Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 108961 November 27, 1998

CITIBANK, N.A., petitioner,

vs.
COURT OF APPEALS (Third Division), and CITI-BANK INTEGRATED GUARDS LABOR
ALLIANCE (CIGLA) SEGA-TUPAS/FSM LOCAL CHAPTER No. 1394, respondents.

PARDO, J.:

The Case

The case before the Court is a petition for review on certiorari seeking to reverse and set aside the
decision of the Court of Appeals1 and its resolution denying reconsideration2, ruling that it is the
labor tribunal, not the regional trial court, that has jurisdiction over the complaint for
injunction and damages filed by petitioner with the regional trial court.

The Facts

In 1983, Citibank and El Toro Security Agency, Inc. (hereafter El Toro) entered into a contract
for the latter to provide security and protective services to safeguard and protect the bank's
premises, situated at 8741 Paseo de Roxas, Makati, Metro Manila. Under the contract, El Toro
obligated itself to provide the services of security guards to safeguard and protect the
premises and property of Citibank against theft, robbery or any other unlawful acts
committed by any person or persons, and assumed responsibility for losses and/or damages
that may be incurred by Citibank due to or as a result of the negligence of El Toro or any of
its assigned personnel.4

Citibank renewed the security contract with El Toro yearly until 1990. On April 22, 1990, the
contract between Citibank and El Toro expired.

On June 7, 1990, respondent Citibank Integrated Guards Labor Alliance-SEGA-TUPAS/FSM

(hereafter CIGLA) filed with the National Conciliation and Mediation Board (NCMB) a request
for preventive mediation citing Citibank as respondent therein giving as issues for preventive
mediation the following:

a) Unfair labor practice;

b) Dismissal of union officers/members; and

c) Union bust.
On June 10, 1990, petitioner Citibank served on El Toro a written notice that the bank would
not renew anymore the service agreement with the latter. Simultaneously, Citibank hired
another security agency, the Golden Pyramid Security Agency, to render security services at
Citibank's premises.

On the same date, June 10, 1990, respondent CIGLA filed a manifestation with the NCMB that
it was converting its request for preventive mediation into a notice of strike for failure of the
parties to reach a mutually acceptable settlement of the issues, which it followed with a
supplemental notice of strike alleging as supplemental issue the mass dismissal of all union
officers and members.

On June 11, 1990, security guards of El Toro who were replaced by guards of the Golden
Pyramid Security Agency considered the non-renewal of El Toro's service agreement with
Citibank as constituting a lockout and/or a mass dismissal. They threatened to go on strike
against Citibank and picket its premises.

In fact, security guards formerly assigned to Citibank under the expired agreement loitered
around and near the Citibank premises in large groups of from twenty (20) and at times fifty
(50) persons.

On June 14, 1990, respondent CIGLA filed a notice of strike directed at the premises of the
Citibank main office.

Faced with the prospect of disruption of its business operations, on June 5, 1990, petitioner
Citibank filed with the Regional Trial Court Makati, a complaint for injunction and
damages.5 The complaint sought to enjoin CIGLA and any person claiming membership
therein from striking or otherwise disrupting the operations of the bank.

On June 18, 1990, respondent CIGLA filed with the trial court a motion to dismiss the
complaint. The motion alleged that:

a) The Court had no jurisdiction, this being labor dispute.

b) The guards were employees of the bank.

c) There were pending cases/labor disputes between the guards

and the bank at the different agencies of the Department of
Labor and Employment (DOLE).

d) The bank was guilty of forum shopping in filing the complaint

with the Regional Trial Court after submitting itself voluntarily to
the jurisdiction of the different agencies of the DOLE.

By order dated August 19, 1990, the trial court denied respondent CIGLA's motion to dismiss.
The relevant portion of the order reads as follows:

Plaintiff in its Opposition alleged that jurisdiction of the court is determined by

the allegations of the complaints. In the plaintiff's complaint there are
allegations, which negate any employer-employee relationship between it and
the CIGLA members; however the Court could not dismiss the case and lift the
restraining order without first threshing out the same at the trial of the case.
 The Court finding the grounds alleged in the defendant's motion well taken, the
motion is hereby denied.

SO ORDERED.

In due time, respondent CIGLA filed with the trial court a motion for reconsideration of the
above-mentioned order. On October 1, 1990, the trial court denied the motion.

Subsequently, respondent CIGLA filed with the trial court its answer to the complaint, and
averred as special and affirmative defense lack of jurisdiction of the court over the subject
matter of the case. Treating the averment as motion to dismiss, on April 27, 1991, the lower
court issued an order denying the motion. The lower court stated:

The Court noted in defendant's Memorandum of Authorities that they made no

mention who among the parties — the plaintiff bank or the defendants union —
paid their wages or salaries and who has the power to dismiss them.

Defendants also alleged that the complaint states no valid cause of action as
plaintiffs allegations are purely anchored on conjectures and conclusions and
not based on ultimate facts.

Plaintiff in its Opposition alleged that it is a well-settled rule, that in a motion to

dismiss based on the ground that the complaint fails to state a cause of action,
the question submitted to the court for determination is the sufficiency of the
allegation in the complaint itself. Plaintiff also alleged that the defendants
disputed the jurisdiction of the court, the parties having employer-employee
relationship; this mere allegation did not serve to automatically deprive the
court of its jurisdiction duly conferred by the allegations of the complaint; in
the opinion of the defendants, a labor dispute exists, the court is duty bound to
find out if such circumstances really exist.

The Court weighing the evidence and jurisprudence in support in support of

the respective contention of the parties, and finding that in the case at bar,
plaintiff seeks to recover pecuniary damages, the Court gives more credence
to the decisions cited by the plaintiff, hence the special and affirmative
defenses alleged in the answer treated as a "Motion to Dismiss" is hereby
denied.

On May 24, 1991, respondent CIGLA filed with the Court of Appeals a petition
for certiorari with preliminary injunction6 assailing the validity of the proceedings had before
the regional trial court.

After due proceedings, on March 31, 1992, the Court of Appeals promulgated its decision in
CIGLA's favor, the dispositive portion of which states:

WHEREFORE, the Writ of Certiorari is GRANTED, and the proceedings before

respondent Judge more particularly the challenged orders are declared null
and void and respondent Judge is enjoined from taking any further action in
Civil Case No. 90-1612 except for the purpose of dismissing it. Following,
however, the disposition in San Miguel Corporation Employees Union vs.
Bersamira, the status quo ante declaration of strike shall be observed pending
the proceedings in the National Conciliation and Mediation Board, Department
 of Labor and Employment, National Capital Region (Annex A of Petition). No
Costs.

SO ORDERED.

On April 29, 1992, petitioner Citibank filed a motion for reconsideration of the decision. On
February 12, 1993, the Court of Appeals denied the motion, finding that the arguments in the
motion for reconsideration are but a rehash, if not a repetition, of the arguments in its
comments, which had been considered by the Court in its decision.

Hence, the petitioner's recourse to this Court.

The Issue

The basic issue involved is whether it is the labor tribunal or the regional trial court that has
jurisdiction over the subject matter of the complaint filed by Citibank with the trial court.

Petitioner's Submission

Petitioner Citibank contends that there is no employer-employee relationship between

Citibank and the security guards represented by respondent CIGLA and that there is no
"labor dispute" in the subject controversy. The security guards were employees of El Toro
security agency, not of Citibank. Its service contract with Citibank had expired and not
renewed.

The Court's Ruling

We sustain the petitioner's contention. This Court has held in many cases that "in
determining the existence of an employer-employee relationship, the following elements are
generally considered: 1) the selection and engagement of the employee; 2) the payment of
wages; 3) the power of dismissal; and 4) the employer's power to control the employee with
respect to the means and methods by which the work is to be accomplished".7 It has been
decided also that the Labor Arbiter has no jurisdiction over a claim filed where no employer-
employee relationship existed between a company and the security guards assigned to it by
a security service contractor.8 In this case, it was the security agency El Toro that recruited,
hired and assigned the watchmen to their place of work. It was the security agency that was
answerable to Citibank for the conduct of its guards.

The question arises. Is there a labor dispute between Citibank and the security guards,
members of respondent CIGLA, regardless of whether they stand in the relation of employer
and employees? Article 212, paragraph 1 of the Labor Code provides the definition of a "labor
dispute". It "includes any controversy or matter concerning terms or conditions of
employment or the association or representation of persons in negotiating, fixing,
maintaining, changing or arranging the terms and conditions of employment, regardless of
whether the disputants stand in the proximate relation of employer and employee.

If at all, the dispute between Citibank and El Toro security agency is one regarding the
termination or non-renewal of the contract of services. This is a civil dispute.9 El Toro was an
independent contractor. Thus, no employer-employee relationship existed between Citibank
and the security guard members of the union in the security agency who were assigned to
secure the bank's premises and property. Hence, there was no labor dispute and no right to
strike against the bank.

It is a basic rule of procedure that "jurisdiction of the court over the subject matter of the
action is determined by the allegations of the complaint, irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein. The jurisdiction
of the court can not be made to depend upon the defenses set up in the answer or upon the
motion to dismiss, for otherwise, the question of jurisdiction would almost entirely depend
upon the defendant."10 "What determines the jurisdiction of the court is the nature of the
action pleaded as appearing from the allegations in the complaint. The averments therein and
the character of the relief sought are the ones to be consulted."11

In the complaint filed with the trial court, petitioner alleged that in 1983, it entered into a
contract with El Toro, a security agency, for security and protection service. The parties
renewed the contract yearly until April 22, 1990. Petitioner further alleged that from June 11,
1990, until the filing of the complaint, El Toro security guards formerly assigned to guard
Citibank premises loitered around the bank's premises in large groups and threatened to
stage a strike, which would hamper its operations and the normal conduct of its business
and that the bank would suffer damages should a strike push through.

On the basis of the allegations of the complaint, it is safe to conclude that the dispute
involved is a civil one, not a labor dispute.12 Consequently, we rule that jurisdiction over the
subject matter of the complaint lies with the regional trial court.

Relief

WHEREFORE, the Court hereby GRANTS the petition for review on certiorari. We REVERSE
and SET ASIDE the decision of the Court of Appeals and its resolution denying
reconsideration in CA-G. R. SP No. 25584, and REMAND the records of the case to the
Regional Trial Court, Makati, for further proceedings in line with the ruling herein that
jurisdiction over the subject matter of the complaint in Civil Case No. 90-1612, is vested
therein.

No pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., Romero, and Purisima, JJ., concur.

Kapunan, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 120567 March 20, 1998

PHILIPPINE AIRLINES, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, FERDINAND PINEDA and GOGFREDO
CABLING, respondents.

MARTINEZ, J.:

Can the National Labor Relations Commission (NLRC), even without a complaint for illegal dismissal
tiled before the labor arbiter, entertain an action for injunction and issue such writ enjoining petitioner
Philippine Airlines, inc. from enforcing its Orders of dismissal against private respondents, and
ordering petitioner to reinstate the private respondents to their previous positions?

This is the pivotal issue presented before us in this petition for certiorari under Rule 65 of the
Revised Rules of Court which seeks the nullification of the injunctive writ dated April 3, 1995 issued
by the NLRC and the Order denying petitioner's motion for reconsideration on the ground that the
said Orders were issued in excess of jurisdiction.

Private respondents are flight stewards of the petitioner. Both were dismissed from the service for
their alleged involvement in the April 3, 1993 currency smuggling in Hong Kong.

Aggrieved by said dismissal, private respondents filed with the NLRC a petition1 for injunction
praying that:

I. Upon filing of this Petition, a temporary restraining order be issued, prohibiting

respondents (petitioner herein) from effecting or enforcing the Decision dated Feb.
22, 1995, or to reinstate petitioners temporarily while a hearing on the propriety of the
issuance of a writ of preliminary injunction is being undertaken;

II. After hearing, a writ of preliminary mandatory injunction be issued ordering

respondent to reinstate petitioners to their former positions pending the hearing of
this case, or, prohibiting respondent from enforcing its Decision dated February 22,
1995 while this case is pending adjudication;

III. After hearing, that the writ of preliminary injunction as to the reliefs sought for be
made permanent, that petitioners be awarded full backwages, moral damages of
PHP 500,000.00 each and exemplary damages of PHP 500,000.00 each, attorney's
fees equivalent to ten percent of whatever amount is awarded, and the costs of suit.
On April 3, 1995, the NLRC issued a temporary mandatory injunction 2 enjoining petitioner to cease
and desist from enforcing its February 22, 1995 Memorandum of dismissal. In granting the writ, the
NLRC considered the following facts, to wit:

. . . that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were
instructed to attend an investigation by respondent's "Security and Fraud Prevention
Sub-Department" regarding an April 3, 1993 incident in Hongkong at which Joseph
Abaca, respondent's Avionics Mechanic in Hongkong "was intercepted by the
Hongkong Airport Police at Gate 05 . . . the ramp area of the Kai Tak International
Airport while . . . about to exit said gate carrying a . . . bag said to contain some 2.5
million pesos in Philippine Currencies. That at the Police Station. Mr. Abaca claimed
that he just found said plastic bag at the Skybed Section of the arrival flight
PR300/03 April 93," where petitioners served as flight stewards of said flight PR300; .
. the petitioners sought "a more detailed account of what this HKG incident is all
about"; but instead, the petitioners were administratively charged, "a hearing" on
which "did
not push through" until almost two (2) years after, i.e, "on January 20, 1995 . . .
where a confrontation between Mr. Abaca and petitioners herein was compulsorily
arranged by the respondent's disciplinary board" at which hearing, Abaca was made
to identify petitioners as co-conspirators; that despite the fact that the procedure of
identification adopted by respondent's Disciplinary Board was anomalous "as there
was no one else in the line-up (which could not be called one) but petitioners . . .
Joseph Abaca still had difficulty in identifying petitioner Pineda as his co-conspirator,
and as to petitioner Cabling, he was implicated and pointed by Abaca only after
respondent's Atty. Cabatuando pressed the former to identify petitioner Cabling as
co-conspirator"; that with the hearing reset to January 25, 1995, "Mr. Joseph Abaca
finally gave exculpating statements to the board in that he cleared petitioners from
any participation or from being the owners of the currencies, and at which hearing
Mr. Joseph Abaca volunteered the information that the real owner of said money was
one who frequented his headquarters in Hongkong to which information, the
Disciplinary Board Chairman, Mr. Ismael Khan," opined "for the need for another
hearing to go to the bottom of the incident"; that from said statement, it appeared
"that Mr. Joseph Abaca was the courier, and had another mechanic in Manila who
hid the currency at the plane's skybed for Abaca to retrieve in Hongkong, which
findings of how the money was found was previously confirmed by Mr. Joseph Abaca
himself when he was first investigated by the Hongkong authorities"; that just as
petitioners "thought that they were already fully cleared of the charges, as they no
longer received any summons/notices on the intended "additional hearings"
mandated by the Disciplinary Board," they were surprised to receive "on February
23, 1995. . . a Memorandum dated February 22, 1995" terminating their services for
alleged violation of respondent's Code of Discipline "effective immediately"; that
sometime . . . first week of March, 1995, petitioner Pineda received another
Memorandum from respondent Mr. Juan Paraiso, advising him of his termination
effective February 3, 1995, likewise for violation of respondent's Code of Discipline; .
..

In support of the issuance of the writ of temporary injunction, the NLRC adapted the view that: (1)
private respondents cannot be validly dismissed on the strength of petitioner's Code of Discipline
which was declared illegal by this Court in the ease at PAL, Inc. vs. NLRC, (G.R. No. 85985),
promulgated August 13, 1993, for the reason that it was formulated by the petitioner without the
participation of its employees as required in R.A. 6715, amending Article 211 of the Labor Code; (2)
the whimsical, baseless and premature dismissals of private respondents which "caused them grave
and irreparable injury" is enjoinable as private respondents are left "with no speedy and adequate
remedy at law" except the issuance of a temporary mandatory injunction; (3) the NLRC is
empowered under Article 218 (e) of the Labor Code not only to restrain any actual or threatened
commission of any or all prohibited or unlawful acts but also to require the performance of a
particular act in any labor dispute, which, if not restrained or performed forthwith, may cause grave
or irreparable damage to any party; and (4) the temporary power of the NLRC was recognized by
this Court in the case of Chemo-Technische Mfg., Inc. Employees Union, DFA, et. al. vs. Chemo-
Technische Mfg., Inc. [G.R. No. 107031, January 25, 1993].

On May 4, 1995, petitioner moved for reconsideration3 arguing that the NLRC erred:

1. . . . in granting a temporary injunction order when it has no

jurisdiction to issue an injunction or restraining order since this may
be issued only under Article 218 of the Labor Code if the case
involves or arises from labor disputes;

2. . . . in granting a temporary injunction order when the termination of

private respondents have long been carried out;

3. . . . in ordering the reinstatement of private respondents on the

basis of their mere allegations, in violation of PAL's right to due
process:

4. . . . in arrogating unto itself management prerogative to discipline

its employees and divesting the labor arbiter of its original and
exclusive jurisdiction over illegal dismissal cases;

5. . . . in suspending the effects of termination when such action is

exclusively within the jurisdiction of the Secretary of Labor;

6. . . . in issuing the temporary injunction in the absence of any

irreparable or substantial injury to both private respondents.

On May 31, 1995, the NLRC denied petitioner's motion for reconsideration, ruling:

"The respondent (now petitioner), for one, cannot validly claim that we cannot
exercise our injunctive power under Article 218 (e) of the Labor Code on the pretext
that what we have here is not a labor dispute as long as it concedes that as defined
by law, a" (l) "Labor Dispute" includes any controversy or matter concerning terms or
conditions of employment." If security of tenure, which has been breached by
respondent and which, precisely, is sought to be protected by our temporary
mandatory injunction (the core of controversy in this case) is not a "term or condition
of employment", what then is?

xxx xxx xxx

Anent respondent's second argument . . . . Article 218 (e) of the Labor Code . . .
empowered the Commission not only to issue a prohibitory injunction, but a
mandatory ("to require the performance") one as well. Besides, as earlier discussed,
we already exercised (on August 23, 1991) this temporary mandatory injunctive
power in the case of "Chemo-Technische Mfg., Inc. Employees Union-DFA et. al. vs.
Chemo-Technische Mfg., Inc., et. al." (supra) and effectively enjoined one (1) month
 old dismissals by Chemo-Technische and that our aforesaid mandatory exercise of
injunctive power, when questioned through a petition for certiorari, was sustained by
the Third Division of the Supreme court per its Resolution dated January 25, 1993.

xxx xxx xxx

Respondent's fourth argument that petitioner's remedy for their dismissals is "to file
an illegal dismissal case against PAL which cases are within the original and
exclusive jurisdiction of the Labor Arbiter' is ignorant. In requiring as a condition for
the issuance of a "temporary or permanent injunction" — "(4) That complainant has
no adequate remedy at law;" Article 218 (e) of the Labor Code clearly
envisioned adequacy, and not plain availability of a remedy at law as an alternative
bar to the issuance of an injunction. An illegal dismissal suit (which takes, on its
expeditious side, three (3) years before it can be disposed of) while available as a
remedy under Article 217 (a) of the Labor Code, is certainly not an "adequate;
remedy at law, Ergo, it cannot as an alternative remedy, bar our exercise of that
injunctive power given us by Article 218 (e) of the Code.

xxx xxx xxx

Thus, Article 218 (e), as earlier discussed [which empowers this Commission "to
require the performance of a particular act" (such as our requiring respondent "to
cease and desist from enforcing" its whimsical memoranda of dismissals and
"instead to reinstate petitioners to their respective position held prior to their subject
dismissals") in "any labor dispute which, if not . . . performed forthwith, may cause
grave and irreparable damage to any party"] stands as the sole "adequate remedy at
law" for petitioners here.

Finally, the respondent, in its sixth argument claims that even if its acts of dismissing
petitioners "may be great, still the same is capable of compensation", and that
consequently, "injunction need not be issued where adequate compensation at law
could be obtained". Actually,
what respondent PAL argues here is that we need not interfere in its whimsical
dismissals of petitioners as, after all, it can pay the latter its backwages. . . .

But just the same, we have to stress that Article 279 does not speak alone of
backwages as an obtainable relief for illegal dismissal; that reinstatement as well is
the concern of said law, enforceable when necessary, through Article 218 (e) of the
Labor Code (without need of an illegal dismissal suit under Article 217 (a) of the
Code) if such whimsical and capricious act of illegal dismissal will "cause grave or
irreparable injury to a party". . . . .4

Hence, the present recourse.

Generally, injunction is a preservative remedy for the protection of one's substantive rights or
interest. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit.
It is resorted to only when there is a pressing necessity to avoid injurious consequences which
cannot be remedied under any standard of compensation. The application of the injunctive writ rests
upon the existence of an emergency or of a special reason before the main case be regularly heard.
The essential conditions for granting such temporary injunctive relief are that the complaint alleges
facts which appear to be sufficient to constitute a proper basis for injunction and that on the entire
showing from the contending parties, the injunction is reasonably necessary to protect the legal
rights of the plaintiff pending the litigation.5 Injunction is also a special equitable relief granted only in
cases where there is no plain, adequate and complete remedy at law.6

In labor cases, Article 218 of the Labor Code empowers the NLRC —

(e) To enjoin or restrain any actual or threatened commission of any or all prohibited
or unlawful acts or to require the performance of a particular act in any labor
dispute which, if not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any decision in favor of such
party; . . ." (Emphasis Ours)

Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of Procedure of the
NLRC, pertinently provides as follows:

Sec. 1. Injunction in Ordinary Labor Dispute. — A preliminary injunction or a

restraining order may be granted by the Commission through its divisions pursuant to
the provisions of paragraph (e) of Article 218 of the Labor Code, as amended, when
it is established on the bases of the sworn allegations in the petition that the acts
complained of, involving or arising from any labor dispute before the Commission,
which, if not restrained or performed forthwith, may cause grave or irreparable
damage to any party or render ineffectual any decision in favor of such party.

xxx xxx xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an
incident to the cases pending before them in order to preserve the rights of the
parties during the pendency of the case, but excluding labor disputes involving
strikes or lockout. 7 (Emphasis Ours)

From the foregoing provisions of law, the power of the NLRC to issue an injunctive writ originates
from "any labor dispute" upon application by a party thereof, which application if not granted "may
cause grave or irreparable damage to any party or render ineffectual any decision in favor of such
party."

The term "labor dispute" is defined as "any controversy or matter concerning terms and conditions of
employment or the association or representation of persons in negotiating, fixing. maintaining,
changing, or arranging the terms and conditions of employment regardless of whether or not the
disputants stand in the proximate relation of employers and employees." 8

The term "controversy" is likewise defined as "a litigated question; adversary proceeding in a court of
law; a civil action or suit, either at law or in equity; a justiciable dispute."9

A "justiciable controversy" is "one involving an active antagonistic assertion of a legal right on one
side and a denial thereof on the other concerning a real, and not a mere theoretical question or
issue." 10

Taking into account the foregoing definitions, it is an essential requirement that there must first be a
labor dispute between the contending parties before the labor arbiter. In the present case, there is
no labor dispute between the petitioner and private respondents as there has yet been no complaint
for illegal dismissal filed with the labor arbiter by the private respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in reality an action for illegal dismissal.
This is clear from the allegations in the petition which prays for; reinstatement of private
respondents; award of full backwages, moral and exemplary damages; and attorney's fees. As such,
the petition should have been filed with the labor arbiter who has the original and exclusive
jurisdiction to hear and decide the following cases involving all workers, whether agricultural or non-
agricultural:

(1) Unfair labor practice;

(2) Termination disputes;

(3) If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;

(4) Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;

(5) Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts; and

(6) Except claims for employees compensation, social security,

medicare and maternity benefits, all other claims arising from
employer- employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand
pesos (P5,000.00), whether or not accompanied with a claim for
reinstatement. 11

The jurisdiction conferred by the foregoing legal provision to the labor arbiter is
both original and exclusive, meaning, no other officer or tribunal can take cognizance of, hear and
decide any of the cases therein enumerated. The only exceptions are where the Secretary of Labor
and Employment or the NLRC exercises the power of compulsory arbitration, or the parties agree to
submit the matter to voluntary arbitration pursuant to Article 263 (g) of the Labor Code, the pertinent
portions of which reads:

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to the national interest, the Secretary of
Labor and Employment may assume jurisdiction over the dispute and decide it or
certify the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or impending
strike or lockout as specified in the assumption or certification order. If one has
already taken place at the time of assumption or certification, all striking or locked out
employees shall immediately resume operations and readmit all workers under the
same terms and conditions prevailing before the strike or lockout. The Secretary of
Labor and Employment or the Commission may seek the assistance of law
enforcement agencies to ensure compliance with this provision as well as with such
orders as he may issue to enforce the same.

On the other hand, the NLRC shall have exclusive appellate jurisdiction over all cases decided by
labor arbiters as provided in Article 217(b) of the Labor Code. In short, the jurisdiction of the NLRC in
illegal dismissal cases is appellate in nature and, therefore, it cannot entertain the private
respondents' petition for injunction which challenges the dismissal orders of petitioner. Article 218(e)
of the Labor Code does not provide blanket authority to the NLRC or any of its divisions to issue
writs of injunction, considering that Section 1 of Rule XI of the New Rules of Procedure of the NLRC
makes injunction only an ancillary remedy in ordinary labor disputes." 12

Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting private
respondents' petition for injunction and ordering the petitioner to reinstate private respondents.

The argument of the NLRC in its assailed Order that to file an illegal dismissal suit with the labor
arbiter is not an "adequate" remedy since it takes three (3) years before it can be disposed of, is
patently erroneous. An "adequate" remedy at law has been defined as one "that affords relief with
reference to the matter in controversy, and which is appropriate to the particular circumstances of
the case." 13 It is a remedy which is equally, beneficial, speedy and sufficient which will promptly
relieve the petitioner from the injurious effects of the acts complained of. 14

Under the Labor Code, the ordinary and proper recourse of an illegally dismissed employee is to file
a complaint for illegal dismissal with the labor arbiter. 15 In the case at bar, private respondents
disregarded this rule and directly went to the NLRC through a petition for injunction praying
that petitioner be enjoined from enforcing its dismissal orders. In Lamb vs. Phipps, 16 we ruled
that if the remedy is specifically provided by law, it is presumed to be adequate. Moreover,
the preliminary mandatory injunction prayed for by the private respondents in their petition
before the NLRC can also be entertained by the labor arbiter who, as shown earlier, has the
ancillary power to issue preliminary injunctions or restraining orders as an incident in the
cases pending before him in order to preserve the rights of the parties during the pendency
of the case. 17

Furthermore, an examination of private respondents' petition for injunction reveals that it has
no basis since there is no showing of any urgency or irreparable injury which the private
respondents might suffer. An injury is considered irreparable if it is of such constant and
frequent recurrence that no fair and reasonable redress can be had therefor in a court of
law, 18 or where there is no standard by which their amount can be measured with reasonable
accuracy, that is, it is not susceptible of mathematical computation. It is considered
irreparable injury when it cannot be adequately compensated in damages due to the nature of
the injury itself or the nature of the right or property injured or when there exists no certain
pecuniary standard for the measurement of damages. 19

In the case at bar, the alleged injury which private respondents stand to suffer by reason of
their alleged illegal dismissal can be adequately compensated and therefore, there exists no
"irreparable injury," as defined above which would necessitate the issuance of the injunction
sought for. Article 279 of the Labor Code provides that an employee who is unjustly
dismissed from employment shall be entitled to reinstatement, without loss of seniority rights
and other privileges, and to the payment of full backwages, inclusive of allowances, and to
other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.

The ruling of the NLRC that the Supreme Court upheld its power to issue temporary
mandatory injunction orders in the case of Chemo-Technische Mfg., Inc. Employees Union-
DFA, et. al. vs. Chemo-Technische Mfg., Inc. et. al., docketed as G.R. No. 107031, is
misleading. As correctly argued by the petitioner, no such pronouncement was made by this
Court in said case. On January 25, 1993, we issued a Minute Resolution in the subject case
stating as follows:
 Considering the allegations contained, the issues raised and the arguments
adduced in the petition for certiorari, as well as the comments of both public
and private respondents thereon, and the reply of the petitioners to private
respondent's motion to dismiss the petition, the Court Resolved to DENY the
same for being premature.

It is clear from the above resolution that we did not in anyway sustain the action of the NLRC
in issuing such temporary mandatory injunction but rather we dismissed the petition as the
NLRC had yet to rule upon the motion for reconsideration filed by petitioner. Thus, the minute
resolution denying the petition for being prematurely filed.

Finally, an injunction, as an extraordinary remedy, is not favored in labor law considering that
it generally has not proved to be an effective means of settling labor disputes. 20 It has been
the policy of the State to encourage the parties to use the non-judicial process of negotiation
and compromise, mediation and arbitration. 21 Thus, injunctions may be issued only in cases
of extreme necessity based on legal grounds clearly established, after due consultations or
hearing and when all efforts at conciliation are exhausted which factors, however, are clearly
absent in the present case.

WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April 3, 1995 and
May 31, 1995, issued by the National Labor Relations Commission (First Division), in NLRC
NCR IC No. 000563-95, are hereby REVERSED and SET ASIDE.

SO ORDERED.

Regalado, Melo, Puno and Mendoza, JJ., concur.

 FIRST DIVISION

G.R. No. 159577 May 3, 2006

CHARLITO PEÑARANDA, Petitioner,

vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.

DECISION

PANGANIBAN, CJ:

Managerial employees and members of the managerial staff are exempted from the provisions of the
Labor Code on labor standards. Since petitioner belongs to this class of employees, he is not
entitled to overtime pay and premium pay for working on rest days.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27,
20032 and July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 74358. The
earlier Resolution disposed as follows:

"WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4

The latter Resolution denied reconsideration.

On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in
the CA disposed as follows:

"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime
pay and premium pay for rest day to complainant is hereby REVERSED and SET ASIDE, and the
complaint in the above-entitled case dismissed for lack of merit.5

The Facts

Sometime in June 1999, Petitioner Charlito Peñaranda was hired as an employee of Baganga
Plywood Corporation (BPC) to take charge of the operations and maintenance of its steam plant
boiler.6 In May 2001, Peñaranda filed a Complaint for illegal dismissal with money claims against
BPC and its general manager, Hudson Chua, before the NLRC.7
After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their position
papers and submit supporting documents.9 Their respective allegations are summarized by the labor
arbiter as follows:

"[Peñaranda] through counsel in his position paper alleges that he was employed by respondent
[Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift
Engineer until he was illegally terminated on December 19, 2000. Further, [he] alleges that his
services [were] terminated without the benefit of due process and valid grounds in accordance with
law. Furthermore, he was not paid his overtime pay, premium pay for working during holidays/rest
days, night shift differentials and finally claims for payment of damages and attorney’s fees having
been forced to litigate the present complaint.

"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under
Philippine laws and is represented herein by its General Manager HUDSON CHUA, [the] individual
respondent. Respondents thru counsel allege that complainant’s separation from service was done
pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on temporary closure due to
repair and general maintenance and it applied for clearance with the Department of Labor and
Employment, Regional Office No. XI to shut down and to dismiss employees (par. 2 position paper).
And due to the insistence of herein complainant he was paid his separation benefits (Annexes C and
D, ibid). Consequently, when respondent [BPC] partially reopened in January 2001, [Peñaranda]
failed to reapply. Hence, he was not terminated from employment much less illegally. He opted to
severe employment when he insisted payment of his separation benefits. Furthermore, being a
managerial employee he is not entitled to overtime pay and if ever he rendered services beyond the
normal hours of work, [there] was no office order/or authorization for him to do so. Finally,
respondents allege that the claim for damages has no legal and factual basis and that the instant
complaint must necessarily fail for lack of merit."10

The labor arbiter ruled that there was no illegal dismissal and that petitioner’s Complaint was
premature because he was still employed by BPC.11 The temporary closure of BPC’s plant did not
terminate his employment, hence, he need not reapply when the plant reopened.

According to the labor arbiter, petitioner’s money claims for illegal dismissal was also weakened by
his quitclaim and admission during the clarificatory conference that he accepted separation benefits,
sick and vacation leave conversions and thirteenth month pay.12

Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on
rest days, and attorney’s fees in the total amount of P21,257.98.13

Ruling of the NLRC

Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium
pay for working on rest days. According to the Commission, petitioner was not entitled to these
awards because he was a managerial employee.14

Ruling of the Court of Appeals

In its Resolution dated January 27, 2003, the CA dismissed Peñaranda’s Petition for Certiorari. The
appellate court held that he failed to: 1) attach copies of the pleadings submitted before the labor
arbiter and NLRC; and 2) explain why the filing and service of the Petition was not done by personal
service.15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that
petitioner still failed to submit the pleadings filed before the NLRC.16

Hence this Petition.17

The Issues

Petitioner states the issues in this wise:

"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it
entertained the APPEAL of the respondent[s] despite the lapse of the mandatory period of TEN
DAYS. 1avv phil.net

"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of jurisdiction
when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16, 2002
REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor arbiter]
with respect to the following:

"I. The finding of the [labor arbiter] that [Peñaranda] is a regular, common employee entitled
to monetary benefits under Art. 82 [of the Labor Code].

"II. The finding that [Peñaranda] is entitled to the payment of OVERTIME PAY and OTHER
MONETARY BENEFITS."18

The Court’s Ruling

The Petition is not meritorious.

Preliminary Issue:

Resolution on the Merits

The CA dismissed Peñaranda’s Petition on purely technical grounds, particularly with regard to the
failure to submit supporting documents.

In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying
the petition before the CA sufficiently supported the allegations therein. Citing this case, Piglas-
Kamao v. NLRC20 stayed the dismissal of an appeal in the exercise of its equity jurisdiction to order
the adjudication on the merits.

The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to
challenge the finding that he was a managerial employee.21 In his Motion for Reconsideration,
petitioner also submitted the pleadings before the labor arbiter in an attempt to comply with the CA
rules.22 Evidently, the CA could have ruled on the Petition on the basis of these attachments.
Petitioner should be deemed in substantial compliance with the procedural requirements.

Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of
petitioner and to tackle his substantive arguments in the present case. Rules of procedure must be
adopted to help promote, not frustrate, substantial justice.23 The Court frowns upon the practice of
dismissing cases purely on procedural grounds.24 Considering that there was substantial
compliance,25 a liberal interpretation of procedural rules in this labor case is more in keeping with the
constitutional mandate to secure social justice.26

First Issue:

Timeliness of Appeal

Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should
be filed within 10 days from receipt thereof.27

Petitioner’s claim that respondents filed their appeal beyond the required period is not substantiated.
In the pleadings before us, petitioner fails to indicate when respondents received the Decision of the
labor arbiter. Neither did the petitioner attach a copy of the challenged appeal. Thus, this Court has
no means to determine from the records when the 10-day period commenced and terminated. Since
petitioner utterly failed to support his claim that respondents’ appeal was filed out of time, we need
not belabor that point. The parties alleging have the burden of substantiating their allegations.28

Second Issue:

Nature of Employment

Petitioner claims that he was not a managerial employee, and therefore, entitled to the award
granted by the labor arbiter.

Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards.
Labor standards provide the working conditions of employees, including entitlement to overtime pay
and premium pay for working on rest days.29 Under this provision, managerial employees are "those
whose primary duty consists of the management of the establishment in which they are employed or
of a department or subdivision."30

The Implementing Rules of the Labor Code state that managerial employees are those who meet
the following conditions:

"(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof;

"(2) They customarily and regularly direct the work of two or more employees therein;

"(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion or any
other change of status of other employees are given particular weight."31

The Court disagrees with the NLRC’s finding that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also takes him out of the coverage of labor
standards. Like managerial employees, officers and members of the managerial staff are not entitled
to the provisions of law on labor standards.32 The Implementing Rules of the Labor Code define
members of a managerial staff as those with the following duties and responsibilities:

"(1) The primary duty consists of the performance of work directly related to management
policies of the employer;
 "(2) Customarily and regularly exercise discretion and independent judgment;

"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of the management of the establishment in which he is employed or
subdivision thereof; or (ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii) execute under
general supervision special assignments and tasks; and

"(4) who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work described
in paragraphs (1), (2), and (3) above."33

As shift engineer, petitioner’s duties and responsibilities were as follows:

"1. To supply the required and continuous steam to all consuming units at minimum cost.

"2. To supervise, check and monitor manpower workmanship as well as operation of boiler
and accessories.

"3. To evaluate performance of machinery and manpower.

"4. To follow-up supply of waste and other materials for fuel.

"5. To train new employees for effective and safety while working.

"6. Recommend parts and supplies purchases.

"7. To recommend personnel actions such as: promotion, or disciplinary action.

"8. To check water from the boiler, feedwater and softener, regenerate softener if beyond
hardness limit.

"9. Implement Chemical Dosing.

"10. Perform other task as required by the superior from time to time."34

The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a
member of the managerial staff. His duties and responsibilities conform to the definition of a member
of a managerial staff under the Implementing Rules.

Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing
the operation of the machines and the performance of the workers in the engineering section. This
work necessarily required the use of discretion and independent judgment to ensure the proper
functioning of the steam plant boiler. As supervisor, petitioner is deemed a member of the
managerial staff.35

Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that
he was the foreman responsible for the operation of the boiler.36 The term foreman implies that he
was the representative of management over the workers and the operation of the
department.37 Petitioner’s evidence also showed that he was the supervisor of the steam plant.38 His
classification as supervisor is further evident from the manner his salary was paid. He belonged to
the 10% of respondent’s 354 employees who were paid on a monthly basis; the others were paid
only on a daily basis.39

On the basis of the foregoing, the Court finds no justification to award overtime pay and premium
pay for rest days to petitioner.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.

ARTEMIO V. PANGANIBAN
Chief Justice
Chairman, First Division
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 169717 March 16, 2011

SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE

PHILIPPINES FOR EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY
VICTORIO-Union President,Petitioner,
vs.
CHARTER CHEMICAL and COATING CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

The right to file a petition for certification election is accorded to a labor organization provided that it
complies with the requirements of law for proper registration. The inclusion of supervisory
employees in a labor organization seeking to represent the bargaining unit of rank-and-file
employees does not divest it of its status as a legitimate labor organization. We apply these
principles to this case.

This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeal’s March 15,
2005 Decision1 in CA-G.R. SP No. 58203, which annulled and set aside the January 13, 2000
Decision2 of the Department of Labor and Employment (DOLE) in OS-A-6-53-99 (NCR-OD-M-9902-
019) and the September 16, 2005 Resolution3 denying petitioner union’s motion for reconsideration.

Factual Antecedents

On February 19, 1999, Samahang Manggagawa sa Charter Chemical Solidarity of Unions in the
Philippines for Empowerment and Reforms (petitioner union) filed a petition for certification election
among the regular rank-and-file employees of Charter Chemical and Coating Corporation
(respondent company) with the Mediation Arbitration Unit of the DOLE, National Capital Region.

On April 14, 1999, respondent company filed an Answer with Motion to Dismiss4 on the ground that
petitioner union is not a legitimate labor organization because of (1) failure to comply with the
documentation requirements set by law, and (2) the inclusion of supervisory employees within
petitioner union.5

Med-Arbiter’s Ruling

On April 30, 1999, Med-Arbiter Tomas F. Falconitin issued a Decision6 dismissing the petition for
certification election. The Med-Arbiter ruled that petitioner union is not a legitimate labor organization
because the Charter Certificate, "Sama-samang Pahayag ng Pagsapi at Authorization," and
"Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa
Saligang Batas" were not executed under oath and certified by the union secretary and attested to
by the union president as required by Section 235 of the Labor Code7 in relation to Section 1, Rule
VI of Department Order (D.O.) No. 9, series of 1997. The union registration was, thus, fatally
defective.
The Med-Arbiter further held that the list of membership of petitioner union consisted of 12
batchman, mill operator and leadman who performed supervisory functions. Under Article 245 of the
Labor Code, said supervisory employees are prohibited from joining petitioner union which seeks to
represent the rank-and-file employees of respondent company.

As a result, not being a legitimate labor organization, petitioner union has no right to file a petition for
certification election for the purpose of collective bargaining.

Department of Labor and Employment’s Ruling

On July 16, 1999, the DOLE initially issued a Decision8 in favor of respondent company dismissing
petitioner union’s appeal on the ground that the latter’s petition for certification election was filed out
of time. Although the DOLE ruled, contrary to the findings of the Med-Arbiter, that the charter
certificate need not be verified and that there was no independent evidence presented to establish
respondent company’s claim that some members of petitioner union were holding supervisory
positions, the DOLE sustained the dismissal of the petition for certification after it took judicial notice
that another union, i.e., Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating
Corporation, previously filed a petition for certification election on January 16, 1998. The Decision
granting the said petition became final and executory on September 16, 1998 and was remanded for
immediate implementation. Under Section 7, Rule XI of D.O. No. 9, series of 1997, a motion for
intervention involving a certification election in an unorganized establishment should be filed prior to
the finality of the decision calling for a certification election. Considering that petitioner union filed its
petition only on February 14, 1999, the same was filed out of time.

On motion for reconsideration, however, the DOLE reversed its earlier ruling. In its January 13, 2000
Decision, the DOLE found that a review of the records indicates that no certification election was
previously conducted in respondent company. On the contrary, the prior certification election filed by
Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating Corporation was, likewise,
denied by the Med-Arbiter and, on appeal, was dismissed by the DOLE for being filed out of time.
Hence, there was no obstacle to the grant of petitioner union’s petition for certification election, viz:

WHEREFORE, the motion for reconsideration is hereby GRANTED and the decision of this Office
dated 16 July 1999 is MODIFIED to allow the certification election among the regular rank-and-file
employees of Charter Chemical and Coating Corporation with the following choices:

1. Samahang Manggagawa sa Charter Chemical-Solidarity of Unions in the Philippines for

Empowerment and Reform (SMCC-SUPER); and

2. No Union.

Let the records of this case be remanded to the Regional Office of origin for the immediate conduct
of a certification election, subject to the usual pre-election conference.

SO DECIDED.9

Court of Appeal’s Ruling

On March 15, 2005, the CA promulgated the assailed Decision, viz:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution dated
January 13, 2000 and February 17, 2000 are hereby [ANNULLED] and SET ASIDE.
SO ORDERED.10

In nullifying the decision of the DOLE, the appellate court gave credence to the findings of the Med-
Arbiter that petitioner union failed to comply with the documentation requirements under the Labor
Code. It, likewise, upheld the Med-Arbiter’s finding that petitioner union consisted of both rank-and-
file and supervisory employees. Moreover, the CA held that the issues as to the legitimacy of
petitioner union may be attacked collaterally in a petition for certification election and the infirmity in
the membership of petitioner union cannot be remedied through the exclusion-inclusion proceedings
in a pre-election conference pursuant to the ruling in Toyota Motor Philippines v. Toyota Motor
Philippines Corporation Labor Union.11 Thus, considering that petitioner union is not a legitimate
labor organization, it has no legal right to file a petition for certification election.

Issues

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of jurisdiction in granting the respondent [company’s] petition for certiorari (CA G.R. No. SP No.
58203) in spite of the fact that the issues subject of the respondent company[’s] petition was already
settled with finality and barred from being re-litigated.

II

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of jurisdiction in holding that the alleged mixture of rank-and-file and supervisory employee[s] of
petitioner [union’s] membership is [a] ground for the cancellation of petitioner [union’s] legal
personality and dismissal of [the] petition for certification election.

III

Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of jurisdiction in holding that the alleged failure to certify under oath the local charter certificate
issued by its mother federation and list of the union membership attending the organizational
meeting [is a ground] for the cancellation of petitioner [union’s] legal personality as a labor
organization and for the dismissal of the petition for certification election.12

Petitioner Union’s Arguments

Petitioner union claims that the litigation of the issue as to its legal personality to file the subject
petition for certification election is barred by the July 16, 1999 Decision of the DOLE. In this decision,
the DOLE ruled that petitioner union complied with all the documentation requirements and that
there was no independent evidence presented to prove an illegal mixture of supervisory and rank-
and-file employees in petitioner union. After the promulgation of this Decision, respondent company
did not move for reconsideration, thus, this issue must be deemed settled.

Petitioner union further argues that the lack of verification of its charter certificate and the alleged
illegal composition of its membership are not grounds for the dismissal of a petition for certification
election under Section 11, Rule XI of D.O. No. 9, series of 1997, as amended, nor are they grounds
for the cancellation of a union’s registration under Section 3, Rule VIII of said issuance. It contends
that what is required to be certified under oath by the local union’s secretary or treasurer and
attested to by the local union’s president are limited to the union’s constitution and by-laws,
statement of the set of officers, and the books of accounts.

Finally, the legal personality of petitioner union cannot be collaterally attacked but may be
questioned only in an independent petition for cancellation pursuant to Section 5, Rule V, Book IV of
the Rules to Implement the Labor Code and the doctrine enunciated in Tagaytay Highlands
International Golf Club Incoprorated v. Tagaytay Highlands Empoyees Union-PTGWO.13

Respondent Company’s Arguments

Respondent company asserts that it cannot be precluded from challenging the July 16, 1999
Decision of the DOLE. The said decision did not attain finality because the DOLE subsequently
reversed its earlier ruling and, from this decision, respondent company timely filed its motion for
reconsideration.

On the issue of lack of verification of the charter certificate, respondent company notes that Article
235 of the Labor Code and Section 1, Rule VI of the Implementing Rules of Book V, as amended by
D.O. No. 9, series of 1997, expressly requires that the charter certificate be certified under oath.

It also contends that petitioner union is not a legitimate labor organization because its composition is
a mixture of supervisory and rank-and-file employees in violation of Article 245 of the Labor Code.
Respondent company maintains that the ruling in Toyota Motor Philippines vs. Toyota Motor
Philippines Labor Union14 continues to be good case law. Thus, the illegal composition of petitioner
union nullifies its legal personality to file the subject petition for certification election and its legal
personality may be collaterally attacked in the proceedings for a petition for certification election as
was done here.

Our Ruling

The petition is meritorious.

The issue as to the legal personality of petitioner union is not barred by the July 16, 1999 Decision of
the DOLE.

A review of the records indicates that the issue as to petitioner union’s legal personality has been
timely and consistently raised by respondent company before the Med-Arbiter, DOLE, CA and now
this Court. In its July 16, 1999 Decision, the DOLE found that petitioner union complied with the
documentation requirements of the Labor Code and that the evidence was insufficient to establish
that there was an illegal mixture of supervisory and rank-and-file employees in its membership.
Nonetheless, the petition for certification election was dismissed on the ground that another union
had previously filed a petition for certification election seeking to represent the same bargaining unit
in respondent company.

Upon motion for reconsideration by petitioner union on January 13, 2000, the DOLE reversed its
previous ruling. It upheld the right of petitioner union to file the subject petition for certification
election because its previous decision was based on a mistaken appreciation of facts.15 From this
adverse decision, respondent company timely moved for reconsideration by reiterating its previous
arguments before the Med-Arbiter that petitioner union has no legal personality to file the subject
petition for certification election.
The July 16, 1999 Decision of the DOLE, therefore, never attained finality because the parties timely
moved for reconsideration. The issue then as to the legal personality of petitioner union to file the
certification election was properly raised before the DOLE, the appellate court and now this Court.

The charter certificate need not be certified under oath by the local union’s secretary or treasurer
and attested to by its president.

Preliminarily, we must note that Congress enacted Republic Act (R.A.) No. 948116 which took effect
on June 14, 2007.17 This law introduced substantial amendments to the Labor Code. However, since
the operative facts in this case occurred in 1999, we shall decide the issues under the pertinent legal
provisions then in force (i.e., R.A. No. 6715,18 amending Book V of the Labor Code, and the rules
and regulations19 implementing R.A. No. 6715, as amended by D.O. No. 9,20

series of 1997) pursuant to our ruling in Republic v. Kawashima Textile Mfg., Philippines, Inc.21

In the main, the CA ruled that petitioner union failed to comply with the requisite documents for
registration under Article 235 of the Labor Code and its implementing rules. It agreed with the Med-
Arbiter that the Charter Certificate, Sama-samang Pahayag ng Pagsapi at Authorization, and
Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa
Saligang Batas were not executed under oath. Thus, petitioner union cannot be accorded the status
of a legitimate labor organization.

We disagree.

The then prevailing Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O.
No. 9, series of 1997, provides:

Section 1. Chartering and creation of a local chapter — A duly registered federation or national union
may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2)
copies of the following:

(a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;

(b) The names of the local/chapter’s officers, their addresses, and the principal office of the
local/chapter; and

(c) The local/chapter’s constitution and by-laws provided that where the local/chapter’s
constitution and by-laws [are] the same as [those] of the federation or national union, this fact
shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the
Treasurer of the local/chapter and attested to by its President.

As readily seen, the Sama-samang Pahayag ng Pagsapi at Authorization and Listahan ng mga
Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas are not
among the documents that need to be submitted to the Regional Office or Bureau of Labor Relations
in order to register a labor organization. As to the charter certificate, the above-quoted rule indicates
that it should be executed under oath. Petitioner union concedes and the records confirm that its
charter certificate was not executed under oath. However, in San Miguel Corporation (Mandaue
Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Corporation Monthlies
Rank-and-File Union-FFW (MPPP-SMPP-SMAMRFU-FFW),22 which was decided under the
auspices of D.O. No. 9, Series of 1997, we ruled –

In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma, 331 Phil. 356 (1996), the Court
ruled that it was not necessary for the charter certificate to be certified and attested by the
local/chapter officers. Id. While this ruling was based on the interpretation of the previous
Implementing Rules provisions which were supplanted by the 1997 amendments, we believe
that the same doctrine obtains in this case. Considering that the charter certificate is prepared
and issued by the national union and not the local/chapter, it does not make sense to have the
local/chapter’s officers x x x certify or attest to a document which they had no hand in the
preparation of.23 (Emphasis supplied)

In accordance with this ruling, petitioner union’s charter certificate need not be executed under oath.
Consequently, it validly acquired the status of a legitimate labor organization upon submission of (1)
its charter certificate,24 (2) the names of its officers, their addresses, and its principal office,25 and (3)
its constitution and by-laws26— the last two requirements having been executed under oath by the
proper union officials as borne out by the records.

The mixture of rank-and-file and supervisory employees in petitioner union does not nullify its legal
personality as a legitimate labor organization.

The CA found that petitioner union has for its membership both rank-and-file and supervisory
employees. However, petitioner union sought to represent the bargaining unit consisting of rank-and-
file employees. Under Article 24527 of the Labor Code, supervisory employees are not eligible for
membership in a labor organization of rank-and-file employees. Thus, the appellate court ruled that
petitioner union cannot be considered a legitimate labor organization pursuant to Toyota Motor
Philippines v. Toyota Motor Philippines Corporation Labor Union28 (hereinafter Toyota).

Preliminarily, we note that petitioner union questions the factual findings of the Med-Arbiter, as
upheld by the appellate court, that 12 of its members, consisting of batchman, mill operator and
leadman, are supervisory employees. However, petitioner union failed to present any rebuttal
evidence in the proceedings below after respondent company submitted in evidence the job
descriptions29 of the aforesaid employees. The job descriptions indicate that the aforesaid
employees exercise recommendatory managerial actions which are not merely routinary but require
the use of independent judgment, hence, falling within the definition of supervisory employees under
Article 212(m)30 of the Labor Code. For this reason, we are constrained to agree with the Med-
Arbiter, as upheld by the appellate court, that petitioner union consisted of both rank-and-file and
supervisory employees.

Nonetheless, the inclusion of the aforesaid supervisory employees in petitioner union does not divest
it of its status as a legitimate labor organization. The appellate court’s reliance on Toyota is
misplaced in view of this Court’s subsequent ruling in Republic v. Kawashima Textile Mfg.,
Philippines, Inc.31 (hereinafter Kawashima). In Kawashima, we explained at length how and why
the Toyota doctrine no longer holds sway under the altered state of the law and rules applicable to
this case, viz:

R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition [on the co-
mingling of supervisory and rank-and-file employees] would bring about on the legitimacy of
a labor organization.
It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules)
which supplied the deficiency by introducing the following amendment to Rule II (Registration of
Unions):

"Sec. 1. Who may join unions. - x x x Supervisory employees and security guards shall not be
eligible for membership in a labor organization of the rank-and-file employees but may join,
assist or form separate labor organizations of their own; Provided, that those supervisory
employees who are included in an existing rank-and-file bargaining unit, upon the effectivity of
Republic Act No. 6715, shall remain in that unit x x x. (Emphasis supplied) and Rule V
(Representation Cases and Internal-Union Conflicts) of the Omnibus Rules, viz:

"Sec. 1. Where to file. - A petition for certification election may be filed with the Regional Office which
has jurisdiction over the principal office of the employer. The petition shall be in writing and under
oath.

Sec. 2. Who may file. - Any legitimate labor organization or the employer, when requested to bargain
collectively, may file the petition.

The petition, when filed by a legitimate labor organization, shall contain, among others:

xxxx

(c) description of the bargaining unit which shall be the employer unit unless circumstances
otherwise require; and provided further, that the appropriate bargaining unit of the rank-and-
file employees shall not include supervisory employees and/or security guards. (Emphasis
supplied)

By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered
labor organization from exercising its right to file a petition for certification election.

Thus, when the issue of the effect of mingling was brought to the fore in Toyota, the Court, citing
Article 245 of the Labor Code, as amended by R.A. No. 6715, held:

"Clearly, based on this provision, a labor organization composed of both rank-and-file and
supervisory employees is no labor organization at all. It cannot, for any guise or purpose, be a
legitimate labor organization. Not being one, an organization which carries a mixture of rank-
and-file and supervisory employees cannot possess any of the rights of a legitimate labor
organization, including the right to file a petition for certification election for the purpose of
collective bargaining. It becomes necessary, therefore, anterior to the granting of an order
allowing a certification election, to inquire into the composition of any labor organization
whenever the status of the labor organization is challenged on the basis of Article 245 of the
Labor Code.

xxxx

In the case at bar, as respondent union's membership list contains the names of at least twenty-
seven (27) supervisory employees in Level Five positions, the union could not, prior to purging itself
of its supervisory employee members, attain the status of a legitimate labor organization. Not being
one, it cannot possess the requisite personality to file a petition for certification election." (Emphasis
supplied)
In Dunlop, in which the labor organization that filed a petition for certification election was one for
supervisory employees, but in which the membership included rank-and-file employees, the Court
reiterated that such labor organization had no legal right to file a certification election to represent a
bargaining unit composed of supervisors for as long as it counted rank-and-file employees among its
members.

It should be emphasized that the petitions for certification election involved

in Toyota and Dunlop were filed on November 26, 1992 and September 15, 1995, respectively;
hence, the 1989 Rules was applied in both cases.

But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by
Department Order No. 9, series of 1997 (1997 Amended Omnibus Rules). Specifically, the
requirement under Sec. 2(c) of the 1989 Amended Omnibus Rules – that the petition for certification
election indicate that the bargaining unit of rank-and-file employees has not been mingled with
supervisory employees – was removed. Instead, what the 1997 Amended Omnibus Rules requires is
a plain description of the bargaining unit, thus:

Rule XI
Certification Elections

xxxx

Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall
contain, among others, the following: x x x (c) The description of the bargaining unit.

In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity of the 1997
Amended Omnibus Rules, although the specific provision involved therein was only Sec. 1, Rule VI,
to wit:

"Section. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union
may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2)
copies of the following: a) a charter certificate issued by the federation or national union indicating
the creation or establishment of the local/chapter; (b) the names of the local/chapter's officers, their
addresses, and the principal office of the local/chapter; and (c) the local/ chapter's constitution and
by-laws; provided that where the local/chapter's constitution and by-laws is the same as that of the
federation or national union, this fact shall be indicated accordingly.

All the foregoing supporting requirements shall be certified under oath by the Secretary or the
Treasurer of the local/chapter and attested to by its President."

which does not require that, for its creation and registration, a local or chapter submit a list of its
members.

Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands Employees Union-
PGTWO in which the core issue was whether mingling affects the legitimacy of a labor organization
and its right to file a petition for certification election. This time, given the altered legal milieu, the
Court abandoned the view in Toyota and Dunlopand reverted to its pronouncement in Lopez that
while there is a prohibition against the mingling of supervisory and rank-and-file employees in one
labor organization, the Labor Code does not provide for the effects thereof. Thus, the Court held that
after a labor organization has been registered, it may exercise all the rights and privileges of a
legitimate labor organization. Any mingling between supervisory and rank-and-file employees in its
membership cannot affect its legitimacy for that is not among the grounds for cancellation of its
registration, unless such mingling was brought about by misrepresentation, false statement or fraud
under Article 239 of the Labor Code.

In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products Plants-
San Miguel Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW, the Court
explained that since the 1997 Amended Omnibus Rules does not require a local or chapter to
provide a list of its members, it would be improper for the DOLE to deny recognition to said local or
chapter on account of any question pertaining to its individual members.

More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which involved a
petition for cancellation of union registration filed by the employer in 1999 against a rank-and-file
labor organization on the ground of mixed membership: the Court therein reiterated its ruling
in Tagaytay Highlands that the inclusion in a union of disqualified employees is not among the
grounds for cancellation, unless such inclusion is due to misrepresentation, false statement or fraud
under the circumstances enumerated in Sections (a) and (c) of Article 239 of the Labor Code.

All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as
interpreted by the Court in Tagaytay Highlands, San Miguel and Air Philippines, had already set the
tone for it. Toyota and Dunlop no longer hold sway in the present altered state of the law and the
rules.32 [Underline supplied]

The applicable law and rules in the instant case are the same as those in Kawashima because the
present petition for certification election was filed in 1999 when D.O. No. 9, series of 1997, was still
in effect. Hence, Kawashimaapplies with equal force here. As a result, petitioner union was not
divested of its status as a legitimate labor organization even if some of its members were
supervisory employees; it had the right to file the subject petition for certification election.

The legal personality of petitioner union cannot be collaterally attacked by respondent company in
the certification election proceedings.

Petitioner union correctly argues that its legal personality cannot be collaterally attacked in the
certification election proceedings. As we explained in Kawashima:

Except when it is requested to bargain collectively, an employer is a mere bystander to any petition
for certification election; such proceeding is non-adversarial and merely investigative, for the
purpose thereof is to determine which organization will represent the employees in their collective
bargaining with the employer. The choice of their representative is the exclusive concern of the
employees; the employer cannot have any partisan interest therein; it cannot interfere with, much
less oppose, the process by filing a motion to dismiss or an appeal from it; not even a mere
allegation that some employees participating in a petition for certification election are actually
managerial employees will lend an employer legal personality to block the certification election. The
employer's only right in the proceeding is to be notified or informed thereof.

The amendments to the Labor Code and its implementing rules have buttressed that policy even
more.33

WHEREFORE, the petition is GRANTED. The March 15, 2005 Decision and September 16, 2005
Resolution of the Court of Appeals in CA-G.R. SP No. 58203 are REVERSED and SET ASIDE. The
January 13, 2000 Decision of the Department of Labor and Employment in OS-A-6-53-99 (NCR-OD-
M-9902-019) is REINSTATED.

No pronouncement as to costs.
SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 187887 September 7, 2011

PAMELA FLORENTINA P. JUMUAD, Petitioner,

vs.
HI-FLYER FOOD, INC. and/or JESUS R. MONTEMAYOR, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari assailing the April 20, 2009 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 03346, which reversed the August 10, 2006 Decision2 and the
November 29, 2007 Resolution3 of the National Labor Relations Commission, 4th Division (NLRC),
in NLRC Case No. V-000813-06. The NLRC Decision and Resolution affirmed in toto the
Decision4 of the Labor Arbiter Julie C. Ronduque (LA) in RAB Case No. VII-10-2269-05 favoring the
petitioner.

The Facts:

On May 22, 1995, petitioner Pamela Florentina P. Jumuad (Jumuad) began her employment with
respondent Hi-Flyer Food, Inc. (Hi-Flyer), as management trainee. Hi-Flyer is a corporation licensed
to operate Kentucky Fried Chicken (KFC) restaurants in the Philippines. Based on her performance
through the years, Jumuad received several promotions until she became the area manager for the
entire Visayas-Mindanao 1 region, comprising the provinces of Cebu, Bacolod, Iloilo and Bohol.5

Aside from being responsible in monitoring her subordinates, Jumuad was tasked to: 1) be highly
visible in the restaurants under her jurisdiction; 2) monitor and support day-to-day operations; and 3)
ensure that all the facilities and equipment at the restaurant were properly maintained and
serviced.6 Among the branches under her supervision were the KFC branches in Gaisano Mall,
Cebu City (KFC-Gaisano); in Cocomall, Cebu City (KFC-Cocomall); and in Island City Mall,
Bohol (KFC-Bohol).

As area manager, Jumuad was allowed to avail of Hi-Flyer’s car loan program,7 wherein
forty (40%) percent of the total loanable amount would be subsidized by Hi-Flyer and the remaining
sixty (60%) percent would be deducted from her salary. It was also agreed that in the event that she
would resign or would be terminated prior to the payment in full of the said car loan, she could opt to
surrender the car to Hi-Flyer or to pay the full balance of the loan.8

In just her first year as Area Manager, Jumuad gained distinction and was awarded the 3rd top area
manager nationwide. She was rewarded with a trip to Singapore for her excellent performance.9

On October 4, 2004, Hi Flyer conducted a food safety, service and sanitation audit at KFC-Gaisano.
The audit, denominated as CHAMPS Excellence Review (CER), revealed several sanitation
violations, such as the presence of rodents and the use of a defective chiller for the storage of
food.10 When asked to explain, Jumuad first pointed out that she had already taken steps to prevent
the further infestation of the branch. As to why the branch became infested with rodents, Jumuad
faulted management’s decision to terminate the services of the branch’s pest control program and to
rely solely on the pest control program of the mall. As for the defective chiller, she explained that it
was under repair at the time of the CER.11 Soon thereafter, Hi-Flyer ordered the KFC-Gaisano
branch closed.

Then, sometime in June of 2005, Hi-Flyer audited the accounts of KFC-Bohol amid reports that
certain employees were covering up cash shortages. As a result, the following irregularities were
discovered: 1) cash shortage amounting to ₱ 62,290.85; 2) delay in the deposits of cash sales by an
average of three days; 3) the presence of two sealed cash-for-deposit envelopes containing paper
cut-outs instead of cash; 4) falsified entries in the deposit logbook; 5) lapses in inventory control; and
6) material product spoilage.12 In her report regarding the incident, Jumuad disclaimed any fault in
the incident by pointing out that she was the one responsible for the discovery of this irregularity.13

On August 7, 2005, Hi-Flyer conducted another CER, this time at its KFC-Cocomall branch. Grout
and leaks at the branch’s kitchen wall, dried up spills from the marinator, as well as a live rat under
postmix, and signs of rodent gnawing/infestation were found.14 This time, Jumuad explained to
management that she had been busy conducting management team meetings at the other KFC
branches and that, at the date the CER was conducted, she had no scheduled visit at the KFC-
Cocomall branch.15

Seeking to hold Jumuad accountable for the irregularities uncovered in the branches under her
supervision, Hi-Flyer sent Jumuad an Irregularities Report16 and Notice of Charges17 which she
received on September 5, 2005. On September 7, 2005 Jumuad submitted her written
explanation.18 On September 28, 2005, Hi-Flyer held an administrative hearing where Jumuad
appeared with counsel. Apparently not satisfied with her explanations, Hi-Flyer served her a Notice
of Dismissal19 dated October 14, 2005, effecting her termination on October 17, 2005.

This prompted Jumuad to file a complaint against Hi-Flyer and/or Jesus R.

Montemayor (Montemayor) for illegal dismissal before the NLRC on October 17, 2005, praying for
reinstatement and payment of separation pay, 13th month pay, service incentive leave, moral and
exemplary damages, and attorney’s fees. Jumuad also sought the reimbursement of the amount
equivalent to her forty percent (40%) contribution to Hi-Flyer’s subsidized car loan program.

While the LA found that Jumuad was not completely blameless for the anomalies discovered, she
was of the view that the employer’s prerogative to dismiss or layoff an employee "must be exercised
without abuse of discretion" and "should be tempered with compassion and understanding."20 Thus,
the dismissal was too harsh considering the circumstances. After finding that no serious cause for
termination existed, the LA ruled that Jumuad was illegally dismissed. The LA disposed:

WHEREFORE, VIEWED FROM THE FOREGOING PREMISES, judgment is hereby rendered

declaring complainant’s dismissal as ILLEGAL. Consequently, reinstatement not being feasible,
respondents HI-FLYER FOOD, INC. AND OR JESUS R. MONTEMAYOR are hereby ordered to
pay, jointly and severally, complainant PAMELA FLORENTINA P. JUMUAD, the total amount of
THREE HUNDRED THIRTY-SIX THOUSAND FOUR HUNDRED PESOS (₱ 336,400.00), Philippine
currency, representing Separation Pay, within ten (10) days from receipt hereof, through the Cashier
of this Arbitration Branch.

Further, same respondents are ordered to reimburse complainant an amount equivalent to 40% of
the value of her car loaned pursuant to the car loan entitlement memorandum.

Other claims are DISMISSED for lack of merit.21

Both Jumuad and Hi-Flyer appealed to the NLRC. Jumuad faulted the LA for not awarding
backwages and damages despite its finding that she was illegally dismissed. Hi-Flyer and
Montemayor, on the other hand, assailed the finding that Jumuad was illegally dismissed and that
they were solidarily liable therefor. They also questioned the orders of the LA that they pay
separation pay and reimburse the forty percent (40%) of the loan Jumuad paid pursuant to Hi-Flyer’s
car entitlement program.

Echoing the finding of the LA that the dismissal of Jumuad was too harsh, the NLRC affirmed in
toto the LA decision dated August 10, 2006. In addition, the NLRC noted that even before the
Irregularities Report and Notice of Charges were given to Jumuad on September 5, 2005, two (2)
electronic mails (e-mails) between Montemayor and officers of Hi-Flyer showed that Hi-Flyer was
already determined to terminate Jumuad. The first e-mail22 read:

From: Jess R. Montemayor

Sent: Tuesday, August 16, 2005 5:59 PM

To: bebe chaves; Maria Judith N. Marcelo; Jennifer Coloma Ravela; Bernard Joseph A. Velasco

Cc: Odjie Belarmino; Jesse D. Cruz

Subject: RE: 049 KFC Cocomall – Food Safety Risk/Product Quality Violation

I agree if the sanctions are light we should change them. In the case of Pamela however, the fact
that Cebu Colon store had these violations is not the first time this incident has happened in her
area. The Bohol case was also in her area and maybe these two incidents is enough grounds
already for her to be terminated or maybe asked to resign instead of being terminated.

I know if any Ops person serves expired product this is ground for termination. I think serving off
specs products such as this lumpy gravy in the case of Coco Mall should be grounds for termination.
How many customers have we lost due to this lumpy clearly out of specs gravy? 20 customers
maybe.

Jess.

The second e-mail,23 sent by one Bebe Chaves of Hi-Flyer to Montemayor and other officers of Hi-
Flyer, reads:

From: bebe chaves

Sent: Sat 9/3/2005 3:45 AM

To: Maria Judith N. Marcelo

CC: Jennifer Coloma Ravela; Goodwin Belarmino; Jess R. Montemayor

Subject: RE: 049 KFC Cocomall – Food Safety Risk/Product Quality Violation

Jojo,
Just an update of our meeting yesterday with Jennifer. After having reviewed the case and all
existing documents, we have decided that there is enough ground to terminate her services.
IR/Jennifer are working hand in hand to service due notice and close the case.

According to the NLRC, these e-mails were proof that Jumuad was denied due process considering
that no matter how she would refute the charges hurled against her, the decision of Hi-Flyer to
terminate her would not change.24

Sustaining the order of the LA to reimburse Jumuad the amount equivalent to 40% of the value of
the car loan, the NLRC explained that Jumuad enjoyed this benefit during her period of employment
as Area Manager and could have still enjoyed the same if not for her illegal dismissal.25

Finally, the NLRC held that the active participation of Montemayor in the illegal dismissal of Jumuad
justified his solidary liability with Hi-Flyer.

Both Jumuad and Hi-Flyer sought reconsideration of the NLRC Decision but their respective motions
were denied on November 29, 2007.26

Alleging grave abuse of discretion on the part of the NLRC, Hi-Flyer appealed the case before the
CA in Cebu City.

On April 20, 2009, the CA rendered the subject decision reversing the decision of the labor tribunal.
The appellate court disposed:

WHEREFORE, in view of the foregoing, the Petition is GRANTED. The Decision of the National
Labor Relations Commission (4th Division) dated 28 September 2007 in NLRC Case No. V-000813-
06 (RAB Case No. VII-10-2269-05, as well as the Decision dated 10 August 2006 of the Honorable
Labor Arbiter Julie C. Ronduque, and the 29 November 2006 Resolution of the NLRC denying
petitioner’s Motion for Reconsideration dated 08 November 2007, are hereby REVERSED and SET
ASIDE.

No pronouncement as to costs.

SO ORDERED.27

Contrary to the findings of the LA and the NLRC, the CA was of the opinion that the requirements of
substantive and procedural due process were complied with affording Jumuad an opportunity to be
heard first, when she submitted her written explanation and then, when she was informed of the
decision and the basis of her termination.28 As for the e-mail exchanges between Montemayor and
the officers of Hi-Flyer, the CA opined that they did not equate to a predetermination of Jumuad’s
termination. It was of the view that the e-mail exchanges were mere discussions between
Montemayor and other officers of Hi-Flyer on whether grounds for disciplinary action or termination
existed. To the mind of the CA, the e-mails just showed that Hi-Flyer extensively deliberated the
nature and cause of the charges against Jumuad.29

On the issue of loss of trust and confidence, the CA considered the deplorable sanitary conditions
and the cash shortages uncovered at three of the seven KFC branches supervised by Jumuad as
enough bases for Hi-Flyer to lose its trust and confidence in her.30

With regard to the reimbursement of the 40% of the car loan as awarded by the labor tribunal, the
CA opined that the terms of the car loan program did not provide for reimbursement in case an
employee was terminated for just cause and they, in fact, required that the employee should stay
with the company for at least three (3) years from the date of the loan to obtain the full 40% subsidy.
The CA further stated that the rights and obligations of the parties should be litigated in a separate
civil action before the regular courts.31

The CA also exculpated Montemayor from any liability since it considered Jumuad’s dismissal with a
just cause and it found no evidence that he acted with malice and bad faith.32

Hence, this petition on the following

GROUNDS:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLD[ING] AS VALID THE

TERMINATION OF PETITIONER’S SERVICES BY RESPONDENTS.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE

DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION 4th DIVISION OF CEBU
CITY WHICH AFFIRMED THE DECISION OF LABOR ARBITER JULUE RENDOQUE.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT REVERSED THE

DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION 4th DIVISION OF CEBU
CITY WHEN IT RULED THAT PETITIONER IS NOT ENTITLED TO REIMBURSEMENT OF
FORTY PERCENT (40%) OF THE CAR VALUE BENEFITS.

It is a hornbook rule that factual findings of administrative or quasi-judicial bodies, which are deemed
to have acquired expertise in matters within their respective jurisdictions, are generally accorded not
only respect but even finality, and bind the Court when supported by substantial evidence.33 While
this rule is strictly adhered to in labor cases, the same rule, however, admits exceptions. These
include: (1) when there is grave abuse of discretion; (2) when the findings are grounded on
speculation; (3) when the inference made is manifestly mistaken; (4) when the judgment of the Court
of Appeals is based on a misapprehension of facts; (5) when the factual findings are conflicting; (6)
when the Court of Appeals went beyond the issues of the case and its findings are contrary to the
admissions of the parties; (7) when the Court of Appeals overlooked undisputed facts which, if
properly considered, would justify a different conclusion; (8) when the facts set forth by the petitioner
are not disputed by the respondent; and (9) when the findings of the Court of Appeals are premised
on the absence of evidence and are contradicted by the evidence on record.34

In the case at bench, the factual findings of the CA differ from that of the LA and the NLRC. This
divergence of positions between the CA and the labor tribunal below constrains the Court to review
and evaluate assiduously the evidence on record.

The petition is without merit.

On whether Jumuad was illegally dismissed, Article 282 of the Labor Code provides:

Art. 282. Termination by Employer. — An employer may terminate an employment for any of the
following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
 (b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

Jumuad was terminated for neglect of duty and breach of trust and confidence. Gross negligence
connotes want or absence of or failure to exercise slight care or diligence, or the entire absence of
care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.
Fraud and willful neglect of duties imply bad faith of the employee in failing to perform his job, to the
detriment of the employer and the latter’s business. Habitual neglect, on the other hand, implies
repeated failure to perform one's duties for a period of time, depending upon the circumstances. It
has been said that a single or an isolated act of negligence cannot constitute as a just cause for the
dismissal of an employee.35 To be a ground for removal, the neglect of duty must be
both gross and habitual.36

On the other hand, breach of trust and confidence, as a just cause for termination of employment, is
premised on the fact that the employee concerned holds a position of trust and confidence, where
greater trust is placed by management and from whom greater fidelity to duty is correspondingly
expected. The betrayal of this trust is the essence of the offense for which an employee is
penalized.37

It should be noted, however, that the finding of guilt or innocence in a charge of gross and habitual
neglect of duty does not preclude the finding of guilty or innocence in a charge of breach of trust and
confidence. Each of the charges must be treated separately, as the law itself has treated them
separately. To repeat, to warrant removal from service for gross and habitual neglect of duty, it must
be shown that the negligence should not merely be gross, but also habitual. In breach of trust and
confidence, so long as it is shown there is some basis for management to lose its trust and
confidence and that the dismissal was not used as an occasion for abuse, as a subterfuge for
causes which are illegal, improper, and unjustified and is genuine, that is, not a mere afterthought
intended to justify an earlier action taken in bad faith, the free will of management to conduct its own
business affairs to achieve its purpose cannot be denied.

After an assiduous review of the facts as contained in the records, the Court is convinced that
Jumuad cannot be dismissed on the ground of gross and habitual neglect of duty. The Court notes
the apparent neglect of Jumuad of her duty in ensuring that her subordinates were properly
monitored and that she had dutifully done all that was expected of her to ensure the safety of the
consuming public who continue to patronize the KFC branches under her jursidiction. Had Jumuad
discharged her duties to be highly visible in the restaurants under her jurisdiction, monitor and
support the day to day operations of the branches and ensure that all the facilities and equipment at
the restaurant were properly maintained and serviced, the deplorable conditions and irregularities at
the various KFC branches under her jurisdiction would have been prevented.

Considering, however, that over a year had lapsed between the incidences at KFC-Gaisano and
KFC-Bohol, and that the nature of the anomalies uncovered were each of a different nature, the
Court finds that her acts or lack of action in the performance of her duties is not born of habit.1avvphi1
Despite saying this, it cannot be denied that Jumuad willfully breached her duties as to be unworthy
of the trust and confidence of Hi-Flyer. First, there is no denying that Jumuad was a managerial
employee. As correctly noted by the appellate court, Jumuad executed management policies and
had the power to discipline the employees of KFC branches in her area. She recommended actions
on employees to the head office. Pertinent is Article 212 (m) of the Labor Code defining a
managerial employee as one who is vested with powers or prerogatives to lay down and execute
management policies and/or hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees.

Based on established facts, the mere existence of the grounds for the loss of trust and confidence
justifies petitioner’s dismissal. Pursuant to the Court’s ruling in Lima Land, Inc. v. Cuevas,38 as long
as there is some basis for such loss of confidence, such as when the employer has reasonable
ground to believe that the employee concerned is responsible for the purported misconduct, and the
nature of his participation therein renders him unworthy of the trust and confidence demanded of his
position, a managerial employee may be dismissed.

In the present case, the CER’s reports of Hi-Flyer show that there were anomalies committed in the
branches managed by Jumuad. On the principle of respondeat superior or command responsibility
alone, Jumuad may be held liable for negligence in the performance of her managerial duties. She
may not have been directly involved in causing the cash shortages in KFC-Bohol, but her
involvement in not performing her duty monitoring and supporting the day to day operations of the
branches and ensure that all the facilities and equipment at the restaurant were properly maintained
and serviced, could have truly prevented the whole debacle from ever occurring.

Moreover, it is observed that rather than taking proactive steps to prevent the anomalies at her
branches, Jumuad merely effected remedial measures. In the restaurant business where the health
and well-being of the consuming public is at stake, this does not suffice. Thus, there is reasonable
basis for Hi-Flyer to withdraw its trust in her and dismissing her from its service.

The disquisition of the appellate court on the matter is also worth mentioning:

In this case, there is ample evidence that private respondent indeed committed acts justifying loss of
trust and confidence of Hi-Flyer, and eventually, which resulted to her dismissal from service. Private
respondent’s mismanagement and negligence in supervising the effective operation of KFC
branches in the span of less than a year, resulting in the closure of KFC-Gaisano due to deplorable
sanitary conditions, cash shortages in KFC-Bohol, in which the said branch, at the time of discovery,
was only several months into operation, and the poor sanitation at KFC-Cocomall. The glaring fact
that three (3) out of the seven (7) branches under her area were neglected cannot be glossed over
by private respondent’s explanation that there was no negligence on her part as the sanitation
problem was structural, that she had been usually busy conducting management team meetings in
several branches of KFC in her area or that she had no participation whatsoever in the alleged cash
shortages.

xxx

It bears stressing that both the Labor Arbiter and the NLRC found that private respondent was
indeed lax in her duties. Thus, said the NLRC: "xxx [i]t is Our considered view that xxx complainant
cannot totally claim that she was not remiss in her duties xxx.39

As the employer, Hi-Flyer has the right to regulate, according to its discretion and best judgment, all
aspects of employment, including work assignment, working methods, processes to be followed,
working regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Management has the prerogative to discipline its employees and to
impose appropriate penalties on erring workers pursuant to company rules and regulations.40 1âwphi1

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, the employer’s exercise of its management prerogative must be upheld.41

In this case, Hi-Flyer exercised in good faith its management prerogative as there is no dispute that
it has lost trust and confidence in her and her managerial abilities, to its damage and prejudice. Her
dismissal, was therefore, justified.

As for Jumuad’s claim for the reimbursement of the 40% of the value of the car loan subsidized by
Hi-Flyer under its car loan policy, the same must also be denied. The rights and obligations of the
parties to a car loan agreement is not a proper issue in a labor dispute but in a civil one.42 It involves
the relationship of debtor and creditor rather than employee-employer relations.43 Jurisdiction,
therefore, lies with the regular courts in a separate civil action.44

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment.
On the other hand, the law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good conduct and loyalty. The
employer may not be compelled to continue to employ such persons whose continuance in the
service will patently be inimical to its interests.45

WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice