LABOR I FINALS REVIEWER 2C
(Thanks to block B for laying down the ground
work)
(Some cases have been deleted since they are already
overturned or the case simply cannot be found even
with diligent search in good faith)
MEDICAL, DENTAL AND OCCUPATIONAL SAFETY
(added this since ma’am said she might include this)
Coverage – Book IV, Rule I, Section I, Omnibus
Rules
Applies to all employers, operating for profit or not,
including the Government and any of its political
subdivisions and government-owned or controlled
corporations, which employs in any workplace one or
more workers.
Art. 156 – First Aid Treatment
Every employer shall keep in his establishment such
first-aid medicines and equipment as the nature and
conditions of work may require, in accordance with
such regulations as the Department of Labor and
Employment shall prescribe. The employer shall take
steps for the training of a sufficient number of
employees in first-aid treatment.
Emergency Medical and Dental Services:
Art. 157 – When Required
It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental
attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the
number of employees exceeds fifty (50) but not more
than two hundred (200) except when the employer does
not maintain hazardous workplaces, in which case, the
services of a graduate first-aider shall be provided for
the protection of workers, where no registered nurse is
available. The Secretary of Labor and Employment shall
provide by appropriate regulations, the services that
shall be required where the number of employees does
not exceed fifty (50) and shall determine by appropriate
order, hazardous workplaces for purposes of this
Article;
(b) The services of a full-time registered nurse, a part-
time physician and dentist, and an emergency clinic,
when the number of employees exceeds two hundred
(200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and a
full-time registered nurse as well as a dental clinic and
an infirmary or emergency hospital with one bed
capacity for every one hundred (100) employees when
the number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall
engage the services of a physician or a dentist who
cannot stay in the premises of the establishment for at
least two (2) hours, in the case of those engaged on
part-time basis, and not less than eight (8) hours, in
the case of those employed on full-time basis. Where
the undertaking is non-hazardous in nature, the
physician and dentist may be engaged on retainer
basis, subject to such regulations as the Secretary of
Labor and Employment may prescribe to insure
immediate availability of medical and dental treatment
and attendance in case of emergency.
Art. 158 – When Not Required
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
The requirement for an emergency hospital or dental
clinic shall not be applicable in case there is a hospital
or dental clinic which is accessible from the employer’s
establishment and he makes arrangement for the
reservation therein of the necessary beds and dental
facilities for the use of his employees.
Art. 159
The physician engaged by an employer shall, in
addition to his duties under this Chapter, develop and
implement a comprehensive occupational health
program for the benefit of the employees of his
employer.
Art. 160
The physicians, dentists and nurses employed by
employers pursuant to this Chapter shall have the
necessary training in industrial medicine and
occupational safety and health. The Secretary of Labor
and Employment, in consultation with industrial,
medical, and occupational safety and health
associations, shall establish the qualifications, criteria
and conditions of employment of such health
personnel.
Art. 161 – Employer Assistance Obligation
It shall be the duty of any employer to provide all the
necessary assistance to ensure the adequate and
immediate medical and dental attendance and
treatment to an injured or sick employee in case of
emergency.
Enforcement/DOLE Obligations:
Art. 162
The Secretary of Labor and Employment shall, by
appropriate orders, set and enforce mandatory
occupational safety and health standards to eliminate
or reduce occupational safety and health hazards in all
workplaces and institute new, and update existing,
programs to ensure safe and healthful working
conditions in all places of employment.
Art. 163
It shall be the responsibility of the Department of Labor
and Employment to conduct continuing studies and
research to develop innovative methods, techniques
and approaches for dealing with occupational safety
and health problems; to discover latent diseases by
establishing causal connections between diseases and
work in environmental conditions; and to develop
medical criteria which will assure insofar as practicable
that no employee will suffer impairment or diminution
in health, functional capacity, or life expectancy as a
result of his work and working conditions.
Art. 164
The Department of Labor and Employment shall
develop and implement training programs to increase
the number and competence of personnel in the field of
occupational safety and industrial health.
Art. 165
(a) The Department of Labor and Employment shall be
solely responsible for the administration and
enforcement of occupational safety and health laws,
regulations and standards in all establishments and
workplaces wherever they may be located; however,
1
chartered cities may be allowed to conduct industrial
safety inspections of establishments within their
respective jurisdictions where they have adequate
facilities and competent personnel for the purpose as
determined by the Department of Labor and
Employment and subject to national standards
established by the latter.
(b) The Secretary of Labor and Employment may,
through appropriate regulations, collect reasonable fees
for the inspection of steam boilers, pressure vessels
and pipings and electrical installations, the test and
approval for safe use of materials, equipment and other
safety devices and the approval of plans for such
materials, equipment and devices. The fee so collected
shall be deposited in the national treasury to the credit
of the occupational safety and health fund and shall be
expended exclusively for the administration and
enforcement of safety and other labor laws
administered by the Department of Labor and
Employment.
Book IV, Rule II, Section 8, Omnibus Rules
(a) Every employer shall give to the Secretary of Labor
and Employment or his duly authorized representative
access to its premises and records at any time of the
day and night when there is work being undertaken
therein for the purpose of determining compliance with
the provisions of this Rule.
(b) Every establishment or workplace shall be inspected
at least once a year to determine compliance with the
provisions of this Rule. Special inspection visits,
however, may be authorized by the Regional Office to
investigate accidents, conduct surveys requested by the
Bureau of Working Conditions, follow-up inspection,
recommendations or to conduct investigations or
inspections upon request of an employer, worker or a
labor union in the establishment.
Book IV, Rule I, Omnibus Rules
Section 2
As used in this Rule, the following terms shall have the
meanings indicated hereunder unless the context
clearly indicates otherwise:
(a) "First-aid treatment" means adequate, immediate
and necessary medical and dental attention or remedy
given in case of injury or sudden illness suffered by a
worker during employment, irrespective of whether or
not such injury or illness is work-connected, before
more extensive medical and/or dental treatment can be
secured. It does not include continued treatment or
follow-up treatment for an injury or illness.
(b) "Work place" means the office, premises or work site
where the workers are habitually employed and shall
include the office or place where the workers who have
no fixed or definite work site regularly report for
assignment in the course of their employment.
(c) "First-aider" means any person trained and duly
certified as qualified to administer first aid by the
Philippine National Red Cross or by any other
organization accredited by the former.
Section 3
Every employer shall keep in or about his work place
the first-aid medicines, equipment and facilities that
shall be prescribed by the Department of Labor and
Employment within 5 days from the issuance of these
regulations. The list of medicines, equipment and
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
facilities may be revised from time to time by the
Bureau of Working Conditions, subject to the approval
of the Secretary of Labor and Employment.
Section 4
Any employer covered by this Rule shall provide his
employees medical and dental services and facilities in
the following cases and manner:
(a) When the number of workers is from 10 to 50 in a
work place, the services of a graduate first-aider shall
be provided who may be one of the workers in the work
place and who has immediate access to the first-aid
medicines prescribed in Section 3 of this Rule.
(b) Where the number of workers exceeds 50 but not
more than 200, the services of a full-time registered
nurse shall be provided. However, if the work place is
non-hazardous, the services of a full-time first-aider
may be provided if a nurse is not available.
(c) Where the number of workers in a work place
exceeds 200 but not more than 300, the services of a
full-time registered nurse, a part-time physician and a
part-time dentist, and an emergency clinic shall be
provided, regardless of the nature of the undertaking
therein. The physician and dentist engaged for such
work place shall stay in the premises for at least two (2)
hours a day; Provided, However, that where the
establishment has more than one (1) work shift a day,
the required two-hour stay shall be devoted to the work
shift which has the biggest number of workers and they
shall, in addition to the requirements of this Rule, be
subject to call at any time during the other work shifts
to attend to emergency cases.
(d) Where the number of workers in a hazardous work
place exceeds 300, the services of a full-time nurse, a
full-time physician, a full-time dentist, a dental clinic
and an infirmary or emergency hospital with one-bed
capacity for every 100 workers shall be provided. The
physician and dentist shall stay in the premises of the
work place for at least eight (8) hours a day; Provided,
However, that where the work place has more than one
(1) work shift a day, they shall be at work place during
the work shift which has the biggest number of workers
and they shall be subject to call at anytime during the
other work shifts to attend to emergency cases. Where
the undertaking in such a work place is non-hazardous
in nature, the employer may engage the services of a
part-time physician and a part-time dentist who shall
have the same responsibilities as those provided in
sub-section (c) of this Section, and shall engage the
services of a full-time registered nurse.
(e) In all work places where there are more than one (1)
work shift in a day, the employer shall, in addition to
the requirements of this Rule, provide the services of a
full-time first-aider for each workshift.
Section 5
An employer need not put up an emergency hospital or
dental clinic in the work place as required in these
regulations where there is a hospital or dental clinic
which is not more than five (5) kilometers away from
the work place if situated in any urban area or which
can be reached by motor vehicle in twenty-five (25)
minutes of travel, if situated in a rural area and the
employer has facilities readily available for transporting
a worker to the hospital or clinic in case of emergency:
Provided, That the employer shall enter into a written
contract with the hospital or dental clinic for the use
2
thereof in the treatment of workers in case of
emergency.
Section 6
The health personnel required to be hired by an
employer pursuant to the Code and these Rules shall
have the following minimum qualifications:
(a) A first-aider must be able to read and write and
must have completed a course in first-aid duly certified
by the National Red Cross or any other organization
accredited by the same.
(b) A nurse must have passed the examination given by
the Board of Examiners and duly licensed to practice
nursing in the Philippines and preferably with at least
fifty (50) hours of training in occupational nursing
conducted by the Department of Health, the Institute of
Public Health of the University of the Philippines or by
any organization accredited by the former.
(c) A physician, whether permanent or part-time, must
have passed the examinations given by the Board of
Examiners for physicians, is licensed to practice
medicine in the Philippines, and is preferably a
graduate of a training course in occupational medicine
conducted by the Bureau of Working Conditions, the
Institute of Public Health of the University of the
Philippines or any organization duly accredited by the
former.
(d) A dentist, whether permanent or part-time, must
have passed the examinations given by the Board of
Examiners for dentists, is licensed to practice dentistry
in the Philippines, and preferably has completed a
training course in occupational dentistry conducted by
the Bureau of Dental Health Services of the
Department of Health or any organization duly
accredited by the former.
Section 7
Nurses, physicians, and dentists employed by covered
employers on the date the Code becomes effective and
who do not possess the special training qualifications
provided in this Rule may attend the respective training
courses pertinent to their field of specialization. The
Bureau of Working Conditions shall initiate the
organization and carrying out of appropriate training
programs for nurses, physicians and dentists in
coordination with the government agencies or private
organizations referred to in the preceding Section.
Section 8
The Bureau of Working Conditions, shall, with the
approval of the Secretary of Labor and Employment,
issue from time to time a detailed list of hazardous
work places for purposes of this Rule, in addition to the
following:
(a) Where the nature of the work exposes the workers to
dangerous environmental elements, contaminations or
work conditions including ionizing radiations,
chemicals, fire, flammable substances, noxious
components and the like.
(b) Where the workers are engaged in construction
work, logging, fire-fighting, mining, quarrying, blasting,
stevedoring, dock work, deep-sea fishing and
mechanized farming.
(c) Where the workers are engaged in the manufacture
or handling of explosives and other pyrotechnic
products.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
(d) Where the workers use or are exposed to heavy or
power-driven machinery or equipment.
(e) Where the workers use or are exposed to power-
driven tools.
Section 9
The physician engaged by an employer pursuant to this
Rule shall, in addition to providing medical services to
the workers in cases of emergency, perform among
others, the following duties:
(a) Conduct pre-employment medical examination, free
of charge, for the proper selection and placement of
workers;
(b) Conduct free of charge annual physical examination
of the workers;
(c) Collaborate closely with the safety and technical
personnel of the establishment to assure selection and
placement of workers from the standpoint of physical,
mental, physiological and psychological suitability,
including investigation of accidents where the probable
causes are exposure to occupational health hazards;
and
(d) Develop and implement a comprehensive
occupational health program for the employees of the
establishment. A report shall be submitted annually to
the Bureau of Working Conditions describing the
program established and the implementation thereof.
Section 10
(a) The employer shall furnish the Bureau of Working
Conditions with copies of all contracts of employment
of medical personnel and contracts with hospitals or
clinics as provided in Section 5 of this Rule.
(b) The employer shall maintain a record of all medical
examinations, treatments and medical activities
undertaken.
(c) The employer shall submit reports in such form, and
containing such information, as the Bureau of Working
Conditions may require from time to time.
Occupational Safety and Health Standards, training
of supervisor/technician: Book IV, Rule II, Section
5 (a)(d), Omnibus Rules – When Required
Every employer shall take steps to train a sufficient
number of his supervisors or technical personnel in
occupational safety and health. An employer may
observe the following guidelines in the training of his
personnel:
(a) In every non-hazardous establishment or workplace
having from fifty (50) to four hundred (400) workers
each shift, at least one of the supervisors or technical
personnel shall be trained in occupational health and
safety and shall be assigned as part-time safety man.
Such safety man shall be the secretary of the safety
committee.
(d) In every hazardous establishment or workplace
having over two hundred (200) workers each shift, at
least two of its supervisors or technical personnel shall
be trained and one of them shall be appointed full-time
safety man and secretary of the safety committee
therein.
Book IV, Rule II, Section 5 (e), Omnibus Rules –
When Not Required
Every employer shall take steps to train a sufficient
number of his supervisors or technical personnel in
3
occupational safety and health. An employer may
observe the following guidelines in the training of his
personnel:
(e) The employment of a full-time safety man not be
required where the employer enters into a written
contract with a qualified consulting organization which
shall develop and carry out his safety and health
activities; Provided, That the consultant shall conduct
plant visits at least four (4) hours a week and is subject
to call anytime to conduct accident investigations and
is available during scheduled inspections or surveys by
the Secretary of Labor and Employment or his
authorized representatives.
III. EMPLOYEE CLASSIFICATION
Art. 278 – Coverage: The provisions of this Title shall
apply to all establishments or undertakings, whether
for profit or not.
Employee Classification:
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.
Art. 281 - Probationary employment. - Probationary
employment shall not exceed six (6) months from the
date the employee started working, unless it is covered
by an apprenticeship agreement stipulating a longer
period. The services of an employee who has been
engaged on a probationary basis may be terminated for
a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards
made known by the employer to the employee at the
time of his engagement. An employee who is allowed to
work after a probationary period shall be considered a
regular employee.
a. Employer Recognition – (Romares v.
NLRC)
2 kinds of regular employees:(1) those who are engaged
to perform activities which are necessary or desirable in
the usual business or trade of the employer; and (2)
those casual employees who have rendered at least one
year of service, whether continuous or broken, with
respect to the activity in which they are employed.
During each rehiring, the summation of which
exceeded 1 year, petitioner was assigned to perform the
same kind of maintenance... Such a continuing need for
the services of petitioner is sufficient evidence of the
necessity and indispensability of his services to
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
PILMICO's business or trade. The fact that petitioner
was employed with another company in the
interregnum from January to April, 1992 is of no
moment.
b. Employer
Determination/Designation
Regardless of the designation petitioner may have
conferred upon respondent's employment status, it is
uncontroverted that the latter, having completed the
probationary period and allowed to work thereafter,
became a regular employee who may be dismissed
only for just or authorized causes. (Phil. Federation
v. NLRC)
Criteria to determine project employees: (1) they are
hired for a specific project, (2) the completion of such
project has been determined at the time of engagement.
The completion or termination of the project for which
petitioners were hired was not determined at the start
of their employment – no specific mention of the period
or duration when the project will be completed. The
date of coverage was left blank. The employment was
not subject to a term but rather to a condition which is
“progress accomplishment”. The workers here should
be considered as regular employees despite their
admissions and declarations to the contrary. Failure
to comply with P.I. # 20 = failure of an employee to
report to the nearest Public Employment Office the
termination of its workers’ services every time project
thereof is completed indicates that said workers are not
project employees. (Violeta v. NLRC)
It is of no moment that petitioner was told when he was
hired that his employment would only be casual, that he
was paid through cash vouchers, and that he did not
comply with regular employment procedure. What
determines whether a certain employment is regular or
casual is not the will and word of the employer much
less the procedure of hiring the employee or the
manner of paying his salary. It is the nature of the
activities performed in relation to the particular business
or trade considering all circumstances, and in some
cases the length of time of its performance and its
continued existence. (De Leon v. NLRC)
c. Management Prerogative
Industrial Timber Corp. vs. Ababon (Mar 2006)
Facts
1. Petitioner notified its workers and DOLE of a “no
plant operation” in its plywood plant.
2. 3 months later, Pet notified its workers and DOLE
that the plant would shut down due to non-renewal of
anti pollution permit and all the workers would be laid
off.
3. 2 months after, there was a final notice of closure or
cessation of business.
4. Plant workers filed a complaint for illegal dismissal,
unfair labor practice and damages
Issue
WON the closure was valid?
Held
Yes, the closure was valid although the notice
requirement was not strictly complied with
Ratio/Doctrine
4
1. Employers are accorded rights and privileges to
assure self-determination, independence and
reasonable return of capital
2. This mass of privileges comprises the so-called
management prerogatives
3. Though broad & unlimited in scope, the State has
the right to determine whether the exercise of such is
in a manner that complies with legal requirements and
does not offend protected rights of labor
4. Right to close an establishment = employer’s
right
5. Art. 283 states that a closure can be a valid basis for
termination provided the 3 requirements are complied
with (see business closure chapter)
Management prerogative is not absolute. While
management is in the best position to know its
operational needs, the exercise of management
prerogative cannot be utilized to circumvent the law
and public policy on labor and social justice.
Prerogative accorded management could not defeat the
very purpose for which our labor laws exist: to
balance the conflicting interests of labor and
management, not to tilt the scale in favor of one over
the other, but to guaranty that labor and management
stand on equal footing when bargaining in good faith
with each other. Management prerogative must be
exercised always with the principles of fair play at heart
and justice in mind. (PAL v. Pascua)
Perez vs. Medical City (Jan 2006)
Facts
1. 2 orderlies were caught pilfering hospital property
and were thus terminated.
2. The pilfered items were found in the orderlies’
lockers despite the hospital policy that hospital
property is not to be kept in employees lockers.
Issue
WON dismissal was appropriate
Held
No, dismissal is not proportionate to the gravity of the
offense.
Ratio/Doctrine
1. The power to dismiss is a recognized prerogative
inherent in the employer’s right to freely manage and
regulate his business.
2. An employer cannot be compelled to employ a
person whose service will be inimical to his interest
3. Dismissal is a measure of self protection
4. However, this right is subject to reasonable
regulation by the State through its police power
A. REGULAR EMPLOYEES
 Perform activities which are usually necessary
or desirable in the usual business or trade of
the employer… (exceptions)
 Rendered at least 1 year of service, whether
such service is continuous or broken with
respect to the activity in which he is employed
 Employee who is allowed to work after a
probationary period
 Learners who have been allowed or suffered to
work during the first 2 months if training is
terminated by the employer before the end of
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
the stipulated period through no fault of the
learners
Art 75(d) - Learnership agreement includes a
commitment to employ the learners if they so desire, as
regular employees upon completion of the learnership.
Sectiion 5(a)(b), Book VI, Rule I, Omnibus Rules
(a) The provisions of written agreements to the
contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be
considered to be regular employment for purposes of
Book VI of the Labor Code 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.
(b) Employment shall be deemed as casual in nature 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 not,
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.
Section 6, Book VI, Rule I, Omnibus Rules
(a) Where the work for which an employee has been
engaged is learnable or apprenticeable in accordance
with the standards prescribed by the Department of
Labor, the probationary employment period of the
employee shall be limited to the authorized learnership
or apprenticeship period, whichever is applicable.
(b) Where the work is neither learnable nor
apprenticeable, the probationary employment period
shall not exceed six (6) months reckoned from the date
the employee actually started working.
(c) The services of an employee who has been engaged
on probationary basis may be terminated only for a just
cause or when authorized by existing laws, or when he
fails to qualify as a regular employee in accordance
with reasonable standards prescribed by the employer.
(d) In all cases involving employees engaged on
probationary basis, the employer shall make known to
the employee the standards under which he will qualify
as a regular employee at the time of his engagement.
Nature of Work
The primary standard of determining regular
employment is the reasonable connection between
the particular activity performed by the employee
in relation to the usual business or trade of the
employer. The test is whether the former is usually
necessary or desirable in the usual business or trade of
the employer. The connection can be determined by
considering the nature of the work performed and its
relation to the scheme of the particular business or
trade in its entirety. 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
permanence as sufficient evidence of the necessity if
5
not indispensability of that activity to the business. The
employment is also considered regular, but only with
respect to such activity and while such activity exists.
Regular employees are classified into 2: by nature of
work & by years of service. Based on the successive
contracts of employment entered into between the
parties, it is clear that the work of the employees were
usually necessary &/or desirable in the usual
trade/business of Ganzon. They also worked for more
than a year already in the company. Finally, despite
the stipulation in the contracts about the designation
of the employees as merely project employees, the court
can still come in if it is clearly shown that the
designation of said periods was merely intended to
preclude the employees from acquiring tenurial
security. (Ganzon v. NLRC)
Private respondents were rendering services necessary
to the day-to-day operations of petitioner PHCCI. This
fact alone qualified them as regular employees. One’s
regularity of employment is not determined by the
number of hours one works but by the nature and by
the length of time one has been in that particular job.
(Perpetual Help Credit v. Faburada)
To be considered as seasonal employees, 2 conditions
must concur: 1.) services performed are occasional in
nature; 2.) the work is only for the duration of 1
season. Respondents were repeatedly assigned in the
same line of work (sugarcane workers) for more than
one season. The sudden changes in work assignments
reeked of bad faith. These changes were implemented
immediately after respondents had organized
themselves into a union and started demanding
collective bargaining. (Hacienda Fatima v. National
Fed. Of Sugarcane Workers)
Big AA Manufacturer vs. Antonio
Facts
1. Respondents worked as carpenters for Petitioner’s
office furniture manufacturing company but their
services were terminated, prompting this case.
2. Petitioner argues that respondents are not regular
employees since they were only project employees who
worked for respondent Antonio, who was an
independent contractor
Issue
WON the respondent are regular employees?
Held
Respondents are regular employees
Ratio/Doctrine
1. Respondents were all employed for more than 1 year
and their work as carpenters were necessary or
desirable in petitioner’s usual trade or business of
making furniture.
2. Based on Art. 280, the test to determine regular or
non-regular status is: “the reasonable connection
between the particular activities performed by the
employee in relation to the usual business or trade of
the employee
3. Though some functions performed for more than 1
year which are desirable or usual do not necessarily
equate to regular employment (ex. Project, seasonal), no
proof was presented that Respondents were such
4. Respondent Antonio could not be an independent
contractor since he was under the control &
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
supervision of the petitioner, worked in the latter’s
premises and used the latter’s tools.
Poseidon Fishing vs. NLRC
Facts
1. Petitioner is a company engaged in deep-sea fishing.
Respondent was hired as a Radio Operator.
2. One 1 occasion, respondent failed to record a call in
one of the logbooks but recorded it in another. He
remedied the mistake soon after he noticed it.
3. Petitioner terminated respondent since the former
noticed the discrepancy and the latter’s explanation
was deemed insufficient.
4. Respondent filed a case for illegal termination. Pet’s
defense was that Resp. was only a contractual or
casual employee since he was paid “por viaje”.
Issue
WON respondent was a regular employee?
Held
Yes, respondent was a regular employee
Ratio/Doctrine
1. If a project employee is:
- continuously rehired by the employer for the
same task or nature of tasks
- these tasks are vital, necessary, indispensable to
the usual business or trade of the employer
= then he is deemed a regular
2. Resp.’s job as a Captain/Radio Operator, for 12
years, was necessary, important and directly related
to deep-sea fishing business of Pet. = he is a regular
employee.
3. Resp. was repeatedly re-hired and the alleged
“Kasunduan” contracts, were meant to circumvent
security of tenure of Resp.
4. Kasunduan did not specify the duration of the
work or the specific project. (Case had a lot of
reference to Brent.)
Extended Period –
The principal test in determining whether particular
employees are “project employees” as distinguished
from “regular employees” is whether the project
employees are assigned to carry out “specific project or
undertaking” the duration (and scope) of which are
specified at the time the employees are engaged for the
project. “Project” in the realm of business and
industry refers to a particular job or undertaking that
is within the regular or usual business of employer, but
which is distinct and separate and identifiable as such
from the undertakings of the company.
The repeated re-hiring and the continuing need for
their services over a long span of time (shortest at 7
yrs) made them regular employees. While length of time
may not be a controlling test for project employment, it
can be a strong factor in determining whether the
employee was hired for a specific undertaking or in fact
tasked to perform functions which are vital, necessary
and indispensable to the usual business or trade of the
employer. (Tomas Lao Construction v. NLRC)
Repeated Renewal of Contract –
An employment may only be said to be “temporary”
where it has been fixed for a specific undertaking the
completion of or termination of which has been
determined at the time of the engagement of the
employee or where the completion of or termination of
which has been determined at the time of the
6
engagement of the employee or where the work or
services to be performed is seasonal in nature and the
employment is for the duration of the season. A
probationary employee is “considered a regular
employee” if he has been “allowed to work after
probationary period.” The fact that her employment has
been a contract-to-contract basis can not alter the
character of employment, because contracts can not
override the mandate of law. By operation of law, she
has become a regular employee. (Beta Electric Corp.
v. NLRC)
B. PROJECT EMPLOYEES
 Employment is fixed for a specific project or
undertaking and its completion or termination
has been determined at the time of the
engagement of the employee
 Strictly speaking, seasonal employees are NOT
project employees…
(Policy Instructions No. 20 of 1977 and D.O. No. 19 of
1993 – pls refer to cases… couldn’t find them.)
Definition
Principal test for determining whether an employee is a
project employee or a regular employee is whether the
project employee was assigned to carry out a specific
project or undertaking, the duration and scope of
which were specified at the time the employee was
engaged for that project.
A project employee is one whose 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. (Imbuido v. NLRC)
When the workers’’ employment contracts attest to the
fact that they had been hired for specific projects, and
their employment was coterminous with the completion
of the project for which they had been hired...
(Association of Trade Union v. Comm. Abella)
When employees are continuously employed in spite of
the alleged completion of the projects in which they
have been hired, then they are deemed as regular
employees, given the nature of their job and the
employer’s main line of business. Petitioners were
continuously employed from the date of hiring up to
dismissal. They worked not only in one special project
but also variably in other projects/jobsites. The very
nature of the employer’s business indicates that it can
hardly fall under the exception to Policy Instruction #
20 that applies to the construction industry. Regular
employees cannot at the same time be project employees.
(Magcalas v. NLRC)
Project Employment
Where 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… Policy Instruction # 20: Project
employees are those employed in connection with a
particular construction project. They are not entitled to
termination pay if they are terminated as a result of the
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
completion of the project or any phase thereof in which
they are employed regardless of the number of the
projects they have been employed by a particular
construction company. The company is not required to
obtain clearance from the Secretary of Labor in
connection with such termination. Non-project (regular)
employees are those employed by a construction
company without reference to any particular project.
(Sandoval Shipyards v. NLRC)
When an employee was assigned to perform same tasks
which are usually necessary or desirable in the usual
business or trade of the employer and when the
assignments did not end on a project to project basis, –
although the contrary was made to appear via the
signing of separate contracts allegedly for different
projects – such employee is a REGULAR employee.
(Magante v. NLRC)
The proviso in the second paragraph of Article 280 of
the Labor Code has recently been explained in Mercado
v. NLRC where it was held that said proviso deems as
regular employees only those "casual" employees who
have rendered at least one year of service regardless of
the fact that such service may be continuous or
broken. It is NOT APPLICABLE to "project"
employees, who are specifically excepted
therefrom. A careful reading of the proviso readily
discloses that the same relates to employment where
the employee is engaged to perform activities that are
usually necessary or desirable in the usual business or
trade of the employer but hastens to qualify that
project employment is specifically exempted therefrom.
(Fernandez v. NLRC)
Petitioner has not shown that private respondents were
hired for a specific project the duration of which had
been determined at the time of hiring. More
importantly, petitioner has not presented the
termination reports required to be submitted to the
Department of Labor and Employment Regional Office
every time his employees' services were terminated
upon completion of a project. Reading Policy
Instructions No. 20 it is clear that respondents were
non-project employees. As mason, carpenter and
laborer, they performed work necessary and desirable
in the usual business of petitioner, and are thus
deemed regular employees. (Uy v. NLRC)
The Court then distinguished two kinds of projects
which a business or industry may undertake. First, "a
project could refer to a particular job or undertaking that
is within the regular or usual business of the employer
company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the
company." The example given is a construction
company that may undertake two or more "projects" at
the same time in different places. Second, a project
may refer to "a particular job or undertaking that is not
within the regular business of the corporation. Such a job
or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations
of the employer. The job or undertaking also begins and
ends at determined or determinable times." The fact
that petitioners were required to render services
necessary or desirable in the operation of NSC's
business for a specified duration did not in any way
7
impair the validity of their contracts of employment which
stipulated a fixed duration therefor. Length of service is
not the controlling determinant of the employment
tenure of a project employee. (Villa v. NLRC)
Application of Rule in Non- Construction Industries
– (Maraguinot v. NLRC)
While Lao admittedly involved the construction
industry, to which Policy Instruction No.
20/Department Order No. 19 regarding work pools
specifically applies, there seems to be no impediment to
applying the underlying principles to industries other
than the construction industry. Neither may it be argued
that a substantial distinction exists between the
projects undertaken in the construction industry and
the motion picture industry. On the contrary, the
raison d' etre of both industries concern projects
with a foreseeable suspension of work.
C. CASUAL EMPLOYEES
 Not REGULAR but can be after employment of
1 year whether such is continuous or broken –
“regularity” attaches to a particular activity
before passage of 1 year (REGULAR CASUAL
Employee)
 Not Seasonal (or Project)
 Passage of time is of the essence
Sectiion 5(b), Book VI, Rule I, Omnibus Rules
(b) Employment shall be deemed as casual in nature 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 not,
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.
Nature of Work – (A.M. Oreta & Co. v. NLRC)
Art. 281 of the Labor Code is clear to the effect that in
all cases involving employees engaged on probationary
period basis, the employer shall make known to the
employee at the time he is hired, the standards by
which he will qualify as a regular employee. Nowhere
in the employment contract executed between
petitioner company and respondent Grulla is there
a stipulation that the latter shall undergo a
probationary period for 3 months before he can
qualify as a regular employee. There is also no
evidence on record showing that the respondent
Grulla has been appraised of his probationary status
and the requirements which he should comply in
order to be a regular employee. In the absence of
these requisites, there is justification in concluding
that respondent Grulla was a regular employee at the
time he was dismissed by petitioner. As such, he is
entitled to security of tenure during his period of
employment and his services cannot be terminated
except for just and authorized causes enumerated
under the Labor Code and under the employment
contract.
One Year Service
A temporary or casual employee, under Article 218
of the Labor Code, becomes regular after service of
one year, unless he has been contracted for a
specific project. It cannot be said that merchandising
is a specific project for the obvious reason that it is an
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
activity related to the day-to-day operations of
California. The records show that the petitioners had
been given an initial six-month contract, renewed for
another six months. Accordingly, under Article 281 of
the Code, they had become regular employees-of-
California-and had acquired a secure tenure. Hence,
they cannot be separated without due process of law.
(Tabas v. California Manufacturing)
While the actual regularization of these employees
entails the mechanical act of issuing regular
appointment papers and compliance with such other
operating procedures, as may be adopted by the
employer, it is more in keeping with the intent and
spirit of the law to rule that the status of regular
employment attaches to the casual employee on
the day immediately after the end of his first year
of service. (Phil. Geothermal v. NLRC)
…the planting of rice and sugar cane does not entail
a whole year operation, the area in question being
comparatively small. Policy Instruction No. 12 of the
Department of Labor and Employment discloses that
the concept of regular and casual employees was
designed to put an end to casual employment in
regular jobs, which has been abused by many
employers to prevent called casuals from enjoying
the benefits of regular employees or to prevent
casuals from joining unions. The same instructions
show that the proviso in the second paragraph of Art.
280 was not designed to stifle small-scale businesses
nor to oppress agricultural land owners to further the
interests of laborers, whether agricultural or industrial.
What it seeks to eliminate are abuses of employers
against their employees and not, as petitioners would
have us believe, to prevent small-scale businesses from
engaging in legitimate methods to realize profit. Hence,
the proviso is applicable only to the employees who
are deemed "casuals" but not to the "project"
employees nor the regular employees treated in
paragraph one of Art. 280. Clearly, therefore,
petitioners being project employees, or, to use the
correct term, seasonal employees, their employment
legally ends upon completion of the project or the
season. The termination of their employment cannot
and should not constitute an illegal dismissal.
(Mercado v. NLRC)
D. FIXED-TERM EMPLOYEES
 Under the Labor Code: Seasonal and Project
Employees
 Under the Civil Code: Includes Employment
which both Employer and Employee, by free
choice, have assigned a specific date of
termination (see Brent School v. Zamora) (ex.
Overseas Contract Workers)
The decisive determinant in term employment should
not be the activities that the employee is called upon to
perform, but the day certain agreed upon by the
parties for the commencement and termination of
their employment relationship, a day certain being
understood to be "that which must necessarily come,
although it may not be known when. Of course, the
term — period has a definite and settled signification. It
means, "Length of existence; duration. A point of time
marking a termination as of a cause or an activity; an
8
end, a limit, a bound; conclusion; termination. A series
of years, months or days in which something is
completed. A time of definite length. . . . the period from
one fixed date to another fixed date . . ." It connotes a
"space of time which has an influence on an obligation
as a result of a juridical act, and either suspends its
demandableness or produces its extinguishment."
Under the Civil Code, therefore, and as a general
proposition, fixed-term employment contracts are not
limited, as they are under the present Labor Code, to
those by nature seasonal or for specific projects with pre-
determined dates of completion; they also include those
to which the parties by free choice have assigned a
specific date of termination. There can of course be no
quarrel with the proposition that where from the
circumstances it is apparent that periods have been
imposed to preclude acquisition of tenurial security by
the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc.
But where no such intent to circumvent the law is
shown, or stated otherwise, where the reason for the
law does not exist, e.g., where it is indeed the employee
himself who insists upon a period or where the nature
of the engagement is such that, without being seasonal
or for a specific project, a definite date of termination is
a sine qua non, would an agreement fixing a period be
essentially evil or illicit, therefore anathema? Would
such an agreement come within the scope of Article
280 which admittedly was enacted "to prevent the
circumvention of the right of the employee to be
secured in his employment? (Brent School v. Zamora)
Even if, as admitted by the parties, petitioners were
repeatedly and successively re-hired on the basis of a
contact of employment for more than one year, they
cannot be considered regularized. Length of service is
not the controlling determinant of the employment
tenure of a project employee. As stated earlier, it is
based on whether or not the employment has been
fixed for a specific project or undertaking, the
completion of which has been determined at the
time of the engagement of the employee.
(Palomares v. NLRC)
Poseidon Fishing vs. NLRC
Facts
1. Petitioner is a company engaged in deep-sea fishing.
Respondent was hired as a Radio Operator.
2. One 1 occasion, respondent failed to record a call in
one of the logbooks but recorded it in another. He
remedied the mistake soon after he noticed it.
3. Petitioner terminated respondent since the former
noticed the discrepancy and the latter’s explanation
was deemed insufficient.
4. Respondent filed a case for illegal termination. Pet’s
defense was that Resp. was only a contractual or
casual employee since he was paid “por viaje”.
Issue
WON respondent was a regular employee?
Held
Yes, respondent was a regular employee
Ratio/Doctrine
1. If a project employee is:
- continuously rehired by the employer for the
same task or nature of tasks
- these tasks are vital, necessary, indispensable to
the usual business or trade of the employer
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
= then he is deemed a regular
2. Resp.’s job as a Captain/Radio Operator, for 12
years, was necessary, important and directly related
to deep-sea fishing business of Pet. = he is a regular
employee.
3. Resp. was repeatedly re-hired and the alleged
“Kasunduan” contracts, were meant to circumvent
security of tenure of Resp.
4. Kasunduan did not specify the duration of the work
or the specific project. (Case had a lot of reference to
Brent.)
E. SEASONAL EMPLOYEES
 Work or service to be performed is seasonal in
nature and the employment is for the duration
of the season.
Phil. Tobacco vs. NLRC
Facts
1. Petitioner sent a notice of permanent closure of the
tobacco re-drying plant to its workers.
2. There were 2 sets of workers:
Lubat Group – those who worked before the 1994
season
Luris Group – those who worked during the 1994
season
3. The Lubat Group was not awarded separation pay
since Pet says they were only seasonal workers who
weren’t hired during the 1994 season which led to the
closure.
Issue
WON Lubat group, being seasonal workers, are entitled
to separation pay?
Held
Yes, they are entitled to separation pay
Ratio/Doctrine
1. Seasonal workers who are re-hired from time to
time and are temporarily laid off during the off
-season are not separated from service in said
period but are merely considered on leave of
absence without pay.
2. This is not inconsistent with Art. 280 since a
seasonal worker may be considered as “in regular
employment” in cases involving determination of an
EM-EE relationship and security of tenure
3. Lubat group’s EM-EE relationship with Pet was not
terminated when the latter hired the Luris group for the
1994 season. Lubat was only considered “on leave” but
still in the employ of the Pet.
4. This does not contradict the Mercado doctrine
since in that case, the seasonal workers performed
different phases of agricultural work and were
allowed to work for other farms.
F. PROBATIONAL EMPLOYEES
 Employment with a probationary (testing
period – generally for the employer to see if
worker is qualified for permanent employment)
 Shall not exceed 6 months from date
employee started working unless covered by an
apprenticeship agreement with a longer period
 Terminated for just cause or failure to qualify
as a regular employee according to reasonable
9
 standards made known by the employer to the
employee at the time of engagement
 Employee who is allowed to work after a
probationary period shall be considered a
regular employee
Art 61 (2nd sentence) - The period of apprenticeship
shall not exceed six months.
Sectiion 5(b), Book VI, Rule I, Omnibus Rules
(b) Employment shall be deemed as casual in nature 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 not,
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.
Art 75 (d) - Any employer desiring to employ learners
shall enter into a learnership agreement with them,
which agreement shall include: (d) A commitment to
employ the learners if they so desire, as regular
employees upon completion of the learnership. All
learners who have been allowed or suffered to work
during the first two (2) months shall be deemed regular
employees if training is terminated by the employer
before the end of the stipulated period through no fault
of the learners.
Definition and Purpose
It is settled that while probationary employees do not
enjoy permanent status, they are entitled to the
constitutional protection of security of tenure. Their
employment may only be terminated for just cause
or when they fail to qualify as regular employees in
accordance with reasonable standards made known
to them by their employer at the time of
engagement, and after due process. Being in the
nature of a “trial period,” the essence of a probationary
period of employment fundamentally lies in the purpose
or objective sought to be attained by both the employer
and the employee during said period. While the
employer observes the fitness, propriety and efficiency of
a probationer to ascertain whether he is qualified for
permanent employment, the probationer, on the other
hand, seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for
permanent employment which obviously were made
known to him.
(Cebu Marine Beach Resort v. NLRC)
Section 2, Rule VII, of the Rules Implementing the Civil
Service Law reads: “Section 2. Original appointment
refers to initial entry into the career service under a
permanent status of a person who meets all the
requirements of the position including the civil service
eligibility. All such persons must serve a probationary
period of six (6) months following their original
appointment and shall undergo a thorough character
investigation. A probationer may be dropped from the
service for unsatisfactory conduct or want of capacity
anytime before the expiration of the probationary
period: Provided, that such action is appealable to the
Commission.” A probationary appointment is intended
to afford the employer an opportunity to observe the
skill, competence and attitude of a probationer (citing
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Escorpizo vs. University of Baguio). (Lucero v. CA)
Duration Rule/Exception
A probationary employee is one who, for a given period
of time, is under observation and evaluation to
determine whether or not he is qualified for permanent
employment. During the probationary period, the
employer is given the opportunity to observe the skill,
competence and attitude of the employee while the
latter seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for
permanent employment. The length of time is
immaterial in determining the correlative rights of
both the employer and the employee in dealing
with each other during said period. There is no
dispute that petitioner, as a probationary employee,
enjoyed only temporary employment status. This meant
that he was terminable anytime, permanent employment
not having been attained in the meantime. The employer
could well decide he no longer needed the probationary
employee’s services or his performance fell short of
expectations, etc. As long as the termination was made
before the expiration of the six-month probationary
period, the employer was well within his rights to sever
the employer-employee relationship. A contrary
interpretation would defect the clear meaning of the
term “probationary.” (De la Cruz v. NLRC)
Security guard of 1 year of sister company was rehired
by A’ Prime, assigned to the same post and worked as
such for 6 months. Thus he has attained regular
employment status and cannot be terminated unless
for a just or authorized cause. The act of transferring
an employee from one company to another whose
owners are the same or identical deprives such worker
of the benefits and protections he is entitled to under
the law and thus cannot be sanctioned. (A’ Prime
Security Services v. NLRC)
Extension of Contract – (Phil. Federation v. NLRC)
While the initial statements of the contract show that
respondent's employment was for a fixed period, the
succeeding provisions thereof contradicted the same
when it provided that respondent shall be under
probationary status commencing on February 17, 1990
and ending six (6) months thereafter. The terms of the
contract are so ambiguous as to preclude a precise
application of the pertinent labor laws. Where a
contract of employment, being a contract of adhesion,
is ambiguous, any ambiguity therein should be
construed strictly against the party who prepared it.
Article 1702 of the Civil Code provides that in case of
doubt, all labor contracts shall be construed in favor of
the laborer.
Absorbed Employees – (Cebu Stevedoring Co. v.
Regional Director)
Well-trained employees cannot be considered
probationary employees. A probationary period of
employment means that a worker is hired for training
for a certain period to determine if he qualifies for a
position or not. Workers herein cannot be considered
as such (CSCI herein absorbed them after CCAS, which
hired them for the same functions, was abolished).
They have been holding the same position for a long
time before they were absorbed for work in the same
1
capacity; they were already well-trained in their
functions.
Standards (Not determined) – (Orient Express v.
NLRC)
No standard whatsoever by which such probationary
period could be hurdled was specified and made known
to him. Due process dictates that an employee be
apprised beforehand of the condition of his employment
and of the terms of advancement therein. Implicit in
Art. 281 is the requirement that reasonable
standards be previously made known by the
employer to the probationary employee at the time
of his engagement, as correctly suggested by the
POEA. Such an essential requirement was not met by
petitioner, even assuming that Flores' alleged
unsatisfactory performance was true. Besides,
unsatisfactory performance is not one of the just
causes for dismissal under the Labor Code.
Private School Teachers Rule
Legal requisites for acquisition by a teacher of
permanent employment, of security of tenure: 1) the
teacher is a full time teacher; 2) The teacher must have
rendered three consecutive years of service; and 3)
such service must have been satisfactory.
Manual of Regulations also states that "a full-time
teacher" is "one whose total working day is devoted
to the school, has no other regular remunerative
employment and is paid on a regular monthly basis
regardless of the number of teaching hours"; and
that in college, the normal "teaching load of a full-time
instruction shall be eighteen hours a week". The
standards by which the service of the probationary
teacher may be adjudged satisfactory so that he may
acquire permanence in his employment or security of
tenure, are set by the school. The setting of those
standards, and the determination of whether or not they
have been met, have been held with this Court to be
prerogative of the school, consistent with academic
freedom and constitutional autonomy by which
educational institutions have the right to choose who
should teach. (La Sallete of Santiago v. NLRC)
However, the provisions of Article 280 of the Labor
Code are clear. It categorically bestows upon a
probationary employee a permanent status only
when he is allowed to work after the probationary
period. As applied to private school teachers, the
probationary period is three years as provided in the
Manual of Regulations for private Schools. It must be
stressed that the law speaks of three years NOT
three schoolyears. Further, the Faculty Manual of
petitioner underscores the completion of three years of
continuous service at CSA before a probationary
teacher acquires tenure. Hence, the complainant
cannot claim any vested right to a permanent
appointment since she had not yet achieved the
prerequisite three-year period under the Manual of
Regulation for Private Schools and the Faculty Manual
of petitioner.
(Colegio de San Agustin v. NLRC)
No person shall be allowed to engage in teaching
and/or act as a teacher unless he has registered as
professional teacher with the National Board for
Teachers. To be eligible as professional teacher, one
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
must have passed the board examination for teachers
or the examinations given by the Civil Service
Commission or jointly by the Department of Education,
Culture & Sports and the Civil Service Commission. -
DECS Order No. 38, series of 1990. Undoubtedly, the
requirement of passing the PBET before one could
become a regular employee as prescribed by
respondent university is legally in order. Being a
prerequisite imposed by law, such requirement could
not have been waived by respondent university, as
herein insisted by petitioners.
(Escorpizo v. Univ. of Baguio)
IV. TERMINATION OF EMPLOYMENT
A. GENERAL CONCEPTS
Coverage
Art. 278 - The provisions of this Title shall apply to all
establishments or undertakings, whether for profit or
not.
Termination of employment (coverage) – Lopez v. NLRC
Facts:
La Union Transport Services Cooperative (LUTRASCO)
appointed Lopez as General Manager on probationary
status but barely 4 months later, he was terminated on
the grounds of (1) loss of trust and confidence and (2)
unsatisfactory performance. Lopez filed a complaint for
illegal dismissal with labor arbiter. Labor arbiter found
the termination illegal as the charges made against
Lopez were baseless. LA ordered reinstatement with
backwages and payment of damages. NLRC affirmed
the illegality of the termination but modified the LA’s
decision as to the reinstatement and award of
backwages and damages.
Issue / Held:
WON probationary employees are also accorded the
right to security of tenure - YES
Ratio:
1. legal basis
- ArtXIII, Sec3 of the 1983 Constitution specific-
ally stipulate that the State “shall guarantee
the rights of ALL workers to… security of ten-
ure...” and the same does not distinguish as to
the kind of worker entitled to this protection 
necessarily includes even probationary employ-
ees
- Art. 281 of the Labor Code: employee on a pro-
bationary basis may be terminated for a just
cause or when he fails to qualify as a regular
employee in accordance w/ reasonable stand-
ards made known by the employer to the em-
ployee at the time of engagement
2. jurisprudence: Manila Hotel Corp v. NLRC
- limitations on the power of employer to termin-
ate a probationary employment contract
a. must be exercised in accordance with the specific
requirements in the contract (ie: period or notice
requirement that may have been stipulated in the
contract)
b. dissatisfaction of the employer must be real and in
good faith; not feigned to circumvent the contract
or the law
c. there must be no unlawful discrimination in the
dismissal
1

Equitable Bank vs. Caguioa
Facts
1. Resp. Caguioa was a bank employee of Petitioner and
was involved in a check-discounting scheme which
prejudiced Antonio Jarina, a bank client.
2. The bank vice president and internal auditor
required Caguoia to explain why she should not be
administratively sanctioned. Despite her explanation
she was found to be guilty of having personally
participated and profited from the scheme and was
thus terminated.
3. Resp. Caguoia filed a case for illegal dismissal
Issue
WON respondent was validly dismissed?
Held
Yes, Pet. Bank presented substantial evidence proving
her complicity in the scheme
Ratio/Doctrine
1. It is the employer who has the burden of proving that
the employee’s dismissal is valid.
2. The case rises or falls on the strength of the
employer’s evidence and not the weakness of the
employee’s defense
3. The employer just need adduce substantial
evidence. It is defined as such relevant evidence that a
reasonable mind might accept as adequate to support a
conclusion
4. Pet bank had presented substantial evidence to prove
Resp.’s direct participation:
- Affidavits and documents
- audit trail
- ledgers showing matching amounts on 21
withdrawals from client’s account and 21 deposited
amounts in resp.’s account
5. This evidence far outweighs resp’s defense of denial,
claim of inadmissibility of Pet’s evidence and claim of
having a RTW business.
* food for thought – is substantial evidence
below/above: Probable Cause? Reasonable doubt?
Preponderance of evidence?
Security of Tenure
Art 279 - 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.
Art 277 - (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 and 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
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
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. The Secretary of the
Department of Labor and Employment may suspend
the effects of the termination pending resolution of the
dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and
Employment before whom such dispute is pending that
the termination may cause a serious labor dispute or is
in implementation of a mass lay-off.
(c) Any employee, whether employed for a definite
period or not, shall, beginning on his first day of
service, be considered as an employee for purposes of
membership in any labor union.
Security of tenure, although provided in the
Constitution, does not give an employee an absolute
vested right in a position as would deprive the
company of its prerogative to change their
assignment or transfer them where they will be
most useful. When a transfer is not unreasonable, nor
inconvenient, nor prejudicial to an employee; and it does
not involve a demotion in rank or diminution of his pay,
benefits, and other privileges, the employee may not
complain that it amounts to a constructive dismissal.
This matter is a prerogative inherent in the
employer’s right to effectively control and manage
the enterprise. (Lanzadares v. Amethyst Security)
There was no proof here that the worker intended to
swindle his employer’s Korean customer. There is thus
no case for a claim that employer lost its trust and
confidence it had reposed on the worker. In addition,
there was no indication that the twin requirements of
notice and hearing have been complied with before
termination. The fundamental guarantee of security of
tenure dictates that no worker shall be dismissed except
for just and authorized cause provided by law and after
due process. (Condo Suite Club Travel v. NLRC)
Nature of Right/Rationale
A termination without just cause entitles a worker to
reinstatement regardless of whether he was accorded
due process. On the other hand, termination of a
worker for cause even without procedural due process
does not warrant reinstatement but the employer
incurs liablility for damages. Petitioner-Employer
herein committed an infraction on the second
requirement. Thus it must be given sanction for its
failure to give formal notice and conduct an
investigation before terminating employee. (Alhambra
Industries v. NLRC)
Employer has a standing policy prohibiting the
encashment of checks of its employees and officials
even if endorsed by top executives of the company.
Employee herein was terminated for such encashment
after she was assured that the executive VP approved of
it. However, it is found that such prohibition policy has
been relaxed and that respondent employer was
informed of such encashment but only acted upon it
when checks bounced. They are thus estopped from
imposing the penalty of termination. An alleged just
1
cause for termination cannot be used as a shield to
dismiss an employee arbitrarily. (Llosa Tan v. Silahis
International Hotel)
Janitors herein hired to work in the Army and Navy
Club but were terminated without a formal
investigation by virtue of the Clubs’ reports that they
MAY HAVE BEEN stealing club properties. LA and
NLRC found them illegally dismissed but NLRC ordered
only payment of separation pay and not reinstatement
plus backwages since it has been 6 years since their
dismissal. NLRC in error. CSC herein is still in business
and considering the workers’ positions, it would not be
difficult for CSC to re-employ them. (City Services
Corp. Workers v. City Services Corp)
Management Prerogative
Dynamic Signmaker vs. Potongan
Facts:
Respondent started working for petitioner as a
production supervisor. In February 1996, the union
declared a strike against petitioner corporation for
replacing its supervisors and designating several
persons to take over the operations of the corporation.
Respondent's salaries were then held and they were
asked to take a leave of absence until further notice.
Respondent then received a letter inviting him to
answer for several charges. Respondent denied the
charges. He then filed a case for illegal dismissal since
although he was not given a formal letter of
termination, he was nonetheless dismissed since he
was asked to take a leave of absence indefinitely and
that he was not instructed nor allowed to return to
work. LA dismissed the complaint . NLRC set aside the
decision of the LA.
Issue: WON respondent was constructively dismissed.
Held: YES
Ratio:
1. Petitioner's claim that respondent was not
dismissed but rather management opted to
reorganize is belied by the letter sent to
respondent by petitioner terminating his
employment not for any just or authorized
cause but for filing a case against petitioner
corporation.
2. Although management has a wide latitude 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,
the scopes and limits of management
prerogatives must be balanced with the
security of tenure.
3. If exercised in good faith then the transfer
is justified, however, in this case respondent
was asked to return only after more than 3
years from the time he was asked to go into an
indefinite leave during which his salary was
withheld and only after the decision of the
NLRC.
- petitioner was never transferred nor
reassigned to another office or position
contrary to what the petitioner seems to allege.
- also there was no valid ground for dismissal.
- also, during the pendency of the case,
petitioner wrote a letter to respondent to report
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
back to work, which is a sign that there was
indeed no valid ground for dismissal.
Decision: Petition Denied
(PhilamLife v. Gramaje)
(Citing Blue Dairy Corporation v. NLRC) The managerial
prerogative to transfer personnel must be exercised
without grave abuse of discretion, bearing in mind the
basic elements of justice and fair play. Having the right
should not be confused with the manner in which that
right is exercised. Thus, it cannot be used as a
subterfuge by the employer to rid himself of an
undesirable worker. The employer must be able to show
that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a
demotion in rank or a diminution of his salaries,
privileges and other benefits. Should the employer fail
to overcome this burden of proof, the employee’s
transfer shall be tantamount to constructive dismissal,
which has been defined as a quitting because
continued employment is rendered impossible,
unreasonable or unlikely; as an offer involving a
demotion in rank and diminution in pay. Likewise,
constructive dismissal exists when an act of clear
discrimination, insensibility or disdain by an employer
has become so unbearable to the employee leaving him
with no option but to forego with his continued
employment.
Requisites of Lawful Dismissal
Requisites for lawful dismissal: Concurrence of
substantive and procedural due process – New City
Builders, Inc. v. NLRC
Facts:
NCBI hired 3 employees (private respondents Ganda,
Ricasa and Epis) who filed a complaint for alleged labor
standards violations committed by the company.
Because of this complaint, the employees’ services were
terminated. However, the company asserts that the
employees were project employees and the reason for
the termination was the cessation of the project for
which they were hired. The employees filed a case for
illegal dismissal. LA held that the employees were
regular and not project employees because their tasks
were necessary and desirable to the business of the
company, hence the dismissal was illegal. LA ordered
their reinstatement. NLRC affirmed the LA’s decision.
CA dismissed NCBI’s appeal.
Issue/Held:
WON there was a valid termination – No
Ratio:
- The SC did not disturb the common findings of
facts of the LA, NLRC and CA as to the status of
the employees  that they were regular and not
project employees
- Being regular employees the following requisites
must concur for a valid termination:
1. The dismissal must be for any of the causes in
Art. 282
2. Employees must be accorded DUE PROCESS
 the opportunity to be heard and to defend
himself
1
- The LA, NLRC and CA all found that NCBI didn’t
comply with the 2 requirements for a valid dis-
missal
- There was no just cause, as listed under Art.282,
nor was their notice given to the employees
Regular workers are entitled to security of tenure and
maybe terminated only for a valid cause with
observance of due process. Procedural due process
requires the employer serve the employee to be
dismissed 2 written notices: (1) to apprise him of the
particular acts or omissions for which their dismissal is
sought and (2) to inform them of the decision of the
employer that they are being dismissed.
(Perpetual Help Credit v, Faburada)
Burden of Proof
Art 277(b, 3rd sentence) - The burden of proving that
the termination was for a valid or authorized cause
shall rest on the employer.
Azcor Manufacturing
Facts:
Capulso worked with Azcor for more than 2 years as a
ceramics worker. He verbally requested to go on sick
leave because of bronchial asthma. Capulso’s
supervisor approved his request but when he reported
to work, he was told that only the owner could allow
him to resume his employment.
Capulso filed a complaint for constructive illegal
dismissal when he was not reinstated even after going
to Azcor 5 times to follow up his employment. Azcor
averred that there was no employer-employee
relationship as Capulso was a former employee who
resigned. Azcor presented a contract of employment
and 2 resignation letters as evidence.
Labor Arbiter dismissed the complaint for illegal
dismissal but ordered Azcor to pay Capulso P200.
NLRC modified the LA’s decision by declaring Capulso’s
dismissal as illegal and ordering reinstatement and
payment of backwages.
Issue / Held:
WON Azcor was able to prove that Capulso’s
termination was valid – No
Ratio:
- in cases of illegal dismissal, burden of proof that
the dismissal was for a valid and authorized cause
rests on the employer
- failure to prove the same would mean that the dis-
missal is not justified and is, therefore, illegal
- in this case, the pieces of evidence presented by
Azcor was not enough to establish the validity of
the dismissal
- The contract of employment stipulated that it was
for a period of 6 months, but it was proven that
Capulso continued working after the lapse of such
period
- 2 resignation letters, purportedly executed by Cap-
ulso, were presented but disregarded because
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
a. they were exactly worded  tend to show
that they were prepared by Azcor
b. they were written in English, a language
that Capulso was not conversant with
c. they were pre-drafted with blank spaces
such that details, like the dates of effectiv-
ity, were only filled in after
- since Azcor was the party who presented the above
pieces of evidence, it was incumbent upon them to
prove their authenticity
General Rule: The employer bears the burden to prove
that the dismissal was for a valid and just cause. In
this case, the respondents failed to prove any such
cause for the petitioner’s dismissal. They
insinuated that the petitioner abandoned his job.
Abandonment Elements: These two factors must
concur – (1) the failure to report for work or
absence without valid or justifiable reason; and (2)
a clear intention to sever employer-employee
relationship. Obviously, the petitioner did not intend to
sever his relationship with the respondent company for
at the time that he allegedly abandoned his job, the
petitioner just filed a complaint for regularization. A
charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more
so when it includes a prayer for reinstatement. (Chavez
v. NLRC)
Measure of Penalty
Assuming that there was breach of trust and
confidence, it appears that this is the first infraction
committed by petitioner. Although the employer has
the prerogative to discipline or dismiss its employee,
such prerogative cannot be exercised wantonly, but
must be controlled by substantive due process and
tempered by the fundamental policy of protection to
labor enshrined in the Constitution. Infractions
committed by an employee should merit only the
corresponding sanction demanded by the
circumstances. The penalty must be commensurate
with the act, conduct or omission imputed to the
employee and imposed in connection with the
employer's disciplinary authority.
RCPI alleged that under its rules, petitioner's infraction
is punishable by dismissal. However, employer's rules
cannot preclude the State from inquiring whether
the strict and rigid application or interpretation
thereof would be harsh to the employee. Petitioner
has no previous record in his 24 long years of service
— this would have been his first offense. The dismissal
imposed on petitioner is unduly harsh and grossly
disproportionate to the infraction which led to the
termination of his services. A lighter penalty would
have been more just, if not humane. In any case,
petitioner paid back the cash shortage in his accounts.
(Farrol v. CA)
Petitioner’s dependence on the doctrine that his
dismissal from the service is unwarranted, harsh and is
not commensurate to his misdeeds is misplaced.
Employers, generally, are allowed a wider latitude of
discretion in terminating the employment of managerial
personnel or those of similar rank performing functions
which by their nature require the employer’s trust and
1
confidence. The fact that the petitioner has worked
with the respondent for more than 16 years, if it is
to be considered at all, should be taken against him.
The infraction that he committed reflects a regrettable
lack of loyalty. Whether or not the respondent was
financially prejudiced is immaterial. What matters
is not the amount involved, be it paltry or
gargantuan; rather the fraudulent scheme in which
the petitioner was involved, which constitutes a
clear betrayal of trust and confidence. (Etcuban v.
Sulpicio Lines)
Lakpue Drug, Inc. v. Belga
Facts:
Belga was working as assistant cashier at Tropical
Biological Phils, Inc (subsidiary of Lakpue). On March
19, 2001, she filed a notice of emergency leave because
she had to bring her daughter to PGH. While she was
there, she experienced labor pains and gave birth on
the same day. Tropical summoned her 2 days after but
she replied that she couldn’t because of her condition.
Belga received a memo ordering her to return to work
and to attend a clarificatory conference on June 2. She
requested that such conference be moved to June 4.
Upon attendance at the said conference, she was
informed of her dismissal w/c was effective on that day.
Because of this, Belga filed a complaint.
Tropical’s alleged grounds for dismissing Belga were (1)
concealment of pregnancy tantamount to dishonesty (2)
insubordination for refusing to go to work (3) lost of
trust and confidence
Labor arbiter found that Belga’s dismissal was illegal.
NLRC reversed but upon petition for certiorari, CA
found for Belga and reinstated the LA’s decision.
Issue / Held:
WON the dismissal of Belga valid – No
Ratio:
- her alleged misconduct was not so grave and seri-
ous as to justify dismissal
a. concealment of her pregnancy – SC found that
it was practically impossible to conceal a full
term pregnancy
b. absence for 16 days – SC found that they were
justified given her condition and although she
failed to file a formal maternity leave, such ac-
tion did not warrant dismissal
c. the functions that Belga performs in the com-
pany were technically clerical and therefore
was not a position of responsibility or trust
and confidence.
- Also, Tropical was not able to show that her ab-
sences caused serious disruption in the company
operations
- Penalty of dismissal was too harsh in the light of
the circumstances in this case and termination
was not commensurate to her supposed faults
- Even assuming that there was a just cause for the
termination, Belga’s dismissal was still illegal as
the company did not comply with the twin-notice
requirement
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
B. TERMINATION OF EMPLOYMENT BY
EMPLOYEE
RESIGNATION
While it is true that petitioner tendered his
resignation letter to respondents requesting that he
be given the same benefits granted by the company
to resigned/retrenched employees, there is no
showing that respondents accepted his
resignation. Acceptance of a resignation tendered by
an employee is necessary to make the resignation
effective. No such acceptance was shown in the instant
case. What appears in the record is a letter
terminating the services of petitioner due to
retrenchment effective January 20, 1998. Verily, said
letter should be interpreted as a non-acceptance of
petitioner’s resignation effective December 31,
1997. As correctly pointed out by the Labor Arbiter, if
respondents considered petitioner resigned as of
December 31, 1997, then there would be no need to
retrench him. (Reyes v. CA)
Respondent’s unsubstantiated and self-serving claim
that she was coerced into signing the resignation letter
does not deserve credence. It is a basic rule in
evidence that the burden of proof is on the part of the
party who makes the allegations. Respondent failed to
discharge this burden. Moreover, the Court of Appeals’
finding that respondent had no motive to resign
because the charges of dishonesty were not fully
substantiated has no basis. Had the separation of
respondent been for dismissal due to loss of trust and
confidence, substantial evidence of the shortages and
non-remittances would have been indispensable.
Such, is not the case here considering her voluntary
resignation. The rule that the filing of a complaint for
illegal dismissal is inconsistent with resignation, is not
applicable to the instant case. The filing of an illegal
dismissal case by respondent was evidently a mere
afterthought. It was filed not because she wanted to
return to work but to claim separation pay and
backwages. (Willi Hahn Enterprises v. Maghuyop)
Shie Jie Corp v. National Federation of Labor
Facts:
Shie Jie hired Francisco et al, members of the National
Federation of Labor, as fish processors but they were
given a 1week suspension by the owners after they
were confronted about their union activities. When
Francisco et al returned to work after the 1wk period,
they were served a notice that their services were
terminated for abandonment of work. Francisco et al
filed a complaint for unfair labor practices, illegal
dismissal and non-payment of benefits.
Shir Jie asserts that Franciso et al were suspended for
1wk because they staged a walk out that interrupted
business operations. Shie Jie directed them to return
to work after the 1wk period but the employees
submitted resignation letters and quit claims instead.
Labor Arbiter held that the dismissal was illegal. NLRC
reversed the LA. CA reversed and set aside NLRC’s
decision.
Issue / Held:
1
WON Shie Jie was able to prove that there was a
voluntary resignation - No
Ratio:
- Voluntary resignation: act of an employee, who
finds himself in a situation in w/c he believes that
personal reasons cannot be sacrificed in favor of
the exigency of the service thus, he has no other
choice but to disassociate himself from his employ-
ment
- Acceptance is necessary to make resignation ef-
fective
- In this case, acceptance was not proven
- Also, there were no overt acts that tend to show
that the employees intended to sever their employ-
ment
- The fact that the employees filed a compliant for il-
legal dismissal negated the assertion that they
resigned from their employment
Oriental Ship Management vs. CA (resignation)
FACTS
Oriental was an authorized recruitment
agencyto recruit seafarers for Kara Seal Inc. They then
hired Cuesta and Gonzaga as Third Engineers for a
one-year contract. The International Transport Workers
Federation (ITF) and Kara Seal entered into an
agreement wherein the employer would increase the
salary of its workers. However, on a routine check, ITF
inspector found out that the crew of the vessel of the
respondents was not paid the increase.
After, respondents were ordered repatriated to
Manila; but before such, they were made to sign Letters
of Indemnity (a quitclaim) which released the liability of
Kara Seal. Respondents then filed a complaint against
Kara Seal and petitioner for illegal dismissal. As
defense, petitioner claimed that there was voluntary
resignation as evidenced by the quitclaim.
ISSUE WON respondents voluntarily resigned
DECISION favor respondents
RATIO
Resignation is defined as the voluntary act of an
employee who finds himself in a situation where he
believes that personal reasons cannot be sacrificed in
favor of the exigency of the service, and he has no other
choice but to disassociate himself from his
employment. It would have been illogical for Cuesta
and Gonzaga to resign and then claim that they were
illegally dismissed.
RULE: resignation is inconsistent with the filing of a
complaint for illegal dismissal.
Just Causes
Art 285 (b) - (b) An employee may put an end to the
relationship without serving any notice on the employer
for any of the following just causes:
1. Serious insult by the employer or his representative
on the honor and person of the employee;
2. Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
3. Commission of a crime or offense by the employer or
his representative against the person of the employee or
any of the immediate members of his family; and
4. Other causes analogous to any of the foregoing.
Without Just Cause
Art 285 (a) - (a) An employee may terminate without
just cause the employee-employer relationship by
serving a written notice on the employer at least one (1)
month in advance. The employer upon whom no such
notice was served may hold the employee liable for
damages.
Section 18(2), Article III, Constitution - (2) No
involuntary servitude in any form shall exist except as
a punishment for a crime whereof the party shall have
been duly convicted.
To constitute a resignation, it must be unconditional
and with the intent to operate as such. There must be
an intention to relinquish a portion of the term of office
accompanied by an act of relinquishment. In the
instant case, the fact that Capulso signified his desire
to resume his work when he went back to petitioner
AZCOR after recuperating from his illness, and actively
pursued his case for illegal dismissal before the labor
courts when he was refused admission by his employer,
negated any intention on his part to relinquish his job
at AZCOR. (Azcor v. NLRC)
Constructive dismissal is "an involuntary resignation
resorted to when continued employment is rendered
impossible, unreasonable or unlikely; when there is a
demotion in rank and/or a diminution in pay; or when
a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee. In this
particular case, respondent voluntarily resigned from
his employment. He was not pressured into resigning.
Voluntary resignation is defined as the act of an
employee who "finds himself in a situation where he
believes that personal reasons cannot be sacrificed in
favor of the exigency of the service and he has no other
choice but to disassociate himself from his
employment."
(Phil. Wireless v. NLRC)
The Court cannot uphold and give weight to private
respondent's resignation letter which appears to have
been written and submitted at the instance of
petitioner. Its form is of the company's and its wordings
are more of a waiver and quitclaim. Moreover, the
supposed resignation was not acknowledged before a
notary public. Petitioner's failure to deny that
Sugarland is its sister company and that petitioner
absorbed Sugarland's security contract and security
personnel assumes overriding significance over the
resignation theorized upon, evincing petitioner's design
to ignore or violate labor laws through the use of the
veil of corporate personality. (A’Prime Security v.
NLRC)
PERFORMANCE OF MILITARY OR CIVIC DUTY
Art. 286 - The bona-fide 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
1
employee to his former position without loss of seniority
rights if he indicates his desire to resume his work not
later than one (1) month from the resumption of
operations of his employer or from his relief from the
military or civic duty.
Section 12, Book VI, Rule I, Omnibus Rules
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, unless the suspension is
for the purpose of defeating the rights of the employees
under the Code, and in case of mandatory fulfillment
by the employee of a military or civic duty. The
payment of wages of the employee as well as the grant
of other benefits and privileges while he is on a military
or civic duty shall be subject to special laws and
decrees and to the applicable individual or collective
bargaining agreement and voluntary employer practice
or policy.
FORCED RESIGNATION
JSS Indochina Corp. vs. Ferrer (forced resignation)
FACTS
Respondents were hired as constructions
workers by the petitioner for its Taiwanese client,
Formosa Plastics Corp. However, upon reaching
Taiwan, they were directed to work as cable/pipe tract
workers. They filed a complaint; petitioner denied
allegations and claimed that the respondents pre-
terminated their contracts (resigned) as they refused to
work as cable tray/pipe tract workers. (LA favored
respondents, NLRC affirmed).
ISSUE WON there was voluntary or forced resignation
DECISION forced resignation!
RATIO
There is no question that petitioner violated its
employment contract when it did not assign them as
construction workers (but as cable tray/pipe tract
workers). Hence, they were forced to resign and to pre-
terminate their contracts in view of petitioner’s breach.
The termination of respondent’s services is without just
or valid cause.
C. TERMINATION OF EMPLOYMENT BY
EMPLOYER
JUST CAUSES (Art 282)
 Serious misconduct or willful disobedience of
the lawful orders of employer or representative
in connection with employee’s work
 Gross and habitual neglect duties
 Fraud or willful breach of the trust reposed in
him by employer or duly authorized
representative
 Commission of a crime or offense against
person of employer or immediate member of his
family or his authorized representative
 Other causes analogous to the foregoing
Art 279 Security of Tenure. In case 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 to his backwages
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
computed from the time his compensation was
withheld from him up to time of his reinstatement.
Art 277(b) Subject to the constitutional right of
workers to security of tenure and their right to be
protected against dismissal except for a just or
authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code,
the employer shall furnish the workers whose
employment is so sought to be terminated a written
notice containing a statement of the cause 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 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.
The Secretary of Labor and Employment may suspend
the effects of the termination pending resolution of the
dispute in the event of a prima facie finding by the
appropriate official of the Department of Labor and
Employment before whom such dispute is pending that
the termination may cause a serious labor dispute or is
in implementation of a mass lay-off.
Basis (Employer Right) – (Ocean East Agency v.
NLRC)
In order that an employer may terminate an employee
on the ground of willful disobedience to the former’s
order, regulations or instructions, it must be
established that the said orders, regulations, or
instructions are a) reasonable and lawful, b) sufficiently
known to the employee, and c) in connection with then
duties which the employee has been engaged
Just Causes – Requisites:
(1) Serious Misconduct/Willful Disobedience OR
Insubordination
Throwing a stapler at the boss was not an act which
was done in relation to one’s duty. Serious misconduct
to be a just cause: a) must be serious; b) must relate to
the performance of the employee’s duties; c) must show
that employee has become unfit to continue working for
the employer. (Phil. Aeolus v. NLRC)
Petitioner was dismissed for not delivering the bags of
cement to the intended buyer but to another person.
The order to petitioner was simple, i.e., to deliver the
merchandise to the Felix Hardware. It was clearly
reasonable, lawful, made known to petitioner and
pertained to his duty as driver of respondent.
Petitioner did not even proffer a justifiable explanation
for his disobedience thereto. Every employee is charged
with the implicit duty of caring for the employer’s
property. Petitioner’s conduct showed that he could not
even be trusted with this task. Further, his hostile
attitude towards his co-workers which eventually led
him to inflict physical injuries on one of them cannot
be countenanced. Petitioner’s “continuance in the
service of respondent company is partly inimical not
1
only to its interests but also to the interest of its other
employees.”
Willful disobedience of the employer’s lawful orders, as
a just cause for the dismissal of an employee, envisages
the concurrence of at least two requisites: (1) the
employee’s assailed conduct must have been willful or
intentional, the willfulness being characterized by a
“wrongful and perverse attitude;” and (2) the order
violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties
which he had been engaged to discharge. (Rosario v.
Victory Ricemill)
In order that an employer may dismiss an employee on
the ground of willful disobedience, there must be
concurrence of at least two (2) requisites: the
employee’s assailed conduct must have been
willful or intentional, the willingness being
characterized by a wrongful and perverse attitude;
and that the order violated must have been
reasonable, lawful, made known to the employee
and must pertain to the duties which he had been
engaged to discharge.
The present case does not show the presence of the
first requisite. As private respondent Gonzales’ failure
to comply with petitioners’ orders were not
characterized by a perverse attitude. At most he can
only be suspended from service for assuming that his
leaves of absence would be approved by management.
The penalty of dismissal is too harsh considering that
private respondent Gonzales has been with the
company for almost five (5) years and has rendered
unblemished service until the period in controversy.
For his unauthorized absences, We hereby rule that a
suspension of one (1) week is commensurate to his
violation of Type C, House Code of Discipline rule on
unauthorized absences.
Anent the alleged willful non-disclosure by private
respondent Gonzales of his candidacy for public office,
We find the same to be unsupported by evidence. The
tenor of private respondent Gonzales’ internal email to
petitioner Angerbauer reveals that the latter was aware
that the reason for the former’s prolonged absences
was his ongoing campaign as Board Member of the
Province of Abra. Considering the same, We are
inclined to believe private respondent Gonzales’ version
of the story. (Acesite Corp v. NLRC)
(Security guard was dismissed for refusing to be
assigned from Negros Oriental to Northern Cotabato)
Insubordination or willful disobedience by an
employee, to constitute a just cause for terminating his
employment, the orders, regulations, or instructions of
the employer or representative must be:
1. reasonable and lawful;
2. sufficiently known to the employee; and
3. in connection with the duties which the employee
has been engaged to discharge.
There is no doubt in this case that the assailed transfer
orders fulfill the second and third elements above-
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
stated. Private respondent Abella was well informed of
the orders of transfer and said orders were well in
connection with the security functions of the private
respondent. It is only the issue of reasonableness and
lawfulness of said orders that have to be elucidated on.
The reasonableness and lawfulness of an order,
regulation, or instruction depend on the circumstances
availing in each case. Reasonableness pertains to the
kind or character of directives and commands and to
the manner in which they are made. It is quite
apparent that the order of transfer of the private
respondent from Negros Oriental to Northern Cotabato
was due to the exigencies of the state of affairs in the
geothermal plants of the petitioner company. Other
internal messages between the petitioner company’s
officers and employees also sustain the validity of the
necessity and lack of bad faith in ordering the transfer
of the private respondent (PNOC-EDC v. Abella)
Ha Yuan vs. NLRC (just causes)
FACTS
Respondent Juvy Soria was a cashier of
petitioners establishment inside the SM Food Court
when she assaulted her co-worker Ma. Teresa
Sumalague resulting in a scuffle. As a result, the SM
Food Court Manager banned the two from working
within the premises. Soria then filed a suit for illegal
dismissal (LA dismissed cased; NLRC AWARDED
SEPARATION PAY)
ISSUE WON a validly dismissed employee is entitled to
separation pay
DECISION
RATIO
Citing PLDT VS. NLRC, “…separation pay shall
be allowed as a measure of social justice on in those
instances where the employee is validly dismissed for
causes other than serious misconduct or those
reflecting on his moral character.”
Hence, separation pay depends on the cause of
dismissal and may be awarded except when the
dismissal is based on 1) serious misconduct 2) moral
character
Note: SERIOUS misconduct – wrongful intent;
transgression of law; etc.
First Dominion Resources Corporation vs.
Penaranda (just causes)
FACTS
Petitioner had hired Penaranda as packer and
Vidal as drugman (both assigned to the night shift).
Penaranda was caught sleeping on the job on two
occasions which led to his termination. Similarly, Vidal
was caught sleeping (but in one instance only) and was
fired as well. Hence, respondents filed separate
complaints for illegal dismissal. LA dismissed the
complaint but NLRC REVERSED and held illegal
dismissal (no just cause daw).
ISSUE WON pet had the right to dismiss respondents
for sleeping on the job
DECISION yes, it’s a just cause
RATIO
It is clear that respondents violated the
company’s policy and warnings of not to sleep on
1
the job. After being duly warned, respondents still
slept on the job. Hence, it shows the willful and
perverse behavior of respondents. Moreover,
management has the right to formulate reasonable
rules to regulate the conduct of its employees for
the protection of its interests. And since the
company policy of not sleeping on the job was a
valid exercise of management prerogative,
respondents were expected to abide by them.
(2) Gross and Habitual Neglect of Duties
(Accountant was dismissed for allowing on 2 occasions
a company to draw more sugar than was due)
Pabiona;s neglect was gross. As her position related to
money matters, she was expected and required to be
extra vigilant in the performance of her job as it
involved financial interest of the company. She was also
habitually remiss in her duties. Neglect of duty to be a
ground for dismissal must be both GROSS and
HABITUAL. (National Sugar v. NLRC)
National Bookstore vs. CA
FACTS
Petitioner hired Ymasa and Gabriel as Cash
Custodian and Head Cashier (respectively) in the SM
North Edsa Branch. It was routinely the task of
respondents to count the day’s sales, placed in plastic
bags and then kept before it was deposited in the bank.
And in one instance, while the money was
about to be deposited, there was a shortage amounting
to more than P40k. Petitioner blamed the respondents
but they denied any involvement in the missing funds
(essentially because they had no access to the vault
that security had always checked them before they left
the branch).
Nevertheless, petitioner fired them after finding
their explanations unsatisfactory. Hence, respondents
filed a complaint for illegal dismissal. LA held that there
was illegal dismissal, NLRC affirmed.
ISSUE WON there was illegal dismissal
DECISION yes there was!
RATIO
Gross neglect of duty and loss of confidence are
just causes for termination. It has been defined as the
want or absence of or failure to exercise slight care
or diligence, or the entire absence of care. It evinces
a thoughtless disregard of consequences without
exerting any effort to avoid them. But the records and
facts DO NOT SHOW that respondents WERE EVEN
REMOTELY NEGLIGENT.
Neglect of duties must not only be gross BUT
ALSO HABITUAL. Thus, the single or isolated act of
negligence does not constitute a just cause for the
dismissal of the employee.
Also, loss of trust and confidence (as a valid
ground) must be based on a willful breach of trust
and founded on clearly established facts. A breach is
willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly
or inadvertently. In this case, petitioner was not able to
establish any willful breach of confidence.
(Driver was dismissed for the collision between the van
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
he was driving and a ten-wheeler truck that caused
damaged to the van and to its passengers. Driver tried
to brake.) In this case, however, there is no substantial
basis to support a finding that petitioner committed
gross negligence. Gross negligence is negligence
characterized by want of even slight care, acting or
omitting to act in a situation where there is a duty to
act, not inadvertently but willfully and intentionally
with a conscious indifference to consequences insofar
as other persons may be affected.
(Tres Reyes v. Maxim’s Tea House)
(3) Loss of Trust and Confidence
Molina vs. Pacific Plans (loss of trust and confidence)
FACTS
PPI hired Agripino Molina as Regional Manager
of Metro Manila. Because of his success, Molina was
promoted Assistant Vice-President with the same
functions as those of a regional manager of the same
sales region. And when an executive of PPI resigned in
order to head Caritas (an HMO), Molina was hired
Assist. VP and Marketing Head of Area 10. And
eventually, there was a decrease in the sales output of
PPI.
Molina was then notified by PPI of reports that
he had breached their confidence (note: he was pirating
employees) and was asked to show cause why he
should not be held administratively liable. He was
preventively suspended pending investigation and after
a while, he was eventually fired for violating standard
operating procedure.
Molina then filed a complaint against PPI for
illegal suspension and illegal dismissal (ground: denial
of due process since he was not given copies of the
report); LA held lawful dismissal; NLRC reversed and
ordered reinstatement; CA reversed, reinstated LA
decision.
ISSUE WON there was valid cause
DECISION NO! Reinstate NLRC decision
RATIO
The loss of trust and confidence must be based
on the willful breach of the trust reposed in the
employee by his employer. Ordinary breach will not
suffice. A breach of trust is willful if it is done
intentionally, knowingly and purposely without
justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently.
As a general rule, employers are allowed wide latitude
of discretion in terminating the employment of
managerial personnel. The mere existence of a basis for
believing that such employee has breached the trust
and confidence of his employer would suffice for his
dismissal
Guidelines:
1. the loss of confidence must not be simulated;
2. it should not be used as a subterfuge for causes
which are illegal, improper or unjustified;
3. it may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary;
4. it must be genuine, not a mere afterthought, to
justify earlier action taken in bad faith; and
5. the employee involved holds a position of trust and
confidence.
1
 Loyalty of an employee to his employer consists
of certain very basic and common sense obligations.
An employee must not, while employed, act contrary to
the employer’s interest. The scope of the duty of loyalty
that an employee owes to his employer may vary with
the nature of their relationship. Employees occupying
a position of trust and confidence owe a higher duty
than those performing low-level tasks. Assisting an
employee’s competitor can even constitute a breach of
the employee’s duty of loyalty.
Nevertheless, the SC was not persuaded that
Caritas was a competitor of PPI. The evidence
adduced by PPI was insufficient to warrant the
petitioner’s dismissal from employment. Here, Molina
was not in breach of confidence since there was
nothing
“inherently wrong” with what he was doing.
Mercury Drug vs. Serrano (Loss of trust and
confidence)
Facts:
Mercury drug employed the services of respondent
Serrano as a pharmacy assistant. Her primary duty
was to attend to the needs of the customers at the
retail counter. On one occasion she was caught by the
manager pocketing the payment of one of the
customers without even issuing an official receipt. The
general manager confronted her about the incident and
as a result Serrano wrote a resignation letter which
Mercury drug did not accept. Instead it issued a notice
for her to appear before an Investigation committee
which found her guilty of dishonesty . Mercury then
terminated her employment. Serrano then filed a
complaint for illegal dismissal, unfair labor practices
and non-payment of benefits. LA ruled in favor of
Serrano. NLRC then reversed the LA by dismissing the
complaint. CA reversed the finding of the NLRC and
upheld the decision of the LA.
Issue: WON the dismissal of Serrano was legal
Held: YES.
Ratio:
1. Mercury terminated the services of Serrano on
the ground of loss of trust and confidence due
to dishonesty.
● Loss of trust and confidence is premised on
the fact that the employee holds a position
whose function may only be performed by
someone who has the confidence of
management.
● Such an employee has a greater duty to the
management than the ordinary rank and
file employees.
● Betrayal of trust is the essence of the
offense which is a ground for the
employee's termination.
2. In this case, there was no doubt that Mercury
had the right to expect full trust and
confidence from Serrano because of her
position.
3. Loss of trust and confidence does not require
proof beyond reasonable doubt.
4. Her act of dishonesty made her unworthy of
the trust and confidence reposed on her by
Mercury.
5. Also, the establishment of probable cause in
the case of qualified theft involving Serrano is
enough ground for her dismissal.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Decision: Petition Granted
(Chief Purser was dismissed for “alleged involvement in
anomaly of ticket issuance,”) We do not find the
allegedly highly irregular condition of the tickets valid
reason to even suspend, much less terminate the
complainant-appellant for loss of trust and confidence.
It has not been established by clear and competent
evidence that the alleged irregular condition of the
tickets was attributable to the complainant or to
other members of the team of inspectors who have
equal access to the tickets. There is no showing at
all on record that the respondent suffered damage
as a consequence of the existence of these tickets
or that the complainant has benefited from the same.
To establish loss of confidence, the employer must have
reasonable ground to believe that the employee is
responsible for the misconduct and his participation
therein renders him unworthy of the trust and
confidence demanded of his position, and makes him
absolutely unfit to continue with his employment.
(Etcuban v. Sulpicio Lines)
(Marketing officer was asked by certain officers of the
company to resign and accept a separation package,
failing which he would be terminated for loss of
confidence.) While Article 282 of the Labor Code
provides that an employer may terminate an employee
based on fraud or willful breach of the trust reposed in
him by his employer or duly authorized representative,
loss of trust and confidence as a just cause for
dismissal was never intended to provide employers with
a carte blanche for terminating employees. Such a
vague, all-encompassing pretext as loss of confidence, if
unqualifiedly given imprimatur by this Court, could
readily reduce to barren the constitutional guarantee of
security of tenure.
(Felix v. NLRC)
Article 282(c) of the same Code provides that "willful
breach by the employee of the trust reposed in him by
his employer" is a cause for the termination of
employment by an employer. This ground should be
duly established. Substantial evidence is sufficient as
long as such loss of confidence is well-founded or if the
employer has reasonable ground to believe that the
employee concerned is responsible for the misconduct
and her act rendered her unworthy of the trust and
confidence demanded of her position. It must be
shown, though, that the employee concerned holds a
position of trust. The betrayal of this trust is the
essence of the offense for which an employee is
penalized.
(Santos v. San Miguel)
(4) Commission of Crime
Commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized
representative
(5) Analogous Causes
An evaluative review of the records of this case
nonetheless supports a finding of a just cause for
2
termination. The reason for which private respondent's
services were terminated, namely, her unreasonable
behavior and unpleasant deportment in dealing with the
people she closely works with in the course of her
employment, is analogous to the other "just causes"
under Article 282(e) of the Labor Code. Her disagreeable
character — "quarrelsome, bossy, unreasonable and
very difficult to deal with" — are supported by the
various testimonies of several co-employees and
students of the school. Her overbearing personality
caused the chief librarian to resign. The complaints
about her objectionable behavior were confirmed by her
reproachable actuations during her meeting with the
petitioner directress when she, upon being advised of
the need to improve her working relations with others,
obstreperously reacted and unceremoniously walked
out on her superior, and arrogantly refused to
subsequently clear up matters or to apologize therefor.
(Cathedral School v. NLRC)
The reason for which the Private respondent’s were
ternminated namely her unreasonable behavior and
unpleasant deportment in her dealing with the people
she closely works with in the course of her
employement is analogous to the other “just causes”
enumerated under Art 282. (International Rice
Research v. NLRC)
Violation of a rule prohibiting the infliction of harm o0r
physical injury against any person under the particular
circumstances provided for in the same rule may be
deemed analogous to the “serious misconduct” stated
in Art 282 (a). (Oania v. NLRC)
Gross inefficiency falls within the purview of “other
causes analogous to the foregoing” under Art 282. (Lim
v. NLRC)
Others:
(1) Abandonment
NEECO II vs. NLRC (Abandonment)
Facts:
NEECO II employed the services of Eduardo Cairlan as
driver and assigned him at the petitioner's office at
Quezon, Nueva Ecija. Danila dela Cruz, petitioner's
general manager terminated the services of respondent
Cairlan due to abandonment. According to dela Cruz,
never did he see the respondent report for work and
worse, it was found in an investigation that respondent
Cairlan was actually employed by the Provincial
Government as driver allegedly under the assumed
name of Eduardo Caimay. Respondent Cairlan then
filed a complaint for illegal dismissal. The LA ruled in
favor of respondent. NLRC affirmed. The CA affirmed
the decision of the LA and the NLRC.
Issue: WON Cairlan was illegally dismissed.
Held: YES.
Ratio:
1. Petitioner miserably failed to establish the fact
of abandonment.
● Abandonment is the deliberate and
unjustified refusal of an employee to
resume his employment; it is a form of
neglect of duty hence a just cause for the
termination of employment by the
employer under Art. 282 of the Labor Code.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
2. There was no evidence that Eduardo Cairlan
and Eduardo Caimay was one and the same.
● Evidence consisted of indexes of payments to
employees under the name of Eduardo
Caimay.
3. Failed to present a bio data which may include
a picture of said Caimay.
4. The petitioner's even failed to attach an
affidavit of a certain Mr. Marcelo, the person
who allegedly conducted the investigation that
led to the discovery of Cairlan's double
identity.
5. Letter of respondent to petitioner showed his
yarning and desire to continue working for
petitioner.
Decision: Petition Granted.
Northwest Tourism Corp. vs CA (Abandonment
cont.)
Facts:
Petitioner owns and operates Asiaworld resort hotel in
Palawan. Respondent Oclarit was hired by petitioner as
an outlet cashier and was later promoted night auditor
of Asiaworld Hotel. An incident occurred involving
several guests wherein they claimed that Oclarit
pocketed the excess of their cash deposits and
surreptitiously made on of them, a certain Roque, to
sign a paid out voucher. Management then conducted
an investigation and issued a memorandum effectively
placing Oclarit under preventive suspension for thirty
days. The House detective then conducted and
investigation and it was concluded that Oclarit indeed
pocketed the excess cash deposit. Northwest even
alleged that at the end of the preventive suspension
Oclarit refused to return to work hence they
terminated his employment due to abandonment.
Oclarit on the other hand claimed that he reported for
duty after the suspension but was told by the
Personnel Manager that he should resign or else he
shall be terminated with a bad record. Oclarit refused
to sign. A memorandum was then issued terminating
the services of Oclarit and citing dishonesty and
abandonment as the bases for his termination. Oclarit
then filed a case for illegal dismissal. LA dismissed the
case. NLRC reversed and declared that Oclarit was
illegally dismissed. CA modified the decision of the
NLRC by absolving several of managers.
Issue: WON Oclarit's termination was valid on the
ground of abandonment.
Held: NO.
Ratio:
1. In order to constitute abandonment of
work, two elements must concur:
a. employee must have failed to report for
work or must have been absent without
valid or justifiable reasons.
b. there must have been a clear intention
on the part of the employee to sever the
employer-employee relationship
manifested by some overt act.
● The employer has the burden of proof to
show the employer's deliberate and
unjustified refusal to resume his
employment without any intention of
returning. Mere absence is not sufficient.
2
 2. The record shows that Oclarit did have the
intent to return from work when he went to see
the Personnel Management.
3. However, he was prevented from returning
from work because he was told to resign
otherwise he would be terminated with a bad
record.
4. Petitioner failed to produce facts of overt acts
of Oclarit showing his clear intention to
abandon his work.
5. Filing of complaint for illegal dismissal by
Oclarit is proof that he did not have any
intention to abandon his work.
Decision: Judgment affirmed with modification.
Big AA Manufacturer vs. Antonio
Facts:
Respondents filed a complaint against petitioner
corporation for illegal lay-offs and illegal deductions.
Since the madatory amicable settlement failed, the
parties were required to submit their position papers.
Respondents allege that they were hired by petitioner in
as carpenters and that they were the regular employees
of the petitioner, they were allowed by the petitioner to
use its equipment and tools for their jobs. Big AA on
the other hand claimed that they were merely
independent contractors and that contrary to the claim
of respondents, they (respondents) refused a job order
hence, their contractual relationship ended. LA ruled in
favor of respondents. NLRC modified the decision of the
LA but in sum affirmed the decision.
Issue: WON respondents abandoned their work
Held: NO
Ratio:
1. For accusing respondents of abandonment,
petitioner must show the elements of
abandonment:
a. respondent's failure to report for work or
absence without a valid reason,
b. respondent's clear intention to sever
employer-employee relations as manifested by
some overt acts. (2nd element is the more
determining factor)
2. Petitioner's argument that the reason for
respondent's abandonment is their resentment
over the implementation of the implementing
guidelines is bereft of merit. It cannot serve as
a basis for saying that they had the intention of
abandoning their work.
3. Furthermore, their filing of a complaint for
illegal dismissal within 2 days after their
dismissal and seeking for their reinstatement
in their position paper runs counter to their
theory.
- it is said that an employee who forthwith
protests his layoff cannot be said to have
abandoned their work.
Petition Denied
Respondents’ overt acts did not indicate abandonment.
(No clear proof of deliberate and unjustified intent to
sever the employer-employee relationship). Their filing
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
of an illegal dismissal charge was inconsistent with
abandonment. (Cebu Marine Beach Resort vs NLRC)
"for abandonment of work to exist, it is essential (1)
that the employee must have 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
manifested by some overt acts. Deliberate and
unjustified refusal on the part of the employee to go
back to his work post and resume his employment
must be established. Absence must be accompanied by
overt acts unerringly pointing to the fact that the
employee simply does not want to work anymore. And
the burden of proof to show that there was unjustified
refusal to go back to work rests on the employer."
(Samarca v. Arc-Men Industries)
The following circumstances proved that respondent
has an intention to sever ties with petitioners: 1.) He
bragged to his co-workers about his plan to quit his
job. 2.) He surrendered his shop keys. 3.) He failed to
report without giving valid reasons. 4.) He immediately
got regular employment in another barber shop. 5.) He
filed for illegal dismissal without praying for
reinstatement. (Paz Martia Jo v. NLRC)
(2) Courtesy Resignation
Resignation per se means voluntary relinquishment of
a position or office. Adding the word courtesy did not
change the essence of resignation. That courtesy
resignations were utilized in government reorganization
did not give private respondent the right to use it as
well in its own reorganization and rehabilitation plan.
There is no guarantee that organization will not use it
to rid themselves arbitrarily of employees they do not
like, in the guise of “streamlining” its organization.
(Batongbacal v. Associated Bank)
(3) Change of Ownership
A business merger is allowed by law. This however
should not be used to permit the employer to escape
payment of termination pay. Such a situation is not
envisioned in the law, for it strikes at the very heart of
social justice. The rule laid out is that an innocent
transferee of a business establishment has no liability
to the employees of the transferor to continue
employing them. Nor is the transferee liable for past
unfair labor practices of the previous owner, except,
when the liability therefore is assumed by the new
employer under the terms of the contract of sale, or
when the liability attaches since owner was part of the
plan to thwart the rights of the employees. (Manlimos
v. NLRC)
(4) Habitual Absenteeism
The service record of private respondent with petitioner
is perpetually characterized by unexplained absences
and unauthorized sick leave extensions. The nature of
his job as lineman-driver requires his physical presence
to minister to incessant complaints often faulted with
electricity, habitual absenteeism of an errant employee
is not concordant with the public service that petitioner
has to assiduously provide. Therefore, his continual
incurrence of absences rendered his dismissal proper.
(Manila Electric Co. v. NLRC)
2
Nowhere in our jurisprudence requires that all medical
certificates be notarized to be accepted as a valid
evidence. In this case, there is [neither] difficulty nor
an obstacle to claim that the medical certificates
presented by complainant are genuine and authentic.
While it is true that the petitioner had objected to the
veracity of the medical certificates because of lack of
notarization, it has been said that verification of
documents is not necessary in order that the said
documents could be considered as substantial
evidence. The medical certificates were properly
signed by the physicians; hence, they bear all the
earmarks of regularity in their issuance and are
entitled to full probative weight.
The respondent did not incur any intermittent
absences. His only recorded absence was the
consecutive ten-day unauthorized absence, albeit due
to painful and unbearable toothache. The petitioner’s
claim that the respondent had manifested poor work
attitude was belied by its own recognition of the
respondent’s dedication to his job as evidenced by the
latter’s awards. (Union Motor Corp v. NLRC)
(5) Fixed-Term Employment
The court has repeatedly upheld the validity of fixed-
term employment provided that a.) fixed period of
unemployment was knowingly and voluntarily agreed
upon by the parties, without any force, duress or
improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating
his consent, and b) it satisfactorily appears that the
employer and employees dealt with each other on more
or less equal terms with no moral dominance whatever
being exercised by the former on the latter. The
employment contracts entered into satisfied all these
requirements. However, the dismissal is illegal because
the employment contract stipulates that the liquidator
has the right to terminate them any time during this
period of temporary employment if they are found
inefficient in the job or violated any rules. (Mendenilla
v. PNB)
The non-renewal of an employment contract with a
term is ordinarily a valid mode of removal at the end of
each period. This rule, however, must yield to the
superior constitutional right of employees, permanent
or termporary, to self-organization. While a temporary
empoloyment may be ended with or without cause, it
certainly may not, however, be terminated for an illegal
cause. (Pamantasan v. Civil Service Commission)
(6) Past Offenses
Dismissal on the basis of loss of trust and confidence
calls for substantial evidence, or the amount of relevant
evidence which a reasonable mind might accept to
justify a conclusion. It does not demand proof beyond
reasonable doubt of the employee’s misconduct. The
panel used all the evidence available to them and thus
cannot be faulted. Furthermore, the decision of
acquittal was rendered after the panel issued its
pronouncement. This, plus the fact that petitioner is
estopped since she agreed to subject herself to the
voluntary arbitrators thru the compromise agreement
justifies the termination. (Ramoran v. Jardine CMG)
Previous offenses may be used as valid justification for
dismissal from work only if the infractions are related
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
to the subsequent offense upon which basis the
termination of employment is decreed. The previous
infraction may be used if it has a bearing to the
proximate offewnse warranting the dismissal. (La
Carlota Planters Assoc v. NLRC)
(7) Habitual Infractions
“It is the employer's prerogative to prescribe reasonable
rules and regulations necessary or proper for the
conduct of its business or concern, to provide certain
disciplinary measures to implement said rules and to
assure that the same be complied with. At the same
time, it is one of the fundamental duties of the
employee to yield obedience to all reasonable rules,
orders, and instructions of the employer, and willful or
intentional disobedience thereof, as a general rule,
justifies rescission of the contract of service and the
preemptory dismissal of the employee." (citing Family
Planning Organization of the Philippines, Inc. vs .NLRC)
Records show the various violations of respondent
company’s rules and regulations committed by
petitioner. His dismissal from the service is, therefore,
in order. Indeed, in Piedad vs. Lanao del Norte Electric
Cooperative, Inc., we ruled that a series of irregularities
when put together may constitute serious misconduct,
which under Article 282 of the Labor Code, as
amended, is a just cause for dismissal. (Gustilo v.
Wyeth Phil, Inc)
(8) Immorality
The Manual of regulation for private Schools provides
that in addition to the just causes enumerated in the
LC, the employment of school personnel, including
faculty, may be terminated for, inter alia, disgraceful or
immoral conduct. Immorality under American
Jurisprudence is defined as a course of conduct which
offends the morals of the community and is a bad
example to the youth whose ideals as a teacher is
supposed to foster and to elevate, the same including
sexual misconduct. (Santos vs NLRC)
(9) Conviction of Crime
Conviction for theft is justification enough for the NLRC
decision to reinstate said convicted person. Such
conviction is a supervening cause that rendered unjust
and inequitable the reinstatement decision.
(Sampaguita Garments Corp vs NLRC)
(10) Qualification Requirements
The condition imposed by respondent RICC/PICMW, as
a principal or client of the contractor Amethyst,
regarding the age requirement of the security guards to
be designated in its compound, is a valid contractual
stipulation. It is an inherent right of RICC/PICMW, as
the principal or client, to specify the qualifications of
the guards who shall render service pursuant to a
service contract. It stands to reason that in a service
contract, the client may require from the service
contractor that the personnel assigned to the client
should meet certain standards and possess certain
qualifications, conformably to the client’s needs.
(Lanzadares vs Amethysts Security)
Constructive Dismissal
Dynamic Signmaker vs. Potongan
Facts:
2
Respondent started working for petitioner as a
production supervisor. In February 1996, the union
declared a strike against petitioner corporation for
replacing its supervisors and designating several
persons to take over the operations of the corporation.
Respondent's salaries were then held and they were
asked to take a leave of absence until further notice.
Respondent then received a letter inviting him to
answer for several charges. Respondent denied the
charges. He then filed a case for illegal dismissal since
although he was not given a formal letter of
termination, he was nonetheless dismissed since he
was asked to take a leave of absence indefinitely and
that he was not instructed nor allowed to return to
work. LA dismissed the complaint . NLRC set aside the
decision of the LA.
Issue: WON respondent was constructively dismissed.
Held: YES
Ratio:
4. Petitioner's claim that respondent was not
dismissed but rather management opted to
reorganize is belied by the letter sent to
respondent by petitioner terminating his
employment not for any just or authorized
cause but for filing a case against petitioner
corporation.
5. Although management has a wide latitude 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,
the scopes and limits of management
prerogatives must be balanced with the
security of tenure.
6. If exercised in good faith then the transfer
is justified, however, in this case respondent
was asked to return only after more than 3
years from the time he was asked to go into an
indefinite leave during which his salary was
withheld and only after the decision of the
NLRC.
- petitioner was never transferred nor
reassigned to another office or position
contrary to what the petitioner seems to allege.
- also there was no valid ground for dismissal.
- also, during the pendency of the case,
petitioner wrote a letter to respondent to report
back to work, which is a sign that there was
indeed no valid ground for dismissal.
Decision: Petition Denied
Management has the prerogative to transfer or assign
employees from one office or area of operation to
another-provided: a) there is no demotion in rank or
diminution of salary, benefits and other privileges; b)
action is not motivated by discrimination, made in bad
faith; c) effected as a form of punishment or demotion
without sufficient cause; d) without grave abuse of
discretion bearing in mind the basic elements of fair
play and justice. (Philippine American Life vs
Gramaje)
The transfer of an employee ordinarily lies within the
ambit of management prerogatives. A transfer amount
to constructive dismissal when the transfer is
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
unreasonable, inconvenient, or prejudicial to the
employee and it involves a demotion in rank or
diminution of salaries, benefits and other privileges.
Here the mere fact that the respondent would be
inconvenienced does not make such transfer illegal. It
is standard in the security business that guards
become sidelined temporarily pending reassignment.
Moreover, the transfer was effected in good faith.
(OSS Security vs NLRC)
Constructive Dismissal does not always involve
forthright dismissal or diminution in rank,
compensation, benefit and privileges. There may be CD
if n act of clear discrimination, insensibility or disdain
by the employer becomes unbearable that it could
foreclose any choice by him except to forego his
continued employment. (Hyatt Taxi Services vs
Catinoy)
CD is defined as a “quitting because continued
employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and
diminution of pay”. (Garcia vs NLRC)
Transfer
Westmont Pharmaceuticals inc. vs Samaniego
(Transfer)
Facts:
Unilab hired the services of Respondent Samaniego as
Professional Service Representative of its marketing
arm, Westmont. Later he was promoted as Senior
Business Development Associate and assigned him in
Isabela as Acting District Manager. He was transferred
to Manila pending the investigation of his subordinate
and physicians of Region II involved in a sales discount
and RX trade-off controversy. He was then placed
under floating status and was assigned to perform
duties not connected with his position. His transfer to
Metro Manila constituted a diminution. Samaniego
then filed a complaint for illegal dismissal claiming that
his transfer was actually a constructive dismissal. LA
ruled in favor of respondent. NLRC ruled that the LA's
decision was null and void for lack of jurisdiction and
merit. The CA set aside the decision of the NLRC and
reinstated the decision of the LA.
Issue: WON the transfer of Samaniego was actually a
constructive dismissal.
Held: Yes
Ratio:
1. In constructive dismissal, the employer has
the burden of proving that the transfer of
an employee is for a just and valid ground,
such as a genuine business necessity.
● The employer must show that the transfer
is not unreasonable, inconvenient, or
prejudicial to the employee.
● It must not involve a diminution of rank or
a diminution in salary and other benefits.
● If the employer cannot overcome this
burden the employee's transfer shall be
tantamount to unlawful constructive
dismissal.
2. Westmont and Unilab failed to discharge this
burden.
● Respondent was unceremoniously transferred
from Isabela to Metro Manila.
2
 ● Such transfer is economically and emotionally
burdensome on the respondent's part since he
had to maintain two residences and he was
placed on floating status, demoted in rank and
was forced to perform functions no longer
supervisory in nature such as fetching arriving
physicians, making deposits in banks and
fetching fieldmen.
● There may also be constructive dismissal if an
act of clear insensibility or disdain by an
employer becomes so unbearable on the part of
the employee that it could foreclose any choice
by him except to forego his continued
employment.
● This is what happened to Samaniego.
Decision: Petition dismissed and Judgment affirmed.
The right to transfer or reassign employees is
recognized as an employer’s right and the prerogative of
management. As the exigency of the business may
require, an employer, in the exercise of his prerogative
may transfer an employee, provided that said transfer
does not result in a demotion in rank or diminution in
salary, benefits and other privileges of the employee; or
is not unreasonable, inconvenient or prejudicial to the
latter; or is not used as a subterfuge by the employer to
rid himself of an undesirable worker. Transfers can be
effected pursuant to a company policy to transfer
employees from one place of work to another place of
work owned by the employer to prevent connivance
among them. Likewise, we have affirmed the right of an
employer to transfer an employee to another office in
the exercise of what it took to be sound business
judgment and in accordance with pre-determined and
established office policy and practice. Particularly so
when no illicit, improper or underhanded purpose can
be ascribed to the employer and the objection to the
transfer was grounded solely on the personal
inconvenience or hardship that will be caused to the
employee by virtue of the transfer. In security services,
the transfer connotes a changing of guards or exchange
of their posts, or their reassignment to other posts.
However, all are considered given their respective posts.
(Urbanes vs CA)
Case law recognizes the employer’s right to transfer or
assign employees from one area of operation to
another, or one office to another or in pursuit of its
legitimate business interest, provided there is no
demotion in rank or diminution of salary, benefits and
other privileges and not motivated by discrimination or
made in bad faith, or effected as a form of punishment
or demotion without sufficient cause. This matter is a
prerogative inherent in the employer’s right to
effectively control and manage the enterprise.
(Lanzadares vs Amethyst Security)
In the employment of personnel, the employer can
prescribe the hiring, work assignments, working
methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline,
dismissal and recall of work, subject only to limitations
imposed by laws. The transfer of an employee ordinarily
lies within the ambit of management prerogatives. A
transfer amount to constructive dismissal when the
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
transfer is unreasonable, inconvenient, or prejudicial to
the employee and it involves a demotion in rank or
diminution of salaries, benefits and other privileges.
Here the mere fact that the respondent would be
inconvenienced does not make such transfer illegal. It
is standard in the security business that guards
become sidelined temporarily pending reassignment.
Moreover, the transfer was effected in good faith.
(OSS Security vs NLRC)
Promotion
There is no law that compels an employee to accept a
promotion for the reason that a promotion is in the
nature of a gift or reward, which a person has a right
to refuse. Hence, the exercise by the private
respondents of their right cannot be considered in law
as insubordination, or willful disobedience of a lawful
order of the employer. As such, there was no valid
cause for the private respondents’ dismissal.
(Phil Telegraph vs CA)
Preventive Suspension
For the protection of the company’s property pending
investigation of any alleged malfeasance or misfeasance
committed by the employee. The employer may place
the worker concerned under preventive suspension if
his continued employment poses a serious and
imminent threat to the life or property of the employer
or of his co-employer. (PAL vs NLRC)
GATBONTON v NLRC
Austria-Martinez J.
Renato Gatbonton, an associate professor in Mapua,
was placed under preventive suspension for 30-days by
Mapua’s Committee on Decorum following a complaint,
filed by a civil engineering student, for sexual
harassment and unfair grading system. The committee
believed that Gatbonton’s continued stay would affect
his performance as well as the students’ learning; the
suspension was also for him to prepare for the
investigation and prevent him from influencing any
faculty members.
Gatbonton filed a complaint with the NLRC for illegal
suspension. Mapua then (pursuant to the compromise
agreement it had with Gatbonton in an earlier case in
the RTC) published in the school organ the IRR of the
Anti-Sexual Harassment Act (RA 7877).
Labor Arbiter: suspension illegal. NLRC reversed.
ISSUE:
WON the suspension was proper?
HOLD:
NO. 1) The suspension of Gatbonton was based on
Mapua’s IRR for RA 7877 which came into effect
only after it was published in the school organ. The
suspension of Gatbonton came earlier therefore the
rules was not yet legally effective. 2) Even if the
IRR was applicable the circumstances mentioned in
the rules that would merit his suspension (evidence
of guilt is strong; pose danger to life/property of
the members of the educational community) wasn’t
present in his case. 3) Even under the labor code
his suspension won’t find justification. Nothing in
the record shows that the suspension was imposed
because his continued employment poses a serious
2
threat to the life or property of the employer or his
co-workers.
Residency Training
A residency or resident physician position in a medical
specialty is never a permanent one. Residency connotes
training and temporary status. It is the step taken by a
physician right after post-graduate internship prior to
his recognition as a specialist or sub-specialist in a
given field.
(Felix v Buenaseda)
BUSINESS-RELATED CAUSES (ART. 283)
 Installation of labor-saving devices
 Redundancy
 Retrenchment to prevent losses
 Closing or cessation of operation of the
establishment or undertaking unless the
closing is for the purpose of circumventing the
provisions of this Title
 Temporary Closure (Art. 286)
Procedure
 Service of a written notice on the workers and
the Ministry of Labor and Employment at least
1 month before
 Termination due to the installation of labor-
saving devices or redundancy: Worker
entitled to a separation pay equivalent to at
least 1 month pay or to at least 1 month pay
for every year of service, whichever is higher
 Termination due to retrenchment to prevent
losses and closures or cessation of
operations: Separation pay equivalent to 1
month pay or at least 1/2 month pay for every
year of service, whichever is higher
 A fraction of at least 6 months shall be
considered 1 whole year
Basis (Employer Right)
Redundancy exists when the services of an employee
are in excess of what would be reasonably demanded
by the actual requirements of the enterprise. An
employer has no legal obligation to keep on the payroll
employees more than the no. needed for the operation
of the business. Retrenchment is an economic ground
to reduce the no. of employees which can only be
justified by reason of the business losses which are
serious, actual and real. (Edge Apparel Inc vs NRLC)
Business-Related or Authorized Causes:
(1) Installation of Labor-Saving Devices
The law authorizes an employer to terminate the
employment of any employee due to the installation of
labor saving devices. The installation of these devices is
a management prerogative, and the courts will not
interfere with its exercise in the absence of abuse of
discretion, arbitrariness, or maliciousness on the part
of management, as in this case.
(Complex Electronics Employees Assoc vs NLRC)
(2) Retrenchment to Prevent Losses
CASIMIRO v. STERN REAL ESTATE
Callejo J.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Stern’s Hotel Rembrandt, due to its dire financial
status, announced on May 6, 1999 a Special
Separation Program (SSP) for all its employees. On May
28, 1999 management submitted its termination report
with DOLE. The report covered 29 employees whose
employment will terminate on June 29, 1999. Mr.
Casimiro and company were included in the report and
they filed a complaint alleging that the company didn’t
really suffer any losses; that the hotel expenses were
bloated.
Labor Arbiter: retrenchment illegal. NLRC: Reversed.
CA affirmed the decision of NLRC.
ISSUE:
WON the retrenchment was valid?
HOLD:
Yes.
Requisites of a valid retrenchment: a) retrenchment
was reasonably necessary to prevent business losses
which if incurred are not merely de minimis but
substantial, real and actual, if only expected, are
reasonably imminent as perceived objectively and in
good faith by the employer b) written notice to DOLE
and the concerned employee at least 1 month prior to
retrenchment c) payment of separation pay d) the
exercise of this prerogative is done in good faith for the
advancement of its interest and not to circumvent the
employees right to security of tenure e) employer used
fair and reasonable criteria in ascertaining who should
be dismissed and who should be retained.
In this case Stern sufficiently proved that it had
suffered losses for 4 years without any future signs of
abatement. A financial statement prepared by an
independent accounting firm is enough to prove the
company’s financial status.
TPI PHILS CEMENT CORP. v. CAJUCOM
Sandoval-Gutierrez J.
Atty. Cajucom VII was employed by TPI as Vice-
President for legal affairs. Due to economic slowdown
TPI implemented cost-cutting measures which resulted
in Cajucom being terminated from service. Cajucom
was sent a letter of termination on Dec.3 1998. He was
terminated on December 30, 1998.
Labor arbiter: dismissal was illegal. NLRC: reversed.
CA: affirmed with modification (must pay him
backwages from the time of his dismissal up to the time
that this dismissal was declared just).
ISSUE:
WON retrenchment was proper?
HOLD:
Yes.
Requisites for retrenchment: a) retrenchment is
necessary to prevent losses and the same was proven b)
written notice to DOLE and the concerned employee at
least 1 month prior to retrenchment c) payment of
separation pay.
Cajucom argued that the losses must be actual. The
court said that when art283 speaks of “retrenchment to
prevent losses” it means that the termination is
authorized to be undertaken by the employer sometime
before the losses anticipated are actually sustained. In
this case TPI was able to prove thru its financial
2
statement audited by independent accounting firms
that it was indeed suffering financially. However since
the company violated the procedural requirement of 1
month prior notice nominal damages was awarded. The
award of backwages was deleted.
PHIL CARPET EMPLOYEES ASSOC. (PHILCEA) v.
STO. TOMAS
Callejo J.
When the 2002-04 CBA between PHILCEA and Phil
Carpet was about to expire, the union’s president asked
for a conference with the management. Instead of
replying to the letter, the company issued a memo
informing its employees of its implementation of cost
reduction programs on account of depressed business
conditions. 88 employees were retrenched. The
Secretary of Labor affirmed the retrenchment.
ISSUE:
WON retrenchment was proper?
HOLD:
No.
Retrenchment—the termination of employment
initiated by the employer through no fault of the
employee and without prejudice to the latter, resorted
by management during periods of business recession,
industrial depression or during seasonal fluctuations or
during lulls over the shortage of materials; a reduction
of manpower utilized by the employer to minimize
business losses. This prerogative must be exercised
only as a last resort. Sliding incomes are not
necessarily losses, much less serious business losses,
within the meaning of the law. The fact that an
employer suffered a net loss absent any other evidence
on its impact on the business, nor on expected losses
that would have been incurred had operations been
continued, may not amount to serious business losses
mentioned in the law. The employer must show that its
losses increased through a period of time and that the
condition of the company will not likely improve in the
near future.
In this case the company failed to prove serious
business losses, from its financial statements the court
gathered that it had suffered certain losses during
some years while an increase in its net sales at other
times.
ARIOLA v. PHILEX MINING CORP.
Carpio J.
Philex sustained financial losses in 1992. To save
costs, Philex tried to reduce its personnel thru early
voluntary retirement and retrenchment programs. A
workforce audit showed that the company had 310
excess positions. On April 30, 1993 the company and
the union representing the Corp.’s supervisory
employees signed a MOA prescribing the criteria for
retrenchment. Ariola and company were the retrenched
supervisory employees who now contend that their
dismissal was illegal.
ISSUE:
WON retrenchment was proper?
HOLD:
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
No. While Philex’s financial condition, before and at the
time it retrenched its employees, justified Ariola’s
retrenchment the company’s noncompliance with one
of the requisites of retrenchment (see Casimiro)
rendered its action illegal. In this case Philex failed to
implement its retrenchment program in a just and
proper manner. It followed the prescribed rule in the
MOA; but the MOA was not ratified by the supervisors
(and therefore can’t prevail over the CBA) and it was in
conflict with the CBA. The difference was that under
the MOA if an employee received a reprimand or
warning from the employer during the last 3 years that
will be counted as a demerit point which will be taken
against him in his evaluation; while under the CBA,
reprimands and warnings are stricken-off the record
every Feb. 1st of each year.
A substantial defect invalidates a dismissal so non
compliance with the requisites for retrenchment (except
as regards written notice which is procedural) will
render the dismissal illegal and without basis.
RETRENCHMENT VIS-À-VIS CLOSURE
ALABANG COUNTRY CLUB v. NLRC
Carpio-Morales J.
After conducting a profitability study on its Food and
Beverages Department and finding that the said
department was incurring substantial losses, Alabang
Country decided to cease the department’s operation
and just open the same to a contractor. The employees
in that department were subsequently dismissed (this
was done after the management had explained their
side to the union and notices were sent) and was paid
separation pay equal to 125% of their monthly salary.
They were also informed that the concessionaire was
willing to accept them as employees and for the same
salary. The union however filed a complaint for illegal
dismissal.
ISSUE:
WON the dismissal was proper?
HOLD:
Yes. This case involves a closure of business
undertaking and not retrenchment. In retrenchment
there is a reduction of personnel to cut down company
cost while in closure there is a complete cessation of a
business operation. Closure can either be because of
substantial business losses (which Alabang in this case
failed to prove) or not. An employer can close shop
anytime for any bona fide reasons. Just as the law
forces no one to go into business, there is no law which
compels anybody to continue the same. In this case the
financial statements of Alabang showed that its
expenses for keeping the F&B department had become
more expensive. The company’s decision absent any
showing of bad faith (that it intend to circumvent the
rights of its employees) is a management prerogative
that should be respected.
(3) Redundancy
DUSIT HOTEL NIKKO v. NUWHRAIN – Dusit Hotel
Nikko Chapter
466 SCRA 374 ~ 09 Aug 2005
2
Ponente: Callejo, Sr., J.
Nature: Petition for review on certiorari of a CA decision
Petitioners – Dusit Hotel Nikko & Philippine Hoteliers,
Inc. (PHI)
Respondents – National Union of Workers in Hotel,
Restaurant & Allied Industries (NUWHRAIN) – Dusit
Hotel Nikko Chapter & Rowena Agoncillo
FACTS:
Rowena was hired on Mar 1984 by Dusit. She was
eventually promoted Senior Front Office Cashier, with a
monthly salary of P14,600 inclusive of service charge.
On Jan 1995, the Hotel decided to trim down the
number of employees from 820 to 750, and offered a
Special Early Retirement Program (SERP) to all
employees, intended to provide them with financial
benefits prior to prolonged renovation period and to
enable management to streamline the organization by
eliminating redundant positions. As a result, Dusit
terminated 243 employees due to redundancy, 161 of
the 243 were Union officers and members, effective Apr
1996. Rowena was one of these employees. Although
she was advised to avail of the SERP, she decided not
to, and filed a complaint for illegal dismissal against
the Hotel. When Dusit found out about the complaint,
they tried to take back the termination letter that they
sent Rowena, but it was already with her counsel. She
was then assured by the Hotel that she was still
considered an employee on temporary lay-off due to
ongoing renovations. Later on, she was offered to be
reinstated, but she refused because the positions being
offered were not her former position or the positions
she wanted.
Rowena’s complaint:
 LA – ruled in favor of Hotel, no illegal dismissal,
dismissed complaint.
 NLRC – reversed LA, ruled in favor of Rowena, there
was illegal dismissal, she is entitled to reinstate-
ment + full backwages.
 CA – affirmed NLRC, dismissed Dusit’s petition for
review.
 SC – affirmed CA, ruled in favor of Rowena, dis-
missed Dusit’s petition.
Union’s case:
 Secretary of Labor & Employment (SOLE) – issued
Order in favor of the Union, declared the dismissal
of the 243 employees as illegal and ordered their
reinstatement with full backwages.
 Union & Hotel entered into a MOA, whereby the
Hotel agreed to pay P15k to each member of the
Union by way of amicable settlement, in addition to
the redundancy pay.
ISSUES:
1. Whether or not Rowena was dismissed
2. Whether or not the redundancy program was valid
3. Whether the MOA is binding on Rowena
HELD:
1. Yes, Rowena was dismissed.
2. Redundancy program was NOT valid.
3. MOA not binding on Rowena.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
RATIO:
1. The termination letter sent to Rowena by the Hotel is
conclusive evidence of her termination. Dusit’s
subsequent offers to transfer her to different positions
were done in bad faith, as a ploy to stave off a suit for
illegal dismissal.
2. As per the SOLE order, the redundancy program
was not valid because it was found to be ‘but a ploy, a
contrivance cunningly scripted by them to subvert the
Union and unlawfully dismiss many of its employees’.
The order also declared Dusit and PHI (which owned
Dusit) guilty of unfair labor practice.
Requisites of a valid redundancy program:
(1) good faith of the employer in abolishing the
redundant position
(2) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and according
abolished
In this case, the SOLE, NLRC, and CA found that
Rowena’s position was not abolished or declared
redundant because the Hotel hired a new set of
employees to perform the tasks done by Rowena.
3. MOA is not binding on Rowena because it is not
shown that she is a member of the Union/bargaining
unit. The MOA applies only to the members who
agreed to the termination of their employment based on
redundancy and received redundancy pay.
RULING: Petition denied.
It is not enough for a company to merely declare that it
has become overmanned. It must produce adequate
proof that such is the actual situation in order to
justify the dismissal of the affected employees for the
redundancy. (Golden Thread Knitting vs NLRC)
(4) Closure of Business (283)
BUSINESS SERVICES v. CA
480 SCRA 571 ~ 30 Jan 2006
Ponente: Quisumbing, J.
Nature: Petition for review on certiorari of a CA decision
& resolution
Petitioners – Business Services of the Future Today,
Inc. (BSFTI) & Ramon Allado
Respondents – CA, Gilbert Veruasa, Ma. Celestina
Veruasa
FACTS:
Mailboxes, Etc. (Davao) is a local franchisee of
Mailboxes, Etc. of the US, engaged in providing
business support & communication service centers.
The local franchisee is operated by BSFTI, whose
stockholders include Ramon Allado.
Veruasa spouses’ version:
On Jan 1996, Gilbert & Celestina Veruasa were hired
by Ramon Allado as manager and assistant manager of
Mailboxes, Etc. Davao for a monthly compensation of
P15,000. Due to lack of founds from BSFTI, they were
not paid from Mar 1997 to Jan 1998, amounting to
2
P142,613.93 in unpaid salaries. On Jan 1998, Allado
personally gave the spouses notices of termination
effective immediately, citing negative cashflow &
BSFTI’s failure to infuse more capital to the business
as reasons for their dismissal. No written notice of
closure was sent to DOLE. Allado padlocked the offices
of Mailboxes Etc. Davao, confiscated all the office
equipment. On Mar 1998, Allado made a partial
payment of P13,125 to the spouses, leaving a balance
of P129,488.93 unpaid despite repeated demands by
the spouses. This led them to file a complaint for illegal
dismissal.
BSFTI’s version:
Sometime 1995, Allado invited Veruasa to invest in the
business, to which he agreed to. He offered to manage
and contribute his former business enterprise Fax
Business Shop worth P300,000 as his investment, to
which Allado accepted. They executed a Shareholder’s
Agreement, to recognize Gilbert’s P300,000
contribution, copies of which were all entrusted to
Gilbert. During the 1st year of operations, BSFTI
suffered losses amounting to P1.145M. Due to failure
to attract other investors, Gilbert and BSFTI agreed to
close shop. BSFTI alleged that Gilbert failed to inform
DOLE of the closure and had in his possession
important company records as well as properties he
contributed to the venture.
Re: complaint for illegal dismissal –
LA – ruled in favor of the Veruasas, declared that there
was an employee-employer relationship between them
and BSFTI (all essential elements of er-ee rel present),
and that they were illegal dismissed. There was no
showing that the spouses were stockholders, the
BSFTI’s Articles of Incorporation failed to show them as
incorporators. Because of failure to notify DOLE +
illegal dismissal, spouses were entitled to backwages,
separation pay, 13th month pay amounting to
P496,897.46 + 10% attorney’s fees.
NLRC – reversed the LA, dismissed the case, ruled that:
(1) Gilbert Veruasa was both a BSFTI employee and
stockholder as evidenced by his communications to
other BSFTI stockholders,
(2) valid closure of business due to serious financial
losses so BSFTI was not obliged to pay separation
benefits
(3) the spouses were not entitled to backwages, because
Gilbert, as manager, had the duty to notify DOLE of the
closure
(4) no basis for awarding 13th month pay
(5) no basis for claim for unpaid salaries since there
were petty cash vouchers showing full payment of their
salaries.
CA – reversed the NLRC, reinstated the LA decision, but
deleted the award of separation pay. According to its
computations, the spouses are entitled to 13th mo pay,
backwages, attorney’s fees amounting to P508,437.54.
ISSUES:
(1) Were the spouses employees or stockholders of
BSFTI?
(2) If they were employees, were they validly dismissed?
(3) Are they entitled to 13th mo pay, backwages,
separation pay as well as unpaid salaries?
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
HELD:
(1) The Veruasa spouses were employees of BSFTI, as
both parties admit to the fact that Gilbert and Celestina
were hired as manager and assistant manager.
(2) Valid dismissal, but non-compliance with
procedural requirement. Notice would not have been
necessary if Gilbert consented to his dismissal due to
closure or cessation of business operations. However,
in this case, Gilbert did not consent, and no convincing
evidence was presented by BSFTI (aside from self-
serving affidavits, which the Court rejected) to prove
this alleged consent, hence BSFTI were obliged to
submit a written notice to DOLE. Due to BSFTI’s
failure to do so, they were liable for nominal damages
amounting to P40,000, following the Agabon doctrine.
(3) Since both NLRC and CA were unanimous in finding
that BSFTI’s closure was bona fide, the Veruasa
spouses were validly dismissed, and not entitled to the
13th mo pay. Based on the Position Papers of both
parties, it was shown that the spouses had made
advances amounting to P178,075.95. They were
actually overpaid by P48,587.02.
RULING: Petition partially granted, CA finding of illegal
dismissal set aside, SC upheld legality of the dismissal.
BSFTI ordered to pay P40,000 nominal damages to
both Veruasa spouses, total of P80,000. The Veruasas
were ordered to refund the P48,587.02 to BSFTI.
AISFB-ALU v. CA
467 SCRA 483 ~ 22 Aug 2005
Ponente: Chico-Nazario, J.
Nature: Special Civil Action in the SC, Certiorari.
Petitioner – Association of Integrated Security Force of
Bislig (AISFB)
Respondents – CA, Paper Industries Corp. of the Phils.
(PICOP)
FACTS:
AISFB is a legitimate labor org duly registered with
DOLE. Formed in 1990, its members are the regular
company hired security guards composing the
Company Guard Force (CGF) maintained and operated
by PICOP. CGF provided security services to PICOP’s
facilities at its mill site. PICOP is a manufacturer of
paper and timber products, its principal place of
operations is at Tabon, Bislig, Surigao del Sur.
In 1991, PICOP was constrained to close its security
force because the Phil Constabulary (PC) Civil Security
Force Command did not approve their application for
renewal of license to operate its own security
department. The non-approval was due to the fact that
some firearms listed in the inventory were unaccounted
for, plus intelligence reports that there were NPA rebels
or sympathizers within the ranks of the CGF. The
Union, on the other hand, alleged that the dismissal by
PICOP was a clear case of union busting.
2
NLRC – dismissed the complaint, declared that the
closure of the CGF was valid and legal, but ordered
PICOP to provide separation benefits.
CA – affirmed the NLRC in toto.
ISSUE: Whether or not PICOP’s closure of its own
security force has an authorized cause, if yes, was the
dismissal validly done.
HELD/RATIO:
Yes, PICOP was constrained to do so due to the non-
renewal of its license to operate its own security force.
Such license requirement is mandated by law – RA
5487, “An Act to Regulate the Organization and
Operation of Private Detective, Watchmen or Security
Guard Agencies”. It would be unfair to expect PICOP to
operate its security force illegally. The closure is
considered a cessation of operations of establishment
or undertaking not due to serious business losses or
financial reverses as provided in the 2nd to the last
sentence of Art. 283 of the LC.
As for the requirements, the Court found that PICOP
complied with both substantive and procedural
requirements of dismissal. It provided the necessary
separation pay as required by Art. 283, and it also
notified both the employees and the DOLE through
written notices and letters 30 days prior to the intended
date of termination.
RULING: The Union’s petition is dismissed. NLRC
affirmed in toto.
Basic is the rule in termination cases that the employer
bears the burden of showing that the dismissal was for
a just or authorized cause. Otherwise the dismissal is
deemed unjustified. Apropos this responsibility,
petitioner corporation should have presented clear and
convincing evidence of imminent economic or business
reversals as form of affirmative defense in the
proceedings before the LA or under justifiable
circumstances, even on appeal with the NLRC. (ME-
SHURN Corp vs ME-SHURN WORKERS UNION)
Explicit from this provision is that closure or cessation
of business operations is allowed even if the business is
not undergoing economic losses. The owner, for any
bona fide reason, can lawfully close shop at anytime.
Jut as no law forces anyone to go into business, no law
can compel anybody to continue init. It would indeed
be stretching the intent and the spirit of the law if we
were to unjustly interfere with the management
prerogative’s to close or cease its business operations,
just because said business operation or undertaking is
not suffering from any loss or simply to provide the
workers continued employment. (Mac Adams Metal
Eng Workers Union vs Mac Adams)
The loss referred to in Art 283 cannot just be any kind
of loss. To impart operational meaning to the
constitutional policy of providing full protection to
labor, the employer’s prerogative to bring down labor
costs by retrenchment must be exercised essentially as
a measure of last resort. (Phil Tobacco Flue Curing vs
NLRC)
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
(5) Temporary Closure (286)
ART. 286. When employment not deemed terminated. -
The bona-fide 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
than one (1) month from the resumption of operations
of his employer or from his relief from the military or
civic duty.
JPL MARKETING PROMOTIONS v. CA
463 SCRA 136 ~ 08 Jul 2005
Ponente: Tinga, J.
Nature: Petition for review on certiorari of a CA decision
& resolution
Petitioner – JPL Marketing Promotions (JPL)
Respondents – CA, NLRC, Noel Gonzales, Ramon Abesa
III & Faustino Aninipot
FACTS:
JPL is a domestic corp engaged in recruitment and
placement of workers. Respondents Gonzales, Abesa,
and Aninipot were hired by JPL as merchandisers and
attendants to the display of California Marketing Corp
(CMC) in various establishments. On 13 Aug 1996,
JPL notified respondents that CMC would stop its
merchandising activity effective 15 Aug 1996. They
were advised to wait for further notice as they would be
transferred to other clients. However, on Oct 1996 (2
months later), instead of waiting for advice from JPL,
respondents filed complaints for illegal dismissal, with
prayer for sep pay, 13th mo pay, service incentive leave
pay and moral damages.
LA – dismissed the complaint for lack of merit, found
that Gonzales and Abesa were employed by the store
where they were assigned to even before the lapse of
the 6-mo period given to JPL to provide them with new
assignments. Thus, they were considered to have
severed their relation with JPL and cannot charge JPL
with illegal dismissal. The LA also held that it was
incumbent upon the respondents to wait during the 6-
mo period until they were reassigned, and only after 6
mos can they file an action for separation pay and not
for illegal dismissal. Other claims – 13th mo and
service incentive leave pay – were also denied.
Respondents appealed to the NLRC.
NLRC – agreed with LA but allowed respondents to
recover separation pay, service incentive leave pay and
13th mo pay. JPL appealed to the CA.
CA – dismissed JPL’s petition, affirmed NLRC in toto. It
justified the award of separation pay on the grounds of
equity and social justice. 13th mo pay was affirmed as
well, because notwithstanding the absence of a
contractual agreement on the grant of 13th mo pay,
such is mandatory under the law. JPL appealed to the
SC.
ISSUES:
3
(1) Whether or not Gonzales et al are entitled to
separation pay, 13th mo pay and service incentive leave
pay
(2) If so, what should be the reckoning point for
computing said awards
HELD/RATIO:
(1)Re: separation pay – Gonzales et al NOT entitled to
sep pay because they were not terminated. The memo
sent to them by JPL was not a notice of termination but
only to inform them of CMC’s termination of its
contract with JPL. They were advised to wait for their
reassignment. Art. 286 of the LC allows the bona fide
suspension of the operation of a business or
undertaking for a period of not more than 6 mos,
wherein employees are placed on “floating status”. If
such status exceeds 6 mos, the employee may then be
considered to have been illegal dismissed, thus entitled
to separation benefits. In this case, it was the
employees themselves who severed their relations with
JPL when they applied for and were employed with
another establishment after receiving the memo from
JPL.
Re: damages – respondents also NOT entitled to
damages because there was no violation of due process
to speak of, the JPL memo was not a notice of
termination. 30-day written notice rule not applicable.
Re: 13th mo pay and service incentive leave pay –
Respondents are entitled to them as a matter of law,
even if the salaries that they received from JPL were
over the minimum wage rate.
(2) Computation of awards
13th mo pay – computed from the first day of
employment.
SIL pay – computed only after the employee has
rendered 1 year of service.
In this case, computation for both benefits should be
only up to 15 Aug 1996, the last day that the
respondents worked for JPL. To extend the period up
to the finality of the NLRC resolution would be unfair to
JPL since the respondents did not render any service to
JPL beyond that date. Both 13th mo pay and SIL pay
are given by law on the basis of service actually
rendered by the employees, as motivation for them to
stay longer with their employer.
RULING: Petition granted in part, CA decision and
resolution modified, award of sep pay deleted. JPL
ordered to pay 13th mo pay starting from the
respondents’ date of employment up to 15 Aug 1996,
as well as SIL pay starting from their 2 nd year of
employment up to 15 Aug 1996.
3. Disease (284)
ART. 284. Disease as ground for termination. - An
employer may terminate the services of an employee
who has been found to be suffering from any disease
and whose continued employment is prohibited by law
or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation
pay equivalent to at least one (1) month salary or to
one-half (1/2) month salary for every year of service,
whichever is greater, a fraction of at least six (6)
months being considered as one (1) whole year.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Book VI, Rule I, SECTION 8. Disease as a ground for
dismissal. — Where the employee suffers from a
disease and his continued employment is prohibited by
law or prejudicial to his health or to the health of his
co-employees, the employer shall not terminate his
employment unless there is a certification by
competent public health authority that the disease is of
such nature of at such a stage that it cannot be cured
within a period of six (6) months even with proper
medical treatment. If the disease or ailment can be
cured within the period, the employee shall not
terminate the employee but shall ask the employee to
take a leave of absence. The employer shall reinstate
such employee to his former position immediately upon
the restoration of his normal health.
The requirement for a medical certificate under Art 284
cannot be dispensed with; otherwise, it would sanction
the unilateral and arbitrary determination by the
employer of the gravity or extent of the employee’s
illness and thus defeat the public policy in the
protection of labor. (Vicente Sy vs CA)
Employee was a cashier/bookkeeper of Norkis and
while on duty one day, fainted and rushed to the
hospital where she was confined and diagnosed and
treated for Meningitis and Diabetes. She was not able
to work for 3 months. When she verified as to her
employment status, Norkis terminated her on account
of health reasons but the real reason behind it is loss of
trust and confidence for defalcation of company funds
committed by her. Her dismissal is Illegal because facts
establishing loss of trust is insubstantial if not
unfounded. (Viola Cruz vs NLRC)
- I don’t know why this is here.
D. PROCEDURAL REQUIREMENTS
Art 277(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 and 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. The Secretary of the Department
of Labor and Employment may suspend the effects of
the termination pending resolution of the dispute in the
event of a prima facie finding by the appropriate official
of the Department of Labor and Employment before
whom such dispute is pending that the termination
may cause a serious labor dispute or is in
implementation of a mass lay-off.
CRUZ v. COCA-COLA BOTTLERS, PHILS., INC.
3
460 SCRA 340 ~ 15 Jun 2005
Ponente: Ynares-Santiago, J.
Nature: Petition for review on certiorari of a CA decision
& resolution
Petitioner – Cornelio Cruz
Respondents – Coca-Cola Bottlers, Phils., Inc., Manuel
Remulla, Jr., Romeo Lara, Rene Horrilleno
FACTS:
Cruz has been employed with Coca-Cola (CC) at its
Calamba plant as a driver/helper since Jun 1983.
Sometimes, he is designated as acting salesman for
CC’s soft drinks. On 25 Jul 1998, Cruz and his helper
Pablito Aguila, after passing through inspection of the
products loaded in the delivery truck, was about to set
out to deliver said products but instead of leaving the
plant, Cruz drove his truck back into the plant
compound, on the pretext of refueling. While inside, he
asked Aguila to load another 30 cases of assorted
canned drinks as plus load. Aguila reminded Cruz of
the documents required (temporary gate pass TGP and
load order gate pass LOGP) but Cruz assured him and
stated “Ayos na”. On his second exit from the plant
premises, Cruz drove past the mandatory inspection
despite the security guards flagging him to stop. One
of the guards saw the additional cases of soda, which
was later on verified to be unlisted in the trucks LOGP.
This caused the security guards to pursue Cruz’s
truck, and when they were able to finally catch up with
him, Cruz could not present any papers for the plus
load. This incident was recorded in a written report
submitted to management, as a result of which, an
inter-office memo dated 27 Jul 1998 was sent to Cruz,
directing him to explain why no disciplinary action
should be taken against him for what he did. Cruz
admitted to what he did and explained that he ‘forgot’
to secure the required documents. On 05 Aug 1998,
an investigation was conducted on the alleged
violations committed by Cruz, which led to his
termination on 19 Aug 1998 through a memo made
effective immediately upon the receipt thereof. On 24
Aug 1998, Cruz filed a complaint for illegal dismissal,
unfair labor practice and damages against CCBPI.
LA – dismissed the complaint for lack of merit, declared
Cruz’s dismissal as valid and lawful because it was
based on a just cause.
NLRC – found the penalty of dismissal too excessive
and not proportionate to the infractions committed by
Cruz, modified the LA’s decision and ordered the
reinstatement of Cruz with full backwages less 6 days
suspension but declared the dismissal illegal. It
retained the dismissal of the ULP and claim for
damages.
CA – modified NLRC ruling, deleted the order of
reinstatement, but allowed backwages from the time
Cruz was dismissed up to finality of its decision. It
declared that the dismissal was for a valid cause but
CCBPI failed to satisfy procedural requirements.
ISSUES:
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
(1) Whether or not Cruz was validly dismissed with just
cause
(2) What is the appropriate penalty
HELD/RATIO:
(1) LA, NLRC, CA  all were unanimous in finding that
Cruz was guilty of dishonest acts. YES, Cruz was
dismissed with just cause, particularly Art. 282(c)
fraud or willful breach by an employee of the trust
reposed in him by his employer or duly authorized
representative. His claim of good faith is untenable
considering his 15 years of service. Rule – 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. Considering his long stay
with CCBPI, Cruz is expected to be very familiar with
the LOGP/TGP requirement.
Plus, it was also found that there were several
violations of company policy committed by Cruz in the
past, dating as far back as 1986. He misrepresented
some of his reports, was involved in car accidents
causing damage to another car and to an outlet store,
was also investigated for shortages in remittances of
collections from customers. He also had several
AWOLs (absent without leave), and was also suspended
for his violations of company policy. CCBPI tolerated
Cruz’s work ethic far too long, and was justified in
terminating him after the flagrant dishonesty he
committed.
(2) Applying the Agabon doctrine, if the dismissal is for
just case, the lack of statutory due process does not
nullify the dismissal or render it illegal. The employer
is liable only for nominal damages, imposed as an
indemnity to vindicate or recognize that the employee’s
right to due process was violated. In this case, P20,000
is enough.
RULING: petition denied. CA affirmed with
modification. Dismissal declared valid, but CCBPI
ordered to pay Cruz P20,000 as nominal damages for
non-compliance with statutory due process.
AGABON v. NLRC
442 SCRA 573 ~ 17 Nov 2004
Ponente – Ynares-Santiago, J.
Nature – Petition for review on certiorari of a CA
decision
Petitioners – Jenny Agabon, Virgilio Agabon
Respondents – NLRC, Riviera Home Improvements, Inc.
(RHI), Vicente Angeles
FACTS:
Jenny and Virgilio Agabon were hired by RHI as
gypsum board and cornice installers on Jan 1992, until
they were dismissed on Feb 1999 for abandonment of
work. They filed a complaint for illegal dismissal and
payment of money claims. On Dec 1999, the Labor
Arbiter (LA) ruled in their favor, declared their
dismissal as illegal, ordered RHI to pay:
1. backwages up to Nov 1999, and
3
 2. in lieu of reinstatement, 1 mo./year of service
separation pay from Jan 1992 to Nov 1999
3. holiday & service incentive leave pay for 1996,
1997, 1998
4. premium pay for holidays and rest days
5. Virgilio’s 13th month pay differential amounting
to P2,150
NLRC reversed the LA, it found that the Agabons had
abandoned their work, and were not entitled to
backwages & separation pay. The other money claims
were denied for lack of evidence.
CA partially reversed the NLRC by some of the money
claims, namely nos. 3 & 5 which were granted by the
LA. CA, like the NLRC, ruled that the dismissal of the
Agabons were not illegal.
ISSUE: Whether or not the Agabons were illegally
dismissed
HELD: Court said that dismissal should be upheld,
but the employer must be held liable for non-
compliance with the procedural requirements for
dismissal. [personal note: the Court did not make a
categorical statement about dismissals for
just/authorized causes but done without complying
with procedural requirements)
RATIO:
1. Re: abandonment – a form of neglect of duty, under
Art. 282 (b), considered as a just cuase for termina-
tion of employment by the employer. 2 factors
must be present for a valid finding of abandon-
ment, namely:
a. failure to report for work or absence without
valid or justifiable reason
b. clear intent to sever employer-employee rela-
tionship
In this case, the Agabons were frequently absent
because they were subcontracted for installation
works with another company, which clearly showed
their intent to sever their employer-employee
relationship with RHI. As held in Sandoval
Shipyard v. Clave, an employee who deliberately
absented from work without leave or permission
from his employer for the purpose of looking for a
job elsewhere is considered to have abandoned his
job. In this case, both Agabons were already
working for another company.
2. 4 scenarios:
(1) dismissal for just/authorized causes or health
reasons, procedural requirements observed 
employer not liable
(2) no just/authorized cause for dismissal but due
process observed  illegal dismissal
(3) no just/authorized case + no due process  il-
legal dismissal
(4) dismissal for just/authorized cause but due
process not observed  this case!
3. Examination of Wenphil, Serrano & Agabon – all of
which applies to the fourth scenario
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
(1) Wenphil or the Belated Due Process Rule –
employee dismissed for just cause (violent temper)
 Held: dismissal upheld, but because of failure of
employer to follow due process requirement, an
indemnity is imposed as penalty, payable to the
employee.
(2) Serrano rule – violation of due process
requirement renders dismissal (even if for
just/authorized cause) ‘ineffectual’ and employer is
liable to pay full backwages from time of
termination until judicially declared that the
dismissal was for a just or authorized cause.
Reason for a departure from Wenphil: imposition of
penalty by way of damages for violation of notice
requirement was not serving as a deterrent,
Serrano rule was meant to address employers’
practice of ‘dismiss now & pay later’.
(3) Agabon rule – reverted back to Wenphil partially
because Serrano encouraged even the most
undesirable employees to file suits on the ground of
non-compliance of procedural requirements. So it’s
back to the penalty system for non-compliance of
procedural requirements, in this case, P30,000 in
nominal damages.
RULING: Petition denied, CA affirmed with
modification, RHI ordered to pay P30,000 each to both
Agabons as nominal damages.
DISSENTING OPINION by Justice Puno
Main point of his dissent: Due process is a
constitutional right necessary to protect security of
tenure and uphold social justice. The workingman’s
right to job security and due process of law cannot be
measured with a reduced price tag.
Puno cites various constitutional provisions (1935,
1973, 1987), statutes, and jurisprudence to emphasize
the importance of the constitutional right of workers
and protection to labor, and that the due process
requirement is not a mere formality that may be
dispensed with at will, but it constitutes a safeguard of
the highest order in response to man’s innate sense of
justice.
Puno prefers the pre-Wenphil doctrine, where a
reasonless violation of the pre-dismissal notice (non-
compliance with procedural requirement) makes the
dismissal of an employee illegal and results in
reinstatement. Imposing a penalty for non-compliance
of procedure = putting a price tag on due process.
Jenny & Virgilio Agabon’s dismissal should be declared
illegal and they should be reinstated without loss of
seniority rights and other privileges with full
backwages. The Court should revert to the pre-
Wenphil doctrine in resolving future labor cases.
“This Court should protect labor and it should walk the
talk.”
Where the dismissal is for a just cause, the lack of
statutory Due Process should not nullify the dismissal
3
 or render it illegal or ineffectual. However, the employer
should indemnify the employee for the violation of his
right to statutory Due Process in the form of Nominal
damages. The amount of damages is addressed to the
sound discretion of the court, taking into account the
relevant circumstances.
Serrano vs. NLRC and Isetann
Facts:
Petitioner was hired by private respondent Isetann as a
security checker to apprehend shoplifters and prevent
pilferage of merchandise. Initially hired on Oct 1984 on
contractual basis, eventually became regular on 1985
and on 1988 became head of the Security Checkers
Section. In 1991, as a cost-cutting measure, Isetann
decided to phase out its entire security section and
engage the services of an independent security agency.
Serrano was given a memorandum terminating his
services effective on that same day on Oct 11, 1991.
Serrano filed a complaint for illegal dismissal, illegal
layoff, unfair labor practice, underpayment of wages,
and nonpayment of salary and overtime pay. The Labor
Arbiter ruled for Serrano. On appeal the NLRC reversed
the decision of the Labor Arbiter.
Issues:
1. WON hiring an independent security agency by Isetann
to replace its current security section as a valid
ground.
2. WON the denial of the right to be given a written notice
is tantamount to an illegal dismissal.
Held:
1. No. Absent proof that management acted in a mali-
cious or arbitrary manner, the court will not interfere
with exercise of the judgment by an employer. The only
bare assertion is that Isetann’s real purpose is to avoid
payment to the security checkers of the wage increases
provided, such assertion is not a sufficient basis. In-
deed, that the phase-out of the security section consti-
tuted a “legitimate business decision” is a factual find-
ing of an administrative agency which must be accor-
ded respect and even finality by this court. Accord-
ingly, SC held that the termination of the petitioner’s
services was for an authorized cause…redundancy.
Hence, pursuant to Art. 283 of the Labor Code, peti-
tioner should be given separate pay at the rate of one
month pay for every year of service.
2. No. The SC do not agree that to disregard the notice re-
quirement by an employer renders the dismissal of em-
ployment null and void. Such a stance is actually a re-
version to the discredited pre-Wenphil rule ordering an
employee to be reinstated and paid backwages when it
is shown that he has not given notice and hearing al-
though his dismissal or layoff is later found to be a just
or authorized cause. Such rule is abandoned in Wen-
phil because it is really unjust to require an employer
to keep in his service one who is guilty, for example, of
an attempt on the life of the employer or the latter’s
family, or when the employer is precisely retrenching in
order to prevent losses. Rather, the remedy is to order
the payment to the employee of full backwages from
the time of his dismissal until the court finds that the
dismissal was for a just cause. But, otherwise, his dis-
missal must be upheld and he should not be rein-
stated. This is because his dismissal is ineffectual.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
The cases cited by both Justice Puno and Panganiban
refer, however, to the denial of due process by the
State, which is not the case here. There are three
reasons why, on the other hand, violation of the
employer of the notice of requirement cannot be
considered a denial of due process resulting in the
nullity of the employee’s dismissal or layoff.
a) The Due Process Clause of the Constitution is a limita-
tion to the governmental powers. It does not apply to
the exercise of private power, such as termination of
employment under the labor code.
b) Notice and hearing are required under the Due Process
Clause before the power of organized society are
brought to bear upon the individual. This is obviously
not the case of termination of employment under Art
283. Here the employee is not faced with an aspect of
the adversary system. The purpose is requiring for a
30-day written notice before an employee is laid off is
not to afford him an opportunity to be heard on any
charge against him, for there is none. The purpose
rather is to give him time to prepare for the eventual
loss of his job and the DOLE an opportunity to determ-
ine whether economic causes do exist justifying the
termination of his employment.
c) Another reason why the notice requirement under Art
283 can not be considered a requirement of the Due
Process Clause is that the employer cannot really be
expected to be entirely an impartial judge of his own
cause. This is also the cause under Art 282.
Lack of notice only makes termination Ineffectual
Not all notice requirements are requirements of due
process. Some are simply part of the procedure to be
followed before a right granted to a party can be
exercised. Others are simply an application of the
Justinian precept, embodied in the Civil Code, to act
with justice, give everyone his due, and observe
honesty and good faith toward one’s fellowmen. Such is
the notice of requirement in Art 282-283. The
consequence of the failure either of the employer or the
employee to live up to this precept is to make him
liable in damages, not to render his act (dismissal or
resignation, as the case may be) void.
In sum, we hold that in proceedings for reinstatement
under Art 283, it is shown that the termination of
employment was due to an authorized cause, then the
employee concerned should not be ordered reinstated
even though there is failure to comply with the 30-day
notice requirement. Instead, he must be granted
separation pay and backwages from the time his
employment was terminated until it is determined that
the termination of employment is for a just cause
because the failure to hear him before he is dismissed
renders the termination of his employment without
effect.
Puno, Dissenting
We must immediately set Wenphil in its proper
perspective as it is a very exceptional case. Its doctrine
must be limited to its distinct facts. In Wenphil, it was
clearly established that the employee had a violent
temper, caused trouble during office hours and even
defied his superiors as they tried to pacify him. The
Labor Arbiter proved that the employee was guilty of
grave misconduct and insubordination; we concluded
with the rule that it would be highly prejudicial to the
interest of the employer to reinstate the employee, but
3
the employer must indemnify the employee the amount
of P1000.00 for dismissing him without notice.
At the outset, Puno emphasized that Wenphil itself
held, and repeatedly held that “the failure of petitioner
to give private respondent the benefit of hearing before
he was dismissed, constitutes an infringement of his
constitutional right to due process of law and equal
protection of the laws.
Before Wenphil, we protected employees with the ruling
that dismissals without prior notice are illegal and the
illegally dismissed employee must be reinstated with
backwages. Wenphil diluted that rule when it held that
due process is satisfied if the employee is given the
opportunity to be heard by the Labor Arbiter. It further
held that an employee cannot be reinstated if it is
established in the hearing that his dismissal is for a
just cause. The failure of the employer is for a just
cause. The failure of the employer to give a pre-
dismissal notice is only to be penalized by payment of
an indemnity. The dilution of the rule has been abused
by unscrupulous employers who then followed the
“dismiss now, pay later” strategy. This evil practice of
employers was what Puno expected the majority to
address in re-examining the Wenphil doctrine. At the
very least, Puno thought the majority would restore the
balance of rights between an employee and an
employer by giving back the employee’s mandatory
right to notice before dismissal.
2) Right to Counsel
The investigating committee violated Salaw’s
constitutional right to due process as he was not given
a chance to defend himself when he was denied the
assistance of counsel during the investigation to be
conducted by PDIC. (Salaw vs NLRC)
3) Notice
First Dominion Resources Corp. vs. Penaranda
Facts: Mercurio Penaranda and Romeo Vidal were
dismissed by First Dominion on account of repeated
violation of Company Rule 8 which strictly prohibits
sleeping while on duty. Penaranda was caught sleeping
and was thereafter warned that a repetition of such will
mean his dismissal. On his second offense, he was
asked to explain why he should not be terminated. He
denied and the company found his denial insufficient
and terminated his employment. Vidal’s case was
similar to that of Penaranda. Upon filing of the
complaints for illegal dismissal, the Labor Arbiter ruled
in favor of the company. On appeal, NLRC reversed the
decision of the Labor Arbiter, ruling that the dismissal
was without cause, but withheld reinstatement and
payment of backwages. The Court of Appeals ruled that
the dismissal was illegal as it was done without just
cause and procedural due process. It awarded full
backwages and attorney’s fees to respondents.
Issue: WON due process was violated because
petitioner failed to conduct a hearing on the matter.
Held: No.Petitioner not only satisfied the two-notice
requirement, it also conducted an investigation, albeit
summary, to determine the culpability of the
respondents. Respondents were confronted in detail
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
with the charges against them and given opportunity to
present their side. Vidal, however adamantly refused to
respond to the charges and Penaranda merely chose to
give a lame denial of the offense imputed to him. They
were afforded a chance to defend themselves but they
opted to be obstinate and complacent. As long as the
employee were given the opportunity to explain his side
and to present evidence in support of his defense, due
process is served.
(4) Hearing
a.) Hearing
An employer can terminate the services of an employee
for just and valid causes, which must be supported by
clear and convincing evidence. Procedurally, employee
must be given notice, with adequate opportunity to be
heard before he is notified of his actual dismissal for
cause. (Permex Inc v. NLRC)
The essence of due process in administrative
proceedings is an opportunity to explain one’s side or
an opportunity to seek reconsideration of the action or
ruling complained of. The requirement of notice and
hearing in termination and hearing in termination
cases does not connote full adversarial proceedings.
Actual adversarial proceedings become necessary only
for clarification or when there is a need to propound
searching questions to witnesses who give vague
testimonies. This is a procedural right which the
employee must ask for since it is not an inherent right,
and summary proceedings may be conducted thereon.
Proof beyond reasonable doubt is not required for a
judgment on the legality of an employee’s dismissal,
nor even preponderance of evidence for that matter,
substantial evidence being sufficient. Substantial
evidence is such relevant evidence as a reasonable
nmind might accept as adequate to support a
conclusion. (Arboleda v. NLRC)
b.) Use of Position Paper
A formal trial-type hearing is not at all times and in all
instances essential to due process. It is enough that
the parties are given a fair and reasonable opportunity
to explain their respective sides of the controversy and
to present supporting evidence on which a fair decision
can be based. In fact, Rule V of the Rules of Procedure
of the NLRC, as amended, outlines the procedure to be
followed in cases before the labor arbiter, as follows:
Section 3. Submission of Position
Papers/Memorandum. –
Should the parties fail to agree upon an amicable
settlement, either in whole or in part, during the
conferences, the Labor Arbiter shall issue an order
stating therein the matters taken up and agreed upon
during the conferences and directing the parties to
simultaneously file their respective verified position
papers.
Those verified position papers shall cover only those
claims and causes of action raised in the complaint
excluding those that may have been amicably settled,
and shall be accompanied by all the supporting
documents including the affidavits of their respective
witnesses which shall take the place of the latter’s
direct testimony. The parties shall, thereafter, not be
allowed to allege facts, or present evidence to prove
facts, not referred to and any cause or causes of action
not included in the complaint or position papers,
3
affidavits, and other documents. Unless otherwise
requested in writing by both parties, the Labor Arbiter
shall direct both parties to submit simultaneously their
position papers/memorandum with the supporting
documents and affidavits within fifteen (15) calendar
days from the date of the last conference, with proof of
having furnished each other with copies thereof.
(Seastar Marine Services, Inc v. Bul-an Jr)
(5) Decision/Award
Sec 14, Art VIII (1987 Constitution) - No decision
shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on
which it is based. No petition for review or motion for
reconsideration of a decision of the court shall be
refused due course or denied without stating the legal
basis therefor.
ABD Overseas Manpower Corp. vs. NLRC
Facts: Mohmina Macaraya applied for employment
with Mars International Manpower, Inc as a
dressmaker. After paying P12,000.00 as processing fee,
she signed a two-year contract with a monthly salary of
$250. Without her knowledge, Mars sudmitted to POEA
her overseas contract worker information sheet as a
domestic helper with a monthly salary of $200. She
was deployed to Riyadh, Saudi Arabia and made to
work as a domestic helper over her objections. After
working for more than 3 months, she was dismissed by
her employer. Upon arriving in the Philippines,
Macaraya files a complaint for illegal dismissal. On
1990, Mars filed an answer. On 1992, Mars filed a
manifestation and motion praying ABD Overseas
Manpower be impleaded in the case, because the latter
apparently became the accredited recruitment agency
in this country of MS Al Babtain Recruitment Office on
Sept 1990. POEA ruled that transferee agency, ABD,
now assumes full and complete responsibility to the
contractual obligation of the principal, MS Al Babtain.
NLRC dismissed the appeal of ABD.
Issue: WON ABD should be liable with her foreign
employee for the monetary awards.
Held: No. Mars impleaded petitioner in the case after it
had been submitted for decision and one-and-a-half
years after it had filed its answer. It should be noted
that petitioner became the accredited recruitment
agency two months after Mars had filed its answer to
the complaint. Basic principles of justice and euity,
however dictate that Mars should not be totally cleared
of its liability to Macaraya under the peculiar
circumstances of this case. ABD shall pay Macaraya
the amount due her under the assailed POEA decision,
without prejudice to its right to be reimbursed by Mars
under the provision of the Civil Code that “whoever
pays for another may demand from the debtor what he
has paid.”
Some relevant point under the topic:
ABD alleges that NLRC merely quoted the findings of
POEA. ABD questions the failure of the NLRC to make
“categorical rulings on the issues” it had raised in its
memorandum on appeal and, therefore, the NLRC
should be charged with “evasion of positive duty or a
virtual refusal to perform the duty enjoined” by law.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
SC: It is a requirement of due process that the parties
to a litigation be informed of how it was decided, with
an explanation of the factual and legal reasons that led
to the conclusions of the court. If the decision or
resolution involves monetary awards, the same shall
contain the specific amount awarded as of the decision
rendered. In this case, the NLRC left the petitioner “in
the dark” by its failure to discuss why the facts it
pointed out in its memorandum in appeal would not
affect the unqualified application of Section 6, Rule 1,
Book III of the POEA rules. It is possible that the NLRC
fully believed that said rule should be applied literally.
This should not, however, have given premium to
brevity in its resolution to the point that the very
underpinnings for a party’s appeal to it would be
completely disregarded and left unresolved.
(6) Burden of Proof
Limketkai Sons Milling, Inc. vs. Llamera
Facts:
Limketkai Sons Milling, Inc. (LSMI) is engaged in the
manufacture and processing of corn oil and coconut
oil. Editha Llamera was hired by LSMI as a laboratory
analyst, assigned at the quality control department. On
1994, LSMI received reports that some of its oil
products had visible impurities and rancid taste. LSMI
directed its employees to explain the reported
adulteration. Llamera was on maternity leave. After an
investigation, LSMI terminated the suspended
employees including Llamera. Llamera challenged her
dismissal. The Labor Arbiter ruled in favor of Llamera.
NLRC reversed the decision of the LA for lack of factual
and legal basis. CA modified the decision of the NLRC
by ruling that Llamera’s termination was illegal.
Issue: WON the cause of the termination was
sufficiently substantiated.
Held: No. Art 277, LC (b) The burden of proving that
the termination was for a valid or authorized cause
shall rest on the employer. In the mind of the appellate
court, petitioner’s simply failed to prove that
respondent’s dismissal was for valid cause. Where
there is no showing of a just or authorized cause for
termination of employment, the law considers the case
a matter of dismissal. The willful breach by the
employee of the trust reposed in him by his employer
must be founded on facts established by the employer.
The latter must be clearly and convincingly proven by
substantial evidence the facts and incidents upon
which loss of confidence in the employee may fairly be
made to rest. In this case, petitioners simply allege that
respondent’s failure to report to the quality control
head the batch that did not meet the minimum
standard showed connivance to sabotage petitioner’s
business. Said allegation, without facts to back it up,
could not and did not suffice as a basis for a finding of
willful breach of trust.
Unlike in other cases where the complainant has the
burden of proof to discharge its allegations, the burden
of establishing facts as bases for an employer’s loss of
confidence in an employee — facts which reasonably
generate belief by the employer that the employee was
3
connected with some misconduct and the nature of his
participation therein is such as to render him unworthy
of trust and confidence demanded of his position — is
on the employer. Should the employer fail in
discharging this onus, the dismissal of the employee
cannot be sustained. This is consonant with the
constitutional guarantee of security of tenure, as
implemented in what is now Sec. 279 of the Labor
Code, as amended. The employer's evidence, although
not required to be of such degree as that required in
criminal cases, i.e., proof beyond reasonable doubt,
must be substantial – it must clearly and convincingly
establish the facts upon which loss of confidence in the
employee may be made to rest. (Felix v. NLRC)
(7) Degree of Proof/Substantial Evidence
“Any lawyer worth his salt knows that quanta of proof
and adjective rules vary depending on whether the
cases to which they are meant to apply are criminal,
civil, or administrative in character.” In criminal
actions, proof beyond reasonable doubt is required for
conviction; in civil actions and proceedings,
preponderance of evidence, as support for a judgment;
and in administrative cases, substantial evidence, as
basis for adjudication. In criminal and civil actions,
applications of the rules of Court is called for, with
more or less strictness. In administrative proceedings,
however, the technical rules of pleading and procedure,
and of evidence, are not strictly adhered to; they
generally apply only suppletorily; indeed, in agrarian
disputes application of the Rules of Court is actually
prohibited. In administrative or quasi-judicial
proceedings, proof beyond reasonable doubt is not
required as basis for a judgment of the legality of an
employer’s dismissal of an employee, nor even
preponderance of evidence, substantial evidence being
sufficient. (Manila Electric Co. v. NLRC)
Tolentino vs. PLDT Co., Inc.
Facts: Rogelio Tolentino had been employed by PLDT,
sponsored his study-training as digital electronic
switching operator and given the position as Testboard
Man. After almost 19 years of service, Tolentino was
dismissed for serious misconduct and loss of trust and
confidence: cash shortage and illegal jumpering.
Tolentino filed a complaint for illegal dismissal against
PLDT. The complaint alleges that there was no factual
and legal basis for his dismissal. LA declared that
PLDT failed to adduce substantial evidence to prove
that Tolentino was dismissed for a lawful cause. NLRC
reversed the decision of LA, and held that there were
just causes for the dismissal, based on the affidavits
and reports as well as the Security Guard logbook. CA
affirmed the decision of the NLRC.
Issue: WON the factual findings are supported by
substantial evidence.
Held: The respondent PLDT, as the employer, is
burdened to prove the validity of the petitioner’s
termination from the employment. The employer’s case
succeeds or fails on the strength of its evidence and
not on the weakness of the employee’s defense. In case
of doubt, the same must be resolved in favor of labor,
pursuant to the issued justice on labor law and the
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
constitution. The employer, however, needs only to
adduce substantial evidence which is such amount of
evidence as to induce a belief that the employee is
responsible for misconduct and participation therein
which renders that employee unworthy of the trust and
confidence by the employer. SC ruled that PLDT failed
to adduce substantial evidence to prove the charge of
shortage of funds. The writer of the affidavit had no
personal knowledge, the Columnar Book was not even
presented or copies of receipts of payments to the
respondent PLDT. On the charge fro illegal tapping and
installation of jumper, the respondent was able to
adduce substantial evidence.
Even if there is no direct evidence to prove that the
employees actually committed the offense, however,
substantial proof based on documentary evidence is
sufficient to warrant their dismissal from employment.
Well-entrenched is the rule that “substantial proof,
and not clear and convincing evidence or proof
beyond reasonable doubt, is sufficient as basis for the
imposition of any disciplinary action upon the
employee. The standard of substantial evidence is
satisfied where the employer has reasonable ground to
believe that the employee is responsible for the
misconduct and his participation therein renders him
unworthy of trust and confidence demanded by his
position.”
(Philtread Tire & Rubber Corp v. Vicente)
The degree of proof required in labor cases is not as
stringent as in other types of cases. Recent decisions of
the Court distinguished the treatment of managerial
employees from that of rank-and-file personnel, insofar
as the application of the doctrine of loss of trust and
confidence is concerned. As to rank-and-file
personnel, loss of trust and confidence as ground
for valid dismissal requires proof of involvement in
the alleged events in question, and that mere
uncorroborated assertions and accusations by the
employer will not be sufficient. As to a managerial
employee, the mere existence of a basis for
believing that such employee has breached the
trust of his employer would suffice for his
dismissal. Hence, in the case of managerial employees,
proof beyond reasonable doubt is not required, it being
sufficient that there is some basis for such loss of
confidence, such as when the employer has reasonable
ground to believe that the employee concerned is
responsible for the purported misconduct, and the
nature of his participation therein renders him
unworthy of the trust and confidence demanded by his
position. (Etcuban v. Sulpicio Lines, Inc)
(8) Prescription
In illegal dismissal, it is settled that the 10-year
prescriptive period fixed in Art 1144 of the Civil Code
may not be invoked by petitioners, for the Civil Code is
a law of general application, while the prescriptive
period fixed in Article 291 of the Labor Code is a
SPECIAL LAW applicable to claims arising from
employer-employee relations. The language of Art 291
of the Labor Code does not limit its application only to
‘money claims specifically recoverable under said Code’
but covers all money claims arising from an employer-
employee relationship. Although the commencement of
3
a civil action stops the running of the statute of
prescription of limitations, its dismissal or voluntary
abandonment by plaintiff leaves the parties in exactly
the same position as though no action had been
commenced at all. (Laureano v. CA)
An action for reinstatement by reason of illegal
dismissal is one based on an injury to the
complainant’s rights, which should be brought within 4
years from time of the dismissal pursuant to Article
1146 of the Civil Code. Thus, a complaint for4 illegal
dismissal filed 2 years and 5 months after the alleged
dismissal was held to be still well within the
prescriptive period. In labor cases, laches may be
applied only upon then most convincing evidence of
deliberate inaction, for the rights of laborers are
protected under the social justice provi9sions of the
Constitution and Civil Code. (Hagonoy Bank v. NLRC)
An action for reinstatement by reason of illegal
dismissal is one based on an injury which may be
brought within 4 years from the time of dismissal
pursuant to Article 1146 of the Civil Code. A delay of
merely four months in instituting an illegal dismissal
case is more than sufficient compliance with the
prescriptive period. It may betray an unlettered man’s
lack of awareness of his rights as a lowly worker but
certainly, he must not be penalized for his tarrying.
(AZCOR Mfg Inc v. NLRC)
(9) Quitclaim
Oriental Shipmanagement Co., Inc. vs CA
Facts: Cuesta and Gonzaga were hired by Kara Seal
through Oriental Shipmanagement Co., Inc. for a one-
year contract with a monthly salary of $900.Cuesta
and Gonzaga boarded M/V Agios Andreas on Nov 14,
1998 and January 5, 1999 respectively. On November
27, 1998, Kara Seal and M/V Agios signed an
Agreement with International Transport workers
Federation (ITF) increasing the monthly salary of the
vessel’s employees. On inspection, on January 8, 1999,
the ITF inspector discovered that M/V Agios had not
been paid according to the ITF Agreement. The
shipmaster assured the ITF Inspector he would comply
as soon as the vessel reached the next port. Upon
reaching the port, Cuesta and Gonzaga were ordered
repatriated to Manila and were made to sign a n
indemnity letter, were it was stipulated that they
signed voluntarily and freely, and that “it confirms that
no disciplinary measures or legal measures will be
instituted against the employees. Upon reaching
manila, both filed a complaint for illegal dismissal.
Both averred that Kara Seal failed to pay their wages
according to the ITF Agreement. They added that prior
to their termination, they demanded that payment of
the unpaid wages be made. Oriental and kara Seal
alleged that they voluntarily resigned as evidenced by
the indemnity letter. The LA ruled in favor of Oriental
and Kara Seal, acknowledging the validity of the
resignation and the repatriation of the complainants.
That such were executed in the presence of the ITF
inspector. NLRC sustained the findings of the LA. CA
reversed the decision of the NLRC, ruling the “Letters of
Indemnity” to be void and without legal effect.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Issue: WON the “Letters of Indemnity” are void.
Held:
Yes. The law is solicitous of the welfare of the
employees because they stand on unequal footing with
their employers and are usually left at the mercy of the
latter. This is especially true of Filipino migrant
workers who, alone in a foreign country, might have no
adequate alternative resources even for their own
personal daily needs. Hence, quitclaims signed by our
migrant workers, such as the Letters of Indemnity in
the instant case, are viewed with strong disfavor.
Public policy dictates that they be presumed to have
been executed at the behest of the employer. It is the
employer’s duty to prove that such quitclaims were
voluntary. The employee’s acknowledgment of his
termination with nary a protest or objection is not
enough to satisfy the requirement of voluntariness on
his part. The Letter’s of Indemnity contained a waiver
by petitioner’s and Kara Seal of the right to institute
disciplinary action against respondents. Hence,
respondents were under the impression that they
would be disciplinarily dealt with if they would not sign
the waiver. Based on the foregoing disquisition, SC was
convinced that respondents were forced to sign the
letters, thus, said Letters of Indemnity must be deemed
void.
(10) Dismissal of Case/Purely Technical Ground
(frowned upon)
This Court, in not a few cases, has consistently held
that cases should be determined on the merits, after
full opportunity to all parties for ventilation of their
causes and defense, rather than on technicality or
some procedural imperfections. In so doing, the ends
of justice would be better served. The dismissal of
cases purely on technical grounds is frowned upon and
the rules of procedure ought not to be applied in a very
rigid, technical sense, for they are adopted to help
secure, not override, substantial justice, and thereby
defeat their very ends. Indeed, rules of procedure are
mere tools designed to expedite the resolution of cases
and other matters pending in court. A strict and rigid
application of the rules that would result in
technicalities that tend to frustrate rather than
promote substantial justice must be avoided.
(Quintano v. NLRC)
(11) Criminal Cases
The purpose of the proceedings before the fiscal is to
determine if there is sufficient evidence to warrant the
prosecution and conviction of the accused. To
successfully convict the accused, the evidence must be
beyond reasonable doubt and not merely substantial.
On the other hand, to support findings and conclusion
of administrative bodies only substantial evidence is
required. It does not follow then that once the fiscal
dismisses the complaint for qualified theft, the
respondents officials should also have decided in favor
of petitioner. For one, the evidence presented before
the two bodies may not be necessarily identical.
Secondly, the appreciation of the facts and evidence
presented is an exercise of discretion on the part of
3
administrative officials over which one cannot impose
his conclusion on the other. The conviction of an
employee in a criminal case is not indispensable to
warrant his dismissal, and the fact that a criminal
complaint against the employee has been dropped by
the fiscal is not binding and conclusive upon a labor
tribunal. (Lacorte v. Inciong)
This case is to be distinguished from those cases in
which it was held that the acquittal of the employee in
the criminal case was not a bar to his dismissal on the
ground of loss of confidence. The rulings in those
cases were based on findings that the evidence in the
crininal case was not sufficient to satisfy the
requirement of proof beyond reasonable doubt but
otherwise adequate to support a finding that that there
was substantial evidence that the employee was guilty.
In contrast, in case at bar, there is entire want of
evidence to justify the dismissal of the Quiambao. With
the dismissal of both the criminal anc civil cases and
without any company investigation conducted to
establish Quiambao’s culpability, Central Cement’s
claim of loss of conficence became untenable.
(Quiambao v. NLRC)
E. RELIEFS/REMEDIES IN ILLEGAL
DISMISSAL
Art 279 – 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.
Art 223 - Appeal. - Decisions, awards, or orders of the
Labor Arbiter are final and executory unless appealed
to the Commission by any or both parties within ten
(10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained
only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion
on the part of the Labor Arbiter;
(b) If the decision, order or award was secured through
fraud or coercion, including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised
which would cause grave or irreparable damage or
injury to the appellant.
In 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.
In any event, the decision of the Labor Arbiter
reinstating a dismissed or separated employee, insofar
as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. The
employee shall either be admitted back to work under
the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the
employer, merely reinstated in the payroll. The posting
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
of a bond by the employer shall not stay the execution
for reinstatement provided herein.
To discourage frivolous or dilatory appeals, the
Commission or the Labor Arbiter shall impose
reasonable penalty, including fines or censures, upon
the erring parties.
In all cases, the appellant shall furnish a copy of the
memorandum of appeal to the other party who shall file
an answer not later than ten (10) calendar days from
receipt thereof.
The Commission shall decide all cases within twenty
(20) calendar days from receipt of the answer of the
appellee. The decision of the Commission shall be final
and executory after ten (10) calendar days from receipt
thereof by the parties.
Any law enforcement agency may be deputized by the
Secretary of Labor and Employment or the Commission
in the enforcement of decisions, awards or orders.
(1) In General
GENERAL RULE: In general, the remedy for illegal
dismissal is the reinstatement of the employee to his
former position without loss of seniority rights and the
payment of backwages. EXCEPTION: But there may be
instances as when reinstatement is not a viable remedy
as where – as in this case – the relations between the
employer and the employee have been so severely
strained that it is not advisable to order reinstatement.
(Lopez v. NLRC)
(a)REINSTATEMENT
1. Definition
Reinstatement presupposes that the previous position
from which one had been removed still exists, or that
there is an unfilled position more or less of a similar
nature as this previously occupied by the employee. An
employee who is separated from his employment on a
false or nonexistent cause is entitled to be reinstated to
his former position because the separation is illegal. If
the position is no longer available for any other valid
and justifiable reason, however, the reinstatement of
the illegally dismissed employee to his former position
would neither be fair nor just. The law itself can not
exact compliance with what is impossible. Ad
imposible tenetur. The employer’s remedy is to reinstate
the employee to a substantially equivalent position
without loss of seniority rights as provided for above.
(PNOC-EDC, et al v. Abella)
An employee who is unjustly dismissed is entitled to
his full backwages computed from the time his
compensation was withheld from him up to the time of
his reinstatement. Mere offer to reinstate a dismissed
employee, given the circumstances in this case, is not
enough. If petitioner were sincere in its intention to
reinstate private respondent, petitioner should have at
the very least reinstated him in its payroll right away.
(Condo-Suite Club v. NLRC)
Reinstatement contemplates a restoration to a position
from which one has been removed or separated so that
the employee concerned may resume the functions of
the position he already held. (Citytrust Banking
Corporation v. NLRC)
3

2.) Exceptions
a.) Closure of Business
While it may be true that petitioners continued to work
in the same place and office as in their previous
employment, it is equally true that they had in fact
been illegally dismissed by their previous employer.
Thus, they lost their former work status and benefits in
a manner violative of the law. Be it noted that, without
their consent, their employment was changed -- from
Insular, which was controlled by Antonio Morillo; to
Queen City, which was “managed and controlled by
private respondent Rodolfo Morillo.” Thus, they
became new employees of the latter firm and, as such,
were deprived of seniority and other employment
benefits they had when they were still with their former
employer. The records indicate that reinstatement is no
longer feasible. Insular Builders, Inc. has ceased
operations. Absent any showing that its business was
deliberately stopped to avoid reinstating the
complaining employees, the amount of back wages
shall be computed from the time of their illegal
termination on July 26, 1993, up to the time of the
cessation of the business operations. “Computing
backwages beyond x x x the date of [cessation of
business], would not only be unjust but confiscatory as
well as violative of the Constitution depriving the
[respondent] of his property rights.” (Retuya v. Hon
Dumarpa)
b.) Economic Business Conditions
The Labor Code provision on reinstatement is aimed to
restore the situation as possible to status quo ante the
unfair labor practice. This requires that those deprived
of a recognized and protected interest by violations of
the law should be made whole so as to prevent the
violator from profiting from his misdeeds. Yet the
4reinstatement remedy must always be adapted to
economic-business conditions.
(Union of Supervisors v. Sec of Labor)
c.) Employee’s Unsuitability
Though Catenza was illegally dismissed (as her
husband was not investigated or convicted of the
alleged acts), she cannot be reinstated. Divine Word is
a Catholic institution, serving the educational and
moral needs of its Catholic studentry. While herself
innocent, the continued presence of Catenza as a
teacher in the school may well be met with antipathy
and antagonism by some sectors in the school
community. Hence, instead of reinstatement, she
should be awarded her separation pay. (Divine Word
High School v. NLRC)
d.) Employee’s Retirement/Coverage
The law recognizes as valid any retirement plan,
agreement or management policy regarding retirement
at an earlier or older age. In the case of Espejo, CISP
did not have any retirement plan for its employees. In
such sitation, Sec 13 Book IV of the Omnibus Rules
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Implementing the Labor Code provides that in the
absence of a retirement plan, agreement or policy an
employee may be retired upon reaching the age of 60
years. Construing this provision, it was held that an
employee may retire or may be retired by his employer
upon reaching 60. Thus, an employee held to be
illegally dismissed cannot be reinstated if he had
already reached the age of 60 years at the time of his
second complaint (pressing for reinstatement) before
the LA. (Espejo v. NLRC)
e.) Antipathy and Antagonism – Strained Relations
A strained relationship between the striking employees
and management is no reason for payroll reinstatement
in lieu of actual reinstatement. Petitioner correctly
points out that labor disputes naturally involve
strained relations between labor and management, and
that in most strikes, the relations between the strikers
and the non-strikers will similarly be tense. Bitter labor
disputes always leave an aftermath of strong emotions
and unpleasant situations. Nevertheless, the
government must still perform its function and apply
the law, especially if, as in this case, national interest is
involved. As a general rule, the State encourages an
environment wherein employers and employees
themselves must deal with their problems in a manner
that mutually suits them best. This is the basic policy
embodied in Article XIII, Section 3 of the Constitution,
which was further echoed in Article 211 of the Labor
Code. Hence, a voluntary, instead of compulsory, mode
of dispute settlement is the general rule.
(Manila Diamond Hotel Employees Union v. CA)
3.) Offer to Reinstate
The offer to re-employ did not cure the vice of the
arbitrary dismissal. It wasn’t as if Ranara were only
one among many others ordered reinstated in a big
company, for whatever enmity the employer might
harbor against him would be diluted and less
personalized. There would be a certain degree of
anonymity, and a resultant immunity from retaliation
in a number alone of the reinstated personnel.
Moreover, it is not unlikely that there would be a labor
union to protect and assure returning workers against
possible reprisals from the employer. In this case, he
was only one among ten employees in a small store,
and had reason to fear that if he accepted the offer, his
employers might be able to detect every small
shortcoming of his as a ground for vindictive
disciplinary action. This is a case of strained relations
between ER-EE that justified the employee’s refusal of
the offer to return. (Ranara v. NLRC)
(b) BACKWAGES
1.) Effect of Failure to Order
The failure of the LA and NLRC to award backwages to
private respondent amounts to a “plain error” which
the SC may rectify in the peition, although the private
respondent did not bring any appeal regarding the
matter, in the interest of substantial justice. The
Supreme Court is clothed with ample authority to
review matters, even if they are not assigned as errors
on appeal, if it finds that their consideration is
4
necessary in arriving at a just decision of the case.
Rules of procedure are mere tools designed to facilitate
the attainment of justice. Their strict and rigid
application, which would result in technicalities that
tend to frustrate rather than promote substantial
justice, must always be avoided.
(Aurora Land v. NLRC)
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.
(St Michael’s Inst v. Santos)
2.) Computation
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.
Backwages should be paid from the TIME OF ILLEGAL
DISMISSAL up to DATE OF REINSTATEMENT.
(Bustamante vs NLRC)
An illegally dismissed employee is entitled to full
backwages, W/O DEDUCTION OF EARNINGS EARNED
ELSEWHERE, from the time his compensation was
withheld until his actual reinstatement. RA 6715
amending Art 279 is clear that FULL backwages should
be paid. Also, the award of damages continues beyond
the date of LA’s decision ordering reinstatement and
extends up to the time said order of reinstatement is
actually carried out. (Food Traders House vs NLRC)
Backwages was paid from the time of Eddie’s
PREVENTIVE SUSPENSION up to Actual
Reinstatement. (Maranaw Hotels vs NLRC)
The fact that the petitioners worked with a sister
company immediately after they were dismissed,
should not preclude the award of FULL BACKWAGES.
Illegaly dismissed employees are entitled to backwages
that should not be diminished or reduced by the
amount they have earned from another employment
during the period of Illegal Dismissal. (Retuya et al vs
Hon. Dumarpa)
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
The fact that the employee did not contest the NLRC
decision limiting his award of backwages to only 1Year
(due to his Negligence in work) is in a sense an
acceptance of his own fault. He is therefore only
entitled to 1 year backwages.
(Solidbank Corp vs CA) – This is a limited exception to
the FULL BACKWAGES W/O ANY DEDUCTION
DOCTRINE.
3.) Fringe Benefits
Deletion of fringe benefits & other monetary awards are
not in accord with law or jurisprudence. As per Article
279 of the Labor Code:
ART. 279 SECURITY OF TENURE. – In cases of regular
employment, the employer shall not terminate the
services of an employee except for 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. (Acesite Corp vs NLRC)
(2) DAMAGES AND ATTORNEY’S FEES
The jurisdiction of the LA under Art 271 is broad and
comprehensive enough to include claims for moral and
exemplary damages sought to be recovered by an
employee whose services has been illegally terminated
by his employer. LA has exclusive and original
jurisdiction over claims for moral and other forms of
damages, so that the employee in the proceedings
before LA should prosecute his claims not only for
reliefs specified under Labor Code but also for damages
under Civil Code. (Associated Citizens Bank vs
Japan)
Balayan’s unjustified and unwarranted dismissal of the
respondents prompted the latter to engage the
professional services of a counsel entitling them to
attorney’s fees. (Remember torts and damages bebe – sir
gilbert) (Balayan Colleges vs NLRC)
Moral damages are recoverable where the dismissal of
the employee was attended by bad faith or fraud, or it
constituted an act oppressive to labor or it was done in
a manner contrary to morals, good customs or public
policy. (Sabi ng remember torts and damages bebe)
(Fernandez vs NLRC)
Mere allegations of besmirched reputation,
embarrassment and sleepless nights are insufficient to
warrant an award of moral damages. It must be shown
that the proximate cause thereof was the unlawful act
of the private respondent. (Servidad vs NLRC)
To warrant an award of Moral damages, it must be
shown that the dismissal of the employee was attended
by bad faith, or constituted an act oppressive to labor
or was done in a manner contrary to morals, good
customs or public policy. In this case, it is proper to
award moral and exemplary damages since the
approval of the employees’ application for retirement
was not done in succession according to the list, but
according to the choice of the respondents and for
4
which complainants were singled out from the list
because they were union officers, past officers and
active members of the complainant association. (Nueva
Ecija Electronics Coop EE Assoc vs NLRC)
Bad faith 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. (Litonjua Group of Companies vs
Vigan)
In Moral damages, it suffices to prove that the claimant
has suffered anxiety, sleepless nights, besmirched
reputation and social humiliation by reason of the act
complained of. Thus, for the anxiety, the seen and
unseen hurt that she suffered, petitioners should also
be made to pay her moral damages, plus exemplary
damages for the oppressive manner of dismissal. (Phil
Aeolus Auto-Motive United Corp vs NLRC)
There 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 extraordinary
concept of attorney’s fees is the one contemplated in
Article 111 of the Labor Code. 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. (Reyes vs CA)
(3) SEPARATION PAY
Ha Yuan vs. NLRC
FACTS
Respondent Juvy Soria was a cashier of
petitioners establishment inside the SM Food Court
when she assaulted her co-worker Ma. Teresa
Sumalague resulting in a scuffle. As a result, the SM
Food Court Manager banned the two from working
within the premises. Soria then filed a suit for illegal
dismissal (LA dismissed cased; NLRC AWARDED
SEPARATION PAY)
ISSUE WON a validly dismissed employee is entitled to
separation pay
DECISION
RATIO
Citing PLDT VS. NLRC, “…separation pay shall
be allowed as a measure of social justice on in those
instances where the employee is validly dismissed for
causes other than serious misconduct or those
reflecting on his moral character.”
Hence, separation pay depends on the cause of
dismissal and may be awarded except when the
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
dismissal is based on 1) serious misconduct 2) moral
character
Note: SERIOUS misconduct – wrongful intent;
transgression of law; etc.
Pursuant to current jurisprudence, separation pay
must be included in the basis for the computation of
attorney’s fees. (Reyes vs CA)
The law is clear on the matter. An employee who is
terminated because of disease is entitled to “separation
pay equivalent to at least one month salary or to one-
half month salary for every year of service, whichever is
greater.” (Vicente Sy vs CA)
a) Computation/Rationale
An employer may not pay separation benefits unequally
for such discrimination breeds resentment and ill-will
among those who have been treated less generously
than others. (Business Day Information Systems and
Services vs NLRC)
Earned sales commissions and allowances of a
salesman should be included in the monthly salary for
the purpose of the computation of their separation pay.
(Songco vs NLRC)
b) Effect of Receipt
Employees who received their separation pay are not
barred from contesting the legality of their dismissal.
The acceptance of those benefits does not amount to
estoppel. (SMC vs Javate)
(4) FINANCIAL ASSISTANCE
When allowed/when not allowed – 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. A contrary rule would
have the effect of rewarding rather than punishing the
erring employee. (PLDT vs NLRC)
(5) INDEMNITY
In view of the strained relations between the employee
and the employer, making the reinstatement no longer
advisable nor feasible, petitioner should receive
separation pay in addition to backwages. (Arms Taxi
vs NLRC)
Ineffectual Doctrine: No procedural due process =
ineffectual dismissal. Indemnity pay = separation pay
from time of dismissal up to finality of decision.
Overturned by AGABON VS NLRC. (Serrano vs NLRC)
(6) LIABILITY OF CORPORATE OFFICERS
(Citing Bogo-Medellin Sugarcane Planters Association,
Inc. v. NLRC) Unless they have exceeded their
authority, corporate officers are, as a general rule, not
4
personally liable for their official acts, because a
corporation, by legal fiction, has a personality separate
and distinct from its officers, stockholders and
members. However, this fictional veil may be pierced
whenever the corporate personality is used as a means
of perpetuating fraud or an illegal act, evading an
existing obligation, or confusing a legitimate issue. In
cases of illegal dismissal, corporate directors and
officers are solidarily liable with the corporation, where
terminations of employment are done with malice or in
bad faith.
(Acesite Corp v NLRC)
Kay Products, Inc. v. CA
Facts: Employees of KPI wanted to form a union. When
the management got the info, it called a meeting to
announce that the said employees were to be
transferred to an employment agency. Through a
memorandum, KPI, through its president, Mr. Kay Lee,
promised that the employees would receive bigger and
better benefits under the agency as regular employees
thereof. KPI directed all employees concerned to sign
resignation letters preparatory to their employment
with the agency.
Employees continued to report for work in KPI
but received less wages/salaries. Less than a month
later, KPI issued a Memo to the employees, stating that
the agency had been dissolved and that there was a
need for them to sign separate contracts with another
manpower agency. In the meantime, KPI employees
were able to organize their union.
The employees claimed that the petitioners
were guilty of unfair labor practice, underpayment of
salaries and service incentive leave pay, and failure to
classify them as regular employees.
Issue: WON the corporate directors and officers are
solidarily liable with the corporation for the
termination of employees.
Held: YES
Ratio:
In labor cases, corporate directors and officers
are solidarily liable with the corporation for the
termination of employment of corporate employees
done with malice or bad faith.
Kay Lee, as the president, actively managed
the business. In fact, she was the one who decided the
employees’ transfer to the employment agencies, and
signed the memoranda ordering such transfer, in bad
faith. In Naguiat v. NLRC, SC held that the president of
a corporation, who actively manages the business, falls
within the meaning of an “employer” as contemplated
by the labor code, and may be held jointly and
severally liable for the obligations of the corporation to
its dismissed employees. Thus, Kay Lee and KPI are
jointly and severally liable for the latter’s obligations.
Uy v. Bueno
Facts: Country-wide bank experienced liquidity
problems. Uy was one of the depositors of the bank
that organized themselves, and was then elected as the
interim Corporate Secretary. At a meeting Bueno
announced that her services as branch manager for
the bank were terminated by Uy. Uy confirmed her
declaration. There was no elaboration as to the
termination explaining that it was an internal matter.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
Uy, et al were sued by Bueno for illegal
dismissal.
Issue: WON Uy was an officer of the bank and should
be held solidarily liable.
Held: No.
Ratio: The records show that Uy was a mere depositor
of the bank who was elected interim president and
corporate secretary by a committee of depositors to
protect their interests given the bad state of the bank.
Lacking evidence to prove otherwise, Uy’s act of
dismissing Bueno cannot be deemed an act as an
officer of the bank. Consequently, it cannot be held
that there existed an employer-employee relationship
between Uy and Bueno when the former allegedly
dismissed the latter. This requirement is jurisdictional
for the Labor Code to apply. Since it was not
established, the Labor arbiter never acquired
jurisdiction over Uy. Likewise, that she terminated the
services of Bueno in bad faith and with malice is of no
moment.
V. RETIREMENT
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."
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.
The first paragraph of the above provisions deals
with the retirement age of an employee
established in (a) a collective bargaining
agreement or (b) other applicable employment
contract.
The second paragraph deals with the retirement
benefits to be received by a retiring employee
which he may have earned under (a) an existing
law, (b) a collective bargaining or (c) other
agreements.
RA 7641: Retirement Pay Law
 Covers all employees in the private sector
regardless of their position, designation or
status and irrespective of the method by which
their wages are paid.
4
  Includes part-time employees, employees of
service and other job contractors and domestic
helpers or persons in the personal service of
another.
 Does not include:
o Workers in retail, service and
agricultural establishments or
operations employing not more than 10
employees
o Workers and employees of the National
Government and its political
subdivisions, including GOCCs if they
are covered by the civil service Law and
its regulations.
1. Three Kinds of Retirement Plans
There are three kinds of retirement schemes. The first
type is compulsory and contributory in character.
The second type is one set up by agreement between
the employer and the employees in collective bargaining
agreements or other agreements between them. The
third type is one that is voluntarily given by the
employer, expressly as in an announced company
policy or impliedly as in a failure to contest the
employee's claim for retirement benefits. It is this
third type of retirement scheme which covers
respondent’s Plan. (Gerlach v. Reuters Ltd Phil)
The option of an employer to retire its employees is
recognized as valid. Citing Bulletin Publishing Corp. v.
Sanchez, the SC held:
The aforestated sections explicitly declare, in no
uncertain terms, that retirement of an employee may be
done upon initiative and option of the management. And
where there are cases of voluntary retirement, the same
is effective only upon the approval of management. The
fact that there are some supervisory employees who
have not yet been retired after 25 years with the
company or have reached the age of sixty merely
confirms that it is the singular prerogative of
management, at its option, to retire supervisors or rank-
and-file members when it deems fit. There should be
no unfair labor practice committed by management if
the retirement of private respondents were made in
accord with the agreed option. That there were
numerous instances wherein management exercised its
option to retire employees pursuant to the
aforementioned provisions, appears to be a fact which
private respondents have not controverted. It seems
only now when the question of the legality of a
supervisors union has arisen that private respondents
attempt to inject the dubious theory that the private
respondents are entitled to form a union or go on strike
because there is allegedly no retirement policy provided
for their benefit. As above noted, this assertion does
not appear to have any factual basis. (PAL v Airline
Pilots Association)
At the time petitioner was dismissed, he was still below
the retirement age of employees of MERALCO at 60. To
date, however, he is now about 65. Imposing a penalty
less harsh than dismissal and ordering his
reinstatement are thus functus oficio, the Labor
Arbiter’s order for his reinstatement not having been
executed.
Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano
To this Court, a denial of the award of backwages to
petitioner from the time of his dismissal up to his age of
retirement suffices as punishment for his dishonesty.
He should not, however, be deprived of his retirement
benefits. (Naguit v. NLRC)
Retirement benefits, on the other hand, are intended to
help the employee enjoy the remaining years of his life,
releasing him from the burden of worrying for his
financial support, and are a form of reward for his
loyalty to the employer.
Since the computed amount of her retirement pay is
much lower than that provided under the law, she is
entitled to receive the difference between the actual
amount of her retirement benefits as required by law
and that provided for under the PERAA. Although she
did not appeal from the NLRC decision awarding her
P85,287.72, this Court awards the entire amount of the
retirement benefits to which she is rightfully entitled
under the law. Technical rules of procedure are not
binding in labor cases. The application of technical
rules of procedure may be relaxed to serve the demands
of substantial justice.
Section 3.3, Rule II of the Rules Implementing R.A.
7641 provides:
3.3 Where both the employer and the employee
contribute to a retirement fund in accordance with an
individual or collective agreement or other applicable
employment contract, the employer’s total contribution
thereto shall not be less than the total retirement
benefits to which the employee would have been
entitled had there been no such retirement fund. In
case the employer’s contribution is less than the
retirement benefits provided under this Rule, the
employer shall pay the difference. (Sta Catalina v.
NLRC)
2. Voluntary Retirement
Ariola v. Philex Mining Corp.
Facts: Ariola, et al were former supervisors of Philex.
Philex sustained financial losses in its operations. To
save costs, Philex reduced its personnel through early
voluntary retirement and retrenchment programs.
Philex and the labor union signed a MOA prescribing
the criteria for retrenchment. Afterwhich, Ariola, et al
received from Philex termination notices informing them
of their retrenchment under their respective MOAs.
Petitioners availed of the early retirement program and
they were paid their separation pay and all of them
signed deeds of release and quitclaim in Philex’s favor.
Ariola claims that they were dismissed illegally.
Issue: WON waiver signed by petitioners is tantamount
to voluntary resignation.
Held: No
Ratio: the dismissal was illegal because it was not
retirement but retrenchment. As basis for finding that
petitioners retired, the CA and LA cited vouchers
petitioner signed showing their receipt of “retirement
gratuity.” The records show that Philex paid these
amounts because of petitioners’ retrenchment. The
gratuity is paid not only to retiring employees but also
to thos who are dismissed for cause “beyond their
control” such as retrenchment. Philex treated the
gratuity as basic separation pay, which comprised their
4
“net separation pay.” Significantly, Philex paid requires (a) service of written notice to the employees
petitioners such after notifying them of their and to the Dole at least one month before the intended
retrenchment. date of cessation of business operations (b) cessation
Philex’s failure to submit other documents must be done in good faith and (c) payment to the
proving the claimed retirement, such as their employees of termination pay amounting to one month
applications for retirement under Philex’s early pay or at least one-half month pay for every year of
voluntary retirement program and their clearance slips, service, whichever is higher.
undermines its claim. The submission of these
documents, which should indicate the reason for
petitioner’s separation from service, would have put to
rest any doubt on the cause of such separation. Thus,
the vouchers in question do not suffice to prove
petitioner’s retirement from Philex. Retirement results
from a voluntary agreement between the employer and
the employee where the latter, after reaching a certain
age, agrees to sever his employment with the former,
Thus if the intent to retire is not clearly established or if
the retirement is involuntary, it is to be treated as a
discharge.

3. Forfeiture of benefits

Equitable PCI Bank v. Caguioa

Facts: Go, the bank’s chairman of the board, dismissed
Caguioa upon the complaint of a client regarding an
‘accounting activities, which was about bank checks,
which were issued to client in exchange for cash at a
discounted rate – all by means of his own capital. The
‘scheme failed,’ resulting in his loss of investments.
Caguioa denied having any knowledge of the
discounting activities. She was asked to explain. The
Bank’s evaluation committee issued a decision, finding
her guilty for “having personally participated in the
check discounting activity, and therefrom, personally
benefited/profited to the prejudice of the bank.” She
was dismissed with automatic forfeiture of benefits.
The NLRC reinstated her for lack of evidence with an
order to pay all unpaid wages and other benefits as
soon as the same shall have been duly computed by
the Arbitration Branch of the Commission.
(I can’t find anything remotely connected to the topic of
forfeiture of benefits except that if found invalid it shall
be computed by the Arbitration Branch of the NLRC)

ITC v. Ababon
Facts: ITC informed the DOLE that it will undergo a
“no plant operation” due to lack of raw materials.
Meanwhile ITC was notified that their lease contract of
their ply-wood plant expired and will not be renewed.
ITC notified the DOLE and its workers of the plant’s
shutdown. Afterwhich, the owner took over the
plywood plant. This prompted Ababon, et al to file a
complaint for illegal dismissal claiming that ITC’s
cessation of operation was intended to bust the union
and that both corporations are controlled by one
owner.

Issue: WON ITC complied with the requirements of the

LC for closure of establishment.
Held: No.
Ratio: ITC did not comply with the notice requirement,
thus the closure was invalid. I believe the important
part here regarding indemnity is with regard to the
requirements for proper closure of an establishment
under Art. 283 of the LC, which included the payment
to the employees their termination pay in the amount
corresponding to their length of service. Article 283

Professor Daway; andres – baldrias – de los SantosMercury Drug corp vs Serrano 4