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Here are select February 2012 rulings of the Supreme Court on labor law and procedure:

Appeal; factual finding of NLRC. Findings of fact of administrative agencies and quasi-judicial
bodies, which have acquired expertise because their jurisdiction is confined to specific matters,
are generally accorded not only respect but finality when affirmed by the Court of Appeals.
Factual findings of quasi-judicial bodies like the NLRC, if supported by substantial evidence, are
accorded respect and even finality by the Supreme Court, more so when they coincide with those
of the Labor Arbiter. Such factual findings are given more weight when the same are affirmed by
the Court of Appeals. In the present case, the Supreme Court found no reason to depart from
these principles since the Labor Arbiter found that there was substantial evidence to conclude
that Oasay had breached the trust and confidence of Palacio Del Gobernador Condominium
Corporation, which finding the NLRC had likewise upheld. Sebastian F. Oasay, Jr. vs. Palacio
del Gobernador Condominium Corporation and Omar T. Cruz, G.R. No. 194306, February 6,
2012.

Civil Service; Clark Development Corporation. Clark Development Corporation (CDC) owes its
existence to Executive Order No. 80 issued by then President Fidel V. Ramos. It was meant to be
the implementing and operating arm of the Bases Conversion and Development Authority tasked
to manage the Clark Special Economic Zone. Expressly, CDC was formed in accordance with
Philippine corporation laws and existing rules and regulations promulgated by the Securities and
Exchange Commission pursuant to Section 16 of Republic Act 7227. CDC, a government owned
or controlled corporation without an original charter, was incorporated under the Corporation
Code. Pursuant to Article IX-B, Sec. 2(1) of the Constitution, the civil service embraces only
those government owned or controlled corporations with original charter. As such, CDC and its
employees are covered by the Labor Code and not by the Civil Service Law. Antonio B. Salenga,
et al. vs. Court of Appeals, et al., G.R. No. 174941, February 1, 2012.

Dismissal; resignation vs. illegal dismissal; telex is not equivalent to tender of resignation.
Article 285 of the Labor Code recognizes termination by the employee of the employment
contract by “serving written notice on the employer at least one (1) month in advance.” Given
that provision, the law contemplates the requirement of a written notice of resignation. In the
absence of a written resignation, it is safe to presume that the employer terminated the seafarers.
In this case, the Supreme Court found the dismissal of De Gracia, et al. to be illegal since
Cosmoship merely sent a telex to Skippers, the local manning agency, claiming that De Gracia,
et al. were repatriated because the latter voluntarily pre-terminated their contracts. Skippers
United Pacific, Inc. and Skippers Maritime Services, Inc. Ltd. vs. Nathaniel Doza, et al., G.R.
No. 175558. February 8, 2012.

Dismissal; substantive and procedural due process. For a worker’s dismissal to be considered
valid, it must comply with both procedural and substantive due process. The legality of the
manner of dismissal constitutes procedural due process, while the legality of the act of dismissal
constitutes substantive due process. Procedural due process in dismissal cases consists of the
twin requirements of notice and hearing. The employer must furnish the employee with two
written notices before the termination of employment can be effected: (1) the first notice apprises
the employee of the particular acts or omissions for which his dismissal is sought; and (2) the
second notice informs the employee of the employer’s decision to dismiss him. Before the
issuance of the second notice, the requirement of a hearing must be complied with by giving the
worker an opportunity to be heard. It is not necessary that an actual hearing be conducted.
Substantive due process, on the other hand, requires that dismissal by the employer be made
based on a just or authorized cause under Articles 282 to 284 of the Labor Code. In this case,
there was no written notice furnished to De Gracia, et al. regarding the cause of their dismissal.
Cosmoship furnished a telex to Skippers, the local manning agency, claiming that De Gracia, et
al. were repatriated because they voluntarily pre-terminated their contracts. This telex was given
credibility and weight by the Labor Arbiter and NLRC in deciding that there was pre-termination
of the employment contract “akin to resignation” and no illegal dismissal. However, as correctly
ruled by the CA, the telex message is “a biased and self-serving document that does not satisfy
the requirement of substantial evidence.” If, indeed, De Gracia, et al. voluntarily pre-terminated
their contracts, then De Gracia, et al. should have submitted their written resignations. Skippers
United Pacific, Inc. and Skippers Maritime Services, Inc. Ltd. vs. Nathaniel Doza, et al., G.R.
No. 175558. February 8, 2012.

Employee benefits; right to bonus; diminution. From a legal point of view, a bonus is a gratuity
or act of liberality of the giver which the recipient cannot demand as a matter of right. The grant
of a bonus is basically a management prerogative which cannot be forced upon the employer
who may not be obliged to assume the onerous burden of granting bonuses. However, a bonus
becomes a demandable or enforceable obligation if the additional compensation is granted
without any conditions imposed for its payment. In such case, the bonus is treated as part of the
wage, salary or compensation of the employee. Particularly instructive is the ruling of the Court
in Metro Transit Organization, Inc. v. National Labor Relations Commission (G.R. No. 116008,
July 11, 1995) where the Court said:

Whether or not a bonus forms part of wages depends upon the circumstances and conditions for
its payment. If it is additional compensation which the employer promised and agreed to give
without any conditions imposed for its payment, such as success of business or greater
production or output, then it is part of the wage. But if it is paid only if profits are realized or if a
certain level of productivity is achieved, it cannot be considered part of the wage. Where it is not
payable to all but only to some employees and only when their labor becomes more efficient or
more productive, it is only an inducement for efficiency, a prize therefore, not a part of the wage.

In this case, there is no dispute that Eastern Telecommunications Phils., Inc. and Eastern
Telecoms Employees Union agreed on the inclusion of a provision for the grant of 14th, 15th and
16th month bonuses in the 1998-2001 CBA Side Agreement, as well as in their 2001-2004 CBA
Side Agreement, which contained no qualification for its payment. There were no conditions
specified in the CBA Side Agreements for the grant of the bonus. There was nothing in the
relevant provisions of the CBA which made the grant of the bonus dependent on the company’s
financial standing or contingent upon the realization of profits. There was also no statement that
if the company derives no profits, no bonus will be given to the employees. In fine, the payment
of these bonuses was not related to the profitability of business operations. Consequently, the
giving of the subject bonuses cannot be peremptorily withdrawn by Eastern Telecommunications
Phils., Inc. without violating Article 100 of the Labor Code, which prohibits the unilateral
elimination or diminution of benefits by the employer. The rule is settled that any benefit and
supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to promote their welfare and to afford
labor full protection. Eastern Telecommunications Philippines, Inc. vs. Eastern Telecoms
Employees Union, G.R. No. 185665, February 8, 2012.

Employee dismissal; constructive dismissal. In constructive dismissal cases, the employer has
the burden of proving that the transfer of an employee is for just or valid ground, such as genuine
business necessity. The employer must demonstrate that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee and that the transfer does not involve a demotion in
rank or a diminution in salary and other benefits. “If the employer fails to overcome this burden
of proof, the employee’s transfer is tantamount to unlawful constructive dismissal.” [Merck
Sharp and Dohme (Philippines) v. Robles, G.R. No. 176506, November 25, 2009] Petitioners
failed to satisfy the burden of proving that the transfer was based on just or valid ground.
Petitioners’ bare assertions of imminent threat from the respondents are mere accusations which
are not substantiated by any proof. The Supreme Court agreed with the Court of Appeals in
ruling that the transfer of respondents amounted to a demotion. Julie’s Bakeshop and/or Edgar
Reyes vs. Henry Arnaiz, et al., G.R. No. 173882, February 15, 2012.

Employee dismissal; disease; dereliction of duties. With regard to disease as a ground for
termination, Article 284 of the Labor Code provides that an employer may terminate the services
of an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health, as well as to the health of his co-
employees. In order to validly terminate employment on this ground, Section 8, Rule I, Book VI
of the Omnibus Rules Implementing the Labor Code requires that: (i) the employee be suffering
from a disease and his continued employment is prohibited by law or prejudicial to his health or
to the health of his co-employees, and (ii) a certification by a competent public health authority
that the disease is of such nature or at such a stage that it cannot be cured within a period of six
(6) months even with proper medical treatment. If the disease or ailment can be cured within the
period, the employer shall not terminate the employee but shall ask the employee to take a leave.
The employer shall reinstate such employee to his former position immediately upon the
restoration of his normal health. In Triple Eight Integrated Services, Inc. v. NLRC (G.R. No.
129584, December 3, 1998), the Court held that the requirement for a medical certificate under
Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the
unilateral and arbitrary determination by the employer of the gravity or extent of the employee’s
illness and, thus, defeat the public policy on the protection of labor.

In this case, Ynson should have reported back to work or attended the investigations conducted
by Wuerth Philippines, Inc. immediately upon being permitted to work by his doctors, knowing
that his position remained vacant for a considerable length of time. However, he did not even
show any sincere effort to return to work. Clearly, since there is no more hindrance for him to
return to work and attend the investigations set by Wuerth Philippines, Inc., Ynson’s failure to do
so was without any valid or justifiable reason. His conduct shows his indifference and utter
disregard of his work and his employer’s interest, and displays his clear, deliberate, and gross
dereliction of duties. The power to dismiss an employee is a recognized prerogative inherent in
the employer’s right to freely manage and regulate his business. The law, in protecting the rights
of the laborers, authorizes neither oppression nor self-destruction of the employer. The worker’s
right to security of tenure is not an absolute right, for the law provides that he may be dismissed
for cause. As a general rule, employers are allowed wide latitude of discretion in terminating the
employment of managerial personnel. The mere existence of a basis for believing that such
employee has breached the trust and confidence of his employer would suffice for his dismissal.
Needless to say, an irresponsible employee like Ynson does not deserve a position in the
workplace, and it is Wuerth Philippines, Inc.’s management prerogative to terminate his
employment. To be sure, an employer cannot be compelled to continue with the employment of
workers when continued employment will prove inimical to the employer’s interest. Wuerth
Philippines, Inc. vs. Rodante Ynson, G.R. No. 175932, February 15, 2012.

Employee dismissal; due process. With respect to due process requirement, the employer is
bound to furnish the employee concerned with two (2) written notices before termination of
employment can be legally effected. One is the notice apprising the employee of the particular
acts or omissions for which his dismissal is sought and this may loosely be considered as the
proper charge. The other is the notice informing the employee of the management’s decision to
sever his employment. This decision, however, must come only after the employee is given a
reasonable period from receipt of the first notice within which to answer the charge, thereby
giving him ample opportunity to be heard and defend himself with the assistance of his
representative should he so desire. The requirement of notice, it has been stressed, is not a mere
technicality but a requirement of due process to which every employee is entitled. Here, Palacio
Del Gobernador Condominium Corporation complied with the “two-notice rule” stated above.
Sebastian F. Oasay, Jr. vs. Palacio del Gobernador Condominium Corporation and Omar T.
Cruz, G.R. No. 194306, February 6, 2012.

Employee dismissal; due process. Cityland did not afford Galang the required notice before he
was dismissed. As the Court of Appeals noted, the investigation conference Tupas called to look
into the janitors’ complaints against Galang did not constitute the written notice required by law
as he had no clear idea what the charges against him were. Romeo A. Galang vs. Citiland Shaw
Tower, Inc. and Virgilio Baldemor, G.R. No. 173291, February 8, 2012.

Employee dismissal; grounds. The validity of an employee’s dismissal from service hinges on
the satisfaction of the two substantive requirements for a lawful termination. These are, first,
whether the employee was accorded due process the basic components of which are the
opportunity to be heard and to defend himself. This is the procedural aspect. And second,
whether the dismissal is for any of the causes provided in the Labor Code of the
Philippines. This constitutes the substantive aspect. On the substantive aspect, the Supreme
Court found that Palacio Del Gobernador Condominium Corporation’s termination of the
Oasay’s employment was for a cause provided under the Labor Code. In terminating Oasay’s
employment, Palacio Del Gobernador Condominium Corporation invoked loss of trust and
confidence. The first requisite for dismissal on the ground of loss of trust and confidence is that
the employee concerned must be holding a position of trust and confidence. Here, it is
indubitable that Oasay holds a position of trust and confidence. The position of Building
Administrator, being managerial in nature, necessarily enjoys the trust and confidence of the
employer. The second requisite is that there must be an act that would justify the loss of trust and
confidence. Loss of trust and confidence, to be a valid cause for dismissal, must be based on a
willful breach of trust and founded on clearly established facts. Palacio Del Gobernador
Condominium Corporation had established, by clear and convincing evidence, Oasay’s acts
which justified its loss of trust and confidence on the former. Sebastian F. Oasay, Jr. vs. Palacio
del Gobernador Condominium Corporation and Omar T. Cruz, G.R. No. 194306, February 6,
2012.

Employee dismissal; just cause. The Supreme Court found that Galang had become unfit to
continue his employment. The evidence supports the view that he continued to exhibit
undesirable traits as an employee and as a person, in relation to both his co-workers and his
superiors, particularly Tupas, her immediate supervisor. Quoting the Court of Appeals’ decision
with approval, the Supreme Court held: “Without offering any possible ill motive that might
have impelled [the respondents] to summarily dismiss [Galang], who admitted having been
absorbed by the former as janitor upon the termination of his contract with his agency, this Court
is more inclined to give credence to the evidence pointing to the conclusion that [Galang’s]
employment was actually severed for a just cause.” Romeo A. Galang vs. Citiland Shaw Tower,
Inc. and Virgilio Baldemor, G.R. No. 173291, February 8, 2012.

Employer; right to discipline employee. In Sagales v. Rustan’s Commercial Corporation (G.R.


No. 166554, November 27, 2008), the Supreme Court ruled:

Truly, while the employer has the inherent right to discipline, including that of dismissing its
employees, this prerogative is subject to the regulation by the State in the exercise of its police
power.

In this regard, it is a hornbook doctrine that infractions committed by an employee should


merit only the corresponding penalty demanded by the circumstance. The penalty must be
commensurate with the act, conduct or omission imputed to the employee and must be
imposed in connection with the disciplinary authority of the employer. (Emphasis in the
original.)

In the case at bar, the penalty handed out by the petitioners was the ultimate penalty of
dismissal. There was no warning or admonition for respondent’s violation of team rules, only
outright termination of his services for an act which could have been punished appropriately with
a severe reprimand or suspension. Negros Slashers, Inc., Rodolfo C. Alvarez and Vicente Tan vs.
Alvin L. Teng, G.R. No. 187122, February 22, 2012.

Employer-employee relationship; onus probandi. The onus probandi falls on petitioner to


establish or substantiate such claim by the requisite quantum of evidence. The issue of Javier’s
alleged illegal dismissal is anchored on the existence of an employer-employee relationship
between him and Fly Ace. As the records bear out, the Labor Arbiter and the Court of Appeals
found Javier’s claim of employment with Fly Ace as wanting and deficient. Although Section 10,
Rule VII of the New Rules of Procedure of the NLRC allows a relaxation of the rules of
procedure and evidence in labor cases, this rule of liberality does not mean a complete
dispensation of proof. Labor officials are enjoined to use reasonable means to ascertain the facts
speedily and objectively with little regard to technicalities or formalities but nowhere in the rules
are they provided a license to completely discount evidence, or the lack of it. The quantum of
proof required, however, must still be satisfied. Hence, “when confronted with conflicting
versions on factual matters, it is for them in the exercise of discretion to determine which party
deserves credence on the basis of evidence received, subject only to the requirement that their
decision must be supported by substantial evidence.” [Salvador Lacorte v. Hon. Amado G.
Inciong, 248 Phil. 232 (1988)] Accordingly, Javier needs to show by substantial evidence that he
was indeed an employee of the company against which he claims illegal dismissal. Bitoy Javier
(Danilo P. Javier) vs. Fly Ace Corporation/Flordelyn Castillo, G.R. No. 192558, February 15,
2012.

Employer-employee relationship; test. To determine the existence of an employer-employee


relationship, the following are considered: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s
conduct. Of these elements, the most important criterion is whether the employer controls or has
reserved the right to control the employee not only as to the result of the work but also as to the
means and methods by which the result is to be accomplished. In this case, Javier was not able to
persuade the Court that the above elements exist in his case. He could not submit competent
proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an
employee, or that Fly Ace could dictate what his conduct should be while at work. In other
words, Javier’s allegations did not establish that his relationship with Fly Ace had the attributes
of an employer-employee relationship on the basis of the above-mentioned four-fold test. Worse,
Javier was not able to refute Fly Ace’s assertion that it had an agreement with a hauling company
to undertake the delivery of its goods. It was also baffling to realize that Javier did not dispute
Fly Ace’s denial of his services’ exclusivity to the company. In short, all that Javier laid down
were bare allegations without corroborative proof. Bitoy Javier (Danilo P. Javier) vs. Fly Ace
Corporation/Flordelyn Castillo, G.R. No. 192558, February 15, 2012.

Employment contract; stages. Contracts undergo three distinct stages, to wit: negotiation;
perfection or birth; and consummation. Negotiation begins from the time the prospective
contracting parties manifest their interest in the contract and ends at the moment of agreement of
the parties. Perfection or birth of the contract takes place when the parties agree upon the
essential elements of the contract. Consummation occurs when the parties fulfill or perform the
terms agreed upon in the contract, culminating in the extinguishment thereof. Under Article 1315
of the Civil Code, a contract is perfected by mere consent and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law. An employment contract, like any other contract, is perfected at the moment (1) the parties
come to agree upon its terms; and (2) concur in the essential elements thereof: (a) consent of the
contracting parties, (b) object certain which is the subject matter of the contract and (c) cause of
the obligation. In the present case, C.F. Sharp, on behalf of its principal, International Shipping
Management, Inc., hired Agustin and Minimo as Sandblaster/Painter for a 3-month contract, with
a basic monthly salary of US$450.00. Thus, the object of the contract is the service to be
rendered by Agustin and Minimo on board the vessel while the cause of the contract is the
monthly compensation they expect to receive. These terms were embodied in the Contract of
Employment which was executed by the parties. The agreement upon the terms of the contract
was manifested by the consent freely given by both parties through their signatures in the
contract. Neither parties disavow the consent they both voluntarily gave. Thus, there is a
perfected contract of employment. C.F. Sharp & Co. Inc. and John J. Rocha vs. Pioneer
Insurance and Surety Corporation, et al., G.R. No. 179469, February 15, 2012.

Employment relationship; commencement. The commencement of an employer-employee


relationship must be treated separately from the perfection of an employment contract. Santiago
v. CF Sharp Crew Management, Inc., (G.R. No. 162419, 10 July 2007) is an instructive
precedent on this point. In that case, the Supreme Court made a distinction between the
perfection of the employment contract and the commencement of the employer-employee
relationship, thus:

The perfection of the contract, which in this case coincided with the date of execution thereof,
occurred when petitioner and respondent agreed on the object and the cause, as well as the rest
of the terms and conditions therein. The commencement of the employer-employee relationship,
as earlier discussed, would have taken place had petitioner been actually deployed from the
point of hire. Thus, even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was the birth of certain rights
and obligations, the breach of which may give rise to a cause of action against the erring party.

Despite the fact that the employer-employee relationship has not commenced due to the failure to
deploy Agustin and Minimo in this case, Agustin and Minimo are entitled to rights arising from
the perfected Contract of Employment, such as the right to demand performance by C.F. Sharp
of its obligation under the contract. C.F. Sharp & Co. Inc. and John J. Rocha vs. Pioneer
Insurance and Surety Corporation, et al., G.R. No. 179469, February 15, 2012.

Forum shopping; elements; res judicata. For forum shopping to exist, it is necessary that (a) there
be identity of parties or at least such parties that represent the same interests in both actions; (b)
there be identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in
one action will, regardless of which party is successful, amount to res judicata in the other
action. Petitioners are correct as to the first two requisites of forum shopping. First, there is
identity of parties involved: Negros Slashers Inc. and respondent Teng. Second, there is identity
of rights asserted i.e., the right of management to terminate employment and the right of an
employee against illegal termination. However, the third requisite of forum shopping is missing
in this case. Any judgment or ruling of the Office of the Commissioner of the Metropolitan
Basketball Association will not amount to res judicata. Res judicata is defined in jurisprudence
as to have four basic elements: (1) the judgment sought to bar the new action must be final; (2)
the decision must have been rendered by a court having jurisdiction over the subject matter and
the parties; (3) the disposition of the case must be a judgment on the merits; and (4) there must
be as between the first and second action, identity of parties, subject matter, and causes of action.
Here, although contractually authorized to settle disputes, the Office of the Commissioner of the
Metropolitan Basketball Association is not a court of competent jurisdiction as contemplated by
law with respect to the application of the doctrine of res judicata. At best, the Office of the
Commissioner of the Metropolitan Basketball Association is a private mediator or go-between as
agreed upon by team management and a player in the Metropolitan Basketball Association
Player’s Contract of Employment. Any judgment that the Office of the Commissioner of the
Metropolitan Basketball Association may render will not result in a bar for seeking redress in
other legal venues. Hence, respondent’s action of filing the same complaint in the Regional
Arbitration Branch of the NLRC does not constitute forum shopping. Negros Slashers, Inc.,
Rodolfo C. Alvarez and Vicente Tan vs. Alvin L. Teng, G.R. No. 187122, February 22, 2012.

Jurisdiction; NLRC. It is clear from the NLRC Rules of Procedure that appeals must be verified
and certified against forum-shopping by the parties-in-interest themselves. The purpose of
verification is to secure an assurance that the allegations in the pleading are true and correct and
have been filed in good faith. In the case at bar, the parties-in-interest are petitioner Salenga, as
the employee, and respondent Clark Development Corporation as the employer. A corporation
can only exercise its powers and transact its business through its board of directors and through
its officers and agents when authorized by a board resolution or its bylaws. The power of a
corporation to sue and be sued is exercised by the board of directors. The physical acts of the
corporation, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate bylaws or by a specific act of the board. Absent the
requisite board resolution, neither Timbol-Roman nor Atty. Mallari, who signed the
Memorandum of Appeal and Joint Affidavit of Declaration allegedly on behalf of respondent
corporation, may be considered as the “appellant” and “employer” referred to by the NLRC
Rules of Procedure. As such, the NLRC had no jurisdiction to entertain the appeal. Antonio B.
Salenga, et al. vs. Court of Appeals, et al., G.R. No. 174941, February 1, 2012.

Labor; effect if procedural due process not followed but with a valid cause for termination. It is
required that the employer furnish the employee with two written notices: (1) a written notice
served on the employee specifying the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his side; and (2) a written notice of
termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination. The twin requirements
of notice and hearing constitute the elements of due process in cases of employee’s
dismissal. The requirement of notice is intended to inform the employee concerned of the
employer’s intent to dismiss and the reason for the proposed dismissal. Upon the other hand, the
requirement of hearing affords the employee an opportunity to answer his employer’s charges
against him and accordingly, to defend himself therefrom before dismissal is
effected. Obviously, the second written notice, as indispensable as the first, is intended to ensure
the observance of due process. In this case, there was only one written notice which required
respondents to explain within five (5) days why they should not be dismissed from the
service. Alcovendas was the only one who signed the receipt of the notice. The others, as
claimed by Lynvil, refused to sign. The other employees argue that no notice was given to
them. Despite the inconsistencies, what is clear is that no final written notice or notices of
termination were sent to the employees. Due to the failure of Lynvil to follow the procedural
requirement of two-notice rule, nominal damages in the amount of P50,000 were granted to
Ariola, et al. despite their dismissal for just cause. Lynvil Fishing Enterprises, Inc. vs. Andres G.
Ariola, et al., G.R. No. 181974, February 1, 2012.

Labor; liability of officers if termination is attended with bad faith. In labor cases, the corporate
directors and officers are solidarily liable with the corporation for the termination of employment
of employees done with malice or in bad faith. Indeed, moral damages are recoverable when the
dismissal of an employee 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. The term
“bad faith” contemplates a “state of mind affirmatively operating with furtive design or with
some motive of self-interest or will or for ulterior purpose.” The Supreme Court agreed with the
ruling of both the NLRC and the Court of Appeals when they pronounced that there was no
evidence on record that indicates commission of bad faith on the part of De Borja, the general
manager of Lynvil, who was tasked with the supervision of the employees and the operation of
the business. There is no proof that he imposed on Ariola, et al. the “por viaje” provision for
purpose of effecting their summary dismissal. Lynvil Fishing Enterprises, Inc. vs. Andres G.
Ariola, et al., G.R. No. 181974, February 1, 2012.

Labor; nature of employment; security of tenure. In the context of these facts — (1) Ariola, et al.
were doing tasks necessary to Lynvil’s fishing business with positions ranging from captain of
the vessel to bodegero; (2) after the end of a trip, they will again be hired for another trip with
new contracts; and (3) this arrangement continued for more than ten years – the Court believed
that Lynvil intended to go around the security of tenure of Ariola, et al. as regular
employees. The Court held that by the express provisions of the second paragraph of Article 280
which cover casual employment, Ariola, et al. had become regular employees of Lynvil. Lynvil
Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No. 181974, February 1, 2012.

Labor; procedural and substantive due process; grounds for valid termination; breach of trust.
Just cause is required for a valid dismissal. The Labor Code provides that an employer may
terminate an employment based on fraud or willful breach of the trust reposed on the
employee. Such breach is considered willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently. It must also be based on substantial evidence and not on the
employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at
the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by
the employer against a claim that the dismissal of an employee was arbitrary. And, in order to
constitute a just cause for dismissal, the act complained of must be work-related and shows that
the employee concerned is unfit to continue working for the employer. In addition, loss of
confidence as a just cause for termination of employment is premised on the fact that the
employee concerned holds a position of responsibility, trust and confidence or that the employee
concerned is entrusted with confidence in delicate matters, such as the handling or care and
protection of the property and assets of the employer. The betrayal of this trust is the essence of
the offense for which an employee is penalized. The Supreme Court found that breach of trust is
present in this case, when Ariola (the captain), Alcovendas (Chief Mate), Calinao (Chief
Engineer), Nubla (cook), Bañez (oiler), and Sebullen (bodegero) conspired with one another and
stole “pampano” and “tangigue” fish and delivered them to another vessel, to the prejudice of
Lynvil. Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No. 181974, February
1, 2012.

Labor; public prosecutor’s decision not binding on the labor tribunal. The Supreme Court has
held in Nicolas v. National Labor Relations Commission [327 Phil. 883, 886-887 (1996)] that a
criminal conviction is not necessary to find just cause for employment termination. Otherwise
stated, an employee’s acquittal in a criminal case, especially one that is grounded on the
existence of reasonable doubt, will not preclude a determination in a labor case that he is guilty
of acts inimical to the employer’s interests. In the reverse, the finding of probable cause is not
followed by automatic adoption of such finding by the labor tribunals. In other words, whichever
way the public prosecutor disposes of a complaint, the finding does not bind the labor tribunal.
Lynvil contends that the filing of a criminal case before the Office of the Prosecutor is sufficient
basis for a valid termination of employment based on serious misconduct and/or loss of trust and
confidence. The Supreme Court held that Lynvil cannot argue that since the Office of the
Prosecutor found probable cause for theft, the Labor Arbiter must follow the finding as a valid
reason for the termination of respondents’ employment. The proof required for purposes that
differ from one and the other are likewise different. Lynvil Fishing Enterprises, Inc. vs. Andres
G. Ariola, et al., G.R. No. 181974, February 1, 2012.

Labor; regular employee; fixed-contract agreement, requisites for validity. Prior Supreme Court
decisions have laid two conditions for the validity of a fixed-contract agreement between the
employer and employee: First, the fixed period of employment was knowingly and voluntarily
agreed upon by the parties without any force, duress, or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or Second, it
satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter. Lynvil contends that
Ariola, et al. were employed under a fixed-term contract which expired at the end of the voyage.
Contrarily, Ariola, et al. contend that they became regular employees by reason of their
continuous hiring and performance of tasks necessary and desirable in the usual trade and
business of Lynvil. Textually, the provision in the contract between Lynvil and Ariola, et al. that:
“NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa patakarang
“por viaje” na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa
pondohan ng lantsa sa Navotas, Metro Manila” is for a fixed period of employment. In the
context, however, of the facts that: (1) Ariola, et al. were doing tasks necessarily to Lynvil’s
fishing business with positions ranging from captain of the vessel to bodegero; (2) after the end
of a trip, they will again be hired for another trip with new contracts; and (3) this arrangement
continued for more than ten years, the clear intention is to go around the security of tenure of
Ariola, et al. as regular employees. As such, the Supreme Court found that Ariola, et al. are
regular employees. Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No.
181974, February 1, 2012.

Labor Code; maximum award of attorney’s fees in cases of recovery of wages. Article 111 of the
Labor Code provides for a maximum award of attorney’s fees in cases of recovery of wages:

a. In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees
equivalent to ten percent of the amount of wages recovered.

b. It shall be unlawful for any person to demand or accept, in any judicial or administrative
proceedings for the recovery of wages, attorney’s fees which exceed ten percent of the amount of
wages recovered.

Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid salaries
and protect their interest, attorney’s fees in the amount of ten percent (10%) of the total claims
was imposed. Skippers United Pacific, Inc. and Skippers Maritime Services, Inc. Ltd.
vs. Nathaniel Doza, et al., G.R. No. 175558. February 8, 2012.

Labor contracting; elements. There is labor-only contracting where: (a) 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 (b) the workers recruited and placed
by such person are performing activities which are directly related to the principal business of
the employer. In the present case, the Supreme Court found that both the capitalization
requirement and the power of control on the part of Requiño are wanting. Generally, the
presumption is that the contractor is a labor-only contractor unless such contractor overcomes the
burden of proving that it has the substantial capital, investment, tools and the like. In the present
case, though Garden of Memories is not the contractor, it has the burden of proving that Requiño
has sufficient capital or investment since it is claiming the supposed status of Requiño as
independent contractor. Garden of Memories, however, failed to adduce evidence purporting to
show that Requiño had sufficient capitalization. Neither did it show that she invested in the form
of tools, equipment, machineries, work premises and other materials which are necessary in the
completion of the service contract. Garden of Memories Park and Life Plan, Inc., et al. vs.
NLRC, 2nd Div., et al., G.R. No. 160278, February 8, 2012.

Migrant Workers; RA No. 8042; money claims in cases of unjust termination. Section 10 of
Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases of unjust
termination of employment contracts:

In case of termination of overseas employment without just, valid or authorized cause as defined
by law or contract, the workers shall be entitled to the full reimbursement of his placement fee
with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of
his employment contract or for three (3) months for every year of the unexpired term, whichever
is less.

The Migrant Workers Act provides that salaries for the unexpired portion of the employment
contract or three (3) months for every year of the unexpired term, whichever is less, shall be
awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in 24 March
2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc. (G.R. No. 167614),
the Court, in an En Banc Decision, declared unconstitutional the clause “or for three months for
every year of the unexpired term, whichever is less” and awarded the entire unexpired portion of
the employment contract to the overseas Filipino worker. On 8 March 2010, however, Section 7
of Republic Act No. 10022 (RA 10022) amended Section 10 of the Migrant Workers Act, and
once again reiterated the provision of awarding the unexpired portion of the employent contract
or three (3) months for every year of the unexpired term, whichever is less. Nevertheless, since
the termination occurred on January 1999 before the passage of the amendatory RA 10022, the
Supreme Court applied RA 8042, without touching on the constitutionality of Section 7 of RA
10022. The declaration in March 2009 of the unconstitutionality of the clause “or for three
months for every year of the unexpired term, whichever is less” in RA 8042 shall be given
retroactive effect to the termination that occurred in January 1999 because an unconstitutional
clause in the law confers no rights, imposes no duties and affords no protection. The
unconstitutional provision is inoperative, as if it was not passed into law at all. Skippers United
Pacific, Inc. and Skippers Maritime Services, Inc. Ltd. vs. Nathaniel Doza, et al., G.R. No.
175558. February 8, 2012.

NLRC; contempt powers. Under Article 218 the Labor Code, the NLRC (and the labor arbiters)
may hold any offending party in contempt, directly or indirectly, and impose appropriate
penalties in accordance with law. The penalty for direct contempt consists of either
imprisonment or fine, the degree or amount depends on whether the contempt is against the
Commission or the labor arbiter. The Labor Code, however, requires the labor arbiter or the
Commission to deal with indirect contempt in the manner prescribed under Rule 71 of the Rules
of Court. Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to initiate
indirect contempt proceedings before the trial court. This mode is to be observed only when
there is no law granting them contempt powers. As is clear under Article 218(d) of the Labor
Code, the labor arbiter or the Commission is empowered or has jurisdiction to hold the offending
party or parties in direct or indirect contempt. Robosa, et al., therefore, have not improperly
brought the indirect contempt charges against the respondents before the NLRC. Federico S.
Robosa, et al. vs. National Labor Relations Commission (First Division), et al., G.R. No. 176085,
February 8, 2012.

NLRC; factual findings. It is a well-entrenched rule that findings of facts of the NLRC,
affirming those of the Labor Arbiter, are accorded respect and due consideration when supported
by substantial evidence. The Supreme Court, however, found that the doctrine of great respect
and finality has no application to the case at bar. The Labor Arbiter dismissed Arnaiz, et al.’s
complaints on mere technicality. The NLRC, upon appeal, then came up with three divergent
rulings. At first, it remanded the case to the Labor Arbiter. However, in a subsequent resolution,
it decided to resolve the case on the merits by ruling that Arnaiz, et al. were constructively
dismissed. But later on, it again reversed itself in its third and final resolution of the case and
ruled in favor of Julie’s bakeshop. Therefore, contrary to Reyes’s claim, the NLRC did not, on
any occasion, affirm any factual findings of the Labor Arbiter. The Court of Appeals is thus
correct in reviewing the entire records of the case to determine which findings of the NLRC is
sound and in accordance with law. Besides, the Court of Appeals may still resolve factual issues
by express mandate of the law despite the respect given to administrative findings of fact. Julie’s
Bakeshop and/or Edgar Reyes vs. Henry Arnaiz, et al., G.R. No. 173882, February 15, 2012.

Probationary employee; valid cause for dismissal but without procedural due process; employee
entitled to nominal damages. Section 2, Rule I, Book VI of the Labor Code’s Implementing
Rules and Regulations provides: “If the termination is brought about by the completion of a
contract or phase thereof, or by failure of an employee to meet the standards of the employer in
the case of probationary employment, it shall be sufficient that a written notice is served the
employee within a reasonable time from the effective date of termination.” Dalangin was hired
by Canadian Opportunities as Immigration and Legal Manager, subject to a probationary period
of six months. One month after hiring Dalangin, the company terminated his employment,
declaring him “unfit” and “unqualified” to continue as Immigration and Legal Manager, for
reasons which included obstinacy and utter disregard of company policies. Propensity to take
prolonged and extended lunch breaks, shows no interest in familiarizing oneself with the policies
and objectives, lack of concern for the company’s interest despite having just been employed in
the company (Declined to attend company sponsored activities, seminars intended to familiarize
company employees with Management objectives and enhancement of company interest and
objectives), lack of enthusiasm toward work, and lack of interest in fostering relationship with
his co-employees. The company contends that it complied with the rule on procedural due
process when it asked Dalangin, through a Memorandum, to explain why he could not attend the
seminar. When he failed to submit his explanation, the company served him a notice the
following day terminating his employment. According to the Supreme Court, the notice to
Dalangin was not served within a reasonable time from the effective date of his termination as
required by the rules since he was dismissed on the very day the notice was given to him.
However, because of the existence of a valid cause for termination, the Supreme Court did not
invalidate his dismissal but penalized the company for its non-compliance with the notice
requirement, and ordered the company to pay an indemnity, in the form of nominal damages
amounting to P10,000. Canadian Opportunities Unlimited, Inc. vs. Bart Q. Dalangin, Jr., G.R.
No. 172223, February 6, 2012.

Probationary employee; valid dismissal even before 6 months. The essence of a probationary
period of employment fundamentally lies in the purpose or objective of both the employer and
the employee during the period. While the employer observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for permanent employment, the
latter seeks to prove to the former that he has the qualifications to meet the reasonable standards
for permanent employment. The “trial period” or the length of time the probationary employee
remains on probation depends on the parties’ agreement, but it shall not exceed six (6) months
under Article 281 of the Labor Code. The Supreme Court found substantial evidence indicating
that the company was justified in terminating Dalangin’s probationary employment. Dalangin
admitted in compulsory arbitration that the proximate cause for his dismissal was his refusal to
attend the company’s “Values Formation Seminar” scheduled for October 27, 2001, a Saturday.
He refused to attend the seminar after he learned that it had no relation to his duties, as he
claimed, and that he had to leave at 2:00 p.m. because he wanted to be with his family in the
province. When the Chief Operations Officer, insisted that he attend the seminar to encourage
his co-employees to attend, he stood pat on not attending, arguing that marked differences exist
between their positions and duties, and insinuating that he did not want to join the other
employees. He also questioned the scheduled 2:00 p.m. seminars on Saturdays as they were not
supposed to be doing a company activity beyond 2:00 p.m. He considers 2:00 p.m. as the close
of working hours on Saturdays; thus, holding them beyond 2:00 p.m. would be in violation of the
law. This incident reveals Dalangin’s lack of interest in establishing a good working relationship
with his co-employees, especially the rank and file; he did not want to join them because of his
view that the seminar was not relevant to his position and duties. It also betrays his arrogant and
condescending attitude towards his co-employees, and a lack of support for the company
objective. Dalangin also exhibited negative working habits, particularly with respect to the one
hour lunch break policy of the company and the observance of the company’s working hours.
Dalangin would take prolonged lunch breaks or would go out of the office – without leave of the
company – and call the personnel manager later only to say that he would be unable to return to
the office because of some personal matters he needs to attend to. Canadian Opportunities
Unlimited, Inc. vs. Bart Q. Dalangin, Jr., G.R. No. 172223, February 6, 2012.

Procedural rules; liberal application. Ordinarily, rules of procedure are strictly enforced by courts
in order to impart stability in the legal system. However, in not a few instances, the Supreme
Court has relaxed the rigid application of the rules of procedure to afford the parties the
opportunity to fully ventilate their cases on the merits. This is in line with the time honored
principle that cases should be decided only after giving all the parties the chance to argue their
causes and defenses. In that way, the ends of justice would be better served. For indeed, the
general objective of procedure is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedure is not to hinder but to promote the
administration of justice. In Ong Lim Sing, Jr. v. FEB Leasing and Finance Corporation (G.R.
No. 168115, June 8, 2007), the Supreme Court ruled:

Courts have the prerogative to relax procedural rules of even the most mandatory character,
mindful of the duty to reconcile both the need to speedily put an end to litigation and the parties’
right to due process. In numerous cases, this Court has allowed liberal construction of the rules
when to do so would serve the demands of substantial justice and equity. x x x

Indeed the prevailing trend is to accord party litigants the amplest opportunity for the proper and
just determination of their causes, free from the constraints of needless technicalities. In this
case, besides the fact that a denial of the recourse to the Court of Appeals would serve more to
perpetuate an injustice and violation of Teng’s rights under our labor laws, the Supreme Court
found that as correctly held by the Court of Appeals, no intent to delay the administration of
justice could be attributed to Teng. The Court of Appeals therefore did not commit reversible
error in excusing Teng’s one-day delay in filing his motion for reconsideration and in giving due
course to his petition for certiorari. Negros Slashers, Inc., Rodolfo C. Alvarez and Vicente Tan
vs. Alvin L. Teng, G.R. No. 187122, February 22, 2012.

Reinstatement; 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. Thus, when there is an order
of reinstatement, the computation of backwages shall be reckoned from the time of illegal
dismissal up to the time that the employee is actually reinstated to his former position. Pursuant
to the order of reinstatement rendered by the Labor Arbiter, the Bank of Lubao sent Manabat a
letter requiring him to report back to work on May 4, 2007. Notwithstanding the said letter,
Manabat opted not to report for work. Thus, it is but fair that the backwages to be awarded to
Manabat should be computed from the time that he was illegally dismissed until the time when
he was required to report for work, i.e. from September 1, 2005 until May 4, 2007. Bank of
Lubao, Inc. vs. Rommel J. Manabat, et al., G.R. No. 188722, February 1, 2012.

Reinstatement; doctrine of strained relations; when applicable. Under the law and prevailing
jurisprudence, an illegally dismissed employee is entitled to reinstatement as a matter of right.
However, if reinstatement would only exacerbate the tension and strained relations between the
parties, or where the relationship between the employer and the employee has been unduly
strained by reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent to order
payment of separation pay instead of reinstatement. Under the doctrine of strained relations, the
payment of separation pay is considered an acceptable alternative to reinstatement when the
latter option is no longer desirable or viable. On one hand, such payment liberates the employee
from what could be a highly oppressive work environment. On the other hand, it releases the
employer from the grossly unpalatable obligation of maintaining in its employ a worker it could
no longer trust. In such cases, it should be proved that the employee concerned occupies a
position where he enjoys the trust and confidence of his employer; and that it is likely that if
reinstated, an atmosphere of antipathy and antagonism may be generated as to adversely affect
the efficiency and productivity of the employee concerned. In the present case, the Supreme
Court found that the relations between the parties had been already strained thereby justifying the
grant of separation pay in lieu of reinstatement in favor of Manabat. Manabat’s reinstatement to
his former position would only serve to intensify the atmosphere of antipathy and antagonism
between the parties. Undoubtedly, Bank of Lubao’s filing of various criminal complaints against
Manabat for qualified theft and the subsequent filing by the latter of the complaint for illegal
dismissal against the former, taken together with the pendency of the instant case for more than
six years, had caused strained relations between the parties. Considering that Manabat’s former
position as bank encoder involves the handling of accounts of the depositors of the Bank of
Lubao, it would not be equitable on the part of the Bank of Lubao to be ordered to maintain the
former in its employ since it may only inspire vindictiveness on the part of Manabat. Also, the
refusal of Manabat to return to work is in itself an indication of the existence of strained relations
between him and the petitioner. Bank of Lubao, Inc. vs. Rommel J. Manabat, et al., G.R. No.
188722, February 1, 2012.

Seafarers; employment contract; perfection stage vs. commencement stage. An employment


contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its
terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b)
object certain which is the subject matter of the contract, and (c) cause of the obligation. The
object of the contract was the rendition of service by Fantonial on board the vessel for which
service he would be paid the salary agreed upon. In this case, the employment contract was
perfected on January 15, 2000 when it was signed by the parties who entered into the contract in
behalf of their principal. However, the employment relationship never commenced since
Fantonial was not allowed to leave on January 17, 2000 and go on board the vessel M/V AUK in
Germany on the ground that he was not yet declared fit to work on the day of his scheduled
departure. But, even if no employer-employee relationship commenced, there was,
contemporaneous with the perfection of the employment contract, the birth of certain rights and
obligations, the breach of which may give rise to a cause of action against the erring party.
Bright Maritime Corporation (BMC) / Desiree P. Tenorio vs. Ricardo B. Fantonial, G.R. No.
165935, February 8, 2012.