B. The Labor Code of the Philippines.
innocence in a criminal case is not determinative of the existence of a just or authorized cause for his or
2. Declaration of Basic Policy.
f. Management Prerogatives/Rights
G.R. No. 212054. March 11, 2015.*
ST. LUKE’S MEDICAL CENTER, INC., petitioner, vs. MARIA THERESA V. SANCHEZ,
respondent.
Labor Law; Management Prerogatives; Among the employer’s management prerogatives is the
right to prescribe reasonable rules and regulations necessary or proper for the conduct of its business
or concern, to provide certain disciplinary measures to implement said rules and to assure that the
same would be complied with.—The right of an employer to regulate all aspects of employment, aptly
called “management prerogative,” gives employers the freedom to regulate, according to their discretion
and best judgment, all aspects of employment, including work assignment, working methods, processes
to be followed, working regulations, transfer of employees, work supervision, layoff of workers and the
discipline, dismissal and recall of workers. In this light, courts often decline to interfere in legitimate
business decisions of employers. In fact, labor laws discourage interference in employers’ judgment
concerning the conduct of their business. Among the employer’s management prerogatives is the right
to prescribe reasonable rules and regulations necessary or proper for the conduct of its business or
concern, to provide certain disciplinary measures to implement said rules and to assure that the same
would be complied with. At the same time, the employee has the corollary duty to obey all reasonable
rules, orders, and instructions of the employer; and willful or intentional disobedience thereto, as a
general rule, justifies termination of the contract of service and the dismissal of the employee.
Same; Termination of Employment; Willful Disobedience; For an employee to be validly dismissed
on willful disobedience, the employer’s orders, regulations, or instructions must be: (1) reasonable and
lawful, (2) sufficiently known to the employee, and (3) in connection with the duties which the employee
has been engaged to discharge.”—Article 296 (formerly Article 282) of the Labor Code provides: Article
296. 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 his representative in connection with his work; x x x x Note that for an employee to be
validly dismissed on this ground, the employer’s orders, regulations, or instructions must be: (1)
reasonable and lawful, (2) sufficiently known to the employee, and (3) in connection with the duties
which the employee has been engaged to discharge.”
Same; Same; Same; Whatever maybe the justification behind the violation of the company rules
regarding excess medical supplies is immaterial since it has been established that an infraction was
deliberately committed.—The Court observes that there lies no competent basis to support the common
observation of the NLRC and the CA that the retention of excess medical supplies was a tolerated
practice among the nurses at the Pediatric Unit. While there were previous incidents of “hoarding,” it
appears that such acts were — in similar fashion — furtively made and the items secretly kept, as any
excess items found in the concerned nurse’s possession would have to be confiscated. Hence, the fact
that no one was caught and/or sanctioned for transgressing the prohibition therefor does not mean that
the so-called “hoarding” practice was tolerated by SLMC. Besides, whatever maybe the justification
behind the violation of the company rules regarding excess medical supplies is immaterial since it has
been established that an infraction was deliberately committed. Doubtless, the deliberate disregard or
disobedience of rules by the employee cannot be countenanced as it may encourage him or her to do
even worse and will render a mockery of the rules of discipline that employees are required to observe.
Same; Same; Conviction in Criminal Case; An employee’s guilt or innocence in a criminal case is
not determinative of the existence of a just or authorized cause for his or her dismissal. It is well-settled
that conviction in a criminal case is not necessary to find just cause for termination of employment.—
The Court finds it inconsequential that SLMC has not suffered any actual damage. While damage
aggravates the charge, its absence does not mitigate nor negate the employee’s liability. Neither is
SLMC’s non-filing of the appropriate criminal charges relevant to this analysis. An employee’s guilt or
her dismissal. It is well-settled that conviction in a criminal case is not necessary to find just cause for
termination of employment, as in this case. Criminal and labor cases involving an employee arising
from the same infraction are separate and distinct proceedings which should not arrest any judgment
from one to the other. As it stands, the Court thus holds that the dismissal of Sanchez was for a just
cause, supported by substantial evidence, and is therefore in order. By declaring otherwise, bereft of
any substantial bases, the NLRC issued a patently and grossly erroneous ruling tantamount to grave
abuse of discretion, which, in turn, means that the CA erred when it affirmed the same. In
consequence, the grant of the present petition is warranted.
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari are the Decision dated November 21, 2013
and the Resolution dated April 4, 2014 of the Court of Appeals (CA) in CA-G.R. SP No.
129108 which affirmed the Decision dated November 19, 2012 and the Resolution dated
January 14, 2013 of the National Labor Relations Commission (NLRC) in NLRC LAC No.
06-001858-12, declaring the dismissal of respondent Maria Theresa V. Sanchez (Sanchez)
illegal.
The Facts
On June 29, 2009, Sanchez was hired by petitioner St. Luke's Medical Center, Inc.
(SLMC) as a Staff Nurse, and was eventually assigned at SLMC, Quezon City's Pediatric
Unit until her termination on July 6, 2011 for her purported violation of SLMC's Code of
Discipline, particularly Section 1, Rule 1 on Acts of Dishonesty, i.e., Robbery, Theft,
Pilferage, and Misappropriation of Funds.
Records reveal that at the end of her shift on May 29, 2011, Sanchez passed through
the SLMC Centralization Entrance/Exit where she was subjected to the standard inspection
procedure by the security personnel. In the course thereof, the Security Guard on-duty,
Jaime Manzanade (SG Manzanade), noticed a pouch in her bag and asked her to open the
same. When opened, said pouch contained the following assortment of medical stocks
which were subsequently confiscated: (a) Syringe 10cl [4 pieces]; (b) Syringe 5cl [3 pieces];
(c) Syringe 3cl [3 pieces]; (d) Micropore [1 piece]; (e) Cotton Balls [1 pack]; (f) Neoflon g26
[1 piece]; (g) Venofix 25 [2 pieces]; and (h) Gloves [4 pieces] (questioned items). Sanchez
asked SG Manzanade if she could just return the pouch inside the treatment room;
however, she was not allowed to do so. Instead, she was brought to the SLMC In-House
Security Department (IHSD) where she was directed to write an Incident Report explaining
why she had the questioned items in her possession. She complied with the directive and
also submitted an undated handwritten letter of apology (handwritten letter) which reads as
follows:
To In-House Security,
I am very sorry for bringing things from [SLMC] inside my bag.
Pasensya na po. Taos-puso po akong humihingi ng tawad sa aking pagkakasala, Alam
ko po na ako ay nagkamali. Hindi ko po dapat dinala yung mga gamit sa hospital. Hindi
ko po alam kung [paano] ako magsisimulang humingi ng patawad. Kahit alam kong bawal
ay nagawa kong makapag uwi ng gamit. Marami pang gamit dahil sa naipon po. Paisa-
isa nagagawa kong makakuha pag nakakalimutan kong isoli. Hindi ko na po naiwan sa
nurse station dahil naisip kong magagamit ko rin po pag minsang nagkakaubusan ng
stocks at talagang may kailangan.
Humihingi po ako ng tawad sa aking ginawa. Isinakripisyo ko ang hindi pagiging "toxic"
sa pagkuha ng gamit para sa bagay na alam kong mali. Inaamin ko na ako'y naging
 madamot, pasuway at makasalanan. Inuna ko ang comfort ko keysa gumawa ng tama.
Manikluhod po akong humihingi ng tawad.
Sorry po. Sorry po. Sorry po talaga.
In a memorandum of even date, the IHSD, Customer Affairs Division, through Duty
Officer Hernani R. Janayon, apprised SLMC of the incident, highlighting that Sanchez
expressly admitted that she intentionally brought out the questioned items.
An initial investigation was also conducted by the SLMC Division of Nursing which
thereafter served Sanchez a notice to explain.
On May 31, 2011, Sanchez submitted an Incident Report Addendum (May 31, 2011
letter), explaining that the questioned items came from the medication drawers of patients
who had already been discharged, and, as similarly practiced by the other staff members,
she started saving these items as excess stocks in her pouch, along with other basic items
that she uses during her shift. She then put the pouch inside the lowest drawer of the
bedside table in the treatment room for use in immediate procedures in case replenishment
of stocks gets delayed. However, on the day of the incident, she failed to return the pouch
inside the medication drawer upon getting her tri-colored pen and calculator and, instead,
placed it inside her bag. Eventually, she forgot about the same as she got caught up in
work, until it was noticed by the guard on duty on her way out of SMLC's premises.
Consequently, Sanchez was placed under preventive suspension effective June 3,
2011 until the conclusion of the investigation by SLMC's Employee and Labor Relations
Department (ELRD) which, thereafter, required her to explain why she should not be
terminated from service for "acts of dishonesty" due to her possession of the questioned
items in violation of Section 1, Rule I of the SLMC Code of Discipline. In response, she
submitted a letter dated June 13, 2011, which merely reiterated her claims in her previous
May 31, 2011 letter. She likewise requested for a case conference, which SLMC
granted. After hearing her side, SLMC, on July 4, 2011, informed Sanchez of its decision to
terminate her employment effective closing hours of July 6, 2011. This prompted her to file a
complaint for illegal dismissal before the NLRC, docketed as NLRC NCR Case No. 07-
11042-11.
In her position paper, Sanchez maintained her innocence, claiming that she had no
intention of bringing outside the SLMC's premises the questioned items since she merely
inadvertently left the pouch containing them in her bag as she got caught up in work that
day. She further asserted that she could not be found guilty of pilferage since the
questioned items found in her possession were neither SLMC's nor its employees' property.
She also stressed the fact that SLMC did not file any criminal charges against her. Anent
her supposed admission in her handwritten letter, she claimed that she was unassisted by
counsel when she executed the same and, thus, was inadmissible for being
unconstitutional.
For its part, SLMC contended that Sanchez was validly dismissed for just cause as she
had committed theft in violation of Section 1, Rule I of the SLMC Code of Discipline, which
punishes acts of dishonesty, i.e., robbery, theft, pilferage, and misappropriation of funds,
with termination from service.
The LA Ruling
In a Decision dated May 27, 2012, the Labor Arbiter (LA) ruled that Sanchez was
validly dismissed for intentionally taking the property of SLMC's clients for her own personal
benefit, which constitutes an act of dishonesty as provided under SLMC's Code of
Discipline.
According to the LA, Sanchez's act of theft was evinced by her attempt to bring the
questioned items that did not belong to her out of SLMC's premises; this was found to be
analogous to serious misconduct which is a just cause to dismiss her. The fact that the
items she took were neither SLMC's nor her co-employees' property was not found by the
LA to be material since the SLMC Code of Discipline clearly provides that acts of dishonesty
committed to SLMC, its doctors, its employees, as well as its customers, are punishable by
a penalty of termination from service. To this, the LA opined that "[i]t is rather illogical to
distinguish the persons with whom the [said] acts may be committed as SLMC is also
answerable to the properties of its patients." Moreover, the LA observed that Sanchez was
aware of SLMC's strict policy regarding the taking of hospital/medical items as evidenced by
her handwritten letter, but nonetheless committed the said misconduct. Finally, the LA
pointed out that SLMC's non-filing of a criminal case against Sanchez did not preclude a
determination of her serious misconduct, considering that the filing of a criminal case is
entirely separate and distinct from the determination of just cause for termination of
employment.
Aggrieved, Sanchez appealed to the NLRC.
The NLRC Ruling
In a Decision dated November 19, 2012, the NLRC reversed and set aside the LA
ruling, and held that Sanchez was illegally dismissed.
The NLRC declared that the alleged violation of Sanchez was a unique case,
considering that keeping excess hospital stocks or "hoarding" was an admitted practice
amongst nurses in the Pediatric Unit which had been tolerated by SLMC management for a
long time. The NLRC held that while Sanchez expressed remorse for her misconduct in her
handwritten letter, she manifested that she only "hoarded" the questioned items for future
use in case their medical supplies are depleted, and not for her personal benefit. It further
held that SLMC failed to establish that Sanchez was motivated by ill-will when she brought
out the questioned items, noting: (a) the testimony of SG Manzanade during the conference
before the ELRD of Sanchez's demeanor when she was apprehended, i.e., "[d]i naman siya
masyado nataranta," and her consequent offer to return the pouch; and (b) that the said
pouch was not hidden underneath the bag. Finally, the NLRC concluded that the
punishment of dismissal was too harsh and the one (1) month preventive suspension
already imposed on and served by Sanchez was the appropriate penalty. Accordingly, the
NLRC ordered her reinstatement, and the payment of backwages, other benefits, and
attorney's fees.
Unconvinced, SLMC moved for reconsideration which was, however, denied in a
Resolution dated January 14, 2013. Thus, it filed a petition for certiorari before the CA.
The CA Ruling
In a Decision dated November 21, 2013, the CA upheld the NLRC, ruling that the latter
did not gravely abuse its discretion in finding that Sanchez was illegally dismissed.
 It ruled that Sanchez's offense did not qualify as serious misconduct, given that: (a) the
questioned items found in her possession were not SLMC property since said items were
paid for by discharged patients, thus discounting any material or economic damage on
SLMC's part; (b) the retention of excess medical supplies was an admitted practice amongst
nurses in the Pediatric Unit which was tolerated by SLMC; (c) it was illogical for Sanchez to
leave the pouch in her bag since she would be subjected to a routine inspection; (d)
Sanchez's lack of intention to bring out the pouch was manifested by her composed
demeanor upon apprehension and offer to return the pouch to the treatment room; and (e)
had SLMC honestly believed that Sanchez committed theft or pilferage, it should have filed
the appropriate criminal case, but failed to do so. Moreover, while the CA recognized that
SLMC had the management prerogative to discipline its erring employees, it, however,
declared that such right must be exercised humanely. As such, SLMC should only impose
penalties commensurate with the degree of infraction. Considering that there was no
indication that Sanchez's actions were perpetrated for self-interest or for an unlawful
objective, the penalty of dismissal imposed on her was grossly oppressive and
disproportionate to her offense.
Dissatisfied, SLMC sought for reconsideration, but was denied in a Resolution54 dated
April 4, 2014, hence, this petition.
The Issue Before the Court
The core issue to be resolved is whether or not Sanchez was illegally dismissed by SLMC.
The Court's Ruling
The petition is meritorious.
The right of an employer to regulate all aspects of employment, aptly called
"management prerogative," gives employers the freedom to regulate, according to their
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. In
this light, courts often decline to interfere in legitimate business decisions of employers. In
fact, labor laws discourage interference in employers' judgment concerning the conduct of
their business.
Among the employer's management prerogatives is the right to prescribe reasonable
rules and regulations necessary or proper for the conduct of its business or concern, to
provide certain disciplinary measures to implement said rules and to assure that the same
would be complied with. At the same time, the employee has the corollary duty to obey all
reasonable rules, orders, and instructions of the employer; and willful or intentional
disobedience thereto, as a general rule, justifies termination of the contract of service and
the dismissal of the employee. Article 296 (formerly Article 282) of the Labor Code provides:
Article 296. 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 his representative in connection with his work;
xxxx
Note that for an employee to be validly dismissed on this ground, the employer's
orders, regulations, or instructions must be: (1) reasonable and lawful, (2) sufficiently known
to the employee, and (3) in connection with the duties which the employee has been
engaged to discharge."
Tested against the foregoing, the Court finds that Sanchez was validly dismissed by
SLMC for her willful disregard and disobedience of Section 1, Rule I of the SLMC Code of
Discipline, which reasonably punishes acts of dishonesty, i.e., "theft, pilferage of hospital or
co-employee property, x x x or its attempt in any form or manner from the hospital, co-
employees, doctors, visitors, [and] customers (external and internal)" with termination from
employment. Such act is obviously connected with Sanchez's work, who, as a staff nurse, is
tasked with the proper stewardship of medical supplies. Significantly, records show that
Sanchez made a categorical admission in her handwritten letter - i.e., "[k]ahit alam kong
bawal ay nagawa kong [makapag-uwi] ng gamit" - that despite her knowledge of its express
prohibition under the SLMC Code of Discipline, she still knowingly brought out the subject
medical items with her. It is apt to clarify that SLMC cannot be faulted in construing the
taking of the questioned items as an act of dishonesty (particularly, as theft, pilferage, or its
attempt in any form or manner) considering that the intent to gain may be reasonably
presumed from the furtive taking of useful property appertaining to another. Note that
Section 1, Rule 1 of the SLMC Code of Discipline is further supplemented by the company
policy requiring the turn-over of excess medical supplies/items for proper handling and
providing a restriction on taking and bringing such items out of the SLMC premises without
the proper authorization or "pass" from the official concerned, which Sanchez was equally
aware thereof. Nevertheless, Sanchez failed to turn-over the questioned items and, instead,
"hoarded" them, as purportedly practiced by the other staff members in the Pediatric Unit.
As it is clear that the company policies subject of this case are reasonable and lawful,
sufficiently known to the employee, and evidently connected with the latter's work, the Court
concludes that SLMC dismissed Sanchez for a just cause.
On a related point, the Court observes that there lies no competent basis to support the
common observation of the NLRC and the CA that the retention of excess medical supplies
was a tolerated practice among the nurses at the Pediatric Unit. While there were previous
incidents of "hoarding," it appears that such acts were - in similar fashion - furtively made
and the items secretly kept, as any excess items found in the concerned nurse's possession
would have to be confiscated. Hence, the fact that no one was caught and/or sanctioned for
transgressing the prohibition therefor does not mean that the so-called "hoarding" practice
was tolerated by SLMC. Besides, whatever maybe the justification behind the violation of
the company rules regarding excess medical supplies is immaterial since it has been
established that an infraction was deliberately committed. Doubtless, the deliberate
disregard or disobedience of rules by the employee cannot be countenanced as it may
encourage him or her to do even worse and will render a mockery of the rules of discipline
that employees are required to observe.
Finally, the Court finds it inconsequential that SLMC has not suffered any actual
damage. While damage aggravates the charge, its absence does not mitigate nor negate
the employee's liability. Neither is SLMC's non- filing of the appropriate criminal charges
relevant to this analysis. An employee's guilt or innocence in a criminal case is not
determinative of the existence of a just or authorized cause for his or her dismissal. It is
well- settled that conviction in a criminal case is not necessary to find just cause for
termination of employment, as in this case. Criminal and labor cases involving an employee
arising from the same infraction are separate and distinct proceedings which should not
arrest any judgment from one to the other.
 As it stands, the Court thus holds that the dismissal of Sanchez was for a just cause,
supported by substantial evidence, and is therefore in order. By declaring otherwise, bereft
of any substantial bases, the NLRC issued a patently and grossly erroneous ruling
tantamount to grave abuse of discretion, which, in turn, means that the CA erred when it
affirmed the same. In consequence, the grant of the present petition is warranted.

WHEREFORE, the petition is GRANTED. The Decision dated November 21, 2013 and
the Resolution dated April 4, 2014 of the Court of Appeals in CA-G.R. SP No. 129108 are
REVERSED and SET ASIDE. The Labor Arbiter's Decision dated May 27, 2012 in NLRC
Case No. NCR 07-11042-11 finding respondent Maria Theresa V. Sanchez to have been
validly dismissed by petitioner St. Luke's Medical Center, Inc. is hereby REINSTATED.
SO ORDERED.

Notes.—For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1)
the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which he had been engaged to discharge. (R.B. Michael
Press vs. Galit, 545 SCRA 23 [2008]; Cosmos Bottling Corporation vs. Nagrama, Jr., 547 SCRA 571
[2008])

Agad committed a serious infraction amounting to theft of company property; This act is akin to a
serious misconduct or willful disobedience by the employee of the lawful orders of his employer in
connection with his work, a just cause for termination of employment recognized under Article 282(a) of
the Labor Code. (Caltex [Philippines], Inc. vs. Agad, 619 SCRA 196 [2010])

——o0o——
 G.R. No. 208451. February 3, 2016
MANILA MEMORIAL PARK CEMETERY, INC., petitioner, vs. EZARD D. LLUZ,
NORMAN CORRAL, ERWIN FUGABAN, VALDIMAR BALISI, EMILIO FABON, JOHN
MARK APLICADOR, MICHAEL CURIOSO, JUNLIN ESPARES, GAVINO FARINAS, and
WARD TRADING AND SERVICES, respondents.
Remedial Law; Civil Procedure; Appeals; As a general rule, factual findings of the Court of
Appeals (CA) are binding upon this Court. One (1) exception to this rule is when the factual findings of
the former are contrary to those of the trial court, or the lower administrative body, as the case may
be.—As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule
is when the factual findings of the former are contrary to those of the trial court, or the lower
administrative body, as the case may be. This Court is obliged to resolve an issue of fact due to the
conflicting findings of the Labor Arbiter on one hand, and the NLRC and the CA on the other.
Labor Law; Contractualization; Contracting arrangements for the performance of specific jobs or
services under the law and its implementing rules are allowed.—Contracting arrangements for the
performance of specific jobs or services under the law and its implementing rules are allowed.
However, contracting must be made to a legitimate and independent job contractor since labor rules
expressly prohibit labor-only contracting.
Same; Same; Labor-Only Contracting; Labor-only contracting exists when the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal.—Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for a principal and any of the following elements are
present: 1) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or 2) The contractor does not exercise the right to control the performance of
the work of the contractual employee.
Same; Same; Same; For failing to register as a contractor, a presumption arises that one is
engaged in labor-only contracting unless the contractor overcomes the burden of proving that it has
substantial capital, investment, tools and the like.—For failing to register as a contractor, a presumption
arises that one is engaged in labor-only contracting unless the contractor overcomes the burden of
proving that it has substantial capital, investment, tools and the like. In this case, however, Manila
Memorial failed to adduce evidence to prove that Ward Trading had any substantial capital, investment
or assets to perform the work contracted for. Thus, the presumption that Ward Trading is a labor-only
contractor stands. Consequently, Manila Memorial is deemed the employer of respondents. As regular
employees of Manila Memorial, respondents are entitled to their claims for wages and other benefits as
awarded by the NLRC and affirmed by the CA.
CARPIO, J.:
The Case
This is a petition for review on certiorari assailing the Decision dated 21 January 2013 and
the Resolution dated 17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.
The Facts
On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila
Memorial) entered into a Contract of Services with respondent Ward Trading and Services
(Ward Trading). The Contract of Services provided that Ward Trading, as an independent
contractor, will render interment and exhumation services and other related work to Manila
Memorial in order to supplement operations at Manila Memorial Park, Parañaque City.
Among those assigned by Ward Trading to perform services at the Manila Memorial
Park were respondents Ezard Lluz, Norman Corral, Erwin Fugaban, Valdimar Balisi, Emilio
Fabon, John Mark Aplicador, Michael Curioso, Junlin Espares, and Gavino Farinas
(respondents). They worked six days a week for eight hours daily and were paid P250 per
day.
On 26 June 2007, respondents filed a Complaint for regularization and Collective
Bargaining Agreement benefits against Manila Memorial; Enrique B. Lagdameo, Manila
Memorial’s Executive Vice-President and Director in Charge for Overall Operations, and
Ward Trading. On 6 August 2007, respondents filed an amended complaint to include illegal
dismissal, underpayment of 13th month pay, and payment of attorney’s fees.
Respondents alleged that they asked Manila Memorial to consider them as regular
workers within the appropriate bargaining unit established in the collective bargaining
agreement by Manila Memorial and its union, the Manila Memorial Park Free Workers
Union (MMP Union). Manila Memorial refused the request since respondents were
employed by Ward Trading, an independent labor contractor. Thereafter, respondents
joined the MMP Union. The MMP Union, on behalf of respondents, sought their
regularization which Manila Memorial again declined. Respondents then filed the complaint.
Subsequently, respondents were dismissed by Manila Memorial. Thus, respondents
amended the complaint to include the prayer for their reinstatement and payment of back
wages.
Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of
jurisdiction since there was no employer-employee relationship. Manila Memorial argued
that respondents were the employees of Ward Trading.
In a Decision dated 29 March 2010, the Labor Arbiter dismissed the complaint for
failing to prove the existence of an employer-employee relationship. The dispositive portion
of the Decision states:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-
entitled case for complainants’ lack of employer-employee relationship with respondent
Manila Memorial Park Cemetery, Inc.
SO ORDERED.
Respondents appealed to the NLRC. In a Decision dated 30 September 2010, the NLRC
reversed the Labor Arbiter’s findings. The NLRC ruled that Ward Trading was a labor-only
contractor and an agent of Manila Memorial. The dispositive portion of the Decision states:
WHEREFORE, premises considered, complainants’ appeal is GRANTED. The assailed
Decision of Labor Arbiter Geobel A. Bartolabac dated March 29, 2010 is MODIFIED. It is
hereby declared that complainants were regular employees of respondent Manila
Memorial Park Cemetery, Inc. and entitled to the benefits provided for under the CBA
between the latter and the Manila Memorial Park Free Workers Union.
Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to
complainants as follows:
1. Ezard D. Lluz – P43,982.79
2. Norman Corral – P29,765.67
3. Erwin Fugaban – P28,634.67
4. Valdimar Balisi – P20,310.33
 5. Emilio Fabon – P43,982.79
6. John Mark Aplicador – P43,982.79
7. Michael Curioso – P43,982.79
8. Ju[n]lin Espares – P43,982.79
9. Gavino Farinas – P43,982.79
SO ORDERED.
Manila Memorial filed a Motion for Reconsideration which was denied in a
Resolution dated 31 January 2011.
Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21
January 2013, the CA affirmed the ruling of the NLRC. The CA found the existence of an
employer-employee relationship between Manila Memorial and respondents. The
dispositive portion of the Decision states:
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The
Decision, dated September 30, 2010 and the Resolution, dated January 31, 2011,
rendered by the National Labor Relations Commission (NLRC) in NLRC LAC No. 06-
001267-10 are AFFIRMED.
SO ORDERED.
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a
Resolution dated 17 July 2013.
Hence, the instant petition.
The Issue
The main issue for our resolution is whether or not an employer-employee relationship
exists between Manila Memorial and respondents for the latter to be entitled to their claim
for wages and other benefits.
The Court’s Ruling
The petition lacks merit.
Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million,
according to Ward Trading’s financial statements for the year 2006, proving that it has
sufficient capitalization to qualify as a legitimate independent contractor. Manila Memorial
insists that nowhere is it provided in the Contract of Services that Manila Memorial controls
the manner and means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the latter’s employees to
abide by company rules and regulations.
Respondents, on the other hand, assert that they are regular employees of Manila
Memorial since Ward Trading cannot qualify as an independent contractor but should be
treated as a mere labor-only contractor. Respondents state that (1) there is enough proof
that Ward Trading does not have substantial capital, investment, tools and the like; (2) the
workers recruited and placed by the alleged contractors performed activities that were
related to Manila Memorial’s business; and (3) Ward Trading does not exercise the right to
control the performance of the work of the contractual employees.
As a general rule, factual findings of the CA are binding upon this Court. One exception
to this rule is when the factual findings of the former are contrary to those of the trial court,
or the lower administrative body, as the case may be. This Court is obliged to resolve an
issue of fact due to the conflicting findings of the Labor Arbiter on one hand, and the NLRC
and the CA on the other.
In order to determine whether there exists an employer-employee relationship between
Manila Memorial and respondents, relevant provisions of the labor law and rules must first
be reviewed. Article 106 of the Labor Code states:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work performed under
the contract, in the same manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly employed
by him. (Emphasis supplied)
Sections 3, 5 and 7 of Department Order No. 18-02 distinguish between legitimate and
labor-only contracting and assume the existence of an employer-employee relationship if
found to be engaged in labor-only contracting. The provisions state:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate
contracting, there exists a trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the contractor or subcontractor,
and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which
decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the
job, work or service, and the contractual workers engaged by the contractor or
subcontractor to accomplish the job, work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement
where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are
present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
 ii) The contractor does not exercise the right to control over the performance of the work
of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of
the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization
in the case of corporations, tools, equipment, implements, machineries and work
premises, actually and directly used by the contractor or subcontractor in the performance
or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services
of the contractual workers are performed, to determine not only the end to be achieved,
but also the manner and means to be used in reaching that end.
xxxx
Section 7. Existence of an employer-employee relationship. – The contractor or
subcontractor shall be considered the employer of the contractual employee for purposes
of enforcing the provisions of the Labor Code and other social legislation. The principal,
however, shall be solidarily liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the
following cases as declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6
(Prohibitions) hereof.isi (Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of
specific jobs or services under the law and its implementing rules are allowed. However,
contracting must be made to a legitimate and independent job contractor since labor rules
expressly prohibit labor-only contracting.
Labor-only contracting exists when the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal and any of the
following elements are present:
1) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
2) The contractor does not exercise the right to control the performance of the work of the
contractual employee.
In the present case, Manila Memorial entered into a Contract of Services with Ward
Trading, a single proprietorship owned by Emmanuel Mayor Ward with business address in
Las Piñas City on 23 February 2006. In the Contract of Services, it was provided that Ward
Trading, as the contractor, had adequate workers and substantial capital or investment in
the form of tools, equipment, machinery, work premises and other materials which were
necessary in the conduct of its business.
However, a closer look at the Contract of Services reveals that Ward Trading does not
have substantial capital or investment in the form of tools, equipment, machinery, work
premises and other materials since it is Manila Memorial which owns the equipment used in
the performance of work needed for interment and exhumation services. The pertinent
provision in the Contract of Services which shows that Manila Memorial owns the equipment
states:
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the
amount of ONE MILLION FOUR HUNDRED THOUSAND PESOS ONLY (Php
1,400,000.00) payable in two (2) years or a monthly payment of FIFTY EIGHT
THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php 58,335.00) to be
deducted from the CONTRACTOR’s billing.
Just by looking at the provision, it seems that the sale was a regular business
transaction between two parties. However, Manila Memorial did not present any evidence to
show that the sale actually pushed through or that payments were made by Ward Trading to
prove an ordinary arm’s length transaction. We agree with the NLRC in its findings:
While the above-cited provision of the Contract of Service implies that respondent MMPCI
would sell subject equipment to Ward at some future time, the former failed to present
any contract of sale as proof that, indeed, it actually sold said equipment to Ward.
Likewise, respondent MMPCI failed to present any "CONTRACTOR’s billing" wherein the
purported monthly installment of P58,335.00 had been deducted, to prove that Ward truly
paid the same as they fell due. In a contract to sell, title is retained by the vendor until full
payment of the price.
Moreover, the Contract of Service provides that:
"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR’s equipment
in the event the COMPANY requires the use of said equipment. x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy
subject equipment, considering that its right to do so is subject to respondent MMPCI’s use
thereof at any time the latter requires it. Such provision is contrary to Article 428 of the Civil
Code, which provides that "The owner has the right to enjoy and dispose of a thing, without
other limitation than those established by law." It is plain to see that Ward is not the owner
of the equipment worth P1,400,000.00 that is being actually and directly used in the
performance of the services contracted out.
Further, the Service Contract states that:
"For its part, the COMPANY agrees to provide the following:
a) Area to store CONTRACTOR’s equipment and materials
b) Office space for CONTRACTOR’s staff and personnel"
This provision is clear proof that even the work premises actually and directly used by
Ward in the performance of the services contracted out is owned by respondent MMPCI.
Also, the difference in the value of the equipment in the total amount of P1,400,000.00
can be glaringly seen in Ward Trading’s financial statements for the year 2006 when
compared to its 2005 financial statements. It is significant to note that these financial
statements were submitted by Manila Memorial without any certification that these financial
statements were actually audited by an independent certified public accountant. Ward
Trading’s Balance Sheet as of 31 December 2005 showed that it had assets in the amount
of P441,178.50 and property and equipment with a net book value of P86,026.50 totaling
P534,705. A year later, Ward Trading’s Balance Sheet ending in 31 December 2006
showed that it had assets in the amount of P57,084.70 and property and equipment with a
net book value of P1,426,468 totaling P1,491,052.70. Ward Trading, in its Income
Statements for the years 2005 and 2006, only earned a net income of P53,800 in the year
ending 2005 and P68,141.50 in 2006. Obviously, Ward Trading could not have raised a
substantial capital of P1,400,000.00 from its income alone without the inclusion of the
equipment owned and allegedly sold by Manila Memorial to Ward Trading after they signed
the Contract of Services on 23 February 2006.
 Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted Section 11 of Department Order No. 18-02, which mandates registration of contractors or
that respondents performed various interment services at its Sucat, Parañaque branch subcontractors with the DOLE, states:
which were directly related to Manila Memorial’s business of developing, selling and Section 11. Registration of Contractors or Subcontractors. – Consistent with authority of
maintaining memorial parks and interment functions. Manila Memorial even retained the the Secretary of Labor and Employment to restrict or prohibit the contracting out of labor
right to control the performance of the work of the employees concerned. As correctly through appropriate regulations, a registration system to govern contracting arrangements
and to be implemented by the Regional Office is hereby established.
observed by the CA:
The Registration of contractors and subcontractors shall be necessary for purposes of
A perusal of the Service Contract would reveal that respondent Ward is still subject to
establishing an effective labor market information and monitoring.
petitioner’s control as it specifically provides that although Ward shall be in charge of the
supervision over individual respondents, the exercise of its supervisory function is heavily
Failure to register shall give rise to the presumption that the contractor is engaged in
dependent upon the needs of petitioner Memorial Park, particularly:
"It is also agreed that: labor-only contracting.
a) The CONTRACTOR’s supervisor will conduct a regular inspection of grave sites/areas
being dug to ensure compliance with the COMPANY’s interment schedules and other For failing to register as a contractor, a presumption arises that one is engaged in
related ceremonies. labor-only contracting unless the contractor overcomes the burden of proving that it has
b) The CONTRACTOR will provide enough manpower during peak interment days substantial capital, investment, tools and the like.
including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the In this case, however, Manila Memorial failed to adduce evidence to prove that Ward
COMPANY’s schedule of interment operation.
Trading had any substantial capital, investment or assets to perform the work contracted for.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or
structure/s resulting from its operation, which must be restored to its/their original Thus, the presumption that Ward Trading is a labor-only contractor stands. Consequently,
condition without delay and at the expense of CONTRACTOR." Manila Memorial is deemed the employer of respondents. As regular employees of Manila
Memorial, respondents are entitled to their claims for wages and other benefits as awarded
The contract further provides that petitioner has the option to take over the functions of by the NLRC and affirmed by the CA.
Ward’s personnel if it finds any part or aspect of the work or service provided to be
unsatisfactory, thus: WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity 2013 and the Resolution dated 1 7 July 2013 of the Court of Appeals in CA-G.R. SP No.
of this CONTRACT and its sole determination, the COMPANY may take over the 119237.
performance of any of the functions mentioned in Paragraph I above, in any of the SO ORDERED.
following cases:
xxx Notes.—Labor-only contracting, which is prohibited, is an arrangement where the contractor or
c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
the grave digging works or other services provided by it to be unsatisfactory." principal. (Iligan Cement Corporation vs. Iliascor Employees and Workers Union-Southern Philippines
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of Federation of Labor [IEWU-SPFL], 586 SCRA 449 [2009])
petitioner Memorial Park as the contract states that the latter may take over if it finds any
part of the services to be below its expectations, including the manner of its performance. In labor-only contracting, the following elements are present: (a) The contractor or subcontractor does
x x x. not have substantial capital or investment to actually perform the job, work or service under its own
account and responsibility; and (b) The employees recruited, supplied or placed by such contractor or
The NLRC also found that Ward Trading’s business documents fell short of sound business subcontractor are performing activities which are directly related to the main business of the principal.
practices. The relevant portion in the NLRC’s Decision states: (Id.)
It is also worth noting that while Ward has a Certificate of Business Name Registration
issued by the Department of Trade and Industry on October 24, 2003 and valid up to ——o0o——
October 24, 2008, the same expressly states that it is not a license to engage in any kind
of business, and that it is valid only at the place indicated therein, which is Las Piñas City.
Hence, the same is not valid in Parañaque City, where Ward assigned complainants to
perform interment services it contracted with respondent MMPCI. It is also noted that the
Permit, which was issued to Ward by the Office of the Mayor of Las Piñas City on October
28, 2003, was valid only up to December 31, 2003. Likewise, the Sanitary Permit to
Operate, which was issued to Ward by the Office of the City Health Officer of the Las
Piñas City Health Office on October 28, 2003, expired on December 31, 2003. While
respondents MMPCI and Lagdameo were able to present copies of the above-mentioned
documents, they failed to present any proof that Ward is duly registered as [a] contractor
with the Department of Labor and Employment.
 G.R. No. 164774. April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA,
petitioners, vs. RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA,
respondents.
Labor Law; Management Prerogatives; Employer Policies; Nepotism; It is true that the policy of the
petitioners prohibiting close relatives from working in the same company takes the nature of an anti-
nepotism employment policy.—It is true that the policy of petitioners prohibiting close relatives from
working in the same company takes the nature of an anti-nepotism employment policy. Companies
adopt these policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability. These policies focus upon the potential employment problems arising from
the perception of favoritism exhibited towards relatives. With more women entering the workforce,
employers are also enacting employment policies specifically prohibiting spouses from working for the
same company. We note that two types of employment policies involve spouses: policies banning only
spouses from working in the same company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same company (anti-nepotism
employment policies).
Same; Same; Same; Same; Two Theories of Employment Discrimination—Disparate Treatment
and Disparate Impact; Words and Phrases; Under the disparate treatment analysis, the employer must
prove that an employment policy is discriminatory on its face; To establish disparate impact, the
complainants must prove that a facially neutral policy has a disproportionate effect on a particular
class.—Unlike in our jurisdiction where there is no express prohibition on marital discrimination, there
are twenty state statutes in the United States prohibiting marital discrimination. Some state courts have
been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital
status and sex discrimination. In challenging the anti-nepotism employment policies in the United
States, complainants utilize two theories of employment discrimination: the disparate treatment and the
disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an employment
policy is discriminatory on its face. No-spouse employment policies requiring an employee of a
particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment
policy prohibiting the employer from hiring wives of male employees, but not husbands of female
employees, is discriminatory on its face. On the other hand, to establish disparate impact, the
complainants must prove that a facially neutral policy has a disproportionate effect on a particular class.
For example, although most employment policies do not expressly indicate which spouse will be
required to transfer or leave the company, the policy often disproportionately affects one sex.
Same; Same; Same; Marital Status Discrimination; The courts narrowly interpreting marital status
to refer only to a person’s status as married, single, divorced, or widowed reason that if the legislature
intended a broader definition it would have either chosen different language or specified its intent.—The
courts narrowly interpreting marital status to refer only to a person’s status as married, single, divorced,
or widowed reason that if the legislature intended a broader definition it would have either chosen
different language or specified its intent. They hold that the relevant inquiry is if one is married rather
than to whom one is married. They construe marital status discrimination to include only whether a
person is single, married, divorced, or widowed and not the “identity, occupation, and place of
employment of one’s spouse.” These courts have upheld the questioned policies and ruled that they did
not violate the marital status discrimination provision of their respective state statutes.
Same; Same; Same; Same; Words and Phrases; The courts that have broadly construed the term
“marital status” rule that it encompassed the identity, occupation and employment of one’s spouse, and
strike down the no-spouse employment policies based on the broad legislative intent of the state
statute, and further hold that the absence of a bona fide occupational qualification invalidates a rule
denying employment to one spouse due to the current employment of the other spouse in the same
office; This is known as the bona fide occupational qualification exception.—The courts that have
broadly construed the term “marital status” rule that it encompassed the identity, occupation and
employment of one’s spouse. They strike down the no-spouse employment policies based on the broad
legislative intent of the state statute. They reason that the no-spouse employment policy violate the
marital status provision because it arbitrarily discriminates against all spouses of present employees
without regard to the actual effect on the individual’s qualifications or work performance. These courts
also find the no-spouse employment policy invalid for failure of the employer to present any evidence of
business necessity other than the general perception that spouses in the same workplace might
adversely affect the business.They hold that the absence of such a bona fide occupational qualification
invalidates a rule denying employment to one spouse due to the current employment of the other
spouse in the same office. Thus, they rule that unless the employer can prove that the reasonable
demands of the business require a distinction based on marital status and there is no better available or
acceptable policy which would better accomplish the business purpose, an employer may not
discriminate against an employee based on the identity of the employee’s spouse. This is known as the
bona fide occupational qualification exception.
Same; Same; Same; Same; Occupational Qualifications; To justify a bona fide occupational
qualification, the employer must prove two factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that there is a factual basis for believing
that all or substantially all persons meeting the qualification would be unable to properly perform the
duties of the job.—We note that since the finding of a bona fide occupational qualification justifies an
employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state courts.
There must be a compelling business necessity for which no alternative exists other than the
discriminatory practice. To justify a bona fide occupational qualification, the employer must prove two
factors: (1) that the employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting
the qualification would be unable to properly perform the duties of the job. The concept of a bona fide
occupational qualification is not foreign in our jurisdiction. We employ the standard of reasonableness
of the company policy which is parallel to the bona fide occupational qualification requirement. In the
recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome
Philippines, Inc., we passed on the validity of the policy of a pharmaceutical company prohibiting its
employees from marrying employees of any competitor company.
Same; Same; Same; Same; Same; The cases of Duncan Association of Detailment-PTGWO v.
Glaxo Wellcome Philippines, Inc., G.R. No. 162994, 17 September 2004, 438 SCRA 343, and
Philippine Telegraphy and Telephone Company v. National Labor Relations Commission, G.R. No.
118978, 23 May 1997, 272 SCRA 596, instruct that the requirement of reasonableness must be clearly
established to uphold a questioned employment policy.—The cases of Duncan and PT&T instruct us
that the requirement of reasonableness must be clearly established to uphold the questioned
employment policy. The employer has the burden to prove the existence of a reasonable business
necessity. The burden was successfully discharged in Duncan but not in PT&T.
Same; Same; Same; Same; Same; That the “company did not just want to have two (2) or more of
its employees related between the third degree by affinity and/or consanguinity” is lame—the policy is
premised on the mere fear that employees married to each other will be less efficient; If the court were
to uphold the questioned rule without valid justification, the employer can create policies based on an
unproven presumption of a perceived danger at the expense of an employee’s right to security of
tenure.—Petitioners’ sole contention that “the company did not just want to have two (2) or more of its
employees related between the third degree by affinity and/or consanguinity” is lame. That the second
paragraph was meant to give teeth to the first paragraph of the questioned rule is evidently not the valid
reasonable business necessity required by the law. It is significant to note that in the case at bar,
respondents were hired after they were found fit for the job, but were asked to resign when they married
a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine
Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its
business operations. Neither did petitioners explain how this detriment will happen in the case of
Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia,
then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to
each other will be less efficient. If we uphold the questioned rule without valid justification, the employer
can create policies based on an unproven presumption of a perceived danger at the expense of an
employee’s right to security of tenure.
Same; Same; Same; Same; Same; The failure to prove a legitimate business concern in imposing
an employer policy cannot prejudice the employee’s right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one company.—Petitioners contend that their
policy will apply only when one employee marries a co-employee, but they are free to marry persons
other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code
but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass
judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate,
effect. The failure of petitioners to prove a legitimate business concern in imposing the questioned
policy cannot prejudice the employee’s right to be free from arbitrary discrimination based upon
stereotypes of married persons working together in one company.
Same; Same; Same; Same; The protection given to labor in this jurisdiction is vast and extensive
that the Supreme Court cannot prudently draw inferences from the legislature’s silence that married
persons are not protected under the Constitution and declare valid a policy based on a prejudice or
stereotype.—The absence of a statute expressly prohibiting marital discrimination in our jurisdiction
cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that
we cannot prudently draw inferences from the legislature’s silence that married persons are not
protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus,
for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether
respondents Simbol and Comia resigned voluntarily has become moot and academic.
Same; Illegal Dismissals; Voluntary Resignation; In voluntary resignation, an employee is
compelled by personal reason(s) to disassociate himself from employment—it is done with the intention
of relinquishing an office, accompanied by the act of abandonment.—The contention of petitioners that
Estrella was pressured to resign because she got impregnated by a married man and she could not
stand being looked upon or talked about as immoral is incredulous. If she really wanted to avoid
embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed
a suit for illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself from employment. It is done with the
intention of relinquishing an office, accompanied by the act of abandonment. Thus, it is illogical for
Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on
the part of petitioners that the resignation was voluntary, Estrella’s dismissal is declared illegal.
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer
banning spouses from working in the same company violates the rights of the employee
under the Constitution and the Labor Code or is a valid exercise of management
prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals
dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor
Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading –
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol),
Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of
the company.
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also
an employee of the company, whom he married on June 27, 1998. Prior to the marriage,
Ongsitco advised the couple that should they decide to get married, one of them should
resign pursuant to a company policy promulgated in 1995, viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd
degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female) developed
a friendly relationship during the course of their employment and then decided to get married, one
of them should resign to preserve the policy stated above.
Simbol resigned on June 20, 1998 pursuant to the company policy.
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-
employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that
pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker.
Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December
21, 1999.
The respondents each signed a Release and Confirmation Agreement. They stated
therein that they have no money and property accountabilities in the company and that they
release the latter of any claim or demand of whatever nature.
Respondents offer a different version of their dismissal. Simbol and Comia allege that
they did not resign voluntarily; they were compelled to resign in view of an illegal company
policy. As to respondent Estrella, she alleges that she had a relationship with co-worker
Zuñiga who misrepresented himself as a married but separated man. After he got her
pregnant, she discovered that he was not separated. Thus, she severed her relationship
with him to avoid dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-
one (21) days. She returned to work on December 21, 1999 but she found out that her
name was on-hold at the gate. She was denied entry. She was directed to proceed to the
personnel office where one of the staff handed her a memorandum. The memorandum
stated that she was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has not been given
a chance to explain. The management asked her to write an explanation. However, after
submission of the explanation, she was nonetheless dismissed by the company. Due to her
urgent need for money, she later submitted a letter of resignation in exchange for her
thirteenth month pay.
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorney’s fees. They averred that the aforementioned company policy is
illegal and contravenes Article 136 of the Labor Code. They also contended that they were
dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack
of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation
perceived as management prerogative. This management prerogative is quite broad and
encompassing for it covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers. Except as provided for or limited by special
law, an employer is free to regulate, according to his own discretion and judgment all the
aspects of employment. (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on
January 11, 2002.
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic) Decision of the National
Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is
entered as follows:
(1) Declaring illegal, the petitioners’ dismissal from employment and ordering private
respondents to reinstate petitioners to their former positions without loss of seniority
rights with full backwages from the time of their dismissal until actual reinstatement;
and
(2) Ordering private respondents to pay petitioners attorney’s fees amounting to 10%
of the award and the cost of this suit.
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding
that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights
towards marriage and the family of employees and of Article 136 of the Labor
Code; and
2. x x x respondents’ resignations were far from voluntary.
We affirm.
The 1987 Constitution states our policy towards the protection of labor under the following
provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions of
work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to expansion and
growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed
in favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case
at bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege
that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a
new meaning if read together with the first paragraph of the rule. The rule does not require
the woman employee to resign. The employee spouses have the right to choose who
between them should resign. Further, they are free to marry persons other than co-
employees. Hence, it is not the marital status of the employee, per se, that is being
discriminated. It is only intended to carry out its no-employment-for-relatives-within-the-third-
degree-policy which is within the ambit of the prerogatives of management.
It is true that the policy of petitioners prohibiting close relatives from working in the
same company takes the nature of an anti-nepotism employment policy. Companies adopt
these policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability. These policies focus upon the potential employment problems
arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment
policies specifically prohibiting spouses from working for the same company. We note that
two types of employment policies involve spouses: policies banning only spouses from
working in the same company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same company (anti-
nepotism employment policies).
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination, there are twenty state statutes in the United States prohibiting marital
discrimination. Some state courts have been confronted with the issue of whether no-
spouse policies violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States,
complainants utilize two theories of employment discrimination:
the disparate treatment and the disparate impact. Under the disparate treatment
analysis, the plaintiff must prove that an employment policy is discriminatory on its face.
No-spouse employment policies requiring an employee of a particular sex to either quit,
transfer, or be fired are facially discriminatory. For example, an employment policy
prohibiting the employer from hiring wives of male employees, but not husbands of female
employees, is discriminatory on its face.
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be required
to transfer or leave the company, the policy often disproportionately affects one sex.
The state courts’ rulings on the issue depend on their interpretation of the scope of
marital status discrimination within the meaning of their respective civil rights acts. Though
they agree that the term "marital status" encompasses discrimination based on a person's
status as either married, single, divorced, or widowed, they are divided on whether the term
has a broader meaning. Thus, their decisions vary.
The courts narrowly interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader
definition it would have either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and ruled that they did not
violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly construed the term "marital status" rule that it
encompassed the identity, occupation and employment of one's spouse. They strike down
the no-spouse employment policies based on the broad legislative intent of the state statute.
They reason that the no-spouse employment policy violate the marital status provision
because it arbitrarily discriminates against all spouses of present employees without regard
to the actual effect on the individual's qualifications or work performance. These courts also
find the no-spouse employment policy invalid for failure of the employer to present any
evidence of business necessity other than the general perception that spouses in the
same workplace might adversely affect the business. They hold that the absence of such
a bona fide occupational qualification invalidates a rule denying employment to one
spouse due to the current employment of the other spouse in the same office. Thus, they
rule that unless the employer can prove that the reasonable demands of the business
require a distinction based on marital status and there is no better available or acceptable
policy which would better accomplish the business purpose, an employer may not
discriminate against an employee based on the identity of the employee’s spouse. This is
known as the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employer’s no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other
than the discriminatory practice. To justify a bona fide occupational qualification, the
employer must prove two factors: (1) that the employment qualification is reasonably related
to the essential operation of the job involved; and, (2) that there is a factual basis for
believing that all or substantially all persons meeting the qualification would be unable to
properly perform the duties of the job.
The concept of a bona fide occupational qualification is not foreign in our jurisdiction.
We employ the standard of reasonableness of the company policy which is parallel to the
bona fide occupational qualification requirement. In the recent case of Duncan Association
of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc., we
passed on the validity of the policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company. We held that Glaxo has a right to
guard its trade secrets, manufacturing formulas, marketing strategies and other confidential
programs and information from competitors. We considered the prohibition against personal
or marital relationships with employees of competitor companies upon Glaxo’s
employees reasonable under the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed company policy, we
recognized that Glaxo only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and procedures.
The requirement that a company policy must be reasonable under the circumstances
to qualify as a valid exercise of management prerogative was also at issue in the 1997 case
of Philippine Telegraph and Telephone Company v. NLRC. In said case, the employee
was dismissed in violation of petitioner’s policy of disqualifying from work any woman
worker who contracts marriage. We held that the company policy violates the right against
discrimination afforded all women workers under Article 136 of the Labor Code, but
established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified
as a "bona fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the ground of a general
principle, such as the desirability of spreading work in the workplace. A requirement of
that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance. (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness
must be clearly established to uphold the questioned employment policy. The employer has
the burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to have two (2) or more
of its employees related between the third degree by affinity and/or consanguinity" is lame.
That the second paragraph was meant to give teeth to the first paragraph of the questioned
rule is evidently not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee. Petitioners
failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma
Dayrit, then an employee of the Repacking Section, could be detrimental to its business
operations. Neither did petitioners explain how this detriment will happen in the case of
Wilfreda Comia, then a Production Helper in the Selecting Department, who married
Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear
that employees married to each other will be less efficient. If we uphold the questioned rule
without valid justification, the employer can create policies based on an unproven
presumption of a perceived danger at the expense of an employee’s right to security of
tenure.
 Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned
policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate
effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a
showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The
failure of petitioners to prove a legitimate business concern in imposing the questioned
policy cannot prejudice the employee’s right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one company.
Notes.—The right to fix the work schedules of the employees rests principally on their employer. (Sime
Darby Pilipinas, Inc. vs. National Labor Relations Commission, 289 SCRA 86 [1998])
Rules and regulations operative in a workplace issued by employers are deemed part of the contract of
employment binding upon the employees who enter the service, on the assumption that they are
knowledgeable of such rules. (Salavarria vs. Letran College, 296 SCRA 184 [1998])
——o0o——

Lastly, the absence of a statute expressly prohibiting marital discrimination in our

jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is
vast and extensive that we cannot prudently draw inferences from the legislature’s
silence that married persons are not protected under our Constitution and declare valid a
policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the questioned policy is
an invalid exercise of management prerogative. Corollarily, the issue as to whether
respondents Simbol and Comia resigned voluntarily has become moot and academic.

As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the
singular fact that her resignation letter was written in her own handwriting. Both ruled that
her resignation was voluntary and thus valid. The respondent court failed to categorically
rule whether Estrella voluntarily resigned but ordered that she be reinstated along with
Simbol and Comia.

Estrella claims that she was pressured to submit a resignation letter because she was
in dire need of money. We examined the records of the case and find Estrella’s contention
to be more in accord with the evidence. While findings of fact by administrative tribunals like
the NLRC are generally given not only respect but, at times, finality, this rule admits of
exceptions, as in the case at bar.

Estrella avers that she went back to work on December 21, 1999 but was dismissed
due to her alleged immoral conduct. At first, she did not want to sign the termination papers
but she was forced to tender her resignation letter in exchange for her thirteenth month pay.

The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or talked about
as immoral is incredulous. If she really wanted to avoid embarrassment and humiliation, she
would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal
and pleaded for reinstatement. We have held that in voluntary resignation, the employee is
compelled by personal reason(s) to dissociate himself from employment. It is done with the
intention of relinquishing an office, accompanied by the act of abandonment. Thus, it is
illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of
sufficient evidence on the part of petitioners that the resignation was voluntary, Estrella’s
dismissal is declared illegal.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477
dated August 3, 2004 is AFFIRMED.
SO ORDERED.
 G.R. No. 218384. July 3, 2017
JOHN L. BORJA and AUBREY L. BORJA/DONG JUAN, petitioners, vs. RANDY B.
MIÑOZA and ALAINE S. BANDALAN, respondents.
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; Well-settled is the rule
in this jurisdiction that only questions of law may be raised in a petition for review on certiorari under
Rule 45 of the Rules of Court, the Supreme Court (SC) being bound by the findings of fact made by the
appellate court; Exceptions.—Well-settled is the rule in this jurisdiction that only questions of law may
be raised in a petition for review on certiorari under Rule 45 of the Rules of Court, this Court being
bound by the findings of fact made by the appellate court. The Court’s jurisdiction is limited to reviewing
errors of law that may have been committed by the lower court. The rule, however, is not without
exception. In New City Builders, Inc. v. NLRC, 460 SCRA 220 (2005), the Court recognized the
following exceptions to the general rule, to wit: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings
the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set
forth in the petition, as well as in the petitioner’s main and reply briefs, are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a different conclusion.
Labor Law; Termination of Employment; Constructive Dismissal; Constructive dismissal exists
when an act of clear discrimination, insensibility, or disdain on the part of the employer has become so
unbearable as to leave an employee with no choice but to forego continued employment, or when there
is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely,
as an offer involving a demotion in rank and a diminution in pay.—Constructive dismissal exists when
an act of clear discrimination, insensibility, or disdain on the part of the employer has become so
unbearable as to leave an employee with no choice but to forego continued employment, or when there
is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely,
as an offer involving a demotion in rank and a diminution in pay. The test of constructive dismissal is
whether a reasonable person in the employee’s position would have felt compelled to give up his job
under the circumstances.
Same; Same; Abandonment; To constitute abandonment, two (2) elements must concur: (a) the
failure to report for work or absence without valid or justifiable reason, and (b) a clear intention to sever
the employer-employee relationship, with the second element as the more determinative factor and
being manifested by some overt acts.—The Court finds that respondents did not go on AWOL, or
abandon their employment, as petitioners claimed. To constitute abandonment, two (2) elements must
concur: (a) the failure to report for work or absence without valid or justifiable reason, and (b) a clear
intention to sever the employer-employee relationship, with the second element as the more
determinative factor and being manifested by some overt acts. Mere absence is not sufficient. The
employer has the burden of proof to show a deliberate and unjustified refusal of the employee to
resume his employment without any intention of returning. Abandonment is incompatible with
constructive dismissal.
Same; Same; Jurisprudence provides that in instances where there was neither dismissal by the
employer nor abandonment by the employee, the proper remedy is to reinstate the employee to his
former position, but without the award of backwages.—In this case, records show that respondents
wasted no time in filing a complaint against petitioners to protest their purported illegal dismissal from
employment. As the filing thereof belies petitioners’ charge of abandonment, the only logical conclusion,
therefore, is that respondents had no such intention to abandon their work. Therefore, since
respondents were not dismissed and that they were not considered to have abandoned their jobs, it is
only proper for them to report back to work and for petitioners to reinstate them to their former positions
or substantially-equivalent positions. In this regard, jurisprudence provides that in instances where there
was neither dismissal by the employer nor abandonment by the employee, the proper remedy is to
reinstate the employee to his former position, but without the award of backwages. However, since
reinstatement was already impossible due to strained relations between the parties, as found by the
NLRC, each of them must bear their own loss, so as to place them on equal footing. At this point, it is
well to emphasize that “in a case where the employee’s failure to work was occasioned neither by his
abandonment nor by a termination, the burden of economic loss is not rightfully shifted to the employer;
each party must bear his own loss.”
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari are the Decision dated August 29,
2014 and the Resolution dated May 13, 2015 rendered by the Court of Appeals (CA) in CA-
G.R. SP No. 07103, which set aside the Decision dated March 30, 2012 and the
Resolution dated June 29, 2012 of the National Labor Relations Commission (NLRC) in
NLRC Case No. VAC-12-000893-2011 (RAB Case No. VII-05-0827-2011) and, thereby,
reinstated the Decision dated September 7, 2011 of the Labor Arbiter, finding respondents
Randy B. Miñoza (Miñoza) and Alaine S. Bandalan (Bandalan; collectively, respondents) to
have been constructively dismissed and entitled to backwages, separation pay, 13th month
pay, service incentive leave pay, moral and exemplary damages, and attorney's fees.
The Facts
Respondents were employed as cooks of Dong Juan, a restaurant owned and operated
by petitioners John L. Borja (John) and Aubrey L. Borja (Aubrey; collectively, petitioners)
located in Cebu City. Mifioza and Bandalan were respectively hired on September 23, 2009
and September 14, 2010.
Respondents alleged that on April 1, 2011, a Friday, Miñoza was absent from work.
Because the company implements a "double-absent" policy, which considers an employee
absent for two (2) days without pay if he/she incurs an absence on a Friday, Saturday, or
Sunday, the busiest days for the restaurant, he chose not to report for work the next day, or
on April 2, 2011.
On the other hand, Bandalan reported for work on April 2, 2011, a Saturday, but was
later advised by John to go home and take a rest, with which he complied. Bandalan
discovered thereafter that John was angry at him for having drinking sessions after work on
April 1, 2011. Because of the "double-absent" policy, Bandalan purposely absented himself
from work on April 3, 2011.
On April 3, 2011, at around ten o' clock in the morning, the company called a meeting
of its employees, including respondents. When asked about his absence on April 1, 2011,
Miñoza explained that he had an argument with his wife, who had been demanding for his
payslips. As for Bandalan, who managed to be present at the meeting despite his intention
to be absent from work, he answered that it would be pointless to report for work that day,
as he would not be paid anyway, considering that he was not allowed to work the day
before.
The following day, or on April 4, 2011, petitioners summoned respondents once again.
Angrily, John accused respondents of planning to extort money from the company and told
them that if they no longer wish to work, they should resign. He then gave them blank
sheets of paper and pens and ordered them to write their own resignation letters.
Respondents replied that they will decide the next day.
On April 5, 2011, the day after, respondents alleged that they reported for work but
were barred from entering the restaurant. Instead, petitioners brought them to another
restaurant where they were forced to receive separate memoranda asking them to justify
their unexplained absences. Thereat, a certain "Mark" was present, who appeared to
respondents as an intimidating and ominous person.
When respondents reported for work on April 6, 2011, they were purportedly refused
entry once more. At closing time that day, respondents were invited to go inside the
restaurant and were subjected to an on-the-spot drug test, the results of which yielded
negative. To his humiliation, Bandalan had to undergo a second test, which also came out
negative.
Thereafter, when Bandalan went outside to buy food, he saw "Mark" and a group of
unfamiliar people standing in a dark area near the restaurant. Later, when he and Miñoza
were on their way home, they heard some people, presumably "Mark" and his hired goons,
shouting at them, "[y]ou fools, do not come back here as something bad will happen to you."
Out of fear, respondents no longer reported for work the following day, April 7, 2011,
and instead, filed a coinplaint for illegal dismissal, with claim for monetary benefits, against
petitioners, docketed as RAB-VII-05- 0827-2011.
In defense, petitioners explained that the "double-absent" policy was actually proposed
by respondents themselves, in reaction to the absences incurred by one of their co-
employees, Josephus Sablada (Sablada), who failed to report for work on two (2) busy
weekends. On March 14, 2011, after explaining the "double-absent" policy to the restaurant
employees, who were all amenable thereto, petitioners enforced the said policy.
Petitioners likewise claimed that from April 1 to 3, 2011, Miñoza failed to report for
work. Thus, in a memorandum dated April 4, 2011, Aubrey sought an explanation for his
absences. Miñoza justified his absence on April 1 by explaining that he had a quarrel with
his wife. The following day, he opted not to report for work anymore on account of the
"double-absent" policy. On April 3, he claimed that he was allowed to skip work.
As for Bandalan, petitioners averred that he was absent on April 3, 2011, a Sunday,
and when required to explain, he clarified that he opted not to report for work anymore
because he will no longer receive any salary for that day on account of the "double-absent"
policy, having been absent on March 25, 2011 and asked to go home on April 2, 2011.
On April 4, 2011, when respondents were summoned for a meeting, they expressed
their intention to resign. However, the following day, they arrived at the restaurant and
insisted that they wanted to work. To maintain order in the restaurant and to keep the other
employees from being harassed, petitioners called on a certain Mark Opura (Opura) to stay
in the restaurant and keep watch.
Petitioners further claimed that respondents worked undertime on April 5, 2011. Then,
Miñoza stopped reporting for work on April 7, 2011, while Bandalan ceased working on April
8, 2011. Thus, Aubrey sent separate memoranda to respondents on April 18, 2011 requiring
them to explain their absence without official leave (AWOL), which they both failed to do.
Subsequently, they were dismissed from employment.
The Labor Arbiter's Ruling
In a Decision dated September 7, 2011, the Labor Arbiter (LA) found respondents to
have been illegally and constructively dismissed and ordered petitioners to pay them the
total amount of ₱l69,077.20, inclusive of backwages, separation pay, 13th month pay,
service incentive leave pay, moral and exemplary damages, and attorney's fees.
Giving more credence to respondents' version of the facts, the LA found that Miñoza
and Bandalan were placed in a difficult situation and left with no choice but to leave their
employment on April 7 and 8, 2011, respectively. Respondents were brought to another
restaurant on April 5, 2011 merely for the purpose of handing to them the memoranda
despite evidence showing that they reported for work at the restaurant on said day. Thereat,
they first encountered Opura, who they claimed was a dubious and intimidating person.
Likewise, respondents were singled out to undergo an on-the-spot drug test, which yielded
negative results. Respondents also decided to forego their employment when they were
threatened by Opura's group. As such, the LA found that respondents were able to establish
the existence of threats to their security and safety, which were the bases for the finding of
constructive dismissal.
Furthermore, the LA rejected the assertion that respondents went on AWOL beginning
April 7, 2011 for Miñoza and April 8, 2011 for Bandalan, considering that they already filed
the instant complaint on April 7, 2011. As such, the memoranda dated April 18, 2011, which
required them to justify their unexplained absences was a mere afterthought.
Having been constructively dismissed, respondents are entitled to reinstatement to their
former positions with backwages from April 7, 2011. However, as reinstatement is no longer
feasible, the LA instead awarded separation pay equivalent to one month pay for every year
of service with a fraction of at least six (6) months service to be credited as a full year
service.
Likewise, the LA awarded 13th month pay and service incentive leave pay to which
respondents were entitled but were not paid. It also awarded moral and exemplary damages
on the ground that petitioners created a hostile work environment that was detrimental to
respondents' security of tenure, as well as attorney's fees, since respondents were
compelled to engage the services of counsel to protect their rights. As to the other monetary
claims sought by respondents, the same were dismissed for lack of basis.
Dissatisfied, petitioners appealed to the NLRC, docketed as NLRC Case No. VAC-12-
000893-2011.
The NLRC's Ruling
In a Decision dated March 30, 2012, the NLRC reversed and set aside the LA's
Decision and entered a new one finding neither constructive dismissal nor abandonment in
this case. Accordingly, it directed petitioners to pay: (a) Miñoza the amounts of ₱14,820.00
as separation pay, ₱10,983.05 as 13th month pay, and ₱2,194.50 as service incentive
leave pay; and (b) Bandalan the amounts of ₱7,410.00 as separation pay, and ₱4,199.00
as 13th month pay.

The NLRC found that respondents were not constructively dismissed on the basis of
the following circumstances: first, there was nothing wrong or irregular for an employer to
hold meetings with its employees if only to monitor their performance or allow them an
avenue to air their grievances; second, there was likewise nothing wrong if an employer
issues memoranda to its employees, as a means of exercising control over them;
and third, similarly, the conduct of a drug test is within the prerogative of the employer in
order to ensure that its employees are fit to remain in its employ. The NLRC stressed that
petitioners also have a business interest to protect and recognized that employers have free
rein to regulate all aspects of employment including the prerogative to instill discipline and to
impose penalties on errant employees.
As regards respondents' allegations that they were threatened, intimidated, and barred
entry into the restaurant, the NLRC rejected them for lack of substantiation. The presence of
Opura was a preventive measure that the NLRC found justified to avert possible
harassment in the work premises which cannot be construed as a means to specifically
threaten or intimidate respondents. The NLRC noted the evidence presented by petitioners
that Bandalan had previously burned and threatened a coemployee; hence, petitioners
cannot be blamed for wanting to ensure a safe and orderly work place. Thus, the NLRC
concluded that Opura's presence did not create a hostile work environment for respondents;
neither was it proven that they hurled threats against respondents, having been rebutted by
evidence presented by petitioners. Perforce, no constructive dismissal transpired in this
case.
However, the NLRC held that respondents did not go on AWOL beginning April 7,
2011. Citing jurisprudence, the NLRC ruled that a charge of abandonment is inconsistent
with the filing of a complaint for constructive dismissal. Moreover, respondents' prayer for
reinstatement belies petitioners' claim of abandonment.
Considering that neither constructive dismissal nor abandonment existed in this case,
the NLRC held that reinstatement is in order. However, under the doctrine of strained
relations, separation pay may be awarded in lieu of reinstatement, as in this case.
Finally, finding the absence of constructive dismissal, the NLRC deleted the award of
moral and exemplary damages and attorney's fees. However, it affirmed the awards for 13th
month pay for both respondents and service incentive leave pay for Miñoza alone.
Respondents moved for reconsideration, which the NLRC denied in a Resolution dated
June 29, 2012; hence, the recourse to the CA via petition for certiorari, docketed as CA-
G.R. SP No. 07103.
The CA's Ruling
In a Decision dated August 29, 2014, the CA set aside the NLRC issuances and
reinstated the LA's Decision, finding respondents to have been constructively dismissed,
with the modification imposing interest at the rate of six percent (6%) per annum on the
monetary awards granted in respondents' favor, computed from the finality of the CA
Decision until full payment.
Contrary to the NLRC's findings, the CA held that petitioners made employment
unbearable for respondents on account of the following circumstances: first, petitioners
formulated and implemented a "double-absent" policy, which is offensive to sound labor-
related management prerogative and actually deters employees from reporting to
work; second, respondents did not resign or go on AWOL - instead, they reported for work,
showing their intention to keep their employment; and finally, the hiring of Opura caused a
hostile and antagonistic environment for respondents.
Petitioners' motion for reconsideration was denied in a Resolution dated May 13, 2015;
hence, this petition.
The Issue Before the Court
The issue to be resolved by the Court is whether or not the CA erred in setting aside
the NLRC's issuances and reinstating the LA's Decision, which found respondents to have
been constructively dismissed.
The Court's Ruling
The petition has merit.
Well-settled is the rule in this jurisdiction that only questions of law may be raised in a
petition for review on certiorari under Rule 45 of the Rules of Court, this Court being bound
by the findings of fact made by the appellate court. The Court's jurisdiction is limited to
reviewing errors of law that may have been committed by the lower court. The rule,
however, is not without exception. In New City Builders, Inc. v. NLRC, the Court recognized
the following exceptions to the general rule, to wit: (1) when the findings are grounded
entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are conclusions without citation
of specific evidence on which they are based; (9) when the facts set forth in the petition, as
well as in the petitioner's main and reply briefs, are not disputed by the respondent; (10)
when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered, would justify a
different conclusion.
The exception, rather than the general rule, applies in the present case. When the
findings of fact of the CA are contrary to those of the NLRC, which findings also differ from
those of the LA, the Court retains its authority to pass upon the evidence and, perforce,
make its own factual findings based thereon.
In this case, the CA, concurring with the LA, found that respondents were constructively
dismissed. The Court is not convinced.
Constructive dismissal exists when an act of clear discrimination, insensibility, or
disdain on the part of the employer has become so unbearable as to leave an employee
with no choice but to forego continued employment, or when there is cessation of work
because continued employment is rendered impossible, unreasonable, or unlikely, as an
offer involving a demotion in rank and a diminution in pay. The test of constructive dismissal
is whether a reasonable person in the employee's position would have felt compelled to give
up his job under the circumstances.
After a punctilious examination of this case, the Court finds that respondents - as
correctly concluded by the NLRC - were not constructively dismissed, in view of the glaring
dearth of evidence to corroborate the same. Despite their allegations, respondents failed to
prove through substantial evidence that they were discriminated against, or that working at
the restaurant had become so unbearable that they were left without any choice but to
relinquish their employment. Neither were they able to prove that there was a demotion in
rank or a diminution in pay such that they were forced to give up their work.
In its reversed decision, the NLRC pointed out that respondents claimed to have been
constructively dismissed when petitioners called several meetings where they inquired
about respondents' absences, for which the latter were issued separate memoranda; they
were subjected to an on-the-spot drug test; they were barred entry into the restaurant; and
they were threatened and intimidated by the presence of Opura, a stranger, in the
restaurant. The foregoing circumstances, however, do not constitute grounds amounting to
constructive dismissal. As the NLRC correctly opined, petitioners were validly exercising
their management prerogative when they called meetings to investigate respondents'
absences, gave them separate memoranda seeking explanation therefor, and conducted an
on-the-spot drug test on its employees, including respondents. Likewise, respondents failed
to substantiate their allegation that they were prohibited from entering the restaurant, or that
they were threatened and intimidated by Opura as to keep them away from the premises.
Instead, and as the NLRC aptly observed, respondents failed to prove that Opura's
presence created a hostile work environment, or that the latter threatened and intimidated
them so much as to convince them to leave their employment. As the Court sees it,
petitioners found it necessary to enforce the foregoing measures to control and regulate the
conduct and behavior of their employees, to maintain order in the work premises, and
ultimately, preserve their business.
reinstatement was already impossible due to strained relations between the parties, as
found by the NLRC, each of them must bear their own loss, so as to place them on equal
footing. At this point, it is well to emphasize that "in a case where the employee's failure to
work was occasioned neither by his abandonment nor by a termination, the burden of
economic loss is not rightfully shifted to the employer; each party must bear his own loss."
In sum, the NLRC ruling holding that respondents were not constructively dismissed
and that they did not abandon their jobs must be reinstated, subject to the modification that
the award of separation pay in their favor must be deleted.
WHEREFORE, the instant petition is GRANTED. The Decision dated August 29, 2014
and Resolution dated May 13, 2015 rendered by the Court of Appeals in CA-G.R. SP No.
07103 are hereby REVERSED and SET ASIDE. The Decision dated March 30, 2012 and
the Resolution dated June 29, 2012 of the National Labor Relations Commission in NLRC
Case No. VAC-12-000893-2011 (RAB Case No. VII-05-0827-2011)
are REINSTATED, with MODIFICATIONS: (a) deleting the awards of separation pay in
favor of respondents Randy B. Miñoza and Alaine S. Bandalan (respondents) in the
amounts of ₱14,820.00 and ₱7,410.00, respectively; and (b) imposing interest at the rate of
six percent (6%) per annum on the remaining monetary awards granted in respondents'
favor, computed from the finality of this Decision until full payment.
SO ORDERED.
Notes.—Constructive dismissal is a dismissal in disguise. (Divine Word College of Laoag vs. Mina,
789 SCRA 369 [2016]) It is a settled doctrine that the filing of a complaint for illegal dismissal is
inconsistent with abandonment of employment. An employee who takes steps to protest his dismissal
cannot logically be said to have abandoned his work. (Intec Cebu, Inc. vs. Court of Appeals, 794 SCRA
266 [2016])
——o0o——

Be that as it may, however, the Court finds that respondents did not go on AWOL, or
abandon their employment, as petitioners claimed. To constitute abandonment, two (2)
elements must concur: (a) the failure to report for work or absence without valid or justifiable
reason, and (b) a clear intention to sever the employer-employee relationship, with the
second element as the more determinative factor and being manifested by some overt acts.
Mere absence is not sufficient. The employer has the burden of proof to show a deliberate
and unjustified refusal of the employee to resume his employment without any intention of
returning. Abandonment is incompatible with constructive dismissal.

In this case, records show that respondents wasted no time in filing a complaint against
petitioners to protest their purported illegal dismissal from employment. As the filing thereof
belies petitioners' charge of abandonment, the only logical conclusion, therefore, is that
respondents had no such intention to abandon their work.

Therefore, since respondents were not dismissed and that they were not considered to
have abandoned their jobs, it is only proper for them to report back to work and for
petitioners to reinstate them to their former positions or substantially-equivalent positions. In
this regard, jurisprudence provides that in instances where there was neither dismissal by
the employer nor abandonment by the employee, the proper remedy is to reinstate the
employee to his former position, but without the award of backwages. However, since
 G.R. No. 202275. JULY 17, 2018
THE PROVINCIAL BUS OPERATORS ASSOCIATION OF THE PHILIPPINES (PBOAP),
THE SOUTHERN LUZON BUS OPERATORS ASSOCIATION, INC. (SO-LUBOA), THE
INTER CITY BUS OPERATORS ASSOCIATION (INTERBOA), and THE CITY OF SAN
JOSE DEL MONTE BUS OPERATORS ASSOCIATION (CSJDMBOA), petitioners, vs.
DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) and LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD (LTFRB), Respondents
DECISION
LEONEN, J.:
Government created policy based on the finding that the boundary payment scheme
that has since determined the take-home pay of bus drivers and conductors has been
proven inadequate in providing our public utility bus drivers and conductors a decent and
living wage. It decided that this was the best approach to ensure that they get the economic
and social welfare benefits that they deserve. This Court will not stand in its way. Policy
questions are not what this Court decides.
This resolves an original action for certiorari and prohibition, assailing the
constitutionality of the following:
First, the Department of Labor and Employment (DOLE) Department Order No. 118-
12, otherwise known as the Rules and Regulations Governing the Employment and
Working Conditions of Drivers and Conductors in the Public Utility Bus Transport
Industry;
Second, all the implementing guidelines issued pursuant to Department Order No. 118-
12, including the National Wages and Productivity Commission's Guidelines No. 1,
series of 2012, otherwise known as the Operational Guidelines on Department Order
No. 118-12; and
Finally, the Land Transportation Franchising and Regulatory Board (LTFRB)
Memorandum Circular No. 2012-001, the subject of which is the Labor Standards
Compliance Certificate.
Petitioners Provincial Bus Operators Association of the Philippines, Southern Luzon
Bus Operators Association, Inc., Inter City Bus Operators Association, and City of San Jose
Del Monte Bus Operators Association (collectively, petitioners) argue that Department Order
No. 118-12 and Memorandum Circular No. 2012-001 violate the constitutional rights of
public utility bus operators to due process of law, equal protection of the laws, and non-
impairment of obligation of contracts.
The facts of the case are as follows:
To ensure road safety and address the risk-taking behavior of bus drivers as its declared
objective, the LTFRB issued Memorandum Circular No. 2012-001 on January 4, 2012,
requiring "all Public Utility Bus (PUB) operators . . . to secure Labor Standards Compliance
Certificates" under pain of revocation of their existing certificates of public convenience or
denial of an application for a new certificate. Memorandum Circular No. 2012-001 more
particularly provides:
MEMORANDUM CIRCULAR
NUMBER 2012-001
SUBJECT: LABOR STANDARDS COMPLIANCE CERTIFICATE
This Memorandum Circular covers all Public Utility Bus (PUB) Operators and is being
issued to ensure road safety through linking of labor standards compliance with franchise
regulation.
It is based on a DOLE rapid survey of bus drivers/conductors and operators on the
working conditions and compensation schemes in the bus transport sector. The survey
results, as validated in a series of focus group discussions with bus operators, drivers,
government regulating agencies and experts from the academe in the fields of
engineering and traffic psychology, indicate that the risk[-]taking behavior of drivers is
associated with the lack of proper training on motor skills, safety and on traffic rules and
regulations; poor health due to long work hours and exposure to health hazards and; lack
of income security under a purely commission-based compensation scheme. The industry
players also cited problems with the enforcement of traffic rules and regulations as well
as the franchising and licensing systems.
To strictly enforce this Memorandum Circular, the Board, thru the [Department of
Transportation and Communication], shall strengthen cooperation and coordination with
the Department of Labor and Employment.
Labor Standards Compliance Certificate
To ensure compliance with the established standards for employment and the Board's
policies on the promotion of road safety, all Public Utility Bus (PUB) operators are
required to secure Labor Standards Compliance Certificates from the Department of
Labor and Employment (DOLE).
The Certificate shall indicate compliance by the PUB operators with all relevant
legislations on wages, labor standards, terms and conditions of employment, and such
mandatory benefits as may now or in the future be provided under Philippine Labor
Laws; Provided that -
Compensation Scheme
The compensation scheme set or approved by the DOLE shall cover the PUB drivers
and conductors and shall adopt a part-fixed-partperformance[-] based compensation
system. The fixed component shall at no time be lower than the applicable minimum
wage in the region. The performance[-]based component shall be based on the net
income of the operator or bus company and on employee safety records such as that in
regard to involvement in road accidents, commission of traffic violations, and
observance of the elementary courtesies of the road.
All PUB drivers and conductors shall be entitled to other mandatory compensation such
as but not limited to overtime, night shift differential, rest day, holiday, birthday, and
service incentive leave pays.
Hours of Work
The number of working hours and rest periods of the drivers and conductors shall be
determined taking into consideration the existing conditions, peculiarities and
requirements of the transport industry.
Benefits
All PUB drivers and conductors shall likewise be entitled to retirement benefits and to all
mandatory social security benefits such as membership in the SSS, Philhealth and Pag-
Ibig as specified by law.
Right to Self Organization
The right of the drivers and conductors to organize themselves to advance their
interests and welfare shall be encouraged. It shall not in any way be abridged or
diminished by way of any agreement or contract entered into in complying with this
issuance or in obtaining the Labor Standards Compliance Certificate.
Nothing herein shall be interpreted to mean as precluding the PUB operators and the
drivers or conductors from entering into collective bargaining agreements granting them
more rights, privileges and benefits.
Company policies and practices, and collective bargaining agreements existing on
effectivity of this issuance which grant more rights, privileges, and benefits to the drivers
and conductors than herein provided shall continue to be in effect and shall not be
diminished by virtue hereof or any subsequent policies or agreements.
 The exercise of the right to self-organization shall m no way adversely affect public
safety and convenience.
Effectivity
Failure on the part of the PUB operators to secure and submit to the Board by July 30,
2012 the required Labor Standards Certificates shall be a ground for the immediate
cancellation or revocation of their franchises/[Certificates of Public Convenience].
No application for new [Certificates of Public Convenience] or renewal of existing
[Certificates of Public Convenience] shall thereafter be granted by the Board without the
required Certificates.
This Memorandum Circular shall take effect fifteen (15) days following its publication in
at least two (2) newspapers of general circulation. Let three (3) copies hereof be filed
with the UP [L]aw Center pursuant to Presidential Memorandum Circular No. 11, dated
9 October 1992.
SO ORDERED.
Five (5) days later or on January 9, 2012, the DOLE issued Department Order No.
118-12, elaborating on the part-fixed-part-performance-based compensation system
referred to in the L TFRB Memorandum Circular No. 2012-001. Department Order No. 118-
12, among others, provides for the rule for computing the fixed and the performance-based
component of a public utility bus driver's or conductor's wage. Relevant portions of
Department Order No. 118-12 provide:
DEPARTMENT ORDER NO.118-12
Series of 2012
RULES AND REGULATIONS GOVERNING THE EMPLOYMENT AND WORKING
CONDITIONS OF DRIVERS AND CONDUCTORS IN THE PUBLIC UTILITY BUS
TRANSPORT INDUSTRY
Pursuant to the provision of Article 5 of the Labor Code of the Philippines, as amended,
the following rules and regulations are hereby issued to ensure the protection and welfare
of drivers and conductors employed in the public utility bus transport industry:
....
RULE II
TERMS AND CONDITIONS OF EMPLOYMENT
SECTION 1. Employment Agreement for Drivers and Conductors. -There shall be an
agreement in writing between the public utility bus owner/operator and the public utility
bus driver and/or conductor, which shall include the following terms:
a) Driver['s] or conductor's full name, date of birth or age, address, civil status, and SSS
ID no.;
b) Public Utility Bus owner's/operator's name and address;
c) Place where and date when the employment agreement is entered into;
d) Amount of the driver's or conductor's fixed wage and formula used for calculating the
performance[-]based compensation in accordance with Rule III (Compensation), as
provided hereunder;
e) Hours of work;
f) Wages and wage-related benefits such as overtime pay, holiday pay, premium pay,
13th month pay and leaves;
g) Social security and welfare benefits;
h) Separation and retirement benefits; and
i) Other benefits under existing laws.
The public utility bus owner/operator shall provide the public utility bus driver/conductor
the signed and notarized original copy of the agreement.
SECTION 2. Minimum Benefits. - The public utility bus drivers and conductors are
entitled to the following benefits:
a) Wages for all actual work during the normal work hours and days shall not be lower
than the applicable minimum wage rates. Wages shall be paid at least once every two
weeks or twice a month at intervals not exceeding 16 days;
b) Twelve (12) Regular Holidays with pay pursuant to Republic Act 9849 (An Act Declaring
The Tenth Day of Zhul Hijja, The Twelfth Month of The Islamic Calendar, A National
Holiday For The Observance of Eidul Adha, Further Amending For The Purpose Section
26, Chapter 7, Book I of Executive Order No. 292, Otherwise Known As The
Administrative Code of 1987, As Amended).The driver/conductor shall be paid holiday
pay of 100% of the minimum wage even if he/she does not report for work, provided
he/she is present or is on leave of absence with pay on the workday immediately
preceding the holiday. If the driver/conductor is required to work on said holiday, he/she
shall be paid 200% of the minimum wage;
c) Rest day of twenty-four (24) consecutive hours for every six (6) consecutive working
days. If the driver/conductor is required to work on a rest day, he/she shall be paid an
additional premium pay of 30% of the basic wage. If the driver/conductor is required to
work on special days under Republic Act No. 9849, he/she shall also be paid an additional
premium pay of 30% of the basic wage. Whenever work is performed on a rest day, which
happens to be also a special day, he/she is entitled to an additional 50% of the basic
wage;
d) Overtime pay equivalent to at least 25% of the basic wage on ordinary days and 30%
on regular holidays, special days and rest days for work beyond eight (8) hours per day;
e) Night shift pay of an additional 10% of the basic wage for work between 10:00 pm and
6:00 am of the following day;
f) Paid service incentive leave of five (5) days for every year of service;
g) 13th month pay pursuant to Presidential Decree No. 851, as amended, which entitles
the employee to receive an amount equivalent to 1112 of the total basic salary earned
within the calendar year, not later than 24 December of each year;
h) Paid maternity leave of sixty (60) days for normal delivery or seventy[-]eight (78) days
for caesarian section delivery, pursuant to Republic Act No. 8282, otherwise known as
the Social Security Act of 1997;
i) Paid paternity leave of seven (7) days, pursuant to Republic Act No. 8187, otherwise
known as the Paternity Leave Act of 1996;
j) Paid parental leave of seven (7) days for solo parents pursuant to Republic Act No.
8972, otherwise known as the Solo Parents' Welfare Act of 2000;
k) Paid leave of ten (10) days for victims of violence against women and their children,
pursuant to Republic Act No. 9262, otherwise known as the Anti-Violence Against Women
and Their Children Act of 2004;
l) Paid special leave for women who underwent surgery caused by gynecological
disorders, pursuant to Republic Act No. 9710, otherwise known as the Magna Carta for
Women; and
m) Retirement pay upon reaching the age of sixty (60) or more, pursuant to Republic Act
No. 7641.
SECTION 3. Hours of Work and Hours of Rest. - The normal hours of work of a driver
and conductor shall not exceed eight (8) hours a day.
If the driver/conductor is required to work overtime, the maximum hours of work shall not
exceed twelve (12) hours in any 24-hour period, subject to the overriding safety and
operational conditions of the public utility bus.
Drivers and conductors shall be entitled to rest periods of at least one (1) hour, exclusive
of meal breaks, within a 12-hour shift.
SECTION 4. Right to Security of Tenure. - Drivers and conductors shall enjoy security
of tenure in their employment as provided by law. Their employment can only be
terminated for just or authorized causes pursuant to the provisions of the Labor Code, as
amended.
....
RULE III
COMPENSATION
SECTION 1. Fixed and Performance[-]Based Compensation Scheme. - Bus owners
and/or operators shall adopt a mutually-agreed upon "part-fixed, part-performance" based
compensation scheme for their bus drivers and conductors.
SECTION 2. Method of Determining Compensation. - Bus owners and/or operators, in
consultation with their drivers and conductors shall determine the following:
[a]) The fixed component shall be based on an amount mutually agreed upon by the
owner/operator and the driver/conductor, which shall in no case be lower than the
applicable minimum wage for work during normal hours/days.
They shall also be entitled to wage[-]related benefits such as overtime pay, premium pay
and holiday pay, among others.
[b]) The performance-based component shall be based on safety performance, business
performance and other related parameters.
SECTION 3. Operational Guidelines. The [National Wages and Productivity
Commission] shall develop operational guidelines to implement the part-fixed, part[-
]performance-based compensation scheme including the formula that should be used by
public utility bus companies within fifteen ( 15) days after publication of th[ese] Rules.
SECTION 4. Submission of Proposed Compensation Scheme.
- All public utility bus owners and/or operators shall submit a proposed compensation
scheme, mutually agreed upon with their drivers/conductors, to the appropriate [Regional
Tripartite Wages and Productivity Board] for information and reference purposes based
on Rule III, Section 2 of th[ese] Rules, within sixty (60) days after the effectivity of this
Order.
....
RULE V
SOCIAL PROTECTION
SECTION 1. Social Welfare Benefits. - Without prejudice to established company policy,
collective bargaining agreement or other applicable employment agreement, all bus
drivers and conductors shall be entitled to coverage for social welfare benefits such as
Pagibig Fund (Republic Act No. 7742), PhilHealth (Republic Act No. 7875, as amended
by Republic Act No. 9241), Employees' Compensation Law (Presidential Decree No. 626),
Social Security Law (Republic Act No. 1161 as amended by Republic Act No. 8282) and
other applicable laws.
The cost of health services for the illnesses and injuries suffered by the driver and
conductor shall be covered by mandatory social welfare programs under existing laws.
RULE VI
TRAINING AND DEVELOPMENT
SECTION 1. Assessment and Certification. - The [Technical Education and Skills
Development Authority], in coordination with the [Occupational Safety and Health Center],
the [Land Transportation Office], the LTFRB and the [Metropolitan Manila Development
Authority] shall implement an assessment and certification program for professional
drivers. The assessment will focus on knowledge, attitude and skills.
SECTION 2. Driver Proficiency Standards. - The [Technical Education and Skills
Development Authority] shall work closely with LTFRB in the implementation of its
Department Order No. 2011-25 "Inclusion of Driver Proficiency Standard as Additional
Requirement in the Exercise of the Regulatory Powers of L TFRB to Issue Certificates of
Public Convenience (CPC)". Applicants for CPCs shall present sufficient proof and submit
a list of its drivers who are duly certified by the TESDA.
....
RULE VIII
COMPLIANCE AND ENFORCEMENT
....
SECTION 4. Failure to Comply/Restitute. - In case of violations committed by bus
owners/operators and failure to comply or correct such violations, the DOLE shall
coordinate with the L TFRB on the matter of appropriate action, including possible
cancellation of franchise after due process.
....
RULE IX
MISCELLANEOUS PROVISIONS
SECTION 1. Transitory Provisions. - Th[ese] Rules shall initially cover the public utility
bus transport companies exclusively serving or plying Metro Manila routes and shall apply
to other public utility bus companies by July 2012.
In the first six months but not later than one year from the effectivity of th[ese] Rules, the
provisions herein stated shall be liberally construed to enable compliance by the public
utility bus companies.
SECTION 2. Operational Guidelines. Operational guidelines to implement th[ese] Rules
shall be issued by concerned DOLE agencies (i.e., [Bureau of Working Conditions],
[Occupational Safety and Health Center], [National Conciliation and Mediation Board],
and [Technical Education and Skills Development Authority]) within fifteen (15) days after
its publication.
SECTION 3. Technical Assistance to Public Utility Bus Transport Companies. -
Public utility bus operators may request for technical assistance from concerned DOLE
agencies in the implementation of th[ese] Rules.
SECTION 4. Non-diminution of Benefits. - Nothing herein shall be construed to
authorize diminution of benefits being enjoyed by the bus drivers and conductors at the
time of the issuance hereof.
SECTION 5. Effect on Existing Company Policy, Contracts or CBAs. - The minimum
benefits provided in th[ese] Rules shall be without prejudice to any company policy,
contract, or Collective Bargaining Agreement (CBA) providing better terms and conditions
of employment.
On January 28, 2012, Atty. Emmanuel A. Mahipus, on behalf of the Provincial Bus
Operators Association of the Philippines, Integrated Metro Manila Bus Operators
Association, Inter City Bus Operators Association, the City of San Jose Del Monte Bus
Operators Association, and Pro-Bus, wrote to then Secretary of Labor and Employment
Rosalinda Dimapilis-Baldoz, requesting to defer the implementation of Department Order
No. 118-12. The request, however, was not acted upon.
Meanwhile, on February 27, 2012 and in compliance with Rule III, Section 3 of
Department Order No. 118-12, the National Wages and Productivity Commission issued
NWPC Guidelines No. 1 to serve as Operational Guidelines on Department Order No. 118-
12. NWPC Guidelines No. 1 suggested formulae for computing the fixed-based and the
performance-based components of a bus driver's or conductor's wage. Relevant portions
of the NWPC Guidelines, including its Annex "A" on a sample computation implementing
the part-fixed-part-performance-based compensation scheme, are reproduced below:
NWPC GUIDELINES NO.1
(series 2012)
OPERATIONAL GUIDELINES ON DEPARTMENT ORDER NO. 118-12 "RULES AND
REGULATIONS GOVERNING THE EMPLOYMENT AND WORKING CONDITIONS OF
DRIVERS AND CONDUCTORS IN THE PUBLIC UTILITY BUS TRANSPORT
INDUSTRY"
Pursuant to Section 3 of Rule III of Department Order No. 118-12 "Rules and Regulations
Governing the Employment and Working Conditions of Drivers and Conductors in the
Public Utility Bus Transport Industry,["] the following operational guidelines on the
adoption of a part-fixed, part-performance[-]based compensation scheme is hereby
issued:
RULE I
COVERAGE AND DEFINITION OF TERMS
SECTION 1. Coverage. - Th[ese] Guidelines shall apply to all public utility bus owners
and/or operators employing drivers and conductors. Owners/operators of coaches,
school, tourist and similar buses who are holders of Certificates of Public Convenience
(CPC) issued by the Land Transportation Franchising and Regulatory Board (L TFRB),
however, are not covered by the provisions of th[ese] Guidelines.
....
RULE II
COMPENSATION
SECTION 1. Part-Fixed, Part-Performance[-]Based Compensation Scheme.
a) Bus owners and/or operators shall adopt a mutually-agreed upon "partfixed, pai1-
performance" based compensation scheme for bus drivers and conductors. It shall take
into consideration revenue, ridership, safety, specific conditions of routes and other
relevant parameters. (Annex A - Sample Computation)
SECTION 2. Fixed Wage Component.
a) The fixed wage component shall be an amount mutually agreed upon by the
owner/operator and the driver/conductor and shall be paid in legal tender. It shall in no
case be lower than the applicable minimum wage (basic wage + COLA) for work
performed during normal hours/days. It shall include wage[-]related benefits such as
overtime pay, nightshift differential, service incentive leave and premium pay among
others. The payment of 13th month pay, holiday and service incentive leave may be
integrated into the daily wage of drivers and conductors, upon agreement of both
owners/operators and drivers and conductors.
b) The fixed wage may be based on a time unit of work (e.g. hourly, daily or monthly). It
may also be based on a per trip or per kilometer basis where the drivers/conductors and
operators may consider the minimum number of trips or kilometres/distance travelled
within an 8-hour period, as basis for determining regular/normal workload for an 8-hour
period. The fixed wage may be computed as follows:
Fixed Wage (Time Rate) = (Basic Wage+ Wage-Related Benefits)
OR
Fixed Wage (Trip Basis) = Rate per Trip x No. of Trips per Day
SECTION 3. Performance-Based Wage Component.
a) The performance-based wage component shall be based on business performance,
safety performance and other relevant parameters. Business performance shall consider
revenue/ridership. Safety performance shall consider safety records such as the
incidence of road accident and traffic violation. The performance-based wage may be
computed as follows:
Reference Amount of Performance Incentive= (Current Average Daily Earnings -
Fixed Wage) x Y%
Where:
i. Current average daily earnings shall be estimated based on average daily earnings for
2011 and/or prior years, as may be agreed upon.
ii. Y - range of values (in percent) that correspond to various levels of safety performance,
such that:
• The lower the incidence of traffic violations and road accidents, the higher will be the
value of Y and the performance incentive
• The higher the incidence of traffic violations and road accidents, the lower will be the
value of Y and the performance incentive
b) Bus operators/owners and drivers/conductors may modify or use other formula for their
compensation scheme provided it is in accordance with the part-fixed[-]part-performance[-
]based compensation scheme as provided herein.
....
SECTION 7. Submission of Proposed Compensation Scheme.- All public utility bus
owners and/or operators shall submit theirproposed compensation scheme, mutually
agreed upon with their drivers/conductors, to the [Regional Tripartite Wage and
Productivity Board] having jurisdiction over the principal place of business of the public
utility bus operator, within sixty (60) days after the effectivity of the Guidelines using the
attached Proposed Compensation Form (Annex B). This form shall be accomplished in
duplicate (2) and shall be accompanied by a duly signed employment agreement between
the bus owner/operator and bus driver and between the bus owner/operator and bus
conductor.
Upon submission, the concerned [Regional Tripartite Wage and Productivity Board] shall
review the compensation scheme for conformity with Rule II of the Guidelines. If found
not in conformance with the Guidelines, the [Regional Tripartite Wage and Productivity
Board] shall provide technical assistance to the concerned bus owner/operator to correct
the non-conformance. The [Regional Tripartite Wage and Productivity Board] shall
thereafter furnish the DOLE-[Regional Office] a copy of the compensation scheme and
the agreements.
RULE III
MISCELLANEOUS PROVISIONS
....
SECTION 2. Non-diminution of Benefits. - Nothing herein shall be construed to
authorize diminution or reduction of existing wages and benefits being enjoyed by the bus
drivers and conductors.
On July 4, 2012, petitioners filed before this Court a Petition with Urgent Request for
Immediate Issuance of a Temporary Restraining Order and/or a Writ of Preliminary
Injunction, impleading the DOLE and the LTFRB as respondents. They pray that this
Court enjoin the implementation of Department Order No. 118-12 and Memorandum
Circular No. 2012-001 for being violative of their right to due process, equal protection,
and non-impairment of obligation of contracts.
In its July 11, 2012 Resolution, this Court deferred the issuance of a status quo
ante order and, instead, required the DOLE and the L TFRB to comment on the Petition.
On July 13, 2012, petitioners filed the Urgent Manifestation with Motion for
Clarification, alleging that Atty. Ma. Victoria Gleoresty Guerra announced in a press
conference that this Court agreed to issue a status quo ante order in the case. They prayed
that this Court clarify whether a status quo ante order was indeed issued.
In its July 13, 2012 Resolution, this Court noted without action the Urgent Manifestation
with Motion for Clarification.
A Very Urgent Motion for Reconsideration of the July 13, 2012 Resolution was filed by
petitioners on which respondents filed a Comment.
On July 27, 2012, the Metropolitan Manila Development Authority (MMDA) filed a
Motion for Leave to Intervene, alleging "direct and material interest in upholding the
constitutionality of [Department Order No. 118-12 and Memorandum Circular No. 2012-
001]." This Court granted the MMDA's Motion in its August 10, 2012 Resolution.
On August 22, 2012, the DOLE and the LTFRB filed their Comment via registered mail
after which petitioners filed their Reply. For intervenor MMDA, it filed its Comment-in-
Intervention on January 8, 2013.
In its September 3, 2013 Resolution, this Court directed the parties to file their
respective memoranda. In compliance, petitioners filed their Memorandum on October 10,
2013, while the DOLE, the LTFRB, and the MMDA filed a Consolidated Memorandum on
November 6, 2013.
As earlier stated, petitioners assail the constitutionality of Department Order No. 118-12
and Memorandum Circular No. 2012-001, arguing that these issuances violate petitioners'
rights to non-impairment of obligation of contracts, due process of law, and equal protection
of the laws. Particularly with respect to Department Order No. 118-12, its provisions on the
payment of part-fixed-part-performance-based wage allegedly impair petitioners' obligations
under their existing collective bargaining agreements where they agreed with their bus
drivers and conductors on a commission or boundary basis. They contend that
Memorandum Circular No. 2012-001 further requires compliance with Department Order
No. 118-12 under threat of revocation of their franchises, which allegedly deprive petitioners
of the capital they invested in their businesses in violation of their right to due process of
law.
Petitioners add that the initial implementation of Department Order No. 118-12 within
Metro Manila allegedly creates an arbitrary distinction between bus operators operating in
Metro Manila and those operating outside of Metro Manila, in violation of petitioners' right to
equal protection of the laws.
Respondents counter that petitioners have no legal standing to file the present Petition
considering that Department Order No. 118-12 and Memorandum Circular No. 2012-001
are directed against bus operators, not against associations of bus operators such as
petitioners. They add that petitioners violated the doctrine of hierarchy courts in directly filing
their Petition before this Court. For these reasons, respondents pray for the dismissal of the
Petition.
On the constitutional issues raised by petitioners, respondents contend that
Department Order No. 118-12 and Memorandum Circular No. 2012-001 are valid issuances
promulgated by the DOLE and the LTFRB in the exercise of their quasi-legislative powers.
Further, they argue that Department Order No. 118-12 and Memorandum Circular No.
2012-001 do not violate public utility bus operators' rights to non-impairment of obligation of
contracts, due process of law, and equal protection of the laws for the following reasons:
First, Department Order No. 118-12 and Memorandum Circular No. 2012-001 were issued
"[to promote and protect] the welfare of the public utility bus drivers and conductors" and
"[to ensure] road safety" by imposing a wage system where public utility bus drivers do
not have to compete with one another and drive recklessly for additional
income. Department Order No. 118-12 and Memorandum Circular No. 2012-001 are
social legislations and police power measures to which petitioners' right against
impairment of obligation of contracts must yield;
Second, certificates of public convenience are not property and are always subject to
amendment, alteration, or repeal. Therefore, public utility bus operators cannot argue that
they were deprived of their property without due process of law when the LTFRB required
further compliance with Memorandum Circular No. 2012-001 for bus operators to retain
their franchises; and
Finally, Department Order No. 118-12 does not violate Metro Manila public utility bus
operators' right to equal protection of the laws since it applies to all public utility bus
operators in the country.
Based on the pleadings, the issues for this Court's resolution are the following:
First, whether or not petitioners Provincial Bus Operators Association of the Philippines,
Southern Luzon Bus Operators Association, Inc., Inter City Bus Operators Association,
and City of San Jose Del Monte Bus Operators Association have legal standing to sue;
Second, whether or not this case falls under any of the exceptions to the doctrine of
hierarchy of courts;
Third, whether or not the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001 deprive public utility bus operators of their right to
due process of law;
Fourth, whether or not the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001 impair public utility bus operators' right to non-
impairment of obligation of contracts; and
Finally, whether or not the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001 deny public utility bus operators of their right to equal
protection of the laws.
This Court dismisses the Petition. Petitioners fail to respect the doctrine of hierarchy of
courts by directly invoking this Court's jurisdiction without any special reason. They fail to
present an actual controversy ripe for adjudication and do not even have the requisite
standing to file this case. Even if this Court proceeds on the merits, petitioners fail to show
the unconstitutionality of the DOLE Department Order No. 118-12 and the LTFRB
Memorandum Circular No. 2012-001.
I
The Constitution vests in this Court and such lower courts as may be established
by law the power to "declare executive and legislative acts void if violative of the
Constitution." This Court's power of judicial review is anchored on Article VIII, Section 1 of
the Constitution:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the government.
Our governmental structure rests on the principle of separation of powers. Under our
constitutional order, the legislative branch enacts law, the executive branch implements the
law, and the judiciary construes the law. In reality, however, the powers are not as strictly
confined or delineated to each branch. "[T]he growing complexity of modern life, the
multiplication of the subjects of governmental regulation, and the increased difficulty of
administering the laws" require the delegation of powers traditionally belonging to the
legislative to administrative agencies. The legislature may likewise apportion competencies
or jurisdictions to administrative agencies over certain conflicts involving special technical
expertise.
Administrative actions reviewable by this Court, therefore, may either be quasi-
legislative or quasi-judicial. As the name implies, quasi-legislative or rule-making power is
the power of an administrative agency to make rules and regulations that have the force and
effect of law so long as they are issued "within the confines of the granting statute." The
enabling law must be complete, with sufficient standards to guide the administrative agency
in exercising its rule-making power. As an exception to the rule on non-delegation of
legislative power, administrative rules and regulations must be "germane to the objects and
purposes of the law, and be not in contradiction to, but in conformity with, the standards
prescribed by law." In Pangasinan Transportation Co., Inc. v. The Public Service
Commission, this Court recognized the constitutional permissibility of the grant of quasi-
legislative powers to administrative agencies, thus:
One thing, however, is apparent in the development of the principle of separation of
powers and that is that the maxim of delegatus non potest delegari or delegata potestas
non potest delegari, attributed to Bracton (De Legibus et Consuetedinious Angliae, edited
by G .E. Woodbine, Yale University Press, 1922, vol. 2, p. 167) but which is also
recognized in principle in the Roman Law (D. 17.18.3), has been made to adapt itself to
 the complexities of modern governments, giving rise to the adoption, within certain limits,
of the principle of "subordinate legislation," not only in the United States and England but
in practically all modem governments. (People vs. Rosenthal and Osmeña, G. R. Nos.
46076 and 46077, promulgated June 12, 1939.) Accordingly, with the growing complexity
of modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency
toward the delegation of greater powers by the legislature, and toward the approval of the
practice by the courts. (Dillon Catfish Drainage Dist. v. Bank of Dillon, 141 S. E. 274, 275,
143 S. Ct. 178; State v. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn. 319.) In harmony
with such growing tendency, this Court, since the decision in the case of Compañia
General de Tabacos de Filipinas vs. Board of Public Utility Commissioners (34 Phil., 136),
relied upon by the petitioner, has, in instances, extended its seal of approval to the
"delegation of greater powers by the legislature." (Inchausti Steamship Co. vs. Public
Utility Commissioner, 44 Phil., 366; Alegre vs.Collector of Customs, 53 Phil., 394; Cebu
Autobus Co. vs. De Jesus, 56 Phil., 446; People vs.Fernandez & Trinidad, G. R. No.
45655, promulgated June 15, 1938; People vs. Rosenthal & Osmeña, G. R. Nos. 46076,
46077, promulgated June 12, 1939; and Robb and Hilscher vs. People, G.R. No. 45866,
promulgated June 12, 1939.)
On the other hand, quasi-judicial or administrative adjudicatory power is "the power to
hear and determine questions of fact to which the legislative policy is to apply and to decide
in accordance with the standards laid down by the law itself in enforcing and administering
the same law." The constitutional permissibility of the grant of quasi-judicial powers to
administrative agencies has been likewise recognized by this Court. In the 1931 case of The
Municipal Council of Lemery, Batangas v. The Provincial Board of Batangas, this Court
declared that the power of the Municipal Board of Lemery to approve or disapprove a
municipal resolution or ordinance is quasi-judicial in nature and, consequently, may be the
subject of a certiorari proceeding.
Determining whether the act under review is quasi-legislative or quasi-judicial is
necessary in determining whenjudicial remedies may properly be availed of. Rules issued in
the exercise of an administrative agency's quasi-legislative power may be taken cognizance
of by courts on the first instance as part of their judicial power, thus:
[W]here what is assailed is the validity or constitutionality of a rule or regulation issued by
the administrative agency in the performance of its quasi-legislative function, the regular
courts have jurisdiction to pass upon the same. The determination of whether a specific
rule or set of rules issued by an administrative agency contravenes the law or the
constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests
the power of judicial review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation in the courts,
including the regional trial courts. This is within the scope of judicial power, which includes
the authority of the courts to determine in an appropriate action the validity of the acts of
the political departments. Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Citations omitted)
However, in cases involving quasi-judicial acts, Congress may require certain quasi-judicial
agencies to first take cognizance of the case before resort to judicial remedies may be allowed.
This is to take advantage of the special technical expertise possessed by administrative
agencies. Pambujan Sur United Mine Workers v. Samar Mining Company, lnc. explained the
doctrine of primary administrative jurisdiction, thus:
That the courts cannot or will not determine a controversy involving a question which is
within the jurisdiction of an administrative tribunal prior to the decision of that question by
the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate matters of fact, and a uniformity
of ruling is essential to comply with the purposes of the regulatory statute administered.
Usually contrasted with the doctrine of primary jurisdiction is the doctrine of exhaustion
of administrative remedies. Though both concepts aim to maximize the special technical
knowledge of administrative agencies, the doctrine of primary administrative jurisdiction
requires courts to not resolve or "determine a controversy involving a question which is
within the jurisdiction of an administrative tribunal." The issue is jurisdictional and the court,
when confronted with a case under the jurisdiction of an administrative agency, has no
option but to dismiss it.
In contrast, exhaustion of administrative remedies requires parties to exhaust all the
remedies in the administrative machinery before resorting to judicial remedies. The
doctrine of exhaustion presupposes that the court and the administrative agency have
concurrent jurisdiction to take cognizance of a matter. However, in deference to the special
and technical expertise of the administrative agency, courts must yield to the administrative
agency by suspending the proceedings. As such, parties must exhaust all the remedies
within the administrative machinery before resort to courts is allowed.
Discussion of the doctrines of primary jurisdiction and exhaustion of administrative
remedies aside, the present case does not require the application of either doctrine.
Department Order No. 118-12 and Memorandum Circular No. 2012-001 were issued in the
exercise of the DOLE's and the LTFRB's quasi-legislative powers and, as discussed, the
doctrines of primary jurisdiction and exhaustion of administrative remedies may only be
invoked in matters involving the exercise of quasi-judicial power. Specifically, Department
Order No. 118-12 enforces the application of labor standards provisions, i.e., payment of
minimum wage and grant of social welfare benefits in the public bus transportation industry.
For its part, Memorandum Circular No. 2012-001 was issued by the LTFRB in the exercise
of its power to prescribe the terms and conditions for the issuance of a certificate of public
convenience and its power to promulgate and enforce rules and regulations on land
transportation public utilities.
II
While resort to courts may directly be availed of in questioning the constitutionality of an
administrative rule, parties may not proceed directly before this Court, regardless of its
original jurisdiction over certain matters. This Court's original jurisdiction over petitions
for certiorari and prohibition may only be invoked for special reasons under the doctrine of
hierarchy of courts.
The doctrine of hierarchy of courts requires that recourse must first be obtained from
lower courts sharing concurrent jurisdiction with a higher court. This is to ensure that this
Court remains a court of last resort so as to "satisfactorily perform the functions assigned to
it by the fundamental charter and immemorial tradition."
The doctrine was first enunciated in People v. Cuaresma where a petition
for certiorari assailing a trial court order granting a motion to quash was directly filed before
this Court. Noting that there was no special reason for invoking this Court's original
jurisdiction, this Court dismissed the petition and required the "strict observance" of the
policy of hierarchy of courts, thus:
This Court's original jurisdiction to issue writs of certiorari (as well as
prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive. It
is shared by this Court with Regional Trial Courts (formerly Courts of First Instance), which
may issue the writ, enforceable in any part of their respective regions. It is also shared by
this Court, and by the Regional Trial Court, with the Court of Appeals (formerly,
Intermediate Appellate Court), although prior to the effectivity of Batas Pambansa
Bilang 129 on August 14, 1981, the latter's competence to issue the extraordinary writs
was restricted to those "in aid of its appellate jurisdiction." This concurrence of jurisdiction
is not, however, to be taken as according to parties seeking any of the writs an absolute,
unrestrained freedom of choice of the court to which application therefor will be directed.
There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most
certainly indicates that petitions for the issuance of extraordinary writs against first level
("inferior") courts should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction
to issue these writs should be allowed only when there are special and important reasons
therefor, clearly and specifically set out in the petition. This is established policy. It is a
policy that is necessary to prevent inordinate demands upon the Court's time and attention
which are better devoted to those matters within its exclusive jurisdiction, and to prevent
further over-crowding of the Court's docket. Indeed, the removal of the restriction on the
jurisdiction of the Court of Appeals in this regard, supra - resulting from the deletion of the
qualifying phrase, "in aid of its appellate jurisdiction" - was evidently intended precisely to
relieve this Court pro tanto of the burden of dealing with applications for the extraordinary
writs which, but for the expansion of the Appellate Court['s] corresponding jurisdiction,
would have had to be filed with it.
The Court feels the need to reaffirm that policy at this time, and to enjoin strict
adherence thereto in the light of what it perceives to be a growing tendency on the part of
litigants and lawyers to have their applications for the so-called extraordinary writs, and
sometime even their appeals, passed upon and adjudicated directly and immediately by
the highest tribunal of the land. The proceeding at bar is a case in point. The application
for the writ of certiorari sought against a City Court was brought directly to this Court
although there is discernible special and important reason for not presenting it to the
Regional Trial Court.
The Court therefore closes this decision with the declaration, for the information and
guidance of all concerned, that it will not only continue to enforce the policy, but will require
a more strict observance thereof. (Citations omitted)
More recently, this Court in The Diocese of Bacolod v. Commission on Elections
explained the purpose of the doctrine: to "ensure that every level of the judiciary performs its
designated roles in an effective and efficient manner." This Court said:
Trial courts do not only determine the facts from the evaluation of the evidence presented
before them. They are likewise competent to determine issues of law which may include
the validity of an ordinance, statute, or even an executive issuance in relation to the
Constitution. To effectively perform these functions, they are territorially organized into
regions and then into branches. Their writs generally reach within those territorial
boundaries. Necessarily, they mostly perform the all-important task of inferring the facts
from the evidence as these are physically presented before them. In many instances, the
facts occur within their territorial jurisdiction, which properly present the 'actual case' that
makes ripe a determination of the constitutionality of such action. The consequences, of
course, would be national in scope. There are, however, some cases where resort to
courts at their level would not be practical considering their decisions could still be
appealed before the higher courts, such as the Court of Appeals.
The Court of Appeals is primarily designated as an appellate court that reviews the
determination of facts and law made by the trial courts. It is collegiate in nature. This
nature ensures more standpoints in the review of the actions of the trial court. But the
Court of Appeals also has original jurisdiction over most special civil actions. Unlike the
trial courts, its writs can have a nationwide scope. It is competent to determine facts and,
ideally, should act on constitutional issues that may not necessarily be novel unless there
are factual questions to determine.
This court, on the other hand, leads the judiciary by breaking new ground or further
reiterating - in the light of new circumstances or in the light of some confusions of bench
or bar - existing precedents. Rather than a court of first instance or as a repetition of the
actions of the Court of Appeals, this court promulgates these doctrinal devices in order
that it truly performs that role. (Citation omitted)
For this Court to take cognizance of original actions, parties must clearly and
specifically allege in their petitions the special and important reasons for such direct
invocation. One such special reason is that the case requires "the proper legal
interpretation of constitutional and statutory provisions." Cases of national interest and of
serious implications, and those of transcendental importance and of first impression have
likewise been resolved by this Court on the first instance.
In exceptional cases, this Court has also overlooked the rule to decide cases that have
been pending for a sufficient period of time. This Court has resolved original actions which
could have been resolved by the lower courts in the interest of speedy justice and
avoidance of delay.
Generally, the rule on hierarchy of courts may be relaxed when "dictated by public
welfare and the advancement of public policy, or demanded by the broader interest of
justice, or the orders complained of were found to be patent nullities, or the appeal was
considered as clearly an inappropriate remedy." For all other cases, the parties must have
exhausted the remedies available before the lower courts. A petition filed in violation of the
doctrine shall be dismissed.
Based on the allegations in the present Petition, this Court finds no special reason for
petitioners to invoke this Court's original jurisdiction.
The alleged "far-reaching consequences" and wide "area of coverage" of Department
Order No. 118-12 and Memorandum Circular No. 2012-001 are not special reasons. With
these justifications, petitioners could have very well filed their Petition before the Court of
Appeals whose writs, as discussed, are likewise nationwide in scope. The issues raised are
not even of first impression.
Petitioners, therefore, failed to respect the hierarchy of courts.
III
Furthermore, the issues raised in this Petition are not justiciable. The Petition presents no
actual case or controversy.
No less than the Constitution in Article VIII, Section 1 requires an actual controversy for the
exercise of judicial power:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether
 or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government. (Underscoring
supplied)
As a rule, "the constitutionality of a statute will be passed on only if, and to the extent
that, it is directly and necessarily involved in a justiciable controversy and is essential to the
protection of the rights of the parties concemed." A controversy is said to be justiciable if:
first, there is an actual case or controversy involving legal rights that are capable of judicial
determination; second, the parties raising the issue must have standing or locus standi to
raise the constitutional issue; third, the constitutionality must be raised at the earliest
opportunity; and fourth, resolving the constitutionality must be essential to the disposition of
the case.
An actual case or controversy is "one which involves a conflict of legal rights, an
assertion of opposite legal claims susceptible of judicial resolution." A case is justiciable if
the issues presented are "definite and concrete, touching on the legal relations of parties
having adverse legal interests." The conflict must be ripe for judicial determination, not
conjectural or anticipatory; otherwise, this Court's decision will amount to an advisory
opinion concerning legislative or executive action. In the classic words
of Angara v. Electoral Commission:
[T]his power of judicial review is limited to actual cases and controversies to be exercised
after full opportunity of argument by the parties, and limited further to the constitutional
question raised or the very lis mota presented. Any attempt at abstraction could only lead
to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.
Narrowed as its function is in this manner, the judiciary does not pass upon questions of
wisdom, justice or expediency of legislation. More than that, courts accord the
presumption of constitutionality to legislative enactments, not only because the legislature
is presumed to abide by the Constitution but also because the judiciary in the
determination of actual cases and controversies must reflect the wisdom and justice of
the people as expressed through their representatives in the executive and legislative
departments of the governments.
Even the expanded jurisdiction of this Court under Article VIII, Section 1 does not
provide license to provide advisory opinions. An advisory opinion is one where the factual
setting is conjectural or hypothetical. In such cases, the conflict will not have sufficient
concreteness or adversariness so as to constrain the discretion of this Court. After all, legal
arguments from concretely lived facts are chosen narrowly by the parties. Those who bring
theoretical cases will have no such limits. They can argue up to the level of absurdity. They
will bind the future parties who may have more motives to choose specific legal arguments.
In other words, for there to be a real conflict between the parties, there must exist actual
facts from which courts can properly determine whether there has been a breach of
constitutional text.
The absence of actual facts caused the dismissal of the petitions in Southern
Hemisphere Engagement Network, Inc. v. Anti-Terrorism Council. In that case, the
petitioners challenged the constitutionality of Republic Act No. 93 72 or the Human Security
Act of 2007 that defines and punishes the crime of terrorism. They contended that since the
enactment of the statute, they had been subjected to "close security surveillance by state
security forces" and branded as "enemies of the State."
In dismissing the petitions, this Court said that there were no "sufficient facts to enable
the Court to intelligently adjudicate the issues." Petitioners' allegations of "sporadic
'surveillance' and ... being tagged as 'communist fronts'" were not enough to substantiate
their claim of grave abuse of discretion on the part of public respondents. Absent actual
facts, this Court said that the Southern Hemisphere petitions operated in the "realm of the
surreal and merely imagined." "Allegations of abuse must be anchored on real events
before courts may step in to settle actual controversies involving rights which are legally
demandable and enforceable."
The petitioners in Republic of the Philippines v. Herminia Harry Roque, et al. likewise
challenged provisions of the Human Security Act, this time, via a petition for declaratory
relief filed before the Regional Trial Court of Quezon City. During the pendency of the case,
this Court decided Southern Hemisphere, where, as just discussed, the challenge against
the constitutionality of the Human Security Act was dismissed. Thus, the Republic filed a
motion to dismiss before the Regional Trial Court, arguing that the declaratory relief case
may no longer proceed.
The Regional Trial Court denied the motion to dismiss on the ground that this Court
in Southern Hemisphere did not pass upon the constitutionality issue. However, this Court,
on certiorari, set aside the Regional Trial Court's order and dismissed the declaratory relief
petitions because they did not properly allege a "state of facts indicating imminent and
inevitable litigation." This Court said:
Pertinently, a justiciable controversy refers to an existing case or controversy that is
appropriate or ripe for judicial determination, not one that is conjectural or merely
anticipatory. Corollary thereto, by "ripening seeds" it is meant, not that sufficient accrued
facts may be dispensed with, but that a dispute may be tried at its inception before it has
accumulated the asperity, distemper, animosity, passion, and violence of a full blown
battle that looms ahead. The concept describes a state of facts indicating imminent and
inevitable litigation provided that the issue is not settled and stabilized by tranquilizing
declaration.
A perusal of private respondents' petition for declaratory relief would show that they have
failed to demonstrate how they are left to sustain or are in immediate danger to sustain
some direct injury as a result of the enforcement of the assailed provisions of RA 9372.
Not far removed from the factual milieu in the Southern Hemisphere cases, private
respondents only assert general interests as citizens, and taxpayers and infractions which
the government could prospectively commit if the enforcement of the said law would
remain untrammelled. As their petition would disclose, private respondents' fear of
prosecution was solely based on remarks of certain government officials which were
addressed to the general public. They, however, failed to show how these remarks tended
towards any prosecutorial or governmental action geared towards the implementation of
RA 9372 against them. In other words, there was no particular, real or imminent threat to
any of them. (Citations omitted, emphasis supplied)
Similar to the petitions in Southern Hemisphere and Roque, the present Petition alleges
no actual facts for this Court to infer the supposed unconstitutionaiity of Department Order
No. 118-12 and Memorandum Circular No. 2012-001.
According to petitioners, implementing Department Order No. 118-12 and
Memorandum Circular No. 2012-001 "may [result] in [the] diminution of the income of ... bus
drivers and conductors." The allegation is obviously based on speculation with the use of
the word "may." There was even no showing of how granting bus drivers' and conductors'
minimum wage and social welfare benefits would result in lower income for them.
 Petitioners likewise claim that the part-fixed-part-performance-based payment scheme
is "unfit to the nature of operation of public transport system or business." This bare
allegation, again, is not supported by facts from which this Court may conclude that the
payment scheme under Department Order No. 118-12 are unfit to the nature of the
businesses of public bus operators. The "time-immemorial" implementation of the boundary
system does not mean that it is the only payment scheme appropriate for the public
transport industry.
There being no actual facts from which this Court could conclude that Department
Order No. 118-12 and Memorandum Circular No. 2012-001 are unconstitutional, this case
presents no actual controversy.
IV
Not only is this Petition not justiciable for failing to present an actual controversy. Petitioners
do not possess the requisite legal standing to file this suit.
Legal standing or locus standi is the "right of appearance in a court of justice on a given
question." To possess legal standing, parties must show "a personal and substantial interest
in the case such that [they have] sustained or will sustain direct injury as a result of the
governmental act that is being challenged." The requirement of direct injury guarantees that
the party who brings suit has such personal stake in the outcome of the controversy and, in
effect, assures "that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions."
The requirements of legal standing and the recently discussed actual case and controversy
are both "built on the principle of separation of powers, sparing as it does unnecessary
interference or invalidation by the judicial branch of the actions rendered by its co-equal
branches of government." In addition, economic reasons justify the rule. Thus:
A lesser but not insignificant reason for screening the standing of persons who desire to
litigate constitutional issues is economic in character. Given the sparseness of our
resources, the capacity of courts to render efficient judicial service to our people is
severely limited. For courts to indiscriminately open their doors to all types of suits and
suitors is for them to unduly overburden their dockets, and ultimately render themselves
ineffective dispensers of justice. To be sure, this is an evil that clearly confronts our
judiciary today.
Standing in private suits requires that actions be prosecuted or defended in the name of
the real party-in-interest, interest being "material interest or an interest in issue to be
affected by the decree or judgment of the case[,] [not just] mere curiosity about the question
involved." Whether a suit is public or private, the parties must have "a present substantial
interest," not a "mere expectancy or a future, contingent, subordinate, or consequential
interest." Those who bring the suit must possess their own right to the relief sought.
Like any rule, the rule on legal standing has exceptions. This Court has taken
cognizance of petitions filed by those who have no personal or substantial interest in the
challenged governmental act but whose petitions nevertheless raise "constitutional issue[s]
of critical significance." This Court summarized the requirements for granting legal standing
to "nontraditional suitors" in Funa v. Villar, thus:
1.) For taxpayers, there must be a claim of illegal disbursement of public funds or that the
tax measure is unconstitutional;
2.) For voters, there must be a showing of obvious interest in the validity of the election
law in question;
3.) For concerned citizens, there must be a showing that the issues raised are of
transcendental importance which must be settled early; and
4.) For legislators, there must be a claim that the official action complained of infringes
their prerogatives as legislators. (Emphasis in the original)
Another exception is the concept of third-party standing. Under this concept, actions
may be brought on behalf of third parties provided the following criteria are met: first, "the
[party bringing suit] must have suffered an 'injury-in-fact,' thus giving him or her a
'sufficiently concrete interest' in the outcome of the issue in dispute"; second, "the party
must have a close relation to the third party"; and third, "there must exist some hindrance to
the third party's ability to protect his or her own interests."
The concept was first introduced in our jurisdiction in White Light Corp. et al. v. City of
Manila, which involved the City of Manila's Ordinance No. 7774 that prohibited "sh01i-time
admission" in hotels, motels, inns, and other similar establishments located in the City. The
Ordinance defined short-time admission as the "admittance and charging of room rate for
less than twelve (12) hours at any given time or the renting out of rooms more than twice a
day or any other term that may be concocted by owners or managers of [hotels and
motels]." The declared purpose of the Ordinance was to protect "the morality of its
constituents in general and the youth in particular."
Hotel and motel operators White Light Corporation, Titanium Corporation, and Sta.
Mesa Tourist and Development Corporation filed a complaint to prevent the implementation
of the Ordinance. The hotel and motel operators argued, among others, that the Ordinance
violated their clients' rights to privacy, freedom of movement, and equal protection of the
laws.
Based on third-party standing, this Court allowed the hotel and motel operators to sue
on behalf of their clients. According to this Court, hotel and motel operators have a close
relation to their customers as they "rely on the patronage of their customers for their
continued viability." Preventing customers from availing of short-time rates would clearly
injure the business interests of hotel and motel operators. As for the requirement of
hindrance, this Court said that "the relative silence in constitutional litigation of such special
interest groups in our nation such as the American Civil Liberties Union in the United States
may also be construed as a hindrance for customers to bring suit."
Associations were likewise allowed to sue on behalf of their members.
In Pharmaceutical and Health Care Association of the Philippines v. Secretary of
Health, the Pharmaceutical and Health Care Association of the Philippines, "representing
its members that are manufacturers of breastmilk substitutes," filed a petition
for certiorari to question the constitutionality of the rules implementing the Milk Code. The
association argued that the provisions of the implementing rules prejudiced the rights of
manufacturers of breastmilk substitutes to advertise their product.
This Court allowed the Pharmaceutical and Health Care Association of the Philippines
to sue on behalf of its members. "[A]n association," this Court said, "has the legal
personality to represent its members because the results of the case will affect their vital
interests." In granting the Phannaceutical and Health Care Association legal standing, this
Court considered the amended articles of incorporation of the association and found that it
was formed "to represent directly or through approved representatives the pharmaceutical Inc. were attached to the petition, thus, proving that the individual members authorized the
and health care industry before the Philippine Government and any of its agencies, the association to sue on their behalf.
medical professions and the general public." Citing Executive Secretary v. Court of
Appeals, this Court declared that "the modem view is that an association has standing to The associations in Pharmaceutical and Health Care Association of the Philippines,
complain of injuries to its members." This Court continued: Holy Spirit Homeowners Association, Inc., and The Executive Secretary were allowed to
[This modem] view fuses the legal identity of an association with that of its members. An sue on behalf of their members because they sufficiently established who their members
association has standing to file suit for its workers despite its lack of direct interest if its were, that their members authorized the associations to sue on their behalf, and that the
members are affected by the action. An organization has standing to assert the concerns members would be directly injured by the challenged governmental acts.
of its constituents.
....
. . . We note that, under its Articles of Incorporation, the respondent was organized . . . to The liberality of this Court to grant standing for associations or corporations whose
act as the representative of any individual, company, entity or association on matters members are those who suffer direct and substantial injury depends on a few factors.
related to the manpower recruitment industry, and to perform other acts and activities
necessary to accomplish the purposes embodied therein. The respondent is, thus, the In all these cases, there must be an actual controversy. Furthermore, there should also
appropriate party to assert the rights of its members, because it and its members are in be a clear and convincing demonstration of special reasons why the truly injured parties
every practical sense identical... The respondent [association] is but the medium through may not be able to sue.
which its individual members seek to make more effective the expression of their voices
and the redress of their grievances.
Alternatively, there must be a similarly clear and convincing demonstration that the
representation of the association is more efficient for the petitioners to bring. They must
In Holy Spirit Homeowners Association, Inc. v. Defensor, the Holy Spirit Homeowners
further show that it is more efficient for this Court to hear only one voice from the
Association, Inc. filed a petition for prohibition, praying that this Court enjoin the National
association. In other words, the association should show special reasons for bringing the
Government Center Administration Committee from enforcing the rules implementing
action themselves rather than as a class suit, allowed when the subject matter of the
Republic Act No. 9207. The statute declared the land occupied by the National Government
controversy is one of common or general interest to many persons. In a class suit, a number
Center in Constitution Hills, Quezon City distributable to bona fide beneficiaries. The
of the members of the class are permitted to sue and to defend for the benefit of all the
association argued that the implementing rules went beyond the provisions of Republic Act
members so long as they are sufficiently numerous and representative of the class to which
No. 9207, unduly limiting the area disposable to the beneficiaries.
they belong.
The National Government Center Administration Committee questioned the legal In some circumstances similar to those in White Light, the third parties represented by
standing of the Holy Spirit Homeowners Association, Inc., contending that the association
the petitioner would have special and legitimate reasons why they may not bring the action
"is not the duly recognized people's organization in the [National Government Center]."
themselves. Understandably, the cost to patrons in the White Light case to bring the action
themselves-i.e., the amount they would pay for the lease of the motels-will be too small
Rejecting the National Government Center Administration Committee's argument, this
compared with the cost of the suit. But viewed in another way, whoever among the patrons
Court declared that the Holy Spirit Homeowners Association, Inc. "ha[ d] the legal standing
files the case even for its transcendental interest endo.ws benefits on a substantial number
to institute the [petition for prohibition] whether or not it is the duly recognized association of
of interested parties without recovering their costs. This is the free rider problem in
homeowners in the [National Government Center]." This Court noted that the individual
economics. It is a negative externality which operates as a disincentive to sue and assert a
members of the association were residents of the National Government Center. Therefore,
transcendental right.
"they are covered and stand to be either benefited or injured by the enforcement of the
[implementing rules], particularly as regards the selection process of beneficiaries and lot
In addition to an actual controversy, special reasons to represent, and disincentives for
allocation to qualified beneficiaries."
the injured party to bring the suit themselves, there must be a showing of the transcendent
nature of the right involved.
In The Executive Secretary v. The Hon. Court of Appeals, cited in the earlier
discussed Pharmaceutical and Health Care Association of the Philippines, the Asian
Only constitutional rights shared by many and requiring a grounded level of urgency
Recruitment Council Philippine Chapter, Inc. filed a petition for declaratory relief for this can be transcendent. For instance, in The Association of Small Landowners in the
Court to declare certain provisions of Republic Act No. 8042 or the Migrant Workers and Philippines, Inc. v. Secretary of Agrarian Reform, 117 the association was allowed to file on
Overseas Filipinos Act of 1995 unconstitutional. The association sued on behalf of its
behalf of its members considering the importance of the issue involved, i.e., the
members who were recruitment agencies.
constitutionality of agrarian reform measures, specifically, of then newly enacted
Comprehensive Agrarian Reform Law.
This Court took cognizance of the associations' petition and said that an association "is
but the medium through which its individual members seek to make more effective the
This Court is not a forum to appeal political and policy choices made by the Executive,
expression of their voices and the redress of their grievances." It noted that the board
Legislative, and other constitutional agencies and organs. This Court dilutes its role in a
resolutions of the individual members of the Asian Recruitment Council Philippine Chapter,
democracy if it is asked to substitute its political wisdom for the wisdom of accountable and
representative bodies where there is no unmistakable democratic deficit. It cannot lose this
place in the constitutional order. Petitioners' invocation of our jurisdiction and the
justiciability of their claims must be presented with rigor. Transcendental interest is not a
talisman to blur the lines of authority drawn by our most fundamental law.
As declared at the outset, petitioners in this case do not have standing to bring this suit.
As associations, they failed to establish who their members are and if these members
allowed them to sue on their behalf. While alleging that they are composed of public utility
bus operators who will be directly injured by the implementation of Department Order No.
118- 12 and Memorandum Circular No. 2012-001, petitioners did not present any proof,
such as board resolutions of their alleged members or their own articles of incorporation
authorizing them to act as their members' representatives in suits involving their members'
individual rights.
Some of the petitioners here are not even persons or entitles authorized by law or by
the Rules allowed to file a suit in court. As intervenor MMDA sufficiently demonstrated,
petitioners Provincial Bus Operators Association of the Philippines, Southern Luzon Bus
Operators Association, Inc., and Inter City Bus Operators Association, Inc. had their
certificates of incorporation revoked by the Securities and Exchange Commission for failure
to submit the required general information sheets and financial statements for the years
1996 to 2003.118 With their certificates of incorporation revoked, petitioners Provincial Bus
Operators Association of the Philippines, Southern Luzon Bus Operators Association, Inc.,
and Inter City Bus Operators Association, Inc. have no corporate existence. They have no
capacity to exercise any corporate power, specifically, the power to sue in their respective
corporate names.
Again, the reasons cited-the "far-reaching consequences" and "wide area of coverage
and extent of effect" of Department Order No. 118-12 and Memorandum Circular No. 2012-
001-are reasons not transcendent considering that most administrative issuances of the
national government are of wide coverage. These reasons are not special reasons for this
Court to brush aside the requirement of legal standing.
Thus far, petitioners have not satisfied any of the following requirements for this Court
to exercise its judicial power. They have not sufficiently demonstrated why this Court should
exercise its original jurisdiction. The issues they raised are not justiciable. Finally, as will be
shown, they failed to demonstrate any breach of constitutional text.
V That no man of what Estate or Condition that he be, shall be put out of land or Tenement,
The protection of private property is the primary function of a constitution. This can be
gleaned in our earliest fundamental law where members of the Malolos Congress declared
their purpose in decreeing the Malolos Constitution: "to secure for [the Filipino people] the
blessings of liberty." It is understood that the rights to enjoy and to dispose of property are
among these blessings considering that several provisions on property are found in the
Constitution. Article 32 of the Malolos Constitution provided that "no Filipino shall establish .
. . institutions restrictive of property rights." Likewise, Article 17 provided that "no one shall
be deprived of his property by expropriation except on grounds of public necessity and
benefit."
At present, the due process clause, the equal protection clause, and the takings clause
of the Constitution serve as protections from the government's taking of property. The non-
impairment clause may likewise be invoked if the property taken is in the nature of a
contract. In any case, all these constitutional limits are subject to the fundamental powers of
the State, specifically, police power. As such, the burden of proving that the taking is
unlawful rests on the party invoking the constitutional right.
Unfortunately for petitioners, they miserably failed to prove why Department Order No.
118-12 and Memorandum Circular No. 2012-001 are unconstitutional.
VI
Article III, Section 1 of the Constitution provides:
ARTICLE III
Bill of Rights
Section 1. No person shall be deprived of life, liberty, or property without due process of
law, nor shall any person be denied the equal protection of the laws.
The values congealed in the fundamental principle prohibiting the deprivation of life,
liberty, and property "without due process of law" may be those derived within our own
cultures even though the current text is but an incarnation from foreign jurisdictions.
For instance, the phrase "due process of law" does not appear in the Malolos
Constitution of 1899. Still, it had similar provisions in Article 32 stating that "no Filipino shall
establish ... institutions restrictive of property rights." Specific to deprivation of property was
Article 17, which stated that "no one shall be deprived of his property by expropriation
except on grounds of public necessity and benefit, previously declared."
Among the "inviolable rules" found in McKinley's Instructions to the Philippine
Commission was "that no person shall be deprived of life, liberty, or property without due
process of law."
As it is now worded, the due process clause has appeared in the Philippine Bill of 1902,
the Jones Law, the 1935 and 1973 Constitutions and, finally, in the 1987 Constitution.
The right to due process was first conceptualized in England, appearing in an English
statute of 1354, with some early scholars claiming that the right to due process is
fundamentally procedural. The statute in which the phrase "due process of law" first
appeared was reportedly enacted to prevent the outlawing of individuals "without their being
summoned to answer for the charges brought against them." The statute, enacted during
Edward the Third's reign, thus provided:
nor taken, nor imprisoned, nor disinherited, nor put to death, without being brought in
answer by due process of law.
Still, other early scholars asserted that the right to due process originally has a
substantive dimension, requiring that any taking of life, liberty, or property be according to
"the law of the land." This is the view of Sir Edward Coke in interpreting chapter 39 of the
Magna Carta on which the due process clause of the United States Constitution is
based. Chapter 39 of the Magna Carta provides:
No free man shall be taken, imprisoned, disseised, outlawed, banished, or in any way
destroyed, nor will We proceed against or prosecute him, except by lawful judgment of
his peers and by the law of the land.
 Currently, this Court reads the due process clause as requiring both procedural and
substantive elements. In the landmark case of Ermita-Malate Hotel and Motel Operators
Association, Inc. v. The Honorable City Mayor of Manila,128 this Court clarified:
There is no controlling and precise definition of due process. It furnishes though a
standard to which governmental action should conform in order that deprivation of life,
liberty or property, in each appropriate case, be valid. What then is the standard of due
process which must exist both as a procedural and as substantive requisite to free the
challenged ordinance, or any government. action for that matter, from the imputation of
legal infirmity; sufficient to spell its doom? It is responsiveness to the supremacy of
reason, obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and
unfairness avoided. To satisfy the due process requirement, official action, to paraphrase
Cardozo, must not outrun the bounds of reasons and result in sheer oppression. Due
process is thus hostile to any official action marred by lack of reasonableness. Correctly
has it been identified as freedom from arbitrariness. It is the embodiment of the sporting
idea of fair play. It exacts fealty "to those strivings for justice" and judges the act of
officialdom of whatever branch "in the light of reason drawn from considerations of
fairness that reflect [democratic] traditions of legal and political thought." It is not a narrow
or "technical conception with fixed content unrelated to time, place and circumstances,"
decisions based on such a clause requiring a "close and perceptive inquiry into
fundamental principles of our society." Questions of due process are not to be treated
narrowly or pedantically in slavery to form or phrases. (Citations omitted)
Despite the debate on the historical meaning of "due process of law," compliance with
both procedural and substantive due process is required in this jurisdiction.
The first aspect of due process-procedural due process-"concerns itself with
government action adhering to the established process when it makes an intrusion into the
private sphere." It requires notice and hearing, and, as further clarified in Medenilla v. Civil
Service Commission:
[I]mplies the right of the person affected thereby to be present before the tribunal which
pronounces judgment upon the question of life, liberty, and property in its most
comprehensive sense; to be heard, by testimony or otherwise, and to have the right of
controverting, by proof, every material fact which bears on the question of the right in the
matter involved.
It is said that due process means "a law which hears before it condemns." The "law" in
the due process clause includes not only statute but also rules issued in the valid exercise
of an administrative agency's quasi-legislative power.
What procedural due process requires depends on the nature of the action. For
instance, judicial proceedings generally require that:
[First,] [t]here must be a court or tribunal clothed with judicial power to hear and determine
the matter before it; [second,] jurisdiction must be lawfully acquired over the person of the
defendant or over the property which is the subject of the proceeding; [third,] the
defendant must be given an opportunity to be heard; and [fourth,] judgment must be
rendered upon lawful hearing.
For "trials and investigations of an administrative character," Ang Tibay v. Court of
Industrial Relations lay down the seven (7) cardinal primary rights, thus:
(1) The first of these rights is the right to a hearing which includes the right of the party
interested or affected to present his own case and submit evidence in support thereof. In
the language of Chief Justice Hughes, in Morgan v. U.S., . . . , "the liberty and property of
the citizen shall be protected by the rudimentary requirements of fair play."
(2) Not only must the party be given an opportunity to present his case and to adduce
evidence tending to establish the rights which he asserts but the tribunal must
consider the evidence presented. . . . In the language of this court in Edwards vs. McCoy,
. . . , "the right to adduce evidence, without the corresponding duty on the part of the board
to consider it, is vain. Such right is conspicuously futile if the person or persons to whom
the evidence is presented can thrust it aside without notice or consideration."
(3) "While the duty to deliberate does not impose the obligation to decide right, it does
imply a necessity which cannot be disregarded, namely, that of having something to
support its decision. A decision with absolutely nothing to support it is a nullity, a place
when directly attached." (Edwards vs. McCoy, supra.) This principle emanates from the
more fundamental principle that the genius of constitutional government is contrary to the
vesting of unlimited power anywhere. Law is both a grant and a limitation upon power.
(4) Not only must there be some evidence to support a finding or conclusion ... , but the
evidence must be "substantial." ... "Substantial evidence is more than a mere scintilla. It
means such relevant evidence as a reasonable mind might accept as adequate to support
a conclusion." . . . The statute provides that 'the rules of evidence prevailing in courts of
law and equity shall not be controlling.' The obvious purpose of this and similar provisions
is to free administrative boards from the compulsion of technical rules so that the mere
admission of matter which would be deemed incompetent in judicial proceedings would
not invalidate the administrative order. ... But this assurance of a desirable flexibility in
administrative procedure does not go so far as to justify orders without a basis in evidence
having rational probative force. Mere uncorroborated hearsay or rumor does not constitute
substantial evidence . . . .
(5) The decision must be rendered on the evidence presented at the hearing, or at least
contained in the record and disclosed to the parties affected ... Only by confining the
administrative tribunal to the evidence disclosed to the parties, can the latter be protected
in their right to know and meet the case against them. It should not, however, detract from
their duty actively to see that the law is enforced, and for that purpose, to use the
authorized legal methods of securing evidence and informing itself of facts material and
relevant to the controversy . . . .
(6) [The tribunal or officer], therefore, must act on its or his own independent consideration
of the law and facts of the controversy, and not simply accept the views of a subordinate
in arriving at a decision . . . .
(7) [The tribunal or officer] should, in all controversial questions, render its decision in such
a manner that the parties to the proceeding can know the various issues involved, and
the reasons for the decisions rendered. The performance of this duty is inseparable from
the authority conferred upon it. (Underscoring supplied; citations omitted)
However, notice and hearing are not required when an administrative agency exercises
its quasi-legislative power. The reason is that in the exercise of quasi-legislative power, the
administrative agency makes no "determination of past events or facts."
The other aspect of due process-substantive due process-requires that laws be
grounded on reason and be free from arbitrariness. The government must have "sufficient
justification for depriving a person of life, liberty, or property." In the words of Justice Felix
Frankfurter, due process is "the embodiment of the sporting idea of fair play."
Essentially, substantive due process is satisfied if the deprivation is done in the
exercise of the police power of the State. Called "the most essential, insistent and
illimitable" of the powers of the State, police power is the "authority to enact legislation that
may interfere with personal liberty or property in order to promote the general welfare." In
the negative, it is the "inherent and plenary power in the State which enables it to prohibit all
that is hurtful to the comfort, safety, and welfare of society." "The reservation of essential
attributes of sovereign power is ... read into contracts as a postulate of the legal order."
 "[P]olice power is lodged primarily in the National Legislature." However, it "may
delegate this power to the President and administrative boards as well as the lawmaking
bodies of municipal corporations or local government units." "Once delegated, the agents
can exercise only such legislative powers as are conferred on them by the [National
Legislature]."
Laws requiring the payment of minimum wage, security of tenure, and traffic safety
have been declared not violative of due process for being valid police power legislations. In
these cases, the test or standard is whether the law is reasonable. The interests of the State
to promote the general welfare, on the one hand, and the right to property, on the other,
must be balanced. As expounded in lchong v. Hernandez:
The conflict, therefore, between police power and the guarantees of due process and
equal protection of the laws is more apparent than real. Properly related, the power and
the guarantees are supposed to coexist. The balancing is the essence or, shall it be said,
the indispensable means for the attainment of legitimate aspirations of any democratic
society. There can be no absolute power, whoever exercise it, for that would be tyranny.
Yet there can neither be absolute liberty, for that would mean license and anarchy. So the
State can deprive persons of life, liberty and property, provided there is due process of
law; and persons may be classified into classes and groups, provided everyone is given
the equal protection of the law. The test or standard, as always, is reason. The police
power legislation must be firmly grounded on public interest and welfare, and a reasonable
relation must exist between purposes and means. And if distinction and classification
ha[ve] been made, there must be a reasonable basis for said distinction.
Given the foregoing, this Court finds that Department Order No. 118-12 and
Memorandum Circular No. 2012-001 are not violative of due process, either procedural or
substantive.
Department Order No. 118-12 and Memorandum Circular No. 2012- 001 were issued in
the exercise of quasi-legislative powers of the DOLE and the LTFRB, respectively. As such,
notice and hearing are not required for their validity.
In any case, it is undisputed that the DOLE created a Technical Working Group that
conducted several meetings and consultations with interested sectors before promulgating
Department Order No. 118-12. Among those invited were bus drivers, conductors, and
operators with whom officials of the DOLE conducted focused group discussions. The
conduct of these discussions more than complied with the requirements of procedural due
process.
Neither are Department Order No. 118-12 and Memorandum Circular No. 2012-001
offensive of substantive due process.
Department Order No. 118-12 and Memorandum Circular No. 2012- 001 are
reasonable and are valid police power issuances. The pressing need for Department Order
No. 118-12 is obvious considering petitioners' admission that the payment schemes prior to
the Order's promulgation consisted of the "payment by results," the "commission basis," or
the boundary system. These payment schemes do not guarantee the payment of minimum
wages to bus drivers and conductors. There is also no mention of payment of social welfare
benefits to bus drivers and conductors under these payment schemes which have allegedly
been in effect since "time immemorial."
There can be no meaningful implementation of Department Order No. 118-12 if
violating it has no consequence. As such, the LTFRB was not unreasonable when it
required bus operators to comply with the part-fixed-part- performance-based payment
scheme under pain of revocation of their certificates of public convenience. The L TFRB has
required applicants or current holders of franchises to comply with labor standards as
regards their employees, and bus operators must be reminded that certificates of public
convenience are not property. Certificates of public convenience are franchises always
subject to amendment, repeal, or cancellation. Additional requirements may be added for
their issuance, and there can be no violation of due process when a franchise is cancelled
for non-compliance with the new requirement.
An equally important reason for the issuance of Department Order No. 118-12 and
Memorandum Circular No. 2012-001 is to ensure "road safety" by eliminating the "risk-
taking behaviors" of bus drivers and conductors. This Court in Hernandez v. Dolor observed
that the boundary system "place[ s] the riding public at the mercy of reckless and
irresponsible drivers-reckless because the measure of their earnings depends largely upon
the number of trips they make and, hence, the speed at which they drive."
Behavioral economics explains this phenomenon. The boundary system puts drivers in
a "scarcity mindset" that creates a tunnel vision where bus drivers are nothing but focused
on meeting the boundary required and will do so by any means possible and regardless of
risks. They stop for passengers even outside of the designated bus stops, impeding traffic
flow. They compete with other bus drivers for more income without regard to speed limits
and bus lanes. Some drivers even take in performance-enhancing drugs and, reportedly,
even illegal drugs such as shabu, just to get additional trips. This scarcity mindset is
eliminated by providing drivers with a fixed income plus variable income based on
performance. The fixed income equalizes the playing field, so to speak, so that competition
and racing among bus drivers are prevented. The variable pay provided in Department
Order No. 118-12 is based on safety parameters, incentivizing prudent driving.
In sum, Department Order No. 118-12 and Memorandum Circular No. 2012-001 are in
the nature of social legislations to enhance the economic status of bus drivers and
conductors, and to promote the general welfare of the riding public. They are reasonable
and are not violative of due process.
VII
Related to due process is the non-impairment clause. The Constitution's Article III, Section
10 provides:
ARTICLE III
Bill of Rights
....
Section 10. No law impairing the obligation of contracts shall be passed.
The non-impairment clause was first incorporated into the United States Constitution
after the American Revolution, an unstable time when worthless money was routinely
issued and the States enacted moratorium laws to extend periods to pay contractual
obligations that further contributed to the lack of confidence to the monetary system during
that time. These practices were prohibited under the clause to limit State interference with
free markets and debtor-creditor relationships.

The clause was first adopted in our jurisdiction through the Philippine Bill of 1902 and,
similar to the due process clause, has consistently appeared in subsequent Constitutions.
Since the non-impairment clause was adopted here, this Court has said that its purpose
is to protect purely private agreements from State interference. This is to "encourage trade
and credit by promoting confidence in the stability of contractual relations."
There are views, however, that the non-impairment clause is obsolete and redundant
because contracts are considered property, and thus, are protected by the due process
clause. On the other hand, studies show why the non-impairment clause should be
maintained. Aside from its traditional purpose of prohibiting State interference in purely
private transactions, the non-impairment clause serves as a guarantee of the separation of
powers between the judicial and legislative branches of the government. The non-
impairment clause serves as a check on the legislature "to act only through generally
applicable laws prescribing rules of conduct that operate prospectively."
This approach, called the institutional regularity approach, was applied in United States
v. Diaz Conde and R. Conde. The accused in the case lent ₱300.00 to two (2) debtors with
5% interest per month, payable within the first 10 days of each and every month. The Usury
Law was subsequently passed in 1916, outlawing the lending of money with usurious
interests.
In 1921, the accused were charged for violating the Usury Law for money lending done
in 1915. The accused were initially convicted but they were subsequently acquitted. This
Court held that the loan contract was valid when it was entered into; thus, to render a
previously valid contract illegal for violating a subsequent law is against the non-impairment
clause. This Court explained:
A law imposing a new penalty, or a new liability or disability, or giving a new right of action,
must not be construed as having a retroactive effect. It is an elementary rule of contract
that the laws in force at the time the contract was made must govern its interpretation and
application. Laws must be construed prospectively and not retrospectively. If a contract is
legal at its inception, it cannot be rendered illegal by any subsequent legislation. If that
were permitted then the obligations of a contract might be impaired, which is prohibited
by the organic law of the Philippine Islands.
It is claimed that the institutional regularity approach "offers the soundest theoretical
basis for reviving the [non-impairment clause] as a meaningful constitutional constraint." It
is consistent with the government's right to regulate itself, but prevents "majoritarian
abuse." With the non-impairment clause, legislature cannot enact "retroactive laws,
selective laws, and laws not supported by a public purpose."
At any rate, so long as the non-impairment clause appears in the Constitution, it may
be invoked to question the constitutionality of State actions.
There is an impairment when, either by statute or any administrative rule issued in the
exercise of the agency's quasi-legislative power, the terms of the contracts are changed
either in the time or mode of the performance of the obligation. There is likewise impairment
when new conditions are imposed or existing conditions are dispensed with.
Not all contracts, however, are protected under the non-impairment clause. Contracts
whose subject matters are so related to the public welfare are subject to the police power of
the State and, therefore, some of its terms may be changed or the whole contract even set
aside without offending the Constitution; otherwise, "important and valuable reforms may be
precluded by the simple device of entering into contracts for the purpose of doing that which
otherwise may be prohibited."
Likewise, contracts which relate to rights not considered property, such as a franchise
or permit, are also not protected by the non-impairment clause. The reason is that the public
right or franchise is always subject to amendment or repeal by the State, the grant being a
mere privilege. In other words, there can be no vested right in the continued grant of a
franchise. Additional conditions for the grant of the franchise may be made and the grantee
cannot claim impairment.
Similar to the right to due process, the right to non-impairment yields to the police
power of the State.
In Anucension v. National Labor Union, Hacienda Luisita and the exclusive bargaining
agent of its agricultural workers, National Labor Union, entered into a collective bargaining
agreement. The agreement had a union security clause that required membership in the
union as a condition for employment. Republic Act No. 3350 was then subsequently
enacted in 1961, exempting workers who were members of religious sects which prohibit
affiliation of their members with any labor organization from the operation of union security
clauses.
On the claim that Republic Act No. 3350 violated the obligation of contract, specifically,
of the union security clause found in the collective bargaining agreement, this Court
conceded that "there was indeed an impairment of [the] union security
clause." Nevertheless, this Court noted that the "prohibition to impair the obligation of
contracts is not absolute and unqualified" and that "the policy of protecting contracts
against impairment presupposes the maintenance of a government by virtue of which
contractual relations are worthwhile - a government which retains adequate authority to
secure the peace and good order of society." A statute passed to protect labor is a
"legitimate exercise of police power, although it incidentally destroys existing contract
rights." "[C]ontracts regulating relations between capital and labor ... are not merely
contractual, and said labor contracts ... [are] impressed with public interest, [and] must yield
to the common good."
This Court found the purpose behind Republic Act No. 3350 legitimate. Republic Act
No. 3350 protected labor by "preventing discrimination against those members of religious
sects which prohibit their members from joining labor unions, confirming thereby their
natural, statutory and constitutional right to work, the fruits of which work are usually the
only means whereby they can maintain their own life and the life of their dependents." This
Court, therefore, upheld the constitutionality of Republic Act No. 3350.
Laws regulating public utilities are likewise police power legislations. In Pangasinan
Transportation Co., Inc. v. The Public Service Commission, Pangasinan Transportation
Co., Inc. (Pangasinan Transportation) filed an application with the Public Service
Commission to operate 10 additional buses for transporting passengers in Pangasinan and
Tarlac. The Public Service Commission granted the application on the condition that the
authority shall only be for 25 years.
When the Public Service Commission denied Pangasinan Transportation's motion for
reconsideration with respect to the imposition of the 25-year validity period, the bus
company filed a petition for certiorari before this Court. It claimed that it acquired its
certificates of public convenience to operate public utility buses when the Public Service Act
did not provide for a definite period of validity of a certificate of public convenience. Thus,
Pangasinan Transportation claimed that it "must be deemed to have the right [to hold its
certificates of public convenience] in perpetuity."
Rejecting Pangasinan Transportation's argument, this Court declared that certificates of
public convenience are granted subject to amendment, alteration, or repeal by Congress.
Statutes enacted for the regulation of public utilities, such as the Public Service Act, are
police power legislations "applicable not only to those public utilities coming into existence
after [their] passage, but likewise to those already established and in operation."
Here, petitioners claim that Department Order No. 118-12 and Memorandum Circular
No. 2012-001 violate bus operators' right to non-impairment of obligation of contracts
because these issuances force them to abandon their "time-honored" employment contracts
or arrangements with their drivers and conductors. Further, these issuances violate the
terms of the franchise of bus operators by imposing additional requirements after the
franchise has been validly issued.
Petitioners' arguments deserve scant consideration. For one, the relations between
capital and labor are not merely contractual as provided in Article 1700 of the Civil
Code. By statutory declaration, labor contracts are impressed with public interest and,
therefore, must yield to the common good. Labor contracts are subject to special laws on
wages, working conditions, hours of labor, and similar subjects. In other words, labor
contracts are subject to the police power of the State.
As previously discussed on the part on due process, Department Order No. 118-12 was
issued to grant bus drivers and conductors minimum wages and social welfare benefits.
Further, petitioners repeatedly admitted that in paying their bus drivers and conductors, they
employ the boundary system or commission basis, payment schemes which cause drivers
to drive recklessly. Not only does Department Order No. 118-12 aim to uplift the economic
status of bus drivers and conductors; it also promotes road and traffic safety.
Further, certificates of public convenience granted to bus operators are subject to
amendment. When certificates of public convenience were granted in 2012, Memorandum
Circular No. 2011-004 on the "Revised Terms and Conditions of [Certificates of Public
Convenience] and Providing Penalties for Violations Thereof' was already in place. This
Memorandum Circular, issued before Memorandum Circular No. 2012-001, already required
public utility vehicle operators to comply with labor and social legislations. Franchise holders
cannot object to the reiteration made in Memorandum Circular No. 2012-001.
All told, there is no violation of the non-impairment clause.
VIII
The equal protection clause was first incorporated in the United States Constitution
through the Fourteenth Amendment, mainly to protect the slaves liberated after the Civil
War from racially discriminatory state laws. This was in 1868. When the Philippines was
ceded by Spain to the United States in 1898, provisions of the United States Constitution
were held not to have been automatically applicable here, except those "parts [falling] within
the general principles of fundamental limitations in favor of personal rights formulated in the
Constitution and its amendments." It is said that the equal protection clause, "[b]eing one
such limitation in favor of personal rights enshrined in the Fourteenth Amendment," was
deemed extended in this jurisdiction upon our cession to the United States. The text of the
equal protection clause first appeared in the Philippine Bill of 1902 and has since appeared
in our subsequent Constitutions.
"Equal protection of the laws" requires that "all persons ... be treated alike, under like
circumstances and conditionsboth as to privileges conferred and liabilities enforced." "The
purpose of the equal protection clause is to secure every person within a state's jurisdiction
against intentional and arbitrary discrimination, whether occasioned by the express terms of
a statute or by its improper execution through the state's duly constituted authorities."
However, the clause does not prevent the legislature from enacting laws making valid
classifications. Classification is "the grouping of persons or things similar to each other in
certain particulars and different from all others in these same particulars." To be valid, the
classification must be: first, based on "substantial distinctions which make real
differences"; second, it must be "germane to the purposes of the law"; third, it must "not be
limited to existing conditions only"; and fourth, it must apply to each member of the class.
In Ichong v. Hernandez, the constitutionality of Republic Act No. 1180 was assailed for
alleged violation of the equal protection clause. The law prohibited aliens from engaging in
retail business in the Philippines. This Court sustained the classification by citizenship
created by Republic Act No. 1180. This Court observed how our economy primarily relied
on retailers to distribute goods to consumers; thus, the legislature saw it fit to limit the
conduct of retail business to Filipinos to protect the country's economic freedom. This Court
said:
Broadly speaking, the power of the legislature to make distinctions and classifications
among persons is not curtailed or denied by the equal protection of the laws clause. The
legislative power admits of a wide scope of discretion, and a law can be violative of the
constitutional limitation only when the classification is without reasonable basis. In
addition to the authorities we have earlier cited, we can also refer to the case of
Lindsley vs. Natural Carbonic Gas Co. (1911), 55 L. ed., 369, which clearly and succinctly
defined the application of equal protection clause to a law sought to be voided as contrary
thereto:
" ... '1. The equal protection clause of the Fourteenth Amendment does not take from the
state the power to classify in the adoption of police laws, but admits of the exercise of the
wide scope of discretion in that regard, and avoids what is done only when it is without
any reasonable basis, and therefore is purely arbitrary. 2. A classification having some
reasonable basis does not offend against that clause merely because it is not made with
mathematical nicety, or because in practice it results in some inequality. 3. When the
classification in such a law is called in question, if any state of facts reasonably can be
conceived that would sustain it, the existence of that state of facts at the time the law was
enacted must be assumed. 4. One who assails the classification in such a law must carry
the burden of showing that it does not rest upon any reasonable basis, but is essentially
arbitrary.'"
The petitioners in Basco v. Philippine Amusement and Gaming Corporation claimed that
Presidential Decree No. 1869, the charter of the Philippine Amusement and Gaming
Corporation, was violative of the equal protection guarantee because it only allowed
gambling activities conducted by the Philippine Amusement and Gaming Corporation but
outlawed the other forms. This Court upheld the constitutionality of Presidential Decree No.
1869 mainly because "[t]he [equal protection] clause does not preclude classification of
individuals who may be accorded different treatment under the law as long as the
classification is not unreasonable or arbitrary."

In the recent case of Garcia v. Drilon, this Court rejected the argument that Republic Act No.
9262 or the Anti-Violence Against Women and Children violated the equal protection
guarantee. According to this Court, the "unequal power relationship between women and
men; the fact that women are more likely than men to be victims of violence; and the
widespread gender bias and prejudice against women" justify the enactment of a law that
specifically punishes violence against women.

In the present case, petitioners' sole claim on their equal protection argument is that the
initial implementation of Department Order No. 118-12 in Metro Manila "is not only
discriminatory but is also prejudicial to petitioners." However, petitioners did not even bother
explaining how exactly Department Order No. 118-12 infringed on their right to equal
protection.

At any rate, the initial implementation of Department Order No. 118- 12 is not violative of the
equal protection clause. In Taxicab Operators of Metro Manila, Inc. v. The Board of
Transportation, this Court upheld the initial implementation of the phase-out of old taxicab
units in Metro Manila because of the "heavier traffic pressure and more constant use" of the
roads. The difference in the traffic conditions in Metro Manila and in other parts of the
country presented a substantial distinction.

The same substantial distinction can be inferred here. Department Order No. 118-12 has also
been implemented in other parts of the country. Petitioners' weak argument is now not only
moot. It also deserves no merit.

IX
In constitutional litigation, this Court presumes that official acts of the other branches of
government are constitutional. This Court proceeds on the theory that "before the act was
done or the law was enacted, earnest studies were made by Congress or the President, or
both, to insure that the Constitution would not be breached." Absent a clear showing of
breach of constitutional text, the validity of the law or action shall be sustained.
WHEREFORE, the Petition is DISMISSED.
SO ORDERED.
 G.R. No. 212003, February 28, 2018
PHILIPPINE SPAN ASIA CARRIERS CORPORATION (FORMERLY SULPICIO LINES,
INC.), petitioner, vs. HEIDI PELAYO, respondent.
DECISION
LEONEN, J.:
"Not every inconvenience, disruption, difficulty, or disadvantage that an employee must
endure sustains a finding of constructive dismissal." It is an employer's right to investigate
acts of wrongdoing by employees. Employees involved in such investigations cannot ipso
facto claim that employers are out to get them. Their involvement in investigations will
naturally entail some inconvenience, stress, and difficulty. However, even if they might be
burdened - and, in some cases, rather heavily so - it does not necessarily mean that an
employer has embarked on their constructive dismissal.
This resolves a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure praying that the assailed Court of Appeals July 4, 2013 Decision and
February 12, 2014 Resolution in CA-G.R. SP No. 04622 be reversed and set aside.
The assailed Court of Appeals July 4, 2013 Decision found grave abuse of discretion
on the part of the National Labor Relations Commission in issuing its May 27, 2011
Decision and August 31, 2011 Decision holding that respondent Heidi Pelayo (Pelayo) was
not constructively dismissed. The assailed Court of Appeals February 12, 2014 Resolution
denied the Motion for Reconsideration of petitioner Philippine Span Asia Carriers
Corporation, then Sulpicio Lines, Inc. (Sulpicio Lines).
Pelayo was employed by Sulpicio Lines as an accounting clerk at its Davao City branch
office. As accounting clerk, her main duties were "to receive statements and billings for
processing of payments, prepare vouchers and checks for the approval and signature of the
branch manager, and release checks for payment."
Sulpicio Lines uncovered several anomalous transactions in its Davao City branch
office. Most notably, a check issued to a certain "J. Josol" had been altered from its original
amount of P20,804.58 to P820,804.58. The signatories to the check were branch manager
Tirso Tan (Tan) and cashier Fely Sobiaco (Sobiaco).
There were also apparent double disbursements. In the first double disbursement, two
(2) checks amounting to P5,312.15 each were issued for a single P5,312.15 transaction
with Davao United Educational Supplies. This transaction was covered by official receipt no.
16527, in the amount of P5,312.15 and dated January 12, 2008. The first check, Philippine
Trust Company (PhilTrust Bank) check no. 2043921, was issued on December 15, 2007.
This was covered by voucher no. 227275. The second check, PhilTrust Bank check no.
2044116, was issued on January 19, 2008 and was covered by voucher no. 227909.
There was another double disbursement for a single transaction. Two (2) checks for
P20,804.58 each in favor of Everstrong Enterprises were covered by official receipt no.
5129, dated January 25, 2008. The first check, PhilTrust Bank check no. 2044156, was
dated January 26, 2008 and covered by voucher no. 228034. The second check, PhilTrust
Bank check no. 2044244, was dated February 9, 2008 and covered by voucher no. 228296.
Another apparent anomaly was a discrepancy in the amounts reflected in what should
have been a voucher and a check corresponding to each other and covering the same
transaction with ARR Vulcanizing. Voucher no. 232550 dated October 30, 2008 indicated
only P17,052.00, but the amount disbursed through check no. 2051313 amounted to
P29,306.00.
Sulpicio Lines' Cebu-based management team went to Davao to investigate from
March 3 to 5, 2010. Pelayo was interviewed by members of the management team as "she
was the one who personally prepared the cash vouchers and checks for approval by Tan
and Sobiaco."
The management team was unable to complete its investigation by March 5, 2010.
Thus, a follow-up investigation had to be conducted. On March 8, 2010, Pelayo was asked
to come to Sulpicio Lines' Cebu main office for another interview. Sulpicio Lines shouldered
all the expenses arising from Pelayo's trip.
In the midst of a panel interview, Pelayo walked out. She later claimed that she was
being coerced to admit complicity with Tan and Sobiaco. Pelayo then returned to Davao
City, where she was admitted to a hospital "because of depression and a nervous
breakdown." She eventually filed for leave of absence and ultimately stopped reporting for
work.
Following an initial phone call asking her to return to Cebu, Sulpicio Lines served on
Pelayo a memorandum dated March 15, 2010, requiring her to submit a written explanation
concerning "double disbursements, payments of ghost purchases and issuances of checks
with amounts bigger than what [were] stated in the vouchers." Sulpicio Lines also placed
Pelayo on preventive suspension for 30 days. It stated:
Among your duties is to receive statements and billings for processing of payments,
prepare vouchers and checks for the signature of the approving authority. In the
preparation of the vouchers and the checks, you also are required to check and to make
sure that the supporting documents are in order. Thus, the double payments and other
payments could not have been perpetra[t]ed without your cooperation and/or neglect of
duty/gross negligence.
You are hereby required to submit within three (3) days from receipt of this letter a written
explanation why no disciplinary action [should] be imposed against you for dishonesty
and/or neglect of duty or gross negligence.
Sulpicio Lines also sought the assistance of the National Bureau of Investigation, which
asked Pelayo to appear before it on March 19, 2010.
Instead of responding to Sulpicio Lines' memorandum or appearing before the National
Bureau of Investigation, Pelayo filed a Complaint against Sulpicio Lines charging it with
constructive dismissal.
Sulpicio Lines denied liability asserting that Pelayo was merely asked to come to Cebu
"to shed light on the discovered anomalies" and was "only asked to cooperate in
prosecuting Tan and Sobiaco." It also decried Pelayo's seeming attempt at "distanc[ing]
herself from the ongoing investigation of financial anomalies discovered."
 In her September 17, 2010 Decision, Labor Arbiter Merceditas C. Larida (Labor Arbiter
Larida) held that Sulpicio Lines constructively dismissed Pelayo. She faulted Sulpicio Lines
for harassing Pelayo when her participation in the uncovered anomalies was "far-
fetched." Labor Arbiter Larida relied mainly on the affidavit of Alex Te (Te), an employee of
Sulpicio Lines assigned at the Accounting Department of its Cebu City main office. Te's
affidavit was attached to the Secretary's Certificate, attesting to Sulpicio Lines' Board
Resolution authorizing Te to act in its behalf in prosecuting Tan and Sobiaco. This affidavit
detailed the duties of Tan and Sobiaco, as branch manager and cashier, respectively, and
laid out the bases for their prosecution. Labor Arbiter Larida noted that the affidavit's silence
on how Pelayo could have been involved demonstrated that it was unjust to suspect her of
wrongdoing.
In its May 27, 2011 Decision, the National Labor Relations Commission reversed Labor
Arbiter Larida's Decision. It explained that the matter of disciplining employees was a
management prerogative and that complainant's involvement in the investigation did not
necessarily amount to harassment. The dispositive portion of this Decision read:
WHEREFORE, foregoing premises considered, the appeal is GRANTED and the
appealed decision is SET ASIDE and VACATED. In lieu thereof, a new judgment is
rendered DISMISSING the above-entitled case for lack of merit.
SO ORDERED.
In its assailed July 4, 2013 Decision, the Court of Appeals found grave abuse of
discretion on the part of the National Labor Relations Commission in reversing Labor Arbiter
Larida's Decision.
Following the denial of its Motion for Reconsideration, Sulpicio Lines filed the present
Petition.
For resolution is the issue of whether or not the Court of Appeals erred in finding grave
abuse of discretion on the part of the National Labor Relations Commission in ruling that
respondent Heidi Pelayo's involvement in the investigation conducted by petitioner did not
amount to constructive dismissal.
The Court of Appeals must be reversed.
An employer who conducts investigations following the discovery of misdeeds by its
employees is not being abusive when it seeks information from an employee involved in the
workflow which occasioned the misdeed. Basic diligence impels an employer to cover all
bases and inquire from employees who, by their inclusion in that workflow, may have
participated in the misdeed or may have information that can lead to the perpetrator's
identification and the employer's adoption of appropriate responsive measures. An
employee's involvement in such an investigation will naturally entail difficulty. This difficulty
does not mean that the employer is creating an inhospitable employment atmosphere so as
to ease out the employee involved in the investigation.
I (1) The first written notice to be served on the employees should contain the specific causes or
While adopted with a view "to give maximum aid and protection to labor," labor laws are
not to be applied in a manner that undermines valid exercise of management prerogative.
Indeed, basic is the recognition that even as our laws on labor and social justice impel a
"preferential view in favor of labor,"
[e]xcept as limited by special laws, an employer is free to regulate, according to
his own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of work. (Emphasis supplied).
The validity of management prerogative in the discipline of employees was sustained
by this Court in Philippine Airlines v. National Labor Relations Commission, "In general,
management has the prerogative to discipline its employees and to impose appropriate
penalties on erring workers pursuant to company rules and regulations."
The rationale for this was explained in Rural Bank of Cantilan, Inc. v. Julve:
While the law imposes many obligations upon the employer, nonetheless, it also protects
the employer's right to expect from its employees not only good performance, adequate
work, and diligence, but also good conduct and loyalty. In fact, the Labor Code does not
excuse employees from complying with valid company policies and reasonable
regulations for their governance and guidance.
Accordingly, in San Miguel Corporation v. National Labor Relations Commission:
An employer has the prerogative to prescribe reasonable rules and regulations necessary
for the proper conduct of its business, to provide certain disciplinary measures in order to
implement said rules and to assure that the same would be complied with. An employer
enjoys a wide latitude of discretion in the promulgation of policies, rules and regulations
on work-related activities of the employees.
It is axiomatic that appropriate disciplinary sanction is within the purview of management
imposition. Thus, in the implementation of its rules and policies, the employer has the
choice to do so strictly or not, since this is inherent in its right to control and manage its
business effectively.
II
Disciplining employees does not only entail the demarcation of permissible and
impermissible conduct through company rules and regulations, and the imposition of
appropriate sanctions. It also involves intervening mechanisms "to assure that [employers'
rules] would be complied with." These mechanisms include the conduct of investigations to
address employee wrongdoing.
While due process, both substantive and procedural, is imperative in the discipline of
employees, our laws do not go so far as to mandate the minutiae of how employers must
actually investigate employees' wrongdoings. Employers are free to adopt different
mechanisms such as interviews, written statements, or probes by specially designated
panels of officers.
In the case of termination of employment for offenses and misdeeds by employees, i.e.,
for just causes under Article 282 of the Labor Code, employers are required to adhere to the
so-called "two-notice rule." King of Kings Transport v. Mamac outlined what "should be
considered in terminating the services of employees":
grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice
 to give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing
or conference, the employees are given the chance to defend themselves personally, with
the assistance of a representative or counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment. (Citation omitted)
The two-notice rule applies at that stage when an employer has previously determined
that there are probable grounds for dismissing a specific employee. The first notice implies
that the employer already has a cause for termination. The employee then responds to the
cause against him or her. The two-notice rule does not apply to anterior, preparatory
investigations precipitated by the initial discovery of wrongdoing. At this stage, an employer
has yet to identify a specific employee as a suspect. These preparatory investigations
logically lead to disciplinary proceedings against the specific employee suspected of
wrongdoing, but are not yet part of the actual disciplinary proceedings against that erring
employee. While the Labor Code specifically prescribes the two-notice rule as the manner
by which an employer must proceed against an employee specifically charged with
wrongdoing, it leaves to the employer's discretion the manner by which it shall proceed in
initially investigating offenses that have been uncovered, and whose probable perpetrators
have yet to be pinpointed.
Thus, subject to the limits of ethical and lawful conduct, an employer is free to adopt
any means for conducting these investigations. They can, for example, obtain information
from the entire roster of employees involved in a given workflow. They can also enlist the
aid of public and private investigators and law enforcers, especially when the uncovered
iniquity amounts to a criminal offense just as much as it violates company policies.
When employee wrongdoing has been uncovered, employers are equally free to adopt
contingency measures; lest they, their clients, and other employees suffer from exigencies
otherwise left unaddressed. These measures may be enforced as soon as an employee's
wrongdoing is uncovered, may extend until such time that disciplinary proceedings are
commenced and terminated, and in certain instances, even made permanent. Employers
can rework processes, reshuffle assignments, enforce stopgap measures, and put in place
safety checks like additional approvals from superiors. In Mandapat v. Add Force Personnel
Services, Inc., this Court upheld the temporary withholding of facilities and privileges as an
incident to an ongoing investigation. Thus, this Court found no fault in the disconnection of
an employee's computer and the suspension of her internet access privilege. Employers
can also place employees under preventive suspension, not as a penalty in itself, but as an
intervening means to enable unhampered investigation and to foreclose "a serious and
imminent threat to the life or property of the employer or of the employee's co-
workers." As Artificio v. National Labor Relations Commission illustrated:
In this case, Artificio's preventive suspension was justified since he was employed as a
security guard tasked precisely to safeguard respondents' client. His continued presence
in respondents' or its client's premises poses a serious threat to respondents, its
employees and client in light of the serious allegation of conduct unbecoming a security
guard such as abandonment of post during night shift duty, light threats and irregularities
in the observance of proper relieving time.
Besides, as the employer, respondent 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.
This Court has upheld a company's management prerogatives so long as they are
exercised in good faith for the advancement of the employer's interest and not for the
purpose of defeating or circumventing the rights of the employees under special laws or
under valid agreements.
III
The standards for ascertaining constructive dismissal are settled:
There is constructive dismissal when an employer's act of clear discrimination,
insensibility or disdain becomes so unbearable on the part of the employee so as to
foreclose any choice on his part except to resign from such employment. It exists where
there is involuntary resignation because of the harsh, hostile and unfavorable conditions
set by the employer. We have held that the standard for constructive dismissal is "whether
a reasonable person in the employee's position would have felt compelled to give up his
employment under the circumstances."
This Court has, however, been careful to qualify that "[n]ot every inconvenience,
disruption, difficulty, or disadvantage that an employee must endure sustains a finding of
constructive dismissal." In a case where the employee decried her employers' harsh words
as supposedly making for a work environment so inhospitable that she was compelled to
resign, this Court explained:
The unreasonably harsh conditions that compel resignation on the part of an employee
must be way beyond the occasional discomforts brought about by the misunderstandings
between the employer and employee. Strong words may sometimes be exchanged as the
employer describes her expectations or as the employee narrates the conditions of her
work environment and the obstacles she encounters as she accomplishes her assigned
tasks. As in every human relationship, there are bound to be disagreements.
However, when these strong words from the employer happen without palpable reason
or are expressed only for the purpose of degrading the dignity of the employee, then a
hostile work environment will be created. In a sense, the doctrine of constructive dismissal
has been a consistent vehicle by this Court to assert the dignity of labor.
Resolving allegations of constructive dismissal is not a one-sided affair impelled by
romanticized sentiment for a preconceived underdog. Rather, it is a question of justice that
"hinges on whether, given the circumstances, the employer acted fairly in exercising a
prerogative." It involves the weighing of evidence and a consideration of the "totality of
circumstances."
IV
 This Court fails to see how the petitioner's investigation amounted to respondent's
constructive dismissal.
The assailed Court of Appeals July 4, 2013 Decision devoted all of three (3)
paragraphs in explaining why respondent was constructively dismissed. It anchored its
conclusion on how "petitioner was made to admit the commission of the crime," and on how
"[respondent] was compelled to give up her employment due to [petitioner's] unfounded,
unreasonable and improper accusations, which made her employment unbearable."
The Court of Appeals was in serious error.
The most basic flaw in the Court of Appeals' reasoning is its naive credulity. It did not
segregate verified facts from impressions and bare allegations. It was quick to lend
credence to respondent's version of events and her bare claim that she "was made to admit
the commission of the crime."
As it stands, all that have been ascertained are that: first, petitioner discovered
anomalies in its Davao branch; second, members of its management team went to Davao to
investigate ; third, the investigation involved respondent considering that, as accounting
clerk, her main duties were "to receive statements and billings for processing of payments,
prepare vouchers and checks for the approval and signature of the Branch Manager, and
release the checks for cash payment"; fourth, the investigation in Davao could not be
completed for lack of time; fifth, respondent was made to come to petitioner's Cebu main
office - all expense paid - for the continuation of the investigation; sixth, in Cebu, respondent
was again interviewed; seventh, respondent walked out in the midst of this interview.
There is no objective proof demonstrating how the interview in Cebu actually
proceeded. Other than respondent's bare allegation, there is nothing to support the claim
that her interviewers were hostile, distrusting, and censorious, or that the interview was a
mere pretext to pin her down. Respondent's recollection is riddled with impressions,
unsupported by independently verifiable facts. These impressions are subjective products of
nuanced perception, personal interpretation, and ingrained belief that cannot be appreciated
as evidencing "the truth respecting a matter of fact.”
Respondent's subsequent hospitalization does not prove harassment or coercion to
make an admission either. The mere fact of its occurrence is not an attestation that
respondent's interview proceeded in the manner that she claimed it did. While it proves that
she was stressed, it does not prove that she was stressed specifically because she was
cornered into admitting wrongdoing.
Human nature dictates that involvement in investigations for wrongdoing, even if one is
not the identified suspect, will entail discomfort and difficulty. Indeed, stress is merely the
"response to physical or psychological demands on a person." Even positive stimuli can
become stressors. Stress, challenge, and adversity are the natural state of things when a
problematic incident is revealed and begs to be addressed. They do not mean that an
employer is bent on inflicting suffering on an employee.
Different individuals react to stress differently "and some people react to stress by
getting sick." Stress is as much a matter of psychological perception as it is of physiological
reaction. Respondent's confinement at a hospital proves that, indeed, she was stressed at
such a degree that it manifested physically. It may also be correlated with the stressors that
respondent previously encountered. Among these stressors was her interview. One can
then reasonably say that respondent's interview may have been difficult for her. However,
any analysis of causation and correlation can only go as far as this. The evidence does not
lead to an inescapable conclusion that respondent's confinement was solely and exclusively
because of how respondent claims her interviewers incriminated her.
The discomfort of having to come to the investigation's venue, the strain of recalling
and testifying on matters that transpired months prior, the frustration that she was being
dragged into the wrongdoing of other employees—if indeed she was completely innocent—
or the trepidation that a reckoning was forthcoming—if indeed she was guilty—and many
other worries doubtlessly weighed on respondent. Yet, these are normal burdens cast upon
her plainly on account of having to cooperate in the investigation. They themselves do not
translate to petitioner's malice. Respondent's physical response may have been acute, but
this, by itself, can only speak of her temperament and physiology. It would be fallacious to
view this physical response as proof of what her interviewers actually told her or did to her.
Indeed, it was possible that respondent was harassed. But possibility is not proof.
Judicial and quasi-judicial proceedings demand proof. Respondent's narrative is rich with
melodramatic undertones of how she suffered a nervous breakdown, but is short of prudent,
verifiable proof. In the absence of proof, it would be a miscarriage of justice to sustain a
party-litigant's allegation.
What is certain is that there were several anomalies in petitioner's Davao branch. It
made sense for petitioner to investigate these anomalies. It also made sense for respondent
to be involved in the investigation.
Contrary to Labor Arbiter Larida's conclusion, respondent's connection with the
uncovered anomalies was not "far-fetched."[75] The anomalies related to discrepancies
between vouchers and checks, multiple releases of checks backed by as many vouchers
(even if there had only been one transaction), and a check altered to indicate a larger
amount, thereby enabling a larger disbursement. Certainly, it made sense to involve in the
investigation the accounting clerk whose main duty was to "prepare vouchers and checks
for the approval and signature of the Branch Manager, and release the checks for cash
payment."
Labor Arbiter Larida's reliance on Te's affidavit is misplaced. That affidavit was
prepared to facilitate the criminal prosecution of Tan, the branch manager, and Sobiaco, the
cashier. It naturally emphasized Tan's and Sobiaco's functions, and related these to the
uncovered anomalies. It would have been absurd to make respondent a focal point as she
was extraneous to the criminal suit against Tan and Sobiaco. The affidavit was reticent
about respondent because it did not have to discuss her.
If at all, Te's affidavit even militates against respondent's claim that petitioner was out to
get her. For if petitioner was indeed bent on pinning her down, it was foolhardy for it to
concentrate its attempts at criminal prosecution on Tan and Sobiaco.
Respondent cannot point to petitioner's referral to the National Bureau of Investigation
as proof of petitioner's malevolence. In the first place, petitioner was free to refer the
commission of crimes to the National Bureau of Investigation. Republic Act No. 157, which
was in effect until the National Bureau of Investigation's functions were calibrated in 2016 by WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed July 4,
Republic Act No. 10867, enabled the National Bureau of Investigation "[t]o render 2013 Decision and February 12, 2014 Resolution of the Court of Appeals in CA-G.R. SP
assistance, whenever properly requested in the investigation or detection of crimes and No. 04622 are REVERSED and SET ASIDE. The National Labor Relations Commission
other offenses." Moreover, petitioner's efforts show that it opted to avail of legitimate, official May 27, 2011 and August 31, 2011 Decisions in NLRC No. MAC-01-011835-2011 (RAB-XI-
channels for conducting investigations. Petitioner's actions demonstrate that rather than 03-00352-2010) are REINSTATED.
insisting on its own position and proceeding with undue haste, it was submitting to the SO ORDERED.
wisdom of an independent, official investigator and was willing to await the outcome of an
official process. While this could have also led to criminal prosecution, it still negates
malicious fixation. Indeed, if petitioner's focus was to subvert respondent, it could have just
lumped her with Tan and Sobiaco. This would have even been to petitioner's advantage as
joining all defendants in a single case would have been more efficient and economical.

In any case, for the very reason of her main functions as accounting clerk, it made
sense to view respondent with a degree of suspicion. It was only logical for petitioner to
inquire into how multiple vouchers and checks could have passed the scrutiny of the officer
tasked to prepare them. It was not capricious for petitioner to ponder if its accounting clerk
acted negligently or had allowed herself to be used, if not acted with deliberate intent to
defraud.

Even if petitioner were to completely distance itself from judicious misgivings against
respondent, elect to not treat her as a suspect, and restrict itself to Tan's and Sobiaco's
complicity, it was still reasonable for it to involve respondent in its investigation. Given her
direct interactions with Tan and Sobiaco and her role in the workflow for payments and
disbursements, it was wise, if not imperative, to invoke respondent as a witness.

In prior jurisprudence, this Court has been so frank as to view an employee's

preemption of investigation as a badge of guilt. In Mandapat v. Add Force Personnel
Services, Inc., this Court quoted with approval the following findings of the Court of Appeals:
Unfortunately, however, before the investigation could proceed to the second step of the
termination process into a hearing or conference, Mandapat chose to resign from her job.
Mandapat's bare allegation that she was coerced into resigning can hardly be given
credence in the absence of clear evidence proving the same. No doubt, Mandapat read
the writing on the wall, knew that she would be fired for her transgressions, and beat the
company to it by resigning. Indeed, by the disrespectful tenor of her memorandum,
Mandapat practically indicated that she was no longer interested in continuing cordial
relations, much less gainful employment with Add Force. (Citation omitted)

This Court will not be so intrepid in this case as to surmise that respondent was truly
complicit in the uncovered anomalies and that termination of employment for just cause was
a foregone conclusion which she was merely trying to evade by ceasing to report to work.
Still, fairness dictates that this Court decline to condone her acts in preempting and refusing
to cooperate in a legitimate investigation, only to cry constructive dismissal. To do so would
be to render inutile legitimate measures to address employee iniquity. It would be to send a
chilling effect against bona fide investigations, for to investigate - riddled as it is with the
strain on employees it naturally entails - would be to court liability for constructive dismissal.
Employees cannot tie employers' hands, incapacitating them, and preemptively defeating
investigations with laments of how the travails of their involvement in such investigations
translates to their employers' fabrication of an inhospitable employment atmosphere so that
an employee is left with no recourse but to resign.
 G.R. No. 198534. July 3, 2013 tantamount to constructive dismissal, which has been defined as a quitting because continued
employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank
JENNY F. PECKSON, petitioner, vs. ROBINSONS SUPERMARKET CORPORATION, and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the employee leaving him with no
JODY GADIA, ROENA SARTE, and RUBY ALEX, respondents.
option but to forego with his continued employment.
Labor Law; Management Prerogatives; The Supreme Court has always upheld the employer’s
Same; Transfer of Employees; When the transfer of an employee is not unreasonable, or
prerogative to regulate all aspects of employment relating to the employees’ work assignment, the
inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a diminution of his
working methods and the place and manner of work.—As we all know, there are various laws imposing
salaries, benefits and other privileges, the employee may not complain that it amounts to a constructive
all kinds of burdens and obligations upon the employer in relation to his employees, and yet as a rule
dismissal.—As further held in Philippine Japan Active Carbon Corporation, 171 SCRA 164 (1989),
this Court has always upheld the employer’s prerogative to regulate all aspects of employment relating
when the transfer of an employee is not unreasonable, or inconvenient, or prejudicial to him, and it does
to the employees’ work assignment, the working methods and the place and manner of work. Indeed,
not involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the
labor laws discourage interference with an employer’s judgment in the conduct of his business.
employee may not complain that it amounts to a constructive dismissal. But like all other rights, there
are limits to the exercise of managerial prerogative to transfer personnel, and on the employer is laid
Same; Same; General Jurisprudential Guidelines Affecting the Right of the Employer to Regulate
the burden to show that the same is without grave abuse of discretion, bearing in mind the basic
Employment.—In Rural Bank of Cantilan, Inc. v. Julve, 171 SCRA 164 (1989), the Court had occasion
elements of justice and fair play. Indeed, management prerogative may not be used as a subterfuge by
to summarize the general jurisprudential guidelines affecting the right of the employer to regulate
the employer to rid himself of an undesirable worker.
employment, including the transfer of its employees: Under the doctrine of management prerogative,
every employer has the inherent right to regulate, according to his own discretion and judgment, all
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; Supreme Court; The
aspects of employment, including hiring, work assignments, working methods, the time, place and
Supreme Court is not a trier of facts, and only errors of law are generally reviewed in petitions for
manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal,
review on certiorari criticizing decisions of the Court of Appeals.—As reiterated in Acebedo Optical v.
and recall of employees. The only limitations to the exercise of this prerogative are those imposed by
National Labor Relations Commission, 527 SCRA 655 (2007), this Court is not a trier of facts, and only
labor laws and the principles of equity and substantial justice. While the law imposes many obligations
errors of law are generally reviewed in petitions for review on certiorari criticizing decisions of the CA.
upon the employer, nonetheless, it also protects the employer’s right to expect from its employees not
Questions of fact are not entertained, and in labor cases, this doctrine applies with greater force.
only good performance, adequate work, and diligence, but also good conduct and loyalty. In fact, the
Factual questions are for labor tribunals to resolve. Thus: Judicial Review of labor cases does not go
Labor Code does not excuse employees from complying with valid company policies and reasonable
beyond the evaluation of the sufficiency of the evidence upon which its labor officials’ findings rest. As
regulations for their governance and guidance. Concerning the transfer of employees, these are the
such, the findings of facts and conclusion of the NLRC are generally accorded not only great weight
following jurisprudential guidelines: (a) a transfer is a movement from one position to another of
and respect but even clothed with finality and deemed binding on this Court as long as they are
equivalent rank, level or salary without break in the service or a lateral movement from one position to
supported by substantial evidence. This Court finds no basis for deviating from said doctrine without
another of equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign an
any clear showing that the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft of
employee for legitimate business purposes; (c) a transfer becomes unlawful where it is motivated by
substantiation. Particularly when passed upon and upheld by the Court of Appeals, they are binding
discrimination or bad faith or is effected as a form of punishment or is a demotion without sufficient
and conclusive upon the Supreme Court and will not normally be disturbed. x x x x As earlier stated, we
cause; (d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or
find no basis for deviating from the oft espoused legal tenet that findings of facts and conclusion of the
prejudicial to the employee.
labor arbiter are generally accorded not only great weight and respect but even clothed with finality and
deemed binding on this Court as long as they are supported by substantial evidence, without any clear
Same; Same; As a privilege inherent in the employer’s right to control and manage its enterprise
showing that such findings of fact, as affirmed by the NLRC, are bereft of substantiation. More so, when
effectively, its freedom to conduct its business operations to achieve its purpose cannot be denied.—As
passed upon and upheld by the Court of Appeals, they are binding and conclusive upon us and will not
a privilege inherent in the employer’s right to control and manage its enterprise effectively, its freedom
normally be disturbed;x x x.
to conduct its business operations to achieve its purpose cannot be denied. We agree with the
appellate court that the respondents are justified in moving the petitioner to another equivalent position,
which presumably would be less affected by her habitual tardiness or inconsistent attendance than if
she continued as a Category Buyer, a “frontline position” in the day-to-day business operations of a
supermarket such as Robinsons. REYES, J.:
For resolution is the Petition for Review on Certiorari of the Decision dated June 8,
Same; Termination of Employment; Constructive Dismissal; Words and Phrases; Constructive 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 109604 affirming the Decision dated
dismissal is a quitting because continued employment is rendered impossible, unreasonable or February 25, 2009 of the National Labor Relations Commission (NLRC) in NLRC NCR Case
unlikely, or an offer involving a demotion in rank and diminution of pay.—As we have already noted, the
No. 00-11-09316-06/NLRC LAC No. 002020-07, which upheld the Dismissal by the Labor
respondents had the burden of proof that the transfer of the petitioner was not tantamount to
constructive dismissal, which as defined in Blue Dairy Corporation v. NLRC, 314 SCRA 401 (1999), is a Arbiter (LA) on May 30, 2007 of Jenny F. Peckson's (petitioner) complaint for constructive
quitting because continued employment is rendered impossible, unreasonable or unlikely, or an offer dismissal.
involving a demotion in rank and diminution of pay: The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and Antecedent Facts and Proceedings
fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, The petitioner first joined the Robinsons Supermarket Corporation (RSC) as a Sales
it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, Clerk on November 3, 1987. On October 26, 2006, she was holding the position of Category
the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to Buyer when respondent Roena Sarte (Sarte), RSC’s Assistant Vice-President for
the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other
Merchandising, reassigned her to the position of Provincial Coordinator, effective November
benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be
1, 2006. Claiming that her new assignment was a demotion because it was non-supervisory
and clerical in nature, the petitioner refused to turn over her responsibilities to the new
Category Buyer, or to accept her new responsibilities as Provincial Coordinator. Jody Gadia
(Gadia) and Ruby Alex (Alex) were impleaded because they were corporate officers of the
RSC.
In a memorandum to the petitioner dated November 13, 2006, the RSC, through Sarte,
demanded an explanation from her within 48 hours for her refusal to accept her new
assignment despite written and verbal demands. Sarte cited a company rule, Offenses
Subject to Disciplinary Action No. 4.07, which provided that "[d]isobedience, refusal or
failure to do assigned task or to obey superior’s/official’s orders/instructions, or to follow
established procedures or practices without valid reason" would be meted the penalty of
suspension.
The petitioner ignored the 48-hour deadline to explain imposed by Sarte. On November
23, 2006, Sarte issued her another memorandum, reiterating her demand to explain in
writing within 48 hours why she persistently refused to assume her new position, and
warning her that this could be her final chance to present her side or be deemed to have
waived her right to be heard.
In her one-paragraph reply submitted on November 27, 2006, the petitioner stated that
she could not accept the position of Provincial Coordinator since she saw it as a demotion.
As it turned out, however, on November 9, 2006, the petitioner had already filed a complaint
for constructive dismissal against RSC, Sarte, Gadia and Alex (respondents).
On November 30, 2006, Sarte issued an instruction to the petitioner to report to RSC’s
Metroeast Depot to help prepare all shipping manifests for Cagayan de Oro and Bacolod,
but as witnessed by RSC employees Raquel Torrechua and Alex, she did not obey as
instructed. Again on December 8, 2006, Sarte issued a similar instruction, citing the need
for certain tasks from the petitioner in preparation for the coming Christmas holidays, but the
petitioner again refused to heed.
As culled from the assailed appellate court decision, the petitioner argued before the LA
that the true organizational chart of the RSC showed that the position of Category Buyer
was one level above that of the Provincial Coordinator, and that moreover, the job
description of a Provincial Coordinator was largely clerical and did not require her to analyze
stock levels and order points, or source new local and international suppliers, or monitor
stock level per store and recommend items for replenishment, or negotiate better items and
discounts from suppliers, duties which only a Category Buyer could perform. She also
claimed that she was instructed to file a courtesy resignation in exchange for a separation
pay of one-half salary per year of service.
The respondents in their position paper denied the correctness of the organizational
chart presented by the petitioner. They maintained that her transfer was not a demotion
since the Provincial Coordinator occupied a "Level 5" position like the Category Buyer, with
the same work conditions, salary and benefits. But while both positions had no significant
disparity in the required skill, experience and aptitude, the position of Category Buyer
demanded the traits of punctuality, diligence and attentiveness because it is a frontline
position in the day-to-day business operations of RSC which the petitioner, unfortunately,
did not possess.
The respondents also raised the petitioner’s record of habitual tardiness as far back as
1999, as well as poor performance rating in 2005. In addition to her performance rating of
"2.8" out of "4.0" in 2005 equivalent to "below expectation," the petitioner was found to be
tardy in June and July 2005, 13 times, and for the entire 2005, 57 times; that she was
suspended twice in 2006 for 20 instances of tardiness and absences from July to
September 2006 alone. We also note that the petitioner was suspended for seven (7) days
in September and October 2005 for deliberately violating a company policy after she was
seen having lunch with a company supplier.
In her affidavit, respondent Sarte denied that the reassignment of the petitioner as
Provincial Coordinator was motivated by a desire to besmirch the name of the latter. She
asserted that it was made in the exercise of management prerogative and sound discretion,
in view of the nsitive position occupied by the Category Buyer in RSC’s daily operations, vis-
à-vis the petitioner’s "below expectation" performance rating and habitual tardiness.
In dismissing the petitioner’s complaint, the LA in its Decision dated May 30, 2007 ruled
that job reassignment or classification is a strict prerogative of the employer, and that the
petitioner cannot refuse her transfer from Category Buyer to Provincial Coordinator since
both positions commanded the same salary structure, high degree of responsibility and
impeccable honesty and integrity. Upholding the employer’s right not to retain an employee
in a particular position to prevent losses or to promote profitability, the LA found no showing
of any illegal motive on the part of the respondents in reassigning the petitioner. The
transfer was dictated by the need for punctuality, diligence and attentiveness in the position
of Category Buyer, which the petitioner clearly lacked. Moreover, the LA ruled that her
persistent refusal to accept her new position amounted to insubordination, entitling the RSC
to dismiss her from employment.
A month after the above ruling, or on June 22, 2007, the petitioner tendered her written
"forced" resignation, wherein she complained that she was being subjected to ridicule by
clients and co-employees alike on account of her floating status since the time she refused
to accept her transfer. She likewise claimed that she was being compelled to accept the
position of Provincial Coordinator without due process.
On appeal, the NLRC in its Decision dated February 25, 2009 sustained the findings of
the LA. It agreed that the lateral transfer of the petitioner from Category Buyer to Provincial
Coordinator was not a demotion amounting to constructive dismissal, since both positions
belonged to Job Level 5 and between them there is no significant disparity in terms of the
requirements of skill, experience and aptitude. Contrary to the petitioner’s assertion, the
NLRC found that the position of Provincial Coordinator is not a rank-and-file position but in
fact requires the exercise of discretion and independent judgment, as well as appropriate
recommendations to management to ensure the faithful implementation of its policies and
programs; that it even exercises influence over the Category Buyer in that it includes
performing a recommendatory function to guide the Category Buyer in making decisions on
the right assortment, price and quantity of the items, articles or merchandise to be sold by
the store.
The NLRC then reiterated the settled rule that management may transfer an employee
from one office to another within the business establishment, provided there is no demotion
in rank or diminution of salary, benefits, and other privileges, and the action is not motivated
by discrimination or bad faith or effected as a form of punishment without sufficient cause. It
ruled that the respondents were able to show that the petitioner’s transfer was not
unreasonable, inconvenient or prejudicial, but was prompted by her failure to meet the
demands of punctuality, diligence, and personal attention of the position of Category Buyer;
that management wanted to give the petitioner a chance to improve her work ethic, but her
obstinate refusal to assume her new position has prejudiced respondent RSC, even while
she continued to receive her salaries and benefits as Provincial Coordinator.
On petition for certiorari to the CA, the petitioner insisted that her transfer from
Category Buyer to Provincial Coordinator was a form of demotion without due process, and
that the respondents unjustifiably depicted her as remiss in her duties, flawed in her
character, and unduly obstinate in her refusal to accept her new post.
In its Decision dated June 8, 2011, the CA found no basis to deviate from the oft-
repeated tenet that the findings of fact and conclusions of the NLRC when supported by
substantial evidence are generally accorded not only great weight and respect but even
finality, and are thus deemed binding.
Petition for Review in the Supreme Court
Now on petition for review to this Court, the petitioner maintains that her lateral transfer
from Category Buyer to Provincial Coordinator was a demotion amounting to constructive
dismissal because her reassignment was not a valid exercise of management prerogative,
but was done in bad faith and without due process. She claims that the respondents
manipulated the facts to show that she was tardy; that they even surreptitiously drew up a
new organizational chart of the Merchandising Department of RSC, soon after she filed her
complaint for illegal dismissal, to show that the position of Provincial Coordinator belonged
to Job Level 5 as the Category Buyer, and not one level below; that the company
deliberately embarrassed her when it cut off her email access; that they sent memoranda to
her clients that she was no longer a Category Buyer, and to the various Robinsons
branches that she was now a Provincial Coordinator, while Milo Padilla (Padilla) was taking
over her former position as Category Buyer; that for seven (7) months, they placed her on
floating status and subjected her to mockery and ridicule by the suppliers and her co-
employees; that not only was there no justification for her transfer, but the respondents
clearly acted in bad faith and with discrimination, insensibility and disdain to make her stay
with the company intolerable for her.
Our Ruling
We find no merit in the petition.
This Court has consistently refused to interfere with the exercise by
management of its prerogative to regulate the employees’ work assignments, the
working methods and the place and manner of work.
As we all know, there are various laws imposing all kinds of burdens and obligations
upon the employer in relation to his employees, and yet as a rule this Court has always
upheld the employer’s prerogative to regulate all aspects of employment relating to the
employees’ work assignment, the working methods and the place and manner of work.
Indeed, labor laws discourage interference with an employer’s judgment in the conduct of
his business.
In Rural Bank of Cantilan, Inc. v. Julve, the Court had occasion to summarize the
general jurisprudential guidelines affecting the right of the employer to regulate employment,
including the transfer of its employees:
Under the doctrine of management prerogative, every employer has the inherent right to
regulate, according to his own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, the time, place and manner of work,
work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and
recall of employees. The only limitations to the exercise of this prerogative are those
imposed by labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects
the employer’s right to expect from its employees not only good performance, adequate
work, and diligence, but also good conduct and loyalty. In fact, the Labor Code does not
excuse employees from complying with valid company policies and reasonable
regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines:
(a) a transfer is a movement from one position to another of equivalent rank, level or salary
without break in the service or a lateral movement from one position to another of
equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign
an employee for legitimate business purposes; (c) a transfer becomes unlawful where it
is motivated by discrimination or bad faith or is effected as a form of punishment or is a
demotion without sufficient cause; (d) the employer must be able to show that the transfer
is not unreasonable, inconvenient, or prejudicial to the employee. (Citations omitted)
In Philippine Japan Active Carbon Corporation v. NLRC, it was held that the exercise of
management’s prerogative concerning the employees’ work assignments is based on its
assessment of the qualifications, aptitudes and competence of its employees, and by
moving them around in the various areas of its business operations it can ascertain where
they will function with maximum benefit to the company.
It is the employer’s prerogative, based on its assessment and perception of its
employees’ qualifications, aptitudes, and competence, to move them around in the various
areas of its business operations in order to ascertain where they will function with maximum
benefit to the company. An employee’s right to security of tenure does not give him such a
vested right in his position as would deprive the company of its prerogative to change his
assignment or transfer him where he will be most useful. When his transfer is not
unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in
rank or a diminution of his salaries, benefits, and other privileges, the employee may not
complain that it amounts to a constructive dismissal.
As a privilege inherent in the employer’s right to control and manage its enterprise
effectively, its freedom to conduct its business operations to achieve its purpose cannot be
denied. We agree with the appellate court that the respondents are justified in moving the
petitioner to another equivalent position, which presumably would be less affected by her
habitual tardiness or inconsistent attendance than if she continued as a Category Buyer, a
"frontline position" in the day-to-day business operations of a supermarket such as
Robinsons.
If the transfer of an employee is not unreasonable, or inconvenient, or prejudicial to him,
and it does not involve a demotion in rank or a diminution of his salaries, benefits and
other privileges, the employee may not complain that it amounts to a constructive
dismissal.
 As we have already noted, the respondents had the burden of proof that the transfer of
the petitioner was not tantamount to constructive dismissal, which as defined in Blue Dairy
Corporation v. NLRC, is a quitting because continued employment is rendered impossible,
unreasonable or unlikely, or an offer involving a demotion in rank and diminution of pay:
The managerial prerogative to transfer personnel must be exercised without grave
abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the
right should not be confused with the manner in which that right is exercised. Thus, it cannot
be used as a subterfuge by the employer to rid himself of an undesirable worker. In
particular, the employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Should the employer fail to
overcome this burden of proof, the employee’s transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because continued employment is rendered
impossible, unreasonable or unlikely; as an offer involving a demotion in rank and
diminution in pay. Likewise, constructive dismissal exists when an act of clear
discrimination, insensibility or disdain by an employer has become so unbearable to the
employee leaving him with no option but to forego with his continued employment.
Thus, as further held in Philippine Japan Active Carbon Corporation, when the transfer
of an employee is not unreasonable, or inconvenient, or prejudicial to him, and it does not
involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the
employee may not complain that it amounts to a constructive dismissal.
But like all other rights, there are limits to the exercise of managerial prerogative to
transfer personnel, and on the employer is laid the burden to show that the same is without
grave abuse of discretion, bearing in mind the basic elements of justice and fair
play. Indeed, management prerogative may not be used as a subterfuge by the employer to
rid himself of an undesirable worker.
Interestingly, although the petitioner claims that she was constructively dismissed, yet
until the unfavorable decision of the LA on May 30, 2007, for seven (7) months she
continued to collect her salary while also adamantly refusing to heed the order of Sarte to
report to the Metroeast Depot. It was only on June 22, 2007, after the LA’s decision, that
she filed her "forced" resignation. Her deliberate and unjustified refusal to assume her new
assignment is a form of neglect of duty, and according to the LA, an act of insubordination.
We saw how the company sought every chance to hear her out on her grievances and how
she ignored the memoranda of Sarte asking her to explain her refusal to accept her transfer.
All that the petitioner could say was that it was a demotion and that her floating status
embarrassed her before the suppliers and her co-employees.
The respondents have discharged the burden of proof that the transfer of the petitioner
was not tantamount to constructive dismissal.
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, a machinist who had been
employed with the petitioner company for 16 years was reduced to the service job of
transporting filling materials after he failed to report for work for one (1) day on account of
an urgent family matter. This is one instance where the employee’s demotion was rightly
held to be an unlawful constructive dismissal because the employer failed to show
substantial proof that the employee’s demotion was for a valid and just cause:
In case of a constructive dismissal, the employer has the burden of proving that the
transfer and demotion of an employee are for valid and legitimate grounds such as
genuine business necessity. Particularly, for a transfer not to be considered a constructive
dismissal, the employer must be able to show that such transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Failure of the employer to
overcome this burden of proof, the employee’s demotion shall no doubt be tantamount to
unlawful constructive dismissal. x x x. (Citation omitted)
In the case at bar, we agree with the appellate court that there is substantial showing
that the transfer of the petitioner from Category Buyer to Provincial Coordinator was not
unreasonable, inconvenient, or prejudicial to her. The petitioner failed to dispute that the job
classifications of Category Buyer and Provincial Coordinator are similar, or that they
command a similar salary structure and responsibilities. We agree with the NLRC that the
Provincial Coordinator’s position does not involve mere clerical functions but requires the
exercise of discretion from time to time, as well as independent judgment, since the
Provincial Coordinator gives appropriate recommendations to management and ensures the
faithful implementation of policies and programs of the company. It even has influence over
a Category Buyer because of its recommendatory function that enables the Category Buyer
to make right decisions on assortment, price and quantity of the items to be sold by the
store.
We also cannot sustain the petitioner’s claim that she was not accorded due process
and that the respondents acted toward her with discrimination, insensibility, or disdain as to
force her to forego her continued employment. In addition to verbal reminders from Sarte,
the petitioner was asked in writing twice to explain within 48 hours her refusal to accept her
transfer. In the first, she completely remained silent, and in the second, she took four (4)
days to file a mere one-paragraph reply, wherein she simply said that she saw the
Provincial Coordinator position as a demotion, hence she could not accept it. Worse, she
may even be said to have committed insubordination when she refused to turn over her
responsibilities to the new Category Buyer, Padilla, and to assume her new responsibilities
as Provincial Coordinator and report to the Metroeast Depot as directed. This was precisely
the reason why the petitioner was kept on floating status. To her discredit, her defiance
constituted a neglect of duty, or an act of insubordination, per the LA.
Neither can we consider tenable the petitioner’s contention that the respondents
deliberately held her up to mockery and ridicule when they cut off her email access, sent
memoranda to her clients that she was no longer a Category Buyer, and to the various
Robinsons branches that she was now a Provincial Coordinator on floating status and that
Padilla was taking over her position as the new Category Buyer. It suffices to state that
these measures are the logical steps to take for the petitioner’s unjustified resistance to her
transfer, and were not intended to subject her to public embarrassment.
Judicial review of labor cases does not go beyond the evaluation of the sufficiency of the
evidence upon which labor officials’ findings rest.
Finally, as reiterated in Acebedo Optical, this Court is not a trier of facts, and only errors
of law are generally reviewed in petitions for review on certiorari criticizing decisions of the
CA. Questions of fact are not entertained, and in labor cases, this doctrine applies with
greater force.
Factual questions are for labor tribunals to resolve. Thus:
Judicial Review or labor cases does not go beyond the evaluation of the sufficiency of the
evidence upon which its labor officials' findings rest. As such, the findings of facts and
 conclusion of the NLRC are generally accorded not only great weight and respect but
even clothed with finality and deemed binding on this Court as long as they are supported
by substantial evidence. This Court finds no basis for deviating from said doctrine without
any clear showing that the findings of the Labor Arbiter, as affirmed by the NLRC, are
bereft of substantiation. Particularly when passed upon and upheld by the Court of
Appeals, they are binding and conclusive upon the Supreme Court and will not normally
be disturbed.
xxxx
As earlier stated, we find no basis for deviating from the oft espoused legal tenet that
findings of facts and conclusion of the labor arbiter are generally accorded not only great
weight and respect but even clothed with finality and deemed binding on this Court as
long as they are supported by substantial evidence, without any clear showing that such
findings of fact, as affirmed by the NLRC, are bereft of substantiation. More so, when
passed upon and upheld by the Com1 of Appeals, they are binding and conclusive upon
us and will not normally be disturbed; x x x. (Citations omitted)

It is our ruling, that the findings of fact and conclusion of the LA, as affirmed by the
NLRC, are supported by substantial evidence, as found by the CA.

WHEREFORE, the premises considered, the Decision of the Court of Appeals dated
June 8, 2011 in CA-G.R. SP No. 109604 is AFFIRMED.
SO ORDERED.

Notes.—For a transfer not to be considered a constructive dismissal, the employer must be able to
show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee. (Philippine
Veterans Bank vs. National Labor Relations Commission, 617 SCRA 204 [2010])

It is within the ambit of the employer’s prerogative to transfer an employee for valid reasons and
according to the requirement of its business, provided that the transfer does not result in demotion in
rank or diminution of salary, benefits and other privileges. (Misamis Oriental II Electric Service
Cooperative [MORESCO II] vs. Cagalawan, 680 SCRA 127 [2012])

——o0o——
 G.R. No. 187226. January 28, 2015 what the society generally considers moral and respectable.—The determination of whether a conduct
is disgraceful or immoral involves a two-step process: first, a consideration of the totality of the
CHERYLL SANTOS LEUS, petitioner, vs. ST. SCHOLASTICA’S COLLEGE circumstances surrounding the conduct; and second, an assessment of the said circumstances vis-à-
vis the prevailing norms of conduct, i.e., what the society generally considers moral and respectable.
WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, respondents.
That the petitioner was employed by a Catholic educational institution per se does not absolutely
determine whether her pregnancy out of wedlock is disgraceful or immoral. There is still a necessity to
Remedial Law; Civil Procedure; Appeals; Points of law, theories, issues, and arguments not
determine whether the petitioner’s pregnancy out of wedlock is considered disgraceful or immoral in
brought to the attention of the trial court ought not to be considered by a reviewing court, as these
accordance with the prevailing norms of conduct.
cannot be raised for the first time on appeal.—“It is well-established that issues raised for the first time
on appeal and not raised in the proceedings in the lower court are barred by estoppel. Points of law,
Same; Same; Same; That the distinction between public and secular morality and religious
theories, issues, and arguments not brought to the attention of the trial court ought not to be considered
morality is important because the jurisdiction of the Court extends only to public and secular morality.—
by a reviewing court, as these cannot be raised for the first time on appeal. To consider the alleged
In Estrada v. Escritor, 408 SCRA 1 (2003), an administrative case against a court interpreter charged
facts and arguments belatedly raised would amount to trampling on the basic principles of fair play,
with disgraceful and immoral conduct, the Court stressed that in determining whether a particular
justice, and due process.”
conduct can be considered as disgraceful and immoral, the distinction between public and secular
morality on the one hand, and religious morality, on the other, should be kept in mind. That the
Department of Education; Schools; Section 57 specifically empowers the Department of Education
distinction between public and secular morality and religious morality is important because the
(DepEd) to promulgate rules and regulations necessary for the administration, supervision and
jurisdiction of the Court extends only to public and secular morality. The Court further explained that:
regulation of the educational system in accordance with the declared policy of Batas Pambansa (BP)
The morality referred to in the law is public and necessarily secular, not religious x x x. “Religious
Bilang 232.—The 1992 MRPS, the regulation in force at the time of the instant controversy, was issued
teachings as expressed in public debate may influence the civil public order but public moral disputes
by the Secretary of Education pursuant to BP 232. Section 70 of BP 232 vests the Secretary of
may be resolved only on grounds articulable in secular terms.” Otherwise, if government relies upon
Education with the authority to issue rules and regulations to implement the provisions of BP 232.
religious beliefs in formulating public policies and morals, the resulting policies and morals would
Concomitantly, Section 57 specifically empowers the Department of Education to promulgate rules and
require conformity to what some might regard as religious programs or agenda. The nonbelievers would
regulations necessary for the administration, supervision and regulation of the educational system in
therefore be compelled to conform to a standard of conduct buttressed by a religious belief, i.e., to a
accordance with the declared policy of BP 232. The qualifications of teaching and nonteaching
“compelled religion,” anathema to religious freedom. Likewise, if government based its actions upon
personnel of private schools, as well as the causes for the termination of their employment, are an
religious beliefs, it would tacitly approve or endorse that belief and thereby also tacitly disapprove
integral aspect of the educational system of private schools. Indubitably, ensuring that the teaching and
contrary religious or nonreligious views that would not support the policy. As a result, government will
nonteaching personnel of private schools are not only qualified, but competent and efficient as well
not provide full religious freedom for all its citizens, or even make it appear that those whose beliefs are
goes hand in hand with the declared objective of BP 232 — establishing and maintaining relevant
disapproved are second-class citizens. Expansive religious freedom therefore requires that government
quality education. It is thus within the authority of the Secretary of Education to issue a rule, which
be neutral in matters of religion; governmental reliance upon religious justification is inconsistent with
provides for the dismissal of teaching and nonteaching personnel of private schools based on their
this policy of neutrality. In other words, government action, including its proscription of immorality as
incompetence, inefficiency, or some other disqualification.
expressed in criminal law like concubinage, must have a secular purpose. That is, the government
proscribes this conduct because it is “detrimental (or dangerous) to those conditions upon which
Remedial Law; Civil Procedure; Appeals; In a petition for review under Rule 45 of the Rules of
depend the existence and progress of human society” and not because the conduct is proscribed by the
Court, such as the instant petition, where the Court of Appeals’ (CA’s) disposition in a labor case is
beliefs of one religion or the other. Although admittedly, moral judgments based on religion might have
sought to be calibrated, the Court’s review is quite limited.—In a petition for review under Rule 45 of the
a compelling influence on those engaged in public deliberations over what actions would be considered
Rules of Court, such as the instant petition, where the CA’s disposition in a labor case is sought to be
a moral disapprobation punishable by law. After all, they might also be adherents of a religion and thus
calibrated, the Court’s review is quite limited. In ruling for legal correctness, the Court has to view the
have religious opinions and moral codes with a compelling influence on them; the human mind
CA decision in the same context that the petition for certiorari it ruled upon was presented to it; the
endeavors to regulate the temporal and spiritual institutions of society in a uniform manner, harmonizing
Court has to examine the CA decision from the prism of whether it correctly determined the presence or
earth with heaven. Succinctly put, a law could be religious or Kantian or Aquinian or utilitarian in its
absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the
deepest roots, but it must have an articulable and discernible secular purpose and justification to pass
NLRC decision on the merits of the case was correct.
scrutiny of the religion clauses.
Labor Law; Termination of Employment; Disgraceful and Immoral Conduct; The fact of the
Same; Same; Same; The proscription against “disgraceful or immoral conduct” under Section
petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the petitioner’s
94(e) of the 1992 Manual of Regulations for Private Schools (MRPS), which is made as a cause for
conduct as disgraceful or immoral.—The labor tribunals concluded that the petitioner’s pregnancy out of
dismissal, must necessarily refer to public and secular morality.—It bears stressing that the right of an
wedlock, per se, is “disgraceful and immoral” considering that she is employed in a Catholic educational
employee to security of tenure is protected by the Constitution. Perfunctorily, a regular employee may
institution. In arriving at such conclusion, the labor tribunals merely assessed the fact of the petitioner’s
not be dismissed unless for cause provided under the Labor Code and other relevant laws, in this case,
pregnancy vis-à-vis the totality of the circumstances surrounding the same. However, the Court finds no
the 1992 MRPS. As stated above, when the law refers to morality, it necessarily pertains to public and
substantial evidence to support the aforementioned conclusion arrived at by the labor tribunals. The fact
secular morality and not religious morality. Thus, the proscription against “disgraceful or immoral
of the petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the petitioner’s
conduct” under Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal, must
conduct as disgraceful or immoral. There must be substantial evidence to establish that premarital
necessarily refer to public and secular morality. Accordingly, in order for a conduct to be considered as
sexual relations and, consequently, pregnancy out of wedlock, are indeed considered disgraceful or
disgraceful or immoral, it must be “‘detrimental (or dangerous) to those conditions upon which depend
immoral.
the existence and progress of human society’ and not because the conduct is proscribed by the beliefs
of one religion or the other.”
Same; Same; Same; The determination of whether a conduct is disgraceful or immoral involves a
two (2)-step process: first, a consideration of the totality of the circumstances surrounding the conduct;
and second, an assessment of the said circumstances vis-à-vis the prevailing norms of conduct, i.e.,
 Same; Same; Same; Premarital sexual relations between two consenting adults who have no
impediment to marry each other, and consequently, conceiving a child out of wedlock, gauged from a
purely public and secular view of morality, does not amount to a disgraceful or immoral conduct under
Section 94(e) of the 1992 Manual of Regulations for Private Schools (MRPS).—Admittedly, the
petitioner is employed in an educational institution where the teachings and doctrines of the Catholic
Church, including that on premarital sexual relations, is strictly upheld and taught to the students. That
her indiscretion, which resulted in her pregnancy out of wedlock, is anathema to the doctrines of the
Catholic Church. However, viewed against the prevailing norms of conduct, the petitioner’s conduct
cannot be considered as disgraceful or immoral; such conduct is not denounced by public and secular
morality. It may be an unusual arrangement, but it certainly is not disgraceful or immoral within the
contemplation of the law. To stress, premarital sexual relations between two consenting adults who
have no impediment to marry each other, and, consequently, conceiving a child out of wedlock, gauged
from a purely public and secular view of morality, does not amount to a disgraceful or immoral conduct
under Section 94(e) of the 1992 MRPS.
Same; Same; Burden of Proof; Settled is the rule that in termination cases, the burden of proving
that the dismissal of the employees was for a valid and authorized cause rests on the employer.—
Settled is the rule that in termination cases, the burden of proving that the dismissal of the employees
was for a valid and authorized cause rests on the employer. It is incumbent upon the employer to show
by substantial evidence that the termination of the employment of the employees was validly made and
failure to discharge that duty would mean that the dismissal is not justified and therefore illegal.
“Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise.”
Same; Same; Security of Tenure; Words and Phrases; Security of tenure is a right which may not
be denied on mere speculation of any unclear and nebulous basis.—Indubitably, bare allegations do
not amount to substantial evidence. Considering that the respondents failed to adduce substantial
evidence to prove their asserted cause for the petitioner’s dismissal, the labor tribunals should not have
upheld their allegations hook, line and sinker. The labor tribunals’ respective findings, which were
arrived at sans any substantial evidence, amounts to a grave abuse of discretion, which the CA should
have rectified. “Security of tenure is a right which may not be denied on mere speculation of any
unclear and nebulous basis.”
Same; Management Prerogative; The exercise of management prerogative is not absolute as it
must be exercised in good faith and with due regard to the rights of labor.—The Court has held that
“management is free to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place and manner of work,
processes to be followed, supervision of workers, working regulations, transfer of employees, work
supervision, layoff of workers and discipline, dismissal and recall of workers. The exercise of
management prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor.” Management cannot exercise its prerogative in a cruel, repressive, or
despotic manner.
Same; Illegal Dismissals; Reinstatement; Separation Pay; Strained Relations; In cases of illegal
dismissal, the accepted doctrine is that separation pay is available in lieu of reinstatement when the
latter recourse is no longer practical or in the best interest of the parties.—Having established that the
petitioner was illegally dismissed, the Court now determines the reliefs that she is entitled to and their
extent. Under the law and prevailing jurisprudence, “an illegally dismissed employee is entitled to
reinstatement as a matter of right.” Aside from the instances provided under Articles 283 and 284 of the
Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal, the accepted
doctrine is that separation pay is available in lieu of reinstatement when the latter recourse is no longer
practical or in the best interest of the parties.
Same; Same; Backwages; Employees who are illegally dismissed are entitled to full backwages,
inclusive of allowances and other benefits or their monetary equivalent, computed from the time their
actual compensation was withheld from them up to the time of their actual reinstatement but if
reinstatement is no longer possible, the backwages shall be computed from the time of their illegal
termination up to the finality of the decision.—“Employees who are illegally dismissed are entitled to full
backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the
time their actual compensation was withheld from them up to the time of their actual reinstatement but if
reinstatement is no longer possible, the backwages shall be computed from the time of their illegal
termination up to the finality of the decision.” Accordingly, the petitioner is entitled to an award of full
backwages from the time she was illegally dismissed up to the finality of this decision.
Same; Same; Moral Damages; Exemplary Damages; The petitioner is not entitled to moral and
exemplary damages; The records of this case are bereft of any clear and convincing evidence showing
that the respondents acted in bad faith or in a wanton or fraudulent manner in dismissing the
petitioner.—The petitioner is not entitled to moral and exemplary damages. “A dismissed employee is
entitled to moral damages when the dismissal is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy.
Exemplary damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent
manner.” “Bad faith, under the law, does not simply connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, or a breach of a known
duty through some motive or interest or ill will that partakes of the nature of fraud.” “It must be noted
that the burden of proving bad faith rests on the one alleging it” since basic is the principle that good
faith is presumed and he who alleges bad faith has the duty to prove the same. “Allegations of bad faith
and fraud must be proved by clear and convincing evidence.” The records of this case are bereft of any
clear and convincing evidence showing that the respondents acted in bad faith or in a wanton or
fraudulent manner in dismissing the petitioner. That the petitioner was illegally dismissed is insufficient
to prove bad faith. A dismissal may be contrary to law but by itself alone, it does not establish bad faith
to entitle the dismissed employee to moral damages. The award of moral and exemplary damages
cannot be justified solely upon the premise that the employer dismissed his employee without cause.
Same; Same; Attorney’s Fees; The petitioner is entitled to attorney’s fees in the amount of ten
percent (10%) of the total monetary award pursuant to Article 111 of the Labor Code.—The petitioner is
entitled to attorney’s fees in the amount of ten percent (10%) of the total monetary award pursuant to
Article 111 of the Labor Code. “It is settled that where an employee was forced to litigate and, thus,
incur expenses to protect his rights and interest, the award of attorney’s fees is legally and morally
justifiable.”
REYES, J.:
Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove
(SSCW), a Catholic educational institution, as a non-teaching personnel, engaged in pre-
marital sexual relations, got pregnant out of wedlock, married the father of her child, and
was dismissed by SSCW, in that order. The question that has to be resolved is whether the
petitioner's conduct constitutes a ground for her dismissal.
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision dated September 24, 2008 and
Resolution dated March 2, 2009 issued by the Court of Appeals (CA) in CA-G.R. SP No.
100188, which affirmed the Resolutions dated February 28, 2007 and May 21, 2007 of the
National Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.
The Facts
 SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001,
SSCW hired the petitioner as an Assistant to SSCW’s Director of the Lay Apostolate and
Community Outreach Directorate.
Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock.
When SSCW learned of the petitioner’s pregnancy, Sr. Edna Quiambao (Sr. Quiambao),
SSCW’s Directress, advised her to file a resignation letter effective June 1, 2003. In
response, the petitioner informed Sr. Quiambao that she would not resign from her
employment just because she got pregnant without the benefit of marriage.
On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing
why she should not be dismissed for engaging in pre-marital sexual relations and getting
pregnant as a result thereof, which amounts to serious misconduct and conduct
unbecoming of an employee of a Catholic school.
In a letter dated May 31, 2003, the petitioner explained that her pregnancy out of
wedlock does not amount to serious misconduct or conduct unbecoming of an employee.
She averred that she is unaware of any school policy stating that being pregnant out of
wedlock is considered as a serious misconduct and, thus, a ground for dismissal. Further,
the petitioner requested a copy of SSCW’s policy and guidelines so that she may better
respond to the charge against her. On June 2, 2003, Sr. Quiambao informed the petitioner
that, pending the promulgation of a "Support Staff Handbook," SSCW follows the 1992
Manual of Regulations for Private Schools (1992 MRPS) on the causes for termination of
employments; that Section 94(e) of the 1992 MRPS cites "disgraceful or immoral conduct"
as a ground for dismissal in addition to the just causes for termination of employment
provided under Article 282 of the Labor Code.
On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter, which, in
part, reads:
To us, pre-marital sex between two consenting adults without legal impediment to
marry each other who later on married each other does not fall within the contemplation
of "disgraceful or immoral conduct" and "serious misconduct" of the Manual of Regulations
for Private Schools and the Labor Code of the Philippines.
Your argument that what happened to our client would set a bad example to the
students and other employees of your school is speculative and is more imaginary than
real. To dismiss her on that sole ground constitutes grave abuse of management
prerogatives.
Considering her untarnished service for two years, dismissing her with her present
condition would also mean depriving her to be more secure in terms of financial capacity
to sustain maternal needs.
In a letter dated June 6, 2003, SSCW, through counsel, maintained that pre-marital
sexual relations, evenif between two consenting adults without legal impediment to marry, is
considered a disgraceful and immoral conduct or a serious misconduct, which are grounds
for the termination of employment under the 1992 MRPS and the Labor Code. That SSCW,
as a Catholic institution of learning, has the right to uphold the teaching of the Catholic
Church and expect its employees to abide by the same. They further asserted that the
petitioner’s indiscretion is further aggravated by the fact that she is the Assistant to the
Director of the Lay Apostolate and Community Outreach Directorate, a position of
responsibility that the students look up to as rolemodel. The petitioner was again directed to
submit a written explanation on why she should not be dismissed.
On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsel’s
letter dated June 4, 2003 as her written explanation.
Consequently, in her letter dated June 11, 2003, Sr. Quiambao informed the petitioner
that her employment with SSCW is terminated on the ground of serious misconduct. She
stressed that pre-marital sexual relations between two consenting adults with no
impediment to marry, even if they subsequently married, amounts to immoral conduct. She
further pointed out that SSCW finds unacceptable the scandal brought about by the
petitioner’s pregnancy out of wedlock as it ran counter to the moral principles that SSCW
stands for and teaches its students.
Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional
Arbitration Branch of the NLRC in Quezon City against SSCW and Sr. Quiambao
(respondents). In her position paper, the petitioner claimed that SSCW gravely abused its
management prerogative as there was no just cause for her dismissal. She maintained that
her pregnancy out of wedlock cannot be considered as serious misconduct since the same
is a purely private affair and not connected in any way with her duties as an employee of
SSCW. Further, the petitioner averred that she and her boyfriend eventually got married
even prior to her dismissal.
For their part, SSCW claimed that there was just cause to terminate the petitioner’s
employment with SSCW and that the same is a valid exercise of SSCW’s management
prerogative. They maintained that engaging in pre-marital sex, and getting pregnant as a
result thereof, amounts to a disgraceful or immoral conduct, which is a ground for the
dismissal of an employee under the 1992 MRPS.
They pointed out that SSCW is a Catholic educational institution, which caters
exclusively to young girls; that SSCW would lose its credibility if it would maintain
employees who do not live up to the values and teachings it inculcates to its students.
SSCW further asserted that the petitioner, being an employee of a Catholic educational
institution, should have strived to maintain the honor, dignity and reputation of SSCW as a
Catholic school.
The Ruling of the Labor Arbiter
On February 28, 2006, the Labor Arbiter (LA) rendered a Decision, in NLRC Case No.
6-17657-03-C which dismissed the complaint filed by the petitioner. The LA found that there
was a valid ground for the petitioner’s dismissal; that her pregnancy out of wedlock is
considered as a "disgraceful and immoral conduct." The LA pointed out that, as an
employee of a Catholic educational institution, the petitioner is expected to live up to the
Catholic values taught by SSCW to its students. Likewise, the LA opined that:
Further, a deep analysis of the facts would lead us to disagree with the complainant that
she was dismissed simply because she violate[d] a Catholic [teaching]. It should not be
taken in isolation but rather it should be analyzed in the lightof the surrounding
circumstances as a whole. We must also take into [consideration] the nature of her work
and the nature of her employer-school. For us, it is not just an ordinary violation. It was
committed by the complainant in an environment where her strict adherence to the same
is called for and where the reputation of the school is at stake. x x x.
 The LA further held that teachers and school employees, both in their official and
personal conduct, must display exemplary behavior and act in a manner that is beyond
reproach.
The petitioner appealed to the NLRC, insisting that there was no valid ground for the
termination of her employment. She maintained that her pregnancy out of wedlock cannot
be considered as "serious misconduct" under Article 282 of the Labor Code since the same
was not of such a grave and aggravated character. She asserted that SSCW did not
present any evidence to establish that her pregnancy out of wedlock indeed eroded the
moral principles that it teaches its students.
The Ruling of the NLRC
On February 28, 2007, the NLRC issued a Resolution, which affirmed the LA Decision
dated February 28, 2006. The NLRC pointed out that the termination of the employment of
the personnel of private schools is governed by the 1992 MRPS; that Section 94(e) thereof
cites "disgraceful or immoral conduct" as a just cause for dismissal, in addition to the
grounds for termination of employment provided for under Article 282 of the Labor Code.
The NLRC held that the petitioner’s pregnancy out of wedlock is a "disgraceful or immoral
conduct" within the contemplation of Section 94(e) of the 1992 MRPS and, thus, SSCW had
a valid reason to terminate her employment.
The petitioner sought reconsideration of the Resolution dated February 28, 2007 but it
was denied by the NLRC in its Resolution dated May 21, 2007.
Unperturbed, the petitioner filed a petition for certiorari with the CA, alleging that the
NLRC gravely abused its discretion in ruling that there was a valid ground for her dismissal.
She maintained that pregnancy out of wedlock cannot be considered as a disgraceful or
immoral conduct; that SSCW failed to prove that its students were indeed gravely
scandalized by her pregnancy out of wedlock. She likewise asserted that the NLRC erred in
applying Section 94(e) of the 1992 MRPS.
The Ruling of the CA
On September 24, 2008, the CA rendered the herein assailed Decision, which denied
the petition for certiorari filed by the petitioner. The CA held that it is the provisions of the
1992 MRPS and not the Labor Code which governs the termination of employment of
teaching and non-teaching personnel of private schools, explaining that:
It is a principle of statutory construction that where there are two statutes that apply to a
particular case, that which was specially intended for the said case must prevail. Petitioner
was employed by respondent private Catholic institution which undeniably follows the
precepts or norms of conduct set forth by the Catholic Church. Accordingly, the Manual
of Regulations for Private Schools followed by it must prevail over the Labor Code, a
general statute. The Manual constitutes the private schools’ Implementing Rules and
Regulations of Batas Pambansa Blg. 232 or the Education Act of 1982. x x x.
The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s
management prerogative to discipline and impose penalties on erring employees pursuant
toits policies, rules and regulations. The CA upheld the NLRC’s conclusion that the
petitioner’s pregnancy out of wedlock is considered as a "disgraceful and immoral conduct"
and, thus, a ground for dismissal under Section 94(e) of the 1992 MRPS. The CA likewise
opined that the petitioner’s pregnancy out of wedlock is scandalous per segiven the work
environment and social milieu that she was in, viz:
Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of
the Labor Code, "disgraceful and immoral conduct" is a basis for termination of
employment.
xxxx
Petitioner contends that her pre-marital sexual relations with her boyfriend and her
pregnancy prior to marriage was not disgraceful or immoral conduct sufficient for her
dismissal because she was not a member of the school’s faculty and there is no evidence
that her pregnancy scandalized the school community.
We are not persuaded. Petitioner’s pregnancy prior to marriage is scandalous in itself
given the work environment and social milieu she was in. Respondent school for young
ladies precisely seeks to prevent its students from situations like this, inculcating in them
strict moral values and standards. Being part of the institution, petitioner’sprivate and
public life could not be separated. Her admitted pre-marital sexual relations was a violation
of private respondent’s prescribed standards of conduct that views pre-marital sex as
immoral because sex between a man and a woman must only take place within the
bounds of marriage.
Finally, petitioner’s dismissal is a valid exercise of the employer-school’s management
prerogative to discipline and impose penalties on erring employees pursuant to its
policies, rules and regulations. x x x. (Citations omitted)
The petitioner moved for reconsideration but it was denied by the CA in its
Resolution dated March 2, 2009.
Hence, the instant petition.
Issues
Essentially, the issues set forth by the petitioner for this Court’s decision are the
following: first, whether the CA committed reversible error in ruling that it is the 1992 MRPS
and not the Labor Code that governs the termination of employment of teaching and non-
teaching personnel of private schools; and second, whether the petitioner’s pregnancy out
of wedlock constitutes a valid ground to terminate her employment.
The Ruling of the Court
The Court grants the petition.
First Issue: Applicability of the 1992 MRPS
The petitioner contends that the CA, in ruling that there was a valid ground to dismiss
her, erred in applying Section 94 of the 1992 MRPS. Essentially, she claims that the 1992
MRPS was issued by the Secretary of Education as the revised implementing rules and
regulations of Batas Pambansa Bilang 232 (BP 232) or the "Education Act of 1982." That
there is no provision in BP 232, which provides for the grounds for the termination of
employment of teaching and non-teaching personnel of private schools. Thus, Section 94 of
the 1992 MRPS, which provides for the causes of terminating an employment, isinvalid as it
"widened the scope and coverage" of BP 232.
The Court does not agree.
The Court notes that the argument against the validity of the 1992 MRPS, specifically
Section 94 thereof, is raised by the petitioner for the first time in the instant petition for
review. Nowhere in the proceedings before the LA, the NLRC or the CA did the petitioner
assail the validity of the provisions of the 1992 MRPS.
 "It is well established that issues raised for the first time on appeal and not raised in the
proceedings in the lower court are barred by estoppel. Points of law, theories, issues, and
arguments not brought to the attention of the trial court ought not to be considered by a
reviewing court, as these cannot be raised for the first time on appeal. To consider the
alleged facts and arguments belatedly raised would amount to trampling on the basic
principles of fair play, justice, and due process."
In any case, even if the Court were to disregard the petitioner’s belated claim of the
invalidity of the 1992 MRPS, the Court still finds the same untenable.
The 1992 MRPS, the regulation in force at the time of the instant controversy, was
issued by the Secretary of Education pursuant to BP 232. Section 70 of BP 232 vests the
Secretary of Education with the authority to issue rules and regulations to implement the
provisions of BP 232. Concomitantly, Section 57 specifically empowers the Department of
Education to promulgate rules and regulations necessary for the administration, supervision
and regulation of the educational system in accordance with the declared policy of BP 232.
The qualifications of teaching and non-teaching personnel of private schools, as well as
the causes for the termination of their employment, are an integral aspect of the educational
system of private schools. Indubitably, ensuring that the teaching and non-teaching
personnel of private schools are not only qualified, but competent and efficient as well goes
hand in hand with the declared objective of BP 232 – establishing and maintaining relevant
quality education. It is thus within the authority of the Secretary of Education to issue a rule,
which provides for the dismissal of teaching and non-teaching personnel of private schools
based on their incompetence, inefficiency, or some other disqualification.
Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to
"prescribe and impose such administrative sanction as he may deem reasonable and
appropriate in the implementing rules and regulations" for the "[g]ross inefficiency of the
teaching or non-teaching personnel" of private schools. Accordingly, contrary to the
petitioner’s claim, the Court sees no reason to invalidate the provisions of the 1992 MRPS,
specifically Section 94 thereof.
Second Issue: Validity of the Petitioner’s Dismissal
The validity of the petitioner’s dismissal hinges on the determination of whether
pregnancy out of wedlock by an employee of a catholic educational institution is a cause for
the termination of her employment.
In resolving the foregoing question,the Court will assess the matter from a strictly
neutral and secular point of view – the relationship between SSCW as employer and the
petitioner as an employee, the causes provided for by law in the termination of
suchrelationship, and the evidence on record. The ground cited for the petitioner’s
dismissal, i.e., pre-marital sexual relations and, consequently, pregnancy outof wedlock, will
be assessed as to whether the same constitutes a valid ground for dismissal pursuant to
Section 94(e) of the 1992 MRPS.
The standard of review in a Rule 45 petition from the CA decision in labor cases.
In a petition for review under Rule 45 of the Rules of Court, such as the instant petition,
where the CA’s disposition in a labor case is sought to be calibrated, the Court’s review
isquite limited. In ruling for legal correctness, the Court has to view the CA decision in the
same context that the petition for certiorari it ruled upon was presented to it; the Court has
to examine the CA decision from the prism of whether it correctly determined the presence
or absence of grave abuse of discretion in the NLRC decision before it, not on the basis of
whether the NLRC decision on the merits of the case was correct.
The phrase "grave abuse of discretion" is well-defined in the Court’s jurisprudence. It
exists where an act of a court or tribunal is performed with a capricious or whimsical
exercise ofjudgment equivalent to lack of jurisdiction. The determination of the presence or
absence of grave abuse of discretion does not include an inquiry into the correctness of the
evaluation of evidence, which was the basis of the labor agency in reaching its conclusion.
Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the
correctness of the evaluation of evidence (that was the basis of the labor tribunals in
determining their conclusion), the incorrectness of its evidentiary evaluation should not
result in negating the requirement of substantial evidence. Indeed, when there is a showing
that the findings or conclusions, drawn from the same pieces of evidence, were arrived at
arbitrarily or in disregard of the evidence on record, they may be reviewed by the courts. In
particular, the CA can grant the petition for certiorariif it finds that the NLRC, in its assailed
decision or resolution, made a factual finding not supported by substantial evidence. A
decision that is not supported by substantial evidence is definitely a decision tainted with
grave abuse of discretion.
The labor tribunals’ respective conclusions that the petitioner’s pregnancy is a "disgraceful
or immoral conduct" were arrived at arbitrarily.
The CA and the labor tribunals affirmed the validity of the petitioner’s dismissal
pursuant to Section 94(e) of the 1992 MRPS, which provides that:
Sec. 94. Causes of Terminating Employment – In addition to the just causes enumerated
in the Labor Code, the employment of school personnel, including faculty, may be
terminated for any of the following causes:
xxxx
e. Disgraceful or immoral conduct;
xxxx
The labor tribunals concluded that the petitioner’s pregnancy out of wedlock, per se, is
"disgraceful and immoral"considering that she is employed in a Catholic educational
institution. In arriving at such conclusion, the labor tribunals merely assessed the fact of the
petitioner’s pregnancy vis-à-visthe totality of the circumstances surrounding the same.
However, the Court finds no substantial evidence to support the aforementioned
conclusion arrived at by the labor tribunals. The fact of the petitioner’s pregnancy out of
wedlock, without more, is not enough to characterize the petitioner’s conduct as disgraceful
or immoral. There must be substantial evidence to establish that pre-marital sexual relations
and, consequently, pregnancy outof wedlock, are indeed considered disgraceful or immoral.
The totality of the circumstances surrounding the conduct alleged to be disgraceful or
immoral must be assessed against the prevailing norms of conduct.
In Chua-Qua v. Clave, the Court stressed that to constitute immorality, the
circumstances of each particular case must be holistically considered and evaluated in light
of the prevailing norms of conductand applicable laws. Otherwise stated, it is not the totality
of the circumstances surrounding the conduct per se that determines whether the same is
disgraceful or immoral, but the conduct that is generally accepted by society as respectable
or moral. If the conduct does not conform to what society generally views as respectable or
moral, then the conduct is considered as disgraceful or immoral. Tersely put, substantial
evidence must be presented, which would establish that a particular conduct, viewed in light
of the prevailing norms of conduct, is considered disgraceful or immoral.
Thus, the determination of whether a conduct is disgraceful or immoral involves a two-
step process: first, a consideration of the totality of the circumstances surrounding the
conduct; and second, an assessment of the said circumstances vis-à-visthe prevailing
norms of conduct, i.e., what the society generally considers moral and respectable.
That the petitioner was employed by a Catholic educational institution per se does not
absolutely determine whether her pregnancy out of wedlock is disgraceful or immoral. There
is still a necessity to determine whether the petitioner’s pregnancy out of wedlock is
considered disgraceful or immoral in accordance with the prevailing norms of conduct.
Public and secular morality should determine the prevailing norms of conduct, not religious
morality.
However, determining what the prevailing norms of conduct are considered disgraceful
or immoral is not an easy task. An individual’s perception of what is moral or respectable is
a confluence of a myriad of influences, such as religion, family, social status, and a
cacophony of others. In this regard, the Court’s ratiocination in Estrada v. Escritor is
instructive.
In Estrada, an administrative case against a court interpreter charged with disgraceful
and immoral conduct, the Court stressed that in determining whether a particular conduct
can be considered as disgraceful and immoral, the distinction between public and secular
morality on the one hand, and religious morality, on the other, should be kept in mind. That
the distinction between public and secular morality and religious morality is important
because the jurisdiction of the Court extends only to public and secular morality. The Court
further explained that:
The morality referred to in the law is public and necessarily secular, not religiousx x x.
"Religious teachings as expressed in public debate may influence the civil public order
but public moral disputes may be resolved only on grounds articulable in secular terms."
Otherwise, if government relies upon religious beliefs in formulating public policies and
morals, the resulting policies and morals would require conformity to what some might
regard as religious programs or agenda.The non-believers would therefore be compelled
to conform to a standard of conduct buttressed by a religious belief, i.e., to a "compelled
religion," anathema to religious freedom. Likewise, if government based its actions upon
religious beliefs, it would tacitly approve or endorse that belief and thereby also tacitly
disapprove contrary religious or non-religious views that would not support the policy. As
a result, government will not provide full religious freedom for all its citizens, or even make
it appear that those whose beliefs are disapproved are second-class citizens. Expansive
religious freedom therefore requires that government be neutral in matters of religion;
governmental reliance upon religious justification is inconsistent with this policy of
neutrality.
In other words, government action, including its proscription of immorality as expressed
in criminal law like concubinage, must have a secular purpose. That is, the government
proscribes this conduct because it is "detrimental (or dangerous) to those conditions upon
which depend the existence and progress of human society" and not because the conduct
is proscribed by the beliefs of one religion or the other. Although admittedly, moral
judgments based on religion might have a compelling influence on those engaged in
public deliberations over what actions would be considered a moral disapprobation
punishable by law. After all, they might also be adherents of a religion and thus have
religious opinions and moral codes with a compelling influence on them; the human mind
endeavors to regulate the temporal and spiritual institutions of society in a uniform
manner, harmonizing earth with heaven. Succinctly put, a law could be religious or
Kantian or Aquinian or utilitarian in its deepest roots, but it must have an articulable and
discernible secular purpose and justification to pass scrutiny of the religion clauses.x x x.
(Citations omitted and emphases ours)
Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it
pertains to public and secular morality; it refers to those conducts which are proscribed
because they are detrimental to conditions upon which depend the existence and progress
of human society. Thus, in Anonymous v. Radam, an administrative case involving a court
utility worker likewise charged with disgraceful and immoral conduct, applying the doctrines
laid down in Estrada, the Court held that:
For a particular conduct to constitute "disgraceful and immoral" behavior under civil
service laws, it must be regulated on account of the concerns of public and secular
morality. It cannot be judged based on personal bias, specifically those colored by
particular mores. Nor should it be grounded on "cultural" values not convincingly
demonstrated to have been recognized in the realm of public policy expressed in the
Constitution and the laws. At the same time, the constitutionally guaranteed rights (such
as the right to privacy) should be observed to the extent that they protect behavior that
may be frowned upon by the majority.
Under these tests, two things may be concluded from the fact that an unmarried woman
gives birth out of wedlock:
(1) if the father of the child is himself unmarried, the woman is not ordinarily
administratively liable for disgraceful and immoral conduct.It may be a not-so-ideal
situation and may cause complications for both mother and child but it does not
give cause for administrative sanction. There is no law which penalizes an
unmarried mother under those circumstances by reason of her sexual conduct or
proscribes the consensual sexual activity between two unmarried persons.
Neither does the situation contravene any fundamental state policy as expressed
in the Constitution, a document that accommodates various belief systems
irrespective of dogmatic origins.
(2) if the father of the child born out of wedlock is himself married to a woman
other thanthe mother, then there is a cause for administrative sanction against
either the father or the mother. In sucha case, the "disgraceful and immoral
conduct" consists of having extramarital relations with a married person. The
sanctity of marriage is constitutionally recognized and likewise affirmed by our
statutes as a special contract of permanent union. Accordingly, judicial employees
have been sanctioned for their dalliances with married persons or for their own
betrayals of the marital vow of fidelity.
In this case, it was not disputed that, like respondent, the father of her child was
unmarried. Therefore, respondent cannot be held liable for disgraceful and immoral
conduct simply because she gave birth to the child Christian Jeon out of
wedlock. (Citations omitted and emphases ours)
Both Estrada and Radamare administrative cases against employees in the civil
service. The Court, however, sees no reason not to apply the doctrines enunciated in
Estrada and Radamin the instant case. Estrada and Radamalso required the Court to
delineate what conducts are considered disgraceful and/or immoral as would constitute a
ground for dismissal. More importantly, as in the said administrative cases, the instant case
involves an employee’s security of tenure; this case likewise concerns employment, which is
not merely a specie of property right, but also the means by which the employee and those
who depend on him live.
It bears stressing that the right of an employee to security of tenure is protected by the
Constitution. Perfunctorily, a regular employee may not be dismissed unless for cause
provided under the Labor Code and other relevant laws, in this case, the 1992 MRPS. As
stated above, when the law refers to morality, it necessarily pertains to public and secular
morality and not religious morality. Thus, the proscription against "disgraceful or immoral
conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal,
must necessarily refer to public and secular morality. Accordingly, in order for a conduct
tobe considered as disgraceful or immoral, it must be "‘detrimental (or dangerous) to those
conditions upon which depend the existence and progress of human society’ and not
because the conduct is proscribed by the beliefs of one religion or the other."
Thus, in Santos v. NLRC, the Court upheld the dismissal of a teacher who had an
extra-marital affair with his co-teacher, who is likewise married, on the ground of disgraceful
and immoral conduct under Section 94(e) of the 1992 MRPS. The Court pointed out that
extra-marital affair is considered as a disgraceful and immoral conduct is an afront to the
sanctity of marriage, which is a basic institution of society, viz:
We cannot overemphasize that having an extra-marital affair is an afront to the
sanctity of marriage, which is a basic institution of society. Even our Family Code provides
that husband and wife must live together, observe mutual love, respect and fidelity. This
is rooted in the fact that both our Constitution and our laws cherish the validity of marriage
and unity of the family. Our laws, in implementing this constitutional edict on marriage and
the family underscore their permanence, inviolability and solidarity.
The petitioner’s pregnancy out of wedlock is not a disgraceful or immoral conduct since she
and the father of her child have no impediment to marry each other.
In stark contrast to Santos, the Court does not find any circumstance in this case which
would lead the Court to conclude that the petitioner committed a disgraceful or immoral
conduct. It bears stressing that the petitioner and her boyfriend, at the time they conceived a
child, had no legal impediment to marry. Indeed, even prior to her dismissal, the petitioner
married her boyfriend, the father of her child. As the Court held in Radam, there is no law
which penalizes an unmarried mother by reason of her sexual conduct or proscribes the
consensual sexual activity between two unmarried persons; that neither does such situation
contravene any fundamental state policy enshrined in the Constitution.
Admittedly, the petitioner is employed in an educational institution where the teachings
and doctrines of the Catholic Church, including that on pre-marital sexual relations, is strictly
upheld and taught to the students. That her indiscretion, which resulted in her pregnancy
out of wedlock, is anathema to the doctrines of the Catholic Church. However, viewed
against the prevailing norms of conduct, the petitioner’s conduct cannot be considered as
disgraceful or immoral; such conduct is not denounced by public and secular morality. It
may be an unusual arrangement, but it certainly is not disgraceful or immoral within the
contemplation of the law.
To stress, pre-marital sexual relations between two consenting adults who have no
impediment to marry each other, and, consequently, conceiving a child out of wedlock,
gauged from a purely public and secular view of morality, does not amount to a disgraceful
or immoral conduct under Section 94(e) of the 1992 MRPS.
Accordingly, the labor tribunals erred in upholding the validity of the petitioner’s
dismissal. The labor tribunals arbitrarily relied solely on the circumstances surrounding the
petitioner’s pregnancy and its supposed effect on SSCW and its students without evaluating
whether the petitioner’s conduct is indeed considered disgraceful or immoral in view of the
prevailing norms of conduct. In this regard, the labor tribunals’ respective haphazard
evaluation of the evidence amounts to grave abuse of discretion, which the Court will rectify.
The labor tribunals’ finding that the petitioner’s pregnancy out of wedlock despite the
absence of substantial evidence is not only arbitrary, but a grave abuse of discretion, which
should have been set right by the CA.
There is no substantial evidence to prove that the petitioner’s pregnancy out of wedlock
caused grave scandal to SSCW and its students.
SSCW claimed that the petitioner was primarily dismissed because her pregnancy out
of wedlock caused grave scandal to SSCW and its students. That the scandal brought
about by the petitioner’s indiscretion prompted them to dismiss her. The LA upheld the
respondents’ claim, stating that:
In this particular case, an "objective" and "rational evaluation" of the facts and
circumstances obtaining in this case would lead us to focus our attention x x x on the
impact of the act committed by the complainant. The act of the complainant x x x eroded
the moral principles being taught and project[ed] by the respondent [C]atholic school to
their young lady students. (Emphasis in the original)
On the other hand, the NLRC opined that:
In the instant case, when the complainant-appellant was already conceiving a child even
before she got married, such is considered a shameful and scandalous behavior, inimical
to public welfare and policy. It eroded the moral doctrines which the respondent Catholic
school, an exclusive school for girls, is teaching the young girls. Thus, when the
respondent-appellee school terminated complainant-appellant’s services, it was a valid
exercise of its management prerogative. Whether or not she was a teacher is of no
moment. There is no separate set of rules for non-teaching personnel. Respondents-
appellees uphold the teachings of the Catholic Church on pre-marital sex and that the
complainant-appellant as an employee of the school was expected to abide by this basic
principle and to live up with the standards of their purely Catholic values. Her subsequent
marriage did not take away the fact that she had engaged in pre-marital sex which the
respondent-appellee school denounces as the same is opposed to the teachings and
doctrines it espouses. (Emphasis ours)
Contrary to the labor tribunals’ declarations, the Court finds that SSCW failed to adduce
substantial evidence to prove that the petitioner’s indiscretion indeed caused grave scandal
to SSCW and its students. Other than the SSCW’s bare allegation, the records are bereft of
any evidence that would convincingly prove that the petitioner’s conduct indeed adversely
affected SSCW’s integrity in teaching the moral doctrines, which it stands for. The petitioner
is only a non-teaching personnel; her interaction with SSCW’s students is very limited. Itis
thus quite impossible that her pregnancy out of wedlock caused such a grave scandal, as
claimed by SSCW, as to warrant her dismissal.
Settled is the rule that in termination cases, the burden of proving that the dismissal of
the employees was for a valid and authorized cause rests on the employer. It is incumbent
upon the employer to show by substantial evidence that the termination of the employment
of the employees was validly made and failure to discharge that duty would mean that the
dismissal is not justified and therefore illegal. "Substantial evidence is more than a mere
scintilla of evidence. It means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds equally reasonable might conceivably
opine otherwise."
Indubitably, bare allegations do not amount to substantial evidence. Considering that
the respondents failed to adduce substantial evidence to prove their asserted cause for the
petitioner’s dismissal, the labor tribunals should not have upheld their allegations hook, line
and sinker. The labor tribunals’ respective findings, which were arrived at sans any
substantial evidence, amounts to a grave abuse of discretion, which the CA should have
rectified. "Security of tenure is a right which may not be denied on mere speculation of any
unclear and nebulous basis."
The petitioner’s dismissal is not a valid exercise of SSCW’s management prerogative.
The CA be labored the management prerogative of SSCW to discipline its employees.
The CA opined that the petitioner’s dismissal is a valid exercise of management prerogative
to impose penalties on erring employees pursuant to its policies, rules and regulations.
The Court does not agree.
The Court has held that "management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers. The exercise of management prerogative,
however, is not absolute as it must be exercised in good faith and with due regard to the
rights of labor." Management cannot exercise its prerogative in a cruel, repressive, or
despotic manner.
SSCW, as employer, undeniably has the right to discipline its employees and, if need
be, dismiss them if there is a valid cause to do so. However, as already explained, there is
no cause to dismiss the petitioner. Her conduct is not considered by law as disgraceful or
immoral. Further, the respondents themselves have admitted that SSCW, at the time of the
controversy, does not have any policy or rule against an employee who engages in pre-
marital sexual relations and conceives a child as a result thereof. There being no valid basis
in law or even in SSCW’s policy and rules, SSCW’s dismissal of the petitioner is despotic
and arbitrary and, thus, not a valid exercise of management prerogative.
In sum, the Court finds that the petitioner was illegally dismissed as there was no just
cause for the termination of her employment. SSCW failed to adduce substantial evidence
to establish that the petitioner’s conduct, i.e., engaging in pre-marital sexual relations and
conceiving a child out of wedlock, assessed in light of the prevailing norms of conduct, is
considered disgraceful or immoral. The labor tribunals gravely abused their discretion in
upholding the validity of the petitioner’s dismissal as the charge against the petitioner lay not
on substantial evidence, but on the bare allegations of SSCW. In turn, the CA committed
reversible error in upholding the validity of the petitioner’s dismissal, failing to recognize that
the labor tribunals gravely abused their discretion in ruling for the respondents.
The petitioner is entitled to separation pay, in lieu of actual reinstatement, full backwages
and attorney’s fees, but not to moral and exemplary damages.
Having established that the petitioner was illegally dismissed, the Court now
determines the reliefs that she is entitled to and their extent. Under the law and prevailing
jurisprudence, "an illegally dismissed employee is entitled to reinstatement as a matter of
right." Aside from the instances provided under Articles 283 and 284 of the Labor Code,
separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal, the
accepted doctrine is that separation pay is available in lieu of reinstatement when the latter
recourse is no longer practical or in the best interest of the parties.
In Divine Word High School v. NLRC, the Court ordered the employer Catholic school
to pay the illegally dismissed high school teacher separation pay in lieu of actual
reinstatement since her continued presence as a teacher in the school "may well be met
with antipathy and antagonism by some sectors in the school community."
In view of the particular circumstances of this case, it would be more prudent to direct
SSCW to pay the petitioner separation pay in lieu of actual reinstatement. The continued
employment of the petitioner with SSCW would only serve to intensify the atmosphere of
antipathy and antagonism between the parties. Consequently, the Court awards separation
pay to the petitioner equivalent to one (1) month pay for every year of service, with a
fraction of at least six (6) months considered as one (1) whole year, from the time of her
illegal dismissal up to the finality of this judgment, as an alternative to reinstatement.
Also, "employees who are illegally dismissed are entitled to full back wages, inclusive of
allowances and other benefits or their monetary equivalent, computed from the time their
actual compensation was withheld from them up to the time of their actual reinstatement but
if reinstatement is no longer possible, the back wages shall be computed from the time of
their illegal termination up to the finality of the decision." Accordingly, the petitioner is
entitled to an award of full back wages from the time she was illegally dismissed up to the
finality of this decision.
Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A
dismissed employee is entitled to moral damages when the dismissal is attended by bad
faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to
good morals, good customs or public policy. Exemplary damages may be awarded if the
dismissal is effected in a wanton, oppressive or malevolent manner."
"Bad faith, under the law, does not simply connote bad judgment or negligence. It
imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, or a
breach of a known duty through some motive or interest or ill will that partakes of the nature
of fraud."
"It must be noted that the burden of proving bad faith rests on the one alleging it" since
basic is the principle that good faith is presumed and he who alleges bad faith has the duty
to prove the same. "Allegations of bad faith and fraud must be proved by clear and
convincing evidence."
 The records of this case are bereft of any clear and convincing evidence showing that
the respondents acted in bad faith or in a wanton or fraudulent manner in dismissing the
petitioner. That the petitioner was illegally dismissed is insufficient to prove bad faith. A
dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle
the dismissed employee to moral damages. The award of moral and exemplary damages
cannot be justified solely upon the premise that the employer dismissed his employee
without cause.

However, the petitioner is entitled to attorney’s fees in the amount of 10% of the total
monetary award pursuant to Article 111 of the Labor Code. "It is settled that where an
employee was forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney’s fees is legally and morally justifiable."

Finally, legal interest shall be imposed on the monetary awards herein granted at the
rate of six percent (6%) per annumfrom the finality of this judgment until fully paid.

WHEREFORE, in consideration of the foregoing disquisitions, the petition is

GRANTED. The Decision dated September 24, 2008 and Resolution dated March 2, 2009
of the Court of Appeals in CA-G.R. SP No. 100188 are hereby REVERSED and SET
ASIDE.

The respondent, St. Scholastica’s College Westgrove, is hereby declared guilty of

illegal dismissal and is hereby ORDERED to pay the petitioner, Cheryll Santos Leus, the
following: (a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay
for every year of service, with a fraction of at least six (6) months considered as one (1)
whole year from the time of her dismissal up to the finality of this Decision; (b) full
backwages from the time of her illegal dismissal up to the finality of this Decision; and (c)
attorney’s fees equivalent to ten percent (10%) of the total monetary award. The monetary
awards herein granted shall earn legal interest at the rate of six percent (6%) per
annumfrom the date of the finality of this Decision untilfully paid. The case is REMANDED
to the Labor Arbiter for the computation of petitioner’s monetary awards.
SO ORDERED.

Notes.—Immoral conduct is conduct which is willful, flagrant or shameless, and which shows a moral
indifference to the opinion of the good and respectable members of the community; A court employees’
act of maintaining an illicit relationship with a woman not his wife is, within the purview of Section
46(b)(5) of Subtitle A, Title I, Book V of the Administrative Code of 1987, disgraceful and immoral
conduct. (Elape vs. Elape, 551 SCRA 403 [2008])

Under Section 52(A)(15), Rule IV of the Uniform Rules on Administrative Cases in the Civil Service,
disgraceful and immoral conduct is classified as a grave offense for which the imposable penalty for the
first offense is six months and one day to one year while the penalty for the second offense is dismissal.
(Gibas, Jr. vs. Gibas, 646 SCRA 110 [2011])

——o0o——
 G.R. No. 221493. August 2, 2017 bawal, bakit bawal ba magpahinga?” Not contented, Esponga gave her supervisor the “dirty finger” sign
and said “Wala ka pala eh, puro ka dakdak. Baka pag ako nagsalita hindi mo kayanin.” It must be noted
STERLING PAPER PRODUCTS ENTERPRISES, INC., petitioner, vs. KMM-KATIPUNAN that he committed all these acts in front of his co-employees, which evidently showed that he intended
to disrespect and humiliate his supervisor. “An aggrieved employee who wants to unburden himself of
and RAYMOND Z. ESPONGA, respondents.
his disappointments and frustrations in his job or relations with his immediate superior would normally
approach said superior directly or otherwise ask some other officer possibly to mediate and discuss the
Labor Law; Termination of Employment; Illegal Dismissals; Burden of Proof; In cases of illegal
problem with the end in view of settling their differences without causing ferocious conflicts. No matter
dismissal, the employer bears the burden of proof to prove that the termination was for a valid or
how the employee dislikes his employer professionally, and even if he is in a confrontational disposition,
authorized cause.—In cases of illegal dismissal, the employer bears the burden of proof to prove that
he cannot afford to be disrespectful and dare to talk with an unguarded tongue and/or with a baleful
the termination was for a valid or authorized cause. In support of its allegation, Sterling submitted the
pen.”
handwritten statement of Pesimo who witnessed the incident between Esponga and Vinoya on June 26,
2010. Pesimo, however, recanted her statement.
Same; Same; Management Prerogative; Time and again, the Supreme Court (SC) has put
emphasis on the right of an employer to exercise its management prerogative in dealing with its affairs
Remedial Law; Evidence; Recantation; The rule is settled that in cases where the previous
including the right to dismiss its erring employees.—Time and again, the Court has put emphasis on the
testimony is retracted and a subsequent different, if not contrary, testimony is made by the same
right of an employer to exercise its management prerogative in dealing with its affairs including the right
witness, the test to decide which testimony to believe is one of comparison coupled with the application
to dismiss its erring employees. It is a general principle of labor law to discourage interference with an
of the general rules of evidence.—A recantation does not necessarily cancel an earlier declaration. The
employer’s judgment in the conduct of his business. As already noted, even as the law is solicitous of
rule is settled that in cases where the previous testimony is retracted and a subsequent different, if not
the welfare of the employees, it also recognizes the employer’s exercise of management prerogatives.
contrary, testimony is made by the same witness, the test to decide which testimony to believe is one of
As long as the company’s exercise of judgment is in good faith to advance its interest and not for the
comparison coupled with the application of the general rules of evidence. A testimony solemnly given in
purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such
court should not be set aside and disregarded lightly, and before this can be done, both the previous
exercise will be upheld.
testimony and the subsequent one should be carefully compared and juxtaposed, the circumstances
under which each was made, carefully and keenly scrutinized, and the reasons and motives for the
change discriminately analysed.

Labor Law; Termination of Employment; Misconduct; For misconduct or improper behavior to be a
just cause for dismissal, the following elements must concur: (a) the misconduct must be serious; (b) it
must relate to the performance of the employee’s duties showing that the employee has become unfit to
continue working for the employer; and (c) it must have been performed with wrongful intent.—Under
Article 282(a) of the Labor Code, serious misconduct by the employee justifies the employer in
terminating his or her employment. Misconduct is defined as an improper or wrong conduct. It is a
transgression of some established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error in judgment. To constitute a valid
cause for the dismissal within the text and meaning of Article 282 of the Labor Code, the employee’s
misconduct must be serious, i.e., of such grave and aggravated character and not merely trivial or
unimportant. Additionally, the misconduct must be related to the performance of the employee’s duties
showing him to be unfit to continue working for the employer. Further, and equally important and
required, the act or conduct must have been performed with wrongful intent. To summarize, for
misconduct or improper behavior to be a just cause for dismissal, the following elements must concur:
(a) the misconduct must be serious; (b) it must relate to the performance of the employee’s duties
showing that the employee has become unfit to continue working for the employer; and (c) it must have
been performed with wrongful intent. In the case at bench, the charge of serious misconduct is duly
substantiated by the evidence on record. Primarily, in a number of cases, the Court has consistently
ruled that the utterance of obscene, insulting or offensive words against a superior is not only
destructive of the morale of his co-employees and a violation of the company rules and regulations, but
also constitutes gross misconduct.
Same; Same; Inflammatory Language; It is well-settled that accusatory and inflammatory
language used by an employee towards his employer or superior can be a ground for dismissal or
termination.—Hence, it is well-settled that accusatory and inflammatory language used by an employee
towards his employer or superior can be a ground for dismissal or termination. Further, Esponga’s
assailed conduct was related to his work. Vinoya did not prohibit him from taking a nap. She merely
reminded him that he could not do so on the sheeter machine for safety reasons. Esponga’s acts reflect
an unwillingness to comply with reasonable management directives. Finally, contrary to the CA’s
pronouncement, the Court finds that Esponga was motivated by wrongful intent. To reiterate, Vinoya
prohibited Esponga from sleeping on the sheeter machine. Later on, when Vinoya was passing by,
Esponga uttered “Huwag maingay, puro bawal.” When she confronted him, he retorted “Puro kayo
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the December 22,
2014 Decision and October 27, 2015 Resolution of the Court of Appeals (CA) in CA-G.R.
SP No. 124596, which nullified the November 15, 2011 Decision and March 2, 2012
Resolution of the National Labor Relations Commission (NLRC)in NLRC CN. RAB-III-11-
17024-10/ NLRC LAC No. 09-002429-11. The NLRC reversed and set aside the May 5,
2011 Decision of the Labor Arbiter (LA).
The Antecedents
On July 29, 1998, petitioner Sterling Paper Products Enterprises, Inc. (Sterling) hired
respondent Raymond Z. Esponga (Esponga), as machine operator.
In June 2006, Sterling imposed a 20-day suspension on several employees including
Esponga, for allegedly participating in a wildcat strike. The Notice of Disciplinary Action
contained a warning that a repetition of a similar offense would compel the management to
impose the maximum penalty of termination of services.
Sterling averred that on June 26, 2010, their supervisor Mercy Vinoya (Vinoya), found
Esponga and his co-employees about to take a nap on the sheeter machine. She called
their attention and prohibited them from taking a nap thereon for safety reasons.
Esponga and his co-employees then transferred to the mango tree near the staff
house. When Vinoya passed by the staff house, she heard Esponga utter, "Huwag maingay,
puro bawal. " She then confronted Esponga, who responded in a loud and disrespectful
tone, "Pura kayo bawal, bakit bawal ba magpahinga.? ,
When Vinoya turned away, Esponga gave her the "dirty finger" sign in front of his co-
employees and said "Wala ka pala eh, puro ka dakdak. Baka pag ako nagsalita hindi mo
kayanin. " The incident was witnessed by Mylene Pesimo (Pesimo), who executed a
handwritten account thereon. Later that day, Esponga was found to have been not working
as the machine assigned to him was not running from 2:20 to 4:30 in the afternoon.
Instead, he was seen to be having a conversation with his co-employees, Bobby Dolor
and Ruel Bertulfo. Additionally, he failed to submit his daily report from June 21 to June 29,
2010.
Hence, a Notice to Explain, dated July 26, 2010, was served on Esponga on July 30,
2010, requiring him to submit his written explanation and to attend the administrative
hearing scheduled on August 9, 2010.
On August 9, 2010, Esponga submitted his written explanation denying the charges
against him. He claimed that he did not argue with Vinoya as he was not in the area where
the incident reportedly took place. Esponga further reasoned that during the time when he
was not seen operating the machine assigned to him, he was at the Engineering
Department and then he proceeded to the comfort room.
The July 26, 2010 Notice to Explain, however, indicated a wrong date when the incident
allegedly happened. Thus, an amended Notice to Explain, dated August 16, 2010, was
issued to Esponga requiring him to submit his written explanation and to attend the
administrative hearing scheduled on August 23, 2010. Esponga, however, failed to submit
his written explanation and he did not attend the hearing.
In view of Esponga's absence, the administrative hearing was rescheduled. The
hearing was reset several more times because of his failure to appear. The hearing was
finally set on October 4, 2010. Esponga and his counsel, however, still failed to attend.
Having found Esponga guilty of gross and serious misconduct, gross disrespect to
superior and habitual negligence, Sterling sent a termination notice, dated November 15,
2010. This prompted Esponga and KMMKatipunan (respondents) to file a complaint for
illegal dismissal, unfair labor practice, damages, and attorney's fees against Sterling.
The LA Ruling
In its May 5, 2011 Decision, the LA ruled that Esponga was illegally dismissed. It held
that Sterling failed to discharge the burden of proof for failure to submit in evidence the
company's code of conduct, which was used as basis to dismiss Esponga. The fallo reads:
WHEREFORE, premises considered, respondents are found to have failed to
discharge their burden of proof, therefore, there is illegal dismissal.
Consequently, respondent corporation is hereby ordered to reinstate complainant
to his former position without loss of seniority rights and other privileges, with full
backwages initially computed at this time at ₱51,148.36.
The reinstatement aspect of this decision is immediately executory even as
respondents are hereby enjoined to submit a report of compliance therewith within ten
(10) days from receipt hereof.
Respondent corporation is likewise assessed 10% attorney's fee in favor of the
complaint in the sum of ₱5,114,84.
All other claims are hereby dismissed for lack of merit.
SO ORDERED.
Not in conformity, Sterling elevated an appeal before the NLRC.
The NLRC Ruling
In its November 15, 2011 Decision, the NLRC reversed and set aside the LA ruling. It
declared that Esponga's dismissal was valid. The NLRC observed that as a result of the
June 26, 2010 incident, Esponga no longer performed his duties and simply spent the
remaining working hours talking with his co-workers. >>
It opined that Esponga intentionally did all these infractions on the same day to show
his defiance and displeasure with Vinoya, who prohibited him from sleeping on the sheeter
machine. It concluded that these were all violations of the Company Code of Conduct and
Discipline, and constituted a valid cause for termination of employment under the Labor
Code. The NLRC disposed the case in this wise:
WHEREFORE, premises considered, the appeal is GRANTED. The Decision appealed
from is REVERSED and SET ASIDE, and a new one issued DISMISSING the complaint.
SO ORDERED.
Undeterred, respondents filed a motion for reconsideration. In its March 2, 2012
Resolution, the NLRC denied the same.
Aggrieved, the respondents filed a petition for certiorari with the CA.
The CA Ruling
It’s assailed December 22, 2014 Decision, the CA reinstated the LA ruling. It held that
the utterances and gesture did not constitute serious misconduct. The CA stated that
Esponga may have committed an error of judgment in uttering disrespectful and provocative
words against his superior and in making a lewd gesture, but it could not be said that his
actuations were motivated by a wrongful intent. It adjudged that Esponga's utterances and
gesture sprung from the earlier incident which he perceived as unfairly preventing him from
taking a rest from work. As such, the CA ruled that Esponga's actuations could only be
regarded as simple misconduct. The dispositive portion reads:
WHEREFORE, the Petition is GRANTED. The Decision dated November 15, 2011 and
Resolution dated March 2, 2012 of the National Labor Relations Commission are SET
ASIDE. The Decision dated May 5, 2011 of Labor Arbiter Leandro Jose is REINSTATED
in full.
SO ORDERED.
Sterling moved for reconsideration, but the CA denied its motion in its assailed October
27, 2015 Resolution.
Hence, this petition for review.
ISSUE
WHETHER THE CAUSE OF ESPONGA'S DISMISSAL AMOUNTS TO SERIOUS
MISCONDUCT
Sterling argues that Esponga's utterance of foul and abusive language against his
supervisor, demonstrating a dirty finger, and defiance to perform his duties undeniably
constitute serious misconduct. It added that Esponga's acts were not only serious, but they
also related to the performance of his duties. Further, Sterling asserts that he was motivated
by wrongful intent.
 In his Comment, dated September 30, 2016, Esponga replied that Sterling failed to
establish the validity of his dismissal by clear and convincing evidence. He insisted that if
doubts exist between the evidence presented by the employer and the employee, the scales
of justice must be tilted in favor of the latter because the employer must affirmatively show
rationally adequate evidence that the dismissal was for a justifiable cause.
In its Reply, dated January 30, 2017, Sterling contended that Esponga's failure to
participate in the administrative investigation conducted on his infraction was a clear
manifestation of his lack of discipline. It asserted that the existence of just and valid cause
for Esponga's dismissal and its compliance with the due process requirements had been
proven by clear, convincing and substantial evidence on record. Sterling reasoned that an
employer has free rein and enjoys wide latitude of discretion to regulate all aspects of
employment, including the prerogative to instil discipline in its employees and to impose
penalties, including dismissal, upon erring employees.
The Court's Ruling
The petition is meritorious.
Pesimo's retraction has no probative value
In cases of illegal dismissal, the employer bears the burden of proof to prove that the
termination was for a valid or authorized cause. In support of its allegation, Sterling
submitted the handwritten statement of Pesimo who witnessed the incident between
Esponga and Vinoya on June 26, 2010. Pesimo, however, recanted her statement.
A recantation does not necessarily cancel an earlier declaration. The rule is settled that
in cases where the previous testimony is retracted and a subsequent different, if not
contrary, testimony is made by the same witness, the test to decide which testimony to
believe is one of comparison coupled with the application of the general rules of evidence. A
testimony solemnly given in court should not be set aside and disregarded lightly, and
before this can be done, both the previous testimony and the subsequent one should be
carefully compared and juxtaposed, the circumstances under which each was made,
carefully and keenly scrutinized, and the reasons and motives for the change discriminately
analysed.
In this case, Pesimo's earlier statement was more credible as there was no proof, much
less an allegation, that the same was made under force or intimidation. It must be noted that
Pesimo's recantation was made only after Esponga came to see her. Nevertheless, in a text
message she sent to Vinoya on January 24, 2011, Pesimo did not deny the contents of her
earlier statement. She merely expressed concern over Esponga's discovery that she had
executed a sworn statement corroborating Vinoya's narration of the incident. Thus, her
earlier statement prevails over her subsequent recantation.
Dismissal from employment on the ground of serious misconduct
Under Article 282 (a) of the Labor Code, serious misconduct by the employee justifies
the employer in terminating his or her employment.
Misconduct is defined as an improper or wrong conduct. It is a transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. To constitute a valid
cause for the dismissal within the text and meaning of Article 282 of the Labor Code, the
employee's misconduct must be serious, i.e., of such grave and aggravated character and
not merely trivial or unimportant.
Additionally, the misconduct must be related to the performance of the employee's
duties showing him to be unfit to continue working for the employer. Further, and equally
important and required, the act or conduct must have been performed with wrongful intent.
To summarize, for misconduct or improper behavior to be a just cause for dismissal,
the following elements must concur: (a) the misconduct must be serious; (b) it must relate to
the performance of the employee's duties showing that the employee has become unfit to
continue working for the employer; and (c) it must have been performed with wrongful
intent.
lIn the case at bench, the charge of serious misconduct is duly substantiated by the
evidence on record.
Primarily, in a number of cases, the Court has consistently ruled that the utterance of
obscene, insulting or offensive words against a superior is not only destructive of the morale
of his co-employees and a violation of the company rules and regulations, but also
constitutes gross misconduct.
In de La Cruz v. National Labor Relations Commission, the dismissed employee
shouted, "Sayang ang pagka-professional mo!" and "Putang ina mo" at the company
physician when the latter refused to give him a referral slip.
Likewise, inAutobus Workers' Union (AWU) v. National Labor Relations
Commission, the dismissed employee told his supervisor "Gago ka" and taunted the latter
by saying, "Bakit anong gusto mo, tang ina mo."
Moreover, in Asian Design and Manufacturing Corporation v. Deputy Minister of
Labor, the dismissed employee made false and malicious statements against the foreman
(his superior) by telling his co-employees: "If you don't give a goat to the foreman, you will
be terminated. If you want to remain in this company, you have to give a goat." The
dismissed employee therein likewise posted a notice in the comfort room of the company
premises, which read: "Notice to all Sander -Those who want to remain in this company,
you must give anything to your foreman."
In Reynolds Philippines Corporation v. Eslava, the dismissed employee circulated
several letters to the members of the company's board of directors calling the executive
vice-president and general manager a "big fool," "anti-Filipino" and accusing him of
"mismanagement, inefficiency, lack of planning and foresight, petty favoritism, dictatorial
policies, one-man rule, contemptuous attitude to labor, anti-Filipino utterances and
activities."
Hence, it is well-settled that accusatory and inflammatory language used by an
employee towards his employer or superior can be a ground for dismissal or termination.
 Further, Esponga's assailed conduct was related to his work. Vinoya did not prohibit
him from taking a nap. She merely reminded him that he could not do so on the sheeter
machine for safety reasons. Esponga's acts reflect an unwillingness to comply with
reasonable management directives.

Finally, contrary to the CA' s pronouncement, the Court finds that Esponga was
motivated by wrongful intent. To reiterate, Vinoya prohibited Esponga from sleeping on the
sheeter machine. Later on, when Vinoya was passing by, Esponga uttered "Huwag main
gay, puro bawal. " When she confronted him, he retorted "Pura kayo bawal, bakit bawal ba
magpahinga?" Not contented, Esponga gave her supervisor the "dirty finger" sign and
said "Wala ka pala eh, puro ka dakdak. Baka pag ako nagsalita hindi mo kayanin. " It must
be noted that he committed all these acts in front of his co-employees, which evidently
showed that he intended to disrespect and humiliate his supervisor.

"An aggrieved employee who wants to unburden himself of his disappointments and
frustrations in his job or relations with his immediate superior would normally approach said
superior directly or otherwise ask some other officer possibly to mediate and discuss the
problem with the end in view of settling their differences without causing ferocious conflicts.
No matter how the employee dislikes his employer professionally, and even if he is in a
confrontational disposition, he cannot afford to be disrespectful and dare to talk with an
unguarded tongue and/or with a baleful pen."

Time and again, the Court has put emphasis on the right of an employer to exercise its
management prerogative in dealing with its affairs including the right to dismiss its erring
employees. It is a general principle of labor law to discourage interference with an
employer's judgment in the conduct of his business. As already noted, even as the law is
solicitous of the welfare of the employees, it also recognizes the employer's exercise of
management prerogatives. As long as the company's exercise of judgment is in good faith
to advance its interest and not for the purpose of defeating or circumventing the rights of
employees under the laws or valid agreements, such exercise will be upheld.

WHEREFORE, the petition is GRANTED. The December 22, 2014 Decision and the
October 27, 2015 Resolution of the Court of Appeals in CA-G.R. SP No. 124596 are
hereby REVERSED and SET ASIDE. The November 15, 2011 Decision and the March 2,
2012 Resolution of the National Labor Relations Commission is REINSTATED.
SO ORDERED.

Notes.—As a rule, “an employer cannot be compelled to continue with the employment of workers when
continued employment will prove inimical to the employer’s interests.” (Sutherland Global Services
[Philippines], Inc. vs. Labrador, 719 SCRA 634 [2014])

To constitute a valid cause for dismissal, the employee’s misconduct must be serious, i.e., of such grave
and aggravated character and not merely trivial or unimportant. Additionally, the misconduct must be
related to the performance of the employee’s duties showing him to be unfit to continue working for the
employer. (Universal Canning, Inc. vs. Court of Appeals, 810 SCRA 369 [2016])

——o0o——
 G.R. No. 210080. November 22, 2017.
MACARIO S. PADILLA, petitioner, vs. AIRBORNE SECURITY SERVICE, INC. and/or
CATALINA SOLIS, respondent.
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; Rule 45 petitions, such
as the one brought by petitioner, may only raise questions of law.—Rule 45 petitions, such as the one
brought by petitioner, may only raise questions of law. Equally settled however, is that this rule admits
of the following exceptions: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there
is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of facts are conflicting; (6) when in making its findings the [Court of Appeals] went beyond
the issues of the case, or its findings are contrary to the admissions of both the appellant and the
appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the facts set forth in the petition,
as well as in the petitioner’s main and reply briefs, are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by the evidence
on record; and (11) when the [Court of Appeals] manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different conclusion.
Labor Law; Security Guards; Floating Status or Temporary Off-detail; The practice of placing
security guards on “floating status” or “temporary off-detail” is a valid exercise of management
prerogative.—The practice of placing security guards on “floating status” or “temporary off-detail” is a
valid exercise of management prerogative. Jurisprudence has settled that the period of temporary off-
detail must not exceed six (6) months. Beyond this, a security guard’s floating status shall be
tantamount to constructive dismissal. In Reyes v. RP Guardians Security Agency, 695 SCRA 620
(2013): Temporary displacement or temporary off-detail of security guard is, generally, allowed in a
situation where a security agency’s client decided not to renew their service contract with the agency
and no post is available for the relieved security guard. Such situation does not normally result in a
constructive dismissal. Nonetheless, when the floating status lasts for more than six (6) months, the
employee may be considered to have been constructively dismissed. No less than the Constitution
guarantees the right of workers to security of tenure, thus, employees can only be dismissed for just or
authorized causes and after they have been afforded the due process of law. x x x Therefore, a security
guard’s employer must give a new assignment to the employee within six (6) months. This assignment
must be to a specific or particular client. “A general return-to-work order does not suffice.” A holistic
analysis of the Court’s disposition in JLFP Investigation reveals that: [1] an employer must assign the
security guard to another posting within six (6) months from his last deployment, otherwise, he would be
considered constructively dismissed; and [2] the security guard must be assigned to a specific or
particular client. A general return-to-work order does not suffice.
Same; Same; General Return-to-Work Orders; Jurisprudence is consistent in its disapproval of
general return-to-work orders as a justification for failure to timely render assignments to security
guards.—To prove that petitioner was offered a new assignment, respondents presented a series of
letters requiring petitioner to report to respondent Airborne’s head office. These letters merely required
petitioner to report to work and to explain why he had failed to report to the office. These letters did not
identify any specific client to which petitioner was to be reassigned. The letters were, at best, nothing
more than general return-to-work orders. Jurisprudence is consistent in its disapproval of general
return-to-work orders as a justification for failure to timely render assignments to security guards.
Same; Termination of Employment; Abandonment; For an employee to be considered to have
abandoned his work, two (2) requisites must concur. First, the employee must have failed to report for
work or have been absent without a valid or justifiable reason. Second, the employee must have had a
“clear intention to sever the employer-employee relationship.”—For an employee to be considered to
have abandoned his work, two (2) requisites must concur. First, the employee must have failed to
report for work or have been absent without a valid or justifiable reason. Second, the employee must
have had a “clear intention to sever the employer-employee relationship.” This Court has emphasized
that “the second element [i]s the more determinative factor.” This second element, too, must be
“manifested by some overt acts.” Petitioner’s conduct belies any intent to abandon his work. To the
contrary, it demonstrates how he took every effort to retain his employment. Right after he received the
first letter dated July 27, 2009, he called Airborne’s head office, only to be told that he had no
assignment yet.
Same; Same; Same; Constructive Dismissal; In Tatel v. JLFP Investigation Security Agency, 752
SCRA 55 (2015): An employee who forthwith takes steps to protest his layoff cannot, as a general rule,
be said to have abandoned his work, and the filing of the complaint is proof enough of his desire to
return to work, thus negating any suggestion of abandonment.—Equally belying petitioner’s intent to
abandon his work is his immediate filing of a Complaint for illegal dismissal on February 23, 2010. This
was only eight (8) month after he was placed on floating status. As similarly noted in Tatel v. JLFP
Investigation Security Agency, 752 SCRA 55 (2015): An employee who forthwith takes steps to protest
his layoff cannot, as a general rule, be said to have abandoned his work, and the filing of the complaint
is proof enough of his desire to return to work, thus negating any suggestion of abandonment. x x x
Taking the totality of circumstances into consideration, this Court is unable to conclude that petitioner
abandoned his work. Rather, this Court finds that he was placed on floating status for more than six (6)
months. Thus, he was constructively dismissed.
Same; Same; It is unreasonable to deny employees their means of earning a living exclusively on
the basis of age when there is no other indication that they are incapable of performing their
functions.—It is unreasonable to deny employees their means of earning a living exclusively on the
basis of age when there is no other indication that they are incapable of performing their functions. It is
true that certain tasks require able-bodied individuals. Age, per se, is not a reliable indication of physical
stamina or mental rigor. What is crucial in determining capacity for continuing employment is an
assessment of an employee’s state of health, not his or her biological age. Outside of limitations
founded on scientific and established wisdom such as the age of minority, proscriptions against child
labor, or a standard retirement age, it is unjust to discriminate against workers who are within an age
range that is typical of physical productivity.
LEONEN, J.:
Placing security guards on floating status is a valid exercise of management
prerogative. However, any such placement on off-detail should not exceed six (6) months.
Otherwise, constructive dismissal shall be deemed to have occurred. Security guards
dismissed in this manner are ordinarily entitled to reinstatement. It is not for tribunals
resolving these kinds of dismissal cases to take the initiative to rule out reinstatement.
Otherwise, the discriminatory conduct of their employers in excluding them from
employment shall unwittingly find official approval.
Age, per se, cannot be a valid ground for denying employment to a security guard.
This resolves a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure praying that the assailed April 18, 2013 Decision and November 11, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 122700 be reversed and set aside.
The assailed Court of Appeals April 18, 2013 Decision sustained the August 3, 2011
Decision of the National Labor Relations Commission, which affirmed the September 10,
2010 Decision of Labor Arbiter Fedriel S. Panganiban (Labor Arbiter Panganiban)
dismissing petitioner Macario S. Padilla's (Padilla) Complaint for illegal dismissal. The
assailed Court of Appeals November 11, 2013 Resolution denied petitioner's Motion for
Reconsideration.

On September 1, 1986, Padilla was hired by respondent Airborne Security Service, Inc.
(Airborne) as a security guard. He was first assigned at an outlet of Trebel Piano along
Ortigas Avenue Extension, Pasig City.
Padilla allegedly rendered continuous service until June 15, 2009, when he was
relieved from his post at City Advertising Ventures Corporation and was advised to wait for
his re-assignment order. On July 27, 2009, he allegedly received a letter from Airborne
directing him to report for assignment and deployment. He called Airborne's office but was
told that he had no assignment yet. On September 9, 2009, he received another letter from
Airborne asking him to report to its office. He sent his reply letter on September 22, 2009
and personally reported to the office to inquire on the status of his deployment with a person
identified as Mr. Dagang, Airborne's Director for Operations. He was told that Airborne was
having a hard time finding an assignment for him since he was already over 38 years old.
Padilla added that he was advised by Airborne's personnel to resign, but he refused. In
December 2009, when he reported to the office to collect his 13th month pay, he was again
persuaded to hand in his resignation letter. Still not having been deployed or re-assigned,
on February 23, 2010, Padilla filed his Complaint for illegal dismissal, impleading Airborne
and its president, respondent Catalina Solis (Solis).
Respondents countered that Padilla was relieved from his post on account of a client's
request. Thereafter, Padilla was directed to report to Airborne's office in accordance with a
Disposition/Relieve Order dated June 15, 2009. However, he failed to comply and went on
absence without leave Instead. Respondents added that more letters-dated July 27, 2009;
September 9, 2009, which both directed Padilla to submit a written explanation of his
alleged unauthorized absences; January 12, 2010; and May 27, 2010-instructed Padilla to
report to Airborne's office, to no avail. Respondents further denied receiving Padilla's
September 22, 2009 letter of explanation.
In his September 10, 2010 Decision, Labor Arbiter Panganiban dismissed Padilla's
Complaint. He lent credence to respondents' claim that Padilla failed to report for work
despite the letters sent to him.
In its August 3, 2011 Decision, the National Labor Relations Commission affirmed in
toto Labor Arbiter Panganiban's Decision.
The assailed Court of Appeals April 18, 2013 Decision sustained the rulings of the
National Labor Relations Commission and of Labor Arbiter Panganiban. It concluded that, if
at all, Padilla was placed on floating status for only two (2) months, from June 15, 2009,
when he was recalled, to July 27, 2009. It emphasized that the temporary ''off-detail" or
placing on '"floating" status of security guards for less than six (6) months does not amount
to dismissal and that there is constructive dismissal only when a security agency fails to
provide an assignment beyond the six (6)-month threshold. The Court of Appeals also found
that it was Padilla who failed to report for work despite respondents' July 27, 2009 and
September 9, 2009 letters.
Following the Court of Appeals' denial of his Motion for Reconsideration, Padilla filed
the present Petition before this Court.
For this Court's resolution is the sole issue of whether or not petitioner Macado S.
Padilla was constructively dismissed from his employment with respondent Airborne
Security Service, Inc., he having been placed on floating status apparently on the basis of
his age and not having been timely re-assigned.
The Court of Appeals gravely erred in ruling that petitioner was not constructively dismissed
and in concluding that he went on absence without leave and abandoned his work.
I
Rule 45 petitions, such as the one brought by petitioner, may only raise questions of
law. Equally settled however, is that this rule admits of the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises or conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there
is grave abuse of discretion; (4) 1:vhen the judgment is based on a misapprehension of
facts; (5) when the findings of facts are conflicting; (6) when in making its findings the
[Court of Appeals] went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary to
the trial court; (8) when the findings are conclusions without citation of specific evidence
on which they are based; (9) when the facts set forth in the petition, as well as in the
petitioner's main and reply briefs, are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by
the evidence on record; and (11) When the [Court of Appeals} manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered, would
justify a different conclusion. (Emphasis supplied, citation omitted)
The Court of Appeals made a gross misapprehension of facts and overlooked other material
details. The facts of this case, when more appropriately considered, sustain a conclusion
different from that of the Court of Appeals. Petitioner was constructively dismissed from
employment owing to his inordinately long floating status.
II
The practice of placing security guards on "floating status" or "temporary off-detail" is a valid
exercise of management prerogative. Jurisprudence has settled that the period of temporary
off-detail must not exceed six (6) months. Beyond this, a security guard's floating status
shall be tantamount to constructive dismissal. In Reyes v. RP Guardians Security Agency:
Temporary displacement or temporary off-detail of security guard is, generally, allowed in
a situation where a security agency's client decided not to renew their service contract
with the agency and no post is available for the relieved security guard. Such situation
does not normally result in a constructive dismissal. Nonetheless, when the floating status
lasts for more than six (6) months, the employee may be considered to have been
constructively dismissed. No less than the Constitution guarantees the right of workers to
security of tenure, thus, employees can only be dismissed for just or authorized causes
and after they have been afforded the due process of law. (Emphasis supplied, citations
omitted)
Therefore, a security guard's-employer must give a new assignment to the employee
within six (6) months. This assignment must be to a specific or particular client. "A general
return-to-work order does not suffice.":
A holistic analysis of the Court's disposition in JLFP Investigation reveals that: [1] an
employer must assign the security guard to another posting within six (6) months from his
last deployment, otherwise, he would be considered constructively dismissed; and [2] the
security guard must be assigned to a specific or particular client. A general return-to- work
order does not suffice.
III
To prove that petitioner was offered a new assignment, respondents presented a series
of letters requiring petitioner to report to respondent Airborne's head office. These letters
merely required petitioner to report to work and to explain why he had failed to report to the
office. These letters did not identify any specific client to which petitioner was to be
reassigned. The letters were, at best, nothing more than general return-to-work orders.
Jurisprudence is consistent in its disapproval of general return-to-work orders as a
justification for failure to timely render assignments to security guards.
In Ibon v. Genghis Khan Security Services, petitioner Ravengar Ibon (Ibon) filed a
complaint for illegal dismissal after he was placed on floating status for more than six (6)
months by his employer, respondent Genghis Khan Security Services (Genghis Khan). In its
defense, Genghis Khan claimed that Ibon abandoned his work after he failed to report for
work despite its letters requiring him to do so. Ruling in favor of Ibon, this Court noted that:
Respondent could not rely on its letter requiring petitioner to report back to work to refute
a finding of constructive dismissal. The letters, dated November 5, 2010 and February 3,
2011, which were supposedly sent to petitioner merely re-quested him to report back to
work and to explain why he failed to report to the office after inquiring about his posting
status.
Similarly, in Soliman Security Services, Inc. v. Sarmiento, respondent security guards
claimed that they were illegally dismissed after they were placed on floating status for more
than six (6) months. Their employer, petitioner Soliman Security Services, Inc. (Soliman),
presented notices requiring them to go back to work. However, this Court found that the
notices did not absolve Soliman of liability:
The crux of the controversy lies in the consequences of the lapse of a significant period
of time without respondents having been reassigned. Petitioner agency faults the
respondents for their repeated failure to comply with the directives to report to the office for
their new assignments. To support its argument, petitioner agency submitted in evidence
notices addressed to respondents, which read:
You are directed to report to the undersigned to clarify your intentions as you have not
been reporting to seek a new assignment after your relief from Interphil.
To this date, we have not received any update from you neither did you update your
government requirements. . .
We are giving you up to May 10, 2007 to comply or we will be forced to drop you from our
roster and terminate your services for abandonment of work and insubordination.
Consider this our final warning.
As for respondents, they maintain that the offers of new assignments were mere empty
promises. Respondents claim that they have been reporting to the office for new
assignments only to be repeatedly turned down and ignored by petitioner's office personnel.
....
Instead of taking the opportunity to clarify during the hearing that respondents were not
dismissed but merely placed on floating status and instead of specifying details about the
available new assignments, the agency merely gave out empty promises. No mention was
made regarding specific details of these pending new assignments. If respondent guards
indeed had new assignments awaiting them, as what the agency has been insinuating since
the day respondents were relieved from their posts, the agency should have identified these
assignments during the hearing instead of asking respondents to report back to the office.
The agency's statement in the notices - that respondents have not clarified their intentions
because they have not reported to seek new assignments since they were relieved from
their posts - is specious at best.
IV
As a further defense, respondents add that it was petitioner who abandoned his work.
For an employee to be considered to have abandoned his work, two (2) requisites must
concur. First, the employee must have failed to report for work or have been absent without
a valid or justifiable reason. Second, the employee must have had a "clear intention to sever
the employer-employee relationship." This Court has emphasized that "the second element
[i]s the more determinative factor." This second element, too, must be "manifested by some
overt acts."
Petitioner's conduct belies any intent to abandon his work. To the contrary, it
demonstrates how he took every effort to retain his employment. Right after he received the
first letter dated July 27, 2009, he called Airborne's head office, only to be told that he had
no assignment yet. Upon being informed by his wife of a subsequent letter dated September
9, 2009, he replied in the following manner:
SIR,
HEREWITH MY EXPLANATION REGARDING YOUR LETTER THAT I RECEIVED MY
WIFE YESTERDAY 22 SEPT. 09, WHY IM NOT REPORTING IN YOUR OFFICE, SINCE
I RECEIVED IN MY POST AT CITY ADVERTISING CORP. JUNE 15 - 09. THAT'S NOT
TRUE, SIR.
KINABUKASAN PAGKA RECEIVED KO SA CITY ADS CORP. NAG-REPORT AKO
PERO DI TA YO NAGKIT A NAKA-ALIS KA NA, NAGKA-USAP TA YO SA CELLPHONE
NG OPISINA KAY MAM POPS. SABI MO SA PAY-DAY NA LANG TAYO MAG-USAP.
AFTER OUR CONVERSATION ON PAY-DAY, YOU TOLD ME "NO AVAILABLE POST
FOR YOU RIGHT NOW, BUT JUST CALL ME UP, OR I WILL CALL YOU IF THERE'S A
POSSIBLE POST." SO OFTENTIMES I'LL CALL, YOUR ANSWER'S THE SAME: "NO
POST".
SO DON'T WORRY, SIR, I'LL ALWAYS PRAY TO OUR ALMIGHTY GOD, SOMEDAY,
YOU GIVE ME WORK I BEST POST.
THANK YOU AND HOPING FOR YOUR UNDERSTAND REGARDING THESE
MATTER.
RESPECTFULLY YOURS,
Mr. M. PADILLA
Petitioner emphasized that he also personally reported to Airborne's Operations
Director, Mr. Dagang, to inquire about his re-assignment. However, Mr. Dagang told him
that ''they were having difficulty finding him a deployment because he was already
old." Petitioner added that sometime in December 2009, when he personally reported to the
head office to get this 13th month pay, he was persuaded to resign.
Considering petitioner's 24 years of uninterrupted service, it is highly improbable that he
would abandon his work so easily. There is no logical explanation why petitioner would
abandon his work. Being a security guard has been his source of income for 24 long years.
 In Tatel v, JLFP Investigation Security Agency, Vicente Tatel (Tatel), a security guard,
filed a complaint for illegal dismissal after being placed on floating status for more than six
(6) months. In finding that Tatel did not abandon his work, this Court gave consideration to
Tatel's prolonged service or continuous employment:
The charge of abandonmient in this case is belied by the high improbability of Tatel
intentionally abandoning his work, taking into consideration his length of service and,
9011comitantly, his security of tenure with JLFP. As the NLRC had opined, no rational
explanation exists as to why an employee who had worked for his employer for more than
ten (10) years would just abandon his work and forego whatever benefits he may be
entitled to as a consequence thereof. As such, respondents failed to si1fficicntly establish
a deliberate and unjustified refusal on the part of Tatel to resume his employment, which
therefore leads to the logical conclusion that the latter had no such intention to abandon
his work.
Equally belying petitioner's intent to abandon his work is his immediate filing of a
Complaint for illegal 4ismissal on February 23, 2010. This was only eight (8) months after
he was placed on floating status. As similarly noted in Tatel v. JLFP Investigation Security
Agency:
An employee who forthwith takes steps to protest his layoff cannot, as a general rule, be
said to have abandoned his work, and the filing of the complaint is proof enough of his
desire to return to work, thus negating any suggestion of abandonment. (Citation omitted)
Taking the totality of circumstances into consideration, this Court is unable to conc1ude
that petitioner abandoned his work. Rather, this Court finds that he was placed on floating
status for more than six (6) months. Thus, he was constructively dismissed.
As a consequence of the finding of illegal dismissal, petitioner would ordinarily be
entitled to reinstatement, pursuant to Article 294 of the Labor Code:
Article 294. Security of Tenure. - ... An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.
It [is unreasonable to deny employees their means of earning a living exclusively on the
basis of age when there is no other indication that they are incapable of performing their
functions. It is true that certain tasks require able-bodied individuals. Age, per se, is not a
reliable indication of physical stamina1 or mental rigor. What is crucial in determining
capacity for continuing employment is an assessment of an employee's state of health, not
his or her biological age, Outside of limitations founded on scientific and established wisdom
such as the age of minority, proscriptions against child labor, or a standard retirement age, it
is unjust to discriminate against workers who are within an age range that is typical of
physical productivity.
Ordinarily, it is not for this Court to foreclose an employee's chances of regaining
employment through reinstatement. It is not for this Court to rule out reinstatement on its
own. To do so would amount to a tacit approval of the abusive, discriminatory conduct
displayed by employers such as Airborne. It would be a capitulation to and virtual
acceptance of the employer's assertion that employees of a certain age can no longer
engage in productive labor. However, considering that petitioner himself specifically prayed
for an award of separation pay and has also been specific in asking that he no longer be
reinstated, this Court awards him separation pay, in lieu of reinstatement.
VI
Respondent Solis may not be held personally liable for the illegal / termination of
petitioner's employment.
As this Court explained in Saudi Arabian Airlines v. Rebesencio:
A corporation has a personality separate and distinct from those of the persons composing
it. Thus, as a rule, corporate directors and officers are not liable for the illegal termination
of a corporation's employees. It is only when they acted in bad faith or with malice that they
become solidarily liable with the corporation.
In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever
Electrical, this court clarified that "[b]ad faith does not connote bad judgment or negligence;
it imports a dishonest purpose or some moral obliquity i:uid conscious doing of wrong; it
means breach of a known duty through some motive or interest or ill will; it partakes of the
nature of fraud."
Other than Solis' designation as Airborne's president, this Court finds no indication that
she acted out of bad faith or with malice specifically aimed at petitioner as, regards the
termination of his employment. Thus, this Court finds that she did not incur any personal
liability.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed April
18, 2013 Decision and November 11, 2013 Resolution of the Court of Appeals in CA-G,R.
SP No. 122700 are REVERSED and SET ASIDE. Accordingly, respondent Airborne
Security Service, Inc. is ordered to pay petitioner Macario S. Padilla:
1. Full backwages and other benefits computed from the date petitioner's employment was
illegally terminated until the finality of this Decision;
2. Separation pay computed from the date petitioner commenced employment 1,until the
finality of this Decision at the rate of one (1) month's salary for every year of service, with a
fraction of a year of at least six (6) months being counted as one (1) whole year; and
3. Attorney's fees equivalent to ten percent (10%) of the total award.
The case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts
due to petitioner, which must be paid without delay, and for the execution of this judgment.
The case is DISMISSED with respect to respondent Catalina Solis.
SO ORDERED.
Notes.—When a “floating status” lasts for more than six (6) months, the employee may be considered to
have been constructively dismissed. (Salvaloza vs. National Labor Relations Commission, 636 SCRA
184 [2010])
A floating status can ripen into constructive dismissal only when it goes beyond the six-month maximum
period allowed by law. (Cañedo vs. Kampilan Security and Detective Agency, Inc., 702 SCRA 647 [2013])
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