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G.R. No. 189851, June 22, 2016 9.

Donaline dela Torre

INTEC CEBU INC., AKIHIKO KAMBAYASHI AND WATARU SATO, Petitioners, v. HON. 10. Joy P. Lomod
COURT OF APPEALS, ROWENA REYES, ROWENA ODIONG, HYDEE AYUDA, TERESITA
BERIDO, CRISTINA LABAPIZ, GEMMA JUMAO-AS, SIGMARINGA BAROLO, LIGAYA B. 11. Jacqueline A. Flores
ANADON, DONALINE DELA TORRE, JOY P. LOMOD, JACQUELINE A. FLORES, SUSAN T.
ALIÑO, ANALYN P. ABALLE, CAROLINE A. LABATOS, LENITH F. ROMANO, LEONILA B. 12. Susan T. Alino
FLORES, CECILIA G. PAPELLERO, AGNES C. CASIO, VIOLETA O. MATCHETE, CANDIDA I.
CRUJIDO, CLAUDIA B. CUTAMORA, ROSALIE R. POLICIOS, GENELYN C. MUÑEZ, ALOME 13. Analyn P. Aballe
MIGUE, ELSIE ALCOS, LYDIALYN B. GODINEZ AND MYRNA S. LOGAOS, Respondents.
14. Caroline A. Labatos
DECISION
15. Lenith F. Romano
PEREZ, J.:
16. Leonila B. Flores
For our resolution is this Petition for Certiorari under Rule 65 of the Rules of Court assailing 17. Cecilia G. Papellero
the Decision1dated 22 April 2009 and Resolution2 dated 31 July 2009 of the Court of Appeals
in CA-G.R. SP No. 03471. The challenged decision reversed the judgment 3 of the National
18. Agnes C. Casio
Labor Relations Commission (NLRC) and reinstatement of the Decision 4 of the Labor Arbiter.
The Labor Arbiter ruled that respondent employees were constructively dismissed.
19. Violeta O. Matchete
As culled from the records of the case, the following antecedent facts appear:
20. Candida I. Crujido
chanRoblesvirtualLawlibraryPetitioner Intec Cebu Inc. (Intec) is engaged in the manufacture
21. Claudia B. Cutamora
and assembly of mechanical system and printed circuit board for cassette tape recorder, CD
and CD ROM player while the following respondents were hired by Intec in 1997 and 1998,
22. Rosalie R. Policios
respectively, as production workers:ChanRoblesVirtualawlibrary
23. Genelyn C. Muñez
1. Rowena Reyes
24. Alome Migue,
2. Rowena R. Odiong
25. Elsie Alcos
3. Hydee P. Ayuda
26. Lydialyn B. Godinez
4. Teresita C. Berido
27. Myrna S. Logaos
5. Cristina S. Labapiz
28. Jenife Espinosa
6. Gemma T. Jumao-as
29. Maria Fe Tomo
7. Sigmaringa B. Barolo
30. Jocelyn Casiban
8. Ligaya B. Anadon
31. Ailyn Bagyao
32. Josephine Casino Cashier of this Arbitration Branch within ten (10) days from receipt of this Decision.

33. Pilar Batajoy All other claims are DISMISSED for insufficiency of evidence and for lack of jurisdiction. The
claims and the case against respondents Feliciana Tero and Cheryl Inso are DISMISSED for
34. Juliet Teofilo lack of merit.7chanroblesvirtuallawlibrary
On 14 December 2007, the NLRC set aside the Decision of the Labor Arbiter and held that
35. Cheryl Sugarol Intec suffered tremendous financial losses which justified the reduction of working days. The
dispositive portion of the decision reads:ChanRoblesVirtualawlibrary
36. Rechel Daitol WHEREFORE, the assailed decision is SET ASIDE and a new one entered declaring that
complainants were not dismissed either actually or constructively. Considering, however, all
37. Janette Quidong5 attendant factors as discussed, respondent Intec Cebu, Inc. is hereby directed to give all
thirty-seven (37) complainants their respective separation pay based on one-half month
Respondents alleged that in 2005, their working days were reduced from 6 to 2-4 days. Intec salary per year of service, or the grand total amount of ONE MILLION ONE HUNDRED
apparently explained that reduction in working days was due to lack of job orders. However, TWENTY-FIVE THOUSAND SEVEN HUNDRED THIRTY-FIVE PESOS (P1,125,735.00) as
respondents discovered that Intec hired around 188 contractual employees tasked to earlier computed per assailed decision.
perform tasks which respondents were regularly doing. On 17 May 2006, private
respondents claimed that they were effectively terminated from employment as shown in Complainants are NOT entitled to backwages.8chanroblesvirtuallawlibrary
the Establishment Termination Report6 submitted to the Department of Labor and Intec elevated the matter to the Court of Appeals. In a Decision dated 22 April 2009, the
Employment (DOLE). Two (2) days later, respondents filed a complaint for illegal dismissal. Court of Appeals reversed the NLRC and reinstated the Decision of the Labor Arbiter with
respect to respondents herein. As for Jenife Espinosa, Maria Fe Tomo, Jocelyn Casiban, Ailyn
Intec, for its part, claimed that the company was established to supply the required materials Bagyao, Josephine Casino, Pilar Batajoy, Juliet Teofilo, Cheryl Sugarol, Rechel Daitol and
of Kenwood Precision Corporation (Kenwood). When Kenwood stopped its operations in the Janette Quidong, the case was dismissed for their failure to sign the verification of
Philippines, Intec's business operations were severely affected, prompting Intec to set up a certification of non-forum shopping in their petition.
new product line exclusively for Pentax Cebu Phils. Corporation (Pentax). In December 2005,
Intec's job orders from Pentax declined. On 4 January 2006, a memorandum was issued The instant petition is one for certiorari with Intec attributing grave abuse of discretion on
informing the employees that the working days would be reduced to 3-4 days from the the part of the Court of Appeals for the following acts:ChanRoblesVirtualawlibrary
normal 6 day-work week. The reduced work week policy was extended from April to June FIRST: BY OVERTURNING ITS OWN RESOLUTION DISMISSING OUTRIGHT THE PRIVATE
2006. A corresponding memorandum was issued and a copy thereof was submitted to the RESPONDENTS' PETITION FOR CERTIORARI, AND THEREBY GIVING DUE COURSE TO
DOLE. THEIR MOTION FOR RECONSIDERATION, WITH THE MANIFEST ADVANCE
PRONOUNCEMENT THAT THE SAID MOTION WOULD EVENTUALLY BE GRANTED.
On 17 May 2007, Labor Arbiter Jermelina Pasignajen Ay-ad declared that respondents were
illegally dismissed and adjudged Intec and its officials liable for payment of separation pay SECOND: BY DISREGARDING THE FACTUAL FINDINGS OF THE HONORABLE NATIONAL
and backwages. Labor Arbiter Ay-ad found that Intec hired casual employees to replace LABOR RELATIONS COMMISSION, 4 th DIVISION, CEBU CITY, THAT THE PRIVATE
respondents. As regards the other monetary claims of respondents, Labor Arbiter Ay-ad RESPONDENTS "WERE NOT DISMISSED EITHER ACTUALLY OR CONSTRUCTIVELY."
ruled that Intec was able to prove, by presenting copies of the payroll, that private
respondents were properly paid. The dispositive portion of the Labor Arbiter's Decision THIRD: BY CAPRICIOUSLY ASSERTING THAT THE FINANCIAL STATEMENTS OF THE
reads:ChanRoblesVirtualawlibrary PETITIONERS ARE SELF-SERVING AND OF DOUBTFUL VERACITY AS THEY WERE NOT
WHEREFORE, judgment is hereby rendered declaring complainants to have been illegally PREPARED BY AN INDEPENDENT AUDITOR, WHICH ASSERTION IS IN EFFECT AN ASSAULT
(constructively) dismissed from their employment. Consequently, the respondents INTEC UPON THE INTEGRITY AND HONESTY OF THE AUDITOR.
CEBU, INC., WATARU SATO AND AKIHIRO KAMBAYASHI, are hereby directed
to PAYjointly and severally the following complainants of the amounts indicated opposite FOURTH: BY CIRCUMVENTING THE DOCTRINE LAID DOWN BY THIS HONORABLE COURT
their names as appearing in the attached Computation sheet consisting of two (2) pages, in IN THE CASE OF "JARDINE DAVIS, INC. vs. THE NLRC, ET AL.", G.R. 26272, JULY 28, 1999,
concept of separation pay and backwages in the total amount of SIX MILLION NINE THAT RESORT TO JUDICIAL REVIEW OF THE DECISION OF THE NLRC BY WAY OF SPECIAL
HUNDRED SIXTY-SEVEN THOUSAND NINE HUNDRED TWENTY-FOUR PESOS CIVIL ACTION FOR CERTIORARI UNDER RULE 65 OF THE RULES OF COURT IS CONFINED
(P6,967,924.00), in cash or in check payable to NLRC-RAB VII, Cebu City, through the ONLY TO ISSUES OF WANT OF JURISDICTION AND GRAVE ABUSE OF DISCRETION ON THE
PART OF THE LABOR TRIBUNAL, BARRING AN INQUIRY AS TO THE CORRECTNESS OF
THE EVALUATION OF EVIDENCE WHICH HAS THE BASIS OF LABOR AGENCY IN of work days prior to its implementation. If the reportorial requirement in retrenchment
REACHING A CONCLUSION; under Article 283 is to be followed, the DOLE should be notified at least one month prior to
the intended date of retrenchment. Be that as it may, Intec submitted its report after the
FIFTH: ASSUMING, WITHOUT HOWEVER ADMITTING, THAT THE PRIVATE RESPONDENTS reduction of workdays was implemented. Moreover, there is nothing on the records which
ARE ENTITLED TO SEPARATION PAY AND BACKWAGES, AS DETERMINED BY THE LABOR show that a second notice was sent to the employees informing them of the extension of the
ARBITER, THE COMPUTATION OF BENEFITS RECEIVEABLE - WHICH CONTAINS GLARING reduced work days to June 2006.
SERIOUS ERROR, IF REINSTATED, AS THE COURT OF APPEALS, 18 th DIVISION, WANTED IT
TO BE.9chanroblesvirtuallawlibrary Intec presented its financial statements from the years 2001-2006 to prove that the
Intec claims that the reduction of the number of working days was undertaken to forestall company was suffering from financial losses owing to the decline of its job orders. The
business losses as proven by the audited financial statements of Intec for the years 2001- summary of Intec's net income/loss for the years 2001-2006 is illustrated
2006. Intec insists that the workers they employed from TESDA and Sisters of Mary were on- below:ChanRoblesVirtualawlibrary
the-job trainees and they were already employed prior to the implementation of the reduced SUMMARY OF INTEC'S NET INCOME (LOSS) 31 APRIL 2001-2006
working days policy of the company. Moreover, Intec stresses that these workers were
retained to enable the company to comply with the urgent off-and-on job orders of Pentax
which could not be accomplished by the regular employees. Net Income Net Loss Totals

Intec reiterates that respondents voluntarily resigned or abandoned their work when they April 30, 2001 (9,708,820.00) (9,708,820.00)
filed their application for leave following the issuance of the second memorandum extending
April 30, 2002 (5,928,636.00) (5,928,636.00)
the implementation of the reduced number of working days. According to Intec, respondents
had categorically declared that they would no longer report for work.
April 30, 2003 4,669,180.00 4,669,180.00
Respondents urge this Court to affirm the findings of the Labor Arbiter and the Court of
April 30, 2004 4,726,326.00 4,726,326.00
Appeals that they were constructively dismissed. Respondents refutes Intec's claim that it is
suffering from business reverses when it just hired additional workers from TESDA and April 30, 2005 (9,240,929.00) (9,240,929.00)
Sisters of Mary despite the fact that respondents were under reduced work days.
April 30, 2006 9,568,674.00 9,568,674.00
The charge of constructive dismissal is predicated on the claim that the implementation of
the reduced work week is illegal. TOTAL 18,964,180.00 (24,878,385.00) (5,914,205.00)11
The Court has held that management is free to regulate, according to its own discretion and An examination of Intec's financial statements for 2005-2006 shows that while Intec
judgment, all aspects of employment, including hiring, work assignments, working methods, suffered a net loss of P9,240,929.00 in 2005, it earned a net income of P9,568,674.00 in
time, place, and manner of work, processes to be followed, supervision of workers, working 2006. The period covered in the financial statement of 2006 is from May 2005-April 2006. It
regulations, transfer of employees, work supervision, lay-off of workers, and discipline, was only on the 9th month of operation did Intec decide to carry out the reduced work day
dismissal and recall of workers. The exercise of management prerogative, however, is not scheme. Note that the reduced work day scheme was implemented only in January 2006.
absolute as it must be exercised in good faith and with due regard to the rights of Unless evidence is shown by the company that the income for 2006 was earned only
labor.10chanrobleslaw between the months of January to April, it is safe to presume that at the time the reduced
work day scheme was being implemented, the company was still benefiting from its gains as
Thus, it was incumbent upon Intec to prove that that the implementation of the reduced shown in the numbers for 2006.
working days is valid and done in good faith. Intec claims that it implemented a reduction of
work days scheme to forestall its losses. Furthermore, the loss incurred in 2005 may be attributed to the acquisition of property and
equipment amounting to P9,218,967.0012 in 2005. There is also no indication in the financial
Two memoranda were allegedly sent to the affected employees informing them of the statements, much less an observation made by the independent auditor, that a reduction in
reduction of work days. The first memorandum was dated 4 January 2006 and submitted to demand would necessitate a reduction in the employees' work days.
the DOLE only on 9 January 2006. In 2006, there was no specific rule or guideline covering
the reduction of workdays. It was only in January 2009 where the DOLE issued Department We cannot give weight to the evidence presented by Intec to prove the slump in demand.
Advisory No. 2, Series of 2009 which requires the employer to notify DOLE of the reduction First, the two-page delivery data are lacking in specifics. The report did not indicate when it
was prepared. Second, the report was prepared by Intec employees and approved by their impugned order. Mere abuse of discretion is not enough; it must be grave. The term grave
President. Third, the report appeared to be mere projections because it was not supported abuse of discretion is defined as a capricious and whimsical exercise of judgment so patent
by corresponding sales or delivery receipts. The actual sales may vary from the projected and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty
demand, thus, the report cannot be made as basis of a slump in demand or a slow-down. enjoined by law, as where the power is exercised in an arbitrary and despotic manner
because of passion or hostility.16chanrobleslaw
In addition, the hiring of 188 workers, whether they be trainees or casual employees,
necessarily incurred cost to the company. No proof was submitted that these newly-hired A writ of certiorari will not issue where the remedy of appeal is available to the aggrieved
employees were performing work different from the regular workers. party.17 In this case, appeal under Rule 45 of the Rules of Court was clearly available to Intec.

In sum, there is no reason to implement a cost-cutting measure in the form of reducing the Finding no grave abuse of discretion in this case, the certiorari petition should be dismissed.
employees' working days.
WHEREFORE, the instant petition is DISMISSED and the Decision dated 22 April 2009 and
Intec committed illegal reduction of work hours. Constructive dismissal occurs when there is Resolution dated 31 July 2009 of the Court of Appeals in CA-G.R. SP No. 03471
cessation of work because continued employment is rendered impossible, unreasonable or are AFFIRMED.
unlikely; when there is a demotion in rank or diminution in pay or both; or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the SO ORDERED.chanRoblesvirtualLawlibrary
employee.13chanrobleslaw -------------------------------x

Intec's unilateral and arbitrary reduction of the work day scheme had significantly greatly MARITAL DISCRIMINATION
reduced respondents' salaries thereby rendering it liable for constructive dismissal.
STAR PAPER CORPORATION, G.R. No. 164774
There is no merit to Intec's charge of abandonment against respondents. To constitute JOSEPHINE ONGSITCO &
abandonment, there must be clear proof of deliberate and unjustified intent to sever the SEBASTIAN CHUA,
employer-employee relationship. Clearly, the operative act is still the employee's ultimate Petitioners, Present:
act of putting an end to his employment. Furthermore, it is a settled doctrine that the filing of
a complaint for illegal dismissal is inconsistent with abandonment of employment. An PUNO, J., Chairman,
employee who takes steps to protest his dismissal cannot logically be said to have SANDOVAL-GUTIERREZ,
abandoned his work. The filing of such complaint is proof enough of his desire to return to CORONA,
work, thus negating any suggestion of abandonment.14chanrobleslaw AZCUNA, and
-versus- GARCIA, JJ.
We affirm the Court of Appeals' finding that there is no proof that respondents committed
unauthorized absences or had otherwise refused to work. The complaint for constructive Promulgated:
dismissal is the best evidence against abandonment because the filing of a complaint for RONALDO D. SIMBOL, April 12, 2006
illegal dismissal is incompatible to abandonment. WILFREDA N. COMIA &
LORNA E. ESTRELLA,
Lastly, we note that Intec availed of the wrong mode of appeal. For certiorari to prosper, the Respondents.
following requisites must concur: (1) the writ is directed against a tribunal, a board or any x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
officer exercising judicial or quasi-judicial functions; (2) such tribunal, board or officer has
acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack DECISION
or excess of jurisdiction; and (3) there is no appeal or any plain, speedy and adequate
remedy in the ordinary course of law.15chanrobleslaw PUNO, J.:

Well-settled is the rule that a petition for certiorari against a court which has jurisdiction
over a case will prosper only if grave abuse of discretion is manifested. The burden is on the
part of the petitioner to prove not merely reversible error, but grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the public respondent issuing the
We are called to decide an issue of first impression: whether the policy of the employer The respondents each signed a Release and Confirmation Agreement. They stated therein
banning spouses from working in the same company violates the rights of the employee that they have no money and property accountabilities in the company and that they release
under the Constitution and the Labor Code or is a valid exercise of management prerogative. the latter of any claim or demand of whatever nature.[7]
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals
dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Respondents offer a different version of their dismissal. Simbol and Comia allege that they
Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter. did not resign voluntarily; they were compelled to resign in view of an illegal company
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading policy. As to respondent Estrella, she alleges that she had a relationship with co-worker
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and Zuiga who misrepresented himself as a married but separated man. After he got her
Administration Department while Sebastian Chua is its Managing Director. pregnant, she discovered that he was not separated. Thus, she severed her relationship with
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), him to avoid dismissal due to the company policy. On November 30, 1999, she met an
Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-
company.[1] one (21) days. She returned to work on December 21, 1999 but she found out that her name
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel
employee of the company, whom he married on June 27, 1998. Prior to the marriage, office where one of the staff handed her a memorandum. The memorandum stated that she
Ongsitco advised the couple that should they decide to get married, one of them should was being dismissed for immoral conduct. She refused to sign the memorandum because she
resign pursuant to a company policy promulgated in 1995,[2] viz.: was on leave for twenty-one (21) days and has not been given a chance to explain. The
management asked her to write an explanation. However, after submission of the
1. New applicants will not be allowed to be hired if in case he/she has [a]
explanation, she was nonetheless dismissed by the company. Due to her urgent need for
relative, up to [the] 3rd degree of relationship, already employed by the
company. money, she later submitted a letter of resignation in exchange for her thirteenth month
pay.[8]
2. In case of two of our employees (both singles [sic], one Respondents later filed a complaint for unfair labor practice, constructive dismissal,
male and another female) developed a friendly relationship during the
course of their employment and then decided to get married, one of them separation pay and attorneys fees. They averred that the aforementioned company policy is
should resign to preserve the policy stated above.[3] illegal and contravenes Article 136 of the Labor Code. They also contended that they were
dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack
Simbol resigned on June 20, 1998 pursuant to the company policy.[4]
of merit, viz.:
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-
employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that [T]his company policy was decreed pursuant to what the
pursuant to company policy, one must resign should they decide to get married. Comia respondent corporation perceived as management prerogative. This
resigned on June 30, 2000.[5] management prerogative is quite broad and encompassing for it covers
hiring, work assignment, working method, time, place and manner of work,
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker. tools to be used, processes to be followed, supervision of workers, working
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly regulations, transfer of employees, work supervision, lay-off of workers and
could have terminated her services due to immorality but she opted to resign on December the discipline, dismissal and recall of workers. Except as provided for or
limited by special law, an employer is free to regulate, according to his own
21, 1999.[6]
discretion and judgment all the aspects of employment. [9] (Citations
omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter Article XIII, Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and
on January 11, 2002. [10]
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a bargaining and negotiations, and peaceful concerted activities, including the
Resolution[11] dated August 8, 2002. They appealed to respondent court via Petition for right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
Certiorari. participate in policy and decision-making processes affecting their rights
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC and benefits as may be provided by law.
decision, viz.:
The State shall promote the principle of shared responsibility between
WHEREFORE, premises considered, the May 31, 2002 (sic)[12]
Decision of workers and employers, recognizing the right of labor to its just share in the
the National Labor Relations Commission is hereby REVERSED and SET fruits of production and the right of enterprises to reasonable returns on
ASIDE and a new one is entered as follows: investments, and to expansion and growth.

(1) Declaring illegal, the petitioners dismissal from


employment and ordering private respondents to reinstate The Civil Code likewise protects labor with the following provisions:
petitioners to their former positions without loss of
seniority rights with full backwages from the time of their Art. 1700. The relation between capital and labor are not merely
dismissal until actual reinstatement; and contractual. They are so impressed with public interest that labor contracts
must yield to the common good. Therefore, such contracts are subject to the
(2) Ordering private respondents to pay petitioners special laws on labor unions, collective bargaining, strikes and lockouts,
attorneys fees amounting to 10% of the award and the cost closed shop, wages, working conditions, hours of labor and similar subjects.
of this suit.[13]
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall
be construed in favor of the safety and decent living for the laborer.
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:

1. X X X THE SUBJECT 1995 POLICY/REGULATION IS VIOLATIVE OF THE The Labor Code is the most comprehensive piece of legislation protecting labor. The case at
CONSTITUTIONAL RIGHTS TOWARDS MARRIAGE AND THE FAMILY OF bar involves Article 136 of the Labor Code which provides:
EMPLOYEES AND OF ARTICLE 136 OF THE LABOR CODE; AND
2. X X X RESPONDENTS RESIGNATIONS WERE FAR FROM VOLUNTARY.[14] Art. 136. It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee shall
We affirm. 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
The 1987 Constitution[15] states our policy towards the protection of labor under the employee merely by reason of her marriage.
following provisions, viz.:

Respondents submit that their dismissal violates the above provision. Petitioners allege that
its policy may appear to be contrary to Article 136 of the Labor Code but it assumes a new
Article II, Section 18. The State affirms labor as a primary social economic
force. It shall protect the rights of workers and promote their welfare. meaning if read together with the first paragraph of the rule. The rule does not require the
woman employee to resign. The employee spouses have the right to choose who between
xxx them should resign. Further, they are free to marry persons other than co-employees. Hence,
it is not the marital status of the employee, per se, that is being discriminated. It is only status as either married, single, divorced, or widowed, they are divided on whether the term
intended to carry out its no-employment-for-relatives-within-the-third-degree-policy which has a broader meaning. Thus, their decisions vary.[24]
is within the ambit of the prerogatives of management.[16] The courts narrowly[25] interpreting marital status to refer only to a person's status as
It is true that the policy of petitioners prohibiting close relatives from working in the same married, single, divorced, or widowed reason that if the legislature intended a broader
company takes the nature of an anti-nepotism employment policy. Companies adopt these definition it would have either chosen different language or specified its intent. They hold
policies to prevent the hiring of unqualified persons based on their status as a relative, that the relevant inquiry is if one is married rather than to whom one is married. They
rather than upon their ability.[17] These policies focus upon the potential employment construe marital status discrimination to include only whether a person is single, married,
problems arising from the perception of favoritism exhibited towards relatives. divorced, or widowed and not the identity, occupation, and place of employment of one's
With more women entering the workforce, employers are also enacting employment policies spouse. These courts have upheld the questioned policies and ruled that they did not violate
specifically prohibiting spouses from working for the same company. We note that two types the marital status discrimination provision of their respective state statutes.
of employment policies involve spouses: policies banning only spouses from working in the The courts that have broadly[26] construed the term marital status rule that it encompassed
same company (no-spouse employment policies), and those banning all immediate family the identity, occupation and employment of one's spouse. They strike down the no-spouse
members, including spouses, from working in the same company (anti-nepotism employment policies based on the broad legislative intent of the state statute. They reason
employment policies).[18] that the no-spouse employment policy violate the marital status provision because it
arbitrarily discriminates against all spouses of present employees without regard to the
actual effect on the individual's qualifications or work performance. [27] These courts also
find the no-spouse employment policy invalid for failure of the employer to present any
Unlike in our jurisdiction where there is no express prohibition on marital
evidence of business necessity other than the general perception that spouses in the same
discrimination,[19] there are twenty state statutes[20] in the United States prohibiting marital
workplace might adversely affect the business.[28] They hold that the absence of such a bona
discrimination. Some state courts[21] have been confronted with the issue of whether no-
fide occupational qualification[29] invalidates a rule denying employment to one spouse
spouse policies violate their laws prohibiting both marital status and sex discrimination.
due to the current employment of the other spouse in the same office. [30] Thus, they rule that
In challenging the anti-nepotism employment policies in the United States, complainants
unless the employer can prove that the reasonable demands of the business require a
utilize two theories of employment discrimination: the disparate treatment and
distinction based on marital status and there is no better available or acceptable policy
the disparate impact. Under the disparate treatment analysis, the plaintiff must prove
which would better accomplish the business purpose, an employer may not discriminate
that an employment policy is discriminatory on its face. No-spouse employment policies
against an employee based on the identity of the employees spouse. [31] This is known as
requiring an employee of a particular sex to either quit, transfer, or be fired are facially
the bona fide occupational qualification exception.
discriminatory. For example, an employment policy prohibiting the employer from hiring
We note that since the finding of a bona fide occupational qualification justifies an employers
wives of male employees, but not husbands of female employees, is discriminatory on its
no-spouse rule, the exception is interpreted strictly and narrowly by these state courts.
face.[22]
There must be a compelling business necessity for which no alternative exists other than the
On the other hand, to establish disparate impact, the complainants must prove that a
discriminatory practice.[32] To justify a bona fide occupational qualification, the employer
facially neutral policy has a disproportionate effect on a particular class. For example,
must prove two factors: (1) that the employment qualification is reasonably related to the
although most employment policies do not expressly indicate which spouse will be required
essential operation of the job involved; and, (2) that there is a factual basis for believing that
to transfer or leave the company, the policy often disproportionately affects one sex.[23]
all or substantially all persons meeting the qualification would be unable to properly
The state courts rulings on the issue depend on their interpretation of the scope of marital
perform the duties of the job.[33]
status discrimination within the meaning of their respective civil rights acts. Though
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
they agree that the term marital status encompasses discrimination based on a person's
employ the standard of reasonableness of the company policy which is parallel to the bona
fide occupational qualification requirement. In the recent case of Duncan Association paragraph of the questioned rule[39] is evidently not the valid reasonable business necessity
of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, required by the law.
Inc.,[34] we passed on the validity of the policy of a pharmaceutical company prohibiting its
It is significant to note that in the case at bar, respondents were hired after they
employees from marrying employees of any competitor company. We held that Glaxohas a
were found fit for the job, but were asked to resign when they married a co-employee.
right to guard its trade secrets, manufacturing formulas, marketing strategies and other
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to
confidential programs and information from competitors. We considered the prohibition Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business
against personal or marital relationships with employees of competitor companies operations. Neither did petitioners explain how this detriment will happen in the case
upon Glaxos employees reasonable under the circumstances because relationships of that of Wilfreda Comia, then a Production Helper in the Selecting Department, who married
nature might compromise the interests of Glaxo. In laying down the assailed company policy, Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear
we recognized that Glaxo only aims to protect its interests against the possibility that a that employees married to each other will be less efficient. If we uphold the questioned rule
competitor company will gain access to its secrets and procedures.[35] without valid justification, the employer can create policies based on an unproven
presumption of a perceived danger at the expense of an employees right to security of
The requirement that a company policy must be reasonable under the tenure.
circumstances to qualify as a valid exercise of management prerogative was also at issue in
the 1997 case of Philippine Telegraph and Telephone Company v. NLRC.[36] In said case,
Petitioners contend that their policy will apply only when one employee marries a
the employee was dismissed in violation of petitioners policy of disqualifying from work any
woman worker who contracts marriage. We held that the company policy violates the right co-employee, but they are free to marry persons other than co-employees. The questioned
against discrimination afforded all women workers under Article 136 of the Labor Code, but policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate
established a permissible exception, viz.:
effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a
[A] requirement that a woman employee must remain unmarried could be showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The
justified as a bona fide occupational qualification, or BFOQ, where the
failure of petitioners to prove a legitimate business concern in imposing the questioned
particular requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of spreading work in policy cannot prejudice the employees right to be free from arbitrary discrimination based
the workplace. A requirement of that nature would be valid provided it
reflects an inherent quality reasonably necessary for satisfactory job upon stereotypes of married persons working together in one company.[40]
performance.[37] (Emphases supplied.)

Lastly, the absence of a statute expressly prohibiting marital discrimination in our


The cases of Duncan and PT&T instruct us that the requirement of reasonableness jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is
must be clearly established to uphold the questioned employment policy. The employer has
vast and extensive that we cannot prudently draw inferences from the legislatures
the burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T. silence[41] that married persons are not protected under our Constitution and declare valid a
policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
We do not find a reasonable business necessity in the case at bar.
undisputed proof of a reasonable business necessity, we rule that the questioned policy is an

Petitioners sole contention that the company did not just want to have two (2) or invalid exercise of management prerogative. Corollarily, the issue as to whether respondents
more of its employees related between the third degree by affinity and/or Simbol and Comia resigned voluntarily has become moot and academic.
consanguinity[38] is lame. That the second paragraph was meant to give teeth to the first
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the SO ORDERED.
singular fact that her resignation letter was written in her own handwriting. Both ruled that
-----------------------------------------------------------X
her resignation was voluntary and thus valid. The respondent court failed to categorically
rule whether Estrella voluntarily resigned but ordered that she be reinstated along with
Simbol and Comia. CHRISTINE JOY CAPIN-CADIZ, Petitioner, v. BRENT HOSPITAL AND COLLEGES,
INC., Respondent.

Estrella claims that she was pressured to submit a resignation letter because she DECISION
was in dire need of money. We examined the records of the case and find Estrellascontention
REYES, J.:
to be more in accord with the evidence. While findings of fact by administrative tribunals like
the NLRC are generally given not only respect but, at times, finality, this rule admits of This is a petition for review on certiorari1 under Rule 45 of the Rules of Court assailing the
Resolutions dated July 22, 20082 and February 24, 20093 of the Court of Appeals (CA) in CA-
exceptions,[42] as in the case at bar.
G.R. SP No. 02373-MIN, which dismissed the petition filed by petitioner Christine Joy Capin-
Cadiz (Cadiz) on the following grounds: (1) incomplete statement of material dates; (2)
failure to attach registry receipts; and (3) failure to indicate the place of issue of counsel's
Estrella avers that she went back to work on December 21, 1999 but was dismissed
Professional Tax Receipt (PTR) and Integrated Bar of the Philippines (IBP) official receipts.
due to her alleged immoral conduct. At first, she did not want to sign the termination papers
Antecedent Facts
but she was forced to tender her resignation letter in exchange for her thirteenth month pay.
Cadiz was the Human Resource Officer of respondent Brent Hospital and Colleges, Inc.
(Brent) at the time of her indefinite suspension from employment in 2006. The cause of
The contention of petitioners that Estrella was pressured to resign because she got suspension was Cadiz's Unprofessionalism and Unethical Behavior Resulting to Unwed
impregnated by a married man and she could not stand being looked upon or talked about as Pregnancy. It appears that Cadiz became pregnant out of wedlock, and Brent imposed the
suspension until such time that she marries her boyfriend in accordance with law.
immoral[43] is incredulous. If she really wanted to avoid embarrassment and humiliation, she
would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal Cadiz then filed with the Labor Arbiter (LA) a complaint for Unfair Labor Practice,
Constructive Dismissal, Non-Payment of Wages and Damages with prayer for
and pleaded for reinstatement. We have held that in voluntary resignation, the employee is Reinstatement.4
compelled by personal reason(s) to dissociate himself from employment. It is done with the
Ruling of the Labor Tribunals
intention of relinquishing an office, accompanied by the act of abandonment. [44] Thus, it is
illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of In its Decision5 dated April 12, 2007, the LA found that Cadiz's indefinite suspension
amounted to a constructive dismissal; nevertheless, the LA ruled that Cadiz was not illegally
sufficient evidence on the part of petitioners that the resignation was dismissed as there was just cause for her dismissal, that is, she engaged in premarital sexual
voluntary, Estrellas dismissal is declared illegal. relations with her boyfriend resulting in a pregnancy out of wedlock.6 The LA further stated
that her "immoral conduct x x x [was] magnified as serious misconduct not only by heir
getting pregnant as a result thereof before and without marriage, but more than that, also by
the fact that Brent is an institution of the Episcopal Church in the Philippines operating both
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477
a hospital and college where [Cadiz] was employed." 7 The LA also ruled that she was not
dated August 3, 2004 is AFFIRMED. entitled to reinstatement "at least until she marries her boyfriend," to backwages and
vacation/sick leave pay. Brent, however, manifested that it was willing to pay her 1311 CLAIM FOR BACKWAGES, ALLOWANCES, SICK LEAVE PAY, MATERNITY PAY AND MORAL
month pay. The dispositive portion of the decision reads: AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES16

WHEREFORE, judgment is hereby rendered, ordering [Brent] to pay [Cadiz] 13th month pay IV
in the sum of Seven Thousand Nine Hundred Seventy & 11/100 Pesos (P7,970.11).
THE [CA] MISPLACED APPLICATION OF THE MATERIAL DATA RULE RESULTING TO GRAVE
All other charges and claims are hereby dismissed for lack of merit. ABUSE OF DISCRETION WHEN IT DISMISSED THE APPEAL17

SO ORDERED.8ChanRoblesVirtualawlibrary Cadiz contends, among others, that getting pregnant outside of wedlock is not grossly
immoral, especially when both partners do not have any legal impediment to marry. Cadiz
Cadiz appealed to the National Labor Relations Commission (NLRC), which affirmed the LA surmises that the reason for her suspension was not because of her relationship with her
decision in its Resolution9 dated December 10, 2007. Her motion for reconsideration having then boyfriend but because of the resulting pregnancy. Cadiz also lambasts Brent's condition
been denied by the NLRC in its Resolution10 dated February 29, 2008, Cadiz elevated her for her reinstatement - that she gets married to her boyfriend - saying that this violates the
case to the CA on petition for certiorariunder Rule 65. stipulation against marriage under Article 136 of the Labor Code. Finally, Cadiz contends
that there was substantial compliance with the rules of procedure, and the CA should not
Ruling of the CA have dismissed the petition.18

The CA, however, dismissed her petition outright due to technical defects in the petition: (1) Brent, meanwhile, adopts and reiterates its position before the LA and the NLRC that Cadiz's
incomplete statement of material dates; (2) failure to attach registry receipts; and (3) failure arguments are irrational and out of context. Brent argues, among others, that for Cadiz to
to indicate the place of issue of counsel's PTR and IBP official receipts. 11 Cadiz sought limit acts of immorality only to extra-marital affairs is to "change the norms, beliefs,
reconsideration of the assailed CA Resolution dated July 22, 2008 but it was denied in the teachings and practices of BRENT as a Church institution of the x x x Episcopal Church in the
assailed Resolution dated February 24, 2009.12The CA further ruled that "a perusal of the Philippines."19
petition will reveal that public respondent NLRC committed no grave abuse of discretion
amounting to lack or excess of jurisdiction x x x holding [Cadiz's] dismissal from employment Ruling of the Court
valid."13
Ordinarily, the Court will simply gloss over the arguments raised by Cadiz, given that the
Hence, the present petition. Cadiz argues that - main matter dealt with by the CA were the infirmities found in the petition and which caused
the dismissal of her case before it. In view, however, of the significance of the issues involved
I in Cadiz's dismissal from employment, the Court will resolve the petition including the
substantial grounds raised herein.
THE HONORABLE [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT HELD TFIAT
[CADIZ'S] IMPREGNATION OUTSIDE OF WEDLOCK IS A GROUND FOR THE TERMINATION The issue to be resolved is whether the CA committed a reversible error in ruling that: (1)
OF [CADIZ'S] EMPLOYMENT14 Cadiz's petition is dismissible on ground of technical deficiencies; and (2) the NLRC did not
commit grave abuse of discretion in upholding her dismissal from employment.
II
Rules of procedure are mere
THE [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT UPHELD THE tools designed to facilitate the
DISMISSAL OF [CADIZ] ON THE GROUND THAT THE INDEFINITE SUSPENSION WAS VALID attainment of justice
AND REQUIRED [CADIZ] TO FIRST ENTER INTO MARRIAGE BEFORE SHE CAN BE
ADMITTED BACK TO HER EMPLOYMENT15 In dismissing outright Cadiz's petition, the CA found the following defects: (1) incomplete
statement of material dates; (2) failure to attach registry receipts; and (3) failure to indicate
III the place of issue of counsel's PTR and IBP official receipts.

RESPONDENT [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT DENIED [CADIZ'S] Rule 46, Section 3 of the Rules of Court states the contents of a petition filed with the CA
under Rule 65, viz, "the petition shall x x x indicate the material dates showing when notice
of the judgment or final order or resolution subject thereof was received, when a motion for
new trial or reconsideration, if any, was filed and when notice of the denial thereof was conduct, including premarital sexual relations, or fornication xxx. She should have been the
received." The rationale for this is to enable the CA to determine whether the petition was epitome of proper conduct, but miserably failed. She herself engaged in premarital sexual
filed within the period fixed in the rules.20 Cadiz's failure to state the date of receipt of the relations, which surely scandalized the Brent community, x x x.31
copy of the NLRC decision, however, is not fatal to her case since the more important
material date which must be duly alleged in a petition is the date of receipt of the resolution The NLRC, for its part, sustained the LA's conclusion.
of denial of the motion for reconsideration,21 which she has duly complied with.22
The Court, however, cannot subscribe to the labor tribunals' conclusions.
The CA also dismissed the petition for failure to attach the registry receipt in the affidavit of
service.23Cadiz points out, on the other hand, that the registry receipt number was indicated Admittedly, one of the grounds for disciplinary action under Brent's policies is immorality,
in the petition and this constitutes substantial compliance with the requirement. What the which is punishable by dismissal at first offense32 Brent's Policy Manual provides:
rule requires, however, is that the registry receipt must be appended to the paper being
served.24 Clearly, mere indication of the registry receipt numbers will not suffice. In fact, the CATEGORY IV
absence of the registry receipts amounts to lack of proof of service. 25 Nevertheless, despite
this defect, the Court finds that the ends of substantial justice would be better served by In accordance with Republic Act No. 1052,33 the following are just cause for terminating an
relaxing the application of technical rules of procedure. 26 With regard to counsel's failure to employment of an employee without a definite period:
indicate the place where the IBP and PTR receipts were issued, there was substantial
compliance with the requirement since it was indicated in the verification and certification x x x x
of non-forum shopping, as correctly argued by Cadiz's lawyer.27cralawred
2. Serious misconduct or willful disobedience by the employee of the orders of his employer
Time and again, the Court has emphasized that rules of procedure are designed to secure or representative in connection with his work, such as, but not limited to the following:
substantial justice. These are mere tools to expedite the decision or resolution of cases and if chanRoblesvirtualLawlibrary
their strict and rigid application would frustrate rather than promote substantial justice, x x x x
then it must be avoided.28
b. Commission of immoral conduct or indecency within the company premises, such as an
Immorality as a just cause for act of lasciviousness or any act which is sinful and vulgar in nature.
termination of employment
c. Immorality, concubinage, bigamy.34ChanRoblesVirtualawlibrary
Both the LA and the NLRC upheld Cadiz's dismissal as. one attended with just cause. The LA,
while ruling that Cadiz's indefinite suspension was tantamount to a constructive dismissal, Its Employee's Manual of Policies, meanwhile, enumerates "[a]cts of immorality such as
nevertheless found that there was just cause for her dismissal. According to the LA, "there scandalous behaviour, acts of lasciviousness against any person (patient, visitors, co-
was just cause therefor, consisting in her engaging in premarital sexual relations with Carl workers) within hospital premises"35 as a ground for discipline and discharge. Brent also
Cadiz, allegedly her boyfriend, resulting in her becoming pregnant out of wedlock." 29 The LA relied on Section 94 of the Manual of Regulations for Private Schools (MRPS), which lists
deemed said act to be immoral, which was punishable by dismissal under Brent's rules and "disgraceful or immoral conduct" as a cause for terminating employment. 36
which likewise constituted serious misconduct under Article 282(a) of the Labor Code. The
LA also opined that since Cadiz was Brent's ITuman Resource Officer in charge of Thus, the question that must be resolved is whether Cadiz's premarital relations with her
implementing its rules against immoral conduct, she should have been the "epitome of boyfriend and the resulting pregnancy out of wedlock constitute immorality. To resolve this,
proper conduct."30 The LA ruled: the Court makes reference to the recently promulgated case of Cheryll Santos Lens v. St.
Scholastica 's College Westgrove and/or Sr. Edna Quiambao, OSB37
[Cadiz's] immoral conduct by having premarital sexual relations with her alleged boy friend,
a former Brent worker and her co-employee, is magnified as serious misconduct not only by Leus involved the same personal circumstances as the case at bench, albeit the employer was
her getting pregnant as a result thereof before and without marriage, but more than that, a Catholic and sectarian educational institution and the petitioner, Cheryl 1 Santos Leus
also by the fact that Brent is an institution of the Episcopal Church in the Philippines xxx (Leus), worked as an assistant to the school's Director of the Lay Apostolate and Community
committed to "developing competent and dedicated professionals xxx and in providing Outreach Directorate. Leus was dismissed from employment by the school for having borne
excellent medical and other health services to the community for the Glory of God and a child out of wedlock. The Court ruled in Leus that the determination of whether a conduct
Service to Humanity." x x x As if these were not enough, [Cadiz] was Brent's Human Resource is disgraceful or immoral involves a two-step process: first, a consideration of the totality of
Officer charged with, among others, implementing the rules of Brent against immoral the circumstances surrounding the conduct; and second, an assessment of the said
circumstances vis-a-vis the prevailing norms of conduct, i.e., what the society generally prescribing such religious standard as gauge as these regulations create the obligation on
considers moral and respectable. both the employee and the employer to abide by the same.46

In this case, the surrounding facts leading to Cadiz's dismissal are straightforward - she was Brent, likewise, cannot resort to the MRPS because the Court already stressed in Leus that
employed as a human resources officer in an educational and medical institution of the "premarital sexual relations between two consenting adults who have no impediment to
Episcopal Church of the Philippines; she and her boyfriend at that time were both single; marry each other, and, consequently, conceiving a child out of wedlock, gauged from a purely
they engaged in premarital sexual relations, which resulted into pregnancy. The labor public and secular view of morality, does not amount to a disgraceful or immoral conduct
tribunals characterized these as constituting disgraceful or immoral conduct. They also under Section 94(e) of the 1992 MRPS."47
sweepingly concluded that as Human Resource Officer, Cadiz should have been the epitome
of proper conduct and her indiscretion "surely scandalized the Brent community." 38 Marriage as a condition for reinstatement

The foregoing circumstances, however, do not readily equate to disgraceful and immoral The doctrine of management prerogative gives an employer the right to "regulate, according
conduct. Brent's Policy Manual and Employee's Manual of Policies do not define what to his own discretion and judgment, all aspects of employment, including hiring, work
constitutes immorality; it simply stated immorality as a ground for disciplinary action. assignments, working methods, the time, place and manner of work, work supervision,
Instead, Brent erroneously relied on the standard dictionary definition of fornication as a transfer of employees, lay-off of workers, and discipline, dismissal, and recall of
form of illicit relation and proceeded to conclude that Cadiz's acts fell under such employees."48 In this case, Brent imposed on Cadiz the condition that she subsequently
classification, thus constituting immorality.39 contract marriage with her then boyfriend for her to be reinstated. According to Brent, this is
"in consonance with the policy against encouraging illicit or common-law relations that
Jurisprudence has already set the standard of morality with which an act should be gauged - would subvert the sacrament of marriage."49
it is public and secular, not religious.40 Whether a conduct is considered disgraceful or
immoral should be made in accordance with the prevailing norms of conduct, which, as Statutory law is replete with legislation protecting labor and promoting equal opportunity in
stated in Leus, refer to those conducts which are proscribed because they are detrimental to employment. No less than the 1987 Constitution mandates that the "State shall afford full
conditions upon which depend the existence and progress of human society. The fact protection to labor, local and overseas, organized and unorganized, and promote full
that a particular act does not conform to the traditional moral views of a certain sectarian employment and equality of employment opportunities for all." 50 The Labor Code of the
institution is not sufficient reason to qualify such act as immoral unless it, likewise, does not Philippines, meanwhile, provides:
conform to public and secular standards. More importantly, there must be substantial
evidence to establish that premarital sexual relations and pregnancy out of wedlock is Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a
considered disgraceful or immoral.41 condition of employment or continuation of employment that a woman employee shall not
get married, or to stipulate expressly or tacitly that upon getting married, a woman
The totality of the circumstances of this case does not justify the conclusion that Cadiz employee shall be deemed resigned or separated, or to actually dismiss, discharge,
committed acts of immorality. Similar to Leus, Cadiz and her boyfriend were both single and discriminate or otherwise prejudice a woman employee merely by reason of her marriage.
had no legal impediment to marry at the time she committed the alleged immoral conduct. In
fact, they eventually married on April 15, 2008.42 Aside from these, the labor tribunals' With particular regard to women, Republic Act No. 9710 or the Magna Carta of
respective conclusion that Cadiz's "indiscretion" "scandalized the Brent community" is Women51 protects women against discrimination in all matters relating to marriage and
speculative, at most, and there is no proof adduced by Brent to support such sweeping family relations, including the right to choose freely a spouse and to enter into marriage
conclusion. Even Brent admitted that it came to know of Cadiz's "situation" only when her only with their free and full consent.52
pregnancy became manifest.43 Brent also conceded that "[a]t the time [Cadiz] and Carl R.
Cadiz were just carrying on their boyfriend-girlfriend relationship, there was no knowledge Weighed against these safeguards, it becomes apparent that Brent's condition is coercive,
or evidence by [Brent] that they were engaged also in premarital sex." 44 This only goes to oppressive and discriminatory. There is no rhyme or reason for it. It forces Cadiz to marry
show that Cadiz did not flaunt her premarital relations with her boyfriend and it was not for economic reasons and deprives her of the freedom to choose her status, which is a
carried on under scandalous or disgraceful circumstances. As declared in Leus, "there is no privilege that inheres in her as an intangible and inalienable right.53 While a marriage or no-
law which penalizes an unmarried mother by reason of her sexual conduct or proscribes the marriage qualification may be justified as a "bona fide occupational qualification," Brent
consensual sexual activity between two unmarried persons; that neither does such situation must prove two factors necessitating its imposition, viz: (1) that the employment
contravene[s] any fundamental state policy enshrined in the Constitution." 45 The fact that qualification is reasonably related to the essential operation of the job involved; and (2)
Brent is a sectarian institution does not automatically subject Cadiz to its religious standard that there is a factual basis for believing that all or substantially all persons meeting the
of morality absent an express statement in its manual of personnel policy and regulations, qualification would be unable to properly perform the duties of the job. 54 Brent has not
shown the presence of neither of these factors. Perforce, the Court cannot uphold the validity
or 12 months 12
of said condition.
P109,304.40
Given the foregoing, Cadiz, therefore, is entitled to reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option, Finally, with regard to Cadiz's prayer for moral and exemplary damages, the Court finds the
separation pay should be awarded as an alternative and as a form of financial assistance. 55 In same without merit. A finding of illegal dismissal, by itself, does not establish bad faith to
the computation of separation pay, the Court stresses that it should not go beyond the entitle an employee to moral damages.63 Absent clear and convincing evidence showing that
date an employee was deemed to have been actually separated from employment, or Cadiz's dismissal from Brent's employ had been carried out in an arbitrary, capricious and
beyond the date when reinstatement was rendered impossible.56 In this case, the malicious manner, moral and exemplary damages cannot be awarded. The Court
records do not show whether Cadiz already severed her employment with Brent or whether nevertheless grants the award of attorney's fees in the amount often percent (10%) of the
she is gainfully employed elsewhere; thus, the computation of separation pay shall be pegged total monetary award, Cadiz having been forced to litigate in order to seek redress of her
based on the findings that she was employed on August 16, 2002, on her own admission in grievances.64
her complaint that she was dismissed on November 17, 2006, and that she was earning a
salary of P9,108.70 per month,57 which shall then be computed at a rate of one (1) month WHEREFORE, the petition is GRANTED. The Resolutions dated July 22, 2008 and February
salary for every year of service,58 as follows: 24, 2009 of the Court of Appeals in CA-G.R. SP No. 02373-M1N are REVERSED and SET
ASIDE, and a NEW ONE ENTERED finding petitioner Christine Joy Capin-Cadiz to have been
dismissed without just cause.
Monthly salary P9,108.70
Respondent Brent Hospital and Colleges, Inc. is hereby ORDERED TO PAY petitioner
multiplied by number of years x
Christine Joy Capin-Cadiz:
in service (Aug 02 to Nov 06) 4
(1) One Hundred Nine Thousand Three Hundred Four Pesos and 40/100 (P109,304.40) as
backwages;
P36,434.80
The Court also finds that Cadiz is only entitled to limited backwages. Generally, the (2) Thirty-Six Thousand Four Hundred Thirty-Four Pesos and 80/100 (P36,434.80) as
computation of backwages is reckoned from the date of illegal dismissal until actual separation pay; and
reinstatement.59 In case separation pay is ordered in lieu of reinstatement or reinstatement
is waived by the employee, backwages is computed from the time of dismissal until the (3) Attorney's fees equivalent to ten percent (10%) of the total award.
finality of the decision ordering separation pay.60Jurisprudence further clarified that the
period for computing the backwages during the period of appeal should end on the date that The monetary awards granted shall earn legal interest at the rate of six percent (6%) per
a higher court reversed the labor arbitration ruling of illegal dismissal. 61 If applied in Cadiz's annum from the date of the finality of this Decision until fully paid.
case, then the computation of backwages should be from November 17, 2006, which was the
time of her illegal dismissal, until the date of promulgation of this decision. Nevertheless, the SO ORDERED
Court has also recognized that the constitutional policy of providing full protection to labor ------------------------------------------------x
is not intended to oppress or destroy management.62 The Court notes that at the time of
Cadiz's indefinite suspension from employment, Leus was yet to be decided by the Court.
Moreover, Brent was acting in good faith and on its honest belief that Cadiz's pregnancy out
of wedlock constituted immorality. Thus, fairness and equity dictate that the award of POST EMPLOYMENT BAN
backwages shall only be equivalent to one (1) year or P109,304.40, computed as follows:
ROLANDO C. RIVERA, G.R. No. 163269
Petitioner,
Monthly salary P9,108.70 Present:
PANGANIBAN, C.J., Chairperson,
multiplied by one year x x YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
receive the net amount of P963,619.28. This amount included his performance incentive
CALLEJO, SR., and
CHICO-NAZARIO, JJ. award (PIA), and his unearned medical, dental and optical allowances in the amount

Promulgated: of P1,666.67, minus his total accountabilities to Solidbank amounting


SOLIDBANK CORPORATION, to P106,973.00.[6] Rivera received the amount and confirmed his separation from Solidbank
Respondent. April 19, 2006
x--------------------------------------------------x on February 25, 1995.[7]

DECISION
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and
Quitclaim, which was notarized on March 1, 1995.[8] Rivera acknowledged receipt of the net
CALLEJO, SR., J.:
proceeds of his separation and retirement benefits and promised that [he] would not, at any
time, in any manner whatsoever, directly or indirectly engage in any unlawful activity
Assailed in this Petition for Review on Certiorari is the Decision[1] of the Court of Appeals prejudicial to the interest of Solidbank, its parent, affiliate or subsidiary companies, their
(CA) in CA-G.R. CV No. 52235 as well as its Resolution[2] denying the Motion for Partial stockholders, officers, directors, agents or employees, and their successors-in-interest and
Reconsideration of petitioner Rolando C. Rivera. will not disclose any information concerning the business of Solidbank, its manner or
operation, its plans, processes, or data of any kind.[9]
Petitioner had been working for Solidbank Corporation since July 1, 1977.[3] He was initially
employed as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant Accountant, Aside from acknowledging that he had no cause of action against Solidbank or its
and Assistant Manager. Prior to his retirement, he became the Manager of the Credit affiliate companies, Rivera agreed that the bank may bring any action to seek an award for
Investigation and Appraisal Division of the Consumers Banking Group. In the meantime, damages resulting from his breach of the Release, Waiver and Quitclaim, and that such
Rivera and his brother-in-law put up a poultry business in Cavite. award would include the return of whatever sums paid to him by virtue of his retirement
under the SRP.[10] Rivera was likewise required to sign an undated Undertaking as a
In December 1994, Solidbank offered two retirement programs to its employees: (a) supplement to the Release, Waiver and Quitclaim in favor of Solidbank in which he declared
the Ordinary Retirement Program (ORP), under which an employee would receive 85% of that he received in full his entitlement under the law (salaries, benefits, bonuses and other
his monthly basic salary multiplied by the number of years in service; and (b) the Special emoluments), including his separation pay in accordance with the SRP. In this Undertaking,
Retirement Program (SRP), under which a retiring employee would receive 250% of the he promised that [he] will not seek employment with a competitor bank or financial
gross monthly salary multiplied by the number of years in service. [4] Since Rivera was only institution within one (1) year from February 28, 1995, and that any breach of the
45 years old, he was not qualified for retirement under the ORP. Under the SRP, he was Undertaking or the provisions of the Release, Waiver and Quitclaim would entitle Solidbank
entitled to receive P1,045,258.95 by way of benefits.[5] to a cause of action against him before the appropriate courts of law.[11]Unlike the Release,
Waiver and Quitclaim, the Undertaking was not notarized.
Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for
retirement under the SRP. Solidbank approved the application and Rivera was entitled to
3. Such sum equivalent to 10% of plaintiffs claims plus P2,000.00 for every
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as Manager
appearance by way of attorneys fees; and
of its Credit Investigation and Appraisal Division of its Consumers Banking Group. [12] Upon
4. Costs of suit.
discovering this, Solidbank First Vice-President for Human Resources Division (HRD) Celia
J.L. Villarosa wrote a letter dated May 18, 1995, informing Rivera that he had violated the PLAINTIFF prays for other reliefs just and equitable under the premises.[15]
Undertaking. She likewise demanded the return of all the monetary benefits he received in
consideration of the SRP within five (5) days from receipt; otherwise, appropriate legal Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a copy of
action would be taken against him.[13] the Release, Waiver and Quitclaim and Undertaking which Rivera executed.[16]

When Rivera refused to return the amount demanded within the given period, In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
Solidbank filed a complaint for Sum of Money with Prayer for Writ of Preliminary Attachment[17] ordering Deputy Sheriff Eduardo Centeno to attach all of Riveras properties
Attachment[14] before the Regional Trial Court (RTC) of Manila on June 26, 1995. Solidbank, not exempt from execution. Thus, the Sheriff levied on a parcel of land owned by Rivera.
as plaintiff, alleged therein that in accepting employment with a competitor bank for the
same position he held in Solidbank before his retirement, Rivera violated his Undertaking In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he received
under the SRP. Considering that Rivera accepted employment with Equitable barely three the net amount of P963,619.28 as separation pay. However, the employment ban provision
months after executing the Undertaking, it was clear that he had no intention of honoring his in the Undertaking was never conveyed to him until he was made to sign it on February 28,
commitment under said deed. 1995. He emphasized that, prior to said date, Solidbank never disclosed any condition to the
retirement scheme, nor did it impose such employment ban on the bank officers and
Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28 employees who had previously availed of the SRP. He alleged that the undertaking not to
plus interests therein, and attorneys fees, thus: seek employment with any competitor bank or financial institution within one (1) year from
February 28, 1995 was void for being contrary to the Constitution, the law and public policy,
WHEREFORE, it is respectfully prayed that: that it was unreasonable, arbitrary, oppressive, discriminatory, cruel, unjust, inhuman, and
1. At the commencement of this action and upon the filing of a bond in such violative of his human rights. He further claimed that the Undertaking was a contract of
amount as this Honorable Court may fix, a writ of preliminary attachment
adhesion because it was prepared solely by Solidbank without his participation; considering
be forthwith issued against the properties of the defendant as satisfaction of
any judgment that plaintiff may secure; his moral and economic disadvantage, it must be liberally construed in his favor and strictly
against the bank.
2. After trial, judgment be rendered ordering defendant to pay plaintiff the
following sums: NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED
NINETEEN AND 28/100 ONLY (P963,619.28) PESOS, Philippine Currency,
as of 23 May 1995, plus legal interest of 12% per annum until fully paid; On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment, alleging
therein that Rivera raised no genuine issue as to any material fact in his Answer except as to
the amount of damages. It prayed that the RTC render summary judgment against Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that
Rivera. Solidbank alleged that whether or not the employment ban provision contained in he had to sign the Undertaking containing the employment ban provision, otherwise his
the Undertaking is unreasonable, arbitrary, or oppressive is a question of law. It insisted that availment of the SRP would not push through. There was no truth to the banks allegation
Rivera signed the Undertaking voluntarily and for valuable that, in exchange for receiving the larger amount of P1,045,258.95 under the SRP, instead of
consideration; and under the Release, Waiver and Quitclaim, he was obliged to return the very much smaller amount of P224,875.81 under the ORP, he agreed that he will not seek
the P963,619.28 upon accepting employment from a competitor bank within the one-year employment in a competitor bank or financial institution within one year from February 28,
proscribed period. Solidbank appended to its motion the Affidavit of Villarosa, where she 1995. It was the bank which conceived the SRP to streamline its organization and all he did
declared that Rivera was employed by Equitable on May 1, 1995 for the same position he was accept it. He stressed that the decision whether to allow him to avail of the SRP belonged
held before his retirement from Solidbank. solely to Solidbank. He also pointed out that the employment ban provision in the
Undertaking was not a consideration for his availment of the SRP, and that if he did not avail
Rivera opposed the motion contending that, as gleaned from the pleadings of the parties as of the retirement program, he would have continued working for Solidbank for at least 15
well as Villarosas Affidavit, there are genuine issues as to material facts which call for the more years, earning more than what he received under the SRP. He alleged that he intended
presentation of evidence. He averred that there was a need for the parties to adduce to go full time into the poultry business, but after about two months, found out that, contrary
evidence to prove that he did not sign the Undertaking voluntarily. He claimed that he would to his expectations, the business did not provide income sufficient to support his
not have been allowed to avail of the SRP if he had not signed it, and consequently, his family. Being the breadwinner, he was then forced to look for a job, and considering his
retirement benefits would not have been paid. This was what Ed Nallas, Solidbank Assistant training and experience as a former bank employee, the job with Equitable was all he could
Vice-President for HRD and Personnel, told him when he received his check on February 28, find. He insisted that he had remained faithful to Solidbank and would continue to do so
1995. Senior Vice-President Henry Valdez, his superior in the Consumers Banking Group, despite the case against him, the attachment of his family home, and the resulting mental
also did not mention that he would have to sign such Undertaking which contained the anguish, torture and expense it has caused them.[19]
assailed provision. Thus, he had no choice but to sign it. He insisted that the question of
whether he violated the Undertaking is a genuine issue of fact which called for the In his Supplemental Opposition, Rivera stressed that, being a former bank employee, it was
presentation of evidence during the hearing on the merits of the case. He also asserted that the only kind of work he knew. The ban was, in fact, practically absolute since it applied to all
he could not cause injury or prejudice to Solidbanks interest since he never acquired any financial institutions for one year from February 28, 1995. He pointed out that he could not
sensitive or delicate information which could prejudice the banks interest if disclosed. work in any other company because he did not have the qualifications, especially
considering his age. Moreover, after one year from February 28, 1995, he would no longer
Rivera averred that he had the right to adduce evidence to prove that he had been have any marketable skill, because by then, it would have been rendered obsolete by non-
faithful to the provisions of the Release, Waiver and Quitclaim, and the Undertaking, and had use and rapid technological advances. He insisted
not committed any act or done or said anything to cause injury to Solidbank. [18] that the ban was not necessary to protect the interest of Solidbank, as, in the first place, he
had no access to any secret information which, if revealed would be prejudicial to Solidbanks
interest. In any case, he was not one to reveal whatever knowledge or information he may Solidbank. The RTC ruled that Rivera had to return the P963,619.28 he received from
have acquired during his employment with said bank.[20] Solidbank, plus interest of 12% per annum from May 23, 1998 until fully paid.

In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from the 1995 Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June 14, 2002
SRP is purely a management prerogative. It was not for Rivera to question and decry the partially granting the appeal. The fallo of the decision reads:
banks policy to protect itself from unfair competition and disclosure of its trade secrets. The
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed
substantial monetary windfall given the retiring officers was meant to tide them over the
from is AFFIRMED with the modification that the attachment and levy upon
one-year period of hiatus, and did not prevent them from engaging in any kind of business or the family home covered by TCT No. 51621 of the Register of Deeds, Las
Pias, Metro Manila, is hereby SET ASIDE and DISCHARGED.
bar them from being employed except with competitor banks/financial institutions. [21]
SO ORDERED.[24]
On December 18, 1995, the trial court issued an Order of Summary Judgment. [22] The fallo of
the decision reads: The CA declared that there was no genuine issue regarding any material fact except as to the
amount of damages. It ratiocinated that the agreement between Rivera and Solidbank was
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff the law between them, and that the interpretation of the stipulations therein could not be
and against defendant ordering the latter to pay to plaintiff bank the
amount of NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED left upon the whims of Rivera. According to the CA, Rivera never denied signing the Release,
NINETEEN AND 28/100 (P963,619.28) PESOS, Philippine Currency, as of
Waiver, and Quitclaim, including the Undertaking regarding the employment prohibition. He
May 23, 1995, plus legal interest at 12% per annum until fully paid, and the
costs of the suit. even admitted joining Equitable as an employee within the proscribed one-year period. The
alleged defenses of Rivera, the CA declared, could not prevail over the admissions in his
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are
directed to meet again and sit down to find out how they can finally end this pleadings. Moreover, Riveras justification for taking the job with Equitable, dire necessity,
rift and litigation, all in the name of equity, for after all, defendant had
worked for the bank for some 18 years.[23] was not an acceptable ground for annulling the Undertaking since there were no earmarks of
coercion, undue influence, or fraud in its execution. Having executed the said deed and

The trial court declared that there was no genuine issue as to a matter of fact in the case thereafter receiving the benefits under the SRP, he is deemed to have waived the right

since Rivera voluntarily executed the Release, Waiver and Quitclaim, and the
Undertaking. He had a choice not to retire, but opted to do so under the SRP, and, in fact,
received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not to assail the same, hence, is estopped from insisting or retaining the said amount
unreasonable. To allow Rivera to be excused from his undertakings in said deed and, at the of P963,619.28.
same time, benefit therefrom would be to allow him to enrich himself at the expense of
However, the CA ruled that the attachment made upon Riveras family home was restitution of P963,619.28 representing his retirement benefits, and interest thereon at 12%
void, and, pursuant to the mandate of Article 155, in relation to Article 153 of the Family per annum as of May 23, 1995 until payment of the full amount.
Code, must be discharged.
On the first issue, petitioner claims that, based on the pleadings of the parties, and the
Hence, this recourse to the Court. documents and affidavits appended thereto, genuine issues as to matters of fact were raised
therein. He insists that the resolution of the issue of whether the employment ban is
Petitioner avers that unreasonable requires the presentation of evidence on the circumstances which led to
respondent banks offer of the SRP and ORP, and petitioners eventual acceptance and signing
I.
of the Undertaking on March 1, 1995. There is likewise a need to adduce evidence on
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE
SUMMARY JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING whether the employment ban is necessary to protect respondents interest, and whether it is
THE EXISTENCE OF GENUINE ISSUES AS TO MATERIAL FACTS WHICH
CALL FOR THE PRESENTATION OF EVIDENCE IN A TRIAL ON THE MERITS. an undue restraint on petitioners constitutional right to earn a living to support his
family. He further insists that respondent is burdened to prove that it sustained damage or
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR injury by reason of his alleged breach of the employment ban since neither the Release,
EMPLOYMENT BAN IMPOSED BY RESPONDENT SOLIDBANK UPON Waiver and Quitclaim, and Undertaking he executed contain any provision that respondent
HEREIN PETITIONER NULL AND VOID FOR BEING UNREASONABLE AND
OPPRESSIVE AND FOR CONSTITUTING RESTRAINT OF TRADE WHICH is automatically entitled to the restitution of the P963,619.28. Petitioner points out that all
VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR CONSTITUTION AND the deeds provide is that, in case of breach thereof, respondent is entitled to protection
LAWS.
before the appropriate courts of law.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS
DECISION ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE On the second issue, petitioner avers that the prohibition incorporated in the Release,
AMOUNT OF P963,619.28 AS OF MAY 23, 1995, PLUS LEGAL INTEREST OF
Waiver and Quitclaim barring him as retiree from engaging directly or indirectly in any
12% PER ANNUM UNTIL FULLY PAID.
unlawful activity and disclosing any information concerning the business of respondent
IV.
bank, as well as the employment ban contained in the Undertaking he executed, are
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE
PORTION OF THE SUMMARY JUDGMENT ORDERING PETITIONER TO PAY oppressive, unreasonable, cruel and inhuman because of its overbreath. He reiterates that it
SOLIDBANK LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID ON
is against public policy, an unreasonable restraint of trade, because it prohibits him to work
THE AFOREMENTIONED SUM [OF] P963,619.28.[25]
for one year in the Philippines, ultimately preventing him from supporting his family. He
points out that a breadwinner in a family of four minor daughters who are all studying, with
The issues for resolution are: (1) whether the parties raised a genuine issue in their a wife who does not work, one would have a very difficult time meeting the financial
pleadings, affidavits, and documents, that is, whether the employment ban incorporated in obligations even with a steady, regular-paying job. He insists that the Undertaking deprives
the Undertaking which petitioner executed upon his retirement is unreasonable, oppressive, him of the means to support his family, and ultimately, his childrens chance for a good
hence, contrary to public policy; and (2) whether petitioner is liable to respondent for the education and future. He reiterates that the returns in his poultry business fell short of his
expectations, and unfortunately, the business was totally destroyed by typhoon Rosing in punished by being ordered to return the sum of P963,619.28 which was given to him for and
November 1995. in consideration of his early retirement.

Petitioner further maintains that respondents management prerogative does not give it a Neither can petitioner be subjected to the penalty of paying 12% interest per annum on his
license to entice its employees to retire at a very young age and prohibit them from seeking retirement pay of P963,619.28 from May 23, 1995, as it is improper and oppressive to him
employment in a so-called competitor bank or financial institution, thus prevent them from and his family. As of July 3, 2002, the interest alone would amount to P822,609.67, thus
working and supporting their families (considering that banking is the only kind of work doubling the amount to be returned to respondent bank under the decision of the RTC and
they know). Petitioner avers that managements prerogative must be without abuse of the CA. The imposition of interest has no basis because the Release, Waiver and Quitclaim,
discretion. A line must be drawn between management prerogative regarding business and the Undertaking do not provide for payment of interest. The deeds only state that breach
operations per se and those which affect the rights of the employees. In treating its employees, thereof would entitle respondent to bring an action to seek damages, to include the return of
management should see to it that its employees are at least properly informed of its decision the amount that may have been paid to petitioner by virtue thereof.On the other hand, any
or modes of action. breach of the Undertaking or the Release, Waiver and Quitclaim would only entitle
respondent to a cause of action before the appropriate courts of law.Besides, the amount
On the last issue, petitioner alleges that the P1,045,258.95 he received was his retirement received by petitioner was not a loan and, therefore, should not earn interest pursuant to
benefit which he earned after serving the bank for 18 years. It was not a mere gift or gratuity Article 1956 of the Civil Code.
given by respondent bank, without the latter giving up something of value in return. On the
contrary, respondent bank received valuable consideration, that is, petitioner quit his job at Finally, petitioner insists that he acted in good faith in seeking employment with
the relatively young age of 45, thus enabling respondent to effect its reorganization plan and another bank within one year from February 28, 1995 because he needed to earn a living to
forego the salary, benefits, bonuses, and promotions he would have received had he not support his family and finance his childrens education. Hence, the imposition of interest,
retired early. which is a penalty, is unwarranted.
Petitioner avers that, under the Undertaking, respondent would be entitled to a
cause of action against him before the appropriate courts of law if he had violated the By way of Comment on the petition, respondent avers that the Undertaking is the law
employment ban. He avers that respondent must prove its entitlement to between it and petitioner. As such, the latter could not assail the deed after receiving the
the P963,619.28. The Undertaking contains no provision that he would have to return the retirement benefit under the SRP. As gleaned from the averments in his petition, petitioner
amount he received under the SRP; much less does it provide that he would have to pay 12% admitted that he executed the Undertaking after having been informed of the nature and
interest per annum on said amount. On the other hand, the Release, Waiver and Quitclaim consequences of his refusal to sign the same, i.e., he would not be able to receive the
does not contain the provision prohibiting him from being employed with any competitor retirement benefit under the SRP.
bank or financial institution within one year from February 28, 1995. Petitioner insists that
he acted in good faith when he received his retirement benefits; hence, he cannot be Respondent maintains that courts have no power to relieve parties of obligations voluntarily
entered into simply because their contracts turned out to be disastrous deeds. Citing the
ruling of this Court in Eastern Shipping Lines, Inc. v. Court of Appeals,[26] respondent avers
that petitioner is obliged to pay 12% per annum interest of the P963,619.28 from judicial or A genuine issue is an issue of fact which requires the presentation of evidence as
extrajudicial demand. distinguished from an issue which is a sham, fictitious, contrived or a false claim. The trial
court can determine a genuine issue on the basis of the pleadings, admissions, documents,
In reply, petitioner asserts that respondent failed to prove that it sustained affidavits or counteraffidavits submitted by the parties. When the facts as pleaded appear
damages, including the amount thereof, and that neither the Release, Waiver and Quitclaim uncontested or undisputed, then there is no real or genuine issue or question as to any fact
nor the Undertaking obliged him to pay interest to respondent. and summary judgment called for. On the other hand, where the facts pleaded by the parties
are disputed or contested, proceedings for a summary judgment cannot take the place of a
The petition is meritorious. trial.[29] The evidence on record must be viewed in light most favorable to the party opposing
the motion who must be given the benefit of all favorable inferences as can reasonably be
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide: drawn from the evidence.[30]

Section 1. Summary judgment for claimant. A party seeking to recover upon


a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at Courts must be critical of the papers presented by the moving party and not of the
any time after the pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a summary judgment in papers/documents in opposition thereto.[31] Conclusory assertions are insufficient to raise
his favor upon all or any part thereof. an issue of material fact.[32] A party cannot create a genuine dispute of material fact through

xxxx mere speculations or compilation of differences.[33] He may not create an issue of fact
through bald assertions, unsupported contentions and conclusory statements. [34] He must do
Sec. 3. Motion and proceedings thereon. The motion shall be served at least
ten (10) days before the time specified for the hearing. The adverse party more than rely upon allegations but must come forward with specific facts in support of a
may serve opposing affidavits, depositions, or admissions at least three (3) claim. Where the factual context makes his claim implausible, he must come forward with
days before the hearing. After the hearing, the judgment sought shall be
rendered forthwith if the pleadings, supporting affidavits, depositions, and more persuasive evidence demonstrating a genuine issue for trial.[35]
admissions on file, show that, except as to the amount of damages, there is
no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law. Where there are no disputed material facts, the determination of whether a party
For a summary judgment to be proper, the movant must establish two requisites: breached a contract is a question of law and is appropriate for summary judgment.[36]When
(a) there must be no genuine issue as to any material fact, except for the amount of damages; interpreting an ambiguous contract with extrinsic evidence, summary judgment is proper so
and (b) the party presenting the motion for summary judgment must be entitled to a long as the extrinsic evidence presented to the court supports only one of the conflicting
judgment as a matter of law.[27] Where, on the basis of the pleadings of a moving party, interpretations.[37] Where reasonable men could differ as to the contentions shown from the
including documents appended thereto, no genuine issue as to a material fact exists, the evidence, summary judgment might be denied.
burden to produce a genuine issue shifts to the opposing party. If the opposing party fails,
the moving party is entitled to a summary judgment.[28]
4. I will not, at any time, in any manner whatsoever, directly or indirectly
In United Rentals (North America), Inc. v. Keizer,[38] the U.S. Circuit Court of Appeals resolved
engage in any unlawful activity prejudicial to the interest of the BANK, its
the issue of whether a summary judgment is proper in a breach of contract action involving parent, affiliate or subsidiary companies, their stockholders, officers,
directors, agents or employees, and their successors-in-interest and will not
the interpretation of such contract, and ruled that: disclose any information concerning the business of the BANK, its manner
or operation, its plans, processes or data of any kind.[40]
[A] contract can be interpreted by the court on summary judgment if (a) the
contracts terms are clear, or (b) the evidence supports only one
construction of the controverted provision, notwithstanding some The second undertaking is incorporated in the Undertaking following petitioners execution
ambiguity. x x x If the court finds no ambiguity, it should proceed to
of the Release, Waiver and Quitclaim which reads:
interpret the contract and it may do so at the summary judgment stage. If,
however, the court discerns an ambiguity, the next step involving an
examination of extrinsic evidence becomes essential. x x x Summary 4. That as a supplement to the Release and Quitclaim, I executed in favor of
judgment may be appropriate even if ambiguity lurks as long as the Solidbank on FEBRUARY 28, 1995, I hereby expressly undertake that I will
extrinsic evidence presented to the court supports only one of the not seek employment with any competitor bank or financial institution
conflicting interpretations.[39] within one (1) year from February 28, 1995.[41]

In this case, there is no dispute between the parties that, in consideration for his availment of
In the Release, Waiver and Quitclaim, petitioner declared that respondent may bring an
the SRP, petitioner executed the Release, Waiver and Quitclaim, and the Undertaking as
action for damages which may include, but not limited to the return of whatever sums he
supplement thereto, and that he received retirement pay amounting to P963,619.28 from
may have received from respondent under said deed if he breaks his undertaking
respondent. On May 1, 1995, within the one-year ban and without prior knowledge of
therein.[42] On the other hand, petitioner declared in the Undertaking that any breach on his
respondent, petitioner was employed by Equitable as Manager of its Credit Investigation and
part of said Undertaking or the terms and conditions of the Release, Waiver and Quitclaim
Appraisal Division, Consumers Banking Group. Despite demands, petitioner failed to return
will entitle respondent to a cause of action against [petitioner] for protection before the
the P963,619.28 to respondent on the latters allegation that he had breached the one-year
appropriate courts of law.[43]
ban by accepting employment from Equitable, which according to respondent was a
competitor bank.
Article 1306 of the New Civil Code provides that the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are
We agree with petitioners contention that the issue as to whether the post-retirement
not contrary to law, morals, good customs, public order or public policy. The freedom of
competitive employment ban incorporated in the Undertaking is against public policy is a
contract is both a constitutional and statutory right.[44] A contract is the law between the
genuine issue of fact, requiring the parties to present evidence to support their respective
parties and courts have no choice but to enforce such contract as long as it is not contrary to
claims.
law, morals, good customs and against public policy.

As gleaned from the records, petitioner made two undertakings. The first is incorporated in
The well-entrenched doctrine is that the law does not relieve a party from the effects of an
the Release, Waiver and Quitclaim that he signed, to wit:
unwise, foolish or disastrous contract, entered into with full awareness of what he was doing
and entered into and carried out in good faith. Such a contract will not be discarded even if
definition: Generally equivalent to occupation, employment, or business,
there was a mistake of law or fact. Courts have no jurisdiction to look into the wisdom of the
whether manual or mercantile; any occupation, employment or business
contract entered into by and between the parties or to render a decision different carried on for profit, gain, or livelihood, not in the liberal arts or in the
learned professions. In Abbotts Law Dictionary, the word is defined as an
therefrom. They have no power to relieve parties from obligation voluntarily assailed, simply occupation, employment or business carried on for gain or profit. Among
because their contracts turned out to be disastrous deals.[45] the definitions given in the Encyclopaedic Dictionary is the following: The
business which a person has learnt, and which he carries on for subsistence
or profit; occupation; particularly employment, whether manual or
On the other hand, retirement plans, in light of the constitutional mandate of affording full mercantile, as distinguished from the liberal arts or the learned professions
and agriculture. Bouvier limits the meaning to commerce and traffic, and
protection to labor, must be liberally construed in favor of the employee, it being the general the handicraft of mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to
rule that pension or retirement plans formulated by the employer are to be construed adopt and apply the broader meaning given by the lexicographers.[50]

against it.[46] Retirement benefits, after all, are intended to help the employee enjoy the
remaining years of his life, releasing him from the burden of worrying for his financial In the present case, the trial court ruled that the prohibition against petitioner accepting

support, and are a form of reward for being loyal to the employer.[47] employment with a competitor bank or financial institution within one year from February
28, 1995 is not unreasonable. The appellate court held that petitioner was estopped from

In Ferrazzini v. Gsell,[48] the Court defined public policy in civil law countries and in the assailing the post-retirement competitive employment ban because of his admission that he

United States and the Philippines: signed the Undertaking and had already received benefits under the SRP.

By public policy, as defined by the courts in the United States and England,
is intended that principle of the law which holds that no subject or citizen The rulings of the trial court and the appellate court are incorrect.
can lawfully do that which has a tendency to be injurious to the public or
against the public good, which may be termed the policy of the law, or
public policy in relation to the administration of the law. (Words & Phrases There is no factual basis for the trial courts ruling, for the simple reason that it
Judicially Defined, vol. 6, p. 5813, and cases cited.) Public policy is the rendered summary judgment and thereby foreclosed the presentation of evidence by the
principle under which freedom of contract or private dealing is restricted
by law for the good of the public. (Id., Id.) In determining whether a contract parties to prove whether the restrictive covenant is reasonable or not. Moreover, on the face
is contrary to public policy the nature of the subject matter determines the
of the Undertaking, the post-retirement competitive employment ban is unreasonable
source from which such question is to be solved. (Hartford Fire Ins. Co. v.
Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.) because it has no geographical limits; respondent is barred from accepting any kind of
employment in any competitive bank within the proscribed period. Although the period of one
The foregoing is sufficient to show that there is no difference in principle
between the public policy (orden publico) in the two jurisdictions (the year may appear reasonable, the matter of whether the restriction is reasonable or
United States and the Philippine Islands) as determined by the Constitution,
laws, and judicial decisions.[49] unreasonable cannot be ascertained with finality solely from the terms and conditions of the
Undertaking, or even in tandem with the Release, Waiver and Quitclaim.

The Court proceeded to define trade as follows:


Undeniably, petitioner retired under the SRP and received P963,619.28 from
x x x In the broader sense, it is any occupation or business carried on for respondent. However, petitioner is not proscribed, by waiver or estoppel, from assailing the
subsistence or profit. Andersons Dictionary of Law gives the following
post-retirement competitive employment ban since under Article 1409 of the New Civil
Code, those contracts whose cause, object or purpose is contrary to law, morals, good unduly harsh or oppressive in curtailing the employees legitimate efforts to earn a livelihood
customs, public order or public policy are inexistent or void from the beginning. Estoppel and must be reasonable in light of sound public policy.[55]
cannot give validity to an act that is prohibited by law or one that is against public policy. [51]
Courts should carefully scrutinize all contracts limiting a mans natural right to follow any
trade or profession anywhere he pleases and in any lawful manner. But it is just as important
Respondent, as employer, is burdened to establish that a restrictive covenant
to protect the enjoyment of an establishment in trade or profession, which its employer has
barring an employee from accepting a competitive employment
built up by his own honest application to every day duty and the faithful performance of the
tasks which every day imposes upon the ordinary man. What one creates by his own labor is
after retirement or resignation is not an unreasonable or oppressive, or in undue or
his. Public policy does not intend that another than the producer shall reap the fruits of
unreasonable restraint of trade, thus, unenforceable for being repugnant to public policy. As
labor; rather, it gives to him who labors the right by every legitimate means to protect the
the Court stated in Ferrazzini v. Gsell,[52] cases involving contracts in restraint of trade are to
fruits of his labor and secure the enjoyment of them to himself. [56] Freedom to contract must
be judged according to their circumstances, to wit:
not be unreasonably abridged. Neither must the right to protect by reasonable restrictions
x x x There are two principal grounds on which the that which a man by industry, skill and good judgment has built up, be denied. [57]
doctrine is founded that a contract in restraint of trade is
void as against public policy. One is, the injury to the public
by being deprived of the restricted partys industry; and the The Court reiterates that the determination of reasonableness is made on the
other is, the injury to the party himself by being precluded
from pursuing his occupation, and thus being prevented particular facts and circumstances of each case.[58] In Esmerson Electric Co. v. Rogers,[59] it
from supporting himself and his family. was held that the question of reasonableness of a restraint requires a thorough

And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the consideration of surrounding circumstances, including the subject matter of the contract, the
rule thus: purpose to be served, the determination of the parties, the extent of the restraint and the

Public welfare is first considered, and if it be not involved, specialization of the business of the employer. The court has to consider whether its
and the restraint upon one party is not greater than enforcement will be injurious to the public or cause undue hardships to the employee, and
protection to the other party requires, the contract may be
sustained. The question is, whether, under the particular whether the restraint imposed is greater than necessary to protect the employer. Thus,the
circumstances of the case and the nature of the particular court must have before it evidence relating to the legitimate interests of the employer which
contract involved in it, the contract is, or is not,
unreasonable.[53] might be protected in terms of time, space and the types of activity proscribed.[60]

In cases where an employee assails a contract containing a provision prohibiting Consideration must be given to the employees right to earn a living and to his ability
him or her from accepting competitive employment as against public policy, the employer to determine with certainty the area within which his employment ban is restituted. A
has to adduce evidence to prove that the restriction is reasonable and not greater than provision on territorial limitation is necessary to guide an employee of what constitutes as
necessary to protect the employers legitimate business interests. [54] The restraint may not be violation of a restrictive covenant and whether the geographic scope is co-extensive with
forfeitures for engaging in subsequent competitive employment, included in
that in which the employer is doing business. In considering a territorial restriction, the facts
pension retirement plans, are valid, even though unrestricted in time or
and circumstances surrounding the case must be considered.[61] geography.The reasoning behind this conclusion is that the forfeiture, unlike
the restraint included in the employment contract, is not a prohibition on the
employees engaging in competitive work but is merely a denial of the right to
Thus, in determining whether the contract is reasonable or not, the trial court participate in the retirement plan if he does so engage. A leading case on this
point is Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at p. 865, where, in passing
should consider the following factors: (a) whether the covenant protects a legitimate on a forfeiture provision similar to that here, the Court said:
business interest of the employer; (b) whether the covenant creates an undue burden on the
A restriction in the contract which does not
employee; (c) whether the covenant is injurious to the public welfare; (d) whether the time preclude the employee from engaging in competitive
and territorial limitations contained in the covenant are reasonable; and (e) whether the activity, but simply provides for the loss of rights or
privileges if he does so is not in restraint of trade. (emphasis
restraint is reasonable from the standpoint of public policy. [62] added)[65]

Not to be ignored is the fact that the banking business is so impressed with public interest A post-retirement competitive employment restriction is designed to protect the employer
where the trust and interest of the public in general is of paramount importance such that against competition by former employees who may retire and obtain retirement or pension
the appropriate standard of diligence must be very high, if not the highest degree of benefits and, at the same time, engage in competitive employment.[66]
diligence.[63]

We have reviewed the Undertaking which respondent impelled petitioner to sign, and find
We are not impervious of the distinction between restrictive covenants barring an employee that in case of failure to comply with the promise not to accept competitive employment
to accept a post-employment competitive employment or restraint on trade in employment within one year from February 28, 1995, respondent will have a cause of action against
contracts and restraints on post-retirement competitive employment in pension and petitioner for protection in the courts of law. The words cause of action for protection in the
retirement plans either incorporated in employment contracts or in collective bargaining courts of law are so broad and comprehensive, that they may also include a cause of action
agreements between the employer and the union of employees, or separate from said for prohibitory and mandatory injunction against petitioner, specific performance plus
contracts or collective bargaining agreements which provide that an employee who accepts damages, or a damage suit (for actual, moral and/or exemplary damages), all inclusive of the
post retirement competitive employment will forfeit retirement and other benefits or will be restitution of the P963,619.28 which petitioner received from respondent. The Undertaking
obliged to restitute the same to the employer. The strong weight of authority is that and the Release, Waiver and Quitclaim do not provide for the automatic forfeiture of the
forfeitures for engaging in subsequent competitive employment included in pension and benefits petitioner received under the SRP upon his breach of said deeds. Thus, the post-
retirement plans are valid even though unrestricted in time or geography.The raison detre is retirement competitive employment ban incorporated in the Undertaking of respondent
explained by the United States Circuit Court of Appeals in Rochester Corporation v. W.L. does not, on its face, appear to be of the same class or genre as that contemplated
Rochester, Jr.:[64] in Rochester.

x x x The authorities, though, generally draw a clear and obvious


distinction between restraints on competitive employment in employment
contracts and in pension plans. The strong weight of authority holds that
PEREZ, J.:
It is settled that actual damages or compensatory damages may be awarded for breach of
contracts. Actual damages are primarily intended to simply make good or replace the loss Before us is a petition for certiorari assailing the Resolution 1 dated 14 October 2010 of the
covered by said breach.[67] They cannot be presumed. Even if petitioner had admitted to Court of Appeals in CA-G.R. SP No. I 065g I which modified its Decision2 dated 31 March
2009, thus allowing the legal compensation or petitioner Marietta N. Portillo's (Portillo)
having breached the Undertaking, respondent must still prove that it suffered damages and monetary claims against respondent corporation Rudolf Lietz, Inc.'s (Lietz Inc.)3 claim for
liquidated damages arising from Portillo’s alleged violation of the "Goodwill Clause" in the
the amount thereof.[68] In determining the amount of actual damages, the Court cannot rely
employment contract executed by the parties.
on mere assertions, speculations, conjectures or guesswork but must depend on competent
proof and on the best evidence obtainable regarding the actual amount of losses. [69] The The facts are not in dispute.

benefit to be derived from a contract which one of the parties has absolutely failed to In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz
perform is of necessity to some extent a matter of speculation of the injured party. (Rudolf) and conformed to by Portillo, the latter was hired by the former under the following
terms and conditions:

On the assumption that the competitive employment ban in the Undertaking is valid, A copy of [Lietz Inc.’s] work rules and policies on personnel is enclosed and an inherent part
of the terms and conditions of employment.
petitioner is not automatically entitled to return the P963,619.28 he received from
respondent. To reiterate, the terms of the Undertaking clearly state that any breach by We acknowledge your proposal in your application specifically to the effect that you will not
engage in any other gainful employment by yourself or with any other company either
petitioner of his promise would entitle respondent to a cause of action for protection in the
directly or indirectly without written consent of [Lietz Inc.], and we hereby accept and
courts of law; as such, restitution of the P963,619.28 will not follow as a matter of course. henceforth consider your proposal an undertaking on your part, a breach of which will
render you liable to [Lietz Inc.] for liquidated damages.
Respondent is still burdened to prove its entitlement to the aforesaid amount by producing
the best evidence of which its case is susceptible.[70] If you are in agreement with these terms and conditions of employment, please signify your
conformity below.4

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was
Appeals in CA-G.R. CV No. 52235 is SET ASIDE. Let this case be REMANDED to the Regional promoted to Sales Representative and received a corresponding increase in basic monthly
salary and sales quota. In this regard, Portillo signed another letter agreement containing a
Trial Court of Manila for further proceedings conformably with this decision of the Court. "Goodwill Clause:"

It remains understood and you agreed that, on the termination of your employment by act of
SO ORDERED. either you or [Lietz Inc.], and for a period of three (3) years thereafter, you shall not engage
directly or indirectly as employee, manager, proprietor, or solicitor for yourself or others in a
-------------------------------------------------X similar or competitive business or the same character of work which you were employed by
[Lietz Inc.] to do and perform. Should you breach this good will clause of this Contract, you
shall pay [Lietz Inc.] as liquidated damages the amount of 100% of your gross compensation
MARIETTA N. PORTILLO, Petitioner, over the last 12 months, it being agreed that this sum is reasonable and just.5
vs.
RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF APPEALS Respondents. Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her exit
interview, Portillo declared that she intended to engage in business—a rice dealership,
DECISION selling rice in wholesale.
On 15 June 2005, Lietz Inc. accepted Portillo’s resignation and reminded her of the "Goodwill On appeal by respondents, the NLRC, through its Second Division, affirmed the ruling of
Clause" in the last letter agreement she had signed. Upon receipt thereof, Portillo jotted a Labor Arbiter Daniel J. Cajilig. On motion for reconsideration, the NLRC stood pat on its
note thereon that the latest contract she had signed in February 2004 did not contain any ruling.
"Goodwill Clause" referred to by Lietz Inc. In response thereto, Lietz Inc. categorically wrote:
Expectedly, respondents filed a petition for certiorari before the Court of Appeals, alleging
Please be informed that the standard prescription of prohibiting employees from engaging in grave abuse of discretion in the labor tribunals’ rulings.
business or seeking employment with organizations that directly or indirectly compete
against [Lietz Inc.] for three (3) years after resignation remains in effect. As earlier adverted to, the appellate court initially affirmed the labor tribunals:

The documentation you pertain to is an internal memorandum of your salary increase, not WHEREFORE, considering the foregoing premises, judgment is hereby rendered by
an employment contract. The absence of the three-year prohibition clause in this document us DENYING the petition filed in this case. The Resolution of the National Labor Relations
(or any document for that matter) does not cancel the prohibition itself. We did not, have Commission (NLRC), Second Division, in the labor case docketed as NLRC NCR Case No. 00-
not, and will not issue any cancellation of such in the foreseeable future[.] [T]hus[,] 09- 08113-2005 [NLRC LAC No. 07-001965-07(5)] is hereby AFFIRMED.9
regretfully, it is erroneous of you to believe otherwise.6
The disposition was disturbed. The Court of Appeals, on motion for reconsideration,
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the modified its previous decision, thus:
exchange of correspondence between them regarding the "Goodwill Clause" in the
employment contract was a moot exercise since Portillo’s articulated intention to go into WHEREFORE, in view of the foregoing premises, we hereby MODIFY the decision
business, selling rice, will not compete with Lietz Inc.’s products. promulgated on March 31, 2009 in that, while we uphold the monetary award in favor of the
[petitioner] in the aggregate sum of ₱110,662.16 representing the unpaid salary,
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines, commission and 13th month pay due to her, we hereby allow legal compensation or set-off of
Limited to head its Pharma Raw Material Department. Ed Keller Limited is purportedly a such award of monetary claims by her liability to [respondents] for liquidated damages
direct competitor of Lietz Inc. arising from her violation of the "Goodwill Clause" in her employment contract with them. 10

Meanwhile, Portillo’s demands from Lietz Inc. for the payment of her remaining salaries and Portillo’s motion for reconsideration was denied.
commissions went unheeded. Lietz Inc. gave Portillo the run around, on the pretext that her
salaries and commissions were still being computed. Hence, this petition for certiorari listing the following acts as grave abuse of discretion of the
Court of Appeals:
On 14 September 2005, Portillo filed a complaint with the National Labor Relations
Commission (NLRC) for non-payment of 1½ months’ salary, two (2) months’ commission, THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING TO
13th month pay, plus moral, exemplary and actual damages and attorney’s fees. RECOGNIZE (sic) THAT THE RESPONDENTS’ EARLIER PETITION IS FATALLY DEFECTIVE;

In its position paper, Lietz Inc. admitted liability for Portillo’s money claims in the total THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY OVERSTEPPING
amount of P110,662.16. However, Lietz Inc. raised the defense of legal compensation: THE BOUNDS OF APPELLATE JURISDICTION[;]
Portillo’s money claims should be offset against her liability to Lietz Inc. for liquidated
damages in the amount of ₱869,633.097 for Portillo’s alleged breach of the "Goodwill Clause"
in the employment contract when she became employed with Ed Keller Philippines, Limited. THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY MODIFYING ITS
PREVIOUS DECISION BASED ON AN ISSUE THAT WAS RAISED ONLY ON THE FIRST
INSTANCE AS AN APPEAL BUT WAS NEVER AT THE TRIAL COURT AMOUNTING TO DENIAL
On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillo’s complaint: OF DUE PROCESS[;]

WHEREFORE, judgment is hereby rendered ordering respondents Rudolf Lietz, Inc. to pay THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING THE
complainant Marietta N. Portillo the amount of Php110,662.16, representing her salary and POSITIVE DUTY TO UPHOLD THE RELEVANT LAWS[.]11
commissions, including 13th month pay.8
Simply, the issue is whether Portillo’s money claims for unpaid salaries may be offset against We are not convinced.
respondents’ claim for liquidated damages.
Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the
Before anything else, we address the procedural error committed by Portillo, i.e., filing a Court of Appeals on the "causal connection between [Portillo’s] monetary claims against
petition for certiorari, a special civil action under Rule 65 of the Rules of Court, instead of a [respondents] and the latter’s claim from liquidated damages against the former."
petition for review on certiorari, a mode of appeal, under Rule 45 thereof. On this score
alone, the petition should have been dismissed outright. Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise
provided under this code, the Arbiters shall have original and exclusive jurisdiction to hear
Section 1, Rule 45 of the Rules of Court expressly provides that a party desiring to appeal and decide, within thirty (30) calendar days after the submission of the case by the parties
by certiorari from a judgment or final order or resolution of the Court of Appeals may file a for decision without extension, even in the absence of stenographic notes, the following case
verified petition for review on certiorari. Considering that, in this case, appeal involving all workers, whether agricultural or nonagricultural:
by certiorari was available to Portillo, that available recourse foreclosed her right to resort to
a special civil action for certiorari, a limited form of review and a remedy of last recourse, xxxx
which lies only where there is no appeal or plain, speedy and adequate remedy in the
ordinary course of law.12 4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations; (Underscoring supplied)
A petition for review on certiorari under Rule 45 and a petition for certiorari under Rule 65
are mutually exclusive remedies. Certiorari cannot co-exist with an appeal or any other Evidently, the Court of Appeals is convinced that the claim for liquidated damages emanates
adequate remedy.13 If a petition for review is available, even prescribed, the nature of the from the "Goodwill Clause of the employment contract and, therefore, is a claim for damages
questions of law intended to be raised on appeal is of no consequence. It may well be that arising from the employeremployee relations."
those questions of law will treat exclusively of whether or not the judgment or final order
was rendered without or in excess of jurisdiction, or with grave abuse of discretion. This is
immaterial. The remedy is appeal, not certiorari as a special civil action.14 As early as Singapore Airlines Limited v. Paño,18 we established that not all disputes between
an employer and his employee(s) fall within the jurisdiction of the labor tribunals. We
differentiated between abandonment per se and the manner and consequent effects of such
Be that as it may, on more than one occasion, to serve the ultimate purpose of all rules of abandonment and ruled that the first, is a labor case, while the second, is a civil law case.
procedures—attaining substantial justice as expeditiously as possible15 —we have accepted
procedurally incorrect petitions and decided them on the merits. We do the same here.
Upon the facts and issues involved, jurisdiction over the present controversy must be held to
belong to the civil Courts. While seemingly petitioner's claim for damages arises from
The Court of Appeals anchors its modified ruling on the ostensible causal connection employer-employee relations, and the latest amendment to Article 217 of the Labor Code
between Portillo’s money claims and Lietz Inc.’s claim for liquidated damages, both claims under PD No. 1691 and BP Blg. 130 provides that all other claims arising from employer-
apparently arising from the same employment relations. Thus, did it say: employee relationship are cognizable by Labor Arbiters [citation omitted], in essence,
petitioner's claim for damages is grounded on the "wanton failure and refusal" without just
x x x This Court will have to take cognizance of and consider the "Goodwill Clause" contained cause of private respondent Cruz to report for duty despite repeated notices served upon
[in] the employment contract signed by and between [respondents and Portillo]. There is no him of the disapproval of his application for leave of absence without pay. This, coupled with
gainsaying the fact that such "Goodwill Clause" is part and parcel of the employment contract the further averment that Cruz "maliciously and with bad faith" violated the terms and
extended to [Portillo], and such clause is not contrary to law, morals and public policy. There conditions of the conversion training course agreement to the damage of petitioner removes
is thus a causal connection between [Portillo’s] monetary claims against [respondents] and the present controversy from the coverage of the Labor Code and brings it within the
the latter’s claim for liquidated damages against the former. Consequently, we should allow purview of Civil Law.
legal compensation or set-off to take place. [Respondents and Portillo] are both bound
principally and, at the same time, are creditors of each other. [Portillo] is a creditor of Clearly, the complaint was anchored not on the abandonment per se by private respondent
[respondents] in the sum of ₱110,662.16 in connection with her monetary claims against the Cruz of his job—as the latter was not required in the Complaint to report back to work—but
latter. At the same time, [respondents] are creditors of [Portillo] insofar as their claims for on the manner and consequent effects of such abandonment of work translated in terms of
liquidated damages in the sum of ₱980,295.2516 against the latter is concerned.17 the damages which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale Veneer & relationship. This is, in other words, a situation where the rule of noscitur a sociis may be
Plywood, Inc. [citation omitted], the pertinent portion of which reads: usefully invoked in clarifying the scope of paragraph 3, and any other paragraph of Article
217 of the Labor Code, as amended. We reach the above conclusion from an examination of
"Although the acts complained of seemingly appear to constitute 'matter involving the terms themselves of Article 217, as last amended by B.P. Blg. 227, and even though
employee-employer' relations as Quisaba's dismissal was the severance of a pre-existing earlier versions of Article 217 of the Labor Code expressly brought within the jurisdiction of
employee-employer relations, his complaint is grounded not on his dismissal per se, as in fact the Labor Arbiters and the NLRC "cases arising from employer-employee relations, [citation
he does not ask for reinstatement or backwages, but on the manner of his dismissal and the omitted]" which clause was not expressly carried over, in printer's ink, in Article 217 as it
consequent effects of such dismissal. exists today. For it cannot be presumed that money claims of workers which do not arise out
of or in connection with their employer-employee relationship, and which would therefore
"Civil law consists of that 'mass of precepts that determine or regulate the relations . . . that fall within the general jurisdiction of regular courts of justice, were intended by the
exist between members of a society for the protection of private interest (1 Sanchez Roman legislative authority to be taken away from the jurisdiction of the courts and lodged with
3). Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the
"money claims of workers" referred to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the employer-employee relationship,
"The 'right' of the respondents to dismiss Quisaba should not be confused with the manner or some aspect or incident of such relationship. Put a little differently, that money
in which the right was exercised and the effects flowing therefrom. If the dismissal was done claims of workers which now fall within the original and exclusive jurisdiction of
anti-socially or oppressively as the complaint alleges, then the respondents violated Article Labor Arbiters are those money claims which have some reasonable causal
1701 of the Civil Code which prohibits acts of oppression by either capital or labor against connection with the employer-employee relationship.21 (Emphasis supplied)
the other, and Article 21, which makes a person liable for damages if he wilfully causes loss
or injury to another in a manner that is contrary to morals, good customs or public policy,
the sanction for which, by way of moral damages, is provided in article 2219, No. 10. [citation We thereafter ruled that the "reasonable causal connection with the employer-employee
omitted]" relationship" is a requirement not only in employees’ money claims against the employer but
is, likewise, a condition when the claimant is the employer.
Stated differently, petitioner seeks protection under the civil laws and claims no
benefits under the Labor Code. The primary relief sought is for liquidated damages for In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,22 which reiterated the San
breach of a contractual obligation. The other items demanded are not labor benefits Miguel ruling and allied jurisprudence, we pronounced that a non-compete clause, as in the
demanded by workers generally taken cognizance of in labor disputes, such as "Goodwill Clause" referred to in the present case, with a stipulation that a violation thereof
payment of wages, overtime compensation or separation pay. The items claimed are makes the employee liable to his former employer for liquidated damages, refers to post-
the natural consequences flowing from breach of an obligation, intrinsically a civil employment relations of the parties.
dispute.19 (Emphasis supplied)
In Dai-Chi, the trial court dismissed the civil complaint filed by the employer to recover
Subsequent rulings amplified the teaching in Singapore Airlines. The reasonable causal damages from its employee for the latter’s breach of his contractual obligation. We reversed
connection rule was discussed. Thus, in San Miguel Corporation v. National Labor Relations the ruling of the trial court as we found that the employer did not ask for any relief under the
Commission,20 we held: Labor Code but sought to recover damages agreed upon in the contract as redress for its
employee’s breach of contractual obligation to its "damage and prejudice." We iterated that
Article 217, paragraph 4 does not automatically cover all disputes between an employer and
While paragraph 3 above refers to "all money claims of workers," it is not necessary to its employee(s). We noted that the cause of action was within the realm of Civil Law, thus,
suppose that the entire universe of money claims that might be asserted by workers against jurisdiction over the controversy belongs to the regular courts. At bottom, we considered
their employers has been absorbed into the original and exclusive jurisdiction of Labor that the stipulation referred to post-employment relations of the parties.
Arbiters. In the first place, paragraph 3 should be read not in isolation from but rather within
the context formed by paragraph 1 (relating to unfair labor practices), paragraph 2 (relating
to claims concerning terms and conditions of employment), paragraph 4 (claims relating to That the "Goodwill Clause" in this case is likewise a postemployment issue should brook no
household services, a particular species of employer-employee relations), and paragraph 5 argument. There is no dispute as to the cessation of Portillo’s employment with Lietz
(relating to certain activities prohibited to employees or to employers). It is evident that Inc.23 She simply claims her unpaid salaries and commissions, which Lietz Inc. does not
there is a unifying element which runs through paragraph 1 to 5 and that is, that they all contest. At that juncture, Portillo was no longer an employee of Lietz Inc. 24The "Goodwill
refer to cases or disputes arising out of or in connection with an employer-employee Clause" or the "Non-Compete Clause" is a contractual undertaking effective after the
cessation of the employment relationship between the parties. In accordance with recover a debt from a former employee [citation omitted] or seeks liquidated damages
jurisprudence, breach of the undertaking is a civil law dispute, not a labor law case. in enforcement of a prior employment contract. [citation omitted]

It is clear, therefore, that while Portillo’s claim for unpaid salaries is a money claim that Neither can we uphold the reasoning of respondent court that because the resolution of the
arises out of or in connection with an employer-employee relationship, Lietz Inc.’s claim issues presented by the complaint does not entail application of the Labor Code or other
against Portillo for violation of the goodwill clause is a money claim based on an act done labor laws, the dispute is intrinsically civil. Article 217(a) of the Labor Code, as amended,
after the cessation of the employment relationship. And, while the jurisdiction over Portillo’s clearly bestows upon the Labor Arbiter original and exclusive jurisdiction over claims for
claim is vested in the labor arbiter, the jurisdiction over Lietz Inc.’s claim rests on the regular damages arising from employer-employee relations─in other words, the Labor Arbiter has
courts. Thus: jurisdiction to award not only the reliefs provided by labor laws, but also damages governed
by the Civil Code.27 (Emphasis supplied)
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
recover damages based on the parties' contract of employment as redress for respondent's In the case at bar, the difference in the nature of the credits that one has against the other,
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the conversely, the nature of the debt one owes another, which difference in turn results in the
controversy belongs to the regular courts. More so must this be in the present case, what difference of the forum where the different credits can be enforced, prevents the application
with the reality that the stipulation refers to the postemployment relations of the parties. of compensation. Simply, the labor tribunal in an employee’s claim for unpaid wages is
without authority to allow the compensation of such claims against the post employment
For sure, a plain and cursory reading of the complaint will readily reveal that the subject claim of the former employer for breach of a post employment condition. The labor tribunal
matter is one of claim for damages arising from a breach of contract, which is within the does not have jurisdiction over the civil case of breach of contract.
ambit of the regular court's jurisdiction. [citation omitted]
We are aware that in Bañez v. Hon. Valdevilla, we mentioned that:
It is basic that jurisdiction over the subject matter is determined upon the allegations made
in the complaint, irrespective of whether or not the plaintiff is entitled to recover upon the Whereas this Court in a number of occasions had applied the jurisdictional provisions of
claim asserted therein, which is a matter resolved only after and as a result of a trial. Neither Article 217 to claims for damages filed by employees [citation omitted], we hold that by the
can jurisdiction of a court be made to depend upon the defenses made by a defendant in his designating clause "arising from the employer-employee relations" Article 217 should apply
answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend with equal force to the claim of an employer for actual damages against its dismissed
almost entirely upon the defendant.25 [citation omitted] employee, where the basis for the claim arises from or is necessarily connected with the fact
of termination, and should be entered as a counterclaim in the illegal dismissal case. 28
xxxx
While on the surface, Bañez supports the decision of the Court of Appeals, the facts beneath
Whereas this Court in a number of occasions had applied the jurisdictional provisions of premise an opposite conclusion. There, the salesman-employee obtained from the NLRC a
Article 217 to claims for damages filed by employees [citation omitted], we hold that by the final favorable judgment of illegal dismissal. Afterwards, the employer filed with the trial
designating clause "arising from the employer-employee relations" Article 217 should apply court a complaint for damages for alleged nefarious activities causing damage to the
with equal force to the claim of an employer for actual damages against its dismissed employer. Explaining further why the claims for damages should be entered as a
employee, where the basis for the claim arises from or is necessarily connected with the fact counterclaim in the illegal dismissal case, we said:
of termination, and should be entered as a counterclaim in the illegal dismissal case.26
Even under Republic Act No. 875 (the ‘Industrial Peace Act,’ now completely superseded by
xxxx the Labor Code), jurisprudence was settled that where the plaintiff’s cause of action for
damages arose out of, or was necessarily intertwined with, an alleged unfair labor practice
This is, of course, to distinguish from cases of actions for damages where the committed by the union, the jurisdiction is exclusively with the (now defunct) Court of
employer-employee relationship is merely incidental and the cause of action proceeds Industrial Relations, and the assumption of jurisdiction of regular courts over the same is a
from a different source of obligation. Thus, the jurisdiction of regular courts was nullity. To allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the
upheld where the damages, claimed for were based on tort [citation omitted], malicious orderly administration of justice." Thus, even after the enactment of the Labor Code, where
prosecution [citation omitted], or breach of contract, as when the claimant seeks to the damages separately claimed by the employer were allegedly incurred as a consequence
of strike or picketing of the union, such complaint for damages is deeply rooted from the
labor dispute between the parties, and should be dismissed by ordinary courts for lack of As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to
jurisdiction. As held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419: recover damages based on the parties’ contract of employment as redress for respondent’s
breach thereof. Such cause of action is within the realm of Civil Law, and jurisdiction over the
Certainly, the present Labor Code is even more committed to the view that on policy controversy belongs to the regular courts. More so must this be in the present case, what
grounds, and equally so in the interest of greater promptness in the disposition of labor with the reality that the stipulation refers to the postemployment relations of the parties.
matters, a court is spared the often onerous task of determining what essentially is a factual
matter, namely, the damages that may be incurred by either labor or management as a result For sure, a plain and cursory reading of the complaint will readily reveal that the subject
of disputes or controversies arising from employer-employee relations.29 matter is one of claim for damages arising from a breach of contract, which is within the
ambit of the regular court’s jurisdiction. [citation omitted]
Evidently, the ruling of the appellate court is modeled after the basis used in Bañez which is
the "intertwined" facts of the claims of the employer and the employee or that the It is basic that jurisdiction over the subject matter is determined upon the allegations made
"complaint for damages is deeply rooted from the labor dispute between the parties." Thus, in the complaint, irrespective of whether or not the plaintiff is entitled to recover upon the
did the appellate court say that: claim asserted therein, which is a matter resolved only after and as a result of a trial. Neither
can jurisdiction of a court be made to depend upon the defenses made by a defendant in his
There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of the answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend
employment contract extended to [Portillo], and such clause is not contrary to law, morals almost entirely upon the defendant.32 (Underscoring supplied).
and public policy. There is thus a causal connection between [Portillo’s] monetary claims
against [respondents] and the latter’s claim for liquidated damages against the former. The error of the appellate court in its Resolution of 14 October 2010 is basic. The original
Consequently, we should allow legal compensation or set-off to take place.30 decision, the right ruling, should not have been reconsidered.1âwphi1

The Court of Appeals was misguided. Its conclusion was incorrect. Indeed, the application of compensation in this case is effectively barred by Article 113 of the
Labor Code which prohibits wage deductions except in three circumstances:
There is no causal connection between the petitioner employees’ claim for unpaid wages and
the respondent employers’ claim for damages for the alleged "Goodwill Clause" violation. ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any person, shall
Portillo’s claim for unpaid salaries did not have anything to do with her alleged violation of make any deduction from wages of his employees, except:
the employment contract as, in fact, her separation from employment is not "rooted" in the
alleged contractual violation. She resigned from her employment. She was not dismissed. (a) In cases where the worker is insured with his consent by the employer, and the
Portillo’s entitlement to the unpaid salaries is not even contested. Indeed, Lietz Inc.’s deduction is to recompense the employer for the amount paid by him as premium on the
argument about legal compensation necessarily admits that it owes the money claimed by insurance;
Portillo.
(b) For union dues, in cases where the right of the worker or his union to check-off has been
The alleged contractual violation did not arise during the existence of the employer- recognized by the employer or authorized in writing by the individual worker concerned;
employee relationship. It was a post-employment matter, a post-employment violation. and
Reminders are apt. That is provided by the fairly recent case of Yusen Air and Sea Services
Phils., Inc. v. Villamor,31 which harked back to the previous rulings on the necessity of (c) In cases where the employer is authorized by law or regulations issued by the Secretary
"reasonable causal connection" between the tortious damage and the damage arising from of Labor.
the employer-employee relationship. Yusen proceeded to pronounce that the absence of the
connection results in the absence of jurisdiction of the labor arbiter. Importantly, such
absence of jurisdiction cannot be remedied by raising before the labor tribunal the tortious WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals in CA-G.R.
damage as a defense. Thus: SP No. I 06581 dated 14 October 20 I 0 is SET ASIDE. The Decision of the Court of Appeals in
CA-G.R. SP No. I 06581 dated 3 I March :2009 is REINSTATED. No costs.
When, as here, the cause of action is based on a quasi-delict or tort, which has no reasonable
causal connection with any of the claims provided for in Article 217, jurisdiction over the SO ORDERED.
action is with the regular courts. [citation omitted]
-------------------------------------X Miranda's service from April 1, 2003 to April 15, 2004 in computing his separation benefits.
Aggrieved, it appealed the said ND to the COA-CGS.
OTHER CASES:
COA-CGS Ruling

NATIONAL TRANSMISSION CORPORATION, Petitioner In its August 7, 2013 decision, the COA-CGS upheld the ND. It noted that the terms of the
vs. Service Agreement clearly stated that there shall be no employer-employee relationship
COMMISSION ON AUDIT (COA) and COA CHAIRPERSON MICHAEL G. AGUINALDO, between Miranda and Transco and that the services rendered are not considered or will not
Respondents be credited as government service. The COA-CGS ruled that Transco Board Resolution No.
2009-005 cannot be used as basis as it did not conform to the laws, rules or regulations
DECISION pertinent to the grant of separation benefits. Thus, it concluded that the Transco Board of
Directors (BOD) erred in including the contractual employees in availing separation benefits.
MENDOZA, J.:
Unconvinced, Transco appealed before the COA.
This petition for certiorari under Rule 64 of the Revised Rules of Court seeks to reverse and
set aside the March 19, 2015 Decision1 and December 23, 2015 Resolution2 of the COA Ruling
Commission on Audit (COA) which affirmed the August 7, 2013 Decision3 of the COA
Corporate Government Sector Cluster 3 (COA-CGS). In its March 19, 2015 decision, the COA sustained the COA-CGS decision. It emphasized that
the grant of separation benefits to separated or displaced Transco employees as a result of
Petitioner National Transmission Corporation (TransCo) is a government owned and the restructuring of the electric industry must be in accordance with the EPIRA. The COA
controlled corporation (GOCC) created under Republic Act (R.A.) No. 9136 or the Electric noted that under the EPIRA and its implementing rules and regulations (IRR), separation
Industry Reform Act of 2001 (EPIRA).4 On March 1, 2003, it began to operate and manage the benefits may be extended to casual or contractual employees, provided their appointments
power transmission system that links power plants to the electric distribution utilities were approved or attested to by the Civil Service Commission (CSC), and they had rendered
nationwide.5 services for at least one (1) year at the time of the effectivity of the EPIRA. It explained that
Miranda was not entitled to separation benefits for the period in question as there was
On April 1, 2003, Transco engaged the services of Benjamin B. Miranda (Miranda) until his nothing in the records which would prove that his appointment was duly approved or
services were terminated on June 30, 2009. From April 1, 2003 to March 21, 2004, however, attested to by the CSC.
Miranda was a contractual employee with the position of Senior Engineer pursuant to the
Service Agreement.6 Moreover, the COA expounded that the Service Agreement explicitly stated that no
employer-employee relationship existed between Miranda and Transco and that he was not
In December 2007, a public bidding was conducted which awarded the concession to the entitled to the benefits enjoyed by government employees. Likewise, it averred that the BOD
National Grid Corporation of the Philippines (NGCP), which was eventually granted a of Transco cannot issue resolutions contrary to the provisions of the EPIRA. The COA
congressional franchise to operate the transmission network through the enactment of R.A. highlighted Section 63 of the EPIRA which requires that the creation of new positions and
No. 9511. On February 28, 2008, the Power Sector Assets and Liabilities Management and the levels of or increase in salaries and all other emoluments and benefits of Transco
Transco executed a Concession Agreement with NGCP setting forth the parties' rights and personnel shall be subject to the approval of the President.
obligations for the concession.7
Lastly, the COA ruled that good faith cannot be appreciated in favor of Miranda and the BOD
On January 15, 2009, TransCo turned over the management and operation of its nationwide of Transco. As such, it concluded that Miranda and the BOD should be held solidarily liable
transmission system to NGCP. As such, several Transco personnel, including Miranda, were for the disallowed amount.
terminated on June 30, 2009.8 Miranda received his separation pay benefits in the aggregate
amount of ₱401,91 l.90 pursuant to Transco Resolution No. TC 2009-005.9 Transco moved for reconsideration but it was denied by the COA in its December 23, 2015
resolution.
On January 26, 2011, Transco received the Notice of Disallowance (ND) No. 11-003-
(10),10 which disallowed in audit the amount of ₱55, 758.26 corresponding to inclusion of Hence, this present petition raising the following issues:
ISSUES The COA disagreed that good faith may be appreciated in favor of Miranda and the approving
officials. It noted that the concerned officials granted the subject benefit notwithstanding the
I knowledge that, under the service agreement and the clear provisions of the EPIRA and its
IRR, Miranda was not entitled to the same. Likewise, the COA opined that Miranda was
WHETHER OR NOT THE GRANT OF FINANCIAL ASSISTANCE/SEPARATION BENEFIT TO bound to refund the excess of his separation benefits on the principle of solutio;
FORMER TRANSCO PERSONNEL ENGAGED BY VIRTUE OF SERVICE AGREEMENTS IS indebiti because he had no legal right to receive and retain the questioned benefits.
PROHIBITED;
In its Reply,14 dated August 30, 2016, Transco argued that the IRR cannot expand the
II provisions of the EPIRA because the latter did not qualify which employees are entitled to
separation benefits-specifically for casual and contractual employees. It opined that the
provisions of the EPIRA should govern, and, thus, all employees of the national government
WHETHER OR NOT IT IS WITHIN THE TRANSCO BOARD'S POWER TO GRANT service who are displaced from service as a result of the restructuring of the electricity
FINANCIAL ASSISTANCE/SEPARATION BENEFIT TO PERSONNEL ENGAGED BY VIRTUE industry are entitled to separation benefits.
OF SERVICE AGREEMENTS; AND
Transco emphasized that the lack of CSC approval did not negate the presence of an
III employer-employee relationship. It posited that the approving officials acted in good faith as
they were merely implementing the provisions of the EPIRA, and wished to provide financial
WHETHER OR NOT COA COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT assistance to its displaced employees. Further, Transco averred that Miranda acted in good
AFFIRMED DECISION NO. 2013-04 AND NOTICE OF DISALLOWANCE NO. 11-003(10). 11 faith as it was his honest intention that he was entitled to receive the disallowed benefits.

Transco argues that it was within its corporate powers to grant separation benefits to its The Court's Ruling
personnel separated due to the privatization of its operations. It explains that it was for this
reason it passed the resolution providing separation benefit to all employees, whether The denial of the subject disbursement is anchored primarily on two things: first, that the
appointed on permanent, contractual or casual basis. Transco bewails that Miranda was service contract of Miranda categorically stated that the service shall not be deemed as
entitled to the separation benefits despite the provisions of the service contract, and the fact government service and that no employer-employee relationship exists; second, that as a
this his appointment lacked CSC approval. contractual employee, Miranda is entitled to separation benefits under the EPIRA and its IRR
only if his appointment had been approved or attested to by the CSC.
It cites Lopez v. MWSS12 (Lopez) where the Court had ruled that therein petitioners were
entitled to severance pay notwithstanding the fact the contracts of service stated that they On the other hand, Transco argued that Miranda, based on the nature of his functions, was a
were not government employees, and that the same was not approved by the CSC. Thus, regular employee entitled to separation benefits pursuant to the EPIRA. It relied on the
Transco argues that similar to the employees in Lopez, Miranda was a regular employee pronouncements made by this Court in Lopez.
entitled to separation benefits. Moreover, it manifests that neither the EPIRA nor R.A. No.
9511 limit to permanent employees the award of separation benefits. Lastly, Transco faults
the COA in not appreciating good faith in the disbursements in question. The Court finds that the COA did not gravely abuse its discretion in upholding the questioned
ND.
In its Comment,13 dated July 29, 2016, the COA countered that it did not commit grave abuse
of discretion in upholding the subject ND as the disbursement in question was contrary to GOCCs employees are bound
law. It explained that Miranda's appointment from April 1, 2003 to April 15, 2004 was by the provisions of the
neither approved nor attested to by the CSC. The COA surmised that pursuant to the EPIRA GOCC 's special charter and
and its IRR, casual and contractual employees are entitled to separation benefits only if their civil service laws
contract of service had been approved or attested by the CSC. It reiterated that the contract
of service explicitly stated that Miranda's services shall not be deemed as government It is undisputed that Transco is a GOCC as it was created by virtue of the EPIRA. As such, it
service and that no employer-employee relationship existed. was bound by civil service laws.15 Under the Constitution,16 the Civil Service
Commission (CSC) is the central personnel agency of the government, including GOCCs. It
primarily deals with matters affecting the career development, rights and welfare of Thus, it is clear that based on the EPIRA and its IRR that all employees of Transco are
government employees.17 entitled to separation benefits, with an additional requirement imposed on casual or
contractual employees - their appointments must have been approved or attested by the
In addition, Transco is bound by the provisions of its charter. Thus, a review of the law CSC. Hence, the COA correctly disallowed Miranda's separation benefit in the amount of
creating Transco and pertinent CSC issuances is in order to determine the propriety of the ₱55,758.26 because it pertained to services rendered under the service contract which was
benefits Miranda received. not attested to by the CSC.

Section 63 of the EPIRA provides for the separation benefits to be awarded to officials and Lopez revisited
employees displaced by the restructuring electricity industry and privatization of NPC
assets, to wit: In an attempt to justify the award of separation benefits covering the entire period of
Miranda's employment, Transco relies on the pronouncement of this Court in Lopez. In the
SECTION 63. Separation Benefits of Officials and Employees of Affected Agencies. - National said case, the Court ruled that the lack of CSC approval or attestation alone could not negate
Government employees displaced or separated from the service as a result of the government employment, viz:
restructuring of the electricity industry and privatization of NPC assets pursuant to this Act,
shall be entitled to either a separation pay and other benefits in accordance with existing Petitioners are indeed regular employees of the MWSS. The primary standard of
laws, rules or regulations or be entitled to avail of the privileges provided under a determining regular employment is the reasonable connection between the particular
separation plan which shall be one and one-half month salary for every year of service in the activity performed by the employee in relation to the usual business or trade of the
government: Provided, however, That those who avail of such privileges shall start their employer. The connection can be determined by considering the nature of the work
government service anew if absorbed by any government-owned successor company. In no performed and its relation to the scheme of the particular business or trade in its
case shall there be any diminution of benefits under the separation plan until the full entirety. Likewise, the repeated and continuing need for the performance of the job
implementation of the restructuring and privatization. has been deemed sufficient evidence of the necessity, if not indispensability of the
activity to the business. Some of the petitioners had rendered more than two decades of
Displaced or separated personnel as a result of the privatization, if qualified, shall be given service to the MWSS. The continuous and repeated rehiring of these bill collectors indicate
preference in the hiring of the manpower requirements of the privatized companies. the necessity and desirability of their services, as well as the importance of the role of bill
collectors in the MWSS.
The salaries of employees of NPC shall continue to be exempt from the coverage of Republic
Act No. 6758, otherwise known as "The Salary Standardization Act". We agree with the CSC when it stated that the authority of government agencies to contract
services is an authority recognized under civil service rules. However, said authority cannot
With respect to employees who are not retained by NPC, the Government, through the be used to circumvent the laws and deprive employees of such agencies from receiving what
Department of Labor and Employment, shall endeavor to implement re-training, job is due them.
counseling, and job placement programs. [Emphasis supplied]
The CSC goes further to say that petitioners were unable to present proof that their
In turn, Rule 33, Section 1 of the IRR of the EPIRA provides: appointments were contractual in nature and submitted to the CSC for its approval, and that
submission to and approval of the CSC are important as these show that their services had
been credited as government service. The point is of no moment. Petitioners were able to
SECTION 1. General Statement on Coverage. - attach only two of such Agreements which bore the stamp of approval by the CSC and these
are simply inadequate to prove that the other agreements were similarly approved. Even
This Rule shall apply to all employees in the National Government service as of 26 June 2001 petitioners admit that subsequently such Agreements were no longer submitted to the CSC
regardless of position, designation or status, who are displaced or separated from the service for its approval. Still, the failure to submit the documents for approval of the CSC cannot
as a result of the Restructuring of the electricity industry and Privatization of NPC militate against the existence of employer-employee relationship between petitioners
assets: Provided, however, That the coverage for casual or contractual employees shall be and MWSS. MWSS cannot raise its own inaction to buttress its adverse position. 18[Emphases
limited to those whose appointments were approved or attested by the Civil Service supplied]
Commission (CSC).
In finding for therein petitioners that they were regular government employees, the Court TransCo's reliance on Lopez, which the Court now abandons, the Court grants Transco' s
applied the four-fold test, and found that the functions they performed reasonably necessary petition pro hac vice and absolved it from any liability in refunding the disallowed amount.
to the business of the MWSS. For the said reasons, they were considered regular government
employees despite the absence of approval or attestation by the CSC. On another note, even if the ND is to be upheld, Miranda should not be solidarily liable to
refund the same.1âwphi1 In Silang v. COA,21 the Court had ruled that passive recipients of the
It must be remembered, however, that the rules of employment in private practice differs disallowed disbursements, who acted in good faith, are absolved from refunding the
from government service.19As astutely explained by our colleague Justice Marvic Leanen, same, viz:
that while a private employer should apply the four-fold test in determining employer-
employee relationship as it is strictly bound by the labor code, a government employer or By way of exception, however, passive recipients or payees of disallowed salaries,
GOCC, must, apart from applying the four-fold test, comply with the rules of the CSC in emoluments, benefits, and other allowances need not refund such disallowed amounts
determining the existence of employer-employee relationship. if they received the same in good faith. Stated otherwise, government officials and
employees who unwittingly received disallowed benefits or allowances are not liable for
The difference between private and public employment is readily apparent in our legal their reimbursement if there is no finding of bad faith. In Lumayna v. COA, the Court declared
landscape. For one, the Labor Code20 recognizes that the terms and conditions of that notwithstanding the disallowance of benefits by COA, the affected personnel who
employment of all government employees, including those of GOCCs, shall be governed by received the said benefits in good faith should not be ordered to refund the disallowed
the civil service law, rules and regulations. Particularly, in cases of GOCCs created by special benefits. Xxx
law, the terms and conditions of employment of its employees are particularly governed by
its charter. In this case, the majority of the petitioners are the LGU of Tayabas, Quezon's rank-and-file
employees and bona fide members of UNG KAT (named-below) who received the 2008 and
Thus, it is high time that the pronouncements in Lopez be abandoned.1âwphi1 The 2009 CNA Incentives on the honest belief that UNGKAT was fully clothed with the authority
authorities cited in the said case pertained to private employers. As such, it was expected to represent them in the CNA negotiations. As the records bear out, there was no indication
that the four-fold test, the reasonable necessity of the duties performed and other standards that these rank-and-file employees, except the UNGKAT officers or members of its Board of
set forth in the Labor Code were used in determining employer-employee relationship. None Directors named below, had participated in any of the negotiations or were, in any manner,
of the cases cited involved the government as the employer, which poses a different privy to the internal workings related to the approval of said incentives; hence, under such
employer-employee relationship from that which is present in private employment. limitation, the reasonable conclusion is that they were mere passive recipients who cannot
be charged with knowledge of any irregularity attending the disallowed
Also, the Lopez case was never cited as an authority in determining employer-employee disbursement. Verily, good faith is anchored on an honest belief that one is legally
relationship between the government and its employees. Consequently, it is best entitled to the benefit, as said employees did so believe in this case. Therefore, said
that Lopez be abandoned because it sets a precarious precedent as it fixes employer- petitioners should not be held liable to refund what they had unwittingly received.
employee relationship in the public sector in disregard of civil service laws, rules and [Emphases supplied]
regulations.
In the present case, Miranda was a mere passive recipient as he had no involvement when
To summarize, employer-employee relationship in the public sector is primarily determined the BOD passed the resolution22 granting separation benefits to all Transco employees. Thus,
by special laws, civil service laws, rules and regulations. While the four-fold test and other Miranda acted in good faith as he merely received the benefits to which he believed he was
standards set forth in the labor code may aid in ascertaining the relationship between the entitled to.
government and its purported employees, they cannot be overriding factors over the
conditions and requirements for public employment as provided for by civil service laws, WHEREFORE, the petition is GRANTED pro hac vice. The March 19, 2015 Decision and
rules and regulations. December 23, 2015 Resolution of the Commission on Audit are REVERSED and SET ASIDE.
The Notice of Disallowance No. 11-003-(10) is DISMISSED.
Disallowed amount need
not be refunded SO ORDERED.

The Court, nevertheless, finds that Transco and Miranda be excused from refunding the -------------------------------X
disallowed amount notwithstanding the propriety of the ND in question. In view of
G.R. No. 192571 April 22, 2014 Manager, indicating therein the job description for as well as the duties and
responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA her application to Abbott on October 4, 2004;
OLIVIA T. YABUT-MISA, TERESITA C. BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs. (b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be
PEARLIE ANN F. ALCARAZ, Respondent. employed on a probationary status;

RESOLUTION (c) On February 12, 2005, Alcaraz signed an employment contract which specifically
stated, inter alia, that she was to be placed on probation for a period of six (6)
PERLAS-BERNABE, J.: months beginning February 15, 2005 to August 14, 2005;

For resolution is respondent Pearlie Ann Alcaraz's (Alcaraz) Motion for Reconsideration (d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her
dated August 23, 2013 of the Court's Decision dated July 23, 2013 (Decision).1 copies of Abbott’s organizational structure and her job description through e-mail;

At the outset, there appears to be no substantial argument in the said motion sufficient for (e) Alcaraz was made to undergo a pre-employment orientation where [Allan G.
the Court to depart from the pronouncements made in the initial ruling. But if only to Almazar] informed her that she had to implement Abbott’s Code of Conduct and
address Akaraz's novel assertions, and to so placate any doubt or misconception in the office policies on human resources and finance and that she would be reporting
resolution of this case, the Court proceeds to shed light on the matters indicated below. directly to [Kelly Walsh];

A. Manner of review. (f) Alcaraz was also required to undergo a training program as part of her
orientation;
Alcaraz contends that the Court should not have conducted a re-weighing of evidence since a
petition for review on certiorari under Rule 45 of the Rules of Court (Rules) is limited to the (g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules
review of questions of law. She submits that since what was under review was a ruling of the from [Maria Olivia T. Yabut-Misa] who explained to her the procedure for evaluating
Court of Appeals (CA) rendered via a petition for certiorari under Rule 65 of the Rules, the the performance of probationary employees; she was further notified that Abbott
Court should only determine whether or not the CA properly determined that the National had only one evaluation system for all of its employees; and
Labor Relations Commission (NLRC) committed a grave abuse of discretion.
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company
The assertion does not justify the reconsideration of the assailed Decision. and had admitted to have an "extensive training and background" to acquire the
necessary skills for her job.2
A careful perusal of the questioned Decision will reveal that the Court actually resolved the
controversy under the above-stated framework of analysis. Essentially, the Court found the Considering the foregoing incidents which were readily observable from the records, the
CA to have committed an error in holding that no grave abuse of discretion can be ascribed Court reached the conclusion that the NLRC committed grave abuse of discretion, viz.:
to the NLRC since the latter arbitrarily disregarded the legal implication of the attendant
circumstances in this case which should have simply resulted in the finding that Alcaraz was [I]n holding that Alcaraz was illegally dismissed due to her status as a regular and not a
apprised of the performance standards for her regularization and hence, was properly a probationary employee, the Court finds that the NLRC committed a grave abuse of discretion.
probationary employee. As the Court observed, an employee’s failure to perform the duties
and responsibilities which have been clearly made known to him constitutes a justifiable To elucidate, records show that the NLRC based its decision on the premise that Alcaraz’s
basis for a probationary employee’s non-regularization. As detailed in the Decision, Alcaraz receipt of her job description and Abbott’s Code of Conduct and Performance Modules was
was well-apprised of her duties and responsibilities as well as the probationary status of her not equivalent to being actually informed of the performance standards upon which she
employment: should have been evaluated on. It, however, overlooked the legal implication of the other
attendant circumstances as detailed herein which should have warranted a contrary finding
(a) On June 27, 2004, [Abbott Laboratories, Philippines (Abbott)] caused the that Alcaraz was indeed a probationary and not a regular employee – more particularly the
publication in a major broadsheet newspaper of its need for a Regulatory Affairs fact that she was well-aware of her duties and responsibilities and that her failure to
adequately perform the same would lead to her non-regularization and eventually, her or quality. By way of example, Alcaraz cites the case of a probationary salesperson and asks
termination.3 how does such employee achieve regular status if he does not know how much he needs to
sell to reach the same.
Consequently, since the CA found that the NLRC did not commit grave abuse of discretion
and denied the certiorari petition before it, the reversal of its ruling was thus in order. The argument is untenable.

At this juncture, it bears exposition that while NLRC decisions are, by their nature, final and First off, the Court must correct Alcaraz’s mistaken notion: it is not the probationary
executory4 and, hence, not subject to appellate review,5 the Court is not precluded from employee’s job description but the adequate performance of his duties and responsibilities
considering other questions of law aside from the CA’s finding on the NLRC’s grave abuse of which constitutes the inherent and implied standard for regularization. To echo the
discretion. While the focal point of analysis revolves on this issue, the Court may deal with fundamental point of the Decision, if the probationary employee had been fully apprised by
ancillary issues – such as, in this case, the question of how a probationary employee is his employer of these duties and responsibilities, then basic knowledge and common sense
deemed to have been informed of the standards of his regularization – if only to determine if dictate that he must adequately perform the same, else he fails to pass the probationary trial
the concepts and principles of labor law were correctly applied or misapplied by the NLRC in and may therefore be subject to termination.8
its decision. In other words, the Court’s analysis of the NLRC’s interpretation of the
environmental principles and concepts of labor law is not completely prohibited in – as it is The determination of "adequate performance" is not, in all cases, measurable by quantitative
complementary to – a Rule 45 review of labor cases. specification, such as that of a sales quota in Alcaraz’s example. It is also hinged on the
qualitative assessment of the employee’s work; by its nature, this largely rests on the
Finally, if only to put to rest Alcaraz’s misgivings on the manner in which this case was reasonable exercise of the employer’s management prerogative. While in some instances the
reviewed, it bears pointing out that no "factual appellate review" was conducted by the Court standards used in measuring the quality of work may be conveyed – such as workers who
in the Decision. Rather, the Court proceeded to interpret the relevant rules on probationary construct tangible products which follow particular metrics, not all standards of quality
employment as applied to settled factual findings. Besides, even on the assumption that a measurement may be reducible to hard figures or are readily articulable in specific pre-
scrutiny of facts was undertaken, the Court is not altogether barred from conducting the engagement descriptions. A good example would be the case of probationary employees
same. This was explained in the case of Career Philippines Shipmanagement, Inc. v. whose tasks involve the application of discretion and intellect, such as – to name a few –
Serna6 wherein the Court held as follows: lawyers, artists, and journalists. In these kinds of occupation, the best that the employer can
do at the time of engagement is to inform the probationary employee of his duties and
Accordingly, we do not re-examine conflicting evidence, re-evaluate the credibility of responsibilities and to orient him on how to properly proceed with the same. The employer
witnesses, or substitute the findings of fact of the NLRC, an administrative body that has cannot bear out in exacting detail at the beginning of the engagement what he deems as
expertise in its specialized field. Nor do we substitute our "own judgment for that of the "quality work" especially since the probationary employee has yet to submit the required
tribunal in determining where the weight of evidence lies or what evidence is credible." The output. In the ultimate analysis, the communication of performance standards should be
factual findings of the NLRC, when affirmed by the CA, are generally conclusive on this Court. perceived within the context of the nature of the probationary employee’s duties and
responsibilities.
Nevertheless, there are exceptional cases where we, in the exercise of our discretionary
appellate jurisdiction may be urged to look into factual issues raised in a Rule 45 petition. The same logic applies to a probationary managerial employee who is tasked to supervise a
For instance, when the petitioner persuasively alleges that there is insufficient or particular department, as Alcaraz in this case.1âwphi1 It is hardly possible for the employer,
insubstantial evidence on record to support the factual findings of the tribunal or court a at the time of the employee’s engagement, to map into technical indicators, or convey in
quo, as Section 5, Rule 133 of the Rules of Court states in express terms that in cases filed precise detail the quality standards by which the latter should effectively manage the
before administrative or quasi-judicial bodies, a fact may be deemed established only if department. Factors which gauge the ability of the managerial employee to either deal with
supported by substantial evidence.7(Emphasis supplied) his subordinates (e.g., how to spur their performance, or command respect and obedience
from them), or to organize office policies, are hardly conveyable at the outset of the
B. Standards for regularization; engagement since the employee has yet to be immersed into the work itself. Given that a
conceptual underpinnings. managerial role essentially connotes an exercise of discretion, the quality of effective
management can only be determined through subsequent assessment. While at the time of
engagement, reason dictates that the employer can only inform the probationary managerial
Alcaraz posits that, contrary to the Court’s Decision, one’s job description cannot by and of employee of his duties and responsibilities as such and provide the allowable parameters for
itself be treated as a standard for regularization as a standard denotes a measure of quantity
the same. Verily, as stated in the Decision, the adequate performance of such duties and equally reasonable, might conceivably opine otherwise.14 To the Court's mind, this threshold
responsibilities is, by and of itself, an implied standard of regularization. of evidence Abbott amply overcame in this case.

In this relation, it bears mentioning that the performance standard contemplated by law All told, the Court hereby denies the instant motion for reconsideration and thereby upholds
should not, in all cases, be contained in a specialized system of feedbacks or evaluation. The the Decision in the main case.
Court takes judicial notice of the fact that not all employers, such as simple businesses or
small-scale enterprises, have a sophisticated form of human resource management, so much WHEREFORE, the motion for reconsideration dated August 23, 2013 of the Court's Decision
so that the adoption of technical indicators as utilized through "comment cards" or dated July 23, 2013 in this case is hereby DENIED.
"appraisal" tools should not be treated as a prerequisite for every case of probationary
engagement. In fact, even if a system of such kind is employed and the procedures for its SO ORDERED.
implementation are not followed, once an employer determines that the probationary
employee fails to meet the standards required for his regularization, the former is not
precluded from dismissing the latter. The rule is that when a valid cause for termination -----------------------------X
exists, the procedural infirmity attending the termination only warrants the payment of
nominal damages. This was the principle laid down in the landmark cases of Agabon v. ARMANDO ALILING, G.R. No. 185829
NLRC9 (Agabon) and Jaka Food Processing Corporation v. Pacot10 (Jaka). In the assailed Petitioner,
Decision, the Court actually extended the application of the Agabon and Jaka rulings to Present:
breaches of company procedure, notwithstanding the employer’s compliance with the
statutory requirements under the Labor Code.11 Hence, although Abbott did not comply with - versus - VELASCO, JR., J., Chairperson
its own termination procedure, its non-compliance thereof would not detract from the PERALTA,
finding that there subsists a valid cause to terminate Alcaraz’s employment. Abbott, ABAD,
however, was penalized for its contractual breach and thereby ordered to pay nominal JOSE B. FELICIANO, MANUEL BERSAMIN, JJ. MENDOZA, and
damages. F. SAN MATEO III, JOSEPH R. PERLAS-BERNABE, JJ.
LARIOSA, and WIDE WIDE Promulgated:
WORLD EXPRESS CORPORATION,
As a final point, Alcaraz cannot take refuge in Aliling v. Feliciano 12 (Aliling) since the same is Respondents. Promulgated:
not squarely applicable to the case at bar. The employee in Aliling, a sales executive, was
belatedly informed of his quota requirement. Thus, considering the nature of his position, April 25, 2012
the fact that he was not informed of his sales quota at the time of his engagement changed x-----------------------------------------------------------------------------------------x
the complexion of his employment. Contrarily, the nature of Alcaraz's duties and
responsibilities as Regulatory Affairs Manager negates the application of the foregoing. DECISION
Records show that Alcaraz was terminated because she (a) did not manage her time
effectively; (b) failed to gain the trust of her staff and to build an effective rapport with them; VELASCO, JR., J.:
(c) failed to train her staff effectively; and (d) was not able to obtain the knowledge and
ability to make sound judgments on case processing and article review which were The Case
necessary for the proper performance of her duties.13 Due to the nature and variety of these
managerial functions, the best that Abbott could have done, at the time of Alcaraz's
engagement, was to inform her of her duties and responsibilities, the adequate performance
of which, to repeat, is an inherent and implied standard for regularization; this is unlike the This Petition for Review on Certiorari under Rule 45 assails and seeks to set aside
circumstance in Aliling where a quantitative regularization standard, in the term of a sales
the July 3, 2008 Decision[1] and December 15, 2008 Resolution[2] of the Court of Appeals
quota, was readily articulable to the employee at the outset. Hence, since the reasonableness
of Alcaraz's assessment clearly appears from the records, her termination was justified. Bear (CA), in CA-G.R. SP No. 101309, entitled Armando Aliling v. National Labor Relations
in mind that the quantum of proof which the employer must discharge is only substantial
Commission, Wide Wide World Express Corporation, Jose B. Feliciano, Manuel F. San Mateo III
evidence which, as defined in case law, means that amount of relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds, and Joseph R. Lariosa. The assailed issuances modified the Resolutions dated May 31,
2007[3] and August 31, 2007[4] rendered by the National Labor Relations Commission (NLRC)
My expectations is [sic] that GX Shuttles should be 80% full by the 3rd week
in NLRC NCR Case No. 00-10-11166-2004, affirming the Decision dated April 25, 2006[5] of
(August 5) after launch (July 15). Pls. make that happen. It has been more
the Labor Arbiter. than a month since you came in. I am expecting sales to be pumping in by
now. Thanks.
The Facts
Nonong
Via a letter dated June 2, 2004,[6] respondent Wide Wide World Express Corporation
(WWWEC) offered to employ petitioner Armando Aliling (Aliling) as Account Executive Thereafter, in a letter of September 25, 2004,[10] Joseph R. Lariosa (Lariosa), Human
(Seafreight Sales), with the following compensation package: a monthly salary of PhP 13,000, Resources Manager of WWWEC, asked Aliling to report to the Human Resources Department
transportation allowance of PhP 3,000, clothing allowance of PhP 800, cost of living to explain his absence taken without leave from September 20, 2004.
allowance of PhP 500, each payable on a per month basis and a 14th month pay depending on
the profitability and availability of financial resources of the company. The offer came with a Aliling responded two days later. He denied being absent on the days in question, attaching
six (6)-month probation period condition with this express caveat: Performance during [sic] to his reply-letter[11] a copy of his timesheet[12] which showed that he worked from
probationary period shall be made as basis for confirmation to Regular or Permanent Status. September 20 to 24, 2004. Alilings explanation came with a query regarding the withholding
of his salary corresponding to September 11 to 25, 2004.
On June 11, 2004, Aliling and WWWEC inked an Employment Contract[7] under the following
terms, among others: In a separate letter dated September 27, 2004,[13] Aliling wrote San Mateo stating: Pursuant
to your instruction on September 20, 2004, I hereby tender my resignation effective October
Conversion to regular status shall be determined on the basis of work
performance; and 15, 2004. While WWWEC took no action on his tender, Aliling nonetheless demanded
reinstatement and a written apology, claiming in a subsequent letter dated October 1,
Employment services may, at any time, be terminated for just cause or in
accordance with the standards defined at the time of engagement.[8] 2004[14] to management that San Mateo had forced him to resign.

Training then started. However, instead of a Seafreight Sale assignment, WWWEC Lariosas response-letter of October 1, 2004,[15] informed Aliling that his case was still in the
asked Aliling to handle Ground Express (GX), a new company product launched on June 18, process of being evaluated. On October 6, 2004,[16] Lariosa again wrote, this time to advise
2004 involving domestic cargo forwarding service for Luzon. Marketing this product and Aliling of the termination of his services effective as of that date owing to his non-satisfactory
finding daily contracts for it formed the core of Alilings new assignment. performance during his probationary period. Records show that Aliling, for the period
indicated, was paid his outstanding salary which consisted of:
Barely a month after, Manuel F. San Mateo III (San Mateo), WWWEC Sales and
PhP 4,988.18 (salary for the September 25, 2004 payroll)
Marketing Director, emailed Aliling[9] to express dissatisfaction with the latters performance,
1,987.28 (salary for 4 days in October 2004)
thus: -------------
PhP 6,975.46 Total
Armand,
Earlier, however, or on October 4, 2004, Aliling filed a Complaint[17] for illegal dismissal due
The grounds upon which complainants dismissal was based did not
to forced resignation, nonpayment of salaries as well as damages with the NLRC against conform not only the standard but also the compliance required under
Article 281 of the Labor Code, Necessarily, complainants termination is not
WWWEC. Appended to the complaint was Alilings Affidavit dated November 12, 2004,[18] in justified for failure to comply with the mandate the law requires.
which he stated: 5. At the time of my engagement, respondents did not make known to me the Respondents should be ordered to pay salaries corresponding to the
unexpired portion of the contract of employment and all other benefits
standards under which I will qualify as a regular employee. amounting to a total of THIRTY FIVE THOUSAND EIGHT HUNDRED ELEVEN
Refuting Alilings basic posture, WWWEC stated in its Position Paper dated PESOS (P35,811.00) covering the period from October 6 to December 7,
2004, computed as follows:
November 22, 2004[19] that, in addition to the letter-offer and employment contract adverted
to, WWWEC and Aliling have signed a letter of appointment [20] on June 11, 2004 containing
Unexpired Portion of the Contract:
the following terms of engagement:
Basic Salary P13,000.00
Additionally, upon the effectivity of your probation, you and your Transportation 3,000.00
immediate superior are required to jointly define your Clothing Allowance 800.00
objectives compared with the job requirements of the position. Based on ECOLA 500.00
the pre-agreed objectives, your performance shall be reviewed on the --------------
3rd month to assess your competence and work attitude. The 5th month P17,300.00
Performance Appraisal shall be the basis in elevating or confirming
your employment status from Probationary to Regular.
10/06/04 12/07/04
Failure to meet the job requirements during the probation stage means that P17,300.00 x 2.7 mos. = P35,811.00
your services may be terminated without prior notice and without recourse
to separation pay. Complainants 13th month pay proportionately for 2004 was not shown to
have been paid to complainant, respondent be made liable to him therefore
computed at SIX THOUSAND FIVE HUNDRED THIRTY TWO PESOS AND
WWWEC also attached to its Position Paper a memo dated September 20, 2004 [21] in which 50/100 (P6,532.50).
San Mateo asked Aliling to explain why he should not be terminated for failure to meet the
For engaging the services of counsel to protect his interest, complainant is
expected job performance, considering that the load factor for the GX Shuttles for the period likewise entitled to a 10% attorneys fees of the judgment amount. Such
other claims for lack of basis sufficient to support for their grant are
July to September was only 0.18% as opposed to the allegedly agreed upon load of 80%
unwarranted.
targeted for August 5, 2004. According to WWWEC, Aliling, instead of explaining himself,
WHEREFORE, judgment is hereby rendered ordering respondent company
simply submitted a resignation letter.
to pay complainant Armando Aliling the sum of THIRTY FIVE THOUSAND
EIGHT HUNDRED ELEVEN PESOS (P35,811.00) representing his salaries
and other benefits as discussed above.
In a Reply-Affidavit dated December 13, 2004,[22] Aliling denied having received a copy
of San Mateos September 20, 2004 letter. Respondent company is likewise ordered to pay said complainant the
amount of TEN THOUSAND SEVEN HUNDRED SIXTY SIX PESOS AND
85/100 ONLY (10.766.85) representing his proportionate 13 th month pay
Issues having been joined, the Labor Arbiter issued on April 25, 2006[23] a Decision declaring for 2004 plus 10% of the total judgment as and by way of attorneys fees.

Alilings termination as unjustified. In its pertinent parts, the decision reads: Other claims are hereby denied for lack of merit. (Emphasis supplied.)
The labor arbiter gave credence to Alilings allegation about not receiving and, therefore, not
Alilings motion for reconsideration was rejected by the CA through the assailed Resolution
bound by, San Mateos purported September 20, 2004 memo. The memo, to reiterate,
dated December 15, 2008.
supposedly apprised Aliling of the sales quota he was, but failed, to meet. Pushing the point,
the labor arbiter explained that Aliling cannot be validly terminated for non-compliance with
Hence, the instant petition.
the quota threshold absent a prior advisory of the reasonable standards upon which his
performance would be evaluated.
The Issues

Both parties appealed the above decision to the NLRC, which affirmed the Decision in toto in
Aliling raises the following issues for consideration:
its Resolution dated May 31, 2007. The separate motions for reconsideration were also
denied by the NLRC in its Resolution dated August 31, 2007. A. The failure of the Court of Appeals to order reinstatement
(despite its finding that petitioner was illegally dismissed from
employment) is contrary to law and applicable jurisprudence.
Therefrom, Aliling went on certiorari to the CA, which eventually rendered the assailed
B. The failure of the Court of Appeals to award backwages (even if
Decision, the dispositive portion of which reads: it did not order reinstatement) is contrary to law and applicable
WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of jurisprudence.
respondent (Third Division) National Labor Relations Commission are C. The failure of the Court of Appeals to award moral and
AFFIRMED, with the following MODIFICATION/CLARIFICATION: exemplary damages (despite its finding that petitioner was dismissed to
Respondents Wide Wide World Express Corp. and its officers, Jose B. prevent the acquisition of his regular status) is contrary to law and
Feliciano, Manuel F. San Mateo III and Joseph R. Lariosa, are jointly and applicable jurisprudence.[25]
severally liable to pay petitioner Armando Aliling: (A) the sum of Forty
Two Thousand Three Hundred Thirty Three & 50/100 (P42,333.50) as the
total money judgment, (B) the sum of Four Thousand Two Hundred Thirty
In their Comment,[26] respondents reiterated their position that WWWEC hired
Three & 35/100 (P4,233.35) as attorneys fees, and (C) the additional sum
equivalent to one-half (1/2) month of petitioners salary as separation pay. petitioner on a probationary basis and fired him before he became a regular employee.

SO ORDERED.[24] (Emphasis supplied.)


The Courts Ruling

The CA anchored its assailed action on the strength of the following premises: (a)
The petition is partly meritorious.
respondents failed to prove that Alilings dismal performance constituted gross and habitual
Petitioner is a regular employee
neglect necessary to justify his dismissal; (b) not having been informed at the time of his
engagement of the reasonable standards under which he will qualify as a regular employee,
On a procedural matter, petitioner Aliling argues that WWWEC, not having appealed
Aliling was deemed to have been hired from day one as a regular employee; and (c) the
from the judgment of CA which declared Aliling as a regular employee from the time he
strained relationship existing between the parties argues against the propriety of
reinstatement.
signed the employment contract, is now precluded from questioning the appellate courts
determination as to the nature of his employment. The CA, on the other hand, citing Cielo v. National Labor Relations
Commission,[29] ruled that petitioner was a regular employee from the outset inasmuch as he
Petitioner errs. The Court has, when a case is on appeal, the authority to review was not informed of the standards by which his probationary employment would be
matters not specifically raised or assigned as error if their consideration is necessary in measured. The CA wrote:
reaching a just conclusion of the case. We said as much in Sociedad Europea de Financiacion,
Petitioner was regularized from the time of the execution of the
SA v. Court of Appeals,[27] It is axiomatic that an appeal, once accepted by this Court, throws
employment contract on June 11, 2004, although respondent company had
the entire case open to review, and that this Court has the authority to review matters not arbitrarily shortened his tenure. As pointed out, respondent company did
not make known the reasonable standards under which he will qualify
specifically raised or assigned as error by the parties, if their consideration is necessary in as a regular employee at the time of his engagement. Hence, he was
arriving at a just resolution of the case. deemed to have been hired from day one as a regular
employee.[30] (Emphasis supplied.)

The issue of whether or not petitioner was, during the period material, a WWWEC, however, excepts on the argument that it put Aliling on notice that he
probationary or regular employee is of pivotal import. Its resolution is doubtless necessary would be evaluated on the 3rd and 5th months of his probationary employment. To WWWEC,
at arriving at a fair and just disposition of the controversy. its efforts translate to sufficient compliance with the requirement that a probationary
worker be apprised of the reasonable standards for his regularization. WWWEC invokes the
The Labor Arbiter cryptically held in his decision dated April 25, 2006 that: ensuing holding in Alcira v. National Labor Relations Commission[31] to support its case:

Be that as it may, there appears no showing that indeed the said Conversely, an employer is deemed to substantially comply with
September 20, 2004 Memorandum addressed to complainant was received the rule on notification of standards if he apprises the employee that he will
by him. Moreover, complainants tasked where he was assigned was a new be subjected to a performance evaluation on a particular date after his
developed service. In this regard, it is noted: hiring. We agree with the labor arbiter when he ruled that:

Due process dictates that an employee be apprised In the instant case, petitioner cannot successfully say that
beforehand of the conditions of his employment and of the terms of he was never informed by private respondent of the standards that
advancement therein. Precisely, implicit in Article 281 of the Labor he must satisfy in order to be converted into regular status. This
Code is the requirement that reasonable standards be previously rans (sic) counter to the agreement between the parties that
made known by the employer to the employee at the time of his after five months of service the petitioners performance would
engagement (Ibid, citing Sameer Overseas Placement Agency, Inc. be evaluated. It is only but natural that the evaluation should be
vs. NLRC, G.R. No. 132564, October 20, 1999).[28] made vis--vis the performance standards for the job. Private
respondent Trifona Mamaradlo speaks of such standard in her
affidavit referring to the fact that petitioner did not perform well in
From our review, it appears that the labor arbiter, and later the NLRC, considered his assigned work and his attitude was below par compared to the
companys standard required of him. (Emphasis supplied.)
Aliling a probationary employee despite finding that he was not informed of the reasonable
standards by which his probationary employment was to be judged.
WWWECs contention is untenable.
qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his
Alcira is cast under a different factual setting. There, the labor arbiter, the NLRC, the engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee. (Emphasis supplied.)
CA, and even finally this Court were one in their findings that the employee concerned knew,
having been duly informed during his engagement, of the standards for becoming a regular Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the
Labor Code
employee. This is in stark contrast to the instant case where the element of being informed
of the regularizing standards does not obtain. As such, Alcira cannot be made to apply to the Sec. 6. Probationary employment. There is probationary
employment where the employee, upon his engagement, is made to
instant case. undergo a trial period where the employee determines his fitness to qualify
for regular employment, based on reasonable standards made known to
him at the time of engagement.
To note, the June 2, 2004 letter-offer itself states that the regularization standards or Probationary employment shall be governed by the following rules:
the performance norms to be used are still to be agreed upon by Aliling and his
xxxx
supervisor. WWWEC has failed to prove that an agreement as regards thereto has been
(d) In all cases of probationary employment, the employer shall
reached. Clearly then, there were actually no performance standards to speak of. And lest it
make known to the employee the standards under which he will qualify
be overlooked, Aliling was assigned to GX trucking sales, an activity entirely different to the as a regular employee at the time of his engagement. Where no
standards are made known to the employee at that time, he shall
Seafreight Sales he was originally hired and trained for. Thus, at the time of his engagement,
be deemed a regular employee. (Emphasis supplied.)
the standards relative to his assignment with GX sales could not have plausibly been
communicated to him as he was under Seafreight Sales. Even for this reason alone, the
To repeat, the labor arbiter, NLRC and the CA are agreed, on the basis of
conclusion reached in Alcira is of little relevant to the instant case.
documentary evidence adduced, that respondent WWWEC did not inform petitioner Aliling
of the reasonable standards by which his probation would be measured against at the time
Based on the facts established in this case in light of extant jurisprudence, the CAs
of his engagement. The Court is loathed to interfere with this factual determination. As We
holding as to the kind of employment petitioner enjoyed is correct. So was the NLRC ruling,
have held:
affirmatory of that of the labor arbiter. In the final analysis, one common thread runs
through the holding of the labor arbiter, the NLRC and the CA, i.e., petitioner Aliling, albeit Settled is the rule that the findings of the Labor Arbiter, when
affirmed by the NLRC and the Court of Appeals, are binding on the
hired from managements standpoint as a probationary employee, was deemed a regular
Supreme Court, unless patently erroneous.It is not the function of the
employee by force of the following self-explanatory provisions: Supreme Court to analyze or weigh all over again the evidence already
considered in the proceedings below. The jurisdiction of this Court in a
petition for review on certiorari is limited to reviewing only errors of law,
Article 281 of the Labor Code not of fact, unless the factual findings being assailed are not supported by
evidence on record or the impugned judgment is based on a
ART. 281. Probationary employment. - Probationary employment misapprehension of facts.[32]
shall not exceed six (6) months from the date the employee started
working, unless it is covered by an apprenticeship agreement stipulating a
longer period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or when he fails to
The more recent Peafrancia Tours and Travel Transport, Inc., v. Sarmiento[33] has contract with WWWEC. The aforequoted Section 6 of the Implementing Rules of Book VI,
reaffirmed the above ruling, to wit: Rule VIII-A of the Code specifically requires the employer to inform the probationary
employee of such reasonable standards at the time of his engagement, not at any time
Finally, the CA affirmed the ruling of the NLRC and adopted as its
own the latter's factual findings. Long-established is the doctrine that later; else, the latter shall be considered a regular employee. Thus, pursuant to the explicit
findings of fact of quasi-judicial bodies x x x are accorded respect, even
finality, if supported by substantial evidence. When passed upon and provision of Article 281 of the Labor Code, Section 6(d) of the Implementing Rules of Book
upheld by the CA, they are binding and conclusive upon this Court and will VI, Rule VIII-A of the Labor Code and settled jurisprudence, petitioner Aliling is deemed a
not normally be disturbed. Though this doctrine is not without exceptions,
the Court finds that none are applicable to the present case. regular employee as of June 11, 2004, the date of his employment contract.

WWWEC also cannot validly argue that the factual findings being assailed are not
supported by evidence on record or the impugned judgment is based on a
misapprehension of facts. Its very own letter-offer of employment argues against its above Petitioner was illegally dismissed

posture. Excerpts of the letter-offer:


To justify fully the dismissal of an employee, the employer must, as a rule, prove that
Additionally, upon the effectivity of your probation, you and your
immediate superior are required to jointly define your objectives the dismissal was for a just cause and that the employee was afforded due process prior to
compared with the job requirements of the position. Based on the pre- dismissal. As a complementary principle, the employer has the onus of proving with clear,
agreed objectives, your performance shall be reviewed on the 3rd month to
assess your competence and work attitude. The 5th month Performance accurate, consistent, and convincing evidence the validity of the dismissal. [34]
Appraisal shall be the basis in elevating or confirming your employment
status from Probationary to Regular.
WWWEC had failed to discharge its twin burden in the instant case.
Failure to meet the job requirements during the probation stage
means that your services may be terminated without prior notice and
without recourse to separation pay. (Emphasis supplied.) First off, the attendant circumstances in the instant case aptly show that the issue of
petitioners alleged failure to achieve his quota, as a ground for terminating employment,
strikes the Court as a mere afterthought on the part of WWWEC. Consider: Lariosas letter of
Respondents further allege that San Mateos email dated July 16, 2004 shows that
September 25, 2004 already betrayed managements intention to dismiss the petitioner for
the standards for his regularization were made known to petitioner Aliling at the time of his
alleged unauthorized absences. Aliling was in fact made to explain and he did so
engagement. To recall, in that email message, San Mateo reminded Aliling of the sales quota
satisfactorily. But, lo and behold, WWWEC nonetheless proceeded with its plan to dismiss
he ought to meet as a condition for his continued employment, i.e., that the GX trucks should
the petitioner for non-satisfactory performance, although the corresponding termination
already be 80% full by August 5, 2004. Contrary to respondents contention, San Mateos
letter dated October 6, 2004 did not even specifically state Alilings non-satisfactory
email cannot support their allegation on Aliling being informed of the standards for his
performance, or that Alilings termination was by reason of his failure to achieve his set
continued employment, such as the sales quota, at the time of his engagement. As it were,
quota.
the email message was sent to Aliling more than a month after he signed his employment
is closely related to gross neglect, for both involve specific acts of omission
What WWWEC considered as the evidence purportedly showing it gave Aliling the
on the part of the employee resulting in damage to the employer or to his
chance to explain his inability to reach his quota was a purported September 20, 2004 memo business. In Buiser vs. Leogardo, this Court ruled that failure to observed
prescribed standards to inefficiency may constitute just cause for dismissal.
of San Mateo addressed to the latter. However, Aliling denies having received such letter and (Emphasis supplied.)
WWWEC has failed to refute his contention of non-receipt. In net effect, WWWEC was at a
loss to explain the exact just reason for dismissing Aliling. It did so anew in Leonardo v. National Labor Relations Commission[36] on the
following rationale:
At any event, assuming for argument that the petitioner indeed failed to achieve his An employer is entitled to impose productivity standards for its
workers, and in fact, non-compliance may be visited with a penalty even
sales quota, his termination from employment on that ground would still be unjustified. more severe than demotion. Thus,

[t]he practice of a company in laying off workers because


Article 282 of the Labor Code considers any of the following acts or omission on the they failed to make the work quota has been recognized in this
part of the employee as just cause or ground for terminating employment: jurisdiction. (Philippine American Embroideries vs. Embroidery
and Garment Workers, 26 SCRA 634, 639). In the case at bar, the
(a) Serious misconduct or willful disobedience by the employee of petitioners' failure to meet the sales quota assigned to each of them
the lawful orders of his employer or representative in connection with his constitute a just cause of their dismissal, regardless of the
work; permanent or probationary status of their employment. Failure to
observe prescribed standards of work, or to fulfill reasonable
(b) Gross and habitual neglect by the employee of his duties; work assignments due to inefficiency may constitute just cause
for dismissal. Such inefficiency is understood to mean failure to
(c) Fraud or willful breach by the employee of the trust reposed in attain work goals or work quotas, either by failing to complete the
him by his employer or duly authorized representative; same within the allotted reasonable period, or by producing
unsatisfactory results. This management prerogative of
(d) Commission of a crime or offense by the employee against the requiring standards may be availed of so long as they are
person of his employer or any immediate member of his family or his duly exercised in good faith for the advancement of the employer's
authorized representatives; and interest. (Emphasis supplied.)

(e) Other causes analogous to the foregoing. (Emphasis


supplied) In fine, an employees failure to meet sales or work quotas falls under the concept of
gross inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for

In Lim v. National Labor Relations Commission,[35] the Court considered inefficiency dismissal under Article 282 of the Code. However, in order for the quota imposed to be

as an analogous just cause for termination of employment under Article 282 of the Labor considered a valid productivity standard and thereby validate a dismissal, managements

Code: prerogative of fixing the quota must be exercised in good faith for the advancement of its
interest. The duty to prove good faith, however, rests with WWWEC as part of its burden to
We cannot but agree with PEPSI that gross inefficiency falls
within the purview of other causes analogous to the foregoing, this show that the dismissal was for a just cause. WWWEC must show that such quota was
constitutes, therefore, just cause to terminate an employee under imposed in good faith. This WWWEC failed to do, perceptibly because it could not. The fact of
Article 282 of the Labor Code. One is analogous to another if it is
susceptible of comparison with the latter either in general or in some the matter is that the alleged imposition of the quota was a desperate attempt to lend a
specific detail; or has a close relationship with the latter. Gross inefficiency
semblance of validity to Alilings illegal dismissal. It must be stressed that even WWWECs
Section 2. Standard of due process: requirements of notice. In all
sales manager, Eve Amador (Amador), in an internal e-mail to San Mateo, hedged on
cases of termination of employment, the following standards of due process
whether petitioner performed below or above expectation: shall be substantially observed.

Could not quantify level of performance as he as was tasked to handle a new I. For termination of employment based on just causes as defined in
product (GX). Revenue report is not yet administered by IT on a month-to- Article 282 of the Code:
month basis. Moreover, this in a way is an experimental activity. Practically (a) A written notice served on the employee specifying the
you have a close monitoring with Armand with regards to his performance. ground or grounds for termination, and giving to said employee
Your assessment of him would be more accurate. reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee


Being an experimental activity and having been launched for the first time, the sales concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his
of GX services could not be reasonably quantified. This would explain why Amador implied evidence or rebut the evidence presented against him; and
in her email that other bases besides sales figures will be used to determine Alilings
(c) A written notice [of] termination served on the
performance. And yet, despite such a neutral observation, Aliling was still dismissed for his employee indicating that upon due consideration of all the
dismal sales of GX services. In any event, WWWEC failed to demonstrate the reasonableness circumstance, grounds have been established to justify his
termination.
and the bona fides on the quota imposition.
In case of termination, the foregoing notices shall be served on the
employees last known address.
Employees must be reminded that while probationary employees do not enjoy
permanent status, they enjoy the constitutional protection of security of tenure. They can
only be terminated for cause or when they otherwise fail to meet the reasonable standards MGG Marine Services, Inc. v. NLRC[38] tersely described the mechanics of what may be
made known to them by the employer at the time of their engagement. [37] Respondent considered a two-part due process requirement which includes the two-notice rule, x x x
WWWEC miserably failed to prove the termination of petitioner was for a just cause nor was one, of the intention to dismiss, indicating therein his acts or omissions complained against,
there substantial evidence to demonstrate the standards were made known to the latter at and two, notice of the decision to dismiss; and an opportunity to answer and rebut the
the time of his engagement. Hence, petitioners right to security of tenure was breached. charges against him, in between such notices.

Alilings right to procedural due process was violated


King of Kings Transport, Inc. v. Mamac [39] expounded on this procedural requirement in this
manner:
As earlier stated, to effect a legal dismissal, the employer must show not only a valid
(1) The first written notice to be served on the employees should
ground therefor, but also that procedural due process has properly been observed. When the
contain the specific causes or grounds for termination against them, and a
Labor Code speaks of procedural due process, the reference is usually to the two (2)-written directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. Reasonable opportunity
notice rule envisaged in Section 2 (III), Rule XXIII, Book V of the Omnibus Rules
under the Omnibus Rules means every kind of assistance that management
Implementing the Labor Code, which provides: must accord to the employees to enable them to prepare adequately for
their defense. This should be construed as a period of at least five calendar
Neither was there compliance with the imperatives of a hearing or conference. The
days from receipt of the notice xxxx Moreover, in order to enable the
employees to intelligently prepare their explanation and defenses, the Court need not dwell at length on this particular breach of the due procedural requirement.
notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general Suffice it to point out that the record is devoid of any showing of a hearing or conference
description of the charge will not suffice. Lastly, the notice should having been conducted. On the contrary, in its October 1, 2004 letter to Aliling, or barely five
specifically mention which company rules, if any, are violated and/or which
among the grounds under Art. 288 [of the Labor Code] is being charged (5) days after it served the notice of termination, WWWEC acknowledged that it was still
against the employees evaluating his case. And the written notice of termination itself did not indicate all the

(2) After serving the first notice, the employees should schedule circumstances involving the charge to justify severance of employment.
and conduct a hearing or conference wherein the employees will be given Aliling is entitled to backwages
the opportunity to (1) explain and clarify their defenses to the charge and separation pay in lieu of reinstatement
against them; (2) present evidence in support of their defenses; and (3)
rebut the evidence presented against them by the management. During the
hearing or conference, the employees are given the chance to defend As may be noted, the CA found Alilings dismissal as having been illegally effected,
themselves personally, with the assistance of a representative or counsel of but nonetheless concluded that his employment ceased at the end of the probationary
their choice x x x.
period. Thus, the appellate court merely affirmed the monetary award made by the NLRC,
(3) After determining that termination is justified, the employer
which consisted of the payment of that amount corresponding to the unserved portion of the
shall serve the employees a written notice of termination indicating that:
(1) all the circumstances involving the charge against the employees have contract of employment.
been considered; and (2) grounds have been established to justify the
severance of their employment. (Emphasis in the original.)
The case disposition on the award is erroneous.

Here, the first and second notice requirements have not been properly observed,
As earlier explained, Aliling cannot be rightfully considered as a mere probationary
thus tainting petitioners dismissal with illegality.
employee. Accordingly, the probationary period set in the contract of employment dated
June 11, 2004 was of no moment. In net effect, as of that date June 11, 2004, Aliling became
The adverted memo dated September 20, 2004 of WWWEC supposedly informing
part of the WWWEC organization as a regular employee of the company without a fixed term
Aliling of the likelihood of his termination and directing him to account for his failure to meet
of employment. Thus, he is entitled to backwages reckoned from the time he was illegally
the expected job performance would have had constituted the charge sheet, sufficient to
dismissed on October 6, 2004, with a PhP 17,300.00 monthly salary, until the finality of this
answer for the first notice requirement, but for the fact that there is no proof such letter had
Decision. This disposition hews with the Courts ensuing holding in Javellana v. Belen:[40]
been sent to and received by him. In fact, in his December 13, 2004 Complainants Reply
Affidavit, Aliling goes on to tag such letter/memorandum as fabrication. WWWEC did not Article 279 of the Labor Code, as amended by Section 34 of
Republic Act 6715 instructs:
adduce proof to show that a copy of the letter was duly served upon Aliling. Clearly enough,
WWWEC did not comply with the first notice requirement. Art. 279. Security of Tenure. - In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights the employee and the employer, separation pay is
and other privileges and to his full backwages, inclusive of granted. In effect, an illegally dismissed employee is
allowances, and to his other benefits or their monetary entitled to either reinstatement, if viable, or
equivalent computed from the time his compensation was separation pay if reinstatement is no longer viable,
withheld from him up to the time of his actual and backwages.
reinstatement. (Emphasis supplied)
The normal consequences of respondents illegal
Clearly, the law intends the award of backwages and similar dismissal, then, are reinstatement without loss of seniority
benefits to accumulate past the date of the Labor Arbiters decision until the rights, and payment of backwages computed from the time
dismissed employee is actually reinstated. But if, as in this case, compensation was withheld up to the date of actual
reinstatement is no longer possible, this Court has consistently ruled that reinstatement. Where reinstatement is no longer viable as
backwages shall be computed from the time of illegal dismissal until an option, separation pay equivalent to one (1) month
the date the decisionbecomes final. (Emphasis supplied.) salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to
payment of backwages. x x x
Additionally, Aliling is entitled to separation pay in lieu of reinstatement on the
Velasco v. National Labor Relations Commission emphasizes:
ground of strained relationship. The accepted doctrine is that separation pay may avail in
lieu of reinstatement if reinstatement is no longer practical or in
the best interest of the parties. Separation pay in lieu of
In Golden Ace Builders v. Talde,[41] the Court ruled: reinstatement may likewise be awarded if the employee decides
not to be reinstated. (emphasis in the original; italics supplied)
The basis for the payment of backwages is different from that for
the award of separation pay. Separation pay is granted where reinstatement Under the doctrine of strained relations, the payment of
is no longer advisable because of strained relations between the employee separation pay is considered an acceptable alternative to
and the employer. Backwages represent compensation that should have reinstatement when the latter option is no longer desirable or
been earned but were not collected because of the unjust dismissal. The viable. On one hand, such payment liberates the employee from what could
basis for computing backwages is usually the length of the employee's be a highly oppressive work environment. On the other hand, it releases the
service while that for separation pay is the actual period when the employer from the grossly unpalatable obligation of maintaining in its
employee was unlawfully prevented from working. employ a worker it could no longer trust.
As to how both awards should be computed, Macasero v. Southern Strained relations must be demonstrated as a fact, however, to
Industrial Gases Philippines instructs: be adequately supported by evidence substantial evidence to show that the
relationship between the employer and the employee is indeed strained as
[T]he award of separation pay is inconsistent with a a necessary consequence of the judicial controversy.
finding that there was no illegal dismissal, for under Article 279 of
the Labor Code and as held in a catena of cases, an employee who is In the present case, the Labor Arbiter found that actual
dismissed without just cause and without due process is entitled to animosity existed between petitioner Azul and respondent as a result
backwages and reinstatement or payment of separation pay in lieu of the filing of the illegal dismissal case. Such finding, especially when
thereof: affirmed by the appellate court as in the case at bar, is binding upon
the Court, consistent with the prevailing rules that this Court will not
Thus, an illegally dismissed employee is try facts anew and that findings of facts of quasi-judicial bodies are
entitled to two reliefs: backwages and accorded great respect, even finality. (Emphasis supplied.)
reinstatement. The two reliefs provided are separate
and distinct. In instances where reinstatement is no
longer feasible because of strained relations between
Moral damages are awarded if the following elements exist in the
As the CA correctly observed, To reinstate petitioner [Aliling] would only create an
case: (1) an injury clearly sustained by the claimant; (2) a culpable act or
atmosphere of antagonism and distrust, more so that he had only a short stint with omission factually established; (3) a wrongful act or omission by the
defendant as the proximate cause of the injury sustained by the claimant;
respondent company.[42] The Court need not belabor the fact that the patent animosity that and (4) the award of damages predicated on any of the cases stated Article
had developed between employer and employee generated what may be considered as the 2219 of the Civil Code. In addition, the person claiming moral damages must
prove the existence of bad faith by clear and convincing evidence for the
arbitrary dismissal of the petitioner. law always presumes good faith. It is not enough that one merely suffered
sleepless nights, mental anguish, and serious anxiety as the result of the
actuations of the other party. Invariably such action must be shown to have
Following the pronouncements of this Court Sagales v. Rustans Commercial been willfully done in bad faith or with ill motive. Bad faith, under the law,
Corporation,[43] the computation of separation pay in lieu of reinstatement includes the does not simply connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a
period for which backwages were awarded: wrong, a breach of a known duty through some motive or interest or ill
will that partakes of the nature of fraud. (Emphasis supplied.)
Thus, in lieu of reinstatement, it is but proper to award
petitioner separation pay computed at one-month salary for every year
of service, a fraction of at least six (6) months considered as one whole In alleging that WWWEC acted in bad faith, Aliling has the burden of proof to
year. In the computation of separation pay, the period where present evidence in support of his claim, as ruled in Culili v. Eastern Telecommunications
backwages are awarded must be included. (Emphasis supplied.)
Philippines, Inc.:[46]

Thus, Aliling is entitled to both backwages and separation pay (in lieu of According to jurisprudence, basic is the principle that good faith is
reinstatement) in the amount of one (1) months salary for every year of service, that is, from presumed and he who alleges bad faith has the duty to prove the same. By
imputing bad faith to the actuations of ETPI, Culili has the burden of proof
June 11, 2004 (date of employment contract) until the finality of this decision with a fraction to present substantial evidence to support the allegation of unfair labor
of a year of at least six (6) months to be considered as one (1) whole year. As determined by practice. Culili failed to discharge this burden and his bare allegations
deserve no credit.
the labor arbiter, the basis for the computation of backwages and separation pay will be
Alilings monthly salary at PhP 17,300.
This was reiterated in United Claimants Association of NEA (UNICAN) v. National
Electrification Administration (NEA),[47] in this wise:
Finally, Aliling is entitled to an award of PhP 30,000 as nominal damages in
consonance with prevailing jurisprudence[44] for violation of due process. It must be noted that the burden of proving bad faith rests on the
one alleging it. As the Court ruled in Culili v. Eastern Telecommunications,
Inc., According to jurisprudence, basic is the principle that good faith is
Petitioner is not entitled to moral and exemplary damages presumed and he who alleges bad faith has the duty to prove the same.
Moreover, in Spouses Palada v. Solidbank Corporation, the Court stated,
Allegations of bad faith and fraud must be proved by clear and convincing
In Nazareno v. City of Dumaguete,[45] the Court expounded on the requisite elements evidence.
for a litigants entitlement to moral damages, thus:
reiterated in the cases of Chua vs. NLRC (182 SCRA 353), Gudez vs.
Similarly, Aliling has failed to overcome such burden to prove bad faith on the part
NLRC (183 SCRA 644)]. In the aforementioned cases, the Supreme Court has
of WWWEC. Aliling has not presented any clear and convincing evidence to show bad faith. expressly held that the irresponsible officer of the corporation (e.g.
President) is liable for the corporations obligations to its workers. Thus,
The fact that he was illegally dismissed is insufficient to prove bad faith. Thus, the CA respondent Yupangco, being the president of the respondent YL Land and
correctly ruled that [t]here was no sufficient showing of bad faith or abuse of management Ultra Motors Corp., is properly jointly and severally liable with the
defendant corporations for the labor claims of Complainants Alba and De
prerogatives in the personal action taken against petitioner. [48] In Lambert Pawnbrokers and Guzman. x x x
Jewelry Corporation v. Binamira,[49] the Court ruled:
xxxx

A dismissal may be contrary to law but by itself alone, it does not As reflected above, the Labor Arbiter held that respondents liability
establish bad faith to entitle the dismissed employee to moral damages. The is solidary.
award of moral and exemplary damages cannot be justified solely upon the
premise that the employer dismissed his employee without authorized There is solidary liability when the obligation expressly so states,
cause and due process. when the law so provides, or when the nature of the obligation so
requires. MAM Realty Development Corporation v. NLRC, on solidary liability
of corporate officers in labor disputes, enlightens:

The officers of WWWEC cannot be held x x x A corporation being a juridical entity, may act only
jointly and severally liable with the company through its directors, officers and employees. Obligations incurred
by them, acting as such corporate agents are not theirs but the
direct accountabilities of the corporation they represent. True
The CA held the president of WWWEC, Jose B. Feliciano, San Mateo and Lariosa solidary liabilities may at times be incurred but only when
exceptional circumstances warrant such as, generally, in the
jointly and severally liable for the monetary awards of Aliling on the ground that the officers
following cases:
are considered employers acting in the interest of the corporation. The CA cited NYK
1. When directors and trustees or, in appropriate
International Knitwear Corporation Philippines (NYK) v. National Labor Relations
cases, the officers of a corporation:
Commission[50] in support of its argument. Notably, NYK in turn cited A.C. Ransom Labor
(a) vote for or assent to patently unlawful acts of
Union-CCLU v. NLRC.[51]
the corporation;

(b) act in bad faith or with gross negligence in


Such ruling has been reversed by the Court in Alba v. Yupangco,[52] where the Court directing the corporate affairs;
ruled:
xxxx
By Order of September 5, 2007, the Labor Arbiter denied
respondents motion to quash the 3rd alias writ. Brushing aside respondents In labor cases, for instance, the Court has held corporate directors
contention that his liability is merely joint, the Labor Arbiter ruled: and officers solidarily liable with the corporation for the termination of
employment of employees done with malice or in bad faith.
Such issue regarding the personal liability of the officers of a
corporation for the payment of wages and money claims to its employees,
as in the instant case, has long been resolved by the Supreme Court in a long A review of the facts of the case does not reveal ample and satisfactory proof that
list of cases [A.C. Ransom Labor Union-CLU vs. NLRC (142 SCRA 269) and
respondent officers of WWEC acted in bad faith or with malice in effecting the termination of
petitioner Aliling. Even assuming arguendo that the actions of WWWEC are ill-conceived and
erroneous, respondent officers cannot be held jointly and solidarily with it. Hence, the ruling WHEREFORE, the petition is PARTIALLY GRANTED. The July 3, 2008 Decision of
on the joint and solidary liability of individual respondents must be recalled. the Court of Appeals in CA-G.R. SP No. 101309 is hereby MODIFIED to read:

WHEREFORE, the petition is PARTIALLY


Aliling is entitled to Attorneys Fees and Legal Interest
GRANTED. The assailed Resolutions of respondent (Third Division)
National Labor Relations Commission are AFFIRMED, with the
following MODIFICATION/CLARIFICATION: Respondent Wide Wide
Petitioner Aliling is also entitled to attorneys fees in the amount of ten percent World Express Corp. is liable to pay Armando Aliling the following: (a)
(10%) of his total monetary award, having been forced to litigate in order to seek redress of backwages reckoned from October 6, 2004 up to the finality of this Decision
based on a salary of PhP 17,300 a month, with interest at 6% per annum on
his grievances, pursuant to Article 111 of the Labor Code and following our ruling in Exodus the principal amount from October 6, 2004 until fully paid; (b) the
International Construction Corporation v. Biscocho,[53] to wit: additional sum equivalent to one (1) month salary for every year of service,
with a fraction of at least six (6) months considered as one whole year
based on the period from June 11, 2004 (date of employment contract) until
In Rutaquio v. National Labor Relations Commission, this Court held that: the finality of this Decision, as separation pay; (c) PhP 30,000 as nominal
It is settled that in actions for recovery of wages or where an damages; and (d) Attorneys Fees equivalent to 10% of the total award.
employee was forced to litigate and, thus, incur expenses to protect SO ORDERED.
his rights and interest, the award of attorneys fees is legally and ---------------------------------X
morally justifiable.

In Producers Bank of the Philippines v. Court of Appeals this Court


MIRANT (PHILIPPINES) CORPORATION AND EDGARDO A. BAUTISTA, Petitioners,
ruled that:
vs.
JOSELITO A. CARO, Respondent.
Attorneys fees may be awarded when a party is compelled to
litigate or to incur expenses to protect his interest by reason of an
unjustified act of the other party. DECISION

VILLARAMA, JR., J.:


While in Lambert Pawnbrokers and Jewelry Corporation,[54] the Court specifically
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
ruled: assailing the Decision2 and Resolution3 of the Court of Appeals (CA) dated June 26, 2007 and
January 11, 2008, respectively, which reversed and set aside the Decision 4 of the National
However, the award of attorneys fee is warranted pursuant to Labor Relations Commission (NLRC) in NLRC NCR CA No. 046551-05 (NCR-00-03-02511-
Article 111 of the Labor Code. Ten (10%) percent of the total award is 05). The NLRC decision vacated and set aside the Decision5 of the Labor Arbiter which found
usually the reasonable amount of attorneys fees awarded. It is settled that that respondent Joselito A. Caro (Caro) was illegally dismissed by petitioner Mirant
where an employee was forced to litigate and, thus, incur expenses to (Philippines) Corporation (Mirant).
protect his rights and interest, the award of attorneys fees is legally and
morally justifiable. Petitioner corporation is organized and operating under and by virtue of the laws of the
Republic of the Philippines. It is a holding company that owns shares in project companies
such as Mirant Sual Corporation and Mirant Pagbilao Corporation (Mirant Pagbilao) which
Finally, legal interest shall be imposed on the monetary awards herein granted at operate and maintain power stations located in Sual, Pangasinan and Pagbilao, Quezon,
respectively. Petitioner corporation and its related companies maintain around 2,000
the rate of 6% per annum from October 6, 2004 (date of termination) until fully paid.
employees detailed in its main office and other sites. Petitioner corporation had changed its Respondent avers that at around 11:30 a.m. of the same day, he received a phone call from
name to CEPA Operations in 1996 and to Southern Company in 2001. In 2002, Southern his wife’s colleague who informed him that a bombing incident occurred near his wife’s work
Company was sold to petitioner Mirant whose corporate parent is an Atlanta-based power station in Tel Aviv, Israel where his wife was then working as a caregiver. Respondent
producer in the United States of America.6 Petitioner corporation is now known as Team attached to his Position Paper a Press Release13 of the Department of Foreign Affairs (DFA)
Energy Corporation.7 in Manila to prove the occurrence of the bombing incident and a letter 14 from the colleague
of his wife who allegedly gave him a phone call from Tel Aviv.
Petitioner Edgardo A. Bautista (Bautista) was the President of petitioner corporation when
respondent was terminated from employment.8 Respondent claims that after the said phone call, he proceeded to the Israeli Embassy to
confirm the news on the alleged bombing incident. Respondent further claims that before he
Respondent was hired by Mirant Pagbilao on January 3, 1994 as its Logistics Officer. In 2002, left the office on the day of the random drug test, he first informed the secretary of his
when Southern Company was sold to Mirant, respondent was already a Supervisor of the Department, Irene Torres (Torres), at around 12:30 p.m. that he will give preferential
Logistics and Purchasing Department of petitioner. At the time of the severance of his attention to the emergency phone call that he just received. He also told Torres that he
employment, respondent was the Procurement Supervisor of Mirant Pagbilao assigned at would be back at the office as soon as he has resolved his predicament. Respondent recounts
petitioner corporation’s corporate office. As Procurement Supervisor, his main task was to that he tried to contact his wife by phone but he could not reach her. He then had to go to the
serve as the link between the Materials Management Department of petitioner corporation Israeli Embassy to confirm the bombing incident. However, he was told by Eveth Salvador
and its staff, and the suppliers and service contractors in order to ensure that procurement is (Salvador), a lobby attendant at the Israeli Embassy, that he could not be allowed entry due
carried out in conformity with set policies, procedures and practices. In addition, respondent to security reasons.
was put incharge of ensuring the timely, economical, safe and expeditious delivery of
materials at the right quality and quantity to petitioner corporation’s plant. Respondent was On that same day, at around 6:15 p.m., respondent returned to petitioner corporation’s
also responsible for guiding and overseeing the welfare and training needs of the staff of the office. When he was finally able to charge his cellphone at the office, he received a text
Materials Management Department. Due to the nature of respondent’s functions, petitioner message from Tina Cecilia (Cecilia), a member of the Drug Watch Committee that conducted
corporation considers his position as confidential.9 the drug test, informing him to participate in the said drug test. He immediately called up
Cecilia to explain the reasons for his failure to submit himself to the random drug test that
The antecedent facts follow: day. He also proposed that he would submit to a drug test the following day at his own
expense. Respondent never heard from Cecilia again.
Respondent filed a complaint10 for illegal dismissal and money claims for 13th and 14th
month pay, bonuses and other benefits, as well as the payment of moral and exemplary On November 8, 2004, respondent received a Show Cause Notice15 from petitioner
damages and attorney’s fees. Respondent posits the following allegations in his Position corporation through Jaime Dulot (Dulot), his immediate supervisor, requiring him to explain
Paper:11 in writing why he should not be charged with "unjustified refusal to submit to random drug
testing." Respondent submitted his written explanation16 on November 11, 2004. Petitioner
On January 3, 1994, respondent was hired by petitioner corporation as its Logistics Officer corporation further required respondent on December 14, 2004 to submit additional pieces
and was assigned at petitioner corporation’s corporate office in Pasay City. At the time of the of supporting documents to prove that respondent was at the Israeli Embassy in the
filing of the complaint, respondent was already a Supervisor at the Logistics and Purchasing afternoon of November 3, 2004 and that the said bombing incident actually occurred.
Department with a monthly salary of ₱39,815.00. Respondent requested for a hearing to explain that he could not submit proof that he was
indeed present at the Israeli Embassy during the said day because he was not allegedly
allowed entry by the embassy due to security reasons. On January 3, 2005, respondent
On November 3, 2004, petitioner corporation conducted a random drug test where submitted the required additional supporting documents.17
respondent was randomly chosen among its employees who would be tested for illegal drug
use. Through an Intracompany Correspondence,12 these employees were informed that they
were selected for random drug testing to be conducted on the same day that they received On January 13, 2005, petitioner corporation’s Investigating Panel issued an Investigating
the correspondence. Respondent was duly notified that he was scheduled to be tested after Report18 finding respondent guilty of "unjustified refusal to submit to random drug testing"
lunch on that day. His receipt of the notice was evidenced by his signature on the and recommended a penalty of four working weeks suspension without pay, instead of
correspondence. termination, due to the presence of mitigating circumstances. In the same Report, the
Investigating Panel also recommended that petitioner corporation should review its policy
on random drug testing, especially of the ambiguities cast by the term "unjustified refusal."
On January 19, 2005, petitioner corporation’s Asst. Vice President for Material Management drug test" for the first offense, Dulot sent respondent a Show Cause Notice24 dated November
Department, George K. Lamela, Jr. (Lamela), recommended 19 that respondent be terminated 8, 2004, requiring him to explain why no disciplinary action should be imposed for his
from employment instead of merely being suspended. Lamela argued that even if respondent failure to take the random drug test. Respondent, in a letter dated November 11, 2004,
did not outrightly refuse to take the random drug test, he avoided the same. Lamela averred explained that he attended to an emergency call from his wife’s colleague and apologized for
that "avoidance" was synonymous with "refusal." the inconvenience he had caused. He offered to submit to a drug test the next day even at his
expense.25 Finding respondent’s explanation unsatisfactory, petitioner corporation formed a
On February 14, 2005, respondent received a letter20 from petitioner corporation’s Vice panel to investigate and recommend the penalty to be imposed on respondent. 26 The
President for Operations, Tommy J. Sliman (Sliman), terminating him on the same date. Investigating Panel found respondent’s explanations as to his whereabouts on that day to be
Respondent filed a Motion to Appeal21 his termination on February 23, 2005. The motion inconsistent, and recommended that he be suspended for four weeks without pay. The
was denied by petitioner corporation on March 1, 2005. Investigating Panel took into account that respondent did not directly refuse to be subjected
to the drug test and that he had been serving the company for ten years without any record
It is the contention of respondent that he was illegally dismissed by petitioner corporation of violation of its policies. The Investigating Panel further recommended that the Mirant
due to the latter’s non-compliance with the twin requirements of notice and hearing. He Drug Policy be reviewed to clearly define the phrase "unjustified refusal to submit to random
asserts that while there was a notice charging him of "unjustified refusal to submit to drug testing."27 Petitioner corporation’s Vice-President for Operations, Sliman, however
random drug testing," there was no notice of hearing and petitioner corporation’s disagreed with the Investigating Panel’s recommendations and terminated the services of
investigation was not the equivalent of the "hearing" required under the law which should respondent in accordance with the subject drug policy. Sliman likewise stated that
have accorded respondent the opportunity to be heard. respondent’s violation of the policy amounted to willful breach of trust and loss of
confidence.28
Respondent further asserts that he was illegally dismissed due to the following
circumstances: A cursory examination of the pleadings of petitioner corporation would show that it concurs
with the narration of facts of respondent on material events from the time that Cecilia sent
an electronic mail at about 9:23 a.m. on November 3, 2004 to all employees of petitioner
1. He signed the notice that he was randomly selected as a participant to the corporation assigned at its Corporate Office advising them of the details of the drug test – up
company drug testing; to the time of respondent’s missing his schedule to take the drug test. Petitioner corporation
and respondent’s point of disagreement, however, is whether respondent’s proffered
2. Even the Investigating Panel was at a loss in interpreting the charge because it reasons for not being able to take the drug test on the scheduled day constituted valid
believed that the term "refusal" was ambiguous, and therefore such doubt must be defenses that would have taken his failure to undergo the drug test out of the category of
construed in his favor; and "unjustified refusal." Petitioner corporation argues that respondent’s omission amounted to
"unjustified refusal" to submit to the random drug test as he could not proffer a satisfactory
3. He agreed to take the drug test the following day at his own expense, which he explanation why he failed to submit to the drug test:
says was clearly not an indication of evasion from the drug test.
1. Petitioner corporation is not convinced that there was indeed such a phone call at
Petitioner corporation counters with the following allegations: noon of November 3, 2004 as respondent could not even tell who called him up.

On November 3, 2004, a random drug test was conducted on petitioner corporation’s 2. Respondent could not even tell if he received the call via the landline telephone
employees at its Corporate Office at the CTC Bldg. in Roxas Blvd., Pasay City. The random service at petitioner corporation’s office or at his mobile phone.
drug test was conducted pursuant to Republic Act No. 9165, otherwise known as the
"Comprehensive Dangerous Drugs Act of 2002." Respondent was randomly selected among 3. Petitioner corporation was also of the opinion that granting there was such a
petitioner’s employees to undergo the said drug test which was to be carried out by Drug phone call, there was no compelling reason for respondent to act on it at the
Check Philippines, Inc.22 expense of his scheduled drug testing. Petitioner corporation principally pointed out
that the call merely stated that a bomb exploded near his wife’s work station
When respondent failed to appear at the scheduled drug test, Cecilia prepared an incident without stating that his wife was affected. Hence, it found no point in confirming it
report addressed to Dulot, the Logistics Manager of the Materials Management with extraordinary haste and forego the drug test which would have taken only a
Department.23 Since it was stated under petitioner corporation’s Mirant Drugs Policy few minutes to accomplish. If at all, respondent should have undergone the drug
Employee Handbook to terminate an employee for "unjustified refusal to submit to a random
testing first before proceeding to confirm the news so as to leave his mind free from corporation’s own Investigating Panel that while respondent did not refuse to submit to the
this obligation. questioned drug test and merely "avoided" it on the designated day, "avoidance" and
"refusal" are one and the same. It also held that the terms "avoidance" and "refusal" are
4. Petitioner corporation maintained that respondent could have easily asked separate and distinct and that "the two words are not even synonymous with each
permission from the Drug Watch Committee that he was leaving the office since the other."31 The Labor Arbiter considered as more tenable the stance of respondent that his
place where the activity was conducted was very close to his work station.29 omission merely resulted to a "failure" to submit to the said drug test – and not an
"unjustified refusal." Even if respondent’s omission is to be considered as refusal, the Labor
To the mind of petitioners, they are not liable for illegal dismissal because all of these Arbiter opined that it was not tantamount to "unjustified refusal" which constitutes as just
circumstances prove that respondent really eluded the random drug test and was therefore cause for his termination. Finally, the Labor Arbiter found that respondent was entitled to
validly terminated for cause after being properly accorded with due process. Petitioners moral and exemplary damages and attorney’s fees.
further argue that they have already fully settled the claim of respondent as evidenced by a
Quitclaim which he duly executed. Lastly, petitioners maintain that they are not guilty of On appeal to the NLRC, petitioners alleged that the decision of the Labor Arbiter was
unfair labor practice as respondent’s dismissal was not intended to curtail his right to self- rendered with grave abuse of discretion for being contrary to law, rules and established
organization; that respondent is not entitled to the payment of his 13th and 14th month jurisprudence, and contained serious errors in the findings of facts which, if not corrected,
bonuses and other incentives as he failed to show that he is entitled to these amounts would cause grave and irreparable damage or injury to petitioners. The NLRC, giving weight
according to company policy; that respondent is not entitled to reinstatement, payment of and emphasis to the inconsistencies in respondent’s explanations, considered his omission
full back wages, moral and exemplary damages and attorney’s fees due to his termination for as "unjustified refusal" in violation of petitioner corporation’s drug policy. Thus, in a decision
cause. dated May 31, 2006, the NLRC ruled, viz.:

In a decision dated August 31, 2005, Labor Arbiter Aliman D. Mangandog found respondent x x x [Respondent] was duly notified as shown by copy of the notice x x x which he signed to
to have been illegally dismissed. The Labor Arbiter also found that the quitclaim purportedly acknowledge receipt thereof on the said date. [Respondent] did not refute [petitioner
executed by respondent was not a bona fide quitclaim which effectively discharged corporation’s] allegation that he was also personally reminded of said drug test on the same
petitioners of all the claims of respondent in the case at bar. If at all, the Labor Arbiter day by Ms. Cecilia of [petitioner corporation’s] drug watch committee. However,
considered the execution of the quitclaim as a clear attempt on the part of petitioners to [respondent] was nowhere to be found at [petitioner corporation’s] premises at the time
mislead its office into thinking that respondent no longer had any cause of action against when he was supposed to be tested. Due to his failure to take part in the random drug test,
petitioner corporation. The decision stated, viz.: an incident report x x x was prepared by the Drug Cause Notice x x x to explain in writing
why no disciplinary action should be taken against him for his unjustified refusal to submit
WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal dismissal, to random drug test, a type D offense punishable with termination. Pursuant to said
and hereby ordered to jointly and severally reinstate complainant back to his former directive, [respondent] submitted an explanation x x x on 11 November 2004, pertinent
position without loss on seniority rights and benefits and to pay him his backwages and portions of which read:
other benefits from the date he was illegally dismissed up to the time he is actually
reinstated, partially computed as of this date in the amount of ₱258,797.50 (₱39,815.00 x 6.5 "I was scheduled for drug test after lunch that day of November 3, 2004 as confirmed with
mos.) plus his 13th and 14th month pay in the amount of ₱43,132.91 or in the total amount Tina Cecilia. I was having my lunch when a colleague of my wife abroad called up informing
of ₱301,930.41. me that there was something wrong [that] happened in their neighborhood, where a bomb
exploded near her workstation. Immediately, I [left] the office to confirm said information
Respondents are also ordered to pay complainant the amount of ₱3,000,000.00 as and by but at around 12:30 P.M. that day, I informed MS. IRENE TORRES, our Department
way of moral and exemplary damages, and to pay complainant the amount equivalent to ten Secretary[,] that I would be attending to this emergency call. Did even [inform] her that I’ll
percent (10%) of the total awards as and by way of attorney’s fees. try to be back as soon as possible but unfortunately, I was able to return at 6:15 P.M. I didn’t
know that Tina was the one calling me on my cell that day. Did only receive her message
after I charged my cell at the office that night. I was able to call back Tina Cecilia later [that]
SO ORDERED.30 night if it’s possible to have it (drug test) the next day.

The Labor Arbiter stated that while petitioner corporation observed the proper procedure in My apology [for] any inconvenience to the Drug Watch Committee, that I forgot everything
the termination of an employee for a purported authorized cause, such just cause did not that day including my scheduled drug test due to confusion of what had happened. It [was]
exist in the case at bar. The decision did not agree with the conclusions reached by petitioner
not my intention not to undergo nor refuse to have a drug test knowing well that it’s a x x x showing that he was able to make a cellphone call at 5:29 p.m. to [petitioner
company policy and it’s mandated by law." corporation’s] supplier, Mutico for a duration of two (2) minutes.32

In the course of the investigation, [respondent] was requested to present proof pertaining to Given the foregoing facts, the NLRC stated that the offer of respondent to submit to another
the alleged call he received on 3 November 2004 from a colleague of his wife regarding the drug test the following day, even at his expense, cannot operate to free him from liability.
bomb explosion in Tel Aviv, his presence at the Israel Embassy also on 3 November 2004. The NLRC opined that taking the drug test on the day following the scheduled random drug
[Respondent], thereafter, submitted a facsimile which he allegedly received from his wife's test would affect both the integrity and the accuracy of the specimen which was supposed to
colleague confirming that she called and informed him of the bombing incident. However, a be taken from a randomly selected employee who was notified of his/her selection on the
perusal of said facsimile x x x reveals that the same cannot be given any probative value same day that the drug test was to be administered. The NLRC further asserted that a drug
because, as correctly observed by [petitioners], it can barely be read and upon inquiry with test, conducted many hours or a day after the employee was notified, would compromise its
PLDT, the international area code of Israel which is 00972 should appear on the face of the results because the employee may have possibly taken remedial measures to metabolize or
facsimile if indeed said facsimile originated from Israel. [Respondent] also could not present eradicate whatever drugs s/he may have ingested prior to the drug test.
proof of his presence at the Israel Embassy on said time and date. He instead provided the
name of a certain Ms. Eveth Salvador of said embassy who could certify that he was present The NLRC further stated that these circumstances have clearly established the falsity of
thereat. Accordingly, Mr. Bailon, a member of the investigation panel, verified with Ms. respondent’s claims and found no justifiable reason for respondent to refuse to submit to the
Salvador who told him that she is only the telephone operator of the Israel Embassy and that petitioner corporation’s random drug test. While the NLRC acknowledged that it was
she was not in a position to validate [respondent’s] presence at the Embassy. Mr. Bailon was petitioner corporation’s own Investigating Panel that considered respondent’s failure to take
then referred to a certain Ms. Aimee Zandueta, also of said embassy, who confirmed that the required drug test as mere "avoidance" and not "unjustified refusal," it concluded that
based on their records, [respondent] did not visit the embassy nor was he attended to by any such finding was merely recommendatory to guide top management on what action to take.
member of said embassy on 3 November 2004. Ms. Zandueta further informed Mr. Bailon
that no bombing occurred in Tel Aviv on 3 November 2004 and that the only reported The NLRC also found that petitioner corporation’s denial of respondent’s motion to
incident of such nature occurred on 1 November 2004. A letter x x x to this effect was written reconsider his termination was in order. Petitioner corporation’s reasons for such denial are
by Consul Ziva Samech of the Embassy of Israel. A press release x x x of the Department of quoted in the NLRC decision, viz.:
Foreign Affairs confirm[ed] that the bombing occurred on 1 November 2004.
"Your appeal is anchored on your claim that you responded to an emergency call from
In his explanation, the [respondent] stated that the reason why he had to leave the office on someone abroad informing you that a bomb exploded near the work station of your wife
3 November 2004 was to verify an information at the Israel Embassy of the alleged bombing making you unable to undergo the scheduled drug testing. This claim is groundless taking
incident on the same day. However, [petitioners] in their position paper alleged that Ms. into account the following:
Torres of [petitioner] company received a text message from him at around 12:47 p.m.
informing her that he will try to be back since he had a lot of things to do and asking her if
there was a signatory on that day. [Respondent] did not deny sending said text messages to We are not convinced that there was indeed that call which you claim to have received noon
Ms. Torres in his reply and rejoinder x x x. He actually confirmed that he was involved in the of November 3, 2004. On the contrary, our belief is based on the fact that you could not tell
CIIS registration with all companies that was involved with [petitioner] company and who called you up or how the call got to you. If you forgot to ask the name of the person who
worked on the registration of [petitioner] company’s vehicles with TRO. called you up, surely you would have known how the call came to you. You said you were
having lunch at the third floor of the CTC building when you received the call. There were
only two means of communication available to you then: the land line telephone service in
It is also herein noted that [respondent] had initially reported to Ms. Torres that it was his your office and your mobile phone. If your claim were (sic) not fabricated, you would be able
mother in law who informed him about the problem concerning his wife. However, in his to tell which of these two was used.
written explanation x x x, the [respondent] stated that it was a friend of his wife, whom he
could not even identify, who informed him of the alleged bombing incident in Tel Aviv, Israel.
[Respondent] also did not deny receiving a cellphone call from Ms. Cecilia that day. He Granting that you indeed received that alleged call, from your own account, there was no
merely stated that he did not know that it was Ms. Cecilia calling him up in a cellphone and it compelling reason for you to act on it at the expense of your scheduled drug testing. The call,
was only after he charged his cellphone at the office that night that he received her message. as it were, merely stated that ‘something wrong happened (sic) in their neighborhood, where
In effect, [respondent] asserted that his cellphone battery was running low or drained. a bomb exploded near her workstation.’ Nothing was said if your wife was affected. There is
[Petitioners] were able to refute [these] averments of [respondent] when they presented no point in confirming it with extraordinary haste and forego the drug test which would
[respondent’s] Smart Billing Statement have taken only a few minutes to accomplish. If at all, you should have undergone the drug
testing first before proceeding to confirm the news so as to leave your mind free from this ordered to pay complainant financial assistance in the amount of one hundred ninety-nine
obligation. thousand seventy five pesos (₱199,075.00).

Additionally, if it was indeed necessary that you skip the scheduled drug testing to verify that SO ORDERED.36
call, why did you not ask permission from the Drug Watch [C]ommittee that you were
leaving? The place where the activity was being conducted was very close to your Respondent filed a motion for reconsideration,37 while petitioners filed a motion for partial
workstation. It was absolutely within your reach to inform any of its members that you were reconsideration38 of the NLRC decision. In a Resolution39 dated June 30, 2006, the NLRC
attending to an emergency call. Why did you not do so? denied both motions.

All this undisputedly proves that you merely eluded the drug testing. Your claim that you did In a petition for certiorari before the CA, respondent raised the following issues: whether the
not refuse to be screened carries no value. Your act was a negation of your words."33 NLRC acted without or in excess of its jurisdiction, or with grave abuse of discretion
amounting to lack or excess of its jurisdiction when it construed that the terms "failure,"
The NLRC found that respondent was not only validly dismissed for cause – he was also "avoidance," "refusal" and "unjustified refusal" have similar meanings; reversed the factual
properly accorded his constitutional right to due process as shown by the following findings of the Labor Arbiter; and held that respondent deliberately breached petitioner’s
succession of events: Anti-Drugs Policy.40 Respondent further argued before the appellate court that his failure to
submit himself to the random drug test was justified because he merely responded to an
1. On November 8, 2004, respondent was given a show-cause notice requiring him emergency call regarding his wife’s safety in Tel Aviv, and that such failure cannot be
to explain in writing within three days why no disciplinary action should be taken considered synonymous with "avoidance" or "refusal" so as to mean "unjustified refusal" in
against him for violation of company policy on unjustified refusal to submit to order to be meted the penalty of termination.41
random drug testing – a type D offense which results in termination.
The CA disagreed with the NLRC and ruled that it was immaterial whether respondent failed,
2. Respondent submitted his explanation on November 11, 2004. refused, or avoided being tested. To the appellate court, the singular fact material to this case
was that respondent did not get himself tested in clear disobedience of company instructions
3. On December 9, 2004, respondent was given a notice of investigation34 informing and policy. Despite such disobedience, however, the appellate court considered the penalty
him of a meeting on December 13, 2004 at 9:00 a.m. In this meeting, respondent was of dismissal to be too harsh to be imposed on respondent, viz.:
allowed to explain his side, present his evidences and witnesses, and confront the
witnesses presented against him. x x x While it is a management prerogative to terminate its erring employee for willful
disobedience, the Supreme Court has recognized that such penalty is too harsh depending on
4. On February 14, 2005, respondent was served a letter of termination which the circumstances of each case. "There must be reasonable proportionality between, on the
clearly stated the reasons therefor.35 one hand, the willful disobedience by the employee and, on the other hand, the penalty
imposed therefor" x x x.
The NLRC, notwithstanding its finding that respondent was dismissed for cause and with due
process, granted financial assistance to respondent on equitable grounds. It invoked the past In this case, [petitioner corporation’s] own investigating panel has revealed that the penalty
decisions of this Court which allowed the award of financial assistance due to factors such as of dismissal is too harsh to impose on [respondent], considering that this was the first time
long years of service or the Court’s concern and compassion towards labor where the in his 10-year employment that the latter violated its company policies. The investigating
infraction was not so serious. Thus, considering respondent’s 10 years of service with panel even suggested that a review be had of the company policy on the term "unjustified
petitioner corporation without any record of violation of company policies, the NLRC refusal" to clearly define what constitutes a violation thereof. The recommendation of the
ordered petitioner corporation to pay respondent financial assistance equivalent to one-half investigating panel is partially reproduced as follows:
(1/2) month pay for every year of service in the amount of One Hundred Ninety-Nine
Thousand Seventy-Five Pesos (₱199,075.00). The NLRC decision states thus: "VII. Recommendation

WHEREFORE, the decision dated 31 August 2005 is VACATED and SET ASIDE. The instant However, despite having violated the company policy, the panel recommends 4 working
complaint is dismissed for lack of merit. However, respondent Mirant [Philippines] Corp. is weeks suspension without pay (twice the company policy’s maximum of 2 working weeks
suspension) instead of termination due to the following mitigating circumstances.
1. Mr. Joselito A. Caro did not directly refuse to be subjected to the random drug test I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO
scheduled on November 3, 2004. CONSIDER THAT:

2. In the case of Mr. Joselito A. Caro, the two conditions for termination (Unjustified A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO SHOULD
and Refusal) were not fully met as he expressly agreed to undergo drug test. HAVE BEEN SUMMARILY DISMISSED CONSIDERING THAT IT LACKED THE
REQUISITE VERIFICATION AND CERTIFICATION AGAINST FORUM
3. Mr. Joselito A. Caro voluntarily offered himself to undergo drug test the following SHOPPING REQUIRED BY THE RULES OF COURT; OR
day at his own expense.
B. AT THE VERY LEAST, THE SAID PETITION FOR CERTIORARI FILED BY
Doubling the maximum of 2 weeks suspension to 4 weeks is indicative of the gravity of the RESPONDENT CARO SHOULD HAVE BEEN CONSIDERED MOOT SINCE
offense committed. The panel believes that although mitigating factors partially offset RESPONDENT CARO HAD ALREADY PREVIOUSLY EXECUTED A QUITCLAIM
reasons for termination, the 2 weeks maximum suspension is too lenient penalty for such an DISCHARGING THE PETITIONERS FROM ALL HIS MONETARY CLAIMS.
offense.
II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED QUESTIONS
The Panel also took into consideration that Mr. Joselito A. Caro has served the company for OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS
ten (10) years without any record of violation of the company policies. OF THE HONORABLE COURT, CONSIDERING THAT:

xxxx A. THE COURT OF APPEALS REVERSED THE DECISION DATED 31 MAY


2006 OF THE NLRC ON THE GROUND THAT THERE WAS GRAVE ABUSE OF
The Panel also recommends that Management review the Mirant Drug Policy specifically DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
‘Unjustified [R]efusal to submit to random drug testing.’ The Panel believes that the term NOTWITHSTANDING THE FACT THAT IT AFFIRMED THE NLRC’S
refusal casts certain ambiguities and should be clearly defined." 42 FINDINGS THAT RESPONDENT CARO DELIBERATELY DISOBEYED
PETITIONER MIRANT’S ANTI-DRUGS POLICY.
The CA however found that award of moral and exemplary damages is without basis due to
lack of bad faith on the part of the petitioner corporation which merely acted within its B. THE PENALTY OF TERMINATION SHOULD HAVE BEEN SUSTAINED BY
management prerogative. In its assailed Decision dated June 26, 2007, the CA ruled, viz.: THE COURT OF APPEALS GIVEN ITS POSITIVE FINDING THAT
RESPONDENT CARO DELIBERATELY AND WILLFULLY DISOBEYED
PETITIONER MIRANT’S ANTI-DRUGS POLICY.
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED. The assailed Decision
dated May 31, 2006 and Resolution dated June 30, 2006 rendered by the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 046551-05 (NCR-00-03-02511-05) are C. IN INVALIDATING RESPONDENT CARO’S DISMISSAL, THE COURT OF
REVERSED and SET ASIDE. The Labor Arbiter’s Decision dated August 31, 2005 is hereby APPEALS SUBSTITUTED WITH ITS OWN DISCRETION A CLEAR
REINSTATED with MODIFICATION by omitting the award of moral and exemplary damages MANAGEMENT PREROGATIVE BELONGING ONLY TO PETITIONER MIRANT
as well as attorney’s fees, and that the petitioner’s salary equivalent to four (4) working IN THE INSTANT CASE.
weeks at the time he was terminated be deducted from his backwages. No cost.
D. THE WILLFUL AND DELIBERATE VIOLATION OF PETITIONER MIRANT’S
SO ORDERED.43 ANTI-DRUGS POLICY AGGRAVATED RESPONDENT CARO’S WRONGFUL
CONDUCT WHICH JUSTIFIED HIS TERMINATION.
Petitioner moved for reconsideration. In its assailed Resolution dated January 11, 2008, the
CA denied petitioners’ motion for reconsideration for lack of merit. It ruled that the E. IN INVALIDATING RESPONDENT CARO’S DISMISSAL, THE COURT OF
arguments in the motion for reconsideration were already raised in their past pleadings. APPEALS, IN EFFECT, BELITTLED THE IMPORTANCE AND SERIOUSNESS
OF PETITIONER MIRANT’S ANTI-DRUGS POLICY AND CONSEQUENTLY
HAMPERED THE EFFECTIVE IMPLEMENTATION OF THE SAME.
In this instant Petition, petitioners raise the following grounds:
F. THE EXISTENCE OF OTHER GROUNDS FOR CARO’S DISMISSAL, SUCH AS submission of a false certification or noncompliance with any of the undertakings therein
WILLFUL DISOBEDIENCE AND [LOSS] OF TRUST AND CONFIDENCE, shall constitute indirect contempt of court, without prejudice to the corresponding
JUSTIFIED HIS TERMINATION FROM EMPLOYMENT. administrative and criminal actions. If the acts of the party or his counsel clearly constitute
willful and deliberate forum shopping, the same shall be ground for summary dismissal with
III. NONETHELESS, THE AWARD OF FINANCIAL ASSISTANCE IN FAVOR OF RESPONDENT prejudice and shall constitute direct contempt, as well as a cause for administrative
CARO IS NOT WARRANTED CONSIDERING THAT RESPONDENT CARO’S WILLFUL AND sanctions.
DELIBERATE REFUSAL TO SUBJECT HIMSELF TO PETITIONER MIRANT’S DRUG TEST AND
HIS SUBSEQUENT EFFORTS TO CONCEAL THE SAME SHOWS HIS DEPRAVED MORAL It is the contention of petitioners that due to respondent’s failure to subscribe the
CHARACTER. Verification and Certification of Non-Forum Shopping before a Notary Public, the said
verification and certification cannot be considered to have been made under oath.
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT HELD PETITIONER BAUTISTA Accordingly, such omission is fatal to the entire petition for not being properly verified and
PERSONALLY LIABLE FOR [RESPONDENT] CARO’S UNFOUNDED CLAIMS CONSIDERING certified. The CA therefore erred when it did not dismiss the petition.
THAT, ASIDE FROM RESPONDENT CARO’S DISMISSAL BEING LAWFUL, PETITIONER
BAUTISTA MERELY ACTED WITHIN THE SCOPE OF HIS FUNCTIONS IN GOOD FAITH. 44 This jurisdiction has adopted in the field of labor protection a liberal stance towards the
construction of the rules of procedure in order to serve the ends of substantial justice. This
We shall first rule on the issue raised by petitioners that the petition for certiorari filed by liberal construction in labor law emanates from the mandate that the workingman’s welfare
respondent with the CA should have been summarily dismissed as it lacked the requisite should be the primordial and paramount consideration.45 Thus, if the rules of procedure will
verification and certification against forum shopping under Sections 4 and 5, Rule 7 of the stunt courts from fulfilling this mandate, the rules of procedure shall be relaxed if the
Rules, viz.: circumstances of a case warrant the exercise of such liberality. If we sustain the argument of
petitioners in the case at bar that the petition for certiorari should have been dismissed
SEC. 4. Verification. – Except when otherwise specifically required by law or rule, pleadings outright by the CA, the NLRC decision would have reached finality and respondent would
need not be under oath, verified or accompanied by affidavit. have lost his remedy and denied his right to be protected against illegal dismissal under the
Labor Code, as amended.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief. It is beyond debate that petitioner corporation’s enforcement of its Anti-Drugs Policy is an
exercise of its management prerogative. It is also a conceded fact that respondent "failed" to
take the random drug test as scheduled, and under the said company policy, such failure
A pleading required to be verified which contains a verification based on "information and metes the penalty of termination for the first offense. A plain, simple and literal application
belief," or upon "knowledge, information and belief," or lacks a proper verification, shall be of the said policy to the omission of respondent would have warranted his outright dismissal
treated as an unsigned pleading. from employment – if the facts were that simple in the case at bar. Beyond debate – the facts
of this case are not – and this disables the Court from permitting a straight application of an
SEC. 5. Certification against forum shopping. – The plaintiff or principal party shall certify otherwise prima facie straightforward rule if the ends of substantial justice have to be
under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a served.
sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any court, It is the crux of petitioners’ argument that respondent’s omission amounted to "unjust
tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or refusal" because he could not sufficiently support with convincing proof and evidence his
claim is pending therein; (b) if there is such other pending action or claim, a complete defenses for failing to take the random drug test. For petitioners, the inconsistencies in
statement of the present status thereof; and (c) if he should thereafter learn that the same or respondent’s explanations likewise operated to cast doubt on his real reasons and motives
similar action or claim has been filed or is pending, he shall report that fact within five (5) for not submitting to the random drug test on schedule. In recognition of these
days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been inconsistencies and the lack of convincing proof from the point of view of petitioners, the
filed. NLRC reversed the decision of the Labor Arbiter. The CA found the ruling of the Labor
Arbiter to be more in accord with the facts, law and existing jurisprudence.
Failure to comply with the foregoing requirements shall not be curable by mere amendment
of the complaint or other initiatory pleading but shall be cause for the dismissal of the case We agree with the disposition of the appellate court that there was illegal dismissal in the
without prejudice, unless otherwise provided, upon motion and after hearing. The case at bar.
While the adoption and enforcement by petitioner corporation of its Anti-Drugs Policy is for the laborer." Applying these provisions of law to the circumstances in the case at bar, it is
recognized as a valid exercise of its management prerogative as an employer, such exercise not fair for this Court to allow an ambiguous policy to prejudice the rights of an employee
is not absolute and unbridled. Managerial prerogatives are subject to limitations provided by against illegal dismissal. To hold otherwise and sustain the stance of petitioner corporation
law, collective bargaining agreements, and the general principles of fair play and justice. 46 In would be to adopt an interpretation that goes against the very grain of labor protection in
the exercise of its management prerogative, an employer must therefore ensure that the this jurisdiction. As correctly stated by the Labor Arbiter, "when a conflicting interest of
policies, rules and regulations on work-related activities of the employees must always be labor and capital are weighed on the scales of social justice, the heavier influence of the latter
fair and reasonable and the corresponding penalties, when prescribed, commensurate to the must be counter-balanced by the sympathy and compassion the law must accord the
offense involved and to the degree of the infraction.47 The Anti-Drugs Policy of Mirant fell underprivileged worker."49
short of these requirements.
Second. The penalty of termination imposed by petitioner corporation upon respondent fell
Petitioner corporation’s subject Anti-Drugs Policy fell short of being fair and reasonable. short of being reasonable. Company policies and regulations are generally valid and binding
between the employer and the employee unless shown to be grossly oppressive or contrary
First. The policy was not clear on what constitutes "unjustified refusal" when the subject to law50 – as in the case at bar. Recognizing the ambiguity in the subject policy, the CA was
drug policy prescribed that an employee’s "unjustified refusal" to submit to a random drug more inclined to adopt the recommendation of petitioner corporation’s own Investigating
test shall be punishable by the penalty of termination for the first offense. To be sure, the Panel over that of Sliman and the NLRC. The appellate court succinctly but incisively pointed
term "unjustified refusal" could not possibly cover all forms of "refusal" as the employee’s out, viz.:
resistance, to be punishable by termination, must be "unjustified." To the mind of the Court,
it is on this area where petitioner corporation had fallen short of making it clear to its x x x We find, as correctly pointed out by the investigating panel, that the [petitioner
employees – as well as to management – as to what types of acts would fall under the corporation’s] Anti-Drug Policy is excessive in terminating an employee for his "unjustified
purview of "unjustified refusal." Even petitioner corporation’s own Investigating Panel refusal" to subject himself to the random drug test on first offense, without clearly defining
recognized this ambiguity, viz.: what amounts to an "unjustified refusal."

The Panel also recommends that Management review the Mirant Drug Policy specifically Thus, We find that the recommended four (4) working weeks’ suspension without pay as the
"Unjustified [R]efusal to submit to random drug testing." The Panel believes that the term reasonable penalty to be imposed on [respondent] for his disobedience. x x x51 (Additional
"refusal" casts certain ambiguities and should be clearly defined. 48 emphasis supplied.)

The fact that petitioner corporation’s own Investigating Panel and its Vice President for To be sure, the unreasonableness of the penalty of termination as imposed in this case is
Operations, Sliman, differed in their recommendations regarding respondent’s case are first- further highlighted by a fact admitted by petitioner corporation itself: that for the ten-year
hand proof that there, indeed, is ambiguity in the interpretation and application of the period that respondent had been employed by petitioner corporation, he did not have any
subject drug policy. The fact that petitioner corporation’s own personnel had to dissect the record of a violation of its company policies.
intended meaning of "unjustified refusal" is further proof that it is not clear on what context
the term "unjustified refusal" applies to. It is therefore not a surprise that the Labor Arbiter, As to the other issue relentlessly being raised by petitioner corporation that respondent’s
the NLRC and the CA have perceived the term "unjustified refusal" on different prisms due to petition for certiorari before the CA should have been considered moot as respondent had
the lack of parameters as to what comes under its purview. To be sure, the fact that the already previously executed a quitclaim discharging petitioner corporation from all his
courts and entities involved in this case had to engage in semantics – and come up with monetary claims, we cannot agree. Quitclaims executed by laborers are ineffective to bar
different constructions – is yet another glaring proof that the subject policy is not clear claims for the full measure of their legal rights,52 especially in this case where the evidence
creating doubt that respondent’s dismissal was a result of petitioner corporation’s valid on record shows that the amount stated in the quitclaim exactly corresponds to the amount
exercise of its management prerogative. claimed as unpaid wages by respondent under Annex A 53 of his Reply54 filed with the Labor
Arbiter. Prima facie, this creates a false impression that respondent’s claims have already
It is not a mere jurisprudential principle, but an enshrined provision of law, that all doubts been settled by petitioner corporation – discharging the latter from all of respondent’s
shall be resolved in favor of labor. Thus, in Article 4 of the Labor Code, as amended, "[a]ll monetary claims. In truth and in fact, however, the amount paid under the subject quitclaim
doubts in the implementation and interpretation of the provisions of [the Labor] Code, represented the salaries of respondent that remained unpaid at the time of his termination –
including its implementing rules and regulations, shall be resolved in favor of labor." In not the amounts being claimed in the case at bar.
Article 1702 of the New Civil Code, a similar provision states that "[i]n case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living
We believe that this issue was extensively discussed by both the Labor Arbiter and the CA WHEREFORE, the petition for review on certiorari is DENIED. The assailed Decision dated
and we find no reversible error on the disposition of this issue, viz.: June 26, 2007 and the Resolution dated January 11, 2008 in CA-G.R. SP No. 96153 are
AFFIRMED with the MODIFICATION that only petitioner corporation is found GUILTY of the
A review of the records show that the alluded quitclaim, which was undated and not even illegal dismissal of respondent Joselito A. Caro. Petitioner Edgardo A. Bautista is not held
notarized although signed by the petitioner, was for the amount of ₱59,630.05. The said personally liable as then President of petitioner corporation at the time of the illegal
quitclaim was attached as Annex 26 in the [petitioners’] Position Paper filed before the dismissal.
Labor Arbiter. As fully explained by [respondent] in his Reply filed with the Labor Arbiter,
the amount stated therein was his last pay due to him when he was terminated, not the No pronouncement as to costs.
amount representing his legitimate claims in this labor suit x x x. To bolster his defense,
[respondent] submitted the pay form issued to him by the [petitioner corporation], showing SO ORDERED.
his net pay at ₱59,630.05 exactly the amount stated in the quitclaim x x x. Then, too, as stated
on the quitclaim itself, the intention of the waiver executed by the [respondent] was to -----------------------------------X
release [petitioner corporation] from any liability only on the said amount representing
[respondent’s] "full and final payment of [his] last salary/separation pay" x x x. It did not in SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN, G.R. No. 185814
any way waive [respondent’s] right to pursue his legitimate claims regarding his dismissal in and HINRICH JOHANN SCHUMACHER,
a labor suit. Thus, We gave no credence to [petitioners’] private defense that alleged Petitioners, Present:
quitclaim rendered the instant petition moot.55 - versus -
VELASCO, JR.,*J.,
Finally, the petition avers that petitioner Bautista should not be held personally liable for NACHURA,**
respondent’s dismissal as he acted in good faith and within the scope of his official functions Acting Chairperso
as then president of petitioner corporation. We agree with petitioners.1âwphi1 Both MANUEL F. DIAZ, Respondent. LEONARDO-DE
decisions of the Labor Arbiter and the CA did not discuss the basis of the personal liability of CASTRO, ***
petitioner Bautista, and yet the dispositive portion of the decision of the Labor Arbiter - BRION, **** and
which was affirmed by the appellate court - held him jointly and severally liable with MENDOZA, JJ.
petitioner corporation, viz.:

WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal dismissal,
and hereby ordered to jointly and severally reinstate complainant back to his former
position without loss on seniority rights and benefits and to pay him his backwages and
other benefits from the date he was illegally dismissed up to the time he is actually Promulgated:Oct
reinstated, partially computed as of this date in the amount of ₱258,797.50 (₱39,815.00 x 6.5 13, 2010
mos.) plus his 13th and 14th month pay in the amount of ₱43,132.91 or in the total amount
of ₱301,930.41. Respondents are also ordered to pay complainant the amount of
₱3,000,000.00 as and by way of moral and exemplary damages, and to pay complainant the
amount equivalent to ten percent (10%) of the total awards as and by way of attorney's fees.

SO ORDERED.56 (Emphasis supplied.)

A corporation has a personality separate and distinct from its officers and board of directors
who may only be held personally liable for damages if it is proven that they acted with
malice or bad faith in the dismissal of an employee. 57 Absent any evidence on record that
petitioner Bautista acted maliciously or in bad faith in effecting the termination of
respondent, plus the apparent lack of allegation in the pleadings of respondent that x ----------------------------------------------------------------------------------------x
petitioner Bautista acted in such manner, the doctrine of corporate fiction dictates that only
petitioner corporation should be held liable for the illegal dismissal of respondent.
DECISION
LOCATION : Lot C3-2A, Phase I, Camelray
Industrial Park II, Calamba,
MENDOZA, J.: Laguna

REPORTS TO : Direct to Mr. Winfried


Petitioners, by way of this petition for review on certiorari under Rule 45, seek to Hartmannshenn
annul and set aside the December 23, 2008 Decision[1] of the Court of Appeals (CA) in CA-G.R.
Normal Working Hours : 8:00 a.m. to 5:00 p.m.
SP No. 100015, which reversed and set aside the December 29, 2006 Resolution[2] of the subject to requirements of the job
National Labor Relations Commission (NLRC). The NLRC Resolution, in turn, reversed and
OVERTIME : ________________________
set aside the June 15, 2006 Decision[3] of the Labor Arbiter (LA).[4]
JOB DESCRIPTION AND RESPONSIBILITIES:
THE FACTS
DAILY/GENERAL DUTIES:
Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized
(a) Represent the company in any event organized by PEZA;
and existing under the laws of the Republic of the Philippines and registered with the (b) Perform sales/marketing functions;
Philippine Economic Zone Authority. Petitioner Winfried Hartmannshenn (Hartmannshenn), (c) Monitor/follow-up customers inquiry on EMPLOYERs services;
(d) Monitor on-going job orders/projects;
a German national, is its president, in which capacity he determines the administration and (e) Submit requirements as needed in application/renewal of
direction of the day-to-day business affairs of SHS. Petitioner Hinrich Johann necessary permits;
(f) Liaise closely with the other commercial and technical staff of
Schumacher (Schumacher), also a German national, is the treasurer and one of the board
the company;
directors. As such, he is authorized to pay all bills, payrolls, and other just debts of SHS of (g) Accomplish PEZA documents/requirements for every sales
whatever nature upon maturity. Schumacher is also the Executive Vice-President of the made; with legal assistance where necessary at EMPLOYERs
expense; and
European Chamber of Commerce of the Philippines (ECCP) which is a separate entity (h) Perform other related duties and responsibilities.
from SHS. Both entities have an arrangement where ECCP handles the payroll requirements
OTHER RESPONSIBILITIES:
of SHS to simplify business operations and minimize operational expenses. Thus, the wages
of SHS employees are paid out by ECCP, through its Accounting Services Department headed (a) abide by and perform to the best of his abilities all functions,
by Juliet Taguiang (Taguiang). duties and responsibilities to be assigned by the EMPLOYER in due
course;
(b) comply with the orders and instructions given from time to time
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business by the EMPLOYER, INC. through its authorized representatives;
Development on probationary status from July 18, 2005 to January 18, 2006, with a monthly (c) will not disclose any confidential information in respect of the
affairs of the EMPLOYER to any unauthorized person;
salary of P100,000.00. Respondents duties, responsibilities, and work hours were described (d) perform any other administrative or non-administrative duties,
in the Contract of Probationary Employment,[5] as reproduced below: as assigned by any of the EMPLOYERs representative from time to
time either through direct written order or by verbal assignment.
The EMPLOYER may take into account EMPLOYEEs training and
NAME : Jose Manuel F. Diaz expertise when assigning additional tasks.

TITLE/STATUS : Manager for Business Development AGREED:


messages and advised him to get in touch with him. Respondent claimed that he never
(sgd. Manuel Diaz).
received the messages.

On November 29, 2005, Hartmannshenn instructed Taguiang not to release


respondents salary. Later that afternoon, respondent called and inquired about his salary.
In addition to the above-mentioned responsibilities, respondent was also instructed Taguiang informed him that it was being withheld and that he had to immediately
by Hartmannshenn to report to the SHS office and plant at least two (2) days every work communicate with Hartmannshenn. Again, respondent denied having received such
week to observe technical processes involved in the manufacturing of perforated materials, directive.
and to learn about the products of the company, which respondent was hired to market and
sell. The next day, on November 30, 2005, respondent served on SHS a demand letter
and a resignation letter. The resignation letter reads:
During respondents employment, Hartmannshenn was often abroad and, because of
This is to tender my irrevocable resignation from SHS Perforated
business exigencies, his instructions to respondent were either sent by electronic mail or Materials, Inc, Philippines, effective immediately upon receipt of my due
relayed through telephone or mobile phone. When he would be in the Philippines, he and the and demandable salary for the period covering November 16 to 30,
respondent held meetings. As to respondents work, there was no close supervision by him. 2005, which has yet been unpaid and is still currently being withheld
albeit illegally. This covers and amounts to the sum of Php50,000.00 pesos
net of all taxes. As my employment contract clearly shows I receive a
During meetings with the respondent, Hartmannshenn expressed his dissatisfaction monthly salary of Php100,000.00 net of all taxes.
over respondents poor performance. Respondent allegedly failed to make any concrete It is precisely because of illegal and unfair labor practices such as
business proposal or implement any specific measure to improve the productivity of the SHS these that I offer my resignation with neither regret nor remorse.[6]
office and plant or deliver sales except for a meagre P2,500.00 for a sample product. In
numerous electronic mail messages, respondent acknowledged his poor performance and In the evening of the same day, November 30, 2005, respondent met with
offered to resign from the company. Hartmannshenn in Alabang. The latter told him that he was extremely disappointed for the
following reasons: his poor work performance; his unauthorized leave and malingering from
Respondent, however, denied sending such messages but admitted that he had November 16 to November 30, 2005; and failure to immediately meet Hartmannshenn upon
reported to the SHS office and plant only eight (8) times from July 18, 2005 to November 30, his arrival from Germany.
2005.
Petitioners averred that respondent was unable to give a proper explanation for his
On November 16, 2005, in preparation for his trip to the Philippines, behavior. Hartmannshenn then accepted respondents resignation and informed him that his
Hartmannshenn tried to call respondent on his mobile phone, but the latter failed to answer. salary would be released upon explanation of his failure to report to work, and proof that he
On November 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on did, in fact, work for the period in question. He demanded that respondent surrender all
November 22 and 24, 2005, notified respondent of his arrival through electronic mail company property and information in his possession. Respondent agreed to these exit
conditions through electronic mail. Instead of complying with the said conditions, however,
respondent sent another electronic mail message to Hartmannshenn and Schumacher On June 15, 2006, the LA rendered his decision, the dispositive portion of which
on December 1, 2005, appealing for the release of his salary. states:

Respondent, on the other hand, claimed that the meeting with Hartmannshenn took WHEREFORE, premises considered, judgment is hereby rendered declaring
complainant as having been illegally dismissed and further ordering his
place in the evening of December 1, 2005, at which meeting the latter insulted him and immediate reinstatement without loss of seniority rights and benefits. It is
rudely demanded that he accept P25,000.00 instead of his accrued wage and stop working also ordered that complainant be deemed as a regular employee.
Accordingly, respondents are hereby ordered to jointly and severally pay
for SHS, which demands he refused. Later that same night, he sent Hartmannshenn and complainant the following
Schumacher an electronic mail message appealing for the release of his salary. Another
1. P704,166.67 (P100,000.00 x 6.5 + (P100,000.00 x 6.5/12) as
demand letter for respondents accrued salary for November 16 to November 30, 2005,
backwages;
13th month pay, moral and exemplary damages, and attorneys fees was sent on December 2, 2. P50,000.00 as unpaid wages;
2005. 3. P37,083.33 as unpaid 13th month pay
4. P200,000.00 as moral and exemplary damages;
5. P99,125.00 as attorneys fees.
To settle the issue amicably, petitioners counsel advised respondents counsel by
SO ORDERED.[8]
telephone that a check had been prepared in the amount of P50,000.00, and was ready for
The LA found that respondent was constructively dismissed because the withholding
pick-up on December 5, 2005. On the same date, a copy of the formal reply letter relating to
of his salary was contrary to Article 116 of the Labor Code as it was not one of the exceptions
the prepared payment was sent to the respondents counsel by facsimile transmission.
for allowable wage deduction by the employer under Article 113 of the Labor Code. He had
Despite being informed of this, respondent never picked up the check.
no other alternative but to resign because he could not be expected to continue working for
an employer who withheld wages without valid cause. The LA also held that respondents
Respondent countered that his counsel received petitioners formal reply letter only
probationary employment was deemed regularized because petitioners failed to conduct a
on December 20, 2005, stating that his salary would be released subsequent to the turn-over
prior evaluation of his performance and to give notice two days prior to his termination as
of all materials owned by the company in his possession. Respondent claimed that the only
required by the Probationary Contract of Employment and Article 281 of the Labor Code.
thing in his possession was a sample panels folder which he had already returned and which
Petitioners contention that they lost trust and confidence in respondent as a managerial
was duly received by Taguiang on November 30, 2005.
employee was not given credence for lack of notice to explain the supposed loss of trust and
confidence and absence of an evaluation of respondents performance.
On December 9, 2005, respondent filed a Complaint[7] against the petitioners for
illegal dismissal; non-payment of salaries/wages and 13th month pay with prayer for
The LA believed that the respondent complied with the obligations in his contract as
reinstatement and full backwages; exemplary damages, and attorneys fees, costs of suit, and
evidenced by his electronic mail messages to petitioners. He ruled that petitioners are jointly
legal interest.
and severally liable to respondent for backwages including 13 th month pay as there was no
showing in the salary vouchers presented that such was integrated in the salary; for moral
THE RULING OF THE LABOR ARBITER
and exemplary damages for having in bad faith harassed respondent into resigning; and for
attorneys fees.
THE RULING OF THE NLRC
THE RULING OF THE COURT OF APPEALS
On appeal, the NLRC reversed the decision of the LA in its December 29,
2006 Resolution, the dispositive portion of which reads: The CA reversed the NLRC resolutions in its December 23, 2008 Decision, the
dispositive portion of said decision reads:
WHEREFORE, premises considered, the appeal is
hereby GRANTED. WHEREFORE, premises considered, the herein petition is
GRANTED and the 29 December 2006 Resolution of the NLRC in NLRC CN
The Decision dated June 15, 2006 is hereby REVERSED and SET RAB-IV-12-21758-05-L, and the 23 May 2007 Resolution denying
ASIDE and a new one is hereby entered: petitioners Motion for Reconsideration, are REVERSED and SET ASIDE.
Accordingly, a new judgment is hereby entered in that petitioner is hereby
(1) dismissing the complaint for illegal dismissal for want awarded separation pay equivalent to at least one month pay, and his full
of merit; backwages, other privileges and benefits, or their monetary equivalent
during the period of his dismissal up to his supposed actual reinstatement
(2) dismissing the claims for 13th month pay, moral and by the Labor Arbiter on 15 June 2006.
exemplary damages and attorneys fees for lack of
factual and legal basis; and SO ORDERED.[10]

(3) ordering respondents to pay the complainants unpaid


salary for the period covering November 16-30, Contrary to the NLRC ruling, the CA held that withholding respondents salary was
2005 in the amount of FIFTY THOUSAND PESOS (Php not a valid exercise of management prerogative as there is no such thing as a management
50,000.00).
prerogative to withhold wages temporarily. Petitioners averments of respondents failure to
SO ORDERED.[9] report to work were found to be unsubstantiated allegations not corroborated by any other
The NLRC explained that the withholding of respondents salary was a valid exercise evidence, insufficient to justify said withholding and lacking in probative value. The
of management prerogative. The act was deemed justified as it was reasonable to demand an malicious withholding of respondents salary made it impossible or unacceptable for
explanation for failure to report to work and to account for his work accomplishments. The respondent to continue working, thus, compelling him to resign. The respondents immediate
NLRC held that the respondent voluntarily resigned as evidenced by the language used in his filing of a complaint for illegal dismissal could only mean that his resignation was not
resignation letter and demand letters. Given his professional and educational background, voluntary. As a probationary employee entitled to security of tenure, respondent was
the letters showed respondents resolve to sever the employer-employee relationship, and illegally dismissed. The CA ruled out actual reinstatement, however, reasoning out that
his understanding of the import of his words and their consequences. Consequently, antagonism had caused a severe strain in their relationship. It was of the view that
respondent could not have been regularized having voluntarily resigned prior to the separation pay equivalent to at least one month pay would be a more equitable disposition.
completion of the probationary period. The NLRC further noted that respondents 13 th month
pay was already integrated in his salary in accordance with his Probationary Contract of THE ISSUES
Employment and, therefore, no additional amount should be due him.
Aggrieved, the petitioners come to this Court praying for the reversal and setting
On January 25, 2007, respondent filed a motion for reconsideration but the NLRC
aside of the subject CA decision presenting the following
subsequently denied it for lack of merit in its May 23, 2007 Resolution.
ISSUES The resolution of these issues is dependent on whether or not respondent was
constructively dismissed by petitioners, which determination is, in turn, hinged on finding
I
out (i) whether or not the temporary withholding of respondents salary/wages by
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE petitioners was a valid exercise of management prerogative; and (ii) whether or not
ERROR IN NOT AFFIRMING THE DECISION OF THE NLRC, WHICH WAS
BASED ON SUBSTANTIAL EVIDENCE. respondent voluntarily resigned.

II
THE COURTS RULING
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR IN NOT AFFIRMING THE NLRCS HOLDING THAT PETITIONERS As a rule, the factual findings of the courts below are conclusive in a petition for
WITHHOLDING OF RESPONDENTS SALARY FOR THE PAYROLL PERIOD
NOVEMBER 16-30, 2005 IN VIEW OF RESPONDENTS FAILURE TO review on certiorari where only errors of law should be reviewed. The case, however, is an
RENDER ACTUAL WORK FOR SAID PAYROLL PERIOD WAS A VALID
exception because the factual findings of the CA and the LA are contradictory to that of the
EXERCISE OF MANAGEMENT PREROGATIVE.
NLRC. Thus, a review of the records is necessary to resolve the factual issues involved and
III
render substantial justice to the parties.[11]
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR IN AFFIRMING THE LABOR ARBITERS FINDING THAT Petitioners contend that withholding respondents salary from November 16 to
RESPONDENT HAD BEEN CONSTRUCTIVELY DISMISSED.
November 30, 2005, was justified because respondent was absent and did not show up for
work during that period. He also failed to account for his whereabouts and work
IV
accomplishments during said period. When there is an issue as to whether an employee has,
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE in fact, worked and is entitled to his salary, it is within management prerogative to
ERROR IN AWARDING RESPONDENT SEPARATION PAY EQUIVALENT temporarily withhold an employees salary/wages pending determination of whether or not
TO AT LEAST ONE MONTH PAY IN LIEU OF REINSTATEMENT, FULL
BACKWAGES, AND OTHER PRIVILEGES AND BENEFITS, OR THEIR such employee did indeed work.
MONETARY EQUIVALENT IN VIEW OF THE FACT THAT RESPONDENT
VOLUNTARILY RESIGNED FROM PETITIONER SHS AND WAS NOT
ILLEGALLY DISMISSED. We disagree with petitioners.

V
Management prerogative refers to the right of an employer to regulate all aspects of
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE employment, such as the freedom to prescribe work assignments, working methods,
ERROR IN NOT HOLDING THAT INDIVIDUAL PETITIONERS processes to be followed, regulation regarding transfer of employees, supervision of their
HARTMANNSHENN AND SCHUMACHER MAY NOT BE HELD SOLIDARILY
AND PERSONALLY LIABLE WITH PETITIONER SHS FOR THE PAYMENT work, lay-off and discipline, and dismissal and recall of work.[12] Although management
OF THE MONETARY AWARD TO RESPONDENT. prerogative refers to the right to regulate all aspects of employment, it cannot be understood
to include the right to temporarily withhold salary/wages without the consent of the
employee. To sanction such an interpretation would be contrary to Article 116 of the Labor
Code, which provides:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be
unlawful for any person, directly or indirectly, to withhold any amount from To substantiate their claim, petitioners presented hard copies of the electronic mail
the wages of a worker or induce him to give up any part of his wages by messages[14] sent to respondent on November 22 and 24, 2005, directing the latter to contact
force, stealth, intimidation, threat or by any other means whatsoever
without the workers consent. Hartmannshenn; the Affidavit[15] of Taguiang stating that she advised respondent on or
about November 29, 2005 to immediately communicate with Mr. Hartmannshenn at the SHS
office; Hartmannshenns Counter-Affidavit[16] stating that he exerted earnest efforts to

Any withholding of an employees wages by an employer may only be allowed in the contact respondent through mobile phone; Schumachers Counter-Affidavit[17]stating that

form of wage deductions under the circumstances provided in Article 113 of the Labor Code, respondent had not filed any request for official leave; and respondents admission in his

as set forth below: Position Paper[18] that he found it absurd to report to the SHS plant when only security
guards and machinists were present.
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of
any person, shall make any deduction from the wages of his employees,
Respondent, on the other hand, presented reports[19] prepared by him and
except:
submitted to Hartmannshenn on November 18 and 25, 2005; a receipt [20] issued to him by
(a) In cases where the worker is insured with his consent by Taguiang for a clients payment during the subject period; and eight notarized letters[21] of
the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the prospective clients vouching for meetings they had with the respondent during the subject
insurance; period.

(b) For union dues, in cases where the right of the worker or
his union to check-off has been recognized by the The Court finds petitioners evidence insufficient to prove that respondent did not
employer or authorized in writing by the individual work from November 16 to November 30, 2005. As can be gleaned from respondents
worker concerned; and
Contract of Probationary Employment and the exchanges of electronic mail
(c) In cases where the employer is authorized by law or messages[22] between Hartmannshenn and respondent, the latters duties as manager for
regulations issued by the Secretary of Labor.
business development entailed cultivating business ties, connections, and clients in order to
As correctly pointed out by the LA, absent a showing that the withholding of
make sales. Such duties called for meetings with prospective clients outside the office rather
complainants wages falls under the exceptions provided in Article 113, the withholding
than reporting for work on a regular schedule. In other words, the nature of respondents job
thereof is thus unlawful.[13]
did not allow close supervision and monitoring by petitioners. Neither was there any
prescribed daily monitoring procedure established by petitioners to ensure that respondent
Petitioners argue that Article 116 of the Labor Code only applies if it is established
was doing his job. Therefore, granting that respondent failed to answer Hartmannshenns
that an employee is entitled to his salary/wages and, hence, does not apply in cases where
mobile calls and to reply to two electronic mail messages and given the fact that he
there is an issue or uncertainty as to whether an employee has worked and is entitled to his
admittedly failed to report to work at the SHS plant twice each week during the subject
salary/wages, in consonance with the principle of a fair days wage for a fair days work.
period, such cannot be taken to signify that he did not work from November 16 to November
Petitioners contend that in this case there was precisely an issue as to whether respondent
30, 2005.
was entitled to his salary because he failed to report to work and to account for his
whereabouts and work accomplishments during the period in question.
Furthermore, the electronic mail reports sent to Hartmannshenn and the receipt background, he was fully aware of the import and consequences of the said letter. They
presented by respondent as evidence of his having worked during the subject period were maintain that respondent resigned to save face and avoid disciplinary measures due to his
not controverted by petitioners. The eight notarized letters of prospective clients vouching allegedly dismal work performance and failure to report to work.
for meetings they had with respondent during the subject period may also be given
credence. Although respondent only presented such letters in support of his Motion for The Court, however, agrees with the LA and the CA that respondent was forced to
Reconsideration filed with the NLRC, they may be considered by this Court in light of Section resign and was, thus, constructively dismissed. In Duldulao v. Court of Appeals, it was written:
10, Rule VII, of the 2005 New Rules of Procedure of the NLRC, which provides in part that the
There is constructive dismissal if an act of clear discrimination,
rules of procedure and evidence prevailing in courts of law and equity shall not be insensibility, or disdain by an employer becomes so unbearable on the part
controlling and the Commission shall use every and all reasonable means to ascertain the of the employee that it would foreclose any choice by him except to forego
his continued employment. It exists where there is cessation of work
facts in each case speedily and objectively, without regard to technicalities of law or because continued employment is rendered impossible, unreasonable or
procedure, all in the interest of due process. While administrative tribunals exercising quasi- unlikely, as an offer involving a demotion in rank and a diminution in
pay. [25]
judicial functions are free from the rigidity of certain procedural requirements, they are
bound by law and practice to observe the fundamental and essential requirements of due
process in justiciable cases presented before them.[23] In this case, due process was afforded
petitioners as respondent filed with the NLRC a Motion to Set Case for Reception of What made it impossible, unreasonable or unlikely for respondent to continue
Additional Evidence as regards the said letters, which petitioners had the opportunity to, and working for SHS was the unlawful withholding of his salary. For said reason, he was forced to
did, oppose. resign. It is of no moment that he served his resignation letter on November 30, 2005, the
last day of the payroll period and a non-working holiday, since his salary was already due
Although it cannot be determined with certainty whether respondent worked for him on November 29, 2005, being the last working day of said period. In fact, he was then
the entire period from November 16 to November 30, 2005, the consistent rule is that if informed that the wages of all the other SHS employees were already released, and only his
doubt exists between the evidence presented by the employer and that by the employee, the was being withheld. What is significant is that the respondent prepared and served his
scales of justice must be tilted in favor of the latter[24] in line with the policy mandated by resignation letter right after he was informed that his salary was being withheld. It would be
Articles 2 and 3 of the Labor Code to afford protection to labor and construe doubts in favor absurd to require respondent to tolerate the unlawful withholding of his salary for a longer
of labor. For petitioners failure to satisfy their burden of proof, respondent is presumed to period before his employment can be considered as so impossible, unreasonable or unlikely
have worked during the period in question and is, accordingly, entitled to his salary. as to constitute constructive dismissal. Even granting that the withholding of respondents
Therefore, the withholding of respondents salary by petitioners is contrary to Article 116 of salary on November 30, 2005, would not constitute an unlawful act, the continued refusal to
the Labor Code and, thus, unlawful. release his salary after the payroll period was clearly unlawful. The petitioners claim that
they prepared the check ready for pick-up cannot undo the unlawful withholding.
Petitioners contend that respondent could not have been constructively dismissed
because he voluntarily resigned as evidenced by his resignation letter. They assert that It is worthy to note that in his resignation letter, respondent cited petitioners illegal
respondent was not forced to draft the letter and his intention to resign is clear from the and unfair labor practice[26] as his cause for resignation. As correctly noted by the CA,
contents and terms used, and that given respondents professional and educational respondent lost no time in submitting his resignation letter and eventually filing a complaint
for illegal dismissal just a few days after his salary was withheld. These circumstances are reinstatement.[29] Respondent is, thus, entitled to reinstatement without loss of seniority
inconsistent with voluntary resignation and bolster the finding of constructive dismissal. rights and other privileges as well as to full backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed from the time his compensation was
Petitioners cite the case of Solas v. Power & Telephone Supply Phils., Inc.[27] to support withheld up to the time of actual reinstatement. Respondent, however, is not entitled to the
their contention that the mere withholding of an employees salary does not by itself additional amount for 13th month pay, as it is clearly provided in respondents Probationary
constitute constructive dismissal. Petitioners are mistaken in anchoring their argument on Contract of Employment that such is deemed included in his salary. Thus:
said case, where the withholding of the salary was deemed lawful. In the above-cited case,
the employees salary was withheld for a valid reason - it was applied as partial payment of a EMPLOYEE will be paid a net salary of One Hundred Thousand
(Php100,000.00) Pesos per month payable every 15th day and end of the
debt due to the employer, for withholding taxes on his income and for his absence without month.
leave. The partial payment of a debt due to the employer and the withholding of taxes on
The compensation package defined in this paragraph shall represent all that
income were valid deductions under Article 113 paragraph (c) of the Labor Code. The is due and demandable under this Contract and includes all benefits required
deduction from an employees salary for a due and demandable debt to an employer was by law such as the 13th month pay. No other benefits, bonus or allowance shall
be due the employee. [30]
likewise sanctioned under Article 1706 of the Civil Code. As to the withholding for income
(emphasis supplied)
tax purposes, it was prescribed by the National Internal Revenue Code. Moreover, the
employee therein was indeed absent without leave.
Respondents reinstatement, however, is no longer feasible as antagonism has
caused a severe strain in their working relationship. Under the doctrine of strained relations,
In this case, the withholding of respondents salary does not fall under any of the
the payment of separation pay is considered an acceptable alternative to reinstatement
circumstances provided under Article 113. Neither was it established with certainty that
when the latter option is no longer desirable or viable. Payment liberates the employee from
respondent did not work from November 16 to November 30, 2005. Hence, the Court agrees
what could be a highly oppressive work environment, and at the same time releases the
with the LA and the CA that the unlawful withholding of respondents salary amounts to
employer from the obligation of keeping in its employ a worker it no longer trusts.Therefore,
constructive dismissal.
a more equitable disposition would be an award of separation pay equivalent to at least one
month pay, in addition to his full backwages, allowances and other benefits. [31]
Respondent was constructively dismissed and, therefore, illegally
dismissed. Although respondent was a probationary employee, he was still entitled to With respect to the personal liability of Hartmannshenn and Schumacher, this Court
security of tenure.Section 3 (2) Article 13 of the Constitution guarantees the right of all has held that corporate directors and officers are only solidarily liable with the corporation
workers to security of tenure. In using the expression all workers, the Constitution puts no for termination of employment of corporate employees if effected with malice or in bad
distinction between a probationary and a permanent or regular employee. This means that faith.[32] Bad faith does not connote bad judgment or negligence; it imports dishonest
probationary employees cannot be dismissed except for cause or for failure to qualify as purpose or some moral obliquity and conscious doing of wrong; it means breach of unknown
regular employees.[28] duty through some motive or interest or ill will; it partakes of the nature of fraud. [33] To
sustain such a finding, there should be evidence on record that an officer or director acted
This Court has held that probationary employees who are unjustly dismissed during
maliciously or in bad faith in terminating the employee.[34]
the probationary period are entitled to reinstatement and payment of full backwages and
other benefits and privileges from the time they were dismissed up to their actual
Petitioners withheld respondents salary in the sincere belief that respondent did not based in Tabuk City, Kalinga. It is engaged in the business of obtaining investments from its
members which are lent out to qualified member-borrowers. Petitioner Josephine Doctor is
work for the period in question and was, therefore, not entitled to it. There was no dishonest TAMPCO Chairperson and member of the cooperative's BOD, while petitioner William, Bao-
purpose or ill will involved as they believed there was a justifiable reason to withhold his Angan is TAMPCO Chief Executive Officer.
salary. Thus, although they unlawfully withheld respondents salary, it cannot be concluded Respondent Magdalena Duclan was employed as TAMPCO Cashier on August 15, 1989, In
that such was made in bad faith. Accordingly, corporate officers, Hartmannshenn and 2002, TAMPCO introduced Special Investment Loans (SILs) to its members and prospective
borrowers. Among those who availed themselves of the SILs were Brenda Falgui (Falgui) and
Schumacher, cannot be held personally liable for the corporate obligations of SHS.
Juliet Kotoken (Kotoken).6

In June 2003, the TAMPCO BOD issued Board Action (BA) No. 28 which limited the grant of
WHEREFORE, the assailed December 23, 2008 Decision of the Court of Appeals in SILs to P5 million and instructed management to collect outstanding loans and thus reduce
CA-G.R. SP No. 100015 is hereby AFFIRMED with MODIFICATION. The additional amount the amount of loans granted to allowable levels. This was prompted by a cooperative report
stating that too many SILs were being granted, the highest single individual borrowing
for 13th month pay is deleted. Petitioners Winfried Hartmannshenn and Hinrich Johann
reached a staggering P14 million, which thus adversely affected the cooperative's ability to
Schumacher are not solidarily liable with petitioner SHS Perforated Materials, Inc. grant regular loans to other members of the cooperative. 7However, despite said board
action, SILs were granted to Falgui and Kotoken over and above the ceiling set. This
prompted the BOD to issue, on October 26, 2003, BA No. 55 completely halting the grant of
SO ORDERED. SILs pending collection of outstanding loans.

---------------------------X Despite issuance of BA No. 55, however, additional SILs were granted to Falgui amounting to
P6,697,000.00 and to Kotoken amounting to P3.5 million.8 Eventually, Falgui filed for
insolvency while Kotoken failed to pay back her loans.
TABUK MULTI-PURPOSE COOPERATIVE, INC. (TAMPCO), JOSEPHINE DOCTOR, AND
On February 23, 2004, TAMPCO indefinitely suspended respondent and other cooperative
WILLIAM BAO-ANGAN, Petitioners, v. MAGDALENA DUCLAN, Respondent.
officials pursuant to BA No. 73-03, and required them to replace the amount of P6 million
representing unpaid loans as of February 21, 2004. On March 6, 2004, respondent's
DECISION suspension was fixed at 15 days, and she was ordered to return to work on March 15, 2004.

DEL CASTILLO, J.: The TAMPCO BOD then created a fact-finding committee (committee) to investigate the SIL
fiasco.9Respondent and other TAMPCO employees were summoned to the proceedings and
An employee's willful and repeated disregard of a resolution issued by a cooperative's board required to submit their respective answers to the committee. 10
of directors (BOD) declaring a moratorium on the approval and release of loans, thus placing
the resources of the cooperative and ultimately the hard-earned savings of its members in a Respondent submitted to the committee an October 21, 2004 letter, 11 admitting that despite
precarious state, constitutes willful disobedience which justifies the penalty of dismissal the issuance of BA No. 55, she and her co-respondents approved and released SILs, and that
under Article 282 of the Labor Code. she acknowledged responsibility therefor.

Assailed in this Petition for Review on Certiorari1 are: 1) the September 15, 2011 After conducting hearings, the committee issued its Report on the Special Investment
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 114753, which reversed and set Loans,12 which states as follows:
aside the November 25, 2009 Decision3 and April 8, 2010 Resolution4 of the National Labor
Relations Commission (NLRC) in NLRC CA-No. 050848-06 (RA-06-09); and 2) the CA's July xxxx
11, 2012 Resolution5 denying reconsideration of its assailed Decision. a. There are loan notes which do not contain the signature of the spouse of the borrower as
mandated under Chapter 10 of the Policy Manual. This is true in the loan notes of Monica
Factual Antecedents Oras, and Juliet Kotoken for her loan application sometime on [sic] January 12, 2004;

Petitioner Tabuk Multi-Purpose Cooperative, Inc. (TAMPCO) is a duly registered cooperative b. Special loans were still granted even after the setting of the allowable ceiling on June 28,
2003 (BA No. 28) and even after the Board of Directors stopped the granting of the Special her to collect the SIL she [had] released even without the loan note and for her to account
Investment Loan on October 26, 2003 (BA No. 55); [for] or pay the missing value of the check bearing no. 00115533 in the amount of
P1,500,000.00 [by] Dec. 31, 2004.
c. Loans were released even there [sic] were lacking documents. The case of the SIL granted
for example to Mrs. Juliet Kotoken and Mrs. Brenda Falgui on January 12, 2004 were [For failure] to collect or account/pay [by then she] shall be [dismissed] from service with
released even without the required loan note. It was revealed that Mr. Peter Socalo prepared forfeiture of all benefits.
the voucher and Mrs. Aligo did the releasing of the amount upon the conformity of Mrs.
Magdalena Duclan. The loan notes were made and executed later after the loans were also She violated policies and Board actions, specially 28 and 55 in relation to the
released; manual.13ChanRoblesVirtualawlibrary
On November 6, 2004. the BOD adopted the report of the committee and ordered that
d. Checks used to secure or postdated checks intended to pay the Special Investment loans
respondent be suspended from November 8 until December 31, 2004; respondent was
were not presented for payment at the time that they fall [sic] due; likewise directed to collect, within the said period, the unauthorized SIL releases she made,
otherwise she would be terminated from employment.14
e. Extension of the term of the loan were done through the substitution of the checks without
prior approval of the Board of Directors. Unable to collect or account for the P1.5 million as required, respondent was dismissed from
employment. Thus, in a February 1, 2005 communication,15 TAMPCO wrote:
All the above findings were not denied and in fact respondents CEO Rev. Ismael Sarmiento
chanRoblesvirtualLawlibrary
admitted the charge against him. "Mea Culpa" x x x he said[,] but at the same time prayed for
Anent your letter dated January 26, 2005, reiterating your plea for a reconsideration of your
the Committee's and Board's understanding and compassion, Magdalena Duclan and Fruto suspension for the reason that you were suspended twice on different days for the
Singwey admitted [their fault under] command responsibility for the action of their
commission of the same offense, the following quoted paragraph was lifted from lines 339
subordinates.
through 350 of the minutes of the regular meeting of the TAMPCO BOD held on November
27, 2004, treating the matter of your concern for your information, to wit:
All the other respondents invoked that they just [performed] their duties [or be charged
chanRoblesvirtualLawlibrary
with] insubordination x x x.
"x x x CEO Sarmiento and Cashier Duclan [requested] reconsideration of their suspension
pointing out that they are being suspended twice for the same offense, The Board denied the
To the issue of the missing check which was raised by Mr. Dulawon in the previous Board
request, clarifying that the basis for the second suspension is the discovery of the release of cash
meetings, the committee heard again the side of the cashier [who] denied that tine same is
to the SIL recipient without first accomplishing the corresponding loan note and which action
missing. Accordingly, the same was changed by Mrs. Brenda Falgui, or that a substitute check is. contrary to the established processes. It was mentioned that such violation is punishable by
was issued by Mrs. Falgui. She [had a] conflicting statement before the Board when she outright dismissal but the policy was humanized with the imposition only of suspension to the
stated that the amount belongs to Juliet's account.
violators to give them ample time to collect the unauthorized disbursement. x x x [The first]
suspension was lifted because their services were urgently needed in the distribution of
CONCLUSION: dividends and patronage refunds. The Board decided to stand by its decision based on the
recommendation of the fact-finding committee."
There was indeed an error, mistake, negligence or abuse of discretion that transpired in the
[For] failure to comply with the tasks required x x x within the effectivity period of your
grant of the special investment loans, x x x [T]here are violations of the policies or Board suspension as set under Office Orders numbered 001-04 and 002-04, both dated November
actions which should be dealt with[.] x x x.
6, 2004, the Board, during its January 29, 2005 regular meeting, decided to terminate your
services xxx effective as of the closing of office hours on February 1, 2005.
RECOMMENDATIONS: Ruling of the Labor Arbiter
AS TO THE ACCOUNTABILITY
On July 12, 2005, respondent filed a complaint for illegal dismissal, with recovery of
backwages; unpaid holiday pay; premium and 13th month pay; moral, exemplary and actual
x x x x damages; and attorney's fees, against respondents which was docketed in the NLRC RAB,
Cordillera Administrative Region, Bagiuo City as NLRC Case No. RAB-CAR-07-Q344-05 (R-
Mrs. Magdalena Duclan
11-08).
The committee recommended that she will be immediately suspended without pay and for
On April 24, 2009, Labor Arbiter Monroe C, Tabingan issued a Decision 16 in the case, ministerial; she has no hand in the processing or approval of the loans; j) TAMPCO had
decreeing as follows: previously tolerated the practice of releasing loans ahead of the processing of vouchers and
chanRoblesvirtualLawlibrary board approval and during the prohibited period; and k) petitioners did not terminate
WHEREFORE, all premises duly considered, the respondent is hereby found to have illegally respondent's co-workers who were charged with committing the same infraction. 18
suspended, then illegally dismissed the herein complainant. In view of the fact that this
decision was a collective act of the Board of Directors and Officers of the respondent, they, as Ruling of the National Labor Relations Commission
well as the respondent Cooperative, are hereby jointly and severally held liable to pay to the
complainant the following: Petitioners filed an appeal before the NLRC, which was docketed as NLRC CA-No. 050848-06
(RA-06-09). On November 25, 2009, the NLRC issued its Decision19 containing the following
1. Her full backwages from the time of her illegal suspension beginning 24 February pronouncement:
2004 to 15 March 2004, and her illegal dismissal from 08 November 2004 to the
finality of this Decision, with legal rate of interest thereon until fully paid, currently Anent respondent's first suspension, the NLRC noted that petitioners already modified the
computed at PhP1,188,283.30, subject to re-computation at the time of the payment period from being indefinite to only 15 days and that respondent was properly paid her
of said monetary claim; wages corresponding to said period of suspension. Thus, there was no need to discuss the
validity of said suspension. Regarding the second suspension from November 8 to December
xxxx 31, 2004, the NLRC found the same as illegal considering that it was imposed as a penalty
and not as a preventive suspension pending investigation of her administrative liability. In
2. Her separation pay in lieu of reinstatement of one (1) month pay for every year of fact, during her suspension, she was ordered to collect the loan illegally released. However,
service beginning at the time of her initial date of hiring, to the finality of this as regards her dismissal from service, the NLRC found the same as valid and for cause. The
decision, with legal rate of interest thereon until fully paid, currently computed at NLRC opined that respondent was notified of the investigation to be conducted by the Fact-
PhP405,002.40, said interest subject to re-computation at the time of the payment; Finding Committee; the notice apprised her that she was being charged with: (1) violation of
BA No. 55 stopping the giving of SILs; (2) violation of BA No. 28 limiting the individual grant
xxxx of SIL to P5 million; and (3) violation of lending policies requiring the consent of spouse in
the granting of loans. Respondent was given the opportunity to answer the charges against
3. Moral damages in the amount of PhP100,000.00 and exemplary damages in the her. In fact, she admitted having released SILs despite the board resolution discontinuing the
amount of PhP100,000.00; same. Despite this admission, petitioners continued with the investigation and found the
following infractions to have been committed by respondent:
4. Her attorney's fees of not less than ten (10%) per centum of the total monetary chanRoblesvirtualLawlibrary
award hereto awarded, currently computed at P159,329.07, subject to re- 1. There were loan notes which did not contain the signature of the borrower's spouse as
computation at the time of payment. mandated by the Policy Manual of the Cooperative;

2. SILs were still granted even after the BOD passed BR Nos. 28 and 55 which limited the
SO ORDERED.17ChanRoblesVirtualawlibrary
ceiling of SILs to be granted and even subsequently stopping the grant of the said loan;
In ruling that respondent was illegally dismissed, the Labor Arbiter made the following
findings: a) respondent's first suspension was for an indefinite period, hence illegal; b)
3. Loans were released even [when] there [were] documents [missing]. The cases of Ms.
respondent was not accorded the opportunity to explain her side before she was meted the
Kotoken and Falgui were cited where their loans were released despite the absence of loan
penalty of suspension; c) placing respondent on suspension and requiring her to personally
notes;
pay the loan is not the proper way to collect irregularly released loans; d) although
respondent's indefinite suspension was eventually reduced to 15 days, by that time
4. [Post-dated] checks used to secure the SlLs were not presented at the time they fell due;
respondent was suspended for 20 days already; e) respondent was deprived of the
and
opportunity to explain her side when she was suspended the second time on November 8,
2004 to December 31, 2004; f) the second suspension was illegal because it was beyond 30
5. Extension of the term of the loans [was] done through substitution of checks without prior
days; g) respondent was suspended twice for the same infraction; h) the February 1, 2005
approval of the BOD.20ChanRoblesVirtualawlibrary
letter informing respondent of her termination is redundant since respondent has been
According to the NLRC, the Fact-Finding Committee discovered that respondent unilaterally
deemed constructively dismissed as early as February 23, 2004 when she was indefinitely
altered the terms of the loan by extending the dates of maturity of checks which secured the
suspended; i) as cashier, respondent's signing of the check before its release is merely
loans and that she reported a partial payment, by way of two (2) checks, of the loan of
Kotoken in the amount of P3 million although the subject checks were not yet encashed. infraction; that the exoneration of her co-respondents - notably the General Manager - who
Worse, the checks were later dishonored when presented for payment. was allowed to retire, given a "graceful exit" from the cooperative, honorably discharged,
allowed to collect his benefits in full, and given a certification to the effect that he did not
As observed by the NLRC, respondent failed to refute the above findings. In fact, she commit any violation of the cooperative's policies, rules, and regulations - constitutes
admitted having released SILs despite knowledge of board resolutions discontinuing the discrimination, favoritism, evident bad faith, and a violation of her constitutional right to
grant of SILs and despite the fact that the borrower concerned had exceeded the allowable equal protection; and that the Labor Arbiter's decision is entirely correct and should be
ceiling. given full credence and respect.

The NLRC did not give credence to respondent's assertion that as a mere cashier, she has no In their Comment24 seeking dismissal of the Petition, petitioners contended that the Petition
discretion at all on the approval of the loans. The NLRC opined that respondent was the was filed to cover up for a lost appeal; that no reversible error is evident; that contrary to
custodian of the entire funds of TAMPCO and also an honorary member of the BOD, advising respondent's claim, her position as cashier is the "lifeblood and very existence of the
the latter on financial matters. The NLRC also held that the release of funds is not purely Cooperative" since she was the "key to the vault and the dispenser of the Cooperative's
ministerial as respondent was expected to check all the supporting documents and whether fund"; that respondent is responsible and accountable for all disbursements because before
pertinent policies regarding the loan had been met by the applicant. the release of the loan proceeds, she must ensure that all the processes and necessary
documents are duly complied with and tibere are no violations of any of the cooperative's
For the NLRC, respondent's transgressions were deliberate infractions of clear and policies and rules; that she is likewise responsible for the collection activities of the
mandatory policies of TAMPCO amounting to gross misconduct. cooperative and the coordination thereof, as required under her job description; that
respondent was customarily appointed by the BOD as its adviser and treasurer - being so,
The dispositive portion of the NLRC Decision reads: she very well knew of its policies; that as cashier, her signature to the checks were required
chanRoblesvirtualLawlibrary prior to the release thereof to the SIL borrowers - thus, she is liable for signing these checks
WHEREFORE, premises considered, the appeal of respondents is GRANTED. The Decision of and releasing them to the borrowers in disregard of BA No. 55 prohibiting the further
the Labor Arbiter dated April 24, 2009 is hereby REVERSED AND SET ASIDE, and a new one release of loans pending collection of those outstanding; that there is no favoritism or
is hereby rendered DISMISSING the above-entitled complaint for lack of merit. Respondent discrimination when the former General Manager was allowed a graceful exit while
Tabuk Multi-Purpose Cooperative, Inc., is, however, ordered to pay complainant's wages for respondent was dismissed, as the decision to allow the former to retire and collect his
the period of November 8 to December 31, 2004. benefits is a management prerogative that respondent cannot interfere with; and that
ultimately, respondent was dismissed not for her failure to collect the outstanding loans, but
SO ORDERED.21ChanRoblesVirtualawlibrary for her violation of the cooperative's policies (BA Nos. 28 and 55); that in dismissing her, due
Respondent moved to reconsider. However, in a Resolution dated April 8, 2010, the NLRC process was observed.
held its ground.22
On September 15, 2011, the CA issued the herein assailed Decision, decreeing as follows:
Ruling of the Court of Appeals chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the Decision of the NLRC dated 25 November 2009 is
In a Petition for Certiorari23 filed with the CA and docketed therein as CA-G.R. SP No. 114753, hereby REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated 24 April 2009 in
respondent sought to set aside the NLRC dispositions and reinstate the Labor Arbiter's NLRC Case No. RAB-CAR-07-0344-05 (R-11-18) is hereby REINSTATED.
judgment, arguing that she had no discretion in the release of the SILs; that she was not an
ex-officio member of the cooperative's BOD; that while she committed a violation of the SO ORDERED.25ChanRoblesVirtualawlibrary
cooperative's policies, she should be accorded clemency just as her co-respondents were The CA held that respondent's dismissal was illegal; that she was not guilty of violating her
pardoned and allowed to collect their benefits; that she did not commit gross misconduct, as duties and responsibilities as Cashier; that she was under the supervision of the
she was not solely responsible for the prohibited release of the SILs to Kotoken and Falgui, cooperative's Finance and Credit Managers, who are primarily responsible for the approval
since they were previously approved by the loan investigator, the Credit Committee, and the of loan applications; that as Cashier, she was a mere co-signatory of check releases and
General Manager prior to their release; that petitioners did not properly observe the twin- simply acts as a "check and balance on the power and authority of the General Manager;"
notice rule prior to her dismissal, as she was not given any notice to present her side - that she does not exercise discretion on the matter of SILs - specifically the assessment,
instead, she was dismissed outright when she failed to collect and return the amount she recommendation, approval and granting thereof; that only the Loan Officers, as well as the
disbursed via the SILs; that there is no just cause for her dismissal; that her length of service Credit, Finance, and General Managers, have a direct hand in the evaluation, assessment and
(15 years) and her unblemished record with the cooperative should merit the setting aside approval of SEL applications, including their required attachments/documents; that while
of her dismissal, and instead, her previous suspensions should suifice as a penalty for her the questioned SILs were released without the approval of the BOD, such practice was
sanctioned and had been adopted and tolerated within TAMPCO ever since; that it is unjust willful disobedience, justifying dismissal under Article 282 of the Labor Code; 32that while the
to require respondent to pay the amounts released to SEL borrowers but which could no Credit and General Managers possessed discretion in the evaluation and approval of SIL
longer be collected; that it was unfair to condemn and punish respondent for the anomalies, applications, respondent as Cashier was still accountable as she was duty-bound to check
while her corespondents, particularly the former General Manager, was given a graceful exit, that the release of the loan amounts was proper and done in accordance with the
honorably discharged, and was even allowed to collect his retirement benefits in full; that cooperative's rules and policies; and that there is no basis to suppose that respondent was
respondent's suspension from November 8 to December 31, 2004 was illegal; and that unfairly treated, since all those found responsible for the SIL fiasco were dismissed from
petitioners failed to comply with the twin-notice rule prior to her dismissal. service after their respective cases were individually considered and accordingly treated
based on the infractions committed.
Petitioners filed a Motion for Reconsideration,26 but the CA denied the same in its July 11,
2012 Resolution. Hence, the present Petition. Respondent's Arguments

In a November 11, 2013 Resolution,27 this Court resolved to give due course to the Petition. In her Comment,33 respondent counters that the Petition fails to present any cogent
argument that warrants reversal of the assailed CA dispositions; that on the contrary, the CA
On March 19, 2014, petitioners filed an Urgent Motion 28 seeking injunctive relief to enjoin correctly upheld her rights to security of tenure and due process; that there was no valid
the execution of judgment. In a March 24, 2014 Resolution,29 the motion was denied. cause to dismiss her; that as Cashier, she had no power to approve SIL applications, but only
release the loan amounts after the applications are evaluated and approved by the Credit
Issues Manager, and under the supervision of the Finance Manager; and that the respective
decisions of the CA and the Labor Arbiter are correct on all points and must be upheld.
Petitioners submit the following issues for resolution:
chanRoblesvirtualLawlibrary Our Ruling
1. WHETHER THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD TO REVERSE
THE DECISION OF THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION The Court grants the Petition.
THEREBY AFFIRMING THE DECISION OF THE HONORABLE LABOR ARBITER.
Under Article 282 of the Labor Code, the employer may terminate the services of its
2. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN employee for the latter's serious misconduct or willful disobedience of its or its
IT DID NOT CONSIDER THE EVIDENCE OF THE PETITIONERS AS IT RULED THAT THE representative's lawful orders. And for willful disobedience to constitute a ground, it is
RESPONDENT WAS REMOVED IN VIOLATION OF THE TWO-NOTICE RULE AND THAT required that: "(a) the conduct of the employee must be willful or intentional; and (b) the
THERE IS NO JUST CAUSE FOR HER REMOVAL. order the employee violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties that he had been engaged to discharge. Willfulness
3. WHETHER THE HONORABLE COURT OF APPEALS PATENTLY COMMUTED A GRAVE must be attended by a wrongful and perverse mental attitude rendering the employee's act
ERROR WHEN IT RULED THAT THE JOB OF THE RESPONDENT MAGDALENA DUCLAN inconsistent with proper subordination, hi any case, the conduct of the employee that is a
INCLUDES CHECK AND BALANCE AND YET IT CONCLUDED THAT HER FUNCTION IS valid ground for dismissal under the Labor Code constitutes harmful behavior against the
MERELY MINISTERIAL. THUS, SHE CANNOT BE HELD ACCOUNTABLE FOR HER [CONDUCT]. business interest or person of his employer. It is implied that in every act of willful
disobedience, the erring employee obtains undue advantage detrimental to the business
4. WHETHER THE HONORABLE COURT OF APPEALS ERRED WHEN IT ACTED ON THE interest of the employer."34
PETITION FOR CERTIORARI (RULE 65) FILED BY THE RESPONDENT DESPITE THE FACT
THAT THE PROPER REMEDY SHOULD [HAVE] BEEN X X X A PETITION FOR REVIEW ON The persistent refusal of the employee to obey the employer's lawful order amounts to
CERTIORARI.30ChanRoblesVirtualawlibrary willful disobedience.35 Indeed, "[o]ne of the fundamental duties of an employee is to obey all
Petitioners' Arguments reasonable rules, orders and instructions of the employer. Disobedience, to be a just cause
for termination, must be willful or intentional, willfulness being characterized by a wrongful
Praying that the assailed CA pronouncements be set aside and that the NLRC judgment be and perverse mental attitude rendering the employee's act inconsistent with proper
reinstated instead, petitioners essentially argue in their Petition and Reply 31 that due subordination. A willful or intentional disobedience of such rule, order or instruction
process was observed in the dismissal of respondent; that there was just and valid cause to justifies dismissal only where such rule, order or instruction is (1) reasonable and lawful, (2)
dismiss her, as she violated the cooperative's policies and board resolutions limiting and sufficiently known to the employee, and (3) connected with the duties which the employee
subsequently prohibiting the grant and release of SILs - which actions jeopardized has been engaged to discharge."36
TAMPCO's financial position; that respondent's actions constituted serious misconduct and
As TAMPCO Cashier, respondent was, among her other designated functions and duties, upon approval of the applications.
responsible and accountable for all disbursements of cooperative funds and the coordination
of delinquency control and collection activities.37 She was likewise expected to understand The Court likewise finds that in dismissing respondent, petitioners observed the
the cooperative's operational procedures,38 and of course, follow its rules, regulations, and requirements of due process. An investigation was conducted by a fact-finding committee;
policies. respondent and her colleagues were summoned and required to explain - and they did;
respondent submitted an October 21, 2004 letter acknowledging and confessing her
A year after introducing the SIL program, TAMPCO realized that a considerable amount of wrongdoing - that despite BA No. 55, she and her colleagues continued to approve and
the cooperative's loanable funds was being allocated to SILs, which thus adversely affected release SILs. After the investigation proceedings, the committee prepared a detailed Report
its ability to lend under the regular loan program. It further discovered that single individual of its findings and containing a recommendation to suspend the respondent, require her to
borrowings under the SIL program reached precarious levels, thus placing the resources of restore the amounts she wrongly disbursed - by collecting the credits herself, and in the
the cooperative at risk. Thus, in June 2003, the TAMPCO BOD issued BA No. 28, putting a cap event of failure to restore the said amounts, she would be dismissed from the service. The
on SIL borrowings at P5 million. In October of the same year, BA No. 55 was issued, Report was approved and adopted by the cooperative's BOD, which resolved to suspend
completely prohibiting the grant of SILs. However, despite issuance of BA Nos. 28 and 55, respondent from November 8 until December 31, 2004 and ordered her to collect, within the
respondent and the other officers of the cooperative including its former General Manager, said period, the unauthorized SIL releases she made; otherwise, she would be terminated
continued to approve and release SILs to borrowers, among them Falgui and Kotoken, who from employment. When respondent failed to restore the amounts in question, the BOD
received millions of pesos in loans in January and December of 2004, and in January 2005. ordered her dismissal from employment. Respondent was informed of her dismissal in a
Eventually, Falgui claimed insolvency, and Kotoken failed to pay back her loans. February 1, 2005 communication addressed to her; this is the second of the twin notices
required by law. Thus, as to respondent, the cooperative observed the proper procedure
The CA failed to consider that in releasing loan proceeds to SIL borrowers like Falgui and prior to her dismissal.
Kotoken even after the BOD issued BA Nos. 28 and 55, respondent, and the other cooperative In termination proceedings of employees, procedural due process consists of the twin
officers, willfully and repeatedly defied a necessary, reasonable and lawful directive of the requirements of notice and hearing. The employer must furnish the employee with two
cooperative's BOD, which directive was made known to them and which they were expected written notices before the termination of employment can be effected: (1) the first apprises
to know and follow as a necessary consequence of their respective positions in the the employee of the particular acts or omissions for which his dismissal is sought; and (2)
cooperative. They placed the resources of the cooperative - the hard-earned savings of its the second informs the employee of the employer's decision to dismiss him. x x
members - in a precarious state as a result of the inability to collect the loans owing to the x39ChanRoblesVirtualawlibrary
borrowers' insolvency or refusal to honor their obligations, Respondent committed gross During the proceedings below, respondent questioned the cooperative's decision requiring
insubordination which resulted in massive financial losses to the cooperative. Applying her to collect the credits from Falgui and/or Kotoken, claiming this was illegal and improper.
Article 282, her dismissal is only proper. But there is nothing wrong in requiring her to do so; this is simply ordering her to restore
the amounts she unlawfully released. She may do so in any way she deemed best: either by
Respondent cannot pretend to ignore the clear mandate of BA Nos. 28 and 55 and justify her paying the amounts from her own funds, or by collecting the same from the borrowers
actions in releasing the loan proceeds to borrowers by claiming that she had no choice but to themselves. The cooperative could have rephrased its directive to her by simply ordering her
release the loan proceeds after the SIL loan applications were evaluated and approved by the to restore the lost amounts. This is pretty much standard procedure in cases of this nature:
loan investigator, the Credit Committee, and the General Manager. These officers were the accused in malversation cases is required to restore the amount lost, and bank tellers or
themselves bound to abide by BA Nos. 28 and 55 - they, just as respondent, are subordinate cashiers are told to pay back what the banks lose through their willful or negligent acts.
to the TAMPCO BOD. Pursuant to the Philippine Cooperative Code of 2008, or Republic Act
No. 9520, TAMPCO's BOD is entrusted with the management of the affairs of the cooperative There is also nothing irregular in the cooperative's decision to require from respondent and
(Article 5 [3]); the direction and management of the cooperative's affairs shall be vested in her colleagues the collection or restoration of the amounts that were illegally released, with
the said board (Article 37); and it shall be responsible for the strategic planning, direction- a threat that in case of failure to do so, they would be dismissed from employment.
setting and policy-formulation activities of the cooperative (Article 38). Respondent and her colleagues were simply given the opportunity to clear themselves from
the serious infractions they committed; their failure to restore the amounts lost in any
Just the same, respondent could have simply refused to release the loan proceeds even if the manner could not prevent the imposition of the ultimate penalty, since their commission of
loan applications were duly approved. Had she done so, she would have been excluded from the serious offense has been adequately shown. In fact, respondent voluntarily confessed her
the indictments. She would have continued with her employment. In this regard, the CA crime. To the mind of the Court, respondent and her colleagues were afforded ample
erred completely in declaring that only the Loan Officers, as well as the Credit, Finance, and opportunity to clear themselves and thus restore the confidence that was lost, and TAMPCO
General Managers are primarily responsible since only they exercised discretion over SIL was not precluded from testing their resolve.
applications, and respondent had no choice but to perfunctorily release the loan proceeds
Finally, while the CA finds that it is unfair for TAMPCO to treat respondent differently from The Factual and Procedural
the former General Manager, who was permitted to retire and collect his benefits in full, the
appellate court must nonetheless be reminded that "[t]he law protects both the welfare of Antecedents
employees and the prerogatives of management. Courts will not interfere with prerogatives
of management on the discipline of employees, as long as they do not violate labor laws, The factual and procedural antecedents have been accurately recited in the May 24, 2011 CA
collective bargaining agreements if any, and general principles of fairness and decision as follows:
justice."40 Moreover, management is not precluded from condoning the infractions of its
employees; as with any other legal right, the management prerogative to discipline
employees and impose punishment may be waived. 41 As far as respondent is concerned, the Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in
cooperative chose not to waive its right to discipline and punish her; this is its privilege as the manufacture, sale and distribution of softdrink products. It has several bottling plants all
the holder of such right. Finally, it cannot be said that respondent was discriminated against over the country, one of which is located in Cebu City. Under the employ of each bottling
or singled out, for among all those indicted, only the former General Manager was accorded plant are bottling operators. In the case of the plant in Cebu City, there are 20 bottling
leniency; the rest, including respondent, were treated on equal footing. As to why the former operators who work for its Bottling Line 1 while there are 12-14 bottling operators who man
General Manager was allowed to retire, this precisely falls within the realm of management its Bottling Line 2. All of them are male and they are members of herein respondent Royal
prerogative; what matters, as far as the Court is concerned, is that respondent was not Plant Workers Union (ROPWU).
singled out and treated unfairly.chanrobleslaw
The bottling operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the
WHEREFORE, the Petition is GRANTED. The assailed September 15, 2011 Decision and July second shift is from 5 p.m. up to the time production operations is finished. Thus, the second
11, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 114753 shift varies and may end beyond eight (8) hours. However, the bottling operators are
are REVERSED and SET ASIDE. The November 25, 2009 Decision of the National Labor compensated with overtime pay if the shift extends beyond eight (8) hours. For Bottling Line
Relations Commission in NLRC CA-No. 050848-06 (RA-06-09) 1, 10 bottling operators work for each shift while 6 to 7 bottling operators work for each
is REINSTATED and AFFIRMED. shift for Bottling Line 2.

SO ORDERED.cralawlawlibrary Each shift has rotations of work time and break time. Prior to September 2008, the rotation
----------------------------------X is this: after two and a half (2 ½) hours of work, the bottling operators are given a 30-minute
break and this goes on until the shift ends. In September 2008 and up to the present, the
rotation has changed and bottling operators are now given a 30-minute break after one and
G.R. No. 198783 April 15, 2013 one half (1 ½) hours of work.

ROYAL PLANT WORKERS UNION, Petitioner, In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their
vs. request. In 1988, the bottling operators of then Bottling Line 1 followed suit and asked to be
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT, Respondent. provided also with chairs. Their request was likewise granted. Sometime in September 2008,
the chairs provided for the operators were removed pursuant to a national directive of
DECISION petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program of
petitioner for bottling operators, wherein every bottling operator is given the responsibility
to keep the machinery and equipment assigned to him clean and safe. The program
MENDOZA, J.: reinforces the task of bottling operators to constantly move about in the performance of
their duties and responsibilities.
Assailed in this petition is the May 24, 2011 Decision1 and the September 2, 2011
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers With this task of moving constantly to check on the machinery and equipment assigned to
Philippines, Inc.-Cebu Plant v. Royal Plant Workers Union, which nullified and set aside the him, a bottling operator does not need a chair anymore, hence, petitioner’s directive to
June 11, 2010 Decision3 of the Voluntary Arbitration Panel (Arbitration Committee) in a case remove them. Furthermore, CCBPI rationalized that the removal of the chairs is
involving the removal of chairs in the bottling plant of Coca-Cola Bottlers Philippines, Inc. implemented so that the bottling operators will avoid sleeping, thus, prevent injuries to their
(CCBPI). persons. As bottling operators are working with machines which consist of moving parts, it
is imperative that they should not fall asleep as to do so would expose them to hazards and
injuries. In addition, sleeping will hamper the efficient flow of operations as the bottling The Arbitration Committee ruled, among others, that the use of chairs by the operators had
operators would be unable to perform their duties competently. been a company practice for 34 years in Bottling Line 2, from 1974 to 2008, and 20 years in
Bottling Line 1, from 1988 to 2008; that the use of the chairs by the operators constituted a
The bottling operators took issue with the removal of the chairs. Through the representation company practice favorable to the Union; that it ripened into a benefit after it had been
of herein respondent, they initiated the grievance machinery of the Collective Bargaining enjoyed by it; that any benefit being enjoyed by the employees could not be reduced,
Agreement (CBA) in November 2008. Even after exhausting the remedies contained in the diminished, discontinued, or eliminated by the employer in accordance with Article 100 of
grievance machinery, the parties were still at a deadlock with petitioner still insisting on the the Labor Code, which prohibited the diminution or elimination by the employer of the
removal of the chairs and respondent still against such measure. As such, respondent sent a employees’ benefit; and that jurisprudence had not laid down any rule requiring a specific
Notice to Arbitrate, dated 16 July 2009, to petitioner stating its position to submit the issue minimum number of years before a benefit would constitute a voluntary company practice
on the removal of the chairs for arbitration. Nevertheless, before submitting to arbitration which could not be unilaterally withdrawn by the employer.
the issue, both parties availed of the conciliation/mediation proceedings before the National
Conciliation and Mediation Board (NCMB) Regional Branch No. VII. They failed to arrive at The Arbitration Committee further stated that, although the removal of the chairs was done
an amicable settlement. in good faith, CCBPI failed to present evidence regarding instances of sleeping while on duty.
There were no specific details as to the number of incidents of sleeping on duty, who were
Thus, the process of arbitration continued and the parties appointed the chairperson and involved, when these incidents happened, and what actions were taken. There was no
members of the Arbitration Committee as outlined in the CBA. Petitioner and respondent evidence either of any accident or injury in the many years that the bottling operators used
respectively appointed as members to the Arbitration Committee Mr. Raul A. Kapuno, Jr. and chairs. To the Arbitration Committee, it was puzzling why it took 34 and 20 years for CCBPI
Mr. Luis Ruiz while they both chose Atty. Alice Morada as chairperson thereof. They then to be so solicitous of the bottling operators’ safety that it removed their chairs so that they
executed a Submission Agreement which was accepted by the Arbitration Committee on 01 would not fall asleep and injure themselves.
October 2009. As contained in the Submission Agreement, the sole issue for arbitration is
whether the removal of chairs of the operators assigned at the production/manufacturing Finally, the Arbitration Committee was of the view that, contrary to CCBPI’s position, line
line while performing their duties and responsibilities is valid or not. efficiency was the result of many factors and it could not be attributed solely to one such as
the removal of the chairs.
Both parties submitted their position papers and other subsequent pleadings in
amplification of their respective stands. Petitioner argued that the removal of the chairs is Not contented with the Arbitration Committee’s decision, CCBPI filed a petition for review
valid as it is a legitimate exercise of management prerogative, it does not violate the Labor under Rule 43 before the CA.
Code and it does not violate the CBA it contracted with respondent. On the other hand,
respondent espoused the contrary view. It contended that the bottling operators have been Ruling of the CA
performing their assigned duties satisfactorily with the presence of the chairs; the removal
of the chairs constitutes a violation of the Occupational Health and Safety Standards, the On May 24, 2011, the CA rendered a contrasting decision which nullified and set aside the
policy of the State to assure the right of workers to just and humane conditions of work as decision of the Arbitration Committee. The dispositive portion of the CA decision reads:
stated in Article 3 of the Labor Code and the Global Workplace Rights Policy.
WHEREFORE, premises considered, the petition is hereby GRANTED and the Decision, dated
Ruling of the Arbtration Committee 11 June 2010, of the Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED and
SET ASIDE. A new one is entered in its stead SUSTAINING the removal of the chairs of the
On June 11, 2010, the Arbitration Committee rendered a decision in favor of the Royal Plant bottling operators from the manufacturing/production line.5
Workers Union (the Union) and against CCBPI, the dispositive portion of which reads, as
follows: The CA held, among others, that the removal of the chairs from the
manufacturing/production lines by CCBPI is within the province of management
Wherefore, the undersigned rules in favor of ROPWU declaring that the removal of the prerogatives; that it was part of its inherent right to control and manage its enterprise
operators chairs is not valid. CCBPI is hereby ordered to restore the same for the use of the effectively; and that since it was the employer’s discretion to constantly develop measures or
operators as before their removal in 2008.4 means to optimize the efficiency of its employees and to keep its machineries and equipment
in the best of conditions, it was only appropriate that it should be given wide latitude in
exercising it.
The CA stated that CCBPI complied with the conditions of a valid exercise of a management THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
prerogative when it decided to remove the chairs used by the bottling operators in the NULLIFYING AND SETTING ASIDE THE DECISION OF THE PANEL OF VOLUNTARY
manufacturing/production lines. The removal of the chairs was solely motivated by the best ARBITRATORS WHICH DECLARED AS NOT VALID THE REMOVAL OF THE CHAIRS OF THE
intentions for both the Union and CCBPI, in line with the "I Operate, I Maintain, I Clean" OPERATORS IN THE MANUFACTURING AND/OR PRODUCTION LINE.
program for bottling operators, wherein every bottling operator was given the responsibility
to keep the machinery and equipment assigned to him clean and safe. The program would In advocacy of its positions, the Union argues that the proper remedy in challenging the
reinforce the task of bottling operators to constantly move about in the performance of their decision of the Arbitration Committee before the CA is a petition for certiorari under Rule 65.
duties and responsibilities. Without the chairs, the bottling operators could efficiently The petition for review under Rule 43 resorted to by CCBPI should have been dismissed for
supervise these machineries’ operations and maintenance. It would also be beneficial for being an improper remedy. The Union points out that the parties agreed to submit the
them because the working time before the break in each rotation for each shift was unresolved grievance involving the removal of chairs to voluntary arbitration pursuant to
substantially reduced from two and a half hours (2 ½ ) to one and a half hours (1 ½) before the provisions of Article V of the existing CBA. Hence, the assailed decision of the Arbitration
the 30-minute break. This scheme was clearly advantageous to the bottling operators as the Committee is a judgment or final order issued under the Labor Code of the Philippines.
number of resting periods was increased. CCBPI had the best intentions in removing the Section 2, Rule 43 of the 1997 Rules of Civil Procedure, expressly states that the said rule
chairs because some bottling operators had the propensity to fall asleep while on the job and does not cover cases under the Labor Code of the Philippines. The judgments or final orders
sleeping on the job ran the risk of injury exposure and removing them reduced the risk. of the Voluntary Arbitrator or Panel of Voluntary Arbitrators are governed by the provisions
of Articles 260, 261, 262, 262-A, and 262-B of the Labor Code of the Philippines.
The CA added that the decision of CCBPI to remove the chairs was not done for the purpose
of defeating or circumventing the rights of its employees under the special laws, the On the substantive aspect, the Union argues that there is no connection between CCBPI’s "I
Collective Bargaining Agreement (CBA) or the general principles of justice and fair play. It Operate, I Maintain, I Clean" program and the removal of the chairs because the
opined that the principles of justice and fair play were not violated because, when the chairs implementation of the program was in 2006 and the removal of the chairs was done in 2008.
were removed, there was a commensurate reduction of the working time for each rotation in The 30-minute break is part of an operator’s working hours and does not make any
each shift. The provision of chairs for the bottling operators was never part of the CBAs difference. The frequency of the break period is not advantageous to the operators because it
contracted between the Union and CCBPI. The chairs were not provided as a benefit because cannot compensate for the time they are made to stand throughout their working time. The
such matter was dependent upon the exigencies of the work of the bottling operators. As bottling operators get tired and exhausted after their tour of duty even with chairs around.
such, CCBPI could withdraw this provision if it was not necessary in the exigencies of the How much more if the chairs are removed?
work, if it was not contributing to the efficiency of the bottling operators or if it would
expose them to some hazards. Lastly, the CA explained that the provision of chairs to the The Union further claims that management prerogatives are not absolute but subject to
bottling operators cannot be covered by Article 100 of the Labor Code on elimination or certain limitations found in law, a collective bargaining agreement, or general principles of
diminution of benefits because the employee’s benefits referred to therein mainly involved fair play and justice. The operators have been performing their assigned duties and
monetary considerations or privileges converted to their monetary equivalent. responsibilities satisfactorily for thirty (30) years using chairs. There is no record of poor
performance because the operators are sitting all the time. There is no single incident when
Disgruntled with the adverse CA decision, the Union has come to this Court praying for its the attention of an operator was called for failure to carry out his assigned tasks. CCBPI has
reversal on the following GROUNDS not submitted any evidence to prove that the performance of the operators was poor before
the removal of the chairs and that it has improved after the chairs were removed. The
I presence of chairs for more than 30 years made the operators awake and alert as they could
relax from time to time. There are sanctions for those caught sleeping while on duty. Before
THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN the removal of the chairs, the efficiency of the operators was much better and there was no
HOLDING THAT A PETITION FOR REVIEW UNDER RULE 43 OF THE RULES OF COURT IS recorded accident. After the removal of the chairs, the efficiency of the operators diminished
THE PROPER REMEDY OF CHALLENGING BEFORE SAID COURT THE DECISION OF THE considerably, resulting in the drastic decline of line efficiency.
VOLUNTARY ARBITRATOR OR PANEL OF VOLUNTARY ARBITRATORS UNDER THE LABOR
CODE. Finally, the Union asserts that the removal of the chairs constitutes violation of the
Occupational Health and Safety Standards, which provide that every company shall keep and
II maintain its workplace free from hazards that are likely to cause physical harm to the
workers or damage to property. The removal of the chairs constitutes a violation of the State
policy to assure the right of workers to a just and humane condition of work pursuant to
Article 3 of the Labor Code and of CCBPI’s Global Workplace Rights Policy. Hence, the appealable to the CA via a petition for review under Rule 43. The recent case of Samahan Ng
unilateral withdrawal, elimination or removal of the chairs, which have been in existence for Mga Manggagawa Sa Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary Arbitrator
more than 30 years, constitutes a violation of existing practice. Buenaventura C. Magsalin and Hotel Enterprises of the Philippines 6 reiterated the well-
settled doctrine on this issue, to wit:
The respondent’s position
In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,7 we
CCBPI reiterates the ruling of the CA that a petition for review under Rule 43 of the Rules of repeated the well-settled rule that a decision or award of a voluntary arbitrator is appealable
Court was the proper remedy to question the decision of the Arbitration Committee. It to the CA via petition for review under Rule 43. We held that:
likewise echoes the ruling of the CA that the removal of the chairs was a legitimate exercise
of management prerogative; that it was done not to harm the bottling operators but for the "The question on the proper recourse to assail a decision of a voluntary arbitrator has
purpose of optimizing their efficiency and CCBPI’s machineries and equipment; and that the already been settled in Luzon Development Bank v. Association of Luzon Development Bank
exercise of its management prerogative was done in good faith and not for the purpose of Employees, where the Court held that the decision or award of the voluntary arbitrator or
circumventing the rights of the employees under the special laws, the CBA or the general panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the
principles of justice and fair play. procedure outlined in Revised Administrative Circular No. 1-95 (now embodied in Rule 43 of
the 1997 Rules of Civil Procedure), just like those of the quasi-judicial agencies, boards and
The Court’s Ruling commissions enumerated therein, and consistent with the original purpose to provide a
uniform procedure for the appellate review of adjudications of all quasi-judicial entities.
The decision in this case rests on the resolution of two basic questions. First, is an appeal to
the CA via a petition for review under Rule 43 of the 1997 Rules of Civil Procedure a proper Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia
remedy to question the decision of the Arbitration Committee? Second, was the removal of v. Court of Appeals, the Court reiterated the aforequoted ruling. In Alcantara, the Court held
the bottling operators’ chairs from CCBPI’s production/manufacturing lines a valid exercise that notwithstanding Section 2 of Rule 43, the ruling in Luzon Development Bank still stands.
of a management prerogative? The Court explained, thus:

The Court sustains the ruling of the CA on both issues. ‘The provisions may be new to the Rules of Court but it is far from being a new law. Section 2,
Rules 42 of the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a
Regarding the first issue, the Union insists that the CA erred in ruling that the recourse taken reiteration of the exception to the exclusive appellate jurisdiction of the Court of Appeals, as
by CCBPI in appealing the decision of the Arbitration Committee was proper. It argues that provided for in Section 9, Batas Pambansa Blg. 129, as amended by Republic Act No. 7902:
the proper remedy in challenging the decision of the Voluntary Arbitrator before the CA is by
filing a petition for certiorari under Rule 65 of the Rules of Court, not a petition for review (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
under Rule 43. awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Employees’
CCBPI counters that the CA was correct in ruling that the recourse it took in appealing the Compensation Commission and the Civil Service Commission, except those falling within the
decision of the Arbitration Committee to the CA via a petition for review under Rule 43 of the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor
Rules of Court was proper and in conformity with the rules and prevailing jurisprudence. Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this
Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.’
A Petition for Review
The Court took into account this exception in Luzon Development Bank but, nevertheless,
under Rule 43 is the held that the decisions of voluntary arbitrators issued pursuant to the Labor Code do not
come within its ambit x x x."
proper remedy
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended,
CCBPI is correct. This procedural issue being debated upon is not novel. The Court has provide:
already ruled in a number of cases that a decision or award of a voluntary arbitrator is
"SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the The Court has held that management is free to regulate, according to its own discretion and
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or judgment, all aspects of employment, including hiring, work assignments, working methods,
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among time, place, and manner of work, processes to be followed, supervision of workers, working
these agencies are the x x x, and voluntary arbitrators authorized by law. regulations, transfer of employees, work supervision, lay-off of workers, and discipline,
dismissal and recall of workers. The exercise of management prerogative, however, is not
xxxx absolute as it must be exercised in good faith and with due regard to the rights of labor. 10

SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals In the present controversy, it cannot be denied that CCBPI removed the operators’ chairs
within the period and in the manner therein provided, whether the appeal involves pursuant to a national directive and in line with its "I Operate, I Maintain, I Clean" program,
questions of fact, of law, or mixed questions of fact and law. launched to enable the Union to perform their duties and responsibilities more efficiently.
The chairs were not removed indiscriminately. They were carefully studied with due regard
SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of to the welfare of the members of the Union. The removal of the chairs was compensated by:
the award, judgment, final order or resolution, or from the date of its last publication, if a) a reduction of the operating hours of the bottling operators from a two-and-one-half (2
publication is required by law for its effectivity, or of the denial of petitioner’s motion for ½)-hour rotation period to a one-and-a-half (1 ½) hour rotation period; and b) an increase
new trial or reconsideration duly filed in accordance with the governing law of the court or of the break period from 15 to 30 minutes between rotations.
agency a quo. x x x. (Emphasis supplied.)’
Apparently, the decision to remove the chairs was done with good intentions as CCBPI
Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator’s Resolution denying wanted to avoid instances of operators sleeping on the job while in the performance of their
petitioner’s motion for reconsideration, petitioner should have filed with the CA, within the duties and responsibilities and because of the fact that the chairs were not necessary
fifteen (15)-day reglementary period, a petition for review, not a petition for certiorari. considering that the operators constantly move about while working. In short, the removal
of the chairs was designed to increase work efficiency. Hence, CCBPI’s exercise of its
management prerogative was made in good faith without doing any harm to the workers’
On the second issue, the Union basically claims that the CCBPI’s decision to unilaterally rights.
remove the operators’ chairs from the production/manufacturing lines of its bottling plants
is not valid because it violates some fundamental labor policies. According to the Union, such
removal constitutes a violation of the 1) Occupational Health and Safety Standards which The fact that there is no proof of any operator sleeping on the job is of no moment. There is
provide that every worker is entitled to be provided by the employer with appropriate seats, no guarantee that such incident would never happen as sitting on a chair is relaxing. Besides,
among others; 2) policy of the State to assure the right of workers to a just and humane the operators constantly move about while doing their job. The ultimate purpose is to
condition of work as provided for in Article 3 of the Labor Code; 8 3) Global Workplace Rights promote work efficiency.
Policy of CCBPI which provides for a safe and healthy workplace by maintaining a productive
workplace and by minimizing the risk of accident, injury and exposure to health risks; and 4) No Violation of Labor Laws
diminution of benefits provided in Article 100 of the Labor Code.9
The rights of the Union under any labor law were not violated. There is no law that requires
Opposing the Union’s argument, CCBPI mainly contends that the removal of the subject employers to provide chairs for bottling operators. The CA correctly ruled that the Labor
chairs is a valid exercise of management prerogative. The management decision to remove Code, specifically Article 13211 thereof, only requires employers to provide seats for women.
the subject chairs was made in good faith and did not intend to defeat or circumvent the No similar requirement is mandated for men or male workers. It must be stressed that all
rights of the Union under the special laws, the CBA and the general principles of justice and concerned bottling operators in this case are men.
fair play.
There was no violation either of the Health, Safety and Social Welfare Benefit provisions
Again, the Court agrees with CCBPI on the matter. under Book IV of the Labor Code of the Philippines. As shown in the foregoing, the removal
of the chairs was compensated by the reduction of the working hours and increase in the
A Valid Exercise of rest period. The directive did not expose the bottling operators to safety and health hazards.

Management Prerogative The Union should not complain too much about standing and moving about for one and one-
half (1 ½) hours because studies show that sitting in workplaces for a long time is hazardous
to one’s health. The report of VicHealth, Australia,12 disclosed that "prolonged workplace In addition, people who interrupted their sitting time more often just by standing or with
sitting is an emerging public health and occupational health issue with serious implications light activities such as housework, shopping, and moving about the office had healthier blood
for the health of our working population. Importantly, prolonged sitting is a risk factor for sugar and fat levels, and smaller waistlines than those whose sitting time was not broken up.
poor health and early death, even among those who meet, or exceed, national13 activity
guidelines." In another report,14 it was written: Of course, in this case, if the chairs would be returned, no risks would be involved because of
the shorter period of working time. The study was cited just to show that there is a health
Workers needing to spend long periods in a seated position on the job such as taxi drivers, risk in prolonged sitting.
call centre and office workers, are at risk for injury and a variety of adverse health effects.
No Violation of the CBA
The most common injuries occur in the muscles, bones, tendons and ligaments, affecting the
neck and lower back regions. Prolonged sitting: The CBA15 between the Union and CCBPI contains no provision whatsoever requiring the
management to provide chairs for the operators in the production/manufacturing line while
● reduces body movement making muscles more likely to pull, cramp or strain when performing their duties and responsibilities. On the contrary, Section 2 of Article 1 of the
stretched suddenly, causes fatigue in the back and neck muscles by slowing the blood supply CBA expressly provides as follows:
and puts high tension on the spine, especially in the low back or neck, and
Article I
● causes a steady compression on the spinal discs that hinders their nutrition and can
contribute to their premature degeneration. SCOPE

Sedentary employees may also face a gradual deterioration in health if they do not exercise SECTION 2. Scope of the Agreement. All the terms and conditions of employment of
or do not lead an otherwise physically active life. The most common health problems that employees and workers within the appropriate bargaining unit (as defined in Section 1
these employees experience are disorders in blood circulation and injuries affecting their hereof) are embodied in this Agreement and the same shall govern the relationship between
ability to move. Deep Vein Thrombosis (DVT), where a clot forms in a large vein after the COMPANY and such employees and/or workers. On the other hand, all such benefits
prolonged sitting (eg after a long flight) has also been shown to be a risk. and/or privileges as are not expressly provided for in this Agreement but which are now
being accorded, may in the future be accorded, or might have previously been accorded, to
Workers who spend most of their working time seated may also experience other, less the employees and/or workers, shall be deemed as purely voluntary acts on the part of the
specific adverse health effects. Common effects include decreased fitness, reduced heart and COMPANY in each case, and the continuance and repetition thereof now or in the future, no
lung efficiency, and digestive problems. Recent research has identified too much sitting as an matter how long or how often, shall not be construed as establishing an obligation on the
important part of the physical activity and health equation, and suggests we should focus on part of the COMPANY. It is however understood that any benefits that are agreed upon by
the harm caused by daily inactivity such as prolonged sitting. and between the COMPANY and the UNION in the Labor-Management Committee Meetings
Associate professor David Dunstan leads a team at the Baker IDI in Melbourne which is regarding the terms and conditions of employment outside the CBA that have general
specifically researching sitting and physical activity. He has found that people who spend application to employees who are similarly situated in a Department or in the Plant shall be
long periods of time seated (more than four hours per day) were at risk of: implemented. [emphasis and underscoring supplied]

● higher blood levels of sugar and fats, As can be gleaned from the aforecited provision, the CBA expressly provides that benefits
and/or privileges, not expressly given therein but which are presently being granted by the
● larger waistlines, and company and enjoyed by the employees, shall be considered as purely voluntary acts by the
management and that the continuance of such benefits and/or privileges, no matter how
● higher risk of metabolic syndrome long or how often, shall not be understood as establishing an obligation on the company’s
part. Since the matter of the chairs is not expressly stated in the CBA, it is understood that it
was a purely voluntary act on the part of CCBPI and the long practice did not convert it into
regardless of how much moderate to vigorous exercise they had. an obligation or a vested right in favor of the Union.

No Violation of the general principles


of justice and fair play xxxx

The Court completely agrees with the CA ruling that the removal of the chairs did not violate Without a doubt, equating the provision of chairs to the bottling operators Ds something
the general principles of justice and fair play because the bottling operators’ working time within the ambit of "benefits'' in the context of Article 100 of the Labor Code is unduly
was considerably reduced from two and a half (2 ½) hours to just one and a half (1 ½) hours stretching the coverage of the law. The interpretations of Article 100 of the Labor Code do
and the break period, when they could sit down, was increased to 30 minutes between not show even with the slightest hint that such provision of chairs for the bottling operators
rotations. The bottling operators’ new work schedule is certainly advantageous to them may be sheltered under its mantle.21
because it greatly increases their rest period and significantly decreases their working time.
A break time of thirty (30) minutes after working for only one and a half (1 ½) hours is a just Jurisprudence recognizes the exercise of management prerogatives. Labor Jaws also
and fair work schedule. discourage interference with an employer's judgment in the conduct of its business. For this
reason, the Court often declines to interfere in legitimate business decisions of employers.
No Violation of Article 100 The law must protect not only the welfare of the employees, but also the right of the
employers.22
of the Labor Code
WHEREFORE, the petition is DENIED.
The operators’ chairs cannot be considered as one of the employee benefits covered in
Article 10016 of the Labor Code. In the Court’s view, the term "benefits" mentioned in the SO ORDERED.
non-diminution rule refers to monetary benefits or privileges given to the employee with
monetary equivalents. -----------------------------------------X

Such benefits or privileges form part of the employees’ wage, salary or compensation making
them enforceable obligations. MARINA'S CREATION ENTERPRISES AND JERRY B. ALFONSO, Petitioners, v. ROMEO V.
ANCHETA, Respondent.
This Court has already decided several cases regarding the non-diminution rule where the
benefits or privileges involved in those cases mainly concern monetary considerations or DECISION
privileges with monetary equivalents. Some of these cases are: Eastern Telecommunication
Phils. Inc. v. Eastern Telecoms Employees Union,17 where the case involves the payment of CARPIO, J.:
14th, 15th and 16th month bonuses; Central Azucarera De Tarlac v. Central Azucarera De
Tarlac Labor Union-NLU,18 regarding the 13th month pay, legal/special holiday pay, night
premium pay and vacation and sick leaves; TSPIC Corp. v. TSPIC Employees The Case
Union,19 regarding salary wage increases; and American Wire and Cable Daily Employees
Union vs. American Wire and Cable Company, Inc.,20 involving service awards with cash
incentives, premium pay, Christmas party with incidental benefits and promotional increase. Before the Court is a petition for review on certiorari1 assailing the 2 June 2014
Decision2 and the 4 March 2015 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
130120.chanroblesvirtuallawlibrary
In this regard, the Court agrees with the CA when it resolved the matter and wrote:
The Facts
Let it be stressed that the aforequoted article speaks of non-diminution of supplements and
other employee benefits. Supplements arc privileges given to an employee which constitute
as extra remuneration besides his or her basic ordinary earnings and wages. From this Petitioner Marina's Creation Enterprises (Marina) is engaged in the business of making
definition, We can only deduce that the other employee benefits spoken of by Article 100 shoes and bags. In January 2010, Marina hired respondent Romeo V. Ancheta (Ancheta) as a
pertain only to those which are susceptible of monetary considerations. Indeed, this could sole attacher in Marina. In March 2011, Ancheta suffered an intra-cranial hemorrhage
only be the most plausible conclusion because the cases tackling Article 100 involve mainly (stroke) and was placed under home care. On 12 May 2011, Ancheta suffered a second
with monetary considerations or privileges converted to their monetary equivalents. stroke and was confined at St. Victoria Hospital in Marikina City for four days. On 26 May
2011, Ancheta filed a Sickness Notification with the Social Security System (SSS) and was
paid sickness benefits in the amount of Eight Thousand One Hundred Pesos (P8,100). The
physician who physically examined Ancheta stated that Ancheta would be fit to resume work The NLRC held that Marina's requirement of having Ancheta submit another medical
after ninety (90) days or on 12 August 2011.4 certificate before he could resume work was reasonable. The NLRC ruled that Marina cannot
be faulted for refusing to admit Ancheta back to work in the absence of a new medical
On 13 August 2011, Ancheta reported for work. Marina, however, wanted Ancheta to submit certificate because it was in the mutual interest of Ancheta and Marina that Ancheta would
a new medical certificate before he could resume his work in Marina. Ancheta did not be medically found capable of withstanding the rigors of work.
comply and was not able to resume his work in Marina. On 8 November 2011, Ancheta filed a
complaint with the Labor Arbiter against Marina and its registered owner Jerry B. Alfonso The dispositive portion of the Decision states:chanRoblesvirtualLawlibrary
for illegal dismissal and non-payment of separation pay. WHEREFORE, premises considered, judgment is rendered DISMISSING complainant's Appeal
for lack of merit. The Decision of Labor Arbiter Romelita N. Rioflorido dated 25 July 2012 is
In his Position Paper,5 Ancheta alleged that after he recovered from his illness he reported AFFIRMED in toto.
for work in Marina but was advised by Marina to just wait for the company's call. When
Ancheta went back to Marina, he was told to take more rest. Ancheta claimed that Marina SO ORDERED.11
had employed two new workers as his replacement. Ancheta alleged that he was not served chanrobleslaw
a notice for his termination and a subsequent notice for hearing as mandated by the Labor Ancheta filed a motion for reconsideration with the NLRC which was denied on 28 February
Code. Ancheta claimed he was illegally dismissed by Marina. 2013.12

In its Position Paper,6 Marina claimed that Ancheta was employed on a piece rate basis and Ancheta filed with the CA a petition for certiorari13 dated 17 May
was not terminated but instead was refused job assignments due to his failure to submit a 2013.chanroblesvirtuallawlibrary
medical clearance showing that he was fit to resume his work. Marina claimed that the
medical certificate was a precautionary measure imposed by the company to avoid any The Decision of the CA
incident that could happen to Ancheta who already had a pre-existing medical condition.
Marina alleged that Ancheta did not present any evidence to prove that he was illegally
dismissed.chanroblesvirtuallawlibrary In a Decision dated 2 June 2014,14 the CA reversed the decision of the NLRC. The CA ruled
that Ancheta was illegally dismissed by Marina. The CA held that the fact of Ancheta's
The Decision of the Labor Arbiter dismissal was established through Marina's own admission in its position paper that the
company had refused to give Ancheta job assignments due to Ancheta's failure to submit a
medical certificate.
In a Decision dated 25 July 2012,7 the Labor Arbiter dismissed Ancheta's complaint for illegal
dismissal and non-payment of separation pay. The Labor Arbiter ruled that Ancheta failed to The CA ruled that the absence of a medical certificate did not justify Marina's refusal to
convincingly prove that he was illegally dismissed. The Labor Arbiter found no positive or furnish Ancheta work assignments. The CA considered the certification by Ancheta's
overt act on the part of Marina that would support Ancheta's claim of illegal dismissal. examining physician attached to Ancheta's SSS Sickness Notification as proof that Ancheta
The dispositive portion of the Labor Arbiter's Decision reads:cralawlawlibrary was fit to resume his work in Marina on 12 August 2011. The CA held that according to the
Implementing Rules of the Labor Code, it was Marina and not Ancheta who had the burden of
WHEREFORE, a decision is hereby rendered dismissing the instant complaint. proving that Ancheta's disease could not be cured within a period of at least six months in
order to justify Ancheta's dismissal. Finally, the CA ruled since Ancheta was illegally
SO ORDERED.8 dismissed, Ancheta was entitled to backwages and separation pay from Marina.
chanrobleslaw
The Decision of the National Labor Relations Commission The dispositive portion of the Decision states:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is GRANTED. The Decision dated January 14, 2013
andResolution dated February 28, 2013 of the NLRC in NLRC NCR Case No. 11-16716-
In a Decision dated 14 January 2013,9 the National Labor Relations Commission (NLRC) 11/NLRC LAC No. 09-002716-12 are ANNULLED and SET ASIDE. Private respondents
affirmed the ruling of the Labor Arbiter. The NLRC ruled that Ancheta was not able to Marina's Creation and Jerry Alfonso are hereby ordered to PAY petitioner Romeo Ancheta:
establish the fact that he was dismissed by Marina.10 The NLRC held that Ancheta, who was (1) full backwages computed from the date of his dismissal up to the finality of this decision;
the employee of Marina, had to first establish the fact of his dismissal before the burden and (2) separation pay equivalent to one month pay for every year of service. For this
could be shifted to Marina, the employer, to prove that his dismissal was legal. purpose, let this case be REMANDED to the Labor Arbiter for the computation of backwages
and separation pay in accordance with this Decision. except for a just cause or when authorized by this title. x x x." Since Ancheta was a regular
employee of Marina, Ancheta's employment can only be terminated by Marina based on just
SO ORDERED.15 or authorized causes provided in the Labor Code. In its position paper, Marina admitted that
chanrobleslaw the company had refused to give Ancheta work assignments until Ancheta submitted a new
Marina filed a motion for reconsideration16 with the CA which was denied on 4 March medical certificate. It is Marina's position that Ancheta's employment would not continue if
2015.17 Ancheta would not submit a new medical certificate. Marina's action in refusing to accept
Ancheta notwithstanding the medical certificate attached to Ancheta's SSS Sickness
Hence, this petition by Marina.chanroblesvirtuallawlibrary Notification stating that Ancheta was physically fit to resume his work in Marina on 12
August 2011 amounts to an illegal dismissal of Ancheta. Book VI, Rule I, Section 8 of the
The Issue Implementing Rules of the Labor Code provides:chanRoblesvirtualLawlibrary
Section 8. Disease as a ground for dismissal. - Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his health or to the health of
The issue in this case is whether Ancheta was illegally dismissed by his co-employees, the employer shall not terminate his employment unless there is a
Marina.chanroblesvirtuallawlibrary certification by a competent public health authority that the disease is of such nature
or at such a stage that it cannot be cured within a period of six (6) months even with
The Ruling of this Court proper medical treatment. If the disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the employee to take a leave. The
employer shall reinstate the employee to his former position immediately upon the
We deny the petition. restoration of his normal health. (Emphasis supplied)
chanrobleslaw
Article 280 of the Labor Code provides for the two types of regular employees, to wit: (1) The Implementing Rules of the Labor Code impose upon the employer the duty not to
employees who have been engaged to perform activities which are usually necessary or terminate an employee until there is a certification by a competent public health authority
desirable in the usual business or trade of the employer, and (2) employees who have that the employee's disease is of such nature or at such a stage that it cannot be cured within
rendered at least one year of service, whether such service is continuous or broken, with a period of six months even with proper medical treatment. In this case, Marina terminated
respect to the activity in which they are employed. In De Leon v. National Labor Relations Ancheta from employment without seeking a prior certification from a competent public
Commission,18 this Court held that the test of determining the regular status of an employee health authority that Ancheta's disease is of such nature or at such a stage that it cannot be
is whether the employee performs work which is usually necessary or desirable in the usual cured within a period of six months even with proper medical treatment. Hence, Ancheta
business or trade of the employer. The connection can be determined by considering the was illegally dismissed by Marina.
nature of the work performed and its relation to the scheme of the particular business or
trade.19 Also, if the employee has been performing the job for at least one year, even if the Finally, the CA did not err in awarding Ancheta full backwages and separation pay. In Reyes v.
performance is not continuous or merely intermittent, the law deems the repeated and R.P. Guardians Security Agency, Inc.,21 this Court held that an employee who was unjustly
continuing need for its performance as sufficient evidence of the necessity if not dismissed from work shall be entitled to reinstatement without loss of seniority rights and
indispensability of the activity to the business.20 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 up to
Applying Article 280 of the Labor Code, Ancheta was a regular employee of Marina. Ancheta, the time of actual reinstatement. If reinstatement is not possible, the award of separation pay
who was working in Marina as a sole attacher, was performing work that was usually is proper.22 Notably, backwages and separation pay are separate and distinct reliefs available
necessary or desirable in the usual business or trade of Marina which was engaged in the to Ancheta who was illegally dismissed by Marina.
business of making shoes and bags. Moreover, Ancheta had been performing work as a sole
attacher in Marina since January 2010 up to March 2011 when he suffered his first stroke. WHEREFORE, we DENY the petition. We AFFIRM the 2 June 2014 Decision and the 4 March
Thus, Ancheta had acquired regular employment status by performing work in Marina for at 2015 Resolution of the Court of Appeals in CA-G.R. SP No. 130120.
least one year.
SO ORDERED.ChanRoblesVirtualawlibrary
In its petition, Marina argues that the company's action of requiring Ancheta to undergo a
medica1 examination and to submit a medical certificate was a valid exercise of management
prerogative. Marina's contention is not correct. Article 279 of the Labor Code provides: "In
cases of regular employment, the employer shall not terminate the services of an employee