CALALANG VS WILLIAMS
upon the constitutional precept regarding the promotion of
Facts:
The National Traffic Commission, in its resolution of July 17,
1940, resolved to recommend to the Director of the Public
Works and to the Secretary of Public Works and
Communications that animal-drawn vehicles be prohibited from
passing along the following for a period of one year from the
date of the opening of the Colgante Bridge to traffic:
1) Rosario Street extending from Plaza Calderon de la Barca
to Dasmariñas Street from 7:30Am to 12:30 pm and from 1:30
pm to 530 pm; and
2) along Rizal Avenue extending from the railroad crossing at
Antipolo Street to Echague Street from 7 am to 11pm
The Chairman of the National Traffic Commission on July 18,
1940 recommended to the Director of Public Works with the
approval of the Secretary of Public Works the adoption of
thethemeasure proposed in the resolution aforementioned in
pursuance of the provisions of theCommonwealth Act No. 548
which authorizes said Director with the approval from the
Secretary of the Public Works and Communication to
promulgate rules and regulations to regulate and control the
use of and traffic on national roads.
On August 2, 1940, the Director recommended to the
Secretary the approval of the recommendations made by the
Chairman of the National Traffic Commission with
modifications. The Secretary of Public Works approved the
recommendations on August 10,1940. The Mayor of Manila
and the Acting Chief of Police of Manila have enforced and
caused to be enforced the rules and regulation. As a
consequence, all animal-drawn vehicles are not allowed to
pass and pick up passengers in the places above mentioned to
the detriment not only of their owners but of the riding public as
well.
Issues:
1) Whether the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act
NO. 548 constitute an unlawful inference with legitimate
business or trade and abridged the right to personal liberty and
freedom of locomotion?
LABOR STANDARDS
2) Whether the rules and regulations complained of infringe
social justice to insure the well-being and economic security of
all the people?
Held:
1) No. The promulgation of the Act aims to promote safe transit
upon and avoid obstructions on national roads in the interest
and convenience of the public. In enacting said law, the
National Assembly was prompted by considerations of public
convenience and welfare. It was inspired by the desire to
relieve congestion of traffic, which is a menace to the public
safety. Public welfare lies at the bottom of the promulgation of
the said law and the state in order to promote the general
welfare may interfere with personal liberty, with property, and
with business and occupations. Persons and property may be
subject to all kinds of restraints and burdens in order to secure
the general comfort, health, and prosperity of the State. To this
fundamental aims of the government, the rights of the
individual are subordinated. Liberty is a blessing which should
not be made to prevail over authority because society will fall
into anarchy. Neither should authority be made to prevail over
liberty because then the individual will fall into slavery. The
paradox lies in the fact that the apparent curtailment of liberty
is precisely the very means of insuring its preserving.
2) No. Social justice is “neither communism, nor despotism,
nor atomism, nor anarchy,” but the humanization of laws and
the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception
may at least be approximated. Social justice means the
promotion of the welfare of all the people, the adoption by the
Government of measures calculated to insure economic
stability of all the competent elements of society, through the
maintenance of a proper economic and social equilibrium in
the interrelations of the members of the community,
constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the
time-honored principles of salus populi estsuprema lex.
Social justice must be founded on the recognition of the
necessity of interdependence among divers and diverse units
of a society and of the protection that should be equally and
evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and
paramount objective of the state of promoting health, comfort
Page 1
and quiet of all persons, and of bringing about “the greatest
good to the greatest number.”
ALALAYAN VS NATIONAL POWER CORPORATION
Facts:
In 1961, Republic Act No. 3043 (An Act to Further Amend
Commonwealth Act Numbered One Hundred Twenty, as
Amended by Republic Act Numbered Twenty Six Hundred and
Forty One) was passed. This law amended the charter of
NAPOCOR (National Power Corporation). Section 3 of RA
3043 provides that:
a. contractors being supplied by NAPOCOR shall not exceed
an annual profit of 12%;
b. if they do, they shall refund such excess to their customers;
c. that NAPOCOR has the power to renew all existing
contracts with franchise holders for the supply of energy.
Petitioners Santiago Alalayan and the Philippine Power and
Development Company (PPDC), one/ member of NAPOCOR’s
franchisee with existing and valid contract assailed that the
said provision deprived them from liberty to contract without
due process of law.
Issue:
Whether or not the Section 3 of RA 3043 violates the
petitioner’s liberty to contract?
Held:
No. I is to be admitted of course that property rights find shelter
in specific constitutional provisions, one of which is the due
process clause. It is equally certain that our fundamental law
framed at a time of “surging unrest and dissatisfaction”,26
when there was the fear expressed in many quarters that a
constitutional democracy, in view of its commitment to the
claims of property, would not be able to cope effectively with
the problems of poverty and misery that unfortunately afflict so
many of our people, is not susceptible to the indictment that
the government therein established is impotent to take the
necessary remedial measures.
It is to be remembered that the liberty relied upon is not
freedom of the mind, which occupies a preferred position, nor
freedom of the person, but the liberty to contract, associated
with business activities, which, as has been so repeatedly
announced, may be subjected, in the interest of the general
welfare under the police power, to restrictions varied in
LABOR STANDARDS
character and wide ranging in scope as long as due process is
observed.
In order to promote the general welfare the state may interfere
with personal liberty, with property, and with business and
occupations. Persons and property may be subjected to all
kinds of restraints and burdens, in order to secure the general
comfort, health, and prosperity of the state
AGABON VS NLRC
Facts:
Private respondent Riviera Home Improvements, Inc. is
engaged in the business of selling and installing ornamental
and construction materials. It employed petitioners Virgilio
Agabon and Jenny Agabon as gypsum board and cornice
installers on January 2, 1992 until February 23, 1999 when
they were dismissed for abandonment of work. Thus,
Petitioners then filed a complaint for illegal dismissal and
payment of money claims
Petitioners also claim that private respondent did not comply
with the twin requirements of notice and hearing. Private
respondent, on the other hand, maintained that petitioners
were not dismissed but had abandoned their work. NLRC ruled
there was just cause and petitioners were not entitled to
backwages and separation pay. The CA in turn ruled that the
dismissal was not illegal because they have abandoned their
work but ordered the payment of money claims.
Issue:
Whether or not petitioners were illegally dismissed.
Held:
Accordingly, petitioners’ dismissal was for a just cause. They
had abandoned their employment and were already working
for another employer.
To dismiss an employee, the law requires not only the
existence of a just and valid cause but also enjoins the
employer to give the employee the opportunity to be heard and
to defend himself.
Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment. It is a form of neglect of
duty, hence, a just cause for termination of employment by the
employer.
Page 2

After establishing that the terminations were for a just and valid
cause, we now determine if the procedures for dismissal were
observed.
The procedure for terminating an employee is found in Book
VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the
Labor Code:
Standards of due process: requirements of notice. – In all
cases of termination of employment, the following standards of
due process shall be substantially observed:
For termination of employment based on just causes as
defined in Article 282 of the Code:
A written notice served on the employee specifying the ground
or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side;
A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present
his evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee
indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on
the employee’s last known address.
Procedurally, (1) if the dismissal is based on a just cause
under Article 282, the employer must give the employee two
written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the
employment: a notice specifying the grounds for which
dismissal is sought a hearing or an opportunity to be heard and
after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer
must give the employee and the Department of Labor and
Employment written notices 30 days prior to the effectivity of
his separation.
From the foregoing rules four possible situations may be
derived: (1) the dismissal is for a just cause under Article 282
of the Labor Code, for an authorized cause under Article 283,
or for health reasons under Article 284, and due process was
observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just
LABOR STANDARDS
or authorized cause and there was no due process; and (4) the
dismissal is for just or authorized cause but due process was
not observed.
The present case squarely falls under the fourth situation. The
dismissal should be upheld because it was established that the
petitioners abandoned their jobs to work for another company.
Private respondent, however, did not follow the notice
requirements and instead argued that sending notices to the
last known addresses would have been useless because they
did not reside there anymore. Unfortunately for the private
respondent, this is not a valid excuse because the law
mandates the twin notice requirements to the employee’s last
known address. Thus, it should be held liable for non-
compliance with the procedural requirements of due process.
Petition denied. CA affirmed with modifications.
PAL VS NLRC
Facts:
On March 15, 1985, the Philippine Airlines, Inc. (PAL)
completely revised its 1966 Code of Discipline. The Code was
circulated among the employees and was immediately
implemented, and some employees were forthwith subjected
to the disciplinary measures embodied therein.
On August 20, 1985, the Philippine Airlines Employees
Association (PALEA) filed a complaint before the National
Labor Relations Commission (NLRC) for unfair labor practice
with the following remarks: “ULP with arbitrary implementation
of PAL’s Code of Discipline without notice and prior discussion
with Union by Management”. In its position paper, PALEA
contended that PAL, by its unilateral implementation of the
Code, was guilty of unfair labor practice, specifically
Paragraphs E and G of Article 249 and Article 253 of the Labor
Code. PALEA alleged that copies of the Code had been
circulated in limited numbers; that being penal in nature the
Code must conform with the requirements of sufficient
publication, and that the Code was arbitrary, oppressive, and
prejudicial to the rights of the employees. It prayed that
implementation of the Code be held in abeyance; that PAL
should discuss the substance of the Code with PALEA; that
employees dismissed under the Code be reinstated and their
cases subjected to further hearing; and that PAL be declared
guilty of unfair labor practice and be ordered to pay damages.
Page 3
PAL filed a motion to dismiss the complaint, asserting its
prerogative as an employer to prescibe rules and regulations
regarding employess’ conduct in carrying out their duties and
functions, and alleging that by implementing the Code, it had
not violated the collective bargaining agreement (CBA) or any
provision of the Labor Code.
Labor Arbiter Isabel P. Ortiguerra handling the case called the
parties to a conference but they failed to appear at the
scheduled date. Interpreting such failure as a waiver of the
parties’ right to present evidence, the labor arbiter considered
the case submitted for decision. On November 7, 1986, a
decision was rendered finding no bad faith on the part of PAL
in adopting the Code and ruling that no unfair labor practice
had been committed. However, the arbiter held that PAL was
“not totally fault free” considering that while the issuance of
rules and regulations governing the conduct of employees is a
“legitimate management prerogative” such rules and
regulations must meet the test of “reasonableness, propriety
and fairness.”
PAL appealed to the NLRC. On August 19, 1988, the NLRC
through Commissioner Encarnacion, with Presiding
Commissioner Bonto-Perez and Commissioner Maglaya
concurring, found no evidence of unfair labor practice
committed by PAL and affirmed the dismissal of PALEA’s
charge.
PAL then filed the instant petition for certiorari charging public
respondents with grave abuse of discretion
Issue:
Whether the management may be compelled to share with the
union or its employees its prerogative of formulating a code of
discipline.
Held:
It was only on March 2, 1989, with the approval of Republic Act
No. 6715, amending Article 211 of the Labor Code, that the
law explicitly considered it a State policy “(t)o ensure the
participation of workers in decision and policy-making
processes affecting the rights, duties and welfare.” However,
even in the absence of said clear provision of law, the exercise
of management prerogatives was never considered boundless.
San Miguel Brewery vs Ople: So long as a company’s
management prerogatives are exercised in good faith for the
LABOR STANDARDS
advancement of the employer’s interest and not for the
purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this
Court will uphold them.
UST vs NLRC: All this points to the conclusion that the
exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective
bargaining agreement, or the general principles of fair play and
justice.
A line must be drawn between management prerogatives
regarding business operations per se and those which affect
the rights of the employees. In treating the latter, management
should see to it that its employees are at least properly
informed of its decisions or modes action. PAL asserts that all
its employees have been furnished copies of the Code. Public
respondents found to the contrary, which finding, to say the
least is entitled to great respect.
The collective bargaining agreement may not be interpreted as
cession of employees’ rights to participate in the deliberation of
matters which may affect their rights and the formulation of
policies relative thereto. And one such mater is the formulation
of a code of discipline.
Industrial peace cannot be achieved if the employees are
denied their just participation in the discussion of matters
affecting their rights. Thus, even before Article 211 of the labor
Code (P.D. 442) was amended by Republic Act No. 6715, it
was already declared a policy of the State, “(d) to promote the
enlightenment of workers concerning their rights and
obligations . . . as employees.” This was, of course, amplified
by Republic Act No 6715 when it decreed the “participation of
workers in decision and policy making processes affecting their
rights, duties and welfare.” PAL’s position that it cannot be
saddled with the “obligation” of sharing management
prerogatives as during the formulation of the Code, Republic
Act No. 6715 had not yet been enacted (Petitioner’s
Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained.
While such “obligation” was not yet founded in law when the
Code was formulated, the attainment of a harmonious labor-
management relationship and the then already existing state
policy of enlightening workers concerning their rights as
employees demand no less than the observance of
transparency in managerial moves affecting employees’ rights.
Page 4
MANILA ELECTRIC VS SECRETARY OF LABOR
QUISUMBING
Facts:
The parties has a pending case before the Secretary of Labor
who rendered a decision ordering that they execute the CBA
incorporating the modifications made by the Secretary.
Some of the alleged members of the union filed an intervention
and reconsideration as well as the supervisors union. They
were ordered to file comments.Petitioner warns that if the
wage increase of P2,200.00 per month as ordered by the
Secretary is allowed, it would simply pass the cost covering
such increase to the consumers through an increase in the
rate of electricity. This is a non sequitur. The Court cannot be
threatened with such a misleading argument. An increase in
the prices of electric current needs the approval of the
appropriate regulatory government agency and does not
automatically result from a mere increase in the wages of
petitioner’s employees.
An estimate by the All Asia financial analyst stated that
petitioner’s net operating income for the same year was about
P5.7 billion, a figure which the Union relies on to support its
claim. Assuming without admitting the truth thereof, the figure
is higher than the P4.171 billion allegedly suggested by
petitioner as its projected net operating income. The P5.7
billion which was the Secretary’s basis for granting the
P2,200.00 is higher than the actual net income of P5.1 billion
admitted by petitioner. It would be proper then to increase this
Court’s award of P1,900.00 to P2,000.00 for the two years of
the CBA award. For 1992, the agreed CBA wage increase for
rank-and-file was P1,400.00 and was reduced to P1,350.00;
for 1993; further reduced to P1,150.00 for 1994. For
supervisory employees, the agreed wage increase for the
years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50,
respectively. Based on the foregoing figures, the P2,000.00
increase for the two-year period awarded to the rank-and-file is
much higher than the highest increase granted to supervisory
employees.
Issue:
W/N matters of salary are part of management prerogative
Held:
LABOR STANDARDS
Yes. There is no need to consult the Secretary of Labor in
cases involving contracting out for 6 months or more as it is
part of management prerogative. However, a line must be
drawn with respect to management prerogatives on business
operations per se and those which affect the rights of the
workers. Employers must see to it that that employees are
properly informed of its decisions to attain harmonious labor
relations and enlighten the worker as to their rights.
The contracting out business or services is an exercise of
business judgment if it is for the promotion of efficiency and
attainment of economy. Management must be motivated by
good faith and contracting out should not be done to
circumvent the law. Provided there was no malice or that it was
not done arbitrarily, the courts will not interfere with the
exercise of this judgment.
PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION VS
NLRC
Facts:
The private respondent (ANGEL ESQUEJO) used to be a
security guard under the employment of the petitioner
company. He works for 12 hours a day and is receiving a
monthly salary. He was then dismissed by the petitioner
company. Because of this, the respondent filed a complaint
with the Labor Arbiter for the payment of his overtime pay. The
Labor Arbiter ruled that the respondent is entitled to an
overtime pay. The NLRC affirmed the decision of the Labor
Arbiter. Hence, the current petition.
The petitioner contends that the fact that the monthly salary of
the petitioner is higher than the minimum wage provided by
law is already compensatory of the excess of 4 hours of work
rendered by the said employee. It argues that the salary of the
petitioner already includes the payment for the excess of 4
hours of work rendered by the respondent. It also contends
that since there is a meeting of the minds between the
respondent and the petitioner, there is already a perfected
contract which means that the parties are bound by their
agreements.
Issue:
1. WON the contract (overtime pay for work rendered for
four (4) hours in excess of the eight (8) hour regular
working period is already included in the P1,990.00
basic salary), between the parties is binding.
Page 5
 2. WON Laches can be applied.
Held:
1. No. With regard to the petitioner’s second contention that
there is already a perfected contract (overtime pay for work
rendered for four (4) hours in excess of the eight (8) hour
regular working period is already included in the P1,990.00
basic salary), hence the terms and conditions imposed therein
binds the parties to the contract, the Supreme Court held that
while such contention has the weight and force of law, it is still
subject to certain exception. The general right to contract is
subject to a limitation that such terms and conditions must not
be contrary to law, public order, public policy, morals and good
customs. Employment contracts are imbued with public
interest and are therefore subject to the police power of the
state. The subject contract in the case at bar is contrary to
labor laws. Therefore, not binding to the parties of the case.
Generally speaking, contracts are respected as the law
between the contracting parties, and they may establish such
stipulations, clauses, terms and conditions as they may see fit;
and for as long as such agreements are not contrary to law,
morals, good customs, public policy or public order, they shall
have the force of law between them.[18] However, x x x, while
it is the inherent and inalienable right of every man to have the
utmost liberty of contracting, and agreements voluntarily and
fairly made will be held valid and enforced in the courts, the
general right to contract is subject to the limitation that the
agreement must not be in violation of the Constitution, the
statute or some rule of law (12 Am. Jur. pp. 641-642).[19] And
under the Civil Code, contracts of labor are explicitly subject to
the police power of the State because they are not ordinary
contracts but are impressed with public interest.[20] Inasmuch
as in this particular instance the contract is question would
have been deemed in violation of pertinent labor laws, the
provisions of said laws would prevail over the terms of the
contract, and private respondent would still be entitled to
overtime pay.
2. No. Petitioners allegation that private respondent is guilty of
laches is likewise devoid of merit. Laches is defined as failure
or neglect for an unreasonable and unexplained 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 an unreasonable time, warranting the presumption
that the party entitled to assert it has either abandoned or
declined to assert it.[23] The question of laches is addressed
to the sound discretion of the court, and since it is an equitable
doctrine, its application is controlled by equitable
LABOR STANDARDS
considerations. It cannot work to defeat justice or to perpetrate
fraud and injustice.[24] Laches cannot be charged against any
worker when he has not incurred undue delay in the assertion
of his rights. Private respondent filed his complaint within the
three-year reglementary period. He did not sleep on his rights
for an unreasonable length of time.[25]
INNODATA PHILIPPINES INC. VS QUIJADA-LOPEZ
Facts:
Innodata Philippines, Inc., is engaged in the encoding/data
conversion business. It employs encoders, indexers,
formatters, programmers, quality/quantity staff, and others, to
maintain its business and do the job orders of its clients.
Estrella G. Natividad and Jocelyn L. Quejada were employed
as formatters by Innodata Philippines, Inc. They [worked] from
March 4, 1997, until their separation on March 3, 1998. They
believed that their job was necessary and desirable to the
usual business of the company which is data
processing/conversion and that their employment is regular
pursuant to Article 280 of the Labor Code,they filed a
complaint for illegal dismissal and for damages as well as for
attorney’s fees against Innodata Phils., Incorporated.
Innodata contended that their employment contracts expired,
having a fixed period of one (1) year. Since the period expired,
their employment was likewise terminated applying the ruling
in the Brent School case.
Labor Arbiter Donato G. Quinto rendered a judgment in favor
of complainants holding complainants Estella G. Natividad and
Jocelyn Quejada to have been illegally dismissed by Innodata
Philippines Incorporated and Innodata Processing Corporation
and ordering reinstatement to their former position without loss
of seniority rights, or to a substantially equivalent position, and
to pay them jointly and severally, backwages computed from
the time they were illegally dismissed on March 3, 1998 up to
the date of this decision in the amount of P112,535.28 EACH,
or in the total amount of P225,070.56 for the two of them; and
further ordered to pay them attorney’s fees in the amount
equivalent to 10% of their respective awards.
Innodata appealed to NLRC which reversed and set aside the
Labor Arbiter’s decision declaring that the contract was for a
fixed term and therefore, the dismissal at the end of their one
year term agreed upon was valid. An MR was filed but was
denied.
Page 6

The CA ruled that respondents were regular employees in
accordance with Section 280 of the Labor Code. It said that the
fixed-term contract prepared by petitioner was a crude attempt
to circumvent respondents’ right to security of tenure.
The disputed contract reads, as follows:
“TERM/DURATION
The EMPLOYER hereby employs, engages and hires the
EMPLOYEE, and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective March 04, 1997 to
March 03, 1998, a period of one (1) year.
xxxxxxxxx
“TERMINATION
7.1 This Contract shall automatically terminate on March 03,
1998 without need of notice or demand.
xxxxxxxxx
7.4 The EMPLOYEE acknowledges that the EMPLOYER
entered into this Contract upon his express representation that
he/she is qualified and possesses the skills necessary and
desirable for the position indicated herein. Thus, the
EMPLOYER is hereby granted the right to pre-terminate this
Contract within the first three (3) months of its duration upon
failure of the EMPLOYEE to meet and pass the qualifications
and standards set by the EMPLOYER and made known to the
EMPLOYEE prior to execution hereof. Failure of the
EMPLOYER to exercise its right hereunder shall be without
prejudice to the automatic termination of the EMPLOYEE’s
employment upon the expiration of this Contract or
cancellation thereof for other causes provided herein and by
law.”
The contract provided two periods. Aside from the fixed one-
year term set in paragraph 1, paragraph 7.4 provides for a
three-month period during which petitioner has the right to pre-
terminate the employment for the “failure of the employees to
meet and pass the qualifications and standards set by the
employer and made known to the employee prior to” their
employment. In effect, the paragraph 7.4 is a probationary
period.
LABOR STANDARDS
Innodata claims that it was constrained by the nature of its
business to enter into fixed-term employment contracts with
employees assigned to job orders. It relies on the availability of
job orders or undertakings from its clients. Thus, the continuity
of work cannot be ascertained.
Hence, this petition.
Issue:
Whether the alleged fixed-term employment contracts are
valid.
Held:
No, “Art. 1700 of the Civil Code provides that the relations
between capital and labor are not merely contractual. They are
so impressed with public interest that labor contracts must
yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects. Innodata’s
contract of employment failed to comply with the standards set
by law and by this Court. “ A contract of employment is
impressed with public interest. For this reason, provisions of
applicable statutes are deemed written into the contract.
Hence, 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.” Moreover,
in case of doubt, the terms of a contract should be construed in
favor of labor.”
DISPOSITIVE: Petition is DENIED, and the assailed Decision
and Resolution are AFFIRMED. Costs against petitioner.
CIRTEX EMPLOYEES LABOR UNIONS- FFW VS CIRTEX
EMPLOYEES
Facts:
This resolves the motion for reconsideration and supplemental
motion for reconsideration filed by respondent, Cirtek
Electronics, Inc., of the Court’s Decision dated November 15,
2010.
Respondent-movant maintains that the Secretary of Labor
cannot insist on a ruling beyond the compromise agreement
entered into by the parties; and that, as early as February 5,
2010, petitioner Union had already filed with the Department of
Page 7
Labor and Employment (DOLE) a resolution of disaffiliation
from the Federation of Free Workers resulting in the latter’s
lack of personality to represent the workers in the present
case.
Issue:
WON petitioner lost its personality to represent the workers
because of its disaffiliation from the Federation of Free
Workers.
Held:
The issue of disaffiliation is an intra-union dispute which must
be resolved in a different forum in an action at the instance of
either or both the FFW and the Union or a rival labor
organization, not the employer.
Indeed, as respondent-movant itself argues, a local union may
disaffiliate at any time from its mother federation, absent any
showing that the same is prohibited under its constitution or
rule. Such, however, does not result in it losing its legal
personality altogether. Verily, Anglo-KMU v. Samahan Ng Mga
Manggagawang Nagkakaisa Sa Manila Bay Spinning Mills At
J.P. Coats enlightens:
A local labor union is a separate and distinct unit primarily
designed to secure and maintain an equality of bargaining
power between the employer and their employee-members. A
local union does not owe its existence to the federation with
which it is affiliated. It is a separate and distinct voluntary
association owing its creation to the will of its members. The
mere act of affiliation does not divest the local union of its own
personality, neither does it give the mother federation the
license to act independently of the local union. It only gives rise
to a contract of agency where the former acts in representation
of the latter. (emphasis and underscoring supplied)
MR denied.
MISAMIS ORIENTAL II ELECTRIC SERVICE
COOPERATIVE VS VIRGILIO CAGALAWAN
Facts
- MORESCO II, a rural electric cooperative, hired
Cagalawan as a Disconnection Lineman on a
probationary basis. On March 1, 1994 Cagalawan was
LABOR STANDARDS
appointed to the same post this time on a permanent
basis.
- July 17, 2001, he was designated as Acting Head of
the disconnection crew in one of the sub-office in
Misamis Oriental. In a Memorandum, MORESCO II
General Manager Ke-e transferred Cagalawan to
another area as a member of the disconnection crew.
- In a letter dated May 15, 2002, cagalawan assailed his
transfer claiming he was effectively demoted to his
position as head of the disconnection crew to a mere
member. He also averted that such transfer was
inconvenient and prejudicial to him.
- In a memorandum dated May 16, 2002 the Ke-e
explained that said transfer was not a demotion since
he was holding the position only by mere designation
and not appointment. Meanwhile and in view of
Cagalawan’s transfer, Ke-e issued an order recalling
the former’s previous designation as Acting Head of
the disconnection crew of the Balingasag sub-office.
- Cagalawan eventually stopped reporting for work. On
July 1, 2002, he filed a complaint for constructive
dismissal before the Arbitration branch of the NLRC
against MORESCO II and its officers, Ke-e and Danilo
Subrado, in their capacities as General Manager and
Board Chairman, respectively.
- In reply, Cagalawan claimed that was transferred
because he executed an Affidavit in support of his co-
employee Jessie Rances, who filed an illegal dismissal
case against MORESCO II.
Issues
(1) Was the respondent constructively dismissed by the
petitioner?
Ruling
The petition has no merit
MORESCO II’s belated submission of evidence cannot
be permitted.
Labor tribunals, such as the NLRC, are not precluded
from receiving evidence submitted on appeal as technical
rules are not binding in cases submitted before them.
However, any delay in the submission of evidence should
Page 8
be adequately explained and should adequately prove
the allegations sought to be proven.
In the present case, MORESCO II did not cite any reason
why it had failed to file its position paper or present its
cause before the Labor Arbiter despite sufficient notice
and time given to do so. Only after an adverse decision
was rendered did it present its defense and rebut the
evidence of Cagalawan by alleging that his transfer was
made in response to the letter-request of the area
manager of the Gingoog sub-office asking for additional
personnel to meet its collection quota. To our mind,
however, the belated submission of the said letter-
request without any valid explanation casts doubt on its
credibility, specially so when the same is not a newly
discovered evidence. For one, the letter-request was
dated May 8, 2002 or a day before the memorandum for
Cagalawan’s transfer was issued. MORESCO II could
have easily presented the letter in the proceedings before
the Labor Arbiter for serious examination. Why it was not
presented at the earliest opportunity is a serious question
which lends credence to Cagalawan’s theory that it may
have just been fabricated for the purpose of appeal.
It should also be recalled that after Cagalawan received
the memorandum for his transfer to the Gingoog sub-
office, he immediately questioned the basis thereof
through a letter addressed to Ke-e. If at that time there
was already a letter- request from the Gingoog area
manager, Ke-e could have easily referred to or specified
this in his subsequent memorandum of May 16, 2002
which served as his response to Cagalawan’s queries
about the transfer. However, the said memorandum was
silent in this respect. Nevertheless, Cagalawan, for his
part, faithfully complied with the transfer order but with
the reservation to contest its validity precisely because he
was not adequately informed of its real basis. The rule is
that it is within the ambit of the employer’s prerogative to
transfer an employee for valid reasons and according to
the requirement of its business, provided that the transfer
does not result in demotion in rank or diminution of
salary, benefits and other privileges. This Court has
always considered the management’s prerogative to
transfer its employees in pursuit of its legitimate interests.
But this prerogative should be exercised without grave
abuse of discretion and with due regard to the basic
elements of justice and fair play, such that if there is a
showing that the transfer was unnecessary or
inconvenient and prejudicial to the employee, it cannot be
upheld. Here, while we find that the transfer of
Cagalawan neither entails any demotion in rank since he
did not have tenurial security over the position of head of
LABOR STANDARDS
the disconnection crew, nor result to diminution in pay as
this was not sufficiently proven by him, MORESCO II’s
evidence is nevertheless not enough to show that said
transfer was required by the exigency of the electric
cooperative’s business interest. Simply stated, the
evidence sought to be admitted by MORESCO II is not
substantial to prove that there was a genuine business
urgency that necessitated the transfer.
PEOPLE VS VERA REYES
Facts:
The defendant was charged with a violation of Act No. 2549,
as amended by Acts Nos. 3085 and 3958 The information
alleged that from September 9 to October 28, 1936, and for the
some time after, the accused, in his capacity as president and
general manager of the Consolidated Mines, having engaged
the services of Severa Velasco de Vera as stenographer, at an
agreed salary of P35 a month willfully and illegally refused to
pay the salary of said stenographer corresponding to the
above-mentioned period of time, which was long due and
payable, in spite of her repeated demands.
The accused interposed a demurrer on the ground that the
facts alleged in the information do not constitute any offense,
and that even if they did, the laws penalizing it are
unconstitutional.
After the hearing, the court sustained the demurrer, declaring
unconstitutional the last part of section 1 of Act No. 2549 as
last amended by Act No. 3958, which considers as an offense
the facts alleged in the information, for the reason that it
violates the constitutional prohibition against imprisonment for
debt, and dismissed the case, with costs de oficio.
In this appeal the Solicitor-General contends that the court
erred in declaring Act No. 3958 unconstitutional.
Issue:
Whether the said constitutional provision is unconstitutional.
Held:
No. The last part of section 1 considers as illegal the refusal of
an employer to pay, when he can do so, the salaries of his
employees or laborers on the fifteenth or last day of every
Page 9
month or on Saturday of every week, with only two days
extension, and the nonpayment of the salary within the periods
specified is considered as a violation of the law.
The same Act exempts from criminal responsibility the
employer who, having failed to pay the salary, should prove
satisfactorily that it was impossible to make such payment.
The court held that this provision is null because it violates the
provision of section 1 (12), Article III, of the Constitution, which
provides that no person shall be imprisoned for debt.
We do not believe that this constitutional provision has been
correctly applied in this case. A close perusal of the last part of
section 1 of Act No. 2549, as amended by section 1 of Act No.
3958, will show that its language refers only to the employer
who, being able to make payment, shall abstain or refuse to do
so, without justification and to the prejudice of the laborer or
employee. An employer so circumstanced is not unlike a
person who defrauds another, by refusing to pay his just debt.
In both cases the deceit or fraud is the essential element
constituting the offense. The first case is a violation of Act No.
3958, and the second isestafa punished by the Revised Penal
Code. In either case the offender cannot certainly invoke the
constitutional prohibition against imprisonment for debt.
Another doctrine:
Police power is the power inherent in a government to enact
laws, within constitutional limits, to promote the order, safety,
health, morals, and general welfare of society. (12 C. J., p.
904.) In the exercise of this power the Legislature has ample
authority to approve the disputed portion of Act No. 3958 which
punishes the employer who, being able to do so, refuses to
pay the salaries of his laborers or employers in the specified
periods of time.
Undoubtedly, one of the purposes of the law is to suppress
possible abuses on the part of employers who hire laborers or
employees without paying them the salaries agreed upon for
their services, thus causing them financial difficulties.
Without this law, the laborers and employees who earn
meager salaries would be compelled to institute civil actions
which, in the majority of cases, would cost them more than that
which they would receive in case of a decision in their favor.
ANTONIO M. SERRANO VS. GALLANT MARITIME
SERVICES, INC. AND MARLOW NAVIGATION CO., INC.
LABOR STANDARDS
GR No. 167614 - March 24, 2009
En banc
FACTS
Petitioner Antonio Serrano was hired by respondents Gallant
Maritime Services, Inc. and Marlow Navigation Co., Inc., under
a POEA-approved contract of employment for 12 months, as
Chief Officer, with the basic monthly salary of US$1,400, plus
$700/month overtime pay, and 7 days paid vacation leave per
month.
On March 19, 1998, the date of his departure, Serrano was
constrained to accept a downgraded employment contract for
the position of Second Officer with a monthly salary of
US$1,000 upon the assurance and representation of
respondents that he would be Chief Officer by the end of April
1998.
Respondents did not deliver on their promise to make Serrano
Chief Officer. Hence, Serrano refused to stay on as second
Officer and was repatriated to the Philippines on May 26, 1998,
serving only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twenty-
three (23) days.
Serrano filed with the Labor Arbiter (LA) a Complaint against
respondents for constructive dismissal and for payment of his
money claims in the total amount of US$26,442.73 (based on
the computation of $2590/month from June 1998 to February
199, $413.90 for March 1998, and $1640 for March 1999) as
well as moral and exemplary damages.
The LA declared the petitioner's dismissal illegal and awarded
him US$8,770, representing his salaray for three (3) months of
the unexpired portion of the aforesaid contract of employment,
plus $45 for salary differential and for attorney's fees
equivalent to 10% of the total amount; however, no
compensation for damages as prayed was awarded.
On appeal, the NLRC modified the LA decision and awarded
Serrano $4669.50, representing three (3) months salary at
$1400/month, plus 445 salary differential and 10% for
attorney's fees. This decision was based on the provision of
RA 8042, which was made into law on July 15, 1995.
Serrano filed a Motion for Partial Reconsideration, but this time
he questioned the constitutionality of the last clause in the 5th
paragraph of Section 10 of RA 8042, which reads:
Sec. 10. Money Claims. - x x x In case of
termination of overseas employment shall be
entitled to the full reimbursement of his
placement fee with interest without just, valid
or authorized cause as defined by law or
contract, the workers of twelve percent
Page 10
 (12%) per annum, plus his salaries for the
unexpired portion of his employment
contract or for three (3) months for every
year of the unexpired term, whichever is
less.
The NLRC denied the Motion; hence, Serrano filed a Petition
for Certiorari with the Court of Appeals (CA), reiterating the
constitutional challenge against the subject clause. The CA
affirmed the NLRC ruling on the reduction of the applicable
salary rate, but skirted the constitutional issue raised by herein
petitioner Serrano.
ISSUES:
1. Whether or not the subject clause violates Section 10,
Article III of the Constitution on non-impairment of contracts;
2. Whether or not the subject clause violate Section 1, Article
III of the Constitution, and Section 18, Article II and Section 3,
Article XIII on labor as a protected sector.
HELD:
On the first issue.
The answer is in the negative. Petitioner's claim that the
subject clause unduly interferes with the stipulations in his
contract on the term of his employment and the fixed salary
package he will receive is not tenable.
Section 10, Article III of the Constitution
provides: No law impairing the obligation of contracts shall be
passed.
The prohibition is aligned with the general principle that laws
newly enacted have only a prospective operation, and cannot
affect acts or contracts already perfected; however, as to laws
already in existence, their provisions are read into contracts
and deemed a part thereof. Thus, the non-impairment clause
under Section 10, Article II is limited in application to laws
about to be enacted that would in any way derogate from
existing acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No.
8042 in 1995 preceded the execution of the employment
contract between petitioner and respondents in 1998.Hence, it
cannot be argued that R.A. No. 8042, particularly the subject
clause, impaired the employment contract of the
parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated
into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject
clause may not be declared unconstitutional on the ground that
it impinges on the impairment clause, for the law was enacted
LABOR STANDARDS
in the exercise of the police power of the State to regulate a
business, profession or calling, particularly the recruitment and
deployment of OFWs, with the noble end in view of ensuring
respect for the dignity and well-being of OFWs wherever they
may be employed. Police power legislations adopted by the
State to promote the health, morals, peace, education, good
order, safety, and general welfare of the people are generally
applicable not only to future contracts but even to those
already in existence, for all private contracts must yield to the
superior and legitimate measures taken by the State to
promote public welfare.
On the second issue.
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees: No person
shall be deprived of life, liberty, or property without due
process of law nor shall any person be denied the equal
protection of the law.
Section 18, Article II and Section 3, Article XIII accord all
members of the labor sector, without distinction as to place of
deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing
constitutional provisions translate to economic security and
parity: all monetary benefits should be equally enjoyed by
workers of similar category, while all monetary obligations
should be borne by them in equal degree; none should be
denied the protection of the laws which is enjoyed by, or
spared the burden imposed on, others in like circumstances.
Such rights are not absolute but subject to the inherent power
of Congress to incorporate, when it sees fit, a system of
classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is
based on substantial distinctions; 2) it is germane to the
purposes of the law; 3) it is not limited to existing conditions
only; and 4) it applies equally to all members of the class.
There are three levels of scrutiny at which the Court reviews
the constitutionality of a classification embodied in a law: a) the
deferential or rational basis scrutiny in which the challenged
classification needs only be shown to be rationally related to
serving a legitimate state interest; b) the middle-tier or
intermediate scrutiny in which the government must show that
the challenged classification serves an important state interest
and that the classification is at least substantially related to
serving that interest; and c) strict judicial scrutiny in which a
legislative classification which impermissibly interferes with the
exercise of a fundamental right or operates to the peculiar
disadvantage of a suspect class is presumed unconstitutional,
and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state
Page 11
interest and that it is the least restrictive means to protect
such interest.
Upon cursory reading, the subject clause appears facially
neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a
discriminatory intent against, and an invidious impact on,
OFWs at two levels:
First, OFWs with employment contracts
of less than one year vis-à-vis OFWs with
employment contracts of one year or more;
Second, among OFWs with employment
contracts of more than one year; and
Third, OFWs vis-à-vis local workers with
fixed-period employment;
In sum, 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
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.
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 imposes a 3-month cap on the
claim of OFWs 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 a vulnerable
sector protected 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.
What constitutes compelling state interest is measured by the
scale of rights and powers arrayed in the Constitution and
calibrated by history. It is akin to the paramount interest of the
state for which some individual liberties must give way, such
as the public interest in safeguarding health or maintaining
medical standards, or in maintaining access to information on
matters of public concern.
In the present case, the Court dug deep into the records but
found no compelling state interest that the subject clause may
possibly serve.
LABOR STANDARDS
In fine, the Government has failed to discharge its burden of
proving the existence of a compelling state interest that would
justify the perpetuation of the discrimination against OFWs
under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the
subject clause is to protect the employment of OFWs by
mitigating the solidary liability of placement agencies, such
callous and cavalier rationale will have to be rejected. There
can never be a justification for any form of government action
that alleviates the burden of one sector, but imposes the same
burden on another sector, especially when the favored sector
is composed of private businesses such as placement
agencies, while the disadvantaged sector is composed of
OFWs whose protection no less than the Constitution
commands. The idea that private business interest can be
elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to
lessen the solidary liability of placement agencies vis-a-
vis their foreign principals, there are mechanisms already in
place that can be
employed to achieve that purpose without infringing on the
constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment
and Employment of Land-Based Overseas Workers, dated
February 4, 2002, imposes administrative disciplinary
measures on erring foreign employers who default on their
contractual obligations to migrant workers and/or their
Philippine agents. These disciplinary measures range from
temporary disqualification to preventive suspension. The
POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains
similar administrative disciplinary measures against erring
foreign employers.
Resort to these administrative measures is undoubtedly the
less restrictive means of aiding local placement agencies in
enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of
R.A. No. 8042 is violative of the right of petitioner and other
OFWs to equal protection.
The subject clause “or for three months for every year of the
unexpired term, whichever is less” in the 5th paragraph of
Section 10 of Republic Act No. 8042 is DECLARED
UNCONSTITUTIONAL
Note:
When the Court is called upon to exercise its power of judicial
review of the acts of its co-equals, such as the Congress, it
does so only when these conditions obtain: (1) that there is an
actual case or controversy involving a conflict of rights
Page 12
susceptible of judicial determination; (2) that the constitutional
question is raised by a proper party and at the earliest
opportunity; and (3) that the constitutional question is the very
lis mota of the case, otherwise the Court will dismiss the case
or decide the same on some other ground.
As discussed earlier, prior to R.A. No. 8042, a uniform system
of computation of the monetary awards of illegally dismissed
OFWs was in place. This uniform system was applicable even
to local workers with fixed-term employment.
Article 605 of the Code of Commerce provides:
Article 605. If the contracts of the captain
and members of the crew with the agent
should be for a definite period or voyage,
they cannot be discharged until the
fulfillment of their contracts, except for
reasons of insubordination in serious
matters, robbery, theft, habitual
drunkenness, and damage caused to the
vessel or to its cargo by malice or manifest
or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v.
Ogilvie, in which the Court held the shipping company liable for
the salaries and subsistence allowance of its illegally
dismissed employees for the entire unexpired portion of their
employment contracts.
While Article 605 has remained good law up to the present,
Article 299 of the Code of Commerce was replaced by Art.
1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and
other laborers hired for a certain time and for a certain
work cannot leave or be dismissed without sufficient cause,
before the fulfillment of the contract.
DOUGLAS MILLARES and ROGELIO LAGDA, vs.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-
GLOBAL MARITIME AGENCY, INC. and ESSO
INTERNATIONAL SHIPPING CO., LTD.
G.R. No. 110524. July 29, 2002
FACTS:
Douglas Millares was employed by ESSO International through
its local manning agency, Trans-Global, in 1968 as a
machinist. In 1975, he was promoted as Chief Engineer which
position he occupied until he opted to retire in 1989.
In 1989, petitioner Millares filed a leave of absence and
applied for optional retirement plan under the Consecutive
LABOR STANDARDS
Enlistment Incentive Plan (CEIP) considering that he had
already rendered more than twenty years of continuous
service.
Esso International denied Millares’ request for optional
retirement on the following grounds, to wit: (1) he was
employed on a contractual basis; (2) his contract of enlistment
(COE) did not provide for retirement before the age of sixty
years; and (3) he did not comply with the requirement for
claiming benefits under the CEIP, i.e., to submit a written
advice to the company of his intention to terminate his
employment within thirty days from his last disembarkation
date.
Subsequently, after failing to return to work after the expiration
of his leave of absence, Millares was dropped from the roster
of crew members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by Esso
International as wiper/oiler in 1969. He was promoted as Chief
Engineer in 1980, a position he continued to occupy until his
last COE expired in 1989.
In 1989, Lagda likewise filed a leave of absence and applied to
avail of the optional early retirement plan in view of his twenty
years continuous service in the company.
Trans-global similarly denied Lagda’s request for availment of
the optional early retirement scheme on the same grounds
upon which Millares request was denied.
Unable to return for contractual sea service after his leave of
absence expire, Lagda was also dropped from the roster of
crew members effective September 1, 1989.
Millares and Lagda filed a complaint-affidavit for illegal
dismissal and non-payment of employee benefits against
private respondents Esso International and Trans-Global
before the POEA.
The POEA rendered a decision dismissing the complaint for
lack of merit. On appeal, NLRC affirmed the decision of the
POEA dismissing the complaint.
NLRC rationcinated that Millares and Lagda, as seamen and
overseas contract workers are not covered by the term “regular
employment” as defined under Article 280 of the Labor Code.
The POEA, which is tasked with protecting the rights of the
Filipino workers for overseas employment to fair and equitable
recruitment and employment practices and to ensure their
welfare, prescribes a standard employment contract for
Page 13
seamen on board ocean-going vessels for a fixed period but in
no case to exceed twelve months.
ISSUE:
Whether or not seafarers are considered regular employees
under Article 280 of the Labor Code.
HELD:
Quoting Brent School Inc. v. Zamora, 1990, and Pablo Coyoca
v. NLRC, 1995, the Supreme Court ruled 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 everytime 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.
As ruled in Brent case, there are certain 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.
And as stated in the 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.
It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no
case to exceed 12 months and shall be stated in the Crew
Contract. Any extension of the Contract period shall be subject
to the mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that
employment of seafarers are for a fixed period only.
Constrained by the nature of their employment which is quite
peculiar and unique in itself, it is for the mutual interest of both
the seafarer and the employer why the employment status
LABOR STANDARDS
must be contractual only or for a certain period of time.
Seafarers spend most of their time at sea and understandably,
they can not stay for a long and an indefinite period of time at
sea.[21] Limited access to shore society during the
employment will have an adverse impact on the seafarer. The
national, cultural and lingual diversity among the crew during
the COE is a reality that necessitates the limitation of its
period.[22]
Petitioners make much of the fact that they have been
continually re-hired or their contracts renewed before the
contracts expired (which has admittedly been going on for
twenty (20) years). By such circumstance they claim to have
acquired regular status with all the rights and benefits
appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of
continuous re-hiring was dictated by practical considerations
that experienced crew members are more preferred.
Petitioners were only given priority or preference because of
their experience and qualifications but this does not detract the
fact that herein petitioners are contractual employees. They
can not be considered regular employees. We quote with favor
the explanation of the NLRC in this wise:
Xxx The reference to permanent and probationary masters and
employees in these papers is a misnomer and does not alter
the fact that the contracts for enlistment between
complainants-appellants and respondent-appellee Esso
International were for a definite periods of time, ranging from 8
to 12 months. Although the use of the terms permanent and
probationary is unfortunate, what is really meant is eligible for-
re-hire. This is the only logical conclusion possible because the
parties cannot and should not violate POEAs requirement that
a contract of enlistment shall be for a limited period only; not
exceeding twelve (12)months.[23]
VirJen Shipping and Marine Services vs. NLRC
125 SCRA 577 (1983)
FACTS:
December, 1978 and January, 1979, the Seamen entered into
separate contracts of employment with the Company,
engaging them to work on board M/T' Jannu for a period of
twelve (12) months. After verification and approval of their
contracts by the NSB, the Seamen boarded their vessel in
Japan.
Page 14
On 10 January 1919, the master of the vessel complainant
Rogelio H. Bisula, received a cable from the Company
advising him of the possibility that the vessel might be directed
to call at ITF-controlled ports said at the same time informing
him of the procedure to be followed in the computation of the
special or additional compensation of crew members while in
said ports. ITF is the acronym for the International Transport
Workers Federation, a militant international labor organization
with affiliates in different ports of the world, which reputedly
can tie down a vessel in a port by preventing its loading or
unloading, This is a sanction resorted to by ITF to enforce the
payment of its wages rates for seafarers the so-called ITF
rates, if the wages of the crew members of a vessel who have
affiliated with it are below its prescribed rates.) In the same
cable of the Company, the expressed its regrets for hot
clarifying earlier the procedure in computing the special
compensation as it thought that the vessel would 'trade in
Caribbean ports only.
On 22 March 1979, the Company sent another cable to
complainant Bisula, this time informing him of the respective
amounts each of the officers and crew members would receive
as special compensation when the vessel called at the port of
Kwinana Australia, an ITF-controlled port. This was followed by
another cable on 23 March 1979, informing him that the
officers and crew members had been enrolled as members of
the ITF in Sidney, Australia, and that the membership fee for
the 28 personnel complement of the vessel had already been
paid.
In reply, the Company proposed a 25% increase in the basic
pay of the complainant crew members, although it claimed,
that it would "suffer and absorb considerable amount of
losses." The proposal was accepted by the Seamen with
certain conditions which were accepted by the Company.
Conformably with the agreement of the parties which was
effected through the cables abovementioned, the Seamen
were paid their new salary rates.
Subsequently, the Company sought authority from the NSB to
cancel the contracts of employment of the Seamen, claiming
that its principals had terminated their manning agreement
because of the actuations of the Seamen. The request was
granted by the NSB Executive Director in a letter dated 10
April 1979. Soon thereafter, the Company cabled the Seamen
informing them that their contracts would be terminated upon
the vessel's arrival in Japan. On 19 April 1979 they Arere
asked to disembark from the vessel, their contracts were
terminated, and they were repatriated to Manila. There is no
showing that the Seamen were given the opportunity to at least
comment on the Company's request for the cancellation of
LABOR STANDARDS
their contracts, although they had served only three (3) out of
the twelve (12) months' duration of their contracts.
The private respondents filed a complaint for illegal dismissal
and non-payment of earned wages with the National Seamen
Board. The Vir-jen Shipping and Marine Services Inc. in turn
filed a complaint for breach of contract and recovery of excess
salaries and overtime pay against the private respondents. On
July 2, 1980, the NSB rendered a decision declaring that the
seamen breached their employment contracts when they
demanded and received from Vir-jen Shipping wages over and
above their contracted rates. The dismissal of the seamen was
declared legal and the seamen were ordered suspended.
The seamen appealed the decision to the NLRC which
reversed the decision of the NSB and required the petitioner to
pay the wages and other monetary benefits corresponding to
the unexpired portion of the manning contract on the ground
that the termination of the contract by the petitioner was
without valid cause
ISSUE:
1. Whether or not the termination of the seamen was
illegal.
2. Whether or not the seamen violated their contracts of
employment.
HELD (FIRST ISSUE)
The termination of the contract of the seamen was illegal.
A manning contract involves the interests not only of the
signatories thereto, such as the local Filipino recruiting agent,
the foreign owner of vessel and the Filipino seamen in general
as well as the country itself.
The wages of seamen engaged in international shipping are
shouldered by the foreign principal. The local manning office is
an agent whose primary function is recruitment and who
.usually gets a lump sum from the ship-owner to defray the
salaries of the crew. The hiring of seamen and the
determination of their compensation is subject to the interplay
of various market factors and one key factor is how much in
terms of profits the local manning office and the foreign ship-
owner may realize after the costs of the voyage are met. And
costs include salaries of officers and crew members.
Filipino seamen are admittedly as competent and reliable as
seamen from any other country in the world. Otherwise, there
would not be so many of them in the vessels sailing in every
Page 15
ocean and sea on this globe. It is competence and reliability, just because of their firmness in their demand for the fulfillment
not cheap labor that makes our seamen so greatly in demand. by petitioner of its obligation it entered into without any
Filipino seamen have never demanded the same high salaries coercion, specially on the part of private respondents.
as seamen from the United States, the United Kingdom, Japan (Emphasis supplied).
and other developed nations. But certainly they are entitled to
government protection when they ask for fair and decent
treatment by their employer.-, and when they exercise the right
to petition for improved terms of employment, especially when
they feel that these are sub-standard or are capable of
improvement according to internationally accepted rules. In the
domestic scene, there are marginal employers who prepare
two sets of payrolls for their employees — one in keeping with
minimum wages and the other recording the sub-standard
wages that the employees really receive, The reliable
employers, however, not only meet the minimums required by
fair labor standards legislation but even go way above the
minimums while earning reasonable profits and prospering.
The same is true of international employment. There is no
reason why this Court and the Ministry of Labor and.
Employment or its agencies and commissions should come out
with pronouncements based on the standards and practices of
unscrupulous or inefficient shipowners, who claim they cannot
survive without resorting to tricky and deceptive schemes,
instead of Government maintaining labor law and
jurisprudence according to the practices of honorable,
competent, and law-abiding employers, domestic or foreign.

The Republic of the Philippines and its ministries and agencies

should present a more honorable and proper posture in official
acts to the whole world, notwithstanding our desire to have as
many job openings both here and abroad for our workers. At
the very least, such as sensitive matter involving no less than
our dignity as a people and the welfare of our workingmen
must proceed from the Batasang Pambansa in the form of
policy legislation, not from administrative rule making or
adjudication.

SECOND ISSUE:

Petitioner claims that the dismissal of private respondents was

justified because the latter threatened the ship authorities in
acceding to their demands, and this constitutes serious
misconduct as contemplated by the Labor Code. This
contention is not well-taken. But even if there had been such a
threat, respondents' behavior should not be censured because
it is but natural for them to employ some means of pressing
their demands for petitioner, the refusal to abide with the terms
of the Special Agreement, to honor and respect the same,
They were only acting in the exercise of their rights, and to
deprive them of their freedom of expression is contrary to law
and public policy. There is no serious misconduct to speak of
in the case at bar which would justify respondents' dismissal

LABOR STANDARDS Page 16