[ G.R. No. 210773, January 23, 2019 ] On September 8, 2010, then President Benigno S.
Aquino III (President
GSIS FAMILY BANK EMPLOYEES UNION, REPRESENTED BY ITS
PRESIDENT MS. JUDITH JOCELYN MARTINEZ, PETITIONER, V.
SEC. CESAR L. VILLANUEVA (IN HIS CAPACITY AS THE
CHAIRMAN OF THE GOVERNANCE COMMISSION FOR
GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS UNDER
THE OFFICE OF THE PRESIDENT), MR. EMMANUEL L. BENITEZ
(IN HIS CAPACITY AS PRESIDENT OF THE GSIS FAMILY BANK),
AND ATTY. GERALDINE MARIE BERBERABE-MARTINEZ (IN HER
CAPACITY AS CHAIRPERSON OF THE BOARD OF DIRECTORS OF
THE GSIS FAMILY BANK), RESPONDENTS.
DECISION
LEONEN, J.:
Officers and employees of government-owned or controlled corporations
without original charters are covered by the Labor Code, not the Civil Service
Law. However, non-chartered government-owned or controlled corporations
are limited by law in negotiating economic terms with their employees. This is
because the law has provided the Compensation and Position Classification
System, which applies to all government-owned or controlled corporations,
chartered or non-chartered.
This Court resolves a Petition[1] for Certiorari, Prohibition, and Mandamus
filed by the GSIS Family Bank Employees Union (GSIS Union), praying that
GSIS Family Bank be declared outside the coverage of Republic Act No.
10149 and, therefore, be directed to negotiate a new collective bargaining
agreement with its employees.
On July 22, 1969, Royal Savings Bank was organized and incorporated as a
thrift bank. It began operating on February 8, 1971, with former Cavite
Representative Renato Dragon as its President and Board Chairman.[2]
On June 28, 1984, Royal Savings Bank filed an application with the Central
Bank of the Philippines (Central Bank) for the appointment of a conservator.[3]
On July 6, 1984, the Central Bank denied Royal Savings Bank's application
for conservatorship, prohibited it from doing business, and placed it under
receivership.[4]
Royal Savings Bank filed several complaints against the Central Bank for
grave abuse of discretion. To amicably settle the cases, then Central Bank
Governor Jose B. Fernandez, Jr. offered to reopen and rehabilitate Royal
Savings Bank if it would drop all its complaints against the Central Bank and
transfer all its shares of stock to Commercial Bank of Manila, a wholly-owned
subsidiary of the Government Service Insurance System.[5]
On September 7, 1984, Royal Savings Bank and Commercial Bank of Manila
entered into a Memorandum of Agreement to rehabilitate and infuse capital
into Royal Savings Bank. Royal Savings Bank was renamed Comsavings
Bank.[6]
Sometime in December 1987, the Government Service Insurance System
transferred its holdings from Commercial Bank of Manila to Boston Bank.
Comsavings Bank was not included in the transfer. Due to Boston Bank's
acquisition of Commercial Bank of Manila, the Government Service
Insurance System took over the control and management of Comsavings
Bank.[7]
On July 19, 1993, Comsavings Bank and the Government Service Insurance
System executed a Memorandum of Agreement where the latter committed to
infuse an additional capital of P2.5 billion into Comsavings Bank. After the
infusion of funds, the Government Service Insurance System effectively
owned 99.55% of Comsavings Bank's outstanding shares of stock.[8]
Sometime in July 2001, Comsavings Bank changed its name to GSIS Family
Bank.[9]
On May 25, 2004,[10] acting on a request for opinion from GSIS Family Bank,
the General Counsel of Bangko Sentral ng Pilipinas opined that GSIS Family
Bank could not be categorized as a government bank:
[GSIS Family Bank], when it was still [Royal Savings Bank], was organized
as a private stock savings and loan association organized under the general
corporation law. Thus, at its inception, the bank was set up for private needs.
When GSIS invested in the bank, it was the result of a business decision on its
part to be an equity owner in a thrift bank. The case of [GSIS Family Bank] is
unlike that of government banks, such as Development Bank of the
Philippines, the Land Bank of the Philippines or Al-Amanah Islamic
Development Bank[,] the charters of which were enacted by the lawmaking
authority for the purpose of addressing public needs....
It is true that P.D. No. 2029 simply defines a GOCC as "a stock or non-stock
corporation, whether performing governmental or proprietary functions, which
is charted by special law or if organized under the general corporation law is
owned by the government directly or indirectly through a parent corporation
or subsidiary corporation to the extent of at least a majority of its outstanding
capital . . . stock or of its outstanding voting capital stock". We believe
however that this definition, which merely requires ownership by the
government for an entity to qualify as a GOCC, has been qualified by the
subsequent promulgation of E.O. No. 292 . . . which requires, in addition, that
the institution was organized to serve public needs.
In view of the foregoing, we find insufficient basis to categorize [GSIS Family
Bank] as a government bank.[11]
Aquino) issued Executive Order No. 7,[12] which placed an indefinite
moratorium on increases in salaries and benefits of employees in government-
owned or controlled corporations and government financial institutions. [13]
On June 6, 2011, President Aquino signed into law Republic Act No. 10149,
or the GOCC Governance Act of 2011.[14] The law created the Governance
Commission for Government-Owned or Controlled Corporations (Governance
Commission), defined as "a central advisory, monitoring, and oversight body
with authority to formulate, implement[,] and coordinate policies"[15] in its
governed sector.
On May 2, 2012, Emmanuel L. Benitez (Benitez), GSIS Family Bank's
president, sought opinion from the Bangko Sentral ng Pilipinas as to whether
GSIS Family Bank may be considered as a government-owned or controlled
corporation or government bank under Republic Act No. 10149.[16]
On May 14, 2012, Bangko Sentral ng Pilipinas advised GSIS Family Bank to
seek the opinion of the Governance Commission, the implementing agency of
Republic Act No. 10149.[17]
On January 15, 2013, GSIS Family Bank met with representatives of the
Governance Commission, which clarified that GSIS Family Bank was
classified as a government financial institution under Republic Act No. 10149.
[18]
On February 11, 2013, Benitez wrote[19] the Governance Commission to seek
further clarification on several issues, namely: (1) GSIS Family Bank's
impending collective bargaining negotiations with its employees; (2) its
authority to enter into a collective bargaining agreement with the GSIS Union;
and (3) its employees' right to strike.[20] Benitez asked:
Should a CBA be the proper mode of determining the terms and conditions of
employment of the rank-and-file employees, the question as to which matters
may be negotiated remains[?]
Did R.A. 10149 effectively amend the provisions of the Labor Code on
[collective bargaining agreements] insofar as compensation is concerned?
Under said law, management and labor may no longer voluntarily determine
the compensation the employees would be entitled to as the law provides for
the development of a "Compensation and Position Classification System
which shall apply to all officers and employees of the GOCCs whether under
the Salary Standardization Law or exempt therefrom and shall consist of
classes of positions grouped into such categories as the GCG may determine,
subject to approval of the President."[21]
On March 8, 2013,[22] the Governance Commission replied that as a
government financial institution, GSIS Family Bank was unauthorized to enter
into a collective bargaining agreement with its employees "based on the
principle that the compensation and position classification system is provided
for by law and not subject to private bargaining."[23]
The Governance Commission further clarified that the right to strike of GSIS
Family Bank's employees was not guaranteed by the Constitution, as they
were government officers and employees.[24]
On December 20, 2013, counsel for the GSIS Union sent GSIS Family Bank a
demand letter[25] for the payment of Christmas bonus to its members, as
stipulated in their Collective Bargaining Agreement. GSIS Union accused
GSIS Family Bank of evading its contractual obligation to its employees by
invoking the Governance Commission's opinion that it was no longer
authorized to grant incentives and other benefits to its employees, unless
authorized by the President of the Philippines.[26]
GSIS Union alleged that Republic Act No. 10149 does not apply to GSIS
Family Bank, as it was a private bank created and established under the
Corporation Code.[27] It asserted that even if the Government Service
Insurance System owned a majority of GSIS Family Bank's outstanding
capital stock, the change in ownership of shares did not automatically place
the bank under the operation of Republic Act No. 10149.[28]
For GSIS Family Bank's refusal to negotiate a new collective bargaining
agreement, the GSIS Union filed a Complaint before the National Conciliation
and Mediation Board, and later, a Notice of Strike.[29]
Some bank employees also filed their own Complaints before the National
Labor Relations Commission and the Department of Labor and Employment.
They aimed to compel GSIS Family Bank to abide by the provisions of their
existing Collective Bargaining Agreement.[30]
On January 30, 2014, petitioner GSIS Union filed before this Court a Petition
for Certiorari,[31] asserting that GSIS Family Bank is a private bank; thus, it is
not covered by the provisions of Republic Act No. 10149.[32]
Petitioner contends that GSIS Family Bank does not perform functions for
public needs since it was created "by private individuals in their own private
capacities pursuant to the provisions of the Corporation Code, to advance their
own private, personal[,] and economic or financial and business needs or
interests."[33]
Petitioner argues that despite the Government Service Insurance System
owning the majority of GSIS Family Bank's shares of stock, the bank did not
automatically fall within the ambit of Republic Act No. 10149.[34] Further, the
law's enactment did not automatically convert it into a government-owned or
controlled corporation or a government financial institution.[35]
Petitioner cites Phil. National Oil Company-Energy Dev't. Corp. v. Hon.
Leogardo,[36] which stated that the employees of the Philippine National Oil
Company-Energy Development Corporation, a government-owned or
controlled corporation incorporated under the Corporation Code, remained
subject to the provisions of the Labor Code.[37]
Finally, petitioner stresses that as a private corporation established under the
Corporation Code, GSIS Family Bank and its employees are covered by the
applicable provisions of the Labor Code, not the Civil Service Law. Thus, the
Collective Bargaining Agreement between petitioner and GSIS Family Bank
cannot be impaired by Republic Act No. 10149.[38]
On April 28, 2014, respondents Benitez and Atty. Geraldine Marie Berberabe-
Martinez (Atty. Berberabe-Martinez) filed their Comment. [39] They admit that
after the Government Service Insurance System purchased majority of GSIS
Family Bank's shares, the bank continued to operate as a private bank,
governed by the Corporation Code and the Labor Code. However, they point
out that with the enactment of Republic Act No. 10149, GSIS Family Bank's
authority to enter into negotiations with its employees was revoked, as
confirmed by the Governance Commission. [40]
Respondents Benitez and Atty. Berberabe-Martinez also point out that the
Petition for Certiorari, Prohibition, and Mandamus was fatally defective since
respondents do not exercise judicial or quasi-judicial functions. Further, they
maintain that the Collective Bargaining Agreement provided remedies for the
enforcement of rights, of which petitioner supposedly did not avail. Thus,
there was a plain, speedy, and adequate remedy available to it, without need to
directly resort to this Court with a Rule 65 petition.[41]
Nonetheless, respondents Benitez and Atty. Berberabe-Martinez insist that as
a government-acquired bank, GSIS Family Bank is a government owned or
controlled corporation under Republic Act No. 10149.[42] They stress that they
merely followed the Governance Commission's directive forbidding them
from negotiating the economic terms of a collective bargaining agreement
with petitioner.[43] They likewise contend that GSIS Family Bank, a
government financial institution covered by the Compensation and Position
Classification System, is not at liberty to negotiate economic terms with its
employees and cannot set its own salary or compensation scheme.[44]
On May 28, 2014, respondent Secretary Cesar L. Villanueva (Villanueva)
filed his Comment,[45] where he brings up petitioner's failure to implead
several indispensable parties. He states that despite the Governance
Commission being a collegial body with five (5) members, only he was
impleaded in the Petition as the Governance Commission's chair. He also
stresses that GSIS Family Bank is governed by a Board of Directors, yet
petitioner only impleaded its President and Board Chairman.[46]
Respondent Villanueva likewise states that petitioner availed of the wrong
remedy[47] and violated the rule on judicial hierarchy by directly filing its
Petition before this Court.[48]
As for the substantial issues, respondent Villanueva points out that GSIS
Family Bank, as a government-owned or controlled corporation, specifically a
government financial institution, falls within the ambit of Republic Act No.
10149 and is subject to the Governance Commission's regulatory jurisdiction.
[49]
Respondent Villanueva rejects petitioner's argument that Republic Act No.
10149 only applies to corporations with original charters. He emphasizes that
the law does not distinguish between chartered and non-chartered
corporations:[50]
All GOCCs, whether chartered or non-chartered, are government corporations
brought about by the fact that they are owned and/or controlled by the
government. While non-chartered GOCCs are akin to "private corporations"
in the sense that their juridical entity and intra-corporate relationships are
primarily governed by the Corporation Code and fall within the administrative
jurisdiction of the [Securities and Exchange Commission], they remain to be
"government corporations" in the sense that they fall within the coverage of
GOCCs under the Administrative Code of 1987, and now also under R.A. No.
10149.[51] (Emphasis in the original, citation omitted)
Respondent Villanueva explains that Republic Act No. 10149 aimed to
standardize or rationalize the compensation framework of government-owned
or controlled corporations and government financial institutions to remedy the
"severe pay imbalance between personnel of these special entities and the rest
of the bureaucracy following the [Salary Standardization Law]."[52] Under
Republic Act No. 10149, the Governance Commission submitted a
Compensation and Position Classification System to President Aquino for his
approval. Thus, pending President Aquino's approval, a moratorium was
established on any increase in salaries and benefits, and any salary increase
shall be subject to the President's approval.[53]
Finally, respondent Villanueva declares that this Court, in Galicto v. H.E.
President Aquino III, et al.,[54] recognized the President's power to provide a
compensation system for government-owned or controlled corporations. [55]
On January 12, 2015, petitioner filed its Reply.[56] It avers that respondents
Villanueva, Benitez, and Atty. Berberabe-Martinez were impleaded as the
officers of Governance Commission and GSIS Family Bank who issued and
affirmed the assailed directives. Hence, they cannot excuse themselves by
"conveniently saying that the rest of the Board of Directors and/or the
institutions they represent have not been impleaded in the petition." [57]
Petitioner also insists that the Governance Commission and GSIS Family
Bank are not indispensable parties.[58] Further, petitioner stresses that the issue
at hand was the correct interpretation of Republic Act No. 10149; thus, the
non-inclusion of the Governance Commission and GSIS Family Bank as party
respondents was not fatal to its cause. Nonetheless, petitioner concedes that if
this Court declares them to be indispensable parties, it will willingly implead
them with the proper motion.[59]
Petitioner likewise argues that its Petition for Certiorari, Prohibition, and
Mandamus was the correct remedy, as it seeks judicial declaration of the
applicability of Republic Act No. 10149 to GSIS Family Bank, and for this
Court to compel respondents Benitez and Atty. Berberabe-Martinez to
negotiate a new collective bargaining agreement.[60]
Petitioner then reiterates that GSIS Family Bank remains a private bank,
outside the coverage of Republic Act No. 10149.[61]
On May 13, 2016, the Bangko Sentral ng Pilipinas Monetary Board, through
MB Resolution 826.A,[62] prohibited GSIS Family Bank from doing business
and designated the Philippine Deposit and Insurance Corporation as its
receiver.
The three (3) issues for this Court's resolution are:
First, whether or not the Petition for Certiorari is the correct remedy;
Second, whether or not the closure of GSIS Family Bank has rendered the
Petition moot; and
Third, whether or not GSIS Family Bank, a non-chartered government-owned
or controlled corporation, can enter into a collective bargaining agreement
with its employees.
I
Judicial power is the court's authority to "settle justiciable controversies or
disputes involving rights that are enforceable and demandable before the
courts of justice or the redress of wrongs for violations of such rights."[63]
This Court's judicial power is anchored on Article VIII, Section 1 of the 1987
Constitution, which provides:
SECTION 1. The judicial power shall be vested in one Supreme Court and in
such lower courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
Judicial power includes the power to enforce rights conferred by law and
determine grave abuse of discretion by any government branch or
instrumentality. Jurisprudence has consistently referred to these two (2) as the
court's traditional and expanded powers of judicial review.[64]
Traditional judicial power is the court's authority to review and settle actual
controversies or conflicting rights between dueling parties and enforce legally
demandable rights. An actual case or controversy exists "when the case
presents conflicting or opposite legal rights that may be resolved by the court
in a judicial proceeding."[65]
On the other hand, the framers of the 1987 Constitution deliberately expanded
this Court's power of judicial review to prevent courts from seeking refuge
behind the political question doctrine and turning a blind eye to abuses
committed by the other branches of government.[66]
This Court's expanded power of judicial review requires a prima facie
showing of grave abuse of discretion by any government branch or
instrumentality. This broad grant of power contrasts with the remedy of
certiorari under Rule 65, which is limited to the review of judicial and quasi-
judicial acts.[67] Nonetheless, this Court, by its own power to relax its rules,
allowed Rule 65 to be used for petitions invoking the courts' expanded
jurisdiction.[68]
Here, petitioner asserts that the Governance Commission committed grave
abuse of discretion amounting to lack or excess of jurisdiction when it
prevented respondents Benitez and Atty. Berberabe-Martinez, as the bank's
President and Chairperson of the Board of Directors, respectively, from
negotiating the economic provisions of the Collective Bargaining Agreement
between petitioner and the bank.[69]
Petitioner claims that in filing its Petition for Certiorari under Rule 65, it has
"no plain, speedy[,] and adequate remedy in the ordinary course of law which
will promptly and immediately relieve them from the injurious effects of the
unconstitutional and patently unwarranted and illegal acts of the
Respondents."[70]
Petitioner is mistaken.
Rule 65, Section 1 of the Rules of Civil Procedure reads:
SECTION 1. Petition for Certiorari. — When any tribunal, board or officer
exercising judicial or quasi-judicial functions has acted without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of the judgment,
order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non forum
shopping as provided in the third paragraph of Section 3, Rule 46.
Thus, a writ of certiorari may only be issued when the following are alleged in
the petition and proven:
(1) the writ is directed against a tribunal, a board[,] or any officer exercising
judicial or quasi[-]judicial functions; (2) such tribunal, board[,] or officer has
acted without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and (3) there is no appeal or any
plain, speedy[,] and adequate remedy in the ordinary course of law.
[71]
 (Citation omitted)
The Governance Commission was created under Republic Act No. 10149. It is
attached to the Office of the President and is the "central advisory, monitoring,
and oversight body with authority to formulate, implement[,] and coordinate
policies"[72] relative to government-owned and controlled corporations. It has
no judicial or quasi-judicial authority, as evidenced by its powers and
functions[73] under the law. Under its charter, the Governance Commission is
empowered to:
 oversee the selection and nomination of directors/trustees and
maintain the quality of Board Governance;
 institutionalize transparency, accountability, financial viability and
responsiveness in corporate performance by monitoring and evaluating
GOCCs' performance;
 rationalize the Sector through streamlining, reorganization, merger,
as well as recommending to the President of the Philippines the
privatization or abolition of a GOCC; and
 establish compensation standards to ensure reasonable and
competitive remuneration schemes that attract and retain the right talent.
[74]
The Governance Commission possesses neither judicial nor quasi judicial
powers; thus, it cannot review or settle actual controversies or conflicting
rights between dueling parties and enforce legally demandable rights. It is not
a tribunal or board exercising judicial or quasi-judicial functions that may
properly be the subject of a petition for certiorari.
Petitioner refers to the Governance Commission's February 5, 2013[75] and
March 8, 2013[76] letters to substantiate its claim that the Governance
Commission forbade respondents Benitez and Atty. Berberabe-Martinez from
negotiating the economic terms of their Collective Bargaining Agreement.
However, a careful review of the letters convinces this Court that they were
merely advisory opinions, rendered in response to the queries of respondents
Atty. Berberabe-Martinez and Benitez.
The February 5, 2013 letter read:
Gentlemen:
We write to formally inform you that pursuant to the terms of Republic Act
(R.A.) No. 10149, the Governing Boards and Managements of all covered
GOCCs, GFIs and GCE/GICPs are without legal authority to enter into
negotiations for the economic terms of Collective Bargaining Agreements
(CBAs); more so, approving CBAs, whether conditionally or unconditionally,
that cover matters involving compensation, allowances, benefits and
incentives.
"Collective Bargaining" covers matters that can be voluntarily agreed upon by
the employer and employees. Presidential Decree (P.D.) No. 1597 and Joint
Resolution (J.R.) No. 4 mandate that SSL exempt GOCCs, including Non-
Chartered GOCCs, shall observe the policies, parameters and guidelines
governing position classification, salary rates, categories and rates of
allowances, benefits and incentives, prescribed by the President, and
that any increase in the existing salary rates, as well as the grant of new
allowances, benefits, and incentives in the rates thereof shall be subject to the
approval of the President.
Executive Order No. 7 (s.2010) likewise provides for a moratorium on
increases in the rates of salaries, and the grant of new allowances, incentives
and other benefits, except for salary adjustments pursuant to Executive Order
No. 811 (s. 2009) and Executive Order No. 900 (s. 2010), until specifically
authorized by the President.
Pursuant to these, compensation matters cannot be voluntarily agreed upon by
the Board with the union under a CBA, since such matters have to be
subjected to policies, guidelines and parameters prescribed and approved by
the President.
As you are aware of, Section 8 of R.A. No. 10149 mandates the Commission
to develop a Compensation and Position Classification System (CPCS) that
strikes a balance between reasonableness and competitiveness, and shall apply
to ALL GOCCs, whether SSL-covered or SSL-exempt. The task of
undertaking the development of a CPCS for all GOCCs has already
commenced and is well underway being already on Phase III of its
development. Pending however the formal promulgation and approval of the
CPCS, the authority to approve or deny requests for any adjustment pertaining
to compensation, additional incentives or benefits, remain with His
Excellency.
In view of the foregoing, and pursuant to the fiduciary duties of the members
of the Board of Directors and Officers, as well as the principles under R.A.
No. 10149, the Commission takes this opportunity to inform Governing
Boards and Management within the GOCC Sector of their lack of authority to
enter into any negotiations for the economic terms of CBAs with their
respective unions.[77] (Emphasis in the original, citation omitted)
A careful reading of the March 8, 2013 letter likewise demonstrates its
advisory nature with no directive for respondents to refrain from negotiating
with petitioner.
Further, petitioner failed to prove that it had no other "plain, speedy[,] and
adequate remedy in the ordinary course of law"[78] aside from its present
Petition. The Governance Commission is an attached agency of the Office of
the President; hence, petitioner could have elevated the advisories to the
Office of the President to question the Governance Commission's legal
opinion.
Finally, it has not escaped this Court's attention that petitioner only impleaded
respondent Villanueva in his capacity as chairperson of the Governance
Commission, and not the four (4) other members of the Governance
Commission.
The Governance Commission is composed of five (5) members. The
chairperson, with a rank of Cabinet Secretary, and two (2) other members,
with the rank of Undersecretary, are appointed by the President. The
Department of Budget and Management and the Department of Finance
Secretaries sit as ex-officio members.[79]
As a collegial body, all members of the Governance Commission should have
been impleaded as indispensable parties in the Petition, since no final
determination of the action can be reached without them.[80] As it is,
petitioner's failure to implead all members of the Governance Commission
should lead to the outright dismissal of this Petition as their non-inclusion is
debilitating since this Court cannot exercise its juridical power when an
indispensable party is not impleaded.[81]
II
Nonetheless, even if all the requirements for the issuance of a writ of certiorari
were alleged and proven, and even if all the indispensable parties were
impleaded, the closure of GSIS Family Bank has rendered the Petition moot.
As seen in the Petition's prayer,[82] this Court is asked to direct GSIS Family
Bank's representatives to perform positive acts:
WHEREFORE, premises considered, Petitioner humbly prays that the
Honorable Court rule in favor of the Petitioner and that a judgment be
rendered:
1. Declaring GSIS Family Bank as a private bank and therefore
outside the coverage of RA 10149;
2. Ordering the [Governance Commission] to DESIST from further
usurping into matters between the GSIS [Family Bank] and its
employees;
3. Directing GSIS [Family Bank] management to immediate[ly]
commence negotiations with the petitioner for a Collective Bargaining
Agreement (CBA) covering the period retroactive January 01, 2012 to
December 31, 2015;
4. Ordering respondent GSIS Family Bank to fully comply with the
terms and conditions of the existing [Collective Bargaining
Agreement] until a new [collective bargaining agreement] has been
negotiated and signed, by providing the benefits, allowances and
incentives and other rightful claims, including the 2013 Christmas bonus,
of the members of the Petitioner union[.][83] (Emphasis supplied)
A case is deemed moot when it ceases to present a justiciable controversy due
to a supervening event. The lack of an actual or justiciable controversy means
that the court has nothing to resolve, and will, in effect, only render an
advisory opinion.[84]
Courts generally dismiss cases on the ground of mootness[85] unless any of the
following instances are present: (1) grave constitutional violations; (2)
exceptional character of the case; (3) paramount public interest; (4) the case
presents an opportunity to guide the bench, the bar, and the public; or (5) the
case is capable of repetition yet evading review.[86]
Despite GSIS Family Bank's closure, which has effectively rendered the case
moot, this Court believes that there is a need to discuss the substantive issues
of the case, as it presents an opportunity to guide the bench and bar on how to
resolve similar issues arising from similarly situated parties.
III
On February 4, 1986, to clarify which of the government entities could be
classified as a government-owned or controlled corporation, [87] then President
Ferdinand E. Marcos issued Presidential Decree No. 2029, which defined a
government-owned or controlled corporation as follows:
SECTION 2. Definition. — A government-owned or controlled corporation is
a stock or a non-stock corporation, whether performing governmental or
proprietary functions, which is directly chartered by a special law or if
organized under the general corporation law is owned or controlled by the
government directly, or indirectly through a parent corporation or subsidiary
corporation, to the extent of at least a majority of its outstanding capital stock
or of its outstanding voting capital stock;
Provided, that a corporation organized under the general corporation law
under private ownership at least a majority of the shares of stock of which
were conveyed to a government financial institution, whether by a foreclosure
or otherwise, or a subsidiary corporation of a government corporation
organized exclusively to own and manage, or lease, or operate specific
physical assets acquired by a government financial institution in satisfaction
of debts incurred therewith, and which in any case by enunciated policy of the
government is required to be disposed of to private ownership within a
specified period of time, shall not be considered a government-owned or
controlled corporation before such disposition and even if the ownership or
control thereof is subsequently transferred to another government-owned or
controlled corporation;
Provided, further, that a corporation created by special law which is explicitly
intended under that law for ultimate transfer to private ownership under
certain specified conditions shall be considered a government-owned or
controlled corporation, until it is transferred to private ownership; and
Provided, finally, that a corporation that is authorized to be established by
special law, but which is still required under that law to register with the
Securities and Exchange Commission in order to acquire a juridical
personality, shall not on the basis of the special law alone be considered a
government-owned or controlled corporation.
On July 25, 1987, then President Corazon C. Aquino issued Executive Order
No. 292 or the Administrative Code of 1987, which replaced the 1917 colonial
period Administrative Code in effect then, and laid out in a "unified document
the major structural, functional[,] and procedural principles and rules of
governance[.]"[88] Section 2(13) of Executive Order No. 292 defined a
government-owned or controlled corporation:
SECTION 2. General Terms Defined. — Unless the specific words of the text,
or the context as a whole, or a particular statute, shall require a different
meaning:
(13) Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature,
and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations, to
the extent of at least fifty-one (51) per cent of its capital stock: Provided,
That government-owned or controlled corporations may be further
categorized by the Department of the Budget, the Civil Service
Commission, and the Commission on Audit for purposes of the exercise
and discharge of their respective powers, functions and responsibilities
with respect to such corporations.
This definition was echoed in Section 3(o) of Republic Act No. 10149:
SECTION 3. Definition of Terms. —
(o) Government-Owned or -Controlled Corporation (GOCC) refers to any
agency organized as a stock or nonstock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature, and
owned by the Government of the Republic of the Philippines directly or
through its instrumentalities either wholly or, where applicable as in the case
of stock corporations, to the extent of at least a majority of its outstanding
capital stock: Provided, however, That for purposes of this Act, the term
"GOCC" shall include GICP/GCE and GFI as defined herein.
Thus, a government-owned or controlled corporation is: (1) established by
original charter or through the general corporation law; (2) vested with
functions relating to public need whether governmental or proprietary in
nature; and (3) directly owned by the government or by its instrumentality, or
where the government owns a majority of the outstanding capital stock.
Possessing all three (3) attributes is necessary to be classified as a
government-owned or controlled corporation.[89]
There is no doubt that GSIS Family Bank is a government-owned or
controlled corporation since 99.55% of its outstanding capital stock is owned
and controlled by the Government Service Insurance System.
Petitioner cites this Court's ruling in Phil. National Oil Company-Energy
Dev't. Corp.[90] to substantiate its claim that government-owned and controlled
corporations without original charters, or those incorporated under the
Corporation Code, are subject to the provisions of the Labor Code, and are
thus free to negotiate economic terms with their employers.[91]
Petitioner is again mistaken.
Phil. National Oil Company-Energy Dev 't. Corp. involved a decision of the
Deputy Minister of Labor upholding his jurisdiction revoking a clearance to
dismiss, earlier issued by the Ministry of Labor's Regional Office. The
petitioner, despite its earlier application for such issuance, contested the
Ministry of Labor's jurisdiction on the ground that it was a government-owned
and controlled corporation.
In disposing of the petition, this Court noted that for purposes of coverage
under the Civil Service Rules, it was only government-owned and controlled
corporations with original charters that were covered:
Under the laws then in force, employees of government-owned and/or
controlled corporations were governed by the Civil Service Law and not by
the Labor Code. Thus,
Article 277 of the Labor Code (PD 442) then provided:
"The terms and conditions of employment of all government employees,
including employees of government-owned and controlled corporations shall
be governed by the Civil Service Law, rules and regulations .. "
In turn, the 1973 Constitution provided:
"The Civil Service embraces every branch, agency, subdivision and
instrumentality of the government, including government-owned or controlled
corporations."
In National Housing Corporation vs. Juco (L-64313, January 17, 1985, 134
SCRA 172), we laid down the doctrine that employees of government-owned
and/or controlled corporations, whether created by special law or formed as
subsidiaries under the general Corporation Law, are governed by the Civil
Service Law and not by the Labor Code.
However, the above doctrine has been supplanted by the present Constitution,
which provides:
"The Civil Service embraces all branches, subdivisions, instrumentalities and
agencies of the Government, including government-owned or controlled
corporations with original charters." (Article IX-B, Section 2 [1])
Thus, under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service
Law is the manner of its creation such that government corporations created
by special charter are subject to its provisions while those incorporated under
the general Corporation Law are not within its coverage.[92]
However, what was in issue in Phil. National Oil Company-Energy Dev't.
Corp.[93] was jurisdiction in relation to dismissal of employees. It had nothing
to do with the obligation of the government-owned or controlled corporation
to collectively bargain in good faith.
Similarly, Galicto[94] was a petition filed by an employee of the Philippine
Health Insurance Corporation (Philhealth) challenging the validity of an
Executive Order issued by the President. The Executive Order imposed a
moratorium on increases in compensation and benefits to be given to
employees, including government-owned and controlled corporations.
[95]
 Unlike the present case, Galicto did not deal with the obligation, if any, of
the management of government-owned or controlled corporations to bargain
collectively with its employees in good faith.
Nonetheless, Galicto involved Philhealth, a corporation with an original
charter, Republic Act No. 7875. More importantly, the case was dismissed due
to the improper remedy,[96] lack of standing,[97] and procedural errors[98] of the
petitioner. This Court also noted that while the case was pending, Republic
Act No. 10149 was promulgated, providing statutory basis for the President to
approve the Compensation and Position Classification System for
government-owned and controlled corporations.[99]
Galicto did not rule on the legality of any provision of Republic Act No.
10149 as it was not raised as an issue. Further, Galicto dismissed the petition
against then President Aquino for being moot.[100]
IV
The right of workers to self-organization, collective bargaining, and
negotiations is guaranteed by the Constitution under Article XIII, Section 3:
SECTION 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers
and employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to expansion
and growth.
The right to self-organization is not limited to private employees and
encompasses all workers in both the public and private sectors, as shown by
the clear declaration in Article IX(B), Section 2(5) that "the right to self
organization shall not be denied to government employees." Article III,
Section 8 of the Bill of Rights likewise states, "[t]he right of the people,
including those employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall not be
abridged."
While the right to self-organization is absolute, the right of government
employees to collective bargaining and negotiation is subject to limitations.
Collective bargaining is a series of negotiations between an employer and a
representative of the employees to regulate the various aspects of the
employer-employee relationship such as working hours, working conditions,
benefits, economic provisions, and others.
Relations between private employers and their employees are subject to the
minimum requirements of wage laws, labor, and welfare legislation. Beyond
these requirements, private employers and their employees are at liberty to
establish the terms and conditions of their employment relationship. In
contrast with the private sector, the terms and conditions of employment of
government workers are fixed by the legislature; thus, the negotiable matters
in the public sector are limited to terms and conditions of employment that are
not fixed by law[101]
Social Security System Employees Association v. Court of Appeals[102] explains
that instead of a collective bargaining agreement or negotiation, government
employees must course their petitions for a change in the terms and conditions
of their employment through the Congress for the issuance of new laws, rules,
or regulations to that effect:
Government employees may, therefore, through their unions or associations,
either petition the Congress for the betterment of the terms and conditions of
employment which are within the ambit of legislation or negotiate with the
appropriate government agencies for the improvement of those which are not
fixed by law.[103]
In PCSO v. Chairperson Pulido-Tan, et al.,[104] the Commission on Audit
disallowed the monthly cost of living allowance being received by Philippine
Charity Sweepstakes Office's officials and employees.
This Court held that the Philippine Charity Sweepstakes Office's charter does
not allow its Board complete liberty to set the salaries and benefits of its
officials and employees. This Court emphasized that as a government-owned
and controlled corporation, the Philippine Charity Sweepstakes Office is
covered by the compensation and position standards issued by the Department
of Budget and Management and applicable laws.[105]
PCSO underscored that the power of a government-owned or controlled
corporation to fix salaries or allowances of its employees is subject to and
must conform to the compensation and classification standards laid down by
applicable law:
Upon the effectivity of R.A. No. 6758, GOCCs like the PCSO are included in
the Compensation and Position Classification System because Section 16 of
the law repeals all laws, decrees, executive orders, corporate charters, and
other issuances or parts thereof, that exempt agencies from the coverage of the
System, or that authorize and fix position classification, salaries, pay rates or
allowances of specified positions, or groups of officials and employees or of
agencies, which are inconsistent with the System, including the proviso under
Section 2 and Section 16 of P.D. No. 985.[106] (Citation omitted)
Republic Act No. 10149 defines a non-chartered government-owned or
controlled corporation as a government-owned or controlled corporation that
was organized and is operating under the Corporation Code.[107] It does not
differentiate between chartered and non-chartered government-owned or
controlled corporations; hence, its provisions apply equally to both:
SECTION 4. Coverage. — This Act shall be applicable to all GOCCs,
GICPs/GCEs, and government financial institutions, including their
subsidiaries, but excluding the Bangko Sentral ng Pilipinas, state universities
and colleges, cooperatives, local water districts, economic zone authorities
and research institutions: Provided, That in economic zone authorities and
research institutions, the President shall appoint one-third (1/3) of the board
members from the list submitted by the GCG. (Emphasis supplied)
Section 9 of Republic Act No. 10149 also categorically states, "Any law to the
contrary notwithstanding, no [government-owned or controlled corporation]
shall be exempt from the coverage of the Compensation and Position
Classification System developed by the [Governance Commission] under this
Act."
Furthermore, Republic Act No. 10149 directed the Governance Commission
to develop a Compensation and Position Classification System, to be
submitted for the President's approval, which shall apply to all officers and
employees of government-owned or controlled corporations, whether
chartered or non-chartered.[108]
On March 22, 2016, President Aquino issued Executive Order No. 203,
[109]
 which approved the compensation and classification standards and the
Index of Occupational Services Framework developed and submitted by the
Governance Commission.
When it comes to collective bargaining agreements and collective negotiation
agreements in government-owned or controlled corporations, Executive Order
No. 203 unequivocally stated that while it recognized the right of workers to
organize, bargain, and negotiate with their employers, "the Governing Boards
of all covered [government-owned or controlled corporations], whether
Chartered or Non-chartered, may not negotiate with their officers and
employees the economic terms of their [collective bargaining
agreements]."[110]
Thus, considering the existing law at the time, GSIS Family Bank could not be
faulted for refusing to enter into a new collective bargaining agreement with
petitioner as it lacked the authority to negotiate economic terms with its
employees.[111] Unless directly challenged in the appropriate case and with a
proper actual controversy, the constitutionality and validity of Republic Act
No. 10149, as it applies to fully government-owned and controlled non-
chartered corporations, prevail.
WHEREFORE, premises considered, the Petition is DENIED.
SO ORDERED.
Peralta (Chairperson), A. Reyes, Jr., Hernando, and  Carandang,[*] JJ.,
concur.
SECOND DIVISION
G.R. No. 216635, June 03, 2019
DR. MARY JEAN P. LORECHE-AMIT, PETITIONER, v. CAGAYAN
DE ORO MEDICAL CENTER, INC. (CDMC), DR. FRANCISCO OH
AND DR. HERNANDO EMANO, RESPONDENTS.
DECISION
J. REYES, JR., J.:
Before us is a Petition for Review on Certiorari,1 which seeks to assail the
Decision2 dated August 3, 2012 and Resolution3 dated April 12, 2013 of the
Court of Appeals (CA)-Cagayan de Oro City, in CA-G.R. SP No. 03067-MIN
which affirmed the decision of the National Labor Relations Commission
(NLRC).
The Relevant Antecedents
Dr. Mary Jean P. Loreche-Amit (petitioner) started working with Cagayan De
Oro Medical Center, Inc. (CDMC), sometime in May 1996, when she was
engaged by the late Dr. Jose N. Gaerlan (Dr. Gaerlan) as Associate Pathologist
in the Department of Laboratories. Upon the demise of Dr. Gaerlan, CDMC's
Board of Directors formally appointed petitioner as Chief Pathologist for five
years or until May 15, 2011.4
On June 13, 2007, (CDMC's) Board of Directors passed a resolution, recalling
petitioner's appointment as Chief Pathologist. This prompted petitioner to file
a complaint for illegal dismissal, contending that she was dismissed by
CDMC from her work without just cause and due process.5
In her complaint, petitioner narrated the circumstances which surrounded the
recall of her appointment. She averred that Dr. Hernando Emano (Dr. Emano)
asked her to help his daughter Dr. Helga Emano-Bleza (Dr. Emano-Bleza) to
qualify as a pathologist considering that petitioner is one of the six members
of the Board of Governors accredited by the Professional Regulation
Commission. However, petitioner refused to assist Dr. Emano-Bleza because
the latter failed to qualify in the clinical pathology examination. Such refusal,
according to petitioner, started the subtle attempt of Dr. Emano to oust her
from her job.6
Soon thereafter, Dr. Francisco Oh (Dr. Oh) issued an Inter-Office
Memorandum addressed to all laboratory personnel stating that working in
and out of the building without proper permission is to be treated as absence
without official leave and payment for printing of duplicate copies not
endorsed to the hospital is a form of stealing. As petitioner slammed the
Memorandum against the wall and tagged the name of Dr. Oh as an irrational
man, she received an Inter-Office Memorandum from Dr. Oh for alleged
conduct unbecoming/insubordination, and to explain why her appointment
should not be revoked due to such behavior. 7 Finally, a Memorandum
recalling her appointment was issued.8
For their part, Dr. Emano, Dr. Oh, and CDMC (collectively referred to as
respondents) averred that petitioner was not hired by them as she merely
assisted Dr. Gaerlan in operating the hospital's laboratory. Respondents
maintained that petitioner worked at the same time as pathologist in Capitol
College Hospital and J.R. Borja Memorial Hospital as she was not prohibited
to do so.9
In dismissing the complaint for lack of jurisdiction, the Labor Arbiter
rendered a Decision10 dated March 31, 2008. The Labor Arbiter found that
petitioner is a corporate officer of the hospital because of her appointment by
the Board of Directors through a resolution; thus, matters relating to the
propriety of her dismissal is under the jurisdiction of the Regional Trial Court
(RTC) under Section 5.2 of Republic Act (R.A.) No. 8799 (The Securities
Regulation Code of the Philippines). The dispositive portion of the Decision
reads:cralawred
WHEREFORE, foregoing premises considered, the above-entitled case is
DISMISSED for lack of jurisdiction.
SO ORDERED.11
chanRoblesvirtualLaw1ibrary
On appeal, the NLRC in a Resolution12 dated March 31, 2009, affirmed the
ruling of the Labor Arbiter and reiterated that petitioner is a corporate officer
and that there was no employer-employee relationship between CDMC and
her. As it is, the issue is an intra-corporate matter, the jurisdiction of which
belongs to the regular courts, viz.:cralawred
WHEREFORE, in view of all the foregoing considerations, the instant
appeal is hereby DISMISSED for lack of merit. The assailed Decision dated
March 31, 2008 is AFFIRMED.
SO ORDERED.13
chanRoblesvirtualLaw1ibrary
Petitioner filed a Petition for Certiorari before the CA.
In a Decision14 dated August 3, 2012, the CA dismissed the petition and
echoed the rulings of the Labor Arbiter and NLRC, thus:cralawred
WHEREFORE, the petition is DISMISSED.
SO ORDERED.15
chanRoblesvirtualLaw1ibrary
The motion for reconsideration filed by petitioner was likewise dismissed in a
Resolution16 dated April 12, 2013.
The Issue
Whether or not the labor tribunals have jurisdiction over the complaint for
illegal dismissal filed by petitioner.
The Court's Ruling
The determination of whether petitioner was indeed an employee of CDMC is
necessary before we proceed to rule on the propriety of her dismissal.
Petitioner argues that she is not a corporate officer because her position as
Pathologist is not among those included in the by-laws of CDMC.
This Court agrees.
To be considered as a corporate officer, the designation must be either
provided by the Corporation Code or the by-laws of the corporation, to
wit:cralawred
Corporate officers are given such character either by the Corporation Code or
by the corporation's by-laws. Under Section 25 of the Corporation Code, the
corporate officers are the president, secretary, treasurer and such other officers
as may be provided in the by-laws. Other officers are sometimes created by
the charter or by-laws of a corporation, or the board of directors may be
empowered under the by-laws of a corporation to create additional offices as
may be necessary.17 (Citation omitted)
In this case, nowhere in the records could the by-laws of CDMC be found. An
appointment through the issuance of a resolution by the Board of Directors
does not make the appointee a corporate officer. It is necessary that the
position is provided in the Corporation Code or in the by-laws. In the absence
of the by-laws of CDMC, there is no reason to conclude that petitioner, as
Pathologist, is considered as a corporate officer. In the cases of WPP
Marketing Communications, Inc. v. Galera18 and Marc II Marketing, Inc. v.
Joson,19 this Court declared that respondents are not corporate officers
because neither the Corporation Code nor the by-laws of the respective
corporations provided so. In the latter case, this Court treated as employee the
respondent whose position was not expressly mentioned in the Corporation
Code or the by-laws.20
Thus, the RTC does not have jurisdiction over the case as there was no intra-
corporate controversy, the latter being operative in vesting jurisdiction upon
Regional Trial Courts over all controversies in the election or appointment of
directors, trustees, officers or managers of corporations, partnerships or
associations.
However, this is not an automatic declaration that petitioner is an employee of
CDMC. The four-fold test, to wit: 1) the selection and engagement of the
employees; 2) the payment of wages; 3) the power of dismissal; and 4) the
power to control the employee's conduct, must be applied to determine the
existence of an employer-employee relationship.21
In this case, it is apparent that CDMC, through the Board of Directors,
exercised the power to select and supervise petitioner as the Pathologist. It
must be emphasized that petitioner was appointed as Pathologist with a term
of five years from May 2006 to May 2011. She was likewise paid
compensation which is at 4% of the gross receipts of the Clinical Section of
the laboratory.
However, based on the records, CDMC does not exercise the power of control
over petitioner.
The power to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship.
This test is premised on whether the person for whom the services are
performed reserves the right to control both the end achieved and the manner
and means used to achieve that end.22
As the Labor Arbiter, NLRC, and the CA aptly observed, petitioner was
working for two other hospitals aside from CDMC, not to mention those other
hospitals which she caters to when her services are needed. Such fact evinces
that petitioner controls her working hours. On this note, relevant is the
economic reality test which this Court has adopted in determining the
existence of employer-employee relationship. Under this test, the economic
realities prevailing within the activity or between the parties are examined,
taking into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties, to wit:cralawred
x x x. In our jurisdiction, the benchmark of economic reality in analyzing
possible employment relationships for purposes of applying the Labor Code
ought to be the economic dependence of the worker on his employer.23
chanRoblesvirtualLaw1ibrary
Thus, the fact that petitioner continued to work for other hospitals strengthens
the proposition that petitioner was not wholly dependent on CDMC.
Petitioner likewise admitted that she receives in full her 4% share in the
Clinical Section of the hospital regardless of the number of hours she worked
therein. Alternatively put, petitioner manages her method and hours of work.
The rule is that where a person who works for another performs his job more
or less at his own pleasure, in the manner he sees fit, not subject to definite
hours or conditions of work, and is compensated according to the result of his
efforts and not the amount thereof, no employer-employee relationship
exists.24
Moreover, the Memorandum, pertaining to petitioner's behavior, issued by Dr.
Oh does not sufficiently establish the element of control. The Memorandum
merely states that intolerable behavior in the hospital cannot be countenanced.
It is administrative in character which does not, in any way, pertains to the
manner and method of petitioner's work.
In sum, this Court finds no reason to overturn the finding of the LA, NLRC,
and the CA that there was no illegal dismissal in this case as it was not
sufficiently proven that petitioner is indeed an employee of CDMC.
WHEREFORE, premises considered, the instant petition is PARTLY
GRANTED in that petitioner is not a corporate officer. The Decision dated
August 3, 2012 and the Resolution dated April 12, 2013 of the Court of
Appeals-Cagayan de Oro City in CA-G.R. SP No. 03067-MIN
are AFFIRMED.
SO ORDERED.
JULITO SAGALES, Petitioner, v. RUSTAN'S COMMERCIAL
CORPORATION, Respondent.
DECISION
REYES, R.T., J.:
Labor is property, and as such merits protection. The right to make it available
is next in importance to the rights of life and liberty. It lies to a large extent at
the foundation of most other forms of property, and of all solid individual and
national prosperity.1
The exultation of labor by Mr. Justice Noah Haynes Swayne of the United
States Supreme Court comes to the fore in this Petition for Review
on Certiorari . The employee questions the propriety of his dismissal after he
was caught stealing 1.335 kilos of squid heads worth P50.00. He invokes his
almost thirty-one (31) years of untarnished service and the several awards he
received from the company to temper the penalty of dismissal meted on him.
The Facts
Petitioner Julito Sagales was employed by respondent Rustan's Commercial
Corporation from October 1970 until July 26, 2001, when he was terminated.
At the time of his dismissal, he was occupying the position of Chief Cook at
the Yum Yum Tree Coffee Shop located at Rustan's Supermarket in Ayala
Avenue, Makati City. He was paid a basic monthly salary of P9,880.00. He
was also receiving service charge of not less than P3,000.00 a month and other
benefits under the law and the existing collective bargaining agreement
between respondent and his labor union.2
In the course of his employment, petitioner was a consistent recipient of
numerous citations3 for his performance. After receiving his latest award on
March 27, 2001, petitioner conveyed to respondent his intention of retiring on
October 31, 2001, after reaching thirty-one (31) years in service.4 Petitioner,
however, was not allowed to retire with his honor intact.
On June 18, 2001, Security Guard Waldo Magtangob, upon instructions from
Senior Guard Bonifacio Aranas, apprehended petitioner in the act of taking
out from Rustan's Supermarket a plastic bag. Upon examination, it was
discovered that the plastic bag contained 1.335 kilos of squid heads
worth P50.00. Petitioner was not able to show any receipt when confronted.
Thus, he was brought to the Security Office of respondent corporation for
proper endorsement to the Makati Headquarters of the Philippine National
Police. Subsequently, petitioner was brought to the Makati Police Criminal
Investigation Division where he was detained. Petitioner was later ordered
released pending further investigation.5
Respondent alleged that prior to his detention, petitioner called up Agaton
Samson, Rustan's Branch Manager, and apologized for the incident. Petitioner
even begged Samson that he would just pay for the squid heads. Samson
replied that it is not within his power to forgive him.6
On June 19, 2001, petitioner underwent inquest proceedings for qualified theft
before Assistant Prosecutor Amado Y. Pineda. Although petitioner admitted
that he was in possession of the plastic bag containing the squid heads, he
denied stealing them because he actually paid for them. As proof, petitioner
presented a receipt. The only fault he committed was his failure to
immediately show the purchase receipt when he was accosted because he
misplaced it when he changed his clothes. He also alleged that the squid heads
were already "scraps" as these were not intended for cooking. Neither were
the squid heads served to customers. He bought the squid heads so that they
could be eaten instead of being thrown away. If he intended to steal from
respondent, he could have stolen other valuable items instead of scrap.7
Assistant Prosecutor Pineda believed the version of petitioner and
recommended the dismissal of the case for "lack of evidence."8 The
recommendation was approved upon review by City Prosecutor Feliciano
Aspi.9
Notwithstanding the dismissal of the complaint, respondent, on June 25, 2001,
required petitioner to explain in writing within forty-eight (48) hours why he
should not be terminated in view of the June 18, 2001 incident. Respondent
also placed petitioner under preventive suspension.10
On June 29, 2001, petitioner was informed that a formal investigation would
be conducted by the Legal Department on July 6, 2001.11
Petitioner and his counsel attended the administrative investigation where he
reiterated his defense before the inquest prosecutor. Also in attendance were
Aranas and Magtangob, who testified on the circumstances surrounding the
apprehension of petitioner; Samson, the branch manager to whom petitioner
allegedly apologized for the incident; and Zenaida Castro, cashier, who
testified that the squid heads were not paid.
Respondent did not find merit in the explanation of petitioner. Thus, petitioner
was dismissed from service on July 26, 2001.12 At that time, petitioner had
been under preventive suspension for one (1) month.
Aggrieved, petitioner filed a complaint for illegal dismissal against
respondent. He also prayed for unpaid salaries/wages, overtime pay, as well as
moral and exemplary damages, attorney's fees, and service charges.13
Labor Arbiter, NLRC, and CA Dispositions
On July 24, 2002, Labor Arbiter Felipe P. Pati dismissed14 the complaint.
IN VIEW OF THE FOREGOING, the complaint for illegal dismissal should
be DISMISSED for lack of merit.
SO ORDERED.15
According to the Labor Arbiter, the nature of the responsibility of petitioner
"was not that of an ordinary employee."16 It then went on to categorize
petitioner as a supervisor in "a position of responsibility where trust and
confidence is inherently infused."17 As such, it behooved him "to be more
knowledgeable if not the most knowledgeable in company policies on
employee purchases of food scrap items in the kitchen."18 Per the evidence
presented by respondent, petitioner breached company policy which justified
his dismissal.
Petitioner appealed to the National Labor Relations Commission
(NLRC).19 On April 10, 2003, the NLRC reversed20 the Labor Arbiter in the
following tenor:
WHEREFORE, the decision appealed from is hereby SET ASIDE and
complainant's dismissal declared illegal. Further, respondent is hereby ordered
to reinstate complainant to his former position without loss of seniority rights
and other benefits and paid backwages computed from time of dismissal up to
the finality of this decision which as of this date amounts to P269,854.16.
All other claims are denied for want of basis.
SO ORDERED.21
The NLRC held that the position of complainant is not supervisory covered by
the trust and confidence rule.22 On the contrary, petitioner is a mere rank-and-
file employee.23 The evidence is also wanting that petitioner committed the
crime charged.24 The NLRC did not believe that petitioner would trade off
almost thirty-one (31) years of service for P50.00 worth of squid heads.25
The NLRC further ruled that petitioner was illegally dismissed as respondent
failed to establish a just cause for dismissal.26 However, the claim for damages
was denied for lack of evidence.27
The motion for reconsideration28 having been denied,29 respondent brought the
matter to the Court of Appeals (CA) via a Petition for Certiorari under Rule
65 of the 1997 Rules on Civil Procedure.30 On July 12, 2004, the CA rendered
the assailed decision, 31 with the following fallo:
WHEREFORE, the petition is GRANTED. The challenged resolutions of
April 10, 2003 and July 31, 2003 of public respondent NLRC
are REVERSED and SET ASIDE. The decision of the Labor Arbiter of July
24, 2002, dismissing private respondent's complaint is REINSTATED.
SO ORDERED.32
In reversing the NLRC, the CA opined that the position of petitioner was
supervisory in nature.33 The CA also held that the evidence presented by
respondent clearly established loss of trust and confidence on
petitioner.34 Lastly, the CA, although taking note of the long years of service
of petitioner and his numerous awards, refused to award separation pay in his
favor. According to the CA, "the award of separation pay cannot be sustained
under the social justice theory" because the instant case "involves theft of the
employer's property."35
Petitioner filed a motion for reconsideration36 which was denied.37 Left with
no other recourse, petitioner availed of the present remedy.38
Issues
Petitioner in his Memorandum39 imputes to the CA the following errors, to
wit:
I. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
CONCLUDED THAT THE POSITION OF THE PETITIONER BEING AN
ASSISTANT COOK AS A SUPERVISORY POSITION FOR BEING
CONTRADICTORY TO THE EVIDENCE ON RECORD.
II. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
CONCLUDED THAT THE DOCTRINE OF TRUST AND CONFIDENCE
APPLIES AGAINST THE PETITIONER TO JUSTIFY HIS DISMISSAL
FROM EMPLOYMENT FOR BEING CONTRADICTORY TO THE
EVIDENCE ON RECORD.40 (Underscoring supplied)cralawlibrary
For a full resolution of the issues in the instant case, the following questions
should be answered: (1) Is the position of petitioner supervisory in nature
which is covered by the trust and confidence rule? (2) Is the evidence on
record sufficient to conclude that petitioner committed the crime charged? and
(3) Assuming that the answer is in the affirmative, is the penalty of dismissal
proper?
Our Ruling
I. The position of petitioner is supervisory in nature which is covered by
the trust and confidence rule.
The nature of the job of an employee becomes relevant in termination of
employment by the employer because the rules on termination of managerial
and supervisory employees are different from those on the rank-and-file.
Managerial employees are tasked to perform key and sensitive functions, and
thus are bound by more exacting work ethics.41 As a consequence, managerial
employees are covered by the trust and confidence rule.42 The same holds true
for supervisory employees occupying positions of responsibility.43
There is no doubt that the position of petitioner as chief cook is supervisory in
nature. A chief cook directs and participates in the preparation and serving of
meals; determines timing and sequence of operations required to meet serving
times; and inspects galley and equipment for cleanliness and proper storage
and preparation of food.44 Naturally, a chief cook falls under the definition of
a supervisor, i.e., one who, in the interest of the employer, effectively
recommends managerial actions which would require the use of independent
judgment and is not merely routinary or clerical.45
It has not escaped Our attention that petitioner changed his stance as far as his
actual position is concerned. In his position paper, he alleged that at the time
of his dismissal, he was "Chief Cook."46 However, in his memorandum, he
now claimed that he was an "Asst. Cook."47 The ploy is clearly aimed at
giving the impression that petitioner is merely a rank-and-file employee. The
change in nomenclature does not, however, help petitioner, as he would still
be covered by the trust and confidence rule. In Concorde Hotel v. Court of
Appeals,48 the Court categorically ruled:
Petitioner is correct insofar as it considered the nature of private
respondent's position as assistant cook a position of trust and
confidence.As assistant cook, private respondent is charged with the care of
food preparation in the hotel's coffee shop. He is also responsible for the
custody of food supplies and must see to it that there is sufficient stock in the
hotel kitchen. He should not permit food or other materials to be taken out
from the kitchen without the necessary order slip or authorization as these are
properties of the hotel. Thus, the nature of private respondent's position as
assistant cook places upon him the duty of care and custody of Concorde's
property.49 (Emphasis supplied)cralawlibrary
Of course, the ruling assumes greater significance if petitioner is the chief
cook. A chief cook naturally performs greater functions and has more
responsibilities than an assistant cook. In eo quod plus sit simper inest et
minimus. The greater always includes the less. Ang malawak ay laging
sumasakop sa maliit.
II. The evidence on record is sufficient to conclude that petitioner
committed the crime charged.
Security of tenure is a paramount right of every employee that is held sacred
by the Constitution.50 The reason for this is that labor is deemed to be
"property"51 within the meaning of constitutional guarantees.52 Indeed, as it is
the policy of the State to guarantee the right of every worker to security of
tenure as an act of social justice,53 such right should not be denied on mere
speculation of any similar or unclear nebulous basis.54 Indeed, the right of
every employee to security of tenure is all the more secured by the Labor
Code by providing that "the employer shall not terminate the services of an
employee except for a just cause or when authorized" by law. Otherwise, an
employee who is illegally dismissed "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."55
Necessarily then, the employer bears the burden of proof to show the basis of
the termination of the employee.56
In the case at bar, respondent has discharged its onus of proving that petitioner
committed the crime charged. We quote with approval the observation of the
CA in this regard:
On this matter, petitioner presents as evidence the verified statement of
security guard Aranas. Aranas positively saw the private in the act of bringing
out the purloined squid heads. Similarly, the statement of security guard
Magtangob attested to the commission by private respondent of the offense
charged. Further, the verified statement of Samson, store manager of
petitioner corporation who is in charge of all personnel, including employees
of the Yum Yum Tree Coffee Shop of which private respondent was a former
assistant cook, attested to the fact of private respondent seeking apology for
the commission of the act. Likewise, the statement of Zenaida Castro (Castro),
cashier of petitioner corporation's supermarket, Makati Branch, Ayala Center,
Makati City, confirmed that indeed the 1.335 kilos of squid heads amounting
to fifty pesos (P50.00)per kilo, had not been paid for.57
The contention of petitioner that respondent merely imputed the crime against
him because he was set to retire is difficult, if not impossible, to believe.
Worth noting is the fact that petitioner failed to impute any ill will or motive
on the part of the witnesses against him. As aptly observed by the Labor
Arbiter:
It seems unbelievable to believe that the apprehending officers up to the
Manager, Mr. Samson, were all telling a lie as what complainant wants to
portray when he alleged in his pleadings that he mentioned to the
apprehending officers [that] he has a receipt for [the squid heads] and that he
never apologized. This is understandable on his part because complainant
wants no loophole in his version. And an easy way out is to fabricate his
allegations.58
We stress that the quantum of proof required for the application of the loss of
trust and confidence rule is not proof beyond reasonable doubt. It is sufficient
that there must only be some basis for the loss of trust and confidence or
that there is reasonable ground to believe, if not to entertain the moral
conviction, that the employee concerned is responsible for the misconduct
and that his participation in the misconduct rendered him absolutely
unworthy of trust and confidence.59
It is also of no moment that the criminal complaint for qualified theft against
petitioner was dismissed. It is well settled that the conviction of an employee
in a criminal case is not indispensable to the exercise of the employer's
disciplinary authority.60
III. The penalty of dismissal is too harsh under the circumstances.
The free will of management to conduct its own business affairs to achieve its
purpose cannot be denied.61 The only condition is that the exercise of
management prerogatives should not be done in bad faith62 or with abuse of
discretion.63 Truly, while the employer has the inherent right to discipline,
including that of dismissing its employees, this prerogative is subject to the
regulation by the State in the exercise of its police power.64
In this regard, it is a hornbook doctrine that infractions committed by an
employee should merit only the corresponding penalty demanded by the
circumstance. The penalty must be commensurate with the act, conduct
or omission imputed to the employee and must be imposed in connection
with the disciplinary authority of the employer.65
For example, in Farrol v. Court of Appeals,66 the employee, who was a district
manager of a bank, incurred a shortage of P50,985.37. He was dismissed
although the funds were used to pay the retirement benefits of five employees
of the bank. The employee was also able to return the amount, leaving a
balance of only P6,995.37 of the shortage. The bank argued that under its
rules, the penalty for the infraction of the employee is dismissal. The Court
disagreed and held that the penalty of dismissal is too harsh. The Court took
note that it is the first infraction of the employee and that he has rendered
twenty-four (24) long years of service to the bank. In the words of Mme.
Justice Consuelo Ynares-Santiago, "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."67
So too did the Court pronounce in Felix v. National Labor Relations
Commission,68 Gutierrez v. Singer Sewing Machine Company,69 Associated
Labor Unions-TUCP v. National Labor Relations Commission,70 Dela Cruz v.
National Labor Relations Commission,71 Philippine Long Distance Telephone
Company v. Tolentino,72 Hongkong and Shanghai Banking Corporation v.
National Labor Relations Commission,73 Permex, Inc. v. National Labor
Relations Commission,74 VH Manufacturing, Inc. v. National Labor Relations
Commission,75 A' Prime Security Services, Inc. v. National Labor Relations
Commission,76 and St. Michael's Institute v. Santos.77
In the case at bar, petitioner deserves compassion more than condemnation. At
the end of the day, it is undisputed that: (1) petitioner has worked for
respondent for almost thirty-one (31) years; (2) his tireless and faithful service
is attested by the numerous awards78 he has received from respondent; (3) the
incident on June 18, 2001 was his first offense in his long years of service; (4)
the value of the squid heads worth P50.00 is negligible; (5) respondent
practically did not lose anything as the squid heads were considered scrap
goods and usually thrown away in the wastebasket; (6) the ignominy and
shame undergone by petitioner in being imprisoned, however momentary, is
punishment in itself; and (7) petitioner was preventively suspended for one
month, which is already a commensurate punishment for the infraction
committed. Truly, petitioner has more than paid his due.
In any case, it would be useless to order the reinstatement of petitioner,
considering that he would have been retired by now. Thus, in lieu of
reinstatement, it is but proper to award petitioner separation pay computed at
one-month salary for every year of service, a fraction of at least six (6) months
considered as one whole year.79 In the computation of separation pay, the
period where backwages are awarded must be included.80
Word of caution.
We do not condone dishonesty. After all, honesty is the best policy. However,
punishment should be commensurate with the offense committed. The
supreme penalty of dismissal is the death penalty to the working man. Thus,
care should be exercised by employers in imposing dismissal to erring
employees. The penalty of dismissal should be availed of as a last resort.
Indeed, the immortal words of Mr. Justice (later Chief Justice) Enrique
Fernando ring true then as they do now: "where a penalty less punitive would
suffice, whatever missteps may be committed by labor ought not be visited
with a consequence so severe. It is not only because of the law's concern for
the workingman. There is, in addition, his family to consider. Unemployment
brings untold hardships and sorrows on those dependent on the wage-
earner."81
WHEREFORE, the appealed Decision of the Court of Appeals
is REVERSED and SET ASIDE. The Decision of the National Labor
Relations Commission is REINSTATED with the MODIFICATION that
petitioner is granted separation pay and backwages in lieu of reinstatement.
SO ORDERED.
G.R. No. 198515               June 15, 2015
DOMINADOR MALABUNGA,* JR., Petitioner,
vs.
CATHAY PACIFIC STEEL CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
An employer may not blame its employees for losses caused by its own
disorganized system and inept personnel.
This Petition for Review on Certiorari1 assails: 1) the March 16, 2011
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 111296 nullifying
and setting aside the February 27, 2009 Decision3 of the National Labor
Relations Commission (NLRC) in NLRC CA Case No. 050647-06 and
reinstating the July 31, 2006 Decision4 of the Labor Arbiter, NLRC NCR,
Quezon City in NLRC NCR Case No. 03-02096-05; and 2) the CA's
September 5, 2011 Resolution5 denying petitioner's Motion for
Reconsideration6 of the herein assailed Decision.
Factual Antecedents
Respondent Cathay Pacific Steel Corporation is a duly registered domestic
corporation engaged in the business of manufacturing steel products. It hired
petitioner Dominador Malabunga, Jr. on April 10, 1996 as one of its
machinists.
On July 9, 2004, an inventory of respondent’s tools and items at the company
warehouse was made, and it was found that one aluminum level7 was issued to
respondent’s Fabrication Unit, and another to petitioner.8
On July 11, 2004, petitioner returned an aluminum level to the warehouse.9
On July 24, 2004, respondent served a written Notice10 upon petitioner,
charging the latter with theft of the aluminum level issued to its Fabrication
Unit and requiring him to submit a written explanation. Respondent claimed
that petitioner stole the aluminum level issued to the Fabrication Unit and
returned the same to cover up the loss of the one issued to him. In other
words, respondent accused petitioner of stealing the aluminum level issued to
the Fabrication Unit and returning the same on July 11, 2004, passing it off as
the one that was issued to him previously; by doing this, petitioner would then
cover up the loss of or failure to return the one that was previously issued to
him.11
Attached to the July 24, 2004 Notice were handwritten statements of
respondent’s warehouse foreman Salvador Narvasa (Narvasa) and
warehouseman Reymundo Manuel Baetiong (Baetiong), both executed on
July 23, 2004. In his statement,12 Narvasa claimed that on July 13, 2004, he
discovered an untarnished ("malinis") aluminum level which petitioner
apparently returned on July 11, 2004, but which was issued to the Fabrication
Unit; that upon checking his records, it was confirmed that it was petitioner
who returned the said tool; that on July 22, 2004, he called petitioner and
Nonito Tercero (Tercero) – one of respondent’s workers assigned to the
Fabrication Unit/Machine Shop who apparently discovered that what
petitioner returned on July 11, 2004 was the missing aluminum level issued to
the Fabrication Unit – to a meeting and told them that what petitioner returned
was the aluminum level issued to the Fabrication Unit; and that petitioner
remarked that if the aluminum level was lost or he stole it, the Fabrication
Unit crew should be charged for the loss of the tool which was issued to them
because they were negligent in its handling ("x x x ang sagot ni Malabunga
wala daw namang problema doon dahil kung naka issue yon sa Fabrication
kahit ninakaw niya ay [sic] at nawala sa kanila dapat daw ay ipakaltas ko sa
Fabrication crews dahil naging pabaya ang mga ito."13).
On the other hand, Baetiong claimed in his statement14 that he was on duty on
July 11, 2004 – or when petitioner returned the aluminum level; that he was
then with Rudolfo Zapanta, another warehouseman; that petitioner returned an
aluminum level; that days after, he learned that what petitioner returned was
the aluminum level issued to the Fabrication Unit; that it was Tercero who
told him that the level returned by petitioner was the one issued to the
Fabrication Unit; that Tercero came to know of this when he came to the
warehouse to borrow an aluminum level; that from an inspection of the
warehouse records, it was discovered that there were only two individuals
who borrowed tools from the warehouse – petitioner and one Carlo Alocino;
that of the two, only petitioner was able to return an aluminum level.
In his written explanation,15 petitioner insisted that the accusation against him
was false, baseless and unfair; that the aluminum level he borrowed on June
28, 2004 was the very same tool which he returned on July 11, 2004; that
when he returned the aluminum level he borrowed, the warehousemen readily
accepted the same and they did not complain about the condition thereof, nor
did they notice anything unusual – for example, that the markings thereon
were erased or defaced, or that there was any defect in the tool; that
respondent’s tools should be permanently marked or security coded in order to
prevent confusion and to forestall baseless accusations such as those being
leveled against him; and that the Fabrication Unit placed a mark on the
aluminum level which it claims to belong to it only several days after the
occurrence of the unfortunate incident. Thus, petitioner wrote in part:
July 23, 2004 – inirequest kong pag-usapan na ito sa mataas na kapulungan
dahil hindi kami magkaintindihan. Sinisisi ko ang bodegero dahil ang alam ko
may mga palatandaan yan bawat isa, kesyo nabubura daw ang inilagay nilang
palatandaan paliwanag ni Ginoong Narvasa na kaharap din si Sir STU. May
paraan yan para lagyan nang palatandaan na di agad-agad nabubura maliban
na lang kung ito ay sadyang burahin at kung sadyain man itong burahin kapag
hiniram yan na may seguridad na palatandaan. Halimbawa aluminum level #3
ang hiniram ko, nang isauli ko ito ay kapansinpansin na ito ay sinadyang
burahin. Kuwestiyonabol yon bakit ito binura, ang ibig kong sabihin hindi
basta makakalusot ang isinoling aluminum level kung ito ay may seguridad na
palatandaan.Nang isauli ko ang aluminum level kong hiniram, walang
alinlangan itong tinanggap ni Raymond16 at nakita man ni Sir STU ang hitsura
nang aluminum level na may diperensya, pwedeng sabihin ni Raymond sa
akin na bakit ganyan ang hitsura niyan dati na ba yan noong ipahiram sa yo?
Pwede ng sabihin na i-check mo dyan sa borrower slip kung may nakalagay
na damageang kabilang parte. Sir, kung may naganap na ganyang pag-uusap
kami ni Raymund hindi sana humantong sa ganito. Kung may sapat na
seguridad na palatandaan sa aluminum level at masigasig nila itong sinisiyasat
bago ito tanggapin at ipahiram sa amin walang magaganap na ganitong
problema.
Papano ko sasang-ayunan na ang isinauli kong aluminum level ay hindi akin
samantalang aminado kayo kaharap si Sir STU na walang identity o seguridad
na palatandaan ang inisyu ninyong aluminum level sa Fabrication. Nilagyan
nila ito ng pangalan kaya nila nasabi na sa kanila nga ito. Samantalang kung
may identity ito o seguridad na palatandaan nang inisyu ninyo ito sa kanila
kahit lagyan nilaito ng pangalan walang magaganap na ganitong usapin.
Kulang si Raymund sa pagsisiyasat at walang sapat na seguridad na
palatandaan nang tanggapin niya ang isinauli kong aluminum level at
makalipas ng 3 araw humiram siTercero nang aluminum level. Nang
mapasakamay niya ito nagtanong siya "Bakit nasa iyo ang aluminum level
nilang nawawala, naang ginamit niyang basehan ay may pangalan ito na
Fabrication. Ako ngayon ang binalingan ninyo dahil ako lamang ang huling
nagsauli nang aluminum level at wala nang iba o kasunod na nagsauli nito. Sa
personal kong opinion hindi yata ito MAKATARUNGAN.17 During the
course of the investigation, hearings were conducted. The written statements
of several employees were likewise taken, thus:
 1. Rodolfo Mangahas (Mangahas), of respondent’s Fabrication record of such transaction. In the immediate time-frame from its discovery,
Unit/Machine Shop, declared in his sworn statement18 that only you had physically approached the Warehouse (on July 11, 2004) to
sometime in June 2004, he learned that their aluminum level was return an aluminum level. It appeared that only you could have done so.
missing; that on July 13, 2004, he was called to the warehouse to
identify an aluminum level; that after examining said tool, he
In the argument given by Mr. Jovito Octobre, Union President, he asked what
concluded that it was the Fabrication Unit’s missing tool; and that
if the aluminum level in question was borrowed by Malabonga Jr. after the
he knew this because the missing aluminum level had a dent at the
discovery of its loss in June 2004 by Nagales. We find the reasoning
edge thereof, and the tool which he was asked to identify had the
argumentative and speculative. Malabonga Jr. made it appear that he
same dent.
borrowed the aluminum [level] for his individual use sometime in June 2004.

2. In his sworn declaration,19 Tercero said that sometime in June

In response to this Mr. Salvador Narvasa, Warehouse Section Head showed a
2004, he learned that their aluminum level was missing; that on
document dated March 23, 2004. It was an inventory of items issued earlier
July 13, 2004, he went to the warehouse to borrow an aluminum
than March 23, 2004 which were due for return to the Warehouse. It instructed
level; that he was given one; that what was given to him turned out
employees concerned to return to the Warehouse items issued to them within
to be the Fabrication Unit’s missing aluminum level; and that he
seven (7) days, otherwise deductions will be made on their wages
knew this because the word "Fabrication" was engraved thereon;
corresponding to the value of the items. Dominador Malabonga[,] Jr. was
and that thereafter he informed Dennis Zapanta, another
included in the list and the document alleged that the aluminum level issued to
warehouseman, of his discovery.
him was number 11.

3. Antonio Nagales (Nagales), welder/fabricator at the Fabrication

At this instance, it is recalled that Malabonga Jr. averred that he borrowed the
Unit, declared in his sworn statement20 that sometime in June 2004,
aluminum level issued to him in the middle of June 2004. But this was not so.
he noticed that the unit’s aluminum level was missing; that on July
The one issued to him was borrowed by him in early March 2004 or earlier,
13, 2004, he was called to the warehouse to identify an aluminum
and this was merely re[-]issued to him after the release of the notice dated
level; and that he examined the said tool that was shown to him,
March 23, 2004. Mr. Narvasa vouched for the authenticity of the document
and he concluded that it was the Fabrication Unit’s missing
and Malabonga Jr. himself did not contest it. So then Malabonga Jr. was not
aluminum level as it had a dent at the edge which he knew was
forthright in his testimony in the investigation when he averred that he
caused by its having fallen when he used the same in the past.
borrowed the aluminum level issued to him personally in June 2004. Was this
a lapse of memory or intended to obscure a fact and mislead the investigating
On December 2, 2004, respondent issued its Decision21 suspending petitioner panel in the proper evaluation of the case? Mr. Narvasa, the Warehouse
for a period of 30 days and requiring him to return the value of the lost Section Head, averred to all present in the investigation that there is no
aluminum level, or ₱280.00, through salary deductions. The decision stated aluminum level marked 11 (eleven) in the custody of the Warehouse.
that petitioner was charged with theft of the Fabrication Unit’s aluminum
level; that on July 11, 2004, petitioner returned to the warehouse an aluminum
With the above, we find that the decision was based on established evidence
level upon which was engraved the word "FABRICATION" and which had a
both testimonial and documentary. Hence, the decision of Mr. Valerio is
dent on the edge thereof; that Tercero discovered the theft when he borrowed
affirmed as to suspending Malabonga Jr. for 30 days and requiring him to pay
the aluminum level from the warehouse; that upon investigation, it was
Php280.00 for the acquisition price of the aluminum level through payroll
learned that petitioner stole the Fabrication Unit’s aluminum level in order to
deduction. No further appeal will be entertained by this Office.26
pass it off as the one which he borrowed previously; that petitioner’s written
explanation was insufficient to subvert the circumstantial evidence which
points to him as the perpetrator of the theft; that petitioner is guilty of serious Thus, petitioner was suspended without pay from January 10, 2005 up to
misconduct under Article 282 of the Labor Code22 and "Patakaran Bilang February 13, 2005. Thereafter, he returned to work.
26"23 of the company rules and regulations relative to theft of company
property or employee/visitor belongings; and that on account of petitioner’s
Ruling of the Labor Arbiter
years of service and the small amount involved, the company decided to
impose the penalty of suspension and not dismissal.
On March 2, 2005, petitioner filed a Complaint for illegal suspension before
the NLRC NCR, Quezon City, docketed as NLRC NCR Case No. 03-02096-
On January 13, 2005, petitioner – through the company union (CAPASCO) –
05. In his Position Paper,27 petitioner argued that he should not be blamed for
filed a Motion for Review24 seeking a reconsideration of the above Decision,
the alleged loss of the Fabrication Unit’s aluminum level; that respondent’s
arguing that there is no convincing evidence to link petitioner to the theft of
warehousemen were to blame for their failure to maintain a system that would
the Fabrication Unit’s aluminum level except for Narvasa’s statement that
clearly indicate the identity of borrowed tools and items from the warehouse;
what petitioner returned was the aluminum level issued to the Fabrication
that in order to conceal their negligence and lack of a system of checking and
Unit.
verifying tools and items in the warehouse, the warehousemen instead passed
the blame on to petitioner; that if he was being charged with the alleged theft
Respondent conducted a hearing on the motion for review, and on February of the Fabrication Unit’s aluminum level – which was recovered anyway –
18, 2005, it issued through its Human Resource Manager LeonardoA. Visorro, then he should not have been suspended and made to pay for the value of the
Jr. a resolution on petitioner’s motion for review.25 It held: recovered item; that the aluminum level he returned was not the Fabrication
Unit’s issued tool; that when he returned the tool on July 11, 2004, the tool
had no markings or defects which would indicate that it was the allegedly lost
At its core, you questioned the findings of guilt declared in the decision of Mr.
aluminum level issued to the Fabrication Unit; and that the word "Fabrication"
Rolando Valerio, Administrative Officer – WRM. It is your contention that
was engraved on the tool only later on, or after he returned the same on July
guilt could not be established for lack of witness to the commission of the act
11, 2004. Thus, petitioner prayed that his suspension without pay from
of theft. The event by itself precludes the presence or existence of witness. But
January 10, 2005 up to February 13, 2005 be declared illegal and that
the decision of Mr. Valerio used the sequence of events and circumstantial
respondent be made to pay his salary during the period, based on his daily rate
evidence in coming up with a finding of guilt. The finding was premised on
of ₱357.85. He likewise prayed for the recovery of attorney’s fees equivalent
the testimonies of witnesses who shed light on the following sequence of
to 10 per cent(10%) of the total award.
events:

In its Position Paper,28 respondent claimed that petitioner’s suspension was

1. June 2004 – discovery of loss of aluminum level issued to the
"Fabrication Unit". Discovery made by Antonio Nagales,
Welder/Fabricator, but not reported to Warehouse.
2. July 9, 2004 – Warehouse made paper inventory of aluminum
levels and other items. Record stood that one (1) aluminum level
was issued to "Fabrication" unit and one (1) to Dominador
Malabonga[,] Jr.
3. July 11, 2004 – Malabonga Jr. returned one (1) aluminum level
to Warehouse.
4. July 13, 2004 – Jose Tercero, Welder/Fabricator, noticed the
presence of one (1) aluminum level at the Warehouse marked with
the engraving "Fabrication", and a small dent showing that the said
item was hit by a hard object.
5. Thereafter – investigation on the issue proceeded.
Investigation conducted clearly showed that the aluminum level with marking
of "Fabrication" was not returned by personnel of the Fabrication. There is no
valid; that based on the written statements of the employees and other
evidence, petitioner was found guilty of theft of company property, for
returning an aluminum level "which was issued to the Fabrication unit and not
the one issued to him;" that petitioner was the one who returned the missing
aluminum level to the warehouse; and that the aluminum level returned by
petitioner was "positively identified by three employees as the particular level
issued to the Fabrication unit which was reported missing as of June 2004."
Respondent concluded that the evidence against the petitioner was sufficient
to satisfy the requirement of substantial evidence and warrant his suspension,
and thus it prayed for the dismissal of the complaint for illegal suspension.
In a Reply29 to respondent’s Position Paper, petitioner contended that the
warehousemen and the Fabrication Unit workers conspired against him to
cover up the loss of the unit’s aluminum level sometime in June2004, which
was not reported at all to the warehouse; that the warehousemen were
negligent in not adopting a system that would enable the proper identification
of tools and items borrowed; that as a result of the lack of such a system, he
was falsely accused of theft; that in fact, there was no evidence to prove that
he stole the unit’s aluminum level; and that on the other hand, there could be
no theft of the unit’s aluminum level since, as far as everyone is concerned, it
was never lost at all since it was never reported missing by the unit.
In a Rejoinder30 to petitioner’s Reply, respondent argued that evidence existed
in the form of inventory reports and the written statements of witnesses which
point to petitioner as the culprit who took the Fabrication Unit’s aluminum
level; that the aluminum level issued to petitioner had not been accounted for
either; and that since he violated company policy against the unlawful taking
of company property, he should be punished, except that instead of dismissal
as stated in the company rules, he was merely suspended.
In a Rejoinder,31 petitioner claimed that respondent’s Position Paper did not
comply with the requirement of certification against forum-shopping and that
it did not contain the required board resolution or certification authorizing
respondent’s counsel to sign for and in behalf of respondent.
On July 31, 2006, the Labor Arbiter issued his Decision dismissing
petitioner’s complaint for illegal suspension. The Labor Arbiter held that
substantial evidence – in the form of written statements of respondent’s
witnesses positively identifying petitioner as returning the Fabrication Unit’s
aluminum level and not the one issued to him – warranted the imposition of
the penalty of suspension. Thus, the Labor Arbiter decreed:
WHEREFORE, premises considered, the complaint is hereby DISMISSED
for lack of merit.
SO ORDERED.32
Ruling of the National Labor Relations Commission
Petitioner appealed to the NLRC, where the case was docketed as NLRC CA
Case No. 050647-06. On February 27, 2009, the NLRC issued its Decision,
declaring as follows:
We find merit in the appeal.
Anent the first ground for appeal, complainant claims that the Labor Arbiter
erred in giving probative weight to the affidavits submitted by respondent
supporting the charge of theft against him. Complainant asserts that the said
affidavits are self-serving evidence having been executed by the employees
who are always submissive to the wishes of the respondent. We agree. Indeed,
aside from the admitted fact that they are all employees of respondent, a
perusal of the affidavits of Rodolfo Mangahas, NonitoTercero and Antonio
Nagales (Annexes "H", "I" and "J", Respondent’s Position Paper) disclose[s]
that they are seriously inadequate to support a conclusion that it was the
complainant who took the lost aluminum level. All of them merely reinforce
the fact that an aluminum level had been lost and that the same was
discovered to have been in the warehouse when Nonito Tercero borrowed an
aluminum level and was given by the warehouseman Dennis Zapanta, by
chance, the lost aluminum level. Nothing therein states that the said aluminum
level was taken by complainant.
Apparently, respondent relied heavily on the statement of the warehouseman
pointing to the complainant as the one who returned to him the lost aluminum
level. But there is nothing on record, except for such statement, that the item
returned by complainant is the same aluminum level that was lost. Even
assuming that it was the complainant who returned the aluminum level 24"
that was discovered subsequently as the very aluminum level 24" that had
been lost in the fabrication unit, said fact alone does not create a presumption
that it was also the complainant who had stolen the same. For it is highly
inconceivable if not completely absurd, for complainant, if he was indeed
guilty of the crime of theft, to return the very object of the crime. Clearly, this
theory defies logic and ordinary human experience.
What is clear from the records is the admitted fact that the warehouseman, as
correctly pointed out by complainant, failed to immediately call the attention
of the latter upon the receipt of his borrowed item if there was indeed a
discrepancy between the level he borrowed, and [the one] he returned. It took
the warehouseman a few days to declare the item returned by complainant as
different from [the one] he borrowed. Thus, we quote with approval
complainant’s argumenton this score:
"21. If the Warehouseman was only doing his duty well by recording the true
identity of the item borrowed by the complainant, it could have been easily
determined whether or not the aluminum level 24" borrowed by the
complainant on June 28, 2004 was the same aluminum level that was
previously missing from the fabrication department. Unfortunately, someone
is passing the blame to the complainant for [him] to avoid complication
arising from [his] own serious negligence." (Memorandum of Appeal)
Further, We also find equally unacceptable the Labor Arbiter’s explanation in
giving the statements of the warehouseman credence and weight on the
presumption that he was not impelled with malice or ill-motive in declaring
so. This finding further defies logic. It should be noted that the lost aluminum
level 24" was found in the possession of the warehouseman three days after
complainant returned his borrowed item. To be sure, the warehouseman, as a
matter of self-preservation, would do anything to pass the blame to somebody
else as pointed out by the complainant. Otherwise, he would be held
answerable by the company for having been caught in possession of the lost
item. To our mind, this fact invariably renders his statement highly suspicious.
Thus, the foregoing doubts in the evidence submitted by respondent should be
resolved against [it]. After all, it is a cardinal rule in labor cases, that in case of
doubts in the evidence presented by the parties, the doubts should be resolved
in favor of labor.
WHEREFORE, judgment is hereby rendered, REVERSING and SETTING
ASIDE the assailed Decision, and a new one issued finding the penalty of
suspension imposed upon the complainant without factual basis. Hence,
respondent Cathay is hereby ordered to pay complainant his salary
commensurate to his one month suspension.
SO ORDERED.33
Respondent moved for reconsideration,34 but in a July 28, 2009
Resolution,35 the NLRC denied the motion.
Ruling of the Court of Appeals
In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP
No. 111296, respondent sought a reversal of the NLRC Decision, arguing that
the latter committed grave abuse of discretion and gross error in exonerating
petitioner from the charge of theft and in nullifying his suspension. It insisted
that petitioner "took the aluminum level issued to the fabrication unit to make
it appear that he has already returned the same aluminum level 11 issued to
him in order to escape liability for the level issued to him."
On March 16, 2011, the CA issued the assailed Decision containing the
following decretal portion:
WHEREFORE, the petition is GRANTED. The February 27, 2009 decision of
the public respondent NLRC in NLRC CA CASE No. 050647-06 is
NULLIFIED and SET ASIDE. The July 31, 2006 decision of the Labor
Arbiter in NLRC NCR CASE No. 03-02096-05 is REINSTATED. SO
ORDERED.37
The CA held that there was reasonable ground to believe that petitioner was
responsible for the theft of the aluminum level assigned to the respondent’s
Fabrication Unit. It sustained the Labor Arbiter’s findings that based on the
statements of Mangahas, Tercero and Nagales – workers at the Fabrication
Unit – and the written explanations of Narvasa and Baetiong, it was
established that what petitioner returned to the warehouse on July 11, 2004
was the Fabrication Unit’s aluminum level and not the one issued to him; that
the aluminum level he returned contained the engraving "Fabrication" and a
dent which was familiar to the Fabrication Unit’s workers; and that the
inventory records would show that at the time, petitioner was the only one
who returned an aluminum level to the warehouse.
The CA added that petitioner’s defense of alibi and denial could not be given
weight, in the face of positive identification by the other witnesses that what
he returned on July 11, 2004 was the Fabrication Unit’s aluminum level, since
it was engraved with "Fabrication" and had the familiar dent.
The appellate court further declared:
Evident from the record is the NLRC’s strained attempt at ratiocination when
it concluded that the warehouseman, as a matter of self-preservation, would do
anything to pass the blame to somebody else or risk being held answerable by
the company for having been caught in possession of the lost item. Being the
custodian of all the tools and equipment of Cathay, it is the warehouseman’s
duty to issue and receive the tools/equipments requested and returned by the
workers. If a worker returns a tool, it would logically be in [the] possession of
the warehouse section. The NLRC thus erred in holding the warehouse section
liable just because it was in possession of the aluminum level when it was
clearly its responsibility to have custody and possession thereof.
The NLRC likewise manifestly erred in ruling that "it is highly inconceivable
if not completely absurd for Malabonga, if he was indeed guilty of the crime
of theft, to return the very object of the crime." In so ruling, it disregarded
Cathay’s finding that the "Fabrication" mark on the aluminum level was small
and the dent thereon was hardly noticeable such that a person who was
unfamiliar with them would not know that the level was the one issued to the
Fabrication Unit. x x x38
Petitioner filed a motion for reconsideration, but the CA denied the same in its
September 5, 2011 Resolution. Hence, the present Petition.
Issue
Petitioner submits that –
THE COURT OF APPEALS ERRED IN VACATING THE DECISION AND
RESOLUTION OF THE NATIONAL LABOR RELATIONS COMMISSION
FINDING RESPONDENT CORPORATION GUILTY OF ILLEGAL
SUSPENSION.39
 Petitioner’s Arguments
Praying that the assailed CA dispositions be set aside and that the NLRC’s
February 27, 2009 Decision in NLRC CA Case No. 050647-06 be reinstated
instead, petitioner essentially maintains in the Petition and Reply40 that the
evidence does not support respondent’s claim that he is guilty of theft and that
what he returned was the Fabrication Unit’s aluminum level; that the
witnesses’ statements are biased, self-serving and intended to exonerate the
declarants from liability for their negligence and failure to secure the
Fabrication Unit’s aluminum level both in the warehouse and in the
Fabrication Unit, thus making him a mere scapegoat; and that the witnesses’
statements are doubtful, as they are uniform and were executed on the same
date and notarized by the same notary public.
Respondent’s Arguments
In its Comment,41 respondent maintains that petitioner raises issues of fact
which are beyond the purview of a petition for review on certiorari; that what
petitioner seeks is a review of the whole evidence and the credibility of the
witnesses against him, which are clearly issues of fact and not law; that there
is no reason to disturb the CA Decision since there is nothing wrong
therewith, and a finding of grave abuse of discretion against the NLRC was
justified; and that substantial evidence exists to warrant a finding that
petitioner is guilty of theft.
Our Ruling
The Court grants the Petition.
In labor cases, issues of fact are for the labor tribunals to resolve, as this Court
is not a trier of facts. However, in exceptional cases, this Court may be urged
to resolve factual issues: "[1] where there is insufficient or insubstantial
evidence to support the findings of the tribunal or the court below; or[2] when
too much is concluded, inferred or deduced from the bare or incomplete facts
submitted by the parties[;] or, [3] where the [Labor Arbiter] and the NLRC
came up with conflicting positions.42 "When there is a divergence between the
findings of facts of the labor tribunals and the CA, there is a need to refer to
the record."43
The instant Petition presents not only a situation where the Labor Arbiter, the
NLRC and the CA differ in their assessment of petitioner’s case, but also one
where the evidence miserably fails to support a finding that petitioner
committed theft. The Labor Arbiter and the CA – and the NLRC as well –
ignored one material piece of evidence which should have exonerated
petitioner from the theft charge.
Respondent claims that what petitioner returned to its warehouse on July 11,
2004 was the Fabrication Unit’s aluminum level. This is based on the identical
claim of Fabrication Unit workers – Mangahas, Tercero, and Nagales – that
they discovered their lost aluminum level upon which was engraved the word
"Fabrication" and had the familiar dent which, based on warehouse records,
turned out to be that which was returned by petitioner.
However, the warehousemen who are in custody of the respondent’s tools and
items tell a different story. Thus, in his written statement, Narvasa declared
among others that –
Nais ko pong ipabatid sa inyongkaalaman ang pangyayari ukol sa nawawalang
aluminum level na naka-issue (sa) Fabrication. Martes po ng umaga July 13,
2004 tinawag ako ni Dennis Zapanta para kausapin si N. Tercero. Nakita daw
ni N. Tercero ang nawawala nilang a. level sa bodega. Nang aking alamin
kung alin sa mga level ang kanyang tinutukoy ay walang duda na sa kanila
nga naka-issue. Tinanong ko si Dennis kung saan nanggaling ang level na
iyon dahil yong araw lang na yon ko nakita sa loob ng bodega. Malinis ang
level at ibang-iba sa mga pinahihiram ng bodega. Ang sagot niya si
Malabonga daw ang nagsauli sa kanila nang araw ng Linggo July 11, 2004.
Tinignan ko ang record kung sino ang mga posibleng nagsauli nito at
napatunayan na si Malabonga lang ang nagsauli niyon.44 (Emphasis and word
in parentheses supplied)
In other words, Narvasa positively declared that what petitioner returned, and
what he and co-warehouseman Dennis Zapanta actually received from
petitioner, was an untarnished (malinis) and unique aluminum level. In other
words, it did not contain any engraving nor bear any dent, damage or scratch.
This directly contradicted the claims of the Fabrication Unit workers.
An examination of the statement of another warehouseman,
Baetiong,45 revealed that he had no personal knowledge at all that what
petitioner returned was the Fabrication Unit’s aluminum level; he claimed to
have learned of this fact only from Tercero, who came to borrow an aluminum
level on July 13, 2004. Upon being given one, Tercero apparently noticed that
it was the Fabrication Unit’s aluminum level, and he told the warehousemen
of this fact. Based on Tercero’s unilateral claim, the warehousemen concluded
that what petitioner returned was indeed the Fabrication Unit’s aluminum
level.
If it is true that the Fabrication Unit’s aluminum level was supposedly lost
sometime in June 2004 which loss was never reported, and subsequently
discovered by Tercero to be in the warehouse all along when he went there to
borrow one on July 13,2004, then it could not be the case that said aluminum
level – which contained an engraving of the word "Fabrication" and had a dent
– was the one petitioner returned on July 11, 2004. The declaration of
warehouseman Narvasa was categorical; he and his colleague Dennis Zapanta
received from petitioner an untarnished aluminum level which had no dent or
damage whatsoever. This can only mean that petitioner returned the aluminum
level that was originally issued to him as stated in the warehouse records, and
not the Fabrication Unit’s aluminum level, since it did not contain an
engraving, and had no dent.
With the foregoing finding, the only logical conclusion that may be arrived at
is that petitioner did not commit theft of the Fabrication Unit’s aluminum
level.
Even if it were to be assumed for the sake of argument that what petitioner
returned was indeed the Fabrication Unit’s aluminum level, still there could be
no valid basis to charge him with theft. As respondent and its witnesses
themselves admitted, there was no official report of loss of the Fabrication
Unit’s aluminum level; the workers at said unit concealed the loss, and
declared it so and admitted it only when Tercero supposedly discovered that
what he had borrowed on July 13, 2004 was the very same aluminum level
which was purportedly missing since June 2004. In other words, the aluminum
level was declared lost at the same time it was found, in which case– using
common sense and logic – there could be no loss at all. As far as respondent is
concerned, the Fabrication Unit’s aluminum level was never lost. More to the
point, we cannot rely on the statements of the Fabrication Unit workers
Mangahas, Tercero, and Nagales; their failure to report the loss of their unit’s
aluminum level makes their statements not only highly doubtful and self-
serving, but unnecessary and uncalled for – an afterthought not worth
considering.
There are many ways to secure company property from pilferage and
theft.1âwphi1 As petitioner himself suggested, security features could be
incorporated in each item or property of the employer. An effective and
efficient system of property identification, recording and monitoring may be
adopted; more efficient and responsible personnel may be hired. In
respondent’s case, it is quite clear that its warehousemen do not have an
efficient system of monitoring and recording the items or tools being brought
in or out of its warehouse. No codes or identifying marks were assigned to the
items and tools to facilitate their easy identification; respondent’s
warehousemen cannot identify the tools and items within the warehouse, and
they readily believe the declarations and statements of the workers – thus
giving out the impression that the warehousemen are not even familiar with
the tools in their custody. These are just a few observations, but they
nonetheless indicate that respondent adopts a poor system of recording,
monitoring and accountability within its warehouse, and its warehousemen
cannot be relied upon.
Faced with the limitations in respondent’s system, this Court cannot sustain its
view that petitioner is guilty of theft of company property. It could simply be
that due to the ineffective system within the warehouse and its inefficient
personnel, there was a mix-up of records; worse, it could be that tools and
items within the warehouse were misplaced or lost due to its irresponsible
personnel. If any, respondent is alone responsible; it cannot conveniently put
the blame on its employees in order to make up for or cover its losses caused
by its own disorganized system and inept personnel.
From the foregoing, there are serious doubts in the evidence on record as to
the factual basis of the charges against petitioner. These doubts shall be
resolved in (his) favor in line with the policy under the Labor Code to afford
protection to labor and construe doubts in favor of labor. The consistent rule is
that if doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter.46 (Word in
parentheses supplied)
WHEREFORE, the Petition is GRANTED. The assailed March 16, 2011
Decision and September 5, 2011 Resolution of the Court of Appeals in
CAG.R. SP No. 111296 are REVERSED and SET ASIDE, and the February
27, 2009 Decision of the National Labor Relations Commission in NLRC CA
Case No. 050647-06 is REINSTATED and AFFIRMED.
SO ORDERED.
G.R. No. 160123, June 17, 2015
CENTRO PROJECT MANPOWER SERVICES
CORPORATION, Petitioner, v. AGUINALDO NALUIS AND THE
COURT OF APPEALS, Respondents.
DECISION
BERSAMIN, J.:
In the interpretation of their provisions, labor contracts require the resolution
of doubts in favor of the laborer because of their being imbued with social
justice considerations. This rule of interpretation is demanded by the Labor
Code1 and the Civil Code.2redarclaw
Both the Labor Arbiter3 and the National Labor Relations Commission
(NLRC)4 resolved the doubt in favor of the employer when it held that
respondent Aguinaldo Naluis (Naluis) had been properly repatriated, and,
consequently, not illegally dismissed. However, on April 23, 2009, the Court
of Appeals (CA) set aside their resolutions, and ruled to the contrary.5 Hence,
this appeal by the employer.
Antecedents
Petitioner Centro Project Manpower Services Corporation (Centro Project), a
local recruitment agency, engaged Naluis to work abroad as a plumber under
Pacific Micronesia Corporation (Pacific Micronesia) in Garapan, Saipan, in
the Commonwealth of the Northern Mariana Islands (Northern Marianas). The
work was covered by the primary Employment Contract dated March 11,
1997,6 whereby his employment would last for 12 months, and would
commence upon his arrival in Northern Marianas. On June 3, 1997, the
Department of Labor and Immigration of Northern Mariana Islands issued an
Authorization for Entry (AE)7 in his favor. On September 3, 1997, Centro
Project and Naluis executed an addendum to the primary Employment
Contract8 to make the start of his employment effective from his departure at
the point of origin instead of his arrival in Northern Marianas.
Naluis left for Northern Mariana on September 13, 1997,9 the date of his
actual deployment, and his employment continued until his repatriation to the
Philippines on June 3, 1998 allegedly due to the expiration of the employment
contract. Not having completed 12 months of work, he filed a complaint for
illegal dismissal against Centro Project.
The Labor Arbiter found that Centro Project had been justified in repatriating
Naluis, and accordingly dismissed the complaint, to wit:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
This Office finds the repatriation of complainant to the Philippines NOT A
DISMISSAL BUT AS A RESULT OF THE LAWS AND REGULATIONS
OF THE COMMONWEALTH OF NORTHERN MARIANA ISLANDS AS
PROVIDED FOR IN THE AUTHORIZATION FOR ENTRY.
xxxx
Although complainant has not served the twelve (12) months period stated in
the Contract of Employment, the Employer has no other alternative but to
repatriate complainant otherwise, the employer could be liable for violation of
the Commonwealth’s Immigration Rules x x x.
xxxx
WHEREFORE, in view of the foregoing, the instant complaint is
hereby DISMISSED lack of merit.10
Naluis appealed to the NLRC, which found that Centro Project had no choice
but to terminate the employment contract because the AE issued by the
Department of Labor and Immigration of Northern Mariana Islands had
limited his stay in Northern Marianas, and that his employment had expired on
May 13, 1998 as explicitly provided in the employment contract executed
between him and Centro Project. The NLRC thus
disposed:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, in view of the foregoing, this Commission resolves to affirm
the Decision of the Labor Arbiter and dismiss the instant appeal for lack of
merit.11redarclaw
Naluis assailed the decision of the NLRC in the CA.
On April 23, 2009, the CA promulgated its judgment setting aside the decision
of the NLRC, holding that the AE did not have any effect on Naluis’
employment status; that the AE did not limit his stay in Northern Marianas;
and that, consequently, Centro Project had breached the contract by ordering
his repatriation. The CA decreed as follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
WHEREFORE, the petition is GRANTED. The assailed decision
is REVERSED and SET ASIDE, and a new one entered DIRECTING the
private respondent to pay the petitioner the following:LawlibraryofCRAlaw
a) Four (4) months salary corresponding to the unpaid portion of his contract
at $520.00 (Five Hundred Twenty U.S. Dollars) per month;
b) Guaranteed overtime pay at an average of thirty (30) to forty (40) hours
per month in excess of straight eight (8) hours regular work schedule
corresponding to the unexpired portion of four (4) months in the contract;
c) Placement fee of Thirteen Thousand Five Hundred (13,500.00) Pesos;
d) Legal holiday equivalent to ten (10) days with pay;
e) Twelve (12) days vacation leave with pay; and
f) Attorney’s fees of Ten Thousand Pesos (P10,000.00).
SO ORDERED.12
Issues
Hence, this appeal, whereby Centro Project submits that the AE categorically
fixed the period of stay of Naluis; and that even the primary Employment
Contract clearly set the date for its expiration.
Naluis counters that the handwritten date of May 3, 1998 was inserted in the
primary Employment Contract only after he had signed it, as distinguished
from all other stipulations that had been typewritten.
Did the expiration date contained in the AE issued by the Department of
Labor and Immigration of Northern Mariana Islands validly cut short Naluis’
stay and thus justified the pre-termination of his work?
Ruling of the Court
The appeal lacks merit.
There is no dispute that Naluis did not complete the 12-month period
stipulated in the primary Employment Contract. However, the NLRC
concluded that Centro Project had been justified in repatriating him because
the AE had stipulated a limit of stay for him. The NLRC thereby relied on a
loose interpretation of the AE and the primary Employment Contract.
In finding that the NLRC committed grave abuse of discretion amounting to
lack or excess of jurisdiction in so concluding, the CA observed
that:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
x x x the document upon which the employer predicated its action to terminate
and repatriate the petitioner i.e., the Authorization of Entry issued by the
immigration authorities of CNMI does not appear to limit the employee’s stay
in the said country. The authorization upon its face simply shows that the
person to whom it is issued should enter CNMI not later than May 13,
1998 as a general rule or, if he is an employee, not later than three months
from its issuance. We submit that an authorization of entry is different from a
limitation of stay in the country visited, which is not indicated in any of the
documents submitted by the respondent.13
We concur with the CA. The burden of proof to show that the employment
contract had been validly terminated pertained to the employer.14 To discharge
its burden, the employer must rely on the strength of its own evidence.
However, Centro Project’s reliance on the AE limiting Naluis’ stay was
unwarranted, and, worse, it did not discharge its burden of proof as the
employer to show that Naluis’ repatriation had been justified.
The recitals of the AE for Naluis were as follows:15
ChanRoblesVirtualawlibrary
This letter allows authorized entry into the Commonwealth of the Northern
Mariana Islands for Aguinaldo S. Naluis.
ChanRoblesVirtualawlibrary
AGUINALDO S NALUIS
Expires Gender Birthdate Citizenship
5/13/98 M 4/11/57 PHL
Employer: PACIFIC MICRONESIA CORPORATION
Occupation
PLUMBER   
:
Issue
Class:
  Date  
706K
6/3/97
Wage
Wage Rate:
  Type:  
$3.25
HOURLY
You are hereby notified of the following requirements:LawlibraryofCRAlaw
1. Present this Authorization for Entry letter to an Immigration Officer
immediately upon arrival at your designated port of entry into the
Commonwealth of the Northern Mariana Islands.
xxxx
3. The Entry Permit, if issued for the purpose of employment, expires
automatically upon termination of such employment and must be
surrendered to your employer.
xxxx
5. You must enter the CNMI within 90 days of issuance of this
“Authorization for Entry” letter if you are entering for the purpose of
employment. (emphasis supplied)
The AE thereby clearly indicated that the date of May 13, 1998 appearing
thereon referred only to the expiration of the document itself. Centro Project
stretched its interpretation to bolster its contention that May 13, 1998 was the
limit of stay for Naluis in Northern Marianas. The interpretation is
unacceptable, for item number 3 of the AE even recognized any employment
period if the AE was issued for the purpose of employment. This meant that
contrary to the position of Centro Project there was no clear and categorical
entry in the AE to the effect that the AE limited his stay in Northern Marianas.
It is fundamental that in the interpretation of contracts of employment, doubts
are generally resolved in favor of the worker.16It is imperative to uphold this
rule herein. Hence, any doubt or vagueness in the provisions of the contract of
employment should have been interpreted and resolved in favor of
Naluis.17redarclaw
Although Centro Project alleges that it feared that Naluis would eventually be
declared an illegal alien had he not been repatriated, the records do not
support the allegation. For one, Centro Project did not demonstrate that its fear
was justified at all. On the contrary, its fear was, at best, imaginary because it
did not submit evidence showing that the Northern Marianas authorities had
ever moved to declare him an illegal alien. Moreover, had Centro Project been
aware of any likelihood of him being soon declared an illegal alien, it could
have easily advised him thereof, and explained the situation to him in due
course. Yet, he was not at all informed of the likelihood.
Denying its participation in the fixing of the expiration date, Centro Project
argues that it was the Philippine representative in Northern Marianas who had
inserted by hand the date of expiration in the Employment Contract.
The argument has no basis.
Firstly, Centro Project’s allegation on the expiration date being merely
inserted by the Philippine representative in Northern Marianas was not
substantiated with credible proof. It supported its allegation by alluding to the
fact that the signature of the person who had verified the employment contract
was similar to the handwritten insertion made on the blank space of the
employment contract. That was not enough, however, in view of the basic rule
that mere allegation is not evidence and is not equivalent to proof.18Hence, the
allegation, an essentially self-serving statement, was devoid of any evidentiary
weight.
And, secondly, even assuming that Centro Project did not have any
participation in fixing the expiration date, it did not amend the employment
contract despite being fully aware that the term of 12 months was clearly
indicated as the period of Naluis’ work. The primary Employment Contract
was sent for approval to the principal employer abroad, as well as to the
immigration authorities of the Philippines and Northern Marianas. In such
circumstances, Centro Project could not but know that the period had been
fixed by the immigration authorities of Northern Marianas prior to his actual
deployment. Thus, Centro Project was in bad faith in not taking any action
when the Philippine immigration authorities supposedly inserted the
handwritten date of expiration of the contract. In fact, the addendum to the
employment contract, approved by the POEA on September 3, 1997, which
categorically stated that “the term of this contract shall be for a period of
Twelve Months,”19 was executed even before he left for Northern Marianas on
September 13, 1997, and after the AE had already been issued by Northern
Marianas on June 3, 1997. Centro Project could have easily apprised him of
the change. Also, the necessary amendments to the primary contract or an
addendum thereto could have been easily made prior to his deployment.
Undoubtedly, the term of the contract was 12 months. The AE could not be
used as a valid cause for pre-terminating the employment of Naluis. His
repatriation was clearly a breach of the contract of employment, for which the
CA awarded to him the following money claims, to wit:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
a) Four (4) months salary corresponding to the unpaid portion of his contract
at $520.00 (Five Hundred Twenty U.S. Dollars) per month;
b) Guaranteed overtime pay at an average of thirty (30) to forty (40) hours
per month in excess of straight eight (8) hours regular work schedule
corresponding to the unexpired portion of four (4) months in the contract;
c) Placement fee of Thirteen Thousand Five Hundred (13,500.00) Pesos;
d) Legal holiday equivalent to ten (10) days with pay;
e) Twelve (12) days vacation leave with pay; and
f) Attorney’s fees of Ten Thousand Pesos (P10,000.00).
We affirm the awards except those for the guaranteed overtime pay and legal
holiday pay. Under Section 1020 of Republic Act No. 8042, the unjustly
terminated employee is entitled to the full reimbursement of his placement fee
with interest at 12% per annum, plus his salaries for the unexpired portion of
his employment contract. We further allow the payment of vacation leave pay
and sick leave pay because the employment contract21 stipulated 12 days
vacation leave with pay and seven days sick leave with pay that could be
taken after one year. With his premature repatriation being unjustified, Naluis
should receive his vacation and sick leave pays, but not the guaranteed
overtime pay and legal holiday pay because the employment contract did not
extend such benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated on April 23,
2003, subject to the DELETION of the awards for guaranteed overtime pay
and legal holiday; and ORDERS the petitioner to pay the costs of suit.
SO ORDERED.cralawlawlibrary
G.R. No. 207354
CHARLIE HUBILLA, JOEL NAYRE, NENITA A. TAN, PEDRO
MAGALLANES, JR., ARNEL YUSON, JANICE CABATBAT, JUDY
PAPINA, VANESSA ESPIRITU, NOEMI YALUNG, GENALYN
RESCOBILLO, FIDEL ZAQUITA, NYL B. CALINGASAN, JANICE
MIRADORA, EVANGELINE CHUA, ROSCHELLE MISSION,
MELANIE BALLESTEROS, MARILYN BACALSO, RENALYN
ALCANTARA, FEDERICO B. VIERNES, CHRISTOPHER B. YARES,
ANA MARY R. AGUILAR, MELANIE SAN MARCOS, EMERLOVE
MONTE, CHONALYN LUCAS, THERESA MALI COSIO, MA. FE
CERCARES, RUBELYN R. CLARO, JONALYN M. YALUNG, MARY
ANN V. MACANAG, RESLYN L. FLORES, CRISTEL C. ROQUE,
TERESA G MUNAR, SUSAN A. DELA CRUZ, SHEENA KAY P. DE
VERA, ARLENE R. ANES, GINA B. BINIBINI, CHERINE V.
ZORILLA, MA. CRISTINE MAGTOTO, FRANCIS MARIE O. DE
CASTRO, VANESSA R. ESPIRITU, RACHELLE V. QUISTORIA,
JULIE ANN ILAN, ANGELIE F. PANOTES, ANABEL PAYOS,
MELISSA M. PERLAS, MELANIE B. BERSES, BARVI ROSE
PERALTA, RESIE AQUE, ROWENA RIVERA, MELANIE M. DY,
CHERYLYN CORO, RANELYN SUBONG, ANGELA SUBILLAGA,
THELMA BARTOLABAC, MICHELLE C. ILAGAN, PRECIOUS MAE
DE GUZMAN, MARY CAROLINE COLINA, FRELYN HIPOLITO,
MYLINE A. CALLOS, JANETH B. SEMBILLO, LEA LYN F.
FERRANCO, MAY C. SANTOS, ROSELLE A. NOBLE, JENNIFER D.
SUYOM, WARREN PETCHIE C. CAJES, ROWELYN F. CATALAN,
RIEZEL ANN A. ALEGRE, DEMETRIA B. PEREZ, GENALYN OSOC,
JUVILYN N. NERI, JOY B. PIMENTEL, AIRENE LAYON, MARY
JOY TURQUEZA, MARY ANN VALENTIN, ROSIE L. NIEBRES,
MELCA MALLORCA, JOY CAGATCAGAT, DIANA CAMARO,
MARIVEL DIJUMO, SHEILA DELA CRUZ, ELIZABETH ARINGO,
JENALYN G. DISMAYA, MELANIE G. TRIA, GRETCHEN D.
MEJOS, and JANELIE R. JIMENEZ, Petitioners
vs.
HSY MARKETING LTD., CO., WANTOFREE ORIENTAL TRADING,
INC., COEN FASHION HOUSE AND GENERAL MERCHANDISE,
ASIA CONSUMER VALUE TRADING, INC., FABULOUS JEANS &
SHIRT & GENERAL MERCHANDISE, LSG MANUFACTURING
CORPORATION, UNITE GENERAL MERCHANDISE, ROSARIO Q.
CO, LUCIA PUN LING YEUNG, and ALEXANDER ARQUEZA,
Respondents
DECISION
LEONEN, J.:
When the evidence in labor cases is in equipoise, doubt is resolved in favor of
the employee.
This is a Petition for Review on Certiorari1 assailing the February 25, 2013
Decision2 and May 30, 2013 Resolution3 of the Court of Appeals in CA-G.R.
SP No. 126522, which upheld the Labor Arbiter's finding that the employees
voluntarily terminated their employment. The assailed judgments also set
aside the National Labor Relations Commission's application of the principle
of equipoise on the ground that the employees failed to present any evidence
in their favor.
HSY Marketing Ltd., Co., Wantofree Oriental Trading, Inc., Coen Fashion
House and General Merchandise, Asia Consumer Value Trading, Inc.,
Fabulous Jeans & Shirt & General Merchandise, LSG Manufacturing
Corporation, Unite General Merchandise, Rosario Q. Co, Lucia Pun Lin
Yeung, and Alexander Arqueza (respondents) are engaged in manufacturing
and selling goods under the brand Novo Jeans & Shirt & General Merchandise
(Novo Jeans).4
Sometime in May 2010 and June 2010, several Novo Jeans employees5 went
to Raffy Tulfo's radio program to air their grievances against their employers
for alleged labor violations. They were referred to the Department of Labor
and Employment Camanava Regional Office. 6
These employees claimed that on June 7, 2010, they were not allowed to enter
the Novo Jeans branches they were employed in. They further averred that
while Novo Jeans sent them a show cause letter the next day, they were in
truth already dismissed from employment. They sent a demand letter on July
19, 2010 to amicably settle the case before the Department of Labor and
Employment but no settlement was reached. They alleged that upon learning
that the Department of Labor and Employment was not the proper forum to
address their grievances, they decided to file a notice of withdrawal and file
their complaint with the Labor Arbiter. 7
On the other hand, Novo Jeans claimed that these employees voluntarily
severed their employment but that they filed complaints later with the
Department of Labor and Employment. They alleged that the employees'
notice of withdrawal was not actually granted by the Department of Labor and
Employment but that the employees nonetheless filed their complaints before
the Labor Arbiter. 8
On May 31, 2011, Labor Arbiter Arden S. Anni rendered a
Decision9 dismissing the complaints. He found that other than the employees'
bare allegations that they were dismissed from June 6 to 9, 2010, they did not
present any other evidence showing that their employment was terminated or
that they were prevented from reporting for work. 10 The Labor Arbiter
likewise ruled that the employees voluntarily severed their employment since
the airing of their grievances on Raffy Tulfo's radio program "[was] enough
reason for them not to report for work, simply because of a possible
disciplinary action by [Novo Jeans]." 11 The dispositive portion of the Labor
Arbiter Decision read:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered
DISMISSING the above-captioned consolidated cases for utter lack of merit
and for forum-shopping.
SO ORDERED.12
The employees appealed to the National Labor Relations Commission. 13
On June 25, 2012, the National Labor Relations Commission rendered a
Decision 14 reversing that of the Labor Arbiter and finding that the employees
were illegally dismissed. It ruled that the allegations of both parties "were
unsubstantiated and thus [were] equipoised" and that "if doubt exists between
the evidence presented by the employer and that by the employee, the scales
of justice must be tilted in favor of the latter."15 The dispositive portion of the
National Labor Relations Commission Decision read:
WHEREFORE, premises considered, judgment is hereby rendered finding the
appeal meritorious with respect to the issue of illegal dismissal. Complainants-
appellants' respective employers are hereby found liable, jointly and severally,
to pay complainants-appellants their backwages and separation pay plus ten
percent thereof as attorney's fees. Accordingly, the decision of the Labor
Arbiter dated May 31, 2011 is hereby MODIFIED. All other dispositions
STANDS (sic) undisturbed.
The computation of the aforesaid awards is as follows:
....
TOTAL AWARD Php30,969,426.00
SO ORDERED.16
Novo Jeans moved for partial reconsideration17 but was denied by the National
Labor Relations Commission in its August 24, 2012 Resolution.18 Thus, it
filed a Petition for Certiorari 19 with the Court of Appeals.
On February 25, 2013, the Court of Appeals rendered a Decision20 reversing
the Decision of the National Labor Relations Commission and reinstating the
Labor Arbiter Decision. The Court of Appeals found that Novo Jeans' counsel,
as the affiant, substantially complied with the verification requirement even if
his personal knowledge was based on facts relayed to him by his clients and
on authentic records since he was not privy to the antecedents of the case.21
The Court of Appeals stated that while the employees merely alleged that they
were no longer allowed to report to work on a particular day, Novo Jeans was
able to present the First Notice of Termination of Employment sent to them,
asking them to explain their sudden absence from work without proper
authorization. It likewise found that the Notices of Termination of
Employment (Notices) did not indicate that the employees were dismissed or
that they were prevented from entering the stores. 22
According to the Court of Appeals, the equipoise rule was inapplicable in this
case since it only applied when the evidence between the parties was equally
balanced. Considering that only Novo Jeans was able to present proof of its
claims, the Court of Appeals was inclined to rule in its favor. 23 Thus, the
Court of Appeals concluded that the case involved voluntary termination of
employment, not illegal dismissal.24 The dispositive portion of its Decision
read:
WHEREFORE, in view of the foregoing, the instant Petition is hereby
GRANTED. The assailed Decision dated June 25, 2012 and Resolution dated
August 24, 2012 rendered by the National Labor Relations Commission in
NLRC LAC No. 07-001930-11/NLRC NCR Cases No. 08-10645-10, 08-
10649-10, 08-10655-10, 08-10660-10, 08- 10662-10, 08-10666-10 and 08-
10670-10 are hereby REVERSED and SET ASIDE. Corollarily, the Decision
dated May 31, 2011 rendered by the Labor Arbiter is hereby REINSTATED.
SO ORDERED.25
The employees filed a Motion for Reconsideration26 but it was denied in the
Court of Appeals May 30, 2013 Resolution.27 Hence, this Petition28 was filed
before this Court.
Petitioners point out that the Court of Appeals erred in not finding grave abuse
of discretion, considering that the petition filed before it was a special civil
action for certiorari. They aver that the Court of Appeals should not have
used the special remedy of certiorari merely to re-evaluate the findings of a
quasi-judicial body absent any finding of grave abuse of discretion. 29
Petitioners likewise argue that respondents were unable to substantially
comply with the verification requirement before the Court of Appeals. They
submit that respondents' counsel would have been privy to the antecedents of
the case so as to have personal knowledge and not merely knowledge as
relayed by his clients. 30 They add that respondents "deliberately withheld the
Annexes of the Position Paper of the Petitioners submitted to the Labor
Arbiter[;] hence, said Position Paper cannot be considered authentic."31
Petitioners assert that the Court of Appeals had no factual basis to rule in
respondents' favor since there was no evidence to prove that the Notices were
sent to petitioners at their last known addresses. The evidence on record
merely showed sample letters of the Notices.32 Petitioners maintain that this is
a situation where the employees allege that they were prevented from entering
their work place and the employer alleges otherwise. They insist that if doubt
exists between the evidence presented by the employer and the evidence
presented by the employees, the doubt must be resolved in favor of the
employees, consistent with the Labor Code's policy to afford protection to
labor. 33
On the other hand, respondents argue that a defect in the verification will not
necessarily cause the dismissal of the pleading and that they had sufficiently
complied with the requirement when the affiant attested that the petition was
based on facts relayed by his clients and on authentic records. 34 They also
point out that only relevant and pertinent documents should be attached to
their pleadings before the courts; thus, the annexes of petitioner, not being
relevant or pertinent, need not be attached to their pleadings. 35
Respondents contend that the Court of Appeals recognized that the issue in
their Petition for Certiorari concerned the alleged grave abuse of discretion of
the National Labor Relations Commission and thoroughly discussed the issue
in the assailed judgment. 36 They likewise submit that the Court of Appeals
may review factual findings of the National Labor Relations Commission
since the finding of grave abuse of discretion requires a re-examination of the
sufficiency or absence of evidence.37
Respondents maintain that the receipt of the Notices was admitted and
recognized by the parties before the Labor Arbiter and was never brought as
an issue until the National Labor Relations Commission made a finding that
the Notices were never received.38 According to respondents, petitioners were
estopped from questioning the receipt of the Notices when they already
admitted to their receipt before the Labor Arbiter.39 They argue that the Labor
Arbiter and the Court of Appeals did not err in finding that the termination of
employment was voluntary since petitioners failed to present evidence of the
fact of their dismissal. 40
The main issue before this Court is whether or not petitioners were illegally
dismissed by respondents. However, there are certain procedural issues that
must first be addressed, in particular: (1) whether or not the Court of Appeals
may, in a petition for certiorari, review and re-assess the factual findings of
the National Labor Relations Commission; and (2) whether or not verification
based on facts relayed to the affiant by his clients is valid.
I
Before discussing the merits of the case, this Court takes this opportunity to
clarify certain doctrines regarding the review of factual findings by the Court
of Appeals.
Factual findings of labor officials exercising quasi-judicial functions are
accorded great respect and even finality by the courts when the findings are
supported by substantial evidence.41 Substantial evidence is "the amount of
relevant evidence which a reasonable mind might accept as adequate to
support a conclusion. "42 Thus, in labor cases, the issues in petitions
for certiorari before the Court of Appeals are limited only to whether the
National Labor Relations Commission committed grave abuse of discretion.
However, this does not mean that the Court of Appeals is conclusively bound
by the findings of the National Labor Relations Commission. If the findings
are arrived at arbitrarily, without resort to any substantial evidence, the
National Labor Relations Commission is deemed to have gravely abused its
discretion:
However, this does not mean that the Court of Appeals is conclusively bound
by the findings of the National Labor Relations Commission. If the findings
are arrived at arbitrarily, without resort to any substantial evidence, the
National Labor Relations Commission is deemed to have gravely abused its
discretion:
On this matter, the settled rule is that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their jurisdiction, are
generally accorded not only respect but even finality by the courts when
supported by substantial evidence, i.e., the amount of relevant evidence which
a reasonable mind might accept as adequate to support a conclusion. We
emphasize, nonetheless, that these findings are not infallible. When there is a
showing that they were arrived at arbitrarily or in disregard of the evidence on
record, they may be examined by the courts. The [Court of Appeals] can then
grant a petition for certiorari if it finds that the [National Labor Relations
Commission], in its assailed decision or resolution, has made a factual finding
that is not supported by substantial evidence. It is within the jurisdiction of the
[Court of Appeals], whose jurisdiction over labor cases has been expanded to
review the findings of the [National Labor Relations Commission].43
The Court of Appeals may also review factual findings if quasi-judicial
agencies' findings are contradictory to its own findings. 44 Thus, it must re-
examine the records to determine which tribunal's findings were supported by
the evidence.
In this instance, the Labor Arbiter and the National Labor Relations
Commission made contradictory factual findings. Thus, it was incumbent on
the Court of Appeals to re-examine their findings to resolve the issues before
it. The Court of Appeals also found that the findings of the National Labor
Relations Commission were not supported by substantial evidence, and
therefore, were rendered in grave abuse of discretion.
Thus, in the determination of whether the National Labor Relations
Commission committed grave abuse of discretion, the Court of Appeals may
re-examine facts and re-assess the evidence. However, its findings may still be
subject to review by this Court.
This Court notes that in cases when the Court of Appeals acts as an appellate
court, it is still a trier of facts. Questions of fact may still be raised by the
parties. If the parties raise pure questions of law, they may directly file with
this Court. Moreover, contradictory factual findings between the National
Labor Relations Commission and the Court of Appeals do not automatically
justify this Court's review of the factual findings. They merely present a prima
facie basis to pursue the action before this Court. The need to review the Court
of Appeals' factual findings must still be pleaded, proved, and substantiated by
the party alleging their inaccuracy. This Court likewise retains its full
discretion to review the factual findings.
II
All petitions for certiorari are required to be verified upon filing. 45 The
contents of verification are stated under Rule 7, Section 4 of the Rules of
Court:
Section 4. Verification. Except when otherwise specifically required by law or
rule, pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and
that the allegations therein are true and correct of his personal knowledge or
based on authentic records.
A pleading required to be verified which contains a verification based on
"information and belief'', or upon "knowledge, information and belief," or
lacks a proper verification, shall be treated as an unsigned pleading.
Thus, for a pleading to be verified, the affiant must attest that he or she has
read the pleading and that the allegations are true and correct based on his or
her personal knowledge or on authentic records. Otherwise, the pleading is
treated as an unsigned pleading.
Shipside Incorporation v. Court of Appeals46required that the assurance should
"not [be] the product of the imagination or a matter of speculation, and that
the pleading is filed in good faith."47 However, verification is merely a formal,
not jurisdictional, requirement. It will not result in the outright dismissal of the
case since courts may simply order the correction of a defective verification. 48
Petitioners argue that respondents' verification was invalid since it was not
based on authentic records, alleging that respondents' failure to attach
petitioners' position paper annexes to their Petition for Certiorari before the
Court of Appeals made their records inauthentic. 49
A pleading may be verified by attesting that the allegations are based either on
personal knowledge and on authentic records, or on personal knowledge or on
authentic records. The use of either, however, is not subject to the affiant's
whim but rather on the nature of the allegations being attested to.
Circumstances may require that the affiant attest that the allegations are based
only on personal knowledge or only on authentic records. Certainly, there can
be situations where the affiant must attest to the allegations being based on
both personal knowledge and on authentic records, thus:
A reading of the above-quoted Section 4 of Rule 7 indicates that a pleading
may be verified under either of the two given modes or under both. The
veracity of the allegations in a pleading may be affirmed based on either one's
own personal knowledge or on authentic records, or both, as warranted. The
use of the [conjunction] "or" connotes that either source qualifies as a
sufficient basis for verification and, needless to state, the concurrence of both
sources is more than sufficient. Bearing both a disjunctive and conjunctive
sense, this parallel legal signification avoids a construction that will exclude
the combination of the alternatives or bar the efficacy of any one of the
alternatives standing alone.
Contrary to petitioner's position, the range of permutation is not left to the
pleader's liking, but is dependent on the surrounding nature of the allegations
which may warrant that a verification be based either purely on personal
knowledge, or entirely on authentic records, or on both sources.50
Authentic records may be the basis of verification if a substantial portion of
the allegations in the pleading is based on prior court proceedings.51 Here, the
annexes that respondents allegedly failed to attach are employee information,
supporting documents, and work-related documents proving that petitioners
were employed by respondents. 52 The fact of petitioners' employment,
however, has not been disputed by respondents. These documents would not
have been the "relevant and pertinent"53 documents contemplated by the rules.
Petitioners likewise contend that respondents' Petition for Certiorari54 before
the Court of Appeals should not have been given due course since the
verification55 signed by respondents' counsel, Atty. Eller Roel I. Daclan (Atty.
Daclan), attested that:
2. I caused the preparation of the foregoing petition and attest that, based upon
facts relayed to me by my clients and upon authentic records made available,
all the allegations contained therein are true and correct[.] 56
Thus, the issue on verification centers on whether the phrase "based upon
facts relayed to me by my clients" may be considered sufficient compliance.
To resolve this issue, this Court must first address whether respondents'
counsel may sign the verification on their behalf.
The rules on compliance with the requirement of the verification and
certification of non-forum shopping were already sufficiently outlined
in Altres v. Empleo, 57 where this Court stated:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements already reflected above respecting non-
compliance with the requirements on, or submission of defective, verification
and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement
on or submission of defective verification, and noncompliance with the
requirement on or submission of defective certification against forum
shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances
are such that strict compliance with the Rule may be dispensed with in order
that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have
been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on
the ground of "substantial compliance" or presence of "special circumstances
or compelling reasons".
5) The certification against forum shopping must be signed by all the plaintiffs
or petitioners in a case; otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable circumstances, however, as
when all the plaintiffs or petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the
party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special Power
of Attorney designating his counsel of record to sign on his behalf. 58
The policy behind the requirement of verification is to guard against the filing
of fraudulent pleadings. Litigants run the risk of perjury59 if they sign the
verification despite knowledge that the stated allegations are not true or are
products of mere speculation:
Verification is not an empty ritual or a meaningless formality. Its import must
never be sacrificed in the name of mere expedience or sheer caprice. For what
is at stake is the matter of verity attested by the sanctity of an oath to secure an
assurance that the allegations in the pleading have been made in good faith, or
are true and correct and not merely speculative. 60
Thus, for verification to be valid, the affiant must have "ample knowledge to
swear to the truth of the allegations in the complaint or petition." 61 Facts
relayed to the counsel by the client would be insufficient for counsel to swear
to the truth of the allegations in a pleading. Otherwise, counsel would be able
to disclaim liability for any misrepresentation by the simple expediency of
stating that he or she was merely relaying facts with which he or she had no
competency to attest to. For this reason, the Rules of Court require no less
than personal knowledge of the facts to sufficiently verify a pleading.
Respondents' counsel, not having sufficient personal knowledge to attest to
the allegations of the pleading, was not able to validly verify the facts as
stated. Therefore, respondents' Petition for Certiorari before the Court of
Appeals should have been considered as an unsigned pleading.
Respondents' certification of non-forum shopping is likewise defective. The
certification of non-forum shopping must be signed by the litigant, not his or
her counsel. The litigant may, for justifiable reasons, execute a special power
of attorney to authorize his or her counsel to sign on his or her behalf. 62 In this
instance, the verification and certification against forum shopping63 was
contained in one ( 1) document and was signed by respondents' counsel, Atty.
Daclan.
Corporations, not being natural persons, may authorize their lawyers through a
Secretary's Certificate to execute physical acts. Among these acts is the
signing of documents, such as the certification against forum shopping. A
corporation's inability to perform physical acts is considered as a justifiable
reason to allow a person other than the litigant to sign the certification against
forum shopping.64 By the same reasoning, partnerships, being artificial
entities, may also authorize an agent to sign the certification on their behalf.
Respondents include three (3) corporations, one (1) partnership, and three (3)
sole proprietorships. Respondents LSG Manufacturing Corporation, Asia
Consumer Value Trading, Inc., and Wantofree Oriental Trading, Inc.
submitted Secretary's Certificates65 authorizing Atty. Daclan to sign on their
behalf. On the other hand, respondent HSY Marketing Ltd., Co. submitted a
Partnership Certification.66 Meanwhile, respondents Alexander Arqueza
(Arqueza), proprietor of Fabulous Jeans and Shirt and General Merchandise,
Rosario Q. Co (Co), proprietor of Unite General Merchandise, and Lucia Pun
Ling Yeung (Yeung), proprietor of Coen Fashion House & General
Merchandise, submitted Special Powers of Attorney67 on their behalf.
However, sole proprietorships, unlike corporations, have no separate legal
personality from their proprietors.68 They cannot claim the inability to do
physical acts as a justifiable circumstance to authorize their counsel to sign on
their behalf. Since there was no other reason given for authorizing their
counsel to sign on their behalf, respondents Arqueza, Co, and Yeung's
certification against forum shopping is invalid.
While courts may simply order the resubmission of the verification or its
subsequent correction,69 a defect in the certification of non-forum shopping is
not curable 70 unless there are substantial merits to the case.71
However, respondents' Petition for Certiorari before the Court of Appeals was
unmeritorious. Thus, its defective verification and certification of non-forum
shopping should have merited its outright dismissal.
III
When the evidence of the employer and the employee are in equipoise, doubts
are resolved in favor of labor.72 This is in line with the policy of the State to
afford greater protection to labor. 73
Petitioners allege that they were illegally dismissed from service when they
were prevented from entering their work premises a day after airing their
grievance in a radio show. On the other hand, respondents deny this allegation
and state that petitioners were never dismissed from employment.
In illegal dismissal cases, the burden of proof is on the employer to prove that
the employee was dismissed for a valid cause and that the employee was
afforded due process prior to the dismissal. 74
Respondents allege that there was no dismissal since they sent petitioners a
First Notice of Termination of Employment, asking them to show cause why
they should not be dismissed for their continued absence from work.
However, petitioners argue that this evidence should not be given weight since
there is no proof that they received this Notice.
Indeed, no evidence has been presented proving that each and every petitioner
received a copy of the First Notice of Termination of
Employment.1âwphi1 There are no receiving copies or acknowledgement
receipts. What respondents presented were "Sample Letters of
Respondents"75 and not the actual Notices that were allegedly sent out.
While petitioners admitted that the Notices may have been sent, they have
never actually admitted to receiving any of them. In their Position Paper
before the Labor Arbiter and in their Memorandum of Appeal before the
National Labor Relations Commission:
On June 7, 2010, all employees who went to complain against the
respondent[ s] were not allowed to enter the stores of respondent[s]. The next
day, respondent[s] sent letter[s] to the employees purporting to be a show
cause letter but the truth of the matter is that all employees who went to the
office of Tulfo to complain against the respondent[ s] were already
terminated[.]76
The lack of evidence of petitioners' receipts suggests that the Notices were an
afterthought, designed to free respondents from any liability without having to
validly dismiss petitioners.
There is likewise no proof that petitioners abandoned their employment. To
constitute abandonment, the employer must prove that "first, the employee
must have failed to report for work or must have been absent without valid or
justifiable reason; and second, [that] there must have been a clear intention on
the part of the employee to sever the employer-employee relationship
manifested by some overt act."77
Abandonment is essentially a matter of intent. It cannot be presumed from the
occurrence of certain equivocal acts. 78 There must be a positive and overt act
signifying an employee's deliberate intent to sever his or her employment.
Thus, mere absence from work, even after a notice to return, is insufficient to
prove abandonment. 79 The employer must show that the employee
unjustifiably refused to report for work and that the employee deliberately
intended to sever the employer-employee relation. Furthermore, there must be
a concurrence of these two (2) elements.80 Absent this concurrence, there can
be no abandonment.
Respondents have not presented any proof that petitioners intended to
abandon their employment. They merely alleged that petitioners have already
voluntarily terminated their employment due to their continued refusal to
report for work. However, this is insufficient to prove abandonment.
Where both parties in a labor case have not presented substantial evidence to
prove their allegations, the evidence is considered to be in equipoise. In such a
case, the scales of justice are tilted in favor of labor. Thus, petitioners are
hereby considered to have been illegally dismissed.
This Court notes that had petitioners been able to substantially prove their
dismissal, it would have been rendered invalid not only for having been made
without just cause81 but also for being in violation of their constitutional
rights. A laborer does not lose his or her right to freedom of expression upon
employment.82 This is "[a] political [right] essential to man's enjoyment of his
[or her] life, to his [or her] happiness, and to his [or her] full and complete
fulfillment."83 While the Constitution and the courts recognize that employers
have property rights that must also be protected, the human rights of laborers
are given primacy over these rights. Property rights may prescribe. Human
rights do not. 84
When laborers air out their grievances regarding their employment in a public
forum, they do so in the exercise of their right to free expression. They are
"fighting for their very survival, utilizing only the weapons afforded them by
the Constitution-the untrammelled enjoyment of their basic human
rights."85 Freedom and social justice afford them these rights and it is the
courts' duty to uphold and protect their free exercise. Thus, dismissing
employees merely on the basis that they complained about their employer in a
radio show is not only invalid, it is unconstitutional.
However, there not being sufficient proof that the dismissal was meant to
suppress petitioners' constitutional rights, this Court is constrained to limit its
conclusions to that of illegal dismissal under the Labor Code.
Petitioners were not dismissed under any of the causes mentioned in Article
279 [282]86 of the Labor Code. They were not validly informed of the causes
of their dismissal. Thus, their dismissal was illegal.
An employee who is found to have been illegally dismissed is entitled to
reinstatement without loss of seniority rights and other privileges. 87 If
reinstatement proves to be impossible due to the strained relations between the
parties, the illegally dismissed employee is entitled instead to separation pay.88
WHEREFORE, the Petition is GRANTED. The February 25, 2013 Decision
and May 30, 2013 Resolution of the Court of Appeals in CA-G.R. SP No.
126522 are SET ASIDE. Respondents are DIRECTED to reinstate
petitioners to their former positions without loss of seniority rights or other
privileges.
SO ORDERED.
G.R. Nos. 178382-83, September 23, 2015
CONTINENTAL MICRONESIA, INC., Petitioner, v. JOSEPH
BASSO, Respondent.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the levised Rules
of Court assailing the Decision2 dated May 23, 2006 and Resolution3 dated
June 19, 2007 of the Court of Appeals in the consolidated cases CA-G.R. SP
No. 83938 and CA-G.R. SP No. 84281. These assailed Decision and
Resolution set aside the Decision4 dated November 28, 2003 of the National
Labor Relations Commission (NLRC) declaring Joseph Basso's (Basso)
dismissal illegal, and ordering the payment of separation pay as alternative to
reinstatement and full backwages until the date of the Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation
organized and existing under the laws of and domiciled in the United States of
America (US). It is licensed to do business in the Philippines.5 Basso, a US
citizen, resided in the Philippines prior to his death.6
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden),
Managing Director-Asia of Continental Airlines, Inc. (Continental), offered
Basso the position of General Manager of the Philippine Branch of
Continental. Basso accepted the offer.7
It was not until much later that Mr. Braden, who had since returned to the US,
sent Basso the employment contract8 dated February 1, 1991, which Mr.
Braden had already signed. Basso then signed the employment contract and
returned it to Mr. Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of
Continental, with Basso retaining his position as General Manager.9
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr.
Schulz), who was then CMI's Vice President of Marketing and Sales,
informing Basso that he has agreed to work in CMI as a consultant on an "as
needed basis" effective February 1, 1996 to July 31, 1996. The letter also
informed Basso that: (1) he will not receive any monetary compensation but
will continue being covered by the insurance provided by CMI; (2) he will
enjoy travel privileges; and (3) CMI will advance Php1,140,000.00 for the
payment of housing lease for 12 months.10
On January 11, 1996, Basso wrote a counter-proposal11 to Mr. Schulz
regarding his employment status in CMI. On March 14, 1996, Basso wrote
another letter addressed to Ms. Marty Woodward (Ms. Woodward) of CMI's
Human Resources Department inquiring about the status of his
employment.12 On the same day, Ms. Woodward responded that pursuant to
the employment contract dated February 1, 1991, Basso could be terminated at
will upon a thirty-day notice. This notice was allegedly the letter Basso
received from Mr. Schulz on December 20, 1995. Ms. Woodward also
reminded Basso of the telephone conversation between him, Mr. Schulz and
Ms. Woodward on December 19, 1995, where they informed him of the
company's decision to relieve him as General Manager. Basso, instead, was
offered the position of consultant to CMI. Ms. Woodward also informed
Basso that CMI rejected his counter-proposal and, thus, terminated his
employment effective January 31, 1996. CMI offered Basso a severance pay,
in consideration of the Php1,140,000.00 housing advance that CMI promised
him.13
Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary
Damages against CMI on December 19, 1996.14 Alleging the presence of
foreign elements, CMI filed a Motion to Dismiss15 dated February 10, 1997 on
the ground of lack of jurisdiction over the person of CMI and the subject
matter of the controversy. In an Order16 dated August 27, 1997, the Labor
Arbiter granted the Motion to Dismiss. Applying the doctrine of lex loci
contractus, the Labor Arbiter held that the terms and provisions of the
employment contract show that the parties did not intend to apply our Labor
Code (Presidential Decree No. 442). The Labor Arbiter also held that no
employer-employee relationship existed between Basso and the branch office
of CMI in the Philippines, but between Basso and the foreign corporation
itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the
determination of certain facts to settle the issue on jurisdiction. NLRC ruled
that the issue on whether the principle of lex loci contractus or lex loci
celebrationis should apply has to be further threshed out.17
Labor Arbiter's Ruling
Labor Arbiter Madjayran H. Ajan in his Decision18 dated September 24, 1999
dismissed the case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was xecuted
in the US "since the letter-offer was under the Texas letterhead and the
acceptance of Complainant was returned there."19 Thus, applying the doctrine
of lex loci celebrationis, US laws apply. Also, applying lex loci contractus,
the Labor Arbiter ruled that the parties did not intend to apply Philippine laws,
thus:
Although the contract does not state what law shall apply, it is obvious that
Philippine laws were not written into it. More specifically, the Philippine law
on taxes and the Labor Code were not intended by the parties to apply,
otherwise Par. 7 on the payment by Complainant U.S. Federal and Home State
income taxes, and Pars. 22/23 on termination by 30-day prior notice, will not
be there. The contract was prepared in contemplation of Texas or U.S. laws
where Par. 7 is required and Pars. 22/23 is allowed.20
The Labor Arbiter also ruled that Basso was terminated for a valid cause
based on the allegations of CMI that Basso committed a series of acts that
constitute breach of trust and loss of confidence.21
The Labor Arbiter, however, found CMI to have voluntarily submitted to his
office's jurisdiction. CMI participated in the proceedings, submitted evidence
on the merits of the case, and sought affirmative relief through a motion to
dismiss.22
NLRC's Ruling
23
On appeal, the NLRC Third Division promulgated its Decision  dated
November 28, 2003, the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET
ASIDE. Respondent CMI is ordered to pay complainant the amount of
US$5,416.00 for failure to comply with the due notice requirement. The other
claims are dismissed.
SO ORDERED.24
The NLRC did not agree with the pronouncement of the Labor Arbiter that his
office has no jurisdiction over the controversy. It ruled that the Labor Arbiter
acquired jurisdiction over the case when CMI voluntarily submitted to his
office's jurisdiction by presenting evidence, advancing arguments in support
of the legality of its acts, and praying for reliefs on the merits of the
case.25cralawred
On the merits, the NLRC agreed with the Labor Arbiter that Basso was
dismissed for just and valid causes on the ground of breach of trust and loss of
confidence. The NLRC ruled that under the applicable rules on loss of trust
and confidence of a managerial employee, such as Basso, mere existence of a
basis for believing that such employee has breached the trust of his employer
suffices. However, the NLRC found that CMI denied Basso the required due
process notice in his dismissal.26
Both CMI and Basso filed their respective Motions for Reconsideration dated
January 15, 200427 and January 8, 2004.28 Both motions were dismissed in
separate Resolutions dated March 15, 200429 and February 27,
2004,30 respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of
Appeals docketed as CA-G.R. SP No. 83938.31 Basso imputed grave abuse of
discretion on the part of the NLRC in ruling that he was validiy dismissed.
CMI filed its own Petition for Certiorari dated May 13, 2004 docketed as CA-
G.R. SP No. 84281,32 alleging that the NLRC gravely abused its discretion
when it assumed jurisdiction over the person of CMI and the subject matter of
the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the
two cases33 and ordered the parties to file their respective Memoranda.
The Court of Appeal's Decision
The Court of Appeals promulgated the now assailed Decision34 dated May 23,
2006, the relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No.
84281 is DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938
is GIVEN DUE COURSE and GRANTED, and accordingly, the assailed
Decision dated November 28, 2003 and Resolution dated February 27, 2004
of the NLRC are SET ASIDE and VACATED. Instead judgment is rendered
hereby declaring the dismissal of Basso illegal and ordering Continental to
pay him separation pay equivalent to one (1) month pay for every year of
service as an alternative to reinstatement. Further, ordering Continental to pay
Basso his full backwages from the date of his said illegal dismissal until date
of this decision. The claim for moral and exemplary damages as well as
attorney's fees are dismissed.35
The Court of Appeals ruled that the Labor Arbiter and the NLRC had
jurisdiction over the subject matter of the case and over the parties. The Court
of Appeals explained that jurisdiction over the subject matter of the action is
determined by the allegations of the complaint and the law. Since the case
filed by Basso is a termination dispute that is "undoubtedly cognizable by the
labor tribunals", the Labor Arbiter and the NLRC had jurisdiction to rule on
the merits of the case. On the issue of jurisdiction over he person of the
parties, who are foreigners, the Court of Appeals ruled that jurisdiction over
the person of Basso was acquired when he filed the complaint for illegal
dismissal, while jurisdiction over the person of CMI was acquired through
coercive process of service of summons to its agent in the Philippines. The
Court of Appeals also agreed that the active participation of CMI in the case
rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI illegally
dismissed Basso. The Court of Appeals found that CMI's allegations of loss of
trust and confidence were not established. CMI "failed to prove its claim of
the incidents which were its alleged bases for loss of trust or
confidence."36 While managerial employees can be dismissed for loss of trust
and confidence, there must be a basis for such loss, beyond mere whim or
caprice.
After the parties filed their Motions for Reconsideration, 37 the Court of
Appeals promulgated Resolution38 dated June 19, 2007 denying CMI's motion,
while partially granting Basso's as to the computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING
THE FACTUAL FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS
INQUIRY INTO WHETHER OR NOT THE NLRC COMMITTED GRAVE
ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING
THAT THE LABOR ARBITER AND THE NLRC HAD JURISDICTION
TO HEAR AND TRY THE ILLEGAL DISMISSAL CASE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING
THAT BASSO WAS NOT VALIDLY DISMISSED ON THE GROUND OF
LOSS OF TRUST OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and
the NLRC in the illegal dismissal case. The first and third issues will be
discussed jointly.
The labor tribunals had jurisdiction over the parties and the subject matter
of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to
determine proper jurisdiction over the parties and the subject matter of the
case. It also alleges that the existence of foreign elements calls or the
application of US laws and the doctrines of lex loci celebrationis (the law of
the place of the ceremony), lex loci contractus (law of the place where a
contract is executed), and lex loci intentionis (the intention of the parties as to
the law that should govern their agreement). CMI also invokes the application
of the rule of forum non conveniens to determine the propriety of the
assumption of jurisdiction by the labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be
resolved first. Where the facts establish the existence of foreign elements, he
case presents a conflict-of-laws issue.39 The foreign element in a case nay
appear in different forms, such as in this case, where one of the parties s an
alien and the other is domiciled in another state.
In Hasegawa v. Kitamura,40 we stated that in the judicial resolution of
conflict-of-laws problems, three consecutive phases are involved: jurisdiction,
choice of law, and recognition and enforcement of judgments. In resolving the
conflicts problem, courts should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the
parties to this case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the
facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly
pleaded and proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one
of the basic exceptions to the application of foreign law? In short, is there any
strong policy or vital interest of the forum that is at stake in this case and
which should preclude the application of foreign law?41
Jurisdiction is defined as the power and authority of the courts to hear, try and
decide cases. Jurisdiction over the subject matter is conferred by the
Constitution or by law and by the material allegations in the complaint,
regardless of whether or not the plaintiff is entitled to recover all or some of
the claims or reliefs sought therein.42 It cannot be acquired through a waiver or
enlarged by the omission of the parties or conferred by the acquiescence of the
court.43 That the employment contract of Basso was replete with references to
US laws, and that it originated from and was returned to the US, do not
automatically preclude our labor tribunals from exercising jurisdiction to hear
and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code,
under Article 217, clearly vests original and exclusive jurisdiction to hear and
decide cases involving termination disputes to the Labor Arbiter. Hence, the
Labor Arbiter and the NLRC have jurisdiction over the subject matter of the
case.
As regards jurisdiction over the parties, we agree with the Court of Appeals
that the Labor Arbiter acquired jurisdiction over the person of Basso,
notwithstanding his citizenship, when he filed his complaint against CMI. On
the other hand, jurisdiction over the person of CMI was acquired through the
coercive process of service of summons. We note that CMI never denied that
it was served with summons. CMI has, in fact, voluntarily appeared and
participated in the proceedings before the courts. Though a foreign
corporation, CMI is licensed to do business in the Philippines and has a local
business address here. The purpose of the law in requiring that foreign
corporations doing business in the country be licensed to do so, is to subject
the foreign corporations to the jurisdiction of our courts.44
Considering that the Labor Arbiter and the NLRC have jurisdiction over the
parties and the subject matter of this case, these tribunals may proceed to try
the case even if the rules of conflict-of-laws or the convenience of the parties
point to a foreign forum, this being an exercise of sovereign prerogative of the
country where the case is filed.45
The next question is whether the local forum is the convenient forum in light
of the facts of the case. CMI contends that a Philippine court is an
inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-
of-laws case may assume jurisdiction if it chooses to do so, provided, that the
following requisites are met: (1) that the Philippine Court is one to which the
parties may conveniently resort to; (2) that the Philippine Court is in a position
to make an intelligent decision as to the law and the facts; and (3) that the
Philippine Court has or is likely to have power to enforce its decision.46 All
these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI lad
physical presence in the Philippines during the duration of the trial. CMI has a
Philippine branch, while Basso, before his death, was residing here. Thus, it
could be reasonably expected that no extraordinary measures were needed for
the parties to make arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts.
The incident subject of this case (i.e. dismissal of Basso) happened in the
Philippines, the surrounding circumstances of which can be ascertained
without having to leave the Philippines. The acts that allegedly led to loss of
trust and confidence and Basso's eventual dismissal were committed in the
Philippines. As to the law, we hold that Philippine law is the proper law of he
forum, as we shall discuss shortly. Also, the labor tribunals have the power to
enforce their judgments because they acquired jurisdiction over the persons of
both parties.
Our labor tribunals being the convenient fora, the next question is what law
should apply in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the
following important questions: (1) What legal system should control a given
situation where some of the significant facts occurred in two or more states;
and (2) to what extent should the chosen legal system regulate the
situation.47 These questions are entirely different from the question of
jurisdiction that only seeks to answer whether the courts of a state where the
case is initiated have jurisdiction to enter a judgment.48 As such, the power to
exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law.49
CMI insists that US law is the applicable choice-of-law under the principles
of lex loci celebrationis and lex loci contractus. It argues that the contract of
employment originated from and was returned to the US after Basso signed it,
and hence, was perfected there. CMI further claims that the references to US
law in the employment contract show the parties' intention to apply US law
and not ours. These references are:
a. Foreign station allowance of forty percent (40%) using the "U.S.
State Department Index, the base being Washington, D.C."
b. Tax equalization that made Basso responsible for "federal and any
home state income taxes."
c. Hardship allowance of fifteen percent (15%) of base pay based
upon the "U.S. Department of State Indexes of living costs
abroad."
d. The employment arrangement is "one at will, terminable by either
party without any further liability on thirty days prior written
notice."50
CMI asserts that the US law on labor relations particularly, the US Railway
Labor Act sanctions termination-at-will provisions in an employment contract.
Thus, CMI concludes that if such laws were applied, there would have been
no illegal dismissal to speak of because the termination-at-will provision in
Basso's employment contract would have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,51 we emphasized that an
essential element of conflict rules is the indication of a "test" or "connecting
factor" or "point of contact". Choice-of-law rules invariably consist of a
factual relationship (such as property right, contract claim) and a connecting
fact or point of contact, such as the situs of the res, the place of celebration,
the place of performance, or the place of wrongdoing. Pursuant to Saudi
Arabian Airlines, we hold that the "test factors," "points of contact" or
"connecting factors" in this case are the
following:chanRoblesvirtualLawlibrary
(1) The nationality, domicile or residence of
Basso;ChanRoblesVirtualawlibrary
(2) The seat of CMI;ChanRoblesVirtualawlibrary
(3) The place where the employment contract has been made, the locus
actus;ChanRoblesVirtualawlibrary
(4) The place where the act is intended to come into effect, e.g., the place of
performance of contractual duties;ChanRoblesVirtualawlibrary
(5) The intention of the contracting parties as to the law that should govern
their agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or
done.52
Applying the foregoing in this case, we conclude that Philippine law the
applicable law. Basso, though a US citizen, was a resident here from he time
he was hired by CMI until his death during the pendency of the case. CMI,
while a foreign corporation, has a license to do business in the Philippines and
maintains a branch here, where Basso was hired to work. The contract of
employment was negotiated in the Philippines. A purely consensual contract,
it was also perfected in the Philippines when Basso accepted the terms and
conditions of his employment as offered by CMI. The place of performance
relative to Biasso's contractual duties was in the Philippines. The alleged
prohibited acts of Basso that warranted his dismissal were committed in the
Philippines.
Clearly, the Philippines is the state with the most significant relationship to the
problem. Thus, we hold that CMI and Basso intended Philippine law to
govern, notwithstanding some references made to US laws and the fact that
this intention was not expressly stated in the contract. We explained
in Philippine Export and Foreign Loan Guarantee Corporation v. V. P.
Eusebio Construction, Inc.53 that the law selected may be implied from such
factors as substantial connection with the transaction, or the nationality or
domicile of the parties.54 We cautioned, however, that while Philippine courts
would do well to adopt the first and most basic rule in most legal systems,
namely, to allow the parties to select the law applicable to their contract, the
selection is subject to the limitation that it is not against the law, morals, or
public policy of the forum.55
Similarly, in Bank of America, NT&SA v. American Realty Corporation,56 we
ruled that a foreign law, judgment or contract contrary to a sound and
established public policy of the forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work
undeniable injustice to the citizens or residents of the forum. To give justice is
the most important function of law; hence, a law, or judgment or contract that
is obviously unjust negates the fundamental principles of Conflict of Laws.57
Termination-at-will is anathema to the public policies on labor protection
espoused by our laws and Constitution, which dictates that no worker shall be
dismissed except for just and authorized causes provided by law and after due
process having been complied with.58 Hence, the US Railway Labor Act,
which sanctions termination-at-will, should not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As
any other fact, it must be alleged and proved.59 If the foreign law is not
properly pleaded or proved, the presumption of identity or similarity of the
foreign law to our own laws, otherwise known as processual presumption,
applies. Here, US law may have been properly pleaded but it was not proved
in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third
issues.
The Court of Appeals may review the factual findings of the NLRC in a
Rule 65 petition.
CMI submits that the Court of Appeals overstepped the boundaries of the
limited scope of its certiorari jurisdiction when instead of ruling on the
existence of grave abuse of discretion, it proceeded to pass upon the legality
and propriety of Basso's dismissal. Moreover, CMI asserts that it was error on
the part of the Court of Appeals to re-evaluate the evidence and circumstances
surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition
for Certiorari under Rule 65 of the Revised Rules of Court was settled in our
decision in St. Martin Funeral Home v. NLRC.60 The general rule is
that certiorari does not lie to review errors of judgment of the trial court, as
well as that of a quasi-judicial tribunal. In certiorari proceedings, judicial
review does not go as far as to examine and assess the evidence of the parties
and to weigh their probative value.61 However, this rule admits of exceptions.
In Globe Telecom, Inc. v. Florendo-Flores,62 we stated:
In the review of an NLRC decision through a special civil action
for certiorari, resolution is confined only to issues of jurisdiction and grave
abuse of discretion on the part of the labor tribunal. Hence, the Court refrains
from reviewing factual assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC. Occasionally, however, the Court is
constrained to delve into factual matters where, as in the instant case, the
findings of the NLRC contradict those of the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look
into the records of the case and re-examine the questioned findings. As a
corollary, this Court is clothed with ample authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their
consideration is necessary to arrive at a just decision of the case. The same
principles are now necessarily adhered to and are applied by the Court of
Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the ruling of the
NLRC.63 (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual hidings
complained of are not supported by the evidence on record; when its
necessary to prevent a substantial wrong or to do substantial justice; when the
findings of the NLRC contradict those of the Labor Arbiter; and when
necessary to arrive at a just decision of the case.64 To make these findings, the
Court of Appeals necessarily has to look at the evidence and make its own
factual determination.65
Since the findings of the Labor Arbiter differ with that of the NLRC, we find
that the Court of Appeals correctly exercised its power to review the evidence
and the records of the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI Managerial
employees enjoy security of tenure and the right of the management to dismiss
must be balanced against the managerial employee's right to security of
tenure, which is not one of the guaranties he gives up.66
In Apo Cement Corporation v. Baptisma,67 we ruled that for an employer to
validly dismiss an employee on the ground of loss of trust and confidence
under Article 282 (c) of the Labor Code, the employer must observe the
following guidelines: 1) loss of confidence should not be simulated; 2) it
should not be used as subterfuge for causes which are improper, illegal or
unjustified; 3) it may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary; and 4) it must be genuine, not a mere afterthought to
justify earlier action taken in bad faith. More importantly, it must be based on
a willful breach of trust and founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not
founded on clearly established facts and evidence sufficient to warrant
dismissal from employment. While proof beyond reasonable doubt is not
required to establish loss of trust and confidence, substantial evidence is
required and on the employer rests the burden to establish it.68 There must be
some basis for the loss of trust, or that the employer has reasonable ground to
believe that the employee is responsible for misconduct, which renders him
unworthy of the trust and confidence demanded by his position.69
CMI alleges that Basso committed the following:chanRoblesvirtualLawlibrary
(1) Basso delegated too much responsibility to the General Sales Agent and
relied heavily on its judgments.70
(2) Basso excessively issued promotional tickets to his friends who had no
direct business with CMI.71
(3) The advertising agency that CMI contracted had to deal directly with
Guam because Basso was hardly available.72 Mr. Schulz discovered that
Basso exceeded the advertising budget by $76,000.00 in 1994 and by
$20,000.00 in 1995.73
(4) Basso spent more time and attention to his personal businesses and was
reputed to own nightclubs in the Philippines.74
(5) Basso used free tickets and advertising money to promote his personal
business,75 such as a brochure that jointly advertised one of Basso's
nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI
merely submitted affidavits of its officers, without any other corroborating
evidence. Basso, on the other hand, had adequately explained his side. On the
advertising agency and budget issues raised by CMI, he explained that these
were blatant lies as the advertising needs of CMI were centralized in its Guam
office and the Philippine office was not authorized to deal with CMI's
advertising agency, except on minor issues.76 Basso further stated that under
CMI's existing policy, ninety percent (90%) of the advertising decisions were
delegated to the advertising firm of McCann-Ericsson in Japan and only ten
percent (10%) were left to the Philippine office.77 Basso also denied the
allegations of owning nightclubs and promoting his personal businesses and
explained that it was illegal for foreigners in the Philippines to engage in retail
trade in the first place.
Apart from these accusations, CMI likewise presented the findings of the audit
team headed by Mr. Stephen D. Goepfert, showing that "for the period of
1995 and 1996, personal passes for Continental and other airline employees
were noted (sic) to be issued for which no service charge was collected."78 The
audit cited the trip pass log of a total of 10 months. The trip log does not
show, however, that Basso caused all the ticket issuances. More, half of the
trips in the log occurred from March to July of 1996,79 a period beyond the
tenure of Basso. Basso was terminated effectively on January 31, 1996 as
indicated in the letter of Ms. Woodward.80
CMI also accused Basso of making "questionable overseas phone calls".
Basso, however, adequately explained in his Reply81 that the phone calls to
Italy and Portland, USA were made for the purpose of looking for a technical
maintenance personnel with US Federal Aviation Authority qualifications,
which CMI needed at that time. The calls to the US were also made in
connection with his functions as General Manager, such as inquiries on his tax
returns filed in Nevada. Biasso also explained that the phone lines82 were open
direct lines that all personnel were free to use to make direct long distance
calls.83
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00
to cover the transfer fee of the Manila Polo Club share from Mr. Kenneth
Glover, the previous General Manager, to him. CMI claimed that "nowhere in
the said contract was it likewise indicated that the Manila Polo Club share was
part of the compensation package given by CMI to Basso."84 CMI's claims are
not credible. Basso explained that the Manila Polo Club share was offered to
him as a bonus to entice him to leave his then employer, United Airlines. A
letter from Mr. Paul J. Casey, former president of Continental, supports
Basso.85 In the letter, Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental
Airlines, he was given the Manila Polo Club share and authorized to have the
share re-issued in his name. In addition to giving Mr. Basso the Manila Polo
Club share, Continental agreed to pay the dues for a period of three years and
this was embodied in his contract with Continental. This was all clone with
my knowledge and approval.86
Clause 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for 2) full backwages from January 31, 1996, the date of his illegal dismissal, to
membership in a club in Manila that your immediate supervisor and I agree is October 2, 2002, the date of his compulsory retirement age.
of at least that value to Continental through you in your role as our General
Manager for the Philippines.87 SO ORDERED.chanroblesvirtuallawlibrary
Taken together, the above pieces of evidence suggest that the Manila Polo
Club share was part of Basso's compensation package and thus he validly used G.R. No. 158693             November 17, 2004
company funds to pay for the transfer fees. If doubts exist between the
evidence presented by the employer and the employee, the scales of justice
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
must be tilted in favor of the latter.88
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA
Finally, CMI violated procedural due process in terminating Basso. In King of
HOME IMPROVEMENTS, INC. and VICENTE
Kings Transport, Inc. v. Mamac89 we detailed the procedural due process steps
ANGELES, respondents.
in termination of employment:
To clarify, the following should be considered in terminating the services of
employees:chanRoblesvirtualLawlibrary

(1) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that
the employees are given the opportunity to submit their written explanation
within a reasonable period. "Reasonable opportunity" under the Omnibus
Rules means every kind of assistance that management must accord to the
employees to enable them to prepare adequately for their defense. This should
be construed as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the accusation against
them, consult a union official or lawyer, gather data and evidence, and decide
on the defenses they will raise against the complaint. Moreover, in order to
enable the employees to intelligently prepare their explanation and defenses,
the notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct
a hearing or conference wherein the employees will be given the opportunity
to: (1) explain and clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut the evidence
presented against them by the management. During the hearing or conference,
the employees are given the chance to defend themselves personally, with the
assistance of a representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an opportunity to come
to an amicable settlement.
(3) After determining that termination of employment is justified, the
employers shall serve the employees a written notice of
termination indicating that: (1) all circumstances involving the charge against
the employees have been considered; and (2) grounds have been established to
justify the severance of their employment. (Emphasis in original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December 19, 1995 and
March 14, 1996, respectively, are not one of the valid twin notices. Neither
identified the alleged acts that CMI now claims as bases for Basso's
termination. Ms. Woodward's letter even stressed that the original plan was to
remove Basso as General Manager but with an offer to make him consultant.
It was inconsistent of CMI to declare Basso as unworthy of its trust and
confidence and, in the same breath, offer him the position of consultant. As
the Court of Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground for his
dismissal was the exercise of the termination at will clause in the employment
contract. The alleged loss of trust and confidence claimed by Continental
appears to be a mere afterthought belatedly trotted out to save the day.90
Basso is entitled to separation pay and full backwages.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of eniority rights
and other privileges, and to his full backwages, inclusive of allowances and
to his other benefits or their monetary equivalent omputed from the time his
compensation was withheld up to the time of actual reinstatement.
Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded
as an alternative. The payment of separation pay is in addition to payment of
backwages.91 In the case of Basso, reinstatement is no longer possible since he
has already passed away. Thus, Basso's separation pay with full backwages
shall be paid to his heirs.
As to the computation of backwages, we agree with CMI that Basso was
entitled to backwages only up to the time he reached 65 years old, the
compulsory retirement age under the law.92 This is our consistent
ruling.93 When Basso was illegally dismissed on January 31, 1996, he was
already 58 years old.94 He turned 65 years old on October 2, 2002. Since
backwages are granted on grounds of equity for earnings lost by an employee
due to his illegal dismissal,95 Basso was entitled to backwages only for the
period he could have worked had he not been illegally dismissed, i.e. from
January 31, 1996 to October 2, 2002.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated May 23, 2006 and Resolution dated June 19, 2007 in the consolidated
cases CA-G.R. SP No. 83938 and CA-G.R. SP No. 84281 are AFFIRMED,
with MODIFICATION as to the award of backwages. Petitioner Continental
Micronesia, Inc. is hereby ordered to pay Respondent Joseph Basso's heirs: 1)
separation pay equivalent to one (1) month pay for every year of service, and
DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision 1 of the Court of Appeals
dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of
National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the
business of selling and installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board
and cornice installers on January 2, 19922 until February 23, 1999 when they
were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision
declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of
the complainants illegal. Accordingly, respondent is hereby
ordered to pay them their backwages up to November 29, 1999 in
the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of
one (1) month for every year of service from date of hiring up to
November 29, 1999.
Respondent is further ordered to pay the complainants their holiday
pay and service incentive leave pay for the years 1996, 1997 and
1998 as well as their premium pay for holidays and rest days and
Virgilio Agabon's 13th month pay differential amounting to TWO
THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the
aggregate amount of ONE HUNDRED TWENTY ONE
THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100
(P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED
TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY
EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per
attached computation of Julieta C. Nicolas, OIC, Research and
Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the
petitioners had abandoned their work, and were not entitled to backwages and
separation pay. The other money claims awarded by the Labor Arbiter were
also denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for
certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not
illegal because they had abandoned their employment but ordered the payment
of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations
Commission is REVERSED only insofar as it dismissed
petitioner's money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997,
 and 1998, as well as their service incentive leave pay for said
years, and to pay the balance of petitioner Virgilio Agabon's 13th
month pay for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were
illegally dismissed.7
Petitioners assert that they were dismissed because the private respondent
refused to give them assignments unless they agreed to work on
a "pakyaw" basis when they reported for duty on February 23, 1999. They did
not agree on this arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that private
respondent did not comply with the twin requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners were not
dismissed but had abandoned their work.9 In fact, private respondent sent two
letters to the last known addresses of the petitioners advising them to report
for work. Private respondent's manager even talked to petitioner Virgilio
Agabon by telephone sometime in June 1999 to tell him about the new
assignment at Pacific Plaza Towers involving 40,000 square meters of cornice
installation work. However, petitioners did not report for work because they
had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day.
When this was not granted, petitioners stopped reporting for work and filed
the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC
are accorded not only respect but even finality if the findings are supported by
substantial evidence. This is especially so when such findings were affirmed
by the Court of Appeals.11 However, if the factual findings of the NLRC and
the Labor Arbiter are conflicting, as in this case, the reviewing court may
delve into the records and examine for itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled
that petitioners' dismissal was for a just cause. They had abandoned their
employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the opportunity
to be heard and to defend himself.13 Article 282 of the Labor Code enumerates
the just causes for termination by the employer: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or
the latter's representative in connection with the employee's work; (b) gross
and habitual neglect by the employee of his duties; (c) fraud or willful breach
by the employee of the trust reposed in him by his employer or his duly
authorized representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate member of his
family or his duly authorized representative; and (e) other causes analogous to
the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment.14 It is a form of neglect of duty, hence, a just cause
for termination of employment by the employer.15 For a valid finding of
abandonment, these two factors should be present: (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was
deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for
an installation work for another company. Subcontracting for another
company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this.
In January 1996, they did not report for work because they were working for
another company. Private respondent at that time warned petitioners that they
would be dismissed if this happened again. Petitioners disregarded the
warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in
determining the penalty that should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that 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. We should apply that rule with more reason here where petitioners were
absent because they were already working in another company.
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice
and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct19 and
loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to his
interests.20
After establishing that the terminations were for a just and valid cause, we
now determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I,
Section 2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of
termination of employment, the following standards of due process
shall be substantially observed:
I. For termination of employment based on just causes as defined
in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground
or grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned,
with the assistance of counsel if the employee so desires, is given
opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and
(c) A written notice of termination served on the employee
indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the
employee's last known address.
Dismissals based on just causes contemplate acts or omissions attributable to
the employee while dismissals based on authorized causes involve grounds
under the Labor Code which allow the employer to terminate employees. A
termination for an authorized cause requires payment of separation pay. When
the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer
possible where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282,
the employer must give the employee two written notices and a hearing or
opportunity to be heard if requested by the employee before terminating the
employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284,
and due process was observed; (2) the dismissal is without just or authorized
cause but due process was observed; (3) the dismissal is without just or
authorized cause and there was no due process; and (4) the dismissal is for just
or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will
not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279
mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation. The dismissal
should be upheld because it was established that the petitioners abandoned
their jobs to work for another company. Private respondent, however, did not
follow the notice requirements and instead argued that sending notices to the
last known addresses would have been useless because they did not reside
there anymore. Unfortunately for the private respondent, this is not a valid
excuse because the law mandates the twin notice requirements to the
employee's last known address.21 Thus, it should be held liable for non-
compliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and
timely to clarify the various rulings on employment termination in the light
of Serrano v. National Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,23 we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and
hearing, was not entitled to reinstatement and backwages because the
dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and caused
trouble during office hours, defying superiors who tried to pacify him. We
concluded that reinstating the employee and awarding backwages "may
encourage him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent
for just cause should be maintained. He has no right to return to his
former employment.
However, the petitioner must nevertheless be held to account for
failure to extend to private respondent his right to an investigation
before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an
infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner
must indemnify the private respondent the amount of P1,000.00.
The measure of this award depends on the facts of each case and
the gravity of the omission committed by the employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an
employee but did not follow the due process requirement, the dismissal may
be upheld but the employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was
changed. We held that the violation by the employer of the notice requirement
in termination for just or authorized causes was not a denial of due process
that will nullify the termination. However, the dismissal is ineffectual and the
employer must pay full backwages from the time of termination until it is
judicially declared that the dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was
the significant number of cases involving dismissals without requisite notices.
We concluded that the imposition of penalty by way of damages for violation
of the notice requirement was not serving as a deterrent. Hence, we now
required payment of full backwages from the time of dismissal until the time
the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay
later" by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full
meaning of Article 279 of the Labor Code which states:
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.
This means that the termination is illegal only if it is not for any of the
justified or authorized causes provided by law. Payment of backwages and
other benefits, including reinstatement, is justified only if the employee was
unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which
elicited strong dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
embodies a system of rights based on moral principles so deeply imbedded in
the traditions and feelings of our people as to be deemed fundamental to a
civilized society as conceived by our entire history. Due process is that which
comports with the deepest notions of what is fair and right and just.26 It is a
constitutional restraint on the legislative as well as on the executive and
judicial powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two
aspects: substantive, i.e., the valid and authorized causes of employment
termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in the
Implementing Rules of P.D. 442, as amended, otherwise known as the Labor
Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department
Order Nos. 9 and 10.27 Breaches of these due process requirements violate the
Labor Code. Therefore statutory due process should be differentiated from
failure to comply with constitutional due process.
Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings;
while statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after
notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for
a just and valid cause but the employee was not accorded due process. The
dismissal was upheld by the Court but the employer was sanctioned. The
sanction should be in the nature of indemnification or penalty, and depends on
the facts of each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the
employee was not given due process, the failure did not operate to eradicate
the just causes for dismissal. The dismissal being for just cause, albeit without
due process, did not entitle the employee to reinstatement, backwages,
damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services,
Inc. v. National Labor Relations Commission,30 which opinion he reiterated
in Serrano, stated:
C. Where there is just cause for dismissal but due process has not
been properly observed by an employer, it would not be right to
order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with
the procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It
might be pointed out that the notice to be given and the hearing to
be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the
employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be no
more than a useless formality and where, accordingly, it would not
be imprudent to apply the res ipsa loquitur rule and award, in lieu
of separation pay, nominal damages to the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the
law on employment termination, we believe that in cases involving dismissals
for cause but without observance of the twin requirements of notice and
hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing
sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair
result by dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or
authorized causes but not complying with statutory due process may have far-
reaching consequences.
This would encourage frivolous suits, where even the most notorious violators
of company policy are rewarded by invoking due process. This also creates
absurd situations where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take for example a
case where the employee is caught stealing or threatens the lives of his co-
employees or has become a criminal, who has fled and cannot be found, or
where serious business losses demand that operations be ceased in less than a
month. Invalidating the dismissal would not serve public interest. It could also
discourage investments that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be
a sword to oppress employers. The commitment of this Court to the cause of
labor does not prevent us from sustaining the employer when it is in the right,
as in this case.32 Certainly, an employer should not be compelled to pay
employees for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who is
admittedly guilty of misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The law protecting the rights
of the laborer authorizes neither oppression nor self-destruction of the
employer.33
It must be stressed that in the present case, the petitioners committed a grave
offense, i.e., abandonment, which, if the requirements of due process were
complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should
not be protected by the Social Justice Clause of the Constitution. Social
justice, as the term suggests, should be used only to correct an injustice. As
the eminent Justice Jose P. Laurel observed, social justice must be founded on
the recognition of the necessity of interdependence among diverse units of a
society and of the protection that should be equally and evenly extended to all
groups as a combined force in our social and economic life, consistent with
the fundamental and paramount objective of the state of promoting the health,
comfort, and quiet of all persons, and of bringing about "the greatest good to
the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to
labor-management relations and dispense justice with an even hand in every
case:
We have repeatedly stressed that social justice – or any justice for
that matter – is for the deserving, whether he be a millionaire in his
mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are to tilt the balance in favor of the poor to
whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor
simply because they are poor, or reject the rich simply because
they are rich, for justice must always be served for the poor and the
rich alike, according to the mandate of the law.35
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided
in favor of labor, as management has rights that should be fully respected and
enforced by this Court. As interdependent and indispensable partners in
nation-building, labor and management need each other to foster productivity
and economic growth; hence, the need to weigh and balance the rights and
welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of "dismiss now, pay later," which we sought to deter in
the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff
for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations
Commissions,38 an employer is liable to pay indemnity in the form of nominal
damages to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due process.
The Court, after considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employee's one month salary. This
indemnity is intended not to penalize the employer but to vindicate or
recognize the employee's right to statutory due process which was violated by
the employer.39
The violation of the petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion of
the court, taking into account the relevant circumstances.40 Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter employers
from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it
failed to pay petitioners' holiday pay, service incentive leave pay and 13th
month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims.
Private respondent is liable for petitioners' holiday pay, service incentive leave
pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even
where the employee must allege non-payment, the general rule is that the
burden rests on the employer to prove payment, rather than on the employee
to prove non-payment. The reason for the rule is that the pertinent personnel
files, payrolls, records, remittances and other similar documents – which will
show that overtime, differentials, service incentive leave and other claims of
workers have been paid – are not in the possession of the worker but in the
custody and absolute control of the employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay
and service incentive leave pay, it could have easily presented documentary
proofs of such monetary benefits to disprove the claims of the petitioners. But
it did not, except with respect to the 13th month pay wherein it presented cash
vouchers showing payments of the benefit in the years disputed. 42 Allegations
by private respondent that it does not operate during holidays and that it
allows its employees 10 days leave with pay, other than being self-serving, do
not constitute proof of payment. Consequently, it failed to discharge the onus
probandi thereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner
Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional
income in the form of the 13th month pay to employees not already receiving
the same43 so as "to further protect the level of real wages from the ravages of
world-wide inflation."44 Clearly, as additional income, the 13th month pay is
included in the definition of wage under Article 97(f) of the Labor Code, to
wit:
(f) "Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms
of money whether fixed or ascertained on a time, task, piece , or
commission basis, or other method of calculating the same, which
is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or
for services rendered or to be rendered and includes the fair and
reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the
employer to the employee…"
from which an employer is prohibited under Article 11345 of the same Code
from making any deductions without the employee's knowledge and consent.
In the instant case, private respondent failed to show that the deduction of the
SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th
month pay was authorized by the latter. The lack of authority to deduct is
further bolstered by the fact that petitioner Virgilio Agabon included the same
as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the
Labor Arbiter ordering the private respondent to pay each of the petitioners
holiday pay for four regular holidays from 1996 to 1998, in the amount of
P6,520.00, service incentive leave pay for the same period in the amount of
P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998
in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The
decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No.
63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their
work, and ordering private respondent to pay each of the petitioners holiday
pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in the amount of P3,255.00
and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the
amount of P2,150.00 is AFFIRMED with the MODIFICATION that private
respondent Riviera Home Improvements, Inc. is further ORDERED to pay
each of the petitioners the amount of P30,000.00 as nominal damages for non-
compliance with statutory due process.
No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez,
Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna,
Tinga, Chico-Nazario, and Garcia, JJ., concur.
SEPARATE OPINION
TINGA, J:
I concur in the result, the final disposition of the petition being correct. There
is no denying the importance of the Court's ruling today, which should be
considered as definitive as to the effect of the failure to render the notice and
hearing required under the Labor Code when an employee is being dismissed
for just causes, as defined under the same law. The Court emphatically
reaffirms the rule that dismissals for just cause are not invalidated due to the
failure of the employer to observe the proper notice and hearing requirements
under the Labor Code. At the same time, The Decision likewise establishes
that the Civil Code provisions on damages serve as the proper framework for
the appropriate relief to the employee dismissed for just cause if the notice-
hearing requirement is not met. Serrano v. NLRC,1 insofar as it is controlling
in dismissals for unauthorized causes, is no longer the controlling precedent.
Any and all previous rulings and statements of the Court inconsistent with
these determinations are now deemed inoperative.
My views on the questions raised in this petition are comprehensive, if I may
so in all modesty. I offer this opinion to discuss the reasoning behind my
conclusions, pertaining as they do to questions of fundamental importance.
Prologue
The factual backdrop of the present Petition for Review is not novel.
Petitioners claim that they were illegally dismissed by the respondents, who
allege in turn that petitioners had actually abandoned their employment. There
is little difficulty in upholding the findings of the NRLC and the Court of
Appeals that petitioners are guilty of abandonment, one of the just causes for
termination under the Labor Code. Yet, the records also show that the
employer was remiss in not giving the notice required by the Labor Code;
hence, the resultant controversy as to the legal effect of such failure vis-à-
vis the warranted dismissal.
Ostensibly, the matter has been settled by our decision in Serrano2, wherein
the Court ruled that the failure to properly observe the notice requirement did
not render the dismissal, whether for just or authorized causes, null and void,
for such violation was not a denial of the constitutional right to due process,
and that the measure of appropriate damages in such cases ought to be the
amount of wages the employee should have received were it not for the
termination of his employment without prior notice.3 Still, the Court has, for
good reason, opted to reexamine the so-called Serrano doctrine through the
present petition
Antecedent Facts
Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in
the manufacture and installation of gypsum board and cornice. In January of
1992, the Agabons were hired in January of 1992 as cornice installers by
Riviera Home. According to their personnel file with Riviera Home, the
Agabon given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk
Subdivision, P-II Parañaque City, Metro Manila.4
It is not disputed that sometime around February 1999, the Agabons stopped
rendering services for Riviera Home. The Agabons allege that beginning on
23 February 1999, they stopped receiving assignments from Riviera
Home.5 When they demanded an explanation, the manager of Riviera Homes,
Marivic Ventura, informed them that they would be hired again, but on a
"pakyaw" (piece-work) basis. When the Agabons spurned this proposal,
Riviera Homes refused to continue their employment under the original terms
and agreement.6 Taking affront, the Agabons filed a complaint for illegal
dismissal with the National Labor Relations Commission ("NLRC").
Riviera Homes adverts to a different version of events leading to the filing of
the complaint for illegal dismissal. It alleged that in the early quarter of 1999,
the Agabons stopped reporting for work with Riviera. Two separate letters
dated 10 March 1999, were sent to the Agabons at the address indicated in
their personnel file. In these notices, the Agabons were directed to report for
work immediately.7 However, these notices were returned unserved with the
notation "RTS Moved." Then, in June of 1999, Virgilio Agabon informed
Riviera Homes by telephone that he and Jenny Agabon were ready to return to
work for Riviera Homes, on the condition that their wages be first adjusted.
On 18 June 1999, the Agabons went to Riviera Homes, and in a meeting with
management, requested a wage increase of up to Two Hundred Eighty Pesos
(P280.00) a day. When no affirmative response was offered by Riviera
Homes, the Agabons initiated the complaint before the NLRC.8
In their Position Paper, the Agabons likewise alleged that they were required
to work even on holidays and rest days, but were never paid the legal holiday
pay or the premium pay for holiday or rest day. They also asserted that they
were denied Service Incentive Leave pay, and that Virgilio Agabon was not
given his thirteenth (13th) month pay for the year 1998.9
After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered
a Decision dated 28 December 1999, finding the termination of the Agabons
illegal, and ordering Riviera Homes to pay backwages in the sum of Fifty Six
Thousand Two Hundred Thirty One Pesos and Ninety Three Centavos
(P56,231.93) each. The Labor Arbiter likewise ordered, in lieu of
reinstatement, the payment of separation pay of one (1) month pay for every
year of service from date of hiring up to 29 November 1999, as well as the
payment of holiday pay, service incentive leave pay, and premium pay for
holiday and restday, plus thirteenth (13th) month differential to Virgilio
Agabon.10
In so ruling, the Labor Arbiter declared that Riviera Homes was unable to
satisfactorily refute the Agabons' claim that they were no longer given work to
do after 23 February 1999 and that their rehiring was only on "pakyaw" basis.
The Labor Arbiter also held that Riviera Homes failed to comply with the
notice requirement, noting that Riviera Homes well knew of the change of
address of the Agabons, considering that the identification cards it issued
stated a different address from that on the personnel file.11 The Labor Arbiter
asserted the principle that in all termination cases, strict compliance by the
employer with the demands of procedural and substantive due process is a
condition sine qua non for the same to be declared valid.12
On appeal, the NLRC Second Division set aside the Labor
Arbiter's Decision and ordered the dismissal of the complaint for lack of
merit.13 The NLRC held that the Agabons were not able to refute the assertion
that for the payroll period ending on 15 February 1999, Virgilio and Jenny
Agabon worked for only two and one-half (2½) and three (3) days,
respectively. It disputed the earlier finding that Riviera Homes had known of
the change in address, noting that the address indicated in the
identification cards was not the Agabons, but that of the persons who should
be notified in case of emergency concerning the employee.14 Thus, proper
service of the notice was deemed to have been accomplished. Further, the
notices evinced good reason to believe that the Agabons had not been
dismissed, but had instead abandoned their jobs by refusing to report for work.
In support of its conclusion that the Agabons had abandoned their work, the
NLRC also observed that the Agabons did not seek reinstatement, but only
separation pay. While the choice of relief was premised by the Agabons on
their purported strained relations with Riviera Homes, the NLRC pointed out
that such claim was amply belied by the fact that the Agabons had actually
sought a conference with Riviera Homes in June of 1999. The NLRC likewise
found that the failure of the Labor Arbiter to justify the award of extraneous
money claims, such as holiday and service incentive leave pay, confirmed that
there was no proof to justify such claims.
A Petition for Certiorari  was promptly filed with the Court of Appeals by the
Agabons, imputing grave abuse of discretion on the part of the NLRC in
dismissing their complaint for illegal dismissal. In a Decision15 dated 23
January 2003, the Court of Appeals affirmed the finding that the Agabons had
abandoned their employment. It noted that the two elements constituting
abandonment had been established, to wit: the failure to report for work or
absence without valid justifiable reason, and; a clear intention to sever the
employer-employee relationship. The intent to sever the employer-employee
relationship was buttressed by the Agabon's choice to seek not reinstatement,
but separation pay. The Court of Appeals likewise found that the service of
the notices were valid, as the Agabons did not notify Riviera Homes of their
change of address, and thus the failure to return to work despite notice
amounted to abandonment of work.
However, the Court of Appeals reversed the NLRC as regards the denial of
the claims for holiday pay, service incentive leave pay, and the balance of
Virgilio Agabon's thirteenth (13th) month pay. It ruled that the failure to
adduce proof in support thereof was not fatal and that the burden of proving
that such benefits had already been paid rested on Riviera Homes.16 Given that
Riviera Homes failed to present proof of payment to the Agabons of their
holiday pay and service incentive leave pay for the years 1996, 1997 and
1998, the Court of Appeals chose to believe that such benefits had not actually
been received by the employees. It also ruled that the apparent deductions
made by Riviera Homes on the thirteenth (13th) month pay of Virgilio
Agabon violated Section 10 of the Rules and Regulations Implementing
Presidential Decree No. 851.17 Accordingly, Riviera Homes was ordered to
pay the Agabons holiday for four (4) regular holidays in 1996, 1997 and 1998,
as well as their service incentive leave pay for said years, and the balance of
Virgilio Agabon's thirteenth (13th) month pay for 1998 in the amount of Two
Thousand One Hundred Fifty Pesos (P2,150.00).18
In their Petition for Review, the Agabons claim that they had been illegally
dismissed, reasserting their version of events, thus: (1) that they had not been
given new assignments since 23 February 1999; (2) that they were told that
they would only be re-hired on a "pakyaw" basis, and; (3) that Riviera Homes
had knowingly sent the notices to their old address despite its knowledge of
their change of address as indicated in the identification cards. 19 Further, the
Agabons note that only one notice was sent to each of them, in violation of the
rule that the employer must furnish two written notices before termination —
the first to apprise the employee of the cause for which dismissal is sought,
and the second to notify the employee of the decision of dismissal.20 The
Agabons likewise maintain that they did not seek reinstatement owing to the
strained relations between them and Riviera Homes.
The Agabons present to this Court only one issue, i.e.: whether or not they
were illegally dismissed from their employment.21 There are several
dimensions though to this issue which warrant full consideration.
The Abandonment Dimension
Review of Factual Finding of Abandonment
As the Decision points out, abandonment is characterized by the failure to
report for work or absence without valid or justifiable reason, and a clear
intention to sever the employer-employee relationship. The question of
whether or not an employee has abandoned employment is essentially a
factual issue.22 The NLRC and the Court of Appeals, both appropriate triers of
fact, concluded that the Agabons had actually abandoned their employment,
thus there is little need for deep inquiry into the correctness of this factual
finding. There is no doubt that the Agabons stopped reporting for work
sometime in February of 1999. And there is no evidence to support their
assertion that such absence was due to the deliberate failure of Riviera Homes
to give them work. There is also the fact, as noted by the NLRC and the Court
of Appeals, that the Agabons did not pray for reinstatement, but only for
separation
pay and money claims.23 This failure indicates their disinterest in maintaining
the employer-employee relationship and their unabated avowed intent to sever
it. Their excuse that strained relations between them and Riviera Homes
rendered reinstatement no longer feasible was hardly given credence by the
NLRC and the Court of Appeals.24
The contrary conclusion arrived at by the Labor Arbiter as regards
abandonment is of little bearing to the case. All that the Labor Arbiter said on
that point was that Riviera Homes was not able to refute the Agabons' claim
that they were terminated on 23 February 1999.25 The Labor Arbiter did not
explain why or how such finding was reachhy or how such finding was
reachhe Agabons was more credible than that of Riviera Homes'. Being bereft
of reasoning, the conclusion deserves scant consideration.
Compliance with Notice Requirement
At the same time, both the NLRC and the Court of Appeals failed to consider
the apparent fact that the rules governing notice of termination were not
complied with by Riviera Homes. Section 2, Book V, Rule XXIII of the
Omnibus Rules Implementing the Labor Code (Implementing Rules)
specifically provides that for termination of employment based on just causes
as defined in Article 282, there must be: (1) written notice served on the
employee specifying the grounds for termination and giving employee
reasonable opportunity to explain his/her side; (2) a hearing or conference
wherein the employee, with the assistance of counsel if so desired, is given
opportunity to respond to the charge, present his evidence or rebut evidence
presented against him/her; and (3) written notice of termination served on the
employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify termination.
At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules
does not require strict compliance with the above procedure, but only that the
same be "substantially observed."
Riviera Homes maintains that the letters it sent on 10 March 1999 to the
Agabons sufficiently complied with the notice rule. These identically worded
letters noted that the Agabons had stopped working without permission that
they failed to return for work despite having been repeatedly told to report to
the office and resume their employment.26 The letters ended with an invitation
to the Agabons to report back to the office and return to work.27
The apparent purpose of these letters was to advise the Agabons that they
were welcome to return back to work, and not to notify them of the grounds of
termination. Still, considering that only substantial compliance with the notice
requirement is required, I am prepared to say that the letters sufficiently
conform to the first notice required under the Implementing Rules. The
purpose of the first notice is to duly inform the employee that a particular
transgression is being considered against him or her, and that an opportunity is
being offered for him or her to respond to the charges. The letters served the
purpose of informing the Agabons of the pending matters beclouding their
employment, and extending them the opportunity to clear the air.
Contrary to the Agabons' claim, the letter-notice was correctly sent to the
employee's last known address, in compliance with the Implementing Rules.
There is no dispute that these letters were not actually received by the
Agabons, as they had apparently moved out of the address indicated therein.
Still, the letters were sent to what Riviera Homes knew to be the Agabons' last
known address, as indicated in their personnel file. The Agabons insist that
Riviera Homes had known of the change of address, offering as proof their
company IDs which purportedly print out their correct new address. Yet, as
pointed out by the NLRC and the Court of Appeals, the addresses indicated in
the IDs are not the Agabons, but that of the person who is to be notified in
case on emergency involve either or both of the Agabons.
The actual violation of the notice requirement by Riviera Homes lies in its
failure to serve on the Agabons the second notice which should inform them
of termination. As the Decision notes, Riviera Homes' argument that sending
the second notice was useless due to the change of address is inutile, since the
Implementing Rules plainly require that the notice of termination should be
served at the employee's last known address.
The importance of sending the notice of termination should not be trivialized.
The termination letter serves as indubitable proof of loss of employment, and
its receipt compels the employee to evaluate his or her next options. Without
such notice, the employee may be left uncertain of his fate; thus, its service is
mandated by the Implementing Rules. Non-compliance with the notice rule, as
evident in this case, contravenes the Implementing Rules. But does the
violation serve to invalidate the Agabons' dismissal for just cause?
The So-Called Constitutional Law Dimension
Justices Puno and Panganiban opine that the Agabons should be reinstated as
a consequence of the violation of the notice requirement. I respectfully
disagree, for the reasons expounded below.
Constitutional Considerations
Of Due Process and the Notice-Hearing
Requirement in Labor Termination Cases
Justice Puno proposes that the failure to render due notice and hearing prior to
dismissal for just cause constitutes a violation of the constitutional right to due
process. This view, as acknowledged by Justice Puno himself, runs contrary to
the Court's pronouncement in Serrano v. NLRC28 that the absence of due
notice and hearing prior to dismissal, if for just cause, violates statutory due
process.
The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent
overview of the history of the doctrine:
Indeed, to contend that the notice requirement in the Labor Code is
an aspect of due process is to overlook the fact that Art. 283 had its
origin in Art. 302 of the Spanish Code of Commerce of 1882
which gave either party to the employer-employee relationship the
right to terminate their relationship by giving notice to the other
one month in advance. In lieu of notice, an employee could be laid
off by paying him a mesada equivalent to his salary for one month.
This provision was repealed by Art. 2270 of the Civil Code, which
took effect on August 30, 1950. But on June 12, 1954, R.A. No.
1052, otherwise known as the Termination Pay Law, was enacted
reviving the mesada. On June 21, 1957, the law was amended by
R.A. No. 1787 providing for the giving of advance notice for every
year of service.29
Under Section 1 of the Termination Pay Law, an employer could dismiss an
employee without just cause by serving written notice on the employee at least
one month in advance or one-half month for every year of service of the
employee, whichever was longer.30 Failure to serve such written notice
entitled the employee to compensation equivalent to his salaries or wages
corresponding to the required period of notice from the date of termination of
his employment.
However, there was no similar written notice requirement under the
Termination Pay Law if the dismissal of the employee was for just cause. The
Court, speaking through Justice JBL Reyes, ruled in Phil. Refining Co. v.
Garcia:31
[Republic] Act 1052, as amended by Republic Act 1787, impliedly
recognizes the right of the employer to dismiss his employees
(hired without definite period) whether for just case, as therein
defined or enumerated, or without it. If there be just cause, the
employer is not required to serve any notice of discharge nor to
disburse termination pay to the employee. xxx32
Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive
to the notion that termination for just cause without notice or hearing violated
the constitutional right to due process. Nonetheless, the Court recognized an
award of damages as the appropriate remedy. In Galsim v. PNB,33 the Court
held:
Of course, the employer's prerogative to dismiss employees hired
without a definite period may be with or without cause. But if the
manner in which such right is exercised is abusive, the employer
stands to answer to the dismissed employee for damages.34
The Termination Pay Law was among the repealed laws with the enactment of
the Labor Code in 1974. Significantly, the Labor Code, in its inception, did
not require notice or hearing before an employer could terminate an employee
for just cause. As Justice Mendoza explained:
Where the termination of employment was for a just cause, no
notice was required to be given to the employee. It was only on
September 4, 1981 that notice was required to be given even where
the dismissal or termination of an employee was for cause. This
was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the
Labor Code. And it was still much later when the notice
requirement was embodied in the law with the amendment of Art.
277(b) by R.A. No. 6715 on March 2, 1989.35
It cannot be denied though that the thinking that absence of notice or hearing
prior to termination constituted a constitutional violation has gained a
jurisprudential foothold with the Court. Justice Puno, in his Dissenting
Opinion, cites several cases in support of this theory, beginning
with Batangas Laguna Tayabas Bus Co. v. Court of Appeals36 wherein we
held that "the failure of petitioner to give the private respondent the benefit of
a hearing before he was dismissed constitutes an infringement on his
constitutional right to due process of law.37
Still, this theory has been refuted, pellucidly and effectively to my mind, by
Justice Mendoza's disquisition in Serrano, thus:
xxx There are three reasons why, on the other hand, violation by
the employer of the notice requirement cannot be considered a
denial of due process resulting in the nullity of the employee's
dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a
limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of employment
under the Labor Code. This is plain from the text of Art. III, §1 of
 the Constitution, viz.: "No person shall be deprived of life, liberty,
or property without due process of law. . . ." The reason is simple:
Only the State has authority to take the life, liberty, or property of
the individual. The purpose of the Due Process Clause is to ensure
that the exercise of this power is consistent with what are
considered civilized methods.
The second reason is that 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
for requiring 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 determine whether economic causes do exist
justifying the termination of his employment.
xxx
The third 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 case in termination of
employment for a just cause under Art. 282 (i.e., serious
misconduct or willful disobedience by the employee of the lawful
orders of the employer, gross and habitual neglect of duties, fraud
or willful breach of trust of the employer, commission of crime
against the employer or the latter's immediate family or duly
authorized representatives, or other analogous cases).38
The Court in the landmark case of People v. Marti39 clarified the proper
dimensions of the Bill of Rights.
That the Bill of Rights embodied in the Constitution is not meant
to be invoked against acts of private individuals finds support in
the deliberations of the Constitutional Commission. True, the
liberties guaranteed by the fundamental law of the land must
always be subject to protection. But protection against whom?
Commissioner Bernas in his sponsorship speech in the Bill of
Rights answers the query which he himself posed, as follows:
"First, the general reflections. The protection of
fundamental liberties in the essence of constitutional
democracy. Protection against whom? Protection
against the state. The Bill of Rights governs the
relationship between the individual and the state. Its
concern is not the relation between individuals, between
a private individual and other individuals. What the Bill
of Rights does is to declare some forbidden zones in the
private sphere inaccessible to any power holder."
(Sponsorship Speech of Commissioner Bernas; Record
of the Constitutional Commission, Vol. 1, p. 674; July
17,1986; Italics supplied)40
I do not doubt that requiring notice and hearing prior to termination for just
cause is an admirable sentiment borne out of basic equity and fairness. Still, it
is not a constitutional requirement that can impose itself on the relations of
private persons and entities. Simply put, the Bill of Rights affords protection
against possible State oppression against its citizens, but not against an unjust
or repressive conduct by a private party towards another.
Justice Puno characterizes the notion that constitutional due process limits
government action alone as "passé," and adverts to nouvelle vague theories
which assert that private conduct may be restrained by constitutional due
process. His dissent alludes to the American experience making references to
the post-Civil War/pre-World War II era when the US Supreme Court seemed
overly solicitous to the rights of big business over those of the workers.
Theories, no matter how entrancing, remain theoretical unless adopted by
legislation, or more controversially, by judicial opinion. There were a few
decisions of the US Supreme Court that, ostensibly, imposed on private
persons the values of the constitutional guarantees. However, in deciding the
cases, the American High Court found it necessary to link the actors to
adequate elements of the "State" since the Fourteenth Amendment plainly
begins with the words "No State shall…"41
More crucially to the American experience, it had become necessary to pass
legislation in order to compel private persons to observe constitutional values.
While the equal protection clause was deemed sufficient by the Warren Court
to bar racial segregation in public facilities, it necessitated enactment of the
Civil Rights Acts of 1964 to prohibit segregation as enforced by private
persons within their property. In this jurisdiction, I have trust in the statutory
regime that governs the correction of private wrongs. There are thousands of
statutes, some penal or regulatory in nature, that are the source of actionable
claims against private persons. There is even no stopping the State, through
the legislative cauldron, from compelling private individuals, under pain of
legal sanction, into observing the norms ordained in the Bill of Rights.
Justice Panganiban's Separate Opinion asserts that corporate behemoths and
even individuals may now be sources of abuses and threats to human rights
and liberties.42 The concern is not unfounded, but appropriate remedies exist
within our statutes, and so resort to the constitutional trump card is not
necessary. Even if we were to engage the premise, the proper juristic exercise
should be to examine whether an employer has taken the attributes of the State
so that it could be compelled by the Constitution to observe the proscriptions
of the Bill of Rights. But the strained analogy simply does not square since the
attributes of an employer are starkly incongruous with those of the State.
Employers plainly do not possess the awesome powers and the tremendous
resources which the State has at its command.
The differences between the State and employers are not merely literal, but
extend to their very essences. Unlike the State, the raison d'etre of employers
in business is to accumulate profits. Perhaps the State and the employer are
similarly capacitated to inflict injury or discomfort on persons under their
control, but the same power is also possessed by a school principal, hospital
administrator, or a religious leader, among many others. Indeed, the scope and
reach of authority of an employer pales in comparison with that of the State.
There is no basis to conclude that an employer, or even the employer class,
may be deemed a de facto state and on that premise, compelled to observe the
Bill of Rights. There is simply no nexus in their functions, distaff as they are,
that renders it necessary to accord the same jurisprudential treatment.
It may be so, as alluded in the dissent of Justice Puno, that a conservative
court system overly solicitous to the concerns of business may consciously gut
away at rights or privileges owing to the labor sector. This certainly happened
before in the United States in the early part of the twentieth century, when the
progressive labor legislation such as that enacted during President Roosevelt's
New Deal regime — most of them addressing problems of labor — were
struck down by an arch-conservative Court.43 The preferred rationale then was
to enshrine within the constitutional order business prerogatives, rendering
them superior to the express legislative intent. Curiously, following its judicial
philosophy at the time the U. S. Supreme Court made due process guarantee
towards employers prevail over the police power to defeat the cause of labor.44
Of course, this Court should not be insensate to the means and methods by
which the entrenched powerful class may maneuver the socio-political system
to ensure self-preservation. However, the remedy to rightward judicial bias is
not leftward judicial bias. The more proper judicial attitude is to give due
respect to legislative prerogatives, regardless of the ideological sauce they are
dipped in.
While the Bill of Rights maintains a position of primacy in the constitutional
hierarchy,45 it has scope and limitations that must be respected and asserted by
the Court, even though they may at times serve somewhat bitter ends. The
dissenting opinions are palpably distressed at the effect of the Decision, which
will undoubtedly provoke those reflexively sympathetic to the labor class. But
haphazard legal theory cannot be used to justify the obverse result. The
adoption of the dissenting views would give rise to all sorts of absurd
constitutional claims. An excommunicated Catholic might demand his/her
reinstatement into the good graces of the Church and into communion on the
ground that excommunication was violative of the constitutional right to due
process. A celebrity contracted to endorse Pepsi Cola might sue in court to
void a stipulation that prevents him/her from singing the praises of Coca Cola
once in a while, on the ground that such stipulation violates the constitutional
right to free speech. An employee might sue to prevent the employer from
reading outgoing e-mail sent through the company server using the company
e-mail address, on the ground that the constitutional right to privacy of
communication would be breached.
The above concerns do not in anyway serve to trivialize the interests of labor.
But we must avoid overarching declarations in order to justify an end result
beneficial to labor. I dread the doctrinal acceptance of the notion that the Bill
of Rights, on its own, affords protection and sanctuary not just from the acts
of State but also from the conduct of private persons. Natural and juridical
persons would hesitate to interact for fear that a misstep could lead to their
being charged in court as a constitutional violator. Private institutions that
thrive on their exclusivity, such as churches or cliquish groups, could be
forced to renege on their traditional tenets, including vows of secrecy and the
like, if deemed by the Court as inconsistent with the Bill of Rights. Indeed,
that fundamental right of all private persons to be let alone would be forever
diminished because of a questionable notion that contravenes with centuries of
political thought.
It is not difficult to be enraptured by novel legal ideas. Their characterization
is susceptible to the same marketing traps that hook consumers to new
products. With the help of unique wrapping, a catchy label, and testimonials
from professed experts from exotic lands, a malodorous idea may gain wide
acceptance, even among those self-possessed with their own heightened
senses of perception. Yet before we join the mad rush in order to proclaim a
theory as "brilliant," a rigorous test must first be employed to determine
whether it complements or contradicts our own system of laws and juristic
thought. Without such analysis, we run the risk of abnegating the doctrines we
have fostered for decades and the protections they may have implanted into
our way of life.
Should the Court adopt the view that the Bill of Rights may be invoked to
invalidate actions by private entities against private individuals, the Court
would open the floodgates to, and the docket would be swamped with,
litigations of the scurrilous sort. Just as patriotism is the last refuge of
scoundrels, the broad constitutional claim is the final resort of the desperate
litigant.
Constitutional Protection of Labor
The provisions of the 1987 Constitution affirm the primacy of labor and
advocate a multi-faceted state policy that affords, among others, full
protection to labor. Section 18, Article II thereof provides:
The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
Further, Section 3, Article XIII states:
The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and
equal employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law.
They shall be entitled to security to tenure, humane conditions of
work, and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits as
may be provided by law.
The State shall promote the principle of shared responsibility
between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and
shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and
employers, recognizing the right of labor to its just share in the
fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth.
The constitutional enshrinement of the guarantee of full protection of labor is
not novel to the 1987 Constitution. Section 6, Article XIV of the 1935
Constitution reads:
The State shall afford protection to labor, especially to working
women, and minors, and shall regulate the relations between the
landowner and tenant, and between labor and capital in industry
and in agriculture. The State may provide for compulsory
arbitration.
Similarly, among the principles and state policies declared in the 1973
Constitution, is that provided in Section 9, Article II thereof:
The State shall afford full protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate the
relations between workers and employers. The State shall assure
the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work. The
State may provide for compulsory arbitration.
On the other hand, prior to the 1973 Constitution, the right to security of
tenure could only be found in legislative enactments and their respective
implementing rules and regulations. It was only in the 1973 Constitution that
security of tenure was elevated as a constitutional right. The development of
the concept of security of tenure as a constitutionally recognized right was
discussed by this Court in BPI Credit Corporation v. NLRC,46 to wit:
The enthronement of the worker's right to security or tenure in our
fundamental law was not achieved overnight. For all its liberality
towards labor, our 1935 Constitution did not elevate the right as a
constitutional right. For a long time, the worker's security of tenure
had only the protective mantle of statutes and their interpretative
rules and regulations. It was as uncertain protection that sometimes
yielded to the political permutations of the times. It took labor
nearly four decades of sweat and tears to persuade our people thru
their leaders, to exalt the worker's right to security of tenure as a
sacrosanct constitutional right. It was Article II, section 2 [9] of our
1973 Constitution that declared as a policy that the State shall
assure the right of worker's to security tenure. The 1987
Constitution is even more solicitous of the welfare of labor.
Section 3 of its Article XIII mandates that the State shall afford full
protection to labor and declares that all workers shall be entitled to
security of tenure. Among the enunciated State policies are the
promotion of social justice and a just and dynamic social order. In
contrast, the prerogative of management to dismiss a worker, as an
aspect of property right, has never been endowed with a
constitutional status.
The unequivocal constitutional declaration that all workers shall be
entitled to security of tenure spurred our lawmakers to strengthen
the protective walls around this hard earned right. The right was
protected from undue infringement both by our substantive and
procedural laws. Thus, the causes for dismissing employees were
more defined and restricted; on the other hand, the procedure of
termination was also more clearly delineated. These substantive
and procedural laws must be strictly complied with before a
worker can be dismissed from his employment.47
It is quite apparent that the constitutional protection of labor was entrenched
more than eight decades ago, yet such did not prevent this Court in the past
from affirming dismissals for just cause without valid notice. Nor was there
any pretense made that this constitutional maxim afforded a laborer a positive
right against dismissal for just cause on the ground of lack of valid prior
notice. As demonstrated earlier, it was only after the enactment of the Labor
Code that the doctrine relied upon by the dissenting opinions became en
vogue. This point highlights my position that the violation of the notice
requirement has statutory moorings, not constitutional.
It should be also noted that the 1987 Constitution also recognizes the principle
of shared responsibility between workers and employers, and the right of
enterprise to reasonable returns, expansion, and growth. Whatever perceived
imbalance there might have been under previous incarnations of the provision
have been obviated by Section 3, Article XIII.
In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption
that all constitutional provisions are self-executing. We reasoned that to
declare otherwise would result in the pernicious situation wherein by mere
inaction and disregard by the legislature, constitutional mandates would be
rendered ineffectual. Thus, we held:
As against constitutions of the past, modern constitutions have
been generally ed upon a different principle and have often become
in effect extensive codes of laws intended to operate directly upon
the people in a manner similar to that of statutory enactments, and
the function of constitutional conventions has evolved into one
more like that of a legislative body. Hence, unless it is expressly
provided that a legislative act is necessary to enforce a
constitutional mandate, the presumption now is that all provisions
of the constitution are self-executing. If the constitutional
provisions are treated as requiring legislation instead of self-
executing, the legislature would have the power to ignore and
practically nullify the mandate of the fundamental law. This can be
cataclysmic. That is why the prevailing view is, as it has always
been, that —
. . . in case of doubt, the Constitution should be
considered self-executing rather than non-self-
executing. . . . Unless the contrary is clearly intended,
the provisions of the Constitution should be considered
self-executing, as a contrary rule would give the
legislature discretion to determine when, or whether,
they shall be effective. These provisions would be
subordinated to the will of the lawmaking body, which
could make them entirely meaningless by simply
refusing to pass the needed implementing statute.49
In further discussing self-executing provisions, this Court stated that:
In self-executing constitutional provisions, the legislature may still
enact legislation to facilitate the exercise of powers directly
granted by the constitution, further the operation of such a
provision, prescribe a practice to be used for its enforcement,
provide a convenient remedy for the protection of the rights
secured or the determination thereof, or place reasonable
safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for
the violation of a self-executing constitutional provision does not
render such a provision ineffective in the absence of such
legislation. The omission from a constitution of any express
provision for a remedy for enforcing a right or liability is not
necessarily an indication that it was not intended to be self-
executing. The rule is that a self-executing provision of the
constitution does not necessarily exhaust legislative power on the
subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it
more available. Subsequent legislation however does not
necessarily mean that the subject constitutional provision is not, by
itself, fully enforceable.50
Thus, the constitutional mandates of protection to labor and security of tenure
may be deemed as self-executing in the sense that these are automatically
acknowledged and observed without need for any enabling legislation.
However, to declare that the constitutional provisions are enough to guarantee
the full exercise of the rights embodied therein, and the realization of ideals
therein expressed, would be impractical, if not unrealistic. The espousal of
such view presents the dangerous tendency of being overbroad and
exaggerated. The guarantees of "full protection to labor" and "security of
tenure", when examined in isolation, are facially unqualified, and the broadest
interpretation possible suggests a blanket shield in favor of labor against any
form of removal regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion, doubtless-but
still hardly within the contemplation of the framers. Subsequent legislation is
still needed to define the parameters of these guaranteed rights to ensure the
protection and promotion, not only the rights of the labor sector, but of the
employers' as well. Without specific and pertinent legislation, judicial bodies
will be at a loss, formulating their own conclusion to approximate at least the
aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source
of a positive enforceable right to stave off the dismissal of an employee for
just cause owing to the failure to serve proper notice or hearing. As
manifested by several framers of the 1987 Constitution, the provisions on
social justice require legislative enactments for their enforceability. This is
reflected in the record of debates on the social justice provisions of the
Constitution:
MS. [FELICITAS S.] AQUINO: We appreciate the concern of the
Commissioner. But this Committee [on Social Justice] has actually
become the forum already of a lot of specific grievances and
specific demands, such that understandably, we may have
been, at one time or another, dangerously treading into the
functions of legislation. Our only plea to the Commission is to
focus our perspective on the matter of social justice and its rightful
place in the Constitution. What we envision here is a mandate
specific enough that would give impetus for statutory
implementation. We would caution ourselves in terms of the
judicious exercise of self-censorship against treading into the
functions of legislation. (emphasis supplied)51
xxx
[FLORENZ D.] REGALADO: I notice that the 1935 Constitution
had only one section on social justice; the same is true with the
1973 Constitution. But they seem to have stood us in good stead;
and I am a little surprised why, despite that attempt at self-
censorship, there are certain provisions here which are
properly for legislation.52
xxx
BISHOP [TEODORO S.] BACANI: [I] think the distinction that
was given during the presentation of the provisions on the Bill of
Rights by Commissioner Bernas is very apropos here. He spoke of
self-executing rights which belong properly to the Bill of
Rights, and then he spoke of a new body of rights which are
more of claims and that these have come about largely through
the works of social philosophers and then the teaching of the
Popes. They focus on the common good and hence, it is not as
easy to pinpoint precisely these rights nor the situs of the
rights. And yet, they exist in relation to the common good.53
xxx
MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of
this kind of collaboration will be left to legislation but the
important thing now is the conservation, utilization or
maximization of the very limited resources. xxx
[RICARDO J.] ROMULO: The other problem is that, by and large,
government services are inefficient. So, this is a problem all by
itself. On Section 19, where the report says that people's
organizations as a principal means of empowering the people to
pursue and protect through peaceful means…, I do not suppose
that the Committee would like to either preempt or exclude the
legislature, because the concept of a representative and
democratic system really is that the legislature is normally the
principal means.
[EDMUNDO G.] GARCIA: That is correct. In fact, people
cannot even dream of influencing the composition or the
membership of the legislature, if they do not get organized. It
is, in fact, a recognition of the principle that unless a citizenry is
organized and mobilized to pursue its ends peacefully, then it
cannot really participate effectively.54
There is no pretense on the part of the framers that the provisions on Social
Justice, particularly Section 3 of Article XIII, are self-executory. Still,
considering the rule that provisions should be deemed self-executing if
enforceable without further legislative action, an examination of Section 3 of
Article XIII is warranted to determine whether it is complete in itself as a
definitive law, or if it needs future legislation for completion and
enforcement.55 Particularly, we should inquire whether or not the provision
voids the dismissal of a laborer for just cause if no valid notice or hearing is
attendant.
Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant
comment on Section 3, Article XIII of the 1987 Constitution:
The [cluster] of rights guaranteed in the second paragraph are the
right "to security of tenure, humane conditions of work, and a
living wage." Again, although these have been set apart by a period
(.) from the next sentence and are therefore not modified by the
final phrase "as may be provided by law," it is not the intention to
place these beyond the reach of valid laws. xxx (emphasis
supplied)56
At present, the Labor Code is the primary mechanism to carry out the
Constitution's directives. This is clear from Article 357 under Chapter 1 thereof
which essentially restates the policy on the protection of labor as worded in
the 1973 Constitution, which was in force at the time of enactment of the
Labor Code. It crystallizes the fundamental law's policies on labor, defines the
parameters of the rights granted to labor such as the right to security of tenure,
and prescribes the standards for the enforcement of such rights in concrete
terms. While not infallible, the measures provided therein tend to ensure the
achievement of the constitutional aims.
The necessity for laws concretizing the constitutional principles on the
protection of labor is evident in the reliance placed upon such laws by the
Court in resolving the issue of the validity of a worker's dismissal. In cases
where that was the issue confronting the Court, it consistently recognized the
constitutional right to security of tenure and employed the standards laid down
by prevailing laws in determining whether such right was violated.58 The
Court's reference to laws other than the Constitution in resolving the issue of
dismissal is an implicit acknowledgment that the right to security of tenure,
while recognized in the Constitution, cannot be implemented uniformly absent
a law prescribing concrete standards for its enforcement.
As discussed earlier, the validity of an employee's dismissal in previous cases
was examined by the Court in accordance with the standards laid down by
Congress in the Termination Pay Law, and subsequently, the Labor Code and
the amendments thereto. At present, the validity of an employee's dismissal is
weighed against the standards laid down in Article 279, as well as Article 282
in relation to Article 277(b) of the Labor Code, for a dismissal for just cause,
and Article 283 for a dismissal for an authorized cause.
The Effect of Statutory Violation
Of Notice and Hearing
There is no doubt that the dismissal of an employee even for just cause,
without prior notice or hearing, violates the Labor Code. However, does such
violation necessarily void the dismissal?
Before I proceed with my discussion on dismissals for just causes, a brief
comment regarding dismissals for authorized cause under Article 283 of the
Labor Code. While the justiciable question in Serrano pertained to a dismissal
for unauthorized cause, the ruling therein was crafted as definitive to
dismissals for just cause. Happily, the Decision today does not adopt the same
unwise tack. It should be recognized that dismissals for just cause and
dismissals for authorized cause are governed by different provisions, entail
divergent requisites, and animated by distinct rationales. The language of
Article 283 expressly effects the termination for authorized cause to the
service of written notice on the workers and the Ministry of Labor at least one
(1) month before the intended date of termination. This constitutes an eminent
difference than dismissals for just cause, wherein the causal relation between
the notice and the dismissal is not expressly stipulated. The circumstances
distinguishing just and authorized causes are too markedly different to be
subjected to the same rules and reasoning in interpretation.
Since the present petition is limited to a question arising from a dismissal for
just cause, there is no reason for making any pronouncement regarding
authorized causes. Such declaration would be merely obiter, since they are
neither the law of the case nor dispositive of the present petition. When the
question becomes justiciable before this Court, we will be confronted with an
appropriate factual milieu on which we can render a more judicious
disposition of this admittedly important question.
B. Dismissal for Just Cause
There is no express provision in the Labor Code that voids a dismissal for just
cause on the ground that there was no notice or hearing. Under Section 279,
the employer is precluded from dismissing an employee except for a just
cause as provided in Section 282, or an authorized cause under Sections 283
and 284. Based on reading Section 279 alone, the existence of just cause by
itself is sufficient to validate the termination.
Just cause is defined by Article 282, which unlike Article 283, does not
condition the termination on the service of written notices. Still, the dissenting
opinions propound that even if there is just cause, a termination may be
invalidated due to the absence of notice or hearing. This view is anchored
mainly on constitutional moorings, the basis of which I had argued against
earlier. For determination now is whether there is statutory basis under the
Labor Code to void a dismissal for just cause due to the absence of notice or
hearing.
As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the
Labor Code was amended to enshrine into statute the twin requirements of
notice and hearing.59 Such requirements are found in Article 277 of the Labor
Code, under the heading "Miscellaneous Provisions." Prior to the amendment,
the notice-hearing requirement was found under the implementing rules issued
by the then Minister of Labor in 1981. The present-day implementing rules
likewise mandate that the standards of due process, including the requirement
of written notice and hearing, "be substantially observed."60
Indubitably, the failure to substantially comply with the standards of due
process, including the notice and hearing requirement, may give rise to an
actionable claim against the employer. Under Article 288, penalties may arise
from violations of any provision of the Labor Code. The Secretary of Labor
likewise enjoys broad powers to inquire into existing relations between
employers and employees. Systematic violations by management of the
statutory right to due process would fall under the broad grant of power to the
Secretary of Labor to investigate under Article 273.
However, the remedy of reinstatement despite termination for just cause is
simply not authorized by the Labor Code. Neither the Labor Code nor its
implementing rules states that a termination for just cause is voided because
the requirement of notice and hearing was not observed. This is not simply an
inadvertent semantic failure, but a conscious effort to protect the prerogatives
of the employer to dismiss an employee for just cause. Notably, despite the
several pronouncements by this Court in the past equating the notice-hearing
requirement in labor cases to a constitutional maxim, neither the legislature
nor the executive has adopted the same tack, even gutting the protection to
provide that substantial compliance with due process suffices.
The Labor Code significantly eroded management prerogatives in the hiring
and firing of employees. Whereas employees could be dismissed even without
just cause under the Termination Pay Law61, the Labor Code affords workers
broad security of tenure. Still, the law recognizes the right of the employer to
terminate for just cause. The just causes enumerated under the Labor Code ¾
serious misconduct or willful disobedience, gross and habitual neglect, fraud
or willful breach of trust, commission of a crime by the employee against the
employer, and other analogous causes ¾ are characterized by the harmful
behavior of an employee against the business or the person of the employer.
These just causes for termination are not negated by the absence of notice or
hearing. An employee who tries to kill the employer cannot be magically
absolved of trespasses just because the employer forgot to serve due notice. Or
a less extreme example, the gross and habitual neglect of an employee will not
be improved upon just because the employer failed to conduct a hearing prior
to termination.
In fact, the practical purpose of requiring notice and hearing is to afford the
employee the opportunity to dispute the contention that there was just cause in
the dismissal. Yet it must be understood – if a dismissed employee is
deprived of the right to notice and hearing, and thus denied the
opportunity to present countervailing evidence that disputes the finding
of just cause, reinstatement will be valid not because the notice and
hearing requirement was not observed, but because there was no just
cause in the dismissal. The opportunity to dispute the finding of the just
cause is readily available before the Labor Arbiter, and the subsequent levels
of appellate review. Again, as held in Serrano:
Even in cases of dismissal under Art. 282, the purpose for the requirement of
notice and hearing is not to comply with the Due Process Clause of the
Constitution. The time for notice and hearing is at the trial stage. Then that is
the time we speak of notice and hearing as the essence of procedural due
process. Thus, compliance by the employer with the notice requirement before
he dismisses an employee does not foreclose the right of the latter to question
the legality of his dismissal. As Art. 277(b) provides, "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. 62
The Labor Code presents no textually demonstrable commitment to invalidate
a dismissal for just cause due to the absence of notice or hearing. This is not
surprising, as such remedy will not restore the employer or employee into
equity. Absent a showing of integral causation, the mutual infliction of wrongs
does not negate either injury, but instead enforces two independent rights of
relief.
The Damages' Dimensions
Award for Damages Must Have Statutory Basis
The Court has grappled with the problem of what should be the proper
remedial relief of an employee dismissed with just cause, but not afforded
either notice or hearing. In a long line of cases, beginning with Wenphil Corp.
v. NLRC63 and up until Serrano in 2000, the Court had deemed an
indemnification award as sufficient to answer for the violation by the
employer against the employee. However, the doctrine was modified
in Serrano.
I disagree with Serrano insofar as it held that employees terminated for just
cause are to be paid backwages from the time employment was terminated
"until it is determined that the termination is for just cause because the failure
to hear him before he is dismissed renders the termination of his employment
without legal effect."64 Article 279 of the Labor Code clearly authorizes the
payment of backwages only if an employee is unjustly dismissed. A dismissal
for just cause is obviously antithetical to an unjust dismissal. An award for
backwages is not clearly warranted by the law.
The Impropriety of Award for Separation Pay
The formula of one month's pay for every year served does have statutory
basis. It is found though in the Labor Code though, not the Civil Code. Even
then, such computation is made for separation pay under the Labor Code. But
separation pay is not an appropriate as a remedy in this case, or in any case
wherein an employee is terminated for just cause. As Justice Vitug noted in
his separate opinion in Serrano, an employee whose employment is
terminated for a just cause is not entitled to the payment of separation
benefits.65 Separation pay is traditionally a monetary award paid as an
alternative to reinstatement which can no longer be effected in view of the
long passage of time or because of the realities of the situation. 66 However,
under Section 7, Rule 1, Book VI of the Omnibus Rules Implementing the
Labor Code, "[t]he separation from work of an employee for a just cause does
not entitle him to the termination pay provided in the Code."67 Neither does
the Labor Code itself provide instances wherein separation pay is warranted
for dismissals with just cause. Separation pay is warranted only for dismissals
for authorized causes, as enumerated in Article 283 and 284 of the Labor
Code.
The Impropriety of Equity Awards
Admittedly, the Court has in the past authorized the award of separation pay
for duly terminated employees as a measure of social justice, provided that the
employee is not guilty of serious misconduct reflecting on moral
character.68 This doctrine is inapplicable in this case, as the Agabons are guilty
of abandonment, which is the deliberate and unjustified refusal of an
employee to resume his employment. Abandonment is tantamount to serious
misconduct, as it constitutes a willful breach of the employer-employee
relationship without cause.
The award of separation pay as a measure of social justice has no statutory
basis, but clearly emanates from the Court's so-called "equity jurisdiction."
The Court's equity jurisdiction as a basis for award, no matter what form it
may take, is likewise unwarranted in this case. Easy resort to equity should be
avoided, as it should yield to positive rules which pre-empt and prevail over
such persuasions.69 Abstract as the concept is, it does not admit to definite and
objective standards.
I consider the pronouncement regarding the proper monetary awards in such
cases as Wenphil Corp. v. NLRC,70 Reta,71 and to a degree, even Serrano as
premised in part on equity. This decision is premised in part due to the
absence of cited statutory basis for these awards. In these cases, the Court
deemed an indemnity award proper without exactly saying where in statute
could such award be derived at. Perhaps, equity or social justice can be
invoked as basis for the award. However, this sort of arbitrariness,
indeterminacy and judicial usurpation of legislative prerogatives is precisely
the source of my discontent. Social justice should be the aspiration of all that
we do, yet I think it the more mature attitude to consider that it ebbs and flows
within our statutes, rather than view it as an independent source of funding.
Article 288 of the Labor Code as a Source of Liability
Another putative source of liability for failure to render the notice requirement
is Article 288 of the Labor Code, which states:
Article 288 states:
Penalties. — Except as otherwise provided in this Code, or unless
the acts complained of hinges on a question of interpretation or
implementation of ambiguous provisions of an existing collective
bargaining agreement, any violation of the provisions of this Code
declared to be unlawful or penal in nature shall be punished with a
fine of not less than One Thousand Pesos (P1,000.00) nor more
than Ten Thousand Pesos (P10,000.00), or imprisonment of not
less than three months nor more than three years, or both such fine
and imprisonment at the discretion of the court.
It is apparent from the provision that the penalty arises due to contraventions
of the provisions of the Labor Code. It is also clear that the provision comes
into play regardless of who the violator may be. Either the employer or the proper award of damages under the Civil Code in cases wherein the employer
employee may be penalized, or perhaps even officials tasked with failed to comply with statutory due process in dismissals for just cause.
implementing the Labor Code.
First. I believe that it can be maintained as a general rule, that failure to
However, it is apparent that Article 288 is a penal provision; hence, the comply with the statutory requirement of notice automatically gives rise to
prescription for penalties such as fine and imprisonment. The Article is also nominal damages, at the very least, even if the dismissal was sustained for just
explicit that the imposition of fine or imprisonment is at the "discretion of the cause.
court." Thus, the proceedings under the provision is penal in character. The
criminal case has to be instituted before the proper courts, and the Labor Code
Nominal damages are adjudicated in order that a right of a plaintiff which has
violation subject thereof duly proven in an adversarial proceeding. Hence,
been violated or invaded by another may be vindicated or recognized without
Article 288 cannot apply in this case and serve as basis to impose a penalty on
having to indemnify the plaintiff for any loss suffered by him.77 Nominal
Riviera Homes.
damages may likewise be awarded in every obligation arising from law,
contracts, quasi-contracts, acts or omissions punished by law, and quasi-
I also maintain that under Article 288 the penalty should be paid to the State, delicts, or where any property right has been invaded.
and not to the person or persons who may have suffered injury as a result of
the violation. A penalty is a sum of money which the law requires to be paid
Clearly, the bare act of failing to observe the notice requirement gives rise to
by way of punishment for doing some act which is prohibited or for not doing
nominal damages assessable against the employer and due the employee. The
some act which is required to be done.72 A penalty should be distinguished
Labor Code indubitably entitles the employee to notice even if dismissal is for
from damages which is the pecuniary compensation or indemnity to a person
just cause, even if there is no apparent intent to void such dismissals
who has suffered loss, detriment, or injury, whether to his person, property, or
deficiently implemented. It has also been held that one's employment,
rights, on account of the unlawful act or omission or negligence of another.
profession, trade, or calling is a "property right" and the wrongful interference
Article 288 clearly serves as a punitive fine, rather than a compensatory
therewith gives rise to an actionable wrong.78
measure, since the provision penalizes an act that violates the Labor Code
even if such act does not cause actual injury to any private person.
In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the
termination therein was for just and valid cause, the manner of termination
Independent of the employee's interests protected by the Labor Code is the
was done in complete disregard of the necessary procedural safeguards.80 The
interest of the State in seeing to it that its regulatory laws are complied with.
Court found nominal damages as the proper form of award, as it was purposed
Article 288 is intended to satiate the latter interest. Nothing in the language of
to vindicate the right to procedural due process violated by the employer.81 A
Article 288 indicates an intention to compensate or remunerate a private
similar holding was maintained in Iran v. NLRC82 and Malaya Shipping v.
person for injury he may have sustained.
NLRC.83 The doctrine has express statutory basis, duly recognizes the
existence of the right to notice, and vindicates the violation of such right. It is
It should be noted though that in Serrano, the Court observed that since the sound, logical, and should be adopted as a general rule.
promulgation of Wenphil Corp. v. NLRC73 in 1989, "fines imposed for
violations of the notice requirement have varied from P1,000.00 to P2,000.00
The assessment of nominal damages is left to the discretion of the court, 84 or
to P5,000.00 to P10,000.00."74 Interestingly, this range is the same range of
in labor cases, of the Labor Arbiter and the successive appellate levels. The
the penalties imposed by Article 288. These "fines" adverted to
authority to nominate standards governing the award of nominal damages has
in Serrano were paid to the dismissed employee. The use of the term "fines,"
clearly been delegated to the judicial branch, and it will serve good purpose
as well as the terminology employed a few other cases,75 may have left an
for this Court to provide such guidelines. Considering that the affected right is
erroneous impression that the award implemented beginning
a property right, there is justification in basing the amount of nominal
with Wenphil was based on Article 288 of the Labor Code. Yet, an
damages on the particular characteristics attaching to the claimant's
examination of Wenphil reveals that what the Court actually awarded to the
employment. Factors such as length of service, positions held, and received
employee was an "indemnity", dependent on the facts of each case and the
salary may be considered to obtain the proper measure of nominal damages.
gravity of the omission committed by the employer. There is no mention
After all, the degree by which a property right should be vindicated is affected
in Wenphil of Article 288 of the Labor Code, or indeed, of any statutory basis
by the estimable value of such right.
for the award.

At the same time, it should be recognized that nominal damages are not meant
The Proper Basis: Employer's Liability under the Civil Code
to be compensatory, and should not be computed through a formula based on
actual losses. Consequently, nominal damages usually limited in pecuniary
As earlier stated, Wenphil allowed the payment of indemnity to the employee value.85 This fact should be impressed upon the prospective claimant,
dismissed for just cause is dependent on the facts of each case and the gravity especially one who is contemplating seeking actual/compensatory damages.
of the omission committed by the employer. However, I
considered Wenphil flawed insofar as it is silent as to the statutory basis for
Second. Actual or compensatory damages are not available as a matter of right
the indemnity award. This failure, to my mind, renders it unwise for to
to an employee dismissed for just cause but denied statutory due process.
reinstate the Wenphil rule, and foster the impression that it is the judicial
They must be based on clear factual and legal bases,86 and correspond to such
business to invent awards for damages without clear statutory basis.
pecuniary loss suffered by the employee as duly proven.87 Evidently, there is
less degree of discretion to award actual or compensatory damages.
The proper legal basis for holding the employer liable for monetary
damages to the employee dismissed for just cause is the Civil Code. The
I recognize some inherent difficulties in establishing actual damages in cases
award of damages should be measured against the loss or injury suffered
for terminations validated for just cause. The dismissed employee retains no
by the employee by reason of the employer's violation or, in case of
right to continued employment from the moment just cause for termination
nominal damages, the right vindicated by the award. This is the proper
exists, and such time most likely would have arrived even before the employer
paradigm authorized by our law, and designed to obtain the fairest
is liable to send the first notice. As a result, an award of backwages disguised
possible relief.
as actual damages would almost never be justified if the employee was
dismissed for just cause. The possible exception would be if it can be proven
Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction the ground for just cause came into being only after the dismissed employee
over claims for actual, moral, exemplary and other forms of damages arising had stopped receiving wages from the employer.
from the employer-employee relations. It is thus the duty of Labor Arbiters to
adjudicate claims for damages, and they should disabuse themselves of any
Yet it is not impossible to establish a case for actual damages if dismissal was
inhibitions if it does appear that an award for damages is warranted. As triers
for just cause. Particularly actionable, for example, is if the notices are not
of facts in a specialized field, they should attune themselves to the particular
served on the employee, thus hampering his/her opportunities to obtain new
conditions or problems attendant to employer-employee relationships, and
employment. For as long as it can be demonstrated that the failure of the
thus be in the best possible position as to the nature and amount of damages
employer to observe procedural due process mandated by the Labor Code is
that may be warranted in this case.
the proximate cause of pecuniary loss or injury to the dismissed employee,
then actual or compensatory damages may be awarded.
The damages referred under Section 217(4) of the Labor Code are those
available under the Civil Code. It is but proper that the Civil Code serve as the
Third. If there is a finding of pecuniary loss arising from the employer
basis for the indemnity, it being the law that regulates the private relations of
violation, but the amount cannot be proved with certainty, then temperate or
the members of civil society, determining their respective rights and
moderate damages are available under Article 2224 of the Civil Code. Again,
obligations with reference to persons, things, and civil acts.76 No matter how
sufficient discretion is afforded to the adjudicator as regards the proper award,
impressed with the public interest the relationship between a private employer
and the award must be reasonable under the circumstances.88 Temperate or
and employee is, it still is ultimately a relationship between private
nominal damages may yet prove to be a plausible remedy, especially when
individuals. Notably, even though the Labor Code could very well have
common sense dictates that pecuniary loss was suffered, but incapable of
provided set rules for damages arising from the employer-employee
precise definition.
relationship, referral was instead made to the concept of damages as
enumerated and defined under the Civil Code.
Fourth. Moral and exemplary damages may also be awarded in the
appropriate circumstances. As pointed out by the Decision,  moral damages are
Given the long controversy that has dogged this present issue regarding
recoverable where the dismissal of the employee was attended by bad faith,
dismissals for just cause, it is wise to lay down standards that would guide the
fraud, or was done in a manner contrary to morals, good customs or public
policy, or the employer committed an act oppressive to labor.89 Exemplary
damages may avail if the dismissal was effected in a wanton, oppressive or
malevolent manner.
Appropriate Award of Damages to the Agabons
The records indicate no proof exists to justify the award of actual or
compensatory damages, as it has not been established that the failure to serve
the second notice on the Agabons was the proximate cause to any loss or
injury. In fact, there is not even any showing that such violation caused any
sort of injury or discomfort to the Agabons. Nor do they assert such causal
relation. Thus, the only appropriate award of damages is nominal damages.
Considering the circumstances, I agree that an award of Fifteen Thousand
Pesos (P15,000.00) each for the Agabons is sufficient.
All premises considered, I VOTE to:
(1) DENY the PETITION for lack of merit, and AFFIRM
the Decision of the Court of Appeals dated 23 January 2003, with
the MODIFICATION that in addition, Riviera Homes be
ORDERED to pay the petitioners the sum of Fifteen Thousand
Pesos (P15,000.00) each, as nominal damages.
(2) HOLD that henceforth, dismissals for just cause may not be
invalidated due to the failure to observe the due process
requirements under the Labor Code, and that the only indemnity
award available to the employee dismissed for just cause are
damages under the Civil Code as duly proven. Any and all
previous rulings and statements of the Court inconsistent with this
holding are now deemed INOPERATIVE.
G.R. No. 86186 May 8, 1992
RAFAEL GELOS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and ERNESTO
ALZONA, respondents.
Balagtas P. Ilagan for petitioner.
Emil Capulong, Jr., for private respondent.
CRUZ, J.:
The Court is asked to determine the real status of the petitioner, who claims to
be a tenant of the private respondent and entitled to the benefits of tenancy
laws. The private respondent objects, contending that the petitioner is only a
hired laborer whose right to occupy the subject land ended with the
termination of their contract of employment.
The subject land is a 25,000 square meter farmland situated in Cabuyao,
Laguna, and belonging originally to private respondent Ernesto Alzona and
his parents in equal shares. On July 5, 1970, they entered into a written
contract with petitioner Rafael Gelos employing him as their laborer on the
land at the stipulated daily wage of P5.00. 1 On September 4, 1973, after
Alzona had bought his parents' share and acquired full ownership of the land,
he wrote Gelos to inform him of the termination of his services and to demand
that he vacate the property. Gelos refused and continued working on the land.
On October 1, 1973, Gelos went to the Court of Agrarian Relations and asked
for the fixing of the agricultural lease rental on the property. He later
withdrew the case and went to the Ministry of Agrarian Reform, which
granted his petition. For his part, Alzona filed a complaint for illegal detainer
against Gelos in the Municipal Court of Cabuyao, but this action was declared
"not proper for trial" by the Ministry of Agrarian Reform because of the
existence of a tenancy relationship between the parties. Alzona was rebuffed
for the same reason when he sought the assistance of the Ministry of Labor
and later when he filed a complaint with the Court of Agrarian Relations for a
declaration of non-tenancy and damages against Gelos. On appeal to the
Office of the President, however, the complaint was declared proper for trial
and so de-archived and reinstated.
After hearing, the Regional Trial Court of San Pablo City (which had taken
over the Court of Agrarian Relations under PB 129) rendered a decision dated
April 21, 1987, dismissing the complaint. 2 It found Gelos to be a tenant of the
subject property and entitled to remain thereon as such. The plaintiff was also
held liable in attorney's fees and costs.
The decision was subsequently reversed by the Court of Appeals. In its
judgment promulgated on November 25, 1988, 3 it held that Gelos was not a
tenant of the land in question and ordered him to surrender it to Alzona. He
was also held liable for the payment of P10,000.00 as attorney's fees and the
costs of the suit.
The basic question the petitioner now raises before the Court is essentially
factual and therefore not proper in a petition for review under Rule 45 of the
Rules of Court. Only questions of law may be raised in this kind of
proceeding. The settled rule is that the factual findings of the Court of Appeals
are conclusive on even this Court as long as they are supported by substantial
evidence. The petitioner has not shown that his case comes under any of those
rare exceptions on such findings may be validly reversed by this Court.
It is true that in Talavera v. Court of Appeals, 4 we held that a factual
conclusion made by the trial court that a person is a tenant farmer, if it is
supported by the minimum evidence demanded by law, is final and conclusive
and cannot be reversed by the appellate tribunals except for compelling
reasons. In the case at bar, however, we find with the respondent court that
there was such a compelling reason. A careful examination of the record
reveals that, indeed, the trial court misappreciated the facts when it ruled that
the petitioner was a tenant of the private respondent.
The circumstance that the findings of the respondent court do not concur with
those of the trial court does not, of course, call for automatic reversal of the
appellate court. Precisely, the function of the appellate court is to review and,
if warranted, reverse the findings of the trial court. Disagreement between the
two courts merely calls on us to make a specially careful study of their
respective decisions to determine which of them should be preferred as more
conformable to the facts at hand.
The Court has made this careful study and will sustain the decision of the
respondent court.
The contract of employment dated July 5, 1970, written in Tagalog and
entitled "Kasunduan ng Upahang Araw," reads pertinently as follows:
1. Ang Unang Panig ay siyang may-ari at nagtatangkilik
ng isang lagay na lupa, sinasaka, na tumatayo sa Nayon
ng Baclaran, Cabuyao, Laguna, na siyang gagawa at
sasaka sa lupa, samantalang ang Ikalawang Panig ay
magiging upahan at katulong sa paggawa ng lupa.
2. Ang Unang Panig ay gustong ipagpatuloy ang
pagbubungkal at paggawa ng bukid na binabanggit sa
itaas at ang Ikalawang Panig ay may ibig na magpaupa
sa paggawa sa halagang P5.00 sa bawat araw, walong
oras na trabaho gaya ng mga sumusunod: Patubigan ng
linang; pagpapahalabas ng mga pilapil; pagpapaaldabis
sa unang araw ng pag-aararo; pagpapalinis ng damo sa
ibabaw ng pilapil; pagpapakamot (unang
pagpapasuyod), pagpapahalang at pagpapabalasaw
(ikalawa't ikatlong pagpapasuyod); isang tao sa
pagsasabog ng abono una sa pagpapantay ng linang;
bago magtanim; isang tao sa pagaalaga ng dapog; upa
sa isang tao ng magbobomba ng gamot laban sa
pagkapit ng mga kulisap (mayroon at wala); sa nag-we-
weeder; upa sa mga tao na maggagamas at
magpapatubig ng palay; magsasapaw ng mga pilapil at
iba pa.
3. Ang Unang Panig at ang Ikalawang Panig ay
nagkasundo na ang huli ay gagawa sa bukid ayon sa
nabanggit sa itaas bilang katulong at upahan lamang.
Ang Unang Panig bukod sa sila ang gagawa at
magsasaka ay maaaring umupa ng iba pang tao
manggagawa sa upahang umiiral sang-ayon sa batas
katulad ng pag-aararo, pagpapahulip, pagpapagamas,
pagbobomba, pagweweeder, pagsasabog ng abono,
pagbobomba ng gamot, pagpapatubig at iba pang mga
gawain. Maaaring alisin ang Ikalawang Panig sa
pagpapatrabaho sa ano mang oras ng Unang Panig.
4. Ipinatatanto ng Ikalawang Panig na siya ay hindi
kasama sa bukid kundi upahan lamang na binabayaran
sa bawa't araw ng kanyang paggawa sa bukid na
nabanggit.
It is noted that the agreement provides that "ang Ikalawang Panig (meaning
Gelos) ay may ibig na magpaupa sa paggawa sa halagang P5.00 sa bawa't
araw, walong oras na trabaho" (The Second Party desires to lease his services
at the rate of P5.00 per day, eight hours of work) and that "Ipinatatanto ng
Ikalawang Panig na siya ay hindi kasama sa bukid kundi upahan lamang na
binabayaran sa bawa't araw ng kanyang paggawa sa bukid na nabanggit.'' (The
Second Party makes it known that he is not a farm tenant but only a hired
laborer who is paid for every day of work on the said farm.)
These stipulations clearly indicate that the parties did not enter into a tenancy
agreement but only a contract of employment. The agreement is a lease of
services, not of the land in dispute. This intention is quite consistent with the
undisputed fact that three days before that agreement was concluded, the
former tenant of the land, Leocadio Punongbayan, had executed an instrument
in which he voluntarily surrendered his tenancy rights to the private
respondent. 5 It also clearly demonstrates that, contrary to the petitioner's
contention, Alzona intended to cultivate the land himself instead of placing it
again under tenancy.
The petitioner would now disavow the agreement, but his protestations are
less than convincing. His wife's testimony that he is illiterate is belied by his
own testimony to the contrary in another proceeding. 6 Her claim that they
were tricked into signing the agreement does not stand up against the
testimony of Atty. Santos Pampolina, who declared under his oath as a
witness (and as an attorney and officer of the court) that he explained the
meaning of the document to Gelos, who even read it himself before signing
it. 7 Atty. Pampolina said the agreement was not notarized because his
commission as notary public was good only for Manila and did not cover
Laguna, where the document was executed. 8 At any rate, the lack of
notarization did not adversely affect the veracity and effectiveness of the
agreement, which, significantly, Gelos and his wife do not deny having
signed.
Gelos points to the specific tasks mentioned in the agreement and suggests
that they are the work of a tenant and not of a mere hired laborer. Not so. The
work specified is not peculiar to tenancy. What a tenant may do may also be
done by a hired laborer working under the direction of the landowner, as in the
case at bar. It is not the nature of the work involved but the intention of the
parties that determines the relationship between them.
As this Court has stressed in a number of cases, 9 "tenancy is not a purely
factual relationship dependent on what the alleged tenant does upon the land.
It is also a legal relationship. The intent of the parties, the understanding when
the farmer is installed, and as in this case, their written
agreements, provided these are complied with and are not contrary to law, are
even more important."
Gelos presented receipts 10 for fertilizer and pesticides he allegedly bought and
applied to the land of the private respondent, but the latter insists that it was
his brother who bought them, being an agriculturist and in charge of the
technical aspect of the farm. Moreover, the receipts do not indicate to which
particular landholding the fertilizers would be applied and, as pointed out by
the private respondent, could refer to the other parcels of land which Gelos
was tenanting.
The petitioner's payment of irrigation fees from 1980 to 1985 to the National
Irrigation Administration on the said landholding is explained by the fact that
during the pendency of the CAR case, the Agrarian Reform Office fixed a
provisional leasehold rental after a preliminary finding that Gelos was the
tenant of the private respondent. As such, it was he who had to pay the
irrigation fees. Incidentally, Section 12, subpar. (r) of PD 946 provides that
the Secretary's determination of the tenancy relationship is only preliminary
and cannot be conclusive on the lower court.
It is noteworthy that, except for the self-serving testimony of the petitioner's
wife, the records of this case are bereft of evidence regarding the sharing of
harvest between Gelos and Alzona. No less importantly, as the Court of
Appeals observed, the petitioner has not shown that he paid rentals on the
subject property from 1970 to 1973, before their dispute arose.
A tenant is defined under Section 5(a) of Republic Act No. 1199 as a person
who himself and with the aid available from within his immediate farm
household cultivates the land belonging to or possessed by another, with the
latter's consent, for purposes of production, sharing the produce with the
landholder under the share tenancy system, or paying to the landholder a
price-certain or ascertainable in produce or in money or both, under the
leasehold tenancy system. (Emphasis supplied)
For this relationship to exist, it is necessary that: 1) the parties are the
landowner and the tenant; 2) the subject is agricultural land; 3) there is
consent; 4) the purpose is agricultural production; 5) there is personal
cultivation; and 6) there is sharing of harvest or payment of rental. In the
absence of any of these requisites, an occupant of a parcel of land, or a
cultivator thereof, or planter thereon, cannot qualify as a de jure tenant. 11
On the other hand, the indications of an employer-employee relationship are:
1) the selection and engagement of the employee; 2) the payment of wages; 3)
the power of dismissal; and 4) the power to control the employee's
conduct –– although the latter is the most important element. 12
According to a well-known authority on the subject, 13 tenancy relationship is
distinguished from farm employer-farm worker relationship in that: "In farm
employer-farm worker relationship, the lease is one of labor with the
agricultural laborer as the lessor of his services and the farm employer as the
lessee thereof. In tenancy relationship, it is the landowner who is the lessor,
and the tenant the lessee of agricultural land. The agricultural worker works
for the farm employer and for his labor be receives a salary or wage regardless
of whether the employer makes a profit. On the other hand, the tenant derives
his income from the agricultural produce or harvest."
The private respondent, instead of receiving payment of rentals or sharing in
the produce of the land, paid the petitioner lump sums for specific kinds of
work on the subject lot or gave him vales, or advance payment of his wages as
laborer thereon. The petitioner's wife claims that Alzona made her husband
sign the invoices all at one time because he allegedly needed them to reduce
his income taxes. Even assuming this to be true, we do not think that made the
said payments fictitious, especially so since the petitioner never denied having
received them.
The other issue raised by the petitioner, which is decidedly legal, is easily
resolved. There being no tenancy relationship, the contention that the private
respondent's complaint has prescribed under Section 38 of R.A. 3844 must
also fail. That section is not applicable. It must be noted that at the very outset,
Alzona rejected the petitioner's claim of agricultural tenancy and immediately
instituted his action for unlawful detainer in accordance with Section 1, Rule
70 of the Rules of Court. As it happened, the said case was held not proper for
trial by the Ministry of Agrarian Reform. He then resorted to other remedies
just so he could recover possession of his land and, finally, in 1979, he yielded
to the jurisdiction of the defunct Court of Agrarian Relations by filing there an
action for declaration of non-tenancy. The action, which was commenced in
1979, was within the ten-year prescriptive period  provided under Article 1144
of the Civil Code for actions based on a written contract. *
The Court quotes with approval the following acute observations made by
Justice Alicia Sempio-Diy:
It might not be amiss to state at this juncture that in
deciding this case in favor of defendant, the lower court
might have been greatly influenced by the fact that
defendant is a mere farmer who is almost illiterate
while plaintiff is an educated landlord, such that it had
felt that it was its duty to be vigilant for the protection
of defendant's interests. But the duty of the court to
protect the weak and the underprivileged should not be
carried out to such an extent as to deny justice to the
landowner whenever truth and justice happen to be on
his side. Besides, defendant's economic position vis a
vis the plaintiff does not necessarily make him the
underprivileged party in this case, for as testified by
plaintiff which defendant never denied, the small land
in question was the only landholding of plaintiff when
he and his father bought the same, at which time he was
just a lowly employee who did not even have a house of
his own and his father, a mere farmer, while defendant
was the agricultural tenant of another piece of land and
also owns his own house, a sari sari  store, and
a caritela. Plaintiff also surmised that it was only after
defendant had been taken into its wings by the
Federation of Free Farmers that he started claiming to
be plaintiff's agricultural tenant, presumably upon the
Federation's instigation and advice. And we cannot
discount this possibility indeed, considering that during
the early stages of the proceedings this case, defendant
even counter-proposed to plaintiff that he would
surrender the land in question to the latter if plaintiff
would convey to him another piece of land adjacent to
the land in question, almost one ha. in area, that
plaintiff had also acquired after buying the land in
question, showing that defendant was not as ignorant as
he would want the Court to believe and had the advice
of people knowledgeable on agrarian matters.
This Court has stressed more than once that social justice –– or any justice for
that matter –– is for the deserving, whether he be a millionaire in his mansion
or a pauper in his hovel. It is true that, in case of reasonable doubt, we are
called upon to tilt the balance in favor of the poor, to whom the Constitution
fittingly extends its sympathy and compassion. But never is it justified to
prefer the poor simply because they are poor, or to reject the rich simply
because they are rich, for justice must always be served, for poor and rich
alike, according to the mandate of the law.
WHEREFORE, the challenged decision of the Court of Appeals is
AFFIRMED and the petition is DENIED, with costs against the petitioner. It
is so ordered.
G.R. No. 82819 February 8, 1989
LUZ LUMANTA, ET AL., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FOOD
TERMINAL, INC., respondents.
J. S. Torregoza and Associates for petitioners.
The Solicitor General for public respondent.
The Government Corporate Counsel for Food Terminal, Inc.
 RESOLUTION
FELICIANO, J.:
The present Petition for certiorari seeks to annul and set aside the Decision of
the National Labor Relations Commission rendered on 18 March 1988 in
NLRC-NCR Case No. 00- 0301035-87, entitled "Luz Lumanta, et al., versus
Food Terminal Incorporated." The Decision affirmed an order of the Labor
Arbiter dated 31 August 1987 dismissing petitioners' complaint for lack of
Jurisdiction.
On 20 March 1987, petitioner Luz Lumanta, joined by fifty-four (54) other
retrenched employees, filed a complaint for unpaid 'd retrenchment or
separation pay against private respondent Food Terminal, Inc. ("FTI") with the
Department of Labor and Employment. The complaint was later amended to
include charges of underpayment of wages and non-payment of emergency
cost of living allowances (ECOLA).
Private respondent FTI moved to dismiss the complaint on the ground of lack
of jurisdiction. It argued that being a government-owned and controlled
corporation, its employees are governed by the Civil Service Law not by the
Labor Code, and that claims arising from employment fall within the
jurisdiction of the Civil Service Commission and not the Department of Labor
and Employment.
The petitioners opposed the Motion to Dismiss contending that although FTI
is a corporation owned and controlled by the government, it has still the marks
of a private corporation: it directly hires its employees without seeking
approval from the Civil Service Commission and its personnel are covered by
the Social Security System and not the Government Service Insurance System.
Petitioners also argued that being a government-owned and controlled
corporation without original charter, private respondent FTl clearly falls
outside the scope of the civil service as marked out in Section 2 (1), Article IX
of the 1987 Constitution.
On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued an Order, 1 the
dispositive part of which read:
On account of the above findings the instant case is
governed by the Civil Service Law. The case at bar lies
outside the jurisdictional competence of this Office.
WHEREFORE, premises considered this case is hereby
directed to be DISMISSED for lack of jurisdiction of
this Office to hear and decide the case.
SO ORDERED.
On 18 March 1988, the public respondent National Labor Relations
Commission affirmed on appeal the order of the Labor Arbiter and dismissed
the petitioners' appeal for lack of merit.
Hence this Petition for Certiorari.
The only question raised in the present Petition is whether or not a labor law
claim against a government-owned and controlled corporation, such as private
respondent FTI, falls within the jurisdiction of the Department of Labor and
Employment.
In refusing to take cognizance of petitioners' complaint against private
respondent, the Labor Arbiter and the National Labor Relations Commission
relied chiefly on this Court's ruling in National Housing Authority v.
Juco,  2 which held that "there should no longer be any question at this time
that employees of government-owned or controlled corporations are governed
by the civil service law and civil service rules and regulations.
Juco was decided under the 1973 Constitution, Article II-B, Section 1 (1) of
which provided:
The civil service embraces every branch, agency,
subdivision, and instrumentality of the Government,
including every government-owned or controlled
corporation.
The 1987 Constitution which took effect on 2 February 1987, has on this point
a notably different provision which reads:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charter. (Article IX-B,
Section 2 [1]).
The Court, in National Service Corporation (NASECO) v. National Labor
Relations Commission, G.R. No. 69870, promulgated on 29 November
1988, 3 quoting extensively from the deliberations 4 of the 1986 Constitutional
Commission in respect of the intent and meaning of the new phrase "with
original charter," in effect held that government-owned and controlled
corporations with original charter refer to corporations chartered by special
law as distinguished from corporations organized under our general
incorporation statute-the Corporation Code. In NASECO, the company
involved had been organized under the general incorporation statute and was a
subsidiary of the National Investment Development Corporation (NIDC)
which in turn was a subsidiary of the Philippine National Bank, a bank
chartered by a special statute. Thus, government-owned or controlled
corporations like NASECO are effectively excluded from the scope of the
Civil Service.
It is the 1987 Constitution, and not the case law embodied in Juco, 5 which
applies in the case at bar, under the principle that jurisdiction is determined as
of the time of the filing of the complaint. 6 At the time the complaint against
private respondent FTI was filed (i.e., 20 March 1987), and at the time the
decisions of the respondent Labor Arbiter and National Labor Relations
Commission were rendered (i.e., 31 August 1987 and 18 March 1988,
respectively), the 1987 Constitution had already come into effect. latter of
Instruction No. 1013, dated 19 April 1980, included Food Terminal, Inc. in the
category of "government-owned or controlled corporations." 7 Since then, FTI
served as the marketing arm of the National Grains Authority (now known as
the National Food Authority). The pleadings show that FTI was previously a
privately owned enterprise, created and organized under the general
incorporation law, with the corporate name "Greater Manila Food Terminal
Market, Inc." 8 The record does not indicate the precise amount of the capital
stock of FM that is owned by the government; the petitioners' claim, and this
has not been disputed, that FTl is not hundred percent (100%) government-
owned and that it has some private shareholders.
We conclude that because respondent FTI is government-owned and
controlled corporation without original charter, it is the Department of Labor
and Employment, and not the Civil Service Commission, which has
jurisdiction over the dispute arising from employment of the petitioners with
private respondent FTI, and that consequently, the terms and conditions of
such employment are governed by the Labor Code and not by the Civil
Service Rules and Regulations.
Public respondent National Labor Relations Commission acted without or in
excess of its jurisdiction in dismissing petitioners complaint.
ACCORDINGLY, the Petition for certiorari is hereby GRANTED and the
Decision of public respondent Labor Arbiter dated 31 August 1987 and the
Decision of public respondent Commission dated 18 March 1988, both in
NLRC-NCR Case No. 00-03-01035-87 are hereby SET ASIDE. The case is
hereby REMANDED to the Labor Arbiter for further appropriate proceedings.
G.R. No. 195466               July 2, 2014
ARIEL L. DAVID, doing business under the name and style "YIELS
HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the
November 22, 2010 decision2 and the January 31, 2011 resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled
and set aside the May 26, 2010 decision4 of the National Labor Relations
Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of
the Labor Arbiter (LA). The LA's decision dismissed respondent John G.
Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner
Ariel L. David, doing business under the name and style "Yiels Hog Dealer,"
for non-payment of overtime pay, holiday pay and 13th month pay. He also
claimed payment for moral and exemplary damages and attorney’s fees.
Macasio also claimed payment for service incentive leave (SIL).8
Macasio alleged9 before the LA that he had been working as a butcher for
David since January 6, 1995. Macasio claimed that David exercised effective
control and supervision over his work, pointing out that David: (1) set the
work day, reporting time and hogs to be chopped, as well as the manner by
which he was to perform his work; (2) daily paid his salary of ₱700.00, which
was increased from ₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 in 2005;
and (3) approved and disapproved his leaves. Macasio added that David
owned the hogs delivered for chopping, as well as the work tools and
implements; the latter also rented the workplace. Macasio further claimed that
David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005
and that he only has ten employees. He alleged that he hired Macasio as a
butcher or chopper on "pakyaw" or task basis who is, therefore, not entitled to
overtime pay, holiday pay and 13th month pay pursuant to the provisions of
the Implementing Rules and Regulations (IRR) of the Labor Code. David
pointed out that Macasio: (1) usually starts his work at 10:00 p.m. and ends at
2:00 a.m. of the following day or earlier, depending on the volume of the
delivered hogs; (2) received the fixed amount of ₱700.00 per engagement,
regardless of the actual number of hours that he spent chopping the delivered
hogs; and (3) was not engaged to report for work and, accordingly, did not
receive any fee when no hogs were delivered.
Macasio disputed David’s allegations.11 He argued that, first, David did not
start his business only in 2005. He pointed to the Certificate of
Employment12 that David issued in his favor which placed the date of his
employment, albeit erroneously, in January 2000. Second, he reported for
work every day which the payroll or time record could have easily proved had
David submitted them in evidence.
Refuting Macasio’s submissions, 13 David claims that Macasio was not his
employee as he hired the latter on "pakyaw" or task basis. He also claimed
that he issued the Certificate of Employment, upon Macasio’s request, only
for overseas employment purposes. He pointed to the "Pinagsamang
Sinumpaang Salaysay,"14 executed by Presbitero Solano and Christopher
(Antonio Macasio’s co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for
lack of merit. The LA gave credence to David’s claim that he engaged
Macasio on "pakyaw" or task basis. The LA noted the following facts to
support this finding: (1) Macasio received the fixed amount of ₱700.00 for
every work done, regardless of the number of hours that he spent in
completing the task and of the volume or number of hogs that he had to chop
per engagement; (2) Macasio usually worked for only four hours, beginning
from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00
fixed wage far exceeds the then prevailing daily minimum wage of ₱382.00.
The LA added that the nature of David’s business as hog dealer supports this
"pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he
is not entitled to overtime, holiday, SIL and 13th month pay.
The NLRC’s Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The
NLRC observed that David did not require Macasio to observe an eight hour
work schedule to earn the fixed ₱700.00 wage; and that Macasio had been
performing a non-time work, pointing out that Macasio was paid a fixed
amount for the completion of the assigned task, irrespective of the time
consumed in its performance. Since Macasio was paid by result and not in
terms of the time that he spent in the workplace, Macasio is not covered by the
Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay
under the Rules and Regulations Implementing the 13th month pay law.18
Macasio moved for reconsideration19 but the NLRC denied his motion in its
August 11, 2010 resolution,20 prompting Macasio to elevate his case to the CA
via a petition for certiorari.21
The CA’s Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasio’s
certiorari petition and reversed the NLRC’s ruling for having been rendered
with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis
employee, it nevertheless found Macasio entitled to his monetary claims
following the doctrine laid down in Serrano v. Severino Santos Transit.23 The
CA explained that as a task basis employee, Macasio is excluded from the
coverage of holiday, SIL and 13th month pay only if he is likewise a "field
personnel." As defined by the Labor Code, a "field personnel" is one who
performs the work away from the office or place of work and whose regular
work hours cannot be determined with reasonable certainty. In Macasio’s
case, the elements that characterize a "field personnel" are evidently lacking as
he had been working as a butcher at David’s "Yiels Hog Dealer" business in
Sta. Mesa, Manila under David’s supervision and control, and for a fixed
working schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th
month pay for three years, with 10% attorney’s fees on the total monetary
award. The CA, however, denied Macasio’s claim for moral and exemplary
damages for lack of basis.
David filed the present petition after the CA denied his motion for
reconsideration24 in the CA’s January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasio’s engagement was on a
"pakyaw" or task basis. Hence, the latter is excluded from the coverage of
holiday, SIL and 13th month pay. David reiterates his submissions before the
lower tribunals27 and adds that he never had any control over the manner by
which Macasio performed his work and he simply looked on to the "end-
result." He also contends that he never compelled Macasio to report for work
and that under their arrangement, Macasio was at liberty to choose whether to
report for work or not as other butchers could carry out his tasks. He points
out that Solano and Antonio had, in fact, attested to their (David and
Macasio’s) established "pakyawan" arrangement that rendered a written
contract unnecessary. In as much as Macasio is a task basis employee – who is
paid the fixed amount of ₱700.00 per engagement regardless of the time
consumed in the performance – David argues that Macasio is not entitled to
the benefits he claims. Also, he posits that because he engaged Macasio on
"pakyaw" or task basis then no employer-employee relationship exists
between them.
Finally, David argues that factual findings of the LA, when affirmed by the
NLRC, attain finality especially when, as in this case, they are supported by
substantial evidence. Hence, David posits that the CA erred in reversing the
labor tribunals’ findings and granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel"
as David would have this Court believe.28 He reiterates his arguments before
the lower tribunals and adds that, contrary to David’s position, the ₱700.00 fee
that he was paid for each day that he reported for work does not indicate a
"pakyaw" or task basis employment as this amount was paid daily, regardless
of the number or pieces of hogs that he had to chop. Rather, it indicates a
daily-wage method of payment and affirms his regular employment status. He
points out that David did not allege or present any evidence as regards the
quota or number of hogs that he had to chop as basis for the "pakyaw" or task
basis payment; neither did David present the time record or payroll to prove
that he worked for less than eight hours each day. Moreover, David did not
present any contract to prove that his employment was on task basis. As David
failed to prove the alleged task basis or "pakyawan" agreement, Macasio
concludes that he was David’s employee. Procedurally, Macasio points out
that David’s submissions in the present petition raise purely factual issues that
are not proper for a petition for review on certiorari. These issues – whether he
(Macasio) was paid by result or on "pakyaw" basis; whether he was a "field
personnel"; whether an employer-employee relationship existed between him
and David; and whether David exercised control and supervision over his
work – are all factual in nature and are, therefore, proscribed in a Rule 45
petition. He argues that the CA’s factual findings bind this Court, absent a
showing that such findings are not supported by the evidence or the CA’s
judgment was based on a misapprehension of facts. He adds that the issue of
whether an employer-employee relationship existed between him and David
had already been settled by the LA29 and the NLRC30 (as well as by the CA per
Macasio’s manifestation before this Court dated November 15, 2012),31 in his
favor, in the separate illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the
labor law provisions on holiday, SIL and 13th month pay to a worker engaged
on "pakyaw" or task basis. In the context of the Rule 65 petition before the
CA, the issue is whether the CA correctly found the NLRC in grave abuse of
discretion in ruling that Macasio is entitled to these labor standards benefits.
The Court’s Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CA’s decision rendered
under a Rule 65 proceeding, this Court’s power of review is limited to
resolving matters pertaining to any perceived legal errors that the CA may
have committed in issuing the assailed decision. This is in contrast with the
review for jurisdictional errors, which we undertake in an original certiorari
action. In reviewing the legal correctness of the CA decision, we examine the
CA decision based on how it determined the presence or absence of grave
abuse of discretion in the NLRC decision before it and not on the basis of
whether the NLRC decision on the merits of the case was correct.32 In other
words, we have to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged before it.33
Moreover, the Court’s power in a Rule 45 petition limits us to a review of
questions of law raised against the assailed CA decision.34
In this petition, David essentially asks the question – whether Macasio is
entitled to holiday, SIL and 13th month pay. This one is a question of law.
The determination of this question of law however is intertwined with the
largely factual issue of whether Macasio falls within the rule on entitlement to
these claims or within the exception. In either case, the resolution of this
factual issue presupposes another factual matter, that is, the presence of an
employer-employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee, David
argues that he engaged the latter on "pakyaw" or task basis. Very noticeably,
David confuses engagement on "pakyaw" or task basis with the lack of
employment relationship. Impliedly, David asserts that their "pakyawan" or
task basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on
"pakyaw" or task basis does not characterize the relationship that may exist
between the parties, i.e., whether one of employment or independent
contractorship. Article 97(6) of the Labor Code defines wages as "xxx the
remuneration or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is payable
by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor Code
speaks of workers paid by results or those whose pay is calculated in terms of
the quantity or quality of their work output which includes "pakyaw" work
and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on
"pakyaw" or task basis negates employer-employee relationship, David would
want the Court to engage on a factual appellate review of the entire case to
determine the presence or existence of that relationship. This approach
however is not authorized under a Rule 45 petition for review of the CA
decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasio’s claim not because of the
absence of an employer-employee but because of its finding that since
Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday
and 13th month pay. Second, we consider it crucial, that in the separate illegal
dismissal case Macasio filed with the LA, the LA, the NLRC and the CA
uniformly found the existence of an employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an
employer-employee relationship is in fact a non-issue in this case. To reiterate,
in deciding a Rule 45 petition for review of a labor decision rendered by the
CA under 65, the narrow scope of inquiry is whether the CA correctly
determined the presence or absence of grave abuse of discretion on the part of
the NLRC. In concrete question form, "did the NLRC gravely abuse its
discretion in denying Macasio’s claims simply because he is paid on a non-
time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no
employer-employee relationship exists baseless. Employing the control
test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is David’s employee
To determine the existence of an employer-employee relationship, four
elements generally need to be considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee’s conduct. These
elements or indicators comprise the so-called "four-fold" test of employment
relationship. Macasio’s relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of
"selection and engagement of the employee." David categorically confirmed
this fact when, in his "Sinumpaang Salaysay," he stated that "nag apply po
siya sa akin at kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated
in their "Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay
nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and
"kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David at kasama
namin siya sa aming trabaho."
Second, David paid Macasio’s wages.Both David and Macasio categorically
stated in their respective pleadings before the lower tribunals and even before
this Court that the former had been paying the latter ₱700.00 each day after
the latter had finished the day’s task. Solano and Antonio also confirmed this
fact of wage payment in their "Pinagsamang Sinumpaang Salaysay."41 This
satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report
for work. This power to determine the work schedule obviously implies power
of control. By having the power to control Macasio’s work schedule, David
could regulate Macasio’s work and could even refuse to give him any
assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasio’s
work as to the means and methods of performing it. In addition to setting the
day and time when Macasio should report for work, the established facts show
that David rents the place where Macasio had been performing his tasks.
Moreover, Macasio would leave the workplace only after he had finished
chopping all of the hog meats given to him for the day’s task. Also, David
would still engage Macasio’s services and have him report for work even
during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio,
could naturally be expected to observe certain rules and requirements and
David would necessarily exercise some degree of control as the chopping of
the hog meats would be subject to his specifications. Also, since Macasio
performed his tasks at David’s workplace, David could easily exercise control
and supervision over the former. Accordingly, whether or not David actually
exercised this right or power to control is beside the point as the law simply
requires the existence of this power to control 4243 or, as in this case, the
existence of the right and opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case
sufficiently points to an employer-employee relationship existing between
David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals – the LA, the NLRC and the CA
– found that Macasio was engaged or paid on "pakyaw" or task basis. This
factual finding binds the Court under the rule that factual findings of labor
tribunals when supported by the established facts and in accord with the laws,
especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as
opposed to straight-hour wage payment, is the non-consideration of the time
spent in working. In a task-basis work, the emphasis is on the task itself, in the
sense that payment is reckoned in terms of completion of the work, not in
terms of the number of time spent in the completion of work.45 Once the work
or task is completed, the worker receives a fixed amount as wage, without
regard to the standard measurements of time generally used in pay
computation.
In Macasio’s case, the established facts show that he would usually start his
work at 10:00 p.m. Thereafter, regardless of the total hours that he spent at the
workplace or of the total number of the hogs assigned to him for chopping,
Macasio would receive the fixed amount of ₱700.00 once he had completed
his task. Clearly, these circumstances show a "pakyaw" or task basis
engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is
determined by applying the "four-fold" test; engagement on "pakyaw" or task
basis does not determine the parties’ relationship as it is simply a method of
pay computation. Accordingly, Macasio is David’s employee, albeit engaged
on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core
issue of whether Macasio is entitled to holiday, 13th month, and SIL pay.
On the issue of Macasio’s entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code
in relation to Section 1, Rule IV of the IRR of the Labor Code, and Article 95
of the Labor Code, as well as Presidential Decree (PD) No. 851. The NLRC,
on the other hand, relied on Article 82 of the Labor Code and the Rules and
Regulations Implementing PD No. 851. Uniformly, these provisions exempt
workers paid on "pakyaw" or task basis from the coverage of holiday, SIL and
13th month pay.
In reversing the labor tribunals’ rulings, the CA similarly relied on these
provisions, as well as on Section 1, Rule V of the IRR of the Labor Code and
the Court’s ruling in Serrano v. Severino Santos Transit.46 These labor law
provisions, when read together with the Serrano ruling, exempt those engaged
on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding
the correct interpretation of these labor code provisions and the implementing
rules; although, to conclude that the worker is exempted or covered depends
on the facts and in this sense, is a question of fact: first, whether Macasio is a
"field personnel"; and second, whether those engaged on "pakyaw" or task
basis, but who are not "field personnel," are exempted from the coverage of
holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review
of a CA decision rendered under Rule 65 and framed in question form, the
legal question is whether the CA correctly ruled that it was grave abuse of
discretion on the part of the NLRC to deny Macasio’s monetary claims simply
because he is paid on a non-time basis without determining whether he is a
field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of
Title I, Book III of the Labor Code - provisions governing working conditions
and rest periods.
Art. 82. Coverage.— The provisions of [Title I] shall apply to employees in
all establishments and undertakings whether for profit or not, but not to
government employees, managerial employees, field personnel, members of
the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid
by results as determined by the Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office
of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article
94 of the Labor Code) and SIL pay (under Article 95 of the Labor Code).
Under Article 82,"field personnel" on one hand and "workers who are paid by
results" on the other hand, are not covered by the Title I provisions. The
wordings of Article82 of the Labor Code additionally categorize workers
"paid by results" and "field personnel" as separate and distinct types of
employees who are exempted from the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding
provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily
wage during regular holidays, except in retail and service establishments
regularly employing less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. – This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged on task or
contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance
thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding
provision in the IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at
least one year of service shall be entitled to a yearly service incentive leave of
five days with pay.
(b) This provision shall not apply to those who are already enjoying the
benefit herein provided, those enjoying vacation leave with pay of at least five
days and those employed in establishments regularly employing less than ten
employees or in establishments exempted from granting this benefit by the
Secretary of Labor and Employment after considering the viability or financial
condition of such establishment. [emphases ours]
xxxx
Section 1. Coverage. – This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised
by the employer including those who are engaged on task or contract basis,
purely commission basis, or those who are paid a fixed amount for performing
work irrespective of the time consumed in the performance thereof. [emphasis
ours]
Under these provisions, the general rule is that holiday and SIL pay provisions
cover all employees. To be excluded from their coverage, an employee must
be one of those that these provisions expressly exempt, strictly in accordance
with the exemption. Under the IRR, exemption from the coverage of holiday
and SIL pay refer to "field personnel and other employees whose time and
performance is unsupervised by the employer including those who are
engaged on task or contract basis[.]" Note that unlike Article 82 of the Labor
Code, the IRR on holiday and SIL pay do not exclude employees "engaged on
task basis" as a separate and distinct category from employees classified as
"field personnel." Rather, these employees are altogether merged into one
classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be
interpreted to mean that those who are engaged on task basis, per se, are
excluded from the SIL and holiday payment since this is what the Labor Code
provisions, in contrast with the IRR, strongly suggest. The arguable
interpretation of this rule may be conceded to be within the discretion granted
to the LA and NLRC as the quasi-judicial bodies with expertise on labor
matters.
However, as early as 1987 in the case of Cebu Institute of Technology v.
Ople49 the phrase "those who are engaged on task or contract basis" in the rule
has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the
rule on ejusdem generis that general and unlimited terms are restrained and
limited by the particular terms that they follow xxx Clearly, petitioner's
teaching personnel cannot be deemed field personnel which refers "to non-
agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.
[Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that
private respondents are not entitled to the service incentive leave benefit
cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is
insufficient to exclude one from the coverage of SIL and holiday pay. They
are exempted from the coverage of Title I (including the holiday and SIL pay)
only if they qualify as "field personnel." The IRR therefore validly qualifies
and limits the general exclusion of "workers paid by results" found in Article
82 from the coverage of holiday and SIL pay. This is the only reasonable
interpretation since the determination of excluded workers who are paid by
results from the coverage of Title I is "determined by the Secretary of Labor in
appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus
Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that
the grant of service incentive leave has been delimited by the Implementing
Rules and Regulations of the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the Implementing
Rules, Service Incentive Leave shall not apply to employees classified as
"field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or
contract basis, purely commission basis." Said phrase should be related with
"field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they
follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which
the CA cited in support of granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem generis50 declared that
"employees engaged on task or contract basis xxx are not automatically
exempted from the grant of service incentive leave, unless, they fall under the
classification of field personnel."51 The Court explained that the phrase
"including those who are engaged on task or contract basis, purely
commission basis" found in Section 1(d), Rule V of Book III of the IRR
should not be understood as a separate classification of employees to which
SIL shall not be granted. Rather, as with its preceding phrase - "other
employees whose performance is unsupervised by the employer" - the phrase
"including those who are engaged on task or contract basis" serves to amplify
the interpretation of the Labor Code definition of "field personnel" as those
"whose actual hours of work in the field cannot be determined with reasonable
certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC
still interpreted the Labor Code provisions and the IRR as exempting an
employee from the coverage of Title I of the Labor Code based simply and
solely on the mode of payment of an employee. The NLRC’s utter disregard
of this consistent jurisprudential ruling is a clear act of grave abuse of
discretion.52 In other words, by dismissing Macasio’s complaint without
considering whether Macasio was a "field personnel" or not, the NLRC
proceeded based on a significantly incomplete consideration of the case. This
action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and
the NLRC had only taken counsel from Serrano and earlier cases, they would
have correctly reached a similar conclusion regarding the payment of holiday
pay since the rule exempting "field personnel" from the grant of holiday pay is
identically worded with the rule exempting "field personnel" from the grant of
SIL pay. To be clear, the phrase "employees engaged on task or contract basis
"found in the IRR on both SIL pay and holiday pay should be read together
with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis"
is entitled to holiday and SIL pay, the presence (or absence) of employer
supervision as regards the worker’s time and performance is the key: if the
worker is simply engaged on pakyaw or task basis, then the general rule is that
he is entitled to a holiday pay and SIL pay unless exempted from the
exceptions specifically provided under Article 94 (holiday pay) and Article95
(SIL pay) of the Labor Code. However, if the worker engaged on pakyaw or
task basis also falls within the meaning of "field personnel" under the law,
then he is not entitled to these monetary benefits.

Macasio does not fall under the classification of "field personnel"

Based on the definition of field personnel under Article 82, we agree with the
CA that Macasio does not fall under the definition of "field personnel." The
CA’s finding in this regard is supported by the established facts of this case:
first, Macasio regularly performed his duties at David’s principal place of
business; second, his actual hours of work could be determined with
reasonable certainty; and, third, David supervised his time and performance of
duties. Since Macasio cannot be considered a "field personnel," then he is not
exempted from the grant of holiday, SIL pay even as he was engaged on
"pakyaw" or task basis.

Not being a "field personnel," we find the CA to be legally correct when it

reversed the NLRC’s ruling dismissing Macasio’s complaint for holiday and
SIL pay for having been rendered with grave abuse of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA
legally erred in finding that the NLRC gravely abused its discretion in denying
this benefit to Macasio.1âwphi1

The governing law on 13th month pay is PD No. 851.53

As with holiday and SIL pay, 13th month pay benefits generally cover all
employees; an employee must be one of those expressly enumerated to be
exempted. Section 3 of the Rules and Regulations Implementing P.D. No.
85154 enumerates the exemptions from the coverage of 13th month pay
benefits. Under Section 3(e), "employers of those who are paid on xxx task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof"55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section
3(e) of the Rules and Regulations Implementing PD No. 851 exempts
employees "paid on task basis" without any reference to "field personnel."
This could only mean that insofar as payment of the 13th month pay is
concerned, the law did not intend to qualify the exemption from its coverage
with the requirement that the task worker be a "field personnel" at the same
time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY

GRANT the petition insofar as the payment of 13th month pay to respondent
is concerned. In all other aspects, we AFFIRM the decision dated November
22, 2010 and the resolution dated January 31, 2011 of the Court of Appeals in
CA-G.R. SP No. 116003.

SO ORDERED.