PRESIDENTIAL DECREE NO.

442, AS AMENDED
A DECREE INSTITUTING A LABOR CODE THEREBY REVISING AND CONSOLIDATING
LABOR AND SOCIAL LAWS TO AFFORD PROTECTION TO LABOR, PROMOTE
EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT AND INSURE INDUSTRIAL
PEACE BASED ON SOCIAL JUSTICE
PRELIMINARY TITLE
Chapter I
GENERAL PROVISIONS
Art. 1. Name of Decree. This Decree shall be known as the "Labor Code of the
Philippines".
Art. 2. Date of effectivity. This Code shall take effect six (6) months after its
promulgation.
Art. 3. Declaration of basic policy. The State shall afford protection to labor, promote
full 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.
Art. 4. Construction in favor of labor. All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Art. 5. Rules and regulations. The Department of Labor and other government agencies
charged with the administration and enforcement of this Code or any of its parts shall
promulgate the necessary implementing rules and regulations. Such rules and regulations
shall become effective fifteen (15) days after announcement of their adoption in
newspapers of general circulation.
Art. 6. Applicability. All rights and benefits granted to workers under this Code shall,
except as may otherwise be provided herein, apply alike to all workers, whether
agricultural or non-agricultural. (As amended by Presidential Decree No. 570-A, November
1, 1974)
ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS
Section 1. The Congress shall give highest priority to the enactment of measures that
protect and enhance the right of all the people to human dignity, reduce social, economic,
and political inequalities, and remove cultural inequities by equitably diffusing wealth and
political power for the common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of
property and its increments.
Section 2. The promotion of social justice shall include the commitment to create economic
opportunities based on freedom of initiative and self-reliance.
LABOR
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 to investments, and to expansion and growth.
Book I - Pre employment
Book II - HRD Program
Book III - Conditions of Employment
Book IV - Health, Safety and Social Welfare
Book V - Labor Relations
Book VI - Post Employment
The elements to determine the existence of an employment relationship are:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employers power to control the employees conduct. The most important
element is the employers control of the employees conduct, not only as to the
result of the work to be done, but also as to the means and methods to
accomplish it.[28]

G.R. No. 164774

April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN

CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer
banning spouses from working in the same company violates the rights of the employee
under the Constitution and the Labor Code or is a valid exercise of management
prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor
Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.

Petitioner Star Paper Corporation (the company) is a corporation engaged in trading

principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol),
Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the
company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage,
Ongsitco advised the couple that should they decide to get married, one of them should
resign pursuant to a company policy promulgated in 1995, 2 viz.:

with him to avoid dismissal due to the company policy. On November 30, 1999, she met an
accident and was advised by the doctor at the Orthopedic Hospital to recuperate for
twenty-one (21) days. She returned to work on December 21, 1999 but she found out that
her name was on-hold at the gate. She was denied entry. She was directed to proceed to
the personnel office where one of the staff handed her a memorandum. The memorandum
stated that she was being dismissed for immoral conduct. She refused to sign the
memorandum because she was on leave for twenty-one (21) days and has not been given
a chance to explain. The management asked her to write an explanation. However, after
submission of the explanation, she was nonetheless dismissed by the company. Due to her
urgent need for money, she later submitted a letter of resignation in exchange for her
thirteenth month pay.8

1. New applicants will not be allowed to be hired if in case he/she has [a] relative,
up to [the] 3rd degree of relationship, already employed by the company.

Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorneys fees. They averred that the aforementioned company policy
is illegal and contravenes Article 136 of the Labor Code. They also contended that they
were dismissed due to their union membership.

2. In case of two of our employees (both singles [sic], one male and another
female) developed a friendly relationship during the course of their employment
and then decided to get married, one of them should resign to preserve the policy
stated above.3

On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for
lack of merit, viz.:

Simbol resigned on June 20, 1998 pursuant to the company policy.

Comia was hired by the company on February 5, 1997. She met Howard Comia, a coemployee, whom she married on June 1, 2000. Ongsitco likewise reminded them that
pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company
allegedly could have terminated her services due to immorality but she opted to resign on
December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated therein
that they have no money and property accountabilities in the company and that they
release the latter of any claim or demand of whatever nature. 7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they
did not resign voluntarily; they were compelled to resign in view of an illegal company
policy. As to respondent Estrella, she alleges that she had a relationship with co-worker
Zuiga who misrepresented himself as a married but separated man. After he got her
pregnant, she discovered that he was not separated. Thus, she severed her relationship

[T]his company policy was decreed pursuant to what the respondent corporation perceived
as management prerogative. This management prerogative is quite broad and
encompassing for it covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers. Except as provided for or limited by special law,
an employer is free to regulate, according to his own discretion and judgment all the
aspects of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on
January 11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as
follows:

(1) Declaring illegal, the petitioners dismissal from employment and ordering
private respondents to reinstate petitioners to their former positions without loss of
seniority rights with full backwages from the time of their dismissal until actual
reinstatement; and
(2) Ordering private respondents to pay petitioners attorneys fees amounting to
10% of the award and the cost of this suit.13

Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.

On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights
towards marriage and the family of employees and of Article 136 of the Labor
Code; and
2. x x x respondents resignations were far from voluntary. 14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the
following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:

The Labor Code is the most comprehensive piece of legislation protecting labor. The case
at bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed
resigned or separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of her marriage.
Respondents submit that their dismissal violates the above provision. Petitioners allege
that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes
a new meaning if read together with the first paragraph of the rule. The rule does not
require the woman employee to resign. The employee spouses have the right to choose
who between them should resign. Further, they are free to marry persons other than coemployees. Hence, it is not the marital status of the employee, per se, that is being
discriminated. It is only intended to carry out its no-employment-for-relatives-within-thethird-degree-policy which is within the ambit of the prerogatives of management. 16
It is true that the policy of petitioners prohibiting close relatives from working in the same
company takes the nature of an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability.17 These policies focus upon the potential employment
problems arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment
policies specifically prohibiting spouses from working for the same company. We note that
two types of employment policies involve spouses: policies banning only spouses from
working in the same company (no-spouse employment policies), and those banning all
immediate family members, including spouses, from working in the same company (antinepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes20 in the United States prohibiting marital

discrimination. Some state courts21 have been confronted with the issue of whether nospouse policies violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants
utilize two theories of employment discrimination: the disparate treatment and
the disparate impact. Under the disparate treatment analysis, the plaintiff must
prove that an employment policy is discriminatory on its face. No-spouse employment
policies requiring an employee of a particular sex to either quit, transfer, or be fired are
facially discriminatory. For example, an employment policy prohibiting the employer from
hiring wives of male employees, but not husbands of female employees, is discriminatory
on its face.22
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be required
to transfer or leave the company, the policy often disproportionately affects one sex. 23
The state courts rulings on the issue depend on their interpretation of the scope of marital
status discrimination within the meaning of their respective civil rights acts. Though they
agree that the term "marital status" encompasses discrimination based on a person's
status as either married, single, divorced, or widowed, they are divided on whether the
term has a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader
definition it would have either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom one is married. They
construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and ruled that they did not
violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it
encompassed the identity, occupation and employment of one's spouse. They strike down
the no-spouse employment policies based on the broad legislative intent of the state
statute. They reason that the no-spouse employment policy violate the marital status
provision because it arbitrarily discriminates against all spouses of present employees
without regard to the actual effect on the individual's qualifications or work
performance.27 These courts also find the no-spouse employment policy invalid for failure
of the employer to present any evidence of business necessity other than the general
perception that spouses in the same workplace might adversely affect the business. 28 They
hold that the absence of such a bona fide occupational qualification29 invalidates a

rule denying employment to one spouse due to the current employment of the other
spouse in the same office.30 Thus, they rule that unless the employer can prove that the
reasonable demands of the business require a distinction based on marital status and
there is no better available or acceptable policy which would better accomplish the
business purpose, an employer may not discriminate against an employee based on the
identity of the employees spouse.31 This is known as the bona fide occupational
qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employers no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other
than the discriminatory practice.32 To justify a bona fide occupational qualification, the
employer must prove two factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that there is a factual basis
for believing that all or substantially all persons meeting the qualification would be unable
to properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
employ the standard ofreasonableness of the company policy which is parallel to the
bona fide occupational qualification requirement. In the recent case of Duncan
Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome
Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any competitor company. We held
that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors. We
considered the prohibition against personal or marital relationships with employees of
competitor companies upon Glaxos employeesreasonable under the circumstances
because relationships of that nature might compromise the interests of Glaxo. In laying
down the assailed company policy, we recognized that Glaxo only aims to protect its
interests against the possibility that a competitor company will gain access to its secrets
and procedures.35
The requirement that a company policy must be reasonable under the circumstances to
qualify as a valid exercise of management prerogative was also at issue in the 1997 case
of Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the
employee was dismissed in violation of petitioners policy of disqualifying from work any
woman worker who contracts marriage. We held that the company policy violates the right
against discrimination afforded all women workers under Article 136 of the Labor Code, but
established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a
"bona fide occupational qualification," or BFOQ, where the particular requirements of

the job would justify the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of that nature would be
valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two (2) or more of
its employees related between the third degree by affinity and/or consanguinity" 38 is lame.
That the second paragraph was meant to give teeth to the first paragraph of the
questioned rule39 is evidently not the valid reasonable business necessity required by the
law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator,
to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its
business operations. Neither did petitioners explain how this detriment will happen in the
case of Wilfreda Comia, then a Production Helper in the Selecting Department, who
married Howard Comia, then a helper in the cutter-machine. The policy is premised on the
mere fear that employees married to each other will be less efficient. If we uphold the
questioned rule without valid justification, the employer can create policies based on an
unproven presumption of a perceived danger at the expense of an employees right to
security of tenure.
Petitioners contend that their policy will apply only when one employee marries a coemployee, but they are free to marry persons other than co-employees. The questioned
policy may not facially violate Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate impact theory, the only way it could pass
judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of petitioners to prove a legitimate business concern in
imposing the questioned policy cannot prejudice the employees right to be free from
arbitrary discrimination based upon stereotypes of married persons working together in
one company.40

is vast and extensive that we cannot prudently draw inferences from the legislatures
silence41 that married persons are not protected under our Constitution and declare valid a
policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the questioned policy is
an invalid exercise of management prerogative. Corollarily, the issue as to whether
respondents Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular
fact that her resignation letter was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent court failed to categorically rule
whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol
and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in
dire need of money. We examined the records of the case and find Estrellas contention to
be more in accord with the evidence. While findings of fact by administrative tribunals like
the NLRC are generally given not only respect but, at times, finality, this rule admits of
exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to
her alleged immoral conduct. At first, she did not want to sign the termination papers but
she was forced to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or talked about
as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation,
she would not have gone back to work at all. Nor would she have filed a suit for illegal
dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal
dismissal. Given the lack of sufficient evidence on the part of petitioners that the
resignation was voluntary, Estrellas dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated
August 3, 2004 isAFFIRMED.1avvphil.net

ANGELINA FRANCISCO,
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction

Petitioner,

G.R. No. 170087

For five years, petitioner performed the duties of Acting Manager. As of December
31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in
the profit of Kasei Corporation.[8]
- versus NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA
Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
annul and set aside the Decision and Resolution of the Court of Appeals dated October 29,
2004[1] and October 7, 2005,[2] respectively, in CA-G.R. SP No. 78515 dismissing the
complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The
appellate court reversed and set aside the Decision of the National Labor Relations
Commission (NLRC) dated April 15, 2003, [3] in NLRC NCR CA No. 032766-02 which affirmed
with modification the decision of the Labor Arbiter dated July 31, 2002, [4] in NLRC-NCR Case
No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was assigned to
handle all the accounting needs of the company. She was also designated as Liaison
Officer to the City of Makati to secure business permits, construction permits and other
licenses for the initial operation of the company.[5]
Although she was designated as Corporate Secretary, she was not entrusted with
the corporate documents; neither did she attend any board meeting nor required to do
so. She never prepared any legal document and never represented the company as its
Corporate Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company.[6]
In 1996, petitioner was designated Acting Manager. The corporation also hired
Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned
to handle recruitment of all employees and perform management administration functions;
represent the company in all dealings with government agencies, especially with the
Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government
of Makati; and to administer all other matters pertaining to the operation of Kasei
Restaurant which is owned and operated by Kasei Corporation. [7]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner

alleged that she was required to sign a prepared resolution for her replacement but she
was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the
designated Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still connected with Kasei
Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. [9]
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning
January up to September 2001 for a total reduction of P22,500.00 as of September
2001. Petitioner was not paid her mid-year bonus allegedly because the company was not
earning well. On October 2001, petitioner did not receive her salary from the
company. She made repeated follow-ups with the company cashier but she was advised
that the company was not earning well.[10]
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the
officers but she was informed that she is no longer connected with the company. [11]
Since she was no longer paid her salary, petitioner did not report for work and filed
an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its technical
consultants on accounting matters and act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her work at her own discretion without control
and supervision of Kasei Corporation. Petitioner had no daily time record and she came to
the office any time she wanted. The company never interfered with her work except that
from time to time, the management would ask her opinion on matters relating to her
profession. Petitioner did not go through the usual procedure of selection of employees,
but her services were engaged through a Board Resolution designating her as technical
consultant. The money received by petitioner from the corporation was her professional
fee subject to the 10% expanded withholding tax on professionals, and that she was not
one of those reported to the BIR or SSS as one of the companys employees. [12]
Petitioners designation as technical consultant depended solely upon the will of
management. As such, her consultancy may be terminated any time considering that her
services were only temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly received by
the BIR showing that petitioner was not among the employees reported to the BIR, as well
as a list of payees subject to expanded withholding tax which included petitioner. SSS
records were also submitted showing that petitioners latest employer was Seiji
Corporation.[13]

The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
1.
finding
complainant
an
employee
of
respondent
corporation;
2.
declaring complainants dismissal as illegal;
3.
ordering respondents to reinstate complainant to her
former position without loss of seniority rights and jointly and severally pay
complainant her money claims in accordance with the following
computation:
a.
b.
c.
d.
e.
f.
g.
h.

Backwages 10/2001 07/2002

275,000.00
(27,500 x 10 mos.)
Salary Differentials (01/2001 09/2001)
22,500.00
Housing Allowance (01/2001 07/2002)
57,000.00
Midyear Bonus 2001
27,500.00
13th Month Pay
27,500.00
10% share in the profits of Kasei
Corp. from 1996-2001
361,175.00
Moral and exemplary damages
100,000.00
10% Attorneys fees
87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to

pay complainant separation pay with additional backwages that would
accrue up to actual payment of separation pay.
SO ORDERED.[14]
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor
Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby
MODIFIED as follows:
1)
Respondents are directed to pay complainant separation
pay computed at one month per year of service in addition to full
backwages from October 2001 to July 31, 2002;
2)
The awards representing moral and exemplary damages
and 10% share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3)
The award of 10% attorneys fees shall be based on salary
differential award only;

4)
The awards representing salary differentials,
allowance, mid year bonus and 13th month pay are AFFIRMED.

housing

SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision
of the National Labor Relations Commissions dated April 15, 2003 is hereby
REVERSED and SET ASIDE and a new one is hereby rendered dismissing
the complaint filed by private respondent against Kasei Corporation, et al.
for constructive dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there was an employeremployee relationship between petitioner and private respondent Kasei Corporation; and if
in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor
Relations Commission on one hand, and the Court of Appeals on the other, there is a need
to reexamine the records to determine which of the propositions espoused by the
contending parties is supported by substantial evidence. [17]
We held in Sevilla v. Court of Appeals [18] that in this jurisdiction, there has been no
uniform test to determine the existence of an employer-employee relation. Generally,
courts have relied on the so-called right of control test where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. In addition to the standard of right-of-control,
the existing economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, can help in determining the existence of an employer-employee
relationship.
However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. There are instances
when, aside from the employers power to control the employee with respect to the means
and methods by which the work is to be accomplished, economic realities of the
employment relations help provide a comprehensive analysis of the true classification of
the individual, whether as employee, independent contractor, corporate officer or some
other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1)
the putative employers power to control the employee with respect to the means and
methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would
take into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties. This is especially appropriate in this case where there is
no written agreement or terms of reference to base the relationship on; and due to the
complexity of the relationship based on the various positions and responsibilities given to
the worker over the period of the latters employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and
Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we held that there is an
employer-employee relationship when the person for whom the services are performed
reserves the right to control not only the end achieved but also the manner and means
used to achieve that end.

served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting

Manager and Corporate Secretary, with substantially the same job functions, that is,
rendering accounting and tax services to the company and performing functions necessary
and desirable for the proper operation of the corporation such as securing business permits
and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be
an employee of respondent corporation because she had served the company for six years
before her dismissal, receiving check vouchers indicating her salaries/wages, benefits,
13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000. [26] When petitioner was
designated General Manager, respondent corporation made a report to the SSS signed by
Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS
specimen signature card which was signed by the President of Kasei Corporation and the
inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. [27]
It is therefore apparent that petitioner is economically dependent on respondent
corporation for her continued employment in the latters line of business.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing

economic conditions prevailing between the parties, in addition to the standard of right-ofcontrol like the inclusion of the employee in the payrolls, to give a clearer picture in
determining the existence of an employer-employee relationship based on an analysis of
the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity, [22] such as: (1) the extent
to which the services performed are an integral part of the employers business; (2) the
extent of the workers investment in equipment and facilities; (3) the nature and degree of
control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the
amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; (6) the permanency and duration of the relationship between the
worker and the employer; and (7) the degree of dependency of the worker upon the
employer for his continued employment in that line of business. [23]
The proper standard of economic dependence is whether the worker is dependent
on the alleged employer for his continued employment in that line of business. [24] In the
United States, the touchstone of economic reality in analyzing possible employment
relationships for purposes of the Federal Labor Standards Act is dependency. [25] By
analogy, the benchmark of economic reality in analyzing possible employment
relationships for purposes of the Labor Code ought to be the economic dependence of the
worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of Seiji
Kamura, the corporations Technical Consultant. She reported for work regularly and

In Domasig v. National Labor Relations Commission,[28] we held that in a business

establishment, an identification card is provided not only as a security measure but mainly
to identify the holder thereof as a bona fide employee of the firm that issues it. Together
with the cash vouchers covering petitioners salaries for the months stated therein, these
matters constitute substantial evidence adequate to support a conclusion that petitioner
was an employee of private respondent.
We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers
with the SSS is proof that the latter were the formers employees. The coverage of Social
Security Law is predicated on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her designation as
such was only for convenience. The actual nature of petitioners job was as Kamuras
direct assistant with the duty of acting as Liaison Officer in representing the company to
secure construction permits, license to operate and other requirements imposed by
government agencies. Petitioner was never entrusted with corporate documents of the
company, nor required to attend the meeting of the corporation. She was never privy to
the preparation of any document for the corporation, although once in a while she was
required to sign prepared documentation for the company.[30]
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the
records of the case.[31] Regardless of this fact, we are convinced that the allegations in the
first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts
do not generally look with favor on any retraction or recanted testimony, for it could have
been secured by considerations other than to tell the truth and would make solemn trials a

mockery and place the investigation of the truth at the mercy of unscrupulous witnesses.
[32]
A recantation does not necessarily cancel an earlier declaration, but like any other
testimony the same is subject to the test of credibility and should be received with caution.

finality of this decision, and separation pay representing one-half month pay for every year
of service, where a fraction of at least six months shall be considered as one whole year.

[33]

Based on the foregoing, there can be no other conclusion that petitioner is an

employee of respondent Kasei Corporation. She was selected and engaged by the
company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved accounting
and tax services rendered to respondent corporation on a regular basis over an indefinite
period of engagement. Respondent corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause. More importantly, respondent
corporation had the power to control petitioner with the means and methods by which the
work is to be accomplished.

[G.R. No. 86963. August 6, 1999]

BATONG BUHAY GOLD MINES, INC., petitioner, vs. HONORABLE DIONISIO DELA
SERNA IN HIS CAPACITY AS THE UNDERSECRETARY OF THE DEPARTMENT
OF LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY, ANTONIO
MENDELEBAR,
MA.
CONCEPCION
Q.
REYES,
AND
THE
OTHER
COMPLAINANTS* IN CASE NO. NCR-LSED-CI-2047-87; MFT CORPORATION
AND SALTER HOLDINGS PTY. LTD., respondents.

The corporation constructively dismissed petitioner when it reduced her salary by

P2,500 a month from January to September 2001. This amounts to an illegal termination of
employment, where the petitioner is entitled to full backwages. Since the position of
petitioner as accountant is one of trust and confidence, and under the principle of strained
relations, petitioner is further entitled to separation pay, in lieu of reinstatement. [34]

RESOLUTION

A diminution of pay is prejudicial to the employee and amounts to constructive

dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of
work resorted to when continued employment becomes impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an
employee.[35] In Globe Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee
ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it impossible for such
employee to continue working for her employer. Hence, her severance from the company
was not of her own making and therefore amounted to an illegal termination of
employment.

PURISIMA, J.:

In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case, attempt to
carefully balance the fragile relationship between employees and employers, we are
mindful of the fact that the policy of the law is to apply the Labor Code to a greater
number of employees. This would enable employees to avail of the benefits accorded to
them by law, in line with the constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary social economic force in
furtherance of social justice and national development.

"xxx on 5 February 1987, Elsie Rosalinda B. Ty, Antonia L. Mendelebar, Ma. Concepcion O.
Reyes and 1,247 others filed a complaint against Batong Buhay Gold Mines, Inc. for: (1)
Non-payment of their basic pay and allowances for the period of 6 July 1983 to 5 July 1984,
inclusive, under Wage Order No. 2; (2) Non-payment of their basic pay and allowances for
the period 16 June 1984 to 5 October 1986, inclusive under Wage Order No. 5; (3) Nonpayment of their salaries for the period 16 March 1986 to the present; (4) Non-payment of
their 13th month pay for 1985, 1986 and 1987; (5) Non-payment of their vacation and sick
leave, and the compensatory leaves of mine site employees; and (6) Non-payment of the
salaries of employees who were placed on forced leaves since November, 1985 to the
present, if this is not feasible, the affected employees be awarded corresponding
separation pay.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court
of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No.
78515 are ANNULLED and SET ASIDE. The Decision of the National Labor Relations
Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina
Franciscos full backwages from the time she was illegally terminated until the date of

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court with a
Prayer for Preliminary Injunction and or Restraining Order brought by Batong Buhay Gold
Mines, Inc. (BBGMI for brevity) to annul three orders issued by respondent Undersecretary
Dionisio dela Serna of the Department of Labor and Employment, dated September 16,
1988, December 14, 1988 and February 13, 1989, respectively.
The Order of September 16, 1988 stated the facts as follows:

On 9 February 1987, the Regional Director set the case for hearing on 17 February 1987.

On 17 February 1987, the respondent moved for the resetting of the case to 2 March 1987.
On 27 February 1987, the complainants filed a Motion for the issuance of an inspection
authority.
xxx
On 13 July 1987, the Labor Standards and Welfare Officers submitted their report with the
following recommendations:
WHEREFORE, premises considered, this case is hereby submitted with the
recommendation that an Order of Compliance be issued directing respondent Batong
Buhay Gold Mines Inc. to pay complainants Elsie Rosalina Ty, et al. FOUR MILLION EIGHT
HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED FORTY-SIX PESOS AND FORTY
CENTAVOS (P4,818,746.40) by way of unpaid salaries of workers from March 16, 1987 to
present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th
months pay for 1985 and 1986, and upaid (sic) vacation/sick/compensatory leave
benefits.
On 31 July 1987, the Regional Director[1] adopted the recommendation of the LSWOs and
issued an order directing the respondent to pay the complainants the sum
of P4,818,746.40 representing their unpaid 13th month pay for 1985 and 1986, wage and
ECOLA differentials under wage order Nos. 2 and 5, unpaid salaries from 16 March 1986 to
present and vacation/sick leave benefits for 1984, 1985 and 1986.
On 19 August 1987, the complainants filed an ex-parte motion for the issuance of a writ of
execution and appointment of special sheriff.

You are to collect the above-stated amount from the respondent and deposit the same
with Cashier of this Office for appropriate disposition to herein complainants under the
supervision of the office of the Director. Otherwise, you are to execute this writ by
attaching the goods and chattels of the respondent not exempt from execution or in case
of insufficiency thereof against the real or immovable property of the respondent.
The Special Sheriff proceeded to execute the appealed Order on 17 September 1987 and
seized three (3) units of Peterbuilt trucks and then sold the same by public
auction. Various materials and motor vehicles were also seized on different dates and sold
at public auction by said sheriff.
xxx xxx

xxx

On 11 December 1987, the respondent finally posted a supersedeas bond which prompted
this Office to issue an Order dated 26 January 1988, restraining the complainants and
sheriff Ramos from enforcing the writ of execution. xxx[2]
BBGMI appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to
respondent Undersecretary Dionisio de la Serna, contending that the Regional Director had
no jurisdiction over the case.
On September 16, 1988, the public respondent issued the first challenged Order
upholding the jurisdiction of the Regional Director and annulling all the auction sales
conducted by Special Sheriff John Ramos. The decretal portion of the said Order ruled:
WHEREFORE, the Order dated 31 July 1987 of the Regional Director, National Capital
Region, is hereby AFFIRMED. Accordingly, the writ of execution dated 14 September 1987
issued in connection thereto is hereby declared VALID.

xxx
On 21 August 1987, the Regional Director issued an Order directing the respondent to put
up a cash or surety bond otherwise a writ of execution will be issued.
xxx
When the respondent failed to post a cash/surety bond, and upon motion for the issuance
of a writ of execution by the complainants, the Regional Director, on 14 September 1987
issued a writ of execution appointing Mr. John Espiridion C. Ramos as Special Sheriff and
directing him to do the following:

However, the public auction sales conducted by special sheriff John Ramos pursuant to the
writ of execution dated 14 September 1987 on 24 September 2, 20, 23, and 29 October
1987 are all hereby declared NULL AND VOID. Furthermore, the personal properties sold
and the proceeds thereof which have been turned over to the complainants thru their legal
counsel are hereby ordered returned to the custody of the respondent and the buyers
respectively.
SO ORDERED.[3]
On October 13, 1988, a Motion for Reconsideration of the aforesaid order was
presented by the complainants in Case No. NCR-LSED-CI-2047-87 but the same was
denied.

On November 7, 1988, a Motion for Intervention was filed by MFT Corporation, inviting
attention to a Deed of Sale executed in its favor by Fidel Bermudez, the highest bidder in
the auction sale conducted on October 29, 1987.
On December 2, 1988, another Motion for Intervention was filed, this time by Salter
Holdings Pty., Ltd., claiming that MFT Corporation assigned its rights over the subject
properties in favor of movant as evidenced by a Sales Agreement between MFT Corp. and
Salter Holdings Pty., Ltd.
The two Motions for Intervention were granted in the second questioned order dated
December 14, 1988, directing the exclusion from annulment of the properties sold at the
October 29, 1987 auction sale and claimed by the intervenors, including one cluster of junk
mining machineries, equipment and supplies, and disposing thus:
WHEREFORE, in view of the foregoing, the motions for reconsideration filed by intervenors
MFT and Salter are hereby granted. Correspondingly, this Offices Order dated 16
September 1988 is hereby modified to exclude from annulment the one lot of junk mining
machineries, equipment and supplies as-is-where-is sold by Sheriff John C. Ramos in the
auction sale of 29 October 1987.
xxx xxx

xxx

Motions for Reconsideration were interposed by Batong Buhay Gold Mining, Inc. and
the respondent employees but to no avail. The same were likewise denied in the third
assailed Order dated February 13, 1989.
Hence, the petition under scrutiny, ascribing grave abuse of discretion amounting to
lack or excess of jurisdiction to the public respondent in issuing the three Orders under
attack.
The questioned Orders aforementioned have given rise to the issues: (1) whether the
Regional Director has jurisdiction over the complaint filed by the employees of BBGMI; and
(2) whether or not the auction sales conducted by the said Special Sheriff are valid.
Anent the first issue, an affirmative ruling is indicated. The Regional Director has
jurisdiction over the BBGMI employees who are the complainants in Case Number NCRLSED-CI-2047-87.
The subject labor standards case of the petition arose from the visitorial and
enforcement powers by the Regional Director of Department of Labor and Employment
(DOLE). Labor standards refers to the minimum requirements prescribed by existing laws,
rules and regulations relating to wages, hours of work, cost of living allowance and other

monetary and welfare benefits, including occupational, safety and health standards.
[4]
Labor standards cases are governed by Article 128(b) of the Labor Code.
The pivot of inquiry here is whether the Regional Director has jurisdiction over subject
labor standards case.
As can be gleaned from the records on hand, subject labor standards case was filed on
February 5, 1987 at which time Article 128 (b) read as follows [5]:
Art. 128 ( b) Visitorial and enforcement powers (b) The Minister of Labor or his duly authorized representative shall have the power to
order and administer, after due notice and hearing, compliance with the labor standards
provisions of this Code based on the findings of labor regulation officers or industrial safety
engineers made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their order, except in cases where the
employer contests the findings of the labor regulations officers and raises issues which
cannot be resolved without considering evidentiary matters that are not verifiable in the
ordinary course of inspection.
Petitioner theorizes that the Regional Director is without jurisdiction over subject case,
placing reliance on the ruling in Zambales Base Inc. vs. Minister of Labor [6]and Oreshoot
Mining Company vs. Arellano.[7]
Respondent Undersecretary Dionision C. Dela Serna, on the other hand, upheld the
jurisdiction of Regional Director Luna C. Piezas by relying on E.O. 111, to quote:
Considering therefore that there still exists an employer-employee relationship between
the parties; that the case involves violations of the labor standard provisions of the labor
code; that the issues therein could be resolved without considering evidentiary matters
that are not verifiable in the normal course of inspection; and, if only to give meaning and
not render nugatory and meaningless the visitorial and enforcement powers of the
Secretary of Labor and Employment as provided by Article 128(b) of the Labor Code, as
amended by Section 2 of Executive Order No. 111 which states:
The provisions of article 217 of this code to the contrary notwithstanding and in cases
where the relationship of employer-employee still exists, the Minister of Labor and
Employment or his duly authorized representative shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provision of
this Code based on the findings of the findings of labor regulation officers or industrial
safety engineers made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their order, except in cases where the

employer contests the findings of the labor regulations officers and raises issues which
cannot be resolved without considering evidentiary matters that are not verifiable in the
ordinary course of inspection.
We agree with the complainants that the regional office a quo has jurisdiction to hear and
decide the instant labor standard case.
xxx xxx

xxx[8]

The Court agrees with the public respondent. In the case of Maternity Childrens
Hospital vs Secretary of Labor (174 SCRA 632), the Court in upholding the jurisdiction of
the Regional Director over the complaint on underpayment of wages and ECOLAs filed on
May 23, 1986, by the employees of Maternity Childrens Hospital, held:
This is a labor standards case and is governed by Art. 128(b) of the Labor Code, as
amended by E.O. 111.
xxx xxx

xxx

Prior to the promulgation of E.O. 111 on December 24, 1986, the Regional Directors
authority over money claims was unclear. The complaint in the present case was filed on
May 23, 1986 when E.O. 111 was not yet in effect. xxx
xxx
We believe, however , that even in the absence of E.O. 111 , Regional Directors already
had enforcement powers over money claims, effective under P.D. 850, issued on December
16, 1975, which transferred labor standards cases from the arbitration system to the
enforcement system.
In the aforecited case, the Court in reinforcing its conclusion that Regional Director
has jurisdiction over labor standards cases, treated E.O. 111 as a curative statute, ruling as
follows:
E.O. No. 111 was issued on December 24, 1986 or three(3) months after the promulgation
of the Secretary of Labors decision upholding private respondents salary differentials and
ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers
of the Regional Director (Article 128(b)) by said E.O. 111 reflects the intention enunciated
in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to
resolve uncontested money claims in cases where an employer-employee relationship still
exists. This intention must be given weight and entitled to great respect. As held in
Progressive Workers Union, et al. vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29, 1985,
150 SCRA 429:

.xx The interpretation by officers of laws which are entrusted to their administration is
entitled to great respect. We see no reason to detract from this rudimentary rule in
administrative law, particularly when later events have proved said interpretation to be in
accord with the legislative intent. xx
The proceedings before the Regional Director must, perforce be upheld on the basis of
Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order
to be considered in the nature of a curative statute with retrospective application.
(Progressive Workers Union, et al. vs. Hon. Aguas, et al. (Supra); M. Garcia vs. Judge A.
Martinez, et al. G.R.No. l-47629, may 28,1979, 90 SCRA 331).
With regard to the petitioners reliance on the cases of Zambales Base, Inc. vs.
Minister of Labor (supra) and Oreshoot Mining Company vs. Arellano, (supra), this is
misplaced. In the case of Zambales Base, Inc., the court has already ruled that:
xxx, in view of the promulgation of Executive Order No. 111, Zambales Base Metals vs.
Minister of Labor is no longer good law. (Emphasis supplied) Executive Order No. 111
is in the character of a curative law, that is to say, it was intended to remedy a defect that,
in the opinion of the Legislature (the incumbent Chief Executive in this case, in the exercise
of her lawmaking powers under the Freedom Constitution) had attached to the provision
under the amendment.
xxx xxx

xxx[9]

The case of Oreshoot Mining Corporation, on the other hand, involved money claims of
illegally dismissed employees. As the employer-employee relationship has already ceased
and reinstatement is sought, jurisdiction necessarily falls under the Labor
Arbiter. Petitioner should not have used this to support its theory as this petition involves
labor standards cases and not monetary claims of illegally dismissed employees.
The Court would have ruled differently had the petitioner shown that subject labor
standards case is within the purview of the exception clause in Article 128 (b) of the Labor
Code. Said provision requires the concurrence of the following elements in order to divest
the Regional Director or his representatives of jurisdiction, to wit: (a) that the petitioner
(employer) contests the findings of the labor regulations officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of inspection. [10]
Nowhere in the records does it appear that the petitioner alleged any of the
aforestated grounds. In fact, in its Motion for Reconsideration of the Order of the Regional
Director dated August 20, 1987, the grounds which petitioner raised were the following:

1. This Honorable Office has no jurisdiction to hear this case and its Order of 31 October
1987 is therefore null and void;
2. Batong Buhay Gold Mines, Inc. is erroneously impleaded as the sole party respondent,
the complaint should have been directed also against the Asset Privatization Trust.
In the other pleadings filed by petitioner in NCR-LSED-C1-2047-87, such as the Urgent
Omnibus Motion to declare void the Writ of Execution for lack of jurisdiction and the
Oppositions it filed on the Motions for Intervention questioning the legal personality of the
intervenors, questions as to the amounts complained of by the employees or absence of
violation of labor standards laws were never raised. Raising lack of jurisdiction in a Motion
to Dismiss is not the contest contemplated by the exception clause under Article 128(b) of
the Labor Code which would take the case out of the jurisdiction of the Regional Director
and bring it before the Labor Arbiter.
The only instance when there was a semblance of raising the aforestated grounds,
was when they filed an Appeal Memorandum dated January 14, 1988, before the
respondent undersecretary. In the said Appeal Memorandum, petitioner comes up with the
defense that the Regional Director was without jurisdiction, as employer-employee
relationship was absent, since petitioner had ceased doing business since 1985.
Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint
Inspection Authority No. CI-2-047-87, were not allowed to look into records, vouchers and
other related documents. The officers of the petitioner alleged that the company is
presently under receivership of the Development Bank of the Philippines. [11] In lieu of this,
the Regional Director had ordered that a summary investigation be conducted. [12] Despite
proper notices, the petitioner refused to appear before the Regional Director. To give it
another chance, an order to file its position paper was issued to substantiate its
defenses. Notwithstanding all these opportunities to be heard, petitioner chose not to
avail of such.
As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, (266
SCRA 111):
xxx Under Art. 128(a) of the Labor Code, the Secretary of Labor or his duly authorized
representatives, such as the Regional Directors, has visitorial powers which authorize him
to inspect the records nd premises of an employer at any time of the day or night
whenever work is being undertaken therein, to question any employee and investigate any
fact, condition or matter, and to determine violations of labor laws, wage orders or rules
and regulations. If the employer refuses to attend the inspection or conference or
to submit any record, such as payrolls and daily time records, he will be deemed
to have waived his right to present evidence. (emphasis supplied)

Petitioners refusal to allow the Labor Standards and Welfare Officers to conduct
inspection in the premises of their head office in Makati and the failure to file their position
paper is equivalent to a waiver of its right to contest the claims of the employees. This
Court had occasion to hold there is no violation of due process where the Regional Director
merely required the submission of position papers and resolved the case summarily
thereafter.[13] Furthermore, the issuance of the compliance order was well within the
jurisdiction of the Regional Director, as Section 14 of the Rules on the Disposition of Labor
Standards Cases provides:
Section 14. Failure to Appear - Where the employer or the complainant fails or refuses
to appear during the investigation, despite proper notice, for two (2) consecutive hearings
without justifiable reasons, the hearing officer may recommend to the Regional Director
the issuance of a compliance order based on the evidence at hand or an order of
dismissal of the complaint as the case may be. (Emphasis supplied)
It bears stressing that this petition involves a labor standards case and it is in keeping
with the law that the worker need not litigate to get what legally belongs to him, for the
whole enforcement machinery of the Department of Labor exists to insure its expeditious
delivery to him free of charge.[14]
Thus, their claim of closure for business, among other things, are factual issues which
cannot be brought here for the first time. As petitioner refused to participate in the
proceedings below where it could have ventilated the appropriate defenses, to do so in this
petition is unavailing. The reason for this is that factual issues are not proper subjects of a
special civil action for certiorari to the Supreme Court.[15]
It is therefore abundantly clear that at the time of the filing of the claims of
petitioners employees, the Regional Director was already exercising visitorial and
enforcement powers.
Regional Directors visitorial and enforcement powers under Art. 128 (b) has
undergone series of amendments which the Court feels to be worth mentioning.
Confusion was engendered by the promulgation of the decision in the case
of Servandos Inc. vs. Secretary of Labor and Employment and the Regional Director,
Region VI, Department of Labor and Employment. [16] In the said case, the Regional Director
took cognizance of the labor standards cases of the employees of Servandos Inc., but this
Court held that:
In the case of Briad Agro Development Corporation vs. Dela Cerna and Camus
Engineering Corp. vs. Sec. Of labor applying E.O. 111 the Court recognized the concurrent
jurisdiction of the Secretary of labor (or Regional Directors) and the labor Arbiters to pass

on employees money claims, including those cases which the labor Arbiters had previously
exercised jurisdiction. However, in a subsequent modificatory resolution in the Briad Agro
Case, dated 9 November 1989, the Court modified its original decision in view of the
enactment of RA 6715, and upheld the power of the Regional Directors to adjudicate
money claims subject to the conditions set forth in Section 2 of said law (RA 6715).

But prevailing law and jurisprudence rendered the Servando ruling inapplicable. In the
recent case of Francisco Guico, Jr. versus The Honorable Secretary of Labor & Employment
Leonardo A. Quisumbing, GR # 131750, promulgated on November 16, 1998, this Court
upheld the jurisdiction of the Regional Director notwithstanding the fact that the amounts
awarded exceeded P5,000.

The power then of the Regional Director (under the present state of law) to adjudicate
employees money claims is subject to the concurrence of all the requisites provided under
Sec. 2 of RA 6715, to wit:

Republic Act 7730, the law governing the visitorial and enforcement powers of the
Labor Secretary and his representatives reads:

(a) the claim is represented by an employer or person employed in domestic or

household service, or househelper;
(b) the claim arises from employer-employee relationship;
(c) the claimant does not seek reinstatement; and
(d) the aggregate money claim of each employee or househelper does not
exceed P5,000.
xxx xxx

xxx[17]

The Servando ruling, in effect, expanded the jurisdictional limitation provided for by
RA 6715 as to include labor standards cases under Article 128 (b) and no longer limited to
ordinary monetary claims under Article 129.
In fact, in the Motion for Reconsideration [18] presented by the private respondents in
the Servando case, the court applied more squarely the P5,000 limit to the visitorial and
enforcement power of the Regional Director, to wit:
To construe the visitorial power of the Secretary of Labor to order and enforce compliance
with labor laws as including the power to hear and decide cases involving employees
claims for wages, arising from employer-employee relations, even if the amount of said
claims exceed P5,000 for each employee, would, in our considered opinion, emasculate
and render meaningless, if not useless, the provisions of Art. 217 (a) and (6) and Article
129 of the Labor Code which, as above-pointed out, confer exclusive jurisdiction on the
Labor Arbiter to hear and decide such employees claims, regardless of amount, can be
heard and determined by the Secretary of Labor under his visitorial power. This does not,
however, appear to be the legislative intent.

Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this
Code to the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized representatives shall
have the power to issue compliance orders to give effect to the labor standards provisions
of this Code and other labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representative shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the
employer contests the findings of the labor employment and enforcement officer and
raises issues supported by documentary proofs which were not considered in the course of
inspection.
xxx xxx

xxx (emphasis supplied)

The present law, RA 7730, can be considered a curative statute to reinforce the
conclusion that the Regional Director has jurisdiction over the present labor standards
case.
Well-settled is the rule that jurisdiction over the subject matter is determined by the
law in force when the action was commenced, unless a subsequent statute provides for its
retroactive application, as when it is a curative legislation. [19]
Curative statutes are intended to supply defects, abridge superfluities in existing laws
and curb certain evils. They are intended to enable persons to carry into effect that which
they have designed and intended, but has failed of expected legal consequence by reason
of some statutory disability or irregularity in their own action. They make valid that which,
before the enactment of the statute, was invalid.[20]
In arriving at this conclusion, the case of Briad Agro Development vs. De la
Cerna[21] comes to the fore. In the said case, RA 6715 was held to be a curative
statute. There, the Court ruled that RA 6715 is deemed a curative statute and should be
applied to pending cases. The rationale of the ruling of the Court was that prior to RA
6715, Article 217 as amended by E.O. 111, created a scenario where the Labor Arbiter and

the Regional Director of DOLE had overlapping jurisdiction over money claims. Such a
situation was viewed as a defect in the law so that when RA 6715 was passed, it was
treated or interpreted by the Court as a rectification of the infirmity of the law, and
therefore curative in nature, with retroactive application.
Parenthetically, the same rationale applies in treating RA 7730 as a curative
statute. Explicit in its title[22] is the legislative intent to rectify the error brought about by
this Courts ruling that RA 6715 covers even labor standards cases where the amounts to
be awarded by the Regional Director exceed P5,000 as provided for under RA
6715. Congressional records relative to Republic Act 7730 reveal that, this bill seeks to do
away with the jurisdictional limitations imposed thru said ruling (referring to Servando) and
to finally settle any lingering doubts on the visitorial and enforcement powers of the
Secretary of Labor and Employment.[23]
All the foregoing studiedly considered, the ineluctable conclusion is that the
application of RA 7730 to the case under consideration is proper.
Thus, it is decisively clear that the public respondent did not act with grave abuse of
discretion in issuing the Order dated September 16, 1988.
The second issue for resolution is the validity of the auction sales conducted by
Special Sheriff Ramos. It bears stressing that the writ of execution issued by the Regional
Director led to the several auction sales conducted on September 24, 1987, October 2,
1987, October 23, 1987, October 29, 1987 and October 30, 1987.

3. One (1) unit 1978 Model peterbuilt truck with Engine No. 6A410319, Chassis
No. 139163-P Truck No. 4 not running condition.
Proceeds of Sale ............P178,000.00
Personal Properties Sold on October 2, 1987:
1. One (1) unit peterbuilt truck model 1978, with Engine No. 6A410347, Chassis
No. 1391539-P.
2. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A410325, Chassis
No. 139149.
3. One (1) unit payloader (caterpillar with Engine No. (not visible) 966.
4. One (1) unit Forklift; one (1) unit crowler crane, Engine No. (not visible); and
one (1) Lot of scrap irons impounded inside the Batong Buhay Compound,
Calanan, Kalinga Apayao.
5. One (1) unit panel Isuzu with Engine No. 821 POF200207, Plate No. PBV 386.
Proceeds of Sale....P228,750.00
Personal Properties Sold on October 23, 1987:

In the first Order of public respondent, the five (5) auction sales were declared null
and void. As the public respondent put it, the scandalously low price for which the
personal properties of the respondent were sold leads us to no other recourse but to
invalidate the auction sales conducted by the special sheriff. [24]

1. One (1) Unit Toyota Land Cruiser, with Engine No. BO4466340, Chassis No.
81400500227, Plate No. BAT 353, burned, damage not running condition, type
of body jeep motor not visible.

In the September 16, 1988 Order [25] of public respondent, the personal properties and
corresponding prices for which they were sold were as follows:

2. Two (2) units peterbuilts, damaged, burned motor Nos. (not visible) and
Chassis Nos. not visible.

Personal properties sold on September 24, 1987:

3. One (1) Unit Layland, burned, damaged and Motor No. not visible.

1. One (1) unit peterbuilt truck Model 1978 with Engine No. 6A4102-65, Chassis
No. 139155-P not running condition.

4. Two (units) air compressor, burned, damaged and one (1) generator.
5. One (1) Unit Loader Michigan 50, damaged and burned, and

2. One (1) unit 1978 Model peterbuilt truck with Engine No. 6467-8040, Chassis
No. 6A410235, truck with Engine No. (Truck 4) not running condition.

6. One (1) rock crasher, damaged, burned, scrap iron junk.

Proceeds of Sale...........P98,000.00

unfairness, or oppression, and there is no misconduct, accident, mistake or surprise

connected with, and tending to cause, the inadequacy. [26]

Properties sold on October 29, 1987:

Consequently, in declaring the nullity of the subject auction sales on the ground of
inadequacy of price, the public respondent acted with grave abuse of discretion amounting
to lack or excess of jurisdiction.

1. One (1) lot of scrap construction materials

2. One (1) lot of scrap mining machineries equipments and supplies.
3. One (1) lot of junk machineries, equipments and supplies.
Proceeds of Sale............P1,699,999.99
Personal Properties Sold on October 20, 1987*
1. One (1) lot of scrap construction materials
2. One (1) lot of scrap mining machineries, equipments and supplies
Proceeds of Sale...........P2,185,000.00
Total Proceeds Sale.... P4,389,749.99
to satisfy the judgment award in the amount of P4,818,746.00.
As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial
agencies are not to be disturbed absent any showing of grave abuse of discretion tainting
the same. But in the case under scrutiny, there was grave abuse of discretion when the
public respondent, without any evidentiary support, adjudged such prices as scandalously
low. He merely relied on the self-serving assertion by the petitioner that the value of the
auctioned properties was more than the price bid. Obviously, this ratiocination did not
suffice to set aside the auction sales.
The presumption of regularity in the performance of official function is applicable
here. Conformably, any party alleging irregularity vitiating auction sales must come
forward with clear and convincing proof.
Furthermore, it is a well-settled principle that:
Mere inadequacy of price is not, of itself sufficient ground to set aside an execution sale
where the sale is regular, proper and legal in other respects, the parties stand on an equal
footing, there are no confidential relation between them, there is no element of fraud,

But, this is not to declare the questioned auction sales as valid. The same are null and
void since on the properties of petitioner involved was constituted a mortgage between
petitioner and the Development Bank of the Philippines, as shown by the:
(a) Deed of Mortgage dated December 28,1973;
(b) Joint Mortgage (Amending Deed of Mortgage) dated August 25, 1975;
(c) Amendment to Joint Mortgage dated October 18, 1976.
(d) Confirmation of Mortgage dated March 27,1979; and
(e) Additional Joint First Mortgage dated March 31, 1981.[27]
The aforementioned documents were executed between the petitioner and
Development Bank of the Philippines (DBP) even prior to the filing of the complaint of
petitioners employees. The properties having been mortgaged to DBP, the applicable law
is Section 14 of Executive Order No. 81, dated 3 December 1986, otherwise known as the
The 1986 Revised Charter of the Development Bank of the Philippines, which exempts
the properties of petitioner mortgaged to DBP from attachment or execution sales. Section
14 of E.O. 81, reads:
Sec. 14. Exemption from Attachment. The provisions of any law to the contrary
notwithstanding, securities on loans and/or other accommodations granted by the Bank or
its predecessor-in-interest shall not be subject to attachment, execution or any other court
process, nor shall they be included in the property of insolvent persons or institutions,
unless all debts and obligations of the Bank or its predecessor-in-interest, penalties,
collection of expenses, and other charges, subject to the provisions of paragraph (e) of
Sec. 9 of this Charter.
In fact, a letter dated January 31, 1990 of Jose C. Sison, Associate Executive Trustee of
the Asset Privatization Trust, to the Office of the Clerk of Court of the Supreme Court,
certified that the petitioner is covered by Proclamation No. 50 issued on December 8, 1986
by President Corazon C. Aquino.

Quoted hereunder are the pertinent portions of the said letter: [28]

xxx xxx

RE: BBGMI vs. Hon. dela Serna, GR No. 86963

(m) Properties specially exempted by law.

Supreme Court Certiorari

xxx xxx

SIR:
xxx

xxx

xxx

xxx all the assets (real and personal/chattel) of Batong Buhay Gold Mines, Inc. (BBGMI)
have been transferred and entrusted to the Asset Privatization Trust (APT) by virtue of
Proclamation No. 50 dated December 8, 1986 of her Excellency, President Corazon C.
Aquino. All the said assets of BBGMI are covered by real and chattel mortgages executed
in favor of the Philippine National Bank (PNB), the Development Bank of the Philippines
(DBP) and the National Investment and Development Corporation (NIDC).
xxx xxx

xxx

Pursuant to the above-quoted provision of law, you are hereby warned that all the
assets (real and personal /chattel) of BBGMI are exempted from writs of execution,
attachment, or any other lien or court processes. The Government, through APT, shall
initiate any administrative measures and remedies against you for any violation of the
vested rights of PNB, DBP and APT.
xxx xxx

xxx

Private respondents contend that even if subject properties were mortgaged to DBP
(now under Asset Privatization Trust), Article 110[29] of the Labor Code, as amended by RA
6715, applies just the same. According to them, the said provision of law grants preference
to money claims of workers over and above all credits of the petitioner. This contention is
untenable. In the case of DBP vs. NLRC,[30] the Supreme Court held that the workers
preference regarding wages and other monetary claims under Article 110 of the Labor
Code, as amended, contemplates bankruptcy or liquidation proceedings of the employers
business. What is more, it does not disregard the preferential lien of mortgagees
considered as preferred credits under the provisions of the New Civil Code on the
classification, concurrence and preference of credits.
We now come to the issue with respect to the second Order, dated December 14,
1988, which declared as valid the auction sale conducted on October 29, 1987 by Special
Sheriff John Ramos. Public respondent had no authority to validate the said auction sale on
the ground that the intervenors, MFT Corporation and Salter Holdings Pty., Ltd., as
purchasers for value, acquired legal title over subject properties.

xxx

Section 14, Executive Order No. 81:

xxx xxx

xxx

xxx

It is well to remember that the said properties were transferred to the intervenors,
when Fidel Bermudez, the highest bidder at the auction sale, sold the properties to MFT
Corporation which, in turn, sold the same properties to Salter Holdings Pty., Ltd. Public
respondent opined that the contract of sale between the intervenors and the highest
bidder should be respected as these sales took place during the interregnum after the
auction sale was conducted on October 29, 1987 and before the issuance of the first
disputed Order declaring all the auction sales null and void.
On this issue, the Court rules otherwise.

(sgd)
JOSE C. SISON
The exemption referred to in the aforecited letter is one of the circumstances
contemplated by Rule 39 of the Revised Rules of Court, to wit:
Sec. 13. Property exempt from execution. - Except as otherwise expressly provided
by law, the following properties, and no other, shall be exempt from execution:

As regards personal properties, the general rule is that title, like a stream, cannot rise
higher than its source.[31] Consequently, a seller without title cannot transfer a title better
than what he holds. MFT Corporation and Salter Holdings Pty., Ltd. trace their title from
Fidel Bermudez, who was the highest bidder of a void auction sale over properties exempt
from execution. Such being the case, the subsequent sale made by him (FidelBermudez) is
incapable of vesting title or ownership in the vendee.
The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as
valid, was issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, the petition is hereby GRANTED, insofar as the Order dated December
14, 1988 of Undersecretary Dionisio dela Serna is concerned, which Order is SET
ASIDE. The Order of September 16, 1988, upholding the jurisdiction of the Regional
Director, is AFFIRMED. No pronouncement as to costs.

Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of

Baganga Plywood Corporation (BPC) to take charge of the operations and maintenance of
its steam plant boiler.6 In May 2001, Pearanda filed a Complaint for illegal dismissal with
money claims against BPC and its general manager, Hudson Chua, before the NLRC. 7

G.R. No. 159577

After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their
position papers and submit supporting documents. 9 Their respective allegations are
summarized by the labor arbiter as follows:

May 3, 2006

CHARLITO PEARANDA, Petitioner,

vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.
DECISION
PANGANIBAN, CJ:
Managerial employees and members of the managerial staff are exempted from the
provisions of the Labor Code on labor standards. Since petitioner belongs to this class of
employees, he is not entitled to overtime pay and premium pay for working on rest days.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January
27, 20032 and July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No.
74358. The earlier Resolution disposed as follows:
"WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4
The latter Resolution denied reconsideration.
On the other hand, the Decision of the National Labor Relations Commission (NLRC)
challenged in the CA disposed as follows:
"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding
overtime pay and premium pay for rest day to complainant is hereby REVERSED and SET
ASIDE, and the complaint in the above-entitled case dismissed for lack of merit. 5
The Facts

"[Pearanda] through counsel in his position paper alleges that he was employed by
respondent [Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as
Foreman/Boiler Head/Shift Engineer until he was illegally terminated on December 19,
2000. Further, [he] alleges that his services [were] terminated without the benefit of due
process and valid grounds in accordance with law. Furthermore, he was not paid his
overtime pay, premium pay for working during holidays/rest days, night shift differentials
and finally claims for payment of damages and attorneys fees having been forced to
litigate the present complaint.
"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and
existing under Philippine laws and is represented herein by its General Manager HUDSON
CHUA, [the] individual respondent. Respondents thru counsel allege that complainants
separation from service was done pursuant to Art. 283 of the Labor Code. The respondent
[BPC] was on temporary closure due to repair and general maintenance and it applied for
clearance with the Department of Labor and Employment, Regional Office No. XI to shut
down and to dismiss employees (par. 2 position paper). And due to the insistence of herein
complainant he was paid his separation benefits (Annexes C and D, ibid). Consequently,
when respondent [BPC] partially reopened in January 2001, [Pearanda] failed to reapply.
Hence, he was not terminated from employment much less illegally. He opted to severe
employment when he insisted payment of his separation benefits. Furthermore, being a
managerial employee he is not entitled to overtime pay and if ever he rendered services
beyond the normal hours of work, [there] was no office order/or authorization for him to do
so. Finally, respondents allege that the claim for damages has no legal and factual basis
and that the instant complaint must necessarily fail for lack of merit." 10
The labor arbiter ruled that there was no illegal dismissal and that petitioners Complaint
was premature because he was still employed by BPC. 11 The temporary closure of BPCs
plant did not terminate his employment, hence, he need not reapply when the plant
reopened.
According to the labor arbiter, petitioners money claims for illegal dismissal was also
weakened by his quitclaim and admission during the clarificatory conference that he

accepted separation benefits, sick and vacation leave conversions and thirteenth month
pay.12

"II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and
OTHER MONETARY BENEFITS."18

Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for
working on rest days, and attorneys fees in the total amount of P21,257.98.13

The Courts Ruling

The Petition is not meritorious.

Ruling of the NLRC

Preliminary Issue:
Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and
premium pay for working on rest days. According to the Commission, petitioner was not
entitled to these awards because he was a managerial employee. 14
Ruling of the Court of Appeals

Resolution on the Merits

The CA dismissed Pearandas Petition on purely technical grounds, particularly with
regard to the failure to submit supporting documents.

In its Resolution dated January 27, 2003, the CA dismissed Pearandas Petition for
Certiorari. The appellate court held that he failed to: 1) attach copies of the pleadings
submitted before the labor arbiter and NLRC; and 2) explain why the filing and service of
the Petition was not done by personal service.15

In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents
accompanying the petition before the CA sufficiently supported the allegations therein.
Citing this case, Piglas-Kamao v. NLRC20 stayed the dismissal of an appeal in the exercise of
its equity jurisdiction to order the adjudication on the merits.

In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that
petitioner still failed to submit the pleadings filed before the NLRC. 16

The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to
challenge the finding that he was a managerial employee. 21 In his Motion for
Reconsideration, petitioner also submitted the pleadings before the labor arbiter in an
attempt to comply with the CA rules.22 Evidently, the CA could have ruled on the Petition on
the basis of these attachments. Petitioner should be deemed in substantial compliance
with the procedural requirements.

Hence this Petition.17

The Issues
Petitioner states the issues in this wise:
"The [NLRC] committed grave abuse of discretion amounting to excess or lack of
jurisdiction when it entertained the APPEAL of the respondent[s] despite the lapse of the
mandatory period of TEN DAYS.1avvphil.net
"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of
jurisdiction when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST
16, 2002 REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor
arbiter] with respect to the following:
"I. The finding of the [labor arbiter] that [Pearanda] is a regular, common
employee entitled to monetary benefits under Art. 82 [of the Labor Code].

Under these extenuating circumstances, the Court does not hesitate to grant liberality in
favor of petitioner and to tackle his substantive arguments in the present case. Rules of
procedure must be adopted to help promote, not frustrate, substantial justice. 23 The Court
frowns upon the practice of dismissing cases purely on procedural grounds. 24 Considering
that there was substantial compliance,25 a liberal interpretation of procedural rules in this
labor case is more in keeping with the constitutional mandate to secure social justice. 26
First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter
should be filed within 10 days from receipt thereof.27

Petitioners claim that respondents filed their appeal beyond the required period is not
substantiated. In the pleadings before us, petitioner fails to indicate when respondents
received the Decision of the labor arbiter. Neither did the petitioner attach a copy of the
challenged appeal. Thus, this Court has no means to determine from the records when the
10-day period commenced and terminated. Since petitioner utterly failed to support his
claim that respondents appeal was filed out of time, we need not belabor that point. The
parties alleging have the burden of substantiating their allegations. 28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore, entitled to the
award granted by the labor arbiter.
Article 82 of the Labor Code exempts managerial employees from the coverage of labor
standards. Labor standards provide the working conditions of employees, including
entitlement to overtime pay and premium pay for working on rest days. 29 Under this
provision, managerial employees are "those whose primary duty consists of the
management of the establishment in which they are employed or of a department or
subdivision."30
The Implementing Rules of the Labor Code state that managerial employees are those who
meet the following conditions:
"(1) Their primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof;
"(2) They customarily and regularly direct the work of two or more employees
therein;
"(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the
promotion or any other change of status of other employees are given particular
weight."31
The Court disagrees with the NLRCs finding that petitioner was a managerial employee.
However, petitioner was a member of the managerial staff, which also takes him out of the
coverage of labor standards. Like managerial employees, officers and members of the
managerial staff are not entitled to the provisions of law on labor standards. 32 The
Implementing Rules of the Labor Code define members of a managerial staff as those with
the following duties and responsibilities:

"(1) The primary duty consists of the performance of work directly related to
management policies of the employer;
"(2) Customarily and regularly exercise discretion and independent judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work
along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute under general supervision special assignments and
tasks; and
"(4) who do not devote more than 20 percent of their hours worked in a workweek
to activities which are not directly and closely related to the performance of the
work described in paragraphs (1), (2), and (3) above."33
As shift engineer, petitioners duties and responsibilities were as follows:
"1. To supply the required and continuous steam to all consuming units at
minimum cost.
"2. To supervise, check and monitor manpower workmanship as well as operation
of boiler and accessories.
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or disciplinary action.
"8. To check water from the boiler, feedwater and softener, regenerate softener if
beyond hardness limit.
"9. Implement Chemical Dosing.
"10. Perform other task as required by the superior from time to time."34

The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner

was a member of the managerial staff. His duties and responsibilities conform to the
definition of a member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved
overseeing the operation of the machines and the performance of the workers in the
engineering section. This work necessarily required the use of discretion and independent
judgment to ensure the proper functioning of the steam plant boiler. As supervisor,
petitioner is deemed a member of the managerial staff. 35
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he
stated that he was the foreman responsible for the operation of the boiler. 36 The term
foreman implies that he was the representative of management over the workers and the
operation of the department.37 Petitioners evidence also showed that he was the
supervisor of the steam plant.38 His classification as supervisor is further evident from the
manner his salary was paid. He belonged to the 10% of respondents 354 employees who
were paid on a monthly basis; the others were paid only on a daily basis. 39
On the basis of the foregoing, the Court finds no justification to award overtime pay and
premium pay for rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.

ARCO METAL PRODUCTS, CO., G.R. No. 170734

INC., and MRS. SALVADOR UY,
Petitioners,
Present:
QUISUMBING, J.,
Chairperson,
TINGA,
VELASCO, and
BRION, JJ.

- versus -

SAMAHAN NG MGA MANGGAGAWA

SA ARCO METAL-NAFLU (SAMARMNAFLU),
Respondent.

Promulgated:
May 14, 2008

x---------------------------------------------------------------------------x
DECISION

TINGA, J.:
This
treats
of
the
Petition
for
Review [1] of
the
Resolution[2] and
Decision[3] of the Court of Appeals dated 9 December 2005 and 29 September 2005,
respectively in CA-G.R. SP No. 85089 entitled Samahan ng mga Manggagawa sa Arco
Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc. and/or Mr. Salvador
Uy/Accredited Voluntary Arbitrator Apron M. Mangabat, [4] which ruled that the 13th month
pay, vacation leave and sick leave conversion to cash shall be paid in full to the employees
of petitioner regardless of the actual service they rendered within a year.
Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioners rank and file employees. Sometime in
December 2003, petitioner paid the 13 th month pay, bonus, and leave encashment of three
union members in amounts proportional to the service they actually rendered in a year,
which is less than a full twelve (12) months. The employees were:
1. Rante Lamadrid
2. Alberto Gamban
3. Rodelio Collantes

Sickness
27 August 2003 to 27 February 2004
Suspension 10 June 2003 to 1 July 2003
Sickness
August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions

petitioner did not prorate the payment of the same benefits to seven (7) employees who
had not served for the full 12 months. The payments were made in 1992, 1993, 1994,
1996, 1999, 2003, and 2004. According to respondent, the prorated payment violates the
rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a
complaint before the National Conciliation and Mediation Board (NCMB). The parties
submitted the case for voluntary arbitration.
The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found
that the giving of the contested benefits in full, irrespective of the actual service rendered
within one year has not ripened into a practice. He noted the affidavit of Joselito
Baingan, manufacturing group head of petitioner, which states that the giving in full of the
benefit was a mere error. He also interpreted the phrase for each year of service found
in the pertinent CBA provisions to mean that an employee must have rendered one year of
service in order to be entitled to the full benefits provided in the CBA. [5]
Unsatisfied, respondent filed a Petition for Review [6] under Rule 43 before the Court
of Appeals, imputing serious error to Mangabats conclusion. The Court of Appeals ruled
that the CBA did not intend to foreclose the application of prorated payments of leave
benefits to covered employees. The appellate court found that petitioner, however, had an
existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby
rejecting
the
claim
that petitioner erred in paying full benefits to its
seven employees. The appellate court noted that aside from the affidavit of petitioners
officer, it has not presented any evidence in support of its position that it has no voluntary
practice of granting the contested benefits in full and without regard to the service actually
rendered within the year. It also questioned why it took petitioner eleven (11) years before

it was able to discover the alleged error. The dispositive portion of the courts decision
reads:
WHEREFORE, premises
considered, the
instant
petition
is
hereby GRANTED and the Decision of Accredited Voluntary Arbiter Apron M.
Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is
hereby AFFIRMED WITH MODIFICATION in that the 13th month pay,
bonus, vacation leave and sick leave conversions to cash shall be paid to
the employees in full, irrespective of the actual service rendered within a
year.[7]

Section 1. Employees/workers covered by this agreement who have

rendered at least one (1) year of service shall be entitled to sixteen (16)
days of sick leave with pay for each year of service. Unused sick
leave shall not be cumulative but shall be converted into its cash
equivalent and shall become due and payable every 1 st Saturday of
December of each year.
Section 2. Sick Leave will only be granted to actual sickness duly
certified by the Company physician or by a licensed physician.
Section 3. All commutable earned leaves will be paid proportionately
upon retirement or separation.

Petitioner moved for the reconsideration of the decision but its motion was denied,
hence this petition.
Petitioner submits that the Court of Appeals erred when it ruled that the grant of
13th month pay, bonus, and leave encashment in full regardless of actual service rendered
constitutes voluntary employer practice and, consequently, the prorated payment of the
said benefits does not constitute diminution of benefits under Article 100 of the Labor
Code.[8]
The petition ultimately fails.
First, we determine whether the intent of the CBA provisions is to grant full benefits
regardless of service actually rendered by an employee to the company. According to
petitioner, there is a one-year cutoff in the entitlement to the benefits provided in the CBA
which is evident from the wording of its pertinent provisions as well as of the existing law.

ARTICLE XVI EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to
employees covered by this agreement and if unused shall be converted into
cash and become due and payable on the 1 st Saturday of December each
year.
Section 2. Employees/workers covered by this agreement who have
rendered at least one (1) year of service shall be entitled to seven (7) days
of Paternity Leave with pay in case the married employees legitimate
spouse gave birth. Said benefit shall be non-cumulative and noncommutative and shall be deemed in compliance with the law on the same.
Section 3. Maternity leaves for married female employees shall be
in accordance with the SSS Law plus a cash grant of P1,500.00 per month.

We agree with petitioner on the first issue. The applicable CBA provisions read:
xxx
ARTICLE XIV-VACATION LEAVE
Section 1. Employees/workers covered by this agreement who have
rendered at least one (1) year of service shall be entitled to sixteen (16)
days vacation leave with pay for each year of service. Unused leaves shall
not be cumulative but shall be converted into its cash equivalent and shall
become due and payable every 1st Saturday of December of each year.
However, if the 1st Saturday of December falls in December 1,
November 30 (Friday) being a holiday, the management will give the cash
conversion of leaves in November 29.
Section 2. In case of resignation or retirement of an employee, his
vacation leave shall be paid proportionately to his days of service rendered
during the year.
ARTICLE XV-SICK LEAVE

ARTICLE XVIII- 13TH MONTH PAY & BONUS

Section 1. The Company shall grant 13th Month Pay to all employees
covered by this agreement. The basis of computing such pay shall be the
basic salary per day of the employee multiplied by 30 and shall become due
and payable every 1st Saturday of December.
Section 2. The Company shall grant a bonus to all employees as
practiced which shall be distributed on the 2nd Saturday of December.
Section 3. That the Company further grants the amount of Two
Thousand Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA
Booklet.[9] (Underscoring ours)
There is no doubt that in order to be entitled to the full monetization of sixteen (16)
days of vacation and sick leave, one must have rendered at least one year of service. The
clear wording of the provisions does not allow any other interpretation. Anent the
13th month pay and bonus, we agree with the findings of Mangabat that the CBA
provisions did not give any meaning different from that given by the law, thus it should be

computed at 1/12 of the total compensation which an employee receives for the whole
calendar year. The bonus is also equivalent to the amount of the 13 th month pay given, or
in proportion to the actual service rendered by an employee within the year.
On the second issue, however, petitioner founders.
As a general rule, in petitions for review under Rule 45, the Court, not being a trier
of facts, does not normally embark on a re-examination of the evidence presented by the
contending parties during the trial of the case considering that the findings of facts of the
Court of Appeals are conclusive and binding on the Court. [10] The rule, however, admits of
several exceptions, one of which is when the findings of the Court of Appeals are contrary
to that of the lower tribunals. Such is the case here, as the factual conclusions of the Court
of Appeals differ from that of the voluntary arbitrator.
Petitioner granted, in several instances, full benefits to employees who have not
served a full year, thus:
1.
2.
3.
4.
5.
6.
7.

Name
Percival Bernas
Cezar Montero
Wilson Sayod
Nomer Becina
Ronnie Licuan
Guilbert Villaruel
Melandro Moque

Reason
Sickness
Sickness
Sickness
Suspension
Sickness
Sickness
Sickness

Duration
July 1992 to November 1992
21 Dec. 1992 to February 1993
May 1994 to July 1994
1 Sept. 1996 to 5 Oct. 1996
8 Nov. 1999 to 9 Dec. 1999
23 Aug. 2002 to 4 Feb. 2003
29 Aug. 2003 to 30 Sept. 2003[11]

Petitioner claims that its full payment of benefits regardless of the length of
service to the company does not constitute voluntary employer practice. It points out that
the payments had been erroneously made and they occurred in isolated cases in the years
1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003 that
the accounting department discovered the error when there were already three (3)
employees involved with prolonged absences and the error was corrected by implementing
the pro-rata payment of benefits pursuant to law and their existing CBA. [12] It adds that the
seven earlier cases of full payment of benefits went unnoticed considering the proportion
of one employee concerned (per year) vis vis the 170 employees of the
company. Petitioner describes the situation as a clear oversight which should not be
taken against it.[13] To further bolster its case, petitioner argues that for a grant of a benefit
to be considered a practice, it should have been practiced over a long period of time and
must be shown to be consistent, deliberate and intentional, which is not what happened in
this case. Petitioner tries to make a case out of the fact that the CBA has not been
modified to incorporate the giving of full benefits regardless of the length of service, proof
that the grant has not ripened into company practice.
We disagree.
Any benefit and supplement being enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the employer. [14] The principle of non-diminution
of benefits is founded on the Constitutional mandate to "protect the rights of workers and

promote their welfare,[15] and to afford labor full protection. [16] Said mandate in turn is
the basis of Article 4 of the Labor Code which states that all doubts in the implementation
and interpretation of this Code, including its implementing rules and regulations shall be
rendered in favor of labor. Jurisprudence is replete with cases which recognize the right of
employees to benefits which were voluntarily given by the employer and which ripened
into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.
[17]
where an employer had freely and continuously included in the computation of the
13th month pay those items that were expressly excluded by the law, we held that the act
which was favorable to the employees though not conforming to law had thus ripened into
a practice and could not be withdrawn, reduced, diminished, discontinued or
eliminated. In Sevilla Trading Company v. Semana,[18] we ruled that the employers act of
including non-basic benefits in the computation of the 13 th month pay was a voluntary act
and had ripened into a company practice which cannot be peremptorily
withdrawn. Meanwhile in Davao Integrated Port Stevedoring Services v. Abarquez,[19] the
Court ordered the payment of the cash equivalent of the unenjoyed sick leave benefits to
its intermittent workers after finding that said workers had received these benefits for
almost four years until the grant was stopped due to a different interpretation of the CBA
provisions.
We
held
that
the
employer cannot
unilaterally withdraw the existing privilege of commutation or conversion to cash given
to said workers, and as also noted that the employer had in fact granted and paid said
cash equivalent of the unenjoyed portion of the sick leave benefits to some intermittent
workers.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a
policy of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of seven
employees who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of
years within which a company practice must be exercised in order to constitute voluntary
company practice.[20] Thus, it can be six (6) years,[21] three (3) years,[22] or even as short as
two (2) years.[23] Petitioner cannot shirk away from its responsibility by merely claiming that
it was a mistake or an error, supported only by an affidavit of its manufacturing group
head portions of which read:
5. 13th month pay, bonus, and cash conversion of unused/earned
vacation leave, sick leave and emergency leave are computed and paid in
full to employees who rendered services to the company for the entire year
and proportionately to those employees who rendered service to the
company for a period less than one (1) year or twelve (12) months in
accordance with the CBA provision relative thereto.
6. It was never the intention much less the policy of the
management to grant the aforesaid benefits to the employees in full
regardless of whether or not the employee has rendered services to the
company for the entire year, otherwise, it would be unjust and inequitable
not only to the company but to other employees as well.[24]

In cases involving money claims of employees, the employer has the

burden of proving that the employees did receive the wages and benefits and that
the same were paid in accordance with law.[25]

[G.R. No 140692. November 20, 2001]

ROGELIO C. DAYAN, petitioner, vs. BANK OF THE PHILIPPINE ISLANDS, XAVIER
LOINAZ, OSCAR CONTRERAS, and GERLANDA DE CASTRO,respondents.

"Date

June 10, 1993

For

SAM Rogelio C. Dayan

RE

SUSPENSION

----------------------------------------------------------------------------------------------------------------

DECISION

"This is to advice that you are placed under suspension effective immediately, until further
notice, due to matters/issues presented to you during our meeting this morning with SVP
OL Contreras, VP EO Adre, SM VGuillermo and myself."[1]

The petition for review seeks the reversal of the decision and resolution, dated 30
April 1999 and 30 August 1999, respectively, of the Court of Appeals in CA-G.R. SP No.
51421 reversing the resolution of 30 August 1996 of the National Labor Relations
Commission ("NLRC").

It would appear that respondent bank had earlier conducted interviews and took
statements given by bank suppliers, forwarders and bank employees regarding certain
supposed malpractices committed by petitioner during his term as a purchasing officer of
the bank. The report,[2] dated 07 July 1993, signed and noted by Rodolfo D. Bernejo and
Victor M. Guillermo, Manager and Senior Manager, respectively, contained the alleged
misconduct committed by petitioner, such as in asking for a 5% commission on purchase
orders, "donations totaling P5K" to pay off his medical bills, and a bottle of cognac from
Alta Printing Services, as well as for overpricing the BPI Family Bank's passbook, soliciting a
gift (refrigerator) for his daughter's wedding from Bind Master Enterprises and JLI
Transport, and obtaining gifts from suppliers on the occasion of his birthday in March
1993. The report also made negative findings and observations about his work
performance.

VITUG, J.:

Petitioner Rogelio C. Dayan started his employment on 30 June 1956 with the
Commercial Bank and Trust Company. He rose from the ranks from that of a mere clerk to
FX clerk in 1957, FX Bookkeeper in 1959, Chief Bookkeeper in 1964, Supervisor of the
Administrative Department in 1969, and Supervisor of the Reconciliation Department in
1978, which latter position he continuously occupied until respondent Bank of the
Philippine Islands acquired and absorbed the Commercial Bank and Trust Company. In
1981, Dayan was promoted Administrative Assistant by respondent bank in its centralized
accounting office. He held several positions thereafter - Assistant Manager of Internal
Operations in 1983, Assistant Manager of Correspondent Bank in 1988, Assistant Manager
of Branch Operations in 1990, Assistant Manager of the Supplies Inventory in 1991, and
then Senior Assistant Manager of the Supplies Inventory in 1991-1992. In addition to the
series of promotions, Dayan was the recipient of various commendations.
Sometime in December 1991, the post of Purchasing Officer became vacant as its
former occupant had retired. The vacated position was offered to Dayan which he initially
declined but, due to the insistence of his superiors, he later accepted on a temporary basis
in February 1993.
On 10 June 1993, Assistant Vice President Gerlanda E. De Castro of the bank, in a
memorandum of even date, placed petitioner under suspension. The full text of the
communication read:

On 14 June 1993, petitioner wrote a memorandum to the bank narrating what had
transpired in his meeting with the bank on 10 June 1993 where he denied all the
accusations against him and contested his preventive suspension. In another 11-page
letter of 20 August 1993 to the Bank, he refuted, point by point, the charges leveled
against him. His denials and plea for compassion notwithstanding, petitioner was
dismissed by respondent bank via a notice of termination, dated 25 October 1993, signed
by AVP Gerlanda de Castro.[3] In a letter of confession, dated 28 October 1993, petitioner
ultimately admitted his infractions and instead asked for financial assistance. [4] He, at the
same time, executed an undated "Release Waiver and Quitclaim" acknowledging receipt of
P400,000.00 financial assistance from the bank and thereby releasing and discharging it,
as well as its officers, stockholders and directors, including the bank "Retirement Plan,"
from any action or claim arising from his employment with the bank and membership in
the retirement plan.[5]
Subsequently, however, petitioner claimed that the letter and the quitclaim were
signed by him under duress. On 14 February 1994, he filed a case for Illegal Dismissal and

Illegal Suspension, with a prayer for an award of retirement benefits, before the Labor
Arbiter.

evidence on the malpractices attributed to petitioner are simply too numerous to be

ignored.

In his decision of 30 June 1995, the Labor Arbiter upheld the validity of the dismissal
of petitioner based on loss of trust and confidence and denied his claim for retirement
benefits and damages; thus:

Contrary to petitioner's claim, the suppliers who complained about the mulcting
activities did, in fact, execute affidavits, such as the sworn statements of Alberto Tadeo,
owner of Alta Printing Services, and Jesus Ibe, owner of JLI Transport, which formed part of
the records of his case. [8] Alfredo Baldonado, an employee under the supervision of
petitioner, himself affirmed under oath the veracity of the suppliers' complaint and
narrated still other incidents of irregularities which had come to his personal knowledge
during the time he worked as a purchasing clerk under petitioner. The charges against
petitioner were supported and backed up by an audit report conducted by the bank's audit
team.

"All told, in the light of a justifiable cause for dismissal, complainant as

supervisory/managerial employee, having breached the trust and confidence reposed on
him by respondent and substantial compliance to due process, complainant's dismissal is
deemed valid and legal.
"Consequently, his claim for retirement benefits and damages having no factual or legal
leg to stand on, must and is hereby DENIED.
"ACCORDINGLY, premises considered, the instant case is hereby DISMISSED for lack of
merit."[6]
On appeal, the NLRC reversed the decision of the labor arbiter and declared the
dismissal to be illegal on the ground that petitioner was denied due process ratiocinating
that a hearing should have been afforded petitioner for a chance to confront the witnesses
against him. In its ruling of 30 August 1996, the NLRC concluded:
"IN VIEW OF THE FOREGOING, respondent is hereby ordered to reinstate complainant
Rogelio Dayan to his former position without loss of seniority rights and other privileges
appurtenant thereto with full backwages from the time his salary was withheld from him up
to [the] time of his retirement, less the amount already received by him." [7]
Respondent bank filed with this Court, docketed G.R. No. 127115, a petition
for certiorari questioning the NLRC decision. The Court referred the petition to the Court of
Appeals. The appellate court rendered its decision on 30 April 1999 and resolution of 30
August 1999, reversing the judgment of the NLRC.
In its petition for review before this Court, petitioner argues that the Court of Appeals
has wrongly relied on unsworn statements taken by the bank from its contractual
employees. Petitioner believes that the factual conclusions of the NLRC which has
acquired expertise on the matters entrusted to it should have instead been respected by
the appellate court.
The Court is not convinced that the Court of Appeals has committed an error in
holding to be justifiable the dismissal of petitioner from respondent bank. The pieces of

Petitioner bewails his preventive suspension. The policy of preventively suspending

an employee under investigation for charges involving dishonesty is an acceptable
precautionary measure in order to preserve the integrity of vital papers and documents
that may be material and relevant to the case and to which he, otherwise, would have
access by virtue of his position.[9]
It would appear that it was only after an exhaustive investigation that respondent
bank finally decided to terminate the services of petitioner on 25 October 1993 via a
"Notice of Termination."
The Court of Appeals was convinced that petitioner's dismissal had been justified
under Article 282 of the Labor Code. It held:
"`(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative.'
"x x x

xxx

xxx

"The statements of witnesses against respondent amply established that respondent was
guilty of malfeasance against his employer. Thus, Alberto Tadeo, a supplier of printing
materials for the company, attested that respondent demanded a 5% commission, a
`donation' of P2,000.00 and a bottle of cognac for his birthday. Witness Jesus Ibe further
testified that respondent demanded a refrigerator for his daughter's wedding and that
when Ibe declined, respondent offered to shoulder half of the cost which he proposed to
pay in installments to Ibe. Witness George Chee, another supplier, testified that
respondent also asked for a refrigerator for his daughter's wedding. These statements are
apart from the verbal complaints of other suppliers against respondent for extortion of a
P5,000.00 to P7,000.00 commission.

"The suppliers' accounts have been substantially corroborated by respondent's own

subordinates who directly observed his dealings with petitioner's suppliers. Among these
are petitioner's purchasing clerk, Alfredo Baldonado, respondent's own secretary Sharon
Lopez, and typist Joel Lim, all of whom testified that respondent asked for gifts from
suppliers. The bank's janitor also testified that respondent deliberately delayed the
facilitation of the documents of suppliers, by among others, asking for a massage while
suppliers waited for the signing of vouchers.

"The law requires that the employer must furnish the worker sought to be dismissed with
two written notices before termination of an employee can be legally effected: (1) notice
which apprises the employee of the particular acts or omissions for which his dismissal is
sought; and (2) the subsequent notice which informs the employee of the employer's
decision to dismiss him. (International Pharmaceuticals, Inc. v. National Labor Relations
Commission, 287 SCRA 213 [1998]) Apart from this, a hearing where the employee can
explain his side is also necessary.

"These sworn statements are replete with details, which to the mind of this court, are clear
indications of the veracity of the witness' statements. They evince substantive and
reasonable causes that would justify dismissal on the ground of loss of trust and
confidence.

"In the case at bench, it may be recalled that after complaints were received by the
management, respondent was called to a meeting on June 10, 1993, where he denied
charges against him. Right after the meeting, he was given a notice of preventive
suspension. During the period of his suspension, the bank's audit team conducted an
investigation and took statements of witnesses against respondent. Respondent also filed
his written explanation. After the investigation, respondent was given a notice of
dismissal.

"Juxtaposed with respondent's sweeping denials and imputations of evil motives against
these witnesses on the theory that the suppliers, his subordinates and even the audit team
which conducted the investigation were all engaged in a grand conspiracy to bring him
down, the witnesses' statements are certainly more believable. Viewed together with
respondent's own letter admitting his liability, it is easy to see that petitioner had
reasonable basis to lose confidence in respondent."[10]
Petitioner was not just a rank and file employee. He held the critical posts of Senior
Assistant Manager of the Supplies Inventory and Purchasing Officer of the bank at the time
of his dismissal, handling fiduciary accounts and transactions and dealing with the bank's
suppliers. His positions carried authority for the exercise of independent judgment and
discretion[11]characteristic of sensitive posts in corporate hierarchy where a wide latitude
could be supposed in setting up stringent standards for continued employment.
A bank, its operation being essentially imbued with public interest, owes great fidelity
to the public it deals with. In turn, it cannot be compelled to continue in its employ a
person in whom it has lost trust and confidence and whose continued employment would
patently be inimical to the bank interest. The law, in protecting the rights of labor,
authorized neither oppression nor self-destruction of an employer company which itself is
possessed of rights that must be entitled to recognition and respect. [12]
The Court of Appeals, in addressing the issue of lack of due process raised by
petitioner, ruled:
"Instead, what he vigorously protests is the alleged lack of due process which attended his
dismissal. He asserts that he was not fully given the chance to air his side.
"We rule in favor of respondent on this point.

"From this sequence of events, it is clear that petitioner failed to comply with the notice
and hearing requirement of the law. The preliminary meeting between respondent and his
superiors is not sufficient compliance with these requirements, as it was, as observed by
the NLRC, merely exploratory and no witnesses were presented against him. It is doctrinal
that a consultation or conference with the employee is not a substitute for the actual
observance of notice and hearing. (Pepsi Cola Bottling Co. v. National Labor Relations
Commission, 210 SCRA 276 [1992]; Equitable Banking Corporation v. National Labor
Relations Commission, supra.) Moreover, where the employee denies charges against him,
a hearing is necessary to thresh out any doubt. (Roche [Philippines] v. National Labor
Relations Commission, 178 SCRA 386 [1989])
"Settled is the rule that the twin requirements of notice and hearing are indispensable for a
dismissal to be validly effected. (Falguera v. Linsangan, 251 SCRA 365 [1995] However,
when the dismissal is effected for a just and valid cause, as in this case, the failure to
observe procedural requirements does not invalidate or nullify the dismissal of an
employee. Hence, if the dismissal of an employee is for a just and valid cause but he is not
accorded due process, the dismissal shall be upheld but the employer must be sanctioned
for non-compliance with the requirements of due process. (Agao v. National Labor
Relations Commission, supra.)
"The dismissal of an employee must be for a just or authorized cause and after due
process. Petitioner failed to comply with the second requirement. For such omission, an
appropriate sanction should be imposed which generally varies depending upon the facts
of each case and gravity of the omission. (Mabaylan v. National Labor Relations
Commission, 203 SCRA 570 [1991]; Wenphil Corporation v. National Labor Relations

Commission, 170 SCRA 69 [1994] In the case at bench, we rule that the amount of
P5,000.00 is ample indemnity under the circumstances."[13]

[14]

The now prevailing rule has recently been handed down in Ruben Serrano vs. NLRC.
The Court has there clarified that -

"Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and
hearing is not to comply with 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.'
"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 or the payment of
compensation at the rate of one-half month for every year of service.
"The Termination Pay Law was held not to be a substantive law but a regulatory measure,
the purpose of which was to give the employer the opportunity to find a replacement or
substitute, and the employee the equal opportunity to look for another job or source of
employment. 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. It cannot be that the former regime denied due process to the
employee. Otherwise, there should now likewise be a rule that, in case an employee
leaves his job without cause and without prior notice to his employer, his act should be
void instead of simply making him liable for damages.

"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)."[15]
In fine, the lack of notice and hearing is considered as being a mere failure to observe
a procedure for the termination of employment which makes the dismissal ineffectual but
not necessarily illegal. The procedural infirmity is then remedied by ordering the payment
to the employee his full backwages from the time of his dismissal until the court finally
rules that the dismissal has been for a valid cause. Re-examining the Wenphil doctrine, the
Court has concluded:
"Not all notice requirements are requirements of due process. Some are simply part of a
procedure to be followed before a right granted to a party can be exercised. Others are
simply an application of the Justinian precept, embodied in the Civil Code, to act with
justice, give everyone his due, and observe honesty and good faith toward one's
fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the
failure either of the employer or the employee to live up to this precept is to make him
liable in damages, not to render his act (dismissal or resignation, as the case may be)
void. The measure of damages is the amount of wages the employee should have
received were it not for the termination of his employment without prior notice. If
warranted, nominal and moral damages may also be awarded.
"x x x

xxx

xxx

"In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that
the termination of employment was due to an authorized cause, then the employee
concerned should not be ordered reinstated even though there is failure to comply with the
30-day notice requirement. Instead, he must be granted separation pay in accordance
with Art. 283, to wit:
"In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one month for every
year of service, whichever is higher. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)

month pay for every year of service, whichever is higher. A fraction of at least
six months shall be considered one (1) whole year.
"If the employee's separation is without cause, instead of being given separation pay, he
should be reinstated. In either case, whether he is reinstated or only granted separation
pay, he should be paid full backwages if he has been laid off without written notice at least
30 days in advance.
"On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that
the employee was dismissed for any of the just causes mentioned in said Art. 282, then, in
accordance with that article, he should not be reinstated. However, he must be paid
backwages from the time his employment was terminated until it is determined that the
termination of employment is for a just cause because the failure to hear him before he is
dismissed renders the termination of his employment without legal effect.
"WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations
Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to
pay petitioner separation pay equivalent to one (1) month pay for every year of service, his
unpaid salary, and his proportionate 13th month pay, in addition, full backwages from the
time his employment was terminated on October 11, 1991 up to the time the decision
herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for
computation of the separation pay, backwages, and other monetary awards to
petitioner."[16]
Although his reinstatement would then be out of the question, petitioner could have
been entitled, nevertheless, to backwages from the time of his termination on 25 October
1993 until his retirement on 24 March 1994 or a period of five (5) months had it not been
for his duly executed letter of 28 October 1993 and "Release, Waiver and Quitclaim,"
acknowledging receipt of P400,000.00 from the bank, thereby releasing and discharging it,
as well as its officers, stockholders, directors and the Bank Retirement Plan, from any
action or claim arising from his employment with the bank and membership in the
Retirement Plan. The documents read:
"Dear Sir/Madam:
"I received your letter dated 25 October 1993 terminating my employment for the reason
stated therein. I admit the fault attributed to me and accept all the consequences of my
infraction, including the forfeiture of whatever benefits and interests I may have under the
Bank's Retirement Plan and policies, without any reservation.
"I however appeal for humanitarian considerations and request Management to grant me
financial assistance to help me endure these difficult times. I understand that whatever

amount Management might grant me will be purely out of its generosity and not because
of any legal obligation.
"Thank you."[17]
The document of "Release, Waiver and Quitclaim" reads:
"THAT I, ROGELIO C. DAYAN, of legal age, Filipino citizen and a resident of 50 Bulusan
Street, Quezon City, Metro Manila, acknowledge that my employment with Bank of the
Philippine Islands (hereinafter called the `Bank') validly ceased effective 25 October 1993,
and that I have received a financial assistance from the Bank in the amount of Four
Hundred Thousand Pesos (P400,000.00), Philippine currency.
"Furthermore, and in consideration of the foregoing
"1. I acknowledge the value of the opportunity afforded to me to be of service to the Bank.
"2. I release, remise and forever discharge the Bank, its stockholders, officers, directors,
agents or employees, and the Bank's Retirement Plan and its trustee, from any action,
claim for sum of money, or other obligations arising from all incidents of my employment
with the Bank and membership in the aforesaid Retirement Plan or the cessation of such
employment or membership.
"3. I acknowledge that I have received all amounts that are now or in the future may be
due me from the Bank.
"4. I will not at any time, in any manner whatsoever, directly or indirectly engage in any
activity prejudicial to the interest of the Bank, its stockholders, officers, directors, agents or
employees, and will not disclose any confidential information concerning the business of
the Bank.
"5. I acknowledge that I have no cause of action, compliant, case or grievance whatsoever
against the Bank, its stockholders, officers, directors, agents or employees, nor against the
Bank's Retirement Plan and its trustee, in respect of any matter incident to or arising out of
my employment with the Bank or membership in the aforesaid Retirement Plan, or the
cessation of such employment or membership. I further warrant that I will institute no
action against the Bank, its stockholders, officers, directors, agents or employees nor
against the Bank's Retirement Plan and its trustee, and will not continue to prosecute any
pending action which I may have filed or which may have been filed on my behalf against
them.

"6. I manifest that the grant to me by the Bank of the financial assistance hereinbefore
stated shall not be taken by me, my heirs or assigns as a confession or admission of
liability on the part of the Bank, its stockholders, officers, directors, agents or employees
for any matter, cause, demand or claim for damage which I may have against any or all of
them. I confirm that the Bank has given to me the aforesaid financial assistance not as a
matter of legal obligation, but as a pure act of generosity.
"7. I agree that the Bank may bring action to seek an award for damages resulting from my
breach of this release, waiver and quitclaim. Such award shall include but not be limited to
the return of the financial assistance given to me by the Bank.
"8.
I finally declare that I have read this entire document, the contents of which
have been explained to me and which I acknowledge to understand, and that the entire
release, waiver and quitclaim hereby given are made by me willingly, voluntarily and with
full knowledge of my rights under the law."[18]
Petitioner would now claim that the letter and quitclaim, aforequoted, were obtained
through deception and coercion.

quitclaim is credible and reasonable, the transaction must be recognized as a valid and
binding undertaking."[20]
Petitioner was a managerial employee and held the rank of Senior Assistant Manager with
a vast experience behind him. As so aptly observed by the Labor Arbiter
"Moreover, we do not believe that a person such as complainant occupying a sensitive
position after rising from the ranks would be willing to compromise his future by agreeing
to execute a document highly prejudicial to his interest. It was simply not a question of
choosing between the devil and the deep blue sea, but more of a case of one making the
most of worse situation. Complainant knew and was well aware of the consequences of his
act hence, his act of repentance at the last moment to save his lost 37 years of service." [21]
Surely, petitioner cannot now be allowed to renege on the voluntary settlement of his
claim with the bank.
WHEREFORE, the decision of the Court of Appeals reinstating the decision of the
Labor Arbiter and setting aside the NLRC's decision is AFFIRMED.

The contention hardly persuades.

Far from having been pressured into executing the documents, it would appear that
petitioner even haggled and pled for some consideration from respondent bank invoking
his longevity of service in the company. Sicangco vs. NLRC[19]explained "Quitclaims executed by employees are commonly frowned upon as contrary to public
policy and ineffective to bar claims for the full measure of the worker's legal
rights. Neither does acceptance of benefits estop the employee from prosecuting his
employer for unfair labor practice acts. The reason is plain. Employer and employee
obviously do not stand on the same footing.
"Nevertheless, the above rule is not without exception, as this Court held in Periquet v.
NLRC:
"`Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there
is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the

[G. R. No. 129329. July 31, 2001]

ESTER M. ASUNCION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
Second
Division,
MABINI
MEDICAL
CLINIC
and DR.
WILFRIDO
JUCO, respondents.
DECISION
KAPUNAN, J.:
In her petition filed before this Court, Ester Asuncion prays that the Decision,
dated November 29, 1996, and the Resolution, dated February 20,1997, of the public
respondent National Labor Relations Commission, Second Division, in NLRC CA. 011188
which reversed the Decision of the Labor Arbiter, dated May 15, 1996 be set aside.
The antecedents of this case are as follows:

On August 16, 1993, petitioner Ester M. Asuncion was employed as an

accountant/bookkeeper by the respondent Mabini Medical Clinic. Sometime in May
1994, certain officials of the NCR-Industrial Relations Division of the Department of Labor
and Employment conducted a routine inspection of the premises of the respondent
company and discovered upon the disclosure of the petitioner of (documents) violations of
the labor standards law such as the non-coverage from the SSS of the
employees. Consequently, respondent Company was made to correct these violations.
On August 9, 1994, the private respondent, Medical Director Wilfrido Juco, issued a
memorandum to petitioner charging her with the following offenses:
1. Chronic Absentism (sic) You have incurred since Aug. 1993 up to the present
35 absences and 23 half-days.
2. Habitual tardiness You have late (sic) for 108 times. As shown on the record
book.
3. Loitering and wasting of company time on several occasions and witnessed
by several employees.
4. Getting salary of an absent employee without acknowledging or signing for it.
5. Disobedience and insubordination - continued refusal to sign memos given to
you.[1]
Petitioner was required to explain within two (2) days why she should not be
terminated based on the above charges.
Three days later, in the morning of August 12, 1994, petitioner submitted her
response to the memorandum. On the same day, respondent Dr. Juco, through a letter
dated August 12, 1994, dismissed the petitioner on the ground of disobedience of lawful
orders and for her failure to submit her reply within the two-day period.
This prompted petitioner to file a case for illegal termination before the NLRC.
In a Decision, dated May 15, 1996, Labor Arbiter Manuel Caday rendered judgment
declaring that the petitioner was illegally dismissed. The Labor Arbiter found that the
private respondents were unable to prove the allegation of chronic absenteeism as it failed
to present in evidence the time cards, logbooks or record book which complainant signed
recording her time in reporting for work. These documents, according to the Labor Arbiter,
were in the possession of the private respondents. In fact, the record book was mentioned

in the notice of termination. Hence, the non-presentation of these documents gives rise to
the presumption that these documents were intentionally suppressed since they would be
adverse to private respondents claim. Moreover, the Labor Arbiter ruled that the
petitioners absences were with the conformity of the private respondents as both parties
had agreed beforehand that petitioner would not report to work on Saturdays. The
handwritten listing of the days when complainant was absent from work or late in reporting
for work and even the computerized print-out, do not suffice to prove that petitioners
absences were unauthorized as they could easily be manufactured. [2] Accordingly, the
dispositive portion of the decision states, to wit:
WHEREFORE, Premises Considered, judgment is hereby rendered declaring the dismissal of
the complainant as illegal and ordering the respondent company to immediately reinstate
her to her former position without loss of seniority rights and to pay the complainants
backwages and other benefits, as follows:
1) P73,500.00 representing backwages as of the date of this decision until she is
actually reinstated in the service;
2) P20,000.00 by way of moral damages and another P20,000.00 representing
exemplary damages; and
3) 10% of the recoverable award in this case representing attorneys fees.
SO ORDERED.[3]
On appeal, public respondent NLRC rendered the assailed decision which set aside the
Labor Arbiters ruling. Insofar as finding the private respondents as having failed to
present evidence relative to petitioners absences and tardiness, the NLRC agrees with the
Labor Arbiter. However, the NLRC ruled that petitioner had admitted the tardiness and
absences though offering justifications for the infractions. The decretal portion of the
assailed decision reads:
WHEREFORE, premises considered, the appealed decision is hereby VACATED and SET
ASIDE and a NEW ONE entered dismissing the complaint for illegal dismissal for lack of
merit.
However, respondents Mabini Medical Clinic and Dr. Wilfrido Juco are jointly and solidarily
ordered to pay complainant Ester Asuncion the equivalent of her three (3) months salary
for and as a penalty for respondents non-observance of complainants right to due
process.
SO ORDERED.[4]

Petitioner filed a motion for reconsideration which the public respondent denied in its
Resolution, dated February 19, 1997. Hence, petitioner through a petition
for certiorari under Rule 65 of the Rules of Court seeks recourse to this Court and raises the
following issue:
THE PUBLIC RESPONDENT ERRED IN FINDING THAT THE PETITIONER WAS DISMISSED BY
THE PRIVATE RESPONDENT FOR A JUST OR AUTHORIZED CAUSE.
The petition is impressed with merit.
Although, it is a legal tenet that factual findings of administrative bodies are entitled
to great weight and respect, we are constrained to take a second look at the facts before
us because of the diversity in the opinions of the Labor Arbiter and the NLRC. [5] A
disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens
the door to a review thereof by this Court.[6]
It bears stressing that a workers employment is property in the constitutional
sense. He cannot be deprived of his work without due process. In order for the dismissal
to be valid, not only must it be based on just cause supported by clear and convincing
evidence,[7] the employee must also be given an opportunity to be heard and defend
himself. [8] It is the employer who has the burden of proving that the dismissal was with just
or authorized cause.[9] The failure of the employer to discharge this burden means that the
dismissal is not justified and that the employee is entitled to reinstatement and
backwages.[10]
In the case at bar, there is a paucity of evidence to establish the charges of
absenteeism and tardiness. We note that the employer company submitted mere
handwritten listing and computer print-outs. The handwritten listing was not signed by the
one who made the same. As regards the print-outs, while the listing was computer
generated, the entries of time and other annotations were again handwritten and
unsigned.[11]
We find that the handwritten listing and unsigned computer print-outs were
unauthenticated and, hence, unreliable. Mere self-serving evidence of which the listing
and print-outs are of that nature should be rejected as evidence without any rational
probative value even in administrative proceedings. For this reason, we find the findings of
the Labor Arbiter to be correct. On this point, the Labor Arbiter ruled, to wit:
x x x In the instant case, while the Notice of Termination served on the complainant clearly
mentions the record book upon which her tardiness (and absences) was based, the
respondent (company) failed to establish (through) any of these documents and the
handwritten listing, notwithstanding, of (sic) the days when complainant was absent from

work or late in reporting for work and even the computerized print-outs, do not suffice to
prove the complainants absences were unauthorized as they could easily be
manufactured. x x x[12]
In IBM Philippines, Inc. v. NLRC,[13] this Court clarified that the liberality of procedure in
administrative actions is not absolute and does not justify the total disregard of certain
fundamental rules of evidence. Such that evidence without any rational probative value
may not be made the basis of order or decision of administrative bodies. The Courts
ratiocination in that case is relevant to the propriety of rejecting the unsigned handwritten
listings and computer print-outs submitted by private respondents which we quote, to wit:
However, the liberality of procedure in administrative actions is subject to limitations
imposed by basic requirements of due process. As this Court said in Ang Tibay v. CIR, the
provision for flexibility in administrative procedure does not go so far as to justify orders
without a basis in evidence having rational probative value. More specifically, as held
in Uichico v. NLRC:
It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the
technical rules of procedure in the adjudication of cases. However, this procedural rule
should not be construed as a license to disregard certain fundamental evidentiary
rules. While the rules of evidence prevailing in the courts of law or equity are not
controlling in proceedings before the NLRC, the evidence presented before it must at least
have a modicum of admissibility for it to be given some probative value. The Statement of
Profit and Losses submitted by Crispa, Inc. to prove its alleged losses, without the
accompanying signature of a certified public accountant or audited by an independent
auditor, are nothing but self-serving documents which ought to be treated as a mere scrap
of paper devoid of any probative value.
The computer print-outs, which constitute the only evidence of petitioners, afford no
assurance of their authenticity because they are unsigned. The decisions of this Court,
while adhering to a liberal view in the conduct of proceedings before administrative
agencies, have nonetheless consistently required some proof of authenticity or reliability
as condition for the admission of documents.
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC,[14] this Court held as
incompetent unsigned daily time records presented to prove that the employee was
neglectful of his duties:
Indeed, the DTRs annexed to the present petition would tend to establish private
respondents neglectful attitude towards his work duties as shown by repeated and
habitual absences and tardiness and propensity for working undertime for the year
1992. But the problem with these DTRs is that they are neither originals nor certified true

copies. They are plain photocopies of the originals, if the latter do exist. More importantly,
they are not even signed by private respondent nor by any of the employers
representatives. x x x.
In the case at bar, both the handwritten listing and computer print-outs being
unsigned, the authenticity thereof is highly suspect and devoid of any rational probative
value especially in the light of the existence of the official record book of the petitioners
alleged absences and tardiness in the possession of the employer company.
Ironically, in the memorandum charging petitioner and notice of termination, private
respondents referred to the record book as its basis for petitioners alleged absenteeism
and tardiness. Interestingly, however, the record book was never presented in
evidence. Private respondents had possession thereof and the opportunity to present the
same. Being the basis of the charges against the petitioner, it is without doubt the best
evidence available to substantiate the allegations. The purpose of the rule requiring the
production of the best evidence is the prevention of fraud, because if a party is in
possession of such evidence and withholds it, and seeks to substitute inferior evidence in
its place, the presumption naturally arises that the better evidence is withheld for
fraudulent purposes which its production would expose and defeat. [15] Thus, private
respondents unexplained and unjustified non-presentation of the record book, which is
the best evidence in its possession and control of the charges against the petitioner, casts
serious doubts on the factual basis of the charges of absenteeism and tardiness.
We find that private respondents failed to present a single piece of credible evidence
to serve as the basis for their charges against petitioner and consequently, failed to fulfill
their burden of proving the facts which constitute the just cause for the dismissal of the
petitioner. However, the NLRC ruled that despite such absence of evidence, there was an
admission on the part of petitioner in her Letter dated August 11, 1994 wherein she wrote:
I am quite surprised why I have incurred 35 absences since August 1993 up to the
present. I can only surmise that Saturdays were not included in my work week at your
clinic. If you will please recall, per agreement with you, my work days at your clinic is from
Monday to Friday without Saturday work. As to my other supposed absences, I believe
that said absences were authorized and therefore cannot be considered as absences which
need not be explained (sic). It is also extremely difficult to understand why it is only now
that I am charged to explain alleged absences incurred way back August 1993. [16]
In reversing the decision of the Labor Arbiter, public respondent NLRC relied upon the
supposed admission of the petitioner of her habitual absenteeism and chronic tardiness.
We do not subscribe to the findings of the NLRC that the above quoted letter of
petitioner amounted to an admission of her alleged absences. As explained by petitioner,

her alleged absences were incurred on Saturdays. According to petitioner, these

should not be considered as absences as there was an arrangement between her and the
private respondents that she would not be required to work on Saturdays. Private
respondents have failed to deny the existence of this arrangement. Hence, the decision of
the NLRC that private respondent had sufficient grounds to terminate petitioner as she
admitted the charges of habitual absences has no leg to stand on.
Neither have the private respondents shown by competent evidence that the
petitioner was given any warning or reprimanded for her alleged absences and
tardiness. Private respondents claimed that they sent several notices to the petitioner
warning her of her absences, however, petitioner refused to receive the same. On this
point, the Labor Arbiter succinctly observed:
The record is bereft of any showing that complainant was ever warned of her absences
prior to her dismissal on August 9, 1994. The alleged notices of her absences from August
17, until September 30, 1993, from October until November 27, 1993, from December 1,
1993 up to February 26, 1994 and the notice dated 31 May 1994 reminding complainant of
her five (5) days absences, four (4) half-days and tardiness for 582 minutes (Annex "1" to
"1-D" attached to respondent' Rejoinder), fail to show that the notices were received by the
complainant. The allegation of the respondents that the complainant refused to received
(sic) the same is self-serving and merits scant consideration. xxx [17]
The Court, likewise, takes note of the fact that the two-day period given to petitioner
to explain and answer the charges against her was most unreasonable, considering that
she was charged with several offenses and infractions (35 absences, 23 half-days and 108
tardiness), some of which were allegedly committed almost a year before, not to mention
the fact that the charges leveled against her lacked particularity.
Apart from chronic absenteeism and habitual tardiness, petitioner was also made to
answer for loitering and wasting of company time, getting salary of an absent employee
without acknowledging or signing for it and disobedience and insubordination. [18] Thus, the
Labor Arbiter found that actually petitioner tried to submit her explanation on August 11,
1994 or within the two-day period given her, but private respondents prevented her from
doing so by instructing their staff not to accept complainants explanation, which was the
reason why her explanation was submitted a day later. [19]
The law mandates that every opportunity and assistance must be accorded to the
employee by the management to enable him to prepare adequately for his defense.
[20]
In Ruffy v. NLRC,[21] the Court held that what would qualify as sufficient or ample
opportunity, as required by law, would be every kind of assistance that management
must accord to the employee to enable him to prepare adequately for his defense. In the

case at bar, private respondents cannot be gainsaid to have given petitioner the ample
opportunity to answer the charges leveled against her.
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 her favor
in line with the policy under the Labor Code to afford protection to labor and construe
doubts in favor of labor.[22] 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. The employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. [23] Not having satisfied its burden of proof, we
conclude that the employer dismissed the petitioner without any just cause. Hence, the
termination is illegal.
Having found that the petitioner has been illegally terminated, she is necessarily
entitled to reinstatement to her former previous position without loss of seniority and the
payment of backwages.[24]
WHEREFORE, the Decision of the National Labor Relations Commission, dated
November 29, 1996 and the Resolution, dated February 20, 1997 are hereby
REVERSED and SET ASIDE, and the Decision of the Labor Arbiter, dated May 15, 1996
REINSTATED.

Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court
is the Decision[1] of the Court of Appeals dated 3 July 2007, as well as its Resolution [2] dated
20 September 2007 affirming the ruling of the National Labor Relations Commission (NLRC)
[3]
directing the payment of separation pay to respondent Ma. Rosario N. Arambulo.
Records show that respondent was initially employed as Clerk in 1972 at Citytrust
Banking Corporation, which eventually merged with the Bank of Philippine Islands
(BPI). She later became Lead Teller, then as Sales Manager, and subsequently, as Bank
Manager in BPI-San Pablo, Laguna Branch in 1996.
On 4 October 2001, respondent was reprimanded for the improper handling and
retention of a clients account.[4] She was transferred to BPI Family Bank in Los Baos,
Laguna on 21 November 2001.
On 26 April 2002, a client of BPI-San Pablo, Laguna Branch requested for a
certification of her savings account. Her balance reflected an amount less than the actual
amount deposited. Hence, BPI conducted an investigation and discovered that its bank
teller, Teotima Helen Azucena (Azucena) was making unauthorized withdrawals. A show
cause memorandum was served to Azucena asking her to explain the unauthorized
withdrawals. In her written response, Azucena implicated respondent, in that the latter, on
many occasions, would make temporary cash borrowings and would return the money at
the end of the day through withdrawals from her own or other clients accounts. There
were times when respondent would fail to return the money withdrawn resulting in
shortages on the part of Azucena. When respondent was transferred to Los Baos, Laguna,
Azucena added that the same practice was continued by her son, Artie Arambulo. [5]
BPI conducted a thorough investigation and discovered that respondent had
approved several withdrawals from various accounts of clients whose signatures were
forged.[6]
Azucena, in a letter dated 2 July 2002, again implicated respondent stating that the
latter instructed her to make unauthorized withdrawals. [7]

G.R. No. 179801

BANK OF THE PHILIPPINEISLANDS AND BPI FAMILY BANK,
Petitioners,
-versusHONORABLE NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION) AND MA. ROSARIO N. ARAMBULO,
Respondents.

Ma. Concepcion Millares, the Assistant Manager of BPI San-Pablo, Laguna Branch,
was also directed to explain why no disciplinary action should be taken against her. Millares
submitted a memorandum attributing the accommodation of unusual transactions to
respondent.[8]
On 22 August 2002, a show-cause memorandum was issued to respondent
informing her of the audit findings relating to temporary borrowings she made from the
initial cash requisitions of Azucena, which support the finding of the claims that fraudulent
withdrawals were used to cover the shortages/non-payment of temporary borrowings. The
report states:
ON TEMPORARY BORROWINGS

x----------------------------------------------------------------------------------------------- x
DECISION
PEREZ, J.:

Teller T.H. Azucena disclosed during the Audit investigation and in

her reply to the Show Cause Memo from Branch Management that during
your tenure as Branch Head of San Pablo-Regidor, you ordered her to

request considerable amount of money from the branch cashier in the

morning. You would then borrow from her cash ranging from P500K to
P1.0M without any supporting document(s).
The temporarily borrowed fund/s was/were replaced either in
cash or through withdrawal from your savings account or from other
clients accounts during the day.
In instances when the amount borrowed from teller Azucena in the
morning was not returned in full in the afternoon, you would then instruct
teller Azucena to withdraw the difference from the accounts of other
depositors with sufficient balances.
Ms. T.H. Azucena had disclosed that you have made the
temporary borrowings to accommodate Mr. Vicente Amante (formerly
city mayor) whom you had allowed to fund his NSF honored checks after
disposition of referred items or after banking hours. The unfunded checks
were covered through withdrawals or check/encashment from other
depositors account, namely: Mr. Emeterio Dikitan, Ms. Penny Penaloza,
Mr.Cheung Tin Chee, Mr. Anderson Ong, Mr. Edmund Dee, among others.
Audit report dated 09/12/01 covering the audit of BPI San PabloRegidor with audit cut-off date June 22, 2001 further show the following:
Two (2) withdrawal slips on 06/27/01 on the account of Mr. Amante
totaling P700K were validated but were not signed by said client at the
time of validation. Per audit report, you personally accomplished the
withdrawal slip for P700K. Immediately thereafter, said amount was
deposited to the account of Mr. E. Dikitan. The two (2) (validated but
unsigned) withdrawal slips held by you were signed by Mr. Liezl Amante
Avanzado (co-depositor of V. Amante) only in the evening of 6/27/018:00PM.
The unfunded checks of Mr. V Amante being deposited to other
depositors accounts with the branch were also covered by transfers of
fund (thru the use of withdrawal/deposit slip) in the afternoon from the
same account where the unfunded check was deposited. Amount of
withdrawal/transfer is the same as the unfunded check to be
covered. Amount of withdrawals ranged from P100K to 400K which were
validated from 5:03PM to 6:26PM.
Audit findings further show that you personally accomplished the
withdrawal slips of E. Dikitan for P100K dated 6/21/01 and for P400K dated
6/20/01.[9]
Respondent admitted that she prepared the unsigned withdrawal slips on the
account of Mr. Vicente Amante (Mr. Amante) totaling P700,000.00 upon request of the
latter. Respondent also explained that she processed the withdrawal slips of Mr. Emeterio

Dikitan, with the latter signing later on, to expedite his transaction with the
bank. Respondent denied any knowledge with regard to the unfunded checks of Mr.
Amante that were supposedly deposited to other depositors account. She argued that the
posting is done by the teller and only amounts over P150,000.00 pass through her.[10]
A hearing was conducted on 2 September 2002 to give respondent opportunity to
present additional explanation.
On 16 January 2003, respondent was served with the notice of termination on the
ground of loss of trust and confidence, for gross violation of policies and procedures as
follows:
a) Temporary Borrowings/Lapping During your tenure as branch head of
San Pablo-Regidor, and in connivance with Teller Teotima H. Azucena, you
would order the latter to request considerable amounts of money from the
branch cashier in the morning. You would then borrow from her the said
cash requisitioned and engage in private lending to accommodate a third
person. The temporary borrowed funds were returned/replaced either in
cash or through withdrawal from your savings account or from other
clients accounts during the day. In instances when the amount borrowed
from teller Teotima H. Azucena in the morning was not returned in full in
the afternoon, you would then instruct teller Teotima H. Azucena to
withdraw the difference from the accounts of other depositors with
sufficient balances.
Bank Internal Audit had verified 928 transactions in your and Ms.
Azucenas temporary borrowings/lapping activities which continued even
after you were transferred to another branch in November 2001 and the
net unaccounted amount of PHP 7,140,000.00 (of which 2,665,000.00 was
reimbursed by Ms. Azucena) unauthorized withdrawals from various branch
clients accounts.
b) Two (2) withdrawals slips on June 27, 2001 on the Maxi-one account
number 3413-0819-46 totaling PHP 700K were validated but unsigned by
the said client at the time of validation. Per internal audit report, you
personally accomplished the withdrawal slips for PHP 700K. Immediately
thereafter, said amount was deposited to the account of 3413-085143. The two (2) (validated but unsigned) withdrawal slips in your
possession were signed by the co-depositor of account number 3413-081946 beyond banking hours of June 27, 2001.
c) You approved the deposit of unfunded checks of Maxi-one account
3413-0819-46 to other depositors account which were covered by
transfers of funds thru the use of withdrawal/deposit slips ranging from PHP
100K to PHP 400K in the afternoon from where the unfunded check was
deposited. The withdrawal slips were validated beyond banking hours. [11]
On 14 March 2003, respondent filed a complaint for illegal dismissal with the labor
arbiter[12] praying for payment of separation pay, backwages and attorneys fees.

Respondent argued that the allegations of Azucena, founded on mere speculations,

presumptions and conclusions, do not establish a case for loss of trust and confidence.
The labor arbiter found respondents dismissal for cause in accordance with the
law. It was established that respondent had approved withdrawals which were later proven
to be forged.[13]
On appeal, the NLRC sustained the dismissal but ordered the payment of
separation pay.
WHEREFORE, premises considered, and in the interest of justice
and equity, judgment is hereby rendered PARTIALLY GRANTING the appeal
and, in conformity therewith, MODIFYING the assailed Decision dated 10
November 2003 insofar as AWARDING herein complainant-appellant
separation pay/severance pay/financial assistance equivalent to one-month
pay inclusive of allowances and other like benefits for every year of service
counted from 20 April 1972 up to 17 January 2003, plus attorneys fees
equivalent to 10% of the total amount of the herein award and, finally,
DIRECTING respondents-appellees banks to forthwith pay the said
award. [14]
The NLRC observed that respondent failed to address the charges of 46 instances of
forgeries cited in the labor arbiters decision. The NLRC did not accept respondents
invocation of good faith in affixing her signatures on the withdrawal slips and held that
these numerous lapses indicate failure on her part as branch manager to oversee and
ensure the implementation of an effective system of check and balances in the processing,
disposition and monitoring of deposits and withdrawals, among others. However, the NLRC
believed that BPI failed to prove that respondent affixed her signatures on the deposit slips
with malice or bad faith. Hence, in the interest of justice and equity, separation pay was
granted.
Petitioner filed a motion for partial reconsideration of the NLRC decision and argued
that respondents misdeeds constitute serious misconduct and reflect upon her moral
character. Petitioner advanced that, therefore, respondent should not be given separation
pay.[15] The NLRC denied it for lack of merit.[16]
Thereupon, petitioner filed a petition for certiorari with the Court of Appeals. The
appellate court, finding no grave abuse of discretion on the part of the NLRC, affirmed its
decision and order.
While upholding respondents dismissal for loss of trust and confidence as lawful,
the appellate court declared that petitioners failed to prove by the requisite quantum of
evidence that respondent was motivated by bad faith or with unlawful intent to gain, when
she affixed her signatures on the withdrawal slips. Considering that her dismissal was not
based on serious misconduct or that which negatively reflected on her moral character, the
appellate court justified the granting of separation pay. [17]

In the instant petition, BPI essentially questions the award of separation pay. It
argues that the very existence of respondents signature on the forged withdrawal slips in
such frequency and involving huge amounts of money, transacted beyond banking hours,
and without the presence of the clients, should be sufficient to hold respondent liable for
fraud, thus negating the finding of good faith.[18] BPI urges this Court to give more weight
to the explanations made by its witnesses against the blanket denial of respondent. [19] BPI
stresses that under the principle of command responsibility, respondent should be held
liable for failure to detect the fraudulent activities and irregularities in her
branch. Respondents omissions, as claimed by BPI, cannot be considered as simple
negligence or misconduct. Thus, BPI insists that respondents acts should have been
properly considered in the disposition of the case. [20]
Respondent concedes that there is a legal ground to terminate her for loss of trust
and confidence on account of simple neglect of duty and misconduct in not being able to
properly implement and follow bank policies and procedure. However, she justifies her
entitlement to separation pay in that her dismissal was not based on serious misconduct,
gross and habitual neglect of duty, nor did her conduct reflect on her moral character.
[21]
She claims that the allegations, issues and arguments raised in the petition have
already been exhaustively discussed and resolved by the Court of Appeals. Respondent
dismisses the issues submitted by petitioner as factual. [22]
Respondent does not contest her dismissal but insists on her entitlement to
separation pay. Therefore, the issue boils down to whether or not respondent should be
awarded separation pay.
We find the petition meritorious.
While as a general rule, an employee who has been dismissed for any of the just
causes enumerated under Article 282 of the Labor Code is not entitled to separation pay,
the Court has allowed in numerous cases the grant of separation pay or some other
financial assistance to an employee dismissed for just causes on the basis of equity.
In the leading case of Philippine Long Distance Telephone Co. v. NLRC, [23] the Court
stated that separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. [24] In granting separation pay to
respondent, the NLRC and Court of Appeals both adhered to this jurisprudential precept
and cleared respondent of bad faith.
However, the succeeding case of Toyota Motor Phils. Corp. Workers Association v.
NLRC[25] reaffirmed the general rule that separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly dismissed for
causes other than serious misconduct, willful disobedience, gross and habitual
neglect of duty, fraud or willful breach of trust, commission of a crime against
the employer or his family, or those reflecting on his moral character. These five
grounds are just causes for dismissal as provided in Article 282 of the Labor Code.
Verily, it may not be amiss to emphasize that if an employee has been dismissed
for a just cause under Article 282 of the Labor Code, he is not entitled to separation pay.

In the instant case, respondent was dismissed on the ground of loss of trust and
confidence.
It is significant to stress that for there to be a valid dismissal based on loss of trust
and confidence, the breach of trust must be willful, meaning it must be done intentionally,
knowingly, and purposely, without justifiable excuse. The basic premise for dismissal on
the ground of loss of confidence is that the employees concerned hold a position of trust
and
confidence. It
is
the
breach
of
this
trust
that
results
in
the
employers loss of confidence in the employee.[26]
Respondent, in affixing her signatures on the withdrawal slips which were later found
to have been accomplished through forgery, clearly failed to monitor these 46 instances of
unauthorized withdrawals. While the evidence presented by BPI fell short of proving
respondents complicity in the forging of these withdrawal slips, her omission, coupled with
unusual accommodation extended to certain bank clients in violation of the banks
standard operating procedures, cost her job. In fact, the validity of her dismissal for loss of
trust and confidence was no longer disputed by respondent.
In the recent case of Reno Foods v. NLM,[27] this Court reiterated the Toyota ruling
and maintained that labor adjudicatory officials and the Court of Appeals must demur the
award of separation pay based on social justice when an employees dismissal is based on
serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or
willful breach of trust; or commission of a crime against the person of the employer or his
immediate family grounds under Art. 282 of the Labor Code that sanction dismissals of
employees.[28]

The case of Aromin v. NLRC[29] is in all fours. In said case, Aromin was the assistant
vice-president of BPI when he was validly dismissed for loss of trust and confidence.
Invoking the pronouncement in Toyota, the Court disallowed the payment of separation
pay on the ground that Aromin was found guilty of willful betrayal of trust, a serious
offense akin to dishonesty.[30]
Therefore, applying the doctrine laid down in Toyota, respondent should be denied
of separation pay.
WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court
of Appeals dated 3 July 2007, insofar as it orders BPI to pay respondent separation pay,
is REVERSED AND SET ASIDE. No costs.
Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it
could have easily presented other proofs, such as the names of other employees who did
not fully serve for one year and thus were given prorated benefits. Experientially, a perfect
attendance in the workplace is always the goal but it is seldom achieved. There must have
been other employees who had reported for work less than a full year and who, as a
consequence received only prorated benefits. This could have easily bolstered petitioners
theory of mistake/error, but sadly, no evidence to that effect was presented.
IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CAG.R. SP No. 85089 dated 29 September 2005 is and its Resolution dated 9 December
2005 are hereby AFFIRMED.