Labor Rev. Case Doctrines

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FUNDAMENTAL PRINCIPLES AND POLICIES

I. Constitutional Provisions
1. Tirazona v. Phil Eds Techno Service
a. (*) As a general rule, an employee who has been dismissed for any of the just
causes enumerated under Article 282 of the Labor Code is not entitled to
separation pay. In Sy v. Metropolitan Bank & Trust Company, 506 SCRA 580
(2006), we declared that only unjustly dismissed employees are entitled to
retirement benefits and other privileges including reinstatement and
backwages. Although by way of exception, the grant of separation pay or
some other financial assistance may be allowed to an employee dismissed for
just causes on the basis of equity, in Philippine Long Distance Telephone
Company v. National Labor Relations Commission, 164 SCRA 671 (1988), we
set the limits for such a grant and gave the following ratio for the same:
[S]eparation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character.
b. (*) While the Court commiserates with the plight of Tirazona, who has
recently manifested that she has since been suffering from her poor health
condition, the Court cannot grant her plea for the award of financial benefits
based solely on this unfortunate circumstance. For all its conceded merit,
equity is available only in the absence of law and not as its replacement.
Equity as an exceptional extenuating circumstance does not favor, nor may it
be used to reward, the indolent or the wrongdoer, for that matter. This Court
will not allow a party, in the guise of equity, to benefit from its own fault.
2. Best Wear Garments v. de lemos
a. The right of employees to security of tenure does not give them vested rights
to their positions to the extent of depriving management of its prerogative to
change their assignments or to transfer them. Thus, an employer may
transfer or assign employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary, benefits, and
other privileges, and the action is not motivated by discrimination, made in
bad faith, or effected as a form of punishment or demotion without sufficient
cause.
b. Being piece-rate workers assigned to individual sewing machines,
respondents’ earnings depended on the quality and quantity of finished
products. That their work output might have been affected by the change in
their specific work assignments does not necessarily imply that any resulting
reduction in pay is tantamount to constructive dismissal. Workers under
piece-rate employment have no fixed salaries and their compensation is
computed on the basis of accomplished tasks. As admitted by respondent De
Lemos, some garments or by-products took a longer time to finish so they
could not earn as much as before. Also, the type of sewing jobs available
would depend on the specifications made by the clients of petitioner company.
Under these circumstances, it cannot be said that the transfer was
unreasonable, inconvenient or prejudicial to the respondents. Such
deployment of sewers to work on different types of garments as dictated by
present business necessity is within the ambit of management prerogative
(*) – pertinent to topic

(**) -pertinent to topic but not included in “Same; same”
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which, in the absence of bad faith, ill motive or discrimination, should not be
interfered with by the courts.
c. It is unfair to charge petitioners with constructive dismissal simply because
the respondents insist that their transfer to a new work assignment was
against their will. We have long stated that “the objection to the transfer
being grounded on solely upon the personal inconvenience or hardship that
will be caused to the employee by reason of the transfer is not a valid reason
to disobey an order of transfer.” That respondents eventually discontinued
reporting for work after their plea to be returned to their former work
assignment was their personal decision, for which the petitioners should not
be held liable particularly as the latter did not, in fact, dismiss them.
d. There was no evidence that respondents were dismissed from employment. In
fact, petitioners expressed willingness to accept them back to work. There
being no termination of employment by the employer, the award of
backwages cannot be sustained. It is well settled that backwages may be
granted only when there is a finding of illegal dismissal. In cases where there
is no evidence of dismissal, the remedy is reinstatement but without
backwages.
e. (*) The constitutional policy of providing full protection to labor is not
intended to oppress or destroy management. While the Constitution is
committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its rights which are entitled
to respect and enforcement in the interest of simple fair play. Thus, where
management prerogative to transfer employees is validly exercised, as in this
case, courts will decline to interfere.
3. Jamer v. NLRC
a. At the outset, the Court notes petitioners’ inexcusable failure to move for the
reconsideration of respondent NLRC’s decision. Thus, the present petition
suffers from a procedural defect that warrants its outright dismissal. While
in some exceptional cases we allowed the immediate recourse to this Court,
we find nothing herein that could warrant an exceptional treatment to this
petition which will justify the omission.
b. Likewise, a motion for reconsideration is an adequate remedy; hence
certiorari proceedings, as in this case, will not prosper. Rule 65, Section 1 of
the Rules of Civil Procedure, as amended, clearly provides that: “When any
tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal,
or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, x x
x”
c. The unquestioned rule in this jurisdiction is that certiorari will lie only if
there is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law against the acts of respondent. In the case at bench,
the plain and adequate remedy referred to in Rule 65, Section 1, is a motion
for reconsideration of the challenged decision and the resolution thereof,

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which was expected to provide an adequate and a more speedy remedy than
the present petition for certiorari.
d. In asserting that there was grave abuse of discretion, petitioners advert to
alleged variances in the factual findings of the Labor Arbiter and the
respondent NLRC. This is inept and erroneous. Firstly, errors of judgment, as
distinguished from errors of jurisdiction, are not within the province of a
special civil action for certiorari. Secondly, a careful reading of the records of
this case would readily show that if there is any error by public respondent in
its analysis of the facts and its evaluation of the evidence, it is not of such a
degree as may be stigmatized as a grave abuse of discretion. Grave abuse of
discretion is committed when the judgment is rendered in a capricious,
whimsical, arbitrary or despotic manner. An abuse of discretion does not
necessarily follow just because there is a reversal by the NLRC of the decision
of the Labor Arbiter. Neither does the mere variance in the evidentiary
assessment of the NLRC and that of the Labor Arbiter would, as a matter of
course, so warrant another full review of the facts. The NLRC’s decision, so
long as it is not bereft of support from the records, deserves respect from the
Court.
e. We must once more reiterate our much repeated but not well-heeded rule
that the special civil action for certiorari is a remedy designed for the
correction of errors of jurisdiction and not errors of judgment. The rationale
for this rule is simple. When a court exercises its jurisdiction an error
committed while so engaged does not deprive it of the jurisdiction being
exercised when the error is committed. If it did, every error committed by a
court would deprive it of its jurisdiction and every erroneous judgment would
be a void judgment. This cannot be allowed. The administration of justice
would not countenance such a rule. Consequently, an error of judgment that
the court may commit in the exercise of its jurisdiction is not correctible
through the original special civil action of certiorari.
f. On the merits, we find and so hold that substantial evidence exists to
warrant the finding that petitioners were validly dismissed for just cause and
after observance of due process.
g. Under the Labor Code, as amended, the requirements for the lawful
dismissal of an employee by his employer are two-fold: the substantive and
the procedural. Not only must the dismissal be for a valid or authorized cause
as provided by law (Articles 282, 283 and 284, of the Labor Code, as
amended), but the rudimentary requirements of due process, basic of which
are the opportunity to be heard and to defend himself, must be observed
before an employee may be dismissed.
h. The NLRC, therefore, did not act with grave abuse of discretion in declaring
that petitioners were legally dismissed from employment. The failure of
petitioners to report to management the aforementioned irregularities
constitute “fraud or willful breach of the trust reposed in them by their
employer or duly authorized representative”—one of the just causes in
terminating employment as provided for by paragraph (c), Article 282 of the
Labor Code, as amended.
i. (*) In other words, petitioners’ admissions in their sworn statements,
together with the other documentary evidences on record, constituted breach
of trust on their part which justifies their dismissal. Private respondents

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Isetann Department Store and Mr. John Go cannot be compelled to retain
employees who are clearly guilty of malfeasance as their continued
employment will be prejudicial to the formers’ best interest. The law, in
protecting the rights of the employees, authorizes neither oppression nor self-
destruction of the employer.
j. (*) The cause of social justice is not served by upholding the interest of
petitioners in disregard of the right of private respondents. Social justice
ceases to be an effective instrument for the “equalization of the social and
economic forces” by the State when it is used to shield wrongdoing. While it is
true that compassion and human consideration should guide the disposition
of cases involving termination of employment since it affects one’s source or
means of livelihood, it should not be overlooked that the benefits accorded to
labor do not include compelling an employer to retain the services of an
employee who has been shown to be a gross liability to the employer. It
should be made clear that when the law tilts the scale of justice in favor of
labor, it is but a recognition of the inherent economic inequality between
labor and management. The intent is to balance the scale of justice; to put the
two parties on relatively equal positions. There may be cases where the
circumstances warrant favoring labor over the interests of management but
never should the scale be so tilted if the result is an injustice to the employer,
Justicia remini regarda est (Justice is to be denied to none)
k. Thus, this Court has held time and again, in a number of decisions, that:
“Loss of confidence is a valid ground for quired to dismiss him on this charge.
It is sufficient if there is ‘some basis’ for such loss of confidence or if the
employer has reasonable ground to believe or to entertain the moral
conviction that the employee concerned is responsible for the misconduct and
that the nature of his participation therein rendered him absolutely
unworthy of the trust and confidence demanded by his position.”
l. We are convinced that the NLRC did not commit grave abuse of discretion in
evaluating the evidence. Petitioners merely denied the charges against them.
Denials are weak forms of defenses, particularly when they are not
substantiated by clear and convincing evidence. The petitioners’ failure to
satisfactorily explain the cash shortages, for which sums they are
responsible, given their respective positions in respondent company, is
enough reason to warrant their dismissal on the ground of loss of confidence.
They cannot place the burden on somebody else given the factual
circumstances of this case.
m. We reiterate the rule that in cases of dismissal for breach of trust and
confidence, proof beyond doubt of the employees’ misconduct is not required.
It is sufficient that the employer had reasonable ground to believe that the
employees are responsible for the misconduct which renders him unworthy of
the trust and confidence demanded by their position. In the case at hand, it
cannot be doubted that respondents succeeded in discharging its burden of
proof.
n. As regards to the second requisite, the law requires that the employer must
furnish the worker sought to be dismissed with two (2) written notices before
termination may be validly effected: first, a notice apprising the employee of
the particular acts or omission for which his dismissal is sought and, second,
a subsequent notice informing the employee of the decision to dismiss him.

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o. It is a well-established rule that the essence of due process is simply an
opportunity to be heard, or as applied to administrative proceedings, an
opportunity to explain one’s side or an opportunity to seek a reconsideration
of the action or ruling complained of. It is evident from the records, that
herein petitioners were given all the opportunities to defend themselves and
air their side before the Committee on Discipline, having been notified by
respondent Isetann’s Human Resources Division Manager, Teresita A.
Villanueva, on August 2, 1990 through letters individually sent to them.
However, when the petitioners were confronted with reports of the anomalies,
they offered no explanation or theory which could account for money lost in
their possession. Hence, the company had no other alternative but to
terminate their employment.
4. Gandara v. NLRC
a. In a long line of cases, the Court has consistently ruled that, findings of fact
by quasi-judicial agencies like the NLRC are conclusive upon the court in the
absence of proof of grave error in the appreciation of facts. Petitioner’s bare
allegation that it was denied the right to be heard is negated by the Labor
Arbiter’s extension of much leniency to petitioner by allowing the latter to
submit a position paper on April 28, 1995, then on May 5, 1995, and finally,
seven (7) days from receipt of the Order dated May 9, 1995. Generally,
reglementary periods are strictly observed to the end that orderly
administration of justice be safeguarded. In the case under consideration, the
public respondent had been quite liberal in observing and enforcing the rules.
Consequently, petitioner’s protestation of denial of opportunity to be heard is
barren of any factual basis.
b. The principle of laches finds a wide room for application here. Laches, in a
general sense, is failure or neglect for an unreasonable length of time to do
that which by exercising due diligence could or should have been done earlier;
it is negligence or omission to assert a right within a reasonable time
warranting a presumption that the party entitled to assert it has either
abandoned or declined to raise it. The doctrine of laches or “stale demands” is
based upon grounds of public policy which require for the peace of society,
discouragement of stale claims. And unlike the statute of limitations, it is not
a mere question of time but is principally a question of inequity or unfairness
or permitting a right or claim to be enforced or asserted. (Tijam v.
Sibonghanoy, 23 SCRA 29). So also, in the Order, dated May 9, 1995,
respondent Commission declared in clear and unequivocal terms that “failure
to file a position paper is deemed a waiver of the right to be heard and that
decisions will be based on the position paper submitted.” Evidently, for
making good his said Order, the Labor Arbiter cannot be faulted for acting
arbitrarily.
c. That petitioner was not represented by a lawyer in all the aforesaid
proceedings was solely attributable to its own negligence or inattention to the
case. While the court has held that representation by a lawyer is a
fundamental right of litigants, petitioner has nobody to blame but itself for
its failure to secure the services of counsel resulting to the dismissal of its
case. In the case under scrutiny, petitioner was represented by a nonlawyer,
Ramon Flores, who was present from the beginning of the case but failed to
efficiently follow-up the case until the promulgation of judgment. While the

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right to due process is available to all the parties, it does not countenance
self-serving excuses devised to undermine orderly administration of justice.
d. After a careful study, and a thorough examination of the pleadings and
supporting documents, it appears decisively clear that private respondent
Silvestre Germano was illegally dismissed. While a prolonged absence
without leave may constitute as a just cause of dismissal, its illegality stems
from the non-observance of due process. Applying the WenPhil Doctrine by
analogy, where dismissal was not preceded by the twin requirement of notice
and hearing, the legality of the dismissal in question, is under heavy clouds
and therefore illegal. While it cannot be deduced unerringly from the records
on hand that private respondent was really dismissed, there is no clear
indication that the latter was to be reinstated. In fact, since the inception of
the case, what petitioner merely endeavored was to compromise for a measly
sum of P5,000.00, and no mention of taking respondent back to his job was
ever offered as part of the deal to end the controversy. What can be surmised
from petitioner’s offer to re-admit the private respondent, was nothing but a
polite gesture couched in words intended to make the impact of his so-called
suspension less severe. Invoking the plight of a working man, where “no
work, no pay” is the rule of thumb, the court cannot sanction an over
extended suspension. The Labor Code explicitly provides, that: “No preventive
suspension shall last longer than thirty (30) days. The employer shall
thereafter reinstate the worker to his former or substantially equivalent
position or the employer may extend the period of suspension provided that
during the period of extension, he pays the wages and other benefits due to the
worker. In such case, the worker shall not be bound to reimburse the amount
paid to him during the extension if the employer decides after completion of
the hearing to dismiss the worker.” In this case, the supposed suspension was
expected to last for more than the period allowed by law, thus making the
suspension constitutive of an illegal dismissal. Therefore, the Labor Arbiter’s
contention is upheld by the Court.
e. (*) Granting arguendo that private respondent’s absence engendered undue
difficulty to the smooth operations of petitioner’s business, considering the
predicament of respondent Silvestre Germano, his dismissal is unwarranted.
In holding the constitutional mandate of protection with to give room for
compassion. The doctrine of “compassionate justice” is applicable under the
premises, private respondent being the breadwinner of his family. “The Social
Justice policy mandates a compassionate attitude toward the working class
in its relation to management. In calling for the protection to labor, the
Constitution does not condone wrongdoing by the employee, it nevertheless
urges a moderation of the sanctions that may be applied to him in the light of
the many disadvantages that weigh heavily on him like an albatross on his
neck.”
f. The timeliness of petitioner’s appeal is an issue which this court endeavors to
pass upon. While the rule governing the instant Petition does not fix a period
within which to file an appeal, “the yardstick to measure the seasonableness
of a Petition for Certiorari is the reasonableness of the duration of time that
expired from the commission of the act complained of, to the institution of the
proceedings to annul the same.” The court had the occasion to hold that
where no law can be applied, resort to the fundamental law can be had. The

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Constitution provides that: “All persons shall have the right to a speedy
disposition of their cases before all judicial, quasi-judicial and administrative
bodies.”
g. All things studiedly considered, we are of the view that public respondent
NLRC did not act with grave abuse of discretion in awarding to private
respondent the amount of P65,685.90 which is not at all excessive under the
facts and circumstances of the case. Time and again, the court held that
factual findings by the Labor Arbiter are to be treated as final absent any
showing that he erred in his evaluation. The familiarity with the parties,
circumstances and opportunity to observe their demeanor is something the
court did not have the privilege to witness.
h. Untenable is petitioner’s contention that the said amount awarded,
representing backwages, separation pay and attorney’s fee is excessive and
tantamount to a deprivation of petitioner’s property without due process of
law. Once a finding of illegal dismissal is established, an award of separation
pay and backwages is in order and binding upon the court, unless the
contrary is proved. The court shares the Labor Arbiter’s observation and
ratiocination that the amount of the questioned award is not excessive in
light of prevailing economic conditions.
II. Civil Code

III. Labor Code
IV. Concept of Shared Responsibility Commented [PR1]: Principle of Shared Responsibility
1. Philippine Airlines v. NLRC (Sec. 3, Art. XIII)
-Both management and labor share a social responsibility
a. (*) PAL asserts that when it revised its Code on March 15, 1985, there was no
in the promotion of industrial peace which redounds in the
law which mandated the sharing of responsibility therefor between employer end to the benefit of all.
and employee. Indeed, it was only on March 2, 1989, with the approval of -The State is mandated to promote the principle of shared
Republic Act No. 6715, amending Article 211 of the Labor Code, that the law responsibility between workers and employers and the
preferential use of voluntary modes, instead of strikes,
explicitly considered it a State policy “(t)o ensure the participation of workers lockouts and compulsory arbitration, in settling disputes.
in decision and policy-making processes affecting their rights, duties and
welfare.” However, even in the absence of said clear provision of law, the
exercise of management prerogatives was never considered boundless. Thus,
in Cruz vs. Medina (177 SCRA 565 [1989]), it was held that management’s
prerogatives must be without abuse of discretion.
b. (*) A close scrutiny of the objectionable provisions of the Code reveals that
they are not purely business-oriented nor do they concern the management
aspect of the business of the company as in the San Miguel case. The
provisions of the Code clearly have repercusions on the employees’ right to
security of tenure. The implementation of the provisions may result in the
deprivation of an employee’s means of livelihood which, as correctly pointed
out by the NLRC, is a property right (Callanta vs. Carnation Philippines,
Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border
on infringement of constitutional rights, we must uphold the constitutional
requirements for the protection of labor and the promotion of social justice,
for these factors, according to Justice Isagani Cruz, tilt “the scales of justice
when there is doubt, in favor of the worker” (Employees Association of the
Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628
[1991] 635). Verily, a line must be drawn between management prerogatives

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regarding business operations per se and those which affect the rights of the
employees. In treating the latter, management should see to it that its
employees are at least properly informed of its decisions or modes of action.
xxx xxx.
c. (*) Indeed, industrial peace cannot be achieved if the employees are denied
their just participation in the discussion of matters affecting their rights.
Thus, even before Article 211 of the Labor Code (P.D. 442) was amended by
Republic Act No. 6715, it was already declared a policy of the State: “(d) To
promote the enlightenment of workers concerning their rights and obligations
. . . as employees.” This was, of course, amplified by Republic Act No. 6715
when it decreed the “participation of workers in decision and policy making
processes affecting their rights, duties and welfare.” PAL’s position that it
cannot be saddled with the “obligation” of sharing management prerogatives
as during the formulation of the Code, Republic Act No. 6715 had not yet
been enacted (Petitioner’s Memorandum, p. 44; Rollo, p. 212), cannot thus be
sustained. While such “obligation” was not yet founded in law when the Code
was formulated, the attainment of a harmonious labor-management
relationship and the then already existing state policy of enlightening
workers concerning their rights as employees demand no less than the
observance of transparency in managerial moves affecting employees’ rights.
V. Preference for Labor; Liberal Interpretation

1. Fuentes v. NLRC
2. PLDT v. NLRC
a. Time and again, this Court has reminded employers that while the power to
dismiss is a normal prerogative of the employer, the same is not without
limitations. The right of an employer to freely discharge his employees is
subject to regulation by the State, basically through the exercise of its police
power. This is so because the preservation of the lives of citizens is a basic
duty of the State, an obligation more vital than the preservation of corporate
profits.
b. This Court agrees with the labor arbiter when he stated that the more
frequent handling by the respondent of overseas calls from the same calling
number than other operators does not give rise to the conclusion that, indeed,
respondent was a party to such anomalous transaction.
c. This Court will not sanction a dismissal premised on mere conjectures and
suspicions. To be a valid ground for respondent’s dismissal, the evidence
must be substantial and not arbitrary and must be founded on clearly
established facts sufficient to warrant his separation from work.
d. It should be borne in mind that in termination cases, the employer bears the
burden of proving that the dismissal is for just cause failing which would
mean that the dismissal is not justified and the employee is entitled to
reinstatement. The essence of due process in administrative proceedings is
the opportunity to explain one’s side or a chance to seek reconsideration of
the action or ruling complained of. The twin requirements of notice and
hearing constitute the essential elements of due process. This simply means
that the employer shall afford the worker ample opportunity to be heard and
to defend himself with the assistance of his representative, if he so desires.
Ample opportunity connotes every kind of assistance that management must

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accord the employee to enable him to prepare adequately for his defense
including legal representation. In the instant case, the petitioner failed to
convincingly establish valid bases on the alleged serious misconduct and loss
of trust and confidence.
e. (*) In carrying out and interpreting the Labor Code’s provisions and its
implementing regulations, the workingman’s welfare should be the
primordial and paramount consideration. This kind of interpretation gives
meaning and substance to the liberal and compassionate spirit of the law as
provided for in Article 4 of the Labor Code, as amended, which states that “all
doubts in the implementation and interpretation of the provisions of the
Labor Code including its implementing rules and regulations shall be
resolved in favor of labor, as well as the Constitutional mandate that the
State shall afford full protection to labor and promote full employment
opportunities for all. Likewise, it shall guarantee the rights of all workers to
security of tenure. Such constitutional right should not be denied on mere
speculation of any unclear and nebulous basis.
VI. Application of Technical Rules: Burden of Proof

a. Technical Rules Not Binding
1. MERALCO v. Jan Carlo Gala
a. (*) We stress at this point that it is the spirit and
intention of labor legislation that the NLRC and the
labor arbiters shall use every reasonable means to
ascertain the facts in each case speedily and objectively,
without regard to technicalities of law or procedure,
provided due process is duly observed. In keeping with
this policy and in the interest of substantial justice, we
deem it proper to give due course to the petition,
especially in view of the conflict between the findings of
the labor arbiter, on the one hand, and the NLRC and
the CA, on the other. As we said in S.S. Ventures
International, Inc. v. S.S. Ventures Labor Union, 559
SCRA 435 (2008), “the application of technical rules of
procedure in labor cases may be relaxed to serve the
demands of substantial justice.”
b. The totality of the circumstances obtaining in the case
convinces us that Gala could not but have knowledge of
the pilferage of company electrical supplies on May 25,
2006; he was complicit in its commission, if not by direct
participation, certainly, by his inaction while it was
being perpetrated and by not reporting the incident to
company authorities. Thus, we find substantial evidence
to support the conclusion that Gala does not deserve to
remain in Meralco’s employ as a regular employee. He
violated his probationary employment agreement,
especially the requirement for him “to observe at all
times the highest degree of transparency, selflessness
and integrity in the performance of their duties and

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responsibilities[.]” He failed to qualify as a regular
employee.
b. How To Deal With Doubts
i. In Employment Contract Interpretation
1. Price v. Innodata Phil
a. (*) After a painstaking review of the arguments and
evidences of the parties, the Court finds merit in the
present Petition. There were no valid fixed-term
contracts and petitioners were regular employees of the
INNODATA who could not be dismissed except for just
or authorized cause. The employment status of a person
is defined and prescribed by law and not by what the
parties say it should be. Equally important to consider
is that a contract of employment is impressed with
public interest such that labor contracts must yield to
the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and
their relationships from the impact of labor laws and
regulations by simply contracting with each other.
b. (*) Under Article 280 of the Labor Code, the applicable
test to determine whether an employment should be
considered regular or non-regular is the reasonable
connection between the particular activity performed by
the employee in relation to the usual business or trade
of the employer. In the case at bar, petitioners were
employed by INNODATA on 17 February 1999 as
formatters. The primary business of INNODATA is data
encoding, and the formatting of the data entered into
the computers is an essential part of the process of data
encoding. Formatting organizes the data encoded,
making it easier to understand for the clients and/or the
intended end users thereof. Undeniably, the work
performed by petitioners was necessary or desirable in
the business or trade of INNODATA.
c. (*) It is also true that while certain forms of
employment require the performance of usual or
desirable functions and exceed one year, these do not
necessarily result in regular employment under Article
280 of the Labor Code. Under the Civil Code, fixed-term
employment contracts are not limited, as they are under
the present Labor Code, to those by nature seasonal or
for specific projects with predetermined dates of
completion; they also include those to which the parties
by free choice have assigned a specific date of
termination. The decisive determinant in term
employment is the day certain agreed upon by the
parties for the commencement and termination of their
employment relationship, a day certain being

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understood to be that which must necessarily come,
although it may not be known when. Seasonal
employment and employment for a particular project
are instances of employment in which a period, where
not expressly set down, is necessarily implied.
d. (*) While this Court has recognized the validity of fixed-
term employment contracts, it has consistently held
that this is the exception rather than the general rule.
More importantly, a fixed-term employment is valid
only under certain circumstances. In Brent, the very
same case invoked by respondents, the Court identified
several circumstances wherein a fixed-term is an
essential and natural appurtenance, to wit: Some
familiar examples may be cited of employment contracts
which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and
natural appurtenance: overseas employment contracts,
for one, to which, whatever the nature of the
engagement, the concept of regular employment with all
that it implies does not appear ever to have been
applied, Article 280 of the Labor Code notwithstanding;
also appointments to the positions of dean, assistant
dean, college secretary, principal, and other
administrative offices in educational institutions, which
are by practice or tradition rotated among the faculty
members, and where fixed terms are a necessity without
which no reasonable rotation would be possible.
Similarly, despite the provisions of Article 280, Policy
Instructions No. 8 of the Minister of Labor implicitly
recognize that certain company officials may be elected
for what would amount to fixed periods, at the
expiration of which they would have to stand down, in
providing that these officials, “x x may lose their jobs as
president, executive vice-president or vice president, etc.
because the stockholders or the board of directors for
one reason or another did not reelect them.”
e. (*) Even assuming that petitioners’ length of
employment is material, given respondents’ muddled
assertions, this Court adheres to its pronouncement in
Villanueva v. National Labor Relations Commission,
295 SCRA 326 (1998), to the effect that where a contract
of employment, being a contract of adhesion, is
ambiguous, any ambiguity therein should be construed
strictly against the party who prepared it. The Court is,
thus, compelled to conclude that petitioners’ contracts of
employment became effective on 16 February 1999, and
that theywere already working continuously for
INNODATA for a year.

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f.
(*) Further attempting to exonerate itself from any
liability for illegal dismissal, INNODATA contends that
petitioners were project employees whose employment
ceased at the end of a specific project or undertaking.
This contention is specious and devoid of merit. In
Philex Mining Corp. v. National Labor Relations
Commission, 312 SCRA 119 (1999), the Court defined
“project employees” as those workers hired (1) for a
specific project or undertaking, and wherein (2) the
completion or termination of such project has been
determined at the time of the engagement of the
employee.
g. (*) Under Section 3, Article XVI of the Constitution, it is
the policy of the State to assure the workers of security
of tenure and free them from the bondage of uncertainty
of tenure woven by some employers into their contracts
of employment. This was exactly the purpose of the
legislators in drafting Article 280 of the Labor Code—to
prevent the circumvention by unscrupulous employers
of the employee’s right to be secure in his tenure by
indiscriminately and completely ruling out all written
and oral agreements inconsistent with the concept of
regular employment.
h. Unless they have exceeded their authority, corporate
officers are, as a general rule, not personally liable for
their official acts, because a corporation, by legal fiction,
has a personality separate and distinct from its officers,
stockholders and members. Although as an exception,
corporate directors and officers are solidarily held liable
with the corporation, where terminations of employment
are done with malice or in bad faith, in the absence of
evidence that they acted with malice or bad faith herein,
the Court exempts the individual respondents, Leo
Rabang and Jane Navarette, from any personal liability
for the illegal dismissal of petitioners.
2. Marcopper Mining v. NLRC
a. The principle that the CBA is the law between the
contracting parties stands strong and true. However,
the present controversy involves not merely an
interpretation of CBA provisions. More importantly, it
requires a determination of the effect of an executive
order on the terms and the conditions of the CBA. This
is, and should be, the focus of the instant case. It is
unnecessary to delve too much on the intention of the
parties as to what they allegedly meant by the term
“basic wage” at the time the CBA and MOA were
executed because there is no question that as of 1 May
1987, as mandated by E.O. No. 178, the basic wage of
workers, or the statutory minimum wage, was increased

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with the integration of the COLA. As of said date, then,
the term “basic wage” includes the COLA. This is what
the law ordains and to which the collective bargaining
agreement of the parties must conform.
b. Petitioner’s arguments eventually lose steam in the
light of the fact that compliance with the law is
mandatory and beyond contractual stipulation by and
between the parties; consequently, whether or not
petitioner intended the basic wage to include the COLA
becomes immaterial. There is evidently nothing to
construe and interpret because the law is clear and
unambiguous. Unfortunately for petitioner, said law, by
some uncanny coincidence, retroactively took effect on
the same date the CBA increase became effective.
Therefore, there cannot be any doubt that the
computation of the CBA increase on the basis of the
“integrated” wage does not constitute a violation of the
CBA.
c. (*) Finally, petitioner misinterprets the declaration of
the Labor Arbiter in the assailed decision that “when
the pendulum of judgment swings to and fro and the
forces are equal on both sides, the same must be stilled
in favor of labor.” While petitioner acknowledges that all
doubts in the interpretation of the Labor Code shall be
resolved in favor of labor, it insists that what is involved
here is the amended CBA which is essentially a contract
between private persons. What petitioner has lost sight
of is the avowed policy of the State, enshrined in our
Constitution, to accord utmost protection and justice to
labor, a policy, we are, likewise, sworn to uphold.
ii. In Appreciation of Evidence
1. Asuncion v. NLRC
a. Although, it is a legal tenet that factual findings of
administrative bodies are entitled to great weight and
respect, we are constrained to take a second look at the
facts before us because of the diversity in the opinions of
the Labor Arbiter and the NLRC. A disharmony
between the factual findings of the Labor Arbiter and
those of the NLRC opens the door to a review thereof by
this Court.
b. It bears stressing that a worker’s employment is
property in the constitutional sense. He cannot be
deprived of his work without due process. In order for
the dismissal to be valid, not only must it be based on
just cause supported by clear and convincing evidence,
the employee must also be given an opportunity to be
heard and defend himself. It is the employer who has
the burden of proving that the dismissal was with just
or authorized cause. The failure of the employer to

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discharge this burden means that the dismissal is not
justified and that the employee is entitled to
reinstatement and backwages.
c. (*) In the case at bar, there is a paucity of evidence to
establish the charges of absenteeism and tardiness. We
note that the employer company submitted mere
handwritten listing and computer print-outs. The
handwritten listing was not signed by the one who made
the same. As regards the print-outs, while the listing
was computer generated, the entries of time and other
annotations were again handwritten and unsigned. We
find that the handwritten listing and unsigned
computer print-outs were unauthenticated and, hence,
unreliable. Mere self-serving evidence of which the
listing and print-outs are of that nature should be
rejected as evidence without any rational probative
value even in administrative proceedings.
d. (*) In IBM Philippines, Inc. v. NLRC, this Court
clarified that the liberality of procedure in
administrative actions is not absolute and does not
justify the total disregard of certain fundamental rules
of evidence. Such that evidence without any rational
probative value may not be made the basis of order or
decision of administrative bodies. The Court’s
ratiocination in that case is relevant to the propriety of
rejecting the unsigned handwritten listings and
computer printouts submitted by private respondents
which we quote, to wit: However, the liberality of
procedure in administrative actions is subject to
limitations imposed by basic requirements of due
process. As this Court said in Ang Tibay v. CIR, the
provision for flexibility in administrative procedure
“does not go so far as to justify orders without a basis in
evidence having rational probative value.”
e. (*) Ironically, in the memorandum charging petitioner
and notice of termination, private respondents referred
to the record book as its basis for petitioner’s alleged
absenteeism and tardiness. Interestingly, however, the
record book was never presented in evidence. Private
respondents had possession thereof and the opportunity
to present the same. Being the basis of the charges
against the petitioner, it is without doubt the best
evidence available to substantiate the allegations. The
purpose of the rule requiring the production of the best
evidence is the prevention of fraud, because if a party is
in possession of such evidence and withholds it, and
seeks to substitute inferior evidence in its place, the
presumption naturally arises that the better evidence is
withheld for fraudulent purposes which its production

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would expose and defeat. Thus, private respondents’
unexplained and unjustified non-presentation of the
record book, which is the best evidence in its possession
and control of the charges against the petitioner, casts
serious doubts on the factual basis of the charges of
absenteeism and tardiness.
f. The law mandates that every opportunity and
assistance must be accorded to the employee by the
management to enable him to prepare adequately for
his defense. In Ruffy v. NLRC, the Court held that what
would qualify as sufficient or “ample opportunity,” as
required by law, would be “every kind of assistance that
management must accord to the employee to enable him
to prepare adequately for his defense.” In the case at
bar, private respondents cannot be gainsaid to have
given petitioner the ample opportunity to answer the
charges leveled against her.
g. (*) From the foregoing, there are serious doubts in the
evidence on record as to the factual basis of the charges
against petitioner. These doubts shall be resolved in her
favor in line with the policy under the Labor Code to
afford protection to labor and construe doubts in favor of
labor. The consistent rule is that if doubts exist between
the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of
the latter. The employer must affirmatively show
rationally adequate evidence that the dismissal was for
a justifiable cause. Not having satisfied its burden of
proof, we conclude that the employer dismissed the
petitioner without any just cause. Hence, the
termination is illegal.
iii. In Application of Policies and Programs
1. PNCC v. NLRC
a. Petitioner, as noted earlier, admitted that it did not file
a motion for reconsideration of the assailed NLRC
Decision. This premature action constitutes a fatal
infirmity. In Interorient Maritime Enterprises vs.
National Labor Relations Commission, this Court, citing
a catena of cases, categorically ruled that: “x x x The
unquestioned rule in this jurisdiction is that certiorari
will lie only if there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of
law against the acts of public respondent. In the instant
case, the plain and adequate remedy expressly provided
by law was a motion for reconsideration of the assailed
decision, based on palpable errors, to be made under
oath and filed within ten (10) calendar days from receipt
of the questioned decision. (T)he filing of such motion is
intended to afford public respondent an opportunity to

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correct any factual or fancied error attributed to it by
way of a re-examination of the legal and factual aspects
of the case. Petitioner’s inaction or negligence under the
circumstances is tantamount to a deprivation of the
right and opportunity of the respondent Commission to
cleanse itself of an error unwittingly committed or to
vindicate itself of an act unfairly imputed. x x x
b. The law is clear that a motion for reconsideration is a
mandatory requirement before one may resort to the
special civil action of certiorari. While there are
recognized exceptions to this rule, petitioner has not
convinced us that this case is one of them. Petitioner’s
bare allegation that the same questions raised before
the public respondent were to be raised before this
Court affords no excuse. Petitioner should have
complied with the procedural requirement. On this
ground alone, the petition should be denied. There is,
however, another cogent reason for dismissing it.
c. (*) Under the separation program, an employee may
qualify if he has rendered “at least one year of
continuous service.” As public respondent has stated,
the plain language of the program did not require that
continuous service be immediately prior to the
employee’s separation. Thus, private respondent’s other
stints at PNCC prior to his last service in 1989 can
properly be considered in order to qualify him under the
program. That the duration of private respondent’s last
stint was less than one year does not militate against
his qualification under the program. We grant this
liberality in favor of private respondent in the light of
the rule in labor law that “when a conflicting interest of
labor and capital are weighed on the scales of social
justice, the heavier influence of the latter must be
counter-balanced by the sympathy and compassion the
law must accord the underprivileged worker.”
d. (*) In the interpretation of an employer’s program
providing for separation benefits, all doubts should be
construed in favor of labor. After all, workers are the
intended beneficiaries of such program and our
Constitution mandates a clear bias in favor of the
working class.
e. In view of the foregoing, there appears no need to
address the question of whether private respondent was
part of a “work pool.” We should point out, however,
that the Solicitor General was inaccurate when he
stated that petitioner had a “work pool” and Respondent
Mendoza was a part thereof. In Raycor Aircontrol
Systems, Inc. vs. National Labor Relations Commission,
we clarified the status of project employees in a “work

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pool” as recognized by Policy Instruction No. 20 thus: “x
x x project employees may or may not be members of a
work pool, (that is, the employer may or may not have
formed a work pool at all), and in turn, members of a
work pool could be either project employees or regular
employees. In the instant case, respondent NLRC did
not indicate how private respondent came to be
considered members of a work pool as distinguished
from ordinary (non-work pool) employees. It did not
establish that a work pool existed in the first place.
Neither did it make any finding as to whether the
herein private respondents were indeed free to leave
anytime and offer their services to other employers, as
vigorously contended by petitioner, despite the fact that
such a determination would have been critical in
defining the precise nature of private respondent’s
employment. Clearly, the NLRC’s conclusion of regular
employment has no factual support and is thus
unacceptable.”
f. We disagree with Respondent NLRC’s disallowance of
the award of attorney’s fees. Private respondent was
evidently and legally entitled to separation benefits in
the paltry amount of P9,204.00 when he was separated
from service. But because of the unjustified stance of
petitioner, he was compelled to litigate to obtain what
was legally due him, that is, to retain a lawyer and to
await for eight years for this case to be finally decided.
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 interests, the
award of attorney’s fees is legally and morally
justifiable.
c. Burden of Proof
i. In Illegal Dismissal cases
1. Gurango v. Best Chemicals
a. (*) In termination cases, the employer has the burden of
proving, by substantial evidence, that the dismissal is
for just cause. If the employer fails to discharge the
burden of proof, the dismissal is deemed illegal. In AMA
Computer College-East Rizal v. Ignacio, 590 SCRA 633
(2009), the Court held that: “In termination cases, the
burden of proof rests on the employer to show that the
dismissal is for just cause. When there is no showing of
a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of
illegal dismissal and the burden is on the employer to
prove that the termination was for a valid or authorized
cause. And the quantum of proof which the employer
must discharge is substantial evidence. An employee’s

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dismissal due to serious misconduct must be supported
by substantial evidence. Substantial evidence is that
amount of relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine
otherwise.”
b. In the present case, aside from Albao’s statement, BCPI
did not present any evidence to show that Gurango
engaged in a fistfight. Moreover, there is no showing
that Gurango’s actions were performed with wrongful
intent. In AMA Computer College-East Rizal, the Court
held that: “The Labor Code provides that an employer
may terminate the services of an employee for a just
cause. Among the just causes in the Labor Code is
serious misconduct. Misconduct is improper or wrong
conduct. It is the transgression of some established and
definite rule of action, a forbidden act, a dereliction of
duty, willful in character, and implies wrongful intent
and not mere error in judgment. The misconduct to be
serious within the meaning of the Labor Code must be
of such a grave and aggravated character and not
merely trivial or unimportant. x x x In National Labor
Relations Commission v. Salgarino, the Court stressed
that “[i]n order to constitute serious misconduct which
will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not
sufficient that the act or conduct complained of has
violated some established rules or policies. It is equally
important and required that the act or conduct must
have been performed with wrongful intent.”
2. Labadan v. Forest Hills
a. (*) While in cases of illegal dismissal, the employer
bears the burden of proving that the dismissal is for a
valid or authorized cause, the employee must first
establish by substantial evidence the fact of dismissal.
The records do not show that petitioner was dismissed
from the service. They in fact show that despite
petitioner’s absence from July 2001 to March 2002
which, by her own admission, exceeded her approved
leave, she was still considered a member of the Forest
Hills faculty which retained her in it payroll.
b. Respecting petitioner’s claim for holiday pay, Forest
Hills contends that petitioner failed to prove that she
actually worked during specific holidays. Article 94 of
the Labor Code provides, however, that (a) Every
worker shall be paid his regular daily wage during
regular holidays, except in retail and service
establishments regularly employing less than ten (10)
workers; (b) The employer may require an employee to

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work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate[.] The
provision that a worker is entitled to twice his regular
rate if he is required to work on a holiday implies that
the provision entitling a worker to his regular rate on
holidays applies even if he does not work.
3. Watchman v. Lumahan
a. It should be remembered that in cases before
administrative and quasijudicial agencies like the
NLRC, the degree of evidence required to be met is
substantial evidence, or such amount of relevant
evidence that a reasonable mind might accept as
adequate to justify a conclusion. In a situation where
the word of another party is taken against the other, as
in this case, we must rely on substantial evidence
because a party alleging a critical fact must duly
substantiate and support its allegation.
b. As no dismissal was carried out in this case, any
consideration of abandonment — as a defense raised by
an employer in dismissal situations — was clearly
misplaced. To our mind, the CA again committed a
reversible error in considering that Nightowl raised
abandonment as a defense. Abandonment, as
understood under our labor laws, refers to the deliberate
and unjustified refusal of an employee to resume his
employment. It is a form of neglect of duty that
constitutes just cause for the employer to dismiss the
employee.
c. (*) Under this construct, abandonment is a defense
available against the employee who alleges a dismissal.
Thus, for the employer “to successfully invoke
abandonment, whether as a ground for dismissing an
employee or as a defense, the employer bears the burden
of proving the employee’s unjustified refusal to resume
his employment.” This burden, of course, proceeds from
the general rule that places the burden on the employer
to prove the validity of the dismissal.
d. Failure to send notices to Lumahan to report back to
work should not be taken against Nightowl despite the
fact that it would have been prudent, given the
circumstance, had it done so. Report-to-work notices are
required, as an aspect of procedural due process, only in
situations involving the dismissal, or the possibility of
dismissal, of the employee. Verily, report-to-work
notices could not be required when dismissal, or the
possibility of dismissal, of the employee does not exist.
e. In cases where no dismissal took place, the proper
award is reinstatement, without backwages, not as a
relief for any illegal dismissal but on equitable grounds.

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When, however, reinstatement of the employee is
rendered impossible, as when the employee had been
out for a long period of time, the award of separation
pay is proper. Here, considering that more than ten (10)
years has already passed from the time Lumahan
stopped reporting for work on April 22, 1999, up to this
date, it is no longer possible and reasonable for
Nightowl to reinstate Lumahan in its service. Thus, in
lieu of reinstatement, we find it just and equitable to
award Lumahan separation pay in an amount
equivalent to one (1)-month pay for every year of
service, computed up to the time he stopped working, or
until April 22, 1999.
4. Penaflor v. Outdoor Clothing
a. While the letter states that Peñaflor’s resignation was
irrevocable, it does not necessarily signify that it was
also voluntarily executed. Precisely because of the
attendant hostile and discriminatory working
environment, Peñaflor decided to permanently sever his
ties with Outdoor Clothing. This falls squarely within
the concept of constructive dismissal that jurisprudence
defines, among others, as involuntarily resignation due
to the harsh, hostile, and unfavorable conditions set by
the employer. It arises when a clear discrimination,
insensibility, or disdain by an employer exists and has
become unbearable to the employee. The gauge for
constructive dismissal is whether a reasonable person in
the employee’s position would feel compelled to give up
his employment under the prevailing circumstances.
With the appointment of Buenaobra to the position he
then still occupied, Peñaflor felt that he was being eased
out and this perception made him decide to leave the
company.
b. (*) The fact of filing a resignation letter alone does not
shift the burden of proving that the employee’s
dismissal was for a just and valid cause from the
employer to the employee. In Mora v. Avesco, 571 SCRA
226 (2008), we ruled that should the employer interpose
the defense of resignation, it is still incumbent upon the
employer to prove that the employee voluntarily
resigned.
c. A corporation, as a juridical entity, may act only
through its directors, officers and employees.
Obligations incurred as a result of the directors’ and
officers’ acts as corporate agents, are not their personal
liability but the direct responsibility of the corporation
they represent. As a rule, they are only solidarily liable
with the corporation for the illegal termination of

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services of employees if they acted with malice or bad
faith.
5. Vicente v. CA and Cinderella Marketing
a. In administrative proceedings, the quantum of proof
required is substantial evidence, which is more than a
mere scintilla of evidence, but such amount of relevant
evidence which a reasonable mind might accept as
adequate to justify a conclusion. The Court of Appeals
may review the factual findings of the NLRC and
reverse its ruling if it finds that the decision of the
NLRC lacks substantial basis. In the same vein, factual
findings of the Court of Appeals are generally not
subject to this Court’s review under Rule 45. However,
the general rule on the conclusiveness of the factual
findings of the Court of Appeals is also subject to well-
recognized exceptions such as where the Court of
Appeals’ findings of facts contradict those of the lower
court, or the administrative bodies, as in this case. All
these considered, we are compelled to make a further
calibration of the evidence at hand.
b. (*) From the totality of evidence on record, it was clearly
demonstrated that respondent Cinderella has
sufficiently discharged its burden to prove that
petitioner’s resignation was voluntary. In voluntary
resignation, the employee is compelled by personal
reason(s) to disassociate himself from employment. It is
done with the intention of relinquishing an office,
accompanied by the act of abandonment. To determine
whether the employee indeed intended to relinquish
such employment, the act of the employee before and
after the alleged resignation must be considered.
Petitioner relinquished her position when she submitted
the letters of resignation. The resignation letter
submitted on February 15, 2000 confirmed the earlier
resignation letter she submitted on February 7, 2000.
The resignation letter contained words of gratitude
which can hardly come from an employee forced to
resign.
c. (*) Petitioner stopped reporting for work although she
met with the officers of the corporation to settle her
accountabilities but never raised the alleged
intimidation employed on her. Also, though the
complaint was filed within the 4-year prescriptive
period, its belated filing supports the contention of
respondent that it was a mere afterthought. Taken
together, these circumstances are substantial proof that
petitioner’s resignation was voluntary. Hence, petitioner
cannot take refuge in the argument that it is the
employer who bears the burden of proof that the

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resignation is voluntary and not the product of coercion
or intimidation. Having submitted a resignation letter,
it is then incumbent upon her to prove that the
resignation was not voluntary but was actually a case of
constructive dismissal with clear, positive, and
convincing evidence. Petitioner failed to substantiate
her claim of constructive dismissal.
d. We agree with the Court of Appeals that it was grave
error on the part of the NLRC to rely on the allegation
that Mr. Tecson threatened and forced petitioner to
resign. Other than being unsubstantiated and self-
serving, the allegation does not suffice to support the
finding of force, intimidation, and ultimately
constructive dismissal. Bare allegations of constructive
dismissal, when uncorroborated by the evidence on
record, cannot be given credence. In St. Michael
Academy v. National Labor Relations Commission, 292
SCRA 478 (1998), we ruled that mere allegations of
threat or force do not constitute substantial evidence to
support a finding of forced resignation. We enumerated
the requisites for intimidation to vitiate consent as
follows: (1) that the intimidation caused the consent to
be given; (2) that the threatened act be unjust or
unlawful; (3) that the threat be real or serious, there
being evident disproportion between the evil and the
resistance which all men can offer, leading to the choice
of doing the act which is forced on the person to do as
the lesser evil; and (4) that it produces a well-grounded
fear from the fact that the person from whom it comes
has the necessary means or ability to inflict the
threatened injury to his person or property. x x x
e. None of the above requisites was established by
petitioner. Other than the allegation that Mr. Tecson
intimidated petitioner into resigning, there were no
other proofs presented to support a finding of forced
resignation to stand against respondent’s denial and
proof against dismissal. Neither can we consider the
conduct of audits and other internal investigations as a
form of harassment against petitioner. Said
investigation was legitimate and justified, conducted in
view of the discovery of the anomalous transaction
involving the employees of the respondent including
petitioner.
ii. In Money Claims and Labor Standard Cases
1. Abduljuahid Pigcaulan v. Security and Credit Investigation
a. (*) Article 94 of the Labor Code provides that: ART. 94.
RIGHT TO HOLIDAY PAY.—(a) Every worker shall be
paid his regular daily wage during regular holidays,
except in retail and service establishments regularly

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employing less than ten (10) workers; x x x x While
Article 95 of the Labor Code provides: ART. 95. RIGHT
TO SERVICE INCENTIVE LEAVE.—(a) Every
employee who has rendered at least one year of service
shall be entitled to a yearly service incentive of five days
with pay. x x x x Under the Labor Code, Pigcaulan is
entitled to his regular rate on holidays even if he does
not work. Likewise, express provision of the law entitles
him to service incentive leave benefit for he rendered
service for more than a year already. Furthermore,
under Presidential Decree No. 851, he should be paid
his 13th month pay. As employer, SCII has the burden
of proving that it has paid these benefits to its
employees.
b. Consistent with the rule that all money claims arising
from an employer-employee relationship shall be filed
within three years from the time the cause of action
accrued, Pigcaulan can only demand the amounts due
him for the period within three years preceding the
filing of the complaint in 2000. Furthermore, since the
records are insufficient to use as bases to properly
compute Pigcaulan’s claims, the case should be
remanded to the Labor Arbiter for a detailed
computation of the monetary benefits due to him.
VII. No Work No Pay

1. Aklan Electric Cooperative v. NLRC
a. At the outset, we reiterate the rule that in certiorari proceedings under
evidence upon which the labor arbiter and public respondent NLRC based
their resolutions. Our query is limited to the determination of whether or not
public respondent NLRC acted without or in excess of its jurisdiction or with
grave abuse of discretion in rendering the assailed resolutions. While
administrative findings of fact are accorded great respect, and even finality
when supported by substantial evidence, nevertheless, when it can be shown
that administrative bodies grossly misappreciated evidence of such nature as
to compel a contrary conclusion, this court had not hesitated to reverse their
factual findings. Factual findings of administrative agencies are not infallible
and will be set aside when they fail the test of arbitrariness. Moreover, where
the findings of NLRC contradict those of the labor arbiter, this Court, in the
exercise of its equity jurisdiction, may look into the records of the case and
reexamine the questioned findings.
b. We do not agree with the finding that private respondents had rendered
services from June 16, 1992 to March 18, 1993 so as to entitle them to
payment of wages. Public respondent based its conclusion on the following:
(a) the letter dated April 7, 1993 of Pedrito L. Leyson, Office Manager of
AKELCO addressed to AKELCO's General Manager, Atty. Leovigildo T.
Mationg, requesting for the payment of private respondents' unpaid wages
from June 16, 1992 to March 18, 1993; (b) the memorandum of said Atty.
Mationg dated 14 April 1993, in answer to the letter request of Pedrito

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Leyson where Atty. Mationg made an assurance that he will recommend such
request; (c) the private respondents' own computation of their unpaid wages.
We find that the foregoing does not constitute substantial evidence to support
the conclusion that private respondents are entitled to the payment of wages
from June 16, 1992 to March 18, 1993. Substantial evidence is that amount of
relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion. These evidences relied upon by public respondent did not
establish the fact that private respondents actually rendered services in the
Kalibo office during the stated period.
c. Their excuse is that the transfer to Kalibo was illegal but we agree with the
Labor Arbiter that it was not for private respondents to declare the
management’s act of temporarily transferring the AKELCO office to Kalibo
as an illegal act. There is no allegation nor proof that the transfer was made
in bad faith or with malice.
d. Private respondents were dismissed by petitioner effective January 31, 1992
and were accepted back by petitioner, as an act of compassion, subject to the
condition of “no work, no pay” effective March 1993 which explains why
private respondents were allowed to draw their salaries again. Notably, the
letter-request of Mr. Leyson for the payment of backwages and other fringe
benefits in behalf of private respondents was made only in April 1993, after a
Board Resolution accepting them back to work out of compassion and
humanitarian reason. It took private respondents about ten months before
they requested for the payment of their backwages, and the long inaction of
private respondents to file their claim for unpaid wages cast doubts as to the
veracity of their claim.
e. (*) [“No Work, No Pay” Principle] The age-old rule governing the relation
between labor and capital, or management and employee of a “fair day’s wage
for a fair day’s labor”—remains as the basic factor in determining employees’
wages. If there is no work performed by the employee there can be no wage or
pay unless, of course, the laborer was able, willing and ready to work but was
illegally locked out, suspended or dismissed, or otherwise illegally prevented
from working, a situation which we find is not present in the instant case. It
would neither be fair nor just to allow private respondents to recover
something they have not earned and could not have earned because they did
not render services at the Kalibo office during the stated period.
f. We hold that public respondent erred in merely relying on the computations
of compensable services submitted by private respondents. There must be
competent proof such as time cards or office records to show that they
actually rendered compensable service during the stated period to entitle
them to wages. It has been established that the petitioner's business office
was transferred to Kalibo and all its equip-ments, records and facilities were
transferred thereat and that it conducted its official business in Kalibo
during the period in question. It was incumbent upon private respondents to
prove that they indeed rendered services for petitioner, which they failed to
do. It is a basic rule in evidence that each party must prove his affirmative
allegation. Since the burden of evidence lies with the party who asserts the
affirmative allegation, the plaintiff or complainant has to prove his
affirmative allegations in the complaint and the defendant or the respondent

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has to prove the affirmative allegation in his affirmative defenses and
counterclaim.
2. Lao Construction v. NLRC
a. The principal test in determining whether particular employees are “project
employees” distinguished from “regular employees” is whether the “project
employees” are assigned to carry out “specific project or undertaking,” the
duration (and scope) of which are specified at the time the employees are
engaged for the project. “Project” in the realm of business and industry refers
to a particular job or undertaking that is within the regular or usual business
of employer, but which is distinct and separate and identifiable as such from
the undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times.
b. While it may be allowed that in the instant case the workers were initially
hired for specific projects or undertakings of the company and hence can be
classified as project employees, the repeated re-hiring and the continuing
need for their services over a long span of time (the shortest, at seven [7]
years) have undeniably made them regular employees. Thus, we held that
where the employment of project employees is extended long after the
supposed project has been finished, the employees are removed from the
scope of project employees and considered regular employees.
c. While length of time may not be a controlling test for project employment, it
can be a strong factor in determining whether the employee was hired for a
specific undertaking or in fact tasked to perform functions which are vital,
necessary and indispensable to the usual business or trade of the employer.
In the case at bar, private respondents had already gone through the status
of project employees. But their employments became non-coterminous with
specific projects when they started to be continuously re-hired due to the
demands of petitioners’ business and were re-engaged for many more projects
without interruption.
d. (*) A work pool may exist although the workers in the pool do not receive
salaries and are free to seek other employment during temporary breaks in
the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to project workers insofar as the
effect of temporary cessation of work is concerned. This is beneficial to both
the employer and employee for it prevents the unjust situation of “coddling
labor at the expense of capital” and at the same time enables the workers to
attain the status of regular employees. Clearly, the continuous rehiring of the
same set of employees within the framework of the Lao Group of Companies
is strongly indicative that private respondents were an integral part of a
work pool from which petitioners drew its workers for its various projects.
e. (*) Truly, the cessation of construction activities at the end of every project is
a foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the end of
a project and before the start of a new one is regular and expected by both
parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being
suspended. The employees are, strictly speaking, not separated from services
but merely on leave of absence without pay until they are reemployed. Thus

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we cannot affirm the argument that non-payment of salary or non-inclusion
in the payroll and the opportunity to seek other employment denote project
employment.
f. Moreover, if private respondents were indeed employed as “project
employees,” petitioners should have submitted a report of termination to the
nearest public employment office every time their employment was
terminated due to completion of each construction project. The records show
that they did not. Policy Instruction No. 20 is explicit that employers of
project employees are exempted from the clearance requirement but not from
the submission of termination report. We have consistently held that failure
of the employer to file termination reports after every project completion
proves that the employees are not project employees. Nowhere in the New
Labor Code is it provided that the reportorial requirement is dispensed with.
The fact is that Department Order No. 19 superseding Policy Instruction No.
20 expressly provides that the report of termination is one of the indicators of
project employment.
g. We agree with the NLRC that the execution of the project employment
contracts was “farcical.” Obviously, the contracts were a scheme of petitioners
to prevent respondents from being considered as regular employees. It
imposed time frames into an otherwise flexible employment period of private
respondents some of whom were employed as far back as 1969. Clearly, here
was an attempt to circumvent labor laws on tenurial security. Settled is the
rule that when periods have been imposed to preclude the acquisition of
tenurial security by the employee, they should be struck down as contrary to
public morals, good customs or public order. Worth noting is that petitioners
had engaged in various joint venture agreements in the past without having
to draft project employment contracts. That they would require execution of
employment contracts and waivers at this point, ostensibly to be used for
audit purposes, is a suspect excuse, considering that petitioners enforced the
directive by withholding the salary of any employee who spurned the order.
h. We likewise reject petitioners’ justification in re-hiring private respondents,
i.e., that it is much cheaper and economical to re-hire or re-employ the same
workers than to train a new set of employees. It is precisely because of this
cost-saving benefit to the employer that the law deems it fair that the
employees be given a regular status. We need not belabor this point.
i. The NLRC was correct in finding that the workers were illegally dismissed.
The rule is that in effecting a valid dismissal, the mandatory requirements of
substantive and procedural due process must be strictly complied with. These
were wanting in the present case. Private respondents were dismissed
allegedly because of insubordination or blatant refusal to comply with a
lawful directive of their employer. But willful disobedience of the employer’s
lawful orders as a just cause for the dismissal of the employees envisages the
concurrence of at least two (2) requisites: (a) the employee’s assailed conduct
must have been willful or intentional, the willfulness being characterized by
a wrongful and perverse attitude; and, (b) the order violated must have been
reasonable, lawful, made known to the employee and must pertain to the
duties which he has been engaged to discharge. The refusal of private
respondents was willful but not in the sense of plain and perverse
insubordination. It was dictated by necessity and justifiable reasons—for

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what appeared to be an innocent memorandum was actually a veiled attempt
to deny them their rightful status as regular employees. The workers
therefore had no option but to disobey the directive which they deemed
unreasonable and unlawful because it would result in their being downsized
to mere project workers. This act of self-preservation should not merit them
the extreme penalty of dismissal.
j. The allegation of petitioners that private respondents are guilty of
abandonment of duty is without merit. The elements of abandonment are: (a)
failure to report for work or absence without valid or justifiable reason, and,
(b) a clear intention to sever the employer-employee relationship, with the
second element as the more determinative factor manifested by some overt
acts. In this case, private respondents Roberto Labendia and Mario Labendia
were forced to leave their respective duties because their salaries were
withheld. They could not simply sit idly and allow their families to starve.
They had to seek employment elsewhere, albeit temporarily, in order to
survive. On the other hand, it would be the height of injustice to validate
abandonment in this particular case as a ground for dismissal of respondents
thereby making petitioners benefit from a gross and unjust situation which
they themselves created. Private respondents did not intend to sever ties
with petitioner and permanently abandon their jobs; otherwise, they would
not have filed this complaint for illegal dismissal.
k. Petitioners submit that since private respondents were only project
employees, they are not entitled to security of tenure. This is incorrect. In
Archbuild Masters and Construction, Inc. v. NLRC we held—x x x a project
employee hired for a specific task also enjoys security of tenure. A
termination of his employment must be for a lawful cause and must be done
in a manner which affords him the proper notice and hearing x x x x To allow
employers to exercise their prerogative to terminate a project worker’s
employment based on gratuitous assertions of project completion would
destroy the constitutionally protected right of labor to security of tenure
(emphasis supplied).
l. Conformably with our ruling in Bustamante v. NLRC the illegally dismissed
employees are entitled to full back wages, undiminished by earnings derived
elsewhere during the period of their illegal dismissal. In the event that
reinstatement is no longer feasible, back wages shall be computed from the
time of illegal termination until the time of the finality of the decision. The
award shall be based on the documents submitted by private respondents,
i.e., affidavits, SSS and Medicare documents, since petitioners failed to
adduce competent evidence to the contrary. The separation pay shall be
equivalent to “at least one (1) month salary or to one (1) month salary for
every year of service, whichever is higher, a fraction of at least six (6) months
being considered as one whole year.”
m. Public respondent NLRC did not err in disregarding the veil of separate
corporate personality and holding petitioners jointly and severally liable for
private respondents’ back wages and separation pay. The records disclose
that the three (3) corporations were in fact substantially owned and
controlled by members of the Lao family composed of Lao Hian Beng alias
Tomas Lao, Chiu Siok Lian (wife of Tomas Lao), Andrew C. Lao, Lao Y.
Heng, Vicente Lao Chua, Lao E. Tin, Emmanuel Lao and Ismaelita Maluto. A

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majority of the outstanding shares of stock in LVM and T&J is owned by the
Lao family. T&J is 100% owned by the Laos as reflected in its Articles of
Incorporation. The Lao Group of Companies therefore is a closed corporation
where the incorporators and directors belong to a single family. Lao Hian
Beng is the same Tomas Lao who owns Tomas Lao Corporation and is the
majority stockholder of T&J. Andrew C. Lao is the Managing Director of
LVM Construction, and President and Managing Director of the Lao Group of
Companies. Petitioners are engaged in the same line of business under one
management and use the same equipment including manpower services.
Where it appears that [three] business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when necessary to
protect the rights of third persons, disregard the legal fiction that the [three]
corporations are distinct entities, and treat them as identical.
n. Consonant with our earlier ruling, we hold that the liability of petitioners
extends to the responsible officers acting in the interest of the corporations.
In view of the peculiar circumstances of this case, we disregard the separate
personalities of the three (3) corporations and at the same time declare the
members of the corporations jointly and severally liable with the corporations
for the monetary awards due to private respondents. It should always be
borne in mind that the fiction of law that a corporation as a juridical entity
has a distinct and separate personality was envisaged for convenience and to
serve justice; therefore it should not be used as a subterfuge to commit
injustice and circumvent labor laws.
3. Imbuido v. NLRC
a. We agree with the findings of the NLRC that petitioner is a project employee.
The principal test for determining whether an employee is a project employee
or a regular employee is whether the project employee was assigned to carry
out a specific project or undertaking, the duration and scope of which were
specified at the time the employee was engaged for that project. A project
employee is one whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or service to
be performed is seasonal in nature and the employment is for the duration of
the season.
b. In the recent case of Maraguinot, Jr. vs. NLRC, we held that “[a] project
employee or a member of a work pool may acquire the status of a regular
employee when the following concur: 1) There is a continuous rehiring of
project employees even after [the] cessation of a project; and 2) The tasks
performed by the alleged “project employee” are vital, necessary and
indispensable to the usual business or trade of the employer.”
c. The alleged causes of petitioner’s dismissal (low volume of work and
belatedly, completion of project) are not valid causes for dismissal under
Articles 282 and 283 of the Labor Code. Thus, petitioner is entitled to
reinstatement without loss of seniority rights and other privileges, and to her
full backwages, inclusive of allowances, and to her other benefits or their
monetary equivalent computed from the time her compensation was withheld
from her up to the time of her actual reinstatement.
d. (**) “At this time, we wish to allay any fears that this decision unduly
burdens an employer by imposing a duty to re-hire a project employee even

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after completion of the project for which he was hired. The import of this
decision is not to impose a positive and sweeping obligation upon the
employer to re-hire project employees. What this decision merely
accomplishes is a judicial recognition of the employment status of a project or
work pool employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool employees who
perform tasks necessary or desirable to the employer’s usual business or trade.
Let it not be said that this decision “coddles” labor, for as Lao has ruled,
project or work pool employees who have gained the status of regular
employees are subject to the “no work-no pay”principle, to repeat: “A work pool
may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a
project. Although primarily applicable to regular seasonal workers, this set-
up can likewise be applied to project workers insofar as the effect of
temporary cessation of work is concerned. This is beneficial to both the
employer and employee for it prevents the unjust situation of “coddling labor
at the expense of capital” and at the same time enables the workers to attain
the status of regular employees.
e. (**) The alleged causes of petitioner’s dismissal (low volume of work
and belatedly, completion of project) are not valid causes for dismissal
under Articles 282 and 283 of the Labor Code. Thus, petitioner is
entitled to reinstatement without loss of seniority rights and other
privileges, and to her full backwages, inclusive of allowances, and to
her other benefits or their monetary equivalent computed from the
time her compensation was withheld from her up to the time of her
actual reinstatement. However, complying with the principles of
“suspension of work” and “no work, no pay” between the end of one
project and the start of a new one, in computing petitioner’s
backwages, the amounts corresponding to what could have been
earned during the periods from the date petitioner was dismissed until
her reinstatement when private respondent was not undertaking any
project, should be deducted.
VIII. Equal Day for Equal Work

1. International School v. Quisumbing
a. That public policy abhors inequality and discrimination is beyond contention.
Our Constitution and laws reflect the policy against these evils. The
Constitution in the Article on Social Justice and Human Rights exhorts
Congress to “give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social, economic,
and political inequalities.” The very broad Article 19 of the Civil Code
requires every person, “in the exercise of his rights and in the performance of
his duties, [to] act with justice, give everyone his due, and observe honesty
and good faith.”
b. International law, which springs from general principles of law, likewise
proscribes discrimination. General principles of law include principles of

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equity, i.e., the general principles of fairness and justice, based on the test of
what is reasonable. The Universal Declaration of Human Rights, the
International Covenant on Economic, Social, and Cultural Rights, the
International Convention on the Elimination of All Forms of Racial
Discrimination, the Convention against Discrimination in Education, the
Convention (No. 111) Concerning Discrimination in Respect of Employment
and Occupation—all embody the general principle against discrimination, the
very antithesis of fairness and justice. The Philippines, through its
Constitution, has incorporated this principle as part of its national laws.
c. (*) The Constitution also directs the State to promote “equality of
employment opportunities for all.” Similarly, the Labor Code provides that
the State shall “ensure equal work opportunities regardless of sex, race or
creed.” It would be an affront to both the spirit and letter of these provisions
if the State, in spite of its primordial obligation to promote and ensure equal
employment opportunities, closes its eyes to unequal and discriminatory
terms and conditions of employment.
d. (*) Discrimination, particularly in terms of wages, is frowned upon by the
Labor Code. Article 135, for example, prohibits and penalizes the payment of
lesser compensation to a female employee as against a male employee for
work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
i. The principle “equal pay for equal work” does
not find application in the present case. The
international character of the School
requires the hiring of foreign personnel to
deal with different nationalities and
different cultures, among the student
population.
ii. Notably, the International Covenant on
Economic, Social, and Cultural Rights,
supra, in Article 7 thereof, provides: The
States Parties to the present Covenant recognize
the right of everyone to the enjoyment of just and
favorable conditions of work, which ensure, in
particular:
1. Remuneration which provides all workers,
as a minimum, with:
a. Fair wages and equal
remuneration for work of equal
value without distinction of any
kind, in particular women being
guaranteed conditions of work not
inferior to those enjoyed by men,
with equal pay for equal work; x x
x.

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The foregoing provisions impregnably
institutionalize in this jurisdiction the long honored
legal truism of “equal pay for equal work.” Persons
who work with substantially equal qualifications,
skill, effort and responsibility, under similar
conditions, should be paid similar salaries.22 This
rule applies to the School, its “international
character” notwithstanding.
e. (*) The School contends that petitioner has not adduced evidence that local-
hires perform work equal to that of foreign-hires. The Court finds this
argument a little cavalier. If an employer accords employees the same
position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that employee to
explain why he receives less or why the others receive more. That would be
adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated
unfairly.
f. The Constitution enjoins the State to “protect the rights of workers and
promote their welfare,” “to afford labor full protection.” The State, therefore,
has the right and duty to regulate the relations between labor and capital.
These relations are not merely contractual but are so impressed with public
interest that labor contracts, collective bargaining agreements included, must
yield to the common good. Should such contracts contain stipulations that are
contrary to public policy, courts will not hesitate to strike down these
stipulations.
IX. Last In First Out

1. Maya Farms Employees Organization v. NLRC
a. This Court has consistently ruled that findings of fact of administrative
agencies and quasi-judicial bodies which have acquired expertise because
their jurisdiction is confined to specific matters are generally accorded not
only respect but even finality and are binding upon this Court unless there is
a showing of grave abuse of discretion, or where it is clearly shown that they
were arrived at arbitrarily or in disregard of the evidence on record.
b. The rule is well-settled that labor laws discourage interference with an
employer’s judgment in the conduct of his business. Even as the law is
solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. As long as
the company’s exercise of the same is in good faith to advance its interest and
not for the purpose of defeating or circumventing the rights of employees
under the laws or valid agreements, such exercise will be upheld.
c. (*) It is not disputed that the LIFO rule applies to termination of employment
in the line of work. Verily, what is contemplated in the LIFO rule is that
when there are two or more employees occupying the same position in the
company affected by the retrenchment program, the last one employed will
necessarily be the first to go.
X. One Company – One Union

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1. Philtranco Services Enterprise v. BLR
a. The Labor Code recognizes two (2) principal groups of employees, namely, the
managerial and the rank and file groups. Thus, Art. 212 (k) of the Code
provides: xxx xxx xxx “k) ‘Managerial employee’ is one who is vested with
powers or prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions. All
employees not falling within this definition are considered rank and file
employees for purposes of this Book.” In implementation of the aforequoted
provision of the law, Section 11 of Rule II, Book V of the Omnibus Rules
implementing the Labor Code did away with existing supervisors’ unions
“classifying the members either as managerial or rank and file employees
depending on the work they perform. If they discharge managerial functions,
supervisors are prohibited from forming or joining any labor organization. If
they do not perform managerial work, they may join the rank and file union
and if none exists, they may form one such rank and file organization. This
rule was emphasized in the case of Bulletin Publishing Corp. v. Sanchez, (144
SCRA 628 [1986]).
b. It, therefore, follows that the members of the KASAMA KO who are
professional, technical, administrative and confidential personnel of
PHILTRANCO performing managerial functions are not qualified to join,
much less form a union. This rationalizes the exclusion of managers and
confidential employees exercising managerial functions from the ambit of the
collective bargaining unit. As correctly observed by Med-Arbiter Adap: “x x x
managerial and confidential employees were expressly excluded within the
operational ambit of the bargaining unit for the simple reason that under the
law, managers are disqualified to be members of a labor organization. On the
other hand, confidential workers were not included because either they were
performing managerial functions and/or their duties and responsibilities were
considered or may be categorized as part and parcel of management as the
primary reason for their exclusion in the bargaining unit. The other
categorized employees were likewise not included because parties have
agreed on the fact that the aforementioned group of workers are not qualified
to join a labor organization at the time the agreement was executed and that
they were classified as outside the parameter of the bargaining unit.” (Rollo,
pp. 28-29).
c. (*) We are constrained to disallow the formation of another union. There is no
dispute that there exists a labor union in the company, herein intervenor, the
NAMAWU-MIF which is the collective bargaining agent of the rank and file
employees in PHILTRANCO. x x x We see no need for the formation of
another union in PHILTRANCO. The qualified members of the KASAMA KO
may join the NAMAWU-MIF if they want to be union members, and to be
consistent with the one-union, one-company policy of the Department of
Labor and Employment, and the laws it enforces. As held in the case of
General Rubber and Footwear Corp. v. Bureau of Labor Relations (155 SCRA
283 [1987]): “x x x It has been the policy of the Bureau to encourage the
formation of an employer unit ‘unless circumstances otherwise require.’ The
proliferation of unions in an employer unit is discouraged as a matter of
policy unless there are compelling reasons which would deny a certain class

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of employees the right to self-organization for purposes of collective
bargaining. This case does not fall squarely within the exception.” (Emphasis
supplied). There are no compelling reasons in this case such as a denial to the
KASAMA KO group of the right to join the certified bargaining unit or
substantial distinctions warranting the recognition of a separate group of
rank and file workers. Precisely, NAMAWU-MIF intervened to make it clear
it has no objections to qualified rank and file workers joining its union.
d. (*) The respondents state that this case is an exception to the general rule
considering that substantial differences exist between the office employees or
professional, technical, administrative and confidential employees vis-a-vis
the field workers or drivers, conductors and mechanics of the petitioner.
Against this contention, we find that the “substantial differences” in the
terms and conditions of employment between the private respondent’s
members and the rest of the company’s rank and file employees are more
imagined than real. We agree with the petitioner that the differences alleged
are not substantial or significant enough to merit the formation of another
union, x x x There may be differences as to the nature of their individual
assignments but the distinctions are not enough to warrant the formation of
separate unions. The private respondent has not even shown that a separate
bargaining unit would be beneficial to the employees concerned. Office
employees also belong to the rank and file. There is an existing employer
wide unit in the company represented by NAMAWU-MIF. And as earlier
stated, the fact that NAMAWU-MIF moved to intervene in the petition for
certification election filed by KASAMA KO negates the allegation that
“substantial differences” exist between the employees concerned. We find a
commonality of interest among them. There are no compelling reasons for the
formation of another union.
XI. Four Fold Test

1. Cesar Lirio (Celkor Ad Sonicmix) v. Wilmer Genovia
a. (*) The elements to determine the existence of an employment relationship
are: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer’s power to control the
employee’s conduct. The most important element is the employer’s control of
the employee’s conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish it.
b. (*) It is settled that no particular form of evidence is required to prove the
existence of an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted.
c. (*) Petitioner wielded the power to dismiss as respondent stated that he was
verbally dismissed by petitioner, and respondent, thereafter, filed an action
for illegal dismissal against petitioner. The power of control refers merely to
the existence of the power. It is not essential for the employer to actually
supervise the performance of duties of the employee, as it is sufficient that
the former has a right to wield the power. Nevertheless, petitioner stated in
his Position Paper that it was agreed that he would help and teach
respondent how to use the studio equipment. In such case, petitioner
certainly had the power to check on the progress and work of respondent.

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d. (*) In termination cases, the burden is upon the employer to show by
substantial evidence that the termination was for lawful cause and validly
made. Article 277 (b) of the Labor Code puts the burden of proving that the
dismissal of an employee was for a valid or authorized cause on the employer,
without distinction whether the employer admits or does not admit the
dismissal. For an employee’s dismissal to be valid, (a) the dismissal must be
for a valid cause, and (b) the employee must be afforded due process.
Procedural due process requires the employer to furnish an employee with
two written notices before the latter is dismissed: (1) the notice to apprise the
employee of the particular acts or omissions for which his dismissal is sought,
which is the equivalent of a charge; and (2) the notice informing the employee
of his dismissal, to be issued after the employee has been given reasonable
opportunity to answer and to be heard on his defense.
2. Marticio Semblante and Dubrick Pilar v. CA, gallera de Mandaue and Spouses Loot
a. The posting of a bond is indispensable to the perfection of an appeal in cases
involving monetary awards from the Decision of the Labor Arbiter. Article
223 of the Labor Code provides: x x x Time and again, however, this Court,
considering the substantial merits of the case, has relaxed this rule on, and
excused the late posting of, the appeal bond when there are strong and
compelling reasons for the liberality, such as the prevention of miscarriage of
justice extant in the case or the special circumstances in the case combined
with its legal merits or the amount and the issue involved. After all, technical
rules cannot prevent courts from exercising their duties to determine and
settle, equitably and completely, the rights and obligations of the parties.
This is one case where the exception to the general rule lies.
b. (*) While respondents had failed to post their bond within the 10-day period
provided above, it is evident, on the other hand, that petitioners are NOT
employees of respondents, since their relationship fails to pass muster the
four-fold test of employment We have repeatedly mentioned in countless
decisions: (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
employee’s conduct, which is the most important element. As found by both
the NLRC and the CA, respondents had no part in petitioners’ selection and
management; petitioners’ compensation was paid out of the arriba (which is a
percentage deducted from the total bets), not by petitioners; and petitioners
performed their functions as masiador and sentenciador free from the
direction and control of respondents. In the conduct of their work, petitioners
relied mainly on their “expertise that is characteristic of the cockfight
gambling,” and were never given by respondents any tool needed for the
performance of their work. Respondents, not being petitioners’ employers,
could never have dismissed, legally or illegally, petitioners, since respondents
were without power or prerogative to do so in the first place. The rule on the
posting of an appeal bond cannot defeat the substantive rights of respondents
to be free from an unwarranted burden of answering for an illegal dismissal
for which they were never responsible.
XII. Management Prerogative

1. Dela Salle University v. Dela Salle University Employees Association

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a. Now, before proceeding to the discussion and resolution of the issues raised in
the pending petitions, certain preliminary matters call for disposition. As we
reiterated in the case of Caltex Refinery Employees Association (CREA) vs.
Jose S. Brillantes, the following are the well-settled rules in a petition for
certiorari involving labor cases. “First, the factual findings of quasijudicial
agencies (such as the Department of Labor and Employment), when
supported by substantial evidence, are binding on this Court and entitled to
great respect, considering the expertise of these agencies in their respective
fields. It is well-established that findings of these administrative agencies are
generally accorded nbt only respect but even finality. “Second, substantial
evidence in labor cases is such amount of relevant evidence which a
reasonable mind will accept as adequate to justify a conclusion. “Third, in
Flores vs. National Labor Relations Commission, we explained the role and
function of Rule 65 as an extraordinary remedy: “It should be noted, in the
first place, that the instant petition is a special civil action for certiorari
under Rule 65 of the Revised Rules of Court. An extraordinary remedy, its
use is available only and restrictively in truly exceptional cases—those
wherein the action of an inferior court, board or officer performing judicial or
quasi-judicial acts is challenged for being wholly void on grounds of
jurisdiction. The sole office of the writ of certiorari is the correction of errors
of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction. It does not include correction of
public respondent NLRC’s evaluation of the evidence and factual findings
based thereon, which are generally accorded not only great respect but even
finality.
b. The University’s arguments on the first issue fail to impress us. The Court
agrees with the Solicitor General that the express exclusion of the computer
operators and discipline officers from the bargaining unit of rank-and-file
employees in the 1986 collective bargaining agreement does not bar any re-
negotiation for the future inclusion of the said employees in the bargaining
unit. During the freedom period, the parties may not only renew the existing
collective bargaining agreement but may also propose and discuss
modifications or amendments thereto.
c. With regard to the alleged confidential nature of the said employees’
functions, after a careful consideration of the pleadings filed before this
Court, we rule that the said computer operators and discipline officers are not
confidential employees. As carefully examined by the Solicitor General, the
service record of a computer operator reveals that his duties are basically
clerical and non-confidential in nature. As to the disciplineofficers, we agree
with the voluntary arbitrator that based on the nature of their duties, they
are not confidential employees and should therefore be included in the
bargaining unit of rank-and-file employees.
d. The Court also affirms the findings of the voluntary arbitrator that the
employees of the College of St. Benilde should be excluded from the
bargaining unit of the rank-and-file employees of Dela Salle University,
because the two educational institutions have their own separate juridical
personality and no sufficient evidence was shown to justify the piercing of the
veil of corporate fiction.

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e. (*) We agree with the voluntary arbitrator that as an exercise of management
prerogative, the University has the right to adopt valid and equitable
grounds as basis for terminating or transferring employees. As we ruled in
the case of Autobus Workers’ Union (AWU) and Ricardo Escanlar vs. National
Labor Relations Commission, “[a] valid exercise of management prerogative
is one which, among others, covers: work assignment, working methods, time,
supervision of workers, transfer of employees, work supervision, and the
discipline, dismissal and recall of workers. Except as provided for, or limited
by special laws, an employer is free to regulate, according to his own discretion
and judgment, all aspects of employment.”
f. On the fourth issue involving the voluntary arbitrator’s ruling that on the
basis of the University’s proposed budget, the University can no longer be
required to grant a second round of wage increases for the school years 1991-
92 and 1992-93 and charge the same to the incremental proceeds, we find
that the voluntary arbitrator committed grave abuse of discretion amounting
to lack or excess of jurisdiction. As we ruled in the case of Caltex Refinery
Employees Association (CREA) vs. Jose S. Brillantes, “x x x x x x. [w]e believe
that the standard proof of a company’s financial standing is its financial
statements duly audited by independent and credible external auditors.”
Financial statements audited by independent external auditors constitute the
normal method of proof of profit and loss performance of a company. The
financial capability of a company cannot be based on its proposed budget
because a proposed budget does not reflect the true financial condition of a
company, unlike audited financial statements, and more importantly, the use
of a proposed budget as proof of a company’s financial condition would be
susceptible to abuse by scheming employers who might be merely feigning
dire financial condition in their business ventures in order to avoid granting
salary increases and fringe benefits to their employees.
2. San Miguel Brewery Sales Force Union (PTGWO) v. Ople
a. (*) Public respondent was correct in holding that the CDS is a valid exercise
of management prerogatives: “Except as limited by special laws, an employer
is free to regulate, according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time,
place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of
work. x x x (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings
Bank vs. CIR, 21 SCRA 226, 235.)” (Perfecto V. Hernandez, Labor Relations
Law, 1985 Ed., p. 44.) Every business enterprise endeavors to increase its
profits. In the process, it may adopt or devise means designed towards that
goal. In Abott Laboratories vs. NLRC, 154 SCRA 713, We ruled: x x x Even as
the law is solicitous of the welfare of the employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives.
The free will of management to conduct its own business affairs to achieve its
purpose cannot be denied.” So long as a company’s management prerogatives
are exercised in good faith for the advancement of the employer’s interest and
not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold them

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(LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries
vs. Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110).
3. Capitol Medical Center v. Meris
a. Work is a necessity that has economic significance deserving legal protection.
The social justice and protection to labor provisions in the Constitution
dictate so.
b. (*) Employers are also accorded rights and privileges to assure their self-
determination and independence and reasonable return of capital. This mass
of privileges comprises the so-called management prerogatives. Although
they may be broad and unlimited in scope, the State has the right to
determine whether an employer’s privilege is exercised in a manner that
complies with the legal requirements and does not offend the protected rights
of labor. One of the rights accorded an employer is the right to close an
establishment or undertaking. The right to close the operation of an
establishment or undertaking is explicitly recognized under the Labor Code
as one of the authorized causes in terminating employment of workers, the
only limitation being that the closure must not be for the purpose of
circumventing the provisions on termination of employment embodied in the
Labor Code.
c. (*) The phrase “closures or cessation of operations of establishment or
undertaking” includes a partial or total closure or cessation. x x x Ordinarily,
the closing of a warehouse facility and the termination of the services of
employees there assigned is a matter that is left to the determination of the
employer in the good faith exercise of its management prerogatives. The
applicable law in such a case is Article 283 of the Labor Code which permits
‘closure or cessation of operation of an establishment or undertaking not due
to serious business losses or financial reverses,’ which, in our reading
includes both the complete cessation of operations and the cessation of only
part of a company’s business. (Emphasis supplied)
d. (*) The phrase “closures or cessation x x x not due to serious business losses or
financial reverses” recognizes the right of the employer to close or cease his
business operations or undertaking even if he is not suffering from serious
business losses or financial reverses, as long as he pays his employees their
termination pay in the amount corresponding to their length of service. It
would indeed be stretching the intent and spirit of the law if a court were to
unjustly interfere in management’s prerogative to close or cease its business
operations just because said business operation or undertaking is not
suffering from any loss. As long as the company’s exercise of the same is in
good faith to advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement,
such exercise will be upheld. Clearly then, the right to close an establishment
or undertaking may be justified on grounds other than business losses but it
cannot be an unbridled prerogative to suit the whims of the employer. The
ultimate test of the validity of closure or cessation of establishment or
undertaking is that it must be bona fide in character. And the burden of
proving such falls upon the employer.
e. Reinstatement, however, is not feasible in case of a strained employer-
employee relationship or when the work or position formerly held by the

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dismissed employee no longer exists, as in the instant case. Dr. Meris is thus
entitled to payment of separation pay at the rate of one (1) month salary for
every year of his employment, with a fraction of at least six (6) months being
considered as one(1) year, and full backwages from the time of his dismissal
from April 30, 1992 until the expiration of his term as Chief of ISU or his
mandatory retirement, whichever comes first.
f. The award by the appellate court of moral damages, however, cannot be
sustained, solely upon the premise that the employer fired his employee
without just cause or due process. Additional facts must be pleaded and
proven to warrant the grant of moral damages under the Civil Code, such as
that the act of dismissal was attended by bad faith or fraud, or was
oppressive to labor, or done in a manner contrary to morals, good customs, or
public policy; and of course, that social humiliation, wounded feelings, grave
anxiety, etc., resulted therefrom. Such circumstances, however, do not obtain
in the instant case. More specifically on bad faith, lack of it is mirrored in Dr.
Clemente’s offer to Dr. Meris to be a consultant of Capitol, despite the
abolition of the ISU. There being no moral damages, the award of exemplary
damages does not lie.
4. Manila Pavilion v. Delada
a. In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin, 180 SCRA
177 (1989), we ruled that the voluntary arbitrator had plenary jurisdiction
and authority to interpret the agreement to arbitrate and to determine the
scope of his own authority—subject only, in a proper case, to the certiorari
jurisdiction of this Court. In that case, the specific issue presented was “the
issue of performance bonus.” We then held that the arbitrator had the
authority to determine not only the issue of whether or not a performance
bonus was to be granted, but also the related question of the amount of
bonus, were it to be granted. We then said that there was no indication at all
that the parties to the arbitration agreement had regarded “the issue of
performance bonus” as a two-tiered issue, only one aspect of which was being
submitted to arbitration; thus, we held that the failure of the parties to
specifically limit the issues to that which was stated allowed the arbitrator to
assume jurisdiction over the related issue.
b. A more recent case is Ludo & Luym Corporation v. Saornido, 395 SCRA 451
(2003). In that case, we recognized that voluntary arbitrators are generally
expected to decide only those questions expressly delineated by the
submission agreement; that, nevertheless, they can assume that they have
the necessary power to make a final settlement on the related issues, since
arbitration is the final resort for the adjudication of disputes. Thus, we ruled
that even if the specific issue brought before the arbitrators merely
mentioned the question of “whether an employee was discharged for just
cause,” they could reasonably assume that their powers extended beyond the
determination thereof to include the power to reinstate the employee or to
grant back wages. In the same vein, if the specific issue brought before the
arbitrators referred to the date of regularization of the employee, law and
jurisprudence gave them enough leeway as well as adequate prerogative to
determine the entitlement of the employees to higher benefits in accordance
with the finding of regularization. Indeed, to require the parties to file
another action for payment of those benefits would certainly undermine labor

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proceedings and contravene the constitutional mandate providing full
protection to labor and speedy labor justice.
c. In Allied Banking Corporation vs. Court of Appeals, 416 SCRA 65 (2003),
employer Allied Bank reassigned respondent Galanida from its Cebu City
branch to its Bacolod and Tagbilaran branches. He refused to follow the
transfer order and instead filed a Complaint before the Labor Arbiter for
constructive dismissal. While the case was pending, Allied Bank insisted that
he report to his new assignment. When he continued to refuse, it directed him
to explain in writing why no disciplinary action should be meted out to him.
Due to his continued refusal to report to his new assignment, Allied Bank
eventually terminated his services. When the issue of whether he could
validly refuse to obey the transfer orders was brought before this Court, we
ruled thus: The refusal to obey a valid transfer order constitutes willful
disobedience of a lawful order of an employer. Employees may object to,
negotiate and seek redress against employers for rules or orders that they
regard as unjust or illegal. However, until and unless these rules or orders
are declared illegal or improper by competent authority, the employees ignore
or disobey them at their peril. For Galanida’s continued refusal to obey Allied
Bank’s transfer orders, we hold that the bank dismissed Galanida for just
cause in accordance with Article 282(a) of the Labor Code. Galanida is thus
not entitled to reinstatement or to separation pay.
d. (**) On 14 December 2007, the Panel of Voluntary Arbitrators (PVA)
issued a Decision and ruled that the transfer of Delada was a valid
exercise of management prerogative. According to the panel, the
transfer order was done in the interest of the efficient and economic
operations of MPH, and that there was no malice, bad faith, or
improper motive attendant upon the transfer of Delada to Seasons
Coffee Shop. They found that the mere fact that he was the Union
President did not “put color or ill motive and purpose” to his transfer.
On the contrary, the PVA found that the real reason why he refused to
obey the transfer order was that he asked for additional monetary
benefits as a condition for his transfer. Furthermore, the panel ruled
that his transfer from Rotisserie to Seasons Coffee Shop did not
prejudice or inconvenience him. Neither did it result in diminution of
salaries or demotion in rank. The PVA thus pronounced that Delada
had no valid and justifiable reason to refuse or even to delay
compliance with the management’s directive. (note: decision of the
PVA was affirmed by the Court)
5. Blue Dairy Corporation v. NLRC
a. (*) No grave abuse of discretion was committed by the NLRC. Indeed, it is the
prerogative of management to transfer an employee from one office to
another within the business establishment based on its assessment and
perception of the employee’s qualifications, aptitudes and competence, and in
order to ascertain where he can function with maximum benefit to the
company. This is a privilege inherent in the employer’s right to control and
manage his enterprise effectively. The freedom of management to conduct its
business operations to achieve its purpose cannot be denied.

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b. (*) But, like other rights, there are limits thereto. The managerial
prerogative to transfer personnel must be exercised without grave abuse of
discretion, bearing in mind the basic elements of justice and fair play. Having
the right should not be confused with the manner in which that right is
exercised. Thus, it cannot be used as a subterfuge by the employer to rid
himself of an undesirable worker.
c. (*) The employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it involve a demotion in
rank or a diminution of his salaries, privileges and other benefits. Should the
employer fail to overcome this burden of proof, the employee’s transfer shall
be tantamount to constructive dismissal, which has been defined as a
quitting because continued employment is rendered impossible, unreasonable
or unlikely; as an offer involving a demotion in rank and diminution in pay.
Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the
employee leaving him with no option but to forego with his continued
employment.
d. (*) Petitioners failed to justify Recalde’s transfer from the position of food
technologist in the laboratory to a worker in the vegetable processing section.
We recall that what triggered Recalde’s transfer was the 21 October incident
where she was found to have allegedly utilized company vehicle in looking for
a new residence during office hours without permission from management. In
petitioners’ view, she was dishonest such that they lost their trust and
confidence in her. Yet, it does not appear that Recalde was provided an
opportunity to refute the reason for the transfer. Petitioners merely relied on
the narrations of the company driver. Nor was Recalde notified in advance of
her impending transfer which was, as we shall elucidate later, a demotion in
rank. In Gaco v. NLRC we noted— While due process required by law is
applied in dismissals, the same is also applicable to demotions as demotions
likewise affect the employment of a worker whose right to continued
employment, under the same terms and conditions, is also protected by law.
Moreover, considering that demotion is, like dismissal, also a punitive action,
the employee being demoted should, as in cases of dismissals, be given a
chance to contest the same.
e. Petitioners overstretched the effect of Recalde’s claimed wrongdoing. We have
ruled that breach of trust and confidence as a ground for dismissal from
employment must be related to the performance of the duties of the employee
such as would show him to be thereby unfit to continue working for the
employer. By analogy, breach of trust and confidence as a ground for
reassignment must be related to the performance of the duties of the
employee such as would show him to be thereby unfit to discharge the same
task. Clearly, the act of dishonesty imputed to Recalde has no bearing at all
to her work in the laboratory.
f. We find insignificant the submission of petitioners that “the coring of lettuce
together with the other production jobs connected therewith is one of the
“those assigned to the vegetable processing section are mostly professionals
like teachers, computer secretaries and forestry graduates.” Rather, the focus
should be on the comparison between the nature of Recalde’s work in the
laboratory and in the vegetable processing section. As food technologist in the

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laboratory, she occupied a highly technical position requiring use of her
mental faculty. As a worker in the vegetable processing section, she
performed mere mechanical work. It was virtually a transfer from a position
of dignity to a servile or menial job. We agree with the observation of the
Office of the Solicitor General that the radical change in Recalde’s nature of
work unquestionably resulted in, as rightly perceived by her, a demeaning
and humiliating work condition. The transfer was a demotion in rank, beyond
doubt.
g. The laboratory is the place where the quality of the totality of petitioners’
products such as dairy, juices, chocolates and vegetables is tested. On the
other hand, the vegetable processing section, as the name implies, involves
processing of vegetables alone. Definitely, a transfer from a workplace where
only highly trusted authorized personnel are allowed access to a workplace
that is not as critical is another reason enough for Recalde to howl a protest.
h. We reiterate that the NLRC did not commit grave abuse of discretion in
affirming the ruling of the Labor Arbiter that petitioners are guilty of
constructive dismissal. Recalde is entitled to reinstatement as food
technologist without loss of seniority rights and privileges and with full back
wages, as directed by the Labor Arbiter. We clarify however that conformably
with Art. 279 of the Labor Code, as amended by Sec. 34 of RA 6715, to be
included in the computation of back wages are the illegally dismissed
employee’s allowances and other benefits or their monetary equivalent.
6. Almodiel v. NLRC
a. Whether petitioner’s functions as Cost Accounting Manager have been
dispensed with or merely absorbed by another is however immaterial. Thus,
notwithstanding the dearth of evidence on the said question, a resolution of
this case can be arrived at without delving into this matter. For even
conceding that the functions of petitioner’s position were merely transferred,
no malice or bad faith can be imputed from said act. A survey of existing case
law will disclose that in Wiltshire File Co., Inc. v. NLRC, the position of Sales
Manager was abolished on the ground of redundancy as the duties previously
discharged by the Sales Manager simply added to the duties of the General
Manager to whom the Sales Manager used to report. In adjudging said
termination as legal, this Court said that redundancy, for purposes of our
Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. The
characterization of an employee’s services as no longer necessary or
sustainable, and therefore, properly terminable, was an exercise of business
judgment on the part of the employer. The wisdom or soundness of such
characterization or decision was not subject to discretionary review on the
part of the Labor Arbiter nor of the NLRC so long, of course, as violation of
law or merely arbitrary and malicious action is not shown.
b. Considering further that petitioner herein held a position which was
definitely managerial in character, Raytheon had a broad latitude of
discretion in abolishing his position. An employer has a much wider
discretion in terminating employment relationship of managerial personnel
compared to rank and file employees. The reason obviously is that officers in
such key positions perform not only functions which by nature require the

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employer’s full trust and confidence but also functions that spell the success
or failure of an enterprise.
c. (*) Petitioner also assails Raytheon’s choice of Ang Tan Chai to head the
Payroll/Mis/Finance Department, claiming that he is better qualified for the
position. It should be noted, however, that Ang Tan Chai was promoted to the
position during the middle part of 1988 or before the abolition of petitioner’s
position in early 1989. Besides the fact that Ang Tan Chai’s promotion
thereto is a settled matter, it has been consistently held that an objection
founded on the ground that one has better credentials over the appointee is
frowned upon so long as the latter possesses the minimum qualifications for
the position. In the case at bar, since petitioner does not allege that Ang Tan
Chai does not qualify for the position, the Court cannot substitute its
discretion and judgment for that which is clearly and exclusively
management prerogative. To do so would take away from the employer what
rightly belongs to him as aptly explained in National Federation of Labor
Unions v. NLRC: “It is a well-settled rule that labor laws do not authorize
interference with the employer’s judgment in the conduct of his business. The
determination of the qualification and fitness of workers for hiring and firing,
promotion or reassignment are exclusive prerogatives of management. The
Labor Code and its implementing Rules do not vest in the Labor Arbiters nor
in the different Divisions of the NLRC (nor in the courts) managerial
authority. The employer is free to determine, using his own discretion and
business judgment, all elements of employment, “from hiring to firing” except
in cases of unlawful discrimination or those which may be provided by law.
There is none in the instant case.”
7. Interphil Laboratories (FFW) v. Interphil
a. The appellate court also correctly held that the question of the Secretary of
Labor and Employment’s jurisdiction over labor and labor-related disputes
was already settled in International Pharmaceutical, Inc. vs. Hon. Secretary
of Labor and Associated Labor Union (ALU) where the Court declared: In the
present case, the Secretary was explicitly granted by Article 263(g) of the
Labor Code the authority to assume jurisdiction over a labor dispute causing
or likely to cause a strike or lockout in an industry indispensable to the
national interest, and decide the same accordingly. Necessarily, this
authority to assume jurisdiction over the said labor dispute must include and
extend to all questions and controversies arising therefrom, including cases
over which the labor arbiter has exclusive jurisdiction.
b. Anent the alleged misappreciation of the evidence proffered by the parties, it
is axiomatic that the factual findings of the Labor Arbiter, when sufficiently
supported by the evidence on record, must be accorded due respect by the
Supreme Court. Here, the report and recommendation of Labor Arbiter
Caday was not only adopted by then Secretary of Labor Quisumbing but was
likewise affirmed by the Court of Appeals. We see no reason to depart from
their findings. Evidence; Parol Evidence Rule; Words and Phrases. —The
parol evidence rule provides that “(w)hen the terms of an agreement have
been reduced to writing, it is considered as containing all the terms agreed
upon and there can be, between the parties and their successors-in-interest,
no evidence of such terms other than the contents of the written agreement.”
(Section 9 [par. 1], Rule 130 of the Rules of Court).

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c. The reliance on the parol evidence rule is misplaced. In labor cases pending
before the Commission or the Labor Arbiter, the rules of evidence prevailing
in courts of law or equity are not controlling. Rules of procedure and evidence
are not applied in a very rigid and technical sense in labor cases. Hence, the
Labor Arbiter is not precluded from accepting and evaluating evidence other
than, and even contrary to, what is stated in the CBA.
d. It is evident from the foregoing provision that the working hours may be
changed, at the discretion of the company, should such change be necessary
for its operations, and that the employees shall observe such rules as have
been laid down by the company. In the case before us, Labor Arbiter Caday
found that respondent company had to adopt a continuous 24-hour work daily
schedule by reason of the nature of its business and the demands of its
clients. It was established that the employees adhered to the said work
schedule since 1988. The employees are deemed to have waived the eight-
hour schedule since they followed, without any question or complaint, the
two-shift schedule while their CBA was still in force and even prior thereto.
The two-shift schedule effectively changed the working hours stipulated in
the CBA. As the employees assented by practice to this arrangement, they
cannot now be heard to claim that the overtime boycott is justified because
they were not obliged to work beyond eight hours.
e. More importantly, the “overtime boycott” or “work slowdown” by the
employees constituted a violation of their CBA, which prohibits the union or
employee, during the existence of the CBA, to stage a strike or engage in
slowdown or interruption of work. In Ilaw at Buklod ng Manggagawa vs.
NLRC, this Court ruled: x x x (T)he concerted activity in question would still
be illicit because contrary to the workers’ explicit contractual commitment
“that there shall be no strikes, walkouts, stoppage or slowdown of work,
boycotts, secondary boycotts, refusal to handle any merchandise, picketing,
sit-down strikes of any kind, sympathetic or general strikes, or any other
interference with any of the operations of the COMPANY during the term of
xxx (their collective bargaining) agreement.” What has just been said makes
unnecessary resolution of SMC’s argument that the workers’ concerted
refusal to adhere to the work schedule in force for the last several years, is a
slowdown, an inherently illegal activity essentially illegal even in the absence
of a no-strike clause in a collective bargaining contract, or statute or rule. The
Court is in substantial agreement with the petitioner’s concept of a slowdown
as a “strike on the installment plan”; as a willful reduction in the rate of work
by concerted action of workers for the purpose of restricting the output of the
employer, in relation to a labor dispute; as an activity by which workers,
without a complete stoppage of work, retard production or their performance
of duties and functions to compel management to grant their demands. The
Court also agrees that such a slowdown is generally condemned as inherently
illicit and unjustifiable, because while the employees “continue to work and
remain at their positions and accept the wages paid to them,” they at the
same time “select what part of their allotted tasks they care to perform of
their own volition or refuse openly or secretly, to the employer’s damage, to
do other work”; in other words, they “work on their own terms.” X x x.
f. (*) Finally, the Court cannot agree with the proposition that respondent
company, in extending substantial separation package to some officers of

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petitioner union during the pendency of this case, in effect, condoned the
illegal acts they committed. Respondent company correctly postured that at
the time these union officers obtained their separation benefits, they were
still considered employees of the company. Hence, the company was merely
complying with its legal obligations. Respondent company could have
withheld these benefits pending the final resolution of this case. Yet,
considering perhaps the financial hardships experienced by its employees and
the economic situation prevailing, respondent company chose to let its
employees avail of their separation benefits. The Court views the gesture of
respondent company as an act of generosity for which it should not be
punished.
RECRUITMENT AND PLACEMENT

I. Recruitment of Local and Migrant Workers
1. Illegal Recruitment (Sec. 5 RA No. 10022)
a. License v. Authority. Definition of Terms (Art. 13 Labor Code)
b. Essential Elements of Illegal Recruitment
i. People v. Angeles
1. (*) Illegal recruitment is committed when two (2) elements
concur: 1) that the offender has no valid license or authority
required by law to enable one to lawfully engage in recruitment
and placement of workers; and 2) that the offender undertakes
either any activity within the meaning of recruitment and
placement defined under Article 13(b), or any prohibited
practices enumerated under Article 34
2. (*) To prove illegal recruitment, it must be shown that the
accused-appellant gave complainants the distinct impression
that he had the power or ability to send complainants abroad for
work such that the latter were convinced to part with their
money in order to be employed. To be engaged in the practice of
recruitment and placement, it is plain that there must at least be
a promise or offer of an employment from the person posing as a
recruiter whether locally or abroad.
3. Under Article 315, paragraph 2(a) of the Revised Penal Code, the
elements of estafa are: (1) the accused has defrauded another by
abuse of confidence or by means of deceit; and (2) damage or
prejudice capable of pecuniary estimation is caused to the
offended party or third person.
ii. People v. Ong
1. (*) Under Art. 13(b) of the Labor Code, “recruitment and
placement” refer to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes
referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not;
provided, that any person or entity which, in any manner, offers
or promises for a fee employment to two or more persons, is
considered engaged in recruitment and placement. On the other
hand, “referral” is defined as the act of passing along or
forwarding of an applicant for employment after an initial

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interview of a selected applicant for employment to a selected
employer, placement officer or bureau.
2. (*) On the other hand, illegal recruitment is considered an
offense involving economic sabotage if any of these qualifying
circumstances exist, namely, (a) when illegal recruitment is
committed by a syndicate, i.e., if it is carried out by a group of
three or more persons conspiring and/or confederating with one
another; or, (b) when illegal recruitment is committed in large
scale, i.e., if it is committed against three or more persons
individually or as a group. The essential elements of the crime of
illegal recruitment in large scale are: (1) the accused engages in
acts of recruitment and placement of workers defined under Art.
13(b) or in any prohibited activities under Art. 34 of the Labor
Code; (2) the accused has not complied with the guidelines issued
by the Secretary of Labor and Employment, particularly with
respect to the securing of a license or an authority to recruit and
deploy workers, either locally or overseas; and (3) the accused
commits the unlawful acts against three or more persons,
individually or as a group. As defined, a “license” is that which is
issued by the Department of Labor and Employment authorizing
a person or entity to operate a private employment agency, while
an “authority” is that issued by the DOLE entitling a person or
association to so engage in recruitment and placement activities
as a private recruitment agency. It is the lack of the necessary
license or authority that renders the recruitment unlawful or
criminal.
3. (*) To prove illegal recruitment, it must be shown that the
accused-appellant gave complainants the distinct impression
that he had the power or ability to send complainants abroad for
work such that the latter were convinced to part with their
money in order to be employed. Accused-appellant represented
himself to complainants as one capable of deploying workers
abroad and even quoted the alleged salary rates of factory and
construction workers in Taiwan. He advised Bacasnot to accept a
job as a factory worker first because it would be then easier for
him to transfer jobs once he got to Taiwan. Accused-appellant
said his mother, who was based in Taiwan, could help Bacasnot.
Bacasnot paid accused-appellant an initial placement fee
agreeing to pay the balance through salary deductions once he
was employed. Accused-appellant also promised jobs to Eliw and
the other complainants. He accompanied them to Manila so that
they could be interviewed and physically examined at the
Steadfast Recruitment Agency with which accused-appellant
represented he was connected. These acts of accused-appellant
created the distinct impression on the eight complainants that he
was a recruiter for overseas employment.
4. (*) Even if accused-appellant did no more than “suggest” to
complainants where they could apply for overseas employment,
his act constituted “referral” within the meaning of Art. 13(b) of

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the Labor Code. Indeed, the testimonial and documentary
evidence in the record shows that accused-appellant did more
than just make referrals. The evidence shows that he made
misrepresentations to them concerning his authority to recruit
for overseas employment and collected various amounts from
them for placement fees. Clearly, accused-appellant committed
acts constitutive of large scale illegal recruitment.
5. (*) Accused-appellant denies that the signatures in the receipts
of payments are his. To be sure, the presentation of the receipts
acknowledging payments is not necessary for the successful
prosecution of accused-appellant. We have already ruled that the
absence of receipts in a case for illegal recruitment does not
warrant the acquittal of the accused-appellant and is not fatal to
the case of the prosecution. As long as the prosecution is able to
establish through credible testimonial evidence that the accused-
appellant has engaged in illegal recruitment, a conviction for the
offense can very well be justified.
6. (*) It is settled that a person who is convicted of illegal
recruitment may, in addition, be convicted of estafa under Art.
315(2)(a) of the Revised Penal Code. There is no problem of
double jeopardy because illegal recruitment is malum
prohibitum, in which the criminal intent is not necessary,
whereas estafa is malum in se in which the criminal intent of the
accused is necessary.
c. Simple Illegal Recruitment
d. Illegal Recruitment in Large Scale
e. Illegal Recruitment as Economic Sabotage
f. Illegal Recruitment v. Estafa
i. People v. Calonzo
1. (*) All the five (5) complaining witnesses met each other for the
first time at the house of Loreta Castañeda. They were not in any
way acquainted with one another prior to that meeting save for
Danilo de los Reyes and his brother-in-law Belarmino
Torregrosa. They all came from different places, yet, they were
all united in pointing to Calonzo as the person who enticed them
to apply for employment abroad. Of course, Calonzo could not
explain what motivated the complaining witnesses to file these
cases against him. The most that Calonzo could do on the
witness stand was to deny all the charges against him. Alas, his
denial is at most lame and cannot prevail over the positive
assertions of the complaining witnesses. In People v. Villafuerte
we ruled—x x x The absence of evidence as to an improper
motive actuating the principal witnesses of the prosecution
strongly tends to sustain no improper motive existed and their
testimony is worthy of full faith and credit. Accused-appellant’s
denial cannot prevail over the positive assertions of
complainants who had no motive to testify falsely against her
except to tell the truth.

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2. (*) Illegal recruitment in large scale is committed when a person
“(a) undertakes any recruitment activity defined under Article
13(b) or any prohibited practice enumerated under Article 34 of
the Labor Code; (b) does not have a license or authority to
lawfully engage in the recruitment and placement of workers;
and (c) commits the same against three or more persons,
individually or as a group.”
3. (*) As regards the conviction of Calonzo for estafa on five (5)
counts we ruled in People v. Turda that recruitment of persons
for overseas employment without the necessary recruiting permit
or authority from the POEA constitutes illegal recruitment;
however, where some other crimes or felonies are committed in
the process, conviction under the Labor Code does not preclude
punishment under other statutes. In People v. Romero we said
that the elements of estafa were: (a) that the accused defrauded
another by abuse of confidence or by means of deceit, and (b) that
damage or prejudice capable of pecuniary estimation is caused to
the offended party or third person.
g. Liabilities
i. Local Recruitment Agency
ii. Foreign Employer
1. Theory of Imputed Knowledge
iii. Solidary Liability
h. Pre-termination of Contract of Migrant Worker
i. Serrano v. Gallant Maritime Services
1. (*) It is plain that prior to R.A. No. 8042, all Overseas Filipino
Workers (OFWs), regardless of contract periods or the
unexpired portions thereof, were treated alike in terms of the
computation of their monetary benefits in case of illegal
dismissal. Their claims were subjected to a uniform rule of
computation: their basic salaries multiplied by the entire
unexpired portion of their employment contracts. The
enactment of the subject clause in R.A. No. 8042 introduced a
differentiated rule of computation of the money claims of
illegally dismissed OFWs based on their employment periods,
in the process singling out one category whose contracts have
an unexpired portion of one year or more and subjecting them
to the peculiar disadvantage of having their monetary awards
limited to their salaries for 3 months or for the unexpired
portion thereof, whichever is less, but all the while sparing the
other category from such prejudice, simply because the latter’s
unexpired contracts fall short of one year.
2. (*) Prior to R.A. No. 8042, OFWs and local workers with fixed-
term employment who were illegally discharged were treated
alike in terms of the computation of their money claims: they
were uniformly entitled to their salaries for the entire
unexpired portions of their contracts. But with the enactment
of R.A. No. 8042, specifically the adoption of the subject clause,
illegally dismissed OFWs with an unexpired portion of one year

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or more in their employment contract have since been
differently treated in that their money claims are subject to a
3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment.
3. (*) The Court concludes that the subject clause contains a
suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are illegally
discharged, it imposed a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more in their
contracts, but with an unexpired portion of one year or more in
their contracts, but none on the claims of other OFWs or local
workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a
peculiar disadvantage, there being a suspect classification
involving vulnerable sector protect by the Constitution, the
Court now subjects the classification to a strict judicial
scrutiny, and determines whether it serves a compelling state
interest through the least restrictive means.
4. (*) The subject clause does not state or imply and definitive
governmental purpose; and it is for that precise reason that the
clause violates not just petitioner’s right to equal protection,
but also her right to substantive due process under Section 1,
Article III of the Constitution. The subject clause being
unconstitutional, petitioner is entitled to his salaries for the
entire unexpired period nine months and 23 days of his
employment contract, pursuant to law and jurisprudence prior
to the enactment of R.A. 8042.
2. Direct Hiring (Art. 18 Labor Code)
3. Contractual Nature of Overseas Employment
a. Millares v. NLRC
i. (*) From the foregoing cases, it is clear that seafarers are considered
contractual employees. They can not be considered as regular
employees under Article 280 of the Labor Code. Their employment is
governed by the contracts they sign every time they are rehired and
their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They
fall under the exception of Article 280 whose employment has been
fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of engagement
of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the
season. We need not depart from the rulings of the Court in the two
aforementioned cases which indeed constitute stare decisis with
respect to the employment status of seafarers.
ii. (*) Petitioners insist that they should be considered regular
employees, since they have rendered services which are usually
necessary and desirable to the business of their employer, and that
they have rendered more than twenty (20) years of service. While this
may be true, the Brent case has, however, held that there are certain

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forms of employment which also require the performance of usual
and desirable functions and which exceed one year but do not
necessarily attain regular employment status under Article 280.
Overseas workers including seafarers fall under this type of
employment which are governed by the mutual agreements of the
parties.
iii. (*) In this jurisdiction and as clearly stated inthe Coyoca case,
Filipino seamen are governed by the Rules and Regulations of the
POEA. The Standard Employment Contract governing the
Employment of All Filipino Seamen on Board Ocean-Going Vessels of
the POEA, particularly in Part I, Sec. C specifically provides that the
contract of seamen shall be for a fixed period. And in no case should
the contract of seamen be longer than 12 months.
b. Santiago v. CF Sharp
i. (*) There is no question that the parties entered into an
employment contract on 3 February 1998, whereby petitioner
was contracted by respondent to render services on board “MSV
Seaspread” for the consideration of US$515.00 per month for
nine (9) months, plus overtime pay. However, respondent failed
to deploy petitioner from the port of Manila to Canada.
Considering that petitioner was not able to depart from the
airport or seaport in the point of hire, the employment contract
did not commence, and no employer-employee relationship was
created between the parties.
ii. (*) A distinction must be made between the perfection of the
employment contract and the commencement of the employer-
employee relationship. The perfection of the contract, which in
this case coincided with the date of execution thereof, occurred
when petitioner and respondent agreed on the object and the
cause, as well as the rest of the terms and conditions therein.
The commencement of the employer-employee relationship, as
earlier discussed, would have taken place had petitioner been
actually deployed from the point of hire. Thus, even before the
start of any employer-employee relationship, contemporaneous
with the perfection of the employment contract was the birth of
certain rights and obligations, the breach of which may give
rise to a cause of action against the erring party. Thus, if the
reverse had happened, that is the seafarer failed or refused to
be deployed as agreed upon, he would be liable for damages.
iii. (*) While the POEA Standard Contract must be recognized and
respected, neither the manning agent nor the employer can
simply prevent a seafarer from being deployed without a valid
reason. Respondent’s act of preventing petitioner from
departing the port of Manila and boarding “MSV Sea-spread”
constitutes a breach of contract, giving rise to petitioner’s cause
of action. Respondent unilaterally and unreasonably reneged on

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its obligation to deploy petitioner and must therefore answer for
the actual damages he suffered.
iv. (*) We take exception to the Court of Appeals’ conclusion that
damages are not recoverable by a worker who was not deployed
by his agency. The fact that the POEA Rules are silent as to the
payment of damages to the affected seafarer does not mean that
the seafarer is precluded from claiming the same. The sanctions
provided for non-deployment do not end with the suspension or
cancellation of license or fine and the return of all documents at
no cost to the worker. They do not forfend a seafarer from
instituting an action for damages against the employer or
agency which has failed to deploy him.
v. Despite the absence of an employeremployee relationship
between petitioner and respondent, the Court rules that the
NLRC has jurisdiction over petitioner’s complaint. The
jurisdiction of labor arbiters is not limited to claims arising
from employer-employee relationships. Section 10 of R.A. No.
8042 (Migrant Workers Act), provides that: Sec.10.Money
Claims.—Notwithstanding any provision of law to the contrary,
the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the
filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of
damages. x x x [Emphasis supplied] Since the present petition
involves the employment contract entered into by petitioner for
overseas employment, his claims are cognizable by the labor
arbiters of the NLRC.
vi. Respondent is thus liable to pay petitioner actual damages in
the form of the loss of nine (9) months’ worth of salary as
provided in the contract. He is not, however, entitled to
overtime pay. While the contract indicated a fixed overtime
pay, it is not a guarantee that he would receive said amount
regardless of whether or not he rendered overtime work. Even
though petitioner was “prevented without valid reason from
rendering regular much less overtime service,” the fact remains
that there is no certainty that petitioner will perform overtime
work had he been allowed to board the vessel. The amount of
US$286.00 stipulated in the contract will be paid only if and
when the employee rendered overtime work. This has been the
tenor of our rulings in the case of Stolt-Nielsen Marine Services
(Phils.), Inc. v. National Labor Relations Commission, 258

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SCRA 643 (1996), where we discussed the matter in this light:
The contract provision means that the fixed overtime pay of
30% would be the basis for computing the overtime pay if and
when overtime work would be rendered. Simply stated, the
rendition of overtime work and the submission of sufficient
proof that said work was actually performed are conditions to
be satisfied before a seaman could be entitled to overtime pay
which should be computed on the basis of 30% of the basic
monthly salary. In short, the contract provision guarantees the
right to overtime pay but the entitlement to such benefit must
first be established. Realistically speaking, a seaman, by the
very nature of his job, stays on board a ship or vessel beyond
the regular eight-hour work schedule. For the employer to give
him overtime pay for the extra hours when he might be
sleeping or attending to his personal chores or even just lulling
away his time would be extremely unfair and unreasonable.
vii. The Court also holds that petitioner is entitled to attorney’s
fees in the concept of damages and expenses of litigation.
Attorney’s fees are recoverable when the defendant’s act or
omission has compelled the plaintiff to incur expenses to
protect his interest. We note that respondent’s basis for not
deploying petitioner is the belief that he will jump ship just like
his brother, a mere suspicion that is based on alleged phone
calls of several persons whose identities were not even
confirmed. Time and again, this Court has upheld management
prerogatives so long as they are exercised in good faith for the
advancement of the employer’s interest and not for the purpose
of defeating or circumventing the rights of the employees under
special laws or under valid agreements. Respondent’s failure to
deploy petitioner is unfounded and unreasonable, forcing
petitioner to institute the suit below. The award of attorney’s
fees is thus warranted.
viii. (*) We likewise do not see respondent’s failure to deploy
petitioner as an act designed to prevent the latter from
attaining the status of a regular employee. Even if petitioner
was able to depart the port of Manila, he still cannot be
considered a regular employee, regardless of his previous
contracts of employment with respondent. In Millares v.
National Labor Relations Commission, 385 SCRA 306 (2002),
the Court ruled that seafarers are considered contractual
employees and cannot be considered as regular employees
under the Labor Code. Their employment is governed by the
contracts they sign every time they are rehired and their
employment is terminated when the contract expires. The

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exigencies of their work necessitates that they be employed on a
contractual basis.
4. Minimum Terms and Conditions of Overseas Employment Contract
II. Regulation and Enforcement
III. Jurisdiction of POEA and Labor Arbiter (RA 8042 Sec. 19)
IV. Repatriation of Workers (Sec. 15, RA 8042)
1. Equi Asia Placement Inc. v. DFA and DOLE
a. (*) Petitioner’s argument that Section 15 does not provide that it shall be
primarily responsible for the repatriation of a deceased OFW is specious and
plain nitpicking. While Republic Act No. 8042 does not expressly state that
petitioner shall be primarily obligated to transport back here to the
Philippines the remains of the deceased Razon, nevertheless, such duty is
imposed upon him as the statute clearly dictates that “the repatriation of
remains and transport of the personal belongings of a deceased worker and
all costs attendant thereto shall be borne by the principal and/or the local
agency.” The mandatory nature of said obligation is characterized by the
legislature’s use of the word “shall.” That the concerned government
agencies opted to demand the performance of said responsibility solely upon
petitioner does not make said directives invalid as the law plainly obliges a
local placement agency such as herein petitioner to bear the burden of
repatriating the remains of a deceased OFW with or without recourse to the
principal abroad. In this regard, we see no reason to invalidate Section 52 of
the omnibus rules as Republic Act No. 8042 itself permits the situation
wherein a local recruitment agency can be held exclusively responsible for
the repatriation of a deceased OFW.
b. (*) We do not see any reason to stamp Section 53 of the Omnibus Rules as
invalid for allegedly contravening Section 15 of the law which states that a
placement agency shall not be responsible for a worker’s repatriation should
the termination of the employer-employee relationship be due to the fault of
the OFW. To our mind, the statute merely states the general principle that
in case the severance of the employment was because of the OFW’s own
undoing, it is only fair that he or she should shoulder the costs of his or her
homecoming. Section 15 of Republic Act No. 8042, however, certainly does
not preclude a placement agency from establishing the circumstances
surrounding an OFW’s dismissal from service in an appropriate proceeding.
As such determination would most likely take some time, it is only proper
that an OFW be brought back here in our country at the soonest possible
time lest he remains stranded in a foreign land during the whole time that
recruitment agency contests its liability for repatriation.
c. (*) As for the sufficiency of standard test, this Court had, in the past,
accepted as sufficient standards the following: “public interest,” “justice and
equity,” “public convenience and welfare,” and “simplicity, economy and
welfare.” In this case, we hold that the legislature’s pronouncements that
Republic Act No. 8042 was enacted with the thought of upholding the
dignity of the Filipinos may they be here or abroad and that the State shall
at all times afford full protection to labor, both here and abroad, meet the
requirement and provide enough guidance for the formulation of the
omnibus rules.

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V. Nationality Requirement (Art. 27 Labor Code)
VI. Hiring of Foreign Nationals for Domestic Employment (Art. 40 and 41 Labor
Code)
EMPLOYER-EMPLOYEE RELATIONSHIP
I. Four Fold Test
a. <Republic v. SSS>
i. (*) In determining the existence of an employer-employee relationship,
the following elements are considered: (1) the selection and
engagement of the workers; (2) the payment of wages by whatever
means; (3) the power of dismissal; and (4) the power to control the
worker’s conduct, with the latter assuming primacy in the overall
consideration. The most important element is the employer’s control of
the employee’s conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish. The power
of control refers to the existence of the power and not necessarily to
the actual exercise thereof. It is not essential for the employer to
actually supervise the performance of duties of the employee; it is
enough that the employer has the right to wield that power. All the
aforesaid elements are present in this case.
ii. (*) As previously pointed out by this Court, an employee-employer
relationship actually exists between the respondent cooperative and
its owners-members. The four elements in the four-fold test for the
existence of an employment relationship have been complied with. The
respondent cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The
existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract, when the terms and
surrounding circumstances show otherwise. The employment status of
a person is defined and prescribed by law and not by what the parties
say it should be.
b. <Great Pacific Life Assurance v. NLRC>
i. Article 280 of the Labor Code provides that “[t]he provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or
trade of the employer.
ii. Furthermore, in determining who is considered an “employee”, the
Court has time and again applied the “four-fold” test, with control
being the most crucial and determinative indicator of an employer-
employee relationship. The “employer” must have control (or must
have reserved the right to control) not only over the result of the
“employee’s” work but also the means and methods by which it is to be
accomplished.

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iii. Applying the above, the Court finds that, as correctly held by public
respondent, the relationships of the Ruiz brothers and Grepalife were
those of employer-employee.
iv. Moreover, it is well-settled that the existence of an employer-employee
relationship is ultimately a question of fact, and such findings of fact
of the labor arbiter and the NLRC shall be accorded not only respect
but even finality when supported by substantial evidence.
v. (**) Furthermore, in determining who is considered an
“employee”, the Court has time and again applied the “four-fold”
test,** with control being the most crucial and determinative
indicator of an employer-employee relationship. The “employer”
must have control (or must have reserved the right to control)
not only over the result of the “employee’s” work but also the
means and methods by which it is to be accomplished
II. Economic Reality Test
a. <Orozco v. CA> (2005)
i. (none)
b. <Orozco v. CA> (2008)
i. The existence of an employer-employee relationship is essentially a
question of fact. Factual findings of quasi-judicial agencies like the
NLRC are generally accorded respect and finality if supported by
substantial evidence. Considering, however, that the CA’s findings are
in direct conflict with those of the Labor Arbiter and NLRC, this Court
must now make its own examination and evaluation of the facts of this
case. It is true that petitioner herself admitted that she “was not, and
[had] never been considered respondent’s employee because the terms
of works were arbitrarily decided upon by the respondent.” However,
the employment status of a person is defined and prescribed by law
and not by what the parties say it should be.
ii. (*) This Court has constantly adhered to the “four-fold test” to
determine whether there exists an employer-employee relationship
between parties. The four elements of an employment relationship
are: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee’s conduct. Of these four elements, it is the power
of control which is the most crucial and most determinative factor, so
important, in fact, that the other elements may even be disregarded.
As this Court has previously held: the significant factor in
determining the relationship of the parties is the presence or absence
of supervisory authority to control the method and the details of
performance of the service being rendered, and the degree to which
the principal may intervene to exercise such control. In other words,
the test is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to the
means and methods by which the same is accomplished.
iii. Petitioner has misconstrued the “control test,” as did the Labor
Arbiter and the NLRC. Not all rules imposed by the hiring party on
the hired party indicate that the latter is an employee of the former.

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Rules which serve as general guidelines towards the achievement of
the mutually desired result are not. It should, however, be obvious
that not every form of control that the hiring party reserves to himself
over the conduct of the party hired in relation to the services rendered
may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term.
A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of service that
gives untrammelled freedom to the party hired and eschews any
intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike
the second, which address both the result and the means used to
achieve it. x x x
iv. The newspaper’s power to approve or reject publication of any specific
article she wrote for her column cannot be the control contemplated in
the “control test,” as it is but logical that one who commissions
another to do a piece of work should have the right to accept or reject
the product. The important factor to consider in the “control test” is
still the element of control over how the work itself is done, not just
the end result thereof. In contrast, a regular reporter is not as
independent in doing his or her work for the newspaper. We note the
common practice in the newspaper business of assigning its regular
reporters to cover specific subjects, geographical locations, government
agencies, or areas of concern, more commonly referred to as “beats.” A
reporter must produce stories within his or her particular beat and
cannot switch to another beat without permission from the editor.
Inmost newspapers also, a reporter must inform the editor about the
story that he or she is working on for the day. The story or article
must also be submitted to the editor at a specified time. Moreover, the
editor caneasily pull out a reporter from one beat and ask him or her
to cover another beat, if the need arises.
v. Although petitioner had a weekly deadline to meet, she was not
precluded from submitting her column ahead of time or from
submitting columns to be published at a later time. More importantly,
respondents did not dictate upon petitioner the subject matter of her
columns, but only imposed the general guideline that the article
should conform to the standards of the newspaper and the general
tone of the particular section. Where a person who works for another
performs his job more or less at his own pleasure, in the manner he
sees fit, not subject to definite hours or conditions of work, and is
compensated according to the result of his efforts and not the amount
thereof, no employer-employee relationship exists.

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vi. Aside from the control test, this Court has also used the economic
reality test. The economic realities prevailing within the activity or
between the parties are examined, taking into consideration the
totality of circumstances surrounding the true nature of the
relationship between the parties. This is especially appropriate when,
as in this case, there is no written agreement or contract on which to
base the relationship. In our jurisdiction, the benchmark of economic
reality in analyzing possible employment relationships for purposes of
applying the Labor Code ought to be the economic dependence of the
worker on his employer.
vii. Petitioner’s main occupation is not as a columnist for respondent but
as a women’s rights advocate working in various women’s
organizations. Likewise, she herself admits that she also contributes
articles to other publications. Thus, it cannot be said that petitioner
was dependent on respondent PDI for her continued employment in
respondent’s line of business. The inevitable conclusion is that
petitioner was not respondent PDI’s employee but an independent
contractor, engaged to do independent work.
viii. The instant case presents a parallel to Sonza. Petitioner was engaged
as a columnist for her talent, skill, experience, and her unique
viewpoint as a feminist advocate. How she utilized all these in writing
her column was not subject to dictation by respondent. As in Sonza,
respondent PDI was not involved in the actual performance that
produced the finished product. It only reserved the right to shorten
petitioner’s articles based on the newspaper’s capacity to accommodate
the same. This fact, we note, was not unique to petitioner’s column. It
is a reality in the newspaper business that space constraints often
dictate the length of articles and columns, even those that regularly
appear therein.
III. Other Forms of Relationship
a. Independent Contractor/Job Contractors
i. D.O. No. 18-A
ii. <Insular Life Assurance Co. Ltd. V. NLRC>
1. (*) It is true that the “control test” expressed in the following
pronouncement of the Court in the 1956 case of Viana vs. Alejo
Al-Lagadan: “x x x In determining the existence of employer-
employee relationship, the following elements are generally
considered, namely: (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 employee conduct—although
the latter is the most important element (35 Am. Jur. 445). x x
x,” has been followed and applied in later cases, some fairly
recent. Indeed, it is without question a valid test of the
character of a contract or agreement to render service. It
should, however, be obvious that not every form of control that
the hiring party reserves to himself over the conduct of the
party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the

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term. A line must be drawn somewhere, if the recognized
distinction between an employee and an individual contractor
is not to vanish altogether.
2. (*) Logically, the line should be drawn between rules that
merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the
result, create no employer-employee relationship unlike the
second, which address both the result and the means used to
achieve it. The distinction acquires particular relevance in the
case of an enterprise affected with public interest, as is the
business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations
between insurer and insured but also to the internal affairs of
the insurance company. Rules and regulations governing the
conduct of the business are provided for in the Insurance Code
and enforced by the Insurance Commissioner. It is, therefore,
usual and expected for an insurance company to promulgate a
set of rules to guide its commission agents in selling its policies
that they may not run afoul of the law and what it requires or
prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and
also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None of
these really invades the agent’s contractual prerogative to
adopt his own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be said to
establish an employer-employee relationship between him and
the Company.
3. The Court, therefore, rules that under the contract invoked by
him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for
unpaid commissions should have been litigated in an ordinary
civil action. The Labor Arbiter erred in taking cognizance of,
and adjudicating, said claim, being without jurisdiction to do
so, as did the respondent NLRC in affirming the Arbiter’s
decision. This conclusion renders it unnecessary and premature
to consider Basiao’s claim for commissions on its merits.
iii. <Singer Sewing Machine v. Drilon>
1. The present case mainly calls for the application of the control
test, which if not satisfied, would lead us to conclude that no
employer-employee relationship exists. Hence, if the union
members are not employees, no right to organize for purposes
of bargaining, nor to be certified as such bargaining agent can
ever be recognized. The following elements are generally
considered in the determination of the employer-employee

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relationship; “(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 employee’s conduct—although
the latter is the most important element”
2. (*) The Agreement confirms the status of the collecting agent in
this case as an independent contractor not only because he is
explicitly described as such but also because the provisions
permit him to perform collection services for the company
without being subject to the control of the latter except only as
to the result of his work. After a careful analysis of the
contents of the agreement, we rule in favor of the petitioner.
The requirement that collection agents utilize only receipt
forms and report forms issued by the Company and that
reports shall be submitted at least once a week is not
necessarily an indication of control over the means by which
the job of collection is to be performed. The agreement itself
specifically explains that receipt forms shall be used for the
purpose of avoiding a co-mingling of personal funds of the
agent with the money collected on behalf of the Company.
Likewise, the use of standard report forms as well as the
regular time within which to submit a report of collection are
intended to facilitate order in office procedures. Even if the
report requirements are to be called control measures, any
control is only with respect to the end result of the collection
since the requirements regulate the things to be done after the
performance of the collection job or the rendition of the service.
3. (*) A thorough examination of the facts of the case leads us to
the conclusion that the existence of an employer-employee
relationship between the Company and the collection agents
cannot be sustained. The plain language of the agreement
reveals that the designation as collection agent does not create
an employment relationship and that the applicant is to be
considered at all times as an independent contractor. This is
consistent with the first rule of interpretation that the literal
meaning of the stipulations in the contract controls (Article
1370, Civil Code; La Suerte Cigar and Cigarette Factory v.
Director of Bureau of Labor Relations, 123SCRA 679 [1983]).
No such words as “to hire and employ” are present. Moreover,
the agreement did not fix an amount for wages nor the
required working hours. Compensation is earned only on the
basis of the tangible results produced, i.e., total collections
made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment
Planning Corp. of the Philippines v. Social Security System, 21
SCRA 924 [1967] which involved commission agents, this Court
had the occasion to rule, thus: “We are convinced from the facts
that the work of petitioner’s agents or registered
representatives more nearly approximates that of an
independent contractor than that of an employee. The latter is
paid for the labor he performs, that is, for the acts of which

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ATTY. BUYCO
such labor consists; the former is paid for the result thereof x x
x. xxx xxx xxx Even if an agent of petitioner should devote all of
his time and effort trying to sell its investment plans he would
not necessarily be entitled to compensation therefor. His right to
compensation depends upon and is measured by the tangible
results he produces.”
4. The Court finds the contention of the respondents that the
union members are employees under Article 280 of the Labor
Code to have no basis. The definition that regular employees
are those who perform activities which are desirable and
necessary for the business of the employer is not determinative
in this case. Any agreement may provide that one party shall
render services for and in behalf of another for a consideration
(no matter how necessary for the latter’s business) even
without being hired as an employee. This is precisely true in
the case of an independent contractorship as well as in an
agency agreement. The Court agrees with the petitioner’s
argument that Article 280 is not the yardstick for determining
the existence of an employment relationship because it merely
distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining
the right of an employee to certain benefits, to join or form a
union, or to security of tenure. Article 280 does not apply where
the existence of an employment relationship is in dispute.
5. The Court finds that since private respondents are not
employees of the Company, they are not entitled to the
constitutional right to join or form a labor organization for
purposes of collective bargaining. Accordingly, there is no
constitutional and legal basis for their “union” to be granted
their petition for direct certification. This Court made this
pronouncement in La Suerte Cigar and Cigarette Factory v.
Director of Bureau of Labor Relations, supra: “x x x The
question of whether employer-employee relationship exists is a
primordial consideration before extending labor benefits under
the workmen’s compensation, social security, medicare,
termination pay and labor relations law. It is important in the
determination of who shall be included in a proposed
bargaining unit because it is the sine qua non, the fundamental
and essential condition that a bargaining unit be composed of
employees. Failure to establish this juridical relationship
between the union members and the employer affects the
legality of the union itself. It means the ineligibility of the
union members to present a petition for certification election as
well as to vote therein x x x.” (At p. 689)
iv. <Besa v. Trajano>
1. The Office of the Solicitor General as counsel for public
respondent agrees that in the present case, no employer-
employee relationship exists.

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2. The shoe shiner is distinct from a piece worker because while
the latter is paid for work accomplished, he does not, however,
contribute anything to the capital of the employer other than
his service. It is the employer of the piece worker who pays his
wages, while the shoe shiner in this instance is paid directly by
his customer. The piece worker is paid f or work accomplished
without regard or concern to the profit as derived by his
employer, but in the case of the shoe shiners, the proceeds
derived from the trade are always divided share and share
alike with respondent Besa. The shoe shiner can take his share
of the proceeds everyday if he wanted to or weekly as is the
practice of Besa's. The employer of the piece worker supervises
and controls his work, but in the case of the shoe shiner,
respondent Besa does not exercise any degree of control or
supervision over their person and their work. All these are not
obtaining in the case of a piece worker as he is in fact an
employee in contemplation of law, distinct from the shoe shiner
in this instance who, in relation to respondent Mamerto B.
Besa, is a partner in the trade. Consequently, employeremployee
relationship between members of the Petitioning union and
respondent Mamerto B. Besa being absent, the latter could not
be held guilty of the unfair labor practice acts imputed against
him."
3. The Supreme Court in the Rosario Brothers case ruled that; "A
basic factor underlying the exercise of rights under the Labor
Code is the status of employment. It is important in the
determination of who shall be included in a proposed
bargaining unit because it is sine qua non. The fundamental
and essential condition that a bargaining unit be composed of
employees. Failure to establish this juridical relationship
between the union members and the employer affects the
legality of the union itself. It means the ineligibility of the
union members to present a petition for certification election as
well as to vote therein. Existence of employer-employee
relationship is determined by the following elements, namely,
a] selection and engagement of the employee; b] payment of
wages; c] powers of dismissal; and d] power to control the
employee's conduct although the latter is the most important
element (Rosario Brothers Inc. vs. Ople, 131 SCRA 72, 1984)"
v. <Sonza v. ABS-CBN Broadcasting Corp.>
1. The existence of an employer-employee relationship is a
question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also
finality when supported by substantial evidence. Substantial
evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion. A party
cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment

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for that of the tribunal in determining where the weight of
evidence lies or what evidence is credible.
2. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer’s power to control the
employee on the means and methods by which the work is
accomplished. The last element, the so-called “control test,” is
the most important element.
3. (*) Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of
SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills,
talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him
through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA
does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test
being the most important element.
4. (*) All the talent fees and benefits paid to SONZA were the
result of negotiations that led to the Agreement. If SONZA
were ABS-CBN’s employee, there would be no need for the
parties to stipulate on benefits such as “SSS, Medicare, x x x
and 13th month pay” which the law automatically incorporates
into every employer-employee contract. Whatever benefits
SONZA enjoyed arose from contract and not because of an
employer-employee relationship.
5. (*) SONZA’s talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because
of SONZA’s unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting
alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
6. (*) Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor. The
control test is the most important test our courts apply in
distinguishing an employee from an independent contractor.
This test is based on the extent of control the hirer exercises
over a worker. The greater the supervision and control the

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hirer exercises, the more likely the worker is deemed an
employee. The converse holds true as well—the less control the
hirer exercises, the more likely the worker is considered an
independent contractor.
7. (*) We find that ABS-CBN was not involved in the actual
performance that produced the finished product of SONZA’s
work. ABS-CBN did not instruct SONZA how to perform his
job. ABSCBN merely reserved the right to modify the program
format and airtime schedule “for more effective programming.”
ABS-CBN’s sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of
SONZA’s work.
8. (*) A radio broadcast specialist who works under minimal
supervision is an independent contractor. SONZA’s work as
television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not
show that ABS-CBN exercised any supervision and control over
how SONZA utilized his skills and talent in his shows.
9. (*) Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent
contractor can validly provide his services exclusively to the
hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
10. SONZA argues that Policy Instruction No. 40 issued by then
Minister of Labor Blas Ople on 8 January 1979 finally settled
the status of workers in the broadcast industry. Under this
policy, the types of employees in the broadcast industry are the
station and program employees. Policy Instruction No. 40 is a
mere executive issuance which does not have the force and
effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZA’s status. A mere
executive issuance cannot exclude independent contractors
from the class of service providers to the broadcast industry.
The classification of workers in the broadcast industry into
only two groups under Policy Instruction No. 40 is not binding
on this Court, especially when the classification has no basis
either in law or in fact.
11. The right of labor to security of tenure as guaranteed in the
Constitution arises only if there is an employeremployee
relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship.
To hold that every person who renders services to another for a
fee is an employee—to give meaning to the security of tenure
clause— will lead to absurd results.
12. The Labor Arbiter can decide a case based solely on the
position papers and the supporting documents without a formal
trial. The holding of a formal hearing or trial is something that
the parties cannot demand as a matter of right. If the Labor

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Arbiter is confident that he can rely on the documents before
him, he cannot be faulted for not conducting a formal trial,
unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the
rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.


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LABOR LAW REVIEW

2018 (2ND SEMESTER)

FUNDAMENTAL PRINCIPLES AND POLICIES

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II. Civil Code

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V. Preference for Labor; Liberal Interpretation

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VI. Application of Technical Rules: Burden of Proof

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VII. No Work No Pay

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VIII. Equal Day for Equal Work

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IX. Last In First Out

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XI. Four Fold Test

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XII. Management Prerogative

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RECRUITMENT AND PLACEMENT

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