LABOR REPORTING ON NOVEMBER 9

G. RULES: MANAGERIAL AND RANK AND FILE

EMPLOYEES

COILE vs. NLRC

This special action for certiorari seeks to annul the Resolution
of the Fifth Division of the National Labor Relations Commission
dated December 6, 1993[1] in NLRC Case No. M-00123-93 (Case
No. RAB- 09-11-00303-92) dismissing petitioner's complaint for
illegal dismissal and money claims, and its Resolution dated March
7, 1994 denying petitioner's Motion for Reconsideration.
Petitioner Alejandro Caoile was employed by private
respondent Coca-Cola Bottlers Philippines, Inc. ("CCBPI") as an
Electrician Data Processing (EDP) Supervisor in its Zamboanga
plant, but was later dismissed on the ground of loss of trust and
confidence for his involvement in the anomalous encashment of
check payments to a contractor. Contesting the ground for his
dismissal, petitioner filed a complaint for illegal dismissal and
money claims against private respondents CCBPI and its officers,
Rene P. Horrileno, the Plant Manager, and Noriel B. Enriquez, the
Plant Finance Manager.
The facts as culled from findings on record below reveal the
following:
On June 6, 1992, private respondent CCBPI, through the local
plant management, contracted the services of Mr. Redempto de
Guzman for the installation of a Private Automatic Branch
Exchange (PABX) housewiring in the plant premises for the sum
of P65,000.00. Since the project fell under the direct supervision of
petitioner, all cash advances by the contractor were course through
him.
On June 13, 1992, Mr. De Guzman, the contractor, requested
for an initial cash advance of P10,000.00. Petitioner caused the
preparation of the Payment Request Memo (PRM) in the amount
of P15,000.00 and the issuance of Bank of the Philippine Islands
(BPI) Check No. 878306 in the amount of P15,000.00. After
securing the endorsement of the contractor, petitioner encashed the
check with the plant teller Mr. Dominador S. Pila and handed
over P10,000.00 to Mr. De Guzman while retaining the amount
of P5,000.00 for himself. When queried by Mr. De Guzamn about
the P5,000.00, complainant replied that it was for the higher ups as
arranged by Mr. Arthur Soldevilla, an alleged partner of Mr. de
Guzman.
The contractor requested for second and third cash advances
on June 23, 1992 and June 30, 1992 in the amounts of P5,000.00
and P10,000.00 respectively. As in the first cash advance,
petitioner caused the preparation of BPI Check No. 878350 dated
June 23, 1992 and BPI Check No. 010355 dated June 30, 1992 in
the amounts of P10,000.00 and P15,000.00 respectively. After
securing the endorsements of the contractor the requested cash
advances while retaining for himself the difference of P10,000.00.
After the project was completed, the contractor requested
payment of the balance of the contract price in the amount
of P25,000.00. Petitioner caused the issuance of BPI Check No.
010499 dated July 8, 1992 in the amount of P24,350.00 (after
deducting 1% of the total contact price by way of witholding
tax). As in the earlier instances, petitioner secured the endorsement
of the contractor, encashed the check with the teller, then handed
over to the contractor only P19,350.00 while retaining fore himself
the amount of P5,000.00.
The contractor was later requested to do additional services no
longer included in the original contract. His original quotation for
the additional services was P8,000.00. However, this was increased
to P8,500.00 upon advice of petitioner. Upon completion of the
additional project, petitioner caused the issuance of BPI Check No.
01530 dated July 9, 1992, and after securing the endorsement of
the contractor, petitioner encashed the check and
delivered P8,000.00 to the contractor and retained P500.00 for
himself.
On September 4, 1992, Mr. de Guzman executed an affidavit
exposing the fraudulent acts perpetrated by petitioner, which
prompted the company to conduct an investigation. On October 1,
1992, petitioner was temporarily prevented from performing his
usual duties and functions, but was required to report daily from
Monday to Friday from 8:00 a.m. to 12:00 noon and from 1:30
p.m. to 5:30 p.m. with full pay.
On October 7, 1992, petitioner was served a Notice of
investigation to take place on October 13, 1992 at 2:00 p.m. in the
plant conference room. During the investigation, petitioner
admitted that the initials in the check vouchers were his but denied
having encashed the checks and delivering the cash payments to
the contractor. However, GM Secretary Carmencita B. Macasinag
and the teller, Mr. Dominador Pila, confirmed the fact that
complainant personally handled the deliveries of the cash
payments of advances made to the contractor. It was established
through the testimony of Mrs. Macasinag and Mr. Pila that
petitioner personally withdrew the checks from the GM Secretary
and had them encashed with the teller after Mr.de Guzman has
endorsed the same.
The result of the investigation, with its recommendation for
dismissal of petitioner, was submitted by Noriel B. Enriquez, the
Plant Finance Manager, to Mr. Rene P. Horrilleno, the Plant
Manager, who forwarded the same to Mr. Mariano A. Limjap,
Senior Vice-President and Administration Director in Manila. On
November 12, 1992, Mr. Limjap, issued an Inter-office
Memorandum sustaining the findings and recommendation of the
local plant management for the termination of complainant from
his employ as EDP Supervisor on the grounds of grave misconduct
and dishonesty considering that his position as EDP Supervisor is
bestowed with the highest trust and confidence by the respondent
as may be seen from the description of his duties and
responsibilities.
As a consequence of his dismissal, petitioner filed a compliant
for illegal dismissal with damages before the Regional Arbitration
Branch IX, Zamboanga City, on November 27, 1992. Efforts
towards an amicable settlement failed. After the submission of the
respective position papers of the parties, the Labor
Arbiter[2] rendered a decision dated February 17, 1993[3] finding
that petitioner was illegally dismissed and ordering his
reinstatement to his former position without loss of seniority or to
a substantially equivalent position without loss of seniority rights;
the payment of backwages for two (2) months in the amount
of P26,400.00, unpaid 14th and 145th month pay and other
benefits for the year 1992 rightfully earned by petitioner; moral
damages in the amount of P20,000.00 and exemplary damages in
the amount of P20,000.00. All other money claims were dismissed
for lack of merit.
Dissatisfied with the decision, private respondents appealed to
NLRC which, in its questioned Resolution dated December 6,
1993, reversed the Labor Arbiter's decision. In the said
Resolution,[4] the NLRC held that petitioner committed acts
constituting a breach of trust and confidence reposed on him by his
employer, thereby justifying his dismissal. His motion for
reconsideration having been denied,[5] petitioner filed the instant
petition[6] before us.
At issue is whether or not the NLRC committed grave abuse
of discretion amounting to lack or excess of jurisdiction in
reversing and setting aside the Labor Arbiter's decision finding
private respondents guilty of illegal dismissal.
 We find no cogent reason to depart from the ruling of the
NLRC.
Law and jurisprudence have long recognized the right of
employers to dismiss employees by reason of loss of trust and
confidence. As provided for in the Labor Code, "Art. 282. An
employer may terminate an employment for any of the following
causes: x x x (c) Fraud or willful breach of the trust reposed in him
by his employer or his duly authorized representative. x x x." In
the case of supervisors or personnel occupying positions of
responsibility, this Court has repeatedly held that loss of trust and
confidence justifies termination.[7] Obviously, as a just cause
provided by law, this ground for terminating employment, springs
from the voluntary or willful act of the employee, or "by reason of
some blameworthy act or omission on the part of the employee".[8]
Loss of confidence as a just cause for termination of
employment is premised from the fact that an employee concerned
holds a position of trust and confidence.[9] This situation holds
where a person is entrusted with confidence on delicate matters,
such as the custody, handling, or care and protection of employer's
property.[10] But, in order to constitute a just cause for dismissal,
the act complained of must be "work-related" such as would show
the employee concerned to be unfit to continue working for the
employer.[11]
Now it must be noted the recent decisions of this Court has
distinguished the treatment of managerial employees from that of
rank-and-file personnel, insofar as the application of the doctrine
of loss of trust and confidence is concerned. Thus with respect to
rank-and-file personnel, loss of trust and confidence as ground for
valid dismissal requires proof of involvement in the alleged events
in question, and that mere uncorroborated assertion and
accusations by the employer will not be sufficient.[12] But, as
regards as a managerial employee, mere existence of a basis for
believing that such employee has breached the trust of his
employer would suffice for his dismissal.[13] Hence, in the case of
managerial employees, proof beyond reasonable doubt is not
required, it being sufficient that 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 by his
position.[14]
In the present case, petitioner is not an ordinary rank-and-file
employee. He is the EDP Supervisor tasked to directly supervise
the installation of the PABX housewiring project in respondent
company's premises. He should have realized that such sensitive
position requires the full trust and confidence of his
employer. Corollary, he ought to know that his job requires that he
keep the trust and confidence bestowed on him by his employer
unsullied. Breaching that trust and confidence, for example, by
pocketing money as "kickback" for himself in the course of the
implementation of the project under his supervision could only
mean dismissal from employment. For, regrettably, while
petitioner vehemently denies having obtained money from the
contractor, the evidence on record proves otherwise.
First, public respondent noted that petitioner volunteered to
personally encashed the checks issued to the contractor, De
Guzman, and then retained certain amounts for himself despite the
objection of De Guzman. What is even reprehensible is that
petitioner gave the impression that the money would be shared
with the 'higher-ups'. This finding is based on the sworn
declaration of De Guzman and corroborated by the testimonies of
Carmencita B. Macasinag who is in charge of the release of checks
and Dominador Pila, the plant teller. Interestingly, while petitioner
disclaims even seeing the subject checks, he admitted as his own
those initials appearing on the check vouchers.
Second, in claiming he never retained the amount
of P20,500.00 for his own benefit, petitioner referred to the letter
of Soldevilla dated October 5, 1992, addressed to the Manager of
Zamboanga Coca-Cola plant. With that letter, petitioner would like
to show that the amounts allegedly retained by him from the cash
advances of De Guzman were eventually turned over to
Soldevilla. However, this is belied by the fact that during the
investigation, Soldevilla was still asking for his share in the
contract proceeds from De Guzman. Clearly, petitioner did not
remit the money to Soldevilla.
Third, petitioner adverted to the "letter-notes" of Soldevilla
issued coincidentally with the release of the checks. These letter-
notes were supposed to remind De Guzman of his agreement with
Soldevilla that the latter's share given to his (Soldevilla)
representative who happens to be the petitioner. Public respondent
did not give credence to these letter-notes as they were brought out
by petitioner only during the arbitration proceedings and not at the
company-level investigation. These letter-notes were mere
afterthought, hence, of questionable probative value.
Petitioner's contention that he was denied due process during
the company-level investigation, in our view, is without basis. As
an essential requirements, due process is one which hears before it
condemns, which proceeds upon inquiry and renders judgment
only after hearing.[15] Even if the employee committed an act which
could constitute a lawful cause or justification for his dismissal,
nevertheless the employer should first give him the opportunity to
explain or present his side.[16] Where the employee denies the
charges against him, a hearing is necessary to thresh out any
doubt.[17]
From the record it appears that petitioner was given the
opportunity to present his side and to defend himself against the
charges against him. Moreover, public respondent noted that the
petitioner had no objection to the manner of the company-level
investigation was conducted. Nor did he seek the assistance of
counsel despite being duly apprised of such right by the hearing
officer. Under the attendant circumstances, there is no basis for the
protestation of petitioner that he was deprived of due process.
In sum, we hold that public respondent committed no grave
abuse of discretion in reversing the decision of the Labor Arbiter
and dismissing the complaint for illegal termination.
WHEREFORE, premises considered, the petition is
DISMISSED for lack of merit. the Resolutions of National Labor
Relations Commission dated December 6, 1993 and March 7, 1994
are hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED
C. TERMINATION OF EMPLOYMENT BY EMPLOYER

1. Preliminary Matters
14.04 Basis of Right and Requirements

MANILA TRADING AND

SUPPLY CO., INC. vs.
ZULUETA
1. EMPLOYERS AND EMPLOYEES; COURT OF INDUSTRIAL
RELATIONS; DISCRETION UNDER RULE-MAKING POWER; RIGHT OF
PARTY TO PRESENT HIS CASE. In view of the facts set out in the
decision, it is clear that the petitioner was not deprived of its right
to present its own case and to adduce evidence in support
thereof. Section 10 of Commonwealth Act NO. 103 empowers the
Court of Industrial Relations to "refer any industrial or agricultural
dispute, or any matter under consideration or advisement by the
court under the provisions of section four hereof to a local board
of inquiry, a provincial fiscal, a justice of the peace or any public
official in any part of the Philippines for investigation, report, and
recommendation, and may delicate to such board or public official
such powers and functions as the said Court of Industrial
Relations may deem necessary; but such delegation shall not
affect the exercise by the court itself of any of its powers or
functions." The purpose of this provision is the expeditious
dctermination of industrial and agricultural disputes and is in
accord with the declared policy of freeing said court from the
fetters of technicalities and legal forms, subject, of course, to the
limitation that no party shall be deprived of his right to present his
own case an l submit evidence in support thereof. And neither
was petitioner denied this right when the said court refused to set
its motion for reconsideration for oral argument. This is a matter
which rests upon the sound discretion of the Court of Industrial
Relations and which it may regulate in pursuance of its rule-
making power under section 20 of Commonwealth Act No. 103.

2. ID; ID.; SECTION 19, AS AMENDED, OF COMMONWEALTH ACT

NO. 103; SELECTION OR DISCHARGE OF EMPLOYEES The
evident purpose of section 19 is to maintain the parties in status
quo during the pendency of an industrial or agricultural dispute in
order to safeguard the public interest and aid the Court of
Industrial Relations in the effective settlement of controversies
which threaten to disrupt industrial peace and progress. As will be
seen, the right of the employees, tenant;, or laborers to be
continued in the service under the last terms and conditions
existing before the dispute arose carries with it the corresponding
obligation on their part not to strike or walk out of their
employment, or to return to it if they have already done so. But
the right of the employees or laborers to be continued in the
service is not without limitation.

3. ID.; ID; ID.; ID. As held in the case of Manila Trading & Supply
Co. V8. Zulueta (G. R. No. 4G853), an employer cannot legally be
compelled to continue with the employment of a person who
admittedly was guilty of misfeasance or malfeasance towards his
employer, and whose continuance in the service or the latter is
patently inimical to his interests. That is to say, a discharge for a
justifiable cause is allowed, and since under section 19 of
Commonwealth Act No. 103 the obligation of the employer to
continue the employee, tenant, or laborer in the service is
incidental to the pendency of an agricultural or industrial dispute,
and is imposed, as we have stated, in the public interest and to
aid the court in the effective settlement of such dispute, the
power of the said court to determine whether a justifiable cause
exists is recognized. Similarly, section 19 has expressly
empowered the Court of Industrial Relations to determine
whether public interest requires that it order the laborer, tenant,
or employee not to strike or walk out during the pendency of an
agricultural or industrial dispute, and it is in this obvious spirit of
the law that we should d construe the provision under
consideration.

4. ID.; ID.; ID.; ID. The right of an employer to freely select or

discharge his employees is subject to regulation by the State
basically in the exercise of its paramount police power. (Manila
Trading & Supply Co. V8. Zulueta, supra.)

This is a petition for a writ of certiorari to review the resolution,

dated January 15, 1940, of the Court of Industrial Relations
entered in its case No. 49, entitled "Philippine Labor Union v.
Manila Trading & Supply Co."cralaw virtua1aw library
On July 7, 1938, the Secretary of Labor certified to the Court of
Industrial Relations that an industrial dispute existed between the
petitioner and certain of its employee who are members of the
respondent union, and that the controversy was a proper one to
be dealt with by said court in the public interest. The matter was
thereupon docketed as case No. 49 of the Court of Industrial
Relations. After a preliminary conference, an order was entered
on August t 6, 1938, by the Honorable Jose G. Generoso, one of
the judges of said court, requiring the petitioner, inter alia, not to
dismiss any of its employees and laborers without the cause and
without the previous consent of the court.

On August 15, 1938, and during the pendency of the industrial

dispute above referred to, the petitioner discharged the
employee Gavino David, on the alleged ground of reduction of
personnel and for irregularities committed by the said employee
in the performance of his duties. On September 1, 1938, the
respondent Philippine Labor Union filed a petition in Case No. 49,
praying for the readmission of Gavino David and other employees
who were similarly dismissed, alleging that their separation from
the service was without just cause and without the previous
consent of the Court of Industrial Relations. The matter was
referred by the court to Mr. Manuel Escudero, attorney of said
court, before whom evidence was taken. Mr. Escudero, on
September 7, 1939, filed his report. C)n November 3, 19.39, the
Honorable Jose G. Generoso entered an order providing for the
reinstatement of the discharged employees, including Gavino
David, the dispositive part of which, in so far as it concerns David,
reads as follows:jgc:chanrobles.com.ph

On November 11, 1939, the petitioner filed a motion for

reconsideration, praying that the same be set for hearing before
the court in banc, and that after hearing, the order of November
3, 1939, be set aside and the petitioner authorized to definitely
discharge the employee Gavino David The Court of Industrial
Relations declined to set the motion for reconsideration for oral
argument before the court as prayed for therein, and, on January
15, 1940, entered a resolution in banc denying said motion.
Hence, this petition for certiorari.

The petitioner now makes the following assignment of

"1. The lower tribunal deprived petitioner of a fair and open
hearing when it failed to set the report of Mr. Manuel Escudero
for hearing before deciding the Gavino David incident.

"2. The lower tribunal, in deciding the Gavino David incident,

erred in considering datos which were not submitted by the
parties as evidence in the case.

"3. The lower tribunal deprived petitioner of a fair and open

hearing when it refused to set the motion for reconsideration of
November 11, 1939 for hearing.

"4. The lower tribunal erred in preventing the dismissal of Gavino

David when the cause for the latters discharge was not due or
related to the employees union activities or affiliation.

In the case of Ang Tibay v. The Court of Industrial Relations, G. R.

No. 46496 (decision on motions for reconsideration and new
trial), promulgated February 27, 1940, we laid down certain
fundamental principles affecting procedure in cases brought
before the Court of Industrial Relations. In that case, we
said:jgc:chanrobles.com.ph

"In the case of Goseco v. Court of Industrial Relations G. R. No.

46673, promulgated September 13, 1939, we had occasion to
point out that the Court of Industrial Relations i9 not narrowly
constrained by technical rules of procedure, and the Act requires
it to act according to justice and equity and substantial merits of
the case, without regard to technicalities or legal forms and shall
not be bound by any technical rules of legal evidence but may
inform its mind in such manner as it may deem just and
equitable. (Section 20, Commonwealth Act No. 103.) It shall not
be restricted to the specific relief claimed or demands made by
the parties to the industrial or agricultural dispute, but may
include in the award, order or decision any matter or
determination which may be deemed necessary or expedient for
the purpose of settling the dispute or of preventing further
industrial or agricultural disputes. (Section 13, ibid.) And in the
light of this legislative policy, appeals to this court have been
especially regulated by the rules recently promulgated by this
court to carry into effect the avowed legislative purpose. The fact,
however, that the Court of Industrial Relations may be said to be
free from the rigidity of certain procedural requirements does not
mean that it can, in justiciable cases coming before it, entirely
ignore or disregard the fundamental and essential requirements
of due process in trials and investigations of an administrative
character. There are cardinal primary rights which must be
respected even in proceedings of this

"(1) The first of these rights is the right to a hearing, which

includes the right of the party interested or affected to I)resent
his own case and submit evidence in support thereof. In the
language of Chief Justice Hughes, in Morgan . . .vs. U. S., 304 U. S.,
1; 58 S. Ct., 773, 999; 82 Law. ed., 1129, the liberty and property
of the citizen shall be protected by the rudimentary requirements
of fair play.

"(2) Not only must the party be given an opportunity to

present his case and to adduce evidence tending to establish the
rights which he asserts but the tribunal must consider the
evidence presented. (Chief Justice Hughes; in Morgan v. U. S., 298
U. S., 468; S. Ct., 906; 80 Law. ed., 1288.) In the language of this
court in Edwards v. McCoy (22 Phil., 598) the right to adduce
evidence, without the corresponding duty on the part of the
board to consider it, is vain. Such right is conspicuously futile if the
person or persons to whom the evidence is presented can thrust
it aside without notice or consideration.

"(3) While the duty to deliberate does not impose the

obligation to decide right, it does imply a necessity which cannot
be disregarded, namely, that of having something to support its
decision. A decision with absolutely nothing to support it is a
nullity, at least when directly attacked. Edwards v. McCoy, supra.)
This principle emanates from the more fundamental principles
that the genius of constitutional government is contrary to the
vesting of unlimited power anywhere. Law is both a grant and a
limitation upon power.

"(4) Not only must there be some evidence to support a finding

of conclusion (City of Manila v. Agustin, G. R. No. 45844,
promulgated November 29, 1937, 3G Off. Gaz., 1335), but the
evidence must be substantial. (Washington, Virginia & Maryland
Coach Co. v. National Labor Relations Board, 301 U. S., 142, 147;
57 S. Ct., 648, 650; 81 Law. ed., 965.) Substantial evidence is
more than a mere scintilla. It means such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion. (Appalachian Electric Power Co, v. National Labor
Relations Board, 4 Cir., 93, F. 2d., 989; National Labor Relations
Board v. Thompson Products, 6 Cir., 97, F. 2d., 13, 15; Ballston-
Stilluater Knitting Co. v. National Labor Relations Board, 2 Cir., 98,
F. 2d., 758, 760.) . . . The statute provides that the rules of
evidence prevailing in courts of law and equity shall not be
controlling. The obvious purpose of this and similar provisions is
to free administrative boards from the compulsion of technical
rules so that the mere admission of matter which would be
deemed incompetent in judicial proceedings would not invalidate
the administrative order. (Interstate Commerce Commission v.
Baird, 194 U. S., 25, 44; 24 S. Ct., 563, 568; 48 Law. ed., 860;
Interstate Commerce Commission v. Louisville & Nashville R. Co.,
227 U. S., 88, 93; 33 Ct., 185, 187; 57 Law. ed., 431; United States
v. Abilene & Southern Ry. Co., 265 U S., 274, 288; 44 S. Ct., 565,
569; 68 Law. ed., 1016; Tagg Bros. & Moorhead v. United States,
v. Abilene 280 U. S. 420, 442; 50 S. Ct., 220, 225; 74 Law. ed., 524.)
But this assurance of a desirable flexibility in administrative
procedure does not go so far as to justify orders without a basis in
evidence having rational probative force. Mere uncorroborated
hearsay or rumor does not constitute substantial evidence.
(Consolidated Edison Co. v. National Labor Relations Board, 59 S.
Ct., 206, 83 Law. ed., No. 4, Adv. Op., p. 131).

"(5) The decision must be rendered on the evidence presented

at the hearing, or at least contained in the record and disclosed to
the parties affected. (Interstate Commerce Commission l~s. L. &
N. R. Co., 227 U. S., 88; 33 S. Ct., 185; 57 Law. ed., 431.) Only by
confining the adrninistrative tribunal to the evidence disclosed to
the parties, can the letter be protected in their right to know and
meet the case against them. It should not, however, detract from
their duty actively to see that the law is enforced, and for that
purr)ose, to use the authorized legal methods of securing
evidence and informing itself of facts material and relevant to the
controversy. Boards of inquiry may be appointed for the purpose
of investigating and determining the facts in any given case, but
their report and decision are only advisory. (Section 9,
Commonwealth Act No. 103." The Court of Industrial Relations
may refer any industrial or agricultural dispute or any matter
under consideration or advisement to a local board of inquiry, a
provincial fiscal, a justice of the peace or any public official in any
part of the Philippines for investigation, report and
recommendation, and may delegate to such board or public
official such powers and functions as the said court of Industrial
Relations may deem necessary, but such delegation shall not
affect the exercise of the court itself of any of its powers. (Section
10, bid.)

"(6) The Court of Industrial Relations or any of its judges,

therefore, must act on its or his own independent consideration
of the law and facts of the controversy, and not simply accept the
views of a subordinate in arriving at a decision. It may be that the
volume of work is such that it is literally impossible for the titular
heads of the Court of Industrial Relations personally to decide all
controversies coming before them. In the United States the
difficulty is solved with the enactment of statutory authority
authorizing examiners or other subordinates to render final
decision, with right to appeal to board or commission, but in our
case there is no such statutory authority.

"(7) The Court of Industrial Relations should, in all controversial

questions, render its decisions in such a manner that the parties
to the proceeding can know the various issues involved, and the
reasons for the decisions rendered. The performance of this duty
is inseparable from the authority conferred upon it."cralaw
virtua1aw library

In the light of the foregoing fundamental principles, we shall now

proceed to determine whether, under the facts of this case, the
petitioner was deprived of a "fair and open hearing" as claimed. It
appears that before the Honorable Jose G. Generoso, one of the
judges of said court, authorized Mr. Escudero to receive the
evidence of the parties, the petition for readmission of the
dismissed laborers, including Gavino David, was first heard by the
said judge on September 28, 1938, December 20, 1938, and April
11, 1939. It appears furthermore that in the course of the
proceedings had before Judge Generoso and in the taking of
evidence before Attorney Escudero, the petitioner was
represented by its attorney and was accorded every opportunity
to present its evidence and to object to the evidence presented
by the Respondent. It also appears that:jgc:chanrobles.com.ph

"En la vista de este asunto celebrada el dia 28 de septiembre de

1938, la recurrida (now petitioner), por medio de su abogado,
pidio con insistencia el nombramiento de un agente y del auditor
del Tribunal para que investigaran el estado financiero de la
recurrida y la cuestion de los despidos de obreros, de que se
quejaba la recurrente (t. n. t., pags. 27, 29, 32 Y 33), cuya peticion
fue concedida no obstante la oposicion de la recurrente (now
respondent).

"Una vez rendido el informe de los mencionados agente y auditor,

la recurrente (now respondent) lo impugno bajo el fundamento
de que no cubria todos los extremos del caso, pero la recurrida
(now petitioner) sostuvo la actuacion de 109 investigadores, y en
escrito de fecha 22 de marzo de 1939, entre otras cosas dijo lo
siguiente: The report of Messrs. Alvarez and Lopez is
comprehensive, and there is no need for further evidence The
court should decide the incident in question in accordance with
said report. (Resolution of Jan. 15, 1940, denying petitioners
motion for reconsideration.)"

It is clear that the petitioner was not deprived of its right to

present its own case and to adduce evidence in support thereof. If
as stated by the court in its resolution quoted above the
petitioner was satisfied with the report of Messrs. Alvarez and
Lopez and expressly informed the court that there was no need
for further evidence, it is not seen how the failure of the Court of
Industrial Relations to set Mr. Escuderos report for hearing could
have prejudiced the petitioner or deprived it of a fair and open
hearing as claimed. Section 10 of Commonwealth Act No. 103
empowers the Court of Industrial Relations to "refer any industrial
or agricultural dispute, or any matter under consideration or
advisement by the Court under the provisions of section four
hereof to a local board of inquiry, a provincial fiscal, a justice of
the peace or any public official in any part of the Philippines for
investigation, report, and recommendation, and may delegate to
such board or public official such powers and functions as the said
Court of Industrial Relations may deem necessary; but such
delegation shall not affect the exercise by the Court itself of any
of its powers or functions." The purpose of this provision is the
expeditious determination of industrial and agricultural disputes
and is in accord with the declared policy of freeing said court from
the fetters of technicalities and legal forms, subject, of course, to
the limitation that no party shall be deprived of his right to
present his own case and submit evidence in support thereof. And
neither was petitioner denied this right when the said court
refused to set its motion for reconsideration for oral argument.
This is a matter which rests upon the sound discretion of the
Court of Industrial Relations and which it may regulate in
pursuance of its rule making power under section 20 of
Commonwealth Act No. 103.
The petitioner complains that the Court of Industrial Relations, in
rendering its order of November 3, 1939, considered "datos"
which were not submitted by the parties as evidence in the case.
The petitioner, however, has not pointed out which of the
findings of fact contained in the said order are not supported by
evidence, or what particular "datos" allegedly not of record and
not disclosed to the parties were relied upon by the said court.
The petitioners assignment of error concerning this point is based
solely on the opening statement "De las pruebas y demas datos
resulta probado:" which precedes the statement of the facts
which the court considered as proved. We are here, therefore,
called upon to deal with a proposition in the abstract and which
we cannot resolve without speculating as to the precise import of
the statement in question.

In support of its last assignment of error, the petitioner contends

that under section 19, as amended, of Common wealth Act No.
103, the Court of Industrial Relations does not have the power to
prevent an employer from discharging an employee if the cause
for the discharge, whatever it might be, is not attributable to a
desire to curtail the union activities of the employee. The
pertinent provision of section 19 as it stood at the time this
incidental controversy arose reads as
follows:jgc:chanrobles.com.ph

"SEC. 19. Implied condition in every contract of employment. In

every contract of employment or tenancy, whether verbal or
written, it is an implied condition that when dispute between the
employer or landlord and the employee, tenant or laborer has
been submitted to the Court of industrial Relations for settlement
or arbitration pursuant to the provisions of this Act or when the
President of the Philippines has ordered an investigation in
accordance with section five of this Act with a view to
determining the necessity and fairness of fixing and adopting a
minimum wage or share of laborers or tenants, and pending
award or decision by the court of such dispute or during the
pendency of the investigation above referred to, the employee,
tenant, or laborer shall not strike or walk out of his employment
when so enjoined by the court after hearing and when public
interest so requires, and if he has already doneso, that he shall
forthwith return to it, upon order of the court, which shall be
issued only after hearing when public interest so requires or when
the dispute cannot, in its opinion, be promptly decided or settled;
and if the employees, tenants or laborers fail to return to work,
the court may authorize the employer or landlord to accept other
employees, tenants, or laborers. A condition shall further be
implied that while such dispute or investigation is pending, the
employer or landlord shall refrain from accepting other
employees, tenants or laborers, unless with the express authority
of the court, and shall permit the continuation in the service of his
employees, tenants or laborers under the last terms and
conditions existing before the dispute arose."cralaw virtua1aw
library

The evident purpose of section 19 is to maintain the parties in

status quo during the pendency of an industrial oragricultural
dispute in order to safeguard the public interest and aid the Court
of Industrial Relations in the effective settlement of controversies
which threaten to disrupt industrial peace and progress. As will be
seen, the right of the employees, tenants, or laborers to be
continued in the service under the last terms and conditions
existing before the dispute arose carries with it the corresponding
obligation on their part not to strike or walk out of their
employment, or to return to it if they have already done so. But
right of the employees or laborers to be continued in the service
is not without limitation, for as we have held in the case of Manila
Trading & Supply Co. v. Zulueta et als., G. R. No. 46853, "an
employer cannot legally be compelled to continue with the
employment of a person who admittedly was guilty of
misfeasance or malfeasance towards his employer, and whose
continuance in the service if the latter is patently inimical to his
interests." That is to say, a discharge for a justifiable cause is
allowed, and since under section 19 of Commonwealth Act No.
103 the obligation of the employer to continue the employee,
tenant, or laborer in the service is incidental to the pendency of
an agricultural or industrial dispute, and is imposed, as we have
stated, in the public interest and to aid the court in the effective
settlement of such dispute, the power of the said court to
determine whether a justifiable cause exists is recognized.
Similarly, Section 19 has expressly empowered the Court of
Industrial Relations to determine whether public interest requires
that it order the laborer, tenant, or employee not to strike or walk
out during the pendency of an agricultural or industrial dispute,
and it is in this obvious spirit of the law that we should construe
the provision under consideration.
The petitioner raises certain constitutional objections against the
power of the Court of Industrial Relations under section 19 of
Commonwealth Act No. 103 to prevent the discharge of an
employee without justifiable cause. We have already held that the
right of an employer to freely select or discharge his employees is
subject to regulation by the State basically in the exercise of its
paramount police power. (Manila Trading & Supply Co. v. Zulueta
supra.)

The writ of certiorari prayed for is hereby denied, with costs

against the petitioner. So ordered.
 A. SERIOUS MISCONDUCT: ART. 297
a. Definition of Acts

LAKPUE DRUG INC., vs.

BELGA
Before us is a petition for review of the July 28, 2004 Decision[1] of the
Court of Appeals in CA-G.R. SP No. 80616 which reversed and set aside
the April 14, 2003 Decision[2] of the National Labor Relations
Commission (NLRC) in NLRC NCR 00-09-04981-01; and its December 17,
2004 Resolution[3] denying the motion for reconsideration.

Petitioner Tropical Biological Phils., Inc. (Tropical), a subsidiary of

Lakpue Group of Companies, hired on March 1, 1995 respondent Ma.
Lourdes Belga (Belga) as bookkeeper and subsequently promoted as
assistant cashier. On March 19, 2001, Belga brought her daughter to the
Philippine General Hospital (PGH) for treatment of broncho-pneumonia.
On her way to the hospital, Belga dropped by the house of Marylinda O.
Vegafria, Technical Manager of Tropical, to hand over the documents
she worked on over the weekend and to give notice of her emergency
leave.

While at the PGH, Belga who was pregnant experienced labor pains and
gave birth on the same day. On March 22, 2001, or two days after giving
birth, Tropical summoned Belga to report for work but the latter replied
that she could not comply because of her situation. On March 30, 2001,
Tropical sent Belga another memorandum ordering her to report for
work and also informing her of the clarificatory conference scheduled
on April 2, 2001. Belga requested that the conference be moved to April
4, 2001 as her newborn was scheduled for check-up on April 2, 2001.
When Belga attended the clarificatory conference on April 4, 2001, she
was informed of her dismissal effective that day.

Belga thus filed a complaint with the Public Assistance and Complaint
Unit (PACU) of the Department of Labor and Employment (DOLE).
Attempts to settle the case failed, hence the parties brought the case
before the NLRC-NCR.

Tropical, for its part, averred that it hired Belga on March 1, 1995 as a
bookkeeper and later promoted to various positions the last of which
was as Treasury Assistant. Tropical claimed that this position was not
merely clerical because it included duties such as assisting the cashier in
preparing deposit slips, bills purchased, withdrawal slips, provisional
receipts, incoming and outgoing bank transactions, postdated checks,
suppliers checklist and issuance of checks, authorities to debit and doing
liaison work with banks.

Tropical also alleged that Belga concealed her pregnancy from the
company. She did not apply for leave and her absence disrupted
Tropicals financial transactions. On March 21, 2001, it required Belga to
explain her unauthorized absence and on March 30, 2001, it informed
her of a conference scheduled on April 2, 2001. Tropical claimed that
Belga refused to receive the second memorandum and did not attend
the conference. She reported for work only on April 4, 2001 where she
was given a chance to explain.

On April 17, 2001, Tropical terminated Belga on the following grounds:

(1) Absence without official leave for 16 days; (2) Dishonesty, for
deliberately concealing her pregnancy; (3) Insubordination, for her
deliberate refusal to heed and comply with the memoranda sent by the
Personnel Department on March 21 and 30, 2001 respectively.[4]

The Labor Arbiter ruled in favor of Belga and found that she was illegally
dismissed, thus:

WHEREFORE, the termination of complainant is hereby declared illegal.

ACCORDINGLY, she should be reinstated with full backwages, which as
of May 31, 2002, now amounts to P122, 248.71.
Ten (10%) percent of the total monetary award as attorneys fees is
likewise ordered.

SO ORDERED.[5]

Tropical appealed to the NLRC, which reversed the findings of the labor
arbiter in its Decision dated April 14, 2003, thus:

WHEREFORE, in the light of the foregoing, the assailed Decision is

REVERSED and SET ASIDE. We thereby render judgment:

(1) declaring complainant-appellees dismissal valid; and

(2) nullifying complainant-appellees monetary claims.

SO ORDERED.[6]

Upon denial of the motion for reconsideration on September 24,

2003,[7] Belga filed a petition for certiorari with the Court of Appeals
which found in favor of Belga, thus:

WHEREFORE, premises considered, the Decision promulgated on April

14, 2003 and the Resolution promulgated on September 24, 2003 of the
public respondent National Labor Relations Commission are hereby
REVERSED and SET ASIDE. The decision of the Labor Arbiter dated June
15, 2002 is hereby REINSTATED.

SO ORDERED.[8]

Hence, Tropical filed the instant petition claiming that:

I.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

HOLDING THAT RESPONDENT WAS ILLEGALLY DISMISSED.

II.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

DISREGARDING THE FINDINGS OF THE NATIONAL LABOR RELATIONS
COMMISSION.[9]

The petition lacks merit.

Tropicals ground for terminating Belga is her alleged concealment of

pregnancy. It argues that such non-disclosure is tantamount to
dishonesty and impresses upon this Court the importance of Belgas
position and the gravity of the disruption her unexpected absence
brought to the company. Tropical also charges Belga with
insubordination for refusing to comply with its directives to report for
work and to explain her absence.

Tropical cites the following paragraphs of Article 282 of the Labor Code
as legal basis for terminating Belga:

Article 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;
....

(c) Fraud or willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative; ....

We have defined 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.
The misconduct to be serious must be of such grave and aggravated
character and not merely trivial and unimportant. Such misconduct,
however serious, must, nevertheless, be in connection with the
employees work to constitute just cause for his separation.[10]

In the instant case, the alleged misconduct of Belga barely falls within
the situation contemplated by the law. Her absence for 16 days was
justified considering that she had just delivered a child, which can hardly
be considered a forbidden act, a dereliction of duty; much less does it
imply wrongful intent on the part of Belga. Tropical harps on the alleged
concealment by Belga of her pregnancy. This argument, however, begs
the question as to how one can conceal a full-term pregnancy. We agree
with respondents position that it can hardly escape notice how she
grows bigger each day. While there may be instances where the
pregnancy may be inconspicuous, it has not been sufficiently proven by
Tropical that Belgas case is such.

Belgas failure to formally inform Tropical of her pregnancy can not be

considered as grave misconduct directly connected to her work as to
constitute just cause for her separation.

The charge of disobedience for Belgas failure to comply with the

memoranda must likewise fail. Disobedience, as a just cause for
termination, must be willful or intentional. Willfulness is characterized
by a wrongful and perverse mental attitude rendering the employees
act inconsistent with proper subordination.[11] In the instant case, the
memoranda were given to Belga two days after she had given birth. It
was thus physically impossible for Belga to report for work and explain
her absence, as ordered.

Tropical avers that Belgas job as Treasury Assistant is a position of

responsibility since she handles vital transactions for the company. It
adds that the nature of Belgas work and the character of her duties
involved utmost trust and confidence.

Time and again, we have recognized the right of employers to dismiss

employees by reason of loss of trust and confidence. However, we
emphasize that such ground is premised on the fact that the employee
concerned holds a position of responsibility or trust and confidence.[12]
In order to constitute a just cause for dismissal, the act complained of
must be work-related such as would show the employee concerned to
be unfit to continue working for the employer.[13] More importantly,
the loss of trust and confidence must be based on the willful breach of
the trust reposed in the employee by his employer. A breach of trust is
willful if it is done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.[14]

Belga was an assistant cashier whose primary function was to assist the
cashier in such duties as preparation of deposit slips, provisional
receipts, post-dated checks, etc. As correctly observed by the Court of
Appeals, these functions are essentially clerical. For while ostensibly,
the documents that Belga prepares as Assistant Cashier pertain to her
employers property, her work does not call for independent judgment
or discretion. Belga simply prepares the documents as instructed by her
superiors subject to the latters verification or approval. Hence, her
position cannot be considered as one of responsibility or imbued with
trust and confidence.

Furthermore, Tropical has not satisfactorily shown how and to what

extent it had suffered damages because of Belgas absences. For while it
may be true that the company was caught unprepared and unable to
hire a temporary replacement, we are not convinced that Belgas
absence for 16 days has wreaked havoc on Tropicals business as to
justify her termination from the company. On the other hand, it is
undisputed that Belga has worked for Tropical for 7 years without any
blemish on her service record. In fact, the company admitted in its
petition that she has rendered seven (7) years of service in compliance
with [the companys] rules.[15] And her fidelity to her work is evident
because even in the midst of an emergency, she managed to transmit to
the company the documents she worked on over the weekend so that it
would not cause any problem for the company.

All told, we find that the penalty of dismissal was too harsh in light of
the circumstances obtaining in this case. While it may be true that Belga
ought to have formally informed the company of her impending
maternity leave so as to give the latter sufficient time to find a
temporary replacement, her termination from employment is not
commensurate to her lapse in judgment.

Even assuming that there was just cause for terminating Belga, her
dismissal is nonetheless invalid for failure of Tropical to observe the
twin-notice requirement. The March 21, 2001 memorandum merely
informed her to report for work and explain her absences. The March
30, 2001 memorandum demanded that she report for work and attend
a clarificatory conference. Belga received the first memorandum but
allegedly refused to receive the second.

In Electro System Industries Corporation v. National Labor Relations

Commission,[16] we held that, in dismissing an employee, the employer
has the burden of proving that the worker has been served two notices:
(1) one to apprise him of the particular acts or omissions for which his
dismissal is sought, and (2) the other to inform him of his employers
decision to dismiss him. The first notice must state that the dismissal is
sought for the act or omission charged against the employee, otherwise
the notice cannot be considered sufficient compliance with the rules. It
must also inform outright that an investigation will be conducted on the
charges particularized therein which, if proven, will result to his
dismissal. Further, we held that a notation in the notice that the
employee refused to sign is not sufficient proof that the employer
attempted to serve the notice to the employee.
An employee who was illegally dismissed from work is 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.[17]
Thus, Belga is entitled to be reinstated to her former or equivalent
position and to the payment of full backwages from the time she was
illegally dismissed until her actual reinstatement.

WHEREFORE, the instant petition is DENIED. The July 28, 2004 Decision
of the Court of Appeals in CA-G.R. SP No. 80616 and its December 17,
2004 Resolution are AFFIRMED in toto.

SO ORDERED.
LABOR REPORTING ON NOVEMBER 23

B. REDUNDANCY
a. BUSINESS JUDGMENT

DOLE PHILIPPINES
INC. vs. NLRC
At issue in this case is the validity of petitioner companys redundancy
program pursuant to which the respondent employees were dismissed.

Petitioner Dole Philippines, Inc., is a corporation organized and existing

under Philippine laws. It is engaged in the business of growing, canning,
processing and manufacturing pineapples and other allied products. The
other petitioners were Dole corporate officers at the time the cases
were instituted.[1]

Private respondents were Doles employees of different ranks and

positions.

The petition alleges that in 1990 and 1991, Dole carried out a massive
manpower reduction and restructuring program aimed at reducing the
total workforce and the number of positions in the companys table of
organization. Dole intimates that the 1990-1991 reduction was a
continuation of previous efforts to restructure its organization.
Previously, in 1982, Dole reduced its manpower by 509 workers but
prolonged collective bargaining negotiations, which ended in 1990,
prevented the company from proceeding with its restructuring.[2]

Among the factors considered by the company in undertaking the

reduction program was the high absenteeism rate, which in 1989
accounted for 16% of total man hours. The high absenteeism rate
translated to higher paid sick leaves, higher operating costs for medical
facilities, and higher transportation costs due to under-filled and late
hauls.[3] Dole also cites the exacerbation of operating cost problems
due to factors beyond [its] control, i.e., the Gulf War, oil price increases,
mandated wage increases, the 9% import levy, power rate hikes, [and]
increased land rentals, existing at that time. Furthermore, the bloody
December 1989 coup detat shook investor confidence and put in doubt
the continued economic progress of the country.[4]

Pursuant to its restructuring efforts, Dole abolished the positions of

foremen, bargaining capataces and foreladies. Employees occupying
these positions were either promoted or were dismissed on grounds of
redundancy.[5]

To address the surplus of manpower relative to its operations, Dole also

decided to reduce the number of employees company-wide.[6] In 1990,
the company offered a Special Voluntary Resignation (SVR) program of
which many employees, including a number of private respondents,
availed.

Upon approval of the applications, notices of termination[7] were sent

to the employees who availed of the SVR. These employees received the
following benefits under the redundancy program:

1. 40 days for every year of service;

2. cash conversion of any earned/unused and accrued vacation leave

credits;

3. proportionate 13th month pay;

4. one month extra pay in lieu of one month prior written notice; and

5. relocation assistance of P3,000.00[8]

After receiving the benefits, said employee-applicants executed a

Release[9] stating that the employee had no claims against Dole in
connection with his or her employment. Subsequently, the dismissed
employees executed another Release of Claim[10] in favor of Dole.

A total of 2,357 hourly and monthly salaried employees were separated

from Dole during this period.[11]

After assessing the outcome of the SVR, Dole found that it could still do
with lesser employees, and proceeded to dismiss more of them in
March 1991.[12] Separated were employees who applied for the SVR in
1990 but whose applications were still pending as well as those
determined by the Company to be redundant owing to excess
manpower of a surplus of employees relative to the jobs needed to be
accomplished.[13] The employees dismissed during this second phase
totaled 435,[14] all of whom received the following benefits:

1. 40 days for every year of service;

2. Cash conversion of accrued vacation leave credits;

3. Proportionate 13th month pay;

4. One month extra pay; and

5. Relocation assistance of P3,000.00.[15]

Overall, 2,792 employees were separated under the SVR Program. A

total of P298,199,000.00 in benefits were paid by Dole to the separated
employees.[16]

On October 22, 1991, a Complaint[17] for illegal dismissal, docketed as

RAB-11-10-50401-91, was filed against petitioners before the Sub-
Regional Arbitration Branch of the National Labor Relations Commission
in General Santos City. Named as complainants in the caption of the
complaint were Adela L. De Lara, Roberto Laab, Sr., Teresita Pelaez,
Jesus Maritoria, Maximo Cruz, Arcadio Gomera, Adelaida Penig and
others.[18]

On September 18, 1992, another Complaint[19] against Dole, docketed

as RAB-11-09-40318-92, was also filed before the Sub-Regional
Arbitration of General Santos City. The caption of the complaint named
Lilia Balucanag, Democrito Lloren, Rogelio Dizon, Felisa Perales,
Selvestra Perales, Eulalio Tejero, Panfilo Puebla, Delia Puebla, Florencia
Pedroso, Rodulfo Antonio, and others as complainants. The complaint
contained similar allegations as the complaint in RAB-11-09-50318-92.

RAB-11-10-50401-91 and RAB-11-09-50318-92 were subsequently

consolidated. On 5 November 1993, Labor Arbiter Amado M. Solano
rendered a decision dismissing the complaints for lack of merit. The
dispositive portion of the decision reads:

WHEREFORE, IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby

rendered.

1. Declaring the dismissal of the above-named complainants in the

instant cases, as valid and lawful;

2. The claims for reinstatement with full backwages, damages and

attorneys fees are hereby dismissed for lack of merit.

SO ORDERED.[20]

Private respondents appealed to the National Labor Relations

Commission (NLRC). On 29 November 1994, the NLRC issued a
Resolution reversing the decision of the Labor Arbiter as follows:

WHEREFORE, the decision appealed from is hereby Reversed and Set

Aside and a new one entered declaring the dismissal of complainants
illegal. Accordingly, respondent company is hereby ordered to reinstate
herein complainants to their respective former positions or equivalent
positions without loss of seniority rights and to pay complainants
backwages effective from the date of their termination up to the time
they are actually reinstated but not exceeding three (3) years, less the
amounts they received as separation pay.

In addition, respondent company is ordered to pay complainants moral

and exemplary damages fixed in the sum of P15,000.00 and P10,000.00
each, respectively and attorneys fees equivalent to ten (10%) percent of
the aggregate monetary award, subject to computation by the
Arbitration Branch of origin at the execution stage.

SO ORDERED.[21]

Petitioners filed a motion for reconsideration but this was denied by the
NLRC in an Order[22] issued on January 30, 1995.

Private respondents belatedly filed an opposition to petitioners motion

for reconsideration[23] on February 2, 1995, which the NLRC received
on February 15, 1995. In said opposition, private respondents also asked
for a clarification concerning the actual number of complainants
referred to in the Resolution of November 29, 1994. Private
respondents alleged that the complaints filed with the Labor Arbiter
were in the nature of a class suit; hence, the judgment award should not
be limited to 21 complainants but should extend to the other
complainants, numbering about 1,407.

Meanwhile, on May 16, 1995, petitioners came to this Court praying for
the annulment of the NLRC Resolution and the issuance of a writ of
preliminary injunction and/or temporary restraining order to enjoin its
execution.

On July 3, 1995, the NLRC issued a Resolution granting private

respondents motion for clarification, holding:

There is merit to the contention of complainants that the word

complainants in the dispositive portion of the resolution of the
Commission dated November 19, 1994 should not refer exclusively to
the named 21 complainants but to all the 1,413 [later corrected to
1,407] complainants. It is very evident from the records that the names
and signatures of other complainants have been specified and that
during the arbitration proceedings, additional lists of complainants were
submitted by complainants/movants herein x x x.[24]

The dispositive portion of the July 3, 1995 NLRC Resolution reads:

WHEREFORE, the instant motion for clarification is granted. Accordingly,

the complaints referred in the dispositive portion of the resolution of
this Commission dated November 29, 1994 are the employees
numbering about 1,407 (as corrected) whose names are listed in
Annexes A, A-1 to A-14 and B, B-1 to B-9 and forming an integral part of
this resolution.

SO ORDERED.[25]

In reaction to the adverse resolution, petitioners filed on August 14,

1995 in this Court a supplement to their petition for certiorari, assailing
the July 3, 1995 Resolution of the NLRC and reiterating their prayer for a
preliminary injunction and/or temporary restraining order.

On August 21, 1995, this Court issued a Resolution[26] granting the

temporary restraining order prayed for.

The issues for this Courts resolution are:

WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO WANT OR ABSENCE OF JURISDICTION IN
SUBSTITUTING ITS OWN JUDGMENT ON WHETHER OR NOT THERE WAS
A NECESSITY FOR THE REDUNDANCY PROGRAM IN PETITIONER FIRM.

II

WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN HOLDING THE RELEASE OF CLAIMS SIGNED BY THE
DISMISSED EMPLOYEES TO BE OF NO LEGAL EFFECT.

III

WHETHER OF NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION IN ORDERING THE REINSTATEMENT OF THE EMPLOYEES
WHO WERE DISMISSED UNDER A VALID REDUNDANCY PROGRAM.

IV

WHETHER OR NOT PUBLIC RESPONDENT COMMITED GRAVE ABUSE OF

DISCRETION IN HOLDING THAT THE REDUNDANCY PROGRAM WAS
INVALID FOR WANT OF THE NECESSARY NOTICE TO THE DOLE.

WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF

DISCRETION WHEN IT ISSUED THE CLARIFICATORY ORDER DECLARING
1,407 PERSONS AS NEW COMPLAINANTS.

VI
WHETHER OR NOT PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION IN AWARDING MORAL AND EXEMPLARY DAMAGES AS
WELL AS ATTORNEYS FEES TO PRIVATE RESPONDENT.[27]

We shall examine the first assigned error, which involves the validity of
petitioners redundancy program.

Redundancy is one of the authorized causes for the dismissal of an

employee.[28] In the leading case of Wiltshire File Co. Inc., vs. NLRC,[29]
we explained the nature of redundancy as an authorized cause for
dismissal:

x x x redundancy in an employers personnel force necessarily or even

ordinarily refers to duplication of work. That no other person was
holding the same position that private respondent held prior to the
termination of his services, does not show that his position had not
become redundant. Indeed, in any well-organized business enterprise, it
would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for
purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant
where it is superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by the
enterprise.

We held, moreover, that the characterization of an employees services

as no longer necessary or sustainable, and, therefore, properly
terminable, is an exercise of business judgment on the part of the
employer. The wisdom or soundness of such characterization or
decision is not subject to discretionary review provided, of course, that
violation of law or arbitrary or malicious action is not shown.

Doles redundancy program does not appear to be tainted by bad faith.

The petition alleges that the redundancy program is part of a wide-scale
restructuring of the company. This purported restructuring is supported
by the companys undisputed history towards these ends, which
culminated in the abolition of certain positions and the Special
Voluntary Resignation program in 1990-1991. Among the avowed goals
of such restructuring is the reduction of absenteeism in the company.
The harsh economic and political climate then prevailing in the country
also emphasized the need for cost-saving measures.

Reorganization as a cost-saving device is acknowledged by

jurisprudence. An employer is not precluded from adopting a new policy
conducive to a more economical and effective management,[30] and
the law does not require that the employer should be suffering financial
losses before he can terminate the services of the employee on the
ground of redundancy.[31]

Private respondents submit, however, that the subsequent hiring of

casual employees to replace the dismissed regular employees is an
indication of bad faith. Petitioner does not deny that they hired casual
employees after the implementation of the redundancy program.
Petitioner explains, however, that it has always hired casuals to
augment the companys manpower requirements in accordance with the
demands of the industry. Petitioner further asserts that the number of
casuals remained relatively constant after the implementation of the
redundancy program, as shown by the graph appended as Annex J[32]
of its supplement to the motion for reconsideration before the NLRC.
The Court finds the foregoing explanation sufficient to negate the
allegations of bad faith by its former employees.

Private respondents also point to references in petitioners studies of

the redundancy program to the elimination of undesirables, abusers
and worst performers as another indicia of petitioners bad faith. The
Court is not too keen on attaching such a sinister significance to these
allusions, however. It may be argued that the elimination of the so-
called undesirables was merely incidental to the redundancy program or
that past transgressions could have been part of the criteria in
determining who among the redundant employees is to be dismissed.

Private respondents harp on the fact that petitioners desire to save on

labor costs was the motivation for the redundancy program. The law,
however, does not prevent employers from saving on labor costs. This
Court has recognized such right. In International Macleod, Inc. vs.
Intermediate Appellate Court, supra, this Court found that the
appointment by the company to the International Heavy Equipment
Corporation as its dealer with the government rendered redundant the
position of Government Relations Officer held by the private
respondent therein. It was held that the determination of the need for
the phasing out of a department as a labor and cost saving device
because it was no longer economical to retain said department is a
management prerogative, with which the courts will not interfere.

In De Ocampo vs. National Labor Relations Commission,[33] the Court

similarly ruled that [t]he reduction of the number of workers in a
company made necessary by the introduction of the services of Gemac
Machineries in the maintenance and repair of its industrial machinery is
justified. There can be no question as to the right of the company to
contract the services of Gemac Machineries to replace the services
rendered by the terminated mechanics with a view to effecting more
economic and efficient methods of production. So long as the
undertaking to save on labor costs is not attended by malice,
arbitrariness, or intent on the part of the employer to circumvent the
law, as in this case, the Court will not interfere with such endeavor.

The lack of notice to the Department of Labor and Employment (DOLE)

does not render the redundancy program void. Petitioner accurately
invokes International Harvester, Inc. vs. NLRC.[34]

x x x if an employee consented to his retrenchment or voluntarily

applied for retrenchment with the employer due to the installation of
labor-saving devices, redundancy, closure or cessation of operation or
to prevent financial losses to the business of the employer, the required
previous notice to the DOLE is not necessary as the employee thereby
acknowledged the existence of a valid cause for termination of his
employment.

Here, most of the private respondents even filled up application forms

to be considered for the redundancy program and thus acknowledged
the existence that their services were redundant.

In any case, private respondents executed two releases in favor of

petitioner company. Not all quitclaims are per se invalid or against
public policy. But those (1) where there is clear proof that the waiver
was wangled from an unsuspecting or gullible person or (2) where the
terms of settlement are unconscionable on their face are invalid. In
these cases, the law will step in to annul the questionable
transaction.[35] There is no showing here that private respondents are
unsuspecting or gullible persons. Neither are the terms of the
settlement unconscionable. Indeed, private respondents received a
generous separation package, as set out in the narration of facts above.

WHEREFORE, the petition is GRANTED and the decision of the NLRC

ANNULLED and SET ASIDE. The temporary restraining order issued by
this Court on August 21, 1995 is LIFTED.

SO ORDERED.
RETRENCHMENT TO PREVENT LOSSES DEFINED

FF MARINE CORP vs. NLRC

Before this Court is a Rule 45 petition assailing the Decision[1] dated 31
January 2002 of the Court of Appeals which affirmed the Resolution[2]
dated 11 October 2000 of the National Labor Relations Commission
(NLRC) that in turn reversed the Decision[3] dated 6 August 1999 of
Labor Arbiter Salimathar V. Nambi. The Labor Arbiter had upheld the
validity of the retrenchment program undertaken by petitioner
corporation.

The factual antecedents of the case follow.

Petitioner F.F. Marine Corporation (FFMC) is a corporation duly

organized and existing under Philippine laws, with Eric A. Cruz as its
president. It is engaged in ship-repair, dry-docking and dredging
services, and has a total of 419 employees including private respondent
Ricardo M. Magno (Magno).[4] Magno, who began working for FFMC on
7 February 1990, was eventually assigned as Lead Electrician at the
Marine Dredging with a monthly salary of P8,500.00.

On 26 October 1998, petitioners filed with the Department of Labor and

Employment (DOLE) a notice that petitioner corporation was
undertaking a retrenchment program to curb the serious business
reverses brought about by the Asian economic crisis.[5] Petitioners
likewise stated in the notice that they had already closed down their dry
docking and ship repair division on 30 August 1998 and that their
dredging services were heavily affected by the economic slowdown
being experienced by the construction industry.[6] They manifested that
the retrenchment program would start on 1 November 1998.[7] The
affected employees were to remain employed only until 16 December
1998.[8]

Pursuant to the retrenchment program, petitioners served the affected

employees a personal notice of retrenchment, stating that their
employment would end at the close of business hours of 16 December
1998. However, petitioners paid them in advance of their payroll from
16 November to 16 December 1998 to spare them from reporting for
work during the period. They were also paid separation pay equivalent
to one-half (1/2) month basic pay per year of service, plus the
proportionate 13th month pay.

On 11 December 1998 and in compliance with its notice to the DOLE

dated 26 October 1998, petitioners filed with the DOLE, an
Establishment Termination Report for the retrenchment of twenty-one
(21) affected employees, including Magno.

In view of the retrenchment, Magno received his separation pay

equivalent to nine (9) years and proportionate 13th month pay in the
total amount of P46,182.41. After receiving the above separation pay,
Magno executed a release and quitclaim in favor of petitioners.[9]

However, on 12 January 1999, Magno filed a complaint for illegal

dismissal, moral and exemplary damages and attorneys fees, with
prayer for reinstatement and payment of backwages against
petitioners.[10] Magno claimed that he was beguiled into accepting the
separation pay since petitioners terminated his services on the pretext
that the dredging machine where he was assigned was temporarily
stalled in Zambales. Magno eventually learned that the company had
been adducing to others a different reason for retrenchment, primarily
the Asian financial crisis.[11]

On 6 August 1999, after the contending parties submitted their

responsive pleadings, Labor Arbiter Salimathar V. Nambi promulgated a
Decision upholding the validity of retrenchment.[12] The dispositive
portion thereof reads:

WHEREFORE, premises considered, the complaint for illegal dismissal is

hereby DISMISSED for lack of merit. Consequently, complainants claim
for backwages, separation pay differential, damages and attorneys fees
[is] likewise dismissed.

SO ORDERED.[13]

Magno appealed the Labor Arbiters Decision to the NLRC which, on 11

October 2000, issued a Resolution reversing the findings and
conclusions of the Labor Arbiter.[14] The NLRC deemed the petitioners
as having been unable to establish proof of actual losses, due to the
absence of financial reports of independent external auditors that
would confirm the losses sustained for the years 1996 and 1997.[15]
The decretal text of the issuance 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 Complainants
dismissal as illegal.

Respondent F.F. Marine Corporation is ordered to pay Complainant:

1. full backwages from December 16, 1998 up to the finality of this

decision;

2. separation pay equivalent to Complainants one (1) month pay for

every year of service, computed from his first day of employment on
February 7, 1990 up to the finality of this decision, the total amount
from which shall be deducted his advanced separation pay of
P38,250.00; and

3. attorneys fees equivalent to ten percent (10%) of his total monetary

award.
SO ORDERED.[16]

After the denial of their Motion for Reconsideration, petitioners

elevated the case to the Court of Appeals by way of Petition for
Certiorari. Before the appellate court, petitioners presented financial
reports prepared by independent external auditors Banaria, Banaria and
Company, auditing FFMCs balance sheets and income statements for
the years 1996 and 1997. Petitioners alleged that these reports could
not be submitted earlier as they had not been completed during the
pendency of the proceedings before the Labor Arbiter.[17]

The appellate court eventually dismissed the petition and affirmed the
resolution of the NLRC. Material to the resolution of the case was the
issue of admissibility and competency as evidence of the 31 December
1997 and 1996 Financial Statements of petitioners. The Court of Appeals
noted that these financial statements were submitted to it only and at
that on the pretext that they had not yet been completed by the
independent auditor when the case was still pending before the Labor
Arbiter. However, the appellate court ruled that a perusal of the
certification issued by Banaria, Banaria and Company regarding the
Financial Statements reveals that the same were executed on 30 March
1998 or nine (9) months prior to the filing of the complaint for illegal
dismissal on 12 January 1999. Thus, the financial statements could have
been offered as evidence before the Labor Arbiter and the NLRC. Thus,
the Court of Appeals reproached petitioners for having suppressed
material evidence.

Accordingly, the appellate court found that petitioners failed to

substantiate the substantive requirements of a valid retrenchment.[18]
The fact that Magno executed a quitclaim in favor of petitioners,
according to the Court of Appeals, did not bar him from filing the instant
complaint for illegal dismissal.[19]

Aggrieved by the decision of the appellate court, petitioners went to

this Court via the present petition for review.
As grounds for appeal, petitioners allege that the appellate court
gravely erred in: (a) finding that petitioners failed to substantiate the
substantive requirements of a valid retrenchment and (b) affirming the
NLRCs award of separation pay and attorneys fees to Magno.[20]

Petitioners argue that retrenchment programs undertaken by

corporations are purely business decisions properly within the
reasonable exercise of management prerogative. As a recognized
management prerogative, petitioners assessment of the necessity of
retrenchment cannot be substituted with the NLRCs own perception,
much less opinion, as to the thrust and direction of petitioners business.
It is only subject to faithful compliance with the substantive and
procedural requirements laid down by law and jurisprudence.[21] They
assert that they complied with both the substantive and procedural
requirements of a valid retrenchment as they were able to show that
the expected losses were not merely de minimis but substantial and
imminent.[22] They point out that in 1994 and 1995, they earned
minimal profits of only P77,609.79 and P155,339.96, respectively.[23]

They further stress that the corporation had been beset with financial
problems as early as 1996 when the company had incurred losses in the
amount of P18,005,918.08. On the other hand, the losses for the years
1997 and 1998 are P21,316,072.89 and P21,234,582.25,
respectively.[24] These losses resulted to a total deficit of
P39,146,167.82 in 1997 and continued to increase.[25] Thus, petitioners
insist that the retrenchment program was necessary to prevent
additional losses. Petitioners also allege that the corporation initially
explored ways of minimizing its losses by taking necessary measures to
cut operational expenses.[26]

They also contend that the appellate court gravely erred in placing too
much emphasis on the late presentation of the 1996-1997 Financial
Statements so as to completely disregard other documentary evidence
submitted by petitioners. The documentary evidence submitted by
petitioners before the Labor Arbiter, consisting of the Statements of
Retained Earnings and Balance Sheets for the periods covering 1993 to
1997, were sufficient to prove that petitioner corporation was
experiencing losses prior to the retrenchment program.[27] They also
allege that having freely entered into the subject quitclaim, Magno was
bound by the terms thereof and may not later be disowned simply
because of change of mind. Thus, they should not be held liable for the
claims of Magno for backwages, separation pay, damages nor attorneys
fees.[28]

The petition suffers from lack of merit.

This Court is not oblivious of the significant role played by the corporate
sector in the countrys economic and social progress. Implicit in turn in
the success of the corporate form in doing business is the ethos of
business autonomy which allows freedom of business determination
with minimal governmental intrusion to ensure economic independence
and development in terms defined by businessmen. Yet, this vast
expanse of management choices cannot be an unbridled prerogative
that can rise above the constitutional protection to labor. Employment
is not merely a lifestyle choice to stave off boredom. Employment to the
common man is his very life and blood which must be protected against
concocted causes to legitimize an otherwise irregular termination of
employment. Imagined or undocumented business losses present the
least propitious scenario to justify retrenchment.

Retrenchment is the termination of employment initiated by the

employer through no fault of the employees and without prejudice to
the latter, resorted to by management during periods of business
recession, industrial depression, or seasonal fluctuations or during lulls
occasioned by lack of orders, shortage of materials, conversion of the
plant for a new production program or the introduction of new methods
or more efficient machinery, or of automation.[29] Retrenchment is a
valid management prerogative. It is, however, subject to faithful
compliance with the substantive and procedural requirements laid
down by law and jurisprudence.

There are three (3) basic requisites for a valid retrenchment to exist, to
wit: (a) the retrenchment is necessary to prevent losses and such losses
are proven; (b) written notice to the employees and to the DOLE at least
one (1) month prior to the intended date of retrenchment; and (c)
payment of separation pay equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is
higher.[30]

Jurisprudential standards to justify retrenchment have been reiterated

by this Court in a long line of cases to forestall management abuse of
this prerogative, viz:

. . . . Firstly, the losses expected should be substantial and not merely de

minimis in extent. If the loss purportedly sought to be forestalled by
retrenchment is clearly shown to be insubstantial and inconsequential
in character, the bonafide nature of the retrenchment would appear to
be seriously in question. Secondly, the substantial loss apprehended
must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer. There should, in other
words, be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the livelihood
of the employees retired or otherwise laid-off. Because of the
consequential nature of retrenchment, it must, thirdly, be reasonably
necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other costs than labor costs.
An employer who, for instance, lays off substantial numbers of workers
while continuing to dispense fat executive bonuses and perquisites or
so-called golden parachutes, can scarcely claim to be retrenching in
good faith to avoid losses. To impart operational meaning to the
constitutional policy of providing full protection to labor, the employers
prerogative to bring down labor costs by retrenching must be exercised
essentially as a measure of last resort, after less drastic meanse.g.,
reduction of both management and rank-and-file bonuses and salaries,
going on reduced time, improving manufacturing efficiencies, trimming
of marketing and advertising costs, etc.have been tried and found
wanting.

Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing evidence. The reason for
requiring this quantum of proof is readily apparent: any less exacting
standard of proof would render too easy the abuse of this ground for
termination of services of employees.[31] (emphasis supplied)

Retrenchment is one of the economic grounds to dismiss employees. It

is resorted to by an employer primarily to avoid or minimize business
losses. The law recognizes this under Article 283[32] of the Labor Code.
However, the employer bears the burden to prove his allegation of
economic or business reverses. The employers failure to prove it
necessarily means that the employees dismissal was not justified.[33]

In the case at bar, petitioners seek to justify the retrenchment on the

ground of serious business losses brought about by the Asian economic
crisis. To prove their claim, petitioners adduced before the Labor Arbiter
the 1994 and 1995 Financial Statements. Said Financial Statements,
however, were prepared only by petitioners accountant, Rosalie
Bengzon, and approved by the manager Bernadette Rosales.[34] They
were not audited by an independent external auditor. The financial
statements show that in 1994 and 1995, petitioner corporation earned
an income of only P77,609.79 and P155,339.96, respectively. In
contrast, the 1996 and 1997 Financial Statements, however, showed
losses[35] of P18,005,918.08, and P21,316,072.89, respectively.

It was only before the Court of Appeals that the financial statements for
the years 1996 and 1997 as audited by an independent external auditor
were introduced.[36] They were not presented before the Labor Arbiter
and the NLRC although they were executed on 30 March 1998, several
months prior to the filing of the complaint for illegal dismissal by Magno
on 12 January 1999.[37]

Petitioners failure to adduce financial statements duly audited by

independent external auditor casts doubt on their claim of losses for
financial statements are easy prey to manipulation and concoction. This
Court has ruled that financial statements audited by independent
external auditors constitute the normal method of proof of the profit
and loss performance of a company.[38] Even this, however, is not a
hard and fast rule as the norm does not compel this Court to accept the
contents of the said documents blindly and without thinking.[39] A
careful examination of financial statements may be resorted to
especially if on their face relevant facts appear to have been ignored
that will warrant a contrary conclusion.

Petitioners had called upon the Court of Appeals to consider alleged

new evidence not presented before the Labor Arbiter or the NLRC, a
course of action unmistakably outside the sphere of that courts
certiorari jurisdiction. This Court itself was confronted with the same
situation in Matugas v. Commission on Elections, et al.,[40] as petitioner
therein asked the Court to consider documents which were not
presented in evidence before the poll body. The Court rejected
petitioners stance, holding that the cause of action sought is clearly
beyond the courts certiorari powers.[41]

In the case at bar, petitioner did not file a motion for leave to present
the alleged new evidence as they simply attached the additional
financial statements to their petition. Significantly in that regard, the
financial statements do not constitute newly discovered evidence as
they had already been prepared by the independent auditors eight (8)
months before the filing of the case with the Labor Arbiter. That must
have been the reason why petitioners opted not to avail of the
prescribed manner for introducing newly discovered evidence.

In the Matugas case, this Court pointedly ruled, thus:

The rule in appellate procedure is that a factual question may not be

raised for the first time on appeal, and documents forming no part of
the proofs before the appellate court will not be considered in disposing
of the issues of an action. This is true whether the decision elevated for
review originated from a regular court or an administrative agency or
quasi-judicial body, and whether it was rendered in a civil case, a special
proceeding, or a criminal case. Piecemeal presentation of evidence is
simply not in accord with orderly justice.
The same rules apply with greater force in certiorari proceedings.
Indeed, it would be absurd to hold public respondent guilty of grave
abuse of discretion for not considering evidence not presented before
it. The patent unfairness of petitioners plea, prejudicing as it would
public and private respondents alike, militates against the admission
and consideration of the subject documents.[42]

Petitioners cite Caete v. NLRC[43] where the Court upheld the NLRCs
consideration of documents submitted to it by the respondent therein
for the first time on appeal. The holding is clearly not apropos since the
documents were presented to the NLRC, unlike in this case where the
new financial statements were submitted for the first time before the
Court of Appeals. That was why this Court in Caete ratiocinated that the
petitioner therein had the opportunity to rebut the truth of the
additional documents. The same cannot be said of the private
respondent in this case.

Considering the foregoing disquisitions, we fail to see any reason to

reverse the legal conclusions made by the Court of Appeals. It is worthy
of note that decisions of the NLRC are reviewable only by the Court of
Appeals via the special civil action of certiorari under Rule 65 of the
Rules of Court.[44] This mode of review may be availed of only in case a
tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to a lack or excess of jurisdiction, and there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law.[45] The sole office of the writ of certiorari is the
correction of errors of jurisdiction including the commission of grave
abuse of discretion amounting to lack of jurisdiction and does not
include correction of public respondents evaluation of the evidence and
the factual findings based thereon.[46]

The appellate courts affirmance of the decision of the NLRC is principally

anchored on the ground that petitioners failed to adduce the 1996 and
1997 Financial Statements audited by an independent external auditor
before the Labor Arbiter and the NLRC. By merely upholding the
evidentiary weight accorded to financial statements duly audited by
independent external auditors, grave abuse of discretion on the part of
the NLRC is hardly imaginable as it is unfounded.

It is essentially required that the alleged losses in business operations

must be proven. Otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might be merely
feigning business losses or reverses in their business ventures in order
to ease out employees.[47] The employer bears the burden of proving
the existence or the imminence of substantial losses with clear and
satisfactory evidence that there are legitimate business reasons
justifying a retrenchment. Should the employer fail to do so, the
dismissal shall be deemed unjustified.[48]

Moreover, petitioners failed to act in consonance with the rule that

retrenchment shall be a remedy of last resort. Even assuming that the
corporation has actually incurred losses by reason of the Asian
economic crisis, the retrenchment is not perfectly justified as there was
no showing that the retrenchment was the last recourse resorted to by
petitioners. Although petitioners allege in their petition before this
Court that they had undertaken cost-cutting measures before they
resorted to retrenchment, their contention does not inspire belief for
the evidence shows that the petition for certiorari filed by petitioners
with the Court of Appeals is bereft of any allegation of prior resort to
cost-cutting measures other than retrenchment.[49] Well-established is
the rule that retrenchment is only a measure of last resort when other
less drastic means have been tried and found to be inadequate.[50]

Considering that the ground for retrenchment availed of by petitioners

was not sufficiently and convincingly established, the retrenchment is
hereby declared illegal and of no effect. The quitclaims executed by
retrenched employees in favor of petitioners were therefore not
voluntarily entered into by them. Their consent was similarly vitiated by
mistake or fraud. The law looks with disfavor upon quitclaims and
releases by employees pressured into signing by unscrupulous
employers minded to evade legal responsibilities.[51] As a rule, deeds of
release or quitclaim cannot bar employees from demanding benefits to
which they are legally entitled or from contesting the legality of their
dismissal. The acceptance of those benefits would not amount to
estoppel. The amounts already received by the retrenched employees
as consideration for signing the quitclaims should, however, be
deducted from their respective monetary awards.[52] Sad to say,
among the retrenched employees, only Magno filed an action for illegal
dismissal.

Undoubtedly, Magno was illegally dismissed but it must be emphasized

that Magno prayed for the payment of separation pay in lieu of
reinstatement on the ground of strained relations between him and
petitioners.[53]

It is well-settled that when a person is illegally dismissed, he is entitled

to reinstatement without loss of seniority rights and other privileges
and to his full backwages.[54] In the event, however, that reinstatement
is no longer feasible, or if the employee decides not to be reinstated,
the employer shall pay him separation pay in lieu of reinstatement.[55]
Such a rule is likewise observed in the case of a strained employer-
employee relationship or when the work or position formerly held by
the dismissed employee no longer exists.[56] In sum, an illegally
dismissed employee is entitled to: (1) either reinstatement if viable or
separation pay if reinstatement is no longer viable, and (2)
backwages.[57]

As to the amount of separation pay, this Court has ruled that separation
pay may be computed at one (1) month pay, or one (1/2) month pay for
every year of service, whichever is higher.[58] It is noteworthy that the
separation pay being awarded in the instant case is due to illegal
dismissal; hence, it is different from the amount of separation pay
provided for in Article 283 in case of retrenchment to prevent losses or
in case of closure or cessation of the employers business, in either of
which the separation pay is equivalent to at least one (1) month or one-
half (1/2) month pay for every year of service, whichever is higher.[59]

Evidently, Magno is entitled to (a) full backwages[60] from 16 December

1998 until the finality of this decision; (b) separation pay equivalent to
his one (1) month pay for every year of service, computed from his first
day of employment on 7 February 1990 up to finality of this decision
less the advanced separation pay of P38,250.00; and (c) attorneys fees
equivalent to ten percent (10%) of his total monetary award.

WHEREFORE, foregoing premises considered, the petition is DENIED and

the challenged Decision and Resolution of the Court of Appeals are
AFFIRMED. Costs against petitioners.

SO ORDERED.
CRITERIA SELECTION OF EMPLOYEE (n/a)

GOLDEN THREAD KNITTING

INDUSTRIES INC., VS. NLRC

From 16 July to 2 September 1992 four (4) separate complaints were

filed against petitioners Golden Thread Knitting Industries, Inc., George
Ng and Wilfredo Bico by their employees: the first, on 16 July 1992 for
unfair labor practice, illegal dismissal, overtime pay, premium pay,
holiday pay and illegal rotation by Gilbert Rivera, Mary Ann Macaspac,
Deogracias Balingit, Lolita Geraldez, Mila Santos, Perlita Matias, Lourdes
Barranco, Melchor Cachucha, Romulo Albasin, Lani Agudo, Rosalie
Cachucha, Cristina Balingit, Rossie Rejuso, Carmen Balingit, George
Macaspac, Flora Balbino, Ma. Luisa Balbino, Angelina Albasin, Vilma
Ballesteros, Evelyn Carlos and Letty Bejamonde; the second, on 22 July
1992, for unfair labor practice, illegal dismissal, reduction of working
days, fabrication/frame-up of union member and union busting, by
Flora Balbino, Mary Ann Macaspac, Rossie Rejuso, Rosalie Cachucha,
Lolita Geraldez, Angelina Albasin, Ma. Luisa Balbino, Vilma Ballesteros
and Carmen Balingit; the third, on 24 August 1992, for unfair labor
practice and withholding of wages filed by Deogracias Balingit; and the
fourth, on 2 September 1992, for unfair labor practice and illegal
dismissal, by Gilbert Rivera and Mary Ann Macaspac. Thereafter, the
four (4) complaints had to be, as they in fact were, consolidated.

During the pendency of these cases, Lolita Geraldez, Perlita Matias, Mila
Santos and Angelina Albasin moved that they be dropped as
complainants in view of their subsequent resignation/ separation from
employment.

The complainants alleged that in the first week of May 1992 they
organized a labor union. On 22 May 1992 Cristina Balingit, wife of the
union Chairman, was dismissed from employment as sewer. In the last
week of May union Chairman Deogracias Balingit himself was
suspended from work as knitting operator. On 1 June 1992 petitioners
shortened the number of working days of the union officers and
members from six (6) to three (3) days a week.

On 1 July 1992 the union filed a petition for certification election.

On 6 July 1992 union members Romulo Albasin, Melchor Cachucha and

George Macaspac, who worked as printers, were barred from entering
the company premises. On 5 August 1992 Flora Balbino was suspended,
then on the same day terminated from her job as sewer. On 14 August
1992 union Vice Chairman Gilbert Rivera, as artist, was dismissed from
employment together with union Secretary Mary Ann Macaspac. On 10
September 1992 Mila Santos was suspended. The complainants thus
considered the foregoing acts as retaliatory measures of petitioners on
account of the former having established a union.

Petitioners contended that they resorted to rotation of work, which

affected practically all employees, because of the low demand for their
towels and shirts. Petitioners also avowed that they validly dismissed
five (5) of the complainants, namely, Romulo Albasin, George Macaspac,
Gilbert Rivera, Mary Ann Macaspac and Flora Balbino. According to
petitioners, Romulo Albasin and George Macaspac slashed several
bundles of towels on 3 July 1992, while the positions of Gilbert Rivera
and Mary Ann Macaspac became redundant. Flora Balbino threatened
the Personnel Manager and violated company rules by removing her
time card from the rack, while Melchor Cachucha was not dismissed but
abandoned his employment on 7 July 1992.

On 17 March 1993 the Labor Arbiter partly ruled in favor of the

complainants. On the issue of unfair labor practice, he opined that the
reduction of working days and suspension or dismissal of union officers
or members were not shown to have been done in retaliation to the
complainants' act of organizing a union. He noted that those events
transpired before petitioners came to know about the existence of the
union which was in the later part of July 1992 when they received the
notice of hearing on the petition for certification election. Moreover, he
was convinced that the reduction of working days which was company
wide was brought about by the low demand for the company's
products.

With respect to the dismissals of Romulo Albasin, George Macaspac,

Gilbert Rivera, Mary Ann Macaspac and Flora Balbino, the Labor Arbiter
upheld petitioners on the validity thereof except that Gilbert Rivera and
Mary Ann Macaspac should be paid separation pay of one-half (1/2)
month for every year of service or P4,602.00 each. On the other hand,
Flora Balbino should be paid her two (2) days' salary of P236.00 that
was withheld from her. As for Melchor Cachucha, the Labor Arbiter
sustained petitioners' contention that he was guilty of abandonment.

Regarding the claims of Deogracias and Cristina Balingit, the Labor

Arbiter found that these were barred by their previous separate
complaints, one of which was pending appeal while the other was
already dismissed. The rest of the claims was dismissed for lack of
merit.[1]

Public respondent National Labor Relations Commission evaluated the

evidence in a different manner. Except for the dismissal of the charge of
unfair labor practice and the award of unpaid wages to Flora Balbino,
the rest of the Labor Arbiter's ruling was set aside on 22 November
1994. According to the NLRC George Macaspac, Mary Ann Macaspac,
Romulo Albasin, Melchor Cachucha, Gilbert Rivera and Flora Balbino
were illegally dismissed so that petitioners were directed to
immediately reinstate them with full back wages and other benefits.

Furthermore, the NLRC found merit in the claim for holiday pay for
1990, 1991 and 1992 and thus ordered petitioners to give complainants
their pay for ten (10) regular holidays for each year. Finally, it required
petitioners to pay attorney's fees equivalent to ten (10%) percent of the
total monetary awards.[2]

Petitioners maintain that valid causes exist for the termination of the
five (5) complainants earlier mentioned. Romulo Albasin and George
Macaspac were caught by security guards M. Abelgas and E. Antonio
slashing with razor blades several bundles of towels in the warehouse at
about 12:30 o'clock in the afternoon of 3 July 1992. The incident, which
constituted serious misconduct, was witnessed by another employee,
Jose Arnel Mejia. Gilbert Rivera and Mary Ann Macaspac were
terminated on 14 August 1992 due to redundancy, i.e., the Design
Section where they worked as artists became overmanned when the
volume of work was drastically reduced. Flora Balbino was guilty of
serious misconduct by hurling invectives at petitioner Bico and
threatening him in front of several workers, and taking her time card off
the rack on 5 August 1992.

In the case of Melchor Cachucha, petitioners insist that he unjustifiably

left his employment on 7 July 1992 and refused to return to work
despite notice sent through his wife, who was also employed by
petitioner company, through a memorandum dated 22 July 1992[3] and
personal notification by another employee, Nilo Wales.[4] Petitioners
insist that private respondents are not entitled to holiday pay on the
basis of bare allegations and without specifying the unpaid holidays.

Clearly, there are only two (2) issues that confront this Court: (1)
whether respondent NLRC committed grave abuse of discretion in
ordering petitioners to reinstate private respondents Romulo Albasin,
George Macaspac, Gilbert Rivera, Mary Ann Macaspac, Flora Balbino
and Melchor Cachucha; and, (2) whether these private respondents are
entitled to holiday pay.

The factual findings of administrative bodies, being considered experts

in their field, are binding on this Court. But this is a general rule which
holds true only when established exceptions do not obtain. One of
these exceptions is where the findings of the Labor Arbiter and the
NLRC are contrary to each other, as in the present case. Thus, there is a
necessity to review the records to determine which conclusions are
more conformable to the evidentiary facts.[5]
With regard to George Macaspac and Romulo Albasin, security guards
M. Abelgas and E. Antonio submitted an incident report to the Manager
of petitioner company regarding the destruction of several bundles of
towels by Macaspac and Albasin with the use of razor blades.[6] In fact,
on 20 July 1992 petitioner Bico as Supervisor of petitioner company
filed a complaint for malicious mischief against them the property
destroyed being worth P3,800.00.[7] In this connection, another
employee of petitioners, Jose Arnel Mejia, executed a sworn statement
on the same day before the State Prosecutor regarding the incident -

xxxx

03. T: Ano naman ang iyong titistiguhan na nakita mo?

S: Nakita ko po na hinihiwa ng dalawang kasamahan ko sa trabaho iyong

nakarolliong tuwalya at ito ay kanilang ikinalat at iyong nakabalot na
plastic sa mga nakarollio ay kanilang pinagsisira.

04. T: Sino naman itong dalawang kasamahan mo na sumira sa mga

nakarolliong tuwalya?

S: Sila ay sina R(O)M(U)LO ALBASIN at GEORGE MACASPAC, na pawang

mga kasamahan ko sa trabaho.

05. T: Kailan at saan naman nangyari ang mga bagay na ito?

S: Noon pong ika-3 ng (H)ul(y)o 1992, mga bandang alas 12:00 ng

tanghali, doon po sa warehouse ng Golden Thread (K)nitting
(I)ndustries, sa no. 270 Tangka St., Malinta, Valenzuela, Metro Manila.

06. T: Nakita mo ba n(an)g kasalukuyan nilang sinisira iyong mga

tuwalya?

S: Opo, nakita ko dahil sabay-sabay kaming lumabas at isa lamang ang

aming dinadaanan.

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

S: Opo, at lunch break na po iyon at maglalabasan kami para kumain at

pagdaan nila doon sa mga nakakamadang tuwalya ay ginulo nila iyong
mga kamada at pinaghihiwa nila.

08. T: Alam mo ba ang dahilan at kung bakit ginawa nila ang bagay na
iyon?

S: Nagalit po siguro sila dahil inalis ni Manager iyong pinaskil nilang

karatula tungkol sa labor x x x x[8]
On 5 November 1992 Mejia executed another affidavit substantially
reiterating his prior narrations.[9]

On 6 August 1992 Macaspac and Albasin executed a counter-affidavit

denying the accusation against them. They claim that they were having
lunch outside the company premises during the time and date of the
alleged incident.[10] Their denial and alibi were substantiated by the
joint affidavits of Mary Ann Macaspac, Perlita Matias, Lolita Geraldez,
Melchor Cachucha and Ma. Luisa Balbino.[11]

NLRC did not find lawful cause for the dismissal of Macaspac and
Albasin since -

x x x x Records show that respondents failed to give the aforenamed

complainants an opportunity to be heard. There was no investigation
conducted, calling the attention of the aforenamed complainants (to)
the charge imputed against them and requiring them to explain and/or
answer the same. Respondents' lone witness in the person of Jose Arnel
Mejia was not presented for confrontation by the said complainants.
Thus, with the vehement denial of the complainants, together with their
own witnesses (pp. 157-163, Records), We find the charge imputed
against them of questionable veracity x x x x[12]

The ruling is correct. We find that petitioners were unable to

substantiate the charge of serious misconduct against Macaspac and
Albasin. The incident report of the two (2) security guards was on its
face categorical on the culpability of subject respondents, yet it is
perplexing that the report was not utilized as supporting evidence in the
criminal proceedings. The affidavit of petitioner Bico sworn to before
the State Prosecutor only mentioned that -

xxxx

03. T: Ano ang dahilan at naririto ka sa aming tang(g)apan at nagbibigay

ng salaysay?

S: Dahil sa ako po ang napag(-)utusan ng aming Manager upang

maghain ng reklamo laban doon sa dalawang trabahador n(a) sumira sa
produktong tuwalya x x x x

09. T: Papaano mo naman nalaman na sila ang nagsira ng mga

produktong tuwalya?

S: Nagpunta po sa akin iyong lady guard at sinabi niya na iyong mga

nakarolliong tuwalya na nakaka(l)at ay mga (h)iniwa at sira. (A)ng
ginawa ko ay pumunta ako doon sa lugar ng mga tuwalya at nakita ko na
sira nga ang mga tuwalya, pinagtanong ko kung sino ang nakakita na
sumira sa mga tuwalya at doon ay mayroon umamin sa akin at sinabi na
sila R(o)m(u)lo Albasin at George Macaspac ang sumira x x x x[13]

As previously stated, the incident report was addressed to the Manager

of the company. Considering that it was the Manager who instructed
petitioner Bico to lodge the criminal complaint, and if the report was
submitted after the incident, then there was no reason for it not to form
part of the evidence in the criminal proceedings. As it is, we can gather
from the narration of petitioner Bico that the person who revealed to
him the identities of the culprits was not one of the security guards but
Mejia who supplied the supporting affidavit. These circumstances
inevitably lead us to the conclusion that the incident report was merely
concocted by petitioners in view of the filing of the labor cases against
them.

The narration of Mejia regarding the alleged slashing incident is

obviously another fabrication. In answer to the query, "Nakita mo ba
n(an)g kasalukuyan nilang sinisira iyong mga tuwalya?" Mejia replied,
"Opo, nakita ko dahil sabay-sabay kaming lumabas at isa lamang ang
aming dinadaanan." Indeed, it is hard to believe that Macaspac and
Albasin destroyed company properties in Mejia's full view who did not
appear to be with them in the controversy. Often, misdeeds are
committed either in the presence of an ally, if nobody is around to blow
the whistle, or when darkness has adequately shrouded the
surroundings. Moreover, it has not been shown that Macaspac and
Albasin were such feckless individuals who would resort to destruction
of company properties in total disregard of its dire consequences. On
the contrary, they were union members fighting for their rights as
employees. Even the reason advanced by Mejia for their misconduct
banks on speculation. Further still, it does not appear that the criminal
case filed by petitioner Bico primarily on the strength of the affidavit of
Mejia ever prospered at the prosecutor's level.

Macaspac and Albasin were likewise denied procedural due process. As

correctly observed by respondent NLRC, petitioners failed to afford
Macaspac and Albasin the benefit of hearing and investigation before
termination. It is also our observation that neither did petitioners
comply with the requirement on notices. An established rule of long
standing is that to effect a completely valid and unassailable dismissal,
an employer must show not only sufficient ground therefor but must
also prove that procedural due process has been observed by giving the
employee two (2) notices: one, of the intention to dismiss, indicating
therein his acts or omissions complained against, and two, notice of the
decision to dismiss.[14] Macaspac and Albasin were summarily eased
out of employment when they were refused entry into the company
premises three (3) days after allegedly slashing the bundles of towels or
on 6 July 1992.
As regards Gilbert Rivera and Mary Ann Macaspac, petitioners claim
that they were constrained to trim down the number of their artists in
the Design Section from five (5) to two (2) as a consequence of the
drastic reduction of their volume of work, and Rivera and Macaspac
were among the three (3) employees dismissed for redundancy.

Rivera and Macaspac assail the alleged redundancy as the events that
transpired prior to their termination proved otherwise. According to
Rivera, on 27 July 1992 he was dismissed on account allegedly of poor
revenues and was in fact offered separation pay, which he refused. He
further said that the following day he was dismissed, he sent a letter to
petitioners Ng and Bico protesting his dismissal, claiming that he had
not done anything wrong to them nor to the company.[15] Further still,
Rivera claimed that on 4 August 1992 he was advised by petitioner Ng
to report for work immediately,[16] although upon his return he was
again offered separation pay but opted instead to continue working.

On her part, Macaspac claims that she was also offered separation pay
on the same ground but she also rejected the offer. Both Rivera and
Macaspac requested evidence of the company's financial setback but
petitioners failed to furnish them any. Rivera's working days were
further reduced from three (3) to two (2) days a week.[17] Insisting on
the redundancy of the positions of Rivera and Macaspac, petitioners
finally dismissed them on 14 August 1992.

The circumstances recounted by Rivera and Macaspac were considered

by the NLRC to have cast serious doubt on the validity and propriety of
their termination. Moreover, the NLRC found that their dismissal was
not reported by petitioners to the Department of Labor and
Employment (DOLE) as required by law.

Again, we agree with respondent NLRC. The characterization of an

employee's services as no longer necessary or sustainable, and
therefore properly terminable, is an exercise of business judgment on
the part of the employer. The wisdom or soundness of such
characterization or decision is not subject to discretionary review on the
part of the Labor Arbiter nor the NLRC provided, of course, that
violation of law or arbitrary or malicious action is not shown.[18] In the
instant case, we question petitioners' exercise of management
prerogative because it was not shown that Rivera and Macaspac's
positions were indeed unnecessary, much less was petitioners' claim
supported by any evidence. It is not enough for a company to merely
declare that it has become overmanned. It must produce adequate
proof that such is the actual situation in order to justify the dismissal of
the affected employees for redundancy.[19]

Furthermore, we have laid down the principle that in selecting the

employees to be dismissed, a fair and reasonable criteria must be used,
such as but not limited to: (a) less preferred status (e. g., temporary
employee), (b) efficiency, and (c) seniority.[20] The records disclose that
no criterion whatsoever was adopted by petitioners in dismissing Rivera
and Macaspac. Another procedural lapse committed by petitioners is
the lack of written notice to the DOLE required under Art. 283 of the
Labor Code.[21] The purpose of such notice is to ascertain the verity of
the cause of termination of employment.[22]

Quite related to the alleged drastic reduction of their volume of work,

petitioners further contended in the proceedings below that they
resorted to rotation of employees due to the low demand for their
products. But respondent NLRC was not persuaded since, other than
petitioners' bare contention, they miserably failed to support it with
concrete evidence.[23]

On the part of Flora Balbino, petitioner Bico submitted a certification

dated 5 August 1992 stating that on that day he explained to Flora
Balbino the company memorandum on her 3-day suspension on the
ground that she repeatedly slowed down her production. He told her to
sign the memorandum which, according to Bico, obviously infuriated
her thus prompting her to hurl invectives at him in the presence of
many persons inside his office. She even threatened him, "Humanda ka
sa darating na araw ipatitiklo kita." The certification was attested to by
five (5) witnesses.[24]

Security guard Abelgas submitted a written report regarding Balbino's

act of stealing the time card in her name after bad mouthing petitioner
Bico and refusing to sign the memorandum on her suspension.[25]
Another employee submitted her own report corroborating Balbino's
act of removing her time card from the rack.[26]

Balbino's story is completely different. According to her, she was

dismissed outright by Bico on the same date she asked for a
memorandum on her suspension. She was however silent on the other
charge that she stole the time card in her name.

The NLRC lent full credence to the version of Balbino. Here, we disagree.
As between the uncorroborated account of Balbino and the narration of
petitioner Bico, which was attested to by witnesses and substantiated
by other employees, we accord weight to the latter. The utterances by
an employee of obscene, insulting or offensive words against a superior
justify his dismissal for gross misconduct. The scornful attitude is also
destructive of his co-employees' morale.[27] However, the dismissal will
not be upheld where it appears, as in this case, that the employee's act
of disrespect was provoked by the employer.[28] It may be recalled that
Balbino was suspended because she allegedly continually slowed down
in her production. Yet, as found by the NLRC, to which we agree,
petitioners failed to show that there was an established quota for
production as a point of reference to determine whether an employee
was performing below or above the quota to warrant the charge.[29]
What surfaces from our assessment of the evidence of petitioners is
that Balbino hurled invectives at petitioner Bico because she was
provoked by the baseless suspension imposed on her. The penalty of
dismissal must be commensurate with the act, conduct or omission
imputed to the employee.[30] Under the circumstances, we believe that
dismissal was a harsh penalty; one (1) week suspension would have
sufficed.

Balbino might have taken the time card in her name but the Court
considers this act as a mere emotional outburst and an offshoot of her
suspension. Anyway, no material damage was demonstrated to have
been suffered by petitioners on account thereof. A time card shows the
actual number of hours and days in a certain period performed by an
employee such that the loss thereof will surely pose a problem. But not
so in the case of Balbino since only her work performed on 31 July and 3
August 1992 was unpaid. These circumstances on non-payment were
uncontroverted by petitioners, rightfully entitling Balbino to an award
therefor which the NLRC determined to be P236.00. Also worth
mentioning is the fact that Balbino was denied procedural due process
when she was summarily dismissed.[31]

Insofar as Melchor Cachucha is concerned, petitioners insist that he

abandoned his work on 7 July 1992 and refused to return despite notice
sent through his wife, through a memorandum dated 22 July 1992, and
personal notification by co-employee Nilo Wales. But disputing the
charge, Cachucha claimed that together with Macaspac and Albasin, he
was prevented by the company security guards from reporting for work
on 6 July 1992.

The NLRC sustained Cachucha that he did not abandon his work
considering that he seasonably filed a complaint for illegal dismissal
against petitioners on 16 July 1992 and positively disavowed any notice
to return to work allegedly sent to him by petitioners.

The NLRC is correct. For abandonment to exist, it is essential that (1) the
employee must have failed to report for work or must have been absent
without valid or justifiable reason; and, (2) there must have been a clear
intention to sever the employer-employee relationship manifested by
some overt acts.[32] The circumstance that Cachucha lost no time in
filing a complaint for illegal dismissal against petitioners on 16 July 1992
is incompatible with the charge of abandonment[33] and confirms in
fact that he was refused entry into the company premises on 6 July
1992.

Petitioners' allegation that they informed Cachucha's wife that

Cachucha must report to work immediately is unsubstantiated and self-
serving. The alleged notification through the memorandum of 22 July
1992 has not been shown to have been received by Cachucha. On the
other hand, the affidavit of Wales stating that on 23 July 1992 he
relayed to Cachucha the directive to return to work which the latter
turned down for lack of interest does not inspire belief. If Wales'
narrations were true, then Cachucha would have simply abided by the
directive and moved for the dismissal of his complaint which was filed
earlier. After all, it was precisely reinstatement that he was seeking.[34]

Dismissal is the ultimate penalty that can be meted to an employee. It

must therefore be based on a clear and not on an ambiguous or
ambivalent ground.[35] From our assessment of the records, we find
that petitioners exercised their authority to dismiss without due regard
to the pertinent exacting provisions of the Labor Code. The right to
terminate should be utilized with extreme caution because its
immediate effect is to put an end to an employee's present means of
livelihood while its distant effect, upon a subsequent finding of illegal
dismissal, is just as pernicious to the employer who will most likely be
required to reinstate the subject employee and grant him full back
wages and other benefits.[36]

The award of compensation for ten (10) regular holidays for 1990, 1991
and 1992 by the NLRC is proper. The dismissed workers distinctly set
forth in their Position Paper that they were not remunerated for ten
(10) regular holidays for the years 1990, 1991 and 1992.[37] This claim
stands undisputed.

WHEREFORE, the Resolution of public respondent National Labor

Relations Commission of 22 November 1994 directing petitioners
GOLDEN THREAD KNITTING INDUSTRIES, INC., GEORGE NG and
WILFREDO BICO to immediately reinstate private respondents George
Macaspac, Mary Ann Macaspac, Romulo Albasin, Melchor Cachucha,
Gilbert Rivera and Flora Balbino to their former positions without loss of
seniority rights and other privileges and with full back wages, inclusive
of allowances, and to their other benefits or their monetary equivalent
computed from the time of their dismissal up to actual reinstatement, is
AFFIRMED but with modification as regards private respondent Balbino
whose date of termination should be 12 August 1992, taking into
account her one (1) week suspension. All the rest of the dispositive
portion, particularly the order to petitioners to pay private respondents
for ten (10) regular holidays for 1990, 1991 and 1992; to pay private
respondent Balbino her wages for two (2) days amounting to P236.00;
and, to pay private respondents attorney's fees equivalent to ten per
cent (10%) of the total monetary awards, is likewise AFFIRMED. Costs
against petitioners.

SO ORDERED.
RETRENCHMENT TO PREVENT LOSSES COVERAGE

BALBALEC vs. NLRC

On June 30, 1989, the Rural Bank of Bangued dismissed three of its
employees, namely, Paulino Balbalec, Juan Bolante and Rolando Beleno
(herein petitioners) alleging that its workforce was being retrenched for
losses suffered by respondent bank during the years 1984-1988. The
letter of termination addressed to petitioners stressed that
management's decision to dismiss them was made to "protect the
bank's stability and profitability" and to "enable the bank to comply
with provisions of the new minimum wage law."1

As a result of their termination from employment petitioners

individually filed cases for unfair labor practice, illegal dismissal, unpaid
salaries, reinstatement and backwages with the Cordillera
Administrative Division of the National Labor Relations Commission in
Baguio City. These cases were ordered consolidated and heard jointly by
respondent NLRC on motion of private respondent.

In their complaint, petitioners alleged that they were singled out for
dismissal after they refused to sign an agreement for determent of
wage increases under Republic Act 6727, an agreement which all of
respondent bank's other employees signed, with the sole exception of
petitioners.2 Respondent bank, on the other hand, averred that
retrenchment of its workforce was necessary to prevent business losses.
It further alleged that said termination would not hamper its operations
and denied that petitioners were singled out, claiming that the latter
ranked last in seniority among its employees.

On December 20, 1990, Labor Arbiter Irenarco R. Rimando rendered his

decision, the dispositive portion of which states the following:3
VIEWED FROM THIS LIGHT, judgment is hereby rendered with the
following dispositions:

1. That there was no valid retrenchment, hence complainants

were illegally dismissed. Consequently, respondent is directed to
reinstate complainants to their former positions without loss of
seniority rights and backwages to be computed from the time that it
was withheld up to the time of their actual reinstatement.

2. That respondent should pay the benefits that are provided for
by R.A. 6640 in addition to the deficiencies in the costs of living
allowances that the complainants would have earned.

3. That the respondent should pay the claims of the complainants

as follows:

4. That the complaint for unfair labor practice is hereby dismissed.

Respondent bank forthwith appealed said decision to the NLRC, which,

through its Third Division, on May 14, 1991 rendered a decision
sustaining the Labor Arbiter's findings and dismissing the appeal for lack
of merit.4 On motion for reconsideration, however, the NLRC in a
resolution5 dated July 31, 1992, partially reversed itself with respect to
the issue of retrenchment, upholding respondent bank's dismissal of
petitioners on the basis of a valid retrenchment, and ordering the
private respondent to pay separation pay equivalent to half a month's
pay for every year of service, plus a penalty for the latter's failure to
comply with the one month notice requirement under Article 284 of the
Labor Code.

Alleging grave abuse of discretion amounting to lack or excess of

jurisdiction, petitioners are before this court by way of a special civil
action for certiorari under Rule 65 of the Revised Rules of Court,
assailing respondent NLRC's resolution modifying its decision dated May
14, 1992 the sole issue for our consideration, therefore, is whether or
not respondent bank's dismissal of petitioners was justified by a valid
retrenchment.

We find for private respondent.

The law recognizes the right of every business entity to reduce its
workforce if the same is made necessary by compelling economic
factors which would endanger its existence or stability. In spite of
overwhelming support granted by the social justice provisions of our
Constitution in favor of labor, the fundamental law itself guarantees,
even during the process of tilting the scales of social justice towards
workers and employees, "the right of enterprises to reasonable returns
of investment and to expansion and growth."6 To hold otherwise would
not only be oppressive and inhuman,7 but also counter productive and
ultimately subversive of the nation's thrust towards a resurgence in our
economy which would ultimately benefit the majority of our people.
Where appropriate and where conditions are in accord with law and
jurisprudence, the Court has authorized valid reductions in the
workforce to forestall business losses,8 the hemorrhaging of capital, or
even to recognize an obvious reduction in the volume of business which
has rendered certain employees redundant.9 Thus, Article 283 of the
Labor Code provides:

Art. 283. Closure of establishment and reduction of personnel.

The employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the purpose
of circumventing the provisions of this Title, by serving a written notice
on the worker and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due
to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least 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.

The above-quoted article not only contemplates the termination of

employment of workers or employees to minimize established business
losses but also to prevent impending losses, for the law's phraseology
explicitly uses the phrase "retrenchment to prevent losses." However,
retrenchment strikes at the very core of an individual's employment and
the burden clearly falls upon the employer to prove economic or
business losses with appropriate supporting evidence. After all, not
every asserted potential loss is sufficient legal warrant for a reduction of
personnel and the evidence adduced in support of a claim of actual or
potential business losses should satisfy certain established standards, to
wit:

1. The losses expected and sought to be avoided must be

substantial and not merely de minimis;

2. The apprehended substantial losses must be reasonably

imminent, as such imminence can be perceived objectively and in good
faith by the employer;

3. The retrenchment should reasonably necessary and likely to

prevent effectively the expected losses;

4. The losses, both the past and forthcoming, must be proven by

sufficient and convincing evidence. 10

The Labor Arbiter found, based on respondent bank's submissions that

it posted losses in the amount of P12,920.22, P3,888.34 and P17,865.12
for the years 1984, 1985 and 1986, respectively. Against these lasses,
respondent bank registered a net income of P12,702.59 and P68,085.56
in 1988 and 1989, respectively. Concluding that "the retrenchment of
personnel can only be availed of by management if the company is
losing or meeting financial reverses," the labor arbiter declared that the
private respondent was unable to sufficiently meet the standards for a
valid retrenchment and held that "the financial reverses were more
imaginary than real to justify the retrenchment taken by the respondent
bank."

These findings of fact are usually sacred, in the sense that this Court will
not, as a general rule disturb factual findings of labor administrative
officials except when there is a showing that factual evidence was either
arbitrarily ignored or misapprehended. On the surface of things, the net
income of respondent bank for the period 1984-1989 did not show a
loss. In fact, respondent bank appeared to have actually registered a
small net profit. Against this however, are the following findings
established by respondent NLRC from both parties' submissions:

First, the bank encountered financial losses in 1989, 1985 and 1986, in
the amount of P12,290.22 P3,888. and P17,865.12 respectively, and its
net profit of P60,085.56 would instead have been a net loss had not the
bank deferred the implementation of the wage increase under RA 6640.
In addition, the bank was faced with a serious financial problem
resulting from a considerable reduction of its total resources by 27.23%
and total loan investments by 35.79% from 1984 to 1988. Past due loan
ration ranged from 29.13% to 32.13% in 1986 to 1988 such that the
bank was required by the Central Bank of the Philippines to set aside a
reserve for bad debts in the amount of P359,464.50 as of December 31,
1988. 11

Obviously, from the foregoing, what was "more imaginary than real,"
borrowing a phrase from the Labor Arbiter's decision, were the
insubstantial profits realized by respondent bank during the period
covered by the financial statements submitted in support of its claim of
business loss. It should be noted, moreover, that unlike huge
commercial banks with large capitalization, the bank involved in the
case at bench is a small rural bank barely afloat and surviving on a
measly capitalization of P500,000.00. 12 Were we to deny private
respondent's urgent request to streamline its work force to enable it to
maintain stability and modest profitability, we would be sending a small
financial institution teetering on the verge of financial ruin tumbling
down on the road to bankruptcy. Thus, we are in agreement with
respondent NLRC in concluding that:

While there is no dispute that the complainants were terminated by the

respondent bank, this Commission is persuaded, however, by the
evidence that their dismissal was carried out due to retrenchment to
prevent losses or the closing or cessation of operation of the
establishment as borne by its losses, decrease in resources as well as
increase in past due loans. The action of the respondent in placing the
complainants in retrenchment should, thus, be viewed as an urgent and
immediate surgical move if only to avert the eventual closure of the
respondent. Retrenchment was rightfully undertaken in the case at bar
by the employer/respondent rural bank before the anticipated losses
are actually sustained or realized.

It need not be overemphasized that the State recognizes the pivotal role
of small rural banks, such as the respondent bank, in the development
of the countryside through its loan portfolios and other services to the
rural folk. While courts must be constantly vigilant in validating claims of
business losses to prevent unscrupulous employers from feigning such
losses in order to dismiss their personnel, we are satisfied that
respondent bank undertook the drastic act of cutting down its
workforce in order to prevent imminent substantial loss to its business.
As to petitioners' claim that they were singled out in the process
because they happened to be the only employees who did not sign an
agreement for deferment of wages under Republic Act 6727, suffice it
to say that such assertion is merely speculative because respondent
bank clearly followed the standard 13 for dismissing its personnel by
selecting the last in seniority among its ten (10) employees, who
happened to be herein petitioners. Moreover, it has been adequately
established that their functions could be taken over by the remaining
bank employees without affecting respondent bank's functions.

A last word. The validity of an employee's dismissal ought to be

distinguished from the manner in which such dismissal was undertaken.
14 Under the Labor Code, the employer seeking to terminate the
services of an employee is legally required to furnish written notice both
to the employee concerned and the Department of Labor at least one
month before the effectivity of such termination. The purpose of such
notice, if the termination is due to just or authorized causes under
Articles 282 and 283 of the Labor Code respectively, is to enable the
employee to make the necessary adjustments to deal with the hard
times ahead. In the instant case, respondent bank sent a letter to
petitioners only on June 26, 1989. The period was clearly wanting and a
violation of respondent bank's responsibility to properly observe the
steps required by law in the authorized dismissal of its employees. Such
being the case, respondent NLRC was therefore correct in granting to
herein petitioners a penalty for non-compliance with one of the
mandatory provisions of Article 283 of the Labor Code, in addition to
their separation pay under the terms of the same provision. Under the
circumstances of the instant case, we are however of the opinion that
the penalty imposed ought to be Five Thousand Pesos (P5,000.00)
instead of the one month salary penalty granted by the NLRC.

ACCORDINGLY, finding that petitioners were dismissed on the basis of a

valid retrenchment, the resolution of Respondent NLRC dated July 31,
1992 is hereby AFFIRMED, with the modification that the private
respondent is ordered to pay a penalty of Five Thousand Pesos
(P5,000.00) to each of the petitioners for its failure to comply with the
one month notice requirement under Article 283 of the Labor Code in
addition to separation pay equivalent to one half month's salary for
every year of service under the same provision.

SO ORDERED.
LABOR REPORTING ON DECEMBER 7

BACKWAGES DEFINED

GENERAL BAPTIST BIBLE COLLEGE and

GENERAL BAPTIST CHURCH OF THE
PHILIPPINES vs. NATIONAL LABOR RELATIONS
COMMISSION and GAUDENCIO O. BASA,

This is a petition for certiorari seeking the reversal of the decision * of

the National Labor Relations Commission (NLRC, for brevity) affirming
the decision of the Labor Arbiter which ordered the reinstatement of
private respondent Gaudencio O. Basa (Basa, for brevity) as Academic
Dean in the petitioner General Baptist Bible College (College, for
brevity) and the payment of backwages, other unpaid salaries and
attorney's fees, with the modification of excluding allowances from
payment of backwages and adjusting the attorney's fees to 10% of the
total award.

The main contention of the petitioners is that reinstatement may not be

awarded because Basa never asked for such in his complaint nor in his
position paper. All that he was claiming was separation pay, fixing at the
same time his claim for unpaid wages as Academic Dean up to July 15,
1987 only. This, petitioners claim, was a very clear indication that he
was no longer interested in working for the school.

First, we have to resolve whether Basa actually has a right to be

reinstated as Academic Dean of the College and second, whether such
relief may be granted notwithstanding the fact that the prayer is for
payment of unpaid salaries and separation pay only.

The facts are as follows:

Sometime in June 1973, Basa was hired by the College as Academic

Dean with an initial monthly salary of P400.00. Thereafter, his salary
was raised, the latest being in June 1986, to P1,412.00 per month.

On April 15, 1986, Basa was appointed President of the College by its
Board of Trustees with the following conditions:
"1. Term the tenure of office of the president shall be four (4)
years, beginning on the first day of May 1986, until April 30, 1990 unless
otherwise the board by a vote of no confidence will suspend his term of
office.

2. Salary The salary of the president shall be P2,500.00. Two

Thousand Five Hundred Pesos Package deal.

3. Benefits and Privileges.

a. The president shall be given a free housing, free electricity and

water provided that he will reside inside the school campus.

b. The president will use and shall have a control over the college
vehicle. However, it will be used only for official school business. . . .

4. Requirements.

a. The President shall exercise all the authority and responsibility

delegated to him by the board of trustees.

b. He shall give up all his secular jobs and concentrate his time for
the administration of the bible college.

c. he shall renew his certificate of good standing with the

Presbytery of the General Baptist Church of the Phils. Inc,:" 1

In accordance with the above terms, Basa assumed the Presidency of

the College on May 1, 1986.

During its regular meeting on June 2, 1987, the Board of Directors

(Trustees) of the College voted to terminate the services of Basa as
President of the College effective June 15, 1987. This decision was made
formal in a letter to Basa, dated June 3, 1987, stating therein the
reasons behind said decision, to wit:

"Please be inform (sic) that at the regular meeting of the Board of

Directors of the General Baptist Bible College on June 2, 1987, held at
Agdao General Baptist Church, Agdao, Davao City, the Board, after
reviewing your explanations on your non-compliance with the terms
and conditions of your employment as President particularly your non-
giving up of your teaching in a secular school and your failure to obtain
a Certificate of Good Standing from the GBCPI Presbytery, (sic) and your
non-compliance of its instructions as to the deposit in a separate
account of GBCC (sic) of the P26,000.00 of its funds which you deposit
(sic) in your personal account, unanimously approved to terminate your
services as President of the Bible College effective June 15, 1987, for
loss of confidence." 2
This termination letter was received by Basa on June 12, 1987.

After the effectivity of his termination as President, on June 22, 1987,

Basa personally, without the assistance of counsel, filed a complaint for
illegal dismissal, money claims and damages, not only for the position of
President but for the position of Academic Dean as well. 3 Thus, what
was in issue before the Labor Arbiter was not only the legality of his
termination as President but also the legality of his termination as
Academic Dean.

On August 25, 1987, Labor Arbiter Conchita J. Martinez rendered a

decision the dispositive portion of which reads:

"WHEREFORE, in consideration of all the foregoing, judgment is hereby

rendered:

1. Finding the dismissal of complainant as President of General

Baptist Bible College Meritorious and the claim for separation pay
without basis;

2. Ordering respondents General Baptist Bible College and the

General Baptist Church of the Philippines, Inc. jointly and solidarily liable
to pay complainant the following claims to wit:

a.) P16,944.00, representing unpaid salaries as Academic Dean

from June 15, 1986 to June 14, 1987.

b.) P6,201.00, representing ECOLA differential from June 22, 1984

to December 1985.

c.) P8,908.00, representing unpaid ECOLA from January 1986 to

June 14, 1987.

3. Ordering respondents to immediately reinstate complainants as

Academic Dean of the General Baptist Bible College with full backwages
and ECOLA from June 16, 1987 until his actual reinstatement;

4. To pay attorney's Fees in the amount of P3,205.00; and

5. Dismissing the Claim for damages for lack of merit.

SO ORDERED." 4

On appeal by the College to the respondent NLRC, the former, on May

27, 1988, rendered a modified decision, to wit:
"The reinstatement of appellee as Academic Dean and the payment of
unpaid salaries is in order. The backwages, however, is limited to the
basic salary (excluding allowance) of the position of Academic Dean
considering that the pay as President already included allowances which
appellee received. It would be unjust to require appellant to pay
appellee double allowance. The award for attorney's fees is
correspondingly adjusted to 10% of the total award.

WHEREFORE, the appealed decision is MODIFIED to the extent above-

discussed.

SO ORDERED." 5

A motion for a reconsideration of the above decision was denied for

lack of merit on September 14, 1988. 6

hence this petition.

Under the express provision of the Labor Code, as amended specifically

by Republic Act. No. 6715 which reads.

"(b) Subject to the constitutional right of workers to security of

tenure and their right to be protected against dismissal except for a just
and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code the employer shall furnish the
worker whose employment is sought to be determinated a written
notice containing a statement of the causes for termination and shall
afford the latter ample opportunity and to defend himself with the
assistance of his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to guidelines set
by the Department of Labor and Employment. Any decision taken by the
employer shall be without prejudice to the right of the worker to
contest the validity or legally of his dismissal by filling a complaint with
the validity or legality of his dismissal by filing a compliant with the
regional branch of the National Labor Relations Commission. The
Burden of proving that the termination was for a valid or authorized
cause shall rest on the employer. . . . 7 (Emphasis supplied.)

the burden is upon the College to prove the valid cause of termination
of Basa not only as President, but as Academis Dean as well. The records
are bereft of any indications that Basa's termination as Academic Dean
was satisfactorily proven to be in accordance with the above provision
of law. On this score alone, the Court already has reason to sustain the
NLRC's decision. The College has not pointed to any specific mode by
which the employer-employee relationship between it and Basa was
terminated as far as the latter's deanship is concerned. It had the duty
to at least inform Basa when, why and how, his term as dean expired,
because his term as dean, upon appointment in June 1973, was
understood to be indefinite. Where there is no showing of clear, valid
and legal cause of termination, the law considers it a case of illegal
dismissal. Thus We have ruled that:

"In termination cases, the burden of proving the just cause of dismissing
an employee rests on the employer, and his failure to do so would result
in a finding that the dismissal is not justified." 8

If the intention of the College upon terminating Basa as President was

to likewise nave his term as Academic Dean expire, it is a basic
requirement of due process that he be informed of the same and be
given a chance to be heard. Here, again, the College failed. On the
contrary, the letter of termination dated June 3, 1987 expressly stated
that the Board of Trustees unanimously approved to terminate his
services as President effective June 15, 1987, for loss of confidence.

When Basa raised this question before the labor tribunal, instead of
facing the issue squarely, the petitioners chose to resort to
technicalities claiming that the issue of reinstatement had never been
raised in the respondent's pleadings.

The rights and obligations arising from the employer-employee

relationship between Basa and the College are contractual in nature. As
in all contracts, the parties are bound not only to the fulfillment of what
has been agreed upon but also to all the consequences which, according
to their nature, may be in keeping with good faith, usage and law. 9 In
the absence of any written terms and conditions which governed the
appointment of Basa as Academic Dean, the position which he held
since June 1973 and at the time of his appointment as President of the
College, we can only judge their intentions by considering their
contemporaneous and subsequent acts. 10

The office of the College President was vacated by the resignation of

Rev. Ruben Angelo. This position was offered to Basa, then the
incumbent Academic Dean, in a special meeting of the Board of
Trustees on April 15, 1986. The appointment, which was effective May
1, 1986, was made in the same meeting after reaching an agreement
with Basa as to the terms and conditions thereof. It is clear that it was
its practice to consider the position of President as distinct from that of
Academic Dean and to appoint different persons to fill up the two
positions.

The implication of the fact that upon the appointment of Basa as

President, the College did not appoint anybody else as Academic Dean,
when considered vis-a-vis the silence of his appointment as to whether
he was to vacate his former position as Academic Dean or not, is that it
expected Basa to act concurrently as President and as Academic Dean.
In the Manual of Regulations for Private Schools prepared by the then
Bureau of Private Schools, the school President is charged with the
administration and supervision of the school. As chief executive officer
of the school, chosen by the Board, he has the responsibility of
executing and implementing the policies and general plans laid down by
the governing board. 11

On the other hand, the work of the dean or principal usually entails
responsibility for all activities connected with his department and not
merely for classroom work and general administration. Internship
should be under the direct supervision of the dean. 12

It is evident that the rules governing private schools consider the two
positions as totally distinct from one another, that of the president as
being primarily administrative while that of the dean as being primarily
academic. Besides, the responsibilities of the higher office do not
necessarily include those of the subordinate offices such that a school
or college president is not expected to perform the functions and
responsibilities of the dean in case of the absence or vacancy of the
latter. Thus, when Basa continued to discharge the duties and
responsibilities of the Office of Academic Dean even after his
assumption into office as the new College President, the implication is
that he was indeed the concurrent President and Academic Dean of the
College.

There is no prohibition in the Manual of Regulations for Private Schools

with respect to one person holding the positions of president and dean
concurrently. We also find nothing repugnant per se in the situation, for
there can be no contrariety nor antagonism that would result in the
attempt by one person to discharge the duties of both positions. It
cannot be said that the two offices are, by nature, incompatible.
Besides, there is no evidence that there is such prohibition in the
articles of incorporation or by-laws of the College.

Under the circumstances of the case, We hold that Basa did not vacate
the position of Academic Dean even after his assumption to the office of
President. Thus, from May 1, 1986 until his termination on June 15,
1987, he was the College Academic Dean and should have continued as
such even after his termination as President. His having been
considered terminated as Academic Dean on June 15, 1987 is without
legal basis. Loss of confidence in Basa as President and his violation of
the conditions of his appointment as President should not affect his
employment as Academic Dean for there is no evidence that he has
likewise violated any agreed terms and conditions of his appointment as
Academic Dean.
His dismissal as President may have been legal, which finding by the
Labor Arbiter has already become final and beyond review by the
courts, but his dismissal as Academic Dean is not.

Having been illegally dismissed from his position as Academic Dean,

Basa is entitled to reinstatement to his former position without loss of
seniority rights and to payment of backwages from the time of his illegal
dismissal up to his actual reinstatement. 13 In resolving whether or not
the relief of reinstatement may be granted to Basa notwithstanding his
failure to pray for the same in his complaint, We rule in the affirmative.
We are for the granting of the relief he is entitled to under the law,
although he failed to specifically pray for the same in his complaint.

We hereby note that Basa's failure to specifically pray for the relief of
reinstatement in a complaint which he personally prepared and signed
using a standard form prepared by the NLRC Regional Arbitration,
Branch No. XI, Davao City, is a procedural lapse which cannot put to
naught a right which he is entitled under a substantive law.
Technicalities have no room in labor cases, where the Rules of Court are
applicable only in order to effectuate the objectives of the Labor Code
and not to defeat them. The pertinent provisions of the Revised Rules of
Court of the Philippines and prevailing jurisprudence may be applied by
analogy or in a suppletory character to effect an expeditious resolution
of labor controversies in a practical and convenient manner. 14 We are
inclined to overlook a procedural defect if only to promote substantial
justice.

We find no grave abuse of discretion committed by the respondent

NLRC in ruling that the reinstatement of herein respondent Basa as
Academic Dean and the payment of unpaid salaries is in order.

But although we sustain the NLRC's ruling of reinstatement of Basa to

his former position with payment of backwages, prudence dictates that
due to the animosity and antagonism which had developed during the
pendency of his case, we must not compel the College to reinstate Basa
to the sensitive position he is entitled to under the law but give it the
option of paying him separation pay in lieu thereof, at the rate of one
month salary, excluding allowances, for every year of service from June
1973 up to the time of his termination, including the period of imputed
service for which he is entitled to backwages. The salary rate prevailing
at the end of the three-year putative service should be used in such
computation. 15

The NLRC, however, erroneously referred to unpaid salaries as

"backwages" when it excluded allowances therefrom. In order to
obviate any further controversy on this matter, We would like to clarify
the difference between the two terms. When the term "backwages"
was used in the NLRC decision, what was actually meant was unpaid
salaries, which pertain to compensation due the employee for services
actually rendered before termination. Backwages, on the other hand,
refer to his supposed earnings had he not been illegally dismissed.
Unpaid salaries refer to those earned prior to dismissal whereas
backwages refer to those earnings lost after illegal dismissal. Thus,
reinstatement would always bring with it payment of backwages but not
necessarily payment of unpaid salaries. Payment of unpaid salaries is
only ordered if there are still salaries collectible from his employer by
reason of services already rendered.

We also want to clarify that when there is an award of backwages this

actually refers to backwages without qualifications and deductions.
Thus, We held that:

"The term "backwages without qualification and deduction" means that

the workers are to be paid their backwages fixed as of the time of the
dismissal or strike without deduction for their earnings elsewhere
during their layoff and without qualification of their wages as thus fixed;
i.e., unqualified by any wage increases or other benefits that may have
been received by their co-workers who are not dismissed or did not go
on strike. Awards including salary differentials are not allowed. The
salary base properly used should, however, include not only the basic
salary but also the emergency cost of living allowances and also
transportation allowances if the workers are entitled thereto." 16

However, since Basa did not interpose an appeal in order to contest the
error committed by the NLRC in excluding the allowances of the
Academic Dean in the computation of backwages, this Court has no
jurisdiction to grant such relief.

In summary, Basa is entitled to:

(a) payment of his unpaid salaries as Academic Dean from May 1,

1986 to June 14, 1987 excluding allowances;

(b) payment of backwages equivalent to three (3) years of his basic

salary as Academic Dean excluding allowances;

(c) reinstatement, or payment of separation pay equivalent to

seventeen (17) months of the basic salary of Academic Dean as of June
1990.

(d) payment of attorney's fees equivalent to 10% of the total

award.

WHEREFORE, the instant petition, is DISMISSED and the assailed

decision is accordingly MODIFIED, without pronouncement as to costs.
BACKWAGES PERIOD (COMPUTATION)

TORRES vs. NLRC

The case is a petition for certiorari[1] to set aside the resolution of the
National Labor Relations Commission[2] denying the appeal from the
Labor Arbiters decision[3] ordering petitioner's reinstatement as
security guard with full back wages, on the ground that it was issued
with grave abuse of discretion.

The facts are as follows:

On January 5, 1989, respondent E & R security agency hired petitioner

Chona P. Torres as a security guard.

On October 27, 1989, during a routinary meeting of the security guards

of the agency assigned to the Philippine Aerospace Development
Corporation, the issue of granting a P25.00 pay increase pursuant to
Republic Act No. 6727 was taken up and questions were raised as to the
date of implementation of the increase. Petitioner Chona P. Torres
stood up and uttered aloud at the presiding officer: "BAKIT ANG
SASABIHIN NINYO SA OPISINA AT DITO AY MAGKAIBA!" to which remark
the presiding officer replied: "WALA NAMAN PAGKAKAIBA, DI BA?". The
presiding officer also asked: "BAKIT AYAW MO DOON SA OPISINA?"
Then petitioner shouted: "WALA NA AKONG TIWALA SA INYO AT SA
AGENCY KASI SINUNGALING KAYO. EH, KUNG LALAKI LANG AKO, BAKA
KUNG ANO PA ANG NAGAWA KO SA INYO NGAYON!"[4]

On October 27, 1989, respondent agency sent petitioner a letter which

states:

"To..............:....SG CHONA TORRES

........................PADC/ERSAI DETACHMENT
........................Pasay Road, Domestic Airport

"SUBJECT...:....Suspension

"Effective immediately, upon receipt hereof, you are hereby suspended

from your duty as Security Guard for a period of fifteen (15) days for
gross violation of Rules and Regulations implementing Republic Act No.
5487 as amended by Presidential Decree No. 1919, Section three (3)
hereof and Standard Operating Procedures of the Agency, tantamount
to discourtesy, disloyalty and insubordination while in the performance
of your duty.

"For info, guidance and compliance.

"CAPT MANUEL M GOMEZ JR (IA) PC

"OPERATIONS MANAGER ERSAI"[5]

On October 30, 1989, petitioner filed with the National Labor Relations
Commission, Arbitration Branch, against respondent E & R Security
Agency, Inc. a complaint for illegal suspension and violation of R. A. No.
6727, and for having been required to sign on a blank payroll.[6]

On November 10, 1989, petitioner received a letter from the agency

informing her that she was re-assigned and required to report at the
respondent's Manila office for further instructions.[7]

On November 27, 1989, respondent agency terminated her services for

abandonment when she failed to report for work in her new
assignment.[8]
On November 30, 1989, petitioner filed with the Labor Arbiter an
amended complaint charging respondent with underpayment of wages
under R.A. No. 6640 and harassment.[9]

On June 26, 1990, Labor Arbiter Daniel C. Cueto rendered a decision the
dispositive portion of which states:

"WHEREFORE, viewed from the foregoing facts and considerations, this

office declares the dismissal of the complainant not in accordance with
law. Hence, respondent is hereby ordered:

"1. To immediately reinstate Complainant to her former position as

security guard without prejudice to reassignment in the exigency of the
service, with full backwages from the time she was placed under
preventive suspension on October 27, 1989 up to the time of her
reinstatement.

"2. To pay the salary of the Complainant for October, 1989.

"3. To pay Complainant the adjusted salary differential for services

rendered for the period January 1 to May 25, 1989, May 26 to August
25, 1989, August 26 to September 30, 1989 under R.A. 6640; and salary
differentials under R.A. 6727 for work rendered covering July 6, 1989 to
October 28, 1989 in the aggregate total of P 15,523.48.

"Other claims are denied for lack of merit.

"SO ORDERED."[10]

On July 20, 1990, respondent E & R Security Agency, Inc. filed with the
National Labor Relations Commission, National Capital Region, its
Appeal Memorandum, in support of its appeal from the decision of the
Labor Arbiter.

On June 25, 1991, the National Labor Relations Commission issued a

resolution denying the appeal on the ground of non-perfection due to
lack of appeal bond and that there was "no compelling reason or
sufficient justification to disturb the contested decision, it being
substantially supported by the established facts and applicable law and
jurisprudence."[11]

On October 7, 1991, the decision having become final, on petitioner's

motion, the Labor Arbiter issued a writ of execution on the
reinstatement aspect, but it was not implemented because the
monetary aspect of the decision remained to be determined.[12]

On November 8, 1991, petitioner asked the Labor Arbiter to issue an

alias writ of execution based on the completed computation of back
wages in the amount of P 104,396.00 worked out by NLRC's Research
and Information Unit. On November 19, 1991, NLRC Sheriff Max L. Lago
issued a Notice of Garnishment which was served on private
respondent's deposit account with the Philippine National Bank, PNC
compound Branch, Diliman, Quezon City, in the amount of P 105,296.00
inclusive of the execution fee of P1,000.00.

On November 27, 1991, the Labor Arbiter directed the Philippine

National Bank to release the garnished amount and to make it payable
to the NLRC cashier for the account of petitioner pending ultimate
release to her. Accordingly, the PNB issued Manager's Check No. AF 90-
8881 dated December 6, 1991.

Meantime, on December 3, 1991, respondent E & R Security Agency,

Inc. filed with the Labor Arbiter[13] an Urgent Ex-Parte Motion to Quash
the Alias Writ of Execution on the ground that there has been a change
in the situation of the parties which makes the execution inequitable.
Respondent contended that petitioner Torres accepted employment
from another security agency without previously resigning from it.

On February 2, 1992, the Labor Arbiter issued an order for partial

execution directing the release of the uncontested salary differential
amounting to P15,523.48, to be deducted from the amount of P
105,396.00, and to withhold the balance thereof, pending resolution of
the Motion to Quash the alias Writ of Execution.[14]

On March 19, 1992, petitioner filed with the National Labor Relations
Commission a petition for mandamus and injunction to compel the
Labor Arbiter to issue an order directing the NLRC Cashier to release the
entire amount deposited with the latter to petitioner.

On August 11, 1992, the National Labor Relations Commission issued a

resolution denying the petition for mandamus and injunction and
ordered Labor Arbiter Daniel C. Cueto to immediately resolve
respondent E & R Security Agency's Urgent Motion to Quash Writ of
Execution.

Hence, this petition.[15]

The sole issue raised is whether or not the NLRC committed grave abuse
of discretion in ordering the Labor Arbiter to resolve the motion to
quash alias writ of execution.

Petitioner contends that the release of the judgment award is purely a

ministerial duty of the Labor Arbiter.

The petition is impressed with merit.

Execution is the final stage of litigation, the end of the suit. It can not be
frustrated except for serious reasons demanded by justice and
equity.[16] In this jurisdiction, the rule is that when a judgment
becomes final and executory, it is the ministerial duty of the court to
issue a writ of execution to enforce the judgment. A writ of execution
may however be refused on equitable grounds as when there was a
change in the situation of the parties that would make execution
inequitable or when certain circumstances, which transpired after
judgment became final, rendered execution of judgment unjust.[17] The
fact that the decision has become final does not preclude a modification
or an alteration thereof because even with the finality of judgment,
when its execution becomes impossible or unjust, it may be modified or
altered to harmonize the same with justice and the facts.[18]

The respondent agency's contention that there has been a change in the
situation of the parties making execution inequitable because petitioner
accepted employment from another agency without resigning from it is
patently without merit. In the recent ruling of the Court, we said that
the rule enunciated in Pines City[19] no longer controls. Now, the rule is
that back wages awarded to an illegally dismissed employee shall not be
diminished or reduced by the earnings derived by him elsewhere during
the period of his illegal dismissal.[20]

In this particular case, the decision is final and, in fact, the amount of P
105,396.00 representing the sum total of the salary differentials and
back wages awarded to petitioner has been garnished from the account
of respondent agency with the Philippine National Bank (PNB) with no
opposition or resistance and it is the ministerial duty of the Labor
Arbiter to release the money to petitioner.

WHEREFORE, the Court GRANTS the petition. The resolution of the

National Labor Relations Commission in NLRC NCR Case No. 00-01-
00137-90 is hereby SET ASIDE. The Court DIRECTS the Labor Arbiter to
order the immediate release of the balance of the judgment award to
petitioner.
FINANCIAL ASSISTANCE NOT ALLOWED

EASTERN PAPER MILLS INC., vs. NLRC

On January 10, 1983, the petitioner, after due notice, investigation, and
hearing, dismissed the private respondent Eduardo Malabanan, an
accounts payable clerk, for having physically assaulted and verbally
abused, within full view and hearing of the other employees, a superior
officer, Mariano Lopingco, who was then the personnel and
administrative manager of the company. The reason for the assault was
private respondent's resentment at being suspected of having stolen an
ash tray from Lopingco's office and being questioned about the matter
by the security office.

Private respondent filed a complaint for illegal dismissal (Annex "A") in

the Ministry (now Department) of Labor and Employment (NLRC-NLC-
Case No. 1-191-83).

After trial, the Labor Arbiter rendered a decision on December 29, 1987,
dismissing Malabanan's complaint and finding that his dismissal from
employment was for just and valid cause. However, the Labor Arbiter
awarded him P 10,000 as "financial assistance" (Annex "C").

On appeal by the petitioner to the NLRC, the Commission on August 31,

1988 affirmed the Labor Arbiter's decision with modification. It awarded
Malabanan separation or termination pay amounting to P 10,780, in lieu
of financial assistance (Annex "E").

Charging grave abuse of discretion on the part of the NLRC, the

company elevated the case to this Court on a petition for certiorari.

The petition is meritorious. Earlier decisions of this Court which, in the

name of compassionate justice, awarded separation pay or financial
assistance to employees who were lawfully dismissed for cause, were
re-examined and abandoned in the recent case of Philippine Long
Distance Telephone Company vs. NLRC, G.R. No. 80609, August 23,
1988, where We ruled:

Separation pay shall be allowed as a measure of social justice only in

those instances where the employee is validly dismissed for cause other
than serious misconduct or those reflecting on his moral character.
Where the reason for the valid dismissal is, for example habitual
intoxication or an offense involving moral turpitude, like theft or illicit
sexual relations with a fellow worker, the employer may not be required
to give the dismissed employee separation pay, or financial assistance,
or whatever other name it is called, on the ground of social justice.
A contrary rule would 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.'

An award of separation pay to an employee who was dismissed for a

valid cause (in this case, for serious misconduct) is legally indefensible. It
contravenes Rule 1, Sec. 7, Book VI of the Omnibus Rules Implementing
the Labor Code which provides that:

Sec. 7. Termination of Employment by Employer.-The just causes for

terminating the services of an employee shall be those provided in
Article 282 of this Code. The separation from work of an employee for a
just cause does not entitle him to the termination pay, provided in the
Code, without prejudice, however, to whatever rights, benefits, and
privileges he may have under the applicable individual or collective
agreement with the employer or voluntary employer policy or practice.

The only cases when separation pay shall be paid, although the
employee was lawfully dismissed, are when the cause of termination
was not attributable to the employee's fault but due to: (1) the
installation of labor-saving devices, (2) redundancy (3) retrenchment,
(4) cessation of the employer's business, or (5) when the employee is
suffering from a disease and his continued employment is prohibited by
law or is prejudicial to his health and to the health of his co- employees.
(Articles 283 and 284, Labor Code.) Other than these cases, an
employee who is dismissed for a just and lawful cause is not entitled to
separation pay even if the award were to be called by another name.

WHEREFORE, the petition for certiorari is granted. The decision of the

National Labor Relations Commission dismissing the private
respondent's complaint for illegal dismissal is affirmed, but the award of
separation pay or financial assistance to him is hereby set aside for lack
of legal basis.

SO ORDERED.