying for a job contract in the companys Antipolo
Station;

3. Theft of company property involving the unauthorized removal of one gallon of Delo
oil from the company storage room;

4. Disrespect/discourtesy towards a co-employee, for using offensive language

against [Vicente Niguidula, the companys supply manager];

5. Disorderly behavior, for challenging Niguidula to a fight during working hours within
the company premises, thereby creating a disturbance that interrupted the normal
flow of activities in the company;

6. Threat and coercion, for threatening to inflict bodily harm on the person of Niguidula
and for coercing [Gil Balais], a subordinate, into soliciting money in [de Castros]
behalf from suppliers/contractors;

7. Abuse of authority, for instructing Balais to collect commissions from Aying and
Samarita, and for requiring Raul Pacaldo (Pacaldo) to exact 2% - 5% of the price of
the contracts awarded to suppliers; and

8. Slander, for uttering libelous statements against Niguidula.[3]

Aggrieved, de Castro filed a complaint for illegal dismissal against LBNI with the National Labor
Relations Commission (NLRC) Arbitration Branch, National Capital Region, praying for reinstatement,
payment of backwages, damages, and attorneys fees.[4] He maintained that he could not have solicited
commissions from suppliers considering that he was new in the company. [5] Moreover, the accusations
were belatedly filed as the imputed acts happened in 1995. He explained that the one gallon of Delo oil
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he allegedly took was actually found in Gil Balais room. [6] He denied threatening Vicente Niguidula, whom
he claimed verbally assaulted him and challenged him to a fight, an incident which he reported to
respondent Edgardo Quiogue, LBNIs executive vice president, and to the Makati police.[7] De Castro
alleged that prior to executing affidavits against him, Niguidula and Balais had serious clashes with him. [8]

On April 30, 1999, the Labor Arbiter rendered a decision [9] in de Castros favor, holding
LBNI liable for illegal dismissal.[10] The Labor Arbiter found the affidavits of LBNIs witnesses to be
devoid of merit, noting that (1) witnesses Niguidula and Balais had altercations with de Castro prior to the
execution of their respective affidavits; (2) the affidavit of Cristino Samarita, one of the suppliers from
whom de Castro allegedly asked for commissions, stated that it was not de Castro, but Balais, who
personally asked for money; and (3) Jose Aying, another supplier, recanted his earlier affidavit. [11]

LBNI appealed the Labor Arbiters ruling to the NLRC. Initially, the NLRC reversed the Labor
Arbiters decision but on de Castros motion for reconsideration, the NLRC reinstated the Labor Arbiters
decision.[12] It ruled that the charges against de Castro were never really substantiated other than by
bare allegations in the witnesses affidavits who were the companys employees and who had altercations
with De Castro prior to the execution of their affidavits. [13]

LBNI again appealed the NLRCs adverse decision to the Court of Appeals (CA). On May 25,
2004, the CA reversed the NLRCs decision and held that de Castros dismissal was based on valid
grounds. It ruled too that the NLRC gravely abused its discretion when it disregarded the affidavits of all
of LBNIs witnesses.[14]

In our September 23, 2008 Decision, we found that de Castros dismissal was based on
unsubstantiated charges. Aying, a contractor, earlier executed an affidavit stating that de Castro asked
him for commission, but in his second affidavit, he recanted his statement and exonerated de
Castro.[15] The other witnesses, Niguidula and Balais, were LBNI employees who resented de
Castro.[16] We noted that de Castro had not stayed long in the company and had not even passed his
probationary period when the acts charged allegedly took place. We found this situation contrary to
common experience, since new employees have a natural motivation to make a positive first impression
on the employer, if only to ensure that they are regularized.[17]

Thus, we ruled that the grounds that LBNI invoked for de Castros dismissal were, at best,
doubtful, based on the evidence presented. These doubts should be interpreted in de Castros favor,
pursuant to Article 4 of the Labor Code.[18] Between a laborer and his employer, doubts reasonably arising
from the evidence or interpretation of agreements and writing should be resolved in the formers favor. [19]

The Motion for Reconsideration

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LBNI now moves for a reconsideration of our September 23, 2008 Decision based on the
following arguments: (1) LBNI had valid legal grounds to terminate de Castros employment for loss of
trust and confidence;[20] (2) the affidavits of LBNIs witnesses should not have been totally
disregarded;[21] and (3) LBNI is currently under rehabilitation, hence, the proceedings in this case must be
suspended.[22] LBNI points out that it filed, with the RTC of Makati, a petition for Corporate Rehabilitation
with Prayer for Suspension of Payments (docketed as S.P. Proc. Case No. M-6126), and on August 19,
2005, the RTC issued a Stay Order directing, among others, that the

enforcement of all claims against Liberty Telecoms, Liberty Broadcasting and

Skyphone, whether for money or otherwise and whether such enforcement is by Court
action or otherwise x x xbe forthwith stayed.[23]

Comment on the Motion for Reconsideration

In his comment, de Castro contends that LBNIs motion for reconsideration contains a rehash of
LBNIs earlier arguments. He avers that despite the RTCs Stay Order, it is premature for this Court to
suspend the proceedings. If a suspension of the proceedings is necessary, the proper venue to file the
motion is with the Office of the Labor Arbiter.[24] De Castro further posits that LBNI should have informed
this Court of the status of its Petition for Corporate Rehabilitation. [25]

THE COURTS RULING

Except for the prayer to suspend the execution of our September 23, 2008 Decision, we do not
find LBNIs Motion for Reconsideration meritorious. Although we reject, for lack of merit, LBNIs arguments
regarding the legality of de Castros dismissal, we suspend the execution of our Decision in deference to
the Stay Order issued by the rehabilitation court.

The issue of illegal dismissal has already been

resolved in the Courts September 23, 2008 Decision

LBNIs motion for reconsideration merely reiterates its earlier arguments, which we have already
addressed in our September 23, 2008 Decision. LBNI has failed to offer any substantive argument that
would convince us to reverse our earlier ruling.

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LBNI argues that there is no logic for it to illegally dismiss de Castro because being on
probationary employment a fact which this Court had stated in its decision all that the company had to do
was not to re-hire him.[26] By this claim, LBNI has misread the import of our ruling. The September 23,
2008 Decision declared that de Castro had not stayed long in the company and had not even passed his
probationary period when the acts charged allegedly took place.[27] Properly read, we found that the acts
charged against de Castro took place when he was still under probationary employment a finding
completely different from LBNIs claim that de Castro was dismissed during his probationary employment.
On the contrary, de Castro was dismissed on the ninth month of his employment with LBNI, and by then,
he was already a regular employee by operation of law. Article 281 of the Labor Code provides that
[p]robationary employment shall not exceed six (6) months from the date the employee started
working, x x x [a]n employee who is allowed to work after a probationary period shall be considered a
regular employee. As a regular employee, de Castro was entitled to security of tenure and his illegal
dismissal from LBNI justified the awards of separation pay, backwages, and damages.

The pendency of the rehabilitation proceedings does

not affect the Courts jurisdiction to resolve the case,
but merely suspends the execution of the September
23, 2008 Decision

On October 18, 2005, while de Castros petition was still pending before the Court, LBNI filed a
motion to suspend the proceedings, citing the Stay Order, dated August 19, 2005, issued by the RTC of
Makati, Branch 138 in S.P. Case No. M-6126.[28] The Stay Order read:

FOR THE REASONS GIVEN and applying Section 6 of the Interim Rules of
Procedure on Corporate Rehabilitation, x x x it is ordered that enforcement of all claims
against [LBNI] whether for money or otherwise and whether such enforcement is
by Court action or otherwise, its guarantors and sureties not solidarily liable with
the petitioner, be forthwith stayed.

xxxx

SO ORDERED.[29]

LBNIs motion was denied in our Resolution of December 12, 2005 for being premature, as de Castro then
had yet to file his reply to LBNIs comment on the petition. [30]Thereafter, nothing was heard from LBNI
regarding the Stay Order or the rehabilitation proceedings it instituted before the RTC of Makati,
Branch 138. Even the memorandum, dated May 4, 2006, that LBNI filed with the Court contained no
reference to the rehabilitation proceedings.[31]

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The filing of a memorandum before the Court is not an empty requirement, devoid of legal significance. In
A.M. No. 99-2-04-SC, the Court declared that issues raised in previous pleadings but not included in
the memorandum shall be deemed waived or abandoned. Being a summation of the parties previous
pleadings, the memoranda alone may be considered by the Court in deciding or resolving the
petition. Thus, on account of LBNIs omission, only the issues raised in the parties memoranda principally,
the validity of de Castros dismissal from LBNI were considered by the Court in resolving the case.

The Court does not take judicial notice of proceedings in the various courts of justice in the
Philippines.[32] At the time we decided the present case, we were thus not bound to take note of and
consider the pendency of the rehabilitation proceedings, as the matter had not been properly brought to
our attention. In Social Justice Society v. Atienza,[33] we said that:

In resolving controversies, courts can only consider facts and issues pleaded by
the parties. Courts, as well as magistrates presiding over them are not omniscient. They
can only act on the facts and issues presented before them in appropriate pleadings.
They may not even substitute their own personal knowledge for evidence. Nor may they
take notice of matters except those expressly provided as subjects of mandatory judicial
notice.

xxxx

The party asking the court to take judicial notice is obligated to supply the court
with the full text of the rules the party desires it to have notice of.

Notably, LBNIs memorandum was filed on May 4, 2006, more than 180 days from the date of the initial
hearing on October 5, 2005 (as set in the Stay Order of August 19, 2005).Under Section 11, Rule 4 of the
Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules), a petition for rehabilitation shall
be dismissed if no rehabilitation plan is approved by the court upon the lapse of 180 days from the date of
initial hearing. While the Interim Rules grant extension beyond the 180-day period, no such extension was
alleged in this case; in fact, as we earlier pointed out, no mention at all was made in LBNIs memorandum
of the rehabilitation proceedings. With the failure of LBNI to raise rehabilitation proceedings in its
memorandum, the Court had sufficient grounds to suppose that the rehabilitation petition had been
dismissed by the time the case was submitted for decision.

Given these circumstances, the existence of the Stay Order which would generally authorize the
suspension of judicial proceedings, even those pending before the Court could not have affected the
Courts action on the present case. At any rate, a stay order simply suspends all actions for claims against
a corporation undergoing rehabilitation; it does not work to oust a court of its jurisdiction over a case
properly filed before it.[34] Our ruling on the principal issue of the case that de Castro had been illegally
dismissed from his employment with LBNI thus stands.

Nevertheless, with LBNIs manifestation that it is still undergoing rehabilitation, the Court resolves to
suspend the execution of our September 23, 2008 Decision. The suspension shall last up to the

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termination of the rehabilitation proceedings, as provided in Section 11, in relation to Section 27, Rule 4 of
the Interim Rules

Sec. 11. Period of the Stay Order. - The stay order shall be effective from the date
of its issuance until the dismissal of the petition or the termination of the
rehabilitation proceedings.

The petition shall be dismissed if no rehabilitation plan is approved by the court upon the
lapse of one hundred eighty (180) days from the date of the initial hearing. The court may
grant an extension beyond this period only if it appears by convincing and compelling
evidence that the debtor may successfully be rehabilitated. In no instance, however, shall
the period for approving or disapproving a rehabilitation plan exceed eighteen (18)
months from the date of filing of the petition.

xxxx

Sec. 27. Termination of Proceedings. In case of the failure of the debtor to submit the
rehabilitation plan, or the disapproval thereof by the court, or the failure of the
rehabilitation of the debtor because of failure to achieve the desired targets or goals as
set forth therein, or the failure of the said debtor to perform its obligations under the said
plan, or a determination that the rehabilitation plan may no longer be implemented in
accordance with its terms, conditions, restrictions, or assumptions, the court shall upon
motion, motu proprio, or upon the recommendation of the Rehabilitation Receiver,
terminate the proceedings. The proceedings shall also terminate upon the successful
implementation of the rehabilitation plan.

WHEREFORE, we DENY the Motion for Reconsideration; accordingly, our Decision dated
September 23, 2008 is hereby AFFIRMED. The National Labor Relations Commission is, however,
directed to SUSPEND the execution of our September 23, 2008 Decision until the Stay Order is lifted or
the corporate rehabilitation proceedings are terminated. Respondent Liberty Broadcasting Network, Inc. is
hereby directed to submit quarterly reports to the National Labor Relations Commission on the status of
its rehabilitation, subject to the penalty of contempt in case of noncompliance.

SO ORDERED.

20. Arco Metal Products Co., vs. Samahan ng mga Manggagaw sa Acro Metal-NAFLU G.R.
No. 170734, March 14, 2008

DECISION

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TINGA, J.:

This treats of the Petition for Review[1] of the Resolution[2] and

[3]
Decision of the Court of Appeals dated 9 December 2005 and 29 September 2005,
respectively in CA-G.R. SP No. 85089 entitled Samahan ng mga Manggagawa sa Arco Metal-NAFLU
(SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary
Arbitrator Apron M. Mangabat,[4] which ruled that the 13th month pay, vacation leave and sick leave
conversion to cash shall be paid in full to the employees of petitioner regardless of the actual service they
rendered within a year.

Petitioner is a company engaged in the manufacture of metal products, whereas respondent is

the labor union of petitioners rank and file employees. Sometime in December 2003, petitioner paid the
13th month pay, bonus, and leave encashment of three union members in amounts proportional to the
service they actually rendered in a year, which is less than a full twelve (12) months. The employees
were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004

2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not
prorate the payment of the same benefits to seven (7) employees who had not served for the full 12
months. The payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to
respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the
Labor Code. Thus, they filed a complaint before the National Conciliation and Mediation Board
(NCMB). The parties submitted the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving
of the contested benefits in full, irrespective of the actual service rendered within one year has
not ripened into a practice. He noted the affidavit of Joselito Baingan, manufacturing group head of
petitioner, which states that the giving in full of the benefit was a mere error. He also interpreted the
phrase for each year of service found in the pertinent CBA provisions to mean that an employee must
have rendered one year of service in order to be entitled to the full benefits provided in the CBA.[5]

Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the Court of Appeals,
imputing serious error to Mangabats conclusion. The Court of Appeals ruled that the CBA did not intend
to foreclose the application of prorated payments of leave benefits to covered employees. The appellate
court found that petitioner, however, had an existing voluntary practice of paying the aforesaid benefits in
full to its employees, thereby rejecting the claim that petitioner erred in paying full benefits to its
seven employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not
presented any evidence in support of its position that it has no voluntary practice of granting the
contested benefits in full and without regard to the service actually rendered within the year. It also
questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The
dispositive portion of the courts decision reads:

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WHEREFORE, premises considered, the instant petition is

hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat in
NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED WITH
MODIFICATION in that the 13th month pay, bonus, vacation leave and sick leave
conversions to cash shall be paid to the employees in full, irrespective of the actual
service rendered within a year.[7]

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this
petition.

Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay,
bonus, and leave encashment in full regardless of actual service rendered constitutes voluntary employer
practice and, consequently, the prorated payment of the said benefits does not constitute diminution of
benefits under Article 100 of the Labor Code.[8]

The petition ultimately fails.

First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of
service actually rendered by an employee to the company. According to petitioner, there is a one-year
cutoff in the entitlement to the benefits provided in the CBA which is evident from the wording of its
pertinent provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at

least one (1) year of service shall be entitled to sixteen (16) days vacation leave with pay
for each year of service. Unused leaves shall not be cumulative but shall be converted into
its cash equivalent and shall become due and payable every 1 st Saturday of December of
each year.

However, if the 1st Saturday of December falls in December 1, November 30

(Friday) being a holiday, the management will give the cash conversion of leaves in
November 29.

Section 2. In case of resignation or retirement of an employee, his vacation leave

shall be paid proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at

least one (1) year of service shall be entitled to sixteen (16) days of sick leave with pay
for each year of service. Unused sick leave shall not be cumulative but shall be

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converted into its cash equivalent and shall become due and payable every 1 st Saturday
of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the
Company physician or by a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon

retirement or separation.

ARTICLE XVI EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees
covered by this agreement and if unused shall be converted into cash and become due
and payable on the 1st Saturday of December each year.

Section 2. Employees/workers covered by this agreement who have rendered at

least one (1) year of service shall be entitled to seven (7) days of Paternity Leave with pay
in case the married employees legitimate spouse gave birth. Said benefit shall be non-
cumulative and non-commutative and shall be deemed in compliance with the law on the
same.

Section 3. Maternity leaves for married female employees shall be in accordance

with the SSS Law plus a cash grant of P1,500.00 per month.

xxx

ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees covered by
this agreement. The basis of computing such pay shall be the basic salary per day of the
employee multiplied by 30 and shall become due and payable every 1 st Saturday of
December.

Section 2. The Company shall grant a bonus to all employees as practiced which
shall be distributed on the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five
Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.[9] (Underscoring
ours)

There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of
vacation and sick leave, one must have rendered at least one year of service. The clear wording of the
provisions does not allow any other interpretation. Anent the 13th month pay and bonus, we agree with
the findings of Mangabat that the CBA provisions did not give any meaning different from that given by
the law, thus it should be computed at 1/12 of the total compensation which an employee receives for the

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whole calendar year. The bonus is also equivalent to the amount of the 13th month pay given, or in
proportion to the actual service rendered by an employee within the year.

On the second issue, however, petitioner founders.

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does
not normally embark on a re-examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding
on the Court.[10] The rule, however, admits of several exceptions, one of which is when the findings of the
Court of Appeals are contrary to that of the lower tribunals. Such is the case here, as the factual
conclusions of the Court of Appeals differ from that of the voluntary arbitrator.

Petitioner granted, in several instances, full benefits to employees who have not served a full
year, thus:

Name Reason Duration

1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 2003[11]

Petitioner claims that its full payment of benefits regardless of the length of service to the
company does not constitute voluntary employer practice. It points out that the payments had been
erroneously made and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and
2003. According to petitioner, it was only in 2003 that the accounting department discovered the error
when there were already three (3) employees involved with prolonged absences and the error was
corrected by implementing the pro-rata payment of benefits pursuant to law and their existing CBA. [12] It
adds that the seven earlier cases of full payment of benefits went unnoticed considering the proportion
of one employee concerned (per year) vis vis the 170 employees of the company. Petitioner describes
the situation as a clear oversight which should not be taken against it. [13] To further bolster its case,
petitioner argues that for a grant of a benefit to be considered a practice, it should have been practiced
over a long period of time and must be shown to be consistent, deliberate and intentional, which is not
what happened in this case. Petitioner tries to make a case out of the fact that the CBA has not been
modified to incorporate the giving of full benefits regardless of the length of service, proof that the grant
has not ripened into company practice.

We disagree.

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer.[14] The principle of non-diminution of benefits is founded on
the Constitutional mandate to "protect the rights of workers and promote their welfare, [15] and to afford
labor full protection.[16] Said mandate in turn is the basis of Article 4 of the Labor Code which states that
all doubts in the implementation and interpretation of this Code, including its implementing rules and

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regulations shall be rendered in favor of labor. Jurisprudence is replete with cases which recognize the
right of employees to benefits which were voluntarily given by the employer and which ripened into
company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.[17] where an
employer had freely and continuously included in the computation of the 13th month pay those items that
were expressly excluded by the law, we held that the act which was favorable to the employees though
not conforming to law had thus ripened into a practice and could not be withdrawn, reduced, diminished,
discontinued or eliminated. In Sevilla Trading Company v. Semana,[18]we ruled that the employers act of
including non-basic benefits in the computation of the 13th month pay was a voluntary act and had ripened
into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao Integrated Port
Stevedoring Services v. Abarquez,[19] the Court ordered the payment of the cash equivalent of the
unenjoyed sick leave benefits to its intermittent workers after finding that said workers had received
these benefits for almost four years until the grant was stopped due to a different interpretation of the
CBA provisions. We held that the employer cannot unilaterally withdraw the existing privilege of
commutation or conversion to cash given to said workers, and as also noted that the employer had in fact
granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to some
intermittent workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of service
rendered. True, there were only a total of seven employees who benefited from such a practice, but it
was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a minimum
number of years within which a company practice must be exercised in order to constitute voluntary
company practice.[20] Thus, it can be six (6) years,[21] three (3) years,[22] or even as short as two (2)
years.[23] Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or an
error, supported only by an affidavit of its manufacturing group head portions of which read:

5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave,
sick leave and emergency leave are computed and paid in full to employees who
rendered services to the company for the entire year and proportionately to those
employees who rendered service to the company for a period less than one (1) year or
twelve (12) months in accordance with the CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the
aforesaid benefits to the employees in full regardless of whether or not the employee has
rendered services to the company for the entire year, otherwise, it would be unjust and
inequitable not only to the company but to other employees as well.[24]

In cases involving money claims of employees, the employer has the

burden of proving that the employees did receive the wages and benefits and that the same we
re paid in accordance with law.[25]

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily
presented other proofs, such as the names of other employees who did not fully serve for one year and
thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the
goal but it is seldom achieved. There must have been other employees who had reported for work less

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than a full year and who, as a consequence received only prorated benefits. This could have easily
bolstered petitioners theory of mistake/error, but sadly, no evidence to that effect was presented.

IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP
No. 85089 dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby
AFFIRMED.

SO ORDERED.

21. LRTA vs. Venus G.R. No. 163782, March 24, 2006

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 163782 March 24, 2006

LIGHT RAIL TRANSIT AUTHORITY, Petitioner,

vs.
PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY C. RAMOS,
SALVADOR A. ALFON, NOEL R. SANTOS, MANUEL A. FERRER, SALVADOR G. ALINAS, RAMON
D. LOFRANCO, AMADOR H.POLICARPIO, REYNALDO B. GENER, and BIENVENIDO G.
ARPILLEDA, Respondents.

x-----------------------------x

G.R. No. 163881 March 24, 2006

METRO TRANSIT ORGANIZATION, INC., Petitioner,

vs.
COURT OF APPEALS, PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY,
NANCY C. RAMOS, SALVADOR A. ALFON, NOEL R. SANTOS, MANUEL A. FERRER, SALVADOR
G. ALINAS, RAMON D. LOFRANCO, AMADOR H. POLICARPIO, and REYNALDO B.
GENER, Respondents.

DECISION

PUNO, J.:

Before us are the consolidated petitions of Light Rail Transit Authority (LRTA) and Metro Transit
Organization, Inc. (METRO), seeking the reversal of the Decision of the Court of Appeals directing them
to reinstate private respondent workers to their former positions without loss of seniority and other rights
and privileges, and ordering them to jointly and severally pay the latter their full back wages, benefits, and
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moral damages. The LRTA and METRO were also ordered to jointly and severally pay attorneys fees
equivalent to ten percent (10%) of the total money judgment.

Petitioner LRTA is a government-owned and controlled corporation created by Executive Order No. 603,
Series of 1980, as amended, to construct and maintain a light rail transit system and provide the
commuting public with an efficient, economical, dependable and safe transportation. Petitioner METRO,
formerly Meralco Transit Organization, Inc., was a qualified transportation corporation duly organized in
accordance with the provisions of the Corporation Code, registered with the Securities and Exchange
Commission, and existing under Philippine laws.

It appears that petitioner LRTA constructed a light rail transit system from Monumento in Kalookan City to
Baclaran in Paraaque, Metro Manila. To provide the commuting public with an efficient and dependable
light rail transit system, petitioner LRTA, after a bidding process, entered into a ten (10)-year Agreement
for the Management and Operation of the Metro Manila Light Rail Transit System from June 8, 1984 until
June 8, 1994 with petitioner METRO.1The Agreement provided, among others, that

1. Effective on the COMMENCEMENT DATE, METRO shall accept and take over from the
AUTHORITY [LRTA] the management, maintenance and operation of the commissioned and
tested portion of the [Light Rail Transit] System x x x [par. 2.02];

2. The AUTHORITY [LRTA] shall pay METRO the MANAGEMENT FEE as follows x x x [par.
5.01];

3. In rendering these services, METRO shall apply its best skills and judgment, in attaining the
objectives of the [Light Rail Transit] System in accordance with accepted professional standards.
It shall exercise the required care, diligence and efficiency in the discharge of its duties and
responsibilities and shall work for the best interest of the [Light Rail Transit] System and the
AUTHORITY [LRTA] [par. 2.03];

4. METRO shall be free to employ such employees and officers as it shall deem necessary in
order to carry out the requirements of [the] Agreement. Such employees and officers shall be the
employees of METRO and not of the AUTHORITY [LRTA]. METRO shall prepare a
compensation schedule and the corresponding salaries and fringe benefits of [its] personnel in
consultation with the AUTHORITY [LRTA] [par. 3.05];

5. METRO shall likewise hold the AUTHORITY [LRTA] free and harmless from any and all fines,
penalties, losses and liabilities and litigation expenses incurred or suffered on account of and by
reason of death, injury, loss or damage to passengers and third persons, including the employees
and representatives of the AUTHORITY [LRTA], except where such death, injury, loss or damage
is attributable to a defect or deficiency in the design of the system or its equipment [par. 3.06].

Pursuant to the above Agreement, petitioner METRO hired its own employees, including herein private
respondents. Petitioner METRO thereafter entered into a collective bargaining agreement with Pinag-
isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor, otherwise known as
PIGLAS-METRO, INC. NFL KMU (Union), the certified exclusive collective bargaining representative
of the rank-and-file employees of petitioner METRO.

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Meanwhile, on June 9, 1989, petitioners LRTA and METRO executed a Deed of Sale where petitioner
LRTA purchased the shares of stocks in petitioner METRO.2However, petitioners LRTA and METRO
continued with their distinct and separate juridical personalities. Hence, when the above ten (10)-year
Agreement expired on June 8, 1994, they renewed the same, initially on a yearly basis, and subsequently
on a monthly basis.

On July 25, 2000, the Union filed a Notice of Strike with the National Conciliation and Mediation Board
National Capital Region against petitioner METRO on account of a deadlock in the collective bargaining
negotiation. On the same day, the Union struck. The power supply switches in the different light rail transit
substations were turned off. The members of the Union picketed the various substations. They completely
paralyzed the operations of the entire light rail transit system. As the strike adversely affected the mobility
of the commuting public, then Secretary of Labor Bienvenido E. Laguesma issued on that same day an
assumption of jurisdiction order3directing all the striking employees "to return to work immediately upon
receipt of this Order and for the Company to accept them back under the same terms and conditions of
employment prevailing prior to the strike."4

In their memorandum,5Department of Labor and Employment Sheriffs Feliciano R. Orihuela, Jr., and
Romeo P. Lemi reported to Sec. Laguesma that they tried to personally serve the Order of assumption of
jurisdiction to the Union through its officials and members on July 26, 2000, but the latter refused to
receive the same. The sheriffs thus posted the Order in the different stations/terminals of the light rail
transit system. Further, the Order of assumption of jurisdiction was published on the July 27, 2000 issues
of the Philippine Daily Inquirer6and the Philippine Star.7

Despite the issuance, posting, and publication of the assumption of jurisdiction and return to work order,
the Union officers and members, including herein private respondent workers, failed to return to work.
Thus, effective July 27, 2000, private respondents, Perfecto Venus, Jr., Bienvenido P. Santos, Jr., Rafael
C. Roy, Nancy C. Ramos, Salvador A. Alfon, Noel R. Santos, Manuel A. Ferrer, Salvador G. Alinas,
Ramon D. Lofranco, Amador H. Policarpio, Reynaldo B. Gener, and Bienvenido G. Arpilleda, were
considered dismissed from employment.

In the meantime, on July 31, 2000, the Agreement for the Management and Operation of the Metro
Manila Light Rail Transit System between petitioners LRTA and METRO expired. The Board of Directors
of petitioner LRTA decided not to renew the contract with petitioner METRO and directed the LRTA
management instead to immediately take over the management and operation of the light rail transit
system to avert the mass transportation crisis.

On October 10, 2000, private respondents Venus, Jr., Santos, Jr., and Roy filed a complaint for illegal
dismissal before the National Labor Relations Commission (NLRC) and impleaded both petitioners LRTA
and METRO. Private respondents Ramos, Alfon, Santos, Ferrer, Alinas, Lofranco, Policarpio, Gener, and
Arpilleda follwed suit on December 1, 2000.

On October 1, 2001, Labor Arbiter Luis D. Flores rendered a consolidated judgment in favor of the private
respondent workers8

WHEREFORE, judgment is hereby rendered in favor of the complainants and against the respondents,
as follows:

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1. Declaring that the complainants were illegally dismissed from employment and ordering their
reinstatement to their former positions without loss of seniority and other rights and privileges.

2. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly
and severally pay the complainants their other benefits and full backwages, which as of June 30,
2001 are as follows:

1. Perfecto H. Venus, Jr. P247,724.36

2. Bienvenido P. Santos, Jr. 247,724.36

3. Rafael C. Roy 247,724.36

4. Nancy [C.] Ramos 254,282.62

5. Salvador A. Alfon 257,764.62

6. Noel R. Santos 221,897.58

7. Manuel A. Ferrer 250,534.78

8. Salvador G. [Alinas] 253,454.88

9. Ramon D. Lofranco 253,642.18

10. Amador H. Policarpio 256,609.22

11. Reynaldo B. Gener 255,094.56

TOTAL P2,746,453.52

3. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly
and severally pay each of the complainants the amount of P50,000.00 as moral damages.

4. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly
and severally pay the complainants attorneys fees equivalent to ten percent (10%) of the total
money judgment.

SO ORDERED.

The complaint filed by Bienvenido G. Arpilleda, although initially consolidated with the main case, was
eventually dropped for his failure to appear and submit any document and position paper. 9

On May 29, 2002, on appeal, the NLRC found that the striking workers failed to heed the return to work
order and reversed and set aside the decision of the labor arbiter. The suit against LRTA was dismissed
since "LRTA is a government-owned and controlled corporation created by virtue of Executive Order No.
603 with an original charter"10and "it ha[d] no participation whatsoever with the termination of
complainants employment."11In fine, the cases against the LRTA and METRO were dismissed,
respectively, for lack of jurisdiction and for lack of merit.

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On December 3, 2002, the NLRC denied the workers Motion for Reconsideration "[t]here being no
showing that the Commission committed, (and that) the Motion for Reconsideration was based on,
palpable or patent errors, and the fact that (the) said motion is not under oath."

On a petition for certiorari however, the Court of Appeals reversed the NLRC and reinstated the Decision
rendered by the Labor Arbiter. Public respondent appellate court declared the workers dismissal as
illegal, pierced the veil of separate corporate personality and held the LRTA and METRO as jointly liable
for back wages.

Hence, these twin petitions for review on certiorari of the decision of public respondent appellate court
filed by LRTA and METRO which this Court eventually consolidated.

In the main, petitioner LRTA argues that it has no employer-employee relationship with private
respondent workers as they were hired by petitioner METRO alone pursuant to its ten (10)-year
Agreement for the Management and Operation of the Metro Manila Light Rail Transit System with
petitioner METRO. Private respondent workers recognized that their employer was not petitioner LRTA
when their certified exclusive collective bargaining representative, the Pinag-isang Lakas ng
Manggagawa sa METRO, Inc. National Federation of Labor, otherwise known as PIGLAS-METRO,
INC. NFL KMU, entered into a collective bargaining agreement with petitioner METRO. Piercing the
corporate veil of METRO was unwarranted, as there was no competent and convincing evidence of any
wrongful, fraudulent or unlawful act on the part of METRO, and, more so, on the part of LRTA.

Petitioner LRTA further contends that it is a government-owned and controlled corporation with an original
charter, Executive Order No. 603, Series of 1980, as amended, and thus under the exclusive jurisdiction
only of the Civil Service Commission, not the NLRC.

Private respondent workers, however, submit that petitioner METRO was not only fully-owned by
petitioner LRTA, but all aspects of its operations and administration were also strictly controlled,
conducted and directed by petitioner LRTA. And since petitioner METRO is a mere adjunct, business
conduit, and alter ego of petitioner LRTA, their respective corporate veils must be pierced to satisfy the
money claims of the illegally dismissed private respondent employees.

We agree with petitioner LRTA. Section 2 (1), Article IX B, 1987 Constitution, expressly provides that
"[t]he civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters." Corporations
with original charters are those which have been created by special law and not through the general
corporation law. Thus, in Philippine National Oil Company Energy Development Corporation v.
Hon. Leogrado, we held that "under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law is the manner of its
creation such that government corporations created by special charter are subject to its provisions while
those incorporated under the general Corporation Law are not within its coverage." 12There should be no
dispute then that employment in petitioner LRTA should be governed only by civil service rules, and not
the Labor Code and beyond the reach of the Department of Labor and Employment, since petitioner
LRTA is a government-owned and controlled corporation with an original charter, Executive Order No.
603, Series of 1980, as amended.

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In contrast, petitioner METRO is covered by the Labor Code despite its later acquisition by petitioner
LRTA. In Lumanta v. National Labor Relations Commission,13this Court ruled that labor law claims
against government-owned and controlled corporations without original charter fall within the jurisdiction
of the Department of Labor and Employment and not the Civil Service Commission. Petitioner METRO
was originally organized under the Corporation Code, and only became a government-owned and
controlled corporation after it was acquired by petitioner LRTA. Even then, petitioner METRO has no
original charter, hence, it is the Department of Labor and Employment, and not the Civil Service
Commission, which has jurisdiction over disputes arising from the employment of its workers.
Consequently, the terms and conditions of such employment are governed by the Labor Code and not by
the Civil Service Rules and Regulations.

We therefore hold that the employees of petitioner METRO cannot be considered as employees of
petitioner LRTA. The employees hired by METRO are covered by the Labor Code and are under the
jurisdiction of the Department of Labor and Employment, whereas the employees of petitioner LRTA, a
government-owned and controlled corporation with original charter, are covered by civil service rules.
Herein private respondent workers cannot have the best of two worlds, e.g., be considered government
employees of petitioner LRTA, yet allowed to strike as private employees under our labor laws.
Department of Justice Opinion No. 108, Series of 1999, issued by then Secretary of Justice Serafin R.
Cuevas on whether or not employees of petitioner METRO could go on strike is persuasive

We believe that METRO employees are not covered by the prohibition against strikes applicable to
employees embraced in the Civil Service. It is not disputed, but in fact conceded, that METRO employees
are not covered by the Civil Service. This being so, METRO employees are not covered by the Civil
Service law, rules and regulations but are covered by the Labor Code and, therefore, the rights and
prerogatives granted to private employees thereunder, including the right to strike, are available to them.

Moreover, as noted by Secretary Benjamin E. Diokno, of the Department of Budget and Management, in
his letter dated February 22, 1999, the employees of METRO are not entitled to the government
amelioration assistance authorized by the President pursuant to Administrative Order No. 37 for
government employees, because the employees of METRO are not government employees since Metro,
Inc. "could not be considered as GOCC as defined under Section 3 (b) of E.O. 518 x x x x"14

Indeed, there was never an intention to consider the employees of petitioner METRO as government
employees of petitioner LRTA as well neither from the beginning, nor until the end. Otherwise, they
could have been easily converted from being employees in the private sector and absorbed as
government employees covered by the civil service when petitioner LRTA acquired petitioner METRO in
1989. The stubborn fact is that they remained private employees with rights and prerogatives granted to
them under the Labor Code, including the right to strike, which they exercised and from which the instant
dispute arose.

We likewise hold that it is inappropriate to pierce the corporate veil of petitioner METRO. In Del Rosario
v. National Labor Relations Commission, we ruled that "[u]nder the law a corporation is bestowed
juridical personality, separate and distinct from its stockholders. But when the juridical personality of the
corporation is used to defeat public convenience, justify wrong, protect fraud or defend crime, the
corporation shall be considered as a mere association of persons, and its responsible officers and/or
stockholders shall be held individually liable. For the same reasons, a corporation shall be liable for the
obligations of a stockholder, or a corporation and its successor-in-interest shall be considered as one and
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the liability of the former shall attach to the latter. But for the separate juridical personality of a corporation
to be disregarded, the wrongdoing must be clearly and convincingly established. It cannot be
presumed."15In Del Rosario, we also held that the "substantial identity of the incorporators of the two
corporations does not necessarily imply fraud."16

In the instant case, petitioner METRO, formerly Meralco Transit Organization, Inc., was originally owned
by the Manila Electric Company and registered with the Securities and Exchange Commission more than
a decade before the labor dispute. It then entered into a ten-year agreement with petitioner LRTA in 1984.
And, even if petitioner LRTA eventually purchased METRO in 1989, both parties maintained their
separate and distinct juridical personality and allowed the agreement to proceed. In 1990, this Court,
in Light Rail Transit Authority v. Commission on Audit, even upheld the validity of the said
agreement.17Consequently, the agreement was extended beyond its ten-year period. In 1995, METROs
separate juridical identity was again recognized when it entered into a collective bargaining agreement
with the workers union. All these years, METROs distinct corporate personality continued quiescently,
separate and apart from the juridical personality of petitioner LRTA.

The labor dispute only arose in 2000, after a deadlock occurred during the collective bargaining between
petitioner METRO and the workers union. This alone is not a justification to pierce the corporate veil of
petitioner METRO and make petitioner LRTA liable to private respondent workers. There are no badges
of fraud or any wrongdoing to pierce the corporate veil of petitioner METRO.

On this point, the Department of Justice Opinion No. 108, Series of 1999, issued by then Secretary of
Justice Serafin R. Cuevas is once again apropos:

Anent the issue of piercing the corporate veil, it was held in Concept Builders, Inc. v. NLRC (G.R. No.
108734, May 29, 1996, 257 SCRA 149, 159) that the test in determining the applicability of the doctrine of
piercing the veil of corporate fiction is as follows:

"1. Control, not mere majority or complete stock control, but complete domination, not only of
finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its
own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention
of plaintiffs legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.

The absence of any one of these elements prevents piercing the corporate veil. In applying the
instrumentality or alter ego doctrine, the courts are concerned with reality and not form, with how the
corporation operated and the individual defendants relationship to that operation."

Here, the records do not show that control was used to commit a fraud or wrong. In fact, it appears that
piercing the corporate veil for the purpose of delivery of public service, would lead to a confusing situation
since the outcome would be that Metro will be treated as a mere alter ego of LRTA, not having a separate
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corporate personality from LRTA, when dealing with the issue of strike, and a separate juridical entity not
covered by the Civil Service when it comes to other matters. Under the Constitution, a government
corporation is either one with original charter or one without original charter, but never both. 18

In sum, petitioner LRTA cannot be held liable to the employees of petitioner METRO.

With regard the issue of illegal dismissal, petitioner METRO maintains that private respondent workers
were not illegally dismissed but should be deemed to have abandoned their jobs after defying the
assumption of jurisdiction and return-to-work order issued by the Labor Secretary. Private respondent
workers, on the other hand, submit that they could not immediately return to work as the light rail transit
system had ceased its operations.

We find for the private respondent workers. In Batangas Laguna Tayabas Bus Co. v. National Labor
Relations Commission,19 we said that the five-day period for the strikers to obey the Order of the
Secretary of Justice and return to work was not sufficient as "some of them may have left Metro Manila
and did not have enough time to return during the period given by petitioner, which was only five
days."20 In Batangas Laguna Tayabas Bus Co.,21we further held

The contention of the petitioner that the private respondents abandoned their position is also not
acceptable. An employee who forthwith takes steps to protest his lay-off cannot by any logic be said to
have abandoned his work.

For abandonment to constitute a valid cause for termination of employment, there must be a deliberate,
unjustified refusal of the employee to resume his employment. This refusal must be clearly established.
As we stressed in a recent case, mere absence is not sufficient; it must be accompanied by overt acts
unerringly pointing to the fact that the employee simply does not want to work anymore.

In the instant case, private respondent workers could not have defied the return-to-work order of the
Secretary of Labor simply because they were dismissed immediately, even before they could obey the
said order. The records show that the assumption of jurisdiction and return-to-work order was issued by
Secretary of Labor Bienvenido E. Laguesma on July 25, 2000. The said order was served and posted by
the sheriffs of the Department of Labor and Employment the following day, on July 26, 2000. Further, the
said order of assumption of jurisdiction was duly published on July 27, 2000, in the Philippine Daily
Inquirer and the Philippine Star. On the same day also, on July 27, 2000, private respondent workers
were dismissed. Neither could they be considered as having abandoned their work. If petitioner METRO
did not dismiss the strikers right away, and instead accepted them back to work, the management
agreement between petitioners LRTA and METRO could still have been extended and the workers would
still have had work to return to.

IN VIEW WHEREOF, the Decision of public respondent Court of Appeals is AFFIRMED insofar as it holds
Metro Transit Organization, Inc. liable for the illegal dismissal of private respondents and orders it to pay
them their benefits and full back wages and moral damages. Further, Metro Transit Organization, Inc. is
ordered to pay attorneys fees equivalent to ten percent (10%) of the total money judgment. The petition
of the Light Rail Transit Authority is GRANTED, and the complaint filed against it for illegal dismissal is
DISMISSED for lack of merit.

SO ORDERED.
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22. Juco vs. NLRC 277 SCRA 528

[G.R. No. 98107. August 18, 1997]

BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL
HOUSING CORPORATION, respondents.

DECISION

HERMOSISIMA, JR., J.:

This is a petition for certiorari to set aside the Decision of the National Labor Relations Commission
(NLRC) dated March 14, 1991, which reversed the Decision dated May 21, 1990 of Labor Arbiter Manuel
R. Caday, on the ground of lack of jurisdiction.

Petitioner Benjamin C. Juco was hired as a project engineer of respondent National Housing
Corporation (NHC) from November 16, 1970 to May 14, 1975. On May 14, 1975, he was separated from
the service for having been implicated in a crime of theft and/or malversation of public funds.

On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with the
Department of Labor.

On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint on the
ground that the NLRC had no jurisdiction over the case.[1]

Petitioner then elevated the case to the NLRC which rendered a decision on December 28, 1982,
reversing the decision of the Labor Arbiter.[2]

Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and on
January 17, 1985, we rendered a decision, the dispositive portion thereof reads as follows:

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National
Labor Relations Commission is SET ASIDE. The decision of the Labor Arbiter dismissing the case before
it for lack of jurisdiction is REINSTATED.[3]

On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for illegal
dismissal, with preliminary mandatory injunction.[4]

On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the ground that
the Civil Service Commission has no jurisdiction over the case.[5]

On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint for lack of
jurisdiction. It ratiocinated that:

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The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that NHC is a
government corporation without an original charter but organized/created under the Corporate Code.

Article IX, Section 2 (1) of the 1987 Constitution provides:

The civil service embraces all branches, subdivisions, instrumentalities and agencies of the government,
including government owned and controlled corporations with original charters. (underscoring supplied)

From the aforequoted constitutional provision, it is clear that respondent NHC is not within the scope of
the civil service and is therefore beyond the jurisdiction of this board. Moreover, it is pertinent to state that
the 1987 Constitution was ratified and became effective on February 2, 1987.

WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed. [6]

On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal with
preliminary mandatory injunction against respondent NHC.[7]

On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that petitioner was
illegally dismissed from his employment by respondent as there was evidence in the record that the
criminal case against him was purely fabricated, prompting the trial court to dismiss the charges against
him. Hence, he concluded that the dismissal was illegal as it was devoid of basis, legal or factual.

He further ruled that the complaint is not barred by prescription considering that the period from
which to reckon the reglementary period of four years should be from the date of the receipt of the
decision of the Civil Service Commission promulgated on April 11, 1989. He also ratiocinated that:

It appears x x x complainant filed the complaint for illegal dismissal with the Civil Service Commission on
January 6, 1989 and the same was dismissed on April 11, 1989 after which on April 28, 1989, this case
was filed by the complainant. Prior to that, this case was ruled upon by the Supreme Court on January
17, 1985 which enjoined the complainant to go to the Civil Service Commission which in fact, complainant
did. Under the circumstances, there is merit on the contention that the running of the reglementary period
of four (4) years was suspended with the filing of the complaint with the said Commission. Verily, it was
not the fault of the respondent for failing to file the complaint as alleged by the respondent but due to, in
the words of the complainant, a legal knot that has to be untangled.[8]

Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:

"Premises considered, judgment is hereby rendered declaring the dismissal of the complainant as illegal
and ordering the respondent to immediately reinstate him to his former position without loss of seniority
rights with full back wages inclusive of allowance and to his other benefits or equivalent computed from
the time it is withheld from him when he was dismissed on March 27, 1977, until actually reinstated.[9]

On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991, the
NLRC promulgated a decision which reversed the decision of Labor Arbiter Manuel R. Caday on the
ground of lack of jurisdiction.[10]

The primordial issue that confronts us is whether or not public respondent committed grave abuse of
discretion in holding that petitioner is not governed by the Labor Code.
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Under the laws then in force, employees of government-owned and /or controlled corporations were
governed by the Civil Service Law and not by the Labor Code. Hence,

Article 277 of the Labor Code (PD 442) then provided:

"The terms and conditions of employment of all government employees, including employees of
government-owned and controlled corporations shall be governed by the Civil Service Law, rules and
regulations x x x.

The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:

The Civil Service embraces every branch, agency, subdivision and instrumentality of the government,
including government-owned or controlled corporations.

Although we had earlier ruled in National Housing Corporation v. Juco,[11] that employees of
government-owned and/or controlled corporations, whether created by special law or formed as
subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the
Labor Code, this ruling has been supplanted by the 1987 Constitution.Thus, the said Constitution now
provides:

The civil service embraces all branches, subdivision, instrumentalities, and agencies of the Government,
including government owned or controlled corporations with original charter. (Article IX-B, Section 2[1])

In National Service Corporation (NASECO) v. National Labor Relations Commission,[12] we had the
occasion to apply the present Constitution in deciding whether or not the employees of NASECO are
covered by the Civil Service Law or the Labor Code notwithstanding that the case arose at the time when
the 1973 Constitution was still in effect. We ruled that the NLRC has jurisdiction over the employees of
NASECO on the ground that it is the 1987 Constitution that governs because it is the Constitution in place
at the time of the decision. Furthermore, we ruled that the new phrase with original charter means that
government-owned and controlled corporations refer to corporations chartered by special law as
distinguished from corporations organized under the Corporation Code. Thus, NASECO which had been
organized under the general incorporation stature and a subsidiary of the National Investment
Development Corporation, which in turn was a subsidiary of the Philippine National Bank, is excluded
from the purview of the Civil Service Commission.

We see no cogent reason to depart from the ruling in the aforesaid case.

In the case at bench, the National Housing Corporation is a government owned corporation
organized in 1959 in accordance with Executive Order No. 399, otherwise known as the Uniform Charter
of Government Corporation, dated January 1, 1959. Its shares of stock are and have been one hundred
percent (100%) owned by the Government from its incorporation under Act 1459, the former corporation
law. The government entities that own its shares of stock are the Government Service Insurance System,
the Social Security System, the Development Bank of the Philippines, the National Investment and
Development Corporation and the Peoples Homesite and Housing Corporation.[13] Considering the fact
that the NHA had been incorporated under act 1459, the former corporation law, it is but correct to say
that it is a government-owned or controlled corporation whose employees are subject to the provisions of
the Labor Code. This observation is reiterated in recent case of Trade Union of the Philippines and Allied
Services (TUPAS) v. National Housing Corporation,[14] where we held that the NHA is now within the

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jurisdiction of the Department of Labor and Employment, it being a government-owned and/or controlled
corporation without an original charter. Furthermore, we also held that the workers or employees of the
NHC (now NHA) undoubtedly have the right to form unions or employees organization and that there is
no impediment to the holding of a certification election among them as they are covered by the Labor
Code.

Thus, the NLRC erred in dismissing petitioners complaint for lack of jurisdiction because the rule now
is that the Civil Service now covers only government-owned or controlled corporations with original
charters.[15] Having been incorporated under the Corporation Law, its relations with its personnel are
governed by the Labor Code and come under the jurisdiction of the National Labor Relations
Commission.

One final point. Petitioners have been tossed from one forum to another for a simple illegal dismissal
case. It is but apt that we put an end to his dilemma in the interest of justice.

WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991 is
hereby REVERSED and the Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.

SO ORDERED.

Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.

23. Caberra vs. NLREC 198 SCRA 573

24. NASECO vs. NLRC November 29, 1988

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-69870 November 29, 1988

NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,

vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION, MINISTRY OF
LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO, respondents.

G.R. No. 70295 November 29,1988

EUGENIA C. CREDO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION AND
ARTURO L. PEREZ, respondents.

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 Page 137 of 278

The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.

Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:

Consolidated special civil actions for certiorari seeking to review the decision * of the Third Division,
National Labor Relations Commission in Case No. 11-4944-83 dated 28 November 1984 and its
resolution dated 16 January 1985 denying motions for reconsideration of said decision.

Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic
corporation which provides security guards as well as messengerial, janitorial and other similar manpower
services to the Philippine National Bank (PNB) and its agencies. She was first employed with NASECO
as a lady guard on 18 July 1975. Through the years, she was promoted to Clerk Typist, then Personnel
Clerk until she became Chief of Property and Records, on 10 March 1980. 1

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

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

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

Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on
Personnel Affairs deliberated and evaluated a number of past acts of misconduct or infractions attributed
to her. 5 As a result of this deliberation, said committee resolved:

1. That, respondent [Credo] committed the following offenses in the Code of Discipline,
viz:

OFFENSE vs. Company Interest & Policies

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No. 3 Any discourteous act to customer, officer and employee of client company or
officer of the Corporation.

OFFENSE vs. Public Moral

No. 7 Exhibit marked discourtesy in the course of official duties or use of profane or
insulting language to any superior officer.

OFFENSE vs. Authority

No. 3 Failure to comply with any lawful order or any instructions of a superior officer.

2. That, Management has already given due consideration to respondent's [Credo]

scandalous actuations for several times in the past. Records also show that she was
reprimanded for some offense and did not question it. Management at this juncture, has
already met its maximum tolerance point so it has decided to put an end to respondent's
[Credo] being an undesirable employee. 6

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

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was being
charged with certain offenses. Notably, these offenses were those which NASECO's Committee on
Personnel Affairs already resolved, on 22 November 1983 to have been committed by Credo.

In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was made to
explain her side in connection with the charges filed against her; however, due to her failure to do
so, 8 she was handed a Notice of Termination, dated 24 November 1983, and made effective 1 December
1983. 9 Hence, on 6 December 1983, Credo filed a supplemental complaint for illegal dismissal in Case
No. 11-4944-83, alleging absence of just or authorized cause for her dismissal and lack of opportunity to
be heard. 10

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

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

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

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

As guidelines for employers in the exercise of their power to dismiss employees for just causes, the law
provides that:

Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall
furnish him a written notice stating the particular acts or omission constituting the grounds
for his dismissal.

xxx xxx xxx

Section 5. Answer and Hearing. The worker may answer the allegations stated against
him in the notice of dismissal within a reasonable period from receipt of such notice. The
employer shall afford the worker ample opportunity to be heard and to defend himself
with the assistance of his representative, if he so desires.

Section 6. Decision to dismiss. The employer shall immediately notify a worker in

writing of a decision to dismiss him stating clearly the reasons therefor. 17

These guidelines mandate that the employer furnish an employee sought to be dismissed two (2) written
notices of dismissal before a termination of employment can be legally effected. These are the notice
which apprises the employee of the particular acts or omissions for which his dismissal is sought and the
subsequent notice which informs the employee of the employer's decision to dismiss him.

Likewise, a reading of the guidelines in consonance with the express provisions of law on protection to
labor 18(which encompasses the right to security of tenure) and the broader dictates of procedural due
process necessarily mandate that notice of the employer's decision to dismiss an employee, with reasons
therefor, can only be issued after the employer has afforded the employee concerned ample opportunity
to be heard and to defend himself.

In the case at bar, NASECO did not comply with these guidelines in effecting Credo's dismissal. Although
she was apprised and "given the chance to explain her side" of the charges filed against her, this chance
was given so perfunctorily, thus rendering illusory Credo's right to security of tenure. That Credo was not
given ample opportunity to be heard and to defend herself is evident from the fact that the compliance
with the injunction to apprise her of the charges filed against her and to afford her a chance to prepare for
her defense was dispensed in only a day. This is not effective compliance with the legal requirements
aforementioned.

The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss her) was
dated 24 November 1983 and made effective 1 December 1983 shows that NASECO was already bent
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on terminating her services when she was informed on 1 December 1983 of the charges against her, and
that any hearing which NASECO thought of affording her after 24 November 1983 would merely be pro
forma or an exercise in futility.

Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry procedures in the
company's Statement of Billings Adjustment did not warrant the severe penalty of dismissal of the NLRC
correctly held that:

... on the charge of gross discourtesy, the CPA found in its Report, dated 22 November
1983 that, "In the process of her testimony/explanations she again exhibited a conduct
unbecoming in front of NASECO Officers and argued to Mr. S. S. Lloren in a sarcastic
and discourteous manner, notwithstanding, the fact that she was inside the office of the
Acctg. General Manager." Let it be noted, however, that the Report did not even describe
how the so called "conduct unbecoming" or "discourteous manner" was done by
complainant. Anent the "sarcastic" argument of complainant, the purported transcript 19 of
the meeting held on 7 November 1983 does not indicate any sarcasm on the part of
complainant. At the most, complainant may have sounded insistent or emphatic about
her work being more complete than the work of Ms. de Castro, yet, the complaining
officer signed the work of Ms. de Castro and did not sign hers.

As to the charge of insubordination, it may be conceded, albeit unclear, that complainant

failed to place same corrections/additional remarks in the Statement of Billings
Adjustments as instructed. However, under the circumstances obtaining, where
complainant strongly felt that she was being discriminated against by her superior in
relation to other employees, we are of the considered view and so hold, that a reprimand
would have sufficed for the infraction, but certainly not termination from services. 20

As this Court has ruled:

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

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

If such acts of misconduct were indeed committed by Credo, they are deemed to have been condoned by
NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a scandalous manner and
raised her voice" in a discussion with NASECO's Acting head of the Personnel Administration 23 no
disciplinary measure was taken or meted against her. Nor was she even reprimanded when she allegedly
talked 'in a shouting or yelling manner" with the Acting Manager of NASECO's Building Maintenance and
Services Department in 1980 24 or when she allegedly "shouted" at NASECO's Corporate Auditor "in front
of his subordinates displaying arrogance and unruly behavior" in 1980, or when she allegedly shouted at
NASECO's Internal Control Consultant in 1981. 25 But then, in sharp contrast to NASECO's penchant for
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 Page 141 of 278

ignoring the aforesaid acts of misconduct, when Credo committed frequent tardiness in August and
September 1983, she was reprimanded. 26

Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily proven,
NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo was given a
salary adjustment for having performed in the job "at least [satisfactorily]" 27 and she was then rated "Very
Satisfactory" 28as regards job performance, particularly in terms of quality of work, quantity of work,
dependability, cooperation, resourcefulness and attendance.

Considering that the acts or omissions for which Credo's employment was sought to be legally terminated
were insufficiently proved, as to justify dismissal, reinstatement is proper. For "absent the reason which
gave rise to [the employee's] separation from employment, there is no intention on the part of the
employer to dismiss the employee concerned." 29 And, as a result of having been wrongfully dismissed,
Credo is entitled to three (3) years of backwages without deduction and qualification. 30

However, while Credo's dismissal was effected without procedural fairness, an award of exemplary
damages in her favor can only be justified if her dismissal was effected in a wanton, fraudulent,
oppressive or malevolent manner. 31 A judicious examination of the record manifests no such conduct on
the part of management. However, in view of the attendant circumstances in the case, i.e., lack of due
process in effecting her dismissal, it is reasonable to award her moral damages. And, for having been
compelled to litigate because of the unlawful actuations of NASECO, a reasonable award for attorney's
fees in her favor is in order.

In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no jurisdiction to
order Credo's reinstatement. NASECO claims that, as a government corporation (by virtue of its being a
subsidiary of the National Investment and Development Corporation (NIDC), a subsidiary wholly owned
by the Philippine National Bank (PNB), which in turn is a government owned corporation), the terms and
conditions of employment of its employees are governed by the Civil Service Law, rules and regulations.
In support of this argument, NASECO cites National Housing Corporation vs. JUCO, 33where this Court
held that "There should no longer be any question at this time that employees of government-owned or
controlled corporations are governed by the civil service law and civil service rifles and regulations."

It would appear that, in the interest of justice, the holding in said case should not be given retroactive
effect, that is, to cases that arose before its promulgation on 17 January 1985. To do otherwise would be
oppressive to Credo and other employees similarly situated, because under the same 1973 Constitution
,but prior to the ruling in National Housing Corporation vs. Juco, this Court had recognized the
applicability of the Labor Code to, and the authority of the NLRC to exercise jurisdiction over, disputes
involving terms and conditions of employment in government owned or controlled corporations, among
them, the National Service Corporation (NASECO).<re||an1w> 34

Furthermore, in the matter of coverage by the civil service of government-owned or controlled

corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon which National
Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was provided that:

The civil service embraces every branch, agency, subdivision, and instrumentality of the
Government, including every government-owned or controlled corporation. ... 35

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 Page 142 of 278

On the other hand, the 1987 Constitution provides that:

The civil service embraces all branches, subdivisions, instrumentalities, and agencies of
the Government, including government-owned or controlled corporations with original
charter. 36(Emphasis supplied)

Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the Court in the
National Housing . Corporation case in the following manner

The infirmity of the respondents' position lies in its permitting a circumvention or

emasculation of Section 1, Article XII-B of the constitution. It would be possible for a
regular ministry of government to create a host of subsidiary corporations under the
Corporation Code funded by a willing legislature. A government-owned corporation could
create several subsidiary corporations. These subsidiary corporations would enjoy the
best of two worlds. Their officials and employees would be privileged individuals, free
from the strict accountability required by the Civil Service Decree and the regulations of
the Commission on Audit. Their incomes would not be subject to the competitive restrains
of the open market nor to the terms and conditions of civil service employment.
Conceivably, all government-owned or controlled corporations could be created, no
longer by special charters, but through incorporations under the general law. The
Constitutional amendment including such corporations in the embrace of the civil service
would cease to have application. Certainly, such a situation cannot be allowed to exist. 37

appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil Service
embraces government-owned or controlled corporations with original charter; and, therefore, by clear
implication, the Civil Service does not include government-owned or controlled corporations which are
organized as subsidiaries of government-owned or controlled corporations under the general corporation
law.

The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional intent and
meaning in the use of the phrase "with original charter." Thus

THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is

recognized.

MR. ROMULO. I beg the indulgence of the Committee. I was reading the
wrong provision.

I refer to Section 1, subparagraph I which reads:

The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of
the government, including government-owned or controlled corporations.

My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the
Commissioner please state his previous question?

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MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1,

under the Civil Service Commission, says: "including government-owned
or controlled corporations.' Does that include a corporation, like the
Philippine Airlines which is government-owned or controlled?

MR. FOZ. I would like to throw a question to the Commissioner. Is the

Philippine Airlines controlled by the government in the sense that the
majority of stocks are owned by the government?

MR. ROMULO. It is owned by the GSIS. So, this is what we might call a
tertiary corporation. The GSIS is owned by the government. Would this
be covered because the provision says "including government-owned or
controlled corporations."

MR. FOZ. The Philippine Airlines was established as a private

corporation. Later on, the government, through the GSIS, acquired the
controlling stocks. Is that not the correct situation?

MR. ROMULO. That is true as Commissioner Ople is about to explain.

There was apparently a Supreme Court decision that destroyed that
distinction between a government-owned corporation created under the
Corporation Law and a government-owned corporation created by its
own charter.

MR. FOZ. Yes, we recall the Supreme Court decision in the case of NHA
vs. Juco to the effect that all government corporations irrespective of the
manner of creation, whether by special charter or by the private
Corporation Law, are deemed to be covered by the civil service because
of the wide-embracing definition made in this section of the existing 1973
Constitution. But we recall the response to the question of Commissioner
Ople that our intendment in this provision is just to give a general
description of the civil service. We are not here to make any declaration
as to whether employees of government-owned or controlled
corporations are barred from the operation of laws, such as the Labor
Code of the Philippines.

MR. ROMULO. Yes.

MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name

has been mentioned by both sides.

MR. ROMULO. I yield part of my time.

THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is

recognized.

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MR. OPLE. In connection with the coverage of the Civil Service Law in
Section 1 (1), may I volunteer some information that may be helpful both
to the interpellator and to the Committee. Following the proclamation of
martial law on September 21, 1972, this issue of the coverage of the
Labor Code of the Philippines and of the Civil Service Law almost
immediately arose. I am, in particular, referring to the period following the
coming into force and effect of the Constitution of 1973, where the Article
on the Civil Service was supposed to take immediate force and effect. In
the case of LUZTEVECO, there was a strike at the time. This was a
government-controlled and government-owned corporation. I think it was
owned by the PNOC with just the minuscule private shares left. So, the
Secretary of Justice at that time, Secretary Abad Santos, and myself sat
down, and the result of that meeting was an opinion of the Secretary of
Justice which 9 became binding immediately on the government that
government corporations with original charters, such as the GSIS, were
covered by the Civil Service Law and corporations spun off from the
GSIS, which we called second generation corporations functioning as
private subsidiaries, were covered by the Labor Code. Samples of such
second generation corporations were the Philippine Airlines, the Manila

Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these
companies I have mentioned as examples, except for the Manila Hotel, had collective
bargaining agreements. In the Philippine Airlines, there were, in fact, three collective
bargaining agreements; one, for the ground people or the PALIA one, for the flight
attendants or the PASAC and one for the pilots of the ALPAC How then could a
corporation like that be covered by the Civil Service law? But, as the Chairman of the
Committee pointed out, the Supreme Court decision in the case of NHA vs. Juco unrobed
the whole thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt are
now considered under that decision covered by the Civil Service Law. I also recall that in
the emergency meeting of the Cabinet convened for this purpose at the initiative of the
Chairman of the Reorganization Commission, Armand Fabella, they agreed to allow the
CBA's to lapse before applying the full force and effect of the Supreme Court decision.
So, we were in the awkward situation when the new government took over. I can agree
with Commissioner Romulo when he said that this is a problem which I am not exactly
sure we should address in the deliberations on the Civil Service Law or whether we
should be content with what the Chairman said that Section 1 (1) of the Article on the
Civil Service is just a general description of the coverage of the Civil Service and no
more.

Thank you, Mr. Presiding Officer.

MR. ROMULO. Mr. Presiding Officer, for the moment, I would be

satisfied if the Committee puts on records that it is not their intent by this
provision and the phrase "including government-owned or controlled
corporations" to cover such companies as the Philippine Airlines.

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MR. FOZ. Personally, that is my view. As a matter of fact, when this draft
was made, my proposal was really to eliminate, to drop from the
provision, the phrase "including government- owned or controlled
corporations."

MR. ROMULO. Would the Committee indicate that is the intent of this
provision?

MR. MONSOD. Mr. Presiding Officer, I do not think the Committee can
make such a statement in the face of an absolute exclusion of
government-owned or controlled corporations. However, this does not
preclude the Civil Service Law to prescribe different rules and
procedures, including emoluments for employees of proprietary
corporations, taking into consideration the nature of their operations. So,
it is a general coverage but it does not preclude a distinction of the rules
between the two types of enterprises.

MR. FOZ. In other words, it is something that should be left to the

legislature to decide. As I said before, this is just a general description
and we are not making any declaration whatsoever.

MR. MONSOD. Perhaps if Commissioner Romulo would like a definitive

understanding of the coverage and the Gentleman wants to exclude
government-owned or controlled corporations like Philippine Airlines,
then the recourse is to offer an amendment as to the coverage, if the
Commissioner does not accept the explanation that there could be a
distinction of the rules, including salaries and emoluments.

MR. ROMULO. So as not to delay the proceedings, I will reserve my

right to submit such an amendment.

xxx xxx xxx

THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is

recognized.

MR. ROMULO. On page 2, line 5, I suggest the following amendment

after "corporations": Add a comma (,) and the phrase EXCEPT THOSE
EXERCISING PROPRIETARY FUNCTIONS.

THE PRESIDING OFFICER (Mr. Trenas). What does the Committee

say?

SUSPENSION OF SESSION

MR. MONSOD. May we have a suspension of the session?

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THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.

It was 7:16 p.m.

RESUMPTION OF SESSION

At 7:21 p.m., the session was resumed.

THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.

Commissioner Romulo is recognized.

MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment to

now read as follows: "including government-owned or controlled corporations WITH
ORIGINAL CHARTERS." The purpose of this amendment is to indicate that government
corporations such as the GSIS and SSS, which have original charters, fall within the
ambit of the civil service. However, corporations which are subsidiaries of these
chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt are excluded
from the coverage of the civil service.

THE PRESIDING OFFICER (Mr. Trenas). What does the Committee

say?

MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original
charters," what exactly do we mean?

MR. ROMULO. We mean that they were created by law, by an act of

Congress, or by special law.

MR. FOZ. And not under the general corporation law.

MR. ROMULO. That is correct. Mr. Presiding Officer.

MR. FOZ. With that understanding and clarification, the Committee

accepts the amendment.

MR. NATIVIDAD. Mr. Presiding officer, so those created by the general

corporation law are out.

MR. ROMULO. That is correct: 38

On the premise that it is the 1987 Constitution that governs the instant case because it is the Constitution
in place at the time of decision thereof, the NLRC has jurisdiction to accord relief to the parties. As an
admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the NASECO is a government-owned or
controlled corporation without original charter.

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Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion
in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687, 2694; also
published in 78 Phil. 221) on the effectivity of the principle of social justice embodied in the 1935
Constitution, said:

Certainly, this principle of social justice in our Constitution as generously conceived and
so tersely phrased, was not included in the fundamental law as a mere popular gesture. It
was meant to (be) a vital, articulate, compelling principle of public policy. It should be
observed in the interpretation not only of future legislation, but also of all laws already
existing on November 15, 1935. It was intended to change the spirit of our laws, present
and future. Thus, all the laws which on the great historic event when the Commonwealth
of the Philippines was born, were susceptible of two interpretations strict or liberal,
against or in favor of social justice, now have to be construed broadly in order to promote
and achieve social justice. This may seem novel to our friends, the advocates of legalism
but it is the only way to give life and significance to the above-quoted principle of the
Constitution. If it was not designed to apply to these existing laws, then it would be
necessary to wait for generations until all our codes and all our statutes shall have been
completely charred by removing every provision inimical to social justice, before the
policy of social justice can become really effective. That would be an absurd conclusion.
It is more reasonable to hold that this constitutional principle applies to all legislation in
force on November 15, 1935, and all laws thereafter passed.

WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with
modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295, are
ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her termination, or if such
reinstatement is not possible, to place her in a substantially equivalent position, with three (3) years
backwages, from 1 December 1983, without qualification or deduction, and without loss of seniority rights
and other privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for moral damages
and P5,000.00 for attorney's fees.

If reinstatement in any event is no longer possible because of supervening events, petitioners in G.R. No.
69870, who are the private respondents in G.R. No. 70295 are ordered to pay Eugenia C. Credo, in
addition to her backwages and damages as above described, separation pay equivalent to one-half
month's salary for every year of service, to be computed on her monthly salary at the time of her
termination on 1 December 1983.

SO ORDERED.

25. Paloma vs. PAL July 14, 2008

DECISION

VELASCO, JR., J.:

The Case

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Before us are these two consolidated petitions for review under Rule 45 separately interposed by
Ricardo G. Paloma and Philippine Airlines, Inc. (PAL) to nullify and set aside the Amended
Decision[1] dated May 31, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 56429, as effectively
reiterated in its Resolution[2] of January 14, 2003.
The Facts

Paloma worked with PAL from September 1957, rising from the ranks to retire, after 35 years of
continuous service, as senior vice president for finance. In March 1992, or some nine (9) months before
Paloma retired on November 30, 1992, PAL was privatized.

By way of post-employment benefits, PAL paid Paloma the total amount of PhP 5,163,325.64
which represented his separation/retirement gratuity and accrued vacation leave pay. For the benefits
thus received, Paloma signed a document denominated Release and Quitclaim[3] but inscribed the
following reservation therein: Without prejudice to my claim for further leave benefits embodied in my aide
memoire transmitted to Mr. Roberto Anonas covered by my 27 Nov. 1992 letter x x x.

The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick leave
credits which PAL allegedly only paid the equivalent of 18 days. He anchored his entitlement on
Executive Order No. (EO) 1077[4] dated January 9, 1986, and his having accumulated a certain number of
days of sick leave credits, as acknowledged in a letter of Alvia R. Leao, then an administrative assistant in
PAL. Leaos letter dated November 12, 1992 pertinently reads:

At your request, we are pleased to confirm herewith the balance of your sick
leave credits as they appear in our records: 230 days.

According to our existing policy, an employee is entitled to accumulate sick leave

with pay only up to a maximum of 230 days.

Had there been no ceiling as mandated by Company policy, your sick leave
credits would have totaled 450 days to date.[5]

Answering Palomas written demands for conversion to cash of his accrued sick leave credits,
PAL asserted having paid all of Palomas commutable sick leave credits due him pursuant to company
policy made applicable to PAL officers starting 1990.

The company leave policy adverted to grants PALs regular ground personnel a graduated sick
leave benefits, those having rendered at least 25 years of service being entitled to 20 days of sick leave
for every year of service. An employee, under the policy, may accumulate sick leaves with pay up to 230
days. Subject to defined qualifications, sick leave credits in excess of 230 days shall be commutable to
cash at the employees option and shall be paid in lump sum on or before May 31st of the following year
they were earned.[6] Per PALs records, Paloma appears to have, for the period from 1990 to 1992,
commuted 58 days of his sick leave credits, broken down as follows: 20 days each in 1990 and 1991 and
18 days in 1992.

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Subsequently, Paloma filed before the Arbitration Branch of the National Labor Relations
Commission (NLRC) a Complaint[7] for Commutation of Accrued Sick Leaves Totaling 392 days. In the
complaint, docketed as NLRC-NCR-Case No. 00-08-05792-94, Paloma alleged having accrued sick
leave credits of 450 days commutable upon his retirement pursuant to EO 1077 which allows retiring
government employees to commute, without limit, all his accrued vacation and sick leave credits. And of
the 450-day credit, Paloma added, he had commuted only 58 days, leaving him a balance of 392 days of
accrued sick leave credits for commutation.

Ruling of the Labor Arbiter

Issues having been joined with the filing by the parties of their respective position papers,[8] the
labor arbiter rendered on June 30, 1995 a Decision[9] dispositively reading:

WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S], INC.

is hereby ordered to pay within ten (10) days from receipt hereof herein complainant
Ricardo G. Paloma, the sum of Six Hundred Seventy Five Thousand Pesos
(P675,000.00) representing his one Hundred sixty two days [162] accumulated sick leave
credits, plus ten (10%) percent attorneys fees of P67,500.00, or a total sum of
P742,500.00.

SO ORDERED.

The labor arbiter held that PAL is not covered by the civil service system and, accordingly, its
employees, like Paloma, cannot avail themselves of the beneficent provision of EO 1077. This executive
issuance, per the labor arbiters decision, applies only to government officers and employees covered by
the civil service, exclusive of the members of the judiciary whose leave and retirement system is covered
by a special law.

However, the labor arbiter ruled that Paloma is entitled to a commutation of his alternative claim
for 202 accrued sick leave credits less 40 days for 1990 and 1991. Thus, the grant of commutation for
162 accrued leave credits.

Both parties appealed[10] the decision of the labor arbiter to the NLRC.

Ruling of the NLRC in NLRC NCR CA No. 009652-95

(NLRC-NCR-Case No. 00-08-05792-94)

On November 26, 1997, the First Division of the NLRC rendered a Decision affirming that of the labor
arbiter, thus:

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WHEREFORE, as recommended, both appeals are DISMISSED. The decision of

Labor Arbiter Felipe T. Garduque II dated June 30, 1995 is AFFIRMED.

SO ORDERED.[11]

Both parties moved for reconsideration. In its Resolution of November 10, 1999, the NLRC,
finding Paloma to have, upon his retirement, commutable accumulated sick leave credits of 230 days,
modified its earlier decision, disposing as follows:

In view of all the foregoing, our decision dated November 26, 1997, be modified
by increasing the sick leave benefits of complainant to be commuted to cash from 162
days to 230 days.

SO ORDERED.[12]

From the above modificatory resolution of the NLRC, PAL went to the CA on a petition for
certiorari under Rule 65, the recourse docketed as CA-G.R. SP No. 56429.

Ruling of the CA in its April 28, 2000 Decision

By a Decision dated April 28, 2000, the CA found for PAL, thus:

WHEREFORE, the petition is granted. Public respondents November 10,

1999 Resolution is set aside. And the complaint of Ricardo Paloma is hereby
DISMISSED. Without costs.
SO ORDERED.[13]

In time, Paloma sought reconsideration.[14]

The May 31, 2001 Amended Decision

On May 31, 2001, the CA issued the assailed Amended Decision reversing its April 28,
2000 Decision. The fallo of the Amended Decision reads:

WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is

hereby vacated and, set aside, and another one entered reinstating the Resolution, dated
10 November 1999, issued by the public respondent National Labor Relations
Commission in NLRC NCR Case No. 00-08-05792-94 [NLRC NCR CA No. 009652-95],
entitled Ricardo G. Paloma v. Philippine Airlines, Incorporated, with the only modification
that the total sums granted by Labor Arbiter Felipe T. Garduque II (P742,500.00,
inclusive of the ten percent (10%) attorneys fees), as affirmed by public respondent
National Labor Relations Commission, First Division, in said NLRC Case No. 00-08-
05792-94, shall earn legal interest from the date of the institution of the complaint until
fully paid/discharged. (Art. 2212, New Civil Code).

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SO ORDERED.[15]

Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and necessarily to
Paloma on the following rationale: Section 2(1) of Article IX(B) of the 1987 Constitution applies
prospectively and, thus, the expressed limitation therein on the applicability of the civil service law only to
government-owned and controlled corporations (GOCCs) with original charters does not preclude the
applicability of EO 1077 to PAL and its then employees. This conclusion, the CA added, becomes all the
more pressing considering that PAL, at the time of the issuance of EO 1077, was still a GOCC and that
Paloma had already 29 years of service at that time. The appellate court also stated that since PAL had
then no existing retirement program, the provisions of EO 1077 shall serve as a retirement program for
Paloma who had meanwhile acquired vested rights under the EO pursuant to Arts. 100 [16] and 287[17] of
the Labor Code.

Significantly, despite affirmatively positing the applicability of EO 1077, the Amended Decision
still deferred to PALs existing policy on the 230-day limit for accrued sick leave with pay that may be
credited to its employees. Incongruously, while the CA reinstated the November 10, 1999 Resolution of
the NLRC, it decreed the implementation of the labor arbiters Decision dated June 30, 1995. As may be
recalled, the NLRC, in its November 10, 1999 Resolution, allowed a 230-day sick leave commutation, up
from the 162 days granted under the June 30, 1995 Decision of the labor arbiter.

Paloma immediately appealed the CAs Amended Decision via a Petition for Review on Certiorari
under Rule 45, docketed as G.R. No. 148415. On the other hand, PAL first sought reconsideration of the
Amended Decision, coming to us after the CA, per its January 14, 2003 Resolution, denied the desired
reconsideration. In net effect then, PALs Petition for Review on Certiorari, docketed as G.R. No. 156764,
assails both the Amended Decision and Resolution of the CA.

The Issues

In G.R. No. 148415, Paloma raises the sole issue of:

WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO. 1077 IS APPLICABLE TO
PETITIONER AND YET APPLYING COMPANY POLICY BY AWARDING THE CASH
EQUIVALENT OF ONLY 162 DAYS SICK LEAVE CREDITS INSTEAD OF THE 450
DAYS SICK LEAVE CREDITS PETITIONER IS ENTITLED TO UNDER E.O. NO. 1077,
DECIDED A QUESTION OF SUBSTANCE IN A MANNER CONTRARY TO LAW AND
APPLICABLE JURISPRUDENCE.[18]

In G.R. No. 156764, PAL raises the following issues for our consideration:

1. May an employee of a non-government corporation [invoke EO] 1077 which the

then President Ferdinand E. Marcos issued on January 9, 1986, solely for the benefit
of government officers and employees covered by the civil service?

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2. Can a judicial body modify or alter a company policy by ordering the commutation
of sick leave credits which, under company policy is non-commutable?[19]

The issues submitted boil down to the question of whether or not EO 1077, before PALs
privatization, applies to its employees, and corollarily, whether or not Paloma is entitled to a commutation
of his accrued sick leave credits. Subsumed to the main issue because EO 1077 applies only to
government employees subject to civil service law is the question of whether or not PALwhich, as early as
1960 until its privatization, had been considered as a government-controlled corporationis covered by and
subject to the limitations peculiar under the civil service system.

There can be no quibbling, as a preliminary consideration, about PAL having been incorporated
as a private corporation whose controlling stocks were later acquired by the GSIS, which is wholly owned
by the government. Through the years before GSIS divested itself of its controlling interests over the
airline, PAL was considered a government-controlled corporation, as we said as much in Phil. Air Lines
Employees Assn. v. Phil. Air Lines, Inc.,[20] a case commenced in August 1958 and finally resolved by the
Court in 1964. The late Blas Ople, former Labor Secretary and a member of the 1986 Constitutional
Commission, described PAL and other like entities spun off from the GSIS as second generation
corporations functioning as private subsidiaries.[21] Before the coming into force of the 1973 Constitution,
a subsidiary of a wholly government-owned corporation or a government corporation with original charter
was covered by the Labor Code. Following the ratification of the 1973 Constitution, these subsidiaries
theoretically came within the pale of the civil service on the strength of this provision: [T]he civil service
embraces every branch, agency, subdivision and instrumentality of the Government, including every
[GOCC] x x x.[22] Then came the 1987 Constitution which contextually delimited the coverage of the civil
service only to a GOCC with original charter.[23]

The Courts Ruling

Considering the applicable law and jurisprudence in the light of the undisputed factual milieu of
the instant case, the setting aside of the assailed amended decision and resolution of the CA is indicated.

Core Issue: Applicability of EO 1077

Insofar as relevant, EO 1077 dated January 9, 1986, entitled Revising the Computation of
Creditable Vacation and Sick Leaves of Government Officers and Employees, provides:

WHEREAS, under existing law and civil service regulations, the number of days of
vacation and sick leaves creditable to a government officer or employee is limited to 300
days;

WHEREAS, by special law, members of the judiciary are not subject to such restriction;

WHEREAS, it is the continuing policy of the government to institute to the extent possible
a uniform and equitable system of compensation and benefits and to enhance the morale
and performance in the civil service.

xxxx

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NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue

of the powers vested in me by the Constitution, do hereby order and direct the following:

Section 1. Any officer [or] employee of the government who retires or voluntary resigns or
is separated from the service through no fault of his own and whose leave benefits are
not covered by special law, shall be entitled to the commutation of all the accumulated
vacation and/or sick leaves to his credit, exclusive of Saturdays, Sundays, and
holidays, without limitation as to the number of days of vacation and sick leaves
that he may accumulate. (Emphasis supplied.)
Paloma maintains that he comes within the coverage of EO 1077, the same having been issued
in 1986, before he severed official relations with PAL, and at a time when the applicable constitutional
provision on the coverage of the civil service made no distinction between GOCCs with original charters
and those without, like PAL which was incorporated under the Corporation Code. Implicit in Palomas
contention is the submission that he earned the bulk of his sick leave credits under the aegis of the 1973
Constitution when PAL, being then a government-controlled corporation, was under civil service
coverage.

The contention is without merit.

PAL never ceased to be operated as a private corporation, and was not subjected to the Civil
Service Law

The Court can allow that PAL, during the period material, was a government-controlled
corporation in the sense that the GSIS owned a controlling interest over its stocks.One stubborn fact,
however, remains: Through the years, PAL functioned as a private corporation and managed as such for
profit. Their personnel were never considered government employees. It may perhaps not be amiss for
the Court to take judicial notice of the fact that the civil service law and rules and regulations have not
actually been made to apply to PAL and its employees. Of governing application to them was the
Labor Code. Consider: (a) Even during the effectivity of the 1973 Constitution but prior to the
promulgation on January 17, 1985 of the decision in No. L-64313 entitled National Housing Corporation v.
Juco,[24] the Court no less recognized the applicability of the Labor Code to, and the authority of the NLRC
to exercise jurisdiction over, disputes involving discipline, personnel movements, and dismissal in
GOCCs, among them PAL;[25] (b) Company policy and collective bargaining agreements (CBAs), instead
of the civil service law and rules, govern the terms and conditions of employment in PAL. In fact, Ople
rhetorically asked how PAL can be covered by the civil service law when, at one time, there were three
(3) CBAs in PAL, one for the ground crew, one for the flight attendants, and one for the pilots; [26] and (c)
When public sector unionism was just an abstract concept, labor unions in PAL with the right to engage in
strike and other concerted activities were already active.[27]

Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees Assn., wherein the
Court stated that the Civil Service Law has not been actually applied to PAL.[28]

Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits of EO
1077 which, to stress, was issued to narrow the gap between the leave privileges between the members
of the judiciary, on one hand, and other government officers and employees in the civil service, on the

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other. That PAL and Paloma may have, at a time, come within the embrace of the civil service by virtue of
the 1973 Constitution is of little moment at this juncture. As held in National Service Corporation v.
National Labor Relations Commission (NASECO),[29] the issue of whether or not a given GOCC falls
within the ambit of the civil service subject, vis--vis disputes respecting terms and conditions of
employment, to the jurisdiction of the Civil Service Commission or the NLRC, as the case may be,
resolves itself into the question of which between the 1973 Constitution, which does not distinguish
between a GOCC with or without an original charter, and the 1987 Constitution, which does, is in
place. To borrow from the 1988 NASECO ruling, it is the 1987 Constitution, which delimits the coverage
of the civil service, that should govern this case because it is the Constitution in place at the time the case
was decided, even if, incidentally, the cause of action accrued during the effectivity of the 1973
Constitution. This has been the consistent holding of the Court in subsequent cases involving GOCCs
without original charters.[30]

It cannot be overemphasized that when Paloma filed his complaint for commutation of sick leave
credits, private interests already controlled, if not owned, PAL. Be this as it may, Paloma, when he filed
said complaint, cannot even assert being covered by the civil service and, hence, entitled to the benefits
attached to civil service employment, such as the right under EO 1077 to accumulate and commute leave
credits without limit. In all, then, Paloma, while with PAL, was never a government employee covered by
the civil service law. As such, he did not acquire any vested rights on the retirement benefits accorded by
EO 1077.

Paloma not entitled to the benefits granted in EO 1077; existing company policy on the matter
applies

What governs Palomas entitlement to sick leave benefits and the computation and commutation
of creditable benefits is not EO 1077, as the labor arbiter and originally the NLRC correctly held, but PALs
company policy on the matter which, as found below, took effect in 1990. The text of the policy is
reproduced in the CAs April 28, 2000 Decision and sets out the following pertinent rules:

POLICY

Regular employees shall be entitled to a yearly period of sick leave with pay, the
exact number of days to be determined on the basis of the employees category and
length of service in the company.

RULES

A. For ground personnel

2. Sick leave shall be granted only upon certification by a company physician that an
employee is incapable of discharging his duties due to illness or injury x x x.

xxxx

3. Sick leave entitlement accrues from the date of an employees regular employment
x x x.

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In case of direct conversion from temporary/daily/project/contract to regular status,

regular employment shall be deemed to have begun on the date of the employees
conversion as a regular employee.

xxxx

4. An employee may accumulate sick leave with pay up to Two Hundred Thirty
(230) days;

An employee who has accumulated seventy-five (75) days sick leave credit at the
end of each year may, at his option, commute seventy-five percent (75%) of his current
sick leave entitlement to cash and the other twenty-five percent (25%) to be added to his
accrued sick leave credits up to two hundred thirty (230) calendar days.

The seventy-five percent (75%) commutable to cash as above provided, shall be paid
up in lump sum on or before May 31st of the following year.

Sick leave credits in excess of two hundred thirty (230) days shall be
commutable to cash at the employees option, and shall be paid in lump sum on or
before May 31st of the following year it was earned.[31] (Emphasis ours.)

As may be gathered from the records, accrued sick leave credits in excess of 230 days were not,
if earned before 1990 when the above policy took effect, commutable to cash; they were simply
forfeited. Those earned after 1990, but still subject to the 230-day threshold rule, were commutable to
cash to the extent of 75% of the employees current entitlement, and payable on or before May 31st of the
following year, necessarily implying that the privilege to commute is time-bound.

It appears that Paloma had, as of 1990, more than 230 days of accrued sick leave
credits. Following company policy, Paloma was deemed to have forfeited the monetary value of his leave
credits in excess of the 230-day ceiling. Now, then, it is undisputed that he earned additional accrued sick
leave credits of 20 days in 1990 and 1991 and 18 days in 1992, which he duly commuted pursuant to
company policy and received with the corresponding cash value. Therefore, PAL is correct in contending
that Paloma had received whatever was due on the commutation of his accrued sick leave credits in
excess of the 230 days limit, specifically the 58 days commutation for 1990, 1991, and 1992.

No commutation of 230 days accrued sick leave credits

The query that comes next is how the 230 days accrued sick leave credits Paloma undoubtedly
had when he retired are to be treated. Is this otherwise earned credits commutable to cash? These
should be answered in the negative.

The labor arbiter granted 162 days commutation, while the NLRC allowed the commutation of the
maximum 230 days. The CA, while seemingly affirming the NLRCs grant of 230 days commutation,
actually decreed a 162-day commutation. We cannot sustain any of the dispositions thus reached for lack
of legal basis, for PALs company policy upon which either disposition was predicated did not provide for a

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commutation of the first 230 days accrued sick leave credits employees may have upon their
retirement.Hence, the NLRC and the CA, by their act of allowing commutation to cash, erred as they
virtually read in the policy something not written or intended therein. Indeed, no law provides for
commutation of unused or accrued sick leave credits in the private sector. Commutation is allowed by
way of voluntary endowment by an employer through a company policy or by a CBA. None of such
medium presently obtains and it would be incongruous if the Court fills up the vacuum.

Confronted with a similar situation as depicted above, the Court, in Baltazar v. San Miguel
Brewery, Inc., declared as follows:

In connection with the question of whether or not appellee is entitled to the cash
value of six months accumulated sick leave, it appears that while under the last
paragraph of Article 5 of appellants Rules and Regulations of the Health, Welfare and
Retirement Plan (Exhibit 3), unused sick leave may be accumulated up to a maximum of
six months, the same is not commutable or payable in cash upon the employees option.

In our view, the only meaning and import of said rule and regulation is that if an
employee does not choose to enjoy his yearly sick leave of thirty days, he may
accumulate such sick leave up to a maximum of six months and enjoy this six months
sick leave at the end of the sixth year but may not commute it to cash.[32]

In fine, absent any provision in the applicable company policy authorizing the commutation of the
230 days accrued sick leave credits existing upon retirement, Paloma may not, as a matter of enforceable
right, insist on the commutation of his sick leave credits to cash.

As PALs senior vice-president for finance upon his retirement, Paloma knew or at least ought to
have known the company policy on accrued sick leave credits and how it was being implemented. Had he
acted on that knowledge in utmost good faith, these proceedings would have not come to pass.

WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for lack of merit, while
the petition under G.R. No. 156764 is hereby GIVEN DUE COURSE. The Amended Decision dated May
31, 2001 of the CA in CA-G.R. SP No. 56429 and its Resolution of January 14, 2003 are
hereby ANNULLED and SET ASIDE, and the CA Decision dated April 28, 2000 is
accordingly REINSTATED.

Costs against Ricardo G. Paloma.

SO ORDERED.

26. Jumuad vs. Hi-Flyer Food, Inc. GR. No. 187887, September 7, 2011

DECISION

MENDOZA, J.:

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This is a petition for review on certiorari assailing the April 20, 2009 Decision[1] of the Court of
Appeals (CA) in CA-G.R. SP No. 03346, which reversed the August 10, 2006 Decision[2] and the
November 29, 2007 Resolution[3] of the National Labor Relations Commission, 4th Division (NLRC), in
NLRC Case No. V-000813-06. The NLRC Decision and Resolution affirmed in toto the Decision[4] of the
Labor Arbiter Julie C. Ronduque (LA) in RAB Case No. VII-10-2269-05 favoring the petitioner.

The Facts:

On May 22, 1995, petitioner Pamela Florentina P. Jumuad (Jumuad) began her employment with
respondent Hi-Flyer Food, Inc. (Hi-Flyer), as management trainee. Hi-Flyer is a corporation licensed to
operate Kentucky Fried Chicken (KFC) restaurants in the Philippines. Based on her performance through
the years, Jumuad received several promotions until she became the area manager for the entire
Visayas-Mindanao 1 region, comprising the provinces of Cebu, Bacolod, Iloilo and Bohol.[5]

Aside from being responsible in monitoring her subordinates, Jumuad was tasked to: 1) be highly visible
in the restaurants under her jurisdiction; 2) monitor and support day-to-day operations; and 3) ensure that
all the facilities and equipment at the restaurant were properly maintained and serviced.[6] Among the
branches under her supervision were the KFC branches in Gaisano Mall, Cebu City (KFC-Gaisano); in
Cocomall, Cebu City (KFC-Cocomall); and in Island City Mall, Bohol (KFC-Bohol).

As area manager, Jumuad was allowed to avail of Hi-Flyers car loan program,[7] wherein
forty (40%) percent of the total loanable amount would be subsidized by Hi-Flyer and the remaining
sixty (60%) percent would be deducted from her salary. It was also agreed that in the event that she
would resign or would be terminated prior to the payment in full of the said car loan, she could opt to
surrender the car to Hi-Flyer or to pay the full balance of the loan.[8]
In just her first year as Area Manager, Jumuad gained distinction and was awarded the 3rd top
area manager nationwide. She was rewarded with a trip to Singapore for her excellent performance.[9]
On October 4, 2004, Hi Flyer conducted a food safety, service and sanitation audit at KFC-
Gaisano. The audit, denominated as CHAMPS Excellence Review (CER),revealed several sanitation
violations, such as the presence of rodents and the use of a defective chiller for the storage of
food.[10] When asked to explain, Jumuad first pointed out that she had already taken steps to prevent the
further infestation of the branch. As to why the branch became infested with rodents, Jumuad faulted
managements decision to terminate the services of the branchs pest control program and to rely solely on
the pest control program of the mall. As for the defective chiller, she explained that it was under repair at
the time of the CER.[11] Soon thereafter, Hi-Flyer ordered the KFC-Gaisano branch closed.

Then, sometime in June of 2005, Hi-Flyer audited the accounts of KFC-Bohol amid reports that certain
employees were covering up cash shortages. As a result, the following irregularities were discovered: 1)
cash shortage amounting to 62,290.85; 2) delay in the deposits of cash sales by an average of three
days; 3) the presence of two sealed cash-for-deposit envelopes containing paper cut-outs instead of cash;
4) falsified entries in the deposit logbook; 5) lapses in inventory control; and 6) material product
spoilage.[12] In her report regarding the incident, Jumuad disclaimed any fault in the incident by pointing
out that she was the one responsible for the discovery of this irregularity. [13]

On August 7, 2005, Hi-Flyer conducted another CER, this time at its KFC-Cocomall branch. Grout
and leaks at the branchs kitchen wall, dried up spills from the marinator, as well as a live rat under

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postmix, and signs of rodent gnawing/infestation were found.[14] This time, Jumuad explained to
management that she had been busy conducting management team meetings at the other KFC branches
and that, at the date the CER was conducted, she had no scheduled visit at the KFC-Cocomall branch.[15]

Seeking to hold Jumuad accountable for the irregularities uncovered in the branches under her
supervision, Hi-Flyer sent Jumuad an Irregularities Report[16] and Notice of Charges[17] which she received
on September 5, 2005. On September 7, 2005 Jumuad submitted her written
explanation.[18] On September 28, 2005, Hi-Flyer held an administrative hearing where Jumuad appeared
with counsel. Apparently not satisfied with her explanations, Hi-Flyer served her a Notice of
Dismissal[19] dated October 14, 2005, effecting her termination on October 17, 2005.

This prompted Jumuad to file a complaint against Hi-Flyer and/or Jesus R. Montemayor (Montemayor) for
illegal dismissal before the NLRC on October 17, 2005, praying for reinstatement and payment of
separation pay, 13th month pay, service incentive leave, moral and exemplary damages, and attorneys
fees. Jumuad also sought the reimbursement of the amount equivalent to her forty percent (40%)
contribution to Hi-Flyers subsidized car loan program.

While the LA found that Jumuad was not completely blameless for the anomalies discovered, she
was of the view that the employers prerogative to dismiss or layoff an employee must be exercised
without abuse of discretion and should be tempered with compassion and understanding. [20] Thus, the
dismissal was too harsh considering the circumstances. After finding that no serious cause for termination
existed, the LA ruled that Jumuad was illegally dismissed. The LA disposed:

WHEREFORE, VIEWED FROM THE FOREGOING PREMISES, judgment is hereby

rendered declaring complainants dismissal as ILLEGAL. Consequently, reinstatement not
being feasible, respondents HI-FLYER FOOD, INC. AND OR JESUS R. MONTEMAYOR
are hereby ordered to pay, jointly and severally, complainant PAMELA FLORENTINA P.
JUMUAD, the total amount of THREE HUNDRED THIRTY-SIX THOUSAND FOUR
HUNDRED PESOS (336,400.00), Philippine currency, representing Separation Pay,
within ten (10) days from receipt hereof, through the Cashier of this Arbitration Branch.
Further, same respondents are ordered to reimburse complainant an amount
equivalent to 40% of the value of her car loaned pursuant to the car loan entitlement
memorandum.

Other claims are DISMISSED for lack of merit.[21]

Both Jumuad and Hi-Flyer appealed to the NLRC. Jumuad faulted the LA for not awarding backwages
and damages despite its finding that she was illegally dismissed. Hi-Flyer and Montemayor, on the other
hand, assailed the finding that Jumuad was illegally dismissed and that they were solidarily liable therefor.
They also questioned the orders of the LA that they pay separation pay and reimburse the forty percent
(40%) of the loan Jumuad paid pursuant to Hi-Flyers car entitlement program.

Echoing the finding of the LA that the dismissal of Jumuad was too harsh, the NLRC affirmed in toto the
LA decision dated August 10, 2006. In addition, the NLRC noted that even before the Irregularities Report
and Notice of Charges were given to Jumuad on September 5, 2005, two (2) electronic mails (e-
mails) between Montemayor and officers of Hi-Flyer showed that Hi-Flyer was already determined to
terminate Jumuad. The first e-mail[22] read:

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From: Jess R. Montemayor

Sent: Tuesday, August 16, 2005 5:59 PM
To: bebe chaves; Maria Judith N. Marcelo; Jennifer Coloma Ravela; Bernard Joseph A.
Velasco
Cc: Odjie Belarmino; Jesse D. Cruz
Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality Violation

I agree if the sanctions are light we should change them. In the case of Pamela however,
the fact that Cebu Colon store had these violations is not the first time this incident has
happened in her area. The Bohol case was also in her area and maybe these two
incidents is enough grounds already for her to be terminated or maybe asked to resign
instead of being terminated.

I know if any Ops person serves expired product this is ground for termination. I think
serving off specs products such as this lumpy gravy in the case of Coco Mall should be
grounds for termination. How many customers have we lost due to this lumpy clearly out
of specs gravy? 20 customers maybe.

Jess.

The second e-mail,[23] sent by one Bebe Chaves of Hi-Flyer to Montemayor and other officers of Hi-Flyer,
reads:

From: bebe chaves

Sent: Sat 9/3/2005 3:45 AM

To: Maria Judith N. Marcelo
CC: Jennifer Coloma Ravela; Goodwin Belarmino; Jess R. Montemayor
Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality Violation

Jojo,

Just an update of our meeting yesterday with Jennifer. After having reviewed the case
and all existing documents, we have decided that there is enough ground to terminate
her services. IR/Jennifer are working hand in hand to service due notice and close the
case.

According to the NLRC, these e-mails were proof that Jumuad was denied due process considering that
no matter how she would refute the charges hurled against her, the decision of Hi-Flyer to terminate her
would not change.[24]

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Sustaining the order of the LA to reimburse Jumuad the amount equivalent to 40% of the value of the car
loan, the NLRC explained that Jumuad enjoyed this benefit during her period of employment as Area
Manager and could have still enjoyed the same if not for her illegal dismissal.[25]
Finally, the NLRC held that the active participation of Montemayor in the illegal dismissal of
Jumuad justified his solidary liability with Hi-Flyer.

Both Jumuad and Hi-Flyer sought reconsideration of the NLRC Decision but their respective motions were
denied on November 29, 2007.[26]

Alleging grave abuse of discretion on the part of the NLRC, Hi-Flyer appealed the case before the CA
in Cebu City.

On April 20, 2009, the CA rendered the subject decision reversing the decision of the labor tribunal. The
appellate court disposed:

WHEREFORE, in view of the foregoing, the Petition is GRANTED. The Decision

of the National Labor Relations Commission (4th Division) dated 28 September 2007 in
NLRC Case No. V-000813-06 (RAB Case No. VII-10-2269-05, as well as the Decision
dated 10 August 2006 of the Honorable Labor Arbiter Julie C. Ronduque, and the 29
November 2006 Resolution of the NLRC denying petitioners Motion for Reconsideration
dated 08 November 2007, are hereby REVERSED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.[27]

Contrary to the findings of the LA and the NLRC, the CA was of the opinion that the requirements of
substantive and procedural due process were complied with affording Jumuad an opportunity to be heard
first, when she submitted her written explanation and then, when she was informed of the decision and
the basis of her termination.[28] As for the e-mail exchanges between Montemayor and the officers of Hi-
Flyer, the CA opined that they did not equate to a predetermination of Jumuads termination. It was of the
view that the e-mail exchanges were mere discussions between Montemayor and other officers of Hi-
Flyer on whether grounds for disciplinary action or termination existed. To the mind of the CA, the e-mails
just showed that Hi-Flyer extensively deliberated the nature and cause of the charges against Jumuad.[29]

On the issue of loss of trust and confidence, the CA considered the deplorable sanitary conditions and the
cash shortages uncovered at three of the seven KFC branches supervised by Jumuad as enough bases
for Hi-Flyer to lose its trust and confidence in her.[30]

With regard to the reimbursement of the 40% of the car loan as awarded by the labor tribunal, the CA
opined that the terms of the car loan program did not provide for reimbursement in case an employee was
terminated for just cause and they, in fact, required that the employee should stay with the company for at
least three (3) years from the date of the loan to obtain the full 40% subsidy. The CA further stated that
the rights and obligations of the parties should be litigated in a separate civil action before the regular
courts.[31]

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The CA also exculpated Montemayor from any liability since it considered Jumuads dismissal with a just
cause and it found no evidence that he acted with malice and bad faith.[32]

Hence, this petition on the following

GROUNDS:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

UPHOLD[ING] AS VALID THE TERMINATION OF PETITIONERS SERVICES
BY RESPONDENTS.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN

IT REVERSED THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION 4TH DIVISION OF CEBU CITY WHICH AFFIRMED THE
DECISION OF LABOR ARBITER JULUE RENDOQUE.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT

REVERSED THE DECISION OF THE NATIONAL LABOR RELATIONS
COMMISSION 4THDIVISION OF CEBU CITY WHEN IT RULED THAT
PETITIONER IS NOT ENTITLED TO REIMBURSEMENT OF FORTY PERCENT
(40%) OF THE CAR VALUE BENEFITS.

It is a hornbook rule that factual findings of administrative or quasi-judicial bodies, which are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded
not only respect but even finality, and bind the Court when supported by substantial evidence.[33] While
this rule is strictly adhered to in labor cases, the same rule, however, admits exceptions. These
include: (1) when there is grave abuse of discretion; (2) when the findings are grounded on speculation;
(3) when the inference made is manifestly mistaken; (4) when the judgment of the Court of Appeals is
based on a misapprehension of facts; (5) when the factual findings are conflicting; (6) when the Court of
Appeals went beyond the issues of the case and its findings are contrary to the admissions of the parties;
(7) when the Court of Appeals overlooked undisputed facts which, if properly considered, would justify a
different conclusion; (8) when the facts set forth by the petitioner are not disputed by the respondent; and
(9) when the findings of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.[34]

In the case at bench, the factual findings of the CA differ from that of the LA and the NLRC. This
divergence of positions between the CA and the labor tribunal below constrains the Court to review and
evaluate assiduously the evidence on record.

The petition is without merit.

On whether Jumuad was illegally dismissed, Article 282 of the Labor Code provides:

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;

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(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.

Jumuad was terminated for neglect of duty and breach of trust and confidence. Gross negligence
connotes want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It
evinces a thoughtless disregard of consequences without exerting any effort to avoid them. Fraud and
willful neglect of duties imply bad faith of the employee in failing to perform his job, to the detriment of the
employer and the latters business. Habitual neglect, on the other hand, implies repeated failure to perform
one's duties for a period of time, depending upon the circumstances. It has been said that a single or an
isolated act of negligence cannot constitute as a just cause for the dismissal of an employee. [35] To be a
ground for removal, the neglect of duty must be both gross and habitual.[36]

On the other hand, breach of trust and confidence, as a just cause for termination of employment, is
premised on the fact that the employee concerned holds a position of trust and confidence, where greater
trust is placed by management and from whom greater fidelity to duty is correspondingly expected. The
betrayal of this trust is the essence of the offense for which an employee is penalized. [37]

It should be noted, however, that the finding of guilt or innocence in a charge of gross and
habitual neglect of duty does not preclude the finding of guilty or innocence in a charge of breach of trust
and confidence. Each of the charges must be treated separately, as the law itself has treated them
separately. To repeat, to warrant removal from service for gross and habitual neglect of duty, it must be
shown that the negligence should not merely be gross, but also habitual. In breach of trust and
confidence, so long as it is shown there is some basis for management to lose its trust and confidence
and that the dismissal was not used as an occasion for abuse, as a subterfuge for causes which are
illegal, improper, and unjustified and is genuine, that is, not a mere afterthought intended to justify an
earlier action taken in bad faith, the free will of management to conduct its own business affairs to
achieve its purpose cannot be denied.

After an assiduous review of the facts as contained in the records, the Court is convinced that Jumuad
cannot be dismissed on the ground of gross and habitual neglect of duty. The Court notes the apparent
neglect of Jumuad of her duty in ensuring that her subordinates were properly monitored and that she had
dutifully done all that was expected of her to ensure the safety of the consuming public who continue to
patronize the KFC branches under her jursidiction. Had Jumuad discharged her duties to be highly visible
in the restaurants under her jurisdiction, monitor and support the day to day operations of the branches
and ensure that all the facilities and equipment at the restaurant were properly maintained and serviced,
the deplorable conditions and irregularities at the various KFC branches under her jurisdiction would have
been prevented.

Considering, however, that over a year had lapsed between the incidences at KFC-Gaisano and KFC-
Bohol, and that the nature of the anomalies uncovered were each of a different nature, the Court finds
that her acts or lack of action in the performance of her duties is not born of habit.

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Despite saying this, it cannot be denied that Jumuad willfully breached her duties as to be unworthy of the
trust and confidence of Hi-Flyer. First, there is no denying that Jumuad was a managerial
employee. As correctly noted by the appellate court, Jumuad executed management policies and
had the power to discipline the employees of KFC branches in her area. She recommended
actions on employees to the head office. Pertinent is Article 212 (m) of the Labor Code defining a
managerial employee as one who is vested with powers or prerogatives to lay down and execute
management policies and/or hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees.

Based on established facts, the mere existence of the grounds for the loss of trust and confidence
justifies petitioners dismissal. Pursuant to the Courts ruling in Lima Land, Inc. v. Cuevas,[38] as long as
there is some basis for such loss of confidence, such as when the employer has reasonable ground to
believe that the employee concerned is responsible for the purported misconduct, and the nature of his
participation therein renders him unworthy of the trust and confidence demanded of his position, a
managerial employee may be dismissed.

In the present case, the CERs reports of Hi-Flyer show that there were anomalies committed in the
branches managed by Jumuad. On the principle of respondeat superior or command responsibility alone,
Jumuad may be held liable for negligence in the performance of her managerial duties. She may not have
been directly involved in causing the cash shortages in KFC-Bohol, but her involvement in not performing
her duty monitoring and supporting the day to day operations of the branches and ensure that all the
facilities and equipment at the restaurant were properly maintained and serviced, could have truly
prevented the whole debacle from ever occurring.

Moreover, it is observed that rather than taking proactive steps to prevent the anomalies at her branches,
Jumuad merely effected remedial measures. In the restaurant business where the health and well-being
of the consuming public is at stake, this does not suffice. Thus, there is reasonable basis for Hi-Flyer to
withdraw its trust in her and dismissing her from its service.
The disquisition of the appellate court on the matter is also worth mentioning:

In this case, there is ample evidence that private respondent indeed committed acts
justifying loss of trust and confidence of Hi-Flyer, and eventually, which resulted to her
dismissal from service. Private respondents mismanagement and negligence in
supervising the effective operation of KFC branches in the span of less than a year,
resulting in the closure of KFC-Gaisano due to deplorable sanitary conditions, cash
shortages in KFC-Bohol, in which the said branch, at the time of discovery, was only
several months into operation, and the poor sanitation at KFC-Cocomall. The glaring fact
that three (3) out of the seven (7) branches under her area were neglected cannot be
glossed over by private respondents explanation that there was no negligence on her
part as the sanitation problem was structural, that she had been usually busy conducting
management team meetings in several branches of KFC in her area or that she had no
participation whatsoever in the alleged cash shortages.

xxx

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It bears stressing that both the Labor Arbiter and the NLRC found that private respondent
was indeed lax in her duties. Thus, said the NLRC: xxx [i]t is Our considered view that
xxx complainant cannot totally claim that she was not remiss in her duties xxx.[39]

As the employer, Hi-Flyer 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. [40]

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, the employers exercise of its management prerogative must be upheld. [41]

In this case, Hi-Flyer exercised in good faith its management prerogative as there is no dispute
that it has lost trust and confidence in her and her managerial abilities, to its damage and prejudice. Her
dismissal, was therefore, justified.

As for Jumuads claim for the reimbursement of the 40% of the value of the car loan subsidized by
Hi-Flyer under its car loan policy, the same must also be denied. The rights and obligations of the parties
to a car loan agreement is not a proper issue in a labor dispute but in a civil one. [42] It involves the
relationship of debtor and creditor rather than employee-employer relations.[43] Jurisdiction, therefore, lies
with the regular courts in a separate civil action.[44]
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 its interests.[45]

WHEREFORE, the petition is DENIED.

SO ORDERED.

27. Alert Security and Investigation Agency vs. Psawilan, GR No. 182397, September 14,
2011.

DECISION

VILLARAMA, JR., J.:

This petition for review on certiorari assails the Decision [1] dated February 1, 2008 of the Court of
Appeals (CA) in CA-G.R. SP No. 99861. The appellate court reversed and set aside the January 31, 2007

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Decision[2] and March 15, 2007 Resolution[3] of the National Labor Relations Commission (NLRC) and
reinstated the Labor Arbiters Decision[4] finding petitioners guilty of illegal dismissal.

The facts follow.

Respondents Saidali Pasawilan, Wilfredo Verceles and Melchor Bulusan were all employed by
petitioner Alert Security and Investigation Agency, Inc. (Alert Security) as security guards
beginning March 31, 1996, January 14, 1997, and January 24, 1997, respectively. They were paid 165.00
pesos a day as regular employees, and assigned at the Department of Science and Technology (DOST)
pursuant to a security service contract between the DOST and Alert Security.

Respondents aver that because they were underpaid, they filed a complaint for money claims
against Alert Security and its president and general manager, petitioner Manuel D. Dasig, before Labor
Arbiter Ariel C. Santos. As a result of their complaint, they were relieved from their posts in the DOST and
were not given new assignments despite the lapse of six months. On January 26, 1999, they filed a joint
complaint for illegal dismissal against petitioners.

Petitioners, on the other hand, deny that they dismissed the respondents. They claimed that from
the DOST, respondents were merely detailed at the Metro Rail Transit, Inc. at the Light Rail Transit
Authority (LRTA) Compound in Aurora Blvd. because the wages therein were already adjusted to the
latest minimum wage. Petitioners presented Duty Detail Orders[5] that Alert Security issued to show that
respondents were in fact assigned to LRTA. Respondents, however, failed to report at the LRTA and
instead kept loitering at the DOST and tried to convince other security guards to file complaints against
Alert Security. Thus, on August 3, 1998, Alert Security filed a termination report [6] with the Department of
Labor and Employment relative to the termination of the respondents.

Upon motion of the respondents, the joint complaint for illegal dismissal was ordered consolidated
with respondents earlier complaint for money claims. The records of the illegal dismissal case were sent
to Labor Arbiter Ariel C. Santos, but later returned to the Office of the Labor Arbiter hearing the illegal
dismissal complaint because a Decision[7] has already been rendered in the complaint for money claims
on July 14, 1999. In that decision, the complaint for money claims was dismissed for lack of merit but
petitioners were ordered to pay respondents their latest salary differentials.

On July 28, 2000, Labor Arbiter Melquiades Sol D. Del Rosario rendered a Decision [8] on the
complaint for illegal dismissal. The Labor Arbiter ruled:

CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding

complainants to have been illegally dismissed. Consequently, each complainant should
be paid in solidum by the respondents the individual awards computed in the body of the
decision, which is hereto adopted as part of this disposition.

SO ORDERED.[9]

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Aggrieved, petitioners appealed the
deciding a re-filed case when it was filed in
shopping. Further, petitioners argued that
transferred. They claimed that it was the
assignment.
decision to the NLRC claiming that the Labor Arbiter erred in
violation of the prohibitions against litis pendencia and forum
complainants were not illegally dismissed but were only
respondents who refused to report for work in their new

On January 31, 2007, the NLRC rendered a Decision [10] ruling that Labor Arbiter Del Rosario did
not err in taking cognizance of respondents complaint for illegal dismissal because the July 14, 1999
Decision of Labor Arbiter Santos on the complaint for money claims did not at all pass upon the issue of
illegal dismissal. The NLRC, however, dismissed the complaint for illegal dismissal after ruling that the
fact of dismissal or termination of employment was not sufficiently established. According to the NLRC,
[the] sweeping generalization that the complainants were constructively dismissed is not sufficient to
establish the existence of illegal dismissal.[11] The dispositive portion of the NLRC decision reads:

WHEREFORE, premises considered, the respondents appeal is hereby given

due course and the decision dated July 28, 2000 is hereby REVERSED and SET-ASIDE
and a new one entered DISMISSING the complaint for illegal dismissal for lack of merit.

SO ORDERED.[12]

Unfazed, respondents filed a petition for certiorari with the CA questioning the NLRC decision and
alleging grave abuse of discretion.

On February 1, 2008, the CA rendered the assailed Decision[13] reversing and setting aside the
NLRC decision and reinstating the July 28, 2000 Decision of Labor Arbiter Del Rosario. The CA ruled that
Alert Security, as an employer, failed to discharge its burden to show that the employees separation from
employment was not motivated by discrimination, made in bad faith, or effected as a form of punishment
or demotion without sufficient cause. The CA also found that respondents were never informed of the
Duty Detail Orders transferring them to a new post, thereby making the alleged transfer ineffective. The
dispositive portion of the CA decision states:

WHEREFORE, premises considered, the January 31, 2007 decision of the NLRC
is hereby REVERSED and SET ASIDE and the July 28, 2000 decision of the Labor
Arbiter is hereby REVIVED.

SO ORDERED.[14]

Petitioners filed a motion for reconsideration, but the motion was denied in a
Resolution[15] dated March 31, 2008.

Petitioners are now before this Court to seek relief by way of a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure, as amended.

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Petitioners argue that the CA erred when it held that the NLRC committed grave abuse of
discretion. According to petitioners, the NLRC was correct when it ruled that there was no sufficient basis
to rule that respondents were terminated from their employment while there was proof that they were
merely transferred from DOST to LRTA as shown in the Duty Detail Orders. Verily, petitioners claim that
there was no termination at all; instead, respondents abandoned their employment by refusing to report
for duty at the LRTA Compound.

Further, petitioners argue that the CA erred when it reinstated the July 28, 2000 Decision of Labor
Arbiter Del Rosario in its entirety. The dispositive portion of said decision ruled that respondents should
be paid their monetary awards in solidum by Alert Security and Manuel D. Dasig, its President and
General Manager. They argue that Alert Security is a duly organized domestic corporation which has a
legal personality separate and distinct from its members or owners. Hence, liability for whatever
compensation or money claims owed to employees must be borne solely by Alert Security and not by any
of its individual stockholders or officers.

On the other hand, respondents claim that the NLRC committed a serious error in ruling that they
failed to provide factual substantiation of their claim of constructive dismissal. Respondents aver that their
Complaint Form[16] sufficiently constitutes the basis of their claim of illegal dismissal. Also, respondents
aver that Alert Security itself admitted that respondents were relieved from their posts as security guards
in DOST, albeit raising the defense that it was a mere transfer as shown by Duty Detail Orders, which,
however, were never received by respondents, as observed by the Labor Arbiter.

Essentially, the issue for resolution is whether respondents were illegally dismissed.

We rule in the affirmative.

As a rule, employment cannot be terminated by an employer without any just or authorized

cause. No less than the 1987 Constitution in Section 3, Article 13 guarantees security of tenure for
workers and because of this, an employee may only be terminated for just[17] or authorized[18] causes that

must comply with the due process requirements mandated[19] by law. Hence, employers are barred from
arbitrarily removing their workers whenever and however they want.The law sets the valid grounds for
termination as well as the proper procedure to take when terminating the services of an employee.

In De Guzman, Jr. v. Commission on Elections,[20] the Court, speaking of the Constitutional

guarantee of security of tenure to all workers, ruled:

x x x It only means that an employee cannot be dismissed (or transferred) from the
service for causes other than those provided by law and after due process is accorded
the employee. What it seeks to prevent is capricious exercise of the power to
dismiss. x x x (Emphasis supplied.)

Although we recognize the right of employers to shape their own work force, this management
prerogative must not curtail the basic right of employees to security of tenure. There must be a valid and
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lawful reason for terminating the employment of a worker. Otherwise, it is illegal and would be dealt with
by the courts accordingly.

As stated in Bascon v. Court of Appeals:[21]

x x x The employers power to dismiss must be tempered with the employees right to
security of tenure. Time and again we have said that the preservation of the lifeblood of
the toiling laborer comes before concern for business profits. Employers must be
reminded to exercise the power to dismiss with great caution, for the State will not
hesitate to come to the succor of workers wrongly dismissed by capricious employers.

In the case at bar, respondents were relieved from their posts because they filed with the Labor
Arbiter a complaint against their employer for money claims due to underpayment of wages. This reason
is unacceptable and illegal. Nowhere in the law providing for the just and authorized causes of termination
of employment is there any direct or indirect reference to filing a legitimate complaint for money claims
against the employer as a valid ground for termination.

The Labor Code, as amended, enumerates several just and authorized causes for a valid
termination of employment. An employee asserting his right and asking for minimum wage is not among
those causes. Dismissing an employee on this ground amounts to retaliation by management for an
employees legitimate grievance without due process. Such stroke of retribution has no place in Philippine
Labor Laws.

Petitioners aver that respondents were merely transferred to a new post wherein the wages are
adjusted to the current minimum wage standards. They maintain that the respondents voluntarily
abandoned their jobs when they failed to report for duty in the new location.

Assuming this is true, we still cannot hold that the respondents abandoned their posts. For
abandonment of work to fall under Article 282 (b) of the Labor Code, as amended, as gross and habitual
neglect of duties there must be the concurrence of two elements. First, there should be a failure of the
employee to report for work without a valid or justifiable reason, and second, there should be a showing
that the employee intended to sever the employer-employee relationship, the second element being the
more determinative factor as manifested by overt acts.[22]

As regards the second element of intent to sever the employer-employee relationship, the CA
correctly ruled that:

x x x the fact that petitioners filed a complaint for illegal dismissal is indicative of their
intention to remain employed with private respondent considering that one of their
prayers in the complaint is for re-instatement. As declared by the Supreme Court, a
complaint for illegal dismissal is inconsistent with the charge of abandonment, because
when an employee takes steps to protect himself against a dismissal, this cannot, by
logic, be said to be abandonment by him of his right to be able to work. [23]

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Further, according to Alert Security itself, respondents continued to report for work and loiter in
the DOST after the alleged transfer order was issued. Such circumstance makes it unlikely that
respondents have clear intention of leaving their respective jobs. In any case, there is no dispute that in
cases of abandonment of work, notice shall be served at the workers last known address. [24] This
petitioners failed to do.

On the element of the failure of the employee to report for work, we also cannot accept the
allegations of petitioners that respondents unjustifiably refused to report for duty in their new posts. A
careful review of the records reveals that there is no showing that respondents were notified of their new
assignments. Granting that the Duty Detail Orders were indeed issued, they served no purpose unless
the intended recipients of the orders are informed of such.

The employer cannot simply conclude that an employee is ipso facto notified of a transfer when
there is no evidence to indicate that the employee had knowledge of the transfer order. Hence, the failure
of an employee to report for work at the new location cannot be taken against him as an element of
abandonment.

We acknowledge and recognize the right of an employer to transfer employees in the interest of
the service. This exercise is a management prerogative which is a lawful right of an employer. However,
like all rights, there are limitations to the right to transfer employees. As ruled in the case of Blue Dairy
Corporation v. NLRC:[25]

x x x The managerial prerogative to transfer personnel must be exercised without grave

abuse of discretion, bearing in mind the basic elements of justice and fair play. Having
the right should not be confused with the manner in which that right is exercised. Thus, it
cannot be used as a subterfuge by the employer to rid himself of an undesirable
worker. In particular, the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion
in rank or a diminution of his salaries, privileges and other benefits. x x x

In addition to these tests for a valid transfer, there should be proper and effective notice to the
employee concerned. It is the employers burden to show that the employee was duly notified of the
transfer. Verily, an employer cannot reasonably expect an employee to report for work in a new location
without first informing said employee of the transfer. Petitioners insistence on the sufficiency of mere
issuance of the transfer order is indicative of bad faith on their part.

Besides, according to petitioners, the reason for the transfer to LRTA of the respondents was that
the wages in LRTA were already adjusted to comply with the minimum wage rates. Now it is hard to
believe that after being ordered to transfer to LRTA where the wages are better, the respondents would
still refuse the transfer. That would mean that the respondents refused better wages and instead chose to
remain in DOST, underpaid, and go through the lengthy process of claiming and asking for minimum
wage. This proposed scenario of petitioners simply does not jibe with human logic and experience.

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On the question of the propriety of holding petitioner Manuel D. Dasig, president and general
manager of Alert Security, solidarily liable with Alert Security for the payment of the money awards in
favor of respondents, we find petitioners arguments meritorious.

Basic is the rule that a corporation has a separate and distinct personality apart from its directors,
officers, or owners. In exceptional cases, courts find it proper to breach this corporate personality in order
to make directors, officers, or owners solidarily liable for the companies acts. Section 31, Paragraph 1 of
the Corporation Code[26] provides:

Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty
of gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors, or trustees shall
be liable jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.

xxxx

Jurisprudence has been consistent in defining the instances when the separate and distinct
personality of a corporation may be disregarded in order to hold the directors, officers, or owners of the
corporation liable for corporate debts. In McLeod v. National Labor Relations Commission,[27] the Court
ruled:

Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or
defend crime. In the absence of malice, bad faith, or a specific provision of law making a
corporate officer liable, such corporate officer cannot be made personally liable for
corporate liabilities. x x x

Further, in Carag v. National Labor Relations Commission,[28] the Court clarified

the McLeod doctrine as regards labor laws, to wit:

We have already ruled in McLeod v. NLRC[29] and Spouses Santos v.

NLRC[30] that Article 212(e)[31] of the Labor Code, by itself, does not make a
corporate officer personally liable for the debts of the corporation. The governing
law on personal liability of directors for debts of the corporation is still Section 31 of the
Corporation Code. x x x

In the present case, there is no evidence to indicate that Manuel D. Dasig, as president and
general manager of Alert Security, is using the veil of corporate fiction to defeat public convenience,
justify wrong, protect fraud, or defend crime. Further, there is no showing that Alert Security has folded up
its business or is reneging in its obligations. In the final analysis, it is Alert Security that respondents are
after and it is also Alert Security who should take responsibility for their illegal dismissal.

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 Page 171 of 278

WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 99861 and the Decision dated July 28, 2000 of the Labor Arbiter
are MODIFIED. Petitioner Manuel D. Dasig is held not solidarily liable with petitioner Alert Security and
Investigation, Inc. for the payment of the monetary awards in favor of respondents. Said Decision of the
Court of Appeals in all other aspects is AFFIRMED.

With costs against the petitioners.

SO ORDERED.

28. Bisig Manggawa sa Tryco vs. NLRC October 15, 2008

DECISION

NACHURA, J.:

This petition seeks a review of the Decision[1] 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 Agreement [2] (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]
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 Page 172 of 278

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 Division[4]

Accordingly, Tryco issued a Memorandum [5] dated April 7, 1997 which directed petitioner Aya-ay
to report to the companys plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated
the order on April 18, 1997.[6] Subsequently, through a Memorandum [7] dated May 9, 1997, Tryco also
directed petitioners Egera, Lario and Barte to report to the companys 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 complaints[8] 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

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 Page 173 of 278

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 managements directive for them to report to the companys 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 companys 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 companys 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 Arbiters 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

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 Page 174 of 278

Courts 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, 08-06115-97 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:

-A-

THE 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.

-B-

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING

THAT PRIVATE RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR PRACTICE.

-C-

THE 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 ATTORNEYS 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.

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 Page 175 of 278

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, Trycos 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 managements right to regulate, according to its own discretion
and judgment, all aspects of employment, including the freedom to transferand reassign employees
according to the requirements of its business.[19] Managements 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 Trycos 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]

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 Page 176 of 278

Incidentally, petitioners cite Escobin v. NLRC[25] 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.

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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 present case. In that case,
an employment contract provided that the workday consists of 12 hours and the employee will be paid a
fixed monthly salary rate that was above the legal minimum wage. However, unlike the present MOA
which specifically states that the 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.

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29. Aguanza vs. Asian Terminal Inc. G.R. No. 163505, August 14, 2009

DECISION

CARPIO, J.:

The Case

This is a petition for review[1]assailing the Decision[2]promulgated on 9 January 2004 of the Court of
Appeals (appellate court) as well as the Resolution[3]promulgated on 5 May 2004 in CA-G.R. SP No.
74626. The appellate court denied Gualberto Aguanzas (Aguanza) petition for certiorari and ruled that the
National Labor Relations Commission (NLRC) was correct when it held that the transfer of the base of
Asian Terminal, Inc.s (ATI) Bismark IV from Manila to Bataan was a valid exercise of management
prerogative.Thus, Aguanza was no longer entitled to receive out-of-port allowance and meal allowance
for work done in Bataan.

The Facts

The appellate court narrated the facts as follows:

Petitioner Gualberto Aguanza was employed with respondent company Asian Terminal,
Inc. from April 15, 1989 to October 1997. He was initially employed as Derickman or
Crane Operator and was assigned as such aboard Bismark IV, a floating crane barge
owned by Asian Terminals, Inc. based at the port of Manila.
As of October 1997, he was receiving the following salaries and benefits from [ATI]:

a. Basic salary - P8,303.30;

b. Meal allowance - P1,800 a month;
c. Fixed overtime pay of 16 hours when the barge is assigned outside Metro Manila;
d. P260.00 per day as out of port allowance when the barge is assigned outside Manila.

Sometime in September 1997, the Bismark IV, together with its crew, was temporarily
assigned at the Mariveles Grains Terminal in Mariveles, Bataan.

On October 20, 1997, respondent James Keith issued a memo to the crew of Bismark IV
stating that the barge had been permanently transferred to the Mariveles Grains terminal
beginning October 1, 1997 and because of that, its crew would no longer be entitled to
out of port benefits of 16 hours overtime and P200 a day allowance.

[Aguanza], with four other members of the crew, stated that they did not object to the
transfer of Bismark IV to Mariveles, Bataan, but they objected to the reduction of their
benefits.

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 Page 179 of 278

When they objected to the reduction of their benefits, they were told by James Keith to
report to the Manila office only to be told to report back to Bataan. On both occasions,
[Aguanza] was not given any work assignment.
After being shuttled between Manila and Bataan, [Aguanza] was constrained to write
respondent Atty. Corvite for clarification of his status, at the same time informing the latter
of his willingness to work either in Manila or Bataan.
While he did not agree with private respondents terms and conditions, he was
nonetheless willing to continue working without prejudice to taking appropriate action to
protect his rights.

Because of private respondents refusal to give him any work assignment and pay his
salary, [Aguanza] filed a complaint for illegal dismissal against respondents.

On the other hand, private respondents claim that:

[Aguanza] was employed by [ATI] on February 1, 1996 as a Derickman in Bismark IV,

one of the floating crane barges of [ATI] based in the port of Manila. In 1997, [ATI] started
operation at the Mariveles Grains Terminals, Mariveles, Bataan. Beginning October 1,
1997, Bismark IV including its crew was transferred to Mariveles. For their transfer, [ATI]
offered the crew the following:

I am asking you to reply to me by the 31st October 1997 if you wish to be

transferred to Mariveles under the following salary conditions:

- regular 40-hour duty Monday to Friday

- overtime paid in excess of 8 hours/day
- overtime paid on Saturdays and Sundays
- no additional allowance
- no transportation

By way of reply to the memorandum, [Aguanza] along with all the members of the crew of
Bismark IV namely: Rodrigo Cayabyab, Wilfredo Alamo, Eulogio Toling, Jonathan
Pereno, Marcelito Vargas, Erwin Greyblas and Christian Paul Almario (crew member
Nestor Resuello did not sign the said letter) answered through an undated letter, to wit:

We used to receive the following whenever we are assigned out of town.

1) P200.00 a day allowance

2) P60.00 per day food allowance
3) 16 hours per day fixed overtime

We have been receiving this [sic] compensation and benefits whenever we are assigned
to Bataan. x x x

They asserted that they have no objection to their assignment in Mariveles, Bataan but
on the former terms and conditions.

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Eventually, the other members of the crew of Bismark IV accepted the transfer and it was
only [Aguanza] who refused the transfer.

On November 12, 1997, [Aguanza] wrote the company asserting that he did not request
his transfer to Manila from Mariveles. He stressed that he was willing to be assigned to
Mariveles so long that there is no diminution of his benefits while assigned to Mariveles,
which meant, even if he was permanently based in Mariveles, Bataan, he should be paid
24 hours a day 8 hours regular work and 16 hours overtime everyday plus P200.00 per
day allowance and P60.00 daily food allowance.

[Aguanza] insisted on reporting to work in Manila although his barge, Bismark IV, and its
other crew were already permanently based in Mariveles, Bataan. [Aguanza] was not
allowed to time in in Manila because his work was in Mariveles, Bataan.

In [Aguanza]s appointment paper, [Aguanza] agreed to the following conditions printed

and which reads in part:

That in the interest of the service, I hereby declare, agree and bind
myself to work in such place of work as ATI may assign or transfer me. I
further agree to work during rest day, holidays, night time or other shifts
or during emergency.[4]

The Labor Arbiters Ruling

In his Decision dated 28 September 1998, the Labor Arbiter found that respondents illegally
dismissed Aguanza. Aguanza was willing to report back to work despite the lack of agreement on his
demands but without prejudice to his claims. The Labor Arbiter also construed ATIs offer of separation
pay worth two months salary for every year of service as indicative of ATIs desire to terminate Aguanzas
services. ATI failed to justify its failure to allow Aguanza to work because of Aguanzas continued
insistence that he be paid his former salary and benefits. ATIs refusal to pay the same amount to
Aguanza violated the rule against diminution of benefits. Although ATI had the prerogative to transfer
employees, the prerogative could not be exercised if the result was demotion of rank or diminution of
salary, benefits and other prerogatives of the employee. The dispositive portion of the Labor Arbiters
decision reads:

WHEREFORE, premises considered, this office is convinced that complainant Aguanza

was illegally dismissed by respondents. Consequently, respondent is hereby ordered to
immediately reinstate complainant to his former position without loss of seniority rights
and to pay him full backwages and benefits from the time he was dismissed effective
November 1997 until he is actually reinstated. Considering that it is clear from
respondents letters that their intention is to assign complainant to Mariveles, Bataan, he
is entitled to all the salary and benefits due him if assigned to said place.

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Anent the claim of complainant for the cash conversion of his vacation and sick leave
credits, respondents never denied their liability for the same. Consequently, they are,
likewise, also ordered to pay complainant the cash equivalent of his unused vacation and
sick leave credits.

Considering that the respondents are obviously in bad faith in effecting the dismissal as
reflected in their ordering him to report back for work but refusing to accept him back,
complainant should be awarded moral and exemplary damages in the amount of
P50,000.00 and P100,000.00, respectively.

Further, respondents are ordered to pay complainant attorneys fees equivalent to ten
(10%) percent of the total amount awarded in favor of the complainant.

SO ORDERED.[5]

Respondents appealed from the Labor Arbiters judgment on 5 May 1999.

The Ruling of the NLRC

In its Decision promulgated on 11 February 2002, the NLRC dismissed Aguanzas complaint and set
aside the decision of the Labor Arbiter. The NLRC adopted the report and recommendation of Labor
Arbiter Cristeta D. Tamayo (Arbiter Tamayo). Arbiter Tamayo recommended that the appeal of
respondents should be granted, and found that Aguanzas insistence to be paid out-of-town benefits,
despite the fact that the crane to which he was assigned was already permanently based outside Metro
Manila, was unreasonable.
The NLRC denied Aguanzas motion for reconsideration in an Order dated 23 September 2002.

The Decision of the Appellate Court

The appellate court affirmed the ruling of the NLRC and dismissed Aguanzas petition in a Decision
promulgated on 9 January 2004. The appellate court stated that:

The fixed overtime of 16 hours, out-of-port allowance and meal allowance previously
granted to [Aguanza] were merely supplements or employment benefits given under a
certain condition, i.e., if [Aguanza] will be temporarily assigned out-of-port. It is not fixed
and is contingent or dependent of [Aguanzas] out-of-port reassignment. Hence, it is not
made part of the wage or compensation.

This Court also finds utter bad faith on the part of [Aguanza]. [Aguanza] claims that he
does not contest his permanent reassignment to Mariveles, Bataan and yet he insisted
on reporting to Manila. If petitioner had only been sincere to his words, he would have

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reported to Mariveles, Bataan where his work is, and in compliance with the employment
contract with [ATI].

There was no illegal dismissal since it was [Aguanza] who refused to report to Mariveles,
Bataan where he was assigned.

[Aguanzas] other claims have no basis and, accordingly, should be denied.

WHEREFORE, premises considered, this petition is DENIED and ORDERED

DISMISSED.

SO ORDERED.[6]

In a Resolution promulgated on 5 May 2004, the appellate court denied Aguanzas motion for
reconsideration.

The Issues

In the present petition, Aguanza states that the appellate court committed the following errors:

1. It was grievous error for the Court of Appeals to uphold the decision of the
NLRC in NLRC NCR CA No. 021014-99 notwithstanding the fact that
respondents appeal to the NLRC was never perfected in view of the insufficiency
of the supersedeas bond posted by them.

2. There is no factual or legal basis for the respondent Court of Appeals to hold
that respondents were correct in not allowing petitioner to time-in in Manila.

3. The Court of Appeals likewise disregarded the evidence on record and

applicable laws in declaring that the petitioner is not entitled to the cash
conversion of his vacation and sick leave credits as well as in denying petitioners
claims for moral and exemplary damages as well as attorneys fees.[7]

The Ruling of the Court

The petition has no merit. We see no reason to overturn the rulings of the NLRC and of the appellate
court.

As a preliminary matter, we agree with the NLRC and the appellate court that the alleged defect in the
perfection of the appeal to the NLRC because of the insufficiency of the supersedeas bond is a defect in
form which the NLRC may waive.[8]

Transfer of Operations is a Valid Exercise of Management Prerogative

Aguanza asserts that his transfer constituted constructive dismissal, while ATI asserts that Aguanzas
transfer was a valid exercise of management prerogative. We agree with ATI.

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ATIs transfer of Bismark IVs base from Manila to Bataan was, contrary to Aguanzas assertions, a valid
exercise of management prerogative. The transfer of employees has been traditionally among the acts
identified as a management prerogative subject only to limitations found in law, collective bargaining
agreement, and general principles of fair play and justice. 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. The free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.[9]

On the other hand, the transfer of an employee may constitute constructive dismissal when continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.[10]
Aguanzas continued employment was not impossible, unreasonable or unlikely; neither was there a clear
discrimination against him. Among the employees assigned to Bismark IV, it was only Aguanza who did
not report for work in Bataan. Aguanzas assertion that he was not allowed to time in in Manila should be
taken on its face: Aguanza reported for work in Manila, where he wanted to work, and not in Bataan,
where he was supposed to work. There was no demotion in rank, as Aguanza would continue his work as
Crane Operator. Furthermore, despite Aguanzas assertions, there was no diminution in pay.

When Bismark IV was based in the port of Manila, Aguanza received basic salary, meal allowance, and
fixed overtime pay of 16 hours and per diem allowance when the barge was assigned outside of Manila.
The last two items were given to Aguanza upon the condition that Bismark IV was assigned outside of
Manila. Aguanza was not entitled to the fixed overtime pay and additional allowances when Bismark IV
was in Manila.

When ATI transferred Bismark IVs operations to Bataan, ATI offered Aguanza similar terms: basic pay for
40 hours of work from Monday to Friday, overtime pay for work done in excess of eight hours per day,
overtime pay for work done on Saturdays and Sundays, no additional allowance and no transportation for
working in Bataan. The circumstances of the case made no mention of the salary structure in case
Bismark IV being assigned work outside of Bataan; however, we surmise that it would not be any different
from the salary structure applied for work done out-of-port. We, thus, agree with the NLRC and the
appellate court when they stated that the fixed overtime of 16 hours, out-of-port allowance and meal
allowance previously granted to Aguanza were merely supplements or employment benefits given on
condition that Aguanzas assignment was out-of-port. The fixed overtime and allowances were not part of
Aguanzas basic salary. Aguanzas basic salary was not reduced; hence, there was no violation of the rule
against diminution of pay.[11]

Aguanza did not contest his transfer, but the reduction in his take-home pay. Aguanza even asserted,
contrary to his acts, that he bound himself to work in such place where ATI might assign or transfer
him.ATI did not dismiss Aguanza; rather, Aguanza refused to report to his proper workplace.

WHEREFORE, we DENY the petition. We AFFIRM the Decision of the Court of Appeals promulgated on
9 January 2004 as well as the Resolution promulgated on 5 May 2004 in CA-G.R. SP No. 74626.
SO ORDERED.

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30. Endico vs. Quantum Foods Distribution Center G.R. No. 161615, January 30, 2009

DECISION

CARPIO, J.:
The Case

This is a petition for review[1] of the 23 December 2003 Decision[2] of the Court of Appeals in CA-G.R. SP
No. 69929. The Court of Appeals reversed the 31 August 2001 Decision[3] and the 28 November 2001
Resolution[4] of the National Labor Relations Commission (NLRC). The NLRC affirmed with modification
the 17 January 2000 Decision[5] of the Labor Arbiter which held that Quantum Foods Distribution Center
(Quantum Foods) constructively dismissed Arnulfo O. Endico (Endico). The NLRC awarded Endico
separation pay, backwages, moral and exemplary damages, and other amounts
totaling P559,021.65.[6] The NLRC also affirmed the transfer of possession and ownership of the service
vehicle but ordered Endico to pay Quantum Foods 10% of its purchase price.

The Facts

On 2 January 1995, Quantum Foods hired Endico as Field Supervisor of Davao City. Quantum Foods
provided Endico with a service vehicle on the understanding that after five years of continuous service to
the company and upon payment of 10% of the vehicles book value, Quantum Foods would turn over
possession and ownership of the vehicle to Endico.

In June 1995, Endico was transferred to Cebu. On 2 January 1996, Endico was promoted as Area
Manager of Cebu. In 1997, in recognition of Endicos achievements and contributions to Quantum Foods,
he was awarded Master Awards for Sales Excellence as the most outstanding Area Manager and was
also rewarded with an all-expense paid trip to Thailand. In the same year, Endico was also given a plaque
of recognition for the elite 100% Achievers Award. In 1998, Endico was again rewarded with an all-
expense paid trip to Hong Kong for his very good performance that year.

In 1999, due to the economic slowdown and to save on operational costs, Quantum Foods streamlined its
operations through the reduction of the companys contractual merchandisers. Endicos merchandisers
were reduced from twelve to five.
In a fax message[7] dated 11 June 1999, Edred Almero, National Sales Manager of Quantum Foods,
instructed Pol H. Acuros (Acuros), Regional Sales Manager and Endicos immediate supervisor, to
immediately relieve Endico from his position. Acuros was also instructed to handle the vacated position
and to be responsible in the turn over of all company properties issued to Endico including the service
vehicle. Acuros was likewise ordered to advise Endico to report to the head office on 14 June
1999. Endico complied with the order and proceeded to the head office in Paraaque.

In the show cause memorandum [8] dated 14 June 1999, Quantum Foods asked Endico to explain in
writing, within 24 hours, why no administrative action should be taken against him because of serious
misconduct due to mismanagement of sales area resulting to lost sales and goodwill with number one
major account. The memorandum stated that, from 1 May to 11 June 1999 at Shoemart Supermarket,
Cebu (SM account), Endico violated Rules 16[9] and 17[10] of Quantum Foods general policies and
procedure.

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On the same day, Endico filed an application for leave of absence[11] effective 17 June to 2 July 1999.

In his answer[12] dated 16 June 1999, Endico denied that there was serious misconduct and
mismanagement in his area as far as the deployment of merchandisers was concerned.Endico said that
he properly coordinated all his actions with Acuros. Endico presented a letter[13] dated 3 May 1999, where
he informed Acuros and the head office that the SM account wanted a merchandiser assigned to it for a
whole day coverage and rejected the merchandiser assigned to it with a half-day schedule. In another
letter[14] dated 7 May 1999, Endico gave the head office an update on the status of the SM
account. Endico added that Quantum Foods did not accord him due process because he was
immediately relieved without being given the opportunity to explain his side. On the same day, Endico
also withdrew his application for leave of absence.[15]

On 17 June 1999, Quantum Foods recalled Endicos application for leave of absence and required him to
report to the head office.[16] Quantum Foods also issued a Personnel Action Request[17] dated 11 June
1999, which provided for Endicos transfer as Area Sales Manager of Cebu to Area Sales Manager of the
head office effective 14 June 1999.However, Endico failed to report for work. In telegrams dated 30
June[18] and 6 July 1999,[19] Quantum Foods reiterated its directive for Endico to report to the head office.

Also on 17 June 1999, Endico, believing that Quantum Foods intended to ease him out of the company,
filed a complaint[20] for constructive illegal dismissal. Endico also prayed for the payment of separation
pay, backwages, other monetary benefits, damages, attorneys fees and recovery of the service vehicle.

Ruling of the Labor Arbiter

On 17 January 2000, the Labor Arbiter rendered a decision in Endicos favor. The dispositive portion of
the 17 January 2000 Decision provides:

WHEREFORE, premises considered, judgment is hereby rendered declaring as illegal

the constructive dismissal of complainant and ordering the respondent Quantum Foods,
Inc. to pay him as follows:

1) Separation Pay Php 121,800.00

2) Backwages 176,136.00
3) Proportionate 13th month pay 13,038.00
4) Unused sick leave 42,120.00
5) Unused vacation leave 42,120.00
6) Performance bonus 10,150.00
7) Productivity bonus 22,837.50
8) Moral and exemplary damages 50,000.00
9) Attorneys fees (10%) 50,820.15
----------------
Total Php 559,021.65[21]

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The respondent Quantum Foods, Inc. or its authorized representative is hereby ordered
to transfer to complainant the possession and ownership of one (1) motor vehicle, a
Mitsubishi L-200 with plate no. TTC 934 in a running and serviceable condition together
with its accessories.

The other claims and the case against respondents Cesar Lota, Edred Almero and
Rogelio de la Cruz are dismissed for lack of merit.

SO ORDERED.[22]

The Labor Arbiter ruled that Quantum Foods constructively dismissed Endico because its actions made
Endicos continued employment impossible, unreasonable and unlikely.The Labor Arbiter said that Endico
was the subject of a highhanded transfer of assignment because Endico was given neither a copy of the
order for his relief nor the reason for his immediate relief. The Labor Arbiter added that Endico was
relieved not because the head office needed his services but as a form of disciplinary action for some
baseless charges. According to the Labor Arbiter, the loss of the SM account was due to the decision of
Quantum Foods to reduce the number of merchandisers and its inaction when Endico raised this
concern.

Quantum Foods appealed to the NLRC.

Ruling of the National Labor Relations Commission

In its 31 August 2001 Decision, the NLRC affirmed the Labor Arbiters decision with modification that
Endico pay 10% of the purchase price of the service vehicle. The dipositive portion of the 31 August 2001
Decision provides:

WHEREFORE, in view of the foregoing, the decision of the Labor Arbiter dated January
17, 2000 is hereby AFFIRMED with a modification on the order to transfer the possession
and ownership of the service vehicle, Mitsubishi L-200 with plate no. TCC 934 to
complainant, as such complainant is likewise directed to pay respondent ten percent
(10%) of the purchase price thereof.

SO ORDERED.[23]

The NLRC agreed with the Labor Arbiter that Quantum Foods constructively dismissed Endico. The
NLRC said that Endico was not just recalled but was immediately transferred to the head office, which
was tantamount to dismissal. The NLRC ruled that Quantum Foods failed to observe the twin
requirements of notice and hearing. The NLRC declared that Endico was immediately relieved from his
functions and was given the opportunity to explain his side only three days after the order for his relief
was issued. The NLRC also ruled that the Labor Arbiter did not err in awarding separation pay to Endico
since reinstatement was no longer possible due to strained relations. With respect to the award of unused
vacation and sick leave credits, performance bonus, and productivity bonus, the NLRC said that these
should be granted because they had become company policy or practice which could not just be
withdrawn.

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Quantum Foods filed a motion for reconsideration. In its 28 November 2001 Resolution,[24] the NLRC
denied the motion.

Quantum Foods filed a petition for certiorari before the Court of Appeals.

Ruling of the Court of Appeals

In its 23 December 2003 Decision, the Court of Appeals ruled in favor of Quantum Foods. The dispositive
portion of the 23 December 2003 Decision provides:

WHEREFORE, the petition is GRANTED. The Decision of the NLRC dated August 31,
2002 as well as its Resolution dated November 28, 2001 are hereby REVERSED AND
SET ASIDE.The complaint for illegal dismissal filed by private respondent is DISMISSED.

SO ORDERED.[25]

The Court of Appeals declared that the NLRC gravely abused its discretion when it ruled that Endico was
constructively dismissed. The Court of Appeals found nothing in the 11 June 1999 fax message and the
show-cause memorandum that supported the NLRCs conclusion that Endico was outrightly
dismissed. The Court of Appeals noted that Quantum Foods even approved Endicos application for leave
of absence and, after Endico recalled his leave application, ordered Endico to report to the head office for
his new job assignment.

The Court of Appeals said that it is settled that the employer has the prerogative to transfer and reassign
employees for valid reasons and according to the requirements of its business, provided that there is no
demotion in rank or diminution of his salary, benefits and other privileges. The Court of Appeals declared
that Quantum Foods acted in good faith and was in the legitimate pursuit of its best interests when it
transferred Endico from Cebu to the head office. The Court of Appeals maintained that Endicos claim that
the transfer would result in a diminution of his pay or benefits was unsubstantiated. The Court of Appeals
added that Quantum Foods had yet to decide on the administrative case when Endico immediately filed
the complaint for constructive dismissal. The Court of Appeals concluded that Endico filed the complaint
in anticipation of what he perceived to be the final outcome of the administrative investigation.

Hence, this petition.

The Issues

Endico raises the following issues:

1. Whether he was constructively dismissed;

2. Whether he is entitled to separation pay, backwages, other monetary benefits, damages and
attorneys fees; and
3. Whether he is entitled to acquire the service vehicle.

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The Ruling of the Court

The petition has no merit.

As a general rule, a petition for review on certiorari under Rule 45 of the Rules of Court is limited to
questions of law. However, this rule admits of exceptions, such as in this case where the findings of the
Labor Arbiter and the NLRC vary from the findings of the Court of Appeals. [26]

Endico maintains that he was constructively dismissed because he did not commit any offense that would
justify his relief. Endico adds that his transfer was intended to unreasonably inconvenience him and his
family because of its substantial effect on their finances and quality of family life, which would ultimately
force him to quit.

On the other hand, Quantum Foods insists that Endico was not transferred but was only temporarily
recalled to the head office pending investigation. Quantum Foods argues that if it did transfer Endico, it
was merely exercising a management prerogative.

Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage
interference with an employers judgment in the conduct of its business. [27] For this reason, the Court often
declines to interfere in legitimate business decisions of employers.[28] The law must protect not only the
welfare of employees, but also the right of employers.[29]

In the pursuit of its legitimate business interests, especially during adverse business conditions,
management has the 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, bad faith, or effected as a form of punishment or demotion
without sufficient cause.[30] This privilege is inherent in the right of employers to control and manage their
enterprises effectively.[31] The right of employees to security of tenure does not give them vested rights to
their positions to the extent of depriving management of its prerogative to change their assignments or to
transfer them.[32]

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining
agreements, and general principles of fair play and justice. [33] The test for determining the validity of the
transfer of employees was explained in Blue Dairy Corporation v. NLRC[34] as follows:

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 a subterfuge by the employer
to rid himself of an undesirable worker. In particular, the employer must be able to show
that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries, privileges and other
benefits. Should the employer fail to overcome this burden of proof, the employees
transfer shall be tantamount to constructive dismissal, which has been defined as a
quitting because continued employment is rendered impossible, unreasonable or unlikely;
as an offer involving a demotion in rank and diminution in pay. Likewise, constructive
dismissal exists when an act of clear discrimination, insensibility or disdain by an

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employer has become so unbearable to the employee leaving him with no option but to
forego with his continued employment.[35]

In this case, we find no reason to disturb the conclusion of the Court of Appeals that there was no
constructive dismissal. Reassignments made by management pending investigation of violations of
company policies and procedures allegedly committed by an employee fall within the ambit of
management prerogative.[36] The decision of Quantum Foods to transfer Endico pending investigation
was a valid exercise of management prerogative to discipline its employees. The transfer, while incidental
to the charges against Endico, was not meant as a penalty, but rather as a preventive measure to avoid
further loss of sales and the destruction of Quantum Foods image and goodwill. It was not designed to be
the culmination of the then on-going administrative investigation against Endico.

Neither was there any demotion in rank or any diminution of Endicos salary, privileges and other
benefits. Endico was being transferred to the head office as area sales manager, the same position
Endico held in Cebu.[37] There was also no proof that the transfer involved a diminution of Endicos salary,
privileges and other benefits.

On the alleged inconvenience on Endico and his family because of the transfer from Cebu to the head
office in Paraaque, we rule that the transfer is valid, there being no showing that there was bad faith on
the part of Quantum Foods.[38] Moreover, we find that Quantum Foods, considering the declining sales
and the loss of a major account in Cebu, was acting in the legitimate pursuit of what it considered its best
interest in deciding to transfer Endico to the head office.

Since we have ruled that Quantum Foods did not constructively dismiss Endico, there is no need to
discuss the other issues raised by Endico.

WHEREFORE, we DENY the petition. We AFFIRM the 23 December 2003 Decision of the Court of
Appeals in CA-G.R. SP No. 69929.

SO ORDERED.

31. Toyota Motors Phil. Corporation vs. NLRC October 19, 2007

DECISION

VELASCO, JR., J.:

The Case

In the instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor
Philippines Corporation Workers Association (Union) and its dismissed officers and members seek to set
aside the February 27, 2003 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and

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67561, which affirmed the August 9, 2001 Decision[2] and September 14, 2001 Resolution[3] of the
National Labor Relations Commission (NLRC), declaring illegal the strikes staged by the Union and
upholding the dismissal of the 227 Union officers and members.

On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor Philippines
Corporation (Toyota) prays for the recall of the award of severance compensation to the 227 dismissed
employees, which was granted under the June 20, 2003 CA Resolution [4] in CA-G.R. SP Nos. 67100 and
67561.

In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four (4)
interrelated cases, they will be referred to as simply the Union and Toyota hereafter.

The Facts

The Union is a legitimate labor organization duly registered with the Department of Labor and
Employment (DOLE) and is the sole and exclusive bargaining agent of all Toyota rank and file
employees.[5]

Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of
vehicles and parts.[6] It is a Board of Investments (BOI) participant in the Car Development Program and
the Commercial Vehicle Development Program. It is likewise a BOI-preferred non-pioneer export trader of
automotive parts and is under the Special Economic Zone Act of 1995. It is one of the largest motor
vehicle manufacturers in the country employing around 1,400 workers for its plants in Bicutan and Sta.
Rosa, Laguna.It is claimed that its assets amount to PhP 5.525 billion, with net sales of PhP 14.646 billion
and provisions for income tax of PhP 120.9 million.

On February 14, 1999, the Union filed a petition for certification election among the Toyota rank and file
employees with the National Conciliation and Mediation Board (NCMB), which was docketed as Case No.
NCR-OD-M-9902-001. Med-Arbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE
Secretary granted the Unions prayer, and, through the June 25, 1999 Order, directed the immediate
holding of the certification election.[7]

After Toyotas plea for reconsideration was denied, the certification election was conducted. Med-Arbiter
Lameyras May 12, 2000 Order certified the Union as the sole and exclusive bargaining agent of all
the Toyota rank and file employees. Toyota challenged said Order via an appeal to the DOLE
Secretary.[8]

In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but
the latter refused to negotiate in view of its pending appeal. Consequently, the Union filed a notice of
strike on January 16, 2001 with the NCMB, docketed as NCMB-NCR-NS-01-011-01, based on Toyotas
refusal to bargain. On February 5, 2001, the NCMB-NCR converted the notice of strike into a preventive
mediation case on the ground that the issue of whether or not the Union is the exclusive bargaining agent
of all Toyota rank and file employees was still unresolved by the DOLE Secretary.

In connection with Toyotas appeal, Toyota and the Union were required to attend a hearing on February
21, 2001 before the Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged
supervisory employees from the votes cast during the certification election. The February 21,

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2001 hearing was cancelled and reset to February 22, 2001. On February 21, 2001, 135 Union officers
and members failed to render the required overtime work, and instead marched to and staged a picket in
front of the BLR office in Intramuros, Manila.[9] The Union, in a letter of the same date, also requested that
its members be allowed to be absent on February 22, 2001 to attend the hearing and instead work on
their next scheduled rest day. This request however was denied by Toyota.

Despite denial of the Unions request, more than 200 employees staged mass actions on February 22 and
23, 2001 in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance
of Toyota. Due to the deliberate absence of a considerable number of employees on February 22 to 23,
2001, Toyota experienced acute lack of manpower in its manufacturing and production lines, and was
unable to meet its production goals resulting in huge losses of PhP 53,849,991.

Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees requiring
them to explain within 24 hours why they should not be dismissed for their obstinate defiance of the
companys directive to render overtime work on February 21, 2001, for their failure to report for work on
February 22 and 23, 2001, and for their participation in the concerted actions which severely disrupted
and paralyzed the plants operations.[10] These letters specifically cited Section D, paragraph 6 of the
Companys Code of Conduct, to wit:

Inciting or participating in riots, disorders, alleged strikes, or concerted actions

detrimental to [Toyotas] interest.

1st offense dismissal.[11]

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its members to
participate in a strike/picket and to abandon their posts, the pertinent portion of which reads, as follows:

YANIG sa kanyang komportableng upuan ang management ng TOYOTA. And

dating takot, kimi, at mahiyaing manggagawa ay walang takot na nagmartsa at
nagprotesta laban sa desperadong pagtatangkang baguhin ang desisyon ng DOLE na
pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa tatlong daang manggagawa
ang lumahok.

xxxx

HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait

ng management ang CBA. Oo maari tayong masaktan sa welga. Oo, maari tayong
magutom sa piketlayn.Subalit may pagkakaiba ba ito sa unti-unting pagpatay sa atin sa
loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang taon na lang ay
magkakabutas na ang ating mga baga sa mga alipato at usok ng welding. Ilang taon na
lang ay marupok na ang ating mga buto sa kabubuhat. Kung dumating na ang panahong
ito at wala pa tayong CBA, paano na? Hahayaan ba nating ang kumpanya lang ang
makinabang sa yamang likha ng higit sa isang dekadang pagpapagal natin?

HUWAG BIBITIW SA NASIMULANG TAGUMPAY!

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PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG MAKATARUNGANG CBA!

HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA MANGGAGAWA
SA TOYOTA![12] (Emphasis supplied.)

On the next day, the Union filed with the NCMB another notice of strike docketed as NCMB-NCR-
NS-02-061-01 for union busting amounting to unfair labor practice.
On March 1, 2001, the Union nonetheless submitted an explanation in compliance with
the February 27, 2001 notices sent by Toyota to the erring employees. The Union members explained
that their refusal to work on their scheduled work time for two consecutive days was simply an exercise of
their constitutional right to peaceably assemble and to petition the government for redress of grievances.
It further argued that the demonstrations staged by the employees on February 22 and 23, 2001 could not
be classified as an illegal strike or picket, and that Toyota had already condoned the alleged acts when it
accepted back the subject employees.[13]

Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned employees
to clarify whether or not they are adopting the March 1, 2001 Unions explanation as their own. The
employees were also required to attend an investigative interview, [14] but they refused to do so.

On March 16, 2001, Toyota terminated the employment of 227 employees[15] for participation in concerted
actions in violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code. The
notice of termination reads:

After a careful evaluation of the evidence on hand, and a thorough assessment

of your explanation, TMP has concluded that there are overwhelming reasons to
terminate your services based on Article 282 of the Labor Code and TMPs Code of
Conduct.

Your repeated absences without permission on February 22 to 23, 2001 to

participate in a concerted action against TMP constitute abandonment of work and/or
very serious misconduct under Article 282 of the Labor Code.

The degree of your offense is aggravated by the following circumstances:

1. You expressed to management that you will adopt the unions letter
dated March 1, 2001, as your own explanation to the charges contained in the
Due Process Form dated February 27, 2001. It is evident from such explanation
that you did not come to work because you deliberately participated together with
other Team Members in a plan to engage in concerted actions detrimental to
TMPs interest. As a result of your participation in the widespread abandonment
of work by Team Members from February 22 to 23, 2001, TMP suffered
substantial damage.

It is significant that the absences you incurred in order to attend the clarificatory
hearing conducted by the Bureau of Labor Relations were unnecessary because
the union was amply represented in the said hearings by its counsel and certain
members who sought and were granted leave for the purpose. Your reason for
being absent is, therefore, not acceptable; and

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2. Your participation in the organized work boycott by Team Members on

February 22 and 23 led to work disruptions that prevented the Company from
meeting its production targets, resulting [in] foregone sales of more than eighty
(80) vehicles, mostly new-model Revos, valued at more than Fifty Million Pesos
(50,000,000.00).

The foregoing is also a violation of TMPs Code of Conduct (Section D, Paragraph 6) to

wit:
Inciting or participating in riots, disorders, illegal strikes or concerted actions
detrimental to TMPs interest.

Based on the above, TMP Management is left with no other recourse but to
terminate your employment effective upon your receipt thereof.

[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager[16]

In reaction to the dismissal of its union members and officers, the Union went on strike on March
17, 2001. Subsequently, from March 28, 2001 to April 12, 2001, the Union intensified its strike by
barricading the gates of Toyotas Bicutan and Sta. Rosa plants. The strikers prevented workers who
reported for work from entering the plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department
Head, stated that:

3. On March 17, 2001, members of the Toyota Motor Philippines Corporation

Workers Association (TMPCWA), in response to the dismissal of some two hundred
twenty seven (227) leaders and members of TMPCWA and without observing the
requirements mandated by the Labor Code, refused to report for work and picketed
TMPC premises from 8:00 a.m. to 5:00 p.m.The strikers badmouthed people coming in
and hurled invectives such as bakeru at Japanese officers of the company. The strikers
likewise pounded the officers vehicle as they tried to enter the premises of the company.

4. On March 28, 2001, the strikers intensified their picketing and barricaded the
gates of TMPCs Bicutan and Sta. Rosa plants, thus, blocking the free ingress/egress to
and from the premises. Shuttle buses and cars containing TMPC employees, suppliers,
dealers, customers and other people having business with the company, were prevented
by the strikers from entering the plants.

5. As a standard operating procedure, I instructed my men to take photographs

and video footages of those who participated in the strike. Seen on video footages taken
on various dates actively participating in the strike were union officers Emilio C.
Completo, Alexander Esteva, Joey Javellonar and Lorenzo Caraqueo.

6. Based on the pictures, among those identified to have participated in the

March 28, 2001 strike were Grant Robert Toral, John Posadas, Alex Sierra, Allan John
Malabanan, Abel Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya, Feliciano

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Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito Puno, Baldwin San
Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino,
Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert Mariquit, Ramil
Gecale, Jimmy Palisoc, Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo
Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino, Allan Palomares, Arturo
Murillo and Robert Gonzales. Attached hereto as Annexes 1 to 18 are the pictures taken
on March 28, 2001 at the Bicutan and Sta. Rosa plants.

7. From March 29 to 31, 2001, the strikers continued to barricade the entrances
to TMPCs two (2) plants. Once again, the strikers hurled nasty remarks and prevented
employees aboard shuttle buses from entering the plants. Among the strikers were
Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico Torres, Freddie Olit,
Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie
Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno, Delmar
Espadilla, Domingo Javier, Apollo Violeta and Elvis Tabinao.[17]

On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary
restraining order (TRO) with the NLRC, which was docketed as NLRC NCR Case No. INJ-0001054-01. It
sought free ingress to and egress from its Bicutan and Sta. Rosa manufacturing plants. Acting on said
petition, the NLRC, on April 5, 2001, issued a TRO against the Union, ordering its leaders and members
as well as its sympathizers to remove their barricades and all forms of obstruction to ensure free ingress
to and egress from the companys premises. In addition, the NLRC rejected the Unions motion to dismiss
based on lack of jurisdiction.[18]

Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, which was
docketed as NLRC NCR (South) Case No. 30-04-01775-01, and prayed that the erring Union officers,
directors, and members be dismissed.[19]

On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an
Order[20] certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all striking
workers to return to work at their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to
accept the returning employees under the same terms and conditions obtaining prior to the strike or at its
option, put them under payroll reinstatement. The parties were also enjoined from committing acts that
may worsen the situation.

The Union ended the strike on April 12, 2001. The union members and officers tried to return to work
on April 16, 2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the
DOLE Secretary.

In the meantime, the Union filed a motion for reconsideration of the DOLE Secretarys April 10, 2001
certification Order, which, however, was denied by the DOLE Secretary in her May 25, 2001 Resolution.
Consequently, a petition for certiorari was filed before the CA, which was docketed as CA-G.R. SP No.
64998.

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In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE Secretary,
docketed the case as Certified Case No. 000203-01.

Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE Secretarys
certification Order, several payroll-reinstated members of the Union staged a protest rally in front of
Toyotas Bicutan Plant bearing placards and streamers in defiance of the April 10, 2001 Order.

Then, on May 28, 2001, around forty-four (44) Union members staged another protest action in
front of the Bicutan Plant. At the same time, some twenty-nine (29) payroll-reinstated employees picketed
in front of the Santa Rosa Plants main entrance, and were later joined by other Union members.

On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of strike, which
was docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE Secretary directed the
second notice of strike to be subsumed in the April 10, 2001 certification Order.

In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit their
respective position papers on June 8, 2001. The union, however, requested for abeyance of the
proceedings considering that there is a pending petition for certiorari with the CA assailing the validity of
the DOLE Secretarys Assumption of Jurisdiction Order.

Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both parties to
submit their respective position papers on or before June 2, 2001. The same Order also denied
the Unions verbal motion to defer hearing on the certified cases.

On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRCs June 19, 2001
Order, praying for the deferment of the submission of position papers until its petition for certiorari is
resolved by the CA.

On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC again
ordered the Union to submit its position paper by July 19, 2001, with a warning that upon failure for it to
do so, the case shall be considered submitted for decision.

Meanwhile, on July 17, 2001, the CA dismissed the Unions petition for certiorari in CA-G.R. SP
No. 64998, assailing the DOLE Secretarys April 10, 2001 Order.

Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position paper
on July 19, 2001. Consequently, the NLRC issued an Order directing the Union to submit its position
paper on the scheduled August 3, 2001 hearing; otherwise, the case shall be deemed submitted for
resolution based on the evidence on record.

During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to submit its
position paper. Later that day, the Union claimed it filed its position paper by registered mail.

Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by
the Union on February 21 to 23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion reads:

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WHEREFORE, premises considered, it is hereby ordered:

(1) Declaring the strikes staged by the Union to be illegal.

(2) Declared [sic] that the dismissal of the 227 who participated in the illegal
strike on February 21-23, 2001 is legal.

(3) However, the Company is ordered to pay the 227 Union members, who participated in
the illegal strike severance compensation in an amount equivalent to one month salary
for every year of service, as an alternative relief to continued employment.

(4) Declared [sic] that the following Union officers and directors to have forfeited their
employment status for having led the illegal strikes on February 21-23, 2001 and May 23
and 28, 2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio
Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva,
Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani
Manguil, Jr., and Mayo Mata.[21]

SO ORDERED.[22]

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to
comply with the procedural requirements of a valid strike under Art. 263 of the Labor Code.

After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001,
the Union again staged strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they
violated Art. 264 of the Labor Code which proscribes any strike or lockout after jurisdiction is assumed
over the dispute by the President or the DOLE Secretary.

The NLRC held that both parties must have maintained the status quo after the DOLE Secretary
issued the assumption/certification Order, and ruled that the Union did not respect the DOLE Secretarys
directive.

Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC
denied in its September 14, 2001 Resolution.[23] Consequently, both parties questioned the August 9,
2001 Decision[24] and September 14, 2001 Resolution of the NLRC in separate petitions for certiorari filed
with the CA, which were docketed as CA-G.R. SP Nos. 67100 and 67561, respectively. The CA then
consolidated the petitions.

In its February 27, 2003 Decision,[25] the CA ruled that the Unions petition is defective in form for
its failure to append a proper verification and certificate of non-forum shopping, given that, out of the 227
petitioners, only 159 signed the verification and certificate of non-forum shopping. Despite the flaw, the
CA proceeded to resolve the petitions on the merits and affirmed the assailed NLRC Decision and
Resolution with a modification, however, of deleting the award of severance compensation to the
dismissed Union members.

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In justifying the recall of the severance compensation, the CA considered the participation in
illegal strikes as serious misconduct. It defined serious misconduct as a transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. It cited Panay Electric Company, Inc. v.
NLRC,[26] where we revoked the grant of separation benefits to employees who lawfully participated in an
illegal strike based on Art. 264 of the Labor Code, which states that 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. [27]
However, in its June 20, 2003 Resolution,[28] the CA modified its February 27, 2003 Decision by
reinstating severance compensation to the dismissed employees based on social justice.

The Issues

Petitioner Union now comes to this Court and raises the following issues for our consideration:

I. Whether the mere participation of ordinary employees in an illegal strike is

enough reason to warrant their dismissal.

II. Whether the Union officers and members act of holding the protest rallies in
front of the BLR office and the Office of the Secretary of Labor and Employment
on February 22 and 23, 2001 should be held as illegal strikes. In relation hereto,
whether the protests committed on May 23 and 28, 2001, should be held as
illegal strikes. Lastly, whether the Union violated the Assumption of Jurisdiction
Order issued by the Secretary of Labor and Employment.

III. Whether the dismissal of 227 Union officers and members constitutes unfair
labor practice.

IV. Whether the CA erred in affirming the Decision of the NLRC which excluded
the Unions Position Paper which the Union filed by mail. In the same vein,
whether the Unions right to due process was violated when the NLRC excluded
their Position Paper.

V. Whether the CA erred in dismissing the Unions Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:

I. Whether the Court of Appeals erred in issuing its Resolution dated June 20,
2003, partially modifying its Decision dated February 27, 2003, and awarding
severance compensation to the dismissed Union members.

In sum, two main issues are brought to the fore:

(1) Whether the mass actions committed by the Union on different occasions are illegal strikes;
and

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(2) Whether separation pay should be awarded to the Union members who participated in the
illegal strikes.

The Courts Ruling

The Union contends that the NLRC violated its right to due process when it disregarded its position paper
in deciding Toyotas petition to declare the strike illegal.

We rule otherwise.

It is entirely the Unions fault that its position paper was not considered by the NLRC. Records readily
reveal that the NLRC was even too generous in affording due process to the Union. It issued no less than
three (3) orders for the parties to submit its position papers, which the Union ignored until the last
minute. No sufficient justification was offered why the Union belatedly filed its position paper. In Datu
Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a party cannot complain of deprivation
of due process if he was afforded an opportunity to participate in the proceedings but failed to do so. If he
does not avail himself of the chance to be heard, then it is deemed waived or forfeited without violating
the constitutional guarantee.[29] Thus, there was no violation of the Unions right to due process on the part
of the NLRC.

On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and
posits that the verification signed by 159 out of the 227 petitioners has already substantially complied with
and satisfied the requirements under Secs. 4 and 5 of Rule 7 of the Rules of Court.

The Unions proposition is partly correct.

Sec. 4 of Rule 7 of the Rules of Court states:

Sec. 4. Verification.Except when otherwise specifically required by law or rule, pleadings

need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records.

A pleading required to be verified which contains a verification based on information and

belief or upon knowledge, information and belief, or lacks a proper verification, shall be
treated as an unsigned pleading.

The verification requirement is significant, as it is intended to secure an assurance that the allegations in
the pleading are true and correct and not the product of the imagination or a matter of speculation. [30] This
requirement is simply a condition affecting the form of pleadings, and noncompliance with the
requirement does not necessarily render it fatally defective. Indeed, verification is only a formal and not a
jurisdictional requirement.[31]

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In this case, the problem is not the absence but the adequacy of the Unions verification, since only 159
out of the 227 petitioners executed the verification. Undeniably, the petition meets the requirement on the
verification with respect to the 159 petitioners who executed the verification, attesting that they have
sufficient knowledge of the truth and correctness of the allegations of the petition. However, their
signatures cannot be considered as verification of the petition by the other 68 named petitioners unless
the latter gave written authorization to the 159 petitioners to sign the verification on their behalf. Thus,
in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies the formal requirements only
with regard to the petitioner who signed the petition but not his co-petitioner who did not sign nor
authorize the other petitioner to sign it on his behalf.[32] The proper ruling in this situation is to consider the
petition as compliant with the formal requirements with respect to the parties who signed it and, therefore,
can be given due course only with regard to them. The other petitioners who did not sign the verification
and certificate against forum shopping cannot be recognized as petitioners have no legal standing before
the Court. The petition should be dismissed outright with respect to the non-conforming petitioners.

In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the ruling
in Loquias and instead proceeded to decide the case on the merits.

The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at
the Toyota plants constituted illegal strikes

When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:

(1) [when it] is contrary to a specific prohibition of law, such as strike by

employees performing governmental functions; or

(2) [when it] violates a specific requirement of law[, such as Article 263 of the
Labor Code on the requisites of a valid strike]; or

(3) [when it] is declared for an unlawful purpose, such as inducing the employer
to commit an unfair labor practice against non-union employees; or

(4) [when it] employs unlawful means in the pursuit of its objective, such as a
widespread terrorism of non-strikers [for example, prohibited acts under Art. 264(e) of the
Labor Code]; or

(5) [when it] is declared in violation of an existing injunction[, such as injunction,

prohibition, or order issued by the DOLE Secretary and the NLRC under Art. 263 of the
Labor Code]; or

(6) [when it] is contrary to an existing agreement, such as a no-strike clause or

conclusive arbitration clause.[33]

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Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are
not within the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their
right to peaceably assemble and petition the government for redress of grievances. Mainly relying on the
doctrine laid down in the case of Philippine Blooming Mills Employees Organization v. Philippine
Blooming Mills Co., Inc.,[34] it argues that the protest was not directed at Toyota but towards the
Government (DOLE and BLR). It explains that the protest is not a strike as contemplated in the Labor
Code. The Union points out that in Philippine Blooming Mills Employees Organization, the mass action
staged in Malacaang to petition the Chief Executive against the abusive behavior of some police officers
was a proper exercise of the employees right to speak out and to peaceably gather and ask government
for redress of their grievances.

The Unions position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects
to that of the present case, the Union fails to realize one major difference: there was no labor dispute
in Philippine Blooming Mills Employees Organization. In the present case, there was an on-going labor
dispute arising from Toyotas refusal to recognize and negotiate with the Union, which was the subject of
the notice of strike filed by the Union on January 16, 2001. Thus, the Unions reliance on Phililippine
Blooming Mills Employees Organization is misplaced, as it cannot be considered a precedent to the case
at bar.

A strike means any temporary stoppage of work by the concerted action of employees as a result
of an industrial or labor dispute. A labor dispute, in turn, includes any controversy or matter concerning
terms or conditions of employment or the association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of the employer and the employee. [35]

In Bangalisan v. Court of Appeals, it was explained that [t]he fact that the conventional term strike was not
used by the striking employees to describe their common course of action is inconsequential, since the
substance of the situation and not its appearance, will be deemed controlling.[36] The term strike has been
elucidated to encompass not only concerted work stoppages, but also slowdowns, mass leaves, sit-
downs, attempts to damage, destroy, or sabotage plant equipment and facilities, and similar activities. [37]

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the
Union officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right
to assemble and ask government for redress of their complaints, but are illegal strikes in breach of the
Labor Code. The Unions position is weakened by the lack of permit from the City of Manila to hold rallies.
Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated through the
concerted action of the employees who deliberately failed to report for work on the convenient excuse
that they will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23,
2001. The purported reason for these protest actions was to safeguard their rights against any abuse
which the med-arbiter may commit against their cause. However, the Union failed to advance convincing
proof that the med-arbiter was biased against them. The acts of the med-arbiter in the performance of his
duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to justify the
February 2001 mass actions. What comes to the fore is that the decision not to work for two days was
designed and calculated to cripple the manufacturing arm of Toyota. It becomes obvious that the real and
ultimate goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining

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agent of the company. This is not a legal and valid exercise of the right of assembly and to demand
redress of grievance.

We sustain the CAs affirmance of the NLRCs finding that the protest rallies staged on February
21 to 23, 2001 were actually illegal strikes. The illegality of the Unions mass actions was succinctly
elaborated by the labor tribunal, thus:

We have stated in our questioned decision that such mass actions staged before
the Bureau of Labor Relations on February 21-23, 2001 by the union officers and
members fall squarely within the definition of a strike (Article 212 (o), Labor Code). These
concerted actions resulted in the temporary stoppage of work causing the latter
substantial losses. Thus, without the requirements for a valid strike having been complied
with, we were constrained to consider the strike staged on such dates as illegal and all
employees who participated in the concerted actions to have consequently lost their
employment status.

If we are going to stamp a color of legality on the two (2) [day-] walk
out/strike of respondents without filing a notice of strike, in effect we are giving
license to all the unions in the country to paralyze the operations of their
companies/employers every time they wish to hold a demonstration in front of any
government agency. While we recognize the right of every person or a group to
peaceably assemble and petition the government for redress of grievances, the exercise
of such right is governed by existing laws, rules and regulations.

Although the respondent union admittedly made earnest representations with the
company to hold a mass protest before the BLR, together with their officers and
members, the denial of the request by the management should have been heeded and
ended their insistence to hold the planned mass demonstration. Verily, the violation of the
company rule cannot be dismissed as mere absences of two days as being suggested by
the union [are but] concerted actions detrimental to Petitioner Toyotas
interest.[38] (Emphasis supplied.)

It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without
satisfying the prerequisites for a valid strike under Art. 263 of the Labor Code.The Union failed to comply
with the following requirements: (1) a notice of strike filed with the DOLE 30 days before the intended
date of strike, or 15 days in case of unfair labor practice; [39] (2) strike vote approved by a majority of the
total union membership in the bargaining unit concerned obtained by secret ballot in a meeting called for
that purpose; and (3) notice given to the DOLE of the results of the voting at least seven days before the
intended strike. These requirements are mandatory and the failure of a union to comply with them renders
the strike illegal.[40] The evident intention of the law in requiring the strike notice and the strike-vote report
is to reasonably regulate the right to strike, which is essential to the attainment of legitimate policy
objectives embodied in the law.[41] As they failed to conform to the law, the strikes on February 21, 22,
and 23, 2001 were illegal.

Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6
of Toyotas Code of Conduct which prohibits inciting or participating in riots, disorders, alleged strikes or
concerted actions detrimental to [Toyotas] interest. The penalty for the offense is

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dismissal. The Union and its members are bound by the company rules, and the February 2001 mass
actions and deliberate refusal to render regular and overtime work on said days violated these rules. In
sum, the February 2001 strikes and walk-outs were illegal as these were in violation of specific
requirements of the Labor Code and a company rule against illegal strikes or concerted actions.

With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as
the legal requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates
of the Bicutan and Sta. Rosa plants and blocked the free ingress to and egress from the company
premises. Toyota employees, customers, and other people having business with the company were
intimidated and were refused entry to the plants. As earlier explained, these strikes were illegal because
unlawful means were employed. The acts of the Union officers and members are in palpable violation of
Art. 264(e), which proscribes acts of violence, coercion, or intimidation, or which obstruct the free ingress
to and egress from the company premises. Undeniably, the strikes from March 28 to April 12, 2001 were
illegal.

Petitioner Union also posits that strikes were not committed on May 23 and 28,
2001. The Union asserts that the rallies held on May 23 and 28, 2001 could not be considered strikes, as
the participants were the dismissed employees who were on payroll reinstatement. It concludes that there
was no work stoppage.

This contention has no basis.

It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies
the case for compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the
state of things as it was before). The intended normalcy of operations is apparent from the fallo of
the April 10, 2001 Order of then DOLE Secretary Patricia A. Sto. Tomas, which reads:

WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the

labor dispute at Toyota Motors Philippines Corporation to the [NLRC] pursuant to Article
263 (g) of the Labor Code, as amended. This Certification covers the current labor cases
filed in relation with the Toyota strike, particularly, the Petition for Injunction filed with the
National Labor Relations Commission entitled Toyota Motor Philippines Corporation vs.
Toyota Motor Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al.,
NLRC Injunction Case No. 3401054-01; Toyota Motor Philippines Corporation vs. Toyota
Motor Philippines Corporation Workers Association, et al., NLRC NCR Case No. 3004-
01775-01, and such other labor cases that the parties may file relating to the strike and
its effects while this Certification is in effect.

As provided under Article 2634(g) of the Labor Code, all striking workers are
directed to return to work at their regular shifts by April 16, 2001; the Company is in turn
directed to accept them back to work under the same terms and conditions obtaining
prior to the work stoppage, subject to the option of the company to merely reinstate a
worker or workers in the payroll in light of the negative emotions that the strike has
generated and the need to prevent the further deterioration of the relationship between
the company and its workers.

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Further, the parties are hereby ordered to cease and desist from committing
any act that might lead to the worsening of an already deteriorated
situation.[42] (Emphasis supplied.)

It is explicit from this directive that the Union and its members shall refrain from engaging in any
activity that might exacerbate the tense labor situation in Toyota, which certainly includes concerted
actions.

This was not heeded by the Union and the individual respondents who staged illegal concerted
actions on May 23 and 28, 2001 in contravention of the Order of the DOLE Secretary that no acts should
be undertaken by them to aggravate the already deteriorated situation.

While it may be conceded that there was no work disruption in the two Toyota plants, the fact still
remains that the Union and its members picketed and performed concerted actions in front of the
Company premises. This is a patent violation of the assumption of jurisdiction and certification Order of
the DOLE Secretary, which ordered the parties to cease and desist from committing any act that might
lead to the worsening of an already deteriorated situation. While there are no work stoppages, the pickets
and concerted actions outside the plants have a demoralizing and even chilling effect on the workers
inside the plants and can be considered as veiled threats of possible trouble to the workers when they go
out of the company premises after work and of impending disruption of operations to company officials
and even to customers in the days to come. The pictures presented by Toyota undoubtedly show that the
company officials and employees are being intimidated and threatened by the strikers. In short,
the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly proscribed
by the DOLE Secretarys Order. We do not find any compelling reason to reverse the NLRC findings that
the pickets on May 23 and 28, 2001 were unlawful strikes.

From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the
March 17 to April 12, 2001 strikes, and the May 23 and 28, 2001 mass actions were illegal strikes.

Union officers are liable for unlawful strikes or illegal acts during a strike

Art. 264 (a) of the Labor Code provides:

ART. 264. PROHIBITED ACTIVITIES

(a) x x x

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.

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Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike
or who knowingly participates in the commission of illegal acts during a lawful strike.

It is clear that the responsibility of union officials is greater than that of the members. They are
tasked with the duty to lead and guide the membership in decision making on union activities in
accordance with the law, government rules and regulations, and established labor practices. The leaders
are expected to recommend actions that are arrived at with circumspection and contemplation, and
always keep paramount the best interests of the members and union within the bounds of law. If the
implementation of an illegal strike is recommended, then they would mislead and deceive the
membership and the supreme penalty of dismissal is appropriate. On the other hand, if the strike is legal
at the beginning and the officials commit illegal acts during the duration of the strike, then they cannot
evade personal and individual liability for said acts.

The Union officials were in clear breach of Art. 264(a) when they knowingly participated in the
illegal strikes held from February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28,
2001. We uphold the findings of fact of the NLRC on the involvement of said union officials in the unlawful
concerted actions as affirmed by the CA, thus:

As regards to the Union officers and directors, there is overwhelming justification to

declare their termination from service. Having instigated the Union members to stage and
carry out all illegal strikes from February 21-23, 2001, and May 23 and 28, 2001, the
following Union officers are hereby terminated for cause pursuant to Article 264(a) of the
Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio
Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey
Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr.,
and Mayo Mata.[43]

The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when
affirmed by the appellate court, are generally accorded great respect, even finality. [44]

Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the NLRC in
the absence of clear showing that these were arbitrary and bereft of any rational basis. [45] In the case at
bench, the Union failed to convince us that the NLRC findings that the Union officials instigated, led, and
knowingly participated in the series of illegal strikes are not reinforced by substantial evidence. Verily,
said findings have to be maintained and upheld. We reiterate, as a reminder to labor leaders, the rule that
[u]nion officers are duty bound to guide their members to respect the law. [46] Contrarily, if the officers urge
the members to violate the law and defy the duly constituted authorities, their dismissal from the service is
a just penalty or sanction for their unlawful acts.[47]

Members liability depends on participation in illegal acts

Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an
illegal act during a strike. While the provision is silent on whether the strike is legal or illegal, we find that
the same is irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they
can be terminated.[48] However, when union members merely participate in an illegal strike without
committing any illegal act, are they liable?

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This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC,[49] where it was
held that an ordinary striking worker cannot be terminated for mere participation in an illegal strike. This
was an affirmation of the rulings in Bacus v. Ople[50] and Progressive Workers Union v. Aguas,[51] where it
was held that though the strike is illegal, the ordinary member who merely participates in the strike should
not be meted loss of employment on the considerations of compassion and good faith and in view of the
security of tenure provisions under the Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa
sa Esso (MME), it was explained that a member is not responsible for the unions illegal strike even if he
voted for the holding of a strike which became illegal.[52]

Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the
liability of a union member in an illegal strike, starting with the rule of vicarious liability, thus:

Under [the rule of vicarious liability], mere membership in a labor union serves as
basis of liability for acts of individuals, or for a labor activity, done on behalf of the union.
The union member is made liable on the theory that all the members are engaged in a
general conspiracy, and the unlawful acts of the particular members are viewed as
necessary incidents of the conspiracy. It has been said that in the absence of statute
providing otherwise, the rule of vicarious liability applies.

Even the Industrial Peace Act, however, which was in effect from 1953 to 1974,
did not adopt the vicarious liability concept. It expressly provided that:
No officer or member of any association or organization, and no association
or organization participating or interested in a labor dispute shall be held
responsible or liable for the unlawful acts of individual officers, members, or
agents, except upon proof of actual participation in, or actual authorization of,
such acts or of ratifying of such acts after actual knowledge thereof.

Replacing the Industrial Peace Act, the Labor Code has not adopted the
vicarious liability rule.[53]

Thus, the rule on vicarious liability of a union member was abandoned and it is only when a
striking worker knowingly participates in the commission of illegal acts during a strike that he will be
penalized with dismissal.

Now, what are considered illegal acts under Art. 264(a)?

No precise meaning was given to the phrase illegal acts. It may encompass a number of acts that
violate existing labor or criminal laws, such as the following:

(1) Violation of Art. 264(e) of the Labor Code which provides that [n]o person engaged in
picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or
egress from the employers premises for lawful purposes, or obstruct public thoroughfares;

(2) Commission of crimes and other unlawful acts in carrying out the strike; [54] and

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(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in
connection with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.
As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing
laws.

In the cases at bench, the individual respondents participated in several mass actions, viz:

(1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001;

(2) The strikes held on March 17 to April 12, 2001; and

(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa
plants.

Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17
to April 12, 2001, and on May 23 and 28, 2001?

The answer is in the affirmative.

As we have ruled that the strikes by the Union on the three different occasions were illegal, we
now proceed to determine the individual liabilities of the affected union members for acts committed
during these forbidden concerted actions.

Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the rule on
the liability of the union members:

Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code
that: [x x x] any worker [x x x] who knowingly participates in the commission of illegal acts
during a strike may be declared to have lost his employment status. [x x x] It can be
gleaned unerringly from the aforecited provision of law in point, however, that an ordinary
striking employee can not be terminated for mere participation in an illegal strike. There
must be proof that he committed illegal acts during the strike and the striker who
participated in the commission of illegal act[s] must be identified. But proof
beyond reasonable doubt is not required. Substantial evidence available under the
circumstances, which may justify the imposition of the penalty of dismissal, may
suffice.

In the landmark case of Ang Tibay vs. CIR, the court ruled Not only must there
be some evidence to support a finding or conclusion, but the evidence must be
substantial. Substantial evidence is more than a mere scintilla. It means such
relevant evidence that a reasonable mind might accept as sufficient to support a
conclusion.[55] (Emphasis supplied.)

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Thus, it is necessary for the company to adduce proof on the participation of the striking
employee in the commission of illegal acts during the strikes.

After a scrutiny of the records, we find that the 227 employees indeed joined the February 21, 22,
and 23, 2001 rallies and refused to render overtime work or report for work. These rallies, as we earlier
ruled, are in reality illegal strikes, as the procedural requirements for strikes under Art. 263 were not
complied with. Worse, said strikes were in violation of the company rule prohibiting acts in citing or
participating in riots, disorders, alleged strikes or concerted action detrimental to Toyotas interest.

With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list of
employees who did not render overtime work on February 21, 2001 and who did not report for work on
February 22 and 23, 2001 as shown by Annex I of Toyotas Position Paper in NLRC Certified Case No.
000203-01 entitled In Re: Labor Dispute at Toyota Motor Philippines Corp. The employees who
participated in the illegal concerted actions were as follows:

1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6.
Alfonso, Erwin; 7. Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano,
Ruel; 11. Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola, Dominador; 14. Atun, Lester;
15. Bala, Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.; 18. Bayani, Roderick;
19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23.
Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27.
Borromeo, Jubert; 28. Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31.
Bustillo, Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie;
35. Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate, Leo
Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal, Dennis;
42. Casaba, Gienell; 43. Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46.
Cinense, Joey; 47. Cometa, Julius; 48. Completo, Emilio; 49. Consignado, Randy; 50.
Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53. Dacalcap, Albert;
54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De
Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre,
Heremo; 62. De Leon, Leonardo; 63. Delos Santos, Rogelio; 64. De Ocampo, Joselito;
65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68. Dela Ysla, Alex; 69.
Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag, Jasper;
73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo, Lionel; 77.
Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George; 81.
Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio; 84. Franco, Nikko; 85. Fulgar,
Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90.
Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola,
Genaro Jr.; 95. Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar,
Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga, Edgar; 102.
Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105. Jaen,
Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan,
Victorio; 110. Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro,
Orlando; 114. Legaspi, Noel; 115. Lising, Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy,
Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell; 120. Lucido, Johny; 121.
Macalindong, Rommel; 122. Madrazo, Nixon; 123. Magbalita, Valentin; 124. Magistrado,
Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan John; 127. Malabrigo,

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Angelito; 128. Malaluan, Rolando Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino;
131. Manaig, Roger; 132. Manalang, Joseph Patrick; 133. Manalo, Manuel Jr.; 134.
Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang,
Jovito; 138. Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141.
Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo;
145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit; 148. Mendoza, Roberto;
149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson;
153. Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad,
Kenneth; 157. Nava, Ronaldo; 158. Nevalga, Alexander; 159. Nicanor, Edwin; 160.
Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito; 163. Obe, Victor; 164. Oclarino,
Alfonso; 165. Ojenal, Leo; 166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169.
Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173.
Paniterce, Alvin; 174. Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177.
Penamante, Jowald; 178. Piamonte, Melvin; 179. Piamonte, Rogelio; 180. Platon,
Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183. Puno, Manjolito; 184. Ramos,
Eddie; 185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan,
David Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo, Baldwin;
192. Sangalang, Jeffrey; 193. Santiago, Eric; 194. Santos, Raymond; 195. Sapin, Al
Jose; 196. Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex; 199. Simborio,
Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202. Tablizo, Edwin; 203. Taclan,
Petronio; 204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson Alexander; 207.
Templo, Christopher; 208. Tenorio, Roderick; 209. Tolentino, Rodel; 210. Tolentino,
Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214.
Toral, Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose
Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221.
Vergara, Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex; 225.
Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and 227. Zamora, Dominador Jr.

Toyotas Position Paper containing the list of striking workers was attested to as true and correct
under oath by Mr. Jose Ma. Aligada, First Vice President of the Group Administration Division
of Toyota. Mr. Emerito Dumaraos, Assistant Department Manager of the Production Department of
Toyota, likewise submitted a June 29, 2001 Affidavit[56] confirming the low attendance of employees on
February 21, 22, and 23, 2001, which resulted from the intentional absences of the aforelisted striking
workers. The Union, on the other hand, did not refute Toyotas categorical assertions on the participation
of said workers in the mass actions and their deliberate refusal to perform their assigned work on
February 21, 22, and 23, 2001. More importantly, it did not deny the fact of absence of the employees on
those days from the Toyota manufacturing plants and their deliberate refusal to render work. Their
admission that they participated in the February 21 to 23, 2001 mass actions necessarily means they
were absent from their work on those days.

Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal
acts like acts of coercion or intimidation and obstructing free ingress to or egress from the company
premises. Mr. Eduardo Nicolas III, Toyotas Security Chief, attested in his affidavit that the strikers
badmouthed people coming in and shouted invectives such as bakeru at Japanese officers of the
company. The strikers even pounded the vehicles of Toyota officials. More importantly, they prevented

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the ingress of Toyotaemployees, customers, suppliers, and other persons who wanted to transact
business with the company. These were patent violations of Art. 264(e) of the Labor Code, and may even
constitute crimes under the Revised Penal Code such as threats or coercion among others.

On March 28, 2001, the following have committed illegal actsblocking the ingress to or egress
from the two (2) Toyota plants and preventing the ingress of Toyotaemployees on board the company
shuttle at the Bicutan and Sta. Rosa Plants, viz:

1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel
Berces; 6. Ariel Garcia; 7. Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10.
Federico Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan Oclarino; 14. Reynaldo
Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18. Roberto
Gonzales

Photographs were submitted by Toyota marked as Annexes 1 through 18 of its Position Paper,
vividly showing the participation of the aforelisted employees in illegal acts. [57]

To further aggravate the situation, a number of union members committed illegal acts (blocking
the ingress to and egress from the plant) during the strike staged on March 29, 2001 at the Toyota plant
in Bicutan, to wit:

1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel
Agosto

Pictures marked as Annexes 21 to 22 of Toyotas Position Paper reveal the illegal acts committed
by the aforelisted workers.[58]

On the next day, March 30, 2001, several employees again committed illegal acts (blocking
ingress to and egress from the plant) during the strike at the Bicutan plant, to wit:

1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle;
6. Alejandro Imperial; 7. Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10.
Elvis Tabirao

Pictures marked as Annexes 25 to 26 and 28 of Toyotas Position Paper show the participation of
these workers in unlawful acts.[59]

On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts
(blocking ingress to and egress from the plant) during the strike held at the Bicutan plant, to wit:

1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador;

5. Antonio Dimayuga; 6. Rurel Borebor; and 7. Alberto Lomboy

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The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes 32
and 33 of Toyotas Position Paper.[60]

On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts (blocking
ingress to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant.[61] Then,
on April 9, 2001, Alvin Paniterce, Dennis Apolinario, and Eduardo Miranda [62] were identified to have
committed illegal acts (blocking ingress to and egress from the Toyota plant) during the strike at the
Toyota Santa Rosa plant and were validly dismissed by Toyota.

Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23,
2001 and May 28, 2001 in front of the Bicutan and Sta. Rosa plants. These workers acts in joining and
participating in the May 23 and 28, 2001 rallies or pickets were patent violations of the April 10, 2001
assumption of jurisdiction/certification Order issued by the DOLE Secretary, which proscribed the
commission of acts that might lead to the worsening of an already deteriorated situation. Art. 263(g) is
clear that strikers who violate the assumption/certification Order may suffer dismissal from work. This was
the situation in the May 23 and 28, 2001 pickets and concerted actions, with the following employees who
committed illegal acts:

a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2) Abel
Berces; (3) Benny Bering; (4) Dexter Bolaos; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy
Consignado; (8) Herbert Dalanon; (9) Leodegario De Silva; (10) Alexander Esteva; (11) Jason
Fajilagutan; (12) Nikko Franco; (13) Genaro Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado;
(16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19) Nila Marcial; (20)
Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz; (23) Cornelio Platon; (24) Alejandro Sampang;
(25) Eric Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel Tagala.

Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a return-to-
work order) committed by the aforelisted strikers.[63]

b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3) Erwin
Alfonso; (4) Dennis Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces;
(9) Benny Bering; (10) Dexter Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo
Caraqueo; (14) Christopher Catapusan; (15) Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa;
(18) Ed Cubelo; (19) Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo;
(23) Basilio Dela Cruz; (24) Roel Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla;
(28) Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33)
Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey Javillonar; (36) Basilio Laqui; (37) Alberto
Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon Madrazo; (41) Valentin Magbalita;
(42) Allan Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas; (46) Alfred
Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio
Piamonte; (52) George Polutan; (53) Eric Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56)
Romualdo Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio;
(61) Nestor Umiten; (62) Joseph Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.

Toyota presented photographs which show said employees conducting mass pickets and
concerted actions.[64]

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Anent the grant of severance compensation to legally dismissed union members, Toyota assails
the turn-around by the CA in granting separation pay in its June 20, 2003 Resolution after initially denying
it in its February 27, 2003 Decision. The company asseverates that based on the CA finding that the
illegal acts of said union members constitute gross misconduct, not to mention the huge losses it
suffered, then the grant of separation pay was not proper.

The general rule is that when just causes for terminating the services of an employee under Art.
282 of the Labor Code exist, the employee is not entitled to separation pay.The apparent reason behind
the forfeiture of the right to termination pay is that lawbreakers should not benefit from their illegal
acts. The dismissed employee, however, is entitled to whatever rights, benefits and privileges [s/he] may
have under the applicable individual or collective bargaining agreement with the employer or voluntary
employer policy or practice[65] or under the Labor Code and other existing laws. This means that the
employee, despite the dismissal for a valid cause, retains the right to receive from the employer benefits
provided by law, like accrued service incentive leaves. With respect to benefits granted by the CBA
provisions and voluntary management policy or practice, the entitlement of the dismissed employees to
the benefits depends on the stipulations of the CBA or the company rules and policies.
As in any rule, there are exceptions. One exception where separation pay is given even though
an employee is validly dismissed is when the court finds justification in applying the principle of social
justice well entrenched in the 1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC,
the Court elucidated why social justice can validate the grant of separation pay, thus:

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.[66]

In the same case, the Court laid down the rule that severance compensation shall be allowed
only when the cause of the dismissal is other than serious misconduct or that which reflects adversely on
the employees moral character. The Court succinctly discussed the propriety of the grant of separation
pay in this wise:

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

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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. [67]

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay
based on social justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts
that reflect on the moral character of the employee. What is unclear is whether the ruling likewise
precludes the grant of separation pay when the employee is validly terminated from work on grounds laid
down in Art. 282 of the Labor Code other than serious misconduct.

A recall of recent cases decided bearing on the issue reveals that when the termination is legally
justified on any of the grounds under Art. 282, separation pay was not allowed. In Ha Yuan Restaurant v.
NLRC,[68] we deleted the award of separation pay to an employee who, while unprovoked, hit her co-
workers face, causing injuries, which then resulted in a series of fights and scuffles between them. We
viewed her act as serious misconduct which did not warrant the award of separation pay. In House of
Sara Lee v. Rey,[69] this Court deleted the award of separation pay to a branch supervisor who regularly,
without authorization, extended the payment deadlines of the companys sales agents. Since the cause
for the supervisors dismissal involved her integrity (which can be considered as breach of trust), she was
not worthy of compassion as to deserve separation pay based on her length of service. In Gustilo v.
Wyeth Phils., Inc.,[70] this Court found no exceptional circumstance to warrant the grant of financial
assistance to an employee who repeatedly violated the companys disciplinary rules and regulations and
whose employment was thus terminated for gross and habitual neglect of his duties. In the doctrinal case
of San Miguel v. Lao,[71] this Court reversed and set aside the ruling of the CA granting retirement benefits
or separation pay to an employee who was dismissed for willful breach of trust and confidence by causing
the delivery of raw materials, which are needed for its glass production plant, to its competitor. While a
review of the case reports does not reveal a case involving a termination by reason of the commission of

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a crime against the employer or his/her family which dealt with the issue of separation pay, it would be
adding insult to injury if the employer would still be compelled to shell out money to the offender after the
harm done.

In all of the foregoing situations, the Court declined to grant termination pay because the causes
for dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended
by willful or wrongful intent or they reflected adversely on the moral character of the employees. We
therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282
like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and
commission of a crime against the employer or his family, separation pay should not be conceded to the
dismissed employee.

In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the
courts may opt to grant separation pay anchored on social justice in consideration of the length of service
of the employee, the amount involved, whether the act is the first offense, the performance of the
employee and the like, using the guideposts enunciated in PLDT on the propriety of the award of
separation pay.

In the case at bench, are the 227 striking employees entitled to separation pay?

In the instant case, the CA concluded that the illegal strikes committed by the Union members
constituted serious misconduct.[72]

The CA ratiocinated in this manner:

Neither can social justice justify the award to them of severance

compensation or any other form of financial assistance. x x x

xxxx

Considering that the dismissal of the employees was due to their

participation in the illegal strikes as well as violation of the Code of Conduct of the
company, the same constitutes serious misconduct. A serious misconduct is a
transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment. In fact, in Panay Electric Company, Inc. v. NLRC, the Supreme Court
nullified the grant of separation benefits to employees who unlawfully participated in an
illegal strike in light of Article 264, Title VIII, Book V of the Labor Code, that, 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.

The constitutional guarantee on social justice is not intended only for the
poor but for the rich as well. It is a policy of fairness to both labor and
management.[73] (Emphasis supplied.)

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In disposing of the Unions plea for reconsideration of its February 27, 2003 Decision, the CA
however performed a volte-face by reinstating the award of separation pay.

The CAs grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance
Telephone Co. v. NLRC that serious misconduct forecloses the award of separation pay. Secondly, the
advertence to the alleged honest belief on the part of the 227 employees that Toyota committed a breach
of the duty to bargain collectively and an abuse of valid exercise of management prerogative has not
been substantiated by the evidence extant on record. There can be no good faith in intentionally incurring
absences in a collective fashion from work on February 22 and 23, 2001 just to attend the DOLE
hearings. The Unions strategy was plainly to cripple the operations and bring Toyota to its knees by
inflicting substantial financial damage to the latter to compel union recognition. The Union officials and
members are supposed to know through common sense that huge losses would befall the company by
the abandonment of their regular work. It was not disputed that Toyota lost more than PhP 50 million
because of the willful desertion of company operations in February 2001 by the dismissed union
members. In addition, further damage was experienced by Toyota when the Union again resorted to
illegal strikes from March 28 to April 12, 2001, when the gates of Toyota were blocked and barricaded,
and the company officials, employees, and customers were intimidated and harassed.Moreover, they
were fully aware of the company rule on prohibition against concerted action inimical to the interests of
the company and hence, their resort to mass actions on several occasions in clear violation of the
company regulation cannot be excused nor justified. Lastly, they blatantly violated the
assumption/certification Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of
law. These acts indeed constituted serious misconduct.

A painstaking review of case law renders obtuse the Unions claim for separation pay. In a slew of
cases, this Court refrained from awarding separation pay or financial assistance to union officers and
members who were separated from service due to their participation in or commission of illegal acts
during strikes. In the recent case of Pilipino Telephone Corporation v. Pilipino Telephone Employees
Association (PILTEA),[74] this Court upheld the dismissal of union officers who participated and openly
defied the return-to-work order issued by the DOLE Secretary. No separation pay or financial assistance
was granted. In Sukhothai Cuisine and Restaurant v. Court of Appeals,[75] this Court declared that the
union officers who participated in and the union members who committed illegal acts during the illegal
strike have lost their employment status. In this case, the strike was held illegal because it violated
agreements providing for arbitration. Again, there was no award of separation pay nor financial
assistance. In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees
Union,[76] the strike was declared illegal because the means employed was illegal. We upheld the validity
of dismissing union members who committed illegal acts during the strike, but again, without awarding
separation pay or financial assistance to the erring employees. In Samahang Manggagawa sa Sulpicio
Lines, Inc. v. Sulpicio Lines,[77] this Court upheld the dismissal of union officers who participated in an
illegal strike sans any award of separation pay. Earlier, in Grand Boulevard Hotel v. Genuine Labor
Organization of Workers in Hotel, Restaurant and Allied Industries,[78] we affirmed the dismissal of
the Unions officers who participated in an illegal strike without awarding separation pay, despite the
NLRCs declaration urging the company to give financial assistance to the dismissed
employees.[79] In Interphil Laboratories Union-FFW, et al. v. Interphil Laboratories, Inc.,[80] this Court
affirmed the dismissal of the union officers who led the concerted action in refusing to render overtime
work and causing work slowdowns. However, no separation pay or financial assistance was
allowed. In CCBPI Postmix Workers Union v. NLRC,[81] this Court affirmed the dismissal of union officers

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 Page 215 of 278

who participated in the strike and the union members who committed illegal acts while on strike, without
awarding them separation pay or financial assistance. In 1996, in Allied Banking Corporation v.
NLRC,[82] this Court affirmed the dismissal of Union officers and members, who staged a strike despite
the DOLE Secretarys issuance of a return to work order but did not award separation pay. In the earlier
but more relevant case of Chua v. NLRC,[83] this Court deleted the NLRCs award of separation benefits to
an employee who participated in an unlawful and violent strike, which strike resulted in multiple deaths
and extensive property damage. In Chua, we viewed the infractions committed by the union officers and
members as a serious misconduct which resulted in the deletion of the award of separation pay in
conformance to the ruling in PLDT. Based on existing jurisprudence, the award of separation pay to the
Union officials and members in the instant petitions cannot be sustained.

One last point to considerit is high time that employer and employee cease to view each other as
adversaries and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each
other to ensure the success of the business. When they consider only their own self-interests, and when
they act only with their own benefit in mind, both parties suffer from short-sightedness, failing to realize
that they both have a stake in the business. The employer wants the business to succeed, considering
the investment that has been made. The employee in turn, also wants the business to succeed, as
continued employment means a living, and the chance to better ones lot in life. It is clear then that they
both have the same goal, even if the benefit that results may be greater for one party than the other. If
this becomes a source of conflict, there are various, more amicable means of settling disputes and of
balancing interests that do not add fuel to the fire, and instead open avenues for understanding and
cooperation between the employer and the employee. Even though strikes and lockouts have been
recognized as effective bargaining tools, it is an antiquated notion that they are truly beneficial, as they
only provide short-term solutions by forcing concessions from one party; but staging such strikes would
damage the working relationship between employers and employees, thus endangering the business that
they both want to succeed. The more progressive and truly effective means of dispute resolution lies in
mediation, conciliation, and arbitration, which do not increase tension but instead provide relief from them.
In the end, an atmosphere of trust and understanding has much more to offer a business relationship
than the traditional enmity that has long divided the employer and the employee.

WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in G.R.
Nos. 158798-99 are GRANTED.

The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of
severance compensation is ANNULLED and SET ASIDE.

The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed
the August 9, 2001 Decision of the NLRC but deleted the grant of severance compensation,
is REINSTATED and AFFIRMED.

No costs.

SO ORDERED.

32. PT&T vs. Court of Appeals, G.R. No. 152057, September 29, 2003

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 Page 216 of 278

SECOND DIVISION

[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]

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 Page 217 of 278

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 SPECIAL FLAT RELOCATION MOVING

RELOCATION RELOCATION ALLOWANCE EXPENSES
ALLOWANCE ALLOWANCE (FREIGHT)

1. Temporary 2.1 Married employee

relocation per bringing along his
P17,500.00 P15,000
diem of family
P260.00/day

2. Permanent 2.2 Married employee

relocation a flat not bringing along
P10,000.00 N/A
monthly his family
allowance of
P5,100.00

2.3 Single employee

bringing along his
qualified
dependent/s
P10,000.00 P15,000

2.4 Single employee not

bringing along his
P7,000.00 N/A[4]
dependent/s

Moreover, the employees who would agree to the transfers would be considered promoted, thus:

FROM TO
NAME
POSITION/JG* WORK POSITION WORK
LOCATION LOCATION

1. ACHA, Jr. Counter-JG2 Legaspi (Br) Courier JG3 Romblon/

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 Page 218 of 278

AVELINO Odiongan
(SL)

2. RODIEL, Jr. Counter Cabanatuan Clerk-JG4 Baguio

CRISTINA Clerk-JG2 (CL) (NWL)

3. DELA CERNA, Jr. CW Cotabato City Clerk-JG4 Kidapawan

IGNACIO Operator-JG2 (CM) (CM)

4. DEMIGILLO Jr. CW Midsayap Courier-JG3 Lebak (CM)

GUILLERMO Operator-JG2 North

5. LAKANDULA, Counter-JG3 Iligan (NM) Clerk JG4 Butuan (EM)

BENJAMIN

6. PARACALE, Jr. CW Makar, Gen. Clerk JG4 Butuan (EM)

JESUS Operator-JG2 Santos (SM)

7. TEE, ROMEO TTY Operator- Zamboanga Clerk JG4 Jolo (WM)[5]

Gen. JG4 City (WM)

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

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 Page 219 of 278

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

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 Page 220 of 278

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:

PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION WHEN IT ISSUED THE ORDERS DATED JUNE 15,

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 Page 221 of 278

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

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 Page 222 of 278

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

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 Page 223 of 278

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.

Bellosillo, (Chairman), Quisumbing, Austria-Martinez and Tinga, JJ., concur.

33. Dosch vs. NLRC, 123 SCRA 296 [1983]

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-51182 July 5, 1983

HELMUT DOSCH, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and NORTHWEST AIRLINES, INC., respondents.

Quasha, Asperilla, Ancheta, Valmonte, Pea & Marcos Law Office for petitioner.

The Solicitor General for respondent NLRC.

Sycip, Salazar, Feliciano, Hernandez & Castillo Law Office for private respondent.

GUERRERO, J.:

This is a petition for review seeking to set aside the decision of the National Labor Relations Commission
in NLRC Case No. RB-4220 reversing the award made by the Labor Arbiter ordering petitioner's
reinstatement by private respondent Northwest Airlines, Inc. with full backwages and other benefits
decreed by law.

The antecedent facts of this case are as follows:

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 Page 224 of 278

Petitioner Helmut Dosch an American citizen, married to a Filipina, was the resident Manager of
Northwest Airlines, Inc. (Northwest, for short) in the Philippines. He has to his credit eleven (11) years of
continuous service with the company, including nine (9) years as Northwest Manager with station at
Manila. On August 18, 1975 he received an inter-office communication from R.C. Jenkins, Northwest's
Vice President for Orient Region based in Tokyo, promoting him to the position of Director of International
Sales and transferring him to Northwest's General Office in Minneapolis, U.S.A., effective the same day.
The full text of the inter-office communication is reproduced below:

NORTHWEST ORIENT Interoffice Communication

To: H. Dosch Manager-Philippines

From: Vice-President, Orient Region
Subject: Transfer
Date: August 18,1975
Location: Tokyo

Dear Helmut:

You have completed nine (9) years of service in the Orient, and in accordance with usual
practice, it is now the Company's intention to transfer you to the General Office in
Minneapolis to broaden your experience base considering that your assignment in the
Philippines has continued for several years longer than is normal for our overseas
managers.

The Company feels that there is need for an executive with your experience to fill the
position of Director of International Sales reporting directly to the Vice President for
Sales. The Company has therefore decided to promote and transfer you to this position
effective today, August 18, 1975. Your monthly compensation will be upgraded and the
proper payroll adjustment will be made in due course effective today.

To implement the foregoing decision of the Company and in order to effect a smooth
turnover, Mr. L.J. Gilbert, Jr. shall, effective today, August 18, 1975, take over your
functions and responsibilities as Manager.

You are expected to report to your new assignment on September 15, 1975. You shall,
however, be afforded sufficient time, which in this case shall not extend beyond
September 15, 1975, within which to wind up your affairs in the Philippines. During this
transition period, you will be on vacation leave for ten (10) days and thereafter on travel
and relocation status with pay. Please see that the Company house you presently occupy
will be made available to your successor by September 10, 1975.

We wish you success in your new assignment.

V
e
r
y
Page 224 of 278
 Page 225 of 278

t
r
u
l
y

y
o
u
r
s
,

(
S
g
d
.
)

R
.

C
.

J
E
N
K
I
N
S

Petitioner, acknowledging receipt of the above memo of August 18, 1975, expressed appreciation for the
promotion and at the same time regretted that "for personal reasons and reasons involving my family, I
am unable to accept a transfer from the Philippines" in his letter dated August 28, 1975 which reads:

R. C. JENKINS V.P., O.R. August 28, 1975

H. DOSCH

TRANSFER

This is to acknowledge receipt of your memo of August 18, 1975, on the subject.

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 Page 226 of 278

While I sincerely appreciate the company's confidence in my abilities as a manager,

which reflects itself in my promotion to the position of Director of International Sales, I
regret that at this time, for personal reasons and reasons involving my family, I am unable
to accept a transfer from the Philippines.

I would, therefore, prefer to remain in my position of Manager-Philippines until such time

that my services in that capacity are no longer required by Northwest Airlines.

(
S
g
d
.
)

H
.

D
O
S
C
H

Petitioner tried to resume his duties as Manager, through a memorandum to the Manila
Staff which reads:

MANILA STAFF Sept. 4, 1975

H. DOSCH MNL

RESUMPTION OF DUTIES Letter No. 454/75

It gives me great pleasure to announce that I advised Mr. Jenkins by letter dated August
28, 1975, that, for personal reasons, I have declined to accept the promotion to the
position of Director of International Sales at the General Office.

Accordingly, upon return to work from an authorized vacation of ten working days, I am
resuming my duties and responsibilities as Manager-Philippines effective today,
September 4, 1975.

I know you will join me in thanking Mr. L.J. Gilbert for taking my place as Acting Manager-
Philippines during my absence from the office.

(
S

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 Page 227 of 278

g
d
.
)

H
.

D
O
S
C
H

Telegrams were also sent by petitioner to Mr. Nightingale, Director for Finance and to Mr.
Jenkins, clearly stating petitioner's desire to remain as Manager-Philippines of Northwest.

On September 9, 1975, the Vice-President for the Orient Region of Northwest advised
petitioner that "in view of the foregoing, your status as an employee of the company
ceased on the close of business on August 31, 1975" and "the company therefore
considers your letter of August 28, 1975, to be a resignation without notice."

On September 16, 1975, Northwest filed a Report on Resignation of Managerial

Employee (Form No. 74-3, Revised September 1974), i.e., Helmut Dosch before
Regional Office No. IV (Manila) Department of Labor, copy thereof furnished petitioner.

The Report was contested by the petitioner and the parties were conciliated by Regional
Office No. IV, Manila but failed to agree on a settlement. The case was thus certified to
the Executive Labor Arbiter, National Labor Relations Commission, for compulsory
arbitration, in the following wise and manner:

Pursuant to P. D. 442, as amended, and its implementing rules and regulations (I) have
the honor to transmit complaint-Case No. R04- 10-(illegible)

COMPLAINANT/S HELMUT DOSCH

Address: c/o Atty. A.D. Valmonte

Don Pable Bldg.
114 Amorsolo St., Makati Rizal

RESPONDENT/S NORTHWEST AIRLINES, INC.

Address: 1020 Roxas Blvd., Manila

and hereby certifies the following issue(s) for arbitration:

1. Illegal dismissal.
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2. x x x

3. x x x

4. x x x

5. x x x

The following issue(s) have been settled-

1. x x x

2. x x x

3. x x x

4. x x x

Attached herewith is the record of the case consisting of THIRTY ONE (31) pages

O
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i
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S
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n
e
d
.

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C
h
a
r
g
e

February 3, 1976.

After hearing, Labor Arbiter Sofronio A. Ona rendered the decision dated December 29,
1976, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, respondent Northwest Airlines, Inc. of 1020 Roxas

Boulevard, Manila is hereby directed to reinstate complainant Helmut Dosch of Makati,
Rizal c/o Atty. A. D. Valmonte, Don Pablo Building, 114 Amorsolo Street, to his former
position with full backwages without deduction whatsoever from the time his salary was
withheld by the respondent until actual reinstatement, without loss of seniority rights and
other benefits recognized by law, including attorney's fees equivalent to 10% of the total
monetary benefits the petitioner may recover, to take effect 10 days from receipt of this
Decision.

SO ORDERED.

Manila, Philippines, December 29, 1976.

Respondent Northwest appealed from the Labor Arbiter's decision to the National Labor Relations
Commission (hereinafter referred to as NLRC) assigning the following errors: (a) the Labor Arbiter erred
in not holding that petitioner had "resigned" from his employment; (b) assuming arguendo that petitioner
"did not resign," the Labor Arbiter erred in not holding that petitioner could be dismissed for failure/refusal
to comply with the valid transfer order and for the employer's loss of trust and confidence of his employee;
(c) the Labor Arbiter erred in impliedly holding that prior clearance was required to effect the termination
of petitioner, a managerial employee; and (d) Labor Arbiter erred in awarding reinstatement, backwages,
and attorney's fees.

Petitioner filed his Reply to the appeal, supporting the findings of the Labor Arbiter and furthermore
questioned the propriety of raising for the first time on appeal the issue whether or not petitioner's refusal
to comply with the transfer order constitutes a just and sufficient cause to dismiss him.

The decision en banc of the NLRC reversed the Labor Arbiter's decision and dismissed the case for lack
of merit, holding that:

The hiring, firing, transfer, demotion and promotion of employees has been traditionally
Identified as a management prerogative. This is a function associated with the employer's
inherent right to control and manage effectively its enterprise. The free will of
management to conduct its own business affairs to achieve its purpose cannot be denied.
This exercise finds support not only in actual management practice but has become a
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part of our jurisprudence in labor relations law where, in a number of cases brought
before the Supreme Court, the highest tribunal ruled in one of these cases (Roldan vs.
Cebu Portland Cement Co., C.A. G.R. No. 24276-R, May 20, 1960, citing Gregorio
Araneta Employees Union vs, Roldan, G.R. No. L-6843, July 20, 1955; Philippine Steel
Metal Workers Union vs. CIR, G.R. No. L-3587, Dec. 11, 1951), pertinent portion of the
decision reads as follows:

... Questions affecting the direction and management of personnel are matters which the
management itself must resolve. Thus the Court has steadfastly held that the
determination of the qualifications and fitness of workers for hiring and firing, promotion
or reassignment on rotation system, are the exclusive prerogatives of management. The
management has also the right to discharge employees when there is need to reduce
personnel because of the precarious condition of the enterprise or as a result of that
closing of a section therein' (Morabe, The Law on Dismissal, 1962 ed., p. 55 citing
Pampanga Bus Co., Inc. v. Employees Association of the Pampanga Bus Co., Inc., Case
No. 17-V, Decision, August 10, 1946).

xxx xxx xxx

In the light of all the foregoing, We find that petitioner's transfer and promotion is a valid
exercise of management's prerogative. It is our view, therefore, that respondent's
decision to consider him resigned from his job after he defined management's order to
transfer and promote him to a new position at the general office at Minnesota, U.S.A. is
justified and warranted. x x x."

Petitioner now comes to Us for review of the decision.

With respect to the procedural error allegedly committed by the respondent Commission in taking
cognizance of an issue raised for the first time on appeal that of petitioner's alleged insubordination for
refusing to comply with the transfer order for him to assume the position of Director of International Sales
at Minneapolis, U.S.A., which said Commission sustained and ruled in favor of Northwest, reversing the
Labor Arbiter's decision, the records disclose that Northwest's theory from the inception of the case to the
rendition of the Labor Arbiter's decision was that petitioner was not dismissed, fired or terminated but that
he resigned from Northwest. This is plain from Northwest's verified " Report on Resignation of Managerial
Employee" in DOL Form No. 74-3 filed on September 16, 1975 with Regional Office No. IV, Department
of Labor, wherein Northwest stated that the termination of employment of "Helmut Dosch, Manager-
Philippines" was due to "resignation". Petitioner contested this report claiming that he never resigned from
the company. In its " Position Paper" dated March 10, 1976 before Regional Branch No. IV, Northwest
emphasized that any issue other than resignation of petitioner is irrelevant, thus: "As allegations relative
to termination are immaterial in this case, petitioner has no basis to claim that 'there is no legitimate
ground upon which Northwest Airlines, Inc. could have terminated the services of Mr. Dosch' or that
petitioner's resignation was 'a circumvention of the law.' In truth petitioner caused his own dissociation
from respondent."

We agree with the Labor Arbiter that "(i)n view of the overwhelming evidence to the effect that petitioner
did not resign or relinquish his position as Manager-Philippines, this Body is without any alternative, but to
declare the sole reason relied upon by respondent- resignation (Exh. 'Q') as baseless and devoid of
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truth." Indeed, the letter dated August 28, 1975 sent by petitioner to R.C. Jenkins cannot be considered
as a resignation as petitioner indicated therein clearly that he preferred to remain as Manager-Philippines
of Northwest.

Realizing that its "resignation" theory was weak and flimsy, Northwest abandoned it and contended for
the first time that petitioner was guilty of insubordination when he refused to comply with the transfer
order. This change of theory on appeal is improper; it is offensive to the basic rules of fair play and justice
and violative of petitioner's constitutional right to due process of law. Appellate courts may not entertain
questions of law or fact not raised in the lower courts (Sec. 18, Rule 46, Revised Rules of Court), for that
would constitute a change of theory not permissible on appeal (Toribio vs. Decasa, 55 Phil. 461).

It is undoubtedly the law, that, where a cause has been tried upon the theory that the
pleadings are at issue, or that a particular issue is made by the pleadings, or where an
issue is tacitly accepted by all parties as properly presented for trial and as the only
issue, the appellate court will proceed upon the same theory. (Lizarraga Hermanos vs.
Yap Tico, 24 Phil. Rep. 504; Molina vs. Somes, 24 Phil. Rep., 45.) it would be unjust and
oppressive for the appellate court to adopt a theory at variance with that on which the
case was presented to and tried by the lower court. It would surprise the parties, to take
them unaware and off their guard, and would in effect, deprive them of their day in court.
(Limpangco Sons vs. Yangco Steamship Co., 34 Phil. 597, 605-609).

Since "resignation" was the particular cause alleged by Northwest in terminating petitioner's employment,
Northwest is restricted to the ground specified and may not invoke any other cause for the discharge. (56
CJS p. 452, citing Georgia Coast and P.R. Co. vs. McFarland, 64 S.E. 897,132 Ga 639; 56 CJS p. 435,
citing Vicknair vs. Southside Plantation Co., 10 La. App. Orleans 43; Warner vs. Fabacher, 6 La. App.
Orleans, 87).

As indicated earlier, Northwest on appeal to NLRC changed its stand and claimed that petitioner was
guilty of insubordination" when he refused to comply with the transfer order made by Vice President
Jenkins dated August 18, 1975. And for such act of insubordination, Northwest claimed it lost confidence
in the petitioner.

We must, however, rightly treat the Jenkins letter as directing the promotion of the petitioner from his
position as Philippine manager to Director of International Sales in Minneapolis, U.S.A. It is not merely a
transfer order alone but as the Solicitor General correctly observes, "it is more in the nature of a
promotion that a transfer, the latter being merely incidental to such promotion." The inter-office
communication of Vice President Jenkins is captioned "Transfer" but it is basically and essentially a
promotion for the nature of an instrument is characterized not by the title given to it but by its body and
contents. (Cf. Shell Co. vs. Firemen's Insurance Co. of Newark, 100 Phil. 757; Borromeo vs. Court of
Appeals, L-22962, Sept. 28, 1972; American Rubber co. vs. Collector of Internal Revenue, L-25965, June
29, 1975). The communication informed the petitioner that effective August 18, 1975, he was to
be promoted to the position of Director of International Sales, and his compensation would be upgraded
and the payroll accordingly adjusted. Petitioner was, therefore, advanced to a higher position and rank
and his salary was increased and that is a promotion. (People ex. rel. Campbell vs. Partridge, 85 N.Y.S.
833, 899 App. Div. 497; State ex rel. Wolcott vs. Celebrezze, 49 N.E. 2d 948, 141 Ohio St. 627, Vol. 34
Words and Phrases, pp. 564, 565). It has been held that promotion denotes a scalar ascent of an officer
or an employee to another position, higher either in rank or salary. (Millares vs. Subido, 20 SCRA 954).
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In the Millares case above, the Supreme Court, speaking thru Acting Chief Justice J.B.L. Reyes,
distinguished between transfer and promotion as follows:

A transfer is a movement from one position to another of equivalent rank, level or salary,
without break in the service. Promotion, on the other hand, 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, Whereas, promotion denotes a scalar
ascent of a senior officer or employee to another position, higher either in rank or salary,
transfer refers to lateral movement from one position to another, of equivalent rank, level
or salary. (p. 962)

There is no law that compels an employee to accept a promotion, as a promotion is in the nature of a gift
or a reward, which a person has a right to refuse. When petitioner refused to accept his promotion to
Director of International Sales, he was exercising a right and he cannot be punished for it as qui jure suo
utitur neminem laedit. He who uses his own legal right injures no one.

It cannot be said that petitioner's refusal to obey the transfer order was contumacious. For one,
petitioner's refusal was justified in that the position of Director of International Sales had been non-
existent since 1965 and was inexistent at the time of petitioner's promotion thereto on August 18, 1975,
which fact is shown by Northwest's Manual Policies and Procedures (Exhibit "X") and admitted by
Northwest's witness, Richardson Sells, in his testimony. Northwest has not even attempted to deny the
non- existence of the position.

Assuming for the sake of argument that the communication or letter of Mr. Jenkins was basically a
transfer, under the particular and peculiar facts obtaining in the case at bar, petitioner's inability or his
refusal to be transferred was not a valid cause for dismissal.

While it may be true that the right to transfer or reassign an employee is an employer's exclusive right and
the prerogative of management, such right is not absolute. The right of an employer to freely select or
discharge his employee is limited by the paramount police power (Phil. Air Lines, Inc. vs. Phil. Airlines
Employees Association, L-24626, June 28, 1974, 57 SCRA 489) for the relations between capital and
labor are not merely contractual but impressed with public interest (Article 1700, New Civil Code). And
neither capital nor labor shall act oppressively against each other (Article 1701, New Civil Code).

There can be no dispute that the constitutional guarantee of security of tenure mandated under Section 9,
Article 2, 1973 Constitution applies to all employees and laborers, whether in the government service or
in the private sector. The fact that petitioner is a managerial employee does not by itself exclude him from
the protection of the constitutional guarantee of security of tenure. Even a manager in a private concern
has the right to be secure in his position, to decline a promotion where, although the promotion carries an
increase in his salary and rank but results in his transfer to a new place of assignment or station and
away from his family. Such an order constitutes removal without just cause and is illegal. Nor can the
removal be justified on the ground of loss of confidence as now claimed by private respondent Northwest,
insisting as it does that by petitioner's alleged contumacious refusal to obey the transfer order, said
petitioner was guilty of insubordination.

We cannot agree to Northwest's submission that petitioner was guilty of disobedience and insubordination
which respondent Commission sustained. The only piece of evidence on which Northwest bases the
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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 his position, saying. " I would, therefore, prefer 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.

Neither is the other ground alleged by Northwest in dismissing petitioner which is loss of confidence,
supported by evidence. On the contrary, the fact that Northwest wanted to promote petitioner to Director
of International Sales as "the Company feels there is need for an executive of (his) experience to fill the
position of Director of International Sales" as well as its Manifestation dated March 23, 1976 that
Northwest "offered to rehire petitioner as Director of International Sales with office at Minneapolis, U.S.A."
clearly indicate that Northwest had full confidence in petitioner. And so We hold and rule that respondent
Commission committed grave abuse of discretion in sustaining the dismissal of petitioner on the ground
of insubordination and loss of confidence.

Indeed, the outright dismissal of petitioner from his position as Manager-Philippines of Northwest Airlines
is much too severe, considering the length of service that petitioner has rendered for eleven (11) fruitful
and loyal years, a strong and vital factor that must be taken into account in labor law determinations
which this Court, speaking thru Chief Justice Fernando in Meracap vs. International Ceramics
Manufacturing Co., Inc., L-48235-36, July 30, 1979, 92 SCRA 412 emphasized should not only
be secundum rationem but also secundum caritatem, to wit:

It would imply at the very least that where a penalty less punitive would suffice, whatever
missteps may be committed by labor ought not to be visited with a consequence so
severe. It is not only because of the law's concern for the workingman. There is, in
addition, his family to consider. Unemployment brings untold hardships and sorrows on
those dependent on the wage-earner. The misery and pain attendant on the loss of jobs
then could be avoided if there be acceptance of the view that under all the circumstances
of this case, petitioners should not be deprived of their means of livelihood. Nor is this to
condone what had been done by them. For all this to condone what had been done by
them. For all this while, since private respondent considered them separated from the
service, they had not been paid. For the strictly juridical standpoint, it cannot be too
strongly stressed, to follow Davis in his masterly work, Discretionary Justice, that where a
decision may be made to rest on informed judgment rather than rigid rules, all the
equities of the case must be accorded their due weight. Finally, labor law determinations,
to quote from Bultmann, should be not only secundum rationem but also secundum
caritatem. (This excerpt was cited in Almira vs B.F. Goodrich Philippines, Inc., 58 SCRA
120,131.)

The trend of recent decisions of this Court as pointed out by Chief Justice Fernando in the recent case
of Johnny Bustillos us. Amado Inciong and Cummins Diesel Sales and Service Corporation of the
Philippines, G.R. 1,45396, January 27, 1983 has been "to vitalize the constitutional mandate of security of
tenure as an aspect of the protection accorded labor. For its forceful and authoritative weight, We quote
lengthily the careful and clear review of Our decisions as follows:
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1. Meracap v. International Ceramics Mfg- Co., Inc. explains why the appeal should be
disposed in that manner. Thus: 'In a number of decisions, Philippine Air Lines, Inc. v.
Philippine Airlines Employees Association, Almira v. B.F. Goodrich Philippines, Central
Textile Mills v. National Labor Relations Commission, and Genconsu Free Workers Union
v. Inciong, this Court has sought to vitalize the constitutional mandate of security of
tenure as an aspect of the protection accorded labor.' We do so again in this case.

2. The decision reached not only by a labor arbitrator who heard the case but also by the
National Labor Relations Commission was the reinstatement of petitioner with back pay.
The challenged order reversed it. Thus: 'In effect, complainant has no involvement in the
alleged pilferage. However, since complainant no longer enjoys the trust and confidence
reposed upon him by respondent as a Service Supervisor, and hence, a managerial
employee, respondent has every right to terminate him. Since the termination is not for a
justifiable cause, complainant is entitled to separation pay.' No case has gone that far.
Moreover, the ruling in Central Textile Mills, Inc. v. National Relations Commission is
squarely in point. Thus: 'The weakness of the petition to repeat, is thus indisputable.
Petitioner, (management) however, would try to impart a semblance of plausibility by
alleging that even on the assumption that no theft was committed, still there was loss of
confidence sufficient to cause his dismissal In the Philippine Airlines decision referred to,
the accusation that theft was committed by the employee was likewise not borne out by
the evidence. To justify a dismissal, management relied on the allegation that there was
breach of trust, a ground analogous to loss of confidence. The Court of Industrial
Relations did not agree. Neither did this Court. Reinstatement was ordered. So it must be
in this case.' The above ruling is reinforced by a case decided last December 15, 1982,
Justice de Castro speaking for the Court in Acda v. Minister of Labor. Thus: 'The findings
of the Labor Arbiter on this point, as upheld by the National Labor Relations Commission,
are quite clear, and We find no reversible error therein the same being substantiated by
evidence of record, aside from the fact that said findings had already attained the
character of finality by the non-perfection of a proper appeal.' The opinion goes on to
state: 'With the charges against petitioner found to be unsubstantiated, We are left with
no other alternative but to hold that the so-called 'loss of confidence' is without basis and
may not be successfully invoked as ground for dismissal which requires some basis
therefor, such ground never having been intended to afford an occasion for abuse by the
employer of its prerogative, as it can easily be subject to abuse because of its subjective
nature, to dismiss employees in contravention with the 'protection of labor' clause of the
Constitution. It is this Constitutional guaranty that accords even to employees employed
on a probationary basis the protection that their services may be terminated only for a
just cause or when authorized by existing laws, or when he fails to qualify as a regular
employee in accordance with reasonable standards prescribed by the employer.'

3. There is likewise this excerpt from Meracap which calls for the reversal of the assailed
order of the Secretary of Labor. Thus: 'In this suit for certiorari to review the dismissal of
an appeal from a decision of the then Acting Secretary of Labor Amado G. Inciong by
respondent Ronaldo Zamora, Presidential Assistant on Legal Affairs, ordering the
dismissal of petitioner Faustino Meracap, the relevance of such a provision becomes
apparent. It was alleged by petitioner that while the termination of his services was based
on his unauthorized absences, the real reason was due to his union activities.

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Respondent Zamora ruled otherwise. Such a finding of fact must be accorded deference.
Nonetheless, considering that petitioner Meracap has been in the employ of the
International Ceramics Manufacturing Company, Inc. for eighteen years, it would appear
that the punishment was much too severe. Dismissal was not warranted. Suspension
would suffice. To that extent, certiorari lies.' Dismissal as pointed out in the latest case in
point, decided fourteen days after Acda, in the ponencia of Justice Melencio- Herrera in
Visperas v. Inciong, 'is too harsh a penalty. A penalty less punitive should have been
proper.' In this case, upon mere suspicion, later found to be unsubstantiated, he was
immediately suspended. A two-year suspension would have sufficed, not the loss of his
job. The length of service was accorded due consideration in decisions of this Tribunal
ordering reinstatement, twenty years in De Leon v. National Labor Relations Commission
and Reyes v. Philippine Duplicators and twenty-two years in Union of Supervisors v.
Secretary of Labor. Here he was in the service for eleven years when suspended.

Accordingly, We must emphasize here the long and faithful years of service that petitioner had rendered
to respondent company, eleven good years, nine of which as Manager with station at Manila. It is plainly
abusive of the company and oppressive to the petitioner that the latter is peremptorily dismissed on the
shallow claim of " resignation without notice," and thereafter converted to alleged loss of confidence. This
unjustified dismissal of the petitioner calls for Our specific ruling in the cited case of De Leon vs. National
Labor Relations Commission, 100 SCRA 691, 700, wherein the Court speaking through Justice De
Castro said:

While a Managerial employee may be dismissed merely on the ground of loss of

confidence the matter of determining whether the cause for dismissing an employee is
justified on ground of loss of confidence, cannot be left entirely to the employer. Impartial
tribunals do not rely only on the statement made by employer that there is 'loss of
confidence' unless duly proved or sufficiently substantiated. We find no reason to disturb
the findings of the Labor Arbiter that the charges against petitioner were not fully
substantiated, and 'there can be no valid reason for said loss of confidence. ...

So must this Court re-enforce the constitutional protection afforded labor and assure the right of workers
to security of tenure. Justice and equity call for petitioner's reinstatement. It should be so not
only secundum rationem but also secundum caritatem.

One last point. We reject the holding of the respondent Commission that petitioner's act in accepting from
the respondent airline several pay checks relative to his pension fund and the cash value representing an
adjustment in the peso amount of his dollar base by reason of currency fluctuation constitutes an
admission if not a conformity, of his lawful separation from office on August 31, 1975. It appears
indubitably that the several pay checks mentioned by respondent NLRC were only refunds of petitioner's
contribution to the pension fund of respondent airline. The money refunded was petitioner's own money,
that which he personally contributed to the retirement plan. If petitioner accepted the cash value
representing the adjustment in the peso amount of petitioner's dollar base, the money was legitimately
and legally due to the petitioner; they are not benefits or privileges granted by the airline to the dismissed
petitioner. There can be no estoppel against petitioner's acceptance of the refund of monies legitimately
his own, nor a waiver of his right to question the termination of his services. (Urgelio vs. Osmea, Jr., 10
SCRA 253). Even employees who receive their separation pay are not barred from contesting the legality
of their dismissal. The acceptance of those benefits would not amount to estoppel as held in the leading
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case of Mercury Drug Company vs. CIR as aptly cited in the decision of the Labor Arbiter. (De Leon vs.
NLRC, 100 SCRA 691).

In Cario vs. Agricultural Credit and Cooperative Financing Administration, 18 SCRA 183, the rationale of
the Court's ruling rejecting the argument that acceptance of separation pay and terminal leave benefits by
the employees illegally dismissed by their employer constitutes estoppel, is stated thus, which We re-
echo as follows:

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 proferred. His, then, is a case of adherence, not of choice. One thing sure,
however, is that petitioner did not relent on their claim. They pressed it. They are deemed
not to have waived any of their rights. Renuntiatio non praesumitur.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the National Labor Relations
Commission in Case No. RB-4220 is hereby REVERSED and SET ASIDE, and the decision of the Labor
Arbiter dated December 29, 1976 in RB-IV-4220-76 ordering petitioner's reinstatement to his former
position with full backwages for three (3) years without loss of seniority rights and other benefits
recognized by law, including attorney's fees equivalent to 10% of the total monetary benefits which the
petitioner may recover, is hereby REINSTATED. Costs against the respondent Northwest.

Petition granted.

SO ORDERED.

Fernando, C.J., Makasiar, Concepcion, Jr., De Castro, Plana, Escolin Vasquez and Relova, JJ., concur.

Aquino, J., concurs in the result.

34. Mendoza vs. Rural Bank of Lucban, G.R. No. 155421, July 7, 2004

[G.R. No. 155421. July 7, 2004]

ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF LUCBAN, respondent.

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DECISION

PANGANIBAN, J.:

The law protects both the welfare of employees and the prerogatives of management. Courts will not
interfere with business judgments of employers, provided they do not violate the law, collective bargaining
agreements, and general principles of fair play and justice. The transfer of personnel from one area of
operation to another is inherently a managerial prerogative that shall be upheld if exercised in good faith -
- for the purpose of advancing business interests, not of defeating or circumventing the rights of
employees.

The Case

The Court applies these principles in resolving the instant Petition for Review [1] under Rule 45 of the
Rules of Court, assailing the June 14, 2002 Decision[2] and September 25, 2002 Resolution[3] of the Court
of Appeals (CA) in CA-GR SP No. 68030. The assailed Decision disposed as follows:

WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit.[4]

The challenged Resolution denied petitioners Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution
Nos. 99-52 and 99-53, which read:

Board Res. No. 99-52

RESOLVED AS IT IS HEREBY RESOLVED that in line with the policy of the bank to familiarize bank
employees with the various phases of bank operations and further strengthen the existing internal control
system[,] all officers and employees are subject to reshuffle of assignments. Moreover, this resolution
does not preclude the transfer of assignment of bank officers and employees from the branch office to the
head office and vice-versa.

Board Res. No. 95-53

Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new
assignments without changes in their compensation and other benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA C/A Clerk Actg. Appraiser

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ELMER L. MENDOZA Appraiser Clerk-Meralco Collection

CHONA R. MENDOZA Clerk-Meralco Bank Teller[5]
Collection

In a letter dated April 30, 1999, Alejo B. Daya, the banks board chairman, directed Briccio V. Cada,
the manager of the banks Tayabas branch, to implement the reshuffle. [6] The new assignments were to
be effective on May 1, 1999 without changes in salary, allowances, and other benefits received by the
aforementioned employees.[7]

On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his
opinion on the reshuffle, as follows:

RE: The recent reshuffle of employees as per

Board Resolution dated April 25, 1999

Dear Sir:

This is in connection with the aforementioned subject matter and which the undersigned received on April
25, 1999.

Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-
Meralco Collection is deemed to be a demotion without any legal basis. Before this action on your part[,]
the undersigned has been besieged by intrigues due to [the] malicious machination of a certain public
official who is bruited to be your good friend. These malicious insinuations were baseless and despite the
fact that I have been on my job as Appraiser for the past six (6) years in good standing and never
involved in any anomalous conduct, my being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant
harassment on your part as a prelude to my termination in due time. This will constitute an unfair labor
practice.

Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until the reason
[for] my being reshuffled is made clear.

Your kind consideration on this request will be highly appreciated. [8]

On May 10, 1999, Daya replied:

Dear Mr. Mendoza,

Anent your undated letter expressing your resentment/comments on the recent managements decision to
reshuffle the duties of bank employees, please be informed that it was never the intention (of
management) to downgrade your position in the bank considering that your due compensation as Bank
Appraiser is maintained and no future reduction was intended.

Aside from giving bank employees a wider experience in various banking operations, the reshuffle will
also afford management an effective tool in providing the bank a sound internal control system/check and
balance and a basis in evaluating the performance of each employee. A continuing bankwide reshuffle of
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employees shall be made at the discretion of management which may include bank officers, if necessary
as expressed in Board Resolution No. 99-53, dated April 25, 1999. Management merely shifted the duties
of employees, their position title [may be] retained if requested formally.

Being a standard procedure in maintaining an effective internal control system recommended by the
Bangko Sentral ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of bank
management.[9]

On June 7, 1999, petitioner submitted to the banks Tayabas branch manager a letter in which he
applied for a leave of absence from work:

Dear Sir:

I wish I could continue working but due to the ailment that I always feel every now and then, I have the
honor to apply for at least ten (10) days sick leave effective June 7, 1999.

Hoping that this request [merits] your favorable and kind consideration and understanding. [10]

On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for twenty
days effective on the same date.[11]

On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before
Arbitration Branch No. IV of the National Labor Relations Commission (NLRC). The Complaint -- for illegal
dismissal, underpayment, separation pay and damages -- was filed against the Rural Bank of Lucban
and/or its president, Alejo B. Daya; and its Tayabas branch manager, Briccio V. Cada. The case was
docketed as NLRC Case SRAB-IV-6-5862-99-Q.[12]

The labor arbiters June 14, 2000 Decision upheld petitioners claims as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of seniority rights with
full backwages from date of dismissal to actual reinstatement in the amount of P55,000.00 as of June 30,
2000.

3. Ordering the payment of separation pay if reinstatement is not possible in the amount of P30,000.00 in
addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount
of P5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

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7. Ordering the payment of Attorneys fees in the amount of P18,000.00 which is 10% of the monetary
award.[13]

On appeal, the NLRC reversed the labor arbiter.[14] In its July 18, 2001 Resolution, it held:

We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its
implementation of its Board Resolution directing the reshuffle of employees at its Tayabas branch to
positions other than those they were occupying. While at first the employees thereby affected would
experience difficulty in adjusting to their new jobs, it cannot be gainsaid that the objective for the reshuffle
is noble, as not only would the employees obtain additional knowledge, they would also be more well-
rounded in the operations of the bank and thus help the latter further strengthen its already existing
internal control system.

The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an
appraiser he was made to perform the work of a clerk in the collection of Meralco payments, which he
may have considered as beneath him and his experience, being a pioneer employee. But it cannot be
discounted either that other employees at the Tayabas branch were similarly reshuffled. The only logical
conclusion therefore is that the Board Resolution was not aimed solely at the [petitioner], but for all the
other employees of the x x x bank as well. Besides, the complainant has not shown by clear, competent
and convincing evidence that he holds a vested right to the position of Appraiser. x x x.

How and by what manner a business concern conducts its affairs is not for this Commission to interfere
with, especially so if there is no showing, as in the case at bar, that the reshuffle was motivated by bad
faith or ill-will. x x x.[15]

After the NLRC denied his Motion for Reconsideration,[16] petitioner brought before the CA a Petition
for Certiorari[17] assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled
thus:

The so-called harassment which Mendoza allegedly experienced in the aftermath of the reshuffling of
employees at the bank is but a figment of his imagination as there is no evidence extant on record which
substantiates the same. His alleged demotion, the cold shoulder stance, the things about his chair and
table, and the alleged reason for the harassment are but allegations bereft of proof and are perforce
inadmissible as self-serving statements and can never be considered repositories of truth nor serve as
foundations of court decisions anent the resolution of the litigants rights.

When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no
[diminution] of his salary benefits and rank. He could even retain his position title, had he only requested
for it pursuant to the reply of the Chairman of the banks board of directors to Mendozas letter protesting
the reshuffle. There is, therefore, no cause to doubt the reasons which the bank propounded in support of
its move to reshuffle its employees, viz:
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1. to familiarize bank employees with the various phases of bank operations, and

2. to further strengthen the existing internal control system of the bank.

The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of
constructive dismissal.

The fact that Mendoza was no longer included in the banks payroll for July 1 to 15, 1999 does not signify
that the bank has dismissed the former from its employ. Mendoza separated himself from the banks
employ when, on June 24, 1999, while on leave, he filed the illegal dismissal case against his employer
for no apparent reason at all.[18]

Hence, this Petition.[19]

The Issues

Petitioner raises the following issues for our consideration:

I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service and/or
abandoned his job when he filed his Complaint for constructive and consequently illegal dismissal;

II. Whether or not the reshuffling of private respondent[s] employees was done in good faith and cannot
be made as the basis of a finding of constructive dismissal, even as the [petitioners] demotion in rank is
admitted by both parties;

III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department
Store (323 SCRA 445)] is applicable to the case at bar;

IV. Whether or not the Court of Appeals erred in dismissing the petitioners money claims, damages, and
unpaid salaries for the period July 1-30, 1999, although this was not disputed by the private respondent;
and

V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC are a
nullity since the appeal filed by private respondent before the NLRC on August 5, 2000 was on the
15th day or five (5) days beyond the reglem[e]ntary period of ten (10) days as provided for by law and the
NLRC Rules of Procedure.[20]

In short, the main issue is whether petitioner was constructively dismissed from his employment.

The Courts Ruling

The Petition has no merit.

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Main Issue:
Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to when continued

employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution of pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.[21] Petitioner argues that he was compelled to file an action for constructive
dismissal, because he had been demoted from appraiser to clerk and not given any work to do, while his
table had been placed near the toilet and eventually removed. [22] He adds that the reshuffling of
employees was done in bad faith, because it was designed primarily to force him to resign. [23]

Management Prerogative to Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often
decline to interfere in legitimate business decisions of employers.[24] Indeed, labor laws discourage
interference in employers judgments concerning the conduct of their business. [25] The law must protect
not only the welfare of employees, but also the right of employers.

In the pursuit of its legitimate business interest, management has the 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.[26] This
privilege is inherent in the right of employers to control and manage their enterprise effectively. [27] The
right of employees to security of tenure does not give them vested rights to their positions to the extent of
depriving management of its prerogative to change their assignments or to transfer them.[28]

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining
agreements, and general principles of fair play and justice.[29] The test for determining the validity of the
transfer of employees was explained in Blue Dairy Corporation v. NLRC[30] as follows:

[L]ike 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 a subterfuge by the employer to rid himself of an undesirable worker. In particular, the
employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other
benefits. Should the employer fail to overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been defined as a quitting because continued
employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank
and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the employee leaving him with no
option but to forego with his continued employment.[31]

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Petitioners Transfer Lawful

The employer bears the burden of proving that the transfer of the employee has complied with the
foregoing test. In the instant case, we find no reason to disturb the conclusion of the NLRC and the CA
that there was no constructive dismissal. Their finding is supported by substantial evidence -- that amount
of relevant evidence that a reasonable mind might accept as justification for a conclusion.[32]

Petitioners transfer was made in pursuit of respondents policy to familiarize bank employees with the
various phases of bank operations and further strengthen the existing internal control system [33] of all
officers and employees. We have previously held that employees may be transferred -- based on their
qualifications, aptitudes and competencies -- to positions in which they can function with maximum benefit
to the company.[34] There appears no justification for denying an employer the right to transfer employees
to expand their competence and maximize their full potential for the advancement of the establishment.
Petitioner was not singled out; other employees were also reassigned without their express consent.

Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges
and other benefits. This fact is clear in respondents Board Resolutions, the April 30, 1999 letter of Bank
President Daya to Branch Manager Cada, and the May 10, 1999 letter of Daya to petitioner.

On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no
credence by both lower tribunals was his bare and self-serving statement that he had been positioned
near the comfort room, made to work without a table, and given no work assignment. [35] Purely conjectural
is his claim that the reshuffle of personnel was a harassment in retaliation for an alleged falsification case
filed by his relatives against a public official.[36] While the rules of evidence prevailing in courts of law are
not controlling in proceedings before the NLRC,[37] parties must nonetheless submit evidence to support
their contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC[38] does not apply to the present factual milieu. The Court ruled therein that the lack
of notice and hearing made the dismissal of the employee ineffectual, but not necessarily illegal.[39] Thus,
the procedural infirmity was remedied by ordering payment of his full back wages from the time of his
dismissal.[40] The absence of constructive dismissal in the instant case precludes the application
of Serrano. Because herein petitioner was not dismissed, then he is not entitled to his claimed monetary
benefits.

Alleged Nullity of NLRC and CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were void, since respondents
appeal before the NLRC had allegedly been filed beyond the reglementary period.[41]A careful scrutiny of
his Petition for Review[42] with the appellate court shows that this issue was not raised there. Inasmuch as
the instant Petition challenges the Decision of the CA, we cannot rule on arguments that were not brought

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before it. This ruling is consistent with the due-process requirement that no question shall be entertained
on appeal, unless it has been raised in the court below. [43]

WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25,
2002 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

35. Norkis Trading Co., vs. NLRC, G.R. No. 168159, August 19, 2005

[G.R. No. 168159. August 19, 2005]

NORKIS TRADING CO., INC., ATTY. NORBERTO QUISUMBING, JR., RACQUEL LICSI, EMMANUEL
S. TAMAYO and NICHOL JUDE THADDEUS JURIDICO, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and MA. ARLENE C. GNILO, respondents.

RESOLUTION

CHICO-NAZARIO, J.:

For resolution is a petition for review of the Decision [1] and Resolution of the Court of Appeals, dated
07 March 2005 and 18 May 2005, respectively, affirming the Resolution of the National Labor Relations
Commission (NLRC) dated 26 March 2004, which, in turn, affirmed the Decision of Labor Arbiter Rolando
L. Bobis, dated 06 November 2003, finding petitioners guilty of illegal dismissal.

On 06 June 2005, petitioners filed before this Court a motion for extension of time to file petition for
review. In our resolution of 04 July 2005, we denied this motion due to lack of:

a) sufficient showing that petitioners have not lost the fifteen (15)-day reglementary period
pursuant to Section 2, Rule 45 of the 1997 Rules of Civil Procedure, as amended, in view
of counsels failure to indicate whether the Court of Appeals resolution dated 18 May 2005
is a denial/dismissal of the petition or a denial of the motion for reconsideration thereof;
and

b) service of a copy of the motion on the Court of Appeals in accordance with Section 4, Rule
13 in relation to Section 2, Rule 45 of the Rules.[2]

In the same resolution, this Court noted petitioners manifestation dated 07 June 2005 that copies of
the motion were served on the Court of Appeals and the Office of the Solicitor General on 7 June 2005 by
registered mail.[3]

On 04 July 2005, petitioners filed their petition for certiorari raising the sole issue of

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WHETHER OR NOT THE COURT OF APPEALS ERRED IN DENYING THE PETITIONERS MOTION
FOR RECONSIDERATION THEREBY AFFIRMING THE DECISION OF THE NLRC AND LABOR
ARBITER THAT PRIVATE RESPONDENT WAS CONSTRUCTIVELY DISMISSED AND THEREFORE
ENTITLED TO BACKWAGES, 13TH MONTH PAY, SERVICE INCENTIVE LEAVE PAY, MORAL
DAMAGES, EXEMPLARY DAMAGES AND ATTORNEYS FEES.[4]

The antecedent facts are exhaustively presented in the assailed decision of the Court of Appeals as
follows:

Private respondent Ma. Arlene C. Gnilo started working for petitioner Norkis Trading Co., Inc. on March 8,
1990 when she was initially trained as administration and finance officer assigned to the companys
branch at Calamba, Laguna. She was subsequently appointed as Acting Administrative Finance Officer
with assignment at Naga City Branch, a position she held until she achieved regular employment status.
On December 1, 1993, she was appointed as Branch Bookkeeper/Cashier of Naga City Branch (Rank
Category 4B). On January 24, 2001, she was promoted as Acting Senior Branch Control Officer for Bicol
Region.

During her stint as Senior BCO for Bicol Region, private respondent was instructed by her immediate
superior Ms. Marfi Ruiz to confirm transactions pertaining to collections and deposits of BCO Marivic
Faura at Polangui. In a memorandum dated May 22, 2002, private respondent was informed by Deputy
Controller Ms. Rhea De Jesus about a recent company audit which disclosed that she had disregarded
the detailed instructions of her superior and failed to perform her duties as a Senior Branch Control
Officer. She was thus directed to explain in writing what actually transpired during her assignment at
Polangui. She complied by submitting her written explanation on May 25, 2002. An investigation by the
companys Internal Audit Group ensued and private respondent was formally charged with Negligence
Resulting to Material Loss. She was instructed to make herself available by reporting to the Inquiry
Assistance Panel (IAP) on June 20, 2002.

After the hearing of the IAP was concluded, private respondent made a written Request for Re-
assignment addressed to Ms. De Jesus to be assigned as Cashier of the Naga Branch which is vacant
and considering that she is a resident of Naga City and a mother. On July 29, 2002, she reiterated this
request to be assigned anew in Naga City while waiting for the resolution of her case, citing that she is a
mother of three (3) growing kids and she wanted to be with her family. In August and September 2002,
private respondent also requested to be furnished a copy of the minutes and/or audit report of the IAP
investigation. The company did not accede to her requests and she continued reporting at the main office
performing whatever work assigned to her, such as monitoring of collections at Cubao Branch for which
she submitted an accomplishment report to Deputy Controller Emmanuel S. Tamayo.

For the period March 18 to April 1, 2003, the company withheld the Transportation and Travel Allowance
(TNT) being received by private respondent amounting to P7,555.00, which prompted her to formally
protest her questionable assignment at the Home Office (HO) in Mandaluyong City which she insisted is
against her appointment as Senior BCO for Bicol Region and Samar. In a letter dated March 21, 2003,
addressed to Deputy Controller Emmanuel S. Tamayo, private respondent berated management for
wanting to ease her out of the company due to a labor case (constructive dismissal) filed by her husband,
who also worked at Norkis for more than thirteen (13) years, and such withdrawal of her travel allowances
is calculated to cause suffering on her part. She expressed that the situation has become unbearable for

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her so that she is constrained to report back to Naga City effective March 24, 2003, there being no written
order issued by management for her to stay in the main office.

Upon returning to Naga City, however, private respondent learned from a co-employee that Deputy
Controller Tamayo through a telephone call gave instruction to deny her entry to the branch premises and
access to company records. She caused this incident to be entered at the local police blotter. On April 2,
2003, she received a faxed Speedletter from Deputy Managing Director Nichol Jude Thaddeus C.
Juridico and Deputy Controller Emmanuel S. Tamayo directing her to report back to the main office
reminding her that her new assignment required her to report to the main office pending issuance of a
permanent assignment, and that she was instructed to monitor the BCO of Porta Coeli Finance
Corporation (PCFC) branches and to assist the BCO Accounting Manager Belen Yaun in the meantime.
She was ordered to explain in writing within forty-eight (48) hours why no disciplinary action should be
taken against her for abandonment of work, which under existing company policy, carries the penalty of
dismissal. She was also directed to refund the total amount of P123,685.00 of travel and transportation
allowance received by her during the period June 1, 2002 and March 17, 2003 because she is not entitled
thereto while assigned at the main office.

In her faxed reply, private respondent explained that she reported at the main office starting June 10,
2002 upon assurance given by her former superior, Ms. Aurea De Jesus, that she shall be receiving her
regular TNT package as Senior BCO-Bicol Region and Samar since her stay in the main office would be
just temporary as they will just iron out the problem in Polangui Branch. There was hesitation on her part
since being a permanent resident of Naga City and mother of three (3) children, she will be dislocated
and separated from her family. She insisted that it was never clarified to her that her area of assignment
is being changed and also denied that Deputy Controller Tamayo specifically instructed her to monitor the
BCOs of Porta Coeli Finance Corporation (PCFC) or assist Ms. Belen Yaun, pointing out that if she ever
assisted Ms. Yaun it was her initiative to get herself busy and if ever she had a record of travel to a PCFC
branch, it was done out of an emergency or her superior was just forced to. She asserted that her
assignment at the HO is a demotion intended to make her feel that her continued presence in the
company is no longer necessary because neither Mr. Tamayo nor Ms. Yaun have been talking to her.
Were it not for her monthly TNT, she could not have stayed at the HO because her take-home pay
amounted to only a little over P2,500.00 every fifteen (15) days, and its subsequent withdrawal by the
company constrained her to report back to Naga City branch, her repeated requests to be returned to her
post having been ignored for the reason that top management was against it. She asserted that her TNT
being a long and accepted company policy, may not be arbitrarily withdrawn and that all her cash
advances and liquidations have been previously approved by her superiors including Mr. Tamayo. She
deplored the mental anguish and social humiliation wrought to her by her present predicament and
sought understanding from the management, wanting to know the reasons behind their instruction to
deny her entry to the premises of the Naga City branch and access to company records as if she were a
thief.

In a memorandum dated April 9, 2003, management reiterated its directive to private respondent for her
to report back to the main office, reminding her that despite her denial regarding any instruction from Mr.
Tamayo for her to monitor the PCFC branches, records showed that she had complied based on reports
she had submitted to the office. Private respondent, however, maintained her position that she could no
longer report to the Home Office after the company withdrew her monthly TNT. She asserted that
considering her difficult situation, she had no choice but to stick to her appointment as Senior BCO-Bicol
Region and Samar there being no superseding memo changing her assignment.
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On April 14, 2003, private respondent received a memorandum from the IAP for an investigation on the
charges of abandonment of work, insubordination and refusal to report back to the place of work (Head
Office), and directing her to attend a hearing set on April 16, 2003 at the main office. On April 15, 2003,
private respondent acknowledged receipt of said memo but proposed that the hearing be held at Naga
City or that she be allowed to make a cash advance to defray her expenses in going to Mandaluyong City
to attend the hearing and investigation by the IAP. She failed to attend the IAP hearing on the scheduled
date as she had been waiting for action from management regarding the concerns she had
communicated. On that same day, she found out that her salary for the period April 1 to 15, 2003 was
withheld and failing to get an explanation from management, she again reported the matter to the police.
Thereupon, she faxed a letter addressed to HRD Manager Raquel Licsi that the situation had become
unbearable for her tantamount to constructive dismissal and consequently she will ventilate her case
before the NLRC.

On April 21, 2003, private respondent filed a complaint for constructive dismissal before the regional
arbitration branch at Naga City, with claims for nonpayment of salaries, service incentive leave pay,
13th month pay, and praying for reinstatement with full back wages, and moral and exemplary damages,
and attorneys fees (NLRC SUB RUB V No. 05-04-00098-03). On April 24, 2003, private respondent
received another memo on the rescheduled date of IAP hearing that very same day, but in a handwritten
reply she submitted to the Naga City Branch, she manifested that she could not longer report at the HO in
view of the case she had already instituted with the NLRC. On April 30, 2003, the company terminated
her services effective May 2, 2003.[5]

In his decision dated 06 November 2003, the Labor Arbiter found petitioners guilty of illegal
dismissal. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered finding respondents [petitioners herein] guilty of ILLEGAL
DISMISSAL. Consequently, the latter are hereby directed to reinstate the complainant [private respondent
herein] to her former position as Sr. BCO in her assignment in Bicol/Samar, within ten (10) days from
receipt of this decision, without loss of seniority and to pay her salary corresponding thereto. Further,
respondents are hereby ordered to pay jointly and severally complainant with the following:

A. Backwages computed from the date of her separation on April 16, 2003 up to the date of her actual
reinstatement, either physically or on payroll, at the option of the respondent, which as of the date of this
decision has already amounted to P69,911.14, based on the rate of P9,273.02 per month for seven (7)
[months];

B. 13th Month Pay equivalent to P3,091.00;

C. Service Incentive Leave Pay for three (3) years amounting to P5,349.75 computed at the rate
of P356.65/day of five (5) days per year.

D. Moral Damages of P200,000.00;

E. Exemplary Damages of P100,000.00; and

F. Attorneys fees equivalent to 10% of the above-amount of P378,351.89 which is P37,835.18.

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All other claims are hereby ordered DISMISSED for lack of merit.[6]

Petitioners thereafter filed their memorandum of appeal before the NLRC which, however, affirmed in
toto the decision of the Labor Arbiter.[7] Petitioners motion for reconsideration was likewise denied.[8]

Petitioners seasonably filed their petition for review on certiorari before the Court of Appeals. In the
decision[9] now impugned before us, the appellate court denied said petition and dismissed the same for
lack of merit. In said decision, the Court of Appeals also affirmed the NLRCs resolutions dated 26 March
2004 and 20 May 2004. The dispositive portion of the Court of Appeals decision follows:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and
accordingly DISMISSED for lack of merit. Consequently, the challenged Resolutions dated March 26,
2004 and May 20, 2004 of the National Labor Relations Commission in NLRC CA No. 038611-04 (NLRC
SRAB-V-0400098-03) are hereby both affirmed.[10]

Petitioners moved for the reconsideration of this ruling but they were rebuffed by the appellate
court.[11]

In this petition, petitioners argue, in the main, that the decision to transfer or re-assign private
respondent from Naga City to the head office in Manila was a legitimate exercise of petitioner
corporations management prerogative. Thus, private respondents refusal to report to work in Manila,
coupled with her insistence that she be allowed to resume her work in Naga City, constitutes
insubordination and willful disobedience justifying the termination of her employment.

We do not agree.

Concededly, employers are allowed, under the broad concept of management prerogative, to
regulate all aspects of personnel administration 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 dismissal and
recall of workers.[12]

Particularly on the matter of transfer of personnel, this Court, in the case of Philippine Japan Active
Carbon Corporation v. National Labor Relations Commission,[13] held that:

It is the employers prerogative, based on its assessment and perception of its employees qualifications,
aptitudes, and competence, to move them around in the various areas of its business operations in order
to ascertain where they will function with maximum benefit to the company. An employees right to security
of tenure does not give him such a vested right in his position as would deprive the company of its
prerogative to change his assignment or transfer him where he will be most useful. When his transfer is
not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts
to a constructive dismissal.[14]

The managements right to transfer or re-assign its personnel, however, is not absolute as it is
subject to limitations imposed by law, collective bargaining agreements, and general principles of fair play
and justice.[15] The employer must, therefore, muster the test for determining the validity of the transfer of
employees as enunciated in the case of Blue Dairy Corporation v. National Labor Relations
Commission,[16] to wit:

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. . . The managerial prerogative to transfer personnel must be exercised without grave abuse of
discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be
confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the
transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion
in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome
this burden of proof, the employees transfer shall be tantamount to constructive dismissal, which has
been defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal
exists when an act of clear discrimination, insensibility or disdain by an employer has become so
unbearable to the employee leaving him with no option but to forego with his continued employment.[17]

In this case, petitioners failed to pass this test. In the words of the Court of Appeals

While petitioners invoke management prerogative in the transfer of private respondent to Manila, there is
no showing at all of any valid and legitimate reason (i.e., business necessity) for the verbal transfer order,
as in fact private respondent was not given work to do, only occasionally and constantly (sic) avoided by
her superiors. Her meek and desperate plea to be allowed to return to her former post in Naga City
Branch was met with total silence on managements end. Such insensitivity and disdain pervading her
work environment became more intense when her travel allowances were withdrawn and management
demanded for refund of those amounts received by her on the ground that she is not entitled thereto while
posted in the main office, which realized such erroneous grant only at a late stage after all the vouchers
underwent routine approval by the concerned officers of the company. No other conclusion is discernible
from the attendant circumstances except to confirm private respondents sentiment gleaned from what she
had been hearing all along, that top management indeed wanted to ease her out of the company, as a
consequence of her husbands filing of a similar illegal dismissal suit before the NLRC. [18]

Surely, petitioners cannot expect this Court to sustain its stance by the simple expedient of invoking
its management prerogative. In the end, it is still up to them, as employers, to discharge the burden of
proving the validity of private respondents transfer to the head office. Having failed in this regard, we are
constrained to sustain the findings of the Court of Appeals as well as those of the NLRC.

We, likewise, rule in favor of private respondent with respect to her entitlement to moral and
exemplary damages. Moral damages may be recovered 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 while exemplary damages are recoverable only if the
dismissal was done in a wanton, oppressive, or malevolent manner. [19] These damages, however, are not
intended to enrich private respondent such that, after deliberations, we find the amount of P50,000.00 for
moral damages and P50,000.00 for exemplary damages sufficient to assuage the sufferings experienced
by private respondent and by way of example or correction for the public good.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The Court of
Appeals Decision dated 07 March 2005 and its Resolution dated 18 May 2005 are hereby AFFIRMED
with the following MODIFICATIONS:1) the amount of backwages shall be computed from the date of
private respondents illegal dismissal until the finality of this judgment; and 2) the amount of moral and
exemplary damages are reduced to P50,000.00 each. With costs.

SO ORDERED.

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Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

36. PLDT vs. Paquio, G.R. No. 152689, October 12, 2005

DECISION

QUISUMBING, J.:
This petition for review on certiorari docketed as G.R. No. 152689, assails the Decision[1] dated
March 7, 2002 of the Court of Appeals in CA-G.R. SP No. 61528. It is consolidated with the Motions for
Reconsideration of this Courts Decision[2] dated December 3, 2002 in G.R. No. 154072.

The antecedent facts of the case are as follows:

Petitioner Philippine Long Distance Telephone Company, Inc. (PLDT) has 27 Exchanges in its
Greater Metro Manila (GMM) Network. Alfredo S. Paguio was the Head of the Garnet Exchange.

In 1994, PLDT assessed the performance of the 27 Exchanges comprising the GMM Network.
Upon receipt of the ratings, Paguio sent Rodolfo Santos, his immediate supervisor and the Assistant
Vice-President of the GMM East Center, a letter criticizing the PLDT criteria for performance rating as
unfair because they depended on manpower. He also suggested that the criteria failed to recognize that
exchanges with new plants could easily meet the objectives of GMM compared to those with old plants.
Despite Paguios criticism, Garnet Exchange, the oldest plant in GMM, obtained the top rating in the
GMM. Nevertheless, Paguio reiterated his letter to Santos and objected to the performance rating as it
was based only on the attainment of objectives, without considering other relevant factors.

In June 1996, PLDT rebalanced the manpower of the East Center. Paguio wrote Santos and
requested reconsideration of the manpower rebalancing, claiming it was unfair to Garnet Exchange
because as the oldest exchange in the East Center, it was disallowed to use contractors for new
installations and was not made beneficiary of the cut-over bonus. After Santos denied his request, Paguio
elevated the matter to respondent Isabelo Ferido, Jr., the First Vice-President-GMM Network Services.

On January 17, 1997, Paguio was reassigned as Head for Special Assignment at the Office of the
GMM East Center and asked to turn over his functions as Garnet Exchange Head to Tessie Go. Believing
that his transfer was a disciplinary action, Paguio requested Ferido for a formal hearing of the charges
against him and asked that his reassignment be deferred. He also filed a complaint against Santos for
grave abuse of authority and manipulation of the East Center performance. As no action was taken by
Ferido, Paguio elevated the matter to Enrique D. Perez, the Senior Executive Vice-President and Chief
Operating Officer of PLDT, who advised him to await the resolution of his complaint.

Consequently, Ferido sent Paguio an inter-office memo stating that he found Paguios
reassignment in order as it was based on the finding that Paguio was not a team player and cannot
accept decisions of management, which is short of insubordination. Ferido advised Paguio to transfer to
any group in the company that may avail of his services. Likewise, Perez, thru an inter-office memo,
informed Paguio that his transfer was not in the nature of a disciplinary action that required investigation
and that he agreed with the reasons of the transfer.

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Aggrieved, Paguio filed, before the Regional Arbitration Branch of the National Labor Relations
Commission (NLRC), a complaint for illegal dismissal with prayer for reinstatement and damages. He
later amended his complaint to illegal demotion with prayer for reversion to old position, damages and
attorneys fees. On November 27, 1998, the Labor Arbiter upheld the validity of Paguios transfer and
dismissed the complaint.[3]

Paguio appealed to the NLRC, which reversed the Labor Arbiters decision. The NLRC found the
transfer unlawful, firstly, because Paguios comments were done in good faith to help his team see their
strong and weak points. According to the NLRC, this showed that he strove to improve his team and was,
indeed, a team player. The NLRC noted that the companys manual emphasized the importance of
communication and what Paguio did was merely to ventilate his opinions and observations. Secondly,
Paguios transfer involved a diminution of his salary, benefits and other privileges. [4]

PLDT moved for reconsideration but the same was denied by the NLRC.[5] Consequently, PLDT
filed a petition for certiorari with the Court of Appeals. The appellate court affirmed the decision of the
NLRC but deleted the monetary award representing the 16% monthly salary increase. [6]

PLDT appealed directly to this Court. Its petition was docketed as G.R. No. 152689.

On the other hand, Paguio sought for partial reconsideration. Upon the appellate courts
[7]
denial of his motion for reconsideration, Paguio elevated the case to this Court where it was docketed
as G.R. No. 154072. On December 3, 2002, the Court rendered judgment in G.R. No. 154072 and held
that Paguio was not entitled to the monetary award representing the 16% monthly salary increase.
However, the Court awarded him moral and exemplary damages and attorneys fees.[8]

Both Paguio and PLDT sought reconsideration. On February 26, 2003, the Court ordered the
consolidation of G.R. No. 152689 and the motions for reconsideration in G.R. No. 154072. [9]

In G.R. No. 152689, PLDT imputes the following errors to the appellate court:
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN
AFFIRMING THE NLRCS DECISION AND RESOLUTION BY RULING THAT THE
TRANSFER OR RE-ASSIGNMENT OF PRIVATE RESPONDENT PAGUIO WAS
UNLAWFUL AND ILLEGAL.

THE HONORABLE COURT OF APPEALS FINDING ON UNLAWFULNESS OF

PAGUIOS TRANSFER OR REASSIGNMENT CONSTITUTES A DRASTIC
DEPARTURE OF THE INSTANCES CONSIDERED TO CONSTITUTE AN ILLEGAL
TRANSFER AS RULED IN SETTLED JURISPRUDENCE INVOLVING SIMILAR CASES.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN CONSIDERING

PETITIONERS ACT OF CHANGING THE PRIVATE RESPONDENTS ASSIGNMENT
ON LEGITIMATE GROUNDS AS TANTAMOUNT TO AN ILLEGAL TRANSFER.

THE HONORABLE COURT OF APPEALS CONTRADICTED THE SETTLED

JURISPRUDENCE ON THE MATTER WHEN IT ORDERED THE REINSTATEMENT OF
PAGUIO.[10]

In brief, the petitioner asks this Court to resolve now the legality of Paguios transfer.
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PLDT contends that the appellate court erred in lending more weight to the factual findings of the
NLRC over those of the Labor Arbiter without stating its basis. Moreover, PLDT alleges that the NLRC
ruling would allow a change of cause of action since the complaint alleged illegal demotion while the
decision involved illegal transfer. PLDT asserts that the reassignment of Paguio was not a demotion
because it was merely a transfer to a position of equivalent rank and salary. According to PLDT, transfer,
as a rule is allowed by law unless it is vitiated by improper motive or is used as a disguise to remove or
punish the employee. It maintains that the appellate court failed to ascribe any illicit or improper motive
behind the transfer of Paguio. Lastly, PLDT claims that the reinstatement of Paguio is no longer possible
as his relationship with the company is already strained and that his position no longer exists due to a
company-wide reorganization.

Paguio argues that his transfer was a demotion since he was assigned to a functionless position
with neither office nor staff and deprived of the opportunity to be promoted as he would have no
performance to speak of in his new post.

Prefatorily, we note from the records that there has been no change of cause of action from illegal
demotion to illegal transfer. Illegal demotion is a type of illegal transfer. Moreover, it is familiar and
fundamental doctrine that it is not the title of the action but the allegations in the pleading that determines
the nature of the action.[11]

Now, on the crux of the matter, jurisprudence abounds that, except as limited by special laws, an
employer is free to regulate, according to his own discretion and judgment, all aspects of employment,
including the transfer of employees.[12] It is the employers prerogative, based on its assessment and
perception of its employees qualifications, aptitudes, and competence, to deploy its employees in the
various areas of its business operations in order to ascertain where they will function with maximum
benefit to the company. An employees right to security of tenure does not give him such a vested right in
his position as would deprive the company of its prerogative to change his assignment or transfer him
where he will be most useful.[13]

Nonetheless, as correctly pointed out by the Court of Appeals, there are limits to the management
prerogative. While it may be conceded that management is in the best position to know its operational
needs, the exercise of management prerogative cannot be utilized to circumvent the law and public policy
on labor and social justice. That prerogative accorded management should not defeat the very purpose
for which our labor laws exist: to balance the conflicting interests of labor and management. By its very
nature, management prerogative must be exercised always with the principles of fair play and
justice.[14] 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.[15] The employer bears the burden of proving that the transfer of
the employee has complied with the foregoing test.[16]

In the present case, we see no credible reason for Paguios transfer except his criticisms of the
companys performance evaluation methods. Based on the undisputed facts, Garnet Exchange was doing
well and excelled in the performance rating. In the same way, Paguios performance was consistently
rated as outstanding. There was also no proof that Paguio refused to comply with any management
policy. Patently, his transfer could not be due to poor performance. Neither was it because he was
needed in the new post for the new assignment was functionless and it was nothing but a title. Paguios
transfer could only be caused by the managements negative reception of his comments. It is prejudicial to

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Paguio because it left him out for a possible promotion as he was assigned to a functionless position with
neither office nor staff.

In the motion for reconsideration in G.R. No. 154072, Paguio maintains that it is speculation on
the part of the Court to rule that he would not maintain his outstanding performance. Thus, he prays for a
monthly salary increase.

In its motion for reconsideration, PLDT points out that one reason for the award of damages and
attorneys fees was the Courts mistaken belief that the company failed to appeal the Court of Appeals
decision. However, PLDT contends that there was a pending appeal of the Court of Appeals finding of
illegal transfer, particularly G.R. No. 152689.

We reiterate our decision in G.R. No. 154072 that awarding a monthly salary increase would be
merely based on speculation. A salary increase is conditioned on both the outstanding performance of the
employee and high returns for the company. It is not a demandable right but a benefit given by
management, subject to the attainment of specific goals. Paguios future performance could not be
guaranteed to be excellent, with high returns to the company, simply because in the past he did excel.
That is the basic reason for a periodic performance rating.

Now, moral damages are recoverable upon sufficient proof of moral suffering, mental anguish,
fright or serious anxiety. The claimant should satisfactorily show the existence of the factual basis of
damages.[17] In the present case, though Paguios transfer was found unlawful by the appellate court, our
review of the records would show that there is no factual basis for such an award.

No exemplary damages can be awarded in the absence of moral or actual damages. And where
the awards for moral and exemplary damages are eliminated, so must the award for attorneys fees. [18]

WHEREFORE, the petition in G.R. No. 152689 is DENIED. The Decision dated March 7, 2002 of the
Court of Appeals in CA-G.R. SP No. 61528 is AFFIRMED. The motion for reconsideration by Alfredo
Paguio of the Decision dated December 3, 2002 in G.R. No. 154072 is DENIED. The motion for
reconsideration of Philippine Long Distance Telephone Company, Inc. is GRANTED IN PART by deleting
the award in the Decision dated December 3, 2002, for moral and exemplary damages and attorneys
fees.

No pronouncement as to costs.

SO ORDERED.

37. Star Paper Corp., vs. Simbol, G.R. No. 164774, April 12, 2006

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

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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 co-employee, 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

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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 Resolution 11 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
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(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:

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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 courts 21 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,

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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

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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 co-employee, 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 silence 41 that married persons are not protected
under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of
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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.

38. Rivera vs. Solidbank, G.R. No. 163269, April 19, 2006

DECISION

CALLEJO, SR., J.:

Assailed in this Petition for Review on Certiorari is the Decision[1] of the Court of Appeals (CA) in CA-G.R.
CV No. 52235 as well as its Resolution[2] denying the Motion for Partial Reconsideration of petitioner
Rolando C. Rivera.

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Petitioner had been working for Solidbank Corporation since July 1, 1977.[3] He was initially employed as
an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant Accountant, and Assistant
Manager. Prior to his retirement, he became the Manager of the Credit Investigation and Appraisal
Division of the Consumers Banking Group. In the meantime, Rivera and his brother-in-law put up a
poultry business in Cavite.

In December 1994, Solidbank offered two retirement programs to its employees: (a) the Ordinary
Retirement Program (ORP), under which an employee would receive 85% of his monthly basic salary
multiplied by the number of years in service; and (b) the Special Retirement Program (SRP), under which
a retiring employee would receive 250% of the gross monthly salary multiplied by the number of years in
service.[4] Since Rivera was only 45 years old, he was not qualified for retirement under the ORP. Under
the SRP, he was entitled to receive P1,045,258.95 by way of benefits.[5]

Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for retirement
under the SRP. Solidbank approved the application and Rivera was entitled to receive the net amount
of P963,619.28. This amount included his performance incentive award (PIA), and his unearned medical,
dental and optical allowances in the amount of P1,666.67, minus his total accountabilities to Solidbank
amounting to P106,973.00.[6] Rivera received the amount and confirmed his separation from Solidbank
on February 25, 1995.[7]

Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and Quitclaim,
which was notarized on March 1, 1995.[8] Rivera acknowledged receipt of the net proceeds of his
separation and retirement benefits and promised that [he] would not, at any time, in any manner
whatsoever, directly or indirectly engage in any unlawful activity prejudicial to the interest of Solidbank, its
parent, affiliate or subsidiary companies, their stockholders, officers, directors, agents or employees, and
their successors-in-interest and will not disclose any information concerning the business of Solidbank, its
manner or operation, its plans, processes, or data of any kind. [9]

Aside from acknowledging that he had no cause of action against Solidbank or its affiliate
companies, Rivera agreed that the bank may bring any action to seek an award for damages resulting
from his breach of the Release, Waiver and Quitclaim, and that such award would include the return of
whatever sums paid to him by virtue of his retirement under the SRP. [10] Rivera was likewise required to
sign an undated Undertaking as a supplement to the Release, Waiver and Quitclaim in favor of Solidbank
in which he declared that he received in full his entitlement under the law (salaries, benefits, bonuses and
other emoluments), including his separation pay in accordance with the SRP. In this Undertaking, he
promised that [he] will not seek employment with a competitor bank or financial institution within one (1)
year from February 28, 1995, and that any breach of the Undertaking or the provisions of the Release,
Waiver and Quitclaim would entitle Solidbank to a cause of action against him before the appropriate
courts of law.[11]Unlike the Release, Waiver and Quitclaim, the Undertaking was not notarized.

On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as Manager of its Credit
Investigation and Appraisal Division of its Consumers Banking Group. [12] Upon discovering this, Solidbank
First Vice-President for Human Resources Division (HRD) Celia J.L. Villarosa wrote a letter dated May
18, 1995, informing Rivera that he had violated the Undertaking. She likewise demanded the return of all
the monetary benefits he received in consideration of the SRP within five (5) days from receipt; otherwise,
appropriate legal action would be taken against him.[13]

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When Rivera refused to return the amount demanded within the given period, Solidbank filed a
complaint for Sum of Money with Prayer for Writ of Preliminary Attachment [14] before the Regional Trial
Court (RTC) of Manila on June 26, 1995. Solidbank, as plaintiff, alleged therein that in accepting
employment with a competitor bank for the same position he held in Solidbank before his retirement,
Rivera violated his Undertaking under the SRP. Considering that Rivera accepted employment with
Equitable barely three months after executing the Undertaking, it was clear that he had no intention of
honoring his commitment under said deed.

Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 plus interests
therein, and attorneys fees, thus:

WHEREFORE, it is respectfully prayed that:

1. At the commencement of this action and upon the filing of a bond in such amount as
this Honorable Court may fix, a writ of preliminary attachment be forthwith issued against
the properties of the defendant as satisfaction of any judgment that plaintiff may secure;

2. After trial, judgment be rendered ordering defendant to pay plaintiff the following sums:
NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100
ONLY (P963,619.28) PESOS, Philippine Currency, as of 23 May 1995, plus legal interest
of 12% per annum until fully paid;

3. Such sum equivalent to 10% of plaintiffs claims plus P2,000.00 for every appearance
by way of attorneys fees; and

4. Costs of suit.

PLAINTIFF prays for other reliefs just and equitable under the premises. [15]

Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy of the Release,
Waiver and Quitclaim and Undertaking which Rivera executed.[16]

In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary Attachment [17] ordering Deputy
Sheriff Eduardo Centeno to attach all of Riveras properties not exempt from execution. Thus, the Sheriff
levied on a parcel of land owned by Rivera.

In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he received the net
amount of P963,619.28 as separation pay. However, the employment ban provision in the Undertaking
was never conveyed to him until he was made to sign it on February 28, 1995. He emphasized that, prior
to said date, Solidbank never disclosed any condition to the retirement scheme, nor did it impose such
employment ban on the bank officers and employees who had previously availed of the SRP. He alleged
that the undertaking not to seek employment with any competitor bank or financial institution within one

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(1) year from February 28, 1995 was void for being contrary to the Constitution, the law and public policy,
that it was unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman, and violative of his
human rights. He further claimed that the Undertaking was a contract of adhesion because it was
prepared solely by Solidbank without his participation; considering his moral and economic disadvantage,
it must be liberally construed in his favor and strictly against the bank.

On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging therein that
Rivera raised no genuine issue as to any material fact in his Answer except as to the amount of
damages. It prayed that the RTC render summary judgment against Rivera. Solidbank alleged that
whether or not the employment ban provision contained in the Undertaking is unreasonable, arbitrary, or
oppressive is a question of law. It insisted that Rivera signed the Undertaking voluntarily and for valuable
consideration; and under the Release, Waiver and Quitclaim, he was obliged to return the P963,619.28
upon accepting employment from a competitor bank within the one-year proscribed period. Solidbank
appended to its motion the Affidavit of Villarosa, where she declared that Rivera was employed by
Equitable on May 1, 1995 for the same position he held before his retirement from Solidbank.

Rivera opposed the motion contending that, as gleaned from the pleadings of the parties as well as
Villarosas Affidavit, there are genuine issues as to material facts which call for the presentation of
evidence. He averred that there was a need for the parties to adduce evidence to prove that he did not
sign the Undertaking voluntarily. He claimed that he would not have been allowed to avail of the SRP if he
had not signed it, and consequently, his retirement benefits would not have been paid. This was what Ed
Nallas, Solidbank Assistant Vice-President for HRD and Personnel, told him when he received his check
on February 28, 1995. Senior Vice-President Henry Valdez, his superior in the Consumers Banking
Group, also did not mention that he would have to sign such Undertaking which contained the assailed
provision. Thus, he had no choice but to sign it. He insisted that the question of whether he violated the
Undertaking is a genuine issue of fact which called for the presentation of evidence during the hearing on
the merits of the case. He also asserted that he could not cause injury or prejudice to Solidbanks interest
since he never acquired any sensitive or delicate information which could prejudice the banks interest if
disclosed.

Rivera averred that he had the right to adduce evidence to prove that he had been faithful to the
provisions of the Release, Waiver and Quitclaim, and the Undertaking, and had not committed any act or
done or said anything to cause injury to Solidbank.[18]

Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that he had to sign
the Undertaking containing the employment ban provision, otherwise his availment of the SRP would not
push through. There was no truth to the banks allegation that, in exchange for receiving the larger amount
of P1,045,258.95 under the SRP, instead of the very much smaller amount of P224,875.81 under the
ORP, he agreed that he will not seek employment in a competitor bank or financial institution within one
year from February 28, 1995. It was the bank which conceived the SRP to streamline its organization and
all he did was accept it. He stressed that the decision whether to allow him to avail of the SRP belonged
solely to Solidbank. He also pointed out that the employment ban provision in the Undertaking was not a
consideration for his availment of the SRP, and that if he did not avail of the retirement program, he would
have continued working for Solidbank for at least 15 more years, earning more than what he received
under the SRP. He alleged that he intended to go full time into the poultry business, but after about two
months, found out that, contrary to his expectations, the business did not provide income sufficient to

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support his family. Being the breadwinner, he was then forced to look for a job, and considering his
training and experience as a former bank employee, the job with Equitable was all he could find. He
insisted that he had remained faithful to Solidbank and would continue to do so despite the case against
him, the attachment of his family home, and the resulting mental anguish, torture and expense it has
caused them.[19]

In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it was the only kind
of work he knew. The ban was, in fact, practically absolute since it applied to all financial institutions for
one year from February 28, 1995. He pointed out that he could not work in any other company because
he did not have the qualifications, especially considering his age. Moreover, after one year from February
28, 1995, he would no longer have any marketable skill, because by then, it would have been rendered
obsolete by non-use and rapid technological advances. He insisted
that the ban was not necessary to protect the interest of Solidbank, as, in the first place, he had no
access to any secret information which, if revealed would be prejudicial to Solidbanks interest. In any
case, he was not one to reveal whatever knowledge or information he may have acquired during his
employment with said bank.[20]

In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the 1995 SRP is purely
a management prerogative. It was not for Rivera to question and decry the banks policy to protect itself
from unfair competition and disclosure of its trade secrets. The substantial monetary windfall given the
retiring officers was meant to tide them over the one-year period of hiatus, and did not prevent them from
engaging in any kind of business or bar them from being employed except with competitor banks/financial
institutions.[21]

On December 18, 1995, the trial court issued an Order of Summary Judgment. [22] The fallo of the decision
reads:

WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and

against defendant ordering the latter to pay to plaintiff bank the amount of NINE
HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100
(P963,619.28) PESOS, Philippine Currency, as of May 23, 1995, plus legal interest at
12% per annum until fully paid, and the costs of the suit.

FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed
to meet again and sit down to find out how they can finally end this rift and litigation, all in
the name of equity, for after all, defendant had worked for the bank for some 18 years. [23]

The trial court declared that there was no genuine issue as to a matter of fact in the case since Rivera
voluntarily executed the Release, Waiver and Quitclaim, and the Undertaking. He had a choice not to
retire, but opted to do so under the SRP, and, in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not unreasonable. To allow
Rivera to be excused from his undertakings in said deed and, at the same time, benefit therefrom would
be to allow him to enrich himself at the expense of Solidbank. The RTC ruled that Rivera had to return
the P963,619.28 he received from Solidbank, plus interest of 12% per annum from May 23, 1998 until
fully paid.

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Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14, 2002 partially
granting the appeal. The fallo of the decision reads:

WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from

is AFFIRMED with the modification that the attachment and levy upon the family home
covered by TCT No. 51621 of the Register of Deeds, Las Pias, Metro Manila, is
hereby SET ASIDE and DISCHARGED.

SO ORDERED.[24]

The CA declared that there was no genuine issue regarding any material fact except as to the amount of
damages. It ratiocinated that the agreement between Rivera and Solidbank was the law between them,
and that the interpretation of the stipulations therein could not be left upon the whims of Rivera. According
to the CA, Rivera never denied signing the Release, Waiver, and Quitclaim, including the Undertaking
regarding the employment prohibition. He even admitted joining Equitable as an employee within the
proscribed one-year period. The alleged defenses of Rivera, the CA declared, could not prevail over the
admissions in his pleadings. Moreover, Riveras justification for taking the job with Equitable, dire
necessity, was not an acceptable ground for annulling the Undertaking since there were no earmarks of
coercion, undue influence, or fraud in its execution. Having executed the said deed and thereafter
receiving the benefits under the SRP, he is deemed to have waived the right

to assail the same, hence, is estopped from insisting or retaining the said amount of P963,619.28.

However, the CA ruled that the attachment made upon Riveras family home was void, and,
pursuant to the mandate of Article 155, in relation to Article 153 of the Family Code, must be discharged.

Hence, this recourse to the Court.

Petitioner avers that

I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE
SUMMARY JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING THE
EXISTENCE OF GENUINE ISSUES AS TO MATERIAL FACTS WHICH CALL FOR THE
PRESENTATION OF EVIDENCE IN A TRIAL ON THE MERITS.

II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR
EMPLOYMENT BAN IMPOSED BY RESPONDENT SOLIDBANK UPON HEREIN
PETITIONER NULL AND VOID FOR BEING UNREASONABLE AND OPPRESSIVE
AND FOR CONSTITUTING RESTRAINT OF TRADE WHICH VIOLATES PUBLIC
POLICY AS ENUNCIATED IN OUR CONSTITUTION AND LAWS.

III.

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THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION

ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE AMOUNT
OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST OF 12% PER
ANNUM UNTIL FULLY PAID.

IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE
PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER TO PAY
SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID ON THE
AFOREMENTIONED SUM [OF] P963,619.28.[25]

The issues for resolution are: (1) whether the parties raised a genuine issue in their pleadings, affidavits,
and documents, that is, whether the employment ban incorporated in the Undertaking which petitioner
executed upon his retirement is unreasonable, oppressive, hence, contrary to public policy; and (2)
whether petitioner is liable to respondent for the restitution of P963,619.28 representing his retirement
benefits, and interest thereon at 12% per annum as of May 23, 1995 until payment of the full amount.

On the first issue, petitioner claims that, based on the pleadings of the parties, and the documents and
affidavits appended thereto, genuine issues as to matters of fact were raised therein. He insists that the
resolution of the issue of whether the employment ban is unreasonable requires the presentation of
evidence on the circumstances which led to respondent banks offer of the SRP and ORP, and petitioners
eventual acceptance and signing of the Undertaking on March 1, 1995. There is likewise a need to
adduce evidence on whether the employment ban is necessary to protect respondents interest, and
whether it is an undue restraint on petitioners constitutional right to earn a living to support his family. He
further insists that respondent is burdened to prove that it sustained damage or injury by reason of his
alleged breach of the employment ban since neither the Release, Waiver and Quitclaim, and Undertaking
he executed contain any provision that respondent is automatically entitled to the restitution of
the P963,619.28. Petitioner points out that all the deeds provide is that, in case of breach thereof,
respondent is entitled to protection before the appropriate courts of law.

On the second issue, petitioner avers that the prohibition incorporated in the Release, Waiver and
Quitclaim barring him as retiree from engaging directly or indirectly in any unlawful activity and disclosing
any information concerning the business of respondent bank, as well as the employment ban contained in
the Undertaking he executed, are oppressive, unreasonable, cruel and inhuman because of its
overbreath. He reiterates that it is against public policy, an unreasonable restraint of trade, because it
prohibits him to work for one year in the Philippines, ultimately preventing him from supporting his
family. He points out that a breadwinner in a family of four minor daughters who are all studying, with a
wife who does not work, one would have a very difficult time meeting the financial obligations even with a
steady, regular-paying job. He insists that the Undertaking deprives him of the means to support his
family, and ultimately, his childrens chance for a good education and future. He reiterates that the returns
in his poultry business fell short of his expectations, and unfortunately, the business was totally destroyed
by typhoon Rosing in November 1995.

Petitioner further maintains that respondents management prerogative does not give it a license to entice
its employees to retire at a very young age and prohibit them from seeking employment in a so-called
competitor bank or financial institution, thus prevent them from working and supporting their families

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(considering that banking is the only kind of work they know). Petitioner avers that managements
prerogative must be without abuse of discretion. A line must be drawn between management prerogative
regarding business operations per se and those which affect the rights of the employees. In treating its
employees, management should see to it that its employees are at least properly informed of its decision
or modes of action.

On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement benefit which
he earned after serving the bank for 18 years. It was not a mere gift or gratuity given by respondent bank,
without the latter giving up something of value in return. On the contrary, respondent bank received
valuable consideration, that is, petitioner quit his job at the relatively young age of 45, thus enabling
respondent to effect its reorganization plan and forego the salary, benefits, bonuses, and promotions he
would have received had he not retired early.

Petitioner avers that, under the Undertaking, respondent would be entitled to a cause of action
against him before the appropriate courts of law if he had violated the employment ban. He avers that
respondent must prove its entitlement to the P963,619.28. The Undertaking contains no provision that he
would have to return the amount he received under the SRP; much less does it provide that he would
have to pay 12% interest per annum on said amount. On the other hand, the Release, Waiver and
Quitclaim does not contain the provision prohibiting him from being employed with any competitor bank or
financial institution within one year from February 28, 1995. Petitioner insists that he acted in good faith
when he received his retirement benefits; hence, he cannot be punished by being ordered to return the
sum of P963,619.28 which was given to him for and in consideration of his early retirement.

Neither can petitioner be subjected to the penalty of paying 12% interest per annum on his retirement pay
of P963,619.28 from May 23, 1995, as it is improper and oppressive to him and his family. As of July 3,
2002, the interest alone would amount to P822,609.67, thus doubling the amount to be returned to
respondent bank under the decision of the RTC and the CA. The imposition of interest has no basis
because the Release, Waiver and Quitclaim, and the Undertaking do not provide for payment of
interest. The deeds only state that breach thereof would entitle respondent to bring an action to seek
damages, to include the return of the amount that may have been paid to petitioner by virtue thereof.On
the other hand, any breach of the Undertaking or the Release, Waiver and Quitclaim would only entitle
respondent to a cause of action before the appropriate courts of law.Besides, the amount received by
petitioner was not a loan and, therefore, should not earn interest pursuant to Article 1956 of the Civil
Code.

Finally, petitioner insists that he acted in good faith in seeking employment with another bank
within one year from February 28, 1995 because he needed to earn a living to support his family and
finance his childrens education. Hence, the imposition of interest, which is a penalty, is unwarranted.

By way of Comment on the petition, respondent avers that the Undertaking is the law between it and
petitioner. As such, the latter could not assail the deed after receiving the retirement benefit under the
SRP. As gleaned from the averments in his petition, petitioner admitted that he executed the Undertaking
after having been informed of the nature and consequences of his refusal to sign the same, i.e., he would
not be able to receive the retirement benefit under the SRP.

Respondent maintains that courts have no power to relieve parties of obligations voluntarily entered into
simply because their contracts turned out to be disastrous deeds. Citing the ruling of this Court in Eastern

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Shipping Lines, Inc. v. Court of Appeals,[26] respondent avers that petitioner is obliged to pay 12% per
annum interest of the P963,619.28 from judicial or extrajudicial demand.

In reply, petitioner asserts that respondent failed to prove that it sustained damages, including the
amount thereof, and that neither the Release, Waiver and Quitclaim nor the Undertaking obliged him to
pay interest to respondent.

The petition is meritorious.

Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:

Section 1. Summary judgment for claimant. A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof.

xxxx

Sec. 3. Motion and proceedings thereon. The motion shall be served at least ten (10)
days before the time specified for the hearing. The adverse party may serve opposing
affidavits, depositions, or admissions at least three (3) days before the hearing. After the
hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting
affidavits, depositions, and admissions on file, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two requisites: (a) there must
be no genuine issue as to any material fact, except for the amount of damages; and (b) the party
presenting the motion for summary judgment must be entitled to a judgment as a matter of law. [27] Where,
on the basis of the pleadings of a moving party, including documents appended thereto, no genuine issue
as to a material fact exists, the burden to produce a genuine issue shifts to the opposing party. If the
opposing party fails, the moving party is entitled to a summary judgment.[28]

A genuine issue is an issue of fact which requires the presentation of evidence as distinguished
from an issue which is a sham, fictitious, contrived or a false claim. The trial court can determine a
genuine issue on the basis of the pleadings, admissions, documents, affidavits or counteraffidavits
submitted by the parties. When the facts as pleaded appear uncontested or undisputed, then there is no
real or genuine issue or question as to any fact and summary judgment called for. On the other hand,
where the facts pleaded by the parties are disputed or contested, proceedings for a summary judgment
cannot take the place of a trial.[29] The evidence on record must be viewed in light most favorable to the
party opposing the motion who must be given the benefit of all favorable inferences as can reasonably be
drawn from the evidence.[30]

Courts must be critical of the papers presented by the moving party and not of the
papers/documents in opposition thereto.[31] Conclusory assertions are insufficient to raise an issue of
material fact.[32] A party cannot create a genuine dispute of material fact through mere speculations or
compilation of differences.[33] He may not create an issue of fact through bald assertions, unsupported
contentions and conclusory statements.[34] He must do more than rely upon allegations but must come

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forward with specific facts in support of a claim. Where the factual context makes his claim implausible,
he must come forward with more persuasive evidence demonstrating a genuine issue for trial. [35]

Where there are no disputed material facts, the determination of whether a party breached a
contract is a question of law and is appropriate for summary judgment. [36]When interpreting an ambiguous
contract with extrinsic evidence, summary judgment is proper so long as the extrinsic evidence presented
to the court supports only one of the conflicting interpretations. [37] Where reasonable men could differ as
to the contentions shown from the evidence, summary judgment might be denied.

In United Rentals (North America), Inc. v. Keizer,[38] the U.S. Circuit Court of Appeals resolved the issue
of whether a summary judgment is proper in a breach of contract action involving the interpretation of
such contract, and ruled that:

[A] contract can be interpreted by the court on summary judgment if (a) the contracts
terms are clear, or (b) the evidence supports only one construction of the controverted
provision, notwithstanding some ambiguity. x x x If the court finds no ambiguity, it should
proceed to interpret the contract and it may do so at the summary judgment stage. If,
however, the court discerns an ambiguity, the next step involving an examination of
extrinsic evidence becomes essential. x x x Summary judgment may be appropriate even
if ambiguity lurks as long as the extrinsic evidence presented to the court supports only
one of the conflicting interpretations.[39]

In this case, there is no dispute between the parties that, in consideration for his availment of the SRP,
petitioner executed the Release, Waiver and Quitclaim, and the Undertaking as supplement thereto, and
that he received retirement pay amounting to P963,619.28 from respondent. On May 1, 1995, within the
one-year ban and without prior knowledge of respondent, petitioner was employed by Equitable as
Manager of its Credit Investigation and Appraisal Division, Consumers Banking Group. Despite demands,
petitioner failed to return the P963,619.28 to respondent on the latters allegation that he had breached
the one-year ban by accepting employment from Equitable, which according to respondent was a
competitor bank.

We agree with petitioners contention that the issue as to whether the post-retirement competitive
employment ban incorporated in the Undertaking is against public policy is a genuine issue of fact,
requiring the parties to present evidence to support their respective claims.

As gleaned from the records, petitioner made two undertakings. The first is incorporated in the Release,
Waiver and Quitclaim that he signed, to wit:

4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in any
unlawful activity prejudicial to the interest of the BANK, its parent, affiliate or subsidiary
companies, their stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information concerning the business of
the BANK, its manner or operation, its plans, processes or data of any kind.[40]

The second undertaking is incorporated in the Undertaking following petitioners execution of the Release,
Waiver and Quitclaim which reads:

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4. That as a supplement to the Release and Quitclaim, I executed in favor of Solidbank

on FEBRUARY 28, 1995, I hereby expressly undertake that I will not seek employment
with any competitor bank or financial institution within one (1) year from February 28,
1995.[41]

In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring an action for
damages which may include, but not limited to the return of whatever sums he may have received from
respondent under said deed if he breaks his undertaking therein.[42] On the other hand, petitioner declared
in the Undertaking that any breach on his part of said Undertaking or the terms and conditions of the
Release, Waiver and Quitclaim will entitle respondent to a cause of action against [petitioner] for
protection before the appropriate courts of law.[43]

Article 1306 of the New Civil Code provides that the contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy. The freedom of contract is both a constitutional and
statutory right.[44] A contract is the law between the parties and courts have no choice but to enforce such
contract as long as it is not contrary to law, morals, good customs and against public policy.

The well-entrenched doctrine is that the law does not relieve a party from the effects of an unwise, foolish
or disastrous contract, entered into with full awareness of what he was doing and entered into and carried
out in good faith. Such a contract will not be discarded even if there was a mistake of law or fact. Courts
have no jurisdiction to look into the wisdom of the contract entered into by and between the parties or to
render a decision different therefrom. They have no power to relieve parties from obligation voluntarily
assailed, simply because their contracts turned out to be disastrous deals. [45]

On the other hand, retirement plans, in light of the constitutional mandate of affording full protection to
labor, must be liberally construed in favor of the employee, it being the general rule that pension or
retirement plans formulated by the employer are to be construed against it.[46] Retirement benefits, after
all, are intended to help the employee enjoy the remaining years of his life, releasing him from the burden
of worrying for his financial support, and are a form of reward for being loyal to the employer. [47]

In Ferrazzini v. Gsell,[48] the Court defined public policy in civil law countries and in the United States and
the Philippines:

By public policy, as defined by the courts in the United States and England, is intended
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, which may be
termed the policy of the law, or public policy in relation to the administration of the
law. (Words & Phrases Judicially Defined, vol. 6, p. 5813, and cases cited.) Public policy
is the principle under which freedom of contract or private dealing is restricted by law for
the good of the public. (Id., Id.) In determining whether a contract is contrary to public
policy the nature of the subject matter determines the source from which such question is
to be solved. (Hartford Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)

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The foregoing is sufficient to show that there is no difference in principle between the
public policy (orden publico) in the two jurisdictions (the United States and the Philippine
Islands) as determined by the Constitution, laws, and judicial decisions. [49]

The Court proceeded to define trade as follows:

x x x In the broader sense, it is any occupation or business carried on for subsistence or

profit. Andersons Dictionary of Law gives the following definition: Generally equivalent to
occupation, employment, or business, whether manual or mercantile; any occupation,
employment or business carried on for profit, gain, or livelihood, not in the liberal arts or
in the learned professions. In Abbotts Law Dictionary, the word is defined as an
occupation, employment or business carried on for gain or profit. Among the definitions
given in the Encyclopaedic Dictionary is the following: The business which a person has
learnt, and which he carries on for subsistence or profit; occupation; particularly
employment, whether manual or mercantile, as distinguished from the liberal arts or the
learned professions and agriculture. Bouvier limits the meaning to commerce and traffic,
and the handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt
and apply the broader meaning given by the lexicographers.[50]

In the present case, the trial court ruled that the prohibition against petitioner accepting employment with
a competitor bank or financial institution within one year from February 28, 1995 is not unreasonable. The
appellate court held that petitioner was estopped from assailing the post-retirement competitive
employment ban because of his admission that he signed the Undertaking and had already received
benefits under the SRP.

The rulings of the trial court and the appellate court are incorrect.

There is no factual basis for the trial courts ruling, for the simple reason that it rendered summary
judgment and thereby foreclosed the presentation of evidence by the parties to prove whether the
restrictive covenant is reasonable or not. Moreover, on the face of the Undertaking, the post-retirement
competitive employment ban is unreasonable because it has no geographical limits; respondent is barred
from accepting any kind of employment in any competitive bank within the proscribed period. Although
the period of one year may appear reasonable, the matter of whether the restriction is reasonable or
unreasonable cannot be ascertained with finality solely from the terms and conditions of the Undertaking,
or even in tandem with the Release, Waiver and Quitclaim.

Undeniably, petitioner retired under the SRP and received P963,619.28 from
respondent. However, petitioner is not proscribed, by waiver or estoppel, from assailing the post-
retirement competitive employment ban since under Article 1409 of the New Civil Code, those contracts
whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy are
inexistent or void from the beginning. Estoppel cannot give validity to an act that is prohibited by law or
one that is against public policy.[51]

Respondent, as employer, is burdened to establish that a restrictive covenant barring an

employee from accepting a competitive employment

after retirement or resignation is not an unreasonable or oppressive, or in undue or unreasonable restraint

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of trade, thus, unenforceable for being repugnant to public policy. As the Court stated in Ferrazzini v.
Gsell,[52] cases involving contracts in restraint of trade are to be judged according to their circumstances,
to wit:

x x x There are two principal 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 in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule thus:

Public welfare is first considered, and if it be not involved, and the

restraint upon one party is not greater than protection to the other party
requires, the contract may be sustained. The question is, whether, under
the particular circumstances of the case and the nature of the particular
contract involved in it, the contract is, or is not, unreasonable.[53]

In cases where an employee assails a contract containing a provision prohibiting him or her from
accepting competitive employment as against public policy, the employer has to adduce evidence to
prove that the restriction is reasonable and not greater than necessary to protect the employers legitimate
business interests.[54] The restraint may not be unduly harsh or oppressive in curtailing the employees
legitimate efforts to earn a livelihood and must be reasonable in light of sound public policy. [55]

Courts should carefully scrutinize all contracts limiting a mans natural right to follow any trade or
profession anywhere he pleases and in any lawful manner. But it is just as important to protect the
enjoyment of an establishment in trade or profession, which its employer has built up by his own honest
application to every day duty and the faithful performance of the tasks which every day imposes upon the
ordinary man. What one creates by his own labor is his. Public policy does not intend that another than
the producer shall reap the fruits of labor; rather, it gives to him who labors the right by every legitimate
means to protect the fruits of his labor and secure the enjoyment of them to himself.[56] Freedom to
contract must not be unreasonably abridged. Neither must the right to protect by reasonable restrictions
that which a man by industry, skill and good judgment has built up, be denied. [57]

The Court reiterates that the determination of reasonableness is made on the particular facts and
circumstances of each case.[58] In Esmerson Electric Co. v. Rogers,[59] it was held that the question of
reasonableness of a restraint requires a thorough consideration of surrounding circumstances, including
the subject matter of the contract, the purpose to be served, the determination of the parties, the extent of
the restraint and the specialization of the business of the employer. The court has to consider whether its
enforcement will be injurious to the public or cause undue hardships to the employee, and whether the
restraint imposed is greater than necessary to protect the employer. Thus,the court must have before it
evidence relating to the legitimate interests of the employer which might be protected in terms of time,
space and the types of activity proscribed.[60]

Consideration must be given to the employees right to earn a living and to his ability to determine
with certainty the area within which his employment ban is restituted. A provision on territorial limitation is

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necessary to guide an employee of what constitutes as violation of a restrictive covenant and whether the
geographic scope is co-extensive with that in which the employer is doing business. In considering a
territorial restriction, the facts and circumstances surrounding the case must be considered. [61]

Thus, in determining whether the contract is reasonable or not, the trial court should consider the
following factors: (a) whether the covenant protects a legitimate business interest of the employer; (b)
whether the covenant creates an undue burden on the employee; (c) whether the covenant is injurious to
the public welfare; (d) whether the time and territorial limitations contained in the covenant are
reasonable; and (e) whether the restraint is reasonable from the standpoint of public policy. [62]

Not to be ignored is the fact that the banking business is so impressed with public interest where the trust
and interest of the public in general is of paramount importance such that the appropriate standard of
diligence must be very high, if not the highest degree of diligence.[63]

We are not impervious of the distinction between restrictive covenants barring an employee to accept a
post-employment competitive employment or restraint on trade in employment contracts and restraints on
post-retirement competitive employment in pension and retirement plans either incorporated in
employment contracts or in collective bargaining agreements between the employer and the union of
employees, or separate from said contracts or collective bargaining agreements which provide that an
employee who accepts post retirement competitive employment will forfeit retirement and other benefits
or will be obliged to restitute the same to the employer. The strong weight of authority is that forfeitures
for engaging in subsequent competitive employment included in pension and retirement plans are valid
even though unrestricted in time or geography.The raison detre is explained by the United States Circuit
Court of Appeals in Rochester Corporation v. W.L. Rochester, Jr.:[64]

x x x The authorities, though, generally draw a clear and obvious distinction

between restraints on competitive employment in employment contracts and in pension
plans. The strong weight of authority holds that forfeitures for engaging in subsequent
competitive employment, included in pension retirement plans, are valid, even though
unrestricted in time or geography.The reasoning behind this conclusion is that the
forfeiture, unlike the restraint included in the employment contract, is not a prohibition on
the employees engaging in competitive work but is merely a denial of the right to
participate in the retirement plan if he does so engage. A leading case on this point is
Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing on a forfeiture
provision similar to that here, the Court said:

A restriction in the contract which does not preclude the

employee from engaging in competitive activity, but simply provides for
the loss of rights or privileges if he does so is not in restraint of
trade. (emphasis added)[65]

A post-retirement competitive employment restriction is designed to protect the employer against

competition by former employees who may retire and obtain retirement or pension benefits and, at the
same time, engage in competitive employment.[66]

We have reviewed the Undertaking which respondent impelled petitioner to sign, and find that in case of
failure to comply with the promise not to accept competitive employment within one year from February

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28, 1995, respondent will have a cause of action against petitioner for protection in the courts of law. The
words cause of action for protection in the courts of law are so broad and comprehensive, that they may
also include a cause of action for prohibitory and mandatory injunction against petitioner, specific
performance plus damages, or a damage suit (for actual, moral and/or exemplary damages), all inclusive
of the restitution of the P963,619.28 which petitioner received from respondent. The Undertaking and the
Release, Waiver and Quitclaim do not provide for the automatic forfeiture of the benefits petitioner
received under the SRP upon his breach of said deeds. Thus, the post-retirement competitive
employment ban incorporated in the Undertaking of respondent does not, on its face, appear to be of the
same class or genre as that contemplated in Rochester.

It is settled that actual damages or compensatory damages may be awarded for breach of
contracts. Actual damages are primarily intended to simply make good or replace the loss covered by
said breach.[67] They cannot be presumed. Even if petitioner had admitted to having breached the
Undertaking, respondent must still prove that it suffered damages and the amount thereof. [68] In
determining the amount of actual damages, the Court cannot rely on mere assertions, speculations,
conjectures or guesswork but must depend on competent proof and on the best evidence obtainable
regarding the actual amount of losses.[69] The benefit to be derived from a contract which one of the
parties has absolutely failed to perform is of necessity to some extent a matter of speculation of the
injured party.

On the assumption that the competitive employment ban in the Undertaking is valid, petitioner is not
automatically entitled to return the P963,619.28 he received from respondent. To reiterate, the terms of
the Undertaking clearly state that any breach by petitioner of his promise would entitle respondent to a
cause of action for protection in the courts of law; as such, restitution of the P963,619.28 will not follow as
a matter of course. Respondent is still burdened to prove its entitlement to the aforesaid amount by
producing the best evidence of which its case is susceptible.[70]

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in
CA-G.R. CV No. 52235 is SET ASIDE. Let this case be REMANDED to the Regional Trial Court of Manila
for further proceedings conformably with this decision of the Court.

SO ORDERED.

39. Duldulao vs. Court of Appeals, G.R. No. 164893, March 1, 2007

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 164893 March 1, 2007

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CONSTANCIA DULDULAO, Petitioner,

vs.
THE COURT OF APPEALS, and BAGUIO COLLEGES FOUNDATION, Respondents.

DECISION

TINGA, J.:

For the Courts adjudication is a petition for review under Rule 45, seeking to set aside the Decision1 of
the Court of Appeals in CA-G.R. SP No. 58291, which affirmed the 30 September 1999 Decision2 of the
National Labor Relations Commission (NLRC) in NLRC CASE RAB-CAR-02-0076-97, NLRC NCR CA
NO. 018861-99.

The facts of the case, as culled from the records, follow.

Petitioner Constancia P. Duldulao was hired by respondent Baguio Colleges Foundation (BCF) as
secretary/clerk-typist and assigned to the College of Law sometime in June of 1987. In August 1996, a
certain law student filed a complaint against petitioner for alleged irregularities in the performance of her
work. Petitioner was told to submit her answer to the complaint and given several extensions within which
to do so. However, despite the extensions, she failed to submit her answer.

On 1 October 1996, Dean Honorato V. Aquino of the College of Law informed respondents President,
Atty. Edilberto B. Tenefrancia, of petitioners failure to file her answer and recommended the assignment
of petitioner outside the College of Law, not only because of such failure to answer but also her having
admitted fraternizing with students of the College. On the same day, respondents Vice President for
Administration, Leonardo S. dela Cruz, issued a Department Order 3 which reads:

October 1, 1996

DEPARTMENT ORDER

To: Mrs. Constancia Duldulao

Re: Transfer of assignment

-------------------------------------------------------------------------------

1. Effective tomorrow 2 October 1996[,] you shall report at the office of the Principals of the High School
and Elementary Departments;

2. You shall render regular duty in those offices until further notice.

3. Please be guided accordingly.

On 3 October 1996, petitioner moved for reconsideration of the Department Order and requested another
five (5)-day extension within which to file her answer. Dean Aquino informed petitioner that he could no
longer act on her motion for reconsideration and motion for extension since the matter had already been
elevated to respondents Executive Board due to the delay in the submission of her answer. Petitioner
eventually filed her answer on 7 October 1996.

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Petitioner filed a case with the BCF Grievance Committee, citing her "unceremonious, capricious,
whimsical and arbitrary reassignment from her position as Secretary of the College of Law to the
Elementary/High School Departments," but the case was transferred to the Administrative Investigating
Committee because petitioner is not a member of the union. On 21 January 1997, the Committee found
the Department Order appropriate since it was intended to prevent the controversy between petitioner
and the complaining student from adversely affecting a harmonious relationship within the College of Law
among all its constituents. It recommended that petitioner start reporting to her new assignment. 4 The
recommendation was approved and adopted by President Tenefrancia on 7 February 1997.5

In the interim, upon the request of several students from the College of Law, respondent constituted a
Fact-Finding Committee to investigate the allegations concerning the administrative matters and policies
in the College. On 26 May 1997, the Fact Finding Committee Report 6 was submitted to the Dean. It
contained, among others, a pronouncement that while petitioner was not guilty of the specific charges
against her, "the implementation by the college secretary of the policies of the college, while oftentimes
carrying the imprimatur of the Dean and of the Faculty, had alienated some students due to the lack of
circumspection which, when coupled with ingrained perceptions, result in failure of communication." 7

The Department Order notwithstanding, petitioner did not report for work and instead took a vacation
leave and several other leave of absences from October 1996 to January 1997. Finally, on 17 February
1997, petitioner filed a complaint for constructive dismissal with prayer for moral and exemplary damages
and attorneys fees before the NLRC Regional Arbitration Branch-Cordillera Administrative Region (NLRC
RAB-CAR). She claimed that she was arbitrarily directed to report for work in a location far from her
original place of assignment on account of which she would be incurring additional expenses in
transportation. In addition, she stated that aside from being tainted with procedural lapses in violation of
her right to due process, the transfer also amounted to her demotion in rank.

On 29 December 1998, Executive Labor Arbiter Jesselito B. Latoja ruled in favor of petitioner, ordering
her reinstatement to her former position and awarding her moral and exemplary damages, as well as
attorneys fees.8

On appeal, the NLRC reversed the Executive Labor Arbiters decision, sustained petitioners transfer, and
dismissed the complaint for illegal dismissal for lack of merit.9 In the Decision, the Commission gave
weight to the argument that petitioner was neither demoted nor dismissed, as her salary, benefits and
other privileges remained the same despite her reassignment. Neither was there any violation of due
process since petitioner was granted an initial period and several extensions within which to file her
answer to the complaint against her. Even as petitioner continued to display a hostile attitude in work by
refusing to report at her new assignment under the guise of leave of absences, respondent did not
impose any disciplinary action, the Commission added.

The Court of Appeals, in turn, upheld the decision of the NLRC. The appellate court ruled that petitioner
was not constructively dismissed, finding that petitioner was unable to point to any evidence that her
reassignment was prompted by the malevolence or ill-will of respondent. Besides, respondent did not
intend petitioners transfer to be a disciplinary sanction against her but merely a temporary measure to
prevent controversy within the College of Law.10

In the instant petition, petitioner reiterates her posture that her transfer was a case of constructive
dismissal, tainted with bad faith and intended as punishment for an erring employee, whereupon she
claims entitlement to backwages, benefits and moral damages.

On the other hand, respondent asserts that petitioners temporary transfer from the Office of the Dean of
the College of Law to the Office of the Principals of the High School and Elementary Departments was
premised on certain considerations, namely: (i) the polarization of the students as a result of the
controversy between petitioner and the complaining student; (ii) petitioners failure to file her answer to
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the complaint against her; and (iii) petitioners having expressly admitted her fraternization with some
students.11 Respondent justifies its reassignment of petitioner as a legitimate exercise of its management
prerogative.12

Essentially, the issue in this case is whether petitioners transfer as secretary/clerk-typist from the College
of Law to the High School and Elementary Departments amounts to constructive dismissal.

The petition deserves rejection.

It is a well-settled rule that findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only
respect but at times even finality if such findings are supported by substantial evidence. 13 This is
especially so in this case, where the findings of the NLRC were affirmed by the Court of Appeals. The
findings of fact made therein can only be set aside upon showing of grave abuse of discretion, fraud or
error of law, none of which has been shown in this case.

There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer

becomes so unbearable on the part of the employee that it would foreclose any choice by him except to
forego his continued employment.14 It exists where there is cessation of work because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank
and a diminution in pay."15 The factual milieu in this case is different. Thus, the NLRC and the Court of
Appeals both ruled that the treatment accorded petitioner does not constitute constructive dismissal.

At the onset, it must be stressed that petitioner has no vested right to the position of secretary/clerk-typist
of the College of Law that may operate to deprive respondent of its prerogative to change or transfer her
assignment to another department where she will be most useful in its

judgment. After all, petitioner was employed by respondent which is the BCF system itself, not the
College of Law only, which is but a component part of the system. Thus, to respondent belongs the
prerogative to reassign petitioner to any of its departments as it sees fit, provided that such reassignment
is made in good faith.

We have long recognized the prerogative of management to transfer an employee from one office to
another within the same business establishment, as the exigency of the business may require, provided
that the transfer does not result in a demotion in rank or a diminution in salary, benefits and other
privileges of the employee; or is not unreasonable, inconvenient or prejudicial to the latter; or is not used
as a subterfuge by the employer to rid himself of an undesirable worker. 16 In the case of Philippine Japan
Active Carbon Corp. v. NLRC,17 the Court ruled:

It is the employers prerogative, based on its assessment and perception of its employees qualifications,
aptitudes, and competence, to move them around in the various areas of its business operations in order
to ascertain where they will function with maximum benefit to the company. An employees right to
security of tenure does not give him such a vested right in his position as would deprive the company of
its prerogative to change his assignment or transfer him where he will be most useful. When his transfer
is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or
a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts
to a constructive dismissal.18

The Court does not see how petitioners transfer from the College of Law to the Office of the Principals of
the Elementary and High School Departments can be described as unreasonable, inconvenient, or
prejudicial to her. In her complaint, petitioner alleged that by reason of the transfer, she would incur
additional transportation expenses, be constrained to engage the services of a househelp, and suffer a
demotion in rank and status. As explained by respondent, the difference in traveling distance is not so

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large as to cause great inconvenience to petitioner as in fact, by merely changing the route to take, the
distance from petitioners house to the College of Law and that from her house to her new assignment will
almost be the same.19

Neither is the transfer equivalent to a demotion in rank and status. Petitioner was a secretary/clerk-typist
of the College of Law. As such secretary/clerk-typist, she would only have to perform the same duties in
the Office of the Principals of the High School and Elementary Departments.

Petitioner argues that she was denied her right to due process when she was transferred to another
department even before she was able to file her answer. Reassignments made by management pending
investigation of irregularities allegedly committed by an employee fall within the ambit of management
prerogative.20 The transfer, while

incidental to the pending charges against petitioner, was not meant to be a penalty, but rather a
preventive measure to avoid further damage to the College of Law. It was not designed to be the
culmination of the then on-going administrative case against petitioner. Hence, the order of transfer prior
to the submission of her answer cannot be deemed a violation of her right to due process.

This Court has, in several instances, upheld reassignments/transfers pending investigations of the
irregularities allegedly committed by employees, the rationale being that the purpose of reassignments is
no different from that of preventive suspension which management could validly impose as a measure of
protection of the companys property pending investigation of any malfeasance or misfeasance committed
by the employee.21

The BCF system that is respondent is more than a business venture; it is, first and foremost, an
educational institution, engaged in the noble task of teaching and preparing our youth for the career paths
they intend to take. In the same way that an ordinary business cannot afford to put at risk its resources
while there is a pending complaint or investigation against a possible erring employee, respondent could
not afford to have a discordant studentry, and a college tainted with controversy. Surely, the harmony and
integrity of its faculty, staff and students are as important as, if not more important than, any of the
properties of respondent.

Petitioner cannot claim constructive dismissal simply because her transfer to another department was
against her wishes and, in her view, amounts to a demotion. "Certainly, the Court cannot accept the
proposition that when an employee opposes his employers 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 employees
wishes that should be made to prevail."22Mere incidental inconvenience is not enough to warrant a claim
of constructive dismissal.23

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.

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