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G.R. No.

85985 August 13, 1993


On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of
Discipline. The Code was circulated among the employees and was immediately
implemented, and some employees were forthwith subjected to the disciplinary measures
embodied therein.

on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a
complaint before the National Labor Relations Commission (NLRC) for unfair labor practice
with the following remarks: “ULP with arbitrary implementation of PAL’s Code of Discipline
without notice and prior discussion with Union by Management”. In its position paper,
PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of
unfair labor practice, specifically Paragraphs E and G of Article 249 and Article 253 of the
Labor Code. PALEA alleged that copies of the Code had been circulated in limited
numbers; that being penal in nature the Code must conform with the requirements of
sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to the
rights of the employees. It prayed that implementation of the Code be held in abeyance; that
PAL should discuss the substance of the Code with PALEA; that employees dismissed
under the Code be reinstated and their cases subjected to further hearing; and that PAL be
declared guilty of unfair labor practice and be ordered to pay damages.

PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to
prescibe rules and regulations regarding employess’ conduct in carrying out their duties and
functions, and alleging that by implementing the Code, it had not violated the collective
bargaining agreement (CBA) or any provision of the Labor Code.

Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but
they failed to appear at the scheduled date. Interpreting such failure as a waiver of the
parties’ right to present evidence, the labor arbiter considered the case submitted for
decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of
PAL in adopting the Code and ruling that no unfair labor practice had been committed.
However, the arbiter held that PAL was “not totally fault free” considering that while the
issuance of rules and regulations governing the conduct of employees is a “legitimate
management prerogative” such rules and regulations must meet the test of
“reasonableness, propriety and fairness.”

PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner
Encarnacion, with Presiding Commissioner Bonto-Perez and Commissioner Maglaya
concurring, found no evidence of unfair labor practice committed by PAL and affirmed the
dismissal of PALEA’s charge.

PAL then filed the instant petition for certiorari charging public respondents with grave
abuse of discretion

whether management may be compelled to share with the union or its employees its
prerogative of formulating a code of discipline.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715,
amending Article 211 of the Labor Code, that the law explicitly considered it a State policy
“(t)o ensure the participation of workers in decision and policy-making processes affecting
the rights, duties and welfare.” However, even in the absence of said clear provision of law,
the exercise of management prerogatives was never considered boundless.

San Miguel Brewery vs Ople: So long as a company’s management prerogatives are

exercised in good faith for the advancement of the employer’s interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements, this Court will uphold them.

UST vs NLRC: All this points to the conclusion that the exercise of managerial prerogatives
is not unlimited. It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice.

a line must be drawn between management prerogatives regarding business operations per
se and those which affect the rights of the employees. In treating the latter, management
should see to it that its employees are at least properly informed of its decisions or modes
action. PAL asserts that all its employees have been furnished copies of the Code. Public
respondents found to the contrary, which finding, to say the least is entitled to great respect.

the collective bargaining agreement may not be interpreted as cession of employees’ rights
to participate in the deliberation of matters which may affect their rights and the formulation
of policies relative thereto. And one such mater is the formulation of a code of discipline.

industrial peace cannot be achieved if the employees are denied their just participation in
the discussion of matters affecting their rights. Thus, even before Article 211 of the labor
Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared a policy
of the State, “(d) To promote the enlightenment of workers concerning their rights and
obligations . . . as employees.” This was, of course, amplified by Republic Act No 6715
when it decreed the “participation of workers in decision and policy making processes
affecting their rights, duties and welfare.” PAL’s position that it cannot be saddled with the
“obligation” of sharing management prerogatives as during the formulation of the Code,
Republic Act No. 6715 had not yet been enacted (Petitioner’s Memorandum, p. 44; Rollo, p.
212), cannot thus be sustained. While such “obligation” was not yet founded in law when
the Code was formulated, the attainment of a harmonious labor-management relationship
and the then already existing state policy of enlightening workers concerning their rights as
employees demand no less than the observance of transparency in managerial moves
affecting employees’ rights.

Case Digest: Gagui v. Dejero & Permejo

G.R. No. 196036 : OCTOBER 23, 2013




On 14 December 1993, respondents Simeon Dejero and Teodoro Permejo filed separate Complaints for
illegal dismissal, nonpayment of salaries and overtime pay, refund of transportation expenses, damages,
and attorney fees against PRO Agency Manila, Inc., and Abdul Rahman Al Mahwes.

The Labor Arbiter Pedro Ramos rendered a decision ordering respondents Pro Agecy Manila Inc., and
Abdul Rahman Al Mahwes to pay complainants. The LA also issued a Writ of Execution. When the writ
was returned unsatisfied, an Alias Writ of Execution was issued, but was also returned unsatisfied.
Respondents filed a Motion to Implead Respondent Pro Agency Manila, Inc. Corporate Officers and
Directors as Judgment Debtor. It included petitioner as the Vice-president/Stockholder/Director of PRO
Agenct, Manila, Inc. The LA granted the motion.

A 2nd Alias Writ of Execution was issued, which resulted in the garnishment of petitioner bank deposit
in the amount of P85,430.48. Since, judgment remained unsatisfied, respondents sought a 3rd alias writ
of execution. The motion was granted resulting in the levying of two parcels of lot owned by petitioner
located in San Fernando Pampanga.

Petitioner filed a Motion to Quash 3rd Alias Writ of Execution. Petitioner alleged that apart from not
being made aware that she was impleaded as one of the parties to the case, the LA decision did not hold
her liable in any form whatsoever. Executive Labor Arbiter denied the motion.

Upon appeal, NLRC denied the appeal for lack of merit. NLRC ruled that in so far as overseas migrant
workers are concerned, it is R.A. 8042 itself that describes the nature of the liability of the corporation
and its officers and directors. It is not essential that the individual officers and directors be impleaded as
party respondents to the case instituted by the worker. A finding of liability on the part of the
corporation will necessarily mean the liability of the corporate officers or directors.

The CA affirmed the NLRC decision. The two Motions for Reconsideration were denied.

ISSUE: Whether or not petitioner may be held jointly and severally liable with PRO Agency Manila, Inc. in
accordance with Section 10 of R.A. 8042?

HELD: The Petitioner may not be held jointly and severally liable.

LABOR LAW: liability of corporate officers

The pertinent portion of Section 10, R.A. 8042 reads as follows: The liability of the principal/employer
and the recruitment/placement agency for any and all claims under this section shall be joint and
several. This provision shall be incorporated in the contract for overseas employment and shall be a
condition precedent for its approval.

In Sto. Tomas v. Salac, we had the opportunity to pass upon the constitutionality of this provision. We
have thus maintained: the Court has already held, pending adjudication of this case, that the liability of
corporate directors and officers is not automatic. To make them jointly and solidarily liable with their
company, there must be a finding that they were remiss in directing the affairs of that company, such as
sponsoring or tolerating the conduct of illegal activities.

Hence, for petitioner to be found jointly and solidarily liable, there must be a separate finding that she
was remiss in directing the affairs of the agency, resulting in the illegal dismissal of respondents.
Examination of the records would reveal that there was no finding of neglect on the part of the
petitioner in directing the affairs of the agency. In fact, respondents made no mention of any instance
when petitioner allegedly failed to manage the agency in accordance with law, thereby contributing to
their illegal dismissal.
Petition for review on certiorari is GRANTED.



G.R. No. 161757; January 25, 2006

Ponente: J. Carpio-Morales


Petitioner, Sunace International Management Services (Sunace), deployed to Taiwan Divina A.

Montehermozo (Divina) as a domestic helper under a 12-month contract effective February 1, 1997.
The deployment was with the assistance of a Taiwanese broker, Edmund Wang, President of Jet Crown
International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese
employer, Hang Rui Xiong, for two more years, after which she returned to the Philippines on February
4, 2000.

Shortly after her return or on February 14, 2000, Divina filed a complaint before the National Labor
Relations Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the
employer-foreign principal alleging that she was jailed for three months and that she was underpaid

Reacting to Divina's Position Paper, Sunace filed on April 25, 2000 an ". . . ANSWER TO COMPLAINANT'S
POSITION PAPER" alleging that Divina's 2-year extension of her contract was without its knowledge and
consent, hence, it had no liability attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy of each document
was annexed to said

The Labor Arbiter, rejected Sunace's claim that the extension of Divina's contract for two more years
was without its knowledge and consent.


Whether the act of the foreigner-principal in renewing the contract of Divina be attributable to Sunace


No, the act of the foreigner-principal in renewing the contract of Divina is not attributable to Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot
be held solidarily liable for any of Divina's claims arising from the 2-year employment extension.
Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship
with its foreign principal when, after the termination of the original employment contract, the foreign
principal directly negotiated with Divina and entered into a new and separate employment contract in

RELATIONS COMMISSION (Third Division) and FERMIN F. GUERRERO, respondents.

Doctrine: Unilateral decisions to alter the use of a vessel from overseas service to coastwise
shipping will not affect the validity of an existing employment contract validly executed. Workers
should not be prejudiced by actions done solely by employers without the former's consent or
Facts: Guerrero was hired by OSM for and in behalf of its principal, Phil Carrier to board its vessel
MN '[Princess] Hoa' as a Master Mariner for a contract period of 10 months. He boarded the vessel
in July 1994 and complied faithfully with the duties assigned to him. Guerrero alleged that from the
start of his work with MN 'Princess Hoa', he was not paid any compensation at all and was forced to
disembark the vessel sometime in January 1995 because he cannot even buy his basic personal
necessities. For almost 7 months, despite the services he rendered, no compensation or
remuneration was ever paid to him. Hence, this case for illegal dismissal, [non-payment] of salaries,
overtime pay and vacation pay against OSM Shipping and its principal, Philippine Carrier Shipping
Agency Services Co (PC-SASCO). OSM, for its part, alleged that on July 26, 1994, Concorde
Pacific, an American company which owns MN 'Princess Hoa', then a foreign registered vessel,
appointed Philippine Carrier as ship manager particularly to negotiate, transact and deal with any
third persons, entities or corporations in the planning of crewing selection or determination of
qualifications of Filipino Seamen. On the same date, OSM entered into a Crew Agreement with Phil
Carrier for the purpose of processing the documents of crew members of MN 'Princess Hoa'.
Thereafter, the contract of Guerrero was processed before the POEA on September 1994. OSM
alleged further that the shipowner changed its plans on the use of the vessel. Instead of using it for
overseas trade, it decided to use it in the coastwise trade, thus, the crewmembers hired never left
the Philippines and were merely used by the shipowner in the coastwise trade. Considering that the
MN 'Princess Hoa' was a foreign registered vessel and could not be used in the coastwise trade, the
shipowner converted the vessel to Philippine registry on September 1994 by way of bareboat
chartering it out to another entity named Philippine Carrier Shipping Lines Co. (PCSLC). To do this,
the shipowner through Conrado Tendido had to terminate its management agreement with PC-
SASCO on September 1994. In the same letter of termination, the ship owner stated that it has
bareboat chartered out the vessel to said [PCSLC] and converted it into Philippine registry.
Consequently, PC-SASCO terminated its crew agreement with OSM in a letter dated December
1994. Because of the bareboat charter of the vessel to PCSLC and its subsequent conversion to
Philippine registry and use in coastwise trade as well as to the termination of the management
agreement and crew agency agreement, a termination of contract ensued whereby PCSLC, the
bareboat charterer, became the disponent owner/employer of the crew. As a disponent
owner/employer, PCSLC is now responsible for the payment of complainant's wages. Labor Arbiter
Manuel Caday rendered a Decision in favor of Guerrero. OSM and its principal, PC-SASCO, were
ordered to jointly and severally pay Guerrero his unpaid salaries and allowances, accrued fixed
overtime pay, vacation leave pay and termination pay. The Decision held that there was a
constructive dismissal of private respondent, since he had not been paid his salary for seven
months. It also dismissed OSM's contention that there was a novation of the employment contract.
NLRC affirmed the LA's Decision, with a modification as to the amount of liability. CA dismissed the
petition because OSM failed to comply with the requirements of Section 3 of Rule 46 of the Rules of
Issue: Did the NLRC commit grave abuse of discretion in ruling in favor of private respondent?

Held: No Ratio: The Court is mindful of the plight of Guerrero and, indeed, of workers in general who
are seeking to recover wages that are being unlawfully withheld from them. Such recovery should
not be needlessly delayed at the expense of their survival. This case is now on its ninth year since
its inception at the LA's office. Its remand to the CA will only unduly delay its disposition. In the
interest of substantial justice, this Court will decide the case on the merits based upon the records of
the case. On behalf of its principal, PC-SASCO, OSM does not deny hiring Guerrero as master
mariner. However, it argues that since he was not deployed overseas, his employment contract
became ineffective, because its object was allegedly absent. Petitioner contends that using the
vessel in coastwise trade and subsequently chartering it to another principal had the effect of
novating the employment contract. We are not persuaded. As approved by POEA, OSM was the
legitimate manning agent of PC-SASCO. As such, it was allowed to select, recruit, hire and deploy
seamen on board the vessel M/V Princess Hoa, which was managed by its principal, PC-SASCO. It
was in this capacity that OSM hired Guerrero as master mariner. They then executed and agreed
upon an employment contract. An employment contract, like any other contract, is perfected at the
moment (1) the parties come to agree upon its terms; and (2) concur in the essential elements
thereof: (a) consent of the contracting parties, (b) object certain which is the subject matter of the
contract and (c) cause of the obligation. Based on the perfected contract, Guerrero complied with his
obligations thereunder and rendered his services on board the vessel. Contrary to OSM's contention,
the contract had an object, which was the rendition of service by Guerrero on board the vessel. The
non-deployment of the ship overseas did not affect the validity of the perfected employment contract.
After all, the decision to use the vessel for coastwise shipping was made by OSM only and did not
bear the written conformity of Guerrero. A contract cannot be novated by the will of only one party.
The claim of OSM that it processed the contract of Guerrero with the POEA only after he had started
working is also without merit. OSM cannot use its own misfeasance to defeat his claim. OSM, as
manning agent, is jointly and severally liable with its principal, PC-SASCO, for Guerrero's claim. This
conclusion is in accordance with Section 1 of Rule II of the POEA Rules and Regulations. Joint and
solidary liability is meant to assure aggrieved workers of immediate and sufficient payment of what is
due them. The fact that OSM and its principal have already terminated their agency agreement does
not relieve the former of its liability.


Petitioner Angelina Francisco was hired by respondent Kasei Corporation
during its incorporation stage as Accountant and Corporate Secretary and later
as Liaison Officer. Subsequently she was also designated Acting Manager until
replaced, but was assured by the company that she was still connected as
Technical Consultant. Thereafter, Kasei Corporation reduced petitioner’s
salary until it was later withheld despite repeated follow-ups. Petitioner once
again asked for her salary but was informed that she is no longer connected
with the company. Petitioner thus filed an action for constructive dismissal
before the Labor Arbiter. Respondent Kasei Corporation averred that petitioner
is not their employee as she performed her work at her own discretion without
their control and supervision. Both the Labor Arbiter and NLRC tribunal found
for petitioner. CA reversed the decision.
Whether or not there was employer-employee relationship between the parties.
Ruling: YES.
In certain cases the control test is not sufficient to give a complete picture of
the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. The better
approach would therefore be to adopt a two-tiered test involving: (1) the
putative employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished; and (2) the underlying
economic realities of the activity or relationship.
By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of
Seiji Kamura, the corporation’s Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer,
Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business permits and
other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to
be an employee of respondent corporation because she had served the company
for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions. Petitioner’s membership in the
SSS as manifested by a copy of the SSS specimen signature card which was
signed by the President of Kasei Corporation and the inclusion of her name in
the on-line inquiry system of the SSS evinces the existence of an employer-
employee relationship between petitioner and respondent corporation. It is
therefore apparent that petitioner is economically dependent on respondent
corporation for her continued employment in the latter’s line of business.

Alabang Country Club, Inc., et al. vs. NLRC, et al. - GR No. 157611 Case Digest


Petitioner Alabang Country Club Inc. (ACCI), is a stock, non-profit corporation that operates and
maintains a country club and various sports and recreational facilities for the exclusive use of its
members. Sometime in 1993, Francisco Ferrer, then President of ACCI, requested its Internal Auditor, to
conduct a study on the profitability of ACCI’s Food and Beverage Department (F & B Department).
Consequently, report showed that from 1989 to 1993, F & B Department had been incurring substantial

Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the
management decided to cease from operating the department and to open the same to a contractor,
such as a concessionaire, which would be willing to operate its own food and beverage business within
the club. Thus, ACCI sent its F & B Department employee’s individual letters informing them that their
services were being terminated and that they would be paid separation pay. The Union in turn, with the
authority of individual respondents, filed a complaint for illegal dismissal.


Whether or not the club’s right to terminate its employees for an authorized cause, particularly to
secure its continued viability and existence is valid.

When petitioner decided to cease operating its F & B Department and open the same to a
concessionaire, it did not reduce the number of personnel assigned thereat. It terminated the
employment of all personnel assigned at the department.

Petitioner’s failure to prove that the closure of its F & B Department was due to substantial losses
notwithstanding, the Court finds that individual respondents were dismissed on the ground of closure or
cessation of an undertaking not due to serious business losses or financial reverses, which is allowed
under Article 283 of the Labor Code.

The closure of operation of an establishment or undertaking not due to serious business losses or
financial reverses includes both the complete cessation of operations and the cessation of only part of a
company’s activities.

Republic of the Philippines




G.R. No. 85286 August 24, 1992

BASILIO A. BALASBAS, petitioner,



The Legal Service for petitioner.

Nicasio Tumulak for private respondent.


The petitioner Basilio Balasbas, questions the Decision of the National Labor Relations Commission
(NLRC), Third Division, dated April 27, 1988, reversing the Decision of the Labor Arbiter and ordering
instead the private respondent to pay petitioner only his 13th month pay.1
The facts in brief are:

Private respondent Jamilla & Company, Inc., owns a security agency named Veterans Philippine Scout
Security Agency. On August 31, 1984, it hired Basilio Balasbas as operations supervisor and assigned him
in the security division. Part of his job was to issue orders relative to the guards' assignments, direct
work activities of the inspectors and re-screen guard applicants. 2

On April 12, 1985 or eight months after his employment, the company handed him a termination notice
advising him of his severance from the service effective immediately pursuant to a retrenchment
program that was being implemented.

The same day, he filed NLRC Case No. 9-3187-85 with the Labor Arbiter for illegal dismissal, non-
payment of the 13th month pay and underpayment of basic salary. 3

Finding that the petitioner's dismissal was indeed unlawful, having been effected without proper notice
as required by law, Labor Arbiter Ruben M. Alberto rendered a judgment on February 28, 1986 ordering
the petitioner's reinstatement with full backwages and other benefits from the date of his dismissal until
actually reinstated. Additionally, he ordered the payment of petitioner's 13th month pay for 1985
(partial) as admitted by respondent company. However, the rest of the complaint was rejected and
dismissed for lack of basis or insufficiency of evidence.4 Interposing grave abuse of discretion and
serious errors in the findings of facts, the respondent company appealed to the NLRC on April 21, 1986.

On April 27, 1988, the NLRC reversed and set aside the Labor Arbiter's ruling, citing in particular the
petitioner's waiver of the mandatory 30-day notice required by law to justify the reversal. We quote:

xxx xxx xxx

It is the posture of the respondent that it was the complainant (petitioner) who waived the 30-day
notice prior to his termination to enable him to collect immediately his separation pay and other
benefits, and that the complainant (petitioner) was originally earmarked for termination of employment
due to just cause, . . .

xxx xxx xxx

WHEREFORE, the decision appealed from is hereby reversed and set aside, and let a new one entered
ordering the respondent to pay complainant (petitioner) his 13th month pay for 1985 (partial.) 5

Petitioner Basilio Balasbas has now elevated his case before us in this Petition for Review on Certiorari.
Seeking the reversal of the NLRC Decision, for having been rendered with grave abuse of discretion and
pleading for affirmance in toto of the Decision of the Labor Arbiter, he specifically invokes Article 277,
paragraph b of the Labor Code which guarantees 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 the same Code. Thereunder, the employer
shall furnish the worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so desires. Finding himself suddenly
jobless, he had no choice but to accept his separation pay of P1,750.00, as well as P500.00 as extra cash
bonus. He argues that his acceptance of the separation pay and other benefits should not be construed
as a waiver of the 30-day notice of termination. Thus, he avers that if the alleged renunciation were
true, he would not have filed a complaint. Yet, on the very same day that he received the said notice, he
immediately lodged a complaint for illegal dismissal against respondent company on April 12, 1985.
From there on, he has vigorously prosecuted his claim through all the stages of the proceedings. 6
Finally, he stoutly maintains that his eventual separation from employment lacks due process.

The common defense of the respondent company and the Solicitor General is that retrenchment, being
a managerial prerogative resorted to by any employer when confronted by economic losses, respondent
was within its rights in separating the petitioner.

It is their position that the 30-day advance notice is deemed to have been waived when the petitioner
voluntarily accepted the termination benefits. In any case, he did receive the notice when he was
informed of his separation due to retrenchment, although it was made effective upon receipt. Such
notice of termination constitutes substantial compliance with the requirement of notice of the law. 7

In its memorandum of June 22, 1989, the private respondent alleges that the present petition, having
been filed beyond fifteen days from notice, as provided under Section 4, Rule 43 of the Rules of Court,
was barred by time. 8 This fatal error is said to have the effect of defeating the petitioner's right to
appeal. 9

Finding the petition meritorious, the Court rules that the NLRC gravely abused its discretion in ordering
only the payment of the petitioner's 13th month pay instead of reinstating him to his previous position
with full backwages.

Under Article 283 of the Labor Code, 10 the closure of a business establishment or reduction of
personnel is a ground for the termination of the services of any employee unless the closing or
retrenching is for the purpose of circumventing the provision of the law. But while business reverses can
be a just cause for terminating employees, these must be sufficiently proved by the employer. 11
(Emphasis supplied.)

The case of Sugar Lopez Corporation v. Federation of Free Workers, 12 lays down the general standards
under which an employer may retrench or reduce the number of his employees. 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. (Emphasis supplied.)
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 far-reaching nature of
the retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the
expected losses.

Lastly, but certainly not the least important, the alleged losses if already incurred, and the expected
imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. 13
(Emphasis supplied).

In the case at bar, there is a dearth of sufficient and convincing documentary evidence to bolster the
claim of the respondent company that it is indeed suffering from business losses of such magnitude as
to impel the retrenchment of petitioner Basilio Balasbas. The records are bereft of evidence on any
application for a reduction of employees or written notice to the Department of Labor. If indeed there
were, it would have been logical for the respondent company to have attached copies of the same.

Interestingly, the records, however, show that immediately after the petitioner's termination from work,
the respondent company advertised and hired another employee for the position of inspector or
investigator, 14 indubitable proof that the alleged retrenchment was merely a cover-up to ease out
herein petitioner Basilio Balasbas.

This unlawful and unjust act of the respondent company was compounded when it dismissed the
petitioner without complying with the 30-day advance notice of termination containing a statement of
the cause for his termination, thus affording him ample opportunity to be heard. 15 (Emphasis

The alleged waiver by the petitioner of the 30-day notice of termination deserves scant consideration.
Being an ordinary rank and file employee, the petitioner may not be expected to completely
comprehend or realize the consequences of his act. This is more than adequately shown by the fact that
he immediately filed a complaint for illegal dismissal on April 12, 1985, 16 the same day he was served
the notice of termination of employment.

Finally, the protestation of the respondent company that the instant petition was perfected out of time
is not supported by law.

On October 17, 1988, we granted the petitioner an extension of thirty days within which to file his
petition and allowed him to litigate as a pauper litigant. 17 The records bear out the fact, that he did
meet the new deadline.

There being no proof of serious business losses or financial reverses that would justify the petitioner's
dismissal and there being a failure on the part of the employer to prove that the dismissal is for a just
cause, the employee is entitled to reinstatement with full backwages. 18

WHEREFORE, the petition is GRANTED. The Decision of respondent NLRC dated April 27, 1988, is hereby
set aside and the Decision of the Labor Arbiter, dated February 28, 1986, is hereby REINSTATED with the
modification that the amount of the backwages that petitioner is entitled to shall be subject to the right
of the private respondent to prove and deduct whatever income may have been earned by the former in
the interim from the date of his unlawful dismissal until actual reinstatement.

Costs against private respondent.


Republic of the Philippines


G.R. No. 202996 June 18, 2014

MARLO A. DEOFERIO, Petitioner,




We resolve the petition for review on certiorari1 filed by petitioner Marlo A. Deoferio to challenge the
February 24, 2012 decision2 and the August 2, 2012 resolution3 of the Court of Appeals (CA) in CA-
G.R. SP No. 115708.

The Factual Antecedents

On February 1, 1996, respondent Intel Technology Philippines, Inc. (Intel)employed Deoferio as a

product quality and reliability engineer with a monthly salary of ₱9,000.00. In July2001, Intel
assigned him to the United States as a validation engineer for an agreed period of two years and
with a monthly salary of US$3,000.00. On January 27, 2002, Deoferio was repatriated to the
Philippines after being confined at Providence St. Vincent Medical Center for major depression with
psychosis.4 In the Philippines, he worked as a product engineer with a monthly salary of ₱23,000.00.5

Deoferio underwent a series of medical and psychiatric treatment at Intel’s expense after his
confinement in the United States. In 2002, Dr. Elizabeth Rondain of Makati Medical Center
diagnosed him to be suffering from mood disorder, major depression, and auditory hallucination.6 He
was also referred to Dr. Norieta Balderrama, Intel’s forensic psychologist, and to a certain Dr.
Cynthia Leynes who both confirmed his mental condition.7 On August 8, 2005, Dr. Paul Lee, a
consultant psychiatrist of the Philippine General Hospital, concluded that Deoferio was suffering from
schizophrenia. After several consultations, Dr. Lee issued a psychiatric report dated January
17,2006 concluding and stating that Deoferio’s psychotic symptoms are not curable within a period
of six months and "will negatively affect his work and social relation with his co-worker[s]."8 Pursuant
to these findings, Intel issued Deoferio a notice of termination on March 10, 2006.9

Deoferio responded to his termination of employment by filing a complaint for illegal dismissal with
prayer for money claims against respondents Intel and Mike Wentling (respondents). He denied that
he ever had mental illness and insisted that he satisfactorily performed his duties as a product
engineer. He argued that Intel violated his statutory right to procedural due process when it
summarily issued a notice of termination. He further claimed that he was entitled to a salary
differential equivalent to the pre-terminated period of his assignment in the United States minus the
base pay that he had already received. Deoferio also prayed for backwages, separation pay, moral
and exemplary damages, as well as attorney’s fees.10

In defense, the respondents argued that Deoferio’s dismissal was based on Dr. Lee’s certification
that: (1) his schizophrenia was not curable within a period of six months even with proper medical
treatment; and (2) his continued employment would be prejudicial to his and to the other employees’
health.11 The respondents also insisted that Deoferio’s presence at Intel’s premises would pose an
actual harm to his co-employees as shown by his previous acts. On May 8, 2003, Deoferio emailed
an Intel employee with this message: "All soul’s day back to work Monday WW45.1." On January 18,
2005, he cut the mouse cables, stepped on the keyboards, and disarranged the desks of his co-
employees.12 The respondents also highlighted that Deoferio incurred numerous absences from work
due to his mental condition, specifically, from January 31, 2002 until February 28, 2002,13 from
August 2002 until September 2002,14 and from May 2003 until July 2003.15 Deoferio also took an
administrative leave with pay from January 2005 until December 2005.16

The respondents further asserted that the twin-notice requirement in dismissals does not apply to
terminations under Article 284 of the Labor Code.17 They emphasized that the Labor Code’s
implementing rules (IRR) only requires a competent public health authority’s certification to
effectively terminate the services of an employee.18They insisted that Deoferio’s separation and
retirement payments for ₱247,517.35 were offset by his company car loan which amounted to
₱448,132.43.19 He was likewise not entitled to moral and exemplary damages, as well as attorney’s
fees, because the respondents faithfully relied on Dr. Lee’s certification that he was not fit to work as
a product engineer.20

The Labor Arbitration Ruling

In a decision21 dated March 6, 2008,the Labor Arbiter (LA) ruled that Deoferio had been validly
dismissed. The LA gave weight to Dr. Lee’s certification that Deoferio had been suffering from
schizophrenia and was not fit for employment. The evidence on record shows that Deoferio’s
continued employment at Intel would pose a threat to the health of his co-employees. The LA further
held that the Labor Code and its IRR do not require the employer to comply with the twin-notice
requirement in dismissals due to disease. The LA also found unmeritorious Deoferio’s money claims
against Intel.22

On appeal by Deoferio, the National Labor Relations Commission (NLRC) wholly affirmed the LA’s
ruling.23 The NLRC also denied24 Deoferio’s motion for reconsideration,25 prompting him to seek relief
from the CA through a petition for certiorari under Rule 65 of the Rules of Court.

The CA’s Ruling

On February 24, 2012, the CA affirmed the NLRC decision. It agreed with the lower tribunals’
findings that Deoferio was suffering from schizophrenia and that his continued employment at Intel
would be prejudicial to his health and to those of his co-employees. It ruled that the only procedural
requirement under the IRR is the certification by a competent public health authority on the non-
curability of the disease within a period of six months even with proper medical treatment. It also
concurred with the lower tribunals that Intel was justified in not paying Deoferio separation pay as
required by Article 284 of the Labor Code because this obligation had already been offset by the
matured car loan that Deoferio owed Intel.26

Deoferio filed the present petition after the CA denied his motion for reconsideration.27

The Petition

In the present petition before the Court, Deoferio argues that the uniform finding that he was
suffering from schizophrenia is belied by his subsequent employment at Maxim Philippines
Operating Corp. and Philips Semiconductors Corp., which both offered him higher compensations.
He also asserts that the Labor Code does not exempt the employer from complying with the twin-
notice requirement in terminations due to disease.28

The Respondents’ Position

In their Comment,29 the respondents posit that the petition raises purely questions of fact which a
petition for review on certiorari does not allow. They submit that Deoferio’s arguments have been
fully passed upon and found unmeritorious by the lower tribunals and by the CA. They additionally
argue that Deoferio’s subsequent employment in other corporations is irrelevant in determining the
validity of his dismissal; the law merely requires the non-curability of the disease within a period of
six months even with proper medical treatment.

The respondents also maintain that Deoferio’s claim for salary differential is already barred by
prescription under Article 291 of the Labor Code.30 Even assuming that the claim for salary
differential has been timely filed, the respondents assert that the parties expressly agreed in the
International Assignment Relocation Agreement that "the assignment length is only an estimate and
not a guarantee of employment for any particular length of time."31Moreover, his assignment in the
United States was merely temporary and did not change his salary base, an amount which he
already received.

The Issues

This case presents to us the following issues:

(1) Whether Deoferio was suffering from schizophrenia and whether his continued
employment was prejudicial to his health, as well as to the health of his co-employees;

(2) Whether the twin-notice requirement in dismissals applies to terminations due to disease;

As part of the second issue, the following issues are raised:

(a) Whether Deoferio is entitled to nominal damages for violation of his right to statutory
procedural due process; and

(b) Whether the respondents are solidarily liable to Deoferio for nominal damages.

(3) Whether Deoferio is entitled to salary differential, backwages, separation pay, moral and
exemplary damages, as well as attorney’s fees.

The Court’s Ruling

We find the petition partly meritorious.

Intel had an authorized cause to dismiss Deoferio from employment

Concomitant to the employer’s right to freely select and engage an employee is the employer’s right
to discharge the employee for just and/or authorized causes. To validly effect terminations of
employment, the discharge must be for a valid cause in the manner required by law. The purpose of
these two-pronged qualifications is to protect the working class from the employer’s arbitrary and
unreasonable exercise of its right to dismiss. Thus, in termination cases, the law places the burden
of proof upon the employer to show by substantial evidence that the termination was for a lawful
cause and in the manner required by law.

In concrete terms, these qualifications embody the due process requirement in labor cases -
substantive and procedural due process. Substantive due process means that the termination must
be based on just and/or authorized causes of dismissal. On the other hand, procedural due process
requires the employer to effect the dismissal in a manner specified in the Labor Code and its IRR.32

The present case involves termination due to disease – an authorized cause for dismissal under
Article 284 of the Labor Code. As substantive requirements, the Labor Code and its IRR33 require the
presence of the following elements:

(1) An employer has been found to be suffering from any disease.

(2) His continued employment is prohibited by law or prejudicial to his health, as well as to
the health of his co-employees.

(3) A competent public health authority certifies that the disease is of such nature or at such
a stage that it cannot be cured within a period of six months even with proper medical
treatment. With respect to the first and second elements, the Court liberally construed the
phrase "prejudicial to his health as well as to the health of his co-employees" to mean
"prejudicial to his health or to the health of his co-employees." We did not limit the scope of
this phrase to contagious diseases for the reason that this phrase is preceded by the phrase
"any disease" under Article 284 of the Labor Code, to wit:

Art. 284. Disease as ground for termination. – An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued employment
is prohibited by law or is prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half
(1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months
being considered as one (1) whole year. [underscores, italics and emphases ours]

Consistent with this construction, we applied this provision in resolving illegal dismissal cases due to
non-contagious diseases such as stroke, heart attack, osteoarthritis, and eye cataract, among
others. In Baby Bus, Inc. v. Minister of Labor,34 we upheld the labor arbitration’s finding that Jacinto
Mangalino’s continued employment – after he suffered several strokes – would be prejudicial to his
health. In Duterte v. Kingswood Trading Co., Inc.,35 we recognized the applicability of Article 284 of
the Labor Code to heart attacks. In that case, we held that the employer- company’s failure to
present a certification from a public health authority rendered Roque Duterte’s termination due to a
heart attack illegal. We also applied this provision in Sy v. Court of Appeals36 to determine whether
Jaime Sahot was illegally dismissed dueto various ailments such as presleyopia, hypertensive
retinopathy, osteoarthritis, and heart enlargement, among others. In Manly Express, Inc. v. Payong,
Jr.,37 we ruled that the employer-company’s non-presentment of a certification from a public health
authority with respect to Romualdo Payong Jr.’s eye cataract was fatal to its defense.

The third element substantiates the contention that the employee has indeed been suffering from a
disease that: (1) is prejudicial to his health as well as to the health of his co-employees; and (2)
cannot be cured within a period of six months even with proper medical treatment. Without the
medical certificate, there can be no authorized cause for the employee’s dismissal. The absence of
this element thus renders the dismissal void and illegal.

Simply stated, this requirement is not merely a procedural requirement, but a substantive one. The1âwphi1

certification from a competent public health authority is precisely the substantial evidence required
by law to prove the existence of the disease itself, its non-curability within a period of six months
even with proper medical treatment, and the prejudice that it would cause to the health of the sick
employee and to those of his co-employees.

In the current case, we agree with the CA that Dr. Lee’s psychiatric report substantially proves that
Deoferio was suffering from schizophrenia, that his disease was not curable within a period of six
months even with proper medical treatment, and that his continued employment would be prejudicial
to his mental health. This conclusion is further substantiated by the unusual and bizarre acts that
Deoferio committed while at Intel’s employ.

The twin-notice requirement applies

to terminations under Article 284 of
the Labor Code

The Labor Code and its IRR are silent on the procedural due process required in terminations due to
disease. Despite the seeming gap in the law, Section 2, Rule 1, Book VI of the IRR expressly states
that the employee should be afforded procedural due process in all cases of dismissals.38

In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong, Jr.,40 promulgated in 2003 and 2005,
respectively, the Court finally pronounced the rule that the employer must furnish the employee two
written notices in terminations due to disease, namely: (1) the notice to apprise the employee of the
ground for which his dismissal is sought; and (2) the notice informing the employee of his dismissal,
to be issued after the employee has been given reasonable opportunity to answer and to be heard
on his defense. These rulings reinforce the State policy of protecting the workers from being
terminated without cause and without affording them the opportunity to explain their side of the

From these perspectives, the CA erred in not finding that the NLRC gravely abused its discretion
when it ruled that the twin-notice requirement does not apply to Article 284 of the Labor Code. This
conclusion is totally devoid of any legal basis; its ruling is wholly unsupported by law and
jurisprudence. In other words, the NLRC’s unprecedented, whimsical and arbitrary ruling, which the
CA erroneously affirmed, amounted to a jurisdictional error.

Deoferio is entitled to nominal

damages for violation of his right to
statutory procedural due process

Intel’s violation of Deoferio’s right to statutory procedural due process warrants the payment of
indemnity in the form of nominal damages. In Jaka Food Processing Corp. v. Pacot,41 we
distinguished between terminations based on Article 282 of the Labor Code42 and dismissals under
Article 283 of the Labor Code.43 We then pegged the nominal damages at ₱30,000.00 if the dismissal
is based on a just cause but the employer failed to comply with the twin-notice requirement. On the
other hand, we fixed the nominal damages at ₱50,000.00 if the dismissal is due to an authorized
cause under Article 283 of the Labor Code but the employer failed to comply with the notice
requirement. The reason is that dismissals for just cause imply that the employee has committed a
violation against the employer, while terminations under Article 283 of the Labor Code are initiated
by the employer in the exercise of his management prerogative.

With respect to Article 284 of the Labor Code, terminations due to disease do not entail any
wrongdoing on the part of the employee. It also does not purely involve the employer’s willful and
voluntary exercise of management prerogative – a function associated with the employer's inherent
right to control and effectively manage its enterprise.44 Rather, terminations due to disease are
occasioned by matters generally beyond the worker and the employer's control.

In fixing the amount of nominal damages whose determination is addressed to our sound discretion,
the Court should take into account several factors surrounding the case, such as: (1) the employer’s
financial, medical, and/or moral assistance to the sick employee; (2) the flexibility and leeway that
the employer allowed the sick employee in performing his duties while attending to his medical
needs; (3) the employer’s grant of other termination benefits in favor of the employee; and (4)
whether there was a bona fide attempt on the part of the employer to comply with the twin-notice
requirement as opposed to giving no notice at all.

We award Deoferio the sum of ₱30,000.00 as nominal damages for violation of his statutory right to
procedural due process. In so ruling, we take into account Intel’s faithful compliance with Article 284
of the Labor Code and Section 8, Rule 1, Book 6 of the IRR. We also note that Deoferio’s separation
pay equivalent to one-half month salary for every year of service45 was validly offset by his matured
car loan. Under Article 1278 of the Civil Code, in relation to Article 1706 of the Civil Code46 and
Article 113(c) of the Labor Code,47 compensation shall take place when two persons are creditors
and debtors of each other in their own right. We likewise consider the fact that Intel exhibited real
concern to Deoferio when it financed his medical expenses for more than four years. Furthermore,
prior to his termination, Intel liberally allowed Deoferio to take lengthy leave of absences to allow him
to attend to his medical needs.

Wentling is not personally liable for

the satisfaction of nominal damages
in favor of Deoferio
Intel shall be solely liable to Deoferio for the satisfaction of nominal damages. Wentling, as a
corporate officer, cannot be held liable for acts done in his official capacity because a corporation, by
legal fiction, has a personality separate and distinct from its officers, stockholders, and members.
There is also no ground for piercing the veil of corporate fiction because Wentling acted in good faith
and merely relied on Dr. Lee’s psychiatric report in carrying out the dismissal.48

Deoferio is not entitled to salary

differential, backwages, separation
pay, moral and exemplary damages,
as well as attorney's fees

Deoferio's claim for salary differential is already barred by prescription. Under Article 291 of the
Labor Code, all money claims arising from employer-employee relations shall be filed within three
years from the time the cause of action accrued. In the current case, more than four years have
elapsed from the pre-termination of his assignment to the United States until the filing of his
complaint against the respondents. We thus see no point in further discussing this matter. His claim
for backwages, separation pay, moral and exemplary damages, as well as attorney's fees must also
necessarily fail as a consequence of our finding that his dismissal was for an authorized cause and
that the respondents acted in good faith when they terminated his services.

WHEREFORE, premises considered, we partially grant the petition; the assailed February 24, 2012
decision and the August 2, 2012 resolution of the Court of Appeals stand but respondent Intel
Technology Philippines, Inc. is ordered to pay petitioner Marlo A. Deoferio nominal damages in the
amount of ₱30,000.00. We totally deny the petition with respect to respondent Mike Wending.




272 SCRA 596


PT&T (Philippine Telegraph & Telephone Company) initially hired Grace de Guzman specifically as
“Supernumerary Project Worker”, for a fixed period from November 21, 1990 until April 20, 1991 as
reliever for C.F. Tenorio who went on maternity leave. She was again invited for employment as
replacement of Erlina F. Dizon who went on leave on 2 periods, from June 10, 1991 to July 1, 1991 and
July 19, 1991 to August 8, 1991.

On September 2, 1991, de Guzman was again asked to join PT&T as a probationary employee where
probationary period will cover 150 days. She indicated in the portion of the job application form under
civil status that she was single although she had contracted marriage a few months earlier. When
petitioner learned later about the marriage, its branch supervisor, Delia M. Oficial, sent de Guzman a
memorandum requiring her to explain the discrepancy. Included in the memorandum, was a reminder
about the company’s policy of not accepting married women for employment. She was dismissed from
the company effective January 29, 1992. Labor Arbiter handed down decision on November 23, 1993
declaring that petitioner illegally dismissed De Guzman, who had already gained the status of a regular
employee. Furthermore, it was apparent that she had been discriminated on account of her having
contracted marriage in violation of company policies.


ISSUE: Whether the alleged concealment of civil status can be grounds to terminate the services of an

Article 136 of the Labor Code, one of the protective laws for women, explicitly prohibits discrimination
merely by reason of marriage of a female employee. It is recognized that company is free to regulate
manpower and employment from hiring to firing, according to their discretion and best business
judgment, except in those cases of unlawful discrimination or those provided by law.

PT&T’s policy of not accepting or disqualifying from work any woman worker who contracts marriage is
afoul of the right against discrimination provided to all women workers by our labor laws and by our
Constitution. The record discloses clearly that de Guzman’s ties with PT&T were dissolved principally
because of the company’s policy that married women are not qualified for employment in the company,
and not merely because of her supposed acts of dishonesty.

The government abhors any stipulation or policy in the nature adopted by PT&T. As stated in the labor

“ART. 136. Stipulation against marriage. — It shall be unlawful for an employer to require as a condition
of employment or continuation of employment that a woman shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of marriage.”

The policy of PT&T is in derogation of the provisions stated in Art.136 of the Labor Code on the right of a
woman to be free from any kind of stipulation against marriage in connection with her employment and
it likewise is contrary to good morals and public policy, depriving a woman of her freedom to choose her
status, a privilege that is inherent in an individual as an intangible and inalienable right. The kind of
policy followed by PT&T strikes at the very essence, ideals and purpose of marriage as an inviolable
social institution and ultimately, family as the foundation of the nation. Such policy must be prohibited
in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the
land not only for order but also imperatively required.