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THIRD DIVISION
COCACOLA BOTTLERS PHILS., INC., G . R. N o. 1 7 9 5 4 6
Petitioner,
Present:
versus
YNARESSANTIAGO, J.,
A L A N M. A G I T O, R E G O L O S . O C A I I I, Chairperson,
E R N E S T O G. A L A R I A O, J R. , A L F O N S O AUSTRIAMARTINEZ, ,
PAA, JR., DEMPSTER P. ONG, CHICONAZARIO,
NACHURA, and
U R R I Q U I A T. A R V I N, G I L H .
PERALTA, JJ.
FRANCISCO, and EDWIN M. GOLEZ ,
Respondents.
Promulgated:
February 13, 2009
x x
D E C I S I O N
CHICONAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision[1] dated 19 February 2007, promulgated by the
Court of Appeals in CAG.R. SP No. 85320, reversing the Resolution[2] rendered on 30 October 2003 by the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 03649403. The Court of Appeals, in its assailed Decision, declared that respondents Alan M. Agito, Regolo S. Oca
III, Ernesto G. Alariao, Jr., Alfonso Paa, Jr., Dempster P. Ong, Urriquia T. Arvin, Gil H. Francisco, and Edwin M. Golez were regular employees of
petitioner CocaCola Bottlers Phils., Inc; and that Interserve Management & Manpower Resources, Inc. (Interserve) was a laboronly contractor,
whose presence was intended merely to preclude respondents from acquiring tenurial security.
Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) and engaged in manufacturing, bottling and
distributing soft drink beverages and other allied products.
On 15 April 2002, respondents filed before the NLRC two complaints against petitioner, Interserve, Peerless Integrated Services, Inc.,
Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th month pay, and damages. The
two cases, docketed as NLRC NCR Case No. 04023452002 and NLRC NCR Case No. 050313702, were consolidated.
Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro Sales Office of petitioner. They had been in the
employ of petitioner for years, but were not regularized. Their employment was terminated on 8 April 2002 without just cause and due
process. However, they failed to state the reason/s for filing a complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.;
and Excellent Partners, Inc.[3]
Petitioner filed its Position Paper (with Motion to Dismiss),[4] where it averred that respondents were employees of Interserve who were
tasked to perform contracted services in accordance with the provisions of the Contract of Services[5] executed between petitioner and Interserve on
23 March 2002. Said Contract between petitioner and Interserve, covering the period of 1 April 2002 to 30 September 2002, constituted legitimate
job contracting, given that the latter was a bona fide independent contractor with substantial capital or investment in the form of tools, equipment,
and machinery necessary in the conduct of its business.
To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of
Incorporation of Interserve;[6] (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue;[7] (3) the Income Tax Return, with
Audited Financial Statements, of Interserve for 2001;[8] and (4) the Certificate of Registration of Interserve as an independent job contractor, issued
by the Department of Labor and Employment (DOLE).[9]
As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages,
and supervised their work, as proven by: (1) respondents Personal Data Files in the records of Interserve;[10] (2) respondents Contract of Temporary
Employment with Interserve;[11] and (3) the payroll records of Interserve.[12]
Petitioner, thus, sought the dismissal of respondents complaint against it on the ground that the Labor Arbiter did not acquire jurisdiction over the
same in the absence of an employeremployee relationship between petitioner and the respondents.[13]
In a Decision dated 28 May 2003, the Labor Arbiter found that respondents were employees of Interserve and not of petitioner. She reasoned that the
standard put forth in Article 280 of the Labor Code for determining regular employment (i.e., that the employee is performing activities that are
necessary and desirable in the usual business of the employer) was not determinative of the issue of whether an employeremployee relationship
existed between petitioner and respondents. While respondents performed activities that were necessary and desirable in the usual business or trade
of petitioner, the Labor Arbiter underscored that respondents functions were not indispensable to the principal business of petitioner, which was
manufacturing and bottling soft drink beverages and similar products.
The Labor Arbiter placed considerable weight on the fact that Interserve was registered with the DOLE as an independent job contractor,
with total assets amounting to P1,439,785.00 as of 31 December 2001. It was Interserve that kept and maintained respondents employee records,
including their Personal Data Sheets; Contracts of Employment; and remittances to the Social Securities System (SSS), Medicare and Pagibig Fund,
thus, further supporting the Labor Arbiters finding that respondents were employees of Interserve. She ruled that the circulars, rules and regulations
which petitioner issued from time to time to respondents were not indicative of control as to make the latter its employees.
Nevertheless, the Labor Arbiter directed Interserve to pay respondents their prorated 13th month benefits for the period of January 2002
until April 2002.[14]
In the end, the Labor Arbiter decreed:
WHEREFORE, judgment is hereby rendered finding that [herein respondents] are employees of [herein petitioner]
INTERSERVE MANAGEMENT & MANPOWER RESOURCES, INC. Concomitantly, respondent Interserve is further ordered
to pay [respondents] their prorated 13th month pay.
The complaints against COCACOLA BOTTLERS PHILS., INC. is DISMISMMED for lack of merit.
In like manner the complaints against PEERLESS INTEGRATED SERVICES, INC., BETTER BUILDING INC. and
EXCELLENT PARTNERS COOPERATIVE are DISMISSED for failure of complainants to pursue against them.
Other claims are dismissed for lack of merit.
The computation of the Computation and Examination Unit, this Commission if (sic) made part of this Decision. [15]
Unsatisfied with the foregoing Decision of the Labor Arbiter, respondents filed an appeal with the NLRC, docketed as NLRC NCR CA No.
03649403.
In their Memorandum of Appeal,[16] respondents maintained that contrary to the finding of the Labor Arbiter, their work was indispensable
to the principal business of petitioner.Respondents supported their claim with copies of the Delivery Agreement[17] between petitioner and TRMD
Incorporated, stating that petitioner was engaged in the manufacture, distribution and sale of soft drinks and other related products with various plants
and sales offices and warehouses located all over the Philippines. Moreover, petitioner supplied the tools and equipment used by respondents in their
jobs such as forklifts, pallet, etc. Respondents were also required to work in the warehouses, sales offices, and plants of petitioner. Respondents
pointed out that, in contrast, Interserve did not own trucks, pallets cartillas, or any other equipment necessary in the sale of CocaCola products.
Respondents further averred in their Memorandum of Appeal that petitioner exercised control over workers supplied by various
contractors. Respondents cited as an example the case of Raul Arenajo (Arenajo), who, just like them, worked for petitioner, but was made to appear
as an employee of the contractor Peerless Integrated Services, Inc. As proof of control by petitioner, respondents submitted copies of: (1) a
Memorandum[18] dated 11 August 1998 issued by Vicente Dy (Dy), a supervisor of petitioner, addressed to Arenajo, suspending the latter from work
until he explained his disrespectful acts toward the supervisor who caught him sleeping during work hours; (2) a Memorandum[19] dated 12 August
1998 again issued by Dy to Arenajo, informing the latter that the company had taken a more lenient and tolerant position regarding his offense
despite having found cause for his dismissal; (3) Memorandum[20] issued by Dy to the personnel of Peerless Integrated Services, Inc., requiring the
latter to present their timely request for leave or medical certificates for their absences; (4) Personnel Workers Schedules, [21] prepared by RB Chua,
another supervisor of petitioner; (5) Daily Sales Monitoring Report prepared by petitioner;[22] and (6) the Conventional Route System Proposed Set
up of petitioner. [23]
The NLRC, in a Resolution dated 30 October 2003, affirmed the Labor Arbiters Decision dated 28 May 2003 and pronounced that no
employeremployee relationship existed between petitioner and respondents. It reiterated the findings of the Labor Arbiter that Interserve was an
independent contractor as evidenced by its substantial assets and registration with the DOLE.In addition, it was Interserve which hired and paid
respondents wages, as well as paid and remitted their SSS, Medicare, and Pagibig contributions. Respondents likewise failed to convince the NLRC
that the instructions issued and trainings conducted by petitioner proved that petitioner exercised control over respondents as their employer.[24] The
dispositive part of the NLRC Resolution states:[25]
WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit. However, respondent Interserve
Management & Manpower Resources, Inc., is hereby ordered to pay the [herein respondents] their prorated 13th month pay.
Aggrieved once more, respondents sought recourse with the Court of Appeals by filing a Petition for Certiorari under Rule 65, docketed as CA
G.R. SP No. 85320.
The Court of Appeals promulgated its Decision on 9 February 2007, reversing the NLRC Resolution dated 30 October 2003. The
appellate court ruled that Interserve was a laboronly contractor, with insufficient capital and investments for the services which it was contracted
to perform. With only P510,000.00 invested in its service vehicles and P200,000.00 in its machineries and equipment, Interserve would be hard
pressed to meet the demands of daily soft drink deliveries of petitioner in the Lagro area. The Court Appeals concluded that the respondents used
the equipment, tools, and facilities of petitioner in the daytoday sales operations.
Additionally, the Court of Appeals determined that petitioner had effective control over the means and method of respondents work as
evidenced by the Daily Sales Monitoring Report, the Conventional Route System Proposed Setup, and the memoranda issued by the supervisor of
petitioner addressed to workers, who, like respondents, were supposedly supplied by contractors. The appellate court deemed that the respondents,
who were tasked to deliver, distribute, and sell CocaCola products, carried out functions directly related and necessary to the main business of
petitioner. The appellate court finally noted that certain provisions of the Contract of Service between petitioner and Interserve suggested that the
latters undertaking did not involve a specific job, but rather the supply of manpower.
The decretal portion of the Decision of the Court of Appeals reads:[26]
WHEREFORE, the petition is GRANTED. The assailed Resolutions of public respondent NLRC are REVERSED and SET
ASIDE. The case is remanded to the NLRC for further proceedings.
Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in a Resolution, dated 31 August 2007.[27]
Hence, the present Petition, in which the following issues are raised[28]:
I
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH EVIDENCE ON RECORD,
APPLICABLE LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT RULED THAT INTERSERVE IS A LABOR
ONLY CONTRACTOR;
II
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH APPLICABLE LAWS AND
ESTABLISHED JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS PERFORMED WORK NECESSARY
AND DESIRABLE TO THE BUSINESS OF [PETITIONER];
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT DECLARED THAT
RESPONDENTS WERE EMPLOYEES OF [PETITIONER], EVEN ABSENT THE FOUR ELEMENTS INDICATIVE OF AN
EMPLOYMENT RELATIONSHIP; AND
IV
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT CONCLUDED THAT INTERSERVE
WAS ENGAGED BY [PETITIONER] TO SUPPLY MANPOWER ONLY.
The Court ascertains that the fundamental issue in this case is whether Interserve is a legitimate job contractor. Only by resolving such
issue will the Court be able to determine whether an employeremployee relationship exists between petitioner and the respondents. To settle the
same issue, however, the Court must necessarily review the factual findings of the Court of Appeals and look into the evidence presented by the
parties on record.
As a general rule, factual findings of the Court of Appeals are binding upon the Supreme Court. One exception to this rule is when the
factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the case may be. This Court is obliged to
resolve an issue of fact herein due to the incongruent findings of the Labor Arbiter and the NLRC and those of the Court of Appeals. [29]
The relations which may arise in a situation, where there is an employer, a contractor, and employees of the contractor, are identified and
distinguished under Article 106 of the Labor Code:
Article 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 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 restriction, 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 laboronly contracting where the person supplying workers to an employee 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 to the workers in the same
manner and extent as if the latter were directly employed by him.
The aforequoted provision recognizes two possible relations among the parties: (1) the permitted legitimate job contract, or (2) the
prohibited laboronly contracting.
A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the formers work, is
permitted by law. Thus, the employeremployee relationship between the job contractor and his employees is maintained. In legitimate job
contracting, the law creates an employeremployee relationship between the employer and the contractors employees only for a limited purpose, i.e.,
to ensure that the employees are paid their wages. The 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 employer is not responsible for any claim made by the
contractors employees.[30]
On the other hand, laboronly contracting is an arrangement wherein the contractor merely acts as an agent in recruiting and supplying the
principal employer with workers for the purpose of circumventing labor law provisions setting down the rights of employees. It is not condoned by
law. A finding by the appropriate authorities that a contractor is a laboronly contractor establishes an employeremployee relationship between the
principal employer and the contractors employees and the former becomes solidarily liable for all the rightful claims of the employees. [31]
Section 5 of the Rules Implementing Articles 106109 of the Labor Code, as amended, provides the guidelines in determining whether
laboronly contracting exists:
Section 5. Prohibition against laboronly contracting. Laboronly contracting is hereby declared prohibited. For this
purpose, laboronly 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 [is] 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 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 reversed 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
supplied.)
When there is laboronly contracting, Section 7 of the same implementing rules, describes the consequences thereof:
Section 7. Existence of an employeremployee relationship.The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The
principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code,
including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following case, as declared by a
competent authority:
a. where there is laboronly contracting; or
b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
According to the foregoing provision, laboronly contracting would give rise to: (1) the creation of an employeremployee relationship
between the principal and the employees of the contractor or subcontractor; and (2) the solidary liability of the principal and the contractor to the
employees in the event of any violation of the Labor Code.
Petitioner argues that there could not have been laboronly contracting, since respondents did not perform activities that were indispensable to
petitioners principal business. And, even assuming that they did, such fact alone does not establish an employeremployee relationship between
petitioner and the respondents, since respondents were unable to show that petitioner exercised the power to select and hire them, pay their wages,
dismiss them, and control their conduct.
The argument of petitioner is untenable.
The law clearly establishes an employeremployee relationship between the principal employer and the contractors employee upon a finding
that the contractor is engaged in laboronly contracting. Article 106 of the Labor Code categorically states: There is laboronly contracting where the
person supplying workers to an employee 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. Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that laboronly
contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at bar.
Respondents worked for petitioner as salesmen, with the exception of respondent Gil Francisco whose job was designated as leadman. In
the Delivery Agreement[32] between petitioner and TRMD Incorporated, it is stated that petitioner is engaged in the manufacture, distribution and
sale of softdrinks and other related products. The work of respondents, constituting distribution and sale of CocaCola products, is clearly
indispensable to the principal business of petitioner. The repeated rehiring of some of the respondents supports this finding.[33] Petitioner also does
not contradict respondents allegations that the former has Sales Departments and Sales Offices in its various offices, plants, and warehouses; and that
petitioner hires Regional Sales Supervisors and District Sales Supervisors who supervise and control the salesmen and sales route helpers.[34]
As to the supposed substantial capital and investment required of an independent job contractor, petitioner calls the attention of the Court to
the authorized capital stock of Interserve amounting to P2,000,000.00.[35] It cites as authority Filipinas Synthetic Fiber Corp. v. National Labor
Relations Commission[36] and Frondozo v. National Labor Relations Commission,[37]where the contractors authorized capital stock of P1,600,000.00
and P2,000,000.00, respectively, were considered substantial for the purpose of concluding that they were legitimate job contractors. Petitioner also
refers to Neri v. National Labor Relations Commission[38] where it was held that a contractor ceases to be a laboronly contractor by having substantial
capital alone, without investment in tools and equipment.
This Court is unconvinced.
At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to P2,000,000.00, only P625,000.00
thereof was paid up as of 31 December 2001.The Court does not set an absolute figure for what it considers substantial capital for an independent job
contractor, but it measures the same against the type of work which the contractor is obligated to perform for the principal. However, this is rendered
impossible in this case since the Contract between petitioner and Interserve does not even specify the work or the project that needs to be performed
or completed by the latters employees, and uses the dubious phrase tasks and activities that are considered contractible under existing laws and
regulations. Even in its pleadings, petitioner carefully sidesteps identifying or describing the exact nature of the services that Interserve was obligated
to render to petitioner. The importance of identifying with particularity the work or task which Interserve was supposed to accomplish for petitioner
becomes even more evident, considering that the Articles of Incorporation of Interserve states that its primary purpose is to operate, conduct, and
maintain the business of janitorial and allied services.[39] But respondents were hired as salesmen and leadman for petitioner. The Court cannot, under
such ambiguous circumstances, make a reasonable determination if Interserve had substantial capital or investment to undertake the job it was
contracting with petitioner.
Petitioner cannot seek refuge in Neri v. National Labor Relations Commission. Unlike in Neri, petitioner was unable to prove in the instant
case that Interserve had substantial capitalization to be an independent job contractor. In San Miguel Corporation v. MAERC Integrated Services,
Inc.,[40] therein petitioner San Miguel Corporation similarly invoked Neri, but was rebuffed by the Court based on the following ratiocination[41]:
Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC. 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 was
sufficiently met if one possessed either attribute.
Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a laboronly
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, 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.
In Neri, the Court considered not only the fact that respondent Building Care Corporation (BCC) had substantial
capitalization but noted that BBC 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. The Court likewise
mentioned that the employees of BCC were engaged to perform specific special services for their principal. The status of BCC had
also been passed upon by the Court in a previous case 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.
Thus, in San Miguel Corporation, the investment of MAERC, the contractor therein, in the form of buildings, tools, and equipment of more
than P4,000,000.00 did not impress the Court, which still declared MAERC to be a laboronly contractor. In another case, Dole Philippines, Inc. v.
Esteva,[42] the Court did not recognize the contractor therein as a legitimate job contractor, despite its paidup capital of over P4,000,000.00, in the
absence of substantial investment in tools and equipment used in the services it was rendering.
Insisting that Interserve had substantial investment, petitioner assails, for being purely speculative, the finding of the Court of Appeals that
the service vehicles and equipment of Interserve, with the values of P510,000.00 and P200,000.00, respectively, could not have met the demands of
the CocaCola deliveries in the Lagro area.
Yet again, petitioner fails to persuade.
The contractor, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in job
contracting.[43] Although not the contractor itself (since Interserve no longer appealed the judgment against it by the Labor Arbiter), said burden of
proof herein falls upon petitioner who is invoking the supposed status of Interserve as an independent job contractor. Noticeably, petitioner failed to
submit evidence to establish that the service vehicles and equipment of Interserve, valued at P510,000.00 and P200,000.00, respectively, were
sufficient to carry out its service contract with petitioner. Certainly, petitioner could have simply provided the courts with records showing the
deliveries that were undertaken by Interserve for the Lagro area, the type and number of equipment necessary for such task, and the valuation of such
equipment. Absent evidence which a legally compliant company could have easily provided, the Court will not presume that Interserve had sufficient
investment in service vehicles and equipment, especially since respondents allegation that they were using equipment, such as forklifts and pallets
belonging to petitioner, to carry out their jobs was uncontroverted.
In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and
respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that
Interserve falls under the definition of a laboronly contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules
Implementing Articles 106109 of the Labor Code, as amended.
The Court, however, does not stop at this finding. It is also apparent that Interserve is a laboronly contractor under Section 5(ii)[44] of the
Rules Implementing Articles 106109 of the Labor Code, as amended, since it did not exercise the right to control the performance of the work of
respondents.
The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as the
CONTRACTOR) and petitioner (as the CLIENT), pertinent portions of which are reproduced below:
WHEREAS, the CONTRACTOR is engaged in the business, among others, of performing and/or undertaking, managing
for consideration, varied projects, jobs and other related managementoriented services;
WHEREAS, the CONTRACTOR warrants that it has the necessary capital, expertise, technical knowhow and a team of
professional management group and personnel to undertake and assume the responsibility to carry out the above mentioned project
and services;
WHEREAS, the CLIENT is desirous of utilizing the services and facilities of the CONTRACTOR for emergency needs,
rush jobs, peak product loads, temporary, seasonal and other special project requirements the extent that the available work of the
CLIENT can properly be done by an independent CONTRACTOR permissible under existing laws and regulations;
WHEREAS, the CONTRACTOR has offered to perform specific jobs/works at the CLIENT as stated heretofore, under
the terms and conditions herein stated, and the CLIENT has accepted the offer.
NOW THEREFORE, for and in consideration of the foregoing premises and of the mutual covenants and stipulations
hereinafter set forth, the parties have hereto have stated and the CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform and/or provide for the CLIENT, on a nonexclusive basis for
tasks or activities that are considered contractible under existing laws and regulations, as may be needed by the CLIENT from time
to time.
2. To carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the
necessary personnel like Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at least Technical/Vocational
courses graduates provided with adequate uniforms and appropriate identification cards, who are warranted by the CONTRACTOR
to be so trained as to efficiently, fully and speedily accomplish the work and services undertaken herein by the
CONTRACTOR. The CONTRACTOR represents that its personnel shall be in such number as will be sufficient to cope with the
requirements of the services and work herein undertaken and that such personnel shall be physically fit, of good moral character and
has not been convicted of any crime. The CLIENT, however, may request for the replacement of the CONTRACTORS personnel if
from its judgment, the jobs or the projects being done could not be completed within the time specified or that the quality of the
desired result is not being achieved.
3. It is agreed and understood that the CONTRACTORS personnel will comply with CLIENT, CLIENTS policies, rules
and regulations and will be subjected onthespot search by CLIENT, CLIENTS duly authorized guards or security men on duty
every time the assigned personnel enter and leave the premises during the entire duration of this agreement.
4. The CONTRACTOR further warrants to make available at times relievers and/or replacements to ensure continuous
and uninterrupted service as in the case of absences of any personnel above mentioned, and to exercise the necessary and due
supervision over the work of its personnel.[45]
Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the respondents, would comply with
CLIENT as well as CLIENTs policies, rules and regulations. It even required Interserve personnel to subject themselves to onthespot searches by
petitioner or its duly authorized guards or security men on duty every time the said personnel entered and left the premises of petitioner. Said
paragraph explicitly established the control of petitioner over the conduct of respondents. Although under paragraph 4 of the same Contract,
Interserve warranted that it would exercise the necessary and due supervision of the work of its personnel, there is a dearth of evidence to
demonstrate the extent or degree of supervision exercised by Interserve over respondents or the manner in which it was actually exercised. There is
even no showing that Interserve had representatives who supervised respondents work while they were in the premises of petitioner.
Also significant was the right of petitioner under paragraph 2 of the Contract to request the replacement of the CONTRACTORS
personnel. True, this right was conveniently qualified by the phrase if from its judgment, the jobs or the projects being done could not be completed
within the time specified or that the quality of the desired result is not being achieved, but such qualification was rendered meaningless by the fact
that the Contract did not stipulate what work or job the personnel needed to complete, the time for its completion, or the results desired.The said
provision left a gap which could enable petitioner to demand the removal or replacement of any employee in the guise of his or her inability to
complete a project in time or to deliver the desired result. The power to recommend penalties or dismiss workers is the strongest indication of a
companys right of control as direct employer.[46]
Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the former would provide relievers and replacements in
case of absences of its personnel, raises another red flag. An independent job contractor, who is answerable to the principal only for the results of a
certain work, job, or service need not guarantee to said principal the daily attendance of the workers assigned to the latter. An independent job
contractor would surely have the discretion over the pace at which the work is performed, the number of employees required to complete the same,
and the work schedule which its employees need to follow.
As the Court previously observed, the Contract of Services between Interserve and petitioner did not identify the work needed to be
performed and the final result required to be accomplished. Instead, the Contract specified the type of workers Interserve must provide petitioner
(Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD) and their qualifications (technical/vocational course graduates, physically fit, of good
moral character, and have not been convicted of any crime). The Contract also states that, to carry out the undertakings specified in the immediately
preceding paragraph, the CONTRACTOR shall employ the necessary personnel, thus, acknowledging that Interserve did not yet have in its employ
the personnel needed by petitioner and would still pick out such personnel based on the criteria provided by petitioner. In other words, Interserve did
not obligate itself to perform an identifiable job, work, or service for petitioner, but merely bound itself to provide the latter with specific types of
employees. These contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency providing petitioner with
workers performing tasks directly related to the latters principal business.
The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it at face
value, since the primary purpose stated in the Articles of Incorporation[47] of Interserve is misleading. According to its Articles of Incorporation, the
principal business of Interserve is to provide janitorial and allied services. The delivery and distribution of CocaCola products, the work for which
respondents were employed and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may have found that the capital
and/or investments in tools and equipment of Interserve were sufficient for an independent contractor for janitorial services, this does not mean that
such capital and/or investments were likewise sufficient to maintain an independent contracting business for the delivery and distribution of Coca
Cola products.
With the finding that Interserve was engaged in prohibited laboronly contracting, petitioner shall be deemed the true employer of
respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which were alleged or
proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents were not its
employees. Records also failed to show that petitioner afforded respondents the twin requirements of procedural due process, i.e., notice and hearing,
prior to their dismissal. Respondents were not served notices informing them of the particular acts for which their dismissal was sought. Nor were
they required to give their side regarding the charges made against them. Certainly, the respondents dismissal was not carried out in accordance with
law and, therefore, illegal.[48]
Given that respondents were illegally dismissed by petitioner, they are entitled to reinstatement, full backwages, inclusive of allowances,
and to their other benefits or the monetary equivalents thereof computed from the time their compensations were withheld from them up to the time
of their actual reinstatement, as mandated under Article 279 of the Labor Code,.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Court AFFIRMS WITH MODIFICATION the Decision
dated 19 February 2007 of the Court of Appeals in CAG.R. SP No. 85320. The Court DECLARES that respondents were illegally dismissed and,
accordingly, ORDERS petitioner to reinstate them without loss of seniority rights, and to pay them full back wages computed from the time their
compensation was withheld up to their actual reinstatement. Costs against the petitioner.
SO ORDERED.
EN BANC
BANK OF THE PHILIPPINE ISLANDS, G.R. No. 164301
Petitioner,
Present:
CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,*
NACHURA,
versus LEONARDODE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ, and
BPI EMPLOYEES UNIONDAVAO CHAPTER MENDOZA, JJ.
FEDERATION OF UNIONS
IN BPI UNIBANK,
Respondent. Promulgated:
August 10, 2010
x x
D E C I S I O N
LEONARDODE CASTRO, J.:
May a corporation invoke its merger with another corporation as a valid ground to exempt its absorbed employees from the coverage of a union shop
clause contained in its existing Collective Bargaining Agreement (CBA) with its own certified labor union? That is the question we shall endeavor to
answer in this petition for review filed by an employer after the Court of Appeals decided in favor of respondent union, which is the employees
recognized collective bargaining representative.
At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on union security clauses, specifically Article
248 (e), which states, x x x Nothing in this Code or in any other law shall stop the parties from requiring membership in a recognized
collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the
signing of the collective bargaining agreement.[1] This case which involves the application of a collective bargaining agreement with a union shop
clause should be resolved principally from the standpoint of the clear provisions of our labor laws, and the express terms of the CBA in question, and
not by inference from the general consequence of the merger of corporations under the Corporation Code, which obviously does not deal with and,
therefore, is silent on the terms and conditions of employment in corporations or juridical entities.
This issue must be resolved NOW, instead of postponing it to a future time when the CBA is renegotiated as suggested by the Honorable
Justice Arturo D. Brion because the same issue may still be resurrected in the renegotiation if the absorbed employees insist on their privileged status
of being exempt from any union shop clause or any variant thereof.
We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that brought the case up to this Court via the instant
petition for review; while the employees actually involved in the case did not pursue the same relief, but had instead chosen in effect to acquiesce to
the decision of the Court of Appeals which effectively required them to comply with the union shop clause under the existing CBA at the time of the
merger of BPI with Far East Bank and Trust Company (FEBTC), which decision had already become final and executory as to the aforesaid
employees. By not appealing the decision of the Court of Appeals, the aforesaid employees are bound by the said Court of Appeals decision to join
BPIs duly certified labor union. In view of the apparent acquiescence of the affected FEBTC employees in the Court of Appeals decision, BPI should
not have pursued this petition for review.However, even assuming that BPI may do so, the same still cannot prosper.
What is before us now is a petition for review under Rule 45 of the Rules of Court of the Decision[2] dated September 30, 2003 of the Court of
Appeals, as reiterated in its Resolution[3] of June 9, 2004, reversing and setting aside the Decision[4] dated November 23, 2001 of Voluntary Arbitrator
Rosalina LetrondoMontejo, in CAG.R. SP No. 70445, entitled BPI Employees UnionDavao ChapterFederation of Unions in BPI Unibank v. Bank
of the Philippine Islands, et al.
The antecedent facts are as follows:
On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on January 20, 2000 by and between BPI, herein
petitioner, and FEBTC.[5] This Article and Plan of Merger was approved by the Securities and Exchange Commission on April 7, 2000.[6]
Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI as the surviving
corporation. FEBTC employees, including those in its different branches across the country, were hired by petitioner as its own employees, with
their status and tenure recognized and salaries and benefits maintained.
Respondent BPI Employees UnionDavao Chapter Federation of Unions in BPI Unibank (hereinafter the Union, for brevity) is the exclusive
bargaining agent of BPIs rank and file employees in Davao City. The former FEBTC rankandfile employees in Davao City did not belong to any
labor union at the time of the merger. Prior to the effectivity of the merger, or on March 31, 2000, respondent Union invited said FEBTC employees
to a meeting regarding the Union Shop Clause (Article II, Section 2) of the existing CBA between petitioner BPI and respondent Union.[7]
The parties both advert to certain provisions of the existing CBA, which are quoted below:
ARTICLE I
Section 1. Recognition and Bargaining Unit The BANK recognizes the UNION as the sole and exclusive collective bargaining
representative of all the regular rank and file employees of the Bank offices in Davao City.
Section 2. Exclusions
Section 3. Additional Exclusions
Section 4. Copy of Contract
ARTICLE II
Section 1. Maintenance of Membership All employees within the bargaining unit who are members of the Union on the date of
the effectivity of this Agreement as well as employees within the bargaining unit who subsequently join or become members of
the Union during the lifetime of this Agreement shall as a condition of their continued employment with the Bank, maintain their
membership in the Union in good standing.
Section 2. Union Shop New employees falling within the bargaining unit as defined in Article I of this Agreement, who may
hereafter be regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union
as a condition of their continued employment. It is understood that membership in good standing in the Union is a condition of
their continued employment with the Bank.[8] (Emphases supplied.)
After the meeting called by the Union, some of the former FEBTC employees joined the Union, while others refused. Later, however,
some of those who initially joined retracted their membership.[9]
Respondent Union then sent notices to the former FEBTC employees who refused to join, as well as those who retracted their membership,
and called them to a hearing regarding the matter. When these former FEBTC employees refused to attend the hearing, the president of the Union
requested BPI to implement the Union Shop Clause of the CBA and to terminate their employment pursuant thereto.[10]
After two months of management inaction on the request, respondent Union informed petitioner BPI of its decision to refer the issue of the
implementation of the Union Shop Clause of the CBA to the Grievance Committee. However, the issue remained unresolved at this level and so it
was subsequently submitted for voluntary arbitration by the parties.[11]
Voluntary Arbitrator Rosalina LetrondoMontejo, in a Decision[12] dated November 23, 2001, ruled in favor of petitioner BPIs interpretation
that the former FEBTC employees were not covered by the Union Security Clause of the CBA between the Union and the Bank on the ground that
the said employees were not new employees who were hired and subsequently regularized, but were absorbed employees by operation of law because
the former employees of FEBTC can be considered assets and liabilities of the absorbed corporation. The Voluntary Arbitrator concluded that
the former FEBTC employees could not be compelled to join the Union, as it was their constitutional right to join or not to join any organization.
Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the same in an Order dated March 25, 2002.[13]
Dissatisfied, respondent then appealed the Voluntary Arbitrators decision to the Court of Appeals. In the herein assailed Decision dated
September 30, 2003, the Court of Appeals reversed and set aside the Decision of the Voluntary Arbitrator.[14] Likewise, the Court of Appeals denied
herein petitioners Motion for Reconsideration in a Resolution dated June 9, 2004.
The Court of Appeals pertinently ruled in its Decision:
A unionshop clause has been defined as a form of union security provision wherein nonmembers may be hired, but to
retain employment must become union members after a certain period.
There is no question as to the existence of the unionshop clause in the CBA between the petitionerunion and the
company. The controversy lies in its application to the absorbed employees.
This Court agrees with the voluntary arbitrator that the ABSORBED employees are distinct and different from NEW
employees BUT only in so far as their employment service is concerned. The distinction ends there. In the case at bar, the
absorbed employees length of service from its former employer is tacked with their employment with BPI. Otherwise stated, the
absorbed employees service is continuous and there is no gap in their service record.
This Court is persuaded that the similarities of new and absorbed employees far outweighs the distinction between
them. The similarities lies on the following, to wit: (a) they have a new employer; (b) new working conditions; (c) new terms of
employment and; (d) new company policy to follow. As such, they should be considered as new employees for purposes of
applying the provisions of the CBA regarding the unionshop clause.
To rule otherwise would definitely result to a very awkward and unfair situation wherein the absorbed employees shall
be in a different if not, better situation than the existing BPI employees. The existing BPI employees by virtue of the unionshop
clause are required to pay the monthly union dues, remain as members in good standing of the union otherwise, they shall be
terminated from the company, and other unionrelated obligations. On the other hand, the absorbed employees shall enjoy the
fruits of labor of the petitionerunion and its members for nothing in exchange. Certainly, this would disturb industrial peace in
the company which is the paramount reason for the existence of the CBA and the union.
The voluntary arbitrators interpretation of the provisions of the CBA concerning the coverage of the unionshop clause
is at war with the spirit and the rationale why the Labor Code itself allows the existence of such provision.
The Supreme Court in the case of Manila Mandarin Employees Union vs. NLRC (G.R. No. 76989, September 29,
1987) rule, to quote:
This Court has held that a valid form of union security, and such a provision in a collective
bargaining agreement is not a restriction of the right of freedom of association guaranteed by the
Constitution.
A closedshop agreement is an agreement whereby an employer binds himself to hire only
members of the contracting union who must continue to remain members in good standing to keep their
jobs. It is THE MOST PRIZED ACHIEVEMENT OF UNIONISM. IT ADDS MEMBERSHIP AND
COMPULSORY DUES. By holding out to loyal members a promise of employment in the closedshop, it
wields group solidarity. (Emphasis supplied)
Hence, the voluntary arbitrator erred in construing the CBA literally at the expense of industrial peace in the company.
With the foregoing ruling from this Court, necessarily, the alternative prayer of the petitioner to require the individual
respondents to become members or if they refuse, for this Court to direct respondent BPI to dismiss them, follows.[15]
Hence, petitioners present recourse, raising the following issues:
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FORMER FEBTC
EMPLOYEES SHOULD BE CONSIDERED NEW EMPLOYEES OF BPI FOR PURPOSES OF APPLYING THE UNION
SHOP CLAUSE OF THE CBA
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE VOLUNTARY
ARBITRATORS INTERPRETATION OF THE COVERAGE OF THE UNION SHOP CLAUSE IS AT WAR WITH THE
SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF ALLOWS THE EXISTENCE OF SUCH PROVISION[16]
In essence, the sole issue in this case is whether or not the former FEBTC employees that were absorbed by petitioner upon the merger
between FEBTC and BPI should be covered by the Union Shop Clause found in the existing CBA between petitioner and respondent Union.
Petitioner is of the position that the former FEBTC employees are not new employees of BPI for purposes of applying the Union Shop Clause of the
CBA, on this note, petitioner points to Section 2, Article II of the CBA, which provides:
New employees falling within the bargaining unit as defined in Article I of this Agreement, who may hereafter be
regularly employed by the Bank shall, within thirty (30) days after they become regular employees, join the Union as a
condition of their continued employment. It is understood that membership in good standing in the Union is a condition of
their continued employment with the Bank.[17] (Emphases supplied.)
Petitioner argues that the term new employees in the Union Shop Clause of the CBA is qualified by the phrases who may hereafter be
regularly employed and after they become regular employees which led petitioner to conclude that the new employees referred to in, and
contemplated by, the Union Shop Clause of the CBA were only those employees who were new to BPI, on account of having been hired initially on a
temporary or probationary status for possible regular employment at some future date. BPI argues that the FEBTC employees absorbed by BPI
cannot be considered as new employees of BPI for purposes of applying the Union Shop Clause of the CBA.[18]
According to petitioner, the contrary interpretation made by the Court of Appeals of this particular CBA provision ignores, or even defies,
what petitioner assumes as its clear meaning and scope which allegedly contradicts the Courts strict and restrictive enforcement of union security
agreements.
We do not agree.
Section 2, Article II of the CBA is silent as to how one becomes a regular employee of the BPI for the first time. There is nothing in the
said provision which requires that a new regular employee first undergo a temporary or probationary status before being deemed as such
under the union shop clause of the CBA.
Union security is a generic term which is applied to and comprehends closed shop, union shop, maintenance of membership or any other form of
agreement which imposes upon employees the obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period for their continued employment. There is maintenance of
membership shop when employees, who are union members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or transferred out of the bargaining unit or the
agreement is terminated.A closedshop, on the other hand, may be defined as an enterprise in which, by agreement between the employer and his
employees or their representatives, no person may be employed in any or certain agreed departments of the enterprise unless he or she is, becomes,
and, for the duration of the agreement, remains a member in good standing of a union entirely comprised of or of which the employees in interest are
a part.[19]
In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,[20] we ruled that:
It is the policy of the State to promote unionism to enable the workers to negotiate with management on the
same level and with more persuasiveness than if they were to individually and independently bargain for the
improvement of their respective conditions. To this end, the Constitution guarantees to them the rights to selforganization,
collective bargaining and negotiations and peaceful concerted actions including the right to strike in accordance with law. There
is no question that these purposes could be thwarted if every worker were to choose to go his own separate way instead of joining
his coemployees in planning collective action and presenting a united front when they sit down to bargain with their
employers. It is for this reason that the law has sanctioned stipulations for the union shop and the closed shop as a means of
encouraging the workers to join and support the labor union of their own choice as their representative in the negotiation of their
demands and the protection of their interest visvis the employer. (Emphasis ours.)
In other words, the purpose of a union shop or other union security arrangement is to guarantee the continued existence of the union
through enforced membership for the benefit of the workers.
All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management are subject to its terms. However, under law
and jurisprudence, the following kinds of employees are exempted from its coverage, namely, employees who at the time the union shop
agreement takes effect are bona fide members of a religious organization which prohibits its members from joining labor unions on religious
grounds;[21] employees already in the service and already members of a union other than the majority at the time the union shop agreement
took effect;[22] confidential employees who are excluded from the rank and file bargaining unit;[23] and employees excluded from the union shop by
express terms of the agreement.
When certain employees are obliged to join a particular union as a requisite for continued employment, as in the case of Union Security
Clauses, this condition is a valid restriction of the freedom or right not to join any labor organization because it is in favor of unionism. This Court,
on occasion, has even held that a union security clause in a CBA is not a restriction of the right of freedom of association guaranteed by the
Constitution.[24]
Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union who must
continue to remain members in good standing to keep their jobs. It is the most prized achievement of unionism. It adds membership and
compulsory dues. By holding out to loyal members a promise of employment in the closed shop, it wields group solidarity.[25]
Indeed, the situation of the former FEBTC employees in this case clearly does not fall within the first three exceptions to the application of
the Union Shop Clause discussed earlier. No allegation or evidence of religious exemption or prior membership in another union or engagement as a
confidential employee was presented by both parties. The sole category therefore in which petitioner may prove its claim is the fourth recognized
exception or whether the former FEBTC employees are excluded by the express terms of the existing CBA between petitioner and respondent.
To reiterate, petitioner insists that the term new employees, as the same is used in the Union Shop Clause of the CBA at issue, refers only to
employees hired by BPI as nonregularemployees who later qualify for regular employment and become regular employees, and not those who, as
a legal consequence of a merger, are allegedly automatically deemed regular employees of BPI. However, the CBA does not make a distinction as to
how a regular employee attains such a status. Moreover, there is nothing in the Corporation Law and the merger agreement mandating the automatic
employment as regular employees by the surviving corporation in the merger.
It is apparent that petitioner hinges its argument that the former FEBTC employees were absorbed by BPI merely as a legal consequence of
a merger based on the characterization by the Voluntary Arbiter of these absorbed employees as included in the assets and liabilities of the dissolved
corporation assets because they help the Bank in its operation and liabilities because redundant employees may be terminated and company benefits
will be paid to them, thus reducing the Banks financial status. Based on this ratiocination, she ruled that the same are not new employees of BPI as
contemplated by the CBA at issue, noting that the Certificate of Filing of the Articles of Merger and Plan of Merger between FEBTC and BPI stated
that x x x the entire assets and liabilities of FAR EASTERN BANK & TRUST COMPANY will be transferred to and absorbed by the BANK OF
THE PHILIPPINE ISLANDS x x x (underlining supplied).[26] In sum, the Voluntary Arbiter upheld the reasoning of petitioner that the FEBTC
employees became BPI employees by operation of law because they are included in the term assets and liabilities.
Absorbed FEBTC Employees are Neither Assets nor Liabilities
In legal parlance, however, human beings are never embraced in the term assets and liabilities. Moreover, BPIs absorption of former
FEBTC employees was neither by operation of law nor by legal consequence of contract. There was no government regulation or law that compelled
the merger of the two banks or the absorption of the employees of the dissolved corporation by the surviving corporation. Had there been such law or
regulation, the absorption of employees of the nonsurviving entities of the merger would have been mandatory on the surviving corporation.[27] In the
present case, the merger was voluntarily entered into by both banks presumably for some mutually acceptable consideration. In fact, the
Corporation Code does not also mandate the absorption of the employees of the nonsurviving corporation by the surviving corporation in
the case of a merger. Section 80 of the Corporation Code provides:
SEC. 80. Effects of merger or consolidation. The merger or consolidation, as provided in the preceding sections shall have the
following effects:
1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation
designated in the plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of
consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be
subject to all the duties and liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and
franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account,
including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each
constituent corporation, shall be taken and deemed to be transferred to and vested in such surviving or consolidated corporation
without further act or deed; and
5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the
constituent corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or
obligations; and any claim, action or proceeding pending by or against any of such constituent corporations may be prosecuted by
or against the surviving or consolidated corporation, as the case may be. Neither the rights of creditors nor any lien upon the
property of any of such constituent corporations shall be impaired by such merger or consolidated.
Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any specific stipulation with respect to the
employment contracts of existing personnel of the nonsurviving entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold
the reasoning that the general stipulation regarding transfer of FEBTC assets and liabilities to BPI as set forth in the Articles of Merger necessarily
includes the transfer of all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything about
it. Even if it is so, it does not follow that the absorbed employees should not be subject to the terms and conditions of employment obtaining
in the surviving corporation.
The rule is that unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements are
not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties. A
labor contract merely creates an action in personam and does not create any real right which should be respected by third
parties. This conclusion draws its force from the right of an employer to select his employees and to decide when to engage them
as protected under our Constitution, and the same can only be restricted by law through the exercise of the police power.[28]
Furthermore, this Court believes that it is contrary to public policy to declare the former FEBTC employees as forming part of the assets or
liabilities of FEBTC that were transferred and absorbed by BPI in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to
refer only to property rights and obligations of FEBTC and do not include the employment contracts of its personnel. A corporation cannot
unilaterally transfer its employees to another employer like chattel. Certainly, if BPI as an employer had the right to choose who to retain among
FEBTCs employees, FEBTC employees had the concomitant right to choose not to be absorbed by BPI. Even though FEBTC employees had no
choice or control over the merger of their employer with BPI, they had a choice whether or not they would allow themselves to be absorbed by
BPI. Certainly nothing prevented the FEBTCs employees from resigning or retiring and seeking employment elsewhere instead of going along with
the proposed absorption.
Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee without the consent of the employee is
in violation of an individuals freedom to contract. It would have been a different matter if there was an express provision in the articles of merger that
as a condition for the merger, BPI was being required to assume all the employment contracts of all existing FEBTC employees with the conformity
of the employees. In the absence of such a provision in the articles of merger, then BPI clearly had the business management decision as to whether
or not employ FEBTCs employees. FEBTC employees likewise retained the prerogative to allow themselves to be absorbed or not; otherwise, that
would be tantamount to involuntary servitude.
There appears to be no dispute that with respect to FEBTC employees that BPI chose not to employ or FEBTC employees who chose to
retire or be separated from employment instead of being absorbed, BPIs assumed liability to these employees pursuant to the merger is FEBTCs
liability to them in terms of separation pay,[29] retirement pay[30] or other benefits that may be due them depending on the circumstances.
Legal Consequences of Mergers
Although not binding on this Court, American jurisprudence on the consequences of voluntary mergers on the right to employment and
seniority rights is persuasive and illuminating.We quote the following pertinent discussion from the American Law Reports:
Several cases have involved the situation where as a result of mergers, consolidations, or shutdowns, one group of
employees, who had accumulated seniority at one plant or for one employer, finds that their jobs have been discontinued except
to the extent that they are offered employment at the place or by the employer where the work is to be carried on in the
future. Such cases have involved the question whether such transferring employees should be entitled to carry with them their
accumulated seniority or whether they are to be compelled to start over at the bottom of the seniority list in the "new" job. It has
been recognized in some cases that the accumulated seniority does not survive and cannot be transferred to the "new" job.
In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three formerly separate railroad
corporations, which had previously operated separate facilities, was consolidated in the shops of one of the roads. Displaced
employees of the other two roads were given preference for the new jobs created in the shops of the railroad which took over the
work. A controversy arose between the employees as to whether the displaced employees were entitled to carry with them to the
new jobs the seniority rights they had accumulated with their prior employers, that is, whether the rosters of the three
corporations, for seniority purposes, should be "dovetailed" or whether the transferring employees should go to the bottom of the
roster of their new employer. Labor representatives of the various systems involved attempted to work out an agreement which,
in effect, preserved the seniority status obtained in the prior employment on other roads, and the action was for specific
performance of this agreement against a demurring group of the original employees of the railroad which was operating the
consolidated shops. The relief sought was denied, the court saying that, absent some specific contract provision otherwise,
seniority rights were ordinarily limited to the employment in which they were earned, and concluding that the contract for which
specific performance was sought was not such a completed and binding agreement as would support such equitable relief, since
the railroad, whose concurrence in the arrangements made was essential to their effectuation, was not a party to the agreement.
Where the provisions of a labor contract provided that in the event that a trucker absorbed the business of another
private contractor or common carrier, or was a party to a merger of lines, the seniority of the employees absorbed or affected
thereby should be determined by mutual agreement between the trucker and the unions involved, it was held in Moore v
International Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241, that the trucker was not required to absorb the
affected employees as well as the business, the court saying that they could find no such meaning in the above clause, stating that
it dealt only with seniority, and not with initial employment. Unless and until the absorbing company agreed to take the
employees of the company whose business was being absorbed, no seniority problem was created, said the court, hence the
provision of the contract could have no application. Furthermore, said the court, it did not require that the absorbing company
take these employees, but only that if it did take them the question of seniority between the old and new employees would be
worked out by agreement or else be submitted to the grievance procedure.[31] (Emphasis ours.)
Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of the dissolved corporations employees or the
recognition of the absorbed employees service with their previous employer may be demanded from the surviving corporation if required by
provision of law or contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the terms and conditions of employment of the
absorbed employees in the case of a corporate merger or consolidation which will, in effect, take away from corporate management the prerogative to
make purely business decisions on the hiring of employees or will give it an excuse not to apply the CBA in force to the prejudice of its own
employees and their recognized collective bargaining agent. In this regard, we disagree with Justice Brion.
Justice Brion takes the position that because the surviving corporation continues the personality of the dissolved corporation and acquires all the
latters rights and obligations, it is dutybound to absorb the dissolved corporations employees, even in the absence of a stipulation in the plan of
merger. He proposes that this interpretation would provide the necessary protection to labor as it spares workers from being left in legal limbo.
However, there are instances where an employer can validly discontinue or terminate the employment of an employee without violating his right to
security of tenure. Among others, in case of redundancy, for example, superfluous employees may be terminated and such termination would be
authorized under Article 283 of the Labor Code.[32]
Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all employees of the nonsurviving corporation, there is still
no basis to conclude that the terms and conditions of employment under a valid collective bargaining agreement in force in the surviving corporation
should not be made to apply to the absorbed employees.
The Corporation Code and the Subject Merger Agreement are Silent on Efficacy, Terms and
Conditions of Employment Contracts
The lack of a provision in the plan of merger regarding the transfer of employment contracts to the surviving corporation could have very well been
deliberate on the part of the parties to the merger, in order to grant the surviving corporation the freedom to choose who among the dissolved
corporations employees to retain, in accordance with the surviving corporations business needs. If terminations, for instance due to redundancy or
laborsaving devices or to prevent losses, are done in good faith, they would be valid. The surviving corporation too is dutybound to protect the
rights of its own employees who may be affected by the merger in terms of seniority and other conditions of their employment due to the
merger. Thus, we are not convinced that in the absence of a stipulation in the merger plan the surviving corporation was compelled, or may be
judicially compelled, to absorb all employees under the same terms and conditions obtaining in the dissolved corporation as the surviving corporation
should also take into consideration the state of its business and its obligations to its own employees, and to their certified collective bargaining agent
or labor union.
Even assuming we accept Justice Brions theory that in a merger situation the surviving corporation should be compelled to absorb the dissolved
corporations employees as a legal consequence of the merger and as a social justice consideration, it bears to emphasize his dissent also recognizes
that the employee may choose to end his employment at any time by voluntarily resigning. For the employee to be absorbed by BPI, it requires the
employees implied or express consent. It is because of this human element in employment contracts and the personal, consensual nature thereof that
we cannot agree that, in a merger situation, employment contracts are automatically transferable from one entity to another in the same manner that a
contract pertaining to purely proprietary rights such as a promissory note or a deed of sale of property is perfectly and automatically transferable to
the surviving corporation.
That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to adjudicate rights and obligations between and among
the merged corporations and the persons that deal with them. Although in a merger it is as if there is no change in the personality of the employer,
there is in reality a change in the situation of the employee. Once an FEBTC employee is absorbed, there are presumably changes in his condition of
employment even if his previous tenure and salary rate is recognized by BPI. It is reasonable to assume that BPI would have different rules and
regulations and company practices than FEBTC and it is incumbent upon the former FEBTC employees to obey these new rules and adapt to their
new environment. Not the least of the changes in employment condition that the absorbed FEBTC employees must face is the fact that prior to the
merger they were employees of an unorganized establishment and after the merger they became employees of a unionized company that had an
existing collective bargaining agreement with the certified union. This presupposes that the union who is party to the collective bargaining agreement
is the certified union that has, in the appropriate certification election, been shown to represent a majority of the members of the bargaining unit.
Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to be absorbed, then due to BPIs blanket
assumption of liabilities and obligations under the articles of merger, BPI was bound to respect the years of service of these FEBTC employees and
to pay the same, or commensurate salaries and other benefits that these employees previously enjoyed with FEBTC.
As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the former FEBTC employees did not enjoy with
their previous employer. As BPI employees, they will enjoy all these CBA benefits upon their absorption. Thus, although in a sense BPI is
continuing FEBTCs employment of these absorbed employees, BPIs employment of these absorbed employees was not under exactly the same terms
and conditions as stated in the latters employment contracts with FEBTC. This further strengthens the view that BPI and the former FEBTC
employees voluntarily contracted with each other for their employment in the surviving corporation.
Proper Appreciation of the Term New Employees Under the CBA
In any event, it is of no moment that the former FEBTC employees retained the regular status that they possessed while working for their
former employer upon their absorption by petitioner. This fact would not remove them from the scope of the phrase new employees as contemplated
in the Union Shop Clause of the CBA, contrary to petitioners insistence that the term new employees only refers to those who are initially hired
as nonregular employees for possible regular employment.
The Union Shop Clause in the CBA simply states that new employees who during the effectivity of the CBA may be regularly employed
by the Bank must join the union within thirty (30) days from their regularization. There is nothing in the said clause that limits its application to
only new employees who possess nonregular status, meaning probationary status, at the start of their employment. Petitioner likewise failed to
point to any provision in the CBA expressly excluding from the Union Shop Clause new employees who are absorbed as regular employees from the
beginning of their employment. What is indubitable from the Union Shop Clause is that upon the effectivity of the CBA, petitioners new regular
employees (regardless of the manner by which they became employees of BPI) are required to join the Union as a condition of their continued
employment.
The dissenting opinion of Justice Brion dovetails with Justice Carpios view only in their restrictive interpretation of who are new
employees under the CBA. To our dissenting colleagues, the phrase new employees (who are covered by the union shop clause) should only include
new employees who were hired as probationary during the life of the CBA and were later granted regular status. They propose that the former
FEBTC employees who were deemed regular employees from the beginning of their employment with BPI should be treated as a special class of
employees and be excluded from the union shop clause.
Justice Brion himself points out that there is no clear, categorical definition of new employee in the CBA. In other words, the term new employee as
used in the union shop clause is used broadly without any qualification or distinction. However, the Court should not uphold an interpretation of the
term new employee based on the general and extraneous provisions of the Corporation Code on merger that would defeat, rather than fulfill, the
purpose of the union shop clause. To reiterate, the provision of the Article 248(e) of the Labor Code in point mandates that nothing in the said
Code or any other law should stop the parties from requiring membership in a recognized collective bargaining agent as a condition of
employment.
Significantly, petitioner BPI never stretches its arguments so far as to state that the absorbed employees should be deemed old employees
who are not covered by the Union Shop Clause. This is not surprising.
By law and jurisprudence, a merger only becomes effective upon approval by the Securities and Exchange Commission (SEC) of the
articles of merger. In Associated Bank v. Court of Appeals,[33] we held:
The procedure to be followed is prescribed under the Corporation Code. Section 79 of said Code requires the approval by the
Securities and Exchange Commission (SEC) of the articles of merger which, in turn, must have been duly approved by a majority
of the respective stockholders of the constituent corporations. The same provision further states that the merger shall be effective
only upon the issuance by the SEC of a certificate of merger. The effectivity date of the merger is crucial for determining
when the merged or absorbed corporation ceases to exist; and when its rights, privileges, properties as well as liabilities
pass on to the surviving corporation. (Emphasis ours.)
In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation, BPI does so at a particular point in
time, i.e., the effectivity of the merger upon the SECs issuance of a certificate of merger. In fact, the articles of merger themselves provided that both
BPI and FEBTC will continue their respective business operations until the SEC issues the certificate of merger and in the event SEC does not issue
such a certificate, they agree to hold each other blameless for the nonconsummation of the merger.
Considering the foregoing principle, BPI could have only become the employer of the FEBTC employees it absorbed after the approval by
the SEC of the merger. If the SEC did not approve the merger, BPI would not be in the position to absorb the employees of FEBTC at all. Indeed,
there is evidence on record that BPI made the assignments of its absorbed employees in BPI effective April 10, 2000, or after the SECs approval of
the merger.[34] In other words, BPI became the employer of the absorbed employees only at some point after the effectivity of the merger,
notwithstanding the fact that the absorbed employees years of service with FEBTC were voluntarily recognized by BPI.
Even assuming for the sake of argument that we consider the absorbed FEBTC employees as old employees of BPI who are not members
of any union (i.e., it is their date of hiring by FEBTC and not the date of their absorption that is considered), this does not necessarily exclude
them from the union security clause in the CBA. The CBA subject of this case was effective from April 1, 1996 until March 31, 2001. Based on the
allegations of the former FEBTC employees themselves, there were former FEBTC employees who were hired by FEBTC after April 1, 1996 and
if their date of hiring by FEBTC is considered as their date of hiring by BPI, they would undeniably be considered new employees of BPI within the
contemplation of the Union Shop Clause of the said CBA. Otherwise, it would lead to the absurd situation that we would discriminate not only
between new BPI employees (hired during the life of the CBA) and former FEBTC employees (absorbed during the life of the CBA) but also among
the former FEBTC employees themselves. In other words, we would be treating employees who are exactly similarly situated (i.e., the group of
absorbed FEBTC employees) differently. This hardly satisfies the demands of equality and justice.
Petitioner limited itself to the argument that its absorbed employees do not fall within the term new employees contemplated under the
Union Shop Clause with the apparent objective of excluding all, and not just some, of the former FEBTC employees from the application of the
Union Shop Clause.
However, in law or even under the express terms of the CBA, there is no special class of employees called absorbed employees. In order for the
Court to apply or not apply the Union Shop Clause, we can only classify the former FEBTC employees as either old or new. If they are not old
employees, they are necessarily new employees. If they are new employees, the Union Shop Clause did not distinguish between new employees who
are nonregular at their hiring but who subsequently become regular and new employees who are absorbed as regular and permanent from the
beginning of their employment. The Union Shop Clause did not so distinguish, and so neither must we.
No Substantial Distinction Under the CBA Between Regular Employees Hired After
Probationary Status and Regular Employees Hired After the Merger
Verily, we agree with the Court of Appeals that there are no substantial differences between a newly hired nonregular employee who was
regularized weeks or months after his hiring and a new employee who was absorbed from another bank as a regular employee pursuant to a merger,
for purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA was signed. At the time they are being
required to join the Union, they are both already regular rank and file employees of BPI. They belong to the same bargaining unit being represented
by the Union. They both enjoy benefits that the Union was able to secure for them under the CBA. When they both entered the employ of BPI, the
CBA and the Union Shop Clause therein were already in effect and neither of them had the opportunity to express their preference for unionism or
not. We see no cogent reason why the Union Shop Clause should not be applied equally to these two types of new employees, for they are undeniably
similarly situated.
The effect or consequence of BPIs socalled absorption of former FEBTC employees should be limited to what they actually agreed
to, i.e. recognition of the FEBTC employees years of service, salary rate and other benefits with their previous employer. The effect should not be
stretched so far as to exempt former FEBTC employees from the existing CBA terms, company policies and rules which apply to employees
similarly situated. If the Union Shop Clause is valid as to other new regular BPI employees, there is no reason why the same clause would be a
violation of the absorbed employees freedom of association.
NonApplication of Union Shop Clause Contrary to the Policy of the Labor Code and Inimical
to Industrial Peace
It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be likewise subject to the same obligations
the CBA imposes upon them. A contrary interpretation of the Union Shop Clause will be inimical to industrial peace and workers solidarity. This
unfavorable situation will not be sufficiently addressed by asking the former FEBTC employees to simply pay agency fees to the Union in lieu of
union membership, as the dissent of Justice Carpio suggests. The fact remains that other new regular employees, to whom the absorbed employees
should be compared, do not have the option to simply pay the agency fees and they must join the Union or face termination.
Petitioners restrictive reading of the Union Shop Clause could also inadvertently open an avenue, which an employer could readily use, in
order to dilute the membership base of the certified union in the collective bargaining unit (CBU). By entering into a voluntary merger with a non
unionized company that employs more workers, an employer could get rid of its existing union by the simple expedient of arguing that the absorbed
employees are not new employees, as are commonly understood to be covered by a CBAs union security clause. This could then lead to a new
majority within the CBU that could potentially threaten the majority status of the existing union and, ultimately, spell its demise as the CBUs
bargaining representative. Such a dreaded but not entirely farfetched scenario is no different from the ingenious and creative unionbusting schemes
that corporations have fomented throughout the years, which this Court has foiled time and again in order to preserve and protect the valued place of
labor in this jurisdiction consistent with the Constitutions mandate of insuring social justice.
There is nothing in the Labor Code and other applicable laws or the CBA provision at issue that requires that a new employee has to be of
probationary or nonregular status at the beginning of the employment relationship. An employer may confer upon a new employee the status of
regular employment even at the onset of his engagement. Moreover, no law prohibits an employer from voluntarily recognizing the length of service
of a new employee with a previous employer in relation to computation of benefits or seniority but it should not unduly be interpreted to exclude
them from the coverage of the CBA which is a binding contractual obligation of the employer and employees.
Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its purpose, which is to afford protection to
the certified bargaining agent and ensure that the employer is dealing with a union that represents the interests of the legally mandated percentage of
the members of the bargaining unit.
The union shop clause offers protection to the certified bargaining agent by ensuring that future regular employees who (a) enter the
employ of the company during the life of the CBA; (b) are deemed part of the collective bargaining unit; and (c) whose number will affect the
number of members of the collective bargaining unit will be compelled to join the union. Such compulsion has legal effect, precisely because the
employer by voluntarily entering in to a union shop clause in a CBA with the certified bargaining agent takes on the responsibility of dismissing the
new regular employee who does not join the union.
Without the union shop clause or with the restrictive interpretation thereof as proposed in the dissenting opinions, the company can jeopardize the
majority status of the certified union by excluding from union membership all new regular employees whom the Company will absorb in future
mergers and all new regular employees whom the Company hires as regular from the beginning of their employment without undergoing a
probationary period. In this manner, the Company can increase the number of members of the collective bargaining unit and if this increase is not
accompanied by a corresponding increase in union membership, the certified union may lose its majority status and render it vulnerable to attack by
another union who wishes to represent the same bargaining unit.[35]
Or worse, a certified union whose membership falls below twenty percent (20%) of the total members of the collective bargaining unit may lose its
status as a legitimate labor organization altogether, even in a situation where there is no competing union.[36] In such a case, an interested party may
file for the cancellation of the unions certificate of registration with the Bureau of Labor Relations.[37]
Plainly, the restrictive interpretation of the union shop clause would place the certified unions very existence at the mercy and control of the
employer. Relevantly, only BPI, the employer appears to be interested in pursuing this case. The former FEBTC employees have not joined BPI
in this appeal.
For the foregoing reasons, Justice Carpios proposal to simply require the former FEBTC to pay agency fees is wholly inadequate to compensate the
certified union for the loss of additional membership supposedly guaranteed by compliance with the union shop clause. This is apart from the fact
that treating these absorbed employees as a special class of new employees does not encourage worker solidarity in the company since another class
of new employees (i.e. those whose were hired as probationary and later regularized during the life of the CBA) would not have the option of
substituting union membership with payment of agency fees.
Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually excluding the absorbed employees from the ambit of the
union shop clause. He proposes that this matter be left to negotiation by the parties in the next CBA. To our mind, however, this proposal does not
sufficiently address the issue. With BPI already taking the position that employees absorbed pursuant to its voluntary mergers with other banks are
exempt from the union shop clause, the chances of the said bank ever agreeing to the inclusion of such employees in a future CBA is next to nil more
so, if BPIs narrow interpretation of the union shop clause is sustained by this Court.
Right of an Employee not to Join a Union is not Absolute and Must Give Way to the Collective
Good of All Members of the Bargaining Unit
The dissenting opinions place a premium on the fact that even if the former FEBTC employees are not old employees, they nonetheless
were employed as regular and permanent employees without a gap in their service. However, an employees permanent and regular employment
status in itself does not necessarily exempt him from the coverage of a union shop clause.
In the past this Court has upheld even the more stringent type of union security clause, i.e., the closed shop provision, and held that it can be made
applicable to old employees who are already regular and permanent but have chosen not to join a union. In the early case of Juat v. Court of
Industrial Relations,[38] the Court held that an old employee who had no union may be compelled to join the union even if the collective bargaining
agreement (CBA) imposing the closed shop provision was only entered into seven years after of the hiring of the said employee. To quote from that
decision:
A closedshop agreement has been considered as one form of union security whereby only union members can be hired and
workers must remain union members as a condition of continued employment. The requirement for employees or workers to
become members of a union as a condition for employment redounds to the benefit and advantage of said employees because
by holding out to loyal members a promise of employment in the closedshop the union wields group solidarity. In fact, it is said
that "the closedshop contract is the most prized achievement of unionism."
x x x x
This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et al. vs. Court of Industrial Relations, et
al., G.R. No. L16561, Jan. 28, 1961, that the closedshop proviso of a collective bargaining agreement entered into between an
employer and a duly authorized labor union is applicable not only to the employees or laborers that are employed after the
collective bargaining agreement had been entered into but also to old employees who are not members of any labor union
at the time the said collective bargaining agreement was entered into. In other words, if an employee or laborer is already a
member of a labor union different from the union that entered into a collective bargaining agreement with the employer providing
for a closedshop, said employee or worker cannot be obliged to become a member of that union which had entered into a
collective bargaining agreement with the employer as a condition for his continued employment. (Emphasis and underscoring
supplied.)
Although the present case does not involve a closed shop provision that included even old employees, the Juat example is but one of the cases that
laid down the doctrine that the right not to join a union is not absolute. Theoretically, there is nothing in law or jurisprudence to prevent an employer
and a union from stipulating that existing employees (who already attained regular and permanent status but who are not members of any union) are
to be included in the coverage of a union security clause. Even Article 248(e) of the Labor Code only expressly exempts old employees who already
have a union from inclusion in a union security clause.[39]
Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano v. Elizalde Rope Workers Union[40] nor by Reyes
v. Trajano.[41] The factual milieus of these three cases are vastly different.
In Victoriano, the issue that confronted the Court was whether or not employees who were members of the Iglesia ni Kristo (INK) sect could be
compelled to join the union under a closed shop provision, despite the fact that their religious beliefs prohibited them from joining a union. In that
case, the Court was asked to balance the constitutional right to religious freedom against a host of other constitutional provisions including the
freedom of association, the nonestablishment clause, the nonimpairment of contracts clause, the equal protection clause, and the social justice
provision. In the end, the Court held that religious freedom, although not unlimited, is a fundamental personal right and liberty, and has a preferred
position in the hierarchy of values.[42]
However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining a union is not absolute. The relevant portion
of Victoriano is quoted below:
The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however,
limited. The legal protection granted to such right to refrain from joining is withdrawn by operation of law, where a labor
union and an employer have agreed on a closed shop, by virtue of which the employer may employ only member of the
collective bargaining union, and the employees must continue to be members of the union for the duration of the contract
in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for an employer "to discriminate in regard to hire or tenure of
employment or any term or condition of employment to encourage or discourage membership in any labor organization"
the employer is, however, not precluded "from making an agreement with a labor organization to require as a condition
of employment membership therein, if such labor organization is the representative of the employees." By virtue, therefore,
of a closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs,
wishes to be employed or to keep his employment, he must become a member of the collective bargaining union. Hence, the
right of said employee not to join the labor union is curtailed and withdrawn.[43] (Emphases supplied.)
If Juat exemplified an exception to the rule that a person has the right not to join a union, Victoriano merely created an exception to the exception on
the ground of religious freedom.
Reyes, on the other hand, did not involve the interpretation of any union security clause. In that case, there was no certified bargaining agent yet since
the controversy arose during a certification election. In Reyes, the Court highlighted the idea that the freedom of association included the right not to
associate or join a union in resolving the issue whether or not the votes of members of the INK sect who were part of the bargaining unit could be
excluded in the results of a certification election, simply because they were not members of the two contesting unions and were expected to have
voted for NO UNION in view of their religious affiliation. The Court upheld the inclusion of the votes of the INK members since in the previous case
of Victoriano we held that INK members may not be compelled to join a union on the ground of religious freedom and even without Victoriano every
employee has the right to vote no union in a certification election as part of his freedom of association. However, Reyes is not authority for Justice
Carpios proposition that an employee who is not a member of any union may claim an exemption from an existing union security clause because he
already has regular and permanent status but simply prefers not to join a union.
The other cases cited in Justice Carpios dissent on this point are likewise inapplicable. Basa v. Federacion Obrera de la Industria Tabaquera y Otros
Trabajadores de Filipinas,[44]Anucension v. National Labor Union,[45] and Gonzales v. Central Azucarera de Tarlac Labor Union[46] all involved
members of the INK. In line with Victoriano, these cases upheld the INK members claimed exemption from the union security clause on religious
grounds. In the present case, the former FEBTC employees never claimed any religious grounds for their exemption from the Union Shop Clause. As
for Philips Industrial Development, Inc. v. National Labor Relations Corporation[47] and Knitjoy Manufacturing, Inc. v. FerrerCalleja,[48] the
employees who were exempted from joining the respondent union or who were excluded from participating in the certification election were found to
be not members of the bargaining unit represented by respondent union and were free to form/join their own union. In the case at bar, it is
undisputed that the former FEBTC employees were part of the bargaining unit that the Union represented. Thus, the rulings
in Philips and Knitjoy have no relevance to the issues at hand.
Time and again, this Court has ruled that the individual employees right not to join a union may be validly restricted by a union security
clause in a CBA[49] and such union security clause is not a violation of the employees constitutional right to freedom of association.[50]
It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in Article XIII on Social Justice. The
constitutional guarantee given the right to form unions[51] and the State policy to promote unionism[52] have social justice considerations. In Peoples
Industrial and Commercial Employees and Workers Organization v. Peoples Industrial and Commercial Corporation,[53] we recognized that [l]abor,
being the weaker in economic power and resources than capital, deserve protection that is actually substantial and material.
The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge upon the individual employees right or
freedom of association, is not to protect the union for the unions sake. Laws and jurisprudence promote unionism and afford certain protections to the
certified bargaining agent in a unionized company because a strong and effective union presumably benefits all employees in the bargaining
unit since such a union would be in a better position to demand improved benefits and conditions of work from the employer. This is the rationale
behind the State policy to promote unionism declared in the Constitution, which was elucidated in the abovecited case of Liberty Flour Mills
Employees v. Liberty Flour Mills, Inc.[54]
In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause, they are required to join the certified
bargaining agent, which supposedly has gathered the support of the majority of workers within the bargaining unit in the appropriate certification
proceeding. Their joining the certified union would, in fact, be in the best interests of the former FEBTC employees for it unites their interests with
the majority of employees in the bargaining unit. It encourages employee solidarity and affords sufficient protection to the majority status of the
union during the life of the CBA which are the precisely the objectives of union security clauses, such as the Union Shop Clause involved herein. We
are indeed not being called to balance the interests of individual employees as against the State policy of promoting unionism, since the employees,
who were parties in the court below, no longer contested the adverse Court of Appeals decision. Nonetheless, settled jurisprudence has already swung
the balance in favor of unionism, in recognition that ultimately the individual employee will be benefited by that policy. In the hierarchy of
constitutional values, this Court has repeatedly held that the right to abstain from joining a labor organization is subordinate to the policy of
encouraging unionism as an instrument of social justice.
Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the former FEBTC employees who refuse to join
the union is the forfeiture of their retirement benefits. This is clearly not the case precisely because BPI expressly recognized under the merger the
length of service of the absorbed employees with FEBTC. Should some refuse to become members of the union, they may still opt to retire if they are
qualified under the law, the applicable retirement plan, or the CBA, based on their combined length of service with FEBTC and BPI. Certainly, there
is nothing in the union shop clause that should be read as to curtail an employees eligibility to apply for retirement if qualified under the law, the
existing retirement plan, or the CBA as the case may be.
In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the CBA covers the former FEBTC employees
who were hired/employed by BPI during the effectivity of the CBA in a manner which petitioner describes as absorption. A contrary appreciation of
the facts of this case would, undoubtedly, lead to an inequitable and very volatile labor situation which this Court has consistently ruled against.
In the case of former FEBTC employees who initially joined the union but later withdrew their membership, there is even greater reason
for the union to request their dismissal from the employer since the CBA also contained a Maintenance of Membership Clause.
A final point in relation to procedural due process, the Court is not unmindful that the former FEBTC employees refusal to join the union
and BPIs refusal to enforce the Union Shop Clause in this instance may have been based on the honest belief that the former FEBTC employees were
not covered by said clause. In the interest of fairness, we believe the former FEBTC employees should be given a fresh thirty (30) days from notice
of finality of this decision to join the union before the union demands BPI to terminate their employment under the Union Shop Clause, assuming
said clause has been carried over in the present CBA and there has been no material change in the situation of the parties.
WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the Court of Appeals is AFFIRMED,
subject to the thirty (30) day notice requirement imposed herein. Former FEBTC employees who opt not to become union members but who qualify
for retirement shall receive their retirement benefits in accordance with law, the applicable retirement plan, or the CBA, as the case may be.
SO ORDERED.
THIRD DIVISION
ABUNDIO BARAYOGA and G.R. No. 160073
BISUDECOPHILSUCOR
CORFARM WORKERS UNION Present:
(PACIWU CHAPTPC),
Petitioners, Panganiban, J., Chairman,
SandovalGutierrez,
Corona,
versus Carpio Morales, and
Garcia, JJ
ASSET PRIVATIZATION Promulgated:
TRUST,*
Respondent. October 24, 2005
x x
DECISION
PANGANIBAN, J.:
Responsibility for the liabilities of a mortgagor towards its employees cannot be transferred via an auction sale to a purchaser who is also the
mortgageecreditor of the foreclosed assets and chattels. Clearly, the mortgageecreditor has no employer __________________
* The Privatization and Management Office has succeeded APT. Comment, p. 1; rollo, p. 480.
employee relations with the mortgagors workers. The mortgage constitutes a lien on the determinate properties of the employerdebtor, because it is a
specially preferred credit to which the workers monetary claims is deemed subordinate.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the January 30, 2003 Decision[2] and the August 27, 2003
Resolution[3] of the Court of Appeals (CA), in CAGR SP No. 58813. The disposition or fallo of the questioned Decision reads as follows:
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the assailed NLRC Decision dated
February 18, 2000 is hereby RECALLED and SET ASIDE insofar as herein petitioner APT is concerned. No cost.[4]
The reversed Decision[5] of the National Labor Relations Commission (NLRC) disposed as follows:
WHEREFORE, premises considered, the decision appealed from is AFFIRMED with modifications as follows:
1. Complainants are awarded their monetary claims for underpayment of salaries and payment of
allowances per their computation on pp. 9799 and 142144 of the records;
2. Complainants are declared to have been illegally dismissed and should be paid their backwages
from 01 May 1991 to 30 October 1992.[6]
The challenged August 27, 2003 Resolution denied petitioners Motion for Reconsideration.
The Facts
The CA summarized the antecedents in this portion of its Decision, which we quote:
BisudecoPhilsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development Corporation
(BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur.
On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public trust was created under Proclamation
No. 50, as amended, mandated to take title to and possession of, conserve, provisionally manage and dispose of nonperforming
assets of the Philippine government identified for privatization or disposition.
Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued Administrative Order No. 14
identifying certain assets of government institutions that were to be transferred to the National Government. Among the assets
transferred was the financial claim of the Philippine National Bank against BISUDECO in the form of a secured loan.
Consequently, by virtue of a Trust Agreement executed between the National Government and APT on February 27, 1987, APT
was constituted as trustee over BISUDECOs account with the PNB.
Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar Corporation (Philsucor)
to take over the management of the sugar plantation and milling operations until August 31, 1992.
Meanwhile, because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its mortgaged
properties were foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On April 2, 1991, APT was
issued a Sheriffs Certificate of Sale.
On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction and
underpayment of wages and other labor standard benefits plus damages.
In the meantime, on July 15, 1992, APTs Board of Trustees issued a resolution accepting the offer of BicolAgro
Industrial Cooperative (BAPCI) to buy the sugar plantation and mill. Again, on September 23, 1992, the board passed another
resolution authorizing the payment of separation benefits to BISUDECOs employees in the event of the companys privatization.
Then, on October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took over its sugar milling
operations under the trade name Peafrancia Sugar Mill (Pensumil).
On December 17, 1992, the union filed a similar complaint, later to be consolidated with its earlier complaint and
docketed as RAB V Case No. 070018491.
On March 2, 1993, it filed an amended complaint, impleading as additional party respondents APT and Pensumil.
In their Position Paper, the union alleged that when Philsucor initially took over the operations of the company, it
retained BISUDECOs existing personnel under the same terms and conditions of employment. Nonetheless, at the start of the
season sometime in May 1991, Philsucor started recalling workers back to work, to the exception of the union members.
Management told them that they will be rehired only if they resign from the union. Just the same, thereafter, the company started
to employ the services of outsiders under the pakyaw system.
BISUDECO, Pensumil and APT all interposed the defense of lack of employeremployee relationship.
x x x x x x x x x
After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed as follows:
WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein complainants of the
mandated employment benefits provided for under Section 27 of Proclamation No. 50 which benefits had
been earlier extended to other employees similarly situated.
SO ORDERED.
Both the union and APT elevated the labor arbiters decision before NLRC.[7]
The NLRC affirmed APTs liability for petitioners money claims. While no employeremployee relationship existed between members of the
petitioner union and APT, at the time of the employees illegal dismissal, the assets of BISUDECO had been transferred to the national government
through APT. Moreover, the NLRC held that APT should have treated petitioners claim as a lien on the assets of BISUDECO. The Commission
opined that APT should have done so, considering its awareness of the pending complaint of petitioners at the time BISUDECO sold its assets to
BAPCI, and APT started paying separation pay to the workers.
Finding their computation to be in order, the NLRC awarded to petitioners their money claims for underpayment, laborstandard benefits, and
ECOLA. It also awarded them their back wages, computed at the prevailing minimum wage, for the period May 1, 1991 (the date of their illegal
dismissal) until October 30, 1992 (the sale of BISUDECO assets to the BAPCI). On the other hand, the NLRC ruled that petitioners were not entitled
to separation pay because of the huge business losses incurred by BISUDECO, which had resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of Court.
Ruling of the Court of Appeals
The CA ruled that APT should not be held liable for petitioners claims for unfair labor practice, illegal dismissal, illegal deduction and
underpayment of wages, as well as other laborstandard benefits plus damages. As found by the NLRC, APT was not the employer of petitioners, but
was impleaded only for possessing BISUDECOs mortgaged properties as trustee and, later, as the highest bidder in the foreclosure sale of those
assets.
Citing Batong Buhay Gold Mines v. Dela Serna,[8] the CA concluded that petitioners claims could not be enforced against APT as
mortgagee of the foreclosed properties of BISUDECO.
Hence, this Petition.[9]
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
I. Whether or not the Court of Appeals erred in ruling that Respondent Asset Privatization Trust (APT) should not be held liable
for the petitioner unions claim for unfair labor practice, illegal dismissal, illegal deduction and underpayment of wages and other
labor standard benefits plus damages.
II. Whether or not the claims of herein petitioners cannot be enforced against APT/PNB as mortgagee of the foreclosed
properties of BISUDECO.
III. Whether or not the entitlement of petitioners upon their claims against Respondent APT is recognized under the law.[10]
In brief, the main issue raised is whether Respondent APT is liable for petitioners monetary claims.
The Courts Ruling
The Petition has no merit.
Main Issue:
Whether APT Is Liable for the Claims of
Petitioners Against Their Former Employer
It should be stressed at the outset that, pursuant to Administrative Order No. 14, Series of 1987,[11] PNBs assets, loans and receivables from
its borrowers were transferred to APT as trustee of the national government. Among the liabilities transferred to APT was PNBs financial claim
against BISUDECO, not the latters assets and chattel. Contrary to petitioners assertions, BISUDECO remained the owner of the mortgaged properties
in August 1988, when the Philippine Sugar Corporation (Philsucor) undertook the operation and management of the sugar plantation until August 31,
1992, under a socalled Contract of Lease between the two corporations. At the time, APT was merely a secured creditor of BISUDECO.[12]
It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO because of the latters continued failure to pay
outstanding loan obligations to PNB/APT. The properties were sold at public auction to APT, the highest bidder, as indicated in the Sheriffs
Certificate of Sale issued on April 2, 1991. It was only in September 1992 (after the expiration of the lease/management Contract with Philsucor in
August 1992), however, when APT took over BISUDECO assets, preparatory to the latters privatization.
In the present case, petitionerunions members who were not recalled to work by Philsucor in May 1991 seek to hold APT liable for their
monetary claims and allegedly illegal dismissal. Significantly, prior to the actual sale of BISUDECO assets to BAPCI on October 30, 1992, the APT
board of trustees had approved a Resolution on September 23, 1992. The Resolution authorized the payment of separation benefits to the employees
of the corporation in the event of its privatization. Not included in the Resolution, though, were petitionerunions members who had not been recalled
to work in May 1991.
The question now before the Court is whether APT is liable to pay petitioners monetary claims, including back wages from May 1, 1991, to
October 30, 1992 (the date of the sale of BISUDECO assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its monetary liabilities to its employees, were not all
automatically assumed by APT as purchaser of the foreclosed properties at the auction sale. Any assumption of liability must be specifically and
categorically agreed upon. In Sundowner Development Corp. v. Drilon,[13] the Court ruled that, unless expressly assumed, labor contracts like
collective bargaining agreements are not enforceable against the transferee of an enterprise. Labor contracts are in personam and thus binding only
between the parties.
No succession of employment rights and obligations can be said to have taken place between the two. Between the employees of
BISUDECO and APT, there is no privity of contract that would make the latter a substitute employer that should be burdened with the obligations of
the corporation. To rule otherwise would result in unduly imposing upon APT an unwarranted assumption of accounts not contemplated in
Proclamation No. 50 or in the Deed of Transfer between the national government and PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially all, the properties of the seller or transferor is
not obliged to absorb the latters employees.[14] The most that the purchasing company may do, for reasons of public policy and social justice, is to
give preference of reemployment to the selling companys qualified separated employees, who in its judgment are necessary to the continued
operation of the business establishment.[15]
In any event, the national government (in whose trust APT previously held the mortgage credits of BISUDECO) is not the employer of petitioner
unions members, who had been dismissed sometime in May 1991, even before APT took over the assets of the corporation. Hence, under existing
law and jurisprudence, there is no reason to expect any kind of bailout by the national government.[16] Even the NLRC found that no employer
employee relationship existed between APT and petitioners. Thus, the Commission gravely abused its discretion in nevertheless holding that APT, as
the transferee of the assets of BISUDECO, was liable to petitioners.
Petitioners also contend that in Central Azucarera del Danao v. Court of Appeals,[17] this Court supposedly ruled that the sale of a business
of a going concern does not ipso facto terminate the employeremployee relations insofar as the successoremployer is concerned, and that change of
ownership or management of an establishment or company is not one of the just causes provided by law for termination of employment[.][18]
A careful reading of the Courts Decision in that case plainly shows that it does not contain the words quoted by counsel for petitioners. At
this juncture, we admonish their counsel[19] of his bounden duty as an officer of the Court to refrain from misquoting or misrepresenting the text of its
decisions.[20] Ever present is the danger that, if not faithfully and exactly quoted, they may lose their proper and correct meaning, to the detriment of
other courts, lawyers and the public who may thereby be misled.[21]
In that case, contrary to the assertions of petitioners, the Court held as follows:
There can be no controversy for it is a principle wellrecognized, that it is within the employers legitimate sphere of management
control of the business to adopt economic policies or make some changes or adjustments in their organization or operations that
would insure profit to itself or protect the investment of its stockholders. As in the exercise of such management prerogative, the
employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties
which may bring about the dismissal or termination of its employees in the process. Such dismissal or termination should not
however be interpreted in such a manner as to permit the employer to escape payment of termination pay. x x x.
In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated by good faith as an
element of exemption from liability. Indeed, an innocent transferee of a business establishment has no liability to the employees
of the transferor to continue employing them. Nor is the transferee liable for past unfair labor practices of the previous owner,
except, when the liability therefor is assumed by the new employer under the contract of sale, or when liability arises because of
the new owners participation in thwarting or defeating the rights of the employees.[22] (Citations omitted.)
In other words, the liabilities of the previous owner to its employees are not enforceable against the buyer or transferee, unless (1) the latter
unequivocally assumes them; or (2) the sale or transfer was made in bad faith. Thus, APT cannot be held responsible for the monetary claims of
petitioners who had been dismissed even before it actually took over BISUDECOs assets.
Moreover, it should be remembered that APT merely became a transferee of BISUDECOs assets for purposes of conservation because of its lien on
those assets a lien it assumed as assignee of the loan secured by the corporation from PNB. Subsequently, APT, as the highest bidder in the auction
sale, acquired ownership of the foreclosed properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act No. 6715, which reads:
Article 110. Workers preference in case of bankruptcy. In the event of bankruptcy or liquidation of the employers business, his
workers shall enjoy first preference as regards their unpaid wages and other monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid.[23]
This Court has ruled in a long line of cases[24] that under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a special preferred
credit that enjoys preference with respect to a specific/determinate property of the debtor. On the other hand, the workers preference under Article
110 of the Labor Code is an ordinary preferred credit. While this provision raises the workers money claim to first priority in the order of preference
established under Article 2244 of the Civil Code, the claim has no preference over special preferred credits.
Thus, the right of employees to be paid benefits due them from the properties of their employer cannot have any preference over the latters
mortgage credit. In other words, being a mortgage credit, APTs lien on BISUDECOs mortgaged assets is a special preferred lien that must be
satisfied first before the claims of the workers.
Development Bank of the Philippines v. NLRC[25] explained the rationale of this ruling as follows:
x x x. A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular
property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the
property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is
a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of
the insolvents assets. It is a right to a first preference in the discharge of the funds of the judgment debtor. x x x
Furthermore, workers claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcy or judicial liquidation
proceedings against the employer.[26] It is settled that the application of Article 110 of the Labor Code is contingent upon the institution of those
proceedings, during which all creditors are convened, their claims ascertained and inventoried, and their preferences determined.[27] Assured thereby
is an orderly determination of the preference given to creditors claims; and preserved in harmony is the legal scheme of classification, concurrence
and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT alone. In holding that the latter, which has never really been an
employer of petitioners, is not liable for their claims, this Court is not reversing or ruling upon their entitlement to back wages and other unpaid
benefits from their previous employer.
On the basis of the foregoing clarification, the Court finds no reversible error in the questioned CA Decision, which set aside the February
8, 2000 Decision of the NLRC. As a mere transferee of the mortgage credit and later as the purchaser in a public auction of BISUDECOs foreclosed
properties, APT cannot be held liable for petitioners claims against BISUDECO: illegal dismissal, unpaid back wages and other monetary benefits.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.
.R. No. 111042. October 26, 1999]
AVELINO LAMBO and VICENTE BELOCURA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and J.C. TAILOR
SHOP and/or JOHNNY CO, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for certiorari to set aside the decision[1] of the National Labor Relations Commission (NLRC) which reversed the awards
made by the Labor Arbiter in favor of petitioners, except one for P4,992.00 to each, representing 13th month pay.
The facts are as follows.
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents J.C. Tailor Shop and/or Johnny Co on
September 10, 1985 and March 3, 1985, respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the case
of the other 100 employees of private respondents, petitioners were paid on a piecework basis, according to the style of suits they made. Regardless
of the number of pieces they finished in a day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal and sought recovery of overtime pay,
holiday pay, premium pay on holiday and rest day, service incentive leave pay, separation pay, 13th month pay, and attorneys fees.
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty of illegal dismissal and accordingly ordered them to pay
petitioners claims. The dispositive portion of the Labor Arbiters decision reads:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring the complainants to have been illegally dismissed and ordering
the respondents to pay the complainants the following monetary awards:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20 = P191,102.40
Add: 10% Attorneys Fees 19,110.24
GRAND TOTAL P210,212.64
= = = = = =
or a total aggregate amount of TWO HUNDRED TEN THOUSAND TWO HUNDRED TWELVE AND 64/100 (P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED.[2]
On appeal by private respondents, the NLRC reversed the decision of the Labor Arbiter. It found that petitioners had not been dismissed from
employment but merely threatened with a closure of the business if they insisted on their demand for a straight payment of their minimum wage, after
petitioners, on January 17, 1989, walked out of a meeting with private respondents and other employees. According to the NLRC, during that
meeting, the employees voted to maintain the company policy of paying them according to the volume of work finished at the rate of P18.00 per
dozen of tailored clothing materials. Only petitioners allegedly insisted that they be paid the minimum wage and other benefits. The NLRC held
petitioners guilty of abandonment of work and accordingly dismissed their claims except that for 13th month pay. The dispositive portion of its
decision reads:
WHEREFORE, in view of the foregoing, the appealed decision is hereby vacated and a new one entered ordering respondents to pay each of the
complainants their 13th month pay in the amount of P4,992.00. All other monetary awards are hereby deleted.
SO ORDERED.[3]
Petitioners allege that they were dismissed by private respondents as they were about to file a petition with the Department of Labor and
Employment (DOLE) for the payment of benefits such as Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they
abandoned their work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of private respondents although they were paid not on the basis of time spent on the
job but according to the quantity and the quality of work produced by them. There are two categories of employees paid by results: (1) those whose
time and performance are supervised by the employer. (Here, there is an element of control and supervision over the manner as to how the work is to
be performed. A piecerate worker belongs to this category especially if he performs his work in the company premises.); and (2) those whose time
and performance are unsupervised. (Here, the employers control is over the result of the work. Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit accomplished. Piecerate payment is generally practiced in garment factories where work is done in
the company premises, while payment on pakyao and takay basis is commonly observed in the agricultural industry, such as in sugar plantations
where the work is performed in bulk or in volumes difficult to quantify.[4] Petitioners belong to the first category, i.e., supervised employees.
In determining the existence of an employeremployee relationship, the following elements must be considered: (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.[5] 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.[6]
In this case, private respondents exercised control over the work of petitioners. As tailors, petitioners worked in the companys premises from
8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. The mere fact that they were paid on a piecerate basis does not negate their status as
regular employees of private respondents. The term wage is broadly defined in Art. 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.[7] Nor does the fact that petitioners are not covered by the SSS affect the employer
employee relationship.
Indeed, the following factors show that petitioners, although piecerate workers, were regular employees of private respondents: (1) within the
contemplation of Art. 280 of the Labor Code, their work as tailors was necessary or desirable in the usual business of private respondents, which is
engaged in the tailoring business; (2) petitioners worked for private respondents throughout the year, their employment not being dependent on a
specific project or season; and, (3) petitioners worked for private respondents for more than one year.[8]
Second. Private respondents contend, however, that petitioners refused to report for work after learning that the J.C. Tailoring and Dress Shop
Employees Union had demanded their (petitioners) dismissal for conduct unbecoming of employees. In support of their claim, private respondents
presented the affidavits[9] of Emmanuel Y. Caballero, president of the union, and Amado Cabaero, member, that petitioners had not been dismissed
by private respondents but that practically all employees of the company, including the members of the union had asked management to terminate the
services of petitioners. The employees allegedly said they were against petitioners request for change of the mode of payment of their wages, and that
when a meeting was called to discuss this issue, a petition for the dismissal of petitioners was presented, prompting the latter to walk out of their jobs
and instead file a complaint for illegal dismissal against private respondents on January 17, 1989, even before all employees could sign the petition
and management could act upon the same.
To justify a finding of abandonment of work, there must be proof of a deliberate and unjustified refusal on the part of an employee to resume
his employment. The burden of proof is on the employer to show an unequivocal intent on the part of the employee to discontinue employment.
[10]
Mere absence is not sufficient. It must be accompanied by manifest acts unerringly pointing to the fact that the employee simply does not want to
work anymore.[11]
Private respondents failed to discharge this burden. Other than the selfserving declarations in the affidavits of their two employees, private
respondents did not adduce proof of overt acts of petitioners showing their intention to abandon their work. On the contrary, the evidence shows that
petitioners lost no time in filing the case for illegal dismissal against private respondent. This fact negates any intention on their part to sever their
employment relationship.[12] Abandonment is a matter of intention; it cannot be inferred or presumed from equivocal acts.[13]
Third. Private respondents invoke the compromise agreement,[14] dated March 2, 1993, between them and petitioner Avelino Lambo, whereby
in consideration of the sum of P10,000.00, petitioner absolved private respondents from liability for money claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy. But those (1) where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person or (2) where the terms of settlement are unconscionable on their face are invalid. In these cases, the law will
step in to annul the questionable transaction.[15] However, considering that the Labor Arbiter had given petitioner Lambo a total award of P94,719.20,
the amount of P10,000.00 to cover any and all monetary claims is clearly unconscionable. As we have held in another case,[16] the subordinate
position of the individual employee visavis management renders him especially vulnerable to its blandishments, importunings, and even
intimidations, and results in his improvidently waiving benefits to which he is clearly entitled. Thus, quitclaims, waivers or releases are looked upon
with disfavor for being contrary to public policy and are ineffective to bar claims for the full measure of the workers legal rights.[17] An employee
who is merely constrained to accept the wages paid to him is not precluded from recovering the difference between the amount he actually received
and that amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th month pay, separation pay and attorneys fees, corresponding
to 10% of the total monetary awards, in favor of petitioners.
As petitioners were illegally dismissed, they are entitled to reinstatement with backwages. Considering that petitioners were dismissed from the
service on January 17, 1989, i.e., prior to March 21, 1989,[18] the Labor Arbiter correctly applied the rule in the Mercury Drug case,[19] according to
which the recovery of backwages should be limited to three years without qualifications or deductions. Any award in excess of three years is null and
void as to the excess.[20]
The Labor Arbiter correctly ordered private respondents to give separation pay. Considerable time has lapsed since petitioners dismissal, so
that reinstatement would now be impractical and hardly in the best interest of the parties. In lieu of reinstatement, separation pay should be awarded
to petitioners at the rate of one month salary for every year of service, with a fraction of at least six (6) months of service being considered as one (1)
year.[21]
The awards for overtime pay, holiday pay and 13th month pay are in accordance with our finding that petitioners are regular employees,
although paid on a piecerate basis.[22] These awards are based on the following computation of the Labor Arbiter:
AVELINO LAMBO
I. BACKWAGES: Jan. 17/89 Jan. 17/92 = 36 mos.
P 64.00/day x 26 days =
1,664.00/mo. x 36 mos. = P 59,904.00
13th Mo. Pay:
P 1,664.00/yr. x 3 yrs. = 4, 992.00
P64,896.00
II. OVERTIME PAY: Jan. 17/86 Jan. 17/89
Jan. 17/86 April 30/87 = 15 mos. & 12 days =
(15 mos. x 26 days + 12 days) = 402 days
*2 hours = 25%
402 days x 2 hrs./day = 804 hrs.
P 32.00/day 8 hrs. =
4.00/hr. x 25% =
1.00/hr. + P4.00/hr. =
5.00/hr. x 804 hrs. = P 4,020.00
May 1/87Sept. 30/87 = 4 mos. & 26 days =
(4 mos. x 26 days + 26 days) = 130 days
130 days x 2 hrs./day = 260 hrs.
P 41.00/day 8 hrs. =
5.12/hr. x 25% =
1.28/hr. + P5.12/hr. =
6.40/hr. x 260 hrs. = P 1,664.00
Oct. 1/87Dec. 13/87 = 2 mos. & 11 days =
(2 mos. x 26 days + 11 days) = 63 days
63 days x 2 hrs./day = 126 hrs.
P 49.00/day 8 hrs. =
6.12/hr. x 25% =
1.53/hr. + P6.12/hr. =
7.65/hr. x 126 hrs. = P963.90
Dec. 14/87 Jan. 17/89 = 13 mos. & 2 days =
(13 mos. x 26 days + 2 days) = 340 days
340 days x 2 hrs./day = 680 hrs.
P 64.00/day 8 hrs. =
8.00/hr. x 25% =
2.00/hr. + P8.00/hr. =
10.00/hr. x 680 hrs. = P6,800.00
P13,447.90
III. HOLIDAY PAY: Jan. 17/86 Jan. 17/89
Jan. 17/86 April 30/87 = 12 RHs; 8 SHs
P 32.00/day x 200% =
64.00/day x 12 days = P768.00
32.00/day x 12 days = (384.00)
P384.00
32.00/day x 30% =
9.60/day x 8 days = 76.80 460.80
May 1/87 Sept. 30/87 = 3 RHs; 3 SHs
P 41.00/day x 200% =
82.00/day x 3 days = P246.00
41.00/day x 3 days = (123.00) P123.00
41.00/day x 30% =
12.30/day x 3 days = 36.90 159.90
Oct. 1/87 Dec. 13/87 = 1 RH
P 49.00/day x 200% =
98.00/day x 1 day = P98.00
49.00/day x 1 day = (49.00) 49.00
Dec. 14/87 Jan. 17/89 = 9 RHs; 8 SHs
P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
64.00/day x 9 days = (576.00) P 576.00
64.00/day x 30% =
19.20/day x 8 days = 153.60 729.60 1,399.30
IV. 13TH MO. PAY:
Jan. 17/86 Jan. 17/89 = 3 yrs.
P 64.00/day x 26 days =
1,664.00/yr. x 3 yrs. = 4,992.00
V. SEPARATION PAY:
Sept. 10/85 Jan. 17/92 = 6 yrs.
1,664.00/mo. x 6 yrs. = 9,984.00
TOTAL AWARD OF AVELINO LAMBO P94,719.20
= = = = = =
VICENTE BELOCURA
I. BACKWAGES:
Jan. 17/89 Jan. 17/92 = 36 mos.
Same computation as A. Lambo P64,896.00
II. OVERTIME PAY: Jan. 17/86 Jan. 17/89
Same computation as A. Lambo 13,447.90
III. HOLIDAY PAY:
Jan. 17/86 Jan. 17/89
Same computation as A. Lambo 1,399.30
IV. 13TH MO. PAY:
Jan. 17/86 Jan. 17/89
Same computation as A. Lambo 4,992.00
V. SEPARATION PAY:
March 3/85 Jan. 17/92 = 7 yrs.
P1,664.00/mo. x 7 yrs. = 11,648.00
TOTAL AWARD OF VICENTE BELOCURA P96,383.20
= = = = =
SUMMARY
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MO. PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorneys Fees 19,110.24
GRAND TOTAL P 210,212.64
= = = = = = =
Except for the award of attorneys fees in the amount of P19,110.24, the above computation is affirmed. The award of attorneys fees should be
disallowed, it appearing that petitioners were represented by the Public Attorneys Office. With regard to petitioner Avelino Lambo, the amount
of P10,000.00 paid to him under the compromise agreement should be deducted from the total award of P94,719.20. Consequently, the award to each
petitioner should be as follows:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P 64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
P 94,719.20
Less 10,000.00
TOTAL P84,719.20 P96,383.20
GRAND TOTAL P181,102.40
= = = = = =
vvvvvvvvvv
WHEREFORE, the decision of the National Labor Relations Commission is SET ASIDE and another one is RENDERED ordering private
respondents to pay petitioners the total amount of One Hundred EightyOne Thousand One Hundred Two Pesos and 40/100 (P181,102.40), as
computed above.
SO ORDERED.
SECOND DIVISION
G.R. No. 81415 June 6, 1990
A.N. BOLINAO, JR., JUAN A. AGSALON, JR., ZOSIMO L. CARREON AND REYNOLD P. DANNUG, petitioners,
vs.
HON. MANUEL S. PADOLINA, PHELPS DODGE (PHILS.) INC., BANK OF AMERICA, AND DEPUTY SHERIFF CARLOS G.
MAOG, respondents.
A.N. Bolinao, Jr. for petitioners.
Mina & Associates for respondents.
Agcaoili & Associates for respondent BA.
PARAS, J.:
This is a petition for certiorari with preliminary injunction which seeks to reverse and to set aside the order of the Regional Trial Court of Pasig,
Metro Manila, dated January 5, 1988 in Civil Case No. 50936 entitled "Phelps Dodge (Phils.) Inc. v. Sabena Mining Corporation" denying the
motion to intervene and dismissing the third party claim filed by herein petitioners.
As gathered from the records, the facts of the case are as follows:
Petitioners A.N. Bolinao, Jr., Reynold P. Dannug, Juan A. Agsalon, Jr. and Zosimo L. Carreon were all former employees of Sabena Mining
Corporation, which had a copper and gold project in operation, located in New Bataan, Davao del Norte. In 1982 and 1983 they were laid off without
being recalled (Rollo, Petition, pp. 34).
In September, 1983, petitioners filed a formal complaint for collection of unpaid salaries, unused accrued vacation and sick leave benefits, 13th
month pay and separation pay before the National Labor Relations Commission (NLRC) against Sabena Mining Corporation and Development Bank
of the Philippines docketed as NCR Case No. 9417883 (Rollo, Petition, p. 5).
On May 29,1984, a compromise agreement was entered into by the parties, wherein petitioners were to be paid on a staggered basis the collective
amount of P385,583.95 (Rollo, Petition, Annex "A, pp. 2224). The company faithfully complied with the scheduled payments only up to March,
1985 because it ceased operations effective April 1, 1985. With this development, petitioners moved for the issuance of a writ of execution in June,
1985 (Rollo, Petition, p. 6).
In an order dated June 21, 1985, the Labor Arbiter issued a writ of execution against the company to collect the balance of P311,580.14 (Rollo,
Annex "B", pp. 2526). On June 27, 1985 Deputy Sheriff Antonio P. Soriano garnished the remaining amount of P150,279.64 in the savings account
of the company at the Development Bank of the Philippines (DBP) (Rollo, Annex "B1 ", p. 27). However, the same amount was previously
garnished by two creditors of the company; namely, Bank of America and Phelps Dodge (Phils.), Inc. Bank of America garnished the amount in
April, 1982 in Civil Case No. 45452 (Rollo, Petition , pp. 45 while Phelps Dodge garnished the amount in June, 1984 in Civil Case No. 50936
(Rollo, Petition, p. 5). Both cases were filed in different branches of the Regional Trial Court in Pasig (Ibid.)
In an order dated September 30, 1987, the respondent court directed the DBP to release to its Deputy Sheriff, herein respondent Carlos G. Maog, the
amount of P150,279.64 declaring that the writ of preliminary attachment made by Bank of America thru Deputy Sheriff Norberto Doblado in Civil
Case No. 45452 by the Pasig Regional Trial Court cannot prevail over the garnishment pursuant to a writ of execution issued in Civil Case No. 50936
in favor of respondent Phelps Dodge (Phils.) Inc., for failure of Bank of America to prosecute its hen (Rollo, Petition, Annex "C", pp. 2931).
The order came to the attention of the petitioners who then filed a "Motion to Intervene and to Lift Order of September 30, 1987" on October 13,
1987 and a third party claim with the deputy sheriff on October 19, 1987 (Rollo, Annex "D', p. 3236; Annex "D1 ", pp. 3842).
DBP did not interpose any objection to the motion to intervene and the third party claim (Reno, Annex "E', pp. 4445). But respondent Phelps Dodge,
Phils., Inc. opposed said Motion to Intervene/Third Party Claim, on the ground among others:
xxx xxx xxx
b) That the rights of preference and first lien of petitioners, as former employees of Sabena Mining Corporation, as provided for
in Art. 110 of the Labor Code and Art. 2244 of the Civil Code, are operative only in insolvency court and in a bankruptcy case;
(Rollo, Annex "F", pp. 4753; Annex "F1", pp. 5457).
Petitioners filed their reply to the opposition and at the same time filed a motion to resolve the third party claim (Rollo, Annex "G, pp. 5862; Annex
"G1", pp. 63 67).
On January 5, 1988 the respondent court issued an order denying the motion to intervene and dismissing the third party claim, declaring that the
garnishment made by its Deputy Sheriff in favor of respondent Phelps Dodge, Phils., Inc. superior to the rights of petitioners (Rollo. Annex "I", pp.
7077).
Hence, the petition.
The Second Division of this Court in its resolution dated August 10, 1989, gave due course to the petition (Rollo, Petition, pp. 219; Resolution, p.
309)
The main thrust in this petition is whether or not petitioners enjoy preferential right or claim over the funds of Sabena Mining Corporation as
provided for under the provisions of Article 110 of the New Labor Code, as amended, and Section 10, Rule VIII, Book III of the Implementing Rules
and Regulations of the Labor Code.
The petitioners contend that under Article 110 and its implementing rules; and regulations of the Labor Code, the claims of the laborers for unpaid
wages and other monetary benefits due them for services rendered prior to bankruptcy enjoy first preference in the satisfaction of credits against a
bankrupt company.
On the other hand, the respondent maintains that the rights of preference and first lien of petitioners, as former employees of Sabena Mining
Corporation, under aforesaid law and rules, are operative only in an insolvency court and in a bankrupt case.
The petition is without merit.
It is quite clear from the provisions of Article 110 of the Labor Code and Section 10, Rule VIII, Book H of the Revised Rules and Regulations
Implementing the Labor Code, that a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be
enforced. Thus, it was held that Article 110 of the Labor Code and its implementing rule cannot be invoked absent a formal declaration of bankruptcy
or a liquidation order (Development Bank of the Philippines v. Labor Arbiter, G.R. Nos. 7826162, March 8, 1989). (Emphasis supplied)
In the case at bar, there was no showing of any insolvency proceeding or declaration of bankruptcy or judicial liquidation that was being filed by
Sabena Mining Corporation. It is only an extrajudicial foreclosure that was being enunciated as when DBP extrajudicially foreclosed the assets of
Sabena Mining Corporation. Conversely, to hold that Article 110 is also applicable in extrajudicial proceedings would be putting the worker in a
better position than the State which could only assert its own prior preference in case of ajudicial proceeding. Article 110 must not be viewed in
isolation and must always be reckoned with the provisions of the Civil Code (DBP v. Labor Arbiter, supra).
Quite recently, the rule enunciated in Republic v. Peralta (150 SCRA 37 [1987]) reads:
Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must be
read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of credits, which
provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or nonpreferred, may
be adjudicated in a binding manner. ...
The reason behind the necessity for a judicial proceeding or a proceeding in rem before the concurrence and preference of credits may be appealed is
to bind all interested persons whether known to the parties or not. The claims of all credits whether preferred or non preferred, the Identification of
the preferred ones and the totality of the employer's assets should be brought into the picture. There can then be an authoritative, fair and binding
adjudication instead of the piece meal settlement which would result from the questioned decision in this case 1(DBP v. Labor Arbiter, supra).
PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit and the questioned Order dated January 5, 1988 issued by the
respondent court is hereby AFFIRMED.
SO ORDERED.
SECOND DIVISION
G.R. No. 204651 August 6, 2014
OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,
vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO and JERRY SABULAO, Respondents.
D E C I S I O N
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the May 7, 2012 decision2 and the November 27, 2012 resolution3 (assailed CA
rulings) of the Court of Appeals (CA) in CAG.R. SP No. 123273. These assailed CA rulings affirmed the July 20, 2011 decision4 and the December
2, 2011 resolution5 (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC LAC No. 0200048911 (NLRC NCR Case No.
060854410). The NLRC rulings in turn reversed and set aside the December 10, 2010 decision6 of the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere all laborers working for petitioner Our
Haus Realty Development Corporation (Our Haus), a company engaged in the construction business.The respondents’ respective employment
records and daily wage rates from 2007 to 2010 are summarized in the table7 below:
Years of Daily
Name Date Hired Year and Place of Assignment
Service Rate
October
Alexander M. Parian 10 years 20072010 Quezon City ₱353.50
1999
January 2008 Quezon City 2009 Antipolo 2010 Quezon
Jay C. Erinco 10 years ₱342.00
2000 City
2008 Quezon City 2009 Antipolo 2010 Quezon
Jerry Q. Sabulao August 1999 10 years ₱342.00
City
Bernardo N.
1994 16 years 20072010 Quezon City ₱383.50
Tenedero
Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus suspended some of its construction projects
and asked the affected workers, including the respondents, to take vacation leaves.8
Eventually, the respondents were asked to report back to work but instead of doing so, they filed with the LA a complaint for underpayment of their
daily wages. They claimed that except for respondent Bernardo N. Tenedero, their wages were below the minimum rates prescribed in the following
wage orders from 2007 to 2010:
1. Wage Order No. NCR13, which provides for a daily minimum wage rate of ₱362.00for the nonagriculture sector (effective from
August 28, 2007 until June 13, 2008); and
2. Wage Order No. NCR14, which provides for a daily minimum wage rate of ₱382.00for the nonagriculture sector (effective from June
14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their holiday, service incentive leave (SIL), 13th month and overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents’ wages complied with the law’s minimum requirement. Aside from paying the
monetary amount of the respondents’ wages, Our Haus also subsidized their meals (3 times a day), and gave them free lodging near the construction
project they were assigned to.10 In determining the total amount of the respondents’ daily wages, the value of these benefits should be considered, in
line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents’ other monetary claims for lack of proof that they were entitled to it.12
On the other hand, the respondents argued that the value of their meals should not be considered in determining their wages’ total amount since the
requirements set under Section 413 of DOLE14 Memorandum Circular No. 215were not complied with.
The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the inclusion of their meals’ value in their
wages.16 Also, Our Haus failed to prove that the value of the facilities it furnished was fair and reasonable.17 Finally, instead of deducting the
maximum amount of 70% of the value of the meals, Our Haus actually withheld its full value (which was Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be taken into account, the respondents’
daily wages would meet the minimum wage rate.19 As to the other benefits, the LA found that the respondents were not able to substantiate their
claims for it.20
The respondents appealed the LA’s decision to the NLRC, which in turn, reversed it. Citing the case of Mayon Hotel & Restaurant v. Adana,21 the
NLRC noted that the respondents did not authorize Our Haus in writing to charge the values of their board and lodging to their wages. Thus, the
samecannot be credited.
The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month payments for the year 2010 and SIL payments for
at least three years,immediately preceding May 31, 2010, the date when the respondents leftOur Haus. However, the NLRC sustained the LA’s ruling
that the respondents were not entitled to overtime pay since the exact dates and times when they rendered overtime work had not been proven.22
Our Haus moved for the reconsideration23 of the NLRC’s decision and submitted new evidence (the five kasunduans) to show that the respondents
authorized Our Haus in writing to charge the values of their meals and lodging to their wages.
The NLRC denied Our Haus’ motion, thus it filed a Rule 65 petition24 with the CA. In its petition, Our Haus propounded a new theory. It made a
distinction between deduction and charging. A written authorization is only necessary if the facility’s value will be deducted and will not be needed if
it will merely be charged or included in the computation of wages.25 Our Haus claimed that it did not actually deduct the values of the meals and
housing benefits. It only considered these in computing the total amount of wages paid to the respondents for purposes of compliance with the
minimum wage law. Hence, the written authorization requirement should not apply.
Our Haus also asserted that the respondents’ claim for SIL pay should be denied as this was not included in their pro formacomplaint. Lastly, it
questioned the respondents’entitlement to attorney’s fees because they were not represented by a private lawyer but by the Public Attorney’s Office
(PAO).
The CA’s Ruling
The CA dismissed Our Haus’ certiorari petition and affirmed the NLRC rulings in toto. It found no real distinction between deduction and
charging,26 and ruled that the legal requirements before any deduction or charging can be made, apply to both. Our Haus, however, failed to prove
that it complied with any of the requirements laid down in Mabeza v. National Labor Relations Commission.27 Accordingly, it cannot consider the
values of its meal and housing facilities in the computation of the respondents’ total wages.
Also, the CA ruled that since the respondents were able to allege nonpayment of SIL in their position paper, and Our Haus, in fact, opposed it in its
various pleadings,28 then the NLRC properly considered it as part of the respondents’ causes of action. Lastly, the CA affirmed the respondent’s
entitlement to attorney’s fees.29
Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the present petition for review on certiorari under Rule
45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without distinction ―whether the facility’s value will be deducted or
merely included in the computation of the wages. At any rate, it complied with the requirements for deductibility of the value of the facilities. First,
the five kasunduans executed by the respondents constitute the written authorization for the inclusion of the board and lodging’s values to their
wages. Second, Our Haus only withheld the amount of ₱290.00 which represents the food’s raw value; the weekly cooking cost (cook’s wage, LPG,
water) at ₱239.40 per person is a separate expense that Our Haus did not withhold from the respondents’ wages.30 This disproves the
respondents’claim that it deducted the full amount of the meals’ value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the complaint; and that the respondents are entitled
to an award of attorney’s fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that the CA did not err inruling that the values of the board and lodging
cannot be deducted from their wages for failure to comply with the requirements set by law.33 And though the claim for SIL pay was not included in
their pro forma complaint, they raised their claims in their position paper and Our Haus had the opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAO’s legal services does not exempt its clients from an award of attorney’s fees.35
The Court’s Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition ― only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45 petition.36 However, in this case, weare confronted with mixed questions of fact
and law that are subsumed under the issue of whether Our Haus complied with the legal requirements on the deductibility of the value of facilities.
Strictly, factual issues cannot be considered under Rule 45 except in the course of resolving if the CA correctly determined whether or not the NLRC
committed grave abuse of discretion in considering and appreciating the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the same context that the petition for certiorariit 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. This is the approach that should bebasic
in a Rule 45 review of a CA ruling in a labor case. In question form, the question to ask in the present case is: did the CA correctly determine that the
NLRC did not commit grave abuse of discretion in ruling on the case?38 We rule that the CA correctly did.
No substantial distinction between deducting and charging a facility’s value from the employee’s wage; the legal requirements for creditability apply
to both
To justify its noncompliance with the requirements for the deductibility of a facility, Our Haus asks us to believe that there is a substantial
distinction between the deduction and the charging of a facility’s value to the wages. Our Haus explains that in deduction, the amount of the wage
(which may already be below the minimum) would still be lessened by the facility’s value, thus needing the employee’s consent. On the other hand,
in charging, there is no reduction of the employee’s wage since the facility’s value will just be theoretically added to the wage for purposes of
complying with the minimum wage requirement.39
Our Haus’ argument is a vain attempt to circumvent the minimum wage law by trying to create a distinction where none exists.
In reality, deduction and charging both operate to lessen the actual takehome pay of an employee; they are two sides of the same coin. In both, the
employee receives a lessened amount because supposedly, the facility’s value, which is part of his wage, had already been paid to him in kind. As
there is no substantial distinction between the two, the requirements set by law must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable value.40
We examine Our Haus’ compliance with each of these requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a facility is customarily furnished by the trade is the existence of a
company policy or guideline showing that provisions for a facility were designated as part of the employees’ salaries.41 To comply with this, Our
Haus presented in its motion for reconsideration with the NLRC the joint sinumpaang salaysayof four of its alleged employees. These employees
averred that they were recipients of free lodging, electricity and water, as well as subsidized meals from Our Haus.42
We agree with the NLRC’s finding that the sinumpaang salaysay statements submitted by Our Haus are selfserving.1âwphi1 For one, Our Haus only
produced the documents when the NLRC had already earlier determined that Our Haus failed to prove that it was traditionally giving the respondents
their board and lodging. This document did not state whether these benefits had been consistently enjoyed by the rest of Our Haus’ employees.
Moreover, the records reveal that the board and lodging were given on a per project basis. Our Haus did not show if these benefits were also provided
inits other construction projects, thus negating its claimed customary nature. Even assuming the sinumpaang salaysay to be true, this document would
still work against Our Haus’ case. If Our Haus really had the practice of freely giving lodging, electricity and water provisions to its employees, then
Our Haus should not deduct its values from the respondents’ wages. Otherwise, this will run contrary to the affiants’ claim that these benefits were
traditionally given free of charge.
Apart from company policy, the employer may also prove compliance with the first requirement by showing the existence of an industrywide
practice of furnishingthe benefits in question among enterprises engaged in the same line of business. If it were customary among construction
companies to provide board and lodging to their workers and treat their values as part of their wages, we would have more reason to conclude that
these benefits were really facilities.
However, Our Haus could not really be expected to prove compliance with the first requirement since the living accommodation of workers in the
construction industry is not simply a matter of business practice. Peculiar to the construction business are the occupational safety and health (OSH)
services which the law itself mandates employers to provide to their workers. This isto ensure the humane working conditions of construction
employees despite their constant exposure to hazardous working environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of
1998,43 employers engaged in the construction business are required to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation ofDOLE DO No. 13, mandates that the cost of the
implementation of the requirements for the construction safety and health of workers, shall be integrated to the overall project cost.44 The rationale
behind this isto ensure that the living accommodation of the workers is not substandard and is strictly compliant with the DOLE’s OSH criteria.
As part of the project cost that construction companies already charge to their clients, the value of the housing of their workers cannot be charged
again to their employees’ salaries. Our Haus cannot pass the burden of the OSH costs of its construction projects to its employees by deducting it as
facilities. This is Our Haus’ obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose testset by jurisprudence. Under this test, if a benefit or
privilege granted to the employee is clearly for the employer’s convenience, it will not be considered as a facility but a supplement.45 Here, careful
consideration is given to the nature of the employer’s business in relation to the work performed by the employee. This test is used to address
inequitable situations wherein employers consider a benefit deductible from the wages even if the factual circumstances show that it clearly redounds
to the employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test additionally recognizes that the employer and the
employee do not stand at the same bargaining positions on benefits that must or must not formpart of an employee’s wage. In the ultimate analysis,
the purpose test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the employees’ wages but not the value of supplements. Facilities include
articles or services for the benefit of the employee or his family but exclude tools of the trade or articles or services primarily for the benefit of the
employer or necessary to the conduct of the employer’s business.47
The law also prescribes that the computation of wages shall exclude whatever benefits, supplementsor allowances given to employees. Supplements
are paid to employees on top of their basic pay and are free of charge.48 Since it does not form part of the wage, a supplement’s value may not be
includedin the determination of whether an employer complied with the prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities but as supplements. In SLL International Cables
Specialist v. National Labor Relations Commission,49 this Court was confronted with the issue on the proper characterization of the free board and
lodging provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and "supplements". It is of the view that the food and lodging, or the electricity and
water allegedly consumed by private respondents in this case were not facilities but supplements. In the case of AtokBig Wedge Assn. v. AtokBig
Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers overand above their
ordinary earnings or wages. "Facilities", on the other hand, are items of expense necessary for the laborer's and his family's existence and subsistence
so thatby express provision of law (Sec. 2[g]), they form part of the wage and when furnished by the employer are deductible therefrom, since if they
are not so furnished, the laborer would spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage
is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility. The distinction lies not so much in the kind of
benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for which it is given.In the case at bench, the items provided were given
freely by SLLfor the purpose of maintaining the efficiency and health of its workers while they were working attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by the employer. If it is primarily for the
employee’s gain, then the benefit is a facility; if its provision is mainly for the employer’s advantage, then it is a supplement. Again, this is to ensure
that employees are protected in circumstances where the employer designates a benefit as deductible from the wages even though it clearly works to
the employer’s greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature of the employer’s business inrelation to the character or type of work
performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive enterprise. The success of its projects is largely a function of the physical strength,
vitality and efficiency of its laborers. Its business will be jeopardized if its workers are weak, sickly, and lack the required energy to perform
strenuous physical activities. Thus, by ensuring that the workers are adequately and well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies heavily and directly on the physical capacity and
endurance of its workers. This is not to say that desk jobs do not require muscle strength; wesimply emphasize that in the construction business, bulk
of the work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the problem ofmeeting target deadlines. More often than not, work is
performed continuously, day and night, in order to finish the project on the designated turnover date. Thus, it will be more convenient to the
employer if itsworkers are housed near the construction site to ensure their ready availability during urgent or emergency circumstances. Also,
productivity issues like tardiness and unexpected absences would be minimized. This observation strongly bears in the present case since three of the
respondents are not residents of the National Capital Region. The board and lodging provision might have been a substantial consideration in their
acceptance of employment in a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging provided by Our Haus are
actually supplements. Although they also work to benefit the respondents, an analysis of the nature of these benefits in relation to Our Haus’ business
shows that they were given primarily for Our Haus’ greater convenience and advantage. If weighed on a scale, the balance tilts more towards Our
Haus’ side. Accordingly, their values cannot be considered in computing the total amount of the respondents’ wages. Under the circumstances, the
dailywages paid to the respondents are clearly below the prescribed minimum wage rates in the years 20072010.
b. The provision of deductible facilities must be voluntarily accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if the employer was authorized in writingby the concerned
employee.51 As it diminishes the takehome pay of an employee, the deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five kasunduans, supposedly executed by the respondents,
containing their conformity to the inclusion of the values of the meals and housing to their total wages. Oddly, Our Haus only offered these
documents when the NLRC had already ruled that respondents did not accomplish any written authorization, to allow deduction from their wages.
These five kasunduans were also undated, making us wonder if they had reallybeen executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus’ four employees, it was not mentioned that they also executed a kasunduanfor their board
and lodging benefits. Because of these surrounding circumstances and the suspicious timing when the five kasunduanswere submitted as evidence,
we agree withthe CA that the NLRC committed no grave abuse of discretion in disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of ₱290.00 per week from each of the respondents for their meals. But it now submits that it did not
actually withhold the entire amount as it did not figure in the computation the money it expended for the salary of the cook, the water, and the LPG
used for cooking, which amounts to ₱249.40 per week per person. From these, it appears that the total meal expense per week for each person is
₱529.40,making Our Haus’ ₱290.00 deduction within the 70% ceiling prescribed by the rules.
However, Our Haus’ valuation cannotbe plucked out of thin air. The valuation of a facility must besupported by relevant documents such as receipts
and company records for it to be considered as fair and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures furnished by the private respondent's
own accountant, without corroborative evidence.On the pretext that records prior to the July 16, 1990 earthquake were lost or destroyed, respondent
failed to produce payroll records, receipts and other relevant documents, where he could have, as has been pointedout in the Solicitor General's
manifestation, "secured certified copies thereof from the nearest regional office of the Department of Labor, the SSS or the BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up with the valuesit assigned for the benefits it provided; it merely listed its supposed
expenses without any supporting document. Since Our Haus is using these additional expenses (cook’s salary, water and LPG) to support its claim
that it did not withhold the full amount of the meals’ value, Our Haus is burdened to present evidence to corroborate its claim. The records however,
are bereft of any evidence to support Our Haus’ meal expense computation. Eventhe value it assigned for the respondents’ living accommodations
was not supported by any documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus complied withthis third
requisite.
A claim not raised in the pro forma complaint may still beraised in the position paper.
Our Haus questions the respondents’ entitlement to SIL pay by pointing out that this claim was not included in the pro forma complaint filed with the
NLRC. However, we agree with the CA that such omission does not bar the labor tribunals from touching upon this cause of action since this was
raised and discussed inthe respondents’ position paper. In SamarMed Distribution v. National Labor Relations Commission,53 we held:
Firstly, petitioner’s contention that the validity of Gutang’s dismissal should not be determined because it had not been included in his complaint
before the NLRC is bereft of merit. The complaint of Gutang was a mere checklist of possible causes of action that he might have against Roleda.
Such manner of preparing the complaint was obviously designed to facilitate the filing of complaints by employees and laborers who are thereby
enabled to expediently set forth their grievances in a general manner. But the noninclusion in the complaint of the issue on the dismissal did not
necessarily mean that the validity of the dismissal could not be an issue.The rules of the NLRC require the submission of verified position papers by
the parties should they fail to agree upon an amicable settlement, and bar the inclusion of any cause of action not mentioned in the complaint or
position paper from the time of their submission by the parties. In view of this, Gutang’s cause of action should be ascertained not from a reading of
his complaint alone but also from a consideration and evaluation of both his complaint and position paper.54
The respondents’ entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of proving it.Particularly in labor cases, the burden of proving payment of
monetary claims rests on the employeron the reasoning that the pertinent personnel files, payrolls, records, remittances and other similar documents
— which will show that overtime, differentials, service incentive leave and other claims of workers have been paid — are not in the possession of the
worker but in the custody and absolute control of the employer.55
Unfortunately, records will disclose the absence of any credible document which will show that respondents had been paid their 13th month pay,
holiday and SIL pays. Our Haus merely presented a handwritten certification from its administrative officer that its employees automatically become
entitled to five days of service incentive leave as soon as they pass probation. This certification was not even subscribed under oath. Our Haus could
have at least submitted its payroll or copies of the pay slips of respondents to show payment of these benefits. However, it failed to do so.
Respondents are entitled to attorney’s fees.
Finally, we affirm that respondents are entitled to attorney’s fees. Our Haus’ asserts that respondents’ availment of free legal services from the PAO
disqualifies them from such award. We find this untenable.
It is settled 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 legally and morally justifiable.56 Moreover, under the PAO Law or Republic Act No. 9406, the costs of the
suit, attorney's fees and contingent fees imposed upon the adversary of the PAO clients after a successful litigation shall be deposited in the National
Treasury as trust fund and shall be disbursed for special allowances of authorized officials and lawyers of the PAO.57
Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them shall be paid to the PAO. It serves as a token
recompense to the PAO for its provision of free legal services to litigants who have no means of hiring a private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly found that the National Labor Relations
Commission did not abuse its discretion in its decision of July 20, 2011 and Resolution of December 2, 2011.1âwphi1 Consequently we DENY the
petition and AFFIRM the Court of Appeals' decision dated May 7, 2012 and resolution dated November 27, 2012 in CAG.R. SP No. 123273. No
costs.
SO ORDERED.
Synopsis/Syllabi
SECOND DIVISION
[G.R. No. 111042. October 26, 1999]
AVELINO LAMBO and VICENTE BELOCURA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and J.C. TAILOR
SHOP and/or JOHNNY CO, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for certiorari to set aside the decision[1] of the National Labor Relations Commission (NLRC) which reversed the awards
made by the Labor Arbiter in favor of petitioners, except one for P4,992.00 to each, representing 13th month pay.
The facts are as follows.
Petitioners Avelino Lambo and Vicente Belocura were employed as tailors by private respondents J.C. Tailor Shop and/or Johnny Co on
September 10, 1985 and March 3, 1985, respectively. They worked from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As in the case
of the other 100 employees of private respondents, petitioners were paid on a piecework basis, according to the style of suits they made. Regardless
of the number of pieces they finished in a day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private respondents for illegal dismissal and sought recovery of overtime pay,
holiday pay, premium pay on holiday and rest day, service incentive leave pay, separation pay, 13th month pay, and attorneys fees.
After hearing, Labor Arbiter Jose G. Gutierrez found private respondents guilty of illegal dismissal and accordingly ordered them to pay
petitioners claims. The dispositive portion of the Labor Arbiters decision reads:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring the complainants to have been illegally dismissed and ordering
the respondents to pay the complainants the following monetary awards:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20 = P191,102.40
Add: 10% Attorneys Fees 19,110.24
GRAND TOTAL P210,212.64
= = = = = =
or a total aggregate amount of TWO HUNDRED TEN THOUSAND TWO HUNDRED TWELVE AND 64/100 (P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED.[2]
On appeal by private respondents, the NLRC reversed the decision of the Labor Arbiter. It found that petitioners had not been dismissed from
employment but merely threatened with a closure of the business if they insisted on their demand for a straight payment of their minimum wage, after
petitioners, on January 17, 1989, walked out of a meeting with private respondents and other employees. According to the NLRC, during that
meeting, the employees voted to maintain the company policy of paying them according to the volume of work finished at the rate of P18.00 per
dozen of tailored clothing materials. Only petitioners allegedly insisted that they be paid the minimum wage and other benefits. The NLRC held
petitioners guilty of abandonment of work and accordingly dismissed their claims except that for 13th month pay. The dispositive portion of its
decision reads:
WHEREFORE, in view of the foregoing, the appealed decision is hereby vacated and a new one entered ordering respondents to pay each of the
complainants their 13th month pay in the amount of P4,992.00. All other monetary awards are hereby deleted.
SO ORDERED.[3]
Petitioners allege that they were dismissed by private respondents as they were about to file a petition with the Department of Labor and
Employment (DOLE) for the payment of benefits such as Social Security System (SSS) coverage, sick leave and vacation leave. They deny that they
abandoned their work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of private respondents although they were paid not on the basis of time spent on the
job but according to the quantity and the quality of work produced by them. There are two categories of employees paid by results: (1) those whose
time and performance are supervised by the employer. (Here, there is an element of control and supervision over the manner as to how the work is to
be performed. A piecerate worker belongs to this category especially if he performs his work in the company premises.); and (2) those whose time
and performance are unsupervised. (Here, the employers control is over the result of the work. Workers on pakyao and takay basis belong to this
group.) Both classes of workers are paid per unit accomplished. Piecerate payment is generally practiced in garment factories where work is done in
the company premises, while payment on pakyao and takay basis is commonly observed in the agricultural industry, such as in sugar plantations
where the work is performed in bulk or in volumes difficult to quantify.[4] Petitioners belong to the first category, i.e., supervised employees.
In determining the existence of an employeremployee relationship, the following elements must be considered: (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.[5] 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.[6]
In this case, private respondents exercised control over the work of petitioners. As tailors, petitioners worked in the companys premises from
8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. The mere fact that they were paid on a piecerate basis does not negate their status as
regular employees of private respondents. The term wage is broadly defined in Art. 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.[7] Nor does the fact that petitioners are not covered by the SSS affect the employer
employee relationship.
Indeed, the following factors show that petitioners, although piecerate workers, were regular employees of private respondents: (1) within the
contemplation of Art. 280 of the Labor Code, their work as tailors was necessary or desirable in the usual business of private respondents, which is
engaged in the tailoring business; (2) petitioners worked for private respondents throughout the year, their employment not being dependent on a
specific project or season; and, (3) petitioners worked for private respondents for more than one year.[8]
Second. Private respondents contend, however, that petitioners refused to report for work after learning that the J.C. Tailoring and Dress Shop
Employees Union had demanded their (petitioners) dismissal for conduct unbecoming of employees. In support of their claim, private respondents
presented the affidavits[9] of Emmanuel Y. Caballero, president of the union, and Amado Cabaero, member, that petitioners had not been dismissed
by private respondents but that practically all employees of the company, including the members of the union had asked management to terminate the
services of petitioners. The employees allegedly said they were against petitioners request for change of the mode of payment of their wages, and that
when a meeting was called to discuss this issue, a petition for the dismissal of petitioners was presented, prompting the latter to walk out of their jobs
and instead file a complaint for illegal dismissal against private respondents on January 17, 1989, even before all employees could sign the petition
and management could act upon the same.
To justify a finding of abandonment of work, there must be proof of a deliberate and unjustified refusal on the part of an employee to resume
his employment. The burden of proof is on the employer to show an unequivocal intent on the part of the employee to discontinue employment.
[10]
Mere absence is not sufficient. It must be accompanied by manifest acts unerringly pointing to the fact that the employee simply does not want to
work anymore.[11]
Private respondents failed to discharge this burden. Other than the selfserving declarations in the affidavits of their two employees, private
respondents did not adduce proof of overt acts of petitioners showing their intention to abandon their work. On the contrary, the evidence shows that
petitioners lost no time in filing the case for illegal dismissal against private respondent. This fact negates any intention on their part to sever their
employment relationship.[12] Abandonment is a matter of intention; it cannot be inferred or presumed from equivocal acts.[13]
Third. Private respondents invoke the compromise agreement,[14] dated March 2, 1993, between them and petitioner Avelino Lambo, whereby
in consideration of the sum of P10,000.00, petitioner absolved private respondents from liability for money claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy. But those (1) where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person or (2) where the terms of settlement are unconscionable on their face are invalid. In these cases, the law will
step in to annul the questionable transaction.[15] However, considering that the Labor Arbiter had given petitioner Lambo a total award of P94,719.20,
the amount of P10,000.00 to cover any and all monetary claims is clearly unconscionable. As we have held in another case,[16] the subordinate
position of the individual employee visavis management renders him especially vulnerable to its blandishments, importunings, and even
intimidations, and results in his improvidently waiving benefits to which he is clearly entitled. Thus, quitclaims, waivers or releases are looked upon
with disfavor for being contrary to public policy and are ineffective to bar claims for the full measure of the workers legal rights.[17] An employee
who is merely constrained to accept the wages paid to him is not precluded from recovering the difference between the amount he actually received
and that amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday pay, 13th month pay, separation pay and attorneys fees, corresponding
to 10% of the total monetary awards, in favor of petitioners.
As petitioners were illegally dismissed, they are entitled to reinstatement with backwages. Considering that petitioners were dismissed from the
service on January 17, 1989, i.e., prior to March 21, 1989,[18] the Labor Arbiter correctly applied the rule in the Mercury Drug case,[19] according to
which the recovery of backwages should be limited to three years without qualifications or deductions. Any award in excess of three years is null and
void as to the excess.[20]
The Labor Arbiter correctly ordered private respondents to give separation pay. Considerable time has lapsed since petitioners dismissal, so
that reinstatement would now be impractical and hardly in the best interest of the parties. In lieu of reinstatement, separation pay should be awarded
to petitioners at the rate of one month salary for every year of service, with a fraction of at least six (6) months of service being considered as one (1)
year.[21]
The awards for overtime pay, holiday pay and 13th month pay are in accordance with our finding that petitioners are regular employees,
although paid on a piecerate basis.[22] These awards are based on the following computation of the Labor Arbiter:
AVELINO LAMBO
I. BACKWAGES: Jan. 17/89 Jan. 17/92 = 36 mos.
P 64.00/day x 26 days =
1,664.00/mo. x 36 mos. = P 59,904.00
13th Mo. Pay:
P 1,664.00/yr. x 3 yrs. = 4, 992.00
P64,896.00
II. OVERTIME PAY: Jan. 17/86 Jan. 17/89
Jan. 17/86 April 30/87 = 15 mos. & 12 days =
(15 mos. x 26 days + 12 days) = 402 days
*2 hours = 25%
402 days x 2 hrs./day = 804 hrs.
P 32.00/day 8 hrs. =
4.00/hr. x 25% =
1.00/hr. + P4.00/hr. =
5.00/hr. x 804 hrs. = P 4,020.00
May 1/87Sept. 30/87 = 4 mos. & 26 days =
(4 mos. x 26 days + 26 days) = 130 days
130 days x 2 hrs./day = 260 hrs.
P 41.00/day 8 hrs. =
5.12/hr. x 25% =
1.28/hr. + P5.12/hr. =
6.40/hr. x 260 hrs. = P 1,664.00
Oct. 1/87Dec. 13/87 = 2 mos. & 11 days =
(2 mos. x 26 days + 11 days) = 63 days
63 days x 2 hrs./day = 126 hrs.
P 49.00/day 8 hrs. =
6.12/hr. x 25% =
1.53/hr. + P6.12/hr. =
7.65/hr. x 126 hrs. = P963.90
Dec. 14/87 Jan. 17/89 = 13 mos. & 2 days =
(13 mos. x 26 days + 2 days) = 340 days
340 days x 2 hrs./day = 680 hrs.
P 64.00/day 8 hrs. =
8.00/hr. x 25% =
2.00/hr. + P8.00/hr. =
10.00/hr. x 680 hrs. = P6,800.00
P13,447.90
III. HOLIDAY PAY: Jan. 17/86 Jan. 17/89
Jan. 17/86 April 30/87 = 12 RHs; 8 SHs
P 32.00/day x 200% =
64.00/day x 12 days = P768.00
32.00/day x 12 days = (384.00)
P384.00
32.00/day x 30% =
9.60/day x 8 days = 76.80 460.80
May 1/87 Sept. 30/87 = 3 RHs; 3 SHs
P 41.00/day x 200% =
82.00/day x 3 days = P246.00
41.00/day x 3 days = (123.00) P123.00
41.00/day x 30% =
12.30/day x 3 days = 36.90 159.90
Oct. 1/87 Dec. 13/87 = 1 RH
P 49.00/day x 200% =
98.00/day x 1 day = P98.00
49.00/day x 1 day = (49.00) 49.00
Dec. 14/87 Jan. 17/89 = 9 RHs; 8 SHs
P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
64.00/day x 9 days = (576.00) P 576.00
64.00/day x 30% =
19.20/day x 8 days = 153.60 729.60 1,399.30
IV. 13TH MO. PAY:
Jan. 17/86 Jan. 17/89 = 3 yrs.
P 64.00/day x 26 days =
1,664.00/yr. x 3 yrs. = 4,992.00
V. SEPARATION PAY:
Sept. 10/85 Jan. 17/92 = 6 yrs.
1,664.00/mo. x 6 yrs. = 9,984.00
TOTAL AWARD OF AVELINO LAMBO P94,719.20
= = = = = =
VICENTE BELOCURA
I. BACKWAGES:
Jan. 17/89 Jan. 17/92 = 36 mos.
Same computation as A. Lambo P64,896.00
II. OVERTIME PAY: Jan. 17/86 Jan. 17/89
Same computation as A. Lambo 13,447.90
III. HOLIDAY PAY:
Jan. 17/86 Jan. 17/89
Same computation as A. Lambo 1,399.30
IV. 13TH MO. PAY:
Jan. 17/86 Jan. 17/89
Same computation as A. Lambo 4,992.00
V. SEPARATION PAY:
March 3/85 Jan. 17/92 = 7 yrs.
P1,664.00/mo. x 7 yrs. = 11,648.00
TOTAL AWARD OF VICENTE BELOCURA P96,383.20
= = = = =
SUMMARY
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MO. PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
TOTAL P94,719.20 P96,383.20
= P191,102.40
ADD: 10% Attorneys Fees 19,110.24
GRAND TOTAL P 210,212.64
= = = = = = =
Except for the award of attorneys fees in the amount of P19,110.24, the above computation is affirmed. The award of attorneys fees should be
disallowed, it appearing that petitioners were represented by the Public Attorneys Office. With regard to petitioner Avelino Lambo, the amount
of P10,000.00 paid to him under the compromise agreement should be deducted from the total award of P94,719.20. Consequently, the award to each
petitioner should be as follows:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P 64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
P 94,719.20
Less 10,000.00
TOTAL P84,719.20 P96,383.20
GRAND TOTAL P181,102.40
= = = = = =
vvvvvvvvvv
WHEREFORE, the decision of the National Labor Relations Commission is SET ASIDE and another one is RENDERED ordering private
respondents to pay petitioners the total amount of One Hundred EightyOne Thousand One Hundred Two Pesos and 40/100 (P181,102.40), as
computed above.
SO ORDERED.
G.R. No. 49549 August 30, 1990
EVELYN CHUAQUA, petitioner,
vs.
HON. JACOBO C. CLAVE, in his capacity as Presidential Executive Assistant, and TAY TUNG HIGH SCHOOL, INC., respondents.
William C. Gunitang and Jaime Opinion for petitioner.
Laogan Law Offices for private respondent.
REGALADO, J.:
This would have been just another illegal dismissal case were it not for the controversial and unique situation that the marriage of herein petitioner,
then a classroom teacher, to her student who was fourteen (14) years her junior, was considered by the school authorities as sufficient basis for
terminating her services.
Private respondent Tay Tung High School, Inc. is an educational institution in Bacolod City. Petitioner had been employed therein as a teacher since
1963 and, in 1976 when this dispute arose, was the class adviser in the sixth grade where one Bobby Qua was enrolled. Since it was the policy of the
school to extend remedial instructions to its students, Bobby Qua was imparted such instructions in school by petitioner. 1 In the course thereof, the
couple fell in love and on December 24, 1975, they got married in a civil ceremony solemnized in Iloilo City by Hon. Cornelio G. Lazaro, City Judge
of Iloilo.2 Petitioner was then thirty (30) years of age but Bobby Qua being sixteen (16) years old, consent and advice to the marriage was given by
his mother, Mrs. Concepcion Ong.3 Their marriage was ratified in accordance with the rites of their religion in a church wedding solemnized by Fr.
Nick Melicor at Bacolod City on January 10, 1976. 4
On February 4, 1976, private respondent filed with the subregional office of the Department of Labor at Bacolod City an application for clearance to
terminate the employment of petitioner on the following ground: "For abusive and unethical conduct unbecoming of a dignified school teacher and
that her continued employment is inimical to the best interest, and would downgrade the high moral values, of the school." 5
Petitioner was placed under suspension without pay on March 12, 1976. 6 Executive Labor Arbiter Jose Y. Aguirre, Jr. of the National Labor
Relations Commission, Bacolod City, to whom the case was certified for resolution, required the parties to submit their position papers and
supporting evidence. Affidavits 7 were submitted by private respondent to bolster its contention that petitioner, "defying all standards of decency,
recklessly took advantage of her position as school teacher, lured a Grade VI boy under her advisory section and 15 years her junior into an amorous
relation." 8 More specifically, private respondent raised issues on the fact that petitioner stayed alone with Bobby Qua in the classroom after school
hours when everybody had gone home, with one door allegedly locked and the other slightly open.
On September 17, 1976, Executive Labor Arbiter Jose Y. Aguirre, Jr., without conducting any formal hearing, rendered an "Award" in NLRC Case
No. 956 in favor of private respondent granting the clearance to terminate the employment of petitioner. It was held therein that —
The affidavits . . . although selfserving but were never disputed by the respondent pointed out that before the marriage of
respondent to Bobby Qua, fourteen (14) years her junior and during her employment with petitioner, an amorous relationship
existed between them. In the absence of evidence to the contrary, the undisputed written testimonies of several witnesses
convincingly picture the circumstances under which such amorous relationship was manifested within the premises of the school,
inside the classroom, and within the sight of some employees. While no direct evidences have been introduced to show that
immoral acts were committed during these times, it is however enough for a sane and credible mind to imagine and conclude
what transpired and took place during these times. . . . 9
Petitioner, however, denied having received any copy of the affidavits referred to. 10
On October 7, 1976, petitioner appealed to the National Labor Relations Commission claiming denial of due process for not having been furnished
copies of the aforesaid affidavits relied on by the labor arbiter. She further contended that there was nothing immoral, nor was it abusive and
unethical conduct unbecoming of a dignified school teacher, for a teacher to enter into lawful wedlock with her student.11
On December 27, 1976, the National Labor Relations Commission unanimously reversed the Labor Arbiter's decision and ordered petitioner's
reinstatement with backwages, with the following specific findings:
Affiant Maselliones deposed and said that he saw appellant and Qua sitting on the student desk inside a classroom after classes.
The depositions of affiants Despi and Chin are of the same tenor. No statements whatever were sworn by them that they were
eyewitnesses to immoral or scandalous acts.
xxx xxx xxx
Even if we have to strain our sense of moral values to accommodate the conclusion of the Arbiter, we could not deduce anything
immoral or scandalous about a girl and a boy talking inside a room after classes with lights on and with the door open.
xxx xxx xxx
Petitionerappellee naively insisted that the clearance application was precipitated by immoral acts which did not lend dignity to
the position of appellant. Aside from such gratuitous assertions of immoral acts or conduct by herein appellant, no evidence to
support such claims was introduced by petitionerappellee. We reviewed the the sequence of events from the beginning of the
relationship between appellant Evelyn Chua and Bobby Qua up to the date of the filing of the present application for clearance in
search of evidence that could have proved detrimental to the image and dignity of the school but none has come to our attention. .
. . 12
The case was elevated by private respondent to the Minister of Labor who, on March 30, 1977, reversed the decision of the National Labor Relations
Commission. The petitioner was, however, awarded six (6) months salary as financial assistance. 13
On May 20, 1977, petitioner appealed the said decision to the Office of the President of the Philippines. 14 After the corresponding exchanges, on
September 1, 1978 said office, through Presidential Executive Assistant Jacobo C. Clave, rendered its decision reversing the appealed decision.
Private respondent was ordered to reinstate petitioner to her former position without loss of seniority rights and other privileges and with full back
wages from the time she was not allowed to work until the date of her actual reinstatement. 15
Having run the gamut of three prior adjudications of the case with alternating reversals, one would think that this decision of public respondent
wrote finis to petitioner's calvary. However, in a resolution dated December 6, 1978, public respondent, acting on a motion for reconsideration 16 of
herein private respondent and despite opposition thereto, 17 reconsidered and modified the aforesaid decision, this time giving due course to the
application of Tay Tung High School, Inc. to terminate the services of petitioner as classroom teacher but giving her separation pay equivalent to her
six (6) months salary. 18
In thus reconsidering his earlier decision, public respondent reasoned out in his manifestation/comment filed on August 14, 1979 in this Court in the
present case:
That this Office did not limit itself to the legal issues involved in the case, but went further to view the matter from the standpoint
of policy which involves the delicate task of rearing and educating of children whose interest must be held paramount in the
school community, and on this basis, this Office deemed it wise to uphold the judgment and action of the school authorities in
terminating the services of a teacher whose actuations and behavior, in the belief of the school authorities, had spawned ugly
rumors that had cast serious doubts on her integrity, a situation which was considered by them as not healthy for a school
campus, believing that a school teacher should at all times act with utmost circumspection and conduct herself beyond reproach
and above suspicion; 19
In this petition for certiorari, petitioner relies on the following grounds for the reversal of the aforesaid resolution of public respondent, viz.:
1. The dismissal or termination of petitioner's employment, despite Tay Tung's claim to the contrary, was actually based on her
marriage with her pupil and is, therefore, illegal.
2. Petitioner's right to due process under the Constitution was violated when the hearsay affidavits of Laddy Maselliones,
Eleuterio Despi, Pina D. Chiu, and Ong Lee Bing, were admitted and considered in evidence without presenting the affiants as
witnesses and affording the petitioner the right to confront and crossexamine them.
3. No sufficient proofs were adduced to show that petitioner committed serious misconduct or breached the trust reposed on her
by her employer or committed any of the other grounds enumerated in Article 283 (Now Article 282) of the Labor Code which
will justify the termination of her employment. 20
We first dispose of petitioner's claim that her right to due process was violated. We do not agree. There is no denial of due process where a party was
afforded an opportunity to present his side. Also, the procedure by which issues are resolved based on position papers, affidavits and other
documentary evidence is recognized as not violative of such right. Moreover, petitioner could have insisted on a hearing to confront and cross
examine the affiants but she did not do so, obviously because she was convinced that the case involves a question of law. Besides, said affidavits
were also cited and discussed by her in the proceedings before the Ministry of Labor.
Now, on the merits. Citing its upright intention to preserve the respect of the community toward the teachers and to strengthen the educational
system, private respondent submits that petitioner's actuations as a teacher constitute serious misconduct, if not an immoral act, a breach of trust and
confidence reposed upon her and, thus, a valid and just ground to terminate her services. It argues that as a school teacher who exercises substitute
parental authority over her pupils inside the school campus, petitioner had moral ascendancy over Bobby Qua and, therefore, she must not abuse such
authority and respect extended to her. Furthermore, it charged petitioner with having allegedly violated the Code of Ethics for teachers the pertinent
provision of which states that a "school official or teacher should never take advantage of his/her position to court a pupil or student." 21
On the other hand, petitioner maintains that there was no ground to terminate her services as there is nothing wrong with a teacher falling in love with
her pupil and, subsequently, contracting a lawful marriage with him. She argued that she was dismissed because of her marriage with Bobby Qua
This contention was sustained in the aforesaid decision of the National Labor Relations Commission thus:
. . . One thing, however, has not escaped our observation: That the application for clearance was filed only after more than one
month elapsed from the date of appellant's marriage to Bobby Qua Certainly, such belated application for clearance weakens
instead of strengthening the cause of petitionerappellee. The alleged immoral acts transpired before the marriage and if it is these
alleged undignified conduct that triggered the intended separation, then why was the present application for clearance not filed at
that time when the alleged demoralizing effect was still fresh and abrasive?22
After a painstaking perusal of the records, we are of the considered view that the determination of the legality of the dismissal hinges on the issue of
whether or not there is substantial evidence to prove that the antecedent facts which culminated in the marriage between petitioner and her student
constitute immorality and/or grave misconduct. To constitute immorality, the circumstances of each particular case must be holistically considered
and evaluated in the light of prevailing norms of conduct and the applicable law. Contrary to what petitioner had insisted on from the very start, what
is before us is a factual question, the resolution of which is better left to the trier of facts.
Considering that there was no formal hearing conducted, we are constrained to review the factual conclusions arrived at by public respondent, and to
nullify his decision through the extraordinary writ of certiorari if the same is tainted by absence or excess of jurisdiction or grave abuse of discretion.
The findings of fact must be supported by substantial evidence; otherwise, this Court is not bound thereby.23
We rule that public respondent acted with grave abuse of discretion. As vividly and forcefully observed by him in his original decision:
Indeed, the records relied upon by the Acting Secretary of Labor (actually the records referred to are the affidavits attached as
Annexes "A" to "D" of the position paper dated August 10, 1976 filed by appellee at the arbitration proceedings) in arriving at his
decision are unbelievable and unworthy of credit, leaving many question unanswered by a rational mind. For one thing, the
affidavits refer to certain times of the day during off school hours when appellant and her student were found together in one of
the classrooms of the school. But the records of the case present a ready answer: appellant was giving remedial instruction to her
student and the school was the most convenient place to serve the purpose. What is glaring in the affidavits is the complete
absence of specific immoral acts allegedly committed by appellant and her student. For another, and very important at that, the
alleged acts complained of invariably happened from September to December, 1975, but the disciplinenary action imposed by
appellee was sought only in February, 1976, and what is more, the affidavits were executed only in August, 1976 and from all
indications, were prepared by appellee or its counsel. The affidavits heavily relied upon by appellee are clearly the product of
afterthought. . . . The action pursued by appellee in dismissing appellant over one month after her marriage, allegedly based on
immoral acts committed even much earlier, is open to basis of the action sought seriously doubted; on the question. The basis of
the action sought is seriously doubted; on the contrary, we are more inclined to believe that appellee had certain selfish, ulterior
and undisclosed motives known only to itself. 24
As earlier stated, from the outset even the labor arbiter conceded that there was no direct evidence to show that immoral acts were committed.
Nonetheless, indulging in a patently unfair conjecture, he concluded that "it is however enough for a sane and credible mind to imagine and conclude
what transpired during those times." 25 In reversing his decision, the National Labor Relations Commission observed that the assertions of immoral
acts or conducts are gratuitous and that there is no direct evidence to support such claim, 26 a finding which herein public respondent himself shared.
We are, therefore, at a loss as to how public respondent could adopt the volteface in the questioned resolution, which we hereby reject, despite his
prior trenchant observations hereinbefore quoted. What is revealing however, is that the reversal of his original decision is inexplicably based on
unsubstantiated surmises and non sequiturs which he incorporated in his assailed resolution in this wise:
. . . While admittedly, no one directly saw Evelyn Chua and Bobby Qua doing immoral acts inside the classroom it seems
obvious and this Office is convinced that such a happening indeed transpired within the solitude of the classrom after regular
class hours. The marriage between Evelyn Chua and Bobby Qua is the best proof which confirms the suspicion that the two
indulged in amorous relations in that place during those times of the day. . . . 27
With the finding that there is no substantial evidence of the imputed immoral acts, it follows that the alleged violation of the Code of Ethics
governing school teachers would have no basis. Private respondent utterly failed to show that petitioner took advantage of her position to court her
student. If the two eventually fell in love, despite the disparity in their ages and academic levels, this only lends substance to the truism that the heart
has reasons of its own which reason does not know. But, definitely, yielding to this gentle and universal emotion is not to be so casually equated with
immorality. The deviation of the circumstances of their marriage from the usual societal pattern cannot be considered as a defiance of contemporary
social mores.
It would seem quite obvious that the avowed policy of the school in rearing and educating children is being unnecessarily bannered to justify the
dismissal of petitioner. This policy, however, is not at odds with and should not be capitalized on to defeat the security of tenure granted by the
Constitution to labor. In termination cases, the burden of proving just and valid cause for dismissing an employee rests on the employer and his
failure to do so would result in a finding that the dismissal is unjustified.
The charge against petitioner not having been substantiated, we declare her dismissal as unwarranted and illegal. It being apparent, however, that the
relationship between petitioner and private respondent has been inevitably and severely strained, we believe that it would neither be to the interest of
the parties nor would any prudent purpose be served by ordering her reinstatement.
WHEREFORE, the petition for certiorari is GRANTED and the resolution of public respondent, dated December 6, 1978 is ANNULLED and SET
ASIDE. Private respondent Tay Tung High School, Inc. is hereby ORDERED to pay petitioner backwages equivalent to three (3) years, without any
deduction or qualification, and separation pay in the amount of one (1) month for every year of service.
SO ORDERED.
G.R. No. 187226 January 28, 2015
CHERYLL SANTOS LEUS, Petitioner,
vs.
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, Respondents.
D E C I S I O N
REYES, J.:
Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove (SSCW), a Catholic educational institution, as a nonteaching
personnel, engaged in premarital sexual relations, got pregnant out of wedlock, married the father of her child, and was dismissed by SSCW, in that
order. The question that has to be resolved is whether the petitioner's conduct constitutes a ground for her dismissal.
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision1 dated
September 24, 2008 and Resolution2 dated March 2, 2009 issued by the Court of Appeals (CA) in CAG.R. SP No. 100188, which affirmed the
Resolutions dated February 28, 20073 and May 21, 20074 of the National Labor Relations Commission (NLRC)in NLRC CA No. 04922206.
The Facts
SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001, SSCW hired the petitioner as an Assistant to SSCW’s
Director of the Lay Apostolate and Community Outreach Directorate.
Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock. When SSCW learned of the petitioner’s pregnancy, Sr. Edna
Quiambao (Sr. Quiambao), SSCW’s Directress, advised her to file a resignation letter effective June 1, 2003. In response, the petitioner informed Sr.
Quiambao that she would not resign from her employment just because she got pregnant without the benefit of marriage.5
On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing why she should not be dismissed for engaging in premarital
sexual relations and getting pregnant as a result thereof, which amounts to serious misconduct and conduct unbecoming of an employee of a Catholic
school.6
In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of wedlock does not amount to serious misconduct or conduct
unbecoming of an employee. She averred that she is unaware of any school policy stating that being pregnant out of wedlock is considered as a
serious misconduct and, thus, a ground for dismissal. Further, the petitioner requested a copy of SSCW’s policy and guidelines so that she may better
respond to the charge against her. On June 2, 2003, Sr. Quiambao informed the petitioner that, pending the promulgation of a "Support Staff
Handbook," SSCW follows the 1992 Manual of Regulations for Private Schools (1992 MRPS) on the causes for termination of employments; that
Section 94(e) of the 1992 MRPS cites "disgraceful or immoral conduct" as a ground for dismissal in addition to the just causes for termination of
employment provided under Article 282 of the Labor Code.8
On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in part, reads:
To us, premarital sex between two consenting adults without legal impediment to marry each other who later on married each other does not fall
within the contemplation of "disgraceful or immoral conduct" and "serious misconduct" of the Manual of Regulations for Private Schools and the
Labor Code of the Philippines.
Your argument that what happened to our client would set a bad example to the students and other employees of your school is speculative and is
more imaginary than real. To dismiss her on that sole ground constitutes grave abuse of management prerogatives.
Considering her untarnished service for two years, dismissing her with her present condition would also mean depriving her to be more secure in
terms of financial capacity to sustain maternal needs.10
In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that premarital sexual relations, evenif between two consenting adults without
legal impediment to marry, is considered a disgraceful and immoral conduct or a serious misconduct, which are grounds for the termination of
employment under the 1992 MRPS and the Labor Code. That SSCW, as a Catholic institution of learning, has the right to uphold the teaching of the
Catholic Church and expect its employees to abide by the same. They further asserted that the petitioner’s indiscretion is further aggravated by the
fact that she is the Assistant to the Director of the Lay Apostolate and Community Outreach Directorate, a position of responsibility that the students
look up to as rolemodel. The petitioner was again directed to submit a written explanation on why she should not be dismissed.
On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsel’s letter dated June 4, 2003 as her written explanation.12
Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the petitioner that her employment with SSCW is terminated on the ground
of serious misconduct. She stressed that premarital sexual relations between two consenting adults with no impediment to marry, even if they
subsequently married, amounts to immoral conduct. She further pointed out that SSCW finds unacceptable the scandal brought about by the
petitioner’s pregnancy out of wedlock as it ran counter to the moral principles that SSCW stands for and teaches its students.
Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC in Quezon City against SSCW
and Sr. Quiambao (respondents). In her position paper,14 the petitioner claimed that SSCW gravely abused its management prerogative as there was
no just cause for her dismissal. She maintained that her pregnancy out of wedlock cannot be considered as serious misconduct since the same is a
purely private affair and not connected in any way with her duties as an employee of SSCW. Further, the petitioner averred that she and her
boyfriend eventually got married even prior to her dismissal.
For their part, SSCW claimed that there was just cause to terminate the petitioner’s employment with SSCW and that the same is a valid exercise of
SSCW’s management prerogative. They maintained that engaging in premarital sex, and getting pregnant as a result thereof, amounts to a
disgraceful or immoral conduct, which is a ground for the dismissal of an employee under the 1992 MRPS.
They pointed out that SSCW is a Catholic educational institution, which caters exclusively to young girls; that SSCW would lose its credibility if it
would maintain employees who do not live up to the values and teachings it inculcates to its students. SSCW further asserted that the petitioner,
being an employee of a Catholic educational institution, should have strived to maintain the honor, dignity and reputation of SSCW as a Catholic
school.15
The Ruling of the Labor Arbiter
On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case No. 61765703C which dismissed the complaint filed by the
petitioner. The LA found that there was a valid ground for the petitioner’s dismissal; that her pregnancy out of wedlock is considered as a
"disgraceful and immoral conduct." The LA pointed out that, as an employee of a Catholic educational institution, the petitioner is expected to live up
to the Catholic values taught by SSCW to its students. Likewise, the LA opined that:
Further, a deep analysis of the facts would lead us to disagree with the complainant that she was dismissed simply because she violate[d] a Catholic
[teaching]. It should not be taken in isolation but rather it should be analyzed in the lightof the surrounding circumstances as a whole. We must also
take into [consideration] the nature of her work and the nature of her employerschool. For us, it is not just an ordinary violation. It was committed by
the complainant in an environment where her strict adherence to the same is called for and where the reputation of the school is at stake. x x x. 17
The LA further held that teachers and school employees, both in their official and personal conduct, must display exemplary behavior and act in a
manner that is beyond reproach.
The petitioner appealed to the NLRC, insisting that there was no valid ground for the termination of her employment. She maintained that her
pregnancy out of wedlock cannot be considered as "serious misconduct" under Article 282 of the Labor Code since the same was not of such a grave
and aggravated character. She asserted that SSCW did not present any evidence to establish that her pregnancy out of wedlock indeed eroded the
moral principles that it teaches its students.18
The Ruling of the NLRC
On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA Decision dated February 28, 2006. The NLRC pointed out that the
termination of the employment of the personnel of private schools is governed by the 1992 MRPS; that Section 94(e) thereof cites "disgraceful or
immoral conduct" as a just cause for dismissal, in addition to the grounds for termination of employment provided for under Article 282 of the Labor
Code. The NLRC held that the petitioner’s pregnancy out of wedlock is a "disgraceful or immoral conduct" within the contemplation of Section 94(e)
of the 1992 MRPS and, thus, SSCW had a valid reason to terminate her employment.
The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but it was denied by the NLRC in its Resolution21 dated May 21,
2007.
Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the NLRC gravely abused its discretion in ruling that there was a
valid ground for her dismissal. She maintained that pregnancy out of wedlock cannot be considered as a disgraceful or immoral conduct; that SSCW
failed to prove that its students were indeed gravely scandalized by her pregnancy out of wedlock. She likewise asserted that the NLRC erred in
applying Section 94(e) of the 1992 MRPS.
The Ruling of the CA
On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied the petition for certiorari filed by the petitioner. The CA held
that it is the provisions of the 1992 MRPS and not the Labor Code which governs the termination of employment of teaching and nonteaching
personnel of private schools, explaining that:
It is a principle of statutory construction that where there are two statutes that apply to a particular case, that which was specially intended for the said
case must prevail. Petitioner was employed by respondent private Catholic institution which undeniably follows the precepts or norms of conduct set
forth by the Catholic Church. Accordingly, the Manual of Regulations for Private Schools followed by it must prevail over the Labor Code, a general
statute. The Manual constitutes the private schools’ Implementing Rules and Regulations of Batas Pambansa Blg. 232 or the Education Act of 1982.
x x x.24
The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s management prerogative to discipline and impose penalties on
erring employees pursuant toits policies, rules and regulations. The CA upheld the NLRC’s conclusion that the petitioner’s pregnancy out of wedlock
is considered as a "disgraceful and immoral conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992 MRPS. The CA likewise
opined that the petitioner’s pregnancy out of wedlock is scandalous per segiven the work environment and social milieu that she was in, viz:
Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of the Labor Code, "disgraceful and immoral conduct" is a
basis for termination of employment.
x x x x
Petitioner contends that her premarital sexual relations with her boyfriend and her pregnancy prior to marriage was not disgraceful or immoral
conduct sufficient for her dismissal because she was not a member of the school’s faculty and there is no evidence that her pregnancy scandalized the
school community.
We are not persuaded. Petitioner’s pregnancy prior to marriage is scandalous in itself given the work environment and social milieu she was in.
Respondent school for young ladies precisely seeks to prevent its students from situations like this, inculcating in them strict moral values and
standards. Being part of the institution, petitioner’sprivate and public life could not be separated. Her admitted premarital sexual relations was a
violation of private respondent’s prescribed standards of conduct that views premarital sex as immoral because sex between a man and a woman
must only take place within the bounds of marriage.
Finally, petitioner’s dismissal is a valid exercise of the employerschool’s management prerogative to discipline and impose penalties on erring
employees pursuant to its policies, rules and regulations. x x x.25 (Citations omitted)
The petitioner moved for reconsideration26 but it was denied by the CA in its Resolution27 dated March 2, 2009.
Hence, the instant petition.
Issues
Essentially, the issues set forth by the petitioner for this Court’s decision are the following: first, whether the CA committed reversible error in ruling
that it is the 1992 MRPS and not the Labor Code that governs the termination of employment of teaching and nonteaching personnel of private
schools; and second, whether the petitioner’spregnancy out of wedlock constitutes a valid ground to terminate her employment.
The Ruling of the Court
The Court grants the petition.
First Issue: Applicability of the 1992 MRPS
The petitioner contends that the CA, in ruling that there was a valid ground to dismiss her, erred in applying Section 94 of the 1992 MRPS.
Essentially, she claims that the 1992 MRPS was issued by the Secretary of Education as the revised implementing rules and regulations of Batas
Pambansa Bilang 232 (BP 232) or the "Education Act of 1982." That there is no provision in BP 232, which provides for the grounds for the
termination of employment of teaching and nonteaching personnel of private schools. Thus, Section 94 of the 1992 MRPS, which provides for the
causes of terminating an employment, isinvalid as it "widened the scope and coverage" of BP 232.
The Court does not agree.
The Court notes that the argument against the validity of the 1992 MRPS, specifically Section 94 thereof, is raised by the petitioner for the first time
in the instant petition for review. Nowhere in the proceedings before the LA, the NLRC or the CA did the petitioner assail the validity of the
provisions of the 1992 MRPS.
"It is well established that issues raised for the first time on appeal and not raised in the proceedings in the lower court are barred by estoppel. Points
of law, theories, issues, and arguments not brought to the attention of the trial court ought not to be considered by a reviewing court, as these cannot
be raised for the first time on appeal. To consider the alleged facts and arguments belatedly raised would amount to trampling on the basic principles
of fair play, justice, and due process."28
In any case, even if the Court were to disregard the petitioner’s belated claim of the invalidity of the 1992 MRPS, the Court still finds the same
untenable.
The 1992 MRPS, the regulation in force at the time of the instant controversy, was issued by the Secretary of Education pursuant to BP 232. Section
7029 of BP 232 vests the Secretary of Education with the authority to issue rules and regulations to implement the provisions of BP 232.
Concomitantly, Section 5730 specifically empowers the Department of Education to promulgate rules and regulations necessary for the
administration, supervision and regulation of the educational system in accordance with the declared policy of BP 232.
The qualifications of teaching and nonteaching personnel of private schools, as well as the causes for the termination of their employment, are an
integral aspect of the educational system of private schools. Indubitably, ensuring that the teaching and nonteaching personnel of private schools are
not only qualified, but competent and efficient as well goes hand in hand with the declared objective of BP 232 – establishing and maintaining
relevant quality education.31 It is thus within the authority of the Secretary of Education to issue a rule, which provides for the dismissal of teaching
and nonteaching personnel of private schools based on their incompetence, inefficiency, or some other disqualification.
Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to "prescribe and impose such administrative sanction as he may
deem reasonable and appropriate in the implementing rules and regulations" for the "[g]ross inefficiency of the teaching or nonteaching personnel"
of private schools.32 Accordingly, contrary to the petitioner’s claim, the Court sees no reason to invalidate the provisions of the 1992 MRPS,
specifically Section 94 thereof. Second Issue: Validity of the Petitioner’s Dismissal
The validity of the petitioner’s dismissal hinges on the determination of whether pregnancy out of wedlock by an employee of a catholic educational
institution is a cause for the termination of her employment.
In resolving the foregoing question,the Court will assess the matter from a strictly neutral and secular point of view – the relationship between SSCW
as employer and the petitioner as an employee, the causes provided for by law in the termination of suchrelationship, and the evidence on record. The
ground cited for the petitioner’s dismissal, i.e., premarital sexual relations and, consequently, pregnancy outof wedlock, will be assessed as to
whether the same constitutes a valid ground for dismissal pursuant to Section 94(e) of the 1992 MRPS.
The standard of review in a Rule 45
petition from the CA decision in
labor cases.
In a petition for review under Rule 45 of the Rules of Court, such as the instant petition, where the CA’s disposition in a labor case is sought to be
calibrated, the Court’s review isquite limited. In ruling for legal correctness, the Court has to view the CA decision in the same context that the
petition for certiorari it ruled upon was presented to it; the Court has 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.33
The phrase "grave abuse of discretion" is welldefined in the Court’s jurisprudence. It exists where an act of a court or tribunal is performed with a
capricious or whimsical exercise ofjudgment equivalent to lack of jurisdiction.34 The determination of the presence or absence of grave abuse of
discretion does not include an inquiry into the correctness of the evaluation of evidence, which was the basis of the labor agency in reaching its
conclusion.35
Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the correctness of the evaluation of evidence (that was the basis
of the labor tribunals in determining their conclusion), the incorrectness of its evidentiary evaluation should not result in negating the requirement of
substantial evidence. Indeed, when there is a showing that the findings or conclusions, drawn from the same pieces of evidence, were arrived at
arbitrarily or in disregard of the evidence on record, they may be reviewed by the courts. In particular, the CA can grant the petition for certiorariif it
finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence. A decision that is not
supported by substantial evidence is definitely a decision tainted with grave abuse of discretion.36
The labor tribunals’ respective
conclusions that the petitioner’s
pregnancy is a "disgraceful or
immoral conduct" were arrived at
arbitrarily.
The CA and the labor tribunals affirmed the validity of the petitioner’s dismissal pursuant to Section 94(e) of the 1992 MRPS, which provides that:
Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated in the Labor Code, the employment of school personnel,
including faculty, may be terminated for any of the following causes:
x x x x
e. Disgraceful or immoral conduct;
x x x x
The labor tribunals concluded that the petitioner’s pregnancy out of wedlock, per se, is "disgraceful and immoral"considering that she is employed in
a Catholic educational institution. In arriving at such conclusion, the labor tribunals merely assessed the fact of the petitioner’s pregnancy visàvisthe
totality of the circumstances surrounding the same.
However, the Court finds no substantial evidence to support the aforementioned conclusion arrived at by the labor tribunals. The fact of the
petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the petitioner’s conduct as disgraceful or immoral. There must be
substantial evidence to establish that premarital sexual relations and, consequently, pregnancy outof wedlock, are indeed considered disgraceful or
immoral.
The totality of the circumstances
surrounding the conduct alleged to
be disgraceful or immoral must be
assessed against the prevailing
norms of conduct.
In ChuaQua v. Clave,37 the Court stressed that to constitute immorality, the circumstances of each particular case must be holistically considered and
evaluated in light of the prevailing norms of conductand applicable laws.38Otherwise stated, it is not the totality of the circumstances surrounding the
conduct per se that determines whether the same is disgraceful or immoral, but the conduct that is generally accepted by society as respectable or
moral. If the conduct does not conform to what society generally views as respectable or moral, then the conduct is considered as disgraceful or
immoral. Tersely put, substantial evidence must be presented, which would establish that a particular conduct, viewed in light of the prevailing norms
of conduct, is considered disgraceful or immoral.
Thus, the determination of whether a conduct is disgraceful or immoral involves a twostep process: first, a consideration of the totality of the
circumstances surrounding the conduct; and second, an assessment of the said circumstances visàvisthe prevailing norms of conduct, i.e., what the
society generally considers moral and respectable.
That the petitioner was employed by a Catholic educational institution per se does not absolutely determine whether her pregnancy out of wedlock is
disgraceful or immoral. There is still a necessity to determine whether the petitioner’s pregnancy out of wedlock is considered disgraceful or immoral
in accordance with the prevailing norms of conduct.
Public and secular morality should
determine the prevailing norms of
conduct, not religious morality.
However, determining what the prevailing norms of conduct are considered disgraceful or immoral is not an easy task. An individual’s perception of
what is moral or respectable is a confluence of a myriad of influences, such as religion, family, social status, and a cacophony of others. In this
regard, the Court’s ratiocination in Estrada v. Escritor39 is instructive.
In Estrada, an administrative case against a court interpreter charged with disgraceful and immoral conduct, the Court stressed that in determining
whether a particular conduct can be considered as disgraceful and immoral, the distinction between public and secular morality on the one hand, and
religious morality, on the other, should be kept in mind.40 That the distinction between public and secular morality and religious morality is important
because the jurisdiction of the Court extends only to public and secular morality.41 The Court further explained that:
The morality referred to in the law is public and necessarily secular, not religiousx x x. "Religious teachings as expressed in public debate may
influence the civil public order but public moral disputes may be resolved only on grounds articulable in secular terms." Otherwise, if government
relies upon religious beliefs in formulating public policies and morals, the resulting policies and morals would require conformity to what some
might regard as religious programs or agenda.The nonbelievers would therefore be compelled to conform to a standard of conduct buttressed by a
religious belief, i.e., to a "compelled religion," anathema to religious freedom. Likewise, if government based its actions upon religious beliefs, it
would tacitly approve or endorse that belief and thereby also tacitly disapprove contrary religious or nonreligious views that would not support the
policy. As a result, government will not provide full religious freedom for all its citizens, or even make it appear that those whose beliefs are
disapproved are secondclass citizens. Expansive religious freedom therefore requires that government be neutral in matters of religion; governmental
reliance upon religious justification is inconsistent with this policy of neutrality.
In other words, government action, including its proscription of immorality as expressed in criminal law like concubinage, must have a secular
purpose. That is, the government proscribes this conduct because it is "detrimental (or dangerous) to those conditions upon which depend the
existence and progress of human society" and not because the conduct is proscribed by the beliefs of one religion or the other. Although admittedly,
moral judgments based on religion might have a compelling influence on those engaged in public deliberations over what actions would be
considered a moral disapprobation punishable by law. After all, they might also be adherents of a religion and thus have religious opinions and moral
codes with a compelling influence on them; the human mind endeavors to regulate the temporal and spiritual institutions of society in a uniform
manner, harmonizing earth with heaven. Succinctly put, a law could be religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must
have an articulable and discernible secular purpose and justification to pass scrutiny of the religion clauses.x x x.42(Citations omitted and emphases
ours)
Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it pertains to public and secular morality; it refers to those
conducts which are proscribed because they are detrimental to conditions upon which depend the existence and progress of human society. Thus, in
Anonymous v. Radam,43 an administrative case involving a court utility worker likewise charged with disgraceful and immoral conduct, applying the
doctrines laid down in Estrada, the Court held that:
For a particular conduct to constitute "disgraceful and immoral" behavior under civil service laws, it must be regulated on account of the concerns of
public and secular morality. It cannot be judged based on personal bias, specifically those colored by particular mores. Nor should it be grounded on
"cultural" values not convincingly demonstrated to have been recognized in the realm of public policy expressed in the Constitution and the laws. At
the same time, the constitutionally guaranteed rights (such as the right to privacy) should be observed to the extent that they protect behavior that
may be frowned upon by the majority.
Under these tests, two things may be concluded from the fact that an unmarried woman gives birth out of wedlock:
(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for disgraceful and immoral conduct.It
may be a notsoideal situation and may cause complications for both mother and child but it does not give cause for administrative
sanction. There is no law which penalizes an unmarried mother under those circumstances by reason of her sexual conduct or proscribes the
consensual sexual activity between two unmarried persons. Neither does the situation contravene any fundamental state policy as expressed
in the Constitution, a document that accommodates various belief systems irrespective of dogmatic origins.
(2) if the father of the child born out of wedlock is himself married to a woman other thanthe mother, then there is a cause for
administrative sanction against either the father or the mother. In sucha case, the "disgraceful and immoral conduct" consists of having
extramarital relations with a married person. The sanctity of marriage is constitutionally recognized and likewise affirmed by our statutes as
a special contract of permanent union. Accordingly, judicial employees have been sanctioned for their dalliances with married persons or
for their own betrayals of the marital vow of fidelity.
In this case, it was not disputed that, like respondent, the father of her child was unmarried. Therefore, respondent cannot be held liable for
disgraceful and immoral conduct simply because she gave birth to the child Christian Jeon out of wedlock.44 (Citations omitted and emphases ours)
Both Estrada and Radamare administrative cases against employees in the civil service. The Court, however, sees no reason not to apply the doctrines
enunciated in Estrada and Radamin the instant case. Estrada and Radamalso required the Court to delineate what conducts are considered disgraceful
and/or immoral as would constitute a ground for dismissal. More importantly, as in the said administrative cases, the instant case involves an
employee’s security of tenure; this case likewise concerns employment, which is not merely a specie of property right, but also the means by which
the employee and those who depend on him live.45
It bears stressing that the right of an employee to security of tenure is protected by the Constitution. Perfunctorily, a regular employee may not be
dismissed unless for cause provided under the Labor Code and other relevant laws, in this case, the 1992 MRPS. As stated above, when the law refers
to morality, it necessarily pertains to public and secular morality and not religious morality. Thus, the proscription against "disgraceful or immoral
conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal, must necessarily refer to public and secular morality.
Accordingly, in order for a conduct tobe considered as disgraceful or immoral, it must be "‘detrimental (or dangerous) to those conditions upon
which depend the existence and progress of human society’ and not because the conduct is proscribed by the beliefs of one religion or the other."
Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an extramarital affair with his coteacher, who is likewise married,
on the ground of disgraceful and immoral conduct under Section 94(e) of the 1992 MRPS. The Court pointed out that extramarital affair is
considered as a disgraceful and immoral conduct is an afront to the sanctity of marriage, which is a basic institution of society, viz:
We cannot overemphasize that having an extramarital affair is an afront to the sanctity of marriage, which is a basic institution of society. Even our
Family Code provides that husband and wife must live together, observe mutual love, respect and fidelity. This is rooted in the fact that both our
Constitution and our laws cherish the validity of marriage and unity of the family. Our laws, in implementing this constitutional edict on marriage
and the family underscore their permanence, inviolability and solidarity.47
The petitioner’s pregnancy out of
wedlock is not a disgraceful or
immoral conduct since she and the
father of her child have no
impediment to marry each other.
In stark contrast to Santos, the Court does not find any circumstance in this case which would lead the Court to conclude that the petitioner
committed a disgraceful or immoral conduct. It bears stressing that the petitioner and her boyfriend, at the time they conceived a child, had no legal
impediment to marry. Indeed, even prior to her dismissal, the petitioner married her boyfriend, the father of her child. As the Court held in Radam,
there is no law which penalizes an unmarried mother by reason of her sexual conduct or proscribes the consensual sexual activity between two
unmarried persons; that neither does such situation contravene any fundamental state policy enshrined in the Constitution.
Admittedly, the petitioner is employed in an educational institution where the teachings and doctrines of the Catholic Church, including that on pre
marital sexual relations, is strictly upheld and taught to the students. That her indiscretion, which resulted in her pregnancy out of wedlock, is
anathema to the doctrines of the Catholic Church. However, viewed against the prevailing norms of conduct, the petitioner’s conduct cannot be
considered as disgraceful or immoral; such conduct is not denounced by public and secular morality. It may be an unusual arrangement, but it
certainly is not disgraceful or immoral within the contemplation of the law.
To stress, premarital sexual relations between two consenting adults who have no impediment to marry each other, and, consequently, conceiving a
child out of wedlock, gauged from a purely public and secular view of morality, does not amount to a disgraceful or immoral conduct under Section
94(e) of the 1992 MRPS.
Accordingly, the labor tribunals erred in upholding the validity of the petitioner’s dismissal. The labor tribunals arbitrarily relied solely on the
circumstances surrounding the petitioner’s pregnancy and its supposed effect on SSCW and its students without evaluating whether the petitioner’s
conduct is indeed considered disgraceful or immoral in view of the prevailing norms of conduct. In this regard, the labor tribunals’ respective
haphazard evaluation of the evidence amounts to grave abuse of discretion, which the Court will rectify.
The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock despite the absence of substantial evidence is not only arbitrary, but a
grave abuse of discretion, which should have been set right by the CA.
There is no substantial evidence to
prove that the petitioner’s pregnancy
out of wedlock caused grave scandal
to SSCW and its students.
SSCW claimed that the petitioner was primarily dismissed because her pregnancy out of wedlock caused grave scandal to SSCW and its students.
That the scandal brought about by the petitioner’s indiscretion prompted them to dismiss her. The LA upheld the respondents’ claim, stating that:
In this particular case, an "objective" and "rational evaluation" of the facts and circumstances obtaining in this case would lead us to focus our
attention x x x on the impact of the act committed by the complainant. The act of the complainant x x x eroded the moral principles being taught and
project[ed] by the respondent [C]atholic school to their young lady students.48 (Emphasis in the original)
On the other hand, the NLRC opined that:
In the instant case, when the complainantappellant was already conceiving a child even before she got married, such is considered a shameful and
scandalous behavior, inimical to public welfare and policy. It eroded the moral doctrines which the respondent Catholic school, an exclusive school
for girls, is teaching the young girls. Thus, when the respondentappellee school terminated complainantappellant’s services, it was a valid exercise
of its management prerogative. Whether or not she was a teacher is of no moment. There is no separate set of rules for nonteaching personnel.
Respondentsappellees uphold the teachings of the Catholic Church on premarital sex and that the complainantappellant as an employee of the
school was expected to abide by this basic principle and to live up with the standards of their purely Catholic values. Her subsequent marriage did not
take away the fact that she had engaged in premarital sex which the respondentappellee school denounces as the same is opposed to the teachings
and doctrines it espouses.49 (Emphasis ours)
Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed to adduce substantial evidence to prove that the petitioner’s
indiscretion indeed caused grave scandal to SSCW and its students. Other than the SSCW’s bare allegation, the records are bereft of any evidence
that would convincingly prove that the petitioner’s conduct indeed adversely affected SSCW’s integrity in teaching the moral doctrines, which it
stands for. The petitioner is only a nonteaching personnel; her interaction with SSCW’s students is very limited. Itis thus quite impossible that her
pregnancy out of wedlock caused such a grave scandal, as claimed by SSCW, as to warranther dismissal.
Settled is the rule that in termination cases, the burden of proving that the dismissal of the employees was for a valid and authorized cause rests on
the employer. It is incumbent upon the employer to show by substantial evidence that the termination of the employment of the employees was
validly made and failure to discharge that duty would mean that the dismissal is not justified and therefore illegal.50 "Substantial evidence is more
than a mere scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as adequateto support a conclusion, even if other
minds equally reasonable mightconceivably opine otherwise."51
Indubitably, bare allegations do not amount to substantial evidence. Considering that the respondents failed to adduce substantial evidence to prove
their asserted cause for the petitioner’s dismissal, the labor tribunals should not have upheld their allegations hook, line and sinker. The labor
tribunals’ respective findings, which were arrived at sans any substantial evidence, amounts to a grave abuse of discretion, which the CA should have
rectified. "Security of tenure is a right which may not be denied on mere speculation of any unclearand nebulous basis."52
The petitioner’s dismissal is not a
valid exercise of SSCW’s
management prerogative.
The CA be labored the management prerogative of SSCW to discipline its employees. The CA opined that the petitioner’s dismissal is a valid
exercise of management prerogative to impose penalties on erring employees pursuant to its policies, rules and regulations.
The Court does not agree.
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 beexercised in good faith and with due regard to the rights of labor." Management cannot exercise its prerogative
in a cruel, repressive, or despotic manner.53
SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss themif there is a valid cause to do so. However, as
already explained, there is no cause to dismiss the petitioner. Her conduct is not considered by law as disgraceful or immoral. Further, the
respondents themselves have admitted that SSCW, at the time of the controversy, does not have any policy or rule against an employee who engages
in premarital sexual relations and conceives a child as a result thereof. There being no valid basis in law or even in SSCW’s policy and rules,
SSCW’s dismissal of the petitioner is despotic and arbitrary and, thus, not a valid exercise of management prerogative.
In sum, the Court finds that the petitioner was illegally dismissed as there was no just cause for the termination of her employment. SSCW failed to
adduce substantial evidence to establish that the petitioner’s conduct, i.e., engaging in premarital sexual relations and conceiving a child out of
wedlock, assessed in light of the prevailing norms of conduct, is considered disgraceful or immoral. The labor tribunals gravely abused their
discretion in upholding the validity of the petitioner’s dismissal as the charge against the petitioner lay not on substantial evidence, but on the bare
allegations of SSCW. In turn, the CA committed reversible error in upholding the validity of the petitioner’s dismissal, failing torecognize that the
labor tribunals gravely abused their discretion in ruling for the respondents.
The petitioner is entitled to
separation pay, in lieu of actual
reinstatement, full backwages and
attorney’s fees, but not to moral and
exemplary damages.
Having established that the petitioner was illegally dismissed, the Court now determines the reliefs thatshe is entitled to and their extent. Under the
law and prevailing jurisprudence, "an illegally dismissed employee is entitled to reinstatement as a matter of right."54 Aside from the instances
provided under Articles 28355 and 28456 of the Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal, the accepted doctrine is that separation pay is available in
lieu of reinstatement when the latter recourse is no longer practical or in the best interest of the parties.57
In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school to pay the illegally dismissed high school teacher separation
pay in lieu of actual reinstatement since her continued presence as a teacher in the school "may well bemet with antipathy and antagonism by some
sectors in the school community."59
In view of the particular circumstances of this case, it would be more prudent to direct SSCW to pay the petitioner separation pay inlieu of actual
reinstatement. The continued employment of the petitioner with SSCW would only serve to intensify the atmosphere of antipathy and antagonism
between the parties. Consequently, the Court awards separation pay to the petitioner equivalent to one (1) month pay for every year of service, with a
fraction of at least six (6) months considered as one (1) whole year, from the time of her illegal dismissal up to the finality of this judgment, as an
alternative to reinstatement.
Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time their actual compensation was withheld from them up to the time of their actual reinstatement but if reinstatement is no
longer possible, the backwages shall be computed from the time of their illegal termination up to the finality of the decision."60 Accordingly, the
petitioner is entitled to an award of full backwages from the time she was illegally dismissed up to the finality of this decision.
Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A dismissed employee isentitled to moral damages 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. Exemplary damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner."61
"Bad faith, under the law, does not simply connote bad judgment or negligence.1âwphi1 It imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, or a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud."62
"It must be noted that the burden of proving bad faith rests on the one alleging it"63 since basic is the principle that good faith is presumed and he who
alleges bad faith has the duty to prove the same.64 "Allegations of bad faith and fraud must be proved by clear and convincing evidence."65
The records of this case are bereft of any clear and convincing evidence showing that the respondents acted in bad faith or in a wanton or fraudulent
manner in dismissing the petitioner. That the petitioner was illegally dismissed is insufficient to prove bad faith. A dismissal may be contrary to law
but by itself alone, it does not establish bad faith to entitle the dismissed employee to moral damages. The award of moral and exemplary damages
cannot be justified solely upon the premise that the employer dismissed his employee without cause.66
However, the petitioner is entitled to attorney’s fees in the amount of 10% of the total monetary award pursuant to Article 11167 of the Labor Code.
"It is settled that where an employee was forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorney’s fees is
legally and morally justifiable."68
Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of six percent (6%) per annumfrom the finality of this
judgment until fully paid.69
WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED. The Decision dated September 24, 2008 and Resolution
dated March 2, 2009 of the Court of Appeals in CAG.R. SP No. 100188 are hereby REVERSED and SET ASIDE.
The respondent, St. Scholastica’s College Westgrove, is hereby declared guilty of illegal dismissal and is hereby ORDERED to pay the petitioner,
Cheryll Santos Leus, the following: (a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay for every year of service, with a
fraction of at least six (6) months considered as one (1) whole year from the time of her dismissal up to the finality of this Decision; (b) full
backwages from the time of her illegal dismissal up to the finality of this Decision; and (c) attorney’s fees equivalent to ten percent (10%) of the total
monetary award. The monetary awards herein granted shall earn legal interest at the rate of six percent (6%) per annumfrom the date of the finality of
this Decision untilfully paid. The case is REMANDED to the Labor Arbiter for the computation of petitioner’s monetary awards.
SO ORDERED.
THIRD DIVISION
DECISION
LEONEN, J.:
As laypersons, seafarers cannot be expected to make completely accurate accounts of their state of health. Unaware of the
nuances of medical conditions, they may, in good faith, make statements that tum out to be false. These honest mistakes do
not negate compensability for disability arising from pre-existing illnesses shown to be aggravated by their working
conditions. However, when a seafarer's proper knowledge of pre-existing conditions and intent to deceive an employer are
established, compensability is negated.
This resolves a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure praying that the assailed
April 10, 2013 Decision2 and July 18, 4013 Resolution3 of the Court of Appeals in CA-G.R. SP No. 124546 be reversed and set
aside.
The assailed Court of Appeals Decision affirmed the National Labor Relations Commission's December 13, 2011 Decision 4 and
February 28, 2012 Resolution,5 which, in turn, affirmed the Labor Arbiter's April 20, 2011 Decision.6 The Labor Arbiter
dismissed Antonio B. Manansala's (Manansala) Complaint for payment of total and permanent disability benefits. The assailed
Court of Appeals Resolution denied Manansala's Motion for Reconsideration. 7
On April 8, 2010, Manansalals services were engaged by Marlow Navigation Phils., Inc., for and on behalf of its principal,
Marlow Navigation Co. Ltd./Cyprus, for him to serve as a "fitter" on board the vessel M/V Seaboxer. 8
Before boarding the vessel, Manansala underwent a Pre Employment Medical Examination (PEME) on March 23, 2010 9 at the
EL ROI Medical Clinic and Diagnostic Center, Inc.10 In his examination, Manansala was required to disclose information
regarding all existing and prior medical conditions. The examination specifically required information on 29 illnesses and/or
conditions, among which were hypertension and diabetes. Manansala's examination certificate indicates that he denied
having hypertension and diabetes, specifically answering "NO" when asked about hypertension and diabetes mellitus.
Following his examination, Manansala was declared fit for sea duty and was cieployed. 11
On May 30, 2010, while on board the M/V Seaboxer, Manansala suffered a stroke, 12 "experienc[ing] moderate headache at
the vertex associated with dizziness and blurring of vision and right[-]sided weakness." 13 He was, then, admitted to the ADK
Hospital in the Maldives14 where a brain CT scan conducted on him showed that he was suffering from an "[a]cute infarct at
the left MCA territory."15Because of this, Manansala was repatriated on June 8, 2010. 16
Manansala was confined at the De Los Santos Medical Center from June 10, 2010 to June 23, 2010, 17under the primary care
of company-designated physician, Dr. Teresita Barrairo (Dr. Barrairo).18 While under Dr. Barrairo's care, he "repeatedly
denied that he ha[d] any past history of diabetes and hypertension." 19
On September 7, 2010,20 Dr. Barrairo issued to Manansala an interim Grade 10 disability rating. 21 She issued a final Grade 10
Disability assessment on September 30, 2010.22
On October 21, 2010, Manansala filed a Complaint against the respondents for total and permanent disability benefits, as
well as damages and attorney's fees.23 When the mandatory conferences failed, the parties were ordered to file their
respective position papers and responsive pleadings. 24
Two (2) months after he filed his Complaint, on December 20, 2010, Manansala's own doctor, Dr. Amado San Luis (Dr. San
Luis), issued a medical opinion stating that Manansala must be considered permanently disabled:
Medical Opinion
....
4. Patient should be permanently disabled (sic) because of the inherent risk of his work as a seaman that will predispose him
to repeated stroke or other cardiovascular attacks. Because of the presence of diabetes, hypertension, hyperlipidemia and
stroke, he is considered a high risk of (sic) developing another stroke. 25
The same opinion indicated that Manansala admitted to having had a long history of hypertension and diabetes, He even
admitted to taking Enalapril and Metformin as maintenance medications. 26
On Apri1 20, 2011, the Labor Arbiter rendered a Decision finding that Manansala was suffering from pre-existing, rather than
work-related, ailments. Therefore, he was not entitled to disability benefits. 27
On December 13, 2011, the National Labor Relations Commission rendered a Decision affirming that of the Labor Arbiter. 28 In
a Resolution dated February 28, 2012, the National Labor Relations Commission denied Manansala's Motion for
Reconsideration.29
Manansala filed a Petition for Certiorari before the Court of Appeals. In its assailed April 10, 2013 Decision, the Court of
Appeals sustained the decision of the National Labor Relations Commission. 30 In its assailed July 18, 2013 Resolution,31 the
Court of Appeals denied Manansala's Motion for Reconsideration.
Hence, Manansala filed the present Petition. He now asserts that he properly disclosed his pre-existing illnesses during his
medical examination and that his stroke was work-related. 32
For resolution is the sole issue of whether or not petitioner Antonio B. Manansala is entitled to total and permanent disability
benefits occasioned by work-related illnesses.
He is not.
Filipinos hired as seafarers are contractual employees whose employment is governed by their respective contracts with their
employers: "[t]heir employment is governed by the contracts they sign every time they are rehired and their employment is
terminated when the contract expires." 33
Seafarers must be registered with the Philippine Overseas Employment Administration (POEA). 34 The POEA Standard
Employment Contract (POEA-SEC) must be executed by seafarers and their employers "as a condition sine qua non prior to
the deployment for overseas work"35 and is "deemed incorporated in [seafarer] employment contract[s]." 36
The POEA-SEC37 requires the employer to compensate a seafarer for work-related illnesses. 38 It defines "work-related illness"
as follows:
Definition of Terms:
....
12. Work-Related Illness - any sickness resulting to disability or death as a result of an occupational disease
listed under Section 32-A of this Contract with the conditions set therein satisfied. 39
The benefits that the employer must pay "when the seafarer suffers work-related injury or illness during the term of his
contract"40 are outlined in Section 20(B) of the POEA-SEC.41
The compensation to be given to a seafarer depends on the severity of the disability suffered. Section 32 of the POEA-SEC
provides a schedule of disabilities and their corresponding impediment grades. 42 The grades range from 1 to 14, with 1 being
the most severe and entailing the highest amount of compensation. 43
II
Section 32-A of the POEA-SEC provides a non-exhaustive list 44 of diseases considered as occupational. The mere occurrence
of a listed illness does not automatically engender compensability. The first paragraph of Section 32-A requires the
satisfaction of all of its listed general conditions "[f]or an occupational disease and the resulting disability or death to be
compensable":
Section 32-A OCCUPATIONAL DISEASES
For an occupational disease and the resulting disability or death to be compensable, all of the following conditions must be
satisfied:
(1) The seafarer's work must involve the risks described herein;
(2) The disease was contracted as a result of the seafarer's exposure to the
described risks;
(3) The disease was contracted within a period of exposure and under such other
factors necessary to contract it;
Common sense dictates that an illness could not possibly have been "contracted as a result of the seafarer's exposure to the
described risks"47 if it has been existing before the seafarer's services are engaged. Still, pre existing illnesses may be
aggravated by the seafarer's working conditions. To the extent that any such aggravation is brought about by the work of the
seafarer, compensability ensues:
Settled is the rule that for illness to be compensable, it is not necessary that the nature of the employment be the sole and
only reason for the illness suffered by the seafarer. It is sufficient that there is a reasonable linkage between the disease
suffered by the employee and his work to lead a rational mind to conclude that his work may have contributed to the
establishment or, at the very least, aggravation of any pre-existing condition he might have had.48 (Emphasis supplied).
Consistent with the basic standard in labor cases and other administrative proceedings, the linkage between the disease or
its aggravation and the working conditions of a seafarer must be proven by substantial evidence. In Jebsens Maritime v.
Undag:49
In labor cases as in other administrative proceedings, substantial evidence or such relevant evidence as a reasonable mind
might accept as sufficient to support a conclusion is required. The oft-repeated rule is that whoever claims entitlement to the
benefits provided by law should establish his or her right thereto by substantial evidence. Substantial evidence is more than
a mere scintilla. The evidence must be real and substantial, and not merely apparent; for the duty to prove work-causation
or work-aggravation imposed by law is real and not merely apparent. 50 (Emphasis supplied, citations omitted)
Compensability is not limited to Section 32-A's listed occupational diseases. For as long as seafarers are able to show by
substantial evidence that they suffered disabilities occasioned by a disease contracted on account of or aggravated by
working conditions, compensation is availing:
Of course, the law recognizes that under certain circumstances, certain diseases not otherwise considered as an occupational
disease under the POEA-SEC may nevertheless have been caused or aggravated by the seafarer's working conditions. In
these situations, the law recognizes the inherent paucity of the list and the difficulty, if not the outright improbability, of
accounting for all the known and unknown diseases that may be associated with, caused or aggravated by such working
conditions.
Hence, the POEA-SEC provides for a disputable presumption of work-relatedness for non-POEA-SEC-listed occupational
disease and the resulting illness or injury which he may have suffered during the term of his employment contract.
This disputable presumption is made in the law to signify that the non inclusion in the list of compensable diseases/illnesses
does not translate to an absolute exclusion from disability benefits. In other words, the disputable presumption does not
signify an automatic grant of compensation and/or benefits claim; the seafarer must still prove his entitlement to disability
benefits by substantial evidence of his illness' work-relatedness. 51
III
The POEA-SEC bars the compensability of disability arising from a pre-existing illness when attended by an employee's
fraudulent misrepresentation. Section 20(E) of the POEA-SEC states:
E. A seafarer who knowingly conceals and does not disclose past medical condition,
disability and history in the pre-employment medical examination constitutes
fraudulent misrepresentation and shall disqualify him from any compensation and
benefits. This may also be a valid ground for termination of employment and
imposition of the appropriate administrative and legal sanctions.
The POEA-SEC's terminology is carefully calibrated: it does not merely speak of incorrectness or falsity, or of incompleteness
or inexactness. Rather, to negate compensability, it requires fraudulent misrepresentation.
To speak of fraudulent misrepresentation is not only to say that a person failed to disclose the truth but that he or she
deliberately concealed it for a malicious purpose. To amount to fraudulent misrepresentation, falsity must be coupled with
intent to deceive and to profit from that deception.
Consequently, reasonable leeway may be extended for inability to make complete and fastidiously accurate accounts when
this inability arises from venial human limitation and frailty. This is a normal tendency for laypersons-such as seafarers-
rendering accounts of their own medical conditions.
IV
Prospective seafarers undergo a pre-employment medical examination (PEME) to determine if they are fit to work. Republic
Act No. 8042, as amended, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, tasks the
Department of Health to regulate the operations of clinics conducting PEMEs for migrant workers. 52
Department of Health Administrative Order No. 2007-0025, which was in effect when petitioner took his PEME, articulated
guidelines on PEMEs for seafarers.53 It identified minimum test requirements, summarized as follows: 54
PEME "B"
PEME "C"
PEME "A" Serving
Serving Seafarers
TEST New Seafarers
(40 years old and
Candidates (below 40 years
above)
old)
Audiometry - - -
Chest X-ray - - -
Color Perception -
Test - -
Complete Blood -
Count and Blood - -
Typing
Complete Physical -
Examination and - -
Medical History
Dental Examination - - -
ECG - X -
HIV OPTIONAL
Psychometric -
- -
examinations
Routine Stool - - -
Routine Urinalysis - - -
RPR - - -
Total Cholesterol X X -
Triglyceride X X -
Visual Acuity - - -
As to their source, there are two categories of information obtained in PEMEs. First is information obtained from and colored
by the prospective seafarer's opinion, i.e., information on medical history gained from probing questions asked to prospective
seafarers and answered by them to the best of their knowledge. Second is information generated by procedures conducted
by health professionals. From these, a determination is made on whether a prospective seafarer is fit, unfit, or temporarily
unfit for sea duty:55
C. On the Assessment of PEME Results
a.) Fit for Sea Duty - The seafarer is assessed as able to perform safely the duties
of his position aboard a ship in the absence of medical care, without danger to
his health or to the safety of the vessel, crew and passengers.
b.) Unfit for Sea Duty - The seafarer is assessed to be not fit for sea duty.
c.) Temporarily Unfit for Sea Duty - The seafarer is assessed to be temporarily
unfit for sea duty when, at the time of PEME, the result shows an abnormal
finding, a suspected medical or surgical condition, or a disclosed significant past
medical history which needs further investigation and reevaluation. The
examinee shall be given thirty (30) days to undergo further assessment in
accordance with the established referral system of the accredited medical clinic.
Within the said period, the seafarer may either be medically upgraded to fitness
or downgraded to unfitness indefinitely based on the results of the follow-up
evaluation.56(Emphasis in the original)
Between the prospective seafarer and an examining physician, the latter is in a better position to assess fitness for the rigors
of sea duty. Apart from one's literal body, a prospective seafarer's only other contribution to a medical examination is a set
of responses to questions. A seafarer's personal health assessment is home by his or her amateur opinion, or otherwise
unrefined understanding of nuanced medical conditions. In contrast, the procedures attendant to a PEME are conducted and
supervised by professionals with sGientific and technical capabilities. Their examinations generate verifiable empirical data,
which are then evaluated by a physician.
A PEME is not expected to be an in-depth examination of a seafarer's health. 57 Still, it must fulfill its purpose of ascertaining a
prospective seafarer's capacity for safely performing tasks at sea. Thus, if it concludes that a seafarer, even one with an
existing medical condition, is "fit for sea duty," it must, on its face, be taken to mean that the seafarer is well in a position to
engage in employment aboard a sea vessel "without danger to his health." 58
A recommendation stating that a seafarer is "fit for sea duty" when standardized procedures would readily reveal that he or
she is not can only mean that medical examiners failed to diligently screen a seafarer. The persons responsible for the
examination are then bound by their negligence. Ultimately, it is more appropriate that the examining physician, a trained
professional, and not the seafarer, who is a layperson, be faulted for discounting the presence of diseases even after
subjecting the seafarer to a series of procedures.
For its part, a recruiting employer is expected to know the physical demands of a seafarer's engagement. It is then equally
expected to peruse the results of PEMEs to ensure that, healthwise, its recruits are up to par. An employer who admits a
physician's "fit to work" detennination binds itself to that conclusion and its necessary consequences. This includes
compensating the seafarer for the aggravation of negligently or deliberately overlooked conditions.
Essential hypertension is among the occupational diseases enumerated in Section 32-A of the POEA-SEC. Section 32-A,
paragraph 2(20) of the POEA-SEC reads:
20. Essential Hypertension
Hypertension classified as primary or essential is considered compensable if it causes impairment of function of body organs
like kidneys, heart, eyes and brain, resulting in permanent disability; Provided, that the following documents substantiate
it: (a) chest x-ray report, (b) ECG report, (c) blood chemistry report, (d) funduscopy report, and (e) C-T scan. (Emphasis
supplied)
Primary or essential hypertension is the most common form of hypertension. 59 It is a "conse uence of an interaction between
environmental and genetic factors."60 Hypertension doubles the risk of cardio-vascular diseases,61 the most common cause of
death in hypertensive patients. 62 Hypertensive patients are also susceptible to having a stroke. 63
The following degrees of severity have been associated with identifying hypertension: 64
....
The cardiovascular risks associated with a given blood pressure are dependent upon the combination of risk factors in the
specific individual. These include age, gender, weight, physical inactivity, smoking, family history, serum cholesterol,
diabetes mellitus and pre existing vascular disease. Effective management of hypertension therefore requires a holistic
approach that is based on the identification of those at highest cardiovascular risk and the adoption of multifactorial
interventions, targeting not only blood pressure but all modifiable cardiovascular risk factors.
In light of these observations[,] a practical definition of hypertension is 'the level of blood pressure at which the benefits of
treatment outweigh the costs and hazards'.65
Consistent with this, "most [hypertensive] patients remain asymptomatic"; 66 and frequently, patients only discover that they
are hypertensive because of a routine examination or because complications have arisen. 67
The POEA-SEC's treatment of essential hypertension recognizes its gradations. To enable compensation, the mere occurrence
of hypertension, even as it is work-related and concurs with the four basic requisites of the first paragraph of Section 32-A,
does not suffice. The POEA-SEC requires an element of gravity. It speaks of essential hypertension only as an overture to the
"impairment of function of body organs like kidneys, heart, eyes and brain." This impairment must then be of such severity
as to be "resulting in permanent disability." 68 Section 32-A, paragraph 2(20), thus, requires three successive occurrences:
first, the contracting of essential hypertension; second, organ impairment arising from essential hypertension; and third,
permanent disability arising from that impairment.
In keeping with the requisite gravity occasioning essential hypertension, the mere averment of essential hypertension and its
incidents do not suffice. In addition to the substantive requirements of essential hypertension's being the cause of organ
impairment leading to permanent disability, the POEA-SEC identifies documentary requirements for considering a claim under
Section 32-A, paragraph 2(20). As is evident from the use of the conjunctive word "and," this enumeration is inclusive and
cumulative, rather than alternative. Accordingly, all documentary requirements must be submitted and satisfied; otherwise, a
claim for benefits should not be entertained. These prerequisites are: first, a chest x-ray report; second, an
electrocardiogram (ECG) report; third, a blood chemistry report; fourth, a funduscopy report; and fifth, a C-T Scan.
The POEA-SEC also includes cardio-vascular diseases in its list of occupational diseases. They are compensable if, in addition
to the requirements of the first paragraph of Section 32-A, any of the conditions listed in Section 32-A, paragraph 2(11) are
attendant:
11. Cardio-Vascular Diseases. Any of the following conditions must be met:
a. If the heart disease was known to have been present during employment, there must be proof thut an acute
exacerbation was clearly precipitated by the unusual strain by reasons of the nature ofhis work.
b. The strain of work that brings about an acute attack must be sufficient severity and must be followed within
24 hours by the clinical signs of a cardiac insult to constitute causal relationship.
c. If a person who was apparently asymptomatic before being subjected to strain at work showed signs and
symptoms of cardiac injury during the performance of his work and such symptoms and signs persisted, it is
reasonable to claim a causal relationship.
Diabetes is not among Section 32-A's listed occupational diseases. As with hypertension, it is a complex medical condition
typified by gradations. Blood sugar levels classify as normal, pre-diabetes, or diabetes depending on the glucose level of a
patient.69
Hypertension and diabetes are hardly elementary conditions that afflicted laypersons could handily grasp. Even the POEA-
SEC's appreciation of essential hypertension proceeds from an understanding that hypertension per se does not equate to
disability warranting cessation of work and entailing compensation. Rather, it concedes that hypertension is identified by
degrees of severity.
Hypertension and diabetes can be difficult to recognize because of gradations whose demarcations are not readily perceptible
and because they can be asymptomatic. This is especially true in their mild stages. Even in relatively advanced stages, their
symptoms may be generic that they are as ea sly mistaken to be indicating other conditions. 75
The greater possibility, then, is that a seafarer's self-assessment of personal medical conditions will fail to capture nuances
that can make the difference between fitness and unfitness for work As laypersons, they do not have the requisite medical
knowledge to properly characterize their illnesses. Even if they are aware of their own medical conditions, they may, in their
non professional opinion but still in good faith, be convinced that their conditions are not so sey re and that they can manage
to perform work aboard a vessel. Seafarers cannot be held to account under an inordinate standard. The POEA-SEC takes
exception to fraudulent misrepresentation, not to honest mistakes.
VI
This Court finds petitioner to have knowingly and fraudulently misrepresented himself as not afflicted with hypertension or
diabetes. He did not merely make inaccuracies in good faith but engaged in serial dishonesty. Thus, this Court affirms the
Decision of the Court of Appeals.
During his PEME, petitioner was recorded to have "categorically answered 'No' when asked whether he has ever suffered
from or has been told to have hypertension and diabetes." 76 After repatriation and while being treated by Dr. Barrairo, the
company-designated physician, he again "denied that he ha[d] any past history of diabetes and hypertension." 77
However, in the medical opinion and evaluation prepared by his own physician, Dr. San Luis, petitioner was indicated to not
only have admitted that "he ha[d] a past history of hypertension and diabetes," 78but even that he was "regularly taking
Enalapril and Metformin respectively to treat the said illnesses." 79
Forced into a corner by his own conflicting declarations, petitioner attempted to extricate himself by disavowing the
declarations he made in his PEME and claiming that it was the examining physician who failed to accurately reflect his
responses on his examination certificate.80
Petitioner's assertion is an admission that he fully knew of his conditions at the moment he was examined, rendering it
pointless for this Court to consider whether he was merely confused at the time of his examination. Additionally, his assertion
burdens him with the task of proving his claims. As he was duty-bound to truthfully answer questions during his
examination, petitioner must show that despite his knowledge, he did not willfully or deceptively withhold information.
Likewise, his imputation of the examining physician's liability despite the examination certificate's indication that his
responses were duly recorded is an affirmative defense or an alternative version of events that becomes his burden to prove.
Petitioner failed to discharge his burden. On the contrary, the confluence of circumstances belies his claims.
Petitioner adequately understood the significance of the declarations attributed to him in his examination certificate.
Petitioner's engagement aboard the MIV Seaboxer was not his first stint as a seafarer. He had been a seafarer since
1994,81 although he worked for respondents, on and off, only since 2007. 82 His prolonged seafaring experience must have
familiarized him with the conduct of PEMEs and the need for him to give truthful answers. He explicitly declared, too, that he
was "aware of the contents of Section 20.E [on misrepresentation] in the POEA [Standard Employment
Contract]."83 Certainly, his awareness of Section 20(E) must have impressed upon him not only the potentil complications of
what he claims to be a false declaration foisted on him by the examining physician but also the urgency of rectifying that
error. Instead, he remained silent and did nothing. Petitioner's concession by omission militates against him.
This Court has nothing to rely on but petitioner's bare recollection. This does not satisfy, He should have actively endeavored
to demonstrate that the false declarations in his examination certificate were anomalous, stray errors. As a seafarer since
1994, he must have completed several other medical examinations. His good faith could have ben substantiated by prior acts
in analogous situations. He could have presented copies of the certificates for his previous medical examinations, but he did
not These would have shown that while the responses he otiered about his conditions in prior instances had been properly
recorded, the examining physician during his March 23, 2010 examination failed to render an accurate account.
It is, of course, possible that prior to his most recent medical examination on March 23, 2010, petitioner had not been
diagnosed with hypertension or diabetes. This would make it impossible for him to present evidence of countervailing prior
declarations. However, even conceding this, petitioners good faith is belied by other circumstances attending this case.
Petitioner's good faith could have been demonstrated by his subsequent acts. Knowing full well that a false declaration was
made on his examination certificate, petitioner should, at the very least, not have compounded it. Instead of this, however,
he maintained before Dr. Barrairo upon repatriation that he had no history of either hypertension or diabetes. It was only
before his personally chosen physician did petitioner admit to not only a history of diabetes and hypertension but even to the
maintenance medications he had been taking to address those illnesses.
A measure of good faith can be appreciated on the part of a seafarer who is unable to grasp the nuances of his or her
medical condition. This Court is unable to appreciate this good faith here. Petitioner knew that his illnesses were of such
severity that he needed to take maintenance medicine. Despite this, he consistently maintained that he had no history of
hypertension or diabetes. Finally confronted with his own discrepant statements he denied accountability by shifting the
blame to a person who was beyond the reach of the proceedings he had initiated.
We are not a trier of facts and only questions of law may be brought before this Court in Rule 45 petitions. Faced with
nothing more than petitioner's self-serving, unsubstantiated backtracking on his own inconsistencies, we see no need to
deviate from the uniform findings of the Labor Arbiter, the National Labor Relations Commission and the Court of Appeals.
Petitioner's disavowals were not statements made in good faith but were part of a serial utterance of lies.
VII
It works no less in petitioner's favor that he failed to observe the procedure outlined by the POEA-SEC concerning disputed
disability assessments by company-designated physicians. Section 20(B)(3) of the POEA-SEC requires referral to a third
physician in the event of diverging findings by a company-designated physician and a seafarer's personally chosen physician:
SECTION 20. COMPENSATION AND BENEFITS
....
The liabilities of the employer when the seafarer suffers work related injury or illness during the term of his contract arc as
follows:
....
3. Upon sign off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent
to his basic wage until he is declared fit to work or the degree of permanent disability has been assessed by
the company-designated physician but in no case shall this period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a post employment medical examination by a
company-designated physician within three working days upon his return except when he is physically
incapacitated to do so, in which case, a written notice to the agency within the same period is deemed as
compliance. Failure of the seafarer to comply with the mandatory reporting requirement shall result in his
forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly
benveen the Employer and the seafarer. The third doctor's decision shall be final and binding on both
parties.
(Emphasis supplied)
INC Shipmanagement, Inc. v. Rosales84 explained the significance of this referral and emphasized that it is "mandatory":
This referral to a third doctor has been held by this Court to be a mandatory proc dure as a consequence of the provision
that it is the company-designated doctor whose sessment should prevail. In other words, the company can insist on its
disability rating even against a contrary opinion by another doctor, unless the seafarer expresses his disagreement by king
for the referral to a third doctor who shall make his or her determination and whose decision is final and binding on the
parties. We have followed this rule in a string of cases, among them, Philippine Hammonia, Ayungo v. Beamko
Shipmanagement Corp., Santiago v. Pacbasin Shipmanagement, Inc., Andrada v. Agemar Manning Agency, and Masangkay
v. Trans-Global Maritime Agency, Inc. Thus, at this point, the matter of referral pursuant to the provision of the POEASEC is
a settled ruling.85 (Citations omitted)
Petitioner made no effort to comply with the required referral. He did not even consult a personally chosen physician before
filing his Complaint. Upon repatriation, the company-designated physician, Dr. Barrairo, assessed petitioner and twice
rendered Grade 10 disability assessments in September 2010.86Disagreeing with these assessments, petitioner would
proceed to file his Complaint on October 21, 2010.87 In need of support for his Complaint, only two months after would
petitioner pick a personal physician, Dr. San Luis, to seek another opinion. Only on December 70, 2010 would Dr. San Luis
declare that petitioner "should be permanently disabled (sic)."88 Beyond this, there is no indication that petitioner did more to
ascertain his proper disability grade.
Petitioner's non-compliance constrains us to not lend credibility to his personal physicians assessment. In any event, the
record demonstrates why this assessment deserves no credence as against that of the company-designated physician. He
was under the care and supervision of Dr. Barrairo throughout the more than four months that intervened between his
repatriation and the filing of his Complaint.89 For a period, he was kept under Dr. Barrairo's close observation as he was
confined at the De Los Santos Medical Center from June 10, 2010 to June 23, 2010. 90 Dr. Barrairo's prolonged care and
observation of him yielded two disability assessments: first, an interim assessment on September 7, 2010; and another, a
verified assessment on September 30, 2010.91 In contrast, petitioner's personal physician examined him on only one
occasion and only under such circumstances that petitioner needed backing for his Complaint. 92
Jurisprudence holds that, in analogous cases, company-designated physicians' assessments are to be upheld. 93 This could
have entitled petitioner to Grade 10 disability benefits. However, his failure to observe Section 20(B)(3)'s requirements is not
all that there is to this case. We cite his non-referral to a third physician, not as a mitigating circumstance, but to emphasize
how multi-layered exigencies militate against him. We have explained at length how petitioner engaged in fraudulent
misrepresentation, deceptively concealing his pre-existing hypertension and diabetes. This, in itself, is fatal to his cause. In
keeping with Section 20(E) of the POEA-SEC, petitioner is, thus, disqualified from receiving any compensation.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed April 10, 2013 Decision and July 18, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 124546 are AFFIRMED.
SO ORDERED.