1
LABOR STANDARDS The Court of Industrial Relations, on January 19, 1963 after trial,
CONDITIONS OF EMPLOYMENT
A. HOURS OF WORK
G.R. No. L-21348 June 30, 1966
RED V COCONUT PRODUCTS, LTD., petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS, TANGLAW NG PAGGAWA,
ALBERTO DELA CRUZ, ET AL., respondents.
BENGZON, J.P., J.:
Red V Coconut Products, Ltd. is a corporation with principal office and
place of business at Lucena City. It has in that city a desiccated coconut
factory. In said factory, it has several hundred workers. About 800 of
said workers are members of Tanglaw ng Paggawa labor union.
Tanglaw ng Paggawa and Red V Coconut Products, Ltd. entered into
a collective bargaining agreement on July 15, 1958. Subsequently,
however, on October 5, 1961, the aforementioned company and union
entered into another collective bargaining agreement, to expire on
October 31, 1965.
The 1958 collective bargaining agreement provided among other things
for payment of differentials to night shift workers in the desiccated
coconut factory.1äwphï1.ñët
The 1961 collective bargaining agreement retained the same
arrangement. It stated:
The present shift differential will remain in effect, namely, 35¢
for the second shift and 55¢ for the third Shift.
In the factory, there are two groups of workers, the three-shift group —
let us call it Group A — and the two — shift group — which we shall call
Group B. As observed by the parties thereto, differentials were paid to
workers, under the 1958 and 1961 contracts, thus:
Hours of
Differentials
Work
Group A — 1st shift 4 A.M. — 12 Noon (8 Hrs.) None
2nd 12
— 8 P.M. (8 Hrs.) .35
shift Noon
3rd shift 8 P.M. — 4 A.M. (8 Hrs.) .55
Group B — (12
1st shift 4 A.M. — 4 P.M. None
Hrs.)
2nd (12
4 P.M. — 4 A.M. .55
shift Hrs.)
On January 17, 1962, Tanglaw ng Paggawa and some 300 workers in
the above-stated factory, members of the said union, who belong to
Group B, filed a petition in the Court of Industrial Relations. Petitioners
therein alleged that the petitioners-workers are shellers, parers,
counters and haulers in the two shifts (Group B) consisting of 12 hours
each shift, the first shift from 4: 00 A.M. to 4: 00 P.M. and the second
shift from 4 P.M. to 4 A.M.; that said workers change shift assignments
every week; that, accordingly, all of them work from 4 A.M. to 4 P.M.
(first shift) for two alternate weeks per month and from 4 P.M. to 4 A.M.
(second shift) likewise for two alternate weeks in a month; that although
said workers perform work from 4 P.M. to 4 A.M., they receive only P.55
differential pay for the corresponding hours of night work; that their
nightwork is equivalent to the nightwork of the 2nd and 3rd shifts of
Group A combined, so that they should receive what the 2nd and 3rd
shifts of Group A, combined, receive as differential pay, namely, P.90
(P.75 plus P.35); that, therefore, they are entitled to payment of P.35
more as differential pay, since up to the time of the petition, they
received only P.55 per night as differential pay.
Said additional P.35 was asked by the petitioners-workers of Group B
f or work done by them from 4 P.M. to 4 A.M. Their claim referred to the
time from July 15, 1958 to the date of the petition, allegedly at P186.90
per sheller, parer, counter and hauler, or a total sum of P65,228.10
more or less.
Respondent company therein filed on January 28, 1962 a motion to
dismiss, stating that the Court of Industrial Relations has no jurisdiction
over the case for the reason that the claim asserted in the petition is a
simple money claim and that an interpretation of a contract (the
collective bargaining agreement is involved, which pertains to the
regular courts.
The Court of Industrial Relations denied said motion by resolution of
February 17, 1962 ruling that the claim is for unpaid overtime pay of
laborers still employed by the company. Said court likewise denied a
motion for reconsideration of the resolution. Red V Coconut Products,
Ltd. filed its answer on May 2, 1962.
In the meanwhile, on April 25, 1962, Tanglaw ng Paggawa filed with
the Court of Industrial Relations a new and independent petition
alleging unfair labor practice against Red V Coconut Products,
Ltd. (CIR Case No. 3150 ULP). It was asserted therein that the
company refused to grant 15 days leave with pay to the members of
the union in violation of the 1961 collective bargaining agreement.
rendered its decision on the petition for differential pay (CIR Case No.
1642-V). It found therein that the petitioners-workers are engaged
on pakiao or piece-work basis, and, therefore, are not entitled to
overtime pay under the Eight-Hour Labor Law (Sec. 2, CA 444); that
their petition for night shift differentials based on the collective
bargaining agreements is meritorious because the company having
paid night differentials indiscriminately to the night shift workers of
Group A and Group B alike, the payments should be uniform and equal
for the night shifts of both groups, that is, P.90. It therefore ordered
payment of the deficiency in said differentials to the workers of Group
B.
Red V Coconut Products, Ltd. moved for reconsideration of said
decision on January 29, 1963. The Court of Industrial Relations en
banc denied said motion by resolution of February 25, 1963. And,
hence, Red V Coconut Products, Ltd. filed this petition for review herein.
Petitioner herein contends that the present case involves a mere
money claim over which the Court of Industrial Relations has no
jurisdiction.1
It is exiomatic that to determine the issue of jurisdiction resort is to be
made to the allegations in the petition or complaint. 2 The petition for
shift differential in the present case, it is true, did not expressly mention
the Eight-Hour Labor Law. Nonetheless, it clearly asserted that (1)
petitioners-laborers "are working in the Red V Coconut Products, Ltd."
and (2) they "work in two (2) shifts (Blue and Red shifts) consisting of
approximately 12 hours each shift." Accordingly, from the said
allegations, it is proper to regard the petition, as the Court of Industrial
Relations did, as one for overtime pay by workers still employed by the
company. As such it falls within the jurisdiction of the Court of Industrial
Relations. For the same is in effect an assertion not of a simple money
claim but, as respondent court rightly held, of a claim for overtime pay
by workers who are employees of the company. 3
During the trial, as stated, evidence was adduced to the effect that the
aforesaid petitioners-workers were engaged on a piece-work basis.
The same, however, does not appear from the petition or complaint
filed with the respondent court. It therefore cannot affect its jurisdiction
over the case, which was already acquired. For jurisdiction, once
acquired, continues until final adjudication of the litigation. 4
Furthermore, although the Eight-Hour Labor Law provides that it does
not cover those workers who prefer to be paid on piece-work basis (Sec.
2, CA 444), nothing in said law precludes an agreement for the payment
of overtime compensation to piece-workers. And in agreeing to the
provision for payment of shift differentials to the petitioners-workers
aforementioned, in the bargaining agreement, as well as in actually
paying to them said differentials, though not in full, the company in
effect freely adhered to an application and implementation of the Eight-
Hour Labor Law, or its objectives, to said workers. It should be
observed that while the provision in the bargaining agreements speaks
of shift differentials for the "second shift" and the "third shift" and Group
B has no third shift, said Group B has a second shift, which performs
work equivalent to that of the corresponding shifts of Group A. It follows
that respondent court did not err in ordering the company to pay the full
and equivalent amount of said differentials (P.90) corresponding, under
the bargaining agreements, to the workers who performed 12 hours of
work, from 4 P.M. to 4 A.M.
And, finally, the laborers in question are not strictly under the full
concept of piece-workers as contemplated by law for the reason that
their hours of work — that is, 12 hours per shift — are fixed by the
employer. As ruled by this Court in Lara v. Del Rosario, 94 Phil. 780,
781-782, the philosophy underlying the exclusion of piece workers from
the Eight-Hour Labor Law is that said workers are paid depending upon
the work they do "irrespective of the amount of time employed" in doing
said work. Such freedom as to hours of work does not obtain in the
case of the laborers herein involved, since they are assigned by the
employer to work in two shifts for 12 hours each shift. Thus it cannot be
said that for all purposes these workers fall outside the law requiring
payment of compensation for work done in excess of eight hours. At
least for the purpose of recovering the full differential pay stipulated in
the bargaining agreement as due to laborers who perform 12 hours of
work under the night shift, said laborers should be deemed pro tanto or
to that extent within the scope of the afore-stated law.
Wherefore, the decision and resolution of the Court of Industrial
Relations under review are affirmed. So ordered.
G.R. No. 109156 July 11, 1996
STOLT-NIELSEN MARINE SERVICES (PHILS.) INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE
OVERSEAS EMPLOYMENT ADMINISTRATION and MEYNARDO J.
HERNANDEZ, respondent.
ROMERO, J.:p
Private respondent Meynardo J. Hernandez was hired by petitioner
Stolt-Nielsen marine Services (Phils.) Inc. (STOLT-NIELSEN, for short)

as radio officer of board M/T Stolt Condor for a period of ten months.
He boarded the vessel on January 20, 1990.
On April 26, 1990, the ship captain ordered private respondent to carry
the baggage of crew member Lito Loveria who was being repatriated.
He refused to obey the order out of fear in view of the utterance of the
said crew member "makakasaksak ako" and also because he did not
perceive such task as one of his duties as radio officer. As a result of
such refusal, private respondent was ordered to disembark on April 30,
1990 and was himself repatriated on May 15, 1990. He was paid his
salaries and wages only up to May 16, 1990.
On June 21, 1990, private respondent filed before the public
respondent POEA a complaint for illegal dismissal and breach of
contract paying for, among all things, payment of his salaries, wages,
overtime and other benefits due to him for the unexpired portion of the
contract which was six (6) months and three (3) days.
Petitioner STOLT-NIELSEN in its answer alleged that on April 26, 1990,
private respondent refused to follow the "request" of the master of the
vessel to explain to Lolito Loveria the reason for the latter's repatriation
and to assist him in carrying his baggage, all in violation of Article XXIV,
Section 1 of the Collective Bargaining Agreement (CBA) and the POEA
Standard Contract. Hence, private respondent, after being afforded the
opportunity to explain his side, was dismissed for gross insubordination
and serious misconduct.
In reply, he denied that the master of the vessel requested him to
explain to Loveria the reason for the latter's repatriation.
Thereafter, POEA Administrator Jose N. Sarmiento rendered an award
in favor of private respondent, as follows:
The issue to be resolved is whether or not complainant was
legally dismissed.
We rule in the affirmative.
Record shows that on April 26, 1990, complainant was
directed by the master of the vessel to carry the luggage of
an outgoing seaman offshore. Complainant, however,
refused to obey the said order, hence, his dismissal from his
employment.
Evaluating the reason for complainant's dismissal, we find the
penalty imposed too severe considering the violation
committed. To our mind, a warning would have been sufficient
since this was the first offense committed. Moreover, as radio
officer, it is not one of his official duties to carry the luggage
of outgoing seaman.
In the light of the foregoing, we hold that complainant's
dismissal due to the aforesaid incident arbitrary, whimsical
and contrary to human nature and experience, hence, not
justified. Accordingly, he is entitled to his salaries for the
unexpired portion of his contract computed as follows:
1. Remaining portion of his contract — 6 months
& 3 days
2. Basic salary — US$1,024.00
3. Fixed Overtime — 420.001
————————
Total US$ 1,434.00
4. Salary/day = ($1,434/30 days) = US$47.8/day
5. Salary for 3 days — ($47.8 x 3) = US$143.4
6. Salary for 6 months — ($1,434 x 6) = US$8,604.00
7. Salary for the unexpired
portion of his contract
(basic salary + fixed O.T.)
for 6 months and 3 days
(US$8,604 + 143.4) = US$8,747.40
Complainant's claim for day's leave with pay for the unexpired
portion of the contract is hereby denied since the same is only
given during actual service.
The claim for damages is hereby denied for want of
jurisdiction.
Complaint is however entitled to five (5%) percent of the total
award as and by way of attorney's fees.
WHEREFORE, PREMISES CONSIDERED, judgment is
hereby rendered ordering respondent to pay complainant the
following or its peso equivalent at the time of payment:
1. EIGHT THOUSAND SEVEN HUNDRED FORTY SEVEN
& 40/100 US DOLLARS (US$8,747.40) or its peso equivalent
at the time of payment, as salaries for the unexpired portion
of his contract.
2. Five percent (5%) of the total award as and by way of
attorney's fees.
All other claims are hereby DENIED for lack of merit.
SO ORDERED.2
Aggrieved, petitioner Stolt-Nelson appealed to the National Labor
Relations Commission. (NLRC).
The NLRC, in a resolution3 dated November 27, 1992, concurred with
the PEOA Administrator in ruling that private respondent, having been
illegally dismissed, was, therefore, entitled to the monetary award. It
further stated that the private respondent's duty as a radio officer or
2
radio operator does not include the carrying of the luggage of any
seaman or explaining to said seaman the reason for his repatriation.
Thus, concluded the NLRC, his termination on this ground was not
proper and, therefore, had every right to the monetary award. The
NLRC likewise granted private respondent's claim for fixed overtime
pay and attorney's fees.
Petitioner, having moved for reconsideration without success, is before
this court on certiorari.
The issues posed for resolution in this case are: (a) whether private
respondent was legally dismissed on the ground of gross
insubordination and serious misconduct; and (b) whether private
respondent was entitled to the award of overtime pay.
With respect to the first issue, petitioner Stolt-Nielsen emphasizes how
"(e)mployment on board ocean-going vessels is totally different from
land-based ones in that the former strict and faithful compliance of all
lawful commands and orders of the master or captain of the vessel is
of paramount and crucial importance." Petitioner then cites Part I,
Section A (2) of the POEA Standard Employment Contract which
provides:
2. The seaman binds himself to the following:
"a. to faithfully comply with and observe
the terms and conditions of this contract,
violation of which shall be subject to
disciplinary action pursuant to appendix 2
of this crew contract.
xxx xxx xxx
d. To be obedient to the lawful commands
of the master or any person who shall
succeed him."
It likewise adverts to Article XXIV, Section 1 of the CBA, viz:
Authority of the Master
Sec. 1. It is understood and agreed that nothing contained in
this is intended or shall be construed so as to restrict in any
way the superiority of the master or to prevent the obedience
of the crew to any lawful order of any superior officer.
(Emphasis ours)
Petitioner contends that since the captain's order to assist the
crew member who was being repatriated in carrying his
baggage is lawful, private respondent's refusal to obey the
command is wilful, thus warranting his dismissal.
Article 282 of the Labor Code provides in part:
Art. 282. Termination by Employer . — An
employer may terminate an employment
for any of the following causes: a) Serious
misconduct or wilful disobedience by the
employee of the lawful orders of his
employer or representative in connection
with his work;
xxx xxx xxx
Wilful disobedience of the employers lawful orders, as a just cause for
the dismissal of an employee, envisages the concurrence of at least
two (2) requisites: the employee's assailed conduct must have been
wilful or intentional, the wilfulness characterized by a "wrongful and
perverse attitude"; and the order violated must be reasonable, lawful,
made known to the employee and must pertain to the duties which he
had been engaged to discharged.4
The Court agrees that by virtue of the aforementioned CBA and POEA
Standard Contract provisions cited by the petitioner, private respondent
is indeed bound to obey the lawful commands of the captain of the ship,
but only as long as these pertain to his duties. The order to carry the
luggage of a crew member, while being lawful, is not part of the duties
of a radio officer. Assuming Arguendo that lawful commands of a ship
captain are supposed to be obeyed by the complement of the ship,
private respondent's so-called "act of disobedience" does not warrant
the supreme penalty of dismissal.
In Gold City Integrated Port Services, Inc. v. NLRC,5 the Court Ruled:
. . . We believe that not every case of insubordination or wilful
disobedience by an employee of a lawful work-connected
order of the employer or its representative is reasonably
penalized with dismissal. For one thing, Article 282 (a) refers
to "serious misconduct or wilful disobedience —". There must
be reasonable proportionality between, on the one hand, the
wilful disobedience by the employee and, on the other hand,
the penalty imposed therefor. . .
In instant case, the POEA found that private respondent's actuation
which led to his dismissal was the first and only act of disobedience
during his service with the petitioner. Furthermore, examination of the
circumstances surrounding private respondent's disobedience shows
that the repatriated seaman's utterance of "makakasaksak ako" so
instilled fear in private respondent that he was deterred from carrying
out the order of the captain. Hence, his act could not be rightfully
characterized as one motivated by a "wrongful and perverse attitude."
Besides, said incident posed no serious or substantial danger to the
well-being of his other co-employees or of the general public doing

business with petitioner employer. Neither did such behavior threaten
substantial prejudice to the business of his employer.
In light of the foregoing, we agree with the NLRC that termination of the
private respondent's services was a disproportionately heavy penalty.
Coming to the second issue involving the award of overtime pay, the
NLRC in its assailed resolution states:
Anent the overtime pay, compliant alleged that he is entitled
thereto as the same is a fixed overtime pay. The respondents
failed to controvert said allegations. In short, the
complainant's claim for overtime pay was undisputed and for
this reason, the grant of this claim must be upheld. 6
Petitioner, on the other hand, cites this Court's
pronouncement in Cagampan v. NLRC,7 thus:
As regards to the question of overtime pay, the NLRC cannot
be faulted for disallowing the payment of said pay because it
merely straightened out the distorted interpretation asserted
by the petitioners and defined the correct interpretation of the
provision on overtime pay embodied in the contract
conformably with settled doctrines on the matter. Notably, the
NLRC ruling on the disallowance of overtime pay is ably
supported by the fact that petitioners never produced any
proof of actual performance of overtime work.
Petitioners have conveniently adopted the view that the
"guaranteed or fixed overtime pay of 30% of the basic salary
per month" embodied in their employment contract should be
awarded to them as part of a "package benefit." They have
theorized that even without sufficient evidence of actual
rendition of overtime work they would automatically be
entitled to overtime pay. Their theory is erroneous for being
illogical and unrealistic. Their thinking even runs counter to
the intention behind the provision. The contract provision
means that the fixed overtime pay of 30% would be a basis
for computing the overtime pay if and when overtime work
would be rendered. Simply stated, the rendition of overtime
work and the submission of sufficient proof that the said work
was actually performed are conditions to be satisfied before
a seaman could be entitled to overtime pay which would be
computed on the basis of 30% of the basic monthly salary. In
short, the contract provision guarantees the right to overtime
pay but the entitlement to such benefit must first be
established. Realistically speaking, a seaman, by the very
nature of his job, stays on board a ship or vessel beyond the
regular eight-hour work schedule. For the employer to give
him overtime pay for the extra hours when he might be
sleeping or attending to his personal chores or even just
lulling away his time would be extremely unfair and
unreasonable.
Petitioner's argument is well taken. A close scrutiny of the computation
of the monetary award8 shows that the award for overtime was for the
remaining six (6) months and three (3) days of private respondent's
contract at which time he was no longer rendering services as he had
already been repatriated. In light of our aforequoted ruling
in Cagampan v. NLRC, said award for overtime should be, as it is
hereby, disallowed for being unjustified.
WHEREFORE, the decision of the NLRC is hereby AFFIRMED with the
modification that the award for overtime pay should be DELETED.
G.R. No. 116593 September 24, 1997
PULP AND PAPER, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND EPIFANIA
ANTONIO, respondents.
PANGANIBAN, J.:
In the absence of wage rates specially prescribed for piece-rate
workers, how should the separation pay and salary differential of such
workers be computed?
Statement of the Case
This is the main question raised in the instant petition for certiorari, filed
under Rule 65 of the Rules of Court, to set aside and annul National
Labor Relations Commission's1 Decision2 promulgated on September
24, 1993 and Resolution3 dated December 16, 1993 in NLRC NCR CA
No. 004041-92.4 Public respondent's assailed Decision affirmed in
toto Labor Arbiter Eduardo J. Carpio's decision5 dated October 6, 1992,
which disposed thus:6
IN VIEW OF ALL THE FOREGOING, judgement
[sic] is hereby rendered:
1. dismissing the complaint for illegal dismissal for
lack of merit;
2. ordering respondent Pulp and Papers
Distributors Inc. to pay complainant Efipania (sic)
Antonio the sum of P49.088.00 representing her
separation pay; and
3
3. ordering respondent to pay the complainant the
sum of P31,149.56 representing the underpayment
of wages.
4. dismissing all other issues far lack of merit.
The assailed Resolution denied petitioner's motion for reconsideration
for lack of merit.
The Facts
The facts as found by the labor arbiter are as follows: 7
A case of illegal dismissal and underpayment of
wages [was] filed by MS. EPIFANIA ANTONIO
[private respondent herein] against PULP AND
PAPER DISTRIBUTORS INC., [petitioner
herein] . . . .
In filing the present complaint, complainant in her
position paper alleges that she was a regular
employee of the . . . corporation having served
thereat as Wrapper sometime in September 1975.
On November 29, 1991, for unknown reasons, she
was advised verbally of her termination and was
given a prepared form of Quitclaim and Release
which she refused to sign. Instead she brought the
present complaint for illegal dismissal.
In charging the [herein petitioner] of underpayment
of wages, complainant in the same position paper
alleges that, rarely during her employment with the
respondent she received her salary, a salary which
was in accordance with the minimum wage law. She
was not paid overtime pay, holiday pay and five-day
service incentive leave pay, hence she is claiming
for payments thereof by instituting the present case.
Respondent on the otherhand [sic] denied having
terminated the services of the complainant and
alleges inter alia that starting 1989 the orders from
customers became fewer and dwindled to the point
that it is no longer practical to maintain the present
number of packer/wrappers. Maintaining the same
number of packers/wrappers would mean less pay
because the work allocation is no longer the same
as it was. Such being the case, the respondent has
to reduce temporarily the number of
packers/wrappers. Complainant was among those
who were temporarily laid-off from work.
Complainant last worked with the company on June
29, 1991.
As regards complainant's allegation that on
November 29, 1991, she was forced to sign a
quitclaim and release by the respondent, the latter
clarified that considering that five months from the
time the complainant last worked with the company,
the management decided to release the
complainant and give her a chance to look for
another job in the meantime that no job is available
for her with the company. In other words,
complainant was given the option and considering
that she did not sign the documents referred to as
the Quitclaim and Release, the respondent did not
insist, and did not terminate the services of the
complainant. It was just surprise [sic] to receive the
present complaint. In fact, respondent added that
the reason why the complainant was called on
November 29, 1991 was not to work but to receive
her 13th month pay of P636.70 as shown by the
voucher she signed (Annex-A, Respondent).
As regards the claim of the complainant for
underpayment, respondent did not actually denied
(sic) the same but give [sic] the reservation that
should the same be determined by this Office it is
willing to settle the same considering the fact that
complainant herein being paid by results, it is not in
a proper position to determine whether the
complainant was underpaid or not.
The Issues
Petitioner couched the main issue in this wise:8
Did the Public Respondent NLRC act correctly in
affirming in toto the decision rendered by the labor
arbitration branch a quo in NLRC NCR Case no. 00-
01-00494-92?
While it expressly admits that private respondent is entitled to
separation pay, petitioner raises nonetheless the following queries: "(a)
Are the factors in determining the amount of separation pay for a 'piece-
rate worker' the same as that of a 'time-worker'? (b) Is a worker, who
was terminated for lack of work, entitled to separation pay at the rate of
one-month's pay for every year of service?"9 The petition is based on
the following "grounds":
I

Public Respondent NLRC committed grave abuse
of discretion and serious reversible error when it
affirmed in toto the award of separation pay in favor
of private respondent, without bases in fact and in
law.
II
Public Respondent NLRC committed grave abuse
of discretion and serious reversible error when it
affirmed in toto the award of underpayment in favor
of private respondent, without bases in fact and in
law.
The Public Respondent's Ruling
In dismissing the appeal of petitioner, public respondent reasoned: 10
It is true that all the above circumstances cited by
the [herein petitioner] are not present in the case at
bar, hence, separation pay based on those
circumstances is not owing to the [herein private
respondent]. However, it is quite obvious that
[petitioner] missed the legal and factual basis why
separation pay was awarded by the Labor Arbiter.
In the first place, the [petitioner] admits that the
complainant-appellee was temporarily laid off on
June 29, 1991. This means that there was a
temporary suspension of employer-employee
relationship between the appellant and the appellee.
Lay-off is a temporary termination initiated by the
employer, but without prejudice to the reinstatement
or recall of the workers who have been temporarily
separated. The reasons for laying off employees
are varied: lack of work, shutdown for repairs,
business reverses, and the like. Always, however,
there is the expectation that the employees who
have been laid off will be recalled or rehired. This
situation is governed by Rule I, Section 12, of Book
VI of the Implementing Rules and Regulations of the
Labor Code, which provides:
Sec. 12. Suspension of
Relationship. — The employer-
employee relationship shall be
deemed suspended in case of
suspension of operation of the
business or undertaking of the
employer for a period not
exceeding six (6) months . . . .
From June 29, 1991 up to the time the complainant-
appellee filed her complaint on January 21, 1992,
there was more than six (6) months that already
elapse (sic) and yet, the appellant failed to recall the
appellee to let her resume working. If the appellant
was not yet in a possession to recall or reinstate the
appellee after six (6) months, up to when shall
appellant let her keep in waiting. Of course, she
cannot be allowed to wait interminably. That is the
reason why the law imposes a period of six (6)
months within which the resumption of employer-
employee relationship must be resumed in
temporary lay-offs. Otherwise, any employer can, in
the guise of a temporary lay-off, close its doors to
an employee for more than six months and their
claim that the lay-off has ripened into termination
and try to get away from any liability. The award of
separation pay is hereby declared in order.
On the second issue raised by the (petitioner) on
appeal, We are also for the Labor Arbiter's ruling
upholding the appellee's right to salary differential in
the amount computed.
The argument interposed by the [petitioner] based
on Art. 101 of the Labor Code, in relation to Rule VII,
Section (8), Book III of the Omnibus Implementing
Rule and Regulations, will not lie in the case at bar.
In the first place, pursuant to the provision of law
cited by the [petitioner], all time and motion studies,
or any other schemes or devices to determine
whether the employees paid by results are being
compensated in accordance with the minimum
wage requirements, shall only be approved on
petition of the interested employer. Thus, it is the
fault of the [petitioner] on whose initiative, a time
and motion study or any other similar scheme is not
yet available in its establishment.
The Court's Ruling
The appeal is not meritorious.
First Issue: Computation of Minimum Wage
Petitioner argues that private respondent was a piece-rate worker and
not a time-worker. Since private respondent's employment as
"(p)acker/(w)rapper" in 1975 until her separation on June 29, 1991,
4
"(h)er salary depended upon the number of 'reams of bond paper' she
packed per day." Petitioner contends that private respondent's work
"depended upon the number and availability of purchase orders from
customers." Petitioner adds that, oftentimes, "packers/wrappers only
work three to four hours a day." Thus, her separation pay "must be
based on her latest actual compensation per piece or on the minimum
wage per piece as determined by Article 101 of the Labor Code,
whichever is higher, and not on the daily minimum wage applicable to
time-workers." 11
Compensation of Pieceworkers
In the absence of wage rates based on time and motion studies
determined by the labor secretary or submitted by the employer to the
labor secretary for his approval, wage rates of piece-rate workers must
be based on the applicable daily minimum wage determined by the
Regional Tripartite Wages and Productivity Commission. To ensure the
payment of fair and reasonable wage rates, Article 101 12 of the Labor
Code provides that "the Secretary of Labor shall regulate the payment
of wages by results, including pakyao, piecework and other nontime
work." The same statutory provision also states that the wage rates
should be based, preferably, on time and motion studies, or those
arrived at in consultation with representatives of workers' and
employers' organizations. In the absence of such prescribed wage
rates for piece-rate workers, the ordinary minimum wage rates
prescribed by the Regional Tripartite Wages and Productivity Boards
should apply. This is in compliance with Section 8 of the Rules
Implementing Wage Order Nos. NCR-02 and NCR-02-A — the
prevailing wage order at the time of dismissal of private
respondent, viz: 13
Sec. 8. Workers Paid by Results. — a) All workers
paid by results including those who are paid on
piece work, takay, pakyaw, or task basis, shall
receive not less than the applicable minimum wage
rates prescribed under the Order for the normal
working hours which shall not exceed eight (8)
hours work a day, or a proportion thereof for work
of less than the normal working hours.
The adjusted minimum wage rates for workers paid
by results shall be computed in accordance with the
following steps:
1) Amount of increase in AMW x 100 = %
increase Previous AMW
2) Existing rate/piece x % increase = increase in
rate/piece;
3) Existing rate/piece + increase in rate/piece =
adjusted rate/piece.
b) The wage rates of workers who are paid by
results shall continue to be established in
accordance with Art. 101 of the Labor Code, as
amended and its implementing regulations.
(Emphasis supplied.)
On November 29, 1991, private respondent was orally informed of the
termination of her employment. Wage Order No. NCR-02, in effect at
the time, set the minimum daily wage for non-agricultural workers like
private respondent at P118.00. 14 This was the rate used by the labor
arbiter in computing the separation pay of private respondent. We
cannot find any abuse of discretion, let alone grave abuse, in the order
of the labor arbiter which was later affirmed by the NLRC.
Moreover, since petitioner employed piece-rate workers, it should have
inquired from the secretary of labor about their prescribed specific wage
rates. In any event, there being no such prescribed rates, petitioner,
after consultation with its workers, should have submitted for the labor
secretary's approval time and motion studies as basis for the wage
rates of its employees. This responsibility of the employer is clear under
Section 8, Rule VII, Book III of the Omnibus Rules Implementing the
Labor Code:
Sec. 8. Payment by result. (a) On petition of any
interested party, or upon its initiative, the
Department of Labor shall use all available devices,
including the use of time and motion studies and
consultations with representatives of employers'
and workers' organizations, to determine whether
the employees in any industry or enterprise are
being compensated in accordance with the
minimum wage requirements of this Rule.
(b) The basis for the establishment of rates for piece,
output or contract work shall be the performance of
an ordinary worker of minimum skill or ability.
(c) An ordinary worker of minimum skill or ability is
the average worker of the lowest producing group
representing 50% of the total number of employees
engaged in similar employment in a particular
establishment, excluding learners, apprentices and
handicapped workers employed therein.
(d) Where the output rates established by the
employer do not conform with the standards
prescribed herein, or with the rates prescribed by

the Department of Labor in an appropriate order,
the employees shall be entitled to the difference
between the amount to which they are entitled to
receive under such prescribed standards or rates
and that actually paid them by employer.
In the present case, petitioner as the employer unquestionably failed to
discharge the foregoing responsibility. Petitioner did not submit to the
secretary of labor a proposed wage rate — based on time and motion
studies and reached after consultation with the representatives from
both workers' and employers' organization — which would have applied
to its piece-rate workers. Without those submissions, the labor arbiter
had the duty to use the daily minimum wage rate for non-agricultural
workers prevailing at the time of private respondent's dismissal, as
prescribed by the Regional Tripartite Wages and Productivity Boards.
Put differently, petitioner did not take the initiative of proposing an
appropriate wage rate for its piece-rate workers. In the absence of such
wage rate, the labor arbiter cannot be faulted for applying the
prescribed minimum wage rate in the computation of private
respondent's separation pay. In fact, it acted and ruled correctly and
legally in the premises.
It is clear, therefore, that the applicable minimum wage for an eight-
hour working day is the basis for the computation of the separation pay
of piece-rate workers like private respondent. The computed daily wage
should not be reduced on the basis of unsubstantiated claims that her
daily working hours were less than eight. Aside from its bare assertion,
petitioner presented no clear proof that private respondent's regular
working day was less than eight hours. Thus, the labor arbiter correctly
used the full amount of P118.00 per day in computing private
respondent's separation pay. We agree with the following
computation: 15
Considering therefore that complainant had been
laid-off for more than six (6) months now, we
strongly feel that it is already reasonable for the
respondent to pay the complainant her separation
pay of one month for every year of service, a
fraction of six (6) months to be considered as one
whole year. Separation pay should be computed
based on her minimum salary as will be determined
hereunder.
Separation pay 1 month = 16
years
P118.00 x 26 x 16 years =
P49,088.00
The amount "P118.00" represents the applicable daily minimum wage
per Wage Order Nos. NCR-02 and NCR-02-A; "26", the number of
working days in a month after excluding the four Sundays which are
deemed rest days; "16", the total number of years spent by private
respondent in the employ of petitioner.
Second Issue: Computation of Separation Pay
Petitioner questions not only the basis for computing private
respondent's monthly wage; it also contends that private respondent's
separation pay should not have been computed at one month's pay for
every year of service. Because private respondent should be
considered retrenched, the separation pay should be "one month's pay
or at least one/half (1/2) month pay for every year of service, whichever
is higher, and not one (1) month's pay for every year of service as public
respondent had ruled." 16
Petitioner misapprehended the ground relied upon by public
respondent for awarding separation pay. In this case, public respondent
held that private respondent was constructively dismissed, pursuant to
Article 286 of the Labor Code which reads:
Art. 286. When employment not deemed terminated.
— The bonafide suspension of the operation of a
business or undertaking for a period not exceeding
six (6) months, or the fulfillment by the employee of
a military or civic duty shall not terminate
employment. In all such cases, the employer shall
reinstate the employee to his former position
without loss of seniority rights if he indicates his
desire to resume his work not later that one (1)
month from his resumption of operations of his
employer or from his relief from the military or civic
duty.
Petitioner failed to discern that public respondent, in finding that the
services of private respondent were terminated, merely adopted by
analogy the rule on constructive dismissal. Since private respondent
was not reemployed within six (6) months from the "suspension" of her
employment, she is deemed to have been constructively
dismissed. 17 Otherwise, private respondent will remain in a perpetual
"floating status." Because petitioner had not shown by competent
evidence any just cause for the dismissal of private respondent, she is
entitled to reinstatement 18 or, if this is not feasible, to separation pay
equivalent to one (1) month salary for every year of service. Private
respondent, however, neither asked for reinstatement 19 nor appealed
from the labor arbiter's finding that she was not illegally dismissed; she
merely prayed for the grant of her monetary claims. Thus, we sustain
5
the award of separation pay made by public respondent, 20 for
employees constructively dismissed are entitled to separation pay.
Because she did not ask for more, we cannot give her more. We repeat:
she appealed neither the decision of the labor arbiter nor that of the
NLRC. Hence, she is not entitled to any affirmative relief.
Furthermore, we cannot sustain petitioner's claim that private
respondent was retrenched. For retrenchment to be considered a
ground for termination, the employer must serve a written notice on the
workers and the Department of Labor and Employment at least one
month before the intended date thereof. 21 Petitioner did not comply
with this requirement.
Third Issue: Determination of Salary Differential
In light of the foregoing discussion, we must also dismiss petitioner's
challenge to the computation of salary differential. As earlier observed,
private respondent is entitled to the minimum wage prevailing at the
time of the termination of her employment. The same rate of minimum
wage, P118.00, should be used in computing her salary differential
resulting from petitioner's underpayment of her wages. Thus, the labor
arbiter correctly deducted private respondent's actually received wage
of P60 a day from the prescribed daily minimum wage of P118.00, and
multiplied the difference by 26 working days, and subsequently by 16
years, equivalent to her length of service with petitioner. Thus, the
amount of P31,149.56 as salary differential. 22
Petitioner argues that "the work of the private respondent is seasonal,
being dependent upon the availability of job-orders" and not "twenty-six
(26) days a month." 23 Further, petitioner contends that private
respondent herself admitted she was "a piece worker whose work [was]
seasonal." 24
Contrary to the assertion of petitioner, neither the assailed Decision nor
the pleadings of private respondent show that private respondent's
work was seasonal. More important, petitioner utterly failed to
substantiate its allegation that private respondent's work was seasonal.
We observe that the labor arbiter based the computation of the salary
differential on a 26-day month on the presumption that private
respondent's work was continuous. In view of the failure of petitioner to
support its claim, we must sustain the correctness of this computation.
WHEREFORE, premises considered, the petition is DISMISSED and
the assailed Decision is AFFIRMED. Costs against petitioner.
SO ORDERED
G.R. No. 132805 February 2, 1999
PHILIPPINE AIRLINES, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER
ROMULUS PROTACIO and DR. HERMINIO A.
FABROS, respondents.
PUNO, J.:
Petitioner Philippine Airlines, Inc. assails the decision of the National
Labor Relations Commission dismissing its appeal from the decision of
Labor Arbiter Romulus S. Protacio which declared the suspension of
private respondent Dr. Herminio A. Fabros illegal and ordered petitioner
to pay private respondent the amount equivalent to all the benefits he
should have received during his period of suspension plus P500,000.00
moral damages.
The facts are as follow:
Private respondent was employed as flight surgeon at petitioner
company. He was assigned at the PAL Medical Clinic at Nichols and
was on duty from 4:00 in the afternoon until 12:00 midnight.
On February 17, 1994, at around 7:00 in the evening, private
respondent left the clinic to have his dinner at his residence, which was
about five-minute drive away. A few minutes later, the clinic received
an emergency call from the PAL Cargo Services. One of its employees,
Mr. Manuel Acosta, had suffered a heart attack. The nurse on duty, Mr.
Merlino Eusebio, called private respondent at home to inform him of the
emergency. The patient arrived at the clinic at 7:50 in the evening and
Mr. Eusebio immediately rushed him to the hospital. When private
respondent reached the clinic at around 7:51 in the evening, Mr.
Eusebio had already left with the patient. Mr. Acosta died the following
day.
Upon learning about the incident, PAL Medical Director Dr. Godofredo
B. Banzon ordered the Chief Flight Surgeon to conduct an investigation.
The Chief Flight Surgeon, in turn, required private respondent to
explain why no disciplinary sanction should be taken against him.
In his explanation, private respondent asserted that he was entitled to
a thirty-minute meal break; that he immediately left his residence upon
being informed by Mr. Eusebio about the emergency and he arrived at
the clinic a few minutes later; that Mr. Eusebio panicked and brought
the patient to the hospital without waiting for him.
Finding private respondent's explanation unacceptable, the
management charged private respondent with abandonment of post
while on duty. He was given ten days to submit a written answer to the
administrative charge.

In his answer, private respondent reiterated the assertions in his
previous explanation. He further denied that he abandoned his post on
February 17, 1994. He said that he only left the clinic to have his dinner
at home. In fact, he returned to the clinic at 7:51 in the evening upon
being informed of the emergency.
After evaluating the charge as well as the answer of private respondent,
petitioner company decided to suspend private respondent for three
months effective December 16, 1994.
Private respondent filed a complaint for illegal suspension against
petitioner.
On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a
decision1 declaring the suspension of private respondent illegal. It also
ordered petitioner to pay private respondent the amount equivalent to
all the benefits he should have received during his period of suspension
plus P500,000.00 moral damages. The dispositive portion of the
decision reads:
WHEREFORE, in view of all the foregoing,
judgment is hereby rendered declaring the
suspension of complainant as illegal, and ordering
the respondents the restitution to the complainant of
all employment benefits equivalent to his period of
suspension, and the payment to the complainant of
P500,000.00 by way of moral damages.2
Petitioner appealed to the NLRC. The NLRC, however, dismissed the
appeal after finding that the decision of the Labor Arbiter is supported
by the facts on record and the law on the matter. 3 The NLRC likewise
denied petitioner's motion for reconsideration. 4
Hence, this petition raising the following arguments:
1. The public respondents acted without or in
excess of their jurisdiction and with grave abuse of
discretion in nullifying the 3-month suspension of
private respondent despite the fact that the private
respondent has committed an offense that
warranted the imposition of disciplinary action.
2. The public respondents acted without or in
excess of their jurisdiction and with grave abuse of
discretion in holding the petitioner liable for moral
damages:
(a) Despite the fact that no formal hearing
whatsoever was conducted for complainant to
substantiate his claim;
(b) Despite the absence of proof that the petitioner
acted in bad faith in imposing the 3-month
suspension; and
(c) Despite the fact that the Labor Arbiter's award of
moral damages is highly irregular, considering that
it was more than what the private respondent
prayed for. 5
We find that public respondents did not err in nullifying the three-month
suspension of private respondent. They, however, erred in awarding
moral damages to private respondent.
First, as regards the legality of private respondent's suspension. The
facts do not support petitioner's allegation that private respondent
abandoned his post on the evening of February 17, 1994. Private
respondent left the clinic that night only to have his dinner at his house,
which was only a few minutes' drive away from the clinic. His
whereabouts were known to the nurse on duty so that he could be
easily reached in case of emergency. Upon being informed of Mr.
Acosta's condition, private respondent immediately left his home and
returned to the clinic. These facts belie petitioner's claim of
abandonment.
Petitioner argues that being a full-time employee, private respondent is
obliged to stay in the company premises for not less than eight (8) hours.
Hence, he may not leave the company premises during such time, even
to take his meals.
We are not impressed.
Art. 83 and 85 of the Labor Code read:
Art. 83. Normal hours of work. — The normal hours
of work of any employee shall not exceed eight (8)
hours a day.
Health personnel in cities and municipalities with a
population of at least one million (1,000,000) or in
hospitals and clinics with a bed capacity of at least
one hundred (100) shall hold regular office hours for
eight (8) hours a day, for five (5) days a week,
exclusive of time for meals, except where the
exigencies of the service require that such
personnel work for six (6) days or forty-eight (48)
hours, in which case they shall be entitled to an
additional compensation of at least thirty per cent
(30%) of their regular wage for work on the sixth day.
For purposes of this Article, "health personnel" shall
include: resident physicians, nurses, nutritionists,
dieticians, pharmacists, social workers, laboratory
technicians, paramedical technicians,
6
psychologists, midwives, attendants and all other
hospital or clinic personnel. (emphasis supplied)
Art. 85. Meal periods. — Subject to such regulations
as the Secretary of Labor may prescribe, it shall be
the duty of every employer to give his employees
not less than sixty (60) minutes time-off for their
regular meals.
Sec. 7, Rule I, Book III of the Omnibus Rules Implementing the Labor
Code further states:
Sec. 7. Meal and Rest Periods. — Every employer
shall give his employees, regardless of sex, not less
than one (1) hour time-off for regular meals, except
in the following cases when a meal period of not
less than twenty (20) minutes may be given by the
employer provided that such shorter meal period is
credited as compensable hours worked of the
employee;
(a) Where the work is non-manual work in nature or
does not involve strenuous physical exertion;
(b) Where the establishment regularly operates not
less than sixteen hours a day;
(c) In cases of actual or impending emergencies or
there is urgent work to be performed on
machineries, equipment or installations to avoid
serious loss which the employer would otherwise
suffer; and
(d) Where the work is necessary to prevent serious
loss of perishable goods.
Rest periods or coffee breaks running from five (5)
to twenty (20) minutes shall be considered as
compensable working time.
Thus, the eight-hour work period does not include the meal break.
Nowhere in the law may it be inferred that employees must take their
meals within the company premises. Employees are not prohibited from
going out of the premises as long as they return to their posts on time.
Private respondent's act, therefore, of going home to take his dinner
does not constitute abandonment.
We now go to the award of moral damages to private respondent.
Not every employee who is illegally dismissed or suspended is entitled
to damages. As a rule, moral damages are recoverable only where the
dismissal or suspension of the employee was attended by bad faith or
fraud, or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs or public policy. 6 Bad faith
does not simply mean negligence or bad judgment. It involves a state
of mind dominated by ill will or motive. It implies a conscious and
intentional design to do a wrongful act for a dishonest purpose or some
moral obliquity.7 The person claiming moral damages must prove the
existence of bad faith by clear and convincing evidence for the law
always presumes good faith.8
In the case at bar, there is no showing that the management of
petitioner company was moved by some evil motive in suspending
private respondent. It suspended private respondent on an honest,
albeit erroneous, belief that private respondent's act of leaving the
company premises to take his meal at home constituted abandonment
of post which warrants the penalty of suspension. Also, it is evident
from the facts that petitioner gave private respondent all the opportunity
to refute the charge against him and to defend himself. These negate
the existence of bad faith on the part of petitioner. Under the
circumstances, we hold that private respondent is not entitled to moral
damages.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The
portion of the assailed decision awarding moral damages to private
respondent is DELETED. All other aspects of the decision are
AFFIRMED.
SO ORDERED.
G.R. No. 111042 October 26, 1999
AVELINO LAMBO and VICENTE BELOCURA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and J.C. TAILOR
SHOP and/or JOHNNY CO, respondents.
MENDOZA, J.:
This is a petition for certiorari to set aside the decision 1 of the National
Labor Relations Commission (NLRC) which reversed the awards made
by the Labor Arbiter in favor of petitioners, except one for P4,992.00 to
each, representing 13th month pay.
The facts are as follows.
Petitioners Avelino Lambo and Vicente Belocura were employed as
tailors by private respondents J.C. Tailor Shop and/or Johnny Co on
September 10, 1985 and March 3, 1985, respectively. They worked
from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. As
in the case of the other 100 employees of private respondents,
petitioners were paid on a piece-work basis, according to the style of

suits they made. Regardless of the number of pieces they finished in a
day, they were each given a daily pay of at least P64.00.
On January 17, 1989, petitioners filed a complaint against private
respondents for illegal dismissal and sought recovery of overtime pay,
holiday pay, premium pay on holiday and rest day, service incentive
leave pay, separation pay, 13th month pay, and attorney’s
fees.1âwphi1.nêt
After hearing, Labor Arbiter Jose G. Gutierrez found private
respondents guilty of illegal dismissal and accordingly ordered them to
pay petitioners’ claims. The dispositive portion of the Labor Arbiter’s
decision reads:
WHEREFORE, in the light of the
foregoing, judgment is hereby rendered
declaring the complainants to have been
illegally dismissed and ordering the
respondents to pay the complainants the
following monetary awards:
AVELINO LAMBO VICENTE BELOCURA
I. BACKWAGES P64,896.00 P64,896.00
II. OVERTIME PAY 13,447.90 13,447.90
III. HOLIDAY PAY 1,399.30 1,399.30
IV. 13TH MONTH PAY 4,992.00 4,992.00
V. SEPARATION PAY 9,984.00 11,648.00
—————— ——————
TOTAL P94,719.20 P96,383.20 =
P191,102.40
Add: 10% Attorney's Fees 19,110.24
——————
GRAND TOTAL P210,212.64
=========
or a total aggregate amount of TWO
HUNDRED TEN THOUSAND TWO
HUNDRED TWELVE AND 64/100
(P210,212.64).
All other claims are dismissed for lack of merit.
SO ORDERED. 2
On appeal by private respondents, the NLRC reversed the decision of
the Labor Arbiter. It found that petitioners had not been dismissed from
employment but merely threatened with a closure of the business if they
insisted on their demand for a "straight payment of their minimum
wage," after petitioners, on January 17, 1989, walked out of a meeting
with private respondents and other employees. According to the NLRC,
during that meeting, the employees voted to maintain the company
policy of paying them according to the volume of work finished at the
rate of P18.00 per dozen of tailored clothing materials. Only petitioners
allegedly insisted that they be paid the minimum wage and other
benefits. The NLRC held petitioners guilty of abandonment of work and
accordingly dismissed their claims except that for 13th month pay. The
dispositive portion of its decision reads:
WHEREFORE, in view of the foregoing, the
appealed decision is hereby vacated and a new one
entered ordering respondents to pay each of the
complainants their 13th month pay in the amount of
P4,992.00. All other monetary awards are hereby
deleted.
SO ORDERED. 3
Petitioners allege that they were dismissed by private respondents as
they were about to file a petition with the Department of Labor and
Employment (DOLE) for the payment of benefits such as Social
Security System (SSS) coverage, sick leave and vacation leave. They
deny that they abandoned their work.
The petition is meritorious.
First. There is no dispute that petitioners were employees of private
respondents although they were paid not on the basis of time spent on
the job but according to the quantity and the quality of work produced
by them. There are two categories of employees paid by results: (1)
those whose time and performance are supervised by the employer.
(Here, there is an element of control and supervision over the manner
as to how the work is to be performed. A piece-rate worker belongs to
this category especially if he performs his work in the company
premises.); and (2) those whose time and performance are
unsupervised. (Here, the employer’s control is over the result of the
work. Workers on pakyao and takay basis belong to this group.) Both
classes of workers are paid per unit accomplished. Piece-rate payment
is generally practiced in garment factories where work is done in the
company premises, while payment on pakyao and takay basis is
commonly observed in the agricultural industry, such as in sugar
plantations where the work is performed in bulk or in volumes difficult
to quantify.4 Petitioners belong to the first category, i.e., supervised
employees.
In determining the existence of an employer-employee relationship, the
following elements must be 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. 5 Of
these elements, the most important criterion is whether the employer
7
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. 6
In this case, private respondents exercised control over the work of
petitioners. As tailors, petitioners worked in the company’s premises
from 8:00 a.m. to 7:00 p.m. daily, including Sundays and holidays. The
mere fact that they were paid on a piece-rate basis does not negate
their status as regular employees of private respondents. The term
"wage" is broadly defined in Art. 97 of the Labor Code as remuneration
or earnings, capable of being expressed in terms of money whether
fixed or ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and does not
define the essence of the relations. 7 Nor does the fact that petitioners
are not covered by the SSS affect the employer-employee relationship.
Indeed, the following factors show that petitioners, although piece-rate
workers, were regular employees of private respondents: (1) within the
contemplation of Art. 280 of the Labor Code, their work as tailors was
necessary or desirable in the usual business of private respondents,
which is engaged in the tailoring business; (2) petitioners worked for
private respondents throughout the year, their employment not being
dependent on a specific project or season; and, (3) petitioners worked
for private respondents for more than one year. 8
Second. Private respondents contend, however, that petitioners
refused to report for work after learning that the J.C. Tailoring and Dress
Shop Employees Union had demanded their (petitioners’) dismissal for
conduct unbecoming of employees. In support of their claim, private
respondents presented the affidavits 9 of Emmanuel Y. Caballero,
president of the union, and Amado Cabañero, member, that petitioners
had not been dismissed by private respondents but that practically all
employees of the company, including the members of the union had
asked management to terminate the services of petitioners. The
employees allegedly said they were against petitioners’ request for
change of the mode of payment of their wages, and that when a
meeting was called to discuss this issue, a petition for the dismissal of
petitioners was presented, prompting the latter to walk out of their jobs
and instead file a complaint for illegal dismissal against private
respondents on January 17, 1989, even before all employees could
sign the petition and management could act upon the
same.1âwphi1.nêt
To justify a finding of abandonment of work, there must be proof of a
deliberate and unjustified refusal on the part of an employee to resume
his employment. The burden of proof is on the employer to show an
unequivocal intent on the part of the employee to discontinue
employment. 10 Mere absence is not sufficient. It must be accompanied
by manifest acts unerringly pointing to the fact that the employee simply
does not want to work anymore. 11
Private respondents failed to discharge this burden. Other than the self-
serving declarations in the affidavits of their two employees, private
respondents did not adduce proof of overt acts of petitioners showing
their intention to abandon their work. On the contrary, the evidence
shows that petitioners lost no time in filing the case for illegal dismissal
against private respondent. This fact negates any intention on their part
to sever their employment relationship. 12 Abandonment is a matter of
intention; it cannot be inferred or presumed from equivocal acts. 13
Third. Private respondents invoke the compromise agreement, 14 dated
March 2, 1993, between them and petitioner Avelino Lambo, whereby
in consideration of the sum of P10,000.00, petitioner absolved private
respondents from liability for money claims or any other obligations.
To be sure, not all quitclaims are per se invalid or against public policy.
But those (1) where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person or (2) where the terms of
settlement are unconscionable on their face are invalid. In these cases,
the law will step in to annul the questionable transaction. 15 However,
considering that the Labor Arbiter had given petitioner Lambo a total
award of P94,719.20, the amount of P10,000.00 to cover any and all
monetary claims is clearly unconscionable. As we have held in another
case, 16 the subordinate position of the individual employee vis-a-
vis management renders him especially vulnerable to its
blandishments, importunings, and even intimidations, and results in his
improvidently waiving benefits to which he is clearly entitled. Thus,
quitclaims, waivers or releases are looked upon with disfavor for being
contrary to public policy and are ineffective to bar claims for the full
measure of the workers’ legal rights. 17 An employee who is merely
constrained to accept the wages paid to him is not precluded from
recovering the difference between the amount he actually received and
that amount which he should have received.
Fourth. The Labor Arbiter awarded backwages, overtime pay, holiday
pay, 13th month pay, separation pay and attorney’s fees,
corresponding to 10% of the total monetary awards, in favor of
petitioners.
As petitioners were illegally dismissed, they are entitled to
reinstatement with backwages. Considering that petitioners were
dismissed from the service on January 17, 1989, i.e., prior to March 21,
1989, 18 the Labor Arbiter correctly applied the rule in the Mercury Drug
case, 19 according to which the recovery of backwages should be
 8

limited to three years without qualifications or deductions. Any award in IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89 = 3 yrs.
excess of three years is null and void as to the excess. 20 P 64.00/day x 26 days =
The Labor Arbiter correctly ordered private respondents to give 1,664.00/yr. x 3 yrs. = 4,992.00
separation pay. Considerable time has lapsed since petitioners’ V. SEPARATION PAY: Sept. 10/85 - Jan. 17/92 = 6
dismissal, so that reinstatement would now be impractical and hardly yrs.
in the best interest of the parties. In lieu of reinstatement, separation P1,664.00/mo. x 6 yrs. =
pay should be awarded to petitioners at the rate of one month salary 9,984.00
for every year of service, with a fraction of at least six (6) months of ————
service being considered as one (1) year. 21
TOTAL AWARD OF
The awards for overtime pay, holiday pay and 13th month pay are in AVELINO LAMBO
accordance with our finding that petitioners are regular employees, P94,719.20
although paid on a piece-rate basis. 22 These awards are based on the
========
following computation of the Labor Arbiter:
VICENTE BELOCURA
AVELINO LAMBO
I. BACKWAGES: Jan. 17/89 - Jan. 17/92 = 36 mos.
I. BACKWAGES: Jan. 17/89 -
Jan. 17/92 = 36 mos. Same computation as A. Lambo
P64,896.00
P 64.00/day x 26 days =
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
1,664.00/mo. x 36 mos. = P59,904.00
Same computation as A. Lambo
13th Mo. Pay:
13,447.90
P1,664.00/yr. x 3 yrs. = 4,992.00
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89
P64,896.00
Same computation as A. Lambo
————
1,399.30
II. OVERTIME PAY: Jan. 17/86 - Jan. 17/89
IV. 13TH MO. PAY: Jan. 17/86 - Jan. 17/89
Jan. 17/86 - April 30/87 = 15 mos. & 12 day =
Same computation as A. Lambo
(15 mos. x 26 days + 12 days) = 402 days 4,992.00
*2 hours = 25% V. SEPARATION PAY: March 3/85 - Jan. 17/92 = 7
402 days x 2 hrs./days = 804 hrs. yrs.
P 32.00/day ÷ 8 hrs. = P1,664.00/mo. x 7 yrs. =
4.00/hr. x 25% = 11,648.00
1.00/hr. + P4.00/hr. = —————
5.00/hr. x 804 hrs. = 4,020.00 TOTAL AWARD OF VICENTE
May 1/87 - Sept. 30/87 = 4 mos. & 26 days = BELOCURA P96,383.20
(4 mos. x 26 days + 26 days) = =========
130 days SUMMARY
130 days x 2 hrs./day = 260 hrs. AVELINO LAMBO VICENTE BELOCURA
P 41.00/day ÷ 8 hrs. = ———————— —————————
5.12/hr. x 25% = I. BACKWAGES P64,896.00 P64,896.00
1.28/hr. + P5.12/hr. = II. OVERTIME PAY 13,447.90 13,447.90
6.40/hr. x 260 hrs. = P1,664.00 III. HOLIDAY PAY 1,399.30 1,399.30
Oct. 1/87 - Dec. 13/87 = 2 mos. & 11 days = IV. 13TH MO. PAY 4,992.00 4,992.00
(2 mos. x 26 days + 11 days) = 63 days V. SEPARATION PAY 9,984.00 11,648.00
63 days x 2 hrs./day = 126 hrs. ————— —————
P 49.00/day ÷ 8 hrs. = TOTAL P94,719.20 P96,383.20
6.12/hr. x 25% = = P191,102.40
1.53/hr. + P6.12/hr. = ADD: 10% Attorney's Fees 19,110.24
7.65/hr. x 126 hrs. = P963.90 —————
Dec. 14/87 - Jan. 17/89 = 13 mos. & 2 days = GRAND TOTAL P210,212.64
(13 mos. x 26 days + 2 days) = 340 days =========
340 days x 2 hrs./day = 680 hrs. Except for the award of attorney’s fees in the amount of P19,110.24,
P 64.00/day ÷ 8 hrs. = the above computation is affirmed. The award of attorney’s fees should
8.00/hr. x 25% = be disallowed, it appearing that petitioners were represented by the
2.00/hr. + P8.00/hr = Public Attorney’s Office. With regard to petitioner Avelino Lambo, the
10.00/hr. x 680 hrs. = P6,800.00 P13,447.90 amount of P10,000.00 paid to him under the compromise agreement
III. HOLIDAY PAY: Jan. 17/86 - Jan. 17/89 should be deducted from the total award of P94,719.20. Consequently,
Jan. 17/86 - April 30/87 = 12 RHs; 8 SHs the award to each petitioner should be as follows:
P 32.00/day x 200% = AVELINO LAMBO VICENTE BELOCURA
64.00/day x 12 days = 768.00 ———————— —————————
32.00/day x 12 days = (384.00) P384.00 I. BACKWAGES P64,896.00 P64,896.00
32.00/day x 30% = ———— II. OVERTIME PAY 13,447.90 13,447.90
9.60/day x 8 days = 76.80 460.80 III. HOLIDAY PAY 1,399.30 1,399.30
——— IV. 13TH MONTH PAY 4,992.00 4,992.00
May 1/87 - Sept. 30/87 = 3 RHs; 3 SHs V. SEPARATION PAY 9,984.00 11,648.00
P 41.00/day x 200% = ————— —————
82.00/day 3 days = 246.00 P 94,719.20
41.00/day x 3 days = (123.00) P123.00 Less 10,000.00
41.00/day x 30% = ———— —————
12.30/day x 3 days = 36.90 159.90 TOTAL P84,719.20 P96,383.20
———— GRAND TOTAL P181,102.40
Oct. 1/87 - Dec. 13/87 = 1 RH =========
P 49.00/day x 200% = WHEREFORE, the decision of the National Labor Relations
Commission is SET ASIDE and another one is RENDERED ordering
98.00/day x 1 day = P98.00
private respondents to pay petitioners the total amount of One Hundred
49.00/day x 1 day = (49.00) 49.00 Eighty-One Thousand One Hundred Two Pesos and 40/100
———— (P181,102.40), as computed above.1âwphi1.nêt
Dec. 14/87 - Jan. 17/89 = 9 RHs; 8 SHs SO ORDERED.
P 64.00/day x 200% =
128.00/day x 9 days = P1,152.00
64.00/day x 9 days = (576.00)
P576.00 G.R. No. 142824 December 19, 2001
64.00/day x 30% = ———— INTERPHIL LABORATORIES EMPLOYEES UNION-FFW, ENRICO
19.20/day x 8 days = 153.60 729.60 1,399.30 GONZALES and MA. THERESA MONTEJO, petitioners,
——— ———

vs.
INTERPHIL LABORATORIES, INC., AND HONORABLE
LEONARDO A. QUISUMBING, SECRETARY OF LABOR AND
EMPLOYMENT, respondents.
KAPUNAN, J.:
Assailed in this petition for review on certiorari are the decision,
promulgated on 29 December 1999, and the resolution, promulgated
on 05 April 2000, of the Court of Appeals in CA-G.R. SP No. 50978.
Culled from the questioned decision, the facts of the case are as follows:
Interphil Laboratories Employees Union-FFW is the sole and exclusive
bargaining agent of the rank-and-file employees of Interphil
Laboratories, Inc., a company engaged in the business of
manufacturing and packaging pharmaceutical products. They had a
Collective Bargaining Agreement (CBA) effective from 01 August 1990
to 31 July 1993.
Prior to the expiration of the CBA or sometime in February 1993,
Allesandro G. Salazar,1 Vice-President-Human Resources Department
of respondent company, was approached by Nestor Ocampo, the union
president, and Hernando Clemente, a union director. The two union
officers inquired about the stand of the company regarding the duration
of the CBA which was set to expire in a few months. Salazar told the
union officers that the matter could be best discussed during the formal
negotiations which would start soon.
In March 1993, Ocampo and Clemente again approached Salazar.
They inquired once more about the CBA status and received the same
reply from Salazar. In April 1993, Ocampo requested for a meeting to
discuss the duration and effectivity of the CBA. Salazar acceded and a
meeting was held on 15 April 1993 where the union officers asked
whether Salazar would be amenable to make the new CBA effective for
two (2) years, starting 01 August 1993. Salazar, however, declared that
it would still be premature to discuss the matter and that the company
could not make a decision at the moment. The very next day, or on 16
April 1993, all the rank-and-file employees of the company refused to
follow their regular two-shift work schedule of from 6:00 a.m. to 6:00
p.m., and from 6:00 p.m. to 6:00 a.m. At 2:00 p.m. and 2:00 a.m.,
respectively, the employees stopped working and left their
workplace without sealing the containers and securing the raw
materials they were working on. When Salazar inquired about the
reason for their refusal to follow their normal work schedule, the
employees told him to "ask the union officers." To minimize the damage
the overtime boycott was causing the company, Salazar immediately
asked for a meeting with the union officers. In the meeting, Enrico
Gonzales, a union director, told Salazar that the employees would only
return to their normal work schedule if the company would agree to their
demands as to the effectivity and duration of the new CBA. Salazar
again told the union officers that the matter could be better discussed
during the formal renegotiations of the CBA. Since the union was
apparently unsatisfied with the answer of the company, the overtime
boycott continued. In addition, the employees started to engage in a
work slowdown campaign during the time they were working, thus
substantially delaying the production of the company. 2
On 14 May 1993, petitioner union submitted with respondent company
its CBA proposal, and the latter filed its counter-proposal.
On 03 September 1993, respondent company filed with the National
Labor Relations Commission (NLRC) a petition to declare illegal
petitioner union's "overtime boycott" and "work slowdown" which,
according to respondent company, amounted to illegal strike. The case,
docketed NLRC-NCR Case No. 00-09-05529-93, was assigned to
Labor Arbiter Manuel R. Caday.
On 22 October 1993, respondent company filed with the National
Conciliation and Mediation Board (NCMB) an urgent request for
preventive mediation aimed to help the parties in their CBA
negotiations.3 The parties, however, failed to arrive at an agreement
and on 15 November 1993, respondent company filed with the Office
of the Secretary of Labor and Employment a petition for assumption of
jurisdiction.
On 24 January 1994, petitioner union filed with the NCMB a Notice of
Strike citing unfair labor practice allegedly committed by respondent
company. On 12 February 1994, the union staged a strike.
On 14 February 1994, Secretary of Labor Nieves Confesor issued an
assumption order4 over the labor dispute. On 02 March 1994, Secretary
Confesor issued an order directing respondent company to
"immediately accept all striking workers, including the fifty-three (53)
terminated union officers, shop stewards and union members back to
work under the same terms and conditions prevailing prior to the strike,
and to pay all the unpaid accrued year end benefits of its employees in
1993."5 On the other hand, petitioner union was directed to "strictly and
immediately comply with the return-to-work orders issued by (the)
Office x x x6 The same order pronounced that "(a)ll pending cases
which are direct offshoots of the instant labor dispute are hereby
subsumed herewith."7
In the i, the case before Labor Arbiter Caday continued. On 16 March
1994, petitioner union filed an "Urgent Manifestation and Motion to
Consolidate the Instant Case and to Suspend Proceedings" seeking
the consolidation of the case with the labor dispute pending before the
Secretary of Labor. Despite objection by respondent company, Labor
9
Arbiter Caday held in abeyance the proceedings before him. However,
on 06 June 1994, Acting Labor Secretary Jose S. Brillantes, after
finding that the issues raised would require a formal hearing and the
presentation of evidentiary matters, directed Labor Arbiters Caday and
M. Sol del Rosario to proceed with the hearing of the cases before them
and to thereafter submit their report and recommendation to his office.
On 05 September 1995, Labor Arbiter Caday submitted his
recommendation to the then Secretary of Labor Leonardo A.
Quisumbing.8 Then Secretary Quisumbing approved and adopted the
report in his Order, dated 13 August 1997, hence:
WHEREFORE, finding the said Report of Labor Arbiter
Manuel R. Caday to be supported by substantial evidence,
this Office hereby RESOLVES to APPROVE and ADOPT the
same as the decision in this case, and judgment is hereby
rendered:
(1) Declaring the 'overtime boycott' and 'work slowdown' as
illegal strike;
(2) Declaring the respondent union officers namely:
Nestor Ocampo President
Carmelo Santos Vice-President
Marites Montejo Treasurer/Board
Member
Rico Gonzales Auditor
Rod Abuan Director
Segundino Flores Director
Hernando Director
Clemente
who spearheaded and led the overtime boycott and work
slowdown, to have lost their employment status; and
(3) Finding the respondents guilty of unfair labor practice for
violating the then existing CBA which prohibits the union or
any employee during the existence of the CBA from staging
a strike or engaging in slowdown or interruption of work and
ordering them to cease and desist from further committing the
aforesaid illegal acts.
Petitioner union moved for the reconsideration of the order but its
motion was denied. The union went to the Court of Appeals via a
petition for certiorari. In the now questioned decision promulgated on
29 December 1999, the appellate court dismissed the petition. The
union's motion for reconsideration was likewise denied.
Hence, the present recourse where petitioner alleged:
THE HONORABLE FIFTH DIVISION OF THE COURT OF
APPEALS, LIKE THE HONORABLE PUBLIC
RESPONDENT IN THE PROCEEDINGS BELOW,
COMMITTED GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK AND/OR EXCESS OF
JURISDICTION WHEN IT COMPLETELY DISREGARDED
"PAROL EVIDENCE RULE" IN THE EVALUATION AND
APPRECIATION OF EVIDENCE PROFERRED BY THE
PARTIES.
THE HONORABLE FIFTH DIVISION OF THE COURT OF
APPEALS COMMITTED GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK AND/OR EXCESS OF
JURISDICTION, WHEN IT DID NOT DECLARE PRIVATE
RESPONDENT'S ACT OF EXTENDING SUBSTANTIAL
SEPARATION PACKAGE TO ALMOST ALL INVOLVED
OFFICERS OF PETITIONER UNION, DURING THE
PENDENCY OF THE CASE, AS TANTAMOUNT TO
CONDONATION, IF INDEED, THERE WAS ANY MISDEED
COMMITTED.
THE HONORABLE FIFTH DIVISION OF THE COURT OF
APPEALS COMMITTED GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK AND/OR EXCESS OF
JURISDICTION WHEN IT HELD THAT THE SECRETARY
OF LABOR AND EMPLOYMENT HAS JURISDICTION
OVER A CASE (A PETITION TO DECLARE STRIKE
ILLEGAL) WHICH HAD LONG BEEN FILED AND PENDING
BEFORE THE LABOR ARBITER.9
We sustain the questioned decision.
On the matter of the authority and jurisdiction of the Secretary of Labor
and Employment to rule on the illegal strike committed by petitioner
union, it is undisputed that the petition to declare the strike illegal before
Labor Arbiter Caday was filed long before the Secretary of Labor and
Employment issued the assumption order on 14 February 1994.
However, it cannot be denied that the issues of "overtime boycott" and
"work slowdown" amounting to illegal strike before Labor Arbiter Caday
are intertwined with the labor dispute before the Labor Secretary. In
fact, on 16 March 1994, petitioner union even asked Labor Arbiter
Caday to suspend the proceedings before him and consolidate the
same with the case before the Secretary of Labor. When Acting Labor
Secretary Brillantes ordered Labor Arbiter Caday to continue with the
hearing of the illegal strike case, the parties acceded and participated

in the proceedings, knowing fully well that there was also a directive for
Labor Arbiter Caday to thereafter submit his report and
recommendation to the Secretary. As the appellate court pointed out,
the subsequent participation of petitioner union in the continuation of
the hearing was in effect an affirmation of the jurisdiction of the
Secretary of Labor.
The appellate court also correctly held that the question of the
Secretary of Labor and Employment's jurisdiction over labor and labor-
related disputes was already settled in International Pharmaceutical,
Inc. vs. Hon. Secretary of Labor and Associated Labor
Union (ALU)10 where the Court declared:
In the present case, the Secretary was explicitly granted by
Article 263(g) of the Labor Code the authority to assume
jurisdiction over a labor dispute causing or likely to cause a
strike or lockout in an industry indispensable to the national
interest, and decide the same accordingly. Necessarily, this
authority to assume jurisdiction over the said labor dispute
must include and extend to all questions and controversies
arising therefrom, including cases over which the labor arbiter
has exclusive jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but
contemplates, exceptions thereto. This is evident from the
opening proviso therein reading '(e)xcept as otherwise
provided under this Code . . .' Plainly, Article 263(g) of the
Labor Code was meant to make both the Secretary (or the
various regional directors) and the labor arbiters share
jurisdiction, subject to certain conditions. Otherwise, the
Secretary would not be able to effectively and efficiently
dispose of the primary dispute. To hold the contrary may even
lead to the absurd and undesirable result wherein the
Secretary and the labor arbiter concerned may have
diametrically opposed rulings. As we have said, '(i)t is
fundamental that a statute is to be read in a manner that
would breathe life into it, rather than defeat it.
In fine, the issuance of the assailed orders is within the
province of the Secretary as authorized by Article 263(g) of
the Labor Code and Article 217(a) and (5) of the same Code,
taken conjointly and rationally construed to subserve the
objective of the jurisdiction vested in the Secretary. 11
Anent the alleged misappreciation of the evidence proffered by the
parties, it is axiomatic that the factual findings of the Labor Arbiter, when
sufficiently supported by the evidence on record, must be accorded due
respect by the Supreme Court.12 Here, the report and recommendation
of Labor Arbiter Caday was not only adopted by then Secretary of Labor
Quisumbing but was likewise affirmed by the Court of Appeals. We see
no reason to depart from their findings.
Petitioner union maintained that the Labor Arbiter and the appellate
court disregarded the "parol evidence rule" 13 when they upheld the
allegation of respondent company that the work schedule of its
employees was from 6:00 a.m. to 6:00 p.m. and from 6:00 p.m. to 6:00
am. According to petitioner union, the provisions of their CBA on
working hours clearly stated that the normal working hours were "from
7:30 a.m. to 4:30 p.m."14 Petitioner union underscored that the regular
work hours for the company was only eight (8) hours. It further
contended that the Labor Arbiter as well as the Court of Appeals should
not have admitted any other evidence contrary to what was stated in
the CBA.
The reliance on the parol evidence rule is misplaced. In labor cases
pending before the Commission or the Labor Arbiter, the rules of
evidence prevailing in courts of law or equity are not controlling. 15 Rules
of procedure and evidence are not applied in a very rigid and technical
sense in labor cases.16 Hence, the Labor Arbiter is not precluded from
accepting and evaluating evidence other than, and even contrary to,
what is stated in the CBA.
In any event, the parties stipulated:
Section 1. Regular Working Hours — A normal workday shall
consist of not more than eight (8) hours. The regular working
hours for the Company shall be from 7:30 A.M. to 4:30 P.M.
The schedule of shift work shall be maintained; however the
company may change the prevailing work time at its
discretion, should such change be necessary in the
operations of the Company. All employees shall observe such
rules as have been laid down by the company for the purpose
of effecting control over working hours.17
It is evident from the foregoing provision that the working hours may be
changed, at the discretion of the company, should such change be
necessary for its operations, and that the employees shall observe
such rules as have been laid down by the company. In the case before
us, Labor Arbiter Caday found that respondent company had to adopt
a continuous 24-hour work daily schedule by reason of the nature of its
business and the demands of its clients. It was established that the
employees adhered to the said work schedule since 1988. The
employees are deemed to have waived the eight-hour schedule since
they followed, without any question or complaint, the two-shift schedule
while their CBA was still in force and even prior thereto. The two-shift
schedule effectively changed the working hours stipulated in the CBA.
10
As the employees assented by practice to this arrangement, they
cannot now be heard to claim that the overtime boycott is justified
because they were not obliged to work beyond eight hours.
As Labor Arbiter Caday elucidated in his report:
Respondents' attempt to deny the existence of such regular
overtime schedule is belied by their own awareness of the
existence of the regular overtime schedule of 6:00 A.M. to
6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following day that
has been going on since 1988. Proof of this is the case
undisputedly filed by the union for and in behalf of its
members, wherein it is claimed that the company has not
been computing correctly the night premium and overtime
pay for work rendered between 2:00 A.M. and 6:00 A.M. of
the 6:00 P.M. to 6:00 A.M. shift. (tsn pp. 9-10, testimony of
Alessandro G. Salazar during hearing on August 9, 1994). In
fact, the union Vice-President Carmelo C. Santos, demanded
that the company make a recomputation of the overtime
records of the employees from 1987 (Exh. "P"). Even their
own witness, union Director Enrico C. Gonzales, testified that
when in 1992 he was still a Quality Control Inspector at the
Sucat Plant of the company, his schedule was sometime at
6:00 A.M. to 6:00 P.M., sometime at 6:00 A.M. to 2:00 P.M.,
at 2:00 P.M. to 10:00 P.M. and sometime at 6:00 P.M. to 6:00
A.M., and when on the 6 to 6 shifts, he received the
commensurate pay (t.s.n. pp. 7-9, hearing of January 10,
1994). Likewise, while in the overtime permits, dated March
1, 6, 8, 9 to 12, 1993, which were passed around daily for the
employees to sign, his name appeared but without his
signatures, he however had rendered overtime during those
dates and was paid because unlike in other departments, it
has become a habit to them to sign the overtime schedule
weekly (t.s.n. pp. 26-31, hearing of January 10, 1994). The
awareness of the respondent union, its officers and members
about the existence of the regular overtime schedule of 6:00
A.M. to 6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following
day will be further shown in the discussion of the second
issue.18
As to the second issue of whether or not the respondents
have engaged in "overtime boycott" and "work slowdown"
from April 16, 1993 up to March 7, 1994, both amounting to
illegal strike, the evidence presented is equally crystal clear
that the "overtime boycott" and "work slowdown" committed
by the respondents amounted to illegal strike.
As undisputably testified to by Mr. Alessandro G. Salazar, the
company's Vice-President-Human Resources Department,
sometime in February, 1993, he was approached by the union
President Nestor Ocampo and Union Director Hernando
Clemente who asked him as to what was the stand of the
company regarding the duration of the CBA between the
company and which was set to expire on July 31, 1993. He
answered that the matter could be best discussed during the
formal renegotiations which anyway was to start soon. This
query was followed up sometime in March, 1993, and his
answer was the same. In early April, 1993, the union
president requested for a meeting to discuss the duration and
effectivity of the CBA. Acceding to the request, a meeting was
held on April 15, 1993 wherein the union officers asked him if
he would agree to make the new CBA effective on August 1,
1993 and the term thereof to be valid for only two (2) years.
When he answered that it was still premature to discuss the
matter, the very next day, April 16, 1993, all the rank and file
employees of the company refused to follow their regular two-
shift work schedule of 6:00 A.M. to 6:00 P.M. and 6:00 P.M.
to 6:00 A.M., when after the 8-hours work, they abruptly
stopped working at 2:00 P.M. and 2:00 A.M., respectively,
leaving their place of work without sealing the containers and
securing the raw materials they were working on. When he
saw the workers leaving before the end of their shift, he asked
them why and their reply was "asked (sic) the union officers."
Alarmed by the overtime boycott and the damage it was
causing the company, he requested for a meeting with the
union officers. In the meeting, he asked them why the regular
work schedule was not being followed by the employees, and
union Director Enrico Gonzales, with the support of the other
union officers, told him that if management would agree to a
two-year duration for the new CBA and an effectivity date of
August 1, 1993, all employees will return to the normal work
schedule of two 12-hour shifts. When answered that the
management could not decide on the matter at the moment
and to have it discussed and agreed upon during the formal
renegotiations, the overtime boycott continued and the
employees at the same time employed a work slowdown
campaign during working hours, causing considerable delay
in the production and complaints from the clients/customers
(Exh. "O", Affidavit of Alessandro G. Salazar which formed
part of his direct testimony). This testimonial narrations of
Salazar was, as earlier said, undisputed because the

respondents' counsel waived his cross examination (t.s.n. p.
15, hearing on August 9, 1994).
Aside from the foregoing undisputed testimonies of Salazar,
the testimonies of other Department Managers pointing to the
union officers as the instigators of the overtime boycott and
work slowdown, the testimony of Epifanio Salumbides (Exh.
"Y") a union member at the time the concerted activities of the
respondents took place, is quoted hereunder:
"2. Noon Pebrero 1993, ipinatawag ng Presidente
ng Unyon na si Nestor Ocampo ang lahat ng taga-
maintenance ng bawat departamento upang
dumalo sa isang miting. Sa miting na iyon, sinabi ni
Rod Abuan, na isang Direktor ng Unyon, na
mayroon ilalabas na memo ang Unyon na nag-
uutos sa mga empleyado ng Kompanya na mag-
imbento ng sari-saring dahilan para lang hindi sila
makapagtrabaho ng "overtime". Sinabihan rin ako
ni Tessie Montejo na siya namang Treasurer ng
Unyon na 'Manny, huwag ka na lang pumasok sa
Biyernes para hindi ka masabihan ng magtrabaho
ng Sabado at Linggo' na siya namang araw ng
"overtime" ko x x x
"3. Nakalipas ang dalawang buwan at noong unang
bahagi ng Abril 1993, miniting kami ng Shop
Stewards namin na sina Ariel Abenoja, Dany
Tansiongco at Vicky Baron. Sinabihan kami na
huwag ng mag-overtime pag nagbigay ng senyas
ang Unyon ng "showtime."
"4. Noong umaga ng ika-15 ng Abril 1993, nagsabi
na si Danny Tansiongco ng "showtime". Dahil dito
wala ng empleyadong nag-overtime at sabay-sabay
silang umalis, maliban sa akin. Ako ay pumasok rin
noong Abril 17 at 18, 1993 na Sabado at Linggo.
"5. Noong ika-19 ng Abril 1993, ako ay ipinatawag
ni Ariel Abenoja Shop Steward, sa opisina ng
Unyon. Nadatnan ko doon ang halos lahat ng
opisyales ng Unyon na sina:
Nestor Ocampo Presidente
Carmelo Bise-
Santos Presidente
Nanding Director
Clemente
TessMontejo Chief Steward
Segundo Flores Director
Enrico Auditor
Gonzales
Boy Alcantara Shop Steward
Rod Abuan Director
at marami pang iba na hindi ko na maala-ala.
Pagpasok ko, ako'y pinaligiran ng mga opisyales ng
Unyon. Tinanong ako ni Rod Aguan kung bakit ako
"nag-overtime" gayong "Binigyan ka na namin ng
instruction na huwag pumasok, pinilit mo pa ring
pumasok." "Management ka ba o Unyonista."
Sinagot ko na ako ay Unyonista. Tinanong niya muli
kung bakit ako pumasok. Sinabi ko na wala akong
maibigay na dahilan para lang hindi pumasok at
"mag-overtime." Pagkatapos nito, ako ay
pinagmumura ng mga opisyales ng Unyon kaya't
ako ay madaliang umalis.
xxx xxx xxx
Likewise, the respondents' denial of having a hand in the work
slowdown since there was no change in the performance and
work efficiency for the year 1993 as compared to the previous
year was even rebuffed by their witness Ma. Theresa Montejo,
a Quality Control Analyst. For on cross-examination, she
(Montejo) admitted that she could not answer how she was
able to prepare the productivity reports from May 1993 to
February 1994 because from April 1993 up to April 1994, she
was on union leave. As such, the productivity reports she had
earlier shown was not prepared by her since she had no
personal knowledge of the reports (t.s.n. pp. 32-35, hearing
of February 27, 1995). Aside from this admission, the
comparison made by the respondents was of no moment,
because the higher production for the years previous to 1993
was reached when the employees regularly rendered
overtime work. But undeniably, overtime boycott and work
slowdown from April 16, 1993 up to March 7, 1994 had
resulted not only in financial losses to the company but also
damaged its business reputation.
Evidently, from all the foregoing, respondents' unjustified
unilateral alteration of the 24-hour work schedule thru their
11
concerted activities of "overtime boycott" and "work
slowdown" from April 16, 1993 up to March 7, 1994, to force
the petitioner company to accede to their unreasonable
demands, can be classified as a strike on an installment basis,
as correctly called by petitioner company x x x19
It is thus undisputed that members of the union by their own volition
decided not to render overtime services in April 1993. 20 Petitioner union
even admitted this in its Memorandum, dated 12 April 1999, filed with
the Court of Appeals, as well as in the petition before this Court, which
both stated that "(s)ometime in April 1993, members of herein petitioner,
on their own volition and in keeping with the regular working hours in
the Company x x x decided not to render overtime". 21 Such admission
confirmed the allegation of respondent company that petitioner
engaged in "overtime boycott" and "work slowdown" which, to use the
words of Labor Arbiter Caday, was taken as a means to coerce
respondent company to yield to its unreasonable demands.
More importantly, the "overtime boycott" or "work slowdown" by the
employees constituted a violation of their CBA, which prohibits the
union or employee, during the existence of the CBA, to stage a strike
or engage in slowdown or interruption of work. 22 In Ilaw at Buklod ng
Manggagawa vs. NLRC ,23 this Court ruled:
x x x (T)he concerted activity in question would still be illicit
because contrary to the workers' explicit contractual
commitment "that there shall be no strikes, walkouts,
stoppage or slowdown of work, boycotts, secondary boycotts,
refusal to handle any merchandise, picketing, sit-down strikes
of any kind, sympathetic or general strikes, or any other
interference with any of the operations of the COMPANY
during the term of x x x (their collective bargaining)
agreement."
What has just been said makes unnecessary resolution of
SMC's argument that the workers' concerted refusal to
adhere to the work schedule in force for the last several years,
is a slowdown, an inherently illegal activity essentially illegal
even in the absence of a no-strike clause in a collective
bargaining contract, or statute or rule. The Court is in
substantial agreement with the petitioner's concept of a
slowdown as a "strike on the installment plan;" as a willful
reduction in the rate of work by concerted action of workers
for the purpose of restricting the output of the employer, in
relation to a labor dispute; as an activity by which workers,
without a complete stoppage of work, retard production or
their performance of duties and functions to compel
management to grant their demands. The Court also agrees
that such a slowdown is generally condemned as inherently
illicit and unjustifiable, because while the employees
"continue to work and remain at their positions and accept the
wages paid to them," they at the same time "select what part
of their allotted tasks they care to perform of their own volition
or refuse openly or secretly, to the employer's damage, to do
other work;" in other words, they "work on their own terms." x
x x24
Finally, the Court cannot agree with the proposition that respondent
company, in extending substantial separation package to some officers
of petitioner union during the pendency of this case, in effect, condoned
the illegal acts they committed.
Respondent company correctly postured that at the time these union
officers obtained their separation benefits, they were still considered
employees of the company. Hence, the company was merely
complying with its legal obligations.25 Respondent company could have
withheld these benefits pending the final resolution of this case. Yet,
considering perhaps the financial hardships experienced by its
employees and the economic situation prevailing, respondent company
chose to let its employees avail of their separation benefits. The Court
views the gesture of respondent company as an act of generosity for
which it should not be punished.
WHEREFORE, the petition is DENIED DUE COURSE and the 29
December 1999 decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 153031 December 14, 2006
PCL SHIPPING PHILIPPINES, INC. and U-MING MARINE
TRANSPORT CORPORATION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and STEVE
RUSEL, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the Decision1 of the Court of Appeals (CA)
dated December 18, 2001 in CA-G.R. SP No. 59976, which affirmed
the Decision of the National Labor Relations Commission (NLRC)
dated March 22, 2000 in NLRC NCR CA No. 018120-99; and the
Resolution of the CA dated April 10, 2002, denying petitioners' motion
for reconsideration.2
The facts of the case, as found by the CA, are as follows:
In April 1996, Rusel was employed as GP/AB seaman by
manning agency, PCL Shipping Philippines, Inc. (PCL
Shipping) for and in behalf of its foreign principal, U-Ming
Marine Transport Corporation (U-Ming Marine). Rusel
thereby joined the vessel MV Cemtex General (MV Cemtex)
for the contract period of twelve (12) months with a basic
monthly salary of US$400.00, living allowance of US$140.00,
fixed overtime rate of US$120.00 per month, vacation leave
with pay of US$40.00 per month and special allowance of
US$175.00.
On July 16, 1996, while Rusel was cleaning the vessel's
kitchen, he slipped, and as a consequence thereof, he
suffered a broken and/or sprained ankle on his left foot. A
request for medical examination was flatly denied by the
captain of the vessel. On August 13, 1996, feeling an
unbearable pain in his ankle, Rusel jumped off the vessel
using a life jacket and swam to shore. He was brought to a
hospital where he was confined for eight (8) days.
On August 22, 1996, a vessel's agent fetched Rusel from the
hospital and was required to board a plane bound for the
Philippines.
On September 26, 1996, Rusel filed a complaint for illegal
dismissal, non-payment of wages, overtime pay, claim for
medical benefits, sick leave pay and damages against PCL
Shipping and U-Ming Marine before the arbitration branch of
the NLRC. In their answer, the latter alleged that Rusel
deserted his employment by jumping off the vessel.
On July 21, 1998, the labor arbiter rendered his decision, the
dispositive portion of which reads as follows:
Wherefore, above premises duly considered we find
the respondent liable for unjust repatriation of the
complainant.
Accordingly, the following award is hereby adjudged
against the respondent:
1. The amount of $2,625.00 or its peso equivalent
at the time of payment representing three (3)
months salary of the complainant due to his illegal
dismissal.
2. The amount of $1,600.00 or its peso equivalent,
representing sick wage benefits.
3. The amount of $550.00 or its peso equivalent,
representing living allowance, overtime pay and
special allowance for two (2) months.
4. The amount of $641.66 or its peso equivalent,
representing unpaid wages from August 11 to 22,
1996.
5. Attorney's fees equivalent to 10% of the total
monetary award.
The rest of the claims are dismissed for lack of merit.
SO ORDERED.3
Aggrieved by the Decision of the Labor Arbiter, herein petitioners
appealed to the NLRC. In its Decision dated March 22, 2000, the NLRC
affirmed the findings of the Labor Arbiter but modified the appealed
Decision, disposing as follows:
WHEREFORE, premises considered, the assailed decision is
as it is hereby ordered MODIFIED in that the amount
representing three months salary of the complainant due to
his illegal dismissal is reduced to US$1,620.00. Further the
award of sick wage benefit is deleted.
All other dispositions are AFFIRMED.
SO ORDERED.4
Petitioners filed a Motion for Reconsideration but the NLRC denied the
same in its Decision of May 3, 2000.5
Petitioners filed a petition for certiorari with the CA.6 In its Decision
dated December 18, 2001, the CA dismissed the petition and affirmed
the NLRC Decision.7
Petitioners filed a Motion for Reconsideration but it was denied by the
CA in its Resolution dated April 10, 2002. 8
Hence, the instant petition with the following assignment of errors:
I. The Court of Appeals erred in ruling that private respondent
was illegally dismissed from employment.
xxxx
II. Likewise, the Court of Appeals erred in not upholding
petitioners' right to pre-terminate private respondent's
employment.
xxxx
12
III. The private respondent is not entitled to other money
claims, particularly as to the award of attorney's fees.9
As to their first assigned error, petitioners contend that the CA erred in
affirming the findings of the NLRC that Rusel's act of jumping ship does
not establish any intent on his part to abandon his job and never return.
Petitioners argue that Rusel's very act of jumping from the vessel and
swimming to shore is evidence of highest degree that he has no
intention of returning to his job. Petitioners further contend that if Rusel
was indeed suffering from unbearable and unmitigated pain, it is
unlikely that he is able to swim two (2) nautical miles, which is the
distance between their ship and the shore, considering that he needed
to use his limbs in swimming. Petitioners further assert that it is error
on the part of the CA to disregard the entries contained in the logbook
and in the Marine Note Protest evidencing Rusels' offense of desertion
because while these pieces of evidence were belatedly presented, the
settled rule is that additional evidence may be admitted on appeal in
labor cases. Petitioners also contend that Rusel's act of desertion is a
grave and serious offense and considering the nature and situs of
employment as well as the nationality of the employer, the twin
requirements of notice and hearing before an employee can be validly
terminated may be dispensed with.
As to their second assigned error, petitioners contend that assuming,
for the sake of argument, that Rusel is not guilty of desertion, they
invoked the alternative defense that the termination of his employment
was validly made pursuant to petitioners' right to exercise their
prerogative to pre-terminate such employment in accordance with
Section 19(C) of the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers On-Board Ocean-Going Vessels,
which provision was incorporated in Rusel's Contract of Employment
with petitioners. Petitioners assert that despite the fact that this issue
was raised before the CA, the appellate court failed to resolve the same.
Anent the last assigned error, petitioners argue that it is error on the
part of the CA to affirm the award of living allowance, overtime pay,
vacation pay and special allowance for two months because Rusel
failed to submit substantial evidence to prove that he is entitled to these
awards. Petitioners further argue that these money claims, particularly
the claim for living allowance, should not be granted because they
partake of the nature of earned benefits for services rendered by a
seafarer. Petitioners also contend that the balance of Rusel's wages
from August 11-22, 1996 should be applied for the payment of the costs
of his repatriation, considering that under Section 19(E) of the Standard
Terms and Conditions Governing the Employment of Filipino Seafarers
On-Board Ocean-Going Vessels, when a seafarer is discharged for any
just cause, the employer shall have the right to recover the costs of his
replacement and repatriation from the seafarer's wages and other
earnings. Lastly, petitioners argue that the award of attorney's fees
should be deleted because there is nothing in the decision of the Labor
Arbiter or the NLRC which states the reason why attorney's fees are
being awarded.
In his Comment, private respondent contends that petitioners are
raising issues of fact which have already been resolved by the Labor
Arbiter, NLRC and the CA. Private respondent argues that, aside from
the fact that the issues raised were already decided by three tribunals
against petitioners' favor, it is a settled rule that only questions of law
may be raised in a petition for review on certiorari under Rule 45 of the
Rules of Court. While there are exceptions to this rule, private
respondent contends that the instant case does not fall under any of
these exceptions. Private respondent asserts that petitioners failed to
substantiate their claim that the former is guilty of desertion. Private
respondent further contends that the right to due process is available
to local and overseas workers alike, pursuant to the provisions of the
Constitution on labor and equal protection as well as the declared policy
contained in the Labor Code. Private respondent argues that
petitioners' act of invoking the provisions of Section 19(C) of the POEA
Contract as an alternative defense is misplaced and is inconsistent with
their primary defense that private respondent was dismissed on the
ground of desertion. As to the award of attorney's fees, private
respondent contends that since petitioners' act compelled the former to
incur expenses to protect his interest and enforce his lawful claims, and
because petitioners acted in gross and evident bad faith in refusing to
satisfy private respondent's lawful claims, it is only proper that
attorney's fees be awarded in favor of the latter. Anent the other
monetary awards, private respondent argues that these awards are all
premised on the findings of the Labor Arbiter, NLRC and the CA that
private respondent's dismissal was improper and illegal.
The Court finds the petition without merit.
Anent the first assigned error, it is a settled rule that under Rule 45 of
the Rules of Court, only questions of law may be raised in this
Court.10 Judicial review by this Court does not extend to a re-evaluation
of the sufficiency of the evidence upon which the proper labor tribunal
has based its determination.11 Firm is the doctrine that this Court is not
a trier of facts, and this applies with greater force in labor
cases.12 Factual issues may be considered and resolved only when the
findings of facts and conclusions of law of the Labor Arbiter are
inconsistent with those of the NLRC and the CA. 13 The reason for this
is that the quasi-judicial agencies, like the Arbitration Board and the
NLRC, have acquired a unique expertise because their jurisdiction are

confined to specific matters.14 In the present case, the question of
whether private respondent is guilty of desertion is factual. The Labor
Arbiter, NLRC and the CA are unanimous in their findings that private
respondent is not guilty of desertion and that he has been illegally
terminated from his employment. After a review of the records of the
instant case, this Court finds no cogent reason to depart from the
findings of these tribunals.
Petitioners assert that the entries in the logbook of MV Cemtex
General15 and in the Marine Note Protest16 which they submitted to the
NLRC confirm the fact that private respondent abandoned the vessel
in which he was assigned. However, the genuineness of the Marine
Note Protest as well as the entries in the logbook are put in doubt
because aside from the fact that they were presented only during
petitioners' Motion for Reconsideration filed with the NLRC, both the
Marine Note Protest and the entry in the logbook which were prepared
by the officers of the vessel were neither notarized nor authenticated
by the proper authorities. Moreover, a reading of these entries simply
shows that private respondent was presumed to have deserted his post
on the sole basis that he was found missing while the MV Cemtex
General was anchored at the port of Takehara, Japan. Hence, without
any corroborative evidence, these documents cannot be used as bases
for concluding that private respondent was guilty of desertion.
Petitioners also question the findings and conclusion of the Labor
Arbiter and the NLRC that what caused private respondent in jumping
overboard was the unmitigated pain he was suffering which was
compounded by the inattention of the vessel's captain to provide him
with the necessary treatment inspite of the fact that the ship was
moored for about two weeks at the anchorage of Takehara, Japan; and,
that private respondent's act was a desperate move to protect himself
and to seek relief for his physical suffering. Petitioners contend that the
findings and conclusions of the Labor Arbiter and the NLRC which were
affirmed by the CA are based on conjecture because there is no
evidence to prove that, at the time he jumped ship, private respondent
was really suffering from an ankle injury.
It is true that no substantial evidence was presented to prove that the
cause of private respondent's confinement in a hospital in Takehara,
Japan was his ankle injury. The Court may not rely on the letter marked
as Annex "B" and attached to private respondent's Position Paper
because it was unsigned and it was not established who executed the
same.17 However, the result of the x-ray examination conducted by the
LLN Medical Services, Inc. on August 26, 1996, right after private
respondent was repatriated to the Philippines, clearly showed that there
is a soft-tissue swelling around his ankle joint. 18 This evidence is
consistent with private respondent's claim that he was then suffering
from an ankle injury which caused him to jump off the ship.
As to petitioners' contention that private respondent could not have
traversed the distance between the ship and the shore if he was indeed
suffering from unbearable pain by reason of his ankle injury, suffice it
to say that private respondent is an able-bodied seaman and that with
the full use of both his arms and the help of a life jacket, was able to
reach the shore.
As correctly defined by petitioners, desertion, in maritime law is:
The act by which a seaman deserts and abandons a ship or
vessel, in which he had engaged to perform a voyage, before
the expiration of his time, and without leave. By desertion, in
maritime law, is meant, not a mere unauthorized absence
from the ship, without leave, but an unauthorized absence
from the ship with an intention not to return to her service;
or as it is often expressed, animo non revertendi, that is, with
an intention to desert.19 (emphasis supplied)
Hence, for a seaman to be considered as guilty of desertion, it is
essential that there be evidence to prove that if he leaves the ship or
vessel in which he had engaged to perform a voyage, he has the clear
intention of abandoning his duty and of not returning to the ship or
vessel. In the present case, however, petitioners failed to present clear
and convincing proof to show that when private respondent jumped
ship, he no longer had the intention of returning. The fact alone that he
jumped off the ship where he was stationed, swam to shore and sought
medical assistance for the injury he sustained is not a sufficient basis
for petitioners to conclude that he had the intention of deserting his post.
Settled is the rule that in termination cases, the burden of proof rests
upon the employer to show that the dismissal is for a just and valid
cause.20 The case of the employer must stand or fall on its own merits
and not on the weakness of the employee's defense. 21 In the present
case, since petitioners failed to discharge their burden of proving that
private respondent is guilty of desertion, the Court finds no reason to
depart from the conclusion of the Labor Arbiter, NLRC and the CA that
private respondent's dismissal is illegal.
In their second assigned error, petitioners cite Section 19(C) of POEA
Memorandum Circular No. 055-9622 known as the Revised Standard
Employment Terms and Conditions Governing the Employment of
Filipino Seafarers On Board Ocean-Going Vessels as their alternative
basis in terminating the employment of private respondent. Said
Section provides as follows:
Section 19. REPATRIATION
xxxx
13
C. If the vessel arrives at a convenient port within a period of
three months before the expiration of his contract, the master/
employer may repatriate the seafarer from such port provided
that the seafarer shall be paid all his earned wages. In
addition, the seafarer shall also be paid his leave pay for the
entire contract period plus a termination pay equivalent to one
(1) month of his basic pay, provided, however, that this mode
of termination may only be exercised by the master/employer
if the original contract period of the seafarer is at least ten (10)
months; provided, further, that the conditions for this mode of
termination shall not apply to dismissal for cause.
The Court is not persuaded. POEA Memorandum Circular No. 055-96
took effect on January 1, 1997 while the contract of employment
entered into by and between private respondent and petitioners was
executed on April 10, 1996. Hence, it is wrong for petitioners to cite this
particular Memorandum because at the time of petitioners' and private
respondent's execution of their contract of employment Memorandum
Circular No. 055-96 was not yet effective.
What was in effect at the time private respondent's Contract of
Employment was executed was POEA Memorandum Circular No. 41,
Series of 1989. It is clearly provided under the second paragraph of
private respondent's Contract of Employment that the terms and
conditions provided under Memorandum Circular No. 41, Series of
1989 shall be strictly and faithfully observed. Hence, it is Memorandum
Circular No. 41, Series of 1989 which governs private respondent's
contract of employment.
Section H (6), Part I of Memorandum Circular No. 41, which has almost
identical provisions with Section 19 (C) of Memorandum Circular No.
055-96, provides as follows:
SECTION H. TERMINATION OF EMPLOYMENT
xxxx
6. If the vessel arrives at a convenient port within a period of
three (3) months before the expiration of the Contract, the
master/employer may repatriate the seaman from such port
provided that the seaman shall be paid all his earned wages.
In addition, the seaman shall also be paid his leave pay for
the entire contract period plus a termination pay equivalent to
one (1) month of his basic pay, provided, however, that this
mode of termination may only be exercised by the
master/employer if the original contact period of the seaman
is at least ten (10) months; provided, further, that the
conditions for this mode of termination shall not apply to
dismissal for cause.
The Court agrees with private respondent's contention that petitioners'
arguments are misplaced. Petitioners may not use the above-quoted
provision as basis for terminating private respondent's employment
because it is incongruent with their primary defense that the latter's
dismissal from employment was for cause. Petitioners may not claim
that they ended private respondent's services because he is guilty of
desertion and at the same time argue that they exercised their option
to prematurely terminate his employment, even without cause, simply
because they have the right to do so under their contract. These
grounds for termination are inconsistent with each other such that the
use of one necessarily negates resort to the other. Besides, it appears
from the records that petitioners' alternative defense was pleaded
merely as an afterthought because it was only in their appeal with the
NLRC that they raised this defense. The only defense raised by
petitioners in their Answer with Counterclaim filed with the office of the
Labor Arbiter is that private respondent was dismissed from
employment by reason of desertion.23 Under the Rules of
Court,24 which is applicable in a suppletory character in labor cases
before the Labor Arbiter or the NLRC pursuant to Section 3, Rule I of
the New Rules of Procedure of the NLRC25, defenses which are not
raised either in a motion to dismiss or in the answer are deemed
waived.26
Granting, for the sake of argument, that petitioners may use Section H
(6), Part I of Memorandum Circular No. 41 or Section 19(C) of
Memorandum Circular No. 055-96 as basis for terminating private
respondent's employment, it is clear that one of the conditions before
any of these provisions becomes applicable is when the vessel arrives
at a convenient port within a period of three (3) months before the
expiration of the contract of employment. In the present case, private
respondent's contract was executed on April 10, 1996 for a duration of
twelve months. He was deployed aboard MV Cemtex General on June
25, 1996 and repatriated to the Philippines on August 22, 1996. Hence,
it is clear that petitioners did not meet this condition because private
respondent's termination was not within a period of three months before
the expiration of his contract of employment.
Moreover, the Court finds nothing in the records to show that petitioners
complied with the other conditions enumerated therein, such as the
payment of all of private respondent's earned wages together with his
leave pay for the entire contract period as well as termination pay
equivalent to his one month salary.
Petitioners admit that they did not inform private respondent in writing
of the charges against him and that they failed to conduct a formal
investigation to give him opportunity to air his side. However, petitioners

contend that the twin requirements of notice and hearing applies strictly
only when the employment is within the Philippines and that these need
not be strictly observed in cases of international maritime or overseas
employment.
The Court does not agree. The provisions of the Constitution as well as
the Labor Code which afford protection to labor apply to Filipino
employees whether working within the Philippines or abroad. Moreover,
the principle of lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction.27 In the present case, it is
not disputed that the Contract of Employment entered into by and
between petitioners and private respondent was executed here in the
Philippines with the approval of the Philippine Overseas Employment
Administration (POEA). Hence, the Labor Code together with its
implementing rules and regulations and other laws affecting labor apply
in this case.28 Accordingly, as to the requirement of notice and hearing
in the case of a seafarer, the Court has already ruled in a number of
cases that before a seaman can be dismissed and discharged from the
vessel, it is required that he be given a written notice regarding the
charges against him and that he be afforded a formal investigation
where he could defend himself personally or through a
representative.29 Hence, the employer should strictly comply with the
twin requirements of notice and hearing without regard to the nature
and situs of employment or the nationality of the employer. Petitioners
failed to comply with these twin requirements.
Petitioners also contend that the wages of private respondent from
August 11-22, 1996 were applied to the costs of his repatriation.
Petitioners argue that the off-setting of the costs of his repatriation
against his wages for the aforementioned period is allowed under the
provisions of Section 19(E) of Memorandum Circular No. 055-96 which
provides that when the seafarer is discharged for any just cause, the
employer shall have the right to recover the costs of his replacement
and repatriation from the seafarer's wages and other earnings.
The Court does not agree. Section 19(E) of Memorandum Circular No.
055-96 has its counterpart provision under Section H (2), Part II of
Memorandum Circular No. 41, to wit:
SECTION H. REPATRIATION
xxxx
2. When the seaman is discharged for disciplinary reasons,
the employer shall have the right to recover the costs of
maintenance and repatriation from the seaman's balance of
wages and other earnings.
xxxx
It is clear under the above-quoted provision that the employer shall
have the right to recover the cost of repatriation from the seaman's
wages and other earnings only if the concerned seaman is validly
discharged for disciplinary measures. In the present case, since
petitioners failed to prove that private respondent was validly
terminated from employment on the ground of desertion, it only follows
that they do not have the right to deduct the costs of private
respondent's repatriation from his wages and other earnings.
Lastly, the Court is not persuaded by petitioners' contention that the
private respondent is not entitled to his money claims representing his
living allowance, overtime pay, vacation pay and special allowance as
well as attorney's fees because he failed to present any proof to show
that he is entitled to these awards.
However, the Court finds that the monetary award representing private
respondent's three months salary as well as the award representing his
living allowance, overtime pay, vacation pay and special allowance
should be modified.
The Court finds no basis in the NLRC's act of including private
respondent's living allowance as part of the three months salary to
which he is entitled under Section 10 of Republic Act (RA) No. 8042,
otherwise known as the "Migrant Workers and Overseas Filipinos Act
of 1995." The pertinent provisions of the said Act provides:
Sec. 10. Money Claims –
xxxx
In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, the
worker shall be entitled to the full reimbursement of his
placement fee with interest at 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.
xxxx
It is clear from the above-quoted provision that what is included in the
computation of the amount due to the overseas worker are only his
salaries. Allowances are excluded. In the present case, since private
respondent received a basic monthly salary of US$400.00, he is,
therefore, entitled to receive a sum of US$1200.00, representing three
months of said salary.
As to the awards of living allowance, overtime pay, vacation pay and
special allowance, it is clearly provided under private respondent's
Contract of Employment that he is entitled to these benefits as follows:
living allowance of US$140.00/month; vacation leave with pay
equivalent to US$40.00/month; overtime rate of US$120.00/month; and,
special allowance of US$175.00/month.30
14
With respect, however, to the award of overtime pay, the correct
criterion in determining whether or not sailors are entitled to overtime
pay is not whether they were on board and can not leave ship beyond
the regular eight working hours a day, but whether they actually
rendered service in excess of said number of hours. 31 In the present
case, the Court finds that private respondent is not entitled to overtime
pay because he failed to present any evidence to prove that he
rendered service in excess of the regular eight working hours a day.
On the basis of the foregoing, the remaining benefits to which the
private respondent is entitled is the living allowance of
US$140.00/month, which was removed in the computation of private
respondent's salary, special allowance of US$175.00/month and
vacation leave with pay amounting to US$40.00/month. Since private
respondent rendered service for two months these benefits should be
doubled, giving a total of US$710.00.
As to the award of attorney's fees, this Court ruled in Reyes v. Court of
Appeals,32 as follows:
x x x [T]here are two commonly accepted concepts of
attorney's fees, the so-called ordinary and extraordinary. In
its ordinary concept, an attorney's fee is the reasonable
compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his
agreement with the client. In its extraordinary concept,
attorney's fees are deemed indemnity for damages ordered
by the court to be paid by the losing party in a litigation. The
instances where these may be awarded are those
enumerated in Article 2208 of the Civil Code, specifically par.
7 thereof which pertains to actions for recovery of wages, and
is payable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof. The extraordinary concept
of attorney's fees is the one contemplated in Article 111 of the
Labor Code, which provides:
Art. 111. Attorney's fees. – (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 x x x
The afore-quoted Article 111 is an exception to the
declared policy of strict construction in the awarding of
attorney's fees. Although an express finding of facts and
law is still necessary to prove the merit of the award,
there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages.
There need only be a showing that the lawful wages were
not paid accordingly, as in this case.
In carrying out and interpreting the Labor Code's provisions
and its implementing regulations, the employee's welfare
should be the primordial and paramount consideration. This
kind of interpretation gives meaning and substance to the
liberal and compassionate spirit of the law as provided in
Article 4 of the Labor Code which states that "[a]ll doubts in
the implementation and interpretation of the provisions of [the
Labor] Code including its implementing rules and regulations,
shall be resolved in favor of labor", and Article 1702 of the
Civil Code which provides that "[i]n case of doubt, all labor
legislation and all labor contracts shall be construed in favor
of the safety and decent living for the laborer." 33 (Emphasis
supplied)
In the present case, it is true that the Labor Arbiter and the NLRC failed
to state the reasons why attorney's fees are being awarded. However,
it is clear that private respondent was illegally terminated from his
employment and that his wages and other benefits were withheld from
him without any valid and legal basis. As a consequence, he is
compelled to file an action for the recovery of his lawful wages and other
benefits and, in the process, incurred expenses. On these bases, the
Court finds that he is entitled to attorney's fees.
WHEREFORE, the petition is PARTLY GRANTED. The Court of
Appeals' Decision dated December 18, 2001 and Resolution dated
April 10, 2002 are AFFIRMED with MODIFICATION to the effect that
the award of US$1620.00 representing private respondent's three
months salary is reduced to US$1200.00. The award of US$550.00
representing private respondent's living allowance, overtime pay,
vacation pay and special allowance for two months is deleted and in
lieu thereof, an award of US$710.00 is granted representing private
respondent's living allowance, special allowance and vacation leave
with pay for the same period.
No costs.
SO ORDERED.
G.R. No. 169434 March 28, 2008
LAZARO V. DACUT, CESARIO G. CAJOTE, ROMERLO F.
TUNGALA, LOWEL Z. ZUBISTA, and ORLANDO P.
TABOY, Petitioners,

vs.
COURT OF APPEALS (Special Twelfth Division), STA. CLARA
INTERNATIONAL TRANSPORT AND EQUIPMENT CORPORATION,
and NICANDRO LINAO, Respondents.
DECISION
QUISUMBING, J.:
Assailed in this petition for review are the Decision 1 dated June 21,
2005 and the Resolution2 dated August 22, 2005 of the Court of
Appeals in CA-G.R. SP No. 76096, which affirmed the
Resolution3 dated May 20, 2002 of the National Labor Relations
Commission (NLRC). The NLRC had affirmed the decision 4 of the
Labor Arbiter in NLRC Case No. NCR-00-09-09578-99, dismissing
petitioners’ complaint for constructive dismissal but ordering the
payment of their holiday pay, accrued sick and vacation leaves and
wage differential.
The antecedent facts culled from the submissions below are as follows:
Petitioners Lazaro V. Dacut, Cesario G. Cajote, Romerlo F. Tungala,
Lowel Z. Zubista, and Orlando P. Taboy were crew members of the
LCT "BASILISA", an inter-island cargo vessel owned by private
respondent Sta. Clara International Transport and Equipment
Corporation.
On November 29, 1998, Dacut discovered a hole in the vessel’s engine
room. The company had the hole patched up with a piece of iron and
cement. Despite the repair, Dacut and Tungala resigned in July 1999
due to the vessel’s alleged unseaworthiness. 5
On the other hand, Cajote went on leave from April 12-28, 1999 to
undergo eye treatment. Since then, he has incurred several
unauthorized absences. Fearing that he will be charged as Absent
Without Leave (AWOL), Cajote resigned in June 1999. 6
On September 22, 1999, petitioners filed a complaint7 for constructive
dismissal amounting to illegal dismissal (except for Zubista and Taboy);
underpayment of wages, special and regular holidays; non-payment of
rest days, sick and vacation leaves, night shift differentials, subsistence
allowance, and fixed overtime pay; actual, moral and exemplary
damages; and litigation costs and attorney’s fees.
Dacut and Tungala claimed that they resigned after Reynalyn G. Orlina,
the secretary of the Personnel Manager, told them that they will be paid
their separation pay if they voluntarily resigned. They also resigned
because the vessel has become unseaworthy after the company
refused to have it repaired properly.8 Meanwhile, Cajote alleged that he
resigned because the company hired a replacement while he was still
on leave. When he returned, the Operations Manager told him that he
will be paid his separation pay if he voluntarily resigned; otherwise, he
would be charged for being AWOL. On the other hand, Zubista claimed
that his wage was below the minimum set by the Regional Tripartite
Wages and Productivity Board. Finally, petitioners alleged that they
were not paid their rest days, sick and vacation leaves, night shift
differentials, subsistence allowance, and fixed overtime pay.
After the Labor Arbiter declared the case submitted for decision, the
company filed its reply to petitioners’ position paper. It countered that
Dacut and Tungala voluntarily resigned due to the vessel’s alleged
unseaworthiness while Cajote resigned to avoid being charged as
AWOL. It also claimed that petitioners’ monetary claims had no basis.
On August 2, 2000, the Labor Arbiter dismissed petitioners’ complaint.
The Labor Arbiter ruled that there was sufficient evidence to prove that
the vessel was seaworthy. Thus, the fear of Dacut and Tungala was
unfounded, and they must bear the consequence of their resignation.
The Labor Arbiter also observed that Cajote has incurred excessive
unauthorized absences which would warrant his dismissal under the
Labor Code. Thus, the Labor Arbiter upheld the company’s position that
Cajote resigned to avoid being charged as AWOL. Finally, the Labor
Arbiter noted that except for the holiday pay, accrued sick and vacation
leaves, and wage differential, petitioners failed to substantiate their
monetary claims. The Labor Arbiter thus held:
WHEREFORE, the foregoing premises considered, judgment is hereby
rendered dismissing complainants’ charge for constructive dismissal
and the concomitant prayer that goes therewith for lack of merit.
However, respondent is ordered to pay the following:
1. [Complainants’] holiday pay and the cash equivalent of
their accrued sick leave/vacation leave credits to:
Holiday Pay Accrued
Regular Special S/L - V/L
Credits
Dacut P1,000.00 P1,099.98 P8,365.35
Tungala P 933.32 P 756.66 P7,850.00
Cajote P1,292.30 P 682.95 P2,100.00
Zubista P 923.04 P 714.98 P2,600.00
15
Taboy P1,307.68 P1,076.91 P5,000.00
[Total] P5,456.34 P4,331.48 P25,915.35
2. Zubista’s wage differential amounting to THIRTY-FOUR
THOUSAND SIX HUNDRED EIGHTY-SEVEN PESOS and
70/100 (P34,687.70)[.]
SO ORDERED.9
Petitioners appealed to the NLRC alleging that the Labor Arbiter erred:
(1) in entertaining the company’s reply after the case had been
submitted for decision; (2) in not finding that Dacut, Cajote and Tungala
were constructively dismissed; (3) in not finding that petitioners were
entitled to their monetary claims; and (4) in not finding that petitioners
were entitled to actual, moral and exemplary damages as well as
litigation costs and attorney’s fees. At this point, Dacut and Tungala
further contended that they resigned because they were being
harassed by the company due to a complaint for violation of labor
standards they had filed earlier against it.
On May 20, 2002, the NLRC affirmed the Labor Arbiter’s
decision. 10 The NLRC clarified that although the Labor Arbiter has
declared the case submitted for decision, the Labor Arbiter may still
entertain the company’s reply in order to ascertain the facts of the case.
The NLRC also declared that Dacut, Cajote and Tungala voluntarily
executed their resignation letters.1avvphi1
Petitioners elevated the case to the Court of Appeals which likewise
affirmed the findings of the NLRC. Petitioners now come before us
alleging that the appellate court committed serious errors of law:
I.
… in holding that there was nothing irregular in admitting
respondents’ belatedly submitted reply and making the same
the primary basis of the decision despite the fact that
petitioners had not been given the chance to refute its
contents.
II.
… IN HOLDING THAT PETITIONERS LAZARO DACUT, [ET]
AL. VOLUNTARILY RESIGNED FROM THEIR
EMPLOYMENT AND WERE NOT CONSTRUCTIVELY
DISMISSED.
III.
… IN RULING THAT PETITIONERS [WERE] NOT
ENTITLED TO THEIR OTHER MONETARY CLAIMS.11
Essentially, we are asked to resolve: (1) whether the Labor Arbiter
erred in admitting the company’s reply after the case had been
submitted for decision; (2) whether Dacut, Tungala and Cajote
voluntarily resigned from their employment; and (3) whether petitioners
were entitled to their monetary claims.1avvphi1
The first issue deals with technical rules and procedural matters. Well-
settled is the rule that technical rules of procedure are not binding in
labor cases.12 In fact, it is the spirit and intention of the Labor Code that
labor officials shall use all reasonable means to ascertain the facts in
each case speedily and objectively, without regard to technicalities of
law or procedure.13
In our view, the fact that the Labor Arbiter admitted the company’s reply
after the case had been submitted for decision did not make the
proceedings before him irregular. Petitioners were given adequate
opportunity in the NLRC and the Court of Appeals to rebut the
company’s evidence against them.
The second and third issues require a review of factual matters. Under
Rule 45 of the Rules of Court, a petition for review on certiorari shall
only raise questions of law considering that the findings of fact of the
Court of Appeals are, as a general rule, conclusive upon and binding
on this Court. This doctrine applies with greater force in labor cases
where the factual findings of the labor tribunals are affirmed by the
Court of Appeals. The reason is that labor officials are deemed to have
acquired expertise in matters within their jurisdiction and therefore, their
factual findings are generally accorded not only respect but also
finality. 14
Here, the Labor Arbiter, the NLRC, and the Court of Appeals were
unanimous in finding that the primary reason why Dacut and Tungala
resigned was the vessel’s alleged unseaworthiness as borne by their
pleadings before the Labor Arbiter. Dacut and Tungala never
mentioned that they resigned because they were being harassed by
the company due to a complaint for violation of labor standards they
had filed against it. This ground was alleged only before the NLRC and
not a single act or incident was cited to prove this point. Even the
alleged assurance by Orlina, that they would be given separation pay,
served merely as a secondary reason why they resigned. In fact, we
doubt that such assurance was even made considering that as
secretary of the Personnel Manager, it was not shown under what
authority Orlina acted when she told Dacut and Tungala to resign.
Likewise deserving scant consideration is Cajote’s claim that the
Operations Manager told him that he will be paid separation pay if he
resigned voluntarily; otherwise, he would be charged as AWOL.
Although the company already hired a replacement, Cajote admitted

that he was still employed at the time he resigned. In fact, the company
tried to give him another assignment but he refused it. Thus, the only
reason why Cajote resigned was his long unauthorized absences which
would have warranted his dismissal in any case.
We find no reason to disturb all these factual findings because they are
amply supported by substantial evidence.
Apropos the monetary claims, there is insufficient evidence to prove
petitioners’ entitlement thereto. As crew members, petitioners were
required to stay on board the vessel by the very nature of their duties,
and it is for this reason that, in addition to their regular compensation,
they are given free living quarters and subsistence allowances when
required to be on board. It could not have been the purpose of our law
to require their employers to give them overtime pay or night shift
differential, even when they are not actually working. Thus, the correct
criterion in determining whether they are entitled to overtime pay or
night shift differential is not whether they were on board and cannot
leave ship beyond the regular eight working hours a day, but whether
they actually rendered service in excess of said number of hours. 15 In
this case, petitioners failed to submit sufficient proof that overtime and
night shift work were actually performed to entitle them to the
corresponding pay.
WHEREFORE, the instant petition is DENIED. The Decision dated
June 21, 2005 and the Resolution dated August 22, 2005 of the Court
of Appeals in CA-G.R. SP No. 76096 are AFFIRMED.
SO ORDERED.
G.R. No. 162195 April 8, 2008
BAHIA SHIPPING SERVICES, INC., petitioner,
vs.
REYNALDO CHUA, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court wherein Bahia Shipping Services, Inc. (petitioner)
assails the August 28, 2003 Decision1 of the Court of Appeals (CA),
affirming the December 23, 1998 Decision and February 15, 1999
Resolution of the National Labor Relations Commission (NLRC); and
the February 19, 2004 CA Resolution,2 denying its Motion for
Reconsideration.
Petitioner adopted the following findings of fact of the CA:
Private respondent Reynaldo Chua was hired by the
petitioner shipping company, Bahia Shipping Services, Inc.,
as a restaurant waiter on board a luxury cruise ship liner M/S
Black Watch pursuant to a Philippine Overseas Employment
Administration (POEA) approved employment contract dated
October 9, 1996 for a period of nine (9) months from October
18, 1996 to July 17, 1997. On October 18, 1996, the private
respondent left Manila for Heathrow, England to board the
said sea vessel where he will be assigned to work.
On February 15, 1997, the private respondent reported for his
working station one and one-half (1½) hours late. On
February 17, 1997, the master of the vessel served to the
private respondent an official warning-termination form
pertaining to the said incident. On March 8, 1997, the vessel's
master, ship captain Thor Fleten conducted an inquisitorial
hearing to investigate the said incident. Thereafter, on March
9, 1997, private respondent was dismissed from the service
on the strength of an unsigned and undated notice of
dismissal. An alleged record or minutes of the said
investigation was attached to the said dismissal notice.
On March 24, 1997, the private respondent filed a complaint
for illegal dismissal and other monetary claims, which case
was assigned to Labor Arbiter Manuel M. Manansala.
The private respondent alleged that he was paid only
US$300.00 per month as monthly salary for five (5) months
instead of US$410.00 as stipulated in his employment
contract. Thus, he claimed that he was underpaid in the
amount of US$110.00 per month for that same period of five
(5) months. He further asserted that his salaries were also
deducted US$20.00 per month by the petitioner for alleged
union dues. Private respondent argued that it was his first
offense committed on board the vessel. He adverted further
that the petitioner has no proof of being a member of the
AMOSUP or the ITF to justify its claim to deduct the said
union dues [from] his monthly salary.
The petitioner disputed the said allegations of the private
respondent by arguing that it received a copy of an addendum
to the collective bargaining agreement (CBA) from the
petitioner's principal, Blackfriars Shipping Company, Ltd.
Consequently, the petitioner requested permission from the
POEA through a letter dated March 17, 1997 to amend the
salary scale of the private respondent to US$300.00 per
month. The petitioner justified its monthly deduction made for
16
union dues against the private respondent's salary in view of
an alleged existing CBA between the Norwegian Seaman's
Union (NSU, for brevity) and the petitioner's principal,
Blackfriars Shipping Co., Ltd. The petitioner further
asseverated that the private respondent has violated the
terms and conditions of his contract as manifested in the said
official warning-termination form by always coming late when
reporting for duty even prior to the February 15, 1997
incident.3
The Labor Arbiter rendered a Decision dated March 5, 1998, holding
petitioner liable to respondent for illegal dismissal and unauthorized
deductions, viz:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring [petitioner] Bahia Shipping Services, Inc. (BSSI)
and its foreign principal Blackfriars Shipping Co., Ltd. (BSCL)
guilty of illegal dismissal. Accordingly, the aforenamed
[petitioner] BSSI and its foreign principal BSCL are hereby
directed to pay jointly and severally, [private respondent]
Reynaldo Chua the sum of US$1,230.00 as earlier computed,
representing his salary for the unexpired portion of the
contract of employment limited to three (3) months under
Republic Act 8042, and convertible to Philippine currency
upon actual payment.
2. Directing the aforenamed [petitioner] BSSI and its foreign
principal BSCL to pay, jointly and severally, [private
respondent] Reynaldo Chua the following money claims as
earlier computed:
Reimbursement/Refund of Plane Fare ----
Illegal Deductions ("Union Dues") ----
Differential Pay (Underpayment of Wages) ----
convertible to Philippine currency upon actual payment.
3. Directing the aforenamed [petitioner] BSSI and its foreign
principal BSCL to pay, jointly and severally, the [private
respondent] Reynaldo Chua ten (10%) percent attorney's
fees based on the total monetary award.
4. Dismissing the other money claims and/or charges of
[private respondent] Reynaldo Chua for lack of factual and
legal basis.
SO ORDERED.4
Petitioner appealed to the NLRC which issued on December 23, 1998
a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision
is hereby MODIFIED in that the award on the unexpired
portion of the contract is deducted the amount equivalent to a
day's work of complainant. The other findings stand
AFFIRMED.
SO ORDERED.5
Petitioner filed a Motion for Reconsideration but the NLRC denied the
same in a Resolution dated February 15, 1999. 6
Respondent did not question the foregoing NLRC decision and
resolution.
Upon a petition for certiorari filed by petitioner, the CA rendered the
August 28, 2003 Decision assailed herein, modifying the NLRC
decision, thus:
WHEREFORE, premises considered, the assailed decision
dated December 23, 1998, and the resolution dated February
15, 1999, of the public respondent NLRC are hereby
AFFIRMED, with the MODIFICATION that the monetary
award representing the salary of the petitioner for the
unexpired portion of the contract which is limited to three (3)
months under Republic Act No. 8042 is DELETED.
SO ORDERED.7
The CA denied petitioner's Motion for Reconsideration.
And so, the present petition raising the following issues:
a) Whether or not the Court of Appeals could grant additional
affirmative relief by increasing the award despite the fact that
respondent did not appeal the decision of both the Labor
Arbiter and the NLRC.
b) Whether or not reporting for work one and one-half (1½)
hours late and abandoning his work are valid grounds for
dismissal.
c) Whether or not respondent is entitled to overtime pay which
was incorporated in his award for the unexpired portion of the
contract despite the fact that he did not render overtime work,
and whether or not, it is proper for the NLRC to award money
claims despite the fact that the NLRC decision, and affirmed
by the Court of Appeals, did not state clearly the facts and the
evidence upon which such conclusions are based. 8
It is noted that petitioner does not question the monetary awards under
Item Nos. 2 and 3 of the dispositive portion of the LA Decision, which
were affirmed in toto by the NLRC and CA.

The issues will be resolved jointly.
The LA declared the dismissal of respondent illegal for the reason that
the infraction he committed of being tardy by 1½ hour should not have
been penalized by petitioner with the ultimate punishment of
termination; rather, the commensurate penalty for such single tardiness
would have been suspension for one or two weeks. The LA further
noted that petitioner meted out on respondent the penalty of dismissal
hastily and summarily in that it merely went through the motions of
notifying respondent and hearing his side when, all along, it had already
decided to dismiss him.9
The NLRC sustained the foregoing findings of the LA, noting that the
claim of petitioner that respondent's tardiness was not infrequent but
habitual is not supported by evidence.10 However, the NLRC held that,
although the penalty of dismissal on respondent was properly lifted, a
penalty of deduction of one day's salary, the same to be subtracted
from his monetary award, should be imposed on the latter for the
tardiness he incurred.11
The CA held that the NLRC and LA did not commit any grave abuse of
discretion in arriving at the factual assessments which are all supported
by substantial evidence.12
Petitioner assails the ruling of the CA for being based on the faulty
premise that respondent incurred tardiness only once when in fact he
had done so habitually.13 Whether respondent had been habitually
tardy prior to February 15, 1997 when he reported for work 1½ hours
late is purely factual in nature. As such, the Court defers to the
concurrent assessments of the LA and NLRC, as affirmed by the CA,
for the evaluation of evidence and the appreciation of the credibility of
witnesses fall within their expertise. 14
As the Court held in Acebedo Optical v . National Labor Relations
Commission,15
Judicial Review of 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.16
In the present case, petitioner has failed to establish a compelling
reason for the Court to depart from this rule. In fact, as pointed out by
the CA, petitioner's claim that respondent's tardiness was habitual lacks
evidentiary support as "no other documents on record were attached to
substantiate that the private respondent was forewarned for the first
and second time for any infraction or offense, work-related or not, vis-
à-vis the performance of his regular duties and functions."17
Such empty claim of petitioner, therefore, cannot persuade the Court to
simply disregard three layers of thorough and in-depth assessments on
the matter by the CA, NLRC and LA.
It being settled that the dismissal of respondent was illegal, it follows
that the latter is entitled to payment of his salary for the unexpired
portion of his contract, as provided under Republic Act (R.A.) No. 8042,
considering that his employment was pre-terminated on March 9, 1997
or four months prior to the expiration of his employment contract on July
17, 1997.
However, the LA limited the award to an amount equivalent to
respondent's salary for three months. The NLRC affirmed said award
but deducted therefrom his salary for one day as penalty for the
tardiness incurred. The CA affirmed the one-day salary deduction
imposed by the NLRC but removed the three months - salary cap
imposed by the LA. In effect, as this particular monetary award now
stands, it is to be computed based on the salary of respondent covering
the period March 9, 1997 to July 17, 1997, less his salary for one day.
Petitioner questions the CA for lifting the three-month salary cap,
pointing out that the LA and NLRC decisions which imposed the cap
can no longer be altered as said decisions where not questioned by
respondent.18
Indeed, a party who has failed to appeal from a judgment is deemed to
have acquiesced to it and can no longer obtain from the appellate court
any affirmative relief other that what was already granted under said
judgment.19 However, when strict adherence to such technical rule will
impair a substantive right, such as that of an illegally dismissed
employee to monetary compensation as provided by law, then equity
dictates that the Court set aside the rule to pave the way for a full and
just adjudication of the case. As the Court held in St. Michael's Institute
v. Santos:20
On the matter of the award of backwages, petitioners
advance the view that by awarding backwages, the appellate
court "unwittingly reversed a time-honored doctrine that a
party who has not appealed cannot obtain from the appellate
court any affirmative relief other than the ones granted in the
appealed decision." We do not agree.
The fact that the NLRC did not award backwages to the
respondents or that the respondents themselves did not
appeal the NLRC decision does not bar the Court of Appeals
from awarding backwages. While as a general rule, a party
who has not appealed is not entitled to affirmative relief other
than the ones granted in the decision of the court below, the
17
Court of Appeals is imbued with sufficient authority and
discretion to review matters, not otherwise assigned as
errors on appeal, if it finds that their consideration is
necessary in arriving at a complete and just resolution of
the case or to serve the interests of justice or to avoid
dispensing piecemeal justice.
Article 279 of the Labor Code, as amended, mandates that
an illegally dismissed employee is entitled to the twin reliefs
of (a) either reinstatement or separation pay, if reinstatement
is no longer viable, and (b) backwages. Both are distinct
reliefs given to alleviate the economic damage suffered by an
illegally dismissed employee and, thus, the award of one does
not bar the other. Both reliefs are rights granted by
substantive law which cannot be defeated by mere
procedural lapses. Substantive rights like the award of
backwages resulting from illegal dismissal must not be
prejudiced by a rigid and technical application of the
rules. The order of the Court of Appeals to award
backwages being a mere legal consequence of the
finding that respondents were illegally dismissed by
petitioners, there was no error in awarding the
same.21 (Emphasis supplied)
The Court has consistently applied the foregoing exception to the
general rule. It does so yet again in the present case.
Section 10 of R.A. No. 8042,22 entitles an overseas worker who has
been illegally dismissed to "his salaries for the unexpired portion of the
employment contract or for three (3) months for every year of the
unexpired term, whichever is less."23
The CA correctly applied the interpretation of the Court in Marsaman
Manning Agency, Inc. v. National Labor Relations Commission 24 that
the second option which imposes a three months – salary cap applies
only when the term of the overseas contract is fixed at one year or
longer; otherwise, the first option applies in that the overseas worker
shall be entitled payment of all his salaries for the entire unexpired
period of his contract.
In Skippers Pacific, Inc. v. Mira,25 wherein the overseas contract
involved was only for six months, the Court held that it is the first option
provided under Section 10 of R.A. No. 8042 which is applicable in that
the overseas worker who was illegally dismissed is entitled to payment
of all his salaries covering the entire unexpired period of his contract.
The CA committed no error in adhering to the prevailing interpretation
of Section 10 of R.A. No. 8042.
Finally, the Court comes to the last issue on whether in the computation
of the foregoing award, respondent's "guaranteed overtime" pay
amounting to US$197.00 per month should be included as part of his
salary. Petitioner contends that there is no factual or legal basis for the
inclusion of said amount because, after respondent's repatriation, he
could not have rendered any overtime work.26
This time, petitioner's contention is well-taken.
The Court had occasion to rule on a similar issue in Stolt-Nielsen
Marine Services (Phils.), Inc. v. National Labor Relations
Commission,27 where the NLRC was questioned for awarding to an
illegally dismissed overseas worker fixed overtime pay equivalent to the
unexpired portion of the latter's contract. In resolving the question, the
Court, citing Cagampan v. National Labor Relations
Commission,28 held that although an overseas employment contract
may guarantee the right to overtime pay, entitlement to such benefit
must first be established, otherwise the same cannot be allowed.
Hence, it being improbable that respondent rendered overtime work
during the unexpired term of his contract, the inclusion of his
"guaranteed overtime" pay into his monthly salary as basis in the
computation of his salaries for the entire unexpired period of his
contract has no factual or legal basis and the same should have been
disallowed.
Based on respondent's Position Paper filed with the Labor Arbiter, 29 his
basic monthly salary is $213.00.
WHEREFORE, the petition is PARTLY GRANTED. The assailed
August 28, 2003 Decision and February 19, 2004 Resolution of the
Court of Appeals are AFFIRMED with MODIFICATION that in the
computation of the payment to respondent Reynaldo Chua of his
salaries for the entire unexpired portion of his contract, his basic
monthly salary of US$213.00 shall be used as the sole basis.
No costs.
G.R. No. 151309 October 15, 2008
BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as
Union President, JOSELITO LARIÑO, VIVENCIO B. BARTE,
SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA
CORPORATION, and/or WILFREDO C. RIVERA, respondents.
DECISION
NACHURA, J.:

This petition seeks a review of the Decision1 of the Court of Appeals
(CA) dated July 24, 2001 and Resolution dated December 20, 2001,
which affirmed the finding of the National Labor Relations Commission
(NLRC) that the petitioners' transfer to another workplace did not
amount to a constructive dismissal and an unfair labor practice.
The pertinent factual antecedents are as follows:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary
medicines and its principal office is located in Caloocan City. Petitioners
Joselito Lariño, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay
are its regular employees, occupying the positions of helper, shipment
helper and factory workers, respectively, assigned to the Production
Department. They are members of Bisig Manggagawa sa Tryco (BMT),
the exclusive bargaining representative of the rank-and-file employees.
Tryco and the petitioners signed separate Memorand[a] of
Agreement2 (MOA), providing for a compressed workweek schedule to
be implemented in the company effective May 20, 1996. The MOA was
entered into pursuant to Department of Labor and Employment
Department Order (D.O.) No. 21, Series of 1990, Guidelines on the
Implementation of Compressed Workweek. As provided in the MOA,
8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as
the regular working hours, and no overtime pay shall be due and
payable to the employee for work rendered during those hours. The
MOA specifically stated that the employee waives the right to claim
overtime pay for work rendered after 5:00 p.m. until 6:12 p.m. from
Monday to Friday considering that the compressed workweek schedule
is adopted in lieu of the regular workweek schedule which also consists
of 46 hours. However, should an employee be permitted or required to
work beyond 6:12 p.m., such employee shall be entitled to overtime
pay.
Tryco informed the Bureau of Working Conditions of the Department of
Labor and Employment of the implementation of a compressed
workweek in the company.3
In January 1997, BMT and Tryco negotiated for the renewal of their
collective bargaining agreement (CBA) but failed to arrive at a new
agreement.
Meantime, Tryco received the Letter dated March 26, 1997 from the
Bureau of Animal Industry of the Department of Agriculture reminding
it that its production should be conducted in San Rafael, Bulacan, not
in Caloocan City:
MR. WILFREDO C. RIVERA
President, Tryco Pharma Corporation
San Rafael, Bulacan
Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan
Dear Mr. Rivera:
This is to remind you that your License to Operate as
Veterinary Drug and Product Manufacturer is addressed at
San Rafael, Bulacan, and so, therefore, your production
should be done at the above mentioned address only. Further,
production of a drug includes propagation, processing,
compounding, finishing, filling, repacking, labeling,
advertising, storage, distribution or sale of the veterinary drug
product. In no instance, therefore, should any of the above be
done at your business office at 117 M. Ponce St., EDSA,
Caloocan City.
Please be guided accordingly.
Thank you.
Very truly yours,
(sgd.)
EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division4
Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which
directed petitioner Aya-ay to report to the company's plant site in
Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the
order on April 18, 1997.6 Subsequently, through a Memorandum7 dated
May 9, 1997, Tryco also directed petitioners Egera, Lariño and Barte to
report to the company's plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan,
contending that it constitutes unfair labor practice. In protest, BMT
declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints 8 for illegal
dismissal, underpayment of wages, nonpayment of overtime pay and
service incentive leave, and refusal to bargain against Tryco and its
President, Wilfredo C. Rivera. In their Position Paper, 9 petitioners
alleged that the company acted in bad faith during the CBA negotiations
because it sent representatives without authority to bind the company,
and this was the reason why the negotiations failed. They added that
the management transferred petitioners Lariño, Barte, Egera and Aya-
ay from Caloocan to San Rafael, Bulacan to paralyze the union. They
prayed for the company to pay them their salaries from May 26 to 31,
1997, service incentive leave, and overtime pay, and to implement
Wage Order No. 4.
In their defense, respondents averred that the petitioners were not
dismissed but they refused to comply with the management's directive
for them to report to the company's plant in San Rafael, Bulacan. They
denied the allegation that they negotiated in bad faith, stating that, in
18
fact, they sent the Executive Vice-President and Legal Counsel as the
company's representatives to the CBA negotiations. They claim that the
failure to arrive at an agreement was due to the stubbornness of the
union panel.
Respondents further averred that, long before the start of the
negotiations, the company had already been planning to decongest the
Caloocan office to comply with the government policy to shift the
concentration of manufacturing activities from the metropolis to the
countryside. The decision to transfer the company's production
activities to San Rafael, Bulacan was precipitated by the letter-reminder
of the Bureau of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of
merit.10 The Labor Arbiter held that the transfer of the petitioners would
not paralyze or render the union ineffective for the following reasons:
(1) complainants are not members of the negotiating panel; and (2) the
transfer was made pursuant to the directive of the Department of
Agriculture.
The Labor Arbiter also denied the money claims, ratiocinating that the
nonpayment of wages was justified because the petitioners did not
render work from May 26 to 31, 1997; overtime pay is not due because
of the compressed workweek agreement between the union and
management; and service incentive leave pay cannot be claimed by
the complainants because they are already enjoying vacation leave
with pay for at least five days. As for the claim of noncompliance with
Wage Order No. 4, the Labor Arbiter held that the issue should be left
to the grievance machinery or voluntary arbitrator.
On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision,
dismissing the case, thus:
PREMISES CONSIDERED, the Decision of February 27,
1998 is hereby AFFIRMED and complainants' appeal
therefrom DISMISSED for lack of merit. Complainants
Joselito Lariño, Vivencio Barte, Saturnino Egera and
Simplicio Aya-ay are directed to report to work at
respondents' San Rafael Plant, Bulacan but without
backwages. Respondents are directed to accept the
complainants back to work.
SO ORDERED.11
On December 22, 1999, the NLRC denied the petitioners' motion for
reconsideration for lack of merit.12
Left with no recourse, petitioners filed a petition for certiorari with the
CA.
On July 24, 2001, the CA dismissed the petition for certiorari and ruled
that the transfer order was a management prerogative not amounting
to a constructive dismissal or an unfair labor practice. The CA further
sustained the enforceability of the MOA, particularly the waiver of
overtime pay in light of this Court's rulings upholding a waiver of
benefits in exchange of other valuable privileges. The dispositive
portion of the said CA decision reads:
WHEREFORE, the instant petition is DISMISSED. The
Decision of the Labor Arbiter dated February 27, 1998 and
the Decision and Resolution of the NLRC promulgated on
October 29, 1999 and December 22, 1999, respectively, in
NLRC-NCR Case Nos. 08-05715-97, 08-06115-97 and 08-
05920-97, are AFFIRMED.
SO ORDERED.13
The CA denied the petitioners' motion for reconsideration on December
20, 2001.14
Dissatisfied, petitioners filed this petition for review raising the following
issues:
-A-
THE HONORABLE COURT OF APPEALS ERRED IN
AFFIRMING THE PATENTLY ERRONEOUS RULING OF
THE LABOR ARBITER AND THE COMMISSION THAT
THERE WAS NO DISMISSAL, MUCH LESS ILLEGAL
DISMISSAL, OF THE INDIVIDUAL PETITIONERS.
-B-
THE COURT OF APPEALS GRAVELY ERRED IN NOT
FINDING AND CONCLUDING THAT PRIVATE
RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR
PRACTICE.
-C-
THE COURT OF APPEALS ERRED IN NOT FINDING AND
CONCLUDING THAT PETITIONERS ARE ENTITLED TO
THEIR MONEY CLAIMS AND TO DAMAGES, AS WELL AS
LITIGATION COSTS AND ATTORNEY'S FEES.15
The petition has no merit.
We have no reason to deviate from the well-entrenched rule that
findings of fact of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind us when supported
by substantial evidence.16 This is particularly true when the findings of
the Labor Arbiter, the NLRC and the CA are in absolute agreement. 17 In
this case, the Labor Arbiter, the NLRC, and the CA uniformly agreed
that the petitioners were not constructively dismissed and that the
transfer orders did not amount to an unfair labor practice. But if only to

disabuse the minds of the petitioners who have persistently pursued
this case on the mistaken belief that the labor tribunals and the
appellate court committed grievous errors, this Court will go over the
issues raised in this petition.
Petitioners mainly contend that the transfer orders amount to a
constructive dismissal. They maintain that the letter of the Bureau of
Animal Industry is not credible because it is not authenticated; it is only
a ploy, solicited by respondents to give them an excuse to effect a
massive transfer of employees. They point out that the Caloocan City
office is still engaged in production activities until now and respondents
even hired new employees to replace them.
We do not agree.
We refuse to accept the petitioners' wild and reckless imputation that
the Bureau of Animal Industry conspired with the respondents just to
effect the transfer of the petitioners. There is not an iota of proof to
support this outlandish claim. Absent any evidence, the allegation is not
only highly irresponsible but is grossly unfair to the government agency
concerned. Even as this Court has given litigants and counsel a
relatively wide latitude to present arguments in support of their cause,
we will not tolerate outright misrepresentation or baseless accusation.
Let this be fair warning to counsel for the petitioners.
Furthermore, Tryco's decision to transfer its production activities to San
Rafael, Bulacan, regardless of whether it was made pursuant to the
letter of the Bureau of Animal Industry, was within the scope of its
inherent right to control and manage its enterprise effectively. While the
law is solicitous of the welfare of employees, it must also protect the
right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied.18
This prerogative extends to the management's right to regulate,
according to its own discretion and judgment, all aspects of
employment, including the freedom to transfer and reassign employees
according to the requirements of its business. 19 Management's
prerogative of transferring and reassigning employees from one area
of operation to another in order to meet the requirements of the
business is, therefore, generally not constitutive of constructive
dismissal.20 Thus, the consequent transfer of Tryco's personnel,
assigned to the Production Department was well within the scope of its
management prerogative.
When the transfer is not unreasonable, or inconvenient, or prejudicial
to the employee, and it does not involve a demotion in rank or
diminution of salaries, benefits, and other privileges, the employee may
not complain that it amounts to a constructive dismissal. 21 However, the
employer has the burden of proving that the transfer of an employee is
for valid and legitimate grounds. The employer must 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.22
Indisputably, in the instant case, the transfer orders do not entail a
demotion in rank or diminution of salaries, benefits and other privileges
of the petitioners. Petitioners, therefore, anchor their objection solely on
the ground that it would cause them great inconvenience since they are
all residents of Metro Manila and they would incur additional expenses
to travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience
is not sufficient to warrant a claim of constructive dismissal. 23 Objection
to a transfer that is grounded solely upon the personal inconvenience
or hardship that will be caused to the employee by reason of the
transfer is not a valid reason to disobey an order of transfer. 24
Incidentally, petitioners cite Escobin v. NLRC25 where the Court held
that the transfer of the employees therein was unreasonable. However,
the distance of the workplace to which the employees were being
transferred can hardly compare to that of the present case. In that case,
the employees were being transferred from Basilan to Manila; hence,
the Court noted that the transfer would have entailed the separation of
the employees from their families who were residing in Basilan and
accrual of additional expenses for living accommodations in Manila. In
contrast, the distance from Caloocan to San Rafael, Bulacan is not
considerably great so as to compel petitioners to seek living
accommodations in the area and prevent them from commuting to
Metro Manila daily to be with their families.
Petitioners, however, went further and argued that the transfer orders
amounted to unfair labor practice because it would paralyze and render
the union ineffective.
To begin with, we cannot see how the mere transfer of its members can
paralyze the union. The union was not deprived of the membership of
the petitioners whose work assignments were only transferred to
another location.
More importantly, there was no showing or any indication that the
transfer orders were motivated by an intention to interfere with the
petitioners' right to organize. Unfair labor practice refers to acts that
violate the workers' right to organize. With the exception of Article 248(f)
of the Labor Code of the Philippines, the prohibited acts are related to
the workers' right to self-organization and to the observance of a CBA.
Without that element, the acts, no matter how unfair, are not unfair labor
practices.26
19
Finally, we do not agree with the petitioners' assertion that the MOA is
not enforceable as it is contrary to law. The MOA is enforceable and
binding against the petitioners. Where it is shown that the person
making the waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding
undertaking.27
D.O. No. 21 sanctions the waiver of overtime pay in consideration of
the benefits that the employees will derive from the adoption of a
compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived
for establishments wishing to save on energy costs, promote
greater work efficiency and lower the rate of employee
absenteeism, among others. Workers favor the scheme
considering that it would mean savings on the increasing cost
of transportation fares for at least one (1) day a week; savings
on meal and snack expenses; longer weekends, or an
additional 52 off-days a year, that can be devoted to rest,
leisure, family responsibilities, studies and other personal
matters, and that it will spare them for at least another day in
a week from certain inconveniences that are the normal
incidents of employment, such as commuting to and from the
workplace, travel time spent, exposure to dust and motor
vehicle fumes, dressing up for work, etc. Thus, under this
scheme, the generally observed workweek of six (6) days is
shortened to five (5) days but prolonging the working hours
from Monday to Friday without the employer being obliged for
pay overtime premium compensation for work performed in
excess of eight (8) hours on weekdays, in exchange for the
benefits abovecited that will accrue to the employees.
Moreover, the adoption of a compressed workweek scheme in the
company will help temper any inconvenience that will be caused the
petitioners by their transfer to a farther workplace.
Notably, the MOA complied with the following conditions set by the
DOLE, under D.O. No. 21, to protect the interest of the employees in
the implementation of a compressed workweek scheme:
1. The employees voluntarily agree to work more than eight
(8) hours a day the total in a week of which shall not exceed
their normal weekly hours of work prior to adoption of the
compressed workweek arrangement;
2. There will not be any diminution whatsoever in the weekly
or monthly take-home pay and fringe benefits of the
employees;
3. If an employee is permitted or required to work in excess
of his normal weekly hours of work prior to the adoption of the
compressed workweek scheme, all such excess hours shall
be considered overtime work and shall be compensated in
accordance with the provisions of the Labor Code or
applicable Collective Bargaining Agreement (CBA);
4. Appropriate waivers with respect to overtime premium pay
for work performed in excess of eight (8) hours a day may be
devised by the parties to the agreement.
5. The effectivity and implementation of the new working time
arrangement shall be by agreement of the parties.
PESALA v. NLRC,28 cited by the petitioners, is not applicable to the
present case. In that case, an employment contract provided that the
workday consists of 12 hours and the employee will be paid a fixed
monthly salary rate that was above the legal minimum wage. However,
unlike the present MOA which specifically states that the employee
waives his right to claim overtime pay for work rendered beyond eight
hours, the employment contract in that case was silent on whether
overtime pay was included in the payment of the fixed monthly salary.
This necessitated the interpretation by the Court as to whether the fixed
monthly rate provided under the employment contract included
overtime pay. The Court noted that if the employee is paid only the
minimum wage but with overtime pay, the amount is still greater than
the fixed monthly rate as provided in the employment contract. It,
therefore, held that overtime pay was not included in the agreed fixed
monthly rate.
Considering that the MOA clearly states that the employee waives the
payment of overtime pay in exchange of a five-day workweek, there is
no room for interpretation and its terms should be implemented as they
are written.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision
dated July 24, 2001 and Resolution dated December 20, 2001
are AFFIRMED.
SO ORDERED.
G.R. No. 173648 January 16, 2012
ABDULJUAHID R. PIGCAULAN,* Petitioner,
vs.
SECURITY and CREDIT NVESTIGATION, INC. and/or RENE AMBY
REYES, Respondents.

DECISION
DEL CASTILLO, J.:
It is not for an employee to prove non-payment of benefits to which he
is entitled by law. Rather, it is on the employer that the burden of
proving payment of these claims rests.
This Petition for Review on Certiorari1 assails the February 24, 2006
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 85515, which
granted the petition for certiorari filed therewith, set aside the March 23,
20043 and June 14, 20044 Resolutions of the National Labor Relations
Commission (NLRC), and dismissed the complaint filed by Oliver R.
Canoy (Canoy) and petitioner Abduljuahid R. Pigcaulan (Pigcaulan)
against respondent Security and Credit Investigation, Inc. (SCII) and its
General Manager, respondent Rene Amby Reyes. Likewise assailed is
the June 28, 2006 Resolution5 denying Canoy’s and Pigcaulan’s Motion
for Reconsideration.6
Factual Antecedents
Canoy and Pigcaulan were both employed by SCII as security guards
and were assigned to SCII’s different clients. Subsequently, however,
Canoy and Pigcaulan filed with the Labor Arbiter separate
complaints7 for underpayment of salaries and non-payment of overtime,
holiday, rest day, service incentive leave and 13th month pays. These
complaints were later on consolidated as they involved the same
causes of action.
Canoy and Pigcaulan, in support of their claim, submitted their
respective daily time records reflecting the number of hours served and
their wages for the same. They likewise presented itemized lists of their
claims for the corresponding periods served.
Respondents, however, maintained that Canoy and Pigcaulan were
paid their just salaries and other benefits under the law; that the salaries
they received were above the statutory minimum wage and the rates
provided by the Philippine Association of Detective and Protective
Agency Operators (PADPAO) for security guards; that their holiday pay
were already included in the computation of their monthly salaries; that
they were paid additional premium of 30% in addition to their basic
salary whenever they were required to work on Sundays and 200% of
their salary for work done on holidays; and, that Canoy and Pigcaulan
were paid the corresponding 13th month pay for the years 1998 and
1999. In support thereof, copies of payroll listings8 and lists of
employees who received their 13th month pay for the periods
December 1997 to November 1998 and December 1998 to November
19999 were presented. In addition, respondents contended that
Canoy’s and Pigcaulan’s monetary claims should only be limited to the
past three years of employment pursuant to the rule on prescription of
claims.
Ruling of the Labor Arbiter
Giving credence to the itemized computations and representative daily
time records submitted by Canoy and Pigcaulan, Labor Arbiter Manuel
P. Asuncion awarded them their monetary claims in his
Decision10 dated June 6, 2002. The Labor Arbiter held that the payroll
listings presented by the respondents did not prove that Canoy and
Pigcaulan were duly paid as same were not signed by the latter or by
any SCII officer. The 13th month payroll was, however, acknowledged
as sufficient proof of payment, for it bears Canoy’s and Pigcaulan’s
signatures. Thus, without indicating any detailed computation of the
judgment award, the Labor Arbiter ordered the payment of overtime pay,
holiday pay, service incentive leave pay and proportionate 13th month
pay for the year 2000 in favor of Canoy and Pigcaulan, viz:
WHEREFORE, the respondents are hereby ordered to pay the
complainants: 1) their salary differentials in the amount of ₱166,849.60
for Oliver Canoy and ₱121,765.44 for Abduljuahid Pigcaulan; 2) the
sum of ₱3,075.20 for Canoy and ₱2,449.71 for Pigcaulan for service
incentive leave pay and; [3]) the sum of ₱1,481.85 for Canoy and
₱1,065.35 for Pigcaulan as proportionate 13th month pay for the year
2000. The rest of the claims are dismissed for lack of sufficient basis to
make an award.
SO ORDERED.11
Ruling of the National Labor Relations Commission
Respondents appealed to the NLRC. They alleged that there was no
basis
for the awards made because aside from the self-serving itemized
computations, no representative daily time record was presented by
Canoy and Pigcaulan. On the contrary, respondents asserted that the
payroll listings they submitted should have been given more probative
value. To strengthen their cause, they attached to their Memorandum
on Appeal payrolls12 bearing the individual signatures of Canoy and
Pigcaulan to show that the latter have received their salaries, as well
as copies of transmittal letters13 to the bank to show that the salaries
reflected in the payrolls were directly deposited to the ATM accounts of
SCII’s employees.
The NLRC, however, in a Resolution14 dated March 23, 2004,
dismissed the appeal and held that the evidence show underpayment
of salaries as well as non-payment of service incentive leave benefit.
Accordingly, the Labor Arbiter’s Decision was sustained. The motion
for reconsideration thereto was likewise dismissed by the NLRC in a
Resolution15 dated June 14, 2004.
Ruling of the Court of Appeals
20
In respondents’ petition for certiorari with prayer for the issuance of a
temporary restraining order and preliminary injunction16 before the CA,
they attributed grave abuse of discretion on the part of the NLRC in
finding that Canoy and Pigcaulan are entitled to salary differentials,
service incentive leave pay and proportionate 13th month pay and in
arriving at amounts without providing sufficient bases therefor.
The CA, in its Decision17 dated February 24, 2006, set aside the rulings
of
both the Labor Arbiter and the NLRC after noting that there were no
factual and legal bases mentioned in the questioned rulings to support
the conclusions made. Consequently, it dismissed all the monetary
claims of Canoy and Pigcaulan on the following rationale:
First. The Labor Arbiter disregarded the NLRC rule that, in cases
involving money awards and at all events, as far as practicable, the
decision shall embody the detailed and full amount awarded.
Second. The Labor Arbiter found that the payrolls submitted by SCII
have no probative value for being unsigned by Canoy, when, in fact,
said payrolls, particularly the payrolls from 1998 to 1999 indicate the
individual signatures of Canoy.
Third. The Labor Arbiter did not state in his decision the substance of
the evidence adduced by Pigcaulan and Canoy as well as the laws or
jurisprudence that would show that the two are indeed entitled to the
salary differential and incentive leave pays.
Fourth. The Labor Arbiter held Reyes liable together with SCII for the
payment of the claimed salaries and benefits despite the absence of
proof that Reyes deliberately or maliciously designed to evade SCII’s
alleged financial obligation; hence the Labor Arbiter ignored that SCII
has a corporate personality separate and distinct from Reyes. To justify
solidary liability, there must be an allegation and showing that the
officers of the corporation deliberately or maliciously designed to evade
the financial obligation of the corporation. 18
Canoy and Pigcaulan filed a Motion for Reconsideration, but same was
denied by the CA in a Resolution19 dated June 28, 2006.
Hence, the present Petition for Review on Certiorari.
Issues
The petition ascribes upon the CA the following errors:
I. The Honorable Court of Appeals erred when it dismissed
the complaint on mere alleged failure of the Labor Arbiter and
the NLRC to observe the prescribed form of decision, instead
of remanding the case for reformation of the decision to
include the desired detailed computation.
II. The Honorable Court of Appeals erred when it [made]
complainants suffer the consequences of the alleged non-
observance by the Labor Arbiter and NLRC of the prescribed
forms of decisions considering that they have complied with
all needful acts required to support their claims.
III. The Honorable Court of Appeals erred when it dismissed
the complaint allegedly due to absence of legal and factual
[bases] despite attendance of substantial evidence in the
records.20
It is well to note that while the caption of the petition reflects both the
names of Canoy and Pigcaulan as petitioners, it appears from its body
that it is being filed solely by Pigcaulan. In fact, the Verification and
Certification of Non-Forum Shopping was executed by Pigcaulan alone.
In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC
are not strictly bound by the rules. And even so, the rules do not
mandate that a detailed computation of how the amount awarded was
arrived at should be embodied in the decision. Instead, a statement of
the nature or a description of the amount awarded and the specific
figure of the same will suffice. Besides, his and Canoy’s claims were
supported by substantial evidence in the form of the handwritten
detailed computations which the Labor Arbiter termed as
"representative daily time records," showing that they were not properly
compensated for work rendered. Thus, the CA should have remanded
the case instead of outrightly dismissing it.
In their Comment,21 respondents point out that since it was only
Pigcaulan who filed the petition, the CA Decision has already become
final and binding upon Canoy. As to Pigcaulan’s arguments,
respondents submit that they were able to present sufficient evidence
to prove payment of just salaries and benefits, which bits of evidence
were unfortunately ignored by the Labor Arbiter and the NLRC. Fittingly,
the CA reconsidered these pieces of evidence and properly
appreciated them. Hence, it was correct in dismissing the claims for
failure of Canoy and Pigcaulan to discharge their burden to disprove
payment.
Pigcaulan, this time joined by Canoy, asserts in his Reply 22 that his filing
of the present petition redounds likewise to Canoy’s benefit since their
complaints were consolidated below. As such, they maintain that any
kind of disposition made in favor or against either of them would
inevitably apply to the other. Hence, the institution of the petition solely
by Pigcaulan does not render the assailed Decision final as to Canoy.
Nonetheless, in said reply they appended Canoy’s affidavit 23 where he
verified under oath the contents and allegations of the petition filed by
Pigcaulan and also attested to the authenticity of its annexes. Canoy,
however, failed to certify that he had not filed any action or claim in
another court or tribunal involving the same issues. He likewise

explains in said affidavit that his absence during the preparation and
filing of the petition was caused by severe financial distress and his
failure to inform anyone of his whereabouts.
Our Ruling
The assailed CA Decision is considered final as to Canoy.
We have examined the petition and find that same was filed by
Pigcaulan solely on his own behalf. This is very clear from the petition’s
prefatory which is phrased as follows:
COMES NOW Petitioner Abduljuahid R. Pigcaulan, by counsel, unto
this Honorable Court x x x. (Emphasis supplied.)
Also, under the heading "Parties", only Pigcaulan is mentioned as
petitioner and consistent with this, the body of the petition refers only to
a "petitioner" and never in its plural form "petitioners". Aside from the
fact that the Verification and Certification of Non-Forum Shopping
attached to the petition was executed by Pigcaulan alone, it was plainly
and particularly indicated under the name of the lawyer who prepared
the same, Atty. Josefel P. Grageda, that he is the "Counsel for
Petitioner Adbuljuahid Pigcaulan" only. In view of these, there is
therefore, no doubt, that the petition was brought only on behalf of
Pigcaulan. Since no appeal from the CA Decision was brought by
Canoy, same has already become final and executory as to him.
Canoy cannot now simply incorporate in his affidavit a verification of
the contents and allegations of the petition as he is not one of the
petitioners therein. Suffice it to state that it would have been different
had the said petition been filed in behalf of both Canoy and Pigcaulan.
In such a case, subsequent submission of a verification may be allowed
as non-compliance therewith or a defect therein does not necessarily
render the pleading, or the petition as in this case, fatally
defective.24 "The court may order its submission or correction, or act on
the pleading if the attending circumstances are such that strict
compliance with the Rule may be dispensed with in order that the ends
of justice may be served thereby. Further, a verification is deemed
substantially complied with when one who has ample knowledge to
swear to the truth of the allegations in the complaint or petition signs
the verification, and when matters alleged in the petition have been
made in good faith or are true and correct."25 However, even if it were
so, we note that Canoy still failed to submit or at least incorporate in his
affidavit a certificate of non-forum shopping.
The filing of a certificate of non-forum shopping is mandatory so much
so that non-compliance could only be tolerated by special
circumstances and compelling reasons.26 This Court has held that
when there are several petitioners, all of them must execute and sign
the certification against forum shopping; otherwise, those who did not
sign will be dropped as parties to the case. 27 True, we held that in some
cases, execution by only one of the petitioners on behalf of the other
petitioners constitutes substantial compliance with the rule on the filing
of a certificate of non-forum shopping on the ground of common interest
or common cause of action or defense.28 We, however, find that
common interest is not present in the instant petition. To recall, Canoy’s
and Pigcaulan’s complaints were consolidated because they both
sought the same reliefs against the same respondents. This does not,
however, mean that they share a common interest or defense. The
evidence required to substantiate their claims may not be the same. A
particular evidence which could sustain Canoy’s action may not
effectively serve as sufficient to support Pigcaulan’s claim.
Besides, assuming that the petition is also filed on his behalf, Canoy
failed to show any reasonable cause for his failure to join Pigcaulan to
personally sign the Certification of Non-Forum Shopping. It is his duty,
as a litigant, to be prudent in pursuing his claims against SCII,
especially so, if he was indeed suffering from financial distress.
However, Canoy failed to advance any justifiable reason why he did not
inform anyone of his whereabouts when he knows that he has a
pending case against his former employer. Sadly, his lack of prudence
and diligence cannot merit the court’s consideration or sympathy. It
must be emphasized at this point that procedural rules should not be
ignored simply because their non-observance may result in prejudice
to a party’s substantial rights. The Rules of Court should be followed
except only for the most persuasive of reasons. 29
Having declared the present petition as solely filed by Pigcaulan, this
Court shall consider the subsequent pleadings, although apparently
filed under his and Canoy’s name, as solely filed by the former.
There was no substantial evidence to support the grant of overtime pay.
The Labor Arbiter ordered reimbursement of overtime pay, holiday pay,
service incentive leave pay and 13th month pay for the year 2000 in
favor of Canoy and Pigcaulan. The Labor Arbiter relied heavily on the
itemized computations they submitted which he considered as
representative daily time records to substantiate the award of salary
differentials. The NLRC then sustained the award on the ground that
there was substantial evidence of underpayment of salaries and
benefits.
We find that both the Labor Arbiter and the NLRC erred in this regard.
The handwritten itemized computations are self-serving, unreliable and
unsubstantial evidence to sustain the grant of salary differentials,
particularly overtime pay. Unsigned and unauthenticated as they are,
there is no way of verifying the truth of the handwritten entries stated
therein. Written only in pieces of paper and solely prepared by Canoy
21
and Pigcaulan, these representative daily time records, as termed by
the Labor Arbiter, can hardly be considered as competent evidence to
be used as basis to prove that the two were underpaid of their salaries.
We find nothing in the records which could substantially support
Pigcaulan’s contention that he had rendered service beyond eight
hours to entitle him to overtime pay and during Sundays to entitle him
to restday pay. Hence, in the absence of any concrete proof that
additional service beyond the normal working hours and days had
indeed been rendered, we cannot affirm the grant of overtime pay to
Pigcaulan.
Pigcaulan is entitled to holiday pay, service incentive leave pay and
proportionate 13th month pay for year 2000.
However, with respect to the award for holiday pay, service incentive
leave
pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to
these benefits.
Article 94 of the Labor Code provides that:
ART. 94. RIGHT TO HOLIDAY PAY. – (a) Every worker shall be paid
his regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than ten (10) workers;
xxxx
While Article 95 of the Labor Code provides:
ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. – (a) Every
employee who has rendered at least one year of service shall be
entitled to a yearly service incentive of five days with pay.
xxxx
Under the Labor Code, Pigcaulan is entitled to his regular rate on
holidays even if he does not work.30 Likewise, express provision of the
law entitles him to service incentive leave benefit for he rendered
service for more than a year already. Furthermore, under Presidential
Decree No. 851,31 he should be paid his 13th month pay. As employer,
SCII has the burden of proving that it has paid these benefits to its
employees.32
SCII presented payroll listings and transmittal letters to the bank to
show that Canoy and Pigcaulan received their salaries as well as
benefits which it claimed are already integrated in the employees’
monthly salaries. However, the documents presented do not prove
SCII’s allegation. SCII failed to show any other concrete proof by
means of records, pertinent files or similar documents reflecting that
the specific claims have been paid. With respect to 13th month pay,
SCII presented proof that this benefit was paid but only for the years
1998 and 1999. To repeat, the burden of proving payment of these
monetary claims rests on SCII, being the employer. It is a rule that one
who pleads payment has the burden of proving it. "Even when the
plaintiff alleges non-payment, still the general rule is that the burden
rests on the defendant to prove payment, rather than on the plaintiff to
prove non-payment."33 Since SCII failed to provide convincing proof
that it has already settled the claims, Pigcaulan should be paid his
holiday pay, service incentive leave benefits and proportionate 13th
month pay for the year 2000.
The CA erred in dismissing the claims instead of remanding the case
to the Labor Arbiter for a detailed computation of the judgment award.
Indeed, the Labor Arbiter failed to provide sufficient basis for the
monetary awards granted.lawphi1 Such failure, however, should not
result in prejudice to the substantial rights of the party.1avvphi1 While
we disallow the grant of overtime pay and restday pay in favor of
Pigcaulan, he is nevertheless entitled, as a matter of right, to his holiday
pay, service incentive leave pay and 13th month pay for year 2000.
Hence, the CA is not correct in dismissing Pigcaulan’s claims in its
entirety.
Consistent with the rule that all money claims arising from an employer-
employee relationship shall be filed within three years from the time the
cause of action accrued,34 Pigcaulan can only demand the amounts
due him for the period within three years preceding the filing of the
complaint in 2000. Furthermore, since the records are insufficient to
use as bases to properly compute Pigcaulan’s claims, the case should
be remanded to the Labor Arbiter for a detailed computation of the
monetary benefits due to him.
WHEREFORE, the petition is GRANTED. The Decision dated
February 24, 2006 and Resolution dated June 28, 2006 of the Court of
Appeals in CA-G.R. SP No. 85515 are REVERSED and SET ASIDE.
Petitioner Abduljuahid R. Pigcaulan is hereby declared entitled to
holiday pay and service incentive leave pay for the years 1997-2000
and proportionate 13th month pay for the year 2000.
The case is REMANDED to the Labor Arbiter for further proceedings to
determine the exact amount and to make a detailed computation of the
monetary benefits due Abduljuahid R. Pigcaulan which Security and
Credit Investigation Inc. should pay without delay.
SO ORDERED.
G.R. No. 182848 October 5, 2011
EMIRATE SECURITY AND MAINTENANCE SYSTEMS, INC. and
ROBERTO A. YAN, Petitioners,

vs.
GLENDA M. MENESE, Respondent.
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari 1 which assails
the decision2 and the resolution3 of the Court of Appeals (CA) rendered
on February 28, 2008 and May 14, 2008, respectively, in CA-G.R. SP.
No. 100073.4
The Antecedents
The facts of the case are summarized below.
On June 5, 2001, respondent Glenda M. Menese (Menese) filed a
complaint for constructive dismissal; illegal reduction of salaries and
allowances; separation pay; refund of contribution to cash bond;
overtime, holiday, rest day and premium pay; damages; and attorney’s
fees against the petitioners, Emirate Security and Maintenance
Systems, Inc. (agency) and its General Manager, Robert A. Yan (Yan).
Menese alleged in the compulsory arbitration proceedings that on April
1, 1999, the agency engaged her services as payroll and billing clerk.
She was assigned to the agency’s security detachment at the Philippine
General Hospital (PGH). She was given a monthly salary of ₱9,200.00
and an allowance of ₱2,500.00, for a total of ₱11,700.00 in
compensation. Effective May 2001, her allowance was allegedly
reduced to ₱1,500.00 without notice, and ₱100.00 was deducted from
her salary every month as her contribution to a cash bond which lasted
throughout her employment. She was required to work seven (7) days
a week, from 8:00 a.m. to 5:00 p.m. She was also required to report for
work on holidays, except on New Year’s Day and Christmas. She
claimed that she was never given overtime, holiday, rest day and
premium pay.
Menese further alleged that on May 4, 2001, she started getting
pressures from the agency for her to resign from her position because
it had been committed to a certain Amy Claro, a protégée of Mrs.
Violeta G. Dapula (Dapula) the new chief of the Security Division of the
University of the Philippines (UP) Manila and PGH. Menese raised the
matter with Yan who told her that the agency was in the process of
establishing goodwill with Dapula, so it had to sacrifice her position to
accommodate Dapula’s request to hire Claro.
Menese claimed that she was told not to worry because if she was still
interested in working with the agency, she could still be retained as a
lady guard with a salary equivalent to the minimum wage. She would
then be detailed to another detachment because Dapula did not like to
see her around anymore. If the offer was acceptable to her, she should
report to the agency’s personnel officer for the issuance of the
necessary duty detail order. Menese thought about the offer and soon
realized that she was actually being demoted in rank and salary. She
eventually decided to decline the offer. She continued reporting to the
PGH detachment and performed her usual functions as if nothing
happened.
Menese alleged that at this juncture, Claro reported at the agency’s
PGH detachment and performed the functions she was doing. She
bewailed that thereafter she continuously received harassment calls
and letters. She was also publicly humiliated and badly treated at the
detachment. The agency, through Security Officer Alton Acab,
prohibited her from using the office computer. On May 18, 2001, Jose
Dante Chan, the agency’s PGH detachment commander, arrogantly
told her to leave PGH. Again on May 25, 2001, Chan shouted at her
and told her to pack her things and to leave immediately, and not to
return to the detachment anymore; otherwise, she would be physically
driven out of the office.
Still not satisfied with what they did, the petitioners allegedly withheld
her salary for May 16-31, 2001. She claimed that the petitioners
dismissed her from the service without just cause and due process.
The petitioners, for their part, denied liability. They alleged that on May
8, 2001, Dapula informed the agency in writing, 5 through Yan, that she
had been receiving numerous complaints from security guards and
other agency employees about Menese’s unprofessional conduct. She
told the petitioners that she was not tolerating Menese’s negative work
attitude despite the fact that she is the wife of Special Police Major
Divino Menese who is a member of the UP Manila police force, and that
as a matter of policy and out of delicadeza, she does not condone
nepotism in her division.
On the basis of Dapula’s letter, Yan sent Menese a memorandum dated
May 16, 2001,6 instructing her to report to the agency’s head office and,
there and then, discussed with her Dapula’s letter. Yan informed
Menese that upon Dapula’s request, she would be transferred to
another assignment which would not involve any demotion in rank or
diminution in her salary and other benefits. Although Menese said that
she would think about the matter, the petitioners were surprised to
receive summons from the labor arbiter regarding the complaint.
The Compulsory Arbitration Rulings
In a decision dated March 14, 2002,7 Labor Arbiter Jovencio LL. Mayor,
Jr. declared Menese to have been constructively dismissed. He found
the petitioners wanting in good faith in transferring Menese to another
detachment as she would be suffering a demotion in rank and a
diminution in pay. Accordingly, he ordered the petitioners to
immediately reinstate Menese and, solidarily, to pay her full backwages
22
of ₱83,443.75 (latest computation); ₱66,924.00 in monetary benefits;
₱50,000.00 and ₱20,000.00 in moral and exemplary damages,
respectively; and attorney’s fees of ₱15,036.74.
The petitioners appealed to the National Labor Relations Commission
(NLRC). On September 30, 2003, the NLRC Second Division issued a
resolution8 granting the appeal and reversing the labor arbiter’s
decision. It ruled that Menese was not constructively dismissed but was
merely transferred to another detachment. It opined that the transfer
was a valid exercise of the petitioners’ management prerogative.
However, it ruled that despite Menese’s refusal to accept the transfer,
she cannot be made liable for abandonment as her refusal was based
on her honest belief that she was being constructively dismissed. The
NLRC ordered Menese, at her option, to immediately report to the
agency’s head office and the agency to accept her back to work. It
absolved Yan from liability, and deleted the award of backwages,
overtime pay and damages.
On October 28, 2003, Menese filed a partial motion for
reconsideration9 of the NLRC resolution and later (on June 17, 2005),
a motion to recall the entry of judgment of October 31, 2003. On June
1, 2007, the NLRC rendered a resolution10 setting aside the entry of
judgment and denying Menese’s partial motion for reconsideration.
The Petition for Certiorari
Menese elevated her case to the CA through a petition for
certiorari11 under Rule 65 of the Rules of Court. In the main, she argued
that the agency was in bad faith when it issued the memoranda dated
May 16, 2001,12 May 22, 200113 and May 28, 2001,14 ordering her
transfer from the PGH detachment to the agency’s head office. She
posited that it was a ploy to create a vacancy in the detachment to
accommodate the entry of Claro, Dapula’s protégée. She regarded the
transfer as a removal from her position at PGH — a constructive
dismissal.
The agency, in rebuttal, posited that Menese was not illegally dismissed,
but was merely transferred to its head office in response to the request
of the new head of the UP-PGH security division for the transfer. The
action, it maintained, was a valid exercise of its management
prerogative. Thus, Menese was guilty of abandoning her employment
when she refused to report for work at her new posting.
The CA Decision
The CA granted the petition in its decision of February 28, 2008. 15 It set
aside the assailed resolutions of the NLRC and reinstated the March
14, 2002 decision of the labor arbiter.
As the labor arbiter did, the CA found Menese to have been
constructively, and therefore illegally, dismissed. It noted that the
memoranda16 on Menese’s transfer were prompted by Dacula’s letter,
dated May 8, 2001,17 to Yan, which contained allegations on Menese’s
supposed unprofessional conduct and involvement in nepotism. It
further noted that when Yan asked Dapula in writing 18 to provide the
agency with documents/evidence that would support her allegations,
she failed to do so. The CA thus concluded that the reasons for
Menese’s transfer did not exist or that no substantial evidence was
presented in that regard.
The CA brushed aside the petitioners’ argument that it was their
prerogative to transfer Menese from the agency’s PGH detachment to
its head office at Ortigas Avenue, Mandaluyong City. Relying on
applicable jurisprudence, the appellate court pointed out that while it is
the management’s prerogative to transfer an employee from one office
to another within the business establishment, it is not without limitation.
It must be exercised in such a way that there is no demotion in rank or
diminution in pay, benefits and other privileges. Otherwise, the transfer
amounts to a constructive dismissal, as correctly pointed out by the
labor arbiter in his decision of March 14, 2002. 19 In this light, the CA
held that the petitioners failed to prove that Menese abandoned her
employment.
The CA sustained all the other findings of the labor arbiter. On the
whole, it ruled that the NLRC misappreciated the evidence in the case.
The petitioners moved for reconsideration, but the CA denied the
motion in its resolution of May 14, 2008. 20
The Petitioners’ Case
Aside from the petition itself,21 the petitioners filed a reply to Menese’s
comment22 and a memorandum23 where they asked for a reversal of
the assailed CA rulings on the ground that the CA gravely erred in:
(1) Affirming the labor arbiter’s findings that Menese was
constructively dismissed;
(2) Holding Yan solidarily liable with the agency for damages;
and
(3) Sustaining the award of backwages, damages and
attorney’s fees, as well as overtime pay.
The petitioners insist that Menese was not illegally dismissed. They
argue that it was Menese who deliberately and unjustifiably refused to
work despite several notices24 to her after she was validly relieved from
her current work assignment due to a client’s request. They maintain
that since Menese chose not to return to work, she must be considered
either to have resigned from or to have abandoned her employment.
They further maintain that nothing on record shows any positive or overt
act of the agency in dismissing Menese.

Moreover, the petitioners regard Menese’s continued refusal to report
to the agency’s head office as an act of gross insubordination
constituting a just cause for termination under Article 282(a) of the
Labor Code. They argue that under this law, an employer may
terminate an employment for serious misconduct or willful disobedience
by the employee of the lawful orders of his employer or his
representative in connection with his work.
The petitioners posit that she is not entitled to reinstatement and
backwages since she failed to comply with the reinstatement option
stated in the NLRC resolution. Neither is she entitled to overtime pay
because she did not work beyond the eight (8)-hour working period; her
one (1) hour time off from twelve noon to 1:00 p.m. is not compensable.
Neither is Menese entitled to moral and exemplary damages because
the evidence on record does not show any malice or bad faith on their
part to justify the award.
The petitioners likewise take exception to the award of attorney’s fees
as the labor arbiter’s decision and the NLRC’s resolution failed to state
the justification for the award. They further contend that the CA gravely
erred in upholding the labor arbiter’s ruling that Yan is solidarily liable
with the agency, as Yan was merely acting in his capacity as the
agency’s general manager, and that there is no showing that Yan acted
maliciously or in bad faith when he ordered Menese’s transfer. They
also point out that Menese did not challenge before the CA the NLRC
ruling absolving Yan from any liability.
The Case for Menese
By way of her comment25 and memorandum,26 Menese asks that the
appeal be denied for lack of merit.
She claims that at the arbitration stage, the petitioners readily admitted
the fact of her removal, manifesting in open session their lack of interest
to settle the case amicably as they have a strong evidence to support
their defense of her dismissal for cause. She observed during the
hearing that the petitioners were very confident about their case,
because according to them, they had Dapula’s letter asking for her
immediate removal.27
Menese further claims that the petitioners realized that they did not
have the necessary evidence, so Yan wrote Dapula a letter asking her
for proof of the complaints or grievances of the security guards against
Menese.28 Dapula did not produce or present the evidence they asked
for resulting in their failure to substantiate their defense of dismissal for
cause. Menese contends that the petitioners then revised their theory
of the case and made it appear that she was not actually dismissed but
was merely transferred, purportedly in the exercise of their
management prerogative.
She posits that her transfer was motivated by ill will and bad faith, as it
was done to facilitate the entry of a favored applicant to the PGH
detachment. She intimates that the labor arbiter resolved the case
correctly when he found her to have been constructively or illegally
dismissed. She bewails the NLRC’s surprising reversal of the labor
arbiter’s decision, but feels vindicated when the CA set aside the NLRC
ruling.
Menese submits that the CA is correct in nullifying the NLRC’s reversal
of her illegal dismissal case because the labor tribunal closed its eyes
to the fact that bad faith attended her transfer. She points out that the
petitioners’ twin directives, vis-à-vis her transfer upon which the NLRC
based its ruling, "were both issued for a selfish and immoral
purpose;"29 the first, dated May 16, 2001,30 was issued for the purpose
of creating a vacancy, and the second, dated May 22, 2001, 31 was
intended to cover up the wrongdoing that was earlier committed. In
other words, the directives were tainted with malice and ill will. On the
matter of Yan’s liability, Menese maintains that the NLRC committed a
serious error in allowing him to get away with his wrongdoing
considering the injustice done to her as a result of her unceremonious
dismissal.
In a different vein, Menese assails the NLRC’s exclusion of the one-
hour meal break as overtime work, for it erroneously assumed that her
employer had been giving its employees a 60 minute time-off for regular
meals and that she was not performing work during the period. She
argues that this was not the actual practice in the workplace,
contending that she continued working even during the one-hour meal
break.
Finally, Menese maintains that the CA correctly reinstated the labor
arbiter’s award of attorney’s fees and the imposition of solidary liability
on Yan and the agency. She posits that in her quest for justice because
of her unceremonious dismissal, she was constrained to engage the
services of a counsel to handle her case.
The Court’s Ruling
We deny the petition for lack of merit. The evidence of Menese’s
unwarranted, unjustified and, in her own language, "unceremonious"
dismissal is so glaring that to ignore it is to commit, as the NLRC did,
grave abuse of discretion.
We note as a starting point that at the time material to the case, Menese
ceased to be the agency’s payroll and billing clerk at its PGH
detachment. The position was taken away from her as she had been
transferred to the agency’s main office on Ortigas Avenue,
Mandaluyong City, upon the request of Dapula, the new chief of the
UP-PGH Security Division. The transfer was to be carried out through
23
a memorandum dated May 16, 200132 issued by Yan; a second
memorandum dated May 22, 200133 issued by Personnel Officer Edwin
J. Yabes, reminding Menese of Yan’s instruction for her to report to the
main office; and a third memorandum dated May 28, 2001, 34 also
issued by Yabes informing Menese that it was her second notice to
assume her work detail at the main office. Yabes instructed her to report
for work on May 30, 2001.
Citing Mendoza v. Rural Bank of Lucban,35 the petitioners argue that
the transfer was undertaken in the exercise of management prerogative
in the pursuit of their legitimate interests. They submit that Menese
refused to comply with the valid transfer orders they issued, making her
liable for abandonment and insubordination. They argue that nothing
on record shows that she was illegally dismissed as no dismissal had
been imposed on her.
On a superficial consideration, the petitioners’ position looks
unassailable as indeed an employer can regulate, generally without
restraint and according to its own discretion and judgment, every
aspect of its business, including work assignments and transfer of
employees, subject only to limitations imposed by law. 36 This
submission, however, glossed over or suppressed a crucial factor in
the present labor controversy. We refer to Dapula’s letter to Yan in early
May 2001,37 asking for Menese’s transfer allegedly due to numerous
complaints from security guards and co-workers regarding her
unprofessionalism and because of nepotism; Menese is the wife of a
member of the UP Manila police force.
Had Yan inquired into Dapula’s claim of Menese’s alleged
unprofessionalism, ideally through an administrative investigation, he
could have been provided with a genuine reason — assuming proof of
Dapula’s accusation existed — for Menese’s transfer or even for her
dismissal, if warranted. That the agency did not get into the bottom of
Dapula’s letter before it implemented Menese’s transfer is indicative of
the sheer absence of an objective justification for the transfer. The most
that the agency did was to write Dapula a letter, through Yan, asking
her to provide documents/evidence in support of her request for
Menese’s transfer.38 Significantly, Yan’s request came after the labor
arbiter’s summons to Yan regarding Menese’s complaint. Dapula never
responded to Yan’s letter and neither did she provide the evidence
needed for the agency’s defense in the complaint.
As Menese noted, the petitioners did not submit as annex to the petition
Yan’s letter to Dapula, and the reason appears to be obvious — they
were trying to avoid calling attention to the absence of proof of
Menese’s alleged unprofessionalism and her involvement in nepotism.
Evidently, the basis for Dapula’s request did not exist. We thus find
credible Menese’s contention that her transfer was a ploy to remove
her from the PGH detachment to accommodate the entry of Dapula’s
protégée. In short, the agency wanted to create a vacancy for Claro,
the protégée. Confronted with this clear intent of the petitioners, we
cannot see how Menese’s transfer could be considered a valid exercise
of management prerogative. As Menese rightly put it, her transfer was
arbitrarily done, motivated no less by ill will and bad faith.
In Blue Dairy Corporation v. NLRC,39 the Court stressed as a matter of
principle that the managerial prerogative to transfer personnel must be
exercised without 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
should not be used as a subterfuge by the employer to get rid of "an
undesirable worker." Measured against this basic precept, the
petitioners undoubtedly abused their discretion or authority in
transferring Menese to the agency’s head office. She had become
"undesirable" because she stood in the way of Claro’s entry into the
PGH detachment. Menese had to go, thus the need for a pretext to get
rid of her. The request of a client for the transfer became the overriding
command that prevailed over the lack of basis for the transfer.
We cannot blame Menese for refusing Yan’s offer to be
transferred.1avvphi1 Not only was the transfer arbitrary and done in
bad faith, it would also result, as Menese feared, in a demotion in rank
and a diminution in pay. Although Yan informed Menese that "based on
the request of the client, she will be transferred to another assignment
which however will not involve any demotion in rank nor diminution in
her salaries and other benefits,"40 the offer was such as to invite
reluctance and suspicion as it was couched in a very general manner.
We find credible Menese’s submission on this point, i.e., that under the
offered transfer: (1) she would hold the position of lady guard and (2)
she would be paid in accordance with the statutory minimum wage, or
from ₱11,720.00 to ₱7,500.00.
In these lights, Menese’s transfer constituted a constructive dismissal
as it had no justifiable basis and entailed a demotion in rank and a
diminution in pay for her. For a transfer not to be considered a
constructive dismissal, the employer must be able to show that the
transfer is for a valid reason, entails no diminution in the terms and
conditions of employment, and must be unreasonably inconvenient or
prejudicial to the employee. If the employer fails to meet these
standards, the employee’s transfer shall amount, at the very least, to
constructive dismissal.41 The petitioners, unfortunately for them, failed
to come up to these standards.

In declaring Menese’s transfer to be in the valid exercise of the
petitioners’ management prerogative, the NLRC grossly
misappreciated the evidence and, therefore, gravely abused its
discretion in closing its eyes to the patent injustice committed on
Menese. It completely disregarded the obvious presence of bad faith in
Menese’s transfer. Labor justice demands that Menese be awarded
moral and exemplary damages42 and, for having been constrained to
litigate in order to protect her rights, attorney’s fees.43
Yan’s solidary liability
Yan had been aware all the time of the utter lack of a valid reason for
Menese’s transfer. He had been aware all the time that Dapula’s
charges against Menese — the ostensible reason for the transfer —
were nonexistent as Dapula failed to substantiate the charges. He was
very much a part of the flagrant and duplicitous move to get rid of
Menese to give way to Claro, Dapula’s protégée.
Based on the facts, Yan is as guilty as the agency in causing the
transfer that was undertaken in bad faith and in a wanton and
oppressive manner. Thus, he should be solidarily liable with the agency
for Menese’s monetary awards.
The overtime pay award
While the labor arbiter declared that Menese’s claim for overtime pay
is unrebutted44 and, indeed, nowhere in the petitioners’ position paper
did they controvert Menese’s claim, we hold that the claim must still be
substantiated. In Global Incorporated v. Commissioner Atienza, 45 a
claim for overtime pay will not be granted for want of factual and legal
basis. In this respect, the records indicate that the labor arbiter granted
Menese’s claim for holiday pay, rest day and premium pay on the basis
of payrolls.46 There is no such proof in support of Menese’s claim for
overtime pay other than her contention that she worked from 8:00 a.m.
up to 5:00 p.m. She presented no evidence to show that she was
working during the entire one hour meal break. We thus find the NLRC’s
deletion of the overtime pay award in order.
Also, the NLRC noted that the award of ₱2,600.00 for the refund of the
cash bond deposit is overstated and should be adjusted to ₱600.00
only, as indicated by the payrolls. We likewise find the adjustment in
order.
All told, except for the above clarifications on the overtime pay award
and the refund of the cash bond deposit, we reiterate and so declare
the petition to be devoid of merit.
WHEREFORE, premises considered, except for the overtime pay
award and the refund of deposit for the cash bond, the petition is
DENIED for lack of merit. The assailed decision and resolution of the
Court of Appeals are AFFIRMED, with the following modifications:
1) The deletion of the overtime pay award; and
2) Adjustment of the refund of the cash or surety bond deposit
award from ₱2,500.00 to ₱600.00.
Costs against the petitioners.
SO ORDERED.
G.R. No. 189404 December 11, 2013
WILGEN LOON, JERRY ARCILLA, ALBERTPEREYE, ARNOLD
PEREYE, EDGARDO OBOSE, ARNEL MALARAS, PATROCINO
TOETIN, EVELYN LEONARDO, ELMER GLOCENDA, RUFO
CUNAMAY, ROLANDOSAJOL, ROLANDO ABUCAYON, JENNIFER
NATIVIDAD, MARITESS TORION, ARMANDO LONZAGA, RIZAL
GELLIDO, EVIRDE HAQUE,1 MYRNA VINAS, RODELITO AYALA,
WINELITO OJEL, RENATO RODREGO, NENA ABINA, EMALYN
OLIVEROS, LOUIE ILAGAN, JOEL ENTIG, ARNEL ARANETA,
BENJAMIN COSE, WELITO LOON and WILLIAM
ALIPAO, Petitioners,
vs.
POWER MASTER, INC., TRI-C GENERAL SERVICES, and
SPOUSES HOMER and CARINA ALUMISIN, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,2 filed by petitioners
Wilgen Loon, Jerry Arcilla, Albert Pereye, Arnold Pereye, Edgardo
Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo, Elmer
Glocenda, Rufo Cunamay, Rolando Sajol, Rolando Abucayon, Jennifer
Natividad, Maritess Torion, Armando Lonzaga, Rizal Gellido, Evirde
Haque, Myrna Vinas, Rodelito Ayala, Winelito Ojel, Renato Rodrego,
Nena Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Arnel Araneta,
Benjamin Cose, Welito Loon, William Alipao (collectively,
the petitioners), to challenge the June 5, 2009 decision3 and the August
28, 2009 resolution4 of the Court of Appeals (CA) in CA-G.R. SP No.
95182.
The Factual Antecedents
Respondents Power Master, Inc. and Tri-C General Services employed
and assigned the petitioners as janitors and leadsmen in various
Philippine Long Distance Telephone Company (PLDT) offices in Metro
Manila area. Subsequently, the petitioners filed a complaint for money
claims against Power Master, Inc., Tri-C General Services and their
officers, the spouses Homer and Carina Alumisin
24
(collectively, the respondents). The petitioners alleged in their
complaint that they were not paid minimum wages, overtime, holiday,
premium, service incentive leave, and thirteenth month pays. They
further averred that the respondents made them sign blank payroll
sheets. On June 11, 2001, the petitioners amended their complaint and
included illegal dismissal as their cause of action. They claimed that the
respondents relieved them from service in retaliation for the filing of
their original complaint.
Notably, the respondents did not participate in the proceedings before
the Labor Arbiter except on April 19, 2001 and May 21, 2001 when
Mr. Romulo Pacia, Jr. appeared on the respondents’ behalf. 5 The
respondents’ counsel also appeared in a preliminary mandatory
conference on July 5, 2001.6 However, the respondents neither filed
any position paper nor proffered pieces of evidence in their defense
despite their knowledge of the pendency of the case.
The Labor Arbiter’s Ruling
In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H.
Salinas partially ruled in favor of the petitioners. The LA awarded the
petitioners salary differential, service incentive leave, and
thirteenth month pays. In awarding these claims, the LA stated that
the burden of proving the payment of these money claims rests with the
employer. The LA also awarded attorney’s fees in favor of the
petitioners, pursuant to Article 111 of the Labor Code. 8
However, the LA denied the petitioners’ claims for backwages,
overtime, holiday, and premium pays. The LA observed that the
petitioners failed to show that they rendered overtime work and worked
on holidays and rest days without compensation. The LA further
concluded that the petitioners cannot be declared to have been
dismissed from employment because they did not show any notice of
termination of employment. They were also not barred from entering
the respondents’ premises.
The Proceedings before the NLRC
Both parties appealed the LA’s ruling with the National Labor Relations
Commission. The petitioners disputed the LA’s denial of their claim for
backwages, overtime, holiday and premium pays. Meanwhile, the
respondents questioned the LA’s ruling on the ground that the LA did
not acquire jurisdiction over their persons.
The respondents insisted that they were not personally served with
summons and other processes. They also claimed that they paid the
petitioners minimum wages, service incentive leave and thirteenth
month pays. As proofs, they attached photocopied and
computerized copies of payroll sheets to their memorandum on
appeal.9 They further maintained that the petitioners were validly
dismissed. They argued that the petitioners’ repeated defiance to their
transfer to different workplaces and their violations of the company
rules and regulations constituted serious misconduct and willful
disobedience.10
On January 3, 2003, the respondents filed an unverified supplemental
appeal. They attached photocopied and computerized copies of
list of employees with automated teller machine (ATM) cards to
the supplemental appeal. This list also showed the amounts allegedly
deposited in the employees’ ATM cards. 11 They also attached
documentary evidence showing that the petitioners were
dismissed for cause and had been accorded due process.
On January 22, 2003, the petitioners filed an Urgent Manifestation
and Motion12 where they asked for the deletion of the supplemental
appeal from the records because it allegedly suffered from
infirmities. First, the supplemental appeal was not verified. Second, it
was belatedly filed six months from the filing of the respondents’ notice
of appeal with memorandum on appeal. The petitioners pointed out that
they only agreed to the respondents’ filing of a responsive pleading until
December 18, 2002.13 Third¸ the attached documentary evidence on
the supplemental appeal bore the petitioners’ forged signatures.
They reiterated these allegations in an Urgent Motion to Resolve
Manifestation and Motion (To Expunge from the Records
Respondents’ Supplemental Appeal, Reply and/or
Rejoinder) dated January 31, 2003.14 Subsequently, the petitioners
filed an Urgent Manifestation with Reiterating Motion to Strike-Off
the Record Supplemental Appeal/Reply, Quitclaims and Spurious
Documents Attached to Respondents’ Appeal dated August 7,
2003.15 The petitioners argued in this last motion that the payrolls
should not be given probative value because they were the
respondents’ fabrications. They reiterated that the genuine payrolls
bore their signatures, unlike the respondents’ photocopies of the
payrolls. They also maintained that their signatures in the respondents’
documents (which showed their receipt of thirteenth month pay) had
been forged.
The NLRC Ruling
In a resolution dated November 27, 2003, the NLRC partially ruled in
favor of the respondents.16 The NLRC affirmed the LA’s awards
of holiday pay and attorney’s fees. It also maintained that the LA
acquired jurisdiction over the persons of the respondents through their
voluntary appearance.
However, it allowed the respondents to submit pieces of evidence
for the first time on appeal on the ground that they had been
deprived of due process. It found that the respondents did not

actually receive the LA’s processes. It also admitted the respondents’
unverified supplemental appeal on the ground that technicalities may
be disregarded to serve the greater interest of substantial due process.
Furthermore, the Rules of Court do not require the verification of a
supplemental pleading.
The NLRC also vacated the LA’s awards of salary differential,
thirteenth month and service incentive leave pays. In so ruling, it
gave weight to the pieces of evidence attached to the memorandum on
appeal and the supplemental appeal. It maintained that the absence of
the petitioners’ signatures in the payrolls was not an indispensable
factor for their authenticity. It pointed out that the payment of money
claims was further evidenced by the list of employees with ATM cards.
It also found that the petitioners’ signatures were not forged. It took
judicial notice that many people use at least two or more different
signatures.
The NLRC further ruled that the petitioners were lawfully dismissed
on grounds of serious misconduct and willful disobedience. It
found that the petitioners failed to comply with various memoranda
directing them to transfer to other workplaces and to attend training
seminars for the intended reorganization and reshuffling.
The NLRC denied the petitioners’ motion for reconsideration in a
resolution dated April 28, 2006.17 Aggrieved, the petitioners filed a
petition for certiorari under Rule 65 of the Rules of Court before the
CA.18
The CA Ruling
The CA affirmed the NLRC’s ruling. The CA held that the petitioners
were afforded substantive and procedural due process. Accordingly,
the petitioners deliberately did not explain their side. Instead, they
continuously resisted their transfer to other PLDT offices and violated
company rules and regulations. It also upheld the NLRC’s findings on
the petitioners’ monetary claims.
The CA denied the petitioners’ motion for reconsideration in a
resolution dated August 28, 2009, prompting the petitioners to file the
present petition.19
The Petition
In the petition before this Court, the petitioners argue that the CA
committed a reversible error when it did not find that the NLRC
committed grave abuse of discretion. They reiterate their arguments
before the lower tribunals and the CA in support of this conclusion. They
also point out that the respondents posted a bond from a surety that
was not accredited by this Court and by the NLRC. In effect, the
respondents failed to perfect their appeal before the NLRC. They
further insist that the NLRC should not have admitted the respondents’
unverified supplemental appeal.20
The Respondents’ Position
In their Comments, the respondents stress that the petitioners only
raised the issue of the validity of the appeal bond for the first time on
appeal. They also reiterate their arguments before the NLRC and the
CA. They additionally submit that the petitioners’ arguments have been
fully passed upon and found unmeritorious by the NLRC and the CA. 21
The Issues
This case presents to us the following issues:
1) Whether the CA erred when it did not find that the NLRC
committed grave abuse of discretion in giving due course to
the respondents’ appeal;
a) Whether the respondents perfected their appeal
before the NLRC; and
b) Whether the NLRC properly allowed the
respondents’ supplemental appeal
2) Whether the respondents were estopped from submitting
pieces of evidence for the first time on appeal;
3) Whether the petitioners were illegally dismissed and are
thus entitled to backwages;
4) Whether the petitioners are entitled to salary differential,
overtime, holiday, premium, service incentive leave, and
thirteenth month pays; and
5) Whether the petitioners are entitled to attorney’s fees.
The Court’s Ruling
The respondents perfected their
appeal with the NLRC because the
revocation of the bonding company's
authority has a prospective
application
Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of
a judgment involving a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or surety bond issued
by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the
judgment appealed from."
Contrary to the respondents’ claim, the issue of the appeal bond’s
validity may be raised for the first time on appeal since its proper filing
is a jurisdictional requirement.22 The requirement that the appeal bond
should be issued by an accredited bonding company is mandatory and
jurisdictional. The rationale of requiring an appeal bond is to discourage
the employers from using an appeal to delay or evade the employees'
25
just and lawful claims. It is intended to assure the workers that they will
receive the money judgment in their favor upon the dismissal of the
employer’s appeal.23
In the present case, the respondents filed a surety bond issued by
Security Pacific Assurance Corporation (Security Pacific) on June 28,
2002. At that time, Security Pacific was still an accredited bonding
company. However, the NLRC revoked its accreditation on February
16, 2003.24 Nonetheless, this subsequent revocation should not
prejudice the respondents who relied on its then subsisting
accreditation in good faith. In Del Rosario v. Philippine Journalists,
Inc.,25 we ruled that a bonding company’s revocation of authority is
prospective in application.
However, the respondents should post a new bond issued by an
accredited bonding company in compliance with paragraph 4, Section
6, Rule 6 of the NLRC Rules of Procedure. This provision states that
"[a] cash or surety bond shall be valid and effective from the date of
deposit or posting, until the case is finally decided, resolved or
terminated or the award satisfied."
The CA correctly ruled that the
NLRC properly gave due course to
the respondents’ supplemental
appeal
The CA also correctly ruled that the NLRC properly gave due course to
the respondents’ supplemental appeal. Neither the laws nor the rules
require the verification of the supplemental appeal. 26 Furthermore,
verification is a formal, not a jurisdictional, requirement. It is mainly
intended for the assurance that the matters alleged in the pleading are
true and correct and not of mere speculation. 27 Also, a supplemental
appeal is merely an addendum to the verified memorandum on appeal
that was earlier filed in the present case; hence, the requirement for
verification has substantially been complied with.
The respondents also timely filed their supplemental appeal on January
3, 2003. The records of the case show that the petitioners themselves
agreed that the pleading shall be filed until December 18, 2002. The
NLRC further extended the filing of the supplemental pleading until
January 3, 2003 upon the respondents’ motion for extension.
A party may only adduce evidence
for the first time on appeal if he
adequately explains his delay in the
submission of evidence and he
sufficiently proves the allegations
sought to be proven
In labor cases, strict adherence to the technical rules of procedure is
not required. Time and again, we have allowed evidence to be
submitted for the first time on appeal with the NLRC in the interest of
substantial justice.28 Thus, we have consistently supported the rule that
labor officials should use all reasonable means to ascertain the facts in
each case speedily and objectively, without regard to technicalities of
law or procedure, in the interest of due process. 29
However, this liberal policy should still be subject to rules of reason and
fairplay. The liberality of procedural rules is qualified by two
requirements: (1) a party should adequately explain any delay in
the submission of evidence; and (2) a party should sufficiently
prove the allegations sought to be proven.30 The reason for these
requirements is that the liberal application of the rules before quasi-
judicial agencies cannot be used to perpetuate injustice and hamper
the just resolution of the case. Neither is the rule on liberal construction
a license to disregard the rules of procedure. 31
Guided by these principles, the CA grossly erred in ruling that the NLRC
did not commit grave abuse of discretion in arbitrarily admitting and
giving weight to the respondents’ pieces of evidence for the first time
on appeal.
A. The respondents failed to
adequately explain their delay
in the submission of evidence
We cannot accept the respondents’ cavalier attitude in blatantly
disregarding the NLRC Rules of Procedure. The CA gravely erred when
it overlooked that the NLRC blindly admitted and arbitrarily gave
probative value to the respondents’ evidence despite their failure to
adequately explain their delay in the submission of evidence. Notably,
the respondents’ delay was anchored on their assertion that they were
oblivious of the proceedings before the LA. However, the respondents
did not dispute the LA’s finding that Mr. Romulo Pacia, Jr. appeared on
their behalf on April 19, 2001 and May 21, 2001. 32 The respondents
also failed to contest the petitioners’ assertion that the respondents’
counsel appeared in a preliminary mandatory conference on July 5,
2001.33
Indeed, the NLRC capriciously and whimsically admitted and gave
weight to the respondents’ evidence despite its finding that they
voluntarily appeared in the compulsory arbitration proceedings. The
NLRC blatantly disregarded the fact that the respondents voluntarily
opted not to participate, to adduce evidence in their defense and to file
a position paper despite their knowledge of the pendency of the
proceedings before the LA. The respondents were also grossly
negligent in not informing the LA of the specific building unit where the
 26

respondents were conducting their business and their counsel’s This case is REMANDED to the Labor Arbiter for the sole purpose of
address despite their knowledge of their non-receipt of the processes.34 computing petitioners' (Wilgen Loon, Jerry Arcilla, Albert Pereye,
B. The respondents failed to Arnold Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin,
sufficiently prove the Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol,
allegations sought to be Rolando Abucayon, Jennifer Natividad, Maritess Torion, Ammndo
proven Lonzaga, Rizal Gellido, Evirdly Haque, Myrna Vinas, Nena Abina,
Furthermore, the respondents failed to sufficiently prove the allegations Emalyn Oliveros, Louie Ilagan, Joel Entig, Amel Araneta, Benjamin
sought to be proven. Why the respondents’ photocopied and Cose and William Alipao) full backwages (computed from the date of
computerized copies of documentary evidence were not presented at their respective dismissals up to the finality of this decision) and their
the earliest opportunity is a serious question that lends credence to the salary differential, service incentive leave, holiday, thirteenth month
petitioners’ claim that the respondents fabricated the evidence for pays, and attorney's fees equivalent to ten percent (10%) of the
purposes of appeal. While we generally admit in evidence and give withheld wages. The respondents are further directed to immediately
probative value to photocopied documents in administrative post a satisfactory bond conditioned on the satisfaction of the awards
proceedings, allegations of forgery and fabrication should prompt affirmed in this Decision.
the adverse party to present the original documents for SO ORDERED.
inspection.35 It was incumbent upon the respondents to present the
originals, especially in this case where the petitioners had submitted
their specimen signatures. Instead, the respondents effectively
deprived the petitioners of the opportunity to examine and controvert
the alleged spurious evidence by not adducing the originals. This Court
is thus left with no option but to rule that the respondents’ failure to
present the originals raises the presumption that evidence willfully
suppressed would be adverse if produced. 36
It was also gross error for the CA to affirm the NLRC’s proposition that
"[i]t is of common knowledge that there are many people who use at
least two or more different signatures."37 The NLRC cannot take judicial
notice that many people use at least two signatures, especially in this
case where the petitioners themselves disown the signatures in the
respondents’ assailed documentary evidence. 38 The NLRC’s position
is unwarranted and is patently unsupported by the law and
jurisprudence.
Viewed in these lights, the scales of justice must tilt in favor of the
employees. This conclusion is consistent with the rule that the
employer’s cause can only succeed on the strength of its own evidence
and not on the weakness of the employee’s evidence. 39
The petitioners are entitled to
backwages
Based on the above considerations, we reverse the NLRC and the CA’s
finding that the petitioners were terminated for just cause and were
afforded procedural due process. In termination cases, the burden of
proving just and valid cause for dismissing an employee from his
employment rests upon the employer. The employer’s failure to
discharge this burden results in the finding that the dismissal is
unjustified.40 This is exactly what happened in the present case.
The petitioners are entitled to salary
differential, service incentive,
holiday, and thirteenth month pays
We also reverse the NLRC and the CA’s finding that the petitioners are
not entitled to salary differential, service incentive, holiday, and
thirteenth month pays. As in illegal dismissal cases, the general rule is
that the burden rests on the defendant to prove payment rather than on
the plaintiff to prove non-payment of these money claims.41 The
rationale for this rule is that the pertinent personnel files, payrolls,
records, remittances and other similar documents – which will show
that differentials, service incentive leave and other claims of workers
have been paid – are not in the possession of the worker but are in the
custody and control of the employer.42
The petitioners are not entitled to
overtime and premium pays
However, the CA was correct in its finding that the petitioners failed to
provide sufficient factual basis for the award of overtime, and premium
pays for holidays and rest days. The burden of proving entitlement to
overtime pay and premium pay for holidays and rest days rests on the
employee because these are not incurred in the normal course of
business.43 In the present case, the petitioners failed to adduce any
evidence that would show that they actually rendered service in excess
of the regular eight working hours a day, and that they in fact worked
on holidays and rest days.
The petitioners are entitled to
attorney’s fees
The award of attorney’s fees is also warranted under the circumstances
of this case.1âwphi1 An employee is entitled to an award of attorney’s
fees equivalent to ten percent (10%) of the amount of the wages in
actions for unlawful withholding of wages. 44
As a final note, we observe that Rodelito Ayala, Winelito Ojel, Renato
Rodrego and Welito Loon are also named as petitioners in this case.
However, we deny their petition for the reason that they were not part
of the proceedings before the CA. Their failure to timely seek redress
before the CA precludes this Court from awarding them monetary
claims.
All told, we find that the NLRC committed grave abuse of discretion in
admitting and giving probative value to the respondents' evidence on
appeal, which errors the CA replicated when it upheld the NLRC rulings.
WHEREFORE, based on these premises, we REVERSE and SET
ASIDE the decision dated June 5, 2009, and the resolution dated
August 28, 2009 of the Court of Appeals in CA-G.R. SP No. 95182.

B. WAGES
G.R. No. L-44169 December 3, 1985
ROSARIO A. GAA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EUROPHIL INDUSTRIES
CORPORATION, and CESAR R. ROXAS, Deputy Sheriff of
Manila, respondents.
PATAJO, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals promulgated on March 30, 1976, affirming the decision of the
Court of First Instance of Manila.
It appears that respondent Europhil Industries Corporation was
formerly one of the tenants in Trinity Building at T.M. Kalaw Street,
Manila, while petitioner Rosario A. Gaa was then the building
administrator. On December 12, 1973, Europhil Industries commenced
an action (Civil Case No. 92744) in the Court of First Instance of Manila
for damages against petitioner "for having perpetrated certain acts that
Europhil Industries considered a trespass upon its rights, namely,
cutting of its electricity, and removing its name from the building
directory and gate passes of its officials and employees" (p. 87 Rollo).
On June 28, 1974, said court rendered judgment in favor of respondent
Europhil Industries, ordering petitioner to pay the former the sum of
P10,000.00 as actual damages, P5,000.00 as moral damages,
P5,000.00 as exemplary damages and to pay the costs.
The said decision having become final and executory, a writ of
garnishment was issued pursuant to which Deputy Sheriff Cesar A.
Roxas on August 1, 1975 served a Notice of Garnishment upon El
Grande Hotel, where petitioner was then employed, garnishing her
"salary, commission and/or remuneration." Petitioner then filed with the
Court of First Instance of Manila a motion to lift said garnishment on the
ground that her "salaries, commission and, or remuneration are
exempted from execution under Article 1708 of the New Civil Code.
Said motion was denied by the lower Court in an order dated November
7, 1975. A motion for reconsideration of said order was likewise denied,
and on January 26, 1976 petitioner filed with the Court of Appeals a
petition for certiorari against filed with the Court of Appeals a petition
for certiorari against said order of November 7, 1975.
On March 30, 1976, the Court of Appeals dismissed the petition
for certiorari. In dismissing the petition, the Court of Appeals held that
petitioner is not a mere laborer as contemplated under Article 1708 as
the term laborer does not apply to one who holds a managerial or
supervisory position like that of petitioner, but only to those "laborers
occupying the lower strata." It also held that the term "wages" means
the pay given" as hire or reward to artisans, mechanics, domestics or
menial servants, and laborers employed in manufactories, agriculture,
mines, and other manual occupation and usually employed to
distinguish the sums paid to persons hired to perform manual labor,
skilled or unskilled, paid at stated times, and measured by the day,
week, month, or season," citing 67 C.J. 285, which is the ordinary
acceptation of the said term, and that "wages" in Spanish is "jornal" and
one who receives a wage is a "jornalero."
In the present petition for review on certiorari of the aforesaid decision
of the Court of Appeals, petitioner questions the correctness of the
interpretation of the then Court of Appeals of Article 1708 of the New
Civil Code which reads as follows:
ART. 1708. The laborer's wage shall not be subject
to execution or attachment, except for debts
incurred for food, shelter, clothing and medical
attendance.
It is beyond dispute that petitioner is not an ordinary or rank and file
laborer but "a responsibly place employee," of El Grande Hotel,
"responsible for planning, directing, controlling, and coordinating the
activities of all housekeeping personnel" (p. 95, Rollo) so as to ensure
the cleanliness, maintenance and orderliness of all guest rooms,
function rooms, public areas, and the surroundings of the hotel.
Considering the importance of petitioner's function in El Grande Hotel,
it is undeniable that petitioner is occupying a position equivalent to that
of a managerial or supervisory position.
In its broadest sense, the word "laborer" includes everyone who
performs any kind of mental or physical labor, but as commonly and
customarily used and understood, it only applies to one engaged in
some form of manual or physical labor. That is the sense in which the
courts generally apply the term as applied in exemption acts, since
persons of that class usually look to the reward of a day's labor for
immediate or present support and so are more in need of the exemption
than are other. (22 Am. Jur. 22 citing Briscoe vs. Montgomery, 93 Ga
602, 20 SE 40; Miller vs. Dugas, 77 Ga 4 Am St Rep 192; State ex rel
I.X.L. Grocery vs. Land, 108 La 512, 32 So 433; Wildner vs.
Ferguson, 42 Minn 112, 43 NW 793; 6 LRA 338; Anno 102 Am St Rep.
84.
In Oliver vs. Macon Hardware Co., 98 Ga 249 SE 403, it was held that
in determining whether a particular laborer or employee is really a
"laborer," the character of the word he does must be taken into
consideration. He must be classified not according to the arbitrary
designation given to his calling, but with reference to the character of
the service required of him by his employer.
27
In Wildner vs. Ferguson, 42 Minn 112, 43 NW 793, the Court also held
that all men who earn compensation by labor or work of any kind,
whether of the head or hands, including judges, laywers, bankers,
merchants, officers of corporations, and the like, are in some sense
"laboring men." But they are not "laboring men" in the popular sense of
the term, when used to refer to a must presume, the legislature used
the term. The Court further held in said case:
There are many cases holding that contractors,
consulting or assistant engineers, agents,
superintendents, secretaries of corporations and
livery stable keepers, do not come within the
meaning of the term. (Powell v. Eldred, 39 Mich,
554, Atkin v. Wasson, 25 N.Y. 482; Short v.
Medberry, 29 Hun. 39; Dean v. De Wolf, 16 Hun.
186; Krausen v. Buckel, 17 Hun. 463; Ericson v.
Brown, 39 Barb. 390; Coffin v. Reynolds, 37 N.Y.
640; Brusie v. Griffith, 34 Cal. 306; Dave v.
Nunan, 62 Cal. 400).
Thus, in Jones vs. Avery, 50 Mich, 326, 15 N.W. Rep. 494, it was held
that a traveling salesman, selling by sample, did not come within the
meaning of a constitutional provision making stockholders of a
corporation liable for "labor debts" of the corporation.
In Kline vs. Russell 113 Ga. 1085, 39 SE 477, citing Oliver vs. Macon
Hardware Co., supra, it was held that a laborer, within the statute
exempting from garnishment the wages of a "laborer," is one whose
work depends on mere physical power to perform ordinary manual
labor, and not one engaged in services consisting mainly of work
requiring mental skill or business capacity, and involving the exercise
of intellectual faculties.
So, also in Wakefield vs. Fargo, 90 N.Y. 213, the Court, in construing
an act making stockholders in a corporation liable for debts due
"laborers, servants and apprentices" for services performed for the
corporation, held that a "laborer" is one who performs menial or manual
services and usually looks to the reward of a day's labor or services for
immediate or present support. And in Weymouth vs. Sanborn, 43 N.H.
173, 80 Am. Dec. 144, it was held that "laborer" is a term ordinarily
employed to denote one who subsists by physical toil in
contradistinction to those who subsists by professional skill. And
in Consolidated Tank Line Co. vs. Hunt, 83 Iowa, 6, 32 Am. St. Rep.
285, 43 N.W. 1057, 12 L.R.A. 476, it was stated that "laborers" are
those persons who earn a livelihood by their own manual labor.
Article 1708 used the word "wages" and not "salary" in relation to
"laborer" when it declared what are to be exempted from attachment
and execution. The term "wages" as distinguished from "salary",
applies to the compensation for manual labor, skilled or unskilled, paid
at stated times, and measured by the day, week, month, or season,
while "salary" denotes a higher degree of employment, or a superior
grade of services, and implies a position of office: by contrast, the term
wages " indicates considerable pay for a lower and less responsible
character of employment, while "salary" is suggestive of a larger and
more important service (35 Am. Jur. 496).
The distinction between wages and salary was adverted to in Bell vs.
Indian Livestock Co. (Tex. Sup.), 11 S.W. 344, wherein it was said:
"'Wages' are the compensation given to a hired person for service, and
the same is true of 'salary'. The words seem to be synonymous,
convertible terms, though we believe that use and general acceptation
have given to the word 'salary' a significance somewhat different from
the word 'wages' in this: that the former is understood to relate to
position of office, to be the compensation given for official or other
service, as distinguished from 'wages', the compensation for labor."
Annotation 102 Am. St. Rep. 81, 95.
We do not think that the legislature intended the exemption in Article
1708 of the New Civil Code to operate in favor of any but those who
are laboring men or women in the sense that their work is manual.
Persons belonging to this class usually look to the reward of a day's
labor for immediate or present support, and such persons are more in
need of the exemption than any others. Petitioner Rosario A. Gaa is
definitely not within that class.
We find, therefore, and so hold that the Trial Court did not err in denying
in its order of November 7, 1975 the motion of petitioner to lift the notice
of garnishment against her salaries, commission and other
remuneration from El Grande Hotel since said salaries, Commission
and other remuneration due her from the El Grande Hotel do not
constitute wages due a laborer which, under Article 1708 of the Civil
Code, are not subject to execution or attachment.
IN VIEW OF THE FOREGOING, We find the present petition to be
without merit and hereby AFFIRM the decision of the Court of Appeals,
with costs against petitioner.
SO ORDERED.
G.R. No. 114698 July 3, 1995
WELLINGTON INVESTMENT AND MANUFACTURING
CORPORATION, petitioner,
vs.

CRESENCIANO B. TRAJANO, Under-Secretary of Labor and
Employment, ELMER ABADILLA, and 34 others, respondents.
NARVASA, C.J.:
The basic issue raised by petitioner in this case is, as its counsel puts
it, "whether or not a monthly-paid employee, receiving a fixed monthly
compensation, is entitled to an additional pay aside from his usual
holiday pay, whenever a regular holiday falls on a Sunday."
The case arose from a routine inspection conducted by a Labor
Enforcement Officer on August 6, 1991 of the Wellington Flour Mills, an
establishment owned and operated by petitioner Wellington Investment
and Manufacturing Corporation (hereafter, simply Wellington). The
officer thereafter drew up a report, a copy of which was "explained to
and received by" Wellington's personnel manager, in which he set forth
his finding of "(n)on-payment of regular holidays falling on a Sunday for
monthly-paid employees."1
Wellington sought reconsideration of the Labor Inspector's report, by
letter dated August 10, 1991. It argued that "the monthly salary of the
company's monthly-salaried employees already includes holiday pay
for all regular holidays . . . (and hence) there is no legal basis for the
finding of alleged non-payment of regular holidays falling on a
Sunday."2 It expounded on this thesis in a position paper subsequently
submitted to the Regional Director, asserting that it pays its monthly-
paid employees a fixed monthly compensation "using the 314 factor
which undeniably covers and already includes payment for all the
working days in a month as well as all the 10 unworked regular holidays
within a year."3
Wellington's arguments failed to persuade the Regional Director who,
in an Order issued on July 28, 1992, ruled that "when a regular holiday
falls on a Sunday, an extra or additional working day is created and the
employer has the obligation to pay the employees for the extra day
except the last Sunday of August since the payment for the said holiday
is already included in the 314 factor," and accordingly directed
Wellington to pay its employees compensation corresponding to four
(4) extra working days.4
Wellington timely filed a motion for reconsideration of this Order of
August 10, 1992, pointing out that it was in effect being compelled to
"shell out an additional pay for an alleged extra working day" despite its
complete payment of all compensation lawfully due its workers, using
the 314 factor.5 Its motion was treated as an appeal and was acted on
by respondent Undersecretary. By Order dated September 22, the
latter affirmed the challenged order of the Regional Director, holding
that "the divisor being used by the respondent (Wellington) does not
reliably reflect the actual working days in a year, " and consequently
commanded Wellington to pay its employees the "six additional working
days resulting from regular holidays falling on Sundays in 1988, 1989
and 1990."6 Again, Wellington moved for reconsideration, 7 and again
was rebuffed.8
Wellington then instituted the special civil action of certiorari at bar in
an attempt to nullify the orders above mentioned. By Resolution dated
July 4, 1994, this Court authorized the issuance of a temporary
restraining order enjoining the respondents from enforcing the
questioned orders.9
Every worker should, according to the Labor Code, 10 "be paid his
regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;" this, of
course, even if the worker does no work on these holidays. The regular
holidays include: "New Year's Day, Maundy Thursday, Good Friday,
the ninth of April, the first of May, the twelfth of June, the fourth of July,
the thirtieth of November, the twenty-fifth of December, and the day
designated by law for holding a general election (or national
referendum or plebiscite).11
Particularly as regards employees "who are uniformly paid by the
month, "the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve." 12 This
monthly salary shall serve as compensation "for all days in the month
whether worked or not," and "irrespective of the number of working
days therein."13 In other words, whether the month is of thirty (30) or
thirty-one (31) days' duration, or twenty-eight (28) or twenty-nine (29)
(as in February), the employee is entitled to receive the entire monthly
salary. So, too, in the event of the declaration of any special holiday, or
any fortuitous cause precluding work on any particular day or days
(such as transportation strikes, riots, or typhoons or other natural
calamities), the employee is entitled to the salary for the entire month
and the employer has no right to deduct the proportionate amount
corresponding to the days when no work was done. The monthly
compensation is evidently intended precisely to avoid computations
and adjustments resulting from the contingencies just mentioned which
are routinely made in the case of workers paid on daily basis.
In Wellington's case, there seems to be no question that at the time of
the inspection conducted by the Labor Enforcement Officer on August
6, 1991, it was and had been paying its employees "a salary of not less
than the statutory or established minimum wage," and that the monthly
salary thus paid was "not . . . less than the statutory minimum wage
multiplied by 365 days divided by twelve," supra. There is, in other
28
words, no issue that to this extent, Wellington complied with the
minimum norm laid down by law.
Apparently the monthly salary was fixed by Wellington to provide for
compensation for every working day of the year including the holidays
specified by law — and excluding only Sundays. In fixing the salary,
Wellington used what it calls the "314 factor;" that is to say, it simply
deducted 51 Sundays from the 365 days normally comprising a year
and used the difference, 314, as basis for determining the monthly
salary. The monthly salary thus fixed actually covers payment for 314
days of the year, including regular and special holidays, as well as days
when no work is done by reason of fortuitous cause, as above specified,
or causes not attributable to the employees.
The Labor Officer who conducted the routine inspection of Wellington
discovered that in certain years, two or three regular holidays had fallen
on Sundays. He reasoned that this had precluded the enjoyment by the
employees of a non-working day, and the employees had consequently
had to work an additional day for that month. This ratiocination received
the approval of his Regional Director who opined 14 that "when a regular
holiday falls on a Sunday, an extra or additional working day is created
and the employer has the obligation to pay its employees for the extra
day except the last Sunday of August since the payment for the said
holiday is already included in the 314 factor." 15
This ingenuous theory was adopted and further explained by
respondent Labor Undersecretary, to whom the matter was appealed,
as follows: 16
. . . By using said (314) factor, the respondent
(Wellington) assumes that all the regular holidays
fell on ordinary days and never on a Sunday. Thus,
the respondent failed to consider the circumstance
that whenever a regular holiday coincides with a
Sunday, an additional working day is created and
left unpaid. In other words, while the said divisor
may be utilized as proof evidencing payment of 302
working days, 2 special days and the ten regular
holidays in a calendar year, the same does not
cover or include payment of additional working days
created as a result of some regular holidays falling
on Sundays.
He pointed out that in 1988 there was "an increase of three (3) working
days resulting from regular holidays falling on Sundays;" hence
Wellington "should pay for 317 days, instead of 314 days." By the same
process of ratiocination, respondent Undersecretary theorized that
there should be additional payment by Wellington to its monthly-paid
employees for "an increment of three (3) working days" for 1989 and
again, for 1990. What he is saying is that in those years, Wellington
should have used the "317 factor," not the "314 factor."
The theory loses sight of the fact that the monthly salary in Wellington
— which is based on the so-called "314 factor" — accounts for all 365
days of a year; i.e., Wellington's "314 factor" leaves no day
unaccounted for; it is paying for all the days of a year with the exception
only of 51 Sundays.
The respondents' theory would make each of the years in question
(1988, 1989, 1990), a year of 368 days. Pursuant to this theory, no
employer opting to pay his employees by the month would have any
definite basis to determine the number of days in a year for which
compensation should be given to his work force. He would have to
ascertain the number of times legal holidays would fall on Sundays in
all the years of the expected or extrapolated lifetime of his business.
Alternatively, he would be compelled to make adjustments in his
employees' monthly salaries every year, depending on the number of
times that a legal holiday fell on a Sunday.
There is no provision of law requiring any employer to make such
adjustments in the monthly salary rate set by him to take account of
legal holidays falling on Sundays in a given year, or, contrary to the
legal provisions bearing on the point, otherwise to reckon a year at
more than 365 days. As earlier mentioned, what the law requires of
employers opting to pay by the month is to assure that "the monthly
minimum wage shall not be less than the statutory minimum wage
multiplied by 365 days divided by twelve," 17 and to pay that salary "for
all days in the month whether worked or not," and "irrespective of the
number of working days therein."18 That salary is due and payable
regardless of the declaration of any special holiday in the entire country
or a particular place therein, or any fortuitous cause precluding work on
any particular day or days (such as transportation strikes, riots, or
typhoons or other natural calamities), or cause not imputable to the
worker. And as also earlier pointed out, the legal provisions governing
monthly compensation are evidently intended precisely to avoid re-
computations and alterations in salary on account of the contingencies
just mentioned, which, by the way, are routinely made between
employer and employees when the wages are paid on daily basis.
The public respondents argue that their challenged conclusions and
dispositions may be justified by Section 2, Rule X, Book III of the
Implementing Rules, giving the Regional Director power — 19
. . . to order and administer (in cases where
employer-employee relations still exist), after due
notice and hearing, compliance with the labor

standards provisions of the Code and the other
labor legislations based on the findings of their
Regulations Officers or Industrial Safety Engineers
(Labor Standard and Welfare Officers) and made in
the course of inspection, and to issue writs of
execution to the appropriate authority for the
enforcement of his order, in line with the provisions
of Article 128 in relation to Articles 289 and 290 of
the Labor Code, as amended. . . .
The respondents beg the question. Their argument assumes that there
are some "labor standards provisions of the Code and the other labor
legislations" imposing on employers the obligation to give additional
compensation to their monthly-paid employees in the event that a legal
holiday should fall on a Sunday in a particular month — with which
compliance may be commanded by the Regional Director — when the
existence of said provisions is precisely the matter to be established.
In promulgating the orders complained of the public respondents have
attempted to legislate, or interpret legal provisions in such a manner as
to create obligations where none are intended. They have acted without
authority, or at the very least, with grave abuse of their discretion. Their
acts must be nullified and set aside.
WHEREFORE, the orders complained of, namely: that of the
respondent Undersecretary dated September 22, 1993, and that of the
Regional Director dated July 30, 1992, are NULLIFIED AND SET
ASIDE, and the proceeding against petitioner DISMISSED.
SO ORDERED.
G.R. No. 118506 April 18, 1997
NORMA MABEZA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL
SUPREME, respondents.
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public
respondent National Labor Relations Commission dated April 28, 1994
vividly illustrates why courts should be ever vigilant in the preservation
of the constitutionally enshrined rights of the working class. Without the
protection accorded by our laws and the tempering of courts, the
natural and historical inclination of capital to ride roughshod over the
rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of
petitioner and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week of May,
1991, she and her co-employees at the Hotel Supreme in Baguio City
were asked by the hotel's management to sign an instrument attesting
to the latter's compliance with minimum wage and other labor standard
provisions of law. 1 The instrument provides: 2
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO,
EVELYN OGOY, MACARIA JUGUETA, ADELAIDA
NONOG, NORMA MABEZA, JONATHAN PICART
and JOSE DIZON, all of legal ages (sic), Filipinos
and residents of Baguio City, under oath, depose
and say:
1. That we are employees of Mr. Peter L. Ng of his
Hotel Supreme situated at No. 416 Magsaysay Ave.,
Baguio City.
2. That the said Hotel is separately operated from
the Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and
assigned in each respective shifts;
4. That we have no complaints against the
management of the Hotel Supreme as we are paid
accordingly and that we are treated well.
5. That we are executing this affidavit voluntarily
without any force or intimidation and for the purpose
of informing the authorities concerned and to
dispute the alleged report of the Labor Inspector of
the Department of Labor and Employment
conducted on the said establishment on February 2,
1991.
IN WITNESS WHEREOF, we have hereunto set our
hands this 7th day of May, 1991 at Baguio City,
Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO
EVELYN OGOY
(Sgd.) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA
MABEZA.
(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON
29
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991,
at Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City Prosecutor's
Office to swear to the veracity and contents of the affidavit as instructed
by management. The affidavit was nevertheless submitted on the same
day to the Regional Office of the Department of Labor and Employment
in Baguio City.
As gleaned from the affidavit, the same was drawn by management for
the sole purpose of refuting findings of the Labor Inspector of DOLE (in
an inspection of respondent's establishment on February 2, 1991)
apparently adverse to the private respondent. 3
After she refused to proceed to the City Prosecutor's Office — on the
same day the affidavit was submitted to the Cordillera Regional Office
of DOLE — petitioner avers that she was ordered by the hotel
management to turn over the keys to her living quarters and to remove
her belongings from the hotel
premises. 4 According to her, respondent strongly chided her for
refusing to proceed to the City Prosecutor's Office to attest to the
affidavit. 5 She thereafter reluctantly filed a leave of absence from her
job which was denied by management. When she attempted to return
to work on May 10, 1991, the hotel's cashier, Margarita Choy, informed
her that she should not report to work and, instead, continue with her
unofficial leave of absence. Consequently, on May 13, 1991, three days
after her attempt to return to work, petitioner filed a complaint for illegal
dismissal before the Arbitration Branch of the National Labor Relations
Commission — CAR Baguio City. In addition to her complaint for illegal
dismissal, she alleged underpayment of wages, non-payment of
holiday pay, service incentive leave pay, 13th month pay, night
differential and other benefits. The complaint was docketed as NLRC
Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe
P. Pati.
Responding to the allegations made in support of petitioner's complaint
for illegal dismissal, private respondent Peter Ng alleged before Labor
Arbiter Pati that petitioner "surreptitiously left (her job) without notice to
the management" 6 and that she actually abandoned her work. He
maintained that there was no basis for the money claims for
underpayment and other benefits as these were paid in the form of
facilities to petitioner and the hotel's other employee. 7 Pointing to the
Affidavit of May 7, 1991, the private respondent asserted that his
employees actually have no problems with management. In a
supplemental answer submitted eleven (11) months after the original
complaint for illegal dismissal was filed, private respondent raised a
new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of
the City of Baguio against petitioner on July 4, 1991. 8
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing
petitioner's complaint on the ground of loss of confidence. His
disquisitions in support of his conclusion read as follows:
It appears from the evidence of respondent that
complainant carted away or stole one (1) blanket, 1
piece bedsheet, 1 piece thermos, 2 pieces towel
(Exhibits "9", "9-A," "9-B," "9-C" and "10" pages 12-
14 TSN, December 1, 1992).
In fact, this was the reason why respondent Peter
Ng lodged a criminal complaint against complainant
for qualified theft and perjury. The fiscal's office
finding a prima facie evidence that complainant
committed the crime of qualified theft issued a
resolution for its filing in court but dismissing the
charge of perjury (Exhibit "4" for respondent and
Exhibit "B-7" for complainant). As a consequence,
complainant was charged in court for the said crime
(Exhibit "5" for respondent and Exhibit "B-6" for the
complainant).
With these pieces of evidence, complainant
committed serious misconduct against her
employer which is one of the just and valid grounds
for an employer to terminate an employee (Article
282 of the Labor Code as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 — affirming the Labor Arbiter's decision. The resolution
substantially incorporated the findings of the Labor
Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil
action for certiorari under Rule 65 of the Rules of Court on the following
grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR
AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER
THAT THE ALLEGED LOSS OF CONFIDENCE IS
A FALSE CAUSE AND AN AFTERTHOUGHT ON
THE PART OF THE RESPONDENT-EMPLOYER
TO JUSTIFY, ALBEIT ILLEGALLY, THE

DISMISSAL OF THE COMPLAINANT FROM HER
EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR
AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ADOPTING THE RULING OF
THE LABOR ARBITER THAT THERE WAS NO
UNDERPAYMENT OF WAGES AND BENEFITS
ON THE BASIS OF EXHIBIT "8" (AN UNDATED
SUMMARY OF COMPUTATION PREPARED BY
ALLEGEDLY BY RESPONDENT'S EXTERNAL
ACCOUNTANT) WHICH IS TOTALLY
INADMISSIBLE AS AN EVIDENCE TO PROVE
PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR
AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO CONSIDER THE
EVIDENCE ADDUCED BEFORE THE LABOR
ARBITER AS CONSTITUTING UNFAIR LABOR
PRACTICE COMMITTED BY THE RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated
August 8, 1995 rejects private respondent's principal claims and
defenses and urges this Court to set aside the public respondent's
assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of
proof to show that the dismissal is for just cause, the failure of which
would mean that the dismissal is not justified and the employee is
entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner
abandoned her job when she failed to return to work on May 8, 1991.
Additionally, in order to strengthen his contention that there existed
sufficient cause for the termination of petitioner, he belatedly included
a complaint for loss of confidence, supporting this with charges that
petitioner had stolen a blanket, a bedsheet and two towels from the
hotel. 15 Appended to his last complaint was a suit for qualified theft
filed with the Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances
upon which private respondent anchored his claim that petitioner
"abandoned" her job were not enough to constitute just cause to
sanction the termination of her services under Article 283 of the Labor
Code. For abandonment to arise, there must be concurrence of two
things: 1) lack of intention to work; 16 and 2) the presence of overt acts
signifying the employee's intention not to work. 17
In the instant case, respondent does not dispute the fact that petitioner
tried to file a leave of absence when she learned that the hotel
management was displeased with her refusal to attest to the affidavit.
The fact that she made this attempt clearly indicates not an intention to
abandon but an intention to return to work after the period of her leave
of absence, had it been granted, shall have expired.
Furthermore, while absence from work for a prolonged period may
suggest abandonment in certain instances, mere absence of one or two
days would not be enough to sustain such a claim. The overt act
(absence) ought
to unerringly point to the fact that the employee has no intention to
return to work, 18 which is patently not the case here. In fact, several
days after she had been advised to take an informal leave, petitioner
tried to resume working with the hotel, to no avail. It was only after she
had been repeatedly rebuffed that she filed a case for illegal dismissal.
These acts militate against the private respondent's claim that
petitioner abandoned her job. As the Solicitor General in his
manifestation observed:
Petitioner's absence on that day should not be
construed as abandonment of her job. She did not
report because the cashier told her not to report
anymore, and that private respondent Ng did not
want to see her in the hotel premises. But two days
later or on the 10th of May, after realizing that she
had to clarify her employment status, she again
reported for work. However, she was prevented
from working by private respondents. 19
We now come to the second cause raised by private respondent to
support his contention that petitioner was validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to
provide employers with a blank check for terminating their employees.
Such a vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given the seal of approval by this Court, could readily
reduce to barren form the words of the constitutional guarantee of
security of tenure. Having this in mind, loss of confidence should ideally
apply only to cases involving employees occupying positions of trust
and confidence or to those situations where the employee is routinely
charged with the care and custody of the employer's money or property.
To the first class belong managerial employees, i.e., those vested with
30
the powers or prerogatives to lay down management policies and/or to
hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees or effectively recommend such managerial actions; and to
the second class belong cashiers, auditors, property custodians, etc.,
or those who, in the normal and routine exercise of their functions,
regularly handle significant amounts of money or property. Evidently,
an ordinary chambermaid who has to sign out for linen and other hotel
property from the property custodian each day and who has to account
for each and every towel or bedsheet utilized by the hotel's guests at
the end of her shift would not fall under any of these two classes of
employees for which loss of confidence, if ably supported by evidence,
would normally apply. Illustrating this distinction, this Court in Marina
Port Services, Inc. vs. NLRC, 20 has stated that:
To be sure, every employee must enjoy some
degree of trust and confidence from the employer
as that is one reason why he was employed in the
first place. One certainly does not employ a person
he distrusts. Indeed, even the lowly janitor must
enjoy that trust and confidence in some measure if
only because he is the one who opens the office in
the morning and closes it at night and in this sense
is entrusted with the care or protection of the
employer's property. The keys he holds are the
symbol of that trust and confidence.
By the same token, the security guard must also be
considered as enjoying the trust and confidence of
his employer, whose property he is safeguarding.
Like the janitor, he has access to this property. He
too, is charged with its care and protection.
Notably, however, and like the janitor again, he is
entrusted only with the physical task of protecting
that property. The employer's trust and confidence
in him is limited to that ministerial function. He is not
entrusted, in the Labor Arbiter's words, with the
duties of safekeeping and safeguarding company
policies, management instructions, and company
secrets such as operation devices. He is not privy
to these confidential matters, which are shared only
in the higher echelons of management. It is the
persons on such levels who, because they
discharge these sensitive duties, may be
considered holding positions of trust and confidence.
The security guard does not belong in such
category. 21
More importantly, we have repeatedly held that loss of confidence
should not be simulated in order to justify what would otherwise be,
under the provisions of law, an illegal dismissal. "It should not be used
as a subterfuge for causes which are illegal, improper and unjustified.
It must be genuine, not a mere afterthought to justify an earlier action
taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of
qualified theft charges against petitioner long after the latter exposed
the hotel's scheme (to avoid its obligations as employer under the Labor
Code) by her act of filing illegal dismissal charges against the private
respondent would hardly warrant serious consideration of loss of
confidence as a valid ground for dismissal. Notably, the Solicitor
General has himself taken a position opposite the public respondent
and has observed that:
If petitioner had really committed the acts charged
against her by private respondents (stealing
supplies of respondent hotel), private respondents
should have confronted her before dismissing her
on that ground. Private respondents did not do so.
In fact, private respondent Ng did not raise the
matter when petitioner went to see him on May 9,
1991, and handed him her application for leave. It
took private respondents 52 days or up to July 4,
1991 before finally deciding to file a criminal
complaint against petitioner, in an obvious attempt
to build a case against her.
The manipulations of private respondents should
not be countenanced. 23
Clearly, the efforts to justify petitioner's dismissal — on top of the
private respondent's scheme of inducing his employees to sign an
affidavit absolving him from possible violations of the Labor Code —
taints with evident bad faith and deliberate malice petitioner's summary
termination from employment.
Having said this, we turn to the important question of whether or not the
dismissal by the private respondent of petitioner constitutes an unfair
labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part
of the employer is alleged is whether or not the employer has exerted
pressure, in the form of restraint, interference or coercion, against his
employee's right to institute concerted action for better terms and
conditions of employment. Without doubt, the act of compelling

employees to sign an instrument indicating that the employer observed
labor standards provisions of law when he might have not, together with
the act of terminating or coercing those who refuse to cooperate with
the employer's scheme constitutes unfair labor practice. The first act
clearly preempts the right of the hotel's workers to seek better terms
and conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation
that "[t]his actuation . . . is analogous to the situation envisaged in
paragraph (f) of Article 248 of the Labor Code" 24 which distinctly makes
it an unfair labor practice "to dismiss, discharge or otherwise prejudice
or discriminate against an employee for having given or being about to
give testimony" 25 under the Labor Code. For in not giving positive
testimony in favor of her employer, petitioner had reserved not only her
right to dispute the claim and proffer evidence in support thereof but
also to work for better terms and conditions of employment.
For refusing to cooperate with the private respondent's scheme,
petitioner was obviously held up as an example to all of the hotel's
employees, that they could only cause trouble to management at great
personal inconvenience. Implicit in the act of petitioner's termination
and the subsequent filing of charges against her was the warning that
they would not only be deprived of their means of livelihood, but also
possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of
quasi-judicial agencies when the same are ably supported by the
evidence on record. However, where such conclusions are based on a
misperception of facts or where they patently fly in the face of reason
and logic, we will not hesitate to set aside those conclusions. Going into
the issue of petitioner's money claims, we find one more salient reason
in this case to set things right: the labor arbiter's evaluation of the
money claims in this case incredibly ignores existing law and
jurisprudence on the matter. Its blatant one-sidedness simply raises the
suspicion that something more than the facts, the law and
jurisprudence may have influenced the decision at the level of the
Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private
respondent's bare claim that the reason the monetary benefits received
by petitioner between 1981 to 1987 were less than minimum wage was
because petitioner did not factor in the meals, lodging, electric
consumption and water she received during the period in her
computations. 26 Granting that meals and lodging were provided and
indeed constituted facilities, such facilities could not be deducted
without the employer complying first with certain legal requirements.
Without satisfying these requirements, the employer simply cannot
deduct the value from the employee's ages. First, proof must be shown
that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing
by the employee. Finally, facilities must be charged at fair and
reasonable value. 27
These requirements were not met in the instant case. Private
respondent "failed to present any company policy or guideline to show
that the meal and lodging . . . (are) part of the salary;" 28 he failed to
provide proof of the employee's written authorization; and, he failed to
show how he arrived at the valuations. 29
Curiously, in the case at bench, the only valuations relied upon by the
labor arbiter in his decision were figures furnished by the private
respondent's own accountant, without corroborative evidence. On the
pretext that records prior to the July 16, 1990 earthquake were lost or
destroyed, respondent failed to produce payroll records, receipts and
other relevant documents, where he could have, as has been pointed
out in the Solicitor General's manifestation, "secured certified copies
thereof from the nearest regional office of the Department of Labor, the
SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and water
consumed by the petitioner were not facilities but supplements. A
benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between
the two not so much lies in the kind (food, lodging) but the
purpose. 31 Considering, therefore, that hotel workers are required to
work different shifts and are expected to be available at various odd
hours, their ready availability is a necessary matter in the operations of
a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the
deficiency in her wages equivalent to the full wage applicable from May
13, 1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave
pay, emergency cost of living allowance, night differential pay, and 13th
month pay for the periods alleged by the petitioner as the private
respondent has never been able to adduce proof that petitioner was
paid the aforestated benefits.
However, the claims covering the period of October 1987 up to the time
of filing the case on May 13, 1988 are barred by prescription as P.D.
442 (as amended) and its implementing rules limit all money claims
arising out of employer-employee relationship to three (3) years from
the time the cause of action accrues. 32
We depart from the settled rule that an employee who is unjustly
dismissed from work normally should be reinstated without loss of
31
seniority rights and other privileges. Owing to the strained relations
between petitioner and private respondent, allowing the former to return
to her job would only subject her to possible harassment and future
embarrassment. In the instant case, separation pay equivalent to one
month's salary for every year of continuous service with the private
respondent would be proper, starting with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A.
6715 and our decision in Osmalik Bustamante, et al. vs. National Labor
Relations Commission, 33 petitioner is entitled to full backwages from
the time of her illegal dismissal up to the date of promulgation of this
decision without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must
furnish the employee sought to be terminated from employment with
two written notices before the same may be legally effected. The first is
a written notice containing a statement of the cause(s) for dismissal;
the second is a notice informing the employee of the employer's
decision to terminate him stating the basis of the dismissal. During the
process leading to the second notice, the employer must give the
employee ample opportunity to be heard and defend himself, with the
assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the
petitioner's dismissal, it is noteworthy that the private respondent never
even bothered to inform petitioner of the charges against her. Neither
was petitioner given the opportunity to explain the loss of the articles. It
was only almost two months after petitioner had filed a complaint for
illegal dismissal, as an afterthought, that the loss was reported to the
police and added as a supplemental answer to petitioner's complaint.
Clearly, the dismissal of petitioner without the benefit of notice and
hearing prior to her termination violated her constitutional right to due
process. Under the circumstance an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and benefits
for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the
National Labor Relations Commission dated April 24, 1994 is
REVERSED and SET ASIDE, with costs. For clarity, the economic
benefits due the petitioner are hereby summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up
to the date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month
pay for the same period;
3) Separation pay equal to one month's salary for every year of
petitioner's continuous service with the private respondent starting with
her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of
petitioner's illegal dismissal up to the date of promulgation of this
decision pursuant to our ruling in Bustamante vs. NLRC. 34
5) P1,000.00.
ORDERED.
G.R. No. 152843 July 20, 2006
INTERCONTINENTAL BROADCASTING CORPORATION, petitioner,
vs.
REYNALDO BENEDICTO, deceased, substituted by his surviving
spouse LOURDES V. BENEDICTO, and children, namely:
REYNALDO V. BENEDICTO, SHIRLEY V. BENEDICTO-TAN,
EDGAR V. BENEDICTO and LILIBETH V. BENEDICTO-DE LA
VICTORIA,*, respondents.
DECISION
CORONA, J.:
This is a petition for review on certiorari1 of the October 18, 2001
decision2 and March 18, 2002 resolution3 of the Court of Appeals (CA)
in CA-G.R. SP No. 53413 which in turn affirmed the March 5, 1999
decision4 and June 10, 1999 resolution5 of the National Labor Relations
Commission (NLRC) in NLRC NCR CA Case No. 017886-99.
Petitioner alleged that Intercontinental Broadcasting Corporation is a
government-owned and controlled corporation.6 It is engaged in the
business of mass media communications including, among others, the
operation of television Channel 13 (IBC 13). 7
In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the
general manager8 then of petitioner, as marketing manager with a
monthly compensation of P20,000 plus 1% commission from
collections of all advertising contracts consummated. 9
In a letter dated October 11, 1994 signed by Tomas Gomez III, at that
time the president of petitioner, Benedicto was terminated from his
position.10
On December 3, 1996, Benedicto filed a complaint with the NLRC for
illegal dismissal and damages. He alleged that after his appointment,
he was able to increase the televiewing, listening and audience ratings
of petitioner which resulted in its improved competitive financial
strength.11 Specifically, in 1994, he claimed that he successfully
initiated, pursued and consummated an advertising contract with VTV
Corporation for a period of five years involving the amount of P600

million.12 However, on October 11, 1994, he was terminated from his
position without just or authorized cause.
Labor arbiter Jovencio LL. Mayor, Jr.,13 in a decision dated August 17,
1998, ruled in favor of Benedicto finding that he was indeed illegally
dismissed. Consequently, Mayor: (1) ordered his reinstatement with full
backwages from the time of his dismissal up to his actual reinstatement
(amounting to P920,000 at the time of the promulgation of the decision);
(2) directed petitioner to pay his 1% commission on the contract with
VTV Corporation (P645,000), attorney’s fees in the amount of 10% of
the total award (P156,500) and (3) dismissed the claim for moral and
exemplary damages.14
Finding the award excessive, petitioner, on October 15, 1998, filed with
the NLRC its memorandum on appeal with motion to re-compute the
award on which the appeal bond was to be based. 15 This motion was
not acted upon,16 hence, on December 10, 1998, petitioner proceeded
to file the appeal bond based on the amounts 17 awarded in the
judgment appealed from.18
In a decision promulgated on March 5, 1999, the NLRC dismissed the
appeal and ruled that petitioner failed to perfect its appeal since it did
not file the appeal bond within the reglementary period. The CA
affirmed the NLRC’s decision.
Thus this petition with application for preliminary injunction and/or
temporary restraining order alleging the following assignment of errors:
I. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING
THE ASSAILED DECISION/RESOLUTION OF THE [NLRC]
ON MERE TECHNICALITY, FAILING TO RECOGNIZE
THAT PETITIONER HAS IN FACT PERFECTED ITS
APPEAL UNDER EXISTING LAW AND JURISPRUDENCE[;]
II. WITH DUE RESPECT, THE [CA] ERRED IN
AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION DEPRIVING PETITIONER OF
ITS RIGHT TO APPEAL, BY IGNORING THE MERITS OF
THE MOTION TO RECOMPUTE AWARD TO REDUCE
BOND AND ITS SIGNIFICANCE IN RELATION TO THE
PERFECTION OF THE APPEAL[;]
III. WITH DUE RESPECT, THE [CA] ERRED IN NOT
PASSING UPON THE SUBSTANTIVE MERITS OF THE
CASE, SPECIALLY ON THE VALIDITY OF THE
REINSTATEMENT OF [BENEDICTO] AT AGE SEVENTY
TWO (72), CONTRARY TO LAW AND JURISPRUDENCE,
AND THE GRANT OF BACKWAGES BEYOND [THE] AGE
FOR COMPULSORY RETIREMENT AT 65[;]
IV. WITH DUE RESPECT, THE [CA] ERRED IN
AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION THAT GRANTS 5-YEAR
AUTOMATIC INCREASE OF AWARD [SUCH] AS
FROM P1.565M TO 2.711M WITHOUT SETTING
[BENEDICTO]’S MOTION TO RECOMPUTE AWARD FOR
HEARING AND WITHOUT DUE NOTICE THEREOF
DEPRIVING THE PETITIONER OF ITS PROPERTY
WITHOUT DUE PROCESS[;]
V. THE [CA] ERRED IN IGNORING THE ISSUE OF
JURISDICTION RAISED BY PETITIONER.19
On June 26, 2002, this Court issued a temporary restraining order
enjoining Benedicto and the NLRC from implementing the decision of
labor arbiter Mayor.20
During the pendency of the case, on November 6, 2002, Benedicto
passed away.21 He was substituted by his surviving spouse Lourdes V.
Benedicto and their four children.22
After this petition was given due course, Atty. Rodolfo B. Barriga, who
claimed to have been hired by Benedicto as collaborating counsel, filed
a motion dated December 17, 2002 praying to be reinstated as counsel
of record of respondents.23 The Court, in a resolution dated March 26,
2003, denied the motion since any attorney-client relationship between
him and Benedicto, if it indeed existed, was terminated by the latter’s
death. Thereafter, Atty. Barriga filed a motion to determine attorney’s
fees and notice and statement of charging lien for attorney’s fees dated
May 5, 2003 praying, among others, that we determine and approve
his attorney’s fees and approve the notice of his charging lien. 24
Now the resolution of the issues.
Petitioner raises the issue of jurisdiction without, however, explaining
properly the basis of its objections.25 Such half-hearted and belated
attempt to argue the NLRC’s alleged lack of jurisdiction cannot possibly
be taken seriously at this late stage of the proceedings.
The NLRC and the CA dismissed petitioner’s appeal. Both held that
petitioner failed to perfect its appeal. Petitioner had ten calendar days
from its receipt of the labor arbiter’s decision on October 5, 1998 to
appeal. While it filed its memorandum on appeal with motion to re-
compute award on October 15, 1998, the appeal bond was posted after
the appeal period.
Under the second paragraph of Article 223 of the Labor Code, when a
judgment involving monetary award is appealed by the employer, the
appeal is perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the
NLRC in an amount equivalent to the monetary award in the judgment.
This assures the workers that if they finally prevail in the case, the
32
monetary award will be given to them on dismissal of the employer’s
appeal.26 It is also meant to discourage employers from using the
appeal to delay or evade payment of their obligations to the
employees.27
Nevertheless, such amount of the bond may be reduced by the NLRC
in meritorious cases, on motion of the appellant. 28 Indeed, an
unreasonable and excessive amount of bond is oppressive and unjust,
and has the effect of depriving a party of his right to appeal. 29
The provision of Article 223 of the Labor Code requiring the posting of
a bond for the perfection of an appeal of a monetary award must be
given liberal interpretation in line with the desired objective of resolving
controversies on the merits.30 If only to achieve substantial justice, strict
observance of the reglementary periods may be relaxed if
warranted.31 However, this liberal interpretation must be justified by
substantial compliance with the rule. As we declared in Buenaobra v.
Lim King Guan:32
It is true that the perfection of an appeal in the manner and
within the period prescribed by law is not only mandatory but
jurisdictional, and failure to perfect an appeal has the effect
of making the judgment final and executory. However,
technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations
of the parties. We have allowed appeals from the decisions of
the labor arbiter to the NLRC, even if filed beyond the
reglementary period, in the interest of justice. 33
In this case, petitioner posted the bond when the NLRC did not act on
its motion for re-computation of the award. There was thus substantial
compliance that justified a liberal application of the requirement on the
timely filing of the appeal bond. Moreover, petitioner presented a
meritorious ground in questioning the computation of the backwages,
as we shall discuss below.
We now proceed to the merits of the case.
The labor arbiter found that Benedicto was an employee (the marketing
manager) of petitioner.34 He also determined that there was no just or
authorized cause for Benedicto’s termination. Neither did petitioner
comply with the two-notice requirement for valid termination under the
law. He therefore concluded that Benedicto was illegally dismissed. 35
These factual findings of the NLRC, confirmed by the CA, are binding
on us since they are supported by substantial evidence. Petitioner,
aside from merely stating that Benedicto’s appointment was
unauthorized,36 did not extensively deal with the issue of whether
Benedicto was in fact its employee. Besides, it is estopped from
denying such fact considering its admission that its former President,
Tomas Gomez III, wrote him a letter of termination on October 11,
1994.37 Petitioner, furthermore, never contested the finding of illegal
dismissal. Accordingly, there are no strong reasons for us to again
delve into the facts.
Instead, the bulk of petitioner’s arguments focused on the labor arbiter’s
order of reinstatement and award of backwages. The issue of
reinstatement was mooted by Benedicto’s death in 2002.
As for the award of backwages, petitioner insists that the award should
be limited to what Benedicto was entitled to as of the compulsory
retirement age of 65 years. When the labor arbiter promulgated his
decision (wherein he awarded the amount of P920,000 as backwages),
Benedicto was already 68 years old. In an order dated August 10, 1999,
he further increased the backwages by P180,000.38
We agree with petitioner that Benedicto was entitled to backwages only
up to the time he reached 65 years old, the compulsory retirement age
under the law.39 When Benedicto was illegally dismissed on October
11, 1994, he was already 64 years old. He turned 65 years old on
December 1, 199440 at which age he was deemed to have retired.
Since backwages are granted on grounds of equity for earnings lost by
an employee due to his illegal dismissal,41 Benedicto was entitled to
backwages only for the period he could have worked had he not been
illegally dismissed, i.e. from October 11, 1994 to December 1, 1994.42
Petitioner also questions the award by the labor arbiter of Benedicto’s
1% commission on the blocktime sale agreement with VTV Corporation
in the amount of P645,000.43 The arbiter found that the agreement was
initiated by and consummated through Benedicto’s efforts and that he
was entitled to the commission.44 This is another factual matter that is
binding on us. However, it is unclear how the labor arbiter arrived at the
amount adjudged. We therefore rule that in computing the amount of
the commission Benedicto was entitled to, the following should be
considered:
First, because Benedicto was entitled to backwages only from
October 11 to December 1, 1994 when he turned 65 years
old, petitioner should pay his commission only for this period.
Second, by nature, commissions are given to employees only
if the employer receives income.45 Employees, as a reward,
receive a percentage of the earnings of the employer, which
they, through their efforts, helped produce. 46 Commissions
are also given in the form of incentives or encouragement so
that employees will be inspired to put a little more industry
into their tasks. Commissions can also be considered as
direct remunerations for services rendered.47 All these
different concepts of commissions are incongruent with the

claim that an employee can continue to receive them
indefinitely after reaching his mandatory retirement age.
Benedicto’s right to the commissions was coterminous with
his employment with petitioner 48 and this ended when he
reached the compulsory retirement age.
Lastly, the stipulation49 providing for commissions (which did
not specify the period of entitlement) would be too
burdensome if interpreted to mean that Benedicto had a right
to it even after his employment with petitioner. Doubts in
contracts should be settled in favor of the greatest reciprocity
of interests.50 A lopsided and open-minded construction could
not have been the parties’ contemplation. Had that been their
intent, then they should have spelled it out in no uncertain
terms.
The labor arbiter should therefore re-compute the commission
Benedicto was entitled to in accordance with these guidelines.
Petitioner is also liable for 10% of the total amount for attorney’s fees
since Benedicto and the present respondents were compelled to litigate
and incur expenses to enforce and protect his rights.51
With respect to Atty. Barriga’s motion, we note that this entails a factual
determination and examination of the evidence. Since Atty. Barriga still
has to prove his entitlement to the attorney’s fees he is claiming and
the amount thereof (if he is so entitled), this may be taken up in the
NLRC which will execute the judgment.52
In summary, this case shall be remanded to the labor arbiter for re-
computation of backwages and commissions to be paid by petitioner to
respondent(s) for the period October 11, 1994 to December 1, 1994
and 10% of the total amount as attorney’s fees. The labor arbiter shall
also set for further hearing Atty. Barriga’s motion to determine his
attorney’s fees and thereafter to fix the amount thereof if he is so
entitled.
WHEREFORE, the assailed decision dated October 18, 2001 and
resolution dated March 18, 2002 of the Court of Appeals in CA-G.R. SP
No. 53413 are hereby REVERSED and SET ASIDE.
Petitioner is ORDERED to pay the deceased respondent’s backwages
and commissions to his heirs from the time he was illegally dismissed
on October 11, 1994 up to the time he reached compulsory retirement
age on December 1, 1994. Likewise, petitioner is ORDERED to pay
attorney’s fees equivalent to 10% of the total monetary award
(backwages plus commissions). For this purpose, the case is hereby
ordered REMANDED to the labor arbiter for the re-computation of the
amounts due.
The labor arbiter is also DIRECTED to set for further hearing Atty.
Rodolfo B. Barriga’s motion to determine his attorney’s fees and
thereafter to fix the amount thereof if due to him.
Our temporary restraining order issued on June 26, 2002 is
hereby LIFTED.
Costs against petitioner.
SO ORDERED.
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI
CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO,
DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court
seeks to annul and set aside the Decision and Resolution of the Court
of Appeals dated October 29, 2004 1 and October 7,
2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the
complaint for constructive dismissal filed by herein petitioner Angelina
Francisco. The appellate court reversed and set aside the Decision of
the National Labor Relations Commission (NLRC) dated April 15,
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with
modification the decision of the Labor Arbiter dated July 31, 2002, 4 in
NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents
were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its
incorporation stage. She was designated as Accountant and Corporate
Secretary and was assigned to handle all the accounting needs of the
company. She was also designated as Liaison Officer to the City of
Makati to secure business permits, construction permits and other
licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not
entrusted with the corporate documents; neither did she attend any
board meeting nor required to do so. She never prepared any legal
document and never represented the company as its Corporate
Secretary. However, on some occasions, she was prevailed upon to
sign documentation for the company. 6
33
In 1996, petitioner was designated Acting Manager. The corporation
also hired Gerry Nino as accountant in lieu of petitioner. As Acting
Manager, petitioner was assigned to handle recruitment of all
employees and perform management administration functions;
represent the company in all dealings with government agencies,
especially with the Bureau of Internal Revenue (BIR), Social Security
System (SSS) and in the city government of Makati; and to administer
all other matters pertaining to the operation of Kasei Restaurant which
is owned and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as
Manager. Petitioner alleged that she was required to sign a prepared
resolution for her replacement but she was assured that she would still
be connected with Kasei Corporation. Timoteo Acedo, the designated
Treasurer, convened a meeting of all employees of Kasei Corporation
and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji
Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a
month beginning January up to September 2001 for a total reduction of
P22,500.00 as of September 2001. Petitioner was not paid her mid-
year bonus allegedly because the company was not earning well. On
October 2001, petitioner did not receive her salary from the company.
She made repeated follow-ups with the company cashier but she was
advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and
the rest of the officers but she was informed that she is no longer
connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for
work and filed an action for constructive dismissal before the labor
arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of
its technical consultants on accounting matters and act concurrently as
Corporate Secretary. As technical consultant, petitioner performed her
work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the
office any time she wanted. The company never interfered with her
work except that from time to time, the management would ask her
opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services
were engaged through a Board Resolution designating her as technical
consultant. The money received by petitioner from the corporation was
her professional fee subject to the 10% expanded withholding tax on
professionals, and that she was not one of those reported to the BIR or
SSS as one of the company’s employees. 12
Petitioner’s designation as technical consultant depended solely upon
the will of management. As such, her consultancy may be terminated
any time considering that her services were only temporary in nature
and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000
duly received by the BIR showing that petitioner was not among the
employees reported to the BIR, as well as a list of payees subject to
expanded withholding tax which included petitioner. SSS records were
also submitted showing that petitioner’s latest employer was Seiji
Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position
without loss of seniority rights and jointly and severally pay complainant
her money claims in accordance with the following computation:
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would
accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of
the Labor Arbiter, the dispositive portion of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby
MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay
computed at one month per year of service in addition to full backwages
from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10%
share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary
differential award only;
4) The awards representing salary differentials, housing allowance, mid
year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision
of the National Labor Relations Commissions dated April 15, 2003 is
hereby REVERSED and SET ASIDE and a new one is hereby rendered
dismissing the complaint filed by private respondent against Kasei
Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration,
hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was
an employer-employee relationship between petitioner and private
respondent Kasei Corporation; and if in the affirmative, (2) whether
petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the
National Labor Relations Commission on one hand, and the Court of
Appeals on the other, there is a need to reexamine the records to
determine which of the propositions espoused by the contending
parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there
has been no uniform test to determine the existence of an employer-
employee relation. Generally, courts have relied on the so-called right
of control test where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. In addition to the standard of
right-of-control, the existing economic conditions prevailing between
the parties, like the inclusion of the employee in the payrolls, can help
in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the
complexity of such a relationship where several positions have been
held by the worker. There are instances when, aside from the
employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished, economic
realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test
involving: (1) the putative employer’s power to control the employee
with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity
or relationship.
This two-tiered test would provide us with a framework of analysis,
which would take into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties. This
is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due
to the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s
employment.
The control test initially found application in the case of Viaña v. Al-
Lagadan and Piga, 19 and lately in Leonardo v. Court of
Appeals, 20 where we held that there is an employer-employee
relationship when the person for whom the services are performed
reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the
existing economic conditions prevailing between the parties, in addition
to the standard of right-of-control like the inclusion of the employee in
the payrolls, to give a clearer picture in determining the existence of an
employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.
Thus, the determination of the relationship between employer and
employee depends upon the circumstances of the whole economic
activity, 22 such as: (1) the extent to which the services performed are
an integral part of the employer’s business; (2) the extent of the
worker’s investment in equipment and facilities; (3) the nature and
degree of control exercised by the employer; (4) the worker’s
opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the
relationship between the worker and the employer; and (7) the degree
34
of dependency of the worker upon the employer for his continued
employment in that line of business. 23
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in
that line of business. 24 In the United States, the touchstone of
economic reality in analyzing possible employment relationships for
purposes of the Federal Labor Standards Act is dependency. 25 By
analogy, the benchmark of economic reality in analyzing possible
employment relationships for purposes of the Labor Code ought to be
the economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an
employee of Kasei Corporation because she was under the direct
control and supervision of Seiji Kamura, the corporation’s Technical
Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting
Manager and Corporate Secretary, with substantially the same job
functions, that is, rendering accounting and tax services to the company
and performing functions necessary and desirable for the proper
operation of the corporation such as securing business permits and
other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be
said to be an employee of respondent corporation because she had
served the company for six years before her dismissal, receiving check
vouchers indicating her salaries/wages, benefits, 13th month pay,
bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioner’s
membership in the SSS as manifested by a copy of the SSS specimen
signature card which was signed by the President of Kasei Corporation
and the inclusion of her name in the on-line inquiry system of the SSS
evinces the existence of an employer-employee relationship between
petitioner and respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter’s line
of business.
In Domasig v. National Labor Relations Commission, 28 we held that in
a business establishment, an identification card is provided not only as
a security measure but mainly to identify the holder thereof as a bona
fide employee of the firm that issues it. Together with the cash vouchers
covering petitioner’s salaries for the months stated therein, these
matters constitute substantial evidence adequate to support a
conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who
registers its workers with the SSS is proof that the latter were the
former’s employees. The coverage of Social Security Law is predicated
on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has
clearly established that petitioner never acted as Corporate Secretary
and that her designation as such was only for convenience. The actual
nature of petitioner’s job was as Kamura’s direct assistant with the duty
of acting as Liaison Officer in representing the company to secure
construction permits, license to operate and other requirements
imposed by government agencies. Petitioner was never entrusted with
corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was
required to sign prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated
the December 5, 2001 affidavit has been allegedly withdrawn by
Kamura himself from the records of the case. 31 Regardless of this fact,
we are convinced that the allegations in the first affidavit are sufficient
to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first
one, courts do not generally look with favor on any retraction or
recanted testimony, for it could have been secured by considerations
other than to tell the truth and would make solemn trials a mockery and
place the investigation of the truth at the mercy of unscrupulous
witnesses. 32 A recantation does not necessarily cancel an earlier
declaration, but like any other testimony the same is subject to the test
of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner
is an employee of respondent Kasei Corporation. She was selected and
engaged by the company for compensation, and is economically
dependent upon respondent for her continued employment in that line
of business. Her main job function involved accounting and tax services
rendered to respondent corporation on a regular basis over an
indefinite period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss her for
cause. More importantly, respondent corporation had the power to
control petitioner with the means and methods by which the work is to
be accomplished.
The corporation constructively dismissed petitioner when it reduced her
salary by P2,500 a month from January to September 2001. This
amounts to an illegal termination of employment, where the petitioner
is entitled to full backwages. Since the position of petitioner as

accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu
of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary
resignation resulting in cessation of work resorted to when continued
employment becomes impossible, unreasonable or unlikely; when
there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-
Flores, 36 we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making
and therefore amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every
case, attempt to carefully balance the fragile relationship between
employees and employers, we are mindful of the fact that the policy of
the law is to apply the Labor Code to a greater number of employees.
This would enable employees to avail of the benefits accorded to them
by law, in line with the constitutional mandate giving maximum aid and
protection to labor, promoting their welfare and reaffirming it as a
primary social economic force in furtherance of social justice and
national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution
of the Court of Appeals dated October 29, 2004 and October 7, 2005,
respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET
ASIDE. The Decision of the National Labor Relations Commission
dated April 15, 2003 in NLRC NCR CA No. 032766-02,
is REINSTATED. The case is REMANDED to the Labor Arbiter for the
recomputation of petitioner Angelina Francisco’s full backwages from
the time she was illegally terminated until the date of finality of this
decision, and separation pay representing one-half month pay for every
year of service, where a fraction of at least six months shall be
considered as one whole year.
SO ORDERED.
G.R. No. 172295 December 23, 2008
LILIA P. LABADAN, petitioner,
vs.
FOREST HILLS ACADEMY/NAOMI CABALUNA and PRESIDING
COMISSIONER SALIC B. DUMARPA, COMMISSIONER PROCULO
T. SARMEN, COMMISSIONER NOVITO C. CAGAYAN, respondents.
DECISION
CARPIO MORALES, J.:
Lilian L. Labadan (petitioner) was hired by private respondent Forest
Hills Mission Academy (Forest Hills) in July 1989 as an elementary
school teacher. From 1990 up to 2002, petitioner was registrar and
secondary school teacher.
On August 18, 2003, petitioner filed a complaint 1 against respondent
Forest Hills and its administrator respondent Naomi Cabaluna for illegal
dismissal, non-payment of overtime pay, holiday pay, allowances,
13th month pay, service incentive leave, illegal deductions, and
damages.
In her Position Paper,2 petitioner alleged that she was allowed to go on
leave from Forest Hills, and albeit she had exceeded her approved
leave period, its extension was impliedly approved by the school
principal because she received no warning or reprimand and was in
fact retained in the payroll up to 2002.3
Petitioner further alleged that since 1990, tithes to the Seventh Day
Adventist church have been illegally deducted from her salary; and she
was not paid overtime pay for overtime service, 13 th month pay, five
days service incentive leave pay, and holiday pay; and that her SSS
contributions have not been remitted.
Claiming that strained relations between her and Forest Hill have
rendered reinstatement not feasible, petitioner prayed for separation
pay in lieu of reinstatement.
In its Position Paper,4 Forest Hills claimed as follows: In July 2001,
petitioner was permitted to go on leave for two weeks but did not return
for work after the expiration of the period. Despite petitioner’s
undertaking to report "soon," she never did even until the end of School
Year 2001-2002. It thus hired a temporary employee to accomplish the
needed reports. When she finally returned for work, classes for the
School Year 2002-2003 were already on-going.
To belie petitioner’s claim that she was dismissed, Forest Hills
submitted a list of faculty members and staff from School Year 1998-
1999 up to School Year 2001 to 2002 which included her name. 5
With regard to the charge for illegal deduction, Forest Hills claimed that
the Seventh Day Adventist Church requires its members to pay tithes
equivalent to 10% of their salaries, and petitioner was hired on account
35
of her being a member thereof, and petitioner never questioned the
deduction of the tithe from her salary.
With regard to the charge for non-payment of overtime pay, holiday pay,
and allowances, Forest Hills noted that petitioner proffered no evidence
to support the same.
The Labor Arbiter decided in favor of petitioner, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Finding respondents Forest Hills Academy and/or Naomi
Cabaluna guilty of illegally dismissing the complainant;
2. Directing respondent to pay complainant Lilia P. Labadan
the total amount of P152,501.02 representing her monetary
award x x x.
Complainant’s other claim[s] are hereby dismissed for lack of
merit and/or failure to substantiate.
SO ORDERED.6
The National Labor Relations Commission (NLRC), finding the Labor
Arbiter to have misappreciated the facts of the case, reversed and set
aside his decision and dismissed petitioner’s complaint by Resolution
of June 30, 2005.7
On petitioner’s Petition for Certiorari,8 the Court of Appeals, by
Resolution9 of December 15, 2005, dismissed the petition for deficient
amount of appellate docket fee, non-attachment of Affidavit of Service,
absence of written explanation why the petition was filed through
registered mail instead of through personal service, and non-
attachment of copies of the Complaint and the Answer filed before the
Labor Arbiter. Petitioner’s Motion for Reconsideration having been
denied,10 she filed the present Petition for Review on
Certiorari,11 faulting the Court of Appeals
x x x IN DISMISSING THE PETITION ON THE GROUND OF
TECHNICALITIES[;]
x x x IN NOT DECIDING ON THE MERITS WHETHER OR
NOT HONORABLE COMMISSIONERS OF THE
5TH DIVISION HAVE COMMITTED AN ACT OF GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION:
A. IN REVERSING THE FINDINGS OF THE
EXECUTIVE LABOR ARBITER THAT HEREIN
PETITIONER-COMPLAINANT WAS NOT
DISMISSED FROM HER WORK AS A TEACHER
and AT THE SAME TIME THE REGISTRAR;
B. IN FINDING THAT BY A PROLONGED
ABSENCE OF ONE YEAR MORE OR LESS,
PETITIONER WAIVED HER 13TH MONTH PAY
AND SERVICE INCENTIVE LEAVES AS SHE
FAILED TO STATE SUCH CLAIMS IN HER
AFFIDAVIT THAT WAS ATTACHED [TO] HER
POSITION PAPER, and;
C. THAT THE DECISION/RESOLUTION
RENDERED BY THE HONORABLE
COMMISSIONERS OF THE 5TH DIVISION WAS
TAINTED WITH GRAVE ABUSE OF DISCRETION
AS IT WAS INCOMPLETE AND
UNLAWFUL[.]12 (Italics and emphasis in the
original)
Non-payment of docket fee at the time of the filing of a petition does not
automatically call for its dismissal as long as the fee is paid within the
applicable prescriptive or reglementary period. 13 While petitioner paid
the P30 deficient amount of the docket fee on February 7, 2006,14 it
was beyond the 60-day period for filing the petition for certiorari.
Nevertheless, the Court, in the interest of substantial justice, brushes
aside this and the other technicalities cited by the Court of Appeals in
its Resolution of December 15, 200515 and, instead of remanding the
case to the appellate court, now hereby decides the case on the merits.
While in cases of illegal dismissal, the employer bears the burden of
proving that the dismissal is for a valid or authorized cause, the
employee must first establish by substantial evidence the fact of
dismissal.16
The records do not show that petitioner was dismissed from the service.
They in fact show that despite petitioner’s absence from July 2001 to
March 2002 which, by her own admission, exceeded her approved
leave,17 she was still considered a member of the Forest Hills
faculty18 which retained her in its payroll.19
Petitioner argues, however, that she was constructively dismissed
when Forest Hills merged her class with another "so much that when
she reported back to work, she has no more claims to hold and no more
work to do."20
Petitioner, however, failed to refute Forest Hills’ claim that when she
expressed her intention to resume teaching, classes were already
ongoing for School Year 2002-2003. It bears noting that petitioner
simultaneously held the positions of secondary school teacher and
registrar and, as the NLRC noted, she could have resumed her work
as registrar had she really wanted to continue working with Forest
Hills.21
Petitioner’s affidavit and those of her former colleagues,22 which she
attached to her Position Paper, merely attested that she was dismissed

from her job without valid cause, but gave no particulars on when and
how she was dismissed.
There being no substantial proof that petitioner was dismissed, she is
not entitled to separation pay or backwages.
Respecting petitioner’s claim for holiday pay, Forest Hills contends that
petitioner failed to prove that she actually worked during specific
holidays. Article 94 of the Labor Code provides, however, that
(a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments
regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any
holiday but such employee shall be paid a compensation
equivalent to twice his regular rate[.]
The provision that a worker is entitled to twice his regular rate if he is
required to work on a holiday implies that the provision entitling a
worker to his regular rate on holidays applies even if he does not work.
The petitioner is likewise entitled to service incentive leave under Article
95 of the Labor Code which provides that
(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of
five days with pay.
(b) This provision shall not apply to those who are already
enjoying the benefit herein provided, those enjoying vacation
leave with pay of at least five days and those employed in
establishments regularly employing less than ten employees
or in establishment exempted from granting this benefit by the
Secretary of Labor after considering the viability or financial
condition of such establishment.
x x x x,
and to 13th month pay under Presidential Decree No. 851. 23
As for petitioner’s claims for overtime pay, it must be denied, for other
than the uncorroborated affidavits of her colleagues, there is no
concrete proof that she is entitled thereto. 24 And so must her claim for
allowances, no proof to her entitlement thereto having been presented
On the deduction of 10% tithe, Article 113 of the Labor Code instructs:
ART. 113. No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his
employees, except:
(a) In cases where the worker is insured with his
consent by the employer, and the deduction is to
recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of the
worker or his union to check-off has been
recognized by the employer or authorized in writing
by the individual worker concerned; and
(c) In cases where the employer is authorized by
law or regulations issued by the Secretary of Labor,
as does Rule VIII, Section 10 of the Rules Implementing Book III of the
Labor Code reading:
SEC. 10. Deductions from the wages of the employees may
be made by the employer in any of the following cases:
(a) When the deductions are authorized by law,
including deductions for the insurance premiums
advanced by the employer in behalf of the
employee as well as union dues where the right to
check-off has been recognized by the employer or
authorized in writing by the individual employee
himself;
(b) When the deductions are with the written
authorization of the employees for payment to a
third person and the employer agrees to do so,
provided that the latter does not receive any
pecuniary benefit, directly or indirectly, from the
transaction. (Emphasis and underscoring supplied)
In the absence then of petitioner’s written conformity to the deduction
of the 10% tithe from her salary, the deduction made by Forest Hills
was illegal.
Finally, on petitioner’s claim that Forest Hills did not remit her SSS
contributions, Villar v. National Labor Relations
Commission25 enlightens:
x x x [T]he burden of proving payment of monetary claims
rests on the employer. x x x
xxxx
The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents –
which will show that overtime, differentials, service incentive
leave and other claims of workers have been paid – are not
in the possession of the worker but in the custody and
absolute control of the employer.26 (Underscoring supplied)
Forest Hills having glossed over this claim, the same must be granted.
Finally, insofar as petitioner was compelled to litigate her money claims,
an award of attorney’s fees equivalent to 10% of the final judgment
award is in order.27
36
WHEREFORE, the Court of Appeals Resolution of December 15, 2005
is SET ASIDE. The petition is GRANTED insofar as petitioner’s claims
for illegal deductions, holiday pay, service incentive leave pay,
13th month pay, and non-remittance of SSS contributions are
concerned. Respondents are accordingly ORDERED to refund to
petitioner the amount of the illegal deductions from her salary; to pay
her holiday pay, service incentive leave pay, and 13 th month pay; to
remit her contributions to the SSS; and to pay her attorney’s fees
equivalent to 10% of the final judgment award. The case is
accordingly REMANDED to the Labor Arbiter for computation of the
amount of such money claims.
SO ORDERED.
G.R. No. 188949 July 26, 2010
CENTRAL AZUCARERA DE TARLAC, Petitioner,
vs.
CENTRAL AZUCARERA DE TARLAC LABOR UNION-
NLU, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court, assailing the Decision1 dated May 28, 2009, and the
Resolution2 dated July 28, 2009 of the Court of Appeals (CA) in CA-
G.R. SP No. 106657.
The factual antecedents of the case are as follows:
Petitioner is a domestic corporation engaged in the business of sugar
manufacturing, while respondent is a legitimate labor organization
which serves as the exclusive bargaining representative of petitioner’s
rank-and-file employees. The controversy stems from the interpretation
of the term "basic pay," essential in the computation of the 13th-month
pay.
The facts of this case are not in dispute. In compliance with Presidential
Decree (P.D.) No. 851, petitioner granted its employees the mandatory
thirteenth (13th) - month pay since 1975. The formula used by petitioner
in computing the 13th-month pay was: Total Basic Annual Salary
divided by twelve (12). Included in petitioner’s computation of the Total
Basic Annual Salary were the following: basic monthly salary; first eight
(8) hours overtime pay on Sunday and legal/special holiday; night
premium pay; and vacation and sick leaves for each year. Throughout
the years, petitioner used this computation until 2006. 3
On November 6, 2004, respondent staged a strike. During the
pendency of the strike, petitioner declared a temporary cessation of
operations. In December 2005, all the striking union members were
allowed to return to work. Subsequently, petitioner declared another
temporary cessation of operations for the months of April and May 2006.
The suspension of operation was lifted on June 2006, but the rank-and-
file employees were allowed to report for work on a fifteen (15) day-per-
month rotation basis that lasted until September 2006. In December
2006, petitioner gave the employees their 13th-month pay based on the
employee’s total earnings during the year divided by 12. 4
Respondent objected to this computation. It averred that petitioner did
not adhere to the usual computation of the 13th-month pay. It claimed
that the divisor should have been eight (8) instead of 12, because the
employees worked for only 8 months in 2006. It likewise asserted that
petitioner did not observe the company practice of giving its employees
the guaranteed amount equivalent to their one month pay, in instances
where the computed 13th-month pay was less than their basic monthly
pay.5
Petitioner and respondent tried to thresh out their differences in
accordance with the grievance procedure as provided in their collective
bargaining agreement. During the grievance meeting, the
representative of petitioner explained that the change in the
computation of the 13th-month pay was intended to rectify an error in
the computation, particularly the concept of basic pay which should
have included only the basic monthly pay of the employees. 6
For failure of the parties to arrive at a settlement, respondent applied
for preventive mediation before the National Conciliation and Mediation
Board. However, despite four (4) conciliatory meetings, the parties still
failed to settle the dispute. On March 29, 2007, respondent filed a
complaint against petitioner for money claims based on the alleged
diminution of benefits/erroneous computation of 13th-month pay before
the Regional Arbitration Branch of the National Labor Relations
Commission (NLRC).7
On October 31, 2007, the Labor Arbiter rendered a
Decision8 dismissing the complaint and declaring that the petitioner had
the right to rectify the error in the computation of the 13th-month pay of
its employees.9 The fallo of the Decision reads:
WHEREFORE, premises considered, the complaint filed by the
complainants against the respondents should be DISMISSED with
prejudice for utter lack of merit.
SO ORDERED.10

Respondents filed an appeal. On August 14, 2008, the NLRC rendered
a Decision11 reversing the Labor Arbiter. The dispositive portion of the
Decision reads:
WHEREFORE, the decision appealed is reversed and set aside and
respondent-appellee Central Azucarera de Tarlac is hereby ordered to
adhere to its established practice of granting 13th[-] month pay on the
basis of gross annual basic which includes basic pay, premium pay for
work in rest days and special holidays, night shift differential and paid
vacation and sick leaves for each year.
Additionally, respondent-appellee is ordered to observe the guaranteed
one[-]month pay by way of 13th month pay.
SO ORDERED. 12
Petitioner filed a motion for reconsideration. However, the same was
denied in a Resolution dated November 27, 2008. Petitioner then filed
a petition for certiorari under Rule 65 of the Rules of Court before the
CA.13
On May 28, 2009, the CA rendered a Decision14 dismissing the petition,
and affirming the decision and resolution of the NLRC, viz.:
WHEREFORE, the foregoing considered, the petition is hereby
DISMISSED and the assailed August 14, 2008 Decision and November
27, 2008 Resolution of the NLRC, are hereby AFFIRMED. No costs.
SO ORDERED.15
Aggrieved, petitioner filed the instant petition, alleging that the CA
committed a reversible error in affirming the Decision of the NLRC, and
praying that the Decision of the Labor Arbiter be reinstated.
The petition is denied for lack of merit.
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851
represents an additional income based on wage but not part of the
wage. It is equivalent to one-twelfth (1/12) of the total basic salary
earned by an employee within a calendar year. All rank-and-file
employees, regardless of their designation or employment status and
irrespective of the method by which their wages are paid, are entitled
to this benefit, provided that they have worked for at least one month
during the calendar year. If the employee worked for only a portion of
the year, the 13th-month pay is computed pro rata.16
Petitioner argues that there was an error in the computation of the 13th-
month pay of its employees as a result of its mistake in implementing
P.D. No. 851, an error that was discovered by the management only
when respondent raised a question concerning the computation of the
employees’
13th-month pay for 2006. Admittedly, it was an error that was
repeatedly committed for almost thirty (30) years. Petitioner insists that
the length of time during which an employer has performed a certain
act beneficial to the employees, does not prove that such an act was
not done in error. It maintains that for the claim of mistake to be negated,
there must be a clear showing that the employer had freely, voluntarily,
and continuously performed the act, knowing that he is under no
obligation to do so. Petitioner asserts that such voluntariness was
absent in this case.17
The Rules and Regulations Implementing P.D. No. 851, promulgated
on December 22, 1975, defines 13th-month pay and basic salary as
follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of
the basic salary of an employee within a calendar year;
(b) "Basic salary" shall include all remunerations or earnings
paid by an employer to an employee for services rendered
but may not include cost-of-living allowances granted
pursuant to Presidential Decree No. 525 or Letter of
Instructions No. 174, profit-sharing payments, and all
allowances and monetary benefits which are not considered
or integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the Decree on
December 16, 1975.
On January 16, 1976, the Supplementary Rules and Regulations
Implementing P.D. No. 851 was issued. The Supplementary Rules
clarifies that overtime pay, earnings, and other remuneration that are
not part of the basic salary shall not be included in the computation of
the 13th-month pay.
On November 16, 1987, the Revised Guidelines on the Implementation
of the 13th-Month Pay Law was issued. Significantly, under this
Revised Guidelines, it was specifically stated that the minimum 13th-
month pay required by law shall not be less than one-twelfth (1/12) of
the total basic salary earned by an employee within a calendar
year.1avvphi1
Furthermore, the term "basic salary" of an employee for the purpose of
computing the 13th-month pay was interpreted to include all
remuneration or earnings paid by the employer for services rendered,
but does not include allowances and monetary benefits which are not
integrated as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits, overtime,
premium, night differential and holiday pay, and cost-of-living
allowances. However, these salary-related benefits should be included
as part of the basic salary in the computation of the 13th-month pay if,
37
by individual or collective agreement, company practice or policy, the
same are treated as part of the basic salary of the employees.
Based on the foregoing, it is clear that there could have no erroneous
interpretation or application of what is included in the term "basic salary"
for purposes of computing the 13th-month pay of employees. From the
inception of P.D. No. 851 on December 16, 1975, clear-cut
administrative guidelines have been issued to insure uniformity in the
interpretation, application, and enforcement of the provisions of P.D.
No. 851 and its implementing regulations.
As correctly ruled by the CA, the practice of petitioner in giving 13th-
month pay based on the employees’ gross annual earnings which
included the basic monthly salary, premium pay for work on rest days
and special holidays, night shift differential pay and holiday pay
continued for almost thirty (30) years and has ripened into a company
policy or practice which cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution
Rule, mandates that benefits given to employees cannot be taken back
or reduced unilaterally by the employer because the benefit has
become part of the employment contract, written or unwritten. 18 The
rule against diminution of benefits applies if it is shown that the grant of
the benefit is based on an express policy or has ripened into a practice
over a long period of time and that the practice is consistent and
deliberate. Nevertheless, the rule will not apply if the practice is due to
error in the construction or application of a doubtful or difficult question
of law. But even in cases of error, it should be shown that the correction
is done soon after discovery of the error. 19
The argument of petitioner that the grant of the benefit was not
voluntary and was due to error in the interpretation of what is included
in the basic salary deserves scant consideration. No doubtful or difficult
question of law is involved in this case. The guidelines set by the law
are not difficult to decipher. The voluntariness of the grant of the benefit
was manifested by the number of years the employer had paid the
benefit to its employees. Petitioner only changed the formula in the
computation of the 13th-month pay after almost 30 years and only after
the dispute between the management and employees erupted. This act
of petitioner in changing the formula at this time cannot be sanctioned,
as it indicates a badge of bad faith.
Furthermore, petitioner cannot use the argument that it is suffering from
financial losses to claim exemption from the coverage of the law on
13th-month pay, or to spare it from its erroneous unilateral computation
of the 13th-month pay of its employees. Under Section 7 of the Rules
and Regulations Implementing P.D. No. 851, distressed employers
shall qualify for exemption from the requirement of the Decree only
upon prior authorization by the Secretary of Labor. 20 In this case, no
such prior authorization has been obtained by petitioner; thus, it is not
entitled to claim such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the Resolution
dated July 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106657
are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 186070 April 11, 2011
CLIENTLOGIC PHILPPINES, INC. (now known as SITEL), JOSEPH
VELASQUEZ, IRENE ROA, and RODNEY SPIRES, Petitioners,
vs.
BENEDICT CASTRO, Respondent.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the September 1, 2008 Decision 1 and the January 7,
2009 Resolution2 of the Court of Appeals (CA), affirming with
modification the November 29, 2007 resolution3 of the National Labor
Relations Commission (NLRC), which held that respondent Benedict
Castro was not illegally dismissed. The CA, however, awarded
respondent’s money claims, viz.:
WHEREFORE, premises considered, the instant Petition is PARTLY
GRANTED. The Resolutions dated 29 November 2007 and 23 January
2008 of the National Labor Relations Commission (Third Division) in
NLRC CN. RAB-CAR-02-0091-07 LAC NO. 08-002207-07 are
AFFIRMED with MODIFICATION in that the monetary awards of
Executive Labor Arbiter Vito C. Bose in his Decision dated 29 June
2007, as computed in Annex "A" thereof, ONLY for holiday premiums
of Php 16,913.35; service incentive leave pay Php8,456.65; overtime
pay of Php 578,753.10; and rest day pay of Php 26,384.80 which
(petitioners) shall jointly and solidarily pay to petitioner, are hereby
REINSTATED. No pronouncement as to costs.
SO ORDERED.4
The second assailed issuance of the CA denied petitioners’ motion for
reconsideration.
The facts:
Respondent was employed by petitioner ClientLogic Philippines, Inc.
(now known and shall hereafter be referred to as SITEL) on February
14, 2005 as a call center agent for its Bell South Account. After six (6)

months, he was promoted to the "Mentor" position, and thereafter to
the "Coach" position. A "Coach" is a team supervisor who is in charge
of dealing with customer complaints which cannot be resolved by call
center agents. In June 2006, he was transferred to the Dot Green
Account.
During respondent’s stint at the Dot Green Account, respondent noticed
that some of the call center agents under him would often make
excuses to leave their work stations. Their most common excuse was
that they would visit the company’s medical clinic. To verify that they
were not using the clinic as an alibi to cut their work hours, respondent
sent an e-mail to the clinic’s personnel requesting for the details of the
agents’ alleged medical consultation. His request was denied on the
ground that medical records of employees are highly confidential and
can only be disclosed in cases involving health issues, and not to be
used to build any disciplinary case against them.
On October 11, 2006, respondent received a notice requiring him to
explain why he should not be penalized for: (1) violating Green Dot
Company’s Policy and Procedure for Direct Deposit Bank Info Request
when he accessed a customer’s online account and then gave the
latter’s routing and reference numbers for direct deposit; and (2)
gravely abusing his discretion when he requested for the medical
records of his team members. Respondent did not deny the infractions
imputed against him. He, however, justified his actuations by explaining
that the customer begged him to access the account because she did
not have a computer or an internet access and that he merely
requested for a patient tracker, not medical records.
In November 2006, a poster showing SITEL’s organizational chart was
posted on the company’s bulletin board, but respondent’s name and
picture were conspicuously missing, and the name and photo of
another employee appeared in the position which respondent was
supposedly occupying.
On January 22, 2007, SITEL posted a notice of vacancy for
respondent’s position, and on February 12, 2007, he received a Notice
of Termination. These events prompted him to file a complaint for illegal
dismissal; non-payment of overtime pay, rest day pay, holiday pay,
service incentive leave pay; full backwages; damages; and attorney’s
fees before the Labor Arbiter (LA) against herein petitioners SITEL and
its officers, Joseph Velasquez (Velasquez), Irene Roa (Roa), and
Rodney Spires (Spires).5
In their position paper,6 petitioners averred that respondent was
dismissed on account of valid and justifiable causes. He committed
serious misconduct which breached the trust and confidence reposed
in him by the company. He was duly furnished the twin notices required
by the Labor Code. Further, he is not entitled to overtime pay, rest day
pay, night shift differential, holiday pay, and service incentive leave pay
because he was a supervisor, hence, a member of the managerial staff.
In a decision dated June 29, 2007,7 the LA ruled in favor of respondent
by declaring him illegally dismissed and ordering petitioners to pay his
full backwages and, in lieu of reinstatement, his separation pay. The LA
further awarded respondent’s money claims upon finding that he was
not occupying a managerial position. The decretal portion of the
decision reads:
WHEREFORE, all premises duly considered, the (petitioners) are
hereby found guilty of illegally dismissing (respondent). As such,
(petitioners) shall be jointly and solidarily liable to pay (respondent) his
full backwages from the date of his dismissal to the finality of this
decision, computed as of today at One Hundred Thirty Eight Thousand
Seven Hundred Fifty Nine Pesos and 80/100 (₱138,759.80) plus,
Seven Hundred Sixty Three Thousand Two Hundred Forty Eight Pesos
and 67/100 (₱763,248.67) representing his separation pay at one
month pay for every year of service, holiday pay and service incentive
leave pay for the three years prior to the filing of this case, overtime pay
for six (6) hours daily, rest day and ten percent (10%) as attorney’s fees.
All other claims are hereby dismissed for lack of evidence.
The computation of the foregoing monetary claims is hereto attached
and made an integral part hereof as Annex "A."
SO ORDERED.8
Aggrieved, petitioners appealed to the NLRC, which, in its November
29, 2007 resolution,9 reversed and set aside the decision of the LA by
dismissing the complaint for lack of merit on the ground that
respondent’s employment was terminated for a just cause. The NLRC
failed to discuss the money claims.
On September 1, 2008, the CA affirmed the NLRC’s finding that there
was no illegal dismissal. Anent the money claims, however, the CA
concurred with the LA’s ruling.10
Petitioners and respondent respectively moved for partial
reconsideration, but their motions were denied in the CA Resolution
dated January 7, 2009.11 From the said denial, only petitioners sought
recourse with this Court through the petition at bar. Respondent’s
failure to partially appeal the CA’s Decision finding him not illegally
dismissed has now rendered the same final and executory; hence, the
instant petition shall traverse only the issue on money claims.
Petitioners argue in the main12 that, as a team supervisor, respondent
was a member of the managerial staff; hence, he is not entitled to
overtime pay, rest day pay, holiday pay, and service incentive leave
pay.
38
We deny the petition.
The petition hinges on the question of whether the duties and
responsibilities performed by respondent qualify him as a member of
petitioners’ managerial staff. This is clearly a question of fact, the
determination of which entails an evaluation of the evidence on record.
The alleged errors of the CA lengthily enumerated in the petition13 are
essentially factual in nature and, therefore, outside the ambit of a
petition for review on certiorari under Rule 45 of the Rules of Civil
Procedure. The Court does not try facts since such statutory duty is
devolved upon the labor tribunals. It is not for this Court to weigh and
calibrate pieces of evidence otherwise adequately passed upon by the
labor tribunals especially when affirmed by the appellate court. 14
Petitioners claim exception to the foregoing rule and assert that the
factual findings of the LA and the NLRC were conflicting. This is not
correct. The labor tribunals’ decisions were at odds only with respect to
the issue of illegal dismissal. Anent the money claims issue, it cannot
be said that their rulings were contradictory because the NLRC,
disappointingly, did not make any finding thereon and it erroneously
construed that the resolution of the money claims was intertwined with
the determination of the legality of respondent’s dismissal. Nonetheless,
the CA has already rectified such lapse when it made a definitive review
of the LA’s factual findings on respondent’s money claims. Agreeing
with the LA, the CA held:
Article 82 of the Labor Code states that the provisions of the Labor
Code on working conditions and rest periods shall not apply to
managerial employees. Generally, managerial employees are not
entitled to overtime pay for services rendered in excess of eight hours
a day.
Article 212 (m) of the Labor Code defines a managerial employee as
"one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees, or to effectively
recommend such managerial actions.
In his Position Paper, (respondent) states that he worked from 8:00 p.m.
to 10:00 a.m. or 4 p.m. to 12:00 p.m. of the following day; he was also
required to work during his restdays and during holidays but he was not
paid; he was also not paid overtime pay; night shift differentials, and
service incentive leave. He was employed as call center agent on 14
February 2005, then promoted as "Mentor" in August 2005, and again
promoted to "Coach" position in September 2005, which was the
position he had when he was terminated. A "coach" is a team
supervisor who is in charge of dealing with customer complaints which
could not be dealt with by call center agents, and if a call center agent
could not meet the needs of a customer, he passes the customer’s call
to the "coach." Clearly, (respondent) is not a managerial employee as
defined by law. Thus, he is entitled to his money claims.
As correctly found by Executive Labor Arbiter Bose:
Employees are considered occupying managerial positions if they meet
all of the following conditions, namely:
1) Their primary duty consists of management of the
establishment in which they are employed or of a department
or subdivision thereof;
2) They customarily and regularly direct the work of two or
more employees therein;
3) They have the authority to hire or fire other employees of
lower rank; or their suggestions and recommendations as to
the hiring and firing and as to the promotion or any other
change of status of other employees are given particular
weight.
They are considered as officers or members of a managerial staff if
they perform the following duties and responsibilities:
1) The primary duty consists of the performance of work
directly related to management of policies of their employer;
2) Customarily and regularly exercise discretion and
independent judgment;
3) (i) Regularly and directly assist a proprietor or a managerial
employee whose primary duty consists of management of the
establishment in which he is employed or subdivision thereof;
or (ii) execute under general supervision work along
specialized or technical lines requiring special training,
experience, or knowledge; or (iii) execute, under general
supervision, special assignment and tasks xxx.
(Respondent’s) duties do not fall under any of the categories
enumerated above. His work is not directly related to management
policies. Even the circumstances shown by the instant case reveal that
(respondent) does not regularly exercise discretion and independent
judgment. (Petitioners) submitted a list of the responsibilities of "HR
Manager/Supervisor" and "Division Manager/Department
Manager/Supervisors" but these do not pertain to (respondent) who
does not have any of the said positions. He was just a team Supervisor
and not (an) HR or Department Supervisor. 15
We find no reversible error in the above ruling. The test of "supervisory"
or "managerial status" depends on whether a person possesses
authority to act in the interest of his employer and whether such
authority is not merely routinary or clerical in nature, but requires the

use of independent judgment.16 The position held by respondent and
its concomitant duties failed to hurdle this test.
As a coach or team supervisor, respondent’s main duty was to deal with
customer complaints which could not be handled or solved by call
center agents. If the members of his team could not meet the needs of
a customer, they passed the customer’s call to respondent.
This job description does not indicate that respondent can exercise the
powers and prerogatives equivalent to managerial actions which
require the customary use of independent judgment. There is no
showing that he was actually conferred or was actually exercising the
following duties attributable to a "member of the managerial staff," viz.:
1) The primary duty consists of the performance of work
directly related to management of policies of their employer;
2) Customarily and regularly exercise discretion and
independent judgment;
3) (i) Regularly and directly assist a proprietor or a managerial
employee whose primary duty consists of management of the
establishment in which he is employed or subdivision thereof;
or (ii) execute under general supervision work along
specialized or technical lines requiring special training,
experience, or knowledge; or (iii) execute, under general
supervision, special assignment and tasks; and
4) Who do not devote more than 20 percent of their hours
worked in a workweek to activities which are not directly and
closely related to the performance of the work described in
paragraphs (1), (2), and (3) above.17
According to petitioners, respondent also performed the following
duties, as shown in the company’s Statement of Policy on Discipline:
a. Know and understand in full the Policy on Discipline
including their underlying reasons.
b. Implement strictly and consistently the Policy on Discipline.
c. Ensure that the said Policy on Discipline is communicated
to and understood by all employees.
d. Monitor compliance by employees with the said Policy.
e. Advise HR Manager on the state of discipline in their
respective departments; problems, if any, and recommend
solution(s) and corrective action(s).
As correctly observed by the CA and the LA, these duties clearly
pertained to "Division Managers/Department Managers/ Supervisors,"
which respondent was not, as he was merely a team supervisor.
Petitioners themselves described respondent as "the superior of a call
center agent; he heads and guides a specific number of agents, who
form a team."181âwphi1
From the foregoing, respondent is thus entitled to his claims for holiday
pay, service incentive leave pay, overtime pay and rest day pay,
pursuant to Book Three of the Labor Code, specifically Article 82, 19 in
relation to Articles 87,20 93,21 and 9522 thereof.
WHEREFORE, premises considered, the Petition is hereby DENIED.
The September 1, 2008 Decision and the January 7, 2009 Resolution
of the Court of Appeals are AFFIRMED.
SO ORDERED.
G.R. No. 176985 April 1, 2013
RICARDO E. VERGARA, JR., Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of the
Rules of Civil Procedure assailing the January 9, 2007 Decision 1 and
March 6, 2007 Resolution2 of the Court of Appeals (CA) in CA .. G.R.
SP No. 94622, which affirmed the January 31, 2006 Decision 3 and
March 8, 2006 Resolution4 of the National Labor Relations Commission
(NLRC) modifying the September 30, 2003 Decision 5 of the Labor
Arbiter (LA) by deleting the sales management incentives in the
computation of petitioner's retirement benefits.
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent
Coca-Cola Bottlers Philippines, Inc. from May 1968 until he retired on
January 31, 2002 as a District Sales Supervisor (DSS) for Las Piñas
City, Metro Manila. As stipulated in respondent’s existing Retirement
Plan Rules and Regulations at the time, the Annual Performance
Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the
computation of retirement benefits, as follows: Basic Monthly Salary +
Monthly Average Performance Incentive (which is the total
performance incentive earned during the year immediately preceding ÷
12 months) × No. of Years in Service.6
Claiming his entitlement to an additional Ph₱474,600.00 as Sales
Management Incentives (SMI)7 and to the amount of Ph₱496,016.67
which respondent allegedly deducted illegally, representing the unpaid
accounts of two dealers within his jurisdiction, petitioner filed a
complaint before the NLRC on June 11, 2002 for the payment of his
"Full Retirement Benefits, Merit Increase, Commission/Incentives,
39
Length of Service, Actual, Moral and Exemplary Damages, and
Attorney’s Fees."8
After a series of mandatory conference, both parties partially settled
with regard the issue of merit increase and length of
service.9 Subsequently, they filed their respective Position Paper and
Reply thereto dealing on the two remaining issues of SMI entitlement
and illegal deduction.
On September 30, 2003, the LA rendered a Decision10 in favor of
petitioner, directing respondent to reimburse the amount illegally
deducted from petitioner’s retirement package and to integrate therein
his SMI privilege. Upon appeal of respondent, however, the NLRC
modified the award and deleted the payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal
deduction, which the LA granted despite respondent’s
opposition.11 Later, without prejudice to the pendency of petitioner’s
petition for certiorari before the CA, the parties executed a Compromise
Agreement12 on October 4, 2006, whereby petitioner acknowledged full
payment by respondent of the amount of Ph₱496,016.67 covering the
amount illegally deducted.
The CA dismissed petitioner’s case on January 9, 2007 and denied his
motion for reconsideration two months thereafter. Hence, this present
petition to resolve the singular issue of whether the SMI should be
included in the computation of petitioner’s retirement benefits on the
ground of consistent company practice. Petitioner insistently avers that
many DSSs who retired without achieving the sales and collection
targets were given the average SMI in their retirement package.
We deny.
This case does not fall within any of the recognized exceptions to the
rule that only questions of law are proper in a petition for review on
certiorari under Rule 45 of the Rules of Court. Settled is the rule that
factual findings of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdiction, are generally
accorded not only respect but even finality, and bind us when supported
by substantial evidence.13 Certainly, it is not Our function to assess and
evaluate the evidence all over again, particularly where the findings of
both the CA and the NLRC coincide.
In any event, even if this Court would evaluate petitioner's arguments
on its supposed merits, We still find no reason to disturb the CA ruling
that affirmed the NLRC. The findings and conclusions of the CA show
that the evidence and the arguments of the parties had all been
carefully considered and passed upon. There are no relevant and
compelling facts to justify a different resolution which the CA failed to
consider as well as no factual conflict between the CA and the NLRC
decisions.
Generally, employees have a vested right over existing benefits
voluntarily granted to them by their employer. 14 Thus, any benefit and
supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer. 15 The principle
of non-diminution of benefits is actually founded on the Constitutional
mandate to protect the rights of workers, to promote their welfare, and
to afford them full protection.16 In turn, said mandate is the basis of
Article 4 of the Labor Code which states that "all doubts in the
implementation and interpretation of this Code, including its
implementing rules and regulations, shall be rendered in favor of
labor."17
There is diminution of benefits when the following requisites are present:
(1) the grant or benefit is founded on a policy or has ripened into a
practice over a long period of time; (2) the practice is consistent and
deliberate; (3) the practice is not due to error in the construction or
application of a doubtful or difficult question of law; and (4) the
diminution or discontinuance is done unilaterally by the employer.18
To be considered as a regular company practice, the employee must
prove by substantial evidence that the giving of the benefit is done over
a long period of time, and that it has been made consistently and
deliberately.19 Jurisprudence has not laid down any hard-and-fast rule
as to the length of time that company practice should have been
exercised in order to constitute voluntary employer practice. 20 The
common denominator in previously decided cases appears to be the
regularity and deliberateness of the grant of benefits over a significant
period of time.21 It requires an indubitable showing that the employer
agreed to continue giving the benefit knowing fully well that the
employees are not covered by any provision of the law or agreement
requiring payment thereof.22 In sum, the benefit must be characterized
by regularity, voluntary and deliberate intent of the employer to grant
the benefit over a considerable period of time. 23
Upon review of the entire case records, We find no substantial evidence
to prove that the grant of SMI to all retired DSSs regardless of whether
or not they qualify to the same had ripened into company practice.
Despite more than sufficient opportunity given him while his case was
pending before the NLRC, the CA, and even to this Court, petitioner
utterly failed to adduce proof to establish his allegation that SMI has
been consistently, deliberately and voluntarily granted to all retired
DSSs without any qualification or conditions whatsoever. The only two
pieces of evidence that he stubbornly presented throughout the entirety
of this case are the sworn statements of Renato C. Hidalgo (Hidalgo)
and Ramon V. Velazquez (Velasquez), former DSSs of respondent

who retired in 2000 and 1998, respectively. They claimed that the SMI
was included in their retirement package even if they did not meet the
sales and collection qualifiers.24 However, juxtaposing these with the
evidence presented by respondent would reveal the frailty of their
statements.
The declarations of Hidalgo and Velazquez were sufficiently countered
by respondent through the affidavits executed by Norman R. Biola
(Biola), Moises D. Escasura (Escasura), and Ma. Vanessa R. Balles
(Balles).25 Biola pointed out the various stop-gap measures undertaken
by respondent beginning 1999 in order to arrest the deterioration of its
accounts receivables balance, two of which relate to the policies on the
grant of SMI and to the change in the management structure of
respondent upon its re-acquisition by San Miguel Corporation.
Escasura represented that he has personal knowledge of the
circumstances behind the retirement of Hidalgo and Velazquez. He
attested that contrary to petitioner’s claim, Hidalgo was in fact qualified
for the SMI. As for Velazquez, Escasura asserted that even if he
(Velazquez) did not qualify for the SMI, respondent’s General Manager
in its Calamba plant still granted his (Velazquez) request, along with
other numerous concessions, to achieve industrial peace in the plant
which was then experiencing labor relations problems. Lastly, Balles
confirmed that petitioner failed to meet the trade receivable qualifiers of
the SMI. She also cited the cases of Ed Valencia (Valencia) and
Emmanuel Gutierrez (Gutierrez), both DSSs of respondent who retired
on January 31, 2002 and December 30, 2002, respectively. She noted
that, unlike Valencia, Gutierrez also did not receive the SMI as part of
his retirement pay, since he failed to qualify under the policy guidelines.
The verity of all these statements and representations stands and holds
true to Us, considering that petitioner did not present any iota of proof
to debunk the same.1âwphi1
Therefore, respondent's isolated act of including the SMI in the
retirement package of Velazquez could hardly be classified as a
company practice that may be considered an enforceable obligation.
To repeat, the principle against diminution of benefits is applicable only
if the grant or benefit is founded on an express policy or has ripened
into a practice over a long period of time which is consistent and
deliberate; it presupposes that a company practice, policy and tradition
favorable to the employees has been clearly established; and that the
payments made by the company pursuant to it have ripened into
benefits enjoyed by them.26 Certainly, a practice or custom is, as a
general rule, not a source of a legally demandable or enforceable
right.27 Company practice, just like any other fact, habits, customs,
usage or patterns of conduct, must be proven by the offering party who
must allege and establish specific, repetitive conduct that might
constitute evidence of habit or company practice. 28
To close, We rule that petitioner could have salvaged his case had he
step up to disprove respondent’s contention that he miserably failed to
meet the collection qualifiers of the SMI. Respondent argues that −
An examination of the Company’s aged trial balance reveals that
petitioner did not meet the trade receivable qualifier. On the contrary,
the said trial balance reveals that petitioner had a large amount of
uncollected overdue accounts. For the year 2001, his percentage
collection efficiency for current issuance was at an average of 13.5% a
month as against the required 70%. For the same, petitioner’s
collection efficiency was at an average of 60.25% per month for
receivables aged 1-30 days, which is again, way below the required
90%. For receivables aged 31-60 days during said year, petitioner’s
collection efficiency was at an average of 56.17% per month, which is
approximately half of the required 100%. Worse, for receivables over
60 days old, petitioner’s average collection efficiency per month was a
reprehensively low 14.10% as against the required 100%. 29
The above data was repeatedly raised by respondent in its Rejoinder
(To Complainant’s Reply) before the LA,30 Memorandum of
Appeal31 and Opposition (To Complainant-Appellee’s Motion for
Reconsideration)32 before the NLRC, and Comment (On the
Petition),33 Memorandum (For the Private Respondent),34 and
Comment (On the Motion for Reconsideration) 35 before the CA. Instead
of frontally rebutting the data, petitioner treated them with deafening
silence; thus, reasonably and logically implying lack of evidence to
support the contrary.
WHEREFORE, the petition is DENIED. The January 9, 2007 Decision
and March 6, 2007 Resolution of the Court of Appeals in CA-G.R. SP
No. 94622, which affirmed the January 31, 2006 Decision and March 8,
2006 Resolution of the NLRC deleting the LA's inclusion of sales
management incentives in the computation of petitioner's retirement
benefits, is hereby AFFIRMED.
SO ORDERED.
C. WAGE DISTORTION
G.R. No. 108556 November 19, 1996
MANILA MANDARIN EMPLOYEES UNION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division,
and the MANILA MANDARIN HOTEL, respondents.
40
NARVASA, C.J.:
The petitioner in this special civil action of certiorari seeks nullification
of the September 11, 1992 Decision of the Second Division of the
National Labor Relations Commission reversing the judgment of the
Labor Arbiter in NLRC NCR Case No. 10-4335-86 and dismissing the
case for lack of merit, as well as of the Commission's November 24,
1992 Resolution denying reconsideration of said decision.
On October 30, 1986, the Manila Mandarin Employees Union (hereafter
UNION), as exclusive bargaining agent of the rank-and-file employees
of the Manila Mandarin Hotel, Inc. (hereafter MANDARIN), filed with the
NLRC Arbitration Branch a complaint in its members' behalf to compel
MANDARIN to pay the salary differentials of the individual employees
concerned because of wage distortions in their salary structure
allegedly created by the upward revisions of the minimum wage
pursuant to various Presidential Decrees and Wage Orders, and the
failure of MANDARIN to implement the corresponding increases in the
basic salary rate of newly-hired employees.
The relevant Presidential Decrees and Wage Orders were specified by
the UNION as follows :
a. PD 1389, amending PD 928, mandating an
increase in the statutory minimum wage by P3.00
spread out over a period of three years, as follows:
P1.00 starting July 1, 1978; P1.00 starting May 1,
1979; and P1.00 starting May 1, 1980.
b. PD 1614, providing that workers covered by PD
1389, whether agricultural or non-agricultural,
should receive an increase of P2.00 in their
statutory minimum wage effective April 1, 1979, the
same representing an acceleration of the remaining
increases under PD 1389; and that all non-
agricultural workers in Metro Manila shall receive a
minimum wage of P12.00;
c. PD 1713, issued on August 18, 1980, providing
an increase in the minimum daily wage rates and for
additional allowance; increasing the minimum daily
wage rates by P1.00, and providing that all private
employers shall pay their employees with wages or
salaries not exceeding P1,500.00 a month, an
additional mandatory living allowance of P60.00 a
month for non-agricultural workers, P45.00 for
plantation workers and P30.00 a month for
agricultural non-plantation workers;
d. PD 1751, issued on December 14, 1980,
increasing the statutory daily minimum wages by
integrating the P4.00 mandatory allowance under
PD 525 and PD 1123 into the basic pay of all
covered workers;
e. Wage Order No. 1, issued on March 26, 1981,
increasing the mandatory emergency living
allowance of all workers with salaries or wages of
P1,500.00 a month by P2.00 a day for non-
agricultural workers, P1.50 a day for agricultural
plantation workers, P1.00 a day for agricultural non-
plantation workers, effective March 22, 1981;
f. Wage Order No. 2 issued on July 6, 1983
increasing the mandatory basic minimum wage and.
living allowance for non-agricultural and agricultural
workers in the following manner:
1) For non-agricultural
employees, receiving not more
than P1,800.00 monthly, P1.00
a day as minimum wage and
P1.50 a day as cost of living
allowance;
2) For plantation agricultural
employees, P1.00 a day as
minimum wage and P0.50 a day
as cost of living allowance
subject to the same salary
ceiling provided in the
immediately preceding section;
and
3) For non-plantation
agricultural employees, P1.00 a
day as minimum wage; and
also, providing that effective October 1, 1983, the
living allowance rates as adjusted in the preceding
section shall be further increased subject to the
same salary ceiling, for non-agricultural employees,
by P1.00.
g. Wage Order No. 3 issued November 7, 1983
increasing the statutory minimum wage rates for
workers in the private sector by P1.00 per day
effective November 1, 1983, and also increasing the

statutory wage rates by P1.00 per day, effective
December 1, 1983;
h. Wage Order No. 4 issued on May 1, 1984
increasing the statutory daily minimum wages, after
integrating the mandatory living allowance under
PDs 1614, 1634, 1678 and 1713 into the basic pay
of all covered employees, effective May 1, 1984; —
after the integration, the minimum daily wage rate
was increased by P11.00 for non-agricultural
workers.
i. Wage Order No. 5 issued on June 11, 1984
increasing the statutory daily minimum wage rates
and living allowances of workers in the private
sector by P3.00 effective June 16, 1984 — the
minimum daily wage rates became P35.00 for
Metro Manila and P34.00 for outside Metro Manila;
and
j. Wage order No. 6, effective November 1, 1984,
increasing the statutory minimum wage rate by
P2.00 per day.
On January 15, 1987, the UNION filed its Position Paper amplifying the
allegations of its complaint and setting forth the legal bases of its
demands against MANDARIN; and on March 25, 1987, it filed an
Amended Complaint presenting an additional claim for payment of
salary differentials to the union members affected, allegedly resulting
from underpayment of wages.
The Labor Arbiter eventually ruled in favor of the UNION, holding that
there were in fact wage distortions entitling its members to salary
adjustments totalling P26,173,601.25 — for 541 employees — as well
as underpayments amounting to P1,978,296.18 — for 182 employees.
The dispositive portion of his decision reads: 1
WHEREFORE, judgment is hereby rendered
ordering the respondent Hotel to pay the individual
complainants who are members of the respondent
Union whose names appear on the respective
computations embodied in this Decision, the
aggregate amount of P26,173,601.25 representing
their salary adjustments by way of correcting the
wage distortions in their respective salary structure,
for the period from October 30, 1983 up to October
31, 1990, and continuously thereafter to pay the
corresponding amounts due them as such salary
adjustments until the same are properly and finally
restored in their basic monthly rates; to pay the
aggregate amount of P1,978,296.18 representing
their salary differentials resulting from
underpayment of wages in violation of the minimum
wage laws, Presidential Decrees and Wage Orders
for the period from March 25, 1984 up to October
31, 1990, and continuously thereafter to pay the
corresponding amounts due them as such salary
differentials until the same are properly and finally
restored into their basic monthly rates.
Likewise, the respondent Hotel is ordered to pay an
amount equivalent to ten percent (10%) of the total
awards granted to individual complainants, by way
of and as attorney's fees.
On appeal, the Second Division of respondent Commission (composed
of Commissioner Domingo H. Zapanta, ponente, and Presiding
Commissioner Edna Bonto-Perez) rendered the dispositions already
referred to and now assailed — setting aside the Labor Arbiter's
judgment and dismissing the UNION's complaint, and later denying the
UNION'S motion for reconsideration. 2
The principal issues raised in this Court are: (1) Whether or not the
NLRC had jurisdiction to take cognizance of MANDARIN'S appeal from
the Labor Arbiter's decision; and (2) if so, whether or not it gravely
abused its discretion in setting aside the Labor Arbiter's judgment and
dismissing the UNION'S complaint.
The issue of jurisdiction is grounded on the posited tardiness of private
respondents' appeal from the Labor Arbiter's judgment to the NLRC,
and fatal defect in their supersedeas bond.
The UNION contends 3 that the records indubitably show that
MANDARIN received on January 22, 1991 its copy of the Labor
Arbiter's Decision (of January 15, 1991), but filed its appeal and paid
the appeal fee only on February 4, 1991, three (3) days beyond the
reglementary ten-day period for doing so. It also condemns as
"anomalous" the certification of Deputy Executive Clerk Gaudencio P.
Demaisip, Jr., NLRC, to the effect that MANDARIN's lawyer had
approached Hon. Domingo H. Zapanta, a member of the Second
Division, NLRC, "for assistance to have the appeal including the appeal
fee in said case duly received and acknowledged on February 1, 1991,
at 4:40 P.M.;" and claims that the anomaly was aggravated when it was
Commissioner Zapanta who wrote the Decision for the Second
Division4 — reversing the Labor Arbiter's judgment, as aforesaid —
despite the UNION'S motion for his disqualification and/or inhibition.
The UNION finally argues that MANDARIN'S appeal was not only tardy
41
but also fatally flawed in that its supersedeas bond had been issued by
a surety company — Plaridel Surety & Insurance Company — which
had pending obligations and liabilities at the time, the Insurance
Commissioner having in fact issued a Cease-and-Desist Order against
said company for issuing bonds of no little magnitude without authority;
and that moreover, the replacement bond of the Commonwealth
Insurance Company — subsequently filed by order of the NLRC — was
just as defective because the latter company had an authorized
maximum net retention level in the amount of only P686,582.80, way
below the monetary award subject of MANDARIN'S appeal to the
Commission.
The Court rules that respondent Commission acted correctly in
accepting and acting on MANDARIN's appeal. The circumstances
attendant upon the filing of the appeal and supersedeas bond are
clearly set forth in the Certification of Deputy Executive Clerk Demaisip,
Jr. 5 above mentioned, viz.:
This is to certify that when Atty. Godofredo Labay
filed the appeal in NLRC NCR Case No. 10-4335-
86 entitled Manila Mandarin Employees Union
vs. Manila Mandarin on Friday, February 1, 1991,
the Cashier and the Docket Section, NCR, were not
around, that no one would receive the pleadings
and the appeal fee. He therefore approached
Commissioner Domingo H. Zapanta for assistance
and to have the appeal including the appeal bond in
said case duly received on February 1, 1991 at 4:50
p.m.
With respect to the appeal fee, since no one was
authorized to act as substitute for the Cashier of the
NCR for purposes of receiving the appeal fee and
issuing a temporary receipt and/or official receipt
therefor, Commissioner Zapanta requested Atty.
Gaudencio P. Demaisip, Jr. to receive said
pleadings and allowed Atty. Labay to pay the appeal
fee on Monday, February 4, 1991.
This certification is issued upon request of Atty.
Labay for whatever purpose it may serve him.
(SGD.) GAUDENCIO P.
DEMAISIP, JR.
Deputy Executive Clerk
Second Division
MANDARIN cannot be faulted for paying the appeal fee only on
February 4, 1991. The fact is that on February 1, 1991, its lawyer was
in the NLRC premises, ready to pay said fee, but was unable to do so
because the NLRC Cashier or any other employee authorized to
receive payment in his stead, was no longer around. This is why
Commissioner Zapanta allowed payment of the appeal fee to be made
on the next business day, as in fact the appeal fee was paid on,
February 4, 1991. This Court has ruled that the failure to pay the appeal
docketing fee within the reglementary period confers a directory, not a
mandatory, power to dismiss an appeal, to be exercised with
circumspection in light of all the relevant facts. 6 In view of these
considerations, and the meritoriousness of MANDARIN's appeal — as
later pronounced by respondent NLRC — the interest of justice was
quite evidently served when MANDARIN's appeal was given due
course despite delayed payment of the docketing fee.
The contention concerning MANDARIN's ostensibly defective appeal
bond, issued by Plaridel Surety and Insurance Company, deserves
short shrift, too. The issuance of the bond antedated this court's
resolution of January 15, 1992 — to which the attention of respondent
NLRC had been invited by the UNION — declaring said surety
company to be of doubtful solvency. More important, the issue was
mooted when MANDARIN posted a new surety bond, through
Commonwealth Insurance Company, in compliance with the Order of
the respondent Commission dated December 10, 1991. The UNION's
contention that this new bond was equally defective because the
bonding company had an authorized maximum net retention level lower
than the sum of P30,967,087.17 involved in this dispute, is
inconsequential, the new bonding company being duly accredited by
this Court and licensed by the Insurance Commission.
At any rate, this Court has invariably ruled that Article 223 of the Labor
Code, requiring a bond in appeals involving monetary awards, must be
liberally construed, in line with the desired objective of resolving
controversies on their merits. 7 The circumstances under which the
bond was filed in this case adequately justify such liberal application of
the provision.
As to the alleged partiality of Commissioner Domingo Zapanta, the
Court finds that his intervention on February 1, 1991 in the matter of
payment of the appeal docketing fee did not, in the circumstances
already related, constitute impropriety or pre-judgment of the case and
a ground for his disqualification as a member of the Second Division to
which the case was thereafter raffled. Significantly, in its motion to
inhibit, the UNION mentioned that the case was "assigned particularly
to the late Commissioner Rustico Diokno . . (but) that upon the latter's
demise, the case was reassigned to Commissioner Domingo Zapanta
as the new ponente." 8 As Commissioner Zapanta had always been a

member of the Second Division, the UNION's motion for his inhibition,
filed more than a year after the occurrence of the incident on which it
was based, becomes suspect as a mere afterthought. In any case,
Commissioner Zapanta did inhibit himself from taking part in the
resolution of the UNION'S motion for reconsideration of the assailed
decision of September 11, 1992, thus dispelling what doubts might
linger about his impartiality.
Coming now to the issue of wage distortion, prior to the effectivity on
June 9, 1989 of Republic Act No. 6727 which, among others, amended
Article 124 (Standards/Criteria for Minimum Wage Fixing) of the Labor
Code, the concept of 'wage distortion' was relatively obscure. So it was
observed by this Court in National Federation of Labor vs. NLRC, 9 a
case involving the same subject Wage Orders:
We note that neither the Wage Orders noted above,
nor the Implementing Rules promulgated by the
Department of Labor and Employment, set forth a
clear and specific notion of "wage distortion." What
the Wage Orders and the Implementing Rules did
was simply to recognize that implementation of the
Wage Orders could result in a 'distortion of the wage
structure' of an employer, and to direct the employer
and the union to negotiate with each other to correct
the distortion. Thus, Section 6 of Wage Order No. 3,
dated 7 November 1983, provided as follows:
Sec. 6. Where the application of
the minimum wage rate
prescribed herein results
in distortions of the wage
structure of an
establishment, the employer
and the union shall negotiate to
correct the distortions. Any
dispute arising from wage
distortions shall be resolved
through the grievance
procedure under their collective
bargaining agreement or
through conciliation.
"In case where there is no
collective bargaining agreement
or recognized labor organization,
the employer shall endeavor to
correct such distortions in
consultation with their workers.
Any dispute arising from wage
distortions shall be resolved
through conciliation by the
appropriate Regional Office of
the Ministry of Labor and
Employment or
through arbitration by the NLRC
Arbitration Branch having
jurisdiction over the work-
place." (Emphasis supplied)
It is therefore opportune to re-state the general principles enunciated in
that case, summarized in Metro Transit Organization, Inc. vs. NLRC, et
al., 10 as follows:
(a) The concept of wage distortion assumes an
existing grouping or classification of employees
which establishes distinctions among such
employees on some relevant or legitimate basis.
This classification is reflected in a differing wage
rate for each of the existing classes of employees.
(b) Wage distortions have often been the result of
government- decreed increases in minimum wages.
There are, however, other causes of wage
distortions, like the merger of two (2) companies
(with differing classification of employees and
different wage rates) where the surviving company
absorbs all the employees of the dissolved
corporation. (In the present Metro case, as already
noted, the wage distortion arose because the
effectivity dates of wage increases given to each of
the two (2) classes of employees (rank-and-file and
supervisory) had not been synchronized in their
respective CBAs.).
(c) Should a wage distortion exist, there is no legal
requirement that, in the rectification of that distortion
by re-adjustment of the wage rates of the differing
classes of employees, the gap which had previously
or historically existed be restored in precisely the
same amount. In other words, correction of a wage
distortion may be done by re-establishing
a substantial or significant gap (as distinguished
from the historical gap) between the wage rates of
the differing classes of employees.
42
(d) The re-establishment of a significant difference
in wage rates may be the result of resort to
grievance procedures or collective bargaining
negotiations.
It was only on June 9, 1989, upon the enactment of R.A. No. 6727
(Wage Rationalization Act, amending, among others, Article 124 of the
Labor Code), 11 that the term "wage distortion" came to be explicitly
defined as:
. . . a situation where an increase in prescribed
wage rates results in the elimination or severe
contraction of Intentional quantitative differences in
wage or salary rates between and among employee
groups in an establishment as to effectively
obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other
logical bases of differentiation.
The same provision lays down the procedure to be followed where
wage distortion arises from the implementation of a wage increase
prescribed by law or ordered by a Regional Wage Board, viz.:
Where the application of any prescribed wage
increase by virtue of a law or wage order issued by
any Regional Board results in distortions of the
wage structure within an establishment, the
employer and the union shall negotiate to correct
the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance
procedure under their collective bargaining
agreement and, if it remains unresolved, through
voluntary arbitration. Unless otherwise agreed by
the parties in writing, such dispute shall be decided
by the voluntary arbitrator or panel of voluntary
arbitrators within ten (10) calendar days from the
time said dispute was referred to voluntary
arbitration.
In cases where there are no collective agreements
or recognized labor unions, the employers and
workers shall endeavor to correct such distortions.
Any dispute arising therefrom shall be settled
through the National Conciliation and Mediation
Board and, if it remains unresolved after ten (10)
calendar days of conciliation, shall be referred to the
appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the
NLRC to conduct continuous hearings and decide
the dispute within twenty (20) calendar days from
the time said dispute is submitted for compulsory
arbitration.
The pendency of a dispute arising from a wage
distortion shall not in any way delay the applicability
of any increase in prescribed wage rates pursuant
to the provisions of law or Wage Order.
The issue of whether or not a wage distortion exists as a consequence
of the grant of a wage increase to certain employees, is a question of
fact; 12 and as a rule, factual findings in labor cases, where grounded
on substantial evidence, are not reviewed. 13 However, a disharmony
such as exists here, between the factual findings of the Labor Arbiter
and those of the NLRC, opens the door to a review thereof by this
Court. 14
The Labor Arbiter ruled that a wage distortion existed, and that "the only
and logical way to correct . . . (it) in the salary structure of the
employees of respondent Hotel is to apply the corresponding increase
made by way of revising upward the minimum wage or integration of
the ECOLA into the basic wage as embodied in the various Presidential
Decrees and Wage Orders, across-the-board, so that employees
whose salaries are above the minimum set by
law but who have already been long in the service will not be
discriminated against." 15
On the other hand, respondent Commission declared in its
decision 16 that there was no wage distortion arising from the
implementation of said Presidential Decrees and Wage Orders such as
warranted across-the-board increases to all employees:
On the issue of wage distortion, we have examined
the various presidential decrees and wage orders
referred to by the complainant and in the Labor
Arbiter's decision and we found nothing therein that
would justify the award of across-the-board
increases to all employees. The apparent intention
of the law is only to upgrade the salaries or wages
of the employees receiving lower than the minimum
daily wage set therein. For example, Section 1 of
Wage Order No. 6 provides that "effective
November 1, 1984, the statutory minimum daily
wage rates of workers in the private sector shall be
increased by P2.00." Also, Section 1 of Presidential
Decree 1389 provides that "Presidential Decree
928 is hereby amended by increasing all existing

statutory minimum wages in the country by Three
Pesos (P3.00) spread equally over a period of three
years, as follows: l) One Peso (P1.00) starting July
1, 1978; 2) One Peso (P1.00) starting May 1, 1979;
and One Peso (P1.00) starting May 1, 1980." Thus,
it is clear that the presidential decrees and wage
orders merely provide for a floor wage to be
observed by the employers in the private sector.
It indeed appears that the clear mandate of those issuances was
merely to increase the prevailing minimum wages of particular
employee groups. There were no across-the-board increases to all
employees; increases were required only as regards those specified
therein. 17 It was therefore incorrect for the UNION to claim that all its
members became automatically entitled to across-the-board increases
upon the effectivity of the Decrees and Wage Orders in question. And
even if there were wage distortions, which is not the case here, the
appropriate remedy thereunder prescribed is for the employer and the
union to "negotiate" to correct them; or, if the dispute be not thereby
resolved, to thresh out the controversy through the grievance
procedure in the collective bargaining agreement, or through
conciliation or arbitration.
A review of the records convinces this Court that respondent NLRC
committed no grave abuse of discretion in holding that no wage
distortion was demonstrated by the UNION. It was, to be sure,
incumbent on the UNION to prove by substantial evidence its assertion
of the existence of a wage distortion. This it failed to do. It presented
no such evidence to establish, as required by the law, what, if any, were
the designed quantitative differences in wage or salary rates between
employee groups, and if there were any severe contractions or
elimination of these quantitative differences.
The UNION's effort to prove wage distortion consisted only of the
presentation of an unverified list of thirteen (13) employees
denominated a "Sample Comparison of Salary Rates Affected by Wage
Distortion," 18 viz.:
SAMPLE COMPARISON OF SALARY RATES OF
COMPLAINANTS AFFECTED BY WAGE DISTORTION
F&B DEFT.
Name Position Date Hired Basic Rate
(12/30/85)
1. Pablo Trinidad — Waiter — 9/1/78 P1,300
2. Eduardo Vito — Waiter — 10/16/80 P1,375
3. Camilo Sanchez — Busboy — 8/1/83 P954
4. Renato Solomon — Busboy — 7/19/84 P1,096
5. Buenconsejo Monico — Busboy — 4/15/85 P968
HOUSEKEEPING DEPT.
1. Ruben A. Rillo — Linen Uniform Att. — 6/19/76
P984
2. Hubert Malolot — Linen Uniform Att. — 1/16/80
P1,238
3. Aurelia Kilat — Linen Uniform Att. — 5/2/79
P1,272
4. Rogelio Molaco — Cloakroom Attn. — 9/1/80
P946
5. David Pineda — Cloakroom Attn. — 9/14/81
P1,194
6. Nemesio Matro — Houseman Attn. — 6/10/76
P1,142
7. Dom'go Sabano — Houseman Attn. — 3/8/82
P1,194
8. Renato Guina — Houseman Attn. — 8/24/81
P1,194
SUBMITTED:
(SGD.) ATTY. R.E. ESPINOSA
9/17/87.
The UNION'S Internal Vice-President, Arnulfo Castro, deposed that the
employees named in this list were the "more or less (13) persons found
to have suffered wage distortion," 19 and the UNION pointed out that
while these thirteen employees occupied similar positions, they were
receiving different rates of salary.
Respondent Commission however found that as explained by private
respondents, such disparity was due simply to the fact that the
employees mentioned had been hired on different dates and were thus
receiving different salaries; or that an employee was hired initially at a
position level carrying a hiring rate higher than the others; or that an
employee failed to meet the cut-off date in the grant of yearly CBA
increase; or that the union did not get the correct data on salaries. The
Commission accepted as more accurate the data presented by
MANDARIN respecting the same employees, to wit: 20
“ANNEX 2”
F&B Dept.
NAME Position Date Hired Basic Rate
per Hotel Records as of 12/30/85
1. Pablo Trinidad Waiter 09/01/78 P1,302.00 *
2. Eduardo Vito Waiter 10/16/80 1,375.00 *
3. Camilo Sanchez Busboy 08/01/83 1,194.00
43
4. Renato Solomon Busboy 07/19/84 1,096.00
5. Buenconsejo Monico Busboy 04/15/85 968.00
Housekeeping Dept.
1. Ruben A. Rillo Linen Uniform Att. 06/19/76
1,417.00
2. Hubert Malolot Linen Uniform Att. 01/16/80
1,238.00
3. Aurelia Kilat Linen Uniform Att. 05/02/79
1,272.00
4. Rogelio Molaco Cloakroom Attn. 09/19/80
1,272.00
5. David Pineda Cloakroom Attn. 09/14/81 1,213.00
6. Nemesio Matro Houseman Attn. 06/10/77
1,342.00
7. Domingo Sabando Houseman Attn. 03/08/82
1,194.00
8. Renato Guina Houseman Attn. 08/24/81
1,194.00
* Vito was hired at a higher position with a higher
hiring rate than that given to Trinidad, i.e. Vito was
hired at P366/mo. while Trinidad at P301/mo. Prior
to hiring, Vito already worked as a waiter at the
Metropolitan Club.
The Court agrees that the claimed wage distortion was actually a result
of the UNION'S failure to appreciate various circumstances relating to
the employment of the thirteen employees. For instance, while some of
these employees mentioned by UNION Vice-President Arnulfo Castro
occupied the same or similar positions, they were hired by the Hotel on
different dates and at different salaries. As explained in part by
MANDARIN:
With respect to the case of Pablo Trinidad and
Eduardo Vito, while they were both occupying the
position of waiter in 1987, with monthly salaries of
P2,044.00 and P2,217.00, respectively, a
comparative study of the records of these
employees shows one of them was initially hired at
a higher position level which naturally carried a
higher hiring rate. Trinidad was originally hired in
1978 as a mere Houseman at the Banquet
Department with a basic starting rate of P301.00 a
month. On the other hand, Vito was originally hired
in 1980 already a Busboy at the Food and Beverage
Department with a starting salary of P366.00 a
month. Before he was hired at the Mandarin Hotel,
Vito had already been working as Waiter at the
Metropolitan Club. Records also show that it was
only after some time that Trinidad was promoted to
Busboy but still with the smaller Banquet
Department. The headway in rate was carried by
Vito although at some point in their careers, these
two employees achieved the same position as
Waiter. Not long after, Vito was promoted to Captain
Waiter while Trinidad remained Waiter. There is
therefore no reason to compare the renumeration of
these two employees as the circumstances
attendant to their employment are different. 21
Respondent Commission correctly concluded that these did not
represent cases of wage distortion contemplated by the law (Article 124,
Labor Code, as amended), i.e., a "situation where an increase in
prescribed wage rates results in the elimination or severe contraction
of intentional quantitative differences in wage or salary rates between
and among employees groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical basis of differentiation."
Moreover, even assuming arguendo that there was really a wage
distortion, it was wrong for the Labor Arbiter, after first acknowledging
that some of the money claims had prescribed under Article 291 of the
Labor
Code, 22 to nevertheless order the computation of salary differentials
retroactive to the effective dates of PDs 1389, 1614, 1713, 1751 and
Wage Orders Nos. 2, 3, 4, 5, and 6: in 1978, 1979, 1980, 1980, July
1983, November 1983, May 1984, June 1981 and November 1984,
respectively. Clearly, five of these Decrees and Wage Orders took
effect after the lapse of the three-year prescriptive period for litigating
claims for wage distortion differentials, the original complaint for wage
distortion having been filed on October 30, 1986 and the amended
complaint for underpayment of wages, on March 25, 1987.
Consequently, the applicable cut-off dates, for purposes of prescription,
were October 30, 1983 and March 25, 1984, respectively.
Finally, the records show that the matter of wage distortion, actual or
imputed under the various issuances up to Wage Order No. 6, had been
settled by the parties as early as July 30, 1985. On that day they
executed a Compromise Agreement with the assistance of the then
Regional Director of the National Capital Region, Severo M. Pucan in
which they affirmed that with the implementation by MANDARIN of
Wage Order Nos. 4 and 6 as well as P.D. 1634, the latter was "deemed

for all legal and purposes to have fully satisfied all its legal and
contractual obligations to its employees under all presidential
issuances on wages." 23
The Compromise Agreement pertinently states:
1. That the respondent shall implement Wage Order
No. 6 effective July 1, 1985, without prejudice to the
outcome of the application for exemption as
distressed employer filed by said respondent with
the National Wage Council as regards benefits that
might be due between November 1, 1985 and June
30, inclusive;
2. The the respondent shall also implement
effective August 1, 1985 the integration of the
P90.00 a month cost of living allowance under P.D.
1634 into the basic wages of its employees as
called for under Wage Order No. 4 in accordance
with the Guidelines contained in the Explanatory
Bulletin issued by the Bureau of Working Conditions
on August 8, 1985;
3. That as soon as the respondent shall have
complied with the above terms of this Compromise
Agreement, said respondent shall be deemed for all
legal intents and purposes to have fully satisfied all
the legal and contractual obligations to its
employees under all presidential issuances on
wages, including Wage Orders No. 4 and 6, and
Article XI of the collective bargaining agreement.
The Labor Code recognizes the conclusiveness of compromises as a
means to settle and end labor disputes. Article 227 provides that "(a)ny
compromise settlement, including those involving labor standard laws,
voluntarily agreed upon by the parties with the assistance of the Bureau
or the regional office of the Department of Labor, shall be final and
binding upon the parties. The National Labor Relations Commission or
any court shall not assume jurisdiction over issues involved therein
except in case of non-compliance thereof or if there is prima
facie evidence that the settlement was obtained through fraud,
misrepresentation or coercion." In Olaybar vs.
NLRC, 24 this Court had occasion, in a labor dispute, to apply the rule
that compromises and settlements have the effect and conclusiveness
of res judicata upon the parties.
Thus, and again assuming arguendo the existence of a wage distortion,
this was corrected under the "fully implemented" Compromise
Agreement; 25 and such correction having been explicitly
acknowledged by the UNION, it is now estopped from claiming that a
distortion still subsists. In the same manner, when the UNION entered
into a new collective bargaining agreement with MANDARIN, providing
for wage increases in 1987, it is deemed to have thereby settled any
remaining question of wage distortion, since the subject of wages and
wage distortions were plainly and unavoidably an economic issue and
the proper subject of collective bargaining. 26
Neither did respondent Commission gravely abuse its discretion in
ruling against the UNION on the issue of underpayment of wages,
The UNION's theory was that since the employees of MANDARIN are
paid on a monthly basis under the Group III category, the applicable
increase in daily wage must be multiplied by 365 and then divided by
12 to determine the equivalent monthly rate. MANDARIN's position, on
the other hand, was that it had consistently been using the multiplier
313, and not 365, for the purpose of deriving salary related benefits of
its employees who are paid by the month, excluding from 365, the 52
unpaid rest days in a year. This appears to have been the consistent
practice of MANDARIN, following the formula for daily paid employees
under Group II category as prepared by the Bureau of Labor
Standards: 27
AR x 313 days = EMR
——————
12
Where: 313 days = 303 actual working days a year
plus the paid 10 unworked regular
holidays.
Actual working days 303
10 legal holidays 10
— VITUG, J.:
Total No. of Days 313.
MANDARIN presented evidence of its practice regarding the use of the
factor 313 in computing the monthly equivalent of the minimum daily
wages and other related benefits of its employees; i.e., Annexes 3 and
4 of its Supplemental Appeal dated November 12, 1991. This was
corroborated by the UNION's Internal Vice President, Arnulfo Castro,
who admitted during cross-examination that in his research and study,
he found that the divisor used in arriving at the daily rate of the hotel
employees was 313 days, which meant that the days-off or rest days
are not paid. 28 The admission confirms that the hotel employees
pertain Group II category under the Bureau of Labor Standards
Guidelines for computing the equivalent monthly minimum wage
rates. 29 Thus, instead of multiplying the applicable minimum daily
wage by 365 and dividing the result by 12 to derive the applicable
44
minimum monthly salary, the factor used is 313, composed of 303
actual working days and the 10 unworked but paid regular holidays in
a year.
In his explanatory Bulletin on the payment of Holiday Pay — Ref. No.
85-08 dated 6 November 1985 — then Secretary Augusto Sanchez of
the Department of Labor and Employment, expatiating on the
implications of the Chartered Bank case, 30 stated:
6. Monthly Paid Employees
Oftentime confusion arises from the different
interpretations as to who is a monthly-paid
employee. A "monthly-paid employee" is one whose
monthly salary includes payments for everyday of
the month although he does not regularly work on
his rest days or Sundays and on regular and special
holidays. Group III in the above illustration covers
monthly paid employees. Employees falling under
Group I, II and IV are in reality daily paid employees
but whose daily rate is translated into its monthly
equivalent. The fact, therefore, that an employee is
regularly paid a fixed monthly rate does not
necessarily mean that he is a monthly-paid
employee as defined above. (Emphasis supplied)
As applied to the UNION, the-monthly equivalent of the minimum wage
under the various Presidential Decrees and Wage Orders based on the
above formula should be as follows:
PD/WO NO. Effectivity Minimum Daily Equivalent
Wage Rate Monthly Rate
PD 1389 01 July 1978 P11.00 P286.96
PD 1614 1 March 1979 13.00 339.00
PD 1813 18 Aug. 1980 14.00 365.17
WO # 2 06 July 1983 19.00 495.58
WO # 3 01 Nov. 1983 20.00 521.67
WO # 4 01 May 1984 32.00 834.67
WO # 5 01 Nov. 1984 35.00 912.92
WO # 6 01 Nov. 1984 37.00 965.08
On the other hand, the monthly pay of the Hotel employees and hiring
rate may be illustrated as follows:
PD/WO NO. Effectivity Equivalent Lowest Salary
Monthly Rate in the Hotel
PD 1389 01 July 1978 P286.92 P350.00
PD 1614 1 March 1979 339.08 411.00
PD 1813 18 Aug. 1980 365.17 562.00
WO # 2 06 July 1983 495.58 960.00
WO # 3 01 Nov. 1983 521.67 960.00
WO # 4 01 May 1984 834.67 960.00
WO # 5 01 Nov. 1984 912.92 960.00
WO # 6 01 Nov. 1984 965.080 1,015.00
A comparative analysis of the wages of the Hotel's employees from
1978 to 1984 vis a vis the minimum wages fixed by law for the period
reveals that at no time during the said period was there any
underpayment of wages by the respondent Hotel. On the contrary, the
prevailing monthly salaries of the subject hotel employees appear to be
over and above the minimum amounts required under the applicable
Presidential Decrees and Wage Orders.
WHEREFORE, the assailed Decision of respondent Commission
promulgated on September 11, 1992 — reversing the judgment of the
Labor Arbiter and dismissing the UNION'S complaint — being based
on substantial evidence and in accord with applicable laws and
jurisprudence, as well as said Commission's Resolution dated 24, 1992
— denying reconsideration — are hereby AFFIRMED in toto.
SO ORDERED.
G.R. No. 102636 September 10, 1993
METROPOLITAN BANK & TRUST COMPANY EMPLOYEES
UNION-ALU-TUCP and ANTONIO V. BALINANG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and
METROPOLITAN BANK and TRUST COMPANY, respondents.
In this petition for certiorari, the Metropolitan Bank & Trust Company
Employees Union-ALU-TUCP (MBTCEU) and its president, Antonio V.
Balinang, raise the issue of whether or not the implementation by the
Metropolitan Bank and Trust Company of Republic Act No. 6727,
mandating an increase in pay of P25 per day for certain employees in
the private sector, created a distortion that would require an adjustment
under said law in the wages of the latter's other various groups of
employees.
On 25 May 1989, the bank entered into a collective bargaining
agreement with the MBTCEU, granting a monthly P900 wage increase
effective 01 January 1989, P600 wage increase 01 January 1990, and
P200 wage increase effective 01 January 1991. The MBTCEU had also
bargained for the inclusion of probationary employees in the list of
employees who would benefit from the first P900 increase but the bank

had adamantly refused to accede thereto. Consequently, only regular
employees as of 01 January 1989 were given the increase to the
exclusion of probationary employees.
Barely a month later, or on 01 January 1989, Republic Act 6727, "an
act to rationalize wage policy determination be establishing the
mechanism and proper standards thereof, . . . fixing new wage rates,
providing wage incentives for industrial dispersal to the countryside,
and for other purposes," took effect. Its provisions, pertinent to this case,
state:
Sec. 4. (a) Upon the effectivity of this Act, the
statutory minimum wage rates of all workers and
employees in the private sector, whether
agricultural or non-agricultural, shall be increased
by twenty-five pesos (P25) per day, . . .: Provided,
That those already receiving above the minimum
wage rates up to one hundred pesos(P100.00) shall
also receive an increase of twenty-five pesos
(P25.00) per day, . . .
xxx xxx xxx
(d) If expressly provided for and agreed upon in the
collective bargaining agreements, all increase in the
daily basic wage rates granted by the employers
three (3) months before the effectivity of this Act
shall be credited as compliance with the increases
in the wage rates prescribed herein, provided that,
where such increases are less than the prescribed
increases in the wage rates under this Act, the
employer shall pay the difference. Such increase
shall not include anniversary wage increases, merit
wage increase and those resulting from the
regularization or promotion of employees.
Where the application of the increases in the wage
rates under this Section results in distortions as
defined under existing laws in the wage structure
within an establishment and gives rise to a dispute
therein, such dispute shall first be settled voluntarily
between the parties and in the event of a deadlock,
the same shall be finally resolved through
compulsory arbitration by the regional branches of
the National Labor Relations Commission (NLRC)
having jurisdiction over the workplace.
It shall be mandatory for the NLRC to conduct
continous hearings and decide any dispute arising
under this Section within twenty (20) calendar days
from the time said dispute is formally submitted to it
for arbitration. The pendency of a dispute arising
from a wage distortion shall not in any way delay the
applicability of the increase in the wage rates
prescribed under this Section.
Pursuant to the above provisions, the bank gave the P25 increase per
day, or P750 a month, to its probationary employees and to those who
had been promoted to regular or permanent status before 01 July 1989
but whose daily rate was P100 and below. The bank refused to give the
same increase to its regular employees who were receiving more than
P100 per day and recipients of the P900 CBA increase.
Contending that the bank's implementation of Republic Act 6727
resulted in the categorization of the employees into (a) the probationary
employees as of 30 June 1989 and regular employees receiving P100
or less a day who had been promoted to permanent or regular status
before 01 July 1989, and (b) the regular employees as of 01 July 1989,
whose pay was over P100 a day, and that, between the two groups,
there emerged a substantially reduced salary gap, the MBTCEU sought
from the bank the correction of the alleged distortion in pay. In order to
avert an impeding strike, the bank petitioned the Secretary of Labor to
assume jurisdiction over the case or to certify the same to the National
Labor Relations Commission (NLRC) under Article 263 (g) of the Labor
Code.1 The parties ultimately agreed to refer the issue for compulsory
arbitration to the NLRC.
The case was assigned to Labor Arbiter Eduardo J. Carpio. In his
decision of 05 February 1991, the labor arbiter disregard with the bank's
contention that the increase in its implementation of Republic Act 6727
did not constitute a distortion because "only 143 employees or 6.8% of
the bank's population of a total of 2,108 regular employees" benefited.
He stressed that "it is not necessary that a big number of wage earners
within a company be benefited by the mandatory increase before a
wage distortion may be considered to have taken place," it being
enough, he said, that such increase "result(s) in the severe contraction
of an intentional quantitative difference in wage between employee
groups."
The labor arbiter concluded that since the "intentional quantitative
difference" in wage or salary rates between and among groups of
employees is not based purely on skills or length of service but also on
"other logical bases of differentiation, a P900.00 wage gap intentionally
provided in a collective bargaining agreement as a quantitative
difference in wage between those who WERE regular employees as of
January 1, 1989 and those who WERE NOT as of that date, is definitely
45
a logical basis of differentiation (that) deserves protection from any
distorting statutory wage increase." Otherwise, he added, "a minimum
wage statute that seek to uplift the economic condition of labor would
itself destroy the mechanism of collective bargaining which, with
perceived stability, has been labor's constitutional and regular source
of wage increase for so long a time now." Thus, since the "subjective
quantitative difference" between wage rates had been reduced from
P900.00 to barely P150.00, correction of the wage distortion pursuant
to Section 4(c) of the Rules Implementing Republic Act 6727 should be
made.
The labor arbiter disposed of the case, thus:
WHEREFORE, premises considered, the
respondent is hereby directed to restore to
complainants and their members the Nine Hundred
(P900.00) Pesos CBA wage gap they used to enjoy
over non-regular employees as of January 1, 1989
by granting them a Seven Hundred Fifty (P750.00)
Pesos monthly increase effective July 1, 1989.
SO ORDERED.2
The bank appealed to the NLRC. On 31 May 1991, the NLRC Second
Division, by a vote of 2 to 1, reversed the decision of the Labor Arbiter.
Speaking, through Commissioners Rustico L. Diokno and Domingo H.
Zapanta, the NLRC said:
. . . a wage distortion can arise only in a situation
where the salary structure is characterized by
intentional quantitative differences among
employee groups determined or fixed on the basis
of skills, length of service, or other logical basis of
differentiation and such differences or distinction
are obliterated (In Re: Labor Dispute at the Bank of
the Philippine Islands, NCMB-RB-7-11-096-89,
Secretary of Labor and Employment, February 18,
1991).
As applied in this case, We noted that in the new
wage salary structure, the wage gaps between
Level 6 and 7 levels 5 and 6, and levels 6 and 7 (sic)
were maintained. While there is a noticeable
decrease in the wage gap between levels 2 and 3,
Levels 3 and 4, and Levels 4 and 5, the reduction in
the wage gaps between said levels is not significant
as to obliterate or result in severe contraction of the
intentional quantitative differences in salary rates
between the employees groups. For this reason, the
basis requirement for a wage in this case. Moreover,
there is nothing in the law which would justify an
across-the-board adjustment of P750.00 as ordered
by the labor Arbiter.
WHEREFORE, premises considered, the appealed
decision is hereby set aside and a new judgment is
hereby entered, dismissing the complaint for lack of
merit.
SO ORDERED.3
In her dissent, Presiding Commissioner Edna Bonto-Perez opined:
There may not be an obliteration nor elimination of
said quantitative distinction/difference aforecited
but clearly there is a contraction. Would such
contraction be severe as to warrant the necessary
correction sanctioned by the law in point, RA 6727?
It is may considered view that the quantitative
intended distinction in pay between the two groups
of workers in respondent company was contracted
by more than fifty (50%) per cent or in particular by
more or less eighty-three (83%) per cent hence,
there is no doubt that there is an evident severe
contraction resulting in the complained of wage
distortion.
Nonetheless, the award of P750.00 per month to all
of herein individual complainants as ordered by the
Labor Arbiter below, to my mind is not the most
equitable remedy at bar, for the same would be an
across the board increase which is not the intention
of RA 6727. For that matter, herein complainants
cannot by right claim for the whole amount of
P750.00 a month or P25.00 per day granted to the
workers covered by the said law in the sense that
they are not covered by the said increase mandated
by RA 6727. They are only entitled to the relief
granted by said law by way of correction of the pay
scale in case of distortion in wages by reason
thereof.
Hence, the formula offered and incorporated in
Wage Order No. IV-02 issued on 21 May 1991 by
the Regional Tripartite Wages and Productivity
Commission for correction of pay scale structures in
case of wage distortion as in the case at bar which
is:

Minimum Wage = % x
Prescribed = Distortion
—————— Increased
Adjustment
Actual Salary
would be the most equitable and fair under the
circumstances obtaining in this case.
For this very reason, I register my dissent from the
majority opinion and opt for the modification of the
Labor Arbiter's decision as afore-discussed.4
The MBTCEU filed a motion for reconsideration of the decision of the
NLRC; having been denied, the MBTCEU and its president filed the
instant petition for certiorari, charging the NLRC with gave abuse of
discretion by its refusal (a) "to acknowledge the existence of a wage
distortion in the wage or salary rates between and among the employee
groups of the respondent bank as a result of the bank's partial
implementation" of Republic Act 6727 and (b) to give due course to its
claim for an across-the-board P25 increase under Republic Act No.
6727.5
We agree with the Solicitor General that the petition is impressed with
merit.6
The term "wage distortion", under the Rules Implementing Republic Act
6727, is defined, thus:
(p) Wage Distortion means a situation where an
increase in prescribed wage rates results in the
elimination or severe contradiction of intentional
quantitative differences in wage or salary rates
between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure based
on skills, length of service, or other logical bases of
differentiation.
The issue of whether or not a wage distortion exists as a consequence
of the grant of a wage increase to certain employees, we agree, is, by
and large, a question of fact the determination of which is the statutory
function of the NLRC.7 Judicial review of labor cases, we may add,
does not go beyond the evaluation of the sufficiency of the evidence
upon which the labor official's findings rest.8 As such, factual findings
of the NLRC are generally accorded not only respect but also finality
provided that its decision are supported by substantial evidence and
devoid of any taint of unfairness of arbitrariness.9 When, however, the
members of the same labor tribunal are not in accord on those aspects
of a case, as in this case, this Court is well cautioned not to be as so
conscious in passing upon the sufficiency of the evidence, let alone the
conclusions derived therefrom.
In this case, the majority of the members of the NLRC, as well as its
dissenting member, agree that there is a wage distortion arising from
the bank's implementation of the P25 wage increase; they do differ,
however, on the extent of the distortion that can warrant the adoption
of corrective measures required by law.
The definition of "wage distortion," 10 aforequoted, shows that such
distortion can so exist when, as a result of an increase in the prescribed
wage rate, an "elimination or severe contraction of intentional
quantitative differences in wage or salary rates" would occur "between
and among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on
skills, length of service, or other logical bases of differentiation." In
mandating an adjustment, the law did not require that there be an
elimination or total abrogation of quantitative wage or salary differences;
a severe contraction thereof is enough. As has been aptly observed by
Presiding Commissioner Edna Bonto-Perez in her dissenting opinion,
the contraction between personnel groupings comes close to eighty-
three (83%), which cannot, by any stretch of imagination, be considered
less than severe.
The "intentional quantitative differences" in wage among employees of
the bank has been set by the CBA to about P900 per month as of 01
January 1989. It is intentional as it has been arrived at through the
collective bargaining process to which the parties are thereby
concluded. 11 The Solicitor General, in recommending the grant of due
course to the petition, has correctly emphasized that the intention of the
parties, whether the benefits under a collective bargaining agreement
should be equated with those granted by law or not, unless there are
compelling reasons otherwise, must prevail and be given effect. 12
In keeping then with the intendment of the law and the agreement of
the parties themselves, along with the often repeated rule that all
doubts in the interpretation and implementation of labor laws should be
resolved in favor of labor, 13 we must approximate an acceptable
quantitative difference between and among the CBA agreed work
levels. We, however, do not subscribe to the labor arbiter's exacting
prescription in correcting the wage distortion. Like the majority of the
members of the NLRC, we are also of the view that giving the
employees an across-the-board increase of P750 may not be
conducive to the policy of encouraging "employers to grant wage and
allowance increases to their employees higher than the minimum rates
of increases prescribed by statute or administrative regulation,"
particularly in this case where both Republic Act 6727 and the CBA
46
allow a credit for voluntary compliance. As the Court, through Associate
Justice Florentino Feliciano, also pointed out in Apex Mining Company,
Inc. v. NLRC: 14
. . . . (T)o compel employers simply to add on
legislated increases in salaries or allowances
without regard to what is already being paid, would
be to penalize employers who grant their workers
more than the statutorily prescribed minimum rates
of increases. Clearly, this would be counter-
productive so far as securing the interests of labor
is concerned. . . .
We find the formula suggested then by Commissioner Bonto-Perez,
which has also been the standard considered by the regional Tripartite
Wages and Productivity Commission for the correction of pay scale
structures in cases of wage distortion, 15 to well be the appropriate
measure to balance the respective contentions of the parties in this
instance. We also view it as being just and equitable.
WHEREFORE, finding merit in the instant petition for certiorari, the
same is GRANTED DUE PROCESS, the questioned NLRC decision is
hereby SET ASIDE and the decision of the labor arbiter is
REINSTATED subject to the MODIFICATION that the wage distortion
in question be corrected in accordance with the formula expressed in
the dissenting opinion of Presiding Commissioner Edna Bonto-Perez.
This decision is immediately executory.
SO ORDERED.
G.R. No. 140689 February 17, 2004
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE
UNIONS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and BANKARD,
INC., respondents.
DECISION
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of the
Rules of Court raises the issue of whether the unilateral adoption by an
employer of an upgraded salary scale that increased the hiring rates of
new employees without increasing the salary rates of old employees
resulted in wage distortion within the contemplation of Article 124 of the
Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level
I, Level II, Level III, Level IV, and Level V. On May 28, 1993, its Board
of Directors approved a "New Salary Scale", made retroactive to April
1, 1993, for the purpose of making its hiring rate competitive in the
industry’s labor market. The "New Salary Scale" increased the hiring
rates of new employees, to wit: Levels I and V by one thousand pesos
(P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum
rates were also adjusted to reach such rates under their levels.
Bankard’s move drew the Bankard Employees Union-WATU
(petitioner), the duly certified exclusive bargaining agent of the regular
rank and file employees of Bankard, to press for the increase in the
salary of its old, regular employees.
Bankard took the position, however, that there was no obligation on the
part of the management to grant to all its employees the same increase
in an across-the-board manner.
As the continued request of petitioner for increase in the wages and
salaries of Bankard’s regular employees remained unheeded, it filed a
Notice of Strike on August 26, 1993 on the ground of discrimination and
other acts of Unfair Labor Practice (ULP).
A director of the National Conciliation and Mediation Board treated the
Notice of Strike as a "Preventive Mediation Case" based on a finding
that the issues therein were "not strikeable".
Petitioner filed another Notice of Strike on October 8, 1993 on the
grounds of refusal to bargain, discrimination, and other acts of ULP -
union busting. The strike was averted, however, when the dispute was
certified by the Secretary of Labor and Employment for compulsory
arbitration.
The Second Division of the NLRC, by Order of May 31, 1995, finding
no wage distortion, dismissed the case for lack of merit.
Petitioner’s motion for reconsideration of the dismissal of the case was,
by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this Court,
docketed as G.R. 121970. In accordance with its ruling in St. Martin
Funeral Homes v. NLRC,1 the petition was referred to the Court of
Appeals which, by October 28, 1999, denied the same for lack of merit.
Hence, the present petition which faults the appellate court as follows:
(1) It misapprehended the basic issues when it concluded that
under Bankard’s new wage structure, the old salary gaps
between the different classification or level of employees
were "still reflected" by the adjusted salary rates 2; and
 47

(2) It erred in concluding that "wage distortion does not Moreover, for purposes of determining the existence of wage distortion,
appear to exist", which conclusion is manifestly contrary to employees cannot create their own independent classification and use
law and jurisprudence.3 it as a basis to demand an across-the-board increase in salary.
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION As National Federation of Labor v. NLRC, et al.10 teaches, the
ACT, amending, among others, Article 124 of the Labor Code) on June formulation of a wage structure through the classification of employees
9, 1989, the term "wage distortion" was explicitly defined as: is a matter of management judgment and discretion.
... a situation where an increase in prescribed wage rates results in the [W]hether or not a new additional scheme of classification of employees
elimination or severe contraction of intentional quantitative differences for compensation purposes should be established by the Company
in wage or salary rates between and among employee groups in an (and the legitimacy or viability of the bases of distinction there
establishment as to effectively obliterate the distinctions embodied in embodied) is properly a matter of management judgment and
such wage structure based on skills, length of service, or other logical discretion, and ultimately, perhaps, a subject matter for
bases of differentiation.4 bargaining negotiations between employer and employees. It is
Prubankers Association v. Prudential Bank and Trust Company 5 laid assuredly something that falls outside the concept of "wage
down the four elements of wage distortion, to wit: (1.) An existing distortion."11 (Emphasis and underscoring supplied)
hierarchy of positions with corresponding salary rates; (2) A significant As did the Court of Appeals, this Court finds that the third element
change in the salary rate of a lower pay class without a concomitant provided in Prubankers is also wanting. For, as the appellate court
increase in the salary rate of a higher one; (3) The elimination of the explained:
distinction between the two levels; and (4) The existence of the In trying to prove wage distortion, petitioner union presented a list of
distortion in the same region of the country. five (5) employees allegedly affected by the said increase:
Normally, a company has a wage structure or method of determining
the wages of its employees. In a problem dealing with "wage distortion,"
the basic assumption is that there exists a grouping or classification of Pay of Old/ Pay of Newly Difference
employees that establishes distinctions among them on some relevant
or legitimate bases.6 Regular Employees Hired Employees
Involved in the classification of employees are various factors such as
the degrees of responsibility, the skills and knowledge required, the A. Prior to April 1, 1993
complexity of the job, or other logical basis of differentiation. The
differing wage rate for each of the existing classes of employees Level I P4,518.75 P3,100 P1,418.75
reflects this classification. (Sammy
Petitioner maintains that for purposes of wage distortion, the Guce)
classification is not one based on "levels" or "ranks" but on two groups
of employees, the newly hired and the old, in each and every level, and Level II P6,242.00 P3,200 P3,042.00
not between and among the different levels or ranks in the salary (Nazario
structure. Abello)
Public respondent National Labor Relations Commission (NLRC)
Level III P4,850.00 P3,300 P1,550.00
refutes petitioner’s position, however. It, through the Office of the
(Arthur
Solicitor General, essays in its Comment of April 12, 2000 as follows:
Chavez)
To determine the existence of wage distortion, the "historical"
classification of the employees prior to the wage increase must be
Level IV P5,339.00 P3,500 P1,839.00
established. Likewise, it must be shown that as between the different
Melissa
classification of employees, there exists a "historical" gap or difference.
Cordero)
xxx
The classification preferred by petitioner is belied by the wage structure Level V P7,090.69 P3,700 P3,390.69
of private respondent as shown in the new salary scale it adopted on (Ma. Lourdes
May 28, 1993, retroactive to April 1, 1993, which provides, thus: Dee)

Hiring Minimum Maximum B. Effective April 1, 1993

Level From To From To From To Level I P4,518.75 P4,100 P418.75

Sammy
Guce)
I 3,100 4,100 3,200 4,200 7,200 9,250
Level II P6,242.00 P4,100 P2,142.00
II 3,200 4,100 3,300 4,200 7,500 9,500
(Nazario
Abello)
III 3,300 4,200 3,400 4,300 8,000 10,000
Level III P4,850.00 P4,200 P650.00
IV 3,500 4,400 3,600 4,500 8,500 10,500
(Arthur
Chavez)
V 3,700 4,700 3,800 4,800 9,000 11,000
Thus the employees of private respondent have been Level IV P5,330.00 P4,400 P939.00
"historically" classified into levels, i.e. I to V, and not on the basis (Melissa
of their length of service. Put differently, the entry of new Cordero)
employees to the company ipso facto place[s] them under any of the
levels mentioned in the new salary scale which private respondent Level V P7,090.69 P4,700 P2,390.69
adopted retroactive [to] April 1, 1993. Petitioner cannot make a contrary (Ma. Lourdes
classification of private respondent’s employees without encroaching Dee)
upon recognized management prerogative of formulating a wage
Even assuming that there is a decrease in the wage gap between the
structure, in this case, one based on level.7 (Emphasis and
pay of the old employees and the newly hired employees, to Our
underscoring supplied)
mind said gap is not significant as to obliterate or result in severe
The issue of whether wage distortion exists being a question of fact that contraction of the intentional quantitative differences in the salary rates
is within the jurisdiction of quasi-judicial tribunals,8 and it being a basic between the employee group. As already stated, the classification
rule that findings of facts of quasi-judicial agencies, like the NLRC, are under the wage structure is based on the rank of an employee, not on
generally accorded not only respect but at times even finality seniority. For this reason, ,wage distortion does not appear to
if they are supported by substantial evidence, as are the findings in the exist.12 (Emphasis and underscoring supplied)
case at bar, they must be respected. For these agencies have acquired
Apart from the findings of fact of the NLRC and the Court of Appeals
expertise, their jurisdiction being confined to specific matters. 9
that some of the elements of wage distortion are absent, petitioner
It is thus clear that there is no hierarchy of positions between the newly cannot legally obligate Bankard to correct the alleged "wage distortion"
hired and regular employees of Bankard, hence, the first element of as the increase in the wages and salaries of the newly-hired was not
wage distortion provided in Prubankers is wanting.lawphi1.nêt due to a prescribed law or wage order.
While seniority may be a factor in determining the wages of employees, The wordings of Article 124 are clear. If it was the intention of the
it cannot be made the sole basis in cases where the nature of their legislators to cover all kinds of wage adjustments, then the language of
work differs. the law should have been broad, not restrictive as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx
 48

Where the application of any prescribed wage increase by virtue of SO ORDERED.

a law or Wage Order issued by any Regional Board results in
distortions of the wage structure within an establishment, the employer
and the union shall negotiate to correct the distortions. Any dispute
arising from the wage distortions shall be resolved through the
grievance procedure under their collective bargaining agreement and,
if it remains unresolved, through voluntary arbitration.
x x x (Italics and emphasis supplied)
Article 124 is entitled "Standards/Criteria for Minimum Wage
Fixing." It is found in CHAPTER V on "WAGE STUDIES, WAGE
AGREEMENTS AND WAGE DETERMINATION" which principally
deals with the fixing of minimum wage. Article 124 should thus be
construed and correlated in relation to minimum wage fixing, the
intention of the law being that in the event of an increase in minimum
wage, the distinctions embodied in the wage structure based on skills,
length of service, or other logical bases of differentiation will be
preserved.
If the compulsory mandate under Article 124 to correct "wage
distortion" is applied to voluntary and unilateral increases by the
employer in fixing hiring rates which is inherently a business judgment
prerogative, then the hands of the employer would be completely tied
even in cases where an increase in wages of a particular group is
justified due to a re-evaluation of the high productivity of a particular
group, or as in the present case, the need to increase the
competitiveness of Bankard’s hiring rate. An employer would be
discouraged from adjusting the salary rates of a particular group of
employees for fear that it would result to a demand by all employees
for a similar increase, especially if the financial conditions of the
business cannot address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to support
its claim that the obligation to rectify wage distortion is not confined to
wage distortion resulting from government decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the obligation
therein to rectify the wage distortion was not by virtue of Article 124 of
the Labor Code, but on account of a then existing "company practice"
that whenever rank-and-file employees were paid a statutorily
mandated salary increase, supervisory employees were, as a matter
of practice, also paid the same amount plus an added premium. Thus
this Court held in said case:
We conclude that the supervisory employees, who then (i.e., on April
17, 1989) had, unlike the rank-and-file employees, no CBA governing
the terms and conditions of their employment, had the right to rely on
the company practice of unilaterally correcting the wage distortion
effects of a salary increase given to the rank-and-file employees, by
giving the supervisory employees a corresponding salary increase plus
a premium. . . .14 (Emphasis supplied)
Wage distortion is a factual and economic condition that may be
brought about by different causes. In Metro Transit, the reduction or
elimination of the normal differential between the wage rates of rank-
and-file and those of supervisory employees was due to the granting to
the former of wage increase which was, however, denied to the latter
group of employees.
The mere factual existence of wage distortion does not, however, ipso
facto result to an obligation to rectify it, absent a law or other source of
obligation which requires its rectification.
Unlike in Metro Transit then where there existed a "company practice,"
no such management practice is herein alleged to obligate Bankard to
provide an across-the-board increase to all its regular employees.
Bankard’s right to increase its hiring rate, to establish minimum salaries
for specific jobs, and to adjust the rates of employees affected thereby
is embodied under Section 2, Article V (Salary and Cost of Living
Allowance) of the parties’ Collective Bargaining Agreement (CBA), to
wit:
Section 2. Any salary increase granted under this Article shall
be without prejudice to the right of the Company to establish such
minimum salaries as it may hereafter find appropriate for specific jobs,
and to adjust the rates of the employees thereby affected to such
minimum salaries thus established.15 (Italics and underscoring supplied)
This CBA provision, which is based on legitimate business-judgment
prerogatives of the employer, is a valid and legally enforceable source
of rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates
by an employer was done arbitrarily and illegally for the purpose of
circumventing the laws or was devoid of any legitimate purpose other
than to discriminate against the regular employees, this Court will not
step in to interfere with this management prerogative. Employees are
of course not precluded from negotiating with its employer and lobby
for wage increases through appropriate channels, such as through a
CBA.
This Court, time and again, has shown concern and compassion to the
plight of workers in adherence to the Constitutional provisions on social
justice and has always upheld the right of workers to press for better
terms and conditions of employment. It does not mean, however, that
every dispute should be decided in favor of labor, for employers
correspondingly have rights under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED.

D. 13TH MONTH PAY
G.R. No. 166208 June 29, 2007
KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and
MELISSA LIM, petitioners,
vs.
SANTIAGO O. MAMAC, respondent.
DECISION
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the employee a breach of
the procedural due process? This is the main issue to be resolved in
this plea for review under Rule 45 of the September 16, 2004
Decision1 of the Court of Appeals (CA) in CA-GR SP No. 81961. Said
judgment affirmed the dismissal of bus conductor Santiago O. Mamac
from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus
company to pay full backwages for violation of the twin-notice
requirement and 13th-month pay. Likewise assailed is the December 2,
2004 CA Resolution2 rejecting KKTI’s Motion for Reconsideration.
The Facts
Petitioner KKTI is a corporation engaged in public transportation and
managed by Claire Dela Fuente and Melissa Lim.
Respondent Mamac was hired as bus conductor of Don Mariano
Transit Corporation (DMTC) on April 29, 1999. The DMTC employees
including respondent formed the Damayan ng mga Manggagawa,
Tsuper at Conductor-Transport Workers Union and registered it with
the Department of Labor and Employment. Pending the holding of a
certification election in DMTC, petitioner KKTI was incorporated with
the Securities and Exchange Commission which acquired new buses.
Many DMTC employees were subsequently transferred to KKTI and
excluded from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa
King of Kings (KKKK) which was registered with DOLE. Respondent
was elected KKKK president.
Respondent was required to accomplish a "Conductor’s Trip Report"
and submit it to the company after each trip. As a background, this
report indicates the ticket opening and closing for the particular day of
duty. After submission, the company audits the reports. Once an
irregularity is discovered, the company issues an "Irregularity Report"
against the employee, indicating the nature and details of the
irregularity. Thereafter, the concerned employee is asked to explain the
incident by making a written statement or counter-affidavit at the back
of the same Irregularity Report. After considering the explanation of the
employee, the company then makes a determination of whether to
accept the explanation or impose upon the employee a penalty for
committing an infraction. That decision shall be stated on said
Irregularity Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductor’s Report of respondent,
KKTI noted an irregularity. It discovered that respondent declared
several sold tickets as returned tickets causing KKTI to lose an income
of eight hundred and ninety pesos. While no irregularity report was
prepared on the October 28, 2001 incident, KKTI nevertheless asked
respondent to explain the discrepancy. In his letter,3 respondent said
that the erroneous declaration in his October 28, 2001 Trip Report was
unintentional. He explained that during that day’s trip, the windshield of
the bus assigned to them was smashed; and they had to cut short the
trip in order to immediately report the matter to the police. As a result
of the incident, he got confused in making the trip report.
On November 26, 2001, respondent received a letter 4 terminating his
employment effective November 29, 2001. The dismissal letter alleged
that the October 28, 2001 irregularity was an act of fraud against the
company. KKTI also cited as basis for respondent’s dismissal the other
offenses he allegedly committed since 1999.
On December 11, 2001, respondent filed a Complaint for illegal
dismissal, illegal deductions, nonpayment of 13th-month pay, service
incentive leave, and separation pay. He denied committing any
infraction and alleged that his dismissal was intended to bust union
activities. Moreover, he claimed that his dismissal was effected without
due process.
In its April 3, 2002 Position Paper,5 KKTI contended that respondent
was legally dismissed after his commission of a series of misconducts
and misdeeds. It claimed that respondent had violated the trust and
confidence reposed upon him by KKTI. Also, it averred that it had
observed due process in dismissing respondent and maintained that
respondent was not entitled to his money claims such as service
incentive leave and 13th-month pay because he was paid on
commission or percentage basis.
On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes
rendered judgment dismissing respondent’s Complaint for lack of
merit.6
Aggrieved, respondent appealed to the National Labor Relations
Commission (NLRC). On August 29, 2003, the NLRC rendered a
Decision, the dispositive portion of which reads:
WHEREFORE, the decision dated 16 September 2002 is MODIFIED
in that respondent King of Kings Transport Inc. is hereby ordered to
indemnify complainant in the amount of ten thousand pesos (P10,000)
for failure to comply with due process prior to termination.
49
The other findings are AFFIRMED.
SO ORDERED.7
Respondent moved for reconsideration but it was denied through the
November 14, 2003 Resolution8 of the NLRC.
Thereafter, respondent filed a Petition for Certiorari before the CA
urging the nullification of the NLRC Decision and Resolution.
The Ruling of the Court of Appeals
Affirming the NLRC, the CA held that there was just cause for
respondent’s dismissal. It ruled that respondent’s act in "declaring sold
tickets as returned tickets x x x constituted fraud or acts of dishonesty
justifying his dismissal."9
Also, the appellate court sustained the finding that petitioners failed to
comply with the required procedural due process prior to respondent’s
termination. However, following the doctrine in Serrano v. NLRC, 10 it
modified the award of PhP 10,000 as indemnification by awarding full
backwages from the time respondent’s employment was terminated
until finality of the decision.
Moreover, the CA held that respondent is entitled to the 13th-month pay
benefit.
Hence, we have this petition.
The Issues
Petitioner raises the following assignment of errors for our
consideration:
Whether the Honorable Court of Appeals erred in awarding in favor of
the complainant/private respondent, full back wages, despite the denial
of his petition for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI did
not comply with the requirements of procedural due process before
dismissing the services of the complainant/private respondent.
Whether the Honorable Court of Appeals rendered an incorrect
decision in that [sic] it awarded in favor of the complaint/private
respondent, 13th month pay benefits contrary to PD 851. 11
The Court’s Ruling
The petition is partly meritorious.
The disposition of the first assigned error depends on whether
petitioner KKTI complied with the due process requirements in
terminating respondent’s employment; thus, it shall be discussed
secondly.
Non-compliance with the Due Process Requirements
Due process under the Labor Code involves two aspects: first,
substantive––the valid and authorized causes of termination of
employment under the Labor Code; and second, procedural––the
manner of dismissal.12 In the present case, the CA affirmed the findings
of the labor arbiter and the NLRC that the termination of employment
of respondent was based on a "just cause." This ruling is not at issue
in this case. The question to be determined is whether the procedural
requirements were complied with.
Art. 277 of the Labor Code provides the manner of termination of
employment, thus:
Art. 277. Miscellaneous Provisions.––x x x
(b) Subject to the constitutional right of workers to security of tenure
and their right to be protected against dismissal except for a just and
authorized cause without prejudice to the requirement of notice under
Article 283 of this Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department
of Labor and Employment. Any decision taken by the employer shall be
without prejudice to the right of the worker to contest the validity or
legality of his dismissal by filing a complaint with the regional branch of
the National Labor Relations Commission. The burden of proving that
the termination was for a valid or authorized cause shall rest on the
employer.
Accordingly, the implementing rule of the aforesaid provision states:
SEC. 2. Standards of due process; requirements of notice.––In all
cases of termination of employment, the following standards of due
process shall be substantially observed:
I. For termination of employment based on just causes as defined in
Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving said employee reasonable
opportunity within which to explain his side.
(b) A hearing or conference during which the employee concerned, with
the assistance of counsel if he so desires is given opportunity to
respond to the charge, present his evidence, or rebut the evidence
presented against him.
(c) A written notice of termination served on the employee, indicating
that upon due consideration of all the circumstances, grounds have
been established to justify his termination. 13
In case of termination, the foregoing notices shall be served on the
employee’s last known address.14

To clarify, the following should be considered in terminating the
services of employees:
(1) The first written notice to be served on the employees should
contain the specific causes or 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.15 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.
In the instant case, KKTI admits that it had failed to provide respondent
with a "charge sheet."16 However, it maintains that it had substantially
complied with the rules, claiming that "respondent would not have
issued a written explanation had he not been informed of the charges
against him."17
We are not convinced.
First, respondent was not issued a written notice charging him of
committing an infraction. The law is clear on the matter. A verbal
appraisal of the charges against an employee does not comply with the
first notice requirement. In Pepsi Cola Bottling Co. v. NLRC,18 the Court
held that consultations or conferences are not a substitute for the actual
observance of notice and hearing. Also, in Loadstar Shipping Co., Inc.
v. Mesano,19 the Court, sanctioning the employer for disregarding the
due process requirements, held that the employee’s written explanation
did not excuse the fact that there was a complete absence of the first
notice.
Second, even assuming that petitioner KKTI was able to furnish
respondent an Irregularity Report notifying him of his offense, such
would not comply with the requirements of the law. We observe from
the irregularity reports against respondent for his other offenses that
such contained merely a general description of the charges against him.
The reports did not even state a company rule or policy that the
employee had allegedly violated. Likewise, there is no mention of any
of the grounds for termination of employment under Art. 282 of the
Labor Code. Thus, KKTI’s "standard" charge sheet is not sufficient
notice to the employee.
Third, no hearing was conducted. Regardless of respondent’s written
explanation, a hearing was still necessary in order for him to clarify and
present evidence in support of his defense. Moreover, respondent
made the letter merely to explain the circumstances relating to the
irregularity in his October 28, 2001 Conductor’s Trip Report. He was
unaware that a dismissal proceeding was already being effected. Thus,
he was surprised to receive the November 26, 2001 termination letter
indicating as grounds, not only his October 28, 2001 infraction, but also
his previous infractions.
Sanction for Non-compliance with Due Process Requirements
As stated earlier, after a finding that petitioners failed to comply with the
due process requirements, the CA awarded full backwages in favor of
respondent in accordance with the doctrine in Serrano v.
NLRC.20 However, the doctrine in Serrano had already been
abandoned in Agabon v. NLRC by ruling that if the dismissal is done
without due process, the employer should indemnify the employee with
nominal damages.21
Thus, for non-compliance with the due process requirements in the
termination of respondent’s employment, petitioner KKTI is sanctioned
to pay respondent the amount of thirty thousand pesos (PhP 30,000)
as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree No.
85122 provides the exceptions in the coverage of the payment of the
13th-month benefit. The provision states:
50
SEC. 3. Employers covered.––The Decree shall apply to all employers
except to:
xxxx
e) Employers of those who are paid on purely commission, boundary,
or task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which
case the employer shall be covered by this issuance insofar as such
workers are concerned.
Petitioner KKTI maintains that respondent was paid on purely
commission basis; thus, the latter is not entitled to receive the 13th-
month pay benefit. However, applying the ruling in Philippine
Agricultural Commercial and Industrial Workers Union v. NLRC,23 the
CA held that respondent is entitled to the said benefit.
It was erroneous for the CA to apply the case of Philippine Agricultural
Commercial and Industrial Workers Union. Notably in the said case, it
was established that the drivers and conductors praying for 13th- month
pay were not paid purely on commission. Instead, they were receiving
a commission in addition to a fixed or guaranteed wage or salary. Thus,
the Court held that bus drivers and conductors who are paid a fixed or
guaranteed minimum wage in case their commission be less than the
statutory minimum, and commissions only in case where they are over
and above the statutory minimum, are entitled to a 13th-month pay
equivalent to one-twelfth of their total earnings during the calendar year.
On the other hand, in his Complaint,24 respondent admitted that he was
paid on commission only. Moreover, this fact is supported by his pay
slips25 which indicated the varying amount of commissions he was
receiving each trip. Thus, he was excluded from receiving the 13th-
month pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September
16, 2004 Decision of the CA is MODIFIED by deleting the award of
backwages and 13th-month pay. Instead, petitioner KKTI is ordered to
indemnify respondent the amount of thirty thousand pesos (PhP 30,000)
as nominal damages for failure to comply with the due process
requirements in terminating the employment of respondent.
No costs.
SO ORDERED.
G.R. No. 160233 August 8, 2007
ROGELIO REYES, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Fifth Division, and
UNIVERSAL ROBINA CORPORATION GROCERY
DIVISION, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court
seeks to reverse the November 14, 2002 Decision1 of the Court of
Appeals in CA-G.R. SP No. 64799, affirming the Decision of the
National Labor Relations Commission (NLRC) which modified the
Decision of the Labor Arbiter as regards the awards of retirement pay
and 13th month pay, and deleted the award of attorney’s fees; as well
as the August 19, 2003 Resolution2 denying the motion for
reconsideration.
Petitioner was employed as a salesman at private respondent’s
Grocery Division in Davao City on August 12, 1977. He was eventually
appointed as unit manager of Sales Department-South Mindanao
District, a position he held until his retirement on November 30,
1997.3 Thereafter, he received a letter regarding the computation of his
separation pay, to wit:
September 10, 1998
MR. ROGELIO J. REYES
#2 San Nicolas Street
Skyline Village, Catalunan Grande
Davao City 8000
Dear Mr. Reyes,
This is in reply to your letter dated August 10, 1998, a copy of which
was received by the undersigned only on September 2, 1998.
We wish to advise you that per our computation, your separation pay
amounts to:
Retirement benefit (computed at 50% pay for
every year of service, a fraction of at least 6 Php 109,192.20
months considered as 1 year)
VL Cash Conversion (144 hours) 7,511.31
SL Cash Conversion (120 hours) 3,129.72
Financial Assistance (as approved by LY
Gokongwei in Memo dated November 4, 1997) 30,000.00

Final Accountability/Accounting
Tax Refund 16,699.35
13th Month Pay 10,919.22
Withheld Commission
November 1997 30,000.00
Salary Overpaid ( 834.59)
Lost Pager ( 6,295.00) 50,488.98
TOTAL Php 200,322.21
This computation is pursuant to Company policy and practice. We are
unable to agree with your suggested basis of computation as they are
without legal basis. Also, we regret that we cannot pay you the Sales
Commission and Tax Refund ahead of the other payments.
Kindly get in touch with us at 671-7098 if you have any questions.
Very truly yours,
(SGD) ATTY. MANUEL R. DEL ROSARIO
Group Human Resources Director
cc: Mr. Lance Gokongwei
Atty. Danny Bolos
Mr. Al Bacleon4
Insisting that his retirement benefits and 13th month pay must be based
on the average monthly salary of ₱42,766.19, which consists of
₱10,919.22 basic salary and ₱31,846.97 average monthly commission,
petitioner refused to accept the check5 issued by private respondent in
the amount of ₱200,322.21.6 Instead, he filed a complaint before the
arbitration branch of the NLRC for retirement benefits, 13th month pay,
tax refund, earned sick and vacation leaves, financial assistance,
service incentive leave pay, damages and attorney’s fees. 7
On March 15, 1999, Labor Arbiter Miriam A. Libron-Barroso rendered
a decision holding that sales commission is part of the basic salary of
a unit manager, thus:
WHEREFORE, JUDGMENT IS HEREBY RENDERED ordering
respondent Universal Robina Corporation-Grocery Division to pay
complainant the net amount of PESOS: NINE HUNDRED ELEVEN
THOUSAND SIX HUNDRED NINETY NINE AND 92/100 (₱911,699.92)
representing his retirement benefits, 13th month pay for 1997, 13th
month pay differential for 1996 and 1995, VL and SL Cash conversion,
withheld commission for 1997, financial assistance and tax refund plus
attorney’s fees equivalent to 5% of the total award.
All other claims are dismissed for lack of basis.
SO ORDERED.8
On appeal, the NLRC modified the decision of the Labor Arbiter by
excluding the overriding commission in the computation of the
retirement benefits and 13th month pay and deleted the award of
attorney’s fees, thus:
WHEREFORE, judgment is rendered:
1. Affirming with modification the decision appealed from
insofar as the award of retirement pay and 13th month pay to
the effect that same be computed based on the ₱10,919.22
basic salary to the exclusion of the overriding commissions of
complainant.
2. Affirming in toto the award of VL cash conversion, SL cash
conversion, tax refund, withheld commission and financial
assistance.
3. Deleting the award of attorney’s fees for lack of merit.
SO ORDERED.9
Both parties moved for reconsideration of the NLRC decision but were
denied by the NLRC for lack of merit. Only petitioner filed a petition for
certiorari before the Court of Appeals but was dismissed for lack of
merit.
Petitioner’s motion for reconsideration was denied; hence this petition
raising the sole issue:
WHETHER OR NOT THE AVERAGE MONTHLY SALES
COMMISSION OF THIRTY ONE THOUSAND EIGHT HUNDRED
FORTY SIX AND 97/100 (Php 31,846.97) SHOULD BE INCLUDED IN
THE COMPUTATION OF HIS RETIREMENT BENEFITS AND 13th
MONTH PAY.10
Petitioner contends that the commissions form part of the basic salary,
citing the case of Philippine Duplicators, Inc. v. National Labor
Relations Commission,11 wherein the Court held that commissions
earned by salesmen form part of their basic salary.12
Private respondent counters that petitioner knew that the overriding
commission is not included in the basic salary because it had not been
considered as such for a long time in the computation of the 13th month
pay, leave commissions, absences and tardiness. Petitioner himself
stated in the complaint that his basic salary is ₱10,919.22, thus, he is
estopped from claiming otherwise. Moreover, in Boie-Takeda
Chemicals, Inc. v. De la Serna,13 the Supreme Court held that the fixed
or guaranteed wage is patently "the basic salary" for this is what the
employee receives for a standard work period, and that commissions
are given for extra efforts exerted in consummating sales or other
transactions. Also, in Soriano v. National Labor Relations
Commission,14 the Court clarified that overriding commission is not
properly includible in the basic salary as it must be earned by actual
51
market transactions attributable to the claimant. Thus, as a unit
manager who supervised the salesmen under his control and did not
enter into actual sale transactions, petitioner’s overriding commissions
must not be considered in the computation of the retirement benefits
and 13th month pay.15
The petition lacks merit. Any seeming inconsistencies between
Philippine Duplicators and Boie-Takeda had been clarified by the Court
in the Resolution dated February 15, 1995 in the Philippine Duplicators
case.16
The Court thus clarified that in Philippine Duplicators, the salesmen’s
commissions, comprising a pre-determined percentage of the selling
price of the goods sold by each salesman, were properly included in
the term basic salary for purposes of computing the 13th month pay.
The salesmen’s commission are not overtime payments, nor profit-
sharing payments nor any other fringe benefit, 17 but a portion of the
salary structure which represents an automatic increment to the
monetary value initially assigned to each unit of work rendered by a
salesman.18
Contrarily, in Boie-Takeda, the so-called commissions paid to or
received by medical representatives of Boie-Takeda Chemicals or by
the rank and file employees of Philippine Fuji Xerox Co., were excluded
from the term basic salary because these were paid to the medical
representatives and rank-and-file employees as productivity bonuses,
which are generally tied to the productivity, or capacity for revenue
production, of a corporation and such bonuses closely resemble profit-
sharing payments and have no clear direct or necessary relation to the
amount of work actually done by each individual employee. 19 Further,
commissions paid by the Boie-Takeda Company to its medical
representatives could not have been sales commissions in the same
sense that Philippine Duplicators paid the salesmen their sales
commissions. Medical representatives are not salesmen; they do not
effect any sale of any article at all.20
In fine, whether or not a commission forms part of the basic salary
depends upon the circumstances or conditions for its payment, which
indubitably are factual in nature for they will require a re-examination
and calibration of the evidence on record. Thus, our review thereof in
the case at bar would violate the settled rule that findings of facts of
quasi-judicial bodies like the NLRC, and affirmed by the Court of
Appeals in due course, are conclusive on this Court, which is not a trier
of facts.21 Nevertheless, should petitioner’s commissions be
considered in the computation of his retirement benefits and 13th
month pay?
We rule in the negative.
Article 287 of the Labor Code, as amended by Republic Act No. 7641,
otherwise known as The New Retirement Law, 22 provides:
Art. 287. Retirement. — Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement
or other applicable employment contract.
xxxx
In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an employee
upon reaching the age of sixty (60) years or more, but not beyond sixty
five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at least one
half (1/2) month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one half (1/2)
month salary shall mean fifteen (15) days plus one twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days
of service incentive leaves.
And, Section 5 of Rule II of the Rules Implementing the New Retirement
Law, provides:
RULE II
Retirement Benefits
xxxx
Section 5. Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an
employee who retires pursuant to the Act shall be entitled to retirement
pay equivalent to at least one-half (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one
whole year.
5.2 Components of One-half (1/2) Month Salary. – For the purpose of
determining the minimum retirement pay due an employee under this
Rule, the term "one-half-month salary" shall include all the following:
(a) Fifteen (15) days salary of the employee based on his
latest salary rate. As used herein, the term "salary" includes
all remunerations paid by an employer to his employees for
services rendered during normal working days and hours,
whether such payments are fixed or ascertained on a time,
task, piece or commission basis, or other method of
calculating the same, and includes the fair and reasonable
value, as determined by the Secretary of Labor and
Employment, of food, lodging, or other facilities customarily
furnished by the employer to his employees. The term does
not include cost of living allowance, profit-sharing payments

and other monetary benefits which are not considered as part
of or integrated into the regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of
service incentive leave.
(c) One-twelfth of the 13 month pay due the employee.
(d) All other benefits that the employer and employee may
agree upon that should be included in the computation of the
employee’s retirement pay. (Emphasis supplied)
The article provides for two types of retirement: (a) compulsory and (b)
optional. The first takes place at age 65, while the second is primarily
determined by the collective bargaining agreement or other
employment contract or employer’s retirement plan. In the absence of
any provision on optional retirement in a collective bargaining
agreement, other employment contract, or employer’s retirement plan,
an employee may optionally retire upon reaching the age of 60 years
or more, but not beyond 65 years, provided he has served at least five
years in the establishment concerned.
For the purpose of computing retirement pay, "one-half month salary"
shall include all of the following:
1) 15 days salary based on the latest salary rate;
2) cash equivalent of 5 days of service incentive leave (or
vacation leave);
3) 1/12 of the 13th month pay;
4) other benefits as may be agreed upon by employer and
employee for inclusion.
But, it shall not include the following:
1) cost of living allowance;
2) profit-sharing payments; and
3) other monetary benefits which are not considered as part
of or integrated into the regular salary of the employees
Petitioner filed for optional retirement upon reaching the age of 60.
However, the basis in computing his retirement benefits is his latest
salary rate of ₱10,919.22 as the commissions he received are in the
form of profit-sharing payments specifically excluded by the foregoing
rules.
As aptly observed by the Court of Appeals:
In fine, Boie-Takeda and Philippine Duplicator particularize the types of
earnings and remuneration that should or should not properly be
included or integrated in the basic salary and which questions are to be
resolved or determined on a case-to-case basis, in the light of the
specific and detailed facts of each case. In other words, when these
earnings and remuneration are closely akin to fringe benefits, overtime
pay or profit-sharing statements, they are properly excluded in
computing retirement pay. However, sales commissions which are
effectively an integral portion of the basic salary structure of an
employee, shall be included in determining the retirement pay.
At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of
₱10,919.22 as salary corresponding to his position as Unit Manager.
Thus, as correctly ruled by public respondent NLRC, the "overriding
commissions" paid to him by Universal Robina Corp. could not have
been ‘sales commissions’ in the same sense that Philippine Duplicators
paid its salesmen sales commissions. Unit Managers are not salesmen;
they do not effect any sale of article at all. Therefore, any commission
which they receive is certainly not the basic salary which measures the
standard or amount of work of complainant as Unit Manager.
Accordingly, the additional payments made to petitioner were not in fact
sales commissions but rather partook of the nature of profit-sharing
business. Certainly, from the foregoing, the doctrine in Boie-Takeda
Chemicals and Philippine Fuji Xerox Corporation, which pronounced
that commissions are additional pay that does not form part of the basic
salary, applies to the present case.23
Aside from the fact that as unit manager petitioner did not enter into
actual sale transactions, but merely supervised the salesmen under his
control, the disputed commissions were not regularly received by him.
Only when the salesmen were able to collect from the sale transactions
can petitioner receive the commissions. Conversely, if no collections
were made by the salesmen, then petitioner would receive no
commissions at all.24 In fine, the commissions which petitioner received
were not part of his salary structure but were profit-sharing payments
and had no clear, direct or necessary relation to the amount of work he
actually performed. The collection made by the salesmen from the sale
transactions was the profit of private respondent from which petitioner
had a share in the form of a commission.
It may be argued that petitioner may have exerted efforts in pushing the
salesmen to close more sale transactions; however, it is not the
criterion which would entitle him to a commission, but the actual sale
transactions brought about by the individual efforts of the salesmen.
Insofar as what constitutes "basic salary," the foregoing discussions
equally apply to the computation of petitioner’s 13th month pay. As held
in San Miguel Corporation v. Inciong:25
Under Presidential Decree 851 and its implementing rules, the basic
salary of an employee is used as the basis in the determination of his
13th-month pay. Any compensations or remunerations which are
deemed not part of the basic pay is excluded as basis in the
computation of the mandatory bonus.
52
Under the Rules and Regulations Implementing Presidential Decree
851, the following compensations are deemed not part of the basic
salary:
a) Cost-of-living allowances granted pursuant to Presidential
Decree 525 and Letter of Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not
considered or integrated as part of the regular basic salary of
the employee at the time of the promulgation of the Decree
on December 16, 1975. (Emphasis supplied)
Finally, considering that the computations, as well as the propriety of
the awards, are unquestionably factual issues that have been
discussed and ruled upon by NLRC and affirmed by the Court of
Appeals, we cannot depart from such findings. 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. Such findings deserve full respect and, without
justifiable reason, ought not to be altered, modified or reversed.26
WHEREFORE, the petition is DENIED. The November 14, 2002
Decision of the Court of Appeals in CA-G.R. SP No. 64799, affirming
the Decision of the National Labor Relations Commission, which
modified the Decision of the Labor Arbiter with respect to the awards of
retirement pay and 13th month pay, and deleted the award of attorney’s
fees is AFFIRMED in toto.
SO ORDERED.
(CENTRAL AZUCARERA DE TARLAC vs. CENTRAL AZUCARERA
DE TARLAC LABOR UNION-NLU)
E. SEPARATION PAY
G.R. No. 141464 September 21, 2005
GRANDSPAN DEVELOPMENT CORPORATION, Petitioner,
vs.
RICARDO BERNARDO, ANTONINO CEÑIDOZA and EDGARDO
DEL PRADO, surviving parent of EDGAR DEL
PRADO, Respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, assailing the Decision 1 dated
September 17, 1999 and Resolution2 dated January 6, 2000 rendered
by the Court of Appeals in CA-G.R. SP No. 50610, entitled "Ricardo
Bernardo, Antonino Ceñidoza and Edgardo Del Prado, as surviving
parent of Edgar Del Prado vs. National Labor Relations Commission,
Grandspan Development Corporation and Joaquin Narag doing
business under the name & style of J. Narag Construction."
The instant controversy stemmed from a complaint for illegal dismissal
and non-payment of benefits filed with the Labor Arbiter by Ricardo
Bernardo, Antonino Ceñidoza and Edgar Del
Prado, respondents, against Grandspan Development
Corporation, petitioner, and/or its warehouse manager, Manuel G. Lee,
docketed as NLRC Case No. RAB-IV-11-4605-92-RI.
Respondents, in their complaint, alleged that sometime in 1990, they
were employed as truck scale monitors by petitioner with a daily salary
of ₱104.00 each. Eventually, they were assigned at its Truck Scale
Section of the Warehouse/Materials Department. They were issued
identification cards signed by Bonifacio Selmo, petitioner’s personnel
manager. On October 28, 1992, petitioner sent them a notice
terminating their services effective October 29, 1992 for using profane
or offensive language, in violation of Article VI (2) (a) of the company’s
Rules and Regulations.
Petitioner denied the allegations of respondents in their complaint,
claiming that they are employees of J. Narag Construction. Sometime
in the third quarter of 1992, Canad Japan Co., Ltd. engaged petitioner’s
services for fabrication works of several round and rectangular steel
tanks needed for the HCMG or Sogo project due for completion in
September, 1992. As a consequence, petitioner subcontracted the
services of J. Narag Construction which, in turn, assigned its 3 helpers
(herein respondents) to work for petitioner’s project. Sometime in
October, 1992, Manuel G. Lee, manager of petitioner’s Warehouse
Department received a report from supervisor Robert Ong that
respondents vandalized the company’s log book and chairs. This
prompted petitioner to send J. Narag Construction a memorandum
terminating the services of respondents for violation of the company’s
Rules and Regulations.
After the submission of the parties’ pleadings and position papers, the
Labor Arbiter rendered a Decision dated June 30, 1994 dismissing
respondents’ complaint. In concluding that respondents were validly
dismissed from employment, the Labor Arbiter held that they were

project employees whose services were terminated upon completion of
the project for which they were hired.
Upon appeal, the National Labor Relations Commission (NLRC) issued
a Resolution dated March 7, 1995 remanding the case to the Labor
Arbiter for appropriate proceedings to determine whether there is an
employer-employee relationship between the parties.
Both parties filed their respective motions for reconsideration but were
denied by the NLRC in separate Resolutions dated April 28, 1995 and
May 31, 1995.
Respondents then filed with this Court a petition for certiorari. Pursuant
to our ruling in St. Martin’s Funeral Home vs. NLRC,3 we referred the
petition to the Court of Appeals for its appropriate action and disposition.
Meantime, respondent Del Prado died and was substituted by his
surviving parent, Edgardo Del Prado.
On September 17, 1999, the Appellate Court rendered a Decision
setting aside the NLRC’s Resolutions and ordering petitioner (1) to
reinstate respondents Bernardo and Ceñidoza to their former positions
and pay, jointly and severally with J. Narag Construction, their
backwages and other benefits, and (2) to pay respondent Del Prado his
separation pay.
The Court of Appeals found that respondents are employees of
petitioner; that they were non-project workers; and that they were
denied due process, thus:
"In the instant case, petitioners were assigned to the Truck Scaling
Materials Department of Grandspan. They worked in Grandspan’s
premises using the materials, supplies and equipment of Grandspan.
They were under the supervision of Grandspan as to the manner and
results of their work, and performed services directly connected to the
usual business of respondent Grandspan for the fabrication of heavy
structural components. The memorandum dated 28 October 1992 (p.
75 Rollo) dismissing the petitioners in fact emanated from Grandspan
Materials Manager Manuel G. Lee and is addressed to the Personnel
Department of Grandspan, albeit containing the self-serving claim that
the employees-petitioners were ‘J. Narag Construction personnel’.
Under the circumstances, We rule that J. Narag was a labor-only
contractor. While petitioners were in J. Narag Construction’s payroll,
such fact does not per se establish J. Narag Construction as an
independent contractor, i.e., the employer of the petitioners. x x x.
xxxxxx
The Office of the Solicitor General opines that petitioners were non-
project employees as they were assigned at Grandspan’s Materials
Department. We agree. Moreover, if petitioners were truly project
employees, private respondents should have presented proof that they
submitted to the nearest public employment office a report of
termination of service of their project employees upon completion of the
construction project, as required by Policy Instruction No. 20. x x x.
Going now to the issue of whether or not petitioners were illegally
dismissed, We rule in the affirmative. In the letter/memo dated 28
October 1992 (Rollo, p. 75), by which Grandspan ostensibly requested
J. Narag to terminate petitioners’ contract immediately, the reason cited
for the dismissal was violation of Article VI 2.a. of company Rules and
Regulations (the use of profane or offensive languages addressed to
company officers) committed, according to the petitioners, through the
vandalism of logbooks and office furniture at the Truck Scale Section
of the Warehouse/Materials Department with obscene drawings. x x x.
However, this is not supported by substantial evidence which is
necessary in order that petitioners may be dismissed for just cause.
Considering that private respondent failed to discharge the burden of
proof reposed on it to show that the dismissal was justified, the
inevitable result is a finding that the dismissal was unjustified (Uy vs.
NLRC, 261 SCRA 505; Caurdanetaan Piece Workers Union vs.
Laguesma, 296 SCRA 401).
Moreover, petitioners were not given ample opportunity to prepare
adequately for their defense, including legal representation (Abiera vs.
NLRC, supra; Pangasinan III Electric Cooperative, Inc. vs. NLRC, 215
SCRA 669), nor were they served notice of investigation, nor given an
opportunity to be heard. This violates the requirement of notice and
hearing in case of employee dismissal, thus petitioners’ dismissal was
void (Abiera vs. NLRC, 202 SCRA 7; Falguera vs. Lansangan, 251
SCRA 364).
As illegally dismissed employees, petitioners are protected by Article
279 of the Labor Code, x x x.
In the case of petitioner Edgar del Prado, now deceased and
represented in this petition by his surviving parent Edgardo del Prado,
reinstatement is no longer possible, thus he should be paid separation
pay equivalent to one month salary for every year of service in addition
to backwages (International Phamaceuticals, Inc. vs. NLRC, 287 SCRA
228).
WHEREFORE, finding merit in the petition, the same is GRANTED.
The assailed NLRC resolutions dated 7 March 1995 and 28 April 1995
are ANNULLED and SET ASIDE.
Private respondent Grandspan is ordered to reinstate petitioners
Ricardo Bernardo and Antonino Ceñidoza to their former positions
without loss of seniority rights. Grandspan and J. Narag Construction
are declared jointly and severally liable to pay said petitioners full
53
backwages and other benefits and privileges enjoyed by respondent
Grandspan employees.
Private respondents Grandspan and J. Narag Construction are likewise
ordered to pay petitioner Edgardo del Prado, surviving parent of Edgar
del Prado, the latter’s separation pay at the rate of one (1) month salary
for every year of service rendered by the deceased.
SO ORDERED."
On October 8, 1999, petitioner filed a motion for reconsideration.
Respondents also filed a motion for reconsideration and/or clarification
praying that the Appellate Court’s Decision be modified by awarding
respondent Del Prado his backwages.
On January 6, 2000, the Court of Appeals promulgated its Resolution
denying petitioner’s motion for reconsideration but modifying its
Decision in the sense that petitioner and J. Narag Construction are
ordered to pay respondent Del Prado his separation pay and
backwages.
Hence, this petition for review on certiorari.
The issue for our resolution is whether the Court of Appeals erred in
holding that respondents are employees of petitioner.
Petitioner argues that it has no employer-employee relationship with
respondents since they are employees of J. Narag Construction, an
independent contractor.
In Miguel vs. JCT Group, Inc.,4 we held:
"The test for determining an employer-employee relationship hinges on
resolving who has the power to select employees, who pays for their
wages, who has the power to dismiss them, and who exercises control
in the methods and the results by which the work is accomplished."
The Court of Appeals found that J. Narag Construction assigned
respondents to perform activities directly related to the main business
of petitioner. They worked in petitioner’s premises, using its equipment,
materials and supplies. J. Narag Construction’s payroll worksheets
covering the period from December 21, 1990 to July 31, 1991 show that
the payment of their salaries was approved by petitioner. The manager
and supervisor of petitioner’s Warehouse Department supervised the
manner and results of their work. It was petitioner who terminated their
services after finding them guilty of using profane or offensive language
in violation of Article VI (2) (a) of the company’s Rules and Regulations.
The Appellate Court then concluded that these circumstances confirm
the existence of an employer-employee relationship between petitioner
and respondents.
We agree.
Unswayed, petitioner insists that J. Narag Construction, being a
legitimate independent contractor, is the employer of respondents. On
this point, the Court of Appeals held that J. Narag Construction is a
labor-only contractor.
Article 106 of the Labor Code, as amended, provides in part:
"ART. 106. Contractor or subcontracting. – x x x.
xxxxxx
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. x x x."
On the basis of the records, we have no reason to deviate from the
Appellate Court’s finding that J. Narag Construction is indeed a labor-
only contractor. These are the reasons: (1) it is not registered as a
building contractor with the SEC; (2) it has no contract with petitioner;
and (3) there is no proof of its financial capability and has no list of
equipment, tools, machineries and implements used in the business.
Clearly, J. Narag Construction could not be respondents’ employer.
But petitioner maintains that respondents are project employees and
as such, their services ended in September, 1992 upon completion of
its HCMG or Sogo project.
In Kiamco vs. NLRC,5 we held:
"The principal test for determining whether particular employees are
properly characterized as ‘project employees,’ as distinguished from
‘regular employees,’ is whether or not the ‘project employees’ were
assigned to carry out a ‘specific project or undertaking,’ the duration
and scope of which were specified at the time the employees were
engaged for that project. As defined, project employees are those
workers hired (1) for a specific project or undertaking, and (2) the
completion or termination of such project or undertaking has been
determined at the time of engagement of the employee."
Here, petitioner could not present employment contracts signed by
respondents showing that their employment was for the duration of the
HCMG or Sogo project.
Likewise, as correctly observed by the Court of Appeals, petitioner
failed to present any report terminating the services of respondents
when its projects were actually finished.
Section 2.2 (e) of the Labor Department Order No. 19 expressly
provides that the report of termination is one of the indications of project
employment.6

Time and again, we held that failure of the employer to file termination
reports after every project completion with the nearest public
employment office is an indication that respondents were
not project employees.7
We, therefore, uphold the finding of the Court of Appeals that
respondents are petitioner’s regular employees. As such, they are
entitled to security of tenure and can only be dismissed for a just or
authorized cause, as provided by Article 279 of the Labor Code, as
amended, thus:
"ARTICLE 279. Security of Tenure. — In cases of regular employment,
the employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. 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."
In Bolinao Security and Investigation Service, Inc. vs. Toston 8, we
emphasized that "it is incumbent upon the employer to prove by the
quantum of evidence required by law that the dismissal of an employee
is not illegal, otherwise, the dismissal would be unjustified."
Here, petitioner failed to discharge its burden. In terminating
respondents’ services, it merely relied on the alleged completion of the
HCMG or Sogo project and on the report that respondents uttered
profane or offensive language in violation of the company’s Rules and
Regulations. As earlier mentioned, they are not project employees. And
as found by the Court of Appeals, there is no evidence to substantiate
the charge of uttering profane or offensive language.
It also appears that petitioner violated respondents’ right to due process.
In Loadstar Shipping Co., Inc. vs. Mesano, 9 we held:
"The law requires that an employee sought to be dismissed must be
served two written notices before termination of his employment. The
first notice is to apprise the employee of the particular acts or omissions
by reason of which his dismissal has been decided upon; and the
second notice is to inform the employee of the employer’s decision to
dismiss him. Failure to comply with the requirement of two notices
makes the dismissal illegal. The procedure is mandatory. Non-
observance thereof renders the dismissal of an employee illegal and
void."
Records show that respondents were not served by petitioner with
notices, verbal or written, informing them of the particular acts for which
their dismissal is sought. Neither were they required to give their side
regarding the alleged serious misconduct imputed against them.
We thus sustain the Court of Appeals ruling that respondents were
deprived of both their substantive and procedural rights to due
process and, therefore, the termination of their employment is illegal.
Since respondents were illegally dismissed from work, they are entitled
to reinstatement without loss of seniority rights, full backwages,
inclusive of allowances, and other benefits or their monetary
equivalent computed from the time their compensation was withheld
from them up to the time of their actual reinstatement. 10
However, the circumstances obtaining in this case do not warrant the
reinstatement of respondents. Antagonism caused a severe strain in
the parties’ employer-employee relationship. Thus, a more equitable
disposition would be an award of separation pay equivalent to at least
one month pay, or one month pay for every year of service, whichever
is higher, (with a fraction of at least six (6) months being considered as
one (1) whole year),11 in addition to their full backwages, allowances
and other benefits.12
Records show that respondents were employed by petitioner from 1990
to October 29, 1992, or for two (2) years, with a daily salary of ₱104.00
each, hence, entitled to a separation pay of ₱4,992.00. 13
WHEREFORE, the assailed Decision dated September 17, 1999 and
Resolution dated January 6, 2000 of the Court of Appeals in CA-G.R.
SP No. 50610 are hereby AFFIRMED with MODIFICATION in the
sense that petitioner is ordered to pay each respondent separation pay
equivalent to ₱4,992.00, plus their respective full backwages, and other
privileges and benefits, or their monetary equivalent, during the period
of their dismissal up to their supposed actual reinstatement.
Costs against petitioner.
SO ORDERED.
G.R. No. 147719 January 27, 2006
HA YUAN RESTAURANT, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JUVY
SORIA, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Respondent Juvy Soria worked as a cashier in petitioner’s
establishment located inside the SM Food Court Makati. On January
11, 1998, respondent assaulted her co-worker Ma. Teresa Sumalague
resulting in a scuffle between the two. Despite the intervention of their
54
supervisor Fiderlie Recide, they were not pacified, prompting Recide to
call for security assistance. The two were then brought to the SM Food
Court Administration Office where they continued to cast tirades at
each other notwithstanding the request of the SM Food Court Manager
to stop. Because they refused to be mollified, they were brought to the
Customer Relations Office for further investigation. As a result of the
incident, the SM Food Court Manager banned the two from working
within the SM Food Court’s premises.
Respondent then filed with the Labor Arbiter a complaint for illegal
dismissal, salary differentials, service incentive leave, separation pay
and damages. It was dismissed by the Labor Arbiter for lack of merit in
a Decision dated December 4, 1998.1
On appeal to the National Labor Relations Commission (NLRC), the
Labor Arbiter’s decision was affirmed with the modification that
respondent was awarded separation pay. The dispositive portion of
NLRC Decision dated September 30, 1999, reads:
WHEREFORE, the foregoing premises considered, the Decision of the
Labor Arbiter is hereby AFFIRMED with the modification that the
respondents are hereby ordered to pay complainant her separation pay
equivalent to one (1) month salary per year of service, based on her
last salary of P196.00/day and counted from 10 December 1984 until
the finality of this Decision.
SO ORDERED.2lavvphil.ne+
This prompted petitioner to file a special civil action for certiorari with
the Court of Appeals (CA), and in its Decision dated March 30, 2001, it
affirmed the NLRC’s decision and dismissed the petition for lack of
merit.
Hence, herein petition for review on certiorari under Rule 45 of the
Rules of Court on the following grounds:
THE PUBLIC RESPONDENT COURT OF APPEALS DEPARTED
FROM ESTABLISHED JURISPRUDENCE AND ERRED AND
GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE NLRC
AWARD TO PRIVATE RESPONDENT JOVY SORIA SEPARATION
PAY EVEN AS HER DISMISSAL ON GROUNDS OF SERIOUS
MISCONDUCT WAS SUSTAINED
CORROLARY (sic) TO THIS GROUND THE LEGAL ISSUE RAISED
IS WHETHER AN AWARD OF SEPARATION PAY IS PROPER TO AN
EMPLOYEE WHO IS FOUND TO HAVE BEEN VALIDLY DISMISSED
ON THE GROUND OF SERIOUS MISCONDUCT 3
The sole issue in this case --- whether a validly dismissed employee
like respondent is entitled to an award of separation pay --- has already
been squarely settled as early as 1988 in the leading case of Philippine
Long Distance Telephone Co. vs. NLRC, 4 wherein it was stated, viz.:
We hold that henceforth separation pay shall be allowed as a measure
of social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving
moral turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever other name it is
called, on the ground of social justice. (Emphasis supplied)
Separation pay therefore, depends on the cause of dismissal, and may
be accordingly awarded provided that the dismissal does not fall under
either of two circumstances: (1) there was serious misconduct, or (2)
the dismissal reflected on the employee’s moral character. 5
The question that now arises in this case is whether the cause of
respondent’s dismissal falls under the two circumstances, i.e., serious
misconduct or the dismissal reflected on the employee’s moral
character.lavvphil.ne+
The Court holds that respondent’s cause of dismissal in this case
amounts as a serious misconduct and as such, separation pay should
not have been awarded to her. Thus, the petition should be granted.
Misconduct is improper or wrongful conduct. It is the transgression of
some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and
not mere error of judgment. To be a valid cause for termination, the
misconduct must be serious.6
While it is true, as respondent contends, that the Labor Arbiter did not
tag her cause of dismissal as serious misconduct, nevertheless, it is its
nature, not its label that characterizes the cause as serious misconduct.
There is no question as regards the incident that caused respondent’s
dismissal. While respondent’s co-worker Sumalague was eating at the
back of the store, respondent rushed toward Sumalague and hit the
latter on the face causing injuries. A scuffle ensued and despite their
supervisor Recide’s pleas, the two continued to fight, prompting Recide
to call the mall security. When the two were brought to the
administration office, they continued bickering and did not heed the
request of the manager to stop, and thus they were brought to the
Customer Relations Office. Because of the incident, the two were
banned from working within the premises. The fact that Sumalague
sustained injuries is a matter that cannot be taken lightly. Moreover, the
incident disturbed the peace in the work place, not to mention that
respondent and Sumalague committed a breach of its
discipline.7 Clearly, respondent committed serious misconduct within

the meaning of Art. 282 of the Labor Code, providing for the dismissal
of employees.
Her cause of dismissal amounting to a serious misconduct, respondent
is not entitled to an award of separation pay. As further stated in
Philippine Long Distance Telephone Co. vs. NLRC:
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels any more
than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to be
poor. This great policy of our Constitution is not meant for the protection
of those who have proved they are not worthy of it, like the workers who
have tainted the cause of labor with the blemishes of their own
character.8
WHEREFORE, the petition is GRANTED. The Court of Appeals
Decision dated March 30, 2001 in CA-G.R. SP No. 58219 is MODIFIED
to the effect that the NLRC Decision dated September 30, 1999 is
AFFIRMED with MODIFICATION in that the award of separation pay in
favor of respondent Juvy Soria is DELETED.
SO ORDERED.
G.R. No. 166507 September 27, 2006
AMKOR TECHNOLOGY PHILIPPINES, INC., ANTHONY MICHAEL
PETRUCCI and ROSEMARIE S. KATALBAS, petitioners,
vs.
NORY A. JUANGCO, respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, assailing the Decision 1 dated
October 20, 2004 and Resolution2 dated December 20, 2004 rendered
by the Court of Appeals in CA-G.R. SP No. 76121, entitled "Nory A.
Juangco, petitioner, v. National Labor Relations Commission, Amkor
Technology Philippines, Inc., Mike Petrucci, Danny D. Franklin And
Rosemarie S. Katalbas, respondents."
The instant controversy stemmed from a complaint for illegal dismissal,
damages and attorney's fees filed with the Labor Arbiter by Nory A.
Juangco, respondent, against Amkor Technology Philippines, Inc.,
Anthony Michael Petrucci, Danny D. Franklin and Rosemarie S.
Katalbas, petitioners, docketed as NLRC NCR Case No. 30-04-02141-
02.
Respondent, in her complaint, alleged that sometime in September
1990, she was employed as production control senior supervisor by
Amkor Technology Philippines, Inc., petitioner company. Eventually,
she became a production control executive director with a monthly
salary of P220,000.00. During her employment, she received several
merit increases and bonuses from petitioner company in recognition of
her exemplary performance. Sometime in October 2001, Tony Ng,
respondent's immediate superior, resigned and was replaced by
Anthony Michael Petrucci, petitioner, as president. The new
management implemented several drastic changes in the existing
corporate policies and the composition of the corporate management
team. During an emergency meeting on November 15, 2001,
petitioners informed her of a staff reorganization and she realized her
services were being terminated effective immediately. Petitioners
directed her to sign a document setting forth the conditions of her
alleged voluntary retirement, such as: (1) payment, on a staggered
basis, of separation benefits at the rate of 11/4 months basic salary per
year of service and additional two months basic salary in lieu of the
one-month notice requirement; and (2) forfeiture of such separation
benefits in case of violation of company rules and regulations on
confidentiality and disruption of operations. Thereafter, she was
ordered to leave the company. On November 21, 2001, after having
been paid her separation benefits, she was forced to sign a "Release
and Quitclaim."
Petitioners denied respondent's allegations in her complaint. They
claimed that as a result of the economic slowdown then experienced in
this country, they contemplated to implement cost-cutting measures.
Several meetings were conducted by petitioners to discuss the
company retrenchment program. Respondent voluntarily submitted
herself for retrenchment and then tendered her resignation letter.
Respondent, having rendered eleven (11) years of service, was paid
by petitioners P3,704,517.98 representing her separation benefits at
the rate of 11/4 months basic salary per year of service. Additionally, she
received her two months salary, leave credits, 13th month pay, and
coop receivable. And after having been paid her separation benefits,
she executed and signed, on November 22, 2001, a Release and
Quitclaim.
After the submission of the parties' pleadings and position papers, the
Labor Arbiter rendered a Decision dated July 31, 2002 holding that
55
respondent was illegally dismissed from employment and ordering
petitioners (1) to reinstate her to her former position as executive
director without loss of seniority rights and other privileges; and (2) to
pay her, jointly and severally, full backwages and other benefits,
damages and attorney's fee equivalent to 10% of the monetary awards,
thus:
WHEREFORE, premises considered, judgment is hereby
rendered declaring the termination of complainant NORY A.
JUANGCO illegal.
Accordingly, respondents AMKOR TECHNOLOGY PHILS.,
INC., MIKE PETRUCCI, DANNY D. FRANKLIN and
ROSEMARIE S. KATALBAS are ordered to jointly and
solidarily reinstate complainant NORY A. JUANGCO to her
former executive position (Executive Director) without loss of
earned seniority rights and other benefits and privileges with
full backwages from date of dismissal up to actual date of
reinstatement in the total amount as of this
date P2,025,833.33 computed as follows:
Basic Salary:
11/15/01 – 7/31/02
P220,000.00/mo. x 8.50 mos. = P1,870,000.00
13th month pay:
P1,870,000.00/12 = P 155,833.33
Total = P2,025,833.33
Respondents are further ordered to jointly and solidarily pay
complainant her performance bonuses and other benefits she
used to receive similarly granted to her co-executive officers.
Respondents are furthermore ordered to pay complainant
moral damages in the amount of Five Million Pesos
(P5,000,000.00) and exemplary damages in the amount
of Three Million Pesos (P3,000,000.00), as well as attorney's
fees equivalent to ten percent (10%) of the entire award. The
amount already received by complainant shall be considered
as partial/advance payment of the judgment award in the final
enforcement of the decision.
SO ORDERED.
On appeal, the National Labor Relations Commission (NLRC)
promulgated its Decision dated October 1, 2002 reversing the Labor
Arbiter's Decision and dismissing respondent's complaint.
Respondent then filed a motion for reconsideration, but was denied by
the NLRC in a Resolution dated December 26, 2002. Hence, she filed
with the Court of Appeals a petition for certiorari with prayer for
issuance of a temporary restraining order and a writ of preliminary
injunction.
On October 20, 2004, the appellate court rendered a Decision setting
aside the NLRC Decision and reinstating that of the Labor Arbiter, but
with modification in the sense that in lieu of reinstatement, respondent
was awarded separation pay and a reduced moral and exemplary
damages of P500,000.00 and P250,000.00, respectively.
In disposing of the case, the Court of Appeals held:
The petition is impressed with merit.
xxxxxx
Notably, the notice of voluntary retirement and the 'Receipt,
Release, Waiver and Quitclaim' partake the nature of a
contract of adhesion, such that the petitioner had no hand in
the preparation of these documents. Since a contract of
adhesion is unilaterally prepared by only one party, and the
only thing left to be done by the other party is to affix his/her
signature, any ambiguity in its provisions or any question as
to the voluntariness of its execution should be generally
resolved against the party who drafted the document
(Magellan Capital Management Corporation vs. Zosa, 355
SCRA 157 [2001]).
Since petitioner claims that she was merely coerced into
signing the subject documents, the voluntariness of the
execution thereof is squarely at issue and petitioner's claim
was correctly given due course by the labor arbiter (JMM
Promotions and Management, Inc. vs. Court of Appeals, 390
SCRA 223 [2002]). Notably, the labor arbiter did not only find
that private respondents failed to prove the voluntariness of
the execution of said documents, but it also found that private
respondents' copy of the 'Receipt and Release, Waiver and
Quitclaim' contained insertions which were not found in
petitioner's copy.
xxxxxx
Despite the foregoing considerations, public respondent
NLRC reversed the labor arbiter's finding of illegal dismissal
and relied heavily on the affidavits of 'ATP Staff members'
stating that petitioner volunteered herself to be included in the
retirement program and therefore was not coerced to sign the
notice of voluntary retirement and the quitclaim. Pitted against
the foregoing circumstances showing the coercion employed
upon petitioner, the affidavits deserve no weight and
credence for they were executed by the executives employed

with private respondent AMKOR and are therefore self-
serving.
That petitioner had already accepted her separation pay, is of
no moment and did not estop her from questioning the legality
of her dismissal. x x x. That petitioner executed the waiver
only on November 21, 2001, or after six (6) days from the
signing of the notice of voluntary retirement, does not detract
from the fact that petitioner was merely forced to resign and
the waiver was an afterthought of private respondents to
camouflage their misdeeds, as correctly noted by the labor
arbiter.
There was therefore, no basis at all for public respondent
NLRC's reversal of the labor arbiter's finding of illegal
dismissal. As a consequence of petitioner's illegal dismissal,
she is entitled to reinstatement and all other privileges
withheld from her from the time of her dismissal up to the time
of reinstatement. This is in consonance with Article 279 of the
Labor Code, which provides that an employee who is unjustly
dismissed is entitled to reinstatement (Rodriguez , Jr. vs.
National Labor Relations Commission, 393 SCRA 511
[2002]).
However, it is undeniable that the strained relations between
the parties render it impracticable to reinstate petitioner who
holds a key position as she has a hand in the operations of
private respondent AMKOR. The award of separation pay in
lieu of reinstatement is more appropriate. Thus, separation
pay equivalent to one (1) month salary for every year of
service should be awarded in lieu of reinstatement (Hantex
Trading Co., Inc. vs. Court of Appeals, 390 SCRA 181 [2002]).
Moreover, the labor arbiter's award of moral damages
of P5,000,000.00 and exemplary damages of P3,000,000.00
is excessive under the attendant circumstances. It is
doctrinally settled that the power of the courts to grant
damages and attorney's fees demands factual, legal and
equitable justification (Ranola vs. Court of Appeals, 322
SCRA 1 [2000]). The Court therefore resolves to reasonably
reduce the same, and taking into account the circumstances
of the case (Asia Pacific Chartering Phils., Inc. vs. Farolan,
393 SCRA 454 [2002]), including the social and financial
position of petitioner, private respondents are ordered to pay
petitioner moral damages in the amount of Five Hundred
Thousand Pesos (P500,000.00) and exemplary damages in
the amount of Two Hundred Fifty Thousand Pesos
(P250,000.00).
WHEREFORE, the present petition is GRANTED. The
assailed Decision dated October 1, 2002 and Resolution
dated December 26, 2002 of public respondent NLRC are
SET ASIDE and the Decision dated July 31, 2002 of the Labor
Arbiter is REINSTATED, with MODIFICATION that in lieu of
reinstatement, petitioner Nory A. Juangco is awarded
separation pay equivalent to one (1) month salary for every
year of service, and the amount of moral damages and
exemplary damages awarded to petitioner is hereby reduced
to Five Hundred Thousand Pesos (P500,000.00) and Two
Hundred Fifty Thousand Pesos (P250,000.00), respectively.
SO ORDERED.
On November 4, 2004, petitioners filed a motion for reconsideration,
but was denied by the appellate court in a Resolution dated December
20, 2004.
Hence, this petition for review on certiorari.
Petitioners contend that the Court of Appeals seriously erred (1) in
holding that respondent was illegally dismissed; and (2) in finding that
respondent is entitled to an award of separation pay, backwages,
damages and attorney's fee.
The basic issue for our resolution is whether respondent was illegally
dismissed from employment.
The Court of Appeals found that respondent's "notice of voluntary
retirement" and the "Receipt, Release, Waiver, and Quitclaim" were
already prepared when respondent signed the same. Hence, any
question as to the validity of their execution should be generally
resolved against petitioners who obviously drafted those documents.
Petitioners merely offered in evidence the affidavits of their executives
stating that respondent volunteered to be included in petitioner
company's retirement program. Considering that these executives are
petitioners' personnel, the Court of Appeals is correct in concluding that
their affidavits are self-serving and, therefore, not credible.
Moreover, the fact that respondent filed a complaint for illegal dismissal
from employment against petitioners completely negates their claim
that she voluntarily retired.
In Molave Tours Corporation v. National Labor Relations
Commission,3 we held:
By vigorously pursuing the litigation of his action against
petitioner, private respondent clearly manifested that he has
no intention of relinquishing his employment, which act is
wholly incompatible to petitioner's assertion that he voluntarily
resigned.
56
But still, petitioners insist that since respondent already received her
separation benefits, she can no longer claim that they coerced her to
retire. On this point, the Court of Appeals ruled that employees who
receive their separation pay are not barred from contesting the legality
of their dismissal from the service and their acceptance of those
benefits would not amount to estoppel. We agree. Otherwise,
employees who have been forced to resign and accept their separation
pay can no longer resort to legal remedies.
Thus, we sustain the ruling of the Court of Appeals that respondent did
not voluntarily retire; she was forced to retire, tantamount to illegal
dismissal. And as correctly pointed out by the same court, it is
"impracticable" to reinstate respondent to her former position. In lieu
thereof, respondent is entitled to an award of separation pay, plus her
full backwages and other privileges and benefits, or their monetary
equivalent, during the period of her dismissal up to her supposed actual
reinstatement. Since she had been paid P3,704,517.98 as separation
benefits, this amount should be deducted from the total monetary
award due her.
We observe that respondent failed to prove she is entitled to moral and
exemplary damages. Thus, these awards should be deleted.
WHEREFORE, we DENY the petition. The assailed Decision dated
October 20, 2004 and Resolution dated December 20, 2004 of the
Court of Appeals in CA-G.R. SP No. 76121 are AFFIRMED with
MODIFICATION in the sense that the awards for moral and exemplary
damages are DELETED. Costs against petitioners.
SO ORDERED.
G.R. No. 154532 October 27, 2006
PETRON CORPORATION AND PETER C. MALIGRO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND CHITO S.
MANTOS, respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this petition for review under
Rule 45 of the Rules of Court is the Resolution dated November 26,
20011 of the Court of Appeals (CA) in CA-G.R. SP No. 67702,
dismissing the petition for certiorari thereat filed by the herein
petitioners on the ground that the Verification and Certification on Non-
Forum Shopping was defective because co-petitioner Peter C. Maligro
was not a signatory thereto, as reiterated in its subsequent Resolution
of July 16, 2002,2 denying the petitioners' motion for reconsideration.
The facts:
Petitioner Petron Corporation (Petron), a corporation duly organized
and existing under the laws of the Philippines, is engaged in the refining,
sale and distribution of petroleum and other related products, while its
co-petitioner Peter C. Maligro was the former Visayas Operations
Assistant Manager of Petron's Visayas-Mindanao District Office at
Lahug, Cebu City.
On May 15, 1990, Petron, through its Cebu District Office, hired the
herein private respondent Chito S. Mantos, an Industrial Engineer, as
a managerial, professional and technical employee with initial
designation as a Bulk Plant Engineering Trainee. He attained regular
employment status on November 15, 1990 and was later on designated
as a Bulk Plant Relief Supervisor, remaining as such for the next five
years while being assigned to the different plants and offices of Petron
within the Visayas area.
It was while assigned at Petron's Cebu District Office with petitioner
Peter Maligro as his immediate superior, when Mantos, thru a Notice of
Disciplinary Action dated October 29, 1996, 3 a copy of which was
received by him on November 18, 1996,4 was suspended for 30 days
from November 1 to 30, 1996 for violating company rules and
regulations regarding Absence Without Leave (AWOL), not having
reported for work during the period August 5 to 27, 1996.
Subsequently, in a notice Termination of Services bearing date
November 20, 19965 and received by him on November 25,
1996,6 Mantos' services were altogether terminated effective
December 1, 1996, by reason of his continued absences from August
28, 1996 onwards, as well as for Insubordination/Discourtesy for
making false accusations against his superior.
Meanwhile, on November 8, 1996, contending that he has been
constructively dismissed as of August 5, 1996, Mantos filed with the
National Labor Relations Commission, Regional Arbitration Branch
(NLRC-RAB), Cebu City, a complaint for illegal dismissal and other
monetary claims against Petron and/or Peter C. Maligro. The case was
docketed as NLRC RAB-VII Case No. 11-1439-96.
In his complaint, Mantos made the following allegations:
xxx He had an unblemished record in his service with [Petron].
Intrigues and professional jealousies, however, have
prevailed over the work atmosphere in [Petron]. This became
more particularly true in regard to his close relationship with
Jaime "Boy" Tamayo, then the VISMIN Operations Manager
who later left the company to migrate to Canada. His

closeness to Tamayo has caused problems with his
relationship with Peter Maligro, Visayas Operations Assistant
Manager, who has been after his neck for sometime.
Maligro's hatred on him became evident when he was
assigned to Nasipit Bulk Plant at Nasipit, Agusan del Norte
for two (2) months or so. He was deprived of his
usual P1,000.00 a day per diem. He was also deprived of the
usual facilities such as the service vehicle and the use and
access to lighterage services.
Because of the tremendous work pressure, he availed and
was granted a vacation leave in March 1996. Before he
reported back to work he was summoned to the office of Peter
Paul Shotwell. There, he was advised by [Petron's] officers to
resign from [Petron] as they were instructed by superiors that
he should quit as they no longer liked him. Failing to convince
him he was later offered to avail of [Petron's] early retirement
program dubbed as "Manpower Reduction Program" or MRP.
Thereafter he was advised to avail of his remaining vacation
leave while they process his MRP papers. After his vacation,
he was no longer allowed to report back at his assignment at
Mactan Aviation Facilities but directly to Maligro at the Cebu
District Office. While being designated as Operations
Engineer, he was assigned only menial tasks such as
recopying errands, digging up files, drafting and redrafting
memoranda and other mere clerical works. On August 5,
1996, Maligro bad-mouthed him in the presence of his co-
employees for alleged dissatisfaction of his work as a mere
clerk. What [Petron and Maligro] have done to him amounts
to constructive dismissal. Hence, his complaint. 7 (Words in
brackets supplied.)
For their part, Petron and Maligro averred that Mantos was dismissed
for just and valid causes effective December 1, 1996, asserting that:
xxx complainant [Mantos] incurred absences without leave
(AWOL) on August 5 to 27, 1996 inclusive. He failed to
comply with the instruction of a superior for him to report for
work at the Cebu City District office and to submit a formal
explanation of his AWOL. From August 28, 1996, up to the
filing of respondents' position paper, complainant has not
reported for work but continued to receive the salary for the
months of August, September and October 2, 1996. An
investigation was conducted on September 2, 1996 but
complainant failed to appear. Instead he sent two (2) letters
thru his counsel accusing respondent Maligro of certain acts
humiliating and prejudicing him. After a series of hearings,
[Petron's] Investigation Committee in a report and
recommendation of November 19, 1996, recommended that
after a 30-day suspension, complainant should be subjected
to a more severe penalty. Hence, they deny complainant's
claims. 8
In a decision dated June 30, 1998, Labor Arbiter Dominador A.
Almirante declared Mantos to have been constructively dismissed but
ruled that only Petron could be held liable to him for separation pay in
lieu of reinstatement and the cash equivalent of his certificate of stocks,
less his personal accountabilities. More specifically, the decision
dispositively states:
WHEREFORE, foregoing premises considered, judgment is
hereby rendered ordering the respondent Petron Corporation
VISMIN District Office to pay complainant the amount of One
Hundred Two thousand Nine Hundred Twenty-Eight Pesos
and 41/100 (P102,928.41) representing the separation pay
for his six (6) years of service at P15,420.00 a month, the
cash equivalent of his certificate of stocks minus his
outstanding account, computed as follows:
a. Separation
Pay:
P15,420.00
x 6 years - P 92, 520.00
b. Cash
equivalent of
certificate of
stocks - P 66,600.00
Total P159,120.00
Minus - P 56, 191.59
P102,
Net Award 928.41
SO ORDERED. 9
Explains the Labor Arbiter in his decision:
57
It is an established fact that for his absences from August 5
to August 27, 1996, complainant was imposed the penalty of
suspension for thirty (30) days from November 1 to 30, 1996
per the letter of respondent Maligro to complainant dated
October 29, 1996 (Annex "D"). From respondents' Annex "6"
which is a memorandum of November 19, 1996 containing
the report of the Investigation Committee it is shown therein
that the summons in this case was received by respondents
on November 14, 1996. The following day, November 15,
1996, the Committee met to determine the factual basis of the
charges of absence without leave and insubordination
against complainant. The Committee was convened seven (7)
days after the filing of the complaint herein on November 8,
1996.
We find that the foregoing factual milieu militates badly
against the cause for the respondents. It appears that the
Investigation Committee was belatedly constituted as an
afterthought after the respondents received the summons in
this case. For his AWOL, complainant was already sufficiently
penalized by suspension for thirty (30) days, the maximum
penalty authorized by law. In fact, complainant was still
serving his suspension when the Committee was convened
and issued the memorandum of November 19, 1996
recommending his dismissal for AWOL and insubordination.
The insubordination aspect stemmed from complainant's
accusation in his complaint for constructive dismissal and
withholding of his stock certificates. The imposition of the
penalty of dismissal smacks of a desire to get even for
complainant's filing of a complaint against the respondents.
Anyway, the penalty of dismissal was too harshly and
[d]isproportionately imposed on the complainant considering
his length of service.
Furthermore, there is in an (sic) unrebutted evidence for the
complainant that earlier while being assigned directly under
respondent Maligro at the Cebu District Office, with the
designation as Operations Engineer, he was assigned only
menial tasks like recopying errands, digging up files, drafting
and redrafting memoranda and other clerical works.
We find that respondents' act was tantamount to constructive
dismissal xxx Under such circumstances, the continuance of
complainant's employment with respondent corporation has
been rendered impossible, unreasonable and unlikely. There
exists also a demotion in rank.
xxx xxx xxx
We find therefore that complainant was illegally dismissed
from the service. He should have been reinstated to his
former position without loss of seniority rights. We find
however, that the filing of this complaint has spawned
strained relationship between the parties. Hence,
reinstatement is no longer practical and feasible. Instead
complainant should be awarded his separation pay
equivalent to one (1) month pay per year of service. He is not
however entitled to backwages. He is not completely free
from blame in his separation from the service. He committed
absences without leave. xxx
xxx xxx xxx
Complainant is also entitled to the cash equivalent of his
certificate of stocks admitted in respondent's Exhibit "7" to
be P66,600.00. From the total award shall be deducted the
amount of P56,191.59 complainant's outstanding account to
respondent.
The rest of the claims are hereby ordered dismissed for lack
of merit not having been substantiated by clear and
convincing evidence. Respondent Peter C. Maligro is hereby
absolved from any liability hereof there being no showing that
he acted in bad faith and in excess of his authority in dealing
with the complainant. 10
Both dissatisfied, the parties questioned the aforementioned Labor
Arbiter's decision: Petron and Maligro, by way of an appeal to the NLRC
at Cebu City, accompanied by a P102, 928.41 surety bond in favor of
Mantos; and the latter, by a motion for reconsideration which the NLRC
eventually treated as an appeal.
On July 31, 2000, the NLRC reversed the findings of the Labor Arbiter
regarding Mantos' constructive dismissal as of November 1, 1996 and
considered him to have been illegally dismissed only on December 1,
1996. In the same decision, the NLRC adjudged Maligro solidarily liable
with Petron, and accordingly modified the Labor Arbiter's decision as
follows:
WHEREFORE, the questioned Decision is MODIFIED in that
complainant was illegally suspended from November 1-30,
1996 and was ILLEGALLY DISMISSED on December 1,
1996, accordingly and as discussed, he should be paid
separation pay based on his one month salary (P15,420.00)
per year of service computed until the month of promulgation
(July, 2000) of this Decision. In addition, complainant is

entitled to full backwages from November 1, 1996 until July,
2000.
The finding below of cash equivalent of certificate of stocks in
the amount of P66,600.00 is deleted. The accountability of
complainant in the amount of P56,191.59 shall be deleted
from his total awards.
Complainant is likewise entitled to ten percent (10%) of the
total awards by way of attorney's fees.
The foregoing liabilities are solidary against respondents
Petron Corporation and Peter C. Maligro.
SO ORDERED.11
Justifying its decision, the NLRC explained that Mantos failed to prove
that he had to quit his job on August 5, 1996 because his continued
employment was rendered impossible, unbearable and unlikely. On the
other hand, Petron and Maligro did not observe the requisite procedural
due process considering that (1) the alleged Notice of Violation of
Company Rules and Regulations dated August 27, 1996 which
preceded the suspension of Mantos was not received by the latter; and
(2) no separate notice for the two new charges of Absence Without
Leave (AWOL) starting August 28, 1996 and
Insubordination/Discourtesy for making false accusations against his
superior, were sent to Mantos prior to the Notice of Termination dated
November 20, 1996 based on the report/recommendation dated
November 19, 1996 of the Investigation Committee. Furthermore, the
Commission noted that on the day after Petron and Maligro received
the summons with respect to Mantos' complaint with the NLRC-RAB,
the Investigation Committee was immediately convened regarding
Mantos' continued absences beginning August 28, 1996 with Maligro
himself being a member of said committee.
With their motion for reconsideration having been denied by the NLRC
in its Resolution of August 31, 2001,12 the petitioners elevated the case
via certiorari to the CA in CA-G.R. SP No. 67702.
As stated at the threshold hereof, the CA, in its assailed Resolution of
November 26, 2001, outrightly dismissed the petition for being
defective in form because only petitioner Petron signed the verification
and certification on non-forum shopping without its co-petitioner Peter
Maligro likewise signing the same.
Their motion for reconsideration having been denied by the CA in its
second impugned Resolution of July 16, 2002, the petitioners are now
with us via the present recourse on the following grounds: 13
A. THE COURT OF APPEALS ERRED IN DISMISSING
PETITIONERS' PETITION FOR CERTIORARI ON THE
GROUND THAT THE SAME FAILED TO COMPLY WITH
THE RULE ON CERTIFICATION ON NON-FORUM
SHOPPING CONSIDERING THAT:
1. THERE WAS SUBSTANTIAL COMPLIANCE BY
PETITIONERS WITH THE REQUIREMENTS ON
CERTIFICATION OF NON-FORUM SHOPPING.
2. THERE WAS A REASONABLE CAUSE FOR
PETITIONER MALIGRO'S FAILURE TO ATTACH
A VERIFICATION/CERTIFICATION OF NON-
FORUM SHOPPING.
B. THE OUTRIGHT DISMISSAL OF THE PETITION BY THE
COURT OF APPEALS WOULD DEFEAT SUBSTANTIAL
JUSTICE CONSIDERING THAT THE NLRC COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION IN FINDING THAT:
1. PRIVATE RESPONDENT'S COMPLAINT FOR
ILLEGAL DISMISSAL WAS NOT FILED AS A
MALICIOUS SCHEME AGAINST PETITIONERS,
DESPITE OVERWHELMING EVIDENCE ON
RECORD.
2. PETITIONERS DISMISSED PRIVATE
RESPONDENT MANTOS WITHOUT OBSERVING
THE REQUISITE PROCEDURAL DUE PROCESS
BECAUSE PETITIONERS ALLEGEDLY DID NOT
PROVE THAT MANTOS RECEIVED THE NOTICE
OF VIOLATION OF COMPANY RULES DATED 27
AUGUST 1996 AS WELL AS THE TWO
TELEGRAMS REQUIRING MANTOS TO REPORT
FOR WORK, CONTRARY TO SUBSTANTIAL
EVIDENCE ON RECORD.
3. THAT PETITIONERS DISMISSED MANTOS
WITHOUT OBSERVING THE REQUISITE
PROCEDURAL DUE PROCESS BECAUSE
PETITIONERS ALLEGEDLY DID NOT SEND A
NOTICE OF VIOLATION OF COMPANY RULES
TO PRIVATE RESPONDENT FOR THE
OFFENSES THAT HE COMMITTED FOR THE
SECOND TIME, DESPITE CONTRARY
EVIDENCE ON RECORD.
4. THAT PETITIONERS DID NOT SHOW HOW
THE INVESTIGATION COMMITTEE THAT
INVESTIGATED MANTOS' VIOLATIONS OF
COMPANY RULES WAS CREATED AND THAT
THE SAME WAS BIASED AGAINST MANTOS
58
MERELY BECAUSE ITS CHAIRMAN WAS
MANTOS' SUPERIOR, DESPITE CONTRARY
EVIDENCE ON RECORD.
5. THAT PETITIONER PETER C. MALIGRO IS
SOLIDARILY LIABLE WITH PETITIONER
PETRON CORPORATION FOR THE LATTER'S
ALLEGED LIABILITY TO MANTOS
NOTWITHSTANDING THE ABSENCE OF
EVIDENCE INDICATING THAT MALIGRO ACTED
WITH BAD FAITH AGAINST MANTOS.
6. THAT PRIVATE RESPONDENT IS ENTITLED
TO AWARD OF FULL BACKWAGES FROM 1
NOVEMBER 1996 UNTIL JULY 2000 AND TO THE
OTHER MONETARY AWARDS MADE BY THE
NLRC.
In his Comment,14 the private respondent avers, among others, that the
petitioners' petition for certiorari in CA-G.R. SP No. 67702 cannot alter
the factual findings of the Labor Arbiter as affirmed by the NLRC. He
argues that the sole office of a writ of certiorari is to correct jurisdictional
errors including grave abuse of discretion amounting to lack or excess
of jurisdiction, and does not include correction of the NLRC's evaluation
of the evidence, whose factual findings are generally accorded not only
great respect but even finality.
The petition is partly meritorious.
Concededly, the fact that only Petron, minus its co-petitioner Peter C.
Maligro, executed and signed the Verification and Certification on Non-
Forum Shopping,15 attached to the petition for certiorari in CA-G.R. SP
No. 67702, is a cause for the dismissal of that petition, conformably with
Section 5, Rule 7 of the Rules of Court which expressly requires that
the certification against forum shopping must have to be certified under
oath by "the plaintiff or principal party," and failure to comply therewith
shall cause the dismissal of the action. 16
Be that as it may, we hold that the CA erred in outrightly dismissing CA-
G.R. SP No. 67702 solely on the ground that therein co-petitioner Peter
Maligro failed to equally sign the verification and certification on non-
forum shopping.
It must be remembered that the petitioners in CA-G.R. SP No.
67702 are Petron and its operations assistant manager, Peter Maligro.
Evidently, Maligro was included in the complaint filed by Mantos in
NLRC RAB-VII Case No. 11-1439-96 in Maligro's capacity as Petron's
corporate officer. Maligro has no separate and distinct personality from
that of Petron, undoubtedly the direct employer of Mantos against
which any award in the latter's favor is enforceable. With Petron being
the real party-in interest in that case and not Maligro, the latter's failure
to equally sign the verification and certification on non-forum shopping
should not have merited the CA's outright dismissal of
the certiorari petition in CA-G.R. SP No. 67702.
In outrightly dismissing the petition, the CA relied on Loquias v. Office
of the Ombudsman.17 The appellate court's reliance on that case is
misplaced. For, in the subsequent case of Micro Sales Operation
Network and Willy Bendol v. NLRC, et. al., 18 wherein the CA based its
dismissal of the therein similarly defective petition for certiorari on the
strength of Loquias, this Court ruled:
The Court of Appeals relied on Loquias v. Office of the
Ombudsman, which held that a certification on non-forum
shopping signed by only one of two or more petitioners is
defective, unless he was duly authorized by his co-petitioner.
However, the said ruling applies when the co-parties are
being sued in their individual capacities. Note that the
petitioners in Loquias are the mayor, vice-mayor, and three
members of the municipal board of San Miguel, Zamboanga
del Sur. The said co-parties were charged with violation of
Republic Act No. 3019 15 in their various capacities.
In the instant case, the petitioners are the company and
its operations manager, Willy Bendol. The latter was
impleaded simply because he was a co-respondent in the
illegal dismissal complaint. He has no interest in this
case separate and distinct from the company, which was
the direct employer of private respondents. Any award of
reinstatement, backwages, and attorney's fees in favor of
private respondents will be enforced against the
company as the real party in interest in an illegal
dismissal case. Petitioner Bendol is clearly a mere
nominal party in the case. His failure to sign the
verification and certification on non-forum shopping is
not a ground for the dismissal of the petition. The
appellate court erred in dismissing outright petitioners'
special civil action for certiorari solely on that ground.
(Emphasis supplied.)
In any event, considering that Maligro derives his standing or
personality in the case from Petron, the certification on non-forum
shopping executed and signed only by the corporation benefited
Maligro such that the attachment of said certification to the petition
in CA-G.R. SP No. 67702 should be deemed substantial compliance
with the rule on certification on non-forum shopping.

We have, therefore, opted to give due course to the present petition.
And realizing that a remand of this case to the CA would only entail
further delay in the proceedings, we deemed it prudent to resolve the
controversy to finally put it to a rest.
In the review of NLRC decisions through the special civil action
of certiorari, resolution is confined only to issues of jurisdiction and
grave abuse of discretion on the part of the labor tribunal. The Court
refrains from reviewing factual assessments of lower courts and
agencies exercising adjudicative functions, such as the NLRC. 19
Here, however, we are constrained to make a review of the records and
a re-examination of the questioned NLRC findings to arrive at a
complete, just and proper determination of the case.
Essentially, the issue posed is the validity of private respondent's
dismissal.
The validity of an employee's dismissal hinges on the satisfaction of
two substantive requirements, to wit: (1) the employee was accorded
due process, basic of which are the opportunity to be heard and to
defend himself; and (2) the dismissal must be for any of the causes
provided for in Article 282 of the Labor Code. 20
The illegality of the act of dismissal constitutes discharge without just
cause, while the illegality in the manner of dismissal is dismissal without
due process.21
Here, private respondent was successively charged with two (2) sets of
offenses and separately penalized for each set.
The first set of infractions consisted of private respondent's being
AWOL from August 5 to 27, 1996 and Insubordination/Discourtesy as
set forth in the Notice of Violation of Company Rules and Regulations
dated August 27, 1996,22 for which he was penalized with suspension
for 30 days effective November 1 to 30, 1996 but only for the charge of
being AWOL. The second set, as contained in the Notice of Violation of
Company Rules and Regulations (EM 300) dated November 12,
199623 consisted also of being AWOL, this time beginning August 28,
1996, and Insubordination/Discourtesy for making false accusations
against his superior, for which he was dismissed effective December
1, 1996.
Private respondent did not report for work starting August 5, 1996 due
to his belief that he has already been dismissed as of said date. But
since he failed to prove his allegation of clear acts of harassment and
humiliation, which had allegedly become so unbearable as to leave him
with no choice but to forego his continued employment, we uphold the
legality of his suspension due to his unauthorized absences from
August 5 to 27, 1996.
With respect to respondent's dismissal, however, we find the same
unjustified.
Under paragraph (a), Article 282 of the Labor Code, 24 an employer may
terminate the services of an employee for his willful disobedience of the
employer's lawful orders in connection with his work.
Verily, the employer's rules, instructions or commands, in order to be a
ground for discharge on the score of disobedience, must be reasonable
and lawful, must be known to the employee, and must pertain to the
duties for which his services were engaged. 25
From the foregoing, it is clear that the factual basis for the petitioners'
charge of insubordination against the private respondent, i.e., making
false accusations against his superior cannot constitute a just cause for
dismissal. The so-called accusations are embodied in the complaint
filed by the private respondent in NLRC RAB-VII Case No. 11-1439-96,
in which complaint he believed himself to have been constructively
dismissed as of August 5, 1996. By no stretch of imagination can the
filing of such complaint constitute insubordination. If, as asserted by the
private respondent, he had been constructively dismissed as of August
5, 1996, such assertion could not have risen to the level of false
accusation against his superior.
On the other hand, while respondent has indeed been absent from
August 28, 1996, the penalty of dismissal therefor is too harsh
considering that all the while, he deemed himself to have been already
dismissed as early as August 5, 1996. Besides, private respondent has
already been penalized with suspension for his unauthorized absences,
which notice of suspension he only received on November 18, 1996.
Likewise, the petitioners failed to prove that they complied with the
requisites of procedural due process in dismissing private respondent.
It is horn-book law that an employee sought to be dismissed must be
served two (2) written notices before termination of employment: a
notice to apprise the employee of the particular acts or omissions for
which his dismissal is sought; and the subsequent notice to inform him
of the employer's decision to discharge him from the service. 26 The
procedure is mandatory and non-observance thereof renders the
dismissal illegal and void.27
Here, while the private respondent received the Notice of Disciplinary
Action dated October 29, 1996 informing him of his suspension, and
the Memorandum dated November 20, 1996 terminating his services,
he did not receive any prior notice[s] apprising him of the particular acts
for which his suspension and/or termination were being sought.
As rightly found by the NLRC, the private respondent was not given the
following notices, to wit: (1) the Notice of Violation of Company Rules
and Regulations dated August 27, 1996 on his AWOL from August 5 to
27, 1996 and Insubordination/Discourtesy with notice of an
59
investigation on September 2, 1996; and (2) the Notice dated
November 12, 1996 on the second set of charges of AWOL starting
August 28, 1996 and Insubordination/Discourtesy for allegedly making
false accusations against his superior with notice of the investigation
on November 15, 1996.
As borne by the records, it was only in their motion for reconsideration
of the NLRC decision that the petitioners proffered the delivery records
of a private courier to show that the aforementioned notices, as well as
two alleged telegrams requiring the private respondent to report for
work,28 were in fact sent to the latter. But, a perusal of said delivery
records does not bear the petitioners' claim. For, apart from the private
respondent's full name, Chito S. Mantos, being written in block letters
on the said delivery records, there is no other way of knowing whether
it was really him who received the notices or that another person could
have received the same in his behalf.29 Verily, said delivery records do
not substantially show respondent's receipt of the notices in question.
Given the above, we cannot give credence to petitioners' claim that as
early as August 27, 1996, the date of the notice allegedly sent to the
respondent informing him of the first set of offenses, the latter already
knew that a committee was going to investigate him for infractions of
company rules and regulations in connection with the second set and
that he was invited to attend the investigating committee's scheduled
hearing.
We, therefore, lend concurrence to the common findings of both the
NLRC and the Labor Arbiter that the committee which investigated the
alleged second set of offenses and which eventually led to the
committee's recommendation for his dismissal was created only on
November 15, 1996 or a day at the heels of the petitioners' receipt on
November 14, 1996 of the summons issued in NLRC RAB-VII Case No.
11-1439-96.
With the reality that no notice of any investigation was timely served on
the private respondent, the latter's filing of his complaint for illegal
dismissal in NLRC RAB-VII Case No. 11-1439-96 on November 8,
1996 could not be said to have been made to preempt the investigation
regarding his alleged offenses as he was yet unaware of any such
investigation. Moreover, as the NLRC rightly observed:
We note from the records that although complainant quit
working starting August 5, 1996 because he felt he was
"constructively dismissed" he did not file outright the present
complaint. Instead, he wrote respondent Maligro on October
18, 1996, thru counsel asking an explanation why no case for
illegal dismissal with damages would be filed against
respondents. When he therefore finally filed the present case
on Novemeber 8, 1996, that showed his lingering belief that
he was constructively dismissed although from the viewpoint
of respondents, he was already penalized with "grave
suspension" for his AWOL from August 5-27, 1996. In short,
the filing of the complaint was not a "malicious scheme" on
the part of the complainant contrary to the contention of
respondents. 30
Petitioners' failure to comply with the two-notice requirement as shown
above, let alone the lack of just cause for terminating the services of
private respondent, rendered the latter's dismissal illegal.
In fine, we rule and so hold that the NLRC did not gravely abuse its
discretion in declaring the illegality of private respondent's dismissal.
We are, however, with the petitioners in their submission that the NLRC
erred in holding petitioner Peter Maligro jointly and severally liable with
petitioner Petron for the money claims of the private respondent.
Settled is the rule in this jurisdiction that a corporation is invested by
law with a legal personality separate and distinct from those acting for
and in its behalf and, in general, from the people comprising it. 31 Thus,
obligations incurred by corporate officers acting as corporate agents
are not theirs but the direct accountabilities of the corporation they
represent.32 True, solidary liabilities may at times be incurred by
corporate officers, but only when exceptional circumstances so
warrant.33 For instance, in labor cases, corporate directors and officers
may be held solidarily liable with the corporation for the termination of
employment if done with malice or in bad faith. 34
In the present case, the apparent basis for the NLRC in holding
petitioner Maligro solidarily liable with Petron were its findings that (1)
the Investigation Committee was created a day after the summons in
NLRC RAB-VII Case No. 11-1439-96 was received, with Maligro no
less being the chairman thereof; and (2) the basis for the charge of
insubordination was the private respondent's alleged making of false
accusations against Maligro.
Those findings, however, cannot justify a finding of personal liability on
the part of Maligro inasmuch as said findings do not point to Maligro's
extreme personal hatred and animosity with the respondent. It cannot,
therefore, be said that Maligro was motivated by malice and bad faith
in connection with private respondent's dismissal from the service.
If at all, what said findings show are the illegality itself of private
respondent's dismissal, the lack of just cause therefor and the non-
observance of procedural due process. Verily, the creation of the
investigation committee and said committee's consideration of the
insubordination charge against the private respondent, were merely

aimed to cover up the illegal dismissal or to give it a semblance of
legality.
Besides, the fact that Maligro himself was the committee chairman is
not itself sufficient to impute bad faith on his part or attribute bias
against him. It is undisputed that Maligro was private respondent's
superior, being Petron's Operations Assistant Manager for Visayas and
Mindanao. It is thus logical for him to be part of the committee that will
investigate private respondent's alleged infractions of company rules
and regulations. As well, the committee was composed of three other
Petron officers as members, and nowhere is there any showing that
Maligro, as committee chairman, influenced the other committee
members to side against the private respondent.
In any event, it must be stressed that private respondent's allegation of
bad faith on the part of Maligro was not established in this case. We
quote the NLRC's finding in this regard:
Whether he really caught the ire of his immediate supervisor
(respondent Maligro) in view of his alleged closeness to the
previous one who migrated to Canada, and whether or not he
was assigned to menial clerical jobs when his designation
was that of Operations Engineer, were not clearly established
by complainant.35
Lastly, as to the award of backwages, we refer to Article 279 of the
Labor Code (as amended by Section 34 of R.A. 6715) which provides
that an employee who is unjustly dismissed from work is entitled to
reinstatement without loss of seniority rights and other privileges, and
to the payment of his full backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him (which, as a rule, is from the time
of his illegal dismissal) up to the time of his actual reinstatement.
Similarly, under R.A. 6715,36 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.37
Since the circumstances obtaining in this case do not warrant private
respondent's reinstatement in the light of the antagonism generated by
this litigation which must have caused a severe strain in the parties'
employer-employee relationship, an award of separation pay in lieu of
reinstatement, equivalent to one month pay for every year of service,
in addition to full backwages, allowances, and other benefits or the
monetary equivalent thereof, is in order. The award of attorney's fees
is sanctioned by law and must be upheld.
WHEREFORE, the assailed Resolution of the Court of Appeals is SET
ASIDE, and the NLRC decision dated July 31, 2000 is AFFIRMED with
the MODIFICATION that (1) private respondent Chito S. Mantos is
awarded separation pay equivalent to one month pay for every year of
service and full backwages, other privileges and benefits or to the
monetary equivalent thereof, computed from the date of his illegal
dismissal on December 1, 1996 until the finality of this decision; and (2)
petitioner Peter C. Maligro is ABSOLVED from any liability adjudged
against co-petitioner Petron Corporation.
Costs against the petitioners.
SO ORDERED.
G.R. No. 147566 December 6, 2006
SAN MIGUEL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and RAFAEL
MALIKSI, respondents
DECISION
GARCIA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioner
San Miguel Corporation (SMC) seeks the reversal and setting aside of
the Decision1 dated September 30, 1999 of the Court of Appeals (CA)
in CA-G.R. SP No. 50321, as reiterated in its Resolution2 of March 20,
2001, affirming in toto an earlier decision of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 005478-93,
entitled "Rafael C. Maliksi v. San Miguel Corporation and/or Philippine
Software Services & Education Center." The affirmed NLRC decision
overturned that of the Labor Arbiter and declared the herein private
respondent Rafael Maliksi (Maliksi) a regular employee of the petitioner
and ordered the latter to reinstate him with benefits.
As found by the NLRC and subsequently adopted by the CA, the facts
are as follows:
On 16 October 1990, Rafael M. Maliksi filed a complaint
against the San Miguel Corporation-Magnolia Division, herein
referred to as SMC and Philippine Software Services and
Education Center herein referred to as PHILSSEC to compel
the said respondents to recognize him as a regular employee.
He amended the complaint on 12 November 1990 to include
60
the charge of illegal dismissal because his services were
terminated on 31 October 1990.
The complainant’s employment record indicates that he
rendered service with Lipercon Services from 1 April 1981 to
February 1982 as budget head assigned to SMC-Beer
Division, then from July 1983 to April 1985 with Skillpower,
Inc., as accounting clerk assigned to SMC-Magnolia Division,
then from October 1988 to 1989 also with Skillpower, Inc. as
acting clerk assigned to SMC-Magnolia Finance, and from
October 1989 to 31 October 1990 with PHILSSEC assigned
to Magnolia Finance as accounting clerk. The complainant
considered himself as an employee of SMC-Magnolia.
Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-
only contractors and any one of which had never been his
employer. His dismissal, according to him, was in retaliation
for his filing of the complaint for regularization in service. His
dismissal was illegal there being no just cause for the action.
He was not accorded due process neither was his dismissal
reported to the Department of Labor and Employment.
PHILSSEC disclaimed liability. As an entity catering (sic)
computer systems and program for business enterprises, it
has contracted with SMC-Magnolia to computerize the latter’s
manual accounting reporting systems of its provincial sales.
PHILSSEC then conducted a three phase analysis of SMC–
Magnolia set up: first the computer needs of the firm was (sic)
determined; then, the development of computer systems or
program suitable; and, finally, set up the systems and train
the employees to operate the same. In all these phases,
PHILSSEC uses its computer system and technology and
provided the necessary manpower to compliment the transfer
of the technology to SMC-Magnolia. Complainant Maliksi was
one of those employed by PHILSSEC whose principal
function was the manual control of data needed during the
computerization. Like all assigned to the project, the
complainant’s work was controlled by PHILSSEC supervisors,
his salary paid by the agency and he reported directly to
PHILSSEC. The computerization project was completed on
31 October 1990, and so, the complainant was terminated on
the said date.
SMC, on the other hand, submitted its position. In the contract
SMC entered with PHILSSEC, the latter undertook to set up
the computerization of the provincial sales reporting system
of Magnolia Division. To carry out the task, PHILSSEC
utilized 3 computer programmers and the rest were data
encoders. The complainant being one of the compliments (sic)
performed the following functions:
xxx xxx xxx
SMC likewise contends that PHILSSEC exercised exclusive
managerial prerogative over the complainant as to hiring,
payment of salary, dismissal and most importantly, the control
over his work. SMC was interested only in the result of the
work specified in the contract but not as to the means and
methods of accomplishing the same. Moreover, PHILSSEC
has substantial capital of its own. It has an IBM system, 3
computers, 17 IBM or IBM-compatible computers; it has a
building where the computer training center and main office
are located. What it markets to clients are computer programs
and training systems on computer technology and not the
usual labor or manpower supply to establishment concerns.
Moreover, what PHILSSEC set up employing the complainant,
among others, has no relation to the principal business of
SMC, which is food and beverage. It was a single relationship
between the people utilized by PHILSSEC and SMC…’ 3
The Labor Arbiter declared Maliksi a regular employee of PHILSSEC
and absolved SMC from liability. Dispositively, the Labor Arbiter’s
decision reads:
WHEREFORE, the complainant, Rafael Maliksi, is
recognized as a regular employee of Philippine Software
Services and Education Center which respondent is ordered
to reinstate him to a job of the same level as his previous
position in any of the projects where there is a vacancy and
without loss of seniority rights. A five months backwages is
awarded because the prolonged suspension from his work
was brought about by his refusal to take any job offered by
PHILSSEC earlier in the proceedings of this case. The
respondent, SMC-Magnolia Division, is exempted from any
liability as the complaint against the said corporation is
dismissed for lack of merit.
SO ORDERED.4
Maliksi appealed to the NLRC. In turn, in a decision dated January 26,
1998, the NLRC reversed that of the Labor Arbiter by declaring Maliksi
a regular employee of the petitioner and ordering the latter to reinstate
him without loss of seniority rights and with full benefits, to wit:
WHEREFORE, as recommended, the decision below is
hereby SET ASIDE. Accordingly, judgment is hereby
rendered directing respondent SMC-Magnolia Division to

reinstate complainant as a regular employee without loss of
seniority rights and other privileges and to pay complainant
full backwages, inclusive of allowances and other benefits or
their monetary equivalent, computed from the time his
compensation was withheld from him up to time of his actual
reinstatement, plus 10% of the total money award for and
attorney’s fees.
SO ORDERED.5
From the aforementioned decision of the NLRC, SMC went
on certiorari to the CA in CA-G.R. SP No. 50321.
As stated at the outset, the CA, in the herein assailed Decision 6 dated
September 30, 1999, affirmed in toto that of the NLRC. In so doing, the
CA found SMC to have utilized PHILSSEC, Lipercon Services, Inc.
(Lipercon) and Skillpower, Inc. (Skillpower) as conduits to circumvent
Article 280 of the Labor Code, employing Maliksi as contractual or
project employee through these entities, thereby undermining his right
to gain regular employment status under the law. The appellate court
echoed the NLRC’s assessment that Maliksi’s work was necessary or
desirable in the business of SMC in its Magnolia Division, for more than
the required one-year period. It affirmed the NLRC’s finding that the
three (3) conduit entities adverted to, Lipercon and Skillpower, are
labor-only contractors such that Maliksi’s previous employment
contracts with SMC, through these two entities, are deemed to have
been entered into in violation of labor laws. Consequently, Maliksi’s
employment with SMC became permanent and regular after the
statutory period of one year of service through these entities. The CA
concluded that on account of his past employment contracts with SMC
under Lipercon and Skillpower, Maliksi was already a regular employee
of SMC when he entered into SMC’s computerization project as part of
the PHILSSEC project complement.
With its motion for reconsideration having been denied by the CA in its
Resolution of March 20, 2001, SMC is now with this Court via the
present recourse on the following assigned errors:
I We do not sustain public respondent’s theory that private
The Court of Appeals gravely erred in declaring private
respondent a regular employee of petitioner SMC despite its
findings that PHILSSEC, the contractor that employed private
respondent, is an independent job contractor.
Corollarily, the declaration of the Honorable Court of Appeals
that private respondent is a regular employee of petitioner
SMC proceeds from the erroneous premise that private
respondent was already a regular employee of SMC when he
was hired by the independent contractor PHILSSEC. Having
been placed in petitioner SMC by a supposed labor-only
contractor, for just five months and for a different job, three
years after his last assignment therein, private respondent
had not thereby become a regular employee of petitioner
SMC.
II
The Court of Appeals gravely erred in ultimately resolving the
case upon the principle that "all doubts must be resolved in
favor of labor"; certainly, protection to labor does not imply
sanctioning a plain injustice to the employer, particularly
where private respondent was shown to have stated
falsehoods and committed malicious intercalations and
misrepresentations.
III
The Court of Appeals gravely erred in declaring that private
respondent was not part of the of the personnel group in the
computerization program of petitioner SMC under PHILSSEC.
We DENY.
SMC concedes that Maliksi, before his employment with PHILSSEC,
worked in SMC from November 1988 to April 1990, but as employee
of Skillpower7 and that he was previously assigned to SMC between
1981 up to February 1985, "for periods spread apart."8 The Labor
Arbiter found, as earlier stated, that Maliksi rendered service with
Lipercon from 1 April 1981 to February 1982 as budget
head assigned to SMC-Beer Division; from July 1983 to April
1985 with Skillpower as accounting clerk assigned to SMC-Magnolia
Division, then from October 1988 to 19899 also with Skillpower as
acting clerk assigned to SMC-Magnolia Finance, and from October
1989 to 31 October 1990 with PHILSSEC assigned to Magnolia
Finance as accounting clerk. In all, it appears that, while under the
employ of either Lipercon or Skillpower, Maliksi has undisputedly
rendered service with SMC for at least three years and seven
months.10
The Court takes judicial notice of the fact that Lipercon and Skillpower
were declared to be labor-only contractors,11 providing as they do
manpower services to the public for a fee. The existence of an
employer-employee relationship is factual and we give due deference
to the factual findings of both the NLRC and the CA that an employer-
employee relationship existed between SMC (or its subsidiaries) and
Maliksi. Indeed, having served SMC for an aggregate period of more
than three (3) years through employment contracts with these two labor
contractors, Maliksi should be considered as SMC’s regular employee.
The hard fact is that he was hired and re-hired by SMC to perform
61
administrative and clerical work that was necessary to SMC’s business
on a daily basis. In Bustamante v. National Labor Relations
Commission, 12 we ruled:
In the case at bar, petitioners were employed at various
periods from 1985 to 1989 for the same kind of work they
were hired to perform in September 1989. Both the labor
arbiter and the respondent NLRC agree that petitioners
were employees engaged to perform activities necessary
in the usual business of the employer. As laborers,
harvesters or sprayers in an agricultural establishment which
produces high grade bananas, petitioners’ tasks are
indispensable to the year-round operations of respondent
company. This belies the theory of respondent company that
the employment of petitioners was terminated due to the
expiration of their probationary period in June 1990. If at all
significant, the contract for probationary employment was
utilized by respondent company as a chicanery to deny
petitioners their status as regular employees and to evade
paying them the benefits attached to such status. Some of the
petitioners were hired as far back as 1985, although the hiring
was not continuous. They were hired and re-hired in a span
of from two to four years to do the same type of work
which conclusively shows the necessity of petitioners’
service to the respondent company’s business.
Petitioners have, therefore, become regular employees after
performing activities which are necessary in the usual
business of their employer. But, even assuming that the
activities of petitioners in respondent company’s plantation
were not necessary or desirable to its business, we affirm the
public respondent’s finding that all of the complainants
(petitioners) have rendered non-continuous or broken service
for more than one (1) year and are consequently considered
regular employees.
respondent should not be made to compensate petitioners for
backwages because its termination of their employment was
not made in bad faith. The act of hiring and re-hiring the
petitioners over a period of time without considering
them as regular employees evidences bad faith on the
part of private respondent. The public respondent made a
finding to this effect when it stated that the subsequent re-
hiring of petitioners on a probationary status "clearly appears
to be a convenient subterfuge on the part of management to
prevent complainants (petitioners) from becoming regular
employees." (Emphasis supplied)
It is worth noting that, except for the computerization project of
PHILSSEC, petitioner did not make any insinuation at all that the
services of Maliksi with SMC was project-related such that an
employment contract with Lipercon and Skillpower was necessary.
In Madriaga v. Court of Appeals,13 the Court, confronted with the same
issue now being addressed, declared that regularization of employment
in SMC should extend to those whose situation is similar to the
complainants in said case. We wrote:
This is the third time that the parties have invoked the power
of this Court to decide the labor dispute involved in this case.
The generative facts of the case are as follows:
On 04 March 1988, the NOWM and a number of
workers-complainants filed with the Arbitration
Branch of the NCR, NLRC, Manila, against San
Miguel Corporation, Philippine Dairy Products
Corporation, Magnolia Dairy Products, Skillpower
Corporation and Lipercon Services, Inc. for
illegal dismissal.
xxx xxx xxx
The Voluntary Arbitrator rendered a decision on 29
July 1988, the dispositive of which states:
WHEREFORE, it is hereby declared that
complainants are regular employees of SMC and
PDPC. Accordingly, SMC and PDPC are hereby
ordered to reinstate the dismissed 85 complainants
to their former positions as their regular employees
effective from the date of the filing of their
complaints with full backwages less the daily
financial assistance of P30.00 per day each,
extended to them by Lipercon and Skillpower.
Aggrieved by the said decision of the Voluntary Arbitrator,
SMC and PDPC filed a petition for certiorari before the
Supreme Court.
It was upon the filing of the said petition for certiorari that the
Court had the first opportunity to pass upon the controversies
involved in this case. In a Resolution dated 30 August 1989,
the Court dismissed G.R. No. 85577 entitled, "Philippine
Dairy Products Corporation and San Miguel Corporation –
Magnolia Dairy Products Division v. Voluntary Arbitrator Tito
F. Genilo of the Department of Labor and Employment (DOLE)

and the National Organization of Workingmen (NOWM)" for
lack of merit. The Court held in full:
Individual private respondents are xxx [SMC, et al.]
laborers supplied to petitioners by Skillpower
Corporation and Lipercon Services, Inc., on the
basis of contracts of services. Upon expiration of
the said contracts, individual private respondents
were denied entry to petitioners' premises.
Individual private respondents and respondent
union thus filed separate complaints for illegal
dismissal against petitioners San Miguel Corp.,
Skillpower Corporation and Lipercon Services, Inc.,
in the [NLRC, NCR] After consolidation and
voluntary arbitration, respondent Labor Arbiter Tito
F. Genilo rendered a decision xxx declaring
individual private respondents regular employees of
petitioners and ordering the latter to reinstate the
former and to pay them backwages. On motion for
execution filed by private respondents, Labor
Arbiter Genilo issued on October 20, 1988 an order
directing, among others, the regularization of "all the
complainants which include those still working and
those already terminated." Hence, this petition for
certiorari with injunction.
Petitioners contend that prior to reinstatement,
individual private respondents should first comply
with certain requirements, like submission of NBI
and police clearances and submission to physical
and medical examinations, since petitioners are
deemed to be direct employers and have the right
to ascertain the physical fitness and moral
uprightness of its employees by requiring the latter
to undergo periodic examinations, and that
petitioners may not be ordered to employ on
regular basis the other workers rendering
services to petitioners by virtue of a similar
contract of services between petitioners and
Skillpower Corporation and Lipercon Services,
Inc. because such other workers were not
parties to or were not impleaded in the voluntary
arbitration case.
Considering that the clearances and examinations
sought by petitioners from private respondents are
not 'periodic' in nature but are made preconditions
for reinstatement, as in fact the petition filed alleged
that reinstatement shall be effective upon
compliance with such requirements, (pp. 5-6 thereof)
which should not be the case because this is not a
case of initial hiring, the workers concerned
having rendered years of service to petitioners
who are considered direct employers, and that
regularization is a labor benefit that should
apply to all qualified employees similarly
situated and may not be denied merely because
some employees were allegedly not parties to or
were not impleaded in the voluntary arbitration
case, even as the finding of Labor Arbiter Genilo
is to the contrary, this Court finds no grave
abuse of discretion committed by Labor Arbiter
Genilo in issuing the questioned order of
October 20, 1988.
ACCORDINGLY, the Court Resolved to Dismiss the
petition for lack of merit.
In fine, the Court affirmed the ruling of the Voluntary Arbitrator
and declared that therein complainants are regular
employees of San Miguel Corporation (SMC) and PDPC. It
must be noted that in the abovequoted Resolution, the
Court extended the benefit of regularization not only to
the original complainants but also to those workers who
are "similarly situated" to therein complainants. Herein
petitioners are among those who are "similarly
situated."14 (Emphasis supplied)
We find respondent Maliksi to be similarly situated with those of the
complainants in Madriaga. Indeed, Lipercon and Skillpower have
figured in not just a few of our decisions, 15 so much so that we are
inclined to believe that these two were involved in labor-only contracting
with respect to Maliksi. We hold that the finding of the NLRC and the
CA as to SMC’s resorting to labor-only contracting is entitled to
consideration in its full weight.
With respect to PHILSSEC, there was no need for Maliksi to be
employed under the former’s computerization program to be
considered a regular employee of SMC at the time. Moreover, SMC
itself admits that Maliksi’s work under the computerization program did
"not require the operation of a computer system, such as the software
program being developed by PHILSSEC."16 Given this admission, we
are simply at a loss to understand why Maliksi should be included in
the computerization project as a project employee. Not being a
62
computer expert, Maliksi’s inclusion in the project was uncalled for. To
our mind, his placement in the project was for the purpose of
circumventing labor laws. The evidence shows that immediately before
he entered the PHILSSEC project in October 1989, Maliksi was fresh
out of his employment with SMC (through Skillpower) as acting clerk
assigned to SMC-Magnolia Finance (from October 1988 to 1989).
Maliksi’s work under the PHILSSEC project was mainly administrative
in nature and necessary to the development of SMC’s business. These
were:
a. posting manually the daily account balances in the workset;
b. fitting the daily totals into the monthly totals;
c. comparing the manual totals with the computer generated
totals;
d. locating the differences between the totals; and,
e. adjusting and correcting errors.
Simply put, the data gathered by SMC on a daily basis through Maliksi’s
work would be submitted for analysis and evaluation, thereby allowing
SMC to make the necessary business decisions that would enable it to
market its products better, or monitor its sales and collection with
efficiency. Without the data gatherer or encoder, no analysis could
occur. SMC would then, for the most part, be kept in the dark.
As to the petitioner’s second assigned error, we hold that there is no
need to resolve the present case under the principle that all doubts
should be resolved in favor of the workingman. The perceived doubt
does not obtain in the first place.
We understand Maliksi’s desperation in making his point clear to SMC,
which unduly refuses to acknowledge his status as a regular employee.
Instead, he was juggled from one employment contract to another in a
continuous bid to circumvent labor laws. The act of hiring and re-hiring
workers over a period of time without considering them as regular
employees evidences bad faith on the part of the employer. 17 Where,
from the circumstances, it is apparent that periods have been imposed
to preclude the acquisition of tenurial security by the employee, the
policy, agreement or practice should be struck down as contrary to
public policy, morals, good customs or public order. 18 In point of law,
any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall be liable
for the damage.19
Ways and means contrived by employers to countermand labor laws
granting regular employment status to their workers are numerous and
long. For instance, they toss the poor workers from one job contractor
to another, make them go through endless applications, lining up,
paperwork, documentation, and physical examinations; make them
sign five- or ten-month-only job contracts, yet re-hire them after brief
"rest periods," but not after requiring them to go through the whole
application and selection process once again; prepare and have them
sign waivers, quitclaims, and the like; refuse to issue them identification
cards, receipts or any other concrete proof of employment or
documentary proof of payment of their salaries; fail to enroll them for
entitlement to social security and other benefits; give them positions,
titles or designations that connote short-term employment.
Others are more creative: they set up "distributors" or "dealers" which
are, in reality, shell or dummy companies. In this manner, the mother
company avoids the employer-employee relations, and is thus shielded
from liability from employee claims in case of illegal dismissal, closure,
unfair labor practices and the like. In those instances, the poor
employees, finding the shell or dummy company to be without assets,
often end up confused and without recourse as to whom to run after.
They sue the mother company which conveniently sets up the defense
of absence of employer-employee relations. In San Miguel Corporation
v. MAERC Integrated Services, Inc.,20 we took note of the practice of
hiring employees through labor contractors that catered exclusively to
the employment needs of SMC or its divisions or other specific
business interests, such that after the specific SMC business or division
ceases to do business, the labor contractor likewise ceases its
operations.
The contrivances may be many and the schemes ingenious and
imaginative. But this Court will not hesitate to put pen to a line and
defend the worker’s right to be secure in his (or her) proprietary right to
regular employment and his right to a secure employment, viz, one that
is free from fear and doubt, that anytime he could be removed,
retrenched, his contract not renewed or he might not be re-hired. The
ramifications may seem trivial, but we cannot allow the ordinary Filipino
worker’s right to tenurial security to be put in jeopardy by recurrent but
abhorrent practices that threaten the very lives of those that depend on
him.
Considering, however, the supervening event that SMC’s Magnolia
Division has been acquired by another entity, it appears that private
respondent’s reinstatement is no longer feasible. Instead, he should be
awarded separation pay as an alternative. 21 Likewise, owing to
petitioner’s bad faith, it should be held liable to pay damages for
causing undue injury and inconvenience to the private respondent in its
contractual hiring-firing-rehiring scheme.
WHEREFORE, the instant petition is DENIED and the assailed CA
decision dated September 30, 1999 is AFFIRMED, with
the MODIFICATION that if the reinstatement of private respondent is

no longer practicable or feasible, then petitioner SMC is ordered to pay
him, in addition to the other monetary awards, separation pay for the
period from October 31, 1990 when he was dismissed until he shall
have been actually paid at the rate of one (1) month salary for every
year of his employment, with a fraction of at least six (6) months being
considered as one (1) year, or the rate of separation pay awarded by
petitioner to its other regular employees as provided by written
agreement, policy or practice, whichever is higher or most beneficial to
private respondent.
In addition, petitioner is hereby suffered to indemnify private
respondent the amount of P50,000.00 as nominal damages for its bad
faith in juggling the latter from one labor contractor to another and
causing him unnecessary injury and inconvenience, and for denying
him his proprietary right to regular employment.
Let this case be REMANDED to the Labor Arbiter for the computation
of private respondent’s backwages, proportionate 13th month pay,
separation pay, attorneys’ fees and other monetary awards; and for
immediate execution.
Costs against the petitioner.
SO ORDERED.
G.R. No. 156934 March 16, 2007
ALPHA C. JACULBE, Petitioner,
vs.
SILLIMAN UNIVERSITY,Respondent.
DECISION
CORONA, J.:
Petitioner comes to us via this petition for review on certiorari1 to
challenge a decision2 of the Court of Appeals (CA) and the
resolution3 affirming it.
Sometime in 1958, petitioner began working for respondent’s university
medical center as a nurse.4
In a letter dated December 3, 1992,5 respondent, through its Human
Resources Development Office, informed petitioner that she was
approaching her 35th year of service with the university and was due
for automatic retirement on November 18, 1993, at which time she
would be 57 years old. This was pursuant to respondent’s retirement
plan for its employees which provided that its members could be
automatically retired "upon reaching the age of 65 or after 35 years of
uninterrupted service to the university."6 Respondent required certain
documents in connection with petitioner’s impending retirement.
A brief exchange of letters7 between petitioner and respondent followed.
Petitioner emphatically insisted that the compulsory retirement under
the plan was tantamount to a dismissal and pleaded with respondent to
be allowed to work until the age of 60 because this was the minimum
age at which she could qualify for SSS8 pension. But respondent stood
pat on its decision to retire her, citing "company policy."
On November 15, 1993, petitioner filed a complaint in the National
Labor Relations Commission (NLRC) for "termination of service with
preliminary injunction and/or restraining order." 9 On November 18,
1993, respondent compulsorily retired petitioner.
After the parties submitted their position papers, the labor arbiter
rendered a decision finding respondent guilty of illegal dismissal and
ordered that petitioner be reinstated and paid full backwages. 10 On
appeal, however, the NLRC reversed the labor arbiter’s decision and
dismissed the complaint for lack of merit. 11 The NLRC likewise denied
petitioner’s motion for reconsideration. 12 In the assailed decision and
resolution, the CA affirmed the NLRC.
Hence, this petition.
The issues for our consideration are:
1) did respondent’s retirement plan imposing automatic
retirement after 35 years of service contravene the security of
tenure clause in the 1987 Constitution and the Labor Code?
2) did respondent commit illegal dismissal by retiring
petitioner solely by reason of such provision in its retirement
plan?
Retirement plans allowing employers to retire employees who are less
than the compulsory retirement age of 65 are not per se repugnant to
the constitutional guaranty of security of tenure. Article 287 of the Labor
Code provides:
ART. 287. Retirement - Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement
or other applicable employment contract. xxx
By its express language, the Labor Code permits employers and
employees to fix the applicable retirement age at below 60 years. 13
However, after reviewing the assailed decision together with the rules
and regulations of respondent’s retirement plan, we find that the plan
runs afoul of the constitutional guaranty of security of tenure contained
in Article XIII, also known as the provision on Social Justice and Human
Rights.
The CA, in ruling against petitioner, premised its decision to uphold the
retirement plan on her voluntary participation therein:
63
The petitioner in this case may, however, argue that the Pantranco
case is not applicable in the case at bar as the controversy in the said
case involves a compulsory retirement on the basis of the length of
service rendered by the employee as agreed in an existing CBA,
whereas in the present case, the private respondent compulsorily
retired the petitioner not based on a CBA but on the retirement scheme
provided for in the private respondent’s retirement plan. Nonetheless,
this argument must fail. The contract fixing for retirement age as
allowed under Article 287 of the Labor Code does not exclusively refer
to CBA which provides for an agreed retirement age. The said provision
explicitly allows, as well, other applicable employment contract to fix
retirement age.
The records disclose that the private respondent’s Retirement Plan has
been in effect for more than 30 years. The said plan is deemed
integrated into the employment contract between private respondent
and its employees as evidenced by the latter’s voluntary
contribution through monthly salary deductions. Previous retirees
have already enjoyed the benefits of the retirement plan, and ever since
the said plan was effected, no questions or disagreement have been
raised, until the same was made to apply to the petitioner.
xxx14 (emphasis ours)
The problem with this line of reasoning is that a perusal of the rules and
regulations of the plan shows that participation therein was not
voluntary at all.
Rule III of the plan, on membership, stated:
SECTION 1 – MEMBERSHIP
All full-time Filipino employees of the University will automatically
become members of the Plan, provided, however, that those who
have retired from the University, even if rehired, are no longer eligible
for membership in the Plan. A member who continues to serve the
University cannot withdraw from the Plan.
xxx xxx xxx
SECTION 2 – EFFECTIVITY OF MEMBERSHIP
Membership in the Plan starts on the day a person is hired on a full-
time basis by the University.
SECTION 3 – TERMINATION OF MEMBERSHIP
Termination of membership in the Plan shall be upon the death of
the member, resignation or termination of employee’s contract by
the University, or retirement from the University.15 (emphasis ours).
Rule IV, on contributions, stated:
The Plan is contributory. The University shall set aside an amount
equivalent to 3½% of the basic salaries of the faculty and staff. To this
shall be added a 5% deduction from the basic salaries of the faculty
and staff.
A member on leave with the University approval shall continue paying,
based on his pay while on leave, his leave without pay should pay his
contributions to the Plan. However, a member, who has been on leave
without pay should pay his contributions based on his salary plus the
University’s contributions while on leave or the full amount within one
month immediately after the date of his reinstatement. Provided[,]
further that if a member has no sufficient source of income while on
leave may pay within six months after his reinstatement. 16
From the language of the foregoing retirement plan rules, the
compulsory nature of both membership in and contribution to the plan
debunked the CA’s theory that petitioner’s "voluntary contributions"
were evidence of her willing participation therein. It was through no
voluntary act of her own that petitioner became a member of the plan.
In fact, the only way she could have ceased to be a member thereof
was if she stopped working for respondent altogether. Furthermore, in
the rule on contributions, the repeated use of the word "shall"
ineluctably pointed to the conclusion that employees had no choice but
to contribute to the plan (even when they were on leave).
According to the assailed decision, respondent’s retirement plan "ha(d)
been in effect for more than 30 years."17 What was not pointed out,
however, was that the retirement plan came into being in 1970 18 or 12
years after petitioner started working for respondent. In short, it was not
part of the terms of employment to which petitioner agreed when she
started working for respondent. Neither did it become part of those
terms shortly thereafter, as the CA would have us believe.
Retirement is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter,
after reaching a certain age agrees to sever his or her employment with
the former.19 In Pantranco North Express, Inc. v. NLRC,20 to which both
the CA and respondent refer, the imposition of a retirement age below
the compulsory age of 65 was deemed acceptable because this was
part of the CBA between the employer and the employees. The consent
of the employees, as represented by their bargaining unit, to be retired
even before the statutory retirement age of 65 was laid out clearly in
black and white and was therefore in accord with Article 287.
In this case, neither the CA nor the respondent cited any agreement,
collective or otherwise, to justify the latter’s imposition of the early
retirement age in its retirement plan, opting instead to harp on
petitioner’s alleged "voluntary" contributions to the plan, which was
simply untrue. The truth was that petitioner had no choice but to
participate in the plan, given that the only way she could refrain from
doing so was to resign or lose her job. It is axiomatic that employer and

employee do not stand on equal footing, 21 a situation which often
causes an employee to act out of need instead of any genuine
acquiescence to the employer. This was clearly just such an instance.
Not only was petitioner still a good eight years away from the
compulsory retirement age but she was also still fully capable of
discharging her duties as shown by the fact that respondent’s board of
trustees seriously considered rehiring her after the effectivity of her
"compulsory retirement."22
As already stated, an employer is free to impose a retirement age less
than 65 for as long as it has the employees’ consent. Stated conversely,
employees are free to accept the employer’s offer to lower the
retirement age if they feel they can get a better deal with the retirement
plan presented by the employer. Thus, having terminated petitioner
solely on the basis of a provision of a retirement plan which was not
freely assented to by her, respondent was guilty of illegal dismissal.
At this point, reinstatement is out of the question.1awphi1.nét Petitioner
is now 71 years old and therefore well over the statutory compulsory
retirement age. For this reason, we grant her separation pay in lieu of
reinstatement. It is also for this reason that we modify the award of
backwages in her favor, to be computed from the time of her illegal
dismissal on November 18, 1993 up to her compulsory retirement age.
WHEREFORE, the petition is hereby GRANTED. The decision of the
Court of Appeals in CA-G.R. SP No. 50445 is REVERSED and SET
ASIDE. The October 25, 1994 decision of the labor arbiter finding
respondent guilty of illegal dismissal is REINSTATED, with
the MODIFICATION that, in lieu of reinstatement, petitioner is awarded
separation pay, the award of backwages to be computed from the time
of her illegal dismissal up to her compulsory retirement age.
SO ORDERED.
G.R. No. 163561 July 24, 2007
CENTRAL PANGASINAN ELECTRIC COOPERATIVE,
INC., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LITO
CAGAMPAN, Respondents.
DECISION
QUISUMBING, J.:
This is a petition for review on certiorari assailing the Decision 1 dated
December 11, 2003 of the Court of Appeals in CA-G.R. SP No. 62285
and its Resolution2 dated April 19, 2004, denying the motion for
reconsideration. The appellate court had affirmed the Decision3 dated
July 31, 2000 of the National Labor Relations Commission (NLRC),
which sustained the decision4 dated January 14, 2000 of the Labor
Arbiter.
The facts are undisputed.
Private respondent Lito Cagampan was the Acting Power Use
Coordinator of petitioner Central Pangasinan Electric Cooperative, Inc.
(CENPELCO). On November 7, 1998, Cagampan received a check
amounting to ₱100,831 from Aurora B. Bonifacio as partial payment for
the installation of a transformer in her building and expansion of a three-
phase line.
In a letter5 dated November 14, 1998, Bonifacio informed
CENPELCO’s General Manager Salvador de Guzman of the said
transaction and that Cagampan did not issue a receipt for the partial
payment made. She also requested the immediate installation of the
transformer. Thereafter, Cagampan was directed to explain in writing
why he should not be disciplined or dismissed for the unauthorized
acceptance of payments for new electrical connections.
Upon investigation, it appeared that Cagampan knowingly entered into
an unauthorized contract for the installation of a transformer, and that
he was not authorized to accept payment. Hence, Cagampan was
found guilty of violating CENPELCO’s Code of Ethics and Discipline,
namely: (1) unauthorized acceptance of payments for new connection;
(2) dishonest or unauthorized activity whether for personal gain or not;
and (3) defrauding others by using the name of the company. He was
dismissed from service.6
Cagampan filed a complaint for illegal dismissal, praying for payment
of backwages and damages, and reinstatement. In a decision dated
January 14, 2000, the Labor Arbiter found that Cagampan used his
position as a CENPELCO employee to enter into a contract with
Bonifacio for the purchase of materials and hiring of labor force
necessary for the installation of a transformer, in violation of company
rules.7 The Labor Arbiter dismissed the complaint for lack of merit but
ordered CENPELCO to pay Cagampan separation pay, thus,
WHEREFORE, PREMISES CONSIDERED, the instant complaint is
hereby DISMISSED for lack of merit. The respondent corporation is,
however, ordered to pay the complainant P99,345.00 (P9,934.50 ÷ 2 =
P4,967.25 x 20) by way of separation pay.
SO ORDERED.8
Both parties appealed to the NLRC. In a decision dated July 31, 2000,
the NLRC affirmed the Labor Arbiter’s decision. Private respondent’s
motion for reconsideration was denied. CENPELCO sought
64
reconsideration of the award of separation pay but was also denied.
Hence, petitioner filed a petition for certiorari with the Court of Appeals
on the ground that the NLRC committed grave abuse of discretion
amounting to lack or in excess of jurisdiction by affirming the award of
separation pay to private respondent. The appellate court dismissed
the petition for lack of merit. Petitioner moved for reconsideration but
was denied.
Hence, this petition where petitioner raises the lone issue of –
Whether the Honorable Court of Appeals’ decision upholding the award
of separation pay to private respondent Cagampan who was legally
dismissed for gross misconduct and acts of dishonesty is contrary to
the existing jurisprudence.9
Simply stated, at issue in this case is the propriety of the award of
separation pay to private respondent.
Petitioner maintains that private respondent is not entitled to separation
pay since he was dismissed for gross misconduct and acts of
dishonesty. It contends that separation pay or financial assistance is
not awarded to employees lawfully dismissed for serious misconduct or
for cause reflecting on his moral character.10
Private respondent for his part claims that payment of separation pay
for humanitarian reasons is proper considering that he had served
petitioner for almost twenty-one years prior to his termination.11
The Court of Appeals in affirming the NLRC decision held that the
NLRC did not gravely abuse its discretion in awarding the benefits of
compassionate justice. It ratiocinated that considering his long years of
service, it did not necessarily follow that no award of separation pay
could be made if there was no illegal dismissal.12
We find for petitioner. Separation pay should not be awarded.
Section 7, Rule I, Book VI of the Omnibus Rules Implementing the
Labor Code provides that when the employee is dismissed for any of
the just causes under Article 28213 of the Labor Code, he shall not be
entitled to termination pay without prejudice to applicable collective
bargaining agreement or voluntary employer policy or
practice.14 Separation pay shall be allowed only in those instances
where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character.15 Separation pay
in such case is granted to stand as a "measure of social justice." 16 If
the cause for the termination of employment cannot be considered as
one of mere inefficiency or incompetence but an act that constitutes an
utter disregard for the interest of the employer or a palpable breach of
trust in him, the grant by the Court of separation benefits is hardly
justifiable.171avvphi1
In this case, private respondent was found by the Labor Arbiter and the
NLRC to have been validly dismissed for violations of company rules,
and certain acts tantamount to serious misconduct. Such findings, if
supported by substantial evidence, are accorded respect and even
finality by this Court.18
Although long years of service might generally be considered for the
award of separation benefits or some form of financial assistance to
mitigate the effects of termination, this case is not the appropriate
instance for generosity under the Labor Code nor under our prior
decisions. The fact that private respondent served petitioner for more
than twenty years with no negative record prior to his dismissal, in our
view of this case, does not call for such award of benefits, since his
violation reflects a regrettable lack of loyalty and worse, betrayal of the
company. If an employee’s length of service is to be regarded as a
justification for moderating the penalty of dismissal, such gesture will
actually become a prize for disloyalty, distorting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of
undesirables.19
WHEREFORE, the petition is GRANTED. The Decision dated
December 11, 2003 of the Court of Appeals in CA-G.R. SP No. 62285
and its Resolution dated April 19, 2004, denying the motion for
reconsideration, are hereby REVERSED and SET ASIDE.
SO ORDERED.
G.R. Nos. 158786 & 158789 October 19, 2007
TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION
(TMPCWA), ED CUBELO, EDWIN ALARANA, ALEX ALEJO, ERWIN
ALFONSO, MELVIN APOSTOL, DANIEL AROLLADO, DOMINADOR
ARRIOLA, LESTER ATUN, ROLANDO BALUYOT, RODERICK
BAYANI, ABEL BERCES, BENNY BERING, MELCHOR BLANCO,
JERRY BOLOCON, ELMER BULAN, NELSON CABAHUG, JESSIE
CABATAY, MARCELO CABEZAS, ROQUE CANDELARIO, JR.,
LORENZO CARAQUEO, DENNIS CARINGAL, GIENELL CASABA,
CHRISTOPHER CATAPUSAN, RICO CATRAL, JULIUS COMETA,
JAY ANTONIO CORAL, REYNALDO CUEVAS, BENIGNO DAVID,
JR., JOEY DE GUZMAN, LEONARDO DE LEON, ROGELIO DELOS
SANTOS, JOSELITO DE OCAMPO, FRANK MANUEL DIA,
ANTONIO DIMAYUGA, ARMANDO ERCILLO, DELMAR
ESPADILLA, DENNIS ESPELOA, JASON FAJILAGUTAN, JOHN
FAJURA, MELENCIO FRANCO, DEXTER FULGAR, EDUARDO
GADO, ERWIN GALANG, ROBIN GARCES, ARIEL GARCIA,
RONALD GASPI, ANGELO GAVARRA, REYNALDO GOJAR,

EDGAR HILANGA, EUGENE JAY HONDRADA, ALEJANDRO
IMPERIAL, FERDINAND JAEN, JOEY JAVILLONAR, BASILIO
LAQUI, ALBERTO LOMBOY, JUDE JONOBELL LOZADA, JOHNNY
LUCIDO, ROMMEL MACALINDONG, NIXON MADRAZO, ROGELIO
MAGISTRADO, JR., PHILIP JOHN MAGNAYE, ALLAN JOHN
MALABANAN, ROLANDO MALALUAN, JR., PAULINO MALEON,
MANUEL MANALO, JR., JONAMAR MANAOG, JOVITO
MANECLANG, BAYANI MANGUIL, JR., CARLITO MARASIGAN,
ROMMEL MARIANO, BOBIT MENDOZA, ERICSON MONTERO,
MARLAW MONTERO, EDWIN NICANOR, RODERICK NIERVES,
LOLITO NUNEZ, FELIMON ORTIZ, EDWIN PECAYO, ERWIN PENA,
JOWALD PENAMANTE, JORGE POLUTAN, EDDIE RAMOS,
ROLANDO REYES, PHILIP ROXAS, DAVID SALLAN, JR.,
BERNARDO SALVADOR, BALDWIN SAN PABLO, JEFFREY
SANGALANG, BERNABE SAQUILABON, ALEX SIERRA,
ROMUALDO SIMBORIO, EDWIN TABLIZO, PETRONIO TACLAN,
JR., RODEL TOLENTINO, ROMMEL TOLENTINO, GRANT ROBERT
TORAL, FEDERICO TORRES, JR., EMANNUEL TULIO, NESTOR
UMITEN, JR., APOLLO VIOLETA, SR., DOMINADOR ZAMORA, JR.,
ROMMEL ARCETA, ANTONIO BORSIGUE, EMILIO COMPLETO,
RANDY CONSIGNADO, BASILIO DELA CRUZ, ALEXANDER
ESTEVA, NIKKO FRANCO, RODEL GAMIT, ROBERTO GONZALES,
PHILIP JALEA, JOEY LLANERA, GERONIMO LOPEZ, RUEL
MANEGO, EDWIN MANZANILLA, KENNETH NATIVIDAD, LARRY
ORMILLA, CORNELIO PLATON, PAUL ARTHUR SALES,
ALEJANDRO SAMPANG, LAURO SULIT, ROLANDO TOMAS,
JOSE ROMMEL TRAZONA, MICHAEL TEDDY YANGYON,
MAXIMINO CRUZ, VIRGILIO COLANDOG, ROMMEL DIGMA,
JOSELITO HUGO, and RICKY CHAVEZ, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (NLRC-
2ND DIVISION), HON. COMMISSIONERS: VICTORINO CALAYCAY,
ANGELITA GACUTAN, and RAUL AQUINO, TOYOTA MOTOR
PHILIPPINES CORPORATION, TAKESHI FUKUDA, and DAVID
GO, Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. Nos. 158798-99
TOYOTA MOTOR PHILIPPINES CORPORATION, Petitioner,
vs.
TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION
(TMPCWA), Respondent.
DECISION
VELASCO, JR., J.:
The Case
In the instant petition under Rule 45 subject of G.R. Nos. 158786 and
158789, Toyota Motor Philippines Corporation Workers Association
(Union) and its dismissed officers and members seek to set aside the
February 27, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R.
SP Nos. 67100 and 67561, which affirmed the August 9, 2001
Decision2 and September 14, 2001 Resolution3 of the National Labor
Relations Commission (NLRC), declaring illegal the strikes staged by
the Union and upholding the dismissal of the 227 Union officers and
members.
On the other hand, in the related cases docketed as G.R. Nos. 158798-
99, Toyota Motor Philippines Corporation (Toyota) prays for the recall
of the award of severance compensation to the 227 dismissed
employees, which was granted under the June 20, 2003 CA
Resolution4 in CA-G.R. SP Nos. 67100 and 67561.
In view of the fact that the parties are petitioner/s and respondent/s and
vice-versa in the four (4) interrelated cases, they will be referred to as
simply the Union and Toyota hereafter.
The Facts
The Union is a legitimate labor organization duly registered with the
Department of Labor and Employment (DOLE) and is the sole and
exclusive bargaining agent of all Toyota rank and file employees. 5
Toyota, on the other hand, is a domestic corporation engaged in the
assembly and sale of vehicles and parts. 6 It is a Board of Investments
(BOI) participant in the Car Development Program and the Commercial
Vehicle Development Program. It is likewise a BOI-preferred non-
pioneer export trader of automotive parts and is under the "Special
Economic Zone Act of 1995." It is one of the largest motor vehicle
manufacturers in the country employing around 1,400 workers for its
plants in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets
amount to PhP 5.525 billion, with net sales of PhP 14.646 billion and
provisions for income tax of PhP 120.9 million.
On February 14, 1999, the Union filed a petition for certification election
among the Toyota rank and file employees with the National
Conciliation and Mediation Board (NCMB), which was docketed as
Case No. NCR-OD-M-9902-001. Med-Arbiter Ma. Zosima C. Lameyra
denied the petition, but, on appeal, the DOLE Secretary granted the
Union’s prayer, and, through the June 25, 1999 Order, directed the
immediate holding of the certification election. 7
After Toyota’s plea for reconsideration was denied, the certification
election was conducted. Med-Arbiter Lameyra’s May 12, 2000 Order
certified the Union as the sole and exclusive bargaining agent of all the
65
Toyota rank and file employees. Toyota challenged said Order via an
appeal to the DOLE Secretary.8
In the meantime, the Union submitted its Collective Bargaining
Agreement (CBA) proposals to Toyota, but the latter refused to
negotiate in view of its pending appeal. Consequently, the Union filed
a notice of strike on January 16, 2001 with the NCMB, docketed as
NCMB-NCR-NS-01-011-01, based on Toyota’s refusal to bargain. On
February 5, 2001, the NCMB-NCR converted the notice of strike into a
preventive mediation case on the ground that the issue of whether or
not the Union is the exclusive bargaining agent of all Toyota rank and
file employees was still unresolved by the DOLE Secretary.
In connection with Toyota’s appeal, Toyota and the Union were
required to attend a hearing on February 21, 2001 before the Bureau
of Labor Relations (BLR) in relation to the exclusion of the votes of
alleged supervisory employees from the votes cast during the
certification election. The February 21, 2001 hearing was cancelled and
reset to February 22, 2001. On February 21, 2001, 135 Union officers
and members failed to render the required overtime work, and instead
marched to and staged a picket in front of the BLR office in Intramuros,
Manila.9 The Union, in a letter of the same date, also requested that its
members be allowed to be absent on February 22, 2001 to attend the
hearing and instead work on their next scheduled rest day. This request
however was denied by Toyota.
Despite denial of the Union’s request, more than 200 employees staged
mass actions on February 22 and 23, 2001 in front of the BLR and the
DOLE offices, to protest the partisan and anti-union stance of Toyota.
Due to the deliberate absence of a considerable number of employees
on February 22 to 23, 2001, Toyota experienced acute lack of
manpower in its manufacturing and production lines, and was unable
to meet its production goals resulting in huge losses of PhP 53,849,991.
Soon thereafter, on February 27, 2001, Toyota sent individual letters to
some 360 employees requiring them to explain within 24 hours why
they should not be dismissed for their obstinate defiance of the
company’s directive to render overtime work on February 21, 2001, for
their failure to report for work on February 22 and 23, 2001, and for their
participation in the concerted actions which severely disrupted and
paralyzed the plant’s operations.10 These letters specifically cited
Section D, paragraph 6 of the Company’s Code of Conduct, to wit:
Inciting or participating in riots, disorders, alleged strikes, or concerted
actions detrimental to [Toyota’s] interest.
1st offense – dismissal.11
Meanwhile, a February 27, 2001 Manifesto was circulated by the Union
which urged its members to participate in a strike/picket and to abandon
their posts, the pertinent portion of which reads, as follows:
YANIG sa kanyang komportableng upuan ang management ng
TOYOTA. And dating takot, kimi, at mahiyaing manggagawa ay walang
takot na nagmartsa at nagprotesta laban sa desperadong
pagtatangkang baguhin ang desisyon ng DOLE na pabor sa UNYON.
Sa tatlong araw na protesta, mahigit sa tatlong daang manggagawa
ang lumahok.
xxxx
HANDA na tayong lumabas anumang oras kung patuloy na
ipagkakait ng management ang CBA. Oo maari tayong masaktan
sa welga. Oo, maari tayong magutom sa piketlayn. Subalit may
pagkakaiba ba ito sa unti-unting pagpatay sa atin sa loob ng 12 taong
makabaling likod ng pagtatrabaho? Ilang taon na lang ay
magkakabutas na ang ating mga baga sa mga alipato at usok ng
welding. Ilang taon na lang ay marupok na ang ating mga buto sa
kabubuhat. Kung dumating na ang panahong ito at wala pa tayong CBA,
paano na? Hahayaan ba nating ang kumpanya lang ang makinabang
sa yamang likha ng higit sa isang dekadang pagpapagal natin?
HUWAG BIBITIW SA NASIMULANG TAGUMPAY!
PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG
MAKATARUNGANG CBA!
HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA
MANGGAGAWA SA TOYOTA! 12 (Emphasis supplied.)
On the next day, the Union filed with the NCMB another notice of strike
docketed as NCMB-NCR-NS-02-061-01 for union busting amounting to
unfair labor practice.
On March 1, 2001, the Union nonetheless submitted an explanation in
compliance with the February 27, 2001 notices sent by Toyota to the
erring employees. The Union members explained that their refusal to
work on their scheduled work time for two consecutive days was simply
an exercise of their constitutional right to peaceably assemble and to
petition the government for redress of grievances. It further argued that
the demonstrations staged by the employees on February 22 and 23,
2001 could not be classified as an illegal strike or picket, and that
Toyota had already condoned the alleged acts when it accepted back
the subject employees.13
Consequently, on March 2 and 5, 2001, Toyota issued two (2)
memoranda to the concerned employees to clarify whether or not they
are adopting the March 1, 2001 Union’s explanation as their own. The
employees were also required to attend an investigative interview, 14 but
they refused to do so.
On March 16, 2001, Toyota terminated the employment of 227
employees15 for participation in concerted actions in violation of its

Code of Conduct and for misconduct under Article 282 of the Labor
Code. The notice of termination reads:
After a careful evaluation of the evidence on hand, and a thorough
assessment of your explanation, TMP has concluded that there are
overwhelming reasons to terminate your services based on Article 282
of the Labor Code and TMP’s Code of Conduct.
Your repeated absences without permission on February 22 to 23,
2001 to participate in a concerted action against TMP constitute
abandonment of work and/or very serious misconduct under Article 282
of the Labor Code.
The degree of your offense is aggravated by the following
circumstances:
1. You expressed to management that you will adopt the
union’s letter dated March 1, 2001, as your own explanation
to the charges contained in the Due Process Form dated
February 27, 2001. It is evident from such explanation that
you did not come to work because you deliberately
participated together with other Team Members in a plan to
engage in concerted actions detrimental to TMP’s interest. As
a result of your participation in the widespread abandonment
of work by Team Members from February 22 to 23, 2001,
TMP suffered substantial damage.
It is significant that the absences you incurred in order to
attend the clarificatory hearing conducted by the Bureau of
Labor Relations were unnecessary because the union was
amply represented in the said hearings by its counsel and
certain members who sought and were granted leave for the
purpose. Your reason for being absent is, therefore, not
acceptable; and
2. Your participation in the organized work boycott by Team
Members on February 22 and 23 led to work disruptions that
prevented the Company from meeting its production targets,
resulting [in] foregone sales of more than eighty (80) vehicles,
mostly new-model Revos, valued at more than Fifty Million
Pesos (50,000,000.00).
The foregoing is also a violation of TMP’s Code of Conduct
(Section D, Paragraph 6) to wit:
"Inciting or participating in riots, disorders, illegal
strikes or concerted actions detrimental to TMP’s
interest."
Based on the above, TMP Management is left with
no other recourse but to terminate your employment
effective upon your receipt thereof.
[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager16
In reaction to the dismissal of its union members and officers,
the Union went on strike on March 17, 2001. Subsequently,
from March 28, 2001 to April 12, 2001, the Union intensified
its strike by barricading the gates of Toyota’s Bicutan and Sta.
Rosa plants. The strikers prevented workers who reported for
work from entering the plants. In his Affidavit, Mr. Eduardo
Nicolas III, Security Department Head, stated that:
3. On March 17, 2001, members of the Toyota Motor
Philippines Corporation Workers Association (TMPCWA), in
response to the dismissal of some two hundred twenty seven
(227) leaders and members of TMPCWA and without
observing the requirements mandated by the Labor Code,
refused to report for work and picketed TMPC premises from
8:00 a.m. to 5:00 p.m. The strikers badmouthed people
coming in and hurled invectives such as "bakeru" at Japanese
officers of the company. The strikers likewise pounded the
officers’ vehicle as they tried to enter the premises of the
company.
4. On March 28, 2001, the strikers intensified their picketing
and barricaded the gates of TMPC’s Bicutan and Sta. Rosa
plants, thus, blocking the free ingress/egress to and from the
premises. Shuttle buses and cars containing TMPC
employees, suppliers, dealers, customers and other people
having business with the company, were prevented by the
strikers from entering the plants.
5. As a standard operating procedure, I instructed my men to
take photographs and video footages of those who
participated in the strike. Seen on video footages taken on
various dates actively participating in the strike were union
officers Emilio C. Completo, Alexander Esteva, Joey
Javellonar and Lorenzo Caraqueo.
6. Based on the pictures, among those identified to have
participated in the March 28, 2001 strike were Grant Robert
Toral, John Posadas, Alex Sierra, Allan John Malabanan,
Abel Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya,
Feliciano Mercado, Charlie Oliveria, Philip Roxas, June
Lamberte, Manjolito Puno, Baldwin San Pablo, Joseph Naguit,
Federico Torres, Larry Gerola, Roderick Bayani, Allan
Oclarino, Reynaldo Cuevas, Jorge Polutan, Arman Ercillo,
Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy Palisoc,
66
Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo
Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino,
Allan Palomares, Arturo Murillo and Robert Gonzales.
Attached hereto as Annexes "1" to "18" are the pictures taken
on March 28, 2001 at the Bicutan and Sta. Rosa plants.
7. From March 29 to 31, 2001, the strikers continued to
barricade the entrances to TMPC’s two (2) plants. Once again,
the strikers hurled nasty remarks and prevented employees
aboard shuttle buses from entering the plants. Among the
strikers were Christopher Saldivar, Basilio Laqui, Sabas
Bernabise, Federico Torres, Freddie Olit, Josel Agosto,
Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga,
Charlie Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro
Imperial, Manjolito Puno, Delmar Espadilla, Domingo Javier,
Apollo Violeta and Elvis Tabinao.17
On March 29, 2001, Toyota filed a petition for injunction with a prayer
for the issuance of a temporary restraining order (TRO) with the NLRC,
which was docketed as NLRC NCR Case No. INJ-0001054-01. It
sought free ingress to and egress from its Bicutan and Sta. Rosa
manufacturing plants. Acting on said petition, the NLRC, on April 5,
2001, issued a TRO against the Union, ordering its leaders and
members as well as its sympathizers to remove their barricades and all
forms of obstruction to ensure free ingress to and egress from the
company’s premises. In addition, the NLRC rejected the Union’s motion
to dismiss based on lack of jurisdiction.18
Meanwhile, Toyota filed a petition to declare the strike illegal with the
NLRC arbitration branch, which was docketed as NLRC NCR (South)
Case No. 30-04-01775-01, and prayed that the erring Union officers,
directors, and members be dismissed.19
On April 10, 2001, the DOLE Secretary assumed jurisdiction over the
labor dispute and issued an Order20 certifying the labor dispute to the
NLRC. In said Order, the DOLE Secretary directed all striking workers
to return to work at their regular shifts by April 16, 2001. On the other
hand, it ordered Toyota to accept the returning employees under the
same terms and conditions obtaining prior to the strike or at its option,
put them under payroll reinstatement. The parties were also enjoined
from committing acts that may worsen the situation.1âwphi1
The Union ended the strike on April 12, 2001. The union members and
officers tried to return to work on April 16, 2001 but were told that
Toyota opted for payroll-reinstatement authorized by the Order of the
DOLE Secretary.
In the meantime, the Union filed a motion for reconsideration of the
DOLE Secretary’s April 10, 2001 certification Order, which, however,
was denied by the DOLE Secretary in her May 25, 2001 Resolution.
Consequently, a petition for certiorari was filed before the CA, which
was docketed as CA-G.R. SP No. 64998.
In the intervening time, the NLRC, in compliance with the April 10, 2001
Order of the DOLE Secretary, docketed the case as Certified Case No.
000203-01.
Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance
of the DOLE Secretary’s certification Order, several payroll-reinstated
members of the Union staged a protest rally in front of Toyota’s Bicutan
Plant bearing placards and streamers in defiance of the April 10, 2001
Order.
Then, on May 28, 2001, around forty-four (44) Union members staged
another protest action in front of the Bicutan Plant. At the same time,
some twenty-nine (29) payroll-reinstated employees picketed in front of
the Santa Rosa Plant’s main entrance, and were later joined by other
Union members.
On June 5, 2001, notwithstanding the certification Order, the Union filed
another notice of strike, which was docketed as NCMB-NCR-NS-06-
150-01. On June 18, 2001, the DOLE Secretary directed the second
notice of strike to be subsumed in the April 10, 2001 certification Order.
In the meantime, the NLRC, in Certified Case No. 000203-01, ordered
both parties to submit their respective position papers on June 8, 2001.
The union, however, requested for abeyance of the proceedings
considering that there is a pending petition for certiorari with the CA
assailing the validity of the DOLE Secretary’s Assumption of
Jurisdiction Order.
Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its
previous order for both parties to submit their respective position
papers on or before June 2, 2001. The same Order also denied the
Union’s verbal motion to defer hearing on the certified cases.
On June 27, 2001, the Union filed a Motion for Reconsideration of the
NLRC’s June 19, 2001 Order, praying for the deferment of the
submission of position papers until its petition for certiorari is resolved
by the CA.
On June 29, 2001, only Toyota submitted its position paper. On July 11,
2001, the NLRC again ordered the Union to submit its position paper
by July 19, 2001, with a warning that upon failure for it to do so, the
case shall be considered submitted for decision.
Meanwhile, on July 17, 2001, the CA dismissed the Union’s petition for
certiorari in CA-G.R. SP No. 64998, assailing the DOLE Secretary’s
April 10, 2001 Order.
Notwithstanding repeated orders to file its position paper, the Union still
failed to submit its position paper on July 19, 2001. Consequently, the

NLRC issued an Order directing the Union to submit its position paper
on the scheduled August 3, 2001 hearing; otherwise, the case shall be
deemed submitted for resolution based on the evidence on record.
During the August 3, 2001 hearing, the Union, despite several
accommodations, still failed to submit its position paper. Later that day,
the Union claimed it filed its position paper by registered mail.
Subsequently, the NLRC, in its August 9, 2001 Decision, declared the
strikes staged by the Union on February 21 to 23, 2001 and May 23
and 28, 2001 as illegal. The decretal portion reads:
WHEREFORE, premises considered, it is hereby ordered:
(1) Declaring the strikes staged by the Union to be illegal.
(2) Declared [sic] that the dismissal of the 227 who
participated in the illegal strike on February 21-23, 2001 is
legal.
(3) However, the Company is ordered to pay the 227 Union
members, who participated in the illegal strike severance
compensation in an amount equivalent to one month salary
for every year of service, as an alternative relief to continued
employment.
(4) Declared [sic] that the following Union officers and
directors to have forfeited their employment status for having
led the illegal strikes on February 21-23, 2001 and May 23
and 28, 2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez,
Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico
Torres, Emilio Completo, Alexander Esteva, Joey Javellonar,
Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue,
Bayani Manguil, Jr., and Mayo Mata.21
SO ORDERED.22
The NLRC considered the mass actions staged on February 21 to 23,
2001 illegal as the Union failed to comply with the procedural
requirements of a valid strike under Art. 263 of the Labor Code.
After the DOLE Secretary assumed jurisdiction over the Toyota dispute
on April 10, 2001, the Union again staged strikes on May 23 and 28,
2001. The NLRC found the strikes illegal as they violated Art. 264 of
the Labor Code which proscribes any strike or lockout after jurisdiction
is assumed over the dispute by the President or the DOLE Secretary.
The NLRC held that both parties must have maintained the status quo
after the DOLE Secretary issued the assumption/certification Order,
and ruled that the Union did not respect the DOLE Secretary’s directive.
Accordingly, both Toyota and the Union filed Motions for
Reconsideration, which the NLRC denied in its September 14, 2001
Resolution.23 Consequently, both parties questioned the August 9,
2001 Decision24 and September 14, 2001 Resolution of the NLRC in
separate petitions for certiorari filed with the CA, which were docketed
as CA-G.R. SP Nos. 67100 and 67561, respectively. The CA then
consolidated the petitions.
In its February 27, 2003 Decision,25 the CA ruled that the Union’s
petition is defective in form for its failure to append a proper verification
and certificate of non-forum shopping, given that, out of the 227
petitioners, only 159 signed the verification and certificate of non-forum
shopping. Despite the flaw, the CA proceeded to resolve the petitions
on the merits and affirmed the assailed NLRC Decision and Resolution
with a modification, however, of deleting the award of severance
compensation to the dismissed Union members.
In justifying the recall of the severance compensation, the CA
considered the participation in illegal strikes as serious misconduct. It
defined serious misconduct as 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.
It cited Panay Electric Company, Inc. v. NLRC,26 where we revoked the
grant of separation benefits to employees who lawfully participated in
an illegal strike based on Art. 264 of the Labor Code, which states that
"any union officer who knowingly participates in an illegal strike and any
worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment
status."27
However, in its June 20, 2003 Resolution, 28 the CA modified its
February 27, 2003 Decision by reinstating severance compensation to
the dismissed employees based on social justice.
The Issues
Petitioner Union now comes to this Court and raises the following
issues for our consideration:
I. Whether the mere participation of ordinary employees in an
illegal strike is enough reason to warrant their dismissal.
II. Whether the Union officers and members’ act of holding
the protest rallies in front of the BLR office and the Office of
the Secretary of Labor and Employment on February 22 and
23, 2001 should be held as illegal strikes. In relation hereto,
whether the protests committed on May 23 and 28, 2001,
should be held as illegal strikes. Lastly, whether the Union
violated the Assumption of Jurisdiction Order issued by the
Secretary of Labor and Employment.
III. Whether the dismissal of 227 Union officers and members
constitutes unfair labor practice.
67
IV. Whether the CA erred in affirming the Decision of the
NLRC which excluded the Union’s Position Paper which the
Union filed by mail. In the same vein, whether the Union’s
right to due process was violated when the NLRC excluded
their Position Paper.
V. Whether the CA erred in dismissing the Union’s Petition for
Certiorari.
Toyota, on the other hand, presents this sole issue for our
determination:
I. Whether the Court of Appeals erred in issuing its Resolution dated
June 20, 2003, partially modifying its Decision dated February 27, 2003,
and awarding severance compensation to the dismissed Union
members.
In sum, two main issues are brought to the fore:
(1) Whether the mass actions committed by the Union on
different occasions are illegal strikes; and
(2) Whether separation pay should be awarded to the Union
members who participated in the illegal strikes.
The Court’s Ruling
The Union contends that the NLRC violated its right to due process
when it disregarded its position paper in deciding Toyota’s petition to
declare the strike illegal.
We rule otherwise.
It is entirely the Union’s fault that its position paper was not considered
by the NLRC. Records readily reveal that the NLRC was even too
generous in affording due process to the Union. It issued no less than
three (3) orders for the parties to submit its position papers, which the
Union ignored until the last minute. No sufficient justification was
offered why the Union belatedly filed its position paper. In Datu
Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a
party cannot complain of deprivation of due process if he was afforded
an opportunity to participate in the proceedings but failed to do so. If he
does not avail himself of the chance to be heard, then it is deemed
waived or forfeited without violating the constitutional
guarantee.29 Thus, there was no violation of the Union’s right to due
process on the part of the NLRC.
On a procedural aspect, the Union faults the CA for treating its petition
as an unsigned pleading and posits that the verification signed by 159
out of the 227 petitioners has already substantially complied with and
satisfied the requirements under Secs. 4 and 5 of Rule 7 of the Rules
of Court.
The Union’s proposition is partly correct.
Sec. 4 of Rule 7 of the Rules of Court states:
Sec. 4. Verification.—Except when otherwise specifically required by
law or rule, pleadings need not be under oath, verified or accompanied
by affidavit.
A pleading is verified by an affidavit that the affiant has read the
pleading and that the allegations therein are true and correct of his
personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based
on "information and belief" or upon "knowledge, information and belief,"
or lacks a proper verification, shall be treated as an unsigned pleading.
The verification requirement is significant, as it is intended to secure an
assurance that the allegations in the pleading are true and correct and
not the product of the imagination or a matter of speculation. 30 This
requirement is simply a condition affecting the form of pleadings, and
noncompliance with the requirement does not necessarily render it
fatally defective. Indeed, verification is only a formal and not a
jurisdictional requirement.31
In this case, the problem is not the absence but the adequacy of the
Union’s verification, since only 159 out of the 227 petitioners executed
the verification. Undeniably, the petition meets the requirement on the
verification with respect to the 159 petitioners who executed the
verification, attesting that they have sufficient knowledge of the truth
and correctness of the allegations of the petition. However, their
signatures cannot be considered as verification of the petition by the
other 68 named petitioners unless the latter gave written authorization
to the 159 petitioners to sign the verification on their behalf. Thus,
in Loquias v. Office of the Ombudsman, we ruled that the petition
satisfies the formal requirements only with regard to the petitioner who
signed the petition but not his co-petitioner who did not sign nor
authorize the other petitioner to sign it on his behalf. 32 The proper ruling
in this situation is to consider the petition as compliant with the formal
requirements with respect to the parties who signed it and, therefore,
can be given due course only with regard to them. The other petitioners
who did not sign the verification and certificate against forum shopping
cannot be recognized as petitioners have no legal standing before the
Court. The petition should be dismissed outright with respect to the
non-conforming petitioners.
In the case at bench, however, the CA, in the exercise of sound
discretion, did not strictly apply the ruling in Loquias and instead
proceeded to decide the case on the merits.
The alleged protest rallies in front of the offices of BLR and DOLE
Secretary and at the Toyota plants constituted illegal strikes
When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of
an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such
as strike by employees performing governmental functions;
or
(2) [when it] violates a specific requirement of law[, such as
Article 263 of the Labor Code on the requisites of a valid
strike]; or
(3) [when it] is declared for an unlawful purpose, such as
inducing the employer to commit an unfair labor practice
against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its
objective, such as a widespread terrorism of non-strikers [for
example, prohibited acts under Art. 264(e) of the Labor Code];
or
(5) [when it] is declared in violation of an existing injunction[,
such as injunction, prohibition, or order issued by the DOLE
Secretary and the NLRC under Art. 263 of the Labor Code];
or
(6) [when it] is contrary to an existing agreement, such as a
no-strike clause or conclusive arbitration clause. 33
Petitioner Union contends that the protests or rallies conducted on
February 21 and 23, 2001 are not within the ambit of strikes as defined
in the Labor Code, since they were legitimate exercises of their right to
peaceably assemble and petition the government for redress of
grievances. Mainly relying on the doctrine laid down in the case
of Philippine Blooming Mills Employees Organization v. Philippine
Blooming Mills Co., Inc.,34 it argues that the protest was not directed at
Toyota but towards the Government (DOLE and BLR). It explains that
the protest is not a strike as contemplated in the Labor Code. The Union
points out that in Philippine Blooming Mills Employees Organization,
the mass action staged in Malacañang to petition the Chief Executive
against the abusive behavior of some police officers was a proper
exercise of the employees’ right to speak out and to peaceably gather
and ask government for redress of their grievances.
The Union’s position fails to convince us.
While the facts in Philippine Blooming Mills Employees
Organization are similar in some respects to that of the present case,
the Union fails to realize one major difference: there was no labor
dispute in Philippine Blooming Mills Employees Organization. In the
present case, there was an on-going labor dispute arising from Toyota’s
refusal to recognize and negotiate with the Union, which was the
subject of the notice of strike filed by the Union on January 16, 2001.
Thus, the Union’s reliance on Phililippine Blooming Mills Employees
Organization is misplaced, as it cannot be considered a precedent to
the case at bar.
A strike means any temporary stoppage of work by the concerted action
of employees as a result of an industrial or labor dispute. A labor
dispute, in turn, includes any controversy or matter concerning terms
or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing, or arranging the
terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of the employer and the
employee.35
In Bangalisan v. Court of Appeals, it was explained that "[t]he fact that
the conventional term ‘strike’ was not used by the striking employees
to describe their common course of action is inconsequential, since the
substance of the situation and not its appearance, will be deemed
controlling."36 The term "strike" has been elucidated to encompass not
only concerted work stoppages, but also slowdowns, mass leaves, sit-
downs, attempts to damage, destroy, or sabotage plant equipment and
facilities, and similar activities.37
Applying pertinent legal provisions and jurisprudence, we rule that the
protest actions undertaken by the Union officials and members on
February 21 to 23, 2001 are not valid and proper exercises of their right
to assemble and ask government for redress of their complaints, but
are illegal strikes in breach of the Labor Code. The Union’s position is
weakened by the lack of permit from the City of Manila to hold "rallies."
Shrouded as demonstrations, they were in reality temporary stoppages
of work perpetrated through the concerted action of the employees who
deliberately failed to report for work on the convenient excuse that they
will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on
February 21 to 23, 2001. The purported reason for these protest actions
was to safeguard their rights against any abuse which the med-arbiter
may commit against their cause. However, the Union failed to advance
convincing proof that the med-arbiter was biased against them. The
acts of the med-arbiter in the performance of his duties are presumed
regular. Sans ample evidence to the contrary, the Union was unable to
justify the February 2001 mass actions. What comes to the fore is that
the decision not to work for two days was designed and calculated to
cripple the manufacturing arm of Toyota. It becomes obvious that the
real and ultimate goal of the Union is to coerce Toyota to finally
acknowledge the Union as the sole bargaining agent of the company.
This is not a legal and valid exercise of the right of assembly and to
demand redress of grievance.
68
We sustain the CA’s affirmance of the NLRC’s finding that the protest
rallies staged on February 21 to 23, 2001 were actually illegal strikes.
The illegality of the Union’s mass actions was succinctly elaborated by
the labor tribunal, thus:
We have stated in our questioned decision that such mass actions
staged before the Bureau of Labor Relations on February 21-23, 2001
by the union officers and members fall squarely within the definition of
a strike (Article 212 (o), Labor Code). These concerted actions resulted
in the temporary stoppage of work causing the latter substantial losses.
Thus, without the requirements for a valid strike having been complied
with, we were constrained to consider the strike staged on such dates
as illegal and all employees who participated in the concerted actions
to have consequently lost their employment status.
If we are going to stamp a color of legality on the two (2) [day-] walk
out/strike of respondents without filing a notice of strike, in effect we are
giving license to all the unions in the country to paralyze the operations
of their companies/employers every time they wish to hold a
demonstration in front of any government agency. While we recognize
the right of every person or a group to peaceably assemble and petition
the government for redress of grievances, the exercise of such right is
governed by existing laws, rules and regulations.
Although the respondent union admittedly made earnest
representations with the company to hold a mass protest before the
BLR, together with their officers and members, the denial of the request
by the management should have been heeded and ended their
insistence to hold the planned mass demonstration. Verily, the violation
of the company rule cannot be dismissed as mere absences of two
days as being suggested by the union [are but] concerted actions
detrimental to Petitioner Toyota’s interest. 38 (Emphasis supplied.)
It is obvious that the February 21 to 23, 2001 concerted actions were
undertaken without satisfying the prerequisites for a valid strike under
Art. 263 of the Labor Code. The Union failed to comply with the
following requirements: (1) a notice of strike filed with the DOLE 30
days before the intended date of strike, or 15 days in case of unfair
labor practice;39 (2) strike vote approved by a majority of the total union
membership in the bargaining unit concerned obtained by secret ballot
in a meeting called for that purpose; and (3) notice given to the DOLE
of the results of the voting at least seven days before the intended strike.
These requirements are mandatory and the failure of a union to comply
with them renders the strike illegal.40 The evident intention of the law in
requiring the strike notice and the strike-vote report is to reasonably
regulate the right to strike, which is essential to the attainment of
legitimate policy objectives embodied in the law. 41 As they failed to
conform to the law, the strikes on February 21, 22, and 23, 2001 were
illegal.
Moreover, the aforementioned February 2001 strikes are in blatant
violation of Sec. D, par. 6 of Toyota’s Code of Conduct which prohibits
"inciting or participating in riots, disorders, alleged strikes or concerted
actions detrimental to [Toyota’s] interest." The penalty for the offense
is dismissal. The Union and its members are bound by the company
rules, and the February 2001 mass actions and deliberate refusal to
render regular and overtime work on said days violated these rules. In
sum, the February 2001 strikes and walk-outs were illegal as these
were in violation of specific requirements of the Labor Code and a
company rule against illegal strikes or concerted actions.
With respect to the strikes committed from March 17 to April 12, 2001,
those were initially legal as the legal requirements were met. However,
on March 28 to April 12, 2001, the Union barricaded the gates of the
Bicutan and Sta. Rosa plants and blocked the free ingress to and
egress from the company premises. Toyota employees, customers,
and other people having business with the company were intimidated
and were refused entry to the plants. As earlier explained, these strikes
were illegal because unlawful means were employed. The acts of the
Union officers and members are in palpable violation of Art. 264(e),
which proscribes acts of violence, coercion, or intimidation, or which
obstruct the free ingress to and egress from the company premises.
Undeniably, the strikes from March 28 to April 12, 2001 were illegal.
Petitioner Union also posits that strikes were not committed on May 23
and 28, 2001. The Union asserts that the rallies held on May 23 and 28,
2001 could not be considered strikes, as the participants were the
dismissed employees who were on payroll reinstatement. It concludes
that there was no work stoppage.
This contention has no basis.
It is clear that once the DOLE Secretary assumes jurisdiction over the
labor dispute and certifies the case for compulsory arbitration with the
NLRC, the parties have to revert to the status quo ante (the state of
things as it was before). The intended normalcy of operations is
apparent from the fallo of the April 10, 2001 Order of then DOLE
Secretary Patricia A. Sto. Tomas, which reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby
CERTIFIES the labor dispute at Toyota Motors Philippines Corporation
to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as
amended. This Certification covers the current labor cases filed in
relation with the Toyota strike, particularly, the Petition for Injunction
filed with the National Labor Relations Commission entitled Toyota
Motor Philippines Corporation vs. Toyota Motor Philippines Corporation

Workers Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction
Case No. 3401054-01; Toyota Motor Philippines Corporation vs.
Toyota Motor Philippines Corporation Workers Association, et al.,
NLRC NCR Case No. 3004-01775-01, and such other labor cases that
the parties may file relating to the strike and its effects while this
Certification is in effect.
As provided under Article 2634(g) of the Labor Code, all striking
workers are directed to return to work at their regular shifts by April 16,
2001; the Company is in turn directed to accept them back to work
under the same terms and conditions obtaining prior to the work
stoppage, subject to the option of the company to merely reinstate a
worker or workers in the payroll in light of the negative emotions that
the strike has generated and the need to prevent the further
deterioration of the relationship between the company and its workers.
Further, the parties are hereby ordered to cease and desist from
committing any act that might lead to the worsening of an already
deteriorated situation.42 (Emphasis supplied.)
It is explicit from this directive that the Union and its members shall
refrain from engaging in any activity that might exacerbate the tense
labor situation in Toyota, which certainly includes concerted actions.
This was not heeded by the Union and the individual respondents who
staged illegal concerted actions on May 23 and 28, 2001 in
contravention of the Order of the DOLE Secretary that no acts should
be undertaken by them to aggravate the "already deteriorated
situation."
While it may be conceded that there was no work disruption in the two
Toyota plants, the fact still remains that the Union and its members
picketed and performed concerted actions in front of the Company
premises. This is a patent violation of the assumption of jurisdiction and
certification Order of the DOLE Secretary, which ordered the parties "to
cease and desist from committing any act that might lead to the
worsening of an already deteriorated situation." While there are no work
stoppages, the pickets and concerted actions outside the plants have
a demoralizing and even chilling effect on the workers inside the plants
and can be considered as veiled threats of possible trouble to the
workers when they go out of the company premises after work and of
impending disruption of operations to company officials and even to
customers in the days to come. The pictures presented by Toyota
undoubtedly show that the company officials and employees are being
intimidated and threatened by the strikers. In short, the Union, by its
mass actions, has inflamed an already volatile situation, which was
explicitly proscribed by the DOLE Secretary’s Order. We do not find any
compelling reason to reverse the NLRC findings that the pickets on May
23 and 28, 2001 were unlawful strikes.
From the foregoing discussion, we rule that the February 21 to 23, 2001
concerted actions, the March 17 to April 12, 2001 strikes, and the May
23 and 28, 2001 mass actions were illegal strikes.
Union officers are liable for unlawful strikes or illegal acts during a strike
Art. 264 (a) of the Labor Code provides:
ART. 264. PROHIBITED ACTIVITIES
(a) x x x
Any worker whose employment has been terminated as a consequence
of an unlawful lockout shall be entitled to reinstatement with full
backwages. Any union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost
his employment status: Provided, That mere participation of a worker
in a lawful strike shall not constitute sufficient ground for termination of
his employment, even if a replacement had been hired by the employer
during such lawful strike.
Art. 264(a) sanctions the dismissal of a union officer who knowingly
participates in an illegal strike or who knowingly participates in the
commission of illegal acts during a lawful strike.
It is clear that the responsibility of union officials is greater than that of
the members. They are tasked with the duty to lead and guide the
membership in decision making on union activities in accordance with
the law, government rules and regulations, and established labor
practices. The leaders are expected to recommend actions that are
arrived at with circumspection and contemplation, and always keep
paramount the best interests of the members and union within the
bounds of law. If the implementation of an illegal strike is recommended,
then they would mislead and deceive the membership and the supreme
penalty of dismissal is appropriate. On the other hand, if the strike is
legal at the beginning and the officials commit illegal acts during the
duration of the strike, then they cannot evade personal and individual
liability for said acts.
The Union officials were in clear breach of Art. 264(a) when they
knowingly participated in the illegal strikes held from February 21 to 23,
2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001.
We uphold the findings of fact of the NLRC on the involvement of said
union officials in the unlawful concerted actions as affirmed by the CA,
thus:
As regards to the Union officers and directors, there is overwhelming
justification to declare their termination from service. Having instigated
the Union members to stage and carry out all illegal strikes from
February 21-23, 2001, and May 23 and 28, 2001, the following Union
69
officers are hereby terminated for cause pursuant to Article 264(a) of
the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito
Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio
Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo,
Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo
Mata.43
The rule is well entrenched in this jurisdiction that factual findings of the
labor tribunal, when affirmed by the appellate court, are generally
accorded great respect, even finality.44
Likewise, we are not duty-bound to delve into the accuracy of the
factual findings of the NLRC in the absence of clear showing that these
were arbitrary and bereft of any rational basis.45 In the case at bench,
the Union failed to convince us that the NLRC findings that the Union
officials instigated, led, and knowingly participated in the series of illegal
strikes are not reinforced by substantial evidence. Verily, said findings
have to be maintained and upheld. We reiterate, as a reminder to labor
leaders, the rule that "[u]nion officers are duty bound to guide their
members to respect the law."46 Contrarily, if the "officers urge the
members to violate the law and defy the duly constituted authorities,
their dismissal from the service is a just penalty or sanction for their
unlawful acts."47
Member’s liability depends on participation in illegal acts
Art. 264(a) of the Labor Code provides that a member is liable when he
knowingly participates in an illegal act "during a strike." While the
provision is silent on whether the strike is legal or illegal, we find that
the same is irrelevant. As long as the members commit illegal acts, in
a legal or illegal strike, then they can be terminated. 48 However, when
union members merely participate in an illegal strike without committing
any illegal act, are they liable?
This was squarely answered in Gold City Integrated Port Service, Inc.
v. NLRC,49 where it was held that an ordinary striking worker cannot be
terminated for mere participation in an illegal strike. This was an
affirmation of the rulings in Bacus v. Ople50 and Progressive Workers
Union v. Aguas,51 where it was held that though the strike is illegal, the
ordinary member who merely participates in the strike should not be
meted loss of employment on the considerations of compassion and
good faith and in view of the security of tenure provisions under the
Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa sa
Esso (MME), it was explained that a member is not responsible for the
union’s illegal strike even if he voted for the holding of a strike which
became illegal.52
Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the
history relating to the liability of a union member in an illegal strike,
starting with the "rule of vicarious liability," thus:
Under [the rule of vicarious liability], mere membership in a labor union
serves as basis of liability for acts of individuals, or for a labor activity,
done on behalf of the union. The union member is made liable on the
theory that all the members are engaged in a general conspiracy, and
the unlawful acts of the particular members are viewed as necessary
incidents of the conspiracy. It has been said that in the absence of
statute providing otherwise, the rule of vicarious liability applies.
Even the Industrial Peace Act, however, which was in effect from 1953
to 1974, did not adopt the vicarious liability concept. It expressly
provided that:
No officer or member of any association or organization, and no
association or organization participating or interested in a labor dispute
shall be held responsible or liable for the unlawful acts of individual
officers, members, or agents, except upon proof of actual participation
in, or actual authorization of, such acts or of ratifying of such acts after
actual knowledge thereof.
Replacing the Industrial Peace Act, the Labor Code has not adopted
the vicarious liability rule.53
Thus, the rule on vicarious liability of a union member was abandoned
and it is only when a striking worker "knowingly participates in the
commission of illegal acts during a strike" that he will be penalized with
dismissal.
Now, what are considered "illegal acts" under Art. 264(a)?
No precise meaning was given to the phrase "illegal acts." It may
encompass a number of acts that violate existing labor or criminal laws,
such as the following:
(1) Violation of Art. 264(e) of the Labor Code which provides
that "[n]o person engaged in picketing shall commit any act of
violence, coercion or intimidation or obstruct the free ingress
to or egress from the employer’s premises for lawful purposes,
or obstruct public thoroughfares";
(2) Commission of crimes and other unlawful acts in carrying
out the strike;54 and
(3) Violation of any order, prohibition, or injunction issued by
the DOLE Secretary or NLRC in connection with the
assumption of jurisdiction/certification Order under Art. 263(g)
of the Labor Code.
As earlier explained, this enumeration is not exclusive and it may cover
other breaches of existing laws.
In the cases at bench, the individual respondents participated in several
mass actions, viz:

(1) The rallies held at the DOLE and BLR offices on February
21, 22, and 23, 2001;
(2) The strikes held on March 17 to April 12, 2001; and
(3) The rallies and picketing on May 23 and 28, 2001 in front
of the Toyota Bicutan and Sta. Rosa plants.
Did they commit illegal acts during the illegal strikes on February 21 to
23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001?
The answer is in the affirmative.
As we have ruled that the strikes by the Union on the three different
occasions were illegal, we now proceed to determine the individual
liabilities of the affected union members for acts committed during
these forbidden concerted actions.
Our ruling in Association of Independent Unions in the Philippines v.
NLRC lays down the rule on the liability of the union members:
Decisive on the matter is the pertinent provisions of Article 264 (a) of
the Labor Code that: "[x x x] any worker [x x x] who knowingly
participates in the commission of illegal acts during a strike may be
declared to have lost his employment status. [x x x]" It can be gleaned
unerringly from the aforecited provision of law in point, however, that
an ordinary striking employee can not be terminated for mere
participation in an illegal strike. There must be proof that he
committed illegal acts during the strike and the striker who
participated in the commission of illegal act[s] must be identified.
But proof beyond reasonable doubt is not required. Substantial
evidence available under the circumstances, which may justify the
imposition of the penalty of dismissal, may suffice.
In the landmark case of Ang Tibay vs. CIR, the court ruled "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 that a
reasonable mind might accept as sufficient to support a
conclusion."55 (Emphasis supplied.)
Thus, it is necessary for the company to adduce proof on the
participation of the striking employee in the commission of illegal acts
during the strikes.
After a scrutiny of the records, we find that the 227 employees indeed
joined the February 21, 22, and 23, 2001 rallies and refused to render
overtime work or report for work. These rallies, as we earlier ruled, are
in reality illegal strikes, as the procedural requirements for strikes under
Art. 263 were not complied with. Worse, said strikes were in violation
of the company rule prohibiting acts "in citing or participating in riots,
disorders, alleged strikes or concerted action detrimental to Toyota’s
interest."
With respect to the February 21, 22, and 23, 2001 concerted actions,
Toyota submitted the list of employees who did not render overtime
work on February 21, 2001 and who did not report for work on February
22 and 23, 2001 as shown by Annex "I" of Toyota’s Position Paper in
NLRC Certified Case No. 000203-01 entitled In Re: Labor Dispute at
Toyota Motor Philippines Corp. The employees who participated in the
illegal concerted actions were as follows:
1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin;
5. Alejo, Alex; 6. Alfonso, Erwin; 7. Apolinario, Dennis; 8. Apostol,
Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12.
Arollado, Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15. Bala,
Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.; 18. Bayani,
Roderick; 19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny;
22. Birondo, Alberto; 23. Blanco, Melchor; 24. Bolanos, Dexter; 25.
Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28. Borsigue,
Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto
Jr.; 32. Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie;
35. Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque
Jr.; 38. Capate, Leo Nelson; 39. Carandang, Resty; 40. Caraqueo,
Lorenzo; 41. Caringal, Dennis; 42. Casaba, Gienell; 43. Catapusan,
Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47.
Cometa, Julius; 48. Completo, Emilio; 49. Consignado, Randy; 50.
Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53.
Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay,
Rene; 57. David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz,
Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62. De Leon,
Leonardo; 63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De
Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68. Dela Ysla,
Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong,
Jessiah; 72. Dumalag, Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando;
75. Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78.
Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George; 81.
Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio; 84. Franco,
Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88.
Galang, Erwin; 89. Gamit, Rodel; 90. Garces, Robin; 91. Garcia, Ariel;
92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95.
Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar,
Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga,
Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104.
Imperial, Alejandro; 105. Jaen, Ferdinand; 106. Jalea, Philip; 107.
Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio; 110.
Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro,
Orlando; 114. Legaspi, Noel; 115. Lising, Reynaldo Jr.; 116. Llanera,
70
Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude
Jonobell; 120. Lucido, Johny; 121. Macalindong, Rommel; 122.
Madrazo, Nixon; 123. Magbalita, Valentin; 124. Magistrado, Rogelio Jr.;
125. Magnaye, Philip John; 126. Malabanan, Allan John; 127.
Malabrigo, Angelito; 128. Malaluan, Rolando Jr.; 129. Malate, Leoncio
Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132. Manalang, Joseph
Patrick; 133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135. Manaog,
Melchor; 136. Mandolado, Melvin; 137. Maneclang, Jovito; 138.
Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141.
Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144.
Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza,
Bobit; 148. Mendoza, Roberto; 149. Milan, Joseph; 150. Miranda,
Eduardo; 151. Miranda, Luis; 152. Montero, Ericson; 153. Montero,
Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad,
Kenneth; 157. Nava, Ronaldo; 158. Nevalga, Alexander; 159. Nicanor,
Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito;
163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit,
Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169. Operana, Danny;
170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173.
Paniterce, Alvin; 174. Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena,
Erwin; 177. Penamante, Jowald; 178. Piamonte, Melvin; 179. Piamonte,
Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John;
183. Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando; 186.
Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David Jr.; 189.
Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo,
Baldwin; 192. Sangalang, Jeffrey; 193. Santiago, Eric; 194. Santos,
Raymond; 195. Sapin, Al Jose; 196. Saquilabon, Bernabe; 197.
Serrano, Ariel; 198. Sierra, Alex; 199. Simborio, Romualdo; 200. Sulit,
Lauro; 201. Tabirao, Elvisanto; 202. Tablizo, Edwin; 203. Taclan,
Petronio; 204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson
Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick; 209.
Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino, Romulo Jr.;
212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214. Toral, Grant Robert;
215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose
Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas,
Joseph; 221. Vergara, Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo
Sr.; 224. Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar,
Christopher; and 227. Zamora, Dominador Jr.
Toyota’s Position Paper containing the list of striking workers was
attested to as true and correct under oath by Mr. Jose Ma. Aligada, First
Vice President of the Group Administration Division of Toyota. Mr.
Emerito Dumaraos, Assistant Department Manager of the Production
Department of Toyota, likewise submitted a June 29, 2001
Affidavit56 confirming the low attendance of employees on February 21,
22, and 23, 2001, which resulted from the intentional absences of the
aforelisted striking workers. The Union, on the other hand, did not refute
Toyota’s categorical assertions on the participation of said workers in
the mass actions and their deliberate refusal to perform their assigned
work on February 21, 22, and 23, 2001. More importantly, it did not
deny the fact of absence of the employees on those days from the
Toyota manufacturing plants and their deliberate refusal to render work.
Their admission that they participated in the February 21 to 23, 2001
mass actions necessarily means they were absent from their work on
those days.
Anent the March 28 to April 12, 2001 strikes, evidence is ample to show
commission of illegal acts like acts of coercion or intimidation and
obstructing free ingress to or egress from the company premises. Mr.
Eduardo Nicolas III, Toyota’s Security Chief, attested in his affidavit that
the strikers "badmouthed people coming in and shouted invectives
such as bakeru at Japanese officers of the company." The strikers even
pounded the vehicles of Toyota officials. More importantly, they
prevented the ingress of Toyota employees, customers, suppliers, and
other persons who wanted to transact business with the company.
These were patent violations of Art. 264(e) of the Labor Code, and may
even constitute crimes under the Revised Penal Code such as threats
or coercion among others.
On March 28, 2001, the following have committed illegal acts––
blocking the ingress to or egress from the two (2) Toyota plants and
preventing the ingress of Toyota employees on board the company
shuttle–– at the Bicutan and Sta. Rosa Plants, viz:
1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John
Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7. Charlie Oliveria; 8.
Manjolito Puno; 9. Baldwin San Pablo; 10. Federico Torres; 11. Larry
Gerola; 12. Roderick Bayani; 13. Allan Oclarino; 14. Reynaldo Cuevas;
15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18.
Roberto Gonzales
Photographs were submitted by Toyota marked as Annexes "1"
through "18" of its Position Paper, vividly showing the participation of
the aforelisted employees in illegal acts.57
To further aggravate the situation, a number of union members
committed illegal acts (blocking the ingress to and egress from the plant)
during the strike staged on March 29, 2001 at the Toyota plant in
Bicutan, to wit:
1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit;
and 5. Joel Agosto

Pictures marked as Annexes "21" to "22" of Toyota’s Position Paper
reveal the illegal acts committed by the aforelisted workers.58
On the next day, March 30, 2001, several employees again committed
illegal acts (blocking ingress to and egress from the plant) during the
strike at the Bicutan plant, to wit:
1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen;
5. Wilfredo Tagle; 6. Alejandro Imperial; 7. Manjolito Puno; 8. Delmar
Espadilla; 9. Apollo Violeta; and 10. Elvis Tabirao
Pictures marked as Annexes "25" to "26" and "28" of Toyota’s Position
Paper show the participation of these workers in unlawful acts. 59
On April 5, 2001, seven (7) Toyota employees were identified to have
committed illegal acts (blocking ingress to and egress from the plant)
during the strike held at the Bicutan plant, to wit:
1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo
Salvador; 5. Antonio Dimayuga; 6. Rurel Borebor; and 7. Alberto
Lomboy
The participations of the strikers in illegal acts are manifest in the
pictures marked as Annexes "32" and "33" of Toyota’s Position Paper. 60
On April 6, 2001, only Rogelio Piamonte was identified to have
committed illegal acts (blocking ingress to and egress from the Toyota
plant) during the strike at the Toyota Santa Rosa plant.61 Then, on April
9, 2001, Alvin Paniterce, Dennis Apolinario, and Eduardo
Miranda62 were identified to have committed illegal acts (blocking
ingress to and egress from the Toyota plant) during the strike at the
Toyota Santa Rosa plant and were validly dismissed by Toyota.
Lastly, the strikers, though on payroll reinstatement, staged protest
rallies on May 23, 2001 and May 28, 2001 in front of the Bicutan and
Sta. Rosa plants. These workers’ acts in joining and participating in the
May 23 and 28, 2001 rallies or pickets were patent violations of the April
10, 2001 assumption of jurisdiction/certification Order issued by the
DOLE Secretary, which proscribed the commission of acts that might
lead to the "worsening of an already deteriorated situation." Art. 263(g)
is clear that strikers who violate the assumption/certification Order may
suffer dismissal from work. This was the situation in the May 23 and 28,
2001 pickets and concerted actions, with the following employees who
committed illegal acts:
a. Strikers who joined the illegal pickets on May 23, 2001 were (1)
Dennis Apolinario; (2) Abel Berces; (3) Benny Bering; (4) Dexter
Bolaños; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy
Consignado; (8) Herbert Dalanon; (9) Leodegario De Silva; (10)
Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko Franco; (13)
Genaro Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado; (16)
Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18) Edwin Manzanilla;
(19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22)
Filemon Ortiz; (23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric
Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel
Tagala.
Pictures show the illegal acts (participation in pickets/strikes despite the
issuance of a return-to-work order) committed by the aforelisted
strikers.63
b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto;
(2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis Apolinario; (5) Melvin
Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny
Bering; (10) Dexter Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo
Capate; (13) Lorenzo Caraqueo; (14) Christopher Catapusan; (15)
Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa; (18) Ed
Cubelo; (19) Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David,
Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel Digma; (25)
Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla; (28)
Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31) Dante
Fulo; (32) Eduardo Gado; (33) Michael Gohilde; (34) Eugene Jay
Hondrada II; (35) Joey Javillonar; (36) Basilio Laqui; (37) Alberto
Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon
Madrazo; (41) Valentin Magbalita; (42) Allan Jon Malabanan; (43)
Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas; (46)
Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo
Ojenal; (50) Allan Oriana; (51) Rogelio Piamonte; (52) George Polutan;
(53) Eric Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56)
Romualdo Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59)
Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62) Joseph
Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.
Toyota presented photographs which show said employees conducting
mass pickets and concerted actions.64
Anent the grant of severance compensation to legally dismissed union
members, Toyota assails the turn-around by the CA in granting
separation pay in its June 20, 2003 Resolution after initially denying it
in its February 27, 2003 Decision. The company asseverates that
based on the CA finding that the illegal acts of said union members
constitute gross misconduct, not to mention the huge losses it suffered,
then the grant of separation pay was not proper.
The general rule is that when just causes for terminating the services
of an employee under Art. 282 of the Labor Code exist, the employee
is not entitled to separation pay. The apparent reason behind the
forfeiture of the right to termination pay is that lawbreakers should not
benefit from their illegal acts. The dismissed employee, however, is
entitled to "whatever rights, benefits and privileges [s/he] may have
71
under the applicable individual or collective bargaining agreement with
the employer or voluntary employer policy or practice" 65 or under the
Labor Code and other existing laws. This means that the employee,
despite the dismissal for a valid cause, retains the right to receive from
the employer benefits provided by law, like accrued service incentive
leaves. With respect to benefits granted by the CBA provisions and
voluntary management policy or practice, the entitlement of the
dismissed employees to the benefits depends on the stipulations of the
CBA or the company rules and policies.
As in any rule, there are exceptions. One exception where separation
pay is given even though an employee is validly dismissed is when the
court finds justification in applying the principle of social justice well
entrenched in the 1987 Constitution. In Phil. Long Distance Telephone
Co. (PLDT) v. NLRC, the Court elucidated why social justice can
validate the grant of separation pay, thus:
The reason is that our Constitution is replete with positive commands
for the promotion of social justice, and particularly the protection of the
rights of the workers. The enhancement of their welfare is one of the
primary concerns of the present charter. In fact, instead of confining
itself to the general commitment to the cause of labor in Article II on the
Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social justice
and human rights with a separate sub-topic for labor. Article XIII
expressly recognizes the vital role of labor, hand in hand with
management, in the advancement of the national economy and the
welfare of the people in general. The categorical mandates in the
Constitution for the improvement of the lot of the workers are more than
sufficient basis to justify the award of separation pay in proper cases
even if the dismissal be for cause.66
In the same case, the Court laid down the rule that severance
compensation shall be allowed only when the cause of the dismissal is
other than serious misconduct or that which reflects adversely on the
employee’s moral character. The Court succinctly discussed the
propriety of the grant of separation pay in this wise:
We hold that henceforth separation pay shall be allowed as a measure
of social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting
on his moral character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral turpitude,
like theft or illicit sexual relations with a fellow worker, the employer may
not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground
of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect,
of rewarding rather than punishing the erring employee for his offense.
And we do not agree that the punishment is his dismissal only and that
the separation pay has nothing to do with the wrong he has committed.
Of course it has. Indeed, if the employee who steals from the company
is granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next employment
because he thinks he can expect a like leniency if he is again found out.
This kind of misplaced compassion is not going to do labor in general
any good as it will encourage the infiltration of its ranks by those who
do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels any more
than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to be
poor. This great policy of our Constitution is not meant for the protection
of those who have proved they are not worthy of it, like the workers who
have tainted the cause of labor with the blemishes of their own
character.67
Explicit in PLDT are two exceptions when the NLRC or the courts
should not grant separation pay based on social justice¾serious
misconduct (which is the first ground for dismissal under Art. 282) or
acts that reflect on the moral character of the employee. What is unclear
is whether the ruling likewise precludes the grant of separation pay
when the employee is validly terminated from work on grounds laid
down in Art. 282 of the Labor Code other than serious misconduct.
A recall of recent cases decided bearing on the issue reveals that when
the termination is legally justified on any of the grounds under Art. 282,
separation pay was not allowed. In Ha Yuan Restaurant v. NLRC,68 we
deleted the award of separation pay to an employee who, while
unprovoked, hit her co-worker’s face, causing injuries, which then
resulted in a series of fights and scuffles between them. We viewed her
act as serious misconduct which did not warrant the award of
separation pay. In House of Sara Lee v. Rey,69 this Court deleted the
award of separation pay to a branch supervisor who regularly, without
authorization, extended the payment deadlines of the company’s sales
agents. Since the cause for the supervisor’s dismissal involved her
integrity (which can be considered as breach of trust), she was not

worthy of compassion as to deserve separation pay based on her
length of service. In Gustilo v. Wyeth Phils., Inc.,70 this Court found no
exceptional circumstance to warrant the grant of financial assistance to
an employee who repeatedly violated the company’s disciplinary rules
and regulations and whose employment was thus terminated for gross
and habitual neglect of his duties. In the doctrinal case of San Miguel v.
Lao,71 this Court reversed and set aside the ruling of the CA granting
retirement benefits or separation pay to an employee who was
dismissed for willful breach of trust and confidence by causing the
delivery of raw materials, which are needed for its glass production
plant, to its competitor. While a review of the case reports does not
reveal a case involving a termination by reason of the commission of a
crime against the employer or his/her family which dealt with the issue
of separation pay, it would be adding insult to injury if the employer
would still be compelled to shell out money to the offender after the
harm done.
In all of the foregoing situations, the Court declined to grant termination
pay because the causes for dismissal recognized under Art. 282 of the
Labor Code were serious or grave in nature and attended by willful or
wrongful intent or they reflected adversely on the moral character of the
employees. We therefore find that in addition to serious misconduct, in
dismissals based on other grounds under Art. 282 like willful
disobedience, gross and habitual neglect of duty, fraud or willful breach
of trust, and commission of a crime against the employer or his family,
separation pay should not be conceded to the dismissed employee.
In analogous causes for termination like inefficiency, drug use, and
others, the NLRC or the courts may opt to grant separation pay
anchored on social justice in consideration of the length of service of
the employee, the amount involved, whether the act is the first offense,
the performance of the employee and the like, using the guideposts
enunciated in PLDT on the propriety of the award of separation pay.
In the case at bench, are the 227 striking employees entitled to
separation pay?
In the instant case, the CA concluded that the illegal strikes committed
by the Union members constituted serious misconduct. 72
The CA ratiocinated in this manner:
Neither can social justice justify the award to them of severance
compensation or any other form of financial assistance. x x x
xxxx
Considering that the dismissal of the employees was due to their
participation in the illegal strikes as well as violation of the Code of
Conduct of the company, the same constitutes serious misconduct. A
serious misconduct 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. In fact, in
Panay Electric Company, Inc. v. NLRC, the Supreme Court nullified the
grant of separation benefits to employees who unlawfully participated
in an illegal strike in light of Article 264, Title VIII, Book V of the Labor
Code, that, "any union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost
his employment status."
The constitutional guarantee on social justice is not intended only for
the poor but for the rich as well. It is a policy of fairness to both labor
and management.73 (Emphasis supplied.)
In disposing of the Union’s plea for reconsideration of its February 27,
2003 Decision, the CA however performed a volte-face by reinstating
the award of separation pay.
The CA’s grant of separation pay is an erroneous departure from our
ruling in Phil. Long Distance Telephone Co. v. NLRC that serious
misconduct forecloses the award of separation pay. Secondly, the
advertence to the alleged honest belief on the part of the 227
employees that Toyota committed a breach of the duty to bargain
collectively and an abuse of valid exercise of management prerogative
has not been substantiated by the evidence extant on record. There
can be no good faith in intentionally incurring absences in a collective
fashion from work on February 22 and 23, 2001 just to attend the DOLE
hearings. The Union’s strategy was plainly to cripple the operations and
bring Toyota to its knees by inflicting substantial financial damage to
the latter to compel union recognition. The Union officials and members
are supposed to know through common sense that huge losses would
befall the company by the abandonment of their regular work. It was
not disputed that Toyota lost more than PhP 50 million because of the
willful desertion of company operations in February 2001 by the
dismissed union members. In addition, further damage was
experienced by Toyota when the Union again resorted to illegal strikes
from March 28 to April 12, 2001, when the gates of Toyota were blocked
and barricaded, and the company officials, employees, and customers
were intimidated and harassed. Moreover, they were fully aware of the
company rule on prohibition against concerted action inimical to the
interests of the company and hence, their resort to mass actions on
several occasions in clear violation of the company regulation cannot
be excused nor justified. Lastly, they blatantly violated the
assumption/certification Order of the DOLE Secretary, exhibiting their
lack of obeisance to the rule of law. These acts indeed constituted
serious misconduct.
72
A painstaking review of case law renders obtuse the Union’s claim for
separation pay. In a slew of cases, this Court refrained from awarding
separation pay or financial assistance to union officers and members
who were separated from service due to their participation in or
commission of illegal acts during strikes. In the recent case of Pilipino
Telephone Corporation v. Pilipino Telephone Employees Association
(PILTEA),74 this Court upheld the dismissal of union officers who
participated and openly defied the return-to-work order issued by the
DOLE Secretary. No separation pay or financial assistance was
granted. In Sukhothai Cuisine and Restaurant v. Court of
Appeals,75 this Court declared that the union officers who participated
in and the union members who committed illegal acts during the illegal
strike have lost their employment status. In this case, the strike was
held illegal because it violated agreements providing for arbitration.
Again, there was no award of separation pay nor financial assistance.
In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel
Employees Union,76 the strike was declared illegal because the means
employed was illegal. We upheld the validity of dismissing union
members who committed illegal acts during the strike, but again,
without awarding separation pay or financial assistance to the erring
employees. In Samahang Manggagawa sa Sulpicio Lines, Inc. v.
Sulpicio Lines,77 this Court upheld the dismissal of union officers who
participated in an illegal strike sans any award of separation pay. Earlier,
in Grand Boulevard Hotel v. Genuine Labor Organization of Workers in
Hotel, Restaurant and Allied Industries,78 we affirmed the dismissal of
the Union’s officers who participated in an illegal strike without
awarding separation pay, despite the NLRC’s declaration urging the
company to give financial assistance to the dismissed
employees.79 In Interphil Laboratories Union-FFW, et al. v. Interphil
Laboratories, Inc.,80 this Court affirmed the dismissal of the union
officers who led the concerted action in refusing to render overtime
work and causing "work slowdowns." However, no separation pay or
financial assistance was allowed. In CCBPI Postmix Workers Union v.
NLRC,81 this Court affirmed the dismissal of union officers who
participated in the strike and the union members who committed illegal
acts while on strike, without awarding them separation pay or financial
assistance. In 1996, in Allied Banking Corporation v. NLRC,82 this
Court affirmed the dismissal of Union officers and members, who
staged a strike despite the DOLE Secretary’s issuance of a return to
work order but did not award separation pay. In the earlier but more
relevant case of Chua v. NLRC,83 this Court deleted the NLRC’s award
of separation benefits to an employee who participated in an unlawful
and violent strike, which strike resulted in multiple deaths and extensive
property damage. In Chua, we viewed the infractions committed by the
union officers and members as a serious misconduct which resulted in
the deletion of the award of separation pay in conformance to the ruling
in PLDT. Based on existing jurisprudence, the award of separation pay
to the Union officials and members in the instant petitions cannot be
sustained.
One last point to consider—it is high time that employer and employee
cease to view each other as adversaries and instead recognize that
theirs is a symbiotic relationship, wherein they must rely on each other
to ensure the success of the business. When they consider only their
own self-interests, and when they act only with their own benefit in mind,
both parties suffer from short-sightedness, failing to realize that they
both have a stake in the business. The employer wants the business to
succeed, considering the investment that has been made. The
employee in turn, also wants the business to succeed, as continued
employment means a living, and the chance to better one’s lot in life. It
is clear then that they both have the same goal, even if the benefit that
results may be greater for one party than the other. If this becomes a
source of conflict, there are various, more amicable means of settling
disputes and of balancing interests that do not add fuel to the fire, and
instead open avenues for understanding and cooperation between the
employer and the employee. Even though strikes and lockouts have
been recognized as effective bargaining tools, it is an antiquated notion
that they are truly beneficial, as they only provide short-term solutions
by forcing concessions from one party; but staging such strikes would
damage the working relationship between employers and employees,
thus endangering the business that they both want to succeed. The
more progressive and truly effective means of dispute resolution lies in
mediation, conciliation, and arbitration, which do not increase tension
but instead provide relief from them. In the end, an atmosphere of trust
and understanding has much more to offer a business relationship than
the traditional enmity that has long divided the employer and the
employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are
DENIED while those in G.R. Nos. 158798-99 are GRANTED.
The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and
67561 restoring the grant of severance compensation is ANNULLED
and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and
67561, which affirmed the August 9, 2001 Decision of the NLRC but
deleted the grant of severance compensation, is REINSTATED and
AFFIRMED.
No costs.
SO ORDERED.

G.R. No. 160905 July 4, 2008
BIENVENIDO D. GOMA, petitioner,
vs.
PAMPLONA PLANTATION INCORPORATED, respondent.
DECISION
NACHURA, J.:
For review is the Decision1 of the Court of Appeals (CA) dated August
27, 2003 granting respondent Pamplona Plantation, Inc.’s petition
for certiorari and its Resolution2 dated November 11, 2003 denying
petitioner Bienvenido Goma’s motion for reconsideration, in CA-G.R.
SP No. 74892.
Petitioner commenced3 the instant suit by filing a complaint for illegal
dismissal, underpayment of wages, non-payment of premium pay for
holiday and rest day, five (5) days incentive leave pay, damages and
attorney’s fees, against the respondent. The case was filed with the
Sub-Regional Arbitration Branch No. VII of Dumaguete City. Petitioner
claimed that he worked as a carpenter at the Hacienda Pamplona since
1995; that he worked from 7:30 a.m. to 12:00 noon and from 1:00 p.m.
to 5:00 p.m. daily with a salary rate of P90.00 a day paid weekly; and
that he worked continuously until 1997 when he was not given any work
assignment.4 On a claim that he was a regular employee, petitioner
alleged to have been illegally dismissed when the respondent refused
without just cause to give him work assignment. Thus, he prayed for
backwages, salary differential, service incentive leave pay, damages
and attorney’s fees.5
On the other hand, respondent denied having hired the petitioner as its
regular employee. It instead argued that petitioner was hired by a
certain Antoy Cañaveral, the manager of the hacienda at the time it was
owned by Mr. Bower and leased by Manuel Gonzales, a jai-alai pelotari
known as "Ybarra."6 Respondent added that it was not obliged to
absorb the employees of the former owner.
In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created
for the operation of tourist resorts, hotels and bars. Petitioner, thus,
rendered service in the construction of the facilities of PPLC. If at all,
petitioner was a project but not a regular employee. 7
On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa dismissed
the case for lack of merit.8 The Labor Arbiter concluded that petitioner
was hired by the former owner, hence, was not an employee of the
respondent. Consequently, his money claims were denied. 9
On appeal to the National Labor Relations Commission (NLRC), the
petitioner obtained favorable judgment when the tribunal reversed and
set aside the Labor Arbiter’s decision. The dispositive portion of the
NLRC decision reads:
WHEREFORE, the Decision of the Labor Arbiter is hereby
SET ASIDE and a new one is hereby issued ORDERING the
respondent, Pamplona Plantation Incorporated, the following:
1) to reinstate the complainant, BIENVENIDO D. GOMA to
his former position immediately without loss of seniority rights
and other privileges;
2) to pay the same complainant TWELVE THOUSAND
THREE HUNDRED FIFTY-NINE PESOS (P12,359.00) in
salary differentials;
3) to pay to the same complainant ONE HUNDRED ONE
THOUSAND SIX HUNDRED SIXTY PESOS (P101,660.00)
in backwages to be updated until actual reinstatement; and
4) to pay attorney’s fee in the amount of ELEVEN
THOUSAND FOUR HUNDRED TWO PESOS (P11,402.00)
which is equivalent to ten percent (10%) of the total judgment
award.1avvphi1
The respondent is further ordered to pay the aggregate
amount of ONE HUNDRED FOURTEEN THOUSAND AND
NINETEEN PESOS (P114,019.00) to the complainant
through the cashier of this Commission within ten (10) days
from receipt hereof.
SO ORDERED.10
Respondent’s motion for reconsideration was denied by the NLRC on
September 9, 2002.11
The NLRC upheld the existence of an employer-employee relationship,
ratiocinating that it was difficult to believe that a simple carpenter from
far away Pamplona would go to Dumaguete City to hire a competent
lawyer to help him secure justice if he did not believe that his right as a
laborer had been violated.12 It added that the creation of the PPLC
required the tremendous task of constructing hotels, inns, restaurants,
bars, boutiques and service shops, thus involving extensive carpentry
work. As an old carpentry hand in the old corporation, the possibility of
petitioner’s employment was great.13 The NLRC likewise held that the
respondent should have presented its employment records if only to
show that petitioner was not included in its list of employees; its failure
to do so was fatal.14 Considering that petitioner worked for the
respondent for a period of two years, he was a regular employee. 15
Aggrieved, respondent instituted a special civil action
for certiorari under Rule 65 before the Court of Appeals which granted
73
the same; and consequently annulled and set aside the NLRC decision.
The CA disposed, as follows:
WHEREFORE, premises considered, the instant petition
is GRANTED. The assailed decision of the NLRC dated
October 24, 2000, as well as the Resolution dated September
9, 2002 in NLRC Case No. V-000882-99, RAB VII-0088-98-D
are hereby ANNULLED and SET ASIDE. The complaint is
ordered DISMISSED.
SO ORDERED.16
Contrary to the NLRC’s finding, the CA concluded that there was no
employer-employee relationship. The CA stressed that petitioner
having raised a positive averment, had the burden of proving the
existence of an employer-employee relationship. Respondent,
therefore, had no obligation to prove its negative averment. 17 The
appellate court further held that while the respondent’s business
required the performance of occasional repairs and carpentry work, the
retention of a carpenter in its payroll was not necessary or desirable in
the conduct of its usual business.18 Lastly, although the petitioner was
an employee of the former owner of the hacienda, the respondent was
not required to absorb such employees because employment contracts
are in personam and binding only between the parties.19
Petitioner now comes before this Court raising the sole issue:
WHETHER OR NOT THE DECISION OF [THE] COURT OF
APPEALS DATED AUGUST 27, 2003, REVERSING AND
SETTING ASIDE THE NLRC (Fourth Division, Cebu City)
RULING THAT THE "PETITIONER WAS NOT ILLEGALLY
DISMISSED AS HE WAS NOT AN EMPLOYEE OF
RESPONDENT", IS CONTRARY TO LAW AND
JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT
IN CONSONANCE WITH THE EVIDENCE ON RECORD.20
The disposition of this petition rests on the resolution of the following
questions: 1) Is the petitioner a regular employee of the respondent? 2)
If so, was he illegally dismissed from employment? and 3) Is he entitled
to his monetary claims?
Petitioner insists that he was a regular employee of the respondent
corporation. The respondent, on the other hand, counters that it did not
hire the petitioner, hence, he was never an employee, much less a
regular one.
Both the Labor Arbiter and the CA concluded that there was no
employer-employee relationship between the petitioner and
respondent. They based their conclusion on the alleged admission of
the petitioner that he was previously hired by the former owner of the
hacienda. Thus, they rationalized that since the respondent was not
obliged to absorb all the employees of the former owner, petitioner’s
claim of employment could not be sustained. The NLRC, on the other
hand, upheld petitioner’s claim of regular employment because of the
respondent’s failure to present its employment records.
The existence of an employer-employee relationship involves a
question of fact which is well within the province of the CA to determine.
Nonetheless, given the reality that the CA’s findings are at odds with
those of the NLRC, the Court is constrained to probe into the attendant
circumstances as appearing on record. 21
A thorough examination of the records compels this Court to reach a
conclusion different from that of the CA. It is true that petitioner admitted
having been employed by the former owner prior to 1993 or before the
respondent took over the ownership and management of the plantation,
however, he likewise alleged having been hired by the respondent as
a carpenter in 1995 and having worked as such for two years until 1997.
Notably, at the outset, respondent categorically denied that it hired the
petitioner. Yet, in its petition filed before the CA, respondent made this
admission:
Private respondent [petitioner herein] cannot be considered a
regular employee since the nature of his work is merely
project in character in relation to the construction of the
facilities of the Pamplona Plantation Leisure Corporation.
He is a project employee as he was hired – 1) for a specific
project or undertaking, and 2) the completion or termination
of such project or undertaking has been determined at the
time of engagement of the employee. x x x.
xxxx
In other words, as regards those workers who worked in
1995 specifically in connection with the construction of the
facilities of Pamplona Plantation Leisure Corporation, their
employment was definitely "temporary" in character and not
regular employment. Their employment was deemed
terminated by operation of law the moment they had finished
the job or activity under which they were employed.22
Thus, departing from its initial stand that it never hired petitioner, the
respondent eventually admitted the existence of employer-employee
relationship before the CA. It, however, qualified such admission by
claiming that it was PPLC that hired the petitioner and that the nature
of his employment therein was that of a "project" and not "regular"
employee.
Parenthetically, this Court in Pamplona Plantation Company, Inc. v.
Tinghil23 and Pamplona Plantation Company v. Acosta24 had pierced

the veil of corporate fiction and declared that the two
corporations,25 PPLC and the herein respondent, are one and the same.
By setting forth these defenses, respondent, in effect, admitted that
petitioner worked for it, albeit in a different capacity. Such an allegation
is in the nature of a negative pregnant, a denial pregnant with the
admission of the substantial facts in the pleadings responded to which
are not squarely denied, and amounts to an acknowledgment that
petitioner was indeed employed by respondent. 26
The employment relationship having been established, the next
question we must answer is: Is the petitioner a regular or project
employee?
We find the petitioner to be a regular employee.
Article 280 of the Labor Code, as amended, provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has
been fixed for a specific project or undertaking, the
completion or termination of which has been determined at
the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue
while such activity exists.
As can be gleaned from this provision, there are two kinds of regular
employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade
of the employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in
which they are employed.27 Simply stated, regular employees are
classified into: regular employees by nature of work; and regular
employees by years of service. The former refers to those employees
who perform a particular activity which is necessary or desirable in the
usual business or trade of the employer, regardless of their length of
service; while the latter refers to those employees who have been
performing the job, regardless of the nature thereof, for at least a
year.28 If the employee has been performing the job for at least one
year, even if the performance is not continuous or merely intermittent,
the law deems the repeated and continuing need for its performance
as sufficient evidence of the necessity, if not indispensability, of that
activity to the business.29
Respondent is engaged in the management of the Pamplona Plantation
as well as in the operation of tourist resorts, hotels, inns, restaurants,
etc. Petitioner, on the other hand, was engaged to perform carpentry
work. His services were needed for a period of two years until such time
that the respondent decided not to give him work assignment anymore.
Owing to his length of service, petitioner became a regular employee,
by operation of law.
Respondent argues that, even assuming that petitioner can be
considered an employee, he cannot be classified as a regular
employee, but merely as a project employee whose services were hired
only with respect to a specific job and only while that specific job existed.
A project employee is assigned to carry out a specific project or
undertaking the duration and scope of which are specified at the time
the employee is engaged in the project. A project is a job or undertaking
which is distinct, separate and identifiable from the usual or regular
undertakings of the company. A project employee is assigned to a
project which begins and ends at determined or determinable times. 30
The principal test used to determine whether employees are project
employees as distinguished from regular employees, is whether or not
the employees were assigned to carry out a specific project or
undertaking, the duration or scope of which was specified at the time
the employees were engaged for that project.31 In this case, apart from
respondent’s bare allegation that petitioner was a project employee, it
had not shown that petitioner was informed that he would be assigned
to a specific project or undertaking. Neither was it established that he
was informed of the duration and scope of such project or undertaking
at the time of his engagement.
Most important of all, based on the records, respondent did not report
the termination of petitioner’s supposed project employment to the
Department of Labor and Employment (DOLE). Department Order No.
19 (as well as the old Policy Instructions No. 20) requires employers to
submit a report of an employee’s termination to the nearest public
employment office every time the employment is terminated due to a
completion of a project. Respondent’s failure to file termination reports,
particularly on the cessation of petitioner’s employment, was an
indication that the petitioner was not a project but a regular employee. 32
74
We stress herein that the law overrides such conditions which are
prejudicial to the interest of the worker whose weak bargaining position
necessitates the succor of the State. What determines whether a
certain employment is regular or otherwise is not the will or word of the
employer, to which the worker oftentimes acquiesces. Neither is it the
procedure of hiring the employee nor the manner of paying the salary
or the actual time spent at work. It is the character of the activities
performed by the employer in relation to the particular trade or business
of the employer, taking into account all the circumstances, including the
length of time of its performance and its continued existence. Given the
attendant circumstances in the case at bar, it is obvious that one year
after he was employed by the respondent, petitioner became a regular
employee by operation of law.33
As to the question of whether petitioner was illegally dismissed, we
answer in the affirmative.
Well-established is the rule that regular employees enjoy security of
tenure and they can only be dismissed for just cause and with due
process, i.e., after notice and hearing. In cases involving an employee’s
dismissal, the burden is on the employer to prove that the dismissal
was legal. This burden was not amply discharged by the respondent in
this case.
Obviously, petitioner’s dismissal was not based on any of the just or
authorized causes enumerated under Articles 282,34 28335 and 28436 of
the Labor Code, as amended. After working for the respondent for a
period of two years, petitioner was shocked to find out that he was not
given any work assignment anymore. Hence, the requirement of
substantive due process was not complied with.
Apart from the requirement that the dismissal of an employee be based
on any of the just or authorized causes, the procedure laid down in
Book VI, Rule I, Section 2 (d) of the Omnibus Rules Implementing the
Labor Code, must be followed.37 Failure to observe the rules is a
violation of the employee’s right to procedural due process.
In view of the non-observance of both substantive and procedural due
process, in accordance with the guidelines outlined by this Court
in Agabon v. National Labor Relations Commission,38 we declare that
petitioner’s dismissal from employment is illegal. 39
Having shown that petitioner is a regular employee and that his
dismissal was illegal, we now discuss the propriety of the monetary
claims of the petitioner. An illegally dismissed employee is entitled to:
(1) either reinstatement, if viable, or separation pay if reinstatement is
no longer viable, and (2) backwages.40
In the instant case, we are prepared to concede the impossibility of the
reinstatement of petitioner considering that his position or any
equivalent position may no longer be available in view of the length of
time that this case has been pending. Moreover, the protracted litigation
may have seriously abraded the relationship of the parties so as to
render reinstatement impractical. Accordingly, petitioner may be
awarded separation pay in lieu of reinstatement. 41
Petitioner’s separation pay is pegged at the amount equivalent to
petitioner’s one (1) month pay, or one-half (1/2) month pay for every
year of service, whichever is higher, reckoned from his first day of
employment up to finality of this decision. Full backwages, on the other
hand, should be computed from the date of his illegal dismissal until the
finality of this decision.
On petitioner’s entitlement to attorney’s fees, we must take into account
the fact that petitioner was illegally dismissed from his employment and
that his wages and other benefits were withheld from him without any
valid and legal basis. As a consequence, he was compelled to file an
action for the recovery of his lawful wages and other benefits and, in
the process, incurred expenses. On these bases, the Court finds that
he is entitled to attorney’s fees equivalent to ten percent (10%) of the
monetary award.42
Lastly, we affirm the NLRC’s award of salary differential. In light of our
foregoing disquisition on the illegality of petitioner’s dismissal, and our
adoption of the NLRC’s findings, suffice it to state that such issue is a
question of fact, and we find no cogent reason to disturb the findings of
the labor tribunal.
WHEREFORE, premises considered, the petition is GRANTED. The
Decision of the Court of Appeals dated August 27, 2003 and its
Resolution dated November 11, 2003 in CA-G.R. SP No. 74892
are REVERSED and SET ASIDE. Petitioner is found to have been
illegally dismissed from employment and thus, is ENTITLED to: 1)
Salary Differential embodied in the NLRC decision dated October 24,
2000 in NLRC Case No. V-000882-99; 2) Separation Pay; 3)
Backwages; and 4) Attorney’s fees equivalent to ten percent (10%) of
the monetary awards. Upon finality of this judgment, let the records of
the case be remanded to the NLRC for the computation of the exact
amounts due the petitioner.
SO ORDERED.
G.R. No. 163607 July 14, 2008
CENTRAL PHILIPPINES BANDAG RETREADERS, INC., Petitioner,
vs.
PRUDENCIO J. DIASNES, Respondent.

DECISION
VELASCO, JR., J.:
Respondent Prudencio J. Diasnes was initially hired by petitioner
Central Philippines Bandag Retreaders, Inc. (Bandag) as technical
service representative for the Visayas and Bicol areas. In the course of
his employment with Bandag, Diasnes was able to show his strengths
and received numerous awards and citations. In 1995, Diasnes
received a promotional appointment as sales manager/officer-in-
charge and was assigned to manage Eastern Visayas Retreaders, Inc.
based in Tacloban City, with a service area covering the whole of
Region VIII.
It was at this latest posting that Diasnes’ work performance started to
deteriorate. From July to September in 1995, six (6) company-issued
checks were dishonored for causes attributable to Diasnes and for
which he was suspended for six (6) days. It was also during this two-
month stretch that his absences and tardiness became more frequent.
On January 2, 1996, Diasnes received a memorandum from his
supervisor, Loreto C. Rico, relieving him from his duties as sales
manager of Region VIII. Two days after, Diasnes received a notice to
appear before the Employee Adjudication Committee on January 9,
1996 to resolve the matter of his relief. After the meeting, the committee
issued the following report and recommendations:
Therefore, the committee unanimously agreed that SM-OIC Prudencio
Diasnes be: Relieved for three (3) months. This will give him enough
time to help his wife’s problem; After the period lapsed he may return
to work, but with another position or function; if he desire[s] to retire
from the company separation/retirement pay may be granted to him. 1
Diasnes, however, did not avail himself of any of the options set forth
in the committee’s report and recommendations, but requested a Cebu
City assignment which his employer granted. In Cebu City, Diasnes’
performance as sales supervisor was far from encouraging. His
attendance and punctuality were likewise very poor. To top it all,
Diasnes did not at all report for work from October 12, 1996 to
November 11, 1996.
Thereafter, on October 31, 1996, Bandag, through supervisor Rico,
addressed a show-cause letter-memorandum to Diasnes, which reads
as follows:
SUBJECT: Habitual tardiness and Absenteeism
Your attendance records from Sept. 1 to Oct. 31, 1996, show that of
the 50 working days, you report[ed for work] only for 25 days. Of the 25
days that you report[ed] for work, you never had any instance that
you’re on time – official reporting time is at 8:00 O’clock A.M.
During this period, you have not reported to work for 25 working days
and these are all absences without official leave. This shows that your
absences [amounted to] 50% [of the official work days] and [you were
tardy] 100% [of the] period referred [to].
You have committed an act unbecoming of an officer and a breach of
our policy on attendance.1avvphi1 Habitual absenteeism and tardiness
are cause for suspension and/or termination from employment.
You are therefore required to submit your written explanation within 48
hrs. from receipt of this memo and present yourself to the employees
adjudication committee.
The Adjudication committee will convene immediately upon receipt of
your reply. This consultation is of a substance to assure you that the
management prerogative to discipline employees is not exercised in an
arbitrary manner.
For your information and strict compliance.
L.C. RICO2
Apparently finding Diasnes’ explanation to be insufficient, Bandag
dismissed Diasnes from the service effective November 11, 1996 on
the grounds stated in the termination letter which reads as follows:
TO : P.J. DIASNES
DATE : NOVEMBER 11, 1996
SUBJECT: TERMINATION OF EMPLOYMENT
You had been notified for gross and habitual neglect of your duty and
had been given enough time to be heard by an employees adjudication
committee[.] Again, you [had been apprised] that the consultation is of
a substance to assure you that the management prerogative to
discipline employees is not exercise[d] in [an] arbitrary manner.
A number of company representatives had been sent to your residence
but all failed to see you in person. A verification with the company
Doctor, yield[ed] negative report of any health related consultation. All
those that has been done is indicative of the management’s concern of
employees.
The termination of your employment is base[d] on the following:
1. HABITUAL TARDINESS FROM SEPT. 1, 1996
TO OCT. 11, 1996.
2. ABSENCES WITHOUT OFFICIAL LEAVE
DURING THE SAME PERIOD.
3. FAILURE TO REPORT FOR WORK FROM
OCTOBER 12, 1996 TO NOVEMBER 11, 1996.
This is a willful breach of trust given to you as officer of the company
and serious misconduct of an employee. And it is our belief, that you
have put an end to the employer-employee relationship without serving
any written notice to the company.
75
Therefore, your employment is terminated effective November 11, 1996.
You are requested to return all company assets in your [possession] to
the company representative who will be authorized to retrieve them.
(Sgd.) Loreto C. Rico
General Manager3
To contest his dismissal from the service, Diasnes filed a complaint with
the Regional Arbitration Branch of the National Labor Relations
Commission (NLRC) for illegal dismissal, non-payment of salaries and
allowances, 13th month pay, and other benefits against Bandag,
Sarmiento Management Group, and Rico, docketed as NLRC RAB VII-
1492-96.
On October 15, 1997, Labor Arbiter Ernesto F. Carreon rendered a
decision which, while holding Diasnes to have been legally dismissed
from the service, directed payment of separation pay in the amount of
PhP 278,965.50 and 13th month pay in the amount of PhP 14,652.74.
Dispositively, the labor arbiter’s decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered
ordering the respondent Central Philippines Bandag Retreaders, Inc. to
pay the complainant Prudencio J. Diasnes Separation Pay in the
amount of P278,965.50 and proportionate 13th month pay in the
amount of P14,652.74.
The case against respondents Sarmiento Management Corporation
and Loreto Rico and the other claims are dismissed for lack of merit.
SO ORDERED.
Therefrom, both parties appealed to the NLRC, Diasnes assailing the
labor arbiter’s finding on the validity of his dismissal, while Bandag
impugning the labor arbiter’s decision insofar as the award of
separation pay was concerned.
Thereafter, on January 12, 1999, the NLRC rendered a
Decision,4 dismissing the separate appeals of both parties and thus
effectively affirming the decision of the labor arbiter.
Aggrieved, Bandag filed a motion to reconsider the decision of the
NLRC.
By Resolution dated October 29, 1999, the NLRC partially granted
reconsideration and deleted the award for separation pay, Diasnes
having failed to establish that Bandag has an established policy of
granting separation pay of one and a half (1 ½) month for every year of
service to separated employees. The fallo of the NLRC’s resolution
reads:
WHEREFORE, premises considered, the Motion for Reconsideration
filed by respondent Central Philippines Bandag Retreaders, Inc., is
PARTIALLY GRANTED. The Decision promulgated on 12 January
1999 is ABANDONED and a new one is entered ordering respondent
Central Philippines Bandag Retreaders, Inc. to pay complainant
Prudencio J. [Diasnes] the amount of P14,652.74 representing [his]
proportionate 13th month pay.
SO ORDERED.
Unsatisfied with the turn of events, Diasnes filed with the Court of
Appeals (CA) a petition for certiorari and prohibition with prayer for
injunctive relief. Docketed as CA-G.R. SP No. 58916, the petition
sought the reinstatement of the NLRC’s Decision dated January 12,
1999.
On June 18, 2003, the CA issued a Decision5 that granted the petition
and effectively reinstated the NLRC’s Decision of January 12, 1999,
thus restoring the award of separation pay. The CA ratiocinated that
separation pay is proper in view of the following main considerations:
the Employee Adjudication Committee’s recommendation, the
imperatives of social justice, and Diasnes’ exemplary performance for
more than ten (10) years.
In time, Bandag filed a motion for reconsideration, but the CA, by
Resolution6 dated April 1, 2004, denied the motion.
Bandag now comes before this Court with the present petition under
Rule 45 raising the sole issue for resolution, rephrased as follows:
WHETHER OR NOT A VALIDLY AND LEGALLY SEPARATED
EMPLOYEE MAY BE ENTITLED TO SEPARATION PAY.
The Court’s Ruling
The labor arbiter resolved the issue in the affirmative, basing his award
of separation pay mainly on the recommendation of the Employee
Adjudication Committee and on the finding that Diasnes’ dismissal was
for a cause not constituting serious misconduct or reflective of his moral
character. This ruling, as earlier recited, was eventually reversed by the
NLRC, but was subsequently reinstated by the CA.
Bandag excepts, claiming that separation pay could not and should not
be granted based solely on the recommendation made by its
adjudication committee. As Bandag explains, the recommendation was
merely an offer which Diasnes did not accept, much less avail himself
of. Alternatively, Bandag argues that the formula used by the labor
arbiter to compute the separation pay, i.e., 1 ½ month’s pay per year of
service instead of only one month’s pay per year of service, is wrong.
Diasnes, arguing for the propriety of the grant of separation pay, states
that, given his exemplary service with the company for ten (10) years,
the ends of social and compassionate justice would best be served if
he is awarded separation pay or financial assistance. Diasnes further
states that other legally separated employees were also granted
separation pay at the rate of 1 ½ month’s salary per year of service.

The petition has merit.
We agree with Bandag that the report of its Employee Adjudication
Committee recommending the grant to Diasnes of separation pay in
case he opts to retire or voluntarily leave the company was merely in
the nature of an offer. Contrary to the perception of the labor arbiter and
the CA, the offer was not an open-ended arrangement which Diasnes
was free to accept or reject when convenient.
As may be recalled, sometime in January 1996, Diasnes was asked by
his superior to appear before the Employee Adjudication Committee to
assess his performance during his tenure as the sales manager of
Region VIII. It was at this time that the committee came up with the
following recommendations: first, that Diasnes be relieved from his post
as sales manager for three months, after which he may return to work
with another position or function; and second, that if Diasnes would
want to retire instead of availing himself of the first option, he would be
granted retirement or separation pay. None of these recommendations,
however, was availed of by Diasnes, as he instead asked to be
transferred to Cebu City and was accommodated. It was some 11
months after the committee made its recommendation and Bandag
acceded to the request for transfer that Diasnes was dismissed from
the service. It is fairly obvious that the committee’s recommendations
were superseded by Bandag’s approval of Diasnes’ request for transfer.
Just as it is fairly obvious that the tender of separation was conditional
on Diasnes severing his official relationship with the company on
voluntary basis. In fine, what amounted to Bandag’s offer for Diasnes
to resign with separation pay was no longer open and effective at the
time of his dismissal from service. Thus, the labor arbiter erred in
invoking the committee’s recommendation as basis for an award of
separation pay.
We also agree with the NLRC’s October 29, 1999 Decision where it
held that Diasnes failed to prove that Bandag regularly grants
separation pay to dismissed employees, as a policy, and without regard
as to the cause of dismissal. Absent substantial proof to the contrary,
we refuse to disturb the factual findings of the NLRC.
The labor arbiter also erred in awarding separation pay based on social
justice.
Gabuay v. Oversea Paper Supply7 defines separation pay as the
amount that an employee receives at the time of his severance and is
designed to provide the employee with the wherewithal during the
period he is looking for another employment. In San Miguel Corporation
v. Lao,8 the Court held that the award of separation pay is authorized
in the situations dealt with in Article 283 and Art. 284 of the Labor Code,
but not in terminations of employment based on instances enumerated
in Art. 282.9 In Eastern Paper Mills, Inc. v. NLRC, this Court held that:
The only cases when separation pay shall be paid, although the
employee was lawfully dismissed, are when the cause of termination
was not attributable to the employee’s fault but due to: (1) the
installation of labor saving devices, (2) redundancy, (3) retrenchment,
(4) cessation of employer’s business, or (5) when the employee is
suffering from a disease and his continued employment is prohibited by
law or is prejudicial to his health and to the health of his co-employees
(Articles 283 and 284, Labor Code.) Other than these cases, an
employee who is dismissed for a just and lawful cause is not entitled to
separation pay even if the award were to be called by another name. 10
Separation pay is likewise awarded in lieu of reinstatement if
reinstatement is no longer feasible, as when the relationship between
the employer and employee has become strained. 11 Still, in some
cases, separation pay or financial assistance may be extended as a
measure of social justice. PLDT v. NLRC settled the matter on the
award and amount of financial assistance or separation pay that may
be awarded a legally separated employee based on social or
compassionate justice. This Court held:
There should be no question that where it comes to such valid but not
iniquitous causes as failure to comply with work standards, the grant of
separation pay to the dismissed employee may be both just and
compassionate, particularly if he has worked for some time with the
company. For example, a subordinate who has irreconcilable policy or
personal differences with his employer may be validly dismissed for
demonstrated loss of confidence, which is an allowable ground. A
working mother who has to be frequently absent because she also has
to take care of her child may also be removed because of her poor
attendance, this being another authorized ground. x x x Under these
and similar circumstances, however, the award to the employee of
separation pay would be sustainable under the social justice policy
even if the separation is for cause.
But where the cause of the separation is more serious than mere
inefficiency, the generosity of the law must be more discerning. There
is no doubt it is compassionate to give separation pay to a salesman if
he is dismissed for his inability to fill his quota but surely he does not
deserve such generosity if his offense is misappropriation of the
receipts of his sales. This is no longer mere incompetence but clear
dishonesty. A security guard found sleeping on the job is doubtless
subject to dismissal but may be allowed separation pay since his
conduct, while inept, is not depraved. But if he was in fact not really
sleeping but sleeping with a prostitute during his tour of duty and in the
company premises, the situation is changed completely. This is not only
76
inefficiency but immorality and the grant of separation pay would be
entirely unjustified.
We hold that henceforth separation pay shall be allowed as a measure
of social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting
on his moral character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral turpitude,
like theft or illicit sexual relations with a fellow worker, the employer may
not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground
of social justice.12
As may noted, PLDT declared that separation pay or financial
assistance should be denied a legally separated employee when the
cause for dismissal is for an act constituting serious misconduct or that
reflects on the employee’s moral character. PLDT, however, did not go
further to state that the grant or award of separation pay or financial
assistance is automatically awarded when the dismissal is for a cause
other than that contemplated in said case. This PLDT doctrine was later
expanded in Toyota Motors Phils. Corp. Workers Association v.
National Labor Relations Commission (Toyota), where we held that:
In all of the foregoing situations, the Court declined to grant termination
pay because the causes for dismissal recognized under Art. 282 of the
Labor Code were serious or grave in nature and attended by willful or
wrongful intent or they reflected adversely on the moral character of the
employees. We, therefore, find that in addition to serious misconduct,
in dismissals based on other grounds under Art. 282, like willful
disobedience, gross and habitual neglect of duty, fraud or willful breach
of trust, and commission of a crime against the employer or his family,
separation pay should not be conceded to the dismissed employee.
In analogous causes for termination, like inefficiency, drug use, and
others, the NLRC or the courts may opt to grant separation pay
anchored on social justice in consideration of length of service of the
employee, the amount involved, whether the act is the first offense, the
performance of the employee and the like, using guideposts enunciated
in PLDT on the propriety of the award of separation pay. 13 (Emphasis
added.)
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA
must demur the award of separation pay based on social justice when
an employee’s dismissal is based on serious misconduct or willful
disobedience; gross and habitual neglect of duty; fraud or willful breach
of trust; or commission of a crime against the person of the employer
or his immediate family—grounds under Art. 28214 of the Labor Code
that sanction dismissals of employees. They must be most judicious
and circumspect in awarding separation pay or financial assistance as
the constitutional policy to provide full protection to labor is not meant
to be an instrument to oppress the employers. The commitment of the
Court to the cause of labor should not embarrass us from sustaining
the employers when they are right, as here. In fine, we should be more
cautious in awarding financial assistance to the undeserving and those
who are unworthy of the liberality of the law.
The attendant circumstances in the present case considered, we are
constrained to deny Diasnes separation pay since the cause for the
termination of his employment amounts to gross and habitual neglect
of his duties. His repeated and continuous absences without prior leave
and his frequent tardiness within the last two months prior to his
dismissal exemplify his utter disregard for his employment and his
employer’s interest. Diasnes’ character is also put into question if we
take into consideration that he should have been dismissed as early as
January 1996, if not for Bandag’s benevolence and goodwill. It is
unthinkable to award separation pay or financial assistance to an
unworthy employee who exploited and took advantage of his
employer’s past generosity and accommodation.
WHEREFORE, the assailed Decision dated June 18, 2003 of the CA in
CA-G.R. SP No. 58916 is hereby REVERSED and SET ASIDE and the
Resolution dated October 29, 1999 of the NLRC is hereby
REINSTATED.
No costs.
SO ORDERED.
G.R. No. 172199 February 27, 2009
ELIZABETH D. PALTENG, Petitioner,
vs.
UNITED COCONUT PLANTERS BANK, Respondent.
DECISION
QUISUMBING, J.:
Assailed in this petition for review on certiorari are the Decision1 dated
December 23, 2005 and Resolution2 dated April 4, 2006 of the Court of
Appeals in CA-G.R. SP No. 72660 denying reconsideration. The
appellate court had modified the Decision3 dated March 6, 2002 of the
National Labor Relations Commission (NLRC) and limited the award of
backwages in favor of petitioner Elizabeth D. Palteng from the time she
was illegally dismissed on October 25, 1996, until the promulgation of
the Labor Arbiter’s Decision4 on December 6, 1999.

The antecedent facts are as follows:
Petitioner Elizabeth D. Palteng was the Senior Assistant
Manager/Branch Operations Officer of respondent United Coconut
Planters Bank in its Banaue Branch in Quezon City.
On April 15, 1996, Area Head and Vice-President Eulallo S. Rodriguez
reported to the bank’s Internal Audit and Credit Review Division that
bank client Clariza L. Mercado-The Red Shop has incurred Past Due
Domestic Bills Purchased (BP) of ₱34,260,000. After conducting a
diligence audit, the division reported to the Audit and Examination
Committee that Palteng committed several offenses under the
Employee Discipline Code in connection with Mercado’s Past Due
Domestic BP. It also recommended that the matter be referred to the
Committee on Employee Discipline for proper disposition.
On August 14, 1996, Palteng was required to explain why no
disciplinary action should be taken against her in connection with the
following alleged offenses:
"1. Gross negligence and dereliction of duties in the
implementation of company policies or valid orders from
Management authorities, when:
a. You granted BP against personal checks. Per
bank policy, checks eligible for BP accommodation
are trade checks and granting of BP against
personal checks is strictly prohibited.
b. You granted accommodations based on client’s
statement that a loan will be released. You failed to
confirm this with AO Pearl Urbano before effecting
the accommodations. You likewise failed to report
to AO Urbano the excess availments on the OL of
the client. Per bank policy on CSBD/CCD clients
with established lines, the servicing unit/branches
shall coordinate all BP/DAUD availments with the
account officer for proper monitoring and control.
2. Abuse of discretion when:
a. You granted BP accommodations to the client in
excess of the ₱5 million sublimit under her Omnibus
Line. In spite of the fact that you did not have the
approving authority, you did not elevate the client’s
availment to the proper authority for approval.
b. You approved the MCs issued to the client
beyond your approving limit of ₱5 million being a
Class C signatory. Issuance[s] were not confirmed
by proper approving body."5
In response, Palteng explained that at the time the BP accommodation
was extended, Mercado has, as far as she knew, an Omnibus Line of
₱100 Million secured by a pledge on jewelries. She was not aware that
the Omnibus Line has been reduced to ₱50 Million and that it contained
a ₱5 Million sublimit on BP. Nevertheless, she accepted full
responsibility for granting the BP accommodation against Mercado’s
personal checks beyond and outside her authority. While she admitted
committing a major offense that may cause her dismissal, she claimed
that it was an honest mistake.6
After hearing and investigation, the committee recommended Palteng’s
dismissal. On October 25, 1996, Palteng was dismissed with forfeiture
of all benefits.7
Palteng filed a complaint8 for illegal dismissal seeking reinstatement to
her former position without loss of seniority rights with full backwages,
or in the alternative, payment of separation pay with full backwages,
and recovery of her monetary claims with damages.
On December 6, 1999, the Labor Arbiter rendered a decision disposing,
thus:
WHEREFORE, premises considered, judgment is hereby rendered
declaring as illegal the termination of herein complainant and ordering
respondent to pay complainant the following:
1.) Separation pay in lieu of reinstatement computed at the
rate of one (1) month pay for every year of service from the
time of her employment up to the time of termination.
2.) Full backwages plus increments or adjustment if any from
the time of her dismissal until finality of judgment.
3.) ₱500,000.00 as moral damages.
4.) [₱300,000.00] as exemplary damages.
5.) 10% of the total monetary award as attorney’s fees.
SO ORDERED.9
The bank appealed to the NLRC which rendered a decision on March
6, 2002, to wit:
WHEREFORE, premises considered[,] the assailed decision is hereby
affirmed except that the awards of moral and exemplary damages are
ordered deleted therefrom.
SO ORDERED.10
Dissatisfied, the bank elevated the matter to the Court of Appeals. On
December 23, 2005, the appellate court modified the decision of the
NLRC, in this wise:
WHEREFORE, premises considered, the petition is
partially GRANTED. The decision of the labor arbiter dated December
6, 1999, as affirmed with modification by the National Labor Relations
Commission, is further MODIFIED in that the award of backwages in
77
favor of respondent Elizabeth D. Palteng shall correspond to the period
from the date of her dismissal (on October 25, 1996) up to the
promulgation of the labor arbiter’s decision (on December 6, 1999).
SO ORDERED.11
The appellate court noted Palteng’s admission that she granted BP
accommodation to Mercado against her personal checks beyond and
outside her authority and that said infraction is a major offense that may
cause her dismissal. Hence, it limited the award of backwages from the
time Palteng was illegally dismissed on October 25, 1996, until the
promulgation of the Labor Arbiter’s Decision on December 6, 1999, as
penalty for her offense.
Petitioner now submits the following issue for our consideration:
THE COURT OF APPEALS ERRED IN LIMITING THE AWARD OF
BACKWAGES IN FAVOR OF PETITIONER, WHOSE DISMISSAL
FROM EMPLOYMENT WAS DECLARED ILLEGAL BY THE COURT
AND THE LABOR TRIBUNALS, TO ONLY UP TO THE DATE OF THE
PROMULGATION OF THE LABOR ARBITER’S DECISION[.]12
The crux of the present controversy is whether the award of backwages,
if any, should be counted from the time petitioner was illegally
dismissed until the promulgation of the Labor Arbiter’s Decision on
December 6, 1999, or until the finality of the decision.
Petitioner contends that the Labor Arbiter, the NLRC and the Court of
Appeals unanimously found her dismissal illegal. Thus, she is entitled
to the twin reliefs of reinstatement (or payment of separation pay if
reinstatement is no longer possible) and payment of backwages. She
adds that the backwages should be computed from the time she was
illegally dismissed on October 25, 1996, until the finality of the decision.
Respondent counters that petitioner is not entitled to the payment of
backwages since she is not entirely faultless or fully innocent of the
offenses imputed against her.
Settled is the rule that an employee who is illegally dismissed from work
is entitled to reinstatement without loss of seniority rights, and other
privileges as well as to full backwages, inclusive of allowances, and to
other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.13 However, in the event that reinstatement is no longer
possible, the employee may be given separation pay
instead.141avvphi1
Notably, reinstatement and payment of backwages are distinct and
separate reliefs given to alleviate the economic setback brought about
by the employee’s dismissal. The award of one does not bar the other.
Backwages may be awarded without reinstatement, and reinstatement
may be ordered without awarding backwages. 15
In a number of cases,16 the Court, despite ordering reinstatement or
payment of separation pay in lieu of reinstatement, has not awarded
backwages as penalty for the misconduct or infraction committed by
the employee.
In the case at bar, petitioner admitted that she granted the BP
accommodation against Mercado’s personal checks beyond and
outside her authority. The Labor Arbiter, the NLRC and the Court of
Appeals all found her to have committed an "error of
judgment,"17 "honest mistake,"18 "honest mistake" vis-à-vis a "major
offense."19
Since petitioner was not faultless in regard to the offenses imputed
against her, we hold that the award of separation pay only, without
backwages, is proper.
WHEREFORE, the Decision dated December 23, 2005 of the Court of
Appeals in CA-G.R. SP No. 72660 is AFFIRMED with the
MODIFICATION that the award of backwages is DELETED. Petitioner
Elizabeth D. Palteng is hereby DECLARED entitled to be paid by
respondent Bank only separation pay in lieu of reinstatement computed
at the rate of one (1) month pay for every year of service from the time
of her employment up to the time of her dismissal. No pronouncement
as to costs.
SO ORDERED.
G.R. No. 169173 June 5, 2009
M+W ZANDER PHILIPPINES, INC. and ROLF
WILTSCHEK, Petitioners,
vs.
TRINIDAD M. ENRIQUEZ, Respondent.
DECISION
PUNO, C.J.:
At bar is a petition for review on certiorari under Rule 45 of the Rules of
Court, seeking the reversal of the decision,1 dated May 31, 2005, of the
Court of Appeals in CA G.R. SP No. 87597, entitled "Trinidad M.
Enriquez v. National Labor Relations Commission, M+W Zander
Philippines, Inc. and Rolf Wiltschek." The decision of the Court of
Appeals set aside the decision of the National Labor Relations
Commission (NLRC) and ruled the dismissal of respondent Trinidad M.
Enriquez (Enriquez) as illegal. The Court of Appeals also ordered
petitioners M+W Zander Philippines, Inc. and Rolf Wiltschek to
reinstate respondent to her former position without loss of seniority

rights and privileges and awarded her moral damages and attorney’s
fees.
The facts are as follows.
On June 4, 2001, respondent Enriquez was hired on probationary basis
as the Administration Manager and Executive Assistant to the General
Manager of petitioner M+W Zander Philippines, Inc. (M+W Zander), a
multi-national corporation engaged in construction and facilities
management. She was confirmed as a permanent employee on
December 4, 2001. As Administration Manager, respondent’s
responsibilities include taking charge of the management of
administrative personnel assigned to the head office, as well as the
security of the company staff and premises and the implementation of
company rules. As Executive Assistant to the General Manager,
respondent was in charge of scheduling, monitoring and tracking all the
General Manager’s appointments and personal finances and serving
as the liaison among the General Manager, the Division Heads, the
Administrative Staff and external contacts.
In January 2002, M+W Zander relieved its General Manager, Mr. Eric
Van Stiegeren, and in his place appointed Mr. Rolf Wiltschek
(Wiltschek). The appointment of Wiltschek as the Acting General
Manager was announced in a meeting held on January 31, 2002. On
the same day, a Letter of Appeal2 was signed by 29 employees of M+W
Zander, opposing the appointment of Wiltschek.
The letter states:
TO: MR. KLAUS GAERTNER
Managing Director
CC: MR. HELMUT KURZBOECK
CC: MISS KITY LEE
DATE: January 31, 2002
LETTER OF APPEAL
We are writing you this Letter of Appeal in the hope of expressing our
concern and sentiments on the appointment of Rolf Wiltschek as the
new General Manager.
We are appealing for your kind attention and consideration on this
matter as part of the m+w Zander family worldwide. We know that
above anything else, the well-being of the company is the first priority
of every employee from whom he derives his livelihood and that of his
family. However, we believe that Rolf Wiltschek as the General
Manager here in the Philippines will not in any way contribute to our
goal of making m+w Zander better equipped to fight all the financial
deficiencies that the company is facing today.
For how can we have a person represent the company when we cannot
even respect him as a person. His human behavior and relationship,
his manners and etiquette appear less than the accepted norms in a
civilized society. His sarcasm and arrogance and seeming feeling of
superiority as expressed by his verbal abuses on his contemporaries
and subordinates is unacceptable even in a poor country like the
Philippines. Most of us in m+w Zander have worked with all sorts of
people with different nationalities, people with even higher positions in
life but we have never seen such an obnoxious and demeaning attitude
towards the Filipino workers. It has perhaps escaped Rolf Wiltschek,
that we Filipinos take pride in our professions and in our Country
humble as it is.
We wish to relay to you our extreme disappointment on the
replacement of Mr. Eric Van Stijgeren with the sudden appointment of
Rolf Wiltschek as the new General Manager. We wish to convey to you
our apprehension on the fate that awaits m+w Zander here in the
Philippines with Rolf Wiltschek as the General Manager. Lastly, we
assure you of our commitment to give our best performance in any task
given us for the welfare of our Company.
Please help us save m+w Zander (Phils.) Inc.
Respectfully yours,
M+W Zander- Manila Head Office STAFF
All of the Undersigned:
1. ABEC TAYAG (sgd.)
2. CARLITO GARCIA (sgd.)
3. MARK JOSEPH AMADOR (sgd.)
4. CHRISTINE SAN AGUSTIN (sgd.)
5. EMMANUEL PIELAGO, JR. (sgd.)
6. STANLEY MOSENDE (sgd.)
7. JOANNE A. MEDIARITO (sgd.)
8. MICHAEL M. ILAGAN (sgd.)
9. DIANE F. COMINTAN (sgd.)
10. ERIC V. NAPOLITAN (sgd.)
11. RAYMOND C. JOSE (sgd.)
12. CHE BONBON (sgd.)
13. POCHOLO G. RATON (sgd.)
14. JON-JON IBARRA (sgd.)
15. MICHELLE DE MESA (sgd.)
16. TRINIDAD M. ENRIQUEZ (sgd.)
17. VIRGILIO G. NATIVIDAD (sgd.)
18. CELSA L. BAG-AO (sgd.)
19. ALLAN RIVERA (sgd.)
78
20. RANDY TECSON (sgd.)
21. JOY P. ESGUERRA (sgd.)
22. LARRY N. MARASIGAN (sgd.)
23. ELMER M. ARANA (sgd.)
24. ALDRIN EVANGELISTA (sgd.)
25. EDWARD A. BORJA (sgd.)
26. ERNESTO M. ANTIQUIA (sgd.)
27. JESS DELA CRUZ (sgd.)
28. P.R. SIMPLICIANO (sgd.)
29. R.L. CRUZ (sgd.)
The same appeal from the employees at the site to follow.3
A day after the Letter of Appeal was released, a number of employees
did not report to work.
Petitioners allege that after the announcement of Wiltschek as the new
General Manager, respondent actively solicited signatures for a letter
opposing the appointment of Wiltschek (Letter of Appeal). The
petitioners claim that Enriquez used her influence and moral
ascendancy to coerce several employees into signing the letter of
appeal.4 They referred to Affidavits of Mark Joseph M. Amador
(Amador),5 Randy R. Tecson (Tecson)6 and Patrocinio R.
Simpliciano,7 M+W Zander’s Accounting Assistant, Network
Administrator and Contract Administrator, respectively, which state that
respondent sought their signature for the Letter of Appeal. Amador
stated in his affidavit8 that on February 1, 2002 one Abelardo Tayag
asked him not to go to work and Enriquez only called him to confirm
that he did not report for work. In Tecson’s affidavit, 9 it was stated that
on February 1, 2002, he received a call from Enriquez in his mobile
phone telling him not to report to work since other employees will not
report to work and that he should just file for a sick leave since they
were doing the same. Tecson said he was already on his way to the
office and refused to follow Enriquez.
Upon discovering respondent Enriquez’s participation in drafting and in
circulating the Letter of Appeal, as well as in the alleged work stoppage
that occurred a day after the release of the Letter, M+W Zander sent a
Notice10 to respondent Enriquez, requiring her to explain within 48
hours from receipt of the notice why no disciplinary action should be
taken against her for willful breach of trust and using her authority
and/or influence as Administration Manager of M+W Zander over her
subordinates to stage a "no work day" on February 1, 2002. It was
indicated that willful breach of trust has a corresponding penalty of
dismissal. Meanwhile, respondent Enriquez was placed under
preventive suspension for 15 working days.
Respondent Enriquez signed a statement, 11 dated February 5, 2002,
denying that she used her authority and/or influence as Administration
Manager and Executive Assistant to the General Manager to compel
her co-employees to stage the illegal work stoppage. She also denied
that she performed any act to disrupt the vital operations of the
company. She said that when she arrived at work on February 2, 2002,
she was given a notice of suspension for 15 days and was instructed
to leave the premises without being given an explanation. Her personal
belongings were inspected and she was escorted out of the premises
like a criminal. Respondent stated in her affidavit that her colleagues
were given an order that if she is seen in the premises of the company,
the administration should be informed immediately and that in no case
should respondent be allowed to enter the premises of the company
except if she is with an authorized escort of the petitioner company. 12
On February 14, 2002, an administrative investigation and an
administrative hearing were conducted by the petitioner. During the
administrative hearing, the respondent submitted several signed
statements from her subordinates, such as Cecilia Benito, 13 the
receptionist; Michelle De Mesa,14 the Engineering Administrative
Assistant; Joy Esguerra,15 an Administrative Assistant, and Christine
Roma San Agustin;16 all saying that they were never advised or
prevailed upon by the respondent not to report to work.
Sales Engineer Allan Ordinario Rivera (Rivera) admitted before the
investigating panel that he was the one who instigated the no work day
on February 1, 2002, but he was not charged by the petitioners. We
quote Rivera’s statement:
14 FEBRUARY 2002
TO WHOM IT MAY CONCERN:
IN RELATION TO THE ALLEGATIONS MADE AGAINST MS.
TRINIDAD ENRIQUEZ, I ALLAN O. RIVERA REQUEST TO BE
ACKNOWLEDGED & RECOGNIZED THROUGH MY OWN
INITIATIVE & NOT FORCED TO PRESENT THIS WRITTEN
STATEMENT TO CLARIFY WHAT REALLY TRANSPIRED ON
JANUARY 31, 2002.
IT WAS ME [sic] WHO GAVE INSTRUCTION TO THOSE PRESENT
THAT EVENING OF JANUARY 31, 2002 NOT TO REPORT FOR
WORK THE FOLLOWING DAY[,] FEBRUARY 01, 2002 (FRIDAY).
IT WAS ALSO I, WHO INVITED MS. TRINIDAD ENRIQUEZ TO JOIN
US, WHO WAS THEN LATER ACCUSED OF INSTIGATING THE
SAID "NO WORK DAY SHOW," WHEREAS, IT WAS I WHO
INSTIGATED THE INCIDENT.
FURTHER MS. TRINIDAD ENRIQUEZ, ASIDE FROM COMING LATE
EVENING, SHE ONLY STAYED FOR LESS THAN AN HOUR, THAT

THE ACCUSATION BY SOME OF THE INDIVIDUALS IS NOT TRUE,
SINCE SOME HAD ALREADY LEFT & MOST OF THE
PARTICIPANTS DID NOT ARRIVED [sic] YET.
THIS IS TO ATTEST TO THE TRUTH OF THE ABOVE.
(Sgd.)
ALLAN ORDINARIO RIVERA
SALES ENGINEER17
Out of the eight subordinates who gave their statements during the
administrative investigation, it was only Stanley Mosende (Mosende)
who stated that he was influenced by respondent Enriquez not to report
for work.18 It appears, however, that Mosende was not absent from
work based on the signed attendance sheet, which showed that he
reported to the office at 5:00 p.m. and signed out at 7:00 p.m. 19 The
accounts of Mosende are incongruous with the statement of Tecson,
the Network Administrator. Tecson submitted a written statement
declaring that around 8:00 a.m. of February 1, 2002, he received a text
message from Mosende and from Wally Borja asking him not to go to
the office.20 He did not mention the respondent. Later on, he
contradicted his earlier statement when he submitted another affidavit
that was attached to the Petition for Review of petitioner M+W Zander,
this time stating that it was respondent Enriquez who called him up in
his mobile phone to tell him not to report to work.
On March 1, 2002, a Notice of Termination21 was received by
respondent informing her that her services as Administration Manager
and Executive Assistant to the General Manager of M+W Zander are
terminated effective the same day. The respondent was found liable for
"willful breach of trust and confidence in using [her] authority and/or
influence as Administrative Manager of M+W Zander Philippines over
[her] subordinate to stage a ‘no work day’ last February 1, 2002, which
in turn disrupted vital operations in the Company." 22
On the same day of her receipt of the Notice of Termination, respondent
filed a Complaint for illegal dismissal with the Arbitration Office of the
NLRC. Respondent Enriquez alleges that petitioners based her
termination on mere speculation since there were a number of
employees who reported to work despite signing the letter of appeal,
and despite the absence of some of the employees, the company still
continued its operations that day.
Labor Arbiter Edgar B. Bisana held that respondent Enriquez was
illegally dismissed.23 Both petitioners, M+W Zander and Wiltschek,
were ordered to reinstate respondent without loss of seniority rights and
privileges, and to pay respondent full backwages and benefits from the
time compensation was withheld from her up to her actual
reinstatement. The petitioners were further ordered to pay ₱100,000.00
as moral damages, ₱100,000.00 as exemplary damages, as well as
attorney’s fees.
The NLRC reversed the decision of the Labor Arbiter and found that
respondent was not illegally dismissed because she committed serious
misconduct which destroyed the trust and confidence of the
management in her.24
The Court of Appeals reversed and set aside the decision of the NLRC
and reinstated the decision of the Labor Arbiter, declaring that the
dismissal of respondent was illegal. 25 The petitioners were ordered to
reinstate respondent to her former position without loss of seniority
rights and privileges. The Court of Appeals deleted the award of
exemplary damages and reduced the award of moral damages to
₱25,000.00. The award of attorney’s fees was also affirmed.1avvphi1
At issue in this petition26 is whether respondent was illegally dismissed
by petitioners. Consequently, it must also be determined whether moral
damages and attorney’s fees should be awarded, if respondent was
illegally dismissed, and whether Wiltschek should be personally liable
together with M+W Zander.
After a thorough review of the records, we affirm the decision of the
Court of Appeals and find that respondent was illegally dismissed by
petitioner M+W Zander.
The sole ground for respondent’s termination by petitioners is "willful
breach of trust and confidence in using [her] authority and/or influence
as Administrative Manager of ZANDER over [her] subordinate to stage
a ‘no work day’ last February 1, 2002."27
Article 282 (c) of the Labor Code allows an employer to terminate the
services of an employee for loss of trust and confidence. 28 Certain
guidelines must be observed for the employer to terminate an
employee for loss of trust and confidence. We held in General Bank
and Trust Company v. Court of Appeals,29 viz.:
[L]oss of confidence should not be simulated. It should not be used as
a subterfuge for causes which are improper, illegal, or unjustified. Loss
of confidence may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary. It must be genuine, not a mere
afterthought to justify earlier action taken in bad faith. 30
The first requisite for dismissal on the ground of loss of trust and
confidence is that the employee concerned must be one holding a
position of trust and confidence.
There are two classes of positions of trust: managerial employees and
fiduciary rank-and-file employees.
Managerial employees are defined as those vested with the powers or
prerogatives to lay down management policies and to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees or
79
effectively recommend such managerial actions. 31 They refer to those
whose primary duty consists of the management of the establishment
in which they are employed or of a department or a subdivision thereof,
and to other officers or members of the managerial staff. 32 Officers and
members of the managerial staff perform work directly related to
management policies of their employer and customarily and regularly
exercise discretion and independent judgment. 33
The second class or fiduciary rank-and-file employees consist of
cashiers, auditors, property custodians, etc., or those who, in the
normal exercise of their functions, regularly handle significant amounts
of money or property.34 These employees, though rank-and-file, are
routinely charged with the care and custody of the employer’s money
or property, and are thus classified as occupying positions of trust and
confidence.
In the case at bar, respondent was employed as the Administration
Manager and the Executive Assistant to the General Manager. The
responsibilities of the Administration Manager include:
- To take charge of the management of Administrative
personnel assigned to the head office in so far as
administrative functions are concerned (Administrative
Assistants assigned to the Division heads and other
managerial positions except HRD);
- To take charge of the over-all security for the company staff,
premises, and sensitive areas; to guard against unauthorized
entry in sensitive areas (as determined by the management
committee);
- To take charge of the implementation of company rules on
housekeeping, cleanliness and security for all occupants of
the Head Office in coordination with the company Division
Heads and HRD;
- To monitor attendance of all administrative personnel and
enforce applicable company rules pertaining thereto;
- To take charge of the maintenance, upkeep and inventory
of all company property within the head office;
- To take charge of the timely provision of supplies and
equipment covered by the proper requisition documents
within the head office;
- To take charge of traffic, tracking, and distribution of all
incoming and outgoing correspondence, packages and
facsimile messages;
- To take care of all official travel arrangements and
documentation by company personnel;
- To ensure the proper allocation of company cars assigned
to the Head Office; and
- To coordinate schedule and documentation of regular staff
meetings and one-on-one meetings as required by EVS and
the Division Heads.35 (Emphasis supplied.)
The duties of the Executive Assistant to the General Manager are as
follows:
- To take care of the scheduling, monitoring, and tracking of
all the GM’s appointments;
- To serve as liaison between the GM, the Division Heads, the
Administrative Staff and external contacts;
- To take care of immigration concerns and corresponding
documents for the GM and the company expatriates;
- To effectively handle, monitor, and document calls for the
GM;
- To handle personal financials (Banking/Bills) for the GM and
- To perform any other tasks relative to the above functions
which may be assigned from time to time by the GM.36
Though respondent’s position is designated as the Administration
Manager of M+W Zander, it does not automatically mean that she
occupies a position of trust and confidence. It is not the job title but the
actual work that the employee performs that determines whether he or
she occupies a position of trust and confidence. 37 Respondent’s duties
as the Administration Manager include management of the
administrative assistants who are assigned to the division heads, in so
far as their administrative functions are concerned. She also takes
charge of the implementation of company rules on housekeeping and
cleanliness, oversees the security of the premises and the sensitive
areas of the company, monitors the inventory of company property, and
ensures the timely provision of supplies and equipment. The position of
an Administration Manager may thus be properly considered as a
managerial position, being a head of administrative assistants of other
divisions, and because of the performance of work directly related to
management policies and company rules.
The second requisite of terminating an employee for loss of trust and
confidence is that there must be an act that would justify the loss of
trust and confidence.38 To be a valid cause for dismissal, the loss of
confidence must be based on a willful breach of trust and founded on
clearly established facts.39
We find that it was not established that respondent used her authority
to influence her subordinates to stage a "no work day"; and assuming
that she performed this act as alleged by petitioners, it does not satisfy

the jurisprudential requirements for valid termination due to loss of trust
and confidence.
Loss of trust and confidence stems from a breach of trust founded on a
dishonest, deceitful or fraudulent act. In the case at bar, respondent did
not commit any act which was dishonest or deceitful. She did not use
her authority as the Administration Manager to misappropriate
company property nor did she abuse the trust reposed in her by
petitioners with respect to her responsibility to implement company
rules. The most that can be attributed to respondent is that she
influenced a single subordinate, without exerting any force or making
any threats, not to report to work. This does not constitute dishonest or
deceitful conduct which would justify the conclusion of loss of trust and
confidence.1awphil
We are convinced that respondent's dismissal cannot justifiably be
sustained since the findings in this case and whatever investigations
may have been made by petitioners miserably fail to establish
culpability on respondent’s part. While dishonesty or disloyalty of an
employee is not to be condoned, neither should a condemnation on that
ground be tolerated on the basis of suspicions spawned by speculative
inferences.40
Petitioners anchored the termination of respondent on the statement
made by a single subordinate, Mosende, which was made during the
administrative investigation conducted by petitioners. Mosende stated
that respondent, as his superior, told him not to report to work on
February 1, 2002.41 It was only Mosende who said that respondent
forced him not to report to work on February 1, 2002. During the
administrative investigation, the rest of respondent’s subordinates did
not identify respondent as the one who influenced them not to go to
work on February 1, 2002.
The act of influencing a single subordinate not to report to work is
insufficient to merit the harsh and grave penalty of dismissal. The
records are bereft of any evidence to prove that respondent in fact
coerced a considerable number of employees to stage the "no work
day." Petitioners may not arbitrarily assert loss of trust and confidence
in respondent based on the lone affidavit of Mosende, in the face of
overwhelming evidence to the contrary, including affidavits from several
subordinates of respondent and the categorical statement of Rivera
that he was the one who influenced other employees to stage the "no
work day."
We note that while 29 other employees signed the Letter of Appeal, and
several employees joined the alleged work stoppage, it was only
respondent who was singled out and dismissed. These protest
activities bear out the general sentiment of discontent within the
company and petitioners cannot pin the blame on respondent alone.
Petitioners may not terminate respondent’s employment on mere
speculation and base her dismissal on unclear and nebulous reasons,
especially where a less punitive penalty would suffice. 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.42
We thus find the dismissal to be illegal. Consequently, respondent is
entitled to reinstatement without loss of seniority rights and other
privileges, and to full backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from the time of the
withholding of the employee's compensation up to the time of actual
reinstatement. If reinstatement is not possible due to the strained
relations between the employer and the employee, separation pay
should instead be paid the employee equivalent to one month salary
for every year of service, computed from the time of engagement up to
the finality of this decision.
Petitioners also raised as an issue the propriety of the award of moral
damages and attorney’s fees, arguing that there is no factual or legal
basis to award such. Petitioners also pointed out that there was also no
discussion in the body of the decision of the Court of Appeals which
states the reasons for the award of damages.
We find that based on the facts of the case, there is sufficient basis to
award moral damages and attorney’s fees to respondent. We have
consistently ruled that in illegal dismissal cases, moral damages are
recoverable only where the dismissal of the employee was attended by
bad faith or fraud, or constituted an act oppressive to labor, or was done
in a manner contrary to morals, good customs or public policy. 43 Such
an award cannot be justified solely upon the premise that the employer
fired his employee without just cause or due process. Additional facts
must be pleaded and proven to warrant the grant of moral damages
under the Civil Code, i.e., that the act of dismissal was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in
a manner contrary to morals, good customs or public policy; and, of
course, that social humiliation, wounded feelings, grave anxiety, and
similar injury resulted therefrom.44
In previous cases where moral damages and attorney’s fees were
awarded, the manner of termination was done in a humiliating and
insulting manner, such as in the case of Balayan Colleges v. National
Labor Relations Commission45 where the employer posted copies of its
letters of termination to the teachers inside the school campus and it
also furnished copies to the town mayor and Parish Priest of their
community for the purpose of maligning the teachers’ reputation. So
80
also in the case of Chiang Kai Shek School v. Court of Appeals, 46 this
Court awarded moral damages to a teacher who was flatly, and without
warning or a formal notice, told that she was dismissed.
In the case at bar, we see it fit to award moral damages to respondent
because the manner in which respondent was treated upon petitioners’
suspicion of her involvement in drafting and in circulating the letter of
appeal and the alleged staging of the "no work day" is contrary to good
morals because it caused unnecessary humiliation to respondent.
When respondent reported to work a day after the alleged "no work
day," she was given a notice of preventive suspension, her personal
belongings were inspected, and she was escorted outside of the
premises, without any explanation. Furthermore, an order was given by
the administration to her subordinates that in no case shall she be
allowed inside the company premises without an authorized escort.
Such measures were unwarranted because the charges against
respondent have no connection to the breach of trust involving loss of
money or company property, which could have called for securing
company property from respondent. The crux is precisely that the
charges against respondent are divorced from the essence of loss of
trust and confidence—which is the commission of an act that is
dishonest, deceitful or fraudulent. And despite this, based merely on
mere suspicion, respondent was treated unfairly when she was not
given an explanation why her personal belongings were inspected, why
she was asked to leave the company building, why she had to be
escorted by guards, why she was banned from the premises, and, most
importantly, why it was necessary at all to issue an order to her
subordinates that she is not allowed in the company premises unless
she is escorted by authorized personnel. These measures are uncalled
for, unfair and oppressive.
On the matter of attorney's fees, we have ruled that attorney's fees may
be awarded only when the employee is illegally dismissed in bad faith
and is compelled to litigate or incur expenses to protect his rights by
reason of the unjustified acts of his employer. 47 In the case at bar,
respondent’s unjustified and unwarranted dismissal prompted her to
engage the professional services of a counsel and she is thus entitled
to an award of attorney’s fees.
Lastly, we come to the issue of whether Wiltschek, as the General
Manager, should be personally liable together with M+W Zander. We
agree with petitioners that he should not be made personally liable. The
general manager of a corporation should not be made personally
answerable for the payment of an illegally dismissed employee's
monetary claims arising from the dismissal unless he had acted
maliciously or in bad faith in terminating the services of the
employee.48 The employer corporation has a separate and distinct
personality from its officers who merely act as its agents.
It is well settled that:
[A] corporation is invested by law with a personality separate and
distinct from those of the persons composing it as well as from that of
any other entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding
the separate corporate personality. 49
The exception noted is where the official "had acted maliciously or in
bad faith," in which event he may be made personally liable for his own
act. That exception is not applicable in the case at bar, because it has
not been proven that Wiltschek was impleaded in his capacity as
General Manager of petitioner corporation and there appears to be no
evidence on record that he acted maliciously or in bad faith in
terminating the services of respondent. His act, therefore, was within
the scope of his authority and was a corporate act for which he should
not be held personally liable for.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The
portion of the assailed decision ordering Rolf Wiltschek liable with M+W
Zander is DELETED. All other aspects of the decision of the Court of
Appeals are AFFIRMED.
SO ORDERED.
G.R. No. 182499 October 2, 2009
CONCEPCION FAELDONIA, Petitioner,
vs.
TONG YAK GROCERIES, JAYME GO and MERLITA
GO, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari assails the Decision 1 and
Resolution2 of the Court of Appeals (CA) dated February 14, 2007 and
March 18, 2008, respectively, in CA-G.R. SP No. 76651 which set aside
the Decision3 of the National Labor Relations Commission (NLRC)
dated September 19, 2002 and its Resolution4 dated January 27, 2003
finding that petitioner Concepcion Faeldonia was illegally dismissed.
Petitioner alleged that she worked at Tong Yak Groceries as
sales/stock clerk from March 1978 until her dismissal on April 20, 2000;
that on January 26, 2000, while on an errand for her employer, she

stepped on a rusted half-inch nail which injured her foot and caused
her to be absent from work; that respondent Jayme Go advised her to
visit Dr. William Ty, who gave her antibiotics and pain killers as
medications;5 that after two weeks of medication, the wounds did not
heal and even worsened; that she was brought to the Metropolitan
Hospital in Sta. Cruz, Manila where she was also diagnosed to be
diabetic; that her foot was operated on and she was confined at the
hospital for 24 days; that the respondents paid the hospital bill
amounting to ₱22,266.40;6 that she was released from the hospital on
March 1, 2000, but was advised to report daily for wound dressing for
three weeks; and that respondents paid for all the expenses. 7
Petitioner also alleged that on March 10, 2000, she was summoned by
respondent Merlita Go who told her that, "ayaw na namin sa iyo dahil
may sakit ka, paengkang-engkang kung lumakad at pagtatawanan ka
lamang ng mga kasamahan mo dito;" however, petitioner did not give
much attention to said statement;8 that she was able to secure from the
SSS a Sickness Notification9 signed by Dr. William Ty certifying that
she is fit to resume work by April 20, 2000; that petitioner reported back
to work on April 20, 2000 but was told to resign and that she would be
given a sum of money to start a business; that when petitioner asked
how much financial assistance would be given her, respondent Merlita
Go angrily stated, "Marami na akong nagastos sa pagpapa-ospital sa
iyo."10
Thereafter, respondents no longer allowed petitioner to go back to work.
Hence, she filed a complaint for illegal dismissal with money claims
before the NLRC,11 claiming that her dismissal was not for cause and
without due process.
Respondents denied that they dismissed petitioner. They alleged that
after petitioner’s accident, they had extended the necessary medical
and hospital assistance to her amounting to almost ₱70,000.00; that
they had been lenient in her attendance at work; that petitioner
demanded for separation pay citing her health condition; that they
required petitioner to submit a certification issued by a government
physician stating her fitness to work,12 but petitioner no longer reported
back for work; that although petitioner submitted a certification that she
is fit to resume work, the same was not issued by a government
physician; and that they were surprised to receive the Notice of Hearing
by the labor tribunal.13
On October 29, 2001, the Labor Arbiter rendered a decision finding that
petitioner was not dismissed from employment, the dispositive portion
of which states:
WHEREFORE, premises considered, judgment is hereby rendered
finding that complainant was not dismissed from work, legally or
otherwise. Respondents are hereby ordered to pay as follows, to wit:
1. Separation pay
P223.50 x 15 days x 22 years = NLRC were based on substantial evidence while those of the labor
P73,755.00 – 52,266.45 = P21,488.55
2. Wage differential
P3.50 x 26 x 5.5 months = P 500.50
3. Service incentive leave
P223.50 x 15 = P 3,352.50
4. 13th Month Pay
P223.50 x 26 x 2 = P11,622.00
All other claims are hereby dismissed for lack of merit.
SO ORDERED.14
The Labor Arbiter found that the assistance given by respondents to
petitioner by way of medical and hospital expenses amounting to about
₱73,755.00, belies the allegation that respondents asked petitioner to
resign without benefits. The arbiter also held that petitioner filed the
complaint when her demand for separation pay was not granted for her
failure to produce a certification from a public health physician.
However, despite the finding that there was no dismissal, the labor
arbiter awarded separation pay to petitioner considering her length of
service and in accordance with Art. 284 of the Labor Code.
On appeal, the NLRC reversed the decision of the Labor Arbiter, the
dispositive portion of which reads:
WHEREFORE, premises considered, the decision under review is
REVERSED and SET ASIDE. Judgment is hereby entered, declaring
complainant Concepcion Faeldonia as illegally dismissed from her
employment. Accordingly, respondents are ordered to REINSTATE the
complainant to her former position without loss of seniority rights, and
to pay the said complainant, jointly and severally, FULL BACKWAGES
computed from April 20, 2000 until actually reinstated.
Respondents are likewise ordered to pay complainant, her salary
differentials in the amount of P500.50, Service Incentive Leave Pay of
P3,352.50 and 13th month pay of P11,622.00.
All other claims of the complainant are dismissed for lack of merit.
81
SO ORDERED.15
The NLRC found that respondents failed to prove that petitioner
abandoned her job. It found that the submission of a certification that
petitioner is fit to work is contrary to the claim that she is demanding for
separation pay for health reasons. The NLRC thus stated:
Not only were the respondents unable to prove that the complainant
abandoned her job. Evidence on hand corroborates the fact that there
was no abandonment at all. Firstly, had there been truth to
respondent’s claim that the complainant opted to be separated from
employment due to health reasons, and that she was not able to prove
entitlement to separation benefits on account of her failure to produce
a medical certification concerning her no longer fit to work as issued by
a public health authority, she should not have, in the first place,
requested the company physician to accomplish the SSS Sickness
Notification form where the latter certified, in clear terms, that
complainant was already fit to work on April 20, 2000. Secondly,
respondents in fact admitted that the said Certification was submitted
to them by the complainant. This again would not be the logical
recourse of an employee seeking separation benefits on the
representation that she is no longer physically fit to work, since the
certification of respondents’ physician actually pertains to
complainant’s being fit to resume her employment. In effect, the facts
obtaining bolster complainant’s assertion that she endeavored to
present herself for resumption of her work, but was refused. This
conclusion is far from being conjectural, as it is based on law, evidence
on record, and the existing jurisprudential norm on the issue of
abandonment. Hence, the finding that complainant was dismissed from
employment, and that such dismissal is illegal. 16
Respondents filed a motion for reconsideration but it was denied; hence,
they filed a petition for certiorari before the Court of Appeals which
issued on February 14, 2007 the herein assailed Decision, 17 the
dispositive portion of which states—
WHEREFORE, the PETITION FOR CERTIORARI is GRANTED.
The decision promulgated on September 19, 2002 and the resolution
dated January 27, 2003 of the National Labor Relations Commission
are NULLIFIED AND SET ASIDE.
The decision dated October 29, 2001 of the Labor Arbiter is
REINSTATED.
SO ORDERED.18
Hence, this petition.
Petitioner argues that the Court of Appeals erred in reversing the NLRC
and in affirming the Labor Arbiter’s ruling. She claims that the appellate
court failed to consider the medical certificate she submitted which was
issued by the company physician attesting her fitness to resume work.
According to petitioner, this only supports her claim that she presented
herself for work but was refused. She maintains that the findings of the
arbiter were groundless.
On the other hand, respondents assert that only questions of law may
be raised in a petition for review on certiorari under Rule 45.
Respondents also argue that the findings of the labor arbiter as affirmed
by the Court of Appeals should be accorded not only respect but even
finality because it was supported by substantial evidence.
The petition is meritorious.
The issue in the instant case is factual: whether petitioner abandoned
her work or was illegally dismissed.
The factual findings of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdictions, are generally
accorded not only respect but even finality.19 However, when there is a
showing that they were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts. 20
We find that the NLRC acted well within its appellate jurisdiction over
the labor arbiter in reversing the latter’s factual conclusions. The
powers and jurisdiction of the NLRC as the country’s labor court is well-
defined in the Labor Code. Article 223 states that decisions, awards or
orders of the Labor Arbiter may be appealed if there is prima facie
evidence of abuse of discretion on the part of the Labor Arbiter, or
serious errors in the finding of facts are raised which would cause grave
or irreparable damage or injury to the appellant 21 while Article 217
specifically provides that the Commission has exclusive appellate
jurisdiction over all cases decided by the labor arbiters. Moreover,
Article 218 (c) vests the Commission the power to "correct, amend, or
waive any error, defect or irregularity whether in substance or form" in
the exercise of its appellate jurisdiction. 221avvphi1
In termination cases, the burden of proof rests upon the employer to
show that the dismissal is for a just and valid cause and failure to do so
would necessarily mean that the dismissal was illegal. 23 In Philippine
Long Distance Telephone Company, Inc. v. Tiamson, the Court ruled:
The employer’s case succeeds or fails on the strength of its evidence
and not on the weakness of the employee’s defense. If doubt exists
between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter. Moreover, the
quantum of proof required in determining the legality of an employee’s
dismissal is only substantial evidence. Substantial evidence is more
than a mere scintilla of evidence or relevant evidence as a reasonable

mind might accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine otherwise. 24
Following this principle, it is incumbent upon the respondents to prove
by substantial evidence that petitioner abandoned her job. For
abandonment to exist, it must be shown that (1) the employee has failed
to report for work or must have been absent without valid or justifiable
reason; and (2) that there must have been a clear intention to sever the
employer-employee relationship as manifested by some overt acts.25
Respondents failed to discharge this burden. Mere absence of
petitioner is not sufficient to establish the allegation of abandonment.
The prolonged absence of petitioner was not without justifiable reason
because it was established that her failure to report for work was due
to the injury she suffered in the course of her employment and with
sufficient notice to respondents. Petitioner also presented herself for
work on the date stated in the medical certificate which stated that she
is fit to resume work.
Above all, the intention to sever the employer-employee relationship
was not duly established by respondents. The prior submission of a
medical certificate that petitioner is fit to resume work negates the claim
of respondents that the former demanded for separation pay on
account of her failing health. Certainly, petitioner cannot demand for
separation benefits on the ground of illness while at the same time
presenting a certification that she is fit to work. Respondents could have
denied petitioner’s demand at that instance and ordered her to return
to work had it not been their intention to sever petitioner from their
employ. Hence, we find the allegation that petitioner presented herself
for work but was refused by respondents more credible.
It should be noted that respondents also failed to observe the
requirements of procedural due process in effecting petitioner’s
dismissal. In dismissing an employee, the employer has the burden of
proving that the dismissed worker has been served two notices: (1) the
first to inform the employee of the particular acts or omissions for which
the employer seeks his dismissal, and (2) the second to inform the
employee of his employer’s decision to terminate him. 26
In cases of abandonment of work, the ground alleged by respondents,
notice shall be served at the worker’s last known address. 27 Here, no
such notice was served to petitioner. Hence, for breach of the due
process requirements, respondents shall also be liable in the amount
of ₱30,000 as indemnity in the form of nominal damages.28
WHEREFORE, the petition is GRANTED. The Decision and Resolution
of the Court of Appeals dated February 14, 2007 and March 18, 2008,
respectively, in CA-G.R. SP No. 76651 are hereby REVERSED and
SET ASIDE. The Decision of the National Labor Relations Commission
dated September 19, 2002 declaring Concepcion Faeldonia as illegally
dismissed is hereby REINSTATED and AFFIRMED with
MODIFICATION that respondents are further ordered to pay nominal
damages in the amount of ₱30,000.00.
SO ORDERED.
G.R. No. 181972 August 25, 2009
PHILIPPINE HOTELIERS, INC., DUSIT HOTEL NIKKO-
MANILA, Petitioner,
vs.
NATIONAL UNION OF WORKERS IN HOTEL, RESTAURANT, AND
ALLIED INDUSTRIES (NUWHRAIN-APL-IUF)- DUSIT HOTEL
NIKKO CHAPTER, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari, under Rule 45
of the Rules of Court, assailing the Decision1 dated 10 September 2007
of the Court of Appeals in CA-G.R. SP No. 92798 granting the ₱30.00-
per-day Emergency Cost of Living Allowance (ECOLA), under Wage
Order (WO) No. NCR-09 (WO No. 9), to 144 employees of petitioner
Dusit Hotel Nikko (Dusit Hotel)2 and imposing upon the latter the
penalty of double indemnity under Republic Act No. 6727, as amended
by Republic Act No. 8188. Likewise assailed herein is the
Resolution3 dated 4 March 2008 of the appellate court in the same case
denying the Motion for Reconsideration of Dusit Hotel.
The antecedent facts of the case are as follows:
WO No. 9, approved by the Regional Tripartite Wages and Productivity
Board (RTWPB) of the National Capital Region (NCR), took effect on 5
November 2001. It grants ₱30.00 ECOLA to particular employees and
workers of all private sectors, identified as follows in Section 1 thereof:
Section 1. Upon the effectivity of this Wage Order, all private sector
workers and employees in the National Capital Region receiving daily
wage rates of TWO HUNDRED FIFTY PESOS (₱250.00) up to TWO
HUNDRED NINETY PESOS (₱290.00) shall receive an emergency
cost of living allowance in the amount of THIRTY PESOS (₱30.00) per
day payable in two tranches as follows:
Amount of ECOLA Effectivity
₱15.00 5 November 2001
82
₱15.00 1 February 2002
On 20 March 2002, respondent National Union of Workers in Hotel,
Restaurant and Allied Industries-Dusit Hotel Nikko Chapter (Union),
through its President, Reynaldo C. Rasing (Rasing), sent a letter4 to
Director Alex Maraan (Dir. Maraan) of the Department of Labor and
Employment-National Capital Region (DOLE-NCR), reporting the non-
compliance of Dusit Hotel with WO No. 9, while there was an on-going
compulsory arbitration before the National Labor Relations
Commission (NLRC) due to a bargaining deadlock between the Union
and Dusit Hotel; and requesting immediate assistance on this matter.
On 24 May 2002, Rasing sent Dir. Maraan another letter following-up
his previous request for assistance.
Acting on Rasing’s letters, the DOLE-NCR sent Labor Standards
Officer Estrellita Natividad (LSO Natividad) to conduct an inspection of
Dusit Hotel premises on 24 April 2002. LSO Natividad’s Inspection
Results Report5 dated 2 May 2002 stated:
Based on interviews/affidavits of employees, they are receiving more
than P290.00 average daily rate which is exempted in the compliance
of Wage Order NCR-09;
Remarks: There is an ongoing negotiation under Case # NCMB-NCR-
NS-12-369-01 & NCMB-NCR-NS-01-019-02 now forwarded to the
NLRC office for the compulsory arbitration.
NOTE: Payrolls to follow later upon request including position paper of
[Dusit Hotel].
By virtue of Rasing’s request6 for another inspection, LSO Natividad
conducted a second inspection of Dusit Hotel premises on 29 May 2002.
In her Inspection Results Report7 dated 29 May 2002, LSO Natividad
noted:
*Non-presentation of records/payrolls
*Based on submitted payrolls & list of union members by NUWHRAIN-
DUSIT HOTEL NIKKO Chapter, there are one hundred forty-four (144)
affected in the implementation of Wage Order No. NCR-09-> ECOLA
covering the periods from Nov.5/01 to present.
Accordingly, the DOLE-NCR issued a Notice of Inspection Result
directing Dusit Hotel to effect restitution and/or correction of the noted
violations within five days from receipt of the Notice, and to submit any
question on the findings of the labor inspector within the same period,
otherwise, an order of compliance would be issued. The Notice of
Inspection Result was duly received by Dusit Hotel Assistant Personnel
Manager Rogelio Santos.8
In the meantime, the NLRC rendered a Decision9 dated 9 October 2002
in NLRC-NCR-CC No. 000215-02 – the compulsory arbitration
involving the Collective Bargaining Agreement (CBA) deadlock
between Dusit Hotel and the Union – granting the hotel employees the
following wage increases, in accord with the CBA:
Effective January 1, 2001- ₱500.00/month
Effective January 1, 2002- ₱550.00/month
Effective January 1, 2003- ₱600.00/month
On 22 October 2002, based on the results of the second inspection of
Dusit Hotel premises, DOLE-NCR, through Dir. Maraan, issued the
Order10 directing Dusit Hotel to pay 144 of its employees the total
amount of ₱1,218,240.00, corresponding to their unpaid ECOLA under
WO No. 9; plus, the penalty of double indemnity, pursuant to Section
12 of Republic Act No. 6727,11 as amended by Republic Act No.
8188,12 which provides:
Sec. 12. Any person, corporation, trust, firm, partnership, association
or entity which refuses or fails to pay any of the prescribed increases
or adjustments in wage rates made in accordance with this Act shall be
punished by a fine not less than Twenty-five thousand pesos (₱25,000)
nor more than One hundred thousand pesos (₱100,000) or
imprisonment of not less than two (2) years nor more than four (4) years
or both such find and imprisonment at the discretion of the court:
Provided, That any person convicted under this Act shall not be entitled
to the benefits provided for under the Probation Law.
The employer concerned shall be ordered to pay an amount equivalent
to double the unpaid benefits owing to the employees: Provided, That
payment of indemnity shall not absolve the employer from the criminal
liability under this Act.
If the violation is committed by a corporation, trust or firm, partnership,
association or any other entity, the penalty of imprisonment shall be
imposed upon the entity’s responsible officers including but not limited
to the president, vice president, chief executive officer, general
manager, managing director or partner. (Emphasis ours.)
Dusit Hotel filed a Motion for Reconsideration13 of the DOLE-NCR
Order dated 22 October 2002, arguing that the NLRC Decision dated 9
October 2002, resolving the bargaining deadlock between Dusit Hotel
and the Union, and awarding salary increases under the CBA to hotel
employees retroactive to 1 January 2001, already rendered the DOLE-
NCR Order moot and academic. With the increase in the salaries of the
hotel employees ordered by the NLRC Decision of 9 October 2002,
along with the hotel employees’ share in the service charges, the 144
hotel employees, covered by the DOLE-NCR Order of 22 October 2002,
would already be receiving salaries beyond the coverage of WO No. 9.

Acting on the Motion for Reconsideration of Dusit Hotel, DOLE-NCR
issued a Resolution14 on 27 December 2002, setting aside its earlier
Order dated 22 October 2002 for being moot and academic, in
consideration of the NLRC Decision dated 9 October 2002; and
dismissing the complaint of the Union against Dusit Hotel, for non-
compliance with WO No. 9, for lack of merit. 1avvphi1
The Union appealed15 the 27 December 2002 Resolution before the
DOLE Secretary maintaining that the wage increases granted by the
NLRC Decision of 9 October 2002 should not be deemed as
compliance by Dusit Hotel with WO No. 9.
The DOLE, through Acting Secretary Manuel G. Imson, issued an
Order16 dated 22 July 2004 granting the appeal of the Union. The DOLE
Secretary reasoned that the NLRC Decision dated 9 October 2002
categorically declared that the wage increase under the CBA finalized
between Dusit Hotel and the Union shall not be credited as compliance
with WOs No. 8 and No. 9. Furthermore, Section 1 of Rule IV of the
Rules Implementing WO No. 9, which provides that wage increases
granted by an employer in an organized establishment within three
months prior to the effectivity of said Wage Order shall be credited as
compliance with the ECOLA prescribed therein, applies only when an
agreement to this effect has been forged between the parties or a
provision in the CBA allowing such crediting exists. Hence, the DOLE
Secretary held:
WHEREFORE, premises considered, the appeal is hereby GRANTED.
The Resolution dated December 27, 2002 issued by the Regional
Director is SET ASIDE and his Order dated October 22, 2002 is hereby
REINSTATED. Dusit Hotel Nikko Manila is hereby ordered to pay its
One Hundred Forty Four (144) employees the aggregate amount of
One Million Two Hundred Eighteen Thousand Two Hundred Forty
Pesos (Php1,218,240.00) representing their Emergency Cost Of Living
Allowance (ECOLA) under Wage Order No. NCR-09 and the penalty of
double indemnity under Republic Act. No. 8188, as amended. 17
Expectedly, Dusit Hotel sought reconsideration18 of the 22 July 2004
Order of the DOLE Secretary. In an Order19 dated 16 December 2004,
the DOLE Secretary granted the Motion for Reconsideration of Dusit
Hotel and reversed his Order dated 22 July 2004. The DOLE Secretary,
in reversing his earlier Order, admitted that he had disregarded therein
that the wage increase granted by the NLRC in the latter’s Decision
dated 9 October 2002 retroacted to 1 January 2001. The said wage
increase, taken together with the hotel employees’ share in the service
charges of Dusit Hotel, already constituted compliance with the WO No.
9. According to the DOLE Secretary:
To stress, the overriding consideration of Wage Order NCR-09 is quite
simple, to provide workers with immediate relief through the grant of
Emergency Cost of Living Allowance to enable them to cope with the
increases in the cost of living. Conformably with the evident intent of
the subject Wage Order as expressed in its preamble, this Office finds
that the substantial share in the service charge being received by the
employees of appellee (Dusit Hotel) more than compensates for the
Emergency Cost of Living Allowance of ₱30.00 given under Wage
Order NCR-09.20
It was then the turn of the Union to file a Motion for
Reconsideration,21 but it was denied by the DOLE Secretary in an
Order22 dated 13 October 2005. The DOLE Secretary found that it
would be unjust on the part of Dusit Hotel if the hotel employees were
to enjoy salary increases retroactive to 1 January 2001, pursuant to the
NLRC Decision dated 9 October 2002, and yet said salary increases
would be disregarded in determining compliance by the hotel with WO
No. 9.
The Union appealed the Orders dated 16 December 2004 and 13
October 2005 of the DOLE Secretary with the Court of Appeals via a
Petition for Review23 under Rule 43 of the Rules of Court. On 10
September 2007, the Court of Appeals promulgated its
Decision24 ruling in favor of the Union. Referring to Section 13 of WO
No. 9, the Court of Appeals declared that wage increases/allowances
granted by the employer shall not be credited as compliance with the
prescribed increase in the same Wage Order, unless so provided in the
law or the CBA itself; and there was no such provision in the case at
bar. The appellate court also found that Dusit Hotel failed to
substantiate its position that receipt by its employees of shares in the
service charges collected by the hotel was to be deemed substantial
compliance by said hotel with the payment of ECOLA required by WO
No. 9. The Court of Appeals adjudged that Dusit Hotel should be liable
for double indemnity for its failure to comply with WO No. 9 within five
days from receipt of notice. The appellate court stressed that ECOLA
is among the laborers’ financial gratifications under the law, and is
distinct and separate from benefits derived from negotiation or
agreement with their employer. In the end, the Court of Appeals
disposed:
WHEREFORE, finding the existence of grave abuse of discretion in the
issuance of the assailed Orders dated December 16, 2004 and October
13, 2005, the same are hereby REVERSED AND SET ASIDE and the
Order dated July 22, 2004 of the respondent DOLE Acting Secretary in
OS-LS-0630-2003-0105 is REINSTATED.25
The Motion for Reconsideration26 of Dusit Hotel was denied for lack of
merit by the Court of Appeals in its Resolution27 dated 4 March 2008.
83
Hence, Dusit Hotel sought recourse from this Court by filing the instant
Petition,28 at the crux of which is the sole issue of whether the 144 hotel
employees were still entitled to ECOLA granted by WO No. 9 despite
the increases in their salaries, retroactive to 1 January 2001, ordered
by NLRC in the latter’s Decision dated 9 October 2002.
Section 1 of WO No. 9 very plainly stated that only private sector
workers and employees in the NCR receiving daily wage rates of
₱250.00 to ₱290.00 shall be entitled to ECOLA. Necessarily, private
sector workers and employees receiving daily wages of more than
₱290.00 were no longer entitled to ECOLA. The ECOLA was to be
implemented in two tranches: ₱15.00/day beginning 5 November 2001;
and the full amount of ₱30.00/day beginning 1 February 2002.
WO No. 9 took effect on 5 November 2001. The Decision rendered by
the NLRC on 9 October 2002 ordered Dusit Hotel to grant its employees
salary increases retroactive to 1 January 2001 and 1 January 2002. In
determining which of its employees were entitled to ECOLA, Dusit Hotel
used as bases the daily salaries of its employees, inclusive of the
retroactive salary increases. The Union protested and insisted that the
bases for the determination of entitlement to ECOLA should be the
hotel employees’ daily salaries, exclusive of the retroactive salary
increases. According to the Union, Dusit Hotel cannot credit the salary
increases as compliance with WO No. 9.
Much of the confusion in this case arises from the insistence of the
Union to apply Section 13 of WO No. 9, which states:
Section 13. Wage increases/allowances granted by an employer in an
organized establishment with three (3) months prior to the effectivity of
this Order shall be credited as compliance with the prescribed increase
set forth herein, provided the corresponding bargaining agreement
provision allowing creditability exists. In the absence of such an
agreement or provision in the CBA, any increase granted by the
employer shall not be credited as compliance with the increase
prescribed in this Order.
In unorganized establishments, wage increases/allowances granted by
the employer within three (3) months prior to the effectivity of this Order
shall be credited as compliance therewith.
In case the increases given are less than the prescribed adjustment,
the employer shall pay the difference. Such increases shall not include
anniversary increases, merit wage increases and those resulting from
the regularization or promotion of employees. (Emphasis ours.)
The Union harps on the fact that its CBA with Dusit Hotel does not
contain any provision on creditability, thus, Dusit Hotel cannot credit the
salary increases as compliance with the ECOLA required to be paid
under WO No. 9.1avvphi1
The reliance of the Union on Section 13 of WO No. 9 in this case is
misplaced. Dusit Hotel is not contending creditability of the hotel
employees’ salary increases as compliance with the ECOLA mandated
by WO No. 9. Creditability means that Dusit Hotel would have been
allowed to pay its employees the salary increases in place of the
ECOLA required by WO No. 9. This, however, is not what Dusit Hotel
is after. The position of Dusit Hotel is merely that the salary increases
should be taken into account in determining the employees’ entitlement
to ECOLA. The retroactive increases could raise the hotel employees’
daily salary rates above ₱290.00, consequently, placing said
employees beyond the coverage of WO No. 9. Evidently, Section 13 of
WO No. 9 on creditability is irrelevant and inapplicable herein.
The Court agrees with Dusit Hotel that the increased salaries of the
employees should be used as bases for determining whether they were
entitled to ECOLA under WO No. 9. The very fact that the NLRC
decreed that the salary increases of the Dusit Hotel employees shall be
retroactive to 1 January 2001 and 1 January 2002, means that said
employees were already supposed to receive the said salary increases
beginning on these dates. The increased salaries were the rightful
salaries of the hotel employees by 1 January 2001, then again by 1
January 2002. Although belatedly paid, the hotel employees still
received their salary increases.
It is only fair and just, therefore, that in determining entitlement of the
hotel employees to ECOLA, their increased salaries by 1 January 2001
and 1 January 2002 shall be made the bases. There is no logic in
recognizing the salary increases for one purpose (i.e., to recover the
unpaid amounts thereof) but not for the other (i.e., to determine
entitlement to ECOLA). For the Court to rule otherwise would be to
sanction unjust enrichment on the part of the hotel employees, who
would be receiving increases in their salaries, which would place them
beyond the coverage of Section 1 of WO No. 9, yet still be paid ECOLA
under the very same provision.
The NLRC, in its Decision dated 9 October 2002, directed Dusit Hotel
to increase the salaries of its employees by ₱500.00 per month,
retroactive to 1 January 2001. After applying the said salary increase,
only 82 hotel employees29 would have had daily salary rates falling
within the range of ₱250.00 to ₱290.00. Thus, upon the effectivity of
WO No. 9 on 5 November 2001, only the said 82 employees were
entitled to receive the first tranch of ECOLA, equivalent to ₱15.00 per
day.
The NLRC Decision dated 9 October 2002 also ordered Dusit Hotel to
effect a second round of increase in its employees’ salaries, equivalent
to ₱550.00 per month, retroactive to 1 January 2002. As a result of this

increase, the daily salary rates of all hotel employees were already
above ₱290.00. Consequently, by 1 January 2002, no more hotel
employee was qualified to receive ECOLA.
Given that 82 hotel employees were entitled to receive the first tranch
of ECOLA from 5 November 2001 to 31 December 2001, the Court
must address the assertion of Dusit Hotel that the receipt by said hotel
employees of their shares in the service charges already constituted
substantial compliance with the prescribed payment of ECOLA under
WO No. 9.
The Court rules in the negative.
It must be noted that the hotel employees have a right to their share in
the service charges collected by Dusit Hotel, pursuant to Article 96 of
the Labor Code of 1991, to wit:
Article 96. Service charges. – All service charges collected by hotels,
restaurants and similar establishments shall be distributed at the rate
of eighty-five percent (85%) for all covered employees and fifteen
percent (15%) for management. The share of employees shall be
equally distributed among them. In case the service charge is abolished,
the share of the covered employees shall be considered integrated in
their wages.
Since Dusit Hotel is explicitly mandated by the afore-quoted statutory
provision to pay its employees and management their respective
shares in the service charges collected, the hotel cannot claim that
payment thereof to its 82 employees constitute substantial compliance
with the payment of ECOLA under WO No. 9. Undoubtedly, the hotel
employees’ right to their shares in the service charges collected by
Dusit Hotel is distinct and separate from their right to ECOLA;
gratification by the hotel of one does not result in the satisfaction of the
other.
The Court, however, finds no basis to hold Dusit Hotel liable for double
indemnity. Under Section 2(m) of DOLE Department Order No. 10,
Series of 1998,30 the Notice of Inspection Result "shall specify the
violations discovered, if any, together with the officer’s recommendation
and computation of the unpaid benefits due each worker with an advice
that the employer shall be liable for double indemnity in case of refusal
or failure to correct the violation within five calendar days from receipt
of notice." A careful review of the Notice of Inspection Result dated 29
May 2002, issued herein by the DOLE-NCR to Dusit Hotel, reveals that
the said Notice did not contain such an advice. Although the Notice
directed Dusit Hotel to correct its noted violations within five days from
receipt thereof, it was not sufficiently apprised that failure to do so within
the given period would already result in its liability for double indemnity.
The lack of advice deprived Dusit Hotel of the opportunity to decide and
act accordingly within the five-day period, as to avoid the penalty of
double indemnity. By 22 October 2002, the DOLE-NCR, through Dir.
Maraan, already issued its Order directing Dusit Hotel to pay 144 of its
employees the total amount of ₱1,218,240.00, corresponding to their
unpaid ECOLA under WO No. 9; plus the penalty of double indemnity,
pursuant to Section 12 of Republic Act No. 6727, as amended by
Republic Act No. 8188.31
Although the Court is mindful of the fact that labor embraces individuals
with a weaker and unlettered position as against capital, it is equally
mindful of the protection that the law accords to capital. While the
Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every
labor dispute will be automatically decided in favor of labor.
Management also has its own rights which, as such, are entitled to
respect and enforcement in the interest of simple fair play.32
In sum, the Court holds that the retroactive salary increases should be
taken into account in the determination of which hotel employees were
entitled to ECOLA under WO No. 9. After applying the salary increases
retroactive to 1 January 2001, 82 hotel employees still had daily salary
rates between ₱250.00 and ₱290.00, thus, entitling them to receive the
first tranch of ECOLA, equivalent to ₱15.00 per day, beginning 5
November 2001, the date of effectivity of WO No. 9, until 31 December
2001. Following the second round of salary increases retroactive to 1
January 2002, all the hotel employees were already receiving daily
salary rates above ₱290.00, hence, leaving no one qualified to receive
ECOLA. Receipt by the 82 hotel employees of their shares from the
service charges collected by Dusit Hotel shall not be deemed payment
of their ECOLA from 5 November 2001 to 31 December 2001.
WHEREFORE, premises considered, the Decision dated 10
September 2007 and the Resolution dated 4 March 2008 of the Court
of Appeals in CA-G.R. SP No. 92798 are hereby AFFIRMED WITH
THE FOLLOWING MODIFICATIONS: (1) Dusit Hotel Nikko is
ORDERED to pay its 82 employees – who, after applying the salary
increases for 1 January 2001, had daily salaries of ₱250.00 to ₱290.00
– the first tranch of Emergency Cost of Living Allowance, equivalent to
₱15.00 per day, from 5 November 2001 to 31 December 2001, within
ten (10) days from finality of this Decision; and (2) the penalty for double
indemnity is DELETED. No costs.
SO ORDERED.
G.R. No. 177970 August 25, 2010
84
AGRICULTURAL AND INDUSTRIAL SUPPLIES CORPORATION,
DAILY HARVEST MERCANTILE, INC., JOSEPH C. SIA HETIONG
and REYNALDO M. RODRIGUEZ, Petitioners,
vs.
JUEBER P. SIAZAR and THE HONORABLE NATIONAL LABOR
RELATIONS COMMISSION, Respondents.
DECISION
ABAD, J.:
This case dwells on circumstances that spell dismissal from work
although the company insists that such circumstances indicate
abandonment of work.
The Facts and the Case
On July 3, 1997 respondent Jueber P. Siazar (Siazar) filed a complaint
for illegal dismissal and unfair labor practice against petitioner
Agricultural and Industrial Supplies Corporation (AISC) and others
before the National Labor Relations Commission (NLRC) in NLRC-
NCR Case 00-07-04689-97.
Siazar claimed that he first worked for the Daily Harvest Mercantile, Inc.
(DHMI) on April 12, 1993 but was transferred after three years in June
1996 to AISC1 as product designer, mold maker, and CNC programmer
with a monthly salary of ₱25,000.00.2
In early 1997, Siazar discovered that his company was not remitting
much of his SSS premiums although the computations appeared on his
pay slips. When he told his co-employees about it, they made their own
inquiries, too.3 On Siazar’s arrival at work on June 17, 1997, the
company guard refused him entry and handed him two notes from the
management: one said that he was not to report for work;4 the other
said that he was to report after two days on June 19, 1997 to Atty.
Rodriguez at his office in Binondo.5
Too anxious over the matter, Siazar did not wait for June 19 and went
straightaway to see Atty. Rodriguez. The latter told Siazar that the
company had decided to abolish his department because of
redundancy and he could no longer work. Atty. Rodriguez asked Siazar
to make a computation of what amount he expected from the company
and return to the lawyer with such computation on the following day and
the company would immediately pay him.6
When Siazar told his co-employees about this development, they
thought that the company removed him from work because of fear that
he would agitate them into forming a union, given the non-remittance
of the correct amounts of their SSS contributions. 7
When Siazar and his wife saw Atty. Rodriguez again at his office on
June 19, 1997, the latter insisted on getting Siazar to do the
computation he asked. Because of the lawyer’s insistence, Siazar
finally gave him a computation of his claims against the company on
June 23, 1997. As Siazar was unsure of his situation, however, he
consulted a lawyer on that same day. This lawyer went with him back
to Atty. Rodriguez who confirmed that Siazar had indeed been
dismissed because his department was no longer earning money. This
surprised Siazar because his department did not generate income on
its own, being a mere support unit of the company. 8 Since all attempts
at negotiation proved futile, Siazar filed his complaint.
AISC had a different version. It claimed the company thought of closing
down Siazar’s department where he worked solo since it was no longer
making money. Thus, they wrote him the two notes on June 17,
1997.9 Atty. Rodriguez did not say, however that the company was
already dismissing Siazar.10 The latter simply decided on his own to
drop out of work after learning of the company’s plan regarding his
department.11 What Atty. Rodriguez and Siazar discussed was how the
latter might be compensated if the company’s plan went through. In
response, Siazar even submitted a proposal that the company found
excessive.12
On December 14, 1998 the Labor Arbiter found that the company did
not yet dismiss Siazar from work13 since they were still negotiating for
a financial package for him. He rather stopped reporting for work of his
own accord after learning of the plan to retrench him. Indeed, the
company gave Siazar no letter of dismissal or
retrenchment.14 Consequently, the Labor Arbiter dismissed the
complaint but ordered the company to give Siazar separation pay, his
unpaid salary, and a proportionate 13th month pay for 1997. 15
Siazar appealed to the NLRC, which ruled16 on June 3, 1999 to uphold
the Labor Arbiter’s finding that the company did not dismiss him from
work and that, misunderstanding its action, he ceased to report for work.
It was all a misunderstanding, said the NLRC, and each party must bear
his own loss to place them on equal footing.17 The NLRC sustained the
award of separation pay, to be reckoned from June 1996 to June 1997,
the time Siazar worked for AISC. The NLRC also affirmed the grant to
him of his unpaid salary and proportionate 13th month pay. 18 Siazar
asked for reconsideration but the NLRC denied it. 19
Not dissuaded, Siazar went up to the Court of Appeals (CA)20 but on
December 21, 200521 the latter court affirmed the NLRC decision. On
motion for reconsideration, however, the CA rendered an Amended
Decision22 on December 13, 2006, finding sufficient evidence that the
company indeed illegally dismissed Siazar from work. The CA based
its finding on the following: (a) Rodriguez told Siazar that he had been
terminated; (b) the company did not allow Siazar to enter its premises;
(c) it wanted to close his department and retrench him from work; (d)

Rodriguez asked Siazar to compute what he expected was to be his
separation pay; (e) the company neither gave Siazar notice nor
informed him of the reason for his dismissal; and (f) it showed no valid
or just cause for the dismissal.
The CA thus ordered the company to reinstate Siazar and pay him full
backwages, inclusive of allowances and other benefits or their
monetary equivalent computed from the time of his dismissal up to the
time of his actual reinstatement.23 The company filed a motion for
reconsideration, but the CA denied the same on May 22, 2007, 24 hence
the present petition for review on certiorari.
Issues Presented
Two issues are presented:
1. Whether or not the company dismissed Siazar from work;
and
2. In the affirmative, whether or not his dismissal was valid.
Court’s Ruling
The company insists that the Court should reinstate the original CA
decision, given the findings of the Labor Arbiter and the NLRC that it
had not dismissed Siazar.25 Ordinarily, the Court will not, on petition for
review on certiorari, reexamine the facts of the case. Here, however,
since the CA overturned its earlier ruling and its factual findings now
differ from those of the Labor Arbiter and the NLRC, the Court is making
an exception.26
From an examination of the record, the Court has ascertained that the
evidence supports the CA’s finding that the company dismissed Siazar
from work. This is evident from the following:
One. On company’s orders, the guard prevented Siazar from entering
its premises to work. The company even gave him notice not to report
for work and instead told him to see the company’s external counsel
after two days. If the company had not yet decided to close down
Siazar’s department and wanted merely to explore that possibility with
him,27 it had no reason to require him to stay away from work in the
meantime. Barring him from work simply meant that the company had
taken away his right to continue working for it.
Two. It is simply preposterous for Siazar or any employee like him to
just give up a job that paid ₱25,000.00 a month when, according to the
company, it had not yet decided to carry out its plan and fire him.
Three. That Siazar lost no time in filing a complaint for illegal dismissal
negates the notion that he voluntarily left or abandoned his job. 28 An
employee who files a suit to claim his job back raises serious doubts
that he even entertained the idea of leaving it in the first place.
Four. Despite Siazar’s failure to show up for work, the company did not
summon him back or ask him to explain his long absence. Normally, an
employer would not stand by when an employee just stops coming to
work as this would affect its business. That the company just sat by
when Siazar did not come to work strengthens his contention that it had
dismissed him. Further, the company failed to substantiate its claim that
it reported Siazar’s irregular behavior to the Department of Labor and
Employment.29 The Court cannot consider allegations that have not
been proved.30
All these show that the company indeed terminated the services of
Siazar. The question now is this: was his termination valid?
Here, the company did not adduce any evidence to prove that Siazar’s
dismissal had been for a just or authorized cause as in fact it had been
its consistent stand that it did not terminate him and that he quit on his
own. But given that the company dismissed Siazar and that such
dismissal had remained unexplained, there can be no other conclusion
but that his dismissal was illegal.31
The Court has held that, under Article 279 of the Labor Code,
separation pay may be awarded to an illegally dismissed employee in
lieu of reinstatement when continued employment is no longer possible
where, as in this case, the continued relationship between the employer
and the employee is no longer viable due to strained relations between
them32 and reinstatement appears no longer practical due to the length
of time that had since passed.33
In awarding separation pay to an illegally dismissed employee, in lieu
of reinstatement, the amount to be awarded shall be equivalent to one
month salary for every year of service34 reckoned from the first day of
employment until the finality of the decision. 35 Payment of separation
pay is in addition to payment of backwages.36 And if separation pay is
awarded instead of reinstatement, backwages shall be computed from
the time of illegal termination up to the finality of the decision.37
The separation pay in this case shall be reckoned from the time Siazar
worked for AISC, from June 1996 until the finality of this decision. The
Court could not hold AISC liable for his work with DHMI for lack of
evidence that the latter was simply an alter ego of AISC and had been
established to evade an existing obligation, justify a wrong, or protect a
fraud.38
WHEREFORE, the Court AFFIRMS the Court of Appeals’ Amended
Decision dated December 13, 2006 and Resolution dated May 22, 2007
in CA-G.R. SP 56228 subject to the MODIFICATION that the liability
for respondent Jueber P. Siazar’s illegal dismissal shall be the sole
liability of petitioner Agricultural and Industrial Supplies Corporation and
that, in lieu of reinstatement with backwages, the latter shall pay Siazar
(a) separation pay in the amount equivalent to one month pay for every
85
year of service computed from June 1996 up to the finality of this
decision; and (b) full backwages computed from the date of his illegal
dismissal on June 17, 1997 up to the finality of the decision.
Let the records of this case be REMANDED to the Labor Arbiter for the
proper computation of the awards.
SO ORDERED.
G.R. No. 181913 March 5, 2010
DANIEL P. JAVELLANA, JR., Petitioner,
vs.
ALBINO BELEN, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 182158
ALBINO BELEN, Petitioner,
vs.
DANIEL P. JAVELLANA, JR. and JAVELLANA FARMS,
INC., Respondents.
DECISION
ABAD, J.:
This case is about the proper computation of the monetary awards of
an illegally dismissed employee.
The Facts and the Case
On May 9, 2000 petitioner Albino Belen (Belen) filed a
complaint1 against respondents Javellana Farms, Inc. and Daniel
Javellana, Jr. (Javellana) for illegal dismissal and underpayment or
non-payment of salaries, overtime pay, holiday pay, service incentive
leave pay (SILP), 13th month pay, premium pay for holiday, and rest
day as well as for moral and exemplary damages and attorney's fees.2
Petitioner Belen alleged that respondent Javellana hired him as
company driver on January 31, 19943 and assigned him the tasks of
picking up and delivering live hogs, feeds, and lime stones used for
cleaning the pigpens.4 On August 19, 1999 Javellana gave him
instructions to (a) pick up lime stones in Tayabas, Quezon; (b) deliver
live hogs at Barrio Quiling, Talisay, Batangas; (c) have the delivery
truck repaired; and (d) pick up a boar at Joliza Farms in Norzagaray,
Bulacan.5
Petitioner Belen further alleged that his long and arduous day finally
ended at 4:30 a.m. of the following day, August 20, 1999. But after just
three hours of sleep, respondent Javellana summoned him to the office.
When he arrived at 8:20 a.m., Javellana had left. After being told that
the latter would not be back until 4:00 p.m., Belen decided to go home
and get some more sleep.6
Petitioner Belen was promptly at the office at 4:00 p.m. but respondent
Javellana suddenly blurted out that he was firing Belen from work.
Deeply worried that he might not soon get another job, Belen asked for
a separation pay. When Javellana offered him only ₱5,000.00, he did
not accept it.7
Respondent Javellana claimed, on the other hand, that he hired
petitioner Belen in 1995, not as a company driver, but as family
driver.8 Belen did not do work for his farm on a regular basis, but picked
up feeds or delivered livestock only on rare occasions when the farm
driver and vehicle were unavailable.9
Regarding petitioner Belen's dismissal from work, respondent
Javellana insisted that he did it for a reason. Belen intentionally failed
to report for work on August 20, 1999 and this warranted his
dismissal.10
In a decision11 dated November 25, 2002, the Labor Arbiter found
petitioner Belen to be a company driver as evidenced by the pay
slips12 that the farm issued to him. Since his abrupt dismissal from work
violated his right to due process, it was illegal. 13 The Labor Arbiter
awarded him backwages, separation pay, 13th month pay, SILP,
holiday pay, salary differential, and attorney's fees. 14
On appeal, the National Labor Relations Commission (NLRC) issued a
resolution15 dated October 23, 2003, modifying the decision of the
Labor Arbiter. The NLRC was convinced that respondent Javellana
hired petitioner Belen as a family driver but required him to make certain
errands that were related to the farm business. Like the Labor Arbiter,
the NLRC also found Belen to have been illegally dismissed. But since
he was but a family driver, the NLRC deleted the award of backwages
and separation pay and instead ordered Javellana to pay him 15 days
salary by way of indemnity pursuant to Article 149 of the Labor Code.
Belen moved for reconsideration, but the NLRC denied his motion. 16
Aggrieved, petitioner Belen elevated the matter to the Court of Appeals
(CA),17 which in its Decision18 dated September 12, 2007, reverted
back to the decision of the Labor Arbiter. The CA held that Belen was
a company driver since, aside from driving respondent Javellana and
his family, he also did jobs that were needed in Javellana's business
operations, such as hauling and delivering live hogs, feeds, and lime
stones for the pig pens.19 The CA also said that Javellana's abrupt
dismissal of Belen for an isolated case of neglect of duty was
unjustified.20 The appellate court, however, modified the award of
backwages and separation pay, as it found the computation to be
erroneous.21

Both respondent Javellana and petitioner Belen moved for
reconsideration of the decision but the CA denied them both on March
3, 2008. 22 Undaunted, they both took recourse to this Court in G.R.
181913 and G.R. 182158, respectively.
The Court consolidated the two cases in its Resolution of July 2,
2008.23 But on July 16, 2008, having initially examined the petition in
G.R. 181913, the Court denied due course to it for respondent
Javellana's failure to sufficiently show reversible error in the assailed
decision.24 Javellana moved for reconsideration but the Court denied it
with finality on September 22, 2008.25
Questions Presented
The questions presented in this case are:
1. Whether or not the Labor Arbiter correctly computed
petitioner Belen's backwages and separation pay; and
2. Whether or not the monetary award in his favor should run
until the finality of the decision in his case.
The Court's Rulings
One. Petitioner Belen points out that the Labor Arbiter correctly
computed his monetary award although he appeared to have been
awarded more than what was right because of a typographical error in
the statement of the period that his backwages covered. The Labor
Arbiter's approved computation gave the period as from August 20,
1999 to November 19, 2000 when the proper period was from August
20, 1999, the date he was dismissed from work, to November 25, 2002,
the date the Labor Arbiter rendered his decision in the case. 26
For the same reason, petitioner Belen claims that his separation pay
should be computed from January 31, 1994, when he was hired, up to
November 25, 2002, when the Labor Arbiter rendered his decision.
Belen also insists that the 10% attorney's fees awarded to him be based
on the total amount arrived at, not by the appellate court, but by the
Labor Arbiter.27
After taking such position initially, petitioner Belen claims that the
amount awarded to him by the Labor Arbiter merely represents a
portion of what he was entitled to. The award of backwages to which
he was entitled should continue to run until the decision in his favor has
become final.281avvphi1
Respondent Javellana points out, however, that the Labor Arbiter's
decision clearly shows that he intended to award backwages and
separation pay only until November 19, 2000. 29 Javellana also
disagreed that the monetary award should be reckoned until the finality
of the decision in petitioner Belen's favor. The Labor Arbiter expressly
limited the amount of that award since he granted Belen's request to be
given separation pay instead of being reinstated. 30
It is obvious from a reading of the Labor Arbiter's decision that the date
November 19, 2000 stated in the computation was mere typographical
error. Somewhere in the body of the decision is the categorical
statement that petitioner Belen "is entitled to backwages from August
20, 1999 up to the date of this decision."31 Since the Labor Arbiter
actually rendered his decision on November 25, 2002, 32 it would be
safe to assume that he caused the computation of the amount of
backwages close to that date or on November 19, 2002. The same
could be said of the computation of petitioner Belen's separation pay.
Two. This leads us to the question, does the amount that the Labor
Arbiter awarded petitioner Belen represent all that he will get when the
decision in his case becomes final or does it represent only the amount
that he was entitled to at the time the Labor Arbiter rendered his
decision, leaving room for increase up to the date the decision in the
case becomes final?
Article 279 of the Labor Code, as amended by Section 34 of Republic
Act 6715 instructs:
Art. 279. Security of Tenure. - In cases of regular employment, the
employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title. 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.
Clearly, the law intends the award of backwages and similar benefits to
accumulate past the date of the Labor Arbiter's decision until the
dismissed employee is actually reinstated. 33 But if, as in this case,
reinstatement is no longer possible, this Court has consistently ruled
that backwages shall be computed from the time of illegal dismissal
until the date the decision becomes final. 34
As it happens, the parties filed separate petitions before this Court. The
petition in G.R. 181913, filed by respondent Javellana, questioned the
CA's finding of illegality of dismissal while the petition in G.R. 182158,
filed by petitioner Belen, challenged the amounts of money claims
awarded to him. The Court denied the first with finality in its resolution
of September 22, 2008;35 the second is the subject of the present case.
Consequently, Belen should be entitled to backwages from August 20,
1999, when he was dismissed, to September 22, 2008, when the
judgment for unjust dismissal in G.R. 181913 became final.
Separation pay, on the other hand, is equivalent to one month pay for
every year of service, a fraction of six months to be considered as one
whole year.36 Here that would begin from January 31, 1994 when
86
petitioner Belen began his service. Technically the computation of his
separation pay would end on the day he was dismissed on August 20,
1999 when he supposedly ceased to render service and his wages
ended. But, since Belen was entitled to collect backwages until the
judgment for illegal dismissal in his favor became final, 37 here on
September 22, 2008, the computation of his separation pay should also
end on that date.
Further, since the monetary awards remained unpaid even after it
became final on September 22, 2008 because of issues raised
respecting the correct computation of such awards, it is but fair that
respondent Javellana be required to pay 12% interest per annum on
those awards from September 22, 2008 until they are paid. The 12%
interest is proper because the Court treats monetary claims in labor
cases the equivalent of a forbearance of credit.38 It matters not that the
amounts of the claims were still in question on September 22, 2008.
What is decisive is that the issue of illegal dismissal from which the
order to pay monetary awards to petitioner Belen stemmed had been
long terminated.39
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the
decision of the Court of Appeals dated September 12, 2007 and its
resolution dated March 3, 2008 in CA-G.R. SP 83354, REINSTATES
the decision of the Labor Arbiter dated November 25, 2002 in NLRC-
NCR Case 30-09-04294-01 with the modification that the awards of
backwages be computed from August 20, 1999 to September 22, 2008
and the separation pay, from January 31, 1994 to September 22, 2008;
the 10% attorney's fees be based on the awards so computed; and that
the amounts due be made to bear interest of 12% per annum from
September 22, 2008 until fully paid.
Let the records of the case be remanded to the National Labor
Relations Commission upon the finality of this judgment for
computation of the exact amounts due petitioner Albino Belen from
respondents Javellana Farms, Inc. and Daniel Javellana, Jr.
SO ORDERED.
G.R. No. 187200 May 5, 2010
GOLDEN ACE BUILDERS and ARNOLD U. AZUL, Petitioners,
vs.
JOSE A. TALDE, Respondent.
DECISION
CARPIO MORALES, J.:
Jose A. Talde (respondent) was hired in 1990 as a carpenter by
petitioner Golden Ace Builders of which its co-petitioner Arnold Azul
(Azul) is the owner-manager. In February 1999, Azul, alleging the
unavailability of construction projects, stopped giving work
assignments to respondent, prompting the latter to file a complaint 1 for
illegal dismissal.
By Decision2 of January 10, 2001, the Labor Arbiter ruled in favor of
respondent and ordered his immediate reinstatement without loss of
seniority rights and other privileges, and with payment of full
backwages, which at that time was computed at ₱144,382.23, and the
amount of ₱3,236.37 representing premium pay for rest days, service
incentive leave pay and 13th month pay.
Pending their appeal to the National Labor Relations Commission
(NLRC) and in compliance with the Labor Arbiter’s Decision, petitioners,
through counsel, advised respondent to report for work in the
construction site within 10 days from receipt thereof. Respondent
submitted, however, on May 16, 2001 a manifestation3 to the Labor
Arbiter that actual animosities existed between him and petitioners and
there had been threats to his life and his family’s safety, hence, he
opted for the payment of separation pay. Petitioners denied the
existence of any such animosity.
Meanwhile, the NLRC dismissed petitioners’ appeal by Resolution4 of
April 22, 2002, holding that respondent was a regular employee and
not a project employee, and that there was no valid ground for the
termination of his services. Petitioners’ motion for reconsideration was
denied by Resolution5 of August 6, 2002.
Petitioners’ appeal to the Court of Appeals was dismissed by
Decision6 of August 12, 2004 which attained finality on September 15,
2004.
As an agreement could not be forged by the parties on the satisfaction
of the judgment, the matter was referred to the Fiscal Examiner of the
NLRC who recomputed at ₱562,804.69 the amount due respondent,
which was approved by the Labor Arbiter by Order 7 of July 5, 2005. A
writ of execution8 dated July 8, 2005 was thereupon issued.
Finding the amount exorbitant, petitioners filed a motion for
reconsideration with the NLRC, contending that since respondent
refused to report back to work, he should be considered to have
abandoned the same, hence, the recomputation of the wages and
benefits due him should not be beyond May 15, 2001, the date when
he manifested his refusal to be reinstated.
By Resolution9 of March 9, 2006, the NLRC granted petitioners’ motion
and accordingly vacated the computation. It held that since respondent
did not appeal the Decision of the Labor Arbiter granting him only

reinstatement and backwages, not separation pay in lieu thereof, he
may not be afforded affirmative relief; and since he refused to go back
to work, he may recover backwages only up to May 20, 2001, the day
he was supposed to return to the job site. Respondent’s motion for
reconsideration was denied by the NLRC by Resolution 10 of June 30,
2006, hence, he filed a petition for certiorari with the Court of Appeals.
By Decision11 of September 10, 2008, the appellate court set aside the
NLRC Resolutions, holding that respondent is entitled to both
backwages and separation pay, even if separation pay was not granted
by the Labor Arbiter, the latter in view of the strained relations between
the parties. The appellate court disposed:
WHEREFORE, in view of all the foregoing premises, judgment is
hereby rendered by us GRANTING the petition filed in this case. The
assailed RESOLUTIONS dated 30, 2006 and March 9, 2006 of the
NLRC are hereby SET ASIDE.
Thus, the full backwages and separation pay to be awarded to the
petitioner shall be computed as follows:
Full Backwages as of June 30, 2005 = ₱562,804.69
Separation Pay:
₱220.00 x 26 days = ₱5,720,00
₱5,720/month x 8 years = 45,760.00
₱608,564.69
We also award an additional 10% of the total monetary award by way
of attorney’s fees for the expenses incurred by the petitioner to protect
his rights and interests. Furthermore, when the decision of this Court
as to the monetary award becomes final and executory, the rate of legal
interest shall be imposed at 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
SO ORDERED. (emphasis in the original)
Petitioners’ motion for reconsideration was denied by Resolution12 of
March 12, 2009, hence, the present petition for review on certiorari.
Petitioners assail the appellate court’s award of separation pay. They
assailed too as contrary to prevailing jurisprudence the computation of
backwages from the time of dismissal up to actual reinstatement. They
contend that, in effect, the appellate court modified an already final and
executory decision.
The petition fails.
The basis for the payment of backwages is different from that for the
award of separation pay. Separation pay is granted where
reinstatement is no longer advisable because of strained relations
between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected
because of the unjust dismissal. The basis for computing backwages is
usually the length of the employee’s service while that for separation
pay is the actual period when the employee was unlawfully prevented
from working.13
As to how both awards should be computed, Macasero v. Southern
Industrial Gases Philippines14 instructs:
[T]he award of separation pay is inconsistent with a finding that there
was no illegal dismissal, for under Article 279 of the Labor Code and as
held in a catena of cases, an employee who is dismissed without just
cause and without due process is entitled
to backwages and reinstatement or payment of separation pay in lieu
thereof:
Thus, an illegally dismissed employee is entitled to two reliefs:
backwages and reinstatement. The two reliefs provided are separate
and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer,
separation pay is granted. In effect, an illegally dismissed employee is
entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal, then,
are reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld
up to the date of actual reinstatement. Where reinstatement is no
longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to
payment of backwages. (emphasis, italics and underscoring supplied)
Velasco v. National Labor Relations Commission emphasizes:
The accepted doctrine is that separation pay may avail in lieu of
reinstatement if reinstatement is no longer practical or in the best
interest of the parties. Separation pay in lieu of reinstatement may
likewise be awarded if the employee decides not to be reinstated.
(emphasis in the original; italics supplied)
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
87
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.15
Strained relations must be demonstrated as a fact, however, to be
adequately supported by evidence16 — substantial evidence to show
that the relationship between the employer and the employee is
indeed strained as a necessary consequence of the judicial
controversy.17
In the present case, the Labor Arbiter found that actual animosity
existed between petitioner Azul and respondent as a result of the filing
of the illegal dismissal case. Such finding, especially when affirmed by
the appellate court as in the case at bar, is binding upon the Court,
consistent with the prevailing rules that this Court will not try facts anew
and that findings of facts of quasi-judicial bodies are accorded great
respect, even finality.
Clearly then, respondent is entitled to backwages and separation pay
as his reinstatement has been rendered impossible due to strained
relations. As correctly held by the appellate court, the backwages due
respondent must be computed from the time he was unjustly dismissed
until his actual reinstatement, or from February 1999 until June 30,
2005 when his reinstatement was rendered impossible without fault on
his part.
The Court, however, does not find the appellate court’s computation of
separation pay in order. The appellate court considered respondent to
have served petitioner company for only eight years. Petitioner was
hired in 1990, however, and he must be considered to have been in the
service not only until 1999, when he was unjustly dismissed, but until
June 30, 2005, the day he is deemed to have been actually separated
(his reinstatement having been rendered impossible) from petitioner
company or for a total of 15 years.
WHEREFORE, the Court of Appeals Decision dated September 10,
2008 and its Resolution dated March 12, 2009 in C.A. G.R. SP No.
961082 are AFFIRMED with the MODIFICATION that the amount of
separation pay due respondent is, in light of the discussion in the
immediately foregoing paragraph, computed at ₱85,800.00.
SO ORDERED.
F. RETIREMENT PAY
(REYES vs. NLRC)
G.R. No. 159701 August 17, 2007
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner,
vs.
THE LATE ROMEO F. BOLSO, represented by his
heirs, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 of the 27 November 2002
Decision2 and the 19 August 2003 Resolution3 of the Court of Appeals
in CA-G.R. SP No. 53911. The Court of Appeals dismissed the petition
of Philippine Long Distance Telephone Company (PLDT) and affirmed
the 26 March 1999 Decision of the National Labor Relations
Commission (NLRC)
finding the dismissal of Romeo F. Bolso (Bolso) illegal. 4
The Facts
Bolso was an Installer/Repairman II of PLDT since February 1982 until
PLDT dismissed him on 20 July 1997.
On 5 February 1996, Samuel Mabunga (Mabunga), a PLDT subscriber,
sold the rights to his telephone line to Ismael Salazar (Salazar) for
₱20,000. Mabunga received ₱15,000 for the transfer. Then, for the
installation of this telephone line, Salazar paid ₱2,500 to a PLDT
installer who introduced himself as Boy Negro and the remaining
₱2,500 to Boy Negro’s two companions.
On 20 May 1996, Salazar wrote PLDT complaining about Mabunga’s
continued usage of the telephone line through an extension, despite
the transfer. Salazar requested PLDT to check out the problem and
immediately cut-off the extension line.5
On 28 June 1996, Salazar went to PLDT’s Quality Control and
Inspection Division (QCID) office where he affirmed having paid ₱2,500
to Boy Negro and another ₱2,500 to Boy Negro’s two companions for
installing the telephone line at his residence. During the investigation,
Salazar positively identified a photograph of Bolso as that of Boy Negro.
Salazar voluntarily executed a Sinumpaang Salaysay6 narrating the
circumstances surrounding the installation of the illegal extension line
and a Certification7 that the man he had identified in the photograph
was the one who actually went to his residence and installed the
telephone line.
On 29 June 1996, the QCID personnel inspected the telephone
installation at Salazar’s residence and confirmed that Mabunga was

using the telephone line through an outside extension installed at
Salazar’s house. PLDT informed Salazar and Mabunga that it was an
unofficial installation, and invited them to its QCID office to enlighten it
on the matter.
On 23 July 1996, PLDT issued an Inter-Office Memo requesting the
appearance of Bolso, together with his immediate supervisor or union
council representative, at PLDT’s Sampaloc Office for the investigation
of his alleged participation in the illegal installation.
On 26 July 1996, both Salazar and Bolso appeared at the QCID
investigation. Salazar reaffirmed his earlier Sinumpaang Salaysay and
Certification, and at the same time, positively picked out and identified
Bolso from among those present as the installer of the unofficial
telephone line. Bolso denied the allegations against him.
Subsequently, Bolso submitted to PLDT what appears to be a
recantation of Salazar’s previous statements, alleging that he did not
personally know Bolso and that Bolso was not Boy Negro. The letter
dated 5 August 1996 reads:
QUALITY CONTROL
INSPECTION DIVISION PLDT
SA KINAUUKULAN,
SA NAGANAP PONG IMBISTIGASYON NI G. FERNANDO R.
ARAMBULO, IMBISTIGADOR NG (Q.C.I.D.) QUALITY CONTROL
AND INSPECTION DIVISION PLDT NOONG IKA-26 NG HULYO,
1996 GANAP NA ALA UNA ’Y MEDYA NG HAPON, ARAW NG
BIYERNES.
NA ANG BUONG KATOTOHANAN AY HINDI KO KILALA SI ROMEO
BOLSO AT SIYA AY NAITURO KO LAMANG NOONG MAGHARAP-
HARAP KAMI NOONG IKA-26 NG HULYO, 1996 DAHIL NGA SA
KABIGLAAN KO AT INIT NG ULO AT SA TOTOO IYON "BOY
NEGRO" NA SINASABI AY HINDI SIYA.
AKO PO AY BINABAGABAG NG AKING KONSENSIYA AT
DAMDAMIN SA PAGTUTURO NG ISANG TAONG WALA NA MANG
KINALAMAN AY MALAKI PO ANG NAGAWANG KASALANAN.
ANG SA INYO AY LUBOS NA GUMAGALANG NA SANA AKO AY
INYONG MAUNAWAAN.
Sgd.
ISMAEL G. SALAZAR8
On 20 January 1997, the Manggagawang Komunikasyon ng Pilipinas,
Bolso’s union, requested the withdrawal of the complaint against Bolso
since the "complainant [sic] failed to satisfy the standard basis for it to
merit further investigation x x x." 9
On 10 July 1997, Bolso’s counsel demanded the immediate dismissal
of the administrative case against Bolso based on Salazar’s retraction
and the release of Bolso’s benefits under PLDT’s early
retirement/redundancy program. 10
Giving no credence to the recantation letter and finding that Salazar’s
previous statements established Bolso’s culpability, PLDT, through an
Inter-Office Memo, terminated Bolso effective 20 June 1997 for serious
misconduct.
On 15 August 1997, Bolso filed with the Labor Arbiter a complaint
against PLDT for illegal dismissal, backwages, and damages, docketed
as NLRC NCR Case No. 00-08-05842-97.
On 6 August 1998, the Labor Arbiter 11 issued his decision dismissing
the case for lack of merit.12 The Labor Arbiter found Bolso’s evidence
"too speculative and conjectural." Bolso’s denial of the charges of
serious misconduct, fraud, and breach of trust was not supported by
convincing evidence except the retraction made by Salazar of his
previous statement pointing to Bolso as the one who installed the illegal
extension line. The Labor Arbiter further held that "while there is no
direct evidence that Bolso exacted money from Salazar in
consideration of the installation of the unofficial extension line," there is
substantial evidence against him for serious misconduct.
On 28 September 1998, Bolso appealed to the NLRC.
Ruling in favor of Bolso, the NLRC held that PLDT failed to prove that
Bolso committed the infraction imputed against him. The recantation of
Salazar of his previous statement regarding Bolso’s installation of the
illegal extension line "totally established Bolso’s innocence." The NLRC
also stated that this was the first time PLDT charged Bolso with an
offense and that "it would have been foolhardy on the part of Bolso to
risk and lose his only source of livelihood at the cost of a measly amount
of ₱2,500." The NLRC further noted that Salazar voluntarily gave his
recantation letter, and he did it in his own handwriting and in a language
very well known to him. The NLRC also found that Bolso was denied of
his right to due process.
The NLRC disposed of the case as follows:
WHEREFORE, in the light of the foregoing, the appeal is hereby
GRANTED. The assailed Decision dated August 6, 1998 is hereby
VACATED and SET ASIDE and a new one is hereby entered ordering
respondent Philippine Long Distance Telephone Co. to reinstate
complainant Romeo F. Bolso to his former position as
Installer/Repairman II without loss of seniority rights and other
employee benefits with full backwages counted from the time of his
dismissal on June 20, 1997 up to the time of actual reinstatement.
All other reliefs herein sought and prayed for are hereby DENIED for
lack of merit.
88
SO ORDERED.13
On 26 April 1999, PLDT filed a motion for reconsideration, which the
NLRC denied in its 30 April 1999 Resolution.
On 23 July 1999, PLDT filed with the Court of Appeals a petition for
certiorari to nullify the NLRC decision and resolution.
On 27 November 2002, the Court of Appeals issued a Decision
dismissing the petition for certiorari.
PLDT filed a motion for reconsideration on 22 January 2003, which the
Court of Appeals denied in its Resolution of 19 August 2003.
Hence, this petition.
The Ruling of the Court of Appeals
Sustaining the NLRC, the Court of Appeals ruled that "special
circumstances exist which raise serious doubt as to the accountability
of Bolso." Salazar’s recantation letter rendered "some truth" to Bolso’s
innocence. Salazar reasoned out that confusion coupled with
indignation drove him to implicate an innocent person, which bothered
his conscience. The Court of Appeals held that Salazar’s retraction was
a declaration against his own interest under Section 38, Rule 130 of the
Rules of Court.14 The Court of Appeals also found no evidence that
Bolso committed the breach attributed to him. "Other than Salazar’s
inadvertence, the alleged incident involving Bolso was unsupported by
relevant and convincing evidence."15
The Court of Appeals went on to say that assuming the recantation was
invalid and that Bolso did commit serious misconduct, "dismissal is too
harsh a penalty considering the length of his service in PLDT and the
infraction was his first offense."
The Court of Appeals likewise ruled that there was no hearing where
Bolso had a reasonable opportunity to air his side and confront his
accuser. "If there was any, it was surely not the kind of investigation
that would suffice to comply with the procedural requirement." Hence,
Bolso was denied of his right to due process, rendering his dismissal
illegal.
The Issue
The issue in this case boils down to whether Bolso’s dismissal for
serious misconduct was lawful.
The Ruling of this Court
The petition is meritorious.
On the issue of just cause
The Labor Code provides that an employer may terminate the services
of an employee for a just cause.16 Among the just causes in the Labor
Code is serious misconduct. Misconduct is improper or wrong conduct.
It is the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. The misconduct to be
serious within the meaning of the Labor Code must be of such a grave
and aggravated character and not merely trivial or unimportant. Such
misconduct, however serious, must nevertheless be in connection with
the employee’s work to constitute just cause for his separation. 17
An employee’s dismissal due to serious misconduct must be supported
by substantial evidence.18 Substantial evidence is that amount of
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise.19
In this case, there is no question that PLDT installers, such as Bolso,
repairmen, and linemen provide services but cannot collect or receive
any personal fees for such services. Violating this company rule
constitutes serious misconduct.20 Did Bolso accept payment for the
installation of an unauthorized PLDT telephone line, which would
constitute serious misconduct warranting his dismissal?
Based on the records, Salazar’s initial statements given to PLDT QCID
narrated how he gave Bolso ₱2,500 for the installation of the telephone
line which he purchased from Mabunga. The telephone line turned out
to be an illegal extension line. Salazar gave separate but similar
statements in the course of the investigation, the first was on 28 June
1996 and another was on 26 July 1996. During the first instance he
went to PLDT QCID’s office, Salazar easily, immediately, and
unhesitatingly identified Bolso’s photograph as the man who went to his
house to install the extension line. During the 26 July 1996 investigation,
while Salazar was facing Bolso, Salazar pointed to him as the installer
of the illegal extension line.
There was also evidence that Bolso received money in exchange for
the installation of the extension line. Salazar added during the 26 July
1996 investigation the following statements:
T25 : Ano ang gusto ninyong idagdag, ibawas o baguhin?
S : Hindi ko talaga siya kilala dahil iyong dalawang taong nauna sa
kanya ang talagang may kilala sa kanya. Kilala ko lang siya sa alyas
niyang "BOY NEGRO". At nung nagbayad ako ng pera, ay siya
talaga ang pinagbigyan ko, doon sa loob ng bahay ko, kasama
iyong dalawa.21 (Emphasis supplied)
The standard of substantial evidence is met where the employer, as in
this case, has reasonable ground to believe that the employee is
responsible for the misconduct and his participation in such misconduct
makes him unworthy of the trust and confidence demanded by his
position.221avvphi1

However, Salazar retracted his statement pointing to Bolso as Boy
Negro who installed the illegal extension line. Salazar’s recantation,
Bolso now claims, clearly established his innocence of the offense
charged. Hence, Bolso’s fate as a PLDT employee lies solely on
Salazar’s statements. Does Salazar’s subsequent retraction of his
previous statement convincingly prove Bolso’s non-participation in the
offense charged?
We rule in the negative.
In a similar case involving PLDT and one of its installers,23 the Court
held that it was more "reasonable to believe that the affidavits of
retraction were, as claimed by petitioner, a mere afterthought, executed
out of compassion to enable private respondent to extricate himself
from the consequence of his malfeasance." As such, the affidavits had
no probative value.
Moreover, a retraction does not necessarily negate an earlier
declaration. For this reason, courts look with disfavor upon retractions.
Hence, when confronted with a recanting witness, in this case the
complainant, courts must not automatically exclude the original
statement based solely on the recantation. Courts should determine
which statement should be given credence through a comparison of the
original and the new statements, applying the general rules of
evidence.24
In this case, Salazar did not expressly repudiate his earlier statement
that he paid Bolso ₱2,500 for the installation of the illegal telephone
line. What Salazar stated in his recantation letter was that Bolso was
not Boy Negro. Therefore, only Bolso’s identity as Boy Negro was
retracted. Salazar’s original statement that Bolso received ₱2,500 for
the installation of the outside extension line remains undisputed.
Even assuming that Salazar retracted fully his original statements given
during the PLDT investigation, Salazar did not swear or subscribe to
his recantation letter. Salazar never identified it himself or affirmed its
veracity. Bolso also submitted the letter to PLDT.
Further, Bolso did not offer any reason for Salazar’s initial imputation
against him. In fact, Bolso stated during the 26 July 1996 investigation
that he did not know of any motive on the part of Salazar for accusing
and pointing him as the installer of the illegal extension line.
T22 : Sa iyong pagkakaalam, ano ang maaaring motibo ni G. Salazar
para paratangan ka niya ng ganito?
S : Wala akong alam na dahilan dahil, unang-una hindi ko siya kilala at
nakikita. Pangalawa, ay hindi ko area iyong lugar na iyan, at hindi ako
nagagawi roon.
T23 : Kung gayon, ano sa palagay mo ang malaking dahilan kung bakit
sa dinami-dami ng empleyado sa PLDT Sampaloc ay ikaw pa ang
naituro ni G. Salazar na isa sa mga nagkabit sa kanyang tirahan ng
telepono bilang 742-5015?
S : Hindi ko alam talaga.25
The Court is mindful that Bolso’s employment with PLDT was his main
source of income and that the infraction imputed on him was his first
offense in his 15 years of service to PLDT. However, the Court cannot
close its eyes to the fact that Salazar positively identified Bolso as the
installer of the illegal extension line for which he was paid ₱2,500. The
Court has held that the longer an employee stays in the service of the
company, the greater is his responsibility for knowledge and
compliance with the norms of conduct and the code of discipline in the
company.26 An employee’s length of service with the company even
aggravates his offense.27 Bolso should have been more loyal to PLDT
from which he had derived his income for 15 years.
Upholding the employee’s interest in disregard of the employer’s right
to dismiss and discipline does not serve the cause of social justice.
Social justice ceases to be an effective instrument for the "equalization
of the social and economic forces" by the State when it is used to shield
wrongdoing.28
Moreover, it is worthy to note that Bolso applied for benefits under
PLDT’s early retirement/redundancy program. Bolso’s counsel even
wrote PLDT for the withdrawal of the administrative complaint against
Bolso and for the release of the benefits under this program. Therefore,
Bolso’s plea for reinstatement in this case conflicts with his application
for early retirement, which PLDT denied due to the then pending
complaint against him. Reinstatement is plainly irreconcilable with
retirement.
At any rate, since Bolso was dismissed for a just cause, neither he nor
his heirs can avail of the retirement benefits.
On the issue of due process
Bolso’s claim that he was denied of his right to due process when PLDT
dismissed him is untenable.
The essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain one’s
side or an opportunity to seek a reconsideration of the action or ruling
complained of.29 A formal or trial-type hearing is not at all times and in
all circumstances essential.30
In the present case, Bolso was notified by way of an Inter-Office
Memo31 dated 23 July 1996 of an investigation, specifically, on his
alleged participation in the installation of an illegal outside extension
found on telephone number 742-5015. He was advised to appear at the
89
investigation to be conducted on 26 July 1996 with his immediate
supervisor or union council representative.
At the investigation conducted on 26 July 1996, Bolso did appear during
which he was apprised of the charges against him, as well as his rights:
Tanong 16: Ginoong Bolso, narinig mo ba ang mga sinabi ni G. Salazar
laban sa iyo. Ngunit bago ka sumagot, nais ko munang ipaalam sa iyo
ang mga karapatan mo sa ilalim ng Bagong Saligang Batas. Una, ikaw
ay may karapatan hindi sumagot o magsawalang kibo sa mga
katanungan ko. May karapatan ka ring sumangguni muna sa isang
abogado o Union Council rep na siyang pili mo upang makatulong sa
pagsisiyasat na ito. Dahil lahat ng sasabihin mo ay maaari naming
gamitin ebidensya laban o pabor sa iyo sa lahat ng hukuman dito sa
Philipinas. Naiintindihan mo ba ang iyong mga nabanggit na karapatan?
S: Oo.32
During this investigation, Bolso was allowed to confront his accuser
Salazar face-to-face, and was given adequate opportunity to
immediately respond to the charges against him. Thereafter, Bolso’s
union, Manggagawang Komunikasyon ng Pilipinas, interceded on his
behalf. Bolso’s counsel also moved for "the immediate dismissal of the
pending administrative case against Bolso." Clearly, Bolso was
afforded ample opportunity to air his side and defend himself. Hence,
there was no denial of his right to due process.
WHEREFORE, we GRANT the petition. We REINSTATE the Decision
of the Labor Arbiter dated 6 August 1998.
SO ORDERED.
G.R. No. 152991 July 21, 2008
ALBERTO P. OXALES, Petitioner,
vs.
UNITED LABORATORIES, INC., Respondent.
DECISION
REYES, R.T., J.:
HOW should a private company retirement plan for employees be
implemented vis-à-vis The Retirement Pay Law (Republic Act No.
7641)?
Papaano ipapatupad ang isang plano ng pribadong kompanya
para sa pagreretiro ng mga empleyado sa harap ng Batas ng
Pagbabayad sa Pagreretiro (Batas Republika Blg. 7641)?
We address the concern in this appeal by certiorari of the Decision1 of
the Court of Appeals (CA) affirming the Resolution 2 and Decision3 of
the Labor Arbiter and the National Labor Relations Commission
(NLRC), respectively, dismissing petitioner Alberto P. Oxales’
complaint for additional retirement benefits, recovery of the cash
equivalent of his unused sick leaves, damages, and attorney’s fees,
against respondent United Laboratories, Inc. (UNILAB).
The Facts
Sometime in 1959, UNILAB established the United Retirement Plan
(URP).4 The plan is a comprehensive retirement program aimed at
providing for retirement, resignation, disability, and death benefits of its
members. An employee of UNILAB becomes a member of the URP
upon his regularization in the company. The URP mandates the
compulsory retirement of any member-employee who reaches the age
of 60.
Both UNILAB and the employee contribute to the URP. On one hand,
UNILAB provides for the account of the employee an actuarially-
determined amount to Trust Fund A. On the other hand, the employee
chips in 2½% of his monthly salary to Trust Fund B. Upon retirement,
the employee gets both amounts standing in his name in Trust Fund A
and Trust Fund B.
As retirement benefits, the employee receives (1) from Trust Fund A a
lump sum of 1½ month’s pay per year of service "based on the
member’s last or terminal basic monthly salary," 5 and (2) whatever the
employee has contributed to Trust Fund B, together with the income
minus any losses incurred. The URP excludes commissions, overtime,
bonuses, or extra compensations in the computation of the basic salary
for purposes of retirement.
Oxales joined UNILAB on September 1, 1968. He was compulsorily
retired by UNILAB when he reached his 60th birthday on September 7,
1994, after having rendered service of twenty-five (25) years, eleven
(11) months, and six (6) days. He was then Director of Manufacturing
Services Group.
In computing the retirement benefits of Oxales based on the 1½ months
for every year of service under the URP, UNILAB took into account only
his basic monthly salary. It did not include as part of the salary base the
permanent and regular bonuses, reasonable value of food allowances,
1/12 of the 13th month pay, and the cash equivalent of service incentive
leave.
Thus, Oxales received from Trust Fund A ₱1,599,179.00, instead of
₱4,260,255.70. He also received ₱176,313.06, instead of ₱456,039.20
as cash equivalent of his unused sick leaves. Lastly, he received
₱397,738.33 from his contributions to Trust Fund B. In sum, Oxales
received the total amount of ₱2,173,230.39 as his retirement benefits.
On August 21, 1997, Oxales wrote UNILAB, claiming that he should
have been paid ₱1,775,907.23 more in retirement pay and unused

leave credits. He insisted that his bonuses, allowances and 13th month
pay should have been factored in the computation of his retirement
benefits.6
On September 9, 1997, UNILAB wrote7 back and reminded Oxales
about the provision of the URP excluding any commissions, overtime,
bonuses or extra compensations in the computation of the basic salary
of the retiring employee.
Disgruntled, Oxales filed a complaint with the Labor Arbiter for (1) the
correct computation of his retirement benefits, (2) recovery of the cash
equivalent of his unused sick leaves, (3) damages, and (4) attorney’s
fees. He argued that in the computation of his retirement benefits,
UNILAB should have included in his basic pay the following, to wit: (a)
cash equivalent of not more than five (5) days service incentive leave;
(b) 1/12th of 13th month pay; and (c) all other benefits he has been
receiving.
Efforts were exerted for a possible amicable settlement. As this proved
futile, the parties were required to submit their respective pleadings and
position papers.
Labor Arbiter, NLRC and CA Dispositions
On June 30, 1998, Labor Arbiter Romulus A. Protasio rendered a
decision dismissing the complaint, thus:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the instant complaint for lack of merit.
SO ORDERED.8
The Labor Arbiter held that the URP clearly excludes commission,
overtime, bonuses, or other extra compensation. Hence, the benefits
asked by Oxales to be included in the computation of his retirement
benefits should be excluded.9
The Arbiter also held that the inclusion of the fringe benefits claimed by
Oxales would put UNILAB in violation of the terms and conditions set
forth by the Bureau of Internal Revenue (BIR) when it approved the
URP as a tax-qualified plan. More, any overpayment of benefits would
adversely affect the actuarial soundness of the plan. It would also
expose the trustees of the URP to liabilities and prejudice the other
employees. Worse, the BIR might even withdraw the tax exemption
granted to the URP.10 Lastly, the Labor Arbiter opined that the URP
precludes the application of the provisions of R.A. No. 7641. 11
Oxales appealed to the NLRC. On February 8, 1999, the NLRC
affirmed the decision of the Labor Arbiter, disposing as follows:
WHEREFORE, in view thereof, the instant appeal is hereby dismissed
for lack of merit and the appealed decision is ordered affirmed.
SO ORDERED.12
The NLRC ruled that the interpretation by Oxales of R.A. No. 7641 is
selective. He only culled the provisions that are beneficial to him,
putting in grave doubt the sincerity of his motives. For instance, he
claims that the value of the food benefits and other allowances should
be included in his monthly salary as multiplicand to the number of his
years of service with UNILAB. At the same time, however, he does not
intend to reduce the 1½ month salary as multiplier under the URP to ½
under R.A. No. 7641.13
The NLRC agreed with the Labor Arbiter that the provisions of R.A. No.
7641 do not apply in view of the URP. The NLRC also took into account
the fact that the benefits granted to Oxales by virtue of the URP was
even higher than what R.A. No. 7641 requires. 14
His motion for reconsideration having been denied, Oxales filed with
the CA a petition for certiorari under Rule 65.
In a decision promulgated on April 12, 2002, the CA dismissed the
petition. The CA ruled that the petition of Oxales calls for a review of
the factual findings of the Labor Arbiter as affirmed by the NLRC. It is
not the normal function of the CA in a special civil action for certiorari to
inquire into the correctness of the evaluation of the evidence by the
Labor Arbiter. Its authority is confined only to issues of jurisdiction or
grave abuse of discretion.15
Just like the Labor Arbiter and the NLRC, the CA also held that R.A.
No. 7641 is applicable only in the absence of a retirement plan or
agreement providing for the retirement benefits of employees in an
establishment.16
Finally, the CA denied the claim of Oxales to moral and exemplary
damages. According to the appellate court, he failed to prove the
presence of bad faith or fraud on the part of UNILAB. His mere
allegations of having suffered sleepless nights, serious anxiety, and
mental anguish are not enough. No premium should be placed on the
right to litigate.17
Left with no other option, Oxales filed the present recourse under Rule
45 of the 1997 Rules of Civil Procedure.18
Issues
In his Memorandum,19 Oxales raises the following issues for Our
disposition, to wit:
1. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT FINDING THAT ACCORDING
TO PREVAILING JURISPRUDENCE, SUCH ERRORS IN
THE COMPUTATION OF RETIREMENT BENEFITS OF
PETITIONER SHOULD BE CORRECTED IN A SPECIAL
ACTION FOR CERTIORARI;
2. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT FINDING THAT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION IN
90
INCORRECTLY INTERPRETING THE URP TO EXCLUDE
SEVERAL REMUNERATIONS FROM THE SAID SALARY
BASE;
3. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE
OF DISCRETION IN TOTALLY IGNORING THE ISSUE AND
IN NOT FINDING THAT THE NLRC COMMITTED GRAVE
ABUSE OF DISCRETION IN INCORRECTLY
INTERPRETING THE URP TO EXCLUDE PERMANENT
AND REGULAR ALLOWANCES FROM THE SALARY BASE
FOR COMPUTING RETIREMENT BENEFITS OF
PETITIONER;
4. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT FINDING THAT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION IN
INCORRECTLY INTERPRETING THE URP TO EXCLUDE
PERMANENT AND REGULAR REMUNERATIONS
MISLABELED AS BONUSES FROM THE SALARY BASE
FOR COMPUTING THE RETIREMENT BENEFITS OF THE
PETITIONER;
5. WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NOT FINDING THAT THE NLRC COMMITTED
GRAVE ABUSE OF DISCRETION IN INCORRECTLY
INTERPRETING THE URP TO EXCLUDE ONE TWELFTH
(1/12th) OF THE STATUTORY THIRTEENTH MONTH PAY
FROM THE SALARY BASE FOR COMPUTING
RETIREMENT BENEFITS;
6. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN THE INTERPRETATION OF R.A.
NO. 7641 WHEN IT CONCLUDED THAT THE SAID LAW IS
APPLICABLE ONLY IN THE ABSENCE OF RETIREMENT
PLAN OR AGREEMENT PROVIDING FOR THE
RETIREMENT BENEFITS OF EMPLOYEES IN AN
ESTABLISHMENT;
7. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT FINDING THAT THE
DEFINITION OF "SALARY" UNDER THE IMPLEMENTING
RULES OF R.A. NO. 7641 SHOULD BE INTERPRETED TO
INCLUDE THE PERMANENT AND REGULAR
REMUNERATIONS OF PETITIONER IN THE SALARY
BASE FOR COMPUTING RETIREMENT BENEFITS;
8. WHETHER OR NOT THE LABOR ARBITER, THE NLRC,
AND COURT OF APPEALS COMMITTED GRAVE ABUSE
OF DISCRETION IN IGNORING AND NOT RESOLVING
THE ISSUES REGARDING PETITIONER’S UNPAID CASH
EQUIVALENT OF THE UNUSED SICK LEAVE CREDITS;
9. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT RULING THAT THE NLRC
GRAVELY ABUSED ITS DISCRETION IN ITS FAILURE TO
PROPERLY INTERPRET THE URP IN DETERMINING THE
EMPLOYMENT PERIOD OF PETITIONER FOR THE
PURPOSE OF COMPUTING RETIREMENT BENEFITS;
10. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT RULING THAT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION IN NOT
REINSTATING THE MEDICAL RETIREMENT BENEFITS
OF PETITIONER;
11. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN TOTALLY AND ARBITRARILY IGNORING
THE ISSUE AND IN NOT FINDING THAT THE NLRC
COMMITTED GRAVE ABUSE OF DISCRETION IN
RENDERING A DECISION IN VIOLATION OF THE
CONSTITUTIONAL REQUIREMENTS WHICH IN EFFECT
DENIED PETITIONER’S RIGHT TO DUE PROCESS;
12. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED AND GRAVELY ABUSED ITS
DISCRETION IN LIKEWISE RENDERING A DECISION IN
VIOLATION OF THE CONSTITUTIONAL REQUIREMENT
THAT DECISIONS SHOULD EXPRESS CLEARLY AND
DISTINCTLY THE FACTS OF THE CASE AND THE LAW
ON WHICH IT IS BASED;
13. WHETHER OR NOT THE COURT OF APPEALS
SERIOUSLY ERRED IN NOT GRANTING MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY’S FEES TO
PETITIONER;
14. WHETHER OR NOT THE SUPREME COURT SHOULD
GRANT PETITIONER UNPAID RETIREMENT PAY,
UNPAID CASH EQUIVALENT OF UNUSED LEAVE
CREDITS, REINSTATEMENT OF MEDICAL BENEFITS,
MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY’S
FEES.20 (Underscoring supplied)
The issues posed by Oxales may be compressed as follows: first,
whether in the computation of his retirement and sick leave benefits,
UNILAB should have factored such benefits like bonuses, cash and
meal allowances, rice rations, service incentive leaves, and 1/12 of the
13th month pay; second, whether R.A. No. 7641 is applicable for

purposes of computing his retirement benefits; and third, whether
UNILAB is liable for moral damages, exemplary damages, and
attorney’s fees.
Our Ruling
The clear language of the URP should be respected.
A retirement plan in a company partakes the nature of a contract, with
the employer and the employee as the contracting parties. It creates a
contractual obligation in which the promise to pay retirement benefits is
made in consideration of the continued faithful service of the employee
for the requisite period.21
The employer and the employee may establish such stipulations,
clauses, terms, and conditions as they may deem convenient. 22 In
Allgeyer v. Louisiana,23 New York Life Ins. Co. v. Dodge,24 Coppage v.
Kansas,25 Adair v. United States,26 Lochner v. New York,27 and Muller
v. Oregon,28 the United States Supreme Court held that the right to
contract about one’s affair is part and parcel of the liberty of the
individual which is protected by the "due process of law" clause of the
Constitution.
The obligations arising from the agreement between the employer and
the employee have the force of law between them and should be
complied with in good faith.29 However, though the employer and the
employee are given the widest latitude possible in the crafting of their
contract, such right is not absolute. There is no such thing as absolute
freedom of contract. A limitation is provided for by the law itself. Their
stipulations, clauses, terms, and conditions should not be contrary to
law, morals, good customs, public order, or public policy. 30 Indeed, the
law respects the freedom to contract but, at the same time, is very
zealous in protecting the contracting parties and the public in general.
So much so that the contracting parties need not incorporate the
existing laws in their contract, as the law is deemed written in every
contract. Quando abest, proviso parties, adest proviso legis. When the
provision of the party is lacking, the provision of the law supplies
it. Kung may kulang na kondisyon sa isang kasunduan, ang batas
ang magdaragdag dito.
Viewed from the foregoing, We rule that Oxales is not entitled to the
additional retirement benefits he is asking. The URP is very clear:
"basic monthly salary" for purposes of computing the retirement pay is
"the basic monthly salary, or if daily[,] means the basic rate of pay
converted to basic monthly salary of the employee excluding any
commissions, overtime, bonuses, or extra compensations." 31 Inclusio
unius est exclusio alterius. The inclusion of one is the exclusion of
others. Ang pagsama ng isa, pagpwera naman sa iba.
The URP is not contrary to law, morals, good customs, public order, or
public policy to merit its nullification. We, thus, sustain it. At first blush,
the URP seems to be disadvantageous to the retiring employee
because of the exclusion of commissions, overtime, bonuses, or extra
compensations in the computation of the basic monthly salary.
However, a close reading of its provisions would reveal otherwise. We
quote with approval the explanation of the NLRC in this regard, viz.:
x x x the United Retirement Plan of the respondent [Unilab] has a one
and one-half months salary for every year of service as the basis of
entitlement. Under the new law, only one-half month of the retiree’s
salary inclusive however, of not more than five (5) days of service
incentive leave and one-twelfth (1/12) of the 13th month pay are used
as the bases in the retirement benefits computation.
Mathematically speaking therefore, complainant’s [Oxales] benefits
received amounting to ₱1,599,179.00 under Trust Fund A together with
the cash equivalent of his unused leaves which has an amount of
₱176,313.06 and his contribution in the Trust Fund B amounting to
₱397,738.33 are way above the entitlement he could have received
under Republic Act 7641, otherwise known as the New Retirement
Law.32 (Underscoring supplied)
Both law33 and jurisprudence34 mandate that if the terms of a contract
are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control. Thus, if the
terms of a writing are plain and unambiguous, there is no room for
construction, since the only purpose of judicial construction is to
remove doubt and uncertainty.35 Only where the language of a contract
is ambiguous and uncertain that a court may, under well-established
rules of construction, interfere to reach a proper construction and make
certain that which in itself is uncertain. 36 Where the language of a
contract is plain and unambiguous, its meaning should be determined
without reference to extrinsic facts or aids. 37
R.A. No. 7641 does not apply in view of the URP which gives to the
retiring employee more than what the law requires; the supporting
cases cited by Oxales are off-tangent.
R.A. No. 7641, otherwise known as "The Retirement Pay Law," only
applies in a situation where (1) there is no collective bargaining
agreement or other applicable employment contract providing for
retirement benefits for an employee; or (2) there is a collective
bargaining agreement or other applicable employment contract
providing for retirement benefits for an employee, but it is below the
requirements set for by law. The reason for the first situation is to
prevent the absurd situation where an employee, who is otherwise
deserving, is denied retirement benefits by the nefarious scheme of
employers in not providing for retirement benefits for their employees.
The reason for the second situation is expressed in the latin maxim
91
pacta privata juri publico derogare non possunt. Private contracts
cannot derogate from the public law. Ang kasunduang pribado ay hindi
makasisira sa batas publiko. Five (5) reasons support this conclusion.
First, a plain reading of the Retirement Pay Law. R.A. No. 7641
originated from the House of Representatives as House Bill 317 which
was later consolidated with Senate Bill 132. It was approved on
December 9, 1992 and took effect on January 7, 1993.38 Amending
Article 287 of the Labor Code, it provides as follows:
Art. 287. Retirement. – Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or
other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided,
however, that an employee’s retirement benefits under any collective
bargaining and other agreements shall not be less than those provided
herein.
In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an employee
upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at least one-
half (1/2) month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term ‘one-half (1/2)
month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days
of service incentive leaves. (Underscoring supplied)
Second, the legislative history of the Retirement Pay Law. It may be
recalled that R.A. No. 7641 traces back its history in the case of Llora
Motors, Inc. v. Drilon.39 In this case, the Court held that the then Article
287 of the Labor Code40 and its Implementing Rules41 may not be the
source of an employee’s entitlement to retirement pay absent the
presence of a collective bargaining agreement or voluntary company
policy that provides for retirement benefits for the employee. 42
Third, the legislative intent of the Retirement Pay Law. A reading of the
explanatory note of Representative Alberto S. Veloso would show why
Congress sought to pass the Retirement Pay Law: many employers
refuse or neglect to adopt a retirement plan for their employees
because of the absence of any legal compulsion for them to do so, thus:
When the Labor Code came into effect in 1974, retirement pay had, as
a matter of course, been granted to employees in the private sector
when they reach the age of sixty (60) years. This had practically been
the rule observed by employers in the country pursuant to the rules and
regulations issued by the then Minister of Labor and Employment to
implement the provisions of the Labor Code, more particularly, where
there is no provision for the same in the collective bargaining
agreement or retirement plan of the establishment.1avvphil
At present, however, such benefit of retirement pay is no longer
available where there is no collective agreement thereon or any
retirement plan at all. This is so because, in a decision of the Supreme
Court (Llora Motors vs. Drilon and NLRC, et al., G.R. No. 82895,
November 7, 1989), it was held that the grant of such benefit under the
rules implementing the Labor Code is not supported by any express
provision of the Labor Code itself. In short, there is no specific statutory
basis for the grant of retirement benefits for employees in the private
sector reaching the age of 60 years.
Since the time of such nullification by the Supreme Court of said
implementing rules on retirement pay for private sector employees,
many employers simply refuse or neglect to adopt any retirement plan
for their workers, obviously emboldened by the thought that, after said
ruling, there is no longer any legal compulsion to grant such retirement
benefits. In our continuous quest to promote social justice, unfair
situations like this, productive of grievance or irritants in the labor-
management relations, must immediately be corrected or remedied by
legislation. (Underscoring supplied)
Fourth, the title of the Retirement Pay Law. The complete title of R.A.
No. 7641 is "An Act Amending Article 287 of Presidential Decree No.
442, As Amended, Otherwise Known as the Labor Code of the
Philippines, By Providing for Retirement Pay to Qualified Private Sector
in the Absence of Any Retirement Plan in the Establishment." Res ipsa
loquitur. The thing speaks for itself. Isang bagay na nangungusap na
sa kanyang sarili.
Fifth, jurisprudence. In Oro Enterprises, Inc. v. National Labor Relations
Commission,43 the Court held that R.A. No. 7641 "is undoubtedly a
social legislation. The law has been enacted as a labor protection
measure and as a curative statute that – absent a retirement plan
devised by, an agreement with, or a voluntary grant from, an employer
– can respond, in part at least, to the financial well-being of workers
during their twilight years soon following their life of labor." 44
In Pantranco North Express, Inc. v. National Labor Relations
Commission,45 the Court held that Article 287 of the Labor Code
"makes clear the intention and spirit of the law to give employers and
employees a free hand to determine and agree upon the terms and
conditions of retirement,"46 and that the law "presumes that employees
know what they want and what is good for them absent any showing

that fraud or intimidation was employed to secure their consent
thereto."47
Lastly, in Brion v. South Philippine Union Mission of the Seventh Day
Adventist Church,48 the Court ruled that a reading of Article 287 of the
Labor Code would reveal that the "employer and employee are free to
stipulate on retirement benefits, as long as these do not fall below floor
limits provided by law."49
We are aware of the several cases cited by Oxales to support his claim
that the computation of his retirement benefits should not have been
limited to the basic monthly salary as defined by the URP. However,
these cases negate, rather than support, his claim.
In Villena v. National Labor Relations Commission,50 the "compulsory
retirement" of Villena was, in fact, an illegal dismissal in disguise. Thus,
the Court ordered the Batangas, Laguna, Tayabas Bus Co. to pay
Villena "his full backwages, allowances, and other benefits for a period
of three (3) years after his illegal dismissal on April 24, 1987, until he
reached the compulsory retirement age plus his retirement benefits
equivalent to his gross monthly pay, allowances and other benefits for
every year of service up to age sixty (60), which is the normal retirement
age for him."51
The distinction between Villena with the instant case is readily apparent.
The Court used the regular compensation of Villena in computing his
retirement benefits because the provision of the CBA for rank-and-file
employees is inapplicable to him, being a managerial employee.
The Villena case was also decided before the passage of R.A. No.
7641.
In Planters Products, Inc. v. National Labor Relations
Commission,52 the petitioning employees were given termination
benefits based on their basic salary. However, Planters Products, Inc.
had integrated the allowances of its remaining employees into their
basic salary. Thus, it was the basic salary that increased. Also, it was
the basic salary as increased (not the basic salary and allowances)
which still formed the basis for the computation of the termination
benefits of the remaining employees of the company. The Court held
that fairness demanded that the terminated employees receive the
same treatment.53 Clearly, such situation is absent here.
In Manuel L. Quezon University v. National Labor Relations
Commission,54 the issue raised was whether respondents are entitled
to the retirement benefits provided for under R.A. No. 7641, even if
petitioner has an existing valid retirement plan. The Court held that the
coverage of the law "applies to establishments with existing collective
bargaining or other agreements or voluntary retirement plans whose
benefits are less than those prescribed under the proviso in question." 55
Admittedly, this Court held in the case of Songco v. National Labor
Relations Commission56 that not only the basic salary but also the
"allowances" (like transportation and emergency living allowances) and
"earned sales commissions" should be taken into consideration in
computing the backwages and separation pay of the employee.
However, a closer examination of the case would show that the
CBA57 between Zuellig and F.E. Zuellig Employees Association, in
which Songco was a member, did not contain an explicit definition of
what salary is. Neither was there any inclusions or exclusions in the
determination of the salary of the employee. Here, the URP has an
explicit provision excluding any commissions, overtime, bonuses, or
extra compensations for purposes of computing the basic salary of a
retiring employee. Too, the Songco case was decided before the
passage of R.A. No. 7641.
Clearly then, R.A. No. 7641 does not apply because the URP grants to
the retiring employee more than what the law gives. Under the URP,
the employee receives a lump sum of 1½ pay per year of service,
compared to the minimum ½ month salary for every year of service set
forth by R.A. No. 7641.
Oxales is trying to have the best of both worlds. He wants to have his
cake and eat it too: the 1½ months formula under the URP, and the
inclusion of the value of food benefits and other allowances he was
entitled to as employee of UNILAB with his monthly salary as the
multiplicand of his number of years in the service. This he should not
be permitted to do, lest a grave injustice is caused to UNILAB, and its
past and future retirees.
We agree with the NLRC observation on this score:
As an illustration, Complainant claims that his monthly salary as the
multiplicand of his number of years in the service should include the
value of the food benefits and other allowances he was entitled while
in the employ of respondent. However, he did not even, by implication,
intend to reduce the 1½ month salary as multiplier under the URP to ½
under the law he invoked. This is a sign of covetousness, unfair both to
the employer and those employees who have earlier retired under said
plan.58
Oxales is not entitled to the reinstatement of his medical benefits,
which are not part of the URP. Corollarily, he is not also entitled to
moral damages, exemplary damages, and attorney’s fees.
Oxales claims that UNILAB unilaterally revoked his medical benefits,
causing him humiliation and anxiety. This, he argues, entitles him to
moral damages, exemplary damages, plus attorney’s fees.
We cannot agree. The records bear out that after Oxales retired from
UNILAB, he chose to join a rival company, Lloyds Laboratories, Inc. As
UNILAB correctly puts it, "[i]f any employer can legally and validly do
92
the supreme act of dismissing a disloyal employee for having joined or
sympathized with a rival company, with more reason may it do the
lesser act of merely discontinuing a benefit unilaterally given to an
already-retired employee."59 As a retired employee, Oxales may not
claim a vested right on these medical benefits. A careful examination
of the URP would show that medical benefits are not included in the
URP.
Indeed, while there is nothing wrong in the act of Oxales in joining a
rival company after his retirement, justice and fair play would dictate
that by doing so, he cannot now legally demand the continuance of his
medical benefits from UNILAB. To rule otherwise would result in an
absurd situation where Oxales would continue to receive medical
benefits from UNILAB while working in a rival company. We note that
these medical benefits are merely unilaterally given by UNILAB to its
retired employees.
We are not unaware of this Court’s pronouncement in Brion v. South
Philippine Union Mission of the Seventh Day Adventist
Church.60 However, Oxales’ plight differs from Brion because the URP
does not expressly cover medical benefits to retirees. In contrast, the
retired employee in Brion had acquired a vested right to the withheld
benefits.
The claim of Oxales to moral damages, exemplary damages, and
attorney’s fees must also be denied for want of basis in law or
jurisprudence. On this score, We echo the pronouncement of the Court
in Audion v. Electric Co., Inc. v. National Labor Relations
Commission,61 to wit:
Moral and exemplary damages are recoverable only where the
dismissal of an employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy. The person claiming
moral damages must prove the existence of bad faith by clear and
convincing evidence for the law always presumes good faith. It is not
enough that one merely suffered sleepless nights, mental anguish,
serious anxiety as the result of the actuations of the other party.
Invariably, such action must be shown to have been willfully done in
bad faith or with ill motive, and bad faith or ill motive under the law
cannot be presumed but must be established with clear and convincing
evidence. Private respondent predicated his claim for such damages
on his own allegations of sleepless
nights and mental anguish, without establishing bad faith, fraud or ill
motive as legal basis therefor.
Private respondent not being entitled to award of moral damages, an
award of exemplary damages is likewise baseless. Where the award of
moral and exemplary damages is eliminated, so must the award for
attorney’s fees be deleted. Private respondent has not shown that he
is entitled thereto pursuant to Art. 2208 of the Civil Code. 62 (Citations
omitted)
Here, there was no dismissal, as Oxales was retired by UNILAB by
virtue of the URP. He was also paid his complete retirement benefits.
Epilogue
It is not disputed that Oxales has worked tirelessly for UNILAB. For one
thing, he has spent a considerable amount of years with the company.
For another, he has contributed much to its growth and expansion.
However, even as We empathize with him in his time of great need, it
behooves Us to interpret the law according to what it mandates.
We reiterate the time-honored principle that the law, in protecting the
rights of the laborer, authorizes neither oppression nor self-destruction
of the employer. While the Constitution is committed to the policy of
social justice and the protection of the working class, management also
has its own rights, which are entitled to respect and enforcement in the
interest of fair play. Out of its concern for those with less privilege in life,
this Court has inclined more often than not toward the employee and
upheld his cause with his conflicts with the employer. Such favorable
treatment, however, has not blinded the Court to rule that justice is in
every case for the deserving. Justice should be dispensed in the light
of the established facts and applicable law and doctrine. 63
WHEREFORE, the appealed Decision is AFFIRMED. No costs.
SO ORDERED.
G.R. No. 181995 July 16, 2012
BIBIANO C. ELEGIR, Petitioner,
vs.
PHILIPPINE AIRLINES, INC., Respondent.
DECISION
REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision1 dated August 6,
2007 of the Court of Appeals (CA) in CA-G.R. SP No. 79111, which
reversed and set aside the Decision2 dated March 18, 2002 and
Order3 dated June 30, 2003 of the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 00-08-06135-97 and
NLRC NCR CA No. 015030-98.
Factual Antecedents

As culled from the records, the instant case stemmed from the following
factual antecedents:
Petitioner Bibiano C. Elegir (petitioner) was hired by Philippine Airlines,
Inc. (PAL) as a commercial pilot, specifically designated as HS748
Limited First Officer, on March 16, 1971.4
In 1995, PAL embarked on a refleeting program and acquired new and
highly sophisticated aircrafts. Subsequently, it sent an invitation to bid
to all its flight deck crew, announcing the opening of eight (8) B747-400
Captain positions that were created by the refleeting program. The
petitioner, who was then holding the position of A-300 Captain,
submitted his bid and was fortunately awarded the same. 5 The
petitioner, together with seven (7) other pilots, was sent for training at
Boeing in Seattle, Washington, United States of America on May 8,
1995, to acquire the necessary skills and knowledge in handling the
new aircraft. He completed his training on September 19, 1995. 6
On November 5, 1996, after rendering twenty-five (25) years, eight (8)
months and twenty (20) days of continuous service, the petitioner
applied for optional retirement authorized under the Collective
Bargaining Agreement (CBA) between PAL and the Airline Pilots
Association of the
Philippines (ALPAP), in which he was a member of good standing. In
response, PAL asked him to reconsider his decision, asseverating that
the company has yet to recover the full value of the costs of his training.
It warned him that if he leaves PAL before he has rendered service for
at least three (3) years, it shall be constrained to deduct the costs of his
training from his retirement pay.7
On November 6, 1996, the petitioner went on terminal leave for thirty
(30) days and thereafter made effective his retirement from service.
Upon securing his clearance, however, he was informed that the costs
of his training will be deducted from his retirement pay, which will be
computed at the rate of ₱ 5,000.00 per year of service. The petitioner,
through his counsel, sent PAL a correspondence, asserting that his
retirement benefits should be based on the computation stated in
Article 287 of the Labor Code, as amended by Republic Act (R.A.) No.
7641, and that the costs of his training should not be deducted
therefrom. In its Reply dated August 4, 1997, PAL refused to yield to
the petitioner’s demand and maintained that his retirement pay should
be based on PAL-ALPAP Retirement Plan of 1967 (PAL-ALPAP
Retirement Plan) and that he should reimburse the company with the
proportionate costs of his training. Thus, on August 27, 1997, the
petitioner filed a complaint for non-payment of retirement pay, moral
damages, exemplary damages and attorney’s fees against PAL. 8
On February 6, 1998, the Labor Arbiter (LA) rendered a Decision, 9 the
pertinent portions of which read:
From the foregoing, it is manifestly clear that an employee’s retirement
benefits under any collective bargaining agreement shall not be less
than those provided under the New Retirement Pay Law and if such
benefits are less, the employee shall pay the difference between the
amount due the employee and that provided under the CBA or
individual agreement or retirement plan (Par. 3.2, Sec. 3, rules
Implementing the New Retirement Pay Law).
Thus, applying the pertinent CBA provision in correlation with the New
Retirement Pay Law, complainant should receive the following amount,
to wit:
22.5 x 26 yrs. x P138,447.00= P2,700,301.50
If we were to follow the PAL’s computation of petitioner’s retirement pay,
the latter’s retirement benefits in the amount of P125,000.00 based on
Section 2, Article VII of the Retirement Plan of the CBA at P5,000.00
per every year of service would be much less than his monthly salary
of P138,477.00 at the time of his retirement. This was never envisioned
by the law. Instead, it is the clear intention of our law makers to provide
a bigger and better retirement pay or benefits under existing laws
and/or existing CBA or other agreements.
xxxx
WHEREFORE, in view of the foregoing, we find PAL liable to the
petitioner for the payment of his retirement benefits as follows:
Retirement Benefits ₱ 2,700,301.50
(22.5 x 26 years x P138,477.00)
Accrued Trip Leave 760,299.37
Accrued Vacation Leave 386,546.44
1996 Unutilized days off 105,089.46
Nov. ‘96 Prod. Allow. (net) 1,726.92
Unpaid Salary 12/1/-5/96 22,416.65
1996 w/tax refund 2,464.42
13th month backpay for the year
1988-1991 171,262.50
TOTAL
93
₱ 4,150,106.20
plus legal interest of 12% per annum from November 06, 1996.
Finally, ten percent (10%) of all sums owing to petitioner is hereby
adjudged as attorney’s fees.
SO ORDERED.10
The LA ratiocinated that PAL had no right to withhold the payment of
the petitioner’s retirement benefits simply because he retired from
service before the lapse of three (3) years. To begin with, there was no
document evidencing the fact that the petitioner was required to stay
with PAL for three (3) years from the completion of his training or that
he was bound to reimburse the company of the costs of his training
should he retire from service before the completion of the period. The
LA likewise dismissed the theory espoused by PAL that the petitioner’s
submission of his bid for the new position which necessarily requires
training created an innominate contract of du ut facias between him and
the company since their relationship is governed by the CBA between
the management and the ALPAP.11
On appeal, the NLRC took a different stance and modified the decision
of the LA in its Decision dated March 18, 2002, which pertinently states:
Considering that [petitioner] was only fifty-two (52) years when he opted
to retire on November 6, 1996, he was, strictly, not yet qualified to
receive the benefits provided under said Article 287 of the Labor Code,
as amended by R.A. 7641. However, petitioner is eligible for retirement
under the CBA between respondent PAL and ALPAP, as he had
already served for more than 25 years with said respondent. This is
covered by the provision in the first paragraph of Article 287 of the
Labor Code which states that an employee may be retired upon
reaching the retirement age established in the collective bargaining
agreement or other applicable employment contract, inasmuch as the
CBA in question does not provide for any retirement age, but limited
itself to the number of years of service or flying hours of the employee
concerned. Consequently, anytime that an employee of respondent
PAL reaches twenty (20) years of service or 20,000 (flying) hours as a
pilot of PAL, then his age at that precise time would be considered as
the retirement age, as far as he is concerned.
The retirement benefits of petitioner should, therefore, be computed in
accordance with both Article 287 of the Labor Code and the Retirement
Plan in the CBA of PAL and ALPAP.
On the second issue, we rule that petitioner is under obligation to
reimburse a portion of the expenses incurred for his training as B747-
400 Captain.
It would be grossly unfair and unjust to PAL if the petitioner would be
allowed to reap the fruits of this training, which upgraded his knowledge
and skills that would enable him to demand higher pay, if he would not
be made to return said benefits in the form of service for a reasonable
period of time, say three (3) years as PAL’s company policy demands.
xxx
xxxx
Thus, with the adjudged reimbursement for training expenses of
P921,281.71 (sic), the awards due to petitioner shall be, as follows:
Retirement Pay (P138,477.00 divided by 2 times 26)
Service Incentive Leave (P138,477.00 divided by 30 x 5)
Accrued Trip Leave
13th Month Pay
1996 Unutilized days off
Nov. 1996 Productive Allowance (net)
Unpaid salary 12/1-5/96
1996 w/ tax refund
TOTAL
LESS:
Reimbursement of training expenses 981,281.71
1996 13thmonth pay overpayment 19,837.16
1996 Christmas bonus overpayment 11,539.75
PESALA 567.93
TOTAL
RETIREMENT PAY STILL PAYABLE
IN VIEW OF THE FOREGOING, the decision of the Labor Arbiter
should be MODIFIED by increasing the awards to the petitioner to ONE
MILLION FOUR HUNDRED SIXTY SIX THOUSAND SEVEN

HUNDRED SIXTY-NINE and 84/100 (P1,466,769.84) PESOS as
computed above.
SO ORDERED.12
Both PAL and petitioner filed their respective motions for partial
reconsideration from the decision of the NLRC. In its Motion for Partial
Reconsideration,13 PAL asseverated that the decision of the NLRC,
directing the computation of the petitioner’s retirement benefits based
on Article 287 of the Labor Code, instead of the CBA, was inconsistent
with the disposition of this Court in Philippine Airlines, Inc. v. Airline
Pilots Association of the Philippines. 14 It emphasized that in said case,
this Court sustained PAL’s position and directed the payment of
retirement benefits of the complainant pilot in accordance with the PAL-
ALPAP Retirement Plan. However, in an Order 15 dated June 30, 2003,
the NLRC denied PAL’s motion for reconsideration.
Unyielding, PAL filed a petition for certiorari with the CA. In said petition,
PAL emphasized that the petitioner’s case should be decided in light of
the ruling in Philippine Airlines, Inc., where this Court held that the
computation of the retirement pay of a PAL pilot who retired before
reaching the retirement age of sixty (60) should be based on the PAL-
ALPAP Retirement Plan or at the rate of P5,000.00 for every year of
service.16
In its Decision dated August 6, 2007, the CA ruled that the petitioner’s
retirement pay should be computed in accordance with PAL-ALPAP
Retirement Plan and the PAL Pilots’ Retirement Benefit Plan as was
held in Philippine Airlines, Inc. It held, thus:
The present case squarely falls within the state of facts upon which the
ruling in Philippine Airlines, Inc., vs. Airline Pilots Association of the
Philippines was enunciated. Petitioner herein applies for retirement at
an age below 60. A distinction was made between a pilot who retires at
the age of sixty and another who retires earlier. The Supreme Court
was explicit when it declared:
"A pilot who retires after twenty years of service or after flying 20,000
hours would still be in the prime of his life and at the peak of his career,
compared to one who retires at the age of 60 years old."
Furthermore, petitioner would not be getting less if his retirement pay
is computed on the PAL-ALPAP retirement plan rather than the formula
provided by the Labor Code. Petitioner did not refute that he already
got retirement benefits from another retirement plan – the PAL
Pilots Retirement Plan. It appearing that the retirement benefits
amounting to P1,800,201.00 being the main bone of contention herein,
this Court proceeds to compute the balance of Capt. Elegir’s retirement
benefits as follows:
Retirement Pay (P5,000 x 25 years) ₱125,000.00
Trip Leave Pay 757,564.04
Vacation Leave Pay 385,155.76
1996 Unutilized Day-Off 104,711.38
Productivity Allowance for 1996 1,726.92
Unpaid Salary for December 1-5,
22,335.00
1996
1996 Withholding Tax Refund 2,464.42
P1,398,957.52
Less Accountabilities:
Training Cost ₱981,281.71
1996 13th Month Pay
19,837.16
Overpayment
1996 Christmas
11,539.75
Bonus
PESALA 567.93 1,013,226.55
BALANCE ₱ 385,730.97
pursuant to the ruling in G.R. No. 143686.
xxxx
WHEREFORE, the petition is GRANTED. The Decision of public
respondent dated March 18, 2002 and its Order of June 30, 2003 are
REVERSED and SET ASIDE. The retirement benefits of petitioner Capt.
Bibiano Elegir shall be based on the 1967 PAL-ALPAP Retirement Plan
andthe PAL Pilots Retirement Benefit Plan and the balance still due
him, pegged at P385,730.97.
SO ORDERED.17 (Citation omitted and emphasis supplied)
94
The petitioner filed a motion for reconsideration but the same was
denied in a Resolution18 dated February 21, 2008. Aggrieved, the
petitioner appealed to this Court.
Essentially, we are called upon to rule on the following issues:
1. Whether the petitioner’s retirement benefits should be
computed based on Article 287 of the Labor Code or on PAL’s
retirement plans;
2. Whether the petitioner should reimburse PAL with the
proportionate costs of his training; and
3. Whether interest should be imposed on the monetary
award in favor of the petitioner.
The Ruling of this Court
The petitioner’s retirement pay should be computed based on PAL’s
retirement plans.
The petitioner maintains that it is Article 287 of the Labor Code which
should be applied in the computation of his retirement pay since the
same provides for higher benefits. He contends that the CA erroneously
resorted to the ruling in Philippine Airlines, Inc. since the circumstances
in the said case, which led this Court to rule in favor of the applicability
of PAL’s retirement plans in computing retirement benefits, are
unavailing in the present case. Specifically, he pointed out that the pilot
in Philippine Airlines, Inc. retired at the age of forty-five (45), while he
opted to retire at fifty-two (52). He further emphasized that the ruling
was anchored on a finding that the retirement benefits that the pilot
would get under Article 287 of the Labor Code are less than those he
would get under PAL’s retirement plans.19
Apparently, the petitioner failed to appreciate the heart behind the ruling
in Philippine Airlines, Inc. To recapitulate, the case stemmed from
PAL’s unilateral act of retiring airline pilot Captain Albino Collantes
(Collantes) under the authority of Section 2, Article VII of the PAL-
ALPAP Retirement Plan. Thereafter, ALPAP filed a Notice of Strike with
the Department of Labor and Employment (DOLE), asseverating that
the retirement of Collantes constituted illegal dismissal and union
busting. The Secretary of Labor assumed jurisdiction and eventually
upheld PAL’s action of retiring Collantes as a valid exercise of its option
under Section 2, Article VII of the PAL-ALPAP Retirement Plan. It
further directed for the computation of Collantes’ retirement benefits on
the basis of Article 287 of the Labor Code. 20 Acting on Collantes’
petition for certiorari, the CA held that the pilot’s retirement benefits
should be based on Article 287 of the Labor Code and not on the PAL-
ALPAP Retirement Plan. On appeal to this Court, we reversed the CA
and ruled that Collantes’ retirement benefits should be computed based
on the PAL-ALPAP Retirement Plan and the PAL Pilots’ Retirement
Benefit Plan and not on Article 287 of the Labor Code since the benefits
under the two (2) plans are substantially higher than the latter. The
dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, the petition is GRANTED.
The March 2, 2000 Decision and the June 19, 2000 Resolution of the
Court of Appeals in CA-G.R. SP No. 54403 are REVERSED and SET
ASIDE. The Order of the Secretary of Labor in NCMB-NCR-N.S. 12-
514-97 dated June 13, 1998, is MODIFIED as follows: The retirement
benefits to be awarded to Captain Albino Collantes shall be based on
the 1967 PAL-ALPAP Retirement Plan and the PAL Pilots’ Retirement
Benefit Plan. The directive contained in subparagraph (2) of the
dispositive portion thereof, which required petitioner to consult the pilot
involved before exercising its option to retire him, is DELETED. The
said Order is AFFIRMED in all other respects.
SO ORDERED.21 (Emphasis supplied)
It bears reiterating that there are only two retirement schemes at point
in this case: (1) Article 287 of the Labor Code, and; (2) the PAL-ALPAP
Retirement Plan and the PAL Pilots’ Retirement Benefit Plan. The two
retirement schemes are alternative in nature such that the retired pilot
can only be entitled to that which provides for superior benefits.
Article 287 of the Labor Code states:
Art. 287. Retirement. - Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or
other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: provided,
however, that an employee’s retirement benefits under any collective
bargaining and other agreements shall not be less than those provided
herein.
In the absence of a retirement plan or agreement plan providing for
retirement benefits of employees in the establishment, an employee
upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared as the compulsory retirement
age, who has served at least five (5) years in the said establishment,
may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at
least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term ‘one-half (1/2)
month salary’ shallmean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days
of service incentive leaves. x x x (Emphasis supplied)

It can be clearly inferred from the language of the foregoing provision
that it is applicable only to a situation where (1) there is no CBA or other
applicable employment contract providing for retirement benefits for an
employee, or (2) there is a CBA or other applicable employment
contract providing for retirement benefits for an employee, but it is
below the requirement set by law. The rationale for the first situation is
to prevent the absurd situation where an employee, deserving to
receive retirement benefits, is denied them through the nefarious
scheme of employers to deprive employees of the benefits due them
under existing labor laws. On the other hand, the second situation aims
to prevent private contracts from derogating from the public law. 22
The primary application of existing CBA in computing retirement
benefits is implied in the title of R.A. No. 7641 which amended Article
287 of the Labor Code. The complete title of R.A. No. 7641 reads: "An
Act Amending Article 287 of Presidential Decree No. 442, As Amended,
otherwise known as the Labor Code of the Philippines, By Providing for
Retirement Pay to Qualified Private Sector in the Absence of Any
Retirement Plan in the Establishment."23
Emphasis must be placed on the fact that the purpose of the
amendment is not merely to establish precedence in application or
accord blanket priority to existing CBAs in computing retirement
benefits. The determining factor in choosing which retirement scheme
to apply is still superiority in terms of benefits provided. Thus, even if
there is an existing CBA but the same does not provide for retirement
benefits equal or superior to that which is provided under Article 287 of
the Labor Code, the latter will apply. In this manner, the employee can
be assured of a reasonable amount of retirement pay for his
sustenance.
Consistent with the purpose of the law, the CA correctly ruled for the
computation of the petitioner’s retirement benefits based on the two (2)
PAL retirement plans because it is under the same that he will reap the
most benefits. Under the PAL-ALPAP Retirement Plan, the petitioner,
who qualified for late retirement after rendering more than twenty (20)
years of service as a pilot, is entitled to a lump sum payment of
P125,000.00 for his twenty-five (25) years of service to PAL. Section 2,
Article VII of the PAL-ALPAP Retirement Plan provides:
Section 2. Late Retirement. Any member who remains in the service of
the company after his normal retirement date may retire either at his
option or at the option of the Company, and when so retired he shall be
entitled either: (a) to a lump sum payment of P5,000.00 for each
completed year of service rendered as a pilot, or (b) to such termination
pay benefits to which he may be entitled under existing laws, whichever
is the greater amount.24
Apart from the abovementioned benefit, the petitioner is also entitled to
the equity of the retirement fund under PAL Pilots’ Retirement Benefit
Plan, which pertains to the retirement fund raised from contributions
exclusively from PAL of amounts equivalent to 20% of each pilot’s
gross monthly pay. Each pilot stands to receive the full amount of the
contribution upon his retirement which is equivalent to 240% of his
gross monthly income for every year of service he rendered to PAL.
This is in addition to the amount of not less than P100,000.00 that he
shall receive under the PAL-ALPAP Retirement Plan.25
In sum, therefore, the petitioner will receive the following retirement
benefits:
(1) P125,000.00 (25 years x P5,000.00) for his 25 years of
service to PAL under the PAL-ALPAP Retirement Plan, and;
(2) 240% of his gross monthly salary for every year of his
employment or, more specifically, the summation of PAL’s
monthly contribution of an amount equivalent to 20% of his
actual monthly salary, under the PAL Pilots’ Retirement
Benefit Plan.
As stated in the records, the petitioner already received the amount due
to him under the PAL Pilots’ Retirement Benefit Plan. 26 As much as we
would like to demonstrate with specificity the amount of the petitioner’s
entitlement under said plan, we are precluded from doing so because
there is no record of the petitioner’s salary, including increments thereto,
attached to the records of this case. To reiterate, the benefit under the
PAL Pilots’ Retirement Benefit Plan pertains to the totality of PAL’s
monthly contribution for every pilot, which amounts to 20% of the actual
monthly salary. Necessarily, the computation of this benefit requires a
record of the petitioner’s salary, which was unfortunately not submitted
by either of the parties. At any rate, the petitioner did not dispute the
fact that he already received his entitlement under the PAL Pilots’
Retirement Benefit Plan nor did he question the propriety of the amount
tendered. Thus, we can reasonably assume that he received the rightful
amount of his entitlement under the plan.
On the other hand, under Article 287 of the Labor Code, the petitioner
would only be receiving a retirement pay equivalent to at least one-half
(1/2) of his monthly salary for every year of service, a fraction of at least
six (6) months being considered as one whole year. To stress, one-half
(1/2) month salary means 22.5 days: 15 days plus 2.5 days
representing one-twelfth (1/12) of the 13th month pay and the
remaining 5 days for service incentive leave. 27
Comparing the benefits under the two (2) retirement schemes, it can
readily be perceived that the 22.5 days worth of salary for every year of
service provided under Article 287 of the Labor Code cannot match the
95
240% of salary or almost two and a half worth of monthly salary per
year of service provided under the PAL Pilots’ Retirement Benefit Plan,
which will be further added to the P125,000.00 to which the petitioner
is entitled under the PAL-ALPAP Retirement Plan. Clearly then, it is to
the petitioner’s advantage that PAL’s retirement plans were applied in
the computation of his retirement benefits.
The petitioner should reimburse PAL with the costs of his training.
As regards the issue of whether the petitioner should be obliged to
reimburse PAL with the costs of his training, the ruling in Almario v.
Philippine Airlines, Inc.28 is controlling. Essentially, in the mentioned
case, this Court recognized the right of PAL to recoup the costs of a
pilot’s training in the form of service for a period of at least three (3)
years. This right emanated from the CBA between PAL and ALPAP,
which must be complied with good faith by the parties. Thus:
"The CBA is the law between the contracting parties – the collective
bargaining representative and the employer-company. Compliance
with a CBA is mandated by the expressed policy to give protection to
labor. In the same vein, CBA provisions should be "construed liberally
rather than narrowly and technically, and the courts must place a
practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and purpose which it is intended to
serve." This is founded on the dictum that a CBA is not an ordinary
contract but one impressed with public interest. It goes without saying,
however, that only provisions embodied in the CBA should be so
interpreted and complied with. Where a proposal raised by a
contracting party does not find print in the CBA, it is not a part thereof
and the proponent has no claim whatsoever to its implementation."
In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine
Airlines, Inc.," the Secretary of the Department of Labor and
Employment (DOLE), passing on the failure of PAL and ALPAP to
agree on the terms and conditions for the renewal of their CBA which
expired on December 31, 1987 and construing Section 1 of Article XXIII
of the 1985-1987 CBA, held:
xxxx
Section 1, Article XXIII of the 1985-1987 CBA provides:
Pilots fifty-five (55) years of age or over who have not previously
qualified in any Company turbo-jet aircraft shall not be permitted to bid
into the Company’s turbo-jet operations. Pilots fifty-five (55) years of
age or over who have previously qualified in the company’s turbo-jet
operations may be by-passed at Company option, however, any such
pilot shall be paid the by-pass pay effective upon the date a junior pilot
starts to occupy the bidded position.
x x x PAL x x x proposed to amend the provision in this wise:
The compulsory retirement age for all pilots is sixty (60) years. Pilots
who reach the age of fifty-five (55) years and over without having
previously qualified in any Company turbo-jet aircraft shall not be
permitted to occupy any position in the Company’s turbo-jet fleet. Pilots
fifty-four (54) years of age and over are ineligible for promotion to any
position in Group I. Pilots reaching the age of fifty-five (55) shall be
frozen in the position they currently occupy at that time and shall be
ineligible for any further movement to any other positions.
PAL’s contention is basically premised on prohibitive training costs. The
return on this investment in the form of the pilot promoted is allegedly
five (5) years. Considering the pilot’s age, the chances of full recovery
are asserted to be quite slim.
ALPAP opposed the proposal and argued that the training cost is offset
by the pilot’s maturity, expertise and experience.
By way of compromise, we rule that a pilot should remain in the position
where he is upon reaching age fifty-seven (57), irrespective of whether
or not he has previously qualified in the Company’s turbo-jet operations.
The rationale behind this is that a pilot who will be compulsorily retired
at age sixty (60) should no longer be burdened with training for a new
position. But if a pilot is only at age fifty-five (55), and promotional
positions are available, he should still be considered and promoted if
qualified, provided he has previously qualified in any company turbo-jet
aircraft. In the latter case, the prohibitive training costs are more than
offset by the maturity, expertise, and experience of the pilot.
Thus, the provision on age limit should now read:
Pilots fifty-seven (57) years of age shall be frozen in their
positions.1âwphi1 Pilots fifty-five (55) [sic] years of age provided they
have previously qualified in any company turbo-jet aircraft shall be
permitted to occupy any position in the company’s turbo-jet
fleet.29 (Citations omitted and emphasis supplied)
Further, we considered PAL’s act of sending its crew for training as an
investment which expects an equitable return in the form of service
within a reasonable period of time such that a pilot who decides to leave
the company before it is able to regain the full value of the investment
must proportionately reimburse the latter for the costs of his training.
We ratiocinated:
It bears noting that when Almario took the training course, he was about
39 years old, 21 years away from the retirement age of 60. Hence, with
the maturity, expertise, and experience he gained from the training
course, he was expected to serve PAL for at least three years to offset
"the prohibitive costs" thereof.
The pertinent provision of the CBA and its rationale aside, contrary to
Almario’s claim, Article 22 of the Civil Code which reads:

"Art. 22. Every person who through an act of performance by another,
or any other means, acquires or comes into possession of something
at the expense of the latter without just or legal ground, shall return the
same to him," applies.
This provision on unjust enrichment recognizes the principle that one
may not enrich himself at the expense of another. An authority on Civil
Law writes on the subject, viz:
"Enrichment of the defendant consists in every patrimonial, physical, or
moral advantage, so long as it is appreciable in money. It may consist
of some positive pecuniary value incorporated into the patrimony of the
defendant, such as: (1) the enjoyment of a thing belonging to the
plaintiff; (2) the benefits from service rendered by the plaintiff to the
defendant; (3) the acquisition of a right, whether real or personal; (4)
the increase of value of property of the defendant; (5) the improvement
of a right of the defendant, such as the acquisition of a right of
preference; (6) the recognition of the existence of a right in the
defendant; and (7) the improvement of the conditions of life of the
defendant.
x x x x"
Admittedly, PAL invested for the training of Almario to enable him to
acquire a higher level of skill, proficiency, or technical competence so
that he could efficiently discharge the position of A-300 First Officer.
Given that, PAL expected to recover the training costs by availing of
Almario’s services for at least three years. The expectation of PAL was
not fully realized, however, due to Almario’s resignation after only eight
months of service following the completion of his training course. He
cannot, therefore, refuse to reimburse the costs of training without
violating the principle of unjust enrichment. 30 (Citation omitted and
emphasis supplied)
After perusing the records of this case, we fail to find any significant fact
or circumstance that could warrant a departure from the established
jurisprudence. The petitioner admitted that as in Almario, the prevailing
CBA between PAL and ALPAP at the time of his retirement
incorporated the same stipulation in Section 1, Article XXIII of the 1985-
1987 CBA31 which provides:
Pilots fifty-seven (57) years of age shall be frozen in their positions.
Pilots fifty-five (55) [sic] years of age provided they have previously
qualified in any company turbo-jet aircraft shall be permitted to occupy
any position in the company’s turbo-jet fleet.32
As discussed in Almario, the above provision initially set the age of fifty-
five (55) years as the reckoning point when a pilot becomes disqualified
to bid for a higher position. The age of disqualification was set at 55
years old to enable PAL to fully recover the costs of the pilot’s training
within a period of five (5) years before the pilot reaches the compulsory
retirement age of sixty (60). The DOLE Secretary however lowered the
age to fifty-seven (57), thereby cutting the supposed period of recovery
of investment to three (3) years. The DOLE Secretary justified the
amendment in that the "prohibitive training costs are more than offset
by the maturity, expertise and the experience of the pilot."33
By carrying over the same stipulation in the present CBA, both PAL and
ALPAP recognized that the company’s effort in sending pilots for
training abroad is an investment which necessarily expects a
reasonable return in the form of service for a period of at least three (3)
years. This stipulation had been repeatedly adopted by the parties in
the succeeding renewals of their CBA, thus validating the impression
that it is a reasonable and acceptable term to both PAL and ALPAP.
Consequently, the petitioner cannot conveniently disregard this
stipulation by simply raising the absence of a contract expressly
requiring the pilot to remain within PAL’s employ within a period of 3
years after he has been sent on training. The supposed absence of
contract being raised by the petitioner cannot stand as the CBA clearly
covered the petitioner’s obligation to render service to PAL within 3
years to enable it to recoup the costs of its investment.
Further, to allow the petitioner to leave the company before it has
fulfilled the reasonable expectation of service on his part will amount to
unjust enrichment. Pertinently, Article 22 of the New Civil Code states:
Art. 22. Every person who through an act of performance by another,
or any other means, acquires or comes into possession of something
at the expense of the latter without just or legal ground, shall return the
same to him.
There is unjust enrichment when a person unjustly retains a benefit at
the loss of another, or when a person retains the money or property of
another against the fundamental principles of justice, equity and good
conscience. Two conditions must concur: (1) a person is unjustly
benefited; and (2) such benefit is derived at the expense of or with
damages to another. The main objective of the principle of unjust
enrichment is to prevent one from enriching oneself at the expense of
another. It is commonly accepted that this doctrine simply means that
a person shall not be allowed to profit or enrich himself inequitably at
another’s expense.34 The enrichment may consist of a patrimonial,
physical, or moral advantage, so long as it is appreciable in money. 35 It
must have a correlative prejudice, disadvantage or injury to the plaintiff
which may consist, not only of the loss of the property or the deprivation
of its enjoyment, but also of the non-payment of compensation for a
prestation or service rendered to the defendant without intent to donate
96
on the part of the plaintiff, or the failure to acquire something what the
latter would have obtained.36
As can be gathered from the facts, PAL invested a considerable
amount of money in sending the petitioner abroad to undergo training
to prepare him for his new appointment as B747-400 Captain. In the
process, the petitioner acquired new knowledge and skills which
effectively enriched his technical know-how. As all other investors, PAL
expects a return on investment in the form of service by the petitioner
for a period of 3 years, which is the estimated length of time within
which the costs of the latter’s training can be fully recovered. The
petitioner is, thus, expected to work for PAL and utilize whatever
knowledge he had learned from the training for the benefit of the
company. However, after only one (1) year of service, the petitioner
opted to retire from service, leaving PAL stripped of a necessary
manpower.
Undeniably, the petitioner was enriched at the expense of PAL. After
undergoing the training fully shouldered by PAL, he acquired a higher
level of technical competence which, in the professional realm,
translates to a higher compensation. To prove this point, his monthly
salary of P125,692.00 was increased to P131,703.00 while he was still
undergoing training. After his training, his salary was further increased
to P137,977.00.37 Further, his training broadened his opportunities for
a better employment as in fact he was able to transfer to another airline
company immediately after he left PAL. 38 To allow the petitioner to
simply leave the company without reimbursing it for the proportionate
amount of the expenses it incurred for his training will only magnify the
financial disadvantage sustained by PAL. Reason and fairness dictate
that he must return to the company a proportionate amount of the costs
of his training.
Award of interest not warranted under the circumstances.
The petitioner claims that the CA should have imposed interest on the
monetary award in his favor. To support his claim, he cited the case of
Eastern Shipping Lines, Inc. v. Court of Appeals,39 where this Court
summarized the rules in the imposition of the proper interest rates:
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for damages. The
provisions under Title XVIII on "Damages" of the Civil Code
govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists
in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be
that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall
be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or
until the demand can be established with
reasonable certainty. Accordingly, where the
demand is established with reasonable certainty,
the interest shall begin to run from the time the claim
is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so
reasonably established at the time the demand is
made, the interest shall begin to run only from the
date the judgment of the court is made (at which
time the quantification of damages may be deemed
to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum
of money becomes final and executory, the rate of
legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction,
this interim period being deemed to be by then an
equivalent to a forbearance of credit. 40 (Citations
omitted and emphasis supplied)
The petitioner, however, took the foregoing guidelines out of context
and entertained a misplaced supposition that all judgments which
include a monetary award must be imposed with interest. The
jurisprudential guideline clearly referred to breach of an obligation
consisting of a forbearance of money, goods or credit before the
imposition of a legal interest of 12% can be warranted. Such essential

element is nowhere to be found in the facts of this case. Even granting
that an interest of 6% may be imposed in cases of breached obligations
not constituting loan or forbearance of money, loan or credit, such
depends upon the discretion of the court. If at all, the monetary award
in favor of the petitioner will earn legal interest from the time the
judgment becomes final and executory until the same is fully satisfied,
regardless of the nature of the breached obligation. The imposition is
justified considering that the interim period from the finality of judgment,
awarding a monetary claim and until payment thereof, is deemed to be
equivalent to a forbearance of credit.41
WHEREFORE, in view of the foregoing disquisitions, the petition is
DENIED. The Decision dated August 6, 2007 of the Court of Appeals
in CA-G.R. SP No. 79111 is AFFIRMED. The Labor Arbiter is hereby
DIRECTED to compute Bibiano C. Elegir's retirement pay based on the
1967 PAL-ALPAP Retirement Plan and the PAL Pilots' Retirement
Benefit Plan, crediting Philippine Airlines, Inc. for the amount it had
already paid the petitioner under the mentioned plans.
SO ORDERED.
G.R. No. 185346 June 27, 2012
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner,
vs.
MIGUELITO M. LAZARO, Respondent.
x-----------------------x
G.R. No. 185442
MIGUELITO M. LAZARO, Petitioner,
vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK and
TEODORO O. ARCENAS, JR., BF RETIREMENT FUND AND
PERFECTO YASAY JR. (IN SUBSTITUTION OF DECEASED
CONRADO BANZON), Respondents.
DECISION
SERENO, J.:
Before this Court are two consolidated Petitions for Review under Rule
45 filed by Banco Filipino Savings and Mortgage Bank (Banco Filipino)
(G.R. No. 185346) and Miguelito M. Lazaro (Lazaro) (G.R. No. 185442).
Both Petitions assail the Court of Appeals (CA) 23 January 2008
Decision and 12 November 2008 Resolution in CA-G.R. SP No. 93145.
Ruling against Lazaro, the CA sustained the judgments of the courts a
quo denying his monetary claims for salary differential, attorney’s fees
and profit sharing. Nevertheless, the appellate court granted him seven
years of retirement differential pay covering the period within which the
bank was under liquidation.
The pertinent facts are as follows:1
On 1 February 1968, Lazaro started working for Banco Filipino as a
probationary employee. Rising from the ranks, he was promoted to the
position of assistant manager, which he held until the bank was closed
by the Central Bank of the Philippines on 25 January 1985.
Notwithstanding the cessation of the regular operations of the bank,
Lazaro was reemployed on 16 April 1992 as a member of a task
force2 assigned to collect its delinquent accounts.
After this Court adjudged that the bank’s closure was illegal, 3 Banco
Filipino eventually reopened in June 1992. Lazaro continued to work
for the bank until he retired from his last post as assistant vice-president
on 1 December 1995. Thereafter, he was paid retirement benefits for
20 years and 7 months of service pegged at his latest gross salary rate
of ₱ 38,000 per month.
Lazaro, however, demanded a higher amount. Specifically, he asserted
that since his employment lasted from 1 February 1968 until 1
December 1995, he should be credited with 27 years and 10 months of
service. Additionally, he claimed that the base amount of his retirement
pay should be increased from ₱ 38,000 to ₱ 50,000 to reflect the salary
increase given by the bank to its senior officers in December 1995.
Aside from demanding his retirement pay differential, Lazaro also
required Banco Filipino to pay the 10% attorney’s fees it received while
foreclosing delinquent accounts. Furthermore, he sought the payment
of his 10% profit share from 1984 to 1995.
Banco Filipino refused the additional demands of Lazaro. As a result,
he filed a Complaint for underpayment of retirement benefits, as well
as nonpayment of attorney’s fees and profit shares before the Labor
Arbiter (LA).
In its defense, Banco Filipino emphasized that Lazaro was entitled only
to 20 years and 7months of service, for he could not include in his
employment the period of 7 years within which the bank was ordered
closed.
Banco Filipino also denied the contention of Lazaro that the basis of his
retirement pay should be increased from ₱ 38,000 to ₱ 50,000.
According to the bank, Lazaro was not covered by the salary increase
granted in December 1995, since he had resigned as early as 1
December 1995. In this regard, the bank cited the Rules of the Banco
Filipino Retirement Fund as follows:4
The normal retirement date of a member shall be a lump sum amount
or gratuity equal to one and one-half month’s salary for every year of
97
service based on the final salary of the member. Credit will be given for
incomplete years pro-rated at one-twelfth (1/12) of the full years credit
for each month of service.
As regards the attorney’s fees, the bank argued that Lazaro was not
entitled thereto, because he had merely performed his functions as a
legal counsel of the bank, for which he was already compensated.
Lastly, Banco Filipino refused to give profit shares without the Monetary
Board’s approval as required by law.
Ultimately, the LA gave credence to the bank’s defenses and, hence,
denied all of Lazaro’s demands.5 On appeal, the National Labor
Relations Commission (NLRC) affirmed the LA’s Decision. 6
After receiving the adverse judgment, Lazaro pursued the action before
the CA. The appellate court modified the LA’s Decision and held that
Lazaro was entitled to retirement pay differential. 7 It reasoned that, as
a consequence of the bank’s continued operations notwithstanding the
receivership proceedings, Banco Filipino could not disclaim the work
performed by Lazaro during the said period. 8 Thus, the whole duration
of seven years must be included in computing his retirement pay
differential.
As for the claims consisting of attorney’s fees and additional retirement
pay on the basis of increased salaries, the CA concurred in the LA’s
denial of those claims.9 With respect to the profit shares demanded by
Lazaro, it dismissed his demands, considering that the bank had
already paid him in full, as evidenced by the attached vouchers and
checks.10
Banco Filipino and Lazaro separately moved for reconsideration, both
of which the appellate court denied.11
In the instant Petitions, the parties question the CA’s dispositions of
Lazaro’s monetary claims.
Banco Filipino assails the grant of a retirement pay differential. It
emphasizes that the liquidation period should not be included in
computing retirement benefits.
Additionally, Banco Filipino cites Banco Filipino Staff Association v.
Banco Filipino Savings and Mortgage Bank and claims that this Court
had already ruled to exclude the seven-year period of closure from the
length of service of the bank’s employees. 12
On the other hand, Lazaro reiterates his demand for a higher salary
base for computing his retirement pay. He also asks that his retirement
pay differential be reckoned from work rendered for 27 years and 10
months. Further, he asks that the 10 months be further rounded off to
one year, given that the Labor Code considers a fraction of at least six
(6) months as a whole year.13
Lazaro also reiterates his claim for attorney’s fees. He additionally
denies having received his profit share in full. Instead, he claims that
the amounts he received were only for the years 1984, 1994 and
1995.14 Banco Filipino therefore still owes him profit shares covering
the period 1985 to 1993.
Lazaro also brings up a matter that he raised for the first time in his
Motion for Reconsideration before the CA.15 He claims a one-day salary
differential for the work he rendered on the day of his retirement on 1
December 1995.16 Hence, he supposedly should be paid the difference
between his previous salary of ₱ 38,000 and the new salary of ₱ 50,000
given to senior officers.
Additionally, he prays for moral damages, exemplary damages,
attorney’s fees and expenses of the suit. 17
Accordingly, the combined issues presented for our resolution are as
follows:
I. Whether the CA gravely erred in granting retirement pay
differentials to Lazaro;
II. Whether the CA committed grievous error in dismissing
Lazaro’s claims for attorney’s fees and profit shares; and
III. Whether the CA committed grievous error in not
addressing Lazaro’s claims for a one-day salary differential
and damages consisting of moral and exemplary damages,
attorney’s fees and expenses of suit.
Ruling of the Court
Retirement Pay Differentials
In essence, Banco Filipino maintains that the seven-year period when
it was under liquidation should not be credited in computing Lazaro’s
retirement pay because, during that period, the bank was considered
closed. It cites, as further basis, G.R. No. 165367 pertaining to Banco
Filipino Staff Association v. Banco Filipino Savings and Mortgage
Bank18 to support the exclusion of the liquidation period.
This contention is without merit, for it inaccurately portrays the status of
a bank under liquidation. In Philippine Veterans Bank v. NLRC, 19 this
Court explained that banks under liquidation retain their legal
personality. In fact, even if they are prohibited from conducting regular
banking business, it is necessary that debts owed to them be
collected.20 Lazaro performed the duty of foreclosing debts in favor of
Banco Filipino. It cannot rightfully disclaim Lazaro’s work that benefitted
it. Consequently, we find no grievous error committed by the CA in
crediting the years covered by the liquidation period as part of Lazaro’s
retirement pay.
With respect to Banco Filipino Staff Association v. Banco Filipino
Savings and Mortgage Bank, which Banco Filipino cites in order to

prove that this Court had earlier excluded the seven-year period of
closure from the length of service of the bank’s employees, the CA read
the case correctly; i.e. that this Court did not categorically exclude the
seven-year period of closure from the length of service of Banco Filipino
employees.21 Thus, the bank cannot use our pronouncement in the said
case to defeat Lazaro’s claim for retirement pay differential.
Notably, Lazaro remains unsatisfied with the award of retirement pay
differential. He seeks these further adjustments: (1) the basis for the
computation of his retirement pay should be increased from ₱ 38,000
to ₱ 50,000; and (2) the retirement pay differential should include 8
years, and not just 7 years and 7 months of his service.
With respect to the claim that the base for computing the retirement pay
should be ₱ 50,000 and not ₱ 38,000, the courts a quo found that since
the applicable Rules of the Banco Filipino Retirement Fund state that
the computation shall be for "each completed month of
service,"22 Lazaro – who did not complete his services for December
1995 – cannot claim the salary increase granted, when he has already
left Banco Filipino, and credit it to his retirement pay. Conversely,
Lazaro argues that the Rules of the Banco Filipino Retirement Fund do
not explicitly state that the computation shall be for each completed
month of service.23
Referring to the Rules of the Banco Filipino Retirement Fund, this Court
observes that they refer to the "final salary" of the employee as basis
for computing the latter’s retirement pay.24
As established by the LA, the NLRC and the CA, the final salary of
Lazaro was ₱ 38,000, and not ₱ 50,000.25 This consistent factual
determination can no longer be retried. It is aphoristic that a
reexamination of factual findings cannot be done through a petition for
review on certiorari under Rule 45 of the Rules of Court, because this
Court reviews only questions of law.26
With regard to the second adjustment Lazaro prays for, we note that he
assiduously went through the whole process of appeal to seek a
rounding off of his 27 years and 10 months of work to 28 years and
consequently obtain a higher retirement pay. Considering the bank’s
grant of 20 years and 7 months of retirement pay,27 plus the CA’s award
of a 7-year retirement pay differential,28 in effect, only 5 months worth
of prorated retirement pay remains unsettled. At this juncture, this Court
reminds everyone that while access to the courts is guaranteed, there
must be limits thereto.29
We rule that the CA committed no reversible error when it did not round
off Lazaro’s length of service. To begin with, his plea for rounding off
his length of service is mistakenly based on Article 287 of the Labor
Code, which provides:
Art. 287. Retirement. – Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or
other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided,
however, that an employee's retirement benefits under any collective
bargaining and other agreements shall not be less than those provided
herein.
In the absence of a retirement plan or agreement providing
for retirement benefits of employees in the establishment, an
employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared
the compulsory retirement age, who has served at least five
(5) years in the said establishment, may retire and shall be
entitled to retirement pay equivalent to at least one-half (1/2)
month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2)
month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the
13th month pay and the cash equivalent of not more than five (5) days
of service incentive leaves. x x x. (Emphasis supplied.)
Lazaro cannot anchor his claim on the said provision, because
governing in this case is the Rules of the Banco Filipino Retirement
Fund. Indeed, as found in the Implementing Rules of the Retirement
Pay Law30 and in jurisprudence,31 only in the absence of an applicable
retirement agreement shall Article 287 of the Labor Code apply. There
is a proviso however, that an employee's retirement benefits under any
agreement shall not be less than those provided in the said article.
It cannot be gainsaid that the Rules of the Banco Filipino Retirement
Fund provide for benefits lower than those in the Labor Code. In fact,
the bank offers a retirement pay equivalent to one and one-half month
salary for every year of service, a rate over and above the one-half
month salary threshold provided by the law.
Moreover, although the Rules of the Banco Filipino Retirement Fund
do not grant a rounding off scheme, they nonetheless provide that
prorated credit shall be given for incomplete years, regardless of the
fraction of months in the retiree’s length of service.32 Hence, even if the
retiree rendered only a fraction of five months, the retiree shall still be
credited with retirement benefits based on the fraction of five months of
service actually rendered.
Notwithstanding the lack of a rounding-up provision, still, the higher
retirement pay, together with the prorated crediting, cannot be deemed
98
to be less favorable than that provided for by the law. Ultimately, the
more important threshold33 to be considered in construing whether the
retirement agreement provides less benefits, compared to those
provided by the Retirement Pay Law, is that the retirement benefits in
the said agreement should at least amount to one-half of the
employee’s monthly salary.
Therefore, considering that Lazaro is bound by the terms of the Rules
of the Banco Filipino Retirement Fund, it follows that he cannot claim
his 27 years and 10 months of work to be rounded off to 28 years in
order to obtain a higher retirement pay.
Attorney’s Fees and Profit Shares
Lazaro must establish a legal basis – either by law, contract or other
sources of obligations34 – to merit the receipt of the additional 10%
attorney’s fees collected in the various foreclosure procedures he
settled as the bank’s legal officer.
After a perusal of the instant Petition, we note that Lazaro has not
produced any contract or provision of law that would warrant the
payment of the additional attorney’s fees. Without any basis, therefore,
this Court sustains the rulings of the courts below that he is only entitled
to his salaries as the bank’s legal officer, because the services he
rendered in the foreclosure proceedings was part of his official tasks.35
Anent the claim for profit shares, the CA has already made a finding
that Lazaro received full payment thereof based on the
check,36 voucher,37 Withholding Tax Certificate38 and
Quitclaim39 attached by Banco Filipino. However, he points out that the
payment covered only his profit shares in 1984, 1994 and 1995; and,
hence, the bank reneged on it duty to give his shares from 1985 to 1993.
On this point, this Court cannot try the case anew to determine fully
whether the CA seriously erred in making a factual conclusion that
Lazaro received full payment of his profit shares. This Court is not a
trier of facts, and this doctrine applies with greater force to labor
cases.40 We generally do not weigh anew the evidence already passed
upon by the CA.41 In any event, Lazaro has not demonstrated that
Banco Filipino earned profits from 1985 to 1993, the very period during
which the bank was closed.
The records show that Banco Filipino’s allegation pertaining to its profit
shares for 1985 to 1993 remains unrefuted. 42 Considering that Lazaro
does not dispute its submission, we rule that he has failed to
substantiate the affirmative relief prayed for.
One-day salary differential and Lazaro’s claims for moral and
exemplary damages, attorney’s fees and expenses of suit
Prefatorily, Lazaro’s claims for one-day salary differential, which was
raised only before the CA, merits instant dismissal.1avvphi1 This ruling
is supported by basic considerations of due process, which prohibits
the raising of issues for the first time on appeal.43 Points of law, theories,
issues, and arguments not brought to the attention of the lower court
will not be considered by the reviewing court.44 To consider them would
be unfair to the adverse party, who would have no opportunity to
present contrary evidence as it could have done had it been aware of
the new theory at the time of the hearing before the trial court. 45
As for damages, attorney’s fees and expenses of the suit, the courts a
quo consistently did not grant, or even address, the claims of Lazaro.
But to finally write finis to this case, we hold that he is not entitled to
those reliefs.
To obtain moral damages, the claimant must prove the existence of bad
faith by clear and convincing evidence, for the law always presumes
good faith. It is not even enough that one merely suffered sleepless
nights, mental anguish and serious anxiety as the result of the
actuations of the other party.46
In this case, Lazaro did not state any moral anguish that he suffered.
Neither did he substantiate his imputations of malice to Banco Filipino.
He only made a sweeping declaration, without concrete proof, that the
bank in refusing his claim maliciously damaged his property rights and
interest.47 Accordingly, neither moral damages nor exemplary
damages48 can be awarded to him.
With respect to attorney’s fees, an award is proper only if the one was
forced to litigate and incur expenses to protect one’s rights and interest
by reason of an unjustified act or omission of the party for whom it is
sought.49 The award of attorney’s fees is more of an exception than the
general rule, since it is not sound policy to place a penalty on the right
to litigate.50
Here, Banco Filipino had a prima facie legitimate defense that, because
it underwent liquidation proceedings, it cannot be compelled to credit
that period to the retirement pay and profit shares of its employees. It
also rationalized that Lazaro cannot be additionally paid attorney’s fees
without showing any basis for the compensation. Considering that
Banco Filipino’s refusal cannot be accurately characterized as
unjustified, Lazaro cannot claim an award of attorney’s fees.
IN VIEW THEREOF, the assailed 23 January 2008 Decision and 12
November 2008 Resolution of the Court of Appeals in CA-G.R. SP No.
93145 are hereby AFFIRMED.
SO ORDERED.