GREGORIO V. TONGKO, G.R. No. 167622 We resolve petitioner Gregorio V.

Tongkos bid,
Petitioner, through his Motion for Reconsideration,[1] to set aside our
Present: June 29, 2010 Resolution that reversed our Decision of
CORONA, C.J., November 7, 2008.[2] With the reversal, the assailed June
CARPIO, 29, 2010 Resolution effectively affirmed the Court of
CARPIO MORALES, Appeals ruling[3] in CA-G.R. SP No. 88253 that the petitioner
VELASCO, JR., was an insurance agent, not the employee, of the
NACHURA, respondent The Manufacturers Life Insurance Co. (Phils.),
- versus - LEONARDO-DE CASTRO, Inc. (Manulife).
BRION,
PERALTA,
BERSAMIN, In his Motion for Reconsideration, petitioner reiterates
DEL CASTILLO, the arguments he had belabored in his petition and various
ABAD, other submissions. He argues that for 19 years, he
VILLARAMA, JR., performed administrative functions and exercised
PEREZ, supervisory authority over employees and agents of
THE MANUFACTURERS MENDOZA, and Manulife, in addition to his insurance agent functions.[4] In
LIFE INSURANCE CO. SERENO, JJ. these 19 years, he was designated as a Unit Manager, a
(PHILS.), INC. and RENATO Promulgated:
A. VERGEL DE DIOS, Branch Manager and a Regional Sales Manager, and now
Respondents. January 25, 2011 posits that he was not only an insurance agent for Manulife
but was its employee as well.
x-----------------------------------------------------------------------------
------------x We find no basis or any error to merit the
reconsideration of our June 29, 2010 Resolution.

RESOLUTION A. Labor Law Control = Employment Relationship

BRION, J.:
Control over the performance of the task of one
providing service both with respect to the means and
1
manner, and the results of the service is the primary
element in determining whether an employment relationship
exists. We resolve the petitioners Motion against his favor
since he failed to show that the control Manulife exercised
over him was the control required to exist in an employer-
employee relationship; Manulifes control fell short of this
norm and carried only the characteristic of the relationship
between an insurance company and its agents, as defined
by the Insurance Code and by the law of agency under the
Civil Code.
The petitioner asserts in his Motion that Manulifes
labor law control over him was demonstrated (1) when it set
the objectives and sales targets regarding production,
recruitment and training programs; and (2) when it
prescribed the Code of Conduct for Agents and the Manulife
Financial Code of Conduct to govern his activities.[5] We find
no merit in these contentions.
In our June 29, 2010 Resolution, we noted that there
are built-in elements of control specific to an insurance
agency, which do not amount to the elements of control that
characterize an employment relationship governed by the
Labor Code. The Insurance Code provides definite
parameters in the way an agent negotiates for the sale of
the companys insurance products, his collection activities
and his delivery of the insurance contract or policy.[6] In
addition, the Civil Code defines an agent as a person who
binds himself to do something in behalf of another, with the
consent or authority of the latter.[7] Article 1887 of the Civil
Code also provides that in the execution of the agency, the
agent shall act in accordance with the instructions of the
principal.
All these, read without any clear understanding of fine
legal distinctions, appear to speak of control by the
insurance company over its agents. They are, however,
controls aimed only at specific results in undertaking an
insurance agency, and are, in fact, parameters set by law in
defining an insurance agency and the attendant duties and
responsibilities an insurance agent must observe and
undertake. They do not reach the level of control into the
means and manner of doing an assigned task that invariably
characterizes an employment relationship as defined by
labor law. From this perspective, the petitioners contentions
cannot prevail.
To reiterate, guidelines indicative of labor law control
do not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the
nature of dictating the means and methods to be employed
in attaining the result.[8] Tested by this norm,
Manulifes instructions regarding the objectives and sales
targets, in connection with the training and engagement of
other agents, are among the directives that the principal
may impose on the agent to achieve the assigned
2
tasks. They are targeted results that Manulife wishes to
attain through its agents. Manulifes codes of conduct,
likewise, do not necessarily intrude into the insurance
agents means and manner of conducting their sales. Codes
of conduct are norms or standards of behavior rather than
employer directives into how specific tasks are to be
done. These codes, as well as insurance industry rules and
regulations, are not per se indicative of labor law control
under our jurisprudence.[9]
The duties[10] that the petitioner enumerated in his Motion
are not supported by evidence and, therefore, deserve
scant consideration. Even assuming their existence,
however, they mostly pertain to the duties of an insurance
agent such as remitting insurance fees to Manulife,
delivering policies to the insured, and after-sale
services. For agents leading other agents, these include the
task of overseeing other insurance agents, the recruitment
of other insurance agents engaged by Manulife as principal,
and ensuring that these other agents comply with the
paperwork necessary in selling insurance. That Manulife
exercises the power to assign and remove agents under the
petitioners supervision is in keeping with its role as a
principal in an agency relationship; they are Manulife agents
in the same manner that the petitioner had all along been a
Manulife agent.
The petitioner also questions Manulifes act of
investing him with different titles and positions in the course
of their relationship, given the respondents position that he
simply functioned as an insurance agent.[11]He also
considers it an unjust and inequitable situation that he would
be unrewarded for the years he spent as a unit manager, a
branch manager, and a regional sales manager.[12]
Based on the evidence on record, the petitioners
occupation was to sell Manulifes insurance policies and
products from 1977 until the termination of the Career
Agents Agreement (Agreement). The evidence also shows
that through the years, Manulife permitted him to exercise
guiding authority over other agents who operate under their
own agency agreements with Manulife and whose
commissions he shared.[13] Under this scheme an
arrangement that pervades the insurance industry petitioner
in effect became a lead agent and his own commissions
increased as they included his share in the commissions of
the other agents;[14] he also received greater
reimbursements for expenses and was allowed to use
Manulifes facilities. His designation also changed from unit
manager to branch manager and then to regional sales
manager, to reflect the increase in the number of agents he
recruited and guided, as well as the increase in the area
where these agents operated.
3
 As our assailed Resolution concluded and as we now
similarly conclude, these arrangements, and the titles and
positions the petitioner was invested with, did not change
his status from the insurance agent that he had always been
(as evidenced by the Agreement that governed his
relationship with Manulife from the start to its disagreeable
end). The petitioner simply progressed from his individual
agency to being a lead agent who could use other agents in
selling insurance and share in the earnings of these other
agents.
In sum, we find absolutely no evidence of labor law
control, as extensively discussed in our Resolution of June
29, 2010, granting Manulifes motion for
reconsideration. The Dissent, unfortunately, misses this
point.
B. No Resulting Inequity
We also do not agree that our assailed Resolution has
the effect of fostering an inequitable or unjust situation. The
records show that the petitioner was very amply paid for his
services as an insurance agent, who also shared in the
commissions of the other agents under his guidance. In
1997, his income was P2,822,620; in 1998, P4,805,166.34;
in 1999, P6,797,814.05; in 2001, P6,214,737.11; and in
2002, P8,003,180.38. All these he earned as an insurance
agent, as he failed to ever prove that he earned these sums
as an employee. In technical terms, he could not have
earned all these as an employee because he failed to
provide the substantial evidence required in administrative
cases to support the finding that he was a Manulife
employee. No inequity results under this legal situation;
what would be unjust is an award of backwages and
separation pay amounts that are not due him because he
was never an employee.
The Dissents discussion on this aspect of the case
begins with the wide disparity in the status of the parties that
Manulife is a big Canadian insurance company while
Tongko is but a single agent of Manulife. The Dissent then
went on to say that [i]f is but just, it is but right, that the
Court interprets the relationship between Tongko and
Manulife as one of employment under labor laws and to
uphold his constitutionally protected right, as an employee,
to security of tenure and entitlement to monetary award
should such right be infringed.[15] We cannot simply invoke
the magical formula by creating an employment relationship
even when there is none because of the unavoidable and
inherently weak position of an individual over a giant
corporation.
The Dissent likewise alluded to an ambiguity in the
true relationship of the parties after Tongkos successive
appointments. We already pointed out that the legal
significance of these appointments had not been sufficiently
4
explained and that it did not help that Tongko never
bothered to present evidence on this point. The Dissent
recognized this but tried to excuse Tongko from this failure
in the subsequent discussion, as follows:
[o]ther evidence was adduced to show such
duties and responsibilities. For one, in his letter
of November 6, 2001, respondent De Dios
addressed petitioner as sales manager. And as I
wrote in my Dissent to the June 29,
2010 Resolution, it is difficult to imagine that
Manulife did not issue promotional appointments
to petitioner as unit manager, branch manager,
and, eventually, regional sales manager. Sound
management practice simply requires an
appointment for any upward personnel
movement, particularly when additional functions
and the corresponding increase in compensation
are involved. Then, too, the adverted affidavits
of the managers of Manulife as to the duties and
responsibilities of a unit manager, such as
petitioner, point to the conclusion that these
managers were employees of Manulife, applying
the four-fold test.[16]
This Court (and all adjudicators for that matter) cannot
and should not fill in the evidentiary gaps in a partys case
that the party failed to support; we cannot and should not
take the cudgels for any party. Tongko failed to support
his cause and we should simply view him and his case as
they are; our duty is to sit as a judge in the case that he and
the respondent presented.
To support its arguments on equity, the Dissent uses
the Constitution and the Civil Code, using provisions and
principles that are all motherhood statements. The mandate
of the Court, of course, is to decide cases based on the
facts and the law, and not to base its conclusions on
fundamental precepts that are far removed from the
particular case presented before it. When there is no room
for their application, of capacity of principles, reliance on the
application of these fundamental principles is misplaced.
C. Earnings were Commissions
That his earnings were agents commissions arising
from his work as an insurance agent is a matter that the
petitioner cannot deny, as these are the declarations and
representations he stated in his income tax returns through
the years. It would be doubly unjust, particularly to the
government, if he would be allowed at this late point to turn
around and successfully claim that he was merely an
employee after he declared himself, through the years, as
an independent self-employed insurance agent with the
privilege of deducting business expenses. This aspect of the
case alone considered together with the probative value of
income tax declarations and returns filed prior to the present
5
controversy should be enough to clinch the present case
against the petitioners favor.
D. The Dissents Solution:
Unwieldy and Legally Infirm
The Dissent proposes that Tongko should be
considered as part employee (as manager) and part
insurance agent; hence, the original decision should be
modified to pertain only to the termination of his
employment as a manager and not as an insurance
agent. Accordingly, the backwages component of the
original award to him should not include the insurance sales
commissions. This solution, according to the line taken by
the Dissent then, was justified on the view that this was
made on a case-to-case basis.
Decisions of the Supreme Court, as the Civil Code
provides, form part of the law of the land. When the Court
states that the determination of the existence of an
employment relationship should be on a case-to-case basis,
this does not mean that there will be as many laws on the
issue as there are cases. In the context of this case, the
four-fold test is the established standard for determining
employer-employee relationship and the existence of these
elements, most notably control, is the basis upon which a
conclusion on the absence of employment relationship was
anchored. This simply means that a conclusion on whether
employment relationship exists in a particular case largely
depends on the facts and, in no small measure, on the
parties evidence vis--vis the clearly defined jurisprudential
standards. Given that the parties control what and how the
facts will be established in a particular case and/or how a
particular suit is to be litigated, deciding the issues on a
case-to-case basis becomes an imperative.
Another legal reality, a more important one, is that the
duty of a court is to say what the law is.[17] This is the same
duty of the Supreme Court that underlies the stare
decisis principle. This is how the public, in general and the
insurance industry in particular, views the role of this Court
and courts in general in deciding cases. The lower courts
and the bar, most specially, look up to the rulings of this
Court for guidance. Unless extremely unavoidable, the
Court must, as a matter of sound judicial policy, resist the
temptation of branding its ruling pro hac vice.
The compromise solution of declaring Tongko both an
employee and an agent is legally unrealistic, unwieldy and
is, in fact, legally infirm, as it goes against the above basic
principles of judicial operation.Likewise, it does not and
cannot realistically solve the problem/issue in this case; it
actually leaves more questions than answers.
As already pointed out, there is no legal basis (be it
statutory or jurisprudential) for the part-employee/part-
6
insurance agent status under an essentially principal-agent
contractual relation which the Dissent proposes to accord to
Tongko. If the Dissent intends to establish one, this is highly
objectionable for this would amount to judicial legislation. A
legal relationship, be it one of employment or one based on
a contract other than employment, exists as a matter of law
pursuant to the facts, incidents and legal consequences of
the relationship; it cannot exist devoid of these legally
defined underlying facts and legal consequences unless the
law itself creates the relationship an act that is beyond the
authority of this Court to do.
Additionally, the Dissents conclusion completely
ignores an unavoidable legal reality that the parties are
bound by a contract of agency that clearly subsists
notwithstanding the successive designation of Tongko as a
unit manager, a branch manager and a regional sales
manager. (As already explained in our Resolution granting
Manulifes motion for reconsideration, no evidence on record
exists to provide the Court with clues as to the precise
impact of all these designations on the contractual agency
relationship.) The Dissent, it must be pointed out, concludes
that Tongkos employment as manager was illegally
terminated; thus, he should be accordingly afforded relief
therefor. But, can Tongko be given the remedies incidental
to his dismissal as manager separately from his status as
an insurance agent? In other words, since the respondents
terminated all relationships with Tongko through the
termination letter, can we simply rule that his role as a
manager was illegally terminated without touching on the
consequences of this ruling on his status as an insurance
agent? Expressed in these terms, the inseparability of his
contract as agent with any other relationship that springs
therefrom can thus be seen as an insurmountable legal
obstacle.
The Dissents compromise approach would also
sanction split jurisdiction. The labor tribunals shall have
jurisdiction over Tongkos employment as manager while
another entity shall decide the issues/cases arising from the
agency relationship. If the managerial employment is
anchored on the agency, how will the labor tribunals decide
an issue that is inextricably linked with a relationship that is
outside the loop of their jurisdiction? As already mentioned
in the Resolution granting Manulifes reconsideration,
the DOMINANT relationship in this case is agency and no
other.
E. The Dissents Cited Cases
The Dissent cites the cases of Great Pacific Life
Assurance Corporation v. National Labor Relations
Commission[18] and Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission[19] to support the
allegation that Manulife exercised control over the petitioner
as an employer.
7

In considering these rulings, a reality that cannot but
be recognized is that cases turn and are decided on the
basis of their own unique facts; the ruling in one case
cannot simply be bodily lifted and applied to another,
particularly when notable differences exist between the cited
cases and the case under consideration; their respective
facts must be strictly examined to ensure that the ruling in
one applies to another. This is particularly true in a
comparison of the cited cases with the present
case. Specifically, care should be taken in reading the cited
cases and applying their rulings to the present case as the
cited cases all dealt with the proper legal characterization
of subsequent management contracts that superseded the
original agency contract between the insurance company
and the agent.
In Great Pacific Life, the Ruiz brothers were appointed
to positions different from their original positions as
insurance agents, whose duties were clearly defined in a
subsequent contract. Similarly, in Insular, de los Reyes, a
former insurance agent, was appointed as acting unit
manager based on a subsequent contract. In both cases,
the Court anchored its findings of labor control on the
stipulations of these subsequent contracts.
In contrast, the present case is remarkable for the
absence of evidence of any change in the nature of the
petitioners employment with Manulife. As previously stated
above and in our assailed Resolution, the petitioner had
always been governed by the Agreement from the start until
the end of his relationship with Manulife. His agency status
never changed except to the extent of being a lead
agent. Thus, the cited cases where changes in company-
agent relationship expressly changed and where the
subsequent contracts were the ones passed upon by the
Court cannot be totally relied upon as authoritative.
We cannot give credit as well to the petitioners claim
of employment based on the affidavits executed by other
Manulife agents describing their duties, because these
same affidavits only affirm their status as independent
agents, not as employees. To quote these various claims:[20]
1.a. I have no fixed wages or salary since my
services are compensated by way of
commissions based on the computed premiums
paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ
my own method in soliciting insurance at a time
and place I see fit;
1.c. I have my own assistant and messenger
who handle my daily work load;
8
 1.d. I use my own facilities, tools, materials and
supplies in carrying out my business of selling
insurance;
xxxx
6. I have my own staff that handles day to day
operations of my office;
7. My staff are my own employees and received
salaries from me;
xxxx
9. My commission and incentives are all
reported to the Bureau of Internal Revenue
(BIR) as income by a self-employed individual or
professional with a ten (10) percent creditable
withholding tax. I also remit monthly for
professionals.
The petitioner cannot also rely on the letter written by
respondent Renato Vergel de Dios to prove that Manulife
exercised control over him. As we already explained in the
assailed Resolution:
Even de Dios letter is not determinative of
control as it indicates the least amount of
intrusion into Tongkos exercise of his role as
manager in guiding the sales agents. Strictly
viewed, de Dios directives are merely
operational guidelines on how Tongko could
align his operations with Manulifes re-directed
goal of being a big league player. The method is
to expand coverage through the use of more
agents. This requirement for the recruitment of
more agents is not a means-and-method control
as it relates, more than anything else, and is
directly relevant, to Manulifes objective of
expanded business operations through the use
of a bigger sales force whose members are all
on a principal-agent relationship.An important
point to note here is that Tongko was not
supervising regular full-time employees of
Manulife engaged in the running of the
insurance business; Tongko was effectively
guiding his corps of sales agents, who are
bound to Manulife through the same agreement
that he had with manulife, all the while sharing in
these agents commissions through his
overrides.[21]
Lastly, in assailing the Agreement between him and
Manulife, the petitioner cites Paguio v. National Labor
Relations Commission[22] on the claim that the agreement
that the parties signed did not conclusively indicate the legal
relationship between them.
The evidentiary situation in the present case,
however, shows that despite the petitioners insistence that
the Agreement was no longer binding between him and
9
Manulife, no evidence was ever adduced to show that their
relationship changed so that Manulife at some point
controlled the means and method of the petitioners work. In
fact, his evidence only further supports the conclusion that
he remained an independent insurance agent a status he
admits, subject only to the qualification that he is at the
same time an employee. Thus, we can only conclude that
the Agreement governed his relations with Manulife.
Additionally, it is not lost on us that Paguio is a ruling
based on a different factual setting; it involves a publishing
firm and an account executive, whose repeated
engagement was considered as an indication of
employment. Our ruling in the present case is specific to the
insurance industry, where the law permits an insurance
company to exercise control over its agents within the limits
prescribed by law, and to engage independent agents for
several transactions and within an unlimited period of time
without the relationship amounting to employment. In light of
these realities, the petitioners arguments on his last
argument must also fail.
The dissent also erroneously cites eight other cases Social
Security System v. Court of Appeals,[23] Cosmopolitan
Funeral Homes, Inc. v. Maalat,[24] Algon Engineering
Construction Corporation v. National Labor Relations
Commission,[25] Equitable Banking Corporation v. National
Labor Relations Commission,[26] Lazaro v. Social Security
Commission,[27] Dealco Farms, Inc. v. National Labor
Relations Commission,[28]South Davao Development
Company, Inc. v. Gamo,[29] and Abante, Jr. v. Lamadrid
Bearing & Parts Corporation.[30] The dissent cited these
cases to support its allegation that labor laws and
jurisprudence should be applied in cases, to the exclusion of
other laws such as the Civil Code or the Insurance Code,
even when the latter are also applicable.
In Social Security System, Cosmopolitan Funeral
Homes, Dealco Farms, and South Davao Development, the
issue that repeats itself is whether complainants were
employees or independent contractors; the legal
relationships involved are both labor law concepts and
make no reference to the Civil Code (or even the Insurance
Code). The provisions cited in the Dissent Articles 1458-
1637 of the Civil Code[31] and Articles 1713-1720 of the Civil
Code [32] do not even appear in the decisions cited.
In Algon, the issue was whether the lease contract
should dictate the legal relationship between the parties,
when there was proof of an employer-employee
relationship. In the cited case, the lease provisions on
termination were thus considered irrelevant because of a
substantial evidence of an employment relationship. The
cited case lacks the complexity of the present case; Civil
Code provisions on lease do not prescribe that lessees
exercise control over their lessors in the way that the
10
Insurance Code and the Civil provide that insurance
companies and principals exercised control over their
agents.
The issue in Equitable, on the other hand, is whether
a lawyer-client relationship or an employment relationship
governs the legal relation between parties. Again, this case
is inapplicable as it does not illustrate the predominance of
labor laws and jurisprudence over other laws, in general,
and the Insurance Code and Civil Code, in particular. It
merely weighed the evidence in favor of an employment
relationship over that of a lawyer-client relationship.
Similarly in Lazaro, the Court found ample proof of control
determinative of an employer-employee relationship. Both
cases are not applicable to the present case, which is
attended by totally different factual considerations as the
petitioner had not offered any evidence of the companys
control in the means and manner of the performance of his
work.
On the other hand, we find it strange that the dissent
cites Abante as a precedent, since the Court, in this case,
held that an employee-employer relationship is notably
absent in this case as the complainant was a sales agent.
This case better supports the majoritys position that a sales
agent, who fails to show control in the concept of labor law,
cannot be considered an employee, even if the company
exercised control in the concept of a sales agent.[33]
It bears stressing that our ruling in this case is not
about which law has primacy over the other, but that we
should be able to reconcile these laws. We are merely
saying that where the law makes it mandatory for a
company to exercise control over its agents, the
complainant in an illegal dismissal case cannot rely on
these legally prescribed control devices as indicators of an
employer-employee relationship. As shown in our
discussion, our consideration of the Insurance Code and
Civil Code provisions does not negate the application of
labor laws and jurisprudence; ultimately, we dismissed the
petition because of its failure to comply with the control test.
WHEREFORE, premises considered, we
hereby DENY the Motion for Reconsideration WITH
FINALITY for lack of merit. No further pleadings shall be
entertained. Let entry of judgment proceed in due course.
SO ORDERED.
DIGEST:
Tongko v. Manufacturers LIfe Insurance Co.
(Phils.), Inc.
(570 SCRA 503)
FACTS:
The contractual relationship between Tongko and
Manulife had two basic phases. The first phase began on
11
July 1, 1977, under a CareerAgent’s Agreement, which
provided that “the Agent is an independent contractor
and nothing contained herein shall be construed
or interpreted ascreating an employer-employee relationship
between the Company and the Agent.”The second phase
started in 1983 when Tongko was named Unit Manager in
Manulife’s Sales Agency Organization. In 1990, he became
aBranch Manager. In 1996), Tongko became a Regional
Sales Manager. Tongko’s gross earnings consisted of
commissions, persistency income, andmanagement
overrides. Since the beginning, Tongko consistently
declared himself self-employed in his income tax returns.
Under oath, he declared hisgross business income and
deducted his business expenses to arrive at his taxable
business income.Respondent Renato Vergel de Dios, sales
manager, wrote Tongko a letter dated November 6, 2001 on
concerns that were brought up duringthe Metro North Sales
Managers Meeting, expressing dissatisfaction of Tongko’s
performance in their agent recruiting business, which
resulted in somechanges on how Tongko would conduct his
duties, including that Tongko hire at his expense a
competent assistant to unload him of routine tasks, whichhe
had been complaining to be too taxing for him.On
December 18, 2001, de Dios wrote Tongko another letter
which served as notice of termination of his Agency
Agreement with the companyeffective fifteen days from
the date of the letter. Tongko filed an illegal dismissal
complaint with the National Labor Relations
Commission (NLRC),alleging that despite the clear terms of
the letter terminating his Agency Agreement, that he was
Manulife’s employee before he was illegally dismissed.The
labor arbiter
decreed that no employer-employee relationship
existed between the parties.The
NLRC
reversed the labor arbiter’s decision on appeal; it
found the existence of an employer-employee relationship
and concluded thatTongko had been illegally dismissed.The
Court of Appeals
found that the NLRC gravely abused its discretion in
its ruling and reverted to the labor arbiter’s decision that
noemployer-employee relationship existed between Tongko
and Manulife.
ISSUE:
Is there an employer-employee relationship between
Tongko and Manulife?.
HELD:
NO. In the determination of whether an employer-
employee relationship exists between 2 parties, this court
applies the four-fold test todetermine the existence of the
elements of such relationship. Jurisprudence is firmly settled
that whenever the existence of an employment
relationshipis in dispute, four elements constitute the
reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the powerof
dismissal; and (d) the employer’s power to
control
the employee’s conduct. IT is the so-called “control
test” which constitutes the most important indexof existence
of the employer-employee relationship that is, whether the
employer controls or has reserved the right to control the
employee not only asto the result of the work to be done but
also as to the means and methods by which the same is to
be accomplished. Stated otherwise, an employer-employee
12
relationship exists where the person for whom the services
are performed reserves the right to control not only the end
to be achieved butalso the means to be used in reaching
such end. In the case at bar, the absence of evidence
showing Manulife’s control over Tongko’s contractualduties
points to the absence of any employer-employee
relationship between Tongko and Manulife. In the context of
the established evidence, Tongkoremained an agent all
along; although his subsequent duties made him a lead
agent with leadership role, he was nevertheless only an
agent whosebasic contract yields no evidence of means-
and-manner control.
Claimant clearly failed to substantiate his claim of
employment relationship by thequantum of evidence the
Labor Code requires.Tongko’s failure to comply with the
guidelines of de Dios’ letter, as a ground for termination of
Tongko’s agency, is a matter that the labortribunals cannot
rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the
courts applying the laws ofinsurance, agency and contracts.
Dispositive:
We REVERSE our Decision of November 7, 2008,
GRANT Manulife’s motion for reconsideration and,
accordingly, DISMISSTongko’s petition
G.R. No. 171212 August 4, 2014
INDOPHIL TEXTILE MILLS, INC., Petitioner,
vs.
ENGR. SALVADOR ADVIENTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under
Rule 45 of the Revised Rules of Court which seeks to
review, reverse and set-aside the Decision1 of the Court of
Appeals (CA), dated May 30, 2005, and its Resolution2dated
January 10, 2006 in the case entitled Jndophil Textile Mills,
Inc. v. Hon. Rolando R. Velasco and Engr. Salvador
Adviento, docketed as CA-G.R. SP No. 83099.
The facts are not disputed.
Petitioner Indophil Textile Mills, Inc. is a domestic
corporation engaged in the business of manufacturing
thread for weaving.3 On August 21, 1990, petitioner hired
respondent Engr. Salvador Adviento as Civil Engineer to
maintain its facilities in Lambakin, Marilao, Bulacan.4 On
August 7, 2002, respondent consulted a physician due to
recurring weakness and dizziness.5 Few days later, he was
diagnosed with Chronic Poly Sinusitis, and thereafter, with
moderate, severe and persistent Allergic
6
Rhinitis. Accordingly, respondent was advised by his doctor
to totally avoid house dust mite and textile dust as it will
transmute into health problems.7
Distressed, respondent filed a complaint against petitioner
with the National Labor Relations Commission (NLRC), San
Fernando, Pampanga, for alleged illegal dismissal and for
13
the payment of backwages, separation pay, actual damages
and attorney’s fees. The said case, docketed as NLRC
Case No. RAB-III-05-5834-03, is still pending resolution with
the NLRC at the time the instant petition was filed.8
Subsequently, respondent filed another Complaint9 with the
Regional Trial Court (RTC) of Aparri, Cagayan, alleging that
he contracted such occupational disease by reason of the
gross negligence of petitioner to provide him with a safe,
healthy and workable environment.
In his Complaint, respondent alleged that as part of his job
description, he conducts regular maintenance check on
petitioner’s facilities including its dye house area, which is
very hot and emits foul chemical odor with no adequate
safety measures introduced by petitioner.10 According to
respondent, the air washer dampers and all roof exhaust
vests are blown into open air, carrying dust
thereto.11 Concerned, respondent recommended to
management to place roof insulation to minimize, if not,
eradicate the health hazards attendant in the work
place.12 However, said recommendation was turned down
by management due to high cost.13 Respondent further
suggested to petitioner’s management that the engineering
office be relocated because ofits dent prone location, such
that even if the door of the office is sealed, accumulated
dust creeps in outside the office.14 This was further
aggravated by the installation of new filters fronting the
office.15 However, no action was taken by
management.16 According to respondent, these
healthhazards have been the persistent complaints of most,
if not all, workers of petitioner.17 Nevertheless, said
complaints fell on deaf ears as petitioner callously ignored
the health problems of its workers and even tended to be
apathetic to their plight, including respondent.18
Respondent averred that, being the only breadwinner in the
family, he made several attempts to apply for a new job, but
to his dismay and frustration, employers who knew ofhis
present health condition discriminated against him and
turned down his application.19 By reason thereof,
respondent suffered intense moral suffering, mental
anguish, serious anxiety and wounded feelings, praying for
the recovery of the following: (1) Five Million Pesos
(₱5,000,000.00) asmoral damages; (2) Two Million Pesos
(₱2,000,000.00) as exemplary damages; and (3) Seven
Million Three Thousand and Eight Pesos (₱7,003,008.00)
as compensatory damages.20 Claiming to be a pauper
litigant, respondent was not required to pay any filing fee.21
In reply, petitioner filed a Motion to Dismiss22 on the ground
that: (1) the RTC has no jurisdiction over the subject matter
of the complaint because the same falls under the original
and exclusive jurisdiction of the Labor Arbiter (LA) under
Article 217(a)(4) of the Labor Code; and (2) there is another
action pending with the Regional Arbitration Branch III of the
NLRC in San Fernando City, Pampanga, involving the same
parties for the same cause.
14
On December 29, 2003, the RTC issued a
Resolution23 denying the aforesaid Motion and sustaining its
jurisdiction over the instant case. It held that petitioner’s
alleged failure to provide its employees with a safe, healthy
and workable environment is an act of negligence, a case of
quasi-delict. As such, it is not within the jurisdiction of the LA
under Article 217 of the Labor Code. On the matter of
dismissal based on lis pendencia, the RTC ruled that the
complaint before the NLRC has a different cause of action
which is for illegal dismissal and prayer for backwages,
actual damages, attorney’s fees and separation pay due to
illegal dismissal while in the present case, the cause of
action is for quasi-delict.24 The falloof the Resolution is
quoted below:
WHEREFORE, finding the motion to dismiss to be without
merit, the Court deniesthe motion to dismiss.
SO ORDERED.25
On February 9, 2004, petitioner filed a motion for
reconsideration thereto, which was likewise denied in an
Order issued on even date.
Expectedly, petitioner then filed a Petition for Certiorariwith
the CA on the ground that the RTC committed grave abuse
of discretion amounting to lack or excess of jurisdiction in
upholding that it has jurisdiction over the subject matter of
the complaint despite the broad and clear terms of Article
217 of the Labor Code, as amended.26
After the submission by the parties of their respective
Memoranda, the CA rendered a Decision27 dated May 30,
2005 dismissing petitioner’s Petition for lack of merit, the
dispositive portion of which states:
WHEREFORE, premises considered, petition for certiorari is
hereby DISMISSEDfor lack of merit. SO ORDERED.28
From the aforesaid Decision, petitioner filed a Motion for
Reconsideration which was nevertheless denied for lack of
merit in the CA’s Resolution29 dated January 10, 2006.
Hence, petitioner interposed the instant petition upon the
solitary ground that "THE HONORABLE COURT OF
APPEALS HAS DECIDED A QUESTION OF SUBSTANCE
IN A WAY NOT IN ACCORD WITH LAW AND WITH
APPLICABLE DECISIONS OF THE HONORABLE
SUPREME COURT."30 Simply, the issue presented before
us is whether or not the RTC has jurisdiction over the
subject matter of respondent’s complaint praying for moral
damages,exemplary damages, compensatory damages,
anchored on petitioner’s alleged gross negligence in failing
to provide a safe and healthy working environment for
respondent.
The delineation between the jurisdiction of regular courts
and labor courts over cases involving workers and their
15
employers has always been a matter of dispute.31 It is up to
the Courts to lay the line after careful scrutiny of the factual
milieu of each case. Here, we find that jurisdiction rests on
the regular courts.
In its attempt to overturn the assailed Decision and
Resolution of the CA, petitioner argues that
respondent’sclaim for damages is anchored on the alleged
gross negligence of petitioner as an employer to provide its
employees, including herein respondent, with a safe,
healthy and workable environment; hence, it arose from an
employer-employee relationship.32 The fact of respondent’s
employment withpetitioner as a civil engineer is a necessary
element of his cause of action because without the same,
respondent cannot claim to have a right to a safe, healthy
and workable environment.33 Thus, exclusive jurisdiction
over the same should be vested in the Labor Arbiter and the
NLRC pursuant to Article 217(a)(4) of the Labor Code of the
Philippines (Labor Code), as amended.34
We are not convinced.
The jurisdiction of the LA and the NLRC is outlined in Article
217 of the Labor Code, as amended by Section 9 of
Republic Act (R.A.) No. 6715, to wit:
ART. 217. Jurisdiction of Labor Arbiters and the
Commission-- (a) Except as otherwise provided under this
Code the Labor Arbiter shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for
decision without extension, even in the absence of
stenographic notes, the following cases involving all
workers, whether agricultural or nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those
cases that workers may file involvingwages, rates of pay,
hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this
Code including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service,involving an
amount exceeding five thousand pesos (₱5,000.00)
regardless of whether accompanied with a claim for
reinstatement.
x x x.35
16
While we have upheld the present trend to refer worker- It is obvious from the complaint that the plaintiffs have not
employer controversies to labor courts in light of the alleged any unfair labor practice. Theirs is a simple action
aforequoted provision, we have also recognized that not all for damages for tortious acts allegedly committed by the
claims involving employees can be resolved solely by our defendants. Such being the case, the governing statute is
labor courts, specifically when the law provides the Civil Code and not the Labor Code. It results that the
otherwise.36 For this reason, we have formulated the orders under revieware based on a wrong premise.40
"reasonable causal connection rule," wherein if there is a
Similarly, we ruled in the recent case of Portillo v. Rudolf
reasonable causal connection between the claim asserted
Lietz, Inc.41 that not all disputes between an employer and
and the employer-employee relations, then the case is
his employees fall within the jurisdiction of the labor
within the jurisdiction of the labor courts; and in the absence
tribunals suchthat when the claim for damages is grounded
thereof, it is the regular courts that have jurisdiction.37 Such
on the "wanton failure and refusal" without just cause of an
distinction is apt since it cannot be presumed that money
employee to report for duty despite repeated notices served
claims of workers which do not arise out of or in connection
upon him of the disapproval of his application for leave
with their employer-employee relationship, and which would
ofabsence, the same falls within the purview of Civil Law, to
therefore fall within the general jurisdiction of the regular
wit:
courts of justice, were intended by the legislative authority to
be taken away from the jurisdiction of the courts and lodged As early as Singapore Airlines Limited v. Paño, we
with Labor Arbiters on an exclusive basis.38 established that not all disputes between an employer and
his employee(s) fall within the jurisdiction of the labor
In fact, as early as Medina vs. Hon. Castro-Bartolome,39 in
tribunals. We differentiated between abandonment per
negating the jurisdiction of the LA, although the parties
seand the manner and consequent effects of such
involved were an employer and two employees, the Court
abandonment and ruled that the first, is a labor case, while
succinctly held that:
the second, is a civil law case.
The pivotal question to Our mind iswhether or not the Labor
Upon the facts and issues involved, jurisdiction over the
Code has any relevance to the reliefs sought by the
present controversy must be held to belong to the civil
plaintiffs. For if the Labor Code has no relevance, any
Courts. While seemingly petitioner's claim for damages
discussion concerning the statutes amending it and whether
arises from employer-employee relations, and the latest
or not they have retroactive effect is unnecessary.
17
amendment to Article 217 of the Labor Code under PD No. In the case at bench, we find that such connection is nil.
1691 and BP Blg. 130 provides that all other claimsarising
True, the maintenance of a safe and healthy workplace is
from employer-employee relationship are cognizable by
ordinarily a subject of labor cases. More, the acts
Labor Arbiters [citation omitted], in essence, petitioner's
complained of appear to constitute matters involving
claim for damages is grounded on the "wanton failure and
employee-employer relations since respondent used to be
refusal"without just cause of private respondent Cruz to
the Civil Engineer of petitioner. However, it should be
report for duty despite repeated notices served upon him of
stressed that respondent’s claim for damages is specifically
the disapproval of his application for leave of absence
grounded on petitioner’s gross negligenceto provide a safe,
without pay. This, coupled with the further averment that
healthy and workable environment for its employees −a
Cruz "maliciously and with bad faith" violated the terms and
case of quasi-delict. This is easily ascertained from a plain
conditions of the conversion training course agreement to
and cursory reading of the Complaint,45 which enumerates
the damage of petitioner removes the present controversy
the acts and/or omissions of petitioner relative to the
from the coverage of the Labor Code and brings it within the
conditions in the workplace, to wit:
purview of Civil Law.
1. Petitioner’s textile mills have excessive flying textile dust
Clearly, the complaint was anchored not on the
and waste in its operations and no effort was exerted by
abandonment per se by private respondent Cruz of his
petitioner to minimize or totally eradicate it;
job—as the latter was not required in the Complaint to
report back to work—but on the manner and consequent 2. Petitioner failed to provide adequate and sufficient dust
effects of such abandonmentof work translated in terms of suction facilities;
the damages which petitioner had to suffer. x x x.42
3. Textile machines are cleaned with air compressors
Indeed, jurisprudence has evolved the rule that claims for aggravating the dusty work place;
damages under Article 217(a)(4) of the Labor Code, to be
4. Petitioner has no physician specializing in
cognizable by the LA, must have a reasonable causal
connection withany of the claims provided for in that respiratoryrelated illness considering it is a textile company;
article.43Only if there is such a connection with the other 5. Petitioner has no device to detectthe presence or density
claims can a claim for damages be considered as arising of dust which is airborne;
from employer-employee relations.44
18
6. The chemical and color room are not equipped with
proper safety chemical nose mask; and
7. The power and boiler plant emit too much smoke with
solid particles blown to the air from the smoke stack of the
power plant emitting a brown rust color which engulfs the
entire compound.46
In addition, respondent alleged that despite his earnest
efforts to suggest to management to place roof insulation to
minimize, if not, eradicate the health hazards attendant in
the workplace, the same was not heeded.47
It is a basic tenet 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 claim asserted therein, which is a matter
resolved only after and as a result of a trial.48 Neither can
jurisdiction of a court bemade to depend upon the defenses
made by a defendant in his answer or motion to
dismiss.49 In this case, a perusal of the complaint would
reveal that the subject matter is one of claim for damages
arising from quasi-delict, which is within the ambit of the
regular court's jurisdiction.
The pertinent provision of Article 2176 of the Civil Code
which governs quasi-delictprovides that: Whoever by act or
omissioncauses damageto another, there being fault or
negligence, is obliged to pay for the damagedone. Such
fault or negligence, if there is no pre-existing contractual
relation between the parties, is called quasi-delict.50
Thus, to sustain a claim liability under quasi-delict, the
following requisites must concur: (a) damages suffered by
the plaintiff; (b) fault or negligence of the defendant, or
someother person for whose acts he must respond; and (c)
the connection of cause and effect between the fault or
negligence of the defendant and the damages incurred by
the plaintiff.51
In the case at bar, respondent alleges that due to the
continued and prolonged exposure to textile dust seriously
inimical to his health, he suffered work-contracted disease
which is now irreversible and incurable, and deprived him of
job opportunities.52 Clearly, injury and damages were
allegedly suffered by respondent, an element of quasi-delict.
Secondly, the previous contract of employment between
petitioner and respondent cannot be used to counter the
element of "no pre-existing contractual relation" since
petitioner’s alleged gross negligence in maintaining a
hazardous work environment cannot be considered a mere
breach of such contract of employment, but falls squarely
within the elements of quasi-delictunder Article 2176 of the
Civil Code since the negligence is direct, substantive and
independent.53 Hence, we ruled in Yusen Air and Sea
Services Phils., Inc. v. Villamor54 that:
19
When, as here, the cause of action is based on a quasi-
delictor tort, which has no reasonable causal connection
with any of the claims provided for in Article 217, jurisdiction
over the action is with the regular courts.55
It also bears stressing that respondent is not praying for any
relief under the Labor Code of the Philippines. He neither
claims for reinstatement nor backwages or separation pay
resulting from an illegal termination. The cause of action
herein pertains to the consequence of petitioner’s omission
which led to a work-related disease suffered by respondent,
causing harm or damage to his person. Such cause of
action is within the realm of Civil Law, and jurisdiction over
the controversy belongs to the regular courts.56
Our ruling in Portillo, is instructive, thus:
There is no causal connection between private respondent’s
claim for damages and the respondent employers’ claim for
damages for the alleged "Goodwill Clause" violation.
Portillo’s claim for unpaid salaries did not have anything to
do with her alleged violation of the employment contract as,
in fact, her separation from employmentis not "rooted" in the
alleged contractual violation. She resigned from her
employment. She was not dismissed. Portillo’s entitlementto
the unpaid salaries is not even contested. Indeed, Lietz
Inc.’s argument about legal compensation necessarily
admits that it owesthe money claimed by Portillo.57
Further, it cannot be gainsaid that the claim for damages
occurred afterthe employer-employee relationship of
petitioner and respondent has ceased. Given that
respondent no longer demands for any relief under the
Labor Code as well as the rules and regulations pertinent
thereto, Article 217(a)(4) of the Labor Code is inapplicable
to the instant case, as emphatically held in Portillo, to wit:
It is clear, therefore, that while Portillo’s claim for unpaid
salaries is a money claim that arises out ofor in connection
with an employeremployee relationship, Lietz Inc.’s claim
against Portillo for violation of the goodwill clause is a
money claim based on an act done after the cessation of
the employment relationship. And, while the jurisdiction over
Portillo’s claim is vested in the labor arbiter, the jurisdiction
over Lietz Inc.’s claim rests on the regular courts. Thus:
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
breach thereof. Such cause of action is within the realm of
Civil Law, and jurisdiction over the controversy belongs to
the regular courts. More so must this be in the present case,
what with the reality that the stipulation refers to the post-
employment relations of the parties.58
Where the resolution of the dispute requires expertise, not
in labor management relations nor in wage structures and
other terms and conditions of employment, but rather in the
20
application of the general civil law, such claim falls outside - versus - PEREZ,*** and
the area of competence of expertise ordinarily ascribed to
MENDOZA, JJ.
the LA and the NLRC.59

Guided by the aforequoted doctrines, we find no reason to

reverse the findings of the CA.1âwphi1 The RTC has
jurisdiction over the subject matter of respondent's
complaint praying for moral damages, exemplary damages,
compensatory damages, anchored on petitioner's alleged FLY ACE CORPORATION/ Promulgated:
gross negligence in failing to provide a safe and healthy
working environment for respondent. WHEREFORE, the FLORDELYN CASTILLO,
petition is DENIED. The Decision of the Court of Appeals, Respondents. February 15, 2012
dated May 30, 2005, and its Resolution dated January 10,
2006 in CA-G.R. SP No. 83099 are hereby AFFIRMED.

SO ORDERED.

BITOY JAVIER G.R. No. 192558 x -----------------------------------------------------------------------------

-----------x
(DANILO P. JAVIER),

Petitioner, Present:
DECISION

CARPIO,* J.,
MENDOZA, J.:
**
PERALTA, Acting Chairperson,

ABAD,

21
This is a petition under Rule 45 of the Rules of Civil
Procedure assailing the March 18, 2010 Decision[1] of the
Court of Appeals (CA) and its June 7, 2010 Resolution,[2] in
CA-G.R. SP No. 109975, which reversed the May 28, 2009
Decision[3] of the National Labor Relations
Commission (NLRC) in the case entitled Bitoy Javier v. Fly
Ace/Flordelyn Castillo,[4] holding that petitioner Bitoy
Javier (Javier) was illegally dismissed from employment and
ordering Fly Ace Corporation (Fly Ace) to pay backwages
and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC
for underpayment of salaries and other labor standard
benefits. He alleged that he was an employee of Fly Ace
since September 2007, performing various tasks at the
respondents warehouse such as cleaning and arranging the
canned items before their delivery to certain locations,
except in instances when he would be ordered to
accompany the companys delivery vehicles, as pahinante;
that he reported for work from Monday to Saturday from
7:00 oclock in the morning to 5:00 oclock in the afternoon;
that during his employment, he was not issued an
identification card and payslips by the company; that on
May 6, 2008, he reported for work but he was no longer
allowed to enter the company premises by the security
guard upon the instruction of Ruben Ong (Mr. Ong), his
superior;[5] that after several minutes of begging to the guard
to allow him to enter, he saw Ong whom he approached and
asked why he was being barred from entering the premises;
that Ong replied by saying, Tanungin mo anak mo; [6]that he
then went home and discussed the matter with his family;
that he discovered that Ong had been courting his daughter
Annalyn after the two met at a fiesta celebration in Malabon
City; that Annalyn tried to talk to Ong and convince him to
spare her father from trouble but he refused to accede; that
thereafter, Javier was terminated from his employment
without notice; and that he was neither given the opportunity
to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of
one Bengie Valenzuela who alleged that Javier was a
stevedore or pahinante of Fly Ace from September 2007 to
January 2008. The said affidavit was subscribed before the
Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in the
business of importation and sales of groceries. Sometime in
December 2007, Javier was contracted by its employee, Mr.
22
Ong, as extra helper on a pakyaw basis at an agreed rate of
₱300.00 per trip, which was later increased to ₱325.00 in
January 2008. Mr. Ong contracted Javier roughly 5 to 6
times only in a month whenever the vehicle of its contracted
hauler, Milmar Hauling Services, was not available. On April
30, 2008, Fly Ace no longer needed the services of
Javier. Denying that he was their employee, Fly Ace insisted
that there was no illegal dismissal.[8] Fly Ace submitted a
copy of its agreement with Milmar Hauling Services and
copies of acknowledgment receipts evidencing payment to
Javier for his contracted services bearing the words, daily
manpower (pakyaw/piece rate pay) and the latters
signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for
lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment
with the Respondent nor any document showing that he
received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give
him said ID and payslips implies that indeed he was not a
regular employee of Fly Ace considering that complainant
was a helper and that Respondent company has contracted
a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but
in the importation and sales of groceries. Since there is a
regular hauler to deliver its products, we give credence to
Respondents claim that complainant was contracted on
pakiao basis.
As to the claim for underpayment of salaries, the payroll
presented by the Respondents showing salaries of workers
on pakiao basis has evidentiary weight because although
the signature of the complainant appearing thereon are not
uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown
by the above described payrolls, Respondents are not liable
for salary differentials. [9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that
the LA skirted the argument of Javier and immediately
concluded that he was not a regular employee simply
23
because he failed to present proof. It was of the view that Finding Javier to be a regular employee, the NLRC ruled
a pakyaw-basis arrangement did not preclude the existence that he was entitled to a security of tenure. For failing to
of employer-employee relationship. Payment by result x x present proof of a valid cause for his termination, Fly Ace
x is a method of compensation and does not define the was found to be liable for illegal dismissal of Javier who was
essence of the relation. It is a mere method of computing likewise entitled to backwages and separation pay in lieu of
compensation, not a basis for determining the existence or reinstatement. The NLRC thus ordered:
absence of an employer-employee relationship.[10] The
WHEREFORE, premises considered, complainants appeal
NLRC further averred that it did not follow that a worker was
is partially GRANTED. The assailed Decision of the labor
a job contractor and not an employee, just because the
arbiter is VACATED and a new one is hereby entered
work he was doing was not directly related to the employers
holding respondent FLY ACE CORPORATION guilty of
trade or business or the work may be considered as extra
illegal dismissal and non-payment of 13th month pay.
helper as in this case; and that the relationship of an
Consequently, it is hereby ordered to pay complainant
employer and an employee was determined by law and the
DANILO Bitoy JAVIER the following:
same would prevail whatever the parties may call it. In this
case, the NLRC held that substantial evidence was
sufficient basis for judgment on the existence of the
employer-employee relationship. Javier was a regular 1. Backwages -₱45,770.83
employee of Fly Ace because there was reasonable 2. Separation pay, in lieu of reinstatement - 8,450.00
connection between the particular activity performed by the
employee (as a pahinante) in relation to the usual business 3. Unpaid 13th month pay (proportionate) - 5,633.33
or trade of the employer (importation, sales and delivery of TOTAL -₱59,854.16
groceries). He may not be considered as an independent
contractor because he could not exercise any judgment in
the delivery of company products.He was only engaged as All other claims are dismissed for lack of merit.
a helper.

SO ORDERED.[11]
24

Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that
Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javiers complaint as ordered by
the LA. The CA exercised its authority to make its own
factual determination anent the issue of the existence of an
employer-employee relationship between the
parties. According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the
employer to prove that its dismissal was for a valid cause.
However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x
x x it is incumbent upon private respondent to prove the
employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by
substantial evidence, that he is an employee of petitioners,
but he failed to discharge his burden. The non-issuance of a
company-issued identification card to private respondent
supports petitioners contention that private respondent was
not its employee.[12]
The CA likewise added that Javiers failure to present salary
vouchers, payslips, or other pieces of evidence to bolster
his contention, pointed to the inescapable conclusion that
he was not an employee of Fly Ace. Further, it found that
Javiers work was not necessary and desirable to the
business or trade of the company, as it was only when there
were scheduled deliveries, which a regular hauling service
could not deliver, that Fly Ace would contract the services of
Javier as an extra helper. Lastly, the CA declared that the
facts alleged by Javier did not pass the control test.
He contracted work outside the company premises; he was
not required to observe definite hours of work; he was not
required to report daily; and he was free to accept other
work elsewhere as there was no exclusivity of his
contracted service to the company, the same being co-
terminous with the trip only.[13] Since no substantial
25
evidence was presented to establish an employer-employee
relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER WAS NOT
A REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations
and self-serving affidavits of the other employees, Fly Ace
has nothing to substantiate its claim that Javier was
engaged on a pakyaw basis. Assuming that Javier was
indeed hired on a pakyaw basis, it does not preclude his
regular employment with the company. Even the
acknowledgment receipts bearing his signature and the
confirming receipt of his salaries will not show the true
nature of his employment as they do not reflect the
necessary details of the commissioned task. Besides,
Javiers tasks as pahinante are related, necessary and
desirable to the line of business by Fly Ace which is
engaged in the importation and sale of grocery items. On
days when there were no scheduled deliveries, he worked
in petitioners warehouse, arranging and cleaning the stored
cans for delivery to clients.[15] More importantly, Javier was
subject to the control and supervision of the company, as he
was made to report to the office from Monday to Saturday,
from 7:00 oclock in the morning until 5:00 oclock in the
afternoon. The list of deliverable goods, together with the
corresponding clients and their respective purchases and
addresses, would necessarily have been prepared by Fly
Ace. Clearly, he was subjected to compliance with company
rules and regulations as regards working hours, delivery
schedule and output, and his other duties in the
warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where
the Court ruled that payment to a worker on a per trip basis
is not significant because this is merely a method of
computing compensation and not a basis for determining
the existence of employer-employee relationship. Javier
likewise invokes the rule that, in controversies between a
26
laborer and his master, x x x doubts reasonably arising from
the evidence should be resolved in the formers favour. The
policy is reflected is no less than the Constitution, Labor
Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts
that he was illegally dismissed by the latters failure to
observe substantive and procedural due process. Since his
dismissal was not based on any of the causes recognized
by law, and was implemented without notice, Javier is
entitled to separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no
substantial evidence to prove employer-employee
relationship. Having a service contract with Milmar Hauling
Services for the purpose of transporting and delivering
company products to customers, Fly Ace contracted Javier
as an extra helper or pahinante on a mere per trip
basis. Javier, who was actually a loiterer in the area, only
accompanied and assisted the company driver when Milmar
could not deliver or when the exigency of extra deliveries
arises for roughly five to six times a month. Before making a
delivery, Fly Ace would turn over to the driver and Javier the
delivery vehicle with its loaded company products. With the
vehicle and products in their custody, the driver and Javier
would leave the company premises using their own means,
method, best judgment and discretion on how to deliver,
time to deliver, where and [when] to start, and manner of
delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as
baseless assertions. Aside from his bare allegations, he
presented nothing to substantiate his status as an
employee. It is a basic rule of evidence that each party must
prove his affirmative allegation. If he claims a right granted
by law, he must prove his claim by competent evidence,
relying on the strength of his own evidence and not upon
the weakness of his opponent.[21]Invoking the case of Lopez
v. Bodega City,[22] Fly Ace insists that in an illegal dismissal
case, the burden of proof is upon the complainant who
claims to be an employee. It is essential that an employer-
employee relationship be proved by substantial evidence.
Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for
a valid cause. However, before a case for illegal dismissal
27
can prosper, an employer-employee relationship must first their contracted services and neither were they subjected to
be established. definite hours or condition of work.

Fly Ace points out that Javier merely offers factual

assertions that he was an employee of Fly Ace, which are
unfortunately not supported by proof, documentary or
otherwise.[23] Javier simply assumed that he was an
employee of Fly Ace, absent any competent or relevant
evidence to support it. He performed his contracted work Fly Ace likewise claims that Javiers function as
a pahinante was not directly related or necessary to its
outside the premises of the respondent; he was not even
principal business of importation and sales of groceries.
required to report to work at regular hours; he was not made
to register his time in and time out every time he was Even without Javier, the business could operate its usual
contracted to work; he was not subjected to any disciplinary course as it did not involve the business of inland
transportation. Lastly, the acknowledgment receipts bearing
sanction imposed to other employees for company
Javiers signature and words pakiao rate, referring to his
violations; he was not issued a company I.D.; he was not
accorded the same benefits given to other employees; he earned salaries on a per trip basis, have evidentiary weight
that the LA correctly considered in arriving at the conclusion
was not registered with the Social Security System (SSS) as
petitioners employee; and, he was free to leave, accept and that Javier was not an employee of the company.
engage in other means of livelihood as there is no
exclusivity of his contracted services with the petitioner, his
services being co-terminus with the trip only. All these lead The Court affirms the assailed CA decision.
to the conclusion that petitioner is not an employee of the
respondents.[24]
It must be noted that the issue of Javiers alleged illegal
Moreover, Fly Ace claims that it had no right to control the dismissal is anchored on the existence of an employer-
result, means, manner and methods by which Javier would employee relationship between him and Fly Ace. This is
perform his work or by which the same is to be essentially a question of fact. Generally, the Court does not
accomplished.[25] In other words, Javier and the company review errors that raise factual questions. However, when
driver were given a free hand as to how they would perform
28
there is conflict among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, it is
proper, in the exercise of Our equity jurisdiction, to review
and re-evaluate the factual issues and to look into the
records of the case and re-examine the questioned
findings.[26] In dealing with factual issues in labor cases,
substantial evidence that amount of relevant evidence which
a reasonable mind might accept as adequate to justify a
conclusion is sufficient.[27]
As the records bear out, the LA and the CA found Javiers
claim of employment with Fly Ace as wanting and deficient.
The Court is constrained to agree. Although Section 10,
Rule VII of the New Rules of Procedure of the
NLRC[28] allows a relaxation of the rules of procedure and
evidence in labor cases, this rule of liberality does not mean
a complete dispensation of proof. Labor officials are
enjoined to use reasonable means to ascertain the facts
speedily and objectively with little regard to technicalities or
formalities but nowhere in the rules are they provided a
license to completely discount evidence, or the lack of it.
The quantum of proof required, however, must still be
satisfied. Hence, when confronted with conflicting versions
on factual matters, it is for them in the exercise of discretion
to determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their
decision must be supported by substantial
evidence.[29] Accordingly, the petitioner needs to show by
substantial evidence that he was indeed an employee of the
company against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and
proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether
the party on whom the burden to prove lies was able to
hurdle the same. No particular form of evidence is required
to prove the existence of such employer-employee
relationship. Any competent and relevant evidence to prove
the relationship may be admitted.Hence, while no particular
form of evidence is required, a finding that such relationship
exists must still rest on some substantial evidence.
Moreover, the substantiality of the evidence depends on its
quantitative as well as its qualitative aspects.[30] Although
substantial evidence is not a function of quantity but rather
of quality, the x x x circumstances of the instant case
demand that something more should have been proffered.
Had there been other proofs of employment, such as x x x
inclusion in petitioners payroll, or a clear exercise of control,
the Court would have affirmed the finding of employer-
employee relationship.[31]
29
In sum, the rule of thumb remains: the onus probandi falls
on petitioner to establish or substantiate such claim by the
requisite quantum of evidence.[32] Whoever claims
entitlement to the benefits provided by law should establish
his or her right thereto x x x.[33] Sadly, Javier failed to
adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier
failed to establish his employment with Fly Ace. By way of
evidence on this point, all that Javier presented were his
self-serving statements purportedly showing his activities as
an employee of Fly Ace. Clearly, Javier failed to pass the
substantiality requirement to support his claim. Hence, the
Court sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an
employed stevedore of Fly Ace, he was made to work in the
company premises during weekdays arranging and cleaning
grocery items for delivery to clients, no other proof was
submitted to fortify his claim. The lone affidavit executed by
one Bengie Valenzuela was unsuccessful in strengthening
Javiers cause. In said document, all Valenzuela attested to
was that he would frequently see Javier at the workplace
where the latter was also hired as stevedore.[34] Certainly, in
gauging the evidence presented by Javier, the Court cannot
ignore the inescapable conclusion that his mere presence at
the workplace falls short in proving employment therein. The
supporting affidavit could have, to an extent, bolstered
Javiers claim of being tasked to clean grocery items when
there were no scheduled delivery trips, but no information
was offered in this subject simply because the witness had
no personal knowledge of Javiers employment status in the
company. Verily, the Court cannot accept Javiers
statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the
burden to pass the well-settled tests to determine the
existence of an employer-employee relationship, viz: (1) the
selection and engagement of the employee; (2) the payment
of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct. Of these elements, the
most important criterion is whether the employer controls or
has reserved the right to control the employee not only as to
the result of the work but also as to the means and methods
by which the result is to be accomplished.[35]
In this case, Javier was not able to persuade the Court that
the above elements exist in his case. He could not submit
competent proof that Fly Ace engaged his services as a
regular employee; that Fly Ace paid his wages as an
30
employee, or that Fly Ace could dictate what his conduct
should be while at work. In other words, Javiers allegations
did not establish that his relationship with Fly Ace had the
attributes of an employer-employee relationship on the
basis of the above-mentioned four-fold test. Worse, Javier
was not able to refute Fly Aces assertion that it had an
agreement with a hauling company to undertake the
delivery of its goods. It was also baffling to realize that
Javier did not dispute Fly Aces denial of his services
exclusivity to the company. In short, all that Javier laid down
were bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid
him on a per trip rate as a stevedore, albeit on
a pakyaw basis. The Court cannot fail to note that Fly Ace
presented documentary proof that Javier was indeed paid
on a pakyaw basis per the acknowledgment receipts
admitted as competent evidence by the LA. Unfortunately
for Javier, his mere denial of the signatures affixed therein
cannot automatically sway us to ignore the documents
because forgery cannot be presumed and must be proved
by clear, positive and convincing evidence and the burden
of proof lies on the party alleging forgery.[36]
Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the
settled rule that payment by the piece is just a method of
compensation and does not define the essence of the
relation.[37] Payment on a piece-rate basis does not negate
regular employment. The term wage is broadly defined in
Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed
or ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and
does not define the essence of the relations. Nor does the
fact that the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining
whether the relationship is that of employer and employee
or one of an independent contractor, each case must be
determined on its own facts and all the features of the
relationship are to be considered.[38] Unfortunately for
Javier, the attendant facts and circumstances of the instant
case do not provide the Court with sufficient reason to
uphold his claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not
31
be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its rights
which are entitled to respect and enforcement in the interest
of simple fair play. Out of its concern for the less privileged
in life, the Court has inclined, more often than not, toward
the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded the
Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine.[39]
WHEREFORE, the petition is DENIED. The March 18,
2010 Decision of the Court of Appeals and its June 7,
2010 Resolution, in CA-G.R. SP No. 109975, are
hereby AFFIRMED.
SO ORDERED.
G.R. No. 192601 June 3, 2013
PHILIPPINE JOURNALISTS, INC., Petitioner,
vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION
MEMBER, MICHAEL ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a
stipulation in a collective bargaining agreement (CBA)
granting funeral or bereavement benefit to a regular
employee for the death of a legal dependent, if the CBA is
silent about it, is to be construed as similar to the meaning
that contemporaneous social legislations have set. This is
because the terms of such social legislations are deemed
incorporated in or adopted by the CBA.
The decision of the Court of Appeals (CA) under review
summarizes the factual and procedural antecedents, as
follows:
Complainant Judith Pulido alleged that she was hired by
respondent as proofreader on 10 January 1991; that she
was receiving a monthly basic salary of P-15,493.66 plus P-
155.00 longevity pay plus other benefits provided by law
and their Collective Bargaining Agreement; that on 21
February 2003, as union president, she sent two letters to
President Gloria Arroyo, regarding their complaint of
mismanagement being committed by PIJ executive; that
sometime in May 2003, the union was furnished with a letter
by Secretary Silvestre Afable, Jr. head of Presidential
Management Staff (PMS), endorsing their letter-complaint to
Ombudsman Simeon V. Marcelo; that respondents took
offense and started harassments to complainant union
president; that on 30 May 2003, complainant received a
letter from respondent Fundador Soriano, International
Edition managing editor, regarding complainant’s
32
attendance record; that complainant submitted her reply to
said memo on 02 June 2003; that on 06 June 2003,
complainant received a memorandum of reprimand; that on
04 July 2003, complainant received another memo from Mr.
Soriano, for not wearing her company ID, which she replied
the next day 05 July 2003; that on 04 August 2003,
complainant again received a memo regarding
complainant’s tardiness; that on 05 August 2003,
complainant received another memorandum asking her to
explain why she should not be accused of fraud, which she
replied to on 07 August 2003; and that on the same day
between 3:00 to 4:00 P.M., Mr. Ernesto "Estong" San
Agustin, a staff of HRD handed her termination paper.
Complainant added that in her thirteen (13) years with the
company and after so many changes in its management
and executives, she had never done anything that will cause
them to issue a memorandum against her or her work
attitude, more so, reasons to terminate her services; that
she got dismissed because she was the Union President
who was very active in defending and pursuing the rights of
her union members, and in fighting against the abuses of
respondent Corporate Officers; and that she got the ire of
respondents when the employees filed a complaint against
the Corporate Officers before Malacañang and which was
later indorsed to the Office of the Ombudsman.
The second complainant Michael L. Alfante alleged that he
started to work with respondents as computer technician at
Management Information System under manager Neri
Torrecampo on 16 May 2000; that on 15 July 2001, he was
regularized receiving a monthly salary of ₱9,070.00 plus
other monetary benefits; that sometime in 2001, Rico
Pagkalinawan replaced Torrecampo, which was opposed by
complainant and three other co-employees; that
Pagkalinawan took offense of their objection; that on 22
October 2002, complainant Alfante received a
memorandum from Pagkalinawan regarding his excessive
tardiness; that on 10 June 2003, complainant Alfante
received a memorandum from Executive Vice-President
Arnold Banares, requiring him to explain his side on the
evaluation of his performance submitted by manager
Pagkalinawan; that one week after complainant submitted
his explanation, he was handed his notice of dismissal on
the ground of "poor performance"; and that complainant was
dismissed effective 28 July 2003.
Complainant Alfante submitted that he was dismissed
without just cause.
Respondents, in their position paper, averred that
complainants Pulido and Alfante were dismissed for cause
and with due process.
With regard to complainant Pulido, respondents averred that
in a memorandum dated 30 May 2003, directed complainant
to explain her habitual tardiness, at least 75 times from
January to May of 2003. In a memorandum, dated 06 June
33
2003, directed complainant to observe the 3 p.m. rule to
avoid grammatical lapses, use of stale stories just to beat
the 10:00 p.m. deadline. In the same memorandum
complainant was given the warning that any repeated
violation of the rules shall be dealt with more severely. Once
again, in a memorandum, dated 04 August 2003,
complainant Pulido was required to explain why no
disciplinary action should be taken against her for habitual
tardiness – 18 times out of the 23 reporting days during the
period from 27 June – 27 July 2003 and on 05 August 2003,
complainant was directed to explain in writing why
complainant should not be administratively sanctioned for
committing fraud or attempting to commit fraud against
respondents. Respondents found complainant’s
explanations unsatisfactory. On 07 August 2003,
respondents dismissed complainant Pulido for habitual
tardiness, gross insubordination, utter disrespect for
superiors, and committing fraud or attempting to commit
fraud which led to the respondents’ loss of confidence upon
complainant Pulido.
In case of complainant Alfante, respondents averred in
defense that complainant was dismissed for "poor
performance" after an evaluation by his superior, and after
being forewarned that complainant may be removed if there
was no showing of improvement in his skills and knowledge
on current technology.
In both instances, respondents maintained that they did not
commit any act of unfair labor practices; that they did not
commit acts tantamount to interfering, restraining, or
coercing employees in the exercise of their right to self-
organization.
Respondents deny liabilities as far as complainants’
monetary claims are concerned. Concerning violations of
the provision on wage distortion under Wage Order No. 9,
respondents stressed that complainants were not affected
since their salary is way over the minimum wage.
With respect to the alleged non-adjustment of longevity pay
and burial aid, respondent PJI pointed out that it complies
with the provisions of the CBA and that both complainants
have not claimed for the burial aid.
Respondents put forward the information that the alleged
nonpayment of rest days – every Monday for the past three
(3) years is a matter that is still at issue in NLRC Case No.
02-0402973-93, which case is still pending before this
Commission.
Respondents asserted that the respondents Arturo Dela
Cruz, Bobby Capco, Arnold Banares, Ruby Ruiz-Bruno and
Fundador Soriano should not be held liable on account of
complainants’ dismissal as they merely acted as agents of
respondent PJI.1
34
Upon the foregoing backdrop, Labor Arbiter Corazon C.
Borbolla rendered her decision on March 29, 2006,
disposing thusly:
WHEREFORE, foregoing premises considered, judgment is
hereby rendered, finding complainant Judith Pulido to have
been illegally dismissed. As such, she is entitled to
reinstatement and backwages from 07 August 2003 up to
her actual or payroll reinstatement. To date, complainant’s
backwages is ₱294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to
pay complainant Judith Pulido her backwages from 07
August 2003 up to her actual or payroll reinstatement and to
reinstate her to her former position without loss of seniority
right.
Respondent is further ordered to submit a report to this
Office on complainant’s reinstatement ten (10) days from
receipt of this decision.
The charge of illegal dismissal by Michael Alfante is hereby
dismissed for lack of merit.
The charge of unfair labor practice is dismissed for lack of
basis.
SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor
organization, Journal Employees Union (JEU), filed a partial
appeal in the National Labor Relations Commission
(NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith
Pulido (Pulido), the other complainant, jointly manifested to
the NLRC that the decision of March 29, 2006 had been
fully satisfied as to Pulido under the following terms,
namely: (a) she would be reinstated to her former position
as editorial staffmember, or an equivalent position, without
loss of seniority rights, effective May 15, 2006; (b) she
would go on maternity leave, and report to work after giving
birth; (c) she would be entitled to backwages of
₱130,000.00; and (d) she would execute the quitclaim and
release on May 11, 2006 in favor of petitioner.4 This left
Alfante as the remaining complainant.
On January 31, 2007, the NLRC rendered its decision
dismissing the partial appeal for lack of merit.
JEU and Alfante moved for the reconsideration of the
decision, but the NLRC denied their motion on April 24,
2007.
Thereafter, JEU and Alfante assailed the decision of the
NLRC before the CA on certiorari (C.A.-G.R. SP No.
99407).
On February 5, 2010, the CA promulgated its decision in
C.A.-G.R. SP No. 99407,7 decreeing:
35
WHEREFORE, premises considered, the instant petition is
PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24,
2007, respectively, of the Third Division of the National
Labor Relations Commission (NLRC), in NLRC NCR CA
No. 048785-06 (NLRC NCR Case No. 00-10-11413-04), are
MODIFIED insofar as the funeral or bereavement aid is
concerned, which is hereby GRANTED, but only after
submission of conclusive proofs that the deceased is a
parent, either father or mother, of the employees concerned,
as well as the death certificate to establish the fact of death
of the deceased legal dependent.
The rest of the findings of fact and law in the assailed
Resolutions are hereby AFFIRMED.
SO ORDERED.
Both parties moved for reconsideration, but the CA denied
their respective motions for reconsideration on June 2,
2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to
challenge the CA’s dispositions regarding the legality of: (a)
Alfante’s dismissal; (b) the non-compliance with Minimum
Wage Order No. 9; and (c) the non-payment of the rest
day.9
On August 18, 2010, the Court denied due course to the
petition in G.R. No. 192478 for failure of petitioners to
sufficiently show that the CA had committed any reversible
error to warrant the Court’s exercise of its discretionary
appellate jurisdiction.10
The Court denied with finality JEU and Alfante’s ensuing
motion for reconsideration through the resolution of
December 8, 2010.11 The entry of judgment in G.R. No.
192478 issued in due course on February 1, 2011.12
On its part, petitioner likewise appealed (G.R. No. 192601),
seeking the review of the CA’s disposition in the decision of
February 5, 2010 on the granting of the funeral and
bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under
Section 4, Article XIII of the CBA, funeral and bereavement
aid should be granted upon the death of a legal dependent
of a regular employee; that consistent with the definition
provided by the Social Security System (SSS), the term
legal dependent referred to the spouse and children of a
married regular employee, and to the parents and siblings,
18 years old and below, of a single regular employee;13that
the CBA considered the term dependents to have the same
meaning as beneficiaries, as provided in Section 5, Article
XIII of the CBA on the payment of death benefits;14 that its
earlier granting of claims for funeral and bereavement aid
without regard to the foregoing definition of the legal
36
dependents of married or single regular employees did not
ripen into a company policy whose unilateral withdrawal
would constitute a violation of Article 100 of the Labor
Code,15 the law disallowing the non-diminution of
benefits;16 that it had approved only four claims from 1999
to 2003 based on its mistaken interpretation of the term
legal dependents, but later corrected the same in
2000;17 that the grant of funeral and bereavement aid for the
death of an employee’s legal dependent, regardless of the
employee’s civil status, did not occur over a long period of
time, was not consistent and deliberate, and was partly due
to its mistake in appreciating a doubtful question of law; and
that its denial of subsequent claims did not amount to a
violation of the law against the non-diminution of benefits.18
In their comment,19 JEU and Alfante countered that the CBA
was a bilateral contractual agreement that could not be
unilaterally changed by any party during its lifetime; and that
the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore
be reduced, diminished, discontinued or eliminated by
petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478,
JEU and Alfante’s submissions on the illegality of his
dismissal, the non-payment of his rest days, and the
violation of Minimum Wage Order No. 9 shall no longer be
considered and passed upon.
The sole remaining issue is whether or not petitioner’s
denial of respondents’ claims for funeral and bereavement
aid granted under Section 4, Article XIII of their CBA
constituted a diminution of benefits in violation of Article 100
of the Labor Code.
Ruling (yes)
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda
Phils., Inc. v. Samahan ng Malayang Manggagawa sa
Honda,20 thuswise:
A collective bargaining agreement (or CBA) refers to the
negotiated contract between a legitimate labor organization
and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining
unit. As in all contracts, the parties in a CBA may establish
such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to
law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is
mandated by the express policy of the law.
37
Accordingly, the stipulations, clauses, terms and conditions
of the CBA, being the law between the parties, must be
complied with by them. The literal meaning of the
stipulations of the CBA, as with every other contract, control
if they are clear and leave no doubt upon the intention of the
contracting parties.22
Here, a conflict has arisen regarding the interpretation of the
term legal dependent in connection with the grant of funeral
and bereavement aid to a regular employee under Section
4, Article XIII of the CBA,23 which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY
agrees to grant a funeral/bereavement aid in the following
instances:
a. Death of a regular employee in line of duty – ₱50,000
b. Death of a regular employee not in line of duty – ₱40,000
c. Death of legal dependent of a regular employee –
₱15,000. (Emphasis supplied)
Petitioner insists that notwithstanding the silence of the
CBA, the term legal dependent should follow the definition
of it under Republic Act (R.A.) No. 8282 (Social Security
Law),24 so that in the case of a married regular employee,
his or her legal dependents include only his or her spouse
and children, and in the case of a single regular employee,
his or her legal dependents include only his or her parents
and siblings, 18 years old and below; and that the term
dependents has the same meaning as beneficiaries as used
in Section 5, Article XIII of the CBA.
We cannot agree with petitioner’s insistence.
Social legislations contemporaneous with the execution of
the CBA have given a meaning to the term legal dependent.
First of all, Section 8(e) of the Social Security Law provides
that a dependent shall be the following, namely: (a) the legal
spouse entitled by law to receive support from the member;
(b) the legitimate, legitimated, or legally adopted, and
illegitimate child who is unmarried, not gainfully employed
and has not reached 21 of age, or, if over 21 years of age,
is congenitally or while still a minor has been permanently
incapacitated and incapable of self-support, physically or
mentally; and (c) the parent who is receiving regular support
from the member. Secondly, Section 4(f) of R.A. No. 7875,
as amended by R.A. No. 9241,25 enumerates who are the
legal dependents, to wit: (a) the legitimate spouse who is
not a member; (b) the unmarried and unemployed
legitimate, legitimated, illegitimate, acknowledged children
as appearing in the birth certificate; legally adopted or step-
children below 21 years of age; (c) children who are 21
years old and order but suffering from congenital disability,
either physical or mental, or any disability acquired that
renders them totally dependent on the member of our
support; and (d) the parents who are 60 years old or older
whose monthly income is below an amount to be
38
determined by the Philippine Health Insurance Corporation
in accordance with the guiding principles set forth in Article I
of R.A. No. 7875. And, thirdly, Section 2(f) of Presidential
Decree No. 1146, as amended by R.A. No. 8291,dependent
for support upon the member or pensioner; (b) the
legitimate, legitimated, legally adopted child, including the
illegitimate child, who is unmarried, not gainfully employed,
not over the age of majority, or is over the age of majority
but incapacitated and incapable of self-support due to a
mental or physical defect acquired prior to age of majority;
and (c) the parents dependent upon the member for
support.1âwphi1
It is clear from these statutory definitions of dependent that
the civil status of the employee as either married or single is
not the controlling consideration in order that a person may
qualify as the employee’s legal dependent. What is rather
decidedly controlling is the fact that the spouse, child, or
parent is actually dependent for support upon the employee.
Indeed, the Court has adopted this understanding of the
term dependent in Social Security System v. De Los
Santos,27 viz:
Social Security System v. Aguas is instructive in
determining the extent of the required "dependency" under
the SS Law. In Aguas, the Court ruled that although a
husband and wife are obliged to support each other,
whether one is actually dependent for support upon the
other cannot be presumed from the fact of marriage alone.
Further, Aguas pointed out that a wife who left her family
until her husband died and lived with other men, was not
dependent upon her husband for support, financial or
otherwise, during the entire period.
Said the Court:
In a parallel case involving a claim for benefits under the
GSIS law, the Court defined a dependent as "one who
derives his or her main support from another. Meaning,
relying on, or subject to, someone else for support; not able
to exist or sustain oneself, or to perform anything without
the will, power, or aid of someone else." It should be noted
that the GSIS law likewise defines a dependent spouse as
"the legitimate spouse dependent for support upon the
member or pensioner." In that case, the Court found it
obvious that a wife who abandoned the family for more than
17 years until her husband died, and lived with other men,
was not dependent on her husband for support, financial or
otherwise, during that entire period. Hence, the Court
denied her claim for death benefits.
The obvious conclusion then is that a wife who is already
separated de facto from her husband cannot be said to be
"dependent for support" upon the husband, absent any
showing to the contrary. Conversely, if it is proved that the
husband and wife were still living together at the time of his
death, it would be safe to presume that she was dependent
39
on the husband for support, unless it is shown that she is
capable of providing for herself.
Considering that existing laws always form part of any
contract, and are deemed incorporated in each and every
contract,28 the definition of legal dependents under the
aforecited social legislations applies herein in the absence
of a contrary or different definition mutually intended and
adopted by the parties in the CBA. Accordingly, the
concurrence of a legitimate spouse does not disqualify a
child or a parent of the employee from being a legal
dependent provided substantial evidence is adduced to
prove the actual dependency of the child or parent on the
support of the employee.
In this regard, the differentiation among the legal
dependents is significant only in the event the CBA has
prescribed a hierarchy among them for the granting of a
benefit; hence, the use of the terms primary beneficiaries
and secondary beneficiaries for that purpose. But
considering that Section 4, Article XIII of the CBA has not
included that differentiation, petitioner had no basis to deny
the claim for funeral and bereavement aid of Alfante for the
death of his parent whose death and fact of legal
dependency on him could be substantially proved.
Pursuant to Article 100 of the Labor Code, petitioner as the
employer could not reduce, diminish, discontinue or
eliminate any benefit and supplement being enjoyed by or
granted to its employees. This prohibition against the
diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.29 The
application of the prohibition against the diminution of
benefits presupposes that a company practice, policy or
tradition favorable to the employees has been clearly
established; and that the payments made by the employer
pursuant to the practice, policy, or tradition have ripened
into benefits enjoyed by them.30 To be considered as a
practice, policy or tradition, however, the giving of the
benefits should have been done over a long period of time,
and must be shown to have been consistent and
deliberate.31 It is relevant to mention that we have not yet
settled on the specific minimum number of years as the
length of time sufficient to ripen the practice, policy or
tradition into a benefit that the employer cannot unilaterally
withdraw.32
The argument of petitioner that the grant of the funeral and
bereavement benefit was not voluntary but resulted from its
mistaken interpretation as to who was considered a legal
dependent of a regular employee deserves scant
consideration. To be sure, no doubtful or difficult question of
law was involved inasmuch as the several cogent statutes
existing at the time the CBA was entered into already
defined who were qualified as the legal dependents of
another. Moreover, the voluntariness of the grant of the
40
benefit became even manifest from petitioner’s admission
that, despite the memorandum it issued in 200033 in order to
"correct" the interpretation of the term legal dependent, it
still approved in 2003 the claims for funeral and
bereavement aid of two employees, namely: (a) Cecille
Bulacan, for the death of her father; and (b) Charito Cartel,
for the death of her mother, based on its supposedly
mistaken interpretation.34
It is further worthy to note that petitioner granted claims for
funeral and bereavement aid as early as 1999, then issued
a memorandum in 2000 to correct its erroneous
interpretation of legal dependent under Section 4, Article
XIII of the CBA. This notwithstanding, the 2001-2004
CBA35 still contained the same provision granting funeral or
bereavement aid in case of the death of a legal dependent
of a regular employee without differentiating the legal
dependents according to the employee's civil status as
married or single. The continuity in the grant of the funeral
and bereavement aid to regular employees for the death of
their legal dependents has undoubtedly ripened into a
company policy. With that, the denial of Alfante's qualified
claim for such benefit pursuant to Section 4, Article XIII of
the CBA violated the law prohibiting the diminution of
benefits.
WHEREFORE, the Court AFFIRMS the decision
promulgated on February 5, 201 0; and ORDERS petitioner
to pay the costs of suit.
SO ORDERED.
G.R. No. 202090
ICT MARKETING SERVICES, INC. (now known as
SYKES MARKETING SERVICES, INC.), Petitioner,
vs.
MARIPHIL L. SALES, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails: 1) the
Januruy 10, 2012 Decision2 of the Court of Appeals (CA) in
CA-G.R. SP No. 109860 nullifying and setting aside the
February 16, 20093 and May 20, 20094 Resolutions of the
National Labor Relations Commission (NLRC) in NLRC LAC
CN. 07-002404- 08(7)/(8) and reinstating with modification
the April 30, 2008 Decision5 of the Labor Arbiter in NLRC-
NCR Case No. 10-11004-07; and 2) the CA's May 28, 2012
Resolution6 denying petitioner's Motion for
7
Reconsideration of the herein Assailed Decision.
Factual Antecedents
Petitioner ICT Marketing Services, Inc. (ICT) – now known
as Sykes Marketing Services, Inc. – is a duly registered
domestic corporation engaged in the business of providing
outsourced customer relations management and business
process outsourcing solutions to various clients in
41
government and in the financial services, insurance,
telecommunications, health care, information technology,
media, energy, and hospitality industries.
On February 22, 2006, petitioner hired respondent Mariphil
L. Sales as its Customer Service Representative (CSR) or
Telephone Service Representative (TSR), and assigned her
to its Capital One account. On August 21, 2006, respondent
became a regular employee, and her monthly base salary
was increased to P16,350.00 and she was given monthly
transportation and meal allowances.
On February 21, 2007, respondent was assigned to the
Washington Mutual account, where she was awarded with a
certificate for being the "Top Converter/Seller (Second
Place)" for the month of April 2007.8
On July 3, 2007, respondent wrote to Glen Odom (Odom) –
petitioner’s Vice President – complaining about supposed
irregularities in the handling of funds entrusted to petitioner
by Washington Mutual which were intended for distribution
to outstanding Washington Mutual CSRs and TSRs as
prizes and incentives. However, no action appears to have
been taken on her complaint.
Respondent was then transferred to the Bank of America
account on July 30, 2007. Without prior notice to
respondent, petitioner scheduled her for training from July
30 to August 6, 2007 on the very same day of her transfer.
On the third day of training (August 1), respondent was
unable to attend. When she reported for training the next
day, respondent was informed that she could not be
certified to handle calls for Bank of America due to her
failure to complete the training. From then on, respondent
was placed on "floating status" and was not given any work
assignment.
In a September 28, 2007 letter9 to petitioner’s Human
Resource (HR) Manager, respondent tendered her
resignation from work, effective upon receipt of the letter.
Respondent wrote:
I was forced to resign due to the reason that my
employment was made on "floating status" effective August
4, 2007 and up to present (almost two months)
I haven’t receive [sic] any notice from you or the HR
department to report for work despite my repeated follow-up
[with] your office thru telephone and mobile phone text
messages. Hence, I consider your inaction to my follow-up
as an indirect termination of my work with ICT.
The reason I was placed [on] floating status is that, I was
absent during the third day of my training with Bank of
America, the account to which I was transferred from
Washington Mutual (WaMu). However, my absence during
such period was justified by the fact that I was sick and I
need [sic] to undergo a medical check-up on that date.
42
Furthermore, I see my transfer from WaMu Account to Bank
of America and the continued floating status of my work was
prompted by the fact that I lodged a complaint against
managers/supervisors assigned in WaMu account regarding
irregularities in the handling of funds given by ICT clients
which were supposed to be distributed as prizes to TSR’s
assigned with WaMu. After the filing of the said complaint,
through your office, I was transferred to another account
(Bank of America) for no apparent reason. I was not even
included in the original list of those who were supposed to
be transferred because my performance record with WaMu
is satisfactory as proven by the fact that I was even
awarded with a certificate as "top converter (seller)" for the
month of April and was supposed to be included again in
the top three highest converter[s] for the month of May, but
unfortunately irregularities were committed, that is why I
filed the aforementioned complaint [with] your office.
On August 1, 2007, a few days after my transfer [to] Bank of
America, my coach, angelo [sic], informed me that I will be
having a training on that same day with Bank of America
which is really unexpected. I was not given a notice in
advance about the training. My coach informed me only
three hours before the said training. Later on during my
training with Bank of America I was [placed on floating
status] indefinitely due to a single absence even though I
am a regular employee having worked in ICT for almost two
years. Another instance [of] discrimination [sic] and bad faith
on the part of ICT management is that, all my fellow agents
who were [placed on floating status] for the same reason
were all ordered to return to work except me [sic]. Moreover,
ICT is continuously hiring TSR’s which only shows that
there are still accounts open or work available in ICT.
However despite the availability of work, I was still on
floating status.
Based on the aforementioned facts and circumstance[s], it
is very clear that the harassment, pressure, and indefinite
floating of my employment with ICT are retaliatory acts
perpetrated by the company because of my complaint/
request for investigation on the irregularities being
committed by certain company officials.
Thus, I can no longer bear the above-mentioned abuses
and discrimination committed against me by ICT
management. Therefore, I have no option but to sever my
relationship with the company, as my continued floating
status had already prejudiced me emotionally and
financially.10
Ruling of the Labor Arbiter
On October 2, 2007, respondent filed a complaint for
constructive dismissal against petitioner and Odom before
the NLRC NCR, Quezon City, docketed as NLRC-NCR
Case No. 10-11004-07.
43
In her Position Paper,11 Reply,12 Rejoinder,13 and combined moral and exemplary damages, and attorney’s
Surrejoinder,14 respondent claimed that for complaining fees equivalent to 10 per cent (10%) of the total award.
about the supposed irregularities in the Washington Mutual
In its Position Paper,18 Reply,19 Rejoinder,20 and
account, petitioner discriminated against her and unduly
Surrejoinder,21 petitioner prayed for the dismissal of the
punished her. Although she was not included in the original
complaint, arguing that respondent was transferred from the
list of CSRs/TSRs for program transfer, she was transferred
Washington Mutual account as an exercise of management
to another account, and then placed on "floating status,"
initiative or prerogative, and due to infractions22 committed
which is tantamount to suspending her indefinitely without
by her, as well as attendance and punctuality issues that
due process, despite her satisfactory performance.
arose. It claimed that respondent could not be certified for
Respondent averred that petitioner’s claim of multiple
the Bank of America account for failing to complete the
absences is not true, because not once was she penalized
training. It maintained that respondent was placed on
therefor, assuming such charge is true. Respondent also
standby status only, and not suspended or
alleged that her one-day absence during the training for the
constructively dismissed. In fact, she was directed to
Bank of America program cannot justify her being placed on
report to its HR department, but she did not do so. It also
a "floating status" because the "no-absence during training"
insisted that respondent resigned voluntarily. It denied
requirement cited by petitioner – using her employment
committing any act of discrimination or any other act which
contract15 and the "New Hire Training Bay"16 as bases –
rendered respondent’s employment impossible,
applies only to new hires on probationary status, and not to
unreasonable or unlikely. Finally, it claimed that prior notice
regularized employees. In any case, the "New Hire Training
of her transfer to the Bank of America account was made
Bay" used by petitioner was for the Capital One program.
through an electronic mail message sent to her; and that
She also pointed out that during her indefinite suspension or
respondent has no cause of action since she resigned
"floating status," petitioner continued to hire new CSRs, as
voluntarily, and thus could not have been illegally
shown by its newspaper advertisements during the
dismissed.
period.17Finally, she asserted that her resignation was not
voluntary, but was forced upon her by petitioner as a result On April 30, 2008, the Labor Arbiter rendered a
of its unlawful acts. Thus, respondent prayed for the Decision23 finding complainant to have been constructively
recovery of backwages, separation pay, P100,000.00 dismissed and awarding separation pay, moral and

44
exemplary damages, and attorney’s fees to respondent. The amount of P32,700.00, P50,000.00 moral and exemplary
Labor Arbiter held: damages plus 10% of the award as attorney’s fees,
hereunder computed:
x x x Complainant was indeed constructively dismissed from
her employment and she quitted [sic] because her I Separation Pay
continued employment thereat is rendered impossible,
unreasonable or unlikely. 2/21/06 – 8/4/07 = 2 yrs.

Complainant’s resignation was sparked by her transfer of P16,350.00 x 2 yrs. = P32,700.00

assignment and eventual placing her [sic] by the respondent
company of [sic] a "on floating" status. II Damages P50,000.00

x x x [T]here was no x x x evidence x x x that complainant’s

transfer was due to the request of a client. Further, if P82,700.00
complainant was indeed remised of [sic] her duties due to
her punctuality and attendance problem of committing P8,270.00
twelve (12) absences alone incurred in July 2007 [sic], why
10% Attorney’s Fees
was there no disciplinary action taken against her like
reprimand or warning[?] P90,970.00

xxxx
And its effect, complainant is entitled to her claim of
separation pay, moral and exemplary damages of
P50,000.00 pesos [sic] including an award of attorney’s
fees.
WHEREFORE, premises considered, judgment is rendered
ordering the respondents to pay complainant of [sic] one
month pay per year of service as separation pay in the total
SO ORDERED.24
Ruling of the National Labor Relations Commission
Petitioner appealed before the NLRC arguing that the Labor
Arbiter erred in ruling that respondent was constructively
dismissed. It also argued that Odom was not personally
liable as he was merely acting in good faith and within his
authority as corporate officer.

45
Respondent likewise interposed an appeal25 arguing that
the award of backwages should be computed from the date
of her dismissal until finality of the Labor Arbiter’s Decision;
and that the proportionate share of her 13th month pay
should be paid to her as well.
On February 16, 2009, the NLRC issued
Resolution,26 declaring as follows:
We reverse.
Upon an examination of the pleadings on file, We find that in
the past the complainant had been transferred from one
program to another without any objection on her part.
Insofar as the instant case is concerned, it appears that the
complainant, aside from having been given a warning for
wrong disposition of a call, had been absent or usually late
in reporting for work, constraining the respondent ICT to
transfer her to another program/account. Required of the
complainant was for her to undergo Product Training for the
program from July 30 to August 6, 2007, and the records
indicate that she attended only two (2) days of training on
July 30 and 31, 2007, did not report on August 1, 2007 and
again reported for training on August 2, 2007. It was then
that ICT’s Operations Subject Matter Expert, Ms. Suzette
Lualhati, informed the complainant that she cannot be
certified for the program because she failed to complete the
number of training days, and there was a need for her to
report to Human Resources for further instructions. As the
complainant did not report to Human Resources, and due to
her derogatory record, the respondent company could not
find another program where the complainant could be
transferred.
From what has been narrated above, We come to the
a conclusion that the respondent company cannot be faulted
for placing the complainant on "floating status." And there
does not appear to be any ill will or bad faith that can be
attributed to the respondent.
Finally, it is well to emphasize that the complainant tendered
her resignation on October 1, 2007. There is no evidence
that the complainant has presented that would indicate that
duress or force has been exerted on her.
All told, We are of the opinion that the findings of the Labor
Arbiter are in stark contrast to the evidence on record.
WHEREFORE, in view of the foregoing, the decision
appealed from is hereby reversed and set aside.
Addordingly [sic], a new one is entered dismissing the
complaint for lack of merit.
SO ORDERED.27
Respondent filed a Motion for Reconsideration,28 but in a
May 20, 2009 Resolution,29 the motion was denied.
Ruling of the Court of Appeals
46
In a Petition for Certiorari30 filed with the CA and docketed
as CA-G.R. SP No. 109860, respondent sought a reversal
of the February 16, 2009 and May 20, 2009 Resolutions of
the NLRC.
Petitioner filed its Comment,31 to which respondent
interposed a Reply.32
On January 10, 2012, the CA issued the assailed Decision
containing the following pronouncement:
This Court finds the petition meritorious.
While it is true that management has the prerogative to
transfer employees, the exercise of such right should not be
motivated by discrimination, made in bad faith, or effected
as a form of punishment or demotion without sufficient
cause. When the transfer is unreasonable, unlikely,
inconvenient, impossible, or prejudicial to the employee, it
already amounts to constructive dismissal. In constructive
dismissal, the employer has the burden of proving that the
transfer and demotion of an employee are for just and valid
grounds, such as genuine business necessity. Should the
employer fail to overcome this burden of proof, the
employee’s transfer shall be tantamount to unlawful
constructive dismissal.
In the case at bench, private respondent corporation failed
to discharge this burden of proof considering the
circumstances surrounding the petitioner’s July 2007
transfer to another account. Prior to her reassignment,
petitioner’s annual performance merited increase in her
salary effective February 2007 and was also awarded a
certificate of achievement for performing well in April 2007.
Her transfer was also abrupt as there was no written
transfer agreement informing her of the same and its
requirements unlike her previous transfer from Capital One
to Washington Mutual account. It is therefore difficult to see
the reasonableness, urgency, or genuine business
necessity to transfer petitioner to a new account. While it
may be true that petitioner has attendance and punctuality
issues, her over-all performance as a CSR/TSR cannot be
said to be below par given the annual merit increase and
the certificate of achievement awarded to her. If indeed,
private respondent corporation had trouble transferring the
petitioner to another post because of her derogatory record,
the corporation could just have dismissed her for cause.
After petitioner’s unjustified transfer, she was informed by
private respondent corporation that she could not be
"certified" or allowed to handle calls for the new account
because of her absence during training. She was later
placed on a floating status and was not given another post.
The Court considers placing the petitioner on a floating
status as another unjustified action of the private
respondent corporation prejudicial to petitioner as
employee. In this case, except for private respondent
corporation’s bare assertion that petitioner no longer
47
reported to the human resources department as instructed,
no proof was offered to prove that petitioner intended to
sever the employer-employee relationship. Private
respondent corporation also offered no credible explanation
why it failed to provide a new assignment to petitioner. Its
assertion that it is petitioner’s derogatory record which made
it difficult for the corporation to transfer her to another
account despite its efforts is not sufficient to discharge the
burden of proving that there are no posts or no accounts
available or willing to accept her.
In Nationwide Security and Allied Services, Inc. vs.
Valderama,33 the Supreme Court declared that due to the
grim economic consequences to the employee of being
placed on a floating status, the employer should bear the
burden of proving that there are no posts available to which
the employee temporarily out of work can be assigned.
These acts by the private respondent corporation, of
transferring petitioner to another account without sufficient
cause and proper notice and its subsequent failure to
provide a new post for her for two months without credible
explanation, constitute unjustified actions prejudicial to the
petitioner as an employee, making it unbearable for her to
continue employment.
Thus, petitioner opted to resign, albeit involuntarily. The
involuntariness of her resignation is evident in her letter
which states categorically:
"I was forced to resign due to the reason that my
employment was made on ‘floating status’ effective August
4, 2007 and up to the present (almost two months) I haven’t
receive [sic] any notice from you or the HR department to
report for work despite my repeated follow-up to your office
thru telephone and mobile phone text
messages.1avvphi1 Hence, I consider your inaction to my
follow-up as an indirect termination of my work with ICT."
Further, petitioner immediately filed a complaint for illegal
dismissal. Resignation, it has been held, is inconsistent with
the filing of a complaint. Thus, private respondent
corporation’s mere assertion that petitioner voluntarily
resigned without offering convincing evidence to prove it, is
not sufficient to discharge the burden of proving such
assertion. It is worthy to note that the fact of filing a
resignation letter alone does not shift the burden of proof
and it is still incumbent upon the employer to prove that the
employee voluntarily resigned.
Therefore, we believe and so hold that petitioner was
constructively dismissed from employment. Constructive
dismissal exists when the resignation on the part of the
employee was involuntary due to the harsh, hostile and
unfavorable conditions set by the employer. The test for
constructive dismissal is whether a reasonable person in the
employee’s position would feel compelled to give up his
employment under the prevailing circumstances. With the
decision of the private respondent corporation to transfer
48
and to thereafter placed [sic] her on floating status,
petitioner felt that she was being discriminated and this
perception compelled her to resign. It is clear from her
resignation letter that petitioner felt oppressed by the
situation created by the private respondent corporation, and
this forced her to surrender her position.
Under Article 279 of the Labor Code, an employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.
As petitioner did not pray for reinstatement but only sought
payment of money claims, the labor arbiter is correct in
awarding separation pay equivalent to one month pay for
every year of service. We also do not find any cogent
reason to disturb the award of damages and attorney’s fees
since we have found bad faith on the part of the private
respondent corporation to abruptly [sic] transfer and place
the petitioner on floating status. Individual respondent Glen
Odom is however, exonerated from any liability as there
was no clear finding that he acted with malice or bad faith.
Backwages and other monetary benefits must also be
included in compliance with the above-mentioned provision
of labor law which shall be reckoned from the time her
constructive dismissal took effect until the finality of this
decision.
WHEREFORE, premises considered, the Resolutions dated
February 16, 2009 and May 20, 2009 respectively, issued
by the public respondent National Labor Relations
Commission (NLRC) in NLRC CA No. 07-002404-08 are
REVERSED and SET ASIDE. The decision of the Labor
Arbiter dated April 30, 2008 is REINSTATED with
MODIFICATION that the petitioner Mariphil L. Sales, be
awarded backwages and other monetary benefits from the
date of her constructive dismissal up to the finality of this
Decision.
SO ORDERED.34
Petitioner filed a Motion for Reconsideration, but the same
was denied in a May 28, 2012 Resolution. Hence, the
present Petition.
In a November 11, 2013 Resolution,35 this Court resolved to
give due course to the Petition.
Issues
Petitioner submits that –
A.
THE COURT OF APPEALS ERRED WHEN IT HELD THAT
RESPONDENT’S TRANSFER WAS UNJUSTIFIED
49
NOTWITHSTANDING EVIDENCE TO SHOW THAT
RESPONDENT WAS NOT DEMOTED AND WAS EVEN
GIVEN THE SAME RANK AND PAY.
B.
THE COURT OF APPEALS ERRED WHEN IT HELD THAT
RESPONDENT’S PLACEMENT UNDER FLOATING
STATUS WAS TANTAMOUNT TO CONSTRUCTIVE
DISMISSAL AS THIS IS CONTRARY TO NUMEROUS
DECISIONS OF THE HONORABLE COURT.
C.
THE COURT OF APPEALS ERRED WHEN IT
REINSTATED LABOR ARBITER MACAM’S DECISION
DATED 30 APRIL 2008 WHICH DECLARED THAT
RESPONDENT WAS CONSTRUCTIVELY DISMISSED,
NOTWITHSTANDING EVIDENCE THAT CLEARLY
SHOWS THAT RESPONDENT VOLUNTARILY
RESIGNED.
D.
THE COURT OF APPEALS ERRED IN AWARDING
RESPONDENT SEPARATION PAY, BACKWAGES,
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S
FEES.36
Petitioner’s Arguments
Praying that the assailed CA dispositions be set aside and
that the NLRC’s February 16, 2009 and May 20, 2009
Resolutions be reinstated instead, petitioner maintains in
the Petition and Reply37 that respondent’s transfer to
another account was done as a valid exercise of
management prerogative, which allows it to regulate all
aspects of employment. Her transfer was done in good faith,
and without diminution in rank and salary. It contends that
respondent knew very well that any CSR/TSR may be
transferred to another program/account anytime for
business reasons; in fact, respondent herself was
transferred from Capital One to Washington Mutual, and
she did not complain. Moreover, she knew as well that
"schedule adherence" or attendance/punctuality is one of
the "metrics" or standards by which the performance of a
CSR is measured, and that she failed to comply in this
regard. It claims that the decision to place her on "floating
status" instead of dismissing her was an accommodation
and should not be treated as an illegal or unjustified act; that
being on "floating status" is not tantamount to constructive
dismissal, and the failure to place or transfer respondent to
another account was due to her derogatory record, and not
petitioner’s bad faith or inaction. It insists that the placing of
an employee on "floating status" for up to six months is
allowed in the event of a bona fide suspension of the
operations or undertaking of a business.38 In any event,
respondent’s voluntary resignation prior to the expiration of
the allowable six-month "floating status" period cannot
50
constitute constructive dismissal, and her immediate filing of
the labor case thereafter is thus premature. Finally,
petitioner posits that since there is no illegal dismissal but
rather a voluntary relinquishment of respondent’s post, then
there is no basis for the pecuniary awards in her favor.
Respondent’s Arguments
In her Comment39 praying for dismissal of the Petition and
the corresponding affirmance of the assailed dispositions,
respondent insists that she was illegally dismissed. She
reiterates that her transfer to the Bank of America account
was an undue penalty for her complaining about supposed
anomalies in the Washington Mutual account. She avers
that the documentary evidence of her supposed
unauthorized absences were manufactured to support
petitioner’s false allegations and mislead this Court into
believing that she was delinquent at work.
She argues that assuming that these absences were true,
then they should have merited her dismissal for cause – yet
the fact is she was not dismissed nor punished for these
supposed absences. She asserts that petitioner’s claim that
she was transferred on the recommendation of a client is
untrue and self-serving, and is unjustified since the client
has no authority to order or recommend her transfer. She
maintains that her being placed on "floating status" was
illegal, since a) there is no evidence to prove her alleged
"attendance and punctuality issues," and b) there was no
bona fide suspension of petitioner’s business or undertaking
for a period not exceeding six months, as prescribed under
Article 286 of the Labor Code,40 which would justify the
suspension of her employment for up to six months. As
enunciated in the Philippine Industrial Security Agency
Corp. v. Dapiton41 case which petitioner itself cited, Article
286 applies only when there is a bona fide suspension of
the employer’s operation or undertaking for a period not
exceeding six months, due to dire exigencies of the
business that compel the employer to suspend the
employment of its workers. Respondent points out that
petitioner continued with its business, and worse, it in fact
continued to hire new CSRs/TSRs during the period of
respondent’s suspension from work. In fine, respondent
alleges that she was constructively dismissed and forced to
resign, rather than continue to subject herself to petitioner’s
discrimination, insensibility, harassment, and disdain; and
that for such illegal acts, she is entitled to indemnity from
petitioner.
Our Ruling
The Court denies the Petition.
Respondent’s Transfer
Under the doctrine of management prerogative, every
employer has the inherent right to regulate, according to his
own discretion and judgment, all aspects of employment,
51
including hiring, work assignments, working methods, the
time, place and manner of work, work supervision, transfer
of employees, lay-off of workers, and discipline, dismissal,
and recall of employees. The only limitations to the exercise
of this prerogative are those imposed by labor laws and the
principles of equity and substantial justice.
While the law imposes many obligations upon the employer,
nonetheless, it also protects the employer’s right to expect
from its employees not only good performance, adequate
work, and diligence, but also good conduct and loyalty. In
fact, the Labor Code does not excuse employees from
complying with valid company policies and reasonable
regulations for their governance and guidance.
Concerning the transfer of employees, these are the
following jurisprudential guidelines: (a) a transfer is a
movement from one position to another of equivalent rank,
level or salary without break in the service or a lateral
movement from one position to another of equivalent rank
or salary; (b) the employer has the inherent right to transfer
or reassign an employee for legitimate business purposes;
(c) a transfer becomes unlawful where it is motivated by
discrimination or bad faith or is effected as a form of
punishment or is a demotion without sufficient cause; (d) the
employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the
employee.42
While the prerogative to transfer respondent to another
account belonged to petitioner, it wielded the same unfairly.
The evidence suggests that at the time respondent was
transferred from the Washington Mutual account to the
Bank of America program, petitioner was hiring additional
CSRs/TSRs.43 This simply means that if it was then hiring
new CSRs/TSRs, then there should be no need to transfer
respondent to the Bank of America program; it could simply
train new hires for that program. Transferring respondent –
an experienced employee who was already familiar with the
Washington Mutual account, and who even proved to be
outstanding in handling the same – to another account
means additional expenses for petitioner: it would have to
train respondent for the Bank of America account, and train
a new hire to take her place in the Washington Mutual
account. This does not make sense; quite the contrary, it is
impractical and entails more expense on petitioner’s part. If
respondent already knew her work at the Washington
Mutual account very well, then it is contrary to experience
and logic to transfer her to another account which she is not
familiar with, there to start from scratch; this could have
been properly relegated to a new hire.
There can be no truth to petitioner’s claim either that
respondent’s transfer was made upon request of the client.
If she was performing outstanding work and bringing in
good business for the client, there is no reason – indeed it is
beyond experience and logic – to conclude that the client
52
would seek her transfer. Such a claim could only be Respondent’s work as a CSR – which is essentially that of a
fabricated. Truly, Experience which is the life of the law — call center agent – is not easy. For one, she was made to
as well as logic and common sense — militates against the work the graveyard shift – that is, from late at night or
petitioners’ cause.44 midnight until dawn or early morning. This certainly takes a
toll on anyone’s physical health. Indeed, call center agents
Moreover, as the appellate court correctly observed, even if
are subjected to conditions that adversely affect their
respondent had attendance and punctuality issues, her
physical, mental and emotional health; exposed to extreme
overall performance as a CSR/TSR was certainly far from
stress and pressure at work by having to address the
mediocre; on the contrary, she proved to be a top
customers’ needs and insure their satisfaction, while
performer. And if it were true that respondent suddenly
simultaneously being conscious of the need to insure
became lax by way of attendance in July 2007, it is not
efficiency at work by improving productivity and a high level
entirely her fault. This may be attributed to petitioner’s
of service; subjected to excessive control and strict
failure to properly address her grievances relative to the
surveillance by management; exposed to verbal abuse from
supposed irregularities in the handling of funds entrusted to
customers; suffer social alienation precisely because they
petitioner by Washington Mutual which were intended for
work the graveyard shift – while family and friends are at
distribution to outstanding Washington Mutual CSRs and
rest, they are working, and when they are at rest, family and
TSRs as prizes and incentives. She wrote petitioner about
friends are up and about; and they work at a quick-paced
her complaint on July 3, 2007; however, no explanation was
environment and under difficult circumstances owing to
forthcoming from petitioner, and it was only during these
progressive demands and ambitious quotas/targets set by
proceedings – or after a case had already been filed – that
management. To top it all, they are not exactly well-paid for
petitioner belatedly and for no other useful purpose
the work they have to do and the conditions they have to
attempted to address her concerns. This may have caused
endure. Respondent’s written query about the prizes and
a bit of disillusionment on the part of respondent, which led
incentives is not exactly baseless and frivolous; the least
her to miss work for a few days in July 2007. Her grievance
petitioner could have done was to timely address it, if it
should have been addressed by petitioner; after all, they
cared about its employee’s welfare. By failing to address
were serious accusations, and have a bearing on the
respondent’s concerns, petitioner exhibited an indifference
CSRs/TSRs’ overall performance in the Washington Mutual
and lack of concern for its employees – qualities that are
account.
diametrically antithetical to the spirit of the labor laws, which
53
aim to protect the welfare of the workingman and foster The managerial prerogative to transfer personnel must be
harmonious relations between capital and labor. By its exercised without grave abuse of discretion, bearing in mind
actions, petitioner betrayed the manner it treats its the basic elements of justice and fair play. Having the right
employees. should not be confused with the manner in which that right
is exercised. Thus, it cannot be used as a subterfuge by the
Thus, the only conceivable reason why petitioner
employer to rid himself of an undesirable worker. In
transferred respondent to another account is the fact that
particular, the employer must be able to show that the
she openly and bravely complained about the supposed
transfer is not unreasonable, inconvenient or prejudicial to
anomalies in the Washington Mutual account; it is not her
the employee; nor does it involve a demotion in rank or a
"derogatory record" or her "attendance and punctuality
diminution of his salaries, privileges and other benefits.
issues", which are insignificant and thus irrelevant to her
Should the employer fail to overcome this burden of proof,
overall performance in the Washington Mutual account.
the employee’s transfer shall be tantamount to constructive
And, as earlier stated, respondent’s "attendance and
dismissal, which has been defined as a quitting because
punctuality issues" were attributable to petitioner’s
continued employment is rendered impossible,
indifference, inaction, and lack of sensitivity in failing to
unreasonable or unlikely; as an offer involving a demotion in
timely address respondent’s complaint. It should share the
rank and diminution in pay.
blame for respondent’s resultant delinquencies.
Likewise, constructive dismissal exists when an act of clear
Thus, in causing respondent’s transfer, petitioner clearly
discrimination, insensibility or disdain by an employer has
acted in bad faith and with discrimination, insensibility and
become so unbearable to the employee leaving him with no
disdain; the transfer was effected as a form of punishment
option but to forego with his continued
for her raising a valid grievance related to her work.
employment.45(Emphasis and underscoring supplied)
Furthermore, said transfer was obviously unreasonable, not
The instant case can be compared to the situation in
to mention contrary to experience, logic, and good business
Veterans Security Agency, Inc. v. Gonzalvo, Jr.,46 where the
sense. This being the case, the transfer amounted to
employee concerned – a security guard who was brave
constructive dismissal.
enough to complain about his employer’s failure to remit its
employees’ Social Security System premiums – was "tossed
around" and finally placed on floating status for no valid
54
reason. Taking the poor employee’s side, this Court
declared:
True, it is the inherent prerogative of an employer to transfer
and reassign its employees to meet the requirements of its
business. Be that as it may, the prerogative of the
management to transfer its employees must be exercised
without grave abuse of discretion. The exercise of the
prerogative should not defeat an employee’s right to
security of tenure. The employer’s privilege to transfer its
employees to different workstations cannot be used as a
subterfuge to rid itself of an undesirable worker.
Here, riled by respondent’s consecutive filing of complaint
against it for nonpayment of SSS contributions, VSAI had
been tossing respondent to different stations thereafter.
From his assignment at University of Santo Tomas for
almost a year, he was assigned at the OWWA main [o]ffice
in Pasig where he served for more than three years. After
three years at the OWWA main office, he was transferred to
the OWWA Pasay City parking lot knowing that the security
services will end forthwith. VSAI even concocted the reason
that he had to be assigned somewhere because his spouse
was already a lady guard assigned at the OWWA main
office. Inasmuch as respondent was single at that time, this
was obviously a mere facade to [get] rid of respondent who
was no longer in VSAIs good graces.
The only logical conclusion from the foregoing discussion is
that the VSAI constructively dismissed the respondent. This
ruling is in rhyme with the findings of the Court of Appeals
and the NLRC. Dismissal is the ultimate penalty that can be
meted to an employee. Inasmuch as petitioners failed to
adduce clear and convincing evidence to support the
legality of respondent’s dismissal, the latter is entitled to
reinstatement and back wages as a necessary
consequence. However, reinstatement is no longer feasible
in this case because of the palpable strained relations, thus,
separation pay is awarded in lieu of reinstatement.
xxxx
Indeed, the Court ought to deny this petition lest the wheels
of justice for aggrieved workingmen grind to a halt. We
ought to abate the culture of employers bestowing security
of tenure to employees, not on the basis of the latter’s
performance on the job, but on their ability to toe the line set
by their employer and endure in silence the flagrant
incursion of their rights, zealously protected by our labor
laws and by the Constitution, no less.47 (Emphasis and
underscoring supplied)
Respondent’s Floating Status
In placing respondent on "floating status," petitioner further
acted arbitrarily and unfairly, making life unbearable for her.
In so doing, it treated respondent as if she were a new hire;
55
it improperly disregarded her experience, status, petitioner refused to certify her and instead placed her on
performance, and achievements in the company; and most floating status. Far from being an "accommodation" as
importantly, respondent was illegally deprived of her salary petitioner repeatedly insists, respondent became the victim
and other emoluments. For her single absence during of a series of illegal punitive measures inflicted upon her by
training for the Bank of America account, she was refused the former.
certification, and as a result, she was placed on floating
Besides, as correctly argued by respondent, there is no
status and her salary was withheld. Clearly, this was an act
basis to place her on "floating status" in the first place since
of discrimination and unfairness considering that she was
petitioner continued to hire new CSRs/TSRs during the
not an inexperienced new hire, but a promising and award-
period, as shown by its paid advertisements and
winning employee who was more than eager to succeed
placements in leading newspapers seeking to hire new
within the company. This conclusion is not totally baseless,
CSRs/TSRs and other employees.48 True enough, the
and is rooted in her outstanding performance at the
placing of an employee on "floating status" presupposes,
Washington Mutual account and her complaint regarding
among others, that there is less work than there are
the incentives, which only proves her zeal, positive work
employees;49 but if petitioner continued to hire new
attitude, and drive to achieve financial success through hard
CSRs/TSRs, then surely there is a surplus of work available
work. But instead of rewarding her, petitioner unduly
for its existing employees: there is no need at all to place
punished her; instead of inspiring her, petitioner dashed her
respondent on floating status. If any, respondent – with her
hopes and dreams; in return for her industry, idealism,
experience, knowledge, familiarity with the workings of the
positive outlook and fervor, petitioner left her with a legacy
company, and achievements – should be the first to be
of, and awful examples in, office politicking, intrigue, and
given work or posted with new clients/accounts, and not
internecine schemes.
new hires who have no experience working for petitioner or
In effect, respondent’s transfer to the Bank of America who have no related experience at all. Once more,
account was not only unreasonable, unfair, inconvenient, experience, common sense, and logic go against the
and prejudicial to her; it was effectively a demotion in rank position of petitioner.
and diminution of her salaries, privileges and other benefits.
The CA could not be more correct in its pronouncement that
She was unfairly treated as a new hire, and eventually her
placing an employee on floating status presents dire
salaries, privileges and other benefits were withheld when
consequences for him or her, occasioned by the withholding
56
of wages and benefits while he or she is not reinstated. To
restate what the appellate court cited, "[d]ue to the grim
economic consequences to the employee, the employer
should bear the burden of proving that there are no posts
available to which the employee temporarily out of work can
be assigned."50 However, petitioner has failed miserably in
this regard.
Resignation
While this Court agrees with the appellate court’s
observation that respondent’s resignation was involuntary
as it became unbearable for her to continue with her
employment, expounding on the issue at length is
unnecessary.
Because she is deemed constructively dismissed from the
time of her illegal transfer, her subsequent resignation
became unnecessary and irrelevant. There was no longer
any position to relinquish at the time of her resignation.
Pecuniary Awards
With the foregoing pronouncements, an award of indemnity
in favor of respondent should be forthcoming. In case of
constructive dismissal, the employee is entitled to full
backwages, inclusive of allowances, and other benefits or
their monetary equivalent, as well as separation pay in lieu
of reinstatement. The readily determinable amounts, as
computed by the Labor Arbiter and correspondingly
reviewed and corrected by the appellate court, should be
accorded finality and deemed binding on this Court.
Settled is the rule that an employee who is unjustly
dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges, and to
his full backwages, inclusive of allowances and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld up to the time of actual
reinstatement. If reinstatement is not possible, however, the
award of separation pay is proper.
Backwages and reinstatement are separate and distinct
reliefs given to an illegally dismissed employee in order to
alleviate the economic damage brought about by the
employee’s dismissal. "Reinstatement is a restoration to a
state from which one has been removed or separated" while
"the payment of backwages is a form of relief that restores
the income that was lost by reason of the unlawful
dismissal." Therefore, the award of one does not bar the
other.
In the case of Aliling v. Feliciano, citing Golden Ace Builders
v. Talde, the Court explained:
Thus, an illegally dismissed employee is entitled to two
reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained
57
relations between the employee and the employer, 3) Moral and exemplary damages in the amount of
separation pay is granted. In effect, an illegally dismissed P50,000.00;
employee is entitled to either reinstatement, if viable, or
4) Attorney's fees equivalent to ten percent (10%) of the
separation pay if reinstatement is no longer viable, and
total monetary award; and
backwages.
5) Interest of twelve per cent (12%) per annum of the total
The normal consequences of respondents’ illegal dismissal,
monetary awards, computed from July 30, 2007 up to June
then, are reinstatement without loss of seniority rights, and
30, 2013, and thereafter, six percent (6%) per annum from
payment of backwages computed from the time
July 1, 2013 until their full satisfaction.
compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as The appropriate Computation Division of the National Labor
an option, separation pay equivalent to one (1) month salary Relations Commission is hereby ordered to COMPUTE and
for every year of service should be awarded as an UPDATE the award as herein determined WITII DISPATCH.
alternative. The payment of separation pay is in addition to
SO ORDERED.
payment of backwages.51

WHEREFORE, the Petition is DENIED. The assailed G.R. No. 174184 January 28, 2015
January 10, 2012 Decision and May 28, 2012 Resolution of
G.J.T. REBUILDERS MACHINE SHOP, GODO FREDO
the Court of Appeals in CA-G.R. SP No. 109860 are
TRILLANA, and JULIANA TRILLANA, Petitioners,
AFFIRMED, with MODIFICATIONS, in that petitioner ICT vs.
Marketing Services, Inc., now known as Sykes Marketing RICARDO AMBOS, BENJAMIN PUTIAN, and RUSSELL
Services, Inc., is ordered to PAY respondent Mariphil L. AMBOS, Respondents.
Sales the following:
DECISION
1) Backwages and all other benefits from July 30, 2007 until
finality of this Decision; LEONEN, J.:

2) Separation pay equivalent to one (1) month salary for To prove serious business losses, employers must present
every year of service; in evidence financial statements showing the net losses
suffered by the business within a sufficient period of time.
58
Generally, it cannot be based on a single financial
statement showing losses. Absent this proof, employers
closing their businesses must pay the dismissed employees
separation pay equivalent to one-month pay or to at least
one-half-month pay for every year of service, whichever is
higher.
This is a Petition for Review on Certiorari 1 of the Court of
Appeals' Decision,2 granting Ricardo Ambos, Russell
Ambos,3 and Benjamin Putian's Petition for Certiorari. The
Court of Appeals found that G.J.T. Rebuilders Machine
Shop (G.J.T. Rebuilders) failed to prove its alleged serious
business losses. Thus, when it closed its establishment on
December 15, 1997, G.J.T. Rebuilders should have paid the
affected employees separation pay.4
G.J.T. Rebuilders is a single proprietorship owned by the
Spouses Godofredo and Juliana Trillana (Trillana spouses).
It was engaged in steel works and metal fabrication,
employing Ricardo Ambos (Ricardo), Russell Ambos
(Russell), and Benjamin Putian (Benjamin) as machinists.5
G.J.T. Rebuilders rented space in the Far East Asia (FEA)
Building in Shaw Boulevard, Mandaluyong City, which
served as the site of its machine shop. On September 8,
1996, a fire partially destroyed the FEA Building.6
Due to the damage sustained by the building, its owner
notified its tenants to vacate their rented units by the end of
September 1996 "to avoid any unforeseen accidents which
may arise due to the damage."7
Despite the building owner’s notice to vacate, G.J.T.
Rebuilders continued its business in the condemned
building. When the building owner finally refused to
accommodate it, G.J.T. Rebuilders left its rented space and
closed the machine shop on December 15, 1997.8 It then
filed an Affidavit of Closure before the Department of Labor
and Employment on February 16, 1998 and a sworn
application to retire its business operations before the
Mandaluyong City Treasurer’s Office on February 25, 1998.9
Having lost their employment without receiving separation
pay, Ricardo, Russell, and Benjamin filed a Complaint for
illegal dismissal before the Labor Arbiter. They prayed for
payment of allowance, separation pay, and attorney’s
fees.10
In their defense, G.J.T. Rebuilders and the Trillana spouses
argued that G.J.T. Rebuilders suffered serious business
losses and financial reverses, forcing it to close its machine
shop. Therefore, Ricardo, Russell, and Benjamin were not
entitled to separation pay.11
Labor Arbiter Facundo L. Leda (Labor Arbiter Leda) decided
the Complaint, finding no convincing proof of G.J.T.
Rebuilders’ alleged serious business losses. Labor Arbiter
Leda, in the Decision12 dated December 28, 1999, found
that Ricardo, Russell, and Benjamin were entitled to
separation pay under Article 283 of the Labor Code.13 In
addition, they were awarded attorney’s fees, having been
constrained to litigate their claims.14
59
Even assuming that G.J.T. Rebuilders’ closure was due to
serious business losses, Labor Arbiter Leda held that the
employees affected were still entitled to separation pay
"based on social justice and equity."15
G.J.T. Rebuilders and the Trillana spouses appealed Labor
Arbiter Leda’s Decision before the National Labor Relations
Commission.16
In contrast with the Labor Arbiter’s finding, the National
Labor Relations Commission found G.J.T. Rebuilders to
have suffered serious business losses. Because of the fire
that destroyed the building where G.J.T. Rebuilders was
renting space, the demand for its services allegedly
declined as "no same customer would dare to entrust
machine works to be done for them in a machine shop lying
in a ruined and condemned building."17 The National Labor
Relations Commission then concluded that the fire
"proximately caused"18 G.J.T. Rebuilders’ serious business
losses, with its financial statement for the fiscal year 1997
showing a net loss of 316,210.00.19
20
In the Decision dated January 25, 2001, the National
Labor Relations Commission vacated and set aside Labor
Arbiter Leda’s Decision and dismissed the Complaint for
lack of merit. Since the Commission found that G.J.T.
Rebuilders ceased operations due to serious business
losses, it held that G.J.T. Rebuilders and the Trillana
spouses need not pay Ricardo, Russell, and Benjamin
separation pay.
Ricardo, Russell, and Benjamin filed a Motion for
Reconsideration, which the National Labor Relations
Commission denied in the Resolution21 dated March 5,
2001.
Because of the alleged grave abuse of discretion of the
National Labor Relations Commission, a Petition for
Certiorari was filed before the Court of Appeals.22
The Court of Appeals reversed the National Labor Relations
Commission’s Decision, agreeing with Labor Arbiter Leda
that G.J.T. Rebuilders failed to prove its alleged serious
business losses. The Court of Appeals conceded that G.J.T.
Rebuilders had to close the machine shop for reasons
connected with the fire that partially destroyed the building
where it was renting space. Nevertheless, G.J.T. Rebuilders
continued its business for more than one year after the fire.
Thus, according to the Court of Appeals, G.J.T. Rebuilders
did not suffer from serious business losses but closed the
machine shop to prevent losses.23
With respect to G.J.T. Rebuilders’ financial statement
showing an alleged net loss in 1997, the Court of Appeals
refused to admit it in evidence since it was not subscribed
under oath by the Certified Public Accountant who prepared
it. According to the Court of Appeals, the financial statement
was subscribed under oath only after G.J.T. Rebuilders had
submitted it to Labor Arbiter Leda as an annex to its Motion
to re-open proceedings and to submit additional evidence.
Thus, the Court of Appeals gave G.J.T. Rebuilders’ financial
statement "scant consideration."24
60
In the Decision25 dated January 17, 2006, the Court of
Appeals granted the Petition for Certiorari, vacating and
setting aside the National Labor Relations Commission’s
Decision. It reinstated Labor Arbiter Leda’s Decision dated
December 28, 1999.
G.J.T. Rebuilders and the Trillana spouses filed a Motion for
Reconsideration, which the Court of Appeals denied in the
Resolution26 dated August 11, 2006.
Petitioners G.J.T. Rebuilders and the Trillana spouses filed
before this court a Petition for Review on
27
Certiorari. Respondents Ricardo, Russell, and Benjamin
commented28 on the Petition, after which petitioners filed a
Reply.29
In their Petition for Review on Certiorari, petitioners maintain
that G.J.T. Rebuilders suffered serious business losses as
evidenced by its financial statement covering the years
1996 and 1997. Petitioners admit that the financial
statement was belatedly subscribed under
30
oath. Nevertheless, "the credibility or veracity of the
entries"31 in the financial statement was not affected since
the Bureau of Internal Revenue received the same
unsubscribed financial statement when G.J.T. Rebuilders
allegedly filed its income tax return on April 15, 1998.32
Considering that petitioners sufficiently proved G.J.T.
Rebuilders’ serious business losses, petitioners argue that
respondents are not entitled to separation pay.
As for respondents, they contend that G.J.T. Rebuilders
failed to prove its alleged serious business losses. They
argue that the financial statement showing a net loss for the
year 1997 was not credible, having been belatedly
subscribed under oath by the Certified Public Accountant
who prepared it.33
With no credible proof of G.J.T. Rebuilders’ supposed
serious business losses, respondents argue that petitioners
must pay them separation pay under Article 283 of the
Labor Code.34
The issue for our resolution is whether petitioners
sufficiently proved that G.J.T. Rebuilders suffered from
serious business losses.
This petition should be denied.
I
G.J.T. Rebuilders must pay respondents
their separation pay for failure to prove
its alleged serious business losses
Article 283 of the Labor Code allows an employer to dismiss
an employee due to the cessation of operation or closure of
its establishment or undertaking, thus:
Art. 283. Closure of establishment and reduction of
personnel. – The employer may also terminate the
employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses
or the closing or cessation of operation of the establishment
61
or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a
written notice on the workers and the Department of Labor
and Employment at least one (1) month before the intended
date thereof. In case of termination due to installation of
labor saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or
to at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
The decision to close one’s business is a management
prerogative that courts cannot interfere with.35 Employers
can "lawfully close shop at anytime,"36 even for reasons of
their own. "Just as no law forces anyone to go into
business, no law can compel anybody to continue in it."37 In
Mac Adams Metal Engineering Workers Union-Independent
v. Mac Adams Metal Engineering,38 this court said:
It would indeed be stretching the intent and spirit of the law
if [courts] were to unjustly interfere with the management’s
prerogative to close or cease its business operations just
because [the] business operation or undertaking is not
suffering from any loss or simply to provide the workers
continued employment.39
However, despite this management prerogative, employers
closing their businesses must pay the affected workers
separation pay equivalent to one-month pay or to at least
one-half-month pay for every year of service, whichever is
higher.40 The reason is that an employee dismissed, even
for an authorized cause, loses his or her means of
livelihood.41
The only time employers are not compelled to pay
separation pay is when they closed their establishments or
undertaking due to serious business losses or financial
reverses.42
Serious business losses are substantial losses, not de
minimis.43 "Losses" means that the business must have
operated at a loss for a period of time for the employer "to
[have] perceived objectively and in good faith"44 that the
business’ financial standing is unlikely to improve in the
future.
The burden of proving serious business losses is with the
employer.45 The employer must show losses on the basis of
financial statements covering a sufficient period of time. The
period covered must be sufficient for the National Labor
Relations Commission and this court to appreciate the
nature and vagaries of the business.
In North Davao Mining Corporation v. NLRC,46 North Davao
Mining Corporation presented in evidence financial
statements showing a continuing pattern of loss from 1988
until its closure in 1992. The company suffered net losses
averaging 3 billion a year, with an aggregate loss of 20
62
billion by the time of its closure.47 This court found that
North Davao suffered serious business losses.48
In Manatad v. Philippine Telegraph and Telephone
Corporation,49 the Philippine Telegraph and Telephone
Corporation presented in evidence financial statements
showing a continuing pattern of loss from 1995 to
1999.50 By 2000, the corporation suffered an aggregate loss
of 2.169 billion, constraining it to retrench some of its
employees. This court held that the Philippine Telegraph
and Telephone Corporation was "fully justified in
implementing a retrenchment program since it was
undergoing business reverses, not only for a single fiscal
year, but for several years prior to and even after the
program."51
In LVN Pictures Employees and Workers Association (NLU)
v. LVN Pictures, Inc.,52 a case G.J.T. Rebuilders cited, LVN
Pictures, Inc. presented in evidence financial statements
showing a continuing pattern of loss from 1957 to 1961. By
the time the corporation closed its business, it had suffered
an aggregate loss of 1,560,985.14.53 This court found that
LVN Pictures, Inc. suffered serious business losses.54
Aside from the obligation to pay separation pay, employers
must comply with the notice requirement under Article 283
of the Labor Code. Employers must serve a written notice
on the affected employees and on the Department of Labor
and Employment at least one month before the intended
date of closure. Failure to comply with this requirement
renders the employer liable for nominal damages.55
We uphold G.J.T. Rebuilders’ decision to close its
establishment as a valid exercise of its management
prerogative. G.J.T. Rebuilders closed its machine shop,
believing that its "former customers . . . seriously doubted
[its] capacity . . . to perform the same quality [of
service]"56 after the fire had partially damaged the building
where it was renting space.
Nevertheless, we find that G.J.T. Rebuilders failed to
sufficiently prove its alleged serious business losses.
The financial statement G.J.T. Rebuilders submitted in
evidence covers the fiscal years 1996 and 1997. Based on
the financial statement, G.J.T. Rebuilders earned a net
income of 61,157.00 in 1996 and incurred a net loss of
316,210.00 in 1997.57
We find the two-year period covered by the financial
statement insufficient for G.J.T. Rebuilders to have
objectively perceived that the business would not recover
from the loss. Unlike in North Davao Mining Corporation,
Manatad, and LVN Pictures Employees and Workers
Association (NLU), no continuing pattern of loss within a
sufficient period of time is present in this case. In fact, in
one of the two fiscal years covered by the financial
statement presented in evidence, G.J.T. Rebuilders earned
a net income. We, therefore, agree with the Labor Arbiter
and the Court of Appeals that G.J.T. Rebuilders closed its
machine shop to prevent losses, not because of serious
business losses.58
63
Considering that G.J.T. Rebuilders failed to prove its alleged service is equal to 7,312.50. The latter amount being higher,
serious business losses, it must pay respondents their Russell must receive 7,312.50 as separation pay.
separation pay equivalent to one-month pay or at least one-
half-month pay for every year of service, whichever is As for Benjamin, he began working as a machinist on
higher. In computing the period of service, a fraction of at February 1, 1994.66 Since he last worked for G.J.T.
least six months is considered a year.59 Rebuilders on December 15, 1997, he worked a total of
three years, 10 months, and 14 days. This period is rounded
Ricardo began working as a machinist on February 9, off to four years, with the last 10 months and 14 days being
1978.60 Since he last worked for G.J.T. Rebuilders on considered a year.67
December 15, 1997, he worked a total of 19 years, 10
months, and six days. This period is rounded off to 20 Benjamin had a daily salary of 225.00 and worked 13 days
years, with the last 10 months and six days being a month.68 His one-month pay, therefore, is equal to
considered a year.61 2,925.00. On the other hand, his one-half-month pay for
every year of service is equal to 5,850.00. The latter amount
Ricardo had a daily salary of 230.00 and worked 13 days a being higher, Benjamin must receive 5,850.00 as separation
month.62 His one-month pay, therefore, is equal to 2,990.00. pay.
On the other hand, his one-half-month pay for every year of
service is equal to 29,250.00. The latter amount being II
higher, Ricardo must receive 29,250.00 as separation pay.
G.J.T. Rebuilders must pay respondents
With respect to Russell, he began his employment on nominal damages for failure to comply
September 1, 1992.63 Since he last worked for G.J.T. with the procedural requirements for
Rebuilders on December 15, 1997, he worked a total of five closing its business
years, three months, and 14 days. This period is rounded off
to five years, not six years, since the last three months and In addition to separation pay, G.J.T. Rebuilders must pay
14 days are less than the six months required to be each of the respondents nominal damages for failure to
considered a year.64 comply with the notice requirement under Article 283 of the
Labor Code.
Russell had a daily salary of 225.00 and worked 13 days a
month.65 His one-month pay, therefore, is equal to 2,925.00. Notice of the eventual closure of establishment is a
On the other hand, his one-half-month pay for every year of "personal right of the employee to be personally informed of
his [or her] proposed dismissal as well as the reasons

64
therefor."69 The reason for this requirement is to "give the
employee some time to prepare for the eventual loss of his
[or her] job."70
The requirement "is not a mere technicality or formality
which the employer may dispense with."71 Should
employers fail to properly notify their employees, they shall
be liable for nominal damages even if they validly closed
their businesses.72
Generally, employers that validly closed their businesses
but failed to comply with the notice requirement are liable in
the amount of 50,000.00.73 This amount of nominal
damages, however, may be reduced depending on "the
sound discretion of the court."74 In Sangwoo Philippines,
Inc. v. Sangwoo Philippines, Inc. Employees Union-
OLALIA,75 we said that:
[i]n the determination of the amount of nominal damages
which is addressed to the sound discretion of the court,
several factors are taken into account: (1) the authorized
cause invoked . . .; (2) the number of employees to be
awarded; (3) the capacity of the employers to satisfy the
awards, taking into account their prevailing financial status
as borne by the records; (4) the employer’s grant of other
termination benefits in favor of the employees; and (5)
whether there was bona fide attempt to comply with the
notice requirements as opposed to giving no notice at all.76
G.J.T. Rebuilders allegedly "conferred with all [of its
employees] of [its] intention to cease business
operations"77 one month before closing its business. It
allegedly submitted an Affidavit of Closure to the
Department of Labor and Employment on February 16,
1998.78
"Conferring with employees" is not the notice required under
Article 283 of the Labor Code.1âwphi1 The law requires a
written notice of closure served on the affected employees.
As to when the written notice should be served on the
Department of Labor and Employment, the law requires that
it be served at least one month before the intended date of
closure. G.J.T. Rebuilders served the written notice on the
Department of Labor and Employment on February 16,
1998, two months after it had closed its business on
December 15, 1997.
With G.J.T. Rebuilders failing to comply with the notice
requirement under Article 283 of the Labor Code, we find
that it deprived respondents of due process. However,
considering that G.J.T. Rebuilders attempted to comply with
the notice requirement, we find the nominal damages of
10,000.00 for each of the respondents sufficient.79
III
Respondents are not entitled to attorney’s fees
Attorney’s fees "represent the reasonable compensation [a
client pays his or her lawyer] [for legal service
rendered]."80 The award of attorney’s fees is the exception
rather than the rule.81 Specifically in labor cases, attorney’s
fees are awarded only when there is unlawful withholding of
wages82 or when the attorney’s fees arise from collective
65
bargaining negotiations that may be charged against union
funds in an amount to be agreed upon by the parties.83 For
courts and tribunals to properly award attorney’s fees, they
must make "an express finding of fact and [citation] of
applicable law"84 in their decisions.
In the present case, there is no unlawful withholding of
wages or an award of attorney’s fees arising from collective
bargaining negotiations. Neither did the Labor Arbiter nor
the Court of Appeals make findings of fact or cite the
applicable law in awarding attorney’s fees. That
respondents were "constrained to engage the services of
counsel to prosecute their claims"85 is not enough
justification since "no premium should be placed on the right
to litigate."86
For these reasons, we delete the award of attorney’s fees.
All told, G.J.T. Rebuilders failed to prove that it closed its
machine shop due to serious business losses. Moreover, it
failed to comply with Article 283 of the Labor Code on the
notice requirement. Therefore, petitioners must pay
respondents Ricardo Ambos, Russell Ambos, and Benjamin
Putian separation pay and nominal damages.
WHEREFORE, the Petition for Review on Certiorari is
DENIED. The Court of Appeals’ Decision dated January 17,
2006 is AFFIRMED with MODIFICATION.
Petitioners are ordered to PAY respondents their separation
pay with 6% legal interest87 from the finality of this Decision
until full payment:
Ricardo Ambos ₱29,250.00
Russell Ambos ₱7,312.50
Benjamin Putian ₱5,850.00.
Furthermore, petitioners shall PAY each of the respondents
₱10,000.00 as nominal damages with 6% legal interest88
from the finality of this Decision until full payment.
The award of attorney's fees is DELETED.
SO ORDERED.
G.R. No. 181490 April 23, 2014
MIRANT (PHILIPPINES) CORPORATION AND EDGARDO
A. BAUTISTA, Petitioners,
vs.
JOSELITO A. CARO, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, 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 Decision4 of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 046551-05
(NCR-00-03-02511-05). The NLRC decision vacated and
set aside the Decision5 of the Labor Arbiter which found that
66
respondent Joselito A. Caro (Caro) was illegally dismissed
by petitioner Mirant (Philippines) Corporation (Mirant).
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 operate and maintain
power stations located in Sual, Pangasinan and Pagbilao,
Quezon, respectively. Petitioner corporation and its related
companies maintain around 2,000 employees detailed in its
main office and other sites. Petitioner corporation had
changed its name to CEPA Operations in 1996 and to
Southern Company in 2001. In 2002, Southern Company
was sold to petitioner Mirant whose corporate parent is an
Atlanta-based power producer in the United States of
America.6 Petitioner corporation is now known as Team
Energy Corporation.7
Petitioner Edgardo A. Bautista (Bautista) was the President
of petitioner corporation when respondent was terminated
from employment.8
Respondent was hired by Mirant Pagbilao on January 3,
1994 as its Logistics Officer. In 2002, when Southern
Company was sold to Mirant, respondent was already a
Supervisor of the Logistics and Purchasing Department of
petitioner. At the time of the severance of his employment,
respondent was the Procurement Supervisor of Mirant
Pagbilao assigned at petitioner corporation’s corporate
office. As Procurement Supervisor, his main task was to
serve as the link between the Materials Management
Department of petitioner corporation and its staff, and the
suppliers and service contractors in order to ensure that
procurement is carried out in conformity with set policies,
procedures and practices. In addition, respondent 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
also responsible for guiding and overseeing the welfare and
training needs of the staff of the Materials Management
Department. Due to the nature of respondent’s functions,
petitioner corporation considers his position as confidential.9
The antecedent facts follow:
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 damages and attorney’s fees. Respondent posits
the following allegations in his Position Paper:11
On January 3, 1994, respondent was hired by petitioner
corporation as its Logistics Officer and was assigned at
petitioner corporation’s corporate office in Pasay City. At the
time of the filing of the complaint, respondent was already a
Supervisor at the Logistics and Purchasing Department with
a monthly salary of ₱39,815.00.
On November 3, 2004, petitioner corporation conducted a
random drug test where 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
67
random drug testing to be conducted on the same day that
they received the correspondence. Respondent was duly
notified that he was scheduled to be tested after lunch on
that day. His receipt of the notice was evidenced by his
signature on the correspondence.
Respondent avers that at around 11:30 a.m. of the same
day, he received a phone call from his wife’s colleague who
informed him that a bombing incident occurred near his
wife’s work station in Tel Aviv, Israel where his wife was
then working as a caregiver. Respondent attached to his
Position Paper a Press Release13 of the Department of
Foreign Affairs (DFA) in Manila to prove the occurrence of
the bombing incident and a letter14 from the colleague of his
wife who allegedly gave him a phone call from Tel Aviv.
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 left the office on the day of the random drug
test, he first informed the secretary of his Department, Irene
Torres (Torres), at around 12:30 p.m. that he will give
preferential attention to the emergency phone call that he
just received. He also told Torres that he would be back at
the office as soon as he has resolved his predicament.
Respondent recounts that he tried to contact his wife by
phone but he could not reach her. He then had to go to the
Israeli Embassy to confirm the bombing incident. However,
he was told by Eveth Salvador (Salvador), a lobby attendant
at the Israeli Embassy, that he could not be allowed entry
due to security reasons.
On that same day, at around 6:15 p.m., respondent returned
to petitioner corporation’s office. When he was finally able to
charge his cellphone at the office, he received a text
message from Tina Cecilia (Cecilia), a member of the Drug
Watch Committee that conducted 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 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.
On November 8, 2004, respondent received a Show Cause
Notice15 from petitioner corporation through Jaime Dulot
(Dulot), his immediate supervisor, requiring him to explain 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 corporation further required respondent on
December 14, 2004 to submit additional pieces of
supporting documents to prove that respondent was at the
Israeli Embassy in the afternoon of November 3, 2004 and
that the said bombing incident actually occurred.
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 submitted the required
additional supporting documents.17
On January 13, 2005, petitioner corporation’s Investigating
Panel issued an Investigating Report18 finding respondent
68
guilty of "unjustified refusal to submit to random drug
testing" and recommended a penalty of four working weeks
suspension without pay, instead of 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 Department, George K.
Lamela, Jr. (Lamela), recommended19 that respondent be
terminated from employment instead of merely being
suspended. Lamela argued that even if respondent did not
outrightly refuse to take the random drug test, he avoided
the same. Lamela averred that "avoidance" was
synonymous with "refusal."
On February 14, 2005, respondent received a letter20 from
petitioner corporation’s Vice President for Operations,
Tommy J. Sliman (Sliman), terminating him on the same
date. Respondent filed a Motion to Appeal21 his termination
on February 23, 2005. The motion was denied by petitioner
corporation on March 1, 2005.
It is the contention of respondent that he was illegally
dismissed by petitioner corporation due to the latter’s non-
compliance with the twin requirements of notice and
hearing. He asserts that while there was a notice charging
him of "unjustified refusal to submit to random drug testing,"
there was no notice of hearing and petitioner corporation’s
investigation was not the equivalent of the "hearing"
required under the law which should have accorded
respondent the opportunity to be heard.
Respondent further asserts that he was illegally dismissed
due to the following circumstances:
1. He signed the notice that he was randomly selected
as a participant to the company drug testing;
2. Even the Investigating Panel was at a loss in
interpreting the charge because it believed that the
term "refusal" was ambiguous, and therefore such
doubt must be construed in his favor; and
3. He agreed to take the drug test the following day at
his own expense, which he says was clearly not an
indication of evasion from the drug test.
Petitioner corporation counters with the following
allegations:
On November 3, 2004, a random drug test was conducted
on petitioner corporation’s employees at its Corporate Office
at the CTC Bldg. in Roxas Blvd., Pasay City. The random
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
petitioner’s employees to undergo the said drug test which
was to be carried out by Drug Check Philippines, Inc.22
When respondent failed to appear at the scheduled drug
test, Cecilia prepared an incident report addressed to Dulot,
the Logistics Manager of the Materials Management
69
Department.23 Since it was stated under petitioner
corporation’s Mirant Drugs Policy Employee Handbook to
terminate an employee for "unjustified refusal to submit to a
random drug test" for the first offense, Dulot sent
respondent a Show Cause Notice24 dated November 8,
2004, requiring him to explain why no disciplinary action
should be imposed for his failure to take the random drug
test. Respondent, in a letter dated November 11, 2004,
explained that he attended to an emergency call from his
wife’s colleague and apologized for 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 panel to
investigate and recommend the penalty to be imposed on
respondent.26 The Investigating Panel found respondent’s
explanations as to his whereabouts on that day to be
inconsistent, and recommended that he be suspended for
four weeks without pay. The 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 of violation of its
policies. The Investigating Panel further recommended that
the Mirant Drug Policy be reviewed to clearly define the
phrase "unjustified refusal to submit to random drug
testing."27 Petitioner corporation’s Vice-President for
Operations, Sliman, however disagreed with the
Investigating Panel’s recommendations and terminated the
services of respondent in accordance with the subject drug
policy. Sliman likewise stated that respondent’s violation of
the policy amounted to willful breach of trust and loss of
confidence.28
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 corporation
assigned at its Corporate Office advising them of the details
of the drug test – up 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 reasons for not being able to take
the drug test on the scheduled day constituted valid
defenses that would have taken his failure to undergo the
drug test out of the category of "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 explanation
why he failed to submit to the drug test:
1. Petitioner corporation is not convinced that there
was indeed such a phone call at noon of November 3,
2004 as respondent could not even tell who called him
up.
2. Respondent could not even tell if he received the
call via the landline telephone service at petitioner
corporation’s office or at his mobile phone.
3. Petitioner corporation was also of the opinion that
granting there was such a phone call, there was no
compelling reason for respondent to act on it at the
expense of his scheduled drug testing. Petitioner
corporation principally pointed out that the call merely
70
 stated that a bomb exploded near his wife’s work
station without stating that his wife was affected.
Hence, it found no point in confirming it with
extraordinary haste and forego the drug test which
would have taken only a few minutes to accomplish. If
at all, respondent should have undergone the drug
testing first before proceeding to confirm the news so
as to leave his mind free from this obligation.
4. Petitioner corporation maintained that respondent
could have easily asked permission from the Drug
Watch Committee that he was leaving the office since
the place where the activity was conducted was very
close to his work station.29
To the mind of petitioners, they are not liable for illegal
dismissal because all of these circumstances prove that
respondent really eluded the random drug test and was
therefore validly terminated for cause after being properly
accorded with due process. Petitioners 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 unfair labor
practice as respondent’s dismissal was not intended to
curtail his right to self-organization; that respondent is not
entitled to the payment of his 13th and 14th month bonuses
and other incentives as he failed to show that he is entitled
to these amounts according to company policy; that
respondent is not entitled to reinstatement, payment of full
back wages, moral and exemplary damages and attorney’s
fees due to his termination for cause.
In a decision dated August 31, 2005, Labor Arbiter Aliman
D. Mangandog found respondent to have been illegally
dismissed. The Labor Arbiter also found that the quitclaim
purportedly executed by respondent was not a bona fide
quitclaim which effectively discharged petitioners of all the
claims of respondent in the case at bar. If at all, the Labor
Arbiter considered the execution of the quitclaim as a clear
attempt on the part of petitioners to mislead its office into
thinking that respondent no longer had any cause of action
against petitioner corporation. The decision stated, 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 reinstated, partially computed as of this date in the
amount of ₱258,797.50 (₱39,815.00 x 6.5 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.30
The Labor Arbiter stated that while petitioner corporation
observed the proper procedure in the termination of an
71
employee for a purported authorized cause, such just cause
did not exist in the case at bar. The decision did not agree
with the conclusions reached by petitioner corporation’s own
Investigating Panel that while respondent did not refuse to
submit to the 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 separate and distinct and that "the two words
are not even synonymous with each other."31 The Labor
Arbiter considered as more tenable the stance of
respondent that his 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 Arbiter opined that it was not
tantamount to "unjustified refusal" which constitutes as just
cause for his termination. Finally, the Labor Arbiter found
that respondent was entitled to moral and exemplary
damages and attorney’s fees.
On appeal to the NLRC, petitioners alleged that the decision
of the Labor Arbiter was rendered with grave abuse of
discretion for being contrary to law, rules and established
jurisprudence, and contained serious errors in the findings
of facts which, if not corrected, would cause grave and
irreparable damage or injury to petitioners. The NLRC,
giving weight and emphasis to the inconsistencies in
respondent’s explanations, considered his omission as
"unjustified refusal" in violation of petitioner corporation’s
drug policy. Thus, in a decision dated May 31, 2006, the
NLRC ruled, viz.:
x x x [Respondent] was duly notified as shown by copy of
the notice x x x which he signed to acknowledge receipt
thereof on the said date. [Respondent] did not refute
[petitioner corporation’s] allegation that he was also
personally reminded of said drug test on the same day by
Ms. Cecilia of [petitioner corporation’s] drug watch
committee. However, [respondent] was nowhere to be found
at [petitioner corporation’s] premises at the time when he
was supposed to be tested. Due to his failure to take part in
the random drug test, 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 to random drug test, a type D
offense punishable with termination. Pursuant to said
directive, [respondent] submitted an explanation x x x on 11
November 2004, pertinent portions of which read:
"I was scheduled for drug test after lunch that day of
November 3, 2004 as confirmed with Tina Cecilia. I was
having my lunch when a colleague of my wife abroad called
up informing 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 but at around 12:30 P.M. that day, I
informed MS. IRENE TORRES, our Department Secretary[,]
that I would be attending to this emergency call. Did even
[inform] her that I’ll 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] night if it’s possible to have it (drug test) the next day.
72
My apology [for] any inconvenience to the Drug Watch
Committee, that I forgot everything that day including my
scheduled drug test due to confusion of what had
happened. It [was] not my intention not to undergo nor
refuse to have a drug test knowing well that it’s a company
policy and it’s mandated by law."
In the course of the investigation, [respondent] was
requested to present proof pertaining to the alleged call he
received on 3 November 2004 from a colleague of his wife
regarding the bomb explosion in Tel Aviv, his presence at
the Israel Embassy also on 3 November 2004.
[Respondent], thereafter, submitted a facsimile which he
allegedly received from his wife's colleague confirming that
she called and informed him of the bombing incident.
However, a perusal of said facsimile x x x reveals that the
same cannot be given any probative value because, as
correctly observed by [petitioners], it can barely be read and
upon inquiry with PLDT, the international area code of Israel
which is 00972 should appear on the face of the facsimile if
indeed said facsimile originated from Israel. [Respondent]
also could not present 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 thereat. Accordingly, Mr.
Bailon, a member of the investigation panel, verified with
Ms. Salvador who told him that she is only the telephone
operator of the Israel Embassy and that she was not in a
position to validate [respondent’s] presence at the Embassy.
Mr. Bailon was then referred to a certain Ms. Aimee
Zandueta, also of said embassy, who confirmed that based
on their records, [respondent] did not visit the embassy nor
was he attended to by any 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 incident of such nature occurred
on 1 November 2004. A letter x x x to this effect was written
by Consul Ziva Samech of the Embassy of Israel. A press
release x x x of the Department of Foreign Affairs
confirm[ed] that the bombing occurred on 1 November
2004.
In his explanation, the [respondent] stated that the reason
why he had to leave the office on 3 November 2004 was to
verify an information at the Israel Embassy of the alleged
bombing incident on the same day. However, [petitioners] in
their position paper alleged that Ms. 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 Ms. Torres in his reply and rejoinder x x x. He
actually confirmed that he was involved in the CIIS
registration with all companies that was involved with
[petitioner] company and worked on the registration of
[petitioner] company’s vehicles with TRO.
It is also herein noted that [respondent] had initially reported
to Ms. Torres that it was his mother in law who informed him
about the problem concerning his wife. However, in his
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
73
call from Ms. Cecilia that day. He merely stated that he did
not know that it was Ms. Cecilia calling him up in a
cellphone and it was only after he charged his cellphone at
the office that night that he received her message. In effect,
[respondent] asserted that his cellphone battery was
running low or drained. [Petitioners] were able to refute
[these] averments of [respondent] when they presented
[respondent’s] Smart Billing Statement
x x x showing that he was able to make a cellphone call at
5:29 p.m. to [petitioner corporation’s] supplier, Mutico for a
duration of two (2) minutes.32
Given the foregoing facts, the NLRC stated that the offer of
respondent to submit to another drug test the following day,
even at his expense, cannot operate to free him from
liability. The NLRC opined that taking the drug test on the
day following the scheduled random drug test would affect
both the integrity and the accuracy of the specimen which
was supposed to be taken from a randomly selected
employee who was notified of his/her selection on the same
day that the drug test was to be administered. The NLRC
further asserted that a drug test, conducted many hours or a
day after the employee was notified, would compromise its
results because the employee may have possibly taken
remedial measures to metabolize or eradicate whatever
drugs s/he may have ingested prior to the drug test.
The NLRC further stated that these circumstances have
clearly established the falsity of respondent’s claims and
found no justifiable reason for respondent to refuse to
submit to the petitioner corporation’s random drug test.
While the NLRC acknowledged that it was petitioner
corporation’s own Investigating Panel that considered
respondent’s failure to take the required drug test as mere
"avoidance" and not "unjustified refusal," it concluded that
such finding was merely recommendatory to guide top
management on what action to take.
The NLRC also found that petitioner corporation’s denial of
respondent’s motion to reconsider his termination was in
order. Petitioner corporation’s reasons for such denial are
quoted in the NLRC decision, viz.:
"Your appeal is anchored on your claim that you responded
to an emergency call from someone abroad informing you
that a bomb exploded near the work station of your wife
making you unable to undergo the scheduled drug testing.
This claim is groundless taking into account the following:
We are not convinced that there was indeed that call which
you claim to have received noon of November 3, 2004. On
the contrary, our belief is based on the fact that you could
not tell who called you up or how the call got to you. If you
forgot to ask the name of the person who 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 your office and your mobile phone. If
your claim were (sic) not fabricated, you would be able to
tell which of these two was used.
74
Granting that you indeed received that alleged call, from
your own account, there was no compelling reason for you
to act on it at the expense of your scheduled drug testing.
The call, as it were, merely stated that ‘something wrong
happened (sic) in their neighborhood, where a bomb
exploded near her workstation.’ Nothing was said if your
wife was affected. There is no point in confirming it with
extraordinary haste and forego the drug test which would
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 obligation.
Additionally, if it was indeed necessary that you skip the
scheduled drug testing to verify that 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 workstation. It was
absolutely within your reach to inform any of its members
that you were attending to an emergency call. Why did you
not do so?
All this undisputedly proves that you merely eluded the drug
testing. Your claim that you did not refuse to be screened
carries no value. Your act was a negation of your words."33
The NLRC found that respondent was not only validly
dismissed for cause – he was also properly accorded his
constitutional right to due process as shown by the following
succession of events:
1. On November 8, 2004, respondent was given a
show-cause notice requiring him to explain in writing
within three days why no disciplinary action should be
taken against him for violation of company policy on
unjustified refusal to submit to random drug testing – a
type D offense which results in termination.
2. Respondent submitted his explanation on
November 11, 2004.
3. On December 9, 2004, respondent was given a
notice of investigation34 informing him of a meeting on
December 13, 2004 at 9:00 a.m. In this meeting,
respondent was allowed to explain his side, present
his evidences and witnesses, and confront the
witnesses presented against him.
4. On February 14, 2005, respondent was served a
letter of termination which clearly stated the reasons
therefor.35
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 decisions of this Court which allowed the award of
financial assistance due to factors such as long years of
service or the Court’s concern and compassion towards
labor where the infraction was not so serious. Thus,
considering respondent’s 10 years of service with petitioner
corporation without any record of violation of company
policies, the NLRC ordered petitioner corporation to pay
respondent financial assistance equivalent to one-half (1/2)
75
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:
WHEREFORE, the decision dated 31 August 2005 is
VACATED and SET ASIDE. The instant complaint is
dismissed for lack of merit. However, respondent Mirant
[Philippines] Corp. is ordered to pay complainant financial
assistance in the amount of one hundred ninety-nine
thousand seventy five pesos (₱199,075.00).
SO ORDERED.36
37
Respondent filed a motion for reconsideration, while
petitioners filed a motion for partial reconsideration38 of the
NLRC decision. In a Resolution39 dated June 30, 2006, the
NLRC denied both motions.
In a petition for certiorari before the CA, respondent raised
the following issues: whether the 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," "avoidance," "refusal" and
"unjustified refusal" have similar meanings; reversed the
factual findings of the Labor Arbiter; and held that
respondent deliberately breached petitioner’s 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
emergency call regarding his wife’s safety in Tel Aviv, and
that such failure cannot be considered synonymous with
"avoidance" or "refusal" so as to mean "unjustified refusal"
in order to be meted the penalty of termination.41
The CA disagreed with the NLRC and ruled that it was
immaterial whether respondent failed, 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 and
policy. Despite such disobedience, however, the appellate
court considered the penalty of dismissal to be too harsh to
be imposed on respondent, viz.:
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
the circumstances of each case. "There must be reasonable
proportionality between, on the one hand, the willful
disobedience by the employee and, on the other hand, the
penalty imposed therefor" x x x.
In this case, [petitioner corporation’s] own investigating
panel has revealed that the penalty of dismissal is too harsh
to impose on [respondent], considering that this was the first
time in his 10-year employment that the latter violated its
company policies. The investigating panel even suggested
that a review be had of the company policy on the term
"unjustified refusal" to clearly define what constitutes a
violation thereof. The recommendation of the investigating
panel is partially reproduced as follows:
"VII. Recommendation
76
However, despite having violated the company policy, the
panel recommends 4 working 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 scheduled on
November 3, 2004.
2. In the case of Mr. Joselito A. Caro, the two
conditions for termination (Unjustified and Refusal)
were not fully met as he expressly agreed to undergo
drug test.
3. Mr. Joselito A. Caro voluntarily offered himself to
undergo drug test the following day at his own
expense.
Doubling the maximum of 2 weeks suspension to 4 weeks is
indicative of the gravity of the offense committed. The panel
believes that although mitigating factors partially offset
reasons for termination, the 2 weeks maximum suspension
is too lenient penalty for such an offense.
The Panel also took into consideration that Mr. Joselito A.
Caro has served the company for ten (10) years without any
record of violation of the company policies.
xxxx
The Panel also recommends that Management review the
Mirant Drug Policy specifically ‘Unjustified [R]efusal to
submit to random drug testing.’ The Panel believes that the
term refusal casts certain ambiguities and should be clearly
defined."42
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
management prerogative. In its assailed Decision dated
June 26, 2007, the CA ruled, viz.:
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 REVERSED and
SET ASIDE. The Labor Arbiter’s Decision dated August 31,
2005 is hereby REINSTATED with MODIFICATION by
omitting the award of moral and exemplary damages as well
as attorney’s fees, and that the petitioner’s salary equivalent
to four (4) working weeks at the time he was terminated be
deducted from his backwages. No cost.
SO ORDERED.43
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 arguments in the motion for reconsideration
were already raised in their past pleadings.
In this instant Petition, petitioners raise the following
grounds:
77
I. THE COURT OF APPEALS COMMITTED REVERSIBLE B. THE PENALTY OF TERMINATION SHOULD
ERROR WHEN IT FAILED TO CONSIDER THAT: HAVE BEEN SUSTAINED BY THE COURT OF
APPEALS GIVEN ITS POSITIVE FINDING THAT
A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO DELIBERATELY AND
RESPONDENT CARO SHOULD HAVE BEEN WILLFULLY DISOBEYED PETITIONER MIRANT’S
SUMMARILY DISMISSED CONSIDERING THAT IT ANTI-DRUGS POLICY.
LACKED THE REQUISITE VERIFICATION AND
CERTIFICATION AGAINST FORUM SHOPPING C. IN INVALIDATING RESPONDENT CARO’S
REQUIRED BY THE RULES OF COURT; OR DISMISSAL, THE COURT OF APPEALS
SUBSTITUTED WITH ITS OWN DISCRETION A
B. AT THE VERY LEAST, THE SAID PETITION FOR CLEAR MANAGEMENT PREROGATIVE
CERTIORARI FILED BY RESPONDENT CARO BELONGING ONLY TO PETITIONER MIRANT IN
SHOULD HAVE BEEN CONSIDERED MOOT SINCE THE INSTANT CASE.
RESPONDENT CARO HAD ALREADY PREVIOUSLY
EXECUTED A QUITCLAIM DISCHARGING THE D. THE WILLFUL AND DELIBERATE VIOLATION OF
PETITIONERS FROM ALL HIS MONETARY CLAIMS. PETITIONER MIRANT’S ANTI-DRUGS POLICY
AGGRAVATED RESPONDENT CARO’S
II. THE COURT OF APPEALS COMMITTED REVERSIBLE WRONGFUL CONDUCT WHICH JUSTIFIED HIS
ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN TERMINATION.
A WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT, E. IN INVALIDATING RESPONDENT CARO’S
CONSIDERING THAT: DISMISSAL, THE COURT OF APPEALS, IN
EFFECT, BELITTLED THE IMPORTANCE AND
A. THE COURT OF APPEALS REVERSED THE SERIOUSNESS OF PETITIONER MIRANT’S ANTI-
DECISION DATED 31 MAY 2006 OF THE NLRC ON DRUGS POLICY AND CONSEQUENTLY
THE GROUND THAT THERE WAS GRAVE ABUSE HAMPERED THE EFFECTIVE IMPLEMENTATION
OF DISCRETION AMOUNTING TO LACK OR OF THE SAME.
EXCESS OF JURISDICTION NOTWITHSTANDING
THE FACT THAT IT AFFIRMED THE NLRC’S F. THE EXISTENCE OF OTHER GROUNDS FOR
FINDINGS THAT RESPONDENT CARO CARO’S DISMISSAL, SUCH AS WILLFUL
DELIBERATELY DISOBEYED PETITIONER DISOBEDIENCE AND [LOSS] OF TRUST AND
MIRANT’S ANTI-DRUGS POLICY.
78
 CONFIDENCE, JUSTIFIED HIS TERMINATION
FROM EMPLOYMENT.
III. NONETHELESS, THE AWARD OF FINANCIAL
ASSISTANCE IN FAVOR OF RESPONDENT CARO IS
NOT WARRANTED CONSIDERING THAT RESPONDENT
CARO’S WILLFUL AND DELIBERATE REFUSAL TO
SUBJECT HIMSELF TO PETITIONER MIRANT’S DRUG
TEST AND HIS SUBSEQUENT EFFORTS TO CONCEAL
THE SAME SHOWS HIS DEPRAVED MORAL
CHARACTER.
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED
WHEN IT HELD PETITIONER BAUTISTA PERSONALLY
LIABLE FOR [RESPONDENT] CARO’S UNFOUNDED
CLAIMS CONSIDERING THAT, ASIDE FROM
RESPONDENT CARO’S DISMISSAL BEING LAWFUL,
PETITIONER BAUTISTA MERELY ACTED WITHIN THE
SCOPE OF HIS FUNCTIONS IN GOOD FAITH.44
We shall first rule on the issue raised by petitioners that the
petition for certiorari filed by respondent with the CA should
have been summarily dismissed as it lacked the requisite
verification and certification against forum shopping under
Sections 4 and 5, Rule 7 of the Rules, viz.:
SEC. 4. Verification. – Except when otherwise specifically
required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read
the pleading and that the allegations therein are true and
correct of his knowledge and belief.
A pleading required to be verified which contains a
verification based on "information and belief," or upon
"knowledge, information and belief," or lacks a proper
verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. – The plaintiff
or principal party shall certify under oath in the complaint or
other initiatory pleading asserting a claim for relief, or in a
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, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein;
(b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five
(5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
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 without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false
certification or noncompliance with any of the undertakings
therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal
79
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 prejudice and
shall constitute direct contempt, as well as a cause for
administrative sanctions.
It is the contention of petitioners that due to respondent’s
failure to subscribe the 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. Accordingly, such omission is fatal to the entire
petition for not being properly verified and certified. The CA
therefore erred when it did not dismiss the petition.
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 liberal construction in labor law emanates from the
mandate that the workingman’s welfare should be the
primordial and paramount consideration.45 Thus, if the rules
of procedure will stunt courts from fulfilling this mandate, the
rules of procedure shall be relaxed if the 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 outright by the
CA, the NLRC decision would have reached finality and
respondent would have lost his remedy and denied his right
to be protected against illegal dismissal under the Labor
Code, as amended.
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 metes the
penalty of termination for the first offense. A plain, simple
and literal application of the said policy to the omission of
respondent would have warranted his outright dismissal
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 otherwise prima facie straightforward rule if the ends
of substantial justice have to be served.
It is the crux of petitioners’ argument that respondent’s
omission amounted to "unjust refusal" because he could not
sufficiently support with convincing proof and evidence his
defenses for failing to take the random drug test. For
petitioners, the inconsistencies in respondent’s explanations
likewise operated to cast doubt on his real reasons and
motives for not submitting to the random drug test on
schedule. In recognition of these inconsistencies and the
lack of convincing proof from the point of view of petitioners,
the 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.
We agree with the disposition of the appellate court that
there was illegal dismissal in the case at bar.
While the adoption and enforcement by petitioner
corporation of its Anti-Drugs Policy is recognized as a valid
exercise of its management prerogative as an employer,
such exercise is not absolute and unbridled. Managerial
80
prerogatives are subject to limitations provided by law,
collective bargaining agreements, and the general principles
of fair play and justice.46 In the exercise of its management
prerogative, an employer must therefore ensure that the
policies, rules and regulations on work-related activities of
the employees must always be fair and reasonable and the
corresponding penalties, when prescribed, commensurate
to the offense involved and to the degree of the
infraction.47 The Anti-Drugs Policy of Mirant fell short of
these requirements.
Petitioner corporation’s subject Anti-Drugs Policy fell short
of being fair and reasonable.
First. The policy was not clear on what constitutes
"unjustified refusal" when the subject drug policy prescribed
that an employee’s "unjustified refusal" to submit to a
random drug test shall be punishable by the penalty of
termination for the first offense. To be sure, the term
"unjustified refusal" could not possibly cover all forms of
"refusal" as the employee’s 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 employees – as well as to
management – as to what types of acts would fall under the
purview of "unjustified refusal." Even petitioner corporation’s
own Investigating Panel recognized this ambiguity, viz.:
The Panel also recommends that Management review the
Mirant Drug Policy specifically "Unjustified [R]efusal to
submit to random drug testing." The Panel believes that the
term "refusal" casts certain ambiguities and should be
clearly defined.48
The fact that petitioner corporation’s own Investigating
Panel and its Vice President for Operations, Sliman, differed
in their recommendations regarding respondent’s case are
first-hand proof that there, indeed, is ambiguity in the
interpretation and application of the subject drug policy. The
fact that petitioner corporation’s own personnel had to
dissect the 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, the NLRC and the CA have perceived
the term "unjustified refusal" on different prisms due to the
lack of parameters as to what comes under its purview. To
be sure, the fact that the courts and entities involved in this
case had to engage in semantics – and come up with
different constructions – is yet another glaring proof that the
subject policy is not clear creating doubt that respondent’s
dismissal was a result of petitioner corporation’s valid
exercise of its management prerogative.
It is not a mere jurisprudential principle, but an enshrined
provision of law, that all doubts shall be resolved in favor of
labor. Thus, in Article 4 of the Labor Code, as amended,
"[a]ll doubts in the implementation and interpretation of the
provisions of [the Labor] Code, including its implementing
rules and regulations, shall be resolved in favor of labor." In
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 for the laborer." Applying these provisions of
81
law to the circumstances in the case at bar, it is not fair for
this Court to allow an ambiguous policy to prejudice the
rights of an employee against illegal dismissal. To hold
otherwise and sustain the stance of petitioner corporation
would be to adopt an interpretation that goes against the
very grain of labor protection in this jurisdiction. As correctly
stated by the Labor Arbiter, "when a conflicting interest of
labor and capital are weighed on the scales of social justice,
the heavier influence of the latter must be counter-balanced
by the sympathy and compassion the law must accord the
underprivileged worker."49
Second. The penalty of termination imposed by petitioner
corporation upon respondent fell 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 to law50 – as in
the case at bar. Recognizing the ambiguity in the subject
policy, the CA was more inclined to adopt the
recommendation of petitioner corporation’s own
Investigating Panel over that of Sliman and the NLRC. The
appellate court succinctly but incisively pointed out, viz.:
x x x We find, as correctly pointed out by the investigating
panel, that the [petitioner corporation’s] Anti-Drug Policy is
excessive in terminating an employee for his "unjustified
refusal" to subject himself to the random drug test on first
offense, without clearly defining what amounts to an
"unjustified refusal."
Thus, We find that the recommended four (4) working
weeks’ suspension without pay as the reasonable penalty to
be imposed on [respondent] for his disobedience. x x
x51 (Additional emphasis supplied.)
To be sure, the unreasonableness of the penalty of
termination as imposed in this case is further highlighted by
a fact admitted by petitioner corporation itself: that for the
ten-year period that respondent had been employed by
petitioner corporation, he did not have any record of a
violation of its company policies.
As to the other issue relentlessly being raised by petitioner
corporation that respondent’s petition for certiorari before
the CA should have been considered moot as respondent
had already previously executed a quitclaim discharging
petitioner corporation from all his monetary claims, we
cannot agree. Quitclaims executed by laborers are
ineffective to bar claims for the full measure of their legal
rights,52 especially in this case where the evidence on
record shows that the amount stated in the quitclaim exactly
corresponds to the amount claimed as unpaid wages by
respondent under Annex A53 of his Reply54 filed with the
Labor Arbiter. Prima facie, this creates a false impression
that respondent’s claims have already been settled by
petitioner corporation – discharging the latter from all of
respondent’s monetary claims. In truth and in fact, however,
the amount paid under the subject quitclaim represented the
salaries of respondent that remained unpaid at the time of
his termination – not the amounts being claimed in the case
at bar.
82
We believe that this issue was extensively discussed by
both the Labor Arbiter and the CA and we find no reversible
error on the disposition of this issue, viz.:
A review of the records show that the alluded quitclaim,
which was undated and not even notarized although signed
by the petitioner, was for the amount of ₱59,630.05. The
said quitclaim was attached as Annex 26 in the [petitioners’]
Position Paper filed before the 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 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 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 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 any way
waive [respondent’s] right to pursue his legitimate claims
regarding his dismissal in a labor suit. Thus, We gave no
credence to [petitioners’] private defense that alleged
quitclaim rendered the instant petition moot.55
Finally, the petition avers that petitioner Bautista should not
be held personally liable for respondent’s dismissal as he
acted in good faith and within the scope of his official
functions as then president of petitioner corporation. We
agree with petitioners.1âwphi1 Both decisions of the Labor
Arbiter and the CA did not discuss the basis of the personal
liability of petitioner Bautista, and yet the dispositive portion
of the decision of the Labor Arbiter - which was affirmed by
the appellate court - held him jointly and severally liable with
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 reinstated, partially computed as of this date in the
amount of ₱258,797.50 (₱39,815.00 x 6.5 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 petitioner
Bautista acted in such manner, the doctrine of corporate
83
fiction dictates that only petitioner corporation should be
held liable for the illegal dismissal of respondent.
WHEREFORE, the petition for review on certiorari is
DENIED. The assailed Decision dated 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 illegal
dismissal of respondent Joselito A. Caro. Petitioner Edgardo
A. Bautista is not held personally liable as then President of
petitioner corporation at the time of the illegal dismissal.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 198783 April 15, 2013
ROYAL PLANT WORKERS UNION, Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU
PLANT, Respondent.
DECISION
MENDOZA, J.:
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
Philippines, Inc.-Cebu Plant v. Royal Plant Workers Union,
which nullified and set aside the June 11, 2010 Decision3 of
the Voluntary Arbitration Panel (Arbitration Committee) in a
case involving the removal of chairs in the bottling plant of
Coca-Cola Bottlers Philippines, Inc. (CCBPI).
The Factual and Procedural
Antecedents
The factual and procedural antecedents have been
accurately recited in the May 24, 2011 CA decision as
follows:
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a
domestic corporation engaged in the manufacture, sale and
distribution of softdrink products. It has several bottling
plants all over the country, one of which is located in Cebu
City. Under the employ of each bottling plant are bottling
operators. In the case of the plant in Cebu City, there are 20
bottling operators who work for its Bottling Line 1 while there
are 12-14 bottling operators who man its Bottling Line 2. All
of them are male and they are members of herein
respondent Royal Plant Workers Union (ROPWU).
The bottling operators work in two shifts. The first shift is
from 8 a.m. to 5 p.m. and the second shift is from 5 p.m. up
to the time production operations is finished. Thus, the
second shift varies and may end beyond eight (8) hours.
However, the bottling operators are compensated with
overtime pay if the shift extends beyond eight (8) hours. For
Bottling Line 1, 10 bottling operators work for each shift
while 6 to 7 bottling operators work for each shift for Bottling
Line 2.
84
Each shift has rotations of work time and break time. Prior
to September 2008, the rotation 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 one half (1 ½) hours of work.
In 1974, the bottling operators of then Bottling Line 2 were
provided with chairs upon their request. In 1988, the bottling
operators of then Bottling Line 1 followed suit and asked to
be 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 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 reinforces the
task of bottling operators to constantly move about in the
performance of their duties and responsibilities.
With this task of moving constantly to check on the
machinery and equipment assigned to him, a bottling
operator does not need a chair anymore, hence, petitioner’s
directive to remove them. Furthermore, CCBPI rationalized
that the removal of the chairs is implemented so that the
bottling operators will avoid sleeping, thus, prevent injuries
to their 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 operators would
be unable to perform their duties competently.
The bottling operators took issue with the removal of the
chairs. Through the representation of herein respondent,
they initiated the grievance machinery of the Collective
Bargaining Agreement (CBA) in November 2008. Even after
exhausting the remedies contained in the grievance
machinery, the parties were still at a deadlock with petitioner
still insisting on the removal of the chairs and respondent
still against such measure. As such, respondent sent a
Notice to Arbitrate, dated 16 July 2009, to petitioner stating
its position to submit the issue on the removal of the chairs
for arbitration. Nevertheless, before submitting to arbitration
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 an amicable settlement.
Thus, the process of arbitration continued and the parties
appointed the chairperson and members of the Arbitration
Committee as outlined in the CBA. Petitioner and
respondent respectively appointed as members to the
Arbitration Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis
Ruiz while they both chose Atty. Alice Morada as
chairperson thereof. They then executed a Submission
Agreement which was accepted by the Arbitration
Committee on 01 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 line while performing their
duties and responsibilities is valid or not.
85
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
valid as it is a legitimate exercise of management
prerogative, it does not violate the Labor 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 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 policy of
the State to assure the right of workers to just and humane
conditions of work as stated in Article 3 of the Labor Code
and the Global Workplace Rights Policy.
Ruling of the Arbtration Committee
On June 11, 2010, the Arbitration Committee rendered a
decision in favor of the Royal Plant Workers Union (the
Union) and against CCBPI, the dispositive portion of which
reads, as follows:
Wherefore, the undersigned rules in favor of ROPWU
declaring that the removal of the operators chairs is not
valid. CCBPI is hereby ordered to restore the same for the
use of the operators as before their removal in 2008.4
The Arbitration Committee ruled, among others, that the use
of chairs by the operators had 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 company practice
favorable to the Union; that it ripened into a benefit after it
had been enjoyed by it; that any benefit being enjoyed by
the employees could not be reduced, diminished,
discontinued, or eliminated by the employer in accordance
with Article 100 of the Labor Code, which prohibited the
diminution or elimination by the employer of the employees’
benefit; and that jurisprudence had not laid down any rule
requiring a specific minimum number of years before a
benefit would constitute a voluntary company practice which
could not be unilaterally withdrawn by the employer.
The Arbitration Committee further stated that, although the
removal of the chairs was done 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 involved, when
these incidents happened, and what actions were taken.
There was no evidence either of any accident or injury in the
many years that the bottling operators used chairs. To the
Arbitration Committee, it was puzzling why it took 34 and 20
years for CCBPI to be so solicitous of the bottling operators’
safety that it removed their chairs so that they would not fall
asleep and injure themselves.
Finally, the Arbitration Committee was of the view that,
contrary to CCBPI’s position, line efficiency was the result of
many factors and it could not be attributed solely to one
such as the removal of the chairs.
Not contented with the Arbitration Committee’s decision,
CCBPI filed a petition for review under Rule 43 before the
CA.
86
Ruling of the CA
On May 24, 2011, the CA rendered a contrasting decision
which nullified and set aside the decision of the Arbitration
Committee. The dispositive portion of the CA decision
reads:
WHEREFORE, premises considered, the petition is hereby
GRANTED and the Decision, dated 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 bottling
operators from the manufacturing/production line.5
The CA held, among others, that the removal of the chairs
from the manufacturing/production lines by CCBPI is within
the province of management prerogatives; that it was part of
its inherent right to control and manage its enterprise
effectively; and that since it was the employer’s discretion to
constantly develop measures or 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 prerogative when it decided
to remove the chairs used by the bottling operators in the
manufacturing/production lines. The removal of the chairs
was solely motivated by the best intentions for both the
Union and CCBPI, in line with the "I Operate, I Maintain, I
Clean" 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 reinforce the task of bottling operators to
constantly move about in the performance of their duties
and responsibilities. Without the chairs, the bottling
operators could efficiently supervise these machineries’
operations and maintenance. It would also be beneficial for
them because the working time before the break in each
rotation for each shift was substantially reduced from two
and a half hours (2 ½ ) to one and a half hours (1 ½) before
the 30-minute break. This scheme was clearly
advantageous to the bottling operators as the number of
resting periods was increased. CCBPI had the best
intentions in removing the chairs because some bottling
operators had the propensity to fall asleep while on the job
and sleeping on the job ran the risk of injury exposure and
removing them reduced the risk.
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 Collective Bargaining Agreement (CBA) or the
general principles of justice and fair play. It opined that the
principles of justice and fair play were not violated because,
when the chairs were removed, there was a commensurate
reduction of the working time for each rotation in each shift.
The provision of chairs for the bottling operators was never
part of the CBAs contracted between the Union and CCBPI.
The chairs were not provided as a benefit because such
matter was dependent upon the exigencies of the work of
the bottling operators. As such, CCBPI could withdraw this
provision if it was not necessary in the exigencies of the
work, if it was not contributing to the efficiency of the bottling
87
operators or if it would expose them to some hazards.
Lastly, the CA explained that the provision of chairs to the
bottling operators cannot be covered by Article 100 of the
Labor Code on elimination or diminution of benefits because
the employee’s benefits referred to therein mainly involved
monetary considerations or privileges converted to their
monetary equivalent.
Disgruntled with the adverse CA decision, the Union has
come to this Court praying for its reversal on the following
GROUNDS
I Procedure, expressly states that the said rule does not
THAT WITH DUE RESPECT, THE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR IN HOLDING THAT A
PETITION FOR REVIEW UNDER RULE 43 OF THE
RULES OF COURT IS THE PROPER REMEDY OF
CHALLENGING BEFORE SAID COURT THE DECISION
OF THE VOLUNTARY ARBITRATOR OR PANEL OF
VOLUNTARY ARBITRATORS UNDER THE LABOR
CODE.
II
THAT WITH DUE RESPECT, THE COURT OF APPEALS
GRAVELY ABUSED ITS DISCRETION IN NULLIFYING
AND SETTING ASIDE THE DECISION OF THE PANEL OF
VOLUNTARY ARBITRATORS WHICH DECLARED AS
NOT VALID THE REMOVAL OF THE CHAIRS OF THE
OPERATORS IN THE MANUFACTURING AND/OR
PRODUCTION LINE.
In advocacy of its positions, the Union argues that the
proper remedy in challenging the decision of the Arbitration
Committee before the CA is a petition for certiorari under
Rule 65. The petition for review under Rule 43 resorted to
by CCBPI should have been dismissed for being an
improper remedy. The Union points out that the parties
agreed to submit the unresolved grievance involving the
removal of chairs to voluntary arbitration pursuant to the
provisions of Article V of the existing CBA. Hence, the
assailed decision of the Arbitration Committee is a judgment
or final order issued under the Labor Code of the
Philippines. Section 2, Rule 43 of the 1997 Rules of Civil
cover cases under the Labor Code of the Philippines. The
judgments or final orders 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.
On the substantive aspect, the Union argues that there is no
connection between CCBPI’s "I Operate, I Maintain, I Clean"
program and the removal of the chairs because the
implementation of the program was in 2006 and the removal
of the chairs was done in 2008. The 30-minute break is part
of an operator’s working hours and does not make any
difference. The frequency of the break period is not
advantageous to the operators because it cannot
compensate for the time they are made to stand throughout
their working time. The bottling operators get tired and
exhausted after their tour of duty even with chairs around.
How much more if the chairs are removed?
88
The Union further claims that management prerogatives are
not absolute but subject to certain limitations found in law, a
collective bargaining agreement, or general principles of fair
play and justice. The operators have been performing their
assigned duties and 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 the attention of an operator
was called for failure to carry out his assigned tasks. CCBPI
has 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 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 the removal of the chairs, the
efficiency of the operators was much better and there was
no recorded accident. After the removal of the chairs, the
efficiency of the operators diminished considerably,
resulting in the drastic decline of line efficiency.
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 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 unilateral withdrawal, elimination or removal of
the chairs, which have been in existence for more than 30
years, constitutes a violation of existing practice.
The respondent’s position
CCBPI reiterates the ruling of the CA that a petition for
review under Rule 43 of the Rules of Court was the proper
remedy to question the decision of the Arbitration
Committee. It 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 purpose of optimizing their
efficiency and CCBPI’s machineries and equipment; and
that the exercise of its management prerogative was done
in good faith and not for the purpose of circumventing the
rights of the employees under the special laws, the CBA or
the general principles of justice and fair play.
The Court’s Ruling
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 remedy to question the decision of the Arbitration
Committee? Second, was the removal of the bottling
operators’ chairs from CCBPI’s production/manufacturing
lines a valid exercise of a management prerogative?
The Court sustains the ruling of the CA on both issues.
Regarding the first issue, the Union insists that the CA erred
in ruling that the recourse taken by CCBPI in appealing the
89
decision of the Arbitration Committee was proper. It argues
that 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 under Rule 43.
CCBPI counters that the CA was correct in ruling that the
recourse it took in appealing the decision of the Arbitration
Committee to the CA via a petition for review under Rule 43
of the Rules of Court was proper and in conformity with the
rules and prevailing jurisprudence.
A Petition for Review
under Rule 43 is the
proper remedy
CCBPI is correct. This procedural issue being debated upon
is not novel. The Court has already ruled in a number of
cases that a decision or award of a voluntary arbitrator is
appealable to the CA via a petition for review under Rule 43.
The recent case of Samahan Ng Mga Manggagawa Sa
Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary Arbitrator
Buenaventura C. Magsalin and Hotel Enterprises of the
Philippines6 reiterated the well-settled doctrine on this issue,
to wit:
In the case of Samahan ng mga Manggagawa sa Hyatt-
NUWHRAIN-APL v. Bacungan,7 we repeated the well-
settled rule that a decision or award of a voluntary arbitrator
is appealable to the CA via petition for review under Rule
43. We held that:
"The question on the proper recourse to assail a decision of
a voluntary arbitrator has already been settled in Luzon
Development Bank v. Association of Luzon Development
Bank Employees, where the Court held that the decision or
award of the voluntary arbitrator or panel of arbitrators
should likewise be appealable to the Court of Appeals, in
line with the 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 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.
Subsequently, in Alcantara, Jr. v. Court of Appeals, and
Nippon Paint Employees Union-Olalia v. Court of Appeals,
the Court reiterated the aforequoted ruling. In Alcantara, the
Court held that notwithstanding Section 2 of Rule 43, the
ruling in Luzon Development Bank still stands. The Court
explained, thus:
‘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 reiteration of the exception to the exclusive
appellate jurisdiction of the Court of Appeals, as provided
for in Section 9, Batas Pambansa Blg. 129, as amended by
Republic Act No. 7902:
90
(3) Exclusive appellate jurisdiction over all final judgments,
decisions, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards
or commissions, including the Securities and Exchange
Commission, the Employees’ Compensation Commission
and the Civil Service Commission, except those falling
within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor 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.’
The Court took into account this exception in Luzon
Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to the
Labor Code do not come within its ambit x x x."
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997
Rules of Civil Procedure, as amended, provide:
"SECTION 1. Scope. - This Rule shall apply to appeals from
judgments or final orders of the Court of Tax Appeals and
from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its
quasi-judicial functions. Among these agencies are the x x
x, and voluntary arbitrators authorized by law.
xxxx
SEC. 3. Where to appeal. - An appeal under this Rule may
be taken to the Court of Appeals within the period and in the
manner therein provided, whether the appeal involves
questions of fact, of law, or mixed questions of fact and law.
SEC. 4. Period of appeal. - The appeal shall be taken within
fifteen (15) days from notice of the award, judgment, final
order or resolution, or from the date of its last publication, if
publication is required by law for its effectivity, or of the
denial of petitioner’s motion for new trial or reconsideration
duly filed in accordance with the governing law of the court
or agency a quo. x x x. (Emphasis supplied.)’
Hence, upon receipt on May 26, 2003 of the Voluntary
Arbitrator’s Resolution denying petitioner’s motion for
reconsideration, petitioner should have filed with the CA,
within the fifteen (15)-day reglementary period, a petition for
review, not a petition for certiorari.
On the second issue, the Union basically claims that the
CCBPI’s decision to unilaterally 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 provide that every worker is entitled
to be provided by the employer with appropriate seats,
among others; 2) policy of the State to assure the right of
workers to a just and humane condition of work as provided
for in Article 3 of the Labor Code;8 3) Global Workplace
Rights 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
91
to health risks; and 4) diminution of benefits provided in
Article 100 of the Labor Code.9
Opposing the Union’s argument, CCBPI mainly contends
that the removal of the subject chairs is a valid exercise of
management prerogative. The management decision to
remove the subject chairs was made in good faith and did
not intend to defeat or circumvent the rights of the Union
under the special laws, the CBA and the general principles
of justice and fair play.
Again, the Court agrees with CCBPI on the matter.
A Valid Exercise of
Management Prerogative
The Court has held that management is free to regulate,
according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working
methods, time, place, and manner of work, processes to be
followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of workers,
and discipline, dismissal and recall of workers. The exercise
of management prerogative, however, is not absolute as it
must be exercised in good faith and with due regard to the
rights of labor.10
In the present controversy, it cannot be denied that CCBPI
removed the operators’ chairs pursuant to a national
directive and in line with its "I Operate, I Maintain, I Clean"
program, 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 to the welfare of the members of the Union.
The removal of the chairs was compensated by: a) a
reduction of the operating hours of the bottling operators
from a two-and-one-half (2 ½)-hour rotation period to a one-
and-a-half (1 ½) hour rotation period; and b) an increase of
the break period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with
good intentions as CCBPI wanted to avoid instances of
operators sleeping on the job while in the performance of
their duties and responsibilities and because of the fact that
the chairs were not necessary 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’ rights.
The fact that there is no proof of any operator sleeping on
the job is of no moment. There is no guarantee that such
incident would never happen as sitting on a chair is relaxing.
Besides, the operators constantly move about while doing
their job. The ultimate purpose is to promote work efficiency.
No Violation of Labor Laws
The rights of the Union under any labor law were not
violated. There is no law that requires employers to provide
chairs for bottling operators. The CA correctly ruled that the
Labor Code, specifically Article 13211 thereof, only requires
92
employers to provide seats for women. No similar
requirement is mandated for men or male workers. It must
be stressed that all concerned bottling operators in this case
are men.
There was no violation either of the Health, Safety and
Social Welfare Benefit provisions 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 rest period. The
directive did not expose the bottling operators to safety and
health hazards.
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 sitting is an
emerging public health and occupational health issue with
serious implications for the health of our working population.
Importantly, prolonged sitting is a risk factor for poor health
and early death, even among those who meet, or exceed,
national13 activity guidelines." In another report,14 it was
written:
Workers needing to spend long periods in a seated position
on the job such as taxi drivers, call centre and office
workers, are at risk for injury and a variety of adverse health
effects.
The most common injuries occur in the muscles, bones,
tendons and ligaments, affecting the neck and lower back
regions. Prolonged sitting:
● reduces body movement making muscles more likely to
pull, cramp or strain when stretched suddenly, causes
fatigue in the back and neck muscles by slowing the blood
supply and puts high tension on the spine, especially in the
low back or neck, and
● causes a steady compression on the spinal discs that
hinders their nutrition and can contribute to their premature
degeneration.
Sedentary employees may also face a gradual deterioration
in health if they do not exercise or do not lead an otherwise
physically active life. The most common health problems
that these employees experience are disorders in blood
circulation and injuries affecting their ability to move. Deep
Vein Thrombosis (DVT), where a clot forms in a large vein
after prolonged sitting (eg after a long flight) has also been
shown to be a risk.
Workers who spend most of their working time seated may
also experience other, less specific adverse health effects.
Common effects include decreased fitness, reduced heart
and lung efficiency, and digestive problems. Recent
research has identified too much sitting as an important part
of the physical activity and health equation, and suggests
we should focus on the harm caused by daily inactivity such
as prolonged sitting.
Associate professor David Dunstan leads a team at the
93
Baker IDI in Melbourne which is specifically researching
sitting and physical activity. He has found that people who
spend long periods of time seated (more than four hours per
day) were at risk of:
● higher blood levels of sugar and fats,
● larger waistlines, and
● higher risk of metabolic syndrome
regardless of how much moderate to vigorous exercise they
had.
In addition, people who interrupted their sitting time more
often just by standing or with light activities such as
housework, shopping, and moving about the office had
healthier blood sugar and fat levels, and smaller waistlines
than those whose sitting time was not broken up.
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 risk in prolonged sitting.
No Violation of the CBA
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 performing their duties and responsibilities. On the
contrary, Section 2 of Article 1 of the CBA expressly
provides as follows:
Article I
SCOPE
SECTION 2. Scope of the Agreement. All the terms and
conditions of employment of employees and workers within
the appropriate bargaining unit (as defined in Section 1
hereof) are embodied in this Agreement and the same shall
govern the relationship between the COMPANY and such
employees and/or workers. On the other hand, all such
benefits 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 the employees and/or workers, shall be
deemed as purely voluntary acts on the part of the
COMPANY in each case, and the continuance and
repetition thereof now or in the future, no matter how long or
how often, shall not be construed as establishing an
obligation on the part of the COMPANY. It is however
understood that any benefits that are agreed upon by and
between the COMPANY and the UNION in the Labor-
Management Committee Meetings regarding the terms and
conditions of employment outside the CBA that have
general application to employees who are similarly situated
in a Department or in the Plant shall be implemented.
[emphasis and underscoring supplied]
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 company and enjoyed by the employees,
shall be considered as purely voluntary acts by the
94
management and that the continuance of such benefits
and/or privileges, no matter how 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 an obligation or a vested right
in favor of the Union.
No Violation of the general principles
of justice and fair play
The Court completely agrees with the CA ruling that the
removal of the chairs did not violate the general principles of
justice and fair play because the bottling operators’ working
time was considerably reduced from two and a half (2 ½)
hours to just one and a half (1 ½) hours and the break
period, when they could sit down, was increased to 30
minutes between rotations. The bottling operators’ new work
schedule is certainly advantageous to them 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 and fair work schedule.
No Violation of Article 100
of the Labor Code
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 non-diminution rule refers to monetary benefits or
privileges given to the employee with monetary equivalents.
Such benefits or privileges form part of the employees’
wage, salary or compensation making them enforceable
obligations.
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
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 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
19
Union, 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.
In this regard, the Court agrees with the CA when it
resolved the matter and wrote:
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
95
ordinary earnings and wages. From this definition, We can
only deduce that the other employee benefits spoken of by
Article 100 pertain only to those which are susceptible of
monetary considerations. Indeed, this could only be the
most plausible conclusion because the cases tackling
Article 100 involve mainly with monetary considerations or
privileges converted to their monetary equivalents.
xxxx
Without a doubt, equating the provision of chairs to the
bottling operators Ds something within the ambit of
"benefits'' in the context of Article 100 of the Labor Code is
unduly stretching the coverage of the law. The
interpretations of Article 100 of the Labor Code do not show
even with the slightest hint that such provision of chairs for
the bottling operators may be sheltered under its mantle.21
Jurisprudence recognizes the exercise of management
prerogatives. Labor Jaws also 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. The law must protect not
only the welfare of the employees, but also the right of the
employers.22
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. Nos. 196280 & 196286 April 2, 2014
UNIVERSIDAD DE STA. ISABEL, Petitioner,
vs.
MARVIN-JULIAN L. SAMBAJON, JR., Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45
urging this Court to set aside the Decision1 dated March 25,
2011 of the Court of Appeals (CA) in CA-GR. SP Nos.
108103 and 108168 which affirmed with modification the
Decision2 dated August 1, 2008 of the National Labor
Relations Commission (NLRC). The NLRC affirmed the
Decision3 dated August 22, 2006 of the Labor Arbiter in
NLRC Sub-RAB V-05-04-00053-05) declaring petitioner
liable for illegal dismissal of respondent.
The Facts
Universidad de Sta. Isabel (petitioner) is a non-stock, non-
profit religious educational institution in Naga City. Petitioner
hired Marvin-Julian L. Sambajon, Jr. (respondent) as a full-
time college faculty member with the rank of Assistant
Professor on probationary status, as evidenced by an
Appointment Contract4 dated November 1, 2002, effective
November 1, 2002 up to March 30, 2003.
After the aforesaid contract expired, petitioner continued to
give teaching loads to respondent who remained a full-time
faculty member of the Department of Religious Education
for the two semesters of school-year (SY) 2003-2004 (June
96
1, 2003 to March 31, 2004); and two semesters of SY 2004-
2005 (June 2004 to March 31, 2005).5
Sometime in June 2003, after respondent completed his
course in Master of Arts in Education, major in Guidance
and Counseling, he submitted the corresponding Special
Order from the Commission on Higher Education (CHED),
together with his credentials for the said master’s degree, to
the Human Resources Department of petitioner for the
purpose of salary adjustment/increase. Subsequently,
respondent’s salary was increased, as reflected in his pay
slips starting October 1-15, 2004.6 He was likewise re-
ranked from Assistant Professor to Associate Professor.
In a letter dated October 15, 2004 addressed to the
President of petitioner, Sr. Ma. Asuncion G. Evidente, D.C.,
respondent vigorously argued that his salary increase
should be made effective as of June 2003 and demanded
the payment of his salary differential. The school
administration thru Sr. Purita Gatongay, D.C., replied by
explaining its policy on re-ranking of faculty members7, viz:
xxxx
Please be informed that teachers in the Universidad are not
re-ranked during their probationary period. The Faculty
Manual as revised for school year 2002-2003 provides
(page 38) "Re-ranking is done every two years, hence the
personnel hold their present rank for two years. Those
undergoing probationary period and those on part-time
basis of employment are not covered by this provision." This
provision is found also in the 2000-2001 Operations Manual.
Your personnel file shows that you were hired as a
probationary teacher in the second semester of school year
2002-2003. By October 2004, you will be completing four (4)
semesters (two school years) of service. Even permanent
teachers are re-ranked only every two years, and you are
not even a permanent teacher. I am informed that you have
been told several times and made to read the Provision in
the Faculty Manual by the personnel office that you cannot
be re-ranked because you are still a probationary teacher.
x x x x8
Respondent insisted on his demand for retroactive pay. In a
letter dated January 10, 2005, Sr. Evidente reiterated the
school policy on re-ranking of teachers, viz:
xxx
Under the Faculty Manual a permanent teacher is not
entitled to re-ranking oftener than once every two years.
From this it should be obvious that, with all the more reason,
a probationary teacher would not be entitled to "evaluation,"
which could result in re-ranking or "adjustment in salary"
oftener than once every two years.
Since you are a probationary teacher, the University is
under no obligation to re-rank you or adjust your salary after
what you refer to as "evaluation." Nevertheless, considering
that in October 2004 you were completing two years of
service, the University adjusted your salary in the light of the
CHED Special Order you submitted showing that you had
obtained the degree of Master of Arts in Education. Instead
97
of being grateful for the adjustment, you insist that the
adjustment be made retroactive to June 2003. Simply
stated, you want your salary adjusted after one semester of
probationary service. We do not think a probationary
teacher has better rights than a permanent teacher in the
matter of re-ranking or "evaluation."9
However, respondent found the above explanation
insufficient and not clear enough. In his letter dated January
12, 2005, he pointed out the case of another faculty
member -- whom he did not name -- also on probationary
status whose salary was supposedly adjusted by petitioner
at the start of school year (June) after he/she had
completed his/her master’s degree in March. Respondent
thus pleaded for the release of his salary differential, or at
the very least, that petitioner give him categorical answers
to his questions.10
Apparently, to resolve the issue, a dialogue was held
between respondent and Sr. Evidente. As to the outcome of
this conversation, the parties gave conflicting accounts.
Respondent claimed that Sr. Evidente told him that the
school administration had decided to shorten his
probationary period to two years on the basis of his
satisfactory performance.11 This was categorically denied by
Sr. Evidente though the latter admitted having informed
respondent "that he was made Associate Professor on
account of his incessant requests for a salary increase
which the Universidad de Santa Isabel eventually
accommodated…considering that [respondent] had
obtained a Master’s Degree in June 2003." She further
informed respondent that "his appointment as Associate
Professor did not affect his status as a probationary
employee" and that petitioner "was not and did not exercise
its prerogative to shorten his probationary period to only two
years." Sr. Stella O. Real, D.C., who issued a Certificate of
Employment to respondent, likewise denied that she
confirmed to respondent that petitioner has shortened his
probationary employment.12
On February 26, 2005, respondent received his letter of
termination which stated:
Greetings of Peace in the Lord!
We regret to inform your good self that your full time
probationary appointment will not be renewed when it
expires at the end of this coming March 31, 2005.
Thank you so much for the services that you have rendered
to USI and to her clientele the past several semesters. We
strongly and sincerely encourage you to pursue your desire
to complete your Post Graduate studies in the University of
your choice as soon as you are able.
God bless you in all your future endeavors.
Godspeed!13
On April 14, 2005, respondent filed a complaint for illegal
dismissal against the petitioner.
In his Decision dated August 22, 2006, Labor Arbiter Jesus
Orlando M. Quinones ruled that there was no just or
authorized cause in the termination of respondent’s
98
probationary employment. Consequently, petitioner was
found liable for illegal dismissal, thus:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered finding respondent school UNIVERSIDAD DE
SANTA ISABEL liable for the illegal dismissal of
complainant MARVIN-JULIAN L. SAMBAJON, JR.
Accordingly, and consistent with Article 279 of the Labor
Code, respondent school is hereby directed to pay
complainant full backwages covering the period/duration of
the 1st semester of academic year 2005-2006.
Reinstatement being rendered moot by the expiration of the
probationary period, respondent school is directed to pay
complainant separation pay in lieu of reinstatement
computed at one (1) month’s pay for every year of service.
An award of 10% attorney’s fees in favor of complainant is
also held in order.
(please see attached computation of monetary award as
integral part of this decision).
All other claims and charges are DISMISSED for lack of
legal and factual basis.
SO ORDERED.14
Petitioner appealed to the NLRC raising the issue of the
correct interpretation of Section 92 of the Manual of
Regulations for Private Schools and DOLE-DECS-CHED-
TESDA Order No. 01, series of 1996, and alleging grave
abuse of discretion committed by the Labor Arbiter in ruling
on a cause of action/issue not raised by the complainant
(respondent) in his position paper.
On August 1, 2008, the NLRC rendered its Decision
affirming the Labor Arbiter and holding that respondent had
acquired a permanent status pursuant to Sections 91, 92
and 93 of the 1992 Manual of Regulations for Private
Schools, in relation to Article 281 of the Labor Code, as
amended. Thus:
In the instant case, the first contract (records, pp. 36; 92)
executed by the parties provides that he was hired on a
probationary status effective November 1, 2002 to March
30, 2003. While his employment continued beyond the
above-mentioned period and lasted for a total of five (5)
consecutive semesters, it appears that the only other
contract he signed is the one (records, p. 103) for the
second semester of SY 2003-2004. A portion of this
contract reads:
"I am pleased to inform you that you are designated and
commissioned to be an Apostle of Love and Service, Unity
and Peace as you dedicate and commit yourself in the
exercise of your duties and responsibilities as a:
FULL-TIME FACULTY MEMBER
of the Religious Education Department from November 1,
2003 to March 31, 2004.
Unless otherwise renewed in writing this designation
automatically terminates as of the date expiration above
stated without further notice."
99
There is no showing that the complainant signed a contract
for the first and second semesters of SY 2004-2005.
Under the circumstances, it must be concluded that the
complainant has acquired permanent status. The last
paragraph of Article 281 of the Labor Code provides that "an
employee who is allowed to work after a probationary period
shall be considered a regular employee." Based thereon,
the complainant required [sic] permanent status on the first
day of the first semester of SY 2003-2004.
As presently worded, Section 92 of the revised Manual of
Regulations for Private Schools merely provides for the
maximum lengths of the probationary periods of academic
personnel of private schools in the three (3) levels of
education (elementary, secondary, tertiary). The periods
provided therein are not requirements for the acquisition, by
them, of permanent status.
WHEREFORE, the decision appealed from is hereby
AFFIRMED.
SO ORDERED.15
Petitioner and respondent sought reconsideration of the
above decision, with the former contending that the NLRC
resolved an issue not raised in the appeal memorandum,
while the latter asserted that the NLRC erred in not
awarding him full back wages so as to conform to the
finding that he had acquired a permanent status. Both
motions were denied by the NLRC which ruled that
regardless of whether or not the parties were aware of the
rules for the acquisition of permanent status by private
school teachers, these rules applied to them and overrode
their mistaken beliefs. As to respondent’s plea for back
wages, the NLRC said the award of back wages was not
done in this case because respondent did not appeal the
Labor Arbiter’s decision.
Both parties filed separate appeals before the CA. On
motion by respondent, the two cases were consolidated
(CA-G.R. SP Nos. 108103 and 108168).16
By Decision dated March 25, 2011, the CA sustained the
conclusion of the NLRC that respondent had already
acquired permanent status when he was allowed to
continue teaching after the expiration of his first
appointment-contract on March 30, 2003. However, the CA
found it necessary to modify the decision of the NLRC to
include the award of back wages to respondent. The
dispositive portion of the said decision reads:
WHEREFORE, premises considered, the petition docketed
as CA-G.R. SP No. 108103 is GRANTED. The challenged
Decision of the NLRC dated August 1, 2008 in NLRC NCR
CA No. 050481-06 (NLRC Sub-RAB V-05-04-00053-05) is
AFFIRMED with MODIFICATION in that Universidad de
Sta. Isabel is directed to reinstate Marvin-Julian L.
Sambajon, Jr. to his former position without loss of seniority
rights and to pay him full backwages computed from the
time his compensation was withheld from him up to the time
of his actual reinstatement. All other aspects are
AFFIRMED.
100
As regards CA-G.R. SP No. 108168, the petition is DENIED
for lack of merit.
SO ORDERED.17
The Petition/Issues
Before this Court, petitioner ascribes grave error on the part
of the CA in sustaining the NLRC which ruled that
respondent was dismissed without just or authorized cause
at the time he had already acquired permanent or regular
status since petitioner allowed him to continue teaching
despite the expiration of the first contract of probationary
employment for the second semester of SY 2002-2003.
Petitioner at the outset underscores the fact that the NLRC
decided an issue which was not raised on appeal, i.e.,
whether respondent had attained regular status. It points out
that the Labor Arbiter’s finding that respondent was
dismissed while still a probationary employee was not
appealed by him, and hence such finding had already
become final.
In fine, petitioner asks this Court to rule on the following
issues: (1) whether the NLRC correctly resolved an issue
not raised in petitioner’s appeal memorandum; and (2)
whether respondent’s probationary employment was validly
terminated by petitioner.
Our Ruling
The petition is partly meritorious.
Issues on Appeal before the NLRC
Section 4(d), Rule VI of the 2005 Revised Rules of
Procedure of the NLRC, which was in force at the time
petitioner appealed the Labor Arbiter’s decision, expressly
provided that, on appeal, the NLRC shall limit itself only to
the specific issues that were elevated for review, to wit:
Section 4. Requisites for perfection of appeal. x x x.
xxxx
(d) Subject to the provisions of Article 218 of the Labor
Code, once the appeal is perfected in accordance with
these Rules, the Commission shall limit itself to reviewing
and deciding only the specific issues that were elevated on
appeal.
We have clarified that the clear import of the
aforementioned procedural rule is that the NLRC shall, in
cases of perfected appeals, limit itself to reviewing those
issues which are raised on appeal. As a consequence
thereof, any other issues which were not included in the
appeal shall become final and executory.18
In this case, petitioner sets forth the following issues in its
appeal memorandum:
5.01
WHETHER THE MARVIN JULIAN L. SAMBAJON, JR.
WAS ILLEGALLY DISMISSED FROM THE UNIVERSIDAD
DE STA. ISABEL.
5.02
101
WHETHER THE UNIVERSIDAD DE STA. ISABEL
SHORTENED THE PROBATIONARY PERIOD OF
MARVIN JULIAN L. SAMBAJON.
5.03
WHETHER RESPONDENTS-APPELLANTS ARE
ENTITLED TO DAMAGES.19
Specifically, petitioner sought the correct interpretation of
the Manual of Regulations for Private School Teachers and
DOLE-DECS-CHED-TESDA Order No. 01, series of 1996,
insofar as the probationary period for teachers.
In reviewing the Labor Arbiter’s finding of illegal dismissal,
the NLRC concluded that respondent had already attained
regular status after the expiration of his first appointment
contract as probationary employee. Such conclusion was
but a logical result of the NLRC’s own interpretation of the
law. Since petitioner elevated the questions of the validity of
respondent’s dismissal and the applicable probationary
period under the aforesaid regulations, the NLRC did not
gravely abuse its discretion in fully resolving the said issues.
As the Court held in Roche (Phils.) v. NLRC20:
Petitioners then suggest that the respondent Commission
abused its discretion in awarding reliefs in excess of those
stated in the decision of the labor arbiter despite the
absence of an appeal by Villareal. To stress this point, they
cited Section 5(c) of the Rules of Procedure of the National
Labor Relations Commission which provides that the
Commission shall, in cases of perfected appeals, limits itself
to reviewing those issues which were raised on appeal.
Consequently, those which were not raised on appeal shall
be final and executory.
There is no merit to this contention. The records show that
the petitioners elevated the issues regarding the
correctness of the award of damages, reinstatement with
backpay, retirement benefits and the cost-saving bonus to
the respondent Commission in their appeal. This opened
the said issues for review and any action taken thereon by
the Commission was well within the parameters of its
jurisdiction. (Emphasis supplied.)
Probationary Employment Period
A probationary employee is one who is on trial by the
employer during which the employer determines whether or
not said employee is qualified for permanent employment. A
probationary appointment is made to afford the employer an
opportunity to observe the fitness of a probationary
employee while at work, and to ascertain whether he will
become a proper and efficient employee. The word
probationary as used to describe the period of employment
implies the purpose of the term or period, but not its
length.21
It is well settled that the employer has the right or is at
liberty to choose who will be hired and who will be denied
employment. In that sense, it is within the exercise of the
right to select his employees that the employer may set or
fix a probationary period within which the latter may test and
102
observe the conduct of the former before hiring him
permanently.22 The law, however, regulates the exercise of
this prerogative to fix the period of probationary
employment. While there is no statutory cap on the
minimum term of probation, the law sets a maximum "trial
period" during which the employer may test the fitness and
efficiency of the employee.23
Article 281 of the Labor Code provides:
ART. 281. Probationary Employment.–Probationary
employment shall not exceed six (6) months from the date
the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the
employer to the employee at the time of his engagement.
An employee who is allowed to work after a probationary
period shall be considered a regular employee.
The probationary employment of teachers in private schools
is not governed purely by the Labor Code. The Labor Code
is supplemented with respect to the period of probation by
special rules found in the Manual of Regulations for Private
Schools.24 On the matter of probationary period, Section 92
of the 1992 Manual of Regulations for Private Schools
regulations states:
Section 92. Probationary Period. – Subject in all instances
to compliance with the Department and school
requirements, the probationary period for academic
personnel shall not be more than three (3) consecutive
years of satisfactory service for those in the elementary and
secondary levels, six (6) consecutive regular semesters of
satisfactory service for those in the tertiary level, and nine
(9) consecutive trimesters of satisfactory service for those in
the tertiary level where collegiate courses are offered on a
trimester basis. (Emphasis supplied.)
Thus, it is the Manual of Regulations for Private Schools,
and not the Labor Code, that determines whether or not a
faculty member in an educational institution has attained
regular or permanent status.25 Section 9326 of the 1992
Manual of Regulations for Private Schools provides that full-
time teachers who have satisfactorily completed their
probationary period shall be considered regular or
permanent.
In this case, the CA sustained the NLRC’s ruling that
respondent was illegally dismissed considering that he had
become a regular employee when petitioner allowed him to
work beyond the date specified in his first probationary
appointment contract which expired on March 30, 2003.
According to the CA:
… As can be gleaned from Section 92 of the 1992 Manual
of Regulations for Private Schools, the probationary period
applicable in this case is not more than six (6) consecutive
regular semesters of satisfactory service. In other words,
the probationary period for academic personnel in the
tertiary level runs from one (1) semester to six (6)
consecutive regular semesters of satisfactory service. In the
103
instant case, records reveal that Sambajon, Jr. only signed Date Contract Period
two appointment contracts. The first appointment-contract
which he signed was dated November 2002 for the period
November 1, 2002 to March 30, 2003, as Assistant November 1, 2002-March 30,
November 1, 2002
Professor 10 on probationary status. x x x The second 2003
appointment-contract which Sambajon, Jr. executed was
dated February 26, 2004, for the period November 1, 2003 September 28,
to March 31, 2004. x x x Compared with the first June 1, 2003-October 31, 2003
2003
appointment-contract, it was not indicated in the February
26, 2004 appointment-contract that Sambajon, Jr. was hired
on probationary status, which explains the NLRC’s November 1, 2003-March 31,
February 26, 2004
conclusion that Sambajon, Jr. already attained permanent 2004
status. At this juncture, it is worthy to emphasize that other
than the period provided under Article 281 of the Labor September 30,
Code, the following quoted portion of Article 281 of the June 1, 2004-October 31, 2004
2004
Labor Code still applies:

"ART. 281. PROBATIONARY EMPLOYMENT. – November 3, 2004-March 31,

x x x x An employee who is allowed to work after a
probationary period shall be considered a regular
employee."
Thus, We sustain the NLRC’s conclusion that Sambajon, Jr.
acquired permanent status on the first day of the first
semester of SY 2003-2004 when he was allowed to
continue with his teaching stint after the expiration of his first
appointment-contract on March 30, 2003.27
On record are five appointment contracts28 of respondent:
October 28, 2004
2005
Only the first and third contracts were signed by the
respondent. However, such lack of signature in the second
contract appears not to be the crucial element considered
by the CA but the fact that the third contract dated February
26, 2004, unlike the previous contracts, does not indicate
the nature of the appointment as probationary employment.
According to the CA, this implies, as concluded by the
NLRC, that respondent was already a regular employee.
We disagree.

104
The third appointment contract dated February 26, 2004 God bless
reads:
In Christ,
February 26, 2004
Sr. Ma. Asuncion G. Evidente, D.C.
MR. MARVIN JULIAN SAMBAJON USI President
Religious Education Department
Witness:
Dear Mr. Sambajon,
Sr. Stella O. Real, D.C.
I am pleased to inform you that you are designated and HR Officer
commissioned to be an Apostle of Love and Service, Unity
and Peace as you dedicate and commit yourself in the I, ______________________ understand that unless
exercise of your duties and responsibilities as a: renewed in writing, my services as ________________
expires automatically on the specific date above stated.
FULL TIME FACULTY MEMBER
of the Religious Education Department from November 1, Furthermore, I fully accept this appointment to help build the
2003 to March 31, 2004. Kingdom of God here and now and to facilitate the living of
the Core Values and the attainment of the Vision-Mission
Unless otherwise renewed in writing, this designation and the goals and objectives of the University.
automatically terminates as of the date expiration above
states without further notice. Received and Conforme:

As a member of the academic/clinical community, you are
expected to live by and give your full support to the
promotion and attainment of the Vision-Mission, goals and
objectives, the rules and regulations, the Core Values which
the University professes to believe and live by.
Congratulations and keep your work full in the spirit of the
Lord for the Charity of Christ urges us to live life to the
fullest.
(SGD.) MARVIN-JULIAN L. SAMBAJON, JR.29
Since it was explicitly provided in the above contract that
unless renewed in writing respondent’s appointment
automatically expires at the end of the stipulated period of
employment, the CA erred in concluding that simply
because the word "probationary" no longer appears below
the designation (Full-Time Faculty Member), respondent
had already become a permanent employee. Noteworthy is
respondent’s admission of being still under probationary
105
period in his January 12, 2005 letter to Sr. Evidente
reiterating his demand for salary differential, which letter
was sent almost one year after he signed the February 26,
2004 appointment contract, to wit:
The problem is that your good office has never categorically
resolved whether or not probationary teachers can also be
evaluated for salary adjustment. Nevertheless, inferring
from your statement that evaluation precedes re-ranking
and in fact is the basis for re-ranking, may I categorically
ask: does it really mean that since, it precedes re-ranking,
evaluation should not take place among probationary
teachers for they can not yet be re-ranked? If so, then how
pitiful are we, probationary teachers for our credentials are
never evaluated since we cannot yet be re-ranked. Oh my
goodness! Can your good office not give me a clearer and
more convincing argument shedding light on this matter?30
Respondent nonetheless claims that subsequently, the
probationary period of three years under the regulations
was shortened by petitioner as relayed to him by Sr.
Evidente herself. However, the latter, together with Sr. Real,
categorically denied having informed respondent that his
probationary period was abbreviated, allegedly the reason
his salary adjustment was not made retroactive. Apart from
his bare assertion, respondent has not adduced proof of any
decision of the school administration to shorten his
probationary period.
In Rev. Fr. Labajo v. Alejandro,31 we held that:
The three (3)-year period of service mentioned in paragraph
75 [of the Manual of Regulations for Private Schools] is of
course the maximum period or upper limit, so to speak, of
probationary employment allowed in the case of private
school teachers. This necessarily implies that a regular or
permanent employment status may, under certain
conditions, be attained in less than three (3) years. By and
large, however, whether or not one has indeed attained
permanent status in one’s employment, before the passage
of three (3) years, is a matter of proof. (Emphasis supplied.)
There can be no dispute that the period of probation may be
reduced if the employer, convinced of the fitness and
efficiency of a probationary employee, voluntarily extends a
permanent appointment even before the three-year period
ends. Conversely, if the purpose sought by the employer is
neither attained nor attainable within the said period, the law
does not preclude the employer from terminating the
probationary employment on justifiable ground; or, a shorter
probationary period may be incorporated in a collective
bargaining agreement. But absent any circumstances which
unmistakably show that an abbreviated probationary period
has been agreed upon, the three-year probationary term
governs.32
As to the Certificate of Employment33 issued by Sr. Real on
January 31, 2005, it simply stated that respondent "was a
full time faculty member in the Religious Education
Department of this same institution" and that he holds the
rank of Associate Professor. There was no description or
qualification of respondent’s employment as regular or
permanent. Neither did the similar Certification34 also issued
106
by Sr. Real on March 18, 2005 prove respondent’s status as
a permanent faculty member of petitioner.
It bears stressing that full-time teaching primarily refers to
the extent of services rendered by the teacher to the
employer school and not to the nature of his appointment.
Its significance lies in the rule that only full-time teaching
personnel can acquire regular or permanent status. The
provisions of DOLE-DECS-CHED-TESDA Order No. 01,
series of 1996, "Guidelines on Status of Employment of
Teachers and of Academic Personnel in Private Educational
Institutions" are herein reproduced:
2. Subject in all instances to compliance with the
concerned agency and school requirements, the
probationary period for teaching or academic
personnel shall not be more than three (3)
consecutive school years of satisfactory service for
those in the elementary and secondary levels; six (6)
consecutive regular semesters of satisfactory service
for those in the tertiary and graduate levels, and nine
(9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are
offered on a trimester basis.
Unless otherwise provided by contract, school
academic personnel who are under probationary
employment cannot be dismissed during the
applicable probationary period, unless dismissal is
compelled by a just cause or causes.
3. Teachers or academic personnel who have served
the probationary period as provided for in the
immediately preceding paragraph shall be made
regular or permanent if allowed to work after such
probationary period. The educational institution,
however, may shorten the probationary period after
taking into account the qualifications and performance
of the probationary teachers and academic personnel.
Full-time teaching or academic personnel are those
meeting all the following requirements:
3.1. Who possess at least the minimum
academic qualifications prescribed by the
Department of Education, Culture and Sports for
Basic Education, the Commission on Higher
Education for Tertiary Education, and the
Technical Education and Skills Development
Authority for Technical and Vocational Education
under their respective Manual of Regulations
governing said personnel;
3.2 Who are paid monthly or hourly, based on
the normal or regular teaching loads as provided
for in the policies, rules and standards of the
agency concerned;
3.3 Whose regular working day of not more than
eight (8) hours a day is devoted to the school;
3.4 Who have no other remunerative occupation
elsewhere requiring regular hours of work that
107
 will conflict with the working hours in the school;
and
3.5 Who are not teaching full-time in any other
educational institution.
All teaching or academic personnel who do not meet
the foregoing qualifications are considered part time.
4. Part-time teaching or academic personnel cannot
acquire regular or permanent employment status.
5. Teaching or academic personnel who do not meet
the minimum academic qualifications shall not acquire
tenure or regular status. The school may terminate
their services when a qualified teacher becomes
available.35
In this case, petitioner applied the maximum three-year
probationary period – equivalent to six consecutive
semesters – provided in the Manual of Regulations. This
can be gleaned from the letter dated March 24, 2004 of Sr.
Grace Namocancat, D.C. addressed to respondent,
informing the latter of the result of evaluation of his
performance for SY 2003-2004 and stating that November
2004 marks his second year of full-time teaching, which
means he had one more year to become a permanent
employee.36
The circumstance that respondent’s services were hired on
semester basis did not negate the applicable probationary
period, which is three school years or six consecutive
semesters. In Magis Young Achievers’ Learning
Center37 the Court explained the three years probationary
period rule in this wise:
The common practice is for the employer and the teacher to
enter into a contract, effective for one school year. At the
end of the school year, the employer has the option not to
renew the contract, particularly considering the teacher’s
performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually
for another school year, the probationary employment
continues. Again, at the end of that period, the parties may
opt to renew or not to renew the contract. If renewed, this
second renewal of the contract for another school year
would then be the last year – since it would be the third
school year – of probationary employment. At the end of this
third year, the employer may now decide whether to extend
a permanent appointment to the employee, primarily on the
basis of the employee having met the reasonable standards
of competence and efficiency set by the employer. For the
entire duration of this three-year period, the teacher remains
under probation. Upon the expiration of his contract of
employment, being simply on probation, he cannot
automatically claim security of tenure and compel the
employer to renew his employment contract. It is when the
yearly contract is renewed for the third time that Section 93
of the Manual becomes operative, and the teacher then is
entitled to regular or permanent employment
38
status. (Emphasis supplied.)
Petitioner argues that respondent’s probationary period
expires after each semester he was contracted to teach and
108
hence it was not obligated to renew his services at the end
of the fifth semester (March 2005) of his probationary
employment. It asserts that the practice of issuing
appointment contracts for every semester was legal and
therefore respondent was not terminated when petitioner did
not renew his contract for another semester as his
probationary contract merely expired. Plainly, petitioner
considered the subject appointment contracts as fixed-term
contracts such that it can validly dismiss respondent at the
end of each semester for the reason that his contract had
expired.
The Court finds no merit in petitioner’s interpretation of the
Manual of Regulations, supplemented by DOLE-DECS-
CHED-TESDA Order No. 01, series of 1996. As we made
clear in the afore-cited case of Magis Young Achievers’
Learning Center, the teacher remains under probation for
the entire duration of the three-year period. Subsequently, in
the case of Mercado v. AMA Computer College-Parañaque
City, Inc.39 the Court, speaking through Justice Arturo D.
Brion, recognized the right of respondent school to
determine for itself that it shall use fixed-term employment
contracts as its medium for hiring its teachers.
Nevertheless, the Court held that the teachers’ probationary
status should not be disregarded simply because their
contracts were fixed-term. Thus:
The Conflict: Probationary Status
and Fixed-term Employment
The existence of the term-to-term contracts covering the
petitioners’ employment is not disputed, nor is it disputed
that they were on probationary status – not permanent or
regular status – from the time they were employed on May
25, 1998 and until the expiration of their Teaching Contracts
on September 7, 2000. As the CA correctly found, their
teaching stints only covered a period of at least seven (7)
consecutive trimesters or two (2) years and three (3)
months of service. This case, however, brings to the fore
the essential question of which, between the two factors
affecting employment, should prevail given AMACC’s
position that the teachers contracts expired and it had the
right not to renew them. In other words, should the teachers’
probationary status be disregarded simply because the
contracts were fixed-term?
The provision on employment on probationary status under
the Labor Code is a primary example of the fine balancing
of interests between labor and management that the Code
has institutionalized pursuant to the underlying intent of the
Constitution.
On the one hand, employment on probationary status
affords management the chance to fully scrutinize the true
worth of hired personnel before the full force of the security
of tenure guarantee of the Constitution comes into play.
Based on the standards set at the start of the probationary
period, management is given the widest opportunity during
the probationary period to reject hirees who fail to meet its
own adopted but reasonable standards. These standards,
together with the just and authorized causes for termination
of employment the Labor Code expressly provides, are the
grounds available to terminate the employment of a teacher
on probationary status. For example, the school may
109
impose reasonably stricter attendance or report compliance
records on teachers on probation, and reject a probationary
teacher for failing in this regard, although the same
attendance or compliance record may not be required for a
teacher already on permanent status. At the same time, the
same just and authorize[d] causes for dismissal under the
Labor Code apply to probationary teachers, so that they
may be the first to be laid-off if the school does not have
enough students for a given semester or trimester.
Termination of employment on this basis is an authorized
cause under the Labor Code.
Labor, for its part, is given the protection during the
probationary period of knowing the company standards the
new hires have to meet during the probationary period, and
to be judged on the basis of these standards, aside from the
usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code,
these standards should be made known to the teachers on
probationary status at the start of their probationary period,
or at the very least under the circumstances of the present
case, at the start of the semester or the trimester during
which the probationary standards are to be applied. Of
critical importance in invoking a failure to meet the
probationary standards, is that the school should show – as
a matter of due process – how these standards have been
applied. This is effectively the second notice in a dismissal
situation that the law requires as a due process guarantee
supporting the security of tenure provision, and is in
furtherance, too, of the basic rule in employee dismissal that
the employer carries the burden of justifying a dismissal.
These rules ensure compliance with the limited security of
tenure guarantee the law extends to probationary
employees.
When fixed-term employment is brought into play under the
above probationary period rules, the situation – as in the
present case – may at first blush look muddled as fixed-term
employment is in itself a valid employment mode under
Philippine law and jurisprudence. The conflict, however, is
more apparent than real when the respective nature of
fixed-term employment and of employment on probationary
status are closely examined.
The fixed-term character of employment essentially refers to
the period agreed upon between the employer and the
employee; employment exists only for the duration of the
term and ends on its own when the term expires. In a
sense, employment on probationary status also refers to a
period because of the technical meaning "probation" carries
in Philippine labor law – a maximum period of six months, or
in the academe, a period of three years for those engaged
in teaching jobs. Their similarity ends there, however,
because of the overriding meaning that being "on probation"
connotes, i.e., a process of testing and observing the
character or abilities of a person who is new to a role or job.
Understood in the above sense, the essentially protective
character of probationary status for management can
readily be appreciated. But this same protective character
gives rise to the countervailing but equally protective rule
that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and
properly communicated standards. Otherwise stated, within
110
the period of the probation, any employer move based on
the probationary standards and affecting the continuity of
the employment must strictly conform to the probationary
rules.
Under the given facts where the school year is divided into
trimesters, the school apparently utilizes its fixed-term
contracts as a convenient arrangement dictated by the
trimestral system and not because the workplace parties
really intended to limit the period of their relationship to any
fixed term and to finish this relationship at the end of that
term. If we pierce the veil, so to speak, of the parties’ so-
called fixed-term employment contracts, what undeniably
comes out at the core is a fixed-term contract conveniently
used by the school to define and regulate its relations with
its teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-
teacher relationship in this manner. The school, however,
cannot forget that its system of fixed-term contract is a
system that operates during the probationary period and for
this reason is subject to the terms of Article 281 of the Labor
Code. Unless this reconciliation is made, the requirements
of this Article on probationary status would be fully negated
as the school may freely choose not to renew contracts
simply because their terms have expired. The inevitable
effect of course is to wreck the scheme that the Constitution
and the Labor Code established to balance relationships
between labor and management.
Given the clear constitutional and statutory intents, we
cannot but conclude that in a situation where the
probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281
should assume primacy and the fixed-period character of
the contract must give way. This conclusion is
immeasurably strengthened by the petitioners’ and the
AMACC’s hardly concealed expectation that the
employment on probation could lead to permanent status,
and that the contracts are renewable unless the petitioners
fail to pass the school’s standards.40 (Additional emphasis
supplied.)
Illegal Dismissal
Notwithstanding the limited engagement of probationary
employees, they are entitled to constitutional protection of
security of tenure during and before the end of the
probationary period.41 The services of an employee who has
been engaged on probationary basis may be terminated for
any of the following: (a) a just or (b) an authorized cause;
and (c) when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by the
employer.42
Thus, while no vested right to a permanent appointment had
as yet accrued in favor of respondent since he had not
completed the prerequisite three-year period (six
consecutive semesters) necessary for the acquisition of
permanent status as required by the Manual of Regulations
for Private Schools43 -- which has the force of law44 -- he
enjoys a limited tenure. During the said probationary period,
he cannot be terminated except for just or authorized
causes, or if he fails to qualify in accordance with
111
reasonable standards prescribed by petitioner for the
acquisition of permanent status of its teaching personnel.
In a letter dated February 26, 2005, petitioner terminated
the services of respondent stating that his probationary
employment as teacher will no longer be renewed upon its
expiry on March 31, 2005, respondent’s fifth semester of
teaching. No just or authorized cause was given by
petitioner. Prior to this, respondent had consistently
achieved above average rating based on evaluation by
petitioner’s officials and students. He had also been
promoted to the rank of Associate Professor after finishing
his master’s degree course on his third semester of
teaching. Clearly, respondent’s termination after five
semesters of satisfactory service was illegal.
Respondent therefore is entitled to continue his three-year
probationary period, such that from March 31, 2005, his
probationary employment is deemed renewed for the
following semester (1st semester of SY 2005-2006).
However, given the discordant relations that had arisen from
the parties’ dispute, it can be inferred with certainty that
petitioner had opted not to retain respondent in its employ
beyond the three-year period.
On the appropriate relief and damages, we adhere to our
disposition in Magis Young Achievers’ Learning Center45:
Finally, we rule on the propriety of the monetary
awards.1âwphi1 Petitioner, as employer, is entitled to
decide whether to extend respondent a permanent status by
renewing her contract beyond the three-year period. Given
the acrimony between the parties which must have been
generated by this controversy, it can be said unequivocally
that petitioner had opted not to extend respondent's
employment beyond this period. Therefore, the award of
backwages as a consequence of the finding of illegal
dismissal in favor of respondent should be confined to the
three-year probationary period. Computing her monthly
salary of F15,000.00 for the next two school years
(F15,000.00 x 10 months x 2), respondent already having
received her full salaries for the year 2002-2003, she is
entitled to a total amount of F300,000.00. Moreover,
respondent is also entitled to receive her 13th month pay
correspondent to the said two school years, computed as
yearly salary, divided by 12 months in a year, multiplied by
2, corresponding to the school years 2003-2004 and 2004-
2005, or F150,000.00 I 12 months x 2 = F25,000.00. Thus,
the NLRC was correct in awarding respondent the amount
of F325,000.00 as backwages, inclusive of 13th month pay
for the school years 2003-2004 and 2004-2005, and the
amount of ₱3,750.00 as pro-rated 13th month pay.
WHEREFORE, the petition for review on certiorari is
PARTLY GRANTED. The Decision dated March 25, 2011 of
the Court of Appeals in CA-G.R. SP Nos. 108103 & 108168
is hereby MODIFIED. Petitioner Universidad de Sta. Isabel
is hereby DIRECTED to PAY respondent Marvin-Julian L.
Sambajon, Jr. back wages corresponding to his full monthly
salaries for one semester (1st semester of SY 2005-2006)
and pro-rated 13th month pay.
112
The case is REMANDED to the Labor Arbiter for a
recomputation of the amounts due to respondent in
conformity with this Decision.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 192571 July 23, 2013
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A.
TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T.
YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated December 10,2009 and Resolution3 dated
June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP
No. 101045 which pronounced that the National Labor
Relations Commission (NLRC) did not gravely abuse its
discretion when it ruled that respondent Pearlie Ann F.
Alcaraz (Alcaraz) was illegally dismissed from her
employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories,
Philippines (Abbott) caused the publication in a major
broadsheet newspaper of its need for a Medical and
Regulatory Affairs Manager (Regulatory Affairs Manager)
who would: (a) be responsible for drug safety surveillance
operations, staffing, and budget; (b) lead the development
and implementation of standard operating
procedures/policies for drug safety surveillance and
vigilance; and (c) act as the primary interface with internal
and external customers regarding safety operations and
queries.4 Alcaraz - who was then a Regulatory Affairs and
Information Manager at Aventis Pasteur Philippines,
Incorporated (another pharmaceutical company like Abbott)
– showed interest and submitted her application on October
4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the
abovementioned position which was an item under the
company’s Hospira Affiliate Local Surveillance Unit (ALSU)
department.6 In Abbott’s offer sheet.7 it was stated that
Alcaraz was to be employed on a probationary basis.8 Later
that day, she accepted the said offer and received an
electronic mail (e-mail) from Abbott’s Recruitment Officer,
petitioner Teresita C. Bernardo (Bernardo), confirming the
same. Attached to Bernardo’s e-mail were Abbott’s
organizational chart and a job description of Alcaraz’s work.9
On February 12, 2005, Alcaraz signed an employment
contract which stated, inter alia, that she was to be placed
113
on probation for a period of six (6) months beginning
February 15, 2005 to August 14, 2005. The said contract
was also signed by Abbott’s General Manager, petitioner
Edwin Feist (Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment
requirements, you are hereby appointed as follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : ₱110,000.00/ month
It is understood that you agree to abide by all existing
policies, rules and regulations of the company, as well as
those, which may be hereinafter promulgated.
Unless renewed, probationary appointment expires on the
date indicated subject to earlier termination by the Company
for any justifiable reason.
If you agree to the terms and conditions of your
employment, please signify your conformity below and
return a copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcaraz’s pre-employment orientation, petitioner
Allan G. Almazar (Almazar), Hospira’s Country Transition
Manager, briefed her on her duties and responsibilities as
Regulatory Affairs Manager, stating that: (a) she will handle
the staff of Hospira ALSU and will directly report to Almazar
on matters regarding Hopira’s local operations, operational
budget, and performance evaluation of the Hospira ALSU
Staff who are on probationary status; (b) she must
implement Abbott’s Code of Good Corporate Conduct
(Code of Conduct), office policies on human resources and
finance, and ensure that Abbott will hire people who are fit
in the organizational discipline; (c) petitioner Kelly Walsh
(Walsh), Manager of the Literature Drug Surveillance Drug
114
Safety of Hospira, will be her immediate supervisor; (d) she
should always coordinate with Abbott’s human resource
officers in the management and discipline of the staff; (e)
Hospira ALSU will spin off from Abbott in early 2006 and will
be officially incorporated and known as Hospira, Philippines.
In the interim, Hospira ALSU operations will still be under
Abbott’s management, excluding the technical aspects of
the operations which is under the control and supervision of
Walsh; and (f) the processing of information and/or raw
material data subject of Hospira ALSU operations will be
strictly confined and controlled under the computer system
and network being maintained and operated from the United
States. For this purpose, all those involved in Hospira ALSU
are required to use two identification cards: one, to identify
them as Abbott’s employees and another, to identify them
as Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa
(Misa), Abbott’s Human Resources (HR) Director, sent
Alcaraz an e-mail which contained an explanation of the
procedure for evaluating the performance of probationary
employees and further indicated that Abbott had only one
evaluation system for all of its employees. Alcaraz was also
given copies of Abbott’s Code of Conduct and Probationary
Performance Standards and Evaluation (PPSE) and
Performance Excellence Orientation Modules (Performance
Modules) which she had to apply in line with her task of
evaluating the Hospira ALSU staff.12
Abbott’s PPSE procedure mandates that the job
performance of a probationary employee should be formally
reviewed and discussed with the employee at least twice:
first on the third month and second on the fifth month from
the date of employment. The necessary Performance
Improvement Plan should also be made during the third-
month review in case of a gap between the employee’s
performance and the standards set. These performance
standards should be discussed in detail with the employee
within the first two (2) weeks on the job. It was equally
required that a signed copy of the PPSE form must be
submitted to Abbott’s Human Resources Department (HRD)
and shall serve as documentation of the employee’s
performance during his/her probationary period. This shall
form the basis for recommending the confirmation or
termination of the probationary employment.13
During the course of her employment, Alcaraz noticed that
some of the staff had disciplinary problems. Thus, she
would reprimand them for their unprofessional behavior
such as non-observance of the dress code, moonlighting,
and disrespect of Abbott officers. However, Alcaraz’s
method of management was considered by Walsh to be "too
strict."14 Alcaraz approached Misa to discuss these
concerns and was told to "lie low" and let Walsh handle the
matter. Misa even assured her that Abbott’s HRD would
support her in all her management decisions.15
115
On April 12, 2005, Alcaraz received an e-mail from Misa
requesting immediate action on the staff’s performance
evaluation as their probationary periods were about to end.
This Alcaraz eventually submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner
Cecille Terrible (Terrible), Abbott’s former HR Director, to
discuss certain issues regarding staff performance
standards. In the course thereof, Alcaraz accidentally saw a
printed copy of an e-mail sent by Walsh to some staff
members which essentially contained queries regarding the
former’s job performance. Alcaraz asked if Walsh’s action
was the normal process of evaluation. Terrible said that it
was not.17
On May 16, 2005, Alcaraz was called to a meeting with
Walsh and Terrible where she was informed that she failed
to meet the regularization standards for the position of
Regulatory Affairs Manager.18 Thereafter, Walsh and
Terrible requested Alcaraz to tender her resignation, else
they be forced to terminate her services. She was also told
that, regardless of her choice, she should no longer report
for work and was asked to surrender her office identification
cards. She requested to be given one week to decide on the
same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant,
Claude Gonzales (Gonzales), that she would be on leave
for that day. However, Gonzales told her that Walsh and
Terrible already announced to the whole Hospira ALSU staff
that Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally
handed to Alcaraz a letter stating that her services had been
terminated effective May 19, 2005.21 The letter detailed the
reasons for Alcaraz’s termination – particularly, that Alcaraz:
(a) did not manage her time effectively; (b) failed to gain the
trust of her staff and to build an effective rapport with them;
(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
necessary for the proper performance of her duties.22 On
May 27, 2005, Alcaraz received another copy of the said
termination letter via registered mail.23
Alcaraz felt that she was unjustly terminated from her
employment and thus, filed a complaint for illegal dismissal
and damages against Abbott and its officers, namely, Misa,
Bernardo, Almazar, Walsh, Terrible, and Feist.24 She
claimed that she should have already been considered as a
regular and not a probationary employee given Abbott’s
failure to inform her of the reasonable standards for her
regularization upon her engagement as required under
Article 29525 of the Labor Code. In this relation, she
contended that while her employment contract stated that
she was to be engaged on a probationary status, the same
did not indicate the standards on which her regularization
would be based.26 She further averred that the individual
116
petitioners maliciously connived to illegally dismiss her
when: (a) they threatened her with termination; (b) she was
ordered not to enter company premises even if she was still
an employee thereof; and (c) they publicly announced that
she already resigned in order to humiliate her.27
On the contrary, petitioners maintained that Alcaraz was
validly terminated from her probationary employment given
her failure to satisfy the prescribed standards for her
regularization which were made known to her at the time of
her engagement.28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed
Alcaraz’s complaint for lack of merit.
The LA rejected Alcaraz’s argument that she was not
informed of the reasonable standards to qualify as a regular
employee considering her admissions that she was briefed
by Almazar on her work during her pre-employment
orientation meeting30 and that she received copies of
Abbott’s Code of Conduct and Performance Modules which
were used for evaluating all types of Abbott employees.31 As
Alcaraz was unable to meet the standards set by Abbott as
per her performance evaluation, the LA ruled that the
termination of her probationary employment was
justified.32 Lastly, the LA found that there was no evidence
to conclude that Abbott’s officers and employees acted in
bad faith in terminating Alcaraz’s employment.33
Displeased with the LA’s ruling, Alcaraz filed an appeal with
the National Labor Relations Commission (NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a
Decision,34 annulling and setting aside the LA’s ruling, the
dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31
March 2006 [sic] is hereby reversed, annulled and set aside
and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual
respondents to have committed illegal dismissal;
2. Respondents are ordered to immediately reinstate
complainant to her former position without loss of seniority
rights immediately upon receipt hereof;
3. To jointly and severally pay complainant backwages
computed from 16 May 2005 until finality of this decision. As
of the date hereof the backwages is computed at
a. Backwages for 15 months PhP
- 1,650,000.00
117
 b. 13th month pay - 110,000.00
PhP
TOTAL
1,760,000.00
4. Respondents are ordered to pay complainant moral
damages of ₱50,000.00 and exemplary damages of
₱50,000.00.
5. Respondents are also ordered to pay attorney’s fees of
10% of the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED. 35
The NLRC reversed the findings of the LA and ruled that
there was no evidence showing that Alcaraz had been
apprised of her probationary status and the requirements
which she should have complied with in order to be a
regular employee.36 It held that Alcaraz’s receipt of her job
description and Abbott’s Code of Conduct and Performance
Modules was not equivalent to her being actually informed
of the performance standards upon which she should have
been evaluated on.37 It further observed that Abbott did not
comply with its own standard operating procedure in
evaluating probationary employees.38 The NLRC was also
not convinced that Alcaraz was terminated for a valid cause
given that petitioners’ allegation of Alcaraz’s "poor
performance" remained unsubstantiated.39
Petitioners filed a motion for reconsideration which was
denied by the NLRC in a Resolution dated July 31, 2007.40
Aggrieved, petitioners filed with the CA a Petition for
Certiorari with Prayer for Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction,
docketed as CA G.R. SP No. 101045 (First CA Petition),
alleging grave abuse of discretion on the part of NLRC
when it ruled that Alcaraz was illegally dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved
for the execution of the NLRC’s Decision before the LA,
which petitioners strongly opposed. The LA denied the said
motion in an Order dated July 8, 2008 which was, however,
eventually reversed on appeal by the NLRC.42 Due to the
foregoing, petitioners filed another Petition for Certiorari with
the CA, docketed as CA G.R. SP No. 111318 (Second CA
Petition), assailing the propriety of the execution of the
NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a
Decision44 dated December 10, 2009, affirmed the ruling of
the NLRC and held that the latter did not commit any grave
abuse of discretion in finding that Alcaraz was illegally
dismissed.
118
It observed that Alcaraz was not apprised at the start of her
employment of the reasonable standards under which she
could qualify as a regular employee.45 This was based on its
examination of the employment contract which showed that
the same did not contain any standard of performance or
any stipulation that Alcaraz shall undergo a performance
evaluation before she could qualify as a regular
employee.46 It also found that Abbott was unable to prove
that there was any reasonable ground to terminate Alcaraz’s
employment.47 Abbott moved for the reconsideration of the
aforementioned ruling which was, however, denied by the
CA in a Resolution48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a
Resolution dated May 18, 2010 (May 18, 2010 Resolution)
and ruled that the NLRC was correct in upholding the
execution of the NLRC Decision.49 Thus, petitioners filed a
motion for reconsideration.
While the petitioners’ motion for reconsideration of the CA’s
May 18, 2010 Resolution was pending, Alcaraz again
moved for the issuance of a writ of execution before the LA.
On June 7, 2010, petitioners received the LA’s order
granting Alcaraz’s motion for execution which they in turn
appealed to the NLRC – through a Memorandum of Appeal
dated June 16, 2010 (June 16, 2010 Memorandum of
Appeal ) – on the ground that the implementation of the LA’s
order would render its motion for reconsideration moot and
academic.50
Meanwhile, petitioners’ motion for reconsideration of the
CA’s May 18, 2010 Resolution in the Second CA Petition
was denied via a Resolution dated October 4, 2010.51 This
attained finality on January 10, 2011 for petitioners’ failure
to timely appeal the same.52 Hence, as it stands, only the
issues in the First CA petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010,
Alcaraz also alleges that petitioners were guilty of forum
shopping when they filed the Second CA Petition pending
the resolution of their motion for reconsideration of the CA’s
December 10, 2009 Decision i.e., the decision in the First
CA Petition.53 She also contends that petitioners have not
complied with the certification requirement under Section 5,
Rule 7 of the Rules of Court when they failed to disclose in
the instant petition the filing of the June 16, 2010
Memorandum of Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Court’s
resolution: (a) whether or not petitioners are guilty of forum
shopping and have violated the certification requirement
under Section 5, Rule 7 of the Rules of Court; (b) whether or
not Alcaraz was sufficiently informed of the reasonable
standards to qualify her as a regular employee; (c) whether
or not Alcaraz was validly terminated from her employment;
and (d) whether or not the individual petitioners herein are
liable.
119
The Court’s Ruling
A. Forum Shopping and
Violation of Section 5, Rule 7
of the Rules of Court.
At the outset, it is noteworthy to mention that the prohibition
against forum shopping is different from a violation of the
certification requirement under Section 5, Rule 7 of the
Rules of Court. In Sps. Ong v. CA,55 the Court explained
that:
x x x The distinction between the prohibition against forum
shopping and the certification requirement should by now be
too elementary to be misunderstood. To reiterate,
compliance with the certification against forum shopping is
separate from and independent of the avoidance of the act
of forum shopping itself. There is a difference in the
treatment between failure to comply with the certification
requirement and violation of the prohibition against forum
shopping not only in terms of imposable sanctions but also
in the manner of enforcing them. The former constitutes
sufficient cause for the dismissal without prejudice to the
filing of the complaint or initiatory pleading upon motion and
after hearing, while the latter is a ground for summary
dismissal thereof and for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant
files multiple suits involving the same parties, either
simultaneously or successively, to secure a favorable
judgment. It exists where the elements of litis pendentia are
present, namely: (a) identity of parties, or at least such
parties who represent the same interests in both actions; (b)
identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity with
respect to the two preceding particulars in the two (2) cases
is such that any judgment that may be rendered in the
pending case, regardless of which party is successful,
would amount to res judicata in the other case.57
In this case, records show that, except for the element of
identity of parties, the elements of forum shopping do not
exist. Evidently, the First CA Petition was instituted to
question the ruling of the NLRC that Alcaraz was illegally
dismissed. On the other hand, the Second CA Petition
pertains to the propriety of the enforcement of the judgment
award pending the resolution of the First CA Petition and
the finality of the decision in the labor dispute between
Alcaraz and the petitioners. Based on the foregoing, a
judgment in the Second CA Petition will not constitute res
judicata insofar as the First CA Petition is concerned. Thus,
considering that the two petitions clearly cover different
subject matters and causes of action, there exists no forum
shopping.
As to the second, Alcaraz further imputes that the
petitioners violated the certification requirement under
Section 5, Rule 7 of the Rules of Court58 by not disclosing
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the fact that it filed the June 16, 2010 Memorandum of
Appeal before the NLRC in the instant petition.
In this regard, Section 5(b), Rule 7 of the Rules of Court
requires that a plaintiff who files a case should provide a
complete statement of the present status of any pending
case if the latter involves the same issues as the one that
was filed. If there is no such similar pending case, Section
5(a) of the same rule provides that the plaintiff is obliged to
declare under oath that to the best of his knowledge, no
such other action or claim is pending.
Records show that the issues raised in the instant petition
and those in the June 16, 2010 Memorandum of Appeal
filed with the NLRC likewise cover different subject matters
and causes of action. In this case, the validity of Alcaraz’s
dismissal is at issue whereas in the said Memorandum of
Appeal, the propriety of the issuance of a writ of execution
was in question.
Thus, given the dissimilar issues, petitioners did not have to
disclose in the present petition the filing of their June 16,
2010 Memorandum of Appeal with the NLRC. In any event,
considering that the issue on the propriety of the issuance of
a writ of execution had been resolved in the Second CA
Petition – which in fact had already attained finality – the
matter of disclosing the June 16, 2010 Memorandum of
Appeal is now moot and academic.
Having settled the foregoing procedural matter, the Court
now proceeds to resolve the substantive issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys
security of tenure. However, in cases of probationary
employment, aside from just or authorized causes of
termination, an additional ground is provided under Article
295 of the Labor Code, i.e., the probationary employee may
also be terminated for failure to qualify as a regular
employee in accordance with the reasonable standards
made known by the employer to the employee at the time of
the engagement.59 Thus, the services of an employee who
has been engaged on probationary basis may be terminated
for any of the following: (a) a just or (b) an authorized cause;
and (c) when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by the
employer.60
Corollary thereto, Section 6(d), Rule I, Book VI of the
Implementing Rules of the Labor Code provides that if the
employer fails to inform the probationary employee of the
reasonable standards upon which the regularization would
be based on at the time of the engagement, then the said
employee shall be deemed a regular employee, viz.:
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(d) In all cases of probationary employment, the employer
shall make known to the employee the standards under
which he will qualify as a regular employee at the time of his
engagement. Where no standards are made known to the
employee at that time, he shall be deemed a regular
employee.
In other words, the employer is made to comply with two (2)
requirements when dealing with a probationary employee:
first, the employer must communicate the regularization
standards to the probationary employee; and second, the
employer must make such communication at the time of the
probationary employee’s engagement. If the employer fails
to comply with either, the employee is deemed as a regular
and not a probationary employee.
Keeping with these rules, an employer is deemed to have
made known the standards that would qualify a probationary
employee to be a regular employee when it has exerted
reasonable efforts to apprise the employee of what he is
expected to do or accomplish during the trial period of
probation. This goes without saying that the employee is
sufficiently made aware of his probationary status as well as
the length of time of the probation.
The exception to the foregoing is when the job is self-
descriptive in nature, for instance, in the case of maids,
cooks, drivers, or messengers.61 Also, in Aberdeen Court,
Inc. v. Agustin,62 it has been held that the rule on notifying a
probationary employee of the standards of regularization
should not be used to exculpate an employee who acts in a
manner contrary to basic knowledge and common sense in
regard to which there is no need to spell out a policy or
standard to be met. In the same light, an employee’s failure
to perform the duties and responsibilities which have been
clearly made known to him constitutes a justifiable basis for
a probationary employee’s non-regularization.
In this case, petitioners contend that Alcaraz was terminated
because she failed to qualify as a regular employee
according to Abbott’s standards which were made known to
her at the time of her engagement. Contrarily, Alcaraz
claims that Abbott never apprised her of these standards
and thus, maintains that she is a regular and not a mere
probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott
had indeed complied with the above-stated requirements.
This conclusion is largely impelled by the fact that Abbott
clearly conveyed to Alcaraz her duties and responsibilities
as Regulatory Affairs Manager prior to, during the time of
her engagement, and the incipient stages of her
employment. On this score, the Court finds it apt to detail
not only the incidents which point out to the efforts made by
Abbott but also those circumstances which would show that
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Alcaraz was well-apprised of her employer’s expectations
that would, in turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a
major broadsheet newspaper of its need for a Regulatory
Affairs Manager, indicating therein the job description for as
well as the duties and responsibilities attendant to the
aforesaid position; this prompted Alcaraz to submit her
application to Abbott on October 4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated
that Alcaraz was to be employed on a probationary status;
(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) months
beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer,
Bernardo sent her copies of Abbott’s organizational
structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment
orientation where Almazar informed her that she had to
implement Abbott’s Code of Conduct and office policies on
human resources and finance and that she would be
reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program
as part of her orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct
and Performance Modules from Misa who explained to her
the procedure for evaluating the performance of
probationary employees; she was further notified that Abbott
had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another
pharmaceutical company and had admitted to have an
"extensive training and background" to acquire the
necessary skills for her job.63
Considering the totality of the above-stated circumstances,
it cannot, therefore, be doubted that Alcaraz was well-aware
that her regularization would depend on her ability and
capacity to fulfill the requirements of her position as
Regulatory Affairs Manager and that her failure to perform
such would give Abbott a valid cause to terminate her
probationary employment.
Verily, basic knowledge and common sense dictate that the
adequate performance of one’s duties is, by and of itself, an
inherent and implied standard for a probationary employee
to be regularized; such is a regularization standard which
need not be literally spelled out or mapped into technical
indicators in every case. In this regard, it must be observed
that the assessment of adequate duty performance is in the
nature of a management prerogative which when
reasonably exercised – as Abbott did in this case – should
be respected. This is especially true of a managerial
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employee like Alcaraz who was tasked with the vital
responsibility of handling the personnel and important
matters of her department.
In fine, the Court rules that Alcaraz’s status as a
probationary employee and her consequent dismissal must
stand. Consequently, in holding that Alcaraz was illegally
dismissed due to her status as a regular and not a
probationary employee, the Court finds that the NLRC
committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its
decision on the premise that Alcaraz’s receipt of her job
description and Abbott’s Code of Conduct and Performance
Modules was not equivalent to being actually informed of
the performance standards upon which she should have
been evaluated on.64 It, however, overlooked the legal
implication of the other attendant circumstances as detailed
herein which should have warranted a contrary finding that
Alcaraz was indeed a probationary and not a regular
employee – more particularly the 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 termination.
Accordingly, by affirming the NLRC’s pronouncement which
is tainted with grave abuse of discretion, the CA committed
a reversible error which, perforce, necessitates the reversal
of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a
probationary employee; the usual two-notice rule does not
govern.65 Section 2, Rule I, Book VI of the Implementing
Rules of the Labor Code states that "if the termination is
brought about by the x x x failure of an employee to meet
the standards of the employer in case of probationary
employment, it shall be sufficient that a written notice is
served the employee, within a reasonable time from the
effective date of termination."
As the records show, Alcaraz's dismissal was effected
through a letter dated May 19, 2005 which she received on
May 23, 2005 and again on May 27, 2005. Stated therein
were the reasons for her termination, i.e., that after proper
evaluation, Abbott determined that she failed to meet the
reasonable standards for her regularization considering her
lack of time and people management and decision-making
skills, which are necessary in the performance of her
functions as Regulatory Affairs Manager.66 Undeniably, this
written notice sufficiently meets the criteria set forth above,
thereby legitimizing the cause and manner of Alcaraz’s
dismissal as a probationary employee under the parameters
set by the Labor Code.67
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D. Employer’s violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to
terminate Alcaraz’s employment and Abbott’s compliance
with the Labor Code termination procedure, it is readily
apparent that Abbott breached its contractual obligation to
Alcaraz when it failed to abide by its own procedure in
evaluating the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an
implied contract between the employer and employee. In
Parts Depot, Inc. v. Beiswenger,68 it has been held that:
Employer statements of policy . . . can give rise to
contractual rights in employees without evidence that the
parties mutually agreed that the policy statements would
create contractual rights in the employee, and, hence,
although the statement of policy is signed by neither party,
can be unilaterally amended by the employer without notice
to the employee, and contains no reference to a specific
employee, his job description or compensation, and
although no reference was made to the policy statement in
pre-employment interviews and the employee does not
learn of its existence until after his hiring. Toussaint, 292
N.W .2d at 892. The principle is akin to estoppel. Once an
employer establishes an express personnel policy and the
employee continues to work while the policy remains in
effect, the policy is deemed an implied contract for so long
as it remains in effect. If the employer unilaterally changes
the policy, the terms of the implied contract are also thereby
changed.1âwphi1 (Emphasis and underscoring supplied.)
Hence, given such nature, company personnel policies
create an obligation on the part of both the employee and
the employer to abide by the same.
Records show that Abbott’s PPSE procedure mandates,
inter alia, that the job performance of a probationary
employee should be formally reviewed and discussed with
the employee at least twice: first on the third month and
second on the fifth month from the date of employment.
Abbott is also required to come up with a Performance
Improvement Plan during the third month review to bridge
the gap between the employee’s performance and the
standards set, if any.69 In addition, a signed copy of the
PPSE form should be submitted to Abbott’s HRD as the
same would serve as basis for recommending the
confirmation or termination of the probationary
70
employment.
In this case, it is apparent that Abbott failed to follow the
above-stated procedure in evaluating Alcaraz. For one,
there lies a hiatus of evidence that a signed copy of
Alcaraz’s PPSE form was submitted to the HRD. It was not
even shown that a PPSE form was completed to formally
assess her performance. Neither was the performance
125
evaluation discussed with her during the third and fifth
months of her employment. Nor did Abbott come up with the
necessary Performance Improvement Plan to properly
gauge Alcaraz’s performance with the set company
standards.
While it is Abbott’s management prerogative to promulgate
its own company rules and even subsequently amend them,
this right equally demands that when it does create its own
policies and thereafter notify its employee of the same, it
accords upon itself the obligation to faithfully implement
them. Indeed, a contrary interpretation would entail a
disharmonious relationship in the work place for the laborer
should never be mired by the uncertainty of flimsy rules in
which the latter’s labor rights and duties would, to some
extent, depend.
In this light, while there lies due cause to terminate
Alcaraz’s probationary employment for her failure to meet
the standards required for her regularization, and while it
must be further pointed out that Abbott had satisfied its
statutory duty to serve a written notice of termination, the
fact that it violated its own company procedure renders the
termination of Alcaraz’s employment procedurally infirm,
warranting the payment of nominal damages. A further
exposition is apropos.
Case law has settled that an employer who terminates an
employee for a valid cause but does so through invalid
procedure is liable to pay the latter nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that
where the dismissal is for a just cause, the lack of statutory
due process should not nullify the dismissal, or render it
illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory
rights.72 Thus, in Agabon, the employer was ordered to pay
the employee nominal damages in the amount of
₱30,000.00.73
Proceeding from the same ratio, the Court modified Agabon
in the case of Jaka Food Processing Corporation v. Pacot
(Jaka)74 where it created a distinction between procedurally
defective dismissals due to a just cause, on one hand, and
those due to an authorized cause, on the other.
It was explained that if the dismissal is based on a just
cause under Article 282 of the Labor Code (now Article 296)
but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect,
initiated by an act imputable to the employee; if the
dismissal is based on an authorized cause under Article 283
(now Article 297) but the employer failed to comply with the
notice requirement, the sanction should be stiffer because
the dismissal process was initiated by the employer’s
126
exercise of his management prerogative.75 Hence, in Jaka, employee, akin to dismissals due to just causes under
where the employee was dismissed for an authorized cause Article 296 of the Labor Code. Therefore, the Court deems it
of retrenchment76 – as contradistinguished from the appropriate to fix the amount of nominal damages at the
employee in Agabon who was dismissed for a just cause of amount of ₱30,000.00, consistent with its rulings in both
neglect of duty77 – the Court ordered the employer to pay Agabon and Jaka.
the employee nominal damages at the higher amount of
E. Liability of individual
₱50,000.00.
petitioners as corporate
Evidently, the sanctions imposed in both Agabon and Jaka officers.
proceed from the necessity to deter employers from future
It is hornbook principle that personal liability of corporate
violations of the statutory due process rights of
directors, trustees or officers attaches only when: (a) they
employees.78 In similar regard, the Court deems it proper to
assent to a patently unlawful act of the corporation, or when
apply the same principle to the case at bar for the reason
they are guilty of bad faith or gross negligence in directing
that an employer’s contractual breach of its own company
its affairs, or when there is a conflict of interest resulting in
procedure – albeit not statutory in source – has the parallel
damages to the corporation, its stockholders or other
effect of violating the laborer’s rights. Suffice it to state, the
persons; (b) they consent to the issuance of watered down
contract is the law between the parties and thus, breaches
stocks or when, having knowledge of such issuance, do not
of the same impel recompense to vindicate a right that has
forthwith file with the corporate secretary their written
been violated. Consequently, while the Court is wont to
objection; (c) they agree to hold themselves personally and
uphold the dismissal of Alcaraz because a valid cause
solidarily liable with the corporation; or (d) they are made by
exists, the payment of nominal damages on account of
specific provision of law personally answerable for their
Abbott’s contractual breach is warranted in accordance with
corporate action.80
Article 2221 of the Civil Code.79
In this case, Alcaraz alleges that the individual petitioners
Anent the proper amount of damages to be awarded, the
acted in bad faith with regard to the supposed crude manner
Court observes that Alcaraz’s dismissal proceeded from her
by which her probationary employment was terminated and
failure to comply with the standards required for her
thus, should be held liable together with Abbott. In the same
regularization. As such, it is undeniable that the dismissal
process was, in effect, initiated by an act imputable to the
127
vein, she further attributes the loss of some of her remaining REINSTATED with the MODIFICATION that petitioner
belongings to them.81 Abbott Laboratories, Philippines be ORDERED to pay
respondent Pearlie Ann F. Alcaraz nominal damages in the
Alcaraz’s contention fails to persuade.
amount of ₱30,000.00 on account of its breach of its own
A judicious perusal of the records show that other than her company procedure.
unfounded assertions on the matter, there is no evidence to
SO ORDERED.
support the fact that the individual petitioners herein, in their
capacity as Abbott’s officers and employees, acted in bad G.R. No. 170388 September 4, 2013
faith or were motivated by ill will in terminating
COLEGIO DEL SANTISIMO ROSARIO AND SR.
Alcaraz’s services. The fact that Alcaraz was made to resign ZENAIDA S. MOFADA, OP, PETITIONERS,
and not allowed to enter the workplace does not necessarily vs.
indicate bad faith on Abbott’s part since a sufficient ground EMMANUEL ROJO,* RESPONDENT.
existed for the latter to actually proceed with her
termination. On the alleged loss of her personal belongings, DECISION
records are bereft of any showing that the same could be DEL CASTILLO, J.:
attributed to Abbott or any of its officers. It is a well-settled
rule that bad faith cannot be presumed and he who alleges This Petition for Review on Certiorari1 assails the August 31,
bad faith has the onus of proving it. All told, since Alcaraz 2005 Decision2 and the November 10, 2005 Resolution3 of
failed to prove any malicious act on the part of Abbott or any the Court of Appeals (CA) in CA-G.R. SP No. 85188, which
of its officers, the Court finds the award of moral or affirmed the July 31, 2003 Decision4 of the National Labor
exemplary damages unwarranted. Relations Commission (NLRC). Said NLRC Decision
affirmed with modification the October 7, 2002 Decision5 of
WHEREFORE, the petition is GRANTED. The Decision the Labor Arbiter (LA) which, in turn, granted respondent
dated December 10, 2009 and Resolution dated June 9, Emmanuel Rojo’s (respondent) Complaint6 for illegal
2010 of the Court of Appeals in CA-G.R. SP No. 101045 are dismissal.
hereby REVERSED and SET ASIDE. Accordingly, the
Decision dated March 30, 2006 of the Labor Arbiter is Factual Antecedents

128
Petitioner Colegio del Santisimo Rosario (CSR) hired served the "three years" or 36 months mentioned in
respondent as a high school teacher on probationary basis paragraph 75 of the 1970 Manual.15
for the school years 1992-1993, 1993-19947 and 1994-
Ruling of the Labor Arbiter
1995.8
The LA ruled that "three school years" means three years of
On April 5, 1995, CSR, through petitioner Sr. Zenaida S.
10 months, not 12 months.16 Considering that respondent
Mofada, OP (Mofada), decided not to renew respondent’s
had already served for three consecutive school years, then
services.9
he has already attained regular employment status. Thus,
Thus, on July 13, 1995, respondent filed a Complaint10 for the non-renewal of his contract for school year 1995-1996
illegal dismissal. He alleged that since he had served three constitutes illegal dismissal.17
consecutive school years which is the maximum number of
The LA also found petitioners guilty of bad faith when they
terms allowed for probationary employment, he should be
treated respondent’s termination merely as the expiration of
extended permanent employment. Citing paragraph 75 of
the third employment contract and when they insisted that
the 1970 Manual of Regulations for Private Schools (1970
the school board actually deliberated on the non-renewal of
Manual), respondent asserted that "full- time teachers who
respondent’s employment without submitting admissible
have rendered three (3) consecutive years of satisfactory
proof of his alleged regular performance evaluation.18
services shall be considered permanent."11
The dispositive portion of the LA’s Decision19 reads:
On the other hand, petitioners argued that respondent knew
that his Teacher’s Contract for school year 1994-1995 with WHEREFORE, premises considered, judgment is hereby
CSR would expire on March 31, 1995.12 Accordingly, rendered ordering the [petitioners]:
respondent was not dismissed but his probationary contract
1. To pay [respondent] the total amount of ₱39,252.00
merely expired and was not renewed.13 Petitioners also
corresponding to his severance compensation and 13th
claimed that the "three years" mentioned in paragraph 75 of
the 1970 Manual refer to "36 months," not three school month pay, moral and exemplary damages.
years.14 And since respondent served for only three school 2. To pay 10% of the total amount due to [respondent] as
years of 10 months each or 30 months, then he had not yet attorney’s fees.

129
All other claims are dismissed for lack of merit.
SO ORDERED.20
Ruling of the National Labor Relations Commission
On appeal, the NLRC affirmed the LA’s Decision with
modification. It held that after serving three school years,
respondent had attained the status of regular
employment21 especially because CSR did not make known
to respondent the reasonable standards he should
meet.22 The NLRC also agreed with the LA that
respondent’s termination was done in bad faith. It held that
respondent is entitled to reinstatement, if viable; or
separation pay, if reinstatement was no longer feasible, and
backwages, viz:
WHEREFORE, premises considered, the appealed
Decision is hereby, AFFIRMED with MODIFICATION only
insofar as the award of separation pay is concerned. Since
[respondent] had been illegally dismissed, [petitioner]
Colegio Del Santisimo Rosario is hereby ordered to
reinstate him to his former position without loss of seniority
rights with full backwages until he is actually reinstated.
However, if reinstatement is no longer feasible, the
respondent shall pay separation pay, in [addition] to the
payment of his full backwages.
The Computation Division is hereby directed to compute
[respondent’s] full backwages to be attached and to form
part of this Decision.
The rest of the appealed Decision stands.
SO ORDERED.23
Petitioners moved for reconsideration which the NLRC
denied in its April 28, 2004 Resolution24 for lack of merit.
Ruling of the Court of Appeals
Petitioners filed a Petition for Certiorari25 before the CA
alleging grave abuse of discretion on the part of the NLRC
in finding that respondent had attained the status of a
regular employee and was illegally dismissed from
employment.
In a Decision26 dated August 31, 2005, the CA denied the
Petition for lack of merit. Citing Cagayan Capitol College v.
National Labor Relations Commission,27 it held that
respondent has satisfied all the requirements necessary to
acquire permanent employment and security of tenure viz:
1. The teacher is a full-time teacher;
2. The teacher must have rendered three (3) consecutive
years of service; and
3. Such service must be satisfactory.28
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According to the CA, respondent has attained the status of
a regular employee after he was employed for three
consecutive school years as a full-time teacher and had
served CSR satisfactorily. Aside from being a high school
teacher, he was also the Prefect of Discipline, a task
entailing much responsibility. The only reason given by
Mofada for not renewing respondent’s contract was the
alleged expiration of the contract, not any unsatisfactory
service. Also, there was no showing that CSR set
performance standards for the employment of respondent,
which could be the basis of his satisfactory or unsatisfactory
performance. Hence, there being no reasonable standards
made known to him at the time of his engagement,
respondent was deemed a regular employee and was, thus,
declared illegally dismissed when his contract was not
renewed.
Petitioners moved for reconsideration. However, the CA
denied the motion for lack of merit in its November 10, 2005
Resolution.29
Hence, the instant Petition. Incidentally, on May 23, 2007,
we issued a Resolution30 directing the parties to maintain
the status quo pending the resolution of the present Petition.
Issue
WHETHER THE COURT OF APPEALS [AS WELL AS THE
NATIONAL LABOR RELATIONS COMMISSION]
COMMITTED GRIEVOUS AND REVERSIBLE ERROR
WHEN IT RULED THAT A BASIC EDUCATION
(ELEMENTARY) TEACHER HIRED FOR THREE (3)
CONSECUTIVE SCHOOL YEARS AS A PROBATIONARY
EMPLOYEE AUTOMATICALLY AND/OR BY LAW
BECOMES A PERMANENT EMPLOYEE UPON
COMPLETION OF HIS THIRD YEAR OF PROBATION
NOTWITHSTANDING [A] THE PRONOUNCEMENT OF
THIS HONORABLE COURT IN COLEGIO SAN AGUSTIN
V. NLRC, 201 SCRA 398 1991 THAT A PROBATIONARY
TEACHER ACQUIRES PERMANENT STATUS "ONLY
WHEN HE IS ALLOWED TO WORK AFTER THE
PROBATIONARY PERIOD" AND [B] DOLE-DECS-CHED-
TESDA ORDER NO. 01, S. 1996 WHICH PROVIDE THAT
TEACHERS WHO HAVE SERVED THE PROBATIONARY
PERIOD "SHALL BE MADE REGULAR OR PERMANENT
IF ALLOWED TO WORK AFTER SUCH PROBATIONARY
PERIOD."31
Petitioners maintain that upon the expiration of the
probationary period, both the school and the respondent
were free to renew the contract or let it lapse. Petitioners
insist that a teacher hired for three consecutive years as a
probationary employee does not automatically become a
regular employee upon completion of his third year of
probation. It is the positive act of the school – the hiring of
the teacher who has just completed three consecutive years
131
of employment on probation for the next school year – that
makes the teacher a regular employee of the school.
Our Ruling
We deny the Petition.
In Mercado v. AMA Computer College-Parañaque City,
Inc.,32 we had occasion to rule that cases dealing with
employment on probationary status of teaching personnel
are not governed solely by the Labor Code as the law is
supplemented, with respect to the period of probation, by
special rules found in the Manual of Regulations for Private
Schools (the Manual). With regard to the probationary
period, Section 92 of the 1992 Manual33 provides:
Section 92. Probationary Period. – Subject in all instances
to compliance with the Department and school
requirements, the probationary period for academic
personnel shall not be more than three (3) consecutive
years of satisfactory service for those in the elementary and
secondary levels, six (6) consecutive regular semesters of
satisfactory service for those in the tertiary level, and nine
(9) consecutive trimesters of satisfactory service for those in
the tertiary level where collegiate courses are offered on a
trimester basis. (Emphasis supplied)
In this case, petitioners’ teachers who were on probationary
employment were made to enter into a contract effective for
one school year. Thereafter, it may be renewed for another
school year, and the probationary employment continues. At
the end of the second fixed period of probationary
employment, the contract may again be renewed for the last
time.
Such employment for fixed terms during the teachers’
probationary period is an accepted practice in the teaching
profession. In Magis Young Achievers’ Learning Center v.
Manalo,34 we noted that:
The common practice is for the employer and the teacher to
enter into a contract, effective for one school year. At the
end of the school year, the employer has the option not to
renew the contract, particularly considering the teacher’s
performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually
for another school year, the probationary employment
continues. Again, at the end of that period, the parties may
opt to renew or not to renew the contract. If renewed, this
second renewal of the contract for another school year
would then be the last year – since it would be the third
school year – of probationary employment. At the end of this
third year, the employer may now decide whether to extend
a permanent appointment to the employee, primarily on the
basis of the employee having met the reasonable standards
of competence and efficiency set by the employer. For the
entire duration of this three-year period, the teacher remains
under probation. Upon the expiration of his contract of
employment, being simply on probation, he cannot
132
automatically claim security of tenure and compel the
employer to renew his employment contract. It is when the
yearly contract is renewed for the third time that Section 93
of the Manual becomes operative, and the teacher then is
entitled to regular or permanent employment status.
(Emphases supplied)
However, this scheme "of fixed-term contract is a system
that operates during the probationary period and for this
reason is subject to Article 281 of the Labor Code,"35 which
provides:
x x x The services of an employee who has been engaged
on a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the
employer to the employee at the time of his engagement.
An employee who is allowed to work after a probationary
period shall be considered a regular employee. [Emphasis
supplied]
In Mercado, we held that "[u]nless this reconciliation is
made, the requirements of [Article 281 on probationary
status would be fully negated as the school may freely
choose not to renew contracts simply because their terms
have expired."36 This will have an unsettling effect in the
equilibrium vis-a-vis the relations between labor and
management that the Constitution and Labor Code have
worked hard to establish.
That teachers on probationary employment also enjoy the
protection afforded by Article 281 of the Labor Code is
supported by Section 93 of the 1992 Manual which
provides:
Sec. 93. Regular or Permanent Status. - Those who have
served the probationary period shall be made regular or
permanent. Full-time teachers who have satisfactorily
completed their probationary period shall be considered
regular or permanent. (Emphasis supplied)
The above provision clearly provides that full-time teachers
become regular or permanent employees once they have
satisfactorily completed the probationary period of three
school years.37 The use of the term satisfactorily necessarily
connotes the requirement for schools to set reasonable
standards to be followed by teachers on probationary
employment. For how else can one determine if
probationary teachers have satisfactorily completed the
probationary period if standards therefor are not provided?
As such, "no vested right to a permanent appointment shall
accrue until the employee has completed the prerequisite
three-year period necessary for the acquisition of a
permanent status. [However, it must be emphasized that]
mere rendition of service for three consecutive years does
not automatically ripen into a permanent appointment. It is
also necessary that the employee be a full-time teacher,
and that the services he rendered are satisfactory."38
133
In Mercado, this Court, speaking through J. Brion, held that:
The provision on employment on probationary status under
the Labor Code is a primary example of the fine balancing
of interests between labor and management that the Code
has institutionalized pursuant to the underlying intent of the
Constitution.
On the one hand, employment on probationary status
affords management the chance to fully scrutinize the true
worth of hired personnel before the full force of the security
of tenure guarantee of the Constitution comes into play.
Based on the standards set at the start of the probationary
period, management is given the widest opportunity during
the probationary period to reject hirees who fail to meet its
own adopted but reasonable standards. These standards,
together with the just and authorized causes for termination
of employment [which] the Labor Code expressly provides,
are the grounds available to terminate the employment of a
teacher on probationary status. x x x
Labor, for its part, is given the protection during the
probationary period of knowing the company standards the
new hires have to meet during the probationary period, and
to be judged on the basis of these standards, aside from the
usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code,
these standards should be made known to the teachers on
probationary status at the start of their probationary period,
or at the very least under the circumstances of the present
case, at the start of the semester or the trimester during
which the probationary standards are to be applied. Of
critical importance in invoking a failure to meet the
probationary standards, is that the school should show – as
a matter of due process – how these standards have been
applied. This is effectively the second notice in a dismissal
situation that the law requires as a due process guarantee
supporting the security of tenure provision, and is in
furtherance, too, of the basic rule in employee dismissal that
the employer carries the burden of justifying a dismissal.
These rules ensure compliance with the limited security of
tenure guarantee the law extends to probationary
employees.
When fixed-term employment is brought into play under the
above probationary period rules, the situation – as in the
present case – may at first blush look muddled as fixed-term
employment is in itself a valid employment mode under
Philippine law and jurisprudence. The conflict, however, is
more apparent than real when the respective nature of
fixed-term employment and of employment on probationary
status are closely examined.
The fixed-term character of employment essentially refers to
the period agreed upon between the employer and the
employee; employment exists only for the duration of the
term and ends on its own when the term expires. In a
sense, employment on probationary status also refers to a
134
period because of the technical meaning "probation" carries
in Philippine labor law – a maximum period of six months, or
in the academe, a period of three years for those engaged
in teaching jobs. Their similarity ends there, however,
because of the overriding meaning that being "on probation"
connotes, i.e., a process of testing and observing the
character or abilities of a person who is new to a role or job.
Understood in the above sense, the essentially protective
character of probationary status for management can
readily be appreciated. But this same protective character
gives rise to the countervailing but equally protective rule
that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and
properly communicated standards. Otherwise stated, within
the period of the probation, any employer move based on
the probationary standards and affecting the continuity of
the employment must strictly conform to the probationary
rules.
x x x If we pierce the veil, so to speak, of the parties’ so-
called fixed-term employment contracts, what undeniably
comes out at the core is a fixed-term contract conveniently
used by the school to define and regulate its relations with
its teachers during their probationary period.39 (Emphasis
supplied; italics in the original)
In the same case, this Court has definitively pronounced
that "in a situation where the probationary status overlaps
with a fixed-term contract not specifically used for the fixed
term it offers, Article 281 should assume primacy and the
fixed-period character of the contract must give way."40
An example given of a fixed-term contract specifically used
for the fixed term it offers is a replacement teacher or a
reliever contracted for a period of one year to temporarily
take the place of a permanent teacher who is on leave. The
expiration of the reliever’s fixed-term contract does not have
probationary status implications as he or she was never
employed on probationary basis. This is because his or her
employment is for a specific purpose with particular focus
on the term. There exists an intent to end his or her
employment with the school upon expiration of this term.41
However, for teachers on probationary employment, in
which case a fixed term contract is not specifically used for
the fixed term it offers, it is incumbent upon the school to
have not only set reasonable standards to be followed by
said teachers in determining qualification for regular
employment, the same must have also been communicated
to the teachers at the start of the probationary period, or at
the very least, at the start of the period when they were to
be applied. These terms, in addition to those expressly
provided by the Labor Code, would serve as the just cause
for the termination of the probationary contract.1âwphi1 The
specific details of this finding of just cause must be
communicated to the affected teachers as a matter of due
process.42 Corollarily, should the teachers not have been
135
apprised of such reasonable standards at the time specified
above, they shall be deemed regular employees.
In Tamson’s Enterprises, Inc. v. Court of Appeals,43 we held
that "[t]he law is clear that in all cases of probationary
employment, the employer shall [convey] to the employee
the standards under which he will qualify as a regular
employee at the time of his engagement. Where no
standards are made known to the employee at that time, he
shall be deemed a regular employee.
In this case, glaringly absent from petitioners’ evidence are
the reasonable standards that respondent was expected to
meet that could have served as proper guidelines for
purposes of evaluating his performance. Nowhere in the
Teacher’s Contract44 could such standards be
45
found. Neither was it mentioned that the same were ever
conveyed to respondent. Even assuming that respondent
failed to meet the standards set forth by CSR and made
known to the former at the time he was engaged as a
teacher on probationary status, still, the termination was
flawed for failure to give the required notice to
respondent.46 This is because Book VI, Rule I, Section 2 of
the IRR of the Labor Code provides:
Section 2. Security of Tenure. – (a) In cases of regular
employment, the employer shall not terminate the services
of an employee except for just or authorized causes as
provided by law, and subject to the requirements of due
process.
(b) The foregoing shall also apply in cases of probationary
employment; provided, however, that in such cases,
termination of employment due to failure of the employee to
qualify in accordance with the standards of the employer
made known to the former at the time of engagement may
also be a ground for termination of employment.
xxxx
(d) In all cases of termination of employment, the following
standards of due process shall be substantially observed:
xxxx
If the termination is brought about by the completion of a
contract or phase thereof, or by failure of an employee to
meet the standards of the employer in the case of
probationary employment, it shall be sufficient that a written
notice is served the employee, within a reasonable time
from the effective date of termination. (Emphasis supplied)
Curiously, despite the absence of standards, Mofada
mentioned the existence of alleged performance
evaluations47in respondent’s case. We are, however, in a
quandary as to what could have been the basis of such
evaluation, as no evidence were adduced to show the
reasonable standards with which respondent’s performance
136
was to be assessed or that he was informed thereof.
Notably too, none of the supposed performance evaluations
were presented. These flaws violated respondent’s right to
due process. As such, his dismissal is, for all intents and
purposes, illegal.
Mofada would also have us believe that respondent chose
to resign as he feared for his life, thus, the school’s decision
not to renew his contract. However, no resignation letter
was presented. Besides, this is contrary to respondent’s act
of immediately filing the instant case against petitioners.

As a matter of due process, teachers on probationary WHEREFORE, the Petition is hereby DENIED. The August
employment, just like all probationary employees, have the 31, 2005 Decision and the November 10, 2005 Resolution
right to know whether they have met the standards against of the Court of Appeals in CA-G.R. SP No. 85188 are
which their performance was evaluated. Should they fail, AFFIRMED. The status quo order of this Court is LIFTED.
they also have the right to know the reasons therefor.
SO ORDERED.
It should be pointed out that absent any showing of
unsatisfactory performance on the part of respondent, it can AMA COMPUTER COLLEGE,
be presumed that his performance was satisfactory, PARAAQUE, and/or G.R. No. 164078
especially taking into consideration the fact that even while
he was still more than a year into his probationary AMABLE C. AGUILUZ IX,
employment, he was already designated Prefect of President, MRS. CELESTE BANSALE,
Discipline. In such capacity, he was able to uncover the School Director, MS. SOCORRO,
existence of a drug syndicate within the school and lessen Present:
the incidence of drug use therein. Yet despite respondent’s MR. PATRICK AZANZA,
substantial contribution to the school, petitioners chose to
GRACE BERANIA and MAJAL JACOB,
disregard the same and instead terminated his services; YNARES-SANTIAGO
while most of those who were involved in drug activities Petitioners,
Chairperson,
within the school were punished with a slap on the wrist as
they were merely made to write letters promising that the AUSTRIA-MARTINEZ
incident will not happen again.48
CHICO-NAZARIO,

137
- versus - NACHURA, and Before this Court is a Petition for Review
[1]
on Certiorari under Rule 45 of the Rules of Civil Procedure
REYES, JJ.
seeking the reversal of the Court of Appeals (CA)
ROLANDO A. AUSTRIA, Decision[2] dated March 29, 2004 which affirmed with
modification the Decision[3] of the National Labor Relations
Respondent. Commission (NLRC), dated March 31, 2003.

The Facts

Promulgated:
Petitioner AMA Computer College, Parañaque (AMA) is an
educational institution duly organized under the laws of
November 23, 2007the Philippines. The rest of the petitioners are principal
officers of AMA. Respondent Rolando A.
[4]
Austria (respondent) was hired by AMA on probationary
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - employment as a college dean on April 24,
--------x 2000.[5] On August 22, 2000, respondents appointment as
dean was confirmed by AMAs Officer-in-Charge (OIC),
Academic Affairs, in his Memorandum,[6] which reads:
DECISION

After a thorough evaluation of the performance of Mr.

NACHURA, J.: Rolando Austria as Dean, we are happy to inform you that
he is hereby officially confirmed as Dean of AMA College
Paraaque effective April 17, 2000 to September 17, 2000.

138
In view of this, he will be entitled to a transportation
allowance of One Thousand Five Hundred Sixty Pesos
(P1,560.00).
In the event that Mr. Austria gives up the Dean position or
fails to meet the standards of the (sic) based on the
evaluation of his immediate superior, he shall be considered
for a faculty position and the appointee agrees that he shall
lose the transportation allowance he enjoys as Dean and be
entitled to his faculty rate.
Sometime in August 2000, respondent was charged with
violating AMAs Employees Conduct and Discipline provided
in its Orientation Handbook (Handbook),[7] as follows:
1) leaking of test questions;
2) failure to monitor general requirements vital to the
operations of the
company; and
3) gross inefficiency.
In a Memorandum[8] dated August 29, 2000, respondent
refuted the charges against him. Thereafter, respondent
was placed on preventive suspension from September 8,
2000 to October 10, 2000. Notices[9] of Investigation were
sent to respondent. Eventually, on September 29, 2000,
respondent was informed of his dismissal, to wit:
Dear Mr. Austria[,]
Please be informed that after a careful deliberation on the
case filed against you and upon serious consideration of the
evidences (sic) presented, the Management has found you
guilty of violating the following policies:
A. Loss of trust and confidence by management due
to gross inefficiency.
(5.21 Very Serious/Grave Offense)
B. Failure to monitor general requirements vital to the
operations of the company.
(5.10 Medium Offense)
139

C. Leaking of test questions.
(4.17 Very Serious/Grave Offense)
This resulted to the loss of trust and confidence in your
credibility as a company officer holding a highly sensitive
position. In view of this, your services as Dean of AMA
Paraaque is hereby terminated effective immediately.
You are hereby instructed to report to the branch HR
Personnel for further instructions. Please bear in mind that
as a company policy you are required to accomplish your
clearance and turn over all documents and responsibilities
to the appropriate officers.
You are barred from entering the company premises unless
with clearance from the HRD.[10]
On October 27, 2000, respondent filed a Complaint[11] for
Illegal Dismissal, Illegal Suspension, Non-Payment of
Salary and 13th Month Pay with prayer for Damages and
Attorney's Fees against AMA and the rest of the petitioners.
Trial on the merits ensued.
The Labor Arbiter's Ruling
In his Decision[12] dated December 6, 2000, the Labor
Arbiter held that petitioners accorded respondent due
process. The Labor Arbiter however, also held that
respondent substantially refuted the charges of gross
inefficiency, incompetence, and leaking of test questions
filed against him. But since respondent can no longer be
reinstated beyond September 17, 2000 as his designation
as college dean was only until such date, respondent should
instead be paid his compensation and transportation
allowance for the period from September 8, 2000 to
September 17, 2000, or the salary and benefits withheld
prior thereto. Thus:
WHEREFORE, premises considered, judgment is hereby
rendered ordering respondent AMA Computer College,
Paraaque to pay complainants proportionate salary for the
period beginning 8 September 2000 to 17 September 2000.
140
P30,000 x 10/30 days = P10,000.00 and his proportionate
transportation allowance.
P1,560.00 x 10/30 days = P520.00 and the salary/benefits
withheld prior to 8 September 2000, if any.
All other claims are hereby dismissed for lack of merit.
SO ORDERED.
Aggrieved, respondent appealed the said Decision to the
NLRC.[13]
The NLRC's Ruling
On March 31, 2003, the NLRC, in its Decision,[14] found
merit in respondent's appeal. The NLRC opined that the
petitioners did not
contravene respondent's allegation that he had attained
regular status after
serving the three (3)-month probationary period required
under the Handbook.[15] Thus, while the NLRC sustained the
Labor Arbiter's finding that petitioners failed to establish the
grounds for respondent's dismissal, it held that the Labor
Arbiter erred in declaring that respondent's appointment was
only from April 24 to September 17, 2000. Accordingly, the
NLRC declared that respondent was a regular employee
and that he was illegally dismissed. Nevertheless, the NLRC
held that reinstatement would not promote industrial
harmony; hence, the NLRC disposed of the case in this
wise:
PREMISES CONSIDERED the Decision of December 6,
2000 is VACATED and a new one entered declaring
complainant illegally dismissed. Respondents are directed
to pay complainant separation pay computed at one (1)
month per year of service in addition to full backwages from
September 29, 2000 until December 6, 2000, or in the
amount of one hundred thousand three hundred seventy
eight-pesos & 80/100 (P100,378.80).
SO ORDERED.[16]
141
 to prove the grounds for respondent's dismissal. The
dispositive portion of the said Decision reads:
Petitioners filed a Motion for Reconsideration[17] assailing
respondent's regular status, which the NLRC in a
Resolution,[18] denied for having been filed out of time and
WHEREFORE, premises considered, the petition is
for lack of merit. Respondent also filed a Motion for Partial
hereby DENIED DUE COURSE and DISMISSED for lack of
Reconsideration,[19] which the NLRC, in another
merit. The decision of the NLRC
Resolution,[20] denied for lack of merit.
is AFFIRMED with MODIFICATION as above stated, with
regard to the computation of backwages.

Thus, petitioners went to the CA via Petition

for Certiorari[21] under Rule 65 of the 1997 Rules of Civil
SO ORDERED.
Procedure.

Petitioners filed a Motion for Reconsideration[23] of the said

Decision, which the CA denied, in its
The CA's Ruling
Resolution[24] dated June 11, 2004, for lack of merit.

On March 29, 2004, the CA held that based on the

Hence, this Petition based on the sole ground that the CA
Handbook and on respondent's appointment, it can be
committed serious error of law in affirming and then further
inferred that respondent was a regular employee, and as
modifying the erroneous decision of the NLRC declaring
such, his employment can only be terminated for any of the
that herein respondent was illegally dismissed by AMA.[25]
causes provided under Article 282[22] of the Labor Code and
after observance of the requirements of due
process. Furthermore, the CA upheld the Labor Arbiters and
the NLRCs similar findings that respondent sufficiently Petitioners argue that respondent, as college dean, was an
academic personnel of AMA under Section 4(m) (4)(c) of
rebutted the charges against him and that petitioners failed
142
the Manual of Regulations for Private Schools[26] (Manual)
and, as such, his probationary employment is governed by
Section 92[27] thereof and not by the Labor Code or AMA's
Handbook; that under the circumstances, respondent has
not yet attained the status of a regular employee; that
respondent's employment was for a fixed term as found by
the Labor Arbiter but the same was terminated earlier due to
just causes; that the respondent, whether he may be
considered as a probationary or a regular employee, was
dismissed for just causes; and that the award of backwages
in favor of the respondent, up to the finality of the decision,
is oppressive to the petitioners, considering the absence of
an order of reinstatement and the respondent's fixed period
of employment.[28]
On the other hand, respondent counters that both the NLRC
and the CA found that respondent was a regular employee
and that he was illegally dismissed; that the instant Petition
raises questions of fact - such as whether or not respondent
is a regular employee and whether or not circumstances
existed warranting his dismissal - which can no longer
be inquired into by
this Court;[29] that petitioners assailed the regular status of
the respondent for the first time only before the CA; that
they never raised as issue respondent's regular status
before the Labor Arbiter and the NLRC because they merely
concentrated on their stand that respondent was lawfully
dismissed; that petitioners failed to discharge the burden of
proving the existence of a valid ground in dismissing
respondent as found by the Labor Arbiter, the NLRC, and
the CA; and that the CA's award of backwages from the
date of actual dismissal up to the date of the finality of the
decision in favor of the respondent is consonant with Article
279[30] of the Labor Code, and hence, valid.[31]
From this exchange of arguments, we glean two ultimate
questions that require resolution, viz.:
1. What is the nature of respondent's employment?
2. Was he lawfully dismissed? no
The first question, i.e., whether respondent is a regular,
probationary, or fixed term employee is essentially factual in
nature.[32] However, the Court opts to resolve this question
due to the far-reaching effects it could bring to the sector of
the academe.
143
 probationary period required in the Handbook, which the
petitioners failed to deny or contravene in the proceedings
As an exception to the general rule, we held in Molina v.
before the Labor Arbiter.
Pacific Plans, Inc.: [33]

Prior to his dismissal, respondent held the position of

A disharmony between the factual findings of the Labor
college dean. The letter of appointment states that he was
Arbiter and the National Labor Relations Commission opens
officially confirmed as Dean of AMA
the door to a review thereof by this Court. Factual findings
College, Paraaque, effective from April 17,
of administrative agencies are not infallible and will be set
2000 to September 17, 2000. Petitioners submit that the
aside when they fail the test of arbitrariness. Moreover,
nature of respondent's employment as dean is one with a
when the findings of the National Labor Relations
fixed term.
Commission contradict those of the Labor Arbiter, this
Court, in the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the questioned
We agree.
findings.

We held that Article 280 of the Labor Code does not

The instant case falls squarely within the aforesaid
proscribe or prohibit an employment contract with a fixed
exception. The Labor Arbiter held that, while petitioners did
period. Even if the duties of the employee consist of
not prove the existence of just causes in order to warrant
activities necessary or desirable in the usual
respondent's dismissal, the latter's employment as dean
business of the employer, the parties
ceased to exist upon expiration of respondent's term of
are free to agree on a fixed period
employment on September 17, 2000. In sum, the Labor
Arbiter held that the nature of respondent's employment is of time for the performance of such activities.
one for a fixed term. On the other hand, the NLRC and the There is nothing essentially
CA both held that respondent is a regular employee
because respondent had fully served the three (3)-month
144

contradictory between a definite period of employment and
the nature of the employees duties.[34]
Thus, this Court's ruling in Brent School, Inc. v. Zamora[35] is
instructive:
The question immediately provoked. . .
is whether or not a voluntary agreement on a fixed term or p
eriod would be valid where the employee "has been engage
d to perform activities which are usually necessary or desira
ble in the usual business or trade of the employer." The defi
nition seems non sequitur. From the premise that the duties
of an employee entail "activities which are usually necessar
y or desirable in the usual business or trade of the employer
" the conclusion does not necessarily follow that the employ
er and employee should be forbidden to stipulate any period
of time for the performance of those activities. There is noth
ing essentially contradictory between a definite period of an
employment contract and the nature of the employee's dutie
s set down in that contract as being "usually necessary or d
esirable in the usual business or trade of the employer." The
concept of the employee's duties as being "usually necessa
ry or desirable in the usual business or trade of the employe
r" is not synonymous with or identical to employment with a f
ixed term. Logically, the decisive determinant in term emplo
yment should not be the activities that the employee is calle
d upon to perform, but the day certain agreed upon by the p
arties for the commencement and termination of their emplo
yment relationship, a day certain being understood to be "th
atwhich must necessarily come, although it may not be kno
wn when." Seasonal employment, and employment for a par
ticular project are merely instances of employment in which
a period, where not expressly set down, is necessarily impli
ed.
xxxxxxxxx
Some familiar examples may be cited of employment contra
cts which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and na
tural appurtenance: overseas employment contracts, for o
ne, to which, whatever the nature of the engagement, the co
ncept of regular employment with all that it implies does not
appear ever to have been applied, Article 280 of the Labor
Code notwithstanding; also appointments to the position
s of dean, assistant dean, college secretary, principal, a
nd other administrative offices in educational institution
s, which are by practice or tradition rotated among the f
aculty members, and where fixed terms are a necessity
145
without which no reasonable rotation would
be possible . . . .
xxx
The instant case involves respondent's position as dean,
and comes within the purview of the Brent School doctrine.
First. The letter of appointment was clear. Respondent was
confirmed as Dean of AMA College, Paraaque, effective
from April 17, 2000 to September 17, 2000. In numerous
cases decided by this Court, we had taken notice, that by
way of practice and tradition, the position of dean is
normally an employment for a fixed term.[36] Although it does
not appear on record─ and neither was it alleged by any of
the parties─ that respondent, other than holding the position
of dean, concurrently occupied a teaching position, it can be
deduced from the last paragraph of said letter that the
respondent shall be considered for a faculty position in the
event he gives up his deanship or fails to meet AMA's
standards. Such provision reasonably serves the intention
set forth in Brent School that the deanship may be rotated
among the other members of the faculty.
Second. The fact that respondent did not sign the letter of
appointment is of no moment. We held in Brent School, to
wit:
Accordingly, and since the entire purpose behind the
development of legislation culminating in the present Article
280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the
employee's right to be secure in his tenure, the clause in
said article indiscriminately and completely ruling out all
written or oral agreements conflicting with the concept of
regular employment as defined therein should be construed
to refer to the substantive evil that the Code itself has
singled out: agreements entered into precisely to circumvent
security of tenure. It should have no application to
instances where a fixed period of employment was
agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being
brought to bear upon the employee and absent any
other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee
dealt with each other on more or less equal terms with
no moral dominance whatever being exercised by the
former over the latter. Unless, thus, limited in its purview,
the law would be made to apply to purposes other than
those explicitly stated by its framers; it thus becomes
146
pointless and arbitrary, unjust in its effects and apt to lead to As such, petitioners aver that the three (3)-month
absurd and unintended consequences.[37] probationary period for officers set forth in the Handbook is
not applicable to the case of respondent.

The Handbook merely provides for two classes of

The fact that respondent voluntarily accepted the
employees for purposes of permanency, i.e., Faculty and
employment, assumed the position, and performed the
Non-Academic. However, the same does not specifically
functions of dean is clear indication that he knowingly and
classify the position of dean as part of the Faculty or of the
voluntarily consented to the terms and conditions of the
Non-Academic personnel. At this juncture, we find solace in
appointment, including the fixed period of his deanship.
the Manual of Regulations for Private Schools
Other than the handwritten notes made in the letter of
Annotated,[38] which provides that the college dean is the
appointment, no evidence was ever presented to show that
senior officer responsible for the operation of an academic
respondents consent was vitiated, or that respondent
program, the enforcement of rules and regulations, and the
objected to the said appointment or to any of its conditions.
supervision of faculty and student services. We already had
Furthermore, in his status as dean, there can be no valid
occasion to state that the position of dean is primarily
inference that he was shackled by any form of moral
academic[39] and, as such, he is considered a managerial
dominance exercised by AMA and the rest of the
employee.[40] Yet, a perusal of the Handbook yields the
petitioners.
interpretation that the provision on the permanency of
Faculty members applies to teachers only. But the
Handbook or school manual must yield to the decree of
Alternatively, petitioners also claim that respondent did not the Manual, the latter having the character of law.[41] The
attain regular status, relying on Section 92 of the Manual in
specified probationary periods in Section 92 of
connection with Section 4(m) 4(c) thereof which provides for
the Manual are the maximum periods; under certain
a three (3)-year probationary period for Academic conditions, regular status may be achieved by the employee
Personnel. Petitioners submit that the position of dean is in less time.[42] However, under the given circumstances and
included in the provision school officials responsible for
the fact that the position of dean in this case is for a fixed
academic matters, and may include other school officials.
term, the issue whether the respondent attained a regular
147
status is not in point. By the same token, the application of
the provision in the Manual as to the required probationary
period is misplaced. It can be well said that a tenured status
of employment co-exists and is co-terminous only with the
definite term fixed in the contract of employment.
In light of the foregoing disquisition, the resolution of the
second question requires full cognizance of respondents
fixed term of employment and all the effects thereof. It is
axiomatic that a contract of employment for a definite period
terminates on its own force at the end of such period.[43] The
lack of notice of termination is of no consequence because
when the contract specifies the length of its duration, it
comes to an end upon the expiration of such period.[44]
flowing from such employment after September 17, 2000,
because the employment, which is the source of the
benefits, had, by then, already ceased to exist.
Finally, while this Court adheres to the principle of social
justice and protection to labor, the constitutional policy to
provide such protection to labor is not meant to be an
instrument to oppress employers. The commitment under
the fundamental law is that the cause of labor does not
prevent us from sustaining the employer when the law is
clearly on its side.[45]
WHEREFORE, the instant Petition is GRANTED and the
CA Decision in CA-G.R. SP No.
78455 is REVERSED and SET ASIDE. The Decision of the
Labor Arbiter, dated December 6, 2000, is
hereby REINSTATED. No costs.

Thus, the unanimous finding of the Labor Arbiter, the NLRC SO ORDERED.
and the CA that respondent adequately refuted all the
BIENVENIDO D. GOMA, G.R. No. 160905
charges against him assumes relevance only insofar as Petitioner,
respondents dismissal from the service was effected by Present:
petitioners before expiration of the fixed period of
YNARES-SANTIAGO, J.,
employment. True, petitioners erred in dismissing the Chairperson,
respondent, acting on the mistaken belief that respondent - versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
was liable for the charges leveled against him.But NACHURA, and
respondent also cannot claim entitlement to any benefit REYES, JJ.

148
PAMPLONA PLANTATIONINCORPORATED, Promulgated:
Respondent.
July 4, 2008

x------------------------------------------------------------------x Petitioner commenced[3] the instant suit by filing a complaint

for illegal dismissal, underpayment of wages, non-payment
of premium pay for holiday and rest day, five (5) days
incentive leave pay, damages and attorneys fees, against
the respondent. The case was filed with the Sub-Regional
DECISION Arbitration Branch No. VII of Dumaguete City. Petitioner
claimed that he worked as a carpenter at the Hacienda
Pamplona since 1995; that he worked from 7:30
NACHURA, J.: a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. daily
with a salary rate of P90.00 a day paid weekly; and that he
worked continuously until 1997 when he was not given any
work assignment.[4]On a claim that he was a regular
employee, petitioner alleged to have been illegally
dismissed when the respondent refused without just cause
to give him work assignment. Thus, he prayed for
backwages, salary differential, service incentive leave pay,
For review is the Decision[1] of the Court of Appeals (CA) damages and attorneys fees.[5]
dated August 27, 2003 granting respondent Pamplona
Plantation, Inc.s petition for certiorari and its
[2]
Resolution dated November 11, 2003 denying petitioner On the other hand, respondent denied having hired the
Bienvenido Gomas motion for reconsideration, in CA-G.R. petitioner as its regular employee. It instead argued that
SP No. 74892. petitioner was hired by a certain Antoy Caaveral, the
manager of the hacienda at the time it was owned by Mr.
Bower and leased by Manuel Gonzales, a jai-alai pelotari

149
known as Ybarra.[6] Respondent added that it was not
obliged to absorb the employees of the former owner.
In 1995, Pamplona Plantation Leisure Corporation (PPLC)
was created for the operation of tourist resorts, hotels and
bars. Petitioner, thus, rendered service in the construction of
the facilities of PPLC. If at all, petitioner was a project but
not a regular employee.[7]
On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa
dismissed the case for lack of merit.[8] The Labor Arbiter
concluded that petitioner was hired by the former owner,
hence, was not an employee of the
respondent. Consequently, his money claims were denied.[9]
On appeal to the National Labor Relations Commission
(NLRC), the petitioner obtained favorable judgment when
the tribunal reversed and set aside the Labor Arbiters
decision. The dispositive portion of the NLRC decision
reads:
WHEREFORE, the Decision of the Labor Arbiter is hereby
SET ASIDE and a new one is hereby issued ORDERING
the respondent, Pamplona Plantation Incorporated, the
following:
1) to reinstate the complainant, BIENVENIDO D. GOMA to
his former position immediately without loss of seniority
rights and other privileges;
2) to pay the same complainant TWELVE THOUSAND
THREE HUNDRED FIFTY-NINE PESOS (P12,359.00) in
salary differentials;
3) to pay to the same complainant ONE HUNDRED ONE
THOUSAND SIX HUNDRED SIXTY PESOS (P101,660.00)
in backwages to be updated until actual reinstatement; and
4) to pay attorneys fee in the amount of ELEVEN
THOUSAND FOUR HUNDRED TWO PESOS (P11,402.00)
which is equivalent to ten percent (10%) of the total
judgment award.
The respondent is further ordered to pay the aggregate
amount of ONE HUNDRED FOURTEEN THOUSAND AND
150
NINETEEN PESOS (P114,019.00) to the complainant
through the cashier of this Commission within ten (10) days
from receipt hereof.
[10]
SO ORDERED.
Respondents motion for reconsideration was denied by the
NLRC on September 9, 2002.[11]
The NLRC upheld the existence of an employer-employee
relationship, ratiocinating that it was difficult to believe that a
simple carpenter from far away Pamplona would go
to Dumaguete City to hire a competent lawyer to help him
secure justice if he did not believe that his right as a laborer
had been violated.[12] It added that the creation of the PPLC
required the tremendous task of constructing hotels, inns,
restaurants, bars, boutiques and service shops, thus
involving extensive carpentry work. As an old carpentry
hand in the old corporation, the possibility of petitioners
employment was great.[13] The NLRC likewise held that the
respondent should have presented its employment records
if only to show that petitioner was not included in its list of
employees; its failure to do so was fatal.[14] Considering that
petitioner worked for the respondent for a period of two
years, he was a regular employee.[15]
Aggrieved, respondent instituted a special civil action
for certiorari under Rule 65 before the Court of Appeals
which granted the same; and consequently annulled and set
aside the NLRC decision. The CA disposed, as follows:
WHEREFORE, premises considered, the instant petition
is GRANTED. The assailed decision of the NLRC
dated October 24, 2000, as well as the Resolution
dated September 9, 2002 in NLRC Case No. V-000882-99,
RAB VII-0088-98-D are hereby ANNULLED and SET
ASIDE. The complaint is ordered DISMISSED.
SO ORDERED.[16]
Contrary to the NLRCs finding, the CA concluded that there
was no employer-employee relationship. The CA stressed
that petitioner having raised a positive averment, had the
burden of proving the existence of an employer-employee
relationship. Respondent, therefore, had no obligation to
prove its negative averment.[17] The appellate court further
held that while the respondents business required the
performance of occasional repairs and carpentry work, the
151
retention of a carpenter in its payroll was not necessary or
desirable in the conduct of its usual business.[18] Lastly,
although the petitioner was an employee of the former
owner of the hacienda, the respondent was not required to
absorb such employees because employment contracts
are in personam and binding only between the parties.[19]
Petitioner now comes before this Court raising the sole
issue:
WHETHER OR NOT THE DECISION OF [THE] COURT OF
APPEALS DATED AUGUST 27, 2003, REVERSING AND
SETTING ASIDE THE NLRC (Fourth Division, Cebu City)
RULING THAT THE PETITIONER WAS NOT ILLEGALLY
DISMISSED AS HE WAS NOT AN EMPLOYEE OF
RESPONDENT, IS CONTRARY TO LAW AND
JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT
IN CONSONANCE WITH THE EVIDENCE ON RECORD.[20]
The disposition of this petition rests on the resolution of the
following questions: 1) Is the petitioner a regular employee
YES of the respondent? 2) If so, was he illegally dismissed
YES from employment? and 3) Is he entitled to his
monetary claims?
Petitioner insists that he was a regular employee of the
respondent corporation. The respondent, on the other hand,
counters that it did not hire the petitioner, hence, he was
never an employee, much less a regular one.
Both the Labor Arbiter and the CA concluded that there was
no employer-employee relationship between the petitioner
and respondent. They based their conclusion on the alleged
admission of the petitioner that he was previously hired by
the former owner of the hacienda. Thus, they rationalized
that since the respondent was not obliged to absorb all the
employees of the former owner, petitioners claim of
employment could not be sustained. The NLRC, on the
other hand, upheld petitioners claim of regular employment
because of the respondents failure to present its
employment records.
The existence of an employer-employee relationship
involves a question of fact which is well within the province
of the CA to determine. Nonetheless, given the reality that
152
the CAs findings are at odds with those of the NLRC, the
Court is constrained to probe into the attendant
xxxx
circumstances as appearing on record.[21]

In other words, as regards those workers who worked in

A thorough examination of the records compels this Court to
1995 specifically in connection with the construction of the
reach a conclusion different from that of the CA. It is true
facilities of Pamplona Plantation Leisure Corporation, their
that petitioner admitted having been employed by the former
employment was definitely temporary in character and not
owner prior to 1993 or before the respondent took over the
regular employment. Their employment was deemed
ownership and management of the plantation, however, he
terminated by operation of law the moment they had
likewise alleged having been hired by the respondent as a
finished the job or activity under which they were
carpenter in 1995 and having worked as such for two years
employed.[22]
until 1997.Notably, at the outset, respondent categorically
denied that it hired the petitioner. Yet, in its petition filed
before the CA, respondent made this admission:

Private respondent [petitioner herein] cannot be considered

Thus, departing from its initial stand that it never hired
a regular employee since the nature of his work is merely
project in character in relation to the construction of the petitioner, the respondent eventually admitted the existence
of employer-employee relationship before the CA. It,
facilities of the Pamplona Plantation Leisure Corporation.
however, qualified such admission by claiming that it was
PPLC that hired the petitioner and that the nature of his
employment therein was that of a project and not regular
He is a project employee as he was hired 1) for a specific
employee.
project or undertaking, and 2) the completion or termination
of such project or undertaking has been determined at the
time of engagement of the employee. x x x.

153
Parenthetically, this Court in Pamplona Plantation
Company, Inc. v. Tinghil[23] and Pamplona Plantation
Company v. Acosta[24] had pierced the veil of corporate
fiction and declared that the two corporations,[25]PPLC and
the herein respondent, are one and the same.
By setting forth these defenses, respondent, in effect,
admitted that petitioner worked for it, albeit in a different
capacity. Such an allegation is in the nature of a negative
pregnant, a denial pregnant with the admission of the
substantial facts in the pleadings responded to which are
not squarely denied, and amounts to an acknowledgment
that petitioner was indeed employed by respondent.[26]
The employment relationship having been established, the
next question we must answer is: Is the petitioner a regular
or project employee?
We find the petitioner to be a regular employee.
Article 280 of the Labor Code, as amended, provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. -
The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual
business or trade of the employer, except where the
employment has been fixed for a specific project or
undertaking, the completion or termination of which has
been determined at the time of the engagement of the
employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of
the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such activity exists.
As can be gleaned from this provision, there are two kinds
of regular employees, namely: (1) those who are engaged
to perform activities which are usually necessary or
154
desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one
year of service, whether continuous or broken, with respect
to the activity in which they are employed.[27] Simply stated,
regular employees are classified into: regular employees by
nature of work; and regular employees by years of
service. The former refers to those employees who perform
a particular activity which is necessary or desirable in the
usual business or trade of the employer, regardless of their
length of service; while the latter refers to those employees
who have been performing the job, regardless of the nature
thereof, for at least a year.[28] If the employee has been
performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the
law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not
indispensability, of that activity to the business.[29]
Respondent is engaged in the management of the
Pamplona Plantation as well as in the operation of tourist
resorts, hotels, inns, restaurants, etc. Petitioner, on the
other hand, was engaged to perform carpentry work. His
services were needed for a period of two years until such
time that the respondent decided not to give him work
assignment anymore. Owing to his length of service,
petitioner became a regular employee, by operation of law.
Respondent argues that, even assuming that petitioner can
be considered an employee, he cannot be classified as a
regular employee, but merely as a project employee whose
services were hired only with respect to a specific job and
only while that specific job existed.
A project employee is assigned to carry out a specific
project or undertaking the duration and scope of which are
specified at the time the employee is engaged in the
project. A project is a job or undertaking which is distinct,
separate and identifiable from the usual or regular
undertakings of the company. A project employee is
assigned to a project which begins and ends at determined
or determinable times.[30]
The principal test used to determine whether employees are
project employees as distinguished from regular employees,
is whether or not the employees were assigned to carry out
a specific project or undertaking, the duration or scope of
which was specified at the time the employees were
engaged for that project.[31] In this case, apart from
155
respondents bare allegation that petitioner was a project the salary or the actual time spent at work. It is the
employee, it had not shown that petitioner was informed that character of the activities performed by the employer in
he would be assigned to a specific project or relation to the particular trade or business of the employer,
undertaking. Neither was it established that he was taking into account all the circumstances, including the
informed of the duration and scope of such project or length of time of its performance and its continued
undertaking at the time of his engagement. existence. Given the attendant circumstances in the case at
bar, it is obvious that one year after he was employed by the
Most important of all, based on the records, respondent did
respondent, petitioner became a regular employee by
not report the termination of petitioners supposed project
operation of law.[33]
employment to the Department of Labor and Employment
(DOLE). Department Order No. 19 (as well as the old Policy
Instructions No. 20) requires employers to submit a report of
As to the question of whether petitioner was illegally
an employees termination to the nearest public
dismissed, we answer in the affirmative.
employment
office every time the employment is terminated due to a
completion of a project. Respondents failure to file
Well-established is the rule that regular employees enjoy
termination reports, particularly on the cessation of
security of tenure and they can only be dismissed for just
petitioners employment, was an indication that the petitioner
cause and with due process, i.e., after notice and
was not a project but a regular employee.[32]
hearing. In cases involving an employees dismissal, the
burden is on the employer to prove that the dismissal was
legal. This burden was not amply discharged by the
We stress herein that the law overrides such conditions
respondent in this case.
which are prejudicial to the interest of the worker whose
weak bargaining position necessitates the succor of the
State. What determines whether a certain employment is
regular or otherwise is not the will or word of the employer, Obviously, petitioners dismissal was not based on any of
the just or authorized causes enumerated under Articles
to which the worker oftentimes acquiesces. Neither is it the
282,[34] 283[35] and 284[36] of the Labor Code, as
procedure of hiring the employee nor the manner of paying
156
amended. After working for the respondent for a period of
two years, petitioner was shocked to find out that he was
not given any work assignment anymore. Hence, the
requirement of substantive due process was not complied
with.
Apart from the requirement that the dismissal of an
employee be based on any of the just or authorized causes,
the procedure laid down in Book VI, Rule I, Section 2 (d) of
the Omnibus Rules Implementing the Labor Code, must be
followed.[37] Failure to observe the rules is a violation of the
employees right to procedural due process.
In view of the non-observance of both substantive and
procedural due process, in accordance with the guidelines
outlined by this Court in Agabon v. National Labor Relations
Commission,[38] we declare that petitioners dismissal from
employment is illegal.[39]
Having shown that petitioner is a regular employee and that
his dismissal was illegal, we now discuss the propriety of
the monetary claims of the petitioner. An illegally dismissed
employee is entitled to: (1) either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and (2)
backwages.[40]
In the instant case, we are prepared to concede the
impossibility of the reinstatement of petitioner considering
that his position or any equivalent position may no longer be
available in view of the length of time that this case has
been pending. Moreover, the protracted litigation may have
seriously abraded the relationship of the parties so as to
render reinstatement impractical. Accordingly, petitioner
may be awarded separation pay in lieu of reinstatement.[41]
Petitioners separation pay is pegged at the amount
equivalent to petitioners one (1) month pay, or one-half (1/2)
month pay for every year of service, whichever is higher,
reckoned from his first day of employment up to finality of
this decision. Full backwages, on the other hand, should be
computed from the date of his illegal dismissal until the
finality of this decision.
On petitioners entitlement to attorneys fees, we must take
into account the fact that petitioner was illegally dismissed
from his employment and that his wages and other benefits
were withheld from him without any valid and legal basis. As
a consequence, he was compelled to file an action for the
recovery of his lawful wages and other benefits and, in the
process, incurred expenses. On these bases, the Court
157
finds that he is entitled to attorneys fees equivalent to ten SO ORDERED.
percent (10%) of the monetary award.[42]
G.R. No. 209499 January 28, 2015

MA. CHARITO C. GADIA, ERNESTO M. PENAS,

Lastly, we affirm the NLRCs award of salary differential. In GEMMABELLE B. REMO, LORENA S. QUESEA, MARIE
light of our foregoing disquisition on the illegality of JOY FRANCISCO, BEVERLY A. CABINGAS, IVEE U.
petitioners dismissal, and our adoption of the NLRCs BALINGIT, ROMA ANGELICA 0. BORJA, MARIE JOAN
findings, suffice it to state that such issue is a question of RAMOS, KIM GUEVARRA, LYNN S. DE LOS SANTOS,
fact, and we find no cogent reason to disturb the findings of CAREN C. ENCANTO, EIDEN BALDOVINO,
the labor tribunal. JACQUELINE B. CASTRENCE,MA.ESTRELLA V. LAPUZ,
JOSELITO L. LORD, RAYMOND G. SANTOS, ABIGAIL
M. VILORIA, ROMMEL C. ACOSTA, FRANCIS JAN S.
WHEREFORE, premises considered, the petition BAYLON, ERIC 0. PADIERNOS, MA. LENELL P. AARON,
is GRANTED. The Decision of the Court of CRISNELL P. AARON, and LAWRENCE CHRISTOPHER
Appeals dated August 27, 2003 and its Resolution F. PAPA, Petitioners,
dated November 11, 2003 in CA-G.R. SP No. 74892 vs.
are REVERSED and SET ASIDE. Petitioner is found to SYKES ASIA, INC./ CHUCK SYKES/ MIKE HINDS/
have been illegally dismissed from employment and thus, MICHAEL HENDERSON, Respondents.
is ENTITLED to: 1) Salary Differential embodied in the
DECISION
NLRC decision dated October 24, 2000 in NLRC Case No.
V-000882-99; 2) Separation Pay; 3) Backwages; and 4) PERLAS-BERNABE, J.:
Attorneys fees equivalent to ten percent (10%) of the
monetary awards. Upon finality of this judgment, let the Assailed in this petition for review on certiorari1 are the
records of the case be remanded to the NLRC for the Decision2 dated April 29, 2013 and the Resolution3 dated
computation of the exact amounts due the petitioner. October 3, 2013 of the Court of Appeals (CA) in CA-G.R.
SP No. 120433, which annulled and set aside the
Decision4 dated November 15, 2010 and the
Resolution5 dated May 10, 2011 of the National Labor
158
Relations Commission (NLRC), in NLRC LAC No. 07-
001583-10, and reinstated the Decision6 dated June 23,
2010 of the Labor Arbiter (LA), holding that herein
petitioners Ma. Charito C. Gadia7 (Gadia), Ernesto M.
Peñas,8 Gemmabelle B. Remo (Remo), Lorena S. Quesea
(Quesea), Marie Joy Francisco, Beverly A. Cabingas, Ivee
U. Balingit9(Balingit), Roma Angelica O. Borja, Marie Joan
Ramos, Kim Guevarra, Lynn S. De Los Santos, Caren C.
Encanto, Eiden Baldovino, Jacqueline B. Castrence
(Castrence), Ma. Estrella V.Lapuz (Lapuz), Joselito L. Lord
(Lord), Raymond G. Santos, Abigail M. Viloria (Viloria),
Rommel C. Acosta10 (Acosta), Francis Jan S. Baylon,Eric O.
Padiernos, Ma. Lenell P. Aaron, Crisnell P. Aaron, and
Lawrence Christopher F.Papa (petitioners) are project
employees of respondent Sykes Asia, Inc. (Sykes Asia),
and thus, were validly terminated from employment.
The Facts
Sykes Asia is a corporation engaged in Business Process
Outsourcing (BPO) which provides support to its
international clients from various sectors (e.g., technology,
telecommunications, retail services) by carrying on some of
their operations, governed by service contracts that it enters
with them.11 On September 2, 2003,12 Alltel
Communications, Inc. (Alltel), a United States-based
telecommunications firm, contracted Sykes Asia’s services
to accommodate the needs and demands of Alltel clients for
its postpaid and prepaid services (Alltel Project). Thus, on
different dates, Sykes Asia hired petitioners as customer
service representatives, team leaders, and trainers for the
Alltel Project.13
Services for the said project went on smoothly until Alltel
sent two (2) letters to Sykes Asia dated August 7,
200914and September 9, 200915 informing the latter that it
was terminating all support services provided by Sykes Asia
related to the Alltel Project. In view of this development,
Sykes Asia sent each of the petitioners end-of-life
notices,16informing them of their dismissal from employment
due to the termination of the Alltel Project. Aggrieved,
petitioners filed separate complaints17 for illegal dismissal
against respondents Sykes Asia, Chuck Sykes, the
President and Chief Operating Officer of Sykes Enterprise,
Inc., and Mike Hinds and Michael Henderson, the President
and Operations Director, respectively, of Sykes Asia
(respondents), praying for reinstatement, backwages, 13th
month pay, service incentive leave pay, night shift
differential, moral and exemplary damages, and attorney’s
fees. In their complaints, petitioners alleged that their
dismissal from service was unjust as the same was effected
without substantive and procedural due process.18
In their defense,19 respondents averred that petitioners were
not regular employees but merely project-based employees,
and as such, the termination of the Alltel Project served as a
valid ground for their dismissal.20 In support of their position,
respondents noted that it was expressly indicated in
159
petitioners’ respective employment contracts that their
positions are "project-based" and thus, "co-terminus to the
project."21 Respondents further maintained that they
complied with the requirements of procedural due process
in dismissing petitioners by furnishing each of them their
notices of termination at least thirty (30) days prior to their
respective dates of dismissal.22
The LA Ruling
In a Decision23 dated June 23, 2010 the LA ruled in favor of
respondents, and accordingly, dismissed petitioners’
complaints for lack of merit.24 It found that petitioners are
merely project-based employees, as their respective
employment contracts indubitably provided for the duration
and term of their employment, as well as the specific project
to which they were assigned, i.e., the Alltel Project.25 Hence,
the LA concluded that the cessation of the Alltel Project
naturally resulted in the termination of petitioners’
employment in Sykes Asia.26 Dissatisfied, petitioners
appealed27 to the NLRC.
The NLRC Ruling
In a Decision28 dated November 15, 2010, the NLRC
modified the LA Decision, ruling that petitioners are regular
employees but were validly terminated due to
redundancy.29 Accordingly, petitioners, except Viloria and
Acosta whose complaints were dismissed without prejudice
for failure to prosecute,30 were awarded their separation pay
with interest of 12% per annum reckoned from the date of
their actual dismissal until full payment, plus attorney’s fees
amounting to 10% of the total monetary award. In addition,
the NLRC awarded nominal damages in the amount of
₱10,000.00 each to petitioners Gadia, Remo, Quesea,
Balingit, Castrence, Lapuz, and Lord for respondents’ failure
to furnish them the required written notice of termination
within the prescribed period.31
Contrary to the LA’s finding, the NLRC found that petitioners
could not be properly characterized as project-based
employees, ratiocinating that while it was made known to
petitioners that their employment would be co-terminus to
the Alltel Project, it was neither determined nor made known
to petitioners, at the time of hiring, when the said project
would end, be terminated, or be completed.32 In this
relation, the NLRC concluded that inasmuch as petitioners
had been engaged to perform activities which are necessary
or desirable in respondents’ usual business or trade of BPO,
petitioners should be deemed regular employees of Sykes
Asia.33 This notwithstanding, and in view of the cessation of
the Alltel Project, the NLRC found petitioners’ employment
with Sykes Asia to be redundant; hence, declared that they
were legally dismissed from service and were only entitled
to receive their respective separation pay.34
Respondents moved for reconsideration,35 which was,
however, denied in a Resolution36 dated May 10, 2011.
160
Unconvinced, Sykes Asia37 elevated the case to the CA on The petition is without merit.
certiorari.38
At the outset, it must be stressed that to justify the grant of
The CA Ruling the extraordinary remedy of certiorari, petitioners must
satisfactorily show that the court or quasi-judicial authority
In a Decision39 dated April 29, 2013, the CA annulled and
gravely abused the discretion conferred upon it. Grave
set aside the ruling of the NLRC, and accordingly, reinstated
abuse of discretion connotes judgment exercised in a
that of the LA.40 It held that a perusal of petitioners’
capricious and whimsical manner that is tantamount to lack
respective employment contracts readily shows that they
of jurisdiction. To be considered "grave," discretion must be
were hired exclusively for the Alltel Project and that it was
exercised in a despotic manner by reason of passion or
specifically stated therein that their employment would be
personal hostility, and must be so patent and gross as to
project-based.41 The CA further held that petitioners’
amount to an evasion of positive duty or to a virtual refusal
employment contracts need not state an actual date as to
to perform the duty enjoined by or to act at all in
when their employment would end, opining that it is enough
contemplation of law.45
that such date is determinable.42
In labor disputes, grave abuse of discretion may be ascribed
Petitioners moved for reconsideration,43 which was,
to the NLRC when, inter alia, its findings and the
however, denied in a Resolution44 dated October 3, 2013,
conclusions reached thereby are not supported by
hence, this petition.
substantial evidence. This requirement of substantial
The Issue Before the Court evidence is clearly expressed in Section 5, Rule 133 of the
Rules of Court which provides that "in cases filed before
The primordial issue for the Court’s resolution is whether or
administrative or quasi-judicial bodies, a fact may be
not the CA correctly granted respondents’ petition for deemed established if it is supported by substantial
certiorari, thereby setting aside the NLRC’s decision holding
evidence, or that amount of relevant evidence which a
that petitioners were regular employees and reinstating the
reasonable mind might accept as adequate to justify a
LA ruling that petitioners were merely project-based
conclusion."46
employees, and thus, validly dismissed from service.
Tested against these considerations, the Court finds that the
The Court’s Ruling CA correctly granted respondents’ certiorari petition before
161
it, since the NLRC gravely abused its discretion in ruling that
petitioners were regular employees of Sykes Asia when the
latter had established by substantial evidence that they
were merely project-based.
Article 29447 of the Labor Code,48 as amended,
distinguishes a project-based employee from a regular
employee as follows:
Art. 294. Regular and casual employment.—The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or
trade of the employer, except where the employment has
been fixed for a specific project or undertaking the
completion or termination of which has been determined at
the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and
the employment is for the duration of the season.
x x x x (Emphasis and underscoring supplied)
In Omni Hauling Services, Inc. v. Bon,49 the Court
extensively discussed how to determine whether an
employee may be properly deemed project-based or
regular, to wit:
A project employee is assigned to a project which begins
and ends at determined or determinable
times.1âwphi1 Unlike regular employees who may only be
dismissed for just and/or authorized causes under the Labor
Code, the services of employees who are hired as "project[-
based] employees" may be lawfully terminated at the
completion of the project.
According to jurisprudence, the principal test for determining
whether particular employees are properly characterised as
"project[-based] employees" as distinguished from "regular
employees," is whether or not the employees were assigned
to carry out a "specific project or undertaking," the duration
(and scope) of which were specified at the time they were
engaged for that project. The project could either be (1) a
particular job or undertaking that is within the regular or
usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the
other undertakings of the company; or (2) a particular job or
undertaking that is not within the regular business of the
corporation. In order to safeguard the rights of workers
against the arbitrary use of the word "project" to prevent
employees from attaining a regular status, employers
claiming that their workers are project[-based] employees
should not only prove that the duration and scope of the
employment was specified at the time they were engaged,
but also, that there was indeed a project.50 (Emphases and
underscoring supplied)
162
Verily, for an employee to be considered project-based, the
employer must show compliance with two (2) requisites,
namely that: (a) the employee was assigned to carry out a
specific project or undertaking; and (b) the duration and
scope of which were specified at the time they were
engaged for such project.
In this case, records reveal that Sykes Asia adequately
informed petitioners of their employment status at the time
of their engagement, as evidenced by the latter’s
employment contracts which similarly provide that they were
hired in connection with the Alltel Project, and that their
positions were "project-based and as such is co-terminus to
the project." In this light, the CA correctly ruled that
petitioners were indeed project-based employees,
considering that: (a) they were hired to carry out a specific
undertaking, i.e., the Alltel Project; and (b) the duration and
scope of such project were made known to them at the time
of their engagement, i.e., "co-terminus with the project."
As regards the second requisite, the CA correctly stressed
that "[t]he law and jurisprudence dictate that ‘the duration of
the undertaking begins and ends at determined or
determinable times’" while clarifying that "[t]he phrase
‘determinable times’ simply means capable of being
determined or fixed."51 In this case, Sykes Asia substantially
complied with this requisite when it expressly indicated in
petitioners’ employment contracts that their positions were
"co-terminus with the project." To the mind of the Court, this
caveat sufficiently apprised petitioners that their security of
tenure with Sykes Asia would only last as long as the Alltel
Project was subsisting. In other words, when the Alltel
Project was terminated, petitioners no longer had any
project to work on, and hence, Sykes Asia may validly
terminate them from employment. Further, the Court
likewise notes the fact that Sykes Asia duly submitted an
Establishment Employment Report52 and an Establishment
Termination Report53 to the Department of Labor and
Employment Makati-Pasay Field Office regarding the
cessation of the Alltel Project and the list of employees that
would be affected by such cessation. As correctly pointed
out by the CA, case law deems such submission as an
indication that the employment was indeed project-based.54
In sum, respondents have shown by substantial evidence
that petitioners were merely project-based employees, and
as such, their services were lawfully terminated upon the
cessation of the Alltel Project.
WHEREFORE, the petition is DENIED. Accordingly, the
Decision dated April 29, 2013 and the Resolution dated
October 3, 2013 of the Court of Appeals in CA-G.R. SP No.
120433 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 204406 February 26, 2014
163
MACARTHUR MALICDEM and HERMENIGILDO
FLORES, Petitioners,
vs.
MARULAS INDUSTRIAL CORPORATION and MIKE
MANCILLA, Respondents.
DECISION
MENDOZA, J.:
This petition for review on certiorari1 under Rule 45 of the
Rules of Court filed by Macarthur Malicdem (Malicdem) and
Hermenigildo Flores (Flores) assails the July 18, 2012
Decision2 and the November 12, 2012 Resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 1244 70,
dismissing their petition for certiorari under Rule 65 in an
action for illegal dismissal.
The Facts:
A complaint4 for illegal dismissal, separation pay, money
claims, moral and exemplary damages, and attorney's fees
was filed by petitioners Malicdem and Flores against
respondents Marulas Industrial Corporation (Marulas) and
Mike Mancilla (Mancilla), who were engaged in the business
of manufacturing sacks intended for local and export
markets.
Malicdem and Flores were first hired by Marulas as extruder
operators in 2006, as shown by their employment contracts.
They were responsible for the bagging of filament yarn, the
quality of pp yarn package and the cleanliness of the work
place area. Their employment contracts were for a period of
one (1) year. Every year thereafter, they would sign a
Resignation/Quitclaim in favor of Marulas a day after their
contracts ended, and then sign another contract for one (1)
year. Until one day, on December 16, 2010, Flores was told
not to report for work anymore after being asked to sign a
paper by Marulas' HR Head to the effect that he
acknowledged the completion of his contractual status. On
February 1, 2011, Malicdem was also terminated after
signing a similar document. Thus, both claimed to have
been illegally dismissed.
Marulas countered that their contracts showed that they
were fixed-term employees for a specific undertaking which
was to work on a particular order of a customer for a
specific period. Their severance from employment was due
to the expiration of their contracts.
On February 7, 2011, Malicdem and Flores lodged a
complaint against Marulas and Mancilla for illegal dismissal.
On July 13, 2011, the Labor Arbiter (LA) rendered a
decision5 in favor of the respondents, finding no illegal
dismissal. He ruled that Malicdem and Flores were not
terminated and that their employment naturally ceased
when their contracts expired. The LA, however, ordered
164
Marulas to pay Malicdem and Flores their respective wage ₱404 – ₱362 = ₱42
differentials, to wit:

WHEREFORE, the complaints for illegal dismissal are x 26 days x 7.03 mos. = 7,676.76
dismissed for lack of merit. Respondent Marulas Industrial
Corporation is, however, ordered to pay complainants wage
differential in the following amounts: 20,111.26

1. Macarthur Malicdem ₱20,111.2 ; and

6
2. Herminigildo Flores ₱18,440.50
2/2/07 – 6/13/08 = None
2/2/08 – 6/13/08 = 4.36 mos. None
6/14/08 – 8/27/08 = 2.47 mos.
6/14/08 – 8/27/08 = 963.30
₱377 – 362 = ₱15
8/28/08 – 6/30/10 = 11,471.20
x 26 days x 2.47 mos. = 963.30
7/1/10 – 12/16/10 = 5.50 mos.
8/28/08 – 6/30/10 = 22.06 mos.
₱404 x ₱362 = ₱42
₱382 – ₱362 = ₱20
x 26 days x 5.50 mos. = 6,006.00
x 26 days x 22.06 mos. = 11,471.20

7/1/10 – 2/2/11 = 7.03 mos. 18,440.50

All other claims are dismissed for lack of merit.

165
SO ORDERED.6
Malicdem and Flores appealed to the NLRC which partially
granted their appeal with the award of payment of 13th
month pay, service incentive leave and holiday pay for three
(3) years. The dispositive portion of its December 19, 2011
Decision7 reads:
WHEREFORE, the appeal is GRANTED IN PART. The
Decision of Labor Arbiter Raymund M. Celino, dated July
13, 2011, is MODIFIED. In addition to the award of salary
differentials, complainants should also be awarded 13th
month pay, service incentive leave and holiday pay for three
years.
SO ORDERED.8
Still, petitioners filed a motion for reconsideration, but it was
denied by the NLRC on February 29, 2011.
Aggrieved, Malicdem and Flores filed a petition for certiorari
under Rule 65 with the CA.
On July 18, 2012, the CA denied the petition,9 finding no
grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the NLRC. It ruled that the issue of
whether or not the petitioners were project employees or
regular employees was factual in nature and, thus, not
within the ambit of a petition for certiorari. Moreover, it
accorded respect and due consideration to the factual
findings of the NLRC, affirming those of the LA, as they
were supported by substantial evidence.
On the substantive issue, the CA explained that "the
repeated and successive rehiring of project employees do
not qualify them as regular employees, as length of service
is not the controlling determinant of the employment tenure
of a project employee, but whether the employment has
been fixed for a specific project or undertaking, its
completion has been determined at the time of the
engagement of the employee."10
Corollarily, considering that there was no illegal dismissal,
the CA ruled that payment of backwages, separation pay,
damages, and attorney's fees had no factual and legal
bases. Hence, they could not be awarded to the petitioners.
Aggrieved, Malicdem and Flores filed a motion for
reconsideration, but their pleas were denied in the CA
Resolution, dated November 12, 2012.
The Petition
Malicdem and Flores now come before this Court by way of
a petition for review on certiorari under Rule 45 of the Rules
of Court praying for the reversal of the CA decision
anchored on the principal argument that the appellate court
erred in affirming the NLRC decision that there was no
illegal dismissal because the petitioners’ contracts of
employment with the respondents simply expired. They
166
claim that their continuous rehiring paved the way for
their regularization and, for said reason, they could not
be terminated from their jobs without just cause.
In their Comment,11 the respondents averred that the
petitioners failed to show that the CA erred in affirming the
NLRC decision. They posit that the petitioners were
contractual employees and their rehiring did not amount to
regularization. The CA cited William Uy Construction Corp.
v. Trinidad,12 where it was held that the repeated and
successive rehiring of project employees did not qualify
them as regular employees, as length of service was not the
controlling determinant of the employment tenure of a
project employee, but whether the employment had been
fixed for a specific project or undertaking, its completion had
been determined at the time of the engagement of the
employee. The respondents add that for said reason, the
petitioners were not entitled to full backwages, separation
pay, moral and exemplary damages, and attorney’s fees.
Now, the question is whether or not the CA erred in not
finding any grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the NLRC.
The Court’s Ruling:
The Court grants the petition.
The petitioners have convincingly shown that they should be
considered regular employees and, as such, entitled to full
backwages and other entitlements.
A reading of the 2008 employment contracts,13 denominated
as "Project Employment Agreement," reveals that there was
a stipulated probationary period of six (6) months from its
commencement. It was provided therein that in the event
that they would be able to comply with the company’s
standards and criteria within such period, they shall be
reclassified as project employees with respect to the
remaining period of the effectivity of the contract.
Specifically, paragraph 3(b) of the agreement reads:
The SECOND PARTY hereby acknowledges, agrees and
understands that the nature of his/her employment is
probationary and on a project-basis. The SECOND PARTY
further acknowledges, agrees and understands that within
the effectivity of this Contract, his/her job performance will
be evaluated in accordance with the standards and criteria
explained and disclosed to him/her prior to signing of this
Contract. In the event that the SECOND PARTY is able to
comply with the said standards and criteria within the
probationary period of six month/s from commencement of
this Contract, he/she shall be reclassified as a project
employee of (o)f the FIRST PARTY with respect to the
remaining period of the effectivity of this Contract.
167
Under Article 281 of the Labor Code, however, "an
employee who is allowed to work after a probationary period
shall be considered a regular employee." When an
employer renews a contract of employment after the lapse
of the six-month probationary period, the employee thereby
becomes a regular employee. No employer is allowed to
determine indefinitely the fitness of its employees.14 While
length of time is not the controlling test for project
employment, it is vital in determining if the employee was
hired for a specific undertaking or tasked to perform
functions vital, necessary and indispensable to the usual
business of trade of the employer.15 Thus, in the earlier
case of Maraguinot, Jr. v. NLRC,16 it was ruled that a project
or work pool employee, who has been: (1) continuously, as
opposed to intermittently, rehired by the same employer for
the same tasks or nature of tasks; and (2) those tasks are
vital, necessary and indispensable to the usual business or
trade of the employer, must be deemed a regular employee.
Thus:
x x x. Lest it be misunderstood, this ruling does not mean
that simply because an employee is a project or work pool
employee even outside the construction industry, he is
deemed, ipso jure, a regular employee. All that we hold
today is that once a project or work pool employee has
been: (1) continuously, as opposed to intermittently, re-hired
by the same employer for the same tasks or nature of tasks;
and (2) these tasks are vital, necessary and indispensable
to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to
Article 280 of the Labor Code and jurisprudence. To rule
otherwise would allow circumvention of labor laws in
industries not falling within the ambit of Policy Instruction
No. 20/Department Order No. 19, hence allowing the
prevention of acquisition of tenurial security by project or
work pool employees who have already gained the status of
regular employees by the employer's conduct.1âwphi1
The test to determine whether employment is regular or not
is the reasonable connection between the particular activity
performed by the employee in relation to the usual business
or trade of the employer. If the employee has been
performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the
law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not
indispensability of that activity to the business.17
Guided by the foregoing, the Court is of the considered view
that there was clearly a deliberate intent to prevent the
regularization of the petitioners.
To begin with, there is no actual project. The only
stipulations in the contracts were the dates of their
effectivity, the duties and responsibilities of the petitioners
as extruder operators, the rights and obligations of the
parties, and the petitioners’ compensation and allowances.
168
As there was no specific project or undertaking to speak of,
the respondents cannot invoke the exception in Article 280
of the Labor Code.18 This is a clear attempt to frustrate the
regularization of the petitioners and to circumvent the law.
Next, granting that they were project employees, the
petitioners could only be considered as regular employees
as the two factors enumerated in Maraguinot, Jr., are
present in this case. It is undisputed that the petitioners
were continuously rehired by the same employer for the
same position as extruder operators. As such, they were
responsible for the operation of machines that produced the
sacks. Hence, their work was vital, necessary and
indispensable to the usual business or trade of the
employer.
In D.M. Consunji, Inc. v. Estelito Jamin19 and Liganza v.
RBL Shipyard Corporation,20 the Court reiterated the ruling
that an employment ceases to be coterminous with specific
projects when the employee is continuously rehired due to
the demands of the employer’s business and re-engaged for
many more projects without interruption.
The respondents cannot use the alleged expiration of the
employment contracts of the petitioners as a shield of their
illegal acts. The project employment contracts that the
petitioners were made to sign every year since the start of
their employment were only a stratagem to violate their
security of tenure in the company. As restated in Poseidon
Fishing v. NLRC,21 "if from the circumstances it is apparent
that periods have been imposed to preclude acquisition of
tenurial security by the employee, they should be
disregarded for being contrary to public policy."
The respondents’ invocation of William Uy Construction
Corp. v. Trinidad22 is misplaced because it is applicable only
in cases involving the tenure of project employees in the
construction industry. It is widely known that in the
construction industry, a project employee's work depends
on the availability of projects, necessarily the duration of his
employment.23 It is not permanent but coterminous with the
work to which he is assigned.24 It would be extremely
burdensome for the employer, who depends on the
availability of projects, to carry him as a permanent
employee and pay him wages even if there are no projects
for him to work on.25 The rationale behind this is that once
the project is completed it would be unjust to require the
employer to maintain these employees in their payroll. To
do so would make the employee a privileged retainer who
collects payment from his employer for work not done. This
is extremely unfair to the employers and amounts to labor
coddling at the expense of management.26"
Now that it has been clearly established that the petitioners
were regular employees, their termination is considered
illegal for lack of just or authorized causes. Under Article
279 of the Labor Code, an employee who is unjustly
dismissed from work shall be entitled to reinstatement
169
without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time
of his actual reinstatement. The law intends the award of
backwages and similar benefits to accumulate past the date
of the LA decision until the dismissed employee is actually
reinstated.
WHEREFORE, the petition is GRANTED. The assailed July
18, 2012 decision of the Court of Appeals and its November
12, 2012 Resolution in CA-G.R. SP No. 1244 70, are hereby
ANNULLED and SET ASIDE.
Accordingly, respondent Marulas Industrial Corporation is
hereby ordered to reinstate petitioners Macarthur Malicdem
and Hermenigildo Flores to their former positions without
loss of seniority rights and other privileges and to pay their
full backwages, inclusive of allowances and their other
benefits or their monetary equivalent computed from the
time their compensations were withheld from them up to the
time of their actual reinstatement plus the wage differentials
stated in the July 13, 2011 decision of the Labor Arbiter, as
modified by the December 19, 2011 NLRC decision.
SO ORDERED.
GR No. 179640, Mar 18, 2015 ]
HACIENDA CATAYWA v. ROSARIO LOREZO +
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari dated
September 28, 2007 of petitioner Hacienda Cataywa,
Manuel Villanueva, et al., (petitioners) seeking to reverse
and set aside the Resolutions, dated October 17,
2006[1] and August 10, 2007,[2] respectively, of the Court of
Appeals (CA) and the Resolution and Order, dated October
12, 2005 and March 8, 2006, respectively, of the Social
Security Commission, ordering petitioners to pay jointly and
severally all delinquent contributions, 3% penalty per month
of delayed payment and damages to respondent Rosario
Lorezo.
The antecedent facts follow:
On October 22, 2002, respondent Rosario Lorezo received,
upon inquiry, a letter from the Social Security System (SSS)
Western Visayas Group informing her that she cannot avail
of their retirement benefits since per their record she has
only paid 16 months. Such is 104 months short of the
minimum requirement of 120 months payment to be entitle
to the benefit. She was also informed that their
170
investigation of her alleged employment under employer contributions were duly paid and remitted to SSS. It was the
Hda. Cataywa could not be confirmed because Manuel late Domingo Lizares, Jr. who managed and administered
Villanueva was permanently residing in Manila and the hacienda.[5] While, Talisay Farms, Inc. filed a motion to
Joemarie Villanueva denied having managed the farm. She dismiss on the ground of lack of cause of action in the
was also advised of her options: continue paying absence of an allegation that there was an employer-
contributions as voluntary member; request for refund; leave employee relationship between Talisay Farms and
her contributions in-trust with the System, or file a petition respondent.[6]
before the Social Security Commission (SSC) so that
liabilities, if any, of her employer may be determined.[3] Consequently, the SSC rendered its Resolution dated
October 12, 2005, thus:
Aggrieved, respondent then filed her Amended Petition
dated September 30, 2003, before the SSC. She alleged
that she was employed as laborer in Hda. Cataywa
WHEREFORE, PREMISES CONSIDERED, this
managed by Jose Marie Villanueva in 1970 but was
Commission finds, and so holds, that Rosario M. Lorezo
reported to the SSS only in 1978. She alleged that SSS
was a regular employee subject to compulsory coverage of
contributions were deducted from her wages from 1970 to
Hda. Cataywa/Manuel Villanueva/ Mancy and Sons
1995, but not all were remitted to the SSS which,
Enterprises, Inc. within the period of 1970 to February 25,
subsequently, caused the rejection of her claim. She also
1990. In view thereof, the aforenamed respondents are
impleaded Talisay Farms, Inc. by virtue of its Investment
hereby ordered to pay jointly and severally, within thirty (30)
Agreement with Mancy and Sons Enterprises. She also
days from receipt hereof, all delinquent contributions within
prayed that the veil of corporate fiction be pierced since she
the proven employment period computed in accordance
alleged that Mancy and Sons Enterprises and Manuel and
with the then prevailing minimum wage (at 11 months per
Jose Marie Villanueva are one and the same.[4]
year) in the amount of P8,293.90, the 3% per month penalty
on the delayed payment of contributions in the amount of
Petitioners Manuel and Jose Villanueva refuted in their
P59,786.10 (computed as of September 9, 2005), pursuant
answer, the allegation that not all contributions of
to Section 22 of the SS Law and the damages in the amount
respondent were remitted. Petitioners alleged that all farm
of P32,356.21 for misrepresentation of the real date of
workers of Hda. Cataywa were reported and their
171
employment, pursuant to Section 24 (b) of the said statute. to wit:
-Petitioner failed to attach the following:
The SSS, on the other hand, is ordered to pay (subject to - Petition/Amended Petition filed before the SSS of
existing rules and regulations) petitioner Rosario M. Lorezo Makati City
her retirement benefit, upon the filing of the claim therefor, - Respondents' Answer filed before the SSS of Makati
and to inform this Commission of its compliance herewith. City
- Parties' respective position paper filed before the
SO ORDERED.[7] SSS of Makati City
- Parties' respective memorandum of appeal filed
before the Commission
The SSC denied petitioners' Motion for Reconsideration.
The petitioner, then, elevated the case before the CA where (Violation of Section 6, Rule 43 of the Rules of Court, in
the case was dismissed outrightly due to technicalities, thus: relation to Section 7, Rule 43 of the Rules of Court)[8]

Following the denial of petitioners' Motion for

The Court Resolved to DISMISS the instant petition on the Reconsideration of the CA, petitioner filed with this Court
basis of the following observations: the present petition stating the following grounds:

1. Signatory to the Verification failed to attach his

authority to sign for and [in] behalf of the other
Petitioners.
(Violation of Section 5, Rule 43 of the Rules of Court,
in relation to Section 7, Rule 45 of the Rules of Court)
1) THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR IN STRICTLY AND RIGIDLY
APPLYING THE TECHNICAL RULES OF PROCEDURE
AND DISMISSING THE CASE ON TECHNICALITY
WITHOUT EVALUATING THE MERITS OF THE CASE;

2. Certified true copies of pleadings and documents

2) THE [SSC] COMMITTED REVERSIBLE ERROR IN
relevant and pertinent to the petition are incomplete,
MAKING CONCLUSIONS FOUNDED ON SPECULATIONS
172
AND SURMISES NOT CONFORMING TO EVIDENCE ON the worsening problem of delay in the resolution of rival
RECORD, MAKING MANIFESTLY MISTAKEN claims and in the administration of justice. However, this
INFERENCES, AND RENDERING JUDGMENT BASED ON Court has recognized exceptions to the Rules, but only for
MISAPPREHENSION OF FACTS AND MISAPPLICATION the most compelling reasons where stubborn obedience to
OF THE LAW, RULING AND RENDERING JUDGMENT the Rules would defeat rather than serve the ends of
THAT: justice.[10]

As in the case of Obut v. Court of Appeals,[11] this Court held

a) RESPONDENT WORKED FROM 1970 TO FEBRUARY
that "judicial orders are issued to be obeyed, nonetheless a
25,1990
non-compliance is to be dealt with as the circumstances
b) PETITIONERS ARE LIABLE FOR DELINQUENT
attending the case may warrant. What should guide judicial
CONTRIBUTIONS
action is the principle that a party-litigant is to be given the
c) PETITIONERS ARE LIABLE FOR 3% PER MONTH
fullest opportunity to establish the merits of his complaint of
PENALTY
defense rather than for him to lose life, liberty, honor or
d) PETITIONERS ARE LIABLE FOR DAMAGES DUE TO
property on technicalities."[12]
MISREPRESENTATION
e) MANCY & SONS ENTERPRISES, INC. AND MANUEL
When the CA dismisses a petition outright and the petitioner
VILLANUEVA ARE ONE AND THE SAME.[9]
files a motion for the reconsideration of such dismissal,
appending thereto the requisite pleadings, documents or
The petition is partially meritorious. order/resolution, this would constitute substantial
[13]
compliance with the Revised Rules of Court. Thus, in the
Petitioners argues that the CA has been too rigid in the present case, there was substantial compliance when in
application of the rules of procedure in dismissing the their Motion for Reconsideration, they attached a secretary
appeal without evaluation of the merits. certificate giving Joemarie's authority to sign on behalf of
the corporation. Petitioners also included the necessary
This Court has emphasized that procedural rules should be attachment.[14]
treated with utmost respect and due regard, since they are
designed to facilitate the adjudication of cases to remedy At the outset, it is settled that this Court is not a trier of facts
173
and will not weigh evidence all over again.[15] However,
considering the issues raised which can be resolved on the
basis of the pleadings and documents filed, and the fact that
respondent herself has asked this Court for early resolution,
this Court deems it more practical and in the greater interest
of justice not to remand the case to the CA but, instead, to
resolve the controversy once and for all.
Petitioners are of the opinion that the SSC committed
reversible error in making conclusions founded on
speculations and surmises that respondent worked from
1970 to February 25, 1990. Petitioners argue that the SSC
did not give credence nor weight at all to the existing SSS
Form R-1A and farm bookkeeper Wilfredo Ibalobor.
Petitioners insist that after thirty long years, all the records
of the farm were already destroyed by termites and
elements, thus, they relied on the SSS Form R-1A as the
only remaining source of information available. Petitioners
also alleged that respondent was a very casual worker.
This Court disagrees.
It was settled that there is no particular form of evidence
required to Drove the existence of the employer-employee
relationship. Any competent and relevant evidence to prove
such relationship may be admitted. This may entirely be
testimonial.[16] If only documentary evidence would be
required to demonstrate the relationship, no scheming
employer would be brought before the bar of
justice.[17]Petitioners erred in insisting that, due to passage
of time, SSS Form R-1A is the only remaining source of
information available to prove when respondent started
working for them. However, such form merely reflected the
time in which the petitioners reported the respondent for
coverage of the SSS benefit. They failed to substantiate
their claim that it was only in 1978 that respondent reported
for work.
The records are bereft of any showing that Demetria
Denaga and Susano Jugue harbored any ill will against the
petitioners prompting them to execute false affidavit. There
lies no reason for this Court not to afford full faith and credit
to their testimonies. Denaga, in her Joint Affidavit with
Jugue, stated that she and respondent started working in
Hda. Cataywa in 1970 and like her, she was reported to the
SSS on December 19, 1978.[18] It was also revealed in the
records that the SSC found that Denaga was employed by
Manuel Villanueva at Hda. Cataywa from 1970 to December
1987.[19]
Jurisprudence has identified the three types of employees
mentioned in the provision[20] of the Labor Code: (1) regular
employees or those who have been engaged to perform
activities that are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or
those whose employment has been fixed for a specific
174
project or undertaking, the completion or termination of she had 16 months of contributions. It does not, in any way,
which has been determined at the time of their engagement, prove that the respondent performed a job which is not in
or those whose work or service is seasonal in nature and is connection with the business or occupation of the employer
performed for the duration of the season; and (3) casual to be considered as casual employee.
employees or those who are neither regular nor project
employees.[21] The test for regular employees to be considered as
such has been thoroughly explained in De Leon v.
NLRC,[27] viz.:
ISSUE: W/N RESPONDENT IS A REGULAR EMPLOYEE.
YES.

The primary standard, therefore, of determining a regular

Farm workers generally fall under the definition of seasonal
employment is the reasonable connection between the
employees.[22] It was also consistently held that seasonal
particular activity performed by the employee in relation
employees may be considered as regular employees when
to the usual business or trade of the employer. The test
they are called to work from time to time.[23] They are in
is whether the former is usually necessary or desirable in
regular employment because of the nature of the job, and
the usual business or trade of the employer. The connection
not because of the length of time they have worked.
can be determined by considering the nature of the work
However, seasonal workers who have worked for one
performed and its relation to the scheme of the particular
season only may not be considered regular employees.[24]
business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if the
The nature of the services performed and not the duration
performance is not continuous or merely intermittent, the
thereof, is determinative of coverage under the law.[25] To be
law deems the repeated and continuing need for its
exempted on the basis of casual employment, the services
performance as sufficient evidence of the necessity if not
must not merely be irregular, temporary or intermittent, but
indispensability of that activity to the business. Hence, the
the same must not also be in connection with the business
employment is also considered regular, but only with
or occupation of the employer.[26] Thus, it is erroneous for
respect to such activity and while such activity exists.[28]
the petitioners to conclude that the respondent was a very
casual worker simply because the SSS form revealed that
175

A reading of the records would reveal that petitioners failed
to dispute the allegation that the respondent performed
hacienda work, such as planting sugarcane point, fertilizing,
weeding, replanting dead sugarcane fields and routine
miscellaneous hacienda work.[29] They merely alleged that
respondent was a very casual worker because she only
rendered work for 16 months.[30] Thus, respondent is
considered a regular seasonal worker and not a casual
worker as the petitioners alleged.
Petitioners also assert that the sugarcane cultivation covers
only a period of six months, thus, disproving the allegation
of the respondent that she worked for 11 months a year for
25 years. This Court has classified farm workers as regular
seasonal employees who are called to work from time to
time and the nature of their relationship with the employer is
such that during the off season, they are temporarily laid off;
but reemployed during the summer season or when their
services may be needed.[31] Respondent, therefore, as a
farm worker is only a seasonal employee. Since petitioners
provided that the cultivation of sugarcane is only for six]
months, respondent cannot be considered as regular
employee during the months when there is no cultivation.
Based on the foregoing facts and evidence on record,
petitioners are liable for delinquent contributions. It being
proven by sufficient evidence that respondent started
working for the hacienda in 1970, it follows that petitioners
are liable for deficiency in the SSS contributions.
The imposition upon and payment by the delinquent
employer of the three percent (3%) penalty for the late
remittance of premium contributions is mandatory and
cannot be waived by the System. The law merely gives to
the Commission the power to prescribe the manner of
paying the premiums. Thus, the power to remit or condone
the penalty for late remittance of premium contributions is
not embraced therein.[32] Petitioners erred in alleging that
the imposition of penalty is not proper.
Petitioners also insist that the award of damages for
misrepresentation is without basis. This Court disagrees.
The law provides that should the employer misrepresent the
true date of the employment of the employee member, such
employer shall pay to the SSS damages equivalent to the
difference between the amount of benefit to which the
employee member or his beneficiary is entitled had the
proper contributions been remitted to the SSS and the
amount payable on the basis of the contributions actually
remitted. However, should the employee member or his
beneficiary is entitled to pension benefits, the damages shall
be equivalent to the accumulated pension due as of the
date of settlement of the claim or to the five years' pension,
whichever is higher, including the dependent's pension.[33]
176
 veil may be pierced only if it becomes a shield for fraud,
Lastly, petitioners aver that there is no legal basis to pierce illegality or inequity committed against a third person.[36]
the veil of corporation entity.
The Court has expressed the language of piercing doctrine
[34]
It was held in Rivera v. United Laboratories, Inc. that - when applied to alter ego cases, as follows: Where the
stock of a corporation is owned by one person whereby the
corporation functions only for the benefit of such individual
owner, the corporation and the individual should be deemed
While a corporation may exist for any lawful purpose, the
the same.[37]
law will regard it as an association of persons or, in case of
two corporations, merge them into one, when its corporate
This Court agrees with the petitioners that there is no need
legal entity is used as a cloak for fraud or illegality. This is
to pierce the corporate veil. Respondent failed to
the doctrine of piercing the veil of corporate fiction. The
substantiate her claim that Mancy and Sons Enterprises,
doctrine applies only when such corporate fiction is used to
Inc. and Manuel and Jose Marie Villanueva are one and the
defeat public convenience, justify wrong, protect fraud, or
same. She based her claim on the SSS form wherein
defend crime, or when it is made as a shield to confuse the
Manuel Villanueva appeared as employer. However, this
legitimate issues, or where a corporation is the mere alter
does not prove, in any way, that the corporation is used to
ego or business conduit of a person, or where the
defeat public convenience, justify wrong, protect fraud, or
corporation is so organized and controlled and its affairs are
defend crime, or when it is made as a shield to confuse the
so conducted as to make it merely an instrumentality,
legitimate issues, warranting that its separate and distinct
agency, conduit or adjunct of another corporation. To
personality be set aside. Also, it was not alleged nor proven
disregard the separate juridical personality of a corporation,
that Mancy and Sons Enterprises, Inc. functions only for the
the wrongdoing must be established clearly and
benefit of Manuel Villanueva, thus, one cannot be an alter
convincingly. It cannot be presumed.[35]
ego of the other.

This Court has cautioned against the inordinate application WHEREFORE, the petition for review on certiorari dated
of this doctrine, reiterating the basic rule that "the corporate September 28, 2007 of petitioners Hda. Cataywa, Manuel

177
Villanueva, et al. is hereby DENIED. Consequently, the Respondent.
resolution by the Social Security Commission is
August 3, 2010
hereby AFFIRMED with MODIFICATIONS that the
delinquent contributions should be computed as six months x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
per year of service, and the case against Manuel and Jose - - - - - - - -x
Marie Villanueva be DISMISSED.

SO ORDERED. DECISION
TUNAY NA PAGKAKAISA G.R. No. 162025
NG MANGGAGAWA
VILLARAMA, JR., J.:
SA ASIABREWERY,
Present: For resolution is an appeal by certiorari filed by petitioner
Petitioner,
under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision[1] dated November 22,
CARPIO MORALES, J., 2002 and Resolution[2] dated January 28, 2004 rendered by
the Court of Appeals (CA) in CA-G.R. SP No. 55578,
Chairperson,
- versus - granting the petition of respondent company and reversing
BRION, the Voluntary Arbitrators Decision[3] dated October 14,
1999.
BERSAMIN,
The facts are:
ABAD,* and
Respondent Asia Brewery, Inc. (ABI) is engaged in the
VILLARAMA, JR., JJ. manufacture, sale and distribution of beer, shandy, bottled
water and glass products. ABI entered into a Collective
Bargaining Agreement (CBA),[4] effective for five (5) years
ASIA BREWERY, INC., Promulgated: from August 1, 1997 to July 31, 2002, with Bisig at Lakas ng
mga Manggagawa sa Asia-Independent (BLMA-
178
INDEPENDENT), the exclusive bargaining representative of
ABIs rank-and-file employees.On October 3, 2000, ABI and
BLMA-INDEPENDENT signed a renegotiated CBA effective
from August 1, 2000 to 31 July 2003.[5]
Article I of the CBA defined the scope of the bargaining unit,
as follows:
Section 1. Recognition. The COMPANY recognizes
the UNION as the sole and exclusive bargaining
representative of all the regular rank-and-file daily paid
employees within the scope of the appropriate bargaining
unit with respect to rates of pay, hours of work and other
terms and conditions of employment. The UNION shall not
represent or accept for membership employees outside
the scope of the bargaining unit herein defined.
Section 2. Bargaining Unit. The bargaining unit shall be
comprised of all regular rank-and-file daily-paid employees
of the COMPANY. However, the following jobs/positions as
herein defined shall be excluded from the bargaining unit,
to wit:
1. Managers
2. Assistant Managers
3. Section Heads
4. Supervisors
5. Superintendents
6. Confidential and Executive Secretaries
7. Personnel, Accounting and Marketing Staff
8. Communications Personnel
9. Probationary Employees
10. Security and Fire Brigade Personnel
11. Monthly Employees
12. Purchasing and Quality Control Staff[6] [EMPHASIS
SUPPLIED.]
Subsequently, a dispute arose when ABIs management
stopped deducting union dues from eighty-one (81)
employees, believing that their membership in BLMA-
INDEPENDENT violated the CBA. Eighteen (18) of these
affected employees are QA Sampling
Inspectors/Inspectresses and Machine Gauge Technician
who formed part of the Quality Control Staff. Twenty (20)
checkers are assigned at the Materials Department of the
Administration Division, Full Goods Department of the
Brewery Division and Packaging Division. The rest are
secretaries/clerks directly under their respective division
managers.[7]
BLMA-INDEPENDENT claimed that ABIs actions restrained
the employees right to self-organization and brought the
179
matter to the grievance machinery. As the parties failed to
amicably settle the controversy, BLMA-INDEPENDENT
lodged a complaint before the National Conciliation and
Mediation Board (NCMB). The parties eventually agreed to
submit the case for arbitration to resolve the issue
of [w]hether or not there is restraint to employees in the
exercise of their right to self-organization.[8]
In his Decision, Voluntary Arbitrator Bienvenido Devera
sustained the BLMA-INDEPENDENT after finding that the
records submitted by ABI showed that the positions of the
subject employees qualify under the rank-and-file category
because their functions are merely routinary and clerical. He
noted that the positions occupied by the checkers and
secretaries/clerks in the different divisions are not
managerial or supervisory, as evident from the duties and
responsibilities assigned to them. With respect to QA
Sampling Inspectors/Inspectresses and Machine Gauge
Technician, he ruled that ABI failed to establish with
sufficient clarity their basic functions as to consider them
Quality Control Staff who were excluded from the coverage
of the CBA. Accordingly, the subject employees were
declared eligible for inclusion within the bargaining unit
represented by BLMA-INDEPENDENT.[9]
On appeal, the CA reversed the Voluntary Arbitrator, ruling
that:
WHEREFORE, foregoing premises considered, the
questioned decision of the Honorable Voluntary Arbitrator
Bienvenido De Vera is hereby REVERSED and SET
ASIDE, and A NEW ONE ENTERED DECLARING THAT:
a) the 81 employees are excluded from and are not eligible
for inclusion in the bargaining unit as defined in Section 2,
Article I of the CBA;
b) the 81 employees cannot validly become members of
respondent and/or if already members, that their
membership is violative of the CBA and that they should
disaffiliate from respondent; and
c) petitioner has not committed any act that restrained or
tended to restrain its employees in the exercise of their right
to self-organization.
NO COSTS.
SO ORDERED.[10]
BLMA-INDEPENDENT filed a motion for reconsideration. In
the meantime, a certification election was held on August
10, 2002 wherein petitioner Tunay na Pagkakaisa ng
Manggagawa sa Asia (TPMA) won. As the incumbent
bargaining representative of ABIs rank-and-file employees
claiming interest in the outcome of the case, petitioner filed
with the CA an omnibus motion for reconsideration of the
decision and intervention, with attached petition signed by
180
the union officers.[11] Both motions were denied by the
CA.[12]
The petition is anchored on the following grounds:
(1)
THE COURT OF APPEALS ERRED IN RULING THAT THE
81 EMPLOYEES ARE EXCLUDED FROM AND ARE NOT
ELIGIBLE FOR INCLUSION IN THE BARGAINING UNIT
AS DEFINED IN SECTION 2, ARTICLE 1 OF THE CBA[;]
(2)
THE COURT OF APPEALS ERRED IN HOLDING THAT
THE 81 EMPLOYEES CANNOT VALIDLY BECOME
UNION MEMBERS, THAT THEIR MEMBERSHIP IS
VIOLATIVE OF THE CBA AND THAT THEY SHOULD
DISAFFILIATE FROM RESPONDENT;
(3)
THE COURT OF APPEALS SERIOUSLY ERRED IN
HOLDING THAT PETITIONER (NOW PRIVATE
RESPONDENT) HAS NOT COMMITTED ANY ACT THAT
RESTRAINED OR TENDED TO RESTRAIN ITS
EMPLOYEES IN THE EXERCISE OF THEIR RIGHT TO
SELF-ORGANIZATION.[13]
Although Article 245 of the Labor Code limits the ineligibility
to join, form and assist any labor organization to managerial
employees, jurisprudence has extended this prohibition to
confidential employees or those who by reason of their
positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and hence, are
likewise privy to sensitive and highly confidential
records.[14] Confidential employees are thus excluded from
the rank-and-file bargaining unit. The rationale for their
separate category and disqualification to join any labor
organization is similar to the inhibition for managerial
employees because if allowed to be affiliated with a Union,
the latter might not be assured of their loyalty in view of
evident conflict of interests and the Union can also become
company-denominated with the presence of managerial
employees in the Union membership.[15] Having access to
confidential information, confidential employees may also
become the source of undue advantage. Said employees
may act as a spy or spies of either party to a collective
bargaining agreement.[16]
In Philips Industrial Development, Inc. v. NLRC,[17] this
Court held that petitioners division secretaries, all Staff of
General Management, Personnel and Industrial Relations
Department, Secretaries of Audit, EDP and Financial
Systems are confidential employees not included within the
rank-and-file bargaining unit.[18] Earlier, in Pier 8 Arrastre &
Stevedoring Services, Inc. v. Roldan-Confesor,[19] we
declared that legal secretaries who are tasked with, among
others, the typing of legal documents, memoranda and
181
 1. Abalos, Andrea A. Materials Mr. Andres G. Co
correspondence, the keeping of records and files, the giving 2. Algire, Juvy L. Materials Mr. Andres G. Co
of and receiving notices, and such other duties as required 3. Anouevo, Shirley P. Materials Mr. Andres G. Co
4. Aviso, Rosita S. Materials Mr. Andres G. Co
by the legal personnel of the corporation, fall under the 5. Barachina, Pauline C. Materials Mr. Andres G. Co
6. Briones, Catalina P. Materials Mr. Andres G. Co
category of confidential employees and hence excluded 7. Caralipio, Juanita P. Materials Mr. Andres G. Co
8. Elmido, Ma. Rebecca S. Materials Mr. Andres G. Co
from the bargaining unit composed of rank-and-file 9. Giron, Laura P. Materials Mr. Andres G. Co
employees.[20] 10. Mane, Edna A. Materials Mr. Andres G. Co

xxxx
Also considered having access to vital labor information are
C2 BREWERY DIVISION
the executive secretaries of the General Manager and the
1. Laloon, Daisy S. Brewhouse Mr. William Tan
executive secretaries of the Quality Assurance Manager,
1. Arabit, Myrna F. Bottling Production Mr. Julius Palmares
Product Development Manager, Finance Director, 2. Burgos, Adelaida D. Bottling Production Mr. Julius Palmares
3. Menil, Emmanuel S. Bottling Production Mr. Julius Palmares
Management System Manager, Human Resources 4. Nevalga, Marcelo G. Bottling Production Mr. Julius Palmares
Manager, Marketing Director, Engineering Manager,
1. Mapola, Ma. Esraliza T. Bottling Maintenance Mr. Ernesto Ang
Materials Manager and Production Manager.[21] 2. Velez, Carmelito A. Bottling Maintenance Mr. Ernesto Ang

1. Bordamonte, Rhumela D. Bottled Water Mr. Faustino Tetonche

In the present case, the CBA expressly excluded 2. Deauna, Edna R. Bottled Water Mr. Faustino Tetonche
3. Punongbayan, Marylou F. Bottled Water Mr. Faustino Tetonche
Confidential and Executive Secretaries from the rank-and- 4. Saguan, Lennie Y. Bottled Water Mr. Faustino Tetonche
file bargaining unit, for which reason ABI seeks their 1. Alcoran, Simeon A. Full Goods Mr. Tsoi Wah Tung
disaffiliation from petitioner. Petitioner, however, maintains 2. Cervantes, Ma. Sherley Y. Full Goods Mr. Tsoi Wah Tung
3. Diongco, Ma. Teresa M. Full Goods Mr. Tsoi Wah Tung
that except for Daisy Laloon, Evelyn Mabilangan and Lennie 4. Mabilangan, Evelyn M. Full Goods Mr. Tsoi Wah Tung
5. Rivera, Aurora M. Full Goods Mr. Tsoi Wah Tung
Saguan who had been promoted to monthly paid positions, 6. Salandanan, Nancy G. Full Goods Mr. Tsoi Wah Tung

the following secretaries/clerks are deemed included among 1. Magbag, Ma. Corazon C. Tank Farm/ Mr. Manuel Yu Liat
Cella Services
the rank-and-file employees of ABI:[22]
1. Capiroso, Francisca A. Quality Assurance Ms. Regina Mirasol
NAME DEPARTMENT IMMEDIATE SUPERIOR
1. Alconaba, Elvira C. Engineering Mr. Clemente Wong
C1 ADMIN DIVISION 2. Bustillo, Bernardita E. Electrical Mr. Jorge Villarosa
3. Catindig, Ruel A. Civil Works Mr. Roger Giron
1. Angeles, Cristina C. Transportation Mr. Melito K. Tan 4. Sison, Claudia B. Utilities Mr. Venancio Alconaba
2. Barraquio, Carina P. Transportation Mr. Melito K. Tan
3. Cabalo, Marivic B. Transportation Mr. Melito K. Tan xxxx
4. Fameronag, Leodigario C. Transportation Mr. Melito K. Tan
C3 PACKAGING DIVISION

182
1. Alvarez, Ma. Luningning L. GP Administration Ms. Susan Bella
2. Caiza, Alma A. GP Technical Mr. Chen Tsai Tyan
3. Cantalejo, Aida S. GP Engineering Mr. Noel Fernandez
4. Castillo, Ma. Riza R. GP Production Mr. Tsai Chen Chih
5. Lamadrid, Susana C. GP Production Mr. Robert Bautista
6. Mendoza, Jennifer L. GP Technical Mr. Mel Oa
As can be gleaned from the above listing, it is rather curious
that there would be several secretaries/clerks for just one
(1) department/division performing tasks which are mostly
routine and clerical. Respondent insisted they fall under the
Confidential and Executive Secretaries expressly excluded
by the CBA from the rank-and-file bargaining unit. However,
perusal of the job descriptions of these secretaries/clerks
reveals that their assigned duties and responsibilities
involve routine activities of recording and monitoring, and
other paper works for their respective departments while
secretarial tasks such as receiving telephone calls and filing
of office correspondence appear to have been commonly
imposed as additional duties.[23] Respondent failed to
indicate who among these numerous secretaries/clerks
have access to confidential data relating to management
policies that could give rise to potential conflict of interest
with their Union membership. Clearly, the rationale under
our previous rulings for the exclusion of executive
secretaries or division secretaries would have little or no
significance considering the lack of or very limited access to
confidential information of these secretaries/clerks. It is not
even farfetched that the job category may exist only on
paper since they are all daily-paid workers. Quite
understandably, petitioner had earlier expressed the view
that the positions were just being reclassified as these
employees actually discharged routine functions.
We thus hold that the secretaries/clerks, numbering about
forty (40), are rank-and-file employees and not confidential
employees.
With respect to the Sampling Inspectors/Inspectresses and
the Gauge Machine Technician, there seems no dispute
that they form part of the Quality Control Staff who, under
the express terms of the CBA, fall under a distinct
category. But we disagree with respondents contention that
the twenty (20) checkers are similarly confidential
employees being quality control staff entrusted with the
handling and custody of company properties and sensitive
information.
Again, the job descriptions of these checkers assigned in
the storeroom section of the Materials Department, finishing
section of the Packaging Department, and the decorating
and glass sections of the Production Department plainly
showed that they perform routine and mechanical tasks
preparatory to the delivery of the finished products.[24] While
it may be argued that quality control extends to post-
production phase -- proper packaging of the finished
products -- no evidence was presented by the respondent to
prove that these daily-paid checkers actually form part of
the companys Quality Control Staff who as such were
exposed to sensitive, vital and confidential information about
183
[companys] products or have knowledge of mixtures of the
products, their defects, and even their formulas which are
considered trade secrets. Such allegations of respondent
must be supported by evidence.[25]
Consequently, we hold that the twenty (20) checkers may
not be considered confidential employees under the
category of Quality Control Staff who were expressly
excluded from the CBA of the rank-and-file bargaining unit.
Confidential employees are defined as those who (1) assist
or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies
in the field of labor relations. The two (2) criteria are
cumulative, and both must be met if an employee is to be
considered a confidential employee that is, the confidential
relationship must exist between the employee and his
supervisor, and the supervisor must handle the prescribed
responsibilities relating to labor relations. The exclusion
from bargaining units of employees who, in the normal
course of their duties, become aware of management
policies relating to labor relations is a principal objective
sought to be accomplished by the confidential employee
rule.[26] There is no showing in this case that the
secretaries/clerks and checkers assisted or acted in a
confidential capacity to managerial employees and obtained
confidential information relating to labor relations
policies. And even assuming that they had exposure to
internal business operations of the company, respondent
claimed, this is not per se ground for their exclusion in the
bargaining unit of the daily-paid rank-and-file employees.[27]
Not being confidential employees, the secretaries/clerks and
checkers are not disqualified from membership in
the Union of respondents rank-and-file employees.
Petitioner argues that respondents act of unilaterally
stopping the deduction of union dues from these employees
constitutes unfair labor practice as it restrained the workers
exercise of their right to self-organization, as provided in
Article 248 (a) of the Labor Code.
Unfair labor practice refers to acts that violate the workers
right to organize. The prohibited acts are related to the
workers right to self organization and to the observance of a
CBA. For a charge of unfair labor practice to prosper, it
must be shown that ABI was motivated by ill will, bad faith,
or fraud, or was oppressive to labor, or done in a manner
contrary to morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings or grave
anxiety resulted x x x[28] from ABIs act in discontinuing the
union dues deduction from those employees it believed
were excluded by the CBA. Considering that the herein
dispute arose from a simple disagreement in the
interpretation of the CBA provision on excluded employees
from the bargaining unit, respondent cannot be said to have
committed unfair labor practice that restrained its
employees in the exercise of their right to self-organization,
nor have thereby demonstrated an anti-union stance.
184
WHEREFORE, the petition is GRANTED. The Decision
dated November 22, 2002 and Resolution dated January
28, 2004 of the Court of Appeals in CA-G.R. SP No. 55578
are hereby REVERSED and SET ASIDE. The checkers and
secretaries/clerks of respondent company are hereby
declared rank-and-file employees who are eligible to join
the Union of the rank-and-file employees.
No costs.
SO ORDERED.
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person
whose services it pays for is an independent contractor
rather than a regular employee with or without a fixed term.
That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the
last resort. At the very least, a competent public health
authority must certify that the disease cannot be cured
within six ( 6) months, even with appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji
Television Network, Inc., seeking the reversal of the Court
of Appeals’ Decision2 dated June 25, 2012, affirming with
modification the decision3 of the National Labor Relations
Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji
Television Network, Inc. ("Fuji") asa news
4
correspondent/producer "tasked to report Philippine news
to Fuji through its Manila Bureau field office."5 Arlene’s
employment contract initially provided for a term of one (1)
year but was successively renewed on a yearly basis with
salary adjustment upon every renewal.6 Sometime in
January 2009, Arlenewas diagnosed with lung cancer.7She
informed Fuji about her condition. In turn, the Chief of News
Agency of Fuji, Yoshiki Aoki, informed Arlene "that the
company will have a problem renewing her contract"8 since
it would be difficult for her to perform her job.9 She "insisted
that she was still fit to work as certified by her attending
physician."10
After several verbal and written communications,11 Arlene
and Fuji signed a non-renewal contract on May 5, 2009
where it was stipulated that her contract would no longer be
renewed after its expiration on May 31, 2009. The contract
also provided that the parties release each other from
liabilities and responsibilities under the employment
contract.12
185
In consideration of the non-renewal contract, Arlene
"acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May
2009, year-end bonus, mid-year bonus, and separation
pay."13 However, Arlene affixed her signature on the
nonrenewal contract with the initials "U.P." for "under
protest."14
On May 6, 2009, the day after Arlene signed the non-
renewal contract, she filed a complaint for illegal dismissal
and attorney’s fees with the National Capital Region
Arbitration Branch of the National Labor Relations
Commission. She alleged that she was forced to sign the
nonrenewal contract when Fuji came to know of her illness
and that Fuji withheld her salaries and other benefits for
March and April 2009 when she refused to sign.15
Arlene claimed that she was left with no other recourse but
to sign the non-renewal contract, and it was only upon
signing that she was given her salaries and bonuses, in
addition to separation pay equivalent to four (4) years.16
In the decision17 dated September 10, 2009, Labor Arbiter
Corazon C. Borbolla dismissed Arlene’s complaint.18Citing
Sonza v. ABS-CBN19 and applying the four-fold test, the
Labor Arbiter held that Arlene was not Fuji’s employee but
an independent contractor.20
Arlene appealed before the National Labor Relations
Commission. In its decision dated March 5, 2010, the
National Labor Relations Commission reversed the Labor
Arbiter’s decision.21 It held that Arlene was a regular
employee with respect to the activities for which she was
employed since she continuously rendered services that
were deemednecessary and desirable to Fuji’s
business.22 The National Labor Relations Commission
ordered Fuji to pay Arlene backwages, computed from the
date of her illegal dismissal.23 The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered GRANTING the instant appeal. The Decision of
the Labor Arbiter dated 19 September 2009 is hereby
REVERSED and SET ASIDE, and a new one is issued
ordering respondents-appellees to pay complainant-
appellant backwages computed from the date of her illegal
dismissal until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for
reconsideration.25 Both motions were denied by the National
Labor Relations Commission for lack of merit in the
resolution dated April 26, 2010.26 From the decision of the
National Labor Relations Commission, both parties filed
separate petitions for certiorari27 before the Court of
186
Appeals. The Court of Appeals consolidated the petitions
and considered the following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-
term contractual employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and
attorney’s fees.28
In the assailed decision, the Court of Appeals affirmed the
National Labor Relations Commission with the modification
that Fuji immediately reinstate Arlene to her position as
News Producer without loss of seniority rights, and pay her
backwages, 13th-month pay, mid-year and year-end
bonuses, sick leave and vacation leave with pay until
reinstated, moral damages, exemplary damages,
attorney’sfees, and legal interest of 12% per annum of the
total monetary awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji
Television Network, Inc. and Yoshiki Aoki is DENIED and
the petition of Arlene S. Espiritu is GRANTED. Accordingly,
the Decision dated March 5, 2010 of the National Labor
Relations Commission, 6th Division in NLRC NCR Case No.
05-06811-09 and its subsequent Resolution dated April 26,
2010 are hereby AFFIRMED with MODIFICATIONS, as
follows:
Fuji Television, Inc. is hereby ORDERED to immediately
REINSTATE Arlene S. Espiritu to her position as News
Producer without loss of seniority rights and privileges and
to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed
from May 5, 2009 (the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from
the date of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as
midyear bonus per year from the date of dismissal, until
reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-
end bonus per year from the date of dismissal, until
reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from
the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or
$1,425.00 per annum from date of dismissal, until
reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary
awards herein stated; and
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10. Legal interest of twelve percent (12%) per annum of the
total monetary awards computed from May 5, 2009, until
their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another
recomputation of the above monetary awards consistent
with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that
Arlene was a regular employee because she was engaged
to perform work that was necessary or desirable in the
business of Fuji,31 and the successive renewals of her fixed-
term contract resulted in regular employment.32
According to the Court of Appeals, Sonzadoes not apply in
order to establish that Arlene was an independent
contractor because she was not contracted on account of
any peculiar ability, special talent, or skill.33 The fact that
everything used by Arlene in her work was owned by Fuji
negated the idea of job contracting.34
The Court of Appeals also held that Arlene was illegally
dismissed because Fuji failed to comply with the
requirements of substantive and procedural due process
necessary for her dismissal since she was a regular
employee.35
The Court of Appeals found that Arlene did not sign the non-
renewal contract voluntarily and that the contract was a
mere subterfuge by Fuji to secure its position that it was her
choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her
employment.36
Fuji filed a motion for reconsideration that was denied in the
resolution37 dated December 7, 2012 for failure to raise new
matters.38
Aggrieved, Fuji filed this petition for review and argued that
the Court of Appeals erred in affirming with modification the
National Labor Relations Commission’s decision, holding
that Arlene was a regular employee and that she was
illegally dismissed. Fuji also questioned the award of
monetary claims, benefits, and damages.39
Fuji points out that Arlene was hired as a stringer, and it
informed her that she would remain one.40 She was hired as
an independent contractor as defined in Sonza.41 Fuji had
no control over her work.42 The employment contracts were
executed and renewed annually upon Arlene’s insistence to
which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and
Fuji dealt on equal terms when they negotiated and entered
into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew her fixed-
term contract as evidenced by her e-mail correspondences
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with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment
since "such employment terminated upon expiration of her
contract."46 Finally, Fuji had dealt with Arlene in good faith,
thus, she should not have been awarded damages.47
Fuji alleges that it did not need a permanent reporter since
the news reported by Arlene could easily be secured from
other entities or from the internet.48 Fuji "never controlled
the manner by which she performed her functions."49It was
Arlene who insisted that Fuji execute yearly fixed-term
contracts so that she could negotiate for annual increases in
her pay.50
Fuji points out that Arlene reported for work for only five (5)
days in February 2009, three (3) days in March 2009, and
one (1) day in April 2009.51 Despite the provision in her
employment contract that sick leaves in excess of 30 days
shall not be paid, Fuji paid Arlene her entire salary for the
months of March, April, and May; four(4) months of
separation pay; and a bonus for two and a half months for a
total of US$18,050.00.52 Despite having received the
amount of US$18,050.00, Arlene still filed a case for illegal
dismissal.53
Fuji further argues that the circumstances would show that
Arlene was not illegally dismissed. The decision tonot renew
her contract was mutually agreed upon by the parties as
indicated in Arlene’s e-mail54 dated March 11, 2009 where
she consented to the non-renewal of her contract but
refused to sign anything.55 Aoki informed Arlene in an e-
mail56 dated March 12, 2009 that she did not need to sign a
resignation letter and that Fuji would pay Arlene’s salary
and bonus until May 2009 as well as separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her
version of the non-renewal agreement that she agreed to
sign this time.58 This attached version contained a provision
that Fuji shall re-hire her if she was still interested to work
for Fuji.59 For Fuji, Arlene’s e-mail showed that she had the
power to bargain.60
Fuji then posits that the Court of Appeals erred when it held
that the elements of an employer-employee relationship are
present, particularly that of control;61 that Arlene’s
separation from employment upon the expiration of her
contract constitutes illegal dismissal;62 that Arlene is entitled
to reinstatement;63 and that Fuji is liable to Arlene for
damages and attorney’s fees.64
This petition for review on certiorari under Rule 45 was filed
on February 8, 2013.65 On February 27, 2013, Arlene filed a
manifestation66 stating that this court may not take
jurisdiction over the case since Fuji failed to authorize
Corazon E. Acerden to sign the verification.67 Fuji filed a
comment on the manifestation68 on March 9, 2013.
189
Based on the arguments of the parties, there are procedural his authority to sign the necessary pleadings, including the
and substantive issues for resolution: verification and certification against forum shopping.69

I. Whether the petition for review should be dismissed as On the other hand, Arlene points outthat the authority given
Corazon E. Acerden, the signatory of the verification and to Mr. Shuji Yano and Mr. Jin Eto in the secretary’s
certification of non forum shopping of the petition, had no certificate is only for the petition for certiorari before the
authority to sign the verification and certification on behalf of Court of Appeals.70 Fuji did not attach any board resolution
Fuji; authorizing Corazon orany other person tofile a petition for
review on certiorari with this court.71 Shuji Yano and Jin Eto
II. Whether the Court of Appeals correctly determined that
could not re-delegate the power thatwas delegated to
no grave abuse of discretion was committed by the National
them.72 In addition, the special power of attorney executed
Labor Relations Commission when it ruled that Arlene was
by Shuji Yano in favor of Corazon indicated that she was
a regular employee, not an independent contractor, and that
empowered to sign on behalf of Shuji Yano, and not on
she was illegally dismissed; and
behalf of Fuji.73
III. Whether the Court of Appeals properly modified the
The Rules of Court requires the
National Labor Relations Commission’s decision by
submission of verification and
awarding reinstatement, damages, and attorney’s fees.
certification against forum shopping
The petition should be dismissed.
Rule 7, Section 4 of the 1997 Rules of Civil Procedure
I provides the requirement of verification, while Section 5 of
the same rule provides the requirement of certification
Validity of the verification and certification against forum
against forum shopping. These sections state:
shopping
SEC. 4. Ver if ica tio n. — Except when otherwise
In its comment on Arlene’s manifestation, Fuji alleges that specifically required by law or rule, pleadings need not be
Corazon was authorized to sign the verification and
under oath, verified or accompanied by affidavit.
certification of non-forum shopping because Mr. Shuji Yano
was empowered under the secretary’s certificate to delegate

190
A pleading is verified by an affidavit that the affiant has read certification or non-compliance with any of the undertakings
the pleading and that the allegations therein are true and therein shall constitute indirect contempt ofcourt, without
correct of his knowledge and belief. prejudice to the corresponding administrative and
criminalactions. If the acts of the party or his counsel clearly
A pleading required to be verifiedwhich containsa
constitute willful and deliberate forum shopping, the same
verification based on "information and belief," or upon
shall be ground for summary dismissal with prejudice and
"knowledge, information and belief," or lacks a proper
shall constitute direct contempt, as well as a cause for
verification, shall be treated as an unsigned pleading.
administrative sanctions.
SEC. 5. Certification against forum shopping.— The plaintiff
Section 4(e) of Rule 4574 requires that petitions for review
or principal party shall certify under oath in the complaint
should "contain a sworn certification against forum shopping
orother initiatory pleading asserting a claim for relief or in a
as provided in the last paragraph of section 2, Rule 42."
sworn certification annexed thereto and simultaneously filed
Section 5 of the same rule provides that failure to comply
therewith: (a) that he has not theretofore commenced any
with any requirement in Section 4 is sufficient ground to
action or filed any claim involving the same issues in any
dismiss the petition.
court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; Effects of non-compliance
(b) if there is such other pending action or claim, a complete
Uy v. Landbank75 discussed the effect of non-compliance
statement of the present status thereof; and (c) if he should
with regard to verification and stated that:
thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five [t]he requirement regarding verification of a pleading is
(5) days therefrom to the court wherein his aforesaid formal, not jurisdictional. Such requirement is simply a
complaint or initiatory pleading has been filed. condition affecting the form of pleading, the non-compliance
of which does not necessarily render the pleading fatally
Failure to comply with the foregoing requirements shall not
defective. Verification is simply intended to secure an
be curable by mere amendment of the complaint or other
assurance that the allegations in the pleading are true and
initiatory pleading but shall be cause for the dismissal of the
correct and not the product of the imagination or a matter of
case without prejudice, unless otherwise provided, upon
speculation, and that the pleading is filed in good faith. The
motion and after hearing. The submission of a false
191
court may order the correction of the pleading if the
verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with inorder
that the ends of justice may thereby be served.76 (Citations
omitted)
Shipside Incorporated v. Court of Appeals77 cited the
discussion in Uy and differentiated its effect from non-
compliance with the requirement of certification against
forum shopping:
On the other hand, the lack of certification against forum
shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45 of the 1997
Rules of Civil Procedure provides that the failure of the
petitioner tosubmit the required documents that should
accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal
thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said
signatory is authorized to file a petition on behalf of the
corporation.78 (Emphasis supplied) Effects of substantial
compliance with the requirement of verification and
certification against forum shopping
Although the general rule is that failure to attach a
verification and certification against forum shopping isa
ground for dismissal, there are cases where this court
allowed substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola
submitted the required certification one day after filing his
electoral protest.80 This court considered the subsequent
filing as substantial compliance since the purpose of filing
the certification is to curtail forum shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña
signed the verification and certification against forum
shopping but failed to attach the board resolution indicating
her authority to sign.83 In a motion for reconsideration, LDP
Marketing attached the secretary’s certificate quoting the
board resolution that authorized Dela Peña.84 Citing
Shipside, this court deemed the belated submission as
substantial compliance since LDP Marketing complied with
the requirement; what it failed to do was to attach proof of
Dela Peña’s authority to sign.85 Havtor Management Phils.,
Inc. v. National Labor Relations Commission86 and General
Milling Corporation v. National Labor Relations
Commission87 involved petitions that were dismissed for
failure to attach any document showing that the signatory on
the verification and certification against forum-shopping was
authorized.88 In both cases, the secretary’s certificate was
attached to the motion for reconsideration.89 This court
considered the subsequent submission of proof indicating
authority to sign as substantial compliance.90 Altres v.
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Empleo91 summarized the rules on verification and
certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in
capsule form the jurisprudential pronouncements . . .
respecting non-compliance with the requirement on, or
submission of defective, verification and certification against
forum shopping:
1) A distinction must be made between non-compliance with
the requirement on or submission of defective verification,
and noncompliance with the requirement on or submission
of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect
therein does not necessarily render the pleading fatally
defective. The court may order its submission or correction
or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed
with in order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when
one who has ample knowledge to swear to the truth of the
allegations in the complaint or petition signs the verification,
and when matters alleged in the petition have been made in
good faith or are true and correct.
4) As to certification against forum shopping, non-
compliance therewith or a defect therein, unlike in
verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to
relax the Rule on the ground of "substantial compliance" or
presence of "special circumstances or compelling reasons."
5) The certification against forum shopping must be signed
by all the plaintiffs or petitioners in a case; otherwise, those
who did not sign will be dropped as parties to the case.
Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense, the
signature of only one of them inthe certification against
forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be
executed by the party-pleader, not by his counsel. If,
however, for reasonable or justifiable reasons, the party-
pleader is unable to sign, he must execute a Special Power
of Attorney designating his counsel of record to sign on his
behalf.92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be
sued through its board of directors or duly authorized
officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can
only be done by natural persons duly authorized either by
the corporate by-laws or a board resolution.93
193
In its petition for review on certiorari, Fuji attached Hideaki
Ota’s secretary’s certificate,94 authorizing Shuji Yano and
Jin Eto to represent and sign for and on behalf of Fuji.95 The
secretary’s certificate was duly authenticated96 by Sulpicio
Confiado, Consul-General of the Philippines in Japan.
Likewise attached to the petition is the special power of
attorney executed by Shuji Yano, authorizing Corazon to
sign on his behalf.97 The verification and certification against
forum shopping was signed by Corazon.98
Arlene filed the manifestation dated February 27, 2013,
arguing that the petition for review should be dismissed
because Corazon was not duly authorized to sign the
verification and certification against forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that
Corazon was properly authorized to sign. On the basis of
the secretary’s certificate, Shuji Yano was empowered to
delegate his authority.
Quoting the board resolution dated May 13, 2010, the
secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the
Court of Appeals, against Philippines’ National Labor
Relations Commission ("NLRC") and Arlene S. Espiritu,
pertaining to NLRC-NCR Case No. LAC 00-002697-09,
RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji
Television Network, Inc./Yoshiki Aoki", and participate in
any other subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of appeals in
the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are
hereby authorized, to verify and execute the certification
against nonforum shopping which may be necessary or
required to be attached to any pleading to [sic] submitted to
the Court of Appeals; and the authority to so verify and
certify for the Corporation in favor of the said persons shall
subsist and remain effective until the termination of the said
case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are
hereby authorized, to represent and appear on behalf the
[sic] Corporation in all stages of the [sic] this case and in
any other proceeding that may necessarily arise thereform
[sic], and to act in the Corporation’s name, place and stead
to determine, propose, agree, decide, do, and perform any
and all of the following:
1. The possibility of amicable settlement or of submission to
alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the
pleadings;
194
4. The possibility of obtaining stipulation or admission of
facts and documents; and
5. Such other matters as may aid in the prompt disposition
of the action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing
Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera as
his attorneys-in-fact.100 The special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with
office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088
Japan, and being the representative of Fuji TV, INc., [sic]
(evidenced by the attached Secretary’s Certificate) one of
the respondents in NLRC-NCR Case No. 05-06811-00
entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before the
Court of Appeals asC.A. G.R. S.P. No. 114867
(Consolidated with SP No. 114889) do hereby make,
constitute and appoint Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rolleraas my true and lawful attorneys-infact for
me and my name, place and stead to act and represent me
in the above-mentioned case, with special power to make
admission/s and stipulations and/or to make and submit as
well as to accept and approve compromise proposals upon
such terms and conditions and under such covenants as my
attorney-in-fact may deem fit, and to engage the services of
Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to
make, sign, execute and deliver such papers ordocuments
as may be necessary in furtherance of the power thus
granted, particularly to sign and execute the verification and
certification of non-forum shopping needed to be
filed.101 (Emphasis in the original)
In its comment102 on Arlene’s manifestation, Fuji argues that
Shuji Yano could further delegate his authority because the
board resolution empowered him to "act in the Corporation’s
name, place and stead to determine, propose, agree,
decided [sic], do and perform any and all of the following: . .
. such other matters as may aid in the prompt disposition of
the action."103 To clarify, Fuji attached a verification and
certification against forum shopping, but Arlene questions
Corazon’s authority to sign. Arlene argues that the
secretary’s certificate empowered Shuji Yano to file a
petition for certiorari before the Court of Appeals, and not a
petition for review before this court, and that since Shuji
Yano’s authority was delegated to him, he could not further
delegate such power. Moreover, Corazon was representing
Shuji Yano in his personal capacity, and not in his capacity
as representative of Fuji.
A review of the board resolution quoted in the secretary’s
certificate shows that Fuji shall "file a Petition for Certiorari
with the Court of Appeals"104 and "participate in any other
subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of appeals in
195
the appropriate venue,"105 and that Shuji Yano and Jin Eto
are authorized to represent Fuji "in any other proceeding
that may necessarily arise thereform [sic]."106 As pointed out
by Fuji, Shuji Yano and Jin Eto were also authorized to "act
in the Corporation’s name, place and stead to determine,
propose, agree, decide, do, and perform anyand all of the
following: . . . 5. Such other matters as may aid in the
prompt disposition of the action."107
Considering that the subsequent proceeding that may arise
from the petition for certiorari with the Court of Appeals is
the filing of a petition for review with this court, Fuji
substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his
authority to Corazon, Article 1892 of the Civil Code of the
Philippines states:
ART. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he shall
be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating
the person, and the person appointed was notoriously
incompetent or insolvent. All acts of the substitute appointed
against the prohibition of the principal shall be void.
The secretary’s certificate does not state that Shuji Yano is
prohibited from appointing a substitute. In fact, heis
empowered to do acts that will aid in the resolution of this
case.
This court has recognized that there are instances when
officials or employees of a corporation can sign the
verification and certification against forum shopping without
a board resolution. In Cagayan Valley Drug Corporation v.
CIR,108 it was held that:
In sum, we have held that the following officials or
employees of the company can sign the verification and
certification without need of a board resolution: (1) the
Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General
Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case.
While the above cases109 do not provide a complete listing
of authorized signatories to the verification and certification
required by the rules, the determination of the sufficiency of
the authority was done on a case to case basis. The
rationale applied in the foregoing cases is to justify the
authority of corporate officers or representatives of the
corporation to sign the verification or certificate against
forum shopping, being ‘in a position to verify the truthfulness
and correctness of the allegations in the petition.’110
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Corazon’s affidavit111 states that she is the "office manager
and resident interpreter of the Manila Bureau of Fuji
Television Network, Inc."112 and that she has "held the
position for the last twenty-three years."113
As the office manager for 23 years,Corazon can be
considered as having knowledge of all matters in Fuji’s
Manila Bureau Office and is in a position to verify "the
truthfulness and the correctness of the allegations in the
Petition."114
Thus, Fuji substantially complied with the requirements of
verification and certification against forum shopping.
Before resolving the substantive issues in this case, this
court will discuss the procedural parameters of a Rule 45
petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode
of appeal for decisions of the National Labor Relations
Commission. It merely states that "[t]he decision of the
Commission shall be final and executory after ten (10)
calendar days from receipt thereof by the parties." Being
final, it is no longer appealable. However, the finality of the
National Labor Relations Commission’s decisions does not
mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations
Commission,116 this court cited several cases117 and
rejected the notion that this court had no jurisdiction to
review decisions of the National Labor Relations
Commission. It stated that this court had the power to
review the acts of the National Labor Relations Commission
to see if it kept within its jurisdiction in deciding cases and
alsoas a form of check and balance.118 This court then
clarified that judicial review of National Labor Relations
Commission decisions shall be by way of a petition for
certiorari under Rule 65. Citing the doctrine of hierarchy of
courts, it further ruled that such petitions shall be filed
before the Court of Appeals. From the Court of Appeals, an
aggrieved party may file a petition for review on certiorari
under Rule 45.
A petition for certiorari under Rule 65 is an original action
where the issue is limited to grave abuse of discretion. As
an original action, it cannot be considered as a continuation
of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under
Rule 45 is a mode of appeal where the issue is limited to
questions of law. In labor cases, a Rule 45 petition is limited
toreviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of
discretion and deciding other jurisdictional errors of the
National Labor Relations Commission.119
197
In Odango v. National Labor Relations Commission,120 this
court explained that a petition for certiorari is an
extraordinary remedy that is "available only and restrictively
in truly exceptional cases"121 and that its sole office "is the
correction of errors of jurisdiction including commission of
grave abuse of discretion amounting to lack or excess of
jurisdiction."122 A petition for certiorari does not include a
review of findings of fact since the findings of the National
Labor Relations Commission are accorded finality.123 In
cases where the aggrieved party assails the National Labor
Relations Commission’s findings, he or she must be able to
show that the Commission "acted capriciously and
whimsically or in total disregard of evidence material to the
controversy."124
When a decision of the Court of Appeals under a Rule 65
petition is brought to this court by way of a petition for
review under Rule 45, only questions of law may be decided
upon. As held in Meralco Industrial v. National Labor
Relations Commission:125
This Court is not a trier of facts. Well-settled is the rule that
the jurisdiction of this Court ina petition for review on
certiorari under Rule 45 of the Revised Rules of Court is
limited to reviewing only errors of law, not of fact, unless the
factual findings complained of are completely devoid of
support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts.
Besides, factual findings of quasi-judicial agencies like the
NLRC, when affirmed by the Court of Appeals, are
conclusive upon the parties and binding on this Court.126
Career Philippines v. Serna,127 citing Montoya v.
Transmed,128 is instructive on the parameters of judicial
review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45
petition. In one case, we discussed the particular
parameters of a Rule 45 appeal from the CA’s Rule 65
decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the
assailed CA decision, in contrast with the review for
jurisdictional error that we undertake under Rule 65.
Furthermore, Rule 45 limits us to the review of questions of
law raised against the assailed CA decision. In ruling for
legal correctness, we have to view the CA decision in the
same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from
the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision
before it, not on the basis of whether the NLRC decision on
the merits of the case was correct. In other words, we have
to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged
before it.129 (Emphasis in the original)
198
Justice Brion’s dissenting opinion in Abott Laboratories,
PhiIippines v. Aicaraz130 discussed that in petitions for
review under Rule 45, "the Court simply determines whether
the legal correctness of the CA’s finding that the NLRC
ruling . . . had basis in fact and in Iaw."131 In this kind of
petition, the proper question to be raised is, "Did the CA
correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the
following guidelines:
If the NLRC ruling has basis in the evidence and the
applicable law and jurisprudence, then no grave abuse of
discretion exists and the CA should so declare and,
accordingly, dismiss the petition. If grave abuse of discretion
exists, then the CA must grant the petition and nullify the
NLRC ruling, entering at the same time the ruling that
isjustified under the evidence and the governing law, rules
and jurisprudence. In our Rule 45 review, this Court must
denythe petition if it finds that the CA correctly
acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive
issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered
services to Fuji. However, Fuji alleges that Arlene was an
independent contractor, while Arlene alleges that she was a
regular employee. To resolve this issue, we ascertain
whether an employer-employee relationship existed
between Fuji and Arlene.
This court has often used the four-fold test to determine the
existence of an employer-employee relationship. Under the
four-fold test, the "control test" is the most important.134 As
to how the elements in the four-fold test are proven, this
court has discussed that:
[t]here is no hard and fast rule designed to establish the
aforesaid elements. Any competent and relevant evidence
to prove the relationship may be admitted. Identification
cards, cash vouchers, social security registration,
appointment letters or employment contracts, payrolls,
organization charts, and personnel lists, serve as evidence
of employee status.135
If the facts of this case vis-à-vis the four-fold test show that
an employer-employee relationship existed, we then
determine the status of Arlene’s employment, i.e., whether
she was a regular employee. Relative to this, we shall
analyze Arlene’s fixed-term contract and determine whether
it supports her argument that she was a regular employee,
or the argument of Fuji that she was an independent
contractor. We shall scrutinize whether the nature of
199
Arlene’s work was necessary and desirable to Fuji’s
business or whether Fuji only needed the output of her
work. If the circumstances show that Arlene’s work was
necessary and desirable to Fuji, then she is presumed to be
a regular employee. The burden of proving that she was an
independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial
evidence.136 "Substantial evidence" has been defined as
"such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion."137
If Arlene was a regular employee, we then determine
whether she was illegally dismissed. In complaints for illegal
dismissal, the burden of proof is on the employee to prove
the fact of dismissal.138 Once the employee establishes the
fact of dismissal, supported by substantial evidence, the
burden of proof shifts tothe employer to show that there was
a just or authorized cause for the dismissal and that due
process was observed.139
IV
Whether the Court of Appeals correctly affirmed the
National Labor
Relations Commission’s finding that Arlene was a regular
employee
Fuji alleges that Arlene was anindependent contractor,
citing Sonza v. ABS-CBN and relying on the following facts:
(1) she was hired because of her skills; (2) her salary was
US$1,900.00, which is higher than the normal rate; (3) she
had the power to bargain with her employer; and (4) her
contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto sign
the non-renewal agreement, considering that she sent an
email with another version of the non-renewal
agreement.140 Further, she is not entitled tomoral damages
and attorney’s fees because she acted in bad faith when
she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other
benefits.141 Arlene argues that she was a regular employee
because Fuji had control and supervision over her work.
The news events that she covered were all based on the
instructions of Fuji.142 She maintains that the successive
renewal of her employment contracts for four (4) years
indicates that her work was necessary and desirable.143 In
addition, Fuji’s payment of separation pay equivalent to one
(1) month’s pay per year of service indicates that she was a
regular employee.144 To further support her argument that
she was not an independent contractor, she states that Fuji
owns the laptop computer and mini-camera that she used
for work.145 Arlene also argues that Sonza is not applicable
because she was a plain reporter for Fuji, unlike Jay Sonza
who was a news anchor, talk show host, and who enjoyed a
celebrity status.146 On her illness, Arlene points outthat it
was not a ground for her dismissal because her attending
physician certified that she was fit to work.147
200
Arlene admits that she signed the non-renewal agreement which heis employed and his employment shall continue
with quitclaim, not because she agreed to itsterms, but while such activity exist.
because she was not in a position to reject the non-renewal
This provision classifies employees into regular, project,
agreement. Further, she badly needed the salary withheld
seasonal, and casual. It further classifies regular employees
for her sustenance and medication.148 She posits that her
into two kinds: (1) those "engaged to perform activities
acceptance of separation pay does not bar filing of a
which are usually necessary or desirable in the usual
complaint for illegal dismissal.149
business or trade of the employer"; and (2) casual
Article 280 of the Labor Code provides that: employees who have "rendered at least one year of service,
whether such service is continuous or broken."
Art. 280. Regular and casual employment.The provisions of
written agreement to the contrary notwithstanding and Another classification of employees, i.e., employees with
regardless of the oral agreement of the parties, an fixed-term contracts, was recognized in Brent School, Inc. v.
employment shall be deemed to be regular where the Zamora150 where this court discussed that:
employee has been engaged to perform activities which are
Logically, the decisive determinant in the term employment
usually necessary or desirable in the usual business or
should not be the activities that the employee is called upon
trade of the employer, except where the employment has
to perform, but the day certain agreed upon by the parties
been fixed for a specific project or undertaking the
for the commencement and termination of their employment
completion or termination of which has been determined at
relationship, a day certainbeing understood to be "that
the time of the engagement of the employee or where the
which must necessarily come, although it may not be known
work or services to be performed is seasonal in nature and
when."151 (Emphasis in the original)
the employment is for the duration of the season.
This court further discussed that there are employment
An employment shall be deemed to be casual if it is not
contracts where "a fixed term is an essential and natural
covered by the preceding paragraph; Provided, That, any
appurtenance"152 such as overseas employment contracts
employee who has rendered at least one year of service,
and officers in educational institutions.153
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in

201
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on
fixed term contracts laid down in Brentin the following
manner:
Cognizant of the possibility of abuse in the utilization of fixed
term employment contracts, we emphasized in Brentthat
where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down as
contrary to public policy or morals. We thus laid down
indications or criteria under which "term employment"
cannot be said to be in circumvention of the law on security
of tenure, namely:
1) The fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force,
duress, or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating
his consent; or
2) It satisfactorily appears that the employer and the
employee dealt with each other on more or less equal terms
with no moral dominance exercised by the former or the
latter.
These indications, which must be read together, make the
Brent doctrine applicable only in a few special cases
wherein the employer and employee are on more or less in
equal footing in entering into the contract. The reason for
this is evident: whena prospective employee, on account of
special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective
employee needs less protection than the ordinary worker.
Lesser limitations on the parties’ freedom of contract are
thus required for the protection of the employee.155(Citations
omitted)
For as long as the guidelines laid down in Brentare satisfied,
this court will recognize the validity of the fixed-term
contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld
the fixedterm employment of petitioners because from the
time they were hired, they were informed that their
engagement was for a specific period. This court stated
that:
[s]imply put, petitioners were notregular employees. While
their employment as mixers, packers and machine
operators was necessary and desirable in the usual
business ofrespondent company, they were employed
temporarily only, during periods when there was heightened
demand for production. Consequently, there could have
been no illegal dismissal when their services were
202
terminated on expiration of their contracts. There was even
no need for notice of termination because they knew exactly
when their contracts would end. Contracts of employment
for a fixed period terminate on their own at the end of such
period.
Contracts of employment for a fixed period are not unlawful.
What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers
from the capricious termination of employment.157 (Citation
omitted)
Caparoso v. Court of Appeals158 upheld the validity of the
fixed-term contract of employment. Caparoso and
Quindipan were hired as delivery men for three (3) months.
At the end of the third month, they were hired on a monthly
basis. In total, they were hired for five (5) months. They filed
a complaint for illegal dismissal.159 This court ruled that
there was no evidence indicating that they were pressured
into signing the fixed-term contracts. There was likewise no
proof that their employer was engaged in hiring workers for
five (5) months onlyto prevent regularization. In the absence
of these facts, the fixed-term contracts were upheld as
valid.160 On the other hand, an independent contractor is
defined as:
. . . one who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its
own account and under one’s own responsibility according
to one’s own manner and method, free from the control and
direction of the principal in all matters connected with the
performance of the work except as to the results thereof.161
In view of the "distinct and independent business" of
independent contractors, no employer-employee
relationship exists between independent contractors and
their principals. Independent contractors are recognized
under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person for the
performance of the former’s work, the employees of the
contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
....
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the contracting-
out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations
within these types of contracting and determine who among
the parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
203
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited
and placed by such person are performing activities which
are directly related to the principal business of such
employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and
extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the
Department of Labor and Employment, a contractor is
defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put
out or farm out with a contractor the performance or
completion of a specific job, work or service within a definite
or predetermined period, regardless of whether such job,
work or service is to be performed or completed within
oroutside the premises of the principal.
This department order also states that there is a trilateral
relationship in legitimate job contracting and subcontracting
arrangements among the principal, contractor, and
employees of the contractor. There is no employer-
employee relationship between the contractor and principal
who engages the contractor’s services, but there is an
employer-employee relationship between the contractor and
workers hired to accomplish the work for the principal.162
Jurisprudence has recognized another kind of independent
contractor: individuals with unique skills and talents that set
them apart from ordinary employees. There is no trilateral
relationship in this case because the independent contractor
himself or herself performs the work for the principal. In
other words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a
columnist for the Philippine Daily Inquirer. This court ruled
that she was an independent contractor because of her
"talent, skill, experience, and her unique viewpoint as a
feminist advocate."164 In addition, the Philippine Daily
Inquirer did not have the power of control over Orozco, and
she worked at her own pleasure.165
Semblante v. Court of Appeals166 involved a
167 168
masiador and a sentenciador. This court ruled that
"petitioners performed their functions as masiadorand
sentenciador free from the direction and control of
respondents"169 and that the masiador and sentenciador
"relied mainly on their ‘expertise that is characteristic of the
cockfight gambling.’"170 Hence, no employer-employee
relationship existed.
204
Bernarte v. Philippine Basketball Association171 involved a
basketball referee. This court ruled that "a referee is an
independent contractor, whose special skills and
independent judgment are required specifically for such
position and cannot possibly be controlled by the hiring
party."172
In these cases, the workers were found to be independent
contractors because of their unique skills and talents and
the lack of control over the means and methods in the
performance of their work.
In other words, there are different kinds of independent
contractors: those engaged in legitimate job contracting and
those who have unique skills and talents that set them apart
from ordinary employees.
Since no employer-employee relationship exists between
independent contractors and their principals, their contracts
are governed by the Civil Code provisions on contracts and
other applicable laws.173
A contract is defined as "a meeting of minds between two
persons whereby one binds himself, with respect to the
other, to give something or to render some
service."174 Parties are free to stipulate on terms and
conditions in contracts as long as these "are not contrary to
law, morals, good customs, public order, or public
policy."175 This presupposes that the parties to a contract
are on equal footing. Theycan bargain on terms and
conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different
and have a higher level of regulation because they are
impressed with public interest. Article XIII, Section 3 of the
1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for
all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making
processes affecting their rights and benefits as may be
provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes,
205
including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and
employers, recognizing the right of labor to its just share in
the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and
growth.
Apart from the constitutional guarantee of protection to
labor, Article 1700 of the Civil Code states:
ART. 1700. The relations between capital and labor are not
merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on
labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and
similar subjects.
In contracts of employment, the employer and the employee
are not on equal footing. Thus, it is subject to regulatory
review by the labor tribunals and courts of law. The law
serves to equalize the unequal. The labor force is a special
class that is constitutionally protected because of the
inequality between capital and labor.176 This presupposes
that the labor force is weak. However, the level of protection
to labor should vary from case to case; otherwise, the state
might appear to be too paternalistic in affording protection to
labor. As stated in GMA Network, Inc. v. Pabriga, the ruling
in Brent applies in cases where it appears that the employer
and employee are on equal footing.177 This recognizes the
fact that not all workers are weak. To reiterate the
discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective
employee, on account of special skills or market forces, is in
a position to make demands upon the prospective
employer, such prospective employee needs less protection
than the ordinary worker. Lesser limitations on the parties’
freedom of contract are thus required for the protection of
the employee.178
The level of protection to labor mustbe determined on the
basis of the nature of the work, qualifications of the
employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s
degree cannot be said to be on equal footing witha grocery
bagger with a high school diploma. Employees who qualify
for jobs requiring special qualifications such as "[having] a
Master’s degree" or "[having] passed the licensure exam"
are different from employees who qualify for jobs that
require "[being a] high school graduate; withpleasing
personality." In these situations, it is clear that those with
special qualifications can bargain with the employer on
equal footing. Thus, the level of protection afforded to these
employees should be different.
206
Fuji’s argument that Arlene was an independent contractor
under a fixed-term contract is contradictory. Employees
under fixed-term contracts cannot be independent
contractors because in fixed-term contracts, an employer-
employee relationship exists. The test in this kind of contract
is not the necessity and desirability of the employee’s
activities, "but the day certain agreed upon by the parties for
the commencement and termination of the employment
relationship."179 For regular employees, the necessity and
desirability of their work in the usual course of the
employer’s business are the determining factors. On the
other hand, independent contractors do not have employer-
employee relationships with their principals. Hence, before
the status of employment can be determined, the existence
of an employer-employee relationship must be established.
The four-fold test180 can be used in determining whether an
employeremployee relationship exists. The elements of the
four-fold test are the following: (1) the selection and
engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control, which
is the most important element.181
The "power of control" was explained by this court in
Corporal, Sr. v. National Labor Relations Commission:182
The power to control refers to the existence of the power
and not necessarily to the actual exercise thereof, nor is it
essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the
employer has the right to wield that power.183 (Citation
omitted)
Orozco v. Court of Appeals further elucidated the meaning
of "power of control" and stated the following:
Logically, the line should be drawn between rules that
merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or
methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party
hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee
relationship unlike the second, which address both the
result and the means used to achieve it. . . .184 (Citation
omitted)
In Locsin, et al. v. Philippine Long Distance Telephone
Company,185 the "power of control" was defined as "[the]
right to control not only the end to be achieved but also the
means to be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and
Dumpit Murillo v. Court of Appeals187 in determining whether
Arlene was an independent contractor or a regular
employee.
In deciding Sonza and Dumpit-Murillo, this court used the
four-fold test. Both cases involved newscasters and
207
anchors. However, Sonza was held to be an independent In Sonza, this court ruled that ABS-CBN did not control how
contractor, while Dumpit-Murillo was held to be a regular Sonza delivered his lines, how he appeared on television, or
employee. how he sounded on radio.195 All that Sonza needed was his
talent.196 Further, "ABS-CBN could not terminate or
Comparison of the Sonza and
discipline SONZA even if the means and methods of
Dumpit-Murillo cases using
performance of his work . . . did not meet ABS-CBN’s
the four-fold test
approval."197 In Dumpit-Murillo, the duties and
Sonza was engaged by ABS-CBN in view of his "unique responsibilities enumerated in her contract was a clear
skills, talent and celebrity status not possessed by ordinary indication that ABC had control over her work.198
employees."188 His work was for radio and television
Application of the four-fold test
programs.189 On the other hand, Dumpit-Murillo was hired
by ABC as a newscaster and co-anchor.190 Sonza’s talent The Court of Appeals did not err when it relied on the ruling
fee amounted to ₱317,000.00 per month, which this court in Dumpit-Murillo and affirmed the ruling of the National
found to be a substantial amount that indicatedhe was an Labor Relations Commission finding that Arlene was a
independent contractor rather than a regular regular employee. Arlene was hired by Fuji as a news
employee. Meanwhile, Dumpit-Murillo’s monthly salary
191
producer, but there was no showing that she was hired
was ₱28,000.00, a very low amount compared to what because of unique skills that would distinguish her from
Sonza received.192 ordinary employees. Neither was there any showing that
she had a celebrity status. Her monthly salary amounting to
Sonza was unable to prove that ABS-CBN could terminate
US$1,900.00 appears tobe a substantial sum, especially if
his services apart from breach of contract. There was no
compared to her salary whenshe was still connected with
indication that he could be terminated based on just or
GMA.199 Indeed, wages may indicate whether oneis an
authorized causes under the Labor Code. In addition, ABS-
independent contractor. Wages may also indicate that an
CBN continued to pay his talent fee under their agreement,
employee is able to bargain with the employer for better
even though his programs were no longer
193
pay. However, wages should not be the conclusive factor in
broadcasted. Dumpit-Murillo was found to have
determining whether one is an employee or an independent
beenillegally dismissed by her employer when they did not
contractor.
renew her contract on her fourth year with ABC.194
208
Fuji had the power to dismiss Arlene, as provided for in nature of Arlene’s work necessary and desirable for Fuji’s
paragraph 5 of her professional employment contract.200 Her usual course of business?
contract also indicated that Fuji had control over her work
Arlene was a regular employee
because she was required to work for eight (8) hours from
with a fixed-term contract
Monday to Friday, although on flexible time.201 Sonza was
not required to work for eight (8) hours, while Dumpit-Murillo The test for determining regular employment is whether
had to be in ABC to do both on-air and off-air tasks. there is a reasonable connection between the employee’s
activities and the usual business of the employer. Article
On the power to control, Arlene alleged that Fuji gave her
280 provides that the nature of work must be "necessary or
instructions on what to report.202 Even the mode of
desirable in the usual business or trade of the employer" as
transportation in carrying out her functions was controlled by
the test for determining regular employment. As stated in
Fuji. Paragraph 6 of her contract states:
ABS-CBN Broadcasting Corporation v. Nazareno:204
6. During the travel to carry out work, if there is change of
In determining whether an employment should be
place or change of place of work, the train, bus, or public
considered regular or non-regular, the applicable test is the
transport shall be used for the trip. If the Employee uses the
reasonable connection between the particular activity
private car during the work and there is an accident the
performed by the employee in relation to the usual business
Employer shall not be responsible for the damage, which
or trade of the employer. The standard, supplied by the law
may be caused to the Employee.203
itself, is whether the work undertaken is necessary or
Thus, the Court of Appeals did not err when it upheld the desirable in the usual business or trade of the employer, a
findings of the National Labor Relations Commission that fact that can be assessed by looking into the nature of the
Arlene was not an independent contractor. services rendered and its relation to the general scheme
under which the business or trade is pursued in the usual
Having established that an employer-employee relationship
course. It is distinguished from a specific undertaking that is
existed between Fuji and Arlene, the next questions for
divorced from the normal activities required incarrying on
resolution are the following: Did the Court of Appeals
the particular business or trade.205
correctly affirm the National Labor Relations Commission
that Arlene had become a regular employee? Was the

209
However, there may be a situation where an employee’s
work is necessary but is not always desirable inthe usual
course of business of the employer. In this situation, there is
no regular employment.
In San Miguel Corporation v. National Labor Relations
Commission,206 Francisco de Guzman was hired to repair
furnaces at San Miguel Corporation’s Manila glass plant. He
had a separate contract for every furnace that he repaired.
He filed a complaint for illegal dismissal three (3) years after
the end of his last contract.207 In ruling that de Guzman did
not attain the status of a regular employee, this court
explained:
Note that the plant where private respondent was employed
for only seven months is engaged in the manufacture of
glass, an integral component of the packaging and
manufacturing business of petitioner. The process of
manufacturing glass requires a furnace, which has a limited
operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said
activity is not regularly performed. Said furnaces are to be
repaired or overhauled only in case of need and after being
used continuously for a varying period of five (5) to ten (10)
years. In 1990, one of the furnaces of petitioner required
repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass.
For this purpose, petitioner must hire workers to undertake
the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project
that was not within the regular business of the corporation.
For petitioner is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity
therefor arose only when a particular furnace reached the
end of its life or operating cycle. Or, as in the second
undertaking, when a particular furnace required an
emergency repair. In other words, the undertakings where
private respondent was hired primarily as helper/bricklayer
have specified goals and purposes which are fulfilled once
the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct
from the usual, ordinary or regular business operations of
petitioner, which is glass manufacturing. These
undertakings, the duration and scope of which had been
determined and made known to private respondent at the
time of his employment, clearly indicated the nature of his
employment as a project employee.208
Fuji is engaged in the business of broadcasting,209 including
news programming.210 It is based in Japan211 and has
overseas offices to cover international news.212
Based on the record, Fuji’s Manila Bureau Office is a small
unit213 and has a few employees.214 As such, Arlene had to
do all activities related to news gathering. Although Fuji
210
insists that Arlene was a stringer, it alleges that her
designation was "News Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and]
work[s] with reporters in the field planning and gathering
information. . . ."216 Arlene’s tasks included "[m]onitoring and
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in
front of a video camera,"217 "the timely submission of news
and current events reports pertaining to the Philippines[,]
and traveling [sic] to [Fuji’s] regional office in
Thailand."218 She also had to report for work in Fuji’s office
in Manila from Mondays to Fridays, eight (8) hours per
day.219 She had no equipment and had to use the facilities
of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National
Labor Relations Commission that the successive renewals
of Arlene’s contract indicated the necessity and desirability
of her work in the usual course of Fuji’s business. Because
of this, Arlene had become a regular employee with the right
to security of tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or
news producer for its Manila Bureau. She was hired for the
primary purpose of news gathering and reporting to the
television network’s headquarters. Espiritu was not
contracted on account of any peculiar ability or special
talent and skill that she may possess which the network
desires to make use of. Parenthetically, ifit were true that
Espiritu is an independent contractor, as claimed by Fuji,
the factthat everything that she uses to perform her job is
owned by the company including the laptop computer and
mini camera discounts the idea of job contracting.221
Moreover, the Court of Appeals explained that Fuji’s
argument that no employer-employee relationship existed in
view of the fixed-term contract does not persuade because
fixed-term contracts of employment are strictly
222
construed. Further, the pieces of equipment Arlene used
were all owned by Fuji, showing that she was a regular
employee and not an independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which
involved fixed-term contracts that were successively
renewed for four (4) years.224 This court held that "[t]his
repeated engagement under contract of hire is indicative of
the necessity and desirability of the petitioner’s work in
private respondent ABC’s business."225
With regard to Fuji’s argument that Arlene’s contract was for
a fixed term, the Court of Appeals cited Philips
Semiconductors, Inc. v. Fadriquela226 and held that where
an employee’s contract "had been continuously extended or
renewed to the same position, with the same duties and
remained in the employ without any interruption,"227 then
such employee is a regular employee. The continuous
renewal is a scheme to prevent regularization. On this
basis, the Court of Appeals ruled in favor of Arlene.
211
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and
prescribed by law and not by what the parties say it should
be. Equally important to consider is that a contract of
employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions
of applicable statutes are deemed written into the contract,
and the parties are not at liberty to insulate themselves and
their relationships from the impact of labor laws and
regulations by simply contracting with each
229
other. (Citations omitted)
Arlene’s contract indicating a fixed term did not
automatically mean that she could never be a regular
employee. This is precisely what Article 280 seeks to avoid.
The ruling in Brent remains as the exception rather than the
general rule.
Further, an employee can be a regular employee with a
fixed-term contract. The law does not preclude the
possibility that a regular employee may opt to have a fixed-
term contract for valid reasons. This was recognized in
Brent: For as long as it was the employee who requested, or
bargained, that the contract have a "definite date of
termination," or that the fixed-term contract be freely entered
into by the employer and the employee, then the validity of
the fixed-term contract will be upheld.230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal
dismissal
Fuji argues that the Court of Appeals erred when it held that
Arlene was illegally dismissed, in view of the non-renewal
contract voluntarily executed by the parties. Fuji also argues
that Arlene’s contract merely expired; hence, she was not
illegally dismissed.231
Arlene alleges that she had no choice but to sign the non-
renewal contract because Fuji withheldher salary and
benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s
contract merely expired and that she voluntarily agreed not
to renew the same. Even a cursory perusal of the subject
Non-Renewal Contract readily shows that the same was
signed by Espiritu under protest. What is apparent is that
the Non-Renewal Contract was crafted merely as a
subterfuge to secure Fuji’s position that it was Espiritu’s
choice not to renew her contract.232
As a regular employee, Arlene was entitled to security of
tenure and could be dismissed only for just or authorized
causes and after the observance of due process.
212
The right to security of tenureis guaranteed under Article
XIII, Section 3 of the 1987 Constitution: ARTICLE XIII.
SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making
processes affecting their rights and benefits as may be
provided by law.
Article 279 of the Labor Code also provides for the right to
security of tenure and states the following:
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 of when authorized by this
Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time of his
actual reinstatement.
Thus, on the right to security of tenure, no employee shall
be dismissed, unless there are just orauthorized causes and
only after compliance with procedural and substantive due
process is conducted.
Even probationary employees are entitled to the right to
security of tenure. This was explained in Philippine Daily
Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period,
probationary employees are still entitled to security of
tenure. It is expressly provided in the afore-quoted Article
281 that a probationary employee may be terminated only
on two grounds: (a) for just cause, or (b) when he fails to
qualify as a regular employee in accordance with
reasonable standards made known by the employer to the
employee at the time of his engagement.234 (Citation
omitted)
The expiration of Arlene’s contract does not negate the
finding of illegal dismissal by Fuji. The manner by which Fuji
informed Arlene that her contract would no longer be
renewed is tantamount to constructive dismissal. To make
matters worse, Arlene was asked to sign a letter of
resignation prepared by Fuji.235 The existence of a fixed-
term contract should not mean that there can be no illegal
213
dismissal. Due process must still be observed in the pre-
termination of fixed-term contracts of employment.
In addition, the Court of Appeals and the National Labor
Relations Commission found that Arlene was dismissed
because of her health condition. In the non-renewal
agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing
chemotherapy which prevents her from continuing to
effectively perform her functions under the said Contract
such as the timely submission of news and current events
reports pertaining to the Philippines and travelling [sic] to
the FIRST PARTY’s regional office in
236
Thailand. (Emphasis supplied)
Disease as a ground for termination is recognized under
Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer
may terminate the services of an employee who has been
found to be suffering from any disease and whose
continued employment is prohibited by law or is prejudicial
to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at
least one (1) month salary or to one-half (1/2) month salary
for every year of service, whichever is greater, a fraction of
at least six (6) months being considered as one (1) whole
year.
Book VI, Rule 1, Section 8 of the Omnibus Rules
Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where the
employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his
healthor to the health of his coemployees, the employer
shall not terminate his employment unless there is a
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 proper
medical treatment. If the disease or ailment can be cured
within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The
employer shall reinstate such employee to his former
position immediately upon the restoration of his normal
health.
For dismissal under Article 284 to bevalid, two requirements
must be complied with: (1) the employee’s disease cannot
be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health
as well as to the health of his co-employees"; and (2)
certification issued by a competent public health authority
that even with proper medical treatment, the disease cannot
be cured within six (6) months.237 The burden of proving
compliance with these requisites is on the
238
employer. Noncompliance leads to the conclusion that the
dismissal was illegal.239
214
There is no evidence showing that Arlene was accorded
due process. After informing her employer of her lung
cancer, she was not given the chance to present medical
certificates. Fuji immediately concluded that Arlene could no
longer perform her duties because of chemotherapy. It did
not ask her how her condition would affect her work. Neither
did it suggest for her to take a leave, even though she was
entitled to sick leaves. Worse, it did not present any
certificate from a competent public health authority. What
Fuji did was to inform her thather contract would no longer
be renewed, and when she did not agree, her salary was
withheld. Thus, the Court of Appeals correctly upheld the
finding of the National Labor Relations Commission that for
failure of Fuji to comply with due process, Arlene was
illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s
fees
The National Labor Relations Commission awarded
separation pay in lieu of reinstatement, on the ground that
the filing of the complaint for illegal dismissal may have
seriously strained relations between the parties. Backwages
were also awarded, to be computed from date of dismissal
until the finality of the National Labor Relations
Commission’s decision. However, only backwages were
included in the dispositive portion because the National
Labor Relations Commission recognized that Arlene had
received separation pay in the amount of US$7,600.00. The
Court of Appeals affirmed the National Labor Relations
Commission’s decision but modified it by awarding moral
and exemplary damages and attorney’s fees, and all other
benefits Arlene was entitled to under her contract with Fuji.
The Court of Appeals also ordered reinstatement, reasoning
that the grounds when separation pay was awarded in lieu
of reinstatement were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment,
the employer shall not terminate the services of an
employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time of his
actual reinstatement. (Emphasis supplied)
The Court of Appeals’ modification of the National Labor
Relations Commission’s decision was proper because the
law itself provides that illegally dismissed employees are
215
entitled to reinstatement, backwages including allowances,
and all other benefits.
On reinstatement, the National Labor Relations Commission
ordered payment of separation pay in lieu of reinstatement,
reasoning "that the filing of the instant suit may have
seriously abraded the relationship of the parties so as to
render reinstatement impractical."242 The Court of Appeals
reversed this and ordered reinstatement on the ground that
separation pay in lieu of reinstatement is allowed only in
several instances such as (1) when the employer has
ceased operations; (2) when the employee’s position is no
longer available; (3) strained relations; and (4) a substantial
period has lapsed from date of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is
instructive:
Well-entrenched is the rule that an illegally dismissed
employee is entitled to reinstatement as a matter of right. . .
. why quitclaims are commonly frowned upon as contrary to
To protect labor’s security of tenure, we emphasize that the
doctrine of "strained relations" should be strictly applied so
as not to deprive an illegally dismissed employee of his right
to reinstatement. Every labor dispute almost always results
in "strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed
employee can never be reinstated.245 (Citations omitted)
The Court of Appeals reasoned that strained relations are a
question of fact that must be supported by evidence.246No
evidence was presented by Fuji to prove that reinstatement
was no longer feasible. Fuji did not allege that it ceased
operations or that Arlene’s position was no longer available.
Nothing in the records shows that Arlene’s reinstatement
would cause an atmosphere of antagonism in the
workplace. Arlene filed her complaint in 2009. Five (5) years
are not yet a substantial period247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is
notentitled to the award of damages and attorney’s fees
because the non-renewal agreement contained a quitclaim,
which Arlene signed. Quitclaims in labor cases do not bar
illegally dismissed employees from filing labor complaints
and money claim. As explained by Arlene, she signed the
non-renewal agreement out of necessity. In Land and
Housing Development Corporation v. Esquillo,248 this court
explained: We have heretofore explained that the reason
public policy, and why they are held to be ineffective to bar
claims for the full measure of the workers’ legal rights, is the
fact that the employer and the employee obviously do not
stand on the same footing. The employer drove the
employee to the wall. The latter must have to get holdof
money. Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no position to
216
resist money proffered. His, then, is a case of adherence,
not of choice.249
With regard to the Court of Appeals’ award of moral and
exemplary damages and attorney’s fees, this court has
recognized in several cases that moral damages are
awarded "when the dismissal is attended by bad faith or
fraud or constitutes an act oppressive to labor, or is done in
a manner contrary to good morals, good customs or public
policy."250 On the other hand, exemplary damages may be
awarded when the dismissal was effected "in a wanton,
oppressive or malevolent manner."251
The Court of Appeals and National Labor Relations
Commission found that after Arlene had informed Fuji of her
cancer, she was informed that there would be problems in
renewing her contract on account of her condition. This
information caused Arlene mental anguish, serious anxiety,
and wounded feelings that can be gleaned from the tenor of
her email dated March 11, 2009. A portion of her email
reads:
I WAS SO SURPRISED . . . that at a time when I am at my
lowest, being sick and very weak, you suddenly came to
deliver to me the NEWS that you will no longer renew my
contract.1awp++i1 I knew this will come but I never thought
that you will be so ‘heartless’ and insensitive to deliver that
news just a month after I informed you that I am sick. I was
asking for patience and understanding and your response
was not to RENEW my contract.252
Apart from Arlene’s illegal dismissal, the manner of her
dismissal was effected in an oppressive approach withher
salary and other benefits being withheld until May 5, 2009,
when she had no other choice but to sign the non-renewal
contract. Thus, there was legal basis for the Court of
Appeals to modify the National Labor Relations
Commission’s decision.
However, Arlene receivedher salary for May
2009.253 Considering that the date of her illegal dismissal
was May 5, 2009,254 this amount may be subtracted from
the total monetary award. With regard to the award of
attorney’s fees, Article 111 of the Labor Code states that
"[i]n cases of unlawful withholding of wages, the culpable
party may be assessed attorney’s fees equivalent to ten
percent of the amount of wages recovered." Likewise, this
court has recognized that "in actions for recovery of wages
or where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of
attorney’s fees is legallyand morally justifiable."255 Due to
her illegal dismissal, Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of
Appeals awarded legal interest at the rate of 12% per
annum.256 In view of this court’s ruling in Nacar v. Gallery
217
Frames,257 the legal interest shall be reducd to a rate of 6%
per annum from July 1, 2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court
of Appeals decision dated June 25, 2012 is AFFIRMED with
the modification that backwages shall be computed from
June 2009. Legal interest shall be computed at the rate of
6% per annum of the total monetary award from date of
finality of this decision until full satisfaction.
SO ORDERED.
G.R. No. 146408 February 29, 2008
PHILIPPINE AIRLINES, INC., petitioner,
vs.
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE,
JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL,
RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M.
CAPIN, RAMEL BERNARDES, LORENZO BUTANAS,
BENSON CARESUSA, JEFFREY LLENOS, ROQUE
PILAPIL, ANTONIO M. PAREJA, CLEMENTE R.
LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO,
CHERRIE ALEGRES, BENEDICTO AUXTERO,
EDUARDO MAGDADARAUG, NELSON M. DULCE, and
ALLAN BENTUZAL, respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy
Services Corporation (Synergy) as Contractor, entered into
an Agreement1 on July 15, 1991 whereby Synergy
undertook to "provide loading, unloading, delivery of
baggage and cargo and other related services to and from
[petitioner]'s aircraft at the Mactan Station."2
The Agreement specified the following "Scope of Services"
of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital,
workers, loading, unloading and delivery materials, facilities,
supplies, equipment and tools for the satisfactory
performance and execution of the following services (the
Work):
a. Loading and unloading of baggage and cargo to and from
the aircraft;
b. Delivering of baggage from the ramp to the baggage
claim area;
c. Picking up of baggage from the baggage sorting area to
the designated parked aircraft;
d. Delivering of cargo unloaded from the flight to cargo
terminal;
218
e. Other related jobs (but not janitorial functions) as may be
required and necessary;
CONTRACTOR shall perform and execute the
aforementioned Work at the following areas located at
Mactan Station, to wit:
a. Ramp Area
b. Baggage Claim Area
c. Cargo Terminal Area, and
d. Baggage Sorting Area3 (Underscoring supplied)
And it expressly provided that Synergy was "an independent
contractor and . . . that there w[ould] be no employer-
employee relationship between CONTRACTOR and/or its
employees on the one hand, and OWNER, on the other."4
On the duration of the Agreement, Section 10 thereof
provided:
10. 1 Should at any time OWNER find the services herein
undertaken by CONTRACTOR to be unsatisfactory, it shall
notify CONTRACTOR who shall have fifteen (15) days from
such notice within which to improve the services. If
CONTRACTOR fails to improve the services under this
Agreement according to OWNER'S specifications and
standards, OWNER shall have the right to terminate this
Agreement immediately and without advance notice.
10.2 Should CONTRACTOR fail to improve the
services within the period stated above or should
CONTRACTOR breach the terms of this Agreement and fail
or refuse to perform the Work in such a manner as will be
consistent with the achievement of the result therein
contracted for or in any other way fail to comply strictly with
any terms of this Agreement, OWNER at its option, shall
have the right to terminate this Agreement and to make
other arrangements for having said Work performed and
pursuant thereto shall retain so much of the money held on
the Agreement as is necessary to cover the OWNER's costs
and damages, without prejudice to the right of OWNER to
seek resort to the bond furnished by CONTRACTOR should
the money in OWNER's possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest
of the respondents, who appear to have been assigned by
Synergy to petitioner following the execution of the July 15,
1991 Agreement, filed on March 3, 1992 complaints before
the NLRC Regional Office VII at Cebu City against
petitioner, Synergy and their respective officials
for underpayment, non-payment of premium pay for
holidays, premium pay for rest days, service incentive leave
pay, 13th month pay and allowances, and for regularization
of employment status with petitioner, they claiming to be
"performing duties for the benefit of [petitioner] since their
job is directly connected with [its] business x x x."5
219
Respondent Auxtero had initially filed a complaint against
petitioner and Synergy and their respective officials for
regularization of his employment status. Later alleging that
he was, without valid ground, verbally dismissed, he filed a
complaint against petitioner and Synergy and their
respective officials for illegal dismissal and reinstatement
with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador
Almirante found Synergy an independent contractor and
dismissed respondents' complaint for regularization against
petitioner, but granted their money claims. The fallo of the
decision reads:
WHEREFORE, foregoing premises considered, judgment is
hereby rendered as follows:
(1) Ordering respondents PAL and Synergy jointly and
severally to pay all the complainants herein their 13thmonth
pay and service incentive leave benefits;
xxxx
(3) Ordering respondent Synergy to pay complainant
Benedicto Auxtero a financial assistance in the amount of
P5,000.00.
The awards hereinabove enumerated in the aggregate total
amount of THREE HUNDRED TWENTY-TWO THOUSAND
THREE HUNDRED FIFTY NINE PESOS AND EIGHTY
SEVEN CENTAVOS (P322,359.87) are computed in detail
by our Fiscal Examiner which computation is hereto
attached to form part of this decision.
The rest of the claims are hereby ordered dismissed for lack
of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division,
Cebu City, vacated and set aside the decision of the Labor
Arbiter by Decision9 of January 5, 1996, the fallo of which
reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador
A. Almirante, dated August 29, 1994, is hereby VACATED
and SET ASIDE and judgment is hereby rendered:
1. Declaring respondent Synergy Services Corporation to be
a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to accept, as its
regular employees, all the complainants, . . . and to give
each of them the salaries, allowances and other
employment benefits and privileges of a regular
employee under the Collective Bargaining Agreement
subsisting during the period of their employment;
xxxx
4. Declaring the dismissal of complainant Benedicto
Auxtero to be illegal and ordering his reinstatement as
220
helper or utility man with respondent Philippine Airlines, with II.
full backwages, allowances and other benefits and
. . . IN AFFIRMING THE RULING OF THE NATIONAL
privileges from the time of his dismissal up to his actual
LABOR RELATIONS COMMISSION ORDERING THE
reinstatement; and
REINSTATEMENT OF RESPONDENT AUXTERO
5. Dismissing the appeal of respondent Synergy Services DESPITE THE ABSENCE [OF] ANY FACTUAL FINDINGIN
Corporation, for lack of merit.10 (Emphasis and underscoring THE DECISION THAT PETITIONER ILLEGALLY
supplied) TERMINATED HIS EMPLOYMENT.

Only petitioner assailed the NLRC decision via petition for III.
certiorari before this Court.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND
By Resolution11 of January 25, 1999, this Court referred the GRAVE ERROR IN UPHOLDING THE DECISION OF THE
case to the Court of Appeals for appropriate action and NATIONAL LABOR RELATIONS COMMISSION WHICH
disposition, conformably with St. Martin Funeral Homes v. COMPELLED THE PETITIONER TO EMPLOY THE
National Labor Relations Commission which was RESPONDENTS AS REGULAR EMPLOYEES DESPITE
promulgated on September 16, 1998. THE FACT THAT THEIR SERVICES ARE IN EXCESS OF
PETITIONER COMPANY'S OPERATIONAL
The appellate court, by Decision of September 29, 2000, 14
REQUIREMENTS. (Underscoring supplied)
affirmed the Decision of the NLRC.12 Petitioner's motion for
reconsideration having been denied by Resolution of Petitioner argues that the law does not prohibit an employer
December 21, 2000,13 the present petition was filed, faulting from engaging an independent contractor, like Synergy,
the appellate court which has substantial capital in carrying on an independent
business of contracting, to perform specific jobs.
I.
Petitioner further argues that its contracting out to Synergy
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS
various services like janitorial, aircraft cleaning, baggage-
COMMISSION DECISION WHICH IMPOSED THE
handling, etc., which are directly related to its business,
RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN
does not make respondents its employees.
PETITIONER AND THE RESPONDENTS HEREIN.

221
Petitioner furthermore argues that none of the four (4)
elements of an employer-employee relationship between
petitioner and respondents, viz: selection and engagement
of an employee, payment of wages, power of dismissal, and
the power to control employee's conduct, is present in the
case.15
Finally, petitioner avers that reinstatement of respondents
had been rendered impossible because it had reduced its
personnel due to heavy losses as it had in fact terminated
its service agreement with Synergy effective June 30,
199816 as a cost-saving measure.
The decision of the case hinges on a determination of
whether Synergy is a mere job-only contractor or a
legitimate contractor. If Synergy is found to be a mere job-
only contractor, respondents could be considered as regular
employees of petitioner as Synergy would then be a mere
agent of petitioner in which case respondents would be
entitled to all the benefits granted to petitioner's regular
employees; otherwise, if Synergy is found to be a legitimate
contractor, respondents' claims against petitioner must fail
as they would then be considered employees of Synergy.
The statutory basis of legitimate contracting or
subcontracting is provided in Article 106 of the Labor Code
which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. -
Whenever an employer enters into a contract with another
person for the performance of the former's work, the
employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the
rights of workers established under the Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these types of
contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code,
to prevent any violation or circumvention of any provision of
this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial
capital or investment in the form of tools, equipment,
222
machineries, work premises, among others, AND the
workers recruited and placed by such person
are performing activities which are directly related to
the principal business of such employer. In such
cases, the person or intermediary shall be
considered merely as an agent of the employer who
shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by
him. (Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are
defined in Department Order (D.O.) No. 18-02, Series of
2002 (Rules Implementing Articles 106 to 109 of the Labor
Code, as amended) as follows:
Section 3. Trilateral relationship in contracting
arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment
between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job
or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently
undertake the performance of the job, work or service,
and the contractual workersengaged by the contractor or
subcontractor to accomplish the job, work or service.
(Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-
only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work
or service for a principal, and any of the following elements
are [sic] present:
(i) The contractor or subcontractor does not have
substantial capital or investment which relates to the job,
work or service to be performed and the employees
recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly
related to the main business of the principal; OR
(ii) The contractor does not exercise the right to control
over the performance of the work of the contractual
employee. (Emphasis, underscoring and capitalization
supplied)
"Substantial capital or investment" and the "right to control"
are defined in the same Section 5 of the Department Order
as follows:
"Substantial capital or investment" refers to capital stocks
and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries
and work premises, actually and directly used by the
223
contractor or subcontractor in the performance or
completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the
person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved,
but also the manner and means to be used in reaching that
end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work
performed by almost all of the respondents - loading and
unloading of baggage and cargo of passengers - is directly
related to the main business of petitioner. And the
equipment used by respondents as station loaders, such as
trailers and conveyors, are owned by petitioner.17
Petitioner asserts, however, that mere compliance with
substantial capital requirement suffices for Synergy to be
considered a legitimate contractor, citing Neri v. National
Labor Relations Commission.18 Petitioner's reliance on said
case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined
that Building Care Corporation had a capital stock of P1
million fully subscribed and paid for.19 The corporation's
status as independent contractor had in fact been previously
confirmed in an earlier case20 by this Court which found it to
be serving, among others, a university, an international
bank, a big local bank, a hospital center, government
agencies, etc."
In stark contrast to the case at bar, while petitioner
steadfastly asserted before the Labor Arbiter and the NLRC
that Synergy has a substantial capital to engage in
legitimate contracting, it failed to present evidence thereon.
As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page
5 of his decision that respondent SYNERGY has substantial
capital, but there is no showing in the records as to how
much is that capital. Neither had respondents shown that
SYNERGY has such substantial capital. x x
21
x (Underscoring supplied)
It was only after the appellate court rendered its challenged
Decision of September 29, 2002 when petitioner, in its
Motion for Reconsideration of the decision, sought to prove,
for the first time, Synergy's substantial capitalization by
attaching photocopies of Synergy's financial statements,
e.g., balance sheets, statements of income and retained
earnings, marked as "Annexes 'A' - 'A-4.'"22
More significantly, however, is that respondents worked
alongside petitioner's regular employees who were
performing identical work.23 As San Miguel Corporation v.
Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25teach,
such is an indicium of labor-only contracting.
224
For labor-only contracting to exist, Section 5 of D.O. No. 18-
02 which requires any of two elements to be present is, for
convenience, re-quoted:
(i) The contractor or subcontractor does not
have substantial capital or investment which relates to
the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly
related to the main business of the principal, OR
(ii) The contractor does not exercise the right to
control over the performance of the work of the contractual
employee. (Emphasis and CAPITALIZATION supplied)
Even if only one of the two elements is present then, there
is labor-only contracting.
The control test element under the immediately-quoted
paragraph (ii), which was not present in the old
Implementing Rules (Department Order No. 10, Series of
1997),26 echoes the prevailing jurisprudential
trend27elevating such element as a primary determinant of
employer-employee relationship in job contracting
agreements.
One who claims to be an independent contractor has to
prove that he contracted to do the work according to his
own methods and without being subject to the employer's
control except only as to the results.28
While petitioner claimed that it was Synergy's supervisors
who actually supervised respondents, it failed to present
evidence thereon. It did not even identify who were the
Synergy supervisors assigned at the workplace.
Even the parties' Agreement does not lend support to
petitioner's claim, thus:
Section
6. Qualified and Experienced Worker: Owner's Right to Dis
miss Workers.
CONTRACTOR shall employ capable and experienced
workers and foremen to carry out the loading, unloading and
delivery Work as well as provide all equipment, loading,
unloading and delivery equipment, materials, supplies and
tools necessary for the performance of the Work.
CONTRACTOR shall upon OWNER'S request furnish the
latter with information regarding the qualifications of the
former's workers, to prove their capability and
experience. Contractor shall require all its workers,
employees, suppliers and visitors to comply with
OWNER'S rules, regulations, procedures and directives
relative to the safety and security of OWNER'S
premises, properties and operations. For this purpose,
CONTRACTOR shall furnish its employees and
workers identification cards to be countersigned by
OWNER and uniforms to be approved by OWNER.
OWNER may require CONTRACTOR to dismiss
225
immediately and prohibit entry into OWNER'S
premises of any person employed therein by
CONTRACTOR who in OWNER'S opinion is
incompetent or misconducts himself or does not
comply with OWNER'S reasonable instructions and
requests regarding security, safety and other matters and
such person shall not again be employed to perform the
services hereunder without OWNER'S
permission.29 (Underscoring partly in the original and partly
supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of
respondents as their work was dependent on the frequency
of plane arrivals.30 And as the NLRC found, petitioner's
managers and supervisors approved respondents' weekly
work assignments and respondents and other regular PAL
employees were all referred to as "station attendants" of the
cargo operation and airfreight services of petitioner.31
Respondents having performed tasks which are usually
necessary and desirable in the air transportation business of
petitioner, they should be deemed its regular employees
and Synergy as a labor-only contractor.32
The express provision in the Agreement that Synergy was
an independent contractor and there would be "no
employer-employee relationship between [Synergy] and/or
its employees on one hand, and [petitioner] on the other
hand" is not legally binding and conclusive as contractual
provisions are not valid determinants of the existence of
such relationship. For it is the totality of the facts and
surrounding circumstances of the case33 which is
determinative of the parties' relationship.
Respecting the dismissal on November 15, 199234 of
Auxtero, a regular employee of petitioner who had been
working as utility man/helper since November 1988, it is not
legally justified for want of just or authorized cause therefor
and for non-compliance with procedural due process.
Petitioner's claim that he abandoned his work does not
persuade.35 The elements of abandonment being (1) the
failure to report for work or absence without valid or
justifiable reason, and (2) a clear intention to sever the
employer-employee relationship manifested by some overt
acts,36 the onus probandi lies with petitioner which,
however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of
petitioner, and found to be illegally dismissed from
employment, should be entitled to salary differential37 from
the time he rendered one year of service until his dismissal,
reinstatement plus backwages until the finality of this
decision.38 In view, however, of the long period of time39 that
had elapsed since his dismissal on November 15, 1992, it
would be appropriate to award separation pay of one (1)
month salary for each year of service, in lieu of
reinstatement.40
226
As regards the remaining respondents, the Court affirms the
ruling of both the NLRC and the appellate court, ordering
petitioner to accept them as its regular employees and to
give each of them the salaries, allowances and other
employment benefits and privileges of a regular employee
under the pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible
for it to comply with the orders of the NLRC and the Court of
Appeals, for during the pendency of this case, it was forced
to reduce its personnel due to heavy losses caused by
economic crisis and the pilots' strike of June 5,
1998.41 Hence, there are no available positions where
respondents could be placed.
And petitioner informs that "the employment contracts of all
if not most of the respondents . . . were terminated by
Synergy effective 30 June 1998 when petitioner terminated
its contract with Synergy."42
Other than its bare allegations, petitioner presented nothing
to substantiate its impossibility of compliance. In fact,
petitioner waived this defense by failing to raise it in its
Memorandum filed on June 14, 1999 before the Court of
Appeals.43 Further, the notice of termination in 1998 was in
disregard of a subsisting temporary restraining order44to
preserve the status quo, issued by this Court in 1996 before
it referred the case to the Court of Appeals in January 1999.
So as to thwart the attempt to subvert the implementation of
the assailed decision, respondents are deemed to be
continuously employed by petitioner, for purposes of
computing the wages and benefits due respondents.
Finally, it must be stressed that respondents, having been
declared to be regular employees of petitioner, Synergy
being a mere agent of the latter, had acquired security of
tenure. As such, they could only be dismissed by petitioner,
the real employer, on the basis of just or authorized cause,
and with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September
29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO
SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD
GONCER, NONILON PILAPIL, AQUILINO YBANEZ,
BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P.
CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES,
LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA,
CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO
TUNACAO, CHERRIE ALEGRES, EDUARDO
MAGDADARAUG, NELSON M. DULCE and ALLAN
BENTUZAL as its regular employees in their same or
substantially equivalent positions, and pay the wages and
benefits due them as regular employees plus salary
227
differential corresponding to the difference between the
wages and benefits given them and those granted to
petitioner's other regular employees of the same rank; and
(b) pay respondent BENEDICTO AUXTERO salary
differential; backwages from the time of his dismissal until
the finality of this decision; and separation pay, in lieu of
reinstatement, equivalent to one (1) month pay for every
year of service until the finality of this decision.
There being no data from which this Court may determine
the monetary liabilities of petitioner, the case is
REMANDED to the Labor Arbiter solely for that purpose.
SO ORDERED.
[G.R. No. 144672. July 10, 2003]
San Miguel Corporation, petitioner, vs. MAERC
Integrated Services, Inc.; and Emerberto Orque,
ROGELIO PRADO, JR., EDDIE SELLE, ALEJANDRO
ANNABIEZA, ANNIAS JUAMO-AS, CONSORCIO
MANLOLOYO, ANANIAS ALCONTIN, REY GESTOPA,
EDGARDO NUEZ, JUNEL CABATINGAN, PAUL
DUMAQUETA, FELIMON ECHAVEZ, VITO SEALANA,
DENECIA PALAO, ROBERTO LAPIZ, BALTAZAR LABIO,
LEONARDO BONGO, EL CID ICALINA, JOSE
DIOCAMPO, ADELO CANTILLAS, ISAIAS BRANZUELA,
RAMON ROSALES, GAUDENCIO PESON, HECTOR
CABAOG, EDGARDO DAGMAYAN, ROGELIO CRUZ,
ROLANDO ESPINA, BERNARDINO REGIDOR, ARNELIO
SUMALINOG, GUMERSINDO ALCONTIN, LORETO
NUEZ, JOEBE BOY DAYON, CONRADO MESANQUE,
MARCELO PESCADOR, MARCELINO JABAGAT,
VICENTE DEVILLERES, VICENTE ALIN, RODOLFO
PAHUGOT, RUEL NAVARES, DANILO ANABIEZA, ALEX
JUEN, JUANITO GARCES, SILVINO LIMBAGA, AURELIO
JURPACIO, JOVITO LOON, VICTOR TENEDERO,
SASING MORENO, WILFREDO HORTEZUELA,
JOSELITO MELENDEZ, ALFREDO GESTOPA, REGINO
GABUYA, JORGE GAMUZARNO, LOLITO COCIDO,
EFRAIM YUBAL, VENERANDO ROAMAR, GERARDO
BUTALID, HIPOLITO VIDAS, VENGELITO FRIAS,
VICENTE CELACIO, CORLITO PESTAAS, ERVIN
HYROSA, ROMMEL GUERERO, RODRIGO ENERLAS,
FRANCISCO CARBONILLA, NICANOR CUIZON, PEDRO
BRIONES, RODOLFO CABALHUG, TEOFILO RICARDO,
DANILO R. DIZON, ALBERTO EMBONG, ALFONSO
ECHAVEZ, GONZALO RORACEA, MARCELO
CARACINA, RAUL BORRES, LINO TONGALAMOS,
ARTEMIO BONGO, JR., ROY AVILA, MELCHOR
FREGLO, RAUL CABILLADA, EDDIE CATAB,
MELENCIO DURANO, ALLAN RAGO, DOMINADOR
CAPARIDA, JOVITO CATAB, ALBERT LASPIAS, ALEX
ANABIEZA, NESTOR REYNANTE, EULOGIO GESTOPA,
MARIO BOLO, EDERLITO A. BALOCANO, JOEL
PEPITO, REYNALDO LUDIA, MANUEL CINCO, ALLAN
AGUSTIN, PABLITO POLEGRATES, CLYDE PRADO,
228
DINDO MISA, ROGER SASING, RAMON ARCALLANA, BINGAS, ROSALIO DURAN, SR., ROSALIO DURAN, JR.,
GABRIEL SALAS, EDWIN SASAN, DIOSDADO ROMEO DURAN, ANTONIO ABELLA, MARIANO
BARRIGA, MOISES SASAN, SINFORIANO CANTAGO, REPOLLO, POLEGARPO DEGAMO, MARIO CEREZA,
LEONARDO MARTURILLAS, MARIO RANIS, ANTONIO LAOROMILLA, PROCTUSO MAGALLANES,
ALEJANDRO RANIDO, JEROME PRADO, RAUL OYAO, ELADIO TORRES, WARLITO DEMANA, HENRY
VICTOR CELACIO, GERALDO ROQUE, ZOSIMO GEDARO, DOISEDERIO GEMPERAO, ANICETO
CARARATON, VIRGILIO ZANORIA, JOSE ZANORIA, GEMPERAO, JERRY CAPAROSO, SERLITO NOYNAY,
ALLAN ZANORIA, VICTORINO SENO, TEODULO LUCIANO RECOPELACION, JUANITO GARCES,
JUMAO-AS, ALEXANDER HERA, ANTHONY ARANETA, FELICIANO TORRES, RANILO VILLAREAL, FERMIN
ALDRIN SUSON, VICTOR VERANO, RUEL ALIVIANO, JUNJIE LAVISTE, TOMACITO DE CASTRO,
SUFRERENCIA, ALFRED NAPARATE, WENCESLAO JOSELITO CAPILINA, SAMUEL CASQUEJO,
BACLOHON, EDUARDO LANGITA, FELIX ORDENEZA, LEONARDO NATAD, BENJAMIN SAYSON, PEDRO
ARSENIO LOGARTA, EDUARDO DELA VEGA, INOC, EDWARD FLORES, EDWIN SASAN, JOSE REY
JOVENTINO CANOOG, ROGELIO ABAPO, RICARDO INOT, EDGAR CORTES, ROMEO LOMBOG, NICOLAS
RAMAS, JOSE BANDIALAN, ANTONIO BASALAN, RIBO, JAIME RUBIN, ORLANDO REGIS, RICKY
LYNDON BASALAN, WILFREDO ALIVIANO, ALCONZA, RUDY TAGALOG, VICTORINO TAGALOG,
BIENVENIDO ROSARIO, JESUS CAPANGPANGAN, EDWARD COLINA, RONIE GONZAGA, PAUL
RENATO MENDOZA, ALEJANDRO CATANDEJAN, CABILLADA, WILFREDO MAGALONA, JOEL PEPITO,
RUBEN TALABA, FILEMON ECHAVEZ, MARCELINO PROSPERO MAGLASANG, ALLAN AGUSTIN, FAUSTO
CARACENA, IGNACIO MISA, FELICIANO AGBAY, BARGAYO, NOMER SANCHEZ, JOLITO ALIN, BIRNING
VICTOR MAGLASANG, ARTURO HEYROSA, ALIPIO REGIDOR, GARRY DIGNOS, EDWIN DIGNOS, DARIO
TIROL, ROSENDO MONDARES, ANICETO LUDIA, DIGNOS, ROGELIO DIGNOS, JIMMY CABIGAS,
REYNALDO LAVANDERO, REUYAN HERCULANO, FERNANDO ANAJAO, ALEX FLORES, FERNANDO
TEODULO NIQUE, EMERBERTO ORQUE, ZOSIMO REMEDIO, TOTO MOSQUIDA, ALBERTO YAGONIA,
BAOBAO, MEDARDO SINGSON, ANTONIO VICTOR BARIQUIT, IGNACIO MISA, ELISEO
PATALINGHUG, ERNESTO SINGSON, ROBERTO VILLARENO, MANUEL LAVANDERO, VIRCEDE, MARIO
TORRES, CESAR ESCARIO, LEODEGARIO DOLLECIN, RANIS, JAIME RESPONSO, MARIANITO AGUIRRE,
ALBERTO ANOBA, RODRIGO BISNAR, ZOSIMO MARCIAL HERUELA, GODOFREDO TUACAO,
229
PERFECTO REGIS, ROEL DEMANA, ELMER CASTILLO, BELLOSILLO , J.:
WINEFREDO CALAMOHOY, RUDY LUCERNAS,
TWO HUNDRED NINETY-ONE (291) workers filed their
ANTONIO CAETE, EFRAIM YUBAL, JESUS
complaints (nine [9] complaints in all) against San Miguel
CAPANGPANGAN, DAMIAN CAPANGPANGAN,
Corporation (petitioner herein) and Maerc Integrated
TEOFILO CAPANGPANGAN, NILO CAPANGPANGAN,
Services, Inc. (respondent herein), for illegal dismissal,
CORORENO CAPANGPANGAN, EMILIO MONDARES,
underpayment of wages, non-payment of service incentive
PONCIANO AGANA, VICENTE DEVILLERES, MARIO
leave pays and other labor standards benefits, and for
ALIPAN, ROMANITO ALIPAN, ALDEON ROBINSON,
separation pays from 25 June to 24 October 1991. The
FORTUNATO SOCO, CELSO COMPUESTO, WILLIAM
complainants alleged that they were hired by San Miguel
ITORALDE, ANTONIO PESCADOR, JEREMIAS
Corporation (SMC) through its agent or intermediary Maerc
RONDERO, ESTROPIO PUNAY, LEOVIJILDO PUNAY,
Integrated Services, Inc. (MAERC) to work in two (2)
ROMEO QUILONGQUILONG, WILFREDO GESTOPA,
designated workplaces in Mandaue City: one, inside the
ELISEO SANTOS, HENRY ORIO, JOSE YAP, NICANOR
SMC premises at the Mandaue Container Services, and
MANAYAGA, TEODORO SALINAS, ANICETO
another, in the Philphos Warehouse owned by
MONTERO, RAFAELITO VERZOSA, ALEJANDRO
MAERC. They washed and segregated various kinds of
RANIDO, HENRY TALABA, ROMULO TALABA,
empty bottles used by SMC to sell and distribute its beer
DIOSDADO BESABELA, SYLVESTRE TORING,
beverages to the consuming public. They were paid on a
EDILBERTO PADILLA, ALLAN HEROSA, ERNESTO
per piece or pakiao basis except for a few who worked as
SUMALINOG, ARISTON VELASCO, JR., FERNANDO
checkers and were paid on daily wage basis.
LOPEZ, ALFONSO ECHAVEZ, NICANOR CUIZON,
DOMINADOR CAPARIDA, ZOSIMO CORORATION, Complainants alleged that long before SMC contracted the
ARTEMIO LOVERANES, DIONISIO YAGONIA, VICTOR services of MAERC a majority of them had already been
CELOCIA, HIPOLITO VIDAS, TEODORO ARCILLAS, working for SMC under the guise of being employees of
MARCELINO HABAGAT, GAUDIOSO LABASAN, another contractor, Jopard Services, until the services of the
LEOPOLDO REGIS, AQUILLO DAMOLE, WILLY ROBLE latter were terminated on 31 January 1988.
and NIEL ZANORIA, respondents.
SMC denied liability for the claims and averred that the
DECISION complainants were not its employees but of MAERC, an
230
independent contractor whose primary corporate purpose
was to engage in the business of cleaning, receiving,
sorting, classifying, etc., glass and metal containers.
It appears that SMC entered into a Contract of Services with
MAERC engaging its services on a non-exclusive basis for
one (1) year beginning 1 February 1988. The contract was
renewed for two (2) more years in March 1989. It also
provided for its automatic renewal on a month-to-month
basis after the two (2)-year period and required that a
written notice to the other party be given thirty (30) days
prior to the intended date of termination, should a party
decide to discontinue with the contract.
In a letter dated 15 May 1991, SMC informed MAERC of the
termination of their service contract by the end of June
1991. SMC cited its plans to phase out its segregation
activities starting 1 June 1991 due to the installation of labor
and cost-saving devices.
When the service contract was terminated, complainants
claimed that SMC stopped them from performing their jobs;
that this was tantamount to their being illegally dismissed by
SMC who was their real employer as their activities were
directly related, necessary and desirable to the main
business of SMC; and, that MAERC was merely made a
tool or a shield by SMC to avoid its liability under the Labor
Code.
MAERC for its part admitted that it recruited the
complainants and placed them in the bottle segregation
project of SMC but maintained that it was only conveniently
used by SMC as an intermediary in operating the project or
work directly related to the primary business concern of the
latter with the end in view of avoiding its obligations and
responsibilities towards the complaining workers.
The nine (9) cases[1] were consolidated. On 31 January
1995 the Labor Arbiter rendered a decision holding that
MAERC was an independent contractor.[2] He dismissed the
complaints for illegal dismissal but ordered MAERC to pay
complainants' separation benefits in the total amount
of P2,334,150.00. MAERC and SMC were also ordered to
jointly and severally pay complainants their wage
differentials in the amount of P845,117.00 and to pay
attorney's fees in the amount of P317,926.70.
The complainants appealed the Labor Arbiter's finding that
MAERC was an independent contractor and solely liable to
pay the amount representing the separation benefits to the
exclusion of SMC, as well as the Labor Arbiter's failure to
grant the Temporary Living Allowance of the
complainants. SMC appealed the award of attorney's fees.
The National Labor Relations Commission (NLRC) ruled in
its 7 January 1997 decision that MAERC was a labor-only
contractor and that complainants were employees of
SMC.[3] The NLRC also held that whether MAERC was a job
231
contractor or a labor-only contractor, SMC was still solidarily
liable with MAERC for the latter's unpaid obligations, citing
Art. 109[4] of the Labor Code. Thus, the NLRC modified the
judgment of the Labor Arbiter and held SMC jointly and
severally liable with MAERC for complainants' separation
benefits. In addition, both respondents were ordered to pay
jointly and severally an indemnity fee of P2,000.00 to each
complainant.
SMC moved for a reconsideration which resulted in the
reduction of the award of attorney's fees from P317,926.70
to P84,511.70. The rest of the assailed decision was
unchanged.[5]
On 12 March 1998, SMC filed a petition for certiorari with
prayer for the issuance of a temporary restraining order
and/or injunction with this Court which then referred the
petition to the Court of Appeals.
On 28 April 2000 the Court of Appeals denied the petition
and affirmed the decision of the NLRC.[6] The appellate
court also denied SMC's motion for reconsideration in a
resolution[7] dated 26 July 2000. Hence, petitioner seeks a
review of the Court of Appeals judgment before this Court.
Petitioner poses the same issues brought up in the appeals
court and the pivotal question is whether the complainants
are employees of petitioner SMC or of respondent MAERC.
Relying heavily on the factual findings of the Labor Arbiter,
petitioner maintained that MAERC was a legitimate job
contractor. It directed this Court's attention to the undisputed
evidence it claimed to establish this assertion: MAERC is a
duly organized stock corporation whose primary purpose is
to engage in the business of cleaning, receiving, sorting,
classifying, grouping, sanitizing, packing, delivering,
warehousing, trucking and shipping any glass and/or metal
containers and that it had listed in its general information
sheet two hundred seventy-eight (278) workers, twenty-two
(22) supervisors, seven (7) managers/officers and a board
of directors; it also voluntarily entered into a service contract
on a non-exclusive basis with petitioner from which it earned
a gross income of P42,110,568.24 from 17 October 1988 to
27 November 1991; the service contract specified that
MAERC had the selection, engagement and discharge of its
personnel, employees or agents or otherwise in the
direction and control thereof; MAERC admitted that it had
machinery, equipment and fixed assets used in its business
valued at P4,608,080.00; and, it failed to appeal the Labor
Arbiter's decision which declared it to be an independent
contractor and ordered it to solely pay the separation
benefits of the complaining workers.
We find no basis to overturn the Court of Appeals and the
NLRC. Well-established is the principle that findings of fact
of quasi-judicial bodies, like the NLRC, are accorded with
respect, even finality, if supported by substantial
232
evidence.[8] Particularly when passed upon and upheld by
the Court of Appeals, they are binding and conclusive upon
the Supreme Court and will not normally be disturbed.[9]
This Court has invariably held that in ascertaining an
employer-employee relationship, the following factors are
considered: (a) the selection and engagement of employee;
(b) the payment of wages; (c) the power of dismissal; and,
(d) the power to control an employee's conduct, the last
being the most important.[10] Application of the aforesaid
criteria clearly indicates an employer-employee relationship
between petitioner and the complainants.
Evidence discloses that petitioner played a large and
indispensable part in the hiring of MAERC's workers. It also
appears that majority of the complainants had already been
working for SMC long before the signing of the service
contract between SMC and MAERC in 1988.
The incorporators of MAERC admitted having supplied and
recruited workers for SMC even before MAERC was
created.[11] The NLRC also found that when MAERC was
organized into a corporation in February 1988, the
complainants who were then already working for SMC were
made to go through the motion of applying for work with Ms.
Olga Ouano, President and General Manager of MAERC,
upon the instruction of SMC through its supervisors to make
it appear that complainants were hired by MAERC. This was
testified to by two (2) of the workers who were segregator
and forklift operator assigned to the Beer Marketing Division
at the SMC compound and who had been working with
SMC under a purported contractor Jopard Services since
March 1979 and March 1981, respectively. Both witnesses
also testified that together with other complainants they
continued working for SMC without break from Jopard
Services to MAERC.
As for the payment of workers' wages, it is conceded that
MAERC was paid in lump sum but records suggest that the
remuneration was not computed merely according to the
result or the volume of work performed. The memoranda of
the labor rates bearing the signature of a Vice-President
and General Manager for the Vismin Beer Operations[12] as
well as a director of SMC[13] appended to the contract of
service reveal that SMC assumed the responsibility of
paying for the mandated overtime, holiday and rest day
pays of the MAERC workers.[14] SMC also paid the
employer's share of the SSS and Medicare contributions,
the 13th month pay, incentive leave pay and maternity
benefits.[15] In the lump sum received, MAERC earned a
marginal amount representing the contractors share. These
lend credence to the complaining workers' assertion that
while MAERC paid the wages of the complainants, it merely
acted as an agent of SMC.
Petitioner insists that the most significant determinant of an
employer-employee relationship, i.e., the right to control, is
absent. The contract of services between MAERC and SMC
233
provided that MAERC was an independent contractor and
that the workers hired by it "shall not, in any manner and
under any circumstances, be considered employees of the
Company, and that the Company has no control or
supervision whatsoever over the conduct of the Contractor
or any of its workers in respect to how they accomplish their
work or perform the Contractor's obligations under the
Contract."[16]
In deciding the question of control, the language of the
contract is not determinative of the parties' relationship;
rather, it is the totality of the facts and surrounding
circumstances of each case.[17]
Despite SMCs disclaimer, there are indicia that it actively
supervised the complainants. SMC maintained a constant
presence in the workplace through its own checkers. Its
asseveration that the checkers were there only to check the
end result was belied by the testimony of Carlito R. Singson,
head of the Mandaue Container Service of SMC, that the
checkers were also tasked to report on the identity of the
workers whose performance or quality of work was not
according to the rules and standards set by SMC. According
to Singson, "it (was) necessary to identify the names of
those concerned so that the management [referring to
MAERC] could call the attention to make these people
improve the quality of work."[18]
Viewed alongside the findings of the Labor Arbiter that the
MAERC organizational set-up in the bottle segregation
project was such that the segregators/cleaners were
supervised by checkers and each checker was also under a
supervisor who was in turn under a field supervisor, the
responsibility of watching over the MAERC workers by
MAERC personnel became superfluous with the presence
of additional checkers from SMC.
Reinforcing the belief that the SMC exerted control over the
work performed by the segregators or cleaners, albeit
through the instrumentality of MAERC, were letters by SMC
to the MAERC management. These were letters[19]written by
a certain Mr. W. Padin[20] addressed to the President and
General Manager of MAERC as well as to its head of
operations,[21] and a third letter[22] from Carlito R. Singson
also addressed to the President and General Manager of
MAERC. More than just a mere written report of the number
of bottles improperly cleaned and/or segregated, the letters
named three (3) workers who were responsible for the
rejection of several bottles, specified the infraction
committed in the segregation and cleaning, then
recommended the penalty to be imposed. Evidently, these
workers were reported by the SMC checkers to the SMC
inspector.
While the Labor Arbiter dismissed these letters as merely
indicative of the concern in the end-result of the job
contracted by MAERC, we find more credible the contention
234
of the complainants that these were manifestations of the discussed were the calling of SMC contractors to have
right of petitioner to recommend disciplinary measures over workers assigned to segregation to undergo and pass eye
MAERC employees. Although calling the attention of its examination to be done by SMC EENT company doctor and
contractors as to the quality of their services may a review of compensation/incentive system for segregators
reasonably be done by SMC, there appears to be no need to improve the segregation activities.[25]
to instruct MAERC as to what disciplinary measures should
But the most telling evidence is a letter by Mr. Antonio
be imposed on the specific workers who were responsible
Ouano, Vice-President of MAERC dated 27 May 1991
for rejections of bottles. This conduct by SMC
addressed to Francisco Eizmendi, SMC President and Chief
representatives went beyond a mere reminder with respect
Executive Officer, asking the latter to reconsider the phasing
to the improperly cleaned/segregated bottles or a genuine
out of SMCs segregation activities in Mandaue City. The
concern in the outcome of the job contracted by MAERC.
letter was not denied but in fact used by SMC to advance its
Control of the premises in which the contractor's work was own arguments. [26]
performed was also viewed as another phase of control
Briefly, the letter exposed the actual state of affairs under
over the work, and this strongly tended to disprove the
which MAERC was formed and engaged to handle the
independence of the contractor.[23] In the case at bar, the
segregation project of SMC. It provided an account of how
bulk of the MAERC segregation activities was accomplished
in 1987 Eizmendi approached the would-be incorporators of
at the MAERC-owned PHILPHOS warehouse but the
MAERC and offered them the business of servicing the
building along with the machinery and equipment in the
SMC bottle-washing and segregation department in order to
facility was actually being rented by SMC. This is evident
avert an impending labor strike. After initial reservations,
from the memoranda of labor rates which included rates for
MAERC incorporators accepted the offer and before long
the use of forklifts and the warehouse at the PHILPHOS
trial segregation was conducted by SMC at the PHILPHOS
area, hence, the NLRCs conclusion that the payment for the
warehouse.[27]
rent was cleverly disguised since MAERC was not in the
business of renting warehouses and forklifts.[24] The letter also set out the circumstances under which
MAERC entered into the Contract of Services in 1988 with
Other instances attesting to SMCs supervision of the
the assurances of the SMC President and CEO that the
workers are found in the minutes of the meeting held by the
employment of MAERC's services would be long term to
SMC officers on 5 December 1988. Among those matters
235
enable it to recover its investments. It was with this
understanding that MAERC undertook borrowings from
banking institutions and from affiliate corporations so that it
could comply with the demands of SMC to invest in
machinery and facilities.
In sum, the letter attested to an arrangement entered into by
the two (2) parties which was not reflected in the Contract of
Services. A peculiar relationship mutually beneficial for a
time but nonetheless ended in dispute when SMC decided
to prematurely end the contract leaving MAERC to shoulder
all the obligations to the workers.
Petitioner also ascribes as error the failure of the Court of
Appeals to apply the ruling in Neri v. NLRC.[28] In that case,
it was held that the law did not require one to possess both
substantial capital and investment in the form of tools,
equipment, machinery, work premises, among others, to be
considered a job contractor. The second condition to
establish permissible job contracting[29] was sufficiently met
if one possessed either attribute.
Accordingly, petitioner alleged that the appellate court and
the NLRC erred when they declared MAERC a labor-only
contractor despite the finding that MAERC had investments
amounting to P4,608,080.00 consisting of buildings,
machinery and equipment.
However, in Vinoya v. NLRC,[30] we clarified that it was not
enough to show substantial capitalization or investment in
the form of tools, equipment, machinery and work premises,
etc., to be considered an independent contractor.In fact,
jurisprudential holdings were to the effect that in determining
the existence of an independent contractor relationship,
several factors may be considered, such as, but not
necessarily confined to, whether the contractor was carrying
on an independent business; the nature and extent of the
work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified
pieces of work; the control and supervision of the workers;
the power of the employer with respect to the hiring, firing
and payment of the workers of the contractor; the control of
the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and
terms of payment.[31]
In Neri, the Court considered not only the fact that
respondent Building Care Corporation (BBC) had
substantial capitalization but noted that BCC carried on an
independent business and performed its contract according
to its own manner and method, free from the control and
supervision of its principal in all matters except as to the
results thereof.[32] The Court likewise mentioned that the
employees of BCC were engaged to perform specific
special services for their principal.[33] The status of BCC had
also been passed upon by the Court in a previous case
236
where it was found to be a qualified job contractor because
it was "a big firm which services among others, a university,
an international bank, a big local bank, a hospital center,
government agencies, etc." Furthermore, there were only
two (2) complainants in that case who were not only
selected and hired by the contractor before being assigned
to work in the Cagayan de Oro branch of FEBTC but the
Court also found that the contractor maintained effective
supervision and control over them.
In comparison, MAERC, as earlier discussed, displayed the
characteristics of a labor-only contractor. Moreover, while
MAERCs investments in the form of buildings, tools and
equipment amounted to more than P4 Million, we cannot
disregard the fact that it was the SMC which required
MAERC to undertake such investments under the
understanding that the business relationship between
petitioner and MAERC would be on a long term basis. Nor
do we believe MAERC to have an independent
business. Not only was it set up to specifically meet the
pressing needs of SMC which was then having labor
problems in its segregation division, none of its workers was
also ever assigned to any other establishment, thus
convincing us that it was created solely to service the needs
of SMC. Naturally, with the severance of relationship
between MAERC and SMC followed MAERCs cessation of
operations, the loss of jobs for the whole MAERC workforce
and the resulting actions instituted by the workers.
Petitioner also alleged that the Court of Appeals erred in
ruling that "whether MAERC is an independent contractor or
a labor-only contractor, SMC is liable with MAERC for the
latter's unpaid obligations to MAERC's workers."
On this point, we agree with petitioner as distinctions must
be made. In legitimate job contracting, the law creates an
employer-employee relationship for a limited purpose, i.e.,
to ensure that the employees are paid their wages.[34]The
principal employer becomes jointly and severally liable with
the job contractor only for the payment of the employees'
wages whenever the contractor fails to pay the same. Other
than that, the principal employer is not responsible for any
claim made by the employees.
On the other hand, in labor-only contracting, the statute
creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor
laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees
had been directly employed by the principal employer. The
principal employer therefore becomes solidarily liable with
the labor-only contractor for all the rightful claims of the
employees.
This distinction between job contractor and labor-only
contractor, however, will not discharge SMC from paying the
separation benefits of the workers, inasmuch as MAERC
237
was shown to be a labor-only contractor; in which case,
petitioner's liability is that of a direct employer and thus
solidarily liable with MAERC.
SMC also failed to comply with the requirement of written
notice to both the employees concerned and the
Department of Labor and Employment (DOLE) which must
be given at least one (1) month before the intended date of
retrenchment.[35] The fines imposed for violations of the
notice requirement have varied.[36] The measure of this
award depends on the facts of each case and the gravity of
the omission committed by the employer.[37] For its failure,
petitioner was justly ordered to indemnify each displaced
worker P2,000.00.
Case No. O6-1165-91
1. Rogelio Prado, Jr P3,056.00 P8,190.00 P11,246.00
2. Eddie Selle 3,056.00 8,190.00 11,246.00
3. Alejandro Annabieza 3,056.00 8,190.00 11,246.00
4. Ananias Jumao-as 3,056.00 8,190.00 11,246.00
5. Consorcio Manloloyo 3,056.00 8,190.00 11,246.00
6. Anananias Alcotin 3,056.00 8,190.00 11,246.00
7. Rey Gestopa 2,865.00 8,190.00 11,055.00
8. Edgardo Nuez 2,865.00 8,190.00 11,055.00

The NLRC and the Court of Appeals affirmed the Labor 9. Junel Cabatingan 2,865.00 8,190.00 11,055.00
Arbiters award of separation pay to the complainants in the 10. Paul Dumaqueta 2,865.00 8,190.00 11,055.00
total amount of P2,334,150.00 and of wage differentials in
the total amount of P845,117.00. These amounts are the 11. Felimon Echavez 2,843.00 8,190.00 10,673.00
aggregate of the awards due the two hundred ninety-one
12. Vito Sealana 2,843.00 8,190.00 10,673.00
(291) complainants as computed by the Labor Arbiter. The
following is a summary of the computation of the benefits 13. Denecia Palao 2,843.00 8,190.00 10,673.00
due the complainants which is part of the Decision of the
14. Roberto Lapiz 3,056.00 8,190.00 11,246.00
Labor Arbiter.
15. Baltazar Labio 3,056.00 8,190.00 11,246.00
SUMMARY
16. Leonardo Bongo 3,056.00 8,190.00 11,246.00
NAME SALARY SEPARATION TOTAL
17. El Cid Icalina 3,056.00 8,190.00 11,246.00
DIFFERENTIAL PAY
238
18. Jose Diocampo 3,056.00 8,190.00 11,246.00 36. Vicente Alin 3,056.00 8,190.00 11,246.00

19. Adelo Cantillas 3,056.00 8,190.00 11,246.00 37. Rodolfo Pahugot 3,056.00 8,190.00 11,246.00

20. Isaias Branzuela 3,056.00 8,190.00 11,246.00 38. Ruel Navares 3,056.00 8,190.00 11,246.00

21. Ramon Rosales 3,056.00 8,190.00 11,246.00 39. Danilo Anabieza 3,056.00 8,190.00 11,246.00

22. Gaudencio Peson 3,056.00 8,190.00 11,246.00 40. Alex Juen 3,056.00 8,190.00 11,246.00

23. Hector Cabaog 3,056.00 8,190.00 11,246.00 41. Juanito Garces 3,056.00 8,190.00 11,246.00

24. Edgardo Dagmayan 3,056.00 8,190.00 11,246.00 42. Silvino Limbaga 3,056.00 8,190.00 11,246.00

25. Rogelio Cruz 3,056.00 8,190.00 11,246.00 43. Aurelio Jurpacio 3,056.00 8,190.00 11,246.00

26. Rolando Espina 3,056.00 8,190.00 11,246.00 44. Jovito Loon 3,056.00 8,190.00 11,246.00

27. Bernardino Regidor 3,056.00 8,190.00 11,246.00 45. Victor Tenedero 3,056.00 8,190.00 11,246.00

28. Arnelio Sumalinog 3,056.00 8,190.00 11,246.00 46. Sasing Moreno 3,056.00 8,190.00 11,246.00

29. Gumersindo Alcontin 3,056.00 8,190.00 11,246.00 47. Wilfredo Hortezuela 3,056.00 8,190.00 11,246.00

30. Loreto Nuez 3,056.00 8,190.00 11,246.00 48. Joselito Melendez 3,056.00 8,190.00 11,246.00

31. Joebe Boy Dayon 3,056.00 8,190.00 11,246.00 49. Alfredo Gestopa 3,056.00 8,190.00 11,246.00

32. Conrado Mesanque 3,056.00 8,190.00 11,246.00 50. Regino Gabuya 3,056.00 8,190.00 11,246.00

33. Marcelo Pescador 3,056.00 8,190.00 11,246.00 51. Jorge Gamuzarno 3,056.00 8,190.00 11,246.00

34. Marcelino Jabagat 3,056.00 8,190.00 11,246.00 52. Lolito Cocido 3,056.00 8,190.00 11,246.00

35. Vicente Devilleres 3,056.00 8,190.00 11,246.00 53. Efraim Yubal 3,056.00 8,190.00 11,246.00

239
54. Venerando Roamar 3,056.00 8,190.00 11,246.00 72. Marcelo Caracina 3,056.00 8,190.00 11,246.00

55. Gerardo Butalid 3,056.00 8,190.00 11,246.00 73. Raul Borres 3,056.00 8,190.00 11,246.00

56. Hipolito Vidas 3,056.00 8,190.00 11,246.00 74. Lino Tongalamos 3,056.00 8,190.00 11,246.00

57. Vengelito Frias 3,056.00 8,190.00 11,246.00 75. Artemio Bongo, Jr. 3,056.00 8,190.00 11,246.00

58. Vicente Celacio 3,056.00 8,190.00 11,246.00 76. Roy Avila 3,056.00 8,190.00 11,246.00

59. Corlito Pestaas 3,056.00 8,190.00 11,246.00 77. Melchor Freglo 3,056.00 8,190.00 11,246.00

60. Ervin Hyrosa 3,056.00 8,190.00 11,246.00 78. Raul Cabillada 3,056.00 8,190.00 11,246.00

61. Rommel Guerero 3,056.00 8,190.00 11,246.00 79. Eddie Catab 3,056.00 8,190.00 11,246.00

62. Rodrigo Enerlas 3,056.00 8,190.00 11,246.00 80. Melencio Durano 3,056.00 8,190.00 11,246.00

63. Francisco Carbonilla 3,056.00 8,190.00 11,246.00 81. Allan Rago 3,056.00 8,190.00 11,246.00

64. Nicanor Cuizon 3,056.00 8,190.00 11,246.00 82. Dominador Caparida 3,056.00 8,190.00 11,246.00

65. Pedro Briones 3,056.00 8,190.00 11,246.00 83. Jovito Catab 3,056.00 8,190.00 11,246.00

66. Rodolfo Cabalhug 3,056.00 8,190.00 11,246.00 84. Albert Laspias 3,056.00 8,190.00 11,246.00

67. Teofilo Ricardo 3,056.00 8,190.00 11,246.00 85. Alex Anabieza 3,056.00 8,190.00 11,246.00

68. Danilo R. Dizon 3,056.00 8,190.00 11,246.00 86. Nestor Reynante 3,056.00 8,190.00 11,246.00

69. Alberto Embong 3,056.00 8,190.00 11,246.00 87. Eulogio Estopa 3,056.00 8,190.00 11,246.00

70. Alfonso Echavez 3,056.00 8,190.00 11,246.00 88. Mario Bolo 3,056.00 8,190.00 11,246.00

71. Gonzalo Roracea 3,056.00 8,190.00 11,246.00 89. Ederlito A. Balocano 3,056.00 8,190.00 11,246.00

240
90. Joel Pepito 3,056.00 8,190.00 11,246.00 108. Raul Oyao 3,056.00 8,190.00 11,246.00

91. Reynaldo Ludia 3,056.00 5,460.00 8,516.00 109. Victor Celacio 3,056.00 5,460.00 8,516.00

92. Manuel Cinco 3,056.00 5,460.00 8,516.00 TOTAL P330,621.00 P884,520.00 P1,215141.00

93. Allan Agustin 3,056.00 8,190.00 11,246.00 Case No. 07-1177-91

94. Pablito Polegrates 3,056.00 8,190.00 11,246.00 110. Gerardo Roque 3,056.00 P5,460.00 P8,516.00

95. Clyde Prado 3,056.00 8,190.00 11,246.00 Case No. 07-1176-91

96. Dindo Misa 3,056.00 8,190.00 11,246.00 111. Zosimo Cararaton P3,056.00 P8,192.00 11,246.00

97. Roger Sasing 3,056.00 8,190.00 11,246.00 Case No. 07-1219-91

98. Ramon Arcallana 3,056.00 8,190.00 11,246.00 112. Virgilio Zanoria P3,056.00 P5,460.00 P8,516.00

99. Gabriel Salas 3,056.00 8,190.00 11,246.00 113. Jose Zanoria 3,056.00 5,460.00 8,516.00

100. Edwin Sasan 3,056.00 8,190.00 11,246.00 114. Allan Zanoria 3,056.00 5,460.00 8,516.00

101. Diosdado Barriga 3,056.00 8,190.00 11,246.00 115. Victorino Seno 3,056.00 5,460.00 8,516.00

102. Moises Sasan 3,056.00 8,190.00 11,246.00 116. Teodulo Jumao-as 3,056.00 5,460.00 8,516.00

103. Sinforiano Cantago 3,056.00 8,190.00 11,246.00 117. Alexander Hera 3,056.00 5,460.00 8,516.00

104. Leonardo Marturillas 3,056.00 8,190.00 11,246.00 118. Anthony Araneta 3,056.00 5,460.00 8,516.00

105. Mario Ranis 3,056.00 8,190.00 11,246.00 119. Aldrin Suson 3,056.00 5,460.00 8,516.00

106. Alejandro Ranido 3,056.00 8,190.00 11,246.00 120. Victor Verano 3,056.00 5,460.00 8,516.00

107. Jerome Prado 3,056.00 8,190.00 11,246.00 121. Ruel Sufrerencia 3,056.00 5,460.00 8,516.00

241
122. Alfred Naparate 3,056.00 5,460.00 8,516.00 134. Wilfredo Aliviano 2,816.00 8,190.00 11,006.00

123. Wenceslao Baclohon 3,056.00 8,190.00 11,246.00 135. Bienvenido Rosario 2,816.00 8,190.00 11,006.00

124. Eduardo Langita 3,056.00 8,190.00 11,246.00 136. Jesus Capangpangan 2,816.00 8,190.00 11,006.00

TOTAL P39,728.00 P76,440.00 P116,168.00 137. Renato Mendoza 2,816.00 8,190.00 11,006.00

Case No. 07-1283-91 138. Alejandro Catandejan 2,816.00 8,190.00 11,006.00

125. Feliz Ordeneza P2,816.00 P8,190.00 P11,006.00 139. Ruben Talaba 2,816.00 8,190.00 11,006.00

126. Arsenio Logarta 3,056.00 8,190.00 11,246.00 140. Filemon Echavez 2,816.00 8,190.00 11,006.00

127. Eduardo dela Vega 3,056.00 8,190.00 11,246.00 141. Marcelino Caracena 2,816.00 8,190.00 11,006.00

128. Joventino Canoog 3,056.00 8,190.00 11,246.00 142. Ignacio Misa 2,816.00 8,190.00 11,006.00

TOTAL P11,984.00 P32,760.00 P44,744.00 143. Feliciano Agbay 2,816.00 8,190.00 11,006.00

Case No. 10-1584-91 144. Victor Maglasang 2,816.00 8,190.00 11,006.00

129. Regelio Abapo P3,056.00 8,190.00 11,246.00 145. Arturo Heyrosa 2,816.00 8,190.00 11,006.00

Case No. 08-1321-91 146. Alipio Tirol 2,816.00 8,190.00 11,006.00

130. Ricardo Ramas P3,056.00 P8,190.00 P11,246.00 147. Rosendo Mondares 2,816.00 8,190.00 11,006.00

Case No. 09-1507-91 148. Aniceto Ludia 2,816.00 8,190.00 11,006.00

131. Jose Bandialan P2,816.00 P8,190.00 P11,006.00 149. Reynaldo Lavandero 2,816.00 8,190.00 11,006.00

132. Antonio Basalan 2,816.00 8,190.00 11,006.00 150. Reuyan Herculano 2,816.00 8,190.00 11,006.00

133. Lyndon Basalan 2,816.00 8,190.00 11,006.00 151. Teodula Nique 2,816.00 8,190.00 11,006.00

242
TOTAL P59,136.00 P171,990.00 P231,126.00 168. Polegarpo Degamo 2,816.00 8,190.00 11,006.00

Case No. 06-1145-91 169. Mario Cereza 2,816.00 8,190.00 11,006.00

152. Emerberto Orque P2,816.00 P8,190.00 P11,006.00 170. Antonio Laoronilla 2,816.00 8,190.00 11,006.00

153. Zosimo Baobao 2,816.00 8,190.00 11,006.00 171. Proctuso Magallanes 2,816.00 8,190.00 11,006.00

154. Medardo Singson 2,816.00 8,190.00 11,006.00 172. Eladio Torres 2,816.00 8,190.00 11,006.00

155. Antonio Patalinghug 2,816.00 8,190.00 11,006.00 173. Warlito Demana 2,816.00 8,190.00 11,006.00

156. Ernesto Singson 2,816.00 8,190.00 11,006.00 174. Henry Gedaro 2,816.00 8,190.00 11,006.00

157. Roberto Torres 2,816.00 8,190.00 11,006.00 175. Doisederio Gemperao 2,816.00 8,190.00 11,006.00

158. Cesar Escario 2,816.00 8,190.00 11,006.00 176. Aniceto Gemperao 2,816.00 8,190.00 11,006.00

159. Leodegario Dollecin 2,816.00 8,190.00 11,006.00 177. Jerry Caparoso 2,816.00 8,190.00 11,006.00

160 Alberto Anoba 2,816.00 8,190.00 11,006.00 178. Serlito Noynay 2,816.00 8,190.00 11,006.00

161. Rodrigo Bisnar 2,816.00 8,190.00 11,006.00 179. Luciano Recopelacion 2,816.00 8,190.00 11,006.00

162. Zosimo Bingas 2,816.00 8,190.00 11,006.00 180. Juanito Garces 2,816.00 8,190.00 11,006.00

163. Rosalio Duran, Sr. 2,816.00 8,190.00 11,006.00 181. Feliciano Torres 2,816.00 8,190.00 11,006.00

164. Rosalio Duran, Jr. 2,816.00 8,190.00 11,006.00 182. Ranilo Villareal 2,816.00 8,190.00 11,006.00

165. Romeo Duran 2,816.00 8,190.00 11,006.00 183. Fermin Aliviano 2,816.00 8,190.00 11,006.00

166. Antonio Abella 2,816.00 8,190.00 11,006.00 184. Junjie Laviste 2,816.00 8,190.00 11,006.00

167. Mariano Repollo 2,816.00 8,190.00 11,006.00 185. Tomacito de Castro 2,816.00 8,190.00 11,006.00

243
186. Joselito Capilina 2,816.00 8,190.00 11,006.00 204. Paul Cabillada 2,816.00 8,190.00 11,006.00

187. Samuel Casquejo 2,816.00 8,190.00 11,006.00 205. Wilfredo Magalona 2,816.00 8,190.00 11,006.00

188. Leonardo Natad 2,816.00 8,190.00 11,006.00 206. Joel Pepito 2,816.00 8,190.00 11,006.00

189. Benjamin Sayson 2,816.00 8,190.00 11,006.00 207. Prospero Maglasang 2,816.00 8,190.00 11,006.00

190. Pedro Inoc 2,816.00 8,190.00 11,006.00 208. Allan Agustin 2,816.00 8,190.00 11,006.00

191. Edward Flores 2,816.00 8,190.00 11,006.00 209. Fausto Bargayo 2,816.00 8,190.00 11,006.00

192. Edwin Sasan 2,816.00 8,190.00 11,006.00 210. Nomer Sanchez 2,816.00 8,190.00 11,006.00

193. Jose Rey Inot 2,816.00 8,190.00 11,006.00 211. Jolito Alin 2,816.00 8,190.00 11,006.00

194. Edgar Cortes 2,816.00 8,190.00 11,006.00 212. Birning Regidor 2,816.00 8,190.00 11,006.00

195. Romeo Lombog 2,816.00 8,190.00 11,006.00 213. Garry Dignos 2,816.00 8,190.00 11,006.00

196. Nicolas Ribo 2,816.00 8,190.00 11,006.00 214. Edwin Dignos 2,816.00 8,190.00 11,006.00

197. Jaime Rubin 2,816.00 8,190.00 11,006.00 215. Dario Dignos 2,816.00 8,190.00 11,006.00

198. Orlando Regis 2,816.00 8,190.00 11,006.00 216. Rogelio Dignos 2,816.00 8,190.00 11,006.00

199. Ricky Alconza 2,816.00 8,190.00 11,006.00 217. Jimmy Cabigas 2,816.00 8,190.00 11,006.00

200. Rudy Tagalog 2,816.00 8,190.00 11,006.00 218. Fernando Anajao 2,816.00 8,190.00 11,006.00

201. Victorino Tagalog 2,816.00 8,190.00 11,006.00 219. Alex Flores 2,816.00 8,190.00 11,006.00

202. Edward Colina 2,816.00 8,190.00 11,006.00 220. Fernando Remedio 2,816.00 8,190.00 11,006.00

203. Ronie Gonzaga 2,816.00 8,190.00 11,006.00 221. Toto Mosquido 2,816.00 8,190.00 11,006.00

244
222. Alberto Yagonia 2,816.00 8,190.00 11,006.00 240. Jesus Capangpangan 2,816.00 8,190.00 11,006.00

223. Victor Bariquit 2,816.00 8,190.00 11,006.00 241. Damian Capangpangan 2,816.00 8,190.00 11,006.00

224. Ignacio Misa 2,816.00 8,190.00 11,006.00 242. Teofilo Capangpangan 2,816.00 8,190.00 11,006.00

225. Eliseo Villareno 2,816.00 8,190.00 11,006.00 243. Nilo Capangpangan 2,816.00 8,190.00 11,006.00

226. Manuel Lavandero 2,816.00 8,190.00 11,006.00 244. Cororeno Capangpangan 2,816.00 8,190.00 11,006.00

227. Vircede 2,816.00 8,190.00 11,006.00 245. Emilio Mondares 2,816.00 8,190.00 11,006.00

228. Mario Ranis 2,816.00 8,190.00 11,006.00 246. Ponciano Agana 2,816.00 8,190.00 11,006.00

229. Jaime Responso 2,816.00 8,190.00 11,006.00 247. Vicente Devilleres 2,816.00 8,190.00 11,006.00

230. Marianito Aguirre 2,816.00 8,190.00 11,006.00 248. Mario Alipan 2,816.00 8,190.00 11,006.00

231. Marcial Heruela 2,816.00 8,190.00 11,006.00 249. Romanito Alipan 2,816.00 8,190.00 11,006.00

232. Godofredo Tuacao 2,816.00 8,190.00 11,006.00 250. Aldeon Robinson 2,816.00 8,190.00 11,006.00

233. Perfecto Regis 2,816.00 8,190.00 11,006.00 251. Fortunato Soco 2,816.00 8,190.00 11,006.00

234. Roel Demana 2,816.00 8,190.00 11,006.00 252. Celso Compuesto 2,816.00 8,190.00 11,006.00

235. Elmer Castillo 2,816.00 8,190.00 11,006.00 253. William Itoralde 2,816.00 8,190.00 11,006.00

236. Wilfredo Calamohoy 2,816.00 8,190.00 11,006.00 254. Antonio Pescador 2,816.00 8,190.00 11,006.00

237. Rudy Lucernas 2,816.00 8,190.00 11,006.00 255. Jeremias Rondero 2,816.00 8,190.00 11,006.00

238. Antonio Caete 2,816.00 8,190.00 11,006.00 256. Estropio Punay 2,816.00 8,190.00 11,006.00

239. Efraim Yubal 2,816.00 8,190.00 11,006.00 257. Leovijildo Punay 2,816.00 8,190.00 11,006.00

245
258. Romeo Quilongquilong 2,816.00 8,190.00 11,006.00 276. Fernando Lopez 2,816.00 8,190.00 11,006.00

259. Wilfredo Gestopa 2,816.00 8,190.00 11,006.00 277. Alfonso Echavez 2,816.00 8,190.00 11,006.00

260. Eliseo Santos 2,816.00 8,190.00 11,006.00 278. Nicanor Cuizon 2,816.00 8,190.00 11,006.00

261. Henry Orio 2,816.00 8,190.00 11,006.00 279. Dominador Caparida 2,816.00 8,190.00 11,006.00

262. Jose Yap 2,816.00 8,190.00 11,006.00 280. Zosimo Cororation 2,816.00 8,190.00 11,006.00

263. Nicanor Manayaga 2,816.00 8,190.00 11,006.00 281. Artemio Loveranes 2,816.00 8,190.00 11,006.00

264. Teodoro Salinas 2,816.00 8,190.00 11,006.00 282. Dionisio Yagonia 2,816.00 8,190.00 11,006.00

265. Aniceto Montero 2,816.00 8,190.00 11,006.00 283. Victor Celocia 2,816.00 8,190.00 11,006.00

266. Rafaelito Versoza 2,816.00 8,190.00 11,006.00 284. Hipolito Vidas 2,816.00 8,190.00 11,006.00

267. Alejandro Ranido 2,816.00 8,190.00 11,006.00 285. Teodoro Arcillas 2,816.00 8,190.00 11,006.00

268. Henry Talaba 2,816.00 8,190.00 11,006.00 286. Marcelino Habagat 2,816.00 8,190.00 11,006.00

269. Romulo Talaba 2,816.00 8,190.00 11,006.00 287. Gaudioso Labasan 2,816.00 8,190.00 11,006.00

270. Diosdado Besabela 2,816.00 8,190.00 11,006.00 288. Leopoldo Regis 2,816.00 8,190.00 11,006.00

271. Sylvestre Toring 2,816.00 8,190.00 11,006.00 289. Aquillo Damole 2,816.00 8,190.00 11,006.00

272. Edilberto Padilla 2,816.00 8,190.00 11,006.00 290. Willy Roble 2,816.00 8,190.00 11,006.00

273. Allan Herosa 2,816.00 8,190.00 11,006.00 TOTAL P391,424.00 P1,138,410.00 P1,529,834.00

274. Ernesto Sumalinog 2,816.00 8,190.00 11,006.00 RECAP

275. Ariston Velasco, Jr. 2,816.00 8,190.00 11,006.00 CASE NO. SALARY SEPARATION TOTAL

246
DIFFERENTIAL PAY
06-1165-91 P330,621.00 P884,520.00 P1,215,141.00
07-1177-91 3,056.00 5,460.00 8,516.00
06-1176-91 3,056.00 8,190.00 11,246.00
07-1219-91 39,728.00 76,440.00 116,168.00
07-1283-91 11,984.00 32,760.00 44,744.00
10-1584-91 3,056.00 8,190.00 11,246.00
08-1321-91 3,056.00 8,190.00 11,246.00
09-1507-91 59,136.00 171,990.00 231,126.00
06-1145-91 391,424.00 1,138,410.00 1,529,834.00
GRAND
TOTAL P845,117.00 P2,334,150.00 P3,179,267.00
However, certain matters have cropped up which require a
review of the awards to some complainants and a
recomputation by the Labor Arbiter of the total amounts.
A scrutiny of the enumeration of all the complainants shows
that some names38 appear twice by virtue of their being
included in two (2) of the nine (9) consolidated cases. A
check of the Labor Arbiters computation discloses that most
of these names were awarded different amounts of
separation pay or wage differential in each separate case
where they were impleaded as parties because the
allegations of the length and period of their employment for
the separate cases, though overlapping, were also
different. The records before us are incomplete and do not
aid in verifying whether these names belong to the same
persons but at least three (3) of those names were found to
have identical signatures in the complaint forms they filed in
the separate cases. It is likely therefore that the Labor
Arbiter erroneously granted some complainants separation
benefits and wage differentials twice. Apart from this, we
also discovered some names that are almost identical.39 It is
possible that the minor variance in the spelling of some
names may have been a typographical error and refer to the
same persons although the records seem to be
inconclusive.
Furthermore, one of the original complainants40 was
inadvertently omitted by the Labor Arbiter from his
computations.41 The counsel for the complainants promptly
filed a motion for inclusion/correction42 which motion was
treated as an appeal of the Decision as the Labor Arbiter
was prohibited by the rules of the NLRC from entertaining
any motion at that stage of the proceedings.43 The NLRC for
its part acknowledged the omission44 but both the
Commission and subsequently the Court of Appeals failed
to rectify the oversight in their decisions.
Finally, the NLRC ordered both MAERC and SMC to
pay P84,511.70 in attorneys fees which is ten percent (10%)
247
of the salary differentials awarded to the complainants in
accordance with Art. 111 of the Labor Code. The Court of
Appeals also affirmed the award. Consequently, with the
recomputation of the salary differentials, the award of
attorneys fees must also be modified.
complainants whose entitlement to separation pay and
wage differentials and the amounts thereof are no longer in
question. Costs against petitioner.
SO ORDERED.

WHEREFORE, the petition is DENIED. The assailed COCA-COLA BOTTLERS G.R. No. 184977
PHILIPPINES, INC.,
Decision of the Court of Appeals dated 28 April 2000 and
Petitioner,
the Resolution dated 26 July 2000 Present:
are AFFIRMED with MODIFICATION. Respondent Maerc
Integrated Services, Inc. is declared to be a labor-only CARPIO, J., Chairperson,
contractor. Accordingly, both petitioner San Miguel - versus - LEONARDO-DE CASTRO,
Corporation and respondent Maerc Integrated Services, BRION,
Inc., are ordered to jointly and severally pay complainants DEL CASTILLO, and
ABAD, JJ.
(private respondents herein) separation benefits and wage RICKY E. DELA CRUZ,
differentials as may be finally recomputed by the Labor ROLANDO M. GUASIS,
Arbiter as herein directed, plus attorneys fees to be MANNY C. PUGAL,
computed on the basis of ten percent (10%) of the amounts RONNIE L. HERMO, Promulgated:
which complainants may recover pursuant to Art. 111 of the ROLANDO C. SOMERO,
Labor Code, as well as an indemnity fee of P2,000.00 to JR., DIBSON D. DIOCARES, December 7, 2009
and IAN B. ICHAPARE,
each complainant.
Respondents.
The Labor Arbiter is directed to review and recompute the x ----------------------------------------------------------------------------
award of separation pays and wage differentials due -------------- x
complainants whose names appear twice or are notably
similar, compute the monetary award due to complainant DECISION
Niel Zanoria whose name was omitted in the Labor Arbiters
Decision and immediately execute the monetary awards as
BRION, J.:
found in the Labor Arbiters computations insofar as those
248
 The present petition for review on certiorari[1] challenges
the decision[2] and resolution[3] of the Court of Appeals (CA)
rendered on August 29, 2008 and October 13, 2008, respectively,
in CA-G.R. SP No. 102988.
THE ANTECEDENTS
Respondents Ricky E. Dela Cruz, Rolando M. Guasis, Manny C.
Pugal, Ronnie L. Hermo, Rolando C. Somero, Jr., Dibson D.
Diocares, and Ian Ichapare (respondents) filed in July 2000 two
separate complaints[4] for regularization with money claims
against Coca-Cola Bottlers Philippines, Inc., (petitioner or the
company). The complaints were consolidated and subsequently
amended to implead Peerless Integrated Service, Inc. (Peerless)
as a party-respondent.
Before the Labor Arbiter, the respondents alleged that they
are route helpers assigned to work in the petitioners trucks. They
go from the Coca- Cola sales offices or plants to customer outlets
such as sari-sari stores, restaurants, groceries, supermarkets and
similar establishments; they were hired either directly by the
petitioner or by its contractors, but they do not enjoy the full
remuneration, benefits and privileges granted to the petitioners
regular sales force. They argued that the services they render are
necessary and desirable in the regular business of the petitioner.[5]
In defense, the petitioner contended that it entered into
contracts of services with Peerless[6] and Excellent Partners
Cooperative, Inc. (Excellent)[7] to provide allied services; under
these contracts, Peerless and Excellent retained the right to select,
hire, dismiss, supervise, control and discipline and pay the salaries
of all personnel they assign to the petitioner; in return for these
services, Peerless and Excellent were paid a stipulated fee. The
petitioner posited that there is no employer-employee relationship
between the company and the respondents and the complaints
should be dismissed for lack of jurisdiction on the part of the
National Labor Relations Commission (NLRC). Peerless did not
file a position paper, although nothing on record indicates that it
was ever notified of the amended complaint.
In reply, the respondents countered that they worked under
the control and supervision of the companys supervisors who
prepared their work schedules and assignments. Peerless and
Excellent, too, did not have sufficient capital or investment to
provide services to the petitioner. The respondents thus argued
that the petitioners contracts of services with Peerless and
Excellent are in the nature of labor-only contracts prohibited by
law.[8]
In rebuttal, the petitioner belied the respondents
submission that their jobs are usually necessary and desirable in
its main business. It claimed that its main business is softdrinks
249
manufacturing and the respondents tasks of handling, loading
and unloading of the manufactured softdrinks are not part of the
manufacturing process. It stressed that its only interest in the
respondents is in the result of their work, and left to them the
means and the methods of achieving this result. It thus argued
that there is no basis for the respondents claim that without
them, there would be over-production in the company and its
operations would come to a halt.[9] The petitioner lastly argued
that in any case, the respondents did not present evidence in
support of their claims of company control and supervision so
that these claims cannot be considered and given weight.[10]
THE COMPULSORY ARBITRATION RULINGS
Labor Arbiter Joel S. Lustria dismissed the complaint for
lack of jurisdiction in his decision of September 28,
2004,[11] after finding that the respondents were the employees
of either Peerless or Excellent and not of the petitioner. He
brushed aside for lack of evidence the respondents claim that
they were directly hired by the petitioner and that company
personnel supervised and controlled their work. The Labor
Arbiter likewise ordered Peerless to accord to the appropriate
complainants all employment benefits and privileges befitting
its regular employees.[12]
The respondents appealed to the NLRC.[13] On October 31,
2007, the NLRC denied the appeal and affirmed the labor
arbiters ruling,[14] and subsequently denied the respondents
motion for reconsideration.[15] The respondents thus sought
relief from the CA through a petition for certiorari under Rule
65 of the Rules of Court.
THE CA DECISION
The main substantive issue the parties submitted to the CA was
whether Excellent and Peerless were independent contractors or
labor-only contractors. Procedurally, the petitioner questioned
the sufficiency of the petition and asked for its dismissal on the
following grounds: (1) the petition was filed out of time; (2)
failure to implead Peerless and Excellent as necessary parties;
(3) absence of the notarized proof of service that Rule 13 of the
Rules of Court requires; and (4) defective verification and
certification.
The CA examined the circumstances of the contractual
arrangements between Peerless and Excellent, on the one hand,
and the company, on the other, and found that Peerless and
Excellent were engaged in labor-only contracting, a prohibited
undertaking.[16] The appellate court explained that based on the
respondents assertions and the petitioners admissions, the
250
contractors simply supplied the company with manpower, and
that the sale and distribution of the companys products are the
same allied services found by this Court in Magsalin v. National
Organization of Workingmen[17] to be necessary and desirable
functions in the companys business.
On the matter of capitalization, the CA invoked our ruling in 7K
Corporation v. NLRC[18] presuming a contractor supplying labor
to be engaged in prohibited labor-only contracting, unless the
contractor can show that it has substantial capital, investment,
and tools to undertake the contract. The CA found no proof in
the records showing the required capitalization and tools; thus,
the CA concluded that Peerless and Excellent were engaged in
labor-only contracting.
The CA faulted the labor tribunals for relying solely on the
contract of services in determining who the real employer
is. Again invoking our 7K Corporation ruling, it pointed out
that the language of a contract is not wholly determinative of the
relationship of the parties; whether a labor-only or a job
contractor relationship exists must be determined using the
criteria established by law. Finding that the Labor Arbiters and
the NLRCs conclusions were not supported by substantial
evidence, the CA nullified the challenged NLRC decision and
ordered the company to reinstate the petitioners with the full
status and rights of regular employees and to grant them all
benefits as provided by existing collective bargaining agreement
or by law.
The CA generally brushed aside the companys procedural
questions.
It ruled that the petition was filed on time, noting that April 7,
2008, a Monday and the last day for filing the petition, was
declared a holiday in lieu of April 9 (Araw ng Kagitingan), a
Wednesday,[19] and that the petition was filed on April 8, 2008,
a Tuesday and a working day.
That the contractors were not impleaded as necessary parties
was not a fatal infirmity, according to the CA, relying on the
ruling of the Court in Cabutihan v. Landcenter Construction
and Development Corporation.[20] On the other hand, the
alleged lack of proof of service was brushed aside on the finding
that there is in the records of the case (page 35 of the petition)
an affidavit of service executed by Rufino San Antonio
indicating compliance with the rule on service. Finally, the CA
ruled that the defect in the verification and certification was a
mere formal requirement that can be excused in the interest of
substantial justice, following the ruling of this Court in Uy v.
Landbank of the Philippines.[21]
251
Petitioner moved for reconsideration of the decision, but the CA identity) and Section 2, Rule IV (prohibition against the
denied the motion in its resolution of October 13, 2008.[22] notarization without appropriate proof of identity); the
verification and certification attached to the petition before the
THE PETITION CA do not indicate that the affiants were personally known to the
notary public, nor did the notary identify the affiants through
The company filed the present appeal on November 4, 2008 on competent evidence of identity other than their community tax
the grounds that the CA erred when it:[23] certificate. These violations, according to the petitioner,
collectively resulted in a petition filed without the proper
1. gave due course to the petition despite the failure of the
respondents to comply with the Rules on Notarial verification and certification required by Section 4, Rule 7 of the
Practice in its verification and certification; Rules of Court.
On the necessary party issue, the petitioner posits that the CA
2. excluded the contractors as necessary parties in
violation of Section 8, Rule 3, in relation with Section ruling excluding the contractors as necessary parties results in the
5, Rule 65 of the Rules of Court; and absurd situation whereby the grant of regularization by the Labor
Arbiter in favor of the respondents and against the contractors, is
3. refused to follow established jurisprudence holding that
the findings of fact of the NLRC are accorded respect, actually the same award the CA held in their favor and against
if not finality, when supported by substantial evidence. the Company thereby making them regular employees of both the
Company and the contractors, a situation which is precisely what
On the notarial issue, the petitioner argues that Rule 65 of the Section 8, Rule 3, in relation to Section 5, Rule 65 of the Rules of
Rules of Court requires that a petition filed before the CA must Court seeks to prevent.
be verified and accompanied with a properly notarized
certification of non-forum shopping. It claims that the The petitioner also takes exception to the CAs reliance on the
verification and certification accompanying the petition were not ruling of the Court in Cabutihan v. Landcenter Construction and
notarized as required by Section 12, Rule II of the 2004 Rules on Development Corporation.[24] It posits that the ruling
Notarial Practice (for failure to present competent evidence of in Cabutihan was taken out of context; in that case, the subject
252
matter was divisible as it pertained to the conveyance of 36.5%
of the property under litigation or, in the alternative, to the value
corresponding to this portion. On this fact situation, the Court
found that the non-joinder of the companions of the petitioner as
party-litigants was not prejudicial to their rights.
In the present case, the petitioner posits that supposed cause of
action (for regularization of the respondents) and the issue of
employer-employee relationship cannot be ruled upon without
including the parties who had already been held liable by the
NLRC. It adds that as a result of the CA ruling, the respondents
are now regular employees of both the petitioner and the
contractors.
In their comment of March 4, 2009,[25] the respondents, aside
from the reiteration of their previously expressed positions on
necessary parties and the labor-only contracting issues, argued
that the rules of procedure are not controlling in labor cases and
that every and all the reasonable means shall be used to
ascertain the facts for the full adjudication of the merits of the
case. They argue that it is more in accord with substantial
justice and equity to overlook procedural questions raised.
THE COURTS RULING
We resolve to deny the petition for lack of merit.
The Notarial Issue.
After due consideration, we deem the respondents to have
substantially complied with the verification and certification
requirements in their petition for certiorari before the CA.
We find from our examination of the records that the fact
situation that gave rise to the notarial issue before the CA was not
a new one; the same situation obtained before the NLRC where
the verification and certification of the respondents appeal were
also notarized before the same notary public Diosdado V.
Macapagal and where the respondents presented the same
evidence of identity (their community tax certificates).[26]
The petitioners belated attention to the imputed defect
indicates to us that the petitioner did not consider this defect
worth raising when things were going its way, but considered it a
serious one when things turned the other way. This opportunistic
stance is not our idea of how technical deficiencies should be
viewed. We are aware, too, that under the circumstances of this
case, the defect is a technical and minor one; the respondents did
file the required verification and certification of non-forum
253
shopping with all the respondents properly participating, marred
only by a glitch in the evidence of their identity.[27] In the interest
of justice, this minor defect should not defeat their petition and is
one that we can overlook in the interest of substantial justice,
taking into account the merits of the case as discussed below.
The Necessary Party Issue.
In our view, the petitioners necessary party issue proceeds
from a misapprehension of the relationships in a contracting
relationship. As lucidly pointed out in Azucenas The Labor Code
with Comments and Cases,[28] there are three parties in a
legitimate contracting relationship, namely: the principal, the
contractor, and the contractors employees. In this trilateral
relationship, the principal controls the contractor and his
employees with respect to the ultimate results or output of the
contract; the contractor, on the other hand, controls his
employees with respect, not only to the results to be obtained, but
with respect to the means and manner of achieving this result.
This pervasive control by the contractor over its employees
results in an employer-employee relationship between them.
This trilateral relationship under a legitimate job
contracting is different from the relationship in a labor-only
contracting situation because in the latter, the contractor simply
becomes an agent of the principal; either directly or through the
agent, the principal then controls the results as well as the means
and manner of achieving the desired results. In other words, the
party who would have been the principal in a legitimate job
contracting relationship and who has no direct relationship with
the contractor's employees, simply becomes the employer in the
labor-only contracting situation with direct supervision and
control over the contracted employees. As Azucena astutely
observed: in labor-contracting, there is really no contracting and
no contractor; there is only the employers representative who
gathers and supplies people for the employer; labor-contracting
is therefore a misnomer.[29]
Where, as in this case, the main issue is labor contracting
and a labor-only contracting situation is found to exist as
discussed below, the question of whether or not the purported
contractors are necessary parties is a non-issue; these purported
contractors are mere representatives of the principal/employer
whose personality, as against that of the workers, is merged with
that of the principal/employer. Thus, this issue is rendered
academic by our conclusion that labor-only contracting exists.
Our labor-only contracting conclusion, too, answers the
254
petitioners argument that confusion results because the workers
will have two employers.
The Contracting Out Issue.
Contracting and sub-contracting are hot labor issues for
two reasons. The first is that job contracting and labor-only
contracting are technical Labor Code concepts that are easily
misunderstood. For one, there is a lot of lay misunderstanding of
what kind of contracting the Labor Code prohibits or allows.
The second, echoing the cry from the labor sector, is that the
Labor Code provisions on contracting are blatantly and
pervasively violated, effectively defeating workers right to
security of tenure.
This Court, through its decisions, can directly help address
the problem of misunderstanding. The second problem, however,
largely relates to implementation issues that are outside the
Courts legitimate scope of activities; the Court can only passively
address the problem through the cases that are brought before us.
Either way, however, the need is for clear decisions that the
workers, most especially, will easily understand and
appreciate. We resolve the present case with these thoughts in
mind.
The law allows contracting and subcontracting involving
services but closely regulates these activities for the protection
of workers. Thus, an employer can contract out part of its
operations, provided it complies with the limits and standards
provided in the Code and in its implementing rules.
The directly applicable provision of the Labor Code on
contracting and subcontracting is Article 106 which provides:
Whenever, an employer enters into a contract with another
person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor
shall be paid in accordance with the provisions of this Code.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these types of
contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code.
There is labor-only contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and
placed by such persons are performing activities which are
directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible
255
 to the workers in the same manner and extent as if the alter of the job, work or service contracted out. [Emphasis
were directly employed by him (underscoring supplied). supplied]
The Department of Labor and Employment implements this
Labor Code provision through its Department Order No. 18-02 The right to control refers to the prerogative of a party to
[30]
(D.O. 18-02). On the matter of labor-only contracting, Section determine, not only the end result sought to be achieved, but also
5 thereof provides: the means and manner to be used to achieve this end.
Prohibition against labor-only contracting. - Labor-only
contracting is hereby declared prohibited x x x labor-only In strictly laymans terms, a manufacturer can sell its products on
contracting shall refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or places workers its own, or allow contractors, independently operating on their
to perform a job, work or service for a principal, and any of
own, to sell and distribute these products in a manner that does
the following elements are present:
not violate the regulations.From the terms of the above-quoted
i) The contractor or subcontractor does
not have sufficient capital or D.O. 18-02, the legitimate job contractor must have the
investment which relates to the job, capitalization and equipment to undertake the sale and
work or service to be performed and
the employees recruited, supplied or distribution of the manufacturers products, and must do it on its
placed by such contractor or own using its own means and selling methods.
subcontractor are performing
activities which are directly related to
the main business of the principal; or In the present case, both the capitalization of Peerless and
ii) The contractor does not exercise the Excellent and their control over the means and manner of their
right to control over the performance
operations are live sub-issues before us.
of the work of the contractual-
employee. A key consideration in resolving these issues is the
Substantial capital or investment refers to capital contract between the company and the purported contractors. The
stocks and subscribed capitalization in the case of contract[31] with Peerless, which is almost identical with the
corporations, tools or equipment, implements, machineries
and work premises, actually and directly used by the contract with Excellent, among others, states:
contractor or subcontractor in the performance or completion

256
 1. The CONTRACTOR agrees and undertakes to perform
and/or provide for the COMPANY, on a non-exclusive basis,
the services of contractual employees for a temporary period
for task or activities that are considered contractible under
DOLE Department Order No. 10, Series of 1 997, such as
lead helpers and replacement for absences as well as other
contractible jobs that may be needed by the Company from
time to time.[32]
xxxx
5. The CONTRACTOR shall have exclusive discretion in the
selection, engagement and discharge of its personnel,
employees or agents or otherwise in the direction and control
hereunder. The determination of the wages, salaries and
compensation of the personnel, workers and employees of the
CONTRACTOR shall be within its full control.[33]
xxxx
. . . Although it is understood and agreed between the parties
hereto that the CONTRACTOR, in the performance of its
obligations hereunder, is subject to the control and direction
of he COMPANY merely as to result to be accomplished by
the work or services herein specified, and not as to the means
and methods of accomplishing such result, the
CONTRACTOR hereby warrants that it will perform such
work or services in such manner as will be consistent with the
achievement of the result herein contracted for.[34]
These provisions particularly, that Peerless and Excellent retain
the right to select, hire, dismiss, supervise, control, and discipline
all personnel they will assign to the petitioner, as well as pay
their salaries were cited by the labor arbiter and the NLRC as
basis for their conclusion that no employer-employee relationship
existed between the respondents and the petitioner.
The Court of Appeals viewed matters differently and
faulted the labor tribunals for relying solely on the service
contracts to prove that the respondents were employees of
Peerless and Excellent. The CA cited in this regard what we said
in 7K Corporation v. NLRC:[35]
The fact that the service contract entered into by
petitioner and Universal stipulated that private respondents
shall be the employees of Universal, would not help
petitioner, as the language of a contract is not determinative
of the relationship of the parties. Petitioner and Universal
cannot dictate, by the mere expedient of a declaration in a
contract, the character of Universal business, i.e., whether as
labor-only contractor , or job contractor, it being crucial that
Universals character be mentioned in terms of and
determined by the criteria set by the statute.[36]
as basis for looking at how the contracted workers really related
with the company in performing their contracted tasks. In other
words, the contract between the principal and the contractor is
not the final word on how the contracted workers relate to the
principal and the purported contractor; the relationships must be
tested on the basis of how they actually operate.
Even before going into the realities of workplace
operations, the CA found that the service contracts[37] themselves
provide ample leads into the relationship between the company,
on the one hand, and Peerless and Excellent, on the other. The
257
CA noted that both the Peerless and the Excellent contracts show
that their obligation was solely to provide the company with the
services of contractual employees,[38] and nothing more. These
contracted services were for the handling and delivery of the
companys products and allied services.[39] Following D.O. 18-02
and the contracts that spoke purely of the supply of labor, the CA
concluded that Peerless and Excellent were labor-only
contractors unless they could prove that they had the required
capitalization and the right of control over their contracted
workers.
The CA concluded that other than the petitioners bare
allegation, there is no indication in the records that Peerless and
Excellent had substantial capital, tools or investment used
directly in providing the contracted services to the petitioner.
Thus, in the handling and delivery of company products, the
contracted personnel used company trucks and equipment in an
operation where company sales personnel primarily handled sales
and distribution, merely utilizing the contracted personnel as
sales route helpers.
In plainer terms, the contracted personnel (acting as sales
route helpers) were only engaged in the marginal work of helping
in the sale and distribution of company products; they only
provided the muscle work that sale and distribution required and
were thus necessarily under the companys control and
supervision in doing these tasks.
Still another way of putting it is that the contractors were
not independently selling and distributing company products,
using their own equipment, means and methods of selling and
distribution; they only supplied the manpower that helped the
company in the handing of products for sale and distribution. In
the context of D.O. 18-02, the contracting for sale and
distribution as an independent and self-contained operation is a
legitimate contract, but the pure supply of manpower with the
task of assisting in sales and distribution controlled by a principal
falls within prohibited labor-only contracting.
The role of sales route helpers in company operations is
not a new issue before this Court as we have ruled on this issue
in Magsalin v. National Organization of Workingmen[40] which
the CA itself cited in the assailed decision. We held in this cited
case that:
The argument of petitioner that its usual business or trade is
softdrink manufacturing and that the work assigned to the
respondent workers so involves merely postproduction
activities, one which is not indispensable in the manufacture
of its products, scarcely can be persuasive. If, as so argued by
petitioner company, only those whose work are directly
involved in the production of softdrinks may be held
performing functions necessary and desirable in its usual
258
 business or trade, there would have been no need for it to
even maintain regular truck sales route helpers. The nature of
supervision over the contracted personnel. They are therefore
the work performed must be viewed from a perspective of the labor-only contractors. Consequently, the contracted personnel,
business or trade in its entirety and not only in a confined
scope.[41] engaged in component functions in the main business of the
company under the latters supervision and control, cannot but be
While the respondents were not direct parties to this ruling, the regular company employees. In these lights, the petition is totally
petitioner was the party involved and Magsalin described in a without merit and hence must be denied.
very significant way the manufacture of softdrinks and the WHEREFORE, premises considered, we
companys sales and distribution activities in relation with one hereby DENY the petition and accordingly AFFIRM the
another. Following the lead we gave in Magsalin, the CA challenged decision and resolution of the Court of Appeals in
concluded that the contracted personnel who served as route CA-G.R. SP No. 102988. Costs against the petitioner.
helpers were really engaged in functions directly related to the SO ORDERED.
overall business of the petitioner. This led to the further CA
conclusion that the contracted personnel were under the G.R. No. 170054 January 21, 2013
companys supervision and control since sales and distribution
GOYA, INC., Petitioner,
were in fact not the purported contractors independent, discrete
vs.
and separable activities, but were component parts of sales and GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
distribution operations that the company controlled in its
DECISION
softdrinks business.
PERALTA, J.:
Based on these considerations, we fully agree with the CA This petition for review on certiorari under Rule 45 of the
that Peerless and Excellent were mere suppliers of labor who had Rules of Civil Procedure seeks to reverse and set aside the
no sufficient capitalization and equipment to undertake sales and June 16, 2005 Decision1 and October 12, 2005
distribution of softdrinks as independent activities separate from Resolution2 of the Court of Appeals in CA-G.R. SP No.
the manufacture of softdrinks, and who had no control and 87335, which sustained the October 26, 2004 Decision3 of
259
Voluntary Arbitrator Bienvenido E. Laguesma, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that
the Company is NOT guilty of unfair labor practice in
engaging the services of PESO.
The company is, however, directed to observe and comply
with its commitment as it pertains to the hiring of casual
employees when necessitated by business circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc.
(Company), a domestic corporation engaged in the
manufacture, importation, and wholesale of top quality food
products, hired contractual employees from PESO
Resources Development Corporation (PESO) to perform
temporary and occasional services in its factory in Parang,
Marikina City. This prompted respondent Goya, Inc.
Employees Union–FFW (Union) to request for a grievance
conference on the ground that the contractual workers do
not belong to the categories of employees stipulated in the
existing Collective Bargaining Agreement (CBA).5 When the
matter remained unresolved, the grievance was referred to
the National Conciliation and Mediation Board (NCMB) for
voluntary arbitration.
During the hearing on July 1, 2004, the Company and the
Union manifested before Voluntary Arbitrator (VA)
Bienvenido E. Laguesma that amicable settlement was no
longer possible; hence, they agreed to submit for resolution
the solitary issue of "[w]hether or not the Company is guilty
of unfair labor acts in engaging the services of PESO, a
third party service provider, under the existing CBA, laws,
and jurisprudence."6 Both parties thereafter filed their
respective pleadings.
The Union asserted that the hiring of contractual employees
from PESO is not a management prerogative and in gross
violation of the CBA tantamount to unfair labor practice
(ULP). It noted that the contractual workers engaged have
been assigned to work in positions previously handled by
regular workers and Union members, in effect violating
Section 4, Article I of the CBA, which provides for three
categories of employees in the Company, to wit:
Section 4. Categories of Employees.– The parties agree on
the following categories of employees:
(a) Probationary Employee. – One hired to occupy a regular
rank-and-file position in the Company and is serving a
probationary period. If the probationary employee is hired or
comes from outside the Company (non-Goya, Inc.
employee), he shall be required to undergo a probationary
period of six (6) months, which period, in the sole judgment
of management, may be shortened if the employee has
already acquired the knowledge or skills required of the job.
If the employee is hired from the casual pool and has
260
worked in the same position at any time during the past two
(2) years, the probationary period shall be three (3) months.
(b) Regular Employee. – An employee who has
satisfactorily completed his probationary period and
automatically granted regular employment status in the
Company.
(c) Casual Employee, – One hired by the Company to
perform occasional or seasonal work directly connected with
the regular operations of the Company, or one hired for
specific projects of limited duration not connected directly
with the regular operations of the Company.
It was averred that the categories of employees had been a
part of the CBA since the 1970s and that due to this
provision, a pool of casual employees had been maintained
by the Company from which it hired workers who then
became regular workers when urgently necessary to employ
them for more than a year. Likewise, the Company
sometimes hired probationary employees who also later
became regular workers after passing the probationary
period. With the hiring of contractual employees, the Union
contended that it would no longer have probationary and
casual employees from which it could obtain additional
Union members; thus, rendering inutile Section 1, Article III
(Union Security) of the CBA, which states:
Section 1. Condition of Employment. – As a condition of
continued employment in the Company, all regular rank-
and-file employees shall remain members of the Union in
good standing and that new employees covered by the
appropriate bargaining unit shall automatically become
regular employees of the Company and shall remain
members of the Union in good standing as a condition of
continued employment.
The Union moreover advanced that sustaining the
Company’s position would easily weaken and ultimately
destroy the former with the latter’s resort to retrenchment
and/or retirement of employees and not filling up the vacant
regular positions through the hiring of contractual workers
from PESO, and that a possible scenario could also be
created by the Company wherein it could "import" workers
from PESO during an actual strike.
In countering the Union’s allegations, the Company argued
that: (a) the law expressly allows contracting and
subcontracting arrangements through Department of Labor
and Employment (DOLE) Order No. 18-02; (b) the
engagement of contractual employees did not, in any way,
prejudice the Union, since not a single employee was
terminated and neither did it result in a reduction of working
hours nor a reduction or splitting of the bargaining unit; and
(c) Section 4, Article I of the CBA merely provides for the
definition of the categories of employees and does not put a
limitation on the Company’s right to engage the services of
261
job contractors or its management prerogative to address
temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Union’s
charge of ULP for being purely speculative and for lacking in
factual basis, but the Company was directed to observe and
comply with its commitment under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I of the
CBAallegedly violated by the Company and indeed the
agreement prescribes three (3) categories of employees in
the Company and provides for the definition, functions and
duties of each. Material to the case at hand is the definition
as regards the functions of a casual employee described as
follows:
Casual Employee – One hired by the COMPANY to perform
occasional or seasonal work directly connected with the
regular operations of the COMPANY, or one hired for
specific projects of limited duration not connected directly
with the regular operations of the COMPANY.
While the foregoing agreement between the parties did
eliminate management’s prerogative of outsourcing parts of
its operations, it serves as a limitation on such prerogative
particularly if it involves functions or duties specified under
the aforequoted agreement. It is clear that the parties
agreed that in the event that the Company needs to engage
the services of additional workers who will perform
"occasional or seasonal work directly connected with the
regular operations of the COMPANY," or "specific projects
of limited duration not connected directly with the regular
operations of the COMPANY", the Company can hire casual
employees which is akin to contractual employees. If we
note the Company’s own declaration that PESO was
engaged to perform "temporary or occasional services" (See
the Company’s Position Paper, at p. 1), then it should have
directly hired the services of casual employees rather than
do it through PESO.
It is evident, therefore, that the engagement of PESO is not
in keeping with the intent and spirit of the CBA provision in
question. It must, however, be stressed that the right of
management to outsource parts of its operations is not
totally eliminated but is merely limited by the CBA. Given
the foregoing, the Company’s engagement of PESO for the
given purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA
Decision,8 the Company immediately filed a petition for
review9 before the Court of Appeals (CA) under Rule 43 of
the Revised Rules of Civil Procedure to set aside the
directive to observe and comply with the CBA commitment
pertaining to the hiring of casual employees when
necessitated by business circumstances. Professing that
such order was not covered by the sole issue submitted for
voluntary arbitration, the Company assigned the following
errors:
262
THE HONORABLE VOLUNTARY ARBITRATOR
EXCEEDED HIS POWER WHICH WAS EXPRESSLY
GRANTED AND LIMITED BY BOTH PARTIES IN RULING
THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING
WITH THE INTENT AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR
COMMITTED A PATENT AND PALPABLE ERROR IN
DECLARING THAT THE ENGAGEMENT OF PESO IS
NOT IN KEEPING WITH THE INTENT AND SPIRIT OF
THE CBA.11
On June 16, 2005, the CA dismissed the petition. In
dispensing with the merits of the controversy, it held:
This Court does not find it arbitrary on the part of the Hon.
Voluntary Arbitrator in ruling that "the engagement of PESO
is not in keeping with the intent and spirit of the CBA." The
said ruling is interrelated and intertwined with the sole issue
to be resolved that is, "Whether or not the Company is guilty
of unfair labor practice in engaging the services of PESO, a
third party service provider, under existing CBA, laws, and
jurisprudence." Both issues concern the engagement of
PESO by the Company which is perceived as a violation of
the CBA and which constitutes as unfair labor practice on
the part of the Company. This is easily discernible in the
decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of
Section 4, Article I of the CBA, it does not constitute unfair
labor practice as it (sic) not characterized under the law as a
gross violation of the CBA. Violations of a CBA, except
those which are gross in character, shall no longer be
treated as unfair labor practice. Gross violations of a CBA
means flagrant and/or malicious refusal to comply with the
economic provisions of such agreement. x x x
Anent the second assigned error, the Company contends
that the Hon. Voluntary Arbitrator erred in declaring that the
engagement of PESO is not in keeping with the intent and
spirit of the CBA. The Company justified its engagement of
contractual employees through PESO as a management
prerogative, which is not prohibited by law. Also, it further
alleged that no provision under the CBA limits or prohibits
its right to contract out certain services in the exercise of
management prerogatives.
Germane to the resolution of the above issue is the
provision in their CBA with respect to the categories of the
employees:
xxxx
A careful reading of the above-enumerated categories of
employees reveals that the PESO contractual employees do
not fall within the enumerated categories of employees
stated in the CBA of the parties. Following the said
263
categories, the Company should have observed and
complied with the provision of their CBA. Since the
Company had admitted that it engaged the services of
PESO to perform temporary or occasional services which is
akin to those performed by casual employees, the Company
should have tapped the services of casual employees
instead of engaging PESO.
In justifying its act, the Company posits that its engagement
of PESO was a management prerogative. It bears stressing
that a management prerogative refers to the right of the
employer to regulate all aspects of employment, such as the
freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline,
and dismissal and recall of work, presupposing the
existence of employer-employee relationship. On the basis
of the foregoing definition, the Company’s engagement of
PESO was indeed a management prerogative. This is in
consonance with the pronouncement of the Supreme Court
in the case of Manila Electric Company vs. Quisumbing
where it ruled that contracting out of services is an exercise
of business judgment or management prerogative.
This management prerogative of contracting out services,
however, is not without limitation. In contracting out
services, the management must be motivated by good faith
and the contracting out should not be resorted to circumvent
the law or must not have been the result of malicious
arbitrary actions. In the case at bench, the CBA of the
parties has already provided for the categories of the
employees in the Company’sestablishment. These
categories of employees particularly with respect to casual
employees serve as limitation to the Company’s prerogative
to outsource parts of its operations especially when hiring
contractual employees. As stated earlier, the work to be
performed by PESO was similar to that of the casual
employees. With the provision on casual employees, the
hiring of PESO contractual employees, therefore, is not in
keeping with the spirit and intent of their CBA. (Citations
omitted)12
The Company moved to reconsider the CA Decision,13 but it
was denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a
Manifestation15 informing this Court that its stockholders and
directors unanimously voted to shorten the Company’s
corporate existence only until June 30, 2006, and that the
three-year period allowed by law for liquidation of the
Company’s affairs already expired on June 30, 2009.
Referring to Gelano v. Court of Appeals,16 Public Interest
Center, Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged
Us, however, to still resolve the case for future guidance of
the bench and the bar as the issue raised herein allegedly
calls for a clarification of a legal principle, specifically,
whether the VA is empowered to rule on a matter not
covered by the issue submitted for arbitration.
264
Even if this Court would brush aside technicality by ignoring
the supervening event that renders this case moot and
academic19 due to the permanent cessation of the
Company’s business operation on June 30, 2009, the
arguments raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by
the sole issue submitted for voluntary arbitration.
Resultantly, the CA did not commit serious error when it
sustained the ruling that the hiring of contractual employees
from PESO was not in keeping with the intent and spirit of
the CBA. Indeed, the opinion of the VA is germane to, or, in
the words of the CA, "interrelated and intertwined with," the
sole issue submitted for resolution by the parties. This being
said, the Company’s invocation of Sections 4 and 5, Rule
IV20 and Section 5, Rule VI21 of the Revised Procedural
Guidelines in the Conduct of Voluntary Arbitration
Proceedings dated October 15, 2004 issued by the NCMB
is plainly out of order.
Likewise, the Company cannot find solace in its cited case
of Ludo & Luym Corporation v. Saornido.22 In Ludo, the
company was engaged in the manufacture of coconut oil,
corn starch, glucose and related products. In the course of
its business operations, it engaged the arrastre services of
CLAS for the loading and unloading of its finished products
at the wharf. The arrastre workers deployed by CLAS to
perform the services needed were subsequently hired, on
different dates, as Ludo’s regular rank-and-file employees.
Thereafter, said employees joined LEU, which acted as the
exclusive bargaining agent of the rank-and-file employees.
When LEU entered into a CBA with Ludo, providing for
certain benefits to the employees (the amount of which vary
according to the length of service rendered), it requested to
include in its members’ period of service the time during
which they rendered arrastre services so that they could get
higher benefits. The matter was submitted for voluntary
arbitration when Ludo failed to act. Per submission
agreement executed by both parties, the sole issue for
resolution was the date of regularization of the workers. The
VA Decision ruled that: (1) the subject employees were
engaged in activities necessary and desirable to the
business of Ludo, and (2) CLAS is a labor-only contractor of
Ludo. It then disposed as follows: (a) the complainants were
considered regular employees six months from the first day
of service at CLAS; (b) the complainants, being entitled to
the CBA benefits during the regular employment, were
awarded sick leave, vacation leave, and annual wage and
salary increases during such period; (c) respondents shall
pay attorney’s fees of 10% of the total award; and (d) an
interest of 12% per annum or 1% per month shall be
imposed on the award from the date of promulgation until
fully paid. The VA added that all separation and/or
retirement benefits shall be construed from the date of
regularization subject only to the appropriate government
laws and other social legislation. Ludo filed a motion for
reconsideration, but the VA denied it. On appeal, the CA
265
affirmed in toto the assailed decision; hence, a petition was
brought before this Court raising the issue, among others, of
whether a voluntary arbitrator can award benefits not
claimed in the submission agreement. In denying the
petition, We ruled:
Generally, the arbitrator is expected to decide only those
questions expressly delineated by the submission
agreement. Nevertheless, the arbitrator can assume that he
has the necessary power to make a final settlement since
arbitration is the final resort for the adjudication of disputes.
The succinct reasoning enunciated by the CA in support of
its holding, that the Voluntary Arbitrator in a labor
controversy has jurisdiction to render the questioned arbitral
awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those
questions expressly stated and limited in the submission
agreement. However, since arbitration is the final resort for
the adjudication of disputes, the arbitrator can assume that
he has the power to make a final settlement. Thus,
assuming that the submission empowers the arbitrator to
decide whether an employee was discharged for just cause,
the arbitrator in this instance can reasonably assume that
his powers extended beyond giving a yes-or-no answer and
included the power to reinstate him with or without back
pay.
In one case, the Supreme Court stressed that "xxx the
Voluntary Arbitrator had plenary jurisdiction and authority to
interpret the agreement to arbitrate and to determine the
scope of his own authority subject only, in a proper case, to
the certiorari jurisdiction of this Court. The Arbitrator, as
already indicated, viewed his authority as embracing not
merely the determination of the abstract question of whether
or not a performance bonus was to be granted but also, in
the affirmative case, the amount thereof.
By the same token, the issue of regularization should be
viewed as two-tiered issue. While the submission
agreement mentioned only the determination of the date or
regularization, law and jurisprudence give the voluntary
arbitrator enough leeway of authority as well as adequate
prerogative to accomplish the reason for which the law on
voluntary arbitration was created – speedy labor justice. It
bears stressing that the underlying reason why this case
arose is to settle, once and for all, the ultimate question of
whether respondent employees are entitled to higher
benefits. To require them to file another action for payment
of such benefits would certainly undermine labor
proceedings and contravene the constitutional mandate
providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of
the questioned VA Decision. Said case reaffirms the plenary
jurisdiction and authority of the voluntary arbitrator to
interpret the CBA and to determine the scope of his/her own
266
authority. Subject to judicial review, the leeway of authority
as well as adequate prerogative is aimed at accomplishing
the rationale of the law on voluntary arbitration – speedy
labor justice. In this case, a complete and final adjudication
of the dispute between the parties necessarily called for the
resolution of the related and incidental issue of whether the
Company still violated the CBA but without being guilty of
ULP as, needless to state, ULP is committed only if there is
gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and
the CA conceded that its engagement of contractual
workers from PESO was a valid exercise of management
prerogative. It is confused. To emphasize, declaring that a
particular act falls within the concept of management
prerogative is significantly different from acknowledging that
such act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Company’s act of
contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however, that
such act is a valid exercise thereof. Obviously, this is due to
the recognition that the CBA provisions agreed upon by the
Company and the Union delimit the free exercise of
management prerogative pertaining to the hiring of
contractual employees. Indeed, the VA opined that "the right
of the management to outsource parts of its operations is
not totally eliminated but is merely limited by the CBA,"
while the CA held that "this management prerogative of
contracting out services, however, is not without limitation. x
x x These categories of employees particularly with respect
to casual employees serve as limitation to the Company’s
prerogative to outsource parts of its operations especially
when hiring contractual employees."
A collective bargaining agreement is the law between the
parties:
It is familiar and fundamental doctrine in labor law that the
CBA is the law between the parties and they are obliged to
comply with its provisions. We said so in Honda Phils., Inc.
v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the
negotiated contract between a legitimate labor organization
and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining
unit.1âwphi1 As in all contracts, the parties in a CBA may
establish such stipulations, clauses, terms and conditions as
they may deem convenient provided these are not contrary
to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes
the law between the parties and compliance therewith is
mandated by the express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear
and leave no doubt upon the intention of the contracting
267
parties, the literal meaning of their stipulations shall control. SO ORDERED.
x x x.24
JOEB M. ALIVIADO, ARTHUR G.R. No. 160506
In this case, Section 4, Article I (on categories of CORPUZ, ERIC ALIVIADO,
employees) of the CBA between the Company and the MONCHITO AMPELOQUIO,
Union must be read in conjunction with its Section 1, Article ABRAHAM BASMAYOR,
JONATHAN MATEO,
III (on union security). Both are interconnected and must be
LORENZO
given full force and effect. Also, these provisions are clear PLATON, JOSE FERNANDO
and unambiguous. The terms are explicit and the language GUTIERREZ, ESTANISLAO
of the CBA is not susceptible to any other interpretation. BUENAVENTURA, LOPE
Hence, the literal meaning should prevail. As repeatedly SALONGA,
held, the exercise of management prerogative is not FRANZ DAVID, NESTOR
unlimited; it is subject to the limitations found in law, IGNACIO,
JULIO REY, RUBEN
collective bargaining agreement or the general principles of
MARQUEZ, JR.,
fair play and justice25 Evidently, this case has one of the MAXIMINO PASCUAL,
restrictions- the presence of specific CBA provisions-unlike ERNESTO
in San Miguel Corporation Employees Union-PTGWO v. CALANAO, ROLANDO
Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol ROMASANTA, RHUEL AGOO,
Corporation v. NLRC,28 and Serrano v. NLRC29cited by the BONIFACIO ORTEGA,
Company. To reiterate, the CBA is the norm of conduct ARSENIO
SORIANO, JR., ARNEL
between the parties and compliance therewith is mandated
ENDAYA,
by the express policy of the law.30 ROBERTO ENRIQUEZ,
NESTOR
WHEREFORE, the petition is DENIED. The assailed June
BAQUILA, EDGARDO
16, 2005 Decision, as well as the October 12, 2005 QUIAMBAO,
Resolution of the Court of Appeals, which sustained the SANTOS BACALSO, SAMSON
October 26, 2004 Decision of the Voluntary Arbitrator, are BASCO,
hereby AFFIRMED. ALADINO GREGORO, JR.,
EDWIN
268
GARCIA, ARMANDO VILLAR, MELCHOR CARDANO,
EMIL MARIANO
TAWAT, MARIO P. LIONGSON, NARANIAN, JOHN
CRESENTE J. GARCIA, SUMERGIDO,
FERNANDO ROBERTO ROSALES, GERRY
MACABENTE, MELECIO C.
CASAPAO, GATPO, GERMAN N. Present:
REYNALDO JACABAN, GUEVARRA,
FERDINAND GILBERT Y. MIRANDA,
SALVO, ALSTANDO MONTOS, RODOLFO C.
RAINER N. SALVADOR, RAMIL TOLEDO, ARNOLD D. CARPIO, J., Chairperson,
REYES, PEDRO G. ROY, LASTONA,
LEONARDO PHILIP M. LOZA, MARIO N. BRION,
P. TALLEDO, ENRIQUE F. CULDAYON, ORLANDO P. DEL CASTILLO,
TALLEDO, JIMENEZ,
WILLIE ORTIZ, ERNESTO FRED P. JIMENEZ, RESTITUTO ABAD, and
SOYOSA, C.
ROMEO VASQUEZ, JOEL PAMINTUAN, JR., ROLANDO J. PEREZ, JJ.
BILLONES, DE
ALLAN BALTAZAR, NOLI ANDRES, ARTUZ BUSTENERA,
GABUYO, ROBERTO B. CRUZ, ROSEDY
EMMANUEL E. LABAN, RAMIR O.
E. YORDAN, DENNIS DACASIN,
PIAT, RAUL DULAY, TADEO ALEJANDRINO ABATON, and
DURAN, ORLANDO S. BALANGUE,
JOSEPH BANICO, ALBERT Petitioners,
LEYNES,
ANTONIO DACUNA, RENATO - versus -
DELA
CRUZ, ROMEO VIERNES, JR., PROCTER & GAMBLE PHILS., Promulgated:
ELAIS INC.,
BASEO, WILFREDO TORRES, and PROMM-GEM INC., March 9, 2010
269
 Respondents. Petitioners worked as merchandisers of P&G from various
x---------------------------------------------------- dates, allegedly starting as early as 1982 or as late as June 1991, to
---------------x
either May 5, 1992 or March 11, 1993, more specifically as follows:

Name Date Employed Date Dismissed

DECISION 1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
DEL CASTILLO, J.: 3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
Labor laws expressly prohibit labor-only contracting. To prevent its 5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
circumvention, the Labor Code establishes an employer-employee 6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
relationship between the employer and the employees of the labor-only
8. Jose Fernando Gutierrez 1988 May 5, 1992
contractor. 9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
The instant petition for review assails the March 21, 2003 Decision[1] of 11. Franz David 1989 March 11, 1993
the Court of Appeals (CA) in CA-G.R. SP No. 52082 and its October 12. Nestor Ignacio 1982 March 11, 1993
20, 2003 Resolution[2] denying the motions for reconsideration 13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
separately filed by petitioners and respondent Procter & Gamble Phils. 15. Maximino Pascual 1990 May 5, 1992
Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of 16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
the National Labor Relations Commission (NLRC), which in turn 17. Rolando Romasanta 1983 March 11, 1993
affirmed the November 29, 1996 Decision[3]of the Labor Arbiter. All 18. [Roehl] Agoo 1988 March 11, 1993
these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and 19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
Promotions Services (SAPS) to be legitimate independent contractors
21. Arnel Endaya 1983 March 11, 1993
and the employers of the petitioners. 22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992
Factual Antecedents 24. Ed[g]ardo Quiambao 1989 March 11, 1993
25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
270
28. Edwin Garcia 1987 May 5, 1992
29. Armando Villar 1990 May 5, 1992
30. Emil Tawat 1988 March 11, 1993
31. Mario P. Liongson 1991 May 5, 1992
32. Cresente J. Garcia 1984 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992
34. Melecio Casapao 1987 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992
36. Ferdinand Salvo 1985 May 5, 1992
37. Alstando Montos 1984 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992
39. Ramil Reyes 1984 March 11, 1993
40. Pedro G. Roy 1987
41. Leonardo [F]. Talledo 1985 March 11, 1993
42. Enrique [F]. Talledo 1988 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992
44. Ernesto Soyosa 1988 May 5, 1992
45. Romeo Vasquez 1985 March 11, 1993
46. Joel Billones 1987 March 11, 1993
47. Allan Baltazar 1989 March 11, 1993
48. Noli Gabuyo 1991 March 11, 1993
49. Emmanuel E. Laban 1987 May 5, 1992
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
52. Tadeo Duran[o] 1988 May 5, 1992
53. Joseph Banico 1988 March 11, 1993
54. Albert Leynes 1990 May 5, 1992
55. Antonio Dacu[m]a 1990 May 5, 1992
56. Renato dela Cruz 1982
57. Romeo Viernes, Jr. 1986
58. El[ia]s Bas[c]o 1989
59. Wilfredo Torres 1986 May 5, 1992
60. Melchor Carda[]o 1991 May 5, 1992
61. [Marino] [Maranion] 1989 May 5, 1992
62. John Sumergido 1987 May 5, 1992
63. Roberto Rosales May, 1987 May 5, 1992
64. Gerry [G]. Gatpo November, 1990 March 11, 1993
65. German N. Guevara May, 1990 March 11, 1993
66. Gilbert Y. Miranda June, 1991 March 11, 1993
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
68. Arnold D. [Laspoa] June 1991 March 11, 1993
69. Philip M. Loza March 5, 1992 March 11, 1993
70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993
71. Orlando P. Jimenez November 6, 1992 March 11, 1993
72. Fred P. Jimenez September, 1991 March 11, 1993
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11,
1993
74. Rolando J. de Andres June, 1991 March 11, 1993
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993
77. Rosedy O. Yordan June, 1991 May 5, 1992
78. Dennis Dacasin May. 1990 May 5, 1992
79. Alejandrino Abaton 1988 May 5, 1992
80. Orlando S. Balangue March, 1989 March 11, 1993[4]
They all individually signed employment contracts with either Promm-
Gem or SAPS for periods of more or less five months at a time.[5] They
were assigned at different outlets, supermarkets and stores where they
handled all the products of P&G. They received their wages from
Promm-Gem or SAPS.[6]
SAPS and Promm-Gem imposed disciplinary measures on
erring merchandisers for reasons such as habitual absenteeism,
dishonesty or changing day-off without prior notice.[7]
271
P&G is principally engaged in the manufacture and production of
different consumer and health products, which it sells on a wholesale
basis to various supermarkets and distributors.[8] To enhance consumer
awareness and acceptance of the products, P&G entered into contracts
with Promm-Gem and SAPS for the promotion and merchandising of
its products.[9]
In December 1991, petitioners filed a complaint[10] against P&G
for regularization, service incentive leave pay and other benefits with
damages. The complaint was later amended[11] to include the matter of
their subsequent dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the
complaint for lack of merit and ruled that there was no employer-
employee relationship between petitioners and P&G. He found that the
selection and engagement of the petitioners, the payment of their
wages, the power of dismissal and control with respect to the means
and methods by which their work was accomplished, were all done and
exercised by Promm-Gem/SAPS. He further found that Promm-Gem
and SAPS were legitimate independent job contractors. The dispositive
portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered Dismissing the above-entitled cases against
respondent Procter & Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.[12]
Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor Arbiters
findings. On July 27, 1998, the NLRC rendered a Decision[13] disposing
as follows:
WHEREFORE, premises considered, the appeal of
complainants is hereby DISMISSED and the decision
appealed from AFFIRMED.
SO ORDERED.[14]
Petitioners filed a motion for reconsideration but the motion was denied
in the November 19, 1998 Resolution.[15]
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA,
alleging grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the Labor Arbiter and the NLRC. However,
said petition was also denied by the CA which disposed as follows:
WHEREFORE, the decision of the National Labor
Relations Commission dated July 27, 1998 is AFFIRMED
with the MODIFICATION that respondent Procter &
Gamble Phils., Inc. is ordered to pay service incentive leave
pay to petitioners.
SO ORDERED.[16]
272
Petitioners filed a motion for reconsideration but the motion was also
denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF
APPEALS HAS COMMITTED [A] REVERSIBLE
ERROR WHEN IT DID NOT FIND THE PUBLIC
RESPONDENTS TO HAVE ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF JURISDICTION IN
RENDERING THE QUESTIONED JUDGMENT
WHEN, OBVIOUSLY, THE PETITIONERS WERE
ABLE TO PROVE AND ESTABLISH THAT
RESPONDENT PROCTER & GAMBLE PHILS., INC. IS
THEIR EMPLOYER AND THAT THEY WERE
ILLEGALLY DISMISSED BY THE FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF
APPEALS HAS COMMITTED [A] REVERSIBLE
ERROR WHEN IT DID NOT DECLARE THAT THE
PUBLIC RESPONDENTS HAD ACTED WITH GRAVE
ABUSE OF DISCRETION WHEN THE LATTER DID
NOT FIND THE PRIVATE RESPONDENTS LIABLE
TO THE PETITIONERS FOR PAYMENT OF ACTUAL,
MORAL AND EXEMPLARY DAMAGES AS WELL
AS LITIGATION COSTS AND ATTORNEYS FEES.[17]
Simply stated, the issues are: (1) whether P&G is the employer
of petitioners; (2) whether petitioners were illegally dismissed; and (3)
whether petitioners are entitled for payment of actual, moral and
exemplary damages as well as litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim
that they were recruited by the salesmen of P&G and were engaged to
undertake merchandising chores for P&G long before the existence of
Promm-Gem and/or SAPS. They further claim that when the latter had
its so-called re-alignment program, petitioners were instructed to fill up
application forms and report to the agencies which P&G created.[18]
Petitioners further claim that P&G instigated their dismissal
from work as can be gleaned from its letter[19] to SAPS dated February
24, 1993, informing the latter that their Merchandising Services
Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-
only contractors providing services of manpower to their client. They
claim that the contractors have neither substantial capital nor tools and
equipment to undertake independent labor contracting. Petitioners insist
that since they had been engaged to perform activities which are
necessary or desirable in the usual business or trade of P&G, then they
are its regular employees.[20]
Respondents Arguments
273
 On the other hand, P&G points out that the instant petition raises
only questions of fact and should thus be thrown out as the Court is not
a trier of facts. It argues that findings of facts of the NLRC, particularly
where the NLRC and the Labor Arbiter are in agreement, are deemed
binding and conclusive on the Supreme Court.
P&G further argues that there is no employment relationship
between it and petitioners. It was Promm-Gem or SAPS that (1)
selected petitioners and engaged their services; (2) paid their salaries;
(3) wielded the power of dismissal; and (4) had the power of control
over their conduct of work.
P&G also contends that the Labor Code neither defines nor
limits which services or activities may be validly outsourced. Thus, an
employer can farm out any of its activities to an independent
contractor, regardless of whether such activity is peripheral or core in
nature. It insists that the determination of whether to engage the
services of a job contractor or to engage in direct hiring is within the
ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007,
we deemed as waived the filing of the Comment of Promm-Gem on
the petition.[21] Also, although SAPS was impleaded as a party in the
proceedings before the Labor Arbiter and the NLRC, it was no longer
impleaded as a party in the proceedings before the CA.[22] Hence, our
pronouncements with regard to SAPS are only for the purpose of
determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments
of lower courts and agencies exercising adjudicative functions, such as
the NLRC. Occasionally, however, the Court is constrained to wade
into factual matters when there is insufficient or insubstantial evidence
on record to support those factual findings; or when too much is
concluded, inferred or deduced from the bare or incomplete facts
appearing on record.[23] In the present case, we find the need to review
the records to ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of
petitioners, it is necessary to first determine whether Promm-Gem and
SAPS are labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever
an employer enters into a contract with another person for
the performance of the formers work, the employees of the
contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails
to pay the wages of his employees in accordance with this
274
 Code, the employer shall be jointly and severally liable with
his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the
same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of labor
to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting
and job contracting as well as differentiations within these
types of contracting and determine who among the parties
involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any
provision of this Code.
There is labor-only contracting where the person
supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers
recruited and placed by such person are performing
activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
(Emphasis and underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code, as amended by Department Order No. 18-
02,[24] distinguishes between legitimate and labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting
Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment
between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job
or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently
undertake the performance of the job, work or service, and
the contractual workers engaged by the contractor or
subcontractor to accomplish the job[,] work or service.
xxxx
Section 5. Prohibition against labor-only
contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall
refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of
the following elements are present:
i) The contractor or subcontractor does not have
substantial capital or investment which relates to the job,
work or service to be performed and the employees
recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly
related to the main business of the principal; or
275

ii) [T]he contractor does not exercise the right to
control over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice
to the application of Article 248 (c) of the Labor Code, as
amended.
Substantial capital or investment refers to capital stocks
and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises,
actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service
contracted out.
The right to control shall refer to the right reserved to the
person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but
also the manner and means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting
arrangements for the performance of specific jobs, works or
services. Indeed, it is management prerogative to farm out any of its
activities, regardless of whether such activity is peripheral or core in
nature. However, in order for such outsourcing to be valid, it must be
made to an independent contractor because the current labor rules
expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the
contractor or sub-contractor merely recruits, supplies or places workers
to perform a job, work or service for a principal[25] and any of the
following elements are present:
i) The contractor or subcontractor does not have
substantial capital or investment which relates to the job,
work or service to be performed and the employees
recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly
related to the main business of the principal; or
ii) The contractor does not exercise the right to
control over the performance of the work of
the contractual employee. (Underscoring supplied)
In the instant case, the financial statements[26] of Promm-Gem
show that it
has authorized capital stock of P1 million and a paid-in capital, or
capital available for operations, of P500,000.00 as of 1990.[27] It also
has long term assets worth P432,895.28 and current assets
of P719,042.32. Promm-Gem has also proven that it maintained its
own warehouse and office space with a floor area of 870 square
meters.[28] It also had under its name three registered vehicles which
were used for its promotional/merchandising business.[29] Promm-Gem
also has other clients[30] aside from P&G.[31] Under the circumstances,
we find that Promm-Gem has substantial investment which relates to
the work to be performed. These factors negate the existence of the
276
element specified in Section 5(i) of DOLE Department Order No. 18-
02.
The records also show that Promm-Gem supplied its
complainant-workers with the relevant materials, such as markers,
tapes, liners and cutters, necessary for them to perform their
work. Promm-Gem also issued uniforms to them. It is also relevant to
mention that Promm-Gem already considered the complainants
working under it as its regular, not merely contractual or project,
employees.[32] This circumstance negates the existence of element (ii)
as stated in Section 5 of DOLE Department Order No. 18-02, which
speaks of contractual employees. This, furthermore, negates on the part
of Promm-Gem bad faith and intent to circumvent labor laws which
factors have often been tipping points that lead the Court to strike down
the employment practice or agreement concerned as contrary to public
policy, morals, good customs or public order.[33]
Under the circumstances, Promm-Gem cannot be considered as
a labor-only contractor. We find that it is a legitimate independent
contractor.
On the other hand, the Articles of Incorporation of SAPS shows
that it has a paid-in capital of only P31,250.00. There is no other
evidence presented to show how much its working capital and assets
are. Furthermore, there is no showing of substantial investment in tools,
equipment or other assets.
In Vinoya v. National Labor Relations Commission,[34] the Court
held that [w]ith the current economic atmosphere in the country, the
paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as
an independent contractor.[35] Applying the same rationale to the
present case, it is clear that SAPS having a paid-in capital of
only P31,250 - has no substantial capital. SAPS lack of substantial
capital is underlined by the records[36] which show that its payroll for its
merchandisers alone for one month would already total P44,561.00. It
had 6-month contracts with P&G.[37] Yet SAPS failed to show that it
could complete the 6-month contracts using its own capital and
investment. Its capital is not even sufficient for one months payroll.
SAPS failed to show that its paid-in capital of P31,250.00 is sufficient
for the period required for it to generate its needed revenue to sustain its
operations independently. Substantial capital refers to capitalization
used in the performance or completion of the job, work or service
contracted out. In the present case, SAPS has failed to show substantial
capital.
Furthermore, the petitioners have been charged with the
merchandising and promotion of the products of P&G, an activity that
has already been considered by the Court as doubtlessly directly related
to the manufacturing business,[38] which is the principal business of
P&G. Considering that SAPS has no substantial capital or investment
and the workers it recruited are performing activities which are directly
related to the principal business of P&G, we find that the former is
engaged in labor-only contracting.
277
 Where labor-only contracting exists, the Labor Code itself
establishes an employer-employee relationship between the employer
and the employees of the labor-only contractor.[39] The statute
establishes this relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been
directly employed by the principal employer.[40]
Consequently, the following petitioners, having been recruited
and supplied
by SAPS[41] -- which engaged in labor-only contracting -- are
considered as the employees of P&G: Arthur Corpuz, Eric Aliviado,
Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo,
Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David,
Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio
Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez,
Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos,
Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F.
Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo,
German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold
D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez,
Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres,
Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.
Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo
Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and
Dennis Dacasin.
The following petitioners, having worked under, and been
dismissed by Promm-Gem, are considered the employees of Promm-
Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia,
Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton,
Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil
Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando
Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta,
Nestor Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto
Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino
Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and
Joeb Aliviado.[42]
Termination of services
We now discuss the issue of whether petitioners were illegally
dismissed. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just[43] or
authorized[44] cause.
In the instant case, the termination letters given by Promm-Gem to its
employees uniformly specified the cause of dismissal as grave
misconduct and breach of trust, as follows:
xxxx
This informs you that effective May 5, 1992, your
employment with our company, Promm-Gem, Inc. has
been terminated. We find your expressed admission, that
you considered yourself as an employee of Procter &
278
 Gamble Phils., Inc. and assailing the integrity of the
Company as legitimate and independent promotion firm, is
deemed as an act of disloyalty prejudicial to the interests of
our Company: serious misconduct and breach of trust
reposed upon you as employee of our Company which
[co]nstitute just cause for the termination of your
employment.
x x x x[45]
Misconduct has been defined as improper or wrong conduct; the
transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, unlawful in character implying
wrongful intent and not mere error of judgment. The misconduct to be
serious must be of such grave and aggravated character and not merely
trivial and unimportant.[46] To be a just cause for dismissal, such
misconduct (a) must be serious; (b) must relate to the performance of
the employees duties; and (c) must show that the employee has become
unfit to continue working for the employer.[47]
In other words, in order to constitute serious misconduct which will
warrant the dismissal of an employee under paragraph (a) of Article
282 of the Labor Code, it is not sufficient that the act or conduct
complained of has violated some established rules or policies. It is
equally important and required that the act or conduct must have been
performed with wrongful intent.[48] In the instant case, petitioners-
employees of Promm-Gem may have committed an error of judgment
in claiming to be employees of P&G, but it cannot be said that they
were motivated by any wrongful intent in doing so. As such, we find
them guilty of only simple misconduct for assailing the integrity of
Promm-Gem as a legitimate and independent promotion firm. A
misconduct which is not serious or grave, as that existing in the instant
case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal,
must be based on the willful breach of the trust reposed in the
employee by his employer. Ordinary breach will not suffice. A breach
of trust is willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.[49]
Loss of trust and confidence, as a cause for termination of
employment, is premised on the fact that the employee concerned holds
a position of responsibility or of trust and confidence. As such, he must
be invested with confidence on delicate matters, such as custody,
handling or care and protection of the property and assets of the
employer. And, in order to constitute a just cause for dismissal, the act
complained of must be work-related and must show that the employee
is unfit to continue to work for the employer.[50] In the instant case, the
petitioners-employees of Promm-Gem have not been shown to be
occupying positions of responsibility or of trust and confidence.
Neither is there any evidence to show that they are unfit to continue to
work as merchandisers for Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-
employees of Promm-Gem.
279
 While Promm-Gem had complied with the procedural aspect of
due process in terminating the employment of petitioners-
employees, i.e., giving two notices and in between such notices, an
opportunity for the employees to answer and rebut the charges against
them, it failed to comply with the substantive aspect of due process as
the acts complained of neither constitute serious misconduct nor breach
of trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were
given no written notice of dismissal. The records show that upon
receipt by SAPS of P&Gs letter terminating their Merchandising
Services Contact effective March 11, 1993, they in turn verbally
informed the concerned petitioners not to report for work anymore. The
concerned petitioners related their dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at
SAPS office. We were told by Mr. Saturnino A. Ponce that
we should already stop working immediately because that
was the order of Procter and Gamble. According to him he
could not do otherwise because Procter and Gamble was
the one paying us. To prove that Procter and Gamble was
the one responsible in our dismissal, he showed to us the
letter[51] dated February 24, 1993, x x x
February 24, 1993
Sales and Promotions Services
Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this
formally informs you that we will not be renewing our
Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your
services to the Company will terminate effective close of
business hours of 11 March 1993.
This is without prejudice to whatever obligations you may
have to the company under the abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet
assignments. But, we were no longer allowed to work and
we were refused entrance by the security guards
posted. According to the security guards, all merchandisers
of Procter and Gamble under S[APS] who filed a case in
the Dept. of Labor are already dismissed as per letter of
Procter and Gamble dated February 25, 1993. x x x[52]
Neither SAPS nor P&G dispute the existence of these
circumstances. Parenthetically, unlike Promm-Gem which dismissed
its employees for grave misconduct and breach of trust due to
disloyalty, SAPS dismissed its employees upon the initiation of
P&G. It is evident that SAPS does not carry on its own business
because the termination of its contract with P&G automatically meant
280
for it also the termination of its employees services. It is obvious from
its act that SAPS had no other clients and had no intention of seeking
other clients in order to further its merchandising business. From all
indications SAPS, existed to cater solely to the need of P&G for the
supply of employees in the latters merchandising concerns only. Under
the circumstances prevailing in the instant case, we cannot consider
SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized
that the onus probandi to prove the lawfulness of the dismissal rests
with the employer.[53] In termination cases, the burden of proof rests
upon the employer to show that the dismissal is for just and valid
cause.[54] In the instant case, P&G failed to discharge the burden of
proving the legality and validity of the dismissals of those petitioners
who are considered its employees. Hence, the dismissals necessarily
were not justified and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to
damages. Moral
and exemplary damages are recoverable where the dismissal of an
employee was attended by bad faith or fraud or constituted an act
oppressive to labor or was done in a manner contrary to morals, good
customs or public policy.[55]
With regard to the employees of Promm-Gem, there being no evidence
of bad faith, fraud or any oppressive act on the part of the latter, we find
no support for the award of damages.
As for P&G, the records show that it dismissed its employees through
SAPS in a manner oppressive to labor. The sudden and peremptory
barring of the concerned petitioners from work, and from admission to
the work place, after just a one-day verbal notice, and for no valid
cause bellows oppression and utter disregard of the right to due process
of the concerned petitioners. Hence, an award of moral damages is
called for.
Attorneys fees may likewise be awarded to the concerned
petitioners who
were illegally dismissed in bad faith and were compelled to litigate or i
ncur expenses to protect their rights by reason of the oppressive
acts[56] of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is
unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges, inclusive of allowances,
and other benefits or their monetary equivalent from the time the
compensation was withheld up to the time of actual
reinstatement.[57] Hence, all the petitioners, having been illegally
dismissed are entitled to reinstatement without loss of seniority rights
and with full back wages and other benefits from the time of their
illegal dismissal up to the time of their actual reinstatement.
281
WHEREFORE, the petition is GRANTED. The Decision petitioners backwages and other benefits; and ten percent of the total
dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No. sum as and for attorneys fees as stated above; and for immediate
52082 and the Resolution dated October 20, execution.
2003 are REVERSED and SET ASIDE. Procter & Gamble Phils.,
Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective
employees immediately without loss of seniority rights and with full SO ORDERED.
backwages and other benefits from the time of their illegal dismissal up
to the time of their actual reinstatement. Procter & Gamble Phils., Inc.
RAMY GALLEGO, G.R. No. 179807
is further ORDERED to pay each of those petitioners considered as its
employees, namely Arthur Corpuz, Eric Aliviado, Monchito Petitioner,
Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo
Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Present:
Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio
Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao,
Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, QUISUMBING, J., Chairpers
Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, - versus - CARPIO MORALES,
Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert
Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, CHICO-NAZARIO,*
Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
LEONARDO-DE CASTRO,**
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B.
Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente PERALTA,*** JJ.
J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz,
BAYER PHILIPPINES, INC.,
Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as
DANPIN GUILLERMO, PRODUCT
moral damages plus ten percent of the total sum as and for attorneys
IMAGE MARKETING, INC., and
fees.
EDGARDO BERGONIA, Promulgated:
Let this case be REMANDED to the Labor Arbiter for the Respondents. July 31, 2009
computation, within 30 days from receipt of this Decision, of
282

x------------------------------------------
--------x
DECISION
CARPIO MORALES, J.:
Ramy Gallego (petitioner) was contracted in April 1992 by
Bayer Philippines, Inc. (BAYER) as crop protection
technician to promote and market BAYER products.[1] Under
the supervision of Aristeo Filipino, BAYER sales
representative for Panay Island, petitioner made farm visits
to different municipalities in Panay Island to convince
farmers to buy BAYER products.[2]
In 1996, petitioners employment with BAYER came to a
halt, prompting him to seek employment with another
company. BAYER eventually reemployed petitioner,
however, in 1997 through Product Image and Marketing
Services, Inc. (PRODUCT IMAGE) of which respondent
Edgardo Bergonia (Bergonia) was the President and
General Manager, performing the same task as that of crop
protection technician promoting BAYER products to farmers
and dealers in Panay Island solely for the benefit of
BAYER.[3]
By petitioners claim, in October, 2001, he was directed by
Pet Pascual, the newly assigned BAYER sales
representative, to submit a resignation letter, but he refused;
and that in January, 2002, he was summoned by his
immediate supervisors including respondent Danpin
Guillermo (Guillermo), BAYER District Sales Manager for
Panay, and was ordered to quit his employment which
called for him to return all pieces of service equipment
issued to him, but that again he refused.[4]
Still by petitioners claim, he continued performing his duties
and receiving compensation until the end of January,
2002; that on April 7, 2002, he received a memorandum that
his area of responsibility would be transferred to Luzon, of
which memorandum he sought reconsideration but to no
avail; and that Guillermo and Bergonia spread rumors that
reached the dealers in Antique to the effect that he was not
anymore connected with BAYER and any transaction with
him would no longer be honored as of April 30, 2002.[5]
283
Believing that his employment was terminated, petitioner
lodged on June 6, 2002 a complaint for illegal dismissal with
the National Labor Relations Commission (NLRC) against
herein respondents BAYER, Guillermo, PRODUCT IMAGE,
and Bergonia, with claims for reinstatement, backwages
and/or separation pay, unpaid wages, holiday pay, premium
pay, service incentive leave and allowances, damages and
attorneys fees.[6]
Respondents BAYER and Guillermo denied the existence of
an employer-employee relationship between BAYER and
petitioner, explaining that petitioners work at BAYER was
simply occasioned by the Contract of Promotional Services
that BAYER had executed with PRODUCT IMAGE whereby
PRODUCT IMAGE was to promote and market BAYER
products on its (PRODUCT IMAGE) own account and in its
own manner and method. They added that as an
independent contractor, PRODUCT IMAGE retained the
exclusive power of control over petitioner as it assigned full-
time supervisors to exercise control and supervision over its
employees assigned at BAYER.[7]
Respondents PRODUCT IMAGE and Bergonia, on the
other hand, admitted that petitioner was hired as an
employee of PRODUCT IMAGE on April 7, 1997 on a
contractual basis to promote and market BAYER products
pursuant to the Contract of Promotional Services forged
between it and BAYER. They alleged that petitioner was a
field worker who had no fixed hours and worked under
minimal supervision, his performance being gauged only by
his accomplishment reports duly certified to by BAYER
acting as his de facto supervisor;[8] that petitioner was
originally assigned to Iloilo but later transferred to
Antique; that petitioner was not dismissed, but went on
official leave from January 23 to 31, 2002, and stopped
reporting for work thereafter; and that petitioner was
supposed to have been reassigned to South Luzon effective
March 15, 2002 in accordance with a personnel
reorganization program, but he likewise failed to report to
his new work station.[9]
By Decision of May 6, 2004,[10] the Labor Arbiter declared
respondents guilty of illegal dismissal, disposing as follows:
WHEREFORE, judgment is rendered declaring
respondents, Bayer Phil. Inc./Danpin Guillermo and Product
Image Marketing Services, Inc./Edgardo Begornia [sic]
guilty of Illegal Dismissal and is
hereby ORDERED to Reinstatecomplainant to his former or
equivalent position ten (10) days from receipt hereof and to
immediately pay complainant upon receipt of this decision
the following:
284

Backwages Php 228,000.00
13th Month Pay Php 19,000.00
Holiday Pay Php 9,500.00
Service Incentive Leave Pay Php 4,750.00
Attorneys Fees ` Php 26,125.00
Total: Php 287,375.00
In so deciding, the Labor Arbiter found, among other things,
that there was an employer-employee relationship between
BAYER and petitioner since BAYER furnished petitioner the
needed facilities and paraphernalia, and fixed the
methodology to be used in the performance of his work.
On appeal by respondents, the NLRC reversed the Decision
of the Labor Arbiter and dismissed petitioners complaint by
Decision of February 22, 2006,[11] holding that as an
independent contractor, PRODUCT IMAGE was the
employer of petitioner but there was no evidence that
petitioner was dismissed by either PRODUCT IMAGE or
BAYER. Sustaining PRODUCT IMAGEs claim of
abandonment, it held that an employee is deemed to have
abandoned his job if he failed to report for work after the
expiration of a duly approved leave of absence or if, after
being transferred to a new assignment, he did not report for
work anymore.
Petitioners Motion for Reconsideration having been denied
by Resolution of May 25, 2006,[12] he appealed to the Court
of Appeals via Certiorari.[13]
By Resolution of September 25, 2006, the appellate court
dismissed petitioners petition for failure to attach to it the
complaint and the parties respective position papers filed
with the Labor Arbiter.[14] His Motion for Reconsideration
having been denied by Resolution of August 14,
2007,[15] petitioner comes before this Court via the present
Petition for Review on Certiorari.
Petitioner argues that the appellate court erred in dismissing
his petition outright considering that it had previously
allowed subsequent submission of required documents not
attached to a petition for certiorari; and that he attached the
285
required pleadings to his Motion for Reconsideration with
the appellate court. Moreover, he contends that
respondents failed to discharge the burden of proving the
validity of his dismissal in order to overturn the finding of the
Labor Arbiter that he was illegally dismissed.[16]
BAYER and Guillermo counter that petitioner raised factual
issues in his petition before the appellate court which are
not reviewable by certiorari; that petitioners failure to attach
the required pleadings to his petition before the appellate
court, coupled with his failure to offer any justification
therefor, provides no occasion for a liberal application of the
rules in his favor; that petitioner has no cause of action
against them as his employer is PRODUCT IMAGE; and
that assuming that petitioner is entitled to his money claims,
the same should be enforced against the performance bond
posted by PRODUCT IMAGE to cover the claims of its
employees assigned at BAYER.[17]
PRODUCT IMAGE and Bergonia postulate in their
Comment that the appellate courts outright dismissal of
petitioners appeal was proper in view of, among other
things, the summary nature of proceedings in labor
cases. They also contend that petitioners present petition
suffers from the following infirmities: (1) it does not contain
an affidavit of service; (2) it is not accompanied by
petitioners Petition for Certiorari before the appellate court;
(3) it does not specify the errors of law allegedly committed
by the appellate court; (4) it is not accompanied by proof of
service upon the adverse party of a copy of the payment of
docket fees; (5) it raises questions of fact; and (6) it
impleads the NLRC and imputes grave abuse of discretion
to the appellate court, thereby implying that the petition is
likewise made under Rule 65 of the Rules of Court. Lastly,
they maintain that petitioner was not dismissed as he
actually abandoned his job.[18]
The Court shall first resolve the procedural issues.
Only errors of law are generally reviewed by this Court in
petitions for review on certiorari of the appellate courts
decisions,[19] and the question of whether an employer-
employee relationship exists in a given case is essentially a
question of fact.[20] Be that as it may, when, as here, the
findings of the NLRC contradict those of the Labor Arbiter,
this Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned
findings.[21]
286
Respecting the appellate courts dismissal of petitioners
Petition for Certiorari for his failure to attach thereto the
relevant pleadings filed with the Labor Arbiter, the
requirement to attach the same under Section 1, Rule
65[22] is considered vis a vis Section 3, Rule 46[23] which
states that the failure of the petitioner to comply with any of
the documentary requirements, such as the attachment of
relevant pleadings, shall be sufficient ground for the
dismissal of the petition. By and large, the outright dismissal
of a petition for failure to comply with said requirement
cannot be assailed as constituting either grave abuse of
discretion or reversible error of law.[24]
The Court, however, is inclined to, as it does, overlook
petitioners failure to attach the subject relevant pleadings to
his Petition for Certiorari before the appellate court in view
of the serious matters dealt with in this case. That brings the
Court to consider the substantial merits of the case, thus
rendering it unnecessary to still discuss the other procedural
matters raised by respondents.
In the main, the substantive issues are: whether PRODUCT
IMAGE is a labor-only contactor and BAYER should be
deemed petitioners principal employer; and whether
petitioner was illegally dismissed from his employment.
Permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to farm out with a
contractor or subcontractor the performance of a specific
job, work, or service within a definite or predetermined
period, regardless of whether such job, work or, service is to
be performed or completed within or outside the premises of
the principal.[25] Under this arrangement, the following
conditions must be met: (a) the contractor carries on a
distinct and independent business and undertakes the
contract work on his account under his own responsibility
according to his own manner and method, free from the
control and direction of his employer or principal in all
matters connected with the performance of his work except
as to the results thereof; (b) the contractor
has substantial capital or investment; and (c) the agreement
between the principal and contractor or subcontractor
assures the contractual employees entitlement to all labor
and occupational safety and health standards, free exercise
of the right to self-organization, security of tenure, and
social welfare benefits.[26]
In distinguishing between permissible job contracting and
prohibited labor-only contracting,[27] the totality of the facts
and the surrounding circumstances of the case are to be
287
considered,[28] each case to be determined by its own facts, Mandaluyong City
and all the features of the relationship assessed.[29]

for having complied with the requirements as provided for

In the case at bar, the Court finds substantial evidence to under the Labor Code, as amended, and its implementing
support the finding of the NLRC that PRODUCT IMAGE is a Rules and having paid the registration fee in the amount
legitimate job contractor. of ONE HUNDRED (P100) PESOS per Official Receipt
Number 6530485Y, dated 21 June 2002.[30]

The Court notes that PRODUCT IMAGE was issued by the

Department of Labor and Employment (DOLE) Certificate of
Registration Numbered NCR-8-0602-176 reading:
The DOLE certificate having been issued by a public officer,
it carries with it the presumption that it was issued in the
regular performance of official duty.[31] Petitioners bare
CERTIFICATE OF REGISTRATION
assertions fail to rebut this presumption. Further, since the
Numbered NCR-8-0602-176 DOLE is the agency primarily responsible for regulating the
business of independent job contractors, the Court can
presume, in the absence of evidence to the contrary, that it
issued to had thoroughly evaluated the requirements submitted by
PRODUCT IMAGE before issuing the Certificate of
Registration.
Mr. Edgardo V. Bergonia Independently of the DOLEs Certification, among the
President circumstances that establish the status of PRODUCT
IMAGE as a legitimate job contractor are: (1) PRODUCT
PRODUCT IMAGE & MARKETING SERVICES, INC. IMAGE had, during the period in question, a contract with
Unit 5& 6 GF J & L Bldg., 251 EDSA Greenhills, BAYER for the promotion and marketing of BAYER

288
products;[32] (2) PRODUCT IMAGE has an independent
business and provides services nationwide to big
companies such as Ajinomoto Philippines and Procter and
Gamble Corporation;[33] and (3) PRODUCT IMAGEs total
assets from 1998 to 2000 amounted
to P405,639, P559,897, and P644,728,
[34]
respectively. PRODUCT IMAGE also posted a bond in
the amount of P100,000 to answer for any claim of its
employees for unpaid wages and other benefits that may
arise out of the implementation of its contract with
BAYER.[35]
PRODUCT IMAGE cannot thus be considered a labor-only
contractor.
The existence of an employer-employee relationship is
determined on the basis of four standards, namely: (a) the
manner of selection and engagement of the putative
employee; (b) the mode of payment of wages; (c) the
presence or absence of power of dismissal; and (d) the
presence or absence of control of the putative employees
conduct. Most determinative among these factors is the so-
called control test.[36]
The presence of the first requisite which refers to selection
and engagement is evidenced by a document entitled Job
Offer, whereby PRODUCT IMAGE offered to hire petitioner
as crop protection technician effective April 7, 1997, which
offer petitioner accepted.[37]
On the second requisite regarding the payment of wages, it
was PRODUCT IMAGE that paid the wages and other
benefits of petitioner, pursuant to the stipulation in the
contract between PRODUCT IMAGE and BAYER that
BAYER shall pay PRODUCT IMAGE an amount based on
services actually rendered without regard to the number of
personnel employed by PRODUCT IMAGE; and that
PRODUCT IMAGE shall faithfully comply with the provisions
of the Labor Code and hold BAYER free and harmless from
any claim of its employees arising from the contract.[38]
As to the third requisite which relates to the power of
dismissal, and the fourth requisite which relates to the
power of control, both powers are vested in PRODUCT
IMAGE. The Contract of Promotional Services provides that
PRODUCT IMAGE shall have the power to discipline its
employees assigned at BAYER, such that no control
whatsoever shall be exercised by BAYER over those
personnel on the manner and method by which they
289
perform their duties,[39] and that all directives, complaints, or stopped reporting for work before filing a complaint for
observations of BAYER relating to the performance of the illegal dismissal, based on his belief that Guillermo and
employees of PRODUCT IMAGE shall be addressed to the Bergonia had spread rumors that his transactions on behalf
latter.[40] of BAYER would no longer be honored as of April 30,
2002. This belief remains just that it is
unsubstantiated.While in cases of illegal dismissal, the
If at all, the only control measure retained by BAYER over employer bears the burden of proving that the dismissal is
petitioner was to act as his de facto supervisor in certifying for a valid or authorized cause, the employee must first
to the veracity of the accomplishment reports he submitted establish by substantial evidence the fact of dismissal.[43]
to PRODUCT IMAGE. This is by no means the kind of
control that establishes an employer-employee relationship
as it pertains only to the results and not the manner and WHEREFORE, the petition is, in light of the
method of doing the work. It would be a rare contract of foregoing, DENIED.
service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his
performance of the engagement.[41] Surely, it would be SO ORDERED.
foolhardy for any company to completely give the reins and
totally ignore the operations it has contracted out.[42] G.R. No. 205300, March 18, 2015

FONTERRA BRANDS PHILS.,

INC., Petitioner, v. LEONARDO1 LARGADO AND
In fine, PRODUCT IMAGE is ineluctably the employer of TEOTIMO ESTRELLADO, Respondents.
petitioner.
DECISION

VELASCO JR., J.:

Respecting the issue of illegal dismissal, the Court
appreciates no evidence that petitioner was The Case
dismissed. What it finds is that petitioner unilaterally

290

This is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court seeking the reversal and setting aside of
the Decision of the Court of Appeals (CA) dated September
6, 2012, as well as its January 11, 2013 Resolution denying
reconsideration thereof, in CA-G.R. SP No. 114227,
entitled Leonardo Largado and Teotimo P. Estrellado v.
National Labor Relations Commission (NLRC), Fonterra
Brands Phils., Inc./Carlo Mendoza, Zytron Marketing &
Promotions Corp./Francisco Valencia, A.C. Sicat Marketing
& Promotional Services/Arturo Sicat.
The Facts
Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted
the services of Zytron Marketing and Promotions Corp.
(Zytron) for the marketing and promotion of its milk and
dairy products. Pursuant to the contract, Zytron provided
Fonterra with trade merchandising representatives (TMRs),
including respondents Leonardo Largado (Largado) and
Teotimo Estrellado (Estrellado). The engagement of their
services began on September 15, 2003 and May 27, 2002,
respectively, and ended on June 6, 2006.
On May 3, 2006, Fonterra sent Zytron a letter terminating its
promotions contract, effective June 5, 2006. Fonterra then
entered into an agreement for manpower supply with A.C.
Sicat Marketing and Promotional Services (A.C. Sicat).
Desirous of continuing their work as TMRs, respondents
submitted their job applications with A.C. Sicat, which hired
them for a term of five (5) months, beginning June 7, 2006
up to November 6, 2006.
When respondents’ 5-month contracts with A.C. Sicat were
about to expire, they allegedly sought renewal thereof, but
wereallegedly refused. This prompted respondents to file
complaints for illegal dismissal, regularization, non-payment
of service incentive leave and 13th month pay, and actual
and moral damages, against petitioner, Zytron, and A.C.
Sicat.
The Labor Arbiter dismissed the complaint and ruled that:
(1) respondents were not illegally dismissed. As a matter of
fact, they were the ones who refused to renew their contract
and that they voluntarily complied with the requirements for
them to claim their corresponding monetary benefits in
relation thereto; and (2) they were consecutively employed
by Zytron and A.C. Sicat, not by Fonterra. The dispositive
portion of the Decision2 reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby
rendered DISMISSING the instant case for utter lack of
merit.
SO ORDERED.cralawred
291
The NLRC affirmed the Labor Arbiter, finding that
respondents’ separation from Zytron was brought about by
the execution of the contract between Fonterra and A.C.
Sicat where the parties agreed to absorb Zytron’s
personnel, including respondents. Too, respondents failed
to present any evidence that they protested this set-up.
Furthermore, respondents failed to refute the allegation that
they voluntarily refused to renew their contract with A.C.
Sicat. Also, respondents did not assert any claim against
Zytron and A.C. Sicat. The NLRC disposed of the case in
this wise:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the appeals are
hereby ordered DISMISSED and the Decision of the Labor
Arbiter is AFFIRMED [in]toto.
SO ORDERED.3
The NLRC decision was assailed in a petition under Rule 65
before the CA.
Ruling on the petition, the CA, in the questioned
Decision,4 found that A.C. Sicat satisfies the requirements of
legitimate job contracting, but Zytron does not. According to
the CA: (1) Zytron’s paid-in capital of P250,000 cannot be
considered as substantial capital; (2) its Certificate of
Registration was issued by the DOLE months after
respondents’ supposed employment ended; and (3) its
claim that it has the necessary tools and equipment for its
business is unsubstantiated. Therefore, according to the
CA, respondents were Fonterra’s employees.
Additionally, the CA held that respondents were illegally
dismissed since Fonterra itself failed to prove that their
dismissal is lawful. However, the illegal dismissal should be
reckoned from the termination of their supposed
employment with Zytron on June 6, 2006. Furthermore,
respondents’ transfer to A.C. Sicat is tantamount to a
completely new engagement by another employer. Lastly,
the termination of their contract with A.C. Sicat arose from
the expiration of their respective contracts with the latter.
The CA, thus, ruled that Fonterra is liable to respondents
and ordered the reinstatement of respondents without loss
of seniority rights, with full backwages, and other benefits
from the time of their illegal dismissal up to the time of their
actual reinstatement. The fallo of the Decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition is
hereby GRANTED. The assailed Decision dated 20
November 2009 and Resolution dated 5 March 2010 of the
National Labor Relations Commission (NLRC), Seventh
Division, are hereby ANULLED and SET ASIDE. Private
respondent Fonterra Brand, Inc. is hereby ordered to
REINSTATE [respondents] without loss of seniority rights.
Private respondents Fonterra Brand, Inc. and Zytron
Marketing and Promotional Corp. are hereby
292
further ORDERED to jointly and severally pay petitioners b. As shown in its Articles of Incorporation, Zytron
their full backwages and other benefits from the time of their had been in business since 1990, or more than
illegal dismissal up to the time of their actual reinstatement; a decade before it signed a merchandising
and attorney’s fees. agreement with petitioner
Fonterra;chanrobleslaw
SO ORDERED.
c. Very importantly, petitioner Fonterra never
Zytron and Fonterra moved for reconsideration, but to no exercised the right to control respondents and
avail. Hence, this petition. other employees of Zytron. Indeed, respondents
neither alleged that petitioner exercised control
The Issues
over them nor presented proof in support thereof
in any of their previous pleadings.
Petitioner presents the following issues for Our
resolution:chanRoblesvirtualLawlibrary
II. Respondents never claimed nor adduced evidence
I. The CA erred in ruling that Zytron was a mere labor-
that they were dismissed from employment by Zytron.
only contractor to petitioner Fonterra, in
In fact, Zytron denies terminating them from work. The
that:chanRoblesvirtualLawlibrary
CA, thus, erred in finding that respondents were
a. As held by the Court, there is no absolute figure “illegally dismissed.”
that constitutes “substantial” capital for an
Succinctly, the issues in the case at bar are: (1) whether or
independent contractor, and the same should
not Zytron and A.C. Sicat are labor-only contractors, making
instead be measured against the type of work it
Fonterra the employer of herein respondents; and (2)
is obligated to do for the principal. It is most
whether or not respondents were illegally dismissed.
respectfully submitted that, here, the
merchandising work undertaken by Zytron’s Our Ruling
paid-in capital of P250,000 was as of 1990, the
year it was incorporated;chanrobleslaw
We find merit in the petition.

293

As regards the CA’s conclusion that Zytron is not a
legitimate job contractor, We are of the view that such is
immaterial to the resolution of the illegal dismissal issue for
one reason: We find that respondents voluntarily terminated
their employment with Zytron, contrary to their allegation
that their employment with Zytron was illegally terminated.
We do not agree with the CA that respondents’ employment
with Zytron was illegally terminated.
As correctly held by the Labor Arbiter and the NLRC, the
termination of respondents’ employment with Zytron was
brought about by the cessation of their contracts with the
latter. We give credence to the Labor Arbiter’s conclusion
that respondents were the ones who refused to renew their
contracts with Zytron, and the NLRC’s finding that they
themselves acquiesced to their transfer to A.C. Sicat.
By refusing to renew their contracts with Zytron,
respondents effectively resigned from the latter. Resignation
is the voluntary act of employees who are compelled by
personal reasons to dissociate themselves from their
employment, done with the intention of relinquishing an
office, accompanied by the act of
5
abandonment. chanroblesvirtuallawlibrary
Here, it is obvious that respondents were no longer
interested in continuing their employment with Zytron. Their
voluntary refusal to renew their contracts was brought about
by their desire to continue their assignment in Fonterra
which could not happen in view of the conclusion of Zytron’s
contract with Fonterra. Hence, to be able to continue with
their assignment, they applied for work with A.C. Sicat with
the hope that they will be able to continue rendering
services as TMRs at Fonterra since A.C. Sicat is Fonterra’s
new manpower supplier. This fact is even acknowledged by
the CA in the assailed Decision where it recognized the
reason why respondents applied for work at A.C. Sicat. The
CA stated that “[t]o continuously work as merchandisers of
Fonterra products, [respondents] submitted their job
applications to A.C. Sicat xxx.”6 This is further bolstered by
the fact that respondents voluntarily complied with the
requirements for them to claim their corresponding
monetary benefits in relation to the cessation of their
employment contract with Zytron.
In short, respondents voluntarily terminated their
employment with Zytron by refusing to renew their
employment contracts with the latter, applying with A.C.
Sicat, and working as the latter’s employees, thereby
abandoning their previous employment with Zytron. Too, it
is well to mention that for obvious reasons, resignation is
inconsistent with illegal dismissal. This being the case,
Zytron cannot be said to have illegally dismissed
respondents, contrary to the findings of the CA.
294

As regards respondents’ employment with A.C. Sicat and its
termination via non-renewal of their contracts, considering
that in labor-only contracting, the law creates an employer-
employee relationship between the principal and the labor-
only contractor’s employee as if such employees are directly
employed by the principal employer, and considers the
contractor as merely the agent of the principal,7it is proper to
dispose of the issue on A.C. Sicat’s status as a job
contractor first before resolving the issue on the legality of
the cessation of respondents’ employment.
In this regard, We defer to the findings of the CA anent A.C.
Sicat’s status as a legitimate job contractor, seeing that it is
consistent with the rules on job contracting and is
sufficiently supported by the evidence on record.
A person is considered engaged in legitimate job
contracting or subcontracting if the following conditions
concur:chanRoblesvirtualLawlibrary
1. The contractor or subcontractor carries on a distinct
and independent business and undertakes to perform
the job, work or service on its own account and under
its own responsibility according to its own manner and
method, and free from the control and direction of the
principal in all matters connected with the
performance of the work except as to the results
thereof;chanrobleslaw
2. The contractor or subcontractor has substantial capital
or investment; and
3. The agreement between the principal and contractor
or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-
organization, security of tenure, and social and
welfare benefits.8
On the other hand, contracting is prohibited when the
contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a
principal and if any of the following elements are present,
thus:chanRoblesvirtualLawlibrary
1. The contractor or subcontractor does not have
substantial capital or investment which relates to the
job, work or service to be performed and the
employees recruited, supplied or placed by such
contractor or subcontractor are performing activities
which are directly related to the main business of the
principal; or
2. The contractor does not exercise the right to control
over the performance of the work of the contractual
employee.9
295
The CA correctly found that A.C. Sicat is engaged in
legitimate job contracting. It duly noted that A.C. Sicat was
able to prove its status as a legitimate job contractor for
having presented the following evidence, to
wit:chanRoblesvirtualLawlibrary
1. Certificate of Business Registration;chanrobleslaw
2. Certificate of Registration with the Bureau of Internal
Revenue;chanrobleslaw
3. Mayor’s Permit;chanrobleslaw
4. Certificate of Membership with the Social Security
System;chanrobleslaw
5. Certificate of Registration with the Department of
Labor and Employment;chanrobleslaw
6. Company Profile; and
7. Certifications issued by its clients.10
Furthermore, A.C. Sicat has substantial capital, having
assets totaling P5,926,155.76 as of December 31, 2006.
Too, its Agreement with Fonterra clearly sets forth that A.C.
Sicat shall be liable for the wages and salaries of its
employees or workers, including benefits, premiums, and
protection due them, as well as remittance to the proper
government entities of all withholding taxes, Social Security
Service, and Medicare premiums, in accordance with
relevant laws.
The appellate court further correctly held that Fonterra’s
issuance of Merchandising Guidelines, stock monitoring and
inventory forms, and promo mechanics, for compliance and
use of A.C. Sicat’s employees assigned to them, does not
establish that Fonterra exercises control over A.C. Sicat.
We agree with the CA’s conclusion that these were imposed
only to ensure the effectiveness of the promotion services to
be rendered by the merchandisers as it would be risky, if not
imprudent, for any company to completely entrust the
performance of the operations it has contracted out.
These sufficiently show that A.C. Sicat carries out its
merchandising and promotions business, independent of
Fonterra’s business. Thus, having settled that A.C. Sicat is
a legitimate job contractor, We now determine whether the
termination of respondents’ employment with the former is
valid.
We agree with the findings of the CA that the termination of
respondents’ employment with the latter was simply brought
about by the expiration of their employment contracts.
Foremost, respondents were fixed-term employees. As
previously held by this Court, fixed-term employment
contracts are not limited, as they are under the present
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Labor Code, to those by nature seasonal or for specific
projects with predetermined dates of completion; they also
include those to which the parties by free choice have
assigned a specific date of termination.11 The determining
factor of such contracts is not the duty of the employee
but the day certain agreed upon by the parties for the
commencement and termination of the employment
relationship.12chanroblesvirtuallawlibrary
In the case at bar, it is clear that respondents were
employed by A.C. Sicat as project employees. In their
employment contract with the latter, it is clearly stated that
“[A.C. Sicat is] temporarily employing [respondents] as
TMR[s] effective June 6[, 2006] under the following terms
and conditions: The need for your service being only for a
specific project, your temporary employment will be for the
duration only of said project of our client, namely to promote
FONTERRA BRANDS products xxx which is expected to be
finished on or before Nov. 06,
2006.” chanroblesvirtuallawlibrary
13
Respondents, by accepting the conditions of the contract
with A.C. Sicat, were well aware of and even acceded to the
condition that their employment thereat will end on said pre-
determined date of termination. They cannot now argue that
they were illegally dismissed by the latter when it refused to
renew their contracts after its expiration. This is so since the
non-renewal of their contracts by A.C. Sicat is a
management prerogative, and failure of respondents to
prove that such was done in bad faith militates against their
contention that they were illegally dismissed. The expiration
of their contract with A.C. Sicat simply caused the natural
cessation of their fixed-term employment there at. We, thus,
see no reason to disturb the ruling of the CA in this respect.
With these, We need not belabor the other assigned errors.
IN VIEW OF THE FOREGOING, the instant Petition for
Review is GRANTED. The assailed Decision of the Court of
Appeals dated September 6, 2012 and its January 11, 2013
Resolution denying reconsideration thereof, in CA-G.R. SP
No. 114227, are hereby REVERSED and SET ASIDE. The
Decision of the National Labor Relations Commission dated
November 20, 2009 and its Resolution dated March 5, 2010
in NLRC Case No. RAB IV 12-23927-06-Q are
hereby REINSTATED.
SO ORDERED.
[G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS
(ISAE), petitioner, vs. HON. LEONARDO A.
QUISUMBING in his capacity as the Secretary of Labor
and Employment; HON. CRESENCIANO B. TRAJANO in
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his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity
as the Superintendent of International School-Manila;
and INTERNATIONAL SCHOOL, INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad,
the local-hires of private respondent School, mostly
Filipinos, cry discrimination. We agree. That the local-hires
are paid more than their colleagues in other schools is, of
course, beside the point. The point is that employees should
be given equal pay for work of equal value. That is a
principle long honored in this jurisdiction. That is a principle
that rests on fundamental notions of justice. That is the
principle we uphold today.
Private respondent International School, Inc. (the School,
for short), pursuant to Presidential Decree 732, is a
domestic educational institution established primarily for
dependents of foreign diplomatic personnel and other
temporary residents.[1] To enable the School to continue
carrying out its educational program and improve its
standard of instruction, Section 2(c) of the same decree
authorizes the School to
employ its own teaching and management personnel
selected by it either locally or abroad, from Philippine or
other nationalities, such personnel being exempt from
otherwise applicable laws and regulations attending their
employment, except laws that have been or will be enacted
for the protection of employees.
Accordingly, the School hires both foreign and local
teachers as members of its faculty, classifying the same into
two: (1) foreign-hires and (2) local-hires. The School
employs four tests to determine whether a faculty member
should be classified as a foreign-hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in
the School and was the School responsible for bringing that
individual to the Philippines?[2]
Should the answer to any of these queries point to the
Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not
accorded local-hires. These include housing, transportation,
shipping costs, taxes, and home leave travel allowance.
Foreign-hires are also paid a salary rate twenty-five percent
(25%) more than local-hires. The School justifies the
difference on two "significant economic disadvantages"
298
foreign-hires have to endure, namely: (a) the "dislocation
factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from
his home country, leave his family and friends, and take the
risk of deviating from a promising career path-all for the
purpose of pursuing his profession as an educator, but this
time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for
one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance
against illness and death, and of course the primary benefit
of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted
again with the same economic reality after his term: that he
will eventually and inevitably return to his home country
where he will have to confront the uncertainty of obtaining
suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive
measure to remain competitive on an international level in
terms of attracting competent professionals in the field of
international education.[3]
When negotiations for a new collective bargaining
agreement were held on June 1995, petitioner International
School Alliance of Educators, "a legitimate labor union and
the collective bargaining representative of all faculty
members"[4] of the School, contested the difference in salary
rates between foreign and local-hires. This issue, as well as
the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a
deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike.
The failure of the National Conciliation and Mediation Board
to bring the parties to a compromise prompted the
Department of Labor and Employment (DOLE) to assume
jurisdiction over the dispute. On June 10, 1996, the DOLE
Acting Secretary, Crescenciano B. Trajano, issued an Order
resolving the parity and representation issues in favor of the
School. Then DOLE Secretary Leonardo A. Quisumbing
subsequently denied petitioner's motion for reconsideration
in an Order dated March 19, 1997. Petitioner now seeks
relief in this Court.
Petitioner claims that the point-of-hire classification
employed by the School is discriminatory to Filipinos and
that the grant of higher salaries to foreign-hires constitutes
racial discrimination.
The School disputes these claims and gives a breakdown of
its faculty members, numbering 38 in all, with nationalities
other than Filipino, who have been hired locally and
classified as local hires.[5]The Acting Secretary of Labor
found that these non-Filipino local-hires received the same
benefits as the Filipino local-hires:
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The compensation package given to local-hires has been
shown to apply to all, regardless of race. Truth to tell, there
are foreigners who have been hired locally and who are
paid equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification
for the distinction in salary rates:
The principle "equal pay for equal work" does not find
application in the present case. The international character
of the School requires the hiring of foreign personnel to deal
with different nationalities and different cultures, among the
student population.
We also take cognizance of the existence of a system of
salaries and benefits accorded to foreign hired personnel
which system is universally recognized. We agree that
certain amenities have to be provided to these people in
order to entice them to render their services in the
Philippines and in the process remain competitive in the
international market.
Furthermore, we took note of the fact that foreign hires have
limited contract of employment unlike the local hires who
enjoy security of tenure. To apply parity therefore, in wages
and other benefits would also require parity in other terms
and conditions of employment which include the
employment contract.
A perusal of the parties' 1992-1995 CBA points us to the
conditions and provisions for salary and professional
compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated
only in accordance with Appendix C hereof provided that the
Superintendent of the School has the discretion to recruit
and hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international
practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the
Overseas Recruited Staff (OSRS) salary schedule. The
25% differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as
differentiated from the tenured status of Locally Recruited
Staff (LRS).
To our mind, these provisions demonstrate the parties'
recognition of the difference in the status of two types of
employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to
justify its claim of parity. It is an established principle of
constitutional law that the guarantee of equal protection of
the laws is not violated by legislation or private covenants
based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and
300
apply to all members of the same class. Verily, there is a
substantial distinction between foreign hires and local hires,
the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be
given a good compensation package in order to attract them
to join the teaching faculty of the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is
beyond contention. Our Constitution and laws reflect the
policy against these evils. The Constitution[8] in the Article
on Social Justice and Human Rights exhorts Congress to
"give highest priority to the enactment of measures that
protect and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities." The very
broad Article 19 of the Civil Code requires every person, "in
the exercise of his rights and in the performance of his
duties, [to] act with justice, give everyone his due, and
observe honesty and good faith."
International law, which springs from general principles of
law,[9] likewise proscribes discrimination. General principles
of law include principles of equity,[10] i.e., the general
principles of fairness and justice, based on the test of what
is reasonable.[11] The Universal Declaration of Human
Rights,[12] the International Covenant on Economic, Social,
and Cultural Rights,[13] the International Convention on the
Elimination of All Forms of Racial Discrimination,[14] the
Convention against Discrimination in Education,[15] the
Convention (No. 111) Concerning Discrimination in Respect
of Employment and Occupation[16] - all embody the general
principle against discrimination, the very antithesis of
fairness and justice. The Philippines, through its
Constitution, has incorporated this principle as part of its
national laws.
In the workplace, where the relations between capital and
labor are often skewed in favor of capital, inequality and
discrimination by the employer are all the more
reprehensible.
The Constitution[17] specifically provides that labor is entitled
to "humane conditions of work." These conditions are not
restricted to the physical workplace - the factory, the office
or the field - but include as well the manner by which
employers treat their employees.
The Constitution[18] also directs the State to promote
"equality of employment opportunities for all." Similarly, the
Labor Code[19] provides that the State shall "ensure equal
work opportunities regardless of sex, race or creed." It
would be an affront to both the spirit and letter of these
provisions if the State, in spite of its primordial obligation to
promote and ensure equal employment opportunities,
closes its eyes to unequal and discriminatory terms and
conditions of employment.[20]
301
Discrimination, particularly in terms of wages, is frowned
upon by the Labor Code. Article 135, for example, prohibits
and penalizes[21] the payment of lesser compensation to a
female employee as against a male employee for work of
equal value. Article 248 declares it an unfair labor practice
for an employer to discriminate in regard to wages in order
to encourage or discourage membership in any labor
organization.
Notably, the International Covenant on Economic, Social,
and Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the
right of everyone to the enjoyment of just and favourable
conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a
minimum, with:
i.....Fair wages and equal remuneration for work of equal
value without distinction of any kind, in particular women
being guaranteed conditions of work not inferior to those
enjoyed by men, with equal pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this
jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries.[22] This rule
applies to the School, its "international character"
notwithstanding.
The School contends that petitioner has not adduced
evidence that local-hires perform work equal to that of
foreign-hires.[23] The Court finds this argument a little
cavalier. If an employer accords employees the same
position and rank, the presumption is that these employees
perform equal work. This presumption is borne by logic and
human experience. If the employer pays one employee less
than the rest, it is not for that employee to explain why he
receives less or why the others receive more. That would be
adding insult to injury. The employer has discriminated
against that employee; it is for the employer to explain why
the employee is treated unfairly.
The employer in this case has failed to discharge this
burden. There is no evidence here that foreign-hires
perform 25% more efficiently or effectively than the local-
hires. Both groups have similar functions and
responsibilities, which they perform under similar working
conditions.
The School cannot invoke the need to entice foreign-hires to
leave their domicile to rationalize the distinction in salary
rates without violating the principle of equal work for equal
pay.
302
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a
reward or recompense for services performed." Similarly,
the Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering
of services." In Songco v. National Labor Relations
Commission,[24] we said that:
"salary" means a recompense or consideration made to a
person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully
from "sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract
foreign-hires, salaries should not be used as an enticement
to the prejudice of local-hires. The local-hires perform the
same services as foreign-hires and they ought to be paid
the same salaries as the latter. For the same reason, the
"dislocation factor" and the foreign-hires' limited tenure also
cannot serve as valid bases for the distinction in salary
rates. The dislocation factor and limited tenure affecting
foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-
hires, such as housing, transportation, shipping costs, taxes
and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of
workers and promote their welfare,"[25] "to afford labor full
protection."[26] The State, therefore, has the right and duty to
regulate the relations between labor and capital.[27]These
relations are not merely contractual but are so impressed
with public interest that labor contracts, collective bargaining
agreements included, must yield to the common
good.[28] Should such contracts contain stipulations that are
contrary to public policy, courts will not hesitate to strike
down these stipulations.
In this case, we find the point-of-hire classification employed
by respondent School to justify the distinction in the salary
rates of foreign-hires and local hires to be an invalid
classification. There is no reasonable distinction between
the services rendered by foreign-hires and local-hires. The
practice of the School of according higher salaries to
foreign-hires contravenes public policy and, certainly, does
not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the
same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given
employer, comprised of all or less than all of the entire body
of employees, consistent with equity to the employer
indicate to be the best suited to serve the reciprocal rights
and duties of the parties under the collective bargaining
provisions of the law."[29] The factors in determining the
appropriate collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of the
303
employees' interest, such as substantial similarity of work
and duties, or similarity of compensation and working
conditions (Substantial Mutual Interests Rule); (3) prior
collective bargaining history; and (4) similarity of
employment status.[30] The basic test of an asserted
bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining
rights.[31]
Secretary of Labor and Employment dated June 10, 1996
and March 19, 1997, are hereby REVERSED and SET
ASIDE insofar as they uphold the practice of respondent
School of according foreign-hires higher salaries than local-
hires.
SO ORDERED.

It does not appear that foreign-hires have indicated their

intention to be grouped together with local-hires for
purposes of collective bargaining. The collective bargaining
history in the School also shows that these groups were
always treated separately. Foreign-hires have limited
tenure; local-hires enjoy security of tenure. Although
foreign-hires perform similar functions under the same
working conditions as the local-hires, foreign-hires are
accorded certain benefits not granted to local-hires. These
benefits, such as housing, transportation, shipping costs,
taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the
exclusion of the former from the latter. To include foreign-
hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective
bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The

petition is hereby GRANTED IN PART. The Orders of the
304